Shimmer Chemicals Pvt.Ltd., Baroda V. The ACIT.,Circle-4, Baroda

ITA 1014/AHD/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8973 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 10-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENA
• Assessee Lawyers: V K SHAH
• Keywords: Business income

Judgement Text

, , ,, ,* * * * IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO.1014/AHD/2012 ( / ASSESSMENT YEAR : 2005-06) SHIMMER CHEMICALS PVT. LTD. BLOCK NO.338, PADRA BORSAD ROAD, VILLAGE MUJPUR DIST : VADODARA # VS. THE ACIT CIRCLE -4, VADODARA. $ # % & # PAN/GIR NO. : AACCS 5505 M ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI V.K. SHAH, A.R. ($'*) / RESPONDENT BY : SHRI OM PRAKASH MEENA, SR. D.R. + ,*-. / DATE OF HEARING 23/01/2017 /012*-. / DATE OF PRONOUNCEMENT 20/03/2017 3# O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE I S DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS )-III, BARODA, DATED 21/02/2012 FOR THE ASSESSMENT YEAR (AY) 2005 -06. ITA NO.1014/AHD /2012 SHIMMER CHEMICALS PVT. LTD. VS. ACIT ASST.YEAR 2005-06 - 2 - 2. ASSESSEE/APPELLANT HAS BEEN TAKEN FOLLOWING GROU NDS OF APPEAL:- I. T HE LEARNED AO HAS ERRED IN LAW AND IN FACT IN LEVYI NG PENALTY OF RS.14,20,788/- UNDER SECTION 271(1)(C) OF THE INCOM E TAX ACT AND THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II I, VADODARA IN CONFIRMING THE SAME ON ESTIMATION OF GROSS PROFI T MADE BY THE THEN AO OF RS. 72,17,421/- I.E. 16% AGAINST THE GP OF RS. 33,34,685 I.E. 7.39% SHOWN BY THE APPELLANT COMPANY AND THEREBY MAKING ADDITION OF RS. 38,82,736/- (72,17,4 21 33,34,685)IN THE INCOME OF THE APPELLANT COMPANY. T HE THEN A.O. HAS ALSO WRONGLY CALCULATED THE COST OF JOB WORK CH ARGES RECEIVED FROM M/S. SHIV SHAKTI CHEMICALS, A SISTER CONCERN AS THE PRODUCT IS BEING DIFFERENT I.E. SEMI FINISHED GOODS . 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE APPELLANT IS A PVT. LTD CO. ENGAGED IN THE BUSI NESS OF MANUFACTURING OF BENZYL CHLORIDE AND BENZYL DEHYDE. THE PRODUCT I S ULTIMATELY USED FOR MANUFACTURING OF PERFUMERY PRODUCTS, PHARMACEUT ICAL DRUGS, INTERMEDIATES ETC. 4. DURING THE YEAR UNDER CONSIDERATION THERE IS A F ALL IN GROSS PROFIT AS COMPARED TO LAST YEAR, DUE TO INCREASE IN COST OF R AW MATERIAL I.E. TOLUNE, COST OF WHICH HAS GONE UP BY APPROXIMATELY 20%-30%. THE LEARNED AO HAS ESTIMATED GROSS PROFIT BY INVOKING PROVISION U/S. 145(3) AT RS.72,17,421/- I.E. @16%, AGAINST THE GROSS P ROFIT OF RS. 33,34,685/- I.E. @ 7.39% SHOWN BY THE APPELLANT COMPANY STATING THAT SINCE THE COST OF PRODUCTION HAS GONE UP, THE APPELLANT IS NOT BOUND TO SELL AT THE FROZEN ITA NO.1014/AHD /2012 SHIMMER CHEMICALS PVT. LTD. VS. ACIT ASST.YEAR 2005-06 - 3 - RATE AND ACCORDINGLY THE APPELLANT IS FAILED TO REC OVER THE SALE PRICE PROPORTIONATE TO INCREASE IN COST OF PURCHASE. THE THEN LD. AO HAS ADDED DIFFERENCE OF RS .38,82,736/- (72,17,421 - 33,34,685) GROSS PROFIT SHOWN BY APPELLANT CO., WHICH HAS BEEN CONFIRMED BY CIT ( A). 5. AGAINST THE ABOVE ADDITION MADE BY THE AO, LD. C IT(A) HELD THAT HE HAS WRONGLY APPLIED THE COST OF JOB WORK CHARGES PAID TO M/S SHIV SHAKTI CHEMICALS, A SISTER CONCERN AS THE PRODUCT I S BEING DIFFERENT. AGAINST THE SAID ORDER, THE COMPANY HAS PREFERRED S ECOND APPEAL BEFORE US. 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IM PUGNED ORDER AND LD. AR CITED SEVERAL JUDGMENT INCLUDING ADDL. C IT VS. CHANDRAVILAS HOTEL (1987) 165 ITR 300 (GUJ), IN THE CASE PENALTY HAD BEEN CANCELLED OBSERVING THAT BOOK PROFITS WERE HELD TO BE NOT AME NABLE TO VERIFICATION AND AS THE ASSESSEES INCOME WAS DETERMINED ON ESTI MATE, THE EXPLANATION TO SECTION 271(1)(C) DID NOT APPLY. 7. IN THE MATTER OF CIT VS. SUBHASH TRADING COMPANY (1996) 221 ITR 110 (GUJ), WHERE BOTH THE TURNOVER AND GROSS PR OFIT WERE ESTIMATED IN A BEST JUDGMENT ASSESSMENT, IT WAS HELD THAT FAI LURE TO RETURN THE CORRECT INCOME WAS NOT ON ACCOUNT OF ANY FRAUD OR G ROSS OF WILLFUL NEGLECT ON THE PART OF ASSESSEE AND IN THE ABSENCE OF ANY OTHER MATERIAL ITA NO.1014/AHD /2012 SHIMMER CHEMICALS PVT. LTD. VS. ACIT ASST.YEAR 2005-06 - 4 - WHICH MIGHT REFLECT ON THE CONDUCT OF THE ASSESSEE ABOUT THE DELIBERATE ATTEMPT TO MAINTAIN FALSE BOOKS OF ACCOUNTS, ON A P REPONDERANCE OF PROBABILITIES, NO OTHER CONCLUSION COULD BE REACHED THAT EXPLANATION TO SECTION 271 (1)(C) WAS NOT APPLICABLE. 8. IN THE MATTER OF RAM CHAND RAM KISHAN CHAWLA VS. ITO (1992) 198 ITR 176 (DEL.), BUSINESS INCOME WAS ESTIMATED A T HIGHER FIGURE THAN RETURNED REJECTED THE ASSESSEES EXPLANATION THAT F ALL IN INCOME WAS DUE TO DISPUTES AMONG THE PARTNERS. THE EXPLANATION OFFERE D BY THE ASSESSEE MUST BE FOUND TO BE FALSE BEFORE INVOKING SECTION 2 71(1)(C). PENALTY WAS CANCELLED. 9. IN THE MATTER OF BALAMKRISHANA ENGG. CONSTRUCTI ON CORPORATION VS. DY. CIT 56 ITD 411 (HYD), IT WAS HELD THAT GROSS PR OFIT ADDITION BEING A MATTER OF ESTIMATING PROFIT A DISALLOWANCE OF ROUTI NE NATURE WOULD NOT CONSTITUTE CONCEALMENT ON PART OF ASSESSEE AND NOT PENALTY IS LIVEABLE. 10. RESPECTFULLY, FOLLOWING THE ABOVE SAID JUDGMENT S WE DELETE THE PENALTY LEVIED ON THE ASSESSEE. ITA NO.1014/AHD /2012 SHIMMER CHEMICALS PVT. LTD. VS. ACIT ASST.YEAR 2005-06 - 5 - 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 20/03/2017 SD/- SD/- ( ) 4 5 (N.K. BILLAIYA) (MA HAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 20/03/2017 PRITI YADAV, SR. PS !'#$ %$' # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-III, BARODA. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. & ' / BY ORDER, (9-- //TRUE COPY// (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY