The ACIT, 2(1), V. Shri Chandumal Tharwani,

ITA 93/IND/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1404 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-11-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 03-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K KARAN
• Assessee Lawyers: PRADEEP GUPTA
• Keywords: Depreciation

Judgement Text

PAGE 1 OF 8 I.T.A.NO.93/IND/2008 CHANDUMAL THARWAN I IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AAMPP3620R I.T.A.NO. 93/IND/2008 A.Y. : 2000-01 ACIT, SHRI CHANDUMAL THARWANI, 2(1), BHOPAL VS PROP. M/S. CHANDUMAL SANMUKHDAS, BETULGANJ, BETUL. APPELLANT RESPONDENT APPELLANT BY : SHRI V.K.KARAN, SR. DR RESPONDENT BY : SHRI PRADEEP GUPTA, ADV. DATE OF HEARING : 03/11/2009 O R D E R PER GUPTA, A.M. THIS APPEAL FILED BY THE REVENUE ARISES OUT OF ORDE R OF THE LD. CIT(A) DATED 3 RD DECEMBER,2007, FOR THE ASSESSMENT YEAR 2001-02. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO. 1 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 7, 02,566/- PAGE 2 OF 8 I.T.A.NO.93/IND/2008 CHANDUMAL THARWAN I MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOW GRO SS PROFIT. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAG ED IN WHOLESALE TRADE OF OIL AND GENERAL GOODS SUCH AS SUGAR, KHALI , PURE GHEE ETC. THE A.O. NOTED THAT GROSS PROFIT AND NET PROFIT AT 1.73 % AND 16 % AS AGAINST 1.33 % AND 0.13 % SHOWN IN THE IMMEDIATELY PRECEDIN G YEAR. THE A.O. BASED UPON THE ANALYSIS OF SUNDRY DEBTORS HELD THAT IT WAS A CASE OF RETAIL SALE AND NOT OF WHOLESALE TRADE AS CLAIMED BY THE A SSESSEE. THE A.O., THEREAFTER, WORKED OUT THE GROSS PROFIT IN SOME ITE MS, WHICH WAS IN THE RANGE OF 4.69 % TO 8.3 %. THE A.O., HOWEVER, APPLIE D AN AVERAGE RATE OF 2.41 % AND WORKED OUT THE ADDITION ON ACCOUNT OF LO W GROSS PROFIT AT RS. 7,02,566/-. ON APPEAL, THE LD. CIT(A) GAVE RELIEF. ON FURTHER APPEAL BY THE DEPARTMENT TO THE TRIBUNAL, THE MATTER WAS REST ORED TO THE FILE OF LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE PLACED COMPARATIVE CHART FOR LAST 3 YEARS, WHEREIN THE GROSS PROFIT RATE, WAS LE SS THAN THE RATE SHOWN BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. IT WA S ALSO SUBMITTED THAT THE ASSESSEE WAS HAVING WHOLESELLERS LICENSE AND FOLLO WING THE SAME METHOD OF ACCOUNTING IN THE EARLIER YEARS AS WELL AS IN SU BSEQUENT YEARS, THEREFORE, THE A.O. WAS NOT JUSTIFIED IN CHANGING T HE NATURE OF BUSINESS AND THAT TOO WITHOUT BRINGING A COGENT MATERIAL ON RECORD FOR MAKING SUCH ADDITION. THE LD. CIT(A) HELD THAT MAJOR CHUNK OF T URNOVER COMPRISED OF SOYABEAN SALES AND WHATEVER EXCESS STOCK WAS FOUND DURING THE COURSE OF PAGE 3 OF 8 I.T.A.NO.93/IND/2008 CHANDUMAL THARWAN I SURVEY HAD BEEN SURRENDERED. HENCE, IT WAS NOT APPR OPRIATE FOR THE A.O. TO ESTIMATE GROSS PROFIT AT THE AVERAGE 2.41 % AND THAT TOO WITHOUT ANY COGENT BASIS. THE LD CIT ALSO HELD THAT NO SPECIFIC WERE POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT OR IN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE, HENCE, THE A.O . WAS NOT JUSTIFIED IN RESORTING TO PROVISIONS OF SECTION 145(3) OF THE AC T, PARTICULARLY WHEN THE ACCOUNTS WERE ALSO AUDITED. ACCORDINGLY, HE DELETED THE IMPUGNED ADDITION. AGGRIEVED BY THIS, THE REVENUE IS IN APPE AL BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE NARRATED THE FA CTS AND PLACED RELIANCE ON THE ORDER OF THE A.O. THE LEARNE D COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, PLACED STRONG RELIANC E ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. IT IS NOTED THAT THE ASSESSEE IS HAVING A LICENSE AS WHOLESALE TRADE R AND FINANCIAL RESULTS SHOWN BY THE ASSESSEE ARE BETTER AS COMPARED TO EAR LIER YEARS. IT IS FURTHER NOTED THAT NO SPECIFIC DEFECTS HAVE BEEN POINTED OU T BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT OR METHOD OF ACCOUN TING EMPLOYED BY THE ASSESSEE. IT IS FURTHER NOTED THAT THE A.O. HAS NOT SPECIFIED OR CLEARLY MENTIONED THE PARTICULARS OF DEBTORS ON THE BASIS O F WHICH HE REACHED TO CONCLUSION THAT THE ASSESSEE WAS A RETAILER AND NOT A WHOLESALER, WHICH BY ITSELF MAKES SUCH ADDITION MADE BY THE A.O. UNTENAB LE IN LAW. IN VIEW OF PAGE 4 OF 8 I.T.A.NO.93/IND/2008 CHANDUMAL THARWAN I THESE FACTS AND CIRCUMSTANCES, WE HOLD THAT THE ORD ER OF THE LD. CIT(A) IS CORRECT IN LAW. HENCE, WE CONFIRM THE SAME. THUS, T HIS GROUND OF REVENUE IS DISMISSED. 7. GROUND NOS. 2 & 3 READ AS UNDER :- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 48,000/- MADE BY THE ASSESSING OFFICER U/S 44AE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 29,203/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPRECI ATION AND INSURANCE CLAIMED ON THE TANKERS. 8. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE OWNED TWO TANKERS, WHICH HE CLAIMED TO USE IN ITS BUSINESS. THE A.O., HOWEVER, ON VERIFICATION OF EXPENSES, FOUND THAT NO SEPARATE AC COUNT FOR EXPENSES ON THESE TANKERS HAD BEEN KEPT AND IN THE ABSENCE OF S UCH DETAILS AND INSUFFICIENCY OF TANKER EXPENSES, HE REACHED TO A C ONCLUSION THAT THE ASSESSEE MUST HAVE LET THESE TWO TANKERS ON HIRE FO R WHICH HE HAD NOT SHOWN ANY INCOME. ACCORDINGLY, HE ESTIMATED THE INC OME THEREFROM AT RS. 48,000/- AS PER PROVISIONS OF SECTION 44AE OF T HE ACT. THE ASSESSEE CLAIMED DEPRECIATION OF RS. 23,147/-, THEREON, WHIC H WAS ALSO DISALLOWED BY THE ASSESSING OFFICER AS HE WAS OF THE OPINION T HAT THE INCOME ADOPTED U/S 44AE COVERED ALL EXPENSES INCLUDING DEPRECIATIO N. SIMILARLY, HE PAGE 5 OF 8 I.T.A.NO.93/IND/2008 CHANDUMAL THARWAN I DISALLOWED INSURANCE EXPENSES. ON APPEAL, THE LD. C IT(A) FOUND THAT THE TANKER EXPENSES HAD BEEN SHOWN IN THE SOYABEAN OIL ACCOUNT AND, THEREFORE, THE A.OS CONCLUSION THAT TANKERS HAD BE EN GIVEN ON HIRE FOR INSUFFICIENCY OF EXPENSES WAS NOT VALID. ACCORDINGL Y, HE DELETED THE ADDITION OF RS. 48,000/- MADE BY THE ASSESSING OFFI CER. CONSEQUENTLY, HE ALSO DELETED THE ADDITION MADE ON ACCOUNT OF DEPREC IATION AS WELL AS INSURANCE. AGGRIEVED BY THIS, THE REVENUE IS IN APP EAL BEFORE US. 9. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. IN OUR OPINION, THE O RDER OF THE A.O. IS BASED UPON PRESUMPTION AND ASSUMPTION WITHOUT ANALY ZING THE FACTUAL MATRIX AS IT IS EVIDENT THAT TANKER EXPENSES HAVE B EEN CLAIMED UNDER THE HEAD SOYABEAN OIL ACCOUNT AND THE A.O. HAS NOT BROU GHT ANY MATERIAL ON RECORD TO ESTABLISH THE FACT THAT THOSE TANKERS WER E LET ON HIRE BY THE ASSESSEE. ACCORDINGLY, WE HOLD THAT THE ORDER OF TH E LD. CIT(A) IS CORRECT IN LAW IN RESPECT OF BOTH THE GROUNDS. THUS, THESE GROUNDS OF THE REVENUE ARE ALSO DISMISSED. 11. GROUND NOS. 4 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN REDUCING THE DISALLOWANCE MADE BY THE PAGE 6 OF 8 I.T.A.NO.93/IND/2008 CHANDUMAL THARWAN I ASSESSING OFFICER ON ACCOUNT OF TELEPHONE EXPENSES FROM RS. 21,889/- TO RS. 12,000/-. 12. THE FACTS, IN BRIEF, ARE THAT THE A.O. MADE A DISAL LOWANCE OF RS. 21,889/- OUT OF TELEPHONE EXPENSES OF RS. 87,577/- ON ACCOUNT OF PERSONAL USE AND PHONE INSTALLED AT RESIDENCE. ON APPEAL, TH E LD. CIT(A) REDUCED THE SAME TO RS. 12,000/-. FOR THE REASON THAT ONLY ONE PHONE HAD BEEN INSTALLED AT THE RESIDENCE, WHICH WAS ALSO USED FOR BUSINESS PURPOSES AND THE TOTAL EXPENSES THEREFOR WAS RS. 14,743/-. HENCE , DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS EXCESSIVE. STILL AGGRI EVED, THE REVENUE IS IN APPEAL BEFORE US. 13. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 14. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES , WE HOLD THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD. CIT(A), AS A REASONABLE VIEW OF THE MATTER HAS BEEN TAKEN BY THE LD. CIT(A). THUS, THIS GROUND OF THE REVENUE IS DISMISSED. 15. GROUND NO. 5 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 27 ,953/- OUT PAGE 7 OF 8 I.T.A.NO.93/IND/2008 CHANDUMAL THARWAN I OF TOTAL ADDITION OF RS. 31,058/-,MADE BY THE ASSES SING OFFICER ON ACCOUNT OF PROFIT ON SALE OF EMPTY BARRE LS. 16. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE SOLD EMP TY BARRELS FOR RS. 31,058/-, WHICH WAS TREATED WHICH WAS TREATED A S PROFIT BY THE ASSESSING OFFICER. ON APPEAL, THE ASSESSEE SUBMITTE D THAT EMPTY BARRELS WERE USED FOR STORAGE OF OIL AND THESE WERE SOLD ON LY WHEN THESE WERE NOT USEABLE DUE TO EITHER LEAKAGE OR DAMAGE. HENCE, NO PROFIT WAS EARNED. THE LD. CIT(A), HOWEVER, DID NOT ACCEPT THIS CONTEN TION OF THE ASSESSEE IN TOTO AND WORKED OUT THE PROFIT THREON @ 10% AT R S. 3105/-. AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 17. THE LD. DR NARRATED THE FACTS AND PLACED RELIANCE O N THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 18. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. FROM THE PERUSAL OF WRITTEN SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD. CIT(A), IT IS NOTED THAT THE ASSESSEE HAD 172 EMPTY BARRELS AT THE BEGINNING OF THE YEAR, WHICH WERE SHOWN AT THE VALU E OF RS. 74,175/- PAGE 8 OF 8 I.T.A.NO.93/IND/2008 CHANDUMAL THARWAN I . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DISPOSED OF 72 BARRELS OUT OF SUCH OPENING QUANTITY AT RS. 31,0 58/-. THE REMAINING QUANTITY OF 100 BARRELS HAS BEEN SHOWN AT RS. 43,117/- AFTER REDUCING THE SUCH SALE VALUE FROM THE OPENING VALUE. HENCE, IN OUR OPINION, THE ENTIRE SALE CONSIDERATION SHOULD B E TAKEN AS ENTIRE PROFIT NORMALLY. HOWEVER, IF THE SAME HAS ALREADY B EEN SHOWN IN THE CREDIT SIDE OF THE PROFIT AND LOSS ACCOUNT OR THE S ALE VALUE THEREOF HAS BEEN REDUCED IN COMPUTING THE VALUE OF REMAINING CL OSING STOCK, THEN, IT AMOUNTS TO OFFERING OF SUCH SALE VALUE AS INCOME AND, THEREFORE, THERE CAN NOT BE ANY PROFIT, NOT EVEN 10 %. HOWEVER, THE ASSESSEE HAS ACCEPTED THE DECISION OF THE LD. CIT(A ), HENCE, IT HAS BECOME FINAL. THUS, THIS GROUND OF THE REVENUE IS D EVOID OF ANY MERITS, HENCE, DISMISSED. 18. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STA NDS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 12TH NOVEMBER, 2009. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :12 TH NOVEMBER, 2009. CPU* 36D9