ITO, Jind v. Sh. Surender Kumar, Jind

ITA 1199/CHANDI/2010 | 2007-2008
Pronouncement Date: 02-11-2011 | Result: Dismissed

Appeal Details

RSA Number 119921514 RSA 2010
Assessee PAN ACUPK2770K
Bench Chandigarh
Appeal Number ITA 1199/CHANDI/2010
Duration Of Justice 1 year(s) 21 day(s)
Appellant ITO, Jind
Respondent Sh. Surender Kumar, Jind
Appeal Type Income Tax Appeal
Pronouncement Date 02-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 02-11-2011
Date Of Final Hearing 01-11-2011
Next Hearing Date 01-11-2011
Assessment Year 2007-2008
Appeal Filed On 11-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI H.L.KARWA HON'BLE VICE PRESIDENT AND SHRI MEHAR SINGH ACCOUNTANT MEMBER ITA NO. 1207/CHD/2010 ASSESSMENT YEAR: 2007-08 SHRI SURENDER KUMAR VS THE ITO C/O M/S H.R. ENTERPRISES WARD-1 DISTT JIND JIND PAN NO. ACUPK2770K & ITA NO. 1199/CHD/2010 ASSESSMENT YEAR: 2007-08 THE ITO VS SHRI SURENDER KUMAR JIND WARD-1 JIND C/O M/S H.R. ENTERPRISES DISTT JIND PAN NO. ACUPK2770K (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SMT. JAI SHREE SHARMA DATE OF HEARING : 01.11.2011 DATE OF PRONOUNCEMENT : 02.11.2011 ORDER PER H.L.KARWA VP THESE TWO APPEALS BY THE ASSESSEE AND REVENUE ARE D IRECTED AGAINST THE ORDER OF CIT(A) ROHTAK DATED 11.8.2010 RELATIN G TO ASSESSMENT YEAR 2007-08. 2 2. FIRSTLY WE WILL DECIDE ASSESSEES APPEAL I.E. I TA NO. 1207/CHD/2010 RELATING TO ASSESSMENT YEAR 2007-08. THE ONLY GROUND RAISED BY THE ASSESSEE IN THIS APPEAL READS AS UNDE R:- 1. ON FACTS IN LAW AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN LAW AND FACTS BY UPHOLDING THE ADDITION OF RS. 2 00 000/- ON ACCOUNT OF LOW GROSS PROFIT RATE. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A PROPRIETOR OF H.R. ENTERPRISES NARWANA. THE MAIN BUSINESS OF THE ASSESSEE IS TRADING IN TIMBER. FOR THE ASSESSMENT YEAR 2007-08 THE ASSESSEE HAD DECLARED GROSS PROFIT OF RS. 55.79 LAC S ON A TOTAL TURN OVER OF RS. 63.40 CRORES RESULTING IN A GP RATE OF 0.88%. THE ASSESSING OFFICER ASKED THE ASSESSEE TO JUSTIFY LOW GP RATE BY FURNIS HING A COMPARATIVE CHART AND ALSO GP RATE SHOWN BY OTHER TRADERS OF TH E LINE. IN A REPLY THE ASSESSEE SUBMITTED THAT DURING THE YEAR UNDER CONSI DERATION HIS BUSINESS WAS WHOLESALE TRADE WHILE DURING THE FINANCIAL YEAR 2004-05 IT WAS RETAIL TRADE. THE ASSESSEE ALSO SUBMITTED THAT THE TURN OV ER IS INCREASED APPROXIMATELY BY NINE TIMES IN COMPARISON TO THE FI NANCIAL YEAR 2005-06 AND THEREFORE REQUESTED THAT THE TRADING RESULTS MAY BE ACCEPTED. THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE EXPLANAT ION OF THE ASSESSEE AND DRAWN ATTENTION OF THE ASSESSEE TO THE COMPARAB LE CASE OF M/S H.R. TIMBER NARWANA WHEREIN ON A TURN OVER OF RS. 23.19 CRORES GP HAS BEEN SHOWN AT RS. 71.46 LACS AT A GP RATE OF 3.08% FOR T HE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE FAILED TO GIVE ANY PLAUSIBLE EXPLANATION FOR THE LO W GP RATE. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSE E DID NOT MAINTAIN ANY DAY TO DAY RECORD OF GOODS AND THEREFORE IT CANNO T VERIFIED WHETHER ALL 3 THE PURCHASES HAVE BEEN ACCOUNTED FOR IN THE SALE O R CLOSING STOCK. HE FURTHER OBSERVED THAT EVEN THE QUALITATIVE AS WELL AS QUANTITATIVE DETAILS OF THE GOODS WERE NOT MAINTAINED. THE ASSESSING OFFIC ER THEREFORE REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME TAX A CT 1961 (IN SHORT 'THE ACT') AS THE TRADING RESULTS DECLARED WERE NOT SUSC EPTIBLE FOR FULL VERIFICATION. TAKING INTO ACCOUNT THE FACTS AND C IRCUMSTANCES OF THE CASE THE ASSESSING OFFICER MADE ADDITION OF RS. 2 00 000 /- TO COVER UP THE LOW GP. 4. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) AND THE LD. CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER STATING THAT THE ASS ESSING OFFICER HAS VERIFIED THE BOOKS OF ACCOUNT AND CAME TO THE CONCL USION THAT PROFITS CANNOT BE ASCERTAINED CORRECTLY FROM THE BOOKS MAIN TAINED BY THE ASSESSEE SINCE STOCK BOOK WHICH IS IMPORTANT FOR T HE WHOLE SALE TRADE HAS NOT BEEN MAINTAINED. THE CIT(A) ALSO OBSERVED THAT THE ASSESSING OFFICER HAS REFERRED A COMPARABLE CASE WITH THE AS SESSEE ON THE ISSUE OF LOW GP FOR WHICH THE ASSESSEE COULD NOT GIVE ANY PL AUSIBLE EXPLANATION. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN TH IS CASE THE ASSESSEE HAS SUBMITTED WRITTEN SUBMISSIONS. THE AS SESSEE HAS STATED THAT HE HAS MAINTAINED REGULAR BOOKS AND THESE WERE GOT AUDITED FROM THE CHARTERED ACCOUNTANT. ALL PURCHASES AND SALES WERE DULY SUPPORTED BY VOUCHERS CONTAINING THE DETAILS OF THE QUANTITIES. THE SUMMARY OF SALES AND PROFITS FOR THE THREE YEARS ARE AS UNDER:- 4 ASSESSMENT YEAR TURN OVER GROSS PROFIT RATE 2007-08 63 40 29 853.85 55 79 983.12 0.88% 2006-07 6 85 58 349.00 20 96 893.18 3.06% 2005-06 4 23 92 144.75 11 44 609.75 2.70% 6. THE ASSESSEE HAS ALSO SUBMITTED THAT THE ASSESSI NG OFFICER HAS NOT POINTED OUT WHERE THE ADDITION IS ON ACCOUNT OF SUP PRESSED SALES INFLATED PURCHASE OR LOW STOCK VALUATION SO AS TO RESULT IN HIGHER GROSS PROFIT. IT IS ALSO SUBMITTED THAT THE ASSESSING OFFICER INVOKED T HE PROVISIONS OF SECTION 145(3) OF THE ACT TO MAKE ONLY ADHOC AND AR BITRARY ADDITION OF RS. 2 LACS TO THE GROSS PROFIT AND THEREBY BUSINESS INC OME OF THE ASSESSEE. IT IS ALSO SUBMITTED BY THE ASSESSEE THAT HE HAS FOLLO WED THE SAME METHOD OF ACCOUNTING AS WELL AS MAINTAINED SAME SET OF BOOKS DURING THIS YEAR ALSO AS IN THE ASSESSMENT YEAR 2005-06. ACCORDINGLY IT WAS SUBMITTED THAT THERE WAS NO JUSTIFICATION IN MAKING THE ADDITION. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN TH IS CASE THE ASSESSEE HAS CONTENDED THAT THE ASSESSING OFFICER HAS NOT PO INTED OUT ANY DEFECT OR DEFICIENCY IN THE BOOKS OF ACCOUNT REGULARLY MAINTA INED BY THE ASSESSEE. IN THIS CASE THE ASSESSING OFFICER HAS CATEGORICAL LY OBSERVED THAT THE ASSESSEE DID NOT MAINTAIN ANY DAY TO DAY RECORD OF BOOKS AND THEREFORE IT WAS NOT POSSIBLE TO VERIFY WHETHER THE PURCHASES WERE ACCOUNTED FOR IN THE SALE OF CLOSING STOCK. THE ASSESSING OFFICER HA S ALSO OBSERVED THAT THE ASSESSEE DID NOT MAINTAIN QUALITATIVE AS WELL AS QU ANTITATIVE DETAILS OF GOODS. EVEN THE GROSS PROFIT SHOWN BY THE ASSESSEE WAS LOW AS COMPARED TO THE EARLIER YEARS. THE ASSESSING OFFICER HAS AL SO DRAWN ATTENTION OF THE ASSESSEE TO A COMPARABLE CASE OF H.R. TIMBERS NARW ANA WHEREIN ON A TURN OVER OF RS. 23.19 CORES GP HAS BEEN SHOWN AT RS. 71.46 LACS AT A GP 5 RATE OF 3.08% FOR THE YEAR UNDER CONSIDERATION. AS PER THE ASSESSING OFFICER THE ASSESSEE COULD NOT GIVE ANY PLAUSIBLE EXPLANATION FOR THE LOW GP RATE. HOWEVER WE FIND THAT THE TURN OVER HAS I NCREASED APPROXIMATELY BY NINE TIMES IN COMPARISON TO THE FINANCIAL YEAR 2005-06 AND THIS MAY BE ONE OF THE REASONS FOR DECLARING LOW GP. CONSID ERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WE ARE OF TH E VIEW THAT THE ADDITION OF RS. 1 LAC IN THIS CASE WILL MEET THE E NDS OF JUSTICE. THUS THE ASSESSEE GETS A RELIEF OF RS. 1 LAC ON THIS ACCOUNT . GROUND NO.1 OF THE APPEAL IS ALLOWED PARTLY. 8. IN ITA NO. 1199/CHD/2010 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DIRECTING TO DELETE THE ADDITIO N AGGREGATING TO RS. 13 50 000/- MADE U/S 68 OF THE I .T. ACT FOR THE ASSESSEES FAILURE TO EXPLAIN SATISFACT ORILY THE SOURCE AND GENUINENESS OF THE CASH CREDITS APPEARING IN THE NAMES OF S/SHRI BHAGWAN DASS SUBHASH CHAND AND SMT. SUNITA AGGRAWAL AT RS. 6 LACS RS. 3.50 LACS AND RS. 4 LACS RESPECTIVELY AT THE TIME OF ASSESSMENT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF INTEREST OF RS. 1 27 478/- CREDITED TO THE ACCOUNTS OF PERSONS WHOSE CREDITS WERE HELD AS BOGUS. 9. VIDE GROUND NOS. 1 & 2 THE REVENUE HAS CHALLENG ED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS. 13 50 00 0/- AS AN UNEXPLAINED CASH CREDIT AND RS. 127 478/- BEING INTEREST PAID T HEREON. 6 10. THE ASSESSING OFFICER NOTICED THREE UNSECURED L OANS FROM THE FOLLOWING PERSONS WERE RECEIVED DURING THE YEAR:- A) SHRI BHAGWAN DASS RS. 6 00 000/- B) SHRI SUBHASH CHAND S/O SHRI BHAGWAN DASS RS. 3 50 0000/- C) SMT. SUNITA AGGARWAL RS. 4 00 000/- TOTAL RS. 13 50 000/- VIDE ORDER SHEET ENTRY DATED 2.12.2009 THE ASSESSI NG OFFICER ASKED THE ASSESSEE TO FURNISH DOCUMENTARY EVIDENCE TO EXPLAIN THE THREE MAIN REQUIREMENTS OF SECTION 68 OF THE INCOME TAX ACT 1 961 (IN SHORT 'THE ACT') I.E. IDENTITY OF THE CREDITOR CAPACITY OF TH E CREDITOR TO ADVANCE THE MONEY AND GENUINENESS OF THE TRANSACTIONS. IN THIS REGARD THE ASSESSEE SUBMITTED THAT THERE WAS CRIMINAL CASE FILED BY THE ABOVE DEPOSITORS AGAINST THE ASSESSEE U/S 138 R.W.S. 141 & 142 OF TH E NEGOTIABLE INSTRUMENTS ACT IN THE COURT OF S.D.J.M. NARWANA. THE ASSESSEE ALSO SUBMITTED THAT NO UNIDENTIFIED PERSON CAN FILE A CR IMINAL CASE AGAINST ANY PERSON IN THE COURT. THUS IDENTITY OF THE DEPOSIT ORS WAS PROVED BEYOND DOUBT. THE ASSESSEE ALSO PROVIDED THE ASSESSING OF FICER WITH THE PERMANENT ACCOUNT NUMBERS OF THE SAID DEPOSITORS AN D THEY WERE THE REGULAR INCOME TAX ASSESSEES WITH THE INCOME TAX OF FICE JIND I.E. WITH THE JURISDICTION OF THE ASSESSING OFFICER ITSELF. AS REGARDS THE GENUINENESS OF THE TRANSACTIONS THE ASSESSEE PRODU CED BANK CERTIFICATE THAT THE TRANSACTIONS WERE ENTERED INTO BY CHEQUE D RAWN ON THEIR BANK ACCOUNTS AND FURTHER BY THE FACT THAT THESE DEPOSIT ORS HAVE FILED A CRIMINAL CASE FOR DISHONOUR OF CHEQUE ISSUED AGAINST THE ASS ESSEE IN THE COURT. HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT THE A BOVE EXPLANATION OF THE ASSESSEE AND MADE ADDITION U/S 68 OF THE ACT ST ATING THAT DESPITE 7 SUFFICIENT OPPORTUNITY PROVIDED THE ASSESSEE COULD NOT LEAD ANY OTHER CONCLUSIVE EVIDENCE TO ESTABLISH THE IDENTITY OF TH E CREDITOR CAPACITY OF THE CREDITOR TO ADVANCE THE MONEY AND GENUINENESS O F THE TRANSACTIONS. THE ASSESSING OFFICER ALSO DISALLOWED INTEREST OF R S. 1 27 478/- PAID ON THE ABOVE AMOUNT. 11. ON APPEAL THE CIT(A) DELETED THE ADDITIONS OBS ERVING AS UNDER:- 4. IN THE APPEAL PROCEEDINGS THE AUTHORIZED REPRESENTATIVE (AR) SUBMITTED THAT HE HAD DISCHARGE D THE ONUS CAST ON HIM BY FURNISHING THE PAN NUMBER OF TH E SAID CREDITORS WHO WERE ASSESSED WITH THE ASSESSING OFFI CER HIMSELF WHICH COULD HAVE BEEN VERIFIED FROM THE AS SESSMENT RECORDS. REGARDING THE GENUINENESS OF THE TRANSACT IONS BANK CERTIFICATES WERE PRODUCED AND FURTHER BY THE FACT THAT THESE CREDITORS HAVE FILED A CRIMINAL CASE FOR DISH ONOR OF CHEQUE ISSUED BY THE ASSESSEE. HE FURTHER RE-ITERA TED THE INABILITY TO PRODUCE THE CONFIRMATIONS FROM THE CRE DITORS IN VIEW OF THE CRIMINAL CASE FILED BY THEM AGAINST THE ASSESSEE. IN SUPPORT OF THE CONTENTION THE AR FILED THE PROC EEDINGS OF CRIMINAL CASE IN THE COURT OF S.D.J.M. NARWANA AND FILED ACCOUNT COPIES IN HIS BOOKS UPTO 31.3.2010 WHEREIN INTEREST HAS NOT BEEN CREDITED SUBSEQUENT TO THE FILING OF C RIMINAL CASE. HE FURTHER PRODUCED EVIDENCE REGARDING DEDU CTION OF TDS ON THE INTEREST CREDITED BEFORE THE FILING OF C RIMINAL CASE BY THE CREDITORS. TO VERIFY THE CLAIM OF ASSE SSEE THE ASSESSING OFFICER HAS BEEN DIRECTED TO SUMMON THE C REDITORS TO CONFIRM THE CASH CREDITS. THE ASSESSING OFFICER VIDE REPORT DATED 25/29.6.2010 REPORTED THAT THE BOOKS O F THE CREDITORS EVIDENCING THE LOAN TO THE ASSESSEE HAD B EEN VERIFIED AND ENCLOSED THE COPIES OF THE RETURNS ALO NGWITH THE ACCOUNT OF THE ASSESSEE. THEREFORE IT IS EVIDENT FROM THE REPORT OF THE ASSESSING OFFICER AND THE DOCUMENTS F URNISHED BY THE ASSESSEE REGARDING THE PROCEEDINGS IN THE CO URT THAT THE CASH CREDITS ARE GENUINE. THE ASSESSING OFFICE R IS 8 THEREFORE DIRECTED TO DELETE THE ADDITION OF RS. 1 3 50 000/- TOWARDS CASH CREDITS AND RS. 1 27 478/- TOWARDS INT EREST THEREON. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE THE C IT(A) HAD DIRECTED THE ASSESSING OFFICER TO SUMMON THE CREDITORS AND CONFI RM THE CASH CREDITS. IN RESPONSE TO THE SAID DIRECTION OF THE CIT(A) TH E ASSESSING OFFICER VIDE REPORT DATED 25/29.6.2010 REPORTED THAT THE BOOKS O F ACCOUNT OF THE CREDITORS EVIDENCING THE LOAN TO THE ASSESSEE HAD B EEN VERIFIED AND ENCLOSED THE COPIES OF THE RETURN ALONGWITH THE ACC OUNT OF THE ASSESSEE. CONSIDERING THE REPORT OF THE ASSESSING OFFICER AND ALSO THE DOCUMENTARY EVIDENCE FURNISHED BY THE ASSESSEE THE CIT(A) CAM E TO THE CONCLUSION THAT THE CASH CREDITS ARE GENUINE. IN THE INSTANT CASE THE ASSESSEE HAS DISCHARGED THE ONUS WHICH WAS CAST UPON HIM US/ 68 OF THE ACT. THE ASSESSEE HAS PROVED THE IDENTITY OF THE DEPOSITORS BY FURNISHING THE PAN NUMBER OF THE CREDITORS WHO WERE ASSESSED WITH THE ASSESSING OFFICER ITSELF. REGARDING THE GENUINENESS OF THE TRANSACTI ONS BANK CERTIFICATES WERE PRODUCED AND FURTHER BY THE FACT THAT CREDITOR S HAVE FILED A CRIMINAL CASE FOR DISHONOR OF CHEQUE ISSUED BY THE ASSESSEE. AS REGARDS THE CAPACITY OF THE CREDITOR TO ADVANCE THE MONEY THE ASSESSEE HAS SUBMITTED THAT ALL THE CREDITORS ARE INCOME TAX ASSESSEES. F URTHERMORE THE ASSESSING OFFICER VIDE REPORT DATED 25/29.6.2010 R EPORTED THAT BOOKS OF THE CREDITORS EVIDENCING THE LOAN TO THE ASSESSEE H AVE BEEN VERIFIED AND ANNEXED THE COPIES OF THE RETURNS ALONGWITH ACCOUNT OF THE ASSESSEE. THUS CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCE S OF THE PRESENT CASE WE DO NOT FIND ANY LEGAL INFIRMITY IN THE ORDER OF CIT(A). IN OUR VIEW THE CIT(A) HAS CORRECTLY DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION 9 OF RS. 13 50 000/- TOWARDS CASH CREDITS AND RS. 1 27 478/- TOWARDS INTEREST THEREON. CONSEQUENTLY WE DISMISS BOTH TH E GROUNDS OF REVENUES APPEAL. 13. IN THE RESULT ASSESSEES APPEAL IS ALLOWED PAR TLY WHILE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 ND DAY OF NOVEMBER 2011. SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 2 ND NOVEMBER 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR