BHARTI MALPANI,JAIPUR vs. ITO, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa MkW0 vtqZu yky lSuh] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & DR. ARJUN LAL SAINI, AM vk;dj vihy la-@ITA No. 336/JP/2015 fu/kZkj.k o"kZ@Assessment Year : 2011-12 cuke Bharti Malpani, I.T.O. Vs. Pro.p- Bharti Exports, Ward 1(2), 11, Film Colony, Chaura Rasta, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ADGPM 6495 G vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 265/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2012-13 cuke Bharti Malpani, I.T.O. Vs. Pro.p- Bharti Exports, Ward 1(2), 11, Film Colony, Chaura Rasta, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ADGPM 6495 G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Bimal Chopra (CA) jktLo dh vksj ls@ Revenue by : Shri P.P. Meena (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 08/11/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 08/01/2018 vkns'k@ ORDER PER: VIJAY PAL RAO, J.M. These two appeals by the assessee are directed against the two separate orders dated 10/02/2015 and 18/01/2016 of ld. CIT(A)-I, Jaipur for the A.Y.2011-12 and 2012-13 respectively. For the appeal of 2011-12, the assessee has raised following grounds of appeal:

ITA 336/JP/2015 & 265/JP/2016_ 2 Bharti Malpani Vs ITO “1. That the Ld. CIT (Appeals) has erred in law and on facts in rejecting the books of account without pointing any discrepancy or defect in the books of account except that some registers were not maintained as it was neither possible nor needed as details are available in the books of account.

of books of account and trading addition made by the Assessing Officer and

confirmed by the ld. CIT(A). The assessee is carrying on business of export

of silver articles and semi precious stones under the trade name M/s Bharti

Exports. During the course of assessment proceedings, the Assessing

Officer noted that the assessee has not furnished day to day stock

inventory of all the items in terms of quantity and value thereof for

ITA 336/JP/2015 & 265/JP/2016_ 3 Bharti Malpani Vs ITO verification of opening stock and closing stock shown in the books of

account. The Assessing Officer further noted that the tax auditor in his tax

audit report has also commented that no such record is maintained by the

assessee. Hence in absence of stock record, the valuation of the stock

shown by the assessee was not verifiable. Accordingly, the Assessing

Officer invoked the provisions of Section 145(3) of the Income Tax Act,

1961 (in short the Act) and rejected the book result of the assessee. The

Assessing Officer then estimated the income of the assessee by applying

G.P. rate of 17% on the turnover.

Officer of rejection of books of account as well as the G.P. rate @ 17%

applied by the Assessing Officer.

sale of the assessee is export and therefore there is no scope of under

valuation of closing stock by the assessee. Further the assessee is getting

the job work done through outsourcing to the parties. He has further

submitted that for the A.Y. 2006-07, this Tribunal has considered an

identical issue and directed the Assessing Officer to apply G.P. rate @

7.50%. Thus, the ld AR has submitted that the G.P. rate applied by the

Assessing Officer and confirmed by the ld. CIT(A) is without any basis or

ITA 336/JP/2015 & 265/JP/2016_ 4 Bharti Malpani Vs ITO justification. He has referred to the past history of the assessee declaring

the G.P. rate and therefore, submitted that the Tribunal for the A.Y. 2006-

07 applied the average G.P. of the past years whereas for the year under

consideration, the A.O. has not applied such criteria.

authorities below. He has further submitted that in the A.Y. 2010-11, the

assessee has declared G.P. @ 10.49% whereas the Assessing Officer

applied G.P. @ 17%, which was not disputed by the assessee as no appeal

was filed against the said decision, therefore, for the year under

consideration when the assessee has declared G.P. of 15.36% then the

estimation of income by applying G.P. rate of 17% by following the decision

on this issue for the A.Y. 2010-11 is justified.

materials available on the record. It is not in dispute that this Tribunal in

assessee’s own case for the A.Y. 2006-07 has upheld the rejection of books

of account on the similar defects found by the Assessing Officer in the

books of account, therefore, following the earlier order of this Tribunal in

assessee’s own case for the A.Y. 2008-09 and 2009-10, the action of the

Assessing Officer in rejecting the books result is upheld.

ITA 336/JP/2015 & 265/JP/2016_ 5 Bharti Malpani Vs ITO 6.1 As regard the G.P. rate applied by the Assessing Officer @ 17% as

against the G.P. rate declared by the assessee at 15.36%, there is no

dispute that after rejection of books of account, the income of the assessee

is required to be estimated on best judgment of the Assessing Officer.

However, even after rejection of books of account and the income is

estimated, it may not necessarily result any addition to the income declared

by the assessee if the G.P. declared by the assessee for the year under

consideration is in line with the average G.P. rate for the past year which

has been accepted by the Assessing Officer or has attained the finality.

Thus, it is settled proposition of law on the point that while estimating the

income after rejecting the books of account, the average G.P. of the past

years, which has attained the finality or accepted by the revenue would be

a proper and reasonable basis for adopting the G.P. for the current year.

Accordingly, we set aside this issue to the record of the Assessing Officer

for computing the average G.P. of past years to be adopted for the year

under consideration to estimate the income of the assessee.

addition made by the Assessing Officer on account of interest charged from

the related parties @ 6% as against the interest paid by the assessee @

12%. The assessee has given loan to relatives and charged 6% interest as

ITA 336/JP/2015 & 265/JP/2016_ 6 Bharti Malpani Vs ITO against the interest paid by the assessee on borrowings @ 12%. The

Assessing Officer disallowed the proportionate interest and made the

addition of Rs. 15,27,073/- on this account.

Assessing Officer has made this addition by assuming wrong facts. He has

pointed out that the assessee has charged interest @ 12% from the some

of the related parties which has not been taken into consideration either by

the Assessing Officer or by the ld. CIT(A). The ld AR has further contended

that the financial position of the related persons were not good and even

the recovery of principal was doubtful hence, on commercial expediency

concessional interest was paid. Further it was submitted that the money

received from the assessee by these relatives was utilized in the business

as evident from the computation sheet of these members showing income

from business and profession. However, all these contentions of the

assessee were not duly considered by the authorities below but were

rejected summarily. He has referred to advance given to one Rahul

Bhandari and submitted that the interest received from the said person was

@ 12% and not @ 6% and therefore no disallowance is called for in this

respect. The ld AR has further submitted that when the recovery of loan

amount itself is doubtful from these persons due to their poor financial

ITA 336/JP/2015 & 265/JP/2016_ 7 Bharti Malpani Vs ITO condition then the interest charged from these persons is based on the

concept of real income.

authorities below and submitted that there is no dispute that the assessee

has charged interest from related parties @ 6% whereas the assessee has

paid interest @ 12%, therefore, the proportionate differential amount

attributable to the loan given to the related party at lower rate of interest is

required to be added.

relevant materials available on the record. The assessee has raised various

contentions before the ld. CIT(A) including the contention that the

assessee’s own interest free funds are more than the advance given to the

related parties and therefore, no disallowance on account of interest is

called for due to short charging of interest. Further the assessee has

pointed out before us that out of five debtors to whom the advance was

given. The assessee charged the interest @ 12% from one Shri Rahul

Bhandari and therefore, to the extent of loan given to that person, no

disallowance is called for. All these facts and contentions were not properly

examined by the authorities below, therefore, this issue requires a proper

verification and afresh adjudication at the level of the Assessing Officer.

ITA 336/JP/2015 & 265/JP/2016_ 8 Bharti Malpani Vs ITO Accordingly, we set aside this issue to the record of the Assessing Officer to

consider the facts and contentions raised by the assessee regarding the

availability of interest free funds as well as the interest charged @ 12%

from one of the debtors. Hence, this issue is restored back to the file of the

Assessing Officer.

raised following grounds of appeal.

“1. That the Ld. CIT (Appeals) has erred in law and facts in not holding that assessment order is invalid in law.

ITA 336/JP/2015 & 265/JP/2016_ 9 Bharti Malpani Vs ITO ratio of law held by Hon’ble Supreme Court in the case of Hero Cycles (P ) Ltd. 379 ITR 347.

assessee does want to press grounds No. 1 and 6 and the same may be

dismissed as not pressed. The ld DR has raised no objection if grounds No.

1 and 6 of the assessee’s appeal are dismissed being not pressed.

Accordingly, grounds No. 1 and 6 of the assessee’s appeal are dismissed

being not pressed.

of books of account and trading addition made by the Assessing Officer and

confirmed by the ld. CIT(A).

relevant materials available on the record. An identical issue has been

considered and decided by us in assessee’s own appeal for the A.Y. 2011-

12 in the foregoing paras of this order. Accordingly, grounds No. 2 and 3 of

the assessee’s appeal are partly allowed on the same terms.

disallowance of interest on account of short charging of interest from the

ITA 336/JP/2015 & 265/JP/2016_ 10 Bharti Malpani Vs ITO related parties. This issue is common as in the assessment year 2011-12.

In view of the our findings for the A.Y. 2011-12, this issue is set aside to the record of the Assessing Officer on same terms.

Sd/- Sd/- ¼MkW0 vtqZu yky lSuh½ ¼fot; iky jko½ (Dr. Arjun Lal Saini) (VIJAY PAL RAO) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 08th January, 2018 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Smt. Bharti Malpani, Jaipur. 1. izR;FkhZ@ The Respondent- The I.T.O. Ward 1(2), Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 336/JP/2015 & 265/JP/2016) 6.

vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत