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Aftab Ahmed, Anurag Maheshwai and Co., 2nd Floor, Raghav Plaza, Court Road, Saharanpur, vs. ITO, Ward-1, Saharanpur
May, 07th 2019
                     INCOME TAX APPELLATE TRIBUNAL
                       DELHI BENCH "A": NEW DELHI
               BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER
                                  AND
             SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER

                           ITA No. 3040/Del/2013
                         (Assessment Year: 2009-10)
              Aftab Ahmed,            Vs.            ITO,
      Anurag Maheshwai and Co.,                     Ward-1,
     2nd Floor, Raghav Plaza, Court               Saharanpur
           Road, Saharanpur,
            PAN: AIAPA2731
               (Appellant)                       (Respondent)


               Assessee by :                  Shri PS Kashyap, CA
                Revenue by:                 Shri Janardan Das, Sr. DR
              Date of Hearing                      18/02/2019
           Date of pronouncement                   06/05/2019


                                   ORDER

PER PRASHANT MAHARISHI, A. M.

1.   This is an appeal filed by the assessee against the order of the ld CIT (A),
     Muzaffarnagar dated 05.03.2013 for the Assessment Year 2009-10.
2.   The assessee has raised the following grounds of appeal:-
     "1.    The addition made by the ld AO on account of addition in gross
            profit of the is bad in law and on facts and is based on conjectures
            and surmises.
     2.     The addition on account of introduction of capital by the ld AO in
            law and facts."
3.   Brief facts of the case shows that assessee is an individual who is running
     a trading business of livestock and manufacturing the raw buffalo meat
     on wholesale basis.     The assessee filed       his return of income on
     30/9/2009 declaring an income of INR 271480/­.        The assessment u/s
     143 (3) of the act was passed on 26/12/2011 in which the learned
     assessing officer has made the total addition of INR 53,68,097/­.    Out of
     these, only two additions are contested before us        (1) on account of
     low gross profit rate adopted by the assessing officer amounting to INR
     75014/­,    (2) the addition on account of capital introduction of INR 2
     05680/­. The assessee preferred an appeal before the learned CIT ­ A
                                                                          Page | 1
     who passed an order on 5/3/2013 partly allowing the appeal of the
     assessee and therefore the assessee is in appeal against        both these
     addition sustained by the learned CIT ­ A.
4.   The 1st ground of appeal is with respect to addition on account of gross
     profit. The facts relating to the above addition shows that that this is the
     1st year of the business of the assessee and assessee on a total sales of
     INR 29,600,000 disclosed a gross profit of 2.25 percentage. The learned
     assessing officer noted that in case of another company ALM industries
     Ltd has declared a gross profit rate of 8.05% on the total sales of     Rs.
     2875770211/­ for the assessment year 2009 ­ 10 and therefore the
     learned AO therefore made an addition of INR 7 5014/­ estimating the
     gross profit at the rate of 2.5%. On appeal before the learned CIT ­ A
     assessee contested the same raising several arguments mentioned at
     page number 10 ­ 14 of his order. The learned CIT ­ A also obtained the
     remand report of AO and rejoinder of assessee. The learned CIT ­ A in
     para no. 3.3.5 of his order has confirmed the addition stating that in case
     of some other assessee dealing in similar trade for assessment year 2009
     ­ 10 reasonable gross profit was estimated and adopted the rate of
     2.50%.   He further noted that in case of ALM industries Ltd the gross
     profit rate of 8.5% is shown.    He further rejected the argument of the
     assessee that the comparable cases details were not made available to
     assessee as assessee himself brought the details downloaded from the
     website. The learned CIT ­ A also stated that in the case of the business
     of the assessee purchases could never be subject to cross verification and
     appellant is at liberty to manipulate the accounts.
5.   Aggrieved by the order of the learned CIT ­ A, the learned authorised
     representative submitted a detailed written submission stating that there
     is no allegation on the assessee that it has manipulated its books of
     accounts. He further stated that the books of accounts of the assessee
     are audited u/s 44AB of the act.      He further stated that there is no
     allegation of any sales made out of the books or none of the purchases
     have been found to be fictitious. In view of this he submitted that the AO
     does not have a right to disturb the book results shown by the assessee.






                                                                          Page | 2
6.   The learned departmental representative vehemently supported the
     orders of the lower authorities. It was stated that when in comparable
     cases the usual gross profit has been disclosed then it is very unusual
     that assessee has shown a very low gross profit.
7.   We have carefully considered the rival contentions and perused the
     orders of the lower authorities.     The fact shows that the books of
     accounts of the assessee are audited and the learned assessing officer
     has made addition only on the basis of the comparable cases.         Merely
     because some other assessee has shown higher profits, the addition
     cannot be made in the hands of the assessee without rejecting the books
     of the accounts of the assessee by pointing out latent, patents, and
     glaring defects in the books of accounts.    The learned AO has failed to
     show that the books of accounts of the assessee are not reliable.       The
     learned CIT ­ A has also confirmed the addition for the simple reason that
     there are chances of the manipulation of book results by the assessee as
     the purchases cannot be verified. This being a mere allegation      and on
     the basis of an allegation the book results of the assessee which are
     audited under section 44AB of the act and no unaccounted sales or
     purchases have in fact been found by the lower authorities, rejection of
     the books of accounts and then making an addition in the hands of the
     assessee by comparable cases is not justified. Even the AO has not given
     the details of the comparable cases to the assessee.         Therefore the
     conduct of the assessing officer also lacks fair play. In view of this we do
     not find any reason to sustain the addition of INR 7 5014 in the hands of
     the assessee on account of lower gross profit.         Accordingly ground
     number 1 of the appeal of the assessee is allowed.
8.   The 2nd ground of appeal is with respect to the addition of INR 2 05680/ ­
     on account of addition of the capital.      As it was the 1st year of the
     business, the learned AO noted that in the month of April 2008 the
     assessee has made an investment of Rs. 2835000/­ in purchase of live
     stocks for the 1st time. Therefore the assessee was directed to explain
     the source wherefrom such investment has been made.          Assessee filed
     the copy of the account of buyer and copy of capital account. AO noted

                                                                          Page | 3
that   on 14/4/2008 the assessee introduced a cash of INR 50,000/- and
on 4/4/2008 cash of INR 1 55680/- has been introduced as a fresh
capital.   The source of this cash in the books of account was not
explained and therefore the learned AO made an addition of INR
205680/­ to the total income of the assessee. The assessee agitated the
issue before the learned CIT ­ A.      Before the learned CIT ­ A in para
number 3.4 it was noted that appellant did not furnish any written
submission on the impugned issue.       However in the remand report the
learned assessing officer reiterated the same facts as stated before him.
The learned AO stated that despite giving opportunity to the assessee
adequately to explain the source of investment, assessee did not bother
to offer any explanation. In the rejoinder assessee submitted that he is
an income taxpaying since assessment year 2005 ­ 06 and submitted the
copies of the income tax returns for assessment year 2005 ­ 06 ­
assessment year 2008 ­ 09.        He therefore stated that as assessee is
assessed to income tax the source of capital introduced out of the savings
made by the assessee during the past year with stands duly explained
and therefore the addition has been wrongly made. It was further stated
that vide reply dated 28/11/2011 the assessee also submitted the
statement of affairs for financial year 2006 ­ 07, 2007 ­ 08 and 2008 ­
09 which were not stated to be incorrect by the AO. The learned CIT ­ A
examined the assessment order and found that appellant along with the
written submission has filed only capital account for assessment year
2009 ­ 10 and copies of the income tax returns were not filed. Therefore
he stated that the contentions raised by the assessee are blatantly
wrong. He further stated that on the examination of the return of income
for assessment year 2009 ­ 10 which shows that the appellant has
earned meager salary of INR 96000 only. He further held that in absence
of any details of earlier earning filed either before the assessing officer or
during the appellate proceedings he confirmed the addition. Accordingly
the assessee has challenged the above before us vide ground number 2
of the appeal.



                                                                       Page | 4
9.    Learned   authorised   representative   submitted    that   assessee   has
      introduced capital in cash in the new business and assessee is assessed
      to income tax for passed so many years.       He stated that copy of the
      income tax return and statement of affairs are placed on record which
      shows that assessee has a capital balance in one firm of INR 362762 as
      on 31/3/2009. Therefore it was stated that since the statement of affairs
      of the assessee clearly shows the capital investment in the business and
      the trade in particular is cash-based therefore there is no reason not to
      believe that the capital introduced in the business of the assessee in the
      month of April is out of the explain the sources of the assessee.       He
      therefore stated that the addition made by the learned assessing officer is
      erroneous.
10.   The learned departmental representative vehemently supported the order
      of the learned AO as well as CIT ­ A.       It was stated that when the
      assessee has failed to submit anything before the assessing officer and
      when the details are submitted as alleged by the assessee before the
      learned CIT ­ A, on examination of the assessment folder, the learned
      CIT ­ A has proved that the statement made by the assessee is wrong.
      Even otherwise there is no availability of the cash with the assessee in
      the business and therefore the addition has rightly been made by the AO.
11.   We have carefully considered the rival contention and found that the
      assessee has introduced a sum of INR 205 680/­, assessee has
      introduced the cash as on 1/4/2000 of INR 50,000 and on 4/4/2008 cash
      of INR 155680/­. The assessee has taken a support of his tax returns
      filed for assessment year 2005 ­ 06 onwards to show that assessee has
      enough cash available in his hands to introduce in the books of account
      on those dates.     The relevant papers have been submitted by the
      assessee at page number 21-44 of the paper book submitted.              On
      verification of these documents it was found that assessee has not
      submitted the cash book of proprietary concern of the assessee.        For
      assessment year 2008 ­ 10 the assessee has filed the return of income
      showing total income of INR 126,000 and out of which he has made an
      investment of INR 20,000 and therefore the net available amount with






                                                                          Page | 5
       him is only INR 1 06, 000 for assessment year 2008 ­ 09 and from which
       the household expenditure of the assessee are required to be reduced.
       Therefore it cannot be believed that assessee has anything left in his
       hands as cash. Further for assessment year 2007 ­ 08 the assessee has
       earned an income of INR 162,000 out of which he has made an
       investment of INR 45,000 and he has left with the net income of INR 1
       17000 from which his annual household expenditure are required to be
       reduced.   Therefore from the records produced before us it is apparent
       that assessee did not have enough cash available with him to introduce in
       the books of his proprietary firm. Even before us the assessee did not
       show any credible evidences which can show that assessee has available
       sources of the funds to deposit with the firm. In view of this we do not
       find any infirmity in the order of the lower authorities in confirming the
       addition of INR 205680 in the hands of the assessee. Accordingly ground
       number 2 of the appeal of the assessee is dismissed.
12.    In the result appeal filed by the assessee is partly allowed.
       Order pronounced in the open court on 06/05/2019.

             -Sd/-                                             -Sd/-
        (H.S.SIDHU)                                     (PRASHANT MAHARISHI)
       JUDICIAL MEMBER                                  ACCOUNTANT MEMBER

 Dated: 06/05/2019
A K Keot

Copy forwarded to

  1.   Applicant
  2.   Respondent
  3.   CIT
  4.   CIT (A)
  5.   DR:ITAT
                                                           ASSISTANT REGISTRAR
                                                             ITAT, New Delhi




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