PRAVEEN KUMAR SHREEMAL,JAIPUR vs. ITO, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh HkkxpUn] ys[kk lnL; ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 39/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2012-13 cuke Shri Praveen Kumar Shreemal The ITO Vs. F-17/A, Malviya Industrial Area Ward- 4(1), Forest Chowky, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AJQPS 3351 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by: Shri N.S. Vyas, CA jktLo dh vksj ls@ Revenue by: Smt. Poonam Rai, DCIT- DR lquokbZ dh rkjh[k@ Date of Hearing : 01/03/2017 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 03 /03/2017 vkns'k@ ORDER PER BHAGCHAND, AM The assessee has filed an appeal against the order of the ld. CIT(A)-2 , Jaipur dated 23-11-2016 for the assessment year 2012-13 raising following grounds of appeal. ‘’1. That the authorities below erred in invoking the provision of Section 145(3) of I.T. Act, 1961 thereby rejecting the books of account and sustaining the trading addition amounting to Rs. 2.00 lacs.

2 ITA No.39/JP/2017 Shri Praveen Kumar Shreemal vs. ITO,Ward- 4(1), Jaipur 2. That the authorities below further erred in disallowing out of telephone expenses, conveyance expenses, repairs and maint. Expenses, car insurance and depreciation on car amounting to Rs. 27,585/- being the 10% of the total claim.

2.1 Apropos Ground No. 1 of the, the facts as emerges from the order

of the ld. CIT(A) is as under:-

‘’2.2 I have perused the facts of the case, the assessment order and the submissions of the appellant. As noted by the Assessing Officer during the year the gross profit has been shown at 10.82% compared to 10.80% in the previous year. The Assessing Officer noted that the assessee has not maintained stock register or the quantitative and qualitative details of opening and closing stock. Further, in the tax audit report also the auditors had commented that the stock register had not been maintained. Further, the assessment history of the assessee shows that a higher gross profit rate was applied by the Assessing Officer and sustained by the appellate authorities including the Hon'ble ITAT in assessment years 2007-08, 2008-09 & 2009-10 as discussed in detail in the order of the Assessing Officer. Thus the trading results of the assessee had not been accepted in the past also and the books of account had been rejected u/s 145(3) and the same had been upheld in appeal. Based on the above, the Assessing Officer rejected the books of accounts u/s 145(3) of the I.T. Act, 1961 and made a lump sum trading addition of Rs. 3,00,000/- for reasons discussed. In the present proceedings, the Authorised Representative submitted that since in the current year the profit percentage is better than the previous year, no trading addition should be made. As already discussed, the assessee is not maintaining proper stock records or register due to which the books of account had been rejected by the Assessing Officer. Further, the assessee's history itself shows that the book results are not proper and additions have been made in the past therefore, even though a slight increase in G.P. has been

3 ITA No.39/JP/2017 Shri Praveen Kumar Shreemal vs. ITO,Ward- 4(1), Jaipur shown in the current year, the rejection of books of account u/s 145(3) is upheld. The trading addition is sustained at Rs. 2,00,000/- instead of Rs. 3,00,000/-. The ground of appeal is partly allowed.

2.2 Apropos Ground No. 2 of the assessee, the facts as emerges from

the order of the ld. CIT(A) is as under:-

‘’3.2 I have perused the facts of the case, the assessment order and the submissions of the appellant. The disallowance has been made as the expenditure were not fully vouched as well as the personal element. The disallowance is sustained at 10% of the expenditure instead of 20%. The ground of appeal is partly allowed.’’

2.3 I have heard the rival contentions and perused the materials

available on record. As regards Ground No. 1 of the assessee, brief facts

of the case are that the assessee derives income from business of trading

of Timber & Plywood. The trading results shown by the assessee for the

year under consideration and preceding year is as under.

A.Y. Sales G.P. (Rs.) G.P. Rate (%) 2012-12 23709913 2565918 10.82% 2011-12 21698393 2342751 10.80%

During the course of assessment proceedings, the AO observed that the

assessee had not maintained the stock register or the quantitative details

of opening and closing stock. He also observed that the in the Tax Audit

Report in Column 28(a) the Auditors has commented that ‘’Not

maintained looking to the size and nature of the business, inventory of

4 ITA No.39/JP/2017 Shri Praveen Kumar Shreemal vs. ITO,Ward- 4(1), Jaipur closing stock taken by proprietor at the end of the financial year.’’ The

AO asked the reason from the assessee for not maintaining the books of

account and stock register for which the assessee simply contended that in

assessee's line of business, it is not possible to maintain day to day stock

register as the assessee is dealing in very large number of different kind

of consumer goods. The AO thus took into consideration the closing

stock on the basis of physical verification made by the assessee. The AO

came to the conclusion that in the absence of such records, it is

impossible to deduce the correct profit from such books of account and he

rejected the books of account of the assessee by invoking the provisions

of Section 145(3) of the Act. The AO further observed that the sales of

the assessee has increased from Rs. 2,16,98,393/- to Rs. 2,37,09,913/-and

gross profit rate has also increased from 10.80% to 10.82% but the

trading results of the assessee were not accepted by the AO in the absence

of stock register. The AO thus made a lumpsum trading addition of Rs.

3.00 lacs in the hands of the assessee by rejecting the books of account of

the assessee u/s 145(3) of the Act and added the sum of Rs. 3.00 lacs to

the income of the assessee. In first appeal, the ld. CIT(A) had reduced the

trading addition to Rs. 2.00 lacs. In appeal before this Bench, it is noted

that the gross profit rate of the assessee is better than preceding year and

5 ITA No.39/JP/2017 Shri Praveen Kumar Shreemal vs. ITO,Ward- 4(1), Jaipur the turnover is also higher for the year under consideration. However, the

assessee is not maintaining the proper books of account with regard to

stock. Therefore, to plug the leakage of revenue, certain disallowance is

inevitable as the opening stock, purchases & sales and closing stock of

the assessee are not verifiable. Thus the lower authorities are justified in

rejecting the books of account of the assessee by invoking the provisions

of Section 145(3) of the Act but the addition sustained by the ld. CIT(A)

to the extent of Rs. 2.00 lacs appears to be on higher side in the present

facts and circumstances of the case and the same is sustained to the extent

of Rs. 50,000/-. Thus the Ground No. 1 of the assessee is partly allowed.

2.3.1 As regards, the Ground No. 2 of the assessee, it is noted that the

AO during the course of assessment proceedings observed that assessee

had claimed telephone expenses of Rs. 72,152/-, conveyance expenses of

Rs. 69,100/-, repairs and maintenance expenses of Rs. 51,988/-, car

insurance expenses of Rs. 12,8434/- and depreciation on car of Rs.

69,774/- totaling to Rs. 2,75,857/-. The AO observed that the expenses

claimed by the assessee in the profit and loss account are related to such

facilities which are certainly proved to be used for other than business

purposes for which he relied on the decision of Hon'ble Madras High

Court in the case of Sundram Industries Ltd. (239 ITR 405). Thus the

6 ITA No.39/JP/2017 Shri Praveen Kumar Shreemal vs. ITO,Ward- 4(1), Jaipur AO made disallowance to the extent of 20% of total expenses resulting

into addition of Rs. 55,171/-. The AO added this amount of Rs. 55,171/-

to the total income of the assessee. In first appeal, the ld. CIT(A) reduced

the same to the extent of 10% instead of 20% made by the AO. In appeal

before this Bench, it is noted that similar issue was decided by ITAT

Jaipur (SMC) Bench vide order dated 29-01-2015 in assessee's own case

in ITA No. 598/JP/2014 for the assessment year 2008-09 by observing as

under:-

‘’4. I have heard the rival contentions of on the other hand, the parties and perused the material available on the record. I find merit in the arguments of the learned counsel for the assessee that when the books of account are rejected and trading addition are made, there is no justification in making further adhoc disallowance qua telephone and conveyance. This view is supported by ITAT in assessee's own case for preceding year. In view thereof, the addition is deleted.

Respectfully following the decision of ITAT Jaipur Bench in assessee's

own case for the assessment year 2008-09 (supra), I direct to delete the

addition of Rs. 27,585/- (being 10% of the total claim) sustained by the

ld. CIT(A). Thus Ground No. 2 of the assessee is allowed.

7 ITA No.39/JP/2017 Shri Praveen Kumar Shreemal vs. ITO,Ward- 4(1), Jaipur 3.0 In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 03/03/2017. Sd/- ¼HkkxpUn½ (Bhagchand) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 03 /03/ 2017 *Mishra आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shri Praveen Kumar Shreemal, Jaipur izR;FkhZ@ The Respondent- The ITO, Ward- 4(1), Jaipur 2. 3. vk;dj vk;qDr¼vihy½@ CIT(A). vk;dj vk;qDr@ CIT, 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 39/JP/2017) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@ Aेेपेजंदज. त्महपेजतंत