Income Tax Officer, Jammu & Kashmir v. M/s New World Wide Trading Company Batamaloo, Jammu & Kashmir

ITA 552/ASR/2016 | 2012-2013
Pronouncement Date: 30-11-2017 | Result: Allowed

Appeal Details

RSA Number 55220914 RSA 2016
Assessee PAN AAIFN4036H
Bench Amritsar
Appeal Number ITA 552/ASR/2016
Duration Of Justice 1 year(s) 27 day(s)
Appellant Income Tax Officer, Jammu & Kashmir
Respondent M/s New World Wide Trading Company Batamaloo, Jammu & Kashmir
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 30-11-2017
Date Of Final Hearing 25-07-2017
Next Hearing Date 25-07-2017
First Hearing Date 25-07-2017
Assessment Year 2012-2013
Appeal Filed On 03-11-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY JUDICIAL MEMBER I.T.A NO. 524/(ASR)/2016 ASSESSMENT YEAR: 2012-13 PAN: AAIFN4036H M/S. NEW WORLD WIDE TRADING COMPANY ADDA BATAMALOO SRINAGAR KASHMIR. VS. INCOME TAX OFFICER WARD-3 (2) RAJ BAGH SRINAGAR KASHMIR. (APPELLANT) (RESPONDENT) I.T.A NO. 552/(ASR)/2016 ASSESSMENT YEAR: 2012-13 PAN: AAIFN4036H INCOME TAX OFFICER WARD-3 (2) RAJ BAGH SRINAGAR KASHMIR. VS. M/S. NEW WORLD WIDE TRADING COMPANY ADDA BATAMALOO SRINAGAR KASHMIR. (APPELLANT) (RESPONDENT) APPELLANT BY : WRITTEN SUBMISSIONS RESPONDENT BY: SH. RAHUL DHAWAN (D.R.) DATE OF HEARING: 12.09.2017 DATE OF PRONOUNCEMENT: 30.11.201 7 ORDER PER T. S. KAPOOR (AM): THESE ARE CROSS APPEALS FILED BY ASSESSEE AS WELL A S BY REVENUE AGAINST THE ORDER OF LD. CIT(A) JAMMU DATED 30.06. 2016 FOR ASST. YEAR: 2012-13. 2. THE GROUNDS OF APPEAL TAKEN BY ASSESSEE IN ITA N O. 524/ASR/2016 ARE REPRODUCED BELOW: 1. ON CIRCUMSTANCES AND FACTS OF THE CASE THE WOR THY CIT(A) HAS ERRED IN NOT DELETING THE ADDITIONS OF RS.57 96 780/- MADE B Y LD. ITO ON THE ITA NOS.524&552(ASR)/2016 ASSESSMENT YEAR: 2012-13 2 GROUND THAT THE ASSESSEE HAD NOT CARRIED FORWARD OP ENING STOCK OF RS.57 96 780/- (PREVIOUS YEARS CLOSING STOCK) IN H IS TRADING ACCOUNT. 2. ON CIRCUMSTANCES AND FACTS OF THE CASE THE WOR THY CIT(A) HAS ERRED IN HOLDING THAT THE LD. ITO HAS COMPUTED NET PROFIT AT RS.42 81 590/- WHICH ON A PLAIN READING OF HER ORDER IS A FACTUALLY WRO NG & MISPLACED OBSERVATIONS. 3. ON CIRCUMSTANCES AND FACTS OF THE CASE THE WOR THY CIT(A) HAS ERRED IN COMPUTING THE INCOME OF THE ASSESSEE AT RS.21 40 79 5/- BEING 4% OF GROSS TURNOVER WHICH NEEDS TO BE DELETED. 4. THE APPELLANT CRAVES LEAVE TO ADD ALTER MODIFY OR MODIFY THE GROUNDS OF APPEAL. AMENDED GROUNDS OF APPEAL TAKEN BY REVENUE IN ITA NO. 552/ASR/2016 1. WHETHER THE LD. CIT (A) JAMMU WAS RIGHT IN LAW IN DELETING ADDITION OF RS. 57 96 780/- MADE ON ACCOUNT OF UNDISCLOSED AND UNACCOUNTED CLOSING STOCKS ON 31-03-2011 AS OPENING STOCKS AS ON 01-04- 2011 WITHOUT APPRECIATING THE FACT THAT ; (I) ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCOUNTS OR D OCUMENTARY EVIDENCE TO SUBSTANTIATE THE CLAIMS MADE IN THE IT RETURN DESPITE GIVEN AMPLE OPPORTUNITY. (II) ASSESSEE DID NOT PRODUCE ANY DOCUMENTARY EVIDENCE R EGARDING HIS CONTENTION / CLAIM THAT HUGE STOCKS WORTH RS. 57 9 6 780/- WERE RENDERED USELESS AND IT I S VALUE TAKEN AS NIL. (III) ASSESSEE DID NOT PRODUCE NECESSARY DETAILS AND SUBS TANTIATE THE PURCHASES WITH ANY RECORDS TO COUNTER THE INFERENCE DRAWN THAT INFLATED PURCHASE HAVE BEEN CLAIMED TO COVER TO UNDISCLOSED STOCK OF RS. 57 96 780/- AND AS SUCH TRADING ADDITION RIGHTLY MA DE BY THE A.O. (IV) WHETHER ASSESSEE CAN CLAIM ANY ACCOUNTING ERR OR WHEN IT HAS NOT MADE ANY MENTION OR NOTE IN THE AUDIT REPORT OR ACC OUNTS REGARDING LARGE CLAIM OF STOCK DAMAGES OF SUCH MAGNITUDE AND ALSO F AILED TO SUBSTANTIATE THE CLAIM WITH ANY SATISFACTORY EVIDENCE AND AS SUC H THE CONTENTION OF THE ASSESSEE APPEARS AN AFTER THOUGHT CLAIM WITHOUT ANY BASIS WHEN CAUGHT ON A WRONG FOOT. 2. WHETHER THE LD. CIT (A) WAS RIGHT IN LAW IN DI RECTING TO ASSESS THE INCOME OF THE ASSESSEE BY APPLYING A NET PROFIT RAT E OF 4% AS AGAINST 8% APPLIED BY THE A.O AFTER CONSIDERING THE I) FAILURE OF THE ASSESSEE TO SUBSTANTIATE THE TRADING RESULTS DECLARED BY ANY SU PPORTING BOOKS OF ACCOUNT OR RECORDS AND II) THE PROVISIONS OF SECTIO N44AD OF THE IT ACT 1961. THE APPELLANT ALSO CRAVES TO AMEND OR ADD ANY OR MO RE GROUNDS OF APPEAL. ITA NOS.524&552(ASR)/2016 ASSESSMENT YEAR: 2012-13 3 3. AT THE TIME OF HEARING NONE WAS PRESENT ON BEHAL F OF ASSESSEE; HOWEVER THE WRITTEN SUBMISSIONS FILED BY ASSESSEE W ERE ON RECORD AND VIDE WRITTEN SUBMISSIONS THE LD. AR HAD SUBMITTED THAT THE APPEAL MAY BE DECIDED ON THE BASIS OF THESE WRITTEN SUBMISSION S. THE WRITTEN SUBMISSIONS WERE CONFRONTED TO LD. DR AND AFTER GOI NG THROUGH THE WRITTEN SUBMISSIONS AND THE CONTENTIONS OF LD. DR THE CASES WERE TAKEN AS HEARD. 4. THE BRIEF FACTS AS APPEARING IN THE ASSESSMENT O RDER ARE THAT ASSESSEE IS A TRADER IN DRY FRUITS AND IS EXPORTER OF DRY FRUITS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER OBSERVED THAT DURING THE PREVIOUS YEAR ENDING AS ON 31.03.2011 T HE ASSESSEE WAS HAVING STOCK OF RS.57 96 780/- AND WHICH DURING THE YEAR UNDER CONSIDERATION SHOULD HAVE BEEN TAKEN BY THE ASSESSE E AS OPENING STOCK AND WHICH HAS NOT BEEN TAKEN BY ASSESSEE AS OPENING STOCK AND THEREFORE THE ASSESSEE WAS CONFRONTED TO EXPLAIN TH E SAME. IN REPLY THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS EXPORTING SPICES AND DRY DATES AND THE SAID GOODS WERE PERISHABLE IN NATURE. IT WAS SUBMITTED THAT IT IS A FACT THAT THERE WAS A STOCK AMOUNTING TO RS.57 96 780/- WHICH IN THE NORMAL COURSE SHOULD HAVE APPEARED AS THE OPENING STOCK BUT AT THE END OF PRECEDING FINANCIAL YEAR ITSELF IT WAS OBSERVED THAT THE GOODS HAD EXPIRED AND HENCE WERE NOT FIT FOR HUMAN CONSUMPTION AND THEREFORE IN THE OPENING STOCK THEIR VALUE WAS TAKE N AS NIL. IT WAS ALSO SUBMITTED THAT BY NOT TAKING THE OPENING STOCK AT R S.57 96 780 THERE IS NO EFFECT ON THE PROFIT OF THE ASSESSEE AS THE SAME WOULD HAVE APPEARED ITA NOS.524&552(ASR)/2016 ASSESSMENT YEAR: 2012-13 4 AS CLOSING STOCK. HOWEVER THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE REPLY AND HE MADE THE ADDITION OF THE SAME. AGG RIEVED THE ASSESSEE FILED APPEAL AND SUBMITTED VARIOUS SUBMISSIONS. THE LD. CIT(A) DELETED THE ADDITIONS HOWEVER HE CALCULATED THE INCOME OF ASSESSEE BY APPLYING 4% PROFIT TO THE SALES AND MADE THE ADDITION TO RS. 21 40 795/-. 5. AGGRIEVED THE BOTH PARTIES ARE IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LD. DR AND HAVE GONE THROUGH T HE WRITTEN SUBMISSIONS FILED BY ASSESSEE. WE FIND THAT THE ASS ESSING OFFICER HAD MADE THE ADDITION OF RS.57 96 780/- AS THE ASSESSEE HAD NOT TAKEN THIS FIGURE AS OPENING STOCK AS PER THE EARLIER YEARS BA LANCE SHEET. THE ASSESSING OFFICER HELD THAT BY NOT TAKING THE OPENI NG STOCK AT THIS AMOUNT THE ASSESSEE HAD REDUCED THE PROFIT WHEREAS IN OUR OPINION BY NOT TAKING THE OPENING BALANCE IN THE DEBIT SIDE OF TRADING ACCOUNT THE PROFIT HAD INCREASED AS THE OPENING STOCK IS ALWAYS CONSIDERED AS AN ITEM OF EXPENDITURE ON THE DEBIT SIDE. THEREFORE THE LD . CIT(A) HAS RIGHTLY DELETED THE SAME BY HOLDING AS UNDER: I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUB MISSIONS MADE BY THE APPELLANT. THE APPELLANT HAS STATED IN HIS SUBMISSION THAT HE COULD NOT PRODUCE THE BOOKS OF ACCOUNTS AND OTHER DETAILS BEFORE THE AO AS THE ASSESSEE'S PREMISES WAS BADLY DAMAGED IN THE FLOODS OF SEPTEMBER 2014 IN WHICH BOOKS OF ACCOUNT S AND OTHER DOCUMENTS WERE ALSO DESTROYED. THE BOOKS OF ACCOUNT S OF THE ASSESSEE WERE DULY AUDITED U/S. 44AB OF THE INCOME TAX ACT 1961 PRIOR TO THE FLOODS AND THE RETURNS WERE FILED ALON G WITH THE AUDIT REPORT AS REQUIRED UNDER THE LAW. FURTHER THE APPEL LANT HAS STATED THAT HE IS ENGAGED IN TRANS LOC TRADE OF SPICES DR Y DATES AND OTHER ALLIED ITEMS AND THESE ITEMS ARE PERISHABLE I N NATURE. HE FURTHER STATED THAT IT IS A FACT THAT THE APPELLANT HAD A CLOSING STOCK OF RS. 57 96 780/- AS ON 31/03/2011 AND IN THE NORM AL COURSE IT SHOULD HAVE APPEARED AS OPENING STOCK IN THE ACCOUN TS FOR THE ITA NOS.524&552(ASR)/2016 ASSESSMENT YEAR: 2012-13 5 FINANCIAL YEAR 2011-12. HOWEVER THE APPELLANT CAME TO' KNOW AT THE END OF THE PRECEDING FINANCIAL YEAR 2010-11 THAT 'B EST BEFORE -USE- DATE' OF THESE GOODS HAD EXPIRED AND HENCE WERE NOT FIT FOR EXPORTS. ACCORDINGLY THE GOODS WERE ABANDONED FOR EXPORT AN D THEIR VALUE WAS TAKEN AS 'NIL' BOTH FOR OPENING STOCK AS WELL A S CLOSING STOCK. IT HAS FURTHER BEEN ARGUED BY THE APPELLANT THAT EVEN IF THE FIGURE OF RS. 57 96/780/- WAS SHOWN AS CLOSING STOCK FOR THE ASSE SSMENT YEAR 2012-13 WITH A NOTE THAT THE GOODS ARE UNSALABLE TH E TRADING ACCOUNT COULD HAVE BEEN SALE AS DECLARED THE APPELLANT THER EFORE PLEADED THAT IT MAY BE AN ACCOUNTING ERROR IT WILL NOT AFFE CT THE PROFITABILITY OF THE ASSESSEE. THE APPELLANT FURTHER STATED THAT THE AO HAD OBTAINED INFORMATION FROM SALE TAX DEPARTMENT AND DID NOT FI ND A SINGLE VARIATION IN THE FIGURES OF PURCHASES AND SALES AND CLOSING S TOCK AS DECLARED BY THE APPELLANT M THE INCOME TAX RETURN. IN VIEW OF T HE ABOVE THAT THE ADDITION MADE THE AO AT RS.-57.96 LACS SHOULD BE DE LETED. I HAVE CONSIDERED THE FACTS OF THE CASE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT STATED AS ABO VE. THE CONTENTION OF THE APPELLANT REGARDING THE CLOSING S TOCK APPEARED TO BE CORRECT AS IT COULD NOT AFFECT THE PROFITABILITY HA D IT BEEN TAKEN AS GOODS NOT FIT FOR SALE. SINCE THE BOOKS OF ACCOUNT OF TH E ASSESSEE HAS BEEN AUDITED AND THE AUDIT REPORT HAS BEEN FILED ALONG W ITH THE RETURN OF INCOME THE SALES DECLARED AT RS.5 35 19 822/- AND A S AGAINST THE TOTAL PURCHASES OF RS.4 81 31 241/- SHOULD BE TAKEN AS CO RRECT FIGURE AND IT SHOULD NOT BE DISTURBED. COMING TO THE GROSS PROFIT AND THE NET PROFIT THE AO HAS WORKED OUT THE PROFIT RATE @8% OF THE GROSS SALES U/S. 44AD OF THE INCOME TAX ACT AND WORKED OUT THE NET PROFIT AT RS .42 81 590/- APPEARS TO BE ON HIGHER SIDE KEEPING IN VIEW THE NATURE O F TRADE AND THE PERISHABLE NATURE OF GOODS SOLD WHERE PROFIT MARGIN S ARE VERY LOW. I THEREFORE HOLD THAT A PROFIT RATE OF 4% ON THE GRO SS SALES COULD BE REASONABLE AND ACCORDINGLY NET PROFIT RATE IS REDU CED FROM RS. 42 81 590/- TO RS. 21 40 795/-. IN EFFECT THE APPEAL IS PARTLY ALLOWED. HOWEVER WHILE DELETING THE ADDITION THE LD. CIT(A ) HAS MADE AN ADDITION OF RS.21 40 795/- BEING 4% OF TURNOVER. TH E ASSESSING OFFICER HAD NOT MADE ANY SUCH ADDITION AS IS APPARENT FROM THE ASSESSMENT ORDER ITSELF. THE ASSESSING OFFICER THOUGH HAD DISC USSED THIS ISSUE OF APPLYING 8% PROFITS TO THE TURNOVER BUT HAD NOT MAD E ANY ADDITION ON THIS ACCOUNT BY HOLDING AS UNDER: SINCE IN THIS CASE THE GROSS TURNOVER/SALES ARE SL IGHTLY HIGHER AND AS SUCH COMPUTATION OF PROFITS AT THE RATE OF 8% OF TH E RECEIPTS WOULD MEET THE ENDS OF JUSTICE IN THIS CASE. ACCORDINGLY THE INCOM E OF THE ASSESSEE COULD BE WORKED OUT BY APPLYING 8% PROFIT RATE TO THE GRO SS RECEIPTS/SALES OF ITA NOS.524&552(ASR)/2016 ASSESSMENT YEAR: 2012-13 6 RS.5 35 19 885/- AND THE NET PROFIT WORKS OUT TO RS . 42 81 590/-. HOWEVER IT HAS BEEN OBSERVED THAT THE HONBLE APPELLATE AUT HORITIES IN CERTAIN CASES 'HAVE HELD THAT THAT NO OTHER ADDITIONS CAN B E MADE TO THE INCOME OF THE ASSESSEE IN CASE THE PROFITS ARE DETERMINED BY APPLYING A PROFIT RATE. THEREFORE CONSIDERING ALL THE FACTS AND CIRCUMSTAN CES OF THE CASE THE ADDITION WORKED OUT AT RS. 42 81 590/- ON ACCOUNT O F ESTIMATION OF PROFITS BY APPLYING 8% PROFIT RATE ON SALES/TURNOVER IS NOT MADE TO THE INCOME OF THE ASSESSEE AND IS DISCUSSED TO JUSTIFY/SUPPORT TH E ASSESSMENT/ADDITIONS BEING MADE IN SUCCEEDING PARA S. THEREFORE IN VIEW OF THE FACTS AND CIRCUMSTANCES WE DEEM IT APPROPRIATE TO REMIT THE CASES BACK TO THE OFFICE O F ASSESSING OFFICER WHO SHOULD PASS A CORRECT ORDER AFTER TAKING INTO ACCOU NT THE FACTS AND CIRCUMSTANCES OF THE CASE. NEEDLESS TO SAY THAT THE ASSESSEE WILL BE PROVIDED SUFFICIENT OPPORTUNITY OF BEING HEARD. 7. IN VIEW OF THE ABOVE THE APPEALS FILED BY ASSES SEE AS WELL AS REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2017 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30.11.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A) (4) THE CIT (5) THE SR DR I.T.A.T. TRUE COPY BY ORDER