Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, JAIPUR BENCHES (SMC
Before: SHRI BHAGCHANDvk;dj vihy la-@ITA No. 903/JP/2017
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर 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. 903/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke Gulab Devi Sarupuria, Income Tax Officer, Vs. 80, Shalimar Bagh, Ajmer Road, Ward-2(3), Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ANPPS 5298 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Jain (Adv) & Shri Ashok Kumar Gupta (Adv) jktLo dh vksj ls@ Revenue by : Shri A.S. Nehra (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 01/01/2018 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 01/01/2018 vkns'k@ ORDER
PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-I, Jaipur dated 23/10/2017 for the A.Y. 2013-14. 2. The assessee is engaged in the business of trading and manufacturing of PP Woven Sacks and all kind of packing material under the name and style of M/s Nakora Packing Industries. The return of income declaring total income of Rs. 12,12,400/- was e-filed on 26/09/2013. The case was selected for scrutiny. The Assessing Officer
ITA 903/JP/2017_ 2 Gulab Devi Sarupuria Vs ITO
made addition of Rs. 3,41,396/- after rejecting books of account and
estimating the G.P. rate at 8% instead of 7.24% declared by the assessee.
The Assessing Officer also made addition of Rs. 1.00 lac out of various
expenses debited in the P&L account. The ld. CIT(A) confirmed the G.P.
addition and gave part relief from ad hoc disallowance of Rs. 1 lacs from
the expenses.
Now the assessee is in appeal before the ITAT by taking following
grounds of appeal:
INVALID INVOKATION OF SEC.145(3) (a) That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in confirming provision of section 145(3) for rejecting the books of accounts without valid reasons. The books of accounts' are audited by chartered accounts and ITS judiciously obligatory on the part of department to accept audited accounts for tax purposes.
(b) That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in confirming provision of section 145(3) for rejecting the audited books of accounts is not justifiable the books of accounts maintained in regular course of business are presumed to be correct, complete and reliable, and books results cannot be disturbed without any material defect section 30 of Evidence Act.
Invalid Trading Addition of Rs. 341396/- by Increasing GP Rate from 7.24% to 8% Arbitrarily:-
That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in confirming trading addition of Rs. 341396/- by increasing GP rate from 7.24% to 8% without any material facts on record. Comparative Chart
ITA 903/JP/2017_ 3 Gulab Devi Sarupuria Vs ITO
A./Y. Gross Gross Profit N/P (In Rs). GP Rate % NP Rate % Turnover 2011-2012 22188617 1596143 598586 7.19% 2.70% 2012-2013 34645905 2496018 952841 7.20% 2.75% 2013-2014 45333610 3283103 1257833 7.24% 2.77%
In spite of constant increase in GP rate in past three years of working CIT(A) just to make trading additions of Rs. 341396/- increased our GP rate from 7.24% to 8% arbitrarily without any material facts on record and thus trading additions of Rs. 341396/- are without justification.
Invalid Disallowance of Rs. 50000/- out of Expenses Arbitrarily
That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in confirming lump sum disallowance of RS. 50000/- of expenses. Ld. CIT(A) has without mentioning any specific query on specific voucher of any head of expenses disallowed in lump sum Rs. 50000/- in the head freight & cartage outward rebate discount & claim, conveyance without any material facts on record therefore disallowance of Rs. 50000/- out of expenses are without justification.
That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in confirming not issuing proper and valid show cause notice before making addition / disallowance.
That on the facts and in the circumstances of the case Ld. CIT(A) has grossly erred in law and facts in confirming in charging interest u/s 234B Rs. 56985/- interest u/s 234C Rs. 6679/- and interest u/s 234D Rs. 6.
Ground No. 1 (a)&(b) of the assessee’s appeal were not pressed at
the time of hearing, therefore, the same stands dismissed as not pressed.
Ground No. 2 of the appeal is against confirming the trading
addition of Rs. 3,41,396/- made on account of enhancing the GP rate from
7.24% to 8%. The ld. CIT(A) has dealt this issue in his order by holding as
under:
ITA 903/JP/2017_ 4 Gulab Devi Sarupuria Vs ITO
3.1.2 Determination:
(i) The brief facts of the case are that the appellant was engaged in the business of trading and manufacturing of PP Woven sacks and all kind of packing material. During the year under consideration, it has disclosed gross profit of Rs. 32,83,103/- on total turnover of Rs. 4,53,33,610/- giving a GP rate of 7.24%. During the assessment proceedings, the AO has observed that the appellant has not maintained day-to-day stock register in terms of quantity as well as quality. The AO has also made certain enquiries u/s 133(6) of the Act and some of the sales made by the appellant to a number of parties could not be verified. In view of these facts, the AO has invoked the provision of section 145(3) of the Act and has rejected the books of accounts of the appellant and has made trading addition of Rs. 3,41,396/- by applying the GP rate of 8% against 7.24% declared by the appellant. The issue has been discussed by the AO in detail from page No. 2 to 6 of the assessment order.
(ii) During the appellate proceedings, the appellant has made detailed submissions as reproduced above and stated that the AO was not justified in rejecting its books of accounts u/s 145 (3) of the Act and it was stated that it has maintained day-to-day stock details. It was further submitted that the AO has applied a GP rate of 8% without appreciating the fact that its trading results were progressive and therefore the trading addition made by the AO deserves to be deleted.
(iii) I have duly considered the submissions of the appellant, assessment order and the material placed on record. It is noted from the details furnished by the appellant during the appellate proceedings that it has maintained quantitative details of HDPE/PP bags only. It has not filed the quantitative details of the raw material consumed for manufacturing of bags. It is also noted from the material placed on record that the
ITA 903/JP/2017_ 5 Gulab Devi Sarupuria Vs ITO
appellant has purchased HDPE/PP Fabric in Kilograms whereas the details of finished products were maintained in numbers and the appellant has not provided any method by which the use of HDPE/PP Fabric in Kilograms could be reconciled with the manufacturing of bags in numbers. In fact, in the tax audit report, the auditor has not stated the yield of the finished products from the consumption of the raw material i.e. HD'PE/PP Fabric. Further, from the details of stitching charges, it has been observed that month wise payments have been stated therein but details relating to day-to-day production of bags by these labourers were not maintained. It is also an undisputed fact that some of the sales made by the appellant could not be verified as some of the parties had already closed their businesses as stated by the appellant.
(iv) Therefore, in view of the above discussion and looking to the totality of facts and circumstances of the case, it is held that the AO was justified in rejecting the books of accounts of the appellant u/s 145 (3) of the Act. The AO has applied a GP rate of 8% against 7.24% declared by the appellant. It is an undisputed fact that during the year under consideration, the trading results were better in comparison to the immediate preceding year but it may be mentioned here that the appellant has not brought on record any material which may indicate that its cases for earlier years were .completed under scrutiny assessments.
(v) In view of these facts, it is held that the AO was justified in making trading addition of Rs. 3,41,396/- to the income of the appellant by estimating GP rate at 8% and hence, the same is hereby sustained.”
The ld AR of the assessee has submitted that the gross profit for the
year under consideration was better than the earlier two preceding years.
ITA 903/JP/2017_ 6 Gulab Devi Sarupuria Vs ITO
He has drawn the attention of the Bench towards the chart wherein the
G.P. for the A.Y. 2013-14 i.e. the year under consideration was 7.24% and
the G.P. rate for the A.Y. 2012-13 was 7.20% and for the A.Y. 2011-12, it
was 7.19%. He has also drawn the attention of the Bench towards the NP
rate, which was also better than in comparison to earlier years. The NP
rate for the year under consideration was 2.77% instead of 2.75% in the
immediate preceding and 2.70% in the A.Y. 2011-12. He has submitted
that the assessee’s book results were better than the earlier years,
therefore, the same should have been accepted by the Assessing Officer.
With regard to the various objections raised by the Assessing Officer while
rejecting the books of account, the ld AR of the assessee has submitted
that the assessee is keeping the record of stock as well as stitching
charges but the same were overlooked by the Assessing Officer. He has
also submitted that the most of the debtors has confirmed the transactions
only very few debtors, who has closed their business, has not responded
to the enquiries made, therefore, there was no reason to reject the books
of account of the assessee. He pleaded that there is no reason to make
such additions.
On the other hand, the ld DR has relied on the orders of the
authorities below.
ITA 903/JP/2017_ 7 Gulab Devi Sarupuria Vs ITO
After hearing both the sides on this issue, the Bench finds that the
book results of the assessee for the year under consideration was better
than the two preceding years, which is clear from the following chart.
A./Y. Gross Turnover Gross Profit GP Rate % NP Rate % N/P (In Rs). 2011-2012 22188617 1596143 598586 7.19% 2.70% 2012-2013 34645905 2496018 952841 7.20% 2.75% 2013-2014 45333610 3283103 1257833 7.24% 2.77% The Hon’ble Rajasthan High Court in various decisions have held that past
history of the assessee is the best guide to accept/reject the book result of
the assessee. The Assessing Officer had not brought on record any
positive evidence to enhance the gross profit for making additions. The
G.P. is better than earlier year. The assessee is purchasing raw material in
kilograms and the output is in pieces. Thus, there is no possible way to
make coordination between input and output. In such a situation, the
gross profit is the proper way to arrive at comparative book results.
Therefore, considering all the facts and circumstances, the Bench finds
that the ld. CIT(A) was not justified in confirming the addition, therefore,
the same is deleted. Ground No. 2 of the assessee’s appeal is allowed.
In the ground No. 3 of the assessee’s appeal, the issue involved is
confirming the lump sum disallowance of Rs. 50000/- made on account of
various expenses debited in the P&L account. The ld Assessing Officer
ITA 903/JP/2017_ 8 Gulab Devi Sarupuria Vs ITO
made addition of Rs. 1.00 lac and the ld. CIT(A) has reduced the same to
Rs. 50,000/- by holding as under:-
“3.3.2 Determination. I have duly considered the assessment order, submissions of the appellant and the material placed on record. It is noted that the A.O. has made a disallowance of Rs. 1 lac out of various expenses claimed by the appellant in its profit and loss account. The appellant could not fully controvert the findings of the A.O. However, the disallowance made by the A.O. appears to be on the higher side. Considering the volume and nature of business of the appellant, it would be fair and reasonable to restrict the disallowance to 50% of the amount disallowed by the A.O. Therefore, the disallowance of Rs. 1 lac made by the A.O. is hereby restricted to Rs. 50,000/-.”
After hearing both the sides on this issue, the Bench is of the view
that sustaining the addition of Rs. 50,000/- is on higher side, therefore, in
the interest of justice, equity and fairness, the disallowance of Rs. 25,000/-
shall be reasonable. Hence addition up to 25,000/- is sustained and
balance is deleted.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 01/01/2018. Sd/- ¼Hkkxpan½ (BHAGCHAND) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- -1st January, 2018
ITA 903/JP/2017_ 9 Gulab Devi Sarupuria Vs ITO *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Smt. Gulab Devi Sarupuria, Jaipur. 1. izR;FkhZ@ The Respondent- The ITO, Ward 2(3), 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. 903/JP/2017) 6. vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत