AUTO TECH(PARTNERSHIP FIRM), Jaipur V. ITO, Jaipur

ITA 238/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5385 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 07-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Keywords: Principle of natural justice
• Section: 40A(3); 143(3); 145

Judgement Text

1 ITA NO.238/JP/2013 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH [SMC] : JAIPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER I.T.A. NO. 238/JP/2013 ASSESSMENT YEAR: 2008-09 M/S. AUTO TECH (PARTNERSHIP FIRM), G-458 (H), ROAD NO.12, VKIA, JAIPUR PAN:AADFA1110G VS THE INCOME TAX OFFICER, WARD 4 (2), JAPUR (APPELLANT) (RESPONDENT) APPELLANT BY NONE(ADJOURNMENT APPLICATION REJECTED ) RESPONDENT BY SHRI RAJ MEHRA, JCIT DATE OF HEARING: 03-03-2016 DATE OF PRONOUNCEMENT: 9-03-2016 O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FR OM THE ORDER OF THE LEARNED CIT (A)-II, JAIPUR DATED 27-12-2012 FOR ASS ESSMENT YEAR 2008-09. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS, ALTHOUG H IT HAS NOT BEEN CLEARLY WORDED:- RELIEF IN ENTIRETY BE GRANTED FOR TRADING ADDITION S MADE BY THE ITO WARD 4(2), JAIPUR AMOUNTING TO RS.685549/- AND ADDITION OF RS.35060 U/S 40A(3) OF THE IT ACT, THE TRADING ADDITIONS GOT REDUCED TO RS .563962/- BY HONBLE CIT APPEALS-II, JAIPUR VIDE ORDER DATED 27/12/2012 AS S UCH RELIEF OF RS.121587 ONLY WAS GIVEN BY THE HONBLE CIT APPEALS-II, JAIPU R IN TRADING ADDITIONS AND THE ADDITIONS OF RS.35060/- IS NOT SURVIVED INDEPEN DENTLY. AS SUCH THE ENTIRE TRADING ADDITIONS MADE BY T H E ITO WARD 4(2), JAIPUR MAY KINDLY BE DELETED AND THE ADDITIONS MADE U/S 40A (3 ) OF THE IT ACT MAY BE DELETED IN ENTIRETY. 2. THIS IS THE CASE OF A FIRM STATED TO BE IN THE B USINESS OF MANUFACTURING OF AGRICULTURAL IMPLEMENTS AND GENERAL FABRICATION. AS PER THE ASSESSMENT ORDER 2 ITA NO.238/JP/2013 PASSED U/S 143(3) OF THE IT ACT DATED 29-10-2010 IT WAS OBSERVED THAT THE ASSESSEE HAD DECLARED GROSS PROFIT OF RS.11,25,530/ - ON THE TURNOVER OF RS.70,89,776/-. THE PERCENTAGE OF GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION WAS 15.88%. AS AGAINST THAT IN THE PRECEDING ASSESS MENT YEAR 2007-08 ON THE TURNOVER OF RS.43.88,000/-, PERCENTAGE OF GROSS PRO FIT AS PER THE AO WAS 23.54%. BECAUSE OF THE DECLINE IN THE RATE OF PROFI T CERTAIN ENQUIRIES HAVE BEEN RAISED BY THE AO. THE AO HAS ALSO MENTIONED THAT ST OCK REGISTER WAS NOT MAINTAINED BY THE ASSESSEE. AS A RESULT, THE AO HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE SALES AT RS.76,00,000/- A ND THEREUPON CALCULATED THE PROFIT AS UNDER:- CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO IN VIEW OF DEFECTS MENTIONED ABOVE I HOLD THAT THE ASSESSEE HAS NOT MAINTAINED THEIR BOOKS OF ACCOUNTS IN PROPER MANNER SO THAT PROFIT C AN BE CORRECTLY DERIVED. FURTHER THERE IS SHARP DECLINE IN G. P. RATE FROM 2 3.84% IN IMMEDIATELY PRECEDING YEAR TO 15.88% IN YEAR UNDER CONSIDERATIO N. CONSIDERING ALL THESE FACTS PROVISIONS OF SECTION 145 (3) ARE APPLIED IN THE CASE OF THE ASSESSEE. BOOKS RESULTS DECLARED BY THE ASSESSEE ARE REJECTED , SALES/GROSS RECEIPTS ARE ESTIMATED AT RS.76,00,000/- AND GROSS PROFIT RATE O F 23.83% IS APPLIED. GROSS PROFIT IS WORKED OUT AT RS.15,11,080/- RESULTING IN TRADING ADDITION OF RS.6,86,549.55. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE LEARNED CIT (A) HAS GRANTED PART RELIEF IN THE FOLL OWING MANNER:- NOW THE QUESTION IS THE APPLICATION OF GP RATE, HE RE TOO THE ACTION OF THE AO IN APPLYING GP RATE OF IMMEDIATELY PRECEDING YEAR O F 23.83% IS JUSTIFIED AS PAST YEARS RESULTS HAVE TO BE TAKEN INTO ACCOUNT A ND IN THE IS CASE HIGHER GP HAS BEEN SHOWN ON LOWER TURNOVER IN THE IMMEDIATELY PRECEDING YEAR, BUT THE ACTION OF THE AO IN ESTIMATING SALES AT RS.76,00,00 0 IS NOT IN ORDER THEREFORE THE AO IS DIRECTED TO APPLY GP RATE OF 23.83% ON RE CEIPTS SHOWN OF RS.70,89,776 WHICH BRINGS PROFIT OF RS.16,89,493 AS AGAINST RS.11,55,531 SHOWN BY THE APPELLANT, THUS TRADING ADDITION OF RS .5,63,962 (RS.16,89,493 RS.11,55,531) AS AGAINST OF RS.6,85,549 MADE BY THE AO IS UPHELD, BALANCE RS.1,21,587 (RS.6,85,649 RS.5,63,962) IS DELETED. 4. ON THE DATE OF HEARING NO ONE WAS PRESENT. HOWEV ER, AN ADJOURNMENT APPLICATION WAS FILED THROUGH THE REGISTRY. THE SAM E IS HEREBY REJECTED CONSIDERING THE TRIFLE NATURE OF THE DISPUTE. 3 ITA NO.238/JP/2013 5. I HAVE HEARD THE LEARNED DR MR. RAJ MEHRA WHO HA S SUPPORTED THE VIEW TAKEN BY THE REVENUE AUTHORITIES. AS FAR AS PART RE LIEF AS GRANTED BY THE LEARNED CIT (A) IS CONCERNED, I HEREBY HOLD THAT THE ESTIMA TION OF SALES WAS RIGHTLY REVERSED. HOWEVER, IT IS NOT APPARENT THAT HOW THE LEARNED CIT (A) HAS APPLIED THE PROFIT RATE OF THE IMMEDIATELY PRECEDING YEAR. IN THE IMMEDIATE PRECEDING YEAR 2007-08 THE GROSS PROFIT RATE WAS 23.84% AS AG AINST THAT THE GROSS PROFIT RATE FOR THE YEAR UNDER CONSIDERATION WAS 15.88%. A LTHOUGH, THERE WAS A DECLINE IN THE PERCENTAGE OF GROSS PROFIT, BUT ONE MORE FAC T IS WORTH CONSIDERATION THAT THE TURNOVER FROM RS.43,88,000/- IN AY 2007-08 HAS GONE UP TO RS.70,89,000/- FOR THE AY 2008-09. ON THIS POINT, GENERALLY AN ARG UMENT HAS BEEN RAISED THAT WHENEVER THERE IS AN INCREASE IN THE TURNOVER THEN TO ACHIEVE THE TARGET OF HIGHER SALES, THE PERCENTAGE OF PROFIT IS COMPROMISED WHIC H REFLECTS LOWER PERCENTAGE OF BOOK RESULT. THEREFORE, KEEPING IN MIND THE OTHE R PROBABILITIES AS WELL AS THE PRINCIPLES OF NATURAL JUSTICE I HEREBY HOLD HAT IT SHALL BE FAIR AND REASONABLE TO COMPUTE THE PROFIT ON THE DECLARED TURNOVER OF THE ASSESSEEBY APPLYING 20% GROSS PROFIT RATE. ALTHOUGH THIS IS JUST AN ESTIMAT ION BUT FACTUAL MATRIX OF THE CASE AS WELL AS THE DISCUSSIONS MADE BY THE AO HAVE INDICATED THAT TO COVER UP CERTAIN LAPSES A NOMINAL ADDITION IS JUSTIFIED. I D IRECT ACCORDINGLY. AS A RESULT PART OF THE GROUND CHALLENGING THE TRADING ADDITION IS PARTLY ALLOWED. IN THE GROUND THE ASSESSEE HAS ALSO CHALLENGED THE ADDITION OF RS.35,060/- AFTER INVOKING THE PROVISIONS OF SECTION 40A (3) OF THE ACT. THE OBSERVATION OF THE AO WAS THAT THE ASSESSEE HAS MADE THE SAID PAYM ENT TO RIICO ON 28-07- 2007 ON ACCOUNT OF RENTS AND FEES. THE EXPLANATION OF THE ASSESSEE WAS THAT THE PAYMENT WAS MADE TO THE GOVERNMENT, HENCE, EXEMPT. THE AO HAS REJECTED THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT THE PAYMENT WAS NOT MADE TO GOVERNMENT BUT TO A CORPORATION. THE FIRST APPELLAT E AUTHORITY HAS CONFIRMED THE ADDITION. IN THE ABSENCE OF ANY SATISFACTORY EX PLANATION OF SUPPORTING 4 ITA NO.238/JP/2013 EVIDENCE I HAVE NO OPTION BUT TO CONFIRM THE FINDIN GS OF THE REVENUE AUTHORITY. THIS PART OF THE GROUND IS HEREBY DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH OF MARCH, 2016. SD/- (MUKUL K. SHRAWAT) JUDICIAL MEMBER JAIPUR, DATED: 9 TH MARCH, 2016 LAKSHMIKANTA DEKA/SR. PS COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T., CONCERNED 4. CIT (APPEALS), JAIPUR. 5. D.R., ITAT, JAIPUR. 6. GUARD FILE TRUE C OPY BY ORDER ASSISTANT REGISTRA R, INCOME TAX APPELLATE TRIBUNA L, JAIPUR BENCH, JAIPUR.