M/s. Paris Gift House, Bhopal v. The C I T, Bhopal

ITA 391/IND/2008 | 2004-2005
Pronouncement Date: 20-04-2010 | Result: Dismissed

Appeal Details

RSA Number 39122714 RSA 2008
Bench Indore
Appeal Number ITA 391/IND/2008
Duration Of Justice 1 year(s) 7 month(s) 24 day(s)
Appellant M/s. Paris Gift House, Bhopal
Respondent The C I T, Bhopal
Appeal Type Income Tax Appeal
Pronouncement Date 20-04-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 20-04-2010
Date Of Final Hearing 15-04-2010
Next Hearing Date 15-04-2010
Assessment Year 2004-2005
Appeal Filed On 26-08-2008
Judgment Text
PAGE 1 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : AAEFP6180-E I.T.A.NO. 391 & 392/IND/2008 A.YS. : 2004-05 & 2005-06 M/S. PARIS GIFT HOUSE CIT 2 VIVEK TOWERS E-5 ARERA COLONY BHOPAL VS BHOPAL. APPELLANT RESPONDENT I.T.A.NO. 338 & 339/IND/2008 A.YS. : 2004-05 & 2005-06 ACIT M/S. PARIS GIFT HOUSE BHOPAL. VS 2 VIVEK TOWERS E-5 ARERA COLONY BHOPAL APPELLANT RESPONDENT APPELLANT BY : SHRI M.K.SHARMA & SHRI KISHORE CHAWLA CAS RESPONDENT BY : SMT.APARNA KARAN SR.DR DATE OF HEARING : 15.04.2010 PAGE 2 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. O R D E R PER V.K. GUPTA A.M. THESE CROSS APPEALS BELONG TO THE SAME ASSESSEE AND INVOLVE COMMON ISSUES HENCE THESE WERE HEARD TOGETHER AND THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. THE LD. SR. DR SUBMITTED THAT FOR THE SAKE OF CONVE NIENCE REVENUES APPEAL IN I.T.A.NO. 339/IND/2008 COULD BE TAKEN FIRST. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO AGREED. 4. GROUND NO.1 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 5 21 688/- OUT OF TOTAL ADDITION OF RS. 6 38 011/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NET PROFIT ADDITION AFTER REJ ECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME-TAX ACT 1961 WITHOUT GIVING SPECIFIC REASON FOR REDUCING THE NET PROFIT RATE FROM 5% TO 2.5 %. PAGE 3 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. 5. THE FACTS IN BRIEF ARE THAT AS A CONSEQUENCE OF S URVEY ACTION U/S 133A ON 10.11.2006 ( A.Y. 2007-08). THE A.O. RE OPENED THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION BY INVO KING PROVISIONS OF SECTION 147 AS DURING THE COURSE OF SURVEY PROCEEDI NGS CERTAIN INCRIMINATING MATERIALS WERE FOUND WHICH INDICATED THAT THE ASSESSEE WAS INDULGED IN OUT OF BOOKS SALES IN THE YEAR UNDER CO NSIDERATION ALSO. THE A.O. THEREAFTER NOTED VARIOUS DISCREPANCIES IN RE GARD TO NON- MAINTENANCE OF PROPER BOOKS OF ACCOUNT LACK OF SUP PORTING EVIDENCE IN RESPECT OF THE VARIOUS EXPENSES CLAIMED BY THE ASSE SSEE AND NON- MAINTENANCE OF STOCK REGISTER/QUANTITATIVE DETAILS. THE A.O. ALSO TRIED TO RECONCILE THE TRANSACTIONS WITH REFERENCE TO COPY OF ACCOUNTS OF OTHER PARTIES WHEREIN CERTAIN DIFFERENCES WERE ALSO FOUN D. ACCORDINGLY THE A.O. FORMED AN OPINION THAT CORRECTNESS OR COMPLETE NESS OF ACCOUNTS OF THE ASSESSEE WAS IN DOUBT AND THEREFORE HE INVOKE D THE PROVISIONS OF SECTION 145(3) OF THE ACT. THE A.O. ALSO RELIED ON CERTAIN JUDICIAL DECISIONS FOR HIS SUCH DECISION. THE A.O. THEREAFTE R COMPARED THE SALES/TURNOVER OF PRECEDING AND SUBSEQUENT YEAR AND FOUND THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARE D NET PROFIT @ 1.91 %. THE A.O. IN VIEW OF THE DISCREPANCIES NOTICED BY H IM AND REJECTION OF BOOKS OF ACCOUNT ESTIMATED NET PROFIT @ 5 % BEFORE INTEREST AND SALARY TO PARTNERS AT RS. 8 68 088/-. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE PAGE 4 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN I T WAS CONTENDED THAT THERE WAS NO BASIS WITH THE A.O. TO ADOPT THE RATE OF NET PROFIT AT 5% PARTICULARLY WHEN THERE WAS A SUBSTANTIAL INCREASE IN THE TURNOVER OF THE ASSESSEE AND AS A CONSEQUENCE THEREOF THE NET PROF IT OUGHT TO HAVE REDUCED. THE ASSESSEE ALSO CHALLENGED THE ACTION OF THE A.O. AS REGARD TO REJECTION OF THE BOOKS OF ACCOUNT AND COMPLETION OF ASSESSMENT U/S 144 OF THE ACT. THE LD. CIT(A) HOWEVER CONFIRMED THE ACT ION OF THE A.O. BOTH IN REGARD TO REJECTION OF BOOKS OF ACCOUNT AS WELL AS COMPLETION OF ASSESSMENT BY INVOKING PROVISIONS OF SECTION 144 OF THE ACT. THE LD. CIT(A) THEREAFTER FOUND THAT THERE WAS A SUBSTANT IAL INCREASE IN THE TURNOVER HENCE NET PROFIT SHOULD HAVE REDUCED AND ACCORDINGLY HE ADOPTED A NET PROFIT RATE OF 2.5 % AS AGAINST 5% AD OPTED BY THE ASSESSING OFFICER AND WORKED OUT THE QUANTUM OF ADDITION AT R S. 1 60 323/-. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 6. LD. SR. DR NARRATED THE FACTS AND PLACED HEAVY RELI ANCE ON THE ORDER OF A.O. 7. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND SUPPORTED THE ORDER OF THE LD. CIT(A) TO THE EXTENT OF RELIEF GIVEN BY HIM BESIDES REITERATING THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. PAGE 5 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. 9. WE FIND THAT THE A.O. HAS NOT GIVEN ANY BASIS TO AD OPT THE NET PROFIT RATE OF 5 % BEFORE INTEREST AND SALARIES TO PARTNERS. EVEN NET PROFIT RATE IN EARLIER YEARS AND SUBSEQUENT YEARS HAS BEEN BROUGHT ON RECORD. THE A.O. HAS ALSO NOT BROUGHT ANY OTHER MATERIAL ON REC ORD TO JUSTIFY SUCH RATE AS IN CASE OF NON-AVAILABILITY OF SUPPORTING VOUCHERS THE PROPER COURSE FOR THE A.O. WOULD HAVE BEEN TO MAKE SPECIFI C DISALLOWANCES. HAVING STATED SO IN OUR VIEW THERE ARE CERTAIN DI SCREPANCIES APART FROM NON-AVAILABILITY OF VOUCHERS WHICH MERIT ESTIMATION OF NET PROFIT RATE AND THEREFORE IN OUR VIEW THE LD. CIT(A) HAS RIGHTLY ADOPTED A NET PROFIT RATE OF 2.5 %. ACCORDINGLY THIS GROUND OF THE REVENUE I S DISMISSED. 10. GROUND NO.2 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 12 13 919/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUPPRES SION OF SALES SUMMARILY AND WITHOUT APPRECIATING THE FACT T HAT THE ASSESSEE FAILED TO RECONCILE ENTRIES OF CREDIT CARD S SALES AND OTHER SALES WITH THE BOOKS OF ACCOUNT. 11. THE FACTS IN BRIEF ARE THAT THE A.O. FOUND T HAT THE ASSESSEE FIRM HAD NOT SHOWN CERTAIN SALE BILLS IN THE BOOKS OF ACCOUNT IN THE PERIOD BETWEEN 28.7.2004 TO 15.8.2004 18.6.2004 22.6.20 04 AND 15.8.2004 TO PAGE 6 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. 29.8.2004. SUCH BILLS WERE IN REGARD TO BOTH CREDIT SALES CASH SALES AS WELL AS CREDIT CARD SALES. THE A.O. REQUIRED THE AS SESSEE TO RECONCILE THE BOOKS OF ACCOUNT WITH SUCH SALE BILLS. HOWEVER IT COULD NOT BE DONE BY THE ASSESSEE. THEREAFTER THE A.O. TAKING INTO ALL THE FACT THAT IN THE COURSE OF SURVEY PROCEEDINGS THE PARTNERS OF THE ASSESSEE HAD ACCEPTED THE FACT THAT THE FIRM WAS ENGAGED IN SALES OUTSIDE THE BOOK S OF ACCOUNT. HENCE HE ESTIMATED THE SALES OUTSIDE THE BOOKS OF ACCOUNT RS. 1 65 15 00 900/- ON THE BASIS OF BILLS NOT FOUND RECORDED IN THE BOO KS OF ACCOUNT AND BY APPLYING A GROSS PROFIT RATE OF 7.35 % THEREON WORK ED OUT THE ESTIMATED SUPPRESSED INCOME AT RS. 12 13 915/-. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A ) WHEREIN IT WAS POINTED OUT THAT THE A.O. REQUIRED THE ASSESSEE TO RECONCILE THE BILL BOOKS AMOUNTED DURING THE COURSE OF SURVEY ON 27.12.2007 AND TO SUBMIT SUCH RECONCILIATION ON 28.12.2007 WHICH WAS NOT POSSIBL E. HENCE THE ACTION OF THE A.O. WAS NOT CORRECT. THE ASSESSEE ALSO TRIE D TO EXPLAIN THE METHOD OF RECORDING ENTRIES PERTAINING TO CREDIT CARD SALE S IN THE BOOKS OF ACCOUNT AND PLEADED THAT SUCH METHODOLOGY WAS NOT APPRECIAT ED BY THE ASSESSING OFFICER. THE LD. CIT(A) DELETED THE ADDITION BY OBS ERVING AS UNDER :- I HAVE SEEN THE MANNER IN WHICH THE ADDITION HAS B EEN MADE BY THE ASSESSING OFFICER AND THE SUBMISSIONS OF THE AR.I HAVE GONE THROUGH THE ASSESSMENT ORDER AND ALSO PER USED THE PAGE 7 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. MATERIAL PLACED BEFORE ME. IN VIEW OF THE FACTS CIRCUMSTANCES AND THE EXPLANATIONS OF THE AR I AM OF THE CONSIDERED OPINION THAT THE ADDITION MADE BY THE AS SESSING OFFICER CANNOT BE SUSTAINED AND IT HAS TO BE DELETE D. THUS THIS GROUND OF THE APPELLANT IS ALSO ALLOWED. 12. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFO RE US. 13. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THA T THE A.O. HAD FOUND SPECIFIC DEFECTS IN THE BILL BOOKS/BOOKS OF ACCOUNT AND AS PER THE ASSESSEES OWN ADMISSION IN THE COURSE FOR SURV EY AS REGARD TO INDULGENCE OF THE ASSESSEE IN THE SALES OUTSIDE THE BOOKS THE ESTIMATION MADE BY THE ASSESSING OFFICER WAS CORRECT IN LAW. S HE FURTHER PLACED STRONG RELIANCE ON THE ORDER OF THE A.O. 14. THE LEARNED COUNSEL ON THE OTHER HAND BESIDES REI TERATING THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES POI NTED OUT THAT IN THIS YEAR NO SURVEY ACTION HAD BEEN TAKEN AGAINST THE A SSESSEE. HENCE ESTIMATION OF SALES WAS NOT JUSTIFIED. HOWEVER ON A QUERY FROM THE BENCH THAT WHETHER ANY RECONCILIATION STATEMENT WAS SUBMI TTED BEFORE THE LD. CIT(A) AS TO CORRECTNESS OF THE BOOKS OF ACCOUNT A ND PROPER RECORD OF ALL THE SALES BILLS THEREIN THE LEARNED COUNSEL COULD NOT GIVE ANY EFFECTIVE REPLY. HOWEVER HE CONTINUED TO ARGUE THE MATTER AS ARGUED BEFORE THE REVENUE AUTHORITIES. PAGE 8 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. 15. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 16. IT IS NOTED THAT THE ASSESSEE HAS NOT PRODUCED ANY CLARIFICATION/RECONCILIATION BEFORE THE LD. CIT(A) NOR BEFORE US AND THE LD. CIT(A) NOR BEFORE US AND THE LD. CIT(A) HAS NOT GIVEN ANY SPECIFIC FINDINGS AS TO HOW THERE WAS NO CASE FOR ESTIMATION OF SUPPRESSED SALES AS IT IS AN UNDISPUTED FACT THAT IN THE COURSE OF SURV EY PROCEEDINGS THE ASSESSEE HAS ACCEPTED TO HAVE BEEN ENGAGED IN MAKIN G SALES OUTSIDE THE BOOKS. AS FAR AS THE QUANTUM OF ESTIMATION IS CONC ERNED WE FIND THAT THIS ASPECT IS REQUIRED TO BE RE-EXAMINED ON PROPER BASI S. HENCE WE RESTORE THIS ISSUE TO THE FILE OF LD. CIT(A) WHO SHALL DEC IDE THE ISSUE AFRESH AS PER LAW AFTER GIVING AN ADEQUATE OPPORTUNITY OF HEA RING TO THE ASSESSEE AS WELL AS THE A.O. IT IS NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE AT LIBERTY TO FILE EVIDENCE/DOCUMENTS IN SUPPORT OF IT S CLAIM. THUS THIS GROUND OF THE REVENUE STANDS ALLOWED FOR STATISTICA L PURPOSES. 17. IN THE RESULT THE REVENUES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. 18. NOW WE SHALL TAKE UP REVENUES APPEAL IN I.T.A.NO. 338/IND/2008. 19. GROUND NO. 1 READS AS UNDER :- PAGE 9 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2 03 467/- OUT OF TOTAL ADDITION OF RS. 2 39 141/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NET PROFIT ADDITION AFTER REJ ECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME-TAX ACT 1961 WITHOUT GIVING SPECIFIC REASON FOR REDUCING THE NET PROFIT RATE FROM 5% TO 3 %. 20. THE ISSUE RAISED IN THIS GROUND IS IDENTICAL TO ISS UE RAISED IN GROUND NO.1 OF REVENUES APPEAL IN I.T.A.NO. 339/IN D/2008. HENCE FOLLOWING THE SAME REASONS WE DISMISS THIS GROUND OF THE REVENUE. 21. GROUND NO.2 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 8 34 865/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUPPRES SION OF SALES SUMMARILY AND WITHOUT APPRECIATING THE FACT T HAT THE ASSESSEE FAILED TO RECONCILE ENTRIES OF CREDIT CARD S SALES AND OTHER SALES WITH THE BOOKS OF ACCOUNT. 22. IN THIS YEAR THE A.O. HAS ESTIMATED SUPPRESSED S ALES AND GROSS PROFIT THEREOF MERELY RELYING ON THE ASSESSMENT PRO CEEDINGS FOR THE ASSESSMENT YEAR 2005-06. THOUGH NO MATERIAL OF LIK E MANNER WAS FOUND PAGE 10 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. IN THE YEAR UNDER CONSIDERATION . THUS TAKING INTO CONSIDERATION THIS FACT WE FIND NO MERIT IN THIS GROUND OF THE REVENUE AS WITHOUT ANY MATERIAL ESTIMATION OF SUPPRESSED SALES CANNOT BE JUSTIFIED. THUS THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 23. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. 24. NOW WE SHALL TAKE UP ASSESSEES APPEALS IN I.T.A.N OS. 391 & 392/IND/2008 FOR ASSESSMENT YEAR 2004-05 AND 2005-0 6. 25. GROUND NO. 1 OF BOTH THESE APPEALS IS RELATED TO TH E VALIDITY OF REOPENING WHICH WAS NOT PRESSED HENCE DISMISSED A S NOT PRESSED. 26. GROUND NO. 4 RELATING TO PROVISION OF REASONABLE OP PORTUNITY TO THE ASSESSEE WHILE COMPLETING ASSESSMENT U/S 144 W AS ALSO NOT PRESSED HENCE AS NOT PRESSED. 27. IN GROUND NO.3 THE ASSESSEE HAS CHALLENGED THE ACT ION OF THE REVENUE AUTHORITIES IN INVOKING THE PROVISIONS OF S ECTION 145(3) OF THE ACT IN WHICH FACTS HAVE ALREADY BEEN NARRATED WHI LE DISPOSING FOR REVENUES APPEAL IN I.T.A.NO. 339/IND/2008 HENCE NOT REPEATED. HAING REGARD TO THOSE FACTS AND SUBMISSIONS MADE BY BOTH THE SIDES WE FIND NO MERIT IN GROUND NO. 3 OF THE ASSESSEES APPEAL. HEN CE THE SAME IS DISMISSED. 28. IN GROUND NO.2 THE ASSESSEE HAS CHALLENGED THE ACT ION OF THE A.O. IN ESTIMATING NET PROFIT @ 2.5 % AND 3 % IN BO TH THESE YEARS IN PAGE 11 OF 11 - I.T.A.NO. 391/IND/2008 ETC. PARIS GIFT HOUSE BHOPAL. WHICH NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE. THERE HAVE BEEN CERTAIN DISCREPANCIES IN THE MAINTENANCE OF BO OKS OF ACCOUNT AS WELL AS CERTAIN INCRIMINATING FACTS HAVE ALSO EMERGED DU RING THE SURVEY PROCEEDINGS. HENCE IN OUR OPINION THE NET PROFIT RATE OF ADOPTED BY THE CIT(A) REQUIRES NO INTERFERENCE FROM OUR SIDE. THUS GROUND NO.2 IS DISMISSED. 29. IN THE RESULT BOTH THESE APPEALS OF THE ASSESSEE A RE DISMISSED. 30. TO SUM UP APPEAL IN I.T.A.NO. 339/IND/2008 IS PART LY ALLOWED FOR STATISTICAL PURPOSES APPEAL IN I.T.A.NO. 338/I ND/2008 IS DISMISSED AND BOTH THE APPEALS OF THE ASSESSEE IN I.T.A.NOS. 391 & 392/IND/2008 ARE DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 20 TH APRIL 2010. (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20 TH APRIL 2010. CPU* 1516