BHAVESH RAMESH SHAH, Sangli V. Dy. CIT, Sangli

ITA 1420/PUN/2013

• Counselvise Citation: 142024514 RSA 2013
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 05-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gross profit estimation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1420/PN/2013 ASSESSMENT YEAR: 2006-07 BHAVESH RAMESH SHAH, C/O M/S V.G. COMPUTERS, VENKATESH SENATE, 1 ST FLOOR, KARMAVEER BHAURAO PATIL CHOWK, SANGLI 416 416. PAN: ACZPS8621C . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE- 2, SANGLI. . RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI RAJESH DAMOR DATE OF HEARING : 16-06-2015 DATE OF PRONOUNCEMENT : 19-06-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A), KOLHAPUR DATED 30.04.2013 RELATING TO ASSESSMENT YEAR 2006-0 7 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,25,000/- ON ACCOUNT OF LOW GROSS PROFIT. 2. WHILE CONFIRMING THE ADDITION OF RS.1,25,000/- THE LEARNED CIT(A) IGNORED THE FACT THAT THE AO DID NOT POINT OUT ANY MAJOR DE FECT OR DISCREPANCY IN THE BOOKS OF ACCOUNTS AND THAT, THEREFORE, NON-MAINTENA NCE OF THE DAY TO DAY QUANTITY STOCK ACCOUNT CANNOT BE A GROUND FOR REJEC TING THE BOOK RESULTS. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF INTEREST AMOUNT ING TO RS.4,32,000/- WHEN FOR THE EARLIER YEARS IT WAS ACCEPTED BY THE DEPARTMEN T THAT THE IMPUGNED AMOUNT OF ADVANCE GIVEN TO ONE SHRI. SUDHIR NIRGUDKAR WAS A TRADE ADVANCE. 4. THE REASONS ASSIGNED FOR CONFIRMING THE ADDITIONS OF RS.1,25,000/- AND RS.4,32,000/- ARE WRONG, INSUFFICIENT AND CONTRARY TO THE FACTS ON RECORD AND PROVISIONS OF LAW. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, M ODIFY AND/ OR DELETE ANY OF THE GROUNDS OF APPEAL. ITA NO.1420/PN/2013 2 3. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHA LF OF THE ASSESSEE AND NOR ANY APPLICATION WAS MOVED FOR ADJOURNMENT. WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING THE LD. DEPARTMENTAL R EPRESENTATIVE FOR THE REVENUE. 4. THE ISSUE IN GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE AS AGAINST THE ADDITION OF RS.1,25,000/-. 5. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE A SSESSEE FOR THE YEAR UNDER CONSIDERATION WAS ENGAGED IN THE BUSINESS OF COMPUT ER SOFTWARE DEVELOPMENT AND TRADING IN MACHINERY AND SPARES AND ALSO REPAIR S AND SERVICES IN ANNUAL MAINTENANCE CONTRACTORS (AMC). THE ASSESSEE WAS PR OVIDING SERVICES IN THIS LINE TO VARIOUS CO-OPERATIVE BANKS AS ANNUAL MAINTE NANCE CONTRACTORS. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTED THAT THE GROSS PROFIT DISCLOSED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS 20.44% AS AGAINST 37.28% DISCLOSED IN ASSESSMENT YE AR 2005-06 AND 37.64% DISCLOSED IN ASSESSMENT YEAR 2004-05. THE EXPLANAT ION OF THE ASSESSEE IN THIS REGARD WAS THAT UPTO THE LAST YEAR, IT WAS ENGAGED IN TRADING ON RETAILS BASIS. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, HE HA D UNDERTAKEN SUPPLY OF MACHINES ONLY TO THE INSTITUTIONS. SO, THERE WAS I NCREASE IN THE SALES BUT THE MARGIN OF THE PROFITS HAD DECREASED. FURTHER, EXPL ANATION WAS ALSO GIVEN IN RESPECT OF THE OTHER ASPECTS OF HIS BUSINESS I.E. M ACHINERY SERVICES AND SOFTWARE AMC RECEIPTS WHICH ARE INCORPORATED AT PAGE 2 OF TH E ASSESSMENT ORDER. THE ASSESSING OFFICER AFTER VERIFYING THE DETAILS OF TU RNOVER AND OTHER EVIDENCES MAINTAINED BY THE ASSESSEE OBSERVED THAT THOUGH THE RE WAS SOME FORCE IN ASSESSEES ARGUMENT, IT COULD NOT BE ACCEPTED IN TOTO . THEREFORE, HE PROPOSED A LUMP-SUM ADDITION OF RS.1,25,000/- TO THE BOOK RESU LTS IN VIEW OF NON- MAINTENANCE OF DAY-TO-DAY STOCK RECORDS INCLUDING L OW GROSS PROFIT DECLARED BY THE ASSESSEE, TO WHICH THE REPRESENTATIVE OF THE AS SESSEE AGREED. ITA NO.1420/PN/2013 3 6. THE CIT(A) UPHELD THE ORDER OF THE ASSESSING OFF ICER, AGAINST WHICH THE ASSESSEE IS IN APPEAL. 7. ON PERUSAL OF THE RECORD AND THE ORDERS PASSED B Y THE AUTHORITIES BELOW, WE FIND THAT ASSESSEE HAS FAILED TO ESTABLISH WITH EVIDENCES THE FALL IN GP RATE AND IN THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES WE UPHOLD THE ADDITION OF RS.1,25,000/-. THUS, THE GROUND OF APPEAL NO.1 RAI SED BY THE ASSESSEE IS DISMISSED. 8. THE ISSUE IN GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF INTEREST TOTALING RS.4,32,000/-. 9. THE ASSESSING OFFICER NOTED FROM THE PERUSAL OF THE BALANCE SHEET AND CONNECTED DETAILS THAT THE ASSESSEE HAD MADE ADVANC ES FOR DIFFERENT PURPOSES. ONE SUCH ADVANCE WAS MADE TO DR. SUDHIR NIRGUDKAR T OTALING RS.36,00,000/-. THE PLEA OF THE ASSESSEE WAS THAT THE ADVANCE WAS M ADE FOR THE PURPOSES OF EXPANSION OF BUSINESS IN MAURITIUS. THE ENTIRE ADV ANCE WAS MADE UPTO LAST YEAR AND EXCEPT FOR STATING THAT IT HAD BEEN MADE FOR EX PANSION OF BUSINESS IN MAURITIUS, NO OTHER DETAILS REGARDING BUSINESS ACTI VITY AT MAURITIUS WERE FURNISHED. IN VIEW THEREOF, THE ASSESSING OFFICER HELD THAT THE SAID ADVANCE WAS FOR NON-BUSINESS PURPOSES AND CONSEQUENTLY INTEREST @ 14% PER ANNUM WAS CHARGED ON THE SAID ADVANCE OF RS.36,00,000/- AND D ISALLOWANCE OF RS.5,04,000/- WAS MADE OUT OF TOTAL INTEREST PAID B Y THE ASSESSEE. 10. THE CIT(A) NOTED THAT THE ASSESSEE HAD MADE AN AVERMENT REGARDING THE ADVANCE GIVEN TO DR. S. NIRGUDKAR FOR EXPANSION OF BUSINESS. THE ADVANCE WAS MADE PRIOR TO 10.08.2004 AND THERE WAS NO PROGRESS IN THE SO CALLED BUSINESS EXPANSION FOR 1 YEARS AFTER MAKING THE ADVANCE. FURTHER, NO OTHER EVIDENCE LIKE, AGREEMENT WITH SHRI NIRGUDKAR OR PAPERS REGAR DING THE PROJECT BEING DEVELOPED WERE PRODUCED. SINCE THE ASSESSEE HAD FA ILED TO ESTABLISH THAT THE ITA NO.1420/PN/2013 4 ADVANCE WAS MADE FOR BUSINESS PURPOSES, THE DISALLO WANCE MADE BY THE ASSESSING OFFICER WAS UPHELD. HOWEVER, THE INTERES T WAS DIRECTED TO BE CHARGED @ 12% INSTEAD OF 14% SINCE THE ASSESSEE WAS PAYING INTEREST @ 12%. 11. THE ASSESSEE BEFORE US HAS FAILED TO CONTROVERT THE FINDINGS OF THE CIT(A) AND HAS ALSO FAILED TO PRODUCE ANY EVIDENCE TO ESTA BLISH THE PROGRESS OF SO CALLED BUSINESS EXPANSION TO BE MADE BY THE ASSESSE E. IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE PLEA OF THE ASSESSEE THAT THE ADVANCE BEING MADE IN THE PRECEDING YEAR, THERE WAS NO MERIT IN ANY DI SALLOWANCE OF INTEREST IN THE YEAR UNDER CONSIDERATION. IN THE ABSENCE OF THE AS SESSEE HAVING ESTABLISHED THE BUSINESS NECESSITY FOR MAKING THE SAID ADVANCE, WE FIND NO MERIT IN THE CLAIM OF THE ASSESSEE IN THIS REGARD AND DISMISSING THE SAME , WE UPHOLD THE DISALLOWANCE OF INTEREST TO THE EXTENT OF 12% OF TO TAL LOAN OF RS.36,00,000/-. ACCORDINGLY, UPHOLDING THE ORDER OF THE CIT(A), WE DISMISS THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON THIS 19 TH DAY OF JUNE, 2015. SD/- SD/- - (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 19 TH JUNE, 2015 SUJEET COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), KOLHAPUR; 4) THE CIT, KOLHAPUR; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE