ITO, Silvassa Ward, Silvassa V. M/s. Clematis Trading Co. Pvt. Ltd, Silvasa

ITA 315/SRT/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1280 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2022
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 29-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 143(3); 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 315/SRT/2019 AY: 2014-15 (Hearing in Virtual Court) I.T.O., Silvassa Ward, Silvassa. Vs M/s Clematis Trading Co. Pvt. Ltd., 404, Silvassa Complex, Behind DAN & Popular Hotel, Tokarkhada, Silvassa. PAN: AADCC 9654 J Appellant/Assessee Respondent/Revenue ITA No. 316/SRT/2019 AY: 2014-15 I.T.O., Silvassa Ward, Silvassa. Vs M/s Eloquent Traders Pvt. Ltd., 8, Chamunda Darshan Building, Near Yogi Hospital, Kilwani Road, Silvassa. PAN: AACCE 3730 C Appellant/Assessee Respondent/Revenue Revenue by Shri Vinod Kumar, Sr.DR Assessee by None Date of hearing 10/10/2022 Date of pronouncement 10/10/2022 Order under Section 254(1) of Income tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by the Revenue directed against the separate orders of learned Commissioner of Income Tax (Appeals), Valsad both dated 30/03/2019 for the assessment year (AY) 2014-15. 2. In both these appeals, the revenue has raised certain common grounds of appeals, certain facts are common in both the appeals, thus, both the appeals are clubbed, heard together and are ITA No. 315 & 316/SRT/2019 ITO Vs. M/s Clematis Trading Co. Pvt. Ltd. & one Anr 2 decided by consolidate order to avoid the conflicting decision. For appreciation of fact, the appeal in ITA No. 315/Srt/2019 (ITO Vs M/s Clematis trading Co. Pvt. Ltd.) is treated as ‘lead’ case, wherein the revenue has raised following grounds of appeal: “1. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in granting relief to the assessee in reducing the gross profit rate at 0.5% as against at 3% estimated by the AO, without considering the facts and of the case in its entirety. 2. The ld. CIT(A) has erred in law and on facts in granting relief to the assessee without considering the fact that the addition on account of gross profit was made by applying the provisions of Section 145(3) as no documentary evidences with regard to purchases, sales and expenses were filed by the assessee, despite sufficient opportunities granted to the assessee. 3. It is, therefore, prayed that the order of the learned CIT(A) be set aside and that the order of the AO be restored. 4. The appellant craves to add, modify or alter any grounds during the course of appeal proceedings.” 3. Brief facts of the case are that the assessee is a company engaged in the business of trading of textile products. During the year, the assessee has shown turnover of Rs. 160.41 crores. The assesse while filing return of income, declared income of Rs. 25,313/-. The case of assessee was selected for scrutiny, the assessment was completed under Section 143(3) of the Income Tax Act, 1961 (in short, the Act) on 29/12/2016. The Assessing Officer while making the assessment, recorded that the assessee has shown loss by making sales of Rs. 160.35 crores against purchase of Rs. 160.41 crores. The Assessing Officer also noted that normally in the line of textile trading, the gross profit ratio ranges from 2 to 5%. The Assessing Officer ITA No. 315 & 316/SRT/2019 ITO Vs. M/s Clematis Trading Co. Pvt. Ltd. & one Anr 3 asked the assessee to provide books of account for verification and justification of profit. The Assessing Officer noted that despite giving numerous opportunity, the assessee did not comply nor furnished any books of account, bank statement, bills and vouchers, thus prevented the Assessing Officer to verify the correctness of books of account. The books of account of assesse was rejected under Section 145(3) and the Assessing Officer estimated 3% gross profit on the total turnover of Rs. 160.41 crores thereby making addition of Rs. 4.81 crores. 4. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee stated that the Assessing Officer rejected the books of account and made addition on ad hoc basis. The books of assessee were duly audited. The assessee is a private limited company and are subjected to annual statutory audit under the provisions of Companies Act with Ministry of Corporate Affairs. The assessee also stated that they have furnished the details of purchase and sales. The ld. CIT(A) after considering the submission of assessee noted that the assessee before him submitted copy of decision in case of Hariom Agro Product Private Ltd and Jalaram Cultivation Private Limited wherein in appeal for A.Y. 2009-10, he estimated gross profit @ 0.5% against 3% estimated by the Assessing Officer. The ld CIT(A) ITA No. 315 & 316/SRT/2019 ITO Vs. M/s Clematis Trading Co. Pvt. Ltd. & one Anr 4 also noted that assessee also furnished gross profit of A.Y. 2014-15, 2013-14 and 2012-13 wherein the gross profit shown in the year under consideration at 0.03% wherein A.Y. 2013- 14, the gross profit was shown at 0.06%. The ld. CIT(A), thus estimated gross profit of assessee @ 0.5% and granted substantial relief to the assessee. 5. Aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before this Tribunal. 6. None appeared on behalf of assessee. Perusal of record shows that this appeal was filed in the year 2019. Notice of hearing was served through registered AD for more than three occasions. The ld. AR of the assessee attended the hearing on 07/12/2021, 15/02/2021, 21/02/2022 and thereafter sent application for adjournment. The assessee was granted last opportunity on 22/08/2022 to make their submission and the appeal was adjourned to 10.110.2022. Today i.e. on 10/10/2022, none appeared on behalf of assessee nor any application for adjournment was filed. In such circumstances, we do not find any justification for adjourning the case and decided to hear the submission of ld. Sr. DR for the revenue and to pass order on the basis of material available on record. 7. The ld. Sr. DR for the revenue submits that in assessee’s own case for A.Y. 2013-14, similar addition was restricted to 1%. ITA No. 315 & 316/SRT/2019 ITO Vs. M/s Clematis Trading Co. Pvt. Ltd. & one Anr 5 The assessee filed appeal before the Tribunal wherein the order of ld. CIT(A) was upheld in ITA No. 3156/Ahd/2016 dated 24/12/2021. The ld. Sr. DR submits that, though the Tribunal confirmed the similar addition @ 1% in assessee’s own case for A.Y. 2013-14, yet he prayed to restore the additions made by Assessing Officer by setting aside the order of ld. CIT(A). The ld. Sr.DR also filed copy of decision in ITA No. 3156/Ahd/2016 dated 24/12/2021. 8. We have considered the submission of ld. Sr. DR for the revenue and have gone through the orders of the lower authorities. We find that before us, the ld. Sr. DR for the revenue vehemently submitted that the order of Assessing Officer in estimating the gross profit @ 3% of total turnover of Rs. 160.00 crores may be restored. However, we find that in assessee’s own case on almost similar set of facts wherein similar estimation was made by Assessing Officer in AY 2013- 14 and on appeal before ld CIT(A) similar additions was restricted to 1% and on further appeal by assessee, the Tribunal passed the following order: “9. Ground No.1 and 2 relates to upholding the addition to the extent of 1.00 % of Gross Profit. We find that the AO during the assessment issued a number of show cause notices to produce the books of accounts and the allied evidences. The AO also conducted enquiries by issuing notice under section 133(6) of the Act calling complete details from the parties from whom the assessee made purchases. In response to such notices, those ITA No. 315 & 316/SRT/2019 ITO Vs. M/s Clematis Trading Co. Pvt. Ltd. & one Anr 6 companies/parties submitted only ledger accounts, no details where furnished with regard to payments of such purchases. Thus, the AO concluded that purchases shown by assessee are not verifiable. The assessee was asked to produce the complete details of month wise purchases, sale and quantity, value, bills, vouchers of expenses and stock statement. The assessee was also asked to produce the lorry receipt no. and truck/vehicle through which the goods were delivered. The AO noted that despite being number of opportunities, no details were furnished. No books of accounts was produced by the assessee. The AO recorded that in the similar business, the other assessee’s in line of textile trading, Gross Profit (GP) Ratio ranges from 2% to 5%. The AO, accordingly, noted that he had no option, except to reject the books of accounts as no details were furnished to justify the declared profit. The AO in absence of basic details, not accepted the books result declared by the assessee. The AO estimated 3% of turnover as income of assessee. The assessee’s turnover is Rs.31.67 crore, accordingly, the AO worked out the addition of Rs.95,03,809/- [3% of turnover]. 10. Before the ld.CIT(A), the assessee raised plea that in Hari Om Agro Products Pvt. Ltd., the ld.CIT(A) estimated Gross Profit @0.5% against 3% estimated by the AO. Further, in case of Jalaram Cultivation, the ld.CIT(A) estimated the Gross Profit @1% against the estimated profit of 3%, estimated by the AO. The ld. CIT(A) after considering the contention of assessee held that there was no basis 3% addition. The assessee is in the business of trading to taxable fabrics and Gross Profit Ratio depend upon the demands and supply condition prevailing in the market. During the year, the AO added 3% of transaction in assessee’s group. The ld.CIT (A) was of the view that AO has not disputed the veracity of the transactions. In associated concern, no physical transfer goods takes place. The expenses recorded are normal and lower side and the turnover shown is large, thus, under these circumstances, the profit cannot be estimated at normal market rate. The ld.CIT(A), considering the fact of the case held that in his opinion, 1% of addition of total turnover would be fair and reasonable, to meet the end of justice and restricted the addition to that extent only. 10. We find that the present appeal was filed on 30.11.2016. The case was fixed for hearing for the first time on 22.03.2018. The ld.AR of the assessee is ITA No. 315 & 316/SRT/2019 ITO Vs. M/s Clematis Trading Co. Pvt. Ltd. & one Anr 7 seeking dates from 22.03.2018 on one ground or other. Not a single piece of evidence is filed before this Tribunal. Though in additional grounds of appeal the assessee raised plea that no proper opportunity was given and that the assessee was prevented from producing details and evidences during the assessment, despite taking such plea no paper book or evidence or books of account is filed before Tribunal. We are conscious of the facts that those corresponding additional ground is already rejected. The assessee despite pendency of appeal for more than five did nothing except for seeking dates. The assessee or their AR have even not filed books result for earlier or subsequent years or any order of any comparable companies cases who are engaged in similar business. The ld.AR simply made is submission that addition restricted by the ld. CIT(A) is on higher side and concluded his submissions in a single sentence. We find that even before ld CIT(A), the assessee only submitted that in one of the comparable companies in Hari Om Agro Products Pvt. Ltd., the ld.CIT(A) restricted addition to the extent of 0.5% and in case of Jalaram Cultivation addition was restricted to 1% by the ld.CIT(A). We find that no documentary evidence was furnished before ld CIT(A). In our view the ld. CIT(A), in a very reasonable manner restricted the addition to 1.00 % of total sale/turnover of assessee. Even now neither the copy of order in case of Hari Om Agro Products Pvt. Ltd. nor any other comparable company or the alleged audited accounts of the assessee is placed. At the addition cost of repetition, we may note that this appeal pending appeal for more than five years, the assessee failed to bring any evidence on record to substantiate their plea that their books result should be accepted. In view of the aforesaid discussion, we do not find any reason to interfere with the order of ld. CIT(A), which we affirm. In the result the ground No. 1 & 2 of the appeal is dismissed.” 9. Considering the decision of Tribunal in assessee’s own case on similar facts in preceding year and respectfully following the same, the estimation made by ld. CIT(A) is increased from 0.5% to 1% of total turnover. Thus, the grounds of appeal raised by the Revenue are partly allowed. ITA No. 315 & 316/SRT/2019 ITO Vs. M/s Clematis Trading Co. Pvt. Ltd. & one Anr 8 10. In the result, this appeal of the revenue is partly allowed. 11. Now we take ITA No. 316/Srt/2019 for A.Y. 2014-15 wherein following grounds have been raised by the revenue. “1. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in granting relief to the assessee in reducing the gross profit rate at 0.5% as against at 3% estimated by the AO, without considering the facts and of the case in its entirety. 2. The ld. CIT(A) has erred in law and on facts in granting relief to the assessee without considering the fact that the addition on account of gross profit was made by applying the provisions of Section 145(3) as no documentary evidences with regard to purchases, sales and expenses were filed by the assessee, despite sufficient opportunities granted to the assessee. 3. It is, therefore, prayed that the order of the learned CIT(A) be set aside and that the order of the AO be restored. 12. Since the facts in this appeal is similar as in ITA No. 315/Srt/2019 for the Assessment year 2014-15, except variation of addition. In this appeal, the assessee filed its return of income on 20/10/2014, declared income of Rs. 19,330/-. The case of assessee was selected for scrutiny, the assessment was completed under Section 143(3) of the Act on 29/12/2016. The books of account of assessee was rejected under Section 145(3) and the Assessing Officer estimated 3% gross profit on the total turnover of Rs. 78,06,50,286/- thereby making addition of Rs. 2,31,92,160/-. On appeal before the ld. CIT(A), the ld. CIT(A) restricted the addition to the extent of 0.5% and rest of the addition was deleted. 13. Considering the facts that the revenue has raised similar grounds of appeal, the facts of the present appeal is also similar, thus ITA No. 315 & 316/SRT/2019 ITO Vs. M/s Clematis Trading Co. Pvt. Ltd. & one Anr 9 following the principal of consistency, the finding given by us in the former paras i.e. in ITA No. 315/Srt/2019 for the Assessment year 2014-15 shall apply mutatis mutandis in this appeal also. In the result, the appeal of the revenue is partly allowed. 14. In the result, both the appeals of the revenue are partly allowed. Order pronounced on 10/10/2022, in open court at the time of hearing. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 10/10/2022 *Ranjan Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr. Pvt. Secretary, ITAT, Surat