Shriji Traders, Hoshangabad V. ACIT Circle Itarsi, Itarsi

ITA 904/Ind/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7742 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 30-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUNIT KUMAR
• Keywords: Rejection of books of accounts; Fair market value
• Section: 143(3); 142(1); 143(2); 44AB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE KUL BHARAT, JUDICIAL MEMBER AND HONBLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.904/IND/2018 ASSESSMENT YEAR 2013-14 REVENUE BY SHRI PUNIT KUMAR , SR.DR ASSESSEE BY SHRI HITESH CHIMNANI , CA DATE OF HEARING 23 . 1 .20 20 DATE OF PRONOUNCEMENT 29 .1.2020 O R D E R PER MANISH BORAD, AM THE ABOVE CAPTIONED APPEAL FILED AT THE INSTANCE OF THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2013-14 IS DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEA LS)-3 (IN SHORT LD.CIT(A)], BHOPAL DATED 23.10.2018 WHICH IS ARIS ING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHOR T THE ACT) DATED 30.03.2016 FRAMED BY ACIT-CIRCLE, ITARSI. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEA L; M/S. SHRIJI TRADERS, VILLAGE THAINI, BANKHEDI, DIST. HOSHANGABAD (M.P) VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE, ITARSI (APPELLANT) (RESPONDENT ) PAN NO. A A ZFS0779D SHRIJI TRADERS ITA NO. 904/IND/2018 2 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E APPELLANTS CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDI TION OF RS.43,812/- ON ACCOUNT OF PURCHASE OF MASOOR FROM RELATED PARTY U/ S 40A(2) OF THE INCOME TAX ACT MADE BY THE LD. A.O. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E APPELLANTS CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF RS.3,50,000/- TOWARDS ESTIMATED QUALITY CLAIM DISCO UNT MADE BY THE LD. A.O. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND T HE AFORESAID GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3 . WE HAVE HEARD RIVAL CONTENTIONS AND RECORDS PLA CED BEFORE US AND GONE THROUGH THE WRITTEN SUBMISSION FILED BY TH E ASSESSEE BEFORE THE LOWER AUTHORITIES AND PAPER BOOK PLACED BEFORE US RUNNING FROM PAGE 1 TO 178. 4. THE FIRST GROUND RELATES TO ADDITION OF RS.43,812/ - U/S 40A(2) OF THE ACT ON ACCOUNT OF PURCHASE OF MASOOR DAL FRO M RELATED PARTY. THE ASSESSEE WHICH IS ENGAGED IN THE BUSINESS OF WH OLE SALE TRADING OF GRAINS AND AGENT OF FOOD GRAINS WAS SUBJECTED TO SCRUTINY U/S 143(3) OF THE ACT THROUGH CASS WHICH WAS CARRIED OU T AFTER SERVING OF STATUTORY NOTICES U/S 143(2) AND 142(1) OF THE A CT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. A.O OBSERVED T HAT THE SHRIJI TRADERS ITA NO. 904/IND/2018 3 ASSESSEE SOLD 2086.3 QUINTALS OF MASOOR DAL TO SHR INATH TRADERS (WHICH IS A RELATED PARTY OF THE ASSESSEE) ON 30.04 .2012 @ RS.3500/- PER QUINTAL AND THEN PURCHASED THE SAME Q UANTITY OF MASOOR ON 04.05.2012 AND 07.05.2012 @ RS.3521/- PER QUINTAL. LD. A.O ALLEGED OF ASSESSEE OF HAVING INTENTIONALLY INCURRED LOSS OF RS.43,812/- AND THUS LIABLE TO THE DISALLOWED SINCE THE TRANSACTION WAS CARRIED OUT WITH THE RELATED PARTY. THUS DISAL LOWANCE U/S 40A(2) OF THE ACT MADE BY THE LD. A.O WAS FURTHER C ONFIRMED BY LD. CIT(A). 5. AFTER GOING THROUGH THE SUBMISSION WE FIND THAT BO TH THE PARTIES I.E. THE PURCHASER I.E. THE ASSESSEE AND TH E SELLER (RELATED PARTY) ARE FALLING UNDER THE SAME TAX BRACKET. THE TRANSACTION WAS CARRIED OUT AS PER MARKET VALUE SINCE THE PRICE OF FOOD GRAIN WAS SUBJECT TO FLUCTUATION. IN THE PRESENT CASE THE PR ICE HAS CHANGED ONLY BY 0.6%. BOTH THE LOWER AUTHORITIES FAILED TO PROVE THAT THE AMOUNT PAID BY THE ASSESSEE TO THE RELATED PARTY IS EXCESSIVE OR UNREASONABLE AND IN ABSENCE THERE OF PROVISIONS OF SECTION 40A(2) CAN BE ATTRACTED. 6. THUS IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE C ASE WHEREIN THE LD. A.O FAILED TO SUBSTANTIATE ITS OPINION WITH THE MATERIAL SHRIJI TRADERS ITA NO. 904/IND/2018 4 EVIDENCE THAT THE EXPENDITURE I.E. PURCHASE MADE BY THE ASSESSEE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS AND IN SUCH CIRCUMSTANCES DISALLOWANCE U/ S 40A(2) IS UNCALLED FOR. EVEN OTHERWISE SINCE BOTH THE ASSESSE E AND RELATED PARTIES ARE BEING SUBJECT TO SIMILAR RATE OF TAX, T HERE WOULD HARDLY BE ANY LOSS TO THE REVENUE. THUS DISALLOWANCE U/S 4 0A(2) OF THE ACT AT RS.43,.812/- STANDS DELETED. GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 7. AS REGARDS GROUND NO.2 THROUGH WHICH THE ASSESSEE HAS CHALLENGED THE FINDING OF LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.3,50,000/- MADE BY THE LD. A.O TOWARDS ESTIMATED QUALITY CLAIM DISCOUNT, WE FIND THAT DURING THE COURSE OF ASSESS MENT PROCEEDINGS LD. A.O ON OBSERVING THAT THE GROSS PROFIT RATE OF THE ASSESSEE HAS DECLINED FROM 5.59% TO 3.98% DIRECTED THE ASSESSEE TO EXPLAIN THE REASONS FOR SUCH FALL. IT WAS SUBMITTED BY THE ASS ESSEE THAT IT OCCURRED DUE TO FLUCTUATION IN THE GOOD GRAINS SINC E THEY ARE DRIVEN BY THE MARKET FORCES. THE LD. A.O WITHOUT FINDING ANYTHING ABNORMAL IN THE BOOKS OF ACCOUNTS MADE ADHOC DISALL OWANCE AT RS.3,50,000/- OBSERVING THAT NO INFORMATION HAS BEE N PROVIDED BY SHRIJI TRADERS ITA NO. 904/IND/2018 5 THE ASSESSEE REGARDING QUALITY CLAIM DISCOUNT AND I TS NEXUS WITH SALES TURNOVER. 8. IN OUR VIEW THE REMARKS/OBSERVATION MADE BY THE L D. A.O ARE VERY GENERAL IN NATURE EVEN WHEN THE BOOKS OF ACCOU NTS OF THE ASSESSEE ARE AUDITED U/S 44AB OF THE ACT AND LD. A. O HAS NOT REJECTED THE BOOKS OF ACCOUNTS AND HAS NOT POINTED OUT ANY DEFECT IN THE FINANCIAL STATEMENT OR BOOKS OF ACCOUNTS. T HE ACTION OF LD. A.O FOR MAKING ADHOC DISALLOWANCE OF RS.3,50,000/- IS QUESTIONABLE IN THE LIGHT OF THE FACT THAT ALL THE DETAILS OF SA LES AND PURCHASE OF GOODS GRAINS WERE PLACED BEFORE HIM. THE RATIO OF QUANTITY CLAIM DISCOUNT TO SALES HAS NO TANGIBLE NEXUS WITH THE GR OSS PROFIT RATIO AND IN FACT SAID RATIO HAS BEEN STATED TO HAVE BEEN ADJUSTED IN THE IMPUGNED FINANCIAL YEAR. THEREFORE THE ADDITION ON SUCH VAGUE BASIS DESERVES TO BE DELETED IN THE GIVEN CASE WHEN THERE IS NEGLIGIBLE FALL IN NET PROFIT RATIO AND TURNOVER HA S ALMOST DOUBLED. WE THUS DELETE THE ADHOC DISALLOWANCE OF RS. 3,50,0 00/- MADE TOWARDS ESTIMATED QUALITY CLAIM DISCOUNT AND ALLOW GROUND NO.2 OF THE ASSESSEE. SHRIJI TRADERS ITA NO. 904/IND/2018 6 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.01.20 20. SD/- SD/- ( KUL BHARAT) (MANI SH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 29 JANUARY, 2020 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE