M/s Mahawar Steel Trading Co., Mandi Gobindgarh v. ITO, Sirhind

IN THE INCOME TAX APPELLATE TRIBUNAL: A BENCH: CHANDIGARH BEFORE HONBLE SHRI D K SRIVASTAVA AM AND HONBLE MS. SUSHMA CHOWLA JM ITA NO. 1443/CHANDI/2010 ASSESSMENT YEAR: 2007-08 M/S MAHAWAR STEEL TRADING CO V I.T.O. SIRHIND LOHA BAZAR MANDI GOBINDGARH PAN: AAAFT 6619 A APPELLANT BY: SHRI ASHWANI KUMAR RESPONDENT BY: SHRI N.K. SAINI ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 18.11.2010 ON TH E FOLLOWING GROUNDS: 1 THAT ORDER PASSED U/S 250(6) OF THE INCOME-TAX A CT IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS THE LD. CIT(A) WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD THE ACTION OF THE AO IN REJECTIN G THE BOOKS OF ACCOUNT WITHOUT PIN POINTING ANY SPECIFIC DEFECT IN THE MAI NTENANCE OF THE SAME. 2 THAT HE WAS FURTHER NOT JUSTIFIED TO ARBITRARILY UPHOLD THE ACTION OF THE AO IN ESTIMATING THE COMMISSION INCOME AT RS. 1 6 37 669/- BY APPLYING AN ARBITRARY PERCENTAGE OF 1-1/2% OF THE T OTAL SALES. 3 THAT THE LD. CIT(A) GRAVELY ERRED IN NOT GIVING SPECIFIC DIRECTION WITH RESPECT TO THE ALLOWABILITY OF EXPENSES CLAIME D IN THE P & L ACCOUNT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE A FIRM FILED ITS RETURN OF INCOME ON 23.10.2007 RETURNING TOTAL INCO ME AT RS. 3 04 920/-. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN I RON AND STEEL GOODS. THE TURN OVER SHOWN BY THE ASSESSEE WAS RS.10 91 77 946/-. T HE AO PERUSED THE ACCOUNTS OF THE ASSESSEE AND NOTICED THAT THE ASSES SEE HAD NEITHER SHOWN ANY OPENING OR CLOSING STOCK IN THE TRADING ACCOUNT. HE THEREFORE INFERRED THAT THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF TRADING BUT IN THE BUSINESS OF EARNING COMMISSION AND ACCORDINGLY APPLIED NET PROF IT RATE OF 1.5% ON THE SALES AND THUS COMPUTED THE INCOME FROM COMMISSION AT RS. 16 37 669/-. ITA NO.1443/CHANDI/2010 MAHAVIR STEEL TRADING CO 2 3. AGGRIEVED BY THE ORDER PASSED BY THE ASSESSING O FFICER THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HOWEVE R ENDORSED THE ORDER OF THE AO IN THIS BEHALF. 4. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF THE APPEAL IT WAS SUBMITTED THAT THE ASSESSEE HAS FOLLOWED SIMILAR PATTERN OF BUSINESS A ND ALSO SIMILAR BOOKS OF ACCOUNT AS IN THE PAST. ACCORDING TO HIM THE ASSES SEE ON RECEIPT OF ORDERS FROM ITS CUSTOMERS PROCURES GOODS FROM REPUTED DEALERS/ SUPPLIERS AND MAKES ARRANGEMENTS FOR SUPPLY OF GOODS DIRECTLY FROM THE PREMISES OF THE SELLERS TO THE PREMISES OF THE PURCHASERS. HE SUBMITTED THAT THE A SSESSEE HAD BEEN FOLLOWING THE AFORESAID PRACTICE IN THE PAST ALSO. HE POINTED OUT THAT THE AFORESAID PRACTICE FOLLOWED BY THE ASSESSEE DID NOT REQUIRE HIM TO MAI NTAIN STOCK AT HIS PREMISES AND THEREFORE THERE WAS NO SUCH STOCK IN THE BOOKS. HIS NEXT SUBMISSION WAS THAT THE AO HAS NOT GIVEN ANY REASON FOR REJECTING THE BOOKS OF ACCOUNT. 5. IN REPLY THE LD. DR SUPPORTED THE ORDERS PASSED BY THE AO AND CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. THE SUBMISSIONS OF THE ASSESSEE AS REG ARDS NATURE OF THE BUSINESS HAVE NOT BEEN CONTROVERTED BY THE DEPARTMENT. THE D EPARTMENT HAS ALSO NOT CONTROVERTED THE SUBMISSIONS OF THE ASSESSEE THAT I T WAS FOLLOWING THE SIMILAR BUSINESS PRACTICE AND MAINTAINED SIMILAR BOOKS OF A CCOUNT IN THE PAST WHICH ACCORDING TO HIM WERE DULY ACCEPTED BY THE DEPARTM ENT. IF THE ASSESSEE HAS MADE ARRANGEMENT FOR DIRECT SUPPLY OF GOODS FROM TH E PREMISES OF SELLERS TO THE PREMISES OF ITS CUSTOMERS THE ASSESSEE OBVIOUSLY W OULD HAVE NO OPENING OR CLOSING STOCK. IN THE ABSENCE OF ANY CONVINCING REA SON TO ESTABLISH THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE IN CORRECT OR INCOMPLETE IT WAS NOT OPEN TO THE AO TO REJECT THE BOOK RESULTS. IN THIS VIEW OF THE MATTER THE IMPUGNED ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS DELETED. APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 18 FEBRUARY 2011 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVASTA VA) JUDICIAL MEMBER ACCOUNTANT MEMBE R CHANDIGARH: THE 18 FEBRUARY 2011 SURESH ITA NO.1443/CHANDI/2010 MAHAVIR STEEL TRADING CO 3 COPY TO: 1. THE APPELLANT M/S MAHAVIR STEEL TRADING CO. MAN DI GOBINDGARH 2. THE RESPONDENT ITO SIRHIND. 3. THE CIT(A) PATIALA 4. THE CIT PATIALA 5. THE D.R INCOME-TAX DEPARTMENT CHANDIGARH TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH