SMT. GULAB DEVI SARUPARIA, JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 903/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2225 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 30-11-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S NEHRA JCIT DHK
• Keywords: Rejection of books of accounts
• Section: 234B; 133(6); 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 903/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14 GULAB DEVI SARUPURIA, 80, SHALIMAR BAGH, AJMER ROAD, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD-2(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ANPPS 5298 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. JAIN (ADV) & SHRI ASHOK KUMAR GUPTA (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI A.S. NEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01/01/2018 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 01/01/2018 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES F ROM THE ORDER OF THE LD. CIT(A)-I, JAIPUR DATED 23/10/2017 FOR THE A. Y. 2013-14. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADIN G AND MANUFACTURING OF PP WOVEN SACKS AND ALL KIND OF PAC KING MATERIAL UNDER THE NAME AND STYLE OF M/S NAKORA PACKING INDUSTRIES . THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 12,12,400/- WAS E-FILED ON 26/09/2013. THE CASE WAS SELECTED FOR SCRUTINY. THE AS SESSING OFFICER ITA 903/JP/2017_ GULAB DEVI SARUPURIA VS ITO 2 MADE ADDITION OF RS. 3,41,396/- AFTER REJECTING BOO KS OF ACCOUNT AND ESTIMATING THE G.P. RATE AT 8% INSTEAD OF 7.24% DEC LARED BY THE ASSESSEE. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS. 1.00 LAC OUT OF VARIOUS EXPENSES DEBITED IN THE P&L ACCOUNT. THE LD. CIT(A) CONFIRMED THE G.P. ADDITION AND GAVE PART RELIEF FROM AD HOC DISALLOWAN CE OF RS. 1 LACS FROM THE EXPENSES. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT BY T AKING FOLLOWING GROUNDS OF APPEAL: 1. INVALID INVOKATION OF SEC.145(3) (A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND FACTS IN CONFIRMING PROVIS ION OF SECTION 145(3) FOR REJECTING THE BOOKS OF ACCOUNTS WITHOUT VALID REASONS. THE BOOKS OF ACCOUNTS' ARE AUDITED BY CHARTERED ACCOUNT S AND ITS JUDICIOUSLY OBLIGATORY ON THE PART OF DEPARTMENT TO ACCEPT AUDITED ACCOUNTS FOR TAX PURPOSES. (B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND FACTS IN CONFIRMING PROVIS ION OF SECTION 145(3) FOR REJECTING THE AUDITED BOOKS OF ACCOUNTS IS NOT JUSTIFIABLE THE BOOKS OF ACCOUNTS MAINTAINED IN REGULAR COURSE OF BUSINESS ARE PRESUMED TO BE CORRECT, COMPLETE AND RELIABLE, AND BOOKS RESULTS CANNOT BE DISTURBED WITHOUT ANY MATERIAL DEFECT SEC TION 30 OF EVIDENCE ACT. 2. INVALID TRADING ADDITION OF RS. 341396/- BY INCR EASING GP RATE FROM 7.24% TO 8% ARBITRARILY:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND FACTS IN CONFIRMING TRADIN G ADDITION OF RS. 341396/- BY INCREASING GP RATE FROM 7.24% TO 8% WIT HOUT ANY MATERIAL FACTS ON RECORD. COMPARATIVE CHART ITA 903/JP/2017_ GULAB DEVI SARUPURIA VS ITO 3 A./Y. GROSS TURNOVER GROSS PROFIT N/P (IN RS). GP RATE % NP RATE % 2011-2012 22188617 1596143 598586 7.19% 2.70% 2012-2013 34645905 2496018 952841 7.20% 2.75% 2013-2014 45333610 3283103 1257833 7.24% 2.77% IN SPITE OF CONSTANT INCREASE IN GP RATE IN PAST TH REE YEARS OF WORKING CIT(A) JUST TO MAKE TRADING ADDITIONS OF RS. 341396 /- INCREASED OUR GP RATE FROM 7.24% TO 8% ARBITRARILY WITHOUT ANY MATER IAL FACTS ON RECORD AND THUS TRADING ADDITIONS OF RS. 341396/- ARE WITH OUT JUSTIFICATION. 3. INVALID DISALLOWANCE OF RS. 50000/- OUT OF EXPENSES ARBITRARILY THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND FACTS IN CONFIRMING LUMP S UM DISALLOWANCE OF RS. 50000/- OF EXPENSES. LD. CIT(A) HAS WITHOUT MENTION ING ANY SPECIFIC QUERY ON SPECIFIC VOUCHER OF ANY HEAD OF EXPENSES DISALLO WED IN LUMP SUM RS. 50000/- IN THE HEAD FREIGHT & CARTAGE OUTWARD REBAT E DISCOUNT & CLAIM, CONVEYANCE WITHOUT ANY MATERIAL FACTS ON RECORD THE REFORE DISALLOWANCE OF RS. 50000/- OUT OF EXPENSES ARE WITHOUT JUSTIFIC ATION. 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND FACTS IN CONFIRMING NOT IS SUING PROPER AND VALID SHOW CAUSE NOTICE BEFORE MAKING ADDITION / DI SALLOWANCE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND FACTS IN CONFIRMING IN CHA RGING INTEREST U/S 234B RS. 56985/- INTEREST U/S 234C RS. 6679/- AND I NTEREST U/S 234D RS. 6. 4. GROUND NO. 1 (A)&(B) OF THE ASSESSEES APPEAL WER E NOT PRESSED AT THE TIME OF HEARING, THEREFORE, THE SAME STANDS DIS MISSED AS NOT PRESSED. 5. GROUND NO. 2 OF THE APPEAL IS AGAINST CONFIRMING THE TRADING ADDITION OF RS. 3,41,396/- MADE ON ACCOUNT OF ENHAN CING THE GP RATE FROM 7.24% TO 8%. THE LD. CIT(A) HAS DEALT THIS ISSUE IN H IS ORDER BY HOLDING AS UNDER: ITA 903/JP/2017_ GULAB DEVI SARUPURIA VS ITO 4 3.1.2 DETERMINATION: (I) THE BRIEF FACTS OF THE CASE ARE THAT THE APPELL ANT WAS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF PP WOVEN S ACKS AND ALL KIND OF PACKING MATERIAL. DURING THE YEAR UNDER CONSIDERATI ON, IT HAS DISCLOSED GROSS PROFIT OF RS. 32,83,103/- ON TOTAL TURNOVER O F RS. 4,53,33,610/- GIVING A GP RATE OF 7.24%. DURING THE ASSESSMENT PR OCEEDINGS, THE AO HAS OBSERVED THAT THE APPELLANT HAS NOT MAINTAINED DAY-TO-DAY STOCK REGISTER IN TERMS OF QUANTITY AS WELL AS QUALITY. T HE AO HAS ALSO MADE CERTAIN ENQUIRIES U/S 133(6) OF THE ACT AND SOME OF THE SALES MADE BY THE APPELLANT TO A NUMBER OF PARTIES COULD NOT BE VERIF IED. IN VIEW OF THESE FACTS, THE AO HAS INVOKED THE PROVISION OF SECTION 145(3) OF THE ACT AND HAS REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT AND HAS MADE TRADING ADDITION OF RS. 3,41,396/- BY APPLYING THE GP RATE OF 8% AGAINST 7.24% DECLARED BY THE APPELLANT. THE ISSUE HAS BEEN DISCUSSED BY THE AO IN DETAIL FROM PAGE NO. 2 TO 6 OF THE ASSESSMENT OR DER. (II) DURING THE APPELLATE PROCEEDINGS, THE APPELLAN T HAS MADE DETAILED SUBMISSIONS AS REPRODUCED ABOVE AND STATED THAT THE AO WAS NOT JUSTIFIED IN REJECTING ITS BOOKS OF ACCOUNTS U/S 14 5 (3) OF THE ACT AND IT WAS STATED THAT IT HAS MAINTAINED DAY-TO-DAY STOCK DETAILS. IT WAS FURTHER SUBMITTED THAT THE AO HAS APPLIED A GP RATE OF 8% W ITHOUT APPRECIATING THE FACT THAT ITS TRADING RESULTS WERE PROGRESSIVE AND THEREFORE THE TRADING ADDITION MADE BY THE AO DESERVES TO BE DELE TED. (III) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS NOTE D FROM THE DETAILS FURNISHED BY THE APPELLANT DURING THE APPELLATE PRO CEEDINGS THAT IT HAS MAINTAINED QUANTITATIVE DETAILS OF HDPE/PP BAGS ONL Y. IT HAS NOT FILED THE QUANTITATIVE DETAILS OF THE RAW MATERIAL CONSUMED F OR MANUFACTURING OF BAGS. IT IS ALSO NOTED FROM THE MATERIAL PLACED ON RECORD THAT THE ITA 903/JP/2017_ GULAB DEVI SARUPURIA VS ITO 5 APPELLANT HAS PURCHASED HDPE/PP FABRIC IN KILOGRAMS WHEREAS THE DETAILS OF FINISHED PRODUCTS WERE MAINTAINED IN NUM BERS AND THE APPELLANT HAS NOT PROVIDED ANY METHOD BY WHICH THE USE OF HDPE/PP FABRIC IN KILOGRAMS COULD BE RECONCILED WITH THE MA NUFACTURING OF BAGS IN NUMBERS. IN FACT, IN THE TAX AUDIT REPORT, THE A UDITOR HAS NOT STATED THE YIELD OF THE FINISHED PRODUCTS FROM THE CONSUMPTION OF THE RAW MATERIAL I.E. HD'PE/PP FABRIC. FURTHER, FROM THE DETAILS OF STITCHING CHARGES, IT HAS BEEN OBSERVED THAT MONTH WISE PAYMENTS HAVE BEEN ST ATED THEREIN BUT DETAILS RELATING TO DAY-TO-DAY PRODUCTION OF BAGS B Y THESE LABOURERS WERE NOT MAINTAINED. IT IS ALSO AN UNDISPUTED FACT THAT SOME OF THE SALES MADE BY THE APPELLANT COULD NOT BE VERIFIED AS SOME OF T HE PARTIES HAD ALREADY CLOSED THEIR BUSINESSES AS STATED BY THE APPELLANT. (IV) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION AND LOOKING TO THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THA T THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS OF THE APPELLANT U/ S 145 (3) OF THE ACT. THE AO HAS APPLIED A GP RATE OF 8% AGAINST 7.24% DE CLARED BY THE APPELLANT. IT IS AN UNDISPUTED FACT THAT DURING THE YEAR UNDER CONSIDERATION, THE TRADING RESULTS WERE BETTER IN C OMPARISON TO THE IMMEDIATE PRECEDING YEAR BUT IT MAY BE MENTIONED HE RE THAT THE APPELLANT HAS NOT BROUGHT ON RECORD ANY MATERIAL WH ICH MAY INDICATE THAT ITS CASES FOR EARLIER YEARS WERE .COMPLETED UN DER SCRUTINY ASSESSMENTS. (V) IN VIEW OF THESE FACTS, IT IS HELD THAT THE AO WAS JUSTIFIED IN MAKING TRADING ADDITION OF RS. 3,41,396/- TO THE INCOME OF THE APPELLANT BY ESTIMATING GP RATE AT 8% AND HENCE, THE SAME IS HER EBY SUSTAINED. 6. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION WAS BETTER THAN THE EARLIER TWO PRECEDING YEARS. ITA 903/JP/2017_ GULAB DEVI SARUPURIA VS ITO 6 HE HAS DRAWN THE ATTENTION OF THE BENCH TOWARDS THE C HART WHEREIN THE G.P. FOR THE A.Y. 2013-14 I.E. THE YEAR UNDER CONSI DERATION WAS 7.24% AND THE G.P. RATE FOR THE A.Y. 2012-13 WAS 7.20% AND FOR THE A.Y. 2011-12, IT WAS 7.19%. HE HAS ALSO DRAWN THE ATTENTION OF THE BE NCH TOWARDS THE NP RATE, WHICH WAS ALSO BETTER THAN IN COMPARISON TO EAR LIER YEARS. THE NP RATE FOR THE YEAR UNDER CONSIDERATION WAS 2.77% INST EAD OF 2.75% IN THE IMMEDIATE PRECEDING AND 2.70% IN THE A.Y. 2011-12. HE HAS SUBMITTED THAT THE ASSESSEES BOOK RESULTS WERE BETTER THAN TH E EARLIER YEARS, THEREFORE, THE SAME SHOULD HAVE BEEN ACCEPTED BY TH E ASSESSING OFFICER. WITH REGARD TO THE VARIOUS OBJECTIONS RAISED BY THE ASSESSING OFFICER WHILE REJECTING THE BOOKS OF ACCOUNT, THE LD AR OF THE AS SESSEE HAS SUBMITTED THAT THE ASSESSEE IS KEEPING THE RECORD OF STOCK AS WELL AS STITCHING CHARGES BUT THE SAME WERE OVERLOOKED BY THE ASSESSIN G OFFICER. HE HAS ALSO SUBMITTED THAT THE MOST OF THE DEBTORS HAS CON FIRMED THE TRANSACTIONS ONLY VERY FEW DEBTORS, WHO HAS CLOSED THEIR BUSINESS, HAS NOT RESPONDED TO THE ENQUIRIES MADE, THEREFORE, THERE WAS NO REAS ON TO REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE PLEADED THAT THERE I S NO REASON TO MAKE SUCH ADDITIONS. 7. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE O RDERS OF THE AUTHORITIES BELOW. ITA 903/JP/2017_ GULAB DEVI SARUPURIA VS ITO 7 8. AFTER HEARING BOTH THE SIDES ON THIS ISSUE, THE BENCH FINDS THAT THE BOOK RESULTS OF THE ASSESSEE FOR THE YEAR UNDER CON SIDERATION WAS BETTER THAN THE TWO PRECEDING YEARS, WHICH IS CLEAR FROM THE FOLLOWING CHART. A./Y. GROSS TURNOVER GROSS PROFIT N/P (IN RS). GP RATE % NP RATE % 2011 - 2012 22188617 1596143 598586 7.19% 2.70% 2012 - 2013 34645905 2496018 952841 7.20% 2.75% 2013 - 2014 45333610 3283103 1257833 7.24% 2.77% THE HONBLE RAJASTHAN HIGH COURT IN VARIOUS DECISION S HAVE HELD THAT PAST HISTORY OF THE ASSESSEE IS THE BEST GUIDE TO ACCEPT /REJECT THE BOOK RESULT OF THE ASSESSEE. THE ASSESSING OFFICER HAD NOT BROUGHT ON RECORD ANY POSITIVE EVIDENCE TO ENHANCE THE GROSS PROFIT FOR M AKING ADDITIONS. THE G.P. IS BETTER THAN EARLIER YEAR. THE ASSESSEE IS PU RCHASING RAW MATERIAL IN KILOGRAMS AND THE OUTPUT IS IN PIECES. THUS, THERE IS NO POSSIBLE WAY TO MAKE COORDINATION BETWEEN INPUT AND OUTPUT. IN SUCH A SITUATION, THE GROSS PROFIT IS THE PROPER WAY TO ARRIVE AT COMPARAT IVE BOOK RESULTS. THEREFORE, CONSIDERING ALL THE FACTS AND CIRCUMSTANC ES, THE BENCH FINDS THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING T HE ADDITION, THEREFORE, THE SAME IS DELETED. GROUND NO. 2 OF THE ASSESSEES APPEAL IS ALLOWED. 9. IN THE GROUND NO. 3 OF THE ASSESSEES APPEAL, TH E ISSUE INVOLVED IS CONFIRMING THE LUMP SUM DISALLOWANCE OF RS. 50000/- MADE ON ACCOUNT OF VARIOUS EXPENSES DEBITED IN THE P&L ACCOUNT. THE LD ASSESSING OFFICER ITA 903/JP/2017_ GULAB DEVI SARUPURIA VS ITO 8 MADE ADDITION OF RS. 1.00 LAC AND THE LD. CIT(A) HAS REDUCED THE SAME TO RS. 50,000/- BY HOLDING AS UNDER:- 3.3.2 DETERMINATION. I HAVE DULY CONSIDERED THE ASSESSMENT ORDER, SUBMIS SIONS OF THE APPELLANT AND THE MATERIAL PLACED ON RECORD. IT IS NOTED THAT THE A.O. HAS MADE A DISALLOWANCE OF RS. 1 LAC OUT OF VARIOUS EXPENSES C LAIMED BY THE APPELLANT IN ITS PROFIT AND LOSS ACCOUNT. THE APPELLANT COULD NO T FULLY CONTROVERT THE FINDINGS OF THE A.O. HOWEVER, THE DISALLOWANCE MADE BY THE A.O. APPEARS TO BE ON THE HIGHER SIDE. CONSIDERING THE VOLUME AND N ATURE OF BUSINESS OF THE APPELLANT, IT WOULD BE FAIR AND REASONABLE TO RESTR ICT THE DISALLOWANCE TO 50% OF THE AMOUNT DISALLOWED BY THE A.O. THEREFORE, THE DISALLOWANCE OF RS. 1 LAC MADE BY THE A.O. IS HEREBY RESTRICTED TO RS. 50,000/-. 10. AFTER HEARING BOTH THE SIDES ON THIS ISSUE, THE BENCH IS OF THE VIEW THAT SUSTAINING THE ADDITION OF RS. 50,000/- IS ON HIGHER SIDE, THEREFORE, IN THE INTEREST OF JUSTICE, EQUITY AND FAIRNESS, THE D ISALLOWANCE OF RS. 25,000/- SHALL BE REASONABLE. HENCE ADDITION UP TO 25,000/- IS SUSTAINED AND BALANCE IS DELETED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/01/2018. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- -1 ST JANUARY, 2018 ITA 903/JP/2017_ GULAB DEVI SARUPURIA VS ITO 9 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SMT. GULAB DEVI SARUPURIA, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD 2(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. 903/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR