Harish Ahuja v. Commissioner Of Income Tax, Chandigarh

ITA No. 196 of 2015 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 196 of 2015 Date of Decision: 24.8.2015 Harish Ahuja ....Appellant. Versus Commissioner of Income Tax, Chandigarh ...Respondent. CORAM:-HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE RAMENDRA JAIN. 1.Whether the Reporters of the local papers may be allowed to see the judgment? 2.To be referred to the Reporters or not? Yes 3.Whether the judgment should be reported in the Digest? PRESENT: Mr. Ravi Shankar, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the assessee underSection 260A of the Income Tax Act, 1961 (in short “the Act”) against theorder dated 31.12.2014 (Annexure A-3) passed by the Income TaxAppellate Tribunal, Chandigarh Bench “B”, Chandigarh (hereinafterreferred to as “the Tribunal”) in ITA No. 484/CHD/2013 for theassessment year 2009-10, claiming the following substantial question oflaw:- Whether on the facts and in law the ITAT is justified inupholding the rejection of books of account merely for absence of stock register, despite there being noother defect in sale, purchase and books of accounts;which means non-fulfillment of ingredients u/s 145(3)of Income Tax Act, 1961 regarding incompleteness orincorrectness of books of account as the AO himselffound that the stock shown is on the higher side? 2.Briefly stated, the facts, necessary for adjudication of theinstant appeal as narrated therein may be noticed. The assessee filedhis return of income 30.9.2009 for the assessment year 2009-10declaring the income at ` 14,04,784/-. The Assessing Officer vide orderdated 28.12.2011 (Annexure A-1) passed under Section 145(3) of theAct framed the assessment at ` 55,14,510/- by making an addition of` 41,09,728/-. Feeling aggrieved, the assessee filed an appeal beforethe Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”].The CIT(A) vide order dated 1.3.2013 (Annexure A-2) while partlyallowing the appeal of the assessee restricted the GP rate to 9% andupheld the rejection of books of account. Still dissatisfied, the assesseefiled an appeal before the Tribunal who vide order dated 31.12.2014(Annexure A-3) upheld the ground of rejection of books of account anddirecting the Assessing Officer to apply GP rate of 8% instead of 9% asordered by the CIT(A). Hence, the present appeal by the assessee. 3.Learned counsel for the assessee relying upon thejudgments in Pandit Brothers v. Commissioner of Income-Tax, Delhi26 ITR 159 (Punjab), Ashoke Refractories Pvt. Ltd. v. Commissionerof Income Tax 279 ITR 457 (CAL) and Commissioner of Income Taxv. Smt. Poonam Rani, 326 ITR 223 (Delhi) submitted that non-production of stock register by itself was not sufficient to invoke Section 145(3) of the Act. It was urged that the rejection of books of account bythe Assessing Officer, in the facts and circumstances of the case, wasuncalled for. 4.After hearing learned counsel for the assessee and perusingthe record, we do not find any substance in the argument raised by thelearned counsel. The Assessing Officer passed the assessment orderunder Section 143(3) of the Act by applying GP rate of 10% on grosssales of ` 11.74 crores after rejecting the books of account underSection 145(3) of the Act on the ground that no stock register wasmaintained by the assessee and, thus, made an addition of ` 41,09,728/-to the total returned income. The CIT(A) held that the figure of closingstock declared by the assessee in the profit and loss account was notverifiable in the absence of stock register and so the GP rate was notverifiable and accordingly restricted the GP rate to 9% and upheld therejection of books of account. The Tribunal while upholding the orders ofthe Assessing Officer as well as the CIT(A) qua rejection of books ofaccount, estimated the GP rate at 8% instead of 9% as ordered by theCIT(A). 5.The assessee was trading in the items of well establishedcompanies and is also a wholesaler C&F agent. In order to checkveracity of the gross profit disclosed by the assessee, maintenance ofstock register by the assessee was essential. The Assessing Officer hadcompared the gross profit rate of the assessee viz-a-viz other similarconcerns. No satisfactory explanation had been furnished by theassessee for not maintaining the stock register. The rejection of booksof account of the assessee by the Assessing Officer was, thus, justified.The relevant findings recorded by the Tribunal read as under:- -4- “7.On consideration of the rival submissions, weare of the view rejection of the books of account isjustified in the matter. The Assessing Officer hasverified the GP rate of different concerns and foundassessee has been declaring different GP, thoughsame calculation was found to be defective by ld. CIT(Appeals) but the fact remains that there was avariation in the GP rate and further, assessee has notmaintained any stock register, therefore theverification of the proper gross profit could not bedone by the Assessing Officer. The valuation of theclosing stock was thus, not verifiable. It was alsofound that assessee is trading in the items of wellestablished companies and is a wholesaler/C&Fagent. Therefore, stock register should have beenmaintained by assessee. Therefore, considering theobjections raised by the Assessing Officer, therejection of books of account is justified. We,therefore, confirm the orders of the authorities belowin rejecting the books of account of the assessee.However, considering the history of the assessee inwhich the assessee has declared lesser gross profitand accepted by the Department, it would bereasonable and proper to direct the authorities belowto apply gross profit rate of 8% instead of 9% appliedby the ld. CIT(Appeals). The orders of authoritiesbelow to that extent are modified and it is directed that income of the assessee be computed by applying GPrate of 8% instead of 9% applied by the ld. CIT(Appeals).” 6.Now adverting to the judgments in Pandit Brothers, Ashoke Refractories Pvt. Ltd. and Smt. Poonam Rani's cases(supra) relied upon by the learned counsel for the appellant, it may benoticed that the principle of law enunciated therein, is well recognized,however, being based on individual fact situation involved therein wouldbe of no help to the case of the assessee. In view of the findings noticedhereinbefore, no benefit can be derived by the assessee from theaforesaid pronouncements. 7.In view of the above, no substantial question of law arises inthis appeal. Accordingly, finding no merit in the instant appeal, the sameis hereby dismissed. (AJAY KUMAR MITTAL) JUDGE August 24, 2015gbs (RAMENDRA JAIN) JUDGE