M/s Sanjhi Ram Hari Sharan,, Chamba v. ITO,, Dalhousi

ITA 1059/CHANDI/2009 | 2005-2006
Pronouncement Date: 30-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 105921514 RSA 2009
Assessee PAN AAAFS8867G
Bench Chandigarh
Appeal Number ITA 1059/CHANDI/2009
Duration Of Justice 1 year(s) 4 month(s) 19 day(s)
Appellant M/s Sanjhi Ram Hari Sharan,, Chamba
Respondent ITO,, Dalhousi
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 30-03-2011
Date Of Final Hearing 02-08-2010
Next Hearing Date 02-08-2010
Assessment Year 2005-2006
Appeal Filed On 11-11-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI N. BARATHVAJA SANKAR VICE PRESIDENT AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.1059/CHD/2009 ASSESSMENT YEAR: 2005-06 M/S SANJHI RAM HARI SHARAN VS. THE ITO CHAMBA DALHOUSIE AT BANIKHET PAN NO. AAAFS8867G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) SHIMLA RELATING TO ASSESSMENT YEAR 2005-06 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE I.T. ACT 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) HAS ERRED IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT RESORTING TO THE PROVISIONS OF SEC TION 145(3) OF THE ACT WHICH IS ARBITRARY AND UNJUSTIFIE D. 2. THAT WITHOUT PREJUDICE TO ABOVE THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS UPHOLDING THE APPLICATIO N OF GP RATE OF 5% AS AGAINST 4.6% DECLARED BY THE ASSES SEE 2 RESULTING IN ADDITION OF RS. 1 60 357/- WHICH IS AR BITRARY AND UNJUSTIFIED. 3. THAT THE LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING THE ENHANCEMENT OF SALES OF RS. 3 87 00 000/- FROM RS. 3 85 96 835/- ON ADHOC BASIS WITHOUT APPRECIATING T HE FACTS IN THE RIGHT PERSPECTIVE WHICH IS ARBITRARY A ND UNJUSTIFIED. 4. THAT THE LD. CIT(A) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS. 1 61 367/- ON ACCOUNT OF DISALLOWAN CE OF INTEREST PAID ON UNSECURED LOANS WHICH IS ARBITRARY AND UNJUSTIFIED. 5. THAT THE LD. CIT(A) HAS FURTHER ERRED IN NOT ADJUDICATING THE GROUND (GROUND NO.5 OF THE APPEAL FILED BEFORE HER) IN RESPECT OF DISALLOWANCE OF RS. 43 874/- MADE ON ACCOUNT OF EXPENSES CLAIMED IN RES PECT OF JEEP TELEPHONE FUEL AND MAINTENANCE OF JEEP WH ICH IS ARBITRARY AND UNJUSTIFIED. 3. THE ISSUE IN GROUND NOS. 1 TO 3 RAISED BY THE A SSESSEE IS AGAINST THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF GP RATE RESULTING IN AN ADDITION OF RS. 1 60 357/-.. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON EXAMINATION OF BOOKS OF ACCOUNT TH E ASSESSEE WAS FOUND TO HAVE PURCHASED ONION AND POTATO VIDE BILL DATED 30.3.2005 FROM M/S ABHISHEK MAHAJAN & SONS SUBZI MANDI PATHANKOT FOR A SUM OF RS. 13 515/-. THE BILL WAS ENTERED IN THE BOOKS OF ACC OUNT ON 30.3.2005. ON THE EXAMINATION OF THE BILL THE ASSESSING OFFICER NOTICED THAT THE GOODS WERE DISPATCHED FROM PATHANKOT ON 1.4.2005 VIDE CHA LLAN DATED 31.3.2005 3 THROUGH TRUCK AND THE RECEIPT OF THE MARKET COMMITT EE BARRIER AT TUNNU HATTI IS DATED 1.4.2005. THE FREIGHT OF RS. 1 700/ - WAS CHARGED ON THE GOODS RELATING TO THIS BILL BY THE PARTY PASSENGER AND GOODS TAX OF RS. 40/- WAS PAID ON 1.4.2005. THE ASSESSEE HAD ENTERE D THE RECEIPT OF THE GOODS IN HIS BOOKS OF ACCOUNT ON 30.3.2005 WHEREAS THE GOODS WERE ACTUALLY RECEIVED ON 1.4.2005. THE ASSESSING OFFIC ER THUS OBSERVED THAT THE BOOKS OF ACCOUNT WERE NOT PROPERLY MAINTAINED B Y THE ASSESSEE . THE ASSESSEE WAS FOUND TO HAVE REDUCED THE GP TO THE EX TENT OF RS. 15 415/- ON THIS ACCOUNT. 5. FURTHER THE ASSESSING OFFICER CALLED FOR ITEM WI SE DETAILS OF GOODS DEALT IN BY THE ASSESSEE AND THE TRADING ACCOUNT IN RESPECT OF VARIOUS ITEMS SOLD BY THE ASSESSEE IS INCORPORATED UNDER P ARA 3 AT PAGES 1 & 2 OF THE ASSESSMENT ORDER. THE ASSESSEE HAS FURNISHED T HE GP RATE OF THE CURRENT YEAR IN RESPECT OF VARIOUS ITEMS TRADED IN AS COMPARED TO THE GP RATE OF THE EARLIER YEAR AND THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS SHOWING CONSTANT / NEAR CONSTANT GP IN THE SAID GOODS. THE ASSESSEE WAS FOUND NOT TO HAVE MAINTAINED ANY STOCK REGISTER OR STOCK INVENTORY AND THE ASSESSEE WAS ALSO UNABLE TO GIVEN ANY SATISFACTORY EXPLANATION IN RESPECT OF VALUATION OF CLOSING STOC K AS ON THE LAST DAY OF THE FINANCIAL YEAR. THE ASSESSEE WAS UNABLE TO REC ONCILE THE PURCHASE AND SALE BILLS AND THE ASSESSING OFFICER SHOW CAUSED TH E ASSESSEE AS TO WHY THE BOOKS OF ACCOUNT BE NOT REJECTED AND THE PROVIS IONS OF SECTION 145(3) BE NOT INVOKED. IN REPLY IT WAS EXPLAINED BY THE ASSESSEE THAT IT WOULD NOT POSSIBLE TO MAINTAIN STOCK REGISTER AS HE WAS D EALING IN VERY LARGE NUMBER OF ITEMS. THE ASSESSING OFFICER IN VIEW OF THE VARIOUS DISCREPANCIES FOUND AND NON RECONCILIATION OF PURCH ASE AND SALES AND NON 4 CONFIRMATION OF THE SALES MADE BY THE ASSESSEE REJ ECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3 ) OF THE ACT AND ESTIMATED THE GP RATE. THE SALES WERE ESTIMATED AT RS. 3.87 CRORES AS AGAINST 3.86 CRORES SHOWN BY THE ASSESSEE AND APPLY ING GP RATE OF 5% AS AGAINST 4.6% SHOWN BY THE ASSESSEE AN ADDITION OF RS. 1 60 375/- WAS MADE WHICH IN TURN INCLUDED THE ADDITION OF RS. 15 415/- ON ACCOUNT OF PURCHASES MADE FROM THE PARTY AT PATHANKOT. THE CI T(A) UPHELD THE ADDITIONS MADE BY THE ASSESSING OFFICER AND THE ASS ESSEE IS IN APPEAL AGAINST THE SAME. 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT DUR ING THE YEAR THE ASSESSEE HAD SHOWN GP RATE OF 4.60% WHICH HAS BEEN ENHANCED TO 5% BY THE AUTHORITIES BELOW. HOWEVER IN THE SUCCEEDING YEAR RELATING TO ASSESSMENT YEAR 2006-07 GP RATE OF 4.28% WAS ACCEP TED BY CIT(A) THOUGH THERE WAS A FALL IN THE GP RATE. THE ASSES SMENT ORDER WAS PASSED U/S 143(3) OF THE ACT BY ESTIMATING THE GP AT 5%. THE COPY OF THE ASSESSMENT ORDER AND APPELLATE ORDER ARE PLACED AT PAGES 3 TO 6 OF THE PAPER BOOK. THE LD. AR FURTHER POINTED OUT THAT THERE WAS NO BASIS FOR ADOPTION OF INCREASE IN THE SALE. THE LD. DR POIN TED OUT THAT IN VIEW OF THE VARIOUS DISCREPANCIES POINTED OUT BY THE ASSESS ING OFFICER IN HIS ASSESSMENT ORDER THERE WAS NO MERIT IN THE PLEADING S OF THE LD. AR AND THERE WAS JUSTIFICATION IN THE TRADING ADDITION MAD E BY THE ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE IS DEALING IN VARIOUS KIRYANA ITEMS AND TH OUGH IS MAINTAINING BOOKS OF ACCOUNT BUT NO STOCK REGISTER IS BEING MAI NTAINED. THE PLEA OF 5 THE ASSESSEE IN THIS REGARD WAS THAT IN THE NATURE OF THE BUSINESS BEING CARRIED OUT IT WAS DIFFICULT TO MAINTAIN A STOCK R EGISTER. FURTHER THE METHOD OF CLOSING STOCK IS CLAIMED TO BE CONSISTENT LY FOLLOWED. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD SH OWN GP OF 4.60% ON TOTAL SALES OF RS. 3.86 CRORES. THE ASSESSING OFFI CER ESTIMATED THE SALES AT 3.87 CRORES. THE ASSESSING OFFICER ON EXAMINATIO N OF THE BOOKS OF ACCOUNT FOUND DISCREPANCY IN RESPECT OF THE PURCHA SES MADE FROM M/S ABHISHEK MAHAJAN & SONS PATHANKOT WHICH AS PER TH E ASSESSEE WAS ENTERED ON 30.3.2005 BUT HOWEVER IT CROSSED BARRI ER FROM PATHANKOT ON 1.4.2005. THE TOTAL QUANTUM OF PURCHASES INCLUDING THE ALLIED EXPENSES IN THIS REGARD WAS RS. 15 415/-. FROM THE PERUSAL OF THE ASSESSMENT ORDER WE FIND THE ASSESSEE TO HAVE FURNISHED THE GP RATE OF DIFFERENT ITEMS TRADED IN BY IT AS ARE TABULATED IN PARA 3 OF THE A SSESSMENT ORDER. THE ALLEGATION OF THE ASSESSING OFFICER IN THIS REGARD WAS THAT THE ASSESSEE WAS SHOWING CONSTANT / NEAR CONSTANT GP IN VARIOUS ITEMS TRADED IN BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AND PRECE DING YEAR. HOWEVER THE ASSESSING OFFICER HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO PROVE THAT THE PURCHASES / SALES MADE BY THE ASSESSEE EXC EPT ITS PURCHASES FROM PATHANKOT WERE NOT BACKED BY PROPER VOUCHERS. THE ASSESSEE IN VIEW OF THE NUMBER OF ITEMS DEALT IN SHOWED ITS INABILITY T O RECONCILE PURCHASES AND SALES BILLS AND ALSO NO STOCK REGISTER WAS BEIN G MAINTAINED BY IT. WE FIND NO MERIT IN THE STAND OF THE ASSESSING OFFICER IN REJECTING THE BOOKS OF ACCOUNT. THE ASSESSEE DURING THE SUCCEEDING YEA R I.E. 2006-07 HAD DECLARED A GP RATE OF 4.28% AND THE ASSESSING OFFIC ER WHILE COMPLETING THE ASSESSMENT HAD APPLIED GP RATE OF 5% AS APPLIED IN THE PRESENT YEAR TO COMPUTE THE INCOME IN THE HANDS OF THE ASSESSEE. T HE CIT(A) DELETED THE SAME THOUGH THERE WAS A FALL IN THE GP RATE AS NO M ATERIAL WAS PLACED ON RECORD TO JUSTIFY THE ADDITION . 6 8. WE FIND SUPPORT FORM THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V OM OVERSEAS [315 ITR 18 5 (P&H)]. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V OM OVE RSEAS (SUPRA) DISMISSED THE APPEAL OF THE REVENUE BY OBSERVING TH AT THE FACTUAL FINDINGS GIVEN BY THE COMMISSIONER (APPEALS) THAT THE ADDITI ONS WERE MADE BY THE ASSESSING OFFICER WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT WAS UPHELD BY THE TRIBUNAL AND AS NO PERVER SITY OR ILLEGALITY IN THE FINDINGS WAS POINTED OUT BY THE DEPARTMENT NO SUBSTANTIAL QUESTION OF LAW AROSE FOR DETERMINATION. 9. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES WE F IND NO MERIT IN THE PRESENT ADDITION BEING MADE IN THE HANDS OF THE ASS ESSEE IN THE ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD TO PROVE THE A SSESSEE TO HAVE EARNED HIGHER GP THAN THE ONE DECLARED BY IT. FURTHER THERE IS NO BASIS IN THE ORDER OF THE ASSESSING OFFICER IN ADOPTING THE SALE S AT RS. 3.87 CRORES AS AGAINST 3.86 CRORES SHOWN BY THE ASSESSEE. ACCORDI NGLY WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 1 6 0 375/- - RS. 15 415/-. THE ADDITION OF RS. 15 415/- ON ACCOUNT OF PURCHASE S IS UPHELD. THE GROUND NOS. 1 TO 3 RAISED BY THE ASSESSEE ARE THU S PARTLY ALLOWED. 10. THE ISSUE IN GROUND NO.4 IS RESPECT OF DISALLOW ANCE OF INTEREST PAID. THE ASSESSING OFFICER FOUND THE ASSESSEE TO HAVE P AID INTEREST ON UNSECURED LOANS RAISED FROM THE FAMILY MEMBERS AT R S. 4 84 099/-. THE ASSESSEE WAS PAYING INTEREST @ 18%. THE ASSESSING OFFICER DISALLOWED THE INTEREST IN EXCESS OF 12% IN THE SAID EXCESS RE SULTING IN AN ADDITION OF RS. 1 61 367/-. THE CIT(A) UPHELD THE SAME AND THE ASSESSEE IS IN APPEAL VIDE GROUND NO.4. 7 11. THE LD. AR POINTED OUT THAT AS PER THE DETAILS FURNISHED AT PAGE 1 OF THE PAPER BOOK THE SIMILAR INTEREST @ 18% WAS ALLO WED IN THE PRECEDING YEAR. FURTHER RELIANCE WAS PLACED ON THE RATIO LAI D DOWN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN DEVENDRA KUMAR GUPTA & SONS (HUF) VS. JCIT (ITA NO. 1225/CHD/2010 ORDER DATED 8.12.2010. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE WAS PAYING INTEREST @ 18% ON THE UNSECURED LOANS RAISED FROM VARIOUS PARTIES. THE SAID INTEREST EXPENSES WAS CL AIMED AND ALLOWED @ 18% IN THE PRECEDING YEARS. FOLLOWING THE PRINCIPL E OF CONSISTENCY WE FIND NO MERIT IN THE DISALLOWING ANY PART OF THE IN TEREST EXPENDITURE PAID BY THE ASSESSEE. ACCORDINGLY WE DIRECT THE ASSESSI NG OFFICER TO ALLOW THE INTEREST @ 18% PER ANNUM AND THE ADDITION OF RS. 1 61.367/- IS DELETED. THUS GROUND NO.4 IS ALLOWED. 13. THE ASSESSEE VIDE GROUND NO.5 HAS RAISED THE IS SUE OF NON ADJUDICATION OF THE GROUND IN RESPECT OF DISALLOWAN CE OUT OF THE JEEP TELEPHONE FUEL AND MAINTENANCE OF JEEP BY CIT(A). HOWEVER IT WAS POINTED OUT BY THE LD. AR THAT 1/10 TH OF THE SIMILAR EXPENDITURE WAS DISALLOWED IN THE SUCCEEDING YEARS. LOOKING TO THE SMALLNESS OF THE ISSUE INVOLVED WE PROCEED TO DISPOSE OF THE PRESENT GROU ND OF APPEAL RAISED BY THE ASSESSEE THOUGH THE SAME HAS NOT BEEN ADJUDICAT ED BY THE CIT(A). WE FIND THAT THE ASSESSING OFFICER HAVE DISALLOWED RS. 43 874/- OUT OF JEEP TELEPHONE FUEL AND MAINTENANCE OF JEEP EXPENSES. T HE ASSESSEE HAS FURNISHED ON RECORD THE PROFIT AND LOSS ACCOUNT OF THE YEAR ENDING 31.3.2005 IN WHICH TELEPHONE EXPENSES OF RS. 80 350 /- HAS BEEN DEBITED AND JEEP FUEL AND MAINTENANCE OF JEEP AT RS. 78 30 2/- ARE DEBITED. WE 8 DIRECT THE ASSESSING OFFICER TO DISALLOW 1/10 TH OUT OF THE AFORESAID EXPENSES. THUS THE GROUND NOS. 5 & 6 ARE PARTLY ALLOWED. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF MARCH 2010. SD/- SD/- (N.BARATHVAJA SANKAR) (SUSHMA CHOWLA) VICE PRESIDENT JUDICIAL MEMBER DATED : 30 TH MARCH 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR