Harish chandra Agarwal L/H Ravinder Kumar Agarwal, Farrukhabad v. ACIT, Farrukhabad

1 ITA 07-09 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH : AGRA. ( BEFORE SHRI R.K. GUPTA AND SHRI P.K. BANSAL ) ITA NO. 07/AG./2009 ASSTT. YEAR : 2003-04. HARISH CHANDRA AGARWAL THROUGH VS. THE ACIT CIRCL E 2(1) LEGAL HEIR RAVINDRA KUMAR AGARWAL FARRUKHABAD. PROP. M/S. RAM NIWAS HARISH CHANDRA & CO. RAILWAY ROAD KAIMGANJ DIST. FRRUKHABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH ADVOCATE RESPONDENT BY : SHRI R.C. SHARMA JR. D/R ORDER PER R.K. GUPTA J.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) GHAZIABAD RELATING TO ASSESSMENT YEAR 2003-04. 2. GROUND NOS. 1 & 2 ARE AGAINST SUSTAINING ADDITIO N OF RS. 8 72 173/-. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM TRADING AND P ROCESSING OF TOBACCO BUSINESS AND RENT FROM PROPERTY. ACCOUNTS OF THE ASSESSEE ARE A UDITED AND AUDIT REPORT ON FORM 3CB AND FORM 3CD AS REQUIRED UNDER SECTION 44AB OF THE ACT HAVE BEEN FILED ALONG WITH THE RETURN OF INCOME. THE GROSS SALES SHOWN BY THE ASS ESSEE WERE AT RS. 1 32 03 579/-. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFF ICER NOTICED THAT THE G.P. RATE SHOWN 2 BY ASSESSEE IS LESS THAN AS COMPARED TO G.P. RATE S HOWN IN EARLIER TWO YEARS. DURING THE YEAR G.P. RATE SHOWN BY ASSESSEE WAS AT 8.028% WHER EAS G.P. RATE SHOWN IN A.Y. 2002-03 WAS AT 12.26% AND IN A.Y. 2001-02 THE G.P. RATE SHO WN WAS AT 11.98%. AFTER EXAMINING OTHER DETAILS THE ASSESSING OFFICER NOTICED THAT A SSESSEE HAS SHOWN TO HAVE PURCHASED 1 10 793 KG OF TOBACCO FROM ITS SISTER CONCERN AND FORM 9R WHICH IS A FORM TO BE MAINTAINED BY THE ASSESSEE AS PER MANDI SHULK SAMIT I HAS NOT BEEN MAINTAINED BY THE ASSESSEE. THE PURCHASES WERE SHOWN AT LETTER HEAD. IN VIEW OF THE ASSESSING OFFICER THE PURCHASES SHOWN BY ASSESSEE FROM ITS SISTER CONCERN S VALUING RS. 8 72 173/- WAS BOGUS PURCHASE AND ACCORDINGLY TO THIS EXTENT THE ADDITIO N WAS MADE ON THIS ACCOUNT. THE LD. CIT (A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THE LD. CIT (A) HAS OBSERVED THAT EVEN IF THE ISSUE OF 9R SLIP MAY NOT BE SACROSANCT BUT THE TRANSACTION MUST BE AMENABLE TO VERIFICATION FROM THE STOCK REGISTER . HOWEVER IN THE INSTANT CASE THE TRANSACTIONS BETWEEN SISTER CONCERNS ARE ADMITTEDLY NOT AMENABLE TO FINAL VERIFICATION. HENCE THE ACTION OF THE ASSESSING OFFICER DESERVES TO BE CONFIRMED. ACCORDINGLY HE CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. THE LD. A/R WHO APPEARED BEFORE THE TRIBUNAL REITERATED THE CONTENTIONS MADE BEFOR E THE LOWER AUTHORITIES. ATTENTION OF THE BENCH WAS DRAWN TO THE WRITTEN SUBMISSIONS DATE D 17.8.2006 FILED BEFORE THE LD. CIT (A) AND COPIES OF OTHER DETAILS PLACED ON RECORD. IT WAS FURTHER SUBMITTED THAT THERE IS NO BAR TO MAKE PURCHASES FROM SISTER CONCERN. THE PURC HASES HAVE BEEN DULY SHOWN IN STOCK REGISTER AND THERE IS A CLOSING BALANCE ALSO. PAYME NTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE. IT WAS FURTHER SUBMITTED THAT THE ASS ESSMENT OF THE SISTER CONCERNS HAS BEEN COMPLETED IN THE SAME CIRCLE WHERE THE SALES SHOWN BY SISTER CONCERN TO THE ASSESSEE HAS 3 BEEN ACCEPTED. THEREFORE HOLDING THE PURCHASES IN THE HANDS OF ASSESSEE FROM ITS SISTER CONCERN AS BOGUS PURCHASE IS NOT JUSTIFIED AT ALL. 3. ON THE OTHER HAND THE LD. D/R PLACED RELIANCE O N THE ORDERS OF THE AUTHORITIES BELOW. 4. AFTER CONSIDERING THE ORDERS OF THE AUTHORITIES BELOW AND PERUSING THE MATERIAL ON RECORD ON WHICH OUR ATTENTION WAS DRAWN WE FOUND T HAT ASSESSEE DESERVES TO SUCCEED IN THIS GROUND. THE ASSESSEE HAD MADE PURCHASES FROM ITS SISTER CONCERNS AND THEY HAVE BEEN SHOWN IN THE STOCK REGISTER ALSO. BOOKS OF ACC OUNT ARE MAINTAINED REGULARLY. NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE ASSESSI NG OFFICER IN THIS REGARD. PAYMENTS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE. IT IS FURTHER SEEN THAT THE ASSESSMENT OF THE SISTER CONCERN IS ALSO MADE IN THE SAME CIRCLE AS STATED BY LD. A/R. IN CASE OF SISTER CONCERNS THE SALES SHOWN TO THE ASSESSEE FIRM HAVE BEEN ACCEPTED. TWO YARDSTICKS ADOPTED BY THE DEPARTMENT IN TWO DIFFERENT HANDS I N OUR CONSIDERED VIEW IS NOT JUSTIFIED. IN ONE CASE THE SALES HAVE BEEN ACCEPTED AND IN OTH ER CASE THE PURCHASES MADE FROM THE SAME PARTY IN WHOSE HANDS THE SALES HAVE BEEN ACCEP TED HAVE BEEN HELD AS BOGUS. ON THIS REASON ALONE THE ASSESSEE DESERVES TO SUCCEED. ACCORDINGLY WE DELETE THE ADDITION OF RS. 8 72 173/- MADE AND CONFIRMED BY THE LOWER A UTHORITIES. 5. GROUND NOS. 3 & 4 RELATES TO MAKING ADDITION OF RS. 5 28 143/- BY APPLYING 4% EXTRA GROSS PROFIT ON THE DISCLOSED SALES. AS DISC USSED ABOVE DURING THE YEAR THERE WAS A FALL IN G.P. RATE BY 4%. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE WITHOUT ANY REASONABLE CAUSE HAS SHOWN G.P. RATE ON LOWER SIDE . THEREFORE HE REJECTED THE BOOKS OF ACCOUNT AND MADE AN ADDITION OF RS. 5 28 143/- BY A PPLYING 4% EXTRA GROSS PROFIT ON THE DISCLOSED SALES. THE LD. CIT (A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THE 4 CONTENTION RAISED BEFORE THE LOWER AUTHORITIES WAS REITERATED BY THE LD. A/R. AGAIN ATTENTION OF THE BENCH WAS DRAWN ON THE WRITTEN SUB MISSIONS PLACED ON RECORD. ATTENTION OF THE BENCH WAS ALSO DRAWN AT PAGE 62 OF THE PAPER BOOK WHERE A REVISED DETAIL OF TRADING ACCOUNT AND PROCESSED TOBACCO ACCOUNT IS PL ACED ON RECORD. IT WAS SUBMITTED THAT IN EARLIER TWO YEARS WHEN THE G.P. RATE SHOWN BY AS SESSEE WAS ON HIGHER SIDE THERE WAS NO PURCHASE OF PROCESSED TOBACCO. HOWEVER DURING T HE YEAR UNDER CONSIDERATION THE ASSESSEE HAD PURCHASED PROCESSED TOBACCO WHICH YIEL DS LOW G.P. ON THE OTHER HAND THE LD. D/R HAS RELIED ON THE ORDERS OF THE ASSESSING O FFICER AND LD. CIT (A). 6. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD WE FIND THAT ASSESSEE ALSO DESERVES TO SUCCEED IN THIS GROU ND. THE CONTENTION OF THE ASSESSEE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA S PURCHASED PROCESSED TOBACCO WHEREAS IN EARLIER YEAR THERE WAS NO PURCHASE OF PR OCESSED TOBACCO. PROCESSED TOBACCO GIVES A LOWER G.P. RATIO. THEREFORE THERE WAS A R EASON FOR CLAIMING LOWER G.P. RATE DURING THE YEAR UNDER CONSIDERATION. IT IS FURTHER SEEN T HAT NO DEFECT WHATSOEVER HAS BEEN POINTED OUT BY THE ASSESSING OFFICER ON THE PURCHAS E/SALES MADE BY THE ASSESSEE. WHATEVER SALES OR PURCHASES HAVE BEEN MADE THEY HA VE BEEN MADE THROUGH PROPER VOUCHERS AND ALL THE PURCHASE AND SALE VOUCHERS HAV E BEEN MAINTAINED AND PRODUCED BEFORE THE ASSESSING OFFICER. A RECONCILIATION CHA RT SHOWING TRADING ACCOUNT AND RELATING TO PROCESSED TOBACCO IS PLACED AT PAGE 62 OF PAPER BOOK. COMPARATIVE FIGURE OF LAST THREE YEARS IS ALSO MENTIONED. AFTER GOING THROUGH THESE DETAILS IT WAS SEEN THAT THERE WAS NO PURCHASE OF PROCESSED TOBACCO IN THE A.Y. 2001-02 A ND 02-03 WHEREAS THERE IS A PURCHASE OF PROCESSED TOBACCO IN THE A.Y. 2003-04. IN PROCE SSED TOBACCO THERE IS ONLY 2.58% G.P. THEREFORE BY APPLYING 4% EXTRA G.P. AT THE END BY THE ASSESSING OFFICER IN OUR VIEW WAS 5 NOT JUSTIFIED. AS STATED ABOVE NO DISCREPANCY WAS POINTED OUT IN THE BOOKS OF ACCOUNT. IF BY ANY REASON THE G.P RATE IS DECLINED IN A PARTICU LAR YEAR THEN WITHOUT POINTING OUT ANY SPECIFIC DEFECT OR BRINGING OUT SOME SPECIFIC MATER IAL ON RECORD THE REJECTION OF G.P. RATE IS NOT JUSTIFIED. IN VIEW OF THE ABOVE FACTS AND CI RCUMSTANCES WE HOLD THAT APPLICATION OF 4% EXTRA GROSS PROFIT ON DISCLOSED SALES WAS NOT JU STIFIED. ACCORDINGLY WE DELETE THE ADDITION OF RS. 5 28 143/- MADE AND CONFIRMED BY TH E LOWER AUTHORITIES. 7. GROUND NO. 5 IS GENERAL IN NATURE. 8. GROUND NO. 6 RELATES TO INTEREST UNDER SECTION 2 34B & 234C WHICH IS CONSEQUENTIAL IN NATURE. THE ASSESSING OFFICER IS D IRECTED TO GIVE RELIEF TO THE ASSESSEE. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . 10. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 .04.2010 SD/- SD/- ( P.K. BANSAL ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AGRA DATED : 23/04/2010. D/- COPY FORWARDED TO :- THE APPELLANT THE RESPONDENT THE CIT THE CIT (A) CONCERNED. THE D/R ITAT AGRA. GUARD FILE (ITA 07/AG/2009) BY ORDER AR ITAT AGRA. 6