ASHOK KUMAR ASWANI, Jaipur V. ACIT, Jaipur

ITA 928/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5597 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Depreciation
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO.928/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2008-09 . SHRI ASHOK KUMAR ASWANI, C/O G. MEHTA & CO., PARAS 127 HARI MARG, CIVIL LINES, JAIPUR. CUKE VS. THE ACIT, CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AATPA 4889 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI G.M. MEHTA (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI KAILASH MANGAL (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 1.12.2015. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 8/01/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THE APPEAL FILED BY THE ASSESSEE IS ARISING FROM T HE ORDER DATED 4.9.2013 PASSED BY THE LEARNED CIT (A)-II, JAIPUR FOR THE A.Y. 2008 -09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- (1) THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING APPLICABILITY OF THE PROVISION OF SECTION 145(3) OF IT ACT. 2 ITA NO.928/JP/2013 A.Y. 2008-09 ASHOK KUMAR ASWANI VS. ACIT, JAIPUR. (2) IN AVOIDANCE OF STOCK REGISTER AND BETTER G.P. RATE THAN IMMEDIATELY PRECEDING YEAR, LD. CIT (A) WAS NOT JUSTIFIED IN SU STAINING ADDITION OF RS. 5,31,235/- BEING 5% OF PURCHASES OF PAPER RADDI, EM PTY BOTTLES AND PLASTIC SCRAPES ETC FROM URDS (KABARIS) FOR THE REA SON THAT ESTIMATE IS ESTIMATE AND CANNOT BE QUESTIONED ON THE BASIS OF L AST YEARS GROSS PROFIT. (3) THAT LD. CIT (A) WAS NOT JUSTIFIED I SUSTAINING DIS ALLOWANCE OF 10% OUT OF TOTAL EXPENSES OF RS. 3,50,088/- OUT OF FOUR DIFFER ENT HEAD OF EXPENSES (TELEPHONE EXPENSES, VEHICLE DEPRECIATION AND EXPEN SE, TRAVELING EXPENSES AND SHOP EXPENSES) ON MERE ESTIMATION WHEN NO UNVOUCHED OR DISALLOWABLE NATURE OF EXPENSES WERE NOTED OR POINT ED OUT IN ANY OF THESE HEADS OF EXPENSES. GROUND NOS. 1 & 2 : 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN WHOLESALE TRADING OF EMPTY BOTTLE, WASTE PAPERS AND PLASTIC SCRAPS UNDER HIS PROPRIETARY CONCERN M/S. ASHOK KUMAR MAGAN LAL. THE ASSESSEE HAS FILED HIS RETURN OF INCOME ON 25.09.208 DECLARING TOTAL INCOME OF RS. 9,81,400/-. THE CASE WAS SCRUTI NIZED UNDER SECTION 143(3) OF THE IT ACT, 1961. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN TOTAL TURNOVER OF RS 1,35,62,212/- AND GROSS PROFIT OF RS. 11,95,1 54/- BY GIVING GP RATE OF 8.81% AS AGAINST TOTAL TURNOVER OF RS. 6,51,97,125/- AND GRO SS PROFIT OF RS. 40,23,370/- BY GIVING GP RATE OF 6.17% IN THE PRECEDING YEAR. THE ASSESSE E HAS ADMITTEDLY NOT MAINTAINED ANY DAY TO DAY QUANTITATIVE OR QUALITATIVE DETAILS. THE AUDITORS IN THE AUDIT REPOERT IN FORM NO. 3CD IN COLUMN NO. 28(B) HAS OBSERVED THAT ASSESSEE HAS NOT MAINTAINED ANY QUANTITATIVE STOCK RECORDS. IN ABSENCE OF ANY QUANT ITY DETAILS OF ANY OF THE ITEMS IT IS NOT POSSIBLE WHETHER EACH OF THE ITEMS ARE COMPLETE LY SHOWN IN THE SALE OR IN CLOSING STOCK. FURTHER THE VALUATION OF EACH OF THE ITEMS L YING IN CLOSING STOCK IS NOT VERIFIABLE. 3 ITA NO.928/JP/2013 A.Y. 2008-09 ASHOK KUMAR ASWANI VS. ACIT, JAIPUR. IT IS THE SWEET WILL OF THE ASSESSEE WHO CAN SHOW A NY VALUE FOR ANY OF THE ITEMS OF CLOSING STOCK. IT IS WORTH TO MENTION THAT THE CLOS ING STOCK OF RS. 78,506/- HAS BEEN SHOWN WITH THE REMARKS OF WHICH VALUATION/RATES ARE NOT VERIFIABLE WITH ANY OF THE RECORDS. THE ASSESSEE HAS MADE TOTAL PURCHASE OF RS 1,12,46,391/- OUT OF WHICH PURCHASES OF RS. 1,06,24,704/- WERE MADE FROM UNREG ISTERED DEALERS (URD) AND PAYMENTS WERE MADE IN CASH. THE ASSESSEE HAS NOT PR ODUCED ANY SINGLE VOUCHER FOR VERIFICATION AFTER REPEATED REQUEST. HENCE PURCHASE S MADE BY THE ASSESSEE ARE REMAINED UNVERIFIABLE. THE DISCREPANCY WAS BROUGHT TO THE NOTICE OF THE LD. A/R OF THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 15.11.2010 AN D WAS ASKED TO SHOW CAUSE WHY THE BOOKS OF ACCOUNT MAY NOT BE REJECTED U/S 145(3) AND A TRADING ADDITION MAY NOT BE MADE TO THE HANDS OF THE ASSESSEE. THE ASSESSEE VID E ITS LETTER DATED 25.11.2010 HAS REPLIED THE AO S QUERY. THE AO CONSIDERED THE SAM E BUT FOUND IT UNACCEPTABLE BECAUSE IN ABSENCE OF ANY QUANTITATIVE OR QUALITATI VE DETAILS, TRADING RESULTS SHOWN BY THE ASSESSEE ARE NOT OPEN FOR ANY VERIFICATION AND IT COULD NOT BE ACCEPTED AS SUCH. THE AO, THEREFORE, BY INVOKING PROVISIONS OF SECTION 14 5(3) OF THE IT ACT, REJECTED THE BOOKS OF ACCOUNTS. 3. AFTER REJECTING THE BOOKS OF ACCOUNTS OF THE ASS ESSEE U/S 145(3) OF THE ACT, THE AO MADE THE TRADING ADDITION OF RS. 5,31,235/- BEIN G 5% OF URD PURCHASES OF RS. 1,12,46,391/- TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED BY THE ORDER OF THE AO, THE ASSE SSEE CARRIED THE MATTER BEFORE THE LD. CIT (A), WHO HAS REJECTED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER :- 4 ITA NO.928/JP/2013 A.Y. 2008-09 ASHOK KUMAR ASWANI VS. ACIT, JAIPUR. 2.3. I HAVE CONSIDERED THE FACTS OF THE CASE, ASSE SSMENT ORDER AND APPELLANTS WRITTEN SUBMISSION. ASSESSING OFFICER R EJECTED APPELLANTS BOOK RESULTS UNDER SECTION 145(3) ON THE GROUND THAT APP ELLANT WAS NOT MAINTAINING QUANTITATIVE STOCK DETAILS AND THEREFOR E IT WAS NOT POSSIBLE TO VERIFY CLOSING STOCK. AO FURTHER MENTIONED THAT ALM OST ENTIRE PURCHASES WERE MADE FROM URDS PARTIES IN CASH FOR WHICH NO VO UCHERS OR DETAILS ARE AVAILABLE AND THEREFORE THE BOOK RESULTS DO NOT GIV E CORRECT PROFIT. APPELLANT ARGUED THAT MERELY ON NON-MAINTENANCE OF STOCK RECORDS, BOOK RESULTS CANNOT BE REJECTED. HOWEVER, ASSESSING OFFI CER REJECTED BOOK RESULT NOT ONLY ON ACCOUNT OF NON-MAINTENANCE OF STOCK OR QUANTITY DETAILS BUT ALSO ON ACCOUNT OF PURCHASES MADE IN CASH WITHOUT P ROPER VOUCHERS. CONSIDERING THE TOTALITY OF THE FACTS, ASSESSING OF FICER IS JUSTIFIED IN NOT ACCEPTING THE BOOK RESULTS. THE JUDICIAL DECISIONS RELIED UPON BY THE APPELLANT ARE NOT APPLICABLE IN VIEW OF THE FACTS M ENTIONED IN THE ASSESSMENT ORDER ACCORDINGLY REJECTION OF BOOK RESU LT BY THE ASSESSING OFFICER IS CONFIRMED. AFTER REJECTING THE BOOK RESULT, ASSESSING OFFICER DISALLOWED 5% OF URD PURCHASES MADE IN CASH. APPELLANT SUBMITTED THA T HIS GROSS PROFIT THIS YEAR IS MORE THAN LAST YEAR AND THEREFORE NO A DDITION SHOULD HAVE BEEN MADE. ASSESSING OFFICER DID NOT MAKE ADDITION TO GROSS PROFIT BUT HE MADE DISALLOWANCE OF 5% OF URD PURCHASES FOR WANT O F VERIFICATION. AFTER REJECTING THE BOOK RESULTS, THE ESTIMATION OF INCOM E MADE BY THE ASSESSING OFFICER NEED NOT BE ACCURATE. ANY ESTIMAT ION IS AN ESTIMATION AND THE SAME CANNOT BE QUESTIONED ON THE BASIS OF L AST YEARS GROSS PROFIT. CONSIDERING THESE FACTS, THE DISALLOWANCE O F URD PURCHASES TO THE EXTENT OF 5% IS CONFIRMED. 5. NOW THE ASSESSEE IS BEFORE US. 5 ITA NO.928/JP/2013 A.Y. 2008-09 ASHOK KUMAR ASWANI VS. ACIT, JAIPUR. 5.1. THE LD. A/R FOR THE ASSESSEE SUBMITTED THAT TH E PROVISIONS OF SECTION 145(3) OF THE IT ACT WERE APPLIED ONLY FOR THE REASON THAT TH E ASSESSEE HAD NOT MAINTAINED STOCK REGISTER. THE APPELLANT IS A WHOLESALER OF WASTE PA PER, EMPTY BOTTLES AND BAGS, BARDANA, USED AND DISCARDED PLASTICS SCRAPS ETC. FO R WHICH IT IS NEITHER PRACTICAL NOR POSSIBLE TO MAINTAIN THE STOCK REGISTER. LD. AO EVE N DID NOT EVEN RECORD ANY FINDING THAT IN ABSENCE OF STOCK REGISTER, BOOKS OF ACCOUNT ARE NOT CORRECT OR COMPLETE. THE LD. A/R PLACED RELIANCE ON THE JUDGMENT OF HONBLE RAJA STHAN HIGH COURT IN THE CASE OF CIT VS. M/S. GOTAN LIME KHNIZ UDYOG, 256 ITR 243 (RAJ.) IN ADDITION TO OTHER DECISIONS MENTIONED IN HIS WRITTEN SUBMISSIONS. THE LD. A/R R EQUESTED THAT ADDITIONS MAY KINDLY BE DELETED. 5.2. ON THE OTHER HAND, THE LD. D/R SUPPORTED THE O RDERS OF THE AUTHORITIES BELOW AND PRAYED THAT THE ORDERS OF THE LOWER AUTHORITIES BE CONFIRMED. 5.3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL ON RECORD. AFTER GOING THROUGH THE ORDERS OF THE LOWER AUTHORITIES, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) AND THE SAME IS CONFIRMED. GROUND NO. 1 & 2 ARE REJECTED. GROUND NO. 3 : 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS CLAIMED FOLLOWING EXPENSES UNDER VARIOUS HEADS : TELEPHONE EXPENSES RS. 41,773/- VEHICLE EXPENSES INCLUDING DEPRECIATION RS. 2,53 ,828/- TRAVELING EXPENSES RS. 21,577/- SHOP EXPENSES RS. 32,910/- THE AO ON VERIFICATION OF THE CONCERNED RECORDS, O BSERVED THAT NO CALL REGISTERS WERE MAINTAINED FOR THE TELEPHONE AND MOBILE, AND THAT P ERSONAL USE OF TELEPHONES CANNOT 6 ITA NO.928/JP/2013 A.Y. 2008-09 ASHOK KUMAR ASWANI VS. ACIT, JAIPUR. BE DENIED AND SEGREGATED. NO LOG BOOK WAS MAINTAINE D BY THE ASSESSEE. IN THE ABSENCE OF LOG BOOK PERSONAL USE OF VEHICLES CANNOT BE DENIED. IN REGARD TO TRAVELING EXPENSES, SELF MADE VOUCHERS WERE FURNISHED. PROPER BILLS/VOUCHERS WERE NOT PRODUCED, THUS GENUINENESS OF THE EXPENSES COULD NOT BE VERIF IED. IN REGARD TO SHOP EXPENSES, THE AO OBSERVED THAT ONLY SELF MADE VOUCHERS WERE F URNISHED AND MOST OF THE EXPENSES WERE INCURRED IN CASH. IN ABSENCE OF COMPL ETE BILLS/VOUCHERS, THE EXPENSES COULD NOT VERIFIED. THE ASSESSEE WAS ASKED VIDE ORD ER SHEET ENTRY DATED 15.11.2010 TO SHOW CAUSE WHY CERTAIN DISALLOWANCE OUT OF THESE EX PENSES SHOULD NOT BE MADE. THE ASSESSEE VIDE HIS LETTER DATED 25.11.2010 SUBMITTED THE REPLY STATING THAT ABOUT EXPENSES IT IS AGAIN STATED THAT EXPENSES PERTAINED TO TRAVELING CONVEYANCE EXP., POWER & FUEL AND DIESEL BELONGS TO ONLY TRADE. NO ENTRANC E OF THE ASSESSEE FOR PERSONAL USE IN SUCH EXPENSE. HOWEVER SHOP EXPENSES, TELEPHONE EXPE NSES MAY BE USED FOR PERSONAL USE SLIGHTLY. THE AO CONSIDERED THE ASSESSEES SUBMISSIONS, BUT COULD NOT FIND IT ACCEPTABLE, THEREFORE, HE MADE THE FOLLOWING DISALL OWANCES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE : TELEPHONE EXPENSES RS. 6,266/- @ 15% VEHICLE EXPENSES INCLUDING DEPRECIATION RS. 28,1 12/- @ 15% TRAVELING EXPENSES RS. 3,237/- @ 15% SHOP EXPENSES RS. 4,937/- @ 15% 7. ON APPEAL BEFORE LD. CIT (A), THE LD. CIT (A) AF TER GOING THROUGH THE ORDER OF THE AO AND SUBMISSIONS OF THE ASSESSEE, HAS RESTRICTED THE DISALLOWANCE TO 10%. 8. NOW THE ASSESSEE IS BEFORE US. 7 ITA NO.928/JP/2013 A.Y. 2008-09 ASHOK KUMAR ASWANI VS. ACIT, JAIPUR. 8.1. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAS NOT MAINTAINED PROPER RECORDS I.E. BILLS, VOUCHERS, LOG BOOK AND MOST OF THE PAYMENTS WERE MADE IN CASH. C ONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, PERSONAL USAGE OF TELEPH ONE, MOBILES, VEHICLES ETC CANNOT BE RULED OUT. THEREFORE, ON THE FACTS AND CIRCUMSTANCE S OF THE CASE, WE FIND IT PROPER TO RESTRICT THE DISALLOWANCE TO 5%. THUS THE ASSESSEE SHALL GET PARTIAL RELIEF. THE GROUND IS PARTLY ALLOWED. 9. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 8/01/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 8/01/2016 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI ASHOK KUMAR ASWNI, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CIRCLE-5, 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. 928/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 8 ITA NO.928/JP/2013 A.Y. 2008-09 ASHOK KUMAR ASWANI VS. ACIT, JAIPUR.