M/s. A.S.RM.Subbaiah Pillai, Trichy V. DCIT, Trichy

ITA 108/CHNY/2009

• Counselvise Citation: 10821714 RSA 2009
• Duration Of Justice: 4 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-09-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 02-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V D GOPAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.108/MDS/2009 ASST. YEAR : 2004-05 A.S.RM. SUBBAIAH PILLAI, NO.6, SOUTH GATE, MAILAM, TRICHIRAPALLI-620008. PAN : AAAFA9382P. (APPELLANT ) V. THE DY. COMMISSIONER OF INCOME TAX , CIRCLE II, TIRUCHIRAPALLI-620 001. (RESPONDENT) DEPARTMENT BY : SHRI SHAJI P. JACOB, ADDL.CIT ASSESSEE BY : SHRI V.D. GOPAL, ADVOCATE DATE OF HEARING : 11 SEP 2013 DATE OF PRONOUNCEMENT : 20 SEP 2013 O R D E R PER S.S. GODARA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S), TIRUCHIRAPALLI, DATED 18.12.2008, PASSED IN APPEAL NO.612/06-7 ITA 108/MDS/2009 2 FOR ASSESSMENT YEAR 2004-05, IN PROCEEDINGS UNDER SEC.143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THE COURSE OF HEARING, THE ASSESSEE DRAWS OUR ATTENTION TOWARDS THE PLEADINGS RAISED IN THE GROUN DS. THEREAFTER, IT CONTENDS THAT THE COMMISSIONER OF IN COME TAX (APPEALS) HAS WRONGLY CONFIRMED THE ADDITION OF ` .20,60,559/- MADE BY THE ASSESSING OFFICER UNDER SEC.41(1) OF TH E ACT AFTER TREATING THE LIABILITY OF SUNDRY CREDITORS TO HA VE REMITTED OR CEASED. THE ASSESSEES FURTHER SUBMISSION IS THAT THE OTHER ADDITION OF ESTIMATION OF GROSS PROFIT @ 3% OF THE GROSS TURNOVER BY THE ASSESSING OFFICER HAS BEEN WRONGLY RESTRICTE D TO 2.5% INSTEAD OF THAT @ 2.01% ALREADY DECLARED. IN SUPP ORT OF THE SUBMISSIONS, IT ALSO FILES PAPER BOOKS AND CASE LAW (WHICH WOULD BE DEAL WITH IN SUCCEEDING PARAGRAPHS) AND PRAYS FO R ACCEPTANCE OF THE APPEAL. 3. THE REVENUE STRONGLY RELIES UPON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) AND PRAYS FOR CONFIRMATION THEREOF. ITS FURTHER SUBMISSION IS TH AT THE ASSESSEE ITA 108/MDS/2009 3 HAD FAILED TO PROVE BEFORE LOWER AUTHORITIES THE DE TAILS SOUGHT QUA SUNDRY CREDITORS THE ADDITIONS ARE LIABLE TO BE AFFIRMED. 4. THE ASSESSEE IS A FIRM, ENGAGED IN THE BUSINESS OF WHOLESALE MERCHANTS IN PROVISION ITEMS. FOR THE IM PUGNED ASSESSMENT YEAR, IT HAD FILED ITS RETURN ON 5.11.20 06 DECLARING INCOME OF ` .24,72,900/- WHICH WAS SUMMARILY PROCESSED. 5. IN THE COURSE OF SCRUTINY, THE ASSESSING OFFICE R CAME ACROSS THE ASSESSEES LEDGER ACCOUNTS CONTAINING SUNDRY CREDITORS TERMED AS PALAPULLIGAL WHICH MEANS A NUMBER OF CREDITORS TO THE TUNE OF ` .20,60,559.54. IN THE PAPER BOOK BEFORE US THEIR NAMES AND DETAILS ARE AT PAGE 99. SO, THE SECOND PART OF THE REVENUES ARGUMENT (SUPRA) STAND S AUTOMATICALLY OVERRULED. WHILST FINALIZING THE ASS ESSMENT VIDE ORDER DATED 27.11.2006, THE ASSESSING OFFICER WAS O F THE VIEW THAT SINCE THE ASSESSEE HAD BEEN SHOWING THE LIABIL ITY OF SUNDRY CREDITORS FOR THE LAST MANY ASSESSMENT YEARS, IT H AD NO INTENTION OF PAYING THE SAME. THEREFORE, HE HELD THAT THE SA ID LIABILITY HAD BECOME ASSESSED INCOME UNDER SEC.41(1) OF THE ACT I N THE ITA 108/MDS/2009 4 NATURE OF REMISSION OR CESSATION THEREOF AND ADDED A SUM OF ` .20,60,559/- IN QUESTION IN THE TOTAL INCOME. SIMILARLY, THE ASSESSEE HAD DECLARED TOTAL TURNOV ER OF ` .23,12,83,525/-. THE GROSS PROFIT STOOD DECLARED A T THE RATE OF 2.01%, QUA THE PROVISION ITEMS OF SUGAR, FLOUR, DHA L ETC. AS PER THE ASSESSING OFFICER, THE SAME WAS MUCH LESS AS CO MPARED TO SIMILARLY SITUATED ENTITIES GROSS PROFITS HAD BE EN DISCLOSED AT THE RATE OF 4%. HE ALSO OBSERVED IN THE ORDER THAT EVEN THE SUGAR STOCK QUANTITY SOLD AT A LOSS WAS NOT QUANT IFIABLE AND ESTIMATED THE PROFIT AT THE RATE OF 3% LEADING TO A N ADDITION OF ` .22,98,790/-. 6. IN ASSESSEES APPEAL, THE COMMISSIONER OF INCOM E TAX (APPEALS) HAS CONFIRMED THE FIRST ADDITION WHER EAS QUA THE SECOND ONE, HE HAS REDUCED THE ESTIMATED PROFIT OF 3% BY THE ASSESSING OFFICER TO 2.5% OF THE GROSS TURNOVER. THIS MAKES THE ASSESSEE AGGRIEVED. ITA 108/MDS/2009 5 7. WE HAVE HEARD BOTH PARTIES, PERUSED THE RELEVAN T FINDINGS, PAPER BOOKS AND THE CASE LAW. THE FIRST QUESTION SOUGHT TO BE RAISED BY THE ASSESSEE IS AS TO WHETHE R OR NOT THE LIABILITY OF SUNDRY CREDITORS COMPUTED IN ITS ACCOU NTS FOR THE PRECEDING ASSESSMENT YEARS COULD BE DEEMED TO HAVE BEEN REMITTED OR CEASED FOR THE PURPOSE OF SEC.41(1) OF THE ACT. IN THIS REGARD, WE FIND THAT THERE IS NO MATERIAL RELI ED UPON BY THE REVENUE APART FROM MERELY DRAWING AN INFERENCE THAT THE LIABILITY IN QUESTION HAD ACTUALLY BEEN REMITTED OR CEASED FO R THE PURPOSE OF SEC.41(1) OF THE ACT. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS PRESUMED THAT SINCE THE LIABILITY IN Q UESTION HAD BEEN CONTINUING FOR THE PAST MANY YEARS, THIS SHOWS THE ASSESSEES INTENTION OF NOT PAYING THEM WHICH WOULD AMOUNT TO ITS REMISSION AND CESSATION. IN THIS REGARD WE FIN D FROM A PERUSAL OF THE CASE LAW RELIED UPON BY THE ASSESSEE IN THE CASE OF CIT V. SOUTHERN ROAD WAYS LTD. (2006) 282 ITR 37 9 (MADRAS) THAT OBTAINING OF A BENEFIT BY VIRTUE OF REMISSION OR CESSATION IS A CONDITION PRECEDENT FOR EXIGIBILITY OF THE RELEVANT PROVISION. ITA 108/MDS/2009 6 SIMILARLY, THEIR LORDSHIPS IN THE CASE OF CIT V. TA MILNADU WAREHOUSING CORPORATION (2007) 292 ITR 310 (MADRAS ) HAVE FURTHER ECHOED THE PRINCIPLE THAT IN THE ABSENCE OF CESSATION OF A LIABILITY, SEC.41(1) OF THE ACT COULD NOT BE PRESSE D INTO OPERATION. UNDISPUTEDLY, APART FROM THE INFERENCE, NO EVIDENCE OF ANY REMISSION OR CESSATION IS FORTHCOMING IN THE CASE I N HAND. THEREFORE, WE ACCEPT THE ASSESSEES CONTENTIONS AND DELETE THE IMPUGNED ADDITION OF ` .20,60,559/-. 8. NOW, WE COME TO THE SECOND LIMB OF ASSESSEES ARGUMENTS ON THE IMPUGNED ESTIMATION OF GROSS PROFI T AT THE RATE OF 3% BY THE ASSESSING OFFICER, RESTRICTED TO 2.5% BY THE COMMISSIONER OF INCOME TAX (APPEALS). AT PAGE 23 O F THE PAPER BOOK, IT IS EVIDENT TO US FROM THE GROSS PROFIT RAT IO FOR THE ASSESSMENT YEAR 2001-02, 2002-03, 2003-04 AND THAT OF THE IMPUGNED ASSESSMENT YEAR STOOD DECLARED BY THE ASSE SSEE @ 1.78%; 1.58%; 1.55% AND 2.01%, RESPECTIVELY. THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME TAX (APPEALS ) HAVE COMPUTED IT @ 3% AND 2.5%. THE PAPER BOOK BEFORE US ITA 108/MDS/2009 7 REVEALS THAT FOR THE IMPUGNED ASSESSMENT YEAR, THE STOCKS OF THE ASSESSEE WERE DULY ASSESSED BY THE SALES-TAX AUTHOR ITIES QUA THE QUANTITY OF SUGAR AND OTHER PROVISIONS. ONCE THAT IS SO, WE DO NOT FIND ANY JUSTIFICATION IN THE ACTION OF THE AUT HORITIES BELOW IN ESTIMATING THE PROFITS OF THE ASSESSEE OVER AND ABO VE WHAT WAS ALREADY MORE THAN THAT DECLARED IN THE PRECEDING AS SESSMENT YEARS WITHOUT ANY DISTINCTION ON FACTS. WHILST HOL DING SO, WE PLACE RELIANCE UPON THE CASE LAW RELIED UPON BY THE ASSESSEE IN THE CASE OF CIT V. ANANDHA METAL CORPORATION (2005 ) 273 ITR 262 (MADRAS) WHEREIN IT HAD BEEN HELD THAT IN EVALU ATING THE STOCK, THE VALUATION ADOPTED BY SALES-TAX AUTHORITI ES IS BINDING ON INCOME-TAX AUTHORITIES. ACCORDINGLY, ADOPTING C ONSISTENCY AND AFTER FOLLOWING THE DECISION OF HONBLE JURISDI CTIONAL HIGH COURT, WE DELETE THE ADDITION AND THE ESTIMATION OF GROSS PROFITS RESTRICTED BY THE COMMISSIONER OF INCOME TAX (APPEA LS) @ 2.5% OF THE GROSS TURNOVER TO THAT @ 2.01% ALREADY DECLA RED BY THE ASSESSEE. ITA 108/MDS/2009 8 9. IN THE RESULT, THE APPEAL STANDS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 20 TH DAY OF SEPTEMBER 2013. SD/- SD/- ( ABRAHAM P. GEORGE ) ( S.S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED : 20 TH SEPTEMBER 2013 JLS. C.C : APPELLANT/RESPONDENT/CIT(A)/CIT/DR/G.FILE