The ITO, Ward-1(3), Surat V. M/s. Manila Processors Pvt. Ltd., Surat

ITA 2337/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8892 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-09-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 31-10-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: J P SHAH
• Keywords: Additional evidence; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND D.C. AGRAWAL, ACCOUNTANT MEMBER) ITA NO.2337/AHD/2005 [ASSTT YEAR : 2002-2003] ITO, WARD-1(3) SURAT. VS. M/S.MANILA PROCESSORS PVT. LTD. PLOT NO.348-349, ROAD NO.3 GIDC, SACHIN, SURAT. REVENUE BY : SMT.NEETA SHAH ASSESSEE BY : SHRI J.P. SHAH O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THIS APPEAL IS BY THE DEPARTMENT AND IT RELATES TO THE ASSESSMENT YEAR 2002-2003. TH E ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF DYEING A ND PRINTING OF THE SARIS AND DRESS MATERIAL ON JOB WORK BASIS. 2. THOUGH THE DEPARTMENT HAS TAKEN SIX GROUNDS OF A PPEAL ONLY TWO ISSUES REQUIRE TO BE DECIDED. THE FIRST IS WHETHER THE CI T(A) WAS JUSTIFIED IN DELETING THE GROSS PROFIT ADDITION OF RS.5,95,623/- AND SECO ND IS WHETHER HE HAD ADMITTED FRESH EVIDENCE IN VIOLATION OF RULE 46A OF THE IT RULES. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE AO REJECTE D THE BOOK RESULTS AND MADE AN ADDITION OF RS.5,95,623/- TO THE GROSS PROF IT. HE REJECTED THE BOOK RESULTS MAINLY ON THE FOLLOWING GROUNDS: A) EXCESS STOCK OF GREY CLOTH OF RS.20,32,053/- WAS FO UND DURING THE SURVEY; B) EXCESS STOCK OF COLOURS AND CHEMICALS OF THE VALUE OF RS.12,16,000/- WAS FOUND DURING THE SURVEY; C) THE ASSESSEE HAD INCURRED EXPENDITURE OF RS.10,12,0 00/- TOWARDS EXTENSION OF THE FACTORY BUILDING WITHOUT RECORDING THE EXPENDITURE IN THE BOOKS; D) UNACCOUNTED CASH OF RS.2,10,000/- WAS FOUND FROM TH E BUSINESS PREMISES DURING THE SURVEY; PAGE - 2 ITA NO.2337/AHD/2005 -2- E) IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT TRA NSPIRED THAT THE ASSESSEE WAS NOT MAINTAINING THE STOCK REGISTER FOR CONSUMPTION OF STORES, COLOURS AND CHEMICALS; F) THERE WAS A FALL IN THE RATE OF GROSS PROFIT WHICH THE ASSESSEE WAS UNABLE TO EXPLAIN SATISFACTORILY. 3. ON APPEAL THE ASSESSEE WOULD APPEAR TO HAVE MADE ELABORATE SUBMISSIONS BEFORE THE CIT(A) IN PARTICULAR FOUR CO MPARABLE CASES WERE BROUGHT TO THE NOTICE OF THE CIT(A) BY THE ASSESSEE AND THEY ARE (A) KABUTEX PROCESSORS, (B) ASMI DYEING AND PRINTING WORKS, (C) ASIAN DYEING AND PRINTING WORKS AND (D) T.M. PATEL PROCESSING PVT. L TD. IT WAS POINTED OUT THAT THE ASSESSEES GROSS PROFIT RATE AS A PERCENTAGE OF THE JOB RECEIPTS WAS 13.08% WHICH COMPARED VERY WELL WITH THE ABOVE FOUR CASES WHERE SUCH GP RATE WAS 12.32%, 11.31%, 10.68% AND 10.42%. THE RELEVANT FI GURES OF JOB RECEIPTS, CLOSING STOCK, MANUFACTURING EXPENSES, COLOURS AND CHEMICALS CONSUMED ETC. RELATING TO THE FOUR COMPARABLE CASES WERE ALSO FUR NISHED BY THE ASSESSEE. 4. THE CIT(A) RELIED ON THE DETAILS FURNISHED BY TH E ASSESSEE RELATING TO THE FOUR COMPARABLE CASES ALONG WITH THE AUDITED BALANC E SHEETS AND PROFIT AND LOSS ACCOUNTS AND HELD THAT THE GROSS PROFIT RATE OF 13. 08% SHOWN BY THE ASSESSEE IS FAR BETTER THAN THAT OF THE OTHER COMPANIES OF THE TRADE. HE ACCORDINGLY DELETED THE ADDITION AND ALLOWED THE APPEAL. 5. THE FIRST OBJECTION TAKEN BY THE LEARNED SR.DR I S BASED ON RULE 46A OF THE IT RULES. IT IS POINTED OUT THAT NEITHER DID T HE CIT(A) RECORD REASONS FOR ADMITTING THE FRESH EVIDENCE NOR DID HE SEND IT TO THE AO FOR HIS COMMENTS OR REBUTTAL. IT IS FURTHER POINTED OUT THAT CERTAIN OTHER SUBMISSION MADE BEFORE THE CIT(A), SUCH AS STRIKE IN THE FACTORY WERE NOT MADE BEFORE THE AO. IT IS THEREFORE CONTENDED THAT THE MATTER SHOULD BE SENT TO THE AO FOR DE NOVO CONSIDERATION. WE HAVE ALSO HEARD THE LEARNED COUN SEL FOR THE ASSESSEE ON THIS ASPECT. HAVING CONSIDERED THE RIVAL SUBMISSIONS, W E ARE OF THE VIEW THAT THERE IS FORCE IN THE CONTENTION OF THE LEARNED SR.DR THA T THE CIT(A) HAS VIOLATED THE PROVISIONS OF RULE 46A. FIRSTLY, IT IS FOR THE CIT (A) TO RECORD REASONS AS TO WHY PAGE - 3 ITA NO.2337/AHD/2005 -3- THE ADDITIONAL EVIDENCE HAS TO BE ADMITTED. ONCE T HE SAME IS ADMITTED, IT HAS TO BE SENT TO THE AO FOR HIS REBUTTAL OR COMMENTS. TH E APPEAL CAN BE DECIDED ONLY THEREAFTER. IT APPEARS TO US, WITH RESPECT, THAT THE CIT(A) HAS NOT FOLLOWED THE PROCEDURE PRESCRIBED BY THE AFORESAID RULE. IT IS NOT DISPUTED ON BEHALF OF THE ASSESSEE THAT THE COMPARABLE CASES AN D DETAILS REGARDING THE SAME FILED BEFORE THE CIT(A) CONSTITUTED FRESH EVIDENCE NOT PRESENTED BEFORE THE AO. IN THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER OF T HE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO HI M TO CONSIDER THE FRESH EVIDENCE ADDUCED BY THE ASSESSEE AND TAKE A FRESH D ECISION REGARDING THE GROSS PROFIT DECLARED BY THE ASSESSEE IN ACCORDANCE WITH LAW AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IN THE VIEW WE HAVE TAKEN IT IS NEITHER NECESSARY NOR PROPER FOR US TO DECIDE THE O THER ISSUE VIZ. WHETHER THE ADDITION WAS RIGHTLY DELETED BY THE CIT(A). 6. THE APPEAL OF THE DEPARTMENT IS THUS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT 30 TH SEPTEMBER, 2009. SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 30-09-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD