Income Tax Appellate Tribunal - Jaipur
Murlidhar Agarwal, Jhunjhunu vs Income Tax Officer, Ward-2, Jhunjhunu on 13 December, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES (SMC), JAIPUR
Jh Hkkxpan] ys[kk lnL;] ds le{k
BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER
vk;dj vihy la-@ITA No. 745/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2011-12
Murlidhar Agarwal, cuke Income Tax Officer,
Prop.- M/s Radha Kishan & Vs. Ward-2,
Sons, Main Market, Singhana, Jhunjhunu.
Distt.- Jhunjhunu.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAPPA 4566 L
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Siddarth Mittal (CA).
jktLo dh vksj ls@ Revenue by : Smt. Poonam Roy (DCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 12/12/2017
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 13/12/2017
vkns'k@ ORDER
PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-3, Jaipur dated 03/08/2017 for the A.Y. 2011-12, wherein the assessee has raised following grounds of appeal:
"1. That on the facts, in the circumstances of the case and in view of the detailed written and oral submissions made and the evidence already available on AO's own record and further evidences adduced by the assesses the orders of the learned Lower Authorities are against the law and facts of the case.
2 ITA 745/JP/2017_ Murlidhar Agarwal Vs ITO
2. That the ld. AO grossly erred in making lump-sum trading addition in the amount of Rs.4,00,000/- on baseless assumptions and without there being any basis and cogent reason and the ld. CIT (Appeals)-3, Jaipur also erred in restricting the same to Rs.3,00,000/- without properly considering the facts and circumstances of the case.
3. That the ld AO also erred in rejecting the books of account of assesses u/s 145(3) on the basis of wrong observations and without any cogent reason while brushing aside the assessee's objections and explanations and the ld CIT (Appeals)-3, Jaipur also erred in confirming the same without considering and appreciating the facts of the case.
4. That the ld. AO grossly erred in making ad hoc disallowance of Rs. 6,932/- i.e. 20% of total- Shop Expenses of Rs.34,659/- without there being any basis and without appreciating the facts of the case and the ld. CIT (Appeals)-3 Jaipur also erred in confirming the same without considering the submissions made by assessee.
5. That the ld. AO erred in disallowing telephone expenses in the amount of Rs. 8,131/- i.e. 20% of total Telephone Expenses of Rs.28,556/- merely on probability of personal use and without considering the facts of the case and the ld. CIT (Appeals)-3, Jaipur also erred in confirming the same without considering the submissions made by assesses.
6. That the ld. AO grossly erred in making addition of Rs.45,275/- on account of low household withdrawals by allegedly estimating household expenses at Rs. 10,000/- per month i.e. Rs. 1,20,000/- for the year without there being any basis and without considering assessee's contention and the ld. CIT(A)-3 Jaipur also erred in confirming the same.
7. That the ld. AO also erred in making addition on account of Interest not charged in the amount of Rs.15,600/- on the basis of wrong observations & facts the ld. CIT (Appeals)-3, Jaipur also erred in confirming the same without considering the facts of the case."
3 ITA 745/JP/2017_ Murlidhar Agarwal Vs ITO
2. The assessee was engaged in the business of trading of grains etc. on wholesale basis in the name and style of M/s Radha Kishan & Sons, Singhana. The return declaring total income of Rs. 8,08,860/- was filed by the assessee on 28/09/2011. The Assessing Officer completed the assessment U/s 143(3) of the Income Tax Act, 1961 (in short the Act) after making various additions at total income of Rs. 13,13,110/-. The ld CIT(A) has given part relief to the assessee.
3. Now the assessee is in appeal before the ITAT. The ground No. 1 of the appeal is general in nature and does not require any adjudication. Hence, the same stands dismissed.
4. In the grounds No. 2 and 3 of the appeal, the issue involved is sustaining the addition of Rs. 3,00,000/- made by invoking the provisions of Section 145(3) of the Act. The ld. CIT(A) has decided the issue by holding as under:
I have considered the observation made by the AO in the assessment order as well as submission filed by the A/R of the appellant. I find that the appellant not maintained quality-wise details of commodities traded. The valuation of closing stock is also not correct in absence of the detail of quality- wise commodities traded. The A/R of the appellant argued in his submission did not touch this issue. He submitted general and routine submissions. Therefore the action of the Assessing Officer for application of provision u/s 145(3) is justified and as per law.
4 ITA 745/JP/2017_ Murlidhar Agarwal Vs ITO Next issue regarding the estimation of Gross Profit and making the addition on account of low Gross Profit rate. The A/R of the appellant argued that no basis of estimation and even no comparable case cited by the AO. There is force in the argument of the A/R of the appellant that the AO made the addition of Rs. 4,00,000/- without any basis and without comparable case. The A/R of the appellant taken the argument that his sales increase from Rs. 10,85,40,520/- to Rs. 13,90,50,027/- in this year compare to the last year. The Gross Profit decreased due to the increase of sales and competition in the market. There is force in the submission of the A/R of the appellant that AO made addition without any comparable case and without any evidences. The sales of the appellant increase about 30%.
Therefore the considering the above facts and increase of sales. I restrict the Gross Profit addition of Rs. 3,00,000/- and balance amount of Rs. 1,00,000/- is deleted. These grounds are partly allowed."
5. While pleading on behalf of the assessee, the ld AR has relied on the pleadings made before the lower authorities and submitted that the lower authorities were not justified in rejecting the books of account and invoking the provisions of Section 145(3) of the Act and also estimating the income.
6. On the other hand, the ld DR has relied on the orders of the authorities below.
7. Bench have heard both the sides on this issue. This is a fact that the assessee was not maintaining quality wise details of the commodities traded, therefore, it shall not be possible to verify the correctness of the 5 ITA 745/JP/2017_ Murlidhar Agarwal Vs ITO valuation of the closing stock. Therefore, the Bench is of the view that the books of account were rightly rejected by invoking the provisions of Section 145(3) of the Act. Further the Assessing Officer made the addition of Rs. 4.00 lacs and the ld. CIT(A) restricted it to Rs. 3.00 lacs. After considering both the sides and various other aspects of the case including the increase in the sales turnover from 10.85 crores to 13.90 crores, the estimated addition of G.P. at Rs. 3.00 lacs is in higher side, therefore, the addition on this count restricted at Rs. 2.00 lacs. Accordingly, ground No. 2 is partly allowed and ground No. 3 is dismissed.
8. In the grounds No. 4 to 7 the issues involved are sustaining the disallowances out of shops expenses, telephone expenses, low household withdrawals and interest not charged respectively. The ld. CIT(A) has dealt these issues by holding as under:
(i) I have carefully considered the material before me. I find that all shop expenses are not fully vouched. Therefore I confirm the addition made by the AO of Rs. 6,932/- out of shop expenses.
Regarding the telephone expenses the AO in his order made detailed finding that the use of telephone for personal purpose. The appellant did not file any submission which established that the telephone was not use for non business purpose. Therefore I am agree with the views of the AO treating 20% of telephone expenses as non business purpose. Hence, I confirm the addition made by the AO of Rs. 8,131/- out of telephone expenses. These grounds are not allowed.
6 ITA 745/JP/2017_ Murlidhar Agarwal Vs ITO
(ii) I have carefully considered the material before me. I find that the AO estimated house hold expenses Rs. 10,000/- per month. In view of the present rising price, mobile phone, satellite T.V., Motor Car and keeping in view the status of assessee and the community to which he belongs. The A/R of the appellant not filed any details and supporting evidences which prove that his withdrawals are sufficient for his house hold expenses. Therefore I am the view that AO rightly estimated house hold expenses Rs. 10,000/- per month. Hence, I confirm the addition made by the AO of Rs. 45,275/-. This ground is not allowed.
(iii) I have carefully considered the material before me. I find that appellant made interest free advances of Rs. 1,30,000/- to his relatives and he paid the interest to borrowed funds . The AO disallowed interest @ 12% to expenses of 15,600/-. The A/R of the appellant argued that he made advance out of his own capital of Rs. 25,93,477/-. This argument of the appellant is without any basis and he failed to establish the nexus that he used to his own capital for advancing for interest free loans. Therefore I am agree that AO rightly disallowances Rs. 15,600/- out of interest paid. Hence, I confirm the addition made by the AO of Rs. 15,600/-. This ground is not allowed."
9. Now the assessee is in appeal before the ITAT. The ld AR of the assessee has reiterated the submissions as made before the lower authorities and prayed to delete the additions.
10. On the other hand, the ld DR has relied on the orders of the authorities below.
11. The Bench have heard both the sides on these issues. Since, the addition on account of gross profit has been sustained, therefore, in view 7 ITA 745/JP/2017_ Murlidhar Agarwal Vs ITO of the various decisions of the Hon'ble Jurisdictional High Court on this issue that no specific additions out of various expenses debited in the P&L account can be sustained. In view of the factual and legal position, the same are directed to be deleted.
12. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 13/12/2017.
Sd/-
¼Hkkxpan½ (BHAGCHAND) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 13th December, 2017 *Ranjan vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Murlidhar Agarwal, Jhunjhunu.
2. izR;FkhZ@ The Respondent- The ITO, Ward-2, Jhunjhunu.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 745/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar