ITO, Gwalior v. Shri Rajendera Prasad Agarwal, Gwalior

ITA 611/AGR/2008 | 2005-2006
Pronouncement Date: 21-04-2010 | Result: Dismissed

Appeal Details

RSA Number 61120314 RSA 2008
Bench Agra
Appeal Number ITA 611/AGR/2008
Duration Of Justice 1 year(s) 6 month(s) 28 day(s)
Appellant ITO, Gwalior
Respondent Shri Rajendera Prasad Agarwal, Gwalior
Appeal Type Income Tax Appeal
Pronouncement Date 21-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 26-06-2010
Date Of Final Hearing 21-04-2010
Next Hearing Date 21-04-2010
Assessment Year 2005-2006
Appeal Filed On 23-09-2008
Judgment Text
1 ITA 610(2)-08 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH : AGRA. ( BEFORE SHRI R.K. GUPTA AND SHRI P.K. BANSAL ) ITA NO. 610 & 611/AG./2008 ASSTT. YEAR : 2004-05 & 05-06. THE INCOME-TAX OFFICER VS. RAJENDRA PRASAD AGARW AL WARD 2(2) GWALIOR. PROP. M/S. RAJENDRA PRASAD BRIJ MOHAN DAL BAZAR GWALIOR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. SHARMA JR. D/R RESPONDENT BY : SHRI NAVIN GARGH ADVO CATE ORDER PER R.K. GUPTA J.M. THESE ARE TWO APPEALS BY THE DEPARTMENT AGAINST TH E ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2004-05. COMMON ISSUES ARE INVOL VED IN BOTH THE APPEALS THEREFORE THEY ARE DISPOSED OFF TOGETHER. 2. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESSEE HAS PLA CED RELIANCE ON THE ORDER OF THE LD. CIT (A). FURTHER THE LD. COUNSEL OF THE ASSESSEE HAS F ILED A CHART SHOWING GROUNDS OF APPEAL AND MENTIONING THAT HOW THE ORDER OF LD. CIT (A) IS CORRECT. 3. AFTER CONSIDERING THE ORDERS OF THE AUTHORITIES BELOW AND THE SUBMISSIONS OF BOTH THE PARTIES THE APPEALS OF THE DEPARTMENT ARE DISP OSED OFF IN THE FOLLOWING MANNER. 2 4. GROUND NO. 1 IN BOTH THE APPEALS RELATES TO ADOP TING THE G.P. RATE OF 0.80% INSTEAD OF 3.2% AS APPLIED BY THE ASSESSING OFFICER. THIS G ROUND IN BOTH THE APPEALS IS DISPOSED OFF TOGETHER. 5. FOR ASSESSMENT YEAR 2004-05 THE ASSESSING OFFIC ER MADE AN ADDITION OF RS. 10 29 780/- BY APPLYING G.P. RATE OF 3.32% ON TOTAL PURCHASES OF RS. 3 92 37 016/-. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OF FICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF SALES AND PURCHASES. THE ASSESSEE FU RNISHED LIST OF PURCHASES FOR RS. 3 92 37 016/- WHICH WERE ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSEE COULD NOT SUBMIT THE DETAILS OF SALES BECAUSE MOST OF THE DET AILS WERE DESTROYED AND TOOK AWAY BY THE MOB GATHERED DURING SURVEY. THE ASSESSING OFFI CER COLLECTED THE INFORMATION FROM THE SALES TAX DEPARTMENT AND FOUND THAT SALES TAX A UTHORITIES APPLIED THE G.P. RATE OF 3.32% WHILE COMPLETING THE ASSESSMENT UNDER VAT FO R FINANCIAL YEAR 2001-02 RELEVANT TO ASSESSMENT YEAR 2002-03. THEREFORE THE ASSESSIN G OFFICER APPLIED A G.P. RATE OF 3.32% AND WORKED OUT THE GROSS PROFIT. THE ASSESSING OF FICER HAS RE-CASTED THE TRADING AND PROFIT & LOSS ACCOUNT PLACING THE OPENING STOCK DI RECT EXPENSES AND INDIRECT EXPENSES AT HIS OWN AND THE AMOUNT OF PURCHASES AND CLOSING STO CK AS SHOWN BY THE ASSESSEE. THE AMOUNT OF TURNOVER WAS DETERMINED AFTER APPLYING TH E GROSS PROFIT RATE OF 3.32% WHICH RESULTED IN AN ADDITIONAL INCOME OF RS. 10 29 780/- WHICH WAS ADDED BY THE ASSESSING OFFICER. DETAILED SUBMISSIONS WERE FILED BEFORE TH E LD. CIT (A). AFTER CONSIDERING THE DETAILED SUBMISSIONS THE LD. CIT (A) FOUND THAT TH E ASSESSING OFFICER WAS NOT JUSTIFIED IN APPLYING THE G.P. RATE OF 3.32% ON THE BASIS OF ASS ESSMENT MADE BY SALES TAX DEPARTMENT. TO COVER UP THE LEAKAGE AND POSSIBLE LE AKAGE THE LD. CIT (A) DIRECTED THE ASSESSING OFFICER TO ADOPT 0.8% GROSS PROFIT ON TUR NOVER AS AGAINST G.P. SHOWN BY THE 3 ASSESSEE AT 0.48%. THE FINDING OF THE LD. CIT (A) HAVE BEEN RECORDED AT PAGE 4 OF HIS ORDER. 6. IN SIMILAR MANNER THE ASSESSING OFFICER HAS MAD E ADDITION FOR A.Y. 2005-06 AT RS. 9 02 277/-. SIMILARLY THE LD. CIT (A) HAS RED UCED THE ADDITION BY DIRECTING THE ASSESSING OFFICER TO APPLY 0.8% G.P. ON THE TURNOVE R. 7. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER FOR BOTH THE YEARS. 8. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESS EE PLACED RELIANCE ON THE ORDER OF THE LD. CIT (A). IT WAS FURTHER SUBMITTED THAT ON SIMILAR FACT THE ADDITION WAS MADE FOR A.Y. 2003-04 ALSO. THE LD. CIT (A) DIRECTED THE ASS ESSING OFFICER TO APPLY G.P. RATE OF 0.7% AND THE ORDER OF THE LD. CIT (A) HAS BEEN AFFI RMED BY THE TRIBUNAL. COPY OF THE ORDER OF THE TRIBUNAL IS PLACED AT PAGES 33 TO 41 O F THE PAPER BOOK. 9. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A). FINDING O F LD. CIT (A) FOR A.Y. 2004-05 HAVE BEEN RECORDED AT PAGE 4 ARE AS UNDER :- I HAVE GONE THROUGH THE WRITTEN SUBMISSION ASSES SMENT ORDER AND ORAL ARGUMENTS PUT FORTH BY THE LD. A/R AND FIND THAT TH E ASSESSING OFFICER HAS APPLIED THE GROSS PROFIT RATE OF 3.32% ON THE BASIS OF GROSS PROFIT RATE ADOPTED BY THE COMMERCIAL TAX DEPARTMENT AND APPLIE D DURING PRECEDING YEAR ALSO. THE ASSESSING OFFICER APPLIED GP. RATE O F 3.32% ON THE BASIS OF RATE ADOPTED BY THE COMMERCIAL TAX DEPARTMENT FO R ASSESSMENT UNDER VAT TAX PURPOSES FOR FINANCIAL YEAR 2001-02. A COPY OF ORDER OF ASSESSMENT UNDER VAT TAX IS SUBMITTED BEFORE ME. TH E COMMERCIAL TAX OFFICER HAS NO WHERE MENTIONED THE BASIS FOR ADOPTI NG THE G.P. RATE OF 3.32%. THE APPELLANT HAS NOT FILED ANY APPEAL AGAIN ST THE ASSESSMENT ORDER FOR VAT BECAUSE THE EXTRA FINANCIAL BURDEN WAS RS. 2637/- ONLY. THERE 4 COULD BE SO MUCH COST IN THE SHAPE OF TIME AND MONE Y FOR FILING THE APPEAL UNDER VAT TAX TO OBJECT EXTRA LEVY OF RS. 2637/-. THE COMMERCIAL TAX DEPARTMENT HAD ACCEPTED THE FIGURES AS SHOWN BY THE APPELLANT FOR THE YEAR UNDER CONSIDERATION. IN VIEW OF ALL THESE THE APP LICATION OF G.P. RATE OF 3.32% IS NOT JUSTIFIED AND ACCORDINGLY THE ASSESSM ENT OF INCOME IS NEITHER WELL BASED NOR IS JUSTIFIED. HOWEVER CONSIDERING T HE NON-VERIFICATION OF SALES AND PURCHASE AS SHOWN BY THE APPELLANT AND NO N MAINTENANCE OF BOOKS OF ACCOUNTS IN THE PROPER MANNER THE POSSIBIL ITY OF LEAKAGES CANNOT BE RULED OUT. THEREFORE TO COVER UP THE POSSIBLE L EAKAGES THE ASSESSING OFFICER IS HEREBY DIRECTED TO ADOPT G.P. RATE OF 0. 8% ON TURNOVER CONSIDERING TOTAL PURCHASES RS. 3 92 37 016/- AS AC CEPTED BY THE COMMERCIAL TAX DEPARTMENT AGAINST AVERAGE G.P. RATE OF 0.35% AS WORKED OUT BY THE APPELLANT FROM THE PURCHASE AND SALES BI LLS SUBMITTED DURING ASSESSMENT PROCEEDING AS WELL AS APPEAL PROCEEDINGS . THE ASSESSING OFFICER HAS CONSIDERED THE INDIRECT EXPENSES RS. 1 97 310/- AS AGAINST RS. 2 46 638/- AS AGAINST TURNOVER OF RS. 4 05 84 418/- OF FINANCIAL YEAR 2003- 04 RELEVANT TO ASSESSMENT YEAR 2004-05 WHICH WORKS OUT TO 0.48%. THE PERCENTAGE OF TOTAL EXPENDITURE COMES TO 0.60% APPR OX. IN VIEW OF THIS THE ASSESSING OFFICER IS HEREBY DIRECTED TO ALLOW T HE CREDIT OF 0.50% OF TOTAL TURNOVER FOR INDIRECT EXPENSES OF THE RESPECT IVE YEAR. ACCORDINGLY THE APPELLANT WILL GET RELIEF. 19. SIMILAR FINDINGS HAVE BEEN GIVEN BY REDUCING TH E PROFIT FOR A.Y. 2005-06. WE FURTHER NOTE THAT ON IDENTICAL FACTS THE ADDITION W AS MADE FOR A.Y. 2003-04 IN CASE OF ASSESSEE ITSELF. THE ASSESSING OFFICER APPLIED G.P . RATE AT 3.32% WHICH WAS REDUCED BY LD. CIT (A) AT 0.7% AND THE ORDERS OF THE LD. CIT ( A) HAS BEEN CONFIRMED BY THE TRIBUNAL WHILE DECIDING THE APPEAL OF THE DEPARTMENT IN ITA NOS. 340 TO 345/AG/2007 RELATING TO ASSESSMENT YEARS 1998-99 TO 2003-04 VIDE ORDER DATE D 23.04.2009. COPY OF THE ORDER OF THE TRIBUNAL IS PLACED AT PAGES 33 TO 41 OF THE PAP ER BOO. SINCE THE FACTS ARE SIMILAR IN 5 THESE TWO YEARS ALSO THEREFORE IN VIEW OF REASONI NG GIVEN BY LD. CIT (A) AND IN VIEW OF DECISION OF TRIBUNAL FOR A.Y. 2003-04 WE CONFIRM T HE ORDER OF THE LD. CIT (A) FOR BOTH THE YEARS. 11. GROUND NO. 2 IS AGAIN RELATING TO DELETION OF A DDITION OF RS. 4 45 343/- BEING 20% CASH PAYMENT MADE BY ASSESSEE AGAINST PURCHASES DIS ALLOWED BY THE ASSESSING OFFICER UNDER SECTION 40A(3). 12. SIMILAR ADDITION WAS DELETED FOR A.Y. 2005-06 I .E. RS. 2 83 086/-. THESE ARE COMMON GROUNDS THEREFORE THEY ARE DISPOSED OFF TO GETHER. 13. THE ASSESSING OFFICER HAS DISALLOWED THE RESPEC TIVE AMOUNT IN VIEW OF PROVISIONS OF SECTION 40A(3). DURING THE APPELLATE PROCEEDINGS FOR A.Y. 2004-05 IT WAS SUBMITTED BEFORE LD. CIT (A) THAT THE ACTUAL FIGURE COMES TO RS. 11 11 203/-. IT WAS FURTHER SUBMITTED THAT ASSESSING OFFICER IS NOT JUSTIFIED I N INVOKING PROVISIONS OF SECTION 40A(3) BECAUSE IT IS APPLICABLE ONLY WHERE THE ASSESSMENT IS COMPLETED ON THE BASIS OF BOOKS OF ACCOUNT MAINTAINED AND EXIST AND NOT IN THE CASE WH ERE THE INCOME HAS BEEN DETERMINED AFTER APPLYING RATE OF PROFIT. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF SHRI RADHIKA PRAKASHAN RAIPUR PVT. LTD. VS. CIT 257 ITR 675 (MP) AND IN THE CASE OF CIT VS. PURSHOTTAM TAMRAKAR 270 ITR 314 (MP). RELIANC E WAS PLACED ON THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF C IT VS. BANWARILAL BANSHIDHAR 229 ITR 229 (ALL.). AFTER CONSIDERING THE SUBMISSION AND P ERUSING THE MATERIAL ON RECORD THE LD. CIT (A) WAS SATISFIED WITH THE SUBMISSION MADE ON B EHALF OF THE ASSESSEE. ACCORDINGLY HE DELETED THE ADDITION. 6 14. SIMILARLY THE ADDITION WAS DELETED FOR ASSESSM ENT YEAR 2005-06 ALSO. THE LD. D/R HAS PLACED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESSEE HAS PLACED ON THE ORDER OF LD. CIT (A). 15. AFTER CONSIDERING THE ORDER OF LD. CIT (A) WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT (A) ON THIS ISSUE ALSO. UNDISPUTEDLY THE INCOME OF THE ASSESSEE HAS BEEN COMPUTED ON THE BASIS OF APPLYING NET PROFIT RATE. THEREFORE DISALLOWANCES OF EXPENSES WERE NOT JUSTIFIED. VARIOUS HIGH COURTS HAVE HELD THAT WHERE THE PROFIT IS DEDUCED AFTER APPLYING NET PROFIT RATE THEN DISALLOWANCE MADE IN VIEW OF THE PROVISIONS OF SECTION 40A(3) IS NOT JUSTIFIED. THE RESPECTIVE DECISIONS PRONOUNCED BY THE HONBLE M.P. HIGH COURT AND THE HONBLE ALLAHABAD HIGH COURT SOMEWHER E MENTIONED ABOVE. IN VIEW OF THE FACTS AND CIRCUMSTANCES WE HOLD THAT THE LD. C IT (A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE UNDER SECTION 40A(3) FOR BOTH THE YEARS. 16. IN THE RESULT APPEALS OF THE DEPARTMENT ARE DI SMISSED. 17. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 .04.2010 SD/- SD/- ( P.K. BANSAL ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AGRA DATED : 26/04/2010. D/- COPY FORWARDED TO :- THE APPELLANT THE RESPONDENT THE CIT THE CIT (A) CONCERNED. THE D/R ITAT AGRA. GUARD FILE (ITA 610(2) /AG/2008) BY ORDER 7 AR ITAT AGRA.