ACIT, Jaipur V. SH. MAHENDRA KUMAR AGARWAL, Jaipur

ITA 737/JPR/2011

• Counselvise Citation: 73723114 RSA 2011
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 17-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Cost of acquisition

Judgement Text

ITA NO. 737//JP/2011 ACIT VS. SHRI MAHENDRA KUMAR AGARWAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 737/JP/2011 ASSESSMENT YEARS : 2008-09 PAN : ABUPK 2500 L THE ACIT VS. SHRI MAHENDRA KUMAR AGARWAL CIRCLE- 1 P/O M/S. MOHAN LAL MAHENDRA KUMAR JEWEL LERS JAIPUR JOHRI BAZAR, JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI D.C. SHARMA ASSESSEE BY : SHRI VIJAY GOYAL AND SHRI GULSHA N AGARWAL DATE OF HEARING: 11-08-2014 DATE OF PRONOUNCEMENT: 12-09-2014 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST T HE ORDER OF THE LD. CIT(A)- I JAIPUR DATED 16-06-2011 FOR THE ASSES SMENT YEAR 2008-09 WHEREIN THE REVENUE HAS RAISED FOLLOWING GROUND S:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN: - (I) NOT UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT WHEN THE SALES MADE COULD NOT BE VERIFIED AND THE C ASH SALES BEING 72.5% OF AL THE SALES AND THE G.P. RATE FELL FROM 0.76% TO 0.15% WITHIN ONE YEAR. ITA NO. 737//JP/2011 ACIT VS. SHRI MAHENDRA KUMAR AGARWAL 2 (II) DELETING THE ADDITION MADE ON ACCOUNT OF LOW G.P. RATE WHICH FELL FROM 0.76 TO 0.15% AND THE G.P. RA TE APPLIED WAS 0.25% 2.1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND CARRIES ON BUSINESS OF GOLD & SILVER BULLION, GOLD SILVER JEWELLERY AND PRECIOUS & SEMI-PRECIOUS STONES IN THE NAME OF THE FOLLOWING PROPRIETORSHIP CONCERNS. (I) M/S. MOHAN LAL MAHENDRA KUMAR (MMJ), JAIPUR (II) M/S. MOHAN LAL MAHENDRA KUMAR JWELLERS (MMJ), NOIDA. (III) M/S. MOHAN LAL MAHENDRA KUMAR JEWELLERS (MMJ) , DELHI. (IV) M/S. A.M. EXPORT, JAIPUR OUT OF THE ABOVE, THE AO REJECTED THE BOOKS OF ACCO UNT U/S 145(3) OF THE ACT IN RESPECT OF CONCERN M/S. MOHAN LAL MAHENDRA KUMAR (MMJ), JAIPUR. THE AO THEREAFTER THE ESTIMATED GROSS PROFIT RATE A T 0.25% AS AGAINST 0.15% DECLARED BY THE ASSESSEE AND MADE AN ADDITION OF RS . 34,11,060/-. VARIOUS OTHER ADDITIONS WERE ALSO MADE. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL BEFORE THE LD. CIT(A) WHO UPHELD THE BOOKS OF ACCOUNT OF THE ASSESSEE AND CONSEQUENTLY DELETED THE ADDITIONS MADE BY THE AO IN THIS BEHALF BY FOLL OWING OBSERVATIONS. ITA NO. 737//JP/2011 ACIT VS. SHRI MAHENDRA KUMAR AGARWAL 3 4.3 REGARDING THE SALES MADE TO SILVER AND SILVER T HE ASSESSEE HAS SUBMITTED THAT HE HAS SUFFICIENT STOCK IN HIS BOOKS ON THE DATE WHEN THE SALE WAS MADE AND THE OUTGOING OF STO CK AGAINST THE SALE WAS RECORDED IN THE STOCK REGISTER OF THE ASSE SSEE. FURTHER, THE SALE WAS AT THE PREVAILING MARKET PRICE AND PAYMENT WAS RECEIVED VIDE CHEQUE. HE HAS ALSO SUBMITTED THAT OF THE TOTA L SALES MADE DURING THE YEAR THE SALES MADE TO SILVER AND SILVER CONSTI TUTED ONLY .03%. 4.4 REGARDING THE DECLINE IN GROSS PROFIT THE AR H AS SUBMITTED THAT WHILE THE GROSS PROFIT HAS IMPROVED ON SALE OF JEWELLERY FROM 6.93% LAST YEAR TO 19.81% THERE HAS BEEN A DEC LINE IN THE GROSS PROFIT ON THE SALE OF BULLION. IN THE PREVIOUS ASSE SSMENT YEAR TURNOVER OF BULLION WAS RS. 62,87,54,088/- WHEREAS DURING TH IS YEAR THE TURNOVER OF BILLION HAS INCREASED BY MORE THAN 4 T IMES TO RS. 3,33,24,90,301/-. THE GROSS PROFIT ON THE SALE OF B ILLION HAS DECLINED FROM .66% TO .10% DURING THE YEAR. THE MAIN REASON FOR THIS DECLINE IS THAT THE ASSESSEE HAS TO TAKE DELIVERY OF GOODS FROM THE SUPPLIER BANK AT THE FIXED RATE USUALLY DECIDED WHILE THE AS SESSEE HAS TO DELIVER GOODS TO THE BUYERS AT THE MARKET PRICE WHICH MAY B E LOWER THAN THE PURCHASE COST OF THE ASSESSEE. DUE TO THE DAY TO DA Y FLUCTUATIONS IN THE BULLION PRICES THE ASSESSEE HAS SUFFERED A DECLINE IN GROSS PROFIT DURING THE YEAR. 4.5 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AN D THE SUBMISSIONS OF THE A.R. TO DETERMINE THE GROSS PROF ITS FOR INGREDIENTS ARE NECESSARY SALES, PURCHASE, VALUE OF THE CLOSING STOCK AND OPENING STOCK. WHEN ALL THESE ARE VERIFIABLE THE BOOKS OF A CCOUNT OF THE ASSESSEE CANNOT BE REJECTED. THE AO HAS NOT BROUGHT ANY FINDING ON RECORD REGARDING NON-VERIFIABILITY OF THE PURCHASES , SALES OR THE VALUATION OF THE CLOSING OR OPENING STOCK. ON VERIF ICATION OF THE STOCK REGISTER IT WAS SEEN THAT THE ASSESSEE HAD SUFFICI ENT STOCK ON THE DATE OF SALE TO M/S. SILVER AND SILVER. THE PAYMENT WAS RECEIVED VIDE CHEQUE BY THE ASSESSEE AND HAS BEEN INCLUDED IN HIS INCOME. THERE APPEARS TO BE NO COGENT GROUND FOR REJECTION OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3). THE DECISION OF THE AO TO REJECT THE BOOKS OF ACCOUNTS U/S 145(3) IS NOT UPHELD. 4.6 ONCE THE BOOKS OF ACCOUNTS ARE ACCEPTED THE QUE STION OF ESTIMATION OF THE INCOME OF THE ASSESSEE DOES NOT A RISE. THE ASSESSEE HAS SUBMITTED THE STATEMENTS OF PURCHASE AND SALE O F BULLION. THESE WERE VERIFIED ON TEST CHECK BASIS. NO DEFECTS COULD BE FOUND TO ITA NO. 737//JP/2011 ACIT VS. SHRI MAHENDRA KUMAR AGARWAL 4 CONTROVERT THE SUBMISSION OF THE A.R. THAT THE LOSS WAS SUFFERED BY THE ASSESSEE ON THE ACCOUNT OF DAILY FLUCTUATIONS ON PR ICE OF BULLION THEREFORE, THE IMPUGNED ADDITION OF RS. 34,11,060/- IS DIRECTED TO BE DELETED. FIRST TWO GROUNDS OF APPEAL ARE DECIDED IN FAVOUR OF THE APPELLANT. 2.3 AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE R EVENUE IS BEFORE US. 2.4 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO. 2.5 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SHRI VIJAY GOYAL, C.A. VEHEMENTLY ARGUED THAT THE AO REJECTED THE BOO KS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) ONLY IN T HE CASE OF M/S. MOHANLAL MAHENDRA KUMAR, ONE OF THE PROPRIETORSHIP CONCERN, DRAWING ADVERSE INFERENCE ON THE FOLLOWING FACTORS. 1. THERE WERE HEAVY CASH SALES WHICH WERE NOT SUB JECT TO VERIFICATION. 2. THE G.P. RATE DURING THE YEAR HAS DECLINED AND T HE ASSESSEE HAVE VAGUE AND GENERAL REPLY WHICH WAS NOT FOUND SATISFACTORY. 3. CERTAIN SALES OF RS. 10,60,000/- WERE MADE TO M/ S. SILVER AND SILVER WHO WAS PROVED AN ENTRY PROVIDER IN THE SERVICE CONDUCTED BY THE BCTT WING OF THE DEPARTMENT. IT HAS NOT BEEN DISPUTED BY THE LD. DR THAT THE ASS ESSEE WAS NOT MAINTAINING THE REGULAR BOOKS OF ACCOUNT AND DAY TO DAY STOCK R EGISTER FOR ALL THE CONCERNS WHICH WERE DULY AUDITED. THE LD. AR SUBMIT TED THAT THE LD. CIT(A) HAS RIGHTLY OBSERVED THAT THE TURNOVER OF THE BULL IONS HAD INCREASED BY MORE ITA NO. 737//JP/2011 ACIT VS. SHRI MAHENDRA KUMAR AGARWAL 5 THAN FOUR TIMES AND THE MAIN REASON FOR DECLINE IN THE GROSS PROFIT RATE WAS THAT THE ASSESSEE HAD TO TAKE DELIVERY OF THE GOODS FROM THE SUPPLIER BANK AT THE FIXED RATES WHEREAS THE ASSESSEE HAD TO SUPPLY THE GOODS TO CUSTOMERS AT THE MARKET RATE. THIS REASON FOR DECLINE IN GROSS P ROFIT RATE ON DAY TO DAY BASIS WAS DULY DEMONSTRATED WHEN THE BOOKS OF ACCOU NT AND STOCK REGISTERS ARE DULY MAINTAINED IN RESPECT OF ALL THE CONCERNS ON THE SAME LINES. THUS THERE WAS NO JUSTIFICATION ON THE PART OF THE AO TO PICK AND CHOOSE THE IMPUGNED PROPRIETORSHIP CONCERN M/S. MOHAN LAL MAHE NDRA KUMAR (MMJ), JAIPUR FOR REJECTION OF BOOKS OF ACCOUNT. IN ALL OT HER PROPRIETORSHIP CONCERNS OF THE ASSESSEE, THE BOOK RESULTS HAVE BEEN ACCEPTE D BY THE AO. THE ORDER OF THE LD. CIT(A) IS BASED ON PROPER VERIFICATION OF T HE FACTS, PLEADINGS AND DEMONSTRATION MADE BY THE ASSESSEE. THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT ANY OF THE FINDINGS GIVEN BY THE LD. CIT (A).THUS THE ORDER OF THE LD. CIT(A) DESERVES TO BE UPHELD. 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. FROM THE RECORD, IT CLEARLY EMERGES T HAT THE ASSESSEE WAS MAINTAINING REGULAR BOOKS OF ACCOUNT AND STOCK INVE NTORY. THE TURNOVER OF BULLION HAD GONE UP BY FOUR TIMES. THE DECLINE OF G ROSS PROFIT RATE HAS BEEN DULY EXPLAINED BY THE ASSESSEE DUE TO THE REASON TH AT THERE WAS FLUCTUATIONS ITA NO. 737//JP/2011 ACIT VS. SHRI MAHENDRA KUMAR AGARWAL 6 IN THE BULLION PRICES. THE BOOKS OF ACCOUNTS OF THI S PROPRIETORSHIP CONCERN ARE IN ORDER WHICH HAS BEEN PROPERLY MAINTAINED BY THE ASSESSEE WITH SUPPORTING VOUCHERS AND STOCK REGISTER. THUS THERE WAS NO JUSTIFICATION IN REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE I.E. M/S. MOHAN LAL MAHENDRA KUMAR (MMJ), JAIPUR. HENCE, IN THIS VIEW OF THE MAT TER, WE SEE NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS UPHELD. THE APPEAL OF THE REVENUE IS DISMISSED. 3.0 IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 12-0 9-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 12 TH SEP 2014 *MISHRA COPY FORWARDED TO:- 1. THE ACIT, CIRCLE- 1, JAIPUR 2. SHRI MAHENDRA KUMAR AGARWAL, JAIPUR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 737/JP/2011) AR ITAT, JAIPUR ITA NO. 737//JP/2011 ACIT VS. SHRI MAHENDRA KUMAR AGARWAL 7 ITA NO. 737//JP/2011 ACIT VS. SHRI MAHENDRA KUMAR AGARWAL 8 ITA NO. 737//JP/2011 ACIT VS. SHRI MAHENDRA KUMAR AGARWAL 9