Shri Shamjibhai Laxmanbhai Thumar, Surat V. The Income tax Officer,Ward-2(1), Surat

ITA 1386/AHD/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6022 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 20-02-2017
• Assessment Year: 1995-1996
• Appeal Filed On: 13-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANILKUMAR BHARADWAJ
• Assessee Lawyers: K N BHATT
• Keywords: Gross profit estimation; Rejection of books of accounts
• Section: 40A(3); 143(3)

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL CAMP AT SURAT BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.1386/AHD/2011 / ASSTT. YEAR: 1995-1996 SHAMJIBHAI LAXMANBHAI THUMAR 94, SUBHASHNAGAR SOCIETY NR. JAMNAGAR BUS STOP GHOD DOD ROAD SURAT 395 001. VS. ITO, WARD-2(1) SURAT. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI K.N. BHATT REVENUE BY : SHRI ANILKUMAR BHARADWAJ, SR.DR ! / DATE OF HEARING : 25/04/2017 '#$ ! / DATE OF PRONOUNCEMENT: 05 /05/2017 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-II, SURAT DATED 15.2.2011 PASSED FOR THE ASSTT.YEAR 1995-96. 2. ASSESSEE HAS RAISED THREE GROUNDS OF APPEAL, WHI CH READS AS UNDER: 1. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A) OUGHT TO HAVE HELD THAT THE LD.AO HAS ERR ED IN LAW AND IN CONFIRMING ADDITIONS OF RS.18,59,284/- ON ACCOUN T OF LOW GP AND HENCE, YOUR APPELLANT MOST HUMBLY PRAYS THAT TH E SAME BE DELETED. ITA NO.1386/AHD/2011 2 2. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A) OUGHT TO HAVE HELD THAT THE LD.AO HAS ERR ED IN LAW AND IN CONFIRMING ADDITIONS OF RS.2,02,940/- ON ACCOUNT OF BOGUS EXPENDITURE AND HENCE, YOUR APPELLANT MOST HUMBLY P RAYS THAT THE SAME BE DELETED. 3. SUCH OTHER RELIEF(S) TO WHICH THE APPELLANT MAYB E LAWFULLY ENTITLED TO. 3. AS FAR AS GROUND NO.3 IS CONCERNED, IT IS GENERA L GROUND OF APPEAL, WHICH DOES NOT CALL FOR RECORDING OF ANY SPECIFIC F INDING NOR ANY ARGUMENT WAS ADVANCED BY THE LD.COUNSEL FOR THE ASS ESSEE ON THIS ISSUE. HENCE, IT IS REJECTED. 4. WE TAKE GROUND NOS.1 AND 2 TOGETHER. BRIEF FACT S OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL. HE HAS FILED H IS RETURN OF INCOME ON 16.10.1995 DECLARING A LOSS OF RS.19,99,351/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. AN ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961 ON 10.3.98. THE LD.AO HAS MADE THREE ADDITIONS TO THE INCOME OF THE ASSESSEE. HE DETERMINED TAXABLE INCOME OF ASSESSEE AT RS.6,44,913/- AS AGAINST LOSS DECLARED BY THE ASSESSEE. DISSATIS FIED WITH THE ASSESSMENT ORDER, THE ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE THE LD.CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE EX PARTE VIDE ORDER DATED 1.8.2002. THE ASSESSEE HAD CHALLENGED THIS O RDER OF THE CIT(A) IN APPEAL BEFORE THE TRIBUNAL VIDE ITA NO.3435/AHD/ 2002. THIS APPEAL WAS ALLOWED FOR STATISTICAL PURPOSE ON 11.8.2008 AN D THE TRIBUNAL HAS SET ASIDE ALL THREE ISSUES TO THE FILE OF THE LD.CI T(A) FOR RE-ADJUDICATION. BY WAY OF THE PRESENT IMPUGNED ORDER, THE LD.CIT(A) HAS RE-ADJUDICATED THE ISSUES RAISED BY THE ASSESSEE AFTER PROVIDING D UE OPPORTUNITY. THE LD.CIT(A) HAS DELETED ONE ADDITION OF RS.5,82,040/- WHICH WAS ADDED BY THE AO ON ACCOUNT OF SIZING GAIN. THE FINDING RECO RDED BY THE LD.CIT(A) READS AS UNDER: ITA NO.1386/AHD/2011 3 3.4.1. DECISION: 3.4.2. I HAVE DULY CONSIDERED THE SUBMISSION OF THE APPELLANT, AND FIND THAT THE APPELLANT HAS NOT FURNISHED ANY EVIDENCE T O CONTRADICT THE FINDINGS OF THE ASSESSING OFFICER REGARDING THE DIS CREPANCIES NOTICED IN .THE .BOOKS OF A/C. VIS-A-VIS IN ITS OWN SISTER CONCERNS AND PROPRIETARY CONCERN WHICH ARE IN THE SAME BUSINESS ACTIVITIES. THE APPELLANT HAS TAKEN VARIOUS ARGUMENTS. HOWEVER, NON E OF THE ARGUMENT EXPLAINS THE DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER VIS-A-VIS THE BOOK RESULTS OF THE SISTER CO NCERNS AND OTHER CONCERNS. THE APPELLANT HAS TAKEN ALTERNATE ARGUMEN T DURING THE COURSE OF APPELLATE PROCEEDINGS THAT WHEN ADDITION HAS BEEN MADE ON ACCOUNT OF G.P., THERE CANNOT BE ANY FURTHER ADD ITION ON ACCOUNT OF 'SIZING GAIN'. I FIND FORCE IN THIS SUBMISSION OF T HE APPELLANT AND, THEREFORE, TAKING ALL FACTORS INTO CONSIDERATION, C ONFIRM THE ADDITION OF RS.18,59,284/- MADE ON ACCOUNT OF LOW G.P. AND OTHE R IRREGULARITIES AND DELETE THE ADDITION OF RS.5,82,040/- MADE ON AC COUNT OF 'SIZING GAIN. IN RESPECT OF ADDITION OF RS.2,02,940/-, U/S 40A(3) OF THE ACT, THE APPELLANT'S SUBMISSION IS THAT IT IS DOUBLE ADDITIO N, AS THE PAYMENT HAS BEEN MADE TO LUCKY FILLING STATION AND THIS NAT URE OF EXPENSES HAS BEEN CONSIDERED BY THE ASSESSING OFFICER FOR RE JECTION OF BOOKS OF A/C. FOR MAKING ADDITION ON ACCOUNT OF LOW G.P. RAT E. IN RESPECT OF DIESEL, FUEL AND ELECTRIC POWER EXPENSES, THE APPEL LANT'S ALTERNATE SUBMISSION IS THAT PETROL PUMP FROM WHERE THE DIESE L WAS PURCHASED WAS FAR AWAY FROM THE FACTORY AND IT INSISTED FOR P AYMENT IN CASH, AND UNDER UNAVOIDABLE AND EXCEPTIONAL CIRCUMSTANCES AS SPECIFIED UNDER RULE 6DD(J) OF THE I.T.RULES, IT IS ALLOWABLE. THE APPELLANT'S CONTENTION THAT THE ABOVE EXPENSES HAVE BEEN CONSIDERED FOR MA KING ADDITION ON ACCOUNT OF LOW G.P. RATE CANNOT BE CONSIDERED BE CAUSE THE ASSESSING OFFICER HAS TAKEN INSTANCES OF INCREASE I N DIESEL AND FUEL EXPENSES VISA-VIS THE EXPENSES IN A.Y. 1994-95 ALON GWITH INCREASE IN OTHER EXPENSES ONLY TO REJECT THE BOOKS OF A/C., WH EREAS THE ABOVE PAYMENT HAS ACTUALLY BEEN MADE IN CASH WHICH FALLS UNDER THE PROVISIONS OF SEC.40A(3) OF THE ACT. THE APPELLANT' S CONTENTION, THUS IS NOT ACCEPTABLE BECAUSE NO EVIDENCE HAS BEEN FURNISH ED TO SHOW THAT THE SAID PARTY INSISTED FOR CASH PAYMENT, AND THE S AME FALLS UNDER THE EXCEPTIONS PROVIDED UNDER RULE 6DD(J) OF THE I.T.RU LES. I, THEREFORE, REJECT THE SUBMISSION OF THE APPELLANT AND UPHOLD T HE ADDITION OF RS.2,02,940/- U/S 40A(3) OF THE ACT. THE ABOVE GROU ND OF APPEAL IS, THEREFORE, PARTLY ALLOWED. 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD THAT A ITA NO.1386/AHD/2011 4 PERUSAL OF THE BOOKS OF ACCOUNTS, THE LD.AO FOUND I T DIFFICULT TO DEDUCE TRUE INCOME BECAUSE THERE WERE INCREASES IN CONSUMP TION OF OIL, CHEMICALS AND TWISTING AND TEXTURING YARN ACTIVITIE S. THE ASSESSEE HAS SHOWN INCREASE IN THE EXPENSES UNDER MANUFACTURING HEAD VIZ. ELECTRIC POWER, DIESEL AND FUEL, CARTING AND FORWARDING EXPE NSES. THE ASSESSEE FAILED TO PRODUCE COPIES OF SALE INVOICES OR PURCHA SE INVOICES, AND THERE WAS FALL IN GP. THUS, THE AO HAS REJECTED BOOKS OF ACCOUNTS AND ESTIMATED GP BY ADOPTING RATE SHOWN BY THE ASSESSEE IN THE IMMEDIATELY PROCEEDING YEAR. 6. BEFORE US, THE ASSESSEE HAS NOT CHALLENGED REJEC TION OF THE BOOKS OF ACCOUNTS. WE HAVE PUT A SPECIFIC QUERY TO THE L D.COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAS NOT TAKEN ANY GROUND CHALLENGING THE REJECTION OF BOOKS OF ACCOUNTS. HE SUBMITTED THAT THE ASSESSEE IS NOT DISPUTING REJECTION OF THE BOOKS OF ACCOUNTS. IF T HAT BE SO, THEN, WE ARE REQUIRED TO EXAMINE WHETHER RATE ADOPTED BY THE AO FOR AN ESTIMATED GP IS IN CONSONANCE WITH THE FACTS ON RECORD OR NOT . WE HAVE EXAMINED THE FACTS WITH THAT ANGLE AND FIND THAT THE ASSESSE E IS ALSO RUNNING TWO MORE PROPRIETORSHIP/SISTER CONCERNS VIZ. M/S.FINE F ABRICS AND M/S.FINE INDUSTRIES. HE HAS SHOWN GP AT 9.02% IN M/S.FINE IN DUSTRIES AND SIMILARLY, AN HIGHER RATE OF GP HAS BEEN IN M/S.FIN E FABRICS. THE GP OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR WAS 4.08%. IF THE FACTS OF THE ASSESSEES OWN CASE AS WELL AS SIMILARLY SIT UATED ASSOCIATED CONCERN ARE TAKEN INTO CONSIDERATION, THEN IT WOULD REVEAL THAT THE AO HAS ADOPTED THE RATE AFTER KEEPING THESE FACTORS IN MIND. THE LD.CIT(A) HAS UPHELD THE RATES IN FINDING EXTRACTED SUPRA. 7. AS FAR AS GROUND NO.2 IS CONCERNED THE LD.CIT(A) HAS RECORDED A SPECIFIC FINDING THAT THE ASSESSEE FAILED TO GIVE A NY PLAUSIBLE EXPLANATION AS TO HOW HIS CASE FALLS WITHIN THE EXPLANATION PROVIDED UNDER RULE 6DD(J) OF THE ACT. AFTER LOOKING TO THE FINDING OF THE LD.CIT(A), WE DO ITA NO.1386/AHD/2011 5 NOT SEE ANY REASONS TO INTERFERE IN IT. ACCORDINGL Y, THE APPEAL OF THE ASSESSEE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 5 TH MAY, 2017 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER