Raza Fabrics, Barabanki V. Additional Commissioner of Income Tax, Lucknow

ITA 161/LKW/2012

• Counselvise Citation: 16123714 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Principle of natural justice

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.161/LKW/2012 ASSESSMENT YEAR:2007 - 08 M/S RAZA FABRICS, K - 510, KATRA, BARABANKI. PAN:AAGFR0148G VS. ADDL.C.I.T., RANGE - IV, LUCKNOW. (APPELLANT) (RESPONDENT) APPELLANT BY NONE RESPONDENT BY SHRI AMIT NIGAM, D.R. DATE OF HEARING 16/07/2014 DATE OF PRONOUNCEMENT 2 2 /08/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, LUCKNOW DATED 23/01/2012 FOR THE ASSESSMENT YEAR 2007 - 08. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE THE LEARNED 'CIT (APPEAL)' FAILED TO APPRECIATE THE FULL FACTS AND THE CIRCUMSTANCES OF THE CASE WHILE COMPLETING THE ASSESSMENT ON RS.512400/ - AGAINST THE RETURNED INCOME OF RS.11766/ - . 2. BECAUSE THE LEARNED 'CIT (APPEALS)' ERRED BOTH ON FACTS AND IN LAW DISALLOWING RS.3,00,000/ - ON ACCOUNT OF LOW GROSS PROFIT. 2 3. BECAUSE THE LEARNED 'CIT (APPEAL)' ERRED BOTH ON FACTS AND IN LAW DISALLOWING RS.40960/ - ON ACCOUNTS OF PACKING EXPENSES. 4. BECAUSE THE LEARNED 'CIT (APPEAL)' ERRED BOTH ON FACTS AND IN LAW DISALLOWING RS.53460/ - ON ACCOUNTS OF CARRIAGE OUTWA RD EXPENSES. 5. BECAUSE THE LEARNED 'CIT (APPEAL)' ERRED BOTH ON FACTS AND IN LAW IN MAKING AND DISALLOWING RS.86718/ - ON ACCOUNT OF INTEREST PAID TO BANK AND PARTNER. 6. BECAUSE NO PROPER REASONS HAS BEEN FORWARDED BOTH BY THE ASSESSING OFFICER AND BY THE LEARNED CIT (APPEAL) IIND, LUCKNOW IN MAKING AND CONFIRMING AND HAS RELIED ON WRONG FACTS AND BASED ON MERE PRESUMPTION. 7. BECAUSE THE ORDER OF THE 'LEARNED CIT (APPEALS) II ND, LUCKNOW, IS WITHOUT ANY MERITS AND IS SIMPLE BASED ON MERE HYPOTHESIS, CO NJUNCTURE & SURMISES AND NEEDS TO BE CANCELLED AND THE INCOME AS RETURNED BY THE APPELLANT BE ACCEPTED. 8. BECAUSE THE ORDER OF THE LEARNED CIT (APPEAL) IS ARBITRARY, CAPRICIOUS, MISCONCEIVED, ERRONEOUS AND AGAINST THE PRINCIPAL OF NATURAL JUSTICE. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE DATE OF HEARING IN SPITE OF NOTICE AND HENCE, WE PROCEED TO DECIDE THIS APPEAL OF THE ASSESSEE EX - PARTE QUA THE ASSESSEE. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 5. WE HAVE CONS IDERED THE SUBMISSIONS OF LEARNED D.R. OF THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFFICER HAS NOTED ON PAGE NO. 2 OF THE ASSESSMENT ORDER THAT THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF MONTHLY PURCHASES AND SALES. THEREAFTER THE ASSESSING OFFICER HAS NOTED MONTHLY FIGURES OF THE PURCHASE AND SALES FOR THE FIRST QUARTER AND WORKED OUT THE GROSS PROFIT AT 23.80% BY ADMITTING THE 3 OPENING STOCK ON 01/04/2006 AT RS.92.13 LAC AND ADMITTING CLOSING STOCK ON 30/06/2 006 AT NIL. THE ASSESSING OFFICER HAS ALSO NOTED THAT AS AGAINST 23.8% GROSS PROFIT FOR THE FIRST QUARTER, THE GROSS PROFIT RATE WAS 2.88% ONLY FOR THE WHOLE YEAR. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THIS POSITION, IT WAS SUBMITTED B Y THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THIS HAS OCCURRED DUE TO TWO REASONS. THE FIRST REASON IS THAT THERE WAS SALES RETURN OF RS. 22,33,122/ - AND THE RATE DIFFERENCE CLAIMED BY THE ASSESSEE WAS RS.17,08,574/ - . IN OUR CONSIDERED OPINION, THE GR OSS PROFIT DOES NOT GO DOWN BECAUSE OF SALES RETURN BECAUSE IN CASE OF SALES RETURN, THE GOODS ARE SOLD AGAIN TO SOME DIFFERENT CUSTOMERS AND THE ONLY IMPACT MAY BE THAT AT THE TIME OF RESALE, THE PROFIT MAY BE LESSER. FOR WHOLE YEAR , THE ASSESSEE HAS SHO WN SALES OF RS.534.85 LAC. AN ADDITION OF RS.3 LAC AGAINST THIS MUCH SALE IS ONLY AN ADDITION OF 0.6% OF THE SALES. IN THE FIRST QUARTER, AGAINST THE SALE OF RS.195.92 LAC S , THE GROSS PROFIT NOTED BY THE ASSESSING OFFICER IS RS.46.63 LAC. EVEN IF BOTH THESE FIGURES OF RS.22.36 LAC AND RS.17.08 LAC TOTALING TO RS.39.4 4 LAC IS REDUCED FROM THE GROSS PROFIT OF THE FIRST QUARTER THEN ALSO THE BALANCE GROSS PROFIT REMAINS AT 7. 19 LAC. THE PERCENTAGE OF THIS GROSS PROFIT ON A SALE OF RS.195.92 LAC WILL BE AROUND 3.68% AS AGAINST REPORTED GROSS PROFIT OF THE ASSESSEE AT 2.88%. HENCE, THE REPORTED GROSS PROFIT IS LESSER BY 0.8% EVEN AGAINST THIS ADJUSTED GROSS PROFIT OF FIRST QUART ER. THE ADDITION MADE BY THE ASSESSING OFFICER IS ONLY AROUND 0.6% OF THE ENTIRE SALE OF THE YEAR REPORTED AT RS.534.85 LAC. HENCE, ON THIS ISSUE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDERS OF THE AUTHORITIES BELOW. 6. REGARDING THE OTHER DISA LLOWANCE MADE BY THE ASSESSING OFFICER OF RS.40,950/ - OUT OF PACKING EXPENSES AND RS.53,460/ - OUT OF CARRIAGE OUTWARD EXPENSES , W E FIND THAT IT IS NOTED BY THE ASSESSING OFFICER THAT THESE EXPENSES WERE INCURRED IN CASH ONLY AND EVEN THE NAMES OF THE PERSO NS TO WHOM THE PAYMENTS WERE MADE, WERE NOT FURNISHED AND EVEN NOT A SINGLE BILL C OULD BE PRODUCED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS 4 MADE DISALLOWANCE TO THE EXTENT OF 10% OF THESE EXPENSES. CONSIDERING THESE FACTS, WE DO NOT FIND A NY REASON TO INTERFERE IN THE ORDERS OF THE AUTHORITIES BELOW ON THESE ISSUES ALSO. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV ) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 /08/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR