Jagdish Technocast Pvt. Ltd., RAJKOT-GUJARAT V. The Assistant Commissioner of Income Tax, Circle-2, RAJKOT-GUJARAT

CO 31/RJT/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6011 (ITAT-RAJKOT)
• Duration Of Justice: 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 31-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C RANPURA
• Assessee Lawyers: JAI RAJ KUMAR
• Keywords: Business expenditure
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) I.T.A. NO.88/RJT/2011 (ASSESSMENT YEAR 2007-08) THE ACIT, CIR.2 VS M/S JAGDISH TECHNOCAST PVT LT D RAJKOT 377, GIDC-2, AJI INDUSTRIAL AREA RAJKOT PAN : AAACJ5370K (APPELLANT) (RESPONDENT) C.O. 31/RJT/2011 (ARISING OUT OF I.T.A. NO.88/RJT/2011) (ASSESSMENT YEAR 2007-08) M/S JAGDISH TECHNOCAST PVT LTD VS THE ACIT, CIR.2 RAJKOT RAJKOT (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI JAI RAJ KUMAR RESPONDENT BY : SHRI JC RANPURA O R D E R PER AL GEHLOT, AM THIS APPEAL FILED BY THE REVENUE AND THE CROSS OBJ ECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 01-12-201 PASS ED BY THE COMMISSIONER OF INCOME-TAX(APPEALS)-III, RAJKOT FOR THE ASSESSMENT YEAR 2007-08. 2. THE FIRST GROUND RAISED BY REVENUE IN ITS APPEAL IS IN RESPECT OF GROSS PROFIT ADDITION. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF MANUFACTURING AND SELLING OF INVESTMENT CASTING. DURING THE ASSESSMENT PROCEEDINGS, ON COMPARISON OF GROSS PROF IT, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN LOWER GROSS PRO FIT WHEN COMPARED TO PRECEDING ASSESSMENT YEAR. THE ASSESSING OFFICER N OTICED THAT SOME OF THE PRODUCTS HAVE BEEN SOLD BY THE ASSESSEE ON THE SAME PRICE OF LAST YEAR IN SPITE OF THE FACT THAT THERE WAS SUBSTANTIAL INCREASE IN RAW-MATERIAL AND HENCE, HE HELD ITA NO.88/RJT/2011 C.O.31/RJT/2011 2 THAT THE SALE BILLS PRODUCED BY THE ASSESSEE WERE N OT AT ALL RELIABLE. THE ASSESSING OFFICER, THEREFORE, REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND APPLIED 16% GROSS PROFIT RATE AS AGAINST DECLARED G ROSS PROFIT OF 14.81%. ACCORDINGLY, THE ASSESSING OFFICER MADE AN ADDITION OF RS.12,99,070. THE CIT(A), AFTER CONSIDERING ASSESSEES SUBMISSIONS AN D VARIOUS DECISIONS HELD THAT THE ASSESSING OFFICER DID NOT POINT OUT ANY SPECIFI C DEFECT IN THE AUDITED BOOKS OF ACCOUNT. THERE IS NO BASIS TO REJECT THE BOOKS OF ACCOUNT. THE ASSESSEE MAINTAINED PROPER BOOKS OF ACCOUNT. NO DISCREPANCY HAS BEEN FOUND IN THE BOOKS OF ACCOUNT. IN THE LIGHT OF THESE FACTS, THE CIT(A) HELD THAT THERE IS NO JUSTIFICATION IN REJECTING THE BOOKS OF ACCOUNT. H E, THEREFORE, DELETED THE ADDITION. 3. I HAVE HEARD THE LEARNED REPRESENTATIVE OF THE P ARTIES. THE ADMITTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER, WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT APPLIED THE GROSS PROFIT OF THE IM MEDIATELY PRECEDING ASSESSMENT YEAR. THE SO-CALLED DEFECT POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT IS ON THE BASIS OF PRESUMPTION AND ASSUMPTION WITHOUT ANY MATERIAL ON RECORD. THE OBJECTION OF THE ASSESSING OFFICER THAT NO PRUDENT BUSINESSMAN WILL SELL THEIR PRODUCT ON THE SAME PRI CE OF LAST YEAR IS WITHOUT POINTING OUT ANY SPECIFIC INSTANCE AND QUANTIFICATI ON OF THAT PART OF OBSERVATION. EVEN OTHERWISE ALSO SUCH DECISIONS ARE OF BUSINESSM AN AND NOT OF A.O.THIS WAS MERELY A ROUTINE OBSERVATION, BASED ON WHICH THE BO OKS OF ACCOUNT MAINTAINED BY THE ASSESSEE CANNOT BE REJECTED. THE REJECTION OF BOOKS OF ACCOUNT ITSELF IS PROVIDED IN SECTION 145 OF THE ACT. I FIND THAT TH E ASSESSING OFFICER HAS FAILED TO POINT OUT ANY SUCH MATERIAL OR EVIDENCE TO SHOW THA T THERE IS A VIOLATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. I, THEREF ORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION. THE FIRST GROUND OF THE REVENUE FAILS. 4. THE SECOND GROUND OF THE REVENUES APPEAL AND ON LY EFFECTIVE GROUND IN THE CROSS OBJECTION PERTAIN TO DISALLOWANCE OUT OF MISCELLANEOUS EXPENSES. THE BRIEF FACTS OF THIS ISSUE ARE THAT ON VERIFICATION OF BOOKS OF ACCOUNT THE ASSESSING ITA NO.88/RJT/2011 C.O.31/RJT/2011 3 OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED MISCE LLANEOUS EXPENSES OF RS.1,31,653. THE ASSESSING OFFICER NOTICED THAT MO ST OF THE VOUCHERS SUPPORTED TO MISCELLANEOUS EXPENSES ARE SELF MADE VOUCHERS PA ID IN CASH. THE ASSESSING OFFICER THEREFORE DISALLOWED 20% OF SUCH EXPENSES O F WHICH THE CALCULATION CAME TO RS.26,300. THE ADDITION OF RS. 26,300 WAS, THER EFORE MADE. THE CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 15,000 . 5. I HAVE HEARD THE LEARNED REPRESENTATIVE OF THE P ARTIES. I FIND THAT THE CIT(A) RESTRICTED THE DISALLOWANCE TO RS.15,000 MER ELY ON THE GROUND THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS ON H IGHER SIDE. WHEREAS CONTRARY TO THAT THE CIT(A) GAVE A FINDING THAT THE ASSESSING OFFICER DID NOT FIND ANY DEFECT IN THE BOOKS OF ACCOUNT OR IDENTIFIED TH E EXPENSES WHICH ARE IN THE NATURE OF PERSONAL OR NON BUSINESS EXPENSES. THIS ASPECT OF THE FACTS HAS NOT BEEN CONSIDERED BY THE CIT(A) WHILE RESTRICTING THE ADDITION TO THE EXTENT OF RS.15,000. AFTER A DETAILED DISCUSSION IN ABOVE PA RAGRAPH, WHILE DECIDING GROUND NO.1 IN REVENUES APPEAL I HAVE ALREADY HELD THAT THE ASSESSING OFFICER HAS FAILED TO POINT OUT ANY DEFECTS IN BOOKS OF ACC OUNT. UNDER THAT CIRCUMSTANCE, SUCH ADHOC DISALLOWANCE CANNOT BE MADE. I, THEREFO RE, FIND THAT THE CIT(A) IS NOT CORRECT IN RESTRICTING THE ADDITION TO THE EXTENT O F RS.15,000. CONSIDERING THE FACTS OF THE CASE, I DELETE THE ENTIRE ADDITION MAD E BY THE ASSESSING OFFICER OF RS.26,300. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08-04-2011. SD/- (A.L. GEHLOT) ACCOUNTANT MEMBER RAJKOT, DT : 08 TH APRIL, 2011 PK/- ITA NO.88/RJT/2011 C.O.31/RJT/2011 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-III, RAJKOT 4. THE CIT-II, RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT