The ITO, Ward-10(1), Ahmedabad V. Shri Saurin Himatlal Gandhi, Ahmedabad

ITA 1055/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9236 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-02-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 10-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: TUSHAR P HEMANI
• Keywords: Opportunity of being heard
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1055/AHD/2014 (ASSESSMENT YEAR: 2006-07) I.T.O.,WARD-10(1), AHMEDABAD V/S SHRI SAURIN HIMATLAL GANDHI PROP: DHARMIT ENTERPRISES, A/12, MADHAV FLATS, NR. VASNA BUS STOP, VASNA, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAWPG4175C APPELLANT BY : SHRI JAMES KURIAN, SR. D.R . RESPONDENT BY : SHRI TUSHAR P. HEMANI, A.R. ( )/ ORDER DATE OF HEARING : 14 -02-201 7 DATE OF PRONOUNCEMENT : 21-02-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)- VXI, AHMEDABAD DATED 28.02.2014 PERTAINING TO A.Y. 2006-07. ITA NO . 105 5/AHD/2014 . A.Y. 2006-0 7 2 2. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DIRECTING A.O. TO ADOPT GP AT 3.38% AS AGAINST THE GP ADOPTED AT 15.73% BY THE A.O. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF FERROUS AND NON- FERROUS METAL UNDER HIS PROPRIETARY CONCERN DHARMIT ENTERPRISE. RETURN OF INCOME WAS FILED ON 31.1.2006 DECLARING INCOME OF R S. 1,56,730/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACC ORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. ON FINDING NO PLAUSIBLE REPLY TO THE STATUTORY NOTI CES AND DUE TO NON- COOPERATION OF THE ASSESSEE, THE A.O. WAS COMPELLED TO COMPLETE THE ASSESSMENT BY ADOPTING THE AVERAGE GP FOR THE THREE IMMEDIATELY PRECEDING YEARS AT 15.73% AND MADE AN ADDITION OF R S. 48.29 LACS. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT( A) AND GOT THE RELIEF. 6. THE ORDER OF THE FIRST APPELLATE AUTHORITY WAS CONT ESTED BY THE REVENUE BEFORE THE TRIBUNAL AND THE TRIBUNAL IN ITA NO. 146 /AHD/2010 VIDE ORDER DATED 09.04.2012 HELD AS UNDER:- 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D. R. AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT BEFORE TH E A.O., ASSESSEE WAS NOT COMPLYING WITH AND NONE APPEARED ON VARIOUS OCCASIO NS BUT BEFORE LD. CIT(A), THE ASSESSEE WAS MAKING COMPLIANCE AND HENCE, LD. C IT(A) SHOULD HAVE ASKED THE ASSESSEE TO PRODUCE THE DESIRED DETAILS AND EVIDENC ES AND THEREAFTER BY OBTAINING REMAND REPORT, HE SHOULD HAVE DECIDED THE ISSUE INSTEAD OF GRANTING AD-HOC RELIEF ON ESTIMATE BASIS. HENCE, WE SET ASID E THE ORDER OF LD. CIT(A) AND RESTORE THE ENTIRE MATTER BACK FOR TO HIM FOR HIS F RESH DECISION, HE SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. ITA NO . 105 5/AHD/2014 . A.Y. 2006-0 7 3 7. PURSUANT TO THE DIRECTIONS OF THE TRIBUNAL, THE LD. CIT(A) ONCE AGAIN HEARD THE ASSESSEE AT LENGTH. THE ASSESSEE STRONGLY CONTE NDED THAT THE A.O. HAS ADOPTED THE AVERAGE GP RATE OF THREE PRECEDING ASSE SSMENT YEARS I.E. A.YS. 2003-04, 2004-05 & 2005-06. IT WAS BROUGHT TO THE N OTICE OF THE LD. CIT(A) THAT IN THOSE YEARS, THE BUSINESS OF THE ASSESSEE W AS IN PURCHASE AND SALE OF BEARING AND ELECTRIC MOTORS AND STAMPING IN WHIC H PROFIT MARGIN IS HIGHER. FROM THE YEAR UNDER CONSIDERATION, THE ASSE SSEE HAS CHANGED THE BUSINESS TO TRADING OF FERROUS AND NON FERROUS META L WHEREIN THE PROFIT MARGIN IS VERY LOW. IT WAS FURTHER BROUGHT TO THE N OTICE OF THE LD. CIT(A) THAT THE MARGIN OF PROFIT IN A.YS. 2006-07, 2007-08 & 20 08-09 WAS AT 1.37%, 1.38% & 3.38% RESPECTIVELY. THE A.O. WAS NOT JUSTIF IED IN ESTIMATING THE GP AT 15.73%. 8. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND COMPARING THE GP RATIO FROM A.Y. 2003-04 ONWARDS, THE LD. CIT(A) CONSIDERE D THE FOLLOWING CHART:- ASSTT YEAR G P RATIO SALES G.P. 2003-04 8.81% 44,85,725 2,95,191 2004-05 25.50% 9,20,730 2,34,835 2005-06 12.88% 19,18,650 2,47,182 2006-07 1.37% 3,36,47,411 4,63,663 2007-08 1.38% 3,70,54,876 4,84,285 2008-09 3.38% 1,35,01,934 4,56,795 ITA NO . 105 5/AHD/2014 . A.Y. 2006-0 7 4 9. THE LD. CIT(A) WAS CONVINCED WITH THE EXPLANATION O F THE ASSESSEE AND DIRECTED THE A.O. TO ADOPT THE GP RATE AT 3.38%. 10. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 11. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN S TATED BEFORE THE LOWER AUTHORITIES. 12. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. IT IS TRUE THAT IN ASSESSMENT YEARS 2003-04, 2004-05 & 2005-06, THE GP RATE OF THE ASSESSEE WERE AT 8.81% , 25.50% & 12 .88% RESPECTIVELY. IT IS EQUALLY TRUE THAT IN A.Y. 2006-07, THE GP RATE WAS 1.37%, IN A.Y. 2007-08, THE GP RATE WAS 1.38% AND IN A.Y. 2008-09, THE GP R ATE WAS 3.38%. 13. WE FIND THAT THE A.O. WAS SIMPLY CARRIED AWAY WITH THE GROSS PROFIT MARGIN OF EARLIER ASSESSMENT YEARS WITHOUT REALIZING THAT THE ASSESSEE HAS CHANGED ITS LINE OF BUSINESS. FROM PURCHASE AND SALE OF BEA RING AND ELECTRIC MOTORS TO TRADING IN FERROUS AND NON FERROUS METAL. THESE FACTS ARE AUTHENTICATED BY THE SUBSEQUENT GROSS PROFIT MARGIN OF THE ASSESS EE WHICH RANGES FROM 1.37% TO 3.38%. 14. CONSIDERING THE FACTS IN TOTALITY, THE INTERNAL COM PARABLES USED BY THE A.O. ARE IN FACT NOT COMPARABLE BECAUSE OF THE CHANGE IN THE NATURE OF BUSINESS. WE FIND THAT THE FIRST APPELLATE AUTHORITY HAS APPR ECIATED THE FACTS IN TRUE ITA NO . 105 5/AHD/2014 . A.Y. 2006-0 7 5 PERSPECTIVE AND THEREFORE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). 15. APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 21 - 02- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 21 /02/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD