M/s R.B.Patel & Co., Indore V. The ITO 5(1), Indore

ITA 147/IND/2011

• Counselvise Citation: 14722714 RSA 2011
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: KAMAL JAIN; KUSHAGRA JAIN

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER 1. ITA NO.146/IND/2010 A.Y. 2007-08 2. ITA NO.147/IND/2010 A.Y. 2007-08 1. M/S SHRI SARVODAYA SAW MILLS INDORE PAN AAKFS-8996F 2. R.B. PATEL & COM INDORE PAN AADFR 9302H ... APPELLANT VS INCOME TAX OFFICER 5(1), INDORE ... RESPONDENT APPELLANT BY : S/SHRI KUSHAGRA JAIN AND KAMAL JAIN RESPONDENT BY : ARUN DEWAN DATE OF HEARING 24.11.2011 DATE OF PRONOUNCEMENT 21.12.2011 2 O R D E R PER R.C. SHRMA THESE ARE THE APPEALS FILED BY THE ASSESSES AGAINS T THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) D ATED 22 ND APRIL, 2011 FOR THE ASSESSMENT YEAR 2007-08. 2. AS COMMON GROUNDS ARE INVOLVED, BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 3. THE GRIEVANCE OF THE ASSESSEE PERTAINS TO ENHANCEMENT OF GROSS PROFIT RATE WITHOUT POINTING O UT ANY DEFECT IN THE BOOKS OF ACCOUNTS BY THE ASSESSIN G OFFICER ON THE BASIS OF PROFIT DECLARED IN THE EARL IER YEAR. THE ASSESSEE IS ALSO AGGRIEVED FOR FURTHER ENHANCEMENT OF GROSS PROFIT BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND ALSO TURNOVER AS SHOWN IN THE BOOKS OF ACCOUNTS. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. BOTH THE ASSESSES WERE ENGAGED IN TRADING OF TIMBER AFTER CUTTING THE LOGS. THE ASSESSEES US ED TO PURCHASE TIMBER LOGS IN AUCTION FROM FOREST 3 DEPARTMENT OF GOVERNMENT OF M.P. SUCH LOGS ARE BEING SAWN AND SUCH SAWN TIMBER IS BEING SOLD. COMPLETE BILLS AND VOUCHERS OF PURCHASE AND SALES WERE ENCLOSED AND THE SAME WERE VERIFIED BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. IN THE COURSE OF ASSESSMENT THE ASSESSING OFFICER FOUND THAT THE GROSS PROFIT DECLARED BY THE ASSESSE E WAS 9.96% AS AGAINST THE GROSS PROFIT OF 10.2% IN ASSESSMENT YEAR 2006-07 AND 11.28% IN ASSESSMENT YEAR 2005-06 IN CASE OF M/S R.B. PATEL & COMPANY. IN REPLY TO THE ASSESSING OFFICERS QUERY REGARDING MARGINAL FALL IN GROSS PROFIT, IT W AS SUBMITTED BY THE ASSESSEE THAT THE COST OF LOGS WAS INCREASING EVERY YEAR AND WHILE CUTTING THE LOGS, SOME OF THE LOGS WERE FOUND TO BE HOLLOW, THEREBY GIVING LESS OUTPUT. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE ASSESSEES SUBMISSIONS AND, THEREFORE, APPLIED GROSS PROFIT RATE OF 10.2% AND MADE THE TRADING ADDITION OF RS.13,862/- AGAINST WHICH THE ASSESSEE PREFERRED AN APPEAL BEFORE 4 COMMISSIONER OF INCOME TAX (APPEALS) WHO PROPOSED TO ENHANCE THE GROSS PROFIT FROM 10.2% TO 15%. THE COMMISSIONER OF INCOME TAX (APPEALS) ALSO ENHANCED THE ACTUAL SALES FROM RS. 73,46,143/- TO RS. 75 LACS THUS MADE FURTHER ADDITION ON ACCOUN T OF GROSS PROFIT AND NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND FIND T HAT COMPLETE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE ASSESSING OFFICER FOR VERIFICATION ALONG WITH DETAILS OF EACH AND EVERY PURCHASE AND SALE AND COPY OF PURCHASE AND SALE BILLS. WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS, THE ASSESSING OFFICER HAS APPLIED THE GROSS PROFIT RATE OF EARLIE R YEAR AND MADE THE TRADING ADDITION. BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE PLACED VARIOUS APPELLATE ORDERS OF TRADERS ENGAGED IN THE SIMILAR LINE OF BUSINESS OF TIMBER S ALE. HOWEVER, WITHOUT APPRECIATING THESE ORDERS, THE 5 COMMISSIONER OF INCOME TAX (APPEALS) ENHANCED THE GROSS PROFIT RATE TO 15% AND ALSO ESTIMATED HIGHER TURNOVER. WE DO NOT FIND ANY JUSTIFICATION IN THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) ENHANCING THE GROSS PROFIT AND ESTIMATING THE TURNOVER AT A HIGHER RATE WITHOUT BRINGING ANY COGENT MATERIAL ON RECORD. ONLY THE PLEA OF NON- MAINTENANCE OF DETAILED STOCK REGISTER REGARDING PURCHASE OF LOGS, ITS CUTTING INTO SMALL PIECES, WI LL NOT CONSTITUTE JUSTIFIABLE REASONS FOR REJECTING BOOKS OF ACCOUNTS AND ENHANCING THE GROSS PROFIT. IN VIEW O F THE NATURE OF BUSINESS THE ASSESSEE WAS ENGAGED IN, IT WAS NOT FEASIBLE TO MAINTAIN QUANTITATIVE DE TAILS OF LOGS CUT AND SOLD IN DIFFERENT SIZES. IN THE CA SE OF JACK ALEGANCE EXPORTS; 233 CTR 398 IT WAS OBSERVED THAT WITHOUT POINTING OUT ANY DEFECT IN TH E BOOKS OF ACCOUNTS, ENHANCEMENT OF GROSS PROFIT RATE WAS NOT JUSTIFIED MORE PARTICULARLY WHEN NATURE OF BUSINESS OF THE ASSESSEE MAKES IT NOT FEASIBLE TO MAINTAIN STOCK REGISTER. 6 6. IN THE INSTANT CASE, WE FIND THAT THE ASSESSEE H AS MAINTAINED PROPER BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED AND INVENTORY OF OPENING AND CLOSING STOCK WAS DULY MAINTAINED, VOUCHERS OF PURCHASE AND SALE WERE PRODUCED BEFORE THE ASSESSING OFFICER FOR VERIFICATION WHEREIN NO DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER. THERE WAS ALSO INCREASE IN RATES DURING THE YEAR AS COMPARED TO EARLIER YEAR WHICH IS ON THE SACRIFICE OF MARGINAL GROSS PROFIT RATE. MERELY ON THE BASIS OF NON-MAINTENANCE OF STOCK REGISTER, IT WAS NOT JUSTIFIABLE ON THE PART OF THE COMMISSIONER OF INCOME TAX (APPEALS) TO ENHANCE THE GROSS PROFIT FROM 9.96% TO 15%. FURTHER, THER E WAS NO REASON FOR ENHANCEMENT OF SALE WITHOUT POINTING OUT THAT THE ASSESSEE WAS INVOLVED IN SELL ING THE TIMBER OUT OF BOOKS. KEEPING IN VIEW THE TOTAL ITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE MODIFY BOTH THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO COMPUTE PROFIT AFTER TAKING GR OSS PROFIT RATE OF 12% ON THE SALES DECLARED BY THE 7 ASSESSEE. WE DIRECT ACCORDINGLY. 7. THE FACTS IN THE CASE OF M/S SARVODAYA SAW HOUSE ; ITA NO. 146/IND/2011 ARE EXACTLY SIMILAR. IN VIEW OF OUR DISCUSSION HEREINABOVE, WE DIRECT THE ASSESSING OFFICER TO COMPUTE INCOME AFTER TAKING GROSS PROFIT RATE OF 12% ON THE DECLARED SALES OF THE ASSESSEE. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED IN PART IN THE TERMS INDICATED HEREINABOVE. SD SD (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DECEMBER 21 , 2011 COPY TO APPELLANT,RESPONDENT,CIT, CIT(A), DR DN/-