The ACIT,Ahmedabad Circle-1, Ahmedabad V. Ashima Ispat Pvt.Limited, Ahmedabad

ITA 3434/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73082 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-03-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 27-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: P M MEHTA
• Section: 40A(3); 2

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT , JUDICIAL MEMBER ./ I T A NO S . 3434 TO 3438 / AHD/20 1 0 / ASSESSMENT YEAR S : 20 0 1 - 0 2 TO 2003 - 04, 2006 - 07 AND 2007 - 08 THE ACIT, CIRCLE - I, AHMEDABAD VS. M/S. ASHIMA ISPAT PVT. LTD. 304, 4 TH FLOOR, AKASHRATH, B/H. PARISEEMA, ELLIS BRIDG E, AHMEDABAD PAN : AABCA 3150 D / APPELLANT / RESPONDENT REVENUE BY : SH. K.C. MATHEWS, SR. DR. ASSESSEE(S) BY : SH. S. N. SOPARKAR & SH. P.M. MEHTA, AR / DATE OF HEARING : 11 / 0 3 /201 4 / DATE OF PRONOUNCEMENT : 14 / 0 3 /201 4 / O R D E R PER SHRI N.S. SAINI , ACCOUNTANT MEMBER: THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - VI, AHMEDABAD FOR THE ASSESSMENT YEARS 2001 - 02, 200 2 - 03, 2003 - 04, ALL DATED 22.10.2010, AND FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08, BOTH DATED 26.10.2010. 2. THE SOLE ISSUE INVOLVED IN ALL THE APPEALS IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE INCOME - TAX ACT OF RS.9,84,625/ - IN THE ASSESSMENT YEAR 2001 - 02, RS.11,36,160/ - IN THE ASSESSMENT YEAR 2002 - 03, RS. 13,70,258/ - IN THE ITA NOS. 3434 TO 3438/AHD/2010 M/S. ASHIMA ISPAT PVT. LTD FOR A.Y. 2001 - 02 TO 2003 - 04, 2006 - 07 & 2007 - 08 - 2 - ASSESSMENT YEAR 2003 - 04, RS.33,09,727/ - IN THE ASSESSMENT YEAR 2006 - 07 AND RS.3,24,70,894/ - IN THE ASSESSMENT YEAR 2007 - 0 8. 3. AT THE TIME OF HEARING, LD. DR SUBMITTED THAT AS THE FACTS AND ISSUES INVOLVED IN ALL THE APPEALS ARE SIMILAR, HE WILL BE ARGUING THE APPEAL FOR THE ASSESSMENT YEAR 2001 - 02 AND THE ARGUMENTS MADE IN THE ASSESSMENT YEAR 2001 - 02 SHALL BE TREATED AS T HE ARGUMENTS OF THE REVENUE IN THE OTHER YEARS OF THE APPEALS ALSO. 4 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDER OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE AO DISALLOWED RS. 9,84,625/ - IN AY 2001 - 02, RS.11,36,160/ - IN AY 2002 - 03, RS.13,70,258/ - IN AY 2003 - 04, RS.33,09,727/ - IN AY 2006 - 07 AND RS. 3,24,70,894/ - IN AY 2007 - 08 BY INVOKING THE PROVISIONS OF SECTION 40A(3). 5 . THE LD. DR BEFORE US DISPUTED THE DELETING OF THE ABOVE ADDITIONS MADE BY T HE LD. CIT(A) AND SUPPORTED THE ORDER OF AO. 6 . WE FIND THAT THE AO AT PARA 5 .5 OF THE ASSESSMENT ORDER OBSERVED AS UNDER: - 5.5 FROM THE FOREGOING AND FROM THE VERIFICATION OF THE DETAILS COLLECTED DURING THE COURSE OF SURVEY, AND STATEMENT RECORDED, I T IS VERY CLEAR THAT THE ASSESSEE HAS NOT PROPERLY MAINTAINING ITS LEDGER ACCOUNT, CASH BOOK ETC. IN VIEW OF THE ABOVE, THE CORRECTNESS OF THE BOOKS OF ACCOUNT MAINTAINED CANNOT BE RELIED UPON. THEREFORE, I AM OF THE OPINION THAT THIS IS A FIT CASE FOR REJ ECTING THE BOOKS OF ACCOUNT BY APPLYING SECTION 145(3) OF THE I.T. ACT, 1961. ACCORDINGLY, BOOK OF ACCOUNTS OF THE ASSESSEE IS REJECTED. 7 . WE THUS FIND THAT IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT THE BOOK RESULT OF THE ASSESSEE WAS REJECTED BY TH E AO AND THEREAFTER THE AO ESTIMATED INCOME OF THE ASSESSEE. ITA NOS. 3434 TO 3438/AHD/2010 M/S. ASHIMA ISPAT PVT. LTD FOR A.Y. 2001 - 02 TO 2003 - 04, 2006 - 07 & 2007 - 08 - 3 - 8 . THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSIONER OF INCO ME - TAX V. BANWARI LAL BANSHIDHA R , (1998) 229 ITR 229 (ALL), HAS HELD AS UNDER: - FOR THE ASSESSMENT YEAR 1971 - 72, THE ASS ESSEE - FIRM WHICH DERIVED INCOME FROM SALE OF AYURVEDIC MEDICINES DISCLOSED A GROSS PROFIT RATE OF 11 PER CENT. IN RESPECT OF SALES, BOTH AT THE HEAD OFFICE AND IN THE BRANCH OFFICE, AT RS. 1,01,020 AND RS. 90,547 RESPECTIVELY, AS AGAINST A GROSS PROFIT RAT E OF 13 PER CENT. SHOWN IN THE PRECEDING YEAR. THE ASSESSING OFFICER REJECTED THE BOOK VERSION OF THE ASSESSEE AND APPLIED THE GROSS PROFIT RATE OF 15 PER CENT. AND MADE AN ADDITION TO THE EXTENT OF RS. 8,834 REPRESENTING ADDITIONAL PROFIT. THE ASSESSING O FFICER ALSO FOUND THAT THE ASSESSEE MADE CASH PAYMENTS EXCEEDING RS. 2,500 TO ITS SUPPLIERS IN THE HEAD OFFICE AND IN THE BRANCH OFFICE TO THE EXTENT OF RS. 54,588 AND RS. 37,340, RESPECTIVELY, AND AS THE PAYMENTS WERE NOT MADE BY CROSSED BANK DRAFT/CROSSE D CHEQUES, THEY WERE DISALLOWED BY THE ASSESSING OFFICER IN VIEW OF SECTION 40A(3) OF THE INCOME - TAX ACT, 1961. THE ASSESSING OFFICER ALSO REJECTED THE ALTERNATIVE PLEA OF THE ASSESSEE THAT THE PAYMENTS IN CASH HAD BEEN MADE TO GENUINE PARTIES IN EXCEPTION AL CIRCUMSTANCES. ON APPEAL TO THE APPELLATE ASSISTANT COMMISSIONER, THE ASSESSEE CONTENDED THAT SECTION 40A(3) WAS APPLICABLE ONLY TO EXPENDITURE AND NOT TO THE PRICE PAID FOR THE PURCHASES AND THAT THE CASE OF THE ASSESSEE WAS GOVERNED BY THE EXCEPTIONAL CIRCUMSTANCES AS STATED UNDER RULE 6DD(J) OF THE INCOME - TAX RULES, 1962. THE APPELLATE ASSISTANT COMMISSIONER HELD THAT THE PAYMENT FOR PURCHASES FELL WITHIN THE SCOPE OF SECTION 40A(3) AND THAT THE INGREDIENTS OF SECTION 40A(3) HAVING NOT BEEN COMPLIED W ITH, THE PAYMENTS FOR PURCHASES WERE RIGHTLY DISALLOWED UNDER SECTION 40A(3). ON FURTHER APPEAL, THE TRIBUNAL HELD THAT WHEN THE INCOME OF THE ASSESSEE WAS COMPUTED BY APPLYING THE GROSS PROFIT RATE AND WHEN NO DEDUCTION WAS ALLOWED IN REGARD TO THE PURCHA SES MADE BY THE ASSESSEE, THERE WAS NO NEED TO LOOK INTO THE PROVISIONS OF SECTION 40A(3) AND RULE 6DD(J). ON A REFERENCE: _ HELD, _ AFFIRMING THE DECISION OF THE TRIBUNAL, THAT NO DISALLOWANCE COULD BE MADE IN VIEW OF THE PROVISIONS OF SECTION 40A(3) READ W ITH RULE 6DD(J) OF THE INCOME - TAX RULES, 1962, AS NO DEDUCTION WAS ALLOWED TO AND CLAIMED BY THE ASSESSEE. WHEN THE GROSS PROFIT RATE WAS APPLIED, THAT WOULD TAKE CARE OF EVERYTHING AND THERE WAS NO NEED FOR THE ASSESSING OFFICER TO MAKE SCRUTINY OF THE AM OUNT INCURRED ON THE PURCHASES MADE BY THE ASSESSEE. ITA NOS. 3434 TO 3438/AHD/2010 M/S. ASHIMA ISPAT PVT. LTD FOR A.Y. 2001 - 02 TO 2003 - 04, 2006 - 07 & 2007 - 08 - 4 - 9 . IN VIEW OF THE ABOVE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). IT IS CONFIRMED AND THE GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 1 0 . IN THE RESULT, THE APP EAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, T HE 14 TH OF MARCH , 2014 AT AHMEDABAD. SD/ - SD/ - SD/ - SD/ - ( KUL BHARAT ) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 14 / 0 3 /20 1 4 BT* TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / T HE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD