Dev Colour Lab, Surat V. The Income tax Officer,Ward-7(1), Surat

ITA 1111/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9027 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Corroborative evidences
• 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; 201

Judgement Text

ITA NO. 1111/ AHD / 201 3 A SSESSMENT Y EAR: 20 0 9 - 10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO. 1111 /AHD/201 3 ASSESSMENT Y EAR : 200 9 - 10 DEV COLOUR LAB , ..... .......... .APPELLANT C/O. MADHAV & ASSOCIATES CHARTERED ACCOUNTANTS, S - 124 - 125, BELGIUM SQUARE, OPP. LINEAR BUS SAND, NEAR DELHI GATE, SURAT 395 003. [PAN: A AEFD 1489 Q ] VS. I NCOME TAX OFFICER, WARD 7(1), SURAT. .. ......... RESPONDENT APPEARANCES BY: M.J. SHAH , FOR THE APPELLANT KAILASH DAN RATNOO , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 2 7 .02. 201 7 DATE OF PRONOUNCING THE ORDER : 10 . 0 3 .2017 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 4 TH MARCH 2013, PASSED BY THE LEARNED CIT(A), FOR THE ASSESSMENT YEA R 200 9 - 10. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL : - 1. THAT THE LEARNED CIT ( A PPEALS ) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION MADE BY LD. ASSESSING OFFICER ON ACCO UNT OF LOW GROSS PROFIT AMOUNTING TO RS.419175. THE LD. CIT ( APPEALS) HAS COMPARED GROSS PROFIT RATIO WITHOUT SORTING ABNORMAL/ACCIDENTAL/CASUAL INCOME OF RS.250000/ - IN AY 2008 - 09 , RECEIVED ON ACCOUNT OF PURCHASE OF PRINTING MACHINERY AS PAYMENTS TOWARDS AS PAPER/CHEMICAL DISCOUNT FOR TEST CHECKING PRINTING ON NEW MACHINE. THE LD. CIT (APPEALS) HAS WRONGLY CALCULATED GROSS PROFIT RATIO @ 21.49% BY NOT DEDUCTING TRADE DISCOUNT OF RS.419175 FROM ITA NO. 1111/ AHD / 201 3 A SSESSMENT Y EAR: 20 0 9 - 10 PAGE 2 OF 5 PURCHASES FOR AY 2009 - 10 AND THEREBY INFLATING PURCHASE AND T HUS LOWERING GROSS PROFIT AND COMPARING IT WITH GROSS PROFIT RATIO OF AY 2008 - 09 BY DEDUCTING TRADE DISCOUNT OF RS.305827 FROM PURCHASE WHICH IS ABSURD. ON THE FACTS AND CIRCUMSTANCES OF CASE THE ADDITION OF RS.419175 ON ACCOUNT OF LOW GROSS PROFIT IS WIT HOUT ANY BASE, ILLEGAL AND UNLAWFUL. 3. TO ADJUDICATE ON TH IS APPEAL, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFORE US IS ENGAGED IN THE BUSINESS OF PHOTO P ROCESSING L AB. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS , THE ASSESSING O FFICER NOTICED THAT THERE IS A SUBSTANTIAL FALL IN GROSS PROFIT RATE. AS AGAINST GROSS PROFIT R A TE OF 30.46% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE GROSS PROFIT RATE IN THE CURRENT YEAR WAS ONLY 27.13%. THE EXPLANATION GIVEN BY THE ASSESSEE WAS REJECTED, AND, WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS, THE ASSESSING O FFICER MADE A GROSS PROFIT ADDITION OF RS.4,19,175/ - BY OBSERVING AS FOLLOWS : - 6.1. THE SUBMISSION OF THE ASSESSEE HAVE BEEN CAREFULLY CONSIDERED AND THE SAME IS FOUND TO BE SELF SERVING AND DEVOID OF ANY MERITS IN LAW CONSIDERING THE FOLLOWING FACTS OF THE CASE. THE AR OF THE ASSESSEE HAS STATED AS MENTIONED ABOVE THAT THE CALCULATION SHOWN FOR COMPARING GROSS PROFIT IS NOT CORRECT. FOR THE COMPA RISON OF GROSS PROFIT ITEM THE TRADING ACCOUNT HAS TO BE TAKEN ON E QUAL FOOTING. ABNORMAL/ACCIDENT AL/CASUAL INCOME OR EXPENDITURE HAS TO BE SORTED OUT. THE DISCOUNT OF RS. 4,19,175/ - IS TRADE DISCOUNT RECEIVED FROM PURCHASE PARTIES. THE COMPARATIVE FIGURE O F TRADE OF TRADE DISCOUNT OF A.Y. 2008 - 09 IS RS . 3,05,827/ - WHICH IS SEPARATED FROM PURCHASE THEN SAME ITEM IN A.Y. 2008 - 09 HAS TO BE SEPARATED FROM PURCHASE AND THE GROSS PROFIT RATIO HAS TO BE COMPARED. FURTHER RS. 2,50,000 / - RE CD. IN A.Y. 2008 - 09 IS SPECI AL DISCOUNT RECEIVED FROM NORITSU KOKI LTD. (MACHINERY PURCHASE PARTY) WHICH IS ABNORMAL INCOME (INDIRECT INCOME) AND WHICH SHOWN AS DIRECT INCOME IN AUDIT REPORT DUE TO WHICH THE GROSS PROFIT RATIO HAS BEEN SEEN ON HIGHER SIDE @ 30.46% IN A.Y. 2008 - 09 WHI CH IS NOT TRUE. THE CALCULATION OF GROSS PROFIT RATIO ON COMPARATIVE BASIS WHILE NULLIFYING THE ABNORMALITIES IS SHOWN. : THE CONTENTION OF THE AR OF THE ASSESSEE WHICH IS MENTIONED IN HIS REPLY DTD. 16 . 12.2011, IS INCORRECT AND SELF SERVING AS WELL AS N OT ACCEPTABLE. AS PER THE AUDIT REPORT - ANNEXURE - I, PART - A, CLEARLY SHOWS THAT THE GROSS PROFIT IS DECREASED BY 3.15% COMPARED TO THE IMMEDIATE PRECEDING YEAR. IF THE SAID DEBIT NOTE AMOUNT OF RS.4,19,175/ - , INCLUDED IN PURCHASES, YOUR G.P. COMES @ 21. 49 % WHICH IS VERY LOW COMPARED TO IMMEDIATE PR ECEDING YEAR. ITA NO. 1111/ AHD / 201 3 A SSESSMENT Y EAR: 20 0 9 - 10 PAGE 3 OF 5 THE AR OF THE ASSESSEE HAS NOT GIVEN ANY COGENT EVIDENCES OR SATISFACTORILY EXPLANATION IN RESPECT OF FALLEN DOWN GROSS PROFIT. AS PER THE AUDIT REPORT - 3CD, ANNEXURE - I, PART - A, DURING THE YE AR ASSESSEE HAS SHOWN TOTAL TURNOVER OF RS. 72,00,347/ - AND G.P. SHOWN OF RS. 19,66,4157 - @ 27.31%, AS COMPARED TO IMMEDIATE PRECEDING YEAR ASSESSEE WAS SHOWN TOTAL TURNOVER OF RS.43,16,827 / - AND G.P. SHOWN OF RS.13,14,742/ - @ 30.46%, THE RATIO OF GROSS PROF IT IS FALLEN DOWN FROM 30.46% TO 27.31%, I.E. THIS CURRENT FINANCIAL YEAR G.P. FALLEN DOWN @ 3.15%. IF THE SAID DEBIT NOTE AMOUNT (DISCOUNT) OF RS.4,19,175/ - , INCLUDED IN PURCHASES, YOUR G.P . COMES @ 21.49% WHICH IS VERY LOW COMPARED TO IMMEDIATE PR ECEDING YEAR. THEREFORE, AFTER CONSIDERING ALL THE SUBMISSIONS AND ARGUMENTS PUT FORTH BY THE ASSESSEE, THE ASSESSEE HAS NOT EXPLAINED THE FALL IN G.P FULLY WITH SUPPORTING EVIDENCE. THEREFORE, THE DEBIT NOTE (DISCOUNT RECEIVED BY THE ASSESSEE FROM THE PURCHASE PARTIES AND THE ASSESSEE HAS MANIPULATED/INCREASED RATIO OF G.P. F ROM THIS DEBIT NOTE AMOUNT) RS. 4,19,175 - , WHICH IS MOST REASONABLE ADDITION AGAINST DISCREPANCIES NOTICED AND THUS THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. [ADDITION OF RS.4,19 ,175 / - ] 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT ANY SUCCESS. WHILE DOING SO, THE LEARNED C IT(A) OBSERVED AS FOLLOWS : - 6.1 I HAVE CONSIDERED THE ASSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE AP PELLANT. THE GROUNDS OF APPEAL - GROUND NO. 1 PERTAINS TO ADDITIO N OF ACCOUNT OF LOW G.P. OF RS. 4,19,175 - . T HE APPELLANT DURING THE APPELLATE PROCEEDINGS MADE THE SAME SUBMISSIONS REGARDING THE G.P. RATE AS MADE BEFORE THE ASSESSING OFFICER. THE DETAILS F ILED SHOW THAT THE G.P. HAS DECREASED BY 3.15% IN COMPARISON TO IMMEDIATE PRECEDING YEAR. THE AUDIT REPORT IN THE 3 CD REPORT , ANNEXURE - 1, PART - A HAS SHOWN A FALL OF G.P. OF 3.15%. THE APPELLANT HAS NOT BROUGHT ON RECORD ANY REASON OR EXPLANATION REGARDING THE FALL IN THE G.P. EXCEPT FOR HIS CONTENTION THAT THE DEBIT NOTE AMOUNT (DISCOUNT) OF RS. 4,19,175/ - WAS RECEIVED AS TRADE DISCOUNT FROM THE PURCHASE PARTY WHICH IS ABNORMAL/ACCIDENTAL/CASUAL INCOME AND NEEDS TO BE SORTED OUT . THE CONTENTION OF THE APPEL LANT IS ERRON EOUS AND MISPLACED ON FACTS AND LAW. IF THE SAID DISCOUNT OF RS.4,19,175 / - IS INCLUDED IN THE PURCHASES, THE G.P. FALLS FURTHER TO 21.49% WHICH IS VERY LOW. IN VIEW OF THE FACTS, THE ADDITION MADE BY THE ASSESSING OFFICER OF RS . 4,19,175/ - IS U PHELD AND THE GROUND OF APPEAL IS DISMISSED. (CONFIRMED - RS.4,19,175/ - ) 5. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME . 6 . I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN T HE LIGHT OF APPLICABLE LEGAL POSITION. ITA NO. 1111/ AHD / 201 3 A SSESSMENT Y EAR: 20 0 9 - 10 PAGE 4 OF 5 7 . I FIND THAT THERE IS NO FINDING BY ANY OF THE AUTHORITY BELOW ABOUT ANY SPECIFIC DEFECT S IN THE BOOKS OF ACCOUNT, AND YET AN ADDITION HAS BEEN MADE TO THE PROFIT DISCLOSED BY THE ASSESSEE . THE BUSINESS SITUATIONS CAN NEVER BE SO STATIC AS TO PERMIT A UNIFORM GROSS PROFIT RATE OVER THE YEARS. THE GROSS PROFIT R ATE BEING T OO LOW CANNOT BE REASON ENOUGH TO REJECT THE BOOKS O F ACCOUNT , AND MAKE GROSS PROFIT ADDITION . I CANNOT , THEREFORE , UPHOLD THE ACTION OF THE AUT HORITIES BELOW IN ADDING THE VALUE OF DEBIT NOTES OF RS.4,19,175/ - O NLY ON THE GROUND THAT SUCH AN ADDITION WILL RESULT IN REASONABLE GROSS PROFIT. THERE IS NO REASON TO DOUBT GENUINE NE SS AND BONAFIDES OF THESE DEBIT NOTES. I, THEREFORE , DELETE THE IMPUG NED ADDITION OF RS.4,19,175/ - . 8. GROUND NO.1 IS THUS ALLOWED. 9. IN THE SECOND AND THIRD GROUND S OF APPEAL, THE ASSESSEE HA S RAISED THE FOLLOWING GRIEVANCE S : 2 . THAT THE LEARNED CIT (APPEALS) HAS CONFIRMED ADDITION OF RS.43640/ - ON ACCOUNT OF PERSONAL USE OF ELECTRICITY BY PARTNER OF FIRM ASSUMING THAT PARTNER HAS CARRIED ON HIS BUSINESS FROM THE PREMISES OF FIRM. HOWEVER, THE LD CIT (APPEALS) HAS NOT BROUGHT ON RECORDS THAT PARTNER IS ACTUALLY CARRYING BUSINESS FROM THE FIRM PREMISES. THE LD . CIT ( A ) H A S WHILE CONFIRMING DISALLOWANCE FAILS TO SEGREGATE THE EXPENSES OF THREE PHASE ELECTRICITY CONSUMPTION OF RS. 197618 AND SINGLE PHASE ELECTRICITY CONSUMPTION OF RS.20592 AND DISALLOWED 20% OF G R OSS AMOUNT (RS.218200) OF ELECTRICITY WHICH IS BASELESS, ILL EGAL AND BAD IN LAW. 3 . THAT THE LEARNED CIT (APPEALS) HAS CONFIRMED DISALLOWANCE OF RS.11489 ON ACCOUNT OF GENERAL EXPENSES UNDER GENERAL REMARKS THAT ASSESSEE HAS NOT PRODUCED COMPLETE BILL AND VOUCHERS. NOT A SINGLE SPECIFIC DEFECT IN ANY VOUCHERS HAS BEEN POINTED OUT AND DISALLOWANCE IS MADE SIMPLY ON ADHOC BASIS WHICH IS BASELESS, ILLEGAL AND UNLAWFUL. 10. LOOKING TO THE SMALLNESS OF AMOUNTS INVOLVED, LEARNED COUNSEL DID NOT MAKE MUCH SUBMISSION ON THESE GROUNDS BEYOND STATING THAT DISALLOWANCES ARE EXCESSIVE AND ITA NO. 1111/ AHD / 201 3 A SSESSMENT Y EAR: 20 0 9 - 10 PAGE 5 OF 5 COULD BE LOWERED DOWN. I DO NOT SEE ANY REASONS TO INTERFERE IN THE S E DISALLOWANCES AND CONFIRM THE SAME. 11. GROUND NO S. 2 & 3 ARE THUS DISMISSED. 12. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THI S 10 TH DAY OF MARCH , 2017 . SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 10 TH DAY OF MARCH , 2017 . PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD