ITO, New Delhi V. M/s. Sant Ram Mangat Ram Jewellers Pvt. Ltd., New Delhi

ITA 1839/DEL/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5815 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 31-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K TEWARI
• Keywords: Gross profit estimation; Business income
• Section: 143(3); 133A; 133(6)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI G BENCH, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA ACCOUNTANT MEMBER ITA NO. 1839 /DEL/2015 [ASSESSMENT YEAR: 20 10 - 11 ] THE I .T . O VS. M/S SANT RAM MANGAT RAM JEWELLERS WARD 22 ( 3 ) PVT. LTD, 8A/7, 1 ST FLOOR, WEA NEW DELHI KAROL BAGH, NEW DELHI PAN : AA H C S 6186 K [APPELLANT] [RESPONDENT] DATE OF HEARING : 26 . 0 6 .201 8 DATE OF PRONOUNCEMENT : 27 .0 6 .2018 ASSESSEE BY : NONE REVENUE BY : S HRI S.K. TEWARI SR DR ORDER PER N.K. BILLAIYA , ACCOUNTANT MEMBER, T HIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 8 , NEW DELHI DATED 06 . 0 1 .201 5 PERTAINING TO ASSESSMENT YEAR 20 1 0 - 11 . 2 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,90,87,624/ - / - MADE BY THE AO. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HEARD THE LD. DR AT LENGTH WHO RELIED UPON THE FINDINGS OF THE AO. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT SURVEY OPERATION U/S 133A OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' ] WAS CONDUCTED ON 15.3.2013. PHYSICAL INVENTO RY OF STOCK WAS ALSO TAKEN AND THERE WAS A DIFFERENCE IN STOCK AS PER PHYSICAL STOCK AND AS PER BOOKS TO THE EXTENT OF RS. 48.48 LAKHS , WHICH WAS OFFERED FOR TAXATION BY THE ASSESSEE. SINCE THE PERIOD OF SURVEY I.E. 15.3.2013 PERTAINED TO F.Y. 2012 - 13, TH E SURRENDERED AMOUNT WAS TO BE CONSIDERED FOR TAXATION IN A.Y 2013 - 14. POST SURVEY OPERATIONS, CERTAIN INVESTIGATIONS /VERIFICATIONS WERE MADE IN RESPECT OF PURCHASE BILLS, SALES AND JUSTIFICATION OF GROSS PROFIT RATE. THE ASSESSEE WAS ASKED TO FURNISH C ONFIRMATIONS OF ACCOUNTS FROM ALL PARTIES FROM WHOM PURCHASES HAS BEEN MADE WITH CORRESPONDING BOOKS AND TRADING RESULTS. ON RECEIVING NO PLAUSIBLE REPLY, THE AO ISSUED NOTICE U/S 133(6) OF THE ACT TO 25 SUCH PARTIES ON THE BASIS OF COPIES OF BILLS SUBMIT TED BY THE 3 ASSESSEE. THE ASSESSEE WAS ASKED TO RECONCILE FROM THE IMPOUNDED MATERIAL. ONCE AGAIN, THE ASSESSEE COULD NOT COMPLY. 5. THE AO FUR T HER ASKED THE ASSESSEE TO JUSTIFY THE GROSS PROFIT RATE. THE AO FOUND THAT ON TOTAL TURNOVER OF RS. 31.55 C RORES, THE ASSESSEE HAS SHOWN GROSS PROFIT AT 2.82 CRORES , WHICH COMES TO 8.95%. ACCORDING TO THE AO, GROSS PROFIT WAS VERY LOW CONSIDERING THE NATURE OF THE BUSINESS OF THE ASSESSEE. THE AO ACCORDINGLY INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND REJECTED THE BOOKS RESULTS AND MADE ADDITION OF RS. 1,90,87,624/ - ON ACCOUNT OF LOW GROSS PROFIT. 6. THE ASSESSEE AGITATED THE MATTER BEFORE THE CIT(A). IT WAS STRONGLY CONTENDED THAT THE NOTICE U/S 133(6) OF THE A C T SENT TO 25 PARTIES HAVE BEEN DULY COMPLIED WITH AND DETAILS WERE FURNISHED AS PER THE DIRECTION OF THE AO. IT WAS FUR T HER POINTED OUT THAT THE AO HAS NOT POINTED OUT AS TO HOW THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE ARE NOT CORRECT AND COMPLETE. 7. AFTER CONSIDERING THE FACT S AND SUBMISSIONS, THE CIT(A) FOUND THAT THE GROSS PROFIT DECLARED BY THE ASSESSEE FOR VARIOUS YEARS IS AS UNDER: 4 A.Y U/S G.P. RATE 2006 - 07 143(3) 6.9% 2007 - 08 143(3) 7.58% 2008 - 09 143(1) 8.19% 2009 - 10 143(1) 8.76% 2010 - 11 143(3) 8.95% 8. THE CIT(A) OBSERVED THAT THE G.P. IS ALWAYS ON THE HIGHER SIDE YEAR AFTER YEAR. THE CIT(A) FURTHER OBSERVED THAT DURING THE YEAR, OUT OF TOTAL SALES OF 31.55 CRORES, RS. 16.77 CRORES SA L E IS FOR 24 CARAT GOLD WHERE PROFIT MARGIN IS VERY LESS. DIAMOND SALE IS RS. 3.28 CRORES. THE 22 CARAT GOLD ORNAMENTS SALE IS RS. 8.24 CRORES. THE FIRST APPELLATE AUTHORITY CONCLUDED THAT HALF OF THE TURNOVER REPRESENTS 24 CARAT GOLD SALE WHERE THE PROFIT MARGIN IS VERY LESS. THE ADOPTION OF G.P. @ 12% BY THE AO WAS F OUND TO BE UNACCEPTABLE, CONSIDERING THE PAST HISTORY OF THE ASSESSEE AND ACCORDINGLY, THE CIT(A) DIRECTED THE AO TO DELETE THE IMPUGNED ADDITION. 9. BEFORE US, THE LD. DR COULD NOT POINT OUT ANY FACTUAL ERROR IN THE FINDINGS OF THE CIT(A). WE HAVE CAREF ULLY PERUSED THE ORDER OF THE AUTHORITIES BELOW. WE FIND THAT THE ENTIRE ADDITION MADE BY THE AO IS ONLY ON ACCOUNT OF THE FACT THAT HE WAS OF THE OPINION THAT THE PROFIT RATE SHOWN BY THE ASSESSEE IS ON THE LOWER SIDE WHEREAS , AS MENTIONED 5 ELSEWHERE, THE G.P. RATE IS ALWAYS ON THE HIGHER SIDE YEAR AFTER YEAR. WE FIND THAT THE AO HAS NOWHERE MENTIONED THE BASIS OF ADOPTING THE G.P. RATE OF 12% WHEREAS THE CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BASED UPON THE FINANCIAL RESULTS OF THE EARLIER YEARS. WE, THEREFORE, DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE CIT(A). ACCORDINGLY, GROUND RAISED BY THE REVENUE IS DISMISSED. 10 . IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 1839 /DEL/2015 IS DISMISSED. THE ORDER IS PRON OUNCED IN THE OPEN COURT ON 27 .0 6 .2018. S D / - S D / - [ H.S. SIDHU ] [ N.K. BILLAIYA ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 T H JUNE , 2018 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 6 DATE OF DICTATION 26.06.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.06.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER