Sri Raghunath Traders, Delhi V. ITO Ward 29(1), New Delhi

ITA 660/DEL/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6596 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 30-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Assessee Lawyers: K P MANJANI
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER ITA NO.660/DEL/2019 ASSESSMENT YEAR: 2011-12 SHRI RAGHUNATH TRADERS 2046, KATRA TOBACOO, KHARI BAOLI, DELHI PAN NO. AABFS5596C VS INCOME TAX OFFICER WARD 29 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K. P. MANJANI, ADVOCATE RESPONDENT BY SHRI S. L. ANURAGI, SR. DR DATE OF HEARING: 04/07/2019 DATE OF PRONOUNCEMENT: 02/08/2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 03.12.2018 OF THE CIT(A)-16, NEW DELHI RELATING TO A. Y. 2011-12. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM AND DEALS IN TRADING OF KIRYANA ME RCHANTS. IT FILED ITS RETURN OF INCOME ON 30.09.2011 DECLARING TOTAL INCOME OF RS.45,240/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE ASSESSING OFFICER OBSERVED FROM THE AUDIT REPOR T THAT ASSESSEE IS NOT MAINTAINING ANY STOCK RECORD AND TH E AUDITORS HAVE POINTED OUT THAT PHYSICAL STOCK WAS VERIFIED A ND CERTIFIED PAGE | 2 BY THE PARTNER. HE, THEREFORE, HELD THAT ALL SALES/ PURCHASES ARE NOT PROPERLY ENTERED IN THE BOOKS OF ACCOUNT. HE, THEREFORE, REJECTED THE BOOK RESULTS BY INVOKING THE PROVISION S OF SECTION 145 OF THE IT ACT. HE ANALYZED THE PAST RESULTS OF THE ASSESSEE VIS--VIS THE CURRENT YEAR RESULTS WHICH ARE AS UND ER :- ASSTT. YEAR TURN OVER G. P. GP% 2009-10 RS.2,50,17,229/- RS.19,01,928/- 7.60% 2010-11 RS.76,45,540/- RS.5,63,794/- 7.37% 2011-12 RS.2,09,13,300/- RS.11,98,677/- 5.73% 3. ADOPTING THE GP RATE OF 10% THE ASSESSING OFFICE R MADE ADDITION OF RS.8,92,653/-TO THE TOTAL INCOME OF THE ASSESSEE. 4. IN APPEAL THE LD.CIT(A) SUSTAINED THE ADDITION S O MADE BY THE ASSESSING OFFICER. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GRO UNDS OF APPEAL :- 1. THE LEARNED A. O. AS WELL AS CIT(A) HAVE ERRED O N FACTS AS WELL AS IN LAW IN SUSTAINING THE TRADING A DDITION OF RS.8,92,653/- EVEN THOUGH NO DEFECTS IN BOOKS INDICATED, BOOKS ARE AUDITED ONES. 2. IT IS WRONGLY STATED THERE IS A HISTORY OF G. P. RATE OF 10% IN THIS CASE, WHICH IS CONTRADICTORY TO THE FAC TS GIVEN IN THIS ORDER. 3. IT IS WRONG THAT THERE IS NO STOCK REGISTER, QUA NTITATIVE TALLY ITSELF IS A STOCK REGISTER BECAUSE IT INDICAT ES OF PAGE | 3 PURCHASES AND SALES IN RUPEES AND GOODS BY QUANTITY AND WEIGHT. 4. THE ABOVE ADDITION IS MERELY ON SURMISES. 6. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION MADE BY THE ASSESSING OFFICER. HE SUBMITTED THAT NO DEFECTS WER E FOUND IN THE BOOKS OF ACCOUNTS EXCEPT NON MAINTENANCE OF STO CK RECORDS. HOWEVER, THE BOOKS OF ACCOUNTS ARE MAINTAINED BY TH E ASSESSEE GIVING QUANTITY WISE PURCHASES AND SALES. THE QUANT ITY OF CLOSING STOCK ALSO TALLIES. THE ASSESSING OFFICER H AS NOT GIVEN ANY INSTANCE OF EARNING OF HIGHER GP OF ANY OTHER C OMPARABLES CONCERN. HE SUBMITTED THAT FROM THE A. Y. 2000-01 T O 2006-07 THE TRADING ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED BY THE CIT(A) AND ON FURTHER APPEAL BY REVENUE, THE TRIBUNAL HAS DISMISSED THE APPEAL FILED BY THE REVENUE. 7. SO FAR AS THE DECISION RELIED BY THE CIT(A) IN T HE CASE OF KACHWALA GEMS VS. CIT [2007] 288 ITR 10 (SC) IS CON CERNED HE SUBMITTED THAT THERE WERE SO MANY DEFECTS POINTED O UT BY THE LOWER AUTHORITIES AND THERE WAS NO QUANTITATIVE TAL LY FOR WHICH THE BASIS OF VALUATION OF CLOSING STOCK BY THE ASSE SSEE WAS REJECTED AND BEST JUDGMENT ASSESSMENT WAS ADOPTED. HOWEVER, IN THE INSTANT CASE THERE IS NO SUCH DEFECT EXCEPT NON MAINTENANCE OF THE STOCK RECORD. HOWEVER, THE BOOKS MAINTAINED BY THE ASSESSEE GIVES THE FULL QUANTITAT IVE DETAILS AND, THEREFORE, THE DECISION RELIED ON BY LD. CIT(A ) IS NOT APPLICABLE. PAGE | 4 8. SO FAR AS THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S. CHADHA AUTOMOBILES INDIA REPORTED IN 13 TAXMAN.COM 152 IS CONCERNED, HE SUBMITTED THAT IN T HAT CASE ALSO THE ASSESSING OFFICER FOUND VARIOUS DISCREPANC IES IN THE BOOKS OF ACCOUNTS PRODUCED AND, THEREFORE, HE REJEC TED THE BOOK RESULTS AND WENT FOR ESTIMATING THE PROFIT. HOWEVER , IN THE INSTANT CASE AS MENTIONED EARLIER, THERE IS NO SUCH OTHER DEFECT EXCEPT NON MAINTENANCE OF STOCK RECORD. THEREFORE, BOTH THE DECISIONS RELIED ON BY LD. CIT(A) WHILE SUSTAINING THE ADDITION IS NOT JUSTIFIED. 9. THE LD. DR ON OTHER HAND HEAVILY RELIED ON THE O RDER OF THE CIT(A). HE SUBMITTED THAT THE LD. CIT(A) HAS GIVEN CATEGORICAL FINDING THAT STOCK REGISTER IS INDISPENSABLE NECESS ITY FOR ARRIVING OF THE CORRECT PROFIT OF THE BUSINESS. SHE HAD ALSO HELD THAT AVAILABILITY OF SALE/ PURCHASE LEDGER ALONE IN THE ABSENCE OF THE CORRESPONDING STOCK REGISTER CANNOT GIVE CORRECT AN D TRUE NATURE OF THE STATE OF AFFAIRS OF THE BUSINESS. FURTHER TH E ASSESSEE HAS PURCHASED FROM THE SISTER CONCERN M/S. SHRI RAGHUNA TH TRADERS WHERE ALSO THE BOOKS OF ACCOUNTS WERE REJEC TED. HE ACCORDINGLY SUBMITTED THAT AN ASSESSEE WHO IS NOT M AINTAINING ANY STOCK REGISTER CANNOT BE EQUATED WITH AN ASSESS EE MAINTAINING STOCK RECORD. THEREFORE, THE LD. CIT(A) WAS FULLY JUSTIFIED IN SUSTAINING THE ADDITION MADE BY THE AS SESSING OFFICER BY ADOPTING THE GP RATE OF 10%. 10. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO PAGE | 5 CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME. I FIND THE ASSESSING OFFICER ESTIMATED THE GP RATE AT 10% AS A GAINST 5.73% SHOWN BY THE ASSESSEE ON THE GROUND THAT ASSE SSEE HAS NOT MAINTAINED ANY STOCK REGISTER AND THE CLOSING S TOCK WAS CERTIFIED BY THE PARTNERS ON THE BASIS OF VERIFICAT ION OF PHYSICAL STOCK. I FIND THE LD. CIT(A) RELYING ON VARIOUS DE CISIONS UPHELD THE ACTION OF THE ASSESSING OFFICER. IT IS THE SUB MISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT ALTHOUGH ASSESSEE HAS NOT MAINTAINED ANY STOCK REGISTER, HOWEVER, THE ACCOUNT S ARE MAINTAINED IN SUCH A WAY THAT QUANTITATIVE DETAILS CAN BE ARRIVED AT ANY POINT OF TIME SINCE QUANTITY IS GIVE N IN PURCHASE AND SALES REGISTER. IN MY OPINION AN ASSESSEE WHO I S NOT MAINTAINING ANY STOCK REGISTER CANNOT BE EQUATED WI TH AN ASSESSEE WHO MAINTENANCES A STOCK REGISTER ON DAY T ODAY BASIS GIVING QUANTITATIVE DETAILS OF ITEMS TRADED. FURTHE R IN THE INSTANT CASE I FIND THE GP RATE HAS FALLEN ALTHOUGH THE TUR NOVER HAS SIGNIFICANTLY GONE UP TO RS.2.09 CRORES AS AGAINST 76.46 LACS IN THE PRECEDING YEAR. WHEN THE TURNOVER GOES UP SUBST ANTIALLY IT IS QUITE POSSIBLE THAT THE GP RATE MAY COME DOWN. HOWEVER, AS MENTIONED EARLIER AN ASSESSEE NOT MAINTAINING ANY S TOCK REGISTER CANNOT BE EQUATED WITH AN ASSESSEE MAINTAI NING STOCK REGISTER GIVING FULL DETAILS. THEREFORE, DELETING THE ENTIRE TRADING ADDITION AS ARGUED BY THE LD. COUNSEL FOR THE ASSES SEE IN MY OPINION CANNOT BE ACCEPTED. CONSIDERING THE TOTALI TY OF THE FACTS OF THE CASE I AM OF THE CONSIDERED OPINION THAT ADD ITION OF RS.50,000/- ON ESTIMATE BASIS FOR POSSIBLE LEAKAGE OF REVENUE DUE TO NON MAINTENANCE OF STOCK RECORDS WILL MEET T HE ENDS OF PAGE | 6 JUSTICE. I, THEREFORE, DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO RS.50,000/- AS AGAINST RS.8,92,653/- MA DE BY HIM AND UPHELD BY THE CIT(A). THE GROUNDS RAISED BY TH E ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.08.2019. SD/- (R.K PANDA) ACCOUNTANT MEMBER *NEHA* DATE:- 02.08.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 23.07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23.07.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS 24.07.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 02.08.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER