ACIT 12(1), MUMBAI V. SHAUKATALI HAJI BASHIR AHMED ANSARI, MUMBAI

ITA 2226/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93002 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Department
• Bench Allotted: E
• Next Hearing Date: 24-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2013
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Cost of acquisition

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 2226 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 09 - 1 0 ) ACIT 12(1), MUMBAI VS. SHRI S HAUKATALI HAJI BASHIR AHMED ANSARI, ROOM NO.14, 3 RD FLOOR, C.S.M. FISH MARKET, PALTON ROAD, OPP. CRAWFORD MARKET, MUMBAI - 400001 ./ ./ PAN/GIR NO. : A BJPA 0436 E ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI NEIL PHILIP /ASSESSEE BY : SHRI ANIL THAKRAR / DATE OF HEARING : 24 /0 6 / 2015 / DATE OF PRONOUNCEMENT 24/06 /2015 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 23 , MUMBAI , DATED 3 - 12 - 2012 FOR THE ASSESSMENT YEAR 20 09 - 10 IN THE MATTER OF ORDER PASSED U/S.14 3 (3) OF THE I.T .ACT . 2 . THE ONLY GRIEVANCE OF THE REVENUE RELATES TO THE CIT(A)S ACTION IN SUSTAINING THE ADDITION OF RS. 3,00,000/ - AS AGAINST THE ADDITION OF RS. 42,06,125/ - MADE BY THE AO ON ESTIMATION BASIS. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FAC TS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORT OF ITA NO. 2226 /1 3 2 SEAFOOD ITEMS. DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO ISSUED NOTICE S U/S.133(6) TO 23 PARTIES TO VERIFY THE GENUINENESS OF PURCHASE TRANSACTION MADE BY THE ASSESSEE. THE TOTAL PURCHASES WAS OF RS. 16,11,78,256/ - . THE AO STATED THAT OUT OF 23 PARTIES, ONLY 12 PARTIES REPLIED. THE AO ALSO CALLED FOR GP & NP STATEMENT FOR THE CURRENT AND EARLIER TWO YEARS, WHICH WAS AS UNDER : - 2007 - 08 2008 - 09 2009 - 10 TURNOVER 12,07,58, 574 7,03,25,414 18,22,89,954 GROSS PROFIT 54,91,816 38,51,350 55,00,391 G.P.% 4.55 5.48 3.02 NET PROFIT 23 , 13 , 294 15 , 22 , 900 23 , 83 , 290 N.P.% 1.92 2.17 1.31 4. THE AO DID NOT ACCEPT THE G .P. RATIO OF 3.02 % SHOWN DURING THE YEAR. ACCORDINGLY, HE REJECTE D THE BOOKS OF ACCOUNT AND ESTIMATED THE GP RATE AT 5.48 % , THUS, MADE ADDITION OF RS. 42,06,125/ - . 5. BY THE IMPUGNED ORDER, THE CIT(A) REDUCED THE ADDITION TO RS. 3 LAKHS AFTER OBSERVING AS UNDER : - 8. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER THE S UBMISSION MADE FOR THE APPELLANT AND THE MATERIAL AVAILABLE ON RECORD. AFTER GOING THROUGH THE DETAILS/SUBMISSIONS FILED BEFORE ME AND AT THE TIME OF ASSESSMENT, IT IS NOTED THAT (I ) TOTAL PU RCHASES OF THE APPELLANT IS RS. 16,11,78 256 / - OUT OF WHICH THE ASSESSING OFFICER HAD SENT NOTICES FOR CONFIRMATION TO THE TUNE OF RS. 11 , 5 4 ,59.0 19, AND THE P ARTIES CONFIRMED THE SUM OF RS. 8,62,13,027 / - DURING T HE COURSE OF ASSESSMENT. (II) TOTAL NUMBER OF PARTIES TO WHOM NOTICES U/S.133(6 ) W ERE ISSUED , WERE 23 A ND OUT OF WHICH, 12 PARTIES REPLIED AND THERE IS NO DIFFERENCE AT ALL IN ALL THESE PARTIES WHO REPLIED TO THE SAID NOTICES. (III)(A) AS PER PARA 5.2 OF AOS ORDER IT IS NOTICED THAT THE QUANTITATIVE RECONCILIATION OF PURCHASE AND SALES WERE DONE BY THE ASSESSEE AT THE TIME OF ASSESSMENT. (B) THE ASSESSEE COULD RECONCILE THE PAYMENTS MADE TO THE PARTIES FROM WHOM REPLY TO THE NOTICES U/S.133(6) WERE NOT RECEIVED WITH HIS LEDGER A/C AND BANK STATEMENT. (IV) THE TURNOVER OF THE APPELLANT FOR THE YEAR UNDER CONSIDER ATION AS COMPARED TO THAT OF A.Y. 2008 - 09 IS INCREASED TO ALMOST 3 TIMES. ITA NO. 2226 /1 3 3 (V) THE PURCHASE COST TO SALES IN FACT IS REDUCED BY 2.54% AS COMPARED TO THAT OF A.Y.2008 - 09. (VI)AFTER GOING THROUGH ALL THE DETAILS FILED BEFORE ME, IT WAS OBSERVED THAT THE NE T FREIGHT CHARGES WERE INCREASED BY 1.48% AND PROCESSING CHARGES AMOUNTS TO 2.82% THE TURNOVER AND THESE TWO FACTORS ARE THE CAUSE OF FALL IN G.P. DURING THE YEAR AND NOT DUE TO HIGHER PURCHASE COST. 9. IN REGARD TO THE EXPENSES, CLAIMED FOR THE FIRST TI ME IN RESPECT OF FISH PROCESSING CHARGES, IT WAS SUBMITTED BY THE AR AS UNDER: 'JUSTIFICATION REGARDING FISH PROCESSING CHARGES AS CAN BE SEEN' FROM THE COMPARABLE FINANCIAL STATEMENTS, THE PROCESSING CHARGES AMOUNT TO RS.49,95,821 / - FOR YEAR ENDED 31.0 3.2009 AS AGAINST NIL FOR THE PRECEDING YEAR ENDED 31.03.2008. IT MAY BE OBSERVED FROM THE BALANCE SHEETS THAT DURING THE YEAR UNDER APPEAL, TURNOVER HAS INCREASED FROM RS. 7.03 CRORES TO RS. 18.23 CRORES. IT IS ALMOST 2.59 TIMES INCREASE IN TURNOVER AS COMPARED TO LAST YEAR. HERE WE ALSO WOULD LIKE TO INFORM THAT OUT OF TOTAL TURNOVER OF RS. 18.23 CRORES FROZEN FISH COMPRISES OF RS. 3.62 CRORES I.E. 19.86% THE APPELLANT IS DEALING IN EXPORT OF SEA FOOD ITEMS I. E. FISH AND IT IS HIGHLY PERISHABLE GOODS. TILL LAST YEAR, THE APPELLANT WAS ONLY DEALING IN FRESH FISH I. E. IMMEDIATELY SALE THE MATERIAL WITHOUT BEING PROCESSED OR STORED IN COLD STORAGE. IN THE CURRENT YEAR, THE APPELLANT HAD ALSO STARTED TO EXPORT FROZEN FISH ALSO DUE TO VARIOUS REASON QS UND ER: 1. DUE TO TIME DIFFERENCE BETWEEN SUPPLY IN LOCAL MARKET AND DEMAND IN OVERSEAS MARKET, IT WAS DIFFICULT TO ACHIEVE HIGHER TURNOVER OF FRESH FISH AT REASONABLE MARGIN AND FOR THE PURPOSE OF EXPANSION OF BUSINESS THE APPELLANT HAD TO START DEALING IN FROZEN FISH (COPY OF SAMPLE BILLS ENCLOSED). 2. TO OVERCOME ABOVE DIFFICULTY OF TIMELY SUPPLY AND DEMAND OF GOODS' OF PERISHABLE NATURE, THE APPELLANT STARTED TO STORE IN COLD STORAGE AFTER CHEMICAL PROCESSING ON THE MATERIAL AND TO SALE MATERIAL AS FROZ EN FISH. DUE TO THE SAME, IT MADE POSSIBLE FOR THE APPELLANT TO PURCHASE IN BULK QUANTITY AND SALE WHEN THERE IS REQUIREMENT IN FOREIGN MARKET. THIS RESULTED INTO DECREASE IN PURCHASE PRICE OF THE MATERIAL AS WELL AS INCREASE IN TURNOVER OF THE APPELLANT . IT CAN BE VERIFIED FROM BALANCE SHEET THAT PERCENTAGE OF PURCHASE TO SALES IS REDUCED FROM 93.42% TO 90.87% IN THE CURRENT YEAR. THUS, THERE IS REDUCTION IN PURCHASE COST BY ALMOST 2.54% ITA NO. 2226 /1 3 4 3. ALSO, FRESH FISH ALWAYS NEEDS TO BE EXPORTED BY AIR WHILE FROZ EN FISH CAN BE EXPORTED BY SEA ALSO. THIS RESULTED INTO LOWER COST AND THEREBY THE APPELLANT HAD COMPETITIVE ADVANTAGE IN OVERSEAS MARKET. 4. BULK QUANTITY CONSIGNMENT CAN BE EXPORTED BY SEA ROUTE WHILE DUE TO SHORTAGE OF AIR SPACE IT WAS DIFFICULT TO EX PORT BULK QUANTITY. FISH PROCESSING CHARGES PAID BY THE APPELLANT MI S. HMG INDUSTRIES LIMITED RS. 48.84 LACS AND MI S. SANCHITA MARINE PRODUCTS RS. 1. 11 LACS THE APPELLANT HAD ALREADY SUBMITTED, COPY OF LEDGER ACCOUNT OF MLS. HMG INDUSTRIES LIMITED DURING THE COURSE OF ASSESSMENT COPY OF WHICH IS ENCLOSED HEREWITH FOR YOUR REFERENCE ... ..!:' FURTHER, THE APPELLANT HAS GIVEN THE REASONS FOR INCREASE IN FRIGHT CHARGES: 'JUSTIFICATION REGARDING INCREASE IN NET FREIGHT BY 1.48% TO THE TOTAL TURNOVER THE NET FREIGHT CHARGES HAVE INCREASED FROM RS. 1. 61LAKHS IN THE YEAR 2007 - 2008 TO RS . 30.56 LAKHS IN THE YEAR 2008 - 2009. THE REASONS FOR NET INCREASE IN NET FREIGHT BY 1.48% TO TOTAL TURNOVER ARE: DUE TO INCREASE IN FUEL RATE AIR FREIGHT INCREASE DUE TO MARKET CONDITION FULL AMOUNT COULD NOT RECOVERED FROM BUYER AIR FREIGHT CARRIER HAS ALSO INCREASED IN OTHER CHARGES LIKE THC, SC AND OTHER CHARGE WHICH NEED TO BE BEAR BY THE APPELLANT ONLY DISCONTINUANCE OF DISCOUNT SYSTEM BY THE FREIGHT AGE NT THE ABOVE REASONS RESULTED IN COMPARATIVELY HIGHER PERCENTAGE OF FREIGHT AGENT THE ABOVE REASONS RESULTED IN COMPARATIVELY HIGHER PERCENTAGE OF FREIGHT IN FY 2008 - 2009 AS AGAINST IN THE PRECEDING YEAR. DURING THE YEAR MAJOR AMOUNT OF FREIGHT CHARGES PA ID BY THE APPELLANT TO AIR FREIGHT M/ S. JET AIRFREIGHT MUMBAI RS. 1,58,57,595/ - M/ S. SWAMI SAMARTH AIRFREIGHT PVT. LTD RS.80,76,168/ - SEA FREIGHT M/ S. APL (INDIA) PRIVATE LIMITED RS. 30,90,492/ - THE APPELLANT HAD ALREADY SUBMITTED COPY OF LEDGER ACCOUNT OF FRIGHT AGENT COPY OF WHICH IS ENCLOSED HEREWITH FOR YOUR REFERENCE. PROCESSING CHARGES PAID DURING THE YEAR AMOUNTS TO RS.49,95,821 / - - WHEREAS THE SAID AMOUNT WAS NIL LAST YEAR, WHICH COMES TO APPROX. 2.82% OF THE TURNOVER'. ITA NO. 2226 /1 3 5 10. A FTER GOING THROUGH THE FACTS, ASSESSMENT ORDER AND SUBMISSIONS AND DETAILS FILED AT THE TIME OF ASSESSMENT AS WELL AS BEFORE ME DURING THE APPELLATE PROCEEDINGS, I AM OF THE OPINION THAT THE FALL IN GROSS PROFIT IS MAINLY ATTRIBUTABLE TO THE INCREASE IN AI R FREIGHT AND FISH PROCESSING CHARGES CLAIMED FOR THE FIRST TIME BY THE APPELLANT. WITH REGARD TO PURCHASE OF GOODS, THE ASSESSING OFFICER HAS NOT BROUGHT ANY CONTRARY FACTS ON RECORD THAT GOOD HAVE NOT BEEN RECEIVED AND ONLY AFTER RECEIVING THE GOODS, THE SALES WERE MADE. THERE IS NO OR NO MATERIAL ON RECORD WHICH SHOWS PAYMENT OF IMPUGNED PURCHASE S CAME BACK TO THE APPELLAN T. THERE IS NO DISPUTE REGARDING QUANTITATIVE TALLY OF PURCHASES; AND SALES AND THERE ARE UNDISPUTED SALE OF RS. 18,22,89,954/. ON TH E BASIS OF ABOVE FACTS, AT THE MOST IT CAN BE PRESUMED THAT THE ASSESSEE DID NOT MAKE PURCHASES FROM ABOVE PARTIES BUT MADE FROM OTHER UNREGISTERED DEALERS AND GOT BENEFIT OF MARGIN OF PURCHASES FRO M UNREGISTERED DEALERS. I FIND THAT TO THAT EXTENT AN ESTI MATION OF PROFIT CAN BE MADE WHICH WILL BE FAIR AND REASONABLE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, 'FOR THE - ABOVE PURPOSES I ESTIMATE RS. 3,00,000 / - AND ACCORDINGLY THE ADDITION TO THE EXTENT OF RS. 3,00,000 / - IS SUSTAINED AND BALANCE ADDITION OF RS.39,06,125/ - IS DELETED OUT O F THE ADDITION MADE OF RS.42,06, 125 / - . 6 . AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN APPEAL BEFORE US. 7 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BEL OW. FROM THE RECORD WE FOUND THAT THE REASON FOR FALL IN GROSS PROFIT RATE DURING THE YEAR IS MAINLY ATTRIBUTABLE TO THE INCREASE IN AIR FREIGHT AND SEE FREIGHT CHARGES. THE CIT(A) RECORDED A FINDING THAT THERE IS NO DISPUTE REGARDING QUANTITATIVE TALLY OF PURCHASES AND SALE. SINCE THERE WAS A QUANTITATIVE TALLY, THE CIT(A) OBSERVED THAT UNDER THESE FACTS AT THE MOST IT CAN BE PRESUMED THAT ASSESSEE DID NOT MAKE PURCHASES FROM THE SAID PARTIES BUT FROM OTHER UNREGISTERED DEALERS AND GOT SOME BENEFITS OF MAR GIN OF PURCHASES FROM UNREGISTERED DEALERS. WE ALSO FOUND THAT THERE IS A SUBSTANTIAL INCREASED IN TURNOVER FROM RS. 7.03 CRORES TO TO 18.22 CRORES DURING THE YEAR UNDER CONSIDERATION. WHENEVER THERE IS INCREASE IN TURNOVER, THERE WILL BE AUTOMATICALLY FA LL IN GROSS PROFIT RATE BECAUSE INCREASE IN TURNOVER CAN BE ACHIEVED AT THE ITA NO. 2226 /1 3 6 SACRIFICE OF SOME MARGIN IN GROSS PROFIT RATE. SINCE THERE IS SUBSTANTIAL INCREASE IN TURNOVER DURING THE YEAR WHICH AMOUNTS TO RS.18.22 CRORES AS COMPARED TO TURNOVER OF PRECEDING YEAR, THE G.P. IS LIKE TO FALL. FURTHER, TO SAFEGUARD THE INTEREST OF REVENUE THE CIT(A) HAS ALREADY UPHELD TO ADDITION OF RS.3.00 LAKHS. THE PURCHASES WHICH COULD NOT BE VERIFIED AMOUNTS TO RS.2.92 CRORES. EVEN IF WE TAKE 1% OF SUCH PURCHASES, IT AMOUNT S TO RS. 2.92 LAKHS. SINCE THE CIT(A) HAS ALREADY UPHELD THE ADDITION OF RS. 3.00 LAKHS, THE ORDER OF CIT(A) DO NOT CALL FOR ANY INTERFERENCE. THE DETAILED FINDING RECORDED BY CIT(A) AT PARA 8, 9 & 10 WITH REGARD TO QUANTITATIVE TALLY OF PURCHASES AND SALES INCREASE IN AIR AND SEA FREIGHT DURING THE YEAR, HAVE NOT BEEN CONTROVERED. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS RECORDED BY CIT(A) . 8 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . O RDER PRONOUNCED IN THE OPEN COURT O N THIS 24/06 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 24/06 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//