DCIT, Kumbakonam V. Shri V.A.Jahabar Sadik, Kumbakonam

ITA 1107/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4982 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 08-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: G NARAYANASWAMY
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. I.T.A. NO.1107(MDS)/2010 ASSESSMENT YEAR: 2004-05 THE DEPUTY COMMISSIONER OF SHRI V.A.J AHABAR SADIK , INCOME-TAX , 25, NAGESWARAN KOIL NORTH ST CIRCLE-I, VS. KUMBAKONAM. KUMBAKONAM. P AN ADVPJ5479N. (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI K.E.B.RENGARAJAN JR. STANDING COUNSEL RESPONDENT BY: SHRI G.NARAYANASWAMY O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE REVENUE FOR THE ASSES SMENT YEAR 2004-05. THE APPEAL IS DIRECTED AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AT TIRUCHIRAPA LLY DATED 22-4- ITA NO.1107(MDS) /2010 2 2010. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPL ETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE IS A DEALER IN GOLD AND SILVER JEW ELLERY AND OTHER ARTICLES. THE ASSESSEE FILED HIS RETURN OF I NCOME FOR THE IMPUGNED ASSESSMENT YEAR ADMITTING A TOTAL INCOME O F ` 11,63,230/- ALONGWITH AGRICULTURAL INCOME OF ` 50,000/-. 3. THERE WAS A SURVEY IN THE BUSINESS PREMISES OF THE ASSESSEE ON 18-11-2003. ACCORDING TO THE ASSESSING OFFICER, THERE WAS A SHORTAGE OF JEWELLERY OF 943 GRAMS. ON THE B ASIS OF THE DETAILS COLLECTED AT THE TIME OF SURVEY, THE ASSESSING OFFI CER COMPUTED THE GROSS PROFIT OF THE BUSINESS OF THE ASSESSEE AT 34% FOR THE BROKEN PERIOD OF 19-11-2003 TO 31-3-2004. THE BROKEN PERI OD IS THE PERIOD BETWEEN THE SURVEY AND THE YEAR ENDING. THE ASSESS ING OFFICER FURTHER OBSERVED THAT THE GROSS PROFIT DISCLOSED BY THE ASSESSEE FOR THE EARLIER BROKEN PERIOD OF THE PREVIOUS YEAR WAS ONLY 6%. HE, THEREFORE, HELD THAT THE WORKING RESULTS REFLECTED IN THE ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE. HE WORKED OUT A SUP PRESSION OF PROFIT OF ` 12,86,204/-. HE GAVE A DEDUCTION OF ` 3 LAKHS FROM THAT SUPPRESSED PROFIT, WHICH HAS ALREADY BEEN CREDITED IN THE CAPITAL ACCOUNT OF THE ASSESSEE AND OFFERED AS INCOME OF TH E IMPUGNED ITA NO.1107(MDS) /2010 3 ASSESSMENT YEAR. THE BALANCE OF ` 9,86,200/- HAS BEEN ADDED TO THE INCOME OF THE ASSESSEE BY WAY OF GROSS PROFIT FACTO R. HE HAS ALSO MADE OTHER ADDITIONS LIKE ADDITION IN THE VALUE OF SILVER, WASTAGE, COOLY CONVERSION, POLISHING CHARGES, ETC. THE TOTA L INCOME WAS THUS DETERMINED AT ` 31,25,525/-. 4. WHEN THE MATTER WAS TAKEN IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE GR OSS PROFIT ADDITION ON THE GROUND THAT NO SPECIFIC OMISSION OR DEFECT WAS POINTED OUT BY THE ASSESSING AUTHORITY SO AS TO REJ ECT THE BOOK RESULTS. IN RESPECT OF THE ADDITION MADE TO SILVER , THE COMMISSIONER OF INCOME TAX (APPEALS) MODIFIED THE SAME FROM ` 5 LAKHS TO ` 3.6 LAKHS, GIVING A RELIEF OF ` 1.4 LAKHS. HE HAS CONFIRMED THE ADDITION OF ` 35,785/- MADE TOWARDS WASTAGE. THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER MODIFIED THE COOLIE CONVERSIO N ADDITION TO ` 1,85,066/- BY GIVING A RELIEF OF ` 1,24,219/-. HE HAS ALSO DELETED THE POLISHING CHARGES ADDITION OF ` 75,500/-. 5. THE REVENUE IS AGGRIEVED AND THEREFORE FILED THIS SECOND APPEAL BEFORE US. WE HEARD SHRI K.E.B.RENGA RAJAN, THE LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE AND SHRI ITA NO.1107(MDS) /2010 4 G.NARAYANASWAMY, THE LEARNED CHARTERED ACCOUNTANT A PPEARING FOR THE RESPONDENT-ASSESSEE. 6. THE FIRST GROUND RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFI ED IN DELETING THE ADDITION MADE BY THE ASSESSING AUTHORITY ON A COMPA RISON OF THE GROSS PROFIT. IT IS TO BE SEEN THAT, AS RIGHTLY PO INTED OUT BY THE COMMISSIONER OF INCOME TAX (APPEALS), THERE WAS NO SPECIFIC CASE OF ANY DEFECT IN THE ACCOUNTS AND WORKING RESULTS P RODUCED BY THE ASSESSEE BEFORE THE ASSESSING AUTHORITY. THE COMMI SSIONER OF INCOME TAX (APPEALS) HAS ARRIVED AT DIFFERENT G.P. RATES ON AN ADHOC BASIS DIVIDING THE PREVIOUS YEAR PERIOD IN TWO PART S, PRE SURVEY PERIOD AND POST SURVEY PERIOD. WHILE DIVIDING THE PREVIOU S PERIOD INTO TWO PARTS, THE VALUATION OF THE UNINTERRUPTED OPENING A ND CLOSING STOCK HAVE NOT BEEN PROPERLY DONE BY THE ASSESSING AUTHOR ITY. AN ELEMENT OF ESTIMATION HAS BEEN DEFINITELY CREPT INTO THE CO MPUTATION MADE OUT BY THE ASSESSING AUTHORITY. MOREOVER, AS CONTENDED BY THE LEARNED CHARTERED ACCOUNTANT, THE PROFIT HAS SHOT UP IN THE POST SURVEY PERIOD NOT BECAUSE OF ANY MANIPULATION BY THE ASSESSEE BUT BECAUSE OF THE STEEP HIKE IN THE PRICES OF GOLD AND SILVER. THIS CRUCIAL ARGUMENT WAS NOT CONSIDERED BY THE ASSESSING OFFICER. ON AN OVE RALL VIEW OF THE ITA NO.1107(MDS) /2010 5 MATTER, WE ARE OF THE OPINION THAT THE COMMISSIONER OF INCOME TAX (APPEALS) IS FULLY JUSTIFIED IN DELETING THE SAID A DDITION. THE GROUND RAISED BY THE REVENUE IN THIS REGARD FAILS. 7. REGARDING THE GROUNDS RAISED BY THE REVENUE AGA INST THE DELETION OF ADDITIONS ON ACCOUNT OF COOLIE CONVERSI ON CHARGES AND POLISHING CHARGES, WE FIND NO INFIRMITY IN THE DECI SION OF THE COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) O N THIS ISSUE. THE REVENUE FAILS ON THESE GROUNDS ALSO. 8. IN RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 6 TH DAY OF JUNE, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 6 TH JUNE, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.