M/s. Rasranjan Food Products Pvt. Ltd., Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 1131/AHD/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8647 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 18-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: G C PIPARA
• Keywords: Business income; Depreciation; Reasonable cause
• Section: 40A(3); 194C

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ./ ITA NO. 1131/AHD/2011 / ASSESSMENT YEAR: 2007-08 RASRANJAN FOOD PRODUCTS P.LTD. RASRANJAN COMPLEX NR. VIJAY CHAR RASTA AHMEDABAD. PAN : AABCR 8986 Q VS ITO, WARD - 5(3) AHMEDABAD. ./ ITA NO. 1392/AHD/2011 / ASSESSMENT YEAR: 2007-08 DCIT, WARD - 5 AHMEDABAD. VS RASRANJAN FOOD PRODUCTS P.LTD. RASRANJAN COMPLEX NR. VIJAY CHAR RASTA AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE(S) BY : SHRI G.C. PIPARA REVENUE BY : SHRI DINESH SINGH, SR.DR / DATE OF HEARING : 21/01/2015 / DATE OF PRONOUNCEMENT: 02/02/2015 $%/ O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER O F THE COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHMEDABAD DATED 8.3.2011. 2. THE GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ESTIM ATION OF SALES AT RS.3.75 CRORES AS AGAINST SALES AS PER BOOKS OF RS.3,45,32,261/-. IN VIEW OF FACTS AND SUBMISSIONS FILED, THE ITA NO.1131/AHD/2011-2 2 LD.CIT() OUGHT TO HAVE ACCEPTED THE SALES AS PER BO OKS OF ACCOUNTS. THE GROUND NO.1 OF THE APPEAL OF THE REVENUE IS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ESTIMATING THE SALES AT RS.3.75 CRORES AS AGAINST RS.5 CRORES ESTIMATED BY THE AO. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO MADE ADDITION BY OBSERVING AS UNDER: 1. THE ASSESSEE WAS ASKED TO SUBMIT MONTH-WISE AS WELL AS ITEM-WISE BREAKUP OF PURCHASE AND CONSUMPTION OF RA W MATERIALS, PRODUCTION, SALES OF FINISHED GOODS AND CLOSING STO CK, FOR YEAR UNDER CONSIDERATION. IN RESPONSE TO THE QUERY RAISE D, THE ASSESSEE COMPANY, VIDE SUBMISSION DATED 09.12.2009, HAS SUBMITTED ONLY THE MONTH-WISE BREAK-UP OF PURCHASE AND SALES. 2. DURING THE COURSE OF ASSESSMENT PROCEEDING S, VIDE ORDER SHEET ENTRY DATED 23.11.2009, THE ASSESSEE WAS SPEC IFICALLY ASKED TO SHOW CAUSE AS TO WHY THE SALES SHOULD NOT BE EST IMATED ON THE SAME LINE OF ESTIMATION MADE IN EARLIER YEARS AS TH E ASSESSEE HAS NOT FURNISHED ANY STOCK REGISTER, SALES REGISTER, E TC. 3. THE ABOVE SUBMISSION OF THE ASSESSEE HAS D ULY BEEN CONSIDERED, BUT THE SAME IS NOT FOUND CONVINCING. T HE ASSESSEE HAS DISCLOSED TOTAL TURNOVER OF RS.3,45,32,261/- DU RING THE YEAR AS AGAINST RS.3,52,48,694/- SHOWN IN THE IMMEDIATEL Y PRECEDING ASSESSMENT YEAR. 4. IT IS NOTICED THAT IN THE F.Y. 2000-2001, RELEVA NT TO A.Y. 2001- 02, THE ASSESSEE WAS HAVING ONLY TWO OUTLETS AT AHM EDABAD, ONE AT VIJAY CROSS ROADS, AND ANOTHER AT AHMEDABAD DOME STIC AIRPORT. WITH THESE TWO OUTLETS AND A SMALL NUMBER OF FRANCHISEES, THE ASSESSEE HAS SHOWN TOTAL SALES OF RS. 3,51,41,3 87/- IN THAT PARTICULAR YEAR. 5. THE SALES SHOWN BY THE ASSESSEE DURING THE YEAR IS SIGNIFICANTLY ON LOWER SIDE AND THE TURNOVER IS NOT KEEPING PACE WITH THE ABOVE FACTORS LIKE EXPANSION OF BUSINESS, INCREASE IN SAL E PRICE, OPENING OF FAST FOOD CENTERS, ETC. IT IS FURTHER OBSERVED T HAT CONSTANTLY FOR THE LAST FIVE TO SIX YEARS, THE ASSESSEE IS SHOWING ITS TURNOVER ALMOST STATIC WHICH IS EVIDENT FROM THE CHART GIVEN BELOW: ITA NO.1131/AHD/2011-2 3 A.Y. TURNOVER 2002-03 RS.3,56,98,780 2003-04 RS.3,38,00,414 2004-05 RS.3,87,62,741 2005-06 RS.3,79,31,575 2006-07 RS.3,52,48,694 4.5. INSPITE OF REPEATED REQUESTS TO FURNISH THE BA SIC DETAILS SUCH AS MONTH- WISE CONSUMPTION OF RAW MATERIAL, PRODUCTION, SALES TAX RETURNS FOR COMPARISON OF ACTUAL PRODUCTION AND SALES, ETC. THE ASSESSEE COULD NOT FURNISH ANY OF THE DETAILS. NO REGULAR BOOKS ARE MA INTAINED BY THE ASSESSEE TO RECORD THE CASH SALES MADE BY IT, DESPITE THE FA CT THAT A MAJOR PORTION OF THE BUSINESS IS CARRIED OUT THROUGH CASH SALES. IN VIEW OF THESE FACTS, THE BOOK RESULT OR THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE NOT RELIABLE AND IT IS NOT POSSIBLE TO CORRECTLY VERIFY OR DETERMINE THE PROFIT FROM THESE BOOKS OF ACCOUNTS. THE FIGURES SHOWN IN THE B OOKS OF ACCOUNTS ARE NOT SUPPORTED BY ANY SUBSTANTIATING DOCUMENTS. IT I S FURTHER SEEN THAT, EVEN THOUGH THE TURNOVER HAS DECREASED AS COMPARED TO IM MEDIATELY PRECEDING ASSESSMENT YEAR, I.E. A.Y.2006-07, THE EXPENSES UND ER THE FOLLOWING HEADS HAVE SHOWN SIGNIFICANT INCREASE:- EXPENSES HEAD A.Y.2006-07 A.Y.2007-08 COLD STORAGE RENT 25320 79341 POWER SUPPLY CHARGES 1887088 2014104 COAL & FUEL EXPENSES 110285 153008 ADVERTISEMENT 347870 896505 PACKING MATERIALS & UTILITIES 488794 735748 DECORATION CHARGES 154200 220580 4.6. AS DISCUSSED ABOVE, THE ASSESSEE IS NOT MAINTA INING ANY ITEM-WISE AS WELL AS QUANTITY-WISE DETAILS OF PURCHASES, CONSUMP TION, PRODUCTION, SALES, ETC. VIDE SUBMISSION DATED 09.12.2009, THE ASSESSEE HAS EXPRESSED ITS INABILITY TO PROVIDE THE ABOVE DETAILS. HENCE, IN A BSENCE OF RECORDS SHOWING COMPLETE DETAILS OF PRODUCTION, CONSUMPTION, STOCK, SALES, COST WORKING OF MAJOR ITEMS, ETC., NO PROPER EXAMINATION OF THE-BOO K RESULTS SHOWN BY-THE ASSESSEE COULD BE CARRIED OUT. IT IS STATED THAT TH E ASSESSEE IS INTENTIONALLY NOT MAINTAINING THE BASIC DETAILS OF ITS BUSINESS, SO AS TO NOT PERMIT THE AO TO ARRIVE AT THE CORRECT PICTURE OF ITS BUSINESS. C ONSIDERING THESE FACTS, IT IS HELD THAT THE SALES DISCLOSED BY THE ASSESSEE IS NO T FOUND ACCEPTABLE AND THEREFORE, I AM CONSTRAINED TO ESTIMATE THE TOTAL S ALES OF RS.5 CRORES, BY REJECTING BOOKS OF ACCOUNTS U/S.145A OF THE IT ACT. AS REGARDS ASSESSEE'S ITA NO.1131/AHD/2011-2 4 CONTENTION THAT THE CIT(A) AS WELL AS THE HON'BLE I TAT HAD ACCEPTED THE ASSESSEE'S CONTENTION IN THIS REGARD AND HAD DELETE D THE ADDITION MADE ON ACCOUNT OF ESTIMATION OF TURNOVER, IT IS STATED THA T A PART OF THE ADDITIONS SO MADE HAVE BEEN CONFIRMED IN APPEAL. AS REGARDS THE ITAT'S ACTION IN DELETING CERTAIN PART OF THE ADDITION, THE DEPARTME NT HAS NOT ACCEPTED THE DECISION OF HON'BLE ITAT AND APPEAL TO HON'BLE HIGH COURT HAS BEEN FILED. 4. ON APPEAL, THE CIT(A) PARTLY ALLOWED THE APPEAL BY OBSERVING AS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. OF THE APPELLANT AND OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE FIND ING OF MY PREDECESSOR IN EARLIER YEARS AND THE ORDERS OF THE HON'BLE ITAT FOR THE EARLIER YEARS. I HAVE ALSO GONE THROUGH MY OWN FINDINGS ON SIMILAR ISSUE FOR A.Y.2006-07. THE FOLLOWING PICTUR E EMERGES ON THIS ISSUE FROM THE EARLIER YEAR'S ORDERS: A.Y. SALES AS PER BOOKS SALES ESTIMATED BY AO SALES AS PER CIT(A) SALES ESTIMATED BY ITAT 2001-02 3.51 4.0 4.00 3.75 2002-03 3.56 5.0 5.00 3.75 2003-04 3.38 5.0 3.38 3.75 2004-05 3.87 5.5 3.87 4.25 2005-06 3.79 6.0 3.79 4.25 2006-07 3.52 5.0 3.75 IT IS SEEN THAT DURING THE YEAR UNDER APPEAL, THE S ALES SHOWN BY THE APPELLANT COMPANY ARE RS.3.45 CRORES. ON COMPAR ISON OF THE SAME WITH THE ABOVE CHART, THE SALE DURING THE YEAR IS ALMOST IN THE RANGE OF SALES SHOWN BY THE APPELLANT DURING TH E A.YS. 2001- 02 TO 2003- 04 I.E. RS.3.28 CRORES TO RS.3.56 CRORES. FOR THE S AID A.YS., ESTIMATE MADE BY THE HON'BLE ITAT WAS AT RS. 3.75 CRORES. THE SALES DURING THE YEAR UNDER CONSIDERATION ARE I N THE SAME RANGE OF SALES DURING THE PREVIOUS YEAR I.E. A.Y.20 06-07 AT RS. 3.52 CRORES. FOR THAT YEAR SALES WERE ESTIMATED BY ME AT RS.3.75 CRORES VIDE APPELLATE ORDER DATED 22/03/2010. KEEPI NG IN VIEW THE ESTIMATE MADE BY ME AND THE TRIBUNAL IN EARLIER YEA RS, I AM OF THE CONSIDERED OPINION THAT IT IS REASONABLE TO ESTIMAT E T HE SALES AT ITA NO.1131/AHD/2011-2 5 RS.3.75 CRORES AS AGAINST THE SALES OF THE APPELLAN T COMPANY AS PER BOOKS OF RS.3,45,32,261/- . THE 2ND GROUND OF APPEAL IS THUS PARTLY ALLOWED. COMING TO THE ISSUE OF ESTIMATION OF G.P., I HAVE C AREFULLY CONSIDERED THE FACTS OF THE CASE AND HA VE GONE THROUGH THE ASSESSMENT ORDER AS WELL AS MY OWN FINDINGS EN SIMI LAR ISSUE FOR A.Y.2006- 07 AND THE ORDERS OF THE HON'BLE ITAT OF EARLIER YE ARS. THE A.O. HAS CONSISTENTLY ESTIMATED THE GP @ 32% IN ALL THE EARLIER YEARS RIGHT FROM A.Y. 2001-02 TO 2006- 07. MY PREDECESSOR RESTRICTED THE SAID GP TO 31% FOR A.Y. 2003-04 TO A .Y. 2005- 06. ON FACTS OF THE CASE, I HAVE RESTRICTED THE G.P. FO R A.Y.2006- 07 AT 29%. THAT SINCE DURING THE YEAR UNDER DISPUTE, THE APPELLANT HAS SHOWN A BETTER GP OF 29.65% COMPARED TO EARLIER YEAR, I SEE NO REASON FOR ESTIMATION OF G.P. KEEPING IN VIEW THE S AID FACT, THE A.O. IS DIRECTED TO ACCEPT THE GP RATE OF 29.65%. A CCORDINGLY, THE GROUND OF APPEAL NO. 3 STANDS ALLOWED 5. THE DR SUPPORTED THE ORDER OF THE AO. 6. THE AR SUBMITTED THAT IN THE EARLIER ASSTT.YEARS 2001-02 AND 2003-04, MATERIALS WERE FOUND DURING THE COURSE OF SEARCH, WHICH SHOWED THAT THE ASSESSEE HAS SUPPRESSED ITS TURNOVE R, AND THEREFORE, THE TURNOVER OF THE ASSESSEE WAS ESTIMATED BY THE A O. IN THE PRESENT YEAR IN APPEAL, THERE IS NO SUCH MATERIAL FOR ESTIM ATING SALES OF THE ASSESSEE. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, THE ASSESSEE HAS SHOWN SALES AT RS.3,45,32,26 1/-IN ITS RETURN OF INCOME. THE AO AFTER REJECTING THE BOOK RESULTS OF THE ASSESSEE ESTIMATED ITS SALES AT RS.5.00 CRORES. ON APPEAL, THE CIT(A) AFTER TAKING INTO CONSIDERATION THE SALES ACCEPTED BY THE TRIBUNAL, IN THE CASE OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR A T RS.3.75 CRORES ESTIMATED THE SALES OF THE ASSESSEE OF THE YEAR UND ER CONSIDERATION AT RS.3.75 LAKHS. AGAINST THE ORDER OF THE CIT(A), BO TH THE PARTIES ARE IN APPEAL BEFORE US. ITA NO.1131/AHD/2011-2 6 8. THE AR CONTENDED BEFORE US THAT THE CIT(A) WAS N OT JUSTIFIED IN ESTIMATING THE SALES AT RS.3.75 CRORES ON THE BASIS OF THE ESTIMATION MADE IN THE PRECEDING YEAR, BECAUSE, IN THE PRECEDI NG YEAR, THE SALES AS PER THE BOOKS OF ACCOUNTS WAS RS.3,52,48,694/-, WHEREAS THE SALES AS PER THE BOOKS OF ACCOUNTS IN THE YEAR UNDER CONS IDERATION WAS REDUCED TO RS.3,45,32,261/-. 9. ON THE OTHER HAND, THE DR ARGUED THAT THE CIT(A) HAS NOT TAKEN INTO CONSIDERATION FINDINGS OF THE AO THAT IN FINAN CIAL YEAR 2000-01 RELEVANT TO THE ASSTT.YEAR 2001-02, THE ASSESSEE WA S HAVING ONLY TWO OUTLETS AT AHMEDABAD ONE AT VIJAY CROSS ROADS, AND OTHER AT AHMEDABAD DOMESTIC AIRPORT. WITH THESE TWO OUTLETS AND A SMALL NUMBER OF FRANCHISEES, THE ASSESSEE HAS SHOWN A TOT AL SALES AT RS.3,51,41,387/- IN THAT PARTICULAR YEAR. AS COMPA RED TO ASSTT.YEAR 2001-02, DURING THE YEAR UNDER CONSIDERATION, WITH THREE OUTLETS AT AHMEDABAD AS WELL AS DISTRIBUTORSHIP AT KALOL AND G ANDHINAGAR, THE ASSESSEE IS SHOWING SALES OF ONLY RS.3,45,32,261/-, WHILE ESTIMATING THE SALES OF THE ASSESSEE OF THE YEAR, WHEN COMPARE D WITH SALES OF THE PRECEDING YEAR. 10. WE FIND THAT THE ASSESSEE HAS NOT DISPUTED THE FACT THAT ONE MORE OUTLET WAS OPENED DURING THE YEAR UNDER CONSIDERATI ON AS WELL AS DISTRIBUTORSHIP WAS GIVEN FOR KALOL AND GANDHINAGAR DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE COULD NOT GIVE A NY COGENT REASON AS TO WHY ITS SALES WERE LESSER THAN THE SALES OF THE PRECEDING YEAR, WHEN ONE MORE OUTLETS WAS OPENED AND TWO FRANCHISEES WER E ADDED BY THE ASSESSEE. FURTHER, THE CIT(A) HAS ESTIMATED THE SA LES ONLY ON THE BASIS OF THE SALES OF THE PRECEDING YEAR WITHOUT CONSIDER ING THE CHANGE OF THE FACT OF THE YEAR UNDER CONSIDERATION TO THE EXTENT OF OPENING OF ONE MORE OUTLETS AND GIVING TWO DISTRIBUTORSHIP ONE A T KALOL AND OTHER AT GANDHINAGAR. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED VIEW, THE AO IS FULLY JUSTIFIED IN ESTIM ATING THE TURNOVER OF ITA NO.1131/AHD/2011-2 7 THE ASSESSEE AT RS.5.00 CRORES (RUPEES FIVE CRORES) . WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND RES TORE THE ORDER OF THE AO ON THIS ISSUE, AND THUS, THIS GROUND OF THE APPE AL OF THE REVENUE IS ALLOWED AND THAT OF THE ASSESSEE IS DISMISSED. 11. THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.1,24,270/- ON ACCOUNT OF DISALLO WANCE U/S.40(A)(IA) OF THE AT ON ACCOUNT OF NON-DEDUCTION OF TDS ON THE PAYMENT MADE FOR PACKING MATERIAL TO TWO PARTIES BY MECHANICALLY FOLLOWING THE DECISION TAKEN BY HIM IN THE CASE OF THE APPELLANT IN A.Y.2006-07 WITHOUT INDEPENDENT CO NSIDERATION AND APPRECIATION OF THE FACTS AND LEGAL POSITION. IN VIEW OF FACTS AND SUBMISSIONS FILED COUPLED WITH LEGAL POSITION, THE IMPUGNED ADDITION OF RS.1,24,2760/- REQUIRES TO BE DELETED. 12. BRIEF FACTS OF THE CASE ARE THAT THE AO DISALLO WED DEDUCTION FOR EXPENDITURE INCURRED ON PACKING MATERIAL OF RS.1,24 ,270/- ON THE GROUND THAT NO TDS WAS DEDUCTED FROM THE PAYMENT MA DE BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 13. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANC E ON THE GROUND THAT IN THE PRECEDING ASSTT.YEAR 2006-07, THE ISSUE WAS DECIDED BY HIM AGAINST THE ASSESSEE VIDE HIS ORDER DATED 22.3.2010 . THE AR OF THE ASSESSEE SUBMITTED THAT IN THE PRECEDING ASSTT.,YEA R 2006-07 THE TRIBUNAL VIDE ITS ORDER DATED 19.4.2013 IN ITA NO.1 794/AHD/2010 AND CO NO.188/AHD/2010 IN THE CASE OF THE ASSESSEE ITSE LF HAS DELETED SIMILAR DISALLOWANCE. 14. THE DR AGREED WITH THE SUBMISSIONS OF THE AR. 15. WE FIND THAT THE TRIBUNAL ASSTT.YEAR 2006-07 WH ILE VACATING THE DISALLOWANCE HELD AS UNDER: 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS ON RECORD. THE ASSESSEE BEFORE US SUBMITT ED THAT THE PURCHASES AGGREGATING TO RS.1,90,661/- IS ON ACCOUN T OF PLASTIC ITA NO.1131/AHD/2011-2 8 TRAYS, CUPS, SPOONS AND PLASTIC DISHES ETC. WHICH D ID NOT CARRY THE LOGO OF THE ASSESSEE AND WERE IN THE NATURE OF PURC HASES. THE PURCHASES WERE OF STANDARDIZED MATERIAL AVAILABLE I N MARKET. THESE SUBMISSIONS OF THE ASSESSEE COULD NOT BE CONT ROVERTED BY THE REVENUE BY BRINGING ANY MATERIAL EVIDENCE ON RE CORD. WE ARE, THEREFORE, OF THE VIEW THAT THE PURCHASES MADE BY T HE ASSESSEE FROM THE AFORESAID THREE PARTIES CANNOT BE CONSIDER ED AS BEING A CASE OF CONTRACT WHICH WOULD REQUIRE DEDUCTION OF T DS U/S 194C OF THE ACT AND, THEREFORE, NO DISALLOWANCE U/S 40(A ) (IA) OF THE ACT IS CALLED FOR. WE, THEREFORE, DIRECT THE AO TO DELE TE THE ADDITION MADE ON THIS COUNT. THIS GROUND OF ASSESSEES CROSS OBJECTION IS ALLOWED. FACTS BEING IDENTICAL, RESPECTFULLY FOLLOWING THE P RECEDENT, WE DELETE THE DISALLOWANCE OF RS.1,24,270/-MADE ON ACCOUNT OF PAC KING MATERIAL. THIS GROUND OF THE ASSESSEE IS ALLOWED. 16. THE GROUND NO.3 OF THE APPEAL OF THE ASSESSEE I S AS UNDER: 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.18,602/- ON ACCOUNT OF LATE REMI TTANCE OF EMPLOYEES CONTRIBUTION TO PF WITHOUT PROPER CONSIDE RATION AND APPRECIATION OF FACTS OF THE CASE AS WELL AS SETTLE D LEGAL POSITION. THAT KEEPING IN VIEW THE RATIO LAID DOWN BY VARIOUS COURTS OF LAW INCLUDING THE HONBLE SUPREME COURT AS CITED BY THE APPELLANT IN THE SUBMISSIONS FILED BEFORE THE LEARNED CIT(A), SI NCE THE ENTIRE PAYMENT HAVING BEEN MADE DURING THE YEAR AND BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME, NO DISALLOWANC E IS WARRANTED. ACCORDINGLY, THE IMPUGNED ADDITION OF RS.18,602/- R EQUIRES TO BE DELETED. 17. BRIEF FACTS OF THE CASE ARE THAT THE AO DISALLO WED RS.18,602/- ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PF AS THE SAM E WERE NOT DEPOSITED WITHIN THE STIPULATED DATE AS PER THE PRO VISIONS OF SECTION 36(1)(VA) AND 2(24)(X) OF THE ACT. 18. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANC E. 19. BEFORE US, THE AR OF THE ASSESSEE SUBMITTED THA T THE ISSUE NOW STANDS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIONER OF I NCOME-TAX-II VS. ITA NO.1131/AHD/2011-2 9 GUJARAT STATE ROAD TRANSPORT CORPORATION, (2014) 36 6 ITR 170 (GUJ) WHEREIN IT WAS HELD THAT EMPLOYEES CONTRIBUTION TO PROVIDENT FUND AND/OR STATE INSURANCE FUND NOT CREDITED BY THE ASS ESSEE TO THE ACCOUNTS OF THE EMPLOYEES IN RELEVANT FUNDS WITHIN THE DUE DATES AS SPECIFIED IN SECTION 36(1)(VA) OF THE ACT, THE AMOU NTS ARE NOT DEDUCTIBLE. RESPECTFULLY FOLLOWING THE ABOVE DECIS ION OF THE HONBLE GUJARAT HIGH COURT, WE DISMISS THE GROUND OF APPEAL OF THE ASSESSEE. 20. THE GROUND NO.2 OF THE REVENUES APPEAL IS AS U NDER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADOPTING GP RATE OF 29.65% AS AGAINST 32% ADOPTED BY THE AO, AN D RESTRICTING THE GP ADDITION OF RS.57,61,691/- TO RS.8,79,935/- 21. THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN GP @29.65% ON TOTAL TURNOVER OF RS.3,45,32,261/- IN THE IMMEDIATE LY PRECEDING ASSESSMENT YEAR I.E. A.Y.2006-07, THE ASSESSEE HAS SHOWN GP @ 26.21% ON TOTAL TURNOVER OF RS.3,52,48,694/- AS AGA INST WHICH THE GP WAS ESTIMATED AT 32% IN THE ASSESSMENT MADE U/S.143 (3) OF THE ACT. FURTHER, OBSERVATION AND FINDINGS OF THE AO ARE AS UNDER: 5.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, VIDE ORDER SHEET ENTRY DATED 23.11.2009, THE ASSESSEE WAS ASKE D TO SHOW CAUSE AS TO WHY THE GP SHOULD NOT BE ESTIMATED AT 3 2%, WHICH WAS ADOPTED IN EARLIER ASSESSMENT YEARS ALSO. IN TH IS REGARD, THE ASSESSEE HAS FILED ITS SUBMISSION ON 09.12.2009, CO NTENDING AS UNDER:- COMING TO THE ESTIMATION OF GROSS PROFIT OF 32% AS AGAINST GROSS PROFIT AS PER BOOKS OF ACCOUNTS AT 29.65%, IT IS STATED THAT THE CORRECT AMOUNT OF GROSS PROFIT HAS BEEN SH OWN AT IT IS NOT POSSIBLE TO MAINTAIN THE SAME GROSS PROFIT Y EAR AFTER YEAR. LOOKING TO THE NATURE OF BUSINESS IN OUR LINE OF TRADE, THE GROSS PROFIT SHOWN IS CORRECT BASED ON BOOKS OF ACCOUNTS, EVIDENCE AND THE RELEVANT DETAILS HAS ALR EADY BEEN FURNISHED AND THEREFORE, THERE IS NO BASE FOR EVEN ESTIMATING THE GROSS PROFIT RATE.' 5.2. THE SUBMISSION OF THE ASSESSEE IS CONSIDERED, BUT NOT FOUND ACCEPTABLE. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THOUGH ITA NO.1131/AHD/2011-2 10 THE ASSESSEE HAS BEEN SPECIFICALLY ASKED; TO GIVE D ETAILS OF MONTH-WISE CONSUMPTION OF RAW MATERIAL AND PRODUCTI ON, SALES TAX RETURNS FOR COMPARISON OF ACTUAL PRODUCTION AND SALES, THE SAME HAVE NOT BEEN .PROVIDED BY THE ASSESSEE. ALL T HESE FACTS POINT TOWARDS DELIBERATE OMISSION ON THE PART OF TH E ASSESSEE SO AS NOT TO ENABLE THE AO TO FIND OUT THE CORRECT GP FOR THE YEAR UNDER, CONSIDERATION. IN THE CIRCUMSTANCES, I AM LE FT WITH NO OTHER ALTERNATIVE BUT TO FOLLOW THE METHODOLOGY ADO PTED IN EARLIER ASSESSMENT YEARS, FOR WORKING OUT THE GP FOR THE YE AR UNDER CONSIDERATION. RELIANCE IS PLACED ON THE' DECISION OF ORISSA HIGH COURT IN THE CASE OF RATANLAL OMPRAKASH VS. CIT - 1 32 ITR 640, WHEREIN IT HAS BEEN HELD THAT GP CAN BE DETERMINED ON THE PAST HISTORY OF THE CASE RECORDS. 5.3. ACCORDINGLY, THE GROSS PROFIT OF THE ASSESSEE AT THE ENHANCED SALE OF RS.5 CRORES 32% IS WORKED OUT AT RS. 1,60,0 0,000/-. AS AGAINST THIS, THE ASSESSEE HAS SHOWN GROSS PROFIT O F RS.1,02,38,309/-. THEREFORE, AN ADDITION OF RS.57,6 1,691/- IS MADE TO THE INCOME OF THE ASSESSEE. PENALTY PROCEED INGS U/S.271(1)(C) OF THE ACT ARE INITIATED FOR CONCEALI NG THE PARTICULARS OF INCOME/FURNISHING INACCURATE PARTICULARS OF INCO ME. 22. ON APPEAL, THE CIT(A) HELD THAT THE AO HAS CONS ISTENTLY ESTIMATED THE GP AT 32% IN ALL THE EARLIER YEARS STARTING FRO M ASSTT.YEAR 2001-02 TO 2006-07. HE OBSERVED THAT HIS PREDECESSOR RESTR ICTED THE SAID GP TO 31% FOR A.Y.2003-04 TO 2005-06. HE OBSERVED THAT O N THE FACTS OF THE CASE, HE HAD RESTRICTED THE GP FOR A.Y.2006-07 AT 2 9%. SINCE DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOW N BETTER GP AT 29.65% COMPARED TO EARLIER YEARS, HE HELD THAT THER E WAS NO REASON FOR ESTIMATION OF GP, HENCE, THE CIT(A) DIRECTED THE AO TO ACCEPT GP RATE AT 29.65% IN INSTEAD OF 32% ESTIMATED BY THE AO. 23. THE DR RELIED ON THE ORDER OF THE AO, WHEREAS, THE AR OF THE ASSESSEE SUBMITTED THAT IN A.Y.2006-07, THE TRIBUNA L IN THE CASE OF ASSESSEE ITSELF HAS ESTIMATED THE GP AT 29%. 24. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT AS NO DISTINGUISHING FACTS HAVE BEEN POINTED OUT DURING T HE YEAR BY THE DR, WE, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L FOR ASSTT.YEAR 2006- ITA NO.1131/AHD/2011-2 11 07, ESTIMATE THE GP OF THE ASSESSEE AT 29%. THUS, THIS GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 25. THE GROUND NO.3 OF THE REVENUES APPEAL IS AS UNDER : 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.19,319/- BEING PRIOR PERIOD SALES-TA X EXPENSES. 26. BRIEF FACTS OF THE CASE ARE THAT THE AO DISALLO WED THE SALES TAX EXPENSES OF RS.19,319/- ON THE GROUND THAT IT PERTA INED TO EARLIER YEARS, AND THE ASSESSEE COULD NOT FURNISH EVIDENCE TO SUBSTANTIATE THAT THE SAME PERTAINS TO THE YEAR UNDER CONSIDERATION. 27. ON APPEAL, THE CIT(A) DELETED THE DISALLOWANCE BY OBSERVING THAT ON GOING THROUGH THE EVIDENCES FILED BY THE ASSESSE E, IT IS SEEN THAT SALES-TAX WAS DETERMINED ON ASSESSMENT OF PRECEDING ASSTT.YEAR 2006- 07 VIDE ORDER PASSED IN OCTOBER, 2006 I.E. DURING T HE YEAR UNDER DISPUTE I.E. ASSTT.YEAR 2007-08, AND THEREFORE, IT IS NOT IN DISPUTE THAT THE LIABILITY FOR THE SAID SALES TAX GOT CRYSTALIZE D DURING ASSTT.YEAR 2007- 08. 28. THE DR SUPPORTED THE ORDER OF THE AO. 29. WE FIND THAT THE DR COULD NOT POINT OUT ANY SPE CIFIC ERROR IN THE FINDINGS OF THE CIT(A). HE ALSO COULD NOT CONTROVE RT THE FINDINGS OF THE CIT(A) BY BRINGING ANY POSITIVE MATERIAL ON RECORD TO SHOW THAT THE LIABILITY FOR SALES TAX HAD NOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. WE, THEREFORE, DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE, WHICH I S CONFIRMED, AND THE GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 30. THE GROUND NO.4 OF THE REVENUES APPEAL IS AS UNDER : 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,35,776/- BEING DEPRECIATION ON MOTOR VEHICLE. ITA NO.1131/AHD/2011-2 12 31. BRIEF FACTS OF THE CASE ARE THAT THE AO DISALLO WED RS.1,35,776/- BEING DEPRECIATION ON OPENING WDV OF MOTOR VEHICLE PURCHASED IN EARLIER YEARS ON THE GROUND THAT THE VEHICLE WAS PU RCHASED IN THE NAME OF DIRECTOR, AND ACCORDINGLY, THE OWNERSHIP OF THE VEHICLE DOES NOT BELONG TO THE COMPANY, AND THEREFORE, NO DEPRECIATI ON IS ALLOWABLE. 32. ON APPEAL, THE CIT(A) OBSERVED THAT IDENTICAL I SSUE AROSE IN EARLIER YEARS, AND FOLLOWING THE DECISION OF HIS PR EDECESSOR AS WELL AS HIMSELF IN ASSESSEES OWN CASE FOR EARLIER ASSTT.YE AR 2004-05 TO 2006- 07, DIRECTED THE AO TO ALLOW DEPRECIATION. 33. THE DR RELIED ON THE ORDER OF THE AO. 34. WE FIND THAT THE FINDING OF THE CIT(A) IN ALLOW ING DEPRECIATION ON VEHICLES PURCHASED IN THE NAME OF DIRECTOR WAS CONF IRMED IN APPEAL BY THE TRIBUNAL IN THE ASSTT.YEAR 2006-07 IN ITA NO.17 94/AHD/2010 AND CO NO.188/AHD/2010 VIDE ORDER DATED 19.4.2013. THEREF ORE, RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THIS GROUND OF APPEA L OF THE REVENUE. 35. THE GROUND NO.5 OF THE REVENUES APPEAL IS AS UNDER : 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,21,432/- OUT OF EXPENSES U/S.4 0A(3). 36. BRIEF FACTS OF THE CASE ARE THAT THE AO OBSERVE D THAT THE ASSESSEE HAS MADE CASH PAYMENT FOR VARIOUS BILLS AGGREGATING TO RS.6,07,164/- TO TORRENT POWER AEC LTD. WHICH WAS IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. SINCE THE ASSESSEE HAD NOT FURN ISHED ANY EXPLANATION, HE DISALLOWED 20% OUT OF THE SAID AMOU NT WHICH WORKS TO RS.1,21,432/-. 37. ON APPEAL, THE CIT(A) DELETED THE DISALLOWANCE BY OBSERVING THAT AS THE BOOK RESULTS OF THE ASSESSEE WAS REJECTED, A ND THE AO ESTIMATED THE SALES AND GP RATIO, NO SEPARATE ADDITION WAS WA RRANTED. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAS FURNISHED EV IDENCE THAT AT THE ITA NO.1131/AHD/2011-2 13 FIRST INSTANCE, THE PAYMENTS WERE MADE THROUGH ACCO UNT PAYEE CHEQUES, WHICH WERE DISHONOURED AND TO AVOID DISCON NECTION OF THE ELECTRICITY, WHICH WOULD HAVE RESULTED IN HUGE LOSS ES IN VIEW OF NATURE OF BUSINESS OF THE ASSESSEE, I.E. THE BUSINESS OF MANU FACTURING OF FOOD ITEMS AND SWEETS, WHICH REQUIRE CONTINUOUS FLOW OF ELECTRICITY, AS ANY FAILURE OF POWER SUPPLY OR DISCONNECTION THEREOF WO ULD RESULT IN CONTAMINATION OF FOOD AND SWEETS IN ABSENCE OF PROP ER REFRIGERATION, THE ASSESSEE WAS COMPELLED TO TAKE THE PAYMENT OF THE B ILLS IMMEDIATELY IN CASH TO AVOID DISCONNECTION BY THE ELECTRICITY COMP ANY. THEREFORE, THE ASSESSEE HAD REASONABLE CAUSE FOR MAKING THE PAYMEN T OF ELECTRICITY BILLS IN CASH. 38. THE DR RELIED ON THE ORDER OF THE AO. 39. WE FIND THAT NO SPECIFIC ERROR IN THE ORDER ON THE CIT(A) COULD BE POINTED OUT BY THE DR. IN THE ABSENCE OF THE SAME, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT( A) ON THIS ISSUE, WHICH IS CONFIRMED, AND THE GROUND OF THE APPEAL O F THE REVENUE IS DISMISSED. 40. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON MONDAY, THE 2 ND FEBRUARY, 2015 AT AHMEDABAD. SD/- SD/- ( SHAILENDRA KUMAR YADAV ) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 02/02/2015