Rajiv Kumar S/o Pawan Kumar Goyal, Ahmedgarh. V. ITO, Malerkotla

ITA 722/CHANDI/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3808 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Gross profit estimation; Business income
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 722/CHD/2016 ASSESSMENT YEAR: 2009-10 SHRI RAJIV KUMAR, VS THE ITO, S/O SHRI PAWAN KUMAR GOYAL, WARD - 2, 53, CINEMA ROAD, MALERKOTLA. NEAR JANTA COLLEGE, AHMEDGARH. PAN: ACJPK6964A & ITA NO. 723/CHD/2016 ASSESSMENT YEAR: 2010-11 SHRI RAJIV KUMAR, VS THE ITO, S/O SHRI PAWAN KUMAR GOYAL, WARD 4(4), 53, CINEMA ROAD, MALERKOTLA. NEAR JANTA COLLEGE, AHMEDGARH. PAN: ACJPK6964A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 15.11.2016 DATE OF PRONOUNCEMENT : 16.11.2016 O R D E R THIS ORDER SHALL DISPOSE OFF BOTH THE ABOVE APPEALS FILED BY ASSESSEE FOR DIFFERENT ASSESSMENT YEARS. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. THE APPEALS AR E DECIDED AS UNDER. 2 ITA 722/2016 ( A.Y. 2009-10) 3. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINS T THE ORDER OF LD. CIT(APPEALS)-2 LUDHIANA DATED 28.03.20 16 FOR ASSESSMENT YEAR 2009-10 CHALLENGING THE LEVY OF PEN ALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT WAS COMPLETED ON 26.12.2011 AT AN INCOME OF RS. 12,00,2 61/- AS AGAINST RETURNED INCOME OF RS. 3,17,870/-. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE MAIN ADDITION OF RS. 8,56,562/- WAS MADE ON ACCOUNT OF LOW GP RATE SHOWN BY THE ASSESSEE BY REJECTING BOOKS OF ACCOUNT BY POINT ING OUT SPECIFIC DEFECTS THEREIN. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAD SHOWN A GROSS TURNOVER OF RS. 4.32 CR AND DECLA RED GP RATE OF 8.09% WHICH WAS LESS BY 1.03% FROM THE PREC EDING ASSESSMENT YEAR. THE ASSESSING OFFICER FURTHER NOT ED THAT ASSESSEE HAD DEBITED ALL THE MANUFACTURING EXPENSES IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER, ACCO RDINGLY, COMPUTED GP AND NOTED THAT GP WORKED OUT TO 2.22% W HICH WAS LESS BY 0.77% FROM PREVIOUS YEAR UNDER THE SIMI LAR CIRCUMSTANCES. THE ASSESSING OFFICER MADE THE ADDIT ION OF RS. 8,56,562/- BY APPLYING GP RATE OF 4.18% ON THE TOTAL SALES OF RS. 4.32CR. THE LD. CIT(APPEALS), COMPARI NG THE CASE OF THE ASSESSEE WITH PREVIOUS YEAR AND CURRENT YEAR, LIMITED THE ADDITION TO RS. 3,33,107/-. THE ASSESS ING OFFICER LEVIED THE PENALTY ON THE AFORESAID ADDITIO N AND LD. CIT(APPEALS) CONFIRMED THE LEVY OF PENALTY. 3 5. AFTER CONSIDERING RIVAL SUBMISSIONS, I AM OF THE VIEW PENALTY IS NOT LEVIABLE IN THE MATTER. THE LD. COU NSEL FOR THE ASSESSEE POINTED OUT THAT ASSESSING OFFICER MAD E THE ADDITION BY APPLYING HIGHER GP RATE OF 4.18% AND TH E ADDITION HAS BEEN FURTHER REDUCED SUBSTANTIALLY BY THE LD. CIT(APPEALS). HE HAS FURTHER POINTED OUT THAT ITAT SMC BENCH, CHANDIGARH IN THE CASE OF THE ASSESSEE IN IT A 408/2011 VIDE ORDER DATED 10.08.2016 REDUCED THE AD DITION TO RS. 1 LAC AGAINST THE ADDITION MAINTAINED BY LD. CIT(APPEALS) IN A SUM OF RS. 3,33,107/-. THE FINDI NGS OF THE TRIBUNAL IN PARA 4 TO 5 ARE REPRODUCED AS UNDER : 4. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED FINDINGS OF AUTHORITIES BELOW. THE LD. COUNSEL FOR THE ASSESSEE DID NOT CHALLENGE THE REJECTION OF BOOKS OF ACCOUNT WHICH IS ALSO NOT CHALLENGED IN THE GROUND OF APPEAL BEFORE TRIBUNAL. MOREOVER, ASSESSING OFFICER HAS GIVEN VARIOUS REASONS IN THE ASSESSMENT ORDER FOR REJECTION OF TH E BOOKS OF ACCOUNT AND VIEW OF THE ASSESSING OFFICER HAVE BEEN CONFIRMED BY THE LD. CIT(APPEALS). THEREFORE, IN THE ABSENCE OF ANY CHALLENGE TO THESE FINDINGS OF THE AUTHORITIES BELOW, I PROCEED TO DECIDE THE ISSUE OF ADDITION IN QUESTION. 4(I) THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THA T ADDITION IS STILL EXCESSIVE BECAUSE GP RATE WAS FOUND LESS ONLY BY 0.77%. I, ON THE EXAMINATION OF THE ORDERS OF THE AUTHORITIES BELOW FOUND THAT ADDITION IS STILL ON EXCESSIVE SIDE. THE AUTHORITI ES BELOW DESPITE REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE ALSO MADE DISALLOWANCE OF 1/5 TH OF THE EXPENSES AND MADE ADDITION OF RS. 25,829/-. THE LD. CIT(APPEALS) CONFIRMED THE ADDITION. IT IS WEL L 4 SETTLED LAW WHEN BOOKS OF ACCOUNT REJECTED, NO FURTHER EXPENSES SHOULD BE DISALLOWED SEPARATELY. SINCE THE ADDITION OF RS. 25,829/- HAVE BEEN MAINTAINED AND IS NOT IN SUBJECT MATTER, BUT THIS ADDITION IS AVAILABLE TO ASSESSEE TO PROVE THAT THE ADDITION ON ACCOUNT OF GP RATE IS EXCESSIVE. IT MA Y ALSO BE NOTED HERE THAT DESPITE NOTING VARIOUS DEFECTS BY THE AUTHORITIES BELOW, ULTIMATELY THE GROSS PROFIT RATE WAS FOUND LESS BY 0.77% WHICH IS VERY NEGLIGIBLE. THE LD. COUNSEL FOR THE ASSESSEE ALSO STATED THAT IN EARLIER YEAR, THE LD. CIT(APPEA LS) DELETED THE ADDITION AND ITAT CONFIRMED THE ORDER OF LD. CIT(APPEALS) VIDE ORDER DATED 22.06.2012, COPY OF THE ORDER IS FILED IN THE PAPER BOOK AT PAG E 53 WHEREBY DEPARTMENTAL APPEAL WAS DISMISSED. THEREFORE, CONSIDERING HISTORY OF THE ASSESSEE AND EARLIER ORDER OF THE TRIBUNAL AND THAT SEPARATE ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE HAVE BEEN MADE WITHOUT ANY JUSTIFICATION, I REDUCE THE ADDITION OF RS. 3,33,107/- TO RS. 1 LAC ONLY. THE ORDERS OF AUTHORITIES BELOW TO THAT EXTENT ARE MODIFIED AND I RESTRICT THE ADDITION TO RS. 1 LAC A S AGAINST ADDITION F RS. 3,33,107/-. 6. HE HAS CONTENDED THAT ON MERE ESTIMATE OF INCOME , NO PENALTY IS LEVIABLE. THE LD. DR, HOWEVER RELIED UP ON ORDERS OF THE AUTHORITIES BELOW. 6(I) IN THIS VIEW OF THE MATTER AND CONSIDERING THE CASE OF THE ASSESSEE IN THE LIGHT OF ORDER OF THE TRIBUNAL ON QUANTUM DATED 10.08.2016 (SUPRA), IT IS CLEAR THAT ULTIMATELY SMALL ADDITION IS MAINTAINED ON ESTIMATE BASIS. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASES OF DHILLON RICE MILLS 256 ITR 447 AND HARI GOPAL SINGH 258 5 ITR 85 DID NOT APPROVE LEVY OF THE PENALTY ON ESTIM ATED ADDITIONS. SINCE IN THIS CASE, ULTIMATELY INCOME I S ESTIMATED, THEREFORE, NO CASE OF CONCEALMENT OF INC OME OR FILING INACCURATE PARTICULARS HAS BEEN MADE OUT BY THE AUTHORITIES BELOW. THE PENALTY IS, THEREFORE NOT L EVIABLE IN THE MATTER. I, ACCORDINGLY, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND CANCEL THE PENALTY. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ITA 723/2016 ( A.Y. : 2010-11) 8. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINS T THE ORDER OF LD. CIT(APPEALS)-2 LUDHIANA DATED 01.03.20 16 FOR ASSESSMENT YEAR 2010-11 CHALLENGING THE REJECTION O F THE BOOKS OF ACCOUNT AND ADDITION OF RS. 17,81,577/- MA DE ON ACCOUNT OF APPLYING HIGHER GP RATE. 9. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS. 2,98,680/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTED THAT ASSESSEE HAD SHOWN GROSS PROFIT OF RS. 31,79,9 32/- ON THE TOTAL SALES OF RS. 3.78 CR AND DECLARED GP RATE OF 2.42%. THE ASSESSING OFFICER NOTED THAT ASSESSEE H AD DEBITED ALL THE MANUFACTURING EXPENDITURE IN THE PR OFIT & LOSS ACCOUNT. THE ASSESSING OFFICER RE-COMPUTED GP AND NOTED THAT GP WORKED OUT TO 2.42%. THE ASSESSING OF FICER FOUND SEVERAL DISCREPANCIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE THEREFORE, REJECTED THE BOOKS OF ACCOUNT O F THE ASSESSEE AND APPLIED AVERAGE GP RATE OF 6.81% AND M ADE 6 ADDITION OF RS. 17,81,577/-. THE LD. CIT(APPEALS) C ONFIRMED THE ADDITION AND DISMISSED THE APPEAL OF THE ASSESS EE. 10. AFTER CONSIDERING RIVAL CONTENTIONS, I AM OF TH E VIEW ADDITION IS EXCESSIVE IN NATURE. THE LD. COUNSEL FO R THE ASSESSEE DID NOT CHALLENGE THE REJECTION OF THE BOO KS OF ACCOUNT. HE HAS SUBMITTED THAT ISSUE IS COVERED BY ORDER OF ITAT SMC BENCH IN THE CASE OF THE SAME ASSESSE E FOR ASSESSMENT YEAR 2009-10 DATED 10.08.2016 (SUPRA) WH ICH IS REPRODUCED ABOVE. HE HAS SUBMITTED THAT ISSUE IS I DENTICAL IN THE ASSESSMENT YEAR UNDER APPEAL AS WELL. 10(I) AFTER CONSIDERING RIVAL SUBMISSIONS, I AM O F THE VIEW ISSUE IS COVERED BY ORDER OF ITAT SMC CHANDIGARH BENCH FOR PRECEDING ASSESSMENT YEAR 2009-10 DATED 10.08.2 016 IN WHICH, AFTER CONSIDERING THE ADDITION OF EXPENSES I N A SUM OF RS. 25,829/-, THE ADDITION WAS RESTRICTED TO RS. 1 LAC ONLY. IN THE PRESENT YEAR ALSO, THE ASSESSING OFFI CER, APART FROM MAKING THE ADDITION ON ACCOUNT OF LOW GP, MADE ADDITION OF RS. 22,000/- UNDER SECTION 40A(3) OF TH E INCOME TAX ACT WHICH WAS NOT CHALLENGED BEFORE LD. CIT(APP EALS). THEREFORE, THIS ADDITION COULD NOT HAVE BEEN MADE W HILE REJECTING THE BOOKS OF ACCOUNT. THEREFORE, SAME WO ULD ALSO BE AVAILABLE TO THE ASSESSEE TO PROVE THAT ADDITION IS EXCESSIVE AS IS HELD BY THE TRIBUNAL IN ASSESSMENT YEAR 2009-10 ABOVE. 11. CONSIDERING THE HISTORY OF THE ASSESSEE NOTED A BOVE, IN THE LIGHT OF ADDITION CONFIRMED BY THE TRIBUNAL IN A SUM OF 7 RS. 1 LAC IN PRECEDING ASSESSMENT YEAR 2009-10 AND FOLLOWING THE ORDER OF THE TRIBUNAL DATED 10.08.201 6 (SUPRA), I REDUCE THE ADDITION OF RS. 17,81,577/- T O RS. 1.50 LACS IN ALL. THE ORDERS OF THE AUTHORITIES BE LOW TO THAT EXTENT ARE MODIFIED AND I RESTRICT THE ADDITION TO RS. 1.50 LACS AS AGAINST ADDITION OF RS. 17,81,577/-. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE FOR ASSES SMENT YEAR 2009-10 IS ALLOWED, HOWEVER, APPEAL OF THE ASS ESSEE FOR ASSESSMENT YEAR 2010-11 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 16 TH NOVEMBER,2016. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH