SHRI MANOJ SURANA Prop. Nakoda Sarees, Bhopal V. THE ACIT-3(1), Bhopal

ITA 745/IND/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5908 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-07-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 21-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R P MOURYA
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T.GERASIA, HON'BLE JUDICIAL MEMBER AN D SHRI N.S. SAINI, HONBLE ACCOUNTANT MEMBER ITA NO. 745/IND/2015 (ASST. YEAR : 2011-12) SHRI MANOJ SURANA, PROP. OF M/S. NAKODA SAREES, BHOPAL VS. ACIT, 3(1), BHOPAL PAN NO. ALNPS4639M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JITENDRA JAIN, CA DEPARTMENT BY : SHRI R.P.MOURYA, DR DATE OF HEARING : 05/07/2016. DATE OF PRONOUNCEMENT : 05/07/2016. O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), BHOPAL-2, DAT ED 23.10.2015. 2. THE SOLE GRIEVANCE OF THE ASSESSEE, IN THIS APPEA L, IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 10,5 2,331/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES O F THE ASSESSEE ON 20.10.2010 AND ACTUAL PHYSICAL INVENTORY WAS DRAWN ON THE STOCK FOUND AT THE PREMISES AND AFTER GIVING DUE CREDIT FOR ALL THE PURCHASE BILLS AND -:2:- SH MANOJ SURANA VS. ACIT,3(1), BHOPAL I.T.A.NO. 7 45/I/15 A.Y. 11-12 SALE BILLS AVAILABLE WITH THE ASSESSEE, BUT NOT ENT ERED IN THE BOOKS OF ACCOUNTS. THE TRADING ACCOUNT DRAWN ON THE CONCLUSI ON OF THE SURVEY OPERATION SUBSTITUTING THE ACTUAL STOCK OF RS. 74,5 9,926/- FOR THE CLOSING STOCK OF RS. 2,61,500/- APPEARED IN THE BOOKS OF AC COUNTS SHOWED GROSS PROFIT @ 12.42 %. THE PROFIT AND LOSS ACCOUNT PREPA RED BY THE ASSESSEE FOR THE FULL YEAR ENDED ON 31 ST MARCH, 2011, SHOWED GROSS PROFIT @ 9.17%. ON QUERY OF THE AO, THE ASSESSEE SUBMITTED T HAT BECAUSE OF SUBSTANTIAL INCREASE IN TURNOVER I.E. 76% OVER THE LAST FINANCIAL YEAR 2009-10 GROSS PROFIT MARGIN HAS BEEN DECREASED. THE ASSESSEE WAS ASKED TO FURNISH SALE AND PURCHASE BILLS TO JUSTIFY HIS CONTENTION. IN RESPONSE, THE ASSESSEE FURNISHED EIGHT BILLS OF SAL ES AND PURCHASE, WHICH SHOWED THE GROSS PROFIT AT 3.12 %. SINCE THE PRODUCTION OF ONLY 8 BILLS FOR COMPARISON CONSIDERING THE HUGE TURNOVER OF RS. 8.2 CRORES IS NOT JUSTIFIED, THE ASSESSEE WAS ASKED TO PRODUCE AT LEAST 50 BILLS OF SALES AND PURCHASES FOR VERIFICATION. THE ASSESSEE SUBMIT TED THAT BECAUSE OF DIFFERENCE OF CODING SYSTEM IN SALES/PURCHASE BILLS , IT IS DIFFICULT TO PRODUCE THE BILLS FOR COMPARISON. THEREFORE, THE AO HELD THAT THE ASSESSEE FAILED TO JUSTIFY THE DECREASE IN GROSS PR OFIT WITH DOCUMENTARY EVIDENCE. THE AO HELD THAT IF THE AVERAGE GROSS PRO FIT OF PREVIOUS THREE YEARS RELEVANT TO ASSESSMENT YEAR 2011-12 IS TAKEN, IT COMES TO 5.9%. THE GROSS PROFIT SHOWN BY THE ASSESSEE IS 4.5 %. SI NCE THE ASSESSEE HAS SUPPRESSED THE GROSS PROFIT BY 1.85% INCOME IN COMPARISON TO ASSESSMENT YEAR 2010-11, THE GROSS PROFIT OF THE AS SESSEE FOR ASSESSMENT YEAR 2011-12 IS INCREASED BY 0.8% AND GR OSS PROFIT IS TAKEN -:3:- SH MANOJ SURANA VS. ACIT,3(1), BHOPAL I.T.A.NO. 7 45/I/15 A.Y. 11-12 AT 5.5 % OF TOTAL SALES, WHICH IS JUSTIFIABLE CONSI DERING THE AVERAGE GROSS PROFIT RATIO OF LAST 3 YEARS AND CONSIDERING THE SUBSTANTIAL INCREASE IN TURNOVER. THEREFORE, AN AMOUNT OF RS. 7,13,633/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER, DURING THE C OURSE OF SURVEY, EXCESS CASH OF RS. 7,25,330/- WAS FOUND AND THE ASS ESSEE HAD DISCLOSED RS. 3,86,632/- SEPARATELY IN THE PROFIT A ND LOSS ACCOUNT UNDER THE HEAD INCOME DECLARED IN SURVEY - CASH. THE AS SESSEE DURING THE ASSESSMENT PROCEEDINGS SUBMITTED BEFORE THE AO THA T AMOUNT OF RS. 3,38,698/- WAS BY MISTAKE LEFT TO BE INCORPORATED I N COMPUTATION OF INCOME. ACCORDINGLY, THE AO ADDED THE SAME TO THE I NCOME OF THE ASSESSEE. 4. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT O UT OF THE EXCESS CASH OF RS. 7,25,330/- FOUND DURING THE COURSE OF S URVEY, THE ASSESSEE HAS DISCLOSED RS. 3,86,632/- SEPARATELY IN ITS PROF IT AND LOSS ACCOUNT AND THE REST OF RS. 3,38,698/- AS CASH SALES AND, T HEREFORE, THE ADDITION OF RS. 3,38,698/- WAS NOT JUSTIFIED. FURTHER, IT WA S ALSO SUBMITTED THAT SINCE THE GROSS PROFIT RATE WAS LOW ON ACCOUNT OF C OST OF SOME OBSOLETE SAREES AND ON ACCOUNT OF ENTRIES PENDING FOR THE GO ODS RECEIVED, THEREFORE, THE ADDITION OF RS. 7,13,633/- ON ACCOUN T OF SUPPRESSED GROSS PROFIT WAS NOT JUSTIFIED. 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ADDITION OF RS. 3,38,698/- ON ACCOUNT OF EXCESS CASH FOUND ON THE GROUND THAT THE ASSESSEE HAS NOTHING T O SHOW ON AS TO WHY TWO DIFFERENT TREATMENTS HAVE BEEN GIVEN TO THE EXCESS CASH FOUND -:4:- SH MANOJ SURANA VS. ACIT,3(1), BHOPAL I.T.A.NO. 7 45/I/15 A.Y. 11-12 BY CREDITING PART OF IT TO THE TRADING ACCOUNT AND A PART OF IT TO THE PROFIT AND LOSS ACCOUNT. 6. REGARDING THE GROSS PROFIT ADDITION OF RS. 7,13, 633/-, THE LD. CIT(A) HELD THAT THE EXPLANATION OF THE ASSESSEE TH AT LOW GROSS PROFIT RATE WAS ON ACCOUNT OF COST OF SOME OBSOLETE SAREES AND ON ACCOUNT OF ENTRIES PENDING FOR THE GOODS RECEIVED WAS UNSUBSTA NTIATED. THE ASSESSEE HAD NOT RAISED ANY OBJECTION TO THE INVENT ORY OR VALUATION OF STOCK BY THE SURVEY PARTY AND AT THE TIME OF SURVE Y NOR SUCH OBJECTION WAS MADE DURING THE ASSESSMENT PROCEEDINGS. THEREFO RE, HE CONFIRMED THE ORDER OF THE AO MAKING ADDITION OF RS. 7,13,633 /-. 7. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT SINCE THE BOOKS OF ACCOUNTS OF THE A SSESSEE WAS NOT REJECTED BY THE AO, THE AO WAS NOT JUSTIFIED IN EST IMATING THE GROSS PROFIT AND MAKING ADDITION OF THE SAME TO THE INCOM E OF THE ASSESSEE. 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 9. WE FIND THAT DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE AO VIDE ORDER SHEET ENTRY DATED 24.2.2014 REQUIRED THE ASSESSEE TO SUBMIT COPIES OF FIFTY BILLS OF SALES AND PURCHASES FOR VE RIFICATION. THE ASSESSEE SUBMITTED THAT BECAUSE OF DIFFERENCE OF CODING SYST EM IN SALES/PURCHASE BILLS, IT WAS DIFFICULT TO PRODUCE THE BILLS FOR CO MPARISON. THEREFORE, THE AO HAD REJECTED THE BOOK RESULT OF THE ASSESSEE AND ESTIMATED THE PROFIT OF THE ASSESSEE. HENCE, WE REJECT THE CONTEN TION OF THE ASSESSEE THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE -:5:- SH MANOJ SURANA VS. ACIT,3(1), BHOPAL I.T.A.NO. 7 45/I/15 A.Y. 11-12 REGULARLY MAINTAINED BY IT AND HENCE WAS NOT JUSTIF IED IN ESTIMATING THE GROSS PROFIT ON THE TOTAL TURNOVER. HENCE, WE CONFI RM THE ORDER OF THE CIT(A) AND DISMISS THIS PART OF THE GROUND OF THE A SSESSEE. 10. REGARDING THE ADDITION OF EXCESS CASH OF RS. 3 ,38,698/- FOUND DURING THE COURSE OF SURVEY, NO SUBMISSIONS WERE MA DE BEFORE US BY THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE. HENCE, THIS PART OF THE GROUND OF THE APPEAL IS ALSO DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON TUESDAY, THE 5 TH DAY OF JULY, 2016 AT INDORE. SD/-(D. T. GERASIA) SD/-(N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 5 TH JULY, 2016. CPU COPY TO: 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R. 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., INDORE