Mohinder Kumar Prop., Rohtak vs Department Of Income Tax

ITO, Vs. Mohinder Kumar, Ward-2, Prop., M/s Durga Agencies, Rohtak. Mohalla Mahajan, Rohtak.

PAN: AAUPK8650N

(Appellant) (Respondent)

Assessee By : Shri Gautam Jain, Advocate Department By : Shri P. Dam Kanunjana, Sr. DR

Date of Hearing : 28.04.2015 Date of Pronouncement : 29.04.2015

ORDER PER R.S. SYAL, AM:

This appeal by the Revenue is directed against the order passed by

the CIT(A) on 31.5.2013 in relation to the assessment year 2010-11. ITA No.4714/Del/2013

2. The first ground is against the deletion of addition of

Rs.81,01,606/-.

3. Succinctly, the assessee is engaged in the trading of sugar. For the

year in question, a turnover of Rs.48.63 crore was declared with gross

profit rate of 0.79%. The corresponding figures of sales for immediately

preceding financial years 2008-09 and 2007-08 were Rs.9.65 crore and

Rs.10.06 crore respectively with gross profit rate of 2.46% and 0.88%

respectively. As the gross profit rate for the year saw a dip in

comparison with earlier two years, the AO came to hold that the books

of account were not properly maintained. It was also observed that the

assessee had shown to have purchased sugar in cash for Rs.75,000/-. In

the absence of any documentary evidence, the same was held to be non-

genuine. Resorting to the provisions of Section 145 of the Act, the AO

rejected the books of account and applied the gross profit rate of 2.46%.

This resulted into an addition of Rs.81,01,606/-. The ld. CIT(A) deleted

the addition.

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4. We have heard the rival submissions and perused the relevant

material on record. It is observed that the assessee is a trader in sugar.

The assessee categorically stated before the AO that the quantitative

details of purchase and sale were duly kept by the assessee, which fact

finds a mention on page 2 of the assessment order. This argument has

not been controverted by the AO. The AO has rejected the books of

account simply on the reason of low gross profit rate in the current year

vis-à-vis the preceding years. The assessee cited an example of a

comparable case of Sundar Lal Ajay Kumar before the ld. CIT(A), who

had shown the GP rate for the same year at 0.56% on turnover of

Rs.49.34 crore. The ld. CIT(A) forwarded such details to the AO asking

for the comments. Considering all these things, the addition has been

deleted. In our considered opinion, the ld. CIT(A) was justified in

deleting the addition for the obvious reason that the books of account

cannot be held to be improperly maintained simply because there is

lower gross profit rate. It becomes more pertinent when the assessee

maintains quantitative details, which remain uncontradicted. In order to

reject the books of account when stock registers are maintained, it is 3 ITA No.4714/Del/2013

necessary for the AO to, inter alia, point out the factual inconsistencies

in the quantity and/or value of purchases, sales, opening and closing

stock. Here is a case in which no such inconsistencies have been

pointed out by the AO. We further find that the GP rate of 0.79% shown

by the assessee favourably compares with 0.56% on turnover of

approximately same value shown by M/s Sundar Lal Ajay Kumar, who

is also dealing in sugar. In view of the above discussion, we hold that

the ld. CIT(A) was justified in upholding the maintenance of books of

account and, resultantly, deleting the addition so made by the AO. The

view taken by the ld. first appellate authority is countenanced and the

ground is dismissed.

5. The only other ground is against the deletion of addition of

Rs.1,55,80,968/-. The facts of this ground are that the assessee was

called upon to furnish details of expenses towards Freight on purchases,

Loading charges, Weight short, Quality claim, Rate difference,

Stationery and Conveyance etc. These expenses totaled Rs.1.55 crore.

The AO disallowed the entire amount on the ground of non-production

4 ITA No.4714/Del/2013

of any reliable and sustainable evidence. The ld. CIT(A) ordered for the

deletion of addition.

6. After considering the rival submissions and perusing the relevant

material on record, we find that the AO has disallowed expenses on

freight on purchases and loading, etc., which form part of Trading

account. Such expenses total Rs.1.44 crore. Once a particular gross

profit rate is applied, there remains no logic in separately making

addition towards some items of Trading account. While dealing with

the first ground, we have accepted the proper maintenance of accounts.

The AO has generalized the things by stating that reliable evidence in

support of expenses was not filed. He has not specifically pointed

towards lack of or improper evidence. We further do not find any

substance in the action of the AO in disallowing the entire expenditure

claimed by the assessee. The invocation of section 40(a)(ia) by the AO

is, again, unbacked by any material to indicate that the assesseee was

liable to deduct tax at source from the payments, which it failed to do.

There is no mention of any specific provision under which the assessee

5 ITA No.4714/Del/2013

was required to deduct tax at source, which it failed to. Here again, the

things have been stated generally without reference to any specific

amount requiring deduction of tax at source under a particular section. In

our considered opinion, the ld. CIT(A) was justified in deleting this

addition. Ergo, we uphold the same. This ground also fails.

7. In the result, the appeal is dismissed.

The order pronounced in the open court on 29.04.2015.

Sd/- Sd/- [H.S. SIDHU] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated, 29th April, 2015. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT

AR, ITAT, NEW DELHI.

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