JHANDI PRASAD HIMMATRAMKA, Jaipur V. INCOME TAX OFFICER, JHUNJHUNU

ITA 683/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1890 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 01-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONAM ROY DCIT DHK
• Keywords: Business income; Income from undisclosed sources
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 683/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 JHANDI PRASAD HIMMATRAMKA, M/S MADAV TRADING COMPANY, MAIN MARKET, CHIRAWA, JHUNJHUNU. CUKE VS. INCOME TAX OFFICER, WARD-2, JHUNJHUNU. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABPH 9950 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM ROY (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10/11/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 21/11/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER DATED 30/06/2017 PASSED BY THE LD. CIT(A)-3, JAIPUR FOR THE A.Y. 2012- 13. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SUGAR IN THE NAME AND STYLED OF M/S MADAV TRADING COMPANY. THE ASSESSIN G OFFICER NOTED ITA 683/JP/2017_ JHANDI PRASAD HIMMATRAMKA VS ITO 2 THAT THE ASSESSEE HAS NOT MAINTAINING STOCK REGISTE R AND ON THAT BASIS THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND MADE A LUMP SUM ADDITION OF RS. 2.00 LACS. THE ASSESSING OFFICER ALSO DID NOT ACCEPT THE DECLARATION OF AGRICULTURAL INCOME OF RS. 22,90 0/- AND ALSO MADE THE ADDITION. THE LD. CIT(A) REDUCED THE TRADING ADDI TION TO RS. 1.00 LAC AND ALSO SUSTAINED THE ADDITION ON ACCOUNT OF AGRIC ULTURAL INCOME OF RS. 22,900/-. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT BY T AKING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LD. CIT(A) ERRED IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUN TS BY LD. AO BY INVOKING PROVISIONS OF SECTION 145(3) OF THE INC OME TAX ACT,1961 SOLELY FOR NON MAINTENANCE OF DAY TO DAY S TOCK REGISTER. APPELLANT PRAYS THE REJECTION OF BOOKS MA Y PLEASE BE HELD BAD IN LAW. 1.1 THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN UPHOLDING THE TRADING ADDITION OF RS.1,00,000/-MADE BY LD. AO AD HOC BASIS. APPELLANT PRAYS ADDITION SO MADE MAY PLEASE BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(A)ERRED IN CONFIRMING THE ACTION OF LD. AO IN T REATING THE AGRICULTURE INCOME OF RS.22,900/- EARNED BY ASSESSE E AS BUSINESS INCOME, ARBITRARILY. 2.1. THAT THE LD. CIT(A) ERRED IN UPHOLDING AGRIC ULTURE INCOME AS BUSINESS INCOME BY COMPLETELY IGNORING THE FACT T HAT ASSESSEE HAS BEEN SHOWING AGRICULTURE INCOME ON YEAR TO YEAR BASIS AND THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT AS SUC H IN ITA 683/JP/2017_ JHANDI PRASAD HIMMATRAMKA VS ITO 3 ASSESSMENTS COMPLETED U/S 143(3) OF THE INCOME TAX ACT. IT IS THEREFORE PRAYED THAT AGRICULTURE INCOME DECLARED B Y ASSESSEE DESERVES TO BE ACCEPTED SUCH. 4. IN THE GROUNDS NO. 1 AND 1.1 OF THE APPEAL, THE ISSUES INVOLVED ARE UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT AN D SUSTAINING THE ADDITION OF RS. 1,00,000/-. THE LD CIT(A) HAS DEALT THE ISSUE IN HER ORDER BY HOLDING AS UNDER: 4.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE, FINDING OF THE A.O. AND ALSO SUBMISSION OF THE APPELLANT . IT IS SEEN THAT THE ASSESSEE IS NOT MAINTAINING DAY TO DAY STO CK REGISTER TO SHOW CORRECTNESS OF PROFIT OF SUGAR BUS INESS. G.P. RATE DURING YEAR IS 0.46% AS AGAINST 0.71% LAS T YEAR. ON THE OTHER HAND, NO SPECIFIC SALE OR PURCHASE WAS FOUND UNVERIFIABLE BY A.O.. CONSIDERING ALL THESE FACTS, I FIND IT REASONABLE TO SUSTAIN TRADING ADDITION TO EXTENT OF RS. 1,00,000/-. 5. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR HAS SUBMITTED AS UNDER: THAT THE APPELLANT IS A WHOLESALER OF SUGAR AND BOO KS OF THE ACCOUNTS WERE DULY AUDITED AND THE AUDITORS HAD NOT MADE ANY ADVE RSE REMARK IN PARTICULAR, NOR HAVE THEY QUESTIONED THE RELIABILIT Y OF THE BOOKS OF THE APPELLANT. FURTHER IN THE TAX AUDIT REPORT THE AUDI TOR HAS DULY VERIFIED THE TALLY OF GOODS TRADED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE SUBMITTED FINAL QUANTITATIVE TALLY IN RESPECT OF THE ITEMS, D EALT WITH BY HIM, GIVING ITA 683/JP/2017_ JHANDI PRASAD HIMMATRAMKA VS ITO 4 COMPLETE QUANTITATIVE DETAILS OF THE GOODS INVOLVED . THE LD.AO WHILE REJECTING THE PLEA OF THE APPELLANT HAS NEITHER POI NTED A SPECIFIC DISCREPANCY IN THE QUANTITATIVE DETAILS, SO SUBMITT ED, NOR HAS HE GIVEN ANY COMPARABLE CASE, WHEREIN A HIGHER GP RATE THAN THE APPELLANT HAS BEEN SHOWN THOUGH GENERAL REFERENCE WAS MADE. THUS, IN A BSENCE OF ANY SUCH DISCREPANCIES, THE BOOKS OF THE APPELLANT HAVE BEEN REJECTED MERELY ON SUSPICION, IN AN ARBITRARY MANNER AND DESERVE TO BE HELD UNWARRANTED. IN THIS REGARD IT IS FURTHER SUBMITTED THAT SOLE ALLEG ATION OF LD. AO THAT NO STOCK REGISTER IS MAINTAINED DOES NOT HOLD GOOD SIN CE EVERY PRECISE DETAILS OF QUANTITY TRADED DULY AUDITED BY TAX AUDITOR WERE SUBMITTED, THUS IN THE CIRCUMSTANCES, PROVISIONS OF SECTION 145(3) WERE WR ONGLY INVOKED. RELIANCE IS PLACED ON THE DECISION OF HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF BHAWANI SILICATE INDUSTRIES REPORTED IN 236 TAXMAN 596 WHEREIN IT HAS BEEN HELD AS UNDER: METHOD OF ACCOUNTING REJECTION OF ACCOUNTS QUA LITATIVE RECORDS BOOKS OF ACCOUNT COULD NOT BE REJECTED MERELY BECAU SE QUALITATIVE RECORDS WAS NOT MAINTAINED. WITH REGARD TO THE AD HOC TRADING ADDITION, IT IS S UBMITTED THAT THE LD. AO HAS COMPLETELY IGNORED THE FACT THAT THE SALES HAVE INCREASED SUBSTANTIALLY (30%) IN THE YEAR UNDER APPEAL. THE NECESSARY COMPA RATIVE CHART OF GP IS AS UNDER: A.Y. SALES G.P. % 2009-10 14,75,80,854.00 1.14 2010-11 21,59,60,250.00 0.74 2012-13 27,90,60,906.00 0.64 FROM THE PERUSAL OF THE AFORESAID CHART IT IS EVIDE NT THAT, THE MARGINAL FALL IN GP RATE IS ATTRIBUTABLE TO THE SUBSTANTIAL INCRE ASE IN TURNOVER, (ABOUT 30% AS COMPARED TO THE PREVIOUS YEAR). SUCH SHARP I NCREASE IN TURNOVER IN THE COMPETITIVE MARKET COULD BE ACHIEVED ONLY BY IN CURRING EXTRA COST OR ITA 683/JP/2017_ JHANDI PRASAD HIMMATRAMKA VS ITO 5 BY LOWERING THE PROFIT MARGIN WHICH IS FUNDAMENTAL PRINCIPAL OF MARKETING. ALSO THAT, THE COMMODITY IN WHICH THE APPELLANT DEA LS, IS A SEMI- PERISHABLE COMMODITY, WHICH DOES NOT HAVE A STATIC DEMAND, AND THUS DUE TO ITS NATURE, HAS TO BE SOLD OFF WITH LESSER M ARGINS, IN ORDER TO ABSTAIN FROM BEING OBSOLETE AND UNFIT FOR CONSUMPTION. THIS RESULTS IN VARIATION IN THE OVERALL GP RATES. FURTHER, THE LD. AO HAS MADE ADHOC ADDITION WITHOUT APPRECIATING THE QUANTUM OF TURNOVER/ RECEIPTS ACHI EVED BY THE APPELLANT AND THEREFORE RESULTS DECLARED BY THE APPELLANT DES ERVES TO BE ACCEPTED. THE HONBLE BENCH IN THE CASE OF ASSESSEE HIMSELF F OR A.Y. 2010-11 THOUGH HAS UPHELD THE APPLICATION OF PROVISIONS OF SECTION 145(3) HOWEVER, ALLOWED SUBSTANTIAL RELIEF IN THE TRADING ADDITION MADE BY LOWER AUTHORITIES, IT IS THUS HUMBLY PRAYED THAT THE ADDI TION SO MADE IN THE CIRCUMSTANCES DESERVES TO BE DELETED. HE RELIED ON THE FOLLOWING CASE LAWS: (I) 316 ITR 120 (2009) MALANI RAMJIVAN JAGANNATHVS. ASS T. CIT (RAJ.) (II) HARIDAS PARIKH V ITO [2009] 29 SOT 13 (JODH.)( URO) (III) ASHOK KUMAR & CO. V. ITO [2004] 2 SOT 518 (AS R.) (SMC) (IV) CM. FRANCIS & CO. (P.) LTD. V. CIT [77 ITR 449 ] (V) ASSTT. CIT V. L.M.P. TRACTORS (P.) LTD. [2005] 148 TAXMAN 52 (MAG.) IN THE CIRCUMSTANCES, IT IS HUMBLY PRAYED THAT THE RESULTS DECLARED BY THE APPELLANT MAY KINDLY BE ACCEPTED, AND PRAYS THAT TH E AD HOC TRADING ADDITION OF RS. 100,000/- MADE BY DESERVES TO BE DE LETED. 6. ON THE OTHER HAND, THE LD. DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. I HAVE HEARD BOTH THE SIDES ON THIS ISSUE. IT IS A FACTUAL ASPECT THAT THE ASSESSEE WAS NOT MAINTAINING DAY TO DAY STO CK REGISTER, ITA 683/JP/2017_ JHANDI PRASAD HIMMATRAMKA VS ITO 6 THEREFORE, IT WAS NOT POSSIBLE TO VERIFY THE CLOSING STOCK VIS A VIS QUANTITY OF PURCHASE AND SALE OF SUGAR. THEREFORE, I SUSTAIN THE REJECTION OF BOOKS OF ACCOUNT. THE LD. CIT(A) RECORDS THAT THE G.P. DECLARED BY THE ASSESSEE WAS .46% WHILE IT WAS .64% IN COMPARISON TO .71% OF PRECEDING YEAR. THEREFORE, THE ADDITION SUST AINED BY THE LD. CIT(A) IS HIGHER SIDE. IN VIEW OF THIS FACT, I SUSTAI N THE ADDITION ONLY OF RS. 50,000/-. ACCORDINGLY, GROUND NO. 1 OF THE APPE AL IS DISMISSED AND THE GROUND NO. 1.1 OF THE APPEAL IS PARTLY ALLOWED. 8. IN THE GROUND NO. 2 AND 2.1 OF THE APPEAL, THE I SSUE INVOLVED IS AGAINST SUSTAINING THE ADDITION OF RS. 22,900/- UND ER THE HEAD BUSINESS INCOME WHILE THE ASSESSEE HAS DECLARED THE INCOME AS AGRICULTURAL INCOME IN THE RETURN OF INCOME. 9. THE LD. CIT(A) HAS SUSTAINED THE ADDITION BY HOLDI NG AS UNDER: IN RESPECT OF ADDITION OF RS. 22,900/- BY A.O. BY TREATING AGRICULTURAL INCOME AS BUSINESS INCOME, IT IS SEEN THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE OF EARNING OF AGRICULTURAL INCOME FROM THE AGRICULTURAL LAND. MER E FILING OF PHOTOCOPY OF JAMBANDI DOES NOT INDICATE EARNING OF AGRICULTURAL INCOME. THEREFORE, ADDITION OF RS. 22,9 00/- MADE BY THE A.O. IS SUSTAINED. ITA 683/JP/2017_ JHANDI PRASAD HIMMATRAMKA VS ITO 7 10. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE L D AR HAS SUBMITTED AS UNDER: UNDER THIS GROUND OF APPEAL THE APPELLANT HAS CHALL ENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 22,900 /- MADE BY THE LD.AO BY TREATING THE AGRICULTURAL INCOME DECLARED BY THE AP PELLANT AS BEING INCOME FROM UNDISCLOSED SOURCES. THE LD. AO HELD THE AGRICULTURAL INCOME DECLARED BY THE ASSESSEE REGULARLY FOR PAST MANY YEARS AS HIS INCOME FROM UNDISCLOSED SOURCES, ONLY FOR THE REASON THAT THE REPORT OF JAMABANDI SUBMITTED BY TH E APPELLANT PERTAINED TO THE YEAR 2010, BY COMPLETELY IGNORING THE FACT T HAT, THE APPELLANT HAS BEEN SHOWING INCOME FROM AGRICULTURAL ACTIVITIES CO NSISTENTLY FOR PAST MANY YEARS AND THE SAME HAVE NEVER BEEN DOUBTED BY THE D EPARTMENT. THUS, ALLEGING THE SAME AS INCOME FROM UNDISCLOSED SOURCE S WITHOUT ANY INCRIMINATING FACTS OR DOCUMENTS ON RECORDS IS ABSO LUTELY BAD IN LAW, AND THUS THE ADDITION SO MADE DESERVES TO BE DELETED AN D THE APPELLANT PRAYS ACCORDINGLY. 11. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 12. I HAVE HEARD BOTH THE SIDES ON THIS ISSUE. AFTE R HEARING AND CONSIDERING THE FACTUAL ASPECTS, I FIND THAT THE AS SESSEE WAS NOT ABLE TO SUBMIT NECESSARY DOCUMENTS IN SUPPORT OF THE CONTEN TION THAT THE ASSESSEE WAS HAVING AGRICULTURAL INCOME OF RS. 22,90 0/- DURING THE ITA 683/JP/2017_ JHANDI PRASAD HIMMATRAMKA VS ITO 8 YEAR UNDER CONSIDERATION. THEREFORE, IN ABSENCE OF A NY SUPPORTING DOCUMENT, I SUSTAIN THE ORDER OF THE LD. CIT(A) ON T HIS ISSUE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/11/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21 ST NOVEMBER, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI JHANDI PRASAD HIMMATRAMKA, CHIRAWA, JHUNJHUNU. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD-2, JHUNJHUNU. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 683/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR