METRO MERCANTILE P. LTD, MUMBAI V. ITO WD 4(20(1), MUMBAI

ITA 3327/MUM/2010

• Counselvise Citation: 332719914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 16-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V SASTRI PER R K
• Assessee Lawyers: M B SANGHVI

Judgement Text

1 ITA NO.3327/MUM/2010 METRO MERCANTILE PVT. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI H BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI N.V. VASUDEVAN, JM & SHRI R K PANDA, AM ITA NO. 3327/MUM/2010 (ASST YEAR 2006-07) M/S . METRO MERCANTILE PVT. LTD., 81, DADYSETH AGIARY LANE, BHULESHWAR, MUMBAI 400 002 PAN AAACM 3480B VS INCOME TAX OFFICER WARD 4(2)(1), AAYAKAR BHAWAN, M.K. MARG, MUMBAI -20. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI M.B. SANGHVI RESPONDENT BY SHRI V.V. SASTRI PER R K PANDA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 22.02.2010 OF THE CIT(A)- 8, MUMBAI RELATING TO AS SESSMENT YEAR 2006-07. 2. THE ASSESSEE IN ITS GROUNDS OF APPEAL HAS CHALLE NGED THE ORDER OF THE LD. CIT(A) CONFIRMING THE ACTION OF THE A.O. IN EST IMATING THE GROSS PROFIT RATE @ 5% AS AGAINST 3.41% DECLARED BY THE ASSESSEE. 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF TRADING IN PAPER AND PAPER BOARDS. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE ASS ESSEE HAS NOT MAINTAINED THE STOCK REGISTER. NO DELIVERY CHALLAN WAS PRODUCED FOR VERIFICATION TO VERIFY THAT THE GOODS SO PURCHASED WERE DELIVERED TO THE 2 ITA NO.3327/MUM/2010 METRO MERCANTILE PVT. LTD. ASSESSEES SHOP/GO-DOWN. SALES REGISTER AND PURCHAS E REGISTER DOES NOT SHOW THE QUANTITY OF GOODS. HE FURTHER NOTED THAT OTHER PURCHASE RECORDED ON 30.3.2006 FROM M/S SAPPI DEUTCHLAND (IMPORT) OF ` 7,00,641/- REACHED IN INDIA ON 4.4.2006 I.E. IN THE NEXT FINANCIAL YEA R. HOWEVER, THE DIRECTOR AND THE REPRESENTATIVE OF THE ASSESSEE COMPANY HAVE CONFIRMED THAT THE STOCK WAS TAKEN ON PHYSICAL VERIFICATION. THEREFORE , THE A.O. WAS OF THE OPINION THAT THE PURCHASE AMOUNTING TO ` 7,00,641/- HAS NOT BEEN INCLUDED IN THE CLOSING STOCK. THE A.O. CONFRONTED THE SAME TO THE ASSESSEE AND ASKED THE ASSESSEE TO EXPLAIN AS TO WHY BOOKS OF AC COUNT OF THE ASSESSEE SHOULD NOT BE REJECTED. REJECTING THE VARIOUS EXPLA NATIONS GIVEN BY THE ASSESSEE AND CONSIDERING THE FACT THAT THE GROSS PR OFIT DURING YEAR @ 3.41% WAS MUCH LESS THAN 5.97% DECLARED IN THE PRECEDING A.Y., THE A.O. HELD THAT THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS AR E DOUBTFUL. HE, ACCORDINGLY, REJECTED THE SAME AND COMPLETED THE AS SESSMENT BY APPLYING G.P. RATE OF 5%. IN APPEAL, THE LD. CIT(A) UPHELD T HE ACTION OF THE A.O. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US. 3. WE HAVE CONSIDERED THE RIVAL ARGUMENTS OF BOTH T HE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT TH AT THE ASSESSEE HAS NOT MAINTAINED ANY STOCK REGISTER AND THE CLOSING STOCK AT THE END OF THE YEAR 3 ITA NO.3327/MUM/2010 METRO MERCANTILE PVT. LTD. HAS BEEN VALUED BY THE MANAGEMENT ON PHYSICAL VERIF ICATION. WITHOUT MAINTAINING THE STOCK REGISTER, THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS CANNOT BE JUSTIFIED AND THE TRUE PROFIT OF THE CONCERN CANNOT BE DETERMINED. WE DO NOT FIND ANY FORCE IN THE SUBMIS SION OF THE LD. COUNSEL FOR THE ASSESSEE THAT NON-MAINTENANCE OF STOCK REGI STER AND NON-INCLUSION OF PURCHASE TO THE TUNE OF ` 7,00,641/- IN THE CLOSING STOCK WILL CALL FOR REJECTION OF BOOKS OF ACCOUNT. WE FURTHER FIND FROM THE ORDER OF THE LD. CIT(A) WHERE HE HAS NOTICED THAT THE G.P. RATIO FROM A.Y. 1999-2000 ONWARDS IS FLUCTUATING. IT WAS SHOWN AT 11.59% IN F.Y. 2001-0 2 , 8.36% IN 1999-2000 AND 6.48% IN 2003-04. WE FIND THE HONBLE SUPREME C OURT IN THE CASE OF S.N. NAMASIVAYAM CHETTIAR VS. CIT 38 ITR 579 HAS HE LD THAT NON- MAINTENANCE OF STOCK REGISTER CAN JUSTIFY REJECTION OF ACCOUNT. THEREFORE, THE ORDER OF THE LD. CIT(A) IN UPHOLDING THE ORDER OF A .O. REJECTING THE BOOKS OF ACCOUNT, IN OUR OPINION, IS JUSTIFIED. HOWEVER, CO NSIDERING THE TOTALITY OF THE FACTS, ADOPTION OF G.P. RATE AT 5%, IN OUR OPINION, APPEARS TO BE ON THE HIGHER SIDE. WE, THEREFORE, DIRECT THE AO TO RESTR ICT THE SAME TO 4% SINCE THE TURNOVER OF THE ASSESSEE HAD GONE UP TO ` 16.71 CRORES DURING THE IMPUGNED A.Y. AS AGAINST ` 7 CRORES IN THE PRECEDING A.Y. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSES SEE ARE, ACCORDINGLY, PARTLY ALLOWED. 4 ITA NO.3327/MUM/2010 METRO MERCANTILE PVT. LTD. 3. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 24.6.2011. SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER SD/- ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 24.6.2011 RK COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT(A) 8 MUMBAI 4 CIT - 4, MUMBAI 5 DR BENCH H 6 MASTER FILE /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI