ITO, Nabha V. M/s New Gurdial Agro Inds., Nabha

ITA 598/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90209 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 04-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: N K SAHI
• Keywords: Rejection of books of accounts; Business income
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 598/CHD/2014 ASSESSMENT YEAR: 2010-11 THE INCOME TAX OFFICER, VS M/S NEW GURDIAL AGRO IND S., WARD, PATIALA ROAD, NABHA. NABHA. PAN: AADFN2994F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH RESPONDENT BY : SHRI N.K.SAHI DATE OF HEARING : 23.06.2015 DATE OF PRONOUNCEMENT : 30.06.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS) PATIALA DATED 25.03.2014 FOR ASSESSMENT YEAR 2010-11. 2. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HA S NOT FILED ANY APPEAL AGAINST THE IMPUGNED ORDER. 3. ON GROUND NOS. 1 TO 4, REVENUE CHALLENGED THE OR DER OF LD. CIT(APPEALS) IN NOT UPHOLDING NET PROFIT @ 1 2% APPLIED BY THE ASSESSING OFFICER AND IN DIRECTING T HE 2 ASSESSING OFFICER TO APPLY GROSS PROFIT RATE OF 8.7 % INSTEAD OF 12%. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE DERIVES INCOME FROM MANUFACTURING AND SALE OF HARVESTER COMBINES. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER ISSUED DETAILED QUESTIONNAIRE AND THE ASSESSEE, IN RESPONSE TO THE SAME FILED THE REP LY IN WHICH ASSESSEE CLAIMED TO HAVE SUBMITTED DETAILS AS KED FOR BY THE ASSESSING OFFICER. HOWEVER, THE BOOKS O F ACCOUNT WERE NOT PRODUCED BEFORE THE ASSESSING OFFI CER. THE ASSESSING OFFICER, THEREFORE, REJECTED THE BOOK RESULTS OBSERVING THAT THE ASSESSEE HAS NOT PRODUCED THE BO OKS OF ACCOUNT. THE ASSESSING OFFICER FURTHER OBSERVED TH AT IN THE ABSENCE OF STOCK REGISTER, THE CONSUMPTION OF R AW MATERIAL, THE MONTH-WISE PRODUCTION OF COMBINES IS NOT VERIFIABLE. FURTHER, NO DETAILS OF WEIGHT OF TYRES , ENGINES ETC. WERE FURNISHED AND THE VALUATION OF CLOSING ST OCK WAS NOT ACCEPTED IN THE ABSENCE OF PURCHASE BILLS. SINC E BOOK RESULTS WERE NOT VERIFIABLE AND ASSESSEE DID NOT PR ODUCE THE BOOKS OF ACCOUNT AT ASSESSMENT STAGE, THEREFORE , THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE GP IN THIS CASE. 5. THE ASSESSEE HAS SHOWN GP AT 7.6% OF THE TURNOVE R. THE ASSESSING OFFICER OBSERVED THAT IN THE CASE OF M/S STANDARD CORPORATION OF INDIA, GP RATE OF 14.21% IS DECLARED. THE ASSESSING OFFICER FURTHER OBSERVED T HAT GP 3 IN THE CASE OF M/S PREET AGRO INDUSTRIES PVT. LTD. SHOWS AT 12.72%. THE ASSESSEE AT THE ASSESSMENT STAGE EXPLA INED THAT GROSS PROFIT IN HARVESTER COMBINE BUSINESS DEP ENDS UPON THE QUALITY AND BRAND NAME OF THE COMBINE. TH E GP WAS 7.1% IN ASSESSMENT YEAR 2009-10 FOR SALES OF RS . 8.42 CR AND IN ASSESSMENT YEAR IN APPEAL 2010-11, IT IS 7.6% ON THE TOTAL SALES OF RS. 10.90 CR. THERE IS AN IN CREASE IN THE SALES AS WELL AS MARGIN OF THE PROFIT. THE ASS ESSEE IS NOT PAYING ANY COMMISSION AND COMPLETE DETAILS ARE FILED. EVEN THE GP MARGIN OF ONE OF THE APPROVED MANUFACTU RER I.E M/S MALKIAT AGRO INDUSTRIES, NABHA IS 8.27% AGA INST SALES OF RS. 2640.11 LACS FOR THE ASSESSMENT YEAR 2 010- 11. THE ASSESSEE BEING UN-APPROVED MANUFACTURER AR E CHARGING GP MARGIN OF 7.6% DURING THE YEAR. THE ASSESSEE, THEREFORE, CORRECTLY SHOWN THE GP. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT CONTENTI ON OF THE ASSESSEE AND ON REJECTION OF THE BOOKS OF ACCOU NT APPLIED GP OF 12%. THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS REITERATED THE SAME SUBMISSIO NS AND ALSO SUBMITTED THAT ACCOUNTS OF THE ASSESSEE AR E AUDITED AND ALSO SUBMITTED THAT HISTORY OF THE ASSE SSEE SHOULD BE CONSIDERED WHILE ESTIMATING THE PROFIT. SINCE THERE IS INCREASE IN THE SALES AND PROFIT IN ASSESS MENT YEAR UNDER APPEAL AS COMPARED TO THE EARLIER YEARS, THEREFORE, ADDITION WAS WHOLLY UNJUSTIFIED. THE AS SESSING OFFICER ALSO FAILED TO CONSIDER COMPARABLE CASE OF M/S MALKIAT AGRO INDUSTRIES, NABHA. THE HISTORY OF THE ASSESSEE WAS ALSO EXPLAINED IN THE CHART REPRODUCED AT 4 PAGE 6 OF THE IMPUGNED ORDER. THE ASSESSEE RELIED UPON SEVERAL DECISIONS IN SUPPORT OF THE CONTENTION THAT HISTORY OF THE ASSESSEE SHOULD BE CONSIDERED FOR ESTIMATING THE PROFIT RATE. THE ASSESSING OFFICER IN HIS COUNTER COMMENTS RELIED UPON ASSESSMENT ORDER. HE HAS SUBMITTED THAT GP OF 8.03% WAS DECLARED IN THE ASSESSMENT YEAR 2007-08, ON GROSS TURNOVER OF RS. 2 .27 CR AND ASSESSMENT WAS COMPLETED UNDER SECTION 143(3 ) AND CERTAIN ADDITIONS WERE MADE AND SUBSEQUENTLY AF TER APPEAL EFFECT, THE GP HAS BEEN COMPUTED AT 8.12%. 6. THE LD. CIT(APPEALS) CONSIDERING THE FACTS OF TH E CASE IN THE LIGHT OF THE SUBMISSIONS OF THE ASSESSEE CON FIRMED THE REJECTION OF THE BOOKS OF ACCOUNT. HOWEVER, CONSIDERING THE HISTORY OF THE ASSESSEE DIRECTED TO APPLY GP OF 8.7% OF THE TURNOVER DECLARED BY ASSESSEE AS AGAINST 12% GP APPLIED BY ASSESSING OFFICER AND RESTRICTED THE ADDITION TO RS. 11,99,288/-. THE AP PEAL OF THE ASSESSEE WAS THUS, PARTLY ALLOWED ON THIS ISSUE . HIS FINDINGS IN PARA 4.3 OF THE APPELLATE ORDER ARE REP RODUCED AS UNDER : 4.3 I HAVE CONSIDERED THE SUBMISSIONS MADE. IT IS NOTED THAT THE APPELLANT HAS FAILED TO PRODUCE THE BOOKS OF ACCOUNTS BEFORE THE A.O. FURTHER, OTHER DETAILS LIK E VALUATION OF STOCK ETC. AND DOCUMENTARY EVIDENCE IN SUPPORT OF VARIOUS CLAIMS WERE ALSO NOT SUBMITTED. THEREFORE, EVIDENTLY, IT WAS NOT POSSIBLE FOR THE A .O. TO VERIFY THE GENUINENESS OF THE BOOKS OF ACCOUNTS. TH EREFORE, I AM OF THE OPINION THAT THE A.O. HAS CORRECTLY REJ ECTED THE BOOK RESULTS SHOWN BY THE APPELLANT. FURTHER, AS REGARDS ESTIMATION OF GP, IT IS SEEN THAT THE A.O. HAS NOT SHOWN THE TRADING RESULTS OF THE COMPARABLE CASES T O THE APPELLANT WHICH IS AGAINST PRINCIPLE OF NATIONAL JU STICE. THE APPELLANT ON THE OTHER HAND, HAS DULY SUBMITTED HIS 5 REASONS FOR JUSTIFICATION OF THE GP DECLARED. THE A PPELLANT HAS DIFFERENTIATED HIS CASE FROM THE COMPARABLE CAS ES MENTIONED BY THE A.O. AND FURTHER RELIED ON THE CAS E OF MALKIAT AGRO INDUSTRIES PUT. LTD. TO JUSTIFY THE GP . IN THE CASE OF M/S HARBHAJAN SINGH & CO. IN ITA NO. 183/CHD/2013 FOR A.Y. 2008-09, THE HON'BLE ITAT, CHANDIGARH VIDE ORDER DATED 15.04.2013 AND RELYING ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. PRAVEEN KUMAR MITTAL DATED 13.10.20 11 HELD THAT EVEN AFTER REJECTION OF BOOKS OF ACCOUNTS , THE PAST HISTORY OF THE ASSESSEE HAS TO BE APPLIED AND ADOPTED FOR THE PURPOSE OF ESTIMATION OF GROSS PROF IT AS THE PAST HISTORY OF THE ASSESSEE IS BEST GUIDE TO ASCER TAIN AND DETERMINE THE TRADING RESULTS OF PARTICULAR YEAR. I N THIS CASE, THE ASSESSMENT FOR A.Y. 2007-08 HAS BEEN COMP LETED UNDER SCRUTINY. THE GP IN A.Y, 2007-08 AFTER THE APPELLATE ORDER COMES TO 8.24+%. LOOKING INTO THE ENTIRETY OF THE FACTS OF THE CASE, IN MY OPINION, IT IS FAIR TO RESTRICT THE GP TO 8.7% OF THE TURNOVER DECLARED BY THE APPE LLANT. THE GROSS PROFIT COMES TO RS. 94,85,279/- IN PLACE OF RS. 82,85,991/- DECLARED BY THE APPELLANT. THUS, ADDIT ION TO THE EXTENT OF RS.11,99,288/- IS CONFIRMED. 7. AFTER HEARING RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL ON THESE GROUNDS. THE REJECTION OF THE BOOKS OF ACCOUNT IN THE CASE OF TH E ASSESSEE IS NOT IN DISPUTE BECAUSE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT BEFORE ASSESSING OFFICER F OR EXAMINATION. THE LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT ASSESSEE HAS NOT PREFERRED ANY APPEAL AGAINST THE PART ADDITION MAINTAINED BY THE LD. CIT(APPEALS). THEREFORE, THE ONLY ISSUE LEFT FOR CONSIDERATION IS WHETHER LD. CIT(APPEALS) WAS JUSTIFIED IN APPLYING GP OF 8. 7% AGAINST GP OF 12% APPLIED BY THE ASSESSING OFFICER. IT IS NOT IN DISPUTE THAT THE GP AND THE TURNOVER OF THE ASSESSEE HAS INCREASED IN ASSESSMENT YEAR UNDER APP EAL AS COMPARED TO THE PRECEDING ASSESSMENT YEAR 2009-1 0. FURTHER, IN THE REMAINING PRECEDING ASSESSMENT YEAR S 2008-09 AND 2007-08, THE TURNOVER OF THE ASSESSEE W AS 6 RS. 4.01 CR AND RS. 2.27 CR ON WHICH GP OF 7.5% AND 8.03% HAVE BEEN DECLARED BY ASSESSEE. THEREFORE CONSIDERING THE HISTORY OF THE ASSESSEE, THERE IS I NCREASE IN THE TURNOVER AS WELL AS GP RATE IN ASSESSMENT YE AR UNDER APPEAL AS COMPARED TO THE EARLIER YEARS. EVE N IN THE CASE OF APPROVED MANUFACTURER I.E. M/S MALKIAT AGRO INDUSTRIES, NABHA, THE GP MARGIN WAS EXPLAINED AT 8 .27% IN ASSESSMENT YEAR 2010-11. 7(I) THE LD. CIT(APPEALS) CORRECTLY RELIED UPON D ECISION OF ITAT CHANDIGARH BENCH AND DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS PAR VEEN KUMAR MITTAL IN WHICH EVEN AFTER REJECTION OF THE B OOKS OF ACCOUNT, THE PAST HISTORY OF THE ASSESSEE WAS CONSI DERED FOR ESTIMATING THE PROFIT. IN THE CASE OF THE ASSE SSEE, REJECTION OF THE BOOKS OF ACCOUNT IS NOT IN DISPUTE . THEREFORE, LD. CIT(APPEALS) WAS JUSTIFIED IN RESTRI CTING THE GP OF 8.7% AGAINST 12% APPLIED BY ASSESSING OFFICER CONSIDERING THE ENTIRETY OF THE FACTS AND HISTORY O F THE CASE OF THE ASSESSEE. NO INFIRMITY HAS BEEN POINTE D OUT IN THE ORDER OF THE LD. CIT(APPEALS), THEREFORE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF LD . CIT(APPEALS). THESE GROUNDS OF APPEAL OF THE REVENU E ARE ACCORDINGLY DISMISSED. 8. ON GROUND NOS. 5 & 6, REVENUE CHALLENGED THE ORD ER OF LD. CIT(APPEALS) IN DELETING THE ADDITIONS OF RS . 1,25,591/- AND RS. 25,263/- MADE ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40(A)(IA) AND SECTION 40 A(3) OF 7 THE ACT. THE LD. CIT(APPEALS) NOTED THAT ASSESSEE HAS DEBITED RS. 2,06,054/- UNDER THE HEAD ADVERTISEMEN T & PUBLICITY EXPENSES. IN THIS CONNECTION RS. 1,25,5 91/- WAS PAID TO ONE PARTY ON WHICH NO TDS WAS DEDUCTED. THEREFORE, DISALLOWANCE WAS MADE UNDER SECTION 40(A )(IA). FURTHER, ASSESSING OFFICER ADDED RS. 25,263/- UNDER SECTION 40A(3) ON ACCOUNT OF CASH PAYMENT, AS IN PA YMENT DETAIL, NAME AND ADDRESS IS NOT MENTIONED. THE ASS ESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT ONCE BOOKS O F ACCOUNT HAVE BEEN REJECTED AND PROFIT HAS BEEN ESTI MATED, THEREFORE, BOTH ADDITIONS ARE NOT JUSTIFIED. THE A SSESSEE RELIED UPON DECISION OF ITAT HYDERABAD BENCH IN THE CASE OF TEJA CONSTRUCTION VS ACIT 29 TTJ (UO) 57/39 SOT 13 IN WHICH IT WAS HELD THAT, ONCE INCOME IS ESTIMATED BY REJECTING THE BOOKS OF ACCOUNT, NO FURTHER ADDITION SHOULD BE MADE. THE LD. CIT(APPEALS) ALSO FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SMT. SANTOSH JAIN 296 ITR 324 (P&H) IN WHICH IT WAS HELD THAT, WHERE INCOME OF THE ASSESSEE IS COMPUTED BY APPLYI NG GP RATE, THERE IS NO NEED TO LOOK INTO PROVISIONS OF S ECTION 40A(3) OF THE ACT AS APPLYING GROSS PROFIT TAKES CA RE OF EXPENDITURE. THE LD. CIT(APPEALS), THEREFORE, DELETED BOTH THE ADDITIONS. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DO N OT FIND ANY MERIT IN THESE GROUNDS OF APPEAL OF THE RE VENUE. ONCE BOOKS OF ACCOUNT HAVE BEEN REJECTED AND PROFIT HAVE BEEN ESTIMATED BY APPLYING HIGHER GP RATE, LD. 8 CIT(APPEALS) WAS JUSTIFIED IN DELETING BOTH THE ADD ITIONS. THE DECISION OF THE ITAT HYDERABAD BENCH AND OF JURISDICTIONAL HIGH COURT, AS MENTIONED ABOVE SQUAR ELY APPLY IN FAVOUR OF THE ASSESSEE TO THE FACTS OF THE CASE. THESE GROUNDS OF APPEAL OF THE REVENUE ARE ACCORDIN GLY, DISMISSED. 10. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH JUNE,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH