Bloom Dekor Ltd., Ahmedabad V. The Dy. CIT.,Circle-1, Ahmedabad

ITA 2276/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0884 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 02-06-2016
• Assessment Year: 1996-1997
• Appeal Filed On: 08-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS SMITI SUMANT
• Assessee Lawyers: JAIMIN DAVE
• Keywords: Gross profit estimation
• Section: 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ ITA.NO.2276/AHD/2011 / ASSTT. YEAR: 1996-1997 BLOOM DEKOR LTD. 2/F, SUMEL, OPP: GNFC INFO TOWER S.G. ROAD THALTEJ, AHMEDABAD 380 059. VS DCIT, CIR.1 AHMEDABAD. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI JAIMIN DAVE REVENUE BY : MRS.SMITI SUMANT, SR.DR / DATE OF HEARING : 02/06/2016 / DATE OF PRONOUNCEMENT: 19/07/2016 $%/ O R D E R THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER OF THE LD.CIT(A)-VI, AHMEDABAD DATED 8.7.2011 PASSED FOR T HE ASSTT.YEAR 1996-97. 2. SOLITARY SUBSTANTIAL GROUND OF APPEAL RAISED BY THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF R S.78,15,104/- WHICH HAS BEEN ADDED BY THE AO ON ACCOUNT OF LOW GP SHOWN BY THE ASSESSEE. 3. THE LD.COUNSEL FOR THE ASSESSEE, AT THE VERY OUT SET, SUBMITTED THAT THIS IS THE SECOND ROUND OF APPEAL BEFORE THE TRIBUNAL. IN THE FIRST ROUND, THE TRIBUNAL HAS SET ASIDE THIS ISSUE VIDE ITA NO.381/A HD/2002 TO THE FIE OF THE LD.CIT(A) FOR RE-ADJUDICATION. HE TOOK US THROUGH THE TRIBUNALS ORDER DATED 6.10.2006, WHICH IS AVAILABLE IN THE PAPER BOOK. I T EMERGES OUT FROM THE RECORD THAT IN PRINCIPLE IT HAS BEEN AGREED THAT TH E BOOKS OF ACCOUNTS OF THE ITA NO.2276/AHD/2011 2 ASSESSEE ARE TO BE REJECTED. IT IS ALSO NOT DISPUT ED THAT THE FACTS FOR THIS ASSESSMENT YEAR AND IN ASSTT.YEAR 1995-96 ARE COMMO N. THE LD.CIT(A) WHILE CONFIRMING THE ADDITION HAS FOLLOWED THE ORDER OF H IS PREDECESSOR IN THE ASSTT.YEAR 1995-96. THE FINDING RECORDED BY THE LD .CIT(A) IN THE IMPUGNED ORDER READS AS UNDER: 2.4 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND APPELLANT'S SUBMISSION. IT IS ADMITTED THAT FACTS O F THIS YEAR ARE IDENTICAL TO THE FACTS OF ASSESSMENT YEAR 1995-96 A S PER ITAT'S ORDER. THAT ASSESSMENT WAS ALSO SET ASIDE BY ITAT TO THE F ILE OF CIT (A). THE APPEAL ORDER IN ASSESSMENT YEAR 1995-96 WAS PASSED IN MAY 2011. THE RELEVANT PART OF THE APPEAL ORDER IS AS UNDER: ' ASSESSING OFFICER REJECTED THE BOOK RESULTS ON TH E GROUND THAT THE LARGE SCALE VARIATION IN INPUT-OUTPUT RATIO POINTED OUT WAS SPECIFIC DISCREPANCIES. THE WORK IN PROGRESS IN MARCH WAS QU ITE HIGH ASSESSEE DID NOT FURNISHED THE DETAILS OF WORK IN PROGRESS F OR DECEMBER 94. ASSESSING OFFICER FOUND THE APPELLANT'S ARGUMENT CO NTRARY TO THE BOOK RESULTS AS DISCUSSED IN PAGES 15 TO 19. ASSESSING O FFICER FOUND LARGE SCALE DISCREPANCIES IN PRODUCTION VIS A VIS RAW MAT ERIAL CONSUMPTION IN THE BOOKS OF ACCOUNTS ON MONTH TO MONTH BASIS. SINC E APPELLANT WAS NOT ABLE TO EXPLAIN THE ERRATIC CONSUMPTION OF RAW MATE RIAL, THE BOOK RESULT REFLECTED GROSS PROFIT AT VERY LOW RATE. THE DECISI ONS RELIED UPON BY THE APPELLANT AND FOLLOWED BY MY LEARNED PREDECESSOR AR E NOT APPLICABLE IN VIEW OF THE PECULIAR FACTS DISCUSSED IN THE ASSE SSMENT ORDER AND MENTIONED IN BRIEF EARLIER. ACCORDINGLY THE BOOK RE SULT REJECTED UNDER SECTION 145 (2) IS CONFIRMED. AFTER REJECTING THE BOOK RESULTS, ASSESSING OFFICER ESTIMATED THE GROSS PROFIT IN COMPARISON TO SUNDECK INDIA LTD WHICH DIS CLOSED GROSS PROFIT AT ABOUT 35% AS AGAINST APPELLANT'S GP OF 22.56%. A SSESSING OFFICER CALCULATED THE GROSS PROFIT IN BOTH THE COMPANIES O N THE SAME BASIS I.E. BY INCLUDING EXPORT BENEFITS AND EXCLUDING OTHER IN COME AND THEREBY REDUCING THE SAME BY EXPENDITURE ON RAW MATERIAL. S INCE THIS WAS THE FIRST YEAR OF MANUFACTURING IN CASE OF APPELLANT CO MPANY AND THERE WERE CERTAIN DIFFERENCES, ASSESSING OFFICER ALLOWED THE BENEFIT OF 5% IN GROSS PROFIT AND EXPECTED APPELLANT'S GROSS PROFIT TO BE 30%. APPELLANT TRIED TO COMPUTE DIFFERENT FIGURES OF GRO SS PROFIT PERCENTAGES BY ONLY CONSIDERING SALES TO WORK OUT GP PERCENTAGE . HOWEVER THIS IS ITA NO.2276/AHD/2011 3 NOT CORRECT SINCE THE GROSS PROFIT AFTER CONSIDERIN G EXPORT BENEFITS WILL ONLY CLOSE TO 23%. THIS IS SO BECAUSE WHILE COMPUTI NG GP RATE AT 28.18% APPELLANT REDUCED RAW MATERIAL AT RS 2,31,31 ,279 AS AGAINST THE CORRECT FIGURE OF 2,37,73,355. THIS WILL REDUCE THE GP BY RS.6 LAKHS. THE CORRECT GP WOULD BE AROUND 34 LAKHS. THE GP PERCENTAGE OF THIS GROSS PROFIT IS ABOUT 23% WHICH IS CLOSE TO TH E CALCULATION MADE BY THE ASSESSING OFFICE. THEREFORE APPELLANT'S ARGUMEN T THAT GP PERCENTAGE COMPUTED BY THE ASSESSING OFFICER IS NOT CORRECT IS REJECTED. ACCORDINGLY THE ADDITION TO GROSS PROFIT MADE BY TH E ASSESSING OFFICER IS CONFIRMED.' IN VIEW OF THE AFORESAID ORDER ON IDENTICAL FACTS, ADDITION OF GROSS PROFIT MADE IN ASSESSMENT YEAR 1996-97 IS ALSO CONFIRMED. IN THE FINAL RESULT THE ADDITION MADE BY THE ASSESS ING OFFICER WHICH WAS SET ASIDE BY ITAT AHMEDABAD IS RESTORED. APPEAL IN THIS CASE IS DISMISSED. 4. THE LD.COUNSEL FOR THE ASSESSEE FURTHER CONTENDE D THAT IN THE ASSTT.YEAR 1995-96 THE ISSUE TRAVELLED TO THE TRIBUNAL IN ITA NO.1817/AHD/2011. THE TRIBUNAL HAS DECIDED THIS APPEAL OF THE ASSESSEE ON 30.5.2014. THE AO HAS APPLIED ESTIMATED GROSS PROFIT RATE OF 30%. THIS R ATE HAS BEEN REDUCED TO 26% BY THE TRIBUNAL. IN OTHER WORDS, THE ASSESSEE HAS SHOWN GP AT 22.56%. THE AO HAS APPLIED THE RATE OF 30%. THE TRIBUNAL HAS RE DUCED TO 26%. HE CONTENDED THAT THE ASSESSEE WILL BE SATISFIED, IF T HE SAME RATE IS BEING ADOPTED IN THIS ASSESSMENT YEAR. THE LD.DR WAS UNABLE TO CONTROVERT THIS CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE. 5. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. THE TRIBUNAL HAS RECORDED THE FOLLOWING FINDING IN THE ASSTT.YEAR 1995-96: 5. WE FIND THAT IT IS NOT IN DISPUTE THAT IN THE FI RST YEAR, THERE IS EVERY POSSIBILITY THAT THERE WILL BE MORE WASTAGE OF RAW MATERIALS BECAUSE OF NEW MACHINERIES AND NEW PRODUCTION PROCEDURE, NEW L ABOUR ETC. ITA NO.2276/AHD/2011 4 THEREFORE, CONSUMPTION OF INPUT RATIO VARIES TILL T HE TIME SMOOTH PRODUCTION TAKES PLACE. 6. IN THE INSTANT CASE, THE GROSS PROFIT RATE OF 30 % ESTIMATED BY THE ASSESSING OFFICER IS WITHOUT BASIS AND THE ASSESSIN G OFFICER HAS BROUGHT NO MATERIAL ON RECORD TO SHOW WHAT WAS THE RATE OF GROSS PROFIT WHICH WAS ACCEPTED BY THE DEPARTMENT IN THE CASE OF M/S. SUNDEK INDIA LIMITED IN ITS FIRST YEAR OF OPERATION. 7. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF T HE CASE, IN OUR CONSIDERED VIEW, IT SHALL BE FAIR AND REASONABLE TO ESTIMATE THE GROSS PROFIT OF THE ASSESSEE AT THE RATE OF 26% IN PLACE OF 22.56% DISCLOSED BY THE ASSESSEE AND 30% ESTIMATED BY THE ASSESSING OFF ICER. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 6. AS OBSERVED EARLIER, THERE IS NO DISPARITY OF FA CTS. SIMILAR RATE OF GP HAS TO BE ADOPTED IN THE ASSTT.YEAR 1996-97 AS ADOP TED IN THE ASSTT.YEAR 1995-96. THE TRIBUNAL IN THE ASSTT.YEAR 1995-96 UP HOLD ENHANCEMENT OF GP BY 4%. WE MODIFY THE ORDER OF THE AUTHORITIES BELO W TO THIS EXTENT IN THE ASSTT.YEAR 1996-97. WE DIRECT THE AO TO RE-COMPUTE THE GROSS PROFIT IN THE ASSTT.YEAR 1996-97 BY MAKING AN ADDITION AT THE RAT E OF 4% TO THE GP RATE DISCLOSED BY THE ASSESSEE. THE LD.AO WILL QUANTIFY THE ADDITION BY THIS ANALOGY. IN VIEW OF THE ABOVE, APPEAL OF THE ASSES SEE IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 19 TH JULY, 2016 AT AHMEDABAD. SD/- SD/- (ANIL CHATURVEDI) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 19/07/2016