SHRINE LABORATORIES P. LTD, THANE V. ITO WD 1(4), KALYAN

ITA 2312/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93248 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 07-04-2014
• Court: TRIBUNAL
• Department Lawyers: NEELIMA V NADKARNI
• Assessee Lawyers: PRATIK SANGHVI
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER I.T.A. NO.2312/M/2014 (AY:2007 - 2008 ) SHRINE LABORATORIES PVT LTD., RH - 8, SHRUTI VILLA, GROUND FLOOR, MIDC, RESIDENTIAL ZONE, DOMBIVALI (E), THANE - 421204. / VS. ITO WARD 1(4), RANI MANSION, MURBAD ROAD, KALYAN 421301. ./ PAN : AAGCS3777H ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PRATIK SANGHVI / RESPONDENT BY : MS. NEELIMA V. NADKARNI, DR / DATE OF HEARING : 06.07.2015 / DATE OF PRONOUNCEMENT : 22 .07.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 7.4.2014 IS AGAINST THE ORDER OF THE CIT (A) - 1, THANE DATED 17.12.2013 FOR THE ASSESSMENT YEAR 2007 - 2008. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. A) IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD AO ERRED IN ADDING LUMP SUM AMOUNT OF RS. 1,66,104/ - IN RESPECT OF REDUCTION IN GROSS PROFIT RATIO FROM THE LAST ASSESSMENT YEAR. B) THE LD AO ERRED IN APPLYING THE SAME GROSS PROFIT RATIO AS IT WAS IN EARLIER YEAR. THE LD AO ALSO ERRED IN NOT ACCEPTING THE STAT EMENT OF MONTHLY QUANTITY MOVEMENT SUBMITTED BEFORE HIM. C) IN COMING TO THE CONCLUSION TO WHICH HE DID, THE LD AO ERRED IN, INTER - ALIA RELYING UPON IRRELEVANT AND EXTRANEOUS CONSIDERATIONS, JUDGMENTS WHILE OMITTING TO CONSIDER RELEVANT FACTS, EVIDENCES, S UBMISSIONS AND CONSIDERATIONS. 2. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD AO ERRED IN DISALLOWING THE EXPENSES OF RS. 2,87,531/ - (BEING 15% OF TOTAL INDIRECT EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT) ON LUMP SUM BASIS AN D THEREAFTER RESTRICTING THE SAID DISALLOWANCE TO THE EXTENT OF RS. 95,843/ - (BEING 5% OF TOTAL INDIRECT EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT) ON LUMP SUM BASIS BY LD CIT (A). (B) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD AO E RRED IN APPLYING THE PROVISIONS OF SECTION 69C. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF AYURVEDIC MEDICINES. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 67,790 / - . ASSESSMENT WAS COMPLETED U/S 143(3) OF 2 THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 6,84,980/ - . IN THE ASSESSMENT, AO REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE GROSS PROFIT (GP) APPLYING THE GP RATE OF ITS PRECEDING ASSESSMENT YEAR 200 6 - 07 IE., 41.42%. AO MADE ADDITION OF RS. 1,66,105/ - ON THIS ACCOUNT. AO ALSO IDENTIFIED CERTAIN ACCOUNTS, WHOSE EXPENDITURE IS UNLIKELY TO SUSTAIN RIGORS OF THE SCRUTINY AND QUANTIFIED SUCH SUSTAINABLE AMOUNTS TOTALLING RS. 19,16,876/ - AND 15% OF THE S AME WAS DISALLOWED ON AD - HOC BASIS ON THIS ACCOUNT, WHICH COMES TO RS. 2,87,531/ - . AO ALSO MADE AN ADDITION OF RS. 1,63,552/ - ON ACCOUNT OF UNEXPLAINED ADVANCES. IN THE ASSESSMENT, AO NOTICED THAT GP RATE FOR THE YEAR UNDER CONSIDERATION IS ONLY 38.52% A S AGAINST THE 41.42% IN THE ASSESSMENT YEAR 2006 - 2007. THE DIFFERENCE OF 3.1% WAS ADDED IN THE ASSESSMENT. ON APPEAL, CIT (A) CONFIRMED THE ADDITION ON ACCOUNT OF GP. FURTHER, CIT (A) RESTRICTED THE DISALLOWANCE OF EXPENSES TO 5% AND THUS, GRANTED PART RELIEF ON THIS ACCOUNT. AGGRIEVED AND DISSATISFIED WITH THE SAID DECISION OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. DURING THE PROCEEDINGS BEFORE THE TRIBUNAL , LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE FACT THAT THE ASSE SSEE HAS NOT RAISED ANY GROUND ON THE LEGAL ISSUE OF REJECTION OF BOOKS OF ACCOUNT. FURTHER, ON THE ISSUE OF BEST JUDGMENT ON THE GP ADDITIONS, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER HAS NOT BROUGHT ANY COMPARABLES TO SUPPORT HIS STA ND. FURTHER, HE HAS ALSO FURNISHED THE GP RATE FOR THE AYS 2006 - 07; 2007 - 08 AND 2008 - 09 AND ARGUED THAT GP RATE OF AY 2005 - 06 SHOULD NOT BE CONSIDERED AS THE SAME IS ON VERY HIGHER SIDE. FURTHER, LD COUNSEL FOR THE ASSESSEE PRAYED FOR CONSIDERING THE AVER AGE GP RATE FOR THE AYS 2006 - 07; 2007 - 08 AND 2008 - 09 AND ALSO MENTIONED THAT ADOPTING THE GP RATE OF 40% IN THIS YEAR SHOULD MEET THE ENDS OF JUSTICE. 4. AFTER HEARING THE LD DR FOR THE REVENUE, WHO RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES, I FIND THE PRAYER OF THE ASSESSEE IS ACCEPTABLE AND THEREFORE, I DIRECT THE AO TO RESTRICT THE ADDITION ON ACCOUNT OF GP ADDITION TO 40% AGAINST 41.42%. ACCORDIN GLY, THIS GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 5. REGARDING THE SECOND ISSUE OF ESTIMATED DISALLOWANCE ON CERTAIN GENERAL EXPENDITURES, ON PERUSAL OF THE CIT (A)S ORDER IN GENERAL AND PARA 13 IN PARTICULAR, I FIND THE SAME IS RELEVANT IN THIS REGARD. CONSIDERING THE IMPORTANCE OF THE SAID PARA 3 13 OF THE CIT (A)S ORDER FOR THE SAKE OF COMPLETENESS OF THIS ORDER, THE SAME IS EXTRACTED AS FOLLOWS: - 13. I HAVE CONSIDERED THE APPELLANTS SUBMISSIONS. THE AO HAS MADE THE DISALLOWANCE AT THE RATE OF 15% OF THE EXPENSES ON ESTIMATE BASIS. IF AN ASSESSEE DOES NOT PRODUCE THE SUPPORTING DOCUMENTARY EVIDENCE FOR CLAIM OF VARIOUS EXPENSES BEFOR E THE AO FOR HIS VERIFICATION, HE IS LEFT WITH NO ALTERNATIVE OTHER THAN TO DISALLOW THE EXPENSES ON ESTIMATE BASIS. VARIOUS DEFECTS IN THE APPELLANTS BOOKS OF ACCOUNTS HAVE ALREADY BEEN POINTED OUT ABOVE. HOWEVER, KEEPING IN VIEW THE NATURE OF BUSINESS, THE DISALLOWANCE MADE BY THE AO IS EXCESSIVE AND IS RESTRICTED TO RS. 95,483/ - BEING 5% OF THE EXPENSES CLAI MED. THE AO IS DIRECTED ACCORDINGLY. 6. FROM THE ABOVE, I FIND THE CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. THEREFORE, I MY VIEW THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE ISSUE RAISED BY THE ASSESSEE DISMISSED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 22 ND JULY, 2015. SD/ - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 22 .7 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI