The ITO, Ward-1(3), Surat V. Mamta Silk Mills Pvt.Ltd., Surat

ITA 2820/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6213 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 15-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASBIR S CHOUHAN SRDR
• Assessee Lawyers: RASESH SHAH
• Keywords: Gross profit estimation; Depreciation; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI D.K.TYAGI, HONBLE JUDICIAL MEMBER, AND SHRI A. MOHAN. ALANKAMONY, HONBLE ACCOUNTANT MEMBE R ITA NO.2820/AHD/2009 ASSESSMENT YEAR:2004-05 DATE OF HEARING:14.7.11 DRAFTED:14.7.11 INCOME TAX OFFICER, WARD-1(3), ROOM NO.113, AAYAKAR BHAVAN, MAJURA GATE, SURAT V/S . M/S. MAMTA SILK MILLS PVT., LTD., K-1286, SURAT TEXTILE MARKET, RING ROAD, SURAT PAN NO.AABCM5904D (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI JASBIR S CHOUHAN, SR-DR RESPONDENT BY:- SHRI RASESH SHAH, AR O R D E R PER D.K.TYAGI, JUDICIAL MEMBER:- THIS IS REVENUES APPEAL AGAINST THE ORDER OF COMM ISSIONER OF INCOME-TAX(APPEALS)-I, SURAT DATED 28-07-2009 FOR T HE ASSESSMENT ORDER 2004-05. THE REVENUE HAS TAKEN THE FOLLOWING GROUND:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LE VIED BY THE A.O. OF RS.4,16,283/- U/S. 271(1)(C)OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FIELD RETURN OF INCOME FOR ASSESSMENT ORDER 2004-05 DECLARING TOTAL INCOME AT NIL. THE ASSESSMENT WAS COMPLETED U/S.143(3), WHEREBY FOLLOW ING TWO ADDITIONS WERE MADE WHICH WERE CONFIRMED BY LD. CIT(APPEALS) ALSO:- ITA NO. 2820/AHD/2009 A.Y. 2004-0 5 ITO WD-1(3), SRT V. M/S. MAMTA SILK MILLS PVT. LT D. PAGE 2 I) ADDITION OF RS.9,00,374/- ON ACCOUNT OF LOW GP. II) ADDITION OF RS.2,60,000/- BEING BOGUS EXPENSES . 3. THE PENALTY PROCEEDINGS U/S. 271(1)(C) WERE INIT IATED. IN HIS PENALTY ORDER THE ASSESSING OFFICER HAS STATED THAT BOOKS OF ACCOUNT OF THE ASSESSEE WAS REJECTED FOR THE FOLLOWING DISCREP ANCIES:- A) THAT THE GP RATIO OF THE ASSESSEE-COMPANY HAD LO WERED TO 3.91% DURING THE YEAR AS COMPARED TO 6.00% IN THE I MMEDIATELY PRECEDING YEAR. B) THAT THERE WERE INCONSISTENCIES IN MONTH-WISE PR ODUCTION VIS-- VIS EXPENSES ON POWER, FUEL AND LABOUR C) THAT THE ASSESSEE HAS NOT MAINTAINED ANY QUANTIT ATIVE RECORDS OF DAY-TO-DAY CONSUMPTION OF RAW MATERIALS AND THAT CONSUMPTION OF RAW MATERIALS WAS UNVERIFIABLE SINCE THE ASSESSEES EXPLANATION WAS NOT SATISFACTO RY THE ASSESSING OFFICER AFTER REJECTION OF BOOKS OF ACCOUNT ADOPTED GP RATE OF 5% LEADING TO ADDITION OF RS.9,00,374/-. IN RESPECT OF OTHER D ISALLOWANCE OF RS.2.60 LAKH, THE AO HAD STATED THAT ASSESSEE HAD CLAIMED R EMUNERATION TO THE DIRECTORS OF A SUM OF RS.7.40 LAKH, WHEREAS IN THE IMMEDIATELY PRECEDING YEAR, IT WAS RS.4.80 LAKH. IT WAS FOUND THAT THE AD DITIONAL REMUNERATION WAS PAID TO TWO NEW DIRECTORS, NAMELY, MS. KANPANA SINGHVI AND MS. MENKA SINGHVI. SINCE THE ASSESSEE COULD NOT JUSTIFY THE REASONABILITY OF THE ABOVE EXPENSES IT WAS TREATED THAT REMUNERATION PAID TO THE NEW DIRECTORS WAS BOGUS AND DISALLOWANCE WAS MADE. BOTH THESE ADDITIONS WERE CONFIRMED BY LD. CIT(APPEALS). 4. DURING THE PENALTY PROCEEDINGS THE ASSESSEE WAS ASKED AS TO WHY PENALTY BE NOT LEVIED IN RESPECT OF THESE TWO ADDIT IONS. THE ASSESSEE ITA NO. 2820/AHD/2009 A.Y. 2004-0 5 ITO WD-1(3), SRT V. M/S. MAMTA SILK MILLS PVT. LT D. PAGE 3 SIMPLY STATED THAT IT HAD FILED APPEAL BEFORE ITAT, THEREFORE IT SHOULD BE KEPT IN ABEYANCE. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND SATISFACTORY BY THE ASSESSING OFFICER AND HE IMPOSE D PENALTY OF RS.4,16,283/- U/S. 271(1)(C) OF THE INCOME-TAX ACT, 1961. THIS PENALTY WAS DELETED BY LD. CIT(APPEALS) BY OBSERVING AS UND ER:- I AGREE WITH THE APPELLANT THAT THE GP ADDITION IS AN ISSUE OF ESTIMATION AND HENCE NO PENALTY CAN BE LEVIED ON TH IS ISSUE. WITH RESPECT TO THE DISALLOWANCE OF REMUNERATION PAID TO TWO NEW DIRECTORS, THIS IS ALSO BEING A DEBATABLE ISSUE. TH E DISALLOWANCE MADE BY THE A.O IS TECHNICAL U/S.40A(2)(B)/37. THER E IS NO MATERIAL ON RECORD TO SHOW THAT INACCURATE PARTICULARS WERE FURNISHED. ALL THE PARTICULARS WERE ON RECORD AND HENCE NO PENALTY CAN BE MADE ON THIS ISSUE. 5. AGGRIEVED BY THIS ORDER OF LD. CIT(APPEALS) NOW REVENUE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING, AT THE OUTSET, LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT IN QUANTUM APPEAL THE ASSES SEE HAS GOT RELIEF BY THE ITAT IN RESPECT OF BOTH THE ADDITIONS AND TH EREFORE THERE IS NO NEED TO INTERFERE WITH THE ORDER PASSED BY LD. CIT( APPEALS). 7. LD. DR DID NOT OBJECT TO THE SUBMISSION OF THE A SSESSEE. 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT IN VIEW OF HONBLE ITATS ORDER IN ITA NO.1669/AHD/2008 DATED 11-02- 2011 THE REVISED TOTAL INCOME WAS COMPUTED BY THE A SSESSING OFFICER AS UNDER:- TOTAL INCOME AS PER ORDER GIVING EFFECT TO CIT(A)S ORDER DATED 10.3.2008 BEFORE ALLOWING BUSINESS LOSS OF 19 96- 97 & UNABSORBED DEPRECIATION OF 1996-97 RS.23,14,444 LESS: RELIEF GRANTED BY ITAT 1.G.P. ADDITION RS.9,00,374 2.REMUNERATION TO DIRECTORS RS.2,60,000 ITA NO. 2820/AHD/2009 A.Y. 2004-0 5 ITO WD-1(3), SRT V. M/S. MAMTA SILK MILLS PVT. LT D. PAGE 4 RS.11,60,374 RS.11,54,070 LESS: SET OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS TO THE EXTENT OF PROFIT AVA ILABLE RS.11,54,070 REVISED TOTAL INCOME RS. N I L IT IS CLEAR FROM THE ABOVE THAT THE GROUND ON WHICH THIS PENALTY WAS IMPOSED NO LONGER EXIST THEREFORE WE FEEL NO NEED T O INTERFERE WITH THE ORDER PASSED BY LD. CIT(APPEALS) AND SAME IS HEREBY UPHELD. 9. IN THE RESULT, REVENUES APPEAL IS DISMISSED ORDER PRONOUNCED IN OPEN COURT ON 14/07/2011 SD/- SD/- (A.MOHAN.ALANKAMONY) (D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 14/07/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-I, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD