M/s. Suryaprakash Silk Mills Pvt.Ltd., Surat V. The ACIT.,Circle-4, Surat

ITA 261/AHD/2009

• Counselvise Citation: 26120514 RSA 2009
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Gross profit estimation; Business income; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. K. GARO DIA, AM) ITA NO. 261/AHD/2009 A. Y.: 2005-06 M/S. SURYAPRAKASH SILK MILLS PVT. LTD., A. K. ROAD, SURAT PA NO. AADCS 3853 P VS THE A. C. I. T., CIRCLE-4, AAYAKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) (RESPONDENT) ITA NO. 262/AHD/2009 A.Y.: 2005-06 M/S. SURYANARAYAN SILK MILLS PVT. LTD., A. K. ROAD, SURAT PA NO. AABCS 3852 N VS THE A. C. I. T., CIRCLE-4, AAYAKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) (RESPONDENT) ITA NO. 298/AHD/2009 A.Y.: 2005-06 THE A. C. I. T., CIRCLE-4, ROOM NO.223, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S. SURYANARAYAN SILK MILLS PVT. LTD., A. K. ROAD, SURAT PA NO. AABCS 3852 N (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI MEHUL K. PATEL, AR DEPARTMENT BY SHRI S. K. GUPTA, CIT DR ITA NO.261, 261 AND 298/AHD/2009 M/S. SURYAPRAKASH SILK MILLS PVT. LTD. VS ACIT, CIC LE-4, SURAT M/S. SURYANARAYAN SILK MILLS PVT. LTD. VS.ACIT, CIR CLE-4, SURAT 2 DATE OF HEARING: 09-01-2012 DATE OF PRONOUNCEMENT: 13-01-2012 O R D E R PER BHAVNESH SAINI: THIS ORDER SHALL DISPOSE OF ALL THE ABOVE APPEALS IN WHICH SAME ISSUE IS INVOLVED. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. ITA NO.261/AHD/2009: AY- 2005-06 M/S. SURYAPRAKASH SILK MILLS PVT. LTD. 3. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)- III, SURAT DATED 03-11-2008 FOR ASS ESSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED INN CONFIRMING THE A CTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.10,44,525/- ON ACCOUNT OF ALLEGED SUNDRY CREDITO RS U/S. 41(1) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED INN CONFIRMING THE A CTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.4 ,937/-- ON ACCOUNT OF CASH CREDITORS. 4. THE AO OBSERVED THAT THE ASSESSEE COMPANY WAS RE QUIRED TO FILE COMPLETE DETAILS OF SUNDRY CREDITORS APPEARING IN THE BALANCE SHEET. COMPLIANCE WAS NOT MADE AND NO CORRESPONDENC E WITH THE ITA NO.261, 261 AND 298/AHD/2009 M/S. SURYAPRAKASH SILK MILLS PVT. LTD. VS ACIT, CIC LE-4, SURAT M/S. SURYANARAYAN SILK MILLS PVT. LTD. VS.ACIT, CIR CLE-4, SURAT 3 CREDITORS REGARDING MONEY STANDING TO THEIR CREDIT WAS FILED. IT WAS FOUND THAT THE DEBTS WERE VERY OLD AND WERE BARRED BY LIMITATION. THE AO ACCORDINGLY APPLIED PROVISIONS OF SECTION 41 (1) OF THE IT ACT. IT WAS ALSO FOUND THAT SIMILAR ADDITION WAS MADE IN AS SESSMENT YEAR 2003-04 ON WHICH THE MATTER IS ALREADY SET ASIDE BY THE TRIBUNAL TO THE FILE OF THE LEARNED CIT(A). PROTECTIVE ASSESSME NT WAS ACCORDINGLY MADE ON THE ABOVE GROUNDS. THE LEARNED CIT(A) DISMI SSED THE APPEAL OF THE ASSESSEE ON BOTH THESE GROUNDS. 5. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET SUBMITTED THAT SINCE THE MATTER WAS RESTORED TO THE FILE OF T HE LEARNED CIT(A) IN ASSESSMENT YEAR 2003-04 AND THE MATTER IS STILL PEN DING BEFORE THE LEARNED CIT(A), THEREFORE, THE MATTER MAY BE RESTOR ED TO THE LEARNED CIT(A) AS IS DIRECTED BY THE TRIBUNAL VIDE ORDER DA TED 19-07-2007. COPY OF THE ORDER IS PLACED ON RECORD. THE LEARNED DR HAS NO OBJECTION FOR RESTORING THE MATTER TO THE FILE OF T HE LEARNED CIT(A). 6. ON CONSIDERATION OF THE ABOVE FACTS, WE ARE OF T HE VIEW THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE LEARNED CIT(A). THE AO MADE PROTECTIVE ASSESSMENT BY FOLLOWING THE ORDE R FOR ASSESSMENT YEAR 2003-04 IN WHICH THE TRIBUNAL HAS R ESTORED THE MATTER TO THE FILE OF THE LEARNED CIT(A) FOR RECONS IDERATION. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THE MATTER IS STILL PENDING BEFORE THE LEARNED CIT(A) FOR HIS CONSIDERATION. AC CORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE B OTH THE GROUNDS OF APPEAL TO HIS FILE WITH DIRECTION TO RE-DECIDE THE SAME IN ACCORDANCE ITA NO.261, 261 AND 298/AHD/2009 M/S. SURYAPRAKASH SILK MILLS PVT. LTD. VS ACIT, CIC LE-4, SURAT M/S. SURYANARAYAN SILK MILLS PVT. LTD. VS.ACIT, CIR CLE-4, SURAT 4 WITH LAW BY GIVING REASONABLE SUFFICIENT OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ITA NO.262/AHD/2009: AY 2005-06 ITA NO.298/AHD/2009:AY 2005-06 M/S. SURYANARAYAN SILK MILLS PVT. LTD. 8. BOTH THE APPEALS ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-III, SURAT DATED 03-11-2008 FOR ASSESSMENT Y EAR 2005-06. 9. GROUNDS NO.1 AND 2 OF THE APPEAL OF THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED INN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.2,88,96,888/- ON ACCOUNT OF ALLEGED SUNDRY CREDITORS U/S. 41(1) OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED INN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.3,86,676/- ON ACCOUNT OF CREDITORS PARTIES TREATED AS CEASED AND ADDED BACK. 10. ON THESE GROUNDS, THE AO SIMILARLY NOTED THAT I N THE PRECEDING ASSESSMENT YEAR 2003-04 THE MATTER IS RESTORED TO T HE FILE OF THE LEARNED CIT(A), THEREFORE, PROTECTIVE ASSESSMENT WA S MADE U/S 41(1) OF THE IT ACT. THE ISSUE IS SIMILAR AS IS CONSIDERE D IN ITA ITA NO.261, 261 AND 298/AHD/2009 M/S. SURYAPRAKASH SILK MILLS PVT. LTD. VS ACIT, CIC LE-4, SURAT M/S. SURYANARAYAN SILK MILLS PVT. LTD. VS.ACIT, CIR CLE-4, SURAT 5 NO.261/AHD/2009. BY FOLLOWING THE ORDER IN ITA NO.2 61/AHD/2009, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTO RE THIS ISSUE ON GROUNDS NO.1 AND 2 OF THE APPEAL TO THE FILE OF THE LEARNED CIT(A) WITH DIRECTION TO RE-DECIDE THESE GROUNDS IN ACCORDANCE WITH LAW BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, GROUNDS NO.1 AND 2 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 11. ON GROUND NO.3 IN THE APPEAL OF THE ASSESSEE, T HE ASSESSEE CHALLENGED CONFIRMING OF ADDITION OF GROSS PROFIT A T 7.43%. REVENUE CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN RESTR ICTING THE ADDITION MADE BY THE AO ON ACCOUNT OF LOW GROSS PROFIT FROM 15% TO 7.43%. THE AO NOTED THAT THE ASSESSEE IS ENGAGED IN DYEING AND PRINTING OF CLOTHES ON JOB WORK BASIS AND HAS SHOWN TURNOVER OF RS.4.77 CRORES IN THE ASSESSMENT YEAR UNDER APPEAL SHOWING GROSS P ROFIT OF 6.70% AND IN THE PRECEDING ASSESSMENT YEAR 2004-05 THE TU RNOVER WAS RS.3.06 CRORES ON WHICH GROSS PROFIT RATE OF 7.43% HAS BEEN SHOWN. THE AO HAS GONE IN DETAIL AND FOUND THAT CERTAIN DI SCREPANCIES IN THE ACCOUNTS OF THE ASSESSEE AND ON COMPARISON OF THE G ROSS PROFITS WITH OTHER TRADERS OF SIMILAR LINE FOUND THAT THE ASSESS EE DID NOT MAINTAIN DAY TO DAY STOCK REGISTER AS WELL AS CONSUMPTION RE CORDS. THE AO ALSO FOUND CERTAIN OTHER REASONS TO JUSTIFY REJECTI ON OF BOOK RESULTS IN THE MATTER. THE AO ACCORDINGLY APPLIED PROVISIONS O F SECTION 145(3) OF THE IT ACT AND ESTIMATED THE PROFIT BY APPLYING PROFIT RATE OF 15% AND MADE THE ADDITION OF RS.39,62,418/-. THE LEARNE D CIT(A) CONFIRMED REJECTION OF THE BOOK RESULTS BUT FOUND THAT GROSS PROFIT RATE IS APPLIED EXCESSIVELY, THEREFORE, LAST YEARS GROS S PROFIT RATE WAS ITA NO.261, 261 AND 298/AHD/2009 M/S. SURYAPRAKASH SILK MILLS PVT. LTD. VS ACIT, CIC LE-4, SURAT M/S. SURYANARAYAN SILK MILLS PVT. LTD. VS.ACIT, CIR CLE-4, SURAT 6 APPLIED @ 7.43% AND RECOMPUTED THE BUSINESS INCOME OF THE ASSESSEE. 12. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY MERIT IN BOTH THE CROSS APPEALS. THE ASSESSEE HAS N OT CHALLENGED THE REJECTION OF THE BOOK RESULTS U/S 145(3) OF THE IT ACT. NO GROUND HAS BEEN RAISED IN THIS REGARD ALSO. THE LEARNED COUNSE L FOR THE ASSESSEE ALSO DID NOT ARGUE ON REJECTION OF THE BOOK RESULTS . THEREFORE, REJECTION OF THE BOOK RESULTS BY THE AUTHORITIES BE LOW IS NOT IN CHALLENGE BEFORE US. THE LEARNED COUNSEL FOR THE AS SESSEE HOWEVER, SUBMITTED THAT THE ADDITION IS STILL ON EXCESSIVE S IDE. THE LEARNED DR RELIED UPON THE ORDER OF THE AO FOR APPLYING 15% GR OSS PROFIT RATE. CONSIDERING THE HISTORY OF THE ASSESSEE, WE FIND TH AT THE LEARNED CIT(A) WAS JUSTIFIED IN APPLYING GROSS PROFIT RATE OF 7.43% AS WAS ADOPTED IN THE PRECEDING ASSESSMENT YEAR. IN THE A SSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS SHOWN MORE TURNOVER AS WELL AS DECLARED THE LOSS AT RS.87,43,828/- IN THE RETURN O F INCOME. THEREFORE, CONSIDERING THE HISTORY OF THE ASSESSEE WE ARE OF THE VIEW THE LEARNED CIT(A) RIGHTLY AND REASONABLY APPLIED T HE GROSS PROFIT RATE OF 7.43% FOR COMPUTING BUSINESS INCOME OF THE ASSES SEE. GROUND NO.3 OF THE APPEAL OF THE ASSESSEE AND THE GROUNDS OF APPEAL OF THE REVENUE HAVE NO MERIT AND ARE ACCORDINGLY DISMISSED . 13. NO OTHER POINT IS ARGUED OR PRESSED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES AND THE DEPARTMENTAL APPEAL IS DISMISSED. ITA NO.261, 261 AND 298/AHD/2009 M/S. SURYAPRAKASH SILK MILLS PVT. LTD. VS ACIT, CIC LE-4, SURAT M/S. SURYANARAYAN SILK MILLS PVT. LTD. VS.ACIT, CIR CLE-4, SURAT 7 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.261/AHD/2009 IS ALLOWED FOR STATISTICAL PURPOSE. THE APPEAL OF THE ASSESSEE IN ITA NO.262/AHD/2009 IS PARTLY ALLOWED F OR STATISTICAL PURPOSES. THE DEPARTMENTAL APPEAL IN ITA NO.298/AHD /2009 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT LAKSHMIKANT LAKSHMIKANT LAKSHMIKANT DEKA DEKA DEKA DEKA/ // / 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