Raghunathji and Sons, Delhi V. ITO, Ward-47(1), New Delhi

ITA 661/DEL/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6599 (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: 2012-2013
• 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.661/DEL/2019 ASSESSMENT YEAR: 2012-13 M/S. SRI RAGHUNATHJI AND SONS., 2046, FIRST FLOOR, KATRA TOBACCO, KHARI BAOLI, DELHI -110006 PAN NO.ABPFS2204Q VS INCOME TAX OFFICER WARD- 47 (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 28.12.2018 OF THE CIT(A)-16, NEW DELHI RELATING TO A. Y. 2012-13. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM AND DEALS IN MANUFACTURING AND TRA DING OF HING, DRY FRUITS AND KIRYANA MERCHANTS. IT FILED I TS RETURN OF INCOME ON 23.09.2012 DECLARING TOTAL INCOME OF RS.1 ,24,250/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER OBSERVED FROM THE AUDIT REPORT THAT ASSESSE E IS NOT MAINTAINING ANY STOCK RECORD AND THE AUDITORS HAVE POINTED OUT PAGE | 2 THAT PHYSICAL STOCK WAS VERIFIED AND CERTIFIED BY T HE PARTNER. HE, THEREFORE, HELD THAT ALL SALES/ PURCHASES ARE NOT P ROPERLY ENTERED IN THE BOOKS OF ACCOUNT. HE, THEREFORE, RE JECTED THE BOOK RESULTS BY INVOKING THE PROVISIONS OF SECTION 145 OF THE IT ACT. HE ANALYZED THE PAST RESULTS OF THE ASSESSEE V IS--VIS THE CURRENT YEAR RESULTS WHICH ARE AS UNDER :- ASSTT. YEAR TURN OVER G. P. GP% 2010-11 RS.2,05,13,214/- RS.6,50,389/- 3.17% 2011-12 RS.7,46,09,116/- RS.21,39,883/- 2.86% 2012-13 RS.5,35,28,593/- RS.23,50,271/- 4.39% 3. ADOPTING THE GP RATE OF 10% THE ASSESSING OFFICE R MADE ADDITION OF RS.32,12,706/- TO THE TOTAL INCOME OF T HE ASSESSEE. 4. IN APPEAL THE LD. CIT(A) SUSTAINED THE ADDITION SO 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.32,12,706/- 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 PAGE | 3 TALLY ITSELF IS A STOCK REGISTER BECAUSE IT INDICAT ES OF 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 AND THEREFORE, THE ASSESSING OFFICER SHOULD NOT HAV E REJECTED THE BOOK RESULTS AND THEREBY MAKING THE ADDITION. HE SU BMITTED THAT THE ASSESSEE IS MAINTAINING QUANTITATIVE TALLY AND NO DEFICIENCY OR SHORTAGE WERE FOUND. FURTHER THE GP R ATE DURING THE YEAR WAS BETTER THAN THE GP RATE SHOWN IN THE P RECEDING ASSESSMENT YEAR. 7. RELYING ON THE FOLLOWING DECISIONS THE LD. COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE NO ADDITION SHOULD HAVE BEEN MADE:- 1. 92 ITD 125 (JP.) (TM) TRIVENI PHARMA V. ITO 2. 325 ITR 13 (DELHI) CIT VS. PARADISE HOLIDAYS 3. 58 SOT 137 (DELHI) ITO VS. SAI INTERNATIONAL 5. 363 ITR 27 (MAD) G. V. D. I. AND CO. V. DCIT 8. 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 PAGE | 4 SUBMITTED THAT THERE WERE SO MANY DEFECTS POINTED O UT BY THE LOWER AUTHORITIES AND THERE WAS NO QUANTITATIVE TAL LY FOR WHICH BASIS OF VALUATION OF CLOSING STOCK BY THE ASSESSEE IS REJECTED AND BEST JUDGMENT ASSESSMENT WAS ADOPTED. HOWEVER, IN THE INSTANT CASE THERE IS NO SUCH DEFECT EXCEPT NON MAI NTENANCE OF THE STOCK RECORD. HOWEVER, THE BOOKS MAINTAINED BY THE ASSESSEE GIVES THE FULL QUANTITATIVE DETAILS AND, T HEREFORE, THE DECISION RELIED ON BY LD. CIT(A) IS NOT APPLICABLE. 9. 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 THAT 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. HOWEVE R, IN THE INSTANT CASE AS MENTIONED EARLIER, THERE IS NO SUCH OTHER DEFECT EXCEPT NON MAINTENANCE OF STOCK RECORD. THEREFORE, BOTH THE DECISIONS RELIED BY CIT(A) WHILE SUSTAINING THE ADD ITION IS NOT JUSTIFIED. 10. THE LD. DR ON OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE LD. CIT(A) HAS GIVEN CATEGORICAL FINDING THAT STOCK REGISTER IS AN INDISPENSABLE NEC ESSITY 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 CORREC T AND TRUE NATURE OF THE STATE OF AFFAIRS OF THE BUSINESS. FUR THER THE ASSESSEE HAS PURCHASED FROM THE SISTER CONCERN M/S. SHRI RAGHUNATH TRADERS WERE ALSO THE BOOKS OF ACCOUNTS W ERE PAGE | 5 REJECTED. HE ACCORDINGLY SUBMITTED THAT AN ASSESSE E WHO IS NOT MAINTAINING ANY STOCK REGISTER CANNOT BE EQUATED WI TH AN ASSESSEE WHO IS MAINTAINING STOCK RECORD. THEREFORE , THE LD. CIT(A) WAS FULLY JUSTIFIED IN SUSTAINING THE ADDITI ON MADE BY THE ASSESSING OFFICER BY ADOPTING THE GP RATE OF 10%. 11. 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 CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME. I FIND THE ASSESSING OFFICER ADOPTED THE GP RATE AT 10% AS AGA INST 4.39% SHOWN BY THE ASSESSEE ON THE GROUND THAT ASSESSEE H AS NOT MAINTAINED ANY STOCK REGISTER AND THE CLOSING STOCK 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 ACCOUNTS 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 IN THE INSTANT CASE HAS GON E UP ALTHOUGH THE TURNOVER HAS SIGNIFICANTLY GONE DOWN TO RS.5.35 CRORES AS AGAINST RS.7.46 CRORES IN THE PRECEDING YEAR. WHEN THE TURNOVER FALLS DOWN SUBSTANTIALLY IT IS QUITE POSSIBLE THAT THE GP RATE MAY PAGE | 6 GO DOWN. HOWEVER, IN THE INSTANT CASE THE GP RATE H AS GONE UP. HOWEVER, AS MENTIONED EARLIER AN ASSESSEE NOT MAINT AINING ANY STOCK REGISTER CANNOT BE EQUATED WITH AN ASSESSEE M AINTAINING STOCK REGISTER GIVING FULL DETAILS. THEREFORE, DEL ETING THE ENTIRE TRADING ADDITION AS ARGUED BY THE LD. COUNSEL FOR T HE ASSESSEE IN MY OPINION CANNOT BE ACCEPTED. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE I AM OF THE CONSIDERED OPINIO N THAT ADDITION OF RS.2 LACS ON ESTIMATED BASIS FOR POSSIBLE LEAKAG E OF REVENUE DUE TO NON MAINTENANCE OF STOCK RECORDS WILL MEET T HE ENDS OF JUSTICE. I, THEREFORE, DIRECT THE ASSESSING OFFICE R TO RESTRICT THE ADDITION TO RS.2 LAKHS AS AGAINST RS.32,12,706/- MA DE BY HIM AND UPHELD BY THE CIT(A). THE GROUNDS RAISED BY TH E ASSESSEE ARE ACCORDINGLY PARTLY ALLOWED. 12. 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 PAGE | 7 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 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