Pradeep Dwarkaprasad Biyani, Bhattar Road V. DCIT, CIRCLE 1 (3), ADAJAN, SURAT

CO 1/SRT/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3730 (ITAT-SURAT)
• Duration Of Justice: 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-02-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-02-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 07-02-2024
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 871/SRT/2023 (AY: 2015-16) (Hearing in Physical Court) D.C.I.T. Circle- 1(3), Adajan, Surat. Vs. Pradeep Dwarkaprasad Biyani Shop No. 28-29, Vardhman Complex, Opp. Uma Bhavan, Bhattar Road, Surat-395007 PAN : AASPB 9593 R APPELLANT RESPONDEDNT C.O. No. 01/SRT/2024 (Arising out of ITA No. 871/SRT/2023)(AY: 2015-16) Pradeep Dwarkaprasad Biyani Shop No. 28-29, Vardhman Complex, Opp. Uma Bhavan, Bhattar Road, Surat-395007 PAN : AASPB 9593 R Vs. D.C.I.T. Circle- 1(3), Adajan, Surat. APPELLANT/OBJECTOR RESPONDEDNT Department by Shri Ravi Kant Gupta, CIT-DR Assessee by Shri Ramesh Malpani, C.A. Date of hearing 15/02/2024 Date of pronouncement 20/02/2024 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. The appeal by the Revenue and Cross Objection (CO) therein by the assessee are directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income tax (Appeals) [‘ld. CIT(A)’ for short] dated 27/10/2023 for the Assessment Year (AY) ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 2 2015-16. The Revenue in its appeal has raised the following grounds of appeal:- 1. On the fact and the circumstances of the case and in law, the Ld. CIT(A) has erred by not accepting the estimation of Gross profit, when finding about rejection of books of accounts have been confirmed, mainly on ground that the assessee is unable to give basic evidence of sales as well as details in respect of cost of production related to sweets and fast food. 2. On the facts and the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 5,95,84,425/- made on account of GP estimation, without appreciating the facts that assessee has not submitted the details in respect of cost of production of sweets and fast food. 3. On the fact and the circumstances of the case and in law, the Ld. CIT (A) was erred in deleting the addition of Rs. 5,95,84,425/- when assessee is totally failed to provide the cost of production in respect of sweets and fast food and thereby proved that the assessee has intended to suppress the actual sales and to hide the actual profit from his business. 4. On the basis of the facts and circumstances of the case and in law, the Ld. CIT (A) ought to have upheld the order of the Assessing Officer. 5. It is therefore prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the Assessing Officer be restored. 6. The appellant craves leave to add, alter, amend and/or withdraw any grounds of appeal either before or during the course of hearing of the appeal. 2. On service of memorandum of appeal of revenue, the assessee filed his CO has raising solitary ground of appeal which reads as under: “1. That on the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in upholding the validity of rejection of the audited accounts of the assessee u/s 145 of the I.T. Act, 1961.” ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 3 3. Brief facts of the case are that the assessee is running a shop of sweet and fast food, filed his return of income for A.Y. 2015-16 on 07/09/2015 declaring taxable income of Rs. 24,88,850/-. The case was selected for scrutiny. During the assessment, the Assessing Officer recorded on verification of details furnished by assessee, the Assessing Officer find that the assessee’s business is in two folds, on one count, sale of sweets and on other count, sale of fast food items. The assessee was asked to furnish details of raw material and consumption thereof for preparation of sweet and fast food. The assessee furnished the details of various items of sweets consisting Kaju Katli, Penda, Bundi and Laddu and items of fast food consisting Chole Bhature, Paneer Tikka, Paw Bhaji and Dahi Papdi Chhat. On receipt of such details, the Assessing Officer was not satisfied about the details provided by assessee in preparing various items. Thereafter, the Assessing Officer issued show cause notice dated 22/12/2017 and proposed to reject the books of account, the contents of show cause notice are recoded on page No. 5 to 10 of assessment order. The Assessing officer in the show cause notice referred the method of preparation of various kind of items, quantity of consumption of material, rate of raw material and ultimate quantity of product and also worked out the cost of production and cost of sale of different items and was of the view that the profit margin in various items ranges from ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 4 300 to 500% and the Assessing Officer in the show cause notice mentioned that the profit margin on the sweets articles is 250% and in fast food is at 400%. The assessee has not shown correct result and proposed to make addition of Rs. 5.95 crores. 4. In response to such show cause notice, the assessee filed detailed written reply. The reply of assessee is recorded on page Nos. 10 to 19 of assessment order. The assessee in its reply disputed the mechanism prescribed in the show cause notice about preparation of different kinds of articles of sweets and fast food and disputed the profit of such percentage. The assesse specifically contended that in earlier years from A.Y. 2011-12 to 2012-13 certain addition was made on estimation basis and on before the Tribunal, the Tribunal has set the gross profit rate at 32% in all the years. Proposed addition is unprecedented as the issue has been settled by the Tribunal. The reply of assessee was not accepted by Assessing Officer, the Assessing officer by referring the contents of his show cause notice and consumption of raw material for preparation of different kind of material and cost thereof, made addition of Rs. 5.95 crores as mentioned in the show cause notice. 5. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed various submissions and specifically contended that addition made by ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 5 Assessing Officer is contrary to the order of Tribunal in assessee’s case for AY. 2011-12 to 2013-14 wherein gross profit rate @ 32% on disclosed sales was determined/directed. The ld. CIT(A) on considering the submission of assessee recorded that during the year under consideration, the assessee has declared 39.62% of gross profit which is higher than the gross profit adopted by the Tribunal @ 32%. The ld. CIT(A) by following the decision of Tribunal in earlier years, directed the Assessing Officer to accept the gross profit @ 39.62% offered by assessee. Aggrieved by the order of ld. CIT(A), the Revenue has filed present appeal before this Tribunal. 6. We have heard the submissions of learned Commissioner of Income Tax-Departmental Representative (CIT-DR) for the revenue and the learned Authorised Representative (AR) of the assessee and have gone through the orders of the lower authorities carefully. The ld. CIT-DR for the revenue vehemently submits that he fully supports the order of Assessing Officer in rejecting the books of account and addition of Rs. 5.95 crores made on the basis of his observation that profit margin in fast food is 400% and the profit margin in sweet articles is 250%. The assessee is making money without showing the real profit. It is not possible by revenue authorities to make survey in every year to determine the real profit. The turnover of assessee is very high. The ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 6 Assessing officer has given complete details and mechanism for preparation of different type of sweet articles as well as different kind of fast food. The ld. CIT-DR for the revenue by referring one of his item of sweet article submits that production cost of Bundi Laddu is only Rs. 120/- per K.G.. The assessee is selling such Laddu @ of Rs. 280 per K.G., thus the profit margin on one K.G. laddu is Rs. 160 per K.G. which is having profit margin of 233% on each K.G. of laddu. The ld. CIT-DR for the revenue referred all other items in the similar view and submits that it is a fit case to reverse the order of ld. CIT(A) and to confirm the order of Assessing Officer. The ld. CIT-DR for the revenue submits that the principle of res-judicata is not applicable on the income tax proceedings, therefore, the Assessing officer was well within his power to reject the books of account and to estimate the income of assessee by ignoring the order of Tribunal in earlier years. 7. On the other hand, the ld. AR of the assessee submits that the grounds of appeal raised by the revenue is squarely covered in favour of assessee and against the revenue by the decision of Tribunal in assessees own case for A.Y. 2011-12 and 2012-13 dated 14/07/2017 in ITA No. 3098/Ahd/2015 and 2637/Ahd/2016 respectively. The order in A.Y. 2011-12 and 2012-13 was followed in A.Y. 2013-14 in ITA No. 20/Srt/2017 dated 13/02/2020. The ld. AR of the assessee submits that ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 7 he has already filed copy of decision of Tribunal. The ld. AR of the assessee submits that for the year under consideration, the assessee has declared gross profit of about 40% which is much higher than the gross profit adopted by Tribunal in earlier years. The ld. AR of the assessee further submits that higher courts and Tribunal in series of decisions has held that the Assessing Officer should not enter into shoes of businessman to determine the manner of business. It is the assessee/businessman who has to decide the cost, manner and the product of his business. The working of profit margin by Assessing officer is imaginary which can never be achieved by any imagination. The Assessing Officer has not followed the decision of Tribunal for A.Y. 2011-12 and 2012-13 which was available on the date when assessment order was passed. 8. On grounds of appeal raised in cross objection, the ld. AR of the assessee fairly accepts that the ground of appeal raised in cross objection is against the assessee as the similar ground of appeal in assessee’s appeal for A.Y. 2011-12 and 2012-13 was rejected by the Tribunal. 9. We have considered the submissions of both the parties and perused the material available on record. We find that the ld. AR of the assessee while making his submission, fairly accepted that the grounds of appeal ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 8 raised by assessee in his cross objection is against him as per decision of Tribunal dated 14/07/2017 for A.Y. 2011-1. On perusal of order for A.Y. 2011-12 & 2012-13, we find that the similar grounds of appeal as raised in the present Cross Objection was held against the assessee, thus the grounds of appeal raised by assessee in his cross objection is dismissed. 10. So far as grounds of appeal raised by the revenue in its appeal are concerned, on our thoughtful consideration, we find that the grounds of appeal raised by the revenue is squarely covered in favour of assessee and against the revenue by the decision of Tribunal for A.Y. 2013-14 wherein the Coordinate Bench following the order of Tribunal in A.Y. 2011-12 and 2012-13 by passing the following order: “6. We have heard the rival submissions and perused the relevant matter available on record. We find that the issue is squarely covered by the order of the decision of the ITAT in the case of assessee for the assessment year 2011-12 & 2012-13 in order dated 14-07-2017, wherein the ITAT as held in Para 10 is reproduced as under:- “10. We observed that the contention of the assessee was that issuing sale bills was not possible on account of heavy rush and the sales bills were issued if it was demanded by the customers. He also contended that because of number of ingredients used for various items, it was difficult to arrive at cost of each such item. 11. After considering the above facts and findings we observed that the assessee has been selling various kinds of items on the basis of issuing of different kinds of tokens. It was found that sales bills are not regularly issued to the customers, material like milk used to be purchased without the proper bill as a result correct manufacturing cost could not be ascertained. In view of the above, we are of the view that the gross profit @32% on the disclosed sales as per the audit report is reasonable and ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 9 appropriate in the case of the assessee. Therefore, the appeal of the assessee is allowed partly.” 7. Therefore, in the above findings respectfully following to the same and the addition was sustained at the rate of 32% of gross profit on sale disclosed as per audit report as held by the Tribunal in the case of the assessee. Therefore, AO is directed to recalculate additions by falling GP rate @32% of disclosed sales. Accordingly, this ground of appeal is partly allowed.” 11. We find that there is no variation in the facts of the present assessment year. In view of the aforesaid categorical finding of Coordinate Bench of this Tribunal in assessee’s own case for three previous assessment years, wherein similar addition was sustained to the extent of 32% of gross profit on disclosed sale. For the year under consideration, the assessee has shown gross profit @ 39.62% which is on higher side than the gross profit ratio provided by the Coordinate Bench in earlier years. Thus, we do not find any illegality or infirmity in the order passed by the ld. CIT(A), which we affirm. 12. So far as objection/argument of ld. CIT-DR for the revenue is concerned that the principle of res judicata is not applicable or that the Assessing Officer was not bound by the decision of Tribunal in earlier years. No doubt, the principle of res-judicata is not applicable in income tax proceedings, however, the facts remained the same, the principle of consistency is to be followed by the revenue authorities. The Assessing Officer acted in a mechanical way by making addition of Rs. 5.95 crores in a predetermined manner as he ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 10 has not deviated even in a single rupees while making addition in the assessment order as has been proposed in the show cause notice. No comparable instance is cited by assessing officer while making additions in crores. The Assessing Officer has mentioned the rate of raw material consumed in preparation of different articles without assigning rate of source of such item, he has simply calculated the cost of raw material vis a vis the sale of particular item which is beyond his jurisdiction. Admittedly, the Assessing Officer is not an expert nor any specific opinion of expert is obtained nor any comparable instance was referred, therefore, we do not find any justification in making addition in a mechanical way and that too in crores of rupees. In the result, grounds of appeal raised by the revenue are dismissed. 13. In the final result, appeal of the revenue as well as cross objection of assessee are dismissed. Order pronounced on 20/02/2024 in open court. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 20/02/2024 *Ranjan ITA No. 871/SRT/2023 & CO 1/SRT/2024 DCIT Vs Pradeep Dwarkaprasad Biyani 11 Copy to: 1. Assessee – 2. Revenue - 3. CIT 4. DR 5. Guard File By Order Sr. Private Secretary, ITAT Surat