The ITO, Ward-1, Anand V. M/s. Rapid QSS Colour Lab, Anand

ITA 2535/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6570 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 03-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G M CHAUHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER DATE OF HEARING : 03/05/2011 DRAFTED ON: 03/0 5/2011 ITA NO.2535/AHD/2009 ASSESSMENT YEAR : 2006-07 THE ITO WARD-1 ANAND VS. M/S.RAPID QSS COLOUR LAB. SHIV COMPLEX SUBHASH ROAD, ANAND PAN/GIR NO. : AACFR 2947 K (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI G.M. CHAUHAN, SR.D.R. RESPONDENT BY: SHRI ASEEM THAKKAR O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHI CH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-IV, BARODA D ATED 11/06/2009 AND THE SOLITARY SUBSTANTIAL GROUND READS AS UNDER: - 2. GROUND NO.1 READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.19,40,427/- ON ACCOUNT OF SUPPRESSION OF SALES O F PHOTO PRINT, OVERLOOKING THE FACT THAT NO SUBSTANTIAL DETAILS A ND NO SUPPORTING DOCUMENT SON THE DISPROPORTION BETWEEN S ALES TO PURCHASE OF ROLL PROCESS WERE SUBMITTED DESPITE SUF FICIENT OPPORTUNITIES PROVIDED. 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT DATED 31/ 12/2008 WERE THAT ITA NO. 2535/AHD/2009 ITO VS. RAPID QSS COLOUR LAB ASST.YEAR 2006-07 - 2 - THE ASSESSEE-FIRM IS RUNNING A PHOTOGRAPHY LAB AND, T HEREFORE IN THE BUSINESS OF PROCESSING OF FILM ROLLS. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAD AN AUTOMATED MACHINE WHICH PR OCESSED AND TOOK OUT THE PRINT SIMULTANEOUSLY. THE MACHINE USE D ROLLS OF PAPERS ON WHICH THE PRINT-OUT WERE USED TO BE TAKEN OUT. THE AO HAS FOUND THAT VARIOUS SIZES OF ROLLS WERE CONSUMED AND THE TOTAL CONSUMPTION OF THE ROLLS WAS 2040 IN NUMBER. THE A O HAS ALSO NOTICED THAT THERE WERE VARIOUS SIZES OF THE ROLLS RANGING FORM 5 ROLL, 6 ROLL AND 12 ROLL. THE AO HAS THEN WORKED OUT THE MEASUREMENT OF ROLLS CONSUMED AND ON THAT BASIS COM PUTED THE NUMBER OF PRINT OUT ALLEGED TO HAVE BEEN TAKEN BY T HE ASSESSEE. THE AO HAS ALSO ACCEPTED THAT THERE WAS POSSIBILITY OF WASTAGE OF ROLLS IN TAKING OUT THE PHOTO-PRINTS. HE HAS ARR IVED AT A FIGURE OF NUMBER OF PRINTS WHICH ACCORDING TO HIM COULD HAVE BEEN TAKEN OUT FROM THE ROLLS CONSUMED. AT THE END, AN ADDITION O F RS.19,40,427/- WAS MADE AS UNDISCLOSED SALES OF PHOTO-PRINTOUT. TH E MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LEARNED CIT(APPEALS) HAS DELETED THE ADDITIO N BY OBSERVING AS UNDER:- 2.2. I HAVE CONSIDERED THE SUBMISSIONS AND THE FAC TS OF THE CASE. THE ADDITION WAS MADE WITHOUT AFFORDING SPECIFIC OP PORTUNITY TO THE APPELLANT TO COMMENT ON ASSESSING OFFICERS MET HOD OF WORKING SALES OR THE CALCULATION THEREOF. ASSESS ING OFFICER ESTIMATED THE SALES OF THE APPELLANT ON THE BASIS O F PAPER ROLLS CONSUMED, THOUGH NO DISCREPANCY OR DEFICIENT IN THE BOOKS OF ACCOUNT ABOUT THEIR CORRECTNESS OF COMPLETENESS HAD BEEN NOTICED. ITA NO. 2535/AHD/2009 ITO VS. RAPID QSS COLOUR LAB ASST.YEAR 2006-07 - 3 - THE ESTIMATION WAS DONE BY THE ASSESSING OFFICER BY RECORDING THAT SALES SHOWN IN THE TRADING ACCOUNT WERE NOT IN ACCORDANCE WITH PURCHASES OF PAPER ROLLS. HOWEVER, NO CLEAR B ASIS FOR FORMING SUCH VIEW IS BROUGHT OUT IN THE ASSESSMENT ORDER. WITHOUT REJECTING THE BOOKS AND WITHOUT FINDING ANY DEFICIE NT AS REGARDS THEIR COMPLETENESS OR CORRECTNESS, TRADING RESULTS, I.E. THE SALES AS PER THE BOOKS OF ACCOUNTS CANNOT BE DISCARDED. THE BOOKS OF ACCOUNTS OF THE APPELLANT, WHICH WERE AUDITED, REFL ECTED APPELLANTS ACTUAL SALES AND PURCHASES AND AS SUCH THERE WAS NO REASON TO SUBSTITUTE THE SALES AS PER BOOKS OF ACCO UNTS BY SALES ESTIMATED FROM QUANTITY OF PAPER ROLL CONSUMPTION. THE ASSESSING OFFICER DID NOT APPRECIATE THAT THERE CANNOT BE ONE TO ONE CORRESPONDENCE BETWEEN CONSUMPTION OF PAPER ROLLS A ND SALES, I.E. THE NUMBER OF PHOTO PRINTS, IN A BUSINESS LIKE THAT OF APPELLANT, DUE TO VARYING SIZES OF PRINTS, VARYING LENGTHS AND WID THS OF PHOTO ROLLS, WASTAGE ETC. AS WELL THE VARYING RATES CHARG ED. EVEN IF A RELIABLE CALCULATION COULD BE DONE FOR NUMBER OF PH OTO PRINTS THAT COULD BE OBTAINED FROM A PARTICULAR PAPER ROLL CONS UMPTION, SUCH NUMBER CANNOT AUTOMATICALLY BE PRESUMED TO BE ACTUA L SALES. BESIDES, AS POINTED OUT BY THE APPELLANT, THERE ARE SEVERAL ASSUMPTIONS IN AO'S WORKING, WHICH ARE INCORRECT. THE FIRST WRONG ASSUMPTION IS THAT THE LENGTH OF 5 AND 6 WI DTH PAPER ROLLS WAS UNIFORMLY TAKEN AS 186 METERS, WHEREAS IN REALI TY IT WAS 156 METERS AS WELL. SIMILARLY LENGTH OF 12 WIDTH PAPE R ROLL WAS NOT ONLY 93 METERS AS TAKEN BY THE ASSESSING OFFICER BU T WAS ALSO 78 METERS AND 88 METERS. THE CALCULATION DONE BY THE ASSESSING OFFICER REGARDING NUMBER OF PRINTS PER ROLL BECOMES FUNDAMENTALLY ERRONEOUS, DUE TO THIS WRONG ASSUMPTION. SIMILARLY AS SUBMITTED BY THE APPELLANT, MOST OF THE TIMES, 12 ROLL WAS U SED FOR MAKING PRINTS OF THE SIZE 8 X 12, RATE FOR WHICH WAS MUC H LOWER THAN 12 X 12 PRESUMED BY THE ASSESSING OFFICER. IT WA S ALSO NOT PROPER TO APPLY AN AVERAGE RATE TO ESTIMATE THE SAL ES, WHEN THE RATES VARIED BETWEEN CUSTOMER TYPES, I.E. PROFESSIO NAL OR NON PROFESSIONAL AND ALSO, DUE TO PRINT QUALITY, PAPER USED, DISCOUNT ETC. THE WORKING DONE BY THE APPELLANT, BY FOLLOWI NG A.OS METHODOLOGY (WITHOUT CONCEDING THAT THERE WAS ANY J USTIFICATION IN SUCH WORKING) RESULTS IN A LESSER FIGURE OF SALES V IZ-A-VIS SALES AS PER THE TRADING ACCOUNT. TO SUM UP, DUE TO THE APPELLANT MAINTAINING COMPLETE ACCOUNT BOOKS DULY SUPPORTED B Y BILLS/VOUCHERS ETC., IT WAS NOT JUSTIFIED TO SUBSTI TUTE SALES AS PER ITA NO. 2535/AHD/2009 ITO VS. RAPID QSS COLOUR LAB ASST.YEAR 2006-07 - 4 - THE BOOKS BY SALES FIGURE ESTIMATED ON THE BASIS OF PAPER ROLL CONSUMPTION. SUCH ESTIMATION, IN ANY CASE, WAS ERR ONEOUS DUE TO SEVERAL ASSUMPTIONS. EVEN OTHERWISE, THE ESTIMA TED FIGURE OF SALES ON SUCH BASIS IS A HYPOTHETICAL FIGURE ONLY. IT IS FURTHER NOTED THAT NO INSTANCES OF SALES OUTSIDE THE BOOKS OF ACC OUNTS WERE FOUND, THE BOOKS OF ACCOUNTS WERE AUDITED AND THE G ROSS PROFIT RATIO OF THE APPELLANT HAD SHOWN INCREASE IN THIS Y EAR AS COMPARED TO PRECEDING YEAR. ADDITION OF RS.19,40,427/- IS D ELETED. 4. WE HAVE HEARD BOTH THE SIDE AT SOME LENGTH . W E HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AFTER DUE CONSIDERATION OF THE FACTS AND MATERIAL PLACED BEFORE US WE HEREBY H OLD THAT LD. CIT(A) WAS CORRECT IN HOLDING THAT IN THE ABSENCE OF ANY E RROR FOUND RECORDED IN THE BOOKS OF ACCOUNTS THERE WAS NO LEGAL REQUIREMEN T TO PRESUME THAT THE ASSESSEE HAS SUPPRESSED THAT SALES. THE A.O. HAS SI MPLY MADE-OUT THE CASE ON AN ASSUMPTION THAT THE PRINT-OUT IN QUESTIO N OUGHT TO HAVE BEEN MADE IN A PARTICULAR MANNER THOUGH ON THE CONTRARY THE ASSESSEE HAS ESTABLISHED THAT THE ENTIRE PROCESSING OF PHOTO-DEV ELOP AND PRODUCTION OF PRINT-OUT BEING MECHANIZED THEREFORE THERE WAS NO P ILFERAGE POSSIBLE . IN THE ABSENCE OF ANY CONTRARY MATERIAL AGAINST THE R ESPONDENT ASSESSEE, WE HEREBY ENDORSE THE FINDINGS ON FACTS OF LD.CIT(A) . THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 5. GROUND NO.2 READS AS UNDER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELE4TING THE ADDITION OF RS.6,25,531/- BEING SUPPRESSION OF ROLL DEVELOPMENT CHARGES OVERLOOKING THE FACT THAT, IN SPITE OF SEVERAL OPPORTUNITIES ASSESS EE FAILED TO SUBSTANTIATE ITS CLAIM. ITA NO. 2535/AHD/2009 ITO VS. RAPID QSS COLOUR LAB ASST.YEAR 2006-07 - 5 - 6. IN RESPECT OF THIS GROUND THE FACTS WERE THA T THE A.O. HAD NOTED THE ASSESSEE WAS DOING THE PROCESSING OF ROLLS IN A AUT OMATIC MACHINE . THE PHOTO-ROLLS PASSES THROUGH MANY CHEMICAL REACTIONS WHICH GIVES A NEGATIVE OF THE PHOTOGRAPHS. THE NEGATIVE IS FURTHE R PROCESSED IN A MACHINE WHICH GIVES THE PHOTO-PRINT OF THE PHOTOGRA PHS. THE ALLEGATIOIN OF THE A.O. WAS THAT THE MONTHLY DETAILS OF SALES W ERE NOT FURNISHED BY THE ASSESSEE. THE A.O. HAS THEREFORE CALCULATED THE ALLEGED SUPPRESSION OF ROLL DEVELOPMENT BY ASSUMING THAT AT LEAST 50% PERS ONS WOULD HAVE DEVELOPED THEIR ROLLS AND WOULD HAVE PAID THE ROLL- DEVELOPING CHARGES. ON THE BASIS OF THE SAID CALCULATION AN ADDITION OF RS. 6,25,531/- WAS MADE. THE MATTER WAS CARRIED BEFORE THE FIRST APPEL LATE AUTHORITY WHO HAS GRANTED RELIEF AFTER RECORDING A FINDING THAT THERE WAS NO JUSTIFICATION IN WORKING OUT ROLL-DEVELOPMENT CHARGES ON THE BASIS O F ASSUMPTION , WHEN THE BOOKS OF ACCOUNTS, SALES REGISTER, CASH MEMO ET C. WERE BEFORE A.O. EVEN BEFORE US THERE IS NO MATERIAL IN POSSESSION O F THE REVENUE TO CONTRADICT THE SAID FINDINGS OF THE FIRST APPELLATE AUTHORITY. WE THEREFORE CONFIRM THE SAME AND DISMISS THIS GROUND OF THE REVENUE. 7 . IN THE RESULT BOTH THE GROUNDS ARE DISMISSED AND REVENUES APPEAL IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 20/ 05 /2011. SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 20/ 05 /2011 ITA NO. 2535/AHD/2009 ITO VS. RAPID QSS COLOUR LAB ASST.YEAR 2006-07 - 6 - T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-BARODA 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION.. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 20/5/2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20/5/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER