AI Insights
The case involves M/s Tech Data Advanced Solutions (India) Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax Appeals-47, Mumbai, for the assessment year 2012-13. The primary contention was the rejection of the books of account by the Assessing Officer (AO) and the subsequent estimation of the GP rate at 8% of turnover. The Tribunal found that the AO had erred in rejecting the books of account based on the assessment order for AY 2011-12, which had been previously overturned. The Tribunal noted that the assessee had provided sufficient documentation and explanations regarding the decline in GP, which were not adequately considered by the AO or the CIT(A).
Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 132063 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-03-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
03-01-2023
Assessment Year
2012-2013
Appeal Filed On
03-11-2022
Judgement Text
vk;dj vihyh; vf/kdj.k eqacbZ ihB ßbZÞ eaqcbZ Jh fodkl voLFkh] U;kf;d lnL;],oa Jh xxu xks;y] ys[kkdkj lnL; ds le{k IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E” BENCH BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER vk-vk-la- 2821@eaqcbZ@2022 ¼fu-oa- 2012&13½ ITA No.2821/MUM/2022 (A.Y.2012-13) M/s Tech Data Advanced Solutions (India) Pvt. Ltd. (earlier known as Avnet Technology Solutions (I) Pvt. Ltd.) A-301, 3 rd Floor, Supreme Business Park, Behind lake Castle, Hiranandani Garden, Powai, Mumbai-400 076 PAN No. AAACO3686M ..... vihykFkhZ/Appellant cuke Vs. Deputy Commissioner of Income Tax Circle 1 (4), Room No.902, 9 th Floor, Old CGO Bldg. Aayakar Bhavan, M.K. Road, Mumbai-400 020 ..... izfroknh/Respondent vihykFkhZ }kjk@Appellant by : Shri Vijay Mehta and Shri Jinesh Bhagdev izfroknh }kjk@Respondent by : Shri Solgy Jose, CIT-DR lquokbZ dh frfFk@Date of hearing : 04/01/2023 ?kks”k.kk dh frfFk@Date of pronouncement : 30/03/2023 vkns’k/ ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax Appeals-47, Mumbai (hereinafter referred to as “the CIT(A)”) dated 05/09/2022 for assessment year 2012-13. P a g e | 2 ITA No.2821/MUM/2022 (A.Y.2012-13) M/S TECH DATA ADVANCED SOLUTIONS (INDIA) PVT. LTD. 2. The assessee in appeal has raised as many as five (5) grounds assailing the findings of CIT(A). The Ld. Authorised Representative (AR) of the assessee stated that the effective grounds of appeal are ground no. 1 and 2. The other grounds are argumentative and are in support of ground no. 1 or 2. 3. Shri Vijay Mehta appearing on behalf of the assessee submits that the assessee is engaged in the business of providing IT enable services. The assessee filed its return of income for the impugned assessment year on 29/11/2022 declaring negative income of - Rs.23,26,47,106/-. The Assessing Officer (AO) placing reliance on the assessment order for AY 2011-12 rejected books of account of the assessee and estimated GP on turnover at the rate of 10% by excluding support service fee. The AO made addition of difference of the GP declared by the assessee (2.86%) and the GP estimated (10%) that is Rs.36,73,56,664/-. Aggrieved by the assessment order dated 31/03/2016 passed u/s 143(3) r.w.s. 144C(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), the assessee filed appeal before the CIT(A). The CIT(A) upheld the findings of AO qua rejection of books. However, the CIT(A) granted part relief to the assessee by restricting GP rate to 8%. Hence, present appeal by the assessee. 4. The ld. AR of the assessee submits that the CIT(A) has decided the issue purely on assumptions. The CIT(A) has erred in observing in para 6.8 of the impugned order that the assessee has failed to show, that the goods are sold below the cost price. The CIT(A) has estimated GP rate of 8% following the order of Tribunal in AY 2010-11 and 2011-12. However, no such finding was given by the Tribunal on GP percentage in AY 2010-11 and 2011-12. The ld. AR submitted that in AY 2010-11 and 2011-12, the AO had rejected the books and had estimated G.P. The assessee assailed the findings of AO before the CIT(A). The CIT(A) in AY 2010- P a g e | 3 ITA No.2821/MUM/2022 (A.Y.2012-13) M/S TECH DATA ADVANCED SOLUTIONS (INDIA) PVT. LTD. 11 and 2011-12 discarded the findings of AO on rejection of books. The Department carried the issue in appeal before the Tribunal in ITA No.4731/MUM/2015 for AY 2010-2011 and ITA No.650/MUM/2016 for AY 2011-12. The Tribunal vide order dated 06/09/2016 dismissed both appeals by the Department. 5. The ld. AR pointed that during scrutiny assessment proceedings, the AO vide notice dated 24/07/2015 u/s 142(1) of the Act had raised specific query (serial no.11) about the comparative analysis of GP and NP ratio of last 3 years including current year and to justify the reason for fall, if any. The AO vide said notice (query no.15), further asked the assessee to furnish party-wise details of purchase and sales above Rs.10 lacs along with their current address and VAT number. The assesee replied to the notice on 24/08/2015. The assessee furnished party-wise details of purchase and sales as sought by the AO in the notice. Thereafter, vide reply dated 24/09/2015, the assessee furnished comparative analysis of GP and NP ratios of last 3 years. The reasons for drop in GP ratio were also explained. Subsequently, the assessee vide reply dated 29/03/2016 gave detailed reasons for low GP. The AO without considering the replies furnished by the assessee completed the assessment. The AO merely placed reliance on the assessment order for AY 2011-12. All the details furnished by the assessee were available before the CIT(A). The first appeal was pending before the CIT(A) for over 6 years. At no point of time the CIT(A) asked for any particular document. On the contrary, the assessee on every date of hearing before the First Appellate Authority made submissions explaining the transactions. No defect was pointed by the AO for rejection of books. As stated earlier, the books were rejected merely on the basis of findings in the preceding assessment year. The ld. AR of the assessee prayed for set asiding the findings of the CIT(A) on this issue and to allow the appeal of assessee. P a g e | 4 ITA No.2821/MUM/2022 (A.Y.2012-13) M/S TECH DATA ADVANCED SOLUTIONS (INDIA) PVT. LTD. 5.1. The ld. AR pointed that insofar as the issue raised in ground no. 2 of appeal, the same is covered by the order of Tribunal for AY 2010-11 and 2011-12 dated 16/09/2019 (supra). 6. Per contra, Shri Solgy Jose representing the Department vehemently defended the impugned order. The ld. DR referring to the observations of the CIT(A) in para 6.7 and 6.8 of the impugned order, prayed for dismissing appeal of the assessee. 7. We have heard the submissions made by rival sides and have examined the orders of authorities below. The primary issue before us for adjudication is rejection of books of account of the assesse and determination of GP rate at 8% of turnover. 8. A perusal of the assessment order shows that the AO has rejected the books of assessee invoking provisions of section 145(3) of the Act on the basis of observations made in the assessment order for AY 2011-12. There was purportedly discrepancy in the closing stock, for AY 2011-12, the same was taken as opening stock for AY 2012-13. Since, the closing stock was not accepted by the AO in AY 2011-12, the AO in the impugned assessment year rejected the opening stock and also rejected the books of assessee. 9. We find that in AY 2010-11 and 2011-12, the books of the assessee were rejected by AO. In first appeal, findings of the AO rejecting books was reversed and addition was deleted by the CIT(A). The Department carried the issue in appeal before the Tribunal. The Co-ordinate Bench in ITA No.473/MUM/2015 and ITA No.650/MUM/2016 (supra) upheld the findings of CIT(A). Thus, in effect rejection P a g e | 5 ITA No.2821/MUM/2022 (A.Y.2012-13) M/S TECH DATA ADVANCED SOLUTIONS (INDIA) PVT. LTD. of books in AY 2010-11 and 2011-12 was reversed. Therefore, the basis for rejecting books of account by the AO in the impugned assessment year has eroded. 10. The Tribunal in AY 2010-11 dismissed appeal of the Revenue against the findings of the CIT(A) in accepting the book results and deleting the additions by observing as under: “5. We have duly considered the rival submissions and deliberated on the judicial pronouncements as referred before us. After due consideration of factual matrix, we find that the assessee is a corporate entity and it accounts were subjected to Audit under the Companies Act as well as under The Income Tax Act. No qualification/adverse remarks have been made by the auditors regarding maintenance of stock records /valuation etc. The figures of sale as well as purchases, on aggregate basis, as per books of accounts perfectly matched with assessee's financial statements. The assessee had produced all sales as well as purchase invoices in digital form before Ld. AO during assessment proceedings. However, no discrepancies could be pointed out in the same by Ld. AO. Further, no specific defects were pointed out in the books of accounts as well. The whole allegation of Ld. AO emanates from figures reported by the assessee in Schedule 19 of the Balance Sheet, based upon which certain conclusions were drawn. However, quantitative discrepancies, if any, stood explained by the fact that the assessee's nature of business made it impractical to report the quantitiative details in the desired manner. The perusal of sample invoices, as produced before us, would support the fact that the assessee was procuring raw material from several vendors which would be assembled into a composite product which could be sold with or without software and the sale transaction could be with or without service contracts. Those facts would explain non-reporting of quantitative details in Schedule 19 of the Balance Sheet and therefore, the conclusions drawn by Ld AO from the same would obviously distort the factual matrix. 6. Another undisputed fact is that the Gross Profit rate in earlier years were much lower after excluding the service income. So far as the reconciliation of Service income & TDS figures reported in Form 26AS is concerned, no specific allegation of non-reporting of any income has been made by Ld. AO in the quantum assessment order and therefore, no adverse conclusion could be drawn therefrom. 7. Therefore, on the facts and circumstances, we considered opinion that first appellate authority has clinched the issue in the right perspective and therefore, the same would not require any interference on our part. No convincing case has P a g e | 6 ITA No.2821/MUM/2022 (A.Y.2012-13) M/S TECH DATA ADVANCED SOLUTIONS (INDIA) PVT. LTD. been made before us to remit the matter back to the file of Ld. AO. Therefore, by confirming the stand of Ld. CIT(A), we dismiss the appeal.” 11. In the impugned assessment year, the assessee during scrutiny proceedings had furnished details of purchase and sale as sought by the AO. The assessee had also furnished comparative analysis of GP and NP for the past 3 years and the reasons for fall in GP. The AO without considering the submissions of assesee and without giving reasons for rejecting assessee’s reasons for fall in GP passed the assessment order. The entire assessment has been framed in a whimsical manner placing undue reliance on the assessment order for AY 2011-12. It is an undisputed fact that the assessee being a limited company is under obligation to get the accounts audited under the Companies Act, as well as under the provisions of Income Tax Act. No defect has been pointed by the AO in the audited accounts of the assessee for the impugned assessment year. It is not the case of Revenue that the assessee has not followed the correct method of accounting or income has not been computed in accordance with the notified standards. The CIT(A) also in a mechanical manner accepted the findings of AO in rejecting books of the assessee. The CIT(A) has observed that the assessee failed to explain the reasons which led to fall in the GP with supporting documentary evidences. We find that the CIT(A) has failed to consider the reasons furnished by the assessee explaining sharp decline in GP rate. 12. Taking into consideration entire facts, we are of considered view that the CIT(A) has erred in confirming the findings of the AO in rejecting books of account and estimating GP rate of 8% without their being any adverse material on record. Hence, findings of the CIT(A) on this issue are quashed. The AO is directed to frame fresh assessment after allowing reasonable opportunity to the asessee to make submissions, in accordance with law. P a g e | 7 ITA No.2821/MUM/2022 (A.Y.2012-13) M/S TECH DATA ADVANCED SOLUTIONS (INDIA) PVT. LTD. 13. In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on Thursday the 30 th day of March 2023. Sd/- Sd/- (GAGAN GOYAL) (VIKAS AWASTHY) Yks[kkdkj lnL;/ACCOUNTANT MEMBER U;kf;d lnL;/JUDICIAL MEMBER eaqcbZ/Mumbai, fnukad/Dated: 30/03/2023 Mahesh R. Sonavane izfrfyih vxzsf”kr of the Order forwarded to: 1. vihykFkh/The Appellant , 2. izfroknh/The Respondent. 3. vk;dj vk;qDr/ CIT 4. foHkkxh; izfrfu/kh] vk;- vih- vf/k-] eqacbZ/DR, ITAT, Mumbai 5. xkMZ QkbZy/Guard file. BY ORDER, //True Copy// (Dy. /Asst. Registrar)/ Sr. Private Secretary ITAT, Mumbai
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