SHRI FATEH CHAND AGARWAL, Jaipur V. INCOME TAX OFFICER, NEEMKATHANA

ITA 885/JPR/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9476 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 19-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH : JAIPUR BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER ITA NO.885/JP/2011 ASSTT. YEAR : 2007-08 PAN:ABPPA5425R SHRI FATEH CHAND AGGARWAL, VS. INCOME TAX OFFICER , NEEM KA THANA, NEEM KA THANA, DISTT. SIKKAR. DISTT. SIKKAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATISH GUPTA, AR RESPONDENT BY : SHRI D.K. MEENA, DR DATE OF HEARING : 26.12.2011 DATE OF PRONOUNCEMENT:03.01.2012 ORDER THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF CIT (A)-III, JAIPUR DATED 09.08.2011 RELATING TO ASSESSMENT YEAR 2007-08. 2. GROUND NOS. 1 TO 3 RELATE TO UPHOLDING THE REJEC TION OF BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) , CONFIRM ING THE TRADING ADDITION OF RS.1,11,060/- MADE BY THE AO AND ENHANCING FURTHER INCOME BY RS.1,17,750/- IN TRADING ACCOUNT BY APPLYING GP RATE @ 19.5% AS AGAINST 18% APPLIED BY THE AO. 3. THE AO NOTICED THAT THERE ARE VARIOUS DEFECTS IN THE MAINTENANCE OF BOOKS OF ACCOUNT AS STOCK REGISTER AS WELL AS QUANTITATIVE T ALLY OF THE STOCK WAS NOT FILED. THEREFORE, HE INVOKED THE PROVISIONS OF SECTION 145(3). THE AS SESSEE HAS SHOWN SALES OF RS.78,10,229/- AND AO ESTIMATED SALES OF RS.78,50,0 00/-. THE ASSESSEE HAS SHOWN GP RATE OF 16.67% AS AGAINST 19.50% SHOWN IN EARLIER YEAR. TAKING INTO ACCOUNT VARIOUS DEFECTS AND DECLINE IN GP RATE, THE AO APPLIED GP R ATE OF 18% ON ESTIMATED SALES OF RS.78,50,000/- 2 4. THE LD. CIT(A) ISSUED ENHANCEMENT NOTICE IN VIEW OF THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF M/S. INANI MARB LES ( 175 TAXMAN 56), WHEREIN IT HAS BEEN HELD THAT IF THE BOOKS OF ACCOUNT ARE REJECTED THEN GROSS PROFIT RATE SHOULD BE DEDUCED ON THE BASIS OF PAST HISTORY. ACCORDINGLY, AFTER SEEKING EXPLANATION FROM THE ASSESSEE, THE LD. CIT(A) APPLIED GP RATE OF 19.5% O N ESTIMATED SALES BY AO WHICH RESULTED A FURTHER ADDITION OF RS.1,17,750/-. 5. AFTER CONSIDERING THE WRITTEN SUBMISSIONS FILED ON BEHALF OF THE ASSESSEE AND THE ORDERS OF THE LOWER AUTHORITIES ON WHICH RELIANCE H AS BEEN PLACED BY THE LD. DR, I FOUND THAT ASSESSEE DESERVES TO SUCCEED IN THESE GROUNDS IN PART. EXCEPT NON-MAINTENANCE OF STOCK REGISTER AND CERTAIN DEFECT IN EXPENSES CLAIM ED, THERE WAS NO MAJOR DISCREPANCY FOUND IN THE BOOKS OF ACCOUNT. IT IS FURTHER SEEN T HAT ALL THE PURCHASES AND SALES VOUCHERS ARE KEPT AND RECORDED IN THE BOOKS OF ACCOUNT REGU LARLY. IT IS FURTHER SEEN THAT SALES OF THE ASSESSEE HAS GONE TO 50 TIMES IN THE YEAR UNDER CON SIDERATION. NEITHER THE AO HAS TAKEN THIS ASPECT INTO CONSIDERATION NOR THE LD. CIT(A) H AS CONSIDERED THIS ASPECT IN DEPTH. THERE WAS NO MATERIAL BEFORE THE AO CONTROVERT THE SALES SHOWN BY THE ASSESSEE. THEREFORE, THERE IS NO QUESTION OF ESTIMATING SALES OVER AND ABOVE SHOWN BY THE ASSESSEE. ACCORDINGLY, I DIRECT THE AO TO ACCEPT THE SALES S HOWN BY THE ASSESSEE. 6. AS REGARDS GP RATE, THERE IS MARGINAL DECLINE I N THE GP RATE DURING THE YEAR UNDER CONSIDERATION. IN EARLIER YEAR, THE GP SHOWN WAS 19 .5% ON THE TOTAL SALES OF RS.29,86,670/- WHEREAS IN THE YEAR UNDER CONSIDERAT ION, IT WAS ESTIMATED ON SALES OF RS.78,50,000/-. THE ASSESSEE HAS SHOWN GP RATE OF 1 6.67%. THERE IS INCREASE IN SALES TO 50 TIMES. THEREFORE, THERE IS REASONABLENESS IN DE CLINING THE GP RATE MARGINALLY. REGARDING THE DECISION OF THE HONBLE RAJASTHAN HIG H COURT IN THE CASE OF M/S. INANI MARBLES (SUPRA), NO DOUBT, WHERE THE BOOKS OF ACCO UNT ARE REJECTED THEN PAST HISTORY IS ONE OF THE MOST RELIABLE BASIS. TAKING INTO ACCOUNT THE PAST HISTORY, IT IS SEEN THAT IN EARLIER YEAR THERE WAS A SALE OF RS.29,86,870/- WHE REAS IN THE YEAR UNDER CONSIDERATION, 3 THE SALE SHOWN BY THE ASSESSEE WAS OF RS.78,50,000 /-. THIS FACTOR HAS NOT BEEN TAKEN INTO CONSIDERATION BY THE LD. CIT(A). THE COU RT HAS CLEARLY HELD THAT CURRENT EVIDENCE SHOULD BE TAKEN INTO CONSIDERATION BY APPL YING GP RATE AFTER CONSIDERING PAST HISTORY. THE CURRENT EVIDENCE IS THAT THE TURNOVER OF THE ASSESSEE HAS BEEN INCREASED MANY TIMES. THEREFORE, KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I HOLD IF GP RATE OF 17% IS APPLIED THAT WILL MEET ENDS OF JUSTI CE. I ORDER ACCORDINGLY. 7. THE REMAINING ISSUE IS AGAINST CONFIRMING THE LU MPSUM DISALLOWANCE OF RS.2,601/- ON ACCOUNT OF TELEPHONE EXPENSES, RS.846 9/- ON ACCOUNT OF SHOP EXPENSES, RS.9755/- ON ACCOUNT OF CAR EXPENSES, RS.4948/- ON ACCOUNT OF SALES TAX DEMAND AND RS.9458/- ON ACCOUNT OF DEPRECIATION ON CAR. 8. AFTER CONSIDERING THE ORDERS OF THE AO AND THE L D. CIT(A), I FEEL THAT THESE DISALLOWANCES HAVE BEEN MADE ON AD-HOC BASIS AND IF THESE DISALLOWANCES ARE RESTRICTED TO 50% OF THE TOTAL DISALLOWANCES THAT WILL MEET ENDS OF JUSTICE, I ORDER ACCORDINGLY. THE AO IS DIRECTED TO RECOMPUTE THE PROFIT OF THE ASSESSEE ON THE BASIS OF MY ABOVE FINDINGS. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 03.0 1.2012 SD/- ( R.K. GUPTA ) JUDICIAL MEMBER DATED : 03.01.2012 /SKR/ COPY FORWARDED TO :- THE ASSESSEE: SH. FATEH CHAND AGGARWAL, NEEM KA THA NA, SIKKAR THE ITO, NEEM KA THANA. THE CIT (A), JAIPUR. THE CIT, THE D/R, ITAT, JAIPUR. GUARD FILE (ITA NO. 885/JP/2011 BY ORDER, 4