The ACIT, Central Circle-3, Surat V. M/s. Suntex Indl.Pvt.Ltd., Surat

ITA 273/AHD/2009

• Counselvise Citation: 27320514 RSA 2009
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-12-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 29-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANURAG SHARMA
• Assessee Lawyers: S K KABRA

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !! '#$ !! '#$ !! '#$ !! '#$, , , , %& %& %& %& '() * +! '() * +! '() * +! '() * +!, , , , (, - (, - (, - (, - ( $ ( $ ( $ ( $ BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND BIJENDRA PAUL JAIN, ACCOUNTANT MEMBER) ITA NO.273, 274 AND 275/AHD/2009 [ASSTT.YEAR : 2001-2002, 2003-04 AND 2004-2005] ACIT, CENT.CIR.3 SURAT. ! /VS. M/S.SUNTEX INDUSTRIES P. LTD. 101, ASHOKA TOWER RING ROAD SURAT. PAN : AADCS 4400 N ( (( (/0 /0 /0 /0 / APPELLANT) ( (( (12/0 12/0 12/0 12/0 / RESPONDENT) - 3 4 (/ REVENUE BY : SHRI ANURAG SHARMA ! 67 3 4 (/ ASSESSEE BY : SHRI S.K. KABRA !8 3 7,/ DATE OF HEARING : 28 TH DECEMBER, 2011 9:; 3 7,/ DATE OF PRONOUNCEMENT : 05-01-2012 (< / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE THREE APPEALS BY THE REVENUE FOR THE ASSTT.YEAR 2001-2002, 2003-2004 AND 2004- 2005 ARE DIRECTED AGAINST THE ORDER OF THE COMMISSI ONER OF INCOME- TAX (APPEALS), SURAT. THEY ARE BEING DISPOSED OF WI TH THIS CONSOLIDATED ORDER. ITA NO.273/AHD/2009 (A.Y. 2001-2002) 2. THE ONLY GROUND RAISED IN THIS APPEAL OF THE REV ENUE READS AS UNDER: ITA NO.273, 274 AND 275/AHD/2009 -2- 1. THE CIT(A) HAS ERRED IN DIRECTING THE AO TO ADO PT THE GP OF PRECEDING ASSESSMENT YEAR INSTEAD OF AVERAGE OF LAST TWO ASSESSMENT YEAR. 3. THE LEARNED DR SUBMITTED THAT THERE WAS NO JUSTI FICATION FOR THE CIT(A) TO APPLY GP RATE OF THE PRECEDING ASSESS MENT YEAR 2000- 01 INSTEAD OF THE AVERAGE OF THE LAST TWO ASSESSMEN T YEARS, AS APPLIED BY THE AO. HE SUBMITTED THAT THE ASSESSEE HAS NOT MAINTAINED DAILY RECORDS OF CONSUMPTION OF COLOURS AND CHEMICALS AND DID NOT MAINTAIN STOCK REGISTER. THERE WAS HIGH VARIATION IN THE CONSUMPTION OF RAW-MATERIAL MONTH-WISE. IN THESE F ACTS, THE AO HAS REJECTED THE BOOK RESULTS SHOWN BY THE ASSESSEE AND HAS ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING THE AVERAGE GP RATE OF THE LAST TWO PRECEDING YEARS AT 10.70%, WHICH WAS QUITE REASONABLE. HE RELIED ON THE ORDER OF THE AO. THE LEARNED COUNS EL FOR THE ASSESSEE SUBMITTED THAT THERE WAS NO JUSTIFICATION FOR REJEC TING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. HE SUBMITTED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2000-2001, THE GP RATE WA S 9.28% ON SALE OF RS.20.66 CRORES AND THE SAME RATE OF 9.28% WAS APPLIED BY THE CIT(A) ON THE SALE OF RS.18.12 CRORES FOR THE R ELEVANT ASSESSMENT YEA AND THE CIT(A) HAS SUSTAINED THE ADDITION OF RS .25,73,878/- TO THE TRADING RESULT OF THE ASSESSEE. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY A ND HAVE PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FI ND THAT THE ISSUE OF REJECTION OF BOOK OF ACCOUNTS IS NOT BEFORE US A S THE ASSESSEE HAS NOT FILED ANY APPEAL OR CROSS-OBJECTION AGAINST THE ORDER OF THE ITA NO.273, 274 AND 275/AHD/2009 -3- CIT(A) HOLDING THE REJECTION OF ACCOUNTS OF THE ASS ESSEE BY THE AO AS VALID. THIS LEAVES US TO THE ONLY ISSUE IN THIS APPEAL REGARDING REASONABLENESS OF THE GP RATE APPLIED. IT IS WELL SETTLED THAT EVEN IN THE BEST JUDGMENT ASSESSMENT OR IN THE CASE OF REJE CTION OF BOOKS, THE ESTIMATES OF INCOME MUST BE HONEST AND FAIR AND SHO ULD NOT BE ARBITRARY, ALTHOUGH SOME ELEMENT OF GUESS WORK IS N ECESSARY. IN THIS CASE, THE ASSESSEE HAS ACHIEVED A HIGH TURNOVER OF RS.18.12 CRORES DURING THE RELEVANT PERIOD AND HAS SHOWN GP RATE OF 8.40%. IN THE IMMEDIATELY PRECEDING ASSTT.YEAR 2000-2001, THE GP RATE COMES TO 9.28% AND THE CIT(A) HAS APPLIED THE RATE OF IMMEDI ATELY PRECEDING ASSTT.YEAR AT 9.28% FOR THE RELEVANT ACCOUNTING PER IOD. THERE BEING NO MATERIAL TO SUGGEST THAT THE GP RATE APPLIED BY THE CIT(A) WAS NOT REASONABLE OR WAS WITHOUT ANY BASIS, WE UPHOLD THE ORDER OF THE CIT(A) AND THE GROUND OF THE REVENUE IS DISMISSED. ITA NO.274/AHD/2009 (A.Y. 2003-2004) 5. THE GROUNDS OF THE APPEAL OF THE REVENUE ARE AS UNDER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE BY DELETING THE 3% DISALLOWANCE MADE BY THE AO ON ACCOUNT OF UNVERIFIABLE PURCHASES AMOUNTING TO RS.7,97,538/-. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE 3% DISALLOWANCE MADE BY THE AO ON ACCOUNT OF UNVERIFIABLE CONSUMPTION OF COLOUR AND CHEMICALS AMOUNTING TO RS.14,51,596/-. ITA NO.273, 274 AND 275/AHD/2009 -4- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING THE AO TO AD OPT THE GP OF EARLIER ASSESSMENT YEAR. 6. THE LEARNED DR SUBMITTED THAT THERE WAS NO JUSTI FICATION FOR THE CIT(A) IN HOLDING THAT NO SEPARATE ADDITION ON ACCOUNT OF UNVERIFIABLE PURCHASES AND UNVERIFIABLE CONSUMPTION OF COLOUR AND CHEMICALS COULD BE MADE WHERE AN AVERAGE RATE OF GP HAS BEEN APPLIED BY REJECTING THE ACCOUNT BOOKS OF THE ASSES SEE. HE SUBMITTED THAT THE AO HAS PLACED MATERIAL ON RECORD TO PROVE THAT THE ASSESSEE HAS UNVERIFIABLE PURCHASES AND UNVERIFIABLE CONSUMP TION OF COLOUR AND CHEMICALS. HE RELIED ON THE ORDER OF THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THER E WERE CERTAIN DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AN D ACCORDINGLY THE CIT(A) HAS HELD THAT THE AO WAS JUSTIFIED IN REJECT ING THE BOOKS OF ACCOUNTS AND ESTIMATING THE INCOME. THE GP RATE OF 10.65% SHOWN BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESS MENT YEAR WAS APPLIED TO THE TURNOVER OF THE ASSESSEE AFTER REJEC TING THE BOOKS OF ACCOUNTS, RESULTING IN ADDITION OF RS.10,88,573/-. THE CIT(A) HAS FURTHER HELD THAT ONCE THE ACCOUNTS BOOK OF THE ASS ESSEE ARE REJECTED AND THE GP ADDITION IS MADE, IT IS NOT REASONABLE T O FURTHER MAKE ANY ADDITION ON ACCOUNT OF UNVERIFIABLE PURCHASES AND C ONSUMPTION OF COLOUR AND CHEMICALS. WE FIND THAT THE ACTION OF T HE AO IN REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATING THE INCOME OF THE ASSESSEE, HAS ITA NO.273, 274 AND 275/AHD/2009 -5- BEEN UPHELD BY THE CIT(A) AND THIS ISSUE IS NOT IN DISPUTE BEFORE US. THE GP RATE OF 10.65% SHOWN IN THE IMMEDIATELY PREC EDING ASSESSMENT YEAR WAS APPLIED TO THE TURNOVER OF THE ASSESSEE WHICH COULD NOT BE SAID TO BE UNREASONABLE OR WITHOUT ANY BASIS. WITH REGARD TO OTHER ISSUES OF FURTHER ADDITION ON ACCOU NT OF UNVERIFIABLE PURCHASES AND UNVERIFIABLE CONSUMPTION OF COLOUR AN D CHEMICALS, WE FIND THAT ONCE THE ACCOUNT BOOKS OF THE ASSESSEE AR E REJECTED AND AVERAGE RATE OF GP IS APPLIED TO THE TURNOVER OF TH E ASSESSEE AND TRADING ADDITION IS MADE, THERE IS NO JUSTIFICATION FOR MAKING ANY ADDITION ON THE BASIS OF SAME REJECTED ACCOUNT BOOK S ON ACCOUNT OF THE DEFECTS IN THE ACCOUNT BOOKS VIZ. UNVERIFIABLE PURCHASES AND UNVERIFIABLE CONSUMPTION OF COLOUR AND CHEMICALS ET C. IN THIS VIEW OF THE MATTER, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A), WHICH IS ACCORDINGLY CONFIRMED AND THE GROU ND NOS.1, 2 AND 3 OF THE REVENUES APPEAL ARE DISMISSED. ITA NO.275/AHD/2009 (A.Y. 2004-2005) 8. THE GROUND NO.1, 2 AND 3 OF THE REVENUES APPEAL READ AS UNDER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE BY DELETING THE 3% DISALLOWANCE MADE BY THE AO ON ACCOUNT OF UNVERIFIABLE PURCHASES AMOUNTING TO RS.14,86,077/- 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE 3% DISALLOWANCE MADE BY THE AO ON ACCOUNT OF ITA NO.273, 274 AND 275/AHD/2009 -6- UNVERIFIABLE CONSUMPTION OF COLOUR AND CHEMICALS AMOUNTING TO RS.7,19,970/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) HAS ERRED IN DIRECTING THE AO TO AD OPT THE GP OF EARLIER ASSESSMENT YEAR. 9. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE IS SUES IN THE GROUND NOS.1, 2 AND 3 OF THE REVENUES APPEAL ARE I DENTICAL TO THE GROUND NOS.1, 2 AND 3 OF THE REVENUES APPEAL FOR T HE EARLIER ASSESSMENT YEAR 2003-2004. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION IN THE FOREGOING PARAGRAPHS OF THIS ORDER WHILE DECIDING THE APPEAL FOR THE EARLIER ASSTT.YEAR 2003-2004, WE HOL D THAT THERE IS NO MERIT IN THE GROUND NOS.1, 2 AND 3 OF THE REVENUES APPEAL, WHICH ARE ACCORDINGLY DISMISSED. 11. GROUND NO.4 OF THE REVENUES APPEAL READS AS UN DER: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWA NCE U/S.43B OF THE ACT AS THE AMENDED PROVISION HAS THE EFFECT FROM THE SUBSEQUENT YEAR. 12. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT T HE DISALLOWANCE OF RS.31,109/- WAS MADE ON ACCOUNT OF LATE PAYMENT OF PF AND ESI. THE CIT(A) HAS HELD THAT IF THE PAYMENT IS MADE BEF ORE THE DUE DATE OF FILING OF RETURN, THE AMOUNT CANNOT BE DISALLOWE D. THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE ITAT, AHMEDABAD BENCHES IN THE CASE OF SAI CONSULTING ENG INEERS P. LTD., ITA NO.273, 274 AND 275/AHD/2009 -7- VIDE ITA NO.2262/AHD/2007 DATED 10-08-2007 FOR A.Y. 2004-2005 AND ACCORDINGLY, THERE IS NOT MERIT IN THE GROUND N O.4 OF THE REVENUE, THE SAME IS ACCORDINGLY REJECTED. 13. IN THE RESULT, ALL THREE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( '() * +! '() * +! '() * +! '() * +! /B.P. JAIN (, - /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