Pradeep Jain, Ludhiana v. ITO, Ludhiana

ITA 576/CHANDI/2011 | 2007-2008
Pronouncement Date: 27-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 57621514 RSA 2011
Assessee PAN ABAPJ4561G
Bench Chandigarh
Appeal Number ITA 576/CHANDI/2011
Duration Of Justice 2 month(s) 3 day(s)
Appellant Pradeep Jain, Ludhiana
Respondent ITO, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 27-07-2011
Assessment Year 2007-2008
Appeal Filed On 24-05-2011
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO. 568/CHD/2011 ASSESSMENT YEAR: 2007-08 THE ITO VS. SHRI PARDEEP JAIN WARD-VII(4) PROP M/S SANDEEP INDUSTRIAL LUDHIANA CORPORATION LUDHIANA PAN NO. ABAPJ4561G & ITA NO. 576/CHD/2011 ASSESSMENT YEAR: 2007-08 SHRI PARDEEP JAIN V THE ITO WARD VII(4) PROP M/S SANDEEP INDUSTRIAL LUDHIANA CORPORATION LUDHIANA PAN NO. ABAPJ4561G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY GARG & SHRI S.K.MANGI RESPONDENT BY: SHRI AJAY SHARMA ORDER PER SUSHMA CHOWLA JM THESE ARE CROSS APPEALS BY THE REVENUE AND ASSESSEE AGAINST THE ORDER OF CIT(A)-II LUDHIANA DATED 17.3.2011 RELATI NG TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143( 3) OF THE I.T. ACT 1961. 2. THE REVENUE IN ITS APPEALS HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL:- 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD . CIT(A)-II LUDHIANA HAS ERRED IN DELETING THE ADDITI ON OF RS. 3 29 950/- ON ACCOUNT OF GP RATE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD . CIT(A)-II LUDHIANA HAS ERRED IN DELETING THE ADDITI ON OF RS. 16 00 000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUNDRY CREDITORS FOR WANT OF EVIDENCE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD . CIT(A)-II LUDHIANA HAS ERRED IN DELETING THE ADDITI ON OF RS. 25000/- MADE ON ACCOUNT OF AGRICULTURE INCOM E. 4. THAT THE ORDER OF LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL ITA NO. 576/CHD/2011 ARE AS UNDER:- 1. THAT THE LD. CIT(A) WHILE DECIDING OUR APPEAL HAS ERRED IN NOT ACCEPTING THE GP RATIO DECLARED @ 21.62% INSTEAD OF 25%. THOUGH THE REASONS FOR LOW GROSS PROFIT RATIO GIVEN TO THE ASSESSING OFFICER A S WELL AS TO THE LD. CIT(A). 2. THAT THE LD. CIT(A) HAS ERRED WHILE NOT ACCEPTING THE ADVANCE TO LANDLADY TO WHOM NO RENT BEING PAID AND NO INTEREST CHARGED AND DECIDED DEEMED INCOME ON ACCOUNT OF INTEREST ON ADVANCE. THOUGH NO INTEREST IS BEING PAID TO THE FAMILY CREDITORS. 3. THAT THE LD. CIT(A) HAS ERRED WHILE CONFIRMING THE ADDITION OF RS. ONE LAC ON ACCOUNT OF SALE OF S CRAP. THOUGH THIS PRACTICE IS BEING ACCEPTED BY THE DEPARTMENT IN PREVIOUS YEARS ALSO WHERE NO SCRAP IS BEING PRODUCED. 4 THE CROSS APPEAL BY THE REVENUE AND ASSESSEE WERE HEARD TOGETHER AND ARE DISPOSED BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAD FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 2 90 297/-. D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE COUNSEL FOR THE ASSESSE E HAD ATTENDED ON VARIOUS DATES OF HEARING AND PRODUCED BOOKS OF ACCO UNT ALONG WITH BILLS AND VOUCHERS. DURING THE YEAR UNDER CONSIDERATION THERE WAS FALL IN GP 3 RATE. THE ASSESSEE EXPLAINED THAT SALES OF RS. 8 L ACS WERE MADE TO M/S HMT(I) ON TENDER BASIS FOR EXPORT TO ZIMBABWE ON WH ICH A LOW MARGINAL PROFIT WAS EARNED. SIMILARLY SALES OF RS. 51 89 4 86/- TO M/S TRIPURA FOREST DEVELOPMENT AND PLANTATION CORPORATION LTD AGARTALA (TRIPURA) WERE MADE ON THE TENDER BASIS. THE EXPLANATION OF THE ASSESSEE WAS REJECTED AND THE ASSESSING OFFICER TO COVER UP ANY LEAKAGE ADOPTED THE GP RATE AT 25% INSTEAD OF 21.62% DECLARED BY THE ASSE SSEE RESULTING IN ADDITION OF RS. 5 49 320/-. HOWEVER THE CIT(A) R ELYING ON THE ORDER OF THE TRIBUNAL IN THE CASE OF SHRI SANDEEP JAIN RESTR ICTED THE ADDITION TO THE EXTENT OF 40% OF ADDITION MADE BY THE ASSESSING OFF ICER AND BALANCE ADDITION TO THE EXTENT OF 60% WAS DELETED. 6. THE ASSESSEE VIDE GROUND NO.1 HAS RAISED THE ISS UE OF NON ACCEPTANCE OF GP RATES DECLARED. THE REVENUE VIDE GROUND NO.1 IS AGAINST THE RELIEF GRANTED BY THE CIT(A) ON ACCOUNT OF GP RATE. 7. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE BOOKS OF ACCOUNT WERE NOT REJECTED BY THE AUTHORITIES BELOW AND GP R ATE WAS APPLIED BY THE ASSESSING OFFICER TO COVER UP LEAKAGE AGAINST WHICH PARTIAL RELIEF HAS BEEN GIVEN BY THE CIT(A). THE LD. AR FOR THE ASSES SEE PLACED RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE OF SHRI SANDE EP JAIN. THE LD. DR PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. IN THE FACTS OF THE CASE BEFORE US THE ASSESSEE HAD PRODU CED THE BOOKS OF ACCOUNT ALONGWITH BILLS AND VOUCHERS DURING THE COU RSE OF ASSESSMENT PROCEEDINGS AND THE SAME IS ACKNOWLEDGED BY THE ASS ESSING OFFICER IN THE ASSESSMENT ORDER. ADMITTEDLY THE BOOKS OF ACCOUNT HAVE BEEN REJECTED BY THE ASSESSING OFFICER. AS PER THE ASSESSING OFFICE R THERE WAS FALL IN THE 4 GP RATE. THE ASSESSEE DECLARED GP RATE OF 21.62% AN D THE REASONS FOR FALL IN GP RATE WAS CLAIMED TO BE ON ACCOUNT OF CERTAIN SALES MADE ON TENDER BASIS TO TWO CONCERNS I.E. M/S HMT(I) AND M/S TRIP URA FOREST DEVELOPMENT CORPORATION LTD. THE ASSESSING OFFICER HAD ESTIMATED THE GP RATE AT 25% IN ORDER TO COVER LEAKAGE. HOWEVE R NO BASIS OF THE ADOPTION OF THE SAID 25% AS GP RATE FOR COMPUTING T HE INCOME OF THE ASSESSEE HAS BEEN PROVIDED BY THE ASSESSING OFFICER . THE CIT(A) HAS ALSO RESTRICTED THE ADDITION TO 40% OF THE ADDITION MADE BY THE ASSESSING OFFICER WHICH IS ALSO WITHOUT ANY BASIS. WE FIND N O MERIT IN THE AFORESAID ADDITION MADE BY THE AUTHORITIES BELOW AS IT IS EST ABLISHED RULE THAT THE GP RATE DECLARED FORM YEAR TO YEAR CANNOT BE CONSTANT AND VARY BECAUSE OF THE VARIOUS FACTORS. THE ASSESSEE DURING THE YEAR UNDE R APPEAL HAD MADE SALES ON TENDER BASIS ON WHICH THE MARGIN OF PROFIT WAS L OWER WHICH RESULTED IN THE LOW GP RATE. THE BOOKS OF ACCOUNT HAVE NOT BEE N REJECTED. THERE IS NO MERIT IN THE ADOPTING THE SAID GP RATE AND DETER MINE THE INCOME IN THE HANDS OF THE ASSESSEE. WE DIRECT THE ASSESSING OF FICER TO ACCEPT THE GP RESULTS SHOWN BY THE ASSESSEE AND ACCORDINGLY ADDIT ION MADE IN THIS REGARD IS DELETED. THE GROUND NO.1 RAISED BY THE A SSESSEE IS THUS ALLOWED AND GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 9. THE GROUND NO.2 RAISED BY THE ASSESSEE IN ITS AP PEAL IS AGAINST THE ADDITION MADE ON ACCOUNT OF ADVANCE TO LAND LADY. 10. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD REFLECTED AN ADVANCE OF RS. 6 75 000/- TO SMT. KAML A JAIN. THE EXPLANATION OF THE ASSESSEE WAS THAT THE SAID ADVAN CES HAD BEEN MADE TO THE LAND LADY AS THE BUSINESS PREMISES FROM WHICH T HE ASSESSEE WAS OPERATING IS OWNED BY HER. HE FURTHER EXPLAINED TH AT NO RENT WAS BEING PAID TO THE LAND LADY. THE ASSESSING OFFICER REJECT ING THE PLEA OF THE 5 ASSESSEE HELD THE SAID ADVANCE TO BE NOT FOR BUSINE SS PURPOSES AND MADE AN ADDITION OF RS. 81 000/- BEING INTEREST @ 12% ON THE SAID ADVANCES OF RS. 6 75 000/-. THE CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE. THE LD. AR FOR THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDENCE ON ITS CLAIM OF HAVING ADVANCED THE SAID AMOUNT ON ACCOUNT OF SECURITY TO THE LAND LADY. IN THE ABSENCE OF THE SAME WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE AND UPHOLDING THE ORDER OF CIT(A) WE DISMISS THE GROUN D NO.2 RAISED BY THE ASSESSEE. 11. THE ISSUE IN GROUND NO.3 IS AGAINST THE ADDITIO N OF RS. 1 00 000/- ON ACCOUNT OF SALE OF SCRAP. THE ASSESSEE HAD NOT S HOWN ANY INCOME FROM SALE OF SCRAP DURING THE YEAR. WHEN CONFRONTED TH E PLEA OF THE ASSESSEE WAS THAT SCRAP WAS NEVER GENERATED AND IF ANY SMAL L PIECES WERE SPARED IT WAS BEING UTILIZED FOR THE MANUFACTURING AND OTH ER MACHINERY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAD EFFECTED SALES OF SCRAP OUTSIDE OF THE BOOKS OF ACCOUNT AND ACCORDING LY MADE AN ADDITION OF RS. 1 LAC. THE CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. THE ASSESSEE HAS FAILED TO FURNISH ANY EV IDENCE TO ESTABLISH ITS STAND THAT THE SCRAP GENERATED IS UTILIZED IN ITS U NIT ITSELF. HOWEVER IN THE INTEREST OF JUSTICE WE RESTRICT THE ADDITION T O RS. 50 000/- ON ACCOUNT OF SALE OF SCRAP OUTSIDE THE BOOKS OF ACCOUNT. THU S THE GROUND NO.3 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 12. THE GROUND NO.2 RAISED BY THE REVENUE IN ITA NO . 568/CHD/2011 IS AGAINST THE DELETION OF ADDITION OF RS. 16 00 000/- . THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD MAD E THE AFORESAID ADDITION HOLDING THE SUNDRY CREDITORS I.E. PARDEEP KUMAR JAIN & SONS (HUF) AS BOGUS. AS THE ASSESSEE COULD NOT PROVE THE EXPENSES OF HUF UP 6 TO THE END OF FINANCIAL YEAR 2006-07 AND ALSO FAILE D TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THE SAID PA RTIES. THE CIT(A) NOTED THAT THE ASSESSEE HAD FURNISHED COPY OF THE A SSESSMENT ORDER PASSED U/S 143(1) OF THE ACT OF THE HUF THE BALANCE SHEET OF THE HUF FOR THE RELEVANT ASSESSMENT YEAR IN WHICH IN THE LIST OF F IXED ASSETS THERE WAS MACHINERY AMOUNTING TO RS. 4 16 250/- WHICH WAS LA TER SOLD BY THE HUF FOR RS. 16 LACS TO THE ASSESSEE. THE CIT(A) DELETE D THE ADDITION OF RS. 16 LACS WITH THE RIDER THAT THE ASSESSING OFFICER WOUL D ENSURE IF NECESSARY BY TAKING REMEDIAL ACTION TO TAX THE INCOME ARISING IN THE HANDS OF THE HUF UNDER THE HEAD BALANCING CHARGE (FIGURE AT WHIC H THE AMOUNT WAS TRANSFERRED BY HUF TO THE APPELLANT WDV). THE REVENUE IS AGGRIEVED BY THE SAID DELETION. THE LD. DR FOR THE REVENUE W AS ASKED TO JUSTIFY THE ADDITION U/S 41(1) OF THE ACT. THE LD. DR FAILED T O EXPLAIN THE SAME. THE LD. AR PLACED RELIANCE ON THE ORDER OF CIT(A). 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ADDITION IN THE PRESENT CASE WAS MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF OPENING BALANCE OUTSTANDING IN THE LIST OF SUNDR Y CREDITORS ON ACCOUNT OF SUM OF RS. 16 LACS DUE TO ONE PARDEEP KUMAR JAI N & SONS (HUF). THE EXPLANATION OF THE ASSESSEE WAS THAT THE SAID AMOU NT WAS ON ACCOUNT OF THE AMOUNT DUE TO THE SAID PARTY ON PURCHASE OF MAC HINERY. THE EVIDENCE OF MACHINERY IN THE HANDS OF THE HUF WHO HAD SOLD T HE SAME TO THE ASSESSEE AND ALSO THE INTIMATION U/S 143(1) OF THE ACT PROVING THE EXISTENCE OF THE PARTY WAS FURNISHED BEFORE THE AUT HORITIES BELOW. THE ABOVE SAID EXISTENCE ESTABLISHES THE IDENTITY OF TH E PARTY AND ALSO THE TRANSACTION ENTERED INTO BETWEEN THE PARTIES. THE CIT(A) IN THE SAID CIRCUMSTANCES DELETED THE ADDITION OF RS. 16 LACS W ITH A RIDER THAT THE ASSESSING OFFICER WOULD ENSURE IF NECESSARY BY TA KING REMEDIAL ACTION TO TAX THE INCOME ARISING IN THE HANDS OF THE HUF UNDE R THE HEAD BALANCING 7 CHARGE (FIGURE AT WHICH THE AMOUNT WAS TRANSFERRED BY HUF TO THE APPELLANT WDV). IN THE AFORESAID CIRCUMSTANCES WE FIND NO MERIT IN THE GROUND NO. 2 RAISED BY THE REVENUE AS NO ADDITI ON IS WARRANTED U/S 41(1) OF THE INCOME TAX ACT AS THE LIABILITY TO PAY RS. 16 LACS IS RECOGNIZED BY THE ASSESSEE. UPHOLDING THE ORDER OF CIT(A) WE DISMISS THE GROUND NO. 2 RAISED BY THE REVENUE. 14. THE ISSUE RAISED BY THE REVENUE IN GROUND NO.3 IS AGAINST THE DELETION OF ADDITION OF RS. 25 000/- BY THE CIT(A) MADE ON ACCOUNT OF AGRICULTURE INCOME. WE FIND THAT THE ASSESSING OF FICER HAS MADE THE ADDITION OF RS. 25 000/- ON ESTIMATION BASIS AS AGR ICULTURE INCOME WITHOUT ANY EVIDENCE OR PROOF REGARDING THE PRODUCE SOWN AN D HARVESTED DURING THE YEAR UNDER CONSIDERATION. THEREFORE WE FIND T HAT THE ASSESSING OFFICER HAD MADE THE ADDITION PURELY ON CONJECTURE AND SURMISE BASIS WHICH WAS RIGHTLY DELETED BY THE CIT(A). WE ARE I N CONFORMITY WITH THE ORDER OF CIT(A) ON THIS ISSUE AND UPHOLDING THE ORD ER OF CIT(A) WE DELETE THE ADDITION OF RS. 25 000/-. THUS THE GROU ND OF APPEAL NO.3 RAISED BY THE REVENUE IS DISMISSED. 15. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JULY 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : JULY 2011 RKK 8 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH