DCIT, Jaipur V. ASHA MANDOWARA, Jaipur

ITA 765/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5240 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PURUSHOTTAM KASHYAP
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Rejection of books of accounts
• 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 BENCHE S, JAIPUR JH VH- VKJ- EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;K F;D LNL; DS LE{K BEFORE: SHRI SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO.765/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. CUKE VS. ASHA MANDOWARA, 155, SECTOR -7, VIDHYADHAR NAGAR, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACTPM 0669 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 02/JP/2016 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 765/JP/2014) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 ASHA MANDOWARA, 155, SECTOR -7, VIDHYADHAR NAGAR, JAIPUR CUKE VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: ACTPM 0669 E IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI PURUSHOTTAM KASHYAP (ADDL.CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12/04/2016 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/05/2016. 2 ITA 765/JP/2014 & CO 02/JP/2016_ DCIT VS ASHA MANDOWARA 2 VKNS'K@ ORDER PER T.R. MEENA, A.M. THE APPEAL FILED BY THE REVENUE AND C.O. BY THE ASS ESSEE ARISE AGAINST THE ORDER OF LD. CIT(A)-II, JAIPUR DATED 09 .09.2014. EFFECTIVE GROUNDS OF REVENUES APPEAL AS WELL AS ASSESSEES C .O. ARE AS UNDER:- GROUND IN REVENUE APPEAL. (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRIC TING THE TRADING ADDITION FROM RS. 76,74,679/- TO RS.9,44,204/- WITHOUT APPRECIATING THE FACT OF THE CASE AND DEFICIENCIES POINTED OUT BY THE AO. GROUNDS IN CROSS OBJECTION 1. THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION OF RS. 9,44,204/- B Y APPLYING THE GP RATE OF 19.20% AS AGAINST THE GP RA TE OF 18.31% DECLARED BY THE ASSESSEE. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORT OF SAND STONE AND SLATE STONE. THE ASSESSEE FILED RETU RN OF INCOME DECLARING TOTAL INCOME OF RS. 1,73,13,520/- ON 25.09.2008. TH E CASE WAS SCRUTINISED U/S 143(3) OF I.T. ACT. DURING THE YEAR THE ASSESS EE DECLARED TOTAL TURNOVER OF RS. 10,66,63,644/- ON WHICH THE ASSESSE E EARNED GROSS PROFIT OF RS.1,95,35,216/- AND NET PROFIT OF RS. 1,57,76,4 09/- WHICH GIVES G.P. @ 18.31% AND N.P.@ 14.79%. THE AO FOUND THAT THE G.P . COMPARED TO LAST YEAR HAS BEEN DECLINED. HE NOTICED THAT THE ASSESSE E WAS NOT MAINTAINING STOCK REGISTER. AS PER QUANTITATIVE AND QUALITATIVE RAW MATERIAL THE 3 ITA 765/JP/2014 & CO 02/JP/2016_ DCIT VS ASHA MANDOWARA 3 PURCHASES MADE FOR RS.4,36,71,773/- MOSTLY IN CASH THROUGH SELF MADE VOUCHER. THE FREIGHT AND CARTAGE EXPENSES OF RS. 56 ,08,293/- PAID IN CASH ON SELF MADE VOUCHER. HE FURTHER OBSERVED THAT IN T HE ABSENCE OF STOCK REGISTER THE VALUATION OF CLOSING STOCK TAKEN BY TH E ASSESSEE IS NOT CORRECT. CALL DETAILS REGISTER AND LOG BOOK WERE NOT MAINTAI NED FOR VEHICLE RUNNING EXPENSES RESPECTIVELY. THEREFORE, HE PROPOSED TO AP PLY PROVISIONS OF SECTION 145(3) OF THE IT ACT. AFTER CONSIDERING THE ASSESSEES REPLY THE AO HELD THAT VARIOUS DISCREPANCIES HAS BEEN NOTICED IN THE BOOKS OF ACCOUNT AS THE ASSESSEE DID NOT MAINTAIN PROPER RECORD AS R EQUIRED. THEREFORE, HE APPLIED SECTION 145(3) OF THE IT ACT AND ACCORDINGL Y HE REJECTED THE BOOKS RESULTS BY RELYING VARIOUS DECISIONS OF VARIOUS HIG H COURTS. HE FURTHER OBSERVED THAT IN PAST THE LD. CIT(A) HAD ALSO CONFI RMED THE G.P.@ 24.51% IN ORDER NO. 227/08-09 DATED 07.08.2009. ALTHOUGH THE ITAT HAD RESTRICTED THE ADDITION OF 20.43% WHICH HAS NOT BEE N ACCEPTED BY THE DEPARTMENT AND THE MATTER IS PENDING BEFORE THE HON BLE RAJASTHAN HIGH COURT. AFTER CONSIDERING THE FACTS HE APPLIED G.P. RATE SHOWN BY THE ASSESSEE @ 18.31%. THE DIFFERENCE OF RS. 76,74,679 /- HAD BEEN ADDED IN THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASSE SSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO HAD ALLOWED THE APPEAL PARTLY, WHICH IS GIVEN AS UNDER: 4 ITA 765/JP/2014 & CO 02/JP/2016_ DCIT VS ASHA MANDOWARA 4 3.2.1 I HAVE PERUSED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. THE HONBLE THIRD MEMBER HAS UPHE LD THE REJECTION OF BOOKS OF ACCOUNTS MADE BY THE ASSE SSING OFFICER ON THE BASIS OF THE DEFECTS POINTED OUT, IN THE ASSESSMENT ORDER. IT IS THE APPELLANTS CONTENTION THAT MERE REJECTION OF BOOKS OF ACCOUNTS SHOULD NOT NECESSARILY RESULT IN TRADING ADDITION PROVIDED THE APPELLANT IS ABLE TO JUSTIFY THE TRADING RESULT. I N THE INSTANT CASE, THE APPELLANT HAS STATED THAT 56.73% OF THE TURNOVER CONSISTED OF GREY STONE AND BROWN STONE. IN THE CASE OF GREY STONE, THE AVERAGE PURCHASE PRICE HAS INCREASED FROM 11.54% TO 31.21% WHEREAS THE AVERAGE SALE PRICE HAS INCREASED FROM 11.31% TO 13.99%. IN THE CASE OF BROWN STONE, IT HAS BEEN STATED THAT ITS PU RCHASE PRICE HAS INCREASED FROM 5.88% TO 17.65% WHEREAS TH E SALE PRICE HAS INCREASED ONLY FROM 4.43% TO 10.44%. THEREFORE IT IS THE CONTENTION OF THE APPELLANT THA T OR AROUND HALF OF THE TURNOVER, THE PURCHASE PRICE HAS INCREASED MORE THAN THE SALE PRICE. IT IS TO BE ME NTIONED THAT THE APPELLANT HAS NOT GIVEN THE QUANTUM OF TUR NOVER OF EITHER GREY STONE OR BROWN STONE WHERE THERE IS APPRECIABLE DIFFERENCE BETWEEN THE INCREASE IN PURC HASE PRICE AND INCREASE IN SALE PRICE. IN THE ABSENCE O F SUCH TURNOVER, IT IS DIFFICULT TO ASCERTAIN THE DEGREES IN GP RATE ON ACCOUNT OF DIFFERENCE BETWEEN INCREASE IN PURCHA SE PRICE VIS A VIS INCREASE IN SALE PRICE. MOREOVER WI TH RESPECT TO 43.27% OF THE TURNOVER, NO REASONS HAVE BEEN GIVEN FOR DECREASE IN GP RATE AS COMPARED TO LAST Y EAR. IT 5 ITA 765/JP/2014 & CO 02/JP/2016_ DCIT VS ASHA MANDOWARA 5 IS TO BE MENTIONED THAT THE GP RATE IN CURRENT YEAR IS 8.31% AS AGAINST 19.35% IN THE PRECEDING ASSESSMENT YEAR I.E. A.Y. 2007- 08(WHICH HAS BEEN UPHELD BY TH E ITAT). 3.2.2 TAKING ALL THE FACTORS INTO CONSIDERATION VIZ (A) THE PAST HISTORY OF THE APPELLANT (B) THAT THE PURCHASE PRICE HAS INCREASED MORE TH AN THE SALE PRICE FOR CERTAIN QUALITIES OF BROWN STONE AND GREY STONE, BUT THE TURNOVER OF EACH INDIVIDUAL QUALITY CANNOT BE ASCERTAINED DUE TO NON MAINTENANCE OF STOCK BOOK AND (C) NO REASONS HAVE BEEN GIVEN FOR DECREASE IN GP RATE WITH RESPECT TO 46.73% OF TOTAL TURNOVER. I AM OF THE CONSIDERED VIEW THAT WHILE THERE ARE JU STIFIABLE REASONS FOR A MINOR FALL IN GP RATE, AS COMPARED T O LAST YEAR. THE SUBMISSION OF THE APPELLANT DOES NOT GIVE ANY R EASON FOR DECREASE IN GROSS PROFIT RATE OF 46.73% OF THE TURN OVER. FOR THE BALANCE PART OF THE TURNOVER WHERE REASONS HAVE BEEN GIVEN, IT IS NOT POSSIBLE TO QUANTIFY THE DECREASE IN GROSS PROFIT IN THE ABSENCE OF STOCK BOOK. IN VIEW OF THE ABOVE, THE G.P. RATE IS ESTIMATED AT 19.20% OF THE TURNOVER WH ICH IS SLIGHTLY LOWER THAN THE G.P. RATE OF THE PRECEDING ASSESSMENT YEAR. THIS WILL RESULT A TRADING ADDITION OF RS. 9, 44,204 (19.2% OF RS. 10,66,63,644 RS. 1,95,35,216). THER EFORE THE ADDITION MADE BY THE AO OF RS. 76,74,679/- IS R ESTRICTED TO RS. 9,44,204/-. 4. NOW THE REVENUE IS IN APPEAL AND THE ASSESSEE IS IN C.O. BEFORE US. THE LD. DR HAS VEHEMENTLY SUPPORTED THE ORDER OF TH E AO. AT THE OUTSET 6 ITA 765/JP/2014 & CO 02/JP/2016_ DCIT VS ASHA MANDOWARA 6 THE LD. AR FOR THE ASSESSEE REITERATED THE ARGUMENT S BEFORE THE CIT(A). HE HAS DRAWN OUR ATTENTION ON A COMPARATIVE CHART O F GP AND ADMITTED DURING THE YEAR THE GP WAS SLIGHTLY DOWN BY 1%, FOR THE REASON THAT AVERAGE PURCHASE PRICE OF GREY AND BROWN SAND STONE /SLATE STONE HAD INCREASE MORE THAN THE INCREASE IN THE SELLING PRIC E. HE HAS DRAWN OUR ATTENTION OF CHART DONE AT SUBMISSIONS AND ARGUED T HAT PURCHASE PRICE WHICH COMPARATIVE GONE UP AND HE FURTHER ARGUED THA T SALE OF THE STONE AT 53.73% OF TOTAL SALE. THEREFORE GP HAD BEEN GON E DOWN AS COMPARED TO PRECEDING YEAR. COST OF MATERIAL CONSUMED AS OF PURCHASE OF SALE HAD INCREASED FROM 37.74% LAST YEAR TO 39.79% THIS YEAR WHICH WOULD BE FULLY VERIFIABLE FROM THE PURCHASE BILL. HE FURTHER ARGU ED THAT SIMILAR ADDITIONS WERE MADE IN A.Y. 2006-07, 2007-08 & 2008-09 WHICH WERE CHALLENGED BY THE HONBLE ITAT AND ALL THE ADDITIONS HAVE BEEN DE LETED BY THE HONBLE ITAT. HE FURTHER RELIED UPON IN CASES OF: 1. CIT VS. JAS JACK ELEGANCE 324 ITR 95.233 CTR 3 98 (DEL.- 2. DCIT VS. PARAS DYEING AND PRINTING MILLS P. L TD. 4 ITR 29 (TRIB.) 3. CIT VS. GOTAN LIME KHANIZ UDHYOG 256 ITR243 (R AJ.) 4. MALANI RAMJIVAN JAGANNATH VS. ACIT 207 CTR (R AJ.) 19 7 ITA 765/JP/2014 & CO 02/JP/2016_ DCIT VS ASHA MANDOWARA 7 HE ARGUED THAT ADDITION CONFIRMED BY LD. CIT(A) ARE NOT JUSTIFIED AND ALSO REQUESTED TO CONFIRM THE ORDER OF THE PARTLY DECIDE D BY THE LD.CIT(A) IN FAVOUR OF THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WHATEVER DEFECTS POINTED OUT BY THE AO ARE SUFFICIENT TO REJECT THE BOOK RESULTS AS PURCHASES AS WELL AS PAYMENTS OF EXPENSES WERE MADE IN CASH WHICH HAS NO T BEEN CONTROVERTED BY THE AR. THEREFORE, WE UPHELD THE RE JECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE IT ACT. THE CO-ORDINATE B ENCH HAS CONSIDERED THE ASSESSEES CASES FROM A.Y.2006-07 TO 2008-09 FO R IDENTICAL ADDITIONS MADE BY THE AO BY REJECTING THE BOOKS OF ACCOUNTS. IT IS GENERAL THAT GP RATE CANNOT BE CONSTRAINED. THE ASSESSEE HAS GIVEN COGENT EVIDENCE FOR DECLINE OF THE GP RATE WHICH HAS BEEN ACCEPTED PART LY BY THE LD. CIT(A). THE SALES ARE CONSTITUTE 56.70% OF TOTAL SALES. TH E REASONS GIVEN BY THE ASSESSEE FOR DECLINE OF GP ARE VERIFIABLE FROM THE BILL WHICH SHOWS THAT GREY STONE PURCHASE PRICE HAS INCREASED FROM 11.54% TO 31.21% WHEREAS BROWN STONE PRICE INCREASED FROM 5.88% TO 17.65% CO MPARED TO PRECEDING YEAR. HOWEVER, SALE PRICE HAD NOT INCREAS ED PROPORTIONATELY AS EVIDENT BY THE AR OF THE ASSESSEE WHICH HAS NOT BEE N CONTROVERTED BY THE LD. AR. THE CASE LAW RELIED UPON BY THE ASSESSEE I. E. CIT VS. JAS JACK ELEGANCE 324 ITR 95/233 CTR 398 (DEL), DCIT VS. PAR AS DYEING AND 8 ITA 765/JP/2014 & CO 02/JP/2016_ DCIT VS ASHA MANDOWARA 8 PRINTING MILLS P. LTD. 4 ITR 29 (TRIB.) CIT VS. GOT AN LIME KHANIZ UDHYOG 256 ITR 243(RAJ.) ARE SQUARELY APPLICABLE. THEREFOR E, WE DISMISS THE REVENUE APPEAL AND ALLOW THE ASSESSEES C.O. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED AND ASSESSEES C.O. IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/05/2016 SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 31 ST MAY, 2016 PILLAI VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE-4, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- SMT. ASHA MANDOWARA, JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 765/JP/2014 & CO 02/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR