SHRI RAJENDRA KUMAR SHARMA, BARAN V. INCOME TAX OFFICER, BARAN

ITA 834/JPR/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4525 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 22-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MONISHA CHOUDHARY JCIT A
• Assessee Lawyers: HEMANG GARGIEYA
• Keywords: Rejection of books of accounts; Depreciation
• Section: 143(3); 37(1); 145(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,A JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 834/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2011-12 SHRI RAJENDRA KUMAR SHARMA PROP. M/S ASHIRWAD FILING STATION, NAGARGARH, BARAN. CUKE VS. THE ITO, BARAN. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: BARPS 3986 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI HEMANG GARGIEYA (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. MONISHA CHOUDHARY (JCIT) A LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 17/03/2021 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT :30/04/2021 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A), KOTA DATED 01.02.2018 FOR THE ASSESSMENT YE AR 2011-12 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUND S OF APPEAL:- 1. THE IMPUGNED ADDITIONS AND DISALLOWANCES MADE I N THE ORDER U/S 143(3) OF THE ACT DATED 25.11.2013 ARE BAD IN L AW AND ON FACTS OF THE CASE, FOR WANT OF JURISDICTION AND VAR IOUS OTHER REASONS AND HENCE THE SAME KINDLY BE DELETED. 2. RS. 3,14,300/- THE LD. CIT(A) ERRED IN LAW AS WE LL AS ON THE FACTS OF THE CASE IN CONFIRMING THE VERY ACTION TAK EN U/S 145(3) AND APPLYING THE GP RATE OF 1.66%, WHICH IS BAD IN LAW WITHOUT ITA NO. 834/JP/2018 SHRI RAJENDRA KUMAR SHARMA VS. ITO 2 JURISDICTION AND BEING VOID AB-INITIO, THE SAME KIN DLY BE QUASHED. CONSEQUENTLY THE IMPUGNED TRADING ADDITIONS MADE U/ S 143(3) ALSO KINDLY BE QUASHED. 3. RS.2,23,840/-: THE ID. CIT(A) ERRED IN LAW AS WE LL AS ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCES O F THE FOLLOWING EXPENSES CLAIMED BY THE MAKING:- S.NO. HEAD OF EXPENSES EXPENSES CLAIMED BY THE ASSESSEE (RS.) 3.1 DEPRECIATION ON TANKER 1,28,031/ - 3.2 TANKER INSURANCE 62,821/ - 3.3 INTEREST ON TATA FINANCE 32,988/ - TOTAL 2,23,840/ - THE DISALLOWANCE SO MADE IS CONTRARY TO THE PROVISI ONS OF LAW AND FACTS OF THE CASE. HENCE, THE SAME KINDLY BE DELETE D IN FULL. 4. THE ID. CIT(A) FURTHER ERRED IN LAW AS WELL AS O N THE FACTS OF THE CASE IN CONFIRMING CHARGING INTEREST U/S 234B, 234C & 234D OF THE ACT. THE APPELLANT TOTALLY DENIES ITS LIABILITY OF CHARGING OF ANY SUCH INTEREST. THE INTEREST SO CHARGED, BEING CONTR ARY TO THE PROVISIONS OF LAW AND FACTS, KINDLY BE DELETED IN F ULL. 2. GROUND NO. 1 WAS NOT PRESSED DURING THE COURSE O F HEARING HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 3. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CIT(A) IN CONFIRMING THE REJECTION OF BOOKS OF ACCO UNTS U/S 145(3) AND APPLYING GP @ 1.66%. IN THIS REGARD, DURING THE CO URSE OF HEARING, THE LD. AR SUBMITTED THAT THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF RUNNING PETROL PUMP AND DURING THE YEAR UNDER CONSI DERATION HAS DECLARED GP RATE OF 1.52% ON SALES OF RS. 20,33,37, 902/- AS AGAINST GP ITA NO. 834/JP/2018 SHRI RAJENDRA KUMAR SHARMA VS. ITO 3 RATE OF 1.51% ON SALES OF RS. 12,31,31,415/- IN PR ECEDING FINANCIAL YEAR. IT WAS SUBMITTED THAT THE ASSESSEE HAS MAINT AINED COMPLETE BOOKS OF ACCOUNTS, ALL THE PURCHASES AND SALES ARE FULLY VOUCHED BY VOUCHERS. IT WAS SUBMITTED THAT THE ALLEGATION OF T HE ASSESSING OFFICER REGARDING NON PRODUCTION OF STOCK REGISTER IS CONTR ARY TO THE FACTS AVAILABLE ON RECORD AS THE ASSESSEE HAS SUBMITTED A DETAILED QUANTITATIVE STATEMENT ALONG WITH THE TAX AUDIT REP ORT AND HAS ALSO SUBMITTED DAILY STOCK SUMMARY OF MOTOR SPIRIT AND H IGH SPEED DIESEL. REGARDING THE ALLEGATION OF THE ASSESSING OFFICER T HAT THE ASSESSEE HAS SHOWN EXCESS SHORTAGE, IT WAS SUBMITTED THAT THE AS SESSEE HAS MAINTAINED COMPLETE RECORD AS PER PRESCRIBED FORMAT BY THE OIL COMPANY. MOREOVER, THE SURPRISE VERIFICATION ARE CO NDUCTED BY THE OIL COMPANY FROM TIME TO TIME AND THE SHORTAGE SO CLAIM ED BY THE ASSESSEE ARE AS PER TOLERANCE LIMIT PROVIDED BY THE OIL COMPANY. IT WAS ACCORDINGLY SUBMITTED THAT THERE IS NO VALID BASIS FOR INVOCATION OF SECTION 145(3) OF THE ACT AND REJECTION OF BOOKS OF ACCOUNTS. IT WAS FURTHER SUBMITTED THAT EVEN WHERE THE BOOKS OF ACCO UNTS ARE REJECTED, THE ASSESSING OFFICER IS REQUIRED TO MAKE A FAIR ES TIMATION OF ASSESSEES INCOME. REGARDING THE COMPARISON OF GP DECLARED BY THE ASSESSEE WITH OTHER PARTIES NAMELY RAJ FILLING STATION AND SETH F ILING STATION, IT WAS SUBMITTED THAT THESE CASES ARE NOT COMPARABLE DUE T O DIFFERENCE IN THE STORAGE CAPACITY OF THESE FILING STATION AS BOTH AR E HAVING 100KL STORAGE CAPACITY WHEREIN THE ASSESSEE IS HAVING ONLY 40 KL STORAGE CAPACITY. IT WAS SUBMITTED THAT THE ASSESSING OFFICER NEVER CONF RONTED THE ASSESSEE THE RELEVANT DETAILS OF SUCH CASES DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THEREFORE, IN ABSENCE OF THE SAME, THE THIRD PARTY DATA CANNOT BE USED AGAINST THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT ITA NO. 834/JP/2018 SHRI RAJENDRA KUMAR SHARMA VS. ITO 4 DURING THE YEAR UNDER CONSIDERATION, THERE IS A SHA RP INCREASE IN THE TURNOVER BY 165% I.E. FROM RS. 12.31 CRORE TO RS. 2 0.33 CRORE AND GROSS PROFIT HAS ALSO INCREASED BY 167% FROM RS 18. 50 LACS TO RS 30.95 LACS AS COMPARED TO PRECEDING YEAR WHICH STRONGLY J USTIFY THE DECLARED TRADING RESULTS. IT WAS FURTHER SUBMITTED THAT THE DECLARED GP @ 1.52% IS BETTER THAN THE AVERAGE GP OF LAST 3 YEARS WHIC H COMES TO 1.44% AND THEREFORE, THE GP SO DECLARED SHOULD BE ACCEPTE D AND IN SUPPORT, RELIANCE WAS PLACED ON THE DECISION IN CASE OF CIT VS. AMRAPALI JEWELS (P) LTD. (2012) 65 DTR 196 (RAJ). 4. IN GROUND NO. 3 WHEREIN THE ASSESSEE HAS CHALLEN GED THE DISALLOWANCE OF EXPENSES AMOUNTING TO RS. 2,23,840/ -, IT WAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE DEPRECIATION OF R S. 1,28,031/- ON TANKER, RS.62,826/- FOR TANKER INSURANCE AND RS. 32 ,988/- FOR INTEREST PAID TO TATA FINANCE FOR PURCHASE OF TANKER. IT WAS SUBMITTED THAT THE AO HAS DISALLOWED THESE EXPENSES ALLEGING THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE REGARDING THE FUEL FOR USE OF TANKER AND ALSO FAILED TO FURNISH EVIDENCE W.R.T. USE OF TANKER FOR BUSINESS PURCHASES. IT WAS FURTHER SUBMITTED THAT THE CONCEPT OF PUT TO U SE OF AN ASSET IS LIMITED TO CLAIM AND CALCULATION OF DEPRECATION ONL Y AND DOES NOT EXTENT TO EXPENSES CLAIMED UNDER SECTION 37(1) WHICH SPECI FICALLY STATES THAT ANY EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF THE BUSINESS OR PROFESSION SHALL BE ALLO WED. THE AO HAS RAISED NO OBJECTION AND RATHER ADMITTED THAT THE PA YMENT HAS BEEN MADE DURING THE YEAR ITSELF. THUS, ALL THE OTHER EX PENSES I.E. INSURANCE OF RS. 62,826/- AND INTEREST OF RS. 32,988/- DESERV ED TO BE ALLOWED. REGARDING DEPRECIATION OF RS. 1,28,031/-, IT WAS SU BMITTED THAT THE ITA NO. 834/JP/2018 SHRI RAJENDRA KUMAR SHARMA VS. ITO 5 LOWER AUTHORITIES DID NOT CONSIDER THE MATTER JUDIC IOUSLY IN AS MUCH AS A BARE PERUSAL OF VAT INVOICE DATED 10.12.2010 CLEA RLY SHOWS THAT THE ASSESSEE HAD PURCHASED COMPLETE TANKER ALONG WITH B ODY AND CHASIS, WHICH WERE DULY DELIVERED ALONG WITH INSURANCE TO H IM ON 10.12.2010. THEREAFTER, THE ASSESSEE PURCHASED COMP LETE ACCESSORIES ON 17.12.2010 AND 05.01.2011 AS PER INVOICE NO. 82 AND 099. FINALLY, CABIN WAS ALSO PURCHASED AND INSTALLED ON 02.03.201 1. MOREOVER, ROAD TAX OF RS. 4,585/- WAS ALSO PAID. FURTHERMORE, THE ASSESSEE HAS BEEN USING THE TANKER FOR HIS BUSINESS IN M/S ASHIR WAD FILLING STATION AND THUS FULFILLED ALL THE THREE CONDITIONS FOR CLA IMING DEPRECIATION I.E (I) OWNERSHIP OF THE ASSET (II) ASSET USED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND (III) ASSET USED DURING THE RELEV ANT PREVIOUS YEAR. ACCORDINGLY, HE WAS FULLY ENTITLED TO CLAIM DEPRECI ATION ON THE TANKER AS WELL AS OTHER EXPENSES INCURRED. IN SUPPORT, THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF COORDINATE BENCH IN CASE OF SHRI MANGAL SINGH PALSANIA VS. ACIT (ITA NO. 52/JP/2014) . 5. PER CONTRA, THE LD. DR RELIED ON THE FINDINGS OF THE LOWER AUTHORITIES AND OUR REFERENCE WAS DRAWN TO THE FIND INGS OF THE LD CIT(A) WHICH ARE CONTAINED AT PAGE 7 OF HIS ORDER WHICH RE ADS AS UNDER:- I HAVE GONE THROUGH ASSESSEES SUBMISSION AND AO S FINDINGS. THE AO DID BRING OUT SPECIFIC INSTANCES OF DISCREPA NCY IN TRADED ITEMS LIKE PETROL AND DIESEL AND THE SHORTAGE CLAIM ED VIS A VIS OTHER DEALERS OF THE SAME AREA. THE APPELLANT HAS N OT BEEN ABLE TO COME UP WITH ANY FURTHER REASONING TO COUNTER TH E FINDINGS OF THE AO IN THE COURSE OF THE APPELLATE PROCEEDINGS A ND HAS NOT EVEN REPRESENTED DESPITE SEVERAL NOTICES FOR HEARIN G IN 4 YEARS SINCE FILING OF THE APPEAL. ITA NO. 834/JP/2018 SHRI RAJENDRA KUMAR SHARMA VS. ITO 6 UNDER THE CIRCUMSTANCES, I SEE NO REASON TO DISAGRE E WITH THE FINDINGS OF THE AO IN REJECTING THE BOOKS OF THE AP PELLANT U/S 145(3) AND ESTIMATION OF HIS PROFITS CONSIDERING TH E LACK OF PROPER EXPLANATION FOR LOWER GP AS COMPARED TO PEER TRADER S IN THE SAME AREA, NON MAINTENANCE OF PROPER STOCK DETAILS AND T HOSE RELATED TO CLAIM OF SHORTAGE, EXPENSES ETC. THE ADDITION OF RS. 3,14,300/- IS UPHELD. THE GROUND OF APPEAL NO. 1 IS DISMISSED. AS REGARDS GROUND NO. 2, THE APPELLANT COULD NOT PR ODUCE THE CLAIM OF EXPENSES RELATED TO THE TANKER BEFORE THE AO AND ONLY RELIED ON ORAL SUBMISSION DESPITE REPEATED QUERY IN THIS REGARD. THE APPELLANT HAS NOT BEEN ABLE TO COME UP WITH ANY FURTHER REASONING TO COUNTER THE FINDINGS OF THE AO IN THE COURSE OF THE APPELLATE PROCEEDINGS. UNDER THE CIRCUMSTANCES, I S EE NO REASON TO DISAGREE WITH THE FINDINGS OF THE AO OF DISA LLOWING THE CLAIM OF EXPENSES INCLUDING DEPRECATION AS THE USE OF THE ASSET FOR BUSINESS PURPOSES BEFORE THE END OF THE YEAR COULD NOT BE ESTABLISHED. THE DISALLOWANCE OF RS. 2,23,840/- IS ACCORDINGLY BEING UPHELD. THE GROUND OF APPEAL NO. 2 IS DISMISS ED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WHERE THE BOOKS OF ACCOUNTS A RE REJECTED BY THE AO, THE AO IS TO ASSESS THE INCOME OF THE ASSESSEE ON THE BASIS OF BEST JUDGMENT AND AVERAGE OF PAST YEARS GP RATE WHICH HA S ATTAINED FINALITY HAS BEEN CONSIDERED AS PROPER AND REASONABLE BASIS AND GUIDANCE FOR THE BEST JUDGMENT. IN THE INSTANT CASE, THE AO HAS ADOPTED G.P RATE OF IMMEDIATELY PRECEDING YEAR AS COMPARED TO AVERAGE O F PAST GP RATES. THE ASSESSEE HAS SUBMITTED THAT AVERAGE OF PAST THR EE YEARS GP RATE COMES TO 1.44% AS COMPARED TO CURRENT YEAR RATE OF 1.52%. WE THEREFORE, FIND THAT THE ASSESSEE HAS DECLARED BETT ER GROSS PROFIT RATE OF ITA NO. 834/JP/2018 SHRI RAJENDRA KUMAR SHARMA VS. ITO 7 1.52% AS COMPARED TO AVERAGE OF PAST THREE YEARS GP RATE OF 1.44% AND EVEN WHERE THE BOOKS OF ACCOUNTS ARE REJECTED, THERE IS NO BASIS FOR MAKING THE ADDITION IN THE HANDS OF THE ASSESSE E. THEREFORE, LEAVING THE QUESTION OF REJECTION OF BOOKS OF ACCOU NTS OPEN AS THE SAME HAS BECOME MORE ACADEMIC IN NATURE, THE ADDITION SO MADE AMOUNTING TO RS 3,14,300/- IS DIRECTED TO BE DELETED. 7. REGARDING CLAIM OF DEPRECIATION AND OTHER EXPEN SES RELATING TO TANKER AMOUNTING TO RS 2,23,840/-, ON PERUSAL OF EX PLANATION AND DOCUMENTATION PLACED ON RECORD, WE FIND THAT THERE IS NO MERIT IN DISALLOWANCE OF THE SAID EXPENSES AND THE SAME ARE DIRECTED TO BE DELETED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/04/2021. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30/04/2021. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI RAJENDRA KUMAR SHARMA, BARAN. 2. IZR;FKHZ@ THE RESPONDENT- ITO, BARAN. 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. ITA NO. 834/JP/2018 SHRI RAJENDRA KUMAR SHARMA VS. ITO 8 6. XKMZ QKBZY@ GUARD FILE { ITA NO.834/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR