ACIT, Jaipur v. ABDUL LATIF, Jaipur

ITA 36/JPR/2011 | 2006-2007
Pronouncement Date: 14-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 3623114 RSA 2011
Bench Jaipur
Appeal Number ITA 36/JPR/2011
Duration Of Justice 6 month(s)
Appellant ACIT, Jaipur
Respondent ABDUL LATIF, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 14-07-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 14-07-2011
Assessment Year 2006-2007
Appeal Filed On 13-01-2011
Judgment Text
1 ITA 36(2)-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 36/JP/2011 ASSTT. YEAR : 2006-07. THE ACIT CIRCLE- 7 VS. SHRI ABDUL LATIF JAIPUR. PROP. M/S. A.L. PAPER HOUSE NEAR TEMPO STAND SANGANER JAIPUR. (APPELLANT) (RESPONDENT) C.O. NO. 20/JP/2011 (ARISING OUT OF ITA NO. 36/JP/2011 ) ASSTT. YEAR : 2006-07. SHRI ABDUL LATIF VS. THE ACIT CIRCLE-7 SANGANER JAIPUR. JAIPUR. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI VINOD JOHARI RESPONDENT BY : SHRI P.C. PARWAL ORDER DATE OF ORDER : 14/07/2011. PER R.K. GUPTA J.M. THIS IS AN APPEAL BY DEPARTMENT AND A CROSS OBJECT ION BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 20 06-07. 2. GROUND NO. 1 IN DEPARTMENTAL APPEAL IS AGAINST R ESTRICTING THE TRADING ADDITION TO RS. 4 70 459/- AGAINST ADDITION OF RS. 12 61 755/- MADE BY AO. 3. IN CROSS OBJECTION GROUND NOS. 1 & 2 RELATE TO CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT BY APPLYING PROVISIONS OF SECTION 145(3) AND AGAINST CONFIRMING THE TRADING ADDITION OF RS. 4 70 459/- BY APPLYING G.P. RATE OF 18.5%. 2 4. SINCE THESE GROUNDS OF THE DEPARTMENT AND ASSESS EE ARE COMMON THEREFORE THEY ARE BEING DISPOSED OFF TOGETHER. 5. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF HANDMADE PAPERS. DURING THE YEAR IT DECLARED G.P. OF RS. 2.74 CRORES OR ODD ON SALES OF RS. 14.54 CRORES OR ODD GIVING A G.P. R ATE OF 18.86%. THEREAFTER THE ASSESSEE FILED A REVISED RETURN ON 31.10.2007 DECLARING G.P. OF RS. 2.62 CRORES OR ODD ON SALES OF RS. 14.42 CRORES OR ODD GIVING A G.P. RATE OF 18.17 %. THE REASON FOR REVISING THE RETURN IS THAT DUE TO OVERSIGHT ON EARLIER OCCASION THE BILL WAS CHARGED BY MAKING OVER PRICING WHICH WAS RECTIFIED BY CUSTOMS AUTHORITY AS WELL AS PURCHASERS WERE INFORMED. THE AO HAS ACCEPTED THE REVISED RETURN OF THE ASSESSEE. T HE AO NOTED THAT ASSESSEE HAS NOT MAINTAINED DAY TO DAY STOCK REGISTER AND THAT THE M AIN RAW MATERIAL I.E. WASTE PAPER WERE PURCHASED FROM BIGGER PARTIES AGAINST CHEQUES BUT F ROM SMALL PARTIES AGAINST CASH AND SUCH CASH PAYMENTS MADE TO SMALL PARTIES WERE NOT F ULLY VERIFIABLE. THEREFORE THE AO INVOKED PROVISIONS OF SECTION 145(3) OF THE IT ACT AND MADE IMPUGNED ADDITION OF RS. 12 61 755/- BY APPLYING G.P. RATE OF 18.89% AS DECL ARED BY ASSESSEE IN THE LAST YEAR. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT THE ASSESSEE WAS MAINTAINING COMPLETE BOOKS OF ACCOUNT ON DAY TO DAY BASIS AND ALL THE TRANSACTION S OF PURCHASES AND SALES WERE FULLY VERIFIABLE FROM THE SUPPORTING BILLS VOUCHERS AND DOCUMENTS MAINTAINED BY THE ASSESSEE. IT WAS SUBMITTED THAT NOT A SINGLE DEFECT HAS BEEN POINTED OUT BY THE AO EITHER IN THE SALES OR PURCHASES WHICH ARE VERIFIABLE. IN RESPEC T TO REVISED RETURN DETAILED SUBMISSIONS WERE FILED ALONG WITH EVIDENCES. IT WAS FURTHER SU BMITTED THAT ASSESSEE WAS DEALING IN HANDMADE PAPERS. THE SIZE AND QUALITY OF THE PAPER S EXPORTED WERE IN THOUSANDS IN NUMBER AND THEREFORE IT WAS NOT POSSIBLE TO MAINT AIN DAY TO DAY STOCK REGISTER. EXCEPT NON MAINTENANCE OF STOCK REGISTER NO OTHER DEFECT WAS POINTED OUT BY THE AO. THE 3 PURCHASES MADE BY ASSESSEE WERE VERIFIABLE AS THEY WERE NOT PURCHASED ON A HIGHER PRICE OR THE LOWER PRICE AS THE CORRECT PURCHASE PRICE HA S BEEN RECORDED IN THE BOOKS OF ACCOUNT. REGARDING G.P. RATE IT WAS SUBMITTED THA T G.P. RATE HAS BEEN DECLINED SLIGHTLY AND THE TURNOVER OF THE ASSESSEE WAS IN CRORES. THE REFORE ON MARGINAL DECLINE OF G.P. RATE DISTURBING THE TRADING RESULT IS NOT JUSTIFIED. RE LIANCE WAS PLACED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF GOTAN L IME KHANIZ UDYOG 256 ITR 243 (RAJ.) AND IN THE CASE OF MALANI RAMJIVAN JAGANNATH 207 CTR 19 (RAJ.). AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERI AL ON RECORD THE LD. CIT (A) NOTED THAT CORRECTNESS OF THE OPENING AND CLOSING STOCK I N ABSENCE OF STOCK REGISTER IS NOT VERIFIABLE THEREFORE APPLICATION OF PROVISIONS OF SECTION 145(3) WAS CONFIRMED. HOWEVER REGARDING G.P. ADDITION THE LD. CIT (A) N OTED THAT THE GROSS PROFIT RATE IS MARGINALLY DECLINED AND IF A G.P. RATE OF 18.5% IS APPLIED AGAINST THE G.P. RATE OF 18.17% SHOWN BY THE ASSESSEE THAT WILL MEET THE ENDS OF JU STICE AS IN EARLIER YEAR G.P. RATE WAS 18.89%. IN THIS WAY ADDITION OF RS. 4 70 459/- WA S CONFIRMED. 6. NOW BOTH ARE APPEAL HERE BEFORE THE TRIBUNAL. 7. THE LD. D/R PLACED RELIANCE ON THE ORDER OF A.O. 8. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESS EE FILED WRITTEN SUBMISSIONS AND IT WAS SUBMITTED THAT ON SIMILAR FACTS THE BOOKS OF A CCOUNTS WERE REJECTED FOR IMMEDIATELY PRECEDING YEAR AND THE TRIBUNAL HAS HELD THAT PROVI SIONS OF SECTION 145(3) ARE NOT APPLICABLE THEREFORE THE TRADING ADDITION MADE AN D CONFIRMED WAS ALSO DELETED IN FULL. ATTENTION OF THE BENCH WAS DRAWN ON COPY OF ORDER I N ITA NO. 33/JP/2009 FOR ASSESSMENT YEAR 2005-06 VIDE ORDER DATED 30.4.2010 PLACED IN THE PAPER BOOK AT PAGES 32 TO 37. RELEVANT FINDING OF THE TRIBUNAL ARE GIVEN IN PARA 5 BY WHICH THE REVENUES 4 GROUND AGAINST NOT UPHOLDING THE PROVISIONS OF SECT ION 145(3) AND AGAINST DELETING THE TRADING ADDITION WAS DISMISSED. 9. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. C IT (A) AND THE ORDER OF THE TRIBUNAL FOR IMMEDIATELY PRECEDING YEAR WE FIND TH AT THERE IS NO SUBSTANCE IN THE GROUND OF THE DEPARTMENT. HOWEVER ASSESSEE DESERVES TO SU CCEED IN HIS GROUNDS. THERE WAS SMALL DECLINE IN GROSS PROFIT RATE I.E. FROM 18.89% TO 18.17%. THE TURNOVER OF THE ASSESSEE WAS MORE THAN RS. 14 CRORES. NOT MAINTAINI NG STOCK REGISTER DOES NOT ATTRACT THE APPLICATION OF PROVISIONS OF SECTION 145(3) AS THER E MUST BE SOME DISCREPANCY IN THE BOOKS OF ACCOUNT OR IN THE PURCHASE OR SALES VOUCHE RS. COMPLETE BOOKS OF ACCOUNT ALONG WITH COMPLETE VOUCHERS WERE MAINTAINED AND PRODUCED FOR TEST CHEQUE. CASH PURCHASES OR CASH SALES IS ALSO NOT A GROUND FOR REJECTION OF BOOKS OF ACCOUNT WITHOUT BRINGING ANY MATERIAL THAT ASSESSEE HAS INFLATED THE PURCHASES O R HAS SUPPRESSED ITS SALES. IN EARLIER YEAR ALSO ON SIMILAR FACTS THE BOOKS OF ACCOUNT WER E REJECTED BY THE AO AND TRADING ADDITION WAS MADE WHICH WAS DELETED BY LD. CIT (A) AND TRIBUNAL HAS CONFIRMED THE DELETION OF ADDITION IN ITS ENTIRETY. IN VIEW OF T HE ABOVE FACTS AND CIRCUMSTANCES WE HOLD THAT LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE APPLICATION OF PROVISIONS OF SECTION 145(3) AND UPHOLDING PART TRADING ADDITION. ACCORD INGLY WE ALLOW THESE GROUNDS OF THE ASSESSEE AND REJECT THE GROUND OF THE DEPARTMENT. 10. SECOND GROUND IN THE APPEAL OF THE DEPARTMENT I S AGAINST DELETING THE ADDITION OF RS. 2 48 404/- MADE BY AO DISALLOWING 20% OF THE FO REIGN TRAVELING EXPENSES OF RS. 12 42 021/-. 11. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF AO. 12. ON THE OTHER HAND LD. COUNSEL OF THE ASSESSEE P LACED RELIANCE ON THE ORDER OF LD. CIT (A) AND WRITTEN SUBMISSIONS FILED DURING THE CO URSE OF HEARING. 5 13. DURING THE ASSESSMENT PROCEEDINGS THE AO NOTIC ED THAT ASSESSEE HAS CLAIMED FOREIGN TRAVELING EXPENSES OF RS. 12 42 021/-. THE AO DISALLOWED 20% OF THE EXPENSES ON THE GROUND THAT ASSESSEE FAILED TO CLARIFY AS TO WHETHER PURPOSE OF FOREIGN TRAVEL WAS FOR THE BUSINESS PURPOSES OR FOR PERSONAL PURPOSES. IT WAS SUBMITTED BEFORE LD. CIT (A) THAT ASSESSEE HAS FILED THE DETAILS OF FOREIGN TRAV ELING EXPENSES WHICH CONTAINS THE DETAILS OF PERSON WHO VISITED THE FOREIGN COUNTRIES PURPOS E OF VISIT EXPENDITURE INCURRED BY HIM AND THE SALES MADE IN THAT TRADE FAIR. ON CONSIDER ATION OF THE SAID DETAILS AND THE SUPPORTING EVIDENCES IT WAS OBSERVED BY LD. CIT (A ) THAT THERE WAS NO GROUND TO MAKE ANY ADDITION. THE FOREIGN TRAVELING EXPENSES WERE FOUND TO BE RELATED WITH THE BUSINESS PURPOSE AS VISITS WERE UNDERTAKEN BY THE STAFF MEMB ER WHO WAS LOOKING AFTER THE SALES ACTIVITY. 14. ON THESE FINDINGS NEITHER ANY DEFECTS WERE POIN TED OUT BY LD. D/R NOR ANY OTHER MATERIAL WERE BROUGHT ON RECORD TO HOLD OTHERWISE. THEREFORE WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A). ACCORDIN GLY WE CONFIRM THE FINDING OF LD. CIT (A). 15. IN CROSS OBJECTION THROUGH GROUND NO. 3 THE AS SESSEE HAS CHALLENGED THE ORDER OF LD. CIT (A) WHO HAS NOT ALLOWED BENEFIT OF TELESCOP ING OF TRADING ADDITION CONFIRMED AGAINST THE ALLEGED UNEXPLAINED INVESTMENT IN BUILD ING. 16. AN ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMEN T WAS MADE IN THE BUILDING WHICH WAS NOT PRESSED BEFORE LD. CIT (A). HOWEVER TELESCOPING WAS ASKED BY THE ASSESSEE AGAINST THE TRADING ADDITION MADE. 17. SINCE WE HAVE DELETED THE ENTIRE TRADING ADDITI ON THEREFORE THERE IS NO QUESTION OF ALLOWING ANY TELESCOPING. THEREFORE THE ACTION OF THE AO IN MAKING ADDITION ON 6 ACCOUNT OF UNEXPLAINED INVESTMENT IN THE BUILDING R EACHED TO ITS FINALITY AND WILL REMAIN SUSTAINED. THEREFORE THIS GROUND OF THE ASSESSEE IS REJECTED. 18. GROUND NO. 4 IS AGAINST UPHOLDING DISALLOWANCE ON ACCOUNT OF TELEPHONE EXPENSES CONVEYANCE AND INTEREST ON CAR LOAN AND D EPRECIATION ON VEHICLES AT RS. 47 100/- RS. 33 208/- AND RS. 55 156/- RESPECTIVEL Y. 19. THE AO DISALLOWED 10% ON ACCOUNT OF ABOVE MENTI ONED EXPENSES. THE LD. CIT (A) CONFIRMED THESE DISALLOWANCES OF EXPENSES AS RE ASONABLE. 20. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. CIT (A) AND WRITTEN SUBMISSIONS OF THE ASSESSEE WE FIND THAT DISALLOWANCES MADE BY AO IS ON HIGHER SIDE. WE ARE OF THE VIEW THAT IF THE DISALLOWANCES ARE RESTRICTED TO RS . 25 000/- RS. 20 000/- AND RS. 25 000/- ON ACCOUNT OF TELEPHONE EXPENSES CONVEYANCE AND IN TEREST ON CAR LOAN AND DEPRECIATION ON VEHICLES RESPECTIVELY WILL MEET THE ENDS OF JUST ICE. WE ORDER ACCORDINGLY. 21. IN THE RESULT APPEAL OF THE DEPARTMENT IS DISM ISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED IN PART. 22. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 14 .07.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR D/- COPY FORWARDED TO :- THE ACIT CIRCLE-7 JAIPUR. SHRI ABDUL LATIF SANGANER JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 36(2)/JP/2011) BY ORDER AR ITAT JAIPUR. 7