Sh. Subhash Chand Prop., Karnal V. ITO, Karnal

ITA 718/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1266 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 07-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 13-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S VIRK
• Assessee Lawyers: DHARAM PAL GUPTA

Judgement Text

ITA NO. 718/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 718/DEL/2012 A.Y. : 2007-08 SH. SUBHASH CHAND PROP. M/S BANSAL IMPEX, TIMBER MARKET, KARNAL. (PAN : ADAPB8885D) VS. INCOME TAX OFFICER, AAYAKAR BHAVAN, SECTOR-12, KARNAL (HARYANA) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. DHARAM PAL GUPTA, ADV. DEPARTMENT BY : SH. G.S. VIRK, SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), KARNAL DA TED 02.11.2011 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED READ AS UNDER:- I) ON THE FACTS AND THE CIRCUMSTANCES OF THE CAS E THE LD. COMMISSIONER OF INCOME TAX (A) HAS NOT APPRECIATED THAT THE GP RATE APPLIED BY ASSESSING OFFICER @ 4.9% AND THUS ADDITION MADE AT ` 1390036/- AND GP RATE REDUCE @4% IS WRONG ON FACTS AS THE ASSESSEE HAS MAINTAINED ALL THE STOCK REGISTE RS AND BOOKS OF ACCOUNTS. ITA NO. 718/DEL/2012 2 II) THAT THE ORDER PASSED BY LD. COMMISSIONER OF IN COME TAX (A) IS ILLEGAL AND WRONG ON THE FOLLOWING POINT ALSO. A) THAT THE GP REFERRED BY ASSESSING OFFICER OF VARIOUS PARTIES, OF VARIOUS YEARS, AND THEN TAKING AVERAGE GP RATE AND THUS (APPLYING 2 4.9% REDUCED TO 4%) HAVE NOT BEEN CONFRONTED OR ANY DETAILS GIVEN TO THE ASSESSEE. THE ITEMS OF EXPENSE DEBITED TO P/L, TRADING AND MANUFACTURING A/CS, WHICH CAN VARY, RESULTING TO DIFFERENT GP OF THE PARTIES REFERRED IN THE ORDER HAS NOT BEEN CONFRONTED BY ITO OR COMMISSIONER OF INCOME TAX (A) AT ALL, WITHOUT APPRECIATING THE POINT THAT E VEN A SINGLE SIGNIFICANT DETAIL MAY AFTER THE ENTIRE GP RATE. B) THAT THE GP RATES OF VARIOUS PARTIES REFERRED IN TH E ASSESSMENT ORDER ARE INCONSISTENT HENCE CANNOT BE RELIED UPON. THAT THE EVIDENCE WHICH IS NOT CONFRONTED CAN NOT BE USED AGAINST THE ASSESSEE BECAUSE THE MINOR VARIATIO N OF FACTS CAN LEAD TO DIFFERENT CONCLUSION. III) THAT SECTION 44AA OF I.T. ACT IS NOT APPLICAB LE TO THIS CASE AS NO DIRECTIONS BY THE CBDT HAVE BEEN ISSUED FOR MAINTAINING THE ACCOUNTS IN A PARTICULAR SYSTEM. IV) THAT THE ASSESSING OFFICER HAS COMPLETELY ACCE PTED THE BOOK VERSION, I.E. VALUE OF OPENING STOCK, PURCHASE S, SALES, C/S. THEN THE NET RESULT I.E. GP IS AUTOMATICALLY AC CEPTED. WHERE AS GP @ 4.9% NOW 4% HAS BEEN APPLIED IS WRON G. ITA NO. 718/DEL/2012 3 V) THAT THE ITO HAS FORMALLY USED 145(3) OF I.T. ACT AND REJECTED THE BOOKS. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY CONTRAVENTION OF SECTION 145(3) OF 44AA. THUS, THE REJECTION OF ACCOUNT BOOKS IS ILLEGAL AND WRONG. VI) THAT THE ASSESSING OFFICER HAS WRONGLY TRAVELL ED BEYOND KEN OF SECTION 145(3) ARBITRARILY, REJECTED THE BOOK S. THE BOOKS CAN BE REJECTED ONLY AND ONLY IF SECTION 44AA IF APPLICABLE AND 145(3) IS NOT STRICTLY ADHERED. 3. IN THIS CASE ASSESSEE DERIVED INCOME FROM TRADING IN TIMBER BUSINESS. MOST OF THE GOODS (TIMBER) ARE IMPORTED FROM SINGAPORE AND SOLD AT GANDHI DHAM (GUJARAT) AND AT KARNAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER N OTED AS UNDER:- I) THAT DESCRIPTION, I.E. QUALITY OF THE TIMBER HAS BEEN GIVEN ON THE PURCHASE BILLS BUT NO SUCH DESCRIPTION WAS GIVEN ON THE SALE BILLS; II) THAT DESCRIPTION OF TIMBER WAS NEITHER GIVEN IN THE OP. STOCK NOR WAS GIVEN IN THE CLOSING STOCK. III) THAT STOCK REGISTER WAS ALSO NOT MAINTAINED QUA LITY WISE. 4. THE ASSESSING OFFICER FURTHER NOTED THAT IT IS NOT POSSIBLE TO VERIFY THE CORRECTNESS OF THE GP DECLARED BY THE AS SESSEE SINCE NO CORRELATION OF SALE BILL WITH PURCHASE BILL COULD B E MADE FOR WANT OF DESCRIPTION OF THE WOOD ON THE SALE BILL. HE AL SO NOTED THAT CORRECTNESS OF THE CLOSING STOCK IS ALSO NOT VERIFI ABLE FOR WANT OF DESCRIPTION OF WOOD. ASSESSING OFFICER ISSUED L ETTER TO THE ASSESSEE PROPOSING TO REJECT THE BOOKS OF ACCOUNTS / TRADIN G RESULTS FOR THE ITA NO. 718/DEL/2012 4 DEFICIENCIES AND ALSO TO ESTIMATE THE GROSS PROFIT @ 4.9% I.E. THE AVERAGE OF GP OF GP OF THREE OTHER FIRMS WORKING IN T HAT AREA. ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPL Y OF THE ASSESSEE AND PROCEEDED TO MAKE THE ADDITION BY REJECTING THE BOOKS OF ACCOUNTS AND APPLIED THE GP RATE OF 4.9% AND ACCORD INGLY, ADDITION OF ` 13,90,036/- WAS MADE. 5. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) HELD THAT AFTER CONSIDERING THE ENTIRE FACTS IN THE SIMIL AR CASES WHERE THE APPEALS WERE DECIDED BY HIS OFFICE, GP @ 4% WAS HELD REASONABLE TO MAKE THE END OF JUSTICE AGAINST THE GP ESTIMATED BY T HE ASSESSING OFFICER @4.9%. ACCORDINGLY, LD. COMMISSIONER OF INC OME TAX (A) DIRECTED THE ASSESSING OFFICER TO WORK OUT THE GP O F THE ASSESSEE AND THE ADDITIONS MADE BY THE ASSESSING OFFICER WAS CON FIRMED UP TO THAT EXTENT ONLY. 6. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IN SIMILAR CASE IN I.T.A. NO. 3442/DE L/2011 (A.Y. 2007- 08), VIDE ORDER DATED 23.9.2011, THIS TRIBUNAL IN S IMILAR CASE IN THE CASE OF OTHER ASSESSEE NAMELY SH. RAM PRATAP VS. ITO HAS DIRECTED THE ASSESSING OFFICER TO ESTIMATE INCOME BY ADOPTIN G GP @ 3.6%. HE ACCORDINGLY, PRAYED THAT THE RATIO FROM THE SA ME ORDER MAY BE APPLIED AS THE FACTS ARE IDENTICAL. THE LD. DEPARTME NTAL REPRESENTATIVE ON THE OTHER HAND SUBMITTED THAT LD. COMMISSIONER OF INCOME TAX (A)S ORDER SHOULD BE ACCEPTED. 7.1 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THIS TRIBUNAL IN I.T.A. N O. 3442/DEL/2011 (A.Y. ITA NO. 718/DEL/2012 5 2007-08), IN THE CASE OF SH. RAM PRATAP VS. ITO HAS ADJUDICATED SIMILAR MATTER AS UNDER:- WE HAVE HEARD BOTH THE SIDES ON BOTH THE ISSUES IN DETAIL. WE HOLD THAT THERE ARE DISCREPANCIES IN RECORDING T HE SALES. THE ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT REFL ECTING THE CORRECT AND TRUE GROSS PROFIT EARNED BY THE ASS ESSEE. THE DISCREPANCIES NOTED OUT BY THE AUTHORITIES BELO W ARE SUFFICIENT TO DISTURB THE BOOK RESULTS DECLARED B Y ASSESSEE. DURING THE HEARING ITSELF, THE LD. AUTHORISED REPRE SENTATIVE AGREED THAT THE ADDITION MAY BE SUSTAINED BY ESTIM ATING THE GROSS PROFIT RATE @ 3.6% WHICH THE ASSESSING OF FICER HIMSELF HAS STATED IN THE QUERY LETTER ISSUED TO TH E ASSESSEE ON THE BASIS OF PAST HISTORY AND COMPARABLE CASES. AFTER HEARING BOTH THE SIDES AND PERUSING ALL THE MATERIA L AVAILABLE ON RECORD, WE DIRECT TO ESTIMATE INCOME BY ADOPTING G.P. RATE @ 3.6%. SINCE WE HAVE SUSTAINED THE ADDITION ON THE BASIS OF ESTIMATING G.P., THEREFORE , WE FIND NO MERIT IN THE ADDITION MADE ON ACCOUNT OF LOW WITH DRAWAL FOR HOUSEHOLD EXPENSES. THEREFORE, WE DIRECT TO DE LETE THE SAME. 7.2 ON THE ABOVE BASIS OF ABOVE ORDER, THE LD. COUN SEL OF THE ASSESSEE PRAYED THAT ON THE SIMILAR FACTS, THE ITAT HAS DIRECTED TO ADOPT THE GP RATE @ 3.6% IN THE AFORESAID CASE, THE SAME MAY BE ADOPTED IN THE CASE OF THE PRESENT ASSESSEE ALSO. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTROVERT THE SUBMISSION THAT IN SIMILAR CIRCUMSTANCES, THE ITAT HAS DIRECTED TO ESTIMATE INCOME BY ADOPTING G.P. RATE @ 3.6%. ITA NO. 718/DEL/2012 6 7.3 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, WE DIRECT THE ASS ESSING OFFICER TO ADOPT THE GP @ 3.6%. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/01/2013. SD/- SD/- [ [[ [A.D. JAIN A.D. JAIN A.D. JAIN A.D. JAIN] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 15/01/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES