Stanzen Links, Bangalore V. ITO, Bangalore

ITA 304/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95397 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARENDRA REBELLA ASST
• Assessee Lawyers: NAGINCHAND KHINCHA
• Keywords: Gross profit estimation; Opportunity of being heard; Assessment record
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE B BENCH, BANGALORE BEFORE SMT ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.304(BNG)/2014 (ASSESSMENT YEAR : 2009-10) M/S STANZEN LINKS, NO.473/A2, 4 TH PHASE, 12 TH CROSS, PEENYA INDUSTRIAL AREA, BANGALORE-560 058 PAN NO.AADFS0817C APPELLANT VS THE INCOME-TAX OFFICER, WARD-6(40, BANGALORE RESPONDENT ASSESSEE BY : SHRI NAGINCHAND KHINCHA, CA REVENUE BY : SHRI NARENDRA REBELLA, ASST.CIT DATE OF HEARING : 18-11-201 5 DATE OF PRONOUNCEMENT : 11-12-2015 O R D E R PER SHRI INTURI RAMA RAO, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, BA NGALORE DATED 25- 11-2013 FOR THE ASSESSMENT YEAR : 2009-10. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APP EAL; 1. THE ORDER OF THE CIT(A) TO THE EXTENT IT CONFIR MS THE ORDER OF THE AO AND ALSO ENHANCED THE INCOME IS BAD IN LAW AND IS LIABLE TO BE QUASHED. 2 ITA NO.304 (B)/2014 2.1 THE AO HAD ERRED IN INCREASING THE GROSS PROFIT RATE FROM 17.57% TO 27% AND THE CIT(A) HAS ERRED IN CONFIRMING THE GROSS PROFIT RATE OF 25%. 2.2. THE APPELLANT HAD EXPLAINED AND SUBSTANTIATED THE REASON FOR THE GROSS PROFIT RATE AS ACHIEVED AND TH E LOWER AUTHORITIES SHOULD HAVE ACCEPTED THE GROSS PR OFIT AS RETURNED WITHOUT MAKING ANY ADDITION THEREON. 2.3. THE ENHANCEMENT IN GROSS PROFIT AS DONE AND SUSTAINED IS NOT BASED ON THE MATERIAL AND IS DONE WITHOUT PROPERLY APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.4 THE APPELLANT HAS MAINTAINED REGULAR AND PROPER BOOKS OF ACCOUNTS WHICH HAVE NOT BEEN REJECTED. THE ADDITION TO GROSS PROFIT AS CONFIRMED BEING HAD ON THE FACTS AND LAW IS TO BE DELETED. 3.1 THE CIT(A) HAS ERRED IN ADDING A SUM OF RS.10,38,574/- BEING UNAVAILED EXCISE DUTY TO THE VALUE OF CLOSING STOCK. 3.2 THE ENHANCEMENT AS DONE BY THE CIT(A) IS NOT PROPER AND NIT IN ACCORDANCE WITH LAW. 3.3 IN ANY CASE AND WITHOUT PREJUDICE THE ADDITION OF RS.10,38,574/- IS BAD IN LAW AND IN FACT AND IS TO BE DELETED. 3 ITA NO.304 (B)/2014 4. IN VIEW OF THE ABOVE AND ON OTHER GROUNDS TO BE ADDUCED AT THE TIME OF HEARING IT IS REQUESTED THAT GROSS PROFIT PERCENTAGE AS RETURNED BE ACCEPTED AND THE ADDITION MADE ON ACCOUNT OF GROSS PROFIT AS AL SO OF RS.10,38,574/- ON ACCOUNT OF UNAVAILED EXCISE DUTY BE DELETED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF ELECTRICAL STAMPINGS AND AUTOMOBILE COMPONENTS. THE RETURN OF INCOME F OR THE AY: 2009-10 WAS FILED ON 15-09-2009 DECLARING TOTAL INCOME OF R S.17,69,008/-. AGAINST THE SAID RETURN OF INCOME ASSESSMENT WAS COMPLETED BY THE ITO, WARD-6(4) ON 26-12-2011 PASSED U/S 143(3) OF THE IT ACT, AFTE R MAKING SEVERAL DISALLOWANCES AT A TOTAL INCOME OF RS.2,71,76,544/- . THE DISPARITY BETWEEN THE RETURNED INCOME AND THE ASSESSED INCOME IS ON A CCOUNT OF ADDITIONS MADE BEING THE DIFFERENCE BETWEEN THE CONTRACT RECE IPTS AS PER FORM-16A AND THE RECEIPTS DISCLOSED IN P&L ACCOUNT OF RS.1,6 2,40,088/-AND A DIFFERENCE ON ADOPTING THE GP RATE OF 27% AS AGAINS T 17.57% DECLARED BY THE ASSESSEE OF RS.91,67,456/-. 4 ITA NO.304 (B)/2014 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER AN APPEA L WAS FILED BEFORE THE LEARNED CIT(A), WHO VIDE HIS IMPUGNED OR DER DELETED THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN CONTRACT RECEIPTS AS PER P&L ACCOUNT AND FORM NO.16A. HOWEVER, MADE AN ADDITION OF RS.10,38 ,574/- ACCOUNT OF VALUATION OF CLOSING STOCK FOLLOWING THE DECISION O F THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS HP GLOBAL SOFT LTD. 34 2 ITR 276. HOWEVER, WHILE CONFIRMING THE ADDITION ON ACCOUNT OF LOW GP, REDUCED THE GP TO 25% AS AGAINST 27% ADOPTED BY THE AO. 5. BEING AGGRIEVED, THE ASSESSEE COMPANY IS IN APPE AL BEFORE US WITH THE PRESENT APPEAL. 6. THE LEARNED AR VEHEMENTLY ARGUED THAT THE ASSESS EE COMPANY FILED ALL THE DETAILS AS CALLED FOR BY THE AO. THE AO HAD NOT FOUND OUT ANY DEFICIENCY IN THE BOOKS OF ACCOUNTS MAINTAINED BY T HE ASSESSEE. HE FURTHER SUBMITTED THAT MERE LOW GP CANNOT BE A GROUND TO ES TIMATE HIGHER RATE OF GP WITHOUT BRINGING ANY EVIDENCE ON RECORD. HE FUR THER SUBMITTED THAT THE AO HAD NOT BROUGHT ANY COMPARABLE INSTANCE IN THE S IMILAR LINE OF 5 ITA NO.304 (B)/2014 BUSINESS WHERE GP OF 27% WAS MADE. IN SUPPORT OF HI S PROPOSITION HE RELIED ON THE FOLLOWING CASE LAWS; 1. CIT VS UP STATE FOOD & ESSENTIAL COMMODITIES (20 13) 39 TAXMANN.COM 106(ALL.) 2. CIT VS SYMPHONY COMFORT SYSTEM LTD. (2013) 35 TA XMANN.COM 53 (GUJ.) 3. ITO VS SAI INTERNATIONAL (2013) 31 TAXMANN.COM 3 46(DEL.) 4. CENTURY TILES LTD. VS JCIT (2014) 51 TAXMANN.CO M 515 (AHD.TRIB.) 5. CIT VS JACKSONS HOUSE (2011) 198 TAXMANN.COM 385 (DEL.) 6. CIT VS K.S.BHATIA (2002) 125 TAXMANN 454(P&H) 7. DHANVI TRADING & INV.(P)LTD. VS DCIT (1998) 96 T AXMAN 98 (AHD.) (MAG.) 8. ITO VS GIRISH M MEHTA (2007) 105 ITD 585(RAJKOT) 9. ALUMINIUM IND,P.LTD. VS CIT (1995) 80- TAXMAN 18 4 (GAU.) 10. CIT VS EASTERN COMMERCIAL ENTERPRISES (1994) 21 0 ITR 104 (CAL.) 6.1 ON THE OTHER HAND, LEARNED SR DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE AO ESTIMATED THE GP AT 27% ON THE SALE S OF 9,72,51,257/- AS 6 ITA NO.304 (B)/2014 AGAINST GP SHOWN BY THE ASSESSEE OF RS.17.57%. THE AO ALSO FURTHER NOTED THAT THE GP IN THE IMMEDIATE PREVIOUS YEAR WA S 29.53%. HOWEVER, AS CLEAR FROM THE ASSESSMENT RECORD, WE FIND THAT THE ASSESSEE HAD NOT OFFERED ANY EXPLANATION TO THE SATISFACTION OF THE AO. NOW, THE ASSESSEE FILED BEFORE US THE COPIES OF EXPLANATION OFFERED BEFORE THE CIT (A). THE ASSESEE ONLY FILED THE COPIES OF THE EXPLANATION FILED BEFORE TH E CIT(A) AND THE CIT(A) AFTER CONSIDERING THE EXPLANATION FILED REDUCED THE GP TO 25% WHICH IS FAR LESS THAN THE IMMEDIATE LAST YEAR OF 29.53%. DURI NG THE COURSE OF HEARING BEFORE US, WE DIRECTED THE LEARNED AR TO FILE THE C OMPARATIVE FIGURES OF PROFITS FOR THE LAST THREE YEARS WHICH HAD NOT BEEN FILED SO FAR. IN THE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION, WE DO NOT HAVE ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) ON THI S GROUND. THUS, THE GROUNDS OF APPEAL NOS.2.1 TO 2.4 ARE DISMISSED. GR OUND NO.3 RELATES TO THE ADDITION OF RS.10,38,574/- ON ACCOUNT OF UN-AVAILED EXCISE DUTY TO THE VALUE OF CLOSING STOCK. THE CIT(A) MADE THIS ADDIT ION AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE FOLLOWIN G THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT VS HP GLOBAL SOFT LTD (SUPRA) 7 ITA NO.304 (B)/2014 BE THAT IT MAY, AS IN THE ORDER PERTAINING TO OTHE R ASSESSMENT YEARS OF THE VERY ASSESSEE IN SOFARAS TH E DISPUTE RELATING TO THE ASSESSEE BEING ENTITLED TO DEDUCT THE AMOUNT FROM OUT OF ITS VALUE OF CLOSING STOCK, AN AMOUNT THAT IS ATTRIBUTABLE TO THE EXCISE DUTY PAID AT THE TIME OF PURCHASE IS A QUESTION DIRECTLY LINKED TO THE PURCHASE PRICE AND THE DUTY PAID ON THAT AND A DUTY ACTUALLY PAID AT THE TIME OF PURCHASE. THIS ASPECT HAS BEEN DISCUSSED BY THE AO AND THOUGH EVEN AS POINTED OUT BY THE ASSESSEE THAT THERE IS CONSIDERABLE CONF USION AS TO WHOSE DUTY LIABILITY IS SOUGHT TO BE PASSED O N TO WHOM, AS TO WHETHER THE ASSESSEE WAS REQUIRED TO BE AR SOME DUTY BEING UTILIZED BY THE ASSESSEE FROM OUT O F THE PRODUCT SOLD TO ITS CUSTOMERS, ULTIMATELY THESE THINGS DO NOT REFLECT INTO A METHOD OF ACCOUNTING F OR THE PURPOSE OF COMPUTING PROFITS OF THE ASSESSEE, BUT O NLY THE QUESTION IS ONE OF DUTY PAID FOR THE PURPOSE OF ACQUISITION OF RAW MATERIALS TO BE CONSUMED IN PRODUCING FINISHED PRODUCT. WHILE IT IS NO DOUBT TRUE THAT THE COST OF PURCHASE S INEVITABLY TO INCLUDE A DUTY COMPONENT IN SOFAR AS AN ASSESSEE IS CONCERNED, SIGNIFICANCE OF SECTION 43B IS ONLY THAT IF A DEDUCTION IS CLAIMED IN RESPECT OF A NY TAX OR DUTY PAID. IT SHOULD BE ON ACTUAL BASIS AND ON 8 ITA NO.304 (B)/2014 MAKING PAYMENT. SECTION 43B DOES NOT BY ITSELF OR PER- SE DISALLOW ANY VALUE FROM THE COST, BUT ONLY STIPU LATES CONDITION THAT IF THE VALUE OF PURCHASES INCLUDES A DUTY COMPONENT, THAT SHOULD BE MADE GOOD TO THE HILT. IT IS FOR THIS SEASON, IT IS HELD THAT ON THE PRINCIPLE O R REQUIREMENT OF SECTION 43B, AN ASSESSEE IS DUTY BOU ND TO MAKE GOOD ACTUAL DUTY IT HAS PAID ON ACCOUNT OF PURCHASES OF RAW MATERIALS FOR PRODUCING FINISHED PRODUCT BY PRODUCING PROOF OF PAYMENT ETC. IT MADE AND THAT NOT HAVING BEEN MADE GOOD ANYWHERE ON RECORD, IN FACT, FOR THE OTHER ASSESSMENT YEARS ALSO, THAT IS A MATTER WHICH CAN BE MADE GOOD AS AMOUNT CLAIMED, BU T NOT IN VACCUM. THE CONCEPT OF METHOD OF ACCOUNTING AS IS SOUGHT T O BE APPLIED, PARTICULARLY IN THE CONTEXT OF THE PROV ISIONS OF SEC.145 IS MORE IN THE NATURE OF A JUGGLERY THA N A STANDARD METHOD OF ACCOUNTING FOR THE PURPOSE OF CLAIMING A DUTY DEDUCTION ON THE COST OF PURCHASES. A DUTY PAID CAN ALWAYS BE CLAIMED IN TERMS OF SEC.43B , BUT NOT OTHERWISE AS THE SECTION MANDATES IT. IT IS FOR THIS REASON, THE MODVAT CREDIT IS CORREC TLY ADDED TO THE INCOME AS WELL AS THE VALUE OF THE CLO SING STOCK FOR THE CURRENT ASSESSMENT YEAR BY THE AO. 9 ITA NO.304 (B)/2014 THE DECISION OF THE HONBLE JURISDICTIONAL HIGH CO URT IS IN LINE WITH THE SETTLED PRINCIPLES OF LAW AND THEREFORE, WE DO NOT FIND ANY INFIRMITY WITH THE ORDER OF THE LEARNED CIT(A), HENCE THE APPEAL F ILED BY THE ASSESSEE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH DECEMBER, 2015. SD/- (ASHA VIJAYARAGHAVAN SD/- (INTURI RAMARAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: BANGALORE D A T E D : 11-12-2015 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR,ITAT, BANGALORE