What did the Tribunal hold?

The Tribunal found that the loss in the handicraft business was genuine due to insect biting, which was evidenced by samples shown to the AO. Since the AO accepted the closing stock and sales figures, the Tribunal directed the deletion of the addition made on account of the GP rate.

The assessee, engaged in handicraft manufacturing and trading, appealed against additions made by the Assessing Officer (AO) and upheld by the CIT(A). The AO had made an addition of Rs. 8,12,343/- by applying a higher GP rate to the handicraft business due to a lower declared GP rate compared to the previous year.

What were the issues?

Whether the AO was justified in applying a higher GP rate to the handicraft business by rejecting the assessee's claim for loss due to insect biting.

Rajesh Vishnoi vs ACIT | ITAT Jodhpur 2020

Income Tax Appellate Tribunal, JODHPUR BENCH (SMC

Before: SHRI R.C.SHARMA

For Appellant: Shri Rajendra Jain, FCA

For Respondent: Shri Abhimanyu Singh Yadav

Hearing: 16/03/2020

PER R.C. SHARMA, A.M.

This is the appeal filed by the assessee against the

order of Ld. CIT(A)-1, Jodhpur dated 27/08/2018 for the

assessment year 2011-12, in the matter of order passed U/s

143(3) of the Income Tax Act, 1961 (in short, the Act).

In this appeal the assessee is aggrieved for trading of

addition of Rs. 5,80,245/- upheld by the Ld. CIT(A) out of

total addition of Rs. 8,12,343/- made by the Assessing

Officer.

2 ITA 512/Jodh/2018 Rajesh Vishnoi Vs ACIT

The assesee is also aggrieved for upholding

disallowance of Rs. 38,103/-out of total disallowance of Rs.

50,804/- made by the Assessing Officer on account of

telephone, conveyance and depreciation on car expenses etc.

I have considered the rival contentions and carefully gone through

the orders of the authorities below. Facts in brief are that the assessee

is engaged in manufactory of handicraft items, trading of wood, SS Flat

etc. For the year under consideration the assessee e-filed the return of

income for A.Y. 2011-12 on 29.09.2011 declaring total income at Rs.

24,48,743/-. Further, the appellant filed revised return on 21.11.2012

declaring total income of Rs. 20,59,719/-. The case was selected for

scrutiny under CASS and notice u/s 143(2) of the Act was issued on

07.09.2013. Appellant is engaged in the manufacturing of handicraft

items, trading of wood, SS flat etc. also, operates bus through his

proprietary concerns namely M/s Shisham Udyog and M/s Saraswati

Udyog. He is also in receipt of salary, short term capital gain and

interest. After hearing the assessee, the Assessing Officer completed the

assessment u/s 143(3) of the Act on 04.02.2014 determining the total

income at Rs. 29,22,865/- making various additions/disallowances. The

Assessing Officer noticed that the GP rate of 1.06% declared in the year

under consideration in respect of handicraft business was lower as

compared to GP rate of 7.21% declared in the immediate preceding

3 ITA 512/Jodh/2018 Rajesh Vishnoi Vs ACIT

year. The A.O. applied G.P. rate of 7% and made addition of Rs.

8,12,343/- in respect of handicraft business. By the impugned order, the

ld. CIT(A) has upheld the addition of Rs. 5,80,245/- against which the

assessee is in further appeal before the ITAT.

From the record I found that the loss was genuinely caused in

wooden Handicrafts business because of insect biting which cannot be

thrusted on supplier of the woods because insect biting occurs at the

premises of the assessee himself after receipt of the woods. I found that

the A.O. has rejected assessee’s claim for loss due to insect biting on

the plea that the assessee dealing in Sesame wood which is a very hard

wood and cannot be eaten away by the insects. To controvert this

observation of the A.O., the assessee has produced samples of Sesame

wood during the assessment proceedings and showed that insect biting

is also affected on Sesame wood. I also found that the A.O. has

accepted the figure of closing stock and there was no suppression of

any sales, accordingly, I do not find any justification for applying the

G.P. rate of 7% by rejecting claim of loss of handicraft/wood division.

Accordingly, I direct the A.O. to delete the addition so made by the A.O.

and upheld by the ld. CIT(A).

The A.O. also made lumpsum disallowance of various expenses

and depreciation amounting to Rs. 50,804/-. By the impugned order, the

4 ITA 512/Jodh/2018 Rajesh Vishnoi Vs ACIT

ld. CIT(A) has restricted the addition to the extent of Rs. 38,103/-.

These disallowances are with regard to conveyance expenses, telephone

expenses and depreciation on car. I have considered rival contentions

and found that assessee had furnished full details of expenses so

incurred before the AO. I also found that the genuineness of the

expenses so claimed was not doubted by the A.O.. Furthermore, the

total expenses claimed of Rs. 3,04,825/- in relevant AY is lower than

total expenses claimed of Rs. 3,56,428/- in AY 2020-11 despite increase

in volume of the business, the total expense had been reduced. Keeping

in view the totality of facts and circumstances of the case, I restrict the

disallowance to the extent of Rs. 5,000/-.

In the result, appeal of the assessee is allowed in part.

Order pronounced in the open court on 20th March, 2020.

Sd/- [R.C. SHARMA] Accountant Member Dated : 20/03/2020 *Ranjan Copy to : 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR 6. Guard File (ITA No. 512/Jodh/2018) Assistant Registrar Jodhpur Bench

RAJESH VISHNOI,JODHPUR vs. ACIT, CIRCLE-1, JODHPUR

What did the Tribunal hold?

What were the facts?

What were the issues?

Which sections of the Income-tax Act were involved?

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