M/s. Balaji Entertainment, Pune V. ITO, Ward 5(4), Pune

ITA 324/PUN/2013

• Counselvise Citation: 32424514 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: S N DOSHI
• Keywords: Gross profit estimation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.324/PN/2013 (ASSESSMENT YEAR : 2008-09) M/S BALAJI ENTERTAINMENT, 206, SILVER PRESTIGE, 1024, SHUKRAWAR PETH, PUNE 411 002. PAN : AAFFB9765Q . APPELLANT VS. INCOME TAX OFFICER, WARD 5(4), PUNE. . RESPONDENT ASSESSEE BY : MR. S. N. DOSHI DEPARTMENT BY : MR. S. P. WALIMBE DATE OF HEARING : 10-03-2014 DATE OF PRONOUNCEMENT : 20-03-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED A GAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 15.09.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 06.12.2010 PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. IN THIS APPEAL, ALTHOUGH THE ASSESSEE HAS RAISED THREE GROUNDS OF APPEAL BUT THE SOLITARY GRIEVANCE PURSUED IN THE CO URSE OF HEARING RELATED TO THE GROUNDS OF APPEAL NOS.1 AND 2 WHICH INVOLVE A C OMMON ISSUE. GROUNDS OF APPEAL NOS.1 AND 2 RELATES TO AN ADDITION OF RS. 6,63,412/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOW GROSS PROFIT RA TE FOR THE YEAR UNDER CONSIDERATION AS COMPARED TO THE IMMEDIATELY PRECED ING ASSESSMENT YEAR. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF ORGANIZING AND UNDERT AKING EXHIBITIONS, TRADE FAIRS, ETC. AND RENDERS CONSULTANCY SERVICES IN RES PECT OF EVENT MANAGEMENTS, ITA NO.324/PN/2013 A.Y. 2008-09 ETC. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.10,39,620/- WHI CH WAS SUBJECT TO SCRUTINY ASSESSMENT. THE ASSESSING OFFICER NOTED THAT DURIN G THE YEAR UNDER CONSIDERATION, THE TURNOVER OF THE ASSESSEE WAS RS. 1,15,41,563/- AS AGAINST THE TURNOVER IN THE PRECEDING YEAR OF RS.40,05,765/ -. IT WAS ALSO NOTICED THAT THE GROSS PROFIT SHOWN BY THE ASSESSEE IN THE IMMED IATELY PRECEDING ASSESSMENT YEAR WAS 29.22% ON A TURNOVER OF RS.40,0 5,765/- WHEREAS DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAD SHOWN GRO SS PROFIT @ 18.25% ON A TURNOVER OF RS.1,15,41,563/-. THE ASSESSING OFFICE R REQUIRED THE ASSESSEE TO EXPLAIN THE FALL IN THE GROSS PROFIT RATE AND IN RE SPONSE ASSESSEE POINTED OUT THAT THERE WAS HEAVY COMPETITION IN THE MARKET AND ACCORDINGLY ASSESSEE WAS REQUIRED TO REVISE HIS PRICES. SECONDLY, ASSESSEE POINTED OUT THAT THERE WAS INCREASE IN THE COST OF SKILLED LABOUR AND ACCORDIN GLY ASSESSEE WAS REQUIRED TO SUB-CONTRACT THE LABOUR AT HIGHER PRICES. THE EXPL ANATION FURNISHED BY THE ASSESSEE WAS NOT FOUND ACCEPTABLE AND ACCORDINGLY T HE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT RATE FOR THE YEAR AT 24% AS AGAINST 18.25% DECLARED BY THE ASSESSEE. THIS RESULTED IN AN ADDITION OF R S.6,63,412/- TO ASSESSEES TOTAL INCOME WHICH HAS SINCE BEEN AFFIRMED BY THE C IT(A). 4. BEFORE US, THE ONLY PLEA OF THE ASSESSEE IS THAT THE ENTIRE ADDITION IS UNTENABLE BECAUSE ASSESSEE HAS DECLARED THE PROFITS ON THE BASIS OF ACCOUNT BOOKS WHICH ARE AUDITED AND NO DEFECTS IN THE SAME HAVE BEEN POINTED OUT. IT IS ALSO POINTED OUT THAT DURING THE YEAR UNDER CONS IDERATION THE TURNOVER OF THE ASSESSEE HAD INCREASED ALMOST 188% IN COMPARISON TO THE EARLIER YEAR AND ALSO THAT ASSESSEE WAS REQUIRED TO MAKE PAYMENTS TO LABOUR SUB-CONTRACTOR WHICH WAS QUITE HIGH DUE TO THE BUSINESS EXIGENCIES . THE LEARNED COUNSEL POINTED OUT THAT IN THE ABSENCE OF ANY DEFECTS OR I NFIRMITIES FOUND IN THE BOOKS OF ACCOUNT MAINTAINED, THE IMPUGNED ADDITION WAS UN SUSTAINABLE. ITA NO.324/PN/2013 A.Y. 2008-09 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW IN SUPPORT OF THE CASE OF THE REVENUE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IT IS QUITE EVIDENT FROM A PERUSAL OF THE ASSESSMENT ORDER THAT THE ASS ESSING OFFICER HAS NOT REFERRED TO ANY PARTICULAR INCORRECTNESS OR INCOMPL ETENESS OF THE ACCOUNTS MAINTAINED BY THE ASSESSEE SO AS TO REJECT THE BOOK RESULTS. PERTINENTLY, THE ASSESSEE IS MAINTAINING REGULAR BOOKS OF ACCOUNT WH ICH ARE SUBJECT TO AUDIT IN TERMS OF SECTION 44AB OF THE ACT AND THE RETURN OF INCOME FILED WAS ACCOMPANIED BY SUCH AUDIT REPORT. SECTION 145(3) O F THE ACT EMPOWERS THE ASSESSING OFFICER TO MAKE A BEST JUDGEMENT, INTER-A LIA, IN A SITUATION WHERE HE IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETEN ESS OF THE ACCOUNTS OF THE ASSESSEE OR WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) THEREOF IS NOT REGULARLY FOLLOWED BY THE ASSESSEE. HAVING REGARD TO THE DISCUSSION MADE IN THE ASSESSMENT YEAR, WE ARE SATI SFIED THAT THE INGREDIENTS OF SECTION 145(3) OF THE ACT HAVE NOT BEEN FULFILLE D SO AS TO EMPOWER THE ASSESSING OFFICER TO DISREGARD THE BOOK RESULTS. N OTABLY, THE ONLY DEFECT SOUGHT TO BE POINTED OUT IS LOW GROSS PROFIT RATE F OR THE YEAR UNDER CONSIDERATION IN COMPARISON TO THAT OF THE IMMEDIAT ELY PRECEDING ASSESSMENT YEAR. A FALL IN GROSS PROFIT RATE BY ITSELF CANNOT BE A GROUND TO MAKE AN ADDITION THOUGH IT COULD NOT BE A REASON FOR THE AS SESSING OFFICER TO MAKE FURTHER INVESTIGATIONS. IN THE PRESENT CASE, ASSES SEE HAS ALSO EXPLAINED THE REASONS FOR THE FALL IN THE GROSS PROFIT RATE WHICH HAS NOT BEEN FOUND TO BE WRONG OR IRRELEVANT. CONSIDERING THE ENTIRETY OF T HE CIRCUMSTANCES AND FACTS OF THE CASE, WE ARE INCLINED TO SET-ASIDE THE IMPUGNED ADDITION ON THE GROUND THAT THE ESSENTIAL REQUIREMENTS OF SECTION 145(3) O F THE ACT HAVE NOT BEEN SPECIFIED BY THE ASSESSING OFFICER AND THUS THE ADD ITION IS UNTENABLE. ACCORDINGLY, THE ORDER OF THE CIT(A) IS SET-ASIDE A ND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE SAID ADDITION. ITA NO.324/PN/2013 A.Y. 2008-09 7. IN SO FAR AS THE GROUND OF APPEAL NO.3 IS CONCER NED, IT IS IN RELATION TO DISALLOWANCE MADE BY THE ASSESSING OFFICER IN TERMS OF SECTION 40(A)(IA) OF THE ACT, WHICH HAS NOT BEEN PRESSED AT THE TIME OF HEAR ING AND IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G . S. PANNU) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE, DATED : 20 TH MARCH, 2014 SUJEET/GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-III, PUNE; 4) THE CIT-III, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE