Appeal details
Counselvise Citation
90524514 RSA 2013
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 6 month(s) 4 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-10-2014
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
16-10-2014
Assessment Year
2009-2010
Appeal Filed On
25-04-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.714/PN/2013 (ASSESSMENT YEAR: 2009-10) M/S. JAYANT COMMERCIAL CORPORATION 95, POLAN PETH, JALGAON 425001 PAN: AADFJ5996M . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-2, JALGAON . RESPONDENT ITA NO.905/PN/2013 (ASSESSMENT YEAR: 2009-10) THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-2, JALGAON . APPELLANT VS. M/S. JAYANT COMMERCIAL CORPORATION 95, POLAN PETH, JALGAON 425001 PAN: AADFJ5996M . RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE REVENUE BY : SHRI P.S. NAIK DATE OF HEARING : 16-10-2014 DATE OF PRONOUNCEMENT : 30-10-2014 ORDER PER SUSHMA CHOWLA, JM: THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENU E ARE AGAINST THE ORDER OF CIT(A)-II, NASHIK DATED 28.02.2013 RE LATING TO ASSESSMENT YEAR 2009-10 AGAINST ORDER PASSED UNDER S ECTION 143(3) OF THE INCOME-TAX ACT. ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 2 2. BOTH THE APPEALS RELATING TO THE ASSESSEE ON SIMILAR IS SUE ARE WHICH BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.714/PN/2013 HAS RAISED THE FO LLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE PREVAILING CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMI NG G.P ADDITION OF RS.16,04,408/-, MERELY BECAUSE OF GROSS PROFITS ARE LOW COMPARED TO PREVIOUS YEAR. APPELLANT MAINTAINED REGULAR BOOKS OF ACCOUNTS, WHICH ARE DULY AUDITED U/S.44AB OF I T ACT, SO ALSO ALL THE PURCHASES AN D SALES ARE DULY SUPPORTED BY BILLS AND QUANTITY WISE DETAILS WERE ALSO REFLECTED IN THE TRADING ACCOUNTS. THEREFORE , ADDITION MAY PLEASE BE DELETED. 2. ON THE FACTS AND IN THE PREVAILING CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMI NG THE G.P ADDITION OF RS.L6,04,408/-,AS THERE IS NO DISPUTE IN RESPECT OF, QUANTITY AND VALUE OF OPENING STOCK, PURCHASES, SALES, AND CLOSING STOCK TOO, AS SHOWN BY THE APPELLANT AND DULY CERTIFIED BY C A, AND HENCE, G.P &N.P ARRIVED AT AS PER THE BOOKS OF ACCOUNTS, CANNOT BE REJECTED. THE REFORE, ADDITION MAY PLEASE BE DELETED. 3. ON THE FACTS AND IN THE PREVAILING CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMI NG THE DISALLOWANCE OF INTEREST OF RS.12,996/-, WITHOUT APPRECIATING CORRECT FACT IN THIS REGARDS, AS EXPENS ES OF INTEREST IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PU RPOSES OF BUSINESS ONLY AND HENCE THE ADDITIONS ARE NOT JUS TIFIED. THEREFORE, ADDITION MAY PLEASE BE DELETED. 4. THE APPELLANT CRAVES THE PERMISSION TO ADD, AMEND, MODIFY, ALTER, REVISE, SUBSTITUTE, DELETE ANY OR ALL GROUN DS OF THE APPEAL, IF DEEMED NECESSARY AT THE TIME OF HEAR ING OF THE APPEAL. 4. THE REVENUE IN ITA NO.905/PN/2013 HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.22,46,288 /- MADE ON ACCOUNT OF DIFFERENCE IN VALUATION OF CLOSING STOCK. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.C IT(A) HAS IGNORED THE FACT THAT DURING ASSESSMENT PROCEEDINGS , ASSESSEE COULD NOT CLARIFIED HOW THE STOCK SHOWN IN THE BOO KS OF ACCOUNTS ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 3 WAS CORRECTLY VALUED AS PER THE METHOD REGULARLY FOLLO WED BY IT AND THE STOCK SHOWN TO THE BANK WAS ON ESTIMATE BASIS. 3. THE APPELLANT CRAVES LEAVE TO AMEND, ADD, ALTER THE ABO VE GROUNDS, IF FELT NECESSARY, LATER. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WA S ENGAGED IN TRADING IN SONY ELECTRONIC ITEMS, CONFECTIONARY, SNACKS AND DISTRIBUTOR OF INDIAN TOBACCO CO. DURING THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE HAD ORIGINALLY FILED RETURN OF INCOME DECLARING INC OME OF RS.29,92,971/- ON 29.09.2009. THEREAFTER, THE ASSESSEE FILED A REVISED RETURN DECLARING TOTAL INCOME OF RS.30,21,556/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN GROSS PROFIT AND NET PROFIT @ 1.58% AND 0.94% R ESPECTIVELY ON TOTAL TURNOVER OF RS.32,08,81,660/-. DURING PRECEDING Y EAR, THE TOTAL TURNOVER WAS RS.32,97,82,571/- ON WHICH THE ASSESS EE HAD DECLARED GROSS PROFIT RATE AT 3.81% AND NET PROFIT RATE A T 1% ONLY. THE REASONS FOR FALL IN GP RATE WERE EXPLAINED BY THE ASSESSE E, TO BE THE GOVERNMENT TENDER OF RS.10.16 CRORES RECEIVED IN THE PR ECEDING YEAR AND HENCE, THE GP RATE WAS HIGHER IN THAT YEAR. FURTHE R, THE ASSESSEE ALSO EXPLAINED THE FALL IN GP RATE IN THREE DIVISIONS SEPARATE LY. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE EXPLANAT ION OF THE ASSESSEE ON ACCOUNT OF VARIOUS POINTS AS ENUMERATED UN DER PARA 5.2 AT PAGES 2 AND 3 OF THE ASSESSMENT ORDER. THE ASSES SING OFFICER WAS OF THE VIEW THAT IN ORDER TO COVER UP THE DECLINE IN GROS S PROFIT AND NET PROFIT RATES, ADDITION OF RS.16,04,408/- @ 0.5% AND 1,40,440/- @ 0.05% RESPECTIVELY WAS TO BE MADE. THE ASSESSING OFFICER FURTHER MADE ANOTHER ADDITION ON ACCOUNT OF DIFFERENCE IN STOCK . THE ASSESSEE HAD RAISED CASH CREDIT FACILITIES FROM THE UNION BANK OF IND IA, JALGAON. FROM THE COPIES OF STOCK STATEMENT SUBMITTED TO THE B ANK AS ON 31.03.2009, THE ASSESSING OFFICER FOUND THAT AS PER THE STO CK ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 4 STATEMENT GIVEN TO THE BANK, THE STOCK WAS RS.1,26,15,00 0/- WHEREAS, AS PER THE BOOKS OF ACCOUNT, THE VALUE OF THE STOCK WAS RS.1,03,68,712/-. THE ASSESSEE WAS SHOW CAUSED TO EXPLA IN AS TO WHY THE DIFFERENCE OF RS.22,46,288/- SHOULD NOT BE TREATED AS UNEXPLAINED INVESTMENT MADE OUTSIDE THE BOOKS OF ACCOUNT. IN REPLY , THE ASSESSEE STATED THAT THE DIFFERENCE IN VALUE WAS DUE TO THE VALUAT ION METHOD ADOPTED AND THE STOCK WAS VALUED ON HIGHER SIDE IN THE STATEMENT SUBMITTED TO THE BANK FOR SOLE PURPOSE OF CONTINUING THE CASH CREDIT FACILITIES. THE ASSESSEE ALSO EXPLAINED THAT THE QUANTITATIVE VALUE OF THE STOCK WAS SAME IN BOTH THE STATEMENTS AND ONLY T HE VALUATION OF THE STOCK DIFFERED. THE ASSESSING OFFICER REJECTING THE EXP LANATION OF THE ASSESSEE MADE AN ADDITION OF RS.22,46,288/- ON ACCOU NT OF UN- RECORDED INVESTMENT IN STOCK. 6. ANOTHER ADDITION WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TRADING LOSS CLAIMED BY THE ASSESSEE. THE ASSESSEE HA D INCURRED TRADING LOSS OF RS.2,88,500/- IN TRANSACTIONS OF URID AND M OTH. THE ASSESSING OFFICER NOTED THAT ALL THE PURCHASES WERE FROM A SSESSEES SISTER CONCERN SITARAM TRADING COMPANY AND THE ASSESSE E HAD CLAIMED TO HAVE SOLD THE SAID GOODS AT LESS RATES AND INC URRED THE LOSS. THE EXPLANATION OF THE ASSESSEE WAS THAT IT WAS NOT REG ULARLY TRADING IN THE SAID ITEMS AND HENCE SUFFERED THE LOSS. HOWEVER, TH E SAID LOSS WAS COMPENSATED AND OVER ALL POSITION WAS PROFIT WAS THE CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER REJECTING THE SAME, DISALLOW ED LOSS OF RS.2,88,500/-. THE ASSESSEE HAD ALSO ADVANCED CERTAIN AM OUNT TO M/S. SARVO KABRA, AN ASSOCIATE CONCERN AND ON THE SAID ADVANCES, NO INTERESTED WAS CHARGED. THE SAID FACT WAS REPORTED IN A UDIT REPORT AND THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY INTEREST ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 5 RELATABLE TO SUCH ADVANCES SHOULD NOT BE DISALLOWED. THE ASSESSING OFFICER DISALLOWED A SUM OF RS.12,996/- ON THIS ACCOUNT. 7. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER, NOTED THAT THE PLEA OF THE ASSESSEE VIS--VIS FALL IN GP RATE WAS ON ACCOUNT OF NO GOVERNMENT TENDER SALE DURING THE YEAR WAS WITHOUT ANY DOCUMENTARY PROOF AND THE ASSESSEE HAVING FAILED TO EXPLAIN THE FALL IN GP , THE ADDITION ON THIS ACCOUNT WAS HELD TO BE WARRANTED. IT W AS FURTHER NOTED BY THE CIT(A) THAT THE GP IN THE CASE OF TRADING OF ITC DEALER SHIP HAD ALSO FALLEN DURING THE YEAR, AGAINST WHICH THE ASSESSE E HAD FAILED TO FURNISH ANY EXPLANATION. SIMILARLY, THE ASSESSEE HAD NOT FURNISHED ANY EXPLANATION WITH REGARD TO FALL IN NET PROFIT RATE IN THE CASE OF SON Y DIVISION FROM 6.5% IN PRECEDING YEAR TO 5.52% IN THE YEAR UN DER CONSIDERATION. THE CIT(A) FURTHER NOTED THAT IN ADDITION TO BOTH IN GP RATE AND NP RATE, THERE WAS CERTAIN OTHER DISCREPANC IES WHICH WARRANTED REJECTION OF ACCOUNTS OF THE ASSESSEE. THE FIR ST DIFFERENCE WAS IN THE VALUATION OF THE CLOSING STOCK GIVEN TO THE BAN K AS ON 31.03.2009 VIS--VIS CLOSING STOCK SHOWN IN THE BOOKS OF AC COUNT. THE CIT(A) ADMITTED THAT THE QUANTITY OF VARIOUS ITEMS OF STO CK INVENTORY IN THE BANK STOCK STATEMENT AND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE BY AND LARGE TALLIED, BUT THERE WAS HUGE DIFFERENCE IN THE V ALUATION OF THE STOCK. THE PLEA OF THE ASSESSEE THAT THE VALUATION IN THE BANK STATEMENT WAS ENHANCED TO CONTINUE TO AVAIL THE CASH C REDIT LIMIT AND THERE WAS NO OUT OF BOOKS INVESTMENTS IN STOCK, WAS REJ ECTED. FURTHER, THE PERUSAL OF THE AUDITED REPORT REFLECT THAT THE ASSES SEE HAD NOT GIVEN THE DETAILS OF TRADING TRANSACTIONS WITH THE SPECIFIED PERSONS WITHIN THE MEANING OF THE SECTION 40A(2)(B) OF THE ACT. ANOT HER ASPECT ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 6 NOTED BY THE CIT(A) WAS THE TRADING LOSS OF RS.2,88,500/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF TRANSACTIONS WITH ITS SISTER CONCERN IN RESPECT OF URID AND MOTH ACCOUNT. IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, VIDE PARA 6.3 AT PAGE 14 TO THE APPELLATE ORDER, THE CIT(A) HELD THAT THE ASSESSEES BOOKS OF ACCOUNT DO NOT DEPICT TRUE AND FAIR TRADING RESULTS. THE CIT(A) FURTHER OBSERVED THAT TH E ASSESSEE HAD FAILED TO PROVIDE ANY CONVINCING REASON FOR THE STEEP FALL IN GP FROM 3.88% TO 1.58% IN THE YEAR UNDER APPEAL. FURTHER, IT HAS BEEN NOTED BY THE CIT(A) THAT NO PROPER DETAILS OF CLOSING STOCK ARE MAINTAINED BY THE ASSESSEE . IN VIEW THEREOF, THE CIT(A) HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT UNDE R SECTION 145(3) OF THE ACT AND THEREAFTER, ESTIMATING THE PROFITS IN T HE HANDS OF THE ASSESSEE. VIDE PARA 6.4 OF THE APPELLATE ORDER, THE C IT(A) OBSERVED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING SEPA RATE ADDITIONS OF RS.22,46,288/- ON ACCOUNT OF DIFFERENCE IN THE V ALUATION STOCK STATEMENT GIVEN TO THE BANK VIS--VIS VALUATION OF STOCK S HOWN IN THE BOOKS OF ACCOUNT. THE OBSERVATION OF THE CIT(A) WAS THAT ASSESSING OFFICER HAS NOT CONTROVERTED THE VALUATION OF TH E STOCK GIVEN IN THE BOOKS OF ACCOUNT WHICH ACCORDING TO THE APPELLAN T HAS BEEN VALUED AT THE LAST PURCHASE PRICE. NO EVIDENCE OF OUT OF B OOKS INVESTMENT IN STOCK-IN-TRADE HAS BEEN BROUGHT ON RECORD BY THE AS SESSING OFFICER. THE APPELLANT HAS STATED THAT VALUATION GIVEN TO THE BANK WAS ON ESTIMATED BASIS. THE CIT(A) ALSO NOTED THAT THE STOCK STATEMENT SUBMITT ED TO THE BANK DOES NOT INDICATE RATE BUT IT ONLY SHOWS QUANTITY OF ITEMS AND THEIR VALUE. SUCH VARIATION IN STOCK LIST GIVEN TO THE BANK AND STOCK AS PER THE BOOKS OF ACCOUNT, AS PER THE CIT(A), COULD NOT BE THE BASIS FOR MAKING THE ADDITION ON ACCOUNT OF STOCK. THUS, THE ADDITIO N OF RS.22,46,288/- WAS DELETED BY THE CIT(A). ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 7 8. AS REGARDS OTHER ADDITION OF TRADING ADDITION OF RS.16,04 ,408/- WAS CONFIRMED BY THE CIT(A). BUT FURTHER ADDITION SUCH AS ADDITION OF RS.1,40,440/- ON ACCOUNT OF NP RATE AND RS.2,88,500/- ON ACCOUNT OF DISALLOWANCE OF TRADING LOSS WAS HELD TO BE NOT WARRANTED. THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST OF RS.1 2,996/- WAS UPHELD BY THE CIT(A). 9. THE ASSESSEE IS IN APPEAL AGAINST THE GP ADDITION MADE IN OF RS.16,04,408/- VIDE GROUNDS OF APPEAL NO.1 & 2. FURTHER, V IDE GROUND OF APPEAL NO.3, THE ASSESSEE IS AGGRIEVED BY THE DISALLOWAN CE OF INTEREST OF RS.12,996/-. THE REVENUE IS IN APPEAL AGAINST THE DELETION OF ADDITION OF RS.22,46,288/- MADE ON ACCOUNT OF DIFFERENCE IN VALUATION OF CLOSING STOCK. 10. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSE SSEE POINTED OUT THAT THE ASSESSEE WAS MAINTAINING THREE SETS OF BOO KS OF ACCOUNT IN RESPECT OF THREE BUSINESSES CARRIED ON BY IT AND WAS MAINTAINING COMPLETE STOCK RECORDS FOR ALL THE THREE DIVISIONS. IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE THAT THE TRADING ACCOUNT ITSELF REFLECTS STOCK POSITION HELD BY THE ASSESSEE AND FURTHER, BOTH THE SALES AND PURCHASES WERE FULLY SUPPORT ED BY BILLS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ASSAILED THE ADDITION MADE ON ACCOUNT OF ESTIMATION OF GP AND POINTED O UT THAT THOUGH THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED BY T HE ASSESSING OFFICER, BUT NO SPECIFIC DIFFERENCE HAD BEEN POINTED OUT BY TH E ASSESSING OFFICER. THE REASONS FOR FALL IN GP RATE WAS THAT DURING THE PRECEDING YEAR, THERE WAS SALE OF GOVERNMENT TENDER O F ABOUT RS.10 CRORES AND THE MARGIN OF PROFIT EARNED ON THAT PARTICULAR SALE WAS NOT ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 8 AVAILABLE TO THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION. OUR ATTENTION WAS DRAWN TO THE SEPARATE TRADING ACCOUNTS OF EACH DIVISION PLACED AT PAGE 56, 73 AND 68 OF THE PAPER BOOK AND IT W AS POINTED OUT THAT THE QUANTITY OF THE STOCK IS MENTIONED IN TRADING AC COUNT ITSELF AGAINST WHICH, THE ASSESSEE IS MAINTAINING PROPER STOCK RE GISTERS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STR ESSED THAT THERE WAS MAJOR FALL IN GP RATE IN TRADING OF FOOD GRAINS. HOWEVE R, THERE WAS MINOR FALL IN GP IN OTHER ITEMS AND THERE WAS NO MERIT IN TH E SAID ADDITION. IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF D ISALLOWANCE OF INTEREST, THE LEARNED AUTHORIZED REPRESENTATIVE POINTED OUT THAT THE ASSESSING OFFICER FAILED TO BRING ON RECORD ANY NEXUS TO PR OVE THAT THE INTEREST BEARING FUNDS HAVE BEEN UTILIZED FOR MAKING THE AFO RESAID ADVANCES AND FURTHER, THE ASSESSEE HAD SUFFICIENT CAPITAL A ND THERE WAS NO MERIT IN THE SAID ADDITION. 11. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE PLACED RELIANCE ON SERIES OF CASE LAWS FOR THE PROPOSITION THAT E VEN IN CASES IF THERE WAS FALL IN GP, THERE WAS NO MERIT IN ANY TRADING ADDITION. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE HOWEVER, PLACED RELIANCE ON THE ORDER OF CIT(A) IN RESPECT OF THE ISSUE RAISED IN THE ASSESSEES APPEAL. THE LEARNED DEPARTMENT AL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE OR DER OF THE ASSESSING OFFICER AND POINTED OUT THAT SINCE THERE WAS TH E DIFFERENCE IN THE VALUATION OF STOCK WHICH IN TURN WAS HYPOTHECATED TO THE BANK, ADDITION WAS WARRANTED IN THE HANDS OF THE ASSESSEE. ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 9 13. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE IN RESPECT OF THE ISSUE RAISED IN REVENUES APPEAL PLACED RE LIANCE ON THE ORDER OF THE CIT(A). 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE VIDE GROUNDS OF APPEAL NO.1 AND 2 HAS RAISE D THE ISSUE AGAINST REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145 (3) OF THE ACT AND ESTIMATION OF PROFIT BY APPLYING GP RATE RESULTING IN AD DITION OF RS.16,04,408/-. THE ASSESSEE IS CARRYING ON THREE LINES OF BUSINESS I.E. TRADING IN FOOD GRAINS, TRADING IN ELECTRIC ITEMS I.E. DEALER O F SONY PRODUCTS AND TRADING IN ITC PRODUCTS. THE ASSESSEE CLA IMS THAT IT WAS MAINTAINING THREE SETS OF BOOKS OF ACCOUNT AND ALSO COMPLE TE STOCK RECORDS IN RESPECT OF THREE DIVISIONS SEPARATELY. THE A SSESSEE AT PAGE 56 OF THE PAPER BOOK HAS FILED THE TRADING ACCOUNT OF TH E FOOD GRAINS DEALT IN BY THE ASSESSEE. THE PERUSAL OF THE SAID TRADIN G ACCOUNT REFLECTS THAT THE ASSESSEE IN THE SAID TRADING ACCOUNT IT SELF HAD DECLARED OPENING STOCK PURCHASES, SALES, CLOSING STOCK, PR OFIT / LOSS OF EACH OF THE ITEMS DEALT IN BY THE ASSESSEE DURING THE YE AR UNDER CONSIDERATION. DURING THE YEAR UNDER CONSIDERATION ON SA LES OF RS.3.76 CRORES, THE ASSESSEE HAD DECLARED GP RATE OF 1 .88% AS AGAINST GP RATE OF 2.83% DECLARED DURING THE PRECEDING YEAR. THE REASON FOR FALL IN GP RATE IN THE SAID CONCERN WAS EXPLAINED TO BE ON ACCOUNT OF NON-RECEIPT OF ANY GOVERNMENT TENDER DURING THE YEAR A S AGAINST THE GOVERNMENT TENDER OF RS.10.16 CRORES RECEIVED DURING THE PRECEDING YEAR. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASS ESSEE FURTHER POINTED OUT THAT THERE WAS NO MERIT IN HOLDING THAT THE ASSESSEE HAD NOT SUBSTANTIALLY EXPLAINED THE FALL IN GP RATE. IT WAS THE PLEA OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE GP RATE ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 10 CANNOT REMAIN CONSTANT FROM YEAR TO YEAR AND BECAUSE OF THE MARKET CONDITIONS, THERE MAY BE VARIATION IN THE GP RATE. WE AR E IN CONFORMITY WITH THE SAID STAND OF THE ASSESSEE BECAUSE O F THE VARIATION IN THE MARKETS, THERE MAY BE VARIATIONS IN THE GP RATE AND NO TRAD ER IN FOOD GRAINS ITEMS CAN DECLARE THE SAME GP RATE FROM YEAR TO YEAR AS THE ITEMS DEALT IN BY THE ASSESSEE ARE MARKET DEPENDEN T. ANOTHER REASON FOR FALL IN GP RATE DURING THE YEAR WAS THE NON-R ECEIPT OF THE GOVERNMENT TENDER WHICH WAS APPROXIMATELY SALES OF RS.1 0.16 CRORES DURING THE PRECEDING YEAR. IN THE OTHER DIVISION OF SONY, THE GP RATE DECLARED BY THE ASSESSEE DURING THE YEAR WAS 6.69% AS AGAINST 7.32% DECLARED IN THE PRECEDING YEAR. FURTHER, IN THE ITC TRAD ING ACCOUNT, THE GP RATE WAS 1.25% AS AGAINST 1.55% DECLARED IN THE P RECEDING YEAR. THE MARGINAL FALL IN GP RATE IN THE OTHER TWO CONCER NS I.E. TRADING OF SONY PRODUCTS AND TRADING OF ITC PRODUCTS WA S TOO MARGINAL AND MERITS TO BE ACCEPTED BEING FALL IN MARKET TREND ESPE CIALLY, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WHERE THE ASSESSEE HAS MAINTAINED COMPLETE STOCK RECORDS VIS--VIS PURCHASES, SA LES, OPENING STOCK AND CLOSING STOCK. IN THE ABSENCE OF ANY EVIDENCE FOUND TO ESTABLISH THAT THE ASSESSEE HAD MADE ANY SALES OUTSIDE THE BOOKS OF ACCOUNT AND THE STOCK BEING COMPLETELY TALLIED, WE FIND NO MERIT IN THE AFORESAID ADDITION. 15. THE HONBLE GAUHATI HIGH COURT IN THE CASE OF ALUMINIUM INDUSTRIES (P) LTD. VS. CIT HAD HELD THAT MERELY BECAUSE THE PROFITS WERE LOW IN THE INSTANT YEAR WAS NOT MATERIAL TO JUSTIFY ADDITION OF PROFITS IN THE ABSENCE OF ANY FINDING RECORDED ABOUT ANY S ERIOUS DEFECTS IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT. ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 11 16. THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF B ABU JEWELLERS VS. ITO IN RELATION TO THE ADDITION MADE IN TRADIN G ACCOUNT OBSERVED AS UNDER: 12. THE HONBLE PUNJAB & HARYANA HIGH COURT IN CIT V S. OM OVERSEAS (2009) 315 ITR 185 (P&H), HAVE LAID DOWN THE PROPOSITION THAT IN THE ABSENCE OF ANY SPECIFIC DEF ECT BEING POINTED OUT IN THE BOOKS OF ACCOUNT, THERE IS NO JUS TIFICATION FOR THE REJECTION OF ACCOUNTS AND MAKING THE ADDITION BY AP PLYING THE HIGH GP RATE THAN THE ONE DECLARED BY THE ASSESSEE. 13 14. THE HONBLE GAUHATI HIGH COURT IN THE CASE OF PYA RELAL MITTAL VS. ASSTT. CIT (2007) 211 CTR (GAU) 512 : (2007) 29 1 ITR 214 (GAU) HELD THAT WHERE THE METHOD OF ACCOUNTING FO LLOWED WAS NOT FAULTY AND THERE WAS NO SUPPRESSION OF MATERIAL F ACTS, THE AUTHORITIES CANNOT EMBARK UPON A SPECULATIVE ASSESSM ENT OF NOTIONAL PROFITS. 15. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE P RESENT CASE AND IN THE ABSENCE OF ANY DEFECTS BEING POINTED OUT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE MERELY BECAUSE THERE WAS A FALL IN THE GP RATE AS COMPARED TO THE PRECEDING YE AR AND THE NATURE OF THE TRADE BEING CARRIED ON BY THE ASSESSE E BEING SALE AND PURCHASE OF GOLD JEWELLERY, WHERE THE RATES OF GOLD HAD INCREASED, WE FIND NO MERIT IN THE REJECTION OF BOOKS OF ACCOUNT AND THE ESTIMATION OF PROFITS. ACCORDINGLY, WE DIRECT THE AO TO ACCEPT THE TRADING RESULTS SHOWN BY THE ASSESSEE AN D DELETE THE ADDITION OF RS.8,59,814/-. THE GROUND NOS.3 TO 5 RAISED BY THE ASSESSEE ARE THUS ALLOWED. 17. IN VIEW OF ABOVE SAID PROPOSITION LAID DOWN IN VARIOUS CA SES, WE FIND NO MERIT IN THE TRADING ADDITION OF RS.16,04,408/-. WE D IRECT THE ASSESSING OFFICER TO DELETE THE SAME. THE GROUNDS OF APPE AL NO.1 AND 2 RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 18. ANOTHER ADDITION LINKED TO THE TRADING ACCOUNT WAS ON ACCOUNT OF THE VALUATION OF THE CLOSING STOCK I.E. THE DIFFERENCE BETWE EN THE VALUATION OF STOCK SUBMITTED TO THE BANK AS ON 31.03.2009 AND THE VALUE OF THE STOCK REFLECTED IN THE TRADING ACCOUNT AS ON 31.03.2009. THE ASSESSEE HAD DECLARED STOCK OF RS.1,03,68,712/- IN IT S BOOKS OF ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 12 ACCOUNT AND HAD DECLARED THE VALUE OF STOCK SUBMITTED T O THE BANK AT RS.1,26,15,000/-. THE EXPLANATION OF THE ASSESSEE IN THIS R EGARD WAS THAT THE ITEMS DECLARED BOTH IN THE BOOKS OF ACCOUNTS A ND FOR THE BANK STOCK LIST WERE IDENTICAL AND THE QUANTITIES OF THE VARIOUS ITEMS WERE IDENTICAL. HOWEVER, THE DIFFERENCE IN VALUATION OF STOCK WAS ON ACC OUNT OF HIGHER VALUATION SUBMITTED TO THE BANK IN ORDER TO RET AIN THE CC FACILITY ALLOWED TO THE ASSESSEE BY THE BANK. THE EXPLANAT ION OF THE ASSESSEE IN THIS REGARD WAS THAT THERE WAS DIFFERENCE IN THE VALUATION METHOD ADOPTED FOR THE DECLARATION TO THE BANK AND THE RE WAS NO DIFFERENCE IN THE QUANTITY OF THE STOCK. THE CIT(A) HAS GIVE N A FINDING THAT THE ASSESSING OFFICER HAD NOT CONTROVERTED THE VALU ATION OF THE STOCK SHOWN IN THE BOOKS OF ACCOUNT WHICH WAS VALUED ON THE BASIS OF THE LAST PURCHASE PRICE. FURTHER, NO EVIDENCE OF OUT OF B OOKS INVESTMENT IN STOCK-IN-TRADE HAD BEEN BROUGHT ON RECOR D BY THE ASSESSING OFFICER. FURTHER, THE VALUATION GIVEN TO THE BAN K WAS ON ESTIMATE BASIS. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE HAS FAILED TO CONTROVERT THE SAID FINDINGS OF THE C IT(A). ACCORDINGLY, WE FIND NO MERIT IN THE ADDITION MADE BY THE A SSESSING OFFICER AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE A RE DISMISSED. 19. THE LAST ISSUE REMAINING IN THE PRESENT APPEAL IS WITH REGARD TO THE DISALLOWANCE OF INTEREST OF RS.12,996/- WHICH HAS BEEN RAISED BY THE ASSESSEE VIDE GROUND NO.3. THE SAID ADVANCE WAS G IVEN TO A SISTER CONCERN AND THE EXPLANATION OF THE ASSESSEE WAS THAT IT HAD NOT UTILIZED ANY INTEREST BEARING FUNDS TO MAKE THE SAID ADVAN CE AS IT HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE TO IT. FURTHER, THE AS SESSING OFFICER HAS FAILED TO BRING ON RECORD ANY NEXUS BETWEEN TH E INTEREST ITA NO.714/PN/2013 ITA NO.905/PN/2013 M/S. JAYANT COMMERCIAL CORPORATION 13 BEARING FUNDS AND THE ADVANCES MADE BY THE ASSESSEE. IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE SAID DISALLOWANCE OF INTER EST BEING ATTRIBUTABLE TO SUCH ADVANCES MADE BY THE ASSESSEE. W E DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.12,996/-. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS ALLOWED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED AN D THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF OCTOBER, 2014. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH OCTOBER, 2014. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-II, NASHIK; 4) THE CIT-II, NASHIK 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE
