ITO, UDAIPUR V. Sh. Kanti Lal Jain (Shah), UDAIPUR

ITA 75/JODH/2013

• Counselvise Citation: 7523314 RSA 2013
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NOS. 75/JU/2013 A.Y: 2009-10 THE I.T.O VS. SHRI KANTI LAL JAIN [SHAH] WARD 1(1) PROP. M/S HARDIK JEWELLERS UDAIPUR VILLAGE BHADRANA THE SALUMBER, UDAIPUR PAN NO. AAVPJ 3592 P (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT KOTHARI DEPARTMENT BY : SHRI N.A. JOSHI DATE OF HEARING : 22.10.2013 DATE OF PRONOUNCEMENT : 22.10.2013 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL FILED BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER OF THE CIT(A), UDAIPUR, DATED 05. 11.2012 FOR A.Y 2009-10. 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE CARRIED ON THE BUSINESS OF WHOLESALE TRADI NG OF SILVER BULLION IN THE NAME AND STYLE M/S HARDIK JEW ELLERS IN SURAT. FOR THE A.Y. 2009-10, THE ASSESSEE HAS S HOWN TOTAL SALE OF RS. 10,81,00,647/- GIVING GROSS PROFI T OF RS. 7,78,324/- WHICH GIVE GROSS PROFIT RATE OF 0.72%. THE ASSESSEE HAS SHOWN NET PROFIT OF 1,88,588/- GIVING NET PROFIT RATE OF 0.17%. THE ASSESSEE HAS MAINTAINED AND PRODUCED REGULAR BOOKS OF ACCOUNT ALONGWITH SUPPORT ING VOUCHERS AND OTHER RELEVANT MATERIAL. SINCE THE AS SESSEE HAD MADE CASH SALES TOTALING RS. 3,21,64,068/- OUT OF TOTAL SALES OF 10,81,00,647/-. THE A.O. REQUIRED THE ASS ESSEE TO PRODUCE THOSE PERSONS/CONCERNS FOR EXAMINATION. THE A.O. ALSO RESORTED TO PROVISIONS OF SECTION 131(1)(D) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'T HE ACT', FOR SHORT] TO VERIFY THE GENUINITY OF CASH SALES. THE A.O. WAS NOT SATISFIED AND THEREFORE, REJECTED THE BOOKS OF ACCOUNT AND HAS FINALLY MADE TRADING ADDITION OF RS . 72,47,266/- BY ADOPTING GROSS PROFIT RATE OF 8%. OB VIOUSLY HE HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSE E U/S 3 145(3) OF THE ACT. AGGRIEVED, THE ASSESSEE WENT IN APPEAL. THE LD. CIT(A) HAS CHOSEN TO DELETE THE ENTIRE ADDI TION ON THE REASONING THAT NEITHER THE INVOCATION OF PROVIS IONS OF SECTION 145(3) OF THE ACT FOR REJECTING THE BOOKS O F ACCOUNT IS JUSTIFIED NOR ADOPTION OF GROSS PROFIT R ATE OF 8% INSTEAD OF 0.72% DECLARED BY THE ASSESSEE IS JUSTIF IED, BEING WITHOUT ANY LOGICAL BASIS. THE REVENUE IS AG GRIEVED AND HAS ASSAILED THE ABOVE FINDING OF THE LD. CIT(A ). THE REVENUE HAS TAKEN IN AS MUCH AS EIGHT GROUNDS OF AP PEAL, ALL OF WHICH PERTAIN TO DELETION OF ADDITION OF RS. 72,47,266/- 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. I T WAS ARGUED BY THE LD. D.R. THAT THERE ARE AMPLE REASONS FOR REJECTING THE BOOKS OF ACCOUNT AS THE A.O. HAS POIN TED OUT SPECIFIC DEFECTS IN THE BOOKS. THAT OUT OF 96 PART IES TO WHOM CASH SALES WERE MADE, ONLY 13 CASES THE A.O. C OULD CONDUCT ENQUIRY AND ONLY TWO PARTIES HAVE ACCEPTED THE SALE TRANSACTIONS AND 11 PARTIES HAVE DENIED ANY 4 TRANSACTIONS OF PURCHASE WITH THE ASSESSEE. IN THE LIGHT OF THE ABOVE, HE HAS ARGUED THAT THE BOOKS WERE CORREC TLY REJECTED AND THE PROVISIONS OF SECTION 145(3) OF TH E ACT WERE RIGHTLY INVOKED. HOWEVER, HE HAS NOT SAID ANY THING ABOUT THE MAGICAL FIGURE OF 8% GROSS PROFIT RATE AD OPTED BY THE A.O. ON THE OTHER HAND, THE LD. A.R. HAS SUPPO RTED THE REASONING GIVEN BY THE LD. CIT(A) TO DISAPPROVE THE REJECTION OF BOOKS OF ACCOUNT AND ACCEPTING THE DEC LARED TRADING RESULTS. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAVE FOUND THAT THE A.O. HAS COMMITTED MISTAKE IN NOT ACCEPTING THE DISCLOSED SALES. HOWEVER, IN THE END , HE HAS ACCEPTED THE ENTIRE FIGURE OF SALES AND HAS EXC LUDED SALES OF RS. 7,789,328/- BEING SALES NOT VERIFIED A ND ON THE REMAINING SALES OF RS. 10,03,19,849/- HE HAS APPLIE D GROSS PROFIT RATE OF 8% AND HAS COME TO A FIGURE OF RS. 80,25,590/-. SINCE THE ASSESSEE HAS ALREADY DECLAR ED GROSS PROFIT OF RS. 7,78,328/-, HE HAS FINALLY MADE TRADING ADDITION OF RS. 72,47,266/-. ON THE OTHER HAND, TH E LD. 5 CIT(A) HAS ACCEPTED THE ENTIRE SALES AND HAS ALSO A CCEPTED THE DECLARED TRADING RESULT BY ACCEPTING THE GROSS PROFIT RATE OF 0.72% DECLARED BY THE ASSESSEE. AFTER CONSI DERING THE FACTS OF THIS CASE WHAT WE HAVE UNDERSTOOD IS T HAT THE A.O. WANTED TO EXCLUDE UNVERIFIED SALES AS HE WAS O F THE OPINION THAT THE ASSESSEE HAS TRIED TO ENHANCE HIS SALES IN ORDER TO MAKE FALSE CAPITAL TO COVER UP THE DEFICIE NCY HE HAS ADOPTED MAGICAL FIGURE OF 8% OF GROSS PROFIT RA TE AFTER REJECTING THE BOOKS OF ACCOUNT AND EXCLUDING THE CA SH SALES. IN OUR CONSIDERED OPINION, THE COURSE ADOPT ED BY THE A.O. IS NOT CORRECT. IT IS TRITE THAT EVEN AFT ER REJECTION OF BOOKS OF ACCOUNT, THE A.O. HAS TO LOOK TOWARDS THE PAST HISTORY OF THE ASSESSEE OR ELSE TH E PAST HISTORY OF COMPARABLE CASES. IN THE GIVEN CASE, TH E ASSESSEES PAST HISTORY IS AVAILABLE WHICH THE A.O. HAS HIMSELF INCORPORATED AT PAGE OF HIS ORDER WHICH WE EXTRACT HEREINBELOW: 6 A.Y. SALES GROSS PROFIT N ET PROFIT GROSS PROFIT NET PROFIT 2009 - 10 108100647 778324 188588 0.72% 0.17% 2008 - 09 129110026 619728 154438 0.48% 0.12% 2007 - 08 83341736 575058 210688 0.69% 0.24% FROM THE ABOVE CHART, IT IS EVIDENTLY CLEAR THAT TH E GROSS PROFIT RATE DECLARED BEING 0.72% IN THIS YEAR IS BE TTER THAN THE PAST TWO A.YS. AS A RESULT, EVEN LEGALLY, NO FU RTHER ADDITION IS CALLED FOR EVEN IF WE UPHOLD THE REJECT ION OF BOOKS BY THE A.O. AS A RESULT, ON MERITS, NO INTER FERENCE IS CALLED FOR. OTHERWISE ALSO, NO SPECIFIC MATERIA L DEFECT HAS BEEN POINTED OUT BY THE A.O. 7 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 22 ND OCTOBER, 2013. SD/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND OCTOBER, 2013 VL/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR