DCIT, Rohtak V. M/s. A.K. Automatic, Rohtak

ITA 2368/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6700 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Keywords: Rejection of books of accounts
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.-2368/DEL/2014 (ASSESS MENT YEAR 2010-11) DCIT ROHTAK CIRCLE ROHTAK (APPELLANT) VS A. K. AUTOMATIC HISAR ROAD ROHTAK AABFA4065A (RESPONDENT) APPELLANT BY SH. S. K. JAIN, DR RESPONDENT BY NONE ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 10/02/2004 PASSED BY CIT(A), ROHTAK. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS ERRED IN LAW AND IN FACTS BY DELETING THE ADDITION OF RS.99,44,401/- MADE BY A.O BY REJECTING THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SEC TION 145(3) OF THE I.T. ACT AND APPLYING THE G.P RATE OF 19.59% AS AGAINST 18.46% SHOWN BY THE APPELLANT AS NO DATE OF HEARING 27.07.2016 DATE OF PRONOUNCEMENT 29.07.2016 SUSTAINABLE DOCUMENTARY EVIDENCE EXPLAINING THE FAL L IN G.P OR IN SUPPORT OF THE EXPENSES DEBITED IN TRADIN G AND IN PROFIT AND LOSS ACCOUNT WAS FURNISHED DURING ASSESS MENT PROCEEDINGS; THE CIT(A) DELETED THE SAID ADDITION W ITHOUT APPRECIATING THE FACTS OF THE CASE MENTIONED IN DET AILS IN ASSESSMENT ORDER. 3. THE ASSESSEE IS ENGAGED IN MANUFACTURING OF PREC ISION TURNED PARTS MAINLY USED IN AUTOMOBILES INDUSTRY, GENERATO R SETS AND OTHER ALLIED INDUSTRIES. GOODS ARE MANUFACTURED AS PER THE SPECIFICATION GIVEN BY THE PURCHASERS. AS THE ASSE SSEE, THE GP RATE VARIED FROM ITEM TO ITEM, NO FIX GP CAN BE ACHIEVED BY ANY BUSINESSMAN IN ANY TRADE MAINTAINED DAY TO DAY BOOK S OF ACCOUNT. THE GP RATE IN THE CASE OF THE ASSESSEE ITSELF FROM ASSESSMENT YEAR 2006-07 TO 2010-11 WERE AS UNDER:- ASSESSMENT YEAR GROSS PROFI T RATE 2006 - 07 18.13% 2007 - 08 20.58% 2008 - 09 19.15% 2009 - 10 19.59% 2010 - 22 18.46% 4. THE ASSESSING OFFICER ISSUED NOTICE U/S 142(1) A LONG WITH QUESTIONNAIRE ON 1/8/2012. ANOTHER NOTICE U/S 143(2 ) WAS ISSUED ON 23/10/2012. FOR THE YEAR UNDER ASSESSMENT COST PROFIT OF RS.14,33,32,730/- I.E. AT 18.46% ON THE SALES TURNO VER OF RS.88 CRORE WAS DECLARED AS AGAINST THIS. THE GP RATE OF 19.59% ON SALES TURNOVER OF RS.65 CRORE WAS DECLARED IN THE IMMEDIA TELY PRECEDING YEAR. THIS DECLINE IN GP RATE WAS EXPLAINED BY THE ASSESSEE AS UNDER:- REGARDING FALL IN G.P RATE WHICH FELL DOWN TO 18.4 6% AS AGAINST 19.59% IN F/Y 2008-09 AND 19.15% IN F/Y 2007-08. S IR, FROM THE COMPARISON OF 3 YEARS G.P YOUR GOOD SELF WILL A PPRECIATE THAT THERE IS VARIATION IN GP RATE IN THIS LINE OF TRADE. THE MAIN REASON OF ALL IN GP RATE WAS INCREASE IN SALE WHICH INCREASED TO OVER RS.88 CRORES FROM RS.65 CRORES IN THE PREVIOU S YEAR. FURTHER THE BUSINESSMAN IS CONCERNED WITH THE AMOUN T OF GROSS PROFIT AND NOT WITH THE PERCENTAGE OF GP RATE. THE GP DURING THE YEAR UNDER ASSESSMENT WAS RS.14,33,32,729.78 AS COM PARED TO RS.11,00,58,078.02 IN THE PREVIOUS YEAR. SIMILA RLY, THE NET PROFIT WAS ALSO INCREASED DURING THE YEAR UNDER ASS ESSMENT TO RS.7,67,93,526.96 AS AGAINST 5,74,17,589.32 IN THE PREVIOUS YEAR. KEEPING IN VIEW THE ABOVE FACTS THE MINOR FA LL IN GP RATE MAY KINDLY BE ACCEPTED. 5. THE ASSESSING OFFICER REJECTED THE TRADING RESU LTS BY INVOKING SECTION 145(3) OF THE INCOME-TAX ACT, 1961 AND ADOP TED GP RATE OF 19.59% OF THE ASSESSMENT YEAR 2009-10 IN THE PRESE NT ASSESSMENT ALSO AND MADE AN ADDITION OF RS.99,44,401/-. THE AS SESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE LD. DR SUBMITTED THAT IN THE PRECEDING ASSES SMENT YEAR 2009-2010, THE GP RATE ADOPTED WAS 19.59% AND THE R EASONS RECORDED BY THE ASSESSING OFFICER FOR ADOPTING THE SAME IN THE PRESENT ASSESSMENT YEAR ARE CORRECT AND INVOCATION OF SECTION 145(3) OF THE ACT FOR REJECTING TRADING RESULTS WAS PROPER. THE LD. DR FURTHER SUBMITTED THAT THE CIT(A) FAILED TO LOOK INTO THIS ASPECT AND HENCE THE ORDER OF THE CIT(A) BE SET ASIDE. 7. FROM THE ASSESSEE SIDE, NONE HAS APPEARED BUT AL L THE RELEVANT DOCUMENTS ARE BEFORE US. 8. WE HAVE HEARD LD. DR AND PERUSED THE DOCUMENTS. VARIATION IN GP RATE IN A PARTICULAR ASSESSMENT YEAR FROM ITS IMMEDIATE PRECEDING YEAR IS NOT A NEW SITUATION IN THE ASSESS EES CASE. IN FACT, THERE WAS FALL OF ALMOST 1 % IN 2008-09 FROM THE EA RLIER PRECEDING YEAR 2007-08 AND THE SAME WAS ACCEPTED BY THE DEPAR TMENT. THE CIT(A) WAS CORRECT IN HOLDING THAT THE ADDITION FOL LOWING THE REJECTIONS OF THE BOOKS OF ACCOUNTS BY THE ASSESSEE AND INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT WAS MADE WI THOUT LOOKING AT THE FACTS OF THE CASE. THE ASSESSEE VIDE ITS EXPLA NATION HAS CLEARLY STATED THAT THE SUBSTANTIAL INCREASE IN SALES FROM RS.65 CRORES IN THE PREVIOUS YEAR TO RS.88 CRORES IN THE PRESENT AS SESSMENT YEAR. THEREFORE, THE RATIO OF GP WAS AFFECTED. THE ASSES SEE ALSO EXPLAINED BEFORE THE AUTHORITIES THAT ANOTHER REASON FOR THIS FALL WAS INCREASE OF PURCHASE OF SEMI-FINISHED ITEMS FROM OTHER MANUF ACTURERS AS APPEARED IN THE PREVIOUS YEAR TO INCREASE THE SALES . THE ASSESSEE HAS SUBMITTED ALL THE RELEVANT DETAILS BEFORE THE A UTHORITIES. BOOKS OF ACCOUNTS WITH ALL VOUCHERS WERE PRODUCED ALONG W ITH WRITTEN SUBMISSIONS ON 16/8/2012 BEFORE THE ASSESSING OFFIC ER. THE ASSESSING OFFICER HAS NOT QUESTIONED OR DOUBTED THE ACCOUNTS. THEREFORE, REJECTION OF BOOKS OF ACCOUNTS WAS NOT J USTIFIED AS THERE WAS NO DEFECTIVE POINTED OUT BY THE ASSESSING OFFIC ER IN THE ASSESSMENT ORDER. MERELY ON THE GROUND THAT THE GP RATE HAS FALLEN FROM 1% FROM THE IMMEDIATE PRECEDING YEAR CANNOT BE A SOLE REASON FOR ADOPTING GP RATE AS PER ASSESSING OFFICERS OWN CONVENIENCE. THUS, WE UPHOLD THE ORDER OF THE CIT (A). 9. IN RESULT, THE REVENUES APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29TH OF JULY 2016. SD/- SD/- (R.S. SYAL) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/07/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 27.07.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 28.07.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 07.2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 29 .07.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 29.07.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.