The ITO, Ward-6(2), Ahmedabad V. Ritaben Bharatbhai Patel, Ahmedabad

ITA 2767/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67632 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-09-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 28-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: S N DIVETIA
• Keywords: Additional evidence; Fair market value
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEM BER THE ITO, WARD-6(2), AHMEDABAD (APPELLANT) VS SMT. RITABEN BHARATBHAI PATEL, PROP. M/S. TECHNO PUMP INDUSTRIES, & DYNAMIC, 5-6, MANICHANDRA SOC. PART-I, THALTEJ, AHMEDABAD PAN- ADVPP7860G (RESPONDENT) REVENUE BY: SRI P.L. KUREEL, SR.D.R. ASSESSEE BY: SRI S.N. DIVETIA, A.R. DATE OF HEARING : 04-09-2013 DATE OF PRONOUNCEMENT : 13-09-20 13 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE REVENUES APPEAL AGAINST THE ORDER OF LD. CIT(A)-XI AHMEDABAD DATED 26-07-2010. 2. REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUNDS:- ITA NO. 2767/AHD/2010 ASSESSMENT YEAR 2001-02 I.T.A NO.2767/AHD/2010 A.Y. 2001-02 PAGE NO ITO VS. M/S. TECHNO PUMP INDUSTRIES & DYNAMIC 2 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CANCELING THE ADDITION OF RS. 8,20,126/- MADE ON ACCOUNT OF LAW G ROSS PROFIT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 10,86,456/- MADE ON ACCOUNT OF UNAC COUNTED CLOSING STOCK U/S 69A OF THE ACT. 3. THE FIRST GROUND RELATES TO ADDITION OF RS. 8,20 ,126/- ON ACCOUNT OF FALL IN GP. WHILE MAKING THE ADDITION ASSESSING OFFICE R HAS OBSERVED AS UNDER:- AS PER THE DIRECTION OF THE HON'BLE ITAT VIDE ORDE R SHEET ENTRY DATED 3.12.2009 AND QUERY LETTER DATED 9. 12. 2009 AND 16 .12 2009 (NO. 5 & 6) THE ASSESSEE WAS AGAIN ASKED TO JUSTIFY AS TO WH ETHER THE CLOSING STOCK WAS SOLD TO SISTER CONCERN TECHNO SUBMERSIBLE PVT. LTD. AT FAIR MARKET VALUE WITH REFERENCE TO THE PROVISIONS OF SE CTION 40A(2)(B) OF THE I. T. ACT, 1961. IN RESPECT OF THE DISCREPANCIE S NOTICED IN THE BOOKS, EXPLAIN, AS TO WHY THE BOOKS OF ACCOUNTS SHO ULD NOT BE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145 OF THE I. T. ACT, 1961 AND TO EXPLAIN THE REASONS FOR FALL IN G. P. HOWEVER, TIL L DATE NO DETAILS HAVE BEEN FURNISHED BY THE ASSESSEE IN THIS REGARD. UNDE R THE CIRCUMSTANCES, THE BOOK RESULTS OF THE ASSESSEE ARE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145 OF THE ACT A ND THE G. P. OF THE ASSESSEE'S BUSINESS IS ESTIMATED 3.80% WHICH IS THE AVERAGE G. P. RATE IN THE PRECEDING TWO YEARS. APPLYING THIS GROSS PRO FIT TO THE SALES OF RS. 215,82,261/- WOULD GIVE A GROSS PROFIT OF RS. 8 ,20,126/- AND THE SAME IS ADDED TO TOTAL INCOME OF THE ASSESSEE.' 4. LD. CIT(A) AFTER TAKING INTO CONSIDERATION THE S UBMISSION OF THE ASSESSEE, REMAND REPORT OF THE AO ON THIS SUBMISSIO N AND COUNTER COMMENTS OF THE ASSESSEE ON THE REMAND REPORT OF THE AO WHIC H HAVE BEEN REPRODUCED BY HIM IN PARA 5.1, 5.2. AND 5.2.1 OF HIS ORDER HAS DELETED THIS ADDITION BY OBSERVING AS UNDER:- 5.3. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER AND THEN IN THE REMAND REPORT THE BASIC OBJECTION OF THE A.O. IS THAT AS SUFFICIENT TIME WAS GIVEN IN AS SESSMENT I.T.A NO.2767/AHD/2010 A.Y. 2001-02 PAGE NO ITO VS. M/S. TECHNO PUMP INDUSTRIES & DYNAMIC 3 PROCEEDINGS, THE ADDITIONAL EVIDENCE IS NOT TO BE A DMITTED. HOWEVER, THE A. O. QUOTED ONLY ONE DATE SPECIFICALLY 03-12-2 009 AND THE ORDER WAS PASSED ON 24-12-2009. THE APPELLANT CONTENDED T HAT SINCE ALL THE RELEVANT FIGURES WERE AVAILABLE WITH THE A. O., THE CORRECT WORKING OF G.P. IS IN NO WAY ADDITIONAL EVIDENCE. ON MERITS A .O. COULD NOT CONTROVERT THE APPELLANT'S CONTENTIONS THAT IF THE ADMINISTRATIVE EXPENSES (WHICH WERE MISTAKENLY TAKEN INTO ACCOUNT BY THE TAX AUDITOR FOR CALCULATION OF G.P) ARE EXCLUDED, G. P. WORKS OUT TO 5.13% (AS AGAINST G. P. @ 3.8% ADOPTED BY A.O) AND NO ADDITION IS WARRANTED. THEREFORE, THE ADDITION MADE BY THE A O. (ON IMPROPER APPRECIATION OF FACTS VERY MUCH ON RECORD) OF RS. 8 ,20,126/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT ASS ESSING OFFICER COULD NOT CONTROVERT THE ASSESSEES CONTENTIONS THAT IF THE A DMINISTRATIVE EXPENSES ARE EXCLUDED HIS GROSS PROFIT WORKS OUT TO 5.13% AS AGA INST GROSS PROFIT ADOPTED BY THE AO @ 3.8%, AND THEREFORE NO ADDITION WAS CAL LED FOR IN THIS CASE. THIS FINDING OF THE LD. CIT(A) HAS REMAINED UNCONTR OVERTED BY THE REVENUE BEFORE US ALSO, THEREFORE WE FEEL NO NEED TO INTERF ERE WITH THE ORDER PASSED BY HIM AND THE SAME IS HEREBY UPHELD. THIS GROUND OF REVENUE IS DISMISSED. 6. SECOND GROUND RELATES TO ADDITION OF RS. 10,86,4 56/- ON ACCOUNT OF UNACCOUNTED CLOSING STOCK U/S. 69A OF THE ACT. AO WHILE MAKING THIS ADDITION HAS OBSERVED AS UNDER:- 'AS PER THE DIRECTION OF THE HON'BLE ITAT , VIDE ORDER SHEET ENTRY DATED 3.12.2009 AND QUERY LETTER DATED 9.12.2009 AND 16.1 2.2009 (NO.4) THE ASSESSEE WAS AGAIN ASKED TO RECONCILE/EXPLAIN THE A BOVE DISCREPANCIES NOTED BETWEEN THE STOCK STATEMENT SUB MITTED TO BANK WITH THE BOOKS OF ACCOUNTS. HOWEVER, TILL DATE NO D ETAILS HAVE BEEN FURNISHED BY THE ASSESSEE IN THIS REGARD. AN IDENTI CAL ISSUE HAD COME UP BEFORE THE JURISDICTIONAL BENCH OF THE HON'BLE I TAT AHMEDABAD IN THE CASE OF ITO VS. DILIP K. SHAH REPORTED AT 83 IT D 9. IN THIS DECISION, THE HON'BLE BENCH HAS TAKEN INTO ACCOUNT VARIOUS DECISIONS I.T.A NO.2767/AHD/2010 A.Y. 2001-02 PAGE NO ITO VS. M/S. TECHNO PUMP INDUSTRIES & DYNAMIC 4 OF DIFFERENCE HIGH COURTS. ADDITION MADE BY THE DEP ARTMENT ON SIMILAR BASIS WAS UPHELD BY THE HON'BENCH ON THE GR OUND THAT THERE WAS NO EVIDENCE ON THE RECORD TO PROVE THAT THE STO CK STATEMENT GIVEN TO THE BANK BY THAT ASSESSEE WAS FACTUALLY WRONG. I N THE CASE OF THE ASSESSEE ALSO, THE ASSESSEE HAS SOLEMNLY AFFIRMED I N THE SAID STOCK STATEMENT THAT THE STOCKS DECLARED THEREIN AS ABOVE WERE TRUE IN RATE AND QUANTITY. THEREFORE, IN THE ABSENCE OF ANY OTHE R EVIDENCE CONTRARY TO SUCH VERIFICATION IN THE FORM OF A CERTIFICATE F ROM THE BANK ETC CONFIRMING ASSESSEE'S CONTENTION AS ABOVE CANNOT BE ACCEPTED. EVEN OTHERWISE THE FIGURES OF STOCKS SHOWN IN THE STOCK STATEMENT SUBMITTED TO THE BANK DO NOT APPEAR TO BE STOCK SHOWN IN THE STOCK STATEMENT SUBMITTED TO THE BANK DO NOT APPEAR TO BE ON ESTIMA TE BASIS ONLY. THE MAJOR ITEM OF 'STAMPING' HAS BEEN SHOWN IN THIS STA TEMENT AT 31992 KGS. IT IS NOT UNDERSTOOD, HOW AND WHY A PERSON WOU LD ESTIMATE SUCH ITEM AT THIS FIGURE, WHEREAS SUCH ESTIMATES ARE GEN ERALLY IN ROUND FIGURES. UNDER THE CIRCUMSTANCES, THE ADDITION OF R S. 10,86,456/- MADE U/S. 69A OF THE I. T. ACT, 1961 IN THE ORIGINA L ASSESSMENT ORDER DATED 31-03-2004 WILL REMAIN INTACT. 7. LD. CIT(A) AFTER TAKING INTO CONSIDERATION THE S UBMISSION OF THE ASSESSEE, REMAND REPORT OF THE AO ON THIS SUBMISSIO N AND COUNTER COMMENTS OF THE ASSESSEE ON THE REMAND REPORT OF THE AO WHIC H HAVE BEEN REPRODUCED BY HIM IN PARA 6.1 OF HIS ORDER HAS DELETED THIS AD DITION BY OBSERVING AS UNDER:- 6.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE A. R . OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN TH E ASSESSMENT ORDER AND THEN IN THE REMAND REPORT. THE APPELLANT'S CONT ENTIONS ARE THAT HIGHER STOCK SHOWN TO BANK WAS FOR AVAILING HIGHER CASH CREDIT LIMIT; THIS PRACTICE IS FOLLOWED OVER THE YEARS; THE OPENI NG STOCK SHOWN TO THE BANK WAS ALSO HIGHER COMPARED TO BOOK STOCK; AN D IF VALUE OF BOTH THE OPENING AND CLOSING STOCK FURNISHED TO THE BANK ARE TAKEN INTO ACCOUNT, THERE IS NO REVENUE IMPLICATION. THE ASSES SING OFFICER IN HIS REMAND REPORT DATED 02-07-2010 ACCEPTED THAT THE OP ENING STOCK STATEMENT SUBMITTED WITH THE BANK WAS FILED BEFORE FINALIZATION OF ASSESSMENT PROCEEDINGS AND COULD NOT CONTROVERT THE CONTENTIONS OF THE APPELLANT. THEREFORE, HAVING CONSIDERED THE FAC TS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT TH E ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ADDITION ON THIS COUNT. THE ADDITION MADE BY I.T.A NO.2767/AHD/2010 A.Y. 2001-02 PAGE NO ITO VS. M/S. TECHNO PUMP INDUSTRIES & DYNAMIC 5 THE A. O. OF RS.10 , 86,456/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. THE ABOVE FINDING OF THE LD. CIT(A) REMAINED UNCONT ROVERTED BY THE REVENUE AT THE TIME OF HEARING BEFORE US. WE FURTH ER FIND THAT LD. CIT(A)S ACTION IS IN CONSISTENT WITH THE RATIO AS LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ARROW EXIM (P) LTD TAX APPEAL NO. 1973 OF 2008 DATED 01-11-2010. THEREFORE, THIS GROUND OF RE VENUE IS ALSO DISMISSED. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (T.R. MEENA) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 13/09/2013 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,