Shri Mehboobmiya Sadrumiya Malik, V. The ACIT., Cirlce-6, Surat

ITA 3139/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6542 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 22-04-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 19-07-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: K N BHATT
• Keywords: Gross profit estimation
• Section: 143(3); 144

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI MUKUL SHRAWAT, JM AND D.C.AGRAWAL, AM MEHBOOBMIYA SADRUMIYA MALIK, PLOT NO.A-2, BLOCK NO.51, AT & PO BHATKOL, TAL.MANGROL, DIST.SURAT. V/S . ASSTT. CIT, CIRCLE-6, SURAT. AND ASSTT. CIT, CIRCLE-6, SURAT. V/S . MEHBOOBMIYA SADRUMIYA MALIK, PLOT NO.A-2, BLOCK NO.51, AT & PO BHATKOL, TAL.MANGROL, DIST.SURAT. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI K. N. BHATT, AR. REVENUE BY:- SHRI M.C. PANDIT, SR.DR. O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER. THESE ARE CROSS APPEALS ONE FILED BY THE ASSESSEE FOR ASST. YEAR 2004-05 AND THE OTHER BY THE REVENUE AGAINST THE OR DER OF LD. CIT(A) DATED 15.5.2007. ITA NO.3139/AHD/2007 ASST. YEAR :2004-05 ITA NO.3163/AHD/2007 ASST. YEAR :2004-05 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL :- 1. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE LD. A.O. HAS ERR ED IN LAW AND IN FACT IN RESORTING TO THE PROVISIONS OF S.144 FOR MAKING THE ASSESSMENT AND HENCE. YOUR APPELLANT MOST HUMBLY PR AYS THAT THE ASSESSMENT ORDER BE QUASHED. 2. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) OUGHT TO HAVE DELETED THE ADDITION OF RS.16,52,870/ - MADE BY THE LD. AO INSTEAD OF SUSTAINING IT TO THE EXTENT O F 1.1% OF TURNOVER I.E. RS.12,53,901/- AND HENCE YOUR APPELLA NT MOSTLY HUMBLY PRAYS THAT THE ADDITION OF RS.12,53,901/- SU STAINED BE DELETED AND THE BOOK RESULTS BE ACCEPTED. 3. SUCH OTHER RELIEF(S) TO WHICH THE APPELLANT MAY BE LAWFULLY ENTITLED TO. WHEREAS THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-IV, SURAT HAS ERRED IN RESTRICTING THE A DDITION TO RS.1,25,390/- AS AGAINST RS.16,52,870/- MADE BY THE AO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-IV, SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. C IT(A) MAY BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED. ITA NO.3139/AHD/2007 3. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAG ED IN THE BUSINESS OF TRADING COTTON YARN AND COTTON WASTE. THE RETURN OF INCOME WAS FILED ON 28.10.2006 DECLARING LOSS OF RS.10,14,432/-. THE AS SESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 19.12.2006 ON AN INCOME OF RS.6,38,440/- WHEREIN AN AMOUNT OF RS.16,52,870/- W AS ADDED ON ACCOUNT 3 OF LOW GP. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS AO ISSUED NOTICE AND SUMMONS TO THE ASSESSEE BUT HE FAILED TO COMPLY AND ACCORDINGLY THE AO PROCEEDED TO COMPLETE THE ASSESS MENT UNDER SECTION 144 ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. T HE AO NOTICED THAT ASSESSEE HAS SHOWN GP RATE OF 1.40% WHEREAS IN THE PRECEDING TWO YEARS IT HAD DECLARED GP RATE OF 1.73% AND 1% FOR ASST. Y EAR 2003-04 AND 2002-03 RESPECTIVELY. NO SPECIFIC REASON FOR FALL I N GP HAS BEEN GIVEN. THE AO DID NOT ACCEPT THE FALL IN GP AND PROCEEDED TO ESTIMATE GP RATE BY AVERAGING THE GP RATES OF PRECEDING TWO YEARS AN D ON THAT BASIS APPLIED A GP RATE OF 1.85% WHICH RESULTED IN AN ADD ITION OF RS.16,52,870/-. BEFORE LD. CIT(A) IT WAS SUBMITTED THAT BOOKS OF ACCOUNT OF ASSESSEE ARE DESTROYED IN FLOODS IN THE CITY IN AUGUST, 2006. THE LD. CIT(A) AFTER CONSIDERING THAT ONCE PRIMARY RECORDS ARE NOT AVAILABLE AND PROFITS HAVE TO BE NECESSARILY ESTIMATED, APPLIED G P RATE OF 1.5% AS COMPARED TO 0.4% SHOWN BY THE ASSESSEE. THIS RESULT ED IN AN ADDITION OF RS.12,53,900/-. THE ASSESSEE GOT CONSEQUENTIAL RELI EF AGAINST WHICH REVENUE IS IN APPEAL. 4. THE LD. AR POINTED OUT THAT FIGURE OF ADDITION S USTAINED BY LD. CIT(A) IS RS.1,25,390/- WHICH IS A TYPOGRAPHICAL MI STAKE AND ACTUAL ADDITION SUSTAINED IS RS.12,53,900/- AND ACCORDINGL Y THE RELIEF ALLOWED TO THE ASSESSEE IS RS.4 LACS. ACCORDINGLY THE REVENUE EFFECT ON THIS RELIEF WOULD BE LESS THAN RS.2 LACS AND THEREFORE, THE AP PEAL OF THE REVENUE SHOULD NOT BE ADMITTED IN VIEW OF THE BOARDS INSTR UCTIONS ON MONETARY LIMIT FOR FILING APPEALS. IN RESPECT OF HIS OWN APP EAL LD. AR SUBMITTED THAT ADDITION SUSTAINED BY THE LD. CIT(A) IS EXCESSIVE. ASSESSMENT FOR 2003- 04 WAS A BOON YEAR WHICH RESULTED IN A VERY HIGH PR OFIT WHEREAS IN ASST. YEAR 2002-03 GP SHOWN IS ONLY 0.6%. THEREFORE, IT I S UNFAIR TO APPLY GP 4 FOR ASST. YEAR 2003-04 EVEN FOR AVERAGING. THE ASSE SSEE WILL NOT BE ABLE TO SUBSTANTIATE HIS PROFIT ON ACCOUNT OF DESTRUCTIO N OF BOOKS IN FLOODS. 5. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER OF AO. HE SUBMITTED THAT ASSESSEE HAS FAILED TO CO-OPERATE WITH THE AO. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND CARE FULLY PERUSING THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT IN ABSE NCE OF BOOKS OF ACCOUNT AO WAS FULLY JUSTIFIED IN ESTIMATING THE PROFIT. BU T LOOKING TO THE FACT THAT IN ASST. YEAR 2002-03 GP RATE WAS ONLY 0.6%, WE DIR ECT THE AO TO APPLY GP RATE OF 1% THIS YEAR ON DECLARED SALES OF RS.11, 39,91,036/- AND MAKE RESULTANT ADDITION. THE ASSESSEE WILL GET CONSEQUEN TIAL RELIEF. 7. SO FAR AS DEPARTMENTAL APPEAL IS CONSIDERED, IT IS DISMISSED IN VIEW OF ADDITION FURTHER REDUCED AS COMPARED TO WHAT WAS SUSTAINED BY LD. CIT(A). 8. AS A RESULT, APPEAL OF REVENUE IS DISMISSED WHER EAS ASSESSEES APPEAL IS PARTLY ALLOWED. SD/- SD/- (MUKUL SHRAWAT) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 30/4/2010 MAHATA/- ORDER PRONOUNCED IN OPEN COURT ON 30/4/2010 5 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD