Sham Sunder Kapoor Prop., Chandigarh v. Addl. CIT,, Chandigarh

ITA 516/CHANDI/2010 | 2006-2007
Pronouncement Date: 25-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 51621514 RSA 2010
Assessee PAN AFYPK8505M
Bench Chandigarh
Appeal Number ITA 516/CHANDI/2010
Duration Of Justice 1 year(s) 6 month(s) 20 day(s)
Appellant Sham Sunder Kapoor Prop., Chandigarh
Respondent Addl. CIT,, Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 25-11-2011
Date Of Final Hearing 04-10-2011
Next Hearing Date 04-10-2011
Assessment Year 2006-2007
Appeal Filed On 05-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS. SUSHMA CHOWLA JUDICIAL MEMBER AND SHRI MEHAR SINGH ACCOUNTANT MEMBER ITA NO.516/CHD/2010 (ASSESSMENT YEAR : 2006-07) SHAM SUNDER KAPOOR PROP. VS. THE ADDL.C.I.T. M/S NIPPY JEWELLERS RANGE IV SCO 167 SECTOR 37-C CHANDIGARH. CHANDIGARH. PAN: AFYPK8505M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARRY RIKHY RESPONDENT BY : SHRI JAISHREE SHARMA DR DATE OF HEARING : 4.10.2011 DATE OF PRONOUNCEMENT : 25.11.2011 O R D E R PER SUSHMA CHOWLA J.M : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) CHANDIGARH DAT ED 16.02.2010 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORD ER PASSED U/S 143(3) THE INCOME TAX ACT 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CHANDIGARH IS DEFECTIVE BOTH IN LAW AND FACTS OF THE CASE. 2. THAT THE LD. COMMISSIONER OF INCOME TAX(APPEALS) CHANDIGARH IS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE LD. ASSESSING OFFICER REGARDING ADDITION OF RS.2 24 980/- MADE ON ACCOUNT OF LOW G.P. RATE. THIS ADDITION IS HIGHLY UNCALLED FOR AND DESERVES T O 2 BE DELETED AS IT HAS BEEN MADE MERELY ON SURMISES AND CONJECTURES WITHOUT ANY STRONG BASIS. 3. THAT THE LD. COMMISSIONER OF INCOME TAX(APPEALS) CHANDIGARH IS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE LD. ASSESSING OFFICER REGARDING ADDITION OF RS.5 30 112/- MADE ON ACCOUNT OF PURCHASES OF DIAMONDS BY TREATING IT PURCHASES OUTSIDE THE BOOKS OF ACCOUNT. THIS ADDITION IS HIGHLY UNCALLED FOR A ND DESERVES TO BE DELETED AS IT HAS BEEN MADE MERELY O N SURMISES AND CONJECTURES WITHOUT ANY STRONG BASIS. 3. THE GROUND NO.1 RAISED BY THE ASSESSEE IS GENERA L IN NATURE AND HENCE THE SAME IS DISMISSED. 4. ISSUE IN GROUND NO. 2 IS AGAINST THE TRADING ADD ITION OF RS.2 24 980/-. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN GP RATE OF 10.16% AS AGAINST GP RATE OF 11.48 % DECLARED IN ASSESSMENT YEAR 2005-06 AND 16% DECLARED IN ASSESSM ENT YEAR 2004-05. THE AO REQUISITIONED THE ASSESSEE TO EXPLAIN THE VA RIATION IN GP RATE AS COMPARED TO THE EARLIER YEAR. THE EXPLANATION OF TH E ASSESSEE IN THIS REGARD WAS THAT DUE TO COMPETITION IN THE TRADE AND IN ORDER TO SURVIVE IN THE MARKET THE ASSESSEE HAD STARTED CONVERTING RAW GOLD INTO JEWELLERY FROM THE LOCAL KAARIGARS. IN THE PRECEDI NG YEARS THE ASSESSEE CLAIMS TO HAVE PURCHASED THE JEWELLERY FROM THE OPE N MARKET AND SOLD THE SAME. THE SECOND PLEA OF THE ASSESSEE WAS THAT IT HAD SHOWN INCREASED SALES DURING THE YEAR ON LOWERING THE GP RATE. THE AO ON THE EXAMINATION OF THE BOOKS OF ACCOUNT FOUND CERTAIN D ISCREPANCIES IN THE BOOKS. THE FIRST DISCREPANCY NOTED BY THE AO WAS I N RESPECT OF THE PURCHASES MADE FROM ONE SHRI GANPATI JEWELLERS. TH E ASSESSEE HAD PURCHASED DIAMOND GOLD ITEMS BUT IN THE STOCK REGI STER ONLY CREDIT OF GOLD OF 655.490 GRAMS WAS REFLECTED AND NO CREDIT O F PURCHASE OF DIAMONDS OF 165.66 CARATS WAS SHOWN. THE PERUSAL O F THE REGISTER OF 3 ORNAMENTS ACCOUNT ALSO REFLECTED THE SAME. IN RESP ECT OF THE SALES ENTERED IN THE STOCK REGISTER THE AO FOUND THAT IN CERTAIN CASES AS ENUMERATED AT PAGE 5 OF THE ASSESSMENT ORDER THE D ATE OF SALE IN THE STOCK REGISTER WAS AT VARIANCE WITH THE DATE OF SAL E AS PER THE SALE BILL. FURTHER ON CERTAIN SALE BILLS NO NAMES/ADDRESSES WERE INCORPORATED. FURTHER THE AO FOUND CERTAIN DISCREPANCIES IN GOLD RATE IN PURCHASE BILLS AS ENUMERATED IN PARA V AT PAGE 6 OF THE ASSE SSMENT ORDER. THE ASSESSEE HAD MAINTAINED THE DETAILS OF CLOSING STOC K IN KILOGRAMS/GRAMS BUT NO ITEM-WISE QUANTITATIVE DETAILS OF STOCK WERE MAINTAINED BY THE ASSESSEE. THE AO IN VIEW THEREOF INVOKED THE PROV ISIONS OF SECTION 145(3) OF THE ACT AND APPLIED GP RATE OF 11.48% AS SHOWN BY THE ASSESSEE IN THE PRECEDING YEAR AND COMPUTED THE INC OME RESULTING IN ADDITION OF RS.2 24 980/-. THE CIT(A) UPHOLD THE A DDITION MADE BY THE AO. 5. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT(A). LD. AR FOR THE ASSESSEE POINTED OUT THAT NO MAJOR DEFECTS WERE POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT ALTHOUGH SOME CLERI CAL DEFECTS IN RESPECT OF DATES AND NAMES OF THE PARTIES WERE REFERRED TO BY THE AO. LD. AR FURTHER SUBMITTED THAT THE ASSESSEE WAS MAINTAINING STOCK REGISTER WEIGHT-WISE I.E. GRAM-WISE BUT NO ITEMIZED STOCK RE GISTER WAS MAINTAINED BY THE ASSESSEE. THE LD. AR FURTHER DRE W OUR ATTENTION TO THE VAT RETURNS FILED BY THE ASSESSEE FOR THE PERIOD UN DER CONSIDERATION UNDER WHICH THE EXCISE AUTHORITIES HAD ACCEPTED THE SALES DECLARED BY THE ASSESSEE. THE NEXT PLEA OF THE LD. AR FOR THE ASSE SSEE WAS THAT THE GROSS PROFIT RATE OF ANY BUSINESS COULD NOT BE CONSTANT F ROM YEAR TO YEAR SPECIALLY IN VIEW OF THE CHANGES IN THE BUSINESS ST RUCTURE BEING CARRIED OUT BY THE ASSESSEE. FURTHER RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF CIT V OM 4 OVERSEAS 315 ITR 185 (P&H). LD. DR FOR THE REVENUE PLACING RELIANCE ON THE ORDER OF THE AO POINTED OUT THAT THE ASSESSE E HAD FAILED TO MAINTAIN ITEMIZED DETAILS OF THE STOCK AND FURTHER DISCREPANCIES WERE POINTED OUT BY THE AO WHICH HAVE NOT BEEN CLARIFIED BY THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF G OLD AND DIAMOND ITEMS UNDER THE PROPRIETARY CONCERN M/S NIPPY JEWELLERS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD DECLARED GROS S PROFIT RATE OF 10.16% AS AGAINST 11.48% DECLARED DURING THE PRECED ING YEAR. THE EXPLANATION OF THE ASSESSEE VIZ-A-VIZ THE FALL IN G P RATE WAS THAT IN THE PRECEDING YEARS IT WAS PURCHASING THE ITEMS OF JEW ELLERY AND SELLING THEM AS SUCH WHEREAS DURING THE YEAR UNDER CONSIDE RATION IT HAD PURCHASED RAW GOLD AND CONVERTED THE SAME INTO ORNA MENTS AND THEREAFTER SOLD THE SAME. FURTHER THE ASSESSEE CLAIMS THAT TH E INCREASE IN TURNOVER DURING THE YEAR UNDER CONSIDERATION WAS ON ACCOUNT OF LOWER GP EARNED BY THE ASSESSEE. 7. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V OM OVERSEAS HAD LAID DOWN THE PROPOSITION THAT NO ADDITION TO T HE GROSS PROFIT IS WARRANTED WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT. 8. COMING TO THE FACTS OF THE PRESENT CASE BEFORE U S THE AO ADMITTED THAT THE ASSESSEE WAS MAINTAINING A STOCK REGISTER WEIGHT-WISE BUT WAS NOT MAINTAINING THE STOCK REGISTER ITEM-WISE. IN T HE LINE OF BUSINESS CARRIED OUT BY THE ASSESSEE THE REQUIREMENT IS TO MAINTAIN A REGISTER OR ORNAMENTS ACCOUNT GOLD SERIES WHICH HAS BEEN MAIN TAINED BY THE ASSESSEE. ADMITTEDLY ONE PURCHASE FROM M/S GANPAT I JEWELLERS WHICH CONSTITUTED OF GOLD AND DIAMOND WAS ENTERED IN THE GOLD ACCOUNT BUT NOT 5 IN THE DIAMOND ACCOUNT. HOWEVER AS POINTED OUT BY THE ASSESSEE THE PAYMENT FOR THE SAME PURCHASE WAS MADE VIDE CHEQUE. FURTHER THE AO HAS REFERRED TO THE ENTRIES OF SALE OF ORNAMENTS IN THE STOCK REGISTER UNDER WHICH CERTAIN SALES MADE ON EARLIER DATES WER E ENTERED ON A LATER DATE IN THE STOCK REGISTER. ONCE THE ENTRIES HAVE BEEN MADE OF THE SALE BILLS THOUGH ON A LATER DATE THE BOOKS OF ACCOUNT CANNOT BE HELD TO BE WANTING. MERELY BECAUSE IN CERTAIN BILLS THE NAME S OF THE PURCHASERS WERE NOT MENTIONED DOES NOT DEPICT A DEFECT IN THE BOOKS OF ACCOUNT. IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND NO MERIT IN THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. FURTHER THE AO HAS BASED THE ESTIMATION OF THE INCOME IN THE HA NDS OF THE ASSESSEE FOR THE CURRENT YEAR ON THE BASIS OF THE RESULTS DE CLARED IN THE PRECEDING YEAR. IN THE LINE OF BUSINESS CARRIED OUT BY THE AS SESSEE THE GROSS PROFIT VARIES FROM YEAR TO YEAR AND MERELY BECAUSE A HIGHE R GP RATE HAS BEEN SHOWN IN THE PRECEDING YEAR CANNOT BE THE BASIS TO COMPUTE THE INCOME FOR THE CURRENT YEAR. REVERSING THE ORDERS OF THE AUTHORITIES BELOW WE DIRECT THE AO TO DELETE THE ADDITION OF RS.2 24 980 /-. 9. THE SECOND ISSUE RAISED BY THE ASSESSEE IS IN RE SPECT OF ADDITION OF RS.5 30 112/-. AS POINTED OUT IN THE PARAS HEREIN ABOVE THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD MADE PURCH ASES FROM ONE SHRI GANPATI JEWELLERS. THE ITEMS PURCHASED BY THE ASSES SEE CONSTITUTED OF BOTH GOLD AND DIAMOND. THE ASSESSEE HAD INCORPORAT ED THE SAID PURCHASE IN ITS STOCK REGISTER HOWEVER ONLY CREDIT OF GOLD OF 655.490 GRAMS REFLECTED IN THE SAID BILL WAS MADE IN THE STOCK R EGISTER AND NO CREDIT OF PURCHASE OF DIAMOND OF 166.66 CARAT WAS MADE IN THE STOCK REGISTER. THE DIAMOND IN THE SAID BILL HAD BEEN VALUED AT RS.5 30 112/-. THE AO NOTED FROM THE EXAMINATION OF STOCK REGISTER THAT NO PURC HASE/SALE OF DIAMOND HAVE BEEN SHOWN BY THE ASSESSEE DURING THE FINANCIA L YEAR 2005-06. THE 6 PURCHASE OF RS.5 30 112/- WAS ADDED AS UNEXPLAINED INVESTMENT U/S 69 OF THE INCOME-TAX ACT. DURING THE APPELLATE PROCEEDIN GS THE CONTENTION OF THE ASSESSEE WAS THAT THE SAID INVOICE HAD BEEN COR RECTLY ENTERED IN THE BOOKS OF ACCOUNT. THE ASSESSEE EXPLAINED THAT THE GROSS QUANTITY IN THE SAID BILL WAS 665.490 GRAMS AND THE NET WEIGHT OF O RNAMENTS WAS ONLY 609.140 GRAMS. THE ENTIRE VALUE OF THE PURCHASE BI LL AS PER THE ASSESSEE WAS ENTERED IN THE BOOKS OF ACCOUNT THOUGH BECAUSE OF CLERICAL ERROR THE TOTAL VALUE WAS NOT CORRECTLY ACCOUNTED FOR IN THE STOCK REGISTER. THE ASSESSEE FURTHER EXPLAINED THAT THE GROSS WEIGHT OF GOLD I.E. 665.490 WAS SHOWN IN THE STOCK REGISTER WHICH COMPRISED OF THE WEIGHT OF DIAMONDS AND COLOURED STONES AT 56.352 GRAMS AND THE NET WEI GHT WAS 609.138 GRAMS WHICH HAS BEEN RIGHTLY SHOWN IN THE INVOICE. THE CIT(A) NOTED THAT THE ASSESSEE WAS MAINTAINING SEPARATE STOCK DE TAILS OF BOTH DIAMOND AND GOLD IN THE BOOKS OF ACCOUNT BUT IN RESPECT OF THE SAID BILL THE WEIGHT OF DIAMOND WAS ACCOUNTED FOR IN THE WEIGHT O F GOLD. THE CIT(A) THUS HELD THAT AS THE ASSESSEE HAD NOT ACCOUNTED FO R THE PURCHASE OF DIAMOND IN HIS BOOKS OF ACCOUNT THE ADDITION OF RS .5 30 112/- WAS JUSTIFIED. THE LD. AR FOR THE ASSESSEE REFERRED TO THE EXTRACT OF STOCK REGISTER PLACED AT PAGES 31-32 OF THE PAPER BOOK AN D POINTED OUT THAT IN THE STOCK REGISTER OF DIAMOND THERE WAS ONLY BROUG HT FORWARD 1065.610 CARAT OF DIAMOND AND NO OTHER PURCHASE WAS SHOWN. HOWEVER IN THE STOCK REGISTER OF GOLD THE PURCHASE OF M/S GANPATI JEWELLERS OF GROSS WEIGHT OF 665.490 GRAMS WAS MADE. THE LD. AR STRES SED THAT THE PAYMENT FOR THE AFORESAID PURCHASE WAS MADE BY CHEQ UE AS CERTIFIED BY THE SELLER THE CERTIFICATE OF M/S GANPATI JEWELLER S IS PLACED AT PAGE 7 OF THE SECOND PAPER BOOK. THE LD. AR POINTED OUT THAT THERE WERE NO DEFECTS IN THE PURCHASE ACCOUNT AND THE SAID PURCHA SES WERE DULY REFLECTED IN THE TRADING ACCOUNT. AN ALTERNATE SUB MISSION WAS RAISED BY THE ASSESSEE THAT A SURRENDER OF RS.25 LACS WAS MAD E BY THE ASSESSEE 7 WHICH WAS ACTED UPON BY FILING THE RETURN OF INCOME . OUR ATTENTION WAS DRAWN TO THE SURRENDER LETTER PLACED AT PAGE 30 OF THE PAPER BOOK IN WHICH RS.10 LACS WAS SURRENDERED AGAINST THE STOCK AND RS.15 LACS AGAINST CASH. IT WAS FURTHER POINTED OUT THAT THE S AID SURRENDER WOULD COVER THE INVESTMENT MADE IN THE CONSTRUCTION OF HO USE IN SECTOR 34D CHANDIGARH. LD. DR FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE CIT(A). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. THE ASSESSEE HAD DURING THE YEAR UNDER CONSIDERATION MADE PURCHASE OF ORNAMENTS OF CONSTITUTION OF GOLD AND DIAMOND TOTAL ING RS.9 73 168/- FROM M/S GANPATI JEWELLERS. THE COPY OF THE SALES INVOICE IS PLACED AT PAGE 8 OF THE SECOND PAPER BOOK. THE PAYMENT FOR T HE SAID PURCHASE WAS MADE VIDE CHEQUE AS IS CERTIFIED BY THE SAID SELLE R AND THE GROSS WEIGHT OF THE ITEMS PURCHASED BY THE ASSESSEE WAS 665.490 GRAMS AND NET WEIGHT OF 609.140 WAS ON ACCOUNT OF GOLD AND DIAMONDS AND WERE OF VALUE OF 165.66 CARAT. THE ASSESSEE IS MAINTAINING STOCK RE GISTER ALTHOUGH ON ACCOUNT OF DIAMOND AND GOLD. HOWEVER IN RESPECT O F THE AFORESAID PURCHASE THE ENTRY WAS MADE IN THE STOCK REGISTER OF GOLD OF THE GROSS WEIGHT OF THE ITEM PURCHASED AND NO ENTRY WAS MADE IN THE DIAMOND REGISTER. THE ADDITION WAS MADE BY THE AO ON ACCOU NT OF UNACCOUNTED PURCHASES RELATING TO VALUE OF THE DIAMOND I.E.RS.5 30 112/-. WE FIND NO MERIT IN THE SAID ADDITION BEING MADE BY THE AUTHOR ITIES BELOW WHERE THE TOTAL PURCHASES OF RS.9 73 168/- HAS BEEN REFLECTED IN THE PURCHASE ACCOUNT AND THE PAYMENT IN RESPECT THEREOF WAS MADE VIDE CHEQUE. MERELY BECAUSE THERE WAS A DISCREPANCY IN THE ENTRY IN THE STOCK REGISTER DOES NOT WARRANT THE ADDITION ON ACCOUNT OF PURCHASES. FURTHER THE ASSESSEE HAS ALREADY MADE A SURRENDER OF RS.25 LACS WHICH CONSTITUTES OF SURRENDER AGAINST STOCK OF RS.10 LAC S AND AGAINST CASH OF 8 RS.15 LACS. IN THE TOTALITY OF FACTS AND CIRCUMSTA NCES OF THE CASE WE DELETE THE ADDITION OF RS.5 30 112/- BEING UNWARRAN TED. 11. GROUND NO. 3 RAISED BY THE ASSESSEE IS THUS AL LOWED. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH DAY OF NOVEMBER 2011. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25 TH NOVEMBER 2011 POONAM COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH