M/S J P INDUSTRIES,JALABAD vs. DY. COMMISSIONER OF INCOME TAX CIRCLE - II, BATHINDA

ORDER Per:Bench:

A batch of 4 appeals of the same assessee were filed against the order of the ld. Commissioner of Income Tax (Appeals), Bathinda [in brevity the ld.CIT(A)]the order passed u/s 250(6) of the IT Act 1961, [in brevity the Act] for A.Ys.2010-11, 2013-14 & 2014-15. The impugned order was emanated from the order of the Dy A.Y.: 2010-11 & 3 Ors 2 Commissioner of Income Tax, Circle-II, Bathinda (in brevity ‘the AO’) order passed u/s 143(3)/147 and 271(1)(c) of the Act.

3. The assessee has taken the following grounds: 1. The Ld. CIT(A) erred on facts and law in confirming the validity of the proceedings initiated by the AO u/s 147/148 because the notice u/s 148 was not served on the assessee in accordance with the provisions of section 282 of the Income Tax Act, 1961.

2. The Ld. CIT(A) erred on facts and law in confirming the validity of the proceedings initiated by the AO u/s 147/148 because no proper satisfaction as prescribed u/s 151 was recorded by the Pr. CIT that the case of the assessee was fit for issue of notice u/s 148.

A.Y.: 2010-11 & 3 Ors 3

4. The Ld. CIT(A) erred on facts and lawinconfirming the addition ofRs. 15,00,000/- on account of alleged theka received from AMs Surinder Sat Agro Foods, Jalalabad without rebutting the explanation submitted by the assessee.

5. The Ld. CIT(A) erred on facts and lawinconfirming the addition ofRs.7,56,140/- on accountof alleged low GP rate without rebutting theexplanation submitted by the assessee.

4. Brief fact of the case is that the survey was conducted in the business premises of the assessee and certain books of account and other documents impounded u/s 133A (3). The impounded books of account included ledger cash books for F.Y. 2009-10 which belongs to M/s Surinder Sat Agro Foods, a sister A.Y.: 2010-11 & 3 Ors 4 concern of the assessee. Thereafter, the revenue has found different anomalies in the books of account of the assessee in relation to the Surinder Sat Agro Foods, a sister concern of the assessee. The assessment was completed and addition is confirmed u/s 69C amount to Rs.12,74,722/- for payment of cash to M/s Surinder Sat Agro Foods (in short SSAF) and Rs.15 lac related to undisclosed payment related to purchase of paddy which was added back with the total income of the assessee. Further the addition was made Rs.7,56,140/- related to the lower G.P. rate in relation to the preceding year. Aggrieved assesseefiled an appeal before the ld. CIT(A). The ld. CIT(A) upheld the order of the ld. AO. Being aggrieved assessee filed an appeal before us.

Ground No. 1 and 2 6. Ground No. 1 and 2 is general in nature and not pressed. Ground No. 3 7. The ld. AR vehemently argued related to addition amount of Rs.12,74,722/-. The difference payment to (SSAF) was made by the assessee and total cumulative figure was taken from the books and the seized documents. The ld. AR agitated the issue that the only the payment was taken but the withdrawal was not considered A.Y.: 2010-11 & 3 Ors 5 by the ld. AO. The ld. AR submitted a written submission and as per APB page -1, the documents are bound that the only one-sided payment are considered not the withdrawal are considered.

A.Y.: 2010-11 & 3 Ors 7

Ground of Appeal No.-6:- The ground of appeal is directed against addition of Rs, 7,56,140/- by the AO on account of applying G1J rate of 11.24 percent of total turnover as against the GP of 10.20 percent disclosed by the appellant. The appellant disclosed gross profit A.Y.: 2010-11 & 3 Ors 8

10.20% and net profit 0.32%. The AO found from 1 he account books of appellant that true profit cannot be deduced. So applied the gross profit rate as declared in last year i.e. 11.24% on total turnover. After calculation the difference of net profit worked out Rs. 7,56,140/-. The same was held as undisclosed profit by the AO and added back to the returned income.” 12. The ld. AR further argued and submitted the written submission the relevant paragraphs page 4 to 5 of the written submission is duly reproduced as below: “GROUND NO.5 This ground is against the addition of rs.756140 by the AO on account of low g.p. rate. The Id.AO has made addition on the ground that in the preceding year the gp rate earned was 11.24% whereas in the year under appeal the g.p. rate is 10.20%. The addition has been made purely on adhoc basis. The Id.AO has made the addition simply on the basis of comparison of g.p. rate with the preceding year without taking into consideration the other aspects of the case. REBUTTAL:

1 First of all it is submitted that the working of the assesee firm is absolutely different in the year under appeal as compared to the preceding year. During the year under appeal the assessee has mainly done trading of rice which is evident from the fact that purchases of paddy during the year is only Rs. 1856090 without there being any opening and closing stock of paddy. As against this the purchase of A.Y.: 2010-11 & 3 Ors 9 paddy and milling of the same is to the tune of Rs.25265916 in the preceding year. This shows that during the year under appeal the assesee has done only trading of rice whereas manufacturing of rice is very negligible whereas in the preceding year the assessee has done substantially quantity of manufacturing. It is a known fact that in trading of bulk item like rice the margin of profit is low as compared to manufacturing.

2 Further, it is submitted that during the year under appeal there has been quantum jump in the sales of the assessee due to the trading. Sale this year has gone upto Rs.7.23 crore against the sale of Rs.4.44 crore in the preceding year which shows jump of more than 62% with such a huge amount of trading in rice the g.p. rate is bound to be low as compared to preceding year.

3 In view of the above submissions it will be appreciated that marginal decrease of 0.32% in g.p. rate is very negligible in view of the reasons given above.

4 It may be submitted here that complete stock tally is maintained and all the quantitative figures giving variety wise details are given in Trading A/c itself. All the expenses debited to Trading A/c are duly vouched. G.P rate depends on so many factors especially in item like rice. Small variation of 1% is absolutely negligible especially keeping in view the factors highlighted above. Hence theaddition of Rs.756140 A.Y.: 2010-11 & 3 Ors 10 needs to be quashed made purely on adhoc basis without going into the facts of the case.”

Ground No. 5 13. The ground no. 5 is related to the addition of difference in GP Rs.7,56,140/-. The ld. AR placed that in preceding year the GP rate was 11.24 on turnover to in current year the GP rate is 10.20. The turnover was also duly in preceding year was 4.44 crore and in current years 7.23 crore. Only GP rate 0.32% has reduced so there is a reason for reduction of GP rate related to increase of turnover. However, the change of GP rate is very negligible. The ld. AR consider the submission and prayed for quashing the addition.

1. That the Ld. CIT(A), Bathinda erred on facts and law in confirming the additions of Rs. 18,28,940/- made by the AO vide order u/s 143(3) dated 28-03-2016.

2. That the Ld. CIT(A) erred on facts and law in confirming the action of the AO of applying the provisions of section 145(3) after rejecting the books of account despite the fact that no specific defect has been pointed out in the books of account which were produced during the course of assessment proceedings.

A.Y.: 2010-11 & 3 Ors 12

3. Notwithstanding the above grounds of appeals, the Ld. CIT(A) erred on facts and law in confirming the addition of Rs.18,28,940/- on account of peak of the alleged cash flow of payments to M/s Surinder Sat Agro Foods without rebutting the contentions of the appellant. The explanation furnished during the course of assessment as well as appellate proceedings has been rejected without rebutting the same.

oefore the appeal is finally heard or disposed of.” In the result, the grounds of aassessee bearing is allowed for statistical purpose.

17. The ld. AR filed a written submission and as per the written submission the ld. AR further argued that the payments made to the party “SSAF” was duly withdrawal from Bank account of the assessee from SBI. In this respect the ld. AR submitted a copy of accounts with assessee and party in APB-1 where the source are duly explained which are withdrawal from the current a/c of the assessee. The ld. AR argued that the entire issue was not considered by the ld. AO and without proper care and addition was made. The relevant documents are also enclosed in Annexure 2 APB page 3 to 11.

A.Y.: 2010-11 & 3 Ors 13

Needless to say, the assessee should get a reasonable opportunity of hearing in set aside proceeding. In the result, the appeal of the assessee is partly allowed for statistical purposes.

initiated i.e. for concealing the particulars of income or furnishing inaccurate particulars of income. 3. The Ld. CIT(A) erred on facts and law in confirming the penalty imposed by the AO u/s 271 (1 )(c) without rebutting the explanation furnished by the assessee during the course of assessment as well as penalty proceedings. 4. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”

21. This ITA 69/Asr/2019 is related to the penalty u/s 271(1)(c) amount to Rs.6 lacs of penalty. As the quantum appeal for assessment year 2013-14 is set aside to the file of the ld. AO. Accordingly, the penalty u/s 271(1)(c) is remanded back to the file of the ld. AO. The penalty will be levied after the considering the quantum. Accordingly, appeal of the assessee ITA 69/Asr/2019 is also allowed for statistical purposes.