Surender Arora, Delhi V. JCIT, New Delhi

ITA 5808/DEL/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6764 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 21-10-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY NISHCHAL
• Keywords: Rejection of books of accounts; Corroborative evidences
• Section: 143(2)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH C, NEW DELHI BEFORE : SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 5808/DEL/2015 ASSESSMENT YEAR: 2011-12 SUREND ER ARORA, PROP. ELECTRO SALES CORPORATION, A-19, PRIYA DARSHANI VIHAR, DELHI. PAN- AAEPA0367Q. (APPELLANT) VS. J.C.I.T., RANGE - 36, NEW DELHI. (RESPONDENT) APPELLANT BY SH. VIJAY NISHCHAL, C.A. RESPONDENT BY SH. RAGHUNATH, SR. DR ORDER PER O.P. KANT, A.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST OR DER DATED 18/05/2015 PASSED BY THE LEARNER COMMISSIONER OF INCOME-TAX (A PPEALS)-19, NEW DELHI (IN SHORT THE LEARNED CIT(A)] FOR ASSESSMENT YEAR 2011- 12 RAISING FOLLOWING GROUNDS: 1. THAT THE ORDER IS AGAINST LAW AND FACTS OF THE CA SE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) WAS NOT JUSTIFIED IN CONFIRMING IMPOUNDING OF SALARY REGIST ER OF THE ASSESSEE U/S 131(3) OF THE INCOME TAX ACT, 1961. EXPENSES OF RS.2 8,02,500/- AS SALARY AND WAGES HAVE BEEN CLAIMED GENUINELY. IT IS PRAYED THAT IMPOUNDING OF SALARY REGISTER BEING UNWARRANTED BE RELEASED TO TH E ASSESSEE. DATE OF HEARING 27.08.2019 DATE OF PRONOUNCEMENT 15 .10.2019 ITA NO. 5808/DEL/2015 2 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) WAS NOT JUSTIFIED IN CONFIRMING THAT CARTAGE VOUCHERS ARE F ALSE AND HAVE BEEN SELF MADE WITHOUT ANY SUPPORTING EVIDENCE. THE CARTAGE EX PENSES OF RS.7,12,368/- HAVE BEEN CLAIMED GENUINELY. IT IS PR AYED THAT THE CONTENTION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BEING UNWARRANTED BE REJECTED. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) WAS NOT JUSTIFIED IN CONFIRMING REJECTION OF THE BOOKS RESU LTS OF THE ASSESSEE U/S 145(3) OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAD MAINTAINED PROPER AND GENUINE BOOKS OF ACCOUNTS. IT IS PRAYED THAT TH E CONTENTION OF COMMISSIONER OF INCOME TAX (APPEALS) BEING UNWARRANT ED BE REJECTED. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) WAS NOT JUSTIFIED IN ESTIMATING NET PROFIT MARGIN AS 1.1% A T RS.48,00,111/- RESULTING IN AN ADDITION OF RS.6,79,359/-. IT IS PR AYED THAT THE RESULTS OF THE ASSESSEE BE ACCEPTED AS THE ASSESSEE HAD MAINTAINED PROPER BOOKS OF ACCOUNTS AS REQUIRED UNDER THE INCOME TAX ACT, 1961 AND ADDITION OF RS. 6,79,359/- BE DELETED. THAT THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT P REJUDICE TO ONE ANOTHER. 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE A SSESSEE WAS ENGAGED IN TRADING OF ELECTRONICS, FMCG GOODS UNDER THE PROPRI ETARY CONCERN, NAMELY M/S ELECTRO SALES CORPORATION. FOR THE YEAR UNDER CONSI DERATION, THE ASSESSEE ON THE TURNOVER OF APPROXIMATELY RS. 45 CRORES, DECLAR ED GROSS PROFIT OF RS. 2,91,16,136 (6.53%) AND NET PROFIT OF RS. 42, 19, 7 52 ( 0.94%) AND FILED RETURN OF INCOME ON 28/09/2011 DECLARING TOTAL INCOME OF R S. 43, 28, 440/-. THE CASE ITA NO. 5808/DEL/2015 3 WAS SELECTED FOR THE SCRUTINY AND NOTICE UNDER SECT ION 143(2) OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT) WAS ISSUED AND COM PLIED WITH. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND CERTAIN DEFECTS IN RESPECT OF THE RECORD MAINTAINED FOR SALARY AND WAGES EXPEN SES OF RS. 28, 02, 500/-AND CARTAGE EXPENSES OF RS. 17,12,368/-. AS THE ASSESSE E COULD NOT EXPLAIN THE DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, HE REJECTED THE BOOKS OF ACCOUNTS INVOKING THE PROVISIONS OF SECTIO N 145(3) OF THE ACT AND ESTIMATED THE NET PROFIT MARGIN AT 2%, WHICH WAS WO RKED OUT TO RS.89,07,475 AND AFTER SUBTRACTING THE PROFIT DECLARED BY THE AS SESSEE OF RS.42, 19, 752/-, HE MADE ADDITION FOR THE BALANCE AMOUNT OF RS. 46, 87, 722/-. 3. ON FURTHER APPEAL, THE LEARNED CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNTS, HOWEVER HE REDUCED THE NET PROFIT MARGIN TO 1.1% AND SUSTAINED ADDITION OF RS.6,79,359/-. AGGRIEVED, THE ASSESSEE IS BEFORE THE TRIBUNAL RAISING THE GROUNDS AS REPRODUCED HEREIN ABOVE. 4. THE GROUND NO. 1 BEING GENERAL IN NATURE, WE ARE NOT REQUIRED TO ADJUDICATE UPON. ITA NO. 5808/DEL/2015 4 5. IN THE GROUND NO. 2, THE ASSESSEE HAS STATED THA T CLAIM OF SALARY AND WAGES EXPENSES IS GENUINE AND HE FURTHER STATED THA T SALARY REGISTER IMPOUNDED BE RELEASED TO THE ASSESSEE. IN OUR OPINI ON, FOR RELEASE OF IMPOUNDED SALARY REGISTER, THE ASSESSEE SHOULD APPR OACH TO THE RELEVANT DEPARTMENTAL AUTHORITIES. THE DEPARTMENTAL AUTHORIT IES MAY DECIDE IN ACCORDANCE WITH LAW DEPENDING ON THE REQUIREMENT OF THOSE DOCUMENTARY EVIDENCES FOR ANY FURTHER PROCEEDINGS. AS FAR AS AD DITION IN DISPUTE IS CONCERNED, NET PROFIT OF RS. 6,79,359/- HAS BEEN SU STAINED BY THE LEARNED CIT(A), WHICH HAS BEEN CONTESTED IN GROUND NO. 4 (F OUR) AND 5(FIVE) BEFORE US. NO ADDITION HAS BEEN MADE IN RESPECT OF SALARY AND CARTAGE EXPENSES AND DEFECT IN MAINTAINING THOSE EXPENSES HAS BEEN MADE BASIS FOR REJECTION OF BOOKS OF ACCOUNT BY THE ASSESSING OFFICER, THEREFOR E, GROUND NO. 2 AND 3 OF THE APPEAL ARE NOT REQUIRED TO BE ADJUDICATED UPON SPEC IFICALLY. ACCORDINGLY, SAME ARE DISMISSED AS INFRUCTUOUS. 6. IN GROUND NO. 4, THE ASSESSEE HAS CHALLENGED REJ ECTION OF BOOKS OF ACCOUNTS SUSTAINED BY THE LEARNED CIT(A). BEFORE US THE COUNSEL OF THE ASSESSEE FILED A PAPER BOOK CONTAINING PAGES 1 TO 1 26 AND SUBMITTED THAT THERE WERE NO MATERIAL DEFECTS IN THE BOOKS OF ACCOUNTS A ND SALARY WAS MAINLY PAID ITA NO. 5808/DEL/2015 5 BY WAY OF CHEQUES TO APPROXIMATELY 17 EMPLOYEES. HE REFERRED TO PAPER BOOK PAGE 30 , WHICH IS SCHEDULE OF PROFIT AND LOSS ACCO UNT CONTAINING SALARY AND WAGES EXPENSES OF RS. 28,02,500/-. HE ALSO REFERRED TO LEDGER OF SALARY ACCOUNT AVAILABLE ON PAGE 35 TO 39 OF THE PAPER BOOK . HE F URTHER REFERRED TO EMPLOYEES DETAILS OF DATE -WISE SALARY PAYMENT AVA ILABLE ON PAGES 40 TO 43 OF THE PAPER BOOK AND EMPLOYEE -WISE MONTHLY PAYMENT O F SALARY AVAILABLE ON PAGE 44 TO 51 OF THE PAPER BOOK . HE SUBMITTED THAT IN ASSESSMENT YEAR 2012- 13 ALSO CERTAIN DEFECTS IN RESPECT OF THE MAINTENAN CE OF THE SALARY VOUCHERS WERE OBSERVED BY THE ASSESSING OFFICER AND ONLY PA RT OF THE SALARY EXPENSES HAVE BEEN DISALLOWED AND NO BOOKS OF ACCOUNTS HAVE BEEN REJECTED. REGARDING THE CARTAGE EXPENSES ALSO, HE RELIED ON THE SUBMISS ION MADE BEFORE THE ASSESSING AUTHORITY AND SUBMITTED THAT MOST OF THE EXPENSES WERE INCURRED ON HAND THELAS, AUTO RICKSHAW AND THREE WHEELER T EMPOS, AND NONE OF THOSE PROVIDED THE RECEIPTS OF THE EXPENSES INCURRED. ACC ORDING TO HIM, EXPENSES ON SALARY AND WAGES AND ON CARTAGE INCURRED ARE GENUIN E AND THEREFORE SUSTAINING OF REJECTION OF BOOKS OF ACCOUNTS BY THE LEARNED CI T(A) IS NOT JUSTIFIED. 7. ON THE CONTRARY, THE LEARNED DR SUBMITTED THAT I T WAS SURPRISING THAT ASSESSEE WAS HAVING TURNOVER OF MORE THAN RS.44 CRO RES AND NO SALARY OR ITA NO. 5808/DEL/2015 6 CARTAGE RECORDS HAVE BEEN MAINTAINED. HE SUBMITTED THAT IN VIEW OF THE NON- MAINTENANCE OF THE SUPPORTING VOUCHERS OF THE EXPEN SES OF SALARY AND CARTAGE, THE EXPENSES DEBITED AND RECORDED IN THE BOOKS OF A CCOUNTS CANNOT BE SUBSTANTIATED AND THUS BOOKS OF ACCOUNTS OF THE ASS ESSEE ARE NOT RELIABLE. THUS, IT WAS SUBMITTED THAT LOWER AUTHORITIES ARE JUSTIF IED IN REJECTING BOOKS OF ACCOUNTS OF THE ASSESSEE AND IN ESTIMATING THE NET PROFIT OF THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER NOTICED THAT IN THE PROFIT AND LOSS ACCOUNT, MAJOR EXPENSES ARE ON SALARY OF RS.28 ,02,500/-AND CARTAGE EXPENSES OF RS.7,12,368/-. REGARDING THE SALARY EXP ENSES, THE ASSESSING OFFICER IMPOUNDED THE SALARY REGISTER AND AFTER EXAMINATION OF RECORDS, HE OBSERVED AS UNDER: (I) THE SALARY REGISTER APPEARS TO BE PREPARED AS A FRESH (II) THE PATTERN OF MAKING THE ATTENDANCE OF ALL TH E EMPLOYEES IS EXACTLY SAME (III) NO ENTRY OF ANY ABSENCE OR LEAVE IN THE REGIS TER WAS MARKED. (IV) THERE WAS NO REVENUE STAMP FOR ANY PAYMENTS MA DE. (V) THERE WAS NO ESI REGISTRATION FOR THE EMPLOYEES . (VI) PAYMENT TO THE PERSONS WHICH HAVE BEEN PAID BY THE CHEQUE , DO NOT APPEAR IN THE SALARY REGISTER. ITA NO. 5808/DEL/2015 7 9. REGARDING CARTAGE EXPENSES, THE ASSESSING OFFICE R OBSERVED THE SAME ARE SELF-MADE WITHOUT ANY SUPPORTING DOCUMENT. IT IS SU BMITTED BY THE ASSESSEE THAT DUE TO RAIN WATER SEEPAGE IN ONE CORNER OF THE PREMISES OF THE ASSESSEE, DOCUMENT ,REGISTERS , VOUCHER ETC. KEPT WERE DAMAGE D AND NEW REGISTERS WERE CREATED. IN VIEW OF THESE OBSERVATIONS THE LEARNED CIT(A) SUSTAINED THE REJECTION OF BOOKS OF ACCOUNTS OBSERVING AS UNDER: 8. I HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSE SSEE AND THE ORDER OF THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS POI NTED OUT SPECIFIC DEFICIENCIES IN THE SALARY PAYMENTS. THE FACT THAT S ALARY PAYMENTS AS PER REGISTER ARE NOT GENUINE AND THE PAYMENTS TO PERSON S WHICH HAVE BEEN PAID BY CHEQUE, DO NOT APPEAR IN THE SALARY REGISTE R, DOES SHOW THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NO T TRUE & CORRECT. THE FAILURE OF THE ASSESSEE TO PRODUCE VOUCHERS IN RESP ECT OF CARTAGE ALSO CAUSE DOUBT ABOUT THE SERIOUSNESS OF THE ASSESSEE IN RESP ECT OF MAINTENANCE OF VOUCHERS. SINCE THESE DEFECTS WERE NOT FOUND IN THE SUBSEQUENT YEARS, A MERE DISALLOWANCE WAS MADE AND THE ASSESSMENT WAS C ARRIED OUT. HOWEVER, FOR THE CASE UNDER REVIEW, SERIOUS DEFECTS HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNTS A ND THEREFORE, I UPHOLD THE REJECTION OF BOOKS OF ACCOUNTS. HOWEVER, I FIND THA T THE ASSESSING OFFICER HAD ESTIMATED NET PROFIT OF 2% TO MAKE AN ADDITION OF RS. 46,87,722/- . THE AMOUNT ADDED IS EVEN MORE THAN THE TOTAL AMOUNT OF SALARY & CARTAGE EXPENSES WHICH WERE BEING INVESTIGATED BY THE ASSES SING OFFICER. IT IS AN ACCEPTED FACT THAT THE TURNOVER OF 45 CRORES CANNOT BE ACHIEVED WITHOUT THE HELP OF EMPLOYEES COMPRISING OF SALESMEN, AFTER SALES SERVICE EXPERTS, ENGINEERS, ETC.. AND CARTAGE FOR TRANSPORT OF CONSU MER DURABLES TO THE RESIDENCE OF BUYERS. CONSIDERING THE FACTS & CIRCUM STANCES OF THE CASE AND ALSO CONSIDERING THE FACT THAT NO SEPARATE DISALLOW ANCE HAS BEEN MADE FOR THE PERSONAL USE OF VEHICLES ETC. BY THE ASSESSEE, I ESTIMATE THE NET PROFIT MARGIN AT 1.1% AT RS. 48,99,111/-. THIS WILL RESULT IN AN ADDITION OF RS. 6,79,359/-. ITA NO. 5808/DEL/2015 8 10. IN OUR OPINION, IN VIEW OF THE GLARING DEFECTS IN THE SALARY REGISTER AS WELL AS CARTAGE REGISTER, THE BOOKS OF ACCOUNTS OF THE A SSESSEE CANNOT BE RELIED UPON AS TRUE AND CORRECT AND THUS THE ACTION OF THE LEAR NED CIT(A) IN SUSTAINING THE REJECTION OF THE BOOKS OF ACCOUNTS IS JUSTIFIED. AS FAR AS APPLICATION OF NET PROFIT OF 1.1% ON THE TURNOVER OF THE ASSESSEE IS CONCERNE D, WE FIND THAT THE GROSS PROFIT OF THE ASSESSEE HAS FALLEN FROM 13.12% IN AS SESSMENT YEAR 2009-10 TO 6.53% IN THE YEAR UNDER CONSIDERATION AND THE NET P ROFIT OF THE ASSESSEE IN IMMEDIATELY PRECEDING ASSESSMENT YEAR IS FOUND TO B E MORE THAN THE NET PROFIT MARGIN OF THE YEAR UNDER CONSIDERATION. BEFORE US N O OTHER COMPARABLE CASE HAVING NET PROFIT MARGIN LESS THAN 1.1% HAS BEEN BR OUGHT ON RECORD BY THE ASSESSEE. THEREFORE IN FACTS AND CIRCUMSTANCES OF T HE CASE, THE NET PROFIT RATE APPLIED BY THE LEARNED CIT(A) IS JUSTIFIED. 11. ACCORDINGLY THE GROUND NO. 4 AND 5 OF THE APPEA L ARE DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/10/2019. SD/- SD/- (SUDHANSHU SRIVASTAVA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 TH OCT., 2019 *AKS*