M/s Mulkh raj & Sons, Amritsar. V. Commissioner of Income Tax - 1, Amritsar.

ITA 8/ASR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7840 (ITAT-AMRITSAR)
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K R JAIN
• Keywords: Revision of order; Reassessment proceedings
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO. 08/(ASR)/2017 ASSESSMENT YEAR: 2009-10 PAN: AACFM0412A M/S MULKH RAJ & SONS 264, EAST MOHAN NAGAR, AMRITSAR. VS. DY. C. I. T., CIRCLE III, AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. K. R. JAIN (ADV. ) RESPONDENT BY : SH. RAHUL DHAWAN (D. R .) DATE OF HEARING: 03.08.2017 DATE OF PRONOUNCEMENT: 23.08.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LD. CIT(A), AMRITSAR DATED 18.10.2016 FOR ASST. YEAR: 2009-10. 2. THE GROUNDS OF APPEAL TAKEN BY ASSESSEE ARE REPR ODUCED BELOW: 1.THAT THE ORDER OF THE LEARNED CIT(A) ESTIMATING THE G. P. AT 3.45% IS WRONG, ILLEGAL AND AGAINST FACTS. 2. THAT THE LD. CIT(A) HAS TAKEN THE G. P. WITHOUT CONSIDERING THE AMOUNT SURRENDERED IN TRADING A/C AND ESTIMATIN G THE G. P. AT 3.45% WHICH IS WRONG, ILLEGAL AND WITHOUT JUS TIFICATION. 3. THAT THE LD. CIT(A) IS NOT JUSTIFIED EVEN BY HIS OWN OBSERVATION WHILE ESTIMATING THE G. P. AT 3.45% ON THE BASIS OF PAST HISTORY. THE G. P. DECLARED BY THE ASSESSEE DURING THE IMMEDIATE PAST A. Y. 2008-09 IS 3.4% AND IS ACC EPTED BY THE DEPARTMENT AND DURING YEAR UNDER APPEAL IS ALSO 3.4%. 3. AT THE OUTSET, THE LD. AR SUBMITTED THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THERE WAS NO ADDITION MADE BY ASSESSIN G OFFICER; HOWEVER ITA NO. 08(ASR)/2017 ASSESSMENT YEAR: 2009-10 2 THE LD. CIT PASSED AN ORDER U/S 263 OF THE ACT AND DIRECTED THE ASSESSING OFFICER TO PASS FRESH ASSESSMENT ORDER WI TH THE FOLLOWING OBSERVATIONS: THE ASSESSING OFFICER HAS NOT EXAMINED & VERIFIED THE SALES & PURCHASE. DETAILS OF OPENING & CLOSING STOCK IS NOT FORTHCOMI NG. VALUE SHOWN HAS NOT BEEN VERIFIED WITH PURCHASE BILLS. DETAILS OF STOCK SURRENDERED AT THE TIME OF SURVEY WAS NOT FURNISHED AND ASSESSING OFFICER HAS NOT EXAMINED THIS ISSUE. THE ASSESSING OFFICER INSTEAD OF FRAMING FRESH ASS ESSMENT IN VIEW OF DIRECTIONS OF LD. CIT(A) MADE THE ADDITION AFTER REJECTION OF BOOKS OF ACCOUNT AND AFTER ESTIMATING THE G.P. OF ASSESSEE A T A HIGHER RATE THEN DECLARED BY ASSESSEE. IT WAS SUBMITTED THAT AN APPE AL BEFORE LD. CIT(A) HE THOUGH RESTRICTED THE ADDITION TO 3.45% OF SALES BUT MADE SEPARATE ADDITION FOR SURRENDERED AMOUNT AND WHICH WAS NOT E VEN CASE OF ASSESSING OFFICER. 4. THE LD. AR SUBMITTED THE ASSESSING OFFICER IN TH E REASSESSMENT PROCEEDINGS DID NOT MAKE ANY ADDITION AS PER DIRECT IONS OF LD. CIT(A) WHICH IS WRONG AND IS NOT IN ACCORDANCE WITH THE PR OVISIONS OF LAW. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN DE CLARING PROGRESSIVE G.P. AND NET PROFIT RATIO AND THEREFORE ALSO THE AD DITIONS SUSTAINED BY LD. CIT(A) WERE NOT AS PER LAW. THE LD. AR SUBMITTED TH AT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SURRENDERED A N AMOUNT OF RS. 5,00,000/- AND HAD INCLUDED THE SAME IN THE PROFIT AND LOSS ACCOUNT AND THEREFORE, THE GROSS PROFIT RATIO WAS 4.22% AGAINST THE EARLIER YEARS RATIO OF 3.4% AND 3.5% RESPECTIVELY. IT WAS SUBMITTED THA T WITHOUT PIN POINTING ANY DEFICIENCY IN THE BOOKS OF ACCOUNTS, T HE ASSESSING OFFICER ITA NO. 08(ASR)/2017 ASSESSMENT YEAR: 2009-10 3 HAD REJECTED THE BOOKS OF ACCOUNT. IT WAS SUBMITTED THAT BOOKS OF ACCOUNT WERE AUDITED AND AUDIT REPORT WAS ALSO FILE D AND AUDITOR HAD NOT MADE ANY ADVERSE COMMENT ON VALUATION OF CLOSING ST OCK. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER REJECTED THE B OOKS OF ACCOUNT IN VIEW OF THE FACT THAT ASSESSEE DID NOT PRODUCE SALE BILLS. HE SUBMITTED THAT SALE BILLS COULD NOT BE SUBMITTED AS THE ASSES SEE HAD CHANGED HIS PLACE OF BUSINESS AND DURING THE SHIFTING THE SALE BILLS GOT MISSING. HE FURTHER ARGUED THAT EVEN IF IT IS ASSUMED THAT THE ASSESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNT CORRECTLY THE BEST CO URSE AVAILABLE TO ASSESSING OFFICER WAS TO ESTIMATE THE PROFITS OF TH E ASSESSEE ON THE BASIS OF PAST HISTORY. THE LD. AR SUBMITTED THAT GROSS PR OFIT RATIO DECLARED DURING THE YEAR WAS 4.22% AGAINST 3.04% AND 3.50% D ECLARED IN EARLIER YEARS. IT WAS SUBMITTED THAT SIMILARLY NET PROFIT R ATIO DECLARED DURING THE YEAR UNDER CONSIDERATION WAS 2.01% AGAINST THE EARL IER YEARS RATIOS OF 0.65% AND 0.61% AND THEREFORE IT WAS ARGUED THAT TH E RATIOS BEING PROGRESSIVE THE ASSESSING OFFICER SHOULD HAVE ACCEP TED THE RESULTS DECLARED BY ASSESSEE. HE SUBMITTED THAT THOUGH LD. CIT(A) RESTRICTED THE ADDITION TO 3.5% ON THE BASIS OF PAST HISTORY BUT H E MADE SEPARATE ADDITION FOR SURRENDERED AMOUNT WHICH IS NOT AS PER THE PROVISIONS OF LAW. 6. THE LD. DR ON THE OTHER HAND, HEAVILY PLACED HIS RELIANCE ON THE ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT THE A SSESSEE WAS NOT ABLE TO PRODUCE THE DETAILS OF OPENING AND CLOSING STOCK S AND ALSO DETAILS OF SALES AND THEREFORE ASSESSING OFFICER HAD RIGHTLY R EJECTED THE BOOKS OF ACCOUNT AND HAD ESTIMATED THE RESULT OF ASSESSEE KE EPING IN VIEW THE ITA NO. 08(ASR)/2017 ASSESSMENT YEAR: 2009-10 4 AMOUNT OF SURRENDER MADE DURING THE YEAR. HE SUBMIT TED THAT LD. CIT(A) HAS ALREADY RESTRICTED THE ADDITION AND HE HAS RIGH TLY HELD THAT THE SURRENDERED INCOME IS TO BE TAXED SEPARATELY. 7. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THOUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT DURING THE YEAR UNDE R CONSIDERATION, THE ASSESSEE SURRENDERED AN AMOUNT OF RS.5,00,000/- AND INCLUDED THE SURRENDERED AMOUNT IN THE PROFIT AND LOSS ACCOUNT A ND THE GROSS PROFIT RATIO BEFORE THE SURRENDER WORKED OUT TO BE 3.02% W HEREAS THE GROSS PROFIT RATIO AFTER THE SURRENDER WAS 4.22%. THE GRO SS PROFIT RATIO IN THE EARLIER YEARS WAS 3.40% AND 3.50%. SIMILARLY THE NE T PROFIT RATIO IS ALSO 2.01% AGAINST THE 0.65% AND 0.61% IN THE EARLIER YE ARS. THE INCREASE IN GROSS PROFIT AND NET PROFIT RATIO IS DUE TO THE FAC T THAT ASSESSEE HAD INCLUDED THE AMOUNT OF SURRENDER IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY ESTIM ATING THE GROSS PROFIT AT 4.35% OF THE SALES WHERE THE ASSESSEE HAD DECLARED THE PROFIT RATIO OF 4.22%. THE BASIS OF INCREASE IN ESTIMATING MARGINAL INCREASE IN GROSS PROFIT WAS NOT JUSTIFIED AND THAT IS WHY LD. CIT(A) HAS RESTRICTED THE ADDITION TO 3.45% BASED UPON PAST HISTORY OF THE AS SESSEE. 8. THE LD. CIT(A) ESTIMATED THE G.P. RATE AT AVERAG E OF 3 YEARS AT 3.45%. HOWEVER HE HELD THAT THE SURRENDERED AMOUNT OF RS.5,00,000/-, BE ASSESSED SEPARATELY. THE ACTION OF LD. CIT(A) IN MAKING SEPARATE ADDITION OF RS.5,00,000/- IS NOT JUSTIFIED AT ALL A S THE ASSESSEE HAD ALREADY DECLARED THE SURRENDERED AMOUNT IN THE PROF IT AND LOSS ACCOUNT AND ASSESSING OFFICER HAD NOT MADE ANY SEPARATE ADD ITION FOR THE ITA NO. 08(ASR)/2017 ASSESSMENT YEAR: 2009-10 5 SURRENDERED AMOUNT AND THEREFORE ALSO THE LD. CIT(A ) EXCEEDED HIS POWERS AND THEREFORE HIS ORDER IS NOT SUSTAINABLE. 9. THE HON'BLE PUNJAB & HARYANA HIGH IN THE CASE OF KIM PHARMA VS. CIT IN ITA NO. 106 VIDE ORDER DATED 27.04.2011 HAS HELD THAT WHERE THE ASSESSEE IS ABLE TO EXPLAIN THE SURRENDERED AMOUNT TO HAVE BEEN EARNED FROM BUSINESS, THE SAME CAN BE ASSESSED ONLY AS A B USINESS INCOME. THE ASSESSEE IN THE PRESENT CASE HAD ALREADY DECLARED T HE SURRENDER AMOUNT IN THE P & L ACCOUNT AND NEITHER ASSESSING OFFICER NOR LD. CIT DURING 263 PROCEEDINGS HAD OBJECTED TO THAT THEREFORE THE ACTION OF LD. CIT(A) IN DIRECTING THE ASSESSING OFFICER TO MAKE SEPARATE AD DITION OF SURRENDERED AMOUNT IS NOT JUSTIFIED. 10. IN VIEW OF THESE FACTS AND CIRCUMSTANCES THE AS SESSING OFFICER IS DIRECTED TO ACCEPT THE DECLARED RESULTS OF ASSESSEE WHICH INCLUDES THE SURRENDERED AMOUNT. 11. IN VIEW OF THE ABOVE, THE APPEAL OF THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.08.2017 [[ SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23.08.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER