M/s Hazur Singh & Sons, Jalandhar V. The Income Tax Officer, Jalandhar

ITA 71/ASR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8809 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKARDR
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JALANDH AR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.71(ASR)/2016 ASSESSMENT YEARS: 2009-10 M/S. HAZUR SINGH & SONS, BAZAR PANJPEER, JALANDHAR. PAN: AAAFH-4310C VS. INCOME TAX OFFICER , W-III(1), JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH.ANIL MIGLANI (ADV.) RESPONDENT BY: SH. BHAWANI SHANKAR(DR.) DATE OF HEARING: 17.01. 2017 DATE OF PRONOUNCEMENT: 20.01.2017 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORDER OF LEARNED CIT(A), JALANDHAR, DATED 04.11.215, FOR ASST. YEAR: 20 09-10. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL. (I) THAT THE ORDER OF THE LD. CIT(A) IS AGAINST LA W AND FACTS OF THE CASE ON THE FILE. (II) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GRAVELY ERRED IN SUSTAINING TRADING ADDITION OF RS.2,59,117/- MADE BY THE AO BY ENHANCING THE G.P. RATE OF THE AS SESSEE FROM 9.25% AS PER BOOKS OF ACCOUNT TO 10.51% BY REJECTIN G THE BOOK RESULTS. (IIA) THAT WHILE SUSTAINING THE ABOVE ADDITION THE LD. CIT(A) IGNORED THAT ADDITION COULD NOT BE SUSTAINED MERELY DUE TO NON MAINTENANCE OF STOCK REGISTER IGNORING THE AUDITED ACCOUNTS, PR OGRESSIVE G.P. RATE FROM EARLIER YEAR AND NO SUPPRESSION IN SALES OR PU RCHASES FOUND BY THE AO. (III) THAT IN THE ALTERNATIVE, THE LD. CIT(A) HAS G RAVELY ERRED IN ACCEPTING THE HIGH G.P. RATE OF 10.51% ADOPTED BY T HE AO AS SHOWN ITA NO.71 (ASR)/2016 ASST. YEAR: 2009-2010 2 BY SOME OTHER TRADER IGNORING THE DIFFERENT ITEMS T RADED BY THAT PARTY AND THE LOWER G.P. RATE SHOWN BY A CONCERN TR ADING IN SIMILAR GOODS AS THAT OF THE ASSESSEE. (VI) THAT IN ANY CASE THE ADDITION OF RS. 2,59,117 /- DESERVES TO BE DELETED. (V) THAT THE APPELLANT BEGS TO ADD OR AMEND ANY GRO UND OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM DOING BUSINESS OF TRADING O F HARDWARE GOODS. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT AUDIT REPORT FILED WITH RETURN OF INCOME MENTIONED THAT N O QUANTITATIVE DETAILS WERE FURNISHED TO AUDITORS AND THEREFORE, HE HELD THAT SINCE AUDIT REPORT DID NOT GIVE ANY INFORMATION REGARDING THE QUANTITAT IVE DETAILS OF OPENING STOCK, PURCHASES AND SALES DURING THE YEAR, THEREFORE, THE ASSESSEE WAS SHOW CAUSED TO GIVE DETAIL OF OPENING AND CLOSING STOCK VALUE WISE AND QUANTITATIVE WISE. IN REPLY THE ASSESSEE SUBMITTED TH AT CLOSING STOCK WAS VALUED AT LOWER OF COSTS OR MARKET PRICE, WH ICH WAS MADE BY PHYSICAL VERIFICATION ON THE LAST DAY OF PREVIOUS YEA R AND THAT THE DETAILED LIST WAS NOT PRESERVED. IN VIEW OF THE FACTS THE ASSESSEE WAS SHOW CAUSED TO JUSTIFY THE TRADING RESULTS. IN REPLY, THE ASSESSEE SUBMITTED AS UNDER: WE ARE CARRYING ON THE BUSINESS OF RESALE OF HARDW ARE GOODS ON RETAIL & WHOLESALE BASIS. DURING THE YEAR UNDER ASSESSMENT W E EARNED GP RATE OF 9.25% ON TURNOVER OF RS.2.05 CRORES WHICH IS MUCH B ETTER AND PROGRESSIVE AS COMPARED TO THE EARLIER YEAR GP RATE OF 9.2% ON SALE OF 2.14 CRORES. IT IS SUBMITTED THAT DUE TO HARD & KEEN COMPETITION IN OU R LINE OF BUSINESS OUR SALES HAD REDUCED A LITTLE BUT WITH EFFORTS AND HAR D WORK WE WERE ABLE TO EARN A BETTER GP RATE THAN THE EARLIER YEAR. ALL TH E PURCHASES AND SALES ARE ITA NO.71 (ASR)/2016 ASST. YEAR: 2009-2010 3 FULLY VOUCHED & RECORDED IN THE BOOKS OF ACCOUNT MA INTAINED IN THE NORMAL COURSE OF BUSINESS. THE TRADING RESULTS ARE PROGRES SIVE. FOR JUSTIFICATION OF OUR TRADING RESULTS AS DESIRED PLEASE FIND ENCLOSED HEREWITH DETAILS OF PURCHASE AND SALE OF FEW ITEMS DEALT WITH BY US. PH OTOSTAT COPIES OF THE RELEVANT PURCHASE/SALE BILLS ARE ALSO ENCLOSED. THE ASSESSEE ALSO ATTACHED A LIST SHOWING G.P RATE OF 11 ITEMS AS PER WHICH THE GROSS PROFIT RATE WAS IN THE RANGE OF 2.78% TO 8. 96%. THE ASSESSING OFFICER, HOWEVER, OBSERVED THAT G.P RATE OF FEW ITEMS WERE RAISING FROM 9.74% TO 10.66%. THE ASSESSING OFFICER FURTHER OB SERVED THAT A SIMILAR FIRM M/S JAGAT SINGH & SONS DEALING IN SIMIL AR ACTIVITIES HAD DECLARED 10.51% OF G.P. IN VIEW OF THE ABOVE, THE ASSESSIN G OFFICER REJECTED THE BOOKS OF ACCOUNT OF ASSESSEE AND ESTIMATED THE G.P BY TAKING A G.P RATE OF 10.51% AND ADDITION ON ACCOUNT OF DIFFERENCE IN G.P DECLARED BY ASSESSEE AND CALCULATED BY ASSESSING OFFICER TO THE TUNE OF RS.2,59,117 WAS MADE. 4. AGGRIEVED WITH THE ORDER, THE ASSESSEE FILED APPEAL BEFORE LD. CIT( A) AND FILED VARIOUS SUBMISSIONS. THE LD. CIT(A), HOWEVER, REJECTED THE ARGUMENTS OF ASSESSEE AND UPHELD THE ADDITION MADE BY ASSESSING OFFICER. 5. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LD. AR FILED A SYNOPSIS AND ALSO FIL ED DECISION OF AMRITSAR BENCH IN ITAT 641(ASR)/2015, DATED 12.08.2016 A ND SUBMITTED THAT THE CONFIRMATION OF ADDITION BY LD. CIT(A) WAS NO T JUSTIFIED. HE SUBMITTED THAT TRADING RESULTS OF THE BOOKS OF ACCOUNTS WERE RE JECTED WITHOUT POINTING OUT ANY SPECIFIC DEFECTS. HE SUBMITTED THAT B OOKS OF ITA NO.71 (ASR)/2016 ASST. YEAR: 2009-2010 4 ACCOUNTS AUDITED BY CHARTERED ACCOUNTANT AND THE PURCHASE AND SA LES AND EXPENSES WERE DULY VOUCHED AND PROPERLY RECORDED IN THE BOOKS OF ACCOUNTS. IT WAS ALSO SUBMITTED THAT DURING THE YEAR UNDER ASSESSM ENT ASSESSEE EARNED G.P RATE OF 9.25% AS COMPARED TO 9.2% IN PRECEDI NG ASSESSMENT YEARS. IT WAS ALSO SUBMITTED THAT ASSESSING OFFICER APPLIED THE TRADING RESULTS OF MS. JAGAT SINGH & SONS, AND HAD CALCULA TED G.P RATE 10.51% WITHOUT CONFRONTING THE TRADING RESULTS TO THE ASSESSEE. IT WAS SUBMITTED THAT SAID CONCERN WAS NOT DEALING IN THE SAME ITEMS IN WHICH THE ASSESSEE WAS DEALING. IT WAS SUBMITTED THAT ANOTHER FIRM M/S SH TRADERS, JALANDHAR WHICH WAS SITUATED NEXT DOOR TO ASSESEE S SHOP AND WAS DEALING IN SIMILAR ITEMS HAD DECLARED G.P RATE OF 9% . 7. THE LD. DR, ON THE OTHER HAND, HEAVILY PLACED HIS RELIAN CE ON THE ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. IN THE PRESENT CASE, WE FIND THAT THE CASE LAW RELIED ON BY ASSESSEE OF AMRITSAR BENCH IN THE CASE OF M/S M.R. KALI A INDUSTRIES IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS IN THAT CASE LUMPSUM ADDITION WAS MADE WHEREAS IN THE PRESEN T CASE THE ADDITION WAS MADE AFTER COMPARING TRADING RESULTS OF M/ S. JAGAT SINGH & SONS. WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESEE HAD NOT PROVIDED QUANTITATIVE DETAILS OF OPENING AND CLO SING STOCK AND PURCHASE AND SALES. FROM THE NATURE OF ACTIVITY OF T HE ASSESSEE, WE FIND THAT MAINTENANCE OF DAY TO DAY STOCK REGISTER IS Q UITE ITA NO.71 (ASR)/2016 ASST. YEAR: 2009-2010 5 DIFFICULT IN THIS CASE. THOUGH THE QUANTITATIVE DETAILS OF O PENING AND CLOSING STOCK, PURCHASE AND SALES HELP THE ASSESSING OFFICER TO DETERMINE THE TRUE INCOME BUT IN THE ABSENCE OF SUCH RECORDS THE BEST WAY OU T TO DETERMINE THE INCOME OF ASSESSEE IS TO COMPARE THE RESULTS WITH THE EARLIER YEARS AS WELL AS WITH THE PERSONS DEALING IN SIMILAR ITEM S OF TRADE. THE ASSESSING OFFICER IN THIS CASE HAS COMPARED THE G.P RATE DECLARED B Y M/S JAGAT SINGH & SONS, WHICH WERE NOT CONFRONTED TO ASSESSEE. T HE LD. AR HAS FURTHER SUBMITTED THAT A TRADER SITUATED NEXT DOO R TO HIM HAD DECLARED A LOWER G.P RATE WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE DEEM IT APPROPRIATE TO REMIT THE ISSUE BACK TO THE ASSESSING OFFICER WHO SHOULD CONFRONT THE TRADING RESULTS OF M/S JAGAT SINGH AND SONS TO T HE ASSESSEE AND SHOULD ALSO CONSIDER THE TRADING RESULTS OF M/S S H TRADERS , AND AFTER EXAMINATION OF THE TRADING RESULTS OF THESE PERSONS SHOULD CALCULATE THE INCOME BY APPLYING THE APPROPRIATE RATE. NEEDLESS TO SAY T HAT ASSESSEE WILL BE PROVIDED SUFFICIENT OPPORTUNITY OF BEING HEARD. 9. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IS ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20.01. 2 017. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20.01.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE ITA NO.71 (ASR)/2016 ASST. YEAR: 2009-2010 6 (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER