M/S RAMANAND INDUSTRIES, JAIPUR V. INCOME TAX OFFICER, WARD-7-3, JAIPUR

ITA 882/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1795 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 11-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANUP SINGH JCIT DHK
• Assessee Lawyers: SUHANI MAMODIA
• Section: 44AD

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S B, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 882/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 M/S RAMANAND INDUSTRIES, F-151, HEERAWALA INDUSTRIAL AREA, NAYLA ROAD, KANOTA, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD- 7(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAJFR 1120 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : MS. SUHANI MAMODIA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI ANUP SINGH (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/11/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 20/11/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10/05/2018 OF LD. CIT(A)-3, JAIPUR FOR THE A.Y. 201 3-14. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE A.O. REJECTED BOOKS OF ACCOUNT THEREAFTER LD. CIT(A) ERRED IN SUS TAINING THE REJECTING OF BOOKS OF ACCOUNT U/S 145(3), WITHOUT P ROPER BASIS WHICH IS UNJUSTIFIED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE A.O. AND CIT(A) ERRED IN MAKING TRADING ADDITION OF RS.3,00, 000/- WHICH WAS FURTHER REDUCED ONLY AT RS. 1,50,000 BY THE LD. CIT (A) WITHOUT ANY BASIS, WHICH LIABLE TO BE QUASHED IN ENTIRELY. ITA 882/JP/2018_ RAMANAND INDUSTRIES VS ITO 2 2. GROUND NO. 1 OF THE APPEAL IS REGARDING REJECTIO N OF BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT). 3. WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSE SSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE ON TH E GROUND THAT THE INVENTORY OF OPENING STOCK AND CLOSING STOCK AND IT S VALUE ARE NOT VERIFIABLE DUE TO THE REASON THAT THE ASSESSEE FILE D THE RETURN OF INCOME FOR THE A.Y. 2012-13 U/S 44AD OF THE ACT AND THEREF ORE, THE PROPER BOOKS OF ACCOUNT WERE NOT MAINTAINED BY THE ASSESSEE DISCL OSING THE CLOSING STOCK WHICH IS TO BE TAKEN AS OPENING STOCK FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS FURTHER NOT ED THAT THE PRODUCTION EXPENSES BOOKED TO THE P&L ACCOUNT ARE NOT FULLY VO UCHED AND THEREFORE THE BOOKS OF ACCOUNT ARE NOT GIVING A CORRECT PICTU RE OF THE AFFAIRS OF THE ASSESSEE AND THE RESULT BEING NET PROFIT. 4. THE ASSESSEE CHALLENGED THE SAID ACTION OF THE AS SESSING OFFICER BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. THE LD. CIT(A) HAS CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT BY NOTING THE FAC T THAT THE ASSESSING OFFICER HAS POINTED OUT THE SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT. 5. HAVING CONSIDERING THE RIVAL SUBMISSIONS AND CAR EFUL PERUSAL OF RECORD, WE FIND THAT THE ASSESSING OFFICER HAS POINT ED OUT SPECIFIC DEFECTS ITA 882/JP/2018_ RAMANAND INDUSTRIES VS ITO 3 IN THE BOOKS OF ACCOUNT REGARDING THE OPENING AND C LOSING STOCK AND VALUATION. FURTHER THE EXPENSES WERE NOT FULLY VOUCH ED AND ALSO DAY TO DAY STOCK REGISTER WAS NOT FOUND TO BE MAINTAINED BY THE ASSESSEE. ACCORDINGLY WE DO NOT FIND ANY ERROR OR ILLEGALITY I N THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE AND REJECTION OF BO OKS OF ACCOUNT IS CONFIRMED. 6. GROUND NO.2 OF THE APPEAL IS REGARDING THE TRADI NG ADDITION OF RS. 3.00 LACS MADE BY THE ASSESSING OFFICER WAS RESTRICT ED BY THE LD. CIT(A) TO RS. 1.50 LACS. 7. WE HAVE HEARD THE LD. AR OF THE ASSESSEE AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE IN PARA 5.3 AS UNDER: 5.3 I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFORE ME. I FIND THAT THE ASSESSING OFFICER MADE THE ADDITION OF RS.3,00,000/ -. THE A/R SUBMITTED THAT THE TRADING RESULT OF THE ASSESSEE FOR THE YEA R AND IMMEDIATELY PRECEDING YEAR ARE AS UNDER: - SALES GP GP RATIO AY 2013-14 1,34,80,953.25 24,91,060.33 18.47% AY 2012-13 21,10,506.18 4,11,756.76 19.50% THE G.P RATE IS SLIGHTLY DECREASED BUT THE FALL IS VERY MUCH JUSTIFIED FROM THE MULTIFOLD INCREASE TURNOVER. YOUR HONOUR, EVEN THE BOOKS ARE REJECTED THAN IT I S THE ESTABLISHED LAW THAT THE ESTIMATION OF PROFIT SHOULD BE MADE FROM F AIR ESTIMATION ON THE ITA 882/JP/2018_ RAMANAND INDUSTRIES VS ITO 4 FACT AND CIRCUMSTANCES. WHERE THE BOOKS OF ACCOUNTS ARE REJECTED THE BEST GUIDE IS ASSESSEE'S OWN HISTORY. AS I MENTIONED ABOVE THE GROSS PROFIT RATE IS SLIG HTLY LOWER AS COMPARE TO THE LAST YEAR AND THIS COULD BE VERY WELL JUSTIFIED FORM THE MANIFOLD INCREASE IN THE TURNOVER. I AM ALSO HEREWITH ENCLOSING A CHART SHOWING EXPEN SES WITH PERCENTAGE ON GROSS TURNOVER FOR THE YEAR END AND IMMEDIATELY PRECEDING YEAR. YOU MAY APPRECIATE HERE THAT ALMOST ALL THE EXPENS ES ARE LOWER IN TERMS OF PERCENTAGE IN COMPARISON TO LAST YEAR THEREFORE THE GROSS TRADING RESULT DECLARED BY ASSESSEE DOES NOT DESERVE TO BE ENHANCE D. YOUR HONOUR HON. RAJASTHAN HIGH COURT HELD IN CASE OF GOTAN LIME KHANIJ UDYOG PAGE NO 26 TAX WORLD 205 EVEN THE BOOKS ARE R EJECTED IN THAT CASE SUCH REJECTION DOES NOT GIVE AUTOMATIC MANDATE TO E NHANCE THE TRADING RESULTS. THE BEST ESTIMATION IS DERIVED FROM ASSESS EE OWN RESULTS AND IT SHOULD BE APPRECIATE. CONSIDERING THE ABOVE FACTS I FIND THAT THE TURNOV ER OF THE APPELLANT ALSO INCREASE FROM RS.21,10,509/- TO RS. 1,34,80,953/- A LMOST 6 TIME WHICH IS THE MAIN REASON FOR DECLINE THE PROFIT RATE. THEREF ORE CONSIDERING THE ABOVE FACTS AND PAST HISTORY OF THE CASE I AM THE O PINION THAT THE ADDITION MADE BY THE ASSESSING OFFICE OF RS.3,00,000/- IS HI GHER SIDE CONSIDERING THE TOTALLY OF THE CASE AND INCREASE IN TURNOVER I RESTRICT THE TRADING ADDITION RS. 1,50,000/-. ACCORDINGLY I CONFIRM TRAD ING ADDITION OF RS. 1,50,000/- AND BALANCE AMOUNT OF RS. 1,50,000/- IS DELETED. THIS GROUND IS PARTLY ALLOWED. THUS, IT IS CLEAR THAT THE LD. CIT(A) HAS ACCEPTED TH E FACT THAT FOR THE YEAR UNDER CONSIDERATION, THE TURNOVER OF THE ASSESSEE H AS INCREASED FOR MORE ITA 882/JP/2018_ RAMANAND INDUSTRIES VS ITO 5 THAN SIX TIMES WHEREAS THERE IS ONLY INSIGNIFICANT D ECREASE IN THE G.P. RATIO DECLARED BY THE ASSESSEE FOR THE YEAR UNDER C ONSIDERATION. FROM THE COMPARATIVE DETAILS AS REPRODUCED BY THE LD. CIT(A) IN THE FINDING REPRODUCED (SUPRA), IT IS CLEAR THAT THERE IS NO SI GNIFICANT DECLINE IN THE G.P. RATIO WHICH IS LESS THAN 1% WHEREAS THE TURNOVE R OF THE ASSESSEE HAS INCREASED SIX TIMES DURING THE YEAR UNDER CONSIDERA TION IN COMPARISON TO THE EARLIER YEARS. HENCE, IT IS SETTLED PROPOSITION OF LAW THAT EVEN IF THE BOOKS OF ACCOUNT ARE REJECTED U/S 145(3) OF THE ACT , IT WOULD NOT IPSO FACTO RESULT TO AN ADDITION EXCEPT THE INCOME ESTIM ATED ON SAME REASONABLE AND PROPER BASIS LEAD TO AN ADDITION. IN THE CASE IN HAND, NEITHER THE ASSESSING OFFICER NOR THE LD. CIT(A) HAS UNDERTAKEN ANY EXERCISE TO ESTIMATE THE INCOME OF THE ASSESSEE ON SOME PROPER AND REASONABLE BASIS AND THEREFORE THE AD HOC ADDITION MADE BY THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) IS NOT PERMISSIBLE UNDER THE PROVISIONS OF THE ACT. AFTER REJECTION OF BOOKS OF ACCOUNT, THE A SSESSING OFFICER WAS MANDATED TO ESTIMATE THE INCOME OF THE ASSESSEE ON SOME PROPER AND REASONABLE BASIS. THE PAST HISTORY OF THE DECLARED G .P. IS CONSIDERED AS A REASONABLE AND PROPER GUIDANCE FOR ESTIMATION OF TH E INCOME. IN ABSENCE OF ANY ESTIMATION MADE BY THE ASSESSING OFFICER, TH E AD HOC ADDITION MADE BY THE AUTHORITIES BELOW IS NOT SUSTAINABLE. AC CORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THERE IS NO SIGN IFICANT OR NOTICEABLE ITA 882/JP/2018_ RAMANAND INDUSTRIES VS ITO 6 DECLINE IN THE G.P. IN COMPARISON TO THE EARLIER YE AR WHEREAS THERE IS A SIGNIFICANT INCREASE OF SIX TIMES IN THE TURNOVER. THE SAID INSIGNIFICANT DECLINE IN THE G.P. CANNOT BE A REASON FOR AN ADDIT ION. ACCORDINGLY WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/11/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 20 TH NOVEMBER, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S RAMANAND INDUSTRIES, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD- 7(3), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 882/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR