Rajesh Kumar Mangla , Gurgaon vs Department Of Income Tax

ITA NO. 4503/Del/2013

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "F", NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. No. 4503/Del/2013 A.Y. : 2008-09 INCOME TAX VS. SH. RAJESH KUMAR OFFICER, MANGLA, WARD 2(1), 13-A, MIANWALI GURGAON COLONY, GURGAON (PAN: AHCPM1045P) (APPELLANT) (RESPONDENT)

Department by : Sh. Vikram Sahay, Sr. D.R. Assessee by : Sh. Vinod Arora, CA

Date of Hearing : 06-01-2015 Date of Order : 09-01-2015

ORDER

PER H.S. SIDHU : JM This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-2, Faridabad dated 20.5.2013 pertaining to assessment year 2008-09.

2. The grounds of appeal read as under:-

1. "Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 22,85,157/-

made by the Assessing officer by rejecting books of accounts and applying a higher GP than shown by assessee despite the fact that AO rejected books after ascertaining that the assessee's balance sheet showed transactions with five parties who had denied business transactions with the assessee.

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2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 22,85,157/- made by the Assessing Officer by accepting the debtors as genuine whereas during the assessment proceedings all the debtors were proved to be non genuine having no business with the assessee.

3. Whether on the facts and circumstances of the case, the Ld. CIT(A) was justified in accepting the assessee stand regarding genuineness of transactions when the party could not be located at the given address.

4. The appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal. "

3. The brief facts of the case are that in this case Return

declaring income of Rs. 12,81,970/-, was filed on 29.9.2008 which

was processed u/s. 143(1) of the I.T. Act, 1961 on 17.3.2010 at the

returned income. The case was selected under compulsory scrutiny

through CASS. Statutory notice u/s. 143(2) of the I.T. Act, 1961 was

issued on 12.8.2009, which was duly served upon the assessee.

Notice u/s. 142(1) alongwith detailed questionnaire was issued on

17.8.2010, which was duly served upon the assessee. The

jurisdiction over the case was assigned to the office of the Addl. CIT,

Gurgaon Range-II, Gurgaon. Requisite information called for have

been furnished, examined and verified and placed on records. On

going through the records, Ld. AO observed that debtors shown by

the assessee are bogus and fictitious. Hence, the books of accounts

of the assesee are not reliable and the same are defective.

Therefore, the books of account of the assessee are rejected u/s.

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145 of the Act and accordingly, made the addition of Rs. 22,85,117/-

in the hands of the assessee vide order dated 31.12.2010.

4. Against the above order the assessee appealed before the Ld.

CIT(A). Ld. CIT(A) elaborately discussed the issues in his order and

accordingly, deleted the addition made by the AO by allowing the

assessee's appeal vide order dated 10.1.2011.

5. Against the above order the Revenue is in appeal before us.

6. We have heard both the counsel and perused the relevant

records, orders of the revenue authorities and written submissions

filed by the assessee through Paper Book wherein he has stated that

Ld. CIT(A) vide para 3.7 clarifies that in this Remand Report the Ld.

AO has accepted that account was confirmed by four parties and

transaction with all the five parties stated in Assessment Order were

duly reflected in Bank Account of the assessee. He further

submitted that those parties were customer of the assessee, there

was no outstanding balance receivable from them at the close of the

year. Transaction with them was only to tune of Rs. 4,03,319/- as

against total turnover for the year being Rs. 22,34,09,540/-.

Rejection of books of account on this ground is totally unlawful and

incorrect.

6.1 We find that AO, on a perusal of trading and profit and loss

account observed that the assessee had credited commission

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income at Rs. 21,39,686/- and GP had been shown at Rs. 20,88,624/-

whereas in the preceding assessment year the commission income

had not been credited in the trading account and was shown

separately in the profit and loss account. The AO, therefore,

reduced commission income in the current year, which resulted in

GP going down to (-) 0.02%. On the basis of these calculations, the

AO concluded that there was a fall in GP rate by 0.62% during the

year as compared to the immediately preceding assessment year.

Since the assessee was not able to produce confirmations, the AO

rejected the books u/s. 145 of the Income Tax Act and estimated the

GP rate @1% resulting in an addition of Rs. 22,85,157/-. We also

find that Ld. CIT(A) sent the additional evidence submitted by the

assessee to the AO for his remand report and AO has submitted his

Report on 19.2.2013 which is reproduced hereunder:-

"From the above facts, it is clear that only one debtor, M/s Spice Communication has furnished confirmation alongwith copy of account. Confirmation in r/o M/s Soni Cellphone, M/s Priyanka Communications, M/s Jain Communications has been furnished by the counsel of the assessee. In the case of M/s JMD Communication, the counsel of the assessee was also not able to furnish confirmation. However, the transactions of all the debtors are duly reflected in the Bank

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account of the assessee. Keeping in view the above facts, admission of additional evidence may kindly be decided on merits."

From the above, we find that Ld. CIT(A) clarified that the AO in

his Remand Report has accepted that account was confirmed by

four parties and transaction with all the five parties stated in

assessment order were duly reflected in the bank account of the

assessee.

6.2 We also find that Ld. CIT(A) has observed that during the year

under consideration and the immediately preceding year the

assessee was a distributor of Idea Rechargeables and Handsets.

During the year under consideration, there was a change in the way

the accounts were presented by the assessee. We find Ld. CIT(A)

in the immediately preceding year sales / purchases of

Rechargeables being tax free were shown separately by netting off

their sale and purchases and showing only the net income arising

on account of purchase and sale of rechargeables. We find that Ld.

CIT(A) has observed that the GP rate in case of purchase /sale of

handsets and that in any purchase /sale of rechargeables for the

period relevant to the assessment year 2007-08 and asstt. year

2008-09 is as under:-

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ITA NO. 4503/Del/2013

GP Rate 2008-09 2007-08 Handsets .62% .62% Rechargeables .94% .84% Thus, if the same accounting treatment is given to the business of purchase / sale of rechargeable in both the years, the GP rate during the year under consideration turns out to be higher than in the immediately preceding year. Ld. CIT(A) observed that the argument of the AO that the GP rate has fallen in the year under consideration compared to the immediately preceding year is bereft of any force and logic. We find that Ld. CIT(A) has been able to understand the explanation given by the assessee with facts and figures that the GP rate is higher during the current year in the business of trading in rechargeables as compared to the immediately preceding year whereas in the business of trading in handsets, constituting a very small part of the total business of the assessee, the GP rate is the same for the two years. Thus, on a consolidated basis the GP rate of the entire business of the assessee is higher during the current year as compared to the immediately preceding year. We find ld. CIT(A) has concluded that AO was not justified to reject the books of accounts to estimate the profits of the assessee at the rate higher than that given in the books of account of the assessee. The GP rate as explained by the assessee was higher in the year under consideration compared to the immediately preceding year and hence any addition on this basis was uncalled for. As regards confirmations, the assessee was given inadequate time to file these. If the AO wanted to get the accounts of some of the parties confirmed, he could have given some more time to the assessee to file confirmed copies of accounts which could have changed his mind regarding his action to reject the books of

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account. Therefore, Ld. CIT(A) held that AO was erred in rejecting the books of account of the assessee and estimating profits of the assessee. Hence, he deleted the addition made by the AO. In view of the above, we find that Ld. CIT(A) has rightly deleted the addition Rs. 22,85,157/- which does not need any interference on our part, hence, the same is upheld.

7. In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Open Court on 09/01/2015.

Sd/- Sd/-

[S.V. MEHROTRA] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER Date 09/01/2015 "SRBHATNAGAR" Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order,

Assistant Registrar, ITAT, Delhi Benches

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