Shri Praveen Kumar Dhoka, Ujjain V. The I.T.O., Ujjain

ITA 581/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8023 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-03-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 14-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S DESHPANDE
• Section: 69B

Judgement Text

PAGE 1 OF 8 - I.T.A.NO. 580 & 581/IND/2009 SHRI ASHOK KUMAR DHOKA & PRAVEEN KUMAR DHOKA, UJJA IN IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : ABFPD4222R I.T.A.NO. 580/IND/2009 A.Y. : 2003-04 SHRI ASHOK KUMAR DHOKA ITO, PROP. OF M/S. NIDHI TRADERS, VS 1(2), MAHIDPUR, DIST. UJJAIN. UJJAIN APPELLANT RESPONDENT PAN NO. : ABFPD4220P I.T.A.NO. 581/IND/2009 A.Y. : 2003-04 SHRI PRAVEEN KUMAR DHOKA ITO, PROP. OF M/S. PRAVEEN TRADING CO., 4/1,SARDAR VALLABHBHAI PATH, MAHIDPUR DIST.UJJAIN VS 1(2), UJJAIN APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPANDE, C. A. RESPONDENT BY : SMT. APARNA KARAN, SR. DR DATE OF HEARING : 03.03.2010 PAGE 2 OF 8 - I.T.A.NO. 580 & 581/IND/2009 SHRI ASHOK KUMAR DHOKA & PRAVEEN KUMAR DHOKA, UJJA IN O R D E R PER BENCH THESE APPEALS BELONG TO CONNECTED ASSESSEES AND HAV E INVOLVED COMMON ISSUES, HENCE, THESE WERE HEARD TOGETHER AND THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST, WE SHALL TAKE UP ASSESSEES APPEAL IN I.T.A. NO. 580/IND/2009. 4. GROUND NOS. 1 & 2 RELATING TO VALIDITY OF REOPENING AND APPLICABILITY OF RULE 6-DD WERE NOT PRESSED, HENCE, DISMISSED AS NOT PRESSED. SIMILARLY, GROUND NOS. 5 & 6, BEING OF GEN ERAL NATURE, WERE NOT PRESSED, HENCE, DISMISSED, AS NOT PRESSED. 5. IN GROUND NO.3, THE ASSESSEE IS AGGRIEVED BY THE DE CISION OF LD. CIT(A) IN WORKING OUT THE PEAK INVESTMENT ON THE BA SIS OF 15 DAYS ROTATIONAL PERIOD AND SUSTAINING ADDITION OF RS. 2, 28,690/-. 6. THE FACTS, IN BRIEF, ARE THAT ON THE BASIS OF INFOR MATION RECEIVED M/S. VIPPY INDUSTRIES LIMITED, THE A.O. REOPENED TH E CASE OF THE ASSESSEE. IT WAS FURTHER FOUND THAT THE ASSESSEE HA D PURCHASED OIL WORTH PAGE 3 OF 8 - I.T.A.NO. 580 & 581/IND/2009 SHRI ASHOK KUMAR DHOKA & PRAVEEN KUMAR DHOKA, UJJA IN RS. 7,97,580/-IN CASH FROM THE SAID FIRM IN THE YEA R UNDER CONSIDERATION . THE A.O. FURTHER FOUND THAT THESE PURCHASES WERE NO T RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE FAILED TO OFFER A NY SATISFACTORY EXPLANATION FOR THE SAME. THE A.O., THEREAFTER, ANA LYZED THE BILL-WISE DETAILS OF SUCH PURCHASES, WHICH ARE REPRODUCED AS UNDER FOR THE SAKE OF READY REFERENCE. S.NO. INVOICE NO. DATE OF SALE SALES MONTH-WISE AMOUNT PEAK AMOUNT 1. 3996 20.11.02 NOV.02 1,13,940 1,13,940 2. 4315 08.12.02 DEC.02 1,16,100 2,30,310 3. 4596 23.12.02 1,14, 210 4. 386 22.01.03 JAN.,03 1,10,700 1,10,700 5. 780 17.02.03 FEB.,03 1,13,940 1,13,940 6. 927 07.03.03 MAR.,03 1,13,670 2,28,690 7. 1195 21.03.03 1,15,020 TOTAL 7,97,580 7. THE A.O., ACCORDINGLY, WORKED OUT A PEAK AMOUNT OF UNDISCLOSED INVESTMENT AT RS. 2,30,310/- AND ADDED THE SAME U/S 69B OF THE ACT. AGGRIEVED BY THIS, THE ASSESSEE CARRIED TH E MATTER INTO APPEAL BEFORE THE LD. CIT(A), WHEREIN IT WAS SUBMITTED THA T PEAK INVESTMENT IN SUCH PURCHASES SHOULD HAVE BEEN TAKEN AT RS. 1,16,0 00/-, BEING THE HIGHEST AMOUNT ON ONE DAY INSTEAD OF TAKING TWO TRA NSACTIONS TAKING PLACE IN DECEMBER, 2002, AMOUNTING TO RS. 2,30,310/-. THE LD. CIT(A), HOWEVER, HELD THAT IN THE ABSENCE OF BOOKS OF ACCOU NT, THE FACT OF RECORDING OF SUCH PURCHASES THEREIN REMAINED UNVERI FIED AND, THEREFORE, A.OS ACTION IN TAKING THE PEAK INVESTMENT IN SUCH PURCHASES WAS ALSO PAGE 4 OF 8 - I.T.A.NO. 580 & 581/IND/2009 SHRI ASHOK KUMAR DHOKA & PRAVEEN KUMAR DHOKA, UJJA IN JUSTIFIED. THE LD. CIT(A) FURTHER HELD THAT, HOWEVE R, MONTH-WISE PURCHASES AS PEAK WAS NOT JUSTIFIED AS SUCH PERIOD WAS PRETTY LONG TIME TO EFFECT THE SALE OF ONE LOT. HAVING STATED SO, HOWEV ER, THE LD. CIT(A) REFUSED THE ASSESSEES PLEA FOR TAKING ONE DAY PURC HASE TO WORK OUT THE BOOK INVESTMENT AND ADOPTED 15 DAYS TIME TO WORK OU T THE PEAK INVESTMENT AND ON THAT BASIS PEAK INVESTMENT WAS WO RKED OUT BY HIM AT RS. 2,28,690/- BEING THE AMOUNT OF PURCHASES MADE D URING THE PERIOD 7.3.2003 TO 21.3.2003. AGGRIEVED BY THIS, THE ASSES SEE IS IN APPEAL BEFORE US. 8. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE F ACTS, REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT( A) BESIDES SUBMITTING THAT NEXT PURCHASES HAD BEEN MADE BY THE ASSESSEE O NLY AFTER THE SALE OF EARLIER PURCHASES AND THERE WAS A GAP OF 15 DAYS BE TWEEN 2 SUCH PURCHASES AND, THEREFORE, AT THE MOST, THE PURCHASE S OF DECEMBER, 2002, AMOUNTING TO RS. 1,16,100/- COULD BE CONSIDERED AS PEAK. 9. THE LD. SR. A. R., ON THE OTHER HAND, PREFERRED TO RELY ON THE ORDER OF THE LD. CIT(A). 10. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 11. THE DISPUTED FACT IS THAT THERE ARE CERTAIN PURCHAS ES, WHICH HAVE REMAINED UNRECORDED IN THE BOOKS OF ACCOUNT. IT IS ALSO NOTED THAT THERE IS PAGE 5 OF 8 - I.T.A.NO. 580 & 581/IND/2009 SHRI ASHOK KUMAR DHOKA & PRAVEEN KUMAR DHOKA, UJJA IN A GAP OF MINIMUM 15 DAYS BETWEEN TWO PURCHASES IN A MONTH. IT IS ALSO NOTED THAT THE REVENUE AUTHORITIES HAVE WORKED OUT THE ADDITION ON THE BASIS OF PEAK INVESTMENT THEORY AND, HOWEVER, THE M ETHODOLOGY OF THE SAME IS NOT AGREEABLE TO THE ASSESSEE. IN OUR OPINI ON, WHEN THE CASH PURCHASES HAVE BEEN MADE IN ADDITION TO THE REGULAR PURCHASE AND NOT RECORDED IN THE BOOKS OF ACCOUNT THEN ONLY PRESUMPT ION WHICH CAN ARISE IS THAT SALE OF SUCH PURCHASES HAVE TAKEN PLACE IN CASH ONLY AND, THEREFORE, THE NEXT PURCHASES CAN BE INFERRED TO HAVE BEEN MAD E FROM THE AMOUNT REALIZED OF SALE OF GOODS PURCHASED ON EARLIER OCCA SION. ON THIS BASIS, IN OUR VIEW, THE ADDITION OF RS. 1,16,600/- BEING THE AMOUNT OF PURCHASES ON 8.12.2002 SHOULD BE MADE U/S 69B OF THE ACT. WE ORD ER ACCORDINGLY. THUS, THIS GROUND OF THE ASSESSEE STANDS PARTLY ALL OWED. 12. IN GROUND NO.4, THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF LD. CIT(A) IN MAKING AN ADDITION OF RS. 56,094/- AGAINS T THE ADDITION OF RS. 42,671/- MADE BY THE ASSESSING OFFICER ON ACCOUNT O F UNDISCLOSED GROSS PROFIT ON SUCH UNRECORDED PURCHASES. 13. THE FACTS, IN BRIEF, ARE THAT THE A.O. FOUND THAT T HE ASSESSEE HAD SHOWN GROSS PROFIT @ 5.35 % ON DISCLOSED TURNOVER A ND APPLIED THIS RATE ON THE UNDISCLOSED PURCHASES OF RS. 7,97,580/- AND MADE AN ADDITION OF RS. 42,671/-. IN APPEAL, THE LD. CIT(A) CHANGED THE LOGIC OF APPLYING GROSS PROFIT RATE ON DISCLOSED NET PURCHASES AND WO RKED OUT THE SAME TO PAGE 6 OF 8 - I.T.A.NO. 580 & 581/IND/2009 SHRI ASHOK KUMAR DHOKA & PRAVEEN KUMAR DHOKA, UJJA IN RS. 56,094/-. THE LD. CIT(A) ALSO REJECTED THE CONT ENTION OF THE ASSESSEE AS REGARDS TO DOUBLE ADDITION FOR THE REASON THAT T HESE PURCHASES REMAINED TO BE PROVED TO HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LEARNED COUNSEL SUBMITTED THAT THE RATE OF NET PROFIT SHOULD HAVE B EEN APPLIED INSTEAD OF GROSS PROFIT AND FOR THIS REASON, THE ACTION OF THE LD. CIT(A) IN ENHANCING THE ADDITION WAS ALSO NOT JUSTIFIED. FOR THE PROPOS ITION OF MAKING OF ADDITION ON THE BASIS OF NET PROFIT, THE LEARNED CO UNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HON'BLE JURISDICTIONAL HI GH COURT IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR AS REPORTED IN 263 ITR 610, WHEREIN THE HON'BLE JURISDICTIONAL HIGH COURT FOLLOWING THE DEC ISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES, AS REPORTED IN 254 ITR 654 HAD HELD THAT THE TOTAL SALE COULD N OT BE RECORDED AS THE PROFIT OF THE ASSESSEE AND NET PROFIT RATE HAD TO B E ADOPTED TO MAKE THE ADDITION. 14. THE LD. SR. A. R., ON THE OTHER HAND, PREFERRED TO RELY ON THE ORDER OF THE LD. CIT(A). 15. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 16. IN VIEW OF THE ABOVE DECISION OF THE HON'BLE JURISD ICTIONAL HIGH COURT, WE HOLD THAT NET PROFIT RATE SHOWN BY THE AS SESSEE ON THE DISCLOSED PAGE 7 OF 8 - I.T.A.NO. 580 & 581/IND/2009 SHRI ASHOK KUMAR DHOKA & PRAVEEN KUMAR DHOKA, UJJA IN SALES SHOULD BE ADOPTED TO WORK OUT THE QUANTUM OF ADDITION IN RESPECT OF UNDISCLOSED SALES. THE A.O. IS, ACCORDINGLY, DIRECT ED TO COMPUTE THE QUANTUM THEREOF. THUS, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 18. NOW, WE SHALL TAKE UP THE ASSESSEES APPEAL IN I.T. A.NO. 581/IND/2009. 19. GROUND NOS. 1 TO 5 & 6 WERE NOT PRESSED, HENCE, DIS MISSED, AS NOT PRESSED. 20. AS REGARDS THE ISSUE RAISED IN GROUND NO.2, THE LEA RNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE RAISED IN THIS GROUND WAS IDENTICAL TO ISSUE RAISED IN GROUND NO.3 OF ASSESSE ES APPEAL IN I.T.A.NO. 580/IND/2009. HENCE, THE ARGUMENTS MADE THEREIN SHO ULD BE CONSIDERED AS MADE HERE AS WELL AND A SIMILAR VIEW CAN BE TAKE N. HOWEVER, ON PERUSAL OF THE ASSESSMENT ORDER, IN THE PRESENT CAS E, IT IS NOTED THAT AS COMPARED TO GAP OF 15 DAYS IN THE DATES OF TWO PURC HASES IN THE CASE OF ASSESSEE IN I.T.A.NO. 580/IN/2009. THE GAP BETWEEN TWO PURCHASES IS OF 1 DAY , 2 DAYS, 3 DAYS, 7 DAYS ALSO, HENCE, THE LOGIC OR THE PRINCIPLE ACQUIRED THEREIN CANNOT BE FOLLOWED IN TOTO HERE. IN OUR VIE W, AT LEAST PURCHASES OF HAVING GAP ONLY OF ONE DAY SHOULD BE TAKEN AS PEAK UNDISCLOSED INVESTMENT AND IN THAT VIEW OF THE MATTER, THE QUAN TUM WORKS OUT TO PAGE 8 OF 8 - I.T.A.NO. 580 & 581/IND/2009 SHRI ASHOK KUMAR DHOKA & PRAVEEN KUMAR DHOKA, UJJA IN RS.1,24,100/-, BEING THE AMOUNT OF TWO PURCHASES MA DE ON 29 TH JANUARY, 2003, AND 30 TH JANUARY, 2003. WE ORDER ACCORDINGLY. THUS, THIS GR OUND OF THE ASSESSEE STANDS PARTLY ALLOWED. 21. IN RESPECT OF ISSUE RAISED IN GROUND NO.4, WE DIREC T THE A.O. TO MAKE AN ADDITION OF NET PROFIT ON UNDISCLOSED SALES FOR THE REASONS MENTIONED IN GROUND NO.4 OF EARLIER APPEAL. THUS, T HIS GROUND OF THE ASSESSEE IS ALSO PARTLY ALLOWED. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 23. TO SUM UP, BOTH THE APPEALS STAND PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 8 TH MARCH,2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 8 TH MARCH, 2010. CPU* 33D53