The ITO, Ward-5(2), Ahmedabad V. M/s. Parikh Spices Products Pvt. Ltd., Ahmedabad

ITA 28/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8663 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-03-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 02-01-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Gross profit estimation; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.28/AHD/2007 & C.O.NO.32/AHD/2007 ASSESSMENT YEAR: 2002-03 DATE OF HEARING:22.3.10 DRAFTED:22.3.10 INCOME TAX OFFICER, WARD-5(2), AHMEDABAD PARIKH SPICES PRODUCTS PVT. LTD. MADHUR COMPLEX, STADIUM CIRCLE, NAVRANGPURA, AHMEDABAD PAN NO.AABCP4122G V/S . V/S . PARIKH SPICES PRODUCTS PVT. LTD., MADHUR COMPLEX, STADIUM CIRCLE, NAVRANGPURA, AHMEDABAD INCOME TAX OFFICER, WARD-5(2), AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI S.N.DIVETIA, AR REVENUE BY:- SHRI ANIL KUMAR, CIT-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY REVENUE AND CROSS OBJECTION (CO) BY ASSESSEE ARE ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APP EALS)-XI, AHMEDABAD IN APPEAL NO. CIT(A)XI/39-138/2005-06 DATED 20-10-2006. THE A SSESSMENT WAS FRAMED BY THE INCOME-TAX OFFICER, WARD-5(2), AHMEDABAD U/S. 143(3 ) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 24-02-2005 FOR ASSESSMENT YEAR 2002-03. 2. THE INTER-CONNECTED ISSUES RAISED IN THIS APPEAL OF REVENUE AND THE CO OF ASSESSEE IS AGAINST THE ORDER OF CIT(A). THE REVEN UE HAS RAISED THE FOLLOWING ITA NO.28/AHD/07 & CO.32/AHD/07 A.Y. 2002-03 ITO WD-5(2) ABD V. PARIKH SPICES PRODUCTS P. LTD. PAGE 2 GROUND NO.1, REGARDING DELETION OF ADDITION MADE BY ASSESSING O FFICER ON ACCOUNT OF LOW GROSS PROFIT (GP):- 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.91 ,95,090/- ON ACCOUNT OF LOW GROSS PROFIT. AS AGAINST THE ORDER OF CIT(A), ASSESSEE HAS CHALLE NGED THE FOLLOWING ADDITION CONFIRMED BY HIM IN GROUND NO.2 :- 2. THE LD. CIT(A) HAS ERRED IN LAW AND/OR ON FACTS IN CONFIRMING FOLLOWING ADDITIONS: (A) EXPIRED GOODS RS. 2,94,476 (B) BAD DEBTS RS.14,69,566 EXCESS PURCHASE PRICE RS.80,00,000 (D) LOSS ON SALE OF SHARES RS.30,72,479 (E) EARLIER YEARS EXPS. RS. 1,34,814 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, STATED THAT BY APPLYING THE PEAK-THEORY, GP ADDITION IS TO BE SUSTAINED, AS, IT IS A HIGHEST ADDITION MADE BY THE ASSESSING OFFICER. ONCE THE A SSESSING OFFICER, REJECTING THE BOOK RESULTS AND APPLYING GP AND MAKING ADDITION, H E HAS NOT TO MAKE OTHER ADDITIONS AS HAVE BEEN MADE. WE FIND FROM THE ORDER S OF THE LOWER AUTHORITIES THAT THE AO HAS REJECTED THE BOOK RESULTS ON THE BASIS T HAT THE ASSESSEE COULD NOT PRODUCE THE CLOSING STOCK REGISTERS, SALES & PURCHA SE BILLS BY GIVING REASONS THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO GIVE SUCH DETAILS INCLUDING THAT OF EXPIRED GOODS CONSIDERED BY THE AO CLAIMED AT RS.2,94,476/-. THE ASSESSEE, BEFORE AO AS WELL AS CIT(A), MADE ONLY ONE SUBMISSION FOR FALL IN GP THA T THERE WAS NO DEMAND OF GOODS IN MARKET AND THERE WAS CUT-THROAT COMPETITION IN T HE MARKET COMPELLED TO SELL GOODS AT LOWER RATE THAN THE MARKET RATES. WE FIND THAT THE AO HAS ALSO MADE ADDITION OF RS.80 LAKH BY APPLYING THE PROVISIONS OF SEC.40A(2B ) OF THE ACT AS THE ASSESSEE IS MAKING PURCHASES FROM A SISTER CONCERN MADHUR INDUS TRIES LTD. AND THAT ALSO TO THE EXTENT OF RS.10,69,33,999/-. THE ASSESSEE HAS RECOR DED THE FIGURE AT RS.4,43,76,612/-. THE OTHER ADDITIONS MADE BY THE A O ON ACCOUNT OF STOCK OF EXPIRED GOODS CLAIMED BY THE ASSESSEE AS LOSS AT RS.2,94,47 6/-, BAD DEBTS AT RS.14,69,566/-, EARLIER YEAR EXPENSES AT RS.1,34,81 4/- AND CLAIM OF LOSS ON ACCOUNT OF FIXED ASSETS AT RS.30,72,479/-. WE FIND THAT ON CE THE BOOK RESULTS ARE REJECTED AND THE ASSESSEE ACCEPTS THAT THE ASSESSEE COULD NO T PRODUCE THE BOOKS OF ACCOUNT ITA NO.28/AHD/07 & CO.32/AHD/07 A.Y. 2002-03 ITO WD-5(2) ABD V. PARIKH SPICES PRODUCTS P. LTD. PAGE 3 SUPPORTED BY BILLS & VOUCHERS, THE LOWER AUTHORITIE S HAVE NO OPTION EXCEPT TO REJECT BOOK RESULTS AND APPLY THE AVERAGE GP AS IN THE PRE SENT CASE. ONCE AFTER REJECTING THE BOOK RESULTS, THE GP IS APPLIED, NO OTHER ADDIT ION U/S.40A (2B) OF THE ACT OR BAD DEBTS OR ON ACCOUNT OF STOCK CANNOT BE MADE. TAKING THE GP ADDITION AT RS.91,95,090/-, WHICH WE SUSTAIN AND THE BALANCE AD DITIONS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY CIT(A) CANNOT SURVIVE. AC CORDINGLY, THE APPEAL OF THE REVENUE IS ALLOWED. SINCE, WE HAVE TAKEN A VIEW TH AT ONCE GP IS APPLIED AFTER REJECTING THE BOOK RESULTS, NO OTHER ADDITIONS CAN BE MADE, WHICH IS DIRECTLY RELATED TO TRADING. ACCORDINGLY, APPEAL OF THE REVENUE AND THE CO OF THE ASSESSEE IS ALLOWED. 4. IN THE RESULT, REVENUES APPEAL AND THE CO OF ASSES SEE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26/03/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED :26/03/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XI, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD