Income Tax Appellate Tribunal - Jaipur
Shri Radhey Shyam Khandelwal, Jaipur vs Assistant Commissioner Of Income ... on 25 April, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM
vk;dj vihy la-@ITA No. 713/JP/2017
fu/kZkj.k o"kZ@Assessment Year: 2012-13
Shri Radhey Shyam Khandelwal cuke The ACIT
C-184, Road No. 9C, VKI Area Vs. Circle - 4
Jaipur Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ADRPK 7193 G
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by: Shri Mukesh Khandelwal, CA
jktLo dh vksj ls@ Revenue by:Shri J.C. Kulhari, JCIT - DR
lquokbZ dh rkjh[k@ Date of Hearing : 4/04/2018
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 25/04/2018
vkns'k@ ORDER
PER BHAGCHAND, AM
The assessee has filed an appeal against the order of the ld. CIT(A), Ajmer dated 03-03-2017 for the Assessment Year 2012-13 raising therein following grounds of appeal.
''1. That under the facts and circumstances of the , the ld. CIT(A) has erred seriously on the facts in confirming the trading addition of Rs. 30,06,609/- made by AO by applying a g.p. rate of 5% as against declared rate of 3.24% in case of Dal Manufacturing business of the appellant.
ITA No.713/JP/2017Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur
2. That under the facts and circumstances of the , the ld. CIT(A) has erred seriously on the facts in confirming the trading addition of Rs. 7,45,247/- made by AO by applying a g.p. rate of 10% as against declared rate of 6.43% in case of Gemstone business of the appellant.
3. That the ld. CIT(A) has erred seriously in law and on facts in confirming addition of Rs. 18,93,100/- made by AO u/s 41(1) of the I.T. Act, 1961.'' 2.1 Apropos Ground No. 1 and 2 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:-
''6.3 I have gone through the assessment order, statement of facts, ground of appeal and written submission carefully. It is sent that in the case of Ambika Gems, the g.p. rate had come down to 3.24% from 11.25% declared in the immediately preceding Assessment Year and in the case of Kohinoor Gems, the N.P. rate has come down to 6.43% from the N.P. Rate of 14.41% declared in the immediately preceding Assessment Year. The AO after discussing the defects noticed by him in the books of the appellant had estimated the GP @ 5% on the declared turnover in the case of Shri Ambika Industries and also estimated the N.P. Rate of Kohinoor Gems @ 10% on the declared turnover. Accordingly, the addition of Rs. 30,06,609/- (Rs. 85,53,099 -
Rs. 55,46,490) was made to profit declared in the case of Ambika Industries and addition of Rs. 7,45,247/-(Rs.20,87,660 - Rs. 13,42,413) was made in the case of Kohinoor Gems. In view of the facts discussed by the AO in the assessment order, I am of the considered view that the AO has rightly invoked the provisions of section 145(3). Hence the rejection of book results of Shri Ambika Industries and Kohinoor Gems u/s 145(3) is held to be valid and in accordance with the provisions of law. The estimation of profit made by the AO, taking into account all the facts of the case, in my view is also reasonable. Hence, the additions of Rs. 30,06,609/- and Rs. 7,45,247/- made by the AO are hereby confirmed.
2.2 During the course of hearing, the ld.AR of the assessee prayed for deletion of trading additions of Rs. 30,06,609/- and Rs. 7,45,247/-
2 ITA No.713/JP/2017Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur respectively confirmed by the ld. CIT(A) for which the ld.AR of the assessee pleaded and also filed the following written submission.
For Ground No. 1 written submission
1. application of provisions of section 145(3) the ld. AO has made various observations (summary of the same is at APB 10) which were replied by the appellant before the ld. CIT (A) (APB 11-12) in details but same were not properly appreciated by the ld. CIT (A). In the order the ld. AO alleged that appellant did not maintain stock register which fact was beyond the real position. The appellant had produced the stock records before the ld. AO on 29/01/2015 (Submissions given to the ld. AO are at APB 1-3, relevant page 2 & 3). The appellant has enclosed quantitative details of goods traded/raw material (APB 6) and the same is a part of audit report and was submitted alongwith return filed. This shows the causal approach of the ld. AO wherein he is ignoring a vital fact of maintenance of stock records. Dal comes under essential commodity and hence comes in the purview of Essential Commodities Act and trader/ manufacrturer dealing therein has to maintain complete stock records.
2. The ld. AO has compared the GP rate of the assessee with one Shri Jugal Kishore Dangayach, without even establishing that the appellant and said Shri Jugal Kishore Dangayach are comparables i.e. whether they are having same infrastructure, technology, marketing set up, same knowledge level, competence of personnel employed etc. There can not be comparision between a street kirana shop with a Reliance Enteprise. Therefore the comparision used by the ld. AO can not be relied.
3. The appellant has maintained and produced all requisite records for deducing correct profit. The ld. AO has only stated that the appellant had accepted about few vouchers without proper supporting. Your honour, the appellant has fairly admitted during assessment proceedings that in a business set up voucher for each and every paisa can not be obtained such as for Tea/Refreshment expenses, petty repairing work of machines, various types of miscellaneous expenses etc. In such circumstances no adverse inference is liable to be drawn. So far as trading account of the assessee (APB 4) are concerned all the ingredients are properly verifiable and hence residual amount has been offered as Gross profit which the ld. AO has disturbed without any basis.
4. It has been held by the Hon`ble Rajasthan High Court in the case of Gotan Lime Khanij Udyog (2002) 256 ITR 243 that rejection of 3 ITA No.713/JP/2017 Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur books of account may not necessarily lead to any addition. In this case the Hon`ble ITAT egven after sustaining application of provisions of section 145(1) deleted the trading addition by stating that no basis was given by the ld.CIT (A) for sustaining trading addition.
5. In the case of CIT v/s Dr A.P. Bahal (2010) 322 ITR 71 (Raj.) it was held by the jurisdictional High Court that section 144/145 only provides a manner of computation of income but it does not deal with addition or deletion from income and hence mere rejection of accounts or some deficiencies in the books of account would not mean that it must necessarily lead to additions to returned income.
6. In the case of CIT v/s Gupta K.N. Construction Co. (2015) 371 ITR 325 Hon`ble jurisdictional Court has held that while applying provisions of 145(3) one has to consider past history of the assessee or trading results must be compared with another similar assessee. In the instant case the GP rate declared registered decline as compared to last year but this was explained on account of heavy jump in the turnover. Further the records maintained by the assessee are sufficient to explain all ingredients of Trading Account and hence no addition can be made. Further as mentioned hereinabove the ld. AO compared the case of the assessee with one Shri Jugal Kishore Dangayach without any basis and such comparision is absolutely without any basis and is liable to be quashed.
7. In the assessment of the assessee for the AY 2014-15 framed u/s 143(3) of the Income Tax Act, 1961 (Copy of the order at APB 19-21). In this case on a turnover of Rs. 10.41 Crores the appellant has declared a GP rate of 2.44%. The ld. AO in this case has made an addition of Rs. 6,80,767 on account of some variation in stock valuation and even after adding the said amount the assessed GP comes to 3.09% which is lower than GP of 3.24% declared for this concerned year. Therefore the addition made by the ld. AO may kindly be deleted.
8. In the case of Cf. Krishnalal & Co. v/s State of Kerala (2001) 123 STC 124 it was held by the Hon`ble Kerala High Court that in case of rejection of accounts there should exist correlation between the addition made and the defects detected. In this case no such correlation exists and hence such vast addition deserves to be quashed.
It is therefore sincerely requested that the trading addition made in case of Dal Manufacturing activity may kindly be deleted.
4 ITA No.713/JP/2017Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur For Ground No. 2 Written Submission Facts of the case: The appellant individual has been engaged into the business of trading of precious and semi precious gemstones under the name and style of M/s. Kohinoor Gems. During the year assessment proceeding the AO observed following GP history of the appellant.
A.Y. Turnover Gross Net profit GP % NP %
Profit
2010-11 1,28,00,796 3,92,433 23,036 3.06 0.18
2011-12 1,35,93,371 19,58,197 1,81,436 14.41 1.33
2012-13 2,08,76,600 13,42,413 1,22,250 6.43 0.59
To made for making this addition relied on the findings given by him in case of Dal manufacturing business (page 6-7 of the assessment order) and applied a GP rate of 10% in place of 6.43% resulting into a trading addition of Rs. 7,45,247.
First appeal, the ld. CIT(A) for sustaining this addition made similar observations as made for Dal Manufacturing business. In fact, he has dealt with both the trading addition in only one para ( para 6.3 at page 9 of appeal order)
1. For applying a GP rate in case of Dal manufacturing activity the ld. AO made efforts to compare the case of the assessee with one Shri Jugal Kishore Dangayach whereas for this business he has not tried to make any comparision. Even for this business also the appellant maintained complete stock records gist of which is at APB 23).
2. A look at the finding of the ld. AO and the ld. CIT (A) for this addition would show that none of them have any perfect basis for applying a GP rate of 10% and such addition has been made merely on estimation. Why 10% rate has been applied why not 11% or 9%. This shows that the addition has been made as per his whims and fancies. The appellant has maintained all requisite books and records and had produced all such and there is basis with the appellant to establish ingredient of each and every amount mentioned in Trading Account and hence the residual figure of GP has to be accepted.
3. The appellant relies on other submissions made for ground no.1 in this regard including the case laws.
It is therefore sincerely requested that the addition may kindly be deleted and oblige.'' 5 ITA No.713/JP/2017 Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur 2.3 On the other hand, the ld. DR supported the orders of the lower authorities.
2.4 We have heard the rival contentions and perused the materials available on record. As regards the Ground No. 1, the main contention of the ld.AR of the assessee is that the AO has compared the G.P. rate of the assessee with one Shri Jugal Kishore Dangayach without comparing the infrastructure, technology, marketing setup, competence of personnel employed etc. As regards the Ground No. 2, the ld.AR contention is that the AO has made the comparison with the Dal Manufacturing business and applied a G.P. Rate of 10% in place of 6.43% resulting into a trading addition of Rs. 7,45,247/-. The comparison of the AO should be in accordance with the similar trade of business. After considering the various facts and legal issues, the Ground No. 1 and Ground No. 2 of the assessee need a relook at the level of AO. Hence both the issues are restored back to the file of the AO to decide them afresh. The AO is directed to provide adequate opportunity of being heard to the assessee.
Thus Ground No. 1 and 2 of the assessee are allowed for Statistical purposes.
6 ITA No.713/JP/2017Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur 3.1 Apropos Ground No. 3 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:-
''7.3 I have gone through the assessment order, statement of facts, grounds of appeal, written submission, remand report and rejoinder carefully. It is seen from the various remand reports of the AO that the appellant in spite of having been given more than one opportunity failed to produce Smt.Anita Agarwal for examination. Though he himself stated that he would ensure the presence of Smt. Anita Agarwal before the AO, if any such instructions were issued by the CIT (Appeal) to the AO. The AO again and again gave the opportunity to the appellant to produce Smt. Anita Agarwal but on some pretexts or another, the appellant did not produce Smt. Anita Agarwal before the AO in spite of more than sufficient opportunity having been granted by the AO, therefore, the genuineness of the confirmatory letter of Smt. Anita Agarwal filed during the course of appellate proceedings cannot be accepted. The claim of the appellant that payment of Rs. 18,93,100/- were made to M/s. Anita Exports on 10-02-2017 is also not acceptable unless Smt. Anita Agarwal confirms before the AO that she had received the payment. Therefore, I am of the considered view that the AO has rightly made the addition of Rs. 18,93,100/- u/s 41(1) in respect of the liability appearing in the name of M/s. Anita Export. Accordingly, the addition of Rs. 18,93,100/- made by the AO is here by confirmed.'' 3.2 During the course of hearing, the ld.AR of the assessee prayed for deletion of addition of Rs. 18,93,100/-u/s 41(1) of the Act confirmed by the ld. CIT(A) for which the ld.AR of the assessee pleaded and filed the following written submission
1. The appellant has submitted following documents in support of above claim :-
(i) Confirmation of the said party acknowledging debt of Rs 1893100 (APB 40).
(ii) Proof of submission of confirmation to the ld. AO directly by the creditor vide letter dated 06/01/2017 (APB 39) 7 ITA No.713/JP/2017 Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur
2. The appellant has paid this balance amount to M/s. Anikta Exports through NEFT on 10/02/2017 and said fact has been confirmed by the said party through Affidavit dated 18/02/2017 (APB 36-37).
3. The bank statement of the appellant as well as that of above named party are enclosed at APB 33-35) evidencing movement of the said sum from the account of the assessee to the account of creditor
4. Therefore there must not be any doubt about pendency of said amount of Rs 18,93,100 as at 31.03.2012. Even the said creditor on her own had submitted a confirmation to the ld. AO during remand proceedings. This shows that she had fear in her mind to appear before ld. AO but with the documents she had confirmed the said outstanding. At no stage such foiled documents were ever doubted by the ld. AO or the ld. CIT (A) and both of them had concentrated only on the failure of the appellant to produce the creditor.
5. In a recent decision of the Hon`ble Karnataka HC in the case of PCIT (Central), Bangaluru v./s Ramgopal Minerals (246 Taxman 267) it has been held that mere non appearance of the creditor can not be taken to reach on the conclusion that liability had ceased to exist. The burden is on revenue to establish such cessation. Therefore in the present case also mere non appearance of the creditor alone may not be made the basis of addition u/s 41(1)
6. The Hon`ble Delhi High Court in the case of The Commissioner of Income Tax Delhi-II vs Jain Exports Pvt. Ltd (89 DTR
265) held that in such case "where the department wishes to tax certain liabilities appearing in the Balance Sheet u/s 41(1) on the logic that same are being shown as outstanding since last many years, such action is not correct.
The issue of genuineness of such credit entry can arise only in the year in which such liability was created. The department having accepted the balance outstanding over several years it was not open for the CIT (Appeals) to confirm the addition of the amount of 1,53,48,850/- on the ground that the assessee could not produce sufficient evidence to prove the genuineness of the transactions which were undertaken in the year 1984- 85."
7. The Hon1ble Punjab & Haryana High Court in the case of CIT v/s Sita Devi Juneja (325 ITR 593) held that "It is the conceded position that in the assessee's balance sheet, the impugned liabilities have been shown, which are payable to the sundry creditors. Such liabilities, shown in the balance sheet, indicate the acknowledgment of the debts payable by the assessee. Merely because such liability is outstanding for the last six years, it cannot be presumed that the said liabilities have ceased to exist. It is also 8 ITA No.713/JP/2017 Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur conceded position that there is no bilateral act of the assessee and the creditors, which indicates that the said liabilities have ceased to exist. In absence of any bilateral act, the said liabilities could not have been treated to have ceased. In view of these facts, the CIT(A) as well as the Tribunal have rightly come to the conclusion that the AO has wrongly invoked the Expln. 1 of s. 41(1) and made the addition on the basis of presumption, conjectures and surmises...."
It is therefore sincerely requested that the invocation of provisions of section 41(1) of the Income Tax Act, 1961 wherein the main thrust of the ld. AO as well as ld. CIT (A) has been about non appearance of the creditor, may please be deleted. The appellant also tried a lot to enforce the said creditor to appear before the ld. AO but she declined to appear. The appellant is not having powers to ensure appearance. Although he could not produce the creditor but with all these documents he could definitely prove that the liability was genuine and hence the addition made by the ld. AO may kindly be deleted. '' 3.3 During the course of hearing, the ld. DR supported the orders of the authorities below.
3.4 We have heard the rival contentions and perused the materials available on record. Brief facts of the case are that the assessee had purchased the goods from M/s. Anita Exports during the year 2009-10.
The same was exported to the other party in which quality of the goods was not found upto the mark. Therefore, the assessee ceased the payment of M/s. Anita Exports. Thus the amount was appearing in the books of the assessee as outstanding. The assessee could not produce the proprietor of M/s. Anita Exports before the AO for examination for which the AO made the addition of Rs. 18,93,100/- u/s 41(1) in the hands of the 9 ITA No.713/JP/2017 Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur assessee. In first appeal, the ld. CIT(A) has confirmed the action of the AO. As per records the purchases were made during the year 2009-10.
There is no evidence on record to establish the claim of the assessee that the quality of the goods were not upto the mark. Hence, payment was not made. There is no evidence on record which establishes that the assessee has not received the payment from person to whom exports of these goods were made. The assessee has also not produced Smt. Anita Agarwal, Prop. M/s. Anita Export before the AO, to establish the genuineness of this liability. The addition was made in the Assessment Year 2012-13. The assessment u/s 143(3) of the Act was made on 23-02-2015. Now the assessee claims that amount has been repaid back in the month of Feb. 2017. No evidence has been submitted as to how the matter got settled with regard to the quality of the goods which has been made the ground by the assessee for not making the payment. Thus the facts on record suggest that this payment is an afterthought of the assessee to establish the genuineness of claim. In view of these facts, we find no merit in such submission of the assessee. Hence, we concur with the findings of the ld. CIT(A) and dismiss the ground no. 3 of the assessee 10 ITA No.713/JP/2017 Shri Radhey Shyam Khandelwal vs ACIT, Circle - 4, Jaipur 4.0 In the result, the appeal of the assessee is partly allowed for Statistical purposes.
Order pronounced in the open Court on 25 -04-2018.
Sd/- Sd/- ¼ fot; iky jko ½ ¼HkkxpUn½ (Vijay Pal Rao) (Bhagchand) U;kf;d lnL; /Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 25 /04/ 2018 *Mishra
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Radhey Shyam Khandelwal, Jaipur
2. izR;FkhZ@ The Respondent- The ACIT,Circle - 4,Jaipur
3. vk;dj vk;qDr¼vihy½@ CIT(A).
4. vk;dj vk;qDr@ CIT,
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.713 /JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 11