M/s. Sun Automobiles, Ahmedabad V. The ACIT.,Cent.Circle-1(2), Ahmedabad

CO 101/AHD/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7895 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR SRDR
• Assessee Lawyers: PRASHANAT MAHARISHI
• Keywords: Unexplained investment
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER IT(SS)A NO.266/AHD/2010 & C.O. NO.101/AHD/2010 (A/O IT(SS)A NO 266/AHD/2010) ASSESSMENT YEAR:2007-08 ACIT, CENTRAL CIRCLE- 1(2), ROOM NO. 305, 3 RD FLOOR, AAYKA BHAVAN, ASHRAM ROAD, AHMEDABAD M/S. SUN AUTOMOBILES, NR. SHAH VADI BUS STOP, N.H. NO.8, NAROL, AHMEDABAD [ PAN NO.AAGFS 9455F ] V/S . V/S . M/S SUN AUTOMOBILES NR. SHAH VADI BUS STOP, N.H. NO. 8, NAROL, AHMEDABAD ACIT, CENTRAL CIRCLE-1(2), ROOMNO.305, 3 RD FLOOR, AAYKAR BHAVAN, ASHRAM ROAD, AHMEDABAD / APPELLANT .. / RESPONDENT) /BY ASSESSEE SHRI PRASHANAT MAHARISHI, AR /BY REVENUE SHRI RAHUL KUMAR, SR-DR /DATE OF HEARING 24-09-2012 ! /DATE OF PRONOUNCEMENT 25-10-2012 ' ' ' ' / // / O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTI ON (CO) FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSI ONER OF INCOME-TAX (APPEALS)-I, AHMEDABAD (CIT(A) FOR SHORT) DATED 2 5-01-2010 FOR THE ASSESSMENT YEAR (AY) 2007-08. FIRST WE TAKE UP REVENUES APPEAL IN IT(SS)A NO.266 /AHD/2010. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- IT(SS)A NO.266/AHD/2010 & CO 101/AHD/2010 A.Y. 07 -08 ACIT CC-1(2) ABD V. M/S. SUN AUTOMOBILES PAGE 2 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11,00,000/- BY TREATING THE TWO GRADERS AS FI XED ASSETS WITHOUT ASSESSEE SUBMITTING ANY SUPPORTING DOCUMENTARY EVID ENCE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ADJUST THE RECORDED VALUE OF THE GOODS BY CONSIDERING THE GP M ARGIN ON THE SALE OF GOODS. 3. BOTH THE GROUNDS ARE INTER-CONNECTED ARE BEING D ISPOSED OF TOGETHER. THE FACTS AS MENTIONED IN PARA-2 IN THE ORDER OF LD . CIT(A), WHICH IS REPRODUCED HEREINBELOW:- 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE APPELLANT IS DERIVING INCOME FROM SALE OF SCRAP. THE APPELLANT-FIRM IS PU RCHASING VARIOUS KINDS OF MACHINERIES IN AUCTION, RENOVATING OR SCRA MBLING THEM AND THEREAFTER, SELLING THE SAME. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION I.E. AY 2007-08 WAS FILED ON 26.10.20 07, DECLARING TOTAL TAXABLE INCOME AT RS.3,88,802/-. PRIOR TO IT, SURVE Y ACTION U/S. 133A OF THE I.T. ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE APPELLANT ON 04.08.2006. DURING THE COURSE OF SURVEY ACTION, THE PHYSICAL STOCK WAS TAKEN AT THE GODOWN OF THE APPELLANT LOCATED AT SHA H WADI, NAROL AND SANAND HIGHWAY, AHMEDABAD. THE TOTAL VALUE OF THE S TOCKS FOUND AT THE AFOREMENTIONED TWO PREMISES WERE VALUED AT RS.9 3,66,396/. HOWEVER, THE STOCK FROM THE ACCOUNTS OF THE FIRM AS ON THE DATE OF SURVEY ACTION HAS BEEN DETERMINED BY THE ASSESSING OFFICER AT RS.65,67,856/-. 4. LD. SR-DR SHRI RAHUL KUMAR RELIED ON THE ORDERS OF ASSESSING OFFICER (AO) AND SUBMITTED THAT LD. CIT(A) WRONGLY DELETED THE ADDITION OF RS.11 LAKH BY TREATING THE TWO GRADER AS FIXED ASSET. ON THE C ONTRARY, LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE ORDER OF LD. CIT(A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. LD. CIT(A) HAS GIVEN A FINDING OF FACT IN PARA-5.5(A) THAT THE APPELLANT IS DEALER IN SCRAP MATERIAL AND IN TH E APPEAL THE ASSESSEE PROVED BEYOND DOUBT THAT THE SISTER CONCERNS OF THE ASSESSEE NAMELY M/S. NATIONAL TRADERS AND M/S. SUN HIRING COMPANY ARE AL SO OPERATING FROM THE SAME PREMISES. THE FACT REMAINS THAT M/S SUN HIRING COMPANY IS DEALING IN GRADERS ARE REFLECTED AS STOCK IN THE BOOKS OF M/S. SUN HIRING COMPANY. THIS FINDING IS NOT REBUTTED BY THE REVENUE BY PLACING A NYTHING CONTRARY. THEREFORE, WE DO NOT FIND ANY INFIRMITY INTO THE OR DER PASSED BY LD. CIT(A) IT(SS)A NO.266/AHD/2010 & CO 101/AHD/2010 A.Y. 07 -08 ACIT CC-1(2) ABD V. M/S. SUN AUTOMOBILES PAGE 3 5.1 NEXT GROUND OF THE REVENUES APPEAL IS AGAINST THE DIRECTION GIVEN BY THE LD. CIT(A) TO ADJUST THE RECORDED VALUE OF GOOD S BY CONSIDERING THE GROSS PROFIT (GP FOR SHORT) MARGIN ON THE SALE OF GOODS. 5.2 LD. DR OF THE REVENUE STRONGLY RELIED ON THE OR DER OF ASSESSING OFFICER AND HE SUBMITTED THAT LD. CIT(A) FAILED TO APPRECIA TE THE FACT THAT ASSESSEE COULD NOT SATISFACTORILY RECONCILE THE DIFFERENCE I N STOCK. ON THE CONTRARY, LD. AR OF THE ASSESSEE SUBMITTED THAT LD. CIT(A) HAS RI GHTLY HELD THE VALUE OF GOODS IS REQUIRED TO BE ADJUSTED BY CONSIDERING THE GP MARGIN ON THE SALE OF SUCH GOODS. 5.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) HAS OB SERVED THAT ASSESSEE HAS PROVED THAT DURING THE COURSE OF SURVEY ACTION, THE STOCK WAS INVENTORIZED AT THE MARKET VALUE OF SCRAP MATERIAL. IN SUCH SITUATI ON, IN ORDER TO DETERMINE THE COST AND CONSEQUENTIAL INVESTMENT OF THE ASSESSEE-F IRM, THE RECORDED VALUE OF GOODS IS REQUIRED TO BE ADJUSTED BY CONSIDERING THE GP MARGIN FROM THE SALE OF SUCH GOODS. IT IS ALSO OBSERVED BY LD. CIT(A) TH AT AS FAR AS GP IS CONCERNED, RATE DECLARED IN THE IMMEDIATE PRECEDING YEAR, I.E., A.Y. 2006-07 IS 12.5% AND IN THE A.Y. 2005-06, THE GP WAS 12.53% . IN ITS WORKING, THE ASSESSEE HAS CLAIMED GP RATE AT 15% WHICH IS CONSID ERED TOO HIGH. THEREFORE, CONSIDERING THE FACTS IN TOTALITY, LD. C IT(A) IN THE YEAR UNDER CONSIDERATION DIRECTED THE AO TO ADOPT THE GP AT 12 .5% FOR SUCH ACCOUNTED STOCK AND ACCORDINGLY, AO WAS DIRECTED TO RE-WORK O UT THE UNACCOUNTED INVESTMENT ON THE STOCK. THERE IS NO INFIRMITY INTO THE ORDER PASSED BY LD. CIT(A), SINCE THE FINDING THAT IN ORDER TO DETERMIN E THE STOCK AND CONSEQUENTIAL INVESTMENT OF THE ASSESSEE-FIRM RECOR DED THE VALUE OF THE GOODS IS REQUIRED TO BE ADJUSTED BY CONSIDERING THE GP MARGIN OF SALE OF SUCH GOODS IS PERFECTLY JUSTIFIED AND IS IN ACCORDANCE W ITH LAW. MOREOVER, LD. CIT(A) HAS DIRECTED THE AO TO ADOPT THE GP RATE AT 12.5% W HICH WAS DECLARED IN THE IMMEDIATE PRECEDING YEAR I.E., AY 2006-07. IN THIS VIEW OF THE MATTER, THIS GROUND OF REVENUES APPEAL IS REJECTED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. IT(SS)A NO.266/AHD/2010 & CO 101/AHD/2010 A.Y. 07 -08 ACIT CC-1(2) ABD V. M/S. SUN AUTOMOBILES PAGE 4 COMING TO ASSESSEES CO NO.101/AHD/2010. 7. 1. LD. ASSESSING OFFICER ERRED IN LAW AS WELL AS ON FACTS IN MAKING ADDITION OF RS.27,98,540/- TOWARDS DISCREPANCY IN S TOCK AT THE TIME OF SURVEY AT THE PREMISES OF THE ASSESSEE AND OUT OF T HIS LD CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING ADDITION OF R S.8,77,558/-. 8. AT THE TIME OF HEARING, LD. AR OF THE ASSESSEE S UBMITTED THAT UNDER THE INSTRUCTION OF ASSESSEE HE DOES NOT WISH TO PRESS T HE CO. HENCE, THE CO OF ASSESSEE IS TREATED AS NOT PRESSED, CONSEQUENTLY SA ME IS DISMISSED AS NOT PRESSED. 9. IN THE RESULT, ASSESSEES CO IS DISMISSED AS NOT PRESSED 10. IN COMBINED RESULT, APPEAL OF REVENUE IS DISMISSED AND THAT OF ASSESSEES CO IS DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP #$%- 25 /10/2012 +,- . ' ' ' ' //0 //0 //0 //0 10 10 10 10 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. $-$/4 5 / CONCERNED CIT 4. 5- / CIT (A) 5. 0 78 ///4, /4!, +,- / DR, ITAT, AHMEDABAD 6. 8;< => / GUARD FILE. BY ORDER/ ' , /TRUE COPY/ ?/+ $ /4!, +,- .