ITO, Jaipur V. MRS MANJU DEVI GOYAL, Jaipur

ITA 954/JPR/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87504 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Assessee Lawyers: K L MOOLCHANDAN I
• Keywords: Rejection of books of accounts; Opportunity of being heard
• Section: 143(3); 145

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 VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 954/JP/2011 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 THE I.T.O. WARD 7(2), JAIPUR CUKE VS. MRS. MANJU DEVI GOYAL, PROP. M/S B.H. INDUSTRIES, TONK, 60, RAM DWARA COLONY, SANGANER, DISTRICT- JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: ABLPG 5713 G VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : MRS. NEENA JEPH. FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI K.L. MOOLCHANDANI LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 19/11/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 09/01/2015 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST T HE ORDER DATED 03/08/2011 PASSED BY THE LEARNED CIT(A)-III, JAIPUR FOR A.Y. 2008-09. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN: (I) IN THE FACTS AND CIRCUMSTANCES OF THE ASSESSEE, THE CIT(A) HAS PASSED A PERVERSE ORDER BY DELETING THE ITA 954/JP/2011_ ITO VS SMT. MANJU DEVI 2 ADDITION OF RS. 34,46,188/- BY HOLDING THAT THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3), WAS NOT FAIR AND JUST, EVEN WHEN PROFITS COULD NOT BE DEDUCTED CORRECTLY FROM THE ACCOUNTS, DEFECTS IN WHICH WERE INDICATED BY THE A.O. (II) THE CIT(A)S ORDER IS PERVERSE IN ACCEPTING THE CONTENTIONS THAT THE G.P. RATE IN THE CURRENT YEAR. (III) THE CIT(A)S ORDER IS PERVERSE, IN HOLDING THA T THE FACTS AND CIRCUMSTANCES IN THE CASE OF THE ASSESSEE , WERE COVERED BY THE RATIO OF THE DECISIONS OF THE COURTS. 2. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFA CTURING OF EDIBLE OIL AND OIL CAKE FROM MUSTARD SEEDS. SHE FI LED HER RETURN ON 26/09/2008 FOR A.Y. 2008-09 AT RS. 1,77,750/-.THIS CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). DURING THE YEAR UNDER CONSIDERATION, THE ASSE SSEE HAD DECLARED GROSS PROFIT AT RS. 37,00,329/- ON TOTAL SALE OF RS . 9,09,21,461/-, WHICH GIVES A G.P. RATE OF 4.07%. THE LEARNED ASSESSING OFFICER COMPARED THE G.P. WITH IMMEDIATE PRECEDING YEAR, WHICH WAS 11. 65% ON TOTAL TURNOVER OF RS. 18,47,468/-. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON DECLINE OF G.P. COMPA RED TO PRECEDING YEAR AND ASKED TO PRODUCE COMPLETE BOOKS OF ACCOUNT FOR VERIFICATION. HE FOUND THAT THE STOCK REGISTER HAD NOT MAINTAINED IN TERM OF QUALITY WISE, DID NOT CONTAIN DAY TO DAY DETAIL OF SHORTAGE. THE STATIC YIELD OF OIL ITA 954/JP/2011_ ITO VS SMT. MANJU DEVI 3 WAS LOWER THAN THE LAST YEAR AND DEFECTIVE CLOSING ST OCK OF RAW MATERIAL AS WELL AS ITEM PRODUCED, THEREFORE, HE REJECTED THE BOOK RESULT U/S 145(3) OF THE ACT. HE AGAIN GAVE SHOW CAUSE NOTICE T O THE ASSESSEE ON THESE DEFECTS POINTED OUT IN EARLIER PARA. AFTER CO NSIDERING THE ASSESSEES REPLY AND VARIOUS CASE LAWS DISCUSSED BY THE ASSESSING OFFICER ON PAGE 5, IT HAS BEEN HELD THAT BOOKS OF A CCOUNT MAINTAINED BY THE ASSESSEE DID NOT REFLECT COMPLETE AND CORRECT P ROFIT AND GAIN OF ASSESSEES BUSINESS. HE ESTIMATED THE G.P. @ 7.86% ( AVERAGE OF G.P. SHOWN BY THE ASSESSEE IN THIS YEAR AND PREVIOUS YEAR ), WHICH WAS RESULTED IN TRADING ADDITION OF RS. 34,46,188/-. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- 2.3 I HAVE CAREFULLY EXAMINED THE OBSERVATIONS OF THE A.O. AND THE COUNTER SUBMISSIONS MADE BY THE LEARNED A.R., V IZ. THE ISSUE UNDER CONSIDERATION. IT IS A MATTER OF FACTS THAT THE A.O. HAD POINTED OUT THAT CERTAIN DEFECTS IN RESPEC T OF MAINTENANCE OF BOOKS OF ACCOUNTS AND OTHER RELATED INCRIMINATING ASPECTS ALSO. HOWEVER, IN IN-DEPTH ANA LYSIS OF SUCH OBSERVATIONS DOES NOT SUGGEST THAT THOSE ASPEC TS ARE OF SUPERFICIAL AND INSIGNIFICANT IN NATURE. SIMILAR LY THE A.O. HAS REJECTED THE BOOKS OF ACCOUNT ON THE GROUNDS TH AT THE ITA 954/JP/2011_ ITO VS SMT. MANJU DEVI 4 G.P. HAS DECREASED FROM 11.65% TO 4.07% IN THE CURR ENT YEAR. HOWEVER, HE FAILED TO APPRECIATE THE SIGNIFICA NT AND VITAL ASPECT THAT THE PREVIOUS YEAR WAS NOT A NORMAL YEAR, BEING THE FIRST YEAR OF BUSINESS AND ALSO INVOLVED ONLY PART OF SUCH PERIOD. MOREOVER, THE TURNOVER IN THE CURRE NT YEAR HAS RISEN TO 9.09 CRORES IN COMPARE TO 18.47 LACS O F THE PREVIOUS YEAR. ACCORDINGLY, THE G.P. OF PREVIOUS YE AR IS NOT COMPARABLE FOR THE ABOVE REASONS, SPECIALLY, IN VIE W OF THE FACT THAT THE TURNOVER OF THE APPELLANT HAS INCREAS ED, MORE THAN 50 TIMES, FROM THE PREVIOUS YEAR. ACCORDINGLY, THE ISSUE OF FALL IN THE G.P., AS POINTED OUT BY THE A. O. HAS BECOME IRRELEVANT AND INSIGNIFICANT, UNDER THE GIVE N CIRCUMSTANCES. MOREOVER, IT SEEMS THAT THE A.O. HAS ALSO GIVEN UNDUE IMPORTANCE TO THE ISSUES LIKE IMPROPER STOCK REGISTER AND STATIC YIELD RATIO OF THE APPELLANT, WI THOUT POINTING OUT ANY SERIOUS DEFECTS THEREIN, WHEREAS SU CH ISSUES/ASPECTS HAVE BEEN FOUND REASONABLY EXPLAINED BY THE LEARNED A.R., AS DISCUSSED HEREINABOVE. IN A SI MILAR CIRCUMSTANCES, THE HONBLE JAIPUR ITAT, IN THE CASE OF UTTAM CHUNA PATHAR UDHYOG (64 ITD 460), DELHI HIGH COURT IN THE CASE OF SMT. POONAM RANI (324 ITR 223), HAS HELD THAT SIMPLY ROUTINE OBSERVATIONS TOWARD BOOKS O F ACCOUNT LIKE, HAVING FEW ERRORS IN ACCOUNTS, NON MAINTENANCE OF PROPER STOCK REGISTER, LACK OF SOME VOUCHERS ETC., DO NOT NECESSARILY RENDERED THE ACCO UNTS UNRELIABLE U/S 145 OF I.T. ACT. THE ONUS IS ON THE ITA 954/JP/2011_ ITO VS SMT. MANJU DEVI 5 DEPARTMENT TO PROVE THAT ACCOUNTS ARE REALLY DEFECT IVE OR INCOMPLETE TO INVOKE SUCH HARSH MEASURES. MOREOVER , IN ANOTHER CASE, I.E. M/S GOTAN LIME KHANIZ UDYOG (256 ITR 243), THE HONBLE RAJASTHAN HIGH COURT HAS ALSO VIE WED THAT THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) DOES NOT ALWAYS LEAD TO AN ADDITION IN EVERY SUCH CIRCUMSTANC ES. MOREOVER, I FIND FORCE IN THE SUBMISSION OF THE LE ARNED AR THAT IF THE TRADING ACCOUNT OF PREVIOUS YEAR IS PRO PERLY RECONSTRUCTED BY DEBITING THE ELECTRIC EXPENSE THER ETO, THE RELEVANT G.P. WOULD HAVE LOWER BY 5% AND BECOME MORE OR LESS COMPARABLE WITH THE G.P. OF CURRENT YEAR. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS FELT THAT THE APPELLANTS CASE IS FAIRLY COVERED BY THE RATIOS UPHELD BY THE COURTS, AS DISCUSSED ABOVE. MOREOVER, IN VIEW OF THE DETAILS SUBMISSIONS AND EXPLANATIONS OFF ERED BY THE LEARNED A.R. VIZ., THE ADVERSE FINDINGS OF THE A.O. REGARDING THE BOOKS OF ACCOUNT ETC., I AM OF CONSI DERED VIEW THAT THE A.O. WAS NOT JUSTIFIED INVOKING THE PR OVISIONS OF SECTION 145(3) OF THE ACT. SIMILARLY FOR THE REA SONS AND JUSTIFICATIONS, DISCUSSED HEREINABOVE, REGARDING TH E NON COMPARABILITY OF G.P. RATIO OF PREVIOUS YEAR WITH TH E CURRENT YEAR, IT ALSO HELD THAT THE A.O. HAS NOT MADE OUT A PROPER CASE FOR MAKING AN ADDITION OF RS. 34,36,188/- U/S 145(3) ITA 954/JP/2011_ ITO VS SMT. MANJU DEVI 6 OF THE ACT IN THE INSTANCE CASE; THEREFORE, THE SAM E STANDS DELETED. CONSEQUENTLY, THIS GROUND IS ALLOWED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D SR. D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE ARGUED THAT THE LEARN ED CIT(A) HAD DELETED THE TRADING ADDITION HAVING CONSIDERED THE VARIOUS CONTENTIONS OF THE APPELLANT INCLUDING WRONG FINDING OF THE LEAR NED ASSESSING OFFICER REGARDING NON-MAINTENANCE OF STOCK REGISTER ETC. AS REPRODUCED AT PAGE NO. 3 IN THE APPELLATE ORDER. THE CONCLUSION SO ARR IVED HAS BEEN SPECIFICALLY RECORDED IN PARA 2.3 OF HIS ORDER AND REITERATED THE ARGUMENTS RAISED BEFORE THE LEARNED CIT(A) AND VEHE MENTLY SUPPORTED THE FINDING OF THE LEARNED CIT(A). HE FURTHER ARGUE D AS UNDER: (I) NO REJECTION OF BOOKS SHOULD BE MADE UNLESS SP ECIFIC DEFECT IN THE ACCOUNTS ARE POINTED OUT BY A.O. OR ANY EVID ENCE IS BROUGHT IN RECORD TO RECORD PRODUCTION OR SALES. ( SHRI HARI INDUSTRIES VS. ADDL. CIT, RANGE, BHARATPUR) TAX WORLD VOL. 47, PAGE 06, JUNE, 2012 (PAGE 241). (II) IT IS UNLAWFUL ON THE PART OF THE A.O. TO MAK E TRADING ADDITION AFTER INVOKING SECTION 145(3) SIMPLY FOR N OT MAINTAINING STOCK REGISTER WHEN BOOKS OF ACCOUNTS ARE COMPLETE A ND CORRECT. ITA 954/JP/2011_ ITO VS SMT. MANJU DEVI 7 (RAWAT INDUSTRIES VS. ITO WARD 4(2), JAIPUR (TAX WORLD VOL-48, PARE 01, JULY, 2012 PAGE 21). (III) BOOKS CANNOT BE REJECTED ON ACCOUNT OF LOWERIN G OF G.P. RATE. NO ADDITION COULD BE MADE WHERE NO MATERIAL FO UND SIMPLY ON ACCOUNT OF FALL IN G.P. RATE (LATE SHRI BHERULAL LUHAR, RAJSAMAD VS. DCIT (CC), UDAIPUR- ITAT JODHPUR BENCH, JODHPUR ( TAX WORLD VOL. 48, PART-02, AUGUST, 2012 PAGE 28). THE LEARNED CIT(A)S FINDING ALSO SUPPORTING THE ASS ESSEES CASE THAT IN PREVIOUS YEAR, TRADING ACCOUNT IS PROPERLY RECONSTR UCTED BY DEBITING THE ELECTRIC EXPENSES THERETO. THE RELEVANT G.P. THEREIN LOWER BY 5% AND BECOME MORE OR LESS COMPARABLE WITH THE G.P. OF CURR ENT YEAR. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LEA RNED CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WHATEVER DEFECTS PO INTED OUT BY THE LEARNED ASSESSING OFFICER ARE NOT SUFFICIENT TO REJ ECT THE BOOK RESULT U/S 145(3) OF THE ACT. THE LEARNED DR HAS NOT CONTROVERT ED THE FINDING GIVEN BY THE LEARNED CIT(A). THE LEARNED CIT(A)S ORDE R IS JUST AND FAIR AND DELIVERED AFTER CONSIDERING ALL THE FACTS AND C IRCUMSTANCES OF THE CASE AND LEGAL PROPOSITION CONSIDERED BY THE LEARNE D ASSESSING OFFICER ITA 954/JP/2011_ ITO VS SMT. MANJU DEVI 8 AS WELL AS THE CIT(A). THEREFORE, WE CONFIRM THE ORDER OF THE LEARNED CIT(A). 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED 09/01/2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ITO, WARD 7(2), JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- MRS. MANJU DEVI, JAIPUR. 3. VK;DJ VK;QDRVIHY @ THE CIT(A)-III, JAIPUR 4. VK;DJ VK;QDR @ CIT, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 954/JP/2011). VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR