Income Tax Appellate Tribunal - Jodhpur
Income Tax Officer vs Arun Kumar Gupta on 21 April, 2006
Equivalent citations: (2006)103TTJ(JODH)134
ORDER
Hari Om Maratha, J.M.
1. The appeal by the Revenue and the cross-objection by the assessee have been filed in relation to the order of the CIT(A), dt. 13th April, 2003 for asst. yr. 1998-99.
2. The assessee is doing business of manufacturing of cooling appliances and also doing fabrication work in iron and steel in the factory named as M/s Utsav Industries of which he is a sole proprietor. In addition to the above, the assessee also does the work of a contractor under MES for making the supply of machinery in the name and style of his proprietorship concern of M/s New Brato Engineering Works.
3. The first ground of appeal of the Revenue relates to deletion of a trading addition of Rs. 3,04,911.
4. The assessee has shown gross sales of Rs. 66,34,020 in M/s Utsav Industries as against sales of Rs. 45,05,501 shown in the immediately preceding year. The GP has declined to 21.80 per cent from 22.40 per cent in the previous year. The small decline in the rate of profit was attributed to the increase in sales. The AO did not find any material defect(s) in the maintenance of the books of account. But the assessee had not maintained stock register and the production records. The AO rejected the books of account of the assessee because there was a slight decline in GP rate and that the stock register was not maintained. After rejecting the books, the AO invoked provisions of Section 145(2) of the Act and estimated the sales at Rs. 70,00,000 and applied a GP rate of 25 per cent and made the impugned addition in the trading result shown by the assessee. The learned CIT(A), however struck down the very rejection of the books of account on the premise that the AO was not justified in invoking the provisions of Section 145(2) for non-maintenance of stock register and production register. But actually the assessee did maintain stock register as has been explained in the audit report. The Department has raised the plea against this deletion in second appeal.
5. We have heard the rival submissions and perused the evidence available on record.
6. After going through the assessment order, the order of learned CIT(A) and after considering the oral submissions of both the parties, we are of the considered opinion that the findings of the learned CIT(A) are perfectly as per law.
The AO has not pointed out any defect(s) in the books of account of the assessee. The assessee has in a way maintained stock register as clarified in the audit report. Even otherwise, in case the assessee did not maintain stock register and the production register, it would not give rise to a reason so as to reject the books of account of the assessee. The small decline in the GP rate stands well explained by the steep increase in the sales during this year. The AO has mentioned that, in the industrial unit manufacturing machinery items like the assessee, the GP rate is usually higher than the GP declared by the assessee but verily, he has not cared to quote any name of such a comparable unit. Therefore, his perception of higher GP rate is based on mere surmises and conjectures, The difference in GP is of 0-40 per cent only whereas the turnover has increased by around Rs. 21,00,000. The small decline in the GP rate stands explained, as there is high increase in the sales. Reliance can be placed on the decision of this Bench in the case of Ashok Kumar Agarwal v. ITO (2005) 98 TTJ (Jd) 663 and Siram Jhanwarlal v. ITO (2005) 98 TTJ (Jd) 639 and CIT v. Gotan Lime Khanij Udhyog . In such circumstances, we confirm the findings of the learned CIT(A) and dismiss the ground taken by the Revenue.
7. The second ground of appeal taken by the Revenue relates to an addition of Rs. 3,00,000 made on account of undisclosed investment in the marriage of Shri Kapil Gupta, the son of the assessee.
8. The marriage of Shri Kapil Gupta was solemnized on 14th Dec, 1997 and the marriage reception was organized in a Five Star Hotel named Umaid Palace, Jodhpur. When enquired, the assessee detailed the expenses made by him along with the sources thereof. The AO doubted certain withdrawals made by the assessee and others and made the impugned addition of Rs. 3,00,000 in the hands of this assessee.
9. In the first appeal, the learned CIT(A) deleted the impugned addition after calling for a remand report from the AO wherein the AO had accepted the source of expenditure to the tune of Rs. 1,00,000 given by Shri Rajesh Gupta, the father-in-law of the son of the assessee on the occasion of Tilak Ceremony. The learned CIT(A) also accepted the other explanation of the assessee and deleted the impugned addition of Rs. 3,00,000.
10. We have heard the rival submissions and perused the evidence available on record.
11. The AO had doubted the source of Rs. 1,00,000 which was stated to have been given by the father-in-law of the bridegroom. The AO in his remand report however accepted the source of this amount. The AO has also doubted the payment made to the goldsmith after the performance of the marriage on 29th Jan., 1998, which was considered by the learned AO as ridiculous because gold jewellery is always purchased before the marriage. But we agree with the learned Authorised Representative as well as the learned CIT(A) that the jewellery was purchased at the time of the marriage but the bills were settled after the marriage, There is nothing abnormal or ridiculous in such act of the assessee as normally the payments incurred in a function are settled after the function is over. The marriage was performed on 14th Dec, 1997 and payment was made on 29th Jan., 1998, which is not too remote a date, which can be considered as ridiculous. An amount of Rs. 25,000 was stated to have been contributed by the grandfather and grandmother of Mr. Kapil Gupta. Both of them have confirmed this fact. There is nothing as unusual with regard to this contribution as well. Insofar as seven gifts received at the time of marriage are concerned these are also of a usual phenomenon seen in the marriages in India. Therefore, in our considered opinion, the learned CIT(A) has correctly deleted the impugned additions and there is no error which can be corrected by us. This leads to disposal of the ground No. 2 of the Revenue's appeal.
12. In cross-objection the assessee has taken as many as six grounds of appeal, out of which ground Nos. 5 and 6 are only formal grounds, which do not require any adjudication.
13. Ground No. 1 of cross-objection relates to an addition of Rs. 30,457 made by the AO on account of interest receipts of income tax refund for various years.
14. The contention of the learned Authorised Representative is that the AO did not send any intimation to inform the assessee that no such interest refund was issued to him and the same was adjusted against outstanding demand. The learned Authorised Representative however, fairly conceded that these payments were shown as adjusted in the financial year under consideration. But he fought on the premise that the AO was bound to intimate to the assessee in view of the provisions of Section 245 of the IT Act with regard to such refund of income-tax before it can be stated to be relevant for a given assessment year. In the background of the above facts, it has been argued by the learned Authorised Representative that these amounts cannot be stated to have been received during the relevant year. The learned Authorised Representative has relied on the various decisions in this regard.
15. After considering the rival submissions, we are convinced that an amount has to be taxed in the year of receipt and in this case there is a confusion with regard to receipt of the impugned amounts during the relevant year. It was concurred by both the parties in the open Court that the issue needs to be restored to the file of the AO for looking into the abovementioned important aspects of this issue, instead of calling for the records of the case. We are also of the same opinion that in the interest of justice this issue be remanded back to the file of the AO with the direction to decide the same afresh after hearing the assessee and also to take into consideration the above observations with regard to receipts of the refund amount, etc,
16. The next ground of cross-objection has been raised in relation to disallowance of Rs. 91,216. This disallowance was stated to be excessive and unreasonable, being approximately 1/5th of the total claim.
17. We have heard the rival submissions and perused the evidence available on record.
18. After hearing both the sides, we feel that the disallowance in conveyance expenses account seems to be on higher side. The AO himself has restricted the disallowance on telephone, etc at 1/10th. In our opinion the ends of justice would meet in case we restrict this disallowance to 1/10th of the total claim, which comes to Rs. 9,121. The ground No. 2 of the cross-objection is thus partly allowed.
19. Ground No. 3 of cross-objection relates to the issue of subsequent enhancing of Rs. 59,603 which is stated to have been disallowed in the body of the order but was not added in the computation part of the assessment order. The AO thereafter rectified the order and the assessee filed independent appeal. The learned CIT(A) had heard both the appeals together but the learned CIT(A) did not decide this issue in so many words.
20. While hearing on this issue the spontaneous opinion formed by the Bench was that this issue does not arise out of the appellate order, nor it is a legal issue, taken for the first time, therefore, this ground of appeal has to be dismissed.
21. The next issue is contained in ground No. 4 of the cross-objection and relates to charging of interest under Section 234B of the Act.
22. The charging of interest under Section 234B as has been held to be mandatory and consequential. Therefore, only consequential relief is allowed to the assessee.
23. In the result, the appeal of the Revenue stands dismissed and cross-objection is partly allowed and partly allowed for statistical purposes.