Appeal Details
Counselvise Citation
[2017] 130 COUNSELVISE.COM (IT) 8977 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 9 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-03-2017
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
SMC
Next Hearing Date
16-03-2017
Assessment Year
2007-2008
Appeal Filed On
05-06-2012
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D/SMC BENCH AHMEDABAD BEFORE SHRI S. S. GODARA, JM & SHRI MANISH BORAD, AM. ITA NO. 996/AHD/2012 ASST. YEAR:2007-08 TULSI INTERMEDIARIES (P)LTD. 15/A, VASANT VIHAR SOCIETY, NR. MITHAKHALI SIX ROAD, NAVRANGPURA, AHMEDABAD. VS. ITO, WD-8(1), AHMEDABAD. APPELLANT RESPONDENT PAN AABCT8215A AND ITA NO. 1224/AHD/2012 ASST. YEAR:2007-08 ITO, WD-8(1), AHMEDABAD. VS. TULSI INTERMEDIARIES (P) LTD. 15/A, VASANT VIHAR SOCIETY, NR. MITHAKHALI SIX ROAD, NAVRANGPURA, AHMEDABAD. APPELLANT RESPONDENT APPELLANT BY SHRI R. B. SHAH, AR RESPONDENT BY SHRI SITARAM MEENA, SR.DR DATE OF HEARING: 16/03/2017 DATE OF PRONOUNCEMENT: 21/03/2017 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THESE CROSS APPEALS FOR ASST. YEAR 2007-08 ARE DIR ECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (A)-XIV, AHMEDABAD, DATED 26/03/2012 VIDE APPEAL NO.CIT(A)- ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 2 XIV/WD.8(1)/316/2009-10 ARISING OUT OF ORDER U/S 14 3(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FRAMED ON 2 3/12/2009 BY ITO, WD-8(1), AHMEDABAD. FOLLOWING GROUNDS HAVE BEEN RAI SED BY ASSESSEE AND THE REVENUE:- 2. REVENUES APPEAL IN ITA NO.1224/AHD/2012 1) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE BOOK RESU LTS REJECTED BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC TION 145(3) OF THE ACT BY RESTRICTING THE ADDITION OF RS.20,37,059/-,ON AC COUNT OF GROSS PROFIT, TO RS. 11,78,612/-. 2) THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN ALLOWING SET OFF OF AD DITIONS SUSTAINED ON ACCOUNT OF GROSS PROFIT ADDITION FROM THE DISALLOWA NCE OF CLAIM OF LOSS CLAIMED ACCOUNT OF FLOOD. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD OUGHT TO HAV E UPHELD THE ORDER OF THE ASSESSING OFFICER. 4) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. C OMMISSIONER OF INCOME- TAX (APPEALS)-XIV, AHMEDABAD MAY BE SET-A-SIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 3. WE WILL FIRST TAKE UP REVENUES APPEAL. 4. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT APPEAL OF THE REVENUE IS TO BE DISMISSED IN LIEU OF CBDT I NSTRUCTIONS NO.20/2015 DATED 10.12.2015 AS THE TAX EFFECT IS LE SS THAN RS.10 LAKHS. 5. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTRO VERT THE SUBMISSIONS OF THE LD. AUTHORISED REPRESENTATIVE AN D ACCEPTED THAT ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 3 THE APPEAL OF REVENUE IS TO BE DISMISSED ON ACCOUNT OF LOW TAX EFFECT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. REVENUE IS IN APPEAL RAISING VARIOUS GROUNDS. HOWEV ER, BOTH THE LD. REPRESENTATIVES HAVE AGREED TO THE FACT THAT TAX EF FECT IN THIS REVENUES APPEAL IS LESS THAN RS.10 LACS. THIS APP EAL WAS PRESENTED ON 05/06/2012. ON 10.12.2015 THE CBDT HA S ISSUED INSTRUCTIONS BEARING NO. 21/2015 PROHIBITING ITS SU BORDINATE AUTHORITIES FROM FILING OF THE APPEAL TO THE TRIBUN AL AGAINST THE ORDER OF THE CIT(A) WHERE THE TAX EFFECT BY VIRTUE OF THE RE LIEF GIVEN BY THE CIT(A) IS LESS THAN RS.10 LAKHS. THE INSTRUCTIONS HAVE BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT, MEANING THERE BY, THESE INSTRUCTIONS ARE APPLICABLE ON PENDING APPEAL ALSO. THE TAX EFFECT ON DELETION OF THE TOTAL ADDITION IN THIS APPEAL WOULD BE LESS THAN RS.10 LAKHS. THE PRESENT APPEAL DESERVES TO BE DISMISSED BEING TREATED TO BE FILED IN VIOLATION OF CBDT INSTRUCTIONS. THE CAS E DOES NOT FALL WITHIN THE AMBIT OF EXCEPTIONS PROVIDED IN THE INST RUCTIONS. IT IS FURTHER OBSERVED THAT SINCE, WHILE HEARING THE APPEAL, SUCH FACTORS WERE NOT CONSIDERED, THEREFORE, IN CASE, ON RE-VERIFICATION AT THE END OF THE AO, IT CAME TO THE NOTICE THAT THE TAX EFFECT IS MORE O R THEY FALL WITHIN THE ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 4 AMBIT OF EXCEPTIONS PROVIDED IN THE INSTRUCTION, TH EN THE DEPARTMENT WILL BE AT LIBERTY TO APPROACH THE TRIBUNAL FOR REC ALL OF THIS ORDER. SUCH APPLICATION SHOULD BE FILED WITHIN LIMITATION PROVI DED IN LAW. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 8. NOW WE TAKE UP ASSESSEES APPEAL IN ITA NO.996/A HD/2012. 9. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT ASSESSEE IS PRIVATE LTD. COMPANY ENGAGED IN THE BUS INESS OF MANUFACTURING AND TRADING CHEMICALS. RETURN OF INCO ME FOR ASST. YEAR 2007-08 WAS FILED ON 31.10.2007 DECLARING LOSS OF R S.3,62,380/-. CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTIC E U/S 143(2) FOLLOWED BY NOTICE U/S 142(1) OF THE ACT WERE ISSUE D AND DULY SERVED ON THE ASSESSEE. ASSESSEE FILED COPIES OF AUDITED B ALANCE SHEET, COMPUTATION OF INCOME AND OTHER DETAILS INCLUDING G ROSS PROFIT RATE CHART FOR THREE YEARS AND NOTE ON MANUFACTURING ACT IVITIES. LD. ASSESSING OFFICER RAISED QUESTION ON THE DOWNFALL O F GROSS PROFIT RATE VIS A- VIS THE PREVIOUS YEARS TO WHICH ASSESSEE R EPLIED THAT ON ACCOUNT OF INCREASE OF TURNOVER AND MANUFACTURING A CTIVITIES AS AGAINST JOB WORK CHARGES AND DUE TO FLOOD GROSS PRO FIT HAS MARGINALLY DECREASED. HOWEVER, LD. ASSESSING OFFICER WAS NOT C ONVINCED WITH THE SUBMISSION OF ASSESSEE AND REJECTED THE BOOKS O F ACCOUNT U/S 145(3) OF THE ACT AND ESTIMATED PROFITS BY APPLYING GROSS PROFIT @ 25% AS AGAINST 20% SHOWN BY ASSESSEE AND AFTER MAKI NG OTHER ADDITIONS AND DISALLOWANCE TOTALING TO RS.46,07,566 /- ASSESSED THE ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 5 INCOME AT RS.42,45,186/-. ASSESSEES TOTAL INCOME W AS COMPUTED BY ASSESSING OFFICER IN FOLLOWING MANNER :- INCOME FROM BUSINESS OR PROFESSION NET LOSS AS PER PROFIT & LOSS A/C: LESS: (-) RS. 3,63,930 LESS : DISALLOWABLE DONATION RS. 1550 (-) RS. 3,62,380 ADD : ADDITION (I) ON ACCOUNT OF GP RS.20,37,0 59 (II)OUT OF UNSECURED LOANS U/S RS. 3,52,015 68 ISALLOWANCE (III) OUT OF FLOOD LOSS RS .15,43,049 (IV) OUT OF JOB WOFK EXPENSE RS. 3,00 ,088 (V)OUT OF UNEXPLAINED EXPENSES RS. 79,542 (VI) OUT OF BAD DEBT CLAIM RS. 2 ,95,812 RS.46,07,566 TOTAL INCOME RS.46,45,1 86 10. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. C OMMISSIONER OF INCOME TAX(A) AND PARTLY SUCCEEDED. 11. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL RAISING FOLLOWING GROUNDS :- 1) ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE IT IS MOST RESPECTFULLY SUBMITTED THAT THE HON'BLE CIT(A) HAS ERRED IN LAW AND ON FACTS BY CONFIRMING THE REJECTION OF ACCOUNTS U/S 145(3) OF THE INCOME TAX ACT, 1961. 2) ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE IT IS MOST RESPECTFULLY SUBMITTED THAT THE HON'BLE C!T(A) HAS ERRED ON FACTS BY CONFIRMING THE ADDITION IN RESPECT GROSS PROFIT BY ESTIMATING THE GROSS. PROFIT @23% AND AMOUNT IN RESPECT TO SUCH TO THE EXTENT OF RS.11,78 ,612/-. 3) ON THE FACTS & IN-THE CIRCUMSTANCES OF THE CASE IT IS MOST RESPECTFULLY SUBMITTED THAT THE HON'BLE CIT(A) HAS ERRED IN LAW AND ON FACTS BY CONFIRMING THE ADDITION TO THE EXTENT OF RS.3,64,43 7/- IN RESPECT OF FLOOD LOSS. 4) ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE IT IS MOST RESPECTFULLY SUBMITTED THAT THE HON'BLE CIT(A) HAS ERRED IN LAW AND ON FACTS BY CONFIRMING THE ADDITION OF RS.3,00,088/- U/S 43B OF THE I. T. ACT, 1961. ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 6 5) ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE IT IS MOST RESPECTFULLY SUBMITTED THAT THE HON'BLE CIT(A) HAS ERRED IN LAW AND ON FACTS BY CONFIRMING THE ADDITION OF RS.3,52,016/- U/S 68 OF THE !.T. ACT, 1961 12. AT THE OUTSET LD. AUTHORISED REPRESENTATIVE REQ UESTED FOR NOT PRESSING GROUND NO.1. THEREFORE, THE SAME IS DISMIS SED AS NOT PRESSED. 13. NOW WE TAKE UP GROUND NO.2. LD. AUTHORISED REPR ESENTATIVE SUBMITTED THAT LD. COMMISSIONER OF INCOME TAX(A) ER RED IN SUSTAINING RATE OF GROSS PROFIT @ 23% AS AGAINST 20% SHOWN BY ASSESSEE BY IGNORING THE FACTS THAT ASSESSEES TURNOVER HAS INC REASED TO APPROX. RS.3.80 CRORES AS COMPARED TO RS.1.56 CRORES IN IMM EDIATELY PRECEDING YEAR AND JOB WORK CHARGES INCREASED TO 49 .27 LACS AS COMPARED TO RS.37.28 LACS IN PRECEDING YEAR. IN TOT ALITY TOTAL GROSS PROFIT OF THE COMPANY HAS INCREASED TO RS.8693532 I N THE YEAR UNDER APPEAL AS COMPARED TO RS.4913542/-. HE FURTHER SUBM ITTED THAT THERE WAS SEVERE FLOOD IN THE CITY AND ASSESSEES MANUFAC TURING ACTIVITIES WERE BADLY AFFECTED BY IT WHICH IS ALSO A REASON FO R LOWER GROSS PROFIT. LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THA T IT IS WELL ESTABLISHED THAT IF THE TURNOVER OF CONCERN INCREAS ES MANY FOLD IT INCREASES THE GROSS PROFIT AMOUNT BUT THE RATE OF G ROSS PROFIT IS REDUCED. HE FURTHER SUBMITTED THAT IN THE PAST ASSE SSEES PROPORTION OF JOB WORK CHARGES WERE HIGHER IN COMPARISON TO SA LE OF MANUFACTURED GOODS AND GROSS PROFIT RATE IS GENERAL LY HIGHER IN JOB WORK CHARGES AND LOWER IN MANUFACTURING/TRADING GOO DS. LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT BOOKS OF ACCOUNTS OF ASSESSEE ARE REGULARLY AUDITED. ASSESSEE IS REGISTE RED UNDER THE EXCISE ACT, VAT RETURN HAVE BEEN FILED, QUANTITATIV E DETAILS WERE ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 7 ATTACHED WITH THE AUDIT REPORT AND IN VIEW OF LOSS DUE TO GOODS DAMAGE IN FLOOD GROSS PROFIT RATE SHOWN BY ASSESSEE WAS CORRECT AND LD. COMMISSIONER OF INCOME TAX(A) ERRED IN SUSTAINI NG ESTIMATED GROSS PROFIT BY APPLYING 23% AS AGAINST 20%. 14. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF LOWER AU THORITIES. HE SUBMITTED THAT ASSESSEE WAS UNABLE TO PROVIDE QUANT ITATIVE DETAILS EVEN ON REQUEST AT SEVERAL TIMES. 15. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED REC ORD PLACED BEFORE US. ASSESSEE IS AGGRIEVED AGAINST LD. COMMIS SIONER OF INCOME TAX(A)S ORDER SUSTAINING ESTIMATED GROSS PR OFIT @ 23% AS AGAINST 25% ESTIMATED BY LD. ASSESSING OFFICER WHER EAS ASSESSEE HAS DISCLOSED GROSS PROFIT @ 20% IN ITS REGULAR AUD ITED BOOKS OF ACCOUNT. WE OBSERVE THAT LD. COMMISSIONER OF INCOME TAX(A) ESTIMATED 23% GROSS PROFIT RATE BY TAKING NOTE OF G ROSS PROFIT RATE OF 3 YEARS BY OBSERVING AS FOLLOWS :- DECISION : I HAVE CAREFULLY PERUSED THE FINDINGS OF THE ASSESS ING OFFICER AND SUBMISSIONS MADE BY THE LD.AR.LT IS NOTED FROM THE ASSESSMENT O RDER THAT IN SPITE OF SEVERAL OPPORTUNITIES, THE APPELLANT DID NOT FURNISH STOCK REGISTER, DETAILS OF CONSUMPTION OF RAW MATERIAL AND OTHER RELEVANT DETAILS WHICH CO ULD HELP IN DETERMINING THE CORRECTNESS OF THE PROFIT SHOWN BY HIM. THEREFORE, THE REJECTION OF BOOKS OF ACCOUNT U/S. 145 BY THE A. O. WAS JUSTIFIED. THE GR OUND OF APPEAL IS DISMISSED. REGARDING THE ESTIMATION OF GROSS PROFIT @ 25% BY T HE ASSESSING OFFICER IT IS SEEN THAT THE A. O. HAS BASED HIS ESTIMATION ON THE GROUND THAT THE G. P. RATIO OF THE IMMEDIATE PREVIOUS YEAR WAS WORKED OUT AT RS.34 ,02% IN-THE REPORT SUBMITTED BY THE INSURANCE SURVEYOR, WHEREAS THE AP PELLANT HAD SHOWN THE G. P. RATE @ 25% IN THAT YEAR. HE ACCORDINGLY APPLIED THE G. P. RALE BY TAKING THE AVERAGE OF LAST TWO YEARS G. P. THE APPELLANT HAS S UBMITTED THAT' THERE WAS AN ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 8 ERROR IN THE REPORT GIVEN BY THE SURVEYOR BY WORKIN G THE G. P. AT 34.2%. THE SURVEYOR HAD TAKEN THE MANUFACTURING EXPENSES AT RS .11,59,195/- INSTEAD OF ACTUAL MANUFACTURING EXPENSES OF RS.22,92,944/-:AND , .THEREFORE; THE G. P. RATIO FOR F. Y. 2005-06 WOULD BE 25,42% INSTEAD OF 34.02% . FURTHER, THE APPELLANT HAS ALSO SUBMITTED THAT THE G. P. ON THE OWN SALES AND JOB WORK SALES ARE DIFFERENT. IN JOB WORK SALES, THE G. P. IS HIGHER WHEREAS IN OWN MANUFACTURING SALES, THE G. P. IS LOWER. IN THE CURRENT A. Y., THERE WERE LESS JOB WORK SALES AS COMPARED TO PRECEDING YEARS. THE DETAILS OF OWN PRODUCTION AND JOB CHARGES OF THE LAST THREE YEARS SUBMITTED BY THE APPELLANT ARE AS FOLLOWS; SR. ASSESSMENT OWN JOB TOTAL % OF JOB %OF NO YEAR MANUFACTURING WORK INCOME WORK SALES MANUFACT - SALES .INCOME TO TOTAL URING SALES SALES TO TOTAL SALES 1, 2007 - 08 37994962 4927402 42922364 1 1 .48% 88.52% 2. 2006 - 07 15596212 3728437 19324649 19.29% 80.70% 3 2005 - 06 11 723024 6313468 18036492 35.00% 65.00% IT IS EVIDENT* FROM THE ABOVE TABLE THAT THE PERCEN TAGE OF MANUFACTURING SALES TO TOTAL SALES WHICH WERE 65% IN A. Y. 2005-06 HAS GON E UP TO 88.52% IN THE CURRENT A. Y. THEREFORE, THIS RATIO IS ALSO GOING T O EFFECT THE OVERALL G. P. FOR THE CURRENT YEAR. IN ADDITION TO THIS, IT IS AN ADMITTE D FACT THAT THERE WERE FLOODS IN THE FACTORY PREMISES WHICH HAVE RESULTED IN HEAVY LOSS TO THE APPELLANT COMPANY. CERTAIN LOSS HAS BEEN REIMBURSED BY THE INSURANCE C OMPANY. HOWEVER, THE FOOD HAS DEFINITELY EFFECTED THE PROFITABILITY OF THE CO MPANY IN THE CURRENT YEAR. IN VIEW OF THE ABOVE MENTIONED FACTS-AND CIRCUMSTAN CES, I AM OF THE CONSIDERED OPINION THAT THE G. P. RATE OF 25% APPLIED BY THE A . Q. IS ON' HIGHER SIDE. THE APPELLANT HAS NOT FURNISHED QUANTITATIVE DETAILS-AN D STOCK REGISTER AND, THEREFORE, REJECTION OF BOOKS OF ACCOUNTS HAVE BEEN UPHELD IN THE PRECEDING DISCUSSION. IN THESE CIRCUMSTANCES, THE G. P. FOR THE CURRENT YEAR HAS TO BE ESTIMATED ON THE BASIS OF DETAILS AVAILABLE. THE G. P. SHOWN BY THE APPELLANT IS 20% AND THE A. O. HAS ESTIMATED IT AT THE RATE OF 25% BY TAKING THE A VERAGE OF EARLIER YEARS. IN VIEW OF PECULIAR FACT SUCH AS FLOODS AND HIGHER RATIO OF OWN MANUFACTURED' GOODS, IT WOULD BE REASONABLE TO ADOPT THE G.P. RATE OF 23% F OR THE CURRENT YEAR. ACCORDINGLY, BY APPLYING THIS RATIO ON TOTAL SALES OF RS.4,29,22,364/~, THE G.P. ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 9 EARNED BY THE APPELLANT SHOULD COME TO RS.98;72,144 /-. THE APPELLANT' HAS SHOWN G.P. OF RS.86,93,532/-. ACCORDINGLY, THE ADDI TION IS REDUCED JO RS.11,78,612/- AND THE BALANCE IS DIRECTED TO BE DE LETED. THE GROUND PF APPEAL IS ACCORDINGLY PARTLY ALLOWED. 16. FROM THE ORDER OF LD. COMMISSIONER OF INCOME TA X(A) WE OBSERVE THAT MERE ESTIMATION HAS BEEN MADE BY LD. C OMMISSIONER OF INCOME TAX(A) BY REPLACING 23% AS AGAINST 25% APPLI ED BY ASSESSING OFFICER. WE FIND THAT LD. COMMISSIONER OF INCOME TAX(A) HAS IGNORED SOME IMPORTANT FACTS WHICH NEEDS CONSID ERATION IN ADJUDICATING THIS ISSUE:- (1) TURNOVER OF THE ASSESSEE HAS MORE THAN DOUBLED IN ASST. YEAR 2007-08 REACHING TO 3.80 CRORES AS AGAINST 1.56 CRO RES IN PRECEDING FINANCIAL YEAR; (2) GROSS JOB WORK CHARGE INCOME HAS INCREASED, BUT DECREASED IN TERMS OF PERCENTAGE OF TOTAL REVENUE; (3) GROSS PROFIT AMOUNT HAS ALSO DOUBLED REACHING T O RS.86.94 LACS AS AGAINST RS.49.16 LACS IN THE PRECEDING YEAR; (4) THERE WAS A FLOOD IN THE TOWN DUE TO WHICH ASSE SSEES MANUFACTURING ACTIVITIES WERE HINDERED FOR SOME PER IOD AND SUFFERED LOSSES. 17. THE ABOVE STATED FACTS CLEARLY SHOWS THAT THER E WERE SUFFICIENT REASONS FOR LOWERING DOWN OF GROSS PROFIT RATE WHIC H WERE FURTHER ADDED BY THE FACT THAT MANUFACTURING ACTIVITIES INC REASED MORE IN PERCENTAGE AS COMPARED TO ITS JOB WORK CHARGES ACTI VITIES AS EVIDENT ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 10 FROM THE CHART FORMING PART OF LD. COMMISSIONER OF INCOME TAX(A) ORDER SHOWING THAT JOB WORK REVENUE WHICH WAS 35% O F THE TOTAL REVENUE ISN ASST. YEAR 2005-06 REDUCED TO 19.29% I N ASST. YEAR 2006-07 AND TO 11.48% IN ASST. YEAR 2007-08. IT I S ALSO UNDISPUTED FACT THAT ASSESSEE IS WORKING WITH A SINGLE PLANT W HERE BOTH THE ACTIVITIES ARE CARRIED ON AND NO SEPARATE COST SHEE TS FOR EACH OF THE ACTIVITIES ARE PREPARED AND THEREFORE, IT IS NOT PO SSIBLE TO BIFURCATE THE ACTIVITYWISE GROSS PROFIT RATE. 18. WE ARE, THEREFORE, OF THE VIEW THAT IN THE TOTA LITY OF THE FACTS AS DISCUSSED ABOVE WHERE ASSESSEE IS DOING MANUFACTURI NG AND PROVIDING JOB WORK, REGULAR BOOKS OF ACCOUNTS ARE D ULY AUDITED WITH ALMOST DOUBLE REVENUE AS WELL AS GROSS PROFIT AS CO MPARED TO PRECEDING FINANCIAL YEAR AND TURBULENCE FACED IN TH E BUSINESS DUE TO NATURAL CALAMITY IN THE FORM OF FLOODS WHICH ALTOGE THER LEAD TO MINOR DECREASE IN GROSS PROFIT RATE, NO ADDITION WAS CALL ED FOR BY ESTIMATING GROSS PROFIT RATE AT 23% AND, THEREFORE, BOOK RESUL T OF THE ASSESSEE NEEDS TO BE ACCEPTED. 16. IN THE RESULT, THIS GROUND OF ASSESSEE IS ALLOW ED. 17. NOW WE TAKE UP GROUND NO.3, WHICH IS RAISED AG AINST THE LD. CIT(A)S ORDER SUSTAINING THE DISALLOWANCE OF LOSS SUFFERED DUE TO FLOOD AT RS.3,64,437/-. 18. THE BRIEF FACTS RELATED TO THIS GROUND ARE THAT THERE WAS FLOOD ON 29.07.2006 AND AS A RESULT OF WHICH THE ASSESSEE SU FFERED HEAVY LOSSES. AGAINST THE TOTAL CLAIM OF LOSS OF RS.58,9 9,205/-, ASSESSEE ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 11 RECEIVED A CHEQUE OF RS.43,56,156/- AND THE REMAINI NG AMOUNT OF RS.15,43,049/- WAS TRANSFERRED TO PROFIT & LOSS ACC OUNT UNDER THE HEAD LOSS INCURRED DURING FLOOD. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER EXAMINED THE SURVEYORS REPORT; AS PER WHICH SAFE STOCKS WAS VALUED AT RS.1 6,93,596/-, BUT THE ASSESSEE CLAIMED THAT THE IMPUGNED SAFE STOCKS WAS HAVING NO MARKET VALUE AS THEY WERE CHEMICALS WHICH ARE WATER SOLUABLE AND THEREFORE, THERE WAS GENUINE LOSS OF RS.15,43,049/- . HOWEVER, LD. ASSESSING OFFICER WAS NOT CONVINCED WITH THIS REPLY AND, TAKING THE BASIS OF SURVEYORS REPORT, WAS OF THE VIEW THAT TH E CLAIM AMOUNT RECEIVED BY THE ASSESSEE WAS THE ACTUAL FLOOD LOSS AND THE REMAINING AMOUNT OF RS.15,43,049/- HAS BEEN INTENTIONALLY DEB ITED TO PROFIT & LOSS ACCOUNT TO REDUCE INCOME AND ACCORDINGLY REDUC ING THE TAX LIABILITY. 19. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE T HE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND PARTLY SUC CEEDED AS LD. COMMISSIONER OF INCOME TAX(A) GAVE TELESCOPIC BENEF IT AGAINST THE ADDITION SUSTAINED ON ACCOUNT OF GROSS PROFIT ESTIM ATION AND ACCORDINGLY SUSTAINED THE DISALLOWANCE OF FLOOD LOS S CLAIM AT RS.3,64,437/-. 20. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 21. LD. AUTHORIZED REPRESENTATIVE VEHEMENTLY ARGUED REITERATING THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE FURTHER ADDED THAT THE SURVEYORS REPORT WAS NOT CHALLENGED BECAU SE IT COULD HAVE ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 12 BEEN A FUTILE EXERCISE AND IT IS WELL KNOWN FACT TH AT INSURANCE COMPANIES NORMALLY PASS LOWER CLAIMS THAN WHAT IS A CTUALLY CLAIMED. IT HAPPENED SO IN THE CASE OF THE ASSESSEE WHERE EV EN WHEN THE STOCK WAS ALMOST DAMAGED, STILL THE SURVEYOR HAS SH OWN SAFE STOCKS OF RS.16,93,596/-, WHICH WAS HARDLY HAVING ANY MARK ET VALUE AND FURTHER REQUESTED FOR ALLOWING THE CLAIM OF FLOOD L OSS AT RS.15,43,049 /- . 22. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE RELIED ON THE ORDER OF BOTH THE LOWER AUTHORITIES AND ADDED T HAT THE SURVEYORS REPORT WAS A CONCRETE EVIDENCE THAT THE ASSESSEE WA S HAVING SAFE STOCKS OF RS.16,93,596/- AND THE ALLEGED LOSS OF RS .15,43,049/- HAS BEEN CLAIMED WITH A CLEAR INTENTION TO REDUCE THE T AX LIABILITY. 23. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED BEFORE US. THE SOLITARY GRIEVANCE IN THIS G ROUND IS AGAINST THE DISALLOWANCE MADE ON ACCOUNT OF FLOOD LOSS EXPENSE OF RS.15,43,049/-. WE FIND THAT DURING THE FINANCIAL YEAR 2006-07 THERE WAS FLOOD ON 29.07.2006, DUE TO WHICH THE ASSESSEE SUFFERED LOSSES. SURVEYOR WAS APPOINTED TO VERIFY THE CLAIM AND AFTE R PHYSICAL VERIFICATION OF STOCK, VERIFICATION OF BOOKS & RECO RDS, ANALYSIS OF GROSS PROFIT FOR LAST THREE YEARS, STOCK STATEMENTS SUBMI TTED TO BANKS, CENVAT DUTY CLAIMED AND ALL OTHER DETAILS RELATING TO STOCK WERE EXAMINED AND FINALLY, AS PER REPORT, DAMAGED GOODS (WITHOUT DUTY) WERE VALUED AT RS.38,34,453/- AND SAFE STOCKS AT RS .16,93,596/-. THE ISSUE IN THIS APPEAL IS WITH REGARD TO SAFE STO CKS OF RS.16,93,596/-. THE ASSESSEE HAS CLAIMED THAT THE SAFE STOCKS HAS ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 13 HARDLY ANY MARKET VALUE AND THEY WERE ALMOST DAMAGE D DUE TO FLOOD AS THE CHEMICALS MANUFACTURED BY THE ASSESSEE WERE WATER-SOLUABLE AND THERE WAS NO MARKET FOR SUCH TYPE OF DAMAGED GO ODS; WHEREAS, THE LD. ASSESSING OFFICER RELIED ON THE SURVEYORS REPORT AND MADE A VIEW THAT THE ASSESSEE HAS INTENTIONALLY CLAIMED LO SS OF RS.15,43,049/- FOR REDUCING THE TAX LIABILITY. SUB SEQUENTLY, THE LD. COMMISSIONER OF INCOME TAX(A) HAS ALSO CONFIRMED TH E OBSERVATIONS OF THE LD. ASSESSING OFFICER, BUT GAVE TELESCOPIC B ENEFIT OF THE ADDITION SUSTAINED ON ACCOUNT OF GROSS PROFIT ESTIMATION WHI CH WAS UPHELD AT RS.11,78,612/- AND SUSTAINED THE REMAINING DISALLOW ANCE. WE FURTHER OBSERVE THAT WHILE ADJUDICATING GROUND NO.2 RELATING TO GROSS PROFIT DISALLOWANCE, WE HAVE ALLOWED ASSESSEES PLE A AND DELETED THE IMPUGNED ADDITION ON ACCOUNT OF GROSS PROFIT ESTIMA TION AND THEREFORE, THE LD. COMMISSIONER OF INCOME TAX(A)S ORDER WILL NOT HAVE ANY IMPACT, AS OBSERVED, WHILE ADJUDICATING GR OUND NO.3. 24. NOW, COMING TO THE FACTUAL PART; UNDISPUTEDLY, THE ASSESSEE HAS SUFFERED LOSS DUE TO FLOOD, BUT EVEN THEN SALES AND GROSS PROFITS HAVE ALMOST DOUBLED IN THIS YEAR WHICH COUPLED WITH THE FACT THAT ASSESSEE IS REGISTERED UNDER EXCISE DEPARTMENT AND REGULAR RETURNS ARE BEING FILED AND MOVEMENT OF GOODS ARE RECORDED IN THE EXCISE RECORDS AND ALSO REGULAR VALUE ADDED TAX RETURNS AR E FURNISHED. THERE IS NO FINDING ON THE PART OF THE REVENUE TO D ISREGARD THE ABOVE FACTS AND NO MISTAKE HAS BEEN OBSERVED IN THE STATU TORY RECORD OF EXCISE AND VAT RETURNS. WE ALSO FIND THAT THE ASSES SEE IS DEALING IN CHEMICALS AND THERE ARE FAIR CHANCES THAT DUE TO FL OOD THE ALLEGED SAFE STOCKS SHOWN BY THE SURVEYOR MAY NOT BE THAT F IT FOR BEING ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 14 SALEABLE IN THE OPEN MARKET, BUT COUPLED WITH ABOVE FACTS, WE ALSO FIND THAT THE ASSESSEE HAD NOT DISPUTED THE SURVEYO RS REPORT AT ANY STAGE AND HAS ACCEPTED THE OUTCOME OF THE REPORT. 25. WE ARE, THEREFORE, OF THE VIEW THAT, IN THE GIV EN CIRCUMSTANCES AND TOTALITY OF FACTS, WHEREIN, ON ONE HAND, ASSESS EE HAS CLAIMED LOSS OF RS.15,43,049/- AND ON THE OTHER HAND, HAS NOT DISPUTED THE SURVEYORS REPORT SHOWING SAFE STOCKS OF RESIDUAL M ATERIALS AT RS.16,93,596/- AND ALSO ACCEPTING THAT THE GOODS IN QUESTION ARE CHEMICALS WHICH LOSSES ITS VALUE, IF MIXED WITH WAT ER, BUT CERTAINLY HAS SOME VALUE, WE FIND IT JUSTIFIED TO SUSTAIN THE DISALLOWANCE OF LOSS DUE TO FLOOD AT RS.1,50,000/- AS AGAINST RS.15,43,0 49/- CLAIMED BY THE ASSESSEE. 26. IN THE RESULT, THIS GROUND OF THE ASSESSEE IS P ARTLY ALLOWED. 27. GROUND NOS. 4 & 5 OF ASSESSEES APPEAL READS AS UNDER:- 4. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE IT IS MOST RESPECTFULLY SUBMITTED THAT THE HONBLE COMMISSIONE R OF INCOME TAX(A) HAS ERRED IN LAW AND ON FACTS BY CONF IRMING THE ADDITION OF RS.3,00,088/- U/S 43B OF THE I.T. ACT, 1961. 5. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE IT IS MOST RESPECTFULLY SUBMITTED THAT THE HONBLE COMMISSIONE R OF INCOME TAX(A) HAS ERRED IN LAW AND ON FACTS BY CONF IRMING THE ADDITION OF RS.3,53,016/- U/S 68 OF THE I.T. ACT, 1 961. ITA NO. 996 & 1224/AHD/2012 ASST. YEAR 2007-08 15 28. THE ABOVE GROUNDS ARE NOT PRESSED AT THE TIME O F HEARING; THEREFORE, THESE GROUNDS ARE DISMISSED AS NOT PRESS ED. 29. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. 30. IN THE COMBINED RESULT, APPEAL OF THE REVENUE I S DISMISSED AND THAT OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST , MARCH, 2017 SD/- SD/- ( S. S. GODARA ) JUDICIAL MEMBER ( MANISH BORAD ) ACCOUNTANT MEMBER DATED 21/03/2017 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER TRUE COPY ASST. REGISTRAR, ITAT, AHMEDABAD
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