ITO, Patiala v. M/s Ram Singh Manmohan Singh, Patiala

ITA 197/CHANDI/2014 | 2010-2011
Pronouncement Date: 24-04-2014 | Result: Dismissed

Appeal Details

RSA Number 19721514 RSA 2014
Assessee PAN AACFR1897G
Bench Chandigarh
Appeal Number ITA 197/CHANDI/2014
Duration Of Justice 1 month(s) 26 day(s)
Appellant ITO, Patiala
Respondent M/s Ram Singh Manmohan Singh, Patiala
Appeal Type Income Tax Appeal
Pronouncement Date 24-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 24-04-2014
Assessment Year 2010-2011
Appeal Filed On 28-02-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD ACCOUNTANT MEMBER AND SHRI SANJAY GARG JUDICIAL MEMBER ITA NO. 197/CHD/2014 ASSESSMENT YEAR: 2010-11 THE I.T.O VS. SHR. RAM SINGH MANMOHAN SI NGH WARD - I SIRHINDI BAZAR PATIALA PATIALA PAN NO. AACFR1897G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. J.S. NAGAR RESPONDENT BY : SHRI. K.P. BAJAJ DATE OF HEARING : 21/04/2014 DATE OF PRONOUNCEMENT : 24.04.2014 ORDER PER SANJAY GARG J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 24.12.2013 OF LD. CIT(A) RELEVANT TO ASSESSME NT YEAR 2010-11. 2. THE REVENUE HAS AGITATED AGAINST THE DELETION OF THE ADDITION OF RS. 27 67 990/- WHICH WAS MADE BY THE ASSESSING OFFICER ESTIMATING THE GROSS PROFIT RATE @ 35% ON THE TOTAL SALES OF THE ASSESSEE AFTE R REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A JEWELER. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND VARIOUS DISCREPANCIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE NOTICED T HAT ASSESSEE HAD NOT MAINTAINED ITEM WISE INVENTORY OF GOODS. SOME OF T HE PURCHASES AND SALES WERE MADE ITEM WISE WHILE CLOSING STOCK OF GOLD AND DIAM OND HAD BEEN SHOWN IN 2 WEIGHT (GRAMS) AND EVEN IN SOME OF THE BILLS THE NA MES OF THE CUSTOMERS OR THEIR ADDRESSES WERE MISSING. THE GP WAS DECLARED BY THE ASSESSEE @ 22.06% IN COMPARISON TO 39.23 DECLARED BY ANOTHER JEWELLER IN THE VICINITY OF THE SHOP OF THE ASSESSEE. THE ASSESSING OFFICER WAS ALSO NOT S ATISFIED WITH THE ACCOUNTING METHOD ADOPTED BY THE ASSESSEE. ACCORDING TO THE A SSESSING OFFICER THE ASSESSEE SHOULD HAVE ADOPTED OF FIFO METHOD WHEREAS THE ASSESSEE HAD ADOPTED WEIGHTED COST METHOD. THE ASSESSING OFFICER CALLED FOR NECESSARY EXPLANATION FROM THE ASSESSEE. THE ASSESSEE SUBMITTED BEFORE TH E ASSESSING OFFICER THAT THERE WAS NO DISCREPANCY IN MAINTAINING THE ACCOUNT S STOCK STATEMENT ETC. THE ASSESSEE HAD BEEN CONSISTENTLY FOLLOWING THE WEIGHT ED COST METHOD OF ACCOUNTING FOR THE LAST SO MANY YEARS AS THE ASSESS EE HAD BEEN IN THIS BUSINESS SINCE 1950. THE MAJORITY OF THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2001-02 TO 2009-10 WERE MADE IN SCRUTINY AND OUT OF THE ABOVE ASSESSMENTS THREE SCRUTINY ASSESSMENTS WERE MADE BY THE SAME ASSESSING OFFICER AND THE SYSTEM OF ACCOUNTING ADOPTED BY THE ASSESSEE HAD NEVER BEEN O BJECTED BY THE REVENUE AUTHORITIES. IT WAS FURTHER SUBMITTED THAT THE ASS ESSEE HAS BEEN IN THE BUSINESS OF SELLING BRANDED JEWELLERY AS WELL AS NON-BRANDED JEWELLERY. IN CASE OF BRANDED JEWELLERY THE EXACT GOLD CONTENT CANNOT BE JUDGED BY NAKED EYE SO THE PURCHASE BILLS WERE IN TERMS OF ITEMS WHEREAS IN C ASE OF NON-BRANDED GOLD JEWELLARY THE SAME WERE MADE ON THE BASIS OF THERE WEIGHT. THE SAME HAD BEEN THE POSITION IN CASE OF DIAMONDS ALSO. THE ASSESSEE ALSO EXPLAINED THAT THE GROSS AND NET WEIGHT MENTIONED IN THE PURCHASE BI LLS WAS RELATING TO THE GROSS WEIGHT OF THE JEWELLERY WHEREAS THE NET WEIGHT WAS THE WEIGHT OF THE GOLD CONTENT IN THE JEWELLERY AND THE DIFFERENCE BETWEEN THE GROSS AND NET WEIGHT WAS IGNORED BEING OF NEGLIGIBLE VALUE. HOWEVER THE AS SESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E AND HE HELD THAT ASSESSEE HAD FAILED TO MAINTAIN THE CORRECT BOOKS OF ACCOUNT AND HAD INFLATED ITS PURCHASES AS WELL AS SALES. HE THEREAFTER TAKING T HE COMPARABLE CASE OF SOME OTHER JEWELLERS IN THE VICINITY ADOPTED THE GP RATE OF 35% ON THE TOTAL SALES OF 3 RS. 2 13 92 327/- SHOWN BY THE ASSESSEE AND MADE AN ADDITION OF RS. 27 60 990/- IN ADDITION TO THE RETURNED INCOME OF RS. 8 64 060/ -. 4. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFF ICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). 5. THE LD. CIT(A) AFTER GOING THROUGH THE FACTS OF THE CASE OBSERVED THAT THE ASSESSEE HAS BEEN ENGAGED IN THE BUSINESS OF JEWELL ERY FOR THE LAST SO MANY YEARS AND HAS BEEN CONSISTENTLY FOLLOWING THE WEIGH TED COST METHOD OF ACCOUNTING WHICH IS ONE OF THE RECOGNIZED METHOD OF ACCOUNTING.. THE RETURN OF INCOME OF THE ASSESSEE WAS DULY SUPPORTED BY THE AU DITED ANNUAL ACCOUNT AND ACCOUNTED DOCUMENTS. EVEN NO FAULT WAS FOUND BY TH E REVENUE AUTHORITIES WITH THE ACCOUNTING METHOD ADOPTED BY THE ASSESSEE DURIN G THE SCRUTINY ASSESSMENT IN THE PAST. HE FURTHER OBSERVED THAT THE ASSESSING OF FICER HAD DISCUSSED GENERAL DISCREPANCIES BUT COULD NOT POINT OUT ANY SPECIFIC DISCREPANCY IN THE ACCOUNTS OF THE ASSESSEE. THERE WAS NO EVIDENCE THAT THE ASSES SEE HAD SUPPRESSED HIS SALES OR INDULGED IN BOGUS PURCHASES OR SALES ETC. HE ALS O OBSERVED THAT THERE WAS NOT DISCREPANCY IN THE QUANTITY OF STOCK. HE ALSO HELD THAT CASE OF OTHER JEWELERS WAS NOT COMPARABLE WITH THAT OF THE ASSESSEE DUE TO THE DIFFERENCE OF PURCHASE AND SALES PRICE OF THE JEWELLERY IN CASE OF THAT OT HER JEWELER AND THEREBY DIFFERENCE OF PROFITS ALSO. THE LD. CIT(A) AFTER DE TAILED DISCUSSION OF THE MATTER AND TAKING INTO CONSIDERATION THE OVER ALL FACTS AN D CIRCUMSTANCES OF THE CASE HELD THAT THE ADDITIONS WERE MADE BY THE ASSESSING OFFICER ON THE BASIS OF MERE PRESUMPTION AND THERE WAS NO REASON FOR THE ASSESSI NG OFFICER TO REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE. HE ACCORDINGLY D ELETED THE ADDITIONS SO MADE BY THE AO. THE REVENUE IS THUS IN APPEAL BEFORE US . 6. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE ASS ESSEE AND HAVE ALSO GONE THROUGH THE RECORDS. 4 7. THE LD. DR BEFORE US HAS CONTENDED THAT ASSESSEE SHOULD HAVE ADOPTED THE FIFO METHOD AS HAS BEEN OBSERVED BY THE ASSESSING O FFICER. HE HAS FURTHER CONTENDED THAT ASSESSEE SHOULD HAVE MENTIONED THE Q UALITY AND QUANTITY OF EACH OF THE JEWELLERY ITEM WHILE MAINTAINING BOOKS OF AC COUNT. 8. ON THE OTHER HAND THE LD. AR HAS STRONGLY CONTEN DED THAT THE ASSESSEE HAS BEEN ADOPTING ONE OF THE ACCEPTED AND RECOGNIZED ME THODS OF ACCOUNTING AND THE SAME HAS BEEN ADOPTED BY THE ASSESSEE CONSISTENTLY FOR THE LAST SO MANY YEARS AND THE REVENUE HAS NEVER POINTED OUT ANY DEFECT IN THE SAME EVEN IN THE SCRUTINY ASSESSMENT MADE DURING THE PAST YEARS. 9. WE HAVE CONSIDERED THE RESPECTIVE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES. MERELY BECAUSE THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE METHOD OF ACCOUNTING OF THE ASSESSEE ITSELF CAN N OT BE A REASON TO REJECT THE BOOKS OF ACCOUNT OF THE ASSESSEE ESPECIALLY WHEN TH E ASSESSEE HAS BEEN FOLLOWING ONE OF THE ACCEPTED AND RECOGNIZED METHOD OF ACCOUNTING. THE LD. CIT(A) HAS DISCUSSED IN DETAIL THE DISCREPANCIES PO INTED OUT BY THE ASSESSING OFFICER IN THE ACCOUNTING METHOD AS WELL AS EXPLAN ATIONS GIVEN BY THE ASSESSEE AND THEREAFTER CONCLUDED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE WRONGLY REJECTED BY THE AO. AFTER GOING THROUGH TH E IMPUGNED ORDER WE DO NOT FIND ANY INFIRMITY IN THE SAME. WE FIND NO REASON TO INTERFERE WITH THE WELL REASONED ORDER OF CIT(A). ACCORDINGLY THE SAME IS HEREBY UPHELD. 10. IN THE RESULT THE APPEAL OF THE REVENUE IS HER EBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.04.2014 SD/- SD/- (T.R. SOOD) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24 TH APRIL 2014 RKK 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSTT REGISTRAR ITAT CHANDIGARH