Vimal Flexsol Ltd., Mehsana V. The ACIT., Cent.Circle-1(2), Ahmedabad

CO 302/AHD/2007

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6826 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 05-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-09-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Gross profit estimation; Corroborative evidences
• Section: 143(3); 37(1)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .% $% % $% % $% % $%, , , , &' ( &' ( &' ( &' ( & ' & ' & ' & ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER) ITA NO.3000/AHD/2007 [ASSTT.YEAR : 2004-2005] WITH CO NO.302/AHD/2007 AND ITA NO.3001/AHD/2007 [ASSTT.YEAR : 2005-2006] ACIT, CENT.CIR.1(2) AHMEDABAD. /VS. VIMAL FLEXSOL LTD. VIMAL HOUSE 31-32 GIDC MEHSANA. ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ( . / &/ REVENUE BY : SHRI S.K.GUPTA 12 . / &/ ASSESSEE BY : SHRI S.N. SOPARKAR 3 . 24'/ DATE OF HEARING : 8 TH DECEMBER, 2011 5%6 . 24'/ DATE OF PRONOUNCEMENT : 5 TH JANUARY, 2012 &7 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE TWO APPEALS BY THE REVENUE FOR THE A.Y.2004-2005 AND 2005-2006 AND CO BY THE ASSESSEE FOR A.Y.2004-2005 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.3000/AHD/2007 : A.Y.2004-2005 (REVENUES APP EAL) 2. THE GROUND NO.1 OF THE REVENUES APPEAL READS AS UNDER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.1,15,000/- MADE ON ACCOUNT OF LOW GP RATE WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE WAS CARRYING OUT BUSINESS OUTSIDE THE BOOKS OF ACCOUNTS AND HENCE AVOIDED VAR IOUS STATUTORY TAXES RESULTING IN THE HIGHER GP. ITA NO.3000/AHD/2007 WITH CO NO.302/AHD/2007 AND ITA NO.3001/AHD/2007 -2- 3. THE LEARNED DR RELIED ON THE ORDER OF THE AO. H E SUBMITTED THAT THE ASSESSEE WAS CARRYING OUT BUSINESS OUTSIDE ITS BOOKS OF ACCOUNTS AND HENCE HAS AVOIDED PAYMENT OF VARIOUS STATUTORY TAXE S WHICH RESULTED IN HIGHER RATE OF GP AND THEREFORE THE GP ADDITION MAD E WAS JUSTIFIED. HE REFERRED TO RELEVANT PORTION OF THE ASSESSMENT ORDE R IN SUPPORT OF THE CASE OF THE REVENUE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE GP ADDITION WAS BASED ON ESTIMATE ONLY AND THE ASSESSEE ON ITS OWN HAS OFFERED TAX ON GP AT THE RATE OF 17.5% TO COVER UP ANY DISCREPANCY IN ITS BOOKS OF ACCOUNTS. HE SUBMITTED THAT THE AO HAS ESTIMATED G P AT 18% JUST ON PRESUMPTION AND WITHOUT BRINGING ANY MATERIAL ON RE CORD. HE SUBMITTED THAT DIFFERENCE WAS ONLY DUE TO TWO ESTIMATES AND D IFFERENCE WAS VERY MARGINAL. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ASSESSE E ITSELF HAS OFFERED ADDITIONAL INCOME OF RS.40 LAKHS FOR THE RELEVANT A SSESSMENT YEAR ON ACCOUNT OF JOB WORK DONE AND THE GP RATE, AFTER CON SIDERING THE ADDITIONAL INCOME, COMES TO 17.5%. THE GP RATE AS PER THE BOO KS OF ACCOUNTS COMES TO 13.5%. THE AO HAS ESTIMATED THE GP AT 18% . WE FIND THAT DIFFERENCE IN THE GP RATE AS PER THE DEPARTMENT AND THE AS PER THE ASSESSEE, AFTER CONSIDERING THE ADDITION INCOME FOR TAXATION PURPOSE, IS VERY MARGINAL AT 0.5%. ONCE THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE REJECTED AND A FLAT RATE OF GP IS TO BE APPLIED, SO ME ELEMENT OF ESTIMATE IS INEVITABLE. IN THIS CASE, THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE GP RATE OF 17.5% WAS NOT JUSTIFIED. IN THESE CIRCU MSTANCES, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN H OLDING THAT THE GP RATE ITA NO.3000/AHD/2007 WITH CO NO.302/AHD/2007 AND ITA NO.3001/AHD/2007 -3- OFFERED BY THE ASSESSEE ON SUCH UNACCOUNTED TURNOVE R WAS BONA FIDE AND DIFFERENCE IS ONLY ON ACCOUNT OF TWO ESTIMATES WHIC H WAS VERY MARGINAL, AND IN DELETING THE ADDITION MADE BY THE AO. ACCOR DINGLY, THE ORDER OF THE CIT(A) IS CONFIRMED AND THE GROUND NO.1 OF THE REVENUES APPEAL IS DISMISSED. 6. THE GROUND NO.2 OF THE REVENUES APPEAL READS AS UNDER: 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.52,54,143/- MADE ON ACCOUNT OF UNEXP LAINED INVESTMENT IN SALES OUTSIDE THE BOOKS OF ACCOUNTS A T RS.4 CRORES, WITHOUT APPRECIATING THE FACT THAT THERE WERE CLEAR CUT ADMISSION ON THE PART OF THE ASSESSEE FOR UNACCOUNTED SALES RECO RDED IN THE REGISTER SEIZED AS ANNEXURE A-13 AND ALSO NO EVIDEN CE WAS FILED BY THE ASSESSEE REGARDING PARTIES ON WHOSE BEHALF SO C ALLED JOB WORK AS CLAIMED WAS CARRIED OUT. 7. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS S HOWN TOTAL SALE OF RS.7.09 CRORES DURING THE YEAR AND HAS SHOWN CLOSIN G STOCK OF RS.43.65 LAKHS AND DEBTORS OF RS.1.20 CRORES. HE SUBMITTED THAT THE INITIAL INVESTMENT OF RS.1.64 CRORES I.E. TOTAL CLOSING STO CK OF RS.43.65 LAKHS AND DEBTORS OF RS.1.20 CRORES WAS REQUIRED TO MAKE 23% OF THE TOTAL SALES. HE SUBMITTED THAT THE AO HAS APPLIED SAME RATIO AND HA S MADE ADDITION OF RS.52.54 LAKHS AS INITIAL INVESTMENT FOR MAKING UNA CCOUNTED SALE OF RS.2.28 CRORES. HE RELIED ON THE ORDER OF THE AO. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ISSUE RAISED IN THE GROUND OF THE REVENUES APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. PRESIDENT INDUSTRIES, 258 ITR 654. HE ITA NO.3000/AHD/2007 WITH CO NO.302/AHD/2007 AND ITA NO.3001/AHD/2007 -4- SUBMITTED THAT NO ADDITION ON ACCOUNT OF INITIAL IN VESTMENT SHOULD BE MADE ON ACCOUNT OF UNACCOUNTED SALES. 9. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND T HAT THE CIT(A) HAS DELETED THE ADDITION BY OBSERVING THAT THE ADDI TION WAS MADE ON PURE GUESS WORK WITHOUT ANY REFERENCE TO ANY SUPPORTING EVIDENCE OR MATERIAL. WE FIND THAT THE DEPARTMENT COULD NOT BRING ANY MAT ERIAL ON RECORD TO SUGGEST THAT THE ASSESSEE HAS INVESTED SOME INITIAL WORKING CAPITAL FOR MAKING THE SALES IN QUESTION. THE ASSESSEE HAS OFF ERED A SUM OF RS.40 LAKHS AS ADDITIONAL INCOME SEPARATELY. DURING THE COURSE OF SEARCH NO UNACCOUNTED SALE BILLS, PURCHASE BILLS AND UNACCOUN TED VALUE OF DEBTORS OR CREDITORS WERE FOUND WHICH COULD SUGGEST THAT UNACC OUNTED WORKING CAPITAL WAS UTILISED BY THE ASSESSEE FOR CARRYING O UT UNACCOUNTED TURNOVER. THE CASE LAW RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IS IN FAVOUR OF THE ASSESSEE. IN THESE CI RCUMSTANCES, WE HOLD THAT THERE WAS NO MISTAKE IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION AND ACCORDINGLY THE ORDER OF THE CIT(A) IS CONFIRME D AND THE GROUND NO.2 OF THE REVENUE IS DISMISSED. 10. CO NO.302/AHD/2007 IN ITA NO.3000/AHD/2007 : A. Y.2004- 2005 (ASSESSEES CO) 11. THE GROUNDS RAISED IN THE APPEAL ARE AS UNDER: 1. WITHOUT PREJUDICE, ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN NOT GIVING ANY FINDING ON THE FIRST GROUND OF THE ASSESSEE THAT THE ORDER PASSED BY THE DCIT U/S.153A R.W.S. 143(3) IS BAD IN LAW AND HENCE DESE RVES TO BE CANCELLED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF R S.19,826 BY ITA NO.3000/AHD/2007 WITH CO NO.302/AHD/2007 AND ITA NO.3001/AHD/2007 -5- HOLDING THAT IT IS NOT ALLOWABLE UNDER THE PROVISIO NS OF SECTION 37(1) OF THE ACT. 12. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THESE GROUNDS OF THE CO, WHICH ARE ACCORDINGLY DISMISSED. ITA NO.3001/AHD/2007 : A.Y.2005-2006 (REVENUES APP EAL) 13. THE GROUND NO.1 OF THE REVENUES READS AS UNDER : 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.85,000/- MADE ON ACCOUNT OF LOW GP R ATE, WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE WAS CARRYING OUT BUSINESS OUTSIDE THE BOOKS OF ACCOUNTS AND HENCE AVOIDED VAR IOUS STATUTORY TAXES RESULTING IN THE HIGHER GP. 14. BOTH THE PARTIES BEFORE US SUBMITTED THAT THIS ISSUE IS IDENTICAL WITH THE ISSUE RAISED IN THE GROUND NO.1 OF THE REVENUE S APPEAL FOR EARLIER ASSTT.YEAR 2004-2005. 15. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND FOR TH E REASONS RECORDED WHILE DISPOSING OF THE GROUND NO.1 OF THE REVENUES APPEAL FOR A.Y.2004-2005 IN THE FOREGOING PARA NO.5 OF THIS OR DER WE HOLD THAT THERE IS NO MERIT IN THE GROUND NO.1 OF THE REVENUES APP EAL, WHICH IS ACCORDINGLY DISMISSED. 16. THE GROUND NO.2 OF THE REVENUES APPEAL READS A S UNDER: 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.13,72,733/- MADE ON ACCOUNT OF SALES OF FINISHED GOODS OUTSIDE THE BOOKS OF ACCOUNTS PRODUCED OUT OF SHORTAGE OF RAW MATERIAL FOUND DURING THE COURSE OF SEARCH. WH ILE DELETING THE SAID ADDITION, THE LD.CIT(A) HAS IGNORED THE FACTS BROUGHT ON RECORD PARTICULARLY THAT WHEN THERE WAS NO DISPUTE REGARDING DISCREPANCY IN THE STOCK FOUND AND RECORDED IN THE BOOKS OF ITA NO.3000/AHD/2007 WITH CO NO.302/AHD/2007 AND ITA NO.3001/AHD/2007 -6- ACCOUNTS, THERE HAS TO BE PRODUCTION AND SALES TO T HE EXTENT OF SHORTAGE OF RAW MATERIALS, OUT SIDE THE BOOKS OF AC COUNTS. 17. THE LEARNED DR SUBMITTED THAT THE ADDITION WAS MADE ON ACCOUNT OF SALES OUTSIDE THE BOOKS OF ACCOUNTS PRODUCED OUT OF SHORTAGE OF RAW MATERIAL FOUND DURING THE COURSE OF SEARCH. HE SUB MITTED THAT THERE IS NO MISTAKE OR DISCREPANCY IN THE BOOKS OF ACCOUNTS AND THEREFORE THERE HAS TO BE SOME PRODUCTION AND SALES TO THE EXTENT OF SHORT AGE OF RAW MATERIALS OUTSIDE THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HE REFERRED TO THE RELEVANT PORTION OF THE ASSESSMENT ORDER IN SUPPORT OF THE C ASE OF THE REVENUE. 18. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN THE GROUND OF APPEAL OF THE REVENUE IS COVERED IN FAVOU R OF THE ASSESSEE WITH THE DECISION OF THE ITAT, AHMEDABAD BENCHES IN ASSE SSEES GROUP CASES I.E. DCIT VS. VIMAL DAIRY LTD. IN ITA NO.2491/AHD/2 007 DATED 20-10- 2011 WHEREIN IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. 19. WE HAVE CONSIDERED RIVAL SUBMISSION CAREFULLY. WE FIND THAT SIMILAR ISSUE WAS DECIDED IN ASSESSEES GROUP CASES , DCIT VS. VIMAL DIARY LTD. (SUPRA) BY THE ITAT, AHMEDABAD BENCHES W HEREIN IT WAS HELD THAT THE ASSESSEE HAS ACCOUNTED FOR THE SALES IN TH E BOOKS OF ACCOUNTS AFTER THE SEARCH AND THE AO DID NOT DISPUTE THE STOCK, PU RCHASES AND SALES MADE BY THE ASSESSEE DURING THE FINANCIAL YEAR, WHICH WA S SHOWN IN THE AUDITED ACCOUNTS. NOTHING WAS FOUND ON RECORD THAT THE AS SESSEE MADE UNACCOUNTED SALES. WE FIND THAT THERE IS NO MATERI AL BEFORE US TO SUSTAIN THE ADDITION AND THE ADDITION HAS BEEN MADE ON PRES UMPTION ONLY. IN THE FACTS OF THE CASE, WE HOLD THAT SINCE THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF AHMEDABAD TRIBUNAL IN ASSESSEES GROUP CASE CITED SUPRA AND THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A) IN ITA NO.3000/AHD/2007 WITH CO NO.302/AHD/2007 AND ITA NO.3001/AHD/2007 -7- HOLDING THAT THE AO HAS NOT DISPUTED ANY SALES RECO RDED DURING THE POST- SEARCH PERIOD AND THE CLOSING STOCK SHOWN IN THE FI NANCIAL STATEMENTS WERE AS PER THE EXCISE RECORD AND IN DIRECTING THE AO TO DELETE THE IMPUGNED ADDITION, THE GROUND NO.2 OF THE REVENUES APPEAL IS LIABLE TO BE DISMISSED AND WE DISMISS ACCORDINGLY. 20. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE FOR A.Y.2004-05 AND 2005-2006 ARE DISMISSED AND CO OF THE ASSESSEE FOR A.Y.2004-05 IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( #.% $% /A.MOHAN ALANKAMONY) &' ( /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD