Sadhan Mondal, Birbhum V. ITO, WD-3, SURI, Birbhum

ITA 537/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4164 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 26-03-2014
• Court: TRIBUNAL
• Department Lawyers: RABINDRA GUHA
• Assessee Lawyers: N O N E
• Section: 143(3)

Judgement Text

1 ITA NO.537/KOL/2014 SADHAN MONDAL., AY 2007-08 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S. S. VISWAN ETHRA RAVI, JM] I.T.A NO. 537/KOL/2014 ASSESSMENT YEAR: 2007-08 SADHAN MONDAL. VS. INCOME-TAX OFFICER, WD-3, S URI, BIRBHUM (PAN: AHUPM2656H) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 02.12.2016 DATE OF PRONOUNCEMENT: 09.12.2016 FOR THE APPELLANT: N O N E FOR THE RESPONDENT: SHRI RABINDRA GUHA, JCIT ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), DURGAPUR VIDE APPEAL NO. 118/CIT(A)/ASL/ITO/SURI/WD-3/BWN/09-10 DATED 24.01. 2014. ASSESSMENT WAS FRAMED BY ITO, WARD-3, SURI, BIRBHUM U/S. 143(3) OF THE IN COME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007- 8 VIDE HIS ORDER DATED 29.12.2009. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN UPHOLDING THE ADDITION OF RS.87,562/- MADE ON ACCOUNT OF STOCK VALUATION IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3 BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSESSEE I S ENGAGED IN HARDWARE BUSINESS WHICH IS A TRADING ACTIVITY AND IN VIEW OF INNUMERABLE NUMBE R OF ITEMS INVOLVED IN SUCH TRADING, DAY TO DAY STOCK REGISTER WAS NOT MAINTAINED ITEM WISE BY THE ASSESSEE. IT IS THE PRACTICE OF THE ASSESSEE TO HAVE THE PHYSICAL VERIFICATION OF THE S TOCKS CONDUCTED BY HIS CHARTERED ACCOUNTANT ONCE IN A YEAR AND BASED ON THAT VALUATI ON OF CLOSING STOCK IT IS REFLECTED IN THE ACCOUNTS. THE ASSESSEE GAVE A DECLARATION BEFORE T HE AO THAT HE HAD NOT MAINTAINED STOCK IN TRADE REGISTER FOR CLOSING STOCK REFLECTED IN TH E ACCOUNTS AT RS.4,37,812/-. THE AO MADE AD HOC ADDITION AT 20% OF THE CLOSING STOCK AND MAD E AN ADDITION OF RS.87,562/- IN THE ASSESSMENT FOR NON-MAINTENANCE OF STOCK REGISTER WH ICH WAS ALSO CONFIRMED BY THE LD. 2 ITA NO.537/KOL/2014 SADHAN MONDAL., AY 2007-08 CIT(A) IN FIRST APPEAL. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND NO.1: 1. THAT THE ORDER OF THE LD. CIT(A), CONFIRMING T HE ADDITION OF RS.87,562/- BEING 20% OF STOCK VALUATION ON ESTIMATION MADE BY THE AO IS ERR ONEOUS IN LAW AS WELL AS ON THE FACTS OF THE CASE. 4. NONE APPEARED ON BEHALF OF THE ASSESSEE. LD. DR VEHEMENTLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE SUBMISSION OF LD. DR AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ON GOING THROUGH THE NATU RE OF BUSINESS IN WHICH THE ASSESSEE IS ENGAGED, THE ASSESSEE HAD EXPRESSED HIS INABILITY T O MAINTAIN THE STOCK REGISTER IN VIEW OF INNUMERABLE NUMBER OF ITEMS INVOLVED IN THE TRADING OF HARDWARE ITEMS. IN ANY CASE, THERE CANNOT BE ANY ADDITION FOR NON-MAINTENANCE OF STOCK REGISTER ON AN ESTIMATE BASIS AT 20% OF CLOSING STOCK. HENCE, WE HOLD THAT THE LOWER AUTHO RITIES HAVE GROSSLY ERRED IN FRAMING THIS ADDITION. ACCORDINGLY, WE DIRECT THE AO TO DELETE THIS ADDITION IN THE SUM OF RS.87,562/-. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 6. THE NEXT GROUND TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) IS JUSTIFIED IN DETERMINING THE NET PROFIT OF THE BUSI NESS OF THE ASSESSEE AT 5% IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE H AS SHOWN NET PROFIT AT 2.97% OF THE TURNOVER. THE AO OBSERVED THAT IN THIS TYPE OF BUS INESS, THE RATIO OF NET PROFIT GENERALLY VARIES FROM 7 TO 10%. ACCORDINGLY, HE ARRIVED THE NET PROFIT OF THE ASSESSEE FOR THE YEAR UNDER APPEAL AT 9% OF TURNOVER AND BROUGHT THE DIFF ERENCE OF 6.03% (I.E. 9% -2.97%) TO TAX AND ADDED BACK THE SAME TO THE TOTAL INCOME AND MAD E AN ADDITION OF RS.2,22,627/- THEREON. ON APPEAL, THE LD. CIT(A) WENT BY THE PAST HISTORY OF THE ASSESSEE WHEREIN HE FOUND THAT THE ASSESSEE FOR THE IMMEDIATELY PRECEDING PREVIOUS YEA R RELEVANT TO AY 2006-07 HAD DECLARED NET PROFIT AT 5% AND IN THE IMMEDIATELY SUCCEEDING YEAR RELEVANT TO AY 2008-09 HAD DECLARED NET PROFIT AT 3.15%. ACCORDINGLY, HE ARRI VED AT THE NET PROFIT OF 5% FOR THE YEAR UNDER APPEAL AND DIRECTED THE AO TO MAKE AN ADDITIO N ONLY TO THE EXTENT OF RS.71,764/- TOWARDS THE SAME. AGGRIEVED, THE ASSESSEE IS IN AP PEAL BEFORE US ON THE FOLLOWING GROUND NO.2: 3 ITA NO.537/KOL/2014 SADHAN MONDAL., AY 2007-08 2. THAT THE ORDER OF THE LD. CIT(A) ESTIMATING TH E NET PROFIT OF THE APPELLANT AT 5% AGAINST A NET PROFIT OF 2.97% DISCLOSED BY THE ASSESSEE IN IT S RETURN OF INCOME IS ERRONEOUS IN LAW AS WELL AS ON THE FACTS OF THE CASE. 8. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE LD . DR HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). 9. WE HAVE HEARD LD. DR AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE LD. CIT(A) HAD GONE BY THE PAST HISTO RY BY FOLLOWING THE NET PROFIT AS DECLARED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING PREVIO US YEAR RELEVANT TO AY 2006-07. HOWEVER, WE STILL FIND THAT EARNING NET PROFIT AT 5 % IN THIS LINE OF BUSINESS WOULD STILL BE DIFFICULT. HENCE, WE HOLD THAT DETERMINATION OF NE T PROFIT AT 4% OF TURNOVER WOULD MEET THE ENDS OF JUSTICE. WE DIRECT THE AO ACCORDINGLY. GR OUND NO. 2 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 09.12.2016 SD/- SD/- (S.S. VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED :9 TH DECEMBER, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SHRI SADHAN MONDAL, VILL. PURANDARPUR, P.O. PURANDARPUR, BIRBHUM 2 RESPONDENT ITO, WARD-3, SURI, BIRBHUM. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .