M/s Sharma Handloom Industries, Agra v. The Dy.CIT, Agra

CO 24/AGR/2009 | 2005-2006
Pronouncement Date: 27-08-2010 | Result: Allowed

Appeal Details

RSA Number 2420323 RSA 2009
Assessee PAN AAAFS1883A
Bench Agra
Appeal Number CO 24/AGR/2009
Duration Of Justice 1 year(s) 15 day(s)
Appellant M/s Sharma Handloom Industries, Agra
Respondent The Dy.CIT, Agra
Appeal Type Cross Objection
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 27-08-2010
Date Of Final Hearing 21-07-2010
Next Hearing Date 21-07-2010
Assessment Year 2005-2006
Appeal Filed On 11-08-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NO.153/AGR/2009 ASST. YEAR: 2005-06 DY. C.I.T. 2 VS. M/S SHARMA HANDLOOM INDUST RIES AGRA. 5/89-A/2-3 SONTH KI MANDI MATHURA ROAD AGRA. (PAN: AAAFS 1883 A). C.O. NO.24/AGR/2009 (IN ITA NO.153/AGR/2009) ASST. YEAR: 2005-06 M/S SHARMA HANDLOOM INDUSTRIES VS. DY. C.I.T. 2 5/89-A/2-3 SONTH KI MANDI AGRA. MATHURA ROAD AGRA. (PAN: AAAFS 1883 A). (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI OM PRAKASH JR. D.R. ASSESSEE BY : SHRI NAVIN GARGH ADVOCATE ORDER PER P.K. BANSAL A.M.: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) DATED 13.12.2009 AND THE CROSS OBJECTION (C.O.) HAS BEEN FILED BY THE ASSESSEE. 2. GROUND NO.1 OF THE APPEAL OF THE REVENUE RELATES TO THE DELETION OF THE ADDITION OF RS.60 054/- MADE BY THE A.O. ON THE BASIS OF THE WR ITTEN DOWN VALUE SHOWN IN THE DEPRECIATION CHART AS PER BALANCE SHEET AND ANNEXURE-J. THE A.O . NOTED THAT THERE IS A DIFFERENCE OF 2 RS.60 054/- BETWEEN THE WRITTEN DOWN VALUE AND DEPR ECIATION CHART. HE WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND ACCORDING LY ADDED THE SAME. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) THE AS SESSEE SUBMITTED THAT THE VALUE AS PER ANNEXURE-J IS THE BOOK VALUE AND NOT WRITTEN DOWN V ALUE WHILE THE VALUE AS PER THE DEPRECIATION CHART (ANNEXURE-A) IS THE WRITTEN DOWN VALUE AS COM PUTED UNDER SECTION 43(6) OF THE ACT FOR THE PURPOSE OF DEPRECIATION CLAIMED UNDER SECTION 32. THEREFORE BOTH THE VALUES OF FIXED ASSETS HAS TO BE REACHED DIFFERENTLY AND DIFFERENCE HAS TO EXI ST BETWEEN THE TWO. EVEN IT WAS STATED THAT DIFFERENCE IN ANNEXURE-J AND DEPRECIATION CHART EXC LUDING THE BUILDING ON WHICH NO DEPRECIATION IS CHARGEABLE AMOUNTING TO RS.10 80 604/-. THE DIF FERENCE REMAINS ONLY RS.1 899.75. THE CIT(A) WAS DULY SATISFIED WITH THE EXPLANATION OF T HE ASSESSEE AND THEREFORE HE DELETED THE ADDITION. 3. BEFORE US THE LD. D.R. RELIED ON THE ORDER OF T HE A.O. AND THE LD. A.R. SUPPORTED THE ORDER OF THE CIT(A). 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AS WELL AS EXPLANATION GIVEN BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW. WE NOTED TH AT THE EXPLANATION GIVEN BY THE ASSESSEE IS PLAUSIBLE ONE AND THERE HAS TO BE DIFFERENCE IN THE VALUE OF THE DEPRECIATION CHART WHICH IS TO BE COMPUTED FOR THE PURPOSE OF CLAIMING DEPRECIATION U NDER SECTION 32 IN ACCORDANCE WITH THE PROVISIONS OF SECTION 43(6) OF THE ACT. THE CIT(A) HAS GIVEN A FINDING OF FACT AFTER APPRECIATING THE FACTS OF THE CASE. NO IOTA OF EVIDENCE WAS BRO UGHT TO OUR KNOWLEDGE WHICH MAY WARRANT OUR INTERFERENCE IN THE ORDER OF THE CIT(A). WE ACCORD INGLY DISMISS THIS GROUND. 3 5. THE NEXT GROUND OF THE APPEAL OF THE REVENUE REL ATES TO THE DELETION OF THE ADDITION OF RS.90 312/- MADE BY THE A.O. ON ACCOUNT OF DECLINE IN THE NET PROFIT (N.P.) RATE FROM 1% TO 0.7%. 6. THE A.O. REJECTED THE BOOKS OF ACCOUNTS OF THE A SSESSEE UNDER SECTION 145(3) OF THE ACT AND ESTIMATED THE N.P. OF THE ASSESSEE @ 1%. THE A SSESSEE WENT BEFORE THE CIT(A) AGAINST THE REJECTION OF THE BOOKS OF ACCOUNTS AND ALSO THE EST IMATION OF THE N.P. THE CIT(A) DID NOT GIVE ANY FINDING ON THE REJECTION OF THE BOOKS OF ACCOUN TS BUT DELETED THE ADDITION MADE DUE TO THE DECLINE IN THE N.P. 7. THE LD. D.R. RELIED ON THE ORDER OF THE A.O. WHI LE THE LD. A.R. SUPPORTED THE ORDER OF THE CIT(A) BUT DID NOT FILE ANY APPEAL AGAINST THE NON- DISPOSAL OF THE GROUND FOR THE REJECTION OF BOOKS OF ACCOUNTS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDER ED THE SAME ALONG WITH THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF THE TAX AUTHORITIES BELOW. WE NOTED FROM THE PROVISIONS OF SECTION 145(3) THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED BY THE A.O. THE A.O. MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144. SECTION 144 OF THE I.T. ACT EMPOWERS THE A.O. TO MAKE ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE TO THE BEST OF HIS JUDGEMENT ON THE BASIS OF ALL THE RELEVANT MATERIAL WHICH THE A.O. HAS GATHERED AND THE DUE SUM PAYABLE BY THE ASSESSEE ON THE BASIS OF SUCH ASSESSMENT AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE BY SERVING NOTICE TO SHOW CASE ON A DATE AND TIME TO B E SPECIFIED IN THE NOTICE THAT THE ASSESSMENT SHOULD NOT BE COMPLETED TO THE BEST OF HIS ASSESSME NT. NOW THE QUESTION ARISES WHY THE A.O. 4 WAS ESTIMATING THE N.P. OF THE ASSESSEE. WHAT WAS THE MATERIAL AVAILABLE BEFORE THE A.O. THE ASSESSEE HAS GIVEN THE G.P. RATE FOR THE LAST THREE YEARS IN THE A.Y. 2003-04. THE G.P. RATE DERIVED BY THE ASSESSEE WAS 8.99% IN THE A.Y. 2004- 05. THE G.P. RATE WAS 8.92% WHILE IN THE IMPUGNED ASSESSMENT THE G.P. RATE WAS 9.75%. THIS CLEARLY PROVES THAT THE G.P. OF THE ASSESSEE HAS IMPROVED DURING THE YEAR UNDER CONSIDERATION IN SPITE OF THE REJECTION OF THE BOOKS OF ACCOUNTS BY THE A.O. THE A.O. HAS ESTIMATED THE NP @ 1% BECAUSE IN THE A.Y. 2004-05 THE ASSESSEE HAS SHOWN THE N.P. @ 1.02% AND THERE WAS N O SCRUTINY ASSESSMENT. IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS WRITTEN THE N.P. @ 0 .7%. THE A.O. HAS APPLIED THE N.P. @ 1%. THE ASSESSEE HAS EXPLAINED THE REASON FOR THE FALL IN THE N.P. RATIO DUE TO THE FALL IN THE SALES. THE PROFIT HAS GONE DOWN BUT THE FIXED EXPENSES SUC H AS SALARY RENT DEPRECIATION TELEPHONE REPAIR AND MAINTENANCE REMAIN THE SAME AND HAS NOT BEEN REDUCED WITH THE REDUCTION OF QUANTUM IN SALES. THIS EFFECTED THE N.P. THUS THE ASSESS EE HAS GIVEN THE REASONS FOR THE FALL IN THE N.P. AS COMPARED TO THE LAST YEAR. THE CIT(A) ON THIS B ASIS DELETED THE ADDITION MADE DUE TO THE N.P. NO DOUBT THE ASSESSEE HAS EXPLAINED THAT INDIRECT F IXED EXPENSES HAS NOT DECREASED WHICH EFFECTED THE N.P. BUT HAS NOT GIVEN A DETAILED RECO NCILIATION CHART TO WHAT EXTENT IT EFFECTED THE N.P. THIS IS A FACT THAT THE REJECTION OF THE BOOK S OF ACCOUNTS HAS DULY BEEN ACCEPTED BY THE ASSESSEE. OTHERWISE THE ASSESSEE WOULD HAVE COME I N APPEAL AGAINST THE ORDER OF THE CIT(A). THE CIT(A) HAS NOT GIVEN ANY FINDING ON THE REJECTI ON OF BOOKS OF ACCOUNTS. THE A.O. THEREFORE HAS THE POWER TO ESTIMATE THE N.P. TO TH E BEST OF HIS ESTIMATE ON THE BASIS OF THE EVIDENCES AVAILABLE ON RECORD. THE BEST EVIDENCE I N THE CASE OF THE ASSESSEE IN OUR OPINION IS THE N.P. DERIVED BY THE ASSESSEE IN THE LAST YEAR. THE ASSESSEE HAS ALSO GIVEN THE REASON THAT THERE WAS FALL IN THE N.P. AS COMPARED TO THIS YEAR BUT DID NOT EXACTLY RECONCILE THE FIGURES. IN OUR OPINION IT WOULD BE REASONABLE TO ESTIMATE THE N.P. @ 0.8% UNDER THE FACTS AND 5 CIRCUMSTANCES OF THE CASE AND WE ACCORDINGLY SET AS IDE THE ORDER OF THE CIT(A) AND DIRECT THE A.O. TO ESTIMATE THE N.P. @ 0.8%. ADDITION TO THAT EXTENT THEREFORE STANDS UPHELD. THUS THIS GROUND IS PARTLY ALLOWED. 9. GROUND NO.3 RELATES TO THE DELETION OF THE ADDIT ION OF RS.4 00 000/- MADE BY THE A.O. ON ACCOUNT OF CASH DEPOSITS IN THE CAPITAL ACCOUNT OF ONE OF THE PARTNERS SHRI PRAKASH CHAND SHARMA. 10. THE BRIEF FACTS RELATING TO THIS GROUND ARE THA T THE A.O. HAS NOTED THAT ONE OF THE PARTNERS SHRI PRAKASH CHAND SHARMA HAS DEPOSITED CASH TO THE EXTENT OF RS.4 00 000/- AS CAPITAL IN THE FIRM. THE ASSESSEE FILED THE CAPITAL ACCOUNT OF SH RI SHARMA WHICH WAS DULY ATTACHED ALONG WITH THE INCOME TAX RETURN. HE ALSO POINTED OUT THAT SH RI SHARMA WITHDRAWN A SUM OF RS.12 90 000/- IN THE YEAR ENDED ON 31.03.2004 AND ACCORDINGLY HAS DEPOSITED A SUM OF RS.4 00 000/- AS ON 01.04.2004. WHEN THE MATTER WENT BEFORE THE CIT(A) THE ASSESSEE HAS CONTENDED THAT SINCE THE INVESTMENT HAS BEEN MADE BY THE FIRM NO ADDITION C AN BE MADE IN THE HANDS OF THE FIRM. EVEN OTHERWISE ALSO HE SUBMITTED THE RELEVANT DOCUMENTS AND CONTENDED THAT NO ADDITION CAN BE MADE AS THE ASSESSEE HAS DULY PROVED THE SOURCE OF DEPOS ITS. THE CIT(A) HAS DELETED THE ADDITION BY OBSERVING AS UNDER :- I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FIND T HAT THE AO HAS NOT REFUTED THE FACT THAT THE PARTNER SHRI PRAKASH CHAN D SHARMA HAD MADE WITHDRAWALS OF RS.12 90 000/- IN THE PRECEDING YEAR I.E. A.Y. 2004-05 OR THAT HE DID NOT HAVE A CLOSING CASH BALANCE OF RS.4 15 444/ - OUT OF WHICH THE IMPUGNED DEPOSIT HAS BEEN MADE BY HIM ON 01.04.2004. ON THE SE FACTS THE AOS FINDING THAT THE SOURCE OF CASH DEPOSIT OF RS.4 00 000/- IN THE CAPITAL ACCOUNT OF PARTNER SHRI PRAKASH CHAND SHARMA IS UNEXPLAINED AND HENCE CONSTITUTES THE APPELLANTS INCOME IS NOT SUSTAINABLE. CONSEQUENTLY THE ADDI TION OF RS.4 00 000/- ON THIS COUNT IS DELETED. 6 11. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING T HROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW WE ARE OF THE VIEW THAT NO INTERFERENCE IS C ALLED FOR IN THE ORDER OF THE CIT(A). THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.4 00 000/- BEING DEPOSITED BY THE PARTNER SHRI PRAKASH CHAND SHARMA IN THE FIRM. THERE HAD BEEN W ITHDRAWAL OF RS.2 90 000/- IN THE PRECEDING YEAR BY SHRI SHARMA WHO WAS HAVING CLOSING CASH BAL ANCE OF RS.4 15 444/- OUT OF WHICH A SUM OF RS.4 00 000/- WAS DEPOSITED BY HIM. NO COGENT M ATERIAL OR EVIDENCE WAS BROUGHT TO OUR KNOWLEDGE WHICH PROVES THAT THE FINDINGS OF THE CIT (A) ARE NOT CORRECT. ON THIS FACT WE ACCORDINGLY CONFIRM THE ORDER ON THIS ISSUE. 12. IN THE RESULT APPEAL FIELD BY THE REVENUE IS P ARTLY ALLOWED. C.O. NO.24/AGR/2009 13. THE ONLY ISSUE INVOLVED IN THE CROSS OBJECTION FILED BY THE ASSESSEE RELATES TO THE SUSTENANCE OF THE ADDITION OF RS.62 418/- AS UNEXPL AINED INVESTMENT IN THE CONSTRUCTION OF THE BOUNDARY WALL. 14. THE BRIEF FACTS OF THE CASE ARE THAT THE A.O. N OTED THAT DURING THE YEAR THE ASSESSEE HAS CONSTRUCTED BOUNDARY WALL OVER THE PLOT OF LAND. T HE INSPECTOR REPORTED THAT THE BOUNDARY WALL OVER THE PLOT OF LAND MEASURING 240 X 100 X 9 CUBIC FEET WAS CONSTRUCTED IN WHICH INVESTMENT OF RS.1 25 400/- HAS BEEN MADE. THE A.O. ACCORDINGLY ADDED A SUM OF RS.62 418/- (RS.1 25 400/- MINUS RS.62 982/-). THE ASSESSEE WENT IN APPEAL BE FORE THE CIT(A). BEFORE THE CIT(A) THE ASSESSEE CONTENDED THAT THE ASSESSEE HAS NOT CONSTR UCTED THE NEW BOUNDARY WALL BUT ONLY REPAIRED 7 AND INCREASED THE HEIGHT OF THE BOUNDARY WALL. THE EXISTING CONSTRUCTION ITSELF PROVES THAT THE PREMISES IS OLD AND NO PREMISES CAN BE LEFT OUT WIT HOUT THE BOUNDARY WALL. ADDITION OF RS.62 418/- HAS BEEN MADE ARBITRARILY MERELY ON THE BASIS OF THE INSPECTORS REPORT WITHOUT GIVING IT TO THE ASSESSEE FOR HIS CONFRONTATION. T HE INSPECTORS REPORT CANNOT BE RELIED AT THE BACK OF THE ASSESSEE. THE INSPECTOR IS NOT A TECHNICAL PERSON. THE CIT(A) CONFIRMED THE ADDITION. 15. BEFORE US THE LD. A.R. REITERATED THE SUBMISSI ONS MADE BEFORE THE CIT(A) WHILE THE LD D.R. RELIED ON THE ORDER OF THE CIT(A). 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. WE NOTED THAT THE ADDITION HAS EBON MADE BY THE A.O . MERELY ON THE BASIS OF THE INSPECTORS REPORT PRESUMING AS IF THE ASSESSEE HAS CONSTRUCTED THE NEW BOUNDARY WALL. THIS IS A FACT THAT THE REPORT OF THE INSPECTOR WAS NOT GIVEN TO THE ASSESS EE FOR HIS CONFRONTATION. THIS TANTAMOUNT TO BE RELYING ON THE EVIDENCE COLLECTED AT THE BACK OF TH E ASSESSEE. THE INSPECTOR IS NOT IN OUR OPINION A TECHNICALLY QUALIFIED PERSON TO DECIDE W HETHER THE NEW BOUNDARY WALL HAS BEEN CONSTRUCTED AND HOW MUCH MONEY HAS BEEN SPENT BY TH E ASSESSEE. WE FIND FORCE IN THE SUBMISSIONS OF THE LD. A.R. THAT NO PREMISES CAN EX IST WITHOUT CONSTRUCTING A BOUNDARY WALL. EVEN OTHERWISE ALSO THE EVIDENCE COLLECTED AT THE BACK OF THE ASSESSEE CANNOT BE THE BASIS OF AN ADDITION UNLESS AND UNTIL THOSE EVIDENCE HAS NOT BE EN SUBMITTED TO THE ASSESSEE FOR HIS REBUTTAL IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF KISHINCHAND CHELLARAM 125 ITR 713 (SC). WE THEREFORE IN THE ABSENCE OF CON FRONTATION OF THE INSPECTORS REPORT TO THE ASSESSEE DELETE THE ADDITION. THUS THE C.O. FILE D BY THE ASSESSEE IS ALLOWED. 8 ITA NO.153/AGR/2009 & C.O. NO.24/AGR/2009 17. IN THE RESULT APPEAL FIELD BY THE REVENUE STAN DS PARTLY ALLOWED AND THE CROSS OBJECTION FILED BY THE ASSESSEE STANDS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 27.08.2010) SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 27 TH AUGUST 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TR IBUNAL AGRA TRUE COPY