ITO 25(3)(3), MUMBAI V. PRIYESH S. NANAVATI, MUMBAI

ITA 3544/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83483 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KESAV B BHUJLE
• Keywords: Tangible material

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ./I.T.A. NO.3544/M/2013 ( AY: 2009 - 2010 ) INCOME TAX OFFICER 25(3)(3), R.NO.304, 3 RD FLOOR, BLDG NO C - 11, PRATYAKSHAKAR BHAVAN, BANDTRA KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051. / VS. PRIYESH S NANAVATI, RASIK KUNJ, M.G. ROAD, KANDIVALI (W), MUMBAI 400 067. ./ PAN : AAAPN6699Q ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI MOHIT JAIN / RESPONDENT BY : KESAV B BHUJLE / DATE OF HEARING :12.8.2014 / DATE OF PRONOUNCEMENT :12.8.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 6.5.2013 IS AGAINST THE ORDER OF THE CIT (A) - 35, MUMBAI DATED 4.2.2013 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING EFFECTIVE GROUND WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION OF RS. 20,54,871 / - MADE BY THE ASSESSING OFFICER BY ESTIMATING NET PROFIT @ 3% OF SALES ON THE BASIS OF GROSS PROFIT SHOWN IN THE LAST 3 YEARS ALTHOUGH NONE OF THE ASSESSMENT WAS COMPLETED UNDER SCRUTINY AND NO COMPARABLE CASE OF SIMILAR NATURE HAS B EEN CITED. 3. AT THE OUTSET, LD DR FOR THE REVENUE BROUGHT OUR ATTENTION TO THE ABOVE MENTIONED GROUND AND IN THIS REGARD HE RELIED ON THE ORDER OF THE AO. 4. BEFORE US, SHRI KESHAV B BHUJLE, LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE ASSESSEE IS ENGAGED IN THE BUSINES S OF TRADING IN CHEMICALS AND SOLVENTS AND FILED THE RETURN OF INCOME REPORTING THE NET PROFIT @ 0.96%. ASSESSMENT WAS COMPLETED BY ESTIMATING 3% OF THE SALES AS NET PROFIT. THUS, THE ADDITION ON ACCOUNT OF BUSINESS IS RS. 20,54,871/ - WAS MADE BY THE AO. MATTER TRAVELLED TO THE FIRST APPELLATE AUTHORITY. 5. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY, ASSESSEE CONTENDED THE ARBITRARY MANNER OF COMPLETION OF ASSESSMENT BY ADOPTING AD - HOC ESTIMATION OF 3% OF SALES AS A NET PROFIT. IT WAS DE MONSTRATED THAT AO CANNOT MAKE SUCH ASSESSMENT WITHOUT HAVING ANY TANGIBLE MATERIAL OR ANY COMPARABLE FIGURES OF NET PROFIT FROM THE OPEN MARKET. IT WAS ALSO DEMONSTRATED THAT THE NET PROFIT OF 0.96% FOR THE CURRENT YEAR IS MUCH HIGHER THAN THE AVERAGE RA TIO OF 0.83% FOR THE ASSESSMENT YEARS 2005 - 06; 2006 - 07 AND 2007 - 08. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) DELETED THE ADDITION AS PER THE DISCUSSION GIVEN IN PARA 6.4 OF THE IMPUGNED ORDER. AGGRIEVED WITH THE DECISION OF THE CIT (A), REVENUE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUND. 6. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED ON THE ORDER OF THE AO. 7. ON THE OTHER HAND, LD COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE ORDER OF THE CIT (A) IN GENERAL AND PARA 6.4 IN PARTICULAR, WE FIND THE SAME IS RELEVANT IN THIS REGARD WHICH READS AS UNDER: 6.4. AS REGARDS ESTIMATION OF NET PROFIT AT 3% OF SALE AND ADDITION OF RS. 20,54,871/ - UNDER THE HEADING INCOME FROM BUSINESS IT IS SEEN THAT THE AO HAS MERELY STATED IN THE ORDER THAT THE NET PROFIT OF RS. 9,79,313/ - WAS AN UNREASONABLE AMOUNT. THE AO HAS NOT BROUGHT ANY MATERIAL OR ANY COMPARABLE FIGURE OF NET PROFITS IN SIMILAR ACTIVITY CARRIED OUT BY OTHER BUSINESS CONCERN. ON THE OTHER HAND, THE APPELLANT HAS FIL ED A CHART FOR LAST 3 YEARS SHOWING TURNOVER, NET PROFIT IN ABSOLUTE FORM AS WELL AS PERCENTAGE FORM, ACCORDING TO WHICH NET PROFIT WAS 1.12%, 0.86% & 0.52% IN FY 2005 - 06, 2006 - 07 & 2007 - 08 RESPECTIVELY. TAKING TOGETHER THE AVERAGE RATIO COMES TO 0.85% IN LAST 3 ASSESSMENT YEARS PRIOR TO AY 2009 - 2010. IN THE PRESENT AY, THE APPELLANT HAS SHOWN 0.96% NET PROFIT, WHICH IS HIGHER THAN THE AVERAGE PERCENTAGE. THE APPELLANT HAS FURTHER EXPLAINED THAT THE NET PROFIT RATIO IS ALSO AFFECTED BY THE FOREIGN EXCHAN GE RATE FLUCTUATION BECAUSE THE APPELLANT IS AN IMPORTER OF INDUSTRIAL CHEMICALS AND FLUCTUATION IN EXCHANGE RATE DEPENDS UPON VARIOUS FACTORS IN INTERNATIONAL MARKET. IN VIEW OF THESE, THE ADDITION OF RS. 20,54,871/ - BY WAY OF ESTIMATION OF NET PROFIT AT 3% CANNOT BE SUSTAINED AND IS THEREFORE DELETED. IN THE RESULT, THE APPELLANTS GROUND ON THIS ISSUE IS ALLOWED. 9. FROM THE ABOVE, IT IS EVIDENT THAT 3% ADOPTED BY THE AO HAS NO BASIS WHATSOEVER. 0.96% REPORTED BY THE ASSESSEE DURING THE YEAR, ITSELF IS MUCH HIGHER THAN THE AVERAGE NET PROFIT OF 0.83% FOR THE SAID 3 ASSESSMENT YEARS. CONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUND RAISED B Y THE REVENUE IS DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2014. SD/ - SD/ - (AMIT SHUKLA) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 12/08/2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI