Karnal Agricultural Steel Industries vs Assistant Commissioner Of Income Tax

PER VIKAS AWASTHY, JM:

The present Miscellaneous Application has been filed by the assessee under Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963 for recalling of ex-parte order of Tribunal dated 24.04.2018.

Shri Mayank Patawari, appearing on behalf of the assessee submits that the Tribunal vide order dated 24.04.2018 dismissed the appeal of assessee in limine for non-prosecution. The ld. Counsel submits that no notice of hearing was received by the assessee after filing of appeal. In the absence of any notice, the assessee was oblivious of the proceedings in the Tribunal on the appeal filed. Hence, the assessee could not appear on the dates fixed for hearing. The ld. Counsel prayed for recalling of an ex-parte order dated 24.04.2018 and prayed for an opportunity to make submissions on merits. The ld. Counsel stated that the assessee has prima facie good case on merits and if an opportunity is granted the assessee would be able to substantiate that the addition made by Assessing Officer (AO) on estimations is liable to be deleted.

Per contra, Shri Vikram Singh Sharma representing the department opposed assessee’s application for recalling Tribunal order dated 24.04.2018 and restoration of appeal.

Both sides heard. The assessee by way of present application is seeking recalling of ex-parte order by the Tribunal dated 24.04.2018, whereby, appeal of the assessee was dismissed for non-prosecution. Considering entire facts of the case, the order dated 24.04.2018 is recalled and the appeal is restored to its original number for fresh adjudication on merits.

In the result, Miscellaneous Application of the assessee is allowed.

With concurrence of both sides, the appeal was taken up for hearing on merits.

The ld. Counsel for the assessee submits that the assessee is engaged in trading of agricultural implements viz harrow discs, tynes, hooks, cultivators, etc. During the period relevant to assessment year under appeal, the assessee had declared GP rate of 0.76%. The assessee produced books of accounts before the Assessing Officer (AO). The AO rejected the books and made best judgment assessment u/s.144 of the Income Tax Act,1961(hereinafter referred to as ‘the Act’). The AO assessed GP at the rate of 4% and made addition of Rs.1,56,21,162/-. Further, the AO made addition of Rs.4,85,932/-u/s.68 of the Act in respect of difference in the credit balance of the creditors M/s. Karnal Agricultural Steel Industries Ltd. The ld. Counsel submits that the assessee had produced Audited financials before the AO. The AO rejected the same merely for the reason that the assessee has not maintained stock register. The AO has made addition estimating GP at 4% which is far more than actual GP of 0.76% declared by the assessee. In appeal before the CIT(A), the assessee remained unsuccessful. Hence, the present appeal.

Per contra, Shri Vikram Singh Sharma representing the department vehemently defending the impugned order submitted that the assessee failed to furnish relevant documents and registers before the AO and the CIT(A). No stock register of quantitative tally of goods traded by the assessee was maintained. Even, the vouchers produced by the assessee were incomplete and did not mention description and specification of the goods. The ld. DR reiterated findings of the AO and the CIT(A) to support that the books of accounts were rightly rejected by the AO. The ld. DR contended that in so far as the addition u/s.68 of the Act, the assessee kept on changing his stand in explaining the difference between the credit balances reflected in books of the assessee and the confirmation received from the creditor. Therefore, the CIT(A) rightly rejected the contention of the assessee. Even in remand proceedings, the assessee was not able to explain the reason for difference in the credit balances. The ld. DR thus prayed for upholding the impugned order and dismissing appeal of the assessee.

Both sides heard, orders of the authorities below examined. The assessee in appeal has assailed the order of CIT(A) on following counts:-

It is an undisputed fact that the assessee had not maintained stock register. A perusal of assessment order reveals that in submissions made before the AO, the assessee had expressed its hardship in not maintaining stock register, as the goods were purchased by weight and were sold in numbers. The assessee took support of no statutory requirement of maintenance of daily stock movement registers under Central Excise Act, Central Sales Tax Act and Haryana VAT Act, for not maintaining stock register. Further, the vouchers produced by the assessee were having cryptic description of products. Therefore, it was not possible to identify vouchers viz a viz products sold. For example under the heading ‘Description and Specification’ it was only mentioned ‘parts of agricultural machinery’. No further description or the article or the specific part of agricultural implement in which assessee is dealing was mentioned in the vouchers. Therefore, from vouchers, stock register could not have been maintained. Since, without stock register it was not possible to ascertain opening stock, closing stock and stocks old, the AO rejected books produced by the assessee. We find no infirmity in rejecting books of account by the AO. Hence, ground of appeal no. 2, 4, 5 & 6 of appeal are dismissed being devoid of merit.

In so far as estimation of GP is concerned, since the AO rejected books of account of the assessee the AO had to estimate profits of the assessee on some reasonable basis. The assessee has declared GP of 0.76% for the period relevant to assessment year under appeal. The Assessing Officer has estimated GP at the rate of 4% after considering GP of comparables trading in agricultural implements in that area. The GP of comparable entities taken by the AO is tabulated as under:-

The assessee objected to selection of comparables on the ground that Agri Impex is engaged in exports of agricultural implements. Therefore, it is having higher margins. With regard to other two entities, it was explained that the assessee’s scale of operation is much larger, therefore, the assessee is trading on lesser margins. The AO accepted the reasons explained by the assessee and has thereafter scaled down proposed estimated GP of 6% to 4%. Taking into consideration entire facts and circumstances of the case, we are of considered opinion that the ends of justice would be met if the GP addition is estimated at 2%. Thus, ground no. 3 of appeal is partly allowed.

In ground no. 7 of appeal, the assessee has assailed addition of Rs.4,85,932/-u/s.68 of the Act. The AO has made addition u/s.68 of the Act as there was difference between the credit balances reflected in the books of assessee at Rs.2,86,15,613/- and the confirmations from the creditor i.e. Karnal Agricultural Steel Industries Ltd. in its books having debit balance of Rs.2,81,29,681/- s. During First Appellate proceedings, the assessee explained that the difference can be reconciled and a letter to that effect from Karnal Agricultural Steel Industries Ltd. was also filed before the CIT(A). The CIT(A) sought remand report under Rule 46A of the Act from the AO. During remand proceedings before the AO, the assessee took a different stand and submitted that certain credit entries not pertaining M/s. Karnal Agricultural Steel Industries Ltd. were wrongly shown in its accounts and in fact credit entries amounting to Rs.4,85,932/- pertain to some other parties and furnished the names of five parties as under:-

The remand report was forwarded to the assessee for comments, however, the assessee made no submissions on the remand report furnished by the AO. No explanation has been furnished by the Counsel for the assessee either before us. The assessee has been taking inconsistent stand with regard to addition made u/s.68 of the Act, hence, we see no reason to disturb findings of the Authorities below on this issue. In the result, ground no. 7 of appeal is dismissed.

In the result, appeal of the assessee is partly allowed.