The ACIT, Central Circle-1(2), Ahmedabad V. Vimal Microns Ltd., Mehsana

ITA 2678/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67665 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 14-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JANGID SRDR
• Keywords: Rejection of books of accounts

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.2535/AHD/2010 [ASSTT.YEAR : 2007-2008] VIMAL MICRONS LTD. 19, GIDC ESTATE, PHASE-II DEDIYASAN, MEHSANA. PAN : AAACV 6289 M /VS. DCIT, CENT.CIR.1(2) AHMEDABAD. ITA NO.2678/AHD/2010 [ASSTT.YEAR : 2007-2008] DCIT, CENT.CIR.1(2) AHMEDABAD. /VS. VIMAL MICRONS LTD. 19, GIDC ESTATE, PHASE-II DEDIYASAN, MEHSANA. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI VARTIK CHOKSHI + 2 3 )/ REVENUE BY : SHRI J.P. JANGID, SR.DR 5 2 &(*/ DATE OF HEARING : 14 TH AUGUST, 2013 678 2 &(*/ DATE OF PRONOUNCEMENT : 5.9.2013 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT : THESE ARE CROSS- APPEALS BY THE ASSESSEE AND THE REVENUE FOR THE ASS ESSMENT YEAR ITA NO.2535 AND 2678/AHD/2010 -2- 2007-2008 AND ARE DIRECTED AGAINST THE ORDER OF THE CIT(A). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. 2. ITA NO.2535/AHD/2010 (ASSESSEES APPEAL): 3. THE FOLLOWING GROUNDS ARE RAISED IN THIS APPEAL OF THE ASSESSEE: 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ER RED IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS OF APP ELLANT WITHOUT APPRECIATING THE VITAL ASPECTS OF THE APPEL LANT'S SUBMISSION CONTAINED IN THE STATEMENT OF FACTS AND WRITTEN SUBMISSIONS DATED 29.06.2010 SUBMITTED BEFORE HIM. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ER RED IN REJECTING THE EXPLANATION OF THE APPELLANT FOR FALL IN GROSS PROFIT DURING THE YEAR AND SUSTAINING THE ADDITION MADE BY ASSESSING OFFICER PARTLY TO THE EXTENT OF RS.11,75,000/- BY E STIMATING GROSS PROFIT RATE AT 17.5%. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ACCOUNT BOOKS OF THE ASSESSEE HAVE BEEN REJECTED MERELY BEC AUSE THERE IS A SHORTFALL IN THE GP RATE OF THE ASSESSEE AT 16.88% DURING THE RELEVANT PERIOD AS AGAINST 19.16% IN THE IMMEDIATELY PRECEDI NG ASSESSMENT YEAR. HE SUBMITTED THAT THE ASSESSEE IS IN THE BUS INESS OF BUYING MINERALS AND SELLING THE SAME AFTER PROCESSING. HE SUBMITTED THAT THE AO HAD ADDED 2.28% OF THE TURNOVER AS INCOME ON ACC OUNT OF LESSER GP SHOWN BY THE ASSESSEE. THE CIT(A) HAS ALLOWED T HE PART RELIEF BY APPLYING GP RATE OF 17.5% ON THE TURNOVER OF THE AS SESSEE. HE REFERRED TO THE RELEVANT PAPERS IN THE COMPILATION FILED BY THE ASSESSEE WHEREIN THERE IS A SUBSTANTIAL INCREASE IN VARIOUS HEADS OF EXPENSES, RESULTING IN LESSER GP DECLARED BY THE ASSESSEE. H E SUBMITTED THAT IN FREIGHT (OUTWARD) INCREASE WAS 98.97%, FREIGHT (INW ARD) INCREASE WAS ITA NO.2535 AND 2678/AHD/2010 -3- 51.93%, ELECTRICITY BILL INCREASED BY 120.36% AND M ACHINERY REPAIR & MAINTENANCE, INCREASE BY 70.92%, POWER AND FUEL EXP ENSES INCREASED BY 67.99% AND LIKEWISE, INCREASE IN OTHER HEADS OF EXPENSES ALSO. HE SUBMITTED THAT THERE IS INCREASE OF 68.43% IN SALES , AND IT WAS ACHIEVED ONLY DUE TO POLICY OF THE ASSESSEE TO SELL THE GOODS AT COMPETITIVE RATES ONLY. HE SUBMITTED THAT THE ACCO UNTS OF THE ASSESSEE WERE AUDITED BY THE CHARTERED ACCOUNTANT, AND NO MI STAKE COULD BE POINTED OUT BY THE AO EXCEPT THAT HE HAS OBSERVED T HAT CERTAIN EXPENSES INCURRED BY THE ASSESSEE WERE SUPPORTED BY SELF-MADE VOUCHERS ONLY. 5. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF TH E LEARNED COUNSEL OF THE ASSESSEE. HE SUBMITTED THAT MOST OF THE EXPENSES INCURRED BY THE ASSESSEE WERE SUPPORTED BY SELF-MAD E VOUCHERS ONLY, AND THEREFORE, THE AO WAS JUSTIFIED IN REJECTING TH E BOOKS OF ACCOUNTS OF THE ASSESSEE, AND APPLYING THE GP AS SHOWN BY TH E ASSESSEE ITSELF IN THE EARLIER YEAR. HE SUBMITTED THAT THE CIT(A) HAS ALSO UPHELD THE FINDING OF THE AO THAT SOME OF THE EXPENSES OF THE ASSESSEE WERE SUPPORTED BY MERELY SELF-MADE VOUCHERS. HE SUBMITT ED THAT THERE IS NO JUSTIFIABLE REASONS WITH THE CIT(A) TO REDUCE TH E GP RATE APPLIED BY THE AO. HE RELIED ON THE ORDER OF THE AO. 6. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY A ND HAVE PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND ALS O COPIES OF VARIOUS DOCUMENTS FILED IN THE COMPILATION FILED BY THE ASSESSEE. WE FIND THAT THE ASSESSEE IS IN THE BUSINESS OF BUYING MINERALS AND SELLING THE SAME AFTER PROCESSING. THERE IS SHORTFALL IN T HE GP RATE DURING THE YEAR AT 16.88% FROM 19.16% IN THE IMMEDIATELY PRECE DING ASSESSMENT ITA NO.2535 AND 2678/AHD/2010 -4- YEAR. WE FIND THAT THE AO COULD NOT POINT OUT ANY DEFECT IN THE ACCOUNT BOOKS KEPT REGULARLY BY THE ASSESSEE, EXCEP T THAT SOME OF THE EXPENSES CLAIMED BY THE ASSESSEE ARE SUPPORTED BY O NLY SELF-MADE VOUCHERS. THIS FINDING OF THE AO THAT SOME OF THE VOUCHERS OF THE ASSESSEE ONLY SELF-MADE VOUCHERS HAS BEEN UPHELD BY THE CIT(A) ALSO. WE FIND THAT MERELY BECAUSE CERTAIN VOUCHERS OF EXP ENSES WERE ONLY SELF-MADE VOUCHERS, HAVING SIGNATURES OF THE RECIPI ENT THEREIN, DOES NOT JUSTIFY THE REJECTION OF THE BOOKS OF ACCOUNTS MAINTAINED IN THE REGULAR COURSE OF BUSINESS BY THE ASSESSEE. NO OTH ER DEFECTS COULD BE POINTED OUT BY THE DEPARTMENT WITH REGARD TO THE MA INTENANCE OF THE ACCOUNTS OF THE ASSESSEE. THE PROPER COURSE IN SUC H FACTS OF THE CASE OF ASSESSEE FOR THE AO IS TO MAKE A SUITABLE DISALL OWANCE OUT OF THE EXPENSES, WHICH WERE NOT SUPPORTED BY PROPER VOUCHE RS AND WERE SUPPORTED ONLY BY SELF-MADE VOUCHERS. WE FIND THAT NO SUCH EXERCISE WAS UNDERTAKEN BY THE AO OR THE CIT(A). THE AO HAS NOT EVEN QUANTIFIED THE EXTENT OF SUCH EXPENSES WHICH ARE SU PPORTED BY ONLY SELF-MADE VOUCHERS. A PERUSAL OF THE COMPARATIVE C HART OF EXPENSES FILED BY THE ASSESSEE CLEARLY SHOWS THAT THERE IS A SUBSTANTIAL INCREASE IN ALMOST ALL THE HEADS OF THE EXPENSES CLAIMED BY THE ASSESSEE. THERE IS AN INCREASE OF 68.43% IN THE SALES FIGURES OF TH E ASSESSEE DURING THE RELEVANT PERIOD AS COMPARED TO THE FIGURE OF SALES IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSEE HAS CLAIME D THAT IT HAS SOLD ITS GOODS AT COMPETITIVE RATES TO ACHIEVE HIGHER SA LES DURING THE YEAR, AND THAT NO ADVERSE FINDING ON THIS CLAIM OF THE AS SESSEE COULD BE MADE BY THE REVENUE AUTHORITIES. IN THE FACTS OF T HE CASE, WE ARE UNABLE TO SUSTAINABLE THE ACTION OF THE REVENUE AUT HORITIES IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE, WHICH WERE R EGULARLY MAINTAINED IN NORMAL COURSE OF BUSINESS, AND AUDITE D BY THE CHARTERED ITA NO.2535 AND 2678/AHD/2010 -5- ACCOUNTANT . HOWEVER, SOME DISALLOWANCE ON ACCOUNT OF SELF-MADE VOUCHERS WITH REGARD TO SOME EXPENSES CLAIMED BY TH E ASSESSEE WAS CALLED FOR. CONSIDERING ENTIRE FACTUAL MATRIX OF T HE CASE OF THE ASSESSEE, AND THE EXTENT OF EXPENDITURE CLAIMED BY THE ASSESSEE, WE ARE OF THE VIEW THAT NO TRADING ADDITION IN THE GP RATE IS SUSTAINABLE, AND ACCORDING, THE SAME IS DELETED, AND DISALLOWANC E OUT OF EXPENSES IS MADE AT RS.3,50,000/- (THREE LAKHS FIFTY THOUSAN D ONLY), ON ACCOUNT OF SELF-MADE VOUCHERS WITH REGARD TO CERTAI N AMOUNT OF EXPENSES CLAIMED BY THE ASSESSEE IN TRADING RESULTS OF THE ASSESSEE. WE DIRECT ACCORDINGLY, AND THE GROUNDS OF THE APPEA L OF THE ASSESSEE ARE PARTLY ALLOWED. ITA NO.2678/AHD/2010 ASSTT.YEAR : 2007-2008 (REVE NUES APPEAL) 7. THE ONLY GROUND RAISED IN THIS APPEAL OF THE REV ENUE IS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN ESTIMATING THE GP @ 17.5% INSTEAD OF 19.16% AS ESTIMATED BY TH E AO. 8. BOTH THE PARTIES BEFORE US SUBMITTED THAT ISSUE IN THIS GROUND OF THE APPEAL OF THE REVENUE IS INTER-LINKED WITH THE ISSUE RAISED IN THE GROUND OF THE APPEAL OF THE ASSESSEE FOR THE SAME A SSESSMENT YEAR I.E. 2007-2008. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION WHILE DISPOSING OF THE ASSESSEES APPEAL F OR THE SAME ASSESSMENT YEAR 2007-2008 IN ITA NO.2535/AHD/2010 F OR A.Y.2007- 2008 IN THE FOREGOING PARAS OF THIS ORDER, WE HOLD THAT THERE IS NO ITA NO.2535 AND 2678/AHD/2010 -6- MERIT IN THE GROUNDS OF THE APPEAL OF THE REVENUE, WHICH IS ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD