Sanmanto Rubber Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-8(3), Ahmedabad

ITA 3620/AHD/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8889 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 24-09-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 05-09-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Assessee Lawyers: J P SHAH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND D.C. AGRAWAL, ACCOUNTANT MEMBER) ITA NO.3620/AHD/2007 [ASSTT YEAR : 2004-2005] SANMANTO RUBBER PVT. LTD. 1 ST FLOOR, DEVASHISH BLDG. NR.CLASSIC GOLD HOTEL C.G. ROAD, ELLISBRIDGE AHMEDABAD 380 006. VS. ITO, WARD-8(3) AHMEDABAD. ASSESSEE BY : SHRI J.P. SHAH REVENUE BY : SHRI RAJEEV AGARWAL O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THIS APPEAL FILED BY THE ASSESSEE RELATES TO THE ASSESSMENT YEAR 2004-2005 AND ARISES OUT OF THE ASSESSMENT ORDER PASSED ON 29-11-2006 UNDER SECTION 143(3) OF THE IN COME-TAX ACT, 1961. 2. THE ASSESSEE IS A COMPANY MANUFACTURING RUBBER P RODUCTS USED IN THE PHARMACEUTICAL INDUSTRY. THE ONLY GROUND OF THE AP PEAL IS AGAINST THE ADDITION OF RS.6,06,606/- MADE TO THE GROSS PROFIT. IN THE RETURN OF INCOME THE ASSESSEE DECLARED GROSS PROFIT OF RS,.17,64,101/- ON A TURNO VER OF RS.90,00,408/-, WHICH CAME TO 19.6% AS AGAINST GROSS PROFIT OF RS.32,34,6 30/- ON A TURNOVER OF RS.80,76,163/-, WHICH CAME TO 40.05% IN THE EARLIER YEAR. WHEN ASKED TO EXPLAIN THE FALL IN THE RATE OF GP THE ASSESSEE SUB MITTED THAT THE COST OF RAW MATERIALS WENT UP SUBSTANTIALLY WHEREAS THE SALE PR ICE DID NOT CORRESPONDINGLY INCREASE AND IN SOME CASES ACTUALLY SHOWED A DECLIN E. THESE DETAILS ARE FOUND COMPILED AT PAGE-4 OF THE PAPER BOOK. THE ASSESSEE ALSO PRODUCED PURCHASE BILLS IN SUPPORT OF THE CLAIM. THE ASSESSING OFFIC ER DID NOT MAKE ANY ADVERSE COMMENTS IN RESPECT OF THE ABOVE CLAIM, BUT PROCEED ED TO VERIFY THE PRODUCTION AND CALLED UPON THE ASSESSEE TO SUBMIT THE PRODUCTI ON REGISTER. THE ASSESSEE WAS ALSO ASKED TO FILE MONTH-WISE DETAILS OF RAW-MA TERIAL CONSUMPTION AND PAGE - 2 ITA NO.3620/AHD/2007 -2- PRODUCTION. THE ASSESSEE RESPONDED BY SAYING THAT QUANTITATIVE DETAILS WERE NOT BEING MAINTAINED AND STOCK RECORDS WERE ALSO NO T MAINTAINED. IN THESE CIRCUMSTANCES, THE AO WAS LEFT WITH NO OPTION EXCEP T TO REJECT THE BOOK RESULTS UNDER SECTION 145(3) OF THE ACT AND PROCEED TO COMP UTE THE PROFITS TO THE BEST OF HIS JUDGMENT. TAKING INTO CONSIDERATION THE ASS ESSEES CLAIM OF INCREASE IN THE PRICES OF RAW MATERIALS WITHOUT ANY CORRESPONDI NG INCREASE IN THE SALE PRICE AND ALSO HAVING REGARD TO THE FACT THAT THE SALE PR ICE IN RESPECT OF SOME ITEMS HAD ACTUALLY FALLEN, THE AO ESTIMATED THE RATE OF G ROSS PROFIT AT 30% WHICH RESULTED IN AN ADDITION OF RS.9,36,012/-. 3. ON APPEAL IT WAS POINTED OUT THAT THE ASSESSMENT YEAR 2003-2004 IN WHICH THE ASSESSEE DECLARED A GROSS PROFIT OF 40.05 % WAS AN EXCEPTIONAL YEAR AND IN THAT YEAR THE ASSESSEE COULD IMPORT RAW MATE RIAL FOR PRICES WHICH WERE LOWER BY LEAST 20% AND THEREFORE THAT ASSESSMENT YE AR CANNOT BE CONSIDERED FOR PURPOSES OF COMPARISON. THE CIT(A), CONSIDERING TH IS SUBMISSION AND ALSO TAKING NOTE OF THE REASONS GIVEN BY THE AO FOR REJE CTING THE BOOK RESULTS, HELD THAT THE REJECTION OF THE BOOK RESULTS WAS JUSTIFIE D BUT AGREED WITH THE ASSESSEE THAT THE RATE OF GROSS PROFIT OF 26.34% DECLARED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2002-2003 AND ACCEPTED BY THE AO MA Y BE ACCEPTED FOR THE YEAR UNDER APPEAL ALSO. THE ADDITION WAS ACCORDINGL Y REDUCED TO RS.6,06,606/-. 4. THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND WE HAVE HEARD THE RIVAL SUBMISSIONS IN THE LIGHT OF THE FACTS BROUGHT OUT I N THE ORDERS OF THE INCOME TAX AUTHORITIES. HAVING REGARD TO THE REASONS GIVEN BY THE AO FOR REJECTING THE BOOK RESULTS, WHICH WE FIND TO BE JUSTIFIED, WE HOL D THAT THE BOOK RESULTS WERE RIGHTLY REJECTED. HOWEVER, AS REGARDS THE RATE OF GROSS PROFIT TO BE ESTIMATED AND ADOPTED WE FIND THAT THOUGH IN THE ASSESSMENT Y EAR 2002-2003 THE GROSS PROFIT RATE OF 26.34% HAS BEEN DECLARED AND ACCEPTE D, IN THE ASSESSMENT YEAR 2005-2006 TO 2007-2008 THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 8.82%, 17.03% AND 22.14% RESPECTIVELY AND WE UNDERSTAND TH AT THEY HAVE BEEN PAGE - 3 ITA NO.3620/AHD/2007 -3- ACCEPTED BY THE INCOME TAX DEPARTMENT UNDER SECTION 143(1). IT SEEMS TO US THAT THERE IS A DOWNWARD TREND OF THE GROSS PROFIT RATE. ACCORDINGLY, WE CONSIDER IT FAIR AND REASONABLE TO ESTIMATE THE GRO SS PROFIT RATE AT 22% FOR THE YEAR UNDER APPEAL AND DIRECT THE AO TO MODIFY THE A SSESSMENT ACCORDINGLY. THE APPEAL OF THE ASSESSEE IS THUS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 30 TH SEPTEMBER, 2009. SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 30-09-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD