Khemchand Kangumal Tharwani, Navsari V. The Dy.CIT.,Navsari Circle, Valsad

ITA 3219/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60501 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 10-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 21-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: RASESH B SHAH
• Keywords: Business income; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 3219/ AHD/2011 (ASSESSMENT YEAR 2006-07) SHRI KHEMCHAND KANGUMAL THARWANI, PROP. M/S. K K BISCUIT BAKERY, 154-155, GIDC, KABILPORE, NAVSARI VS. DCIT, NAVSARI CIRCLE, NAVSARI PAN/GIR NO. : AALPT1806G (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI RASESH B SHAH, AR RESPONDENT BY: SHRI B L YADAV, SR. DR DATE OF HEARING: 10.05.2012 DATE OF PRONOUNCEMENT: 15. 06.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) VALSAD DATED 18.10.2011 FOR THE ASSESSMENT YEAR 200 6-07. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN REJECTING THE BOOK RESULTS U/S. 145(3) OF THE I. T. ACT, 1961 . 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN PARTLY CONFIRMING THE ACTION OF ASSESS ING OFFICER IN ENHANCING TURNOVER AND MAKING G.P ADDITION ON SUCH TURNOVER BY SUSTAINING THE ENHANCEMENT OF TURNOVER TO THE EXTEN T OF 10% AS AGAINST 15% MADE BY ASSESSING OFFICER. I.T.A.NO.3219 /AHD/2011 2 3. IT IS THEREFORE PRAYED THAT THE ADDITION MADE BY ASSESSING OFFICER AND CONFIRMED BY COMMISSIONER OF INCOME-TAX (APPEALS) MAY PLEASE BE DELETED. 4. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE AP PEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE A.O. HAS NO TED ON PAGE 8 OF THE ASSESSMENT ORDER THAT THERE WAS VARIOUS DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE SUCH AS : (I) NO STOCK R EGISTER MAINTAINED, (II) NO ITEM WISE QUANTITY OF RAW MATERIAL, FINISHED GOO DS MAINTAINED, (III) NO BASIC RECORDS OF DAY-TO-DAY SALES ARE MAINTAINED, ( IV) NO RECORD RELATING TO GOODS SUPPLIED TO THE BRANCHES ARE MAINTAINED AND ( V) NO CORRELATION OF INCREASE IN ADMINISTRATIVE EXPENSES AND OTHER EXPEN SES PACKING EXPENSES, OVERTIME EXPENSES WERE ESTABLISHED WITH THE INCREAS E IN SALES DURING THE PRESENT YEAR. THE A.O. REJECTED BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) AND HELD THAT TOTAL SALES OF THE ASSESSEE CA N BE ADOPTED BY MAKING ADDITION OF 15% IN THE SALES DECLARED BY THE ASSESS EE AND ON SUCH ADDITIONAL SALES, GP RATE DECLARED BY THE ASSESSEE SHOULD BE APPLIED @ 20.46% AND IN THIS MANNER, HE MADE ADDITION OF RS10 ,33,982/-. BEING AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE LD. CIT(A) WHO HELD THAT INSTEAD OF MAKING ADDITION @ 15% IN THE S ALES, ADDITION SHOULD BE MADE TO THE EXTENT OF 10% ONLY. NOW, THE ASSESS EE IS IN FURTHER APPEAL BEFORE US. 3. IT WAS SUBMITTED BY THE LD. A.R. BEFORE US THAT THE WRITTEN SUBMISSION FILED BEFORE LD. CIT(A) ARE AVAILABLE ON PAGES 1-6 OF THE PAPER BOOK AND IT WAS SUBMITTED BEFORE LD. CIT(A) O N PAGE 6 THAT AS PER THE TRIBUNAL ORDER FOR THE ASSESSMENT YEAR 2005-06, WHEREIN TRIBUNAL HAS CONFIRMED THE ADDITION IN THE TURNOVER OF ONLY RS.1 0 LACS, WHICH AMOUNTED TO 2.16% OF THE TURNOVER OF THAT YEAR, IN THE PRESENT YEAR, THE ADDITION SHOULD BE MADE IN THE TURNOVER OF 2% OF TH E TURNOVER AS DECLARED I.T.A.NO.3219 /AHD/2011 3 BY THE ASSESSEE AS AGAINST 10% ADDITION UPHELD BY L D. CIT(A). HE FURTHER SUBMITTED THAT THE CHART OF SALES, GP, NP ALONG WIT H GP RATIO AND NP RATIO IS ALSO AVAILABLE ON PAGE 7 OF THE PAPER BOOK AS PE R WHICH, THE GP OF THE PRESENT YEAR IS BETTER THAN THE PRECEDING YEAR AND SUCCEEDING YEAR ALTHOUGH THERE IS SLIGHT FALL IN NP BUT STILL ADDIT ION CONFIRMED BY LD. CIT(A) IS EXCESSIVE. HE ALSO SUBMITTED THAT THE TR IBUNAL ORDER IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IS AVAILABLE ON PAGE 8-15 OF THE PAPER BOOK AND THE AUDITED ACCOUNTS ALO NG WITH TAX AUDIT REPORT IS AVAILABLE ON PAGE 16-43 OF THE PAPER BOOK . LD. D.R. SUPPORTED THE ORDER OF LD. CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. FIRST, WE EXAMINE THE BASIS OF THE TRIB UNAL DECISION IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2005-06. IN THAT YEAR, IT IS NOTED BY THE TRIBUNAL IN PARA 8.2 ON PAGE 14 OF THE PAPER BOOK THAT THE NET PROFIT FOR THAT YEAR WAS 1.98% AS COMPARED TO 1.02 % IN TH E PRECEDING YEAR AND, THEREFORE, ENHANCEMENT OF SALES BY THE A.O. TO THE EXTENT OF 10% OF THE TOTAL TURNOVER WAS HELD TO BE EXCESSIVE AND THE TRI BUNAL CONFIRMED THE ADDITION IN SALES OF RS.10 LACS ONLY AS AGAINST THE TURNOVER DECLARED IN THAT YEAR OF RS.462.70 LACS. IN THE PRESENT YEAR, THE N ET PROFIT DECLARED BY THE ASSESSEE IS ON LESSER SIDE AS COMPARED TO THE ASSES SMENT YEAR 2005-06 BUT IN OUR CONSIDERED OPINION, INSTEAD OF COMPARING NET PROFIT, COMPARISON SHOULD BE MADE OF THE NET PROFIT BEFORE INTEREST AN D DEPRECIATION. IF WE DO SO, WE FIND THAT THE PERCENTAGE OF NET PROFIT BE FORE INTEREST AND DEPRECIATION IN THE PRESENT YEAR IS 9.45% AS AGAINS T 8.95% IN THE PRECEDING YEAR I.E. ASSESSMENT YEAR 2005-06. THIS EXERCISE WE HAVE DONE ON THE BASIS OF DATA GIVEN IN THE TAX AUDIT REPORT ON PAGE 38 OF THE PAPER BOOK. THE WORKING HAS BEEN DONE FOR BOTH THE YEARS AS UNDER: I.T.A.NO.3219 /AHD/2011 4 2006-07 2005-06 TURNOVER 50184301 46270827 G.P. 10773883 9452710 G.P. PERCENTAGE 21.47 20.43 NP BEFORE INTT. & DEPN. 4742613 4139718 PERCENTAGE OF NP BEFORE INTT. & DEPN. 9.45 8.95 5. FROM THE ABOVE WORKING, WE FIND THAT IN THE PRES ENT YEAR ALSO, PERCENTAGE OF NET PROFIT BEFORE INTEREST AND DEPREC IATION IS BETTER AS COMPARED TO THE SAME IN THE PRECEDING YEAR AND, THE REFORE, IN OUR CONSIDERED OPINION, THE ENHANCEMENT IN SALES SHOULD BE RESTRICTED TO RS.10 LACS AS HAS BEEN DONE BY THE TRIBUNAL IN THE PRECEDING YEAR I.E. ASSESSMENT YEAR 2005-06. IT IS ALSO HELD THAT THE ADDITION TO BE MADE SHOULD BE RESTRICTED TO THE GP ON SUCH ADDITIONAL T URNOVER OF RS.10 LACS WHICH WILL BE OF RS.2.15 LACS BECAUSE THE GP RATE A S PER ABOVE WORKING IS 21.5%, WE HOLD ACCORDINGLY. THE ASSESSEE GETS PART RELIEF AND THIS GROUND IS ALLOWED IN PART. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO.3219 /AHD/2011 5 1. DATE OF DICTATION 13/6 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14/6. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 15/6 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.15/6 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 15/6/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .