SHRI OM PRAKASH TAPARIA, KOTA V. JOINT COMMISSIONER OF INCOME TAX, RANGE-2, KOTA

ITA 544/JPR/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7961 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 22-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA JHA CIT DHK
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA , ACCOUNTANT MEMBER VK;DJ VIHY LA -@ ITA NO. 544/JP/2017 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2011-12 SHRI OM PRAKASH TAPARIA, PROP. M/S KUSUMIKA TEA & TRADING (KOTA) COMPANY, ARYA SAMAJ ROAD, KOTA (RAJ). CUKE VS. J.C.I.T., RANGE-2, KOTA (RAJ). LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AALPT 4934 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKS J LS @ ASSESSEE BY : SHRI VEDANT AGARWAL (ADV) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAJENDRA JHA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08/08/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 20/08/2019 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD.CIT(A), ALWAR DATED 28/04/2017 FOR THE A.Y. 2011-12 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF WHOLESALE TRADING IN SPICES & GENERAL ITEMS. DURING THE COURSE OF SCRUTINY ITA 544/JP/2017 OM PRAKASH TAPARIA VS JCIT 2 ASSESSMENT, THE A.O. REJECTED BOOKS OF ACCOUNT AFTER OBSERVING THAT THE ASSESSEE HAS NOT PRODUCED STOCK REGISTER CONTAINING DAY TO DAY DETAILS OF HIS PURCHASE AND SALES IN QUANTITATIVE TERMS AND THAT INVENTORY OF CLOSING STOCK CANNOT BE SUBJECTED TO FULL VERIFICATION, SINCE IT DOES NOT CONTAIN COMPLETE DESCRIPTION OF EACH AND EVERY DETAIL AS ON 31/3/2010. THE A.O. ALSO OBSERVED THAT THERE IS A SUBSTANTIAL DECLINE IN G.P. DURING THE YEAR FROM 6.27% TO 6.09%. AFTER REJECTING BOOKS OF ACCOUNT, THE A.O. ESTIMATED G.P. AT 7.25% AND MADE ADDITION OF RS. 4,26,330/-. BY THE IMPUGNED ORDER, THE LD. CIT(A) AFTER GIVING DUE REASONING ESTIMATED G.P. AT 6.5% AS AGAINST THE A.O.S ACTION OF ESTIMATING THE SAME AT 7.25%. AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE ITAT. 3. THE LD. AR OF THE ASSESSEE FIRSTLY ARGUED THAT REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT WAS NOT JUSTIFIED. FROM THE RECORD, I FOUND THAT THE A.O. HAS REJECTED THE BOOKS OF ACCOUNT FOR THE FOLLOWING REASONS: 1. THE ASSESSEE HAS FAILED TO PRODUCE THE STOCK REGISTER CONTAINING DAY TO DAY ACTIVITIES OF ITS PURCHASES AND SALES. 2. ASSESSEE HAS FAILED TO PROVE THAT HE HAS MADE PURCHASES FROM HIS WIFE AT MARKET RATES. ITA 544/JP/2017 OM PRAKASH TAPARIA VS JCIT 3 3. THE INVENTORY OF CLOSING STOCK FILED BY THE ASSESSEE CANNOT BE VERIFIED SINCE IT DOES NOT CONTAIN COMPLETE DESCRIPTION OF ITEMS OF STOCK. 4. GROSS PROFIT RATE DECLARED FOR THE YEAR WAS LOWER. THE LD AR CITED VARIOUS JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THE PROPOSITION THAT BOOKS OF ACCOUNT SHOULD NOT BE REJECTED FOR ONE OF THE REASON OR THE OTHER. I HAD DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE LD. AR AND FOUND THAT THE FACTS OF EACH CASE ARE DISTINGUISHABLE FROM THE ASSESSEES CASE WHEREIN THE A.O. HAS BEEN POINTED OUT VARIOUS REASONS FOR REJECTION OF BOOKS OF ACCOUNT WHICH I FOUND TO BE JUSTIFIABLE. ACCORDINGLY, I UPHOLD THE REJECTION OF BOOKS OF ACCOUNT. 4. SO FAR AS TRADING RESULT OF 6.50% IS CONCERNED, I FOUND THAT DURING THE YEAR UNDER CONSIDERATION, THE SALES OF THE ASSESSEE HAS INCREASED FROM 2.72 CRORES TO 3.67 CRORES WHICH HAS GIVEN G.P. OF RS. 22.37 LACS AS COMPARED TO THE G.P. OF 17.08 LACS IN THE PRECEDING YEAR. INCREASE IN SALES WILL AFFECT THE G.P. AND AT THE SACRIFICE OF MARGIN OF G.P. ONE CAN ATTEND A HIGHER SALE. THEREFORE, KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES, I MODIFY THE ORDERS OF THE LOWER ITA 544/JP/2017 OM PRAKASH TAPARIA VS JCIT 4 AUTHORITIES AND DIRECT THE A.O. TO RECOMPUTE THE TRADING ADDITION BY APPLYING G.P. OF 6.20%. 5. THE NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION MADE ON ACCOUNT OF LOW HOUSEHOLD EXPENSES. FROM THE RECORD, I FOUND THAT THE LOWER AUTHORITIES HAVE ESTIMATED HOUSEHOLD EXPENSES AT RS. 25,000/- PER MONTH BY GIVING THE CREDIT OF RS. 1,24,200/- AN ADDITION OF RS. 1,75,800/- WAS MADE. TELESCOPING BENEFIT WAS ALSO GIVEN OF TRADING ADDITION. CONTENTION OF THE LD AR WAS THAT THERE IS SIX MEMBERS IN THE FAMILY. SCHOOL FEES OF TWO CHILDREN ARE MADE SEPARATELY. LIC PREMIUM WAS ALSO PAID SEPARATELY. TOTAL FAMILY WITHDRAWALS ARE OF RS. 1,74,200/- . THE ASSESSEE RESIDES IN HIS OWN HOUSE AND THEREFORE, NO RENT IS BEING PAID. ELECTRICITY EXPENSES FOR THE WHOLE YEAR WERE RS. 13,900/- ONLY. NO CEREMONY WHETHER SOCIAL OR RELIGIOUS WAS ORGANIZED DURING THE YEAR. THERE IS NO MEMBERSHIP WITH ANY CLUB. EXPENSES ON TELEPHONES WERE DEBITED TO P&L ACCOUNT OF BUSINESS. THERE WAS NO DOMESTIC SERVANT AND THERE IS NO CREDIT CARD. THERE WAS NO ENTERTAINMENT FACILITY IN AJMER. THEREFORE, THE HOUSEHOLD EXPENSES INCURRED BY THE ASSESSEE ARE QUITE REASONABLE. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE A.O. ITA 544/JP/2017 OM PRAKASH TAPARIA VS JCIT 5 HAS MADE ADDITION AFTER CONTROVERTING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE A.O. WITH REGARD TO CONTRIBUTION BY SON OF THE ASSESSEE TOWARDS HOUSEHOLD EXPENSES. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE VIS A VIS STANDARD OF LIVING OF THE ASSESSEE, I DIRECT THE A.O. TO RESTRICT ADDITION UNDER HOUSEHOLD EXPENSES TO THE TUNE OF RS. 1.00 LACS IN PLACE OF RS. 1,75,800/- MADE BY THE A.O. 7. THE A.O. HAS ALSO MADE DISALLOWANCE OF RS. 42,997/- ON ACCOUNT OF INTEREST PAID ON BORROWED CAPITAL WHICH WAS UTILIZED FOR NON-BUSINESS PURPOSES. THE CONTENTION OF THE LD AR WAS THAT THE ASSESSEE WAS HAVING SUFFICIENT FUND OF HIS OWN, THEREFORE, NO DISALLOWANCE IS WARRANTED. 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE WAS HAVING SUFFICIENT CAPITAL WHICH WAS MORE THAN THE INTEREST FREE ADVANCES GIVEN TO THE RELATIVES, ACCORDINGLY, NO DISALLOWANCE IS WARRANTED. I DIRECT THE A.O. TO DELETE THE DISALLOWANCE OF INTEREST SO MADE. ITA 544/JP/2017 OM PRAKASH TAPARIA VS JCIT 6 9. THE A.O. HAS ALSO MADE DISALLOWANCE OF 20% OUT OF THE CAR AND TELEPHONE EXPENSES. KEEPING IN VIEW THE NATURE OF ASSESSEES BUSINESS VIS A VIS HIS STANDARD OF LIVING, I DIRECT THE A.O. TO RESTRICT THE DISALLOWANCE TO 10% ON CAR AND TELEPHONE TOWARDS PERSONAL USE. I DIRECT ACCORDINGLY. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH AUGUST, 2019 SD/- JES'K LH 'KEKZ ( RAMESH C SHARMA ) YS[KK LNL; @ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20 TH AUGUST, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI OM PRAKASH TAPARIA, KOTA. 2. IZR;FKHZ @ THE RESPONDENT- THE J.C.I.T., RANGE-2, KOTA. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 544/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR