The ITO, Ward-5(1), Ahmedabad V. M/s. Nilsin Ultrachem Ltd., Ahmedabad

ITA 3307/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57172 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-01-2012
• Assessment Year: 1993-1994
• Appeal Filed On: 11-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income

Judgement Text

ITA NO.3307, 3308,3309/AHD/2009 A.YRS. 1993 -94, 94-95 & 95-96. 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, A HMEDABAD (BEFORE SHRI MUKUL KUMAF SHRAWAT,JM & SHRI A.L. GE HLOT A.M.) I.T.A.NO. 3307 TO 3309 /AHD/2009 (ASSESSMENT YEARS: 1993-94, 1994-95 & 19 95-96 ) THE INCOME TAX OFFICER, WARD-5(1), AHMEDABAD. (APPELLANT) VS. NILSIN ULTRACHEM LTD., 25, G.I.D.C. ESTATE, VATVA, AHMEDABAD. (RESPONDENT) PAN: AABCN 1520C ON BEHALF OF THE REVENUE :SHRI SAMIR TEKRIWAL, SR . D. R. ON BEHALF OF THE ASSESSEE :SHRI ASEEM THAKKAR. ( )/ ORDER DATE OF HEARING : 12-1-2012 DATE OF PRONOUNCEMENT : 10-2-2012 PER: SHRI A. L. GEHLOT, ACCOUNTANT MEMBER. ALL THE THREE APPEALS ARE FILED BY THE REVENUE AGA INST THE THREE SEPARATE ORDERS OF LD. CIT (A)-XI, AHMEDABAD DATED 12-10-200 9, 13-10-09 AND 14-10-09 RESPECTIVELY FOR THE ASSESSMENT YEARS 1993-94, 1994 -95 AND 1995-96 RESPECTIVELY. 2. SOME GROUNDS RAISED IN THESE APPEALS BASED ON ID ENTICAL SET OF FACTS, THEREFORE FOR THE SAKE OF CONVENIENCE ALL THESE APP EALS ARE DECIDED BY THIS COMMON ORDER. 3. THE FIRST COMMON GROUND RAISED BY THE REVENUE IN ITS APPEAL IS IN RESPECT OF ADDITION ON ACCOUNT OF G.P. DETAILED AS UNDER:- ITA NO.3307, 3308,3309/AHD/2009 A.YRS. 1993 -94, 94-95 & 95-96. 2 ASSESSMENT YEAR. G.P.AMOUNT. 1993-94 6,46,826/- 1994-95 12,91,994/- 1995-96 6,35,020/- 4. THE CIT (A) DELETED THE ADDITION FOR ALL THE THR EE YEARS. THE DETAILED DISCUSSION MADE BY THE CIT (A) IN HIS ORDER FOR A.Y .1993-94 AND SAME WAS FOLLOWED IN OTHER YEARS, I.E. IN A.Y. 1994-95 AND 1 995-96. 5. SINCE FACTS ARE IDENTICAL, THEREFORE THE FACTS N OTED BY CIT (A) AND DISCUSSION MADE THEREON BY CIT (A) IN A.Y. 1993-94 HAVE BEEN C ONSIDERED BY US FOR DECIDING THESE APPEALS. 6. IN ASSESSMENT YEAR 1993-94 THE AO MADE THE ADDIT ION ADFTER REJECTING BOOKS OF ACCOUNT AS UNDER:- THE ASSESSEE HAS FURNISHED THE FOLLOWING TRADING A CCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS :- OPENING 33,43,456.75 PURCHASES & MFG. EXPS. 7,50,14,418.80 G.P. 21,12,165.93 1,29,66,042. 48 SALES 72,39,714.51 RAW MATERIALS 13,40,113.47 TOTAL 85,79,817.17 CLOSING STOCK 43,86,224.50 TOTAL 1,29,66,042.48 THE GROSS PROFIT AS SHOWN BY THE ASSESSEE COMPANY I S REJECTED ON THE GROUND THAT SALES HAVE BEEN SUPPRESSED AND IT IS DESIRED T O APPLY THE RATE OF 30% LIKE LAST YEAR. THE CORRECT SALES WOULD BE WORKED OUT AS UNDER:- ITA NO.3307, 3308,3309/AHD/2009 A.YRS. 1993 -94, 94-95 & 95-96. 3 OPENING STOCK 33,43,456.75 SALES E STIMATED 92,26,644.36 PURCHASES & MFG. EXPS. 75,01,418.80 CLOSING STOCK 43,86,224.50 G.P. 30% 27,67,993.31 1,36,12,868.86 1,36,12,868 .86 3343456.75 + 75014418.80 4386224 .50 X 100 100-30 OR 645865105 X 100 70 = 92,26,644.36 = CORRECT SALE. I, THEREFORE, APPLY A RATE OF 30% ON THE ESTIMATED SALES OF RS.92,26,644.36 1 WHICH MEANS AN ADDITION OF RS.6,46,826.28 (RS.27,67 ,993.31 -21,21,165.93) TO SALES AND GROSS PROFIT. THUS THE ASSESSING OFFICER ADOPTED G.P. @ 30% AND E STIMATED THE SALES ACCORDING TO THE FORMULA DEVISED BY HIM, THEREBY MAKING ADDIT ION OF RS.6,46,826/-. 7. THE RELEVANT FINDING OF CIT (A) IS AS UNDER:- 3.2. I HAVE CONSIDERED THE FINDINGS OF THE ASSESSI NG OFFICER, THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE AND THE ARGUMENTS ADVANCED BY THE ASSESSEE DURING THE COURSE OF HEARING. I AM UNABLE TO UPHOLD THE ACTION OF THE ASSESSING OFFICER FOR THE FOLLOWING REASONS:- I) NON-PRODUCTION OF DAY TO DAY STOCK REGISTER, CONSUM PTION REGISTER ETC., BY THE ASSESSEE AT THE TIME OF HEARING ON 13- 3-1996 DOES NOT MEAN THAT THE ASSESSEE IS NOT MAINTAINING REQUIRED RECORDS. IN THIS CONNECTION, IT MAY BE NOTED THAT THE APPELLANTS PR ODUCT (ULTRA-MARINE BLUE) IS EXCISABLE AND MAINTENANCE OF CERTAIN PRODUCTION AND ITA NO.3307, 3308,3309/AHD/2009 A.YRS. 1993 -94, 94-95 & 95-96. 4 QUANTITATIVE RECORDS IS MANDATORY. SECONDLY, APPELL ANTS BOOKS OF ACCOUNTS ARE DULY AUDITED U/S.44AB.UNLESS SPECIFIC DEFICIENCIES IN THE BOOKS OF ACCOUNTS HAVE BEEN POINTED OUT, REJECTION OF BOOKS OF ACCOUNT, WHICH ARE DULY AUDITED, CANNOT BE DONE. TH EREFORE, AO HAS NOT MADE OUT ANY CASE FOR REJECTION OF BOOK RESULTS . IT MAY ALSO BE STATED HERE THAT A.O. MADE THE ASSESSMENT U/S. 143( 3) AND NOT U/S.144. II) THE ASSESSING OFFICERS ESTIMATE OF G.P. AT 30% HAS NO BASIS. FURTHER, THE ASSESSING OFFICER DID NOT STOP WITH ESTIMATING THE G.P. AT A HIGHER RATE ON THE SALES ADMITTED BY THE ASSESSEE, BUT WEN T ON TO ESTIMATE THE SALES ON THE BASIS OF HIS OWN MATHEMATICAL FORMULA. III) I FIND FORCE IN THE ARGUMENTS OF THE APPELLANT THAT THE SALES OF RAW MATERIALS OF RS. 14,63,803/- WERE EFFECTED TO THE S ISTER CONCERNS AT COST PRICE PLUS SOME HANDLING CHARGES SUCH AS LOADI NG ETC., THEREBY EARNING NO PROFIT AND THAT IF THE SALES OF SUCH RAW MATERIALS BE DEDUCTED FROM THE TOTAL SALES, THE G.P. ON MANUFACT URED GOODS WORKS OUT TO 29.8%. THE DETAILS FURNISHED BY THE APPELLAN T ARE AS UNDER:- ASSESSMENT YEAR 1991-92 1992-93 199 3-94 TOTAL SALES AS PER ASSESSEES BOOKS (INCLUSIVE OF CCS) 89,99,000 1,03,70,000 85,80,000 NET SALES )EXCLUDING CCS) 87,51,000 1,03,70,000 85,80,000 SALES OF RAW MATERIALS & CHEMICALS 0 3,21,000 14,64,000 SALE OF MANUFACTURED ULTRAMARINE BLUE. 87,51,000 1,00,49,000 71,16,000 GROS PROFIT AS PER BOOKS 21,50,000 28,17,000 21,21,000 G.P.AS % OF THE TOTAL SALES (AS PER ASSESSEE) 26.65% 28.03% 29.81% TOTAL SALES ESTIMATED BY AO 87,51,000 1,00,49,000 92,27,000 GROSS PROFIT AS ASSESSED BY AO. 26,25,000 30,14,000 27,68,000 G.P. AS % OF THE TOTAL SALES (AS ESTIMATED BY A.O.) 30.00% 30.00% 30.00% FINAL G.P. AS APPROVED BY ITAT. 26.65% APPEAL PENDING ITA NO.3307, 3308,3309/AHD/2009 A.YRS. 1993 -94, 94-95 & 95-96. 5 IV) THE HONBLE ITAT VIDE ORDER DATED 13-4-1999 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1991-92 UPHELD THE G.P. RET URNED BY THE ASSESSEE AT 26.65% AND DELETED THE ADDITION MADE BY THE AO., HOLDING THAT THERE WAS NO REASON TO ESTIMATE THE SAME AT 30 % . I MAY MENTION HERE THAT THE ESTIMATION OF G.P. AT 30% STARTED IN A.Y. 1991-92 AND WAS FOLLOWED YEAR AFTER YEAR. IT IS ALSO OBSERVED T HAT DURING THE A.Y. 1991-92, THERE WERE NO SALES OF RAW MATERIALS AND T HEREFORE, THE G.P. AT 26.65% WAS ON SALE OF FINISHED PRODUCT ONLY. ACCORDINGLY, I HOLD THAT THERE IS NO JUSTIFIABLE RE ASON FOR REJECTING THE RESULTS SHOWN BY THE APPELLANT AS PER THE BOOKS OF ACCOUNT. THE ADDITION OF RS.6,46,826/- IS DELETED AND THE APPELL ANTS GROUND OF APPEAL STANDS ALLOWED. 8. BEFORE DELETING THE ADDITIONS THE CIT (A) APPREC IATED COMPARATIVE POSITION OF G.P. AS UNDER:- ASSESSMENT YEAR 1991-92 1992-93 1993-94 1994-95 1995-96 TOTAL SALES AS PER ASESSEES BOOKS (INCLUSIVE OF CCS) 89,99,000 1,03,70,000 85,80,000 1,06,86,000 1,39, 65,000 NET SALES (EXCLUDING CCS 87,51,000 1,03,70,000 85,80,000 1,06,86,000 1,39,65 ,000 SALES OF RAW MATERIALS & CHEMICALS 0 3,21,000 14,64,000 20,58,000 30,36,000 SALE OF MANUFACTURED ULTRAMARINE BLUE 87,51,000 1,00,49,000 71,16,000 86,28,000 1,09, 29,000 GROSS PROFIT AS PER BOOKS) 21,50,000 28,17,000 21,21,000 23,01,000 35 ,54,000 G.P. AS % OF THE TOTAL SALES (AS PER ASSESSEE) 26.65% 28.03% 29,81% 26.67% 32.52% TOTAL SALES ESTIMATED BY A.O. 87,51,000 1,00,49,000 92,27,000 1,19,78,000 1,39,29 ,000 GROSS PROFIT AS ASSESSED BY A.O. 26,25,000 30,14,000 27,68,000 35,93,000 41, 89,000 G.P. AS % OF THE TOTAL SALES (AS 30.00% 30.00% 30.00% 30.00% 30.0 0% ITA NO.3307, 3308,3309/AHD/2009 A.YRS. 1993 -94, 94-95 & 95-96. 6 ESTIMATED BY AO FINAL G.P. AS APPROVED BY ITAT 26.65% APPEAL PENDING 9. WE HAVE HEARD THE LD. REPRESENTATIVE OF THE PART IES AND RECORDS PERUSED. WE NOTICED THAT THE CIT (A) APPRECIATED THE FACTS A ND FOUND THAT BOOKS OF ACCOUNT OF THE ASSESSEE ARE SUBJECT TO VERIFICATION BY EXCI SE DEPARTMENT. BOOKS OF ACCOUNT ARE SUBJECT TO AUDIT UNDER SECTION 44AB OF THE ACT. THE AO UNABLE TO POINT OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE RATE OF 30% APPLIED BY AO FOR ESTIMATION OF PROFIT HAS NO B ASIS. THE CIT (A) FOLLOWED THE ORDER OF ITAT OF A.Y. 1991-92 WHEREIN G.P. AT THE R ATE OF 26.55% WAS ACCEPTED HOLDING THAT THERE IS NO BASIS FOR ESTIMATION OF G. P. BY APPLYING 30% OF RATE. FACTS OF THE CASE UNDER CONSIDERATION IN ALL THE THREE YE ARS ARE IDENTICAL TO THE FACTS OF THE CASE FOR A.Y. 1991-92 WHEREIN THE ITAT HAS ALREADY DECIDED THE ISSUE. IN THE LIGHT OF FACTS AND ABOVE DISCUSSION WE DID NOT FIND NY IN FIRMITY IN THE ORDERS OF CIT (A). THE ORDERS OF CIT (A) FOR ALL HE THREE YEARS ARE CO NFIRMED ON THE ISSUE. 10. THE SECOND COMMON GROUND RAISED IN ALL THE THRE E YEARS PERTAINS TO DISALLOWANCE OF COMMISSION EXPENDITURE U/S.40A (2)( B) OF THE ACT. THE DETAILS OF AMOUNT ARE AS UNDER:- A.Y. 1993-94 RS. 86,417 A.Y. 1994-95 RS. 41,69 0 A.Y. 1995-96 RS. 33, 786 11. DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTI CED THAT THE ASSESSEE PAID FINANCIAL CHARGES/COMMISSION AT THE RATE OF 16% TO ITS SISTER CONCERNS COVERED BY SECTION 40A(2)(B) OF THE ACT WHEREAS SUCH PAYMENTS TO OTHER PARTIES WERE MADE @ 5%. THE A.O. DISALLOWED EXCESS PAYMENT OF 11%. ITA NO.3307, 3308,3309/AHD/2009 A.YRS. 1993 -94, 94-95 & 95-96. 7 12. THE CIT (A) IN PRINCIPLE ACCEPTED THE A. OS FI NDINGS. HOWEVER, THE CIT (A) FOUND THAT 9% WAS REASONABLE AND UPHELD DISALLO WANCE IN EXCESS OF 9%. THE REPRESENTATIVE OF THE PARTIES SUBMITTED THAT THE AS SESSEE DID NOT CHALLENGE THE ORDER OF CIT (A) ON THE ISSUE. 13. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PA RTIES AND RECORDS PERUSED. WE NOTICED THAT THE CIT (A) AFTER APPRECIATING FACT S AND AFTER CONSIDERING ASSESSEES SUBMISSION THE PAYMENT WAS MADE TO FIND DOMESTIC BUYERS WITH A VIEW TO SUSTAIN BUSINESS BECAUSE IN A.Y. 1993-94 THE EXP ORT SALE CAME TO NIL. THE ASSESSEE HIMSELF HAS REDUCED THIS PAYMENT FROM 16% TO 12.5% IN SUBSEQUENT YEARS. THE FINDING OF CIT (A) IS BASED ON FACTS ON RECORD. CONTRARY TO THE FINDING OF CIT (A), NEITHER MATERIAL IS ON RECORD NOR HAS P OINTED OUT AT THE TIME OF HEARING BEFORE US. IN ABSENCE OF SUCH MATERIAL FACT A DIFFE RENT ESTIMATION CAN NOT BE MADE AT THIS STAGE, WE THEREFORE, CONFIRMED THE ORDER OF CIT (A) ON THE ISSUE. 14. OTHER GROUNDS RAISED EITHER SUPPORTING GROUNDS OR GENERAL IN NATURE REQUIRES NO FINDING. 15. IN THE RESULT APPEALS OF THE REVENUE FOR ALL TH E THREE YEARS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 10 - 2 - 2012. SD/- SD/- (MUKUL KUMAR SHRAWAT) ( A. L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA NO.3307, 3308,3309/AHD/2009 A.YRS. 1993 -94, 94-95 & 95-96. 8 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XI, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 6 - 2 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 7 / 2 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 8 - 2 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 10 - 2 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 10 - 2 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13 - 2 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..