Rajeshkumar Babulal Agarwal(HUF), Palanpur V. ACIT, Central Circle-2(4), Ahmedabad

ITSSA 39/AHD/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4678 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 15-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJAI PRATAP SINGH
• Section: 40A(3); 143(3); 153A; 143(2); 13; 145(3)

Judgement Text

आयकर अपील य अ धकरण, अहमदाबाद यायपीठ । IN THE INCOME TAX APPELLATE TRIBUNAL, “C” BENCH, AHMEDABAD BEFORE MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./IT(SS)A.No.38 to 40/Ahd/2018 नधा रण वष /Asstt. Year: 2011-12 to 2013-14 Rajeshkumar Babulal Agarwal (HUF) 39, APMC yard, Iqbalgadh Taluka: Amirgadh Dist. Banaskantha. PAN : AACHA 5546 F Vs. ACIT, Cent.Cir.2(4) Ahmedabad. आयकर अपील सं./IT(SS)A.No.41/Ahd/2018 नधा रण वष / Asstt. Year: 2011-12 Shri Manojkumar Babulal Agarwal (HUF) 40, APMC yard, Iqbalgadh Taluka: Amirgadh Dist. Banaskantha. PAN : AACHA 5547 E Vs. ACIT, Cent.Cir.2(4) Ahmedabad. आयकर अपील सं./IT(SS)A.No.42/Ahd/2018 नधा रण वष / Asstt. Year: 2012-13 B.B. Tradelink Agro P. Ltd. D-14, 15, 16, 17 New APMC Yard , Palanpur 385 001. PAN : AAECB 3254 C Vs. ACIT, Cent.Cir.2(4) Ahmedabad. (Applicant) (Responent) Assessee by : None Revenue by : Shri Ajai Pratap Singh, CIT-DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 0 4 / 0 4 / 2 0 2 2 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 2 2 / 0 4 / 2 0 2 2 आदेश/O R D E R PER MADHUMITA ROY, JUDICIAL MEMBER: These are three set of appeals preferred by the different asessees against orders of the ld.CIT(A)-12, Ahmedabad dated 6.12.2017 and 5.12.2017 for IT(SS)A.No.38/Ahd/2018 and 4 Others 2 the above three Assessment Years. Since issues involved in these appeals are identical, they are heard together and are being disposed of by this common order. 2. At the time of hearing, none appeared on behalf of the assessees. It appears from the record that since 10.10.2019 on number of occasions, neither adjournment was sought for nor any one represented on behalf of the assessee before the Tribunal. Having no other alternative, we proceed to dispose of all the appeals ex parte qua the assessee. 3. It is noticed that issues in the grounds raised and the facts of the case in the respective appeals of the assessee are verbatim same except variation in the figures. Therefore, we would take note of the facts as emanating from the case of Rajeshkumar Babulal Agrawal (HUF) in IT(SS)A.No.38/Ahd/2018 for the sake of convenience. 4. Brief facts leading to the case is this that a search action under section 132 of the Act was carried out in the group cases of Agrawal Group on 27.9.2012. The case was centralized with Central Cir.2(4), Ahmedabad and notice under section 153A of the Act was issued on 5.4.2013 asking the assessee to file return of income within 30 days from the date of receipt of the notice. The assessee filed return of income on 6.5.2014 declaring total income at (-) Rs.4,18,354/- and agricultural income of Rs.8,30,166/-. Notice under section 143(2) was issued on 4.6.2014 followed by notice under section 142(1) along with questionnaire on 15.10.2014. 5. The assessee was engaged in the business of trading of agricultural commodities, like castor seeds, guvar, bajra etc. The AO has noticed at page No.2 of his order, a chart showing trading result of the assessee. As per the IT(SS)A.No.38/Ahd/2018 and 4 Others 3 said chart, for the Asst.Year 2011-12, the assessee has made total purchase of Rs.21,08,15,552/- out of which URD purchases were of Rs.15,72,64,282/-. In other words, URD purchases constituted 75% of the total purchases. The ld.AO asked the assessee to furnish party-wise complete details of the purchases with complete names, postal addresses, bills/vouchers and mode of payment and receipt taken for such payment. In response thereto, the assessee filed details of URD purchases which claimed to be made from farmers. Thereafter, due to all the payments in respect of URD were found to be made in cash, the AO proposed to invoke provisions of section 40A(3) of the Act. The assessee explained that URD purchases were made from the farmers and members of the APMC, and the payment in cash was made to these farmers after withdrawing the same from the bank. The assessee further submitted that the payments made to the farmers in cash would not attract provisions of section 40A(3) of the Act as the exception provided in Rule 6DD permits payment made to the farmers in cash for purchase of agriculture produce. As regards details of bills/vouchers, it was explained that it was practically difficult to maintain and keep full records of large numbers of farmers however, details of transactions could be available in the khedut bill book maintained by the company and the same were duly recorded in the regular books of accounts. Though the AO has accepted explanation of the assessee with regard to the payment in cash to the farmers and some of the farmers having confirmed sales of agriculture produce to the assessee, however, he noticed certain discrepancies in the bills and vouchers with regard to purchases from URD and in maintenance of stock registers. The AO observed that bills/ vouchers were not signed by the sellers; names and addresses were not mentioned in bills; that there is no bifurcation between purchases from APMC and URD. There was neither any proof of payment APMC charges and market cess. Therefore, the purchases claimed by the IT(SS)A.No.38/Ahd/2018 and 4 Others 4 assessee were not genuine. The ld.AO has also noticed fluctuations in the rates of commodities which were purchased from URD. The AO also noticed some differences in the stock as per books vis-à-vis physical verification. In view of this, the ld.AO observed that the books of accounts maintained by the assessee were not complete and correct and therefore, true and correct profit of business could not be deducted therefrom. Accordingly, the ld.AO proposed to invoke provisions of section 145(3) of the Act. It was explained to the AO that the assessee acted as intermediary between the purchasers and sellers. The assessee purchases produces from the several farmers, who are mostly URDs and coming far away remote villages, and it is practically very difficult to verify all the transactions and produce all the purchasers. Therefore, this should not be considered as reason for rejection of books of accounts. So far as alleged discrepancies in stock is concerned, it was explained by Shri Manoj B. Agrawal that difference in the sock of assessee was covered by the disclosure made by him in the statement recorded under section 132(4) of the Act. Therefore, no adverse inference should be made for invocation of provisions of section 145(3) of the Act. As regards price variation, it was explained that the price of the commodities would be determined on the basis of demand and supply. Sometimes, supplies from the farmers would be very less, and therefore, to fulfill commitment of the assessee to supply the commodities in turn to the millers, the assessee has to purchase from outside stockiest through sister concerns at higher price. It is for this reason that purchases from the sister concerns are at a higher price as compared to URD purchases. This kind of price variation does occur in the commodity market, which depended upon demand and supply and market dynamism. Therefore, for this reason also proposed rejection of the books of accounts should not be invoked as submitted by the assessee before the AO. IT(SS)A.No.38/Ahd/2018 and 4 Others 5 6. However, the explanations of the assessee were not found acceptable to the AO. He rejected the books of accounts of the assessee and recomputed gross profit at the rate of 4% of sales in the case under consideration, which consideration and finding equally made applicable to all other cases of group concerns. The table showing working of gross profit/net profit has been given in the assessment order from page Nos.10 & 11, and 13 & 14. Accordingly, in this case, the AO made an addition of Rs.57,78,845/- being the difference between the gross profit shown by the assessee and computed at 4% of the sale. 7. Aggrieved by the action of the AO, assessee went in appeal before the ld.CIT(A). After examining the claim of the assessee, the ld.CIT(A) restricted gross profit rate at 2% instead of 4% estimated by the AO. By doing so, addition made by the AO of Rs.57,78,845/- was reduced to Rs.15,29,695/-. The ld.CIT(A) also gave similar relief to other assesses also. For better understanding, the relevant part of observations of the CIT(A) is reproduced hereunder: “4.5 Considering the facts mentioned herein above, it is observed that AO rejected books of account and estimated gross profit @ 4% on observations discussed above. It is observed that though Appellant had produced fanners for verification, complete details regarding quality of goods, signature of farmers on purchase vouchers along with the fact that each Group concern was showing different gross profit even though they were dealing in similar agricultural produces. The contention of AO that purchase bills maintained by the Appellant are self-serving vouchers if considered in strict sense, as there was no signature of sellers on these bills or other any other receipts in lieu of making payment to sellers against purchases claimed to be made from them do to some extent support the view of AO that the Appellant had not prepared books of account correctly but in the overall circumstances of the case and no detection of manipulation of purchases, sales and/or other expenses, I am of considered view that the AO does not appear to be on sound footing in rejecting such books of account u/s 145(3) of the Act. IT(SS)A.No.38/Ahd/2018 and 4 Others 6 4.6 So far as estimation of gross profit at the rate 4% is concerned, the AO has not given any comparable instances wherein similar firms have earned such profit. The AO has referred to profitability shown by four group concerns being Kedarnath Agri Tradelink Limited (1 year), BB Trade Link Agro Pvt. Limited (2 years) Kedarnath Corporation (5 years) and Mahavir Trading Company (5 years) and he found that BB Trade Link Agro Pvt. Limited had shown GP @ 3.25% only in one year i.e. 2013-14. It is observed that Kedarnath Corporation and appellant are showing profit in the range of 1% to 2 % hence I also hold that the AO was incorrect in choosing base rate of GP at the rate 3.25% (even though finally he estimated 4% for entire group) only on the ground that higher profit was shown by such concerns and same was reasonable. Also the fact that in appellant's own case for A.Y.2014-15 gross profit has been shown @ 1.76 % and the same has been accepted by the Assessing Officer while passing Assessment Order cannot be ignored. Considering the above arguments and the fact that Appellant is doing trading activity, estimation of gross @ 4% is significantly higher and cannot be considered as correct rate more particularly when no correct comparable third party evidences are brought on record. 4.7 It is observed that Kedaranth Agri Tradelink Pvt. Limited has shown profit @ 1.41% in A.Y.2015-16 and the AO accepted such profit while passing the Assessment Order u/s 143(3) of the Act on 29th September, 2017. It is also observed that appellant in its own case has shown gross profit @ 1.76% in A.Y.2014-15 and on similar facts the AO has passed an order u/s 143(3) of the Act on 19th December, 2016 estimating gross profit @ 2% as reasonable profit and observing as under: "Now the question arises that what amount of profit should be estimated. It seen that in the applications before the Hon'ble Income Tax Settlement Commission, Mumbai, the Karta of this Assessee HUF, in his own individual taken as Gross profit @2% of sales as against Rs.2,62,63,320/- shown by the assessee” 4.8 It is also seen that Mr. Rajesh B. Agrawal, who had filed settlement petition for search carried out in his case, had offered income considering gross profit @ 2% before Hon'ble Settlement Commission and same was accepted by the Commission". Even the AO in the case of the appellant for A.Y.2014-15 has considered gross profit @ 2% as reasonable profit Considering the order passed by the Hon'ble Settlement Commission as well as subsequent orders passed by AO, it appears reasonable that gross profit for the appellant be estimated @ 2% for the Assessment Years involved. Thus as the Appellant has shown gross profit @ 1.28% in A.Y.2011-12 and hence after allowing credit of gross profit already shown by appellant, addition made by AO for Rs.57,78,845/- is restricted to Rs. 15,29,695/-. Further, in A.Y. 2012-13 appellant has shown gross loss @ -0.50% and the AO has IT(SS)A.No.38/Ahd/2018 and 4 Others 7 made addition of Rs.8,56,82,745/- based upon estimation of gross profit @ 4% and so after considering reasonable gross profit at the rate of 2%, addition of Rs.4,76,01,525/- is confirmed. Similarly in A.Y. 2013-14 wherein gross profit has been shown by appellant @ 1.21%, out of total addition made by AO for Rs.4,23,04,140/-, addition of Rs.1,19,78,592/- is confirmed. These grounds of appeal are partly allowed.” 8. Not satisfied with the part relief given by the ld.CIT(A), the assessee are in further appeal before the Tribunal. 9. Heard the ld.DR and perused orders of the Revenue authorities and also materials available on record. We find that the AO has rejected books of accounts of the assessee under section 145(3) of the Act and estimated gross profit rate at 4% by construing that some of the bills/vouchers are self-serving and did not bear signatures of the sellers in strict sense; certain discrepancies in physical stock lying with the assessee; and that price variation in some cases. Though the AO has not fully rejected the explanation of the assessee, he invoked provisions of section 145(3) of the Act. There is no proof with the AO that the assessee has manipulated purchases and sales in order to show low GP. We find that the ld.CIT(A) has lucidly discussed the issue in his impugned order and after considering entire aspects of the matter, restricted the addition only to the extent of 2% of the sales. We have already extracted the relevant observation and conclusion of the ld.CIT(A) on this issue. In the light of the findings of the ld.CIT(A) and the conclusion arrived at by the ld.CIT(A) the estimation of profit at 2% of the sales, are found to be reasonable, which in our considered opinion is without any ambiguity. We make it clear that no submission has been made by the assessee and in the absence of the same and any other material evidence to the contrary, we have no other alternative but to uphold the order passed by the ld.CIT(A), which in our considered opinion a reasoned one. Thus, this ground appeal raised by the assessee is devoid of any merit and hence rejected. IT(SS)A.No.38/Ahd/2018 and 4 Others 8 10. So far as identical grounds raised in the remaining appeals are concerned, we find that facts and circumstances are similar barring variation in the quantum. Since assessees have challenged composite order of the ld.CIT(A), our findings and conclusions made in the case of Rajeshkumar Babulal Agrawal-HUF for A.Y.2011-12, would apply mutatis mutandis in other appeals also. With this observation, we reject grounds raised by the assessees on the issue of estimation of gross profit by the ld.CIT(A). 11. There is one more ground remains to be adjudicated in three appeals of Shri Rajeshkumar Babulal Agrawal (HUF) i.e. the ld.CIT(A) has erred in confirming the addition on account of agricultural income as income from other sources. 12. Brief facts in this issue can be noticed from the order of the ld.AO as under: “7. During assessment proceedings, assessee was asked to furnish the complete documents to prove the genuineness of agricultural income shown by him at Rs.8,30,166/-. Assessee furnished copy of account of agricultural income and copies of sale bills regarding sale of agricultural produce. But, he had not furnished evidence for land holding, crops sown, quantity of produce taken and details and evidences to show that agricultural activities were actually carried out and details of expenses. Therefore, assessee was asked to explain as to why the agricultural income shown by him should not be treated as income from other sources. In response there, assessee submitted that he had furnished copies of account of agricultural income and copies of sale bills. The submission has been considered, but the same cannot be accepted completely. Assessee had not furnished the evidences of land holding, details of crops sown etc. No expenses had been deducted from the gross receipts which are required to be incurred for carrying out agricultural activities. It has also been noticed that the sale had been shown to Kedarnath Corporation is proprietorship concern of Manoj agrawal, HUF, which is their family concern. Therefore, agricultural income shown by the assessee cannot be considered as genuine completely. Accordingly, after considering all the facts and circumstances of the case, 50% of IT(SS)A.No.38/Ahd/2018 and 4 Others 9 agricultural income shown by the assessee is held as unreasonable and accordingly, amount of Rs.4,15,080/- is treated as income from other sources and added to the income of the assessee. As the assessee has furnished inaccurate particulars of his income, penalty proceedings under section 271(l)(c) are being initiated against the assessee.” 13. Aggrieved by the above order of the AO, assessee went in appeal before the ld.CIT(A) who confirmed the order with similar finding. Still aggrieved, the assessee is before us. 14. There is no prosecution before us by the assessee or anyone on behalf of the assessee, whereas the ld.DR supported the orders of the Revenue authorities. 15. Heard ld.DR and gone through the orders of the Revenue authorities on this issue. The assessee has claimed agriculture income of Rs.8,30,166/-, 11,33,432 and Rs.8,17,293/- for the assessment years 2011-12, 2012-13 and 2013-14 respectively. To prove the claim of agricultural income, the ld.AO sought details viz. copies of agriculture bill, ledger accounts, land holding and ownership, details of crops grow, details of expenses. However, the assessee was unable to do so. In the absence of any valid explanation supported by any evidence, either before the AO or before the ld.CIT(A), both the authorities concurrently found that the agriculture income earned by the assessee was not genuine completely. However, the ld.AO allowed the claim of the assessee to 50% of agriculture income shown by the assessee, and remaining 50% was added to the total income of the assessee. Even before us also there is no material to rebut the finding of the Revenue authorities. Therefore, in our opinion, both the authorities have justified in their action to restrict 50% of the agriculture income claimed by the assessee. We also make it clear that in absence of any contrary material to refute the finding of IT(SS)A.No.38/Ahd/2018 and 4 Others 10 the lower authorities, we have no other alternative but to confirm the order of the ld.CIT(A), since the same is found to be passed after appreciating the factual position. Thus, this ground in all three appeals is rejected. 16. In the result, all the appeals of the assessees are dismissed. Order pronounced in the Court on 22 nd April, 2022 at Ahmedabad. Sd/- Sd/- ANNAPURNA GUPTA (ACCOUNTANT MEMBER) (MADHUMITA ROY) JUDICIAL MEMBER TRUE COPY Ahmedabad; Dated 22/04/2022 आदेश क- . त0ल1प अ2े1षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु !त / Concerned CIT 4. आयकर आय ु !त(अपील) / The CIT(A) 5. $वभागीय 'त'न ध, आयकर अपील य अ धकरण / DR, ITAT, 6. गाड* फाईल / Guard file. आदेशान ु सार /BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation- 04-4-2022 2. Date on which the typed draft is placed before the Dictating Member 3. Date on which the approved draft comes to the Sr.P.S./P.S. - 4. Date on which the fair order is placed before the Dictating Member for Pronouncement .................... 5. Date on which the file goes to the Bench Clerk .. : 22.04.2022 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order.......................... Date of Despatch of the Order..................