The DCIT, Circle-9, Surat V. Smt. Jayaben Bholabhai Patel, Surat

ITA 2867/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63063 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 06-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 18-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: R N VEPARI

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , ! '#, $% $ & BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ./ I.T.A. NO. 2867/AHD/2011 ( ! ) ! ) ! ) ! ) / / / / ASSESSMENT YEAR : 2005-06) THE DY.CIT CIRCLE09 SURAT ! ! ! ! / VS. SMT.JAYABEN BHOLABHAI PATEL PROP.JAY IMPEX 12, MANINAGAR SOCIETY A.K. ROAD SURAT 395 006 * $% ./+, ./ PAN/GIR NO. : AFJPP 2200D ( *- / // / APPELLANT ) .. ( ./*- / RESPONDENT ) *- 0 $ / APPELLANT BY : SHRI T.SANKAR, SR. D.R. ./*- 1 0 $ / RESPONDENT BY : SHRI R.N. VEPARI, A.R. !2 1 % / / / / DATE OF HEARING : 06/11/2012 34) 1 % / DATE OF PRONOUNCEMENT : 9.11.12 $5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FRO M THE ORDER OF THE LD.CIT(A)-V, SURAT DATED 14.07.2011 PASSED FOR A.Y . 2005-06 AND THE ONLY GROUND IS REPRODUCED BELOW:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.38,93,695/- MADE BY THE A.O. ON ACCOUNT OF SUPPRESSED YIELD. ITA NO.2867/AHD/2011 (BY REVENUE) DY.CIT VS. SMT.JAYABEN BHOLABHAI PATEL ASST.YEAR - 2005-06 - 2 - 2. AT THE OUTSET, WE HAVE BEEN INFORMED THAT IN THE PAST IN ASSESSEES OWN CASE FOR THIS VERY ASSESSMENT YEAR, I.E. A.Y. 2 004-05 THE ITAT B BENCH AHMEDABAD VIDE AN ORDER DATED 18.2.2010, TITL ED AS THE DY.CIT VS. SMT.JAYABEN BHOLABHAI PATEL (IN ITA NOS.2847 & 3332/AHD/2007 CROSS APPEALS) HAS RESTORED THIS VERY ISSUE BACK T O THE FILE OF THE AO AS PER THE FOLLOWING DIRECTIONS:- 7. AS REGARDS ESTIMATION OF PROFITS AFTER REJECTI ON OF BOOKS RESULTS, WE ARE OF THE OPINION THAT IT IS NOT OPEN TO THE AO TO MAKE ANY ADDITION ON ESTIMATE BASIS OR ON PURE GUESS WOR K. THE LD. CIT(A) WHILE UPHOLDING THE FINDINGS OF THE AO REGAR DING ESTIMATION OF PROFITS ON THE BASIS OF COMPABLE RESU LTS IN THE CASE OF FEW OTHER ASSESSES INCLUDING A SISTER CONCERN, OBSE RVED THAT THE ASSESSEE SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO S HOW CAUSE BEFORE ADOPTING COMPARATIVE GP RATE. THE LD.DR AP PEARING BEFORE US DID NOT OPPOSE THE SUBMISSIONS OF THE LD. AR THAT COMPARABLE CASE WERE OF EXPORTERS WHILE THE ASSESSE E WAS SELLING DIAMONDS ONLY IN THE LOCAL MARKET. THOUGH THE LD. AR PLACED RELIANCE ON DECISION M/S. B SURESHKUMAR & CO (SUPRA ), BUT THE SAID DECISION IS ALSO OF AN 100% EXPORTER OF POLISH ED DIAMONDS. THUS, RELIANCE ON THE SAID DECISION IS TOTALLY MISP LACED. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THE AO DID NOT CONF RONT THE COMPARABLE CASES CHOSEN BY HIM TO THE ASSESSEE BEFO RE ADOPTING GP RATE OF 5.20%, WE CONSIDER IT FAIR AND APPROPRIA TE TO SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ASPECT AND REST ORE THE MATTER TO THE FILE OF THE AO FOR DECIDING THE ISSUE RELATING TO APPLICATION OF GP RATE AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWI NG SUFFICIENT OPPORTUNITY TO THE ASSESSEE, KEEPING IN MIND OUR AF ORESAID OBSERVATIONS. WITH THESE DIRECTIONS, GROUND NOS II (1)&(2) IN THE APPEAL ARE DISPOSED OF. 3. CONSEQUENT THEREUPON, THE AO HAS PASSED THE IMPU GNED ORDER U/S.143(3) R.W.S. 254 OF IT ACT DATED 24.12.2010. THE ASSESSEE IS AN INDIVIDUAL CARRYING ON MANUFACTURING AN EXPORT OF D IAMONDS. IT WAS ITA NO.2867/AHD/2011 (BY REVENUE) DY.CIT VS. SMT.JAYABEN BHOLABHAI PATEL ASST.YEAR - 2005-06 - 3 - NOTED BY THE AO WHILE PASSING THE ORIGINAL ASSESSME NT ORDER THAT THERE WAS LOWER RATE OF GROSS PROFIT COMPARING THE PAST Y EARS. ALTHOUGH, THE ASSESSEE HAD MAINTAINED QUANTITATIVE INVENTORY OF T HE STOCK BUT THE ALLEGATION OF THE REVENUE DEPARTMENT AT THAT TIME W AS THAT THE ASSESSEE HAD FAILED TO FURNISH THE QUALITATIVE DETAILS OF CL OSING STOCK. ON ACCOUNT OF THAT REASON, THE AO HAD PICKED UP FEW CASES AND ON THE BASIS OF THOSE COMPARABLE INSTANCES ASSESSED THE INCOME BY ENHANCI NG GP RATE BY 4%. IN THE SECOND ROUND OF PROCEEDINGS, ON ONE HAND, TH E REVENUE HAS GIVEN CERTAIN COMPARABLE INSTANCES, AND ON THE OTHER HAND , THE ASSESSEE HAS ALSO MADE CERTAIN REFERENCES OF COMPARABLE CASES WH ICH WERE STATED TO BE IN ASSESSEES FAVOUR. CONSIDERING THAT SITUATION, THE AO HAS COMMENTED IN PARA-7.3 THAT IT WAS DIFFICULT TO ASSESS THE INC OME BY ADOPTING THE METHOD OF COMPARABLE CASES TO ARRIVE AT THE ESTIMAT ED INCOME OF THE ASSESSEE. THEREAFTER, THE AO HAS COMMENTED THAT T HE PROFITABILITY IN THE SAID LINE OF BUSINESS WOULD DEPEND UPON CERTAIN FAC TORS SUCH AS, VALUE OF PLANT, MACHINERY EMPLOYED, RATIO OF OWN CAPITAL WIT H THE BORROWED CAPITAL, RISK TAKING CAPACITY, TIME DEVOTED, ETC. THE AO HAS THEREFORE ADOPTED AN ANOTHER METHOD TO ARRIVE AT THE TAXABLE INCOME AND THAT ANOTHER METHOD WAS YIELD METHOD. FOR THE PURPOSE OF YIELD METHOD THE AO HAD COMPARED THE YIELD OF THE ASSESSEE FOR T HE YEAR UNDER CONSIDERATION WITH THE YIELD OF THE ASSESSEE OF PAS T FEW YEARS. ACCORDING TO HIM, IN COMPARISON TO THE PAST YEARS, THE YIELD HAD ALSO GONE DOWN. HE HAS ALSO COMMENTED THAT BY ADOPTING THE AVERAGE YIELD METHOD THE ADDITION WAS OF THE SAME LEVEL AS IT WAS MADE BY TH E AO PREVIOUSLY. HE HAS CONCLUDED THAT THE INCOME WAS TO BE ESTIMATED B Y APPLYING AVERAGE ITA NO.2867/AHD/2011 (BY REVENUE) DY.CIT VS. SMT.JAYABEN BHOLABHAI PATEL ASST.YEAR - 2005-06 - 4 - YIELD OF POLISHED DIAMOND AND IN HIS OPINION 1% DI FFERENCE WOULD SUFFICE TO MEET THE ENDS OF THE JUSTICE. 4. CONSIDERING THE CHANGE OF THIS STAND TAKEN BY TH E AO FROM COMPARABLE GP RATE INSTANCES TO ASSESS THE INCOME O N YIELD METHOD, THE LD.CIT(A) WAS OF THE OPINION THAT WHILE DOING S O THE AO HAS EXCEEDED THE JURISDICTION. THE CONCLUSION OF THE L D.CIT(A) IS AS FOLLOWS:- DECISION 6. I HAVE GONE THROUGH THE HONBLE ITATS ORDER, A SSESSMENT ORDER AS WELL AS THE SUBMISSIONS OF THE APPELLANT. I AM INCLINED TO AGREE WITH THE A.R.S SUBMISSION THAT THE A.O. HA S OVERSTEPPED THE DIRECTION GIVEN BY THE HON'BLE ITAT. THE OBSER VATION OF THE A.O. THAT THE PROCESS OF COMPARING G.P. FROM THE NI NE CASES SUBMITTED BY THE APPELLANT, IS DIFFICULT & TIME CON SUMING. THIS OBSERVATION OF THE A.O. PERHAPS REFLECTS VERY BADLY ON THE PART OF THE A.O. APART FROM THIS FACT, THE SUBMISSIONS (RE ASONS FOR FALL) GIVEN BY THE APPELLANT WITH REGARD TO FALL IN G.P. IS QUITE REASONABLE. EVEN THE ADDITION MADE ON THE BASIS OF YIELD LACKS APPLICATION OF MIND AS THERE ARE MANY FACTORS WHICH ARE RESPONSIBLE FOR VARIATION OF YIELD AND THE A.O. HAS NOT DISCUSSED/CONSIDERED THOSE FACTORS WHILE ESTIMATING 1% OF SUPPRESSED YIELD FOR MAKING ADDITION. 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSCIENTIOUS VIEW THAT THE AO HAS NOT FOLLOWED THE DIRECTIONS OF THE TRIBUNAL AS GIVEN BY ORDER DATED 18/02/2010 (SUPRA) . THE DIRECTION OF THE TRIBUNAL WAS THAT THE AO SHALL CONFRONT THE COM PARABLE CASES CHOOSING BY HIM TO THE ASSESSEE BEFORE ADOPTING THE GP RATE AT 5.20%. ITA NO.2867/AHD/2011 (BY REVENUE) DY.CIT VS. SMT.JAYABEN BHOLABHAI PATEL ASST.YEAR - 2005-06 - 5 - ON THIS ASPECT, THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO FOR DECIDING THE ISSUE RELATING TO APPLICATION OF GP RA TE. THE AO WAS THEREFORE EXPECTED TO RE-ASSESSEE THE INCOME AS PER THE DIRECTIONS OF THE TRIBUNAL AND TO PROCEED WITH THE ASSESSMENT WITHIN THOSE FOUR CORNERS. BY ADOPTING YIELD METHOD WHICH WAS APPARENTLY NOT THE DIRECTION OF THE TRIBUNAL, THE AO HAD EXCEEDED ITS JURISDICTION, THEREFORE WE HEREBY HOLD THAT LD.CIT(A) HAS RIGHTLY HELD SO. RESULTANT LY, WE HEREBY DISMISS THIS GROUND OF THE REVENUE. 6. AS A RESULT, REVENUES APPEAL STANDS DISMISSED. SD/- SD/- ( ! '# ) ( ) $% ( ANIL CHATURVEDI ) ( MUKU L KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 9 / 11 /2012 6..!, .!../ T.C. NAIR, SR. PS $5 1 .7 8$7) $5 1 .7 8$7) $5 1 .7 8$7) $5 1 .7 8$7)/ COPY OF THE ORDER FORWARDED TO : 1. *- / THE APPELLANT 2. ./*- / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-V, SURAT 5. 7<= .! , , / DR, ITAT, AHMEDABAD 6. = >2 / GUARD FILE. $5! $5! $5! $5! / BY ORDER, /7 . //TRUE COPY// ? ?? ?/ // / + + + + ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD