Rajasthan High Court - Jaipur
Gehlot Pan Bhandar vs Income Tax Officer on 18 November, 1999
Equivalent citations: (2000)66TTJ(NULL)482
ORDER
B.M. KOTHARI, AM.:
This appeal by the assessee is directed against order dt. 17th Aug., 1992, passed by the Dy. Commissioner (Appeals) for assessment year 1989-90.
2. The assessee has raised as many as 7 grounds but all those grounds relate to two items of addition.
3. Ground Nos. 1 to 4 relate to confirmation of addition made by the assessing officer in the declared trading results by the Dy. Commissioner (Appeals). The assessee is dealing in pan masala, toilet soap, tea, cigarettes and other commodities of daily use, A survey was conducted under section 133A on 3rd March, 1989. The assessing officer observed that during the course of survey cash was found short by sum of Rs. 22,756. Stock was also found short by an amount Rs. 4,983. It was further found during the course of survey that cash sales effected by the assessee were not being fully recorded in the books of account. It was found that cash memos were not issued on the date of survey in respect of cash sales aggregating to Rs. 9,640. The assessee declared gross profit rate of 5.99 per cent as against g.p. rate of 6.56 per cent declared in the immediately preceding year. The assessee submitted explanation for decline in g.p. rate. The assessing officer did not accept those explanation and applied g.p. rate of 7 per cent. The assessing officer thus made an addition of Rs. 20,310 in the declared g.p. The Dy. Commissioner (Appeals) after considering the submission made on behalf of the assessee, directed the assessing officer to apply g.p. rate of 6.55 per cent, which was the rate of g.p. disclosed by the assessee in the immediately preceding year. The assessee has preferred the present appeal against part confirmation of the addition made in the declared gross profit.
4. The learned counsel submitted that the sales made by the assessee in the year under consideration has increased substantially as compared to the sales of the preceding year. Such increase in the sales fully justifies a meagre decline in the g.p. rate. He drew my attention to the g.p. chart placed at p. 1 of the paper book, which is reproduced here as under :
Asst. yr.
Sales G.P. Rate Remarks 1986-87 10,92,099 94,703 6.36 1987-88 12,23,086 78,864 6.45 1988-89 8,30,464 84,465 6.56 1989-90 18,81,741 1,12,689
5.98 under appeal.
The learned counsel also drew my attention to the written submissions submitted before the Dy. Commissioner (Appeals). He specifically pointed out that the Appellate Assistant Commissioner has applied g.p. rate of 6 per cent in assessee's case for assessment year 1984-85. The learned counsel also placed reliance on judgment reported in 29 STC 478 at p. 482 and Rajkurnar Jain v. Assistant Commissioner (1994) 49 M (AD) (TM) 558 : (1994) 208 ITR 22 (All) (AT) at p. 42. The learned counsel pointed out that the assessing officer has brought no material on record to justify the addition so made in the declared trading results. Shri Ojha, learned counsel, further explained that the discrepancy found in the course of survey were also properly explained before the assessing officer but he has failed to consider them in proper perspective. The learned counsel thus strongly urged that the additions should be deleted.
5. The learned departmental Representative submitted that the Dy. Commissioner (Appeals) has sustained only a part amount of the addition made in the declared trading results which hardly comes to about Rs. 10,000. The addition so sustained by the Dy. Commissioner (Appeals) is based on the g.p. rate of 6.56 per cent shown by the assessee himself in the immediately preceding year. The g.p. rate of 6 per cent for assessment year 1984-85 relied upon by the assessee's counsel is not relevant as the best comparison can be made with the results of the immediately preceding year, He thus strongly supported the order of the Dy. Commissioner (Appeals).
6. 1 have carefully considered the submissions made by learned representatives of the parties and have perused the orders of the learned departmental authorities. The assessee gave the detailed written submissions before the assessing officer justifying meagre decline in g.p. rate in the year under consideration as compared to the preceding year. It was inter alia, pointed out that the total sales in ST paid account was Rs. 4,77,268 in which g.p. rate of 6 per cent was derived. Likewise, the assessee derived g.p. rate of 5.5 per cent in ST free account where sale was of Rs. 9,67,460. The assessee is dealing in commodities which are sold at nominal margin of profit. For instance, it was pointed out that the assessee is selling the products of Hindustan Lever Ltd. on which a very nominal profit rate is allowed by the principal. The sales during the year under consideration have gone up. The assessee, however, could not submit proper explanation for the shortage in cash and stocks found during the course of survey. It is, therefore, a case where resort to estimation of g.p. may be justified. However, on a careful consideration of the entire relevant facts and particularly the fact that sales during the year under consideration has increased to Rs. 18,81,741 as against sale of only Rs. 8,30,464 in assessment year 198889. 1 am of the view that it would be just and proper to direct the assessing officer to restrict the addition in the declared g.p. by an amount of Rs. 6,000 only. The assessing officer is directed to grant necessary relief.
7. As regards the addition of Rs. 4, 1100 sustained by the Dy. Commissioner (Appeals) on account of alleged interest income received by the assessee in respect of short cash found during the course of survey, I am inclined to agree with the assessee's submission that there was no evidence on record to show that the assessee had derived income from interest on the alleged short cash found at the time of survey at shop premises. The assessee had explained before the departmental authorities that the cash had been taken to the residence of the partners on the day preceding the date of survey. There is no material on record to prove that such an explanation given by the assessee is patently wrong. There is also no material on record to show that the assessee has earned any such interest income outside the books of account. Tax can be levied only on real income and not on any hypothetical or notional income. 1 am, therefore, of the view that the addition of Rs- 4,100 made by the assessing officer cannot be sustained. The assessing officer is directed to delete the same.
8. In the result, the appeal is partly allowed.