Deepak Iron Store, Patiala V. ACIT, Sangrur

ITA 928/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0114 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 12-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 31-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: N K SHAHI
• Section: 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 928/CHD/2015 ASSESSMENT YEAR: 2010-11 M/S DEEPAK IRON STORE, VS. THE ACIT, CIRCLE, NABHA, DISTT. PATIALA SANGRUR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. N.K. SHAHI RESPONDENT BY : SH. MANOJ MISHRA DATE OF HEARING : 12.04.2016 DATE OF PRONOUNCEMENT : 12.04.2016 ORDER PER SANJAY GARG, JM THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER OF THE CIT(A), PATIALA DATED 9.11.2015. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE O RDER OF LD. ASSESSING OFFICER REJECTING THE AUDITED BOOKS O F ACCOUNTS OF THE APPELLANT BY INVOKING THE PROVISION S OF SECTION 145(3) OF THE INCOME-TAX ACT, 1961. 2. THE LD. CIT(A) NOT JUSTIFIED IN CONFIRMING THE ORD ER OF THE LD. ASSESSING OFFICER MAKING AN ADDITION OF RS. 7,6 1,158/- BY APPLYING GP RATE OF 9.178% AGAINST THE DECLARED GP RATE OF 6.1%. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP CONCERN ENGAGED IN THE SALE OF IRON AND STEEL GOODS. A SURV EY U/S 133A OF THE INCOME TAX ACT WAS CONDUCTED ON THE BUSINESS PREMISES OF THE A SSESSEE ON 29.7.2009. DURING SURVEY, PHYSICAL VERIFICATION OF THE STOCK W AS CARRIED OUT AND THE PHYSICAL STOCK AT THE PREMISES OF THE ASSESSEE WAS FOUND IN EXCESS THAN THAT WAS DECLARED IN THE BOOKS. CERTAIN OTHER DISCREPANCIES WERE ALSO FOUND. THE ASSESSEE ON THE DATE OF SURVEY SURRENDERED THE FOLLOWING ADD ITIONAL INCOME FOR THE YEAR UNDER CONSIDERATION:- I. ON ACCOUNT OF EXCESS CASH FOUND RS. 8,20,000/- II. ON ACCOUNT OF EXCESS STOCK RS. 3,10,000/- III. ON ACCOUNT OF SUNDRY RECEIVABLE RS. 18,70,000 /- TOTAL RS. 30,00,000/- 4. DURING THE ASSESSMENT PROCEEDINGS SUBSEQUENT TO THE SURVEY ACTION, THE LD. ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD NOT MAINTAINED THE STO CK REGISTER AND THAT STOCK FOUND AT THE PREMISES WAS MORE THAN AS RECORDED IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER THEREAFTER PROCEEDED TO ESTIMATE THE GP OF THE ASSESSEE FOR THE YEAR. HE OBSERVED FROM THE P&L ACCOUNT THAT AS ON THE DATE OF SURVEY, THE ASSESSEE HAD SHOWN CLOSING STOCK AT RS. 85,14,177/- AND GP AT RS. 5,60,322/- ON THE TOTAL SALE OF RS. 91,78,306/- WHICH GAVE GP RAT E OF 6.10%. HOWEVER, ON THE DATE OF SURVEY U/S 133 A OF THE INCOME TAX ACT, STO CK WAS FOUND AT RS. 88,20,800/-. THE ASSESSING OFFICER CALCULATED THE G P AT RS. 8,42,463/- AFTER TAKING THE PHYSICAL STOCK AT RS. 88,20,800/- ON THE TOTAL SALE OF RS. 91,78,306/-, WHICH GAVE GP RATE OF 9.178%. HE, ACCORDINGLY ESTI MATED THE GP RATE AT 9.178%. 3 5. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). HOWEVER, THE LD. CIT(A) CONFIRMED THE ABOVE ACTION OF THE ASSESSING OFFICER. THE ASSESSEE THUS HAS COME IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. VIDE GROUN D NO.1 OF THE APPEAL, THE ASSESSEE HAS AGITATED THE ACTION OF THE LOWER A UTHORITIES IN REJECTING THE AUDITED BOOKS OF ACCOUNT OF THE ASSESSEE BY INVOKI NG THE PROVISIONS OF SECTION 145(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE A CT'). 7. THE LD. AR OF THE ASSESSEE SUBMITTED BEFORE US T HAT THE BOOKS OF ACCOUNT HAVE BEEN REJECTED BY THE ASSESSING OFFICER BECAUSE OF THE FOLLOWING THREE REASONS:- I) NON MAINTENANCE OF STOCK REGISTER. II) CLAIMING OF EXCESS SALARY PAID TO EMPLOYEES IN THE BOOKS OF ACCOUNT. III) PURCHASE BILLS UNACCOUNTED FOR IN THE BOOKS. THE LD. AR OF THE ASSESSEE WHILE RELYING UPON THE CERTAIN CASE LAWS HAS VEHEMENTLY ARGUED THAT THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT BECAUSE OF THE ABOVE STATED REASON S WAS WRONG. HE WHILE RELYING UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V POONAM RANI (2010) 192 TAXMAN 167 (DELHI) HAS CONTE NDED THAT WHERE THE OTHER DETAILS WERE AVAILABLE TO THE ASSESSING OFFICER, TH E BOOKS OF ACCOUNT CANNOT BE REJECTED MERELY BECAUSE OF NON MAINTENANCE OF THE S TOCK REGISTER. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY THE LD. AR. IN THE CASE OF CIT V POONAM RAN I (SUPRA), THE HON'BLE DELHI HIGH COURT OBSERVED THAT WHERE THE ASSESSEE H AD SUBMITTED ALL THE 4 COMPARATIVE DETAILS IN RESPECT OF RAW MATERIALS AS WELL AS FURNISHED GOODS, AND THE ASSESSEE HAD ALSO EXPLAINED THE MARGINAL INCREA SE IN THE WEIGHT OF WIRE ALONGWITH SUPPORTING DATA FOR THE YEAR IN QUESTION AS WELL AS IN PRECEDING YEARS; THE ASSESSEE WAS DULY REGISTERED UNDER THE CENTRAL EXCISE ACT AND WAS MAINTAINING PROPER QUANTITATIVE DETAILS IN THE PRES CRIBED MANNER AND ADOPTED THE CONSISTENT AND REGULAR METHOD OF ACCOUNTING AND VALUATION OF STOCK ETC., AND ALL THE DETAILS RELATING TO STOCK SALE / PURCHASE W ERE AVAILABLE THEN UNDER THE CIRCUMSTANCES, MERELY BECAUSE THE ASSESSEE HAD NOT MAINTAINED THE DAILY STOCK REGISTER WAS NOT SUFFICIENT FOR REJECTING THE BOOKS OF ACCOUNT. HOWEVER, WE FIND THAT THE ABOVE CASE LAW RELIED UPON BY THE LD. AR I S NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE. IN T HE CASE OF THE ASSESSEE, A SURVEY ACTION WAS CARRIED OUT AND PHYSICAL STOCK AT THE PREMISES OF THE ASSESSEE WAS FOUND IN EXCESS. CERTAIN OTHER DISCREPANCIES WE RE ALSO FOUND IN THE ACCOUNTS. THE ASSESSEE ALSO SURRENDERED AN INCOME O F RS. 30 LAKHS INCLUDING RS. 3,10,000/- ON ACCOUNT OF EXCESS STOCK: THE ASSESSEE WAS ALSO FOUND TO HAVE CLAIMED EXCESSIVE EXPENDITURE ON ACCOUNT OF SALARY PAID TO THE EMPLOYEES ETC; UNDER SUCH CIRCUMSTANCES, THE BOOKS OF ACCOUNT OF T HE ASSESSEE WERE REJECTED BY THE ASSESSING OFFICER. THE CASE OF THE ASSESSEE WA S ALSO NOT THAT THE ASSESSEE HAD MAINTAINED THOUGH STOCK REGISTER BUT NOT ITEM-W ISE. IN THIS CASE, THE STOCK REGISTER WAS NOT MAINTAINED AT ALL AND THE EXCESS S TOCK WAS FOUND AT THE PREMISES. DUE TO THE ABOVE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF ASSESSING OFFICER IN REJECTING THE BOOKS O F ACCOUNT OF THE ASSESSEE. GROUND NO.1 OF THE APPEAL IS, THEREFORE, DISMISSED. 8. IN GROUND NO.2, THE ASSESSEE HAS AGITATED THE AC TION OF THE ASSESSING OFFICER IN ESTIMATING THE GP RATE WHILE TAKING INTO CONSIDERATION THE EXCESS STOCK FOUND DURING THE SURVEY ACTION. IN OUR VIEW, THE GP RATE OF THE WHOLE YEAR SHOULD NOT HAVE BEEN ESTIMATED TAKING INTO CONSIDER ATION THE STOCK FIGURE ON A 5 CERTAIN DATE. THE LD. AR HAS BROUGHT OUR ATTENTIONS TO A TABLE TO SHOW THAT FOR THE LAST SO MANY YEARS, THE GP RATE OF THE ASSESSEE WAS CONSISTENTLY AT 6.1%. THE ASSESSING OFFICER WHILE ESTIMATING THE GP RATE HAS NOT TAKEN INTO CONSIDERATION THE PAST HISTORY TO DETERMINE THE TRA DING RESULTS. THE LD. AR HAS RELIED UPON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S HARBJAHAN SINGH & CO. IN ITA NO. 183/CHD/2013 ORDER DATED 15.4.2013 WHEREIN THE TRIBUNAL HAS HELD THAT AFTER REJECTION OF BOOKS OF ACCOUNT, THE PAST HISTORY OF THE ASSESSEE IS TO BE CONSIDERED. ON TH E OTHER HAND, THE LD. DR HAS SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY ES TIMATED THE GP RATE ON THE BASIS OF THE EXCESS STOCK FOUND DURING THE SURVEY A CTION. 9. AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE L D. REPRESENTATIVES OF BOTH THE PARTIES, WE ARE OF THE VIEW THAT FOR DETER MINING OF THE GP RATE, EXCESS STOCK FOUND ON A PARTICULAR DATE CANNOT BE SOLE GUI DING FACTOR. WE, THEREFORE, SET ASIDE THE ESTIMATION MADE BY THE ASSESSING OFFICER AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER DIRECTING HIM TO ESTI MATE THE GP RATE TAKING INTO CONSIDERATION DETAILS OF THE PRECEDING / SUBSEQUENT YEARS, IF AVAILABLE, AND THE OTHER GUIDING FACTOR AND TAKE A HOLISTIC VIEW IN TH IS REGARD. GROUND NO.2 OF THE APPEAL IS THEREFORE, TREATED AS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.04.2016 SD/- SD/- (RANO JAIN) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12 TH APRIL, 2016 RKK 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR