The ITO, Ward-1(3), JAMNAGAR V. Shri Anil Sohanlal Jain, JAMNAGAR

ITA 1120/RJT/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7320 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 27-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Assessee Lawyers: KAMLESH RATHOD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.1120/RJT/2009 (ASSESSMENT YEAR 2005-06) ITO, WD.1(3) VS SHRI ANIL SOHANLAL JAIN RAJKOT PROP BHAVNA METAL C-2/32, STU GIDC, JAMNAGAR PAN : ABRPT8133B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAI RAJ KUMAR RESPONDENT BY : SHRI KAMLESH RATHOD O R D E R PER N.R.S. GANESAN, JM THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A), JAMNAGAR DATED 10-09-2009 AND PERTAINS TO ASSESSMENT YEAR 20 05-06. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS ESTIM ATION OF GROSS PROFIT. SHRI JAI RAJ KUMAR, THE LD.DR SUBMITTED THAT THE ASSESSEE IS ENG AGED IN THE BUSINESS OF TRADING IN NON FERROUS METAL AND SCRAPS. DURING THE YEAR UNDE R CONSIDERATION THE ASSESSEE PURCHASED BRASS SCRAP FROM UNREGISTERED DEALER. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE THE BILLS AND VOUCHERS IN SUPPORT OF PURCHASES FROM UNREGISTERED DEALERS. HOWEVER, THE ASSESSEE FAILED TO PRODUCE THE PURCHASE BILLS AND VOUCHERS. THE ASSESSEE HAS ALSO FAILED TO PRODUCE THE PERSONS FROM WHOM THE SO-CALLED SCRAPS ARE PURCHASED FOR IDENTIF ICATION AND VERIFICATION. THE ASSESSEE HIMSELF PREPARED THE VOUCHERS AND QUOTED T HE RATE, HOWEVER, IT DID NOT CONTAIN THE NAMES AND ADDRESSES OF THE SELLERS. IN THE ABS ENCE OF ANY SUPPORTING MATERIAL THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT AT 5% OF THE SALES. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(A) MODIFIED THE SAME AT 2% IN RESPECT OF PURCHASES FROM UNREGISTERED DEALERS AS AGAINST 5% ADOPTED BY THE A SSESSING OFFICER. 3. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTA TIVE THE ESTIMATION OF PROFIT AT 2% IS VERY LOW. THE ASSESSING OFFICER HAS ESTIMATE D THE PROFIT AT 5% ON THE BASIS OF THE SALES MADE BY THE ASSESSEE WHICH IS VERY REASONABLE . ON THE CONTRARY, SHRI KAMALESH ITA NO.114/RJT/2008 2 RATHOD, THE LEARNED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FILED COM PARISON OF RATE OF PURCHASES MADE FROM UNREGISTERED DEALERS WITH PURCHASE RATE PREVAI LING IN THE MARKET. REFERRING TO PAGE 2 OF THE CIT(A)S ORDER MORE PARTICULARLY PARAGRAPH 4, THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS REPRODUCED R EPLY GIVEN BY THE ASSESSEE IN THE IMPUGNED ORDER. REFERRING TO THE ORDER OF THIS TRI BUNAL IN PUSHKAR RAJ J KABRA IN ITA NO.867/RJT/2009 DATED 23-08-2010, THE LD.REPRESENTA TIVE FOR THE ASSESSEE SUBMITTED THAT THIS TRIBUNAL HAS MADE AN ADHOC ADDITION OF RS. 5 L AKHS AS AGAINST THE ADDITION OF RS. 22,24,031 MADE BY THE ASSESSING OFFICER BY ESTIMATI NG THE GROSS PROFIT AT 5% ON THE PURCHASES MADE FROM UNREGISTERED DEALERS. IN THIS CASE, ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, THE CIT(A) HAS FIXED GROS S PROFIT AT 2% WHICH IS MORE THAN THE GROSS PROFIT FIXED BY THIS TRIBUNAL IN THE CASE OF PUSHKAR RAJ J KABRA (SUPRA). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DIS PUTE THAT THE ASSESSEE HAS PURCHASED BRASS SCRAPS FROM UNREGISTERED DEALERS / HAWKERS. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS NO PURCHASE BILLS / VOUCHERS. THE ASS ESSEE HAS NO PARTICULARS ABOUT THE SELLERS OF THE SCRAP. HOWEVER, THE ASSESSEE HAS, A DMITTEDLY MAINTAINED SALES BILLS. IN THE ABSENCE OF ANY MATERIAL TO SUPPORT THE PURCHASE S, THE ASSESSING OFFICER, ON THE BASIS OF THE SALES BILLS, HAS ESTIMATED GROSS PROFIT AT 5 %. HOWEVER, THE CIT(A) MODIFIED THE SAME AT 2%. THE QUESTION NOW ARISES FOR CONSIDERAT ION IS WHETHER THE GROSS PROFIT FIXED AT 2% BY THE CIT(A) IS JUSTIFIED OR NOT? 5. THE RATE OF GROSS PROFIT IS NOT A CONSTANT FIGUR E. THE GROSS PROFIT WOULD FLUCTUATE DEPEND UPON VARIOUS FACTORS SUCH AS DEMAND IN THE M ARKET, AVAILABILITY OF RAW MATERIALS, DEMAND OF FINISHED PRODUCTS, ETC. THEREFORE, GROSS PROFIT WOULD ALWAYS FLUCTUATE FROM TIME TO TIME. FOR THE PURPOSE OF ESTIMATING THE GR OSS PROFIT, THE INCOME-TAX AUTHORITIES HAS TO CONSIDER VARIOUS FACTORS SUCH AS GROSS PROFI T ADOPTED BY SIMILARLY PLACED TRADERS IN THE SAME LOCALITY FOR THE SAME PERIOD. THE DECI SION OF THIS TRIBUNAL IN PUSHKAR RAJ J KABRA (SUPRA) RELATES TO ASSESSMENT YEAR 2006-07 WH EREAS THE ASSESSMENT YEAR UNDER CONSIDERATION BEFORE US IS ASSESSMENT YEAR 2005-06. THEREFORE, THE DECISION OF THIS TRIBUNAL IN THE CASE OF PUSHKAR RAJ J KABRA CANNOT BE OF ANY ASSISTANCE TO THE ASSESSEE. WHAT IS RELEVANT IS THE GROSS PROFIT ADO PTED BY THE SIMILARLY PLACED ASSESSEES IN THE SAME FINANCIAL YEAR. SINCE THE FINANCIAL YE AR IS DIFFERENT, IN OUR OPINION, THE ITA NO.114/RJT/2008 3 DECISION OF THE TRIBUNAL IN PUSHKAR RAJ J KABRA (SU PRA) CANNOT BE OF ANY HELP TO THE ASSESSEE. HOWEVER, WE FIND THAT THE PETTY TRADERS, WHO TRADE IN BRASS SCRAPS SOLD THE BRASS SCRAPS TO THE ASSESSEE IN SMALLER LOTS. THE ASSESSEE HAS PURCHASED THE SAME BY PAYING CASH. THE ASSESSEE HAS NOT MAINTAINED ANY B OOKS OF ACCOUNT FOR VERIFICATION. THE DETAILS OF SUCH HAWKERS / PETTY TRADERS ARE NOT AVAILABLE. THEREFORE, ESTIMATION OF PROFIT ON THE BASIS OF THE SALES BILLS IS ONE OF TH E METHODS TO COMPUTE THE GROSS PROFIT OF THE ASSESSEE. THE ASSESSING OFFICER ADOPTED 5% GRO SS PROFIT RATE. HOWEVER, THE CIT(A) MODIFIED THE SAME AT 2%. BY TAKING INTO CONSIDERAT ION THE NATURE OF TRADE, THE ABSENCE OF SUPPORTING MATERIALS LIKE PURCHASE BILLS, VOUCHE RS AND THE GROSS PROFIT ADOPTED BY THE ASSESSEE FOR EARLIER ASSESSMENT YEAR, ETC. WE FIND THAT ESTIMATION OF PROFIT AT 2% WOULD MEET THE ENDS OF JUSTICE. THEREFORE, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY AND HENCE THE SAME IS CONFIRMED. 6. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON -03-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 25 TH MARCH, 2011 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), JAMNAGAR 4. THE CIT, JAMNAGAR 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT