ITO, Jaipur V. SHRI SURESH KUMAR GOYAL, Jaipur

ITA 705/JPR/2012

• Counselvise Citation: 70523114 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 01-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S L PODDAR

Judgement Text

ITA NO. 705/JP/2012 THE ITO, WARD- 7(3) VS. SHRI SURESH KUMAR G OYAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 705/JP/2012 ASSESSMENT YEAR: 2008-09 PAN : ABIPG 0220 B THE ITO VS. SHRI SURESH KUMAR GOYAL WARD- 7 (3) 175, MOHALLA MAHAJAN JAIPUR VILLAGE JAHOTA, TEHSIL AMER, JAIPUR (APPELLANT) (RESPONDENT) C.O. NO. 61/JP/2012 (ARISING OUT OF ITA NO. 705/JP/2012) ASSESSMENT YEAR: 2008-09 PAN : ABIPG 0220 B SHRI SURESH KUMAR GOYAL VS. THE ITO 175, MOHALLA MAHAJAN WARD- 7 (3) VILLAGE JAHOTA, TEHSIL AMER, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI AJAY MALIK, ADDL. CIT ASSESSEE BY : SHRI S.L. PODDAR, ADVOCATE DATE OF HEARING: 25-11-2014 DATE OF PRONOUNCEMENT: 09-01-2015 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 22-05-2012 FOR THE ASSESSM ENT YEAR 2008-09 AND THE ASSESSEE HAS FILED THE C.O. ITA NO. 705/JP/2012 THE ITO, WARD- 7(3) VS. SHRI SURESH KUMAR G OYAL 2 2.1 THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN:- (1) THE LD. CIT(A) HAS PASSED A PERVERSE ORDER IN R ESTRICTING GROSS PROFIT RATE TO 2.75% INSTEAD OF THE GROSS PRO FIT RATE OF 4.24% BY THE AO ON THE BASIS OF THE DECLARED GROSS PROFIT RATE IN ASSESSMENT YEAR 2006-07. (2) THE LD. CIT(A) ORDER IS PERVERSE SINCE SPECIFIC FACTS FOR ASSESSMENT YEAR 2008-09 AS DISCUSSED BY THE AO HAVE NOT BEEN CONSIDERED BY HIM IN APPLYING THE GROSS PROFIT RATE OF 2.75% EVEN WHILE THE INVOKING OF THE SECTION 145(3) OF TH E ACT HAD BEEN UPHELD. 2.2 THE ASSESSEE HAS RAISED SOLITARY GROUND AS UNDE R:- 1. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADD ITION OF RS. 3,60,274/- BY APPLYING THE GROSS PROFIT RATE OF 2.7 5% AS AGAINST GROSS PROFIT RATE OF 1.63% DECLARED BY THE ASSESSEE . 2.3 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C ARRIES ON BUSINESS IN THE NAMES OF ITS PROPRIETORSHIP CONCERN M/S. GOYAL TELE COM WHICH DEALS IN CONSUMER GOODS AND M/S. GOYAL TELECOM IS AUTHORIZED DEALER OF VODAFONE, ESSAR DIZILINK LTD. A/C BOOKS OF BOTH THE PROPRIET ORSHIP CONCERNS ARE AUDITED U/S 44AB OF THE ACT. THE RESULTS IN RESPEC T OF M/S. GOYAL AGENCIES WERE ACCEPTED WHEREAS IN THE CASE OF M/S. GOYAL TEL ECOM THE AO OBSERVED THAT ENTIRE SALES OF SIM CARDS SHOWN BY THE ASSESSE E WAS IN CASH AND THE STOCK INVENTORY PRODUCED BY THE ASSESSEE WAS AT RS. 6,35,459/- WHEREAS IN ITA NO. 705/JP/2012 THE ITO, WARD- 7(3) VS. SHRI SURESH KUMAR G OYAL 3 THE TRADING ACCOUNT THE VALUE OF THE STOCK WAS AT R S. 6,26,395/-. THE ASSESSEE WAS ASKED TO RECONCILE THE DAY TO DAY STOC K. THE ASSESSEE REPLIED THAT DAY TO DAY STOCK REGISTER WAS NOT MAINTAINED A ND THE STOCK DETAILS WERE ADOPTED ON THE BASIS OF PHYSICAL VERIFICATION. THE AO FURTHER OBSERVED THAT THE ASSESSEE WAS IN TRADING OF SIM CARD AS WELL AS RECEIVING COMMISSION. IF THE COMMISSION INCOME OF RS. 8,66,541/- WAS EXCLUDE D . THE SIM TRADING RESULTED IN LOSS OF RS. 3,40,819/-. THE AO WAS OF T HE VIEW THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE TRADING LOSS. THEREFORE, THE TOTAL SALE OF THE ASSESSEE WAS ESTIMATED AT RS. 3,22,50,000/- IN PLACE OF RS.3 ,22,18,045/- & APPLIED G.P. RATE @ 4.24% WHICH RESULTED INTO TRADING ADDIT ION OF RS. 17,08,220/-. 2.4 THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHO ALLOWED PART RELIEF TO THE ASSESSEE BY FOLLOWING OBSERVATIO NS. 2.3.1.. AS OBSERVED FROM THE PAST YEARS RESULT, THE APPELLANT HAS OFFERED GROSS PROFIT RATE AT 4.24 % THEREIN, ALBEIT ON THE MEAGER TURNOVER OF RS. 38.65 LACS. H OWEVER, WHILE FOLLOWING THE PRINCIPLE OF THE PAST HISTORY, IT APPEARS THAT THE AO HAS MECHANICALLY APPLIED THE SAME GROSS PROF IT RATIO IN THE CURRENT YEAR , EVEN THE ASSESSEE HAS ACHIEVED SUBSTANTIAL HIGHER TURNOVER , I THIS YEAR (I.E. MORE THAN 8 TIM ES THAN THE PREVIOUS YEAR). THUS IT IS EVIDENT THAT THE AO HAS SIMPLY IGNORED THE ABOVE CRUCIAL ASPECT THAT THE TURNOVER OF THE APPELLANT HAS SUBSTANTIALLY8 INCREASED IN THE CURRE NT YEAR; THEREFORE, THE FALL IN GROSS PROFIT, TO SOME EXTENT , IS QUITE NATURAL AND UNDERSTANDABLE, UNDER GIVEN CIRCUMSTANC ES. MOREOVER, THE AO HA ALSO NOT GIVEN ANY REASONS TO E STIMATE THE TURNOVER OF THE ASSESSEE AT HIGHER SIDE I.E. RS. 3 ,22,50,000/-. CONSIDERING THE ABOVE ASPECT, IN MY CONSIDERED VIEW , THE ITA NO. 705/JP/2012 THE ITO, WARD- 7(3) VS. SHRI SURESH KUMAR G OYAL 4 ADOPTION OF GROSS PROFIT @ 2.75%, IN THE CURRENT YE AR , WOULD BE FAIR AND SUFFICIENT TO MEET THE BOTH ENDS OF THE JUSTICE. ACCORDINGLY, THE AO IS DIRECTED TO RESTRICT THE EST IMATION OF INCOME U/S 145(3), BY ADOPTING THE GROSS PROFIT RAT E AT 2.75%, AT THE TOTAL TURNOVER OF RS. 3,22,18,045/-. IN VIE W OF THE ABOVE, THE CORRESPONDING REVISED TRADING ADDITION HAS BEEN WORKED OUT AS UNDER:- 1 2 3 4 5 S.N. TOTAL TURNOVER G.P. OFFERED @ 1.64% REVISED G.P. ESTIMATED @ 2.75% DIFFERENCE/ ADDITION CONFIRMED 1 RS. 3,22,18,045 RS. 5,25,722 RS. 8,85,996 RS. 3,6 0,274 IN THE LIGHT OF THE ABOVE WORKING, THE TRADING ADDI TION U/S 145() OF THE ACT IS RESTRICTED RS. 3,60,274/-, IN PLACE OF RS. 17,08,220/-, AS PROPOSED BY THE AO IN THE IMPUGNED ORDER. CONSEQUENTLY, THIS GROUND OF APPEAL IS PARTLY ALLOW ED. 2.5 AGGRIEVED, BOTH THE PARTIES ARE BEFORE US I.E. THE REVENUE IS THROUGH APPEAL AND THE ASSESSEE IS THROUGH CROSS OBJECTION. 2.6 THE LD. DR AT THE OUTSET CONTENDS THAT THE LD. CIT(A) HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNT WHICH HAS NOT BEEN CH ALLENGED BY THE ASSESSE. DESPITE REJECTING THE REJECTION OF BOOKS OF ACCOUNT , HE ACCEPTED THE TURNOVER OF RS. 3,22,18,045/- WITHOUT ASSIGNING ANY REASON. THE TOTAL TURNOVER AS PER BOOKS OF ACCOUNT OF THE ASSESSEE HAS BEEN UPHELD. W HEN IT IS CLEAR THAT ASSESSEE'S ALL SALES ARE THROUGH CASH AND NO DAY TO DAY STOCK IS MAINTAINED THEN IN THAT CASE THERE IS NO JUSTIFICATION FOR THE ASSESSEE TO EXCLUDE THE ESTIMATION OF SALES. BESIDES, THE GROSS PROFIT HAS BEEN ESTIMATED AT 2.75% AS AGAINST 4.24% ESTIMATED BY THE AO. THUS THERE IS NO JUSTIFICATION IN THE ITA NO. 705/JP/2012 THE ITO, WARD- 7(3) VS. SHRI SURESH KUMAR G OYAL 5 ORDER OF THE LD. CIT(A) IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT AND THERE BEING NO JUSTIFIED REASONS FOR REDUCING THE E STIMATE IN GIVING THE REQUISITE RELIEF. 2.7 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE CONTENDS THAT SIM CARDS ARE INVARIABLY SOLD ON M.R.P. GIVEN BY THE CO MPANY, NO BILLS WERE RAISED ABOUT THE PURCHASES EFFECTED BY THE ASSESSEE . THE PURCHASES TURNOVER REMAINED UNCHANGED. THERE IS NO JUSTIFICATION FOR T HE AO IN ESTIMATING THE SALES ONLY ON THE REASON THAT CASH SALES ARE MADE B Y THE AO. IT IS RATHER INDICATED THAT THE ASSESSEE HAS TO SELL SIM CARDS I N CASH AND IF THE ANY CUSTOMER OFFERED CHEQUE THE ASSESSEE CANNOT REFUSE. THEREFORE, THE ADVERSE INFERENCE WAS DRAWN BY THE AO TO ESTIMATE THE SALES IS NOT JUSTIFIED. 2.8 COMING TO THE ISSUE ABOUT NON-MAINTENANCE OF ST OCK REGISTER, THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT AS PER AOS VERSION, THE ASSESSEE PRODUCED INVENTORY OF CLOSING STOCK WITH VALUE OF R S. 6,35,459/- AS AGAINST BOOK STOCK OF RS. 6,26,395/-. WHEN THESE FIGURES AR E AVAILABLE WITH THE AO THEN SAME CAN BE TREATED BY THE AO AS OPENING STOCK . THUS IT HAS NO REVENUE EFFECT. IT IS PLEADED THAT THE AO CANNOT ESTIMATE T HE GROSS PROFIT RATE AT 4.24% ARBITRARILY WITHOUT TAKING INTO CONSIDERATION THAT ITS TURNOVER HAS ARISEN AT 8 TIMES HIGH. THE GROSS PROFIT RATE AT 4. 24% AT MEAGER TURNOVER CANNOT BE A BENCH MARK FOR ADOPTION OF GROSS PROFIT RATE. ITA NO. 705/JP/2012 THE ITO, WARD- 7(3) VS. SHRI SURESH KUMAR G OYAL 6 2.9 APROPOS C.O. , IT IS CONTENDED THAT THE ASSESSE E OFFERED GROSS PROFIT RATE AT 1.63% WHEREAS THE LD. CIT(A) ADOPTED AT 2.7 5% WITHOUT ANY BASIS WHICH SHOULD BE REDUCED. 2.10 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT EMERGES FROM THE RECORD THA T THE ASSESSEE WAS MAINTAINING PROPER BOOKS OF ACCOUNT WHICH WERE DULY AUDITED. ALL THE PURCHASES ARE DULY VOUCHED WHICH HAVE NOT BEEN QUES TIONED. APROPOS SALES, IT APPEARS THAT THE ASSESSEE'S BUSINESS OF SALES OF SIM CARDS IS IN CASH WHICH CANNOT BE FOUND FAULT WITH. THE TURNOVER OF THE ASS ESSEE HAS INCREASED BY 8 TIMES. IN THESE CIRCUMSTANCES, THE ESTIMATION OF SA LES BY THE AO CANNOT BE HELD AS JUSTIFIED AS MEAGER DIFFERENCE IN THE CLOSI NG STOCK WAS AT RS. 9,000/-. BESIDES, IF ANY DEFECT IS FOUND IN QUESTION, IT BEC OMES POSTPONEMENT OF INCOME AS CORRESPONDING AMOUNT BECOMES OPENING STOC K OF THE ASSESSEE IN NEXT YEAR. THEREFORE, THE ESTIMATION OF SALES AS MA DE BY THE AO CANNOT BE UPHELD. COMING TO THE COMMON ISSUE OF ESTIMATION OF GROSS PROFIT, WE ARE OF THE VIEW THAT IN CASE OF TURNOVER OF 8 TIMES, THE S IGNIFICANT IMPACT ON THE GROSS PROFIT. THE REJECTION OF BOOKS HAS NOT BEEN C HALLENGED BY THE ASSESSEE AND LOOKING AT SOME OF THE DEFECTS, SOME CORRECTIVE ACTION IS CALLED TOWARDS ASSESSEE'S TRADING RESULTS. THUS IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE SEE NO INFIRMITY IN THE ORDER OF THE LD. C IT(A) IN ESTIMATING THE ITA NO. 705/JP/2012 THE ITO, WARD- 7(3) VS. SHRI SURESH KUMAR G OYAL 7 GROSS PROFIT RATE AT 2.75% WHICH IS UPHELD. THUS TH E APPEAL OF THE REVENUE AS WELL AS C.O. OF THE ASSESSEE ARE DISMISSED. 3.0 IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS C.O. OF THE ASSESSEE ARE DISMISSED THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 0 9 -01-2015 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 9 TH JAN 2015 *MISHRA COPY FORWARDED TO:- 1.THE ITO , WED 7 (3), JAIPUR 2. SHRI SURESH KUMAR GOYAL, JAIPUR 3. THE LD. CIT(A) 4. THE LD. CIT BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 705/JP/2012) AR ITAT, JAIPUR