M/S. RAKESH KUMAR GOYAL, MUMBAI V. THE ITO 12(2)(1), MUMBAI

ITA 2771/MUM/2007

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1879 (ITAT-MUMBAI)
• Duration Of Justice: 13 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2002-2003
• Appeal Filed On: 10-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL DESH
• Keywords: Business income; Salary income; Corroborative evidences
• Section: 143(3); 142(1); 80HHC; 143(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 2771/MUM/2007 ( ASSESSMENT YEARS: 2002-03 ) M/S. RAKESH KUMAR GOYAL, 109, CHURCHGATE CHAMBERS, 5, NEW MARINE LINES, MUMBAI 20 / VS. THE ITO -12(2)(1) AAYAKAR BHAVAN MUMBAI 400 020. ./ ./ PAN/GIR NO. : AABPG3433C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI SUNIL DESHPANDE, DR / DATE OF HEARING 01/12/2020 !'# / DATE OF PRONOUNCEMENT 07/12/2020 / O R D E R PER PAVAN KUMAR GADALE - JM: THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -12, MUMBAI, PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1961. 2. THE APPEAL, FOR THE A.Y 2002-03 WAS FILED WITH THE HONBLE TRIBUNAL ON 29.06.2007.THE APPEAL WAS ITA NO . 2771 /MUM/2007 RAKESH KUMAR GOYAL, MUMBAI. - 2 - POSTED FOR HEARING FROM THE DATE OF FILING TO TILL TODAY I.E 31 TIMES. ON VERIFYING THE ORDER SHEET FOR THE YEAR 2020, WE FIND ON 06.01.2010 AT THE REQUEST OF LD COUNSEL VIDE LETTER DATED 6-1-2020 ADJOURNMENT WAS SOUGHT. ON 09.01.2020 ALSO ADJOURNMENT WAS REQUESTED. SUBSEQUENTLY, THE CASE WAS POSTED ON 18.02.2020 AND NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT PETITION WAS FILED AND THE CASE WAS ADJOURNED TO 30-04-2020. DUE TO COVID- 19 PANDEMIC, THE CASE WAS POSTED FOR HEARING ON 22.09.2020 BUT NONE APPEARED ON BEHALF OF THE ASSESSEE. FINALLY ON 01.012.2020, WHEN THE CASE WAS POSTED FOR HEARING ALSO, NONE APPEARED ON BEHALF OF THE ASSESSEE. CONSIDERING THE FACTS ON RECORD, THE APPEAL FILED BY THE ASSESSEE IS MORE THAN 10 YEARS OLD AND IT LOOKS LIKE THE ASSESSEE IS NOT INTERESTED IN PROSECUTING THE APPEAL. HENCE WE CONSIDERED THE SUBMISSIONS OF THE LD.DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE APPEAL WAS HEARD. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL . 1. THE LD. CIT(A) HAS ERRED IN APPLYING ESTIMATED GP RATE OF 1% ON LOCAL SALES AND WRONGLY ADDED RS. 32,21,938/- TO TOTAL INCOME. ITA NO . 2771 /MUM/2007 RAKESH KUMAR GOYAL, MUMBAI. - 3 - IT IS EXPLAINED TO THE LD. CIT(A) THAT THERE WAS E XPORT AS WELL AS LOCAL SALES IN THE A.Y 2002-03. THERE WAS PROFIT IN THE EXPORT SALES AND LOSS IN THE LOCAL SALES AND SAME SHOULD BE ALLOWED. IN FACT THE LOSS IN THE LOCAL SALES WAS DUE TO SAL E OF THE ACRYLIC TOE AND SYNTHETIC WASTE WHICH WAS NOT USEAB LE. AS WE HAVE THE OPENING STOCK OF ACRYLIC TOW AND SYNTHETIC WASTE DUE TO BULK BUYING IN EARLIER YEARS , TO GOT THE QUANTITY DISCOUNT. THESE MATERIAL WAS REGULARL Y USED BY US. DUE TO MOISTURE SOME OF THE MATERIAL DETERI ORATE AND WAS NOT USEABLE. IT IS SIMPLY WASTE FOR US. A FTER NEGOTIATION AND SHOWING THE MATERIAL TO DIFFERENT PARTIES/AGENTS/SUPPLIERS SOME OF THE QUANTITY SENT TO THEM FOR APPROVAL BASIS AT THE AGREED PRICE, LOWER THAN PURCHASE PRICE. 3. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSES SEE IS ENGAGED IN THE BUSINESS OF TRADING AND EXPORT OF HOSIERY GOODS AND WOOLEN ITEMS. THE RETURN OF INCOM E FOR THE A.Y 2002-03 WAS FILED ON 20.10.2002 DECLARI NG THE TOTAL INCOME OF RS.1,84,810/-.THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S 143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIONER WERE ISSUED. IN COMPLIANCE, THE LD. AR O F THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAILS. THE ASSESSEE WAS DERIVING INCOME FROM SALARY AND WAS ENGAGED IN THE BUSINESS ITA NO . 2771 /MUM/2007 RAKESH KUMAR GOYAL, MUMBAI. - 4 - OF TRADING OF EXPORT OF HOSIERY GOODS IN THE NAME A ND STYLE OF PROPRIETARY CONCERNS M/S. BRAUN TEXTILE PROCESSORS AND M/S. SHIRDI OVERSEAS IMPORTS AND EXPORTS. WHEREAS M/S. BRAUN TEXTILE PROCESSORS EXISTED UP TO 31.10.2001 AND LATER WAS CONVERTED TO PARTNERSHIP. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80 HHC OF THE ACT OF RS. 65,23,387/- IN RESPECT OF PROPRIETARY CONCERN M/S. BRAUN TEXTILE PROCESSORS AND THE REPORT U/S 80HHC(4) IN FORM NO.10CCAC IS FURNISHED ALONG WITH THE RETURN OF INCOME. THE A.O FOUND THAT IN THE CURRENT FINANCIAL YEAR, THE ASSES SEE HAS DISCLOSED EXPORT SALES, HIGH SEAS SALES, AND TH E GROSS PROFIT WORKED OUT TO RS. 71,59,208/-.THE A.O ON VERIFICATION OF THE CREDIT SALES FOUND THAT THE ASS ESSEE HAS SHOWN MORE THAN 1% OF GROSS PROFIT. WHEREAS, IN RESPECT OF CASH SALES, LOSS HAS BEEN DISCLOSED, FUR THER CASH SALES COULD NOT BE VERIFIED AS NO EVIDENCE OF BILLS/VOUCHERS WERE PRODUCED BY THE ASSESSEE. THE A.O MADE THE ANALYSIS OF THE GROSS PROFIT RATIO FOR THE A.Y 1999-2000 TO 2000-2001 AND INCREASE IN GROSS PROFIT PERCENTAGE. THE A.O DEALT ON DISPUTED ISSUE AT PARA 4 OF THE ORDER AND MADE ADDITION OF DIFFERENCE IN GROSS PROFIT OF RS. 32,21,938/- IN RESPECT OF HIGH SEAS ITA NO . 2771 /MUM/2007 RAKESH KUMAR GOYAL, MUMBAI. - 5 - SALES. SIMILARLY A.O DEALT ON THE ISSUES OF DEDUCT ION U/S 80HHC OF THE ACT AND DISALLOWED THE CLAIM AND WITH OTHER ADDITIONS ASSESSED THE TOTAL INCOME OF R S. 1, 08,04,600/- AND PASSED THE ORDER U/S 143(3) OF T HE ACT DATED 29.03.2005. 4.AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A). THE LD. CIT(A) CONSIDERED THE GROUNDS OF APPEAL, FINDINGS OF THE A.O AND SUBMISSIONS OF THE ASSESSEE AND GRANTED THE RELIEF ON OTHER GROUNDS OF APPEAL BUT HAS CONFIRMED THE ADDITION OF DIFFERENCE OF GROSS PROFIT OF RS. 32,22,930/-AS THE ASSESSEE HAS NOT FILED ANY SUPPORTING EVIDENCES IN RESPECT OF THE CLAIMS BEFOR E THE A.O, AND EVEN BEFORE THE CIT(A) NO EVIDENCE CO ULD BE FURNISHED TO SUBSTANTIATE THE SALE PRICE. IN RE SPECT OF LOSS DECLARED BY THE ASSESSEE, THE A.O HAS REJEC TED THE SET OFF AND WAS CONFIRMED BY THE CIT(A) AND THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOWED.. AGGRIE VED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS FILED AN APPEAL WITH THE TRIBUNAL. 5. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ADJOURNMENT PETITION WAS FILED ITA NO . 2771 /MUM/2007 RAKESH KUMAR GOYAL, MUMBAI. - 6 - AND WAS DISCUSSED IN THE ABOVE PARAGRAPHS. THE CONTENTIONS OF THE ASSESSEE AS PER THE GROUND OF APPEAL THAT, THE CIT(A) HAS ERRED IN CONFIRMING TH E GROSS PROFIT OF 1% ON LOCAL SALES AND WAS WRONGLY ADDED BY THE A.O. TO THE TOTAL INCOME. WHEREAS, THE LD. DR SUBMITTED THAT ASSESSEE WAS PROVIDED AMPLE OPPORTUNITY TO SUBSTANTIATE THE CLAIMS EVEN BEFORE THE CIT(A) BUT NO EVIDENCES WERE FILED. 6.WE HEARD THE LD. DR SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS RAISED THE SO LE GROUND OF APPEAL THAT, THE A.O HAS MADE ADDITION OF 1% OF GROSS PROFIT RATE ON LOCAL SALES AND MADE ADDITION OF RS. 32,21,938/-. ON PERUSAL OF THE SUBMISSIONS MADE BEFORE THE A.O AND CIT(A),NO EVIDENCE WAS FILED IN SPITE OF PROVIDING OPPORTUNIT IES OF HEARING TO SUBSTANTIATE THE SALE PRICE AND THE GOODS WHICH WERE SOLD ARE ONLY WASTE AND UN-USEABLE MATERIAL. WE FIND THE LD CIT(A) HAS DEALT ON THE FINDINGS OF THE A.O AND THE SUBMISSIONS OF THE ASSESSEE IN THE APPELLATE PROCEEDINGS REFERRED AT P AGE 2 PARA 1.3 TO 1.12 OF THE ORDER AS UNDER: 1.3 BEFORE THE UNDERSIGNED THE APPELLANT DURING TH E HEARING OF THE APPEAL PROCEEDINGS, SUBMITTED THAT T HE G.P ITA NO . 2771 /MUM/2007 RAKESH KUMAR GOYAL, MUMBAI. - 7 - RATE OF EXPORT SALES EVEN CREDIT SALES CANNOT BE AP PLIED TO LOCAL CASH SALES SUCH GOODS ARE REJECTED AND ARE PO OR QUALITY ITEMS. THEREFORE, THEY ARE SOLD IN THE LOC AL MARKET AT A LOWER RATE OF GROSS PROFIT. 1.4 FURTHER IT WAS PLEADED THAT DUE TO BULK BUYING IN EARLIER YEARS, THE OPENING STOCK OF ACRYLIC TOW AND SYNTHETIC WASTE GATHERED MOISTURE AND THEREFORE AFT ER NEGOTIATIONS THEY WERE SOLD AT A LOWER PRICE. 1.5 THE UNDERSIGNED HAS CAREFULLY PERUSED THROUGH THE RIVAL CONTENTIONS. 1.6 IT IS HOWEVER AN ADMITTED FACT THAT NO SUPPORT ING DETAILS WAS FURNISHED BEFORE THE A.O. 1.7 MOREOVER, EVEN BEFORE THE UNDERSIGNED, YET THE APPELLANT FURNISHED A FEW COPIES OF BILLS REGARDING THE PURCHASES OF MATERIALS MENTIONED ABOVE, YET NO EVID ENCE COULD BE FURNISHED TO SUBSTANTIATE THE SALES PRICES . NO EVIDENCES WERE EITHER FURNISHED IN SUPPORT OF THE S TATED REASONS THAT SUCH GOODS SOLD LOCALLY WERE ONLY WAST E AND UNUSABLE MATERIAL. 1.8 NOW COMING TO THE GROUND TAKEN IN APPEAL THE O NLY GRIEVANCE OF THE APPELLANT IS, THAT THE A.O SHOULD HAVE ADDED RS. 71,836/- ONLY (BEING 1% OF CASH SALES OF RS. 71,83,595/-) IN PLACE OF RS. 94,530/- (BEING 1% OF TOTAL SALES OF RS. 94,53,020/-). IN THE GROUND OF APPEAL FILED WITH THE FORM NO. 35, THE APPELLANT AGREED THAT THE AO AT BEST, COULD HAVE ADDED 1% GP ON CASH SALES ONLY. 1.9 THE UNDERSIGNED HAS CONSIDERED ALL THE RELEVAN T DETAILS. IT IS NOTED THAT IT IS A FACT THAT ON CRE DIT SALES THE PROFIT MARGIN IS HIGHER THAN ON THE CASH SALES AS I T IS THE NORMAL BUSINESS PRACTICE. ITA NO . 2771 /MUM/2007 RAKESH KUMAR GOYAL, MUMBAI. - 8 - 1.10 THEREFORE ON PRINCIPLE THE AO ACTION OF REJEC TING THE LOSS DECLARED BY THE APPELLANT, IS CONFIRMED. HOWE VER THE ADDITION MADE OF RS. 94,530/- BY THE A.O IS REDUCED TO RS. 71,836/- ONLY, IN VIEW OF THE OBSERVATIONS AND FINDINGS IN THE EARLIER PARAGRAPHS. 1.11 THUS THE MAIN GROUND IS REJECTED BUT THE ALTE RNATE GROUND OF THE APPELLANT IS ALLOWED. 1.12 THEREFORE, FOR STATISTICAL PURPOSES, THIS GRO UND IS TREATED AS PARTLY ALLOWED. 7. CONSIDERING THE FACTS AND THE MATERIAL ON RECORD , THE LD CIT(A) HAS DEALT ON THE DISPUTED ISSUES AND HAS CONFIRMED THE ACTION OF THE A.O. WE FIND THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE ON THE ALTERNATIVE GROUND OF APPEAL BUT IN RESPECT OF ADDI TION HE HAS SUSTAINED THE ACTION OF THE A.O. CONSIDERING THE OVERALL FACTS AND OBSERVATIONS OF THE CIT(A), WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT(A) AND UPHELD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE ASSESSEE. 8. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S DISMISSED. ITA NO . 2771 /MUM/2007 RAKESH KUMAR GOYAL, MUMBAI. - 9 - ORDER PRONOUNCED IN THE OPEN COURT ON 07.12.2020 SD/- SD/- (SHAMIM YAHYA) (PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 07/12/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI