The ACIT(OSD)Circle-8, Ahmedabad V. Smarneev Fashions Pvt.Ltd., Ahmedabad

ITA 1800/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89582 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: VIVEK N CHAVDA AR
• Section: 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , ( .) , ! BEFORE SHRI BEFORE SHRI G.D. AGARWAL,VICE PRESIDEN T (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.1800/AHD/2011 ( / ASSESSMENT YEAR : 2008-09) ACIT (OSD) CIRCLE-8 AHMEDABAD / VS. SMARNEEV FASHIONS PVT.LTD. G-11, ANIKET BUILDING NR.NAVRANGPURA MUNICIPAL MARKET CG ROAD, AHMEDABAD % & ./ ./ PAN/GIR NO. : AACCS 8736 J ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %(+ / APPELLANT BY : SHRI DINESH SINGH, SR.DR )*%(,+ / RESPONDENT BY : SHRI VIVEK N. CHAVDA, AR - ., /& / DATE OF HEARING 03/06/2015 0123 , /& / DATE OF PRONOUNCEMENT 05/06/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDAB AD (CIT(A) IN SHORT) DATED 26/05/2011 PERTAINING TO ASSESSMEN T YEAR (AY) 2008-09. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- ITA NO.1800/AHD /2011 ACIT (OSD) VS. SMARNEEV FASHIONS PVT.LTD. ASST.YEAR 2008-09 - 2 - [1] THE LD.CIT(A)-XIV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.12,81,112/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD.COMMISSIONER OF INCOME-TAX[A], AHMEDABAD OUGHT T O HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. [3] IT IS THEREFORE, PRAYED THAT THE ORDER OF THE L D.COMMISSIONER OF INCOME-TAX[A]-XIV, AHMEDABAD MAY BE SET-ASIDE AND T HAT OF THE ASSESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 07/10/2010, THEREBY THE ASSESSING OFFICER (AO IN SHORT) REJECTE D THE TRADING RESULT SHOWN BY THE ASSESSEE AND PROCEE DED TO MAKE ADDITION OF RS.12,81,112/-. AGAINST THE SAID ASSESSMENT ORD ER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS ALLOWED THE APPEAL AND THEREBY DELETED THE ADDITION AS MADE BY THE AO. 3. THE LD.SR.DR SUPPORTED THE ORDER OF THE AO AND S UBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N. HE SUBMITTED THAT THE AO HAS OBSERVED THAT IN EARLIER YEARS, GROSS PR OFIT RATE AS DECLARED BY THE ASSESSEE WAS AT 22.99% IN RESPECT OF THE AY 200 5-06, 22.75% IN RESPECT OF AY 2006-07 AND 25.18% IN RESPECT OF AY 2 007-08. THE AO OBSERVED THAT DESPITE THE AFORESAID TREND OF THE GR OSS PROFIT PERCENTAGE, THE ASSESSEE HAS SHOWN NEGATIVE GP RATIO IN THE YEA R UNDER APPEAL. IT IS ITA NO.1800/AHD /2011 ACIT (OSD) VS. SMARNEEV FASHIONS PVT.LTD. ASST.YEAR 2008-09 - 3 - SUBMITTED THAT ONE OF THE DIRECTORS OF THE COMPANY, MS.SWATI A.SHAH HAS SHOWN AS CREDITOR IN THE LIST OF CREDITORS. HE SUBMITTED THAT UNDER THESE FACTS, THE ADDITION SHOULD HAVE BEEN CONFIRME D. 3.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UPPORTED THE ORDER OF THE LD.CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS GIVEN AN ELABORATE F INDING IN PARA-2.3 OF HIS ORDER WHICH READS AS UNDER:- 2.3 DECISION : I HAVE CAREFULLY PERUSED THE PENALTY ORDER AND THE SUBMISSION FILED BY THE ID.AR OF THE APPELLANT. THE MAIN POINT S OF THE APPELLANT'S SUBMISSION CAN BE SUMMARISED AS UNDER:- I) HE HAS BEEN MAINTAINING THE SAME SET OF .BOOKS OF A CCOUNTS FROM LAST SO MANY YEARS, WHICH WERE ACCEPTED BY THE DEPARTMENT. II) AS HE WAS DEALING IN LARGE NUMBER OF ITEMS WHICH WE RE SMALL IN VALUE. THERE WAS NO POSSIBILITY OF MAINTAINING S TOCK REGISTER ON DAY TO DAY BASIS. III) NO SPECIFIC FINDING REGARDING THE DEFECTS IN THE BO OKS OF ACCOUNT HAVE BEEN GIVEN BY THE ASSESSING OFFICER. IV) A LOWER RATE OF GROSS PROFIT IN ABSENCE OF ANY MATE RIAL, POINTING TOWARDS FALSEHOOD OF THE BOOKS OF ACCOUNT CANNOT BY ITSELF BE A GROUND TO REJECT THE BOOKS OF ACCOUNTS. ITA NO.1800/AHD /2011 ACIT (OSD) VS. SMARNEEV FASHIONS PVT.LTD. ASST.YEAR 2008-09 - 4 - V) THE AO FAILED TO RECOGNIZE THAT THE COMPANY HAD CLO SED DOWN ITS OPERATION FROM NOVEMBER, 2007. IT RETRENCH ED ALL ITS EMPLOYEES AND SOLD/WRITTEN OFF STOCKS AND THEREFORE THERE WAS NO INVENTORY AS ON 31/03/2008. THE CLOSE OF BUSINES S WAS FULLY SUPPORTED BY THE DOCUMENTARY EVIDENCE. VI) THE ASSESSING OFFICER WAS NOT JUSTIFIED IN COMPARIN G THE GP RATIO OF NORMAL WORKING YEARS WITH THE YEAR IN WHIC H THERE WAS A CLOSE OF BUSINESS. VII) THE GP RATIO HAS BEEN WORKED OUT BY THE AO WITHOUT TAKING INTO ACCOUNT THE DISCOUNT SALE, SALES RETURNS AND W RITING BACK OF CREDIT BALANCES WHICH WOULD HAVE POSITIVELY IMPA CTED THE WORKING OF GP RATIO. VIII) THE ACCOUNTS WERE NOT PREPARED ON THE CONCEPT OF GOING CONCERN AS THE OPERATIONS WERE CLOSE DOWN DURING TH E YEAR. IX) THERE WAS A PHYSICAL VERIFICATION OF THE S TOCK. X) THERE WERE NET LOSSES IN EARLIER YEARS ALS O. AFTER GOING THROUGH THE SUBMISSIONS OF THE APPELLAN T AND THE ASSESSMENT ORDER I AM OF THE OPINION THAT THE BOOKS OF ACCOUNTS HAVE NOT BEEN CORRECTLY REJECTED BY THE ASSESSING OFFICE R. THE ASSESSING OFFICER HAS NOT POINTED ANY MATERIAL DEFECT IN THE BOOKS OF ACCOUNTS OF APPELLANT. SINCE THE APPELLANT WAS CLOSING DOWN AS BUSINESS AND HAS IN FACT CLOSED DOWN ALL THE OPERATIONS, THE STOCK AT T HE YEAR-END WAS NIL. ALL THE ABNORMAL FACTS POINTED OUT BY THE ASSESSING OFFICER HAVE BEEN CORRECTLY .EXPLAINED BY THE APPELLANT WITH THE HELP OF DOCUMENTARY EVIDENCE WHEREVER REQUIRED. MERELY BECAUSE THERE IS A FALL IN GROSS PROFIT OR THERE IS A NIL CLOSING STOCK AT THE END O F THE YEAR THE BOOKS OF ACCOUNTS CANNOT BE REJECTED. THE APPELLANT HAS ALSO EXPLAINED THE REASONS FOR FALL IN GP RATE. HE HAD TO SELL ITS GOO DS AT A HUGE DISCOUNT AS HE HAD DECIDED TO CLOSE DOWN THE BUSINESS ALL TH ESE FACTS HAVE BEEN PROPERLY RECORDED IN BOOKS OF ACCOUNTS AND SUPPLEME NTARY DOCUMENTS. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFF ICER AFTER REJECTING ITA NO.1800/AHD /2011 ACIT (OSD) VS. SMARNEEV FASHIONS PVT.LTD. ASST.YEAR 2008-09 - 5 - THE BOOKS OF ACCOUNTS UNDER SECTION 145 (3) IS HERE BY DELETED AND THE APPEAL OF THE APPELLANT IS ALLOWED. 4.1. THE ABOVE FINDING OF THE LD.CIT(A) IS NOT REBU TTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD. THEREF ORE, WE SEE NO REASON TO INTERFERE WITH THE AFORESAID FINDING OF THE LD.C IT(A), SAME IS HEREBY UPHELD. THUS, GROUND NO.1 OF REVENUES APPEAL IS R EJECTED. 5. GROUND NOS.2 & 3 ARE GENERAL IN NATURE WHICH REQ UIRE NO INDEPENDENT ADJUDICATION. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 5 TH DAY OF JUNE, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( .) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 5/ 06 /2015 6/..- , .-../ T.C. NAIR, SR. PS ITA NO.1800/AHD /2011 ACIT (OSD) VS. SMARNEEV FASHIONS PVT.LTD. ASST.YEAR 2008-09 - 6 - !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-XIV, AHMEDABAD 5. ; <)-89 , /893 , 7 / DR, ITAT, AHMEDABAD 6. < => . / GUARD FILE. / BY ORDER, * ;) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 3.6.15 (DICTATION-PAD 4- PAGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..4.6.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.5.6.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 5.6.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER