M/s. Choksi Metal Refinery, Surat V. The ACIT.,Circle-2, Surat

ITA 2734/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6399 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 22-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Gross profit estimation
• Section: 145

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI M.K. SHRAWAT, JM AND D.C.AGRAWAL, AM M/S CHOKSI METAL REFINERY, P.NO.21, BLOCK NO.26A, ROAD NO.11, M.G. ROAD, UDHNA UDHYOGNAGAR, SURAT. VS. A.C.I.T., CIRCLE-2, SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI HARDIK VORA, AR RESPONDENT BY:- SHRI B. L. YADAV, SR.DR O R D E R PER MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER . THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMERGED FROM THE ORDER OF CIT(A)-II, SURAT, DATED 13.8.201 0. SUBSTANTIVE GROUNDS ARGUED BEFORE US, ARE GROUND NOS.1 & 2 WHICH ARE RE PRODUCED BELOW :- (1) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN REJECTING THE BOOK RESULTS U/S 145(3) OF THE IT ACT. (2) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WE LL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING ADDITION OF RS.1,80,617/- ON ACCOU NT OF ALLEGED LOW GROSS PROFIT. ITA NO.2734/AHD/2010 ASST. YEAR 2007-08 ITA NO.2734/AHD/2010 ASST. YEAR 2007-08 2 2. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED UNDER SECTION 143(3), DATED 29.09.2009 ARE THAT THE ASSESSEE FIRM IS STATED TO BE IN THE BUSINESS OF METAL REFIN ING. IT WAS OBSERVED BY THE AO THAT THERE WAS A FALL IN GP BY 2.53% AS PER FOLLOWING CHART REPRODUCED BY HIM:- ASST. YEAR TURNOVER GROSS PROFIT GP MARGIN (%) 2007-08 3,06,46,495.00 58,32,225.00 19.03 2006-07 2,36,31,312.00 50,94,202.00 21.56 2005-06 2,08,50,625.00 38,09,290.00 19.27 A SHOW CAUSE WAS ISSUED AS TO WHY THE BOOK RESULTS BE NOT REJECTED AND GP SHOULD NOT BE ESTIMATED AT THE AVERAGE PROFIT RA TE. IT WAS PROPOSED AS FOLLOWS :- ACCORDINGLY, THE BOOK RESULTS SHOWN BY THE ASSESSE E ARE REJECTED AND THE GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION IS ES TIMATED AFTER ADOPTING THE AVERAGE RATE 19.62%. ACCORDINGLY, THE GROSS PRO FIT FOR THE YEAR UNDER CONSIDERATION IS WORKED OUT AS UNDER :- GP @ 19.62% ON RS.3,06,46,495/- : RS.60,12,842/- LESS: GP @ 19.03 ON RS.3,06,46,495/- (ALREADY SHOWN BY THE ASSESSEE) : RS.58,3 2,225/- -------------------- DIFFERENCE : RS.1,80,617/- ============ IN VIEW OF THE ABOVE, AN AMOUNT OF RS.1,80,617/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF ESTIMATION OF GROSS PROFIT. ACCORDINGLY, AN ADDITION OF RS.1,80,617/- WAS MADE. THE SAID ADDITION WAS CHALLENGED. ITA NO.2734/AHD/2010 ASST. YEAR 2007-08 3 3. BEFORE LD. CIT(A) IT WAS CONTESTED THAT WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE THE AO HAS MADE AN AD HOC ADDITION BY DISTURBING THE GP DECLARED BY THE ASSES SEE. IT WAS CONTESTED THAT COMPLETE DETAILS OF QUANTITY ACCOUNT AND QUANT ITY REGISTERED AS REQUIRED UNDER EXCISE LAW WERE PRODUCED. ASSESSEE H AS PLACED RELIANCE ON THE DECISION OF HON. GUJARAT HIGH COURT IN THE C ASE OF SUKHADIA JAMNADAS MAGANLAL VS. ITO 13 DTR GUJ 149 FOR THE LE GAL PROPOSITION THAT REJECTION OF ACCOUNTS AND ESTIMATION OF INCOME WITHOUT ANY FINDING THAT THERE WAS SUPPRESSION OF SALE, GP ADDITION WAS HELD AS NOT JUSTIFIABLE. THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISI ON OF HON. PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. PAWAN KUM AR (2009) 316 ITR 324 (P&H). HOWEVER, THE LD. CIT(A) WAS NOT CONVINCE D AND UPHELD THE ADDITION. 4. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED TH E ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION F ILED BEFORE US. IT IS EVIDENT FROM THESE ORDERS THAT MERELY ON THE BASIS OF FALL IN GP RATE FOR THE YEAR UNDER CONSIDERATION, THE IMPUGNED ADDITION WAS MADE. IT IS NOT THE CASE OF THE REVENUE THAT SOME SUPPRESSIONS OF S ALES WERE DETECTED AS PER THE BOOKS OF ACCOUNT. IT IS ALSO NOT THE CASE O F THE REVENUE THAT THE BOOKS OF ACCOUNTS WERE INCOMPLETE OR THE CORRECT PR OFIT COULD NOT BE ITA NO.2734/AHD/2010 ASST. YEAR 2007-08 4 DEDUCED. RATHER, ON THE OTHER HAND, THE ASSESSEE HA S FURNISHED THE REQUISITE DETAILS AND CLAIMED THAT ALL THE SALES AS WELL AS PURCHASES WERE FULLY VOUCHED AND VERIFIABLE. IT WAS ALSO CLAIMED T HAT ALL THE EXPENDITURE WERE SUPPORTED BY BILLS/VOUCHERS. FACTS OF THE CASE HAVE REVEALED THAT THE ASSESSEE IS ALSO SUBJECT TO ASSESSMENT BY EXCISE DE PARTMENT. DUE TO THE SAID REASON, THE PRODUCTION REGISTER AND REQUISITE DETAILS WERE MAINTAINED BY THE ASSESSEE AND ALSO PLACED BEFORE THE AO FOR V ERIFICATION. THE IMPUGNED ASSESSMENT ORDER IS SILENT ABOUT THE REASO NS FOR INVOCATION OF THE PROVISIONS OF SECTION 145 OF THE IT ACT. NO SPE CIFIC FINDING OR REASON WAS GIVEN FOR NOT ACCEPTING THE BOOK RESULTS. IN NU MBER OF DECISIONS IT WAS HELD BY HONBLE COURTS THAT IF ACCOUNTS WERE NO T FOUND DEFECTIVE THEN PROFIT MUST NOT BE ESTIMATED. RATHER IT WAS HE LD THAT IT IS NOT PERMISSIBLE TO REJECT THE BOOKS OF ACCOUNTS MERELY ON THE GROUND OF LOW GP RATE AS COMPARED TO THE EARLIER YEARS. TO BUTTRE SS THESE LEGAL POSITIONS CASE LAWS CITED ARE CIT VS. K. BHATIA (2004) 269 IT R 577 (P&H) AND CIT VS. JAS JACK ELEGANCE EXPORTS (2010) 324 ITR 93 (DE L). UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE NOT INCLINED TO AFFIRM THE FINDINGS OF THE AUTHORITIES BELOW AND REVERSE T HE SAME. BOTH THE GROUNDS RAISED BY THE ASSESSEE ARE HEREBY ALLOWED. ITA NO.2734/AHD/2010 ASST. YEAR 2007-08 5 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 17 TH JUNE, 2011. SD/- SD/- (D.C. AGRAWAL) (M. K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL ME MBER AHMEDABAD, DATED : 17/6/2011. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 3/6/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 3/6/2011 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 DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 17.6.2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 17.6.2011 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..