CHANDUMAL THAWARI,BETUL vs. JCIT RANGE-2, BHOPAL

आदेश / O R D E R

This appeal by the assessee is directed against order of the Commissioner of Income Tax Appeals [CIT(A)]-1, Bhopal dated 30.04.2019 pertaining to the assessment year 2010-11. The assessee has raised following grounds of appeal:

Chandumal Tharwani ITA. No.837/Ind/2019

“1. That on the facts & in the circumstances of the case and in law, and having regard to the explanation furnished, it be kindly held that the findings of the learned lower authorities that there is an under valuation of closing stock by Rs. 140643 are wholly wrong and unjustified and, therefore, such findings be quashed and the addition of Rs. 140643 be kindly deleted. That on the facts & in the circumstances of the case and in law, (2) and having regard to the explanation furnished, it be kindly held that the findings of the learned lower authorities that the assessee had sold sarky khali of Rs. 75894 without having any stock on that day are wholly wrong and unjustified and, therefore, such findings be quashed and the addition of Rs. 75894 be kindly deleted. That on the facts & in the circumstances of the case and in law, (3) and having regard to the explanation furnished, it be kindly held that the assessee had genuinely incurred transit business loss in soyabeen account at Rs. 102825. The findings of the learned lower authorities for not accepting such genuine loss are wholly wrong, unlawful and unjustified and, therefore, such findings be quashed and the loss claimed at Rs.102825 be kindly accepted. (4) That on the facts & in the circumstances of the case and in law, and having regard to the explanation furnished before the learned lower authorities, the learned CIT(A) is not justified in sustaining the addition of Rs. 644750 for the alleged lower gross profit. The assessee submits that the said unjustified addition be kindly deleted That on the facts & in the circumstances of the case and in Jaw, (5) the findings of the learned CIT(A) in para 2 at page 22 of the order that "once the assessee has raised an alternative ground/submission it means that the assessee has accepted the addition of gross profit of Rs. 644750", are wholly wrong, unlawful and unjustified. Such findings be kindly quashed. That on the facts & in the circumstances of the case and in law, (6) that tile alternate contention raised in the appeal did not mean that the assessee is not objecting the merits of the following additions. The findings & the decision of the learned CIT(A) in para 2 of the order are, therefore, wholly wrong, unlawful and injudicious and be kindly quashed.

(7) That on the facts & in the circumstances of the case and in law, the learned CIT(A) erred in law and not justified in not adjudicating independently the additions made in assessment of (i) Rs. 140643 for the alleged under valuation of closing stock, (ii) Rs. 75894 for sale of sarky khali without having stock and (iii) Rs. 102825 for the transit loss in soyabeen account. The assessee submits that all such additions be kindly adjudicated independently having regard to the explanation furnished, duly supported by documentary evidences, and it be held that the 2

Chandumal Tharwani ITA. No.837/Ind/2019

aforesaid additions are wholly unjustified and unlawful. 8) That on the facts & in the circumstances of the case and in law, the learned lower authorities erred in law in estimating the household expenditure of the assessee at Rs. 619000 purely on assumptions and presumptions and without any positive material or evidence on record and without satisfying the judicial requirements of section 69C. Such arbitrary estimates of the learned lower authorities be held as unlawful and unjustified and, therefore, the same be kindly quashed. (9) That on the facts & in the circumstances of the case and in law, the levy' of interest u/s. 234A, 234B & 234C are unlawful and hence be cancelled.

the assessee who is an individual trading in soyabean oil was

picked up for scrutiny assessment. Notice u/s 143(2) of the Income

Tax Act 1961(herein after referred as the Act) was issued on

23.09.2011. In response to the notice, Authorized Representative of

the assessee filed written submissions and documents. The

assessing officer while framing the assessment noticed that the

assessee had claimed closing stock of Soyabean Oil at

Rs.70,40,299/- for quantity of 1577.73 quintal at an average rate

of Rs.4462.29 per quintal. The assessee furnished the relevant

details thereof. On verification of details, assessing officer observed

that the assessee deals in Soyabean Oil that includes loose

Soyabean Oil and packed Soyabean Oil with brand name “Kriti”

from Kriti Industries India Ltd. Devas. However, no such separate 3

Chandumal Tharwani ITA. No.837/Ind/2019

details of Soyabean Oil were mentioned in the sales bills. The

assessing officer was of the view that the assessee had understated

the closing stock of Soyabean Oil by Rs.1,40,643/-, therefore, he

made addition. In this regard, further, assessing officer observed

that the assessee made sales of “Sarki Khalli” without having stock

in hand. Hence, he made an addition of Rs.75,894/-. Further, the

assessing officer made addition of Rs.1,20,825/- by observing that

in the quantitative details of Soyabean Oil account, the assessee

has claimed loss of Rs.26.85 quintals. He was asked to justify the

loss, however no submission for explanation was offered, hence,

the assessing officer made addition of Rs.75,894/-. The assessing

officer observed that in the consolidated trading account, the

assessee had claimed gross profit of Rs.61,71,500/- against total

sales of Rs.33,17,16,268/- which comes to nominal 1.86%. The

assessing officer was of the view that there were various

discrepancies in the books of accounts maintained by the assessee.

The valuation of closing stock has not been made properly.

Quantity losses were claimed without any specific details

supported by documentary evidences. Goods were sold without

corresponding stock of material in hand. It was further seen that 4

Chandumal Tharwani ITA. No.837/Ind/2019

the assessee has maintained general quantity record of various

items dealt by him. However, no quality wise details thereof were

maintained. For example, the commodity “sugar” is available in

three varieties viz best, medium and lower quality, having different

purchase/sale price. However, quantitative record of only “sugar”

has been maintained and bifurcation thereof in different variety

was not available. Hence, the assessing officer invoked the

provision of section 145 and rejected the book results and

proceeded to estimate profit. The assessing officer adopted the

average of gross profit of earlier two financial years and made

addition of Rs.6,44,750/-. Further, the assessing officer made

addition on account of low withdrawal for household expenses

amounting to Rs.6,19,000/- but did not made separate additions

as addition was already made for estimated Gross Profit. The

assessing officer further made ad hoc disallowance in respect of

shop expenses of Rs.6,707/-, petrol expenses of Rs.5,889/-, out of

telephone expenses of Rs.4,868/-, out of travelling expenses of

Rs.991/-, vehicle expenses of Rs.468/- and disallowance out of

depreciation on car of Rs.4,619/-. Hence, assessed the total

Chandumal Tharwani ITA. No.837/Ind/2019

income at Rs.29,16,264/- against returned income of

Rs.19,10,610/-.

the ld. CIT(A) who after considering the submissions partly allowed

the appeal.

various grounds of appeal.

not justified in rejecting the book results as the discrepancy

noticed by the Ld. A.O was not correct as the assessee had given

necessary explanation and evidence to prove that no such

discrepancy existed. Books of accounts were also not required to be

rejected. As regards the household expenses it was contended that

sufficient drawings were shown by the assessee and his family

members. The submissions made by the assessee reads as

follows:-

2.Ground no.1- Undervaluation of closing stock of soya bean oil Rs. 1,40,643/-

Chandumal Tharwani ITA. No.837/Ind/2019 a.AO page 2 para 4.2 - no difference in quantity as per AO and as per assessee, tax audit report PB 23 b.Rate per quintal (assessee) - average rate PB 70 c.Basis on which rate per quintal has been arrived at by Ld. AO is best known to him d.Uniform rate applied for entire purchases

3.Notice issued u/s 142(1) dated 12.03.2013 and fixed for hearing on 31.03.2013.

Another notice was also issued on the same date fixing the date of hearing on 21.03.2013. [PB 73]

4.Assessment order passed on 26.03.2013 i.e. before the date of hearing. The order was passed without considering the submission of assessee which was filed in dak on 31.03.2013. 5.Ground no.2 - sale of sarki khalli without having any stock

a.Posting error in the tally software b.Incorrect posting Entry of stock and invoice on 27.02.2010 PB 40 c.Stock delivered before the date of invoice d.Copy of bilty dated 17.02.2010 PB 42 e.Copy of invoice dated 27.02.2010 PB 41 f.Stock details with correct posting PB 39

6.Ground no. 3 - Quantity loss of soya bean oil

a. Loss of stock of soya bean oil reported in the tax audit report PB 23

b.Ld. AO page 4 para 6.1 – “why the said loss should not be treated as unexplained sales .....”

Chandumal Tharwani ITA. No.837/Ind/2019 c.Loss duly supported with documents FIRs [PB 44-44A] d.Loss treated as income - deemed e.Quantitative details as per table of AO on page 2 para 4.2 - after considering the loss f. No document on record from Ld. AO to establish that assessee has sold this stock

8.Remand report called-

a.In the remand report, Ld. AO has not given any finding on the documents submitted but has merely stated about applicability of rule 46A. [PB 66-67] b.Incorrect fact - hearing fixed on 21.03.2013 - correct fact - hearing fixed on 31.03.2013 [PB 73]

9.Rejoinder submitted - Assessee covered by rule 46A.

a.Prevented by sufficient cause from producing evidence which he was called to produce by the Ld. AO [Rule 46A(1)(b)] b.Ld.AO has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal [Rule 46A(1)(d)]

10.Ground no. 4 and 5- Gross profit of Rs. 6,44,750 sustained

a.No specific/categorical finding that the books of accounts are rejected. It is merely an observation by Ld.AO - AO page 5 para 7.2 b.Higher the turnover, lesser is the profit margin AO page 5 para 7.3

Chandumal Tharwani ITA. No.837/Ind/2019

Particulars AY 2008-09 AY 2009-10 AY 2010-11 Turnover 29,50,75,793 28,57,20,667 33,17,16,268

c.Quality wise details not maintained - no requirement under law - AD page 4 para 7.1 d.Ground 5 - assessee has never accepted that addition by applying the provisions of section 145 be sustained - incorrect fact in CIT(A) order page 22 .para 2(i)

e. Books of accounts are audited and no adverse comment by the auditor

l1.Ground no. 6 -inter linked with 1 to 3 - assessing is objecting the merits of additions made on account of under valuation of closing stock of soya bean oil, sale without stock in hand and quantity loss of soya bean oil.

12.Ground no. 7 - CIT(A) after considering the documents under rule 46A sustained

13.Ground no. 8 - household expenses

a.Assessee is aged about 73 years, betul is a small place b.Common mess and kitchen, joint family setup c.Married sons - income tax assessee, ITR on record d.Expenses of grandchildren incurred by their respective parents e.Expenses related only to assessee and his wife should be considered, ITR of wife also placed on record f.Burden of expenses of entire family cannot be shifted to one person. Family members have their income duly returned and meet their responsibilities.

Chandumal Tharwani ITA. No.837/Ind/2019

argued supporting the order of both the lower authorities.

placed before us. Effectively the assessee had raised 8 grounds of

appeals. Ground No.1, 2 & 3 are with regard to the addition made

for the discrepancies found in the books of accounts noticed by

the Ld. A.O. Ground No.4,5,6 & 7 are with regard to rejection of

book results and estimation of Gross Profit by the Ld. A.O. Ground

No.8 relates to the addition for household expenditure but the

same was not separately added since the telescoping benefit was

given against the addition for Gross Profit.

raised by the assessee concluded that since the addition for Gross

Profit has already been made by the Ld. A.O by rejecting the book

results and making addition of Rs.6,44,750/- Ld. A.O was not

justified to have made separate additions for the discrepancies

noticed in the books of accounts.

closing stock of soyabean oil at Rs,1,40,643/- we fail to find any 10

Chandumal Tharwani ITA. No.837/Ind/2019

merit in the finding of Ld. A.O since there was no difference in the

quantity as noted by the Ld. A.O and as mentioned in the audit

report. The only difference is about the rate of soyabean oil

charged by the Ld. A.O. We find that in the closing stock assessee

has valued total stock on average rate of 4462 on the closing stock

at 1577.73 quintal whereas the Ld. A.O has applied the purchase

rate of Rs.5205 on the packed soyabean oil and Rs.4391/- on the

loose soyabean oil. But there is no basis mentioned in the

assessment order about the rates so adopted. The assessee is

consistently valuing its closing stock at cost or market value

whichever is low and has applied the same. In these given facts

the addition in undervaluation of closing stock of soyabean oil at

Rs.1,46,143/- was uncalled for.

alleging that the assessee has not having any such stock, we on

perusal of the records find that assessee purchased sarki khalli

from Vishnu Oil Industries vide Bill No.26 dated 27.2.2010.

However the goods were received 10 days prior from 17.2.2010 by

Poonam Road Lines. So the assessee had stock of sarki khalli as

on 17.2.2010 but since the bill was entered on 27.2.2010 there 11

Chandumal Tharwani ITA. No.837/Ind/2019

was a negative stock appearing in the quantitative details. The

negative stock appeared since the Accountant entered the stock on

28.2.2010. Has it been made on 27.2.2010 there would have been

no negative stock. This fact is discernable from the paper book

page 39. Thus in our considered view this is not a discrepancy and

no addition was called for at Rs.75,894/- on account of sales

without stock in hand.

Rs.1,20,825/- on account of quantity loss of soyabean oil

(inadvertently mentioned as 1,02,825/- in grounds of appeal), we

find that in the quantitative details the assessee has claimed loss

of 26.85 quintal. Ld. A.O made addition for Rs.1,20,825/- for the

alleged loss of 26.85 quintal for the reason that the assessee had

not given necessary reply. However on perusal of the Audit Report

we find that this loss was very well reported in the Tax Audit

Report which is placed at page-23 of the paper book at Annexure-

III to the Audit Report. The details shows that the assessee had

opening stock of soyabean oil at 796.8 quintal and purchase

during the year is 49946.96 quintal and sale during the year is

49139.25 quintal. The loss of soyabean oil is merely 0.05% of the 12

Chandumal Tharwani ITA. No.837/Ind/2019

total soyabean oil sold during the year which is in consonance with

the business activity consistently carried out by the assessee. In

these given facts no addition was called for the quantity loss in

soyabean oil at Rs.1,02,725/-. Thus Ground No.1,2 & 3 of the

assessee’s appeal are allowed.

assessee has challenged the addition for estimated Gross Profit at

Rs.6,44,750/- made by Ld. A.O by rejecting the book results. In

our considered view since the additions made by the Ld. A.O for

the alleged discrepancies noticed in the books of accounts have

already been deleted by us there remains no basis for the Ld. A.O

of rejecting the book results since there is no plausible reason left

to reject the book results. Whatever discrepancies were noticed

have already been dealt by us and the addition so made have been

deleted and in the given facts and circumstances of the case where

the assessee has maintained regular books of accounts with

quantitative details, the action of rejecting the book results u/s

145(2) of the Act is held to be incorrect and thus no addition for

estimated Gross Profit at Rs.6,44,750/- is called for. Thus Ground

No.4,5,6&7of the assessee’s appeal are allowed. 13

Chandumal Tharwani ITA. No.837/Ind/2019

expenses at Rs.6,19,000/-. Though the Ld. A.O has not made

separate addition for the household expenses as they were

considered to be part of the Gross Profit addition of Rs.6,44,750/-

made by the Ld. A.O but since we have deleted the addition for

Gross Profit, the issue of household expenses becomes live. We

observe that the Ld.A.O has estimated the household expenditure

at Rs.70,000/- per month totaling to Rs.8,40,000/- for the family

of the assessee consisting of 9 major members and 3 grand

children. Household expenses of Rs.2,21,000/- has been shown by

the assessee in his name as well as in the name of other family

members in the Income Tax Return, thus the addition of

Rs.6,19,000/- was made. Though it was claimed by the Ld.

Counsel for the assessee that the assessee’s family living in a small

place namely Betul and being the joint family the expenditure is

low and burden of entire family cannot be shifted.

case and being fair to both the parties and in absence of complete

household expenditure details which have not been filed by the

assessee, are of the considered view that the household 14

Chandumal Tharwani ITA. No.837/Ind/2019

expenditure of Rs.40,000/- per month totaling to Rs.4,80,000/-

would be sufficient to cover up the household expenses incurred by

the assessee. As the assessee has shown household expenses of

Rs.2,21,000/- (which includes Rs.72,000/- withdrawal shown by

the assessee and the remaining by other family members) the

shortfall would be Rs.2,59,000/- which is directed to be added to

the income of the assessee. Thus Ground No.8 is partly allowed

and addition for household expenses is sustained at Rs.2,59,000/-

adjudication.

The order pronounced as per Rule 34 of ITAT Rules, 1963 on 30.04.2021. Sd/- Sd/-

(MADHUMITA ROY) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER

�दनांक /Dated : 30th April, 2021 /Dev Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore