Shri Kalidas Bhanabhai Patel, Vapi V. The Income tax Officer,Vapi Ward-2, Vapi

CO 10/AHD/2012

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7576 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-07-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Keywords: Additional evidence
• Section: 145; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2582/AHD/2011 ASSESSMENT YEAR :2008-09 & C.O. NO.10/AHD/2012 ASSESSMENT YEAR :2008-09 INCOME TAX OFFICER, VAPI WARD-2, VAPI SH. KALIDAS BHANABHAI PATEL PROP: PATEL ENGINEERING, PLOT NO.-784/1, 40SHED AREA, GIDC, VAPI V/S . V/S . SH. KALIDAS BHANABHAI PATEL PROP: PATEL ENGINEERING, PLOT NO.-784/1, 40SHED AREA, GIDC, VAPI INCOME TAX OFFICER, VAPI WARD-2, VAPI PAN NO. ADBPB4053E (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI T. SANKAR, SR.D.R. /BY ASSESSEE SHRI S.N.SOPARKAR (SR.ADV.) WITH SHRI JAIMIN GANDHI, A.R. /DATE OF HEARING 2 6 .0 7 .2012 /DATE OF PRONOUNCEMENT 31.08.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE AND THE C.O. OF THE ASSE SSEE, EMANATED FROM THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (A PPEALS), VALSAD, DATED 20.07.2011 FOR THE ASSESSMENT YEAR 2008-09. THE I SSUES AND ARGUMENTS IN REVENUES APPEAL AND ASSESSEES C.O. ARE SAME. THE REFORE, WE ARE DECIDING ITA NO. 2582/AHD/2011 & C.O. NO.10/AHD/2012 A.Y. 08-09 PAGE 2 BOTH IN A CONSOLIDATE ORDER FOR THE SAKE OF CONVENI ENCE. THE GROUNDS OF APPEAL ARE AS UNDER:- (1) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,46,868/- MAD E ON ACCOUNT OF LOW G.P. BY HOLDING THAT THERE IS MARGINAL DROP IN THE G.P. BUT AT THE SAME TIME THERE IS INCREASE IN THE TURNOVER. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,46,868/- MAD E ON ACCOUNT OF ADVANCE FROM DEBTORS BY HOLDING THAT THE ASSESSEE H AS SUBMITTED CONFIRMATION LETTERS FROM THE SUNDRY CREDITORS. 2. THE FIRST GROUND OF APPEAL IS AGAINST THE LOW G. P. RATE. THE FACT OF THE CASE IS THAT GROSS PROFITS SHOWN AT RS.26,43,953/- @ 22.87% ON TOTAL TURN OVER OF RS. 1,15,63,284/- WHICH WAS IMMEDIATE PRECEDING YEAR RS.21,14,815/- @ 23.5% ON TOTAL TURN OVER OF RS.89,97,646/-. G.P. R ATE IN A.Y. 06-07 WAS 31.19%. THE G.P. RATE WAS SHOWING DECLINING TREND. THE ASSESSEE HAD SHOWN CLOSING STOCK OF RS.65,06,106/- AS AGAINST TO TAL TURN OVER OF RS.1.15 CRORES NOT VERIFIABLE IN ABSENCE OF BOOKS OF ACCOUN TS. THEREFORE, THE A.O. REJECTED THE BOOKS RESULTS AND APPLIED SECTION 145 OF THE IT ACT. HE APPLIED G.P. RATE 25% AGAINST 22.87% SHOWN BY THE ASSESSEE AND DIFFERENCE OF RS.2,46,868/- WAS ADDED IN THE INCOME OF THE ASSESS EE. 3. BEING AGGRIEVED BY THIS ADDITION, THE APPELLANT CARRIED THE MATTER BEFORE CIT(A) WHO HAS DELETED THE ADDITION IN PARAGRAPH NO .6.3 HELD AS UNDER: 6.3 DECISION :- I HAVE CONSIDERED THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE SUBMISSION MADE BY THE AR OF THE APPELLANT. THE BASIS OF THE ADDITION MADE BY THE A O IS DUE TO THE FALL OF GP DURING THE LAST COUPLE OF YEARS. THE AO FOUND T HAT THE GP HAS BEEN ITA NO. 2582/AHD/2011 & C.O. NO.10/AHD/2012 A.Y. 08-09 PAGE 3 FALLING EVERY YEAR. THE AO ALSO HAD DOUBT OF HUGE C/S DURING THE YEAR. THEREFORE, HE REJECTED THE BOOKS OF A/C AND ESTIMAT ED THE INCOME BY REWORKING THE GP. ON THE OTHER HAND THE LD. AR ARG UED THAT THE FALL OF GP IS DUE TO THE VARIOUS REASONS. FIRST OF ALL, TH E TURNOVER OF THE APPELLANT HAS BEEN CONSTANTLY MOVING UPWARD. WHEN THE TURNOVER IS HIGH, THERE IS A SCOPE FOR COMPROMISE IN THE MARGIN AL GP. SECONDLY, THE HUGE C/S SUGGEST THAT THE CAPITAL AND WIP IS LO CKED UP WHICH CONTRIBUTES TO THE LOWER GP ARGUED BY THE LD. AR. I HAVE CONSIDERED THE FACT AND CIRCUMSTANCES OF THE CASE. THERE IS A MAR GINAL DROPPED IN THE GP BUT AT THE SAME TIME, THERE IS INCREASE IN THE T URNOVER. IT IS REASONABLE TO PRESUME THAT COST OF MANUFACTURING MI GHT HAVE GONE UP THIS YEAR COMPARED TO PREVIOUS YEARS DUE TO INFLATI ON AND OTHER FACTORS. THERE IS JUSTIFICATION ON MARGINAL FALL IN GP DUE T O THE MARKET CONDITIONS. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITIO N. THUS, THIS GROUND IS ALLOWED. 4. NOW THE REVENUE IS BEFORE US. LD. D.R. SHRI T. SANKAR, SR. D.R., CONTENDED THAT THE ASSESSEE HAD NOT PRODUCED THE BO OKS OF ACCOUNT BEFORE THE A.O. THEREFORE, HE RIGHTLY REJECTED THE BOOKS OF RESULT AND GP ADDITION IS REASONABLE. THEREFORE, IT SHOULD BE CONFIRMED. 5. FROM THE SIDE OF THE ASSESSEE, SHRI S.N. SOPARKA R, SR. ADV. CONTENDED THAT THE LD. CIT(A) HAS THOROUGHLY CONSIDERED THE D EFECTS POINTED OUT BY THE LD. A.O. AND VARIFIED THE FACTS HIMSELF AND HE PRAYED T O CONFIRM THE ORDER OF THE CIT(A). 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND GONE THROUGH THE FACTS OF THE CASE. THE CLOSING STOCK AS WELL A S TURNOVER HAVE BEEN INCREASED SUBSTANTIALLY BUT G.P. RATE HAS GONE DOWN . IT IS MARKET TREND THAT SALE INCREASES THEN G.P. RATE HAS TO BE REDUCED. T HE BOOKS WERE REGULARLY ITA NO. 2582/AHD/2011 & C.O. NO.10/AHD/2012 A.Y. 08-09 PAGE 4 MAINTAINED. AFTER AUDITED THE BOOKS OF ACCOUNTS, R ETURN WAS FILED. HOWEVER, THE SAME HAS NOT BEEN PRODUCED BEFORE THE A.O. DURI NG THE COURSE OF ASSESSMENT PROCEEDING. HE RIGHTLY APPLIED SECTION 145 OF THE IT ACT. THEREFORE, WE CONFIRM THE ADDITION OF RS.50,000/- O N ACCOUNT OF LOW G.P. IN THE INTEREST OF JUSTICE THUS, ON THIS GROUND, THE A PPEAL OF THE REVENUE IS PARTLY ALLOWED. 7. THE SECOND GROUND OF APPEAL IS AGAINST DELETING THE ADDITION OF RS.39,25,386/- MADE ON ACCOUNT OF ADVANCE FROM DEBT ORS. IT IS OBSERVED BY THE A.O. THAT THE APPELLANT HAD SHOWN ADVANCE FROM THE DEBTORS RS.39,25,386/- IN BALANCE SHEET. THE A.O. DID NOT FIND LOGICAL THESE ADVANCE FROM THE DEBTORS. THE ASSESSEE COULD NOT FURNISH T HE CONFIRMATION FROM THE DEBTORS DURING THE COURSE OF ASSESSMENT PROCEEDING EXCEPT M/S. TECH FAB INDIA WHICH WAS ALSO NOT COMPLETE CONFIRMATION ACCO RDING TO A.O. AS NO PAN NO., NO SIGNATURE HAD BEEN PUT ON IT. THE A.O. HEL D THAT THE BURDEN OF PROVE IS ON THE APPELLANT TO ESTABLISH THE GENUINENESS OF CA SH CREDITOR. THEREFORE, HE MADE ADDITION OF RS.39,25,386/- U/S 68 OF THE IT AC T. 8. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AP PELLANT CARRIED THE MATTER BEFORE CIT(A) WHO HAS DELETED THE ADDITION A ND HELD AS UNDER: 7.3 DECISION :- I HAVE CONSIDERED THE OBSERVATION OF THE AO IN T HE ASSESSMENT ORDER AS WELL AS THE SUBMISSION MADE BY THE AR OF THE APPELLANT CAREFULLY. BEFORE ME THE APPELLANT FURNI SHED LEDGER A/CS OF THE PARTIES. THE A/C OF THE APPELLANT HAS BEEN AUDITED U/S.44AB OF THE ACT. THE APPELLANT FURTHER SUBMITTED THE CONFIRMATION LE TTERS FROM THE SUNDRY CREDITORS WHICH CLEARLY SHOWS THAT THE TRANSACTIONS EFFECTED BY THESE PARTIES ARE NOT ONE TIME BUT SPREAD OVER THE YEAR. THE APPELLANT HAD ITA NO. 2582/AHD/2011 & C.O. NO.10/AHD/2012 A.Y. 08-09 PAGE 5 ALSO PRODUCED CERTAIN SALE BILLS IN THIS REGARDS. FURTHER, THE LD. AR CONTENDED THAT THE ADVANCES WERE SQUARED OFF WHEN T HE GOODS ARE DELIVERED TO THE PARTIES. THERE IS A FORCE IN THE ARGUMENT OF THE LD. AR. SUNDRY CREDITOR PER SAY CANNOT BE ADDED U/S. 68 OF THE ACT. THE APPELLANT HAD ALSO SUBMITTED NAME, ADDRESS, AMOUNT AND A/C DETAILS BEFORE THE AO. THE AMOUNT IN QUESTION IS NOT IN TH E NATURE OF LOAN BUT THE PURCHASE ADVANCE FOR WHICH THE PROVISION U/S.68 IS NOT ATTRACTED. IN VIEW OF THE ABOVE, I AM INCLINED TO GRANT RELIEF TO THE APPELLANT. THUS, THE AO IS DIRECTED TO DELETE THE ADDITION. THIS GR OUND IS ALLOWED. 9. NOW, THE REVENUE IS BEFORE US. LD. SR. D.R. CON TENDED THAT THE CIT(A) HAS ADMITTED THE ADDITIONAL EVIDENCE DURING THE COU RSE OF APPELLANT PROCEEDING AND NO OPPORTUNITY WAS GIVEN TO THE A.O. FURTHER, HE HAS DRAWN OUR ATTENTION ON THE PAPER BOOK FROM PAGE NOS. 22 T O 45. THESE ARE SALE BILLS FOR A.Y.09-10 IN THE NAME OF M/S. TECH FAB INDIA, H OLOGRAPHIC SECURITY MARKING SYSTEMS PVT. LTD. AND VARIOUS OTHER PARTIES WHICH REQUIRED VERIFICATION BY THE A.O. THEREFORE, HE REQUESTED T O SET ASIDE THE MATTER TO THE A.O. FOR VERIFICATION. 10. FROM THE APPELLANT SIDE, LD. COUNSEL FOR THE AS SESSEE FAIRLY ACCEPTED THE PROPOSAL FOR SETTING ASIDE THE MATTER TO THE A. O. 11. WE HAVE HEARD BOTH THE SIDES. THE EVIDENCES PR ODUCED BEFORE THE CIT(A) HAD NOT BEEN VERIFIED BY THE A.O. THEREFORE , IN THE INTEREST OF JUSTICE, THE A.O. SHOULD BE GIVEN OPPORTUNITY ON EVIDENCE FI LED BY THE ASSESSEE BEFORE THE CIT(A). ACCORDINGLY, WE HAVE CONSIDERED VIEW T HAT THE ISSUE IS REQUIRED TO BE RE-EXAMINED BY THE A.O. THUS, WE SET ASIDE THE ORDER TO THE A.O. FOR DE NOVO. C.O. NO. 10/AHD/2012 ITA NO. 2582/AHD/2011 & C.O. NO.10/AHD/2012 A.Y. 08-09 PAGE 6 12. THE ASSESSEE HAS FILED CROSS OBJECTION ON G.P. AS WELL AS ADDITION U/S 68 BUT WE HAVE GIVEN DETAILED FINDINGS IN REVENUES APPEAL AS DISCUSSED ABOVE AND THE LD. COUNSEL FOR THE APPELLANT HAS NOT PRESSED THE C.O. THEREFORE, THE SAME IS DISMISSED. 13. IN THE COMBINED RESULT, THE REVENUES APPEAL IS PARTLY ALLOWED AND THE ASSESSEES C.O. IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 31.08.2012 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT ME MBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. '#$ / APPELLANT 2. &'#$ / RESPONDENT 3. )*)+ ' ', / CONCERNED CIT 4. ' ',- ' / CIT (A) 5. 01'' +, ' ''' +, 34 * / DR, ITAT, AHMEDABAD 6. 167 89 / GUARD FILE. BY ORDER/ , :/3' )' ' ''' +, 34 * < STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 23.08.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 24.08.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION XXX 6) DATE OF INITIAL SIGN BY MEMBERS 31.08.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 31.08.2012 ITA NO. 2582/AHD/2011 & C.O. NO.10/AHD/2012 A.Y. 08-09 PAGE 7