Virender Kumar Prop., Fatehabad V. ITO, Fatehabad

ITA 94/DEL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5439 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 31-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 05-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R MISHRA
• Keywords: Rejection of books of accounts; Business income; Accommodation entries
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC , NEW DELHI BEFORE SH. N. K. SAINI, ACCOUNTANT MEMBER ITA NO. 94 /DEL/2017 : ASSTT. YEAR : 2011 - 1 2 VIRENDER KUMAR PROP. CA J.P. GOYAL, 1 ST FLOOR, SHIVALAY A MARKET, G.T. ROAD, FATEHABAD - 125050 VS INCOME TAX OFFICER, WARD - 2 , FATEHABAD (APPELLANT) (RESPONDENT) PAN NO. A MOPK1490Q ASSESSEE BY : SH. GAUTAM JAIN, ADV. REVENUE BY : SH. B. R. MISHRA , SR. DR DATE OF HEARING : 08 .02 .201 8 DATE OF PRONOUNCEMENT : 26 . 0 4 .201 8 ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 17.10.2016 OF LD. CIT(A) , HISAR . 2. IN THIS APPEAL ALTHOUGH 9 GROUNDS HAVE BEEN RAISED BUT THE ONLY GRIEVANCE OF THE ASSESSEE RELA TES TO THE SUSTENANCE OF ADDITION OF RS.4,82,252/ - MADE BY THE AO IN BIRI ACCOUNT BY APPLYING AN ADHOC RATE OF PROFIT/COMMISSION OF 2% ON THE PURCHASE OF BIRI. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 02.07.2011 DE CLARING AN INCOME OF RS.3,47,658/ - WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AT THE RETURNED INCOME. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE FURNISHED THE BOOKS OF ACCOUNTS ALONGW ITH VOUCHERS WHICH WERE TEST CHECKED . HOWEVER, THE AO MADE THE ADDITION OF RS.4,82,252/ - BY OBSERVING IN PARA 10 OF THE IMPUGNED ORDER AS UNDER: ITA NO. 94 /DEL /201 7 VIRENDER KUMAR 2 10. IN ORDER TO WORK OUT THE INCOME OF THE ASSESSEE FROM THE AFORESAID D EALINGS, IT MAY BE MENTIONED THAT IN T HE 'BIRI' A/C, THE ASSESSEE HAS SHOWN PURCHASES OF RS.4,22,13,866 / - AND SALES WORTH RS.4,25,10,624/ - THEREBY GIVING GROSS PROFIT OF RS.2,96,758/ - AS THERE ARE NO OPENING OR CLOSING STOCKS OF THE ITEMS. THE ASSESSEE HAS SHOWN PURCHASES (TOTAL OF SALE BILLS ISSUED BY M/S BHARAT MOTORS, BANSWARA TO THE ASSESSEE) AT RS.3,70,96,306 / - AND COMMISSION @ 2% THEREON AS AFORESAID WORKS OUT TO RS.7,41,926/ - . SINCE THE ASSESSEE HAS DECLARED GROSS PROFIT OF RS.2,96,758/ - ON THE TOTAL SALES OF RS.4,25,10,624/ - GIVING THER EBY A G.P. RATE OF 0.70%. ACCORDINGLY, THE ASSESSEE IS ALLOWED THE BENEFIT OF GROSS PROFIT @ 0.70% ON RS.3,70,96,306/ - WHICH IN ACTUAL TERMS COMES LO RS.2,59,674/ - . HENCE, THE DIFFERENCE OF RS.4,82,252/ - (RS.7,41,926 - RS,2,59,674) IS TREATED AS INCOME OF T HE ASSESSEE FROM UNDISCLOSED SOURCES AND ACCORDINGLY ADDED BACK TOWARDS HIS TAXABLE INCOME. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO SUSTAINED THE ADDITION BY OBSERVIN G IN PARAS 4.2 & 4.3 OF THE IMPUGNED ORDER AS UNDER: 4.2 I HAVE CAREFULLY EXAMINED THE FACTS OF THE CASE. THE APPELLANT IN ITS WRITTEN SUBMISSIONS HAS ONLY TRIED TO CONTROVERT FINDINGS OF THE AO. HOWEVER, NO FRESH EVIDENCE REGARDING SALES OF BIRIS ETC. HAVE BEEN BROUGHT ON RECORD BY THE APPELLANT. APPELLANT HAS STATED THAT CASH HAS BEEN DEPOSITED ON SAME DATE ON WHICH CHEQUE HAS BEEN ISSUED. THIS DOES NOT PROVE THAT APPELLANT HAD MA DE SALE OF BIRIS, IN POINT NO. C , APPELLANT HAS STATED THAT REPORT OF INSPECTOR WAS NOT GIVEN TO HIM. HOWEVER, APPELLANT HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT APPELLANT WAS IN FACT SELLING BRAND OF BIRIS SUCH AS DESAI AND GOLA ETC. IN POINT NO. D, APPELLANT HAS STATED THAT THE CONTENTION OF THE AO REGARDING NOT MAKING ANY SALES ON CREDIT BASIS IS NOT CORRECT. HOWEVER, APPELLANT HAS NOT BROUGHT ON RECORD ANY EVIDENCE REGARDING THE FACT THAT ALL SALES WERE MADE IN CASH ONLY OUT OF TOTAL GOODS SOLD OF RS. 4.25 CRORES AS THERE WAS NO OPENING OR CLOSING STOCK. IN POINT NO. E, APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY REASON WHY HE COULD NOT REMEMBER THE NAME OF PERSONS WHO WERE MAKING SUCH LARGE PAYMENT IN CASH TO HIM. IN POINT NO. F, APPELLANT HAS TRIED TO SHOW THAT IT WAS EARNING LESS THAN 2% COMMISSION. APPELLANT HAS STATED THAT IT HAS PRODUCED C FORMS DULY ITA NO. 94 /DEL /201 7 VIRENDER KUMAR 3 AUTHENTICATED BY EXCISE DEPARTMENT FATEHABAD, IT'S BOOKS OF ACCOUNTS ARE AUDITED, PURCHASES SALE BILL HAVE BEEN PRODUCED, BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED U/S 145(3) OF THE ACT AND THAT THE AO HAS RELIED UPON ONLY FEW ENTRIES TO SHOW THAT APPELLANT HAD EARNED CO MMISSION INCOME OF 2%. OTHER ENTRIES SHOW THAT APPELLANT WAS EARNING NEGATIVE RETURNS OF - 18.42% TO - 6.17% ALSO. APPELLANT HAS QUESTIONED NON - REJECTION OF BOOKS OF THE APPELLANT. 4.3 HOWEVER, FROM THE REPLY OF THE APPELLANT, APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY DETAILS WHICH ESTABLISH THE AUTHENTICITY OF THE SALES MADE. FROM THE NATURE OF TRANSACTIONS RECORDED BY THE AO, IT APPEARS THAT APPELLANT HAS ONLY BEEN GRANTING ACCOMMODATION ENTRIES TO THE PARTY IN RAJASTHAN FOR THE PURPOSES OF AVOIDING PAYME NT OF VAT @ 20%. APPELLANT HAS APPARENTLY RECORDED ENTRIES IN ITS BOOKS WHEREIN CHEQUES HAVE BEEN ISSUED AGAINST DEPOSIT OF CASH ON WHICH APPELLANT HAS EARNED COMMISSION INCOME. IN THE ABSENCE OF ANY FURTHER EVIDENCE TO THE CONTRARY, REGARDING ACTUAL SALES OF BIRIS BY THE APPELLANT, THE CALCULATION MADE BY THE AO OF EARNING COMMISSION INCOME @ 2% IS THEREFORE CONFIRMED. ON THE TOTAL SALES OF RS. 4,25,10,624/ - APPELLANT HAS DECLARED GP OF RS. 2,96,758/ - ONLY WHICH GIVES A GP RATE OF 0.70%. AFTER GRANTING BEN EFIT OF GP @ 0.70% DECLARED BY THE APPELLANT THE ACTION OF THE AO IN ADDING RS. 4,82,252/ - (RS. 7,41,926 - RS. 2,59,674) IS THEREFORE CONFIRMED AS BEING INCOME OF THE APPELLANT FROM UNDISCLOSED SOURCES. THEREFORE, THI S GROUND OF APPEAL IS DISMISSED. 5. N OW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WAS WITHOUT BASIS. HE GAVE IN WRITING AS UNDER: IN THIS RESPECT, IT IS SUBMITTED THAT THE ABOVE PRESUMPTION/CALCULATI ON ARE ALSO NOT BASED EVEN ON THE FACTS OF THE CASE AS EXPLAINED BELOW: - I) THAT THE RATE OF COMMISSION OF 2% AS WORKED OUT BY THE LD. A.O. IS NOT BASED ON THE FACTS OF THE CASE AS EXPLAINED ABOVE. II) THAT THE LD, A.O. HAS APPLIED THE ALLEGED RATE OF COMMISSION ON THE ENTIRE PURCHASES OF BIRI MADE FROM THE MONTH OF DECEMBER, 2010 TO MARCH, 2012 FROM M/S BHARAT MOTORS, BANSWARA WHEREAS NO CASH TRANSACTIONS ITA NO. 94 /DEL /201 7 VIRENDER KUMAR 4 (REGARDING DEPOSIT OF SECURITY ON THE DATE OF CHEUQE ENCASED/CREDITED) WAS MADE SINCE AFTER DECEM BER, 2012. III) THAT APPLICATION OF RATE OF NET PROFIT IS ONE OF THE METHODS TO ASSESS THE INCOME OF AN ASSESSEE WHERE THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE FOUND BY THE ASSESSING OFFICER TO BE INCORRECT OR INCOMPLETE OR NOT IN CONFORMITY W ITH THE ACCOUNTING STANDARDS NOTIFIED BY THE CENTRAL GOVERNMENT OR IN THE CIRCUMSTANCES MENTIONED IN SUB - SECTION (3) OF SECTION 145. BUT IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT INVOKED SECTION 145(3) TO PROVE THAT THE ITEMS SHOWN IN THE BOOKS OF ACCOUNT OR PROFIT AND LOSS ACCOUNT AND BALANCE SHEET DRAWN ON THAT BASIS ARE INCORRECT. THEREFORE, THE QUESTION OF APPLICATION OF RATE OF NET PROFIT, I.E. 2% COMMISSION ON PURCHASES, DOES NOT ARISE ON THE FACTS OF THE CASE. IV) IT IS FURTHER SUBMITTED T HAT AS PER THE VERSION OF THE LD. A.O. NEITHER ANY PURCHASES NOR ANY SALE HAVE BEEN MADE, THEN WHY THE COMMISSION @2% ON PURCHASES IS TREATED AS AN INCOME OF THE APPELLANT. HENCE, FROM THE ABOVE FACTS AND SUBMISSIONS, IT IS VERY MUCH CLEAR THAT THE INFERE NCE OF NOT PURCHASING OR SELLING THE GOODS DRAWN BY THE LD. A.O. IS NOT BASED ON THE FACTS OF THE CASE AND YOU ARE REQUESTED TO SET ASIDE THE ORDER OF THE LD. A.O. AND ADDITION MADE ON THIS ISSUE MAY KINDLY BE DELETED. III) IT IS FURTHER SUBMITTED THAT TH E WORTHY CIT (APPEAL) HAS ACCEPTED PURCHASES OF BIRI MADE BY THE APPELLANT AS GENUINE BUT HELD THAT APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY DETAILS WHICH ESTABLISH AUTHENTICITY OF SALES. IN THIS RESPECT, IT IS SUBMITTED THAT THE APPELLANT HAS BEEN MAINT AINING REGULAR BOOKS OF ACCOUNTS AND ALL THE SALES HAVE BEEN DULY ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS WHICH WERE AUDITED BY A QUALIFIED CHARTERED ACCOUNTANTS AND NO DISCREPANCY WHAT SO EVER HAS BEEN POINTED OUT BY THE LD. A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ALL THE DETAILS REGARDING PURCHASE AND SALES OF BIRI MADE BY THE APPELLANT HAVE ALREADY BEEN FURNISHED IN THE QUARTERLY RETURN SUBMITTED TO THE EXCISE & TAXATION DEPARTMENT, HARYANA AND WHO HAS ALSO ISSUED STATUTORY C' FORMS AGA INST THE PURCHASES OF BIRI MADE BY THE APPELLANT. FURTHER, IT IS SUBMITTED, THE LD. A.O. HAS ALSO CONSIDERED THE G.P. AMOUNTING TO RS.296758/ - EARNED ON THE SALES OF BIRI AS CLEARLY MENTIONED AT PARA NO.4.3 OF THE ASSESSMENT ORDER. THEREFORE, BY NO STRETCH OF IMAGINATION, IT CAN NOT BE CONCLUDED THAT THE SALES MADE BY THE APPELLANT ARE NOT GENUINE AS EXPLAINED ABOVE. ITA NO. 94 /DEL /201 7 VIRENDER KUMAR 5 THEREFORE, FROM THE ABOVE FACTS AND SUBMISSIONS, IT IS CRYSTAL CLEAR THAT ALL THE PURCHASES AND SALES OF BIRI MADE BY THE APPELLANT ARE QUITE I NE AS SUMMARIZED BELOW: - I) TH AT COPY OF PURCHASE INVOICES OF BIRI SHOWING THE COMPLETE NAME, ADDRESS, TIN NUMBER OF THE SUPPLIER ALONG WITH DESCRIPTION OF GOODS (BIRI), QUANTITY, RATE, AMOUNT, CST CHARGED @2% ARE VERY MUCH AVAILABLE ON RECORD. II) THAT COPY OF GR SHOWING THE NAME AND ADDRESS OF THE TRANSPORTER WHO DELIVERED THE GOODS TO THE APPELLANT AND QUANTITY OF DELIVERED AND FREIGHT CHARGED BY THE TRANSPORTER ARE ALSO VERY MUCH AVAILABLE ON RECORD. III) THAT ALL THE PURCHASES HAVE ALREADY BEEN AC COUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS AND HAVE BEEN SHOWN IN LP - 3 (LIST OF PURCH ASES OF GOODS MADE FROM THE OUT SIDE OF THE STATES) SUBMITTED TO THE EXCISE AND TAXATION DEPARTMENT, FATEHABAD ALONG WITH QUARTERLY RETURN WHO HAVE ISSUED STATUTORY 'C' F ORMS FOR P URCHASING GOODS (BIRI) FROM OUT SIDE THE STATE OF HARYANA. IV) THAT ALL THE PAYMENTS TO THE SUPPLIER HAVE BEEN MADE TO BANKING CHANNELS AND CONFIRMED COPY OF ACCOUNTS OF THE SUPPLIER AND BANK STATEMENT ARE VERY MUCH AVAILABLE ON RECORD. V) THA T CASH MEMO SHOWING THE SALES OF BIRI MADE IN THE NORMAL COURSE OF BUSINESS HAVE BEEN PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO SPECIFIC DISCREPANCY WAS POINTED OUT EITHER IN THE CASH MEMO OR IN THE BOOKS OF ACCOUNTS PRODUCED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS. VI) THAT THE A.O. HAS DULY ACCEPTED THE TRADING RESULTS SHOWN IN THE BIRI ACCOUNT WHILE MAKING THE ASSESSMENT AND GIVEN THE RELIEF/CREDIT OF GP SHOWN IN THE BIRI ACCOUNT WHILE MAKING THE ADDITION ON THE PRESUMPTION THAT NO ACTUAL PURCHASES/SALES HAVE BEEN MADE BY THE APPELLANT. WHEN GP HAS BEEN CONSIDERED, IT IS MEANS THAT THE SALES AS WELL AS THE PURCHASES ARE QUITE GENUINE. 6 . IN HIS RIVAL SUBMISSIONS, THE LD. SR. DR STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BEL OW AND REITERATED THE SUBMISSIONS MADE THEREIN. ITA NO. 94 /DEL /201 7 VIRENDER KUMAR 6 7 . I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE AO HAD NOT REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT. HE MADE THE ADDITION BY PRESUMING THAT THE ASSESSEE MIGHT HAVE EARNED THE COMMISSION @ 2% ON THE PURCHASES. AT THE SAME TIME, HE HAD NOT DOUBTED THE SALES MADE BY THE ASSESSEE FROM THE PURCHAS ES. EVEN, THE AO HAD CONSIDERED THAT THE GROSS PROFIT AMOUNTING TO RS.2,96,758/ - WAS EARNED B Y THE ASSESSEE FROM THE SALE OF BIRI. IN MY OPINION, WHEN THE SAL ES HAS BEEN ACCEPTED AS GENUINE THE N THE AO WAS NOT JUSTIFIED IN PRESUMING THAT THE ASSESSEE EARNE D COMMISSION ON THE PURCHASES OF GOODS (BIRI) . FURTHERMORE, IN THE PRESENT CASE, NEITHER THE AO NOR THE LD. CIT(A) HAD GIVEN ANY BASIS FOR ADOPTING THE RATE OF COMMISSION/PROFIT AT 2%, THEREFORE, THE ADDITION MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. ACCORDINGLY, THE SAME IS DELETED. 8 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . (ORD E R PRONOUNCED IN THE OPEN COU RT ON 26 /0 4 /2018 ) SD/ - (N. K. SAINI) ACCOUNTANT MEMBER DAT ED: 26 /0 4 /2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR