The ITO, Ward-6(1), Surat V. M/s. Arunbhai Gopalbhai Panchal, Surat

ITA 2463/AHD/2010

• Counselvise Citation: 246320514 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Keywords: Gross profit estimation; Rejection of books of accounts; Corroborative evidences
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND A. MOHAN ALANKAMON Y, AM) ITA NO.2463/AHD/2010 A. Y.: 2007-08 THE INCOME TAX OFFICER, WARD 6(1), SURAT, ROOM NO.614, 6 TH FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S. ARUNBHAI GOPALBHAI PANCHAL, AMBAJI ROAD, TALUKA MANDVI, SURAT PA NO. AFFPP 0290 K (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. P. TALATI, SR. DR RESPONDENT BY NONE DATE OF HEARING: 22-05-2012 DATE OF PRONOUNCEMENT: 22-06-2012 O R D E R PER A. MOHAN ALANKAMONY: THE REVENUE HAS FILED THIS APPEAL AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) -IV, SURAT IN APPEAL NO. CAS-IV/250/2009-10 DATED 25-05-2010, FOR THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE IN ITS APPEAL HAS RAISED FOUR GROUND S, WHEREIN GROUND NO. 3 & 4 ARE GENERAL IN NATURE AND DO NOT S URVIVE FOR ADJUDICATION, THE OTHER TWO RELEVANT GROUNDS ARE RE PRODUCED HEREIN BELOW:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LT. CIT(A), SURAT HAS ERRED IN DELETING TH E ADDITION OF RS.286391/- MADE ON ACCOUNT OF FALL IN GP. ITA NO.2463/AHD/2010 (AY: 2007-08) THE ITO, WARD-6(1), SURAT VS M/S. ARUNBHAI GOPALBHA I PANCHAL 2 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N OF RS.1200721/- MADE ON ACCOUNT OF NON GENUINE LIABILI TY. 3.1 THE ASSESSEE IS THE PROPRIETOR OF M/S. RADHE KR ISHNA ENG. & LAXMI TRANC., ENGAGED IN THE BUSINESS OF PURCHASE A ND SALES OF TRACTORS AND MANUFACTURING OF TRAILERS, FILED HIS R ETURN OF INCOME ON 29- 10-2007 DECLARING TOTAL INCOME AT RS.1,73,790/- ALO NG WITH AUDITED ACCOUNTS AND AUDIT REPORT IN FORM NO.3CB AND 3CD. T HE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ASSESSMENT ORD ER WAS PASSED BY THE LEARNED AO ON 24-12-2009 U/S 143(3) OF THE I T ACT RE- COMPUTING ASSESSEES INCOME AT RS.16,60,900/- WHERE BY CERTAIN ADDITIONS WERE MADE. ON APPEAL BEFORE THE LEARNED C IT(A), ADDITION WITH RESPECT TO FALL IN GP OF RS.2,86,391/- AND ADD ITION WITH RESPECT TO NON GENUINE LIABILITIES OF RS.12,00,721/- WERE DELE TED. AGGRIEVED BY THIS ORDER OF THE LEARNED CIT(A) THE REVENUE IS IN APPEAL BEFORE US. NONE APPEARED ON BEHALF OF THE ASSESSEE, HOWEVER TH E LD. DR WAS PRESENT, THEREFORE WE DECIDED TO PROCEED WITH THE C ASE TO ADJUDICATE ON MERITS. 3.2.1 DELETION OF ADDITION OF RS.2,86,391/- ON ACCOUNT O F FALL ON GP : DURING THE ASSESSMENT PROCEEDINGS THE LEARNED AO OBSERVED THAT THE ASSESSEE HAS SHOWN GROSS PROFIT O F RS.6,68,334/- @11.92% ON A TOTAL TURNOVER OF RS.56,04,521/-. IN T HE PRECEDING ASSESSMENT YEAR ASSESSEES GROSS PROFIT WAS RS.2,54 ,299/ WHICH WAS 18.81% AGAINST THE TOTAL TURNOVER OF RS.13,51,7 70/- AND IN THE AY 2005-06 ASSESSEES GROSS PROFIT RATE WAS 15.25%. ON BEING QUERIED BY THE LEARNED AO THE ASSESSEE WAS UNABLE T O COME OUT WITH ITA NO.2463/AHD/2010 (AY: 2007-08) THE ITO, WARD-6(1), SURAT VS M/S. ARUNBHAI GOPALBHA I PANCHAL 3 ANY COGENT REASON FOR THE FALL IN GROSS PROFIT IN T HE YEAR UNDER CONSIDERATION. FURTHER ANALYZING THE COMPARATIVE ST ATEMENT OF PROFIT OF THE ASSESSEE FOR THE PREVIOUS YEARS, THE LD. AO OPINED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE DID NOT DEPICT CO MPLETE AND CORRECT PICTURE OF THE ACCOUNTS. IT WAS FURTHER NOT ICED THAT THE ASSESSEE WAS NOT MAINTAINING QUANTITATIVE DETAILS O F STOCK, SOME STOCK WERE VALUED AT COST AND SOME STOCK WERE AT MA RKET PRICE, AND FOR DELIVERY OF TRACTORS THE ASSESSEE WAS NOT MAINT AINING DELIVERY CHALLAN. FURTHER THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS, BILLS/VOUCHERS FOR PURCHASE AND SALES, FOR VERIFICA TION BEFORE THE LEARNED AO. FOR THE AFORESAID REASONS THE LEARNED A O REJECTED THE BOOKS OF ACCOUNTS U/S 145 OF THE ACT AND ADDED RS.2 ,86,391/- ON ACCOUNT OF FALL IN GROSS PROFIT TO THE INCOME OF TH E ASSESSEE ON THE BASIS OF PREVIOUS TWO YEARS RATE OF GROSS PROFIT. 3.2.2 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E LEARNED CIT(A). THE LEARNED CIT(A) CONSIDERING THE SUBMISSI ONS OF THE LEARNED AO AND THE ASSESSEE, WAS OF THE VIEW THAT T HE ASSESSEE HAD PRODUCED BEFORE THE AO ALL THE RELEVANT DETAILS, BO OKS OF ACCOUNTS, VOUCHERS, STOCK REGISTER, BANK STATEMENT, CASH BOOK , DETAILS OF DEBTORS AND CREDITORS WHICH WERE VERIFIABLE AND OTH ER PARTICULARS THAT WAS REQUIRED TO BE PRODUCED BEFORE THE AO. THE LEAR NED CIT(A) ALSO OBSERVED THAT THE LEARNED AO HAD REJECTED THE BOOK OF ACCOUNTS OF THE ASSESSEE WITHOUT POINTING OUT ANY SIGNIFICANT D EFECTS. THUS, THE LEARNED CIT(A) HELD THAT THE LEARNED AO WAS NOT JUS TIFIED IN MAKING THE ADDITION DUE TO FALL IN GP RATIO AND ACCORDINGL Y DELETED THE ADDITION MADE BY THE LEARNED AO ON THIS COUNT. ITA NO.2463/AHD/2010 (AY: 2007-08) THE ITO, WARD-6(1), SURAT VS M/S. ARUNBHAI GOPALBHA I PANCHAL 4 3.2.3 BEFORE US, THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED AO AND PRAYED THAT HIS ORDER MAY BE SUSTAINED. 3.2.4 WE HAVE HEARD THE REVENUE AND PERUSED THE MAT ERIALS ON RECORD. FROM THE ORDER OF THE LEARNED CIT(A) IT IS EVIDENT THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESS EE ARE COMPLETELY VERIFIABLE AND NO SIGNIFICANT DEFECTS COULD BE POIN TED OUT. SUPPORTING EVIDENCE RELATING TO CLOSING STOCK WAS ALSO MADE AV AILABLE BEFORE THE REVENUE AND IS RELIABLE. THE NAMES AND ADDRESS AND COMPLETE PARTICULARS WITH RESPECT TO SALE OF FIVE TRACTORS B ELOW THE COST WERE ALSO FURNISHED AND NO ADVERSE INFERENCE COULD BE CONSTRU ED. THE QUANTITATIVE DETAILS WERE FURNISHED IN THE TAX AUDI T REPORT. VALUATION WITH RESPECT TO PETTY ITEMS AND SPARE PARTS WERE ALSO FO UND RELIABLE. WITH THE ABOVE FINDINGS THE LEARNED CIT(A) ARRIVED AT A CONC LUSION THAT REJECTION OF BOOKS U/S 145 OF THE ACT WAS NOT WARRANTED AS OT HERWISE HELD BY THE LEARNED AO. FURTHER, THE LEARNED CIT(A) ALSO OBSERV ED THAT THE ASSESSEE HAD PURCHASED AND SOLD TRACTORS APART FROM PURCHASE AND SALES OF TRACTOR PARTS AND THEREBY THERE WAS A CHAN GE IN NATURE OF BUSINESS. CONSIDERING THE ABOVE FACTS, WE ARE ALSO OF OPINION THAT ADDITION OF RS.2,87,391/- MADE BY THE LEARNED AO ON ACCOUNT OF LOW GP IS NOT WARRANTED. THEREFORE, WE ARE INCLINED TO UPH OLD THE ORDER OF THE LEARNED CIT(A). ACCORDINGLY, WE CONFIRM THE ORDER O F THE LEARNED CIT(A) DELETING RS.2,87,391/- BEING ADDITION MADE ON ACCOU NT OF LOW GP. 3.3 DELETION OF ADDITION OF RS.12,00,721/- ON ACCOUNT O F NON- GENUINE LIABILITY : WITH REGARD TO NON-GENUINE LIABILITIES THE LEARNE D AO NOTED THAT THE ASSESSEE HAS SHOWN UNDER THE HEAD OT HER LIABILITIES RS.12,00,721/- IN ITS BOOKS OF ACCOUNTS AS ON 31-0 3-2007 AGAINST ITA NO.2463/AHD/2010 (AY: 2007-08) THE ITO, WARD-6(1), SURAT VS M/S. ARUNBHAI GOPALBHA I PANCHAL 5 TWELVE DIFFERENCE PERSONS. THE LEARNED AO HAD ASKED THE ASSESSEE TO PRODUCE ALL THE TWELVE PERSONS ALONG WITH PROOF OF IDENTITY AND DOCUMENTS SUBSTANTIATING THEIR CREDITWORTHINESS TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF HIS CLAIM EXCEPT CONFIRMATIO N LETTERS FROM THE TWELVE CREDITORS. THE ASSESSEE CLAIMED THAT ALL THE CREDITORS WERE BUYERS OF THE TRACTORS WHO HAD ADVANCED THE AMOUNT IN CASH IN ORDER TO PURCHASE THE TRACTORS BY OBTAINING FINANCE FROM PUB LIC SECTOR BANKS OR TRACTOR COMPANYS SUBSIDIARIES. ACCORDING TO THE LE ARNED AO, THE ASSESSEE COULD NOT SUBSTANTIATE HIS CLAIM WHICH AMO UNTS TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THUS, THE LEAR NED AO ADDED THE AFORESAID SUM OF RS.12,00,721/- TO THE INCOME OF TH E ASSESSEE AND ALSO INITIATED PENALTY PROCEEDINGS U/S 271 (1) ( C ) OF THE ACT. 3.3.1 THE ASSESSEE CARRIED THE MATTER BEFORE THE LE ARNED CIT(A). AFTER EXAMINING THE ISSUE IN DETAIL THE LEARNED CIT (A) CAME TO THE FOLLOWING CONCLUSION: THE ASSESSEE HAD RECEIVED ADVANCE PAYMENT FROM HIS CUSTOMERS FOR PURCHASE OF TRACTORS. ALL SUCH PAYMEN TS WERE RECEIVED BY CHEQUES/DD AND THE SAME WERE DIRECTLY G IVEN TO THE MANUFACTURER OF THE TRACTORS. THE DIFFERENCE BE TWEEN THE INVOICE PRICE AND ADVANCE PAYMENTS STOOD TO THE CRE DIT OF THE CUSTOMERS AND HENCE, THEY WERE REFUNDABLE. THUS, TH E ENTIRE AMOUNT OF RS.12,00,721/- WHICH WAS EXCESS RECEIVED FROM THE CUSTOMERS OF THE ASSESSEE ON ONE HAND STOOD AS A CR EDITORS IN THE BOOKS OF THE ASSESSEE AND ON THE OTHER HAND STO OD AS ITA NO.2463/AHD/2010 (AY: 2007-08) THE ITO, WARD-6(1), SURAT VS M/S. ARUNBHAI GOPALBHA I PANCHAL 6 DEBTORS BEING RECEIVABLE FROM THE MANUFACTURERS WHI CH WERE TO BE REFUNDED TO THE CUSTOMERS. BASED ON THE ABOVE CONCLUSION, THE LEARNED CIT(A) D ELETED THE ADDITION OF RS.12,00,721/-. 3.3.2 THE LEARNED DR COULD NOT CONTROVERT TO THE FI NDINGS OF THE LEARNED CIT(A) BEFORE US. SINCE THE LEARNED CIT(A) HAD EXAMINED THESE FACTS IN DETAIL AND DELETED THE ADDITION, AND FURTHER NOTHING IS BROUGHT BEFORE US TO REVERT THE DECISION OF THE LD. CIT(A), WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF TH E LEARNED CIT(A). THEREFORE, WE HEREBY CONFIRM THE ORDER OF THE LEARN ED CIT(A). THUS, THE ADDITION OF RS.12,00,721/- MADE ON ACCOUNT OF N ON GENUINE CREDITORS STANDS DELETED. 4 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 22-06-2012 SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ ITA NO.2463/AHD/2010 (AY: 2007-08) THE ITO, WARD-6(1), SURAT VS M/S. ARUNBHAI GOPALBHA I PANCHAL 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: DIRECT DICTATION ON AMS COMP UTER 05-06-12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: -06-12 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR.P.S ./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: