The ACIT, Circle-1, Surat V. M/s. Kabra Plastics Ltd., Surat

ITA 2539/AHD/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1309 (ITAT-SURAT)
• Duration Of Justice: 5 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 15-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH LD
• Keywords: Gross profit estimation; Corroborative evidences
• Section: 40(a)(ia)

Judgement Text

ACIT, CIRCLE-1, SURAT VS. M/S. KABRA PLASTICS LTD./ITA NO.2539/AHD/2014 /A.Y. 2010-11 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.2539/AHD/2014 [ [ / ASSESSMENT YEAR: 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, SURAT 395 001. V S. M/S. KABRA PLASTICS LTD., B-729, 7 TH FLOOR, INTERNATIONAL TRADE CENTRE, MAJURA GATE, SURAT-395001 [PAN: AAACK 9739 P] / APPELLANT /RESPONDENT /REVENUE BY SHRI O.P. SINGH LD. CIT ( DR ) [ /ASSESSEE BY NONE. / DATE OF HEARING: 04 . 12 .2019 /PRONOUNCEMENT ON: 05 . 12 .2019 /O R D E R PER O.P.MEENA, AM: 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, SURAT [IN SHORT CIT(A)] DATED 09.06.2014 FOR THE ASSESSMENT YEAR 2010-11. 2. GROUND NO.1,2 & 3 ARE AGAINST THE NULLIFYING THE REJECTION OF BOOKS OF ACCOUNT U/S.145(3) OF THE ACT MADE BY THE AO EVEN THOUGH VARIOUS DISCREPANCIES WERE NOTICED IN THE BOOKS OF ACCOUNT AND DELETING THE ADDITION OF RS.4,87,61,536/- ON ACCOUNT OF LOW GP IN MANUFACTURING ACTIVITY AND TRADING ACTIVITY AS COMPARED TO PREVIOUS YEARS. ACIT, CIRCLE-1, SURAT VS. M/S. KABRA PLASTICS LTD./ITA NO.2539/AHD/2014 /A.Y. 2010-11 PAGE 2 OF 6 3. SINCE THE ABOVE GROUNDS RELATE TO NULLIFYING REJECTION OF BOOKS OF ACCOUNT AND DELETING THE ADDITION ON ACCOUNT OF GP, THE SAME ARE BEING CONSIDERED TOGETHER. 4. BRIEF FACTS ARE THAT THE AO NOTED THAT THERE IS FALL IN GP RATE IN RESPECT OF MANUFACTURING ACTIVITY AND TRADING ACTIVITY AS COMPARED TO PREVIOUS YEARS. THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN THE REASON FOR FALL IN GP, WHICH WERE FURNISHED BY THE ASSESSEE AS REPRODUCED IN PARA 4.2 OF THE ASSESSMENT ORDER. FURTHER, THE ASSESSEE HAS MADE VARIOUS SUBMISSIONS DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, THE AO OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED DAY-TO-DAY STOCK REGISTER FOR VERIFICATION AND THERE IS UNUSUAL AND ABNORMAL DECREASE IN THE GP FROM LAST THREE YEARS. THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACCOUNT BILLS AND VOUCHERS. IN VIEW OF THIS, THE AO REJECTED THE BOOKS RESULT U/S.145(3) OF THE ACT AND ADOPTED GP AT THE RATE OF 8.93% BEING THE AVERAGE OF LAST THREE PREVIOUS YEARS OF THE TOTAL TURNOVER IN RESPECT OF MANUFACTURING ACTIVITY. SIMILARLY, GP RATE WAS ADOPTED AT 8.44% BEING THE AVERAGE OF LAST THREE YEARS OF THE TOTAL TURNOVER IN RESPECT OF TRADING ACTIVITY. ACCORDINGLY, THIS IS REGULATED IN THE TOTAL ADDITION OF RS.4,87,61,536/-. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). WHEREIN, IT WAS CONTENDED THAT THE BOOKS OF ACCOUNT ARE SUPPORTED BY BILLS AND VOUCHERS. THE QUANTITATIVE RECORDS HAVE BEEN MAINTAINED AND AUDITED BY EXCISE AUTHORITY, AND NO DISCREPANCY WAS ACIT, CIRCLE-1, SURAT VS. M/S. KABRA PLASTICS LTD./ITA NO.2539/AHD/2014 /A.Y. 2010-11 PAGE 3 OF 6 NOTICED BY THE AO. IT WAS FURTHER EXPLAINED THAT THE DETAILS OF STOCK REGISTER ON BOOKS OF ACCOUNT WERE FURNISHED BEFORE THE AO. WITH REGARD TO FALL IN GP RATE, IT WAS SUBMITTED THAT THE RESULT OF PRECEDING YEAR IS NOT COMPARABLE WITH THIS YEAR ON ACCOUNT OF HIGH PORTION OF JOB WORK WITH GOOD MARGIN AND FURTHER, THE GP OF CURRENT YEAR IS IN LINE WITH GP OF OTHER YEARS EXCEPT IMMEDIATE PRECEDING YEAR. IT WAS ALSO SUBMITTED THAT REASON IS FALL IN GP WERE DULY EXPLAINED DURING THE ASSESSMENT PROCEEDINGS. THE AO HAS MADE VERIFICATION BY ISSUING NOTICES U/S.133(6) TO DIFFERENT PARTIES IN RESPECT OF WHICH NO DISCREPANCY WAS FOUND BY HIM. THE DETAILED EXPLANATIONS WERE FILED BY THE ASSESSEE DURING THE APPELLATE PROCEEDING WHICH HAS BEEN REPRODUCED IN HIS ORDER AT PAGE 4 TO 11. AFTER CONSIDERING THE FACTS OF THE CASE, THE LD. CIT(A) HAS GIVEN HIS FINDING IN PARA 5 OF THE APPELLATE ORDER BY HOLDING THAT THE DETAILS SUBMITTED DURING THE APPELLATE PROCEEDINGS AND AS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS BEFORE THE AO. THE ASSESSEE HAS FURNISHED ALL THE RELEVANT DETAILS AS MENTIONED BY THE AO AND PRODUCED ALL THE COMPLETE BOOKS OF ACCOUNT DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT HAS FILED A COPY OF LETTER DATED 08-03-2013, SUBMITTED TO THE AO DURING ASSESSMENT PROCEEDINGS WHEREIN AT PAGE 8 OF EXHIBIT-A, THE APPELLANT HAS CLEARLY MENTIONED THAT COMPLETE BOOKS OF ACCOUNT, ALONG WITH EXCISE RECORDS, WERE PRODUCED BEFORE AO. THEREFORE, IN ABSENCE OF ANY DEFECT OR IRREGULARITY FOUND IN THE BOOKS OF ACCOUNT, THE PROVISION OF SECTION 145(3) CANNOT BE INVOKED. WITH REGARD TO GP ADDITION, THE LD. ACIT, CIRCLE-1, SURAT VS. M/S. KABRA PLASTICS LTD./ITA NO.2539/AHD/2014 /A.Y. 2010-11 PAGE 4 OF 6 CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS EXPLAINED THE REASON IN FALL OF GP DUE TO INCREASING IN TURNOVER FROM THE PREVIOUS YEAR. ACCORDINGLY, THE ADDITION MADE BY THE AO ON ACCOUNT OF GP WAS ALSO DELETED. 6. BEING AGGRIEVED, THE REVENUE FILED THIS APPEAL BEFORE THIS TRIBUNAL. THE LD. CIT(DR) RELYING ON THE ORDER OF THE AO SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED REQUISITE DETAILS, THEREFORE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND THERE WAS AN ABNORMAL FALL IN GP RATE AS COMPARED LAST YEAR, HENCE THAT GP RATE HAS BEEN RIGHTLY MADE. 7. NO ONE APPEARED FROM THE SIDE OF THE ASSESSEE. 8. WE HAVE HEARD THE LD. CIT(DR) AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD.CIT(A) HAS GIVEN HIS FINDING THAT THE BOOKS OF ACCOUNT ARE DULY MAINTAINED AND PRESENTED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, PROVISIONS OF SECTION 145(3) ARE NOT APPLICABLE. SIMILARLY, THE FALL IN GP WAS EXPLAINED AS TURNOVER DURING THE YEAR ALSO HAD INCREASED FROM RS.14 CRORE TO RS.38 CRORE. SIMILARLY, THE A.Y. 2012-13, THE GP DROPPED FROM 2.19% TO 1.41% AS THE TURNOVER INCREASED FROM 10 CRORE TO 41 CRORE. FURTHER, THE AO HAS NOT FOUND ANY DEFECTS IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT, HENCE THE GP OF ADDITION MADE BY THE AO WAS RIGHTLY DELETED BY THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS GIVEN OF DETAILS OF FINDING AS PER PARA 5 REPRODUCED AS UNDER: 5. I HAVE CONSIDERED THE FACTS OF THE CASE, BASIS OF ADDITION MADE BY AO AND SUBMISSIONS OF APPELLANT. AS IT IS CLEAR FROM THE ASSESSMENT ORDER, AO HAS REJECTED THE BOOKS U/S. 145(3) OF THE ACT ON THE GROUNDS THAT THE ACIT, CIRCLE-1, SURAT VS. M/S. KABRA PLASTICS LTD./ITA NO.2539/AHD/2014 /A.Y. 2010-11 PAGE 5 OF 6 APPELLANT HAS NOT MAINTAINED DAY TO DAY STOCK REGISTER AND QUANTITY-WISE QUALITY REGISTER; IT HAS NOT FURNISHED COMPLETE DETAILS WITH SUPPORTING EVIDENCE IN RESPECT OF VARIOUS EXPENSES SUCH AS STORES, SPARE PARTS, PACKING MATERIAL, JOB WORK, POWER AND FUEL ETC.; IT HAS NOT PRODUCED COMPLETE SET OF BOOKS OF ACCOUNT, BANK STATEMENTS, BILLS/VOUCHERS IN SUPPORT OF ITS CLAIM OF EXPENSES INCLUDING PURCHASES ETC. HOWEVER, FROM THE DETAILS SUBMITTED DURING APPELLATE PROCEEDINGS, AS WERE SUBMITTED DURING ASSESSMENT PROCEEDINGS BEFORE AO, IT IS CLEAR THAT APPELLANT FURNISHED ALL THE RELEVANT DETAILS AS MENTIONED BY AO AND PRODUCED THE COMPLETE BOOKS OF ACCOUNT DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT HAS FILED THE COPY OF LETTER DATED 08.03.2013, SUBMITTED TO AO DURING ASSESSMENT PROCEEDINGS, WHEREIN AT PAGE- 8 OF EXHIBIT- A, APPELLANT HAS CLEARLY MENTIONED THAT COMPLETE BOOKS OF ACCOUNT, ALONG WITH EXCISE RECORDS, WERE PRODUCED BEFORE AO. ON THE SAME PAGE, IT IS ALSO MENTIONED THAT THE APPELLANT MAINTAINED QUANTITATIVE RECORDS OF GOODS, BOTH MANUFACTURING AND TRADING, AND SUCH RECORDS HAVE BEEN AUDITED BY EXCISE AUTHORITIES ALSO AND NO DISCREPANCY WAS FOUND BY THEM. IT IS ALSO SUBMITTED ON THE SAME PAGE THAT PURCHASES BOOK AND SALES BOOK WITH ALL THE PURCHASE/SALE BILLS AND EVIDENCE HAVE BEEN PRODUCED ALONG WITH QUANTITATIVE DETAILS. SIMILARLY, IN THE SAME LETTER VIDE PARA 2.4, APPELLANT HAS FILED THE COMPLETE DETAILS OF ALL THE EXPENSES SUPPORTED WITH BILLS/VOUCHERS/CHALLANS, WHICH HAVE BEEN MENTIONED BY AO IN THE ASSESSMENT ORDER WITH THE COMMENTS THAT THE ASSESSEE FAILED TO FURNISH PROPER DETAILS OF THESE EXPENSES WITH SUPPORTING EVIDENCE. IT IS ALSO REFLECTED FROM LETTER THAT IN ADDITION TO AFORESAID DETAILS OF EXPENSES AND OTHER ITEMS, APPELLANT FURNISHED THE DETAILS OF OTHER EXPENSES ALSO SUPPORTED WITH DOCUMENTARY EVIDENCE. THE APPELLANT HAS RECONCILED THE DIFFERENCE IN TRANSACTIONS WITH THE PARTIES TO WHOM NOTICES U/S.133(6) WERE ISSUED BY AO AND ALSO JUSTIFIED THE ALLOWANCE OF EXPENSES U/S. 40(A)(IA) OF THE ACT. FROM THE ABOVE, IT IS EVIDENT THAT REASONS GIVEN BY AO FOR REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) ARE BASED ON WRONG FACTS AND AGAINST THE TRUTH. COMPLETE BOOKS OF ACCOUNT AND SUPPORTING EVIDENCE WERE PRODUCED BEFORE HIM AND HE FAILED TO FIND ANY DEFECT OR IRREGULARITY IN THEM. THE CONCLUSION DRAWN BY AO THAT THE ASSESSEE HAS NOT MAINTAINED DAY TO DAY STOCK REGISTER AND QUANTITY- WISE QUALITY REGISTER IS ALSO NOT CORRECT WHICH IS EVIDENT FROM THE SUBMISSIONS OF APPELLANT. IN ABSENCE OF ANY DEFECT OR IRREGULARITY FOUND IN THE BOOKS OF ACCOUNT AND OTHER DETAILS PRODUCECD BY APPELLANT OR SUBMISSIONS MADE BY IT, THE PROVISIONS OF SECTION 145(3) CANNOT BE INVOKED. THE AO HAS REJECTED THE BOOKS OF ACCOUNT BY GIVING GENERAL REASONS. HE HAS FAILED TO MENTION ANY SPECIFIC INSTANCE INDICATING ANY DEFECT OR IRREGULARITY IN THE BOOKS OF ACCOUNT. IN SUCH SITUATION, THE CONCLUSION DRAWN BY AO CANNOT BE SUPPORTED. ON THE OTHER HAND, APPELLANT HAS DULY EXPLAINED THE REASONS FOR FALL IN GP IN COMPARISON TO EARLIER YEARS. IT HAS MENTIONED THAT DURING THE YEAR THE TURNOVER HAS INCREASED FROM 38 CRORE TO 56 CRORE AND DUE TO WHICH GP RATE HAS GONE DOWN. AS PER APPELLANT, IN THE EARLIER PROCEEDING YEAR I.E. 2009-10 ALSO GP HAD FALLEN BY ALMOST 9.10% IN COMPARISON TO A.Y. 2008-09 AS IN THAT YEAR ALSO TURNOVER HAD INCREASED FROM 14 CRORE TO 38 CRORE. SIMILARLY, IN A.Y. 2012-13, GP DROPPED FROM 2.19% TO 1.41% AS THE TURNOVER INCREASED FROM 10 CRORE TO 41 CRORE. AS EXPLAINED BY APPELLANT, THE TREND IN IT'S BUSINESS LINE IS TO KEEP GROWING AND DO NOT HOLD THE TRADING GOODS ON HAND FOR LONGER PERIOD AND SELL THEM IN MARKET AT PREVAILING PRICE TO GAIN THE ADVANTAGE OF TURNOVER. THUS, THE APPELLANT HAS BEEN ABLE TO DULY EXPLAIN THE REASONS OF FALL IN GP DURING THE YEAR IN COMPARISON TO EARLIER YEARS. IN VIEW OF AFORESAID DISCUSSION, I HOLD THAT THE AO HAS WRONGLY INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT BY REJECTING THE BOOKS ACIT, CIRCLE-1, SURAT VS. M/S. KABRA PLASTICS LTD./ITA NO.2539/AHD/2014 /A.Y. 2010-11 PAGE 6 OF 6 OF ACCOUNT AND ESTIMATING THE GROSS PROFIT. I, THEREFORE, DELETE THE ADDITION OF RS.4,87,61,5367- MADE BY AO AND ALLOW THE GROUNDS TAKEN BY APPELLANT. 9. IN THE LIGHT OF ABOVE DISCUSSION OF THE FINDING OF THE LD. CIT(A), WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). HENCE, THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 05.12.2019. SD/- SD/- (SANDEEP GOSAIN) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER / SURAT, DATED : 5 TH DECEMBER, 2019/ S. SAMANTA, PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER // TRUE COPY // / / TRUE COPY / ASSISTANT REGISTRAR, SURAT