Income-tax Officer, V. Sunderpuriya Steel & Roller Flour Mills Pvt. Ltd., Jalgaon

ITA 1968/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9290 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARI KISHAN
• Assessee Lawyers: YOGESH KAMAL
• Keywords: Gross profit estimation; Additional evidence; Corroborative evidences
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1968 /P U N/201 4 / ASSESSMENT YEAR : 20 1 0 - 1 1 THE INCOME TAX OFFICER, WARD 1(2), JALGAON . / APPELLANT VS. SUNDERPURIYA STEEL & ROLLER FLOUR MILLS PVT. LTD., H - 5, MIDC AREA, JALGAON. . / RESP ONDENT PAN: AAECS5393M / APPELLANT BY : S HRI HARI KISHAN / RESPONDENT BY : SHRI YOGESH KAMAL, ADDL. CIT / DATE OF HEARING : 3 1 .0 5 . 2017 / DATE OF PRONOUNCEMENT: 16 . 0 6 .20 1 7 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) - 2 , NASHIK , DATED 28.08.2014 RELATING TO ASSESSMENT YEAR 20 10 - 11 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - ITA NO. 1968 /P U N/20 1 4 SUNDERPURIYA STEEL AND ROLLER FLOUR MILLS PVT. LTD. 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.38,42,031/ - MADE BY A.O. ON ACCOUNT OF ESTIMATING G.P. IGNORING THE FACT THAT IN ABSENC E OF ANY DOCUMENTARY EVIDENCES OF COMPANIES PURCHASES AND SALES VOUCHERS AND BILLS AND IGNORING THE REMARKS OF C.A. IN HIS AUDIT REPORT. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION TO RS. 2,40,764/ - MADE BY A .O. ON ACCOUNT OF DISALLOWANCE OF PART OF SOME OF THE EXPENDITURE IGNORING THE FACT THAT THE ASSESSEE HAD NOT PROVIDED DETAILS OF EXPENDITURE FOR GENUINENESS AND THIS ADDITION WAS MADE ON EXCESS EXPENDITURE AS COMPARED TO LAST YEAR. 3. ON THE FACTS AND CI RCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION TO RS.37,34,014/ - MADE BY A.O. ON ACCOUNT OF SUNDRY CREDITOR AS PER PROVISION OF SECTION 68 OF THE INCOME - TAX ACT, 1961 IGNORING THE FACT THAT IN ABSENCE OF DETAIL ADDRESSES OF THE SUND RY CREDITORS, CONFIRMATION LETTERS OF SUNDRY CREDITORS AND ASSESSEES ACCOUNTS IN SUNDRY CREDITORS BOOKS, THE GENUINENESS CANNOT BE VERIFIED. 3. THE ISSUE IN GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) IN RESTRICTING THE GP ADDITION IN THE HANDS OF ASSESSEE. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME AT RS.5,00,270/ - . THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY AND VARIOUS NOTICES WERE ISSUED TO THE ASSESSEE. THE ASSESSEE DID NOT COMPLY TO THE SAID NOTICES. THEREAFTER, O N 23.01.2013 , T HE ASSESSEE RAISED AN OBJECTION TO THE JURISDICTION OF THE ASSESSING OFFICER AND CLAIMED THAT THE NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT WAS ILLEGAL. THE ASSESSING OFFICER VIDE LETTER DATED 15.03.2013 MET WITH THE OBJECTIONS OF ASSESSEE AND HE WAS ASKED TO FURNISH THE DETAILS ALONG WITH BOOKS OF ACCOUNT. THE CASE WAS FIXED FOR HEA RING ON 20.03.2013 . HOWEVER, THE ASSESSEE REQUESTED FOR ADJOURNMENT AND THE MATTER WAS ADJOURNED TO 22.03 .2013 . THE DIRECTOR OF ASSESSEE COMPANY ATTENDED ON THAT DATE STATING THAT THE INFORMATION WAS PROVIDED IN PROTEST VIDE LETTER DATED 21.03.2013. THE ASSESSING OFFICER AGAIN SOUGHT INFORMATION FROM THE ASSESSEE AND SERVED A LETTER DATED 22.03.2013. HOWEV ER, ON THE DATE FIXED ITA NO. 1968 /P U N/20 1 4 SUNDERPURIYA STEEL AND ROLLER FLOUR MILLS PVT. LTD. 3 FOR HEARING I.E. 25.03.2013 , THE ASSESSEE SOUGHT ADJOURNMENT TILL 26.03.2013 AND NO INFORMATION WAS FILED TILL 5 PM ON 26.03.2013 . THEREAFTER, A LETTER WAS FILED WITH SOME DETAILS. THE ASSESSEE FURNISHED THE DETAILS OF MONTHLY PURCH ASES AND SALES ONLY BUT NO BOOKS OF ACCOUNT OR DOCUMENTS WERE PRODUCED ; THE COPY OF CASH BOOK WAS NOT PRODUCED . THE ASSESSEE FURNISHED THE DETAILS / LIST BUT DID NOT FURNISH ANY SUPPORTING EVIDENCE BY WAY OF BILLS AND VOUCHERS AND THIS INFORMATION WAS ALS O PRODUCED AT THE FAG END OF THE YEAR. THE ASSESSING OFFICER THEREAFTER, PROCEEDED TO COMPLETE THE ASSESSMENT ON THE BASIS OF MATERIAL AVAILABLE ON RECORD INCLUDING THE AUDIT REPORT FILED BY THE ASSESSEE. THE AUDITOR IN THE GENERAL REMARKS VIDE POINT NO. 7 HAD MENTIONED MANY OF THE PURCHASES DEBITED TO TRADING ACCOUNT ARE ON THE BASIS OF SELF MADE VOUCHERS, BILLS OR INVOICE ARE NOT MADE AVAILABLE AT THE TIME OF AUDIT. THE ASSESSING OFFICER THUS, OBSERVED THAT THE SAME PROVES THAT THE ASSESSEES BOOKS OF ACCOUNT ARE NOT FULLY AND PROPERLY SUPPORTED BY PROPER VOUCHERS. THE ASSESSEE HAD FAILED TO FURNISH THE COMPANYS AUDIT REPORT. IN VIEW THEREOF, THE ASSESSING OFFICER ESTIMATED THE BOOK RESULTS BY APPLYING THE GP RATE OF 5% AND WORKED OUT THE ADDITION O F RS.58,90,699/ - . THE ASSESSING OFFICER ALSO CONSIDERED THE VARIOUS EXPENSES DEBITED BY THE ASSESSEE, AGAINST WHICH THE ASSESSEE HAD FAILED TO FURNISH ANY EVIDENCE. THE EXPENSES WERE ON ACCOUNT OF BROKERAGE EXPENSES, REPAIRS & MAINTENANCE, TRANSPORT EXPE NSES AND SALARY. THE ASSESSING OFFICER MADE DISALLOWANCE OF 25% OUT OF TOTAL EXPENSES ON RS.9,63,055/ - RESULTING IN ADDITION OF RS. 2,40,764/ - . ANOTHER ASPECT NOTED BY THE ASSESSING OFFICER WAS THE SUNDRY CREDITORS SHOWN BY THE ASSESSEE IN WHICH THE ASSES SEE HAD SHOWN THE BALANCE AT RS. 37,34,01 3 / - . THE ASSESSING OFFICER NOTED THAT IN THE PRECEDING YEAR, THE SUNDRY CREDITORS WERE AT RS. 1,65,15,212/ - ITA NO. 1968 /P U N/20 1 4 SUNDERPURIYA STEEL AND ROLLER FLOUR MILLS PVT. LTD. 4 WHICH STOOD REDUCED TO RS.37,34,013/ - , WHEREAS AS COMPARED TO THE SALES AND OTHER INCOME, IF ANY, IT WAS CLE AR THAT NO SUCH INCOME WAS GENERATED FROM THE SAID BUSINESS. THE ASSESSEE HAD NOT FURNISHED THE LIST OF SUNDRY CREDITORS BUT HAD FILED ACCOUNTS OF TWO PERSONS ONLY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID CREDITORS ARE BOGUS CREDITORS AND ADD ITION OF RS.37,34,014/ - WAS MADE IN THE HANDS OF ASSESSEE. 5. BEFORE T HE CIT(A), THE ASSESSEE FURNISHED INFORMATION AND REMAND REPORT WAS CALLED FOR. THE FIRST ASPECT WHICH WAS DECIDED BY THE CIT(A) WAS JURISDICTION OF THE ASSESSING OFFICER. THE SECOND ISSUE WHICH WAS DECIDED BY THE CIT(A) WAS THE ADDITION MADE ON ACCOUNT OF GROSS PROFIT RESULTING IN GP ADDITION OF RS.58,90,699/ - . THE ASSESSEE HAD DECLARED GP RATE OF 2.12%, WHEREAS THE ASSESSING OFFICER HAD ESTIMATED THE GP RATE AT 5% OBSERVING THAT IN EARLIER YEARS, THE GP RATE WAS HIGHER. HOWEVER, THE CIT(A) NOTED THAT THE TREND OF GP RATE WAS INCREASING FROM YEAR TO YEAR AND WAS HIGHER DURING THE YEAR. HOWEVER, THE ASSESSING OFFICER HAD POINTED OUT THAT THE ASSESSEE FAILED TO FURNISH AUDIT REPORT, B ILLS & VOUCHERS, INVOICES, ETC. AND HENCE, THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE HELD TO BE NOT PROPER AND RELIABLE. THE CIT(A) ACCEPTED THE REJECTION OF BOOKS OF ACCOUNT. HOWEVER, WITH REGARD TO ESTIMATION OF GROSS PROFIT, THE SAME WAS RE DUCED TO 3.12%. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN THIS REGARD AND HAS RAISED THE ISSUE VIDE GROUND OF APPEAL NO.1 AGAINST DELETION OF ADDITION OF RS. 38,42,031/ - . ITA NO. 1968 /P U N/20 1 4 SUNDERPURIYA STEEL AND ROLLER FLOUR MILLS PVT. LTD. 5 7. DURING THE COURSE OF HEARING, IT TRANSPIRED THAT THE ASSESSEE H AD FILED AN APPEAL AGAINST THE ORDER OF CIT(A) WHICH WAS LISTED FOR HEARING ON 07.05.2015. IT WAS NOT BROUGHT TO THE KNOWLEDGE OF THE BENCH THAT ANY APPEAL HAS BEEN FILED BY THE REVENUE BY EITHER OF THE LEARNED AUTHORIZED REPRESENTATIVES AND HENCE, THE IS SUE WAS DECIDED IN THE SAID APPEAL . THE FIRST ISSUE WAS THE ISSUE OF JURISDICTION AND SECOND ISSUE WAS THE APPLICATION OF GP RATE. THE TRIBUNAL IN ITA NO.2 0 63/PN/ 2014, RELATING TO ASSESSMENT YEAR 2010 - 11 ALONG WITH LEAD ORDER IN ITA NO.1294/PN/2013, RELA TING TO ASSESSMENT YEAR 2008 - 09 IN THE CASE OF SHRI MAHENDRA J. BANSAL VS. ITO VIDE ORDER DATED 27.05.2015 , DIRECTED THE ADOPTION OF GP RATE OF 2.5%. THE ISSUE RAISED BY WAY OF GROUND OF APPEAL HAS ALREADY BEEN DECIDED BY THE TRIBUNAL IN THE APPEAL FILED BY THE ASSESSEE AND FOLLOWING THE SAME PARITY OF REASONING, WE RESTRICT THE GP ADDITION BY APPLYING 2.5%, HENCE THE GROUND OF APPEAL NO.1 RAISED BY THE REVENUE IS DISMISSED. 8. THE SECOND ISSUE RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION ON ACCOUNT OF DISALLOWANCE OF CERTAIN EXPENDITURE. THE ASSESSING OFFICER HAD MADE THE SAID ADDITION AS THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT AND ALSO PRODUCE VOUCHERS, ETC. HOWEVER, THE CIT(A) DELETED THE ADDITION AS THE ASSESSING OFFICER IN THE R EMAND PROCEEDINGS DID NOT GIVE ANY NOTICE TO THE ASSESSEE. BEFORE THE CIT(A), THE ASSESSEE CONTENDED THAT THERE WAS NO PRIMA FACIE REASON TO MAKE THE DISALLOWANCE OUT OF EXPENSES ON ACCOUNT OF BROKERAGE, REPAIRS AND MAINTENANCE, TRAVELLING EXPENSES AND SA LARY. IN THE REMAND REPORT, THE ASSESSING OFFICER NOTED THAT EXPLANATION WAS FILED ITA NO. 1968 /P U N/20 1 4 SUNDERPURIYA STEEL AND ROLLER FLOUR MILLS PVT. LTD. 6 BEFORE THE CIT(A) THAT THE ASSESSING OFFICER HAD NOT ALLOWED SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE AND TO PRODUCE THE BOOKS OF ACCOUNT, VOUCHERS, ETC. HE VEHEM ENTLY STATED THAT THE SAID CONTENTION WAS TOTALLY WRONG AND BASELESS. HE REFERRED TO THE CONTENTS OF THE ASSESSMENT ORDER, WHEREIN SPECIFIC DATES FOR COMPLIANCE WERE NOT COMPLIED WITH BY THE ASSESSEE. THE ASSESSING OFFICER NOTED THE ADDITIONAL EVIDENCE B EING FILED DURING THE COURSE OF APPELLATE PROCEEDINGS. HE GIVES THE FINDING THAT THE ASSESSEE HAD ONLY FILED THE ACCOUNT EXTRACTS, WHICH DOES NOT SHOW AS TO HOW MUCH DEFECTS EXISTS SUCH AS SELF MADE VOUCHERS, THIRD PARTY VOUCHERS, ETC. FURTHER, IN RESPEC T OF ADDITIONS ON ACCOUNT OF SUNDRY CREDITORS, THE ASSESSEE BY WAY OF ADDITIONAL EVIDENCE HAD ONLY FURNISHED THE ACCOUNT EXTRACT WITHOUT ANY CONFIRMATION THEREOF. THE ASSESSING OFFICER REJECTED THE SO - CALLED ADDITIONAL EVIDENCE. HOWEVER, THE CIT(A) OBSER VED THAT THE ASSESSING OFFICER HAS ONLY REPEATED HIS OBSERVATIONS REGARDING NON - COMPLIANCE AND HAS NOT COMMENTED ON THE VOUCHERS FILED. THE CIT(A) ALSO OBSERVED THAT THE ASSESSING OFFICER FAILED TO GIVE OPPORTUNITY TO THE ASSESSEE TO PRODUCE BOOKS OF ACCO UNT / VOUCHERS, ETC. HE ALSO HOLDS THAT NO SEPARATE DISALLOWANCE WAS TO BE MADE ONCE THE GP RATE IS ESTIMATED. WE FIND NO MERIT IN THE OBSERVATIONS OF THE CIT(A) IN THIS REGARD. THE ESTIMATION OF GP IS IN RESPECT OF TRADING RESULTS SHOWN BY THE ASSESSEE . HOWEVER, THE DISALLOWANCE OF EXPENSES IS FOR THE ASSESSEE NOT HAVING ESTABLISHED ITS CLAIM VIS - - VIS THE SAID EXPENDITURE. THE ASSESSEE HAD FAILED TO PRODUCE BOOKS OF ACCOUNT DURING THE COURSE OF ASSESSMENT AND ALSO DURING REMAND PROCEEDINGS. THE CIT( A) ACKNOWLEDGED THE SAME BUT STILL DELETES THE SAID ADDITION. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAD REQUESTED THAT THE MATTER MAY BE SENT BACK TO THE ASSESSING OFFICER. IN VIEW OF ITA NO. 1968 /P U N/20 1 4 SUNDERPURIYA STEEL AND ROLLER FLOUR MILLS PVT. LTD. 7 THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE REVERSE TH E FINDINGS OF CIT(A) AND REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER , WHO IS DIRECTED TO VERIFY THE CLAIM OF ASSESSEE. THE ASSESSEE IS DIRECTED TO PRODUCE THE BOOKS OF ACCOUNT AND ALL SUPPORTING VOUCHERS TO ESTABLISH ITS CLAIM OF EXPENDITURE. 9. SIMILARLY, IN RESPECT OF ISSUE RAISED ON SUNDRY CREDITORS IN THE REMAND REPORT, THE ASSESSING OFFICER ACKNOWLEDGES THAT THE ASSESSEE HAD ONLY FURNISHED THE ACCOUNT EXTRACT WITHOUT ANY CONFIRMATION. THE CIT(A) HAS DELETED THE SAID ADDITION SINCE THE A DDITION HAD BEEN MADE ON ACCOUNT OF LOW GP. THERE IS ABSOLUTELY NO MERIT IN THE ORDER OF CIT(A) IN THIS REGARD AND ADDITION ON ACCOUNT OF LOW GP WOULD NOT COVER THE ADDITIONS MADE UNDER SECTION 68 OF THE ACT, WHICH ARE INDEPENDENT ADDITIONS MADE IN THE HA NDS OF ASSESSEE. THE LIST OF SUNDRY CREDITORS SHOWS CREDIT BALANCE TOTALING RS. 74,14,166/ - AND DEBIT BALANCE TOTALING RS.36,80,150/ - AND THE NET CREDIT BALANCE WAS RS.37,34,014/ - , WHICH WAS ADDED BY THE ASSESSING OFFICER. THE PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE SAID NET BALANCE ALSO INCLUDED OPENING BALANCE OF RS.9,56,438/ - IS CREDIT AND RS.18,30,860/ - IS DEBIT WHICH COULD NOT BE ADDED IN THE HANDS OF ASSESSEE. HOWEVER, WE FIND THAT THE ASSESSEE HAS FAIL ED TO FILE COMPLETE DETAILS BOTH IN RESPECT OF CREDIT AND DEBIT BALANCES DEBITED TO THE LIST OF SUNDRY CREDITORS ALONG WITH CONFIRMATION. THE MATTER IS REMITTED BACK TO THE FILE OF ASSESSING OFFICER, WHO SHALL DECIDE THE ISSUE AFTER AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESS EE, WHO IN TURN, IS DIRECTED TO FILE THE CONFIRMATION AND ESTABLISH ITS CLAIM OF SUNDRY CREDITORS. ACCORDINGLY, BOTH THE GROUNDS OF APPEAL NO.2 AND 3 RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL ITA NO. 1968 /P U N/20 1 4 SUNDERPURIYA STEEL AND ROLLER FLOUR MILLS PVT. LTD. 8 PURPOSES. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, PARTLY ALLOWED. 1 0 . IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 16 TH DAY OF JUNE , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 16 TH JUNE , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLA NT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - 2 , NASHIK ; 4. / THE CIT - 2 , NASHIK ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / ASSISTANT REGISTRAR, , / ITAT, PUNE