Income Tax Appellate Tribunal - Jaipur
Shri Naresh Kumar, Jaipur vs Income Tax Officer, Jaipur on 10 September, 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 VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA. No. 389/JP/2018
fu/kZkj.k o"kZ@Assessment Year : 2013-14
Shri Naresh Kumar cuke The ITO,
Mangal Arpan Villa No. 6, Vs. Ward-7(2),
Iskon Temple, Rampura Road, Jaipur.
Jaipur (Raj).
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: BAFPK 3864 C
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj l@
s Assessee by : Shri Mukesh Khandelwal (C.A.)
jktLo dh vksj ls@ Revenue by : Shri. J.C. Kulhari (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 06/09/2018
mn?kks"k.kk dh rkjh[k@Date of Pronouncement :10/09/2018
vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-3, Jaipur dated 23.02.2018 for the Assessment Year 2013-14 wherein the assessee has taken the following grounds of appeal:
"1. That under the facts and circumstances of the case, the ld CIT(A) has erred seriously on facts in sustaining the action of the ld. AO in taking the turnover of the appellant as per form 26AS in 2 ITA No. 389/JP/2018 Shri Naresh Kumar vs. ITO place of that recorded in account statement issued by the supplier.
2. That under the facts and circumstances of the case, the ld CIT(A) has erred on facts in sustaining the action of the ld. AO in estimating the profit of Rs. 95,174/- (as against Rs. 1,05,671/- estimated by the ld. AO) alleged to have been earned on variation in turnover as per Form 26AS and that declared in return.
3. That under the facts and circumstances of the case, the ld CIT(A) has erred in applying NP rate of 13.51% (as against NP rate of 15% applied by ld. AO) for estimating the income of the appellant by ignoring the facts produced before him."
2. In respect of Grounds Nos. 1 and 2, briefly the facts of the case are that during the year under consideration the assessee had declared purchases of Rs. 2,27,36,544.55 and sale of Rs. 2,59,70,333/- and on such sales, he has disclosed GP of Rs. 32,15,638.45 (i.e. 12.38%). The AO observed that in Form 26AS, the supplier of liquor has collected tax at source on purchases of Rs. 2,34,41,016/- as against which the appellant has declared purchases of Rs. 2,27,36,544 only and hence, he has alleged suppression in purchases of Rs. 7,04,472/- and he has considered that the appellant has not declared such purchases and had sold goods in unaccounted way and on such purchases, he has applied a Profit rate of 15% and has made addition of Rs. 1,05,671/- thereon. The AO has also alleged that another defect in the books is that no sale bills are issued and hence sales quantum is unverifiable and he has rejected books of 3 ITA No. 389/JP/2018 Shri Naresh Kumar vs. ITO account u/s 145(3) and has estimated GP rate of the appellant @ 15% and accordingly has made addition of 2.62% on declared sales of Rs. 2,59,70,333/- resulting into an addition of Rs. 6,79,912/-.
3. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who has given partial relief to the assessee and the relevant findings are contained at para 5.3 which is reproduced as under:-
"5.3 I have carefully considered the material before me. I find that the total purchase as per 26AS are 2,33,86,546/- which is independent source of the purchases, this fact is also accepted by the A/R of the appellant in his submission and the A/R of the appellant failed to reconcile the figure with the purchase shown in the books of account. The A/R of the appellant submitted that M/s RSBCL has filed some incorrect figure in its return of TCS. This argument is not believable. This is the duty of the appellant to correct the 26AS and take the correct figure if there is mismatch but appellant failed to provide it. Therefore I am the opinion that the appellant not shown the Gross Profit on the purchases of Rs. 7,04,472/-. The Gross Profit rate in the ground No. 2 taken by me @ 13.51%. Thus the undisclosed Gross Profit comes to Rs. 95,174/-, Hence I confirm the addition of Rs. 95,174/- and balance amount of Rs. 10,497/- is deleted. This ground is partly allowed."
4. During the course of hearing, the ld. AR has submitted that for framing the assessment, the AO accepted the turnover as per 4 ITA No. 389/JP/2018 Shri Naresh Kumar vs. ITO entries of TCS appearing in Form 26AS only. He forgot to take into consideration that the entries in Form 26AS are incorporated as per the details provided by the deductor of the tax or collector of the tax. In this case, M/s. Rajasthan State Beverages Corp. Ltd. (a Govt. of Rajasthan Enterprise) had collected tax @ 1% u/s 206C of the Income tax Act, 1961. The responsibility to file periodical returns of such TCS was also on said collector and hence the appellant did not have any control over such returns. The said corporation provided wrong details in form 26AS which is verifiable from the following :-
A. In the assessment order, the AO has mentioned about declaring total purchases of Rs. 2,34,41,016/- which seems to be the figure appearing at the time of assessment proceedings whereas as per Form 26AS downloaded on 04.05.2018, the said figure is coming to the tune of Rs. 2,33,86,546/- meaning thereby that during this intervening period, some wrong inputs were rectified by the said corporation.
B. As per the statement of purchases provided by the above named Corporation in the sales column total amount of sales to the appellant during the year is coming to the tune of Rs. 2,29,70,411/- which is summation of amount of sales and 1% TCS. If we gross up the figure, the sales figure comes to Rs. 2,27,42,982/- which is very close to declared purchases of Rs. 2,27,36,544/-.5 ITA No. 389/JP/2018
Shri Naresh Kumar vs. ITO Therefore, the allegation of suppression in purchase is wrong and unjustified and deserves to be quashed.
5. The ld. DR is heard who has relied on the findings of the lower authorities.
6. We have heard the rival contentions and perused the material available on record. We find that there are variations in the purchase as shown by the assessee and as reported in Form 26AS and the statement of the supplier so furnished by the assessee. Given that there is no finding of the ld CIT(A) regarding the amended Form 26AS and statement of the supplier so submitted by the assessee, we hereby set-aside the matter to the file of the ld CIT(A) who shall examine the same after calling the report from the AO and the supplier regarding exact quantum of purchases so made by the assessee during the financial year relevant to impunged assessment year. In the result, the ground is allowed for statistical purposes.
7. Regarding Ground No. 3, the ld. AR has submitted that the Id. CIT (A) has applied a GP rate of 13.51% for determining income of the appellant as against a rate of 15% applied by the AO. It was submitted that immediately preceding year was the first year of business of the appellant wherein he had declared a sales of Rs. 1,74,83,759/- on which GP rate declared was @ 14.63% whereas during the year under consideration, the appellant has declared a turnover of Rs. 2,59,70,333/- yielding a growth of 48.54% over last year and 6 ITA No. 389/JP/2018 Shri Naresh Kumar vs. ITO on such turnover, he has declared a GP rate of 12.38% which is absolutely justified considering:-
A. After 1997, the state government has started awarding contracts for liquor shop wise and not district wise. In earlier set up the district liquor contractor used to enjoy the benefit of monopoly whereas in shop wise contractors there are large number of liquor contractors in a district who meet with the tough competition and in such perfect competition set up the GOP margin is bound to be low and is shrinking year by year.
B. As per current policy of the government, the contractors are bound to purchase liquor only from government companies/corporations wherein the contractor do not have any right to make bargains whereas in earlier set up due to freedom of buying liquor from any private company or elsewhere the contractor used to enjoy benefits of availing various promotion schemes. Therefore the GP rate is bound to come down.
C. Even in a small area due to large number of shops the customer gets the benefit of choosing that shop wherefrom he can buy liquor at cheaper price due to which the contractor is bound to sell the goods at lesser than MRP written on the product.
It is therefore, humbly requested that the declared GP rate of 12.38% is absolutely justified and may kindly be accepted and the 7 ITA No. 389/JP/2018 Shri Naresh Kumar vs. ITO addition of Rs. 6,72,912/- (reduced by the ld. CIT( A) to Rs.
3,12,954/-) may please be deleted.
8. In this regard, the relevant findings of the ld CIT(A) are contained at para 6.3 which is reproduced as under:-
"6.3 I have carefully considered the material before me. I find that Assessing Officer rejected the books of accounts on the basis of that the purchases are not properly shown and all the sales are not unvariable, the expenses are not properly vouched. The A/R of the appellant failed to file any submission which established that the sales and expenses are properly shown and purchases are not suppressed.
Therefore I am the view that the result shown by the appellant in the books of accounts are not correct and true. Hence I upheld the action of the Assessing Officer to reject the books of accounts by applying the provision u/s 145(3) of the I.T. Act.
The next issue is the estimation of the Gross Profit rates. The Assessing Officer estimation the Gross Profit rate @ 15% without any basis. The A/R of the appellant submitted that only violation u/s 145(3) does not necessarily result into some trading addition as held by the Rajasthan High Court and he also relied upon the case law of Honourable Supreme Court in the case of Malani Ramjivan Jagannath v/s ACIT (316 ITR 120 and CIT V/s Gotan Lime Khanij Udhyog (256 ITR 243) but these case laws are not applicable in this case because in 8 ITA No. 389/JP/2018 Shri Naresh Kumar vs. ITO this case the purchases are not shown properly sales and expenses are not fully verifiable .
Further the A/R submitted that the Gross Profit of last year is 14.63% and Gross Profit in present year is 12.38%. The average of the Gross Profit of two year comes 13.51%. The Honourable Rajasthan High Court held in various cases that past history is the best method for estimation of Gross Profit.
Therefore following the guidelines issued by the Honourable Rajasthan High Court I adopt the Gross Profit rate @ 13.51%. Thus the Gross Profit comes Rs. 35,28,592/-. The appellant shown Gross Profit Rs. 32,15,638/-. Thus the addition comes of Rs. 3,12,954/- . Accordingly I confirm the addition of Rs. 3,12,954/- and balance amount of Rs. 3,66,958/- is deleted. This ground is partly allowed."
9. The ld. DR is heard who has relied on the findings of the lower authorities.
10. We have heard the rival contentions and perused the material available on record. The limited issue under consideration relates to estimation of gross profit rate on the declared turnover of the assessee. The assessee is engaged in the business of liquor business where both purchases and the sales and the prices thereof are regulated by the Government. Given the nature of business and the same liquor contract running over the last year and the year under consideration, we donot find the hypothesis of increase in turnover of the assessee over the past 9 ITA No. 389/JP/2018 Shri Naresh Kumar vs. ITO year which has resulted in reduced gross profit during the year acceptable. The assessee has declared G.P of 12.38% which has been increased by the AO at 15% and subsequently reduced to 13.51% by the ld CIT(A). Given that in the earlier year, the assessee himself has declared a G.P rate of 14.63%, we find that the ld CIT(A) has been reasonable in estimating the current year G.P rate at 13.51%. In the result, the ground taken by the assessee is hereby dismissed.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 10/09/2018.
Sd/- Sd/-
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(Vijay Pal Rao) (Vikram Singh Yadav)
U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur
fnukad@Dated:-10/09/2018.
*Santosh
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Naresh Kumar, Jaipur.
2. izR;FkhZ@ The Respondent- ITO, Ward- 7(2), Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File { ITA No. 389/JP/2018} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar