The ITO, Ward-5(3), Surat V. Shri Nareshkumar S.Kevrani, Surat

ITA 2795/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89437 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 06-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Gross profit estimation

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD 0 0 , !' , # $ BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER NO.2795/AHD/2012 % &% / ASSESSMENT YEAR: 2007-08 INCOME TAX OFFICER, WARD 5(3),SURAT. VS SHRI NARESHKUMAR S. KEVRANI PROP. OF SAHAJ SILK, R.K.T. MARKET, RING ROAD, SURAT. '( / (APPELLANT) )' '( / (RESPONDENT) REVENUE BY : SHRI B. L. YADAV, SR.D.R. ASSESSEE(S) BY : NONE. / DATE OF HEARING : 13/05/2015 / DATE OF PRONOUNCEMENT: 14/05/2015 ITA NO2795/AHD/2010 2 * / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT (A)-IV, SURAT DATED 1-7-2010. 2. GROUND NO.1 OF THE APPEAL IS DIRECTED AGAINST TH E ORDER OF CIT (A) DELETING THE ADDITION OF RS.6,18,685/- MADE ON ACCOUNT OF LOW GROSS PROFIT. 3. GROUND NO.2 OF THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE CIT(A) RESTRICTING THE ADDITION TO RS.2,19,190 /- BEING 25% OF CREDITORS AMOUNTING TO RS.8,76,758/- ON ACCOUNT OF IN GENUINE CREDITORS. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE IS ENGAGED IN MANUFACTURI NG AND TRADING OF SYNTHETIC CLOTH. THE A.O. REJECTED THE BOOK RES ULTS OF THE ASSESSEE ON ACCOUNT OF NON MAINTENANCE OF STOCK REG ISTER. HE OBSERVED THAT THE ASSESSEE HAS SHOWN GROSS PROFIT W HICH WORKS OUT TO 6.40%. ACCORDING TO HIM THE OTHER ASSESSEES IN SIMILAR LINE OF BUSINESS HAS SHOWN GROSS PROFIT RANGING FROM 19. 30% TO 11%. ITA NO2795/AHD/2010 3 HE THEREFORE, ESTIMATED GROSS PROFIT OF THE ASSESSE E AT 15% AND THEREBY MADE AN ADDITION OF RS.6,18,685/-. 5. FURTHER, HE OBSERVED THAT THE ASSESSEE HAS NOT B EEN ABLE TO FURNISH CONFIRMATION IN RESPECT OF 8 CREDITORS OF R S.8,76,758/- AND THEREFORE MADE ADDITION OF THE SAME. 6. ON APPEAL CIT (A) OBSERVED THAT THE PURCHASES AN D SALES OF THE ASSESSEE WAS FULLY SUPPORTED BY BILLS AND VOUCH ERS. ACCORDING TO CIT (A), SIMPLY NON MAINTENANCE OF STOCK REGISTE R DOES NOT EMPOWER THE A.O. TO REJECT THE BOOK RESULTS. THE CI T (A) IN RESPECT OF CREDITORS OBSERVED THAT THE PURCHASES MA DE BY THE ASSESSEE FROM THE 8 CREDITORS IN QUESTION WERE SUPP ORTED BY THE BILLS AND PAYMENTS TO THEM WERE MADE BY ACCOUNT PAY EE CHEQUES. 7. HOWEVER, THE CIT (A) CONFIRMED THE ADDITION TO T HE EXTENT OF RS.2,19,190/- AGAINST THE ADDITION OF RS.8,76,758/- ON ACCOUNT OF SUNDRY CREDITORS AND RS.6,18,685/- WAS ON ACCOUNT O F LOW GROSS PROFIT. 8. WE FIND THAT THE REVENUE HAS BROUGHT NO MATERIAL BEFORE US TO SHOW THAT THE GROSS PROFIT DISCLOSED BY THE ASSE SSEE DURING THE YEAR WAS LOWER THAN THE GROSS PROFIT DISCLOSED BY T HE ASSESSEE IN EARLIER YEARS. FURTHER, D.R. COULD NOT BRING ANY MA TERIAL BEFORE US TO SHOW THAT THE ALLEGED COMPARABLE CASE ON THE BAS IS OF WHICH GROSS PROFIT OF THE ASSESSEE WAS CONSIDERED LOW BY THE A.O. WAS ITA NO2795/AHD/2010 4 INFORMED TO THE ASSESSEE ALONG WITH ALL THE RELEVAN T DETAILS IN RESPECT OF THOSE CASES AND THEREAFTER THE ASSESSEE WAS ALLOWED AN OPPORTUNITY TO MAKE SUBMISSIONS IN RESPECT OF COMPA RABILITY OF THOSE CASES WITH THE CASE OF THE ASSESSEE. IN ABSE NCE OF ANY SUCH MATERIAL BROUGHT BEFORE US IN OUR CONSIDERED VIEW T HE ALLEGATION OF THE A.O. THAT THE GROSS PROFIT DISCLOSED BY THE ASS ESSEE WAS LOW IS NOT SUSTAINABLE. 9. IN RESPECT OF CREDITORS WE FIND THAT NO MATERIAL WAS BROUGHT BEFORE US BY THE D.R. TO SHOW THAT THE PURCHASES MA DE FROM THOSE CREDITORS BY THE ASSESSEE WAS NOT SUPPORTED B Y BILLS OR WERE NOT VERIFIABLE OR THE FINDING OF THE CIT (A) THAT P AYMENTS TO THE SAID CREDITORS WERE SUBSEQUENTLY MADE BY ACCOUNT PA YEE CHEQUES WAS NOT CORRECT. IN ABSENCE OF ANY SUCH MATERIAL WE FIND NO GOOD REASON TO INTERFERE WIT THE ORDER OF THE CIT (A). T HEREFORE, GROUND NO.1 AND GROUND NO.2 OF THE APPEAL OF THE REVENUE A RE DISMISSED. 10. GROUND NO.3 OF THE APPEAL OF THE REVENUE IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DELETING THE ADDITION OF R S.6 LAKHS ON ACCOUNT OF UNEXPLAINED CAPITAL INTRODUCED. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDER OF THE LOWER AUTHORITIES AND THE RELEVANT MATERIAL AVA ILABLE ON RECORD. THE A.O. OBSERVED THAT DURING THE YEAR THAT ASSESSEE HAS CREDITED RS.6 LAKHS IN HIS CAPITAL ACCOUNT. ASSES SEE EXPLAINED BEFORE THE A.O. THAT OUT OF RS.6 LAKHS RS. 4,68,000 /- WAS RECEIVED BY THE ASSESSEE FROM SALE OF HOUSE AT JUNAGADH AND BALANCE ITA NO2795/AHD/2010 5 RS.1,30,000/- WAS FROM HIS RETAIL TRADE BUSINESS. A .O. ADMITTED THAT IN RESPECT OF SALE PROCEEDS OF HOUSE AT JUNAGA DH, THE ASSESSEE FILED COPY OF SALE DEED WITH HIM. HOWEVER, THE A.O. NOT ACCEPTED THE SAME ON THE GROUND THAT THE SAID HOUSE WAS NOT DISCLOSED IN THE BALANCE SHEET OF THE ASSESSEE IN E ARLIER YEAR AND NO CAPITAL GAIN/LOSS IN RESPECT OF THE SAME WAS DIS CLOSED IN THE RETURN OF INCOME. 12. IN RESPECT OFRS.1,30,000/-,A.O. OBSERVED THAT T HE ASSESSEE HAS NOT SUBMITTED ANY DETAILS INCLUDING BANK ACCOUN T OF IMAGE MENSWEAR. 13 ON APPEAL, CIT (A) DELETED THE ABOVE ADDITION BY OBSERVING THAT THE ASSESSEE ACTUALLY SUFFERED CAPITAL LOSS ON SALE OF HOUSE IN RESPECT OF RS.4,68,000/- FURTHER, IN RESPECT OF PRO PRIETORSHIP CONCERN STYLED AS IMAGE MENSWEAR, CIT (A) OBSERVED THAT THE ASSESSEE DECLARED INCOME THEREFROM U/S.44AF AND THE REFORE, THE ASSESSEE WAS NOT REQUIRED TO MAINTAIN BOOKS OF ACCO UNTS IN RESPECT THEREOF AND THEREFORE NO ADVERSE INFERENCE CAN BE DRAWN FOR NON MAINTENANCE OF BOOKS OF ACCOUNTS OF THAT BU SINESS. 14. WE FIND THAT HE CIT (A) HAS STATED THAT THE ASS ESSEE HAS SUFFERED CAPITAL LOSS ON SALE OF HOUSE AT RS.4,68,0 00/- BUT THE CIT (A) HAS NOT BROUGHT ON RECORD ANY DETAILS ABOUT THE PURCHASE OF THE PROPERTY I.E. WHEN THE ASSESSEE ACQUIRED THE PR OPERTY AND WHAT WAS ITS COST. THEREFORE, THE BASIS OF CIT(A) S FINDING IS NOT CLEAR. 15. FURTHER IN RESPECT OF IMAGE MENSWEAR IT IS NOT CLEAR FROM THE ORDER OF THE CIT (A) THAT WHAT WAS THE INCOME DISCL OSED BY THE ASSESSEE FROM SAID BUSINESS AND HOW THE SAID BUSINE SS CAN BE ITA NO2795/AHD/2010 6 ACCEPTED AS SOURCE OF RS.1,30,000/- AS CLAIMED BY T HE ASSESSEE. WE THUS, FIND THAT THE ORDER OF THE CIT (A) IS CRYP TIC AND THEREFORE UNSUSTAINABLE. WE THEREFORE RESTORE THIS ISSUE BA CK TO THE FILE OF THE CIT (A) AND DIRECT HIM TO RE-ADJUDICATE THE ISS UE BY PASSING A SPEAKING ORDER AFTER ALLOWING BOTH THE PARTIES REAS ONABLE OPPORTUNITY OF HEARING. THUS THIS GROUND OF APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE 16. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON THRUSDAY THE 14 TH DAY OF 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 14 /05/2015 * + )#',- .-&' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III 5. !' ## , / DR, ITAT, 6. '$% & / GUARD FILE. * / BY ORDER, / / 0 ( DY./ASSTT.REGISTRAR , / ITAT, AHMEDABAD ITA NO2795/AHD/2010 7 1. DATE OF DICTATION- : 14-5-2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14-5-15 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.14515 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 14-5-2015 5 .DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER