Dy,Commissioner of Income-tax Circle-4, Nagpur V. Smt .Saroj Rander, Nagpur

ITA 114/NAG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93391 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 05-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI S R KIRTANE
• Keywords: Gross profit estimation

Judgement Text

1 ITA NO.114/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO . 114/NAG/2013 ASSESSMENT YE AR : 2009-10. DY. COMMISSIONER OF INCOME-TAX, SMT. SAROJ RANDER, CIRCLE-4, NAGPUR. V/S. 1 ST FLOOR,SARVODAY CLOTH MARKET, GANDHIBAGH, NA GPUR. PAN AAKPR0537M APPELLANT RESPONDENT. APPELLANT BY : S HRI SHRI S.R. KIRTANE. RESPONDENT BY : SH RI VIJAY CHANDAK.. DATE OF HEARING 23-04-2015 DATE OF ORDER - 20 TH MAY, 2015 O R D E R PER SHRI SHAMIM YAHYA, A.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS)-II, NAGPUR DATED 05-02-2013 AND PERTAI NS TO ASSESSMENT YEAR 2009- 10. THE GROUNDS OF APPEAL READ AS UNDER : 2 ITA NO.114/NAG/2013 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN TREATING THE REJECTING OF THE BOOKS OF ACCOUNTS BY THE A.O. AND THE ESTIMATION OF GROSS PROFITS AS NOT JUSTIFIED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN ALLOWING A LOW PROFIT THOUGH THE ASSESSEE FAILED TO PRODUCE D OCUMENTARY EVIDENCE IN SUPPORT OF SUCH A WIDE FLUCTUATION IN VALUE OF PUR CHASE AND SALE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN DELETING THE ADDITION STATING THAT THE PECULIAR CIRCUMSTANC ES IN WHICH THE SAME QUALITY6 OF MATERIAL IS SOLD AT DIFFERENT PRICES O N THE SAME DAY TO THE SAME PARTY. 2. THE ASSESSEE IS A PROPRIETOR OF M/S SRISWASTIK E NTERPRISES WHICH IS DEALING IN THE BUSINESS OF YARN TRADING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE GROSS PROFIT RATIO SHOWN WAS .90%. THE ASSESSING OFFICER WAS OF THE OPINION THAT THIS WAS VERY LOW. THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS DEALING IN YARN. THE YARN PRIC ES ARE SUBJECT TO MARKET FLUCTUATION. THE PROFIT MARGINS CANNOT BE FIXED ON YEAR TO YEAR AND EVEN ON DAY TO DAY BASIS. AFTER PURCHASE OF YARN THE ASSESSEE HAS TO SELL THE SAME ACCORDING TO THE PRICES PREVAILING IN THE MARKET. THE YARN PURCH ASED ARE SOLD AS SOON AS POSSIBLE SINCE CARRYING OF STOCK FOR LONGER PERIOD WILL CARRY THE RISK OF WIDE FLUCTUATION IN YARN PRICES. THE ASSESSING OFFICER W AS NOT SATISFIED. THE ASSESSING OFFICER COMPARED THE GROSS PROFIT SHOWN FOR THE CUR RENT YEAR WITH THAT ASSESSED FOR THE PRECEDING YEAR. THE ASSESSING OFFICER OBSER VED AS UNDER : THE GP % FOR PREVIOUS THREE YEARS IS 1.5%, 2.6% & 2.6% FOR A.Y. 2006-07, 2007-08 & 2008-09 IS RESPECTIVELY. BUT IN THE PRES ENT ASSESSMENT YEAR, THE GROSS PROFIT PERCENT HAS REDUCED TO 0.90% WHICH IS ABYSMALLY LOW. THE ASSESSEE WAS ASKED TO SUBMIT THE REASONS FOR THIS, BUT THE REASONS GIVEN 3 ITA NO.114/NAG/2013 CANNOT IN ANY WAY SUBSTANTIATE LOW GP WHICH ARE D ISCUSSED IN DETAIL ABOVE AND HENCE LOW GP OF 0.90% IS NOT ACCEPTABLE. AS AS SESSEE HAS COMPLETELY FAILED TO SUBSTANTIATE THE FLUCTUATION RATES OF SA LES AND HENCE HAS COMPLETELY FAILED TO QUANTIFY & SUPPORT THE GP AS SHOWN IN HER BOOKS OF ACCOUNT. FOR THIS REASON THE ASSESSING OFFICER REJECTED THE B OOKS OF ACCOUNT AND COMPUTED THE GROSS PROFIT AT THE RATE OF 2.6% WHICH WAS THE AVERAGE OF PRECEDING FOUR YEARS ASSESSED GROSS PROFIT. ACCORDINGLY, THE ASSESSING O FFICER MADE THE ADDITION OF ` .76,13,490/-. 3. UPON ASSESSEES APPEAL, LEARNED CIT(APPEALS) NOT ED THAT THE GROSS PROFIT PERCENTAGE SHOWN DURING THE YEAR UNDER CONSIDERATIO N IS .91% WHICH IS HIGHER THAN THE GP PERCENTAGE OF .21% AND .75% AS SHOWN IN ASSESSMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY. LEARNED CIT(APPEALS) FURT HER OBSERVED THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MAT ERIAL TO SHOW THAT THERE ARE DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WAR RANTING THEIR REJECTION. LEARNED CIT(APPEALS) FURTHER REFERRED TO THE CIT(AP PEALS) ORDER FOR ASSESSMENT YEAR 2007-08 WHEREIN IT WAS HELD THAT THE REJECTION OF BOOKS OF ACCOUNT BY THE ASSESSING OFFICER AND THE ESTIMATION OF GP IS NOT JU STIFIED. ACCORDINGLY, LEARNED CIT(APPEALS) DELETED THE ADDITION. AGAINST THE ABOV E ORDER, REVENUE IS IN APPEAL BEFORE US. 4. LEARNED D.R. SUBMITTED THAT THERE IS A VARIATION IN THE GROSS PROFIT SHOWN BY THE ASSESSEE. THE ASSESSEE HAS NOT BEEN ABLE TO PRO PERLY JUSTIFY THE VARIATION. ACCORDINGLY HE SUBMITTED THAT THE ORDER OF THE ASSE SSING OFFICER MAY BE UPHELD. 4 ITA NO.114/NAG/2013 5. LEARNED COUNSEL OF THE ASSESSEE, ON THE OTHER HA ND, SUBMITTED THAT THE ASSESSING OFFICER HAS COMPARED THE GROSS PROFIT WIT H THAT ASSESSED IN EARLIER YEARS. LEARNED COUNSEL SUBMITTED THAT THE GROSS PRO FIT AS ASSESSED BY THE ASSESSING OFFICER IN EARLIER YEARS HAS BEEN DELETED IN APPELLATE PROCEEDINGS. HENCE HE SUBMITTED THAT THERE IS NO BASIS FOR ADDIT ION MADE BY THE ASSESSING OFFICER. IN THIS REGARD, LEARNED COUNSEL REFERRED T O THE DECISION OF ITAT, NAGPUR BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 20 07-08 IN ITA NO. 250/NAG/2012. IN THIS CASE VIDE ORDER DATED 19-11-2 014 THE TRIBUNAL HAD HELD THAT THE CIT(APPEALS) HAS MADE A CATEGORICAL FINDIN G THAT THE ASSESSING OFFICER COULD NOT FIND ANY IRREGULARITY IN THE BOOKS OF ACC OUNT WHICH COULD TRIGGER REJECTION OF BOOKS. THE TRIBUNAL UPHELD THE CIT(APPE ALS) ORDER THAT THE RESULTS AS DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THE ASSESSING OFFICER HAS NOT FOUND ANY D EFECTS IN THE BOOKS OF ACCOUNT. HE HAS REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE ONLY BY COMPARING THE GROSS PROFIT RATIO OF THE CURRENT YEAR WITH THAT ASSESSED IN EARLIER YEARS. THE GROSS PROFIT AS ASSESSED BY THE ASSESSING OFFICER IN EARLIER YEA RS HAS NOT BEEN SUSTAINED BY THE APPELLATE AUTHORITY. HENCE IT CANNOT BE SAID THAT T HE BENCH MARK ADOPTED BY THE ASSESSING OFFICER FOR COMPARING THE GROSS PROFIT OR ASSESSING THE GROSS PROFIT IS SUSTAINABLE. IN ASSESSEES OWN CASE THE ITAT FOR AS SESSMENT YEAR 2007-08 IN SIMILAR CIRCUMSTANCES HAD UPHELD THE ORDER OF LEARN ED CIT(APPEALS). SINCE IN ASSESSEES OWN CASE SIMILAR ADDITION MADE BY THE AS SESSING OFFICER WAS DELETED BY THE CIT(APPEALS) AND THE SAME WAS UPHELD BY THE ITAT, WE FIND THAT DOCTRINE OF STARELECESIS MANDATES THAT WE FOLLOW THE PRECEDENT AND UPHOLD THE ORDER OF 5 ITA NO.114/NAG/2013 LEARNED CIT(APPEALS) SINCE THE FACTS ARE IDENTICAL . FOLLOWING THE ABOVE DECISION, WE UPHOLD THE ORDER OF LEARNED CIT(APPEALS). 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY, 2015. SD/- SD/- (MUKUL K. SHRAWAT) (SHAMIM YAHYA) JUDICIAL MEMBER. ACCOUNTANT MEMBER NAGPUR, DATED: 20 TH MAY, 2015. COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. T RUE COPY. BY ORDER ASSISTANT REGISTRAR, I TAT, NAGPUR WAKODE