ITO-6(3)(3), MUMBAI V. M/S. MALANG STEEL INDIA PVT. LTD., MUMBAI

ITA 3783/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55255 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gross profit estimation
• Section: 142(1); 144

Judgement Text

1 ITA NO. 3783/MUM/2010 (ASST YEAR 2006-07) IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI B BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI R S SYAL , AM & SHRI VIJAY PAL RAO, J M ITA NO. 3783/MUM/2010 (ASST YEAR 2006-07) THE INCOME TAX OFFICER WARD 6(3)(3), MUMBAI VS M/S MALANG STEEL INDIA P LTD 356/370 SAMUEL ST R NO.11 MASJID MUMBAI 400 003 (APPELLANT) (RESPONDENT) PAN NO. AABCH 5706N ASSESSEE BY NONE REVENUE BY SHRI P C MAURYA DT.OF HEARING 6 TH SEPT 2011 DT OF PRONOUNCEMENT 16 TH , SEPT 2011 PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 20.1.2010 OF THE CIT(A) FOR THE ASSESSMENT YEAR 2006-07. 2 THE REVENUE HAS RAISED VARIOUS GROUNDS IN THIS AP PEAL; HOWEVER, THE ONLY ISSUE ARISES FOR OUR CONSIDERATION AND ADJUDICATION WHETH ER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN RESTRICTING THE GP RATE AT 3% OF THE TOTAL TURNOVER AS AGAINST 7% ESTIMATED BY THE ASSE SSING OFFICER WHILE FRAMING THE ASSESSMENT U/S 144 OF THE I T ACT. 2.1 WE HAVE HEARD THE LD DR AS WELL AS THE LD AR OF THE ASSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASS ESSEE COMPANY IS DEALING IN IRON AND STEEL PRODUCTS. THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 12.12.2006 2 ITA NO. 3783/MUM/2010 (ASST YEAR 2006-07) DECLAIMING THE INCOME OF RS. 12,694/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) ALONG WITH QUESTIONNA IRE WERE ISSUED. IN RESPONSE, THE CHARTERED ACCOUNTANT OF THE ASSESSEE COMPANY ATTEND ED THE ASSESSMENT PROCEEDINGS ON 16.10.2008 AND FILED CERTAIN DETAILS . HOWEVER, THE ASSESSING OFFICER DESIRED THAT THE PURCHASE AND SALES DETAILS WERE TO BE FILED IN A SPECIFIC FORMAT AS UNDER: SR.NO NAME AND ADDRESS OF THE PARTY FROM WHOM GOODS PURCHASED OPENING OUTSTANDING AMT PAYABLE AMT OF PURCHASES AMT PAID CLOSING OUTSTANDING PAYABLE SR.NO NAME AND ADDRESS OF THE PARTY FROM WHOM GOODS SOLD OPENING OUTSTANDING AMOUNT RECEIVABLE AMT OF SALES AMT PAID CLOSING OUTSTANDING RECEIVABLE 2.2 SINCE THE ASSESSEE DID NOT COMPLY WITH THE DIRE CTIONS OF THE ASSESSING OFFICER, THE ASSESSING OFFICER RESORTED TO FRAME THE ASSESSM ENT U/S 144 AND MADE GP ESTATE AT 7% OF THE TOTAL TURNOVER AS UNDER: HAD ASSESSEE GIVEN ABOVE DETAILS, OUTSTANDING CREDI TORS AND DEBTORS & TOTAL PURCHASES AND SALES WOULD HAVE BEEN NOTICED. ASSESSE E HAS NOT ONLY GIVEN IN DETAIL THE NATURE OF BUSINESS CARRIED ON WITH MODUS OPERANDI INVOLVED BUT ALSO HAS NOT SUBMITTED ALL PURCHASE BILLS AND SALE B ILLS ALONG WITH ALL BOOKS OF ACCOUNT, COPIES OF ALL BANK STATEMENTS FOR VERIFICAT ION. DUE TO FAILURE ON THE ART OF THE ASSESSEE TO FURNISH THESE DETAILS, WHICH W ERE ESSENTIAL FOR COMPLETING THE ASSESSMENT FOR THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE WAS REQUESTED TO SHOW CAUSE A S TO WHY THE GP WORKED OUT IN ITS CASE AT 0.61% SHOULD NOT BE ADOPTE D AT 7% WORKED TO RS. 41,72,657/-, HENCE THE ADDITION ON ACCOUNT OF L OW GP WILL BE RS. 38,07,259/-(41,72,657/- 3,65,398/-) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE BEING NO COOPERATIVE FROM THE ASSESSEE, GP WORKED OUT IN THE CASE OF THE ASSESSEE AT 0.61% IS ADOPTED AT 7% WHICH WORKS OUT TO RS. 41,72, 657/-, HENCE THE ADDITION ON ACCOUNT OF LOW GP IS RS. 38,07,259/- ( 41,72,657 /-DECLARED GP 3,65,398/-), 3 ITA NO. 3783/MUM/2010 (ASST YEAR 2006-07) AND THEREFORE, THE AMOUNT OF RS. 38,07,259/- IS ADDE D TO TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF LOW GP. 3 ON APPEAL, THE CIT(A), AFTER CONSIDERING THE FACT S AND CIRCUMSTANCES OF THE CASE REDUCED THE GP ESTIMATE FROM 7% TO 3% IN PASR 6 TO 8 OF HIS ORDER AS UNDER: 6. I AGREE WITH THE APPELLANT THAT THE GP AT 7% IS HIGH FOR A TRADER IN IRON & STEEL. MOREOVER, THE ASSESSING OFFICER HAS NOT GIVEN ANY COMPARABLE INSTANCES TO SUBSTANTIATE THE RATE OF GP ADOPTED BY HIM. 7. HOWEVER, THE APPELLANT WAS AGAIN GIVEN AN OPPORTU NITY IN THE COURSE OF APPELLATE PROCEEDINGS TO SUBMIT COMPARABLE CASE IN THE SAME LINE OF BUSINESS TO SHOW THAT THE RATE OF GP EARNED BY THE AP PELLANT WAS COMPARABLE. THE APPELLANT DID NOT PRODUCE ANY INFORMA TION TO SUPPORT ITS CONTENTION. THE RATE OF GP DECLARED BY THE APPELLANT IN VARIOUS YEARS APPEARS TO HAVE FLUCTUATED WIDELY FROM 0.6% IN THE C URRENT ASSESSMENT YEAR TO 1.56% N ASSESSMENT YEAR 2007-08. IT THEREFORE CANN OT B SAID THAT THE RATE OF GP DECLARED IN ASSESSMENT YEAR 2006-07 REFLECTED THE C URRENT PROFITS. CIRCUMSTANCES CHANGE IN A BUSINESS FROM YEAR TO YEA R. THE RATE OF GP IN ONE YEAR CANNOT BE ALWAYS TAKEN AS CORRECT RATE FOR ANOTHE R YEAR. THE APPELLANT HAS FURTHER NOT FURNISHED ANY DETAILS OR TURNOVER, NATU RE OF PRODUCTS TRADED, TO SHOW THAT CIRCUMSTANCES IN BOTH THE YEARS WERE COMPA RABLE. EVEN IF THEY ARE, IT HAS TO BE AGREED THAT THE APPELLANT HAD DECL ARED LOW GP RATE IN 2006- 07. 8. IN A SITUATION WHERE THE GP RATE ESTIMATED BY TH E ASSESSING OFFICER IS AT A HIGHLY UNREASONABLE FIGURE WITHOUT ANY BASIS AND ON T HE OTHER HAND THE APPELLANT HAS NOT GIVEN ANY INFORMATION TO SUPPORT THE GP RATE LESS THAN 2%, I AM LEFT WITH N OTHER ALTERNATIVE BUT TO MAKE A FAIR AND REASONABLE ESTIMATE OF GP RATE OF A TRADER IN IRON AND STEEL PRODUCTS. IT I S HOWEVER, A FACT THAT THE GP AT THE RATE OF 1.56% HAS BEEN ACCEPTED IN THE ASSESS MENT OF AY 2007-08. A GP RATE OF 3% WOULD BE A FAIR ESTIMATE FOR GROSS PROFI T IN THE CURRENT YEAR. 4 HAVING GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AND HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE CIT(A) ON GP ESTIMATE, PARTICULARLY WHEN TH E ASSESSING OFFICER HAS NOT GIVEN ANY COMPARABLE INSTANCES OR THE GP RATE PREVAILING IN THIS NATURE OF BUSINESS. WE FURTHER NOTE THAT FOR THE EARLIER ASSESSMENT YEAR, THE GP OF THE ASSESSEE WAS LESS THAN 3%, WHICH WAS ACCEPTED BY THE ASSESSING OFFICER. TH EREFORE, IN OUR OPINION, THE GP 4 ITA NO. 3783/MUM/2010 (ASST YEAR 2006-07) RATE OF 3% AS ESTIMATED BY THE CIT(A) IS REASONABLE AND JUSTIFIED. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. 5 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THE 16 TH , DAY OF SEPT 2011. SD/ SD/- ( R S SYAL ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 16 TH , SEPT 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI