Sh. Chasvinder Singh, Delhi V. ACIT, New Delhi

ITA 322/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0683 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASIMA NEB
• Assessee Lawyers: DINESH CHANDRA
• Keywords: Depreciation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI B BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA ACCOUNTANT MEMBER , AND SHRI N.K. CHOUDH A RY , JUDICIAL MEMBER ITA NO. 322 / DEL/201 6 [ASSESSMENT YEAR: 20 10 - 11 ] SHRI CHASVINDER SINGH VS. THE A.C.I.T 18, RAJASTHANI UDYOG N AGAR CIRCLE 19 (1) G.T. KARNAL ROAD, DELHI NEW DELHI PAN : AARPS 6458 D [APPELLANT] [RESPONDENT] DATE OF HEARING : 1 7 .0 9 .2018 DATE OF PRONOUNCEMENT : 1 7 .0 9 .2018 ASSESSEE BY : SHRI DINESH CHANDRA, ADV REVENUE BY : MS. ASIMA NEB , SR. DR ORDER PER N.K. BILLAIYA , ACCOUNTANT MEMBER, T HIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE CIT(A) - 1 2 , NEW DELHI DATED 03 . 1 1 .201 5 PERTAINING TO A.Y 20 10 - 11 . 2 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 22,17,692/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOW NET PROFIT RATIO. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTO PARTS UNDER THE NAME AND STYLE SWISS AUTO PRODUCTS . THE RETURN FOR THE YEAR UNDER CONSIDERATION WAS SELECTED FOR SCRUTINY ASSESSMENT AND, ACC ORDINGLY, STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE A.O OBSERVED THAT ON A TOTAL TURNOVER OF RS. 17.53 CRORES, THE ASSESSEE HAS SHOWN G.P OF RS. 1.66 CRORES , WHICH COMES TO 9.52%. THE ASSESSING OFFICER NOTICED THAT IN THE IMMEDIATELY PRECEDING YEAR, THE G.P. RATE WAS 10.23% ON A TOTAL TURNOVER OF RS. 19.32 CRORES. THE ASSESSING OFFICER FURTHER NOTICED THAT THE N.P. RATE FOR THE YEAR UNDER CONSIDERATION WAS SHOWN AT 0.67% AS COMPA RED TO 1.93% IN THE IMMEDIATELY PRECEDING YEAR. THE ASSESSEE WAS ASKED TO EXPLAIN THE REASONS FOR DECLINE IN THE TRADING RESULTS. 3 3. THE ASSESSEE FILED DETAILED REPLY EXPLAINING THAT DURING THE YEAR UNDER CONSIDERATION, DEPRECIATION AND FINANCIAL CHARGES WERE HIGHER THAN THE PREVIOUS YEAR , WHICH RESULTED IN DECLINE IN THE PROFIT RATIO. 4. THE ASSESSING OFFICER WAS NOT CONVINCED WITH THE CONTENTION OF THE ASSESSEE. THE ASSESSING OFFICER FURTHER FOUND THAT THE ASSESSEE HAS CLAIMED 35.69 LAKHS AS SALES PRO MOTION MATERIAL EXPENSES. THE ASSESSING OFFICER NOTICED THAT THE SALES PROMOTION EXPENSES CLAIMED BY THREE SISTER CONCERNS OF THE ASSESSEE WERE LESSER THAN THAT OF THE ASSESSEE. THE ASSESSING OFFICER WAS OF THE OPINION THAT SINCE ALL THREE SISTER CONCERN S ARE USING THE BRAND NAME SWISS, THEREFORE, SALES PROMOTION EXPENSES CLAIMED BY THE ASSESSEE HAS TO BE PARTLY BORNE BY THE SISTER CONCERNS. 5. ON THESE FACTS, THE ASSESSING OFFICER MADE AN ADDITION OF RS. 22,17,692/ - ON ACCOUNT OF LOW PROFIT AND ADDIT ION OF RS. 8,34,544/ - ON ACCOUNT OF SALES PROMOTION EXPENSES. 6. THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE LD. CIT(A) AND ONCE AGAIN EXPLAINED THE REASONS FOR FALL IN PROFIT RATIO. 4 7. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT SINCE THE ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF DECLINE IN PROFIT RATIO, THE ADDITION ON ACCOUNT OF EXCESS BUSINESS PROMOTION EXPENSES CANNOT BE MADE AND , ACCORDINGLY , DELETED THE ADDITION OF RS. 8,34,544/ - AND CONFIRMED THE ADDIT ION OF RS. 22,17,692/ - ON ACCOUNT OF FALL IN G.P. RATE. 8. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 9. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 10. THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. 11. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. PAGE 3 OF THE PAPER BOOK IS THE PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. WE FIND THAT THE DEPRECIATION CLAIMED DURING THE YEAR UNDE R CONSIDERATION IS RS. 34.13 5 LAKHS AS AGAINST THE SAME AT RS. 27.01 LAKHS IN THE IMMEDIATELY PRECEDING YEAR. WE FURTHER FIND THAT THE FINANCIAL CHARGES FOR THE YEAR UNDER CONSIDERATION IS AT RS. 10.73 LAKHS AS AGAINST 2.39 LAKHS CLAIMED IN THE IMMEDIATELY PRECEDING YEAR. WE FURTHER FIND THAT DECLINE IN THE G.P . RATE IS MARGINAL, WHICH IS 0.71% AND THE FALL IN N.P. RATE IS ONLY 1.26%. PAGES 37 AND 38 OF THE PAPER BOOK ARE QUANTITATIVE DETAILS OF THE PRINCIPAL ITEMS OF RAW MATERIAL AND FINISHED PRODUCTS DU RING THE YEAR UNDER CONSIDERATION WHICH SHOWS THAT THE TRADING ACCOUNT OF THE ASSESSEE IS FULLY QUANTIFIED. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS NOT FOUND ANY DEFECT IN THE BOOKS OF ACCOUNT. IN OUR CONSIDERED OPINION, W ITHOUT REJECTING THE BOOK S OF ACCOUNT, THE ASSESSING OFFICER SHOULD NOT HAVE REJECTED THE BOOK RESULTS . IN OUR CONSIDERED OPINION, DROP IN THE G.P. RATIO WAS SUPPORTED BY A PLAUSIBLE REASON AND TRADING RESULTS ARE FOUND TO BE QUANTIFIED AND NO DEFECT HAS BEEN FOUND IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFORE, THE ACCOUNTS OF THE ASSESSEE CANNOT BE SAID TO BE DEFECTIVE OR INCOMPLETE FOR SUSTAINING THE ADDITION. WE, ACCORDINGLY, SET ASIDE T HE FINDINGS OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFI CER TO DELETE THE IMPUGNED ADDITION. 6 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 322/DEL/2016 IS ALLOWED. THE ORDER IS PR ON O UNCED IN THE OPEN COURT ON 1 7 .0 9 .2018. SD/ - SD/ - [ N.K. CHOUDH A RY ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 7 T H SEPTEMBER , 2018 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI 7 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER