MURLIDHAR AGARWAL, JHUNJHUNU V. INCOME TAX OFFICER, WARD-2, JHUNJHUNU

ITA 745/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1838 (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. 745/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 MURLIDHAR AGARWAL, PROP.- M/S RADHA KISHAN & SONS, MAIN MARKET, SINGHANA, DISTT.- JHUNJHUNU. CUKE VS. INCOME TAX OFFICER, WARD-2, JHUNJHUNU. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAPPA 4566 L 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 M ADE AND THE EVIDENCE ALREADY AVAILABLE ON AOS OWN RECORD A ND FURTHER EVIDENCES ADDUCED BY THE ASSESSES THE ORDER S OF THE LEARNED LOWER AUTHORITIES ARE AGAINST THE LAW AND F ACTS OF THE CASE. ITA 745/JP/2017_ MURLIDHAR AGARWAL VS ITO 2 2. THAT THE LD. AO GROSSLY ERRED IN MAKING LUMP-SUM TRADING ADDITION IN THE AMOUNT OF RS.4,00,000/- ON BASELESS ASSUMPTIONS AND WITHOUT THERE BEING ANY BASIS AND C OGENT REASON AND THE LD. CIT (APPEALS)-3, JAIPUR ALSO ERR ED IN RESTRICTING THE SAME TO RS.3,00,000/- WITHOUT PROPERLY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . 3. THAT THE LD AO ALSO ERRED IN REJECTING THE BOOKS OF ACCOUNT OF ASSESSES U/S 145(3) ON THE BASIS OF WRONG OBSERVATI ONS AND WITHOUT ANY COGENT REASON WHILE BRUSHING ASIDE THE ASSESSEES OBJECTIONS AND EXPLANATIONS AND THE LD C IT (APPEALS)-3, JAIPUR ALSO ERRED IN CONFIRMING THE SA ME WITHOUT CONSIDERING AND APPRECIATING THE FACTS OF THE CASE. 4. THAT THE LD. AO GROSSLY ERRED IN MAKING AD HOC D ISALLOWANCE OF RS. 6,932/- I.E. 20% OF TOTAL - SHOP EXPENSES OF RS.34,659/- WITHOUT THERE BEING ANY BASIS AND WITHO UT APPRECIATING THE FACTS OF THE CASE AND THE LD. CIT (APPEALS)-3 JAIPUR ALSO ERRED IN CONFIRMING THE SAME WITHOUT CO NSIDERING THE SUBMISSIONS MADE BY ASSESSEE. 5. THAT THE LD. AO ERRED IN DISALLOWING TELEPHONE E XPENSES IN THE AMOUNT OF RS. 8,131/- I.E. 20% OF TOTAL TELEPHO NE EXPENSES OF RS.28,556/- MERELY ON PROBABILITY OF PER SONAL USE AND WITHOUT CONSIDERING THE FACTS OF THE CASE A ND THE LD. CIT (APPEALS)-3, JAIPUR ALSO ERRED IN CONFIRMING TH E SAME WITHOUT CONSIDERING THE SUBMISSIONS MADE BY ASSESSE S. 6. THAT THE LD. AO GROSSLY ERRED IN MAKING ADDITION OF RS.45,275/- ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWALS BY ALLEGEDLY ESTIMATING HOUSEHOLD EXPENSES AT RS. 10,0 00/- PER MONTH I.E. RS. 1,20,000/- FOR THE YEAR WITHOUT THERE BEING ANY BASIS AND WITHOUT CONSIDERING ASSESSEE'S CONTEN TION AND THE LD. CIT(A)-3 JAIPUR ALSO ERRED IN CONFIRMING TH E SAME. 7. THAT THE LD. AO ALSO ERRED IN MAKING ADDITION ON ACCOUNT OF INTEREST NOT CHARGED IN THE AMOUNT OF RS.15,600/- O N THE BASIS OF WRONG OBSERVATIONS & FACTS THE LD. CIT (AP PEALS)-3, JAIPUR ALSO ERRED IN CONFIRMING THE SAME WITHOUT CO NSIDERING THE FACTS OF THE CASE. ITA 745/JP/2017_ MURLIDHAR AGARWAL VS ITO 3 2. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADIN G OF GRAINS ETC. ON WHOLESALE BASIS IN THE NAME AND STYLE OF M/S RADH A KISHAN & SONS, SINGHANA. THE RETURN DECLARING TOTAL INCOME OF RS. 8,08,860/- WAS FILED BY THE ASSESSEE ON 28/09/2011. THE ASSESSING OFFICER C OMPLETED THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) AFTER MAKING VARIOUS ADDITIONS AT TOTAL INCOME OF R S. 13,13,110/-. 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. 3,00,000/- MADE BY I NVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE LD. CIT(A) HAS DEC IDED 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 APPEL LANT. I FIND THAT THE APPELLANT NOT MAINTAINED QUALITY-WISE DETAILS OF CO MMODITIES TRADED . THE VALUATION O F CLOSING STOCK IS ALSO NOT CORRECT IN ABSENCE OF THE DETAIL OF QUALITY- WISE COMMODITIES TRADED. THE A/R OF THE APPELLANT A RGUED IN HIS SUBMISSION DID NOT TOUCH THIS ISSUE. HE SUBMITTED G ENERAL AND ROUTINE SUBMISSIONS. THEREFORE THE ACTION OF THE ASSESSING OFFICER FOR APPLICATION OF PROVISION U/S 145(3) IS JUSTIFIED AND AS PER LAW. ITA 745/JP/2017_ MURLIDHAR AGARWAL VS ITO 4 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 AND EVEN NO COMP ARABLE CASE CITED BY THE AO. THERE IS FORCE IN THE ARGUMENT OF THE A/R O F THE APPELLANT THAT THE AO MADE THE ADDITION OF RS. 4,00,000/- WITHOUT ANY BASIS AND WITHOUT COMPARABLE CASE. THE A/R OF THE APPELLANT TAKEN THE ARGUMENT THAT HIS SALES INCREASE FROM RS. 10,85,40,520/- TO RS. 13,90 ,50,027/- IN THIS YEAR COMPARE TO THE LAST YEAR. THE GROSS PROFIT DECREASE D DUE TO THE INCREASE OF SALES AND COMPETITION 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 EVIDENCES. THE SALES OF THE APPELLA NT INCREASE ABOUT 30%. THEREFORE THE CONSIDERING THE ABOVE FACTS AND INCRE ASE OF SALES. I RESTRICT THE GROSS PROFIT ADDITION OF RS. 3,00,000/- AND BAL ANCE AMOUNT OF RS. 1,00,000/- IS DELETED. THESE GROUNDS ARE PARTLY ALL OWED. 5. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR HAS RELIED ON THE PLEADINGS MADE BEFORE THE LOWER AUTHORITIES AND SUBMITTED THAT THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T AND ALSO 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 ITA 745/JP/2017_ MURLIDHAR AGARWAL VS ITO 5 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 OF FICER MADE THE ADDITION OF RS. 4.00 LACS AND THE LD. CIT(A) RESTRICTED IT T O RS. 3.00 LACS. AFTER CONSIDERING BOTH THE SIDES AND VARIOUS OTHER ASPECT S OF THE CASE INCLUDING THE INCREASE IN THE SALES TURNOVER FROM 10.85 CRORE S TO 13.90 CRORES, THE ESTIMATED ADDITION OF G.P. AT RS. 3.00 LACS IS IN H IGHER SIDE, THEREFORE, THE ADDITION ON THIS COUNT RESTRICTED AT RS. 2.00 LACS. ACCORDINGLY, GROUND NO. 2 IS PARTLY ALLOWED AND GROUND NO. 3 IS DISMISSED. 8. IN THE GROUNDS NO. 4 TO 7 THE ISSUES INVOLVED AR E SUSTAINING THE DISALLOWANCES OUT OF SHOPS EXPENSES, TELEPHONE EXPEN SES, LOW HOUSEHOLD WITHDRAWALS AND INTEREST NOT CHARGED 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. 6,932/- OUT OF SHOP EXPENSES. REGARDING THE TELEPHONE EXPENSES THE AO IN HIS ORD ER MADE DETAILED FINDING THAT THE USE OF TELEPHONE FOR PERSONAL PURP OSE. THE APPELLANT DID NOT FILE ANY SUBMISSION WHICH ESTABLISHED THAT THE TELE PHONE WAS NOT USE FOR NON BUSINESS PURPOSE. THEREFORE I AM AGREE WITH THE VIE WS OF THE AO TREATING 20% OF TELEPHONE EXPENSES AS NON BUSINESS PURPOSE. HENC E, I CONFIRM THE ADDITION MADE BY THE AO OF RS. 8,131/- OUT OF TELEPHONE EXPE NSES. THESE GROUNDS ARE NOT ALLOWED. ITA 745/JP/2017_ MURLIDHAR AGARWAL VS ITO 6 (II) I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFOR E ME. I FIND THAT THE AO ESTIMATED HOUSE HOLD EXPENSES RS. 10,000/- 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 THAT AO RIGHTLY ESTIMATED HOUSE HOLD EXPENSES RS. 10,000/- PER MONTH. HENCE, I CONFIRM THE ADDITION MADE BY THE AO OF RS. 45,275/-. THIS GROUND IS NOT ALLOWED. (III) I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFO RE ME. I FIND THAT APPELLANT MADE INTEREST FREE ADVANCES OF RS. 1,30,000/- TO HI S RELATIVES AND HE PAID THE INTEREST TO BORROWED FUNDS . THE AO DISALLOWED INTE REST @ 12% TO EXPENSES OF 15,600/-. THE A/R OF THE APPELLANT ARGUED THAT HE M ADE ADVANCE OUT OF HIS OWN CAPITAL OF RS. 25,93,477/-. THIS ARGUMENT OF TH E APPELLANT IS WITHOUT ANY BASIS AND HE FAILED TO ESTABLISH THE NEXUS THAT HE USED TO HIS OWN CAPITAL FOR ADVANCING FOR INTEREST FREE LOANS. THEREFORE I AM A GREE THAT AO RIGHTLY DISALLOWANCES RS. 15,600/- OUT OF INTEREST PAID. HE NCE, I CONFIRM THE ADDITION MADE BY THE AO OF RS. 15,600/-. 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 GROSS PROFIT HAS BEEN SUSTAI NED, THEREFORE, IN VIEW ITA 745/JP/2017_ MURLIDHAR AGARWAL VS ITO 7 OF THE VARIOUS DECISIONS OF THE HONBLE JURISDICTIO NAL HIGH COURT ON THIS ISSUE THAT NO SPECIFIC ADDITIONS OUT OF VARIOUS EXP ENSES DEBITED IN THE P&L ACCOUNT CAN BE SUSTAINED. IN VIEW OF THE FACTUAL AND LEGAL POSITION, 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 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI MURLIDHAR AGARWAL, JHUNJHUNU. 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. 745/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR