ITO, Kurukshetra V. Sh. Anurodh Kumar Goel, Thanesar

ITA 643/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5175 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 21-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: K R CHHABRA
• Keywords: Rejection of books of accounts
• Section: 44AD; 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 643/CHD/2016 ASSESSMENT YEAR : 2011-12 THE ITO, VS. SHRI ANURODH KUMAR GOEL, WARD 1, PROP. M/S BALAJI ENTERPRISES, KURUKSHETRA, NEAR TARA CHAND DHARAMSHALA, THANESAR. PAN NO. ABKPG8699L & C.O. NO. 25/CHD/2016 IN ITA NO. 643/CHD/2016 ASSESSMENT YEAR : 2011-12 SHRI ANURODH KUMAR GOEL, VS THE ITO, PROP. M/S BALAJI ENTERPRISES, WARD 1, NEAR TARA CHAND DHARAMSHALA, KURUKSHETRA. THANESAR. PAN NO. ABKPG8699L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MITTAL, DR RESPONDENT BY : SHRI K.R.CHHABRA DATE OF HEARING : 03.04.2017 DATE OF PRONOUNCEMENT : 18.05.2017 ORDER PER MS. DIVA SINGH,JM THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE CORRECTNESS OF THE ORDER DATED 31.03.2016 OF LD. CIT(APPEA LS) KARNAL PERTAINING TO 2011-12 ASSESSMENT YEARS ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN LAW IN APPLYING THE GROSS PROFIT @ 4% AS AGAINST THE RATE OF 30% APPLIED BY THE AO, BY IGNORING THE FACT THAT EV EN THE STATUTE HAS PROVIDED SUCH OPTION U/S 44AD TO ACCEPT PROFIT RATE ONLY @ 8% & ABOVE U/S 44AD. 2. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE G ROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR DISPOSED OFF. 2. THE ASSESSEE HAS ALSO FILED THE CROSS OBJECTION IN TH E PRESENT APPEAL ASSAILING THE CORRECTNESS OF THE ORDER OF THE LD. CIT(APPE ALS) ON THE FOLLOWING GROUNDS : 1. ON FACTS AND IN CIRCUMSTANCES OF THE CASE LND. CIT ( A) WAS NOT 2 JUSTIFIED IN APPLYING THE PROVISION OF SECTION 145 OF THE I.T.ACT WHEN THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNT, I NVENTORY OF STOCK AND NO INFIRMITY IN THE BOOKS OF ACCOUNT WAS FOUND. 2. ON FACTS AND IN CIRCUMSTANCES OF THE CASE LND. CIT ( A) WAS NOT JUSTIFIED IN APPLYING THE GROSS PROFIT RATE OF 4% O N THE SALES OF RS. 8,24,39,918/- AS AGAINST 2.35% SHOWN BY THE ASSESSE E. 3. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSE E'S RETURN WAS PICKED UP FOR SCRUTINY. THE ASSESSEE IN THE YEAR UNDER CONSID ERATION WAS DEALING IN HONEY. THE ASSESSEE DISCLOSED GP RATE OF 2.31% AS THE GROSS PROFIT SHOWN WAS OF RS. 19,05,396/- ON GROSS TURNOVER OF RS. 8,24,39,918/-. TH E ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE TO VERIFY THE GROSS PROFIT RA TE DISCLOSED. IN RESPONSE TO THIS, THE ASSESSEE AS PER RECORD IS FOUND T O HAVE STATED THAT ORIGINAL SALE BILLS AND PURCHASE BILLS HAVE ALREADY BEEN PRODU CED. ADDRESSING THE PECULIAR BUSINESS, IT WAS SUBMITTED THAT THE VERY NAT URE OF THE BUSINESS PRECLUDES THE ASSESSEE FROM MAINTAINING A STOCK REGISTER AS HONEY WAS PURCHASED FROM FIELDS AT VARIOUS PLACES AND DISPATCHED TO BUYERS FROM THOSE PLACES. HOWEVER, NOT CONVINCED WITH THE EXPLANATION AS IN THE ABSENCE OF DAY- TO-DAY RECORD OF PURCHASE AND SALE, THE BOOK RESULTS WE RE REJECTED AND ADDITION WAS MADE BY THE ASSESSING OFFICER HOLDING AS UNDER : 6. AS PER PURCHASE VOUCHERS PRODUCED ON 12.03.2014, TH E ASSESSEE VIDE VOUCHERS NO. 151,153 & 200 PURCHASED HONEY @ R S.48 PER KG., RS.63 PER KG. AND RS.73 PER KG. RESPECTIVELY. ON THIS BAS IS AVERAGE PURCHASE PRICE OF HONEY COMES TO RS.61/-PER KG. WHILE AS PER SALE VOUCHER DT.OL.04.2010 .PRODUCED ON 12.03.2014, THE ASSESSEE SOLD HONEY & RS.90/- PER KG. AND ASSESSEE ALSO SOLD HONEY & @ RS .95 PER KG. VIDE SALE VOUCHER NO 250 DT. 30.01.2011. ON THIS BASIS AVERAG E COMES TO RS.92.5 PER KG. IN THIS WAY AND ON THIS BASIS THE ASSESSEE SH OULD HAVE SHOWN GP MORE THAN 50%. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND TAKING A REASONABLE VIEW OF THE MATTER , G P RATE OF 30% ON THE SALES OF RS.82439918/- IS APPLIED. 7. ON THIS BASIS THE GROSS PROFIT WORKS OUT TO RS. 247 31975/- AS AGAINST RS. 1905396/- SHOWN BY THE ASSESSEE. THIS W OULD RESULT INTO AN ADDITION OF RS.22826579/- AS AGAINST RS.1905396/ - SHOWN BY THE ASSESSEE. THIS WOULD RESULT INTO AN ADDITION OF RS. 22826S79/-. ACCORDINGLY AN ADDITION OF RS. 22826579/- IS MADE TO THE TAXABLE INCOME OF THE ASSESSEE. 4. THE ASSESSEE CHALLENGED THE REJECTION OF BOOKS OF ACC OUNT AND THE ADDITION ON MERIT BEFORE THE LD. CIT(APPEALS). THE REJECTIO N OF BOOKS OF ACCOUNT WAS UPHELD AND CONSIDERING THE PAST HISTORY OF T HE ASSESSEE AND THE COMPARATIVE CHART GIVEN, THE LD. CIT(APPEALS) RESTRICTED THE GROSS PROFIT TO 4% OF THE SALES. AGGRIEVED BY THE AFORESAID FINDING, BOTH THE PARTIES ARE IN APPEAL BEFORE THE ITAT ON THE AFOREMENTIONED GROUNDS. 5. THE LD. SR.DR INVITING ATTENTION TO THE ASSESSMENT ORDE R SUBMITTED THAT IN THE ABSENCE OF MAINTAINING THE BASIC DO-CUMENTS I.E. THE STOCK REGISTER, THE 3 CORRECTNESS OF THE DAY-TODAY SALES AND PURCHASES COULD NOT BE VERIFIED. IT WAS ALSO HIS SUBMISSION THAT THE RELIEF GRANTED BY THE LD. CIT(AP PEALS) RELYING UPON PAST HISTORY, IN WHICH PRESUMABLY ASSESSMENT HAS N OT BEEN MADE UNDER SECTION 143(3) OF THE ACT, CAN NOT BE ACCEPTED. IT WAS ALSO HIS SUBMISSION THAT NOWHERE HAS THE LD. CIT(A) GIVEN A FINDING TH AT HE HAS SEEN THE FACTS HIMSELF AS HE HAS MERELY ACCEPTED THE ARGUMEN TS OF THE ASSESSEE AS TRUE AND CORRECT WITHOUT ANY VERIFICATION. ACCORDINGLY, IT WAS HIS PRAYER THAT EITHER THE ADDITION MADE BY THE ASSESSING OFFICER MAY BE SUSTAINED OR IN THE ALTERNATE, THE ISSUE MAY BE RESTORED TO THE ASSESSING O FFICER TO VERIFY THE CORRECT FACTS. 6. THE LD. AR, ON THE OTHER HAND, SUBMITTED THAT THE VER Y NATURE OF ASSESSEE'S BUSINESS DID NOT MAKE IT FEASIBLE THAT A STOCK REGISTER COULD BE MAINTAINED. ADDRESSING THE PAST HISTORY ON THE ISSUE, IT W AS SUBMITTED IT WOULD SHOW THAT NO ADDITION HAS BEEN MADE. IT WAS FURTHER SUBMITTED THAT IN 2013-14 ASSESSMENT YEAR, IT HAD BEEN BROUGHT TO THE NOTICE OF THE LD. CIT(APPEALS) THAT THE ASSESSING OFFICER HIMSELF IN 143(3) PROC EEDINGS, HAD ACCEPTED GROSS PROFIT RATE OF 1.50% ON SAME SET OF FACTS. ACCORDINGLY, IT WAS HIS SUBMISSION THAT THE BOOKS OF ACCOUNT WERE WRONGLY REJECTED AND NO ADDITION ON FACTS SHOULD HAVE BEEN SUSTAINED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE BEFORE THE LD. CIT(A ) RELIED UPON PAST HISTORY ON THE ISSUE AND BEFORE US HAS RELIED UPON THE O RDER PASSED BY THE A.O. UNDER SECTION 143(3) IN 2013-14 ASSESSMENT YEAR. ADDR ESSING THE SAID ORDER FIRST, IT IS SEEN THAT THE ASSESSEE WAS FOUND TO HA VE MAINTAINED STOCK REGISTER AND PURCHASE AND SALES BILLS. THUS, THE FACTS ARE DISTINGUISHABLE. IT IS A MATTER OF FACT THAT THE ASSESSEE BEFORE THE ASSESSING O FFICER HAD ALSO RELIED UPON COMPARATIVE GROSS PROFIT RATE OF OTHER TRADER S FOR THE YEAR UNDER CONSIDERATION. WE NOTE THAT THE CORRECTNESS OF THE SAID CLAIM HAS NEITHER BEEN EXAMINED BY THE CIT (APPEALS) NOR BY THE ASSESSING OFFICER . THUS, CONSIDERING THE ISSUE RAISED IN THE DEPARTMENTAL APPEAL, WE FIND THERE IS NO BASIS WHATSOEVER, FOR THE ASSESSING OFFICER TO APPLY THE G .P. RATE OF 30%. ACCORDINGLY, IN THE AFOREMENTIONED PECULIAR FACTS AND CIRCU MSTANCES, WE FIND THAT AS FAR AS DEPARTMENTAL GROUND IS CONCERNED, IT HAS TO BE DISMISSED. THE LAW IS WELL SETTLED THAT EVEN THOUGH IN A BEST JUDGEMENT ASSESSMENT, THERE IS A CERTAIN DEGREE OF GUESS WORK, HOWEVER, BEST JUDGEME NT ASSESSMENT SHOULD NOT BE ARBITRARY. IT IS INCUMBENT ON THE ADJUDICATING AU THORITY TO ATTEMPT TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME. SUPPORT IS DRAWN FROM THE 4 DECISION OF THE APEX COURT IN THE CASE OF KACHWALA GEMS V JCIT 288 ITR 10 (SC). CONSIDERING THE GROUNDS RAISED BY THE ASSESSEE, WE FIND THAT AS FAR AS THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS IS CONCERNED, THE FINDING HAS TO BE UPHELD AS IN THE ABSENCE OF STOCK REGISTER ETC. WHICH WE NOTE HAS BEEN MAINTAINED IN THE SUBSEQUENT YEAR, THE CORRECTNESS OF TH E ASSESSEE'S ACCOUNT, CAN NOT BE SAID TO BE VERIFIABLE. 7.1 ADDRESSING THE SECOND GROUND RAISED IN THE CROSS O BJECTION FILED BY THE ASSESSEE, WE NOTE THAT ON THE FACTS, THE VIEW TAKEN BY THE ASSESSING OFFICER IN 2013-14 ASSESSMENT YEAR IS NOT OF MUCH HELP AS IT PROCE EDS ON A DIFFERENT SET OF FACTS AS WOULD BE EVIDENT FROM THE FOLLOWING EXTRACT OF TH E ORDER DATED 21.03.2016 :- 3.1 DURING THE COURSE OF INSTANT ASSESSMENT PROCEE DINGS, THE ASSESSEE FILED AUDITED BALANCE-SHEET, TRADING ACCOU NT AND PROFIT & LOSS ACCOUNT ALONG WITH ANNEXURES THERETO, STOCK REGISTER AND PU RCHASE/SALE BILLS. IT HAS BEEN SUBMITTED THAT THE VALUATION OF CLOSING STOCK HAS B EEN MADE AT MORE THAN THE PURCHASE PRICE; THAT THE VALUATION STOCK HAS BEEN M ADE ON FIFO METHOD; THAT THE RATES APPLIED BY THE AO FOR THE ASSES SMENT YEAR 2011-12 ARE NOT APPLICABLE FOR THE SUBSEQUENT YEARS; THAT THE ASSES SEE HAS FILED QUANTITATIVE DETAILS AND VALUE OF PURCHASE, SALE AND CLOSING STO CK. THE ID COUNSEL PLEADED THE BOOKS-RESULTS TO BE CORRECTLY DECLARED. 3.2 THE AFORE-DISCUSSED EXPLANATION / SUBMISSIONS HAVE BEEN CONSIDERED TOGETHER WITH THE INFORMATION PLACED ON RECORD AND THE BOOKS OF ACCOUNT PRODUCED. HOWEVER, IT IS SEEN THAT IN ITS TRADING ACCOUNT, THE ASSESSEE HAS CLAIMED TRANSPORT EXPENSES AMOUNTING RS.10,09,640/- . ON A PERUSAL OF THE CORRESPONDING VOUCHERS IT IS NOTICED THAT A NUMBER OF SUCH EXPENSES HAVE BEEN CLAIMED ON THE BASIS OF SELF-PREPARED VOUCHERS NOT SUPPORTED WITH THE PROPER BILLS; PAYMENTS HAVE BEEN MADE IN CASH AND EVEN THE IDENTITY OF THE RECIPIENTS IS NOT ASCERTAINABLE TO VERIFY THE SAME. ON BEING CO NFRONTED WITH THIS OBSERVATION, THE ID COUNSEL PLEADED THAT THE ASSESSEE TRADED IN HONEY FOR WHICH THE SUPPLIERS WERE LARGELY THE FARMERS OR THE VILLAGERS. AND TH AT, THEREFORE, IN SOME OF THE CASES, THE TRANSPORTATION HAD TO BE GOT DONE THROUG H UN-ORGANIZED TRANSPORTERS WHO DID NOT HAVE THEIR GRS, BUILTY, BI LLS ETC.. FURTHER, THAT SUCH TRANSPORTATION WAS NECESSARY FOR CARRYING THE GOODS . HOWEVER, AFTER FURTHER DISCUSSION, THE ID COUNSEL CONSENTED FOR AN ADHOC DISALLOWANCE OF RS.1,50,000/- OUT OF SUCH EXPENSES, SUBJECT TO NO P ENALTY. ACCORDINGLY, AN ADDITION OF RS.1,50,000/- IS HEREBY MADE TO THE ASSESSEE'S TOTAL INCOME. 3.3 FURTHER, THE ASSESSEE HAS SHOWN CLOSING STOC K OF HONEY AT 5,394.5 KG VALUED AT RS.5,21,948/-.AS PER THE MONTH-WISE PURCH ASE/SALE CHART FILED BY THE ASSESSEE, THE AVERAGE PURCHASE RATE FO R THE MONTH PF MARCH 2013 COMES TO RS. 100.70 PER KG. IT HAS ALSO BEEN SUBMIT TED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT THE ASSESSEE HAS FOLLO WED FIFO METHOD IN TRADING. THEREFORE, THE CLOSING STOCK WOULD BE OUT OF THE PURCHASES MADE DURING MARCH, 201.3, REQUIRING ITS VALUATION @ RS. 100.70 PER KG. IN THIS WAY, THE VALUE OF CLOSING STOCK WORKS OUT TO RS.5,43,226 /- (I.E.5394.5 X 100.70)/-. THE ASSESSEE HAS SHOWN ITS VALUE AT RS.5,21,948/-. (THEREFORE, AN ADDITION OF RS.21,278/- (I.E 5,43,226-5,21,948) IS HEREBY MADE ON ACCOUNT OF DIFFERENCE IN VALUATION OF THE CLOSING STOCK OF HONEY, TO WHICH T HE ID COUNSEL HAS ALSO CONSENTED. 7.2 ACCORDINGLY, IN THE AFORESAID PECULIAR FACTS AND CIRCUMS TANCES HOLDING THAT THE INCOME OF THE ASSESSEE UNDER CONSIDERATION HAS TO BE ESTIMATED, THE 5 ISSUE IS RESTORED BACK TO THE FILE OF THE A.O. WHILE SO DIREC TING, IT MAY NOT BE OUT OF PLACE TO DIRECT THAT THE ESTIMATE HAS TO BE BASE D ON ACCEPTABLE JUDICIAL STANDARDS AND THE BEST COMPARABLE STANDARD CAN BE AS SESSEE'S OWN HISTORY. HOWEVER, SINCE THE REQUEST FOR REMAND IS ACCEPTED, THE IS SUE IS LEFT OPEN TO THE A.O. TO ESTIMATE THE SAME TAKING ASSESSEE'S HISTORY AND/OR BY MAKING A COMPARISON WITH SIMILARLY PLACED PERSONS IN THE YEAR UNDER CONSIDERATION AS THE ESTIMATE MADE WITHOUT APPLYING JUDICIALLY ACCEPTABLE C RITERIA IS OPEN TO THE CHALLENGE OF BEING PERVERSE. THUS, IN ORDER TO AVOID T HE TAINT OF ARBITRARINESS, THE LD. AO IS DIRECTED TO PASS A JUST AND FAIR ORDER IN ACCORDANCE WITH LAW. ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE BACK TO THE FILE OF A.O. IN THE LIGHT OF THE ABOVE DIRECTIONS TO ESTIMATE GROSS PROFIT RATE. 8. AS A RESULT, THE DEPARTMENTAL APPEAL STANDS REJECTED AND THE ASSESSEE'S CROSS OBJECTION PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY,2017. SD/- SD/- (ANNAPURNA GUPTA) (DI VA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.