Income Tax Appellate Tribunal - Amritsar
Anthony Fr Madasser, Jalandhar vs Assessee on 27 May, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND
SH. T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A No.54 (Asr)/2015
Assessment Year: 2011-12
Anthony F. R. Madasser Vs. Income Tax Officer
Prop. M/s Navjeevan Ward-III(3),
Enterprises, Jalandhar.
G-12, Guru Gobind Singh
Avenue, Jalandhar.
PAN: APQPM 9874B
(Appellant) (Respondent)
I.T.A No.380(Asr)/2015
Assessment Year: 2012-13
Anthony F. R. Madasser Vs. Asst. CIT,
Prop. M/s Nav Jeevan Circle-II
Enterprises, Jalandhar.
G-12, Guru Gobind Singh
Avenue, Jalandhar.
PAN: APQPM 9874B
(Appellant) (Respondent)
I.T.A Nos.115 & 408 (Asr)/2015
Assessment Year: 2011-12 & 2012-13
Income Tax Officer, Vs. Sh. Anthony F. R. Madasser
Ward-II(3), Prop. M/s Nav Jeevan
Jalandhar. Enterprises,
G-12, Guru Gobind Singh
Avenue, Jalandhar.
PAN: APQPM 9874B
(Appellant) (Respondent)
Appellant by: Sh. Umesh Takyar (DR)
Respondent by: Sh. Sudhir Sehgal (Adv.)
2 ITA Nos.54,380, 115 & 408(Asr) 2015
Asst. Years 2011-12 & 2012-13
Date of hearing: 23.05.2016
Date of pronouncement: 27.05.2016.
ORDER
PER T.S.KAPOOR, (AM) This is a group of four appeals consisting of cross appeals filed by assessee as well as by Revenue for Asst. Years: 2011-12 & 2012-13 respectively. Both parties have challenged the order of learned CIT(A) dated 23.12.2014 and dated 27.05.2015 passed by learned CIT(A) for Asst. Years: 2011-12 & 2012-13.
2. Both these appeals involved similar issues and these were heard together, therefore, for the sake of convenience a common and consolidated order is being passed.
3. At the outset, the learned AR submitted that the issue in these appeals is covered by the order of Hon'ble Tribunal in the case of assessee himself for Asst. Year 2008-09 to 2010-11, wherein the Hon'ble Tribunal vide order dated 17.02.2016 had disposed off similar issues and, therefore, the same may be disposed off accordingly.
4. The learned AR in this respect submitted that Hon'ble Tribunal while disposing of appeals of assessee and Revenue had determined the Gross Profit on costs of sales and had made detailed calculations and in this respect our attention was invited to the operative part of the Tribunal Order as contained in para 22 onwards. The learned AR submitted that on the basis of which the Hon'ble Tribunal had determined the taxable income of assessee on the same basis, he has 3 ITA Nos.54,380, 115 & 408(Asr) 2015 Asst. Years 2011-12 & 2012-13 prepared charts showing the calculation of profits to be taxed for the two years and he filed the same and a copy of which was provided to learned DR.
5. The learned DR conceded that if the issue is covered by the earlier order of Tribunal then he has no objection if the Hon'ble Tribunal decides the similar issues as in the earlier years.
6. We have heard the rival parties and have gone through the material placed on record. We find that the facts and circumstances of the present appeals and those decided by Tribunal vide its order dated 17.02.2016 are similar. For the sake of convenience the facts of the cases are explained as under:
The assessee is an individual and is deriving income from retail sale of School Books and Stationary items. The Assessing Officer observed during the assessment proceedings that the gross profit declared by assessee was quite low, as compared to the margin of profit in this type of trade and further he had observed certain unexplained cash deposits in saving Bank Account of the assessee and therefore, the Assessing Officer held that assessee had deposited cash out of unrecorded sales.
The Assessing Officer also observed that besides the sale of School Books and Stationary items the assessee was supplying to various schools, school bags, neck-ties etc, and from the sale bills, he observed that items were being sold at MRP Prices.4 ITA Nos.54,380, 115 & 408(Asr) 2015
Asst. Years 2011-12 & 2012-13 The Assessing Officer from the perusal of purchase bills had observed that assessee was being allowed discount on purchases from 25% to 40% which the assessee was not disclosing anywhere, therefore, the Assessing Officer held that assessee was not declaring true profits and therefore on the basis of discount allowed by suppliers he calculated the margin of assessee and made additions accordingly. The learned CIT(A) had part allowed the relief to the assessee.
7. Aggrieved with the orders of learned CIT(A) the assessee as well as Revenue had filed cross appeals and Hon'ble Tribunal vide order dated 17.02.2016 disposed off the appeals by holding as under:
"22. We have heard the rival parties and have gone through the material placed on record. We find that the assessee has taken a jurisdictional issue in the AY 2008-09 by way of an additional ground, which during the course of hearing before us, was revised and which reads as under:
"That the assessment having been reopened u/s 148 on the basis of cash deposit of RS.5,45,980/- in the bank account with Standard Chartered Bank, Jalandhar in the name of the assessee but no addition having been made for the same by the AO Thus, no income as a matter of fact having escaped assessment, it was not open to the AO to independently asses some other income, which is not part of the reason recorded u/s 148 by the A.O."
23. The reasons recorded for reopening of the case for the AY 2008-09 are placed at PB 108, which for the sake of completeness are reproduced below:
"During the course of assessment proceedings in the case of the assessee for the assessment year 2009-10, an AIR information of cash deposits of Rs.16,52,000/- in account no. 715-1-0137597 with Standard Chartered Bank, Jalandhar was received. Subsequently vide letter dated 22.12/2011 the assessee admitted that the deposits in the said bank account were unaccounted and were the proceeds of unaccounted sales. Subsequently, assessment was completed for the AY 2009-10 by utilising this AIR information & addition amounting to Rs.2,55,92,341/- was done.
2. From the bank statement obtained from the bank of the same account, it is seen that cash amounting to RS.5,45,980/- has been 5 ITA Nos.54,380, 115 & 408(Asr) 2015 Asst. Years 2011-12 & 2012-13 deposited for AY 2008-09 also. Since, it has already been admitted by the assessee that the deposits in this bank account is actually unaccounted sale proceeds, I have reason to believe that income chargeable to tax on account of unaccounted sales, has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. Issue notice u/s 148."
24. From the above reasons recorded, we find that the case of the assessee was reopened on account of an AIR information regarding the factum that the assessee had deposited certain cash in his bank account with the Standard Chartered Bank, Jalandhar. The assessee during the course of assessment proceedings in the AY 2009-10 had admitted that part cash of deposit in the bank account represented unaccounted sales. The AO had observed that a part of cash deposit was also deposited in AY 2008-09. Therefore, he reopened the assessment for AY 2008-09 while finalising the assessment order for the AY 2009-10, the AO made trading addition of Rs.2,55,92,341/- but did not make separate addition for cash deposited in the bank account, as he held that trading addition made by him covered the cash deposit in the bank. However, while finalizing the assessment for Asst.Year 2008-09, the AO recorded the following findings.
"1. BACK GROUND:- During the course of assessment proceedings in the scrutiny case of the assessee for the assessment year 2009- 10, an AIR information of the cash deposits of Rs.16,52,000/- in assessee's saving bank account No.715-1-013759-7 with Standard Chartered Bank, Jalandhar was received. During the course of assessment proceedings vide letter dated 20.l2.2011, assessee admitted that the source of deposits in the said bank account were unaccounted and were the proceeds of unaccounted sales of his proprietary concern M/s Navjeevan Enterprises. Keeping in view the facts the facts/information on record vide order dated 30.12.2011. assessment was completed for the assessment year 2009-10. Addition amounting to Rs.2,55,92,341/- was made primarily on the basis of AIR information w.r.t cash deposits in the saving bank account. From the bank statement obtained from the bank of the same account, it is seen that cash amounting to Rs.5,45,980/- has been deposited during financial year 2007-08 relevant to assessment year 2008-09 also. Since, it has already been admitted by the assessee that the source of deposits in this bank account is actually unaccounted sale proceeds of his business of trading in books/stationary items. Notice u/s 147/148 of the Income Tax Act,1961 dated 08.02.2012 was issued after recording the reasons for the same. The said notice stands duly served upon assessee on 09.02.2012."
From the above findings, we note that he did mention the fact of deposit of cash amounting to Rs.5,45,980/- in the AY 2008-09 and he has held that since the assessee had already admitted that the source of deposit in the bank account is unaccounted sale proceeds, therefore, he made the trading addition ignoring cash deposit as he had already observed that 6 ITA Nos.54,380, 115 & 408(Asr) 2015 Asst. Years 2011-12 & 2012-13 the cash deposit represented unaccounted sale proceeds. Therefore, we do not see any force in the arguments of the ld. counsel that since he had not made the addition of cash deposit, no other addition can be made. In view of the above, additional ground taken by the assessee is dismissed.
25. As regards the legal ground taken by the assessee in three appeals regarding rejection of books of account, we find that the AO on the basis of gross profit ratio declared by the assessee and on the basis of cash deposit in the bank account had held the sale figures not to be reliable but he had accepted all other figures of trading and profit & loss account and rather he has calculated the suppression in gross profit on the basis of opening and closing stock and on the basis of purchases as declared by the assessee.
26. The contention of the ld. counsel that since the AO had not rejected the books of account, therefore, he should not have estimated the income of the assessee by applying gross profit ratio whereas we find that the AO has clearly established suppression of sales and assessee himself had admitted that part of deposits in the bank account were on account of unaccounted ales. Therefore, the sale figures were not reliable and therefore, the AO has rejected the sale figures and had calculated the cost of goods sold from the same figures of opening stock and purchases as submitted by the assessee. We find that Assessing Officer has nowhere rejected the books of accounts and in fact he has relied upon the same figures of opening stock, purchases, and closing stock to calculate cost of goods sold on accepted accounting principles and therefore contention of the ld. Counsel that income was estimated without rejection of books of accounts does not hold ground as income of assessee was not estimated and it was calculated only on the basis of same figures from Trading Account submitted by Assessee. On the other hand we further find that ld. CIT(A) has recorded a finding that books of accounts were rejected which is not a correct findings. However, since we have held that income was not just estimated but was calculated on the basis of figures submitted by assessee himself therefore, this ground of appeal has become a non-issue and therefore is not being adjudicated.
27. Now coming to the merits of the case, we find that it is a fact that the assessee had not recorded a part of sale in the regular books of accounts as he has already admitted that part of sale proceeds were deposited in the bank. Therefore, the AO and the ld. CIT(A) has rightly not considered the figure of sales for arriving at the cost of goods sold. However, the authorities below have rightly estimated the calculation of cost of goods sold on the basis of figures provided by the assessee in his trading account. The authorities below completely verified the purchases after calling information u/s 133(6) from the various suppliers of the assessee and from where the assessee was getting discount also. By completing the assessment, the AO did not allow benefit of free distribution of stationery and books which the assessee had claimed and which was one of the reasons for low gross profit ratio. Before the ld. CIT(A) complete details alongwith confirmations from Principals of various Schools 7 ITA Nos.54,380, 115 & 408(Asr) 2015 Asst. Years 2011-12 & 2012-13 alongwith details of books distributed free of cost were filed which were forwarded to the AO also. The ld. CIT(A) after obtaining the remand report from the AO had found the claim of the assessee as genuine and therefore, he rightly allowed the relief to the assessee on account of free distribution of books/discount allowed by assessee. This is the only grievance raised by the Revenue but which in our opinion has been rightly allowed by ld. CIT(A) as AO did not raise any objections on merits during remand proceedings. In view of the above grounds of appeal taken by Revenue are dismissed.
28. Now coming to appeals frilled by assessee. The ld. CIT(A) calculated suppression in gross profits by applying the highest Gross Profit ratio. We are in agreement with findings of the ld. CIT(A) so far as method of calculation of suppression in gross profit is concerned, however, we are not in agreement with the ld. CIT(A) where he applied the highest percentage of gross profit ratio out of three percentages worked out by him. We find that the results arrived at by applying gross profit ratio relied upon by ld. CIT(A), do not depict a fair and true picture as by applying exorbitant rate of gross profit, the figures arrived at by the ld. CIT(A) are absurd. The correct gross profit ratio worked out by the ld. CIT(A) on the basis of gross discount received by the assessee as compared to gross purchases made by the assessee should have been applied and the application of this gross profit ratio is in consonance with the findings of the AO, which he had made in the beginning of the assessment order for AY 2009-10, where he has held that rate of profit in this trade is more than 20%. The Gross Profit ratio calculated on the basis of gross discount and gross purchases is tabulated as below.
2008-09 25.17%
2009-10 24.29%
2010-11 26.09%
The contention of the ld. counsel that gross profit ratio with respect to sales should have been applied while working out suppression in the gross profit does not carry any force as the sale figure in the trading account itself was not reliable. Therefore, any working with respect to sale will not give fair results. Moreover, the argument of the ld. counsel that assessee be allowed relief on account of wastage etc. equivalent to 10% of purchase also do not carry any force in view of the fact that method of valuation of stock as adopted by the assessee and as noted in audit report is cost or market price, whichever is less. Therefore, the deterioration in value of stock if any on account of change in syllabus/wastage must already have been taken into account while valuing the stock at market prices as apparently market value of such stock would have been lower than the cost price. In view of the above, these two arguments of the ld. counsel are rejected and the formula adopted by the ld. CIT(A) is upheld subject to application of gross profit rate worked out by him. The suppression of gross profit in various years 8 ITA Nos.54,380, 115 & 408(Asr) 2015 Asst. Years 2011-12 & 2012-13 by applying gross profit ratio based upon gross purchases and gross discount for three years is worked out as under:
Asst. Year 2008-09 Total purchases made by the assessee. Rs.3,24,13,274/-
Purchases on which no discount was received Rs.5002821/-
(15.43%) Purchases on which assessee got discount Rs.2,74,10,454/-
Ranging from 10% to 50% (84.57%) Total purchases accounted for in the Books of account Rs.3,24,13,274/-
Total cost of sales as worked out by the Assessing Officer in the assessment order Rs.1,95,75,634/-
In the absence of any quantitative details, it is presumed that out of goods valuing at Rs.1,95,75,634/-/-, the assessee sold 84.57% of goods on which he got discount and 15.43% of goods on which he did not get any discount.
84.57 cost of sales of goods Rs.1,65,55,114/-
15.43% cost of sales of goods Rs.30,20,520/-
Total cost of sales Rs.1,95,75,634/-
Gross profit @ 25.17% on cost of sales of Rs.1,65,55,114/-
Rs.4166922/-
Gross profit @15.43% on cost of sales of Rs.30,20,520/- Rs.4,66,066/-
Total gross profit earned by the assessee Rs.46,32,988/-
Less: Discount allowed by the assessee Rs.6025710/-
Balance gross profit (-) Rs.13,92,721/-
Less: Gross profit declared by the assessee Rs.3,36,758/-
Undisclosed gross profit earned by the assessee Rs. Nil as G.P declared by assessee is more than figure calculated above.
Asst. Year 2009-10 Total purchases made by the assessee. Rs.7,11,65,750/-
Purchases on which no discount was received Rs.1,14,55,914/-
9 ITA Nos.54,380, 115 & 408(Asr) 2015Asst. Years 2011-12 & 2012-13 (16.1%) Purchases on which assessee got discount Rs.5,97,09,836/-
Ranging from 10% to 50% (83.9%) Total purchases accounted for in the Books of account Rs.7,11,65,750/- Total cost of sales as worked out by the Assessing Officer in the assessment order Rs.6,34,43,718/-
In the absence of any quantitative details, it is presumed that out of goods valuing at Rs.6,34,43,718/-, the assessee sold 83.9% of goods on which he got discount and 16.1% of goods on which he did not get any discount.
83.9% of cost of sales of goods Rs.5,32,29,279/-
16.1% of cost of sales of goods Rs.1,02,14,439/-
Total cost of sales Rs.6,34,43,718/-
Gross profit @ 24.29 % on cost of sales of Rs.5,32,29,279/- Rs.1,29,29,392/-
Gross profit @16.5% on cost of sales of Rs.1,02,14,439/- Rs.16,85,382/-
Total gross profit earned by the assessee Rs.1,4614774/-
Less: Discount allowed by the assessee Rs.5803705/-
Balance gross profit Rs.8811069/-
Less: Gross profit declared by the assessee Rs.15,61,570/-
Undisclosed gross profit earned by the assessee Rs.72,49,498/-
Asst. Year 2010-11 Total purchases made by the assessee. Rs.7,26,90,516/-
Purchases on which no discount was received Rs.1,44,04,845/-
(19.8%) Purchases on which assessee got discount Rs.58285671/-
Ranging from 10% to 50% (80.2%) Total purchases accounted for in the Books of account Rs.7,26,90,516/-
Total cost of sales as worked out by the Assessing 10 ITA Nos.54,380, 115 & 408(Asr) 2015 Asst. Years 2011-12 & 2012-13 Officer in the assessment order Rs.7,49,67,934/-
In the absence of any quantitative details, it is presumed that out of goods valuing at Rs.74967934/-, the assessee sold 83.9% of goods on which he got discount and 19.8% of goods on which he did not get any discount.
80.2% of cost of sales of goods Rs.60124283/-
19.8% of cost of sales of goods Rs.1,4843651/-
Total cost of sales Rs.74967934/-
Gross profit @ 26.09 % on cost of sales of Rs.60124283 Rs.15686425/-
Gross profit @16.5% on cost of sales of Rs.14843651 Rs.2449202/-
Total gross profit earned by the assessee Rs.18135627/-
Less: Discount allowed by the assessee Rs.14407113/-
Balance gross profit Rs.3728514/-
Less: Gross profit declared by the assessee Rs.2693796/-
Undisclosed gross profit earned by the assessee Rs.1034718/-
The orders of learned CIT(A) are modified to the extent stated above and additions are restricted to the amounts of undisclosed gross profit as calculated above. In view of the above the appeals filed by assessee are partly allowed."
In the present case, in the case of Revenue's appeals the Revenue is aggrieved with the deletion made by learned CIT(A) on account of deduction for free distribution of books. However, we find that learned CIT(A) had allowed relief on account of free distribution of books after getting remand report from Assessing Officer and in earlier years we had already dismissed the appeals filed by Revenue on similar grounds and therefore, the appeals filed by Revenue in the present years are also dismissed.
11 ITA Nos.54,380, 115 & 408(Asr) 2015Asst. Years 2011-12 & 2012-13
8. As regards the appeals filed by assessee following the earlier order of Tribunal the calculation of taxable income is worked out as under:
F o r A s s t. Ye a r 2 0 1 1 -1 2 Particulars Amount (Rs.) Total Purchases made by the Assessee 78358954 Purchases on which no discount was received 16588976 (21.2%) Purchases on which assessee got discount ranging from 10% to 50% 61769978 (78.8%) Total Purchases accounted for in the Books of accounts 78358954 Total cost of sales as worked out by the CIT(A) in his order 83424504 In the absence of any quantitative details, it is presumed that out of goods valuing at Rs. 83424504/-, the assessee has sold 78.80% of goods on which he got discount and 21.2% of goods on which he did not get any discount.
78.8% of cost of sales of goods 65763537
21.2% of cost of sale of goods 17660967
Total cost of sales 83424504
Gross Profit @ 29.03% on cost of sales of Rs. 65763537/- 1,90,91,155
Gross Profit © 16.5% on cost of sales of Rs. 17660967/- 2914060
Total Gross Profit earned by the assessee 22005215
Less Discount allowed by the assessee 15159103
Balance Gross Profit 6846112
Less Gross Profit declared by the assessee 4050998
Undisclosed gross profit earned by the assessee 2795114
(Addition to be sustained)
For Asst. Year 2012-13
Particulars Amount (Rs.)
Total Purchases made by the Assessee 110688179
Purchases on which no discount was received 27012580
12 ITA Nos.54,380, 115 & 408(Asr) 2015
Asst. Years 2011-12 & 2012-13
(24.4%)
Purchases on which assessee got discount ranging from 10% to 50% 83675599 (75.6%) Total Purchases accounted for in the Books of accounts 110688179 Total cost of sales as worked out by the CIT(A) in the order 99609039 In the absence of any quantitative details, it is presumed that out of goods valuing at Rs. 99609039/-, the assessee has sold 75.60% of goods on which he got discount and 24.40% of goods on which he did not get any discount.
75.60% of cost of sales of goods 75304433
24.40% of cost of sale of goods 24304606
Total cost of sales 99609039
Gross Profit @ 27.44% on cost of sales of Rs.75304433/- 20663536
Gross Profit © 16.5% on cost of sales of Rs.24304606/- 4010260
Total Gross Profit earned by the assessee 24673796
Less Discount allowed by the assessee 24240113
Balance Gross Profit 433683
Less Gross Profit declared by the assessee 4618230
Undisclosed gross profit earned by the assessee -4184547
(Addition to be sustained) Nil
9. In view of the above, the appeals filed by assessee are partly allowed.
10. In nutshell, the appeals filed by assessee are partly allowed whereas the appeals filed by Revenue are dismissed.
Order pronounced in the open Court on 27th May, 2016.
Sd/- Sd/-
(A.D. JAIN) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated:27.05.2016.
/PK/Ps.
13 ITA Nos.54,380, 115 & 408(Asr) 2015
Asst. Years 2011-12 & 2012-13
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