M/s Tilak Raj Ashok Kumar,, Ropar v. Addl. CIT,, Chandigarh

ITA 616/CHANDI/2009 | 2005-2006
Pronouncement Date: 30-08-2010 | Result: Allowed

Appeal Details

RSA Number 61621514 RSA 2009
Assessee PAN AAAFT6435C
Bench Chandigarh
Appeal Number ITA 616/CHANDI/2009
Duration Of Justice 1 year(s) 2 month(s) 27 day(s)
Appellant M/s Tilak Raj Ashok Kumar,, Ropar
Respondent Addl. CIT,, Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 30-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-08-2010
Assessment Year 2005-2006
Appeal Filed On 02-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI G.S.PANNU ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO. 616/CHD/2009 ASSESSMENT YEAR: 2005-06 M/S TILAK RAJ ASHOK KUMAR VS. THE ADDL CIT DISTT. ROPAR RANGE VI CHANDIGARH PAN NO. AAAFT6435C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.K.JINDAL RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) PATIALA DATED 25.3.2009 RELATING TO ASSESSMENT YEAR 2005-0 6 AGAINST THE ORDER PASSED UNDER SECTION 143(3) / 144 OF THE I.T. ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDI NG THE REJECTION OF BOOKS AND ASSESSMENT MADE U/S 144 DUE TO LOW G.P. AND NON MAINTENANCE OF STOCK RECORD S UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. B) A) THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 2 11 819/- ON ACCOUNT OF LOW GP WHICH HAS BEEN MADE BY TAKING AVERAGE GP OF LAST TWO YEARS WITHOUT POINTING OUT ANY DEFECT IN SALE/ PURCHASE / EXPENSES ETC. C) ALTERNATIVELY THE LEARNED CIT(A) IS NOT JUSTIFIED IN NOT ALLOWING THE ADJUSTMENT OF ADDITION MADE ON ACCOUNT OF LOW G.P. AGAINST AMOUNT 2 SURRENDERED DURING SURVEY AS THE SURRENDER WAS MADE TO COVER UP DISCREPANCIES IN STOCK. 3 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS A WHOLE SELLER IN KARYANA ITEMS. THE RETURN OF INCOME WAS FILED O N 31.10.2005 FOR RS. 8 72 929/-. THERE WAS A SURVEY U/S 133A OF THE INC OME TAX ACT ON 3.12.2004. THE ASSESSEE OFFERED SUM OF RS. 10.00 L ACS AS ADDITIONAL INCOME. DURING THE COURSE OF ASSESSMENT THE ASSESS ING OFFICER REQUISITIONED ASSESSEE TO FURNISH DETAILS OF CLOSIN G STOCK AND METHOD OF VALUATION OF CLOSING STOCK ETC. THE ASSESSING OFFI CER NOTED THAT AS PER ASSESSEE STOCK ON CLOSING DAY WAS COUNTED MANUALLY AND THERE WAS NO STOCK REGISTER. THE AUDITOR IN AUDIT REPORT IN FOR M NO. 3 CD HAD ALSO NOT MENTIONED THE QUANTITATIVE DETAILS OF STOCK. THE A SSESSING OFFICER COMPARED THE GP RATE OF VARIOUS ITEMS DEALT IN BY A SSESSEE WITH THOSE DECLARED IN THE PRECEDING THREE YEARS. THE COMPARA TIVE DETAILS OF GP RATE DECLARED IN MAJOR ITEMS DURING THE YEAR AND PRECEDI NG YEARS ARE INCORPORATED AT PAGE 3 OF THE ASSESSMENT ORDER. TH E ASSESSING OFFICER NOTED THAT THE GP RATE HAD GONE DOWN IN MOST OF THE ITEMS. FURTHER GP RATE WAS COMPARED WITH OTHER DEALERS IN SAME LOCALI TY AS DETAILED IN PARA 5.2 OF ASSESSMENT ORDER. THE ASSESSEE HAD DECLARED GP RATE OF 1.64% DURING THE YEAR AS AGAINST 2.35% SHOWN IN THE PREC EDING YEAR. THE ASSESSING OFFICER REJECTING THE BOOKS OF ACCOUNT U/ S 145(3) OF I.T. ACT APPLIED THE AVERAGE GP RATE OF LAST TWO ASSESSMENT YEARS AGAINST GP RATE DECLARED DURING THE YEAR AND WORKED OUT THE DIFFERE NTIAL GROSS PROFIT AS TABULATED AT PAGE 6 OF THE ASSESSMENT ORDER AT RS. 2 64 774/-. THE ASSESSING OFFICER ALLOWED RELIEF OF 20% FROM THE SA ME AND SUM OF RS. 2 11 819/- WAS INCLUDED AS INCOME OF THE ASSESSEE. THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFFICER. THE ASSESSEE I S IN APPEAL AGAINST THE ORDER OF CIT(A). 3 4. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT AFTER THE SURVEY ON 3.12.2004 THE ASSESSEE OFFERED ADDITIONAL INCOME O F RS. 10 LACS AND NO SEPARATE ADDITION IS WARRANTED AFTER TELESCOPING WI TH THE SURRENDER WHICH WAS ON ACCOUNT OF STOCKS DEBTORS AND CASH. THE L EARNED AR SUBMITTED THAT BEFORE SURRENDER THE GP WAS 1.64 % AND AFTER I NCLUDING THE SURRENDER THE GP RATE WORKED OUT TO 3.64% AS AGAINST 2.35% S HOWN IN THE PRECEDING YEAR. FURTHER IT WAS POINTED OUT THAT THE ASSESSE E WAS MAINTAINING COMPLETE QUANTITATIVE DETAILS OF STOCK AND SEPARATE TRADING ACCOUNT IN EACH ITEM OF STOCK WERE BEING FILED. IN THE ABOVESAID REJECTION OF BOOKS OF ACCOUNT WAS NOT JUSTIFIED AND THERE WAS FURTHER NO MERIT IN APPLYING THE GP RATE OF THE PRECEDING YEARS. THE LEARNED DR FOR THE REVENUE RELIED ON THE ORDER OF THE ORDER OF ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE BEFORE US WAS CARRYING ON THE WHOLESALE BU SINESS OF TRADING IN KARYANA GOODS. THE ASSESSEE HAD DURING THE YEAR UN DER CONSIDERATION DECLARED NET LOSS OF RS. 1 27 071/- AS PER AUDITED PROFIT AND LOSS ACCOUNT. THE COPY OF AUDITED ACCOUNTS ARE PLACED AT PAGES 13 TO 21 OF THE PAPER BOOK. THE ASSESSEE AT PAGES 14 TO 17 OF THE PAPER BOOK HAS FURNISHED SEPARATE TRADING ACCOUNT OF EACH ITEMS OF STOCK DEA LT IN BY THE ASSESSEE. THE ASSESSEE HAS FURNISHED THE QUANTITY WISE AND VA LUE WISE DETAILS OF OPENING STOCK PURCHASES SALES AND CLOSING STOCK O F EACH ITEM IN THE SAID TRADING ACCOUNT/S WHICH IN TURN IS PART OF ITS AUD ITED ACCOUNTS WHICH WERE FURNISHED ALONG WITH THE RETURN OF INCOME. TH E LD. A.R. FOR THE ASSESSEE HAS ALSO FURNISHED SEPARATE LEDGER ACCOUNT S OF EACH ITEM OF GOODS DEALT IN BY THE ASSESSEE WHICH REFLECT THE SALE/PUR CHASE BOTH QUANTITATIVE AND VALUE-WISE ON RECORD PLACED AT PAGES 35 TO 108 OF THE PAPER BOOK. THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE ASSES SING OFFICER. THE 4 ASSESSEE HAD WORKED OUT THE TOTAL GROSS PROFIT FOR THE YEAR ON THE BASIS OF THE ABOVE SAID RECORD. THE GP RATE SHOWN DURING TH E YEAR WAS 1.64 % AS AGAINST 2.35% SHOWN IN ASSESSMENT YEAR 2004-05 AND 2.26% SHOWN IN ASSESSMENT YEAR 2003-04. THERE IS A DECLINE IN TH E GP RATE DURING THE YEAR AS COMPARED TO THE EARLIER YEARS. THE ASSESSE E DURING ASSESSMENT PROCEEDINGS EXPLAINED THE REASONS FOR FALL IN GP RA TE. THE REPLIES OF THE ASSESSEE BEFORE THE ASSESSING OFFICER ARE PLACED AT PAGES 23 & 24 AND 25 TO 27 OF THE PAPER BOOK. THE REASONS FOR FALL IN G P RATE WERE ATTRIBUTED TO INCREASE IN SALE AND DUE TO MARKET TRENDS AS THE A SSESSEE WAS DEALING IN ITEMS LIKE SUGAR GHEE TINS KHOA REFINED OIL ETC. THE ASSESSEE IN DETAIL EXPLAINED WITH EVIDENCE THE RATES AT WHICH ITEMS WE RE PURCHASED AND SOLD VIDE ITS REPLY DATED 17.12.2007 PLACED AT PAGES 25 TO 27 OF THE PAPER BOOK. THE ASSESSING OFFICER REJECTING THE SAID EXP LANATION OF THE ASSESSEE COMPARED THE TRADING RESULTS WITH THOSE R EFLECTED IN PRECEDING YEAR. THERE IS NO MERIT IN SUCH COMPARISON IN VIE W OF THE RECORDS AND EVIDENCES MAINTAINED AND PRODUCED BY ASSESSEE BEFOR E THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS NOT FOUND ANY ERROR IN THE RECORD MAINTAINED BY ASSESSEE EXCEPT THE ALLEGATION OF NON -MAINTENANCE OF STOCK REGISTER. FIRST MAINTENANCE OF STOCK REGISTER PER SE IS NOT MANDATORY AND EVEN OTHERWISE FROM THE DETAILS / DOCUMENTS MAINTAI NED BY THE ASSESSEE THE QUANTITATIVE WISE RECORD OF THE VARIOUS ITEMS O F STOCK DEALT IN ARE AVAILABLE AND SUCH DETAILS WERE FURNISHED BEFORE AS SESSING OFFICER DURING ASSESSMENT PROCEEDINGS AND ALSO ALONG WITH THE RETU RN OF INCOME. THE ASSESSING OFFICER HAS ALSO TABULATED ITEM WISE DETA ILS OF SALES GROSS PROFIT AND GP RATE AND COMPARED THE SAME ITEM WISE WITH THOSE OF PRECEDING YEAR TO WORK OUT THE TRADING ADDITION IN THE HANDS OF ASSESSEE. THE QUANTITATIVE WISE DETAILS OF STOCK AVAILABLE ON RECORD ARE NOT REFERRED TO BY THE ASSESSING OFFICER AND INFERENCES DRAWN TO THE CONTRARY. WE FIND 5 NO MERIT IN THE ORDER OF ASSESSING OFFICER IN ADOPT ING THE GP RATE OF PRECEDING YEARS FOR COMPUTING THE INCOME FOR THE YE AR UNDER APPEAL. 6 THE ASSESSING OFFICER FURTHER COMPARED THE TRADIN G RESULTS SHOWN BY THE ASSESSEE WITH THOSE SHOWN BY THE CONCERNS A LLEGEDLY IN THE SAME TRADE. HOWEVER SUCH RESULTS WERE NOT CONFRONTED TO ASSESSEE BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. B EFORE THE LD. CIT(A) THE ASSESSEE HAS EXPLAINED IN RESPECT OF EACH PART Y HOW THE SAME HAS NO COMPARISON WITH THE FACTS OF ASSESSEE. THE CONCERN M/S BHAGAT RAM DES RAJ JAWAHAR MARKET NANGAL REFERRED BY THE LEARNED ASSESSING OFFICER WAS A RETAILER IN KARYNA GOODS WHEREAS THE ASSESSEE WAS WHOLE SELLER AS ALSO ADMITTED AND MENTIONED IN THE ORDER UNDER APPE AL. FURTHER SALES IN THE CASE OF M/S BHAGAT RAM DES RAJ WERE ONLY RS. 6 0 LACS WHEREAS ASSESSEE HAD TOTAL SALES OF NEARLY 5 CRORES. THE O THER CASE OF M/S AGGARWAL GENERAL STORE SEC. II NAYA NANGAL (WHICH IS ACTUALLY M/S AGGARWAL AGENCIES) JAWAHAR MARKET NANGAL DEALS IN CONFECTIONERY GOODS WHICH IS ENTIRELY A DIFFERENT TRADE IN WHICH PROFIT MARGIN CANNOT BE COMPARED WITH THAT OF THE ASSESSEE. MOREOVER S ALES OF SAID CONCERN ARE ONLY RS. 50 LACS WHEREAS THE ASSESSEE HAS MADE SAL E OF RS. 5 CRORES APPROX. RELIANCE PLACED BY THE LEARNED ASSESSING O FFICER ON THE DECISION OF HON'BLE SUPREME COURT IN (2007) 158 TAXMAN 71 IS MISCONCEIVED. THE ASSESSEE THEREIN WAS DEALING IN PRECIOUS STONES IN WHICH TRADE MARGIN OF PROFIT IS MUCH HIGHER AS COMPARED TO OTHER TRADE S. IN VIEW OF THE EXPLANATION OF ASSESSEE THERE IS NO MERIT IN PLACI NG RELIANCE ON THE RESULTS SHOWN BY THOSE CONCERNS AS THESE WERE NOT IN THE LI NE OF BUSINESS CARRIED ON BY ASSESSEE. FURTHER THE ASSESSING OFFICER HAD NOT CONFRONTED THE ASSESSEE WITH THE ABOVE SAID DETAILS AND THUS THE R ELIANCE ON SUCH MATERIAL/DETAILS FOR COMPUTING THE ADDITION IN THE HANDS OF THE ASSESSEE IS 6 NOT WARRANTED BEING IN VIOLATION OF PRINCIPLES OF N ATURAL JUSTICE AS NO PERSON IS TO BE CONDEMNED UNHEARD. 7 THE ASSESSEE DURING THE YEAR HAD FILED RETURN OF INCOME SHOWING NET LOSS OF RS. 1 27 071/- ON THE BASIS OF TRADING RESU LTS IN WHICH GP RATE DECLARED WAS 1.64%. HOWEVER DURING SURVEY OPERATI ONS U/S 133A OF THE ACT THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS. 10.00 LACS FOR THE YEAR UNDER CONSIDERATION. THE COMPUTATION OF INCOM E AFTER INCLUDING SURRENDER OF ADDITIONAL INCOME OF RS. 10.00 LACS AT RS. 8 72 930/- IS PLACED AT PAGE 1 OF THE PAPER BOOK. THE SURRENDER OF RS. 10.00 LACS WAS ON ACCOUNT OF STOCK UGRAHI AND CASH . THE COPY OF SURRENDER LETTER IS ENCLOSED AT PAGE 22 OF THE PAPER BOOK. FURTHER ON I NCLUSION OF RS. 10.00 LACS TO THE TRADING RESULTS DECLARED BY ASSESSEE T HE GP RATE WORKS TO 3.64% AS AGAINST GP RATE OF 2.35% SHOWN IN ASSESSME NT YEAR 2004-05 AND 2.26% SHOWN IN ASSESSMENT YEAR 2003-04. IN THE ABOVE SAID FACTS & CIRCUMSTANCES THERE IS NO MERIT IN ANY FURTHER TRA DING ADDITION. WE SET ASIDE THE ORDER OF LD. CIT(A) IN THIS REGARD AND DE LETE THE ADDITION OF RS. 211 819/- IN VIEW OF OUR DISCUSSION HEREINABOVE. T HE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE ALLOWED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF AUGUST 2010. SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH AUGUST 2010 SURESH & RKK 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR