DCIT, New Delhi v. M/s I P Jewellers Pvt. Ltd., New Delhi

ITA 1633/DEL/2011 | 2007-2008
Pronouncement Date: 16-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 163320114 RSA 2011
Assessee PAN AABCI3960P
Bench Delhi
Appeal Number ITA 1633/DEL/2011
Duration Of Justice 5 month(s) 11 day(s)
Appellant DCIT, New Delhi
Respondent M/s I P Jewellers Pvt. Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 16-09-2011
Date Of Final Hearing 13-09-2011
Next Hearing Date 13-09-2011
Assessment Year 2007-2008
Appeal Filed On 04-04-2011
Judgment Text
ITA NO. 1633/DEL/2011 & CO NO. 153/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 1633/DEL/2011 A.Y. : 2007-08 DCIT CIRCLE 11(1) NEW DELHI ROOM NO. 312 CR BUILDING NEW DELHI VS. M/S I.P. JEWELLERS PVT. LTD. 2719 BANK STREET KAROL BAGH NEW DELHI - 110005 (PAN/GIR NO. : AABCI3960P AND C.O. NO. 153/DEL/2011 (IN ITA NO. 1633 /DEL/2011) A.Y. 2007-08 M/S I.P. JEWELLERS PVT. LTD. VS. DCIT CIRCLE 11(1 ) 2719 BANK STREET KAROL BAGH NEW DELHI NEW DELHI 110005 ROOM NO. 312 CR BUILDING (PAN/GIR NO. : AABCI3960P NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. DEEPAK GULATI CA DEPARTMENT BY : SH. SALIL MISHRA SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE EMANATE OUT OF ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) DATED 12.1.2011 AND PERTAIN TO ASSESSMENT YEAR 200 7-08. ITA NO. 1633/DEL/2011 & CO NO. 153/DEL/2011 2 REVENUES APPEAL REVENUES APPEAL REVENUES APPEAL REVENUES APPEAL 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INCO ME TAX (APPEALS) HAS ERRED IN RESTRICTING THE ADDITION OF ` 5 LACS AND GIVING RELIEF ON ` 45 LACS ON ACCOUNT OF REJECTION OF THE BOOKS OF ACCOUNT. 3. ASSESSEE COMPANY IN THIS REGARD DERIVED INCOME FRO M MANUFACTURING TRADING IN JEWELLERY. IN THE ASSESSMEN T ORDER ASSESSING OFFICER OBSERVED THAT ON PERUSAL OF THE ASSESSMEN T RECORDS INCLUDING THE RETURN OF INCOME BALANCE SHEET P&L ACCOUNT AND THE TAX AUDIT REPORT NUMEROUS DISCREPANCIES WERE OBSERVED. FURT HER ASSESSING OFFICER OBSERVED THAT THERE WAS ABSENCE OF A STOCK REGISTER CASH MEMOS ETC.. HE HELD THAT IF THESE FACTS WERE CONSIDE RED ALONGWITH ABSENCE OF VOUCHERS IN SUPPORT OF THE EXPENSES AND PURCHASES AND EXISTENCE OF LOW PROFITS MAY GIVE RISE TO LEGITIMATE INFERENCE THAT ALL IS NOT WELL WITH THE BOOKS AND THE SAME CANNOT BE RELI ED UPON TO ASSESS THE INCOME PROFITS OR GAINS OF AN ASSESSEE AND THE AUTHORITIES WOULD BE JUSTIFIED IN REJECTING THE ACCOUNT BOOKS U/S 145( 2). THE ASSESSING OFFICER MADE A LUMP SUM ADDITION OF ` 50 LACS OVER AND ABOVE THE PROFITS DECALRED BY THE ASSESSEE. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT HE HAS VERIFIED THE BOOKS OF A CCOUNTS. HE OBSERVED THAT STOCK REGISTER WAS HAND WRITTEN AND NOT PROPERLY MAINTAINED. LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER REFERRED THAT ASSESSEE HAS PRODUCED THE FOLLOWING D OCUMENTS BEFORE HIM : CASH BOOK LEDGER STOCK REGISTER SALE/PURCHASE BI LLS EXPENSES VOUCHERS AND BANK STATEMENT. ITA NO. 1633/DEL/2011 & CO NO. 153/DEL/2011 3 4.1 HE HELD THAT HE HAS VERIFIED THESE DOCUMENTS AND NOTED THAT ALL THE DOCUMENTS ARE SATISFACTORILY MAINTAINED EXCEPT S TOCK REGISTER. HE FURTHER OBSERVED THAT SUCH TYPE OF GOLD ORNAMENTS TRADE THE PREPARATION OF SELF MADE VOUCHERS BOGUS VOUCHERS/ B ILLS CANNOT BE RULED OUT. HE FURTHER OBSERVED THAT INFLATION OF EXPENDITURES CLAIMED IN P&L ACCOUNT CANNOT ALSO BE RULED OUT. CONSIDERI NG THE OVERALL PICTURE OF THE BUSINESS HE MADE DISALLOWANCE OF ` 5 LACS FROM ALL EXPENSES CLAIMED AND STOCK ACCOUNT NOT PROPERLY MAI NTAINED. HENCE HE HELD THAT IT WILL BE FAIR THAT ADDITION OF ` 5 L ACS WILL BE MADE ON ACCOUNT OF STOCK REGISTER NOT SATISFACTORILY MAINT AINED. HE DIRECTED THE ASSESSING OFFICER TO GIVE RELIEF AMOUNTING TO ` 45 00 000/-. 5. AGAINST THE ABOVE ORDER THE REVENUE AND ASSESS EE BOTH ARE IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RELEVANT RECORDS. WE FIND THAT ASSESSEE HAS NOT MAINTAINED THE STOCK REGISTER IN THIS REGARD AND CASH MEMOS AND VOUCHERS ETC. HAV E ALSO BEEN FOUND MISSING IN SOME CASES. FURTHERMORE THERE I S A DECLINE IN THE GROSS PROFIT RATE FROM 10.44% FOR THE YEAR ENDING 31 .3.2006 TO 8.99% IN THE PRESENT YEAR. ASSESSING OFFICER HAS MADE AN ADHOC DISALLOWANCE OF ` 50 LACS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS SUSTAINED THE DISALLOWANCE OF ` 5 LAC S. ABSENCE OF STOCK REGISTER AND IN SOME CASES CASH MEMO AND VOUCHERS D OES CALL FOR SOME DISALLOWANCE. THOUGH LD. COMMISSIONER OF INCOME T AX (APPEALS) HAS UPHELD THE ADDITION ONLY TO THE EXTENT OF ` 5 L ACS BUT NO BASIS HAS BEEN GIVEN BY HIM TO ARRIVE AT A CONCLUSION THAT H OW THE ADDITION ONLY TO THE EXTENT OF ` 5 LACS WAS JUSTIFIABLE. SIMILAR IS THE CASE WITH THE ADDITION MADE BY THE ASSESSING OFFICER WHEN HE MAD E ITA NO. 1633/DEL/2011 & CO NO. 153/DEL/2011 4 THE ADHOC ADDITION OF ` 50 LACS. ACCORDING TO WEL L SETTLED LAW EVEN WHETHER THE ADDITION IS TO BE MADE ON THE BASIS OF E STIMATE THEN IT MUST HAVE SOME REASONABLE BASIS. ACCORDING TO FAC TS NOTED BY THE ASSESSING OFFICER AND LD. COMMISSIONER OF INCOME TA X (APPEALS) THE GP RATE OF EARLIER YEARS HAVE ALSO BEEN PROVIDED IN THE SHAPE OF CHART. THEREFORE IT WOULD HAVE BEEN APPROPRIATE BY THE L D. COMMISSIONER OF INCOME TAX (APPEALS) IF HE HAS REFERRED TO THAT HI STORY AND THOUGH THE ABSENCE OF STOCK REGISTER JUSTIFIED THE REJECTION OF BOOKS BUT THE ESTIMATE ADDITION SHOULD HAVE BEEN BASED ON THE H ISTORY OF THE CASE. THIS HAS BEEN GIVEN AS PER THE CHART FURNISHED BY T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS ANNEX ED WITH HIS ORDER WHICH IS REFERRED TO AS TREND CHART OF TRAD ING RESULT. THE IMPUGNED ASSESSMENT YEAR IS 2007-08 IN WHICH THE GP RA TE HAS BEEN SHOWN AT 8.99% AS AGAINST THE GP RATE OF PRECEDING 3 YEARS AS I.E. ASSESSMENT YEAR 2004-05 IT IS 10.94% ASSESSMENT YEA R 2005-06 IT IS 12.86% AND FOR ASSESSMENT YEAR 2006-07 IT IS 10.44%. THOUGH IT HAS BEEN THE CASE OF THE LD. AUTHORISED REPRESENTATIVE THAT WHILE UPHOLDING THE ADDITION ITS NET PROFIT INSTEAD OF G ROSS PROFIT SHOULD BE CONSIDERED BUT WE FIND THAT NO JUSTIFICATION IN SU CH CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE AS WHEN SEEING THE B OOKS RESULTS IT WOULD BE APPROPRIATE TO GO THROUGH THE GP RATE INSTE AD OF GOING INTO NET PROFIT RATE BECAUSE NET PROFIT MAY HAVE SOME OT HER FACTORS ALSO BY WHICH THE NET PROFIT CAN INCLINE AND DECLINE. THERE FORE THE GP RATE IS GENERALLY TAKEN AS CRITERIA WHEN AN ESTIMATED ADDITI ON IS TO BE MADE. LOOKING INTO THE HISTORY OF THE CASE AND ACCEPTING SOME CONTENTION OF THE ASSESSEE THAT FOR THE YEAR UNDER CONSIDERATION THERE MAY BE SOME REASON TO HAVE SOME LESS GP RATE WE ARE OF THE OPIN ION THAT APPLICATION OF GP RATE OF 10% WILL BE APPROPRIATE A ND THE TURNOVER FOR ITA NO. 1633/DEL/2011 & CO NO. 153/DEL/2011 5 THE YEAR UNDER CONSIDERATION AS MENTIONED IN THE T REND CHART IS A SUM OF ` 12 97 35 457/- AND GP SHOWN IS AROUND 9%. T HEREFORE ADDITION OF THE AMOUNT OF LUMPSUM 1% OF THE TURNOV ER WILL BE APPROPRIATE. HAVING HELD SO WE FIND NO JUSTIFICATI ON IN THE CROSS OBJECTION RAISED BY THE ASSESSEE VIDE WHICH ASSESSEE HAS CONTESTED THE SUSTAINED ADDITION OF ` 5 LACS BY THE LD. COMMISS IONER OF INCOME TAX (APPEALS) AS IN THE DEPARTMENTAL APPEAL WE HO LD THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN EXCES S RELIEF TO THE ASSESSEE. ACCORDINGLY INSTEAD OF SUSTAINED ADDITI ON OF ` 5 LACS WE DIRECT THAT THE ADDITION IS MADE IN THE HANDS OF TH E ASSESSEE ON ACCOUNT OF REJECTION OF BOOKS AND APPLICATION OF GRO SS PROFIT RATE IS ` 12 97 354/-. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND CROSS OBJECTION FILED BY THE ASSESSEE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/9/2011. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [I.P. I.P. I.P. I.P. BANSAL BANSAL BANSAL BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 16/9/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES