Sh. Naresh Kumar, Bathinda V. The Income-tax Officer, Bathinda

ITA 61/ASR/2014

• Counselvise Citation: 6120914 RSA 2014
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TARSEM LAL
• Assessee Lawyers: ASHWANI KALIA
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH ; AMRITSAR(SMC) . BEFORE SH. A.D. JAIN, JUDICIAL MEMEBR ITA NO.61(ASR)/2014 ASSESSMENT YEAR:2009-10 PAN:AROPK3236D SH.NARESH KUMAR, VS. INCOME TAX OFFICER, 17941, STREET NO.5A, WARD 1(1), BATHINDA. 40 FT ROAD, BATHINDA. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. ASHWANI KALIA, CA RESPONDENT BY: SH.TARSEM LAL, DR DATE OF HEARING : 09/09/2015 DATE OF PRONOUNCEMENT: 06/11/2015 ORDER THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2009-10 AGAINST THE ORDER DATED 29.11.2013 PASSED BY THE LD. CIT(A) , BATHINDA. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE REVISED GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A), BATHINDA HAS ERRED IN LAW AND ON FACTS, IN CONFIRMING THE GROSS PROFIT RATE OF 20% ON THE ALLE GED ACCOUNTED SALES OF RS.36,63,890/- AS AGAINST THE G ROSS PROFIT RATE OF 15% WHICH IS BEING REGULARLY DECLARED AND A LSO ACCEPTED BY CIT(A) FOR SALE AS PER BOOKS. 2. THAT THE LD. CIT(A), BATHINDA HAS ERRED IN LAW A ND ON FACTS, IN CONFIRMING THE DISALLOWANCE OF RS.50,000/- OUT OF L ABOUR EXPENSES ON ADHOC BASIS. ITA NO.61(ASR)/2014 2 3. THAT THE LD. CIT(A), BATHINDA HAS ERRED IN LAW A ND ON FACTS, IN CONFIRMING THE DISALLOWANCE OF RS.20,000/- FROM OTH ER EXPENSES ON ADHOC BASIS. 2. GROUND NO.1 IS AGAINST THE LD. CIT(A)S ACTION IN CONFIRMING THE GP RATE OF 20% ON THE ALLEGED UNACCOUNTED SALES OF RS. 36,63,890/- AS AGAINST THE GP RATE OF 15% ACCEPTED BY THE LD. CIT(A) FOR S ALE AS PER BOOKS. 3. THE FACTS ARE THAT THE ASSESSEE IS A SCRAP DEALE R DOING BUSINESS IN INDIVIDUAL STATUS. AS PER AIR INFORMATION THE ASSES SEE HAD SAVING FUND ACCOUNT NO.018715300003570 WITH HDFC. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE SAM E WAS NOT REFLECTED IN THE BALANCE SHEET FILED WITH THE INCOME TAX DEPARTMENT. THE ASSESSEE WAS REQUIRED TO EXPLAIN REGARDING THE DEBIT/CREDIT E NTRIES IN THE SAVING FUND ACCOUNT. BUT NO EXPLANATION WAS FILED. THE ASSESSEE WAS ALSO MAINTAINING ANOTHER CURRENT ACCOUNT WITH HDFC IN WHICH THE CLOS ING BALANCE AS PER BALANCE SHEET WAS RS.1,04,693/-. BUT AS PER THE BA NK ACCOUNT, THE SAME WAS RS.1,29,250/-. SINCE THE AO WAS NOT SATISFIED ABOUT THE COMPLETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUNT, THE ASSESSMENT WAS FRAMED U/S 144, AS PROVIDED U/S 145(3) OF THE INCOME TAX ACT. THE AO T REATED THE TOTAL DEPOSITS IN THE SAVING FUND ACCOUNT WITH HDFC AMOUN TING TO RS.36,63,890/ AS UNACCOUNTED SALES. THE AO APPLIED GROSS PROFIT R ATE OF 20% ON THE TOTAL SALES OF RS.96,92,608/- (RS.60,28,718/- AS PER RE GULAR BOOKS OF ACCOUNT + RS.36,63,890/- UNACCOUNTED SALES. THE AO FURTHER DI SALLOWED RS.50,000/- ITA NO.61(ASR)/2014 3 OUT OF LABOUR EXPENSES AND RS.20,000/- OUT OF OTHER EXPENSES AND ASSESSED THE INCOME AT RS.12,99,080/-. 4. THE LD. CIT(A) DIRECTED THE AO TO APPLY A GP RAT E OF 15% ON THE REGULAR SALES OF RS.60,28,718/-, AS DECLARED BY THE ASSESSEE IN THE ASSESSMENT YEARS 2008-09, 2009-10 & 2011-12, RELYING ON NARBA DA STEEL LTD. VS. ACIT, (2007) 108 TTJ(ASR) 741 FOR THE PROPOSITION THAT THE PAST HISTORY IS A GOOD GUIDE TO THE AO FOR ESTIMATING THE INCOME IN T HE CASE OF REJECTION OF BOOKS OF ACCOUNT. HOWEVER, APROPOS THE UNACCOUNTED SALES OF RS.36,63,890/-, HOLDING THAT IN UNACCOUNTED TRANSAC TIONS, SINCE NO TAXES ARE PAID, PROFIT MARGIN IS ALWAYS MORE. THE LD. CIT(A) CONFIRMED THE APPLICATION OF GP RATE OF 20%. 5. AS AGAINST THIS, THE LD. COUNSEL FOR THE ASSESSE E HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE GP RATE OF 2 0% ON THE ALLEGED UNACCOUNTED SALES OF RS.36,63,890/-, AS AGAINST THE GP RATE OF 15%, WHICH IS REGULARLY BEING DECLARED BY THE ASSESSEE AND WHICH WAS ALSO ACCEPTED BY THE LD. CIT(A) FOR THE YEAR UNDER CONSIDERATION WITH RE GARD TO THE SALES AS PER BOOKS. HE FURTHER REQUESTED THAT REGARDING UNACCOUN TED SALES ALSO, GP RATE OF 15% BE APPLIED AND SAME EXPENSES BE ALSO ALLOWE D. 6. ON THE OTHER HAND, THE LD. DR HAS STRONGLY SUPPO RTED THE IMPUGNED ORDER ON THIS ISSUE. IT HAS BEEN CONTENDED THAT UN DENIABLY, SALES WERE OUTSIDE THE BOOKS OF ACCOUNT; THAT, THEREFORE, VAT EXPENSES WERE NOT PAID ITA NO.61(ASR)/2014 4 BY THE ASSESSEE; AND THAT THE EXPENSES WERE INCURRE D FROM THE SOURCES NOT DISCLOSED BY THE ASSESSEE, FOR WHICH REASON THERE IS NO QUESTION OF ALLOWING ANY EXPENSES. 7. IN THIS REGARD, THE OBSERVATION OF THE LD. CIT(A ) THAT IN THE CASE OF UNACCOUNTED SALES, SINCE NO TAXES ARE PAID, THE PRO FIT MARGIN IS ALWAYS MORE, STANDS NOT EFFECTIVELY REBUTTED. IN THE FACTS, THE APPLICATION OF GP RATE OF 20%, IN MY CONSIDERED OPINION, HAS RIGHTLY BEEN AP PLIED. IT CANNOT BE EQUATED WITH THE GP RATE APPLIED ON ACCOUNTED SALES . A DETERRENT NEEDS TO BE IMPOSED, WHICH HAS RIGHTLY BEEN DONE BY THE LD. CI T(A). 8. APROPOS THE CLAIM OF EXPENSES, THE LD. DR IS RI GHT IN CONTENDING THAT THESE EXPENSES WERE INCURRED FROM UNDISCLOSED SOUR CES, THEREFORE, NO ALLOWANCE OF EXPENSES IS CALLED FOR. AS SUCH GROUND NO.1 IS REJECTED. 9. APROPOS GROUND NOS. 2 & 3, THESE GROUNDS CHALLEN GE THE LD. CIT(A)S ACTION OF CONFIRMING THE DISALLOWANCE OF RS.50,000/ - OUT OF LABOUR EXPENSES ON AD-HOC BASIS AND RS.20,000/- OUT OF OTHER EXPENS ES, AGAIN ON AD-HOC BASIS. 10. BOTH THESE DISALLOWANCES WERE MADE AND CONFIRME D, SINCE THE ASSESSEE DID NOT PRODUCE ANY VOUCHER. 11. AS PER THE LD. COUNSEL FOR THE ASSESSEE, ADDIT IONS STAND ALREADY MADE, WHILE DETERMINING THE GROSS PROFIT AND NO EXPENSES ARE ALLOWED. THEREFORE, IT IS CONTENDED THAT NO FURTHER ADDITION CAN BE MADE. ITA NO.61(ASR)/2014 5 12. ON THE OTHER HAND, THE LD. DR HAS PLACED RELIAN CE ON THE IMPUGNED ORDER QUA BOTH THESE GROUNDS. 13. HERE, WE FIND THAT THE DISALLOWANCE OF RS.50,00 0/- IS OUT OF LABOUR EXPENSES. LABOUR EXPENSES ARE DIRECTLY RELATED TO THE SALES MADE AND AS SUCH, THEY NEED TO BE ALLOWED. THE ASSESSEES CONTE NTION HERE IS ACCEPTED, SINCE THE ADDITION ALREADY STANDS MADE WHILE APPLYI NG THE GP RATE. 14. SO FAR AS REGARDS THE OTHER EXPENSES, HOWEVER, IT HAS NOT BEEN SHOWN AS TO WHETHER, AND IF SO, HOW THESE EXPENSES ARE D IRECTLY RELATED TO THE SALES MADE. THEREFORE, ON THIS ACCOUNT, NO DISALLOWANCE I S CALLED FOR. THE LD. CIT(A)S ORDER IN THIS REGARD, CONFIRMING THE DISAL LOWANCE OF RS.20,000/- OUT OF OTHER EXPENSES IS CONFIRMED. ACCORDINGLY, GR OUND NO.2 IS ACCEPTED, WHEREAS, GROUND NO.3 IS REJECTED. 15. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 6TH NOVEMB ER, 2015. SD/- (A.D. JAIN) JUDICIAL MEMBER /SKR/ DATED: 06/11/2015 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. NARESH KUMAR, BATHINDA 2. THE ITO, WARD 1(1) BATHINDA. 3. THE CIT(A), BATHINDA 4. THE CIT,, BATHINDA. 5. THE SR DR, ITAT, ASR. TRUE COPY BY ORDER