Unity Dyechem (P) Ltd., Anand V. The Deputy Commissioner of Income Tax, Circle-1(3), Baroda

ITA 3394/AHD/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4563 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-01-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 16-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: JAIMIN B SHAH
• Keywords: Gross profit estimation
• Section: 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I RAJPAL YADAV , VICE PRESIDENT AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER UNITY DYECHEM (P) LTD. GOLANA ROAD, AT - SOKHADA, TA: KAMBHAT, DISTT: ANAND PAN: AAACU5068R (APPELLANT) VS THE DY. CIT , CIRCLE - 1 ( 3) , BARODA (RESPONDENT) REVENUE BY : S H RI DILIP KUMAR , SR. D . R. ASSESSEE BY: SHRI JAIMIN B. SHAH , A.R. DATE OF HEARING : 27 - 0 1 - 2 020 DATE OF PRONOUNCEMENT : 21 - 02 - 2 020 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2012 - 13 , ARI SES FROM ORDER OF THE CIT(A) - 1, VADODARA DATED 21 - 10 - 2 016 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - I T A NO . 3394 / A HD/20 16 A SS ESSMENT YEAR 2012 - 13 I.T.A NO. 3394 /AHD/20 16 A.Y. 2012 - 13 PAGE NO UNITY DY ECHEM (P) LTD. VS. DY. CIT 2 1. THAT THE LEARNED CI T(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRM ING AN ADDITIONS OF RS.8,00,000/ - ON ACCOUNT OF VALUATION OF CLOSING STOCK TO THE BOOK RESULT SHOWN BY THE APPELLANT. 2. THE G.P. SHOWN BY THE APPELLANT IN THE SUCCEEDING YEAR @ 14.88 % HAVE BEEN ACCEPTED IN SCRUTINY ASSESSMENT AND THERE IS NO DISTINGUISHING FEATURES DURING THE YEAR UNDER CONSIDERATION THE ADDITIONS IN CLOSING STOCK OF RS. 8,00,000/ - REQUIRES TO BE DELETED. 3. THAT THE LEARNED CIT(A) HAS NOT APPRECIATED THE FACTS THAT PRICES OF RAW MATERIALS GAS, ICE ETC. HAVE INCREASED A TREMENDOUSLY AND SALES HAVE ALSO INCREASED, REDUCTION IN G.P. @ 4.62% IS FULLY JUSTIFIED WHEN G.P. @ 14.88% HAVE BEEN ACCEPTED IN 2013 - 14 IN SCRUTINY ASSESSMENT AND AS SUCH ADDITIONS IN CLOSING STOCK AMOUNTIN G TO RS. 8,00,000/ - REQUIRES TO BE DELETED. 4. THAT THERE IS NO SUPPRESSION OF STOCK OR INFLATION OF EXPENDITURE AND OPENING STOCK, PURCHASES AND SALES HAVE BEEN ACCEPTED AND THEREFORE THERE IS NO REASONING FOR MAKING AN ADDITIONS OF RS. 8,00,000/ - ON ESTI MATED BASIS WHICH REQUIRES TO BE DELETED. 5. ON PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT AND MATERIALS SUBMITTED DURING THE COURSE OF ASSESSMENT AND APPELLATE PROCEEDINGS, BE CONSIDERED IN PROPER PERSPECTIVE AND ADDITIONS OF RS. 8,00,0 00/ - REQUIRES TO BE DELETED. WITHOUT PREJUDICE : 6. IF THE HON'BLE TRIBUNAL MAY NOT DELETE THE ADDITIONS OF RS.8,00,000/ - MADE ON ESTIMATED BASIS TO SEAL ANY LEAKAGE OF REVENUE ON ACCOUNT OF VALUATION OF CLOSING STOCK IN THE ALTERNATIVE THE FINDING MAY PLE ASE BE GIVEN TO GRANT SETOFF AS OPENING STOCK IN THE SUBSEQUENT YEAR. 3. ALL THE GROUNDS OF APPEAL OF THE ASSESSEE ARE PERTAINED TO THE ISSUE OF ADDITION OF RS. 8 LACS ON ACCOUNT OF VALUATION OF CLOSING STOCK BECAUSE OF LOW GROSS PROFIT, THEREFORE, FOR THE SAKE OF CONVENIENCE ALL THESE GROUNDS OF APPEAL ARE ADJUDICATED TOGETHER BY THIS COMM ON ORD ER. 4. T HE ASSESSEE HAS FILED RETURN OF INCOME DECLARING INCOME AT RS. 17 , 69 , 350/ - ON 23 RD SEP, 2012. THE CASE WAS SUBJECT TO SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 8 TH AUGUST, 2013. DURING ASSES SMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS DECLARED GROSS PROFIT AT 24.25% AFTER DEBITING MANUFACTURING EXPENSES OF R S. 1 , 42 , 23 , 01 8 / - FOR A.Y. 2011 - 12 WHEREAS DURING THE YEAR UNDER CONSIDERATION T HE ASSESSEE HAS SHOWN GROSS PROFIT @ 3 0 .16% WITHOUT DEBITING EXPENSES PERTAINING TO MANUFACTURING CONSUMPTION. THEREFORE , THE ASSESSING OFFICER HAS RE - WORKED THE GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION AFTER DEBITING MANUFACTURING EXPENSES TO THE AM OUNT OF RS. 1 , 59 , 21 , 60 1 / - AND DETERMINED GROSS PROFIT AT I.T.A NO. 3394 /AHD/20 16 A.Y. 2012 - 13 PAGE NO UNITY DY ECHEM (P) LTD. VS. DY. CIT 3 19.63%. T HESE DETAILED WORKING ARE GIVEN BY THE ASSESSING OFFICER AT PAGE NO. 4 & 5 OF THE ASSESSMENT ORDER. IN VIEW FO R THE ABOVE , THE ASSESSING OFFICER OBSERVED THAT THERE WAS A SUBSTANTIAL F ALL IN GROSS PROFIT FROM 24.25% TO 19.63% IN THE YEAR UNDER CONSIDERATION AND I N MONETARY TERM, THE ASSESSING OFFICER HAS DETERMINED THE GROSS PROFIT FAL L TO THE AMOUNT OF R S. 68 , 80 ,4 89/ - . IN ADDITION TO THE ABOVE , THE ASSESSING OFFICER HAS ALSO NOTICED T HAT CLOSING STOCK OF SEMI FINISHED GOODS AS WELL AS FINISHED GOODS HAVE BEEN VALUED AT A LOWER RATE TH A N T HE OPENING STOCK AS REPORTED AT PAGE NO. 6 OF THE ASSESSMENT O RDER. THE ASSESSING OFFICER STATED THAT OPENING STOCK OF FINISHED GOODS HAS BEEN VALUE D AT R S. 928.87 WHILE CLOSING STOCK HAS BEEN VALUED AT R S. 347.21. T HE ASSESSING OFFICER HAS ALSO NOTICED THAT IN SOME ITEMS OF FINISHED STOCK AND SEMI - FINISHED STOCK THE ASSESSEE HAS APPLIED THE SAME RA T E FOR VALUATION OF INVENTORY AS REPO R TE D AT PAGE NO. 7 O F THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS ALSO NOTICED THAT SOME ITEM S OF FINISHED STOCK PERTAINI NG TO THE CURRENT YEAR HAVE BEEN VALUED AT THE SAME RATE AS THAT OF LAST YEA R AS REPORTED AT PAGE NO. 7 OF THE ASSESSMENT ORDER . T HE ASSESSING OFFICE R HAS ALSO NOTIC ED THAT SOME ITEM S OF RAW MATERIAL FORMING PART OF INVENTORY HAVE BEEN VALUED AT LASER RATE AS COMPARED TO THE PRECEDING YEARS . T HE ASSESSING OFFICER HAS STATED THAT THERE WERE 34 ITEMS IN THE FINISHED STOCK BUT THE ASSESSEE HAS FURNISHED COST OF 13 ITEMS ONLY AND NO INFORMATION IN RESPECT OF COST ING OF 23 ITEMS WERE FURNISHED. BROADLY CONSIDERING THE ABOVE STATED DISCREPANCIES , THE ASS ESSING OFFICER HAS ESTIMATED LEA KAGE OF REVENUE ON ACCOUNT OF VALUATION OF CLOSING STOCK TO THE AMOUNT OF RS. 8 LACS A FTER TAKING INTO CONSIDERATION IMP ACT OF RISE IN COST OF MATERIAL , CONSUMPTION ETC. AND ADDED THIS AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. I.T.A NO. 3394 /AHD/20 16 A.Y. 2012 - 13 PAGE NO UNITY DY ECHEM (P) LTD. VS. DY. CIT 4 5. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 8 LACS ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFO RE LD. CIT(A) , THE ASSESSEE HAS SUBMITTED THAT RAW MATERIAL PRICES HAVE INCREASED DURING THE YEAR COMPARED TO IMMEDIATELY PRECEDING YEAR. IT IS ALSO SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION SALES HAS BEEN INCREASED BY R S. 2 , 14 , 35 , 224 IN COMPARIS ON TO IMMEDIATELY PREC EDING YEAR AND THERE WAS A KEEN COMPETITIVE IN THIS LIN E OF B USI N ESS WHICH RESULTED IN REDUCTION OF GROSS PROFIT @ 4.62%. REGARDING SHOWING CERTAIN ITEMS OF MATERIAL AT THE SAME PRICE IN THE STOCK STATEMENT AS IN THE PRECEDING ASSESS MENT YEAR, THE ASSESSING OFFICER EXPLAINED THAT SAME WAS ON ACCOUNT OF OLD STOCK L YING IN THE INVENTORY TO WHICH OLD RATE WAS APPLIED. IT WAS ALSO SUBMITTED THAT NO INSTANCES OF SALE MADE OUTSIDE THE BOOKS OF ACCOUNT WAS DETECTED BY THE ASSESSING OFFICER. HOWEVER, IT IS OBSERVED THAT THE ASSESSEE HAS SUBMITTED DETAIL IN RESPECT O F 13 ITEMS OF FINISHED STOCK OUT OF TOTAL 34 ITEMS OF FINISHED STOCK. THE ASSESSEE HAS ALSO NOT FULLY EXPLAINED THE DEFICIENCY POINTED OUT IN VALUATION OF FINISHED STOCK/ SEMI - FIN ISHED STOCK OR RAW MATERIAL BY TH E ASSESSING OFFICER. THE ASSESSEE HAS ALSO FAILED TO RE - CONCILE THE VARIATION IN VALUATION OF RAW MATERIAL FORMING PART OF INVENTORY AT LOWER R ATE AS COMPARED TO EARLIER YEAR AND VARIATION IN VALUATION OF SEMI - FINISHED AN D FINISHED STOCK AT A LOWER RATE THAN THE EARLIER YEAR. CONSIDERING T HE ABOVE ANOMALIES , WE ARE OF THE VIEW THAT IT WILL APPR OPRIATE TO RESTRICT THE DISALLOWANCE TO THE AMOUNT OF RS. 4 LACS AS AGAINST ESTIMATION MADE BY THE I.T.A NO. 3394 /AHD/20 16 A.Y. 2012 - 13 PAGE NO UNITY DY ECHEM (P) LTD. VS. DY. CIT 5 ASSESSING OFFICER AT RS. 8 LACS . THEREFORE, THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 21 - 02 - 20 20 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SING H ) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD : DATED 21 /02 /2020 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,