M/s. Patel Sanitary Pvt.Ltd., Surat V. The ACIT,Circle-1, Surat

ITA 1125/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63313 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 01-11-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 12-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T SHANKAR
• Assessee Lawyers: R N VEPARI
• Keywords: Rejection of books of accounts

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , ! '#, $% $ & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO.1125/AHD/2010 ( ! ) ! ) ! ) ! ) / / / / ASSESSMENT YEAR : 2002-03) PATEL SANITARY PVT.LTD. 5, PRESIDENT PLAZA NEAR RTO RING ROAD, SURAT ! ! ! ! / VS. THE ASST.CIT CIRCLE-1 SURAT * $% ./+, ./ PAN/GIR NO. : AACCP 0200C ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 $ / APPELLANT BY : SHRI R.N. VEPARI, A.R. ./*- 1 0 $ / RESPONDENT BY : SHRI T.SHANKAR, SR.D.R. !2 1 % / / / / DATE OF HEARING : 1.11.2012 34) 1 % / DATE OF PRONOUNCEMENT : 21.12.12 $5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FR OM THE ORDER OF CIT(A)-I, SURAT DATED 08/02/2010. GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS:- 2. GROUND NO.1 READS AS UNDER: (I) REJECTION OF BOOK RESULT :- (1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) ERRED IN CONFIRMING REJECTION OF BOOK RESULTS WHEN NO DEF ECTS IN THE BOOKS WERE POINTED OUT AND WHATEVER SMALL DISCREPANCIES WERE THERE WERE EXPLAINED. ITA NO.1125/AHD /2010 PATEL SANITARY PVT.LTD. VS. ACIT ASST.YEAR - 2002-03 - 2 - (2) THE APPELLANT FURTHER SUBMITS THAT THE APPELLA NT HAVING MAINTAINED COMPLETE QUANTITY TALLY OF ALL THE ITEMS MENTIONED AND FILED THE COMPLETE STOCK RECORDS THE BOOK RESULT OUGHT NOT TO HAVE BEEN REJECTED. 2.1. THIS GROUND HAS A CHEQUERED HISTORY. EARLIER , ITAT A BENCH AHMEDABAD VIDE AN APPEAL NO.1516/AHD/2005 FOR A.Y. 2002-03 TITLED AS PATEL SANITARY PVT.LTD. VS. THE ASSTT.CIT ORDER DATED 25/01/2008 HAD RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR DE NOVO ADJUDICATION. IT WAS NOTED BY THE TRIBUNAL THAT CERTAIN DOCUMENTS WERE NOT CONSIDERED BY THE REVENUE AUTHORITIES WHILE REJECTING THE BOOK S OF THE ASSESSEE. IN CONSEQUENCE THEREUPON, THE AO HAD PROCEEDED ACCORDI NGLY AND PASSED THE IMPUGNED ORDER U/S.143(3) R.W.S. 254 OF IT ACT DATED 31/08/2009. WE HAVE NOTED THAT CERTAIN NOTICES WERE ISSUED BUT THE ASSESSEE HAS NOT FURNISHED THE REQUISITE INFORMATION ON RECORD. HOW EVER, THE AO HAS PROCEEDED WITH THE ASSESSMENT PROCEEDINGS ON THE BA SIS OF THE SUBMISSIONS FURNISHED BY THE ASSESSEE. THE ASSESS EE HAD SHOWN AN INCOME OF RS.6,89,770/- AS PER THE RETURN, HOWEVER THE ASSESSMENT WAS MADE ON THE INCOME OF RS.14,00,174/-. IT WAS NOTED THAT THE ASSESSEE WAS ENGAGED IN THE TRADING OF SANITARY-WARES. FURTHER IT WAS NOTED BY THE AO THAT THE TURNOVER FOR THE YEAR UNDER CONSIDE RATION WAS RS.200.02 LACS ON WHICH NET PROFIT DECLARED WAS AT RS.6.32 L ACS. AS AGAINST THAT, THE TRADING RESULT IN THE IMMEDIATE PRECEDING YEAR WERE THAT THE TOTAL TURNOVER WAS SHOWN AT RS.211.99 LACS ON WHICH THE P ROFIT WAS AT RS.12.88 LACS. THE OBSERVATION OF THE AO WAS THA T THE GP SHOWN WAS AT 18.65% AND N.P. SHOWN WAS AT 3.1% FOR THE YEAR UNDE R CONSIDERATION. CERTAIN DISCREPANCIES WAS NOTED BY THE AO THROUGH W HICH HE HAS TRIED TO ITA NO.1125/AHD /2010 PATEL SANITARY PVT.LTD. VS. ACIT ASST.YEAR - 2002-03 - 3 - DEMONSTRATE THAT THE SALES BILL HAVE NOT CORRECTLY SHOWN THE QUANTITY. THE BILLS OF TILES HAVE WRONGLY BEEN VALUED WHILE CHECK ING THE PURCHASE PRICES. AS MANY AS NINE DEFECTS WERE NOTED BY THE AO. AO HAS ALSO NOTED THAT AS PER THE SALES BILLS PRODUCED, THERE W ERE NUMBER OF DISCREPANCIES. THE ASSESSEE WAS ASKED TO EXPLAIN T HE DISCREPANCY. IN THE ABSENCE OF PROPER EXPLANATION, THE AO HAS CONCL UDED THAT THE TRANSACTIONS RECORDED IN THE BOOKS OF ACCOUNTS, ALT HOUGH RELATED TO SALES, WAS NOT RELIABLE NOR THE DISCREPANCY WAS REMOVED. DUE TO THIS REASON, THE AO HAS REJECTED THE BOOKS OF ACCOUNTS IN THE FO LLOWING MANNER:- 6. IN VIEW OF THE DISCUSSED MADE ABOVE, IT IS CRY STAL CLEAR THAT THE ASSESSEE COULD NOT EXPLAIN THE DISCREPANCIES/DIFFER ENCES POINTED OUT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEE DINGS. FURTHER, ASSESSEE COULD NOT SUBSTANTIATE ITS EXPLAN ATION REGARDING LOW G.P. WITH SUPPORTING PROOF AND EVIDENCES. THES E ARE THE SUFFICIENT REASONS TO REJECT THE BOOK RESULT SHOWN BY THE ASSESSEE U/S.145(3) OF THE I.T.ACT. ACCORDINGLY BOOKS OF AC COUNT OF THE ASSESSEE IS REJECTED. IT IS ALSO CONCLUDED THAT WH ILE FINALIZING THE ORIGINAL ASSESSMENT ORDER THE THEN ASSESSING OFFICE R HAS RIGHTLY REJECTED THE BOOK RESULT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT WHICH WAS ALSO CONFIRMED BY THE CIT(A), WHILE FINALIZING THE APPEAL FILED BY THE ASSESSEE. FINALLY, THE INCOME AS ORIGINALLY ASSESSED WAS REP EATED. ON THE TURNOVER THE ASSESSING OFFICER HAD APPLIED THE NET PROFIT RATE AT 7% AND THE TOTAL INCOME WAS THUS DETERMINED AT RS.14,00,17 4/-. THE SAID ASSESSMENT WAS CHALLENGED. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, LD.CIT(A) HAS AGAIN EXAMINED THE NATURE OF DOCUMENT S PLACED BEFORE HIM, HOWEVER HELD THAT IN THE LIGHT OF THE DISCREPA NCIES POINTED OUT BY THE ITA NO.1125/AHD /2010 PATEL SANITARY PVT.LTD. VS. ACIT ASST.YEAR - 2002-03 - 4 - AO, THE BOOKS WERE NOT RELIABLE. THE REJECTION OF BOOKS OF ACCOUNT WAS THEREFORE UPHELD. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE HEREBY CONFIRM THE FINDINGS OF THE AUTHORITIES BELOW. IT IS WORT H TO MENTION THAT VIDE AN ORDER OF THIS FORUM, THIS ASSESSEE HAD BEEN GIVEN A CHANCE TO PLACE ALL THE RELEVANT INFORMATION IN SUPPORT OF THE BOOK RESULT. FOR THAT REASON, THE MATTER HAD BEEN RESTORED BACK TO THE FILE OF THE AO . IT WAS EXPECTED FROM THIS TAXPAYER THAT WHEN SUCH TYPE OF MATTER WAS BEING RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER, THEN HE HAD TO CO-OPERATE WITH THE PROCEEDINGS. HOWEVER, THE ASSESSEE HAS MERELY FURNISHED CERTAIN DOCUMENTS BUT FAILED TO FURNISH SATISFACTORY SUPPOR TING EVIDENCE. NON- MAINTENANCE OF COMPLETE RECORD CAN LEAD TO REJECTIO N OF BOOKS OF ACCOUNT. EVEN FOR A.Y. 2001-02 AFTER THE SURVEY OP ERATION THE ASSESSEE HAD SURRENDERED THE INCOME DUE TO NON-EXPLANATION O F DISCREPANCIES. IN FACT, THAT THEORY WAS TO BE APPLIED ON THE PRESENT FACTS OF THE CASE HENCE THE BOOKS OF ACCOUNTS WERE RIGHTLY REJECTED. WE HE REBY AFFIRM THE REJECTION OF BOOKS OF ACCOUNT. THIS GROUND OF THE ASSESSEE IS HEREBY DISMISSED. 5. GROUND NO.2 READS AS UNDER :- (II) ESTIMATE OF INCOME :- (1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED IN ESTIMATING INCOME AT 6% OF THE TURNOVER WHEN SUCH I NCOME IS NOT EARNED IN THIS LINE OF BUSINESS, MORE SO HAS CO MMITTED MISTAKE IN TAKING NET PROFIT AT 6% ON THE BASIS OF EARLIER YEAR WHEN THE NET PROFIT FOR THAT YEAR WAS ONLY 1.75%. (2) THE APPELLANT FURTHER SUBMITS THAT THE LEARNED COMM ISSIONER OF INCOME-TAX (APPEALS) FAILED TO TAKE INTO CONSIDE RATION ALL THE RELATED FACTS AND CONTENTIONS AND EVIDENCE FURN ISHED TO HIM. ITA NO.1125/AHD /2010 PATEL SANITARY PVT.LTD. VS. ACIT ASST.YEAR - 2002-03 - 5 - (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADD ITION IS REQUIRED TO BE DELETED. 5.1. AS NOTED IN ABOVE PARAGRAPHS, THE ASSESSEES B OOKS OF ACCOUNT HAVE SHOWN CERTAIN DISCREPANCIES. THEREFORE, REJEC TION OF BOOKS WAS AFFIRMED. IT HAS ALSO BEEN NOTED THAT IN THE PAST FOR THE YEAR UNDER CONSIDERATION THIS VERY ISSUE HAD REACHED UPTO THE STAGE OF THE TRIBUNAL WHICH WAS RESTORED BACK BY THE RESPECTED CO-ORDINAT E BENCH TO THE FILE OF THE ASSESSING OFFICER TO DECIDE AFRESH. DURING THE SECOND ROUND, THE ASSESSING OFFICER HAS AGAIN REITERATED THOSE DISCRE PANCIES, HOWEVER, AT THE END, ARRIVED AT THE CONCLUSION TO ESTIMATE THE NET PROFIT @ 7%, APPLIED ON THE TOTAL TURNOVER. WHEN THE SAID ESTIMATION WA S CHALLENGED BEFORE LD.CIT(A), THE SAME WAS REDUCED TO 6%. AT THIS JUN CTURE, IT IS WORTH TO MAKE A MENTION THAT A LITIGATION SHOULD SET AT REST AT SOME STAGE. NO SUBSTANTIAL PURPOSE IS GOING TO BE SERVED FOR ENCOU RAGING REPETITIVE LITIGATION. IN THE PRESENT CASE EVEN IF THE ASSESS EE IS HARPING UPON THE POINT THAT THE STOCK WAS PROPERLY MAINTAINED AND TH AT WAS NOT JUDICIOUSLY EXAMINED BY THE REVENUE AUTHORITIES BUT FOR THAT RE ASON ALONE WE ARE NOT GOING TO RESTORE THIS ISSUE AGAIN FOR RE-EXAMINATIO N. THE ONUS WAS ON THE ASSESSEE FOR TIMELY AND PROMPTLY COMPLIANCE OF THE NOTICES. DUE TO THIS REASON WE ARE OF THE CONSIDERED VIEW THAT THE REVEN UE AUTHORITIES HAVE RIGHTLY CHOSEN THE PATH OF ESTIMATION OF THE INCOME . UNDER CERTAIN EXCEPTIONAL CIRCUMSTANCES, THE ASSESSING OFFICER IS EXPECTED TO EXERCISE THIS POWER OF ESTIMATION OF INCOME. IN ESTIMATING AN INCOME THERE OUGHT TO BE SOME GUESS WORK BUT THAT GUESS WORK SHOULD NO T BE VINDICTIVE. IN THE PRESENT CASE, WE HEREBY HOLD THAT THE REVENUE AUTHORITIES HAVE RIGHTLY AND IN BONA FIDE MANNER EXERCISED THAT AUTH ORITY. WE FIND NO ITA NO.1125/AHD /2010 PATEL SANITARY PVT.LTD. VS. ACIT ASST.YEAR - 2002-03 - 6 - FALLACY FOR ADOPTING THE RECOURSE OF ESTIMATION. H OWEVER, WE HAVE TO JUDGE WHETHER THE ESTIMATION WAS JUSTIFIABLE OR NOT . UNDISPUTEDLY, THE TURNOVER AS WELL AS THE PROFIT RATIO BOTH HAVE GONE DOWN DURING THE YEAR UNDER CONSIDERATION. IN SUCH A SITUATION, IT IS NO T PROPER TO DISCUSS ABOUT THE REASONS FOR THE FALL IN THE GROSS PROFIT RATE B UT TO DIRECTLY APPLY THE NET PROFIT RATE SO THAT THE FINAL INCOME SHOULD BE DETERMINED ON WHICH TAX CAN BE COMPUTED. FOR THIS PURPOSE, WE HAVE NOTED T HAT ON ONE HAND, WE HAVE SEEN THAT THE RECORDS HAVE REVEALED THAT THE N ET PROFIT FOR THE YEAR UNDER CONSIDERATION WAS MERELY AT 3.16% WHICH ADMIT TEDLY WAS TOWARDS LOWER SIDE IN THIS LINE OF BUSINESS. REVENUE AUTHO RITIES HAVE GATHERED THE INFORMATION THAT IN THIS LINE OF BUSINESS THE N ORMAL RATE OF PROFIT WAS FROM 7 TO 9%, BUT THAT TOO APPEARS TO BE TOWARDS H IGHER SIDE. WE, THEREFORE DEEM IT PROPER TO DIRECT THE ASSESSING OF FICER TO ESTIMATE THE INCOME BY APPLYING THE NET PROFIT RATE AT 5% THUS C OMPUTE THE NET TAXABLE INCOME ACCORDINGLY. IN THE RESULT, THIS GROUND O F THE ASSESSEE IS HEREBY PARTLY ALLOWED. 6. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY A LLOWED. SD/- SD/- ( ! '# ) ( ) $% ( ANIL CHATURVEDI ) ( MUKU L KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 21/ 12 /2012 6..!, .!../ T.C. NAIR, SR. PS ITA NO.1125/AHD /2010 PATEL SANITARY PVT.LTD. VS. ACIT ASST.YEAR - 2002-03 - 7 - $5 1 .7 8$7) $5 1 .7 8$7) $5 1 .7 8$7) $5 1 .7 8$7)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-I, SURAT 5. 7<= .! , , / DR, ITAT, AHMEDABAD 6. = >2 / GUARD FILE. $5! $5! $5! $5! / BY ORDER, /7 . //TRUE COPY// ? ?? ?/ // / + + + + ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DIRECT DICTATION ON COMPUTER DATED 01.11.12 & 20.12.12 (PARTIAL DICTATION-PAD DATED 20.12.12 PAGES 6 ATTAC HED) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 6.11.12/20/12.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S21.12.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.12.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER