BABU LAL SAINI, Jaipur V. ITO, BEHROR

ITA 775/JPR/2013

• Counselvise Citation: 77523114 RSA 2013
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 15-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S L CHANDEL
• Keywords: Source of fund
• Section: 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC JAIPUR BEFORE SHRI B.R. JAIN, ACCOUNTANT MEMBER ITA NO. 775/JP/2013 ASSESSMENT YEAR: 2008-09 PAN NO. AOBPS8811A SHRI BABU LAL SAINI, VS. INCOME TAX OFFICER C/O M/S BABU LAL CHITTAR MAL, WARD BEHROR, BEHRO R. NEW SABZI MANDI, KOTPUTLI, (JAIPUR). (APPELLANT) (RESPONDENT) APPELLANT BY : (NONE) WRITTEN SUBMISSION RESPONDENT BY : SHRI S.L. CHANDEL. DATE OF HEARING : 21.11.2013 DATE OF PRONOUNCEMENT : 21.11.2013 ORAL ORDER PER B.R. JAIN, A.M. THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 08 TH AUGUST, 2013 OF LD. CIT (APPEALS), ALWAR, RAISES THE SOLITARY GROUND AS UNDER:- 1. THE LEARNED A.O. HAS ERRED IN MAKING TRADING AD DITION OF RS. 3,06,340/- AND CIT (APPEALS) HAS ERRED IN RESTRICTI NG IT RS. 1,50,000/-. 2. BRIEFLY THE FACTS ARE THAT THE ASSESSEE RETURNED INCOME OF RS. 1,58,941/- FROM THE BUSINESS OF TRADING OF VEGETABLES ON SEMI WHOLESALE BASIS AND COMMISSION/ARATH INCOME. PURSUANT TO NOTICE U/S 148 OF THE ACT ISSUED ON 10/2/2011, THE ASSESSEE SUBMITTED THAT THE RETURN ALREADY FILED ON 09/12/2009, MAY 2 BE TREATED AS A VALID RETURN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED FOR RECORD AND FOUND THAT THE ASSESSEE HAS NOT MAINTAINED SEPARATE ACCOUNTS FOR TRADING OF VEGETABLES AND COM MISSION/ARATH INCOME. PROPER BOOKS OF ACCOUNT WERE ALSO NOT FOUND MAINTAINED. TH E DETAILS OF SALES AND PURCHASES WERE FOUND NOTED IN A DIARY. THE EXPENSES FOR ELECTRICITY, RENT, SALARY AND MISCELLANEOUS WERE FOUND PARTLY VOUCHED AND NO PROPER DETAILS WERE MAINTAINED. PURCHASES WERE NOT FULLY VOUCHED. THE A SSESSING OFFICER PROPOSED TO APPLY A NET PROFIT RATE OF 5% IN VIEW OF PROVISIONS OF SECTION 44AF OF THE ACT. SINCE THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND INCOMPLETE DETAILS WERE PRODUCED AND ALSO THE PURCHASES BEING NOT VERIFIABLE, THE ASSESSING OFFIC ER AFTER CONSIDERING THE ASSESSEES REPLY AND CONSIDERING THE FACTS OF THE C ASE, WAS SATISFIED THAT TRUE PROFITS OF BUSINESS CANNOT BE DEDUCED. HE, THEREFORE, APPLI ED PROVISIONS OF SECTION 145(3) OF THE I.T. ACT AND ESTIMATED THE INCOME FROM TRADI NG BUSINESS OF VEGETABLES AT RS. 1,28,887/- BY APPLYING 5% PROFIT RATE ON DECLARED S ALES IN VIEW OF PROVISIONS OF SECTION 44AF OF THE ACT. IN RELATION TO THE COMMISS ION INCOME, HE ACCEPTED THE ASSESSEES CLAIM THAT PROPORTIONATE DEDUCTION FOR E XPENSES CHARGED IN THE PROFITS AND LOSS ACCOUNT BE ALLOWED FROM COMMISSION INCOME. ACCORDINGLY, NET COMMISSION INCOME WAS DEDUCED TO RS. 3,58,748/-. TH E NET INCOME HAS THUS BEEN ASSESSED AT RS. 4,65,280/- AS AGAINST THE DECLARED INCOME OF RS. 1,58,941/-. 3 3. THE LD. CIT(APPEALS) CONSIDERING THE DEFECTS IN ACCOUNTS, WAS SATISFIED THAT TRUE PROFITS FROM THE BOOKS OF ACCOUNT MAINTAI NED BY THE ASSESSEE CANNOT BE DEDUCED. HE, THEREFORE, UPHELD THE ACTION AND AGREE D WITH THE LOGIC ADOPTED BY THE ASSESSING OFFICER IN MAKING ALLOCATION OF EXPENSES PROPORTIONATELY TO BOTH THE SOURCES OF INCOME, WHICH FACT WAS ALSO NOT DISPUTED BY THE ASSESSEE IN APPEAL BEFORE HIM. HE, HOWEVER, UPON APPRECIATION OF FACTS , WAS OF THE OPINION THAT THE APPLICATION OF PROFIT RATE OF 5% ON THE TRADING OF VEGETABLES ON WHOLESALE BASIS IS HIGHER AND CONSIDERING THE WORKING OF COMMISSION IN COME, HE FOUND IT FAIR TO RESTRICT TRADING ADDITION OF RS. 1,50,000/- ONLY ON ESTIMATE BASIS AND ALLOWED RELIEF OF RS. 1,56,340/- TO THE ASSESSEE. 4. ASSESSEES COUNSEL VIDE LETTER DATED 15/11/2013 LAID ON RECORD, REQUIRES THE DECISION TO BE TAKEN ON THE GROUND IN APPEAL ON THE BASIS OF WRITTEN SUBMISSIONS. IT HAS BEEN CONTENDED IN THE WRITTEN SUBMISSIONS THAT THE ASSESSEE IS A WHOLESALER AND AS SUCH PROVISIONS OF SECTION 44AF OF THE ACT I S NOT APPLICABLE ON HIM. IF THE ASSESSEE HAS NOT OPTED THE DEEMING PROVISION OF SEC TION 44AF OF THE ACT, HIS INCOME CANNOT BE ASSURED U/S 44AF OF THE ACT. RELIA NCE HAS BEEN PLACED ON THE JUDGMENT BY THE CHENNAI BENCH OF THE TRIBUNAL IN TH E CASE OF RUKMANI DEVI 2010 102 DTR 227 CHENNAI. IN SO FAR AS THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME IS CONCERNED, IT HAS BEEN CLAI MED THAT THE ALLEGATIONS MADE BY THE ASSESSING OFFICER AS REGARDS DEFECTS IN BOOK S OF ACCOUNT ARE GENERAL AND VAGUE. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT. T HERE IS NO STATUTORY 4 REQUIREMENT TO MAINTAIN SEPARATE BOOKS OF ACCOUNT F OR TRADING BUSINESS AND COMMISSION BUSINESS, IN VIEW OF JUDGMENT BY HON'BLE SUPREME COURT IN THE CASE OF J.K. WOOLEN MANUFACTURING CO. 72 ITR 612 (SC). M ERELY BECAUSE, THE ASSESSEE MAINTAINED RECORD IN A DIARY, THIS BY ITSELF DID NO T GIVE JURISDICTION TO THE ASSESSING OFFICER TO REJECT BOOKS OF ACCOUNT AND ES TIMATE INCOME. THE LD. CIT(A) HAS ARBITRARILY AND WITHOUT LAYING ANY BASIS ON REC ORD, PROCEEDED TO SUSTAIN THE ADDITION OF RS. 1,50,000/-, THIS NEEDS TO BE DELETE D. 5. ON THE OTHER HAND, THE LD. D.R. CONTENDS THAT TH E RECORD MAINTAINED IN DIARY BY THE ASSESSEE WAS NOT COMPLETE. PURCHASES W ERE NOT FULLY VOUCHED. TRUE PROFITS FROM THE DIARY MAINTAINED COULD NOT BE DEDU CED. THE ASSESSING OFFICER BEING SATISFIED THAT THE ACCOUNTS ARE NOT CORRECT A ND COMPLETE, REJECTED THE BOOKS OF ACCOUNT FOR BONAFIDE REASONS AND ESTIMATED THE I NCOME WITHIN THE SCOPE OF POWERS VESTED IN HIM. THE ASSESSEE HAS NOT ASSAILED THE ACTION WITH REGARD TO THE REJECTION OF BOOKS OF ACCOUNT NOR PRODUCED ANY SUPP ORTIVE MATERIAL IN SUPPORT OF WRITTEN SUBMISSIONS PLACED ON RECORD. THE LD. CIT(A ) HAS BEEN FAIR ENOUGH TO ALLOW A RELIEF OF RS. 1,56,340/- AND SUSTAINED ADDI TION OF RS. 1,50,000/- ONLY, WHICH REQUIRES NO INTERFERENCE. 6. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. THE ASSESSEE HAS NOT RAISED ANY GROUND IN APPEAL WITH RESPECT TO REJECTI ON OF ACCOUNTS BY APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. THE FINDIN G REACHED BY THE ASSESSING OFFICER THAT THE EXPENSES ARE NOT FULLY VOUCHED AND EVEN THE PURCHASES ARE NOT 5 FULLY VOUCHED IS NOT SHOWN TO BE PERVERSE. SINCE TH E PURCHASES AND OTHER EXPENSES ARE NOT FULLY VOUCHED, THE GENUINENESS OF SUCH CLAI M FOR DEDUCTION COULD NOT BE ACCEPTED IN DEDUCING CORRECT PROFITS OF BUSINESS OF THE ASSESSEE. THE ACCOUNTS THUS HAVE BEEN REJECTED ON RATIONAL BASIS AND WITHOUT AN Y BIAS. AFTER REJECTING THE ACCOUNTS BY APPLICATION OF PROVISIONS OF SECTION 14 5(3) OF THE ACT, IT WAS WITHIN THE SCOPE OF POWERS OF THE ASSESSING OFFICER TO MAK E A BEST JUDGMENT ASSESSMENT BY ESTIMATING THE INCOME ON REASONABLE BASIS WITH R EFERENCE TO THE TURNOVER OF THE ASSESSEE. THE LD. CIT(A) HAS ALSO FOUND THAT THE AS SESSING OFFICER HAS FAILED TO BRING ON RECORD ANY MATERIAL TO JUSTIFY THE TREATME NT OF RECEIPTS FROM WHOLESALE BUSINESS AS RETAIL TRADE. IN THIS VIEW OF THE MATTE R, THE APPLICATION OF NET PROFIT RATE OF 5% WAS CONSIDERED HIGHER. KEEPING IN VIEW THE DE DUCTION FOR EXPENSES ALLOCATED AGAINST COMMISSION INCOME, HE CONSIDERED IT FAIR AND REASONABLE TO RESTRICT THE TRADING ADDITION TO RS. 1,50,000/- ONL Y BY ALLOWING RELIEF OF RS. 1,56,340/-. THE LD. CIT(A) DID NOT CORRECT ASSESSME NT BY APPLICATION OF PROVISIONS OF SECTION 44AF OF THE ACT BUT CORRECTED THE ESTIMATE OF INCOME WITHIN THE SCOPE OF HIS POWERS AND SUSTAINED ADDITION OF R S. 1,50,000/- ONLY ON THE MATERIAL, WHICH HAVE RELEVANT BASIS AND NEXUS TO TH E BUSINESS TURNOVER EFFECTED BY THE ASSESSEE. SINCE THE BASIS ADOPTED BY THE LD. CI T(A) ARE RELEVANT AND HAVING REGARD TO THE JUDGMENT BY THE HON'BLE APEX COURT IN THE CASE OF CST VS. H.M. ESUFALI (1973) 90 ITR 271 (SC) 277 AS RELIED UPON B Y THE LD. D.R. AT BAR, I FIND 6 NO REASON TO INTERFERE WITH THE ADDITION SUSTAINED BY THE LD. CIT(A). ACCORDINGLY, GROUND RAISED IN APPEAL BEING DEVOID OF ANY MERIT, STANDS REJECTED. 7. IN THE RESULT, THE APPEAL BY THE ASSESSEE STANDS DISMISSED AS ANNOUNCED IN THE OPEN COURT IMMEDIATELY AFTER CLOSE OF THE HEARI NG ON 21 ST NOVEMBER, 2013. SD/- (B.R. JAIN) ACCOUNTANT MEMBER JAIPUR, DATED : 21.11.2013 * RANJAN COPY FORWARDED TO :- 1. SHRI BABU LAL SAINI. 2. THE ITO, WARD BEHROR, BEHROR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (ITA NO. 775/JP/2013) BY ORDER, AR ITAT JAIPUR.