SHRI RAJENDRA GOYAL , NEW DELHI V. INCOME TAX OFFICER, WARD-2, JHUNJHUNU

ITA 744/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1842 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 04-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONAM ROY DCIT DHK
• Assessee Lawyers: SIDDARTH MITTAL
• Keywords: Gross profit estimation
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 744/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 RAJENDRA GOYAL, PROP.- M/S SHYAM TRADERS, 108, BHAGIRATHI APARTMENTS, SECTOR- 9, ROHINI, NEW DELHI. CUKE VS. INCOME TAX OFFICER, WARD-2, JHUNJHUNU. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAPPA 4567 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SIDDARTH MITTAL (CA). JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONAM ROY (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12/12/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 13/12/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER OF THE LD. CIT(A)-3, JAIPUR DATED 03/08/2017 FOR THE A .Y. 2011-12, WHEREIN THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DETAILED WRITTEN AND ORAL SUBMISSIONS MADE A ND THE EVIDENCE ALREADY AVAILABLE ON AOS OWN RECORD AND F URTHER EVIDENCES ADDUCED BY THE ASSESSEE THE ORDERS OF THE LEARNED LOWER AUTHORITIES ARE AGAINST THE LAW AND FACTS OF THE CASE. ITA 744/JP/2017_ RAJENDRA GOYAL VS ITO 2 2. THAT THE LD. AO GROSSLY ERRED IN INVOKING THE PR OVISIONS OF SECTION 145(3) OF THE I T ACT, 1961 AND THE LD. CIT (APPEALS)-3, JAIPUR ALSO ERRED IN CONFIRMING THE SAME WITHOUT CO NSIDERING AND APPRECIATING THE FACTS OF THE CASE. 3. THAT THE LD. AO GROSSLY ERRED IN APPLYING NET PR OFIT RATE @0.67% AND ESTIMATING THE NET PROFIT IN THE AMOUNT OF RS.20,51,429/- BY MAKING ADDITION OF RS.3,04,903/- THEREOF WITHOUT THERE BEING ANY BASIS AND THE LD. CIT (APPE ALS)-3, JAIPUR ALSO ERRED IN CONFIRMING THE TRADING ADDITIO N OF RS. 1,51,811/- WITHOUT PROPERLY CONSIDERING THE FACTS A ND CIRCUMSTANCES OF THE CASE. 4. THAT THE LD. AO ERRED IN MAKING ADHOC DISALLOWAN CE OF RS.9,338/- I.E. 20% OF TOTAL SHOP EXPENSES OF RS.46, 690/- WITHOUT THERE BEING ANY BASIS AND WITHOUT APPRECIAT ING THE FACTS OF THE CASE AND THE LD. CIT (APPEALS)-3, JAIP UR ALSO ERRED IN CONFIRMING THE SAME. 5. THAT THE LD. AO FURTHER ERRED IN DISALLOWING TEL EPHONE EXPENSES IN THE AMOUNT OF RS.4,077/- I.E. 20% OF TOTAL TELEP HONE EXPENSES OF RS.20,387/- MERELY ON PROBABILITY OF PER SONAL USE AND WITHOUT CONSIDERING THE FACTS OF THE CASE AND T HE LD. CIT (APPEALS)-3, JAIPUR ALSO ERRED IN CONFIRMING THE SA ME WITHOUT CONSIDERING THE SUBMISSIONS MADE BY ASSESSEE. 6. THAT THE LD. AO GROSSLY ERRED IN MAKING ADDITION OF RS.58,500/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS BY ALLEGEDL Y ESTIMATING HOUSEHOLD EXPENSES AT RS.15,000/- PER MO NTH I.E. RS.1,80,000/- FOR THE YEAR WITHOUT THERE BEING ANY BASIS AND WITHOUT CONSIDERING ASSESSEES CONTENTION AND THE L D. CIT (APPEALS)-3, JAIPUR ALSO ERRED IN CONFIRMING THE SA ME WITHOUT CONSIDERING THE SUBMISSIONS MADE BY ASSESSEE. 2. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADIN G OF FOOD GRAINS ON WHOLESALE BASIS IN THE NAME AND STYLE OF M/S SHYA M TRADERS. THE RETURN DECLARING TOTAL INCOME OF RS. 11,91,000/- WAS FILED BY THE ASSESSEE ON ITA 744/JP/2017_ RAJENDRA GOYAL VS ITO 3 24/09/2011. THE ASSESSING OFFICER COMPLETED THE ASS ESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AFTER MA KING VARIOUS ADDITIONS AT TOTAL INCOME OF RS. 15,67,820/-. THE LD CIT(A) HAS GIVEN PART RELIEF TO THE ASSESSEE. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. THE GROUND NO. 1 OF THE APPEAL IS GENERAL IN NATURE AND DOES NOT REQUIR E ANY ADJUDICATION. HENCE, THE SAME STANDS DISMISSED. 4. IN THE GROUNDS NO. 2 AND 3 OF THE APPEAL, THE IS SUE INVOLVED IS SUSTAINING THE ADDITION OF RS. 1,51,811/- MADE BY I NVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE LD. CIT(A) HAS DECIDED THE ISSUE BY HOLDING AS UNDER: I HAVE CONSIDERED THE OBSERVATION MADE BY THE AO IN THE ASSESSMENT ORDER AS WELL AS SUBMISSION FILED BY THE A/R OF THE APPELLAN T. I FIND THAT THE APPELLANT NOT MAINTAINED QUALITY-WISE DETAILS OF COMMODITIES TRADED . THE TRADING EXPENSES ARE NOT FULLY VOUCHED. THE A/R OF THE APPELLANT DID NOT MAKE ANY ARGUMENT IN HIS SUBMISSIONS ABOUT THE DEFECTS POINT ED OUT BY THE A.O. IN THE ASSESSMENT ORDER. THEREFORE THE ACTION OF THE ASSES SING OFFICER FOR APPLICATION OF PROVISION U/S 145(3) IS JUSTIFIED AN D AS PER LAW. NEXT ISSUE REGARDING THE ESTIMATION OF GROSS PROFI T AND MAKING THE ADDITION ON ACCOUNT OF LOW GROSS PROFIT RATE. THE A /R OF THE APPELLANT ARGUED THAT NO BASIS OF ESTIMATION BY THE AO. THERE IS FOR CE IN THE ARGUMENT OF THE A/R OF THE APPELLANT THAT THE AO MADE THE ADDITION OF RS. 3,04,903/- WITHOUT ANY BASIS. THE A/R OF THE APPELLANT TAKEN THE ARGUM ENT THAT HIS TURNOVER INCREASE 3.5 TIMES IN THIS YEAR COMPARE TO THE LAST YEAR. THE GROSS PROFIT ITA 744/JP/2017_ RAJENDRA GOYAL VS ITO 4 DECREASED DUE TO THE INCREASE OF SALES AND COMPETIT ION IN THE MARKET. THERE IS FORCE IN THE SUBMISSION OF THE A/R OF THE APPELLANT THAT AO MADE ADDITION WITHOUT ANY COMPARABLE CASE AND WITHOUT ANY EVIDENC ES. THE SALES OF THE APPELLANT ALSO INCREASE. THEREFORE CONSIDERING THE ABOVE FACTS AND INCREASE OF SALES. I HAVE ADOPT THE AVERAGE GROSS PROFIT RATE O F LAST TWO YEARS I.E. 0.67%, 0.57% THE AVERAGE COMES 0.62% THUS GROSS PROFIT COM E RS. 18,98,337/-. THE APPELLANT SHOWN GROSS PROFIT RS. 17,46,526/-. ACCOR DINGLY, I CONFIRM THE TRADING ADDITION OF RS. 1,51,811/- (18,98,337-17,46 ,526/-) AND BALANCE AMOUNT OF RS. 1,53,092/- IS DELETED. THESE GROUNDS ARE PARTLY ALLOWED. 5. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR HAS RELIED ON THE PLEADINGS MADE BEFORE THE LOWER AUTHORITIES AND SUB MITTED THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN REJECTING THE BOOK S OF ACCOUNT AND INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND ALS O ESTIMATING THE INCOME. 6. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. 7. BENCH HAVE HEARD BOTH THE SIDES ON THIS ISSUE. TH IS IS A FACT THAT THE ASSESSEE WAS NOT MAINTAINING QUALITY WISE DETAILS OF THE COMMODITIES TRADED, THEREFORE, IT SHALL NOT BE POSSIBLE TO VERI FY THE CORRECTNESS OF THE VALUATION OF THE CLOSING STOCK. THEREFORE, THE BENCH IS OF THE VIEW THAT THE BOOKS OF ACCOUNT WERE RIGHTLY REJECTED BY INVOKING T HE PROVISIONS OF SECTION 145(3) OF THE ACT. FURTHER THE ASSESSING OFFICER MA DE THE ADDITION OF RS. 3,04,903/- LACS AND THE LD. CIT(A) RESTRICTED IT TO RS. 1,51,811/- LACS. AFTER CONSIDERING BOTH THE SIDES AND THE VARIOUS OTHER AS PECTS OF THE CASE ITA 744/JP/2017_ RAJENDRA GOYAL VS ITO 5 INCLUDING THE INCREASE IN THE SALES TURNOVER BY 3.5 TIMES IN THE YEAR UNDER CONSIDERATION IN COMPARISON TO IMMEDIATE PRECEDING YEAR, THE ESTIMATE OF G.P. AT RS. 1,51,811/- LACS IS JUSTIFIED, THEREFORE , THE BENCH UPHOLD THE ORDER OF THE LD. CIT(A) ON THIS GROUND. ACCORDINGLY, GROUNDS NO. 2 AND 3 ARE DISMISSED. 8. IN THE GROUNDS NO. 4 TO 6 THE ISSUES INVOLVED AR E SUSTAINING THE DISALLOWANCES OUT OF SHOPS EXPENSES, TELEPHONE EXPEN SES AND LOW HOUSEHOLD WITHDRAWALS RESPECTIVELY. THE LD. CIT(A) HAS DEALT THESE ISSUES BY HOLDING AS UNDER: (I) I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFORE ME. I FIND THAT ALL SHOP EXPENSES ARE NOT FULLY VOUCHED. THEREFORE I CONFIRM THE ADDITION MADE BY THE AO OF RS. 9,338/- OUT OF SHOP EXPENSES. REGARDING THE TELEPHONE EXPENSES THE AO IN HIS ORD ER MADE DETAILED FINDING THAT THE USE OF TELEPHONE AND FOR PERSONAL PURPOSE, THE APPELLANT DID NOT FILE ANY SUBMISSION WHICH ESTABLISHED THAT THE TELEPHONE WAS NOT USE FOR NON BUSINESS PURPOSE. THEREFORE I AM AGREE WITH THE VIEWS OF THE ASSESSING OFFICER THAT HE RIGHTLY DISALLOWANCE 20% OF TELEPHO NE EXPENSES AS NON BUSINESS PURPOSE. HENCE, I CONFIRM THE ADDITION MADE BY THE AO OF RS. 2,246/- OUT OF TELEPHONE EXPENSES. THESE GROUNDS ARE NOT ALLOWED. (II) I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFOR E ME. I FIND THAT THE AO ESTIMATED HOUSE HOLD EXPENSES RS. 15,000/- PER MONT H. IN VIEW OF THE PRESENT RISING PRICE, MOBILE PHONE, SATELLITE T.V., MOTOR C AR AND KEEPING IN VIEW THE STATUS OF ASSESSEE AND THE COMMUNITY TO WHICH HE BE LONGS. THE A/R OF THE APPELLANT NOT FILED ANY DETAILS AND SUPPORTING EVID ENCES WHICH PROVE THAT HIS WITHDRAWALS ARE SUFFICIENT FOR HIS HOUSE HOLD EXPEN SES. THEREFORE I AM THE VIEW ITA 744/JP/2017_ RAJENDRA GOYAL VS ITO 6 THAT AO RIGHTLY ESTIMATED HOUSE HOLD EXPENSES RS. 1 5,000/- PER MONTH. HENCE, I CONFIRM THE ADDITION MADE BY THE AO OF RS. 58,500/- . THIS GROUND IS NOT ALLOWED. 9. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. THE LD AR OF THE ASSESSEE HAS REITERATED THE SUBMISSIONS AS MADE BEF ORE THE LOWER AUTHORITIES AND PRAYED TO DELETE THE ADDITIONS. 10. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 11. THE BENCH HAVE HEARD BOTH THE SIDES ON THESE ISS UES. SINCE, THE ADDITION ON ACCOUNT OF ESTIMATING OF GROSS PROFIT A ND REJECTION OF BOOKS OF ACCOUNT HAS BEEN SUSTAINED, THEREFORE, IN VIEW OF TH E VARIOUS DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT ON THIS ISSUE , NO SPECIFIC ADDITIONS OUT OF EXPENSES DEBITED IN P&L ACCOUNT CAN BE SUSTAINED . THEREFORE, THE SAME ARE DIRECTED TO BE DELETED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/12/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 13 TH DECEMBER, 2017 ITA 744/JP/2017_ RAJENDRA GOYAL VS ITO 7 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI RAJENDRA GOYAL, NEW DELHI. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD-2, JHUNJHUNU. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 744/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR