The DCIT, Circle-5(1), Visakhapatnam V. Sri Mulukutla Ashok Chowdary, Visakhapatnam

ITA 114/VIZ/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0679 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 19-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S S GOPINATH
• Assessee Lawyers: K S S SHARMA
• Keywords: Rejection of books of accounts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.114/VIZAG/2010 ASSESSMENT YEAR : 2006-07 DCIT, CIRCLE-5(1) VISAKHAPATNAM SRI MULUKUTLA ASHOK CHOWDHARY VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAWPM 3597L APPELLANT BY: SHRI G.S.S. GOPINATH, DR RESPONDENT BY: SHRI K.S.S. SHARMA, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT CIT(A) OUGHT TO HA VE APPRECIATED THE FACT THAT ESTIMATION OF ADDITION HAS BEEN MADE KEEPING I N VIEW THE RATE OF PROFIT IN THE SIMILAR LINE OF BUSINESS. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RE CORD. THE FACTS BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE IS AN IND IVIDUAL CARRYING ON BUSINESS IN PURCHASE AND SALE OF IRON & STEEL IN TH E NAME OF VIZAG COMPANY STEEL. HE IS ALSO A PARTNER IN THE FIRM OF M/S. V. C. FERRO ALLOYS AND M/S. VISAKHA CONSTRUCTIONS. BESIDES THIS, HE DERIVES IN COME FROM OTHER SOURCES BEING INTEREST FROM BANK AND DIVIDEND FROM SHARES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FILED ALL RELEVANT INFORMATION LIKE VAT RETURN, MONTHLY PURCHASE AND SALES, CUSTOMER WI SE PURCHASE AND SALE, DETAILS OF INTEREST ACCOUNT ETC. HOWEVER, THE A.O. , ON THE BASIS OF THE NET PROFIT OF ANOTHER DEALER WHOSE TURNOVER IS MORE THA N RS.150 CRORES HAS ESTIMATED THE NET PROFIT AT 0.4% INSTEAD OF 0.16% D ECLARED BY THE ASSESSEES AFTER REJECTING THE BOOKS OF ACCOUNTS. 2 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) W ITH THE SUBMISSIONS THAT THE TURNOVER OF THE ASSESSEES IS RS.26.52 CROR ES AND IT MAINLY DEALS WITH VIZAG STEEL PLANT IN WHICH MARGIN OF PROFIT IS LESS . IT WAS FURTHER CONTENDED BEFORE THE CIT(A) THAT IF THE TRADE DISCOUNT RECEIV ED BY THE ASSESSEES FROM ITS SUPPLIERS IS REDUCED FROM THE COST OF PURCHASES, TH E NET PROFIT DERIVED IS 2% SINCE DISCOUNT RECEIVED BY HIM WILL GO TO REDUCE TH E COST OF PURCHASE. FURTHER THE ASSESSEE HAS PAID THE HUGE INTEREST AMO UNTING TO RS.33 LAKHS. THEREFORE, THE AOS ACTION OF ESTIMATING THE NET PR OFIT WITHOUT ANY EVIDENCE AND WITHOUT REJECTING THE BOOKS OF ACCOUNT IS NOT J USTIFIED. THE CIT(A) RE- EXAMINED THE ISSUE IN THE LIGHT OF ASSESSEES CONTEN TIONS AND ARRIVED AT A CONCLUSION THAT THE A.O. HAS REJECTED THE BOOKS OF ACCOUNTS WITHOUT POINTING OUT ANY MISTAKE OR DEFECTS THEREIN. NO EVIDENCE HA S BEEN BROUGHT ON RECORD BY THE A.O. WHICH CAN PROVE THAT NET PROFIT SHOWN B Y THE ASSESSEE WAS LOW. THE CIT(A) ACCORDINGLY DELETED THE ADDITIONS. 4. NOW THE REVENUE IS BEFORE US AND PLACED A HEAVY RELIANCE UPON THE ORDER OF THE A.O. THE LD. D.R. HAS CONTENDED THAT THE ASSESSING OFFICER HAS ESTIMATED THE INCOME OF THE ASSESSEES, KEEPING IN V IEW THE PROFIT DECLARED BY THE OTHER ASSESSEES IN THE SIMILAR LINE OF BUSINESS . 5. THE LD. COUNSEL FOR THE ASSESSEES ON THE OTHER H AND HAS SUBMITTED THAT THE A.O. HAS MADE A GENERAL QUERIES FROM THE A SSESSEES AND HE HAS NOT REJECTED THE BOOKS OF ACCOUNTS BY POINTING OUT ANY SPECIFIC DEFECT THEREIN. THE QUERIES RAISED BY THE ASSESSING OFFICER WERE DU LY REPLIED BY THE ASSESSEES AND THE REASONS FOR THIS PROFIT WAS STATED BY THE A SSESSEES AS THE MAJOR PURCHASES ARE FROM M/S. VISAKHAPATNAM STEEL PLANT. THE MARGIN ALLOWED TO HIM IS VERY LESS AND SALES WERE MADE AT A COMPETITI VE PRICE KEEPING IN VIEW THE DISCOUNTS IT GETS FROM ITS MAIN SUPPLIER. IT WA S ALSO CONTENDED BEFORE THE A.O. THAT IF THE TRADE DISCOUNTS RECEIVED BY THE AS SESSEE FROM ITS SUPPLIERS REDUCED THE COST OF PURCHASES, THE NET PROFIT DERIV ED IS 2%. 3 6. HAVING CAREFULLY EXAMINED THE ORDER OF THE LOWER AUTHORITIES, WE FIND THAT ASSESSEE HAS PLACED ALL RELEVANT EVIDENCE BEFO RE THE A.O. AND THE ASSESSING OFFICER HAS ESTIMATED THE PROFIT OF THE A SSESSEES WITHOUT REJECTING THE BOOKS OF ACCOUNTS AND ALSO ON THE BASIS OF THE PROFITS SHOWN BY THE OTHER BUSINESS CONCERNS IN A SIMILAR LINE OF BUSINESS. W HILE ESTIMATING THE PROFIT, THE ASSESSING OFFICER HAS NOT TAKEN INTO ACCOUNT TH E ARGUMENTS OF THE ASSESSEES THAT IF THE DISCOUNTS GIVEN BY THE SUPPLI ER IS TAKEN INTO ACCOUNT, THE NET GROSS PROFIT WOULD BE AT 2%. WHEREAS, THE CIT( A) HAS TAKEN ALL THESE ASPECTS INTO ACCOUNT WHILE ADJUDICATING THE ISSUE. WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) AND WE CONFIRM THE SAME. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 24.6.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 24 TH JUNE, 2010 COPY TO 1 THE DCIT, CIRCLE-5(1), VISAKHAPATNAM 2 SRI MULUKUTLA ASHOK CHOWDHARY, D.NO.26-40-3, CHAI TANYA NAGAR, VISAKHAPATNAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM