ITO, New Delhi V. M/s Gondwana Enterprises, New Delhi

ITA 2203/DEL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7493 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA

Judgement Text

ITA NO. 2203/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2203/DEL/2011 A.Y. : 2007-08 ITO, WARD 30(1), ROOM NO. 111, DRUM SHAPE BLDG., NEW DELHI VS. M/S GONDWANA ENTERPRISES, 3/15, ASAF ALI ROAD, DARYA GANJ, NEW DELHI 110 002 (PAN/GIR NO. : AAAFG2043D) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : NONE DEPARTMENT BY : SH. SALIL MISHRA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 21.2.2 011 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS OF APPEAL RAISED READ AS UNDER:- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN RESTRICTING THE ADDITION OF ` 1,00,000/- AS AGAINST ` 16,84,735/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF UNSUBSTANTIATED FALL IN GP, IGNORING THE CATEGORICA L FINDING OF ASSESSING OFFICER THAT ASSESSEE FAILED TO EXPLA IN THE FALL IN GP PROPERLY EVEN BEFORE THE LD. COMMISSIONER OF INC OME ITA NO. 2203/DEL/2011 2 TAX (APPEALS) AND ALSO THERE IS NO SANCTITY OF THE AUDIT REPORT. (II) THE APPELLANT CRAVES LEAVE FOR RESERVING THE R IGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING THIS APPEAL. 3. IN THIS CASE ASSESSEE IS A PARTNERSHIP FIRM CONSI STING OF FIVE PARTNERS. THE ASSESSEE IS IN THE BUSINESS OF MANUFA CTURING OF ELASTIC IRON CLIPS FOR SUPPLYING TO INDIAN RAILWAYS. THE T OTAL TURNOVER OF THE ASSESSEE DURING THE YEAR WAS ` 1,62,48,066/- AND THE GP WAS OF ` 7,52,474/- WHICH IS @ 4.63%. THE TURNOVER OF TH E ASSESSEE DURING THE PRECEDING YEAR WAS ` 1,69,67,458/- AND THE GP WA S ` 28,94,634/- WHICH IS @ 17.06%. THE NET PROFIT OF THE ASSESSE E WAS ONLY OF ` 37,581/- AGAINST THE TOTAL TURNOVER OF ` 1,62,48,06 6/- AND THE ASSESSEE HAS FILED THE LOSS RETURN OF (-) 7,828/-. THUS, TH ERE WAS DRASTIC FALL IN THE GP RATE IN THE CURRENT YEAR WHICH IS @ 4.63% AGA INST THE IMMEDIATE PRECEDING YEAR GP OF @ 17.06%. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD ASKED FOR THE REASONS FOR THE FALL IN GP BUT THREE WAS NO SATISFAC TORY EXPLANATION AND ACCORDINGLY, ASSESSING OFFICER ESTIMATED THE GP @ 15 % OF ` 24,37,210/- AS AGAINST THE DECLARED GP OF ` 7,52,4 74/- AND MADE THE ADDITION OF ` 16,84,736/- (` 24,37,210 - ` 7,52,474 ). 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT THERE WAS CONSIDERABLE MERIT I N THE ASSESSEES SUBMISSION THAT THE ASSESSEE IS NOT DOING A GOOD BU SINESS AS THE TURNOVER IS VERY LOW AND IN FACT IS ON THE VERGE OF CLOSURE BECAUSE OF THE TOUGH COMPETITION IN THE MARKET. LD. COMMISSIO NER OF INCOME ITA NO. 2203/DEL/2011 3 TAX (APPEALS) NOTED AT THE SAME TIME, THERE IS STILL A FALL IN GP IN THE CURRENT YEAR COMPARED TO THE LAST YEAR WHICH AS NOT BEEN PROPERLY EXPLAINED. LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER NOTED THAT SINCE THE ASSESSEE IS NOT DOING WELL IN THE BU SINESS AS IT IS EVIDENT FROM THE CARRY FORWARD THE LOSSES FROM THE EARLIER YE ARS, ASSESSING OFFICER WAS NOT JUSTIFIED TO ESTIMATE THE GP @ FLAT RATE OF 15%. LD. COMMISSIONER OF INCOME TAX (APPEALS) OPINED THAT AFT ER CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, HE WAS OF THE VIEW THAT THE ENDS OF JUSTICE WILL BE MET IF A LUMP SUM ESTIMATED AD DITION OF ` 1 LAKH IS CONFIRMED AND THE BALANCE IS DELETED. ACCORDING LY, LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED A SUM O F ` 1 LAKH AND BALANCE AMOUNT OF ` 15,84,734/- WAS DELETED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E. NONE APPEARED ON BEHALF OF THE ASSESSEE. IN OUR CONS IDERED OPINION, THE MATTER CAN BE DISPOSED OF BY HEARING THE LD. DEPARTM ENTAL REPRESENTATIVE. WE HAVE CAREFULLY CONSIDERED THE R ECORDS AND HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. WE FIND THAT ASSESSING OFFICER HAS MADE THE ESTIMATED ADDITION ON ACCOUNT OF LOW G. P. HE HAS NOT BROUGHT ON RECORD ANY SHORTCOMING IN THE BOOKS OR VO UCHERS MAINTAINED BY THE ASSESSEE. IT IS ALSO TRUE THAT ASSESSEE HAS NOT ITA NO. 2203/DEL/2011 4 GIVEN DETAILED REASONING FOR FALL IN G.P. AS COMPARE D TO PREVIOUS YEARS. IN OUR CONSIDERED OPINION, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS TAKEN A BALANCED VIEW OF MAKING A LUMP SUMP ADDITI ON OF ` 1 LAKH. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE SAME. AC CORDINGLY, WE CONFIRM THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/1/2012. SD/- SD/- [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 20/1/2012 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES