M/s Rama Shankar Manoj Kumar, Agra v. D.C.I.T., Central Circle, Agra

ITA 180/AGR/2011 | 2006-2007
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 18020314 RSA 2011
Assessee PAN AAJFR2150G
Bench Agra
Appeal Number ITA 180/AGR/2011
Duration Of Justice 10 month(s) 12 day(s)
Appellant M/s Rama Shankar Manoj Kumar, Agra
Respondent D.C.I.T., Central Circle, Agra
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 30-03-2012
Date Of Final Hearing 26-03-2012
Next Hearing Date 26-03-2012
Assessment Year 2006-2007
Appeal Filed On 18-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE : SHRI BHAVNESH SAINI JUDICIAL MEMBER & SHRI A. L. GEHLOT ACCOUNTANT MEMBER ITA NO. 180/AGRA/2011 ASST. YEAR : 2006-07 M/S. RAMA SHANKER MANOJ KUMAR VS. D.C.I.T. CENTR AL CIRCLE 89 MOTIGANJ AGRA. AGRA. (PAN : AAJFR 2150 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANURAG SINHA ADVOCATE RESPONDENT BY : SHRI WASEEM ARSHAD SR. DR DATE OF HEARING : 26.03.2012 DATE OF PRONOUNCEMENT OF ORDER : 30.03.2012 ORDER PER BHAVNESH SAINI J.M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-II AGRA DATED 22.02.2011 FOR THE ASSESSMENT YEAR 2006- 07. THE ASSESSEE IN THE GROUNDS OF APPEAL CHALLENGED THE ORDER OF LD. CIT(A ) IN CONFIRMING PART OF THE ADDITION BY APPLYING G.P. RATE OF 4.27% AGAINST 2.9 8% DISCLOSED BY THE ASSESSEE. FURTHER ADDITION OF RS.86 100/- WAS ALSO CHALLENGE D ON ACCOUNT OF EXCESS STOCK. INTEREST U/S. 234B IS ALSO UNDER CHALLENGE. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FIRM DERIVES INCOME FROM TRADING OF RICE. THE ASSESSEE FIRM WAS CONSTITUTED W.E.F. 01.04.2005. PREVIOUSLY IT ITA NO. 180/AGRA/2011 2 WAS DOING BUSINESS IN THE NAME AND STYLE OF M/S. RA MA SHANKER DINESH KUMAR AT THE SAME ADDRESS TILL 31.03.2005. A SEARCH U/S. 132 OF THE IT ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE THEIR FAMILY MEMBERS AND THEIR BUSINESS CONCERNS ON 05.01.2006. DURING THE COURSE OF SEARCH CERTAIN DO CUMENTS BOOKS OF ACCOUNT ETC. WERE FOUND. THE BOOK OF ACCOUNT WERE SEIZED VIDE AN NEXURES WHICH ARE NOTED AT PAGES 2 TO 7 OF THE ASSESSMENT ORDER WHICH INCLUDE D BOOKS OF ACCOUNT PAPERS ETC. BELONGING TO THE ASSESSEE FIRM. THE ASSESSEE WAS AL SO REQUIRED TO SPECIFY THE EXACT BOOKS OF ACCOUNT WHERE THE TRANSACTIONS CONTAINED I N THE SEIZED PAPERS WERE ENTERED INTO AND ALSO DIRECTED TO CO-RELATE THE SAM E WITH THE BOOKS OF ACCOUNT. THE REQUIRED INFORMATION WAS NOT FURNISHED AND EVEN THE PROPER EXPLANATIONS HAVE NOT BEEN PROVIDED WITH REGARD TO ENTRIES IN THE BOOKS O F ACCOUNT. THE AO FURTHER NOTED THAT SEARCH WAS TEMPORARILY CONCLUDED AND SEALS WER E PUT BY THE SEARCH PARTY ON THE PREMISES. HOWEVER IN THE NIGHT THE PREMISES W ERE BROKEN OPEN AND DOCUMENTS BOOKS OF ACCOUNT LOOSE PAPERS AND STOCK S WERE REMOVED. FIR TO THAT EFFECT WAS ALSO LODGED WITH THE POLICE. THE STOCK F OUND AT DIFFERENT PREMISES OF THE ASSESSEE IS ALSO NOTED AT PAGES 8 TO 10 OF THE ASSE SSMENT ORDER AND THE ASSESSEE WAS REQUIRED TO EXPLAIN THE AVAILABILITY OF STOCK WITH REFERENCE TO THE PURCHASE BILLS AND BOOKS OF ACCOUNT AND THE ENTRIES RECORDED IN THE SA ME. THE ASSESSEE DID NOT FILE THE REQUIRED DETAILS AND NO SATISFACTORY EXPLANATION WA S GIVEN WITH REGARD TO DIFFERENCE IN THE STOCK. SEVERAL DETAILS WERE ALSO CALLED FOR AT THE ASSESSMENT STAGE WHICH ARE ITA NO. 180/AGRA/2011 3 NOTED IN THE ASSESSMENT ORDER BUT THE ASSESSEE HAS NOT FURNISHED REPLY TO THE SATISFACTION OF THE AO. THE AO THEREFORE NOTED TH AT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT AND THAT THE BOO KS OF ACCOUNT ARE NOT CORRECT AND COMPLETE. THEREFORE VERIFICATION IS NOT POSSIB LE AND CORRECT PROFIT CANNOT BE DEDUCED THERE FROM. THEREFORE BOOK RESULTS OF THE ASSESSEE WERE REJECTED U/S. 145(3) OF THE IT ACT. IT WAS ALSO NOTED THAT THE PA RENT COMPANY M/S. RAMA SHANKER DINESH KUMAR HAS SHOWN G.P. RATE IN EARLIER YEARS AT 4.29% 5.15% AND 3.36%. THEREFORE AVERAGE OF THE SAME WAS TAKEN AT 4.27% G.P. AND SINCE EXCESS STOCK WAS NOT EXPLAINED AND DETAILS WERE NOT FURNIS HED THEREFORE THE TOTAL SALES WERE ESTIMATED AT RS.5 00 00 000/- AS AGAINST SALES DECLARED BY THE ASSESSEE AT RS.3 62 98 317/-. BY APPLYING GP RATE OF 4.27% ON E STIMATED SALES OF RS.5 00 00 000/- THE PROFIT WAS WORKED OUT TO RS.2 1 35 000/- AS AGAINST RS.10 46 203/- DECLARED BY THE ASSESSEE AND ACCORDI NGLY THE ADDITION OF RS.10 88 797/- WAS MADE. FURTHER IT WAS NOTED THAT ADMITTEDLY THERE WAS VARIATION IN THE STOCK FOUND ON THE DATE OF SURVEY AND THE EX CESS STOCK WAS COUNTED TO 82 BAGS OF BANSMATI RICE WEIGHING 25 KG EACH BAG. RATE OF BANSMATI RICE AT THE RELEVANT TIME WAS RS.42/- PER KG. AND EXCESS STOCK WAS WORKED OUT TO RS.86 100/- AND ADDITION WAS ACCORDINGLY MADE. BOTH THE ADDITIO NS WERE CHALLENGED WS FILED BEFORE THE LD. CIT(A) WHICH IS REPRODUCED IN THE A PPELLATE ORDER AND IT WAS BRIEFLY STATED THAT THE ASSESSMENT PROCEEDINGS STARTED AT T HE FAG END OF THE ASSESSMENT AND ITA NO. 180/AGRA/2011 4 ALL THE QUERIES OF THE AO WERE REPLIED. THEREFORE ADDITIONS ARE UNJUSTIFIED. IT WAS EXPLAINED THAT THE ASSESSEE FIRM CAME INTO EXISTENC E RECENTLY AND THERE IS NO BASIS TO ESTIMATE THE SALES OR TO APPLY AVERAGE GROSS PRO FIT RATE IN THE MATTER. THE BOOKS OF ACCOUNT ARE AUDITED AND NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT. CERTAIN DECISIONS WERE RELIED UPON IN SUPPORT OF THE SUBMIS SIONS. 3. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.86 1 00/- ON ACCOUNT OF EXCESS STOCK BECAUSE NO OBJECTION WAS RAISED BY THE ASSESS EE AT THE TIME WHEN STOCK INVENTORY WAS PREPARED DURING THE COURSE OF SURVEY. THE LD. CIT(A) ALSO NOTED THAT SINCE STOCK INVENTORY WAS ALSO PREPARED AT THE TIME OF SURVEY AND VARIATION WAS FOUND AND DISCREPANCIES HAVE BEEN NOTED THEREFORE THE ADDITIONS SHALL HAVE TO BE CONFIRMED. AS REGARDS THE G.P. ADDITION THE LD. CI T(A) NOTED THAT THE BOOKS OF ACCOUNT HAVE BEEN REJECTED BY THE AO IN A VERY LIGH T HEARTED MANNER PARTICULARLY WHEN THE BOOKS OF ACCOUNT ARE AUDITED AND NO SPECIF IC DISCREPANCIES HAVE BEEN FOUND IN THE BOOKS OF ACCOUNT. THE LD. CIT(A) ALSO NOTED THAT MERELY BECAUSE EXCESS STOCK WAS FOUND DURING THE SURVEY FOR WHICH SEPARATE ADDITION IS MADE THERE CANNOT BE ANY BASIS TO ESTIMATE THE SALES. FI NDING OF AO FOR ESTIMATING THE SALES WAS ACCORDINGLY SET ASIDE. HOWEVER THE LD. CIT(A) CONFIRMED THE PART OF THE ADDITIONS ON ACCOUNT OF APPLYING HIGHER G.P. RA TE AS HAS BEEN POINTED OUT BY THE AO. ITA NO. 180/AGRA/2011 5 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT NO SPECIFIC DE FECTS HAVE BEEN POINTED OUT IN THE BOOKS OF ACCOUNT AND THAT THERE MAY BE A CONFUS ION IN COUNTING THE EXCESS STOCK BECAUSE THERE MAY BE SOME MISTAKES IN DOING T HAT EXERCISE AS NO EVIDENCE WAS FOUND DURING THE COURSE OF SURVEY THAT THE ASSE SSEE MADE PURCHASES OUT OF THE BOOKS OF ACCOUNT. ON THE OTHER HAND THE LD. DR REL IED UPON THE ORDERS OF THE AUTHORITIES BELOW AND RELIED UPON THE ORDER OF ITAT AHMEDABAD BENCH IN THE CASE OF DCIT VS. BHOGILAL MULCHAND. 96 ITD 344. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT THE SEARCH WAS CONDUCTED IN THIS CASE IN WHICH BOOKS OF ACCOUN T AND OTHER DOCUMENTS WERE FOUND AND SEIZED. AT THE ASSESSMENT STAGE THE AO C ALLED FOR SEVERAL DETAILS FROM THE ASSESSEE AS NOTED IN THE ASSESSMENT ORDER BUT NO SATISFACTORY EXPLANATION HAS BEEN GIVEN. IT IS ALSO NOTED IN THE ASSESSMENT ORDE R THAT SINCE THE SEARCH WAS TEMPORARILY CONCLUDED THEREFORE SEAL WAS PUT AT T HE PREMISES WHICH WAS BROKEN OPEN AND DOCUMENTS AND BOOKS OF A/C STOCKS WERE RE MOVED. FIR TO THAT EFFECT WAS ALSO LODGED. IT WAS ALSO FOUND THAT DURING THE COURSE OF SURVEY THERE WAS DIFFERENCE IN THE STOCK FOUND IN THE BOOKS AND THE PHYSICAL STOCK AS PER INVENTORY PREPARED BY THE OFFICERS OF THE REVENUE DEPARTMENT. SPECIFIC QUANTITY OF EXCESS ITA NO. 180/AGRA/2011 6 STOCK WAS NOTED IN THE INVENTORY AND THE ASSESSEE D ID NOT OBJECT TO THE PREPARATION OF INVENTORY OF THE STOCK. SINCE EXCESS STOCK WAS F OUND IN THE PREMISES OF THE ASSESSEE THEREFORE BURDEN WOULD BE ON THE ASSESS EE TO EXPLAIN THE EXCESS STOCK WITH REFERENCE TO THE ENTRIES MADE IN THE BOOKS OF ACCOUNT. IT WAS MERELY EXPLAINED BEFORE THE LD. CIT(A) THAT COUNTING OF THE STOCK WA S DONE MANUALLY AND IT IS QUITE HUMANLY POSSIBLE THAT THERE ARE SOME MISTAKES IN TH AT EXERCISE. EXCEPT THAT EXPLANATION NO SPECIFIC EXPLANATION HAS BEEN GIVEN BY THE ASSESSEE FOR EXPLAINING THE EXCESS STOCK FOUND AT THE PREMISES OF THE ASSES SEE. SINCE THE ASSESSEE FAILED TO EXPLAIN THE EXCESS STOCK AND HAS NOT RAISED ANY OBJ ECTION TO THE PREPARATION OF INVENTORY OF THE STOCK AND THE ASSESSEE FURTHER FAI LED TO EXPLAIN THE EXCESS STOCK BEFORE THE AUTHORITIES BELOW WITH REFERENCE TO THE ENTRIES MADE IN THE BOOKS OF ACCOUNT WE ARE OF THE VIEW THAT THE AUTHORITIES BE LOW WERE JUSTIFIED IN MAKING AND CONFIRMING THE ADDITION OF RS.86 100/- ON ACCOUNT O F EXCESS STOCK. FURTHER NOTHING IS PRODUCED BEFORE US DURING THE COURSE OF HEARING TO EXPLAIN THIS ISSUE. THEREFORE IN THE ABSENCE OF ANY EVIDENCE OR MATERIAL ON OUR R ECORD WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDERS OF THE A UTHORITIES BELOW ON THIS ISSUE. THE ADDITION MADE ON ACCOUNT OF EXCESS STOCK OF RS.86 1 00/- IS ACCORDINGLY CONFIRMED AND THIS GROUND OF APPEAL OF THE ASSESSEE IS ACCOR DINGLY DISMISSED. ITA NO. 180/AGRA/2011 7 6. NOW WE TAKE UP THE ESTIMATE OF G.P. FOR THE PUR POSE OF MAKING ADDITION. THE LD. CIT(A) ALLOWED PART RELIEF TO THE ASSESSEE WITH REGARD TO THE ESTIMATE OF SALES. THE LD. CIT(A) SET ASIDE THE ORDER OF AO WIT H REGARD TO ESTIMATE OF THE TURNOVER ON WHICH THERE IS NO APPEAL BY THE REVENU E DEPARTMENT. THEREFORE IT REMAINS CONFIRMED THAT THE SALES DISCLOSED BY THE A SSESSEE AT RS.3 62 98 317/- ARE ACCEPTED BY THE LD. CIT(A). THE AO REJECTED THE BOO KS OF ACCOUNT BECAUSE THE QUERY OF THE AO HAS NOT BEEN EXPLAINED AND THAT THE BOOKS OF ACCOUNT WERE FOUND NOT TO BE MAINTAINED CORRECTLY SO AS TO DEDUCE THE CORRECT PROFIT THERE FROM. THE AO SPECIFICALLY NOTED THAT THE SEAL PUT ON THE PREM ISES OF THE ASSESSEE WAS BROKEN OPEN AND THE DOCUMENTS BOOKS OF ACCOUNT AND STOCK WERE REMOVED. THIS ITSELF IS SUFFICIENT TO CONFIRM THE FINDINGS OF THE AUTHORITI ES BELOW REGARDING REJECTION OF BOOKS OF ACCOUNT BECAUSE THE ASSESSEE FAILED TO EXP LAIN THE ENTRIES CONTAINED IN THE BOOKS OF ACCOUNT. THE REMOVAL OF DOCUMENTS AND PAPE RS BY BREAKING OPEN THE SEAL OF THE SEARCH PARTY WOULD CLEARLY PROVE THAT THE B OOKS OF ACCOUNT OF THE ASSESSEE WERE NOT RELIABLE AND DUE TO THIS REASON ONLY THE ASSESSEE BROKE OPEN THE SEAL OF THE SEARCH PARTY. IT IS ALSO NOT A DENYING FACT THA T THE EXCESS STOCK WAS FOUND DURING THE COURSE OF OPERATION NOTED ABOVE ON WHICH WE H AVE CONFIRMED THE ADDITION ON ACCOUNT OF EXCESS STOCK. THEREFORE THE BOOK RESULT OF THE ASSESSEE HAS BEEN RIGHTLY REJECTED IN THE MATTER FOR THE PURPOSE OF ESTIMATIN G THE BOOK RESULTS. HONBLE DELHI HIGH COURT IN THE CASE OF ACTION ELECTRICALS 258 I TR 188 HELD THAT WHEN THE ITA NO. 180/AGRA/2011 8 AMOUNTS DISCOVERED DURING THE SEARCH AND SURRENDER MADE REJECTION OF ACCOUNTS PROPER AND ESTIMATED ASSESSMENT ON PREVIOUS YEARS BASIS WAS HELD TO BE JUSTIFIED. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BIMAL K UMAR ANANT KUMAR 288 ITR 278 HELD THAT CASH CREDITS SURRENDERED AND THERE WA S ABSENCE OF STOCK REGISTER THEREFORE REJECTION OF ACCOUNTS JUSTIFIED. CONSIDE RING THE FACTS AND CIRCUMSTANCES NOTED ABOVE WE ARE OF THE VIEW THAT THE BOOKS OF A CCOUNT OF THE ASSESSEE WERE RIGHTLY REJECTED IN THE MATTER FOR THE PURPOSE OF E STIMATING THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT IS AL SO NOT A DENYING FACT THAT THE ASSESSEE CAME INTO EXISTENCE W.E.F 01.04.2005 AND H AS SHOWN G.P. RATE OF 2.98%. THUS IT WAS THE FIRST YEAR OF THE BUSINESS OF THE ASSESSEE. THE AO APPLIED AVERAGE G.P. RATE OF 4.27% OF THE EARLIER FIRM WHICH WAS SU CCEEDED BY THE ASSESSEE. THE AO IN THE ASSESSMENT ORDER NOTED THAT THE PARENT CO MPANY M/S. RAMA SHANKER DINESH KUMAR HAS SHOWN G.P. OF 3.36% IN THE ASSESSM ENT YEAR 2004-05. NO OTHER FIGURE IS GIVEN FOR THE ASSESSMENT YEAR 2005-06. TH EREFORE CONSIDERING THE FACT THAT ADDITION ON ACCOUNT OF EXCESS STOCK IS MAINTAI NED SEPARATELY AND IT WAS THE FIRST YEAR OF THE BUSINESS OF ASSESSEE THEREFORE IN THE TOTALITY OF FACTS AND CIRCUMSTANCES AND THAT THE PARENT COMPANY HAS SHOWN G.P. RATE OF 3.36% IN THE ASSESSMENT YEAR 2004-05 IT WOULD BE REASONABLE AND PROPER IF G.P. RATE OF 3.50% BE APPLIED AGAINST THE DECLARED SALES BY THE ASSESS EE FOR THE PURPOSE OF MAKING THE ADDITION ON ACCOUNT OF ESTIMATED PROFIT. WE ACCORD INGLY MODIFY THE ORDERS OF THE ITA NO. 180/AGRA/2011 9 AUTHORITIES BELOW AND DIRECT THE AO TO APPLY G.P. R ATE OF 3.5% ON THE SALES DISCLOSED BY THE ASSESSEE AND COMPUTE THE BUSINESS INCOME ACCORDINGLY. IN THE RESULT THIS GROUND OF APPEAL IS PARTLY ALLOWED. T HERE IS NO CHALLENGE TO CHARGING OF INTEREST WHICH IS MANDATORY AND COMPENSATORY IN NA TURE. THEREFORE CHARGING OF INTEREST IS JUSTIFIED AND CONFIRMED. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED BY ORDER 4. CIT CONCERNED 5. DR ITAT AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY