M/s M.S. Sarraf & Co., Kanpur V. ITO 5(3), Kanpur

ITA 385/LKW/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62160 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-06-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 28-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gross profit estimation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B : LUCKNOW BEFORE SHRI S. K. YADAV, JUDICIAL MEMBER AND SHRI MEHAR SINGH , ACCOUNTANT MEMBER I.T.A. NO. 385 /LKW/1 1 ASSESSMENT YEAR: 2001 - 02 M/S M. S. SARAF & CO., VS. INCOME TAX OFFICER - 5(3), 54/37, NAYAGANJ, KANPUR. KANPUR. PAN:AAAPO5040L (APPELLANT) (RESPONDENT) APPELLANT B Y : SHRI RAKESH GARG, ADVOCATE RESPONDENT BY : SMT. SWATI RATAN, D.R. DATE OF HEARING : 28 / 06 /201 2 DATE OF PRONOUNCEMENT : 03/07/2012 ORDER PER MEHAR SIN GH; A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 31/03/2011 OF CIT(A) - I I, KANPUR RELEVANT TO ASSESSMENT YEAR 2001 - 2002. 2. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE LEARNED A.R. CONTENDED THAT THE ADDITION UPHELD BY THE CIT(A) IS NOT IN CONSONANCE OF THE FACTUAL MATRIX OF THE CASE, HENCE, THE SAME MAY BE DELETED . IT WAS ARGUED BY LEARNED A.R. THAT SALES HAS INCREASE D FROM ` 6,53,329/ - TO ` 8,18,748/ - GIVING AN 2 INCREASE OF ` 1,65,419/ - IN TERMS OF VALUE AND 25.32% IN TERMS OF PERCENTAGE. LIKEWISE THE GROSS PROFIT HAS INCREASED FROM ` 3,66,810/ - TO ` 4,07,420/ - GIVING AN INCREASE OF ` 40,610/ - IN TERMS OF VALUE AND 11.07% I N TERMS OF GROSS PROFIT RATE. HOWEVER, THE GROSS PROFIT RATE HAD DECLINED FROM 56.14% TO 49.76%. IT WAS STATED BY LEARNED A.R. THAT THE DECLINE IS ONLY NOTIONAL FOR THE REASON THAT THE SALES HAVE INCREASED. THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJE CTED BY THE ASSESSING OFFICER ON THE PREMISE THAT SUCH ACCOUNT BOOKS, AS PROVIDED U/S 44A HAVE NOT BEEN MAINTAINED. 2. LEARNED D.R. ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF CIT(A). 3. WE HAVE CAREFULLY PERUSED RIVAL SUBMISSIONS, FACTS OF THE C ASE AND THE RELEVANT RECORDS AND FOUND THAT THE ADDITION HAS BEEN MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE BILLS FOR PURCHASES FROM UNREGISTERED DEALERS WERE NOT PRODUCED AND ONLY SELF - MADE BILLS WERE PRODUCED. THE ASSESSEE SUBMITTED BEFORE TH E ASSESSING OFFICER THAT FALL IN GROSS PROFIT IS ATTRIBUTABLE DUE TO FLUCTUATION IN THE MARKET. THE ASSESSEE ALSO FILED CONFIRMATION FROM SOME OF THE PARTIES WITH WHOM CASH PURCHASE AND SALE WERE MADE FROM UNREGISTERED DEALERS , TO PROVE HIS CONTENTION. HOWEVER, THE ASSESSING OFFICER MADE THE IMPUGNED ADDITION OF ` 1,92,580/ - , ON ACCOUNT OF LOW GROSS PROFIT. THE GROSS PROFIT AS RECORDED , IN THE ASSESSMENT ORDER , FOR VARIOUS ASSESSMENT YEARS ARE AS UNDER: 3 A.Y. SALE GROSS PROFI T GROSS PROFIT RATE ------ ------- ---------------- --------------------- 1999 - 2000 6,14,771/ - 2,91,454/ - 47.40% 2000 - 2001 6,53,329/ - 3,66,810/ - 56.14% 2001 - 2002 8,18,748/ - 4,07,420/ - 49.76% 4. A BARE PERUSAL OF THE ABOVE GROSS PROFIT RATE REVEALS THAT THERE IS FLUCTUATION IN THE GROSS PROFIT RATE DEPENDING UPON THE MARKET CONDITIONS OF THE TRADE. THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT RATE AT 60% OF THE TOTAL TURNOVER AND ACCORDINGLY WORKED OUT THE GROSS PROFIT. THE LEARNED CIT(A) RESTR ICTED THE GROSS PROFIT AT 50% OF THE SALE ACCEPTED BY THE SALES TAX DEPARTMENT AT ` 8,18,742/ - . HOWEVER, A BARE PERUSAL OF THE ASSESSMENT ORDER AS WELL AS THE ORDER PASSED BY LEARNED CIT(A), CLEARLY REVEALS THAT BOTH THE AUTHORITIES HAVE MADE ESTIMATION OF GROSS PROFIT WITHOUT BRINGING ON RECORD ANY COGENT AND CORROBORATIVE EVIDENCE TO SUPPORT THEIR ESTIMATION. THE ESTIMATION BASED ON SURMISES AND CONJECTURES, WITHOUT HAVING ANY SUPPORT , CANNOT BE SUSTAINED. THE RELEVANT FINDING OF CIT(A) ARE REPRODUCED H EREUNDER: THE FACTS OF THE CASE AND SUBMISSIONS MADE BY THE APPELLANT ARID REMAND REPORT ON THIS GROUND AS MENTIONED ABOVE HAVE BEEN CAREFULLY CONSIDERED. IT IS OBSERVED THAT THE A.O. HAS MADE TRADING ADDITION AT ` 1,92,580/ - ON THE GROUND THAT THE APPELLANT DID NOT PRODUCE THE STOCK REGISTER, NON MAINTENANCE OF BOOKS OF ACCOUNTS AND ALSO BECAUSE OF FAILURE TO EXPLAIN THE METHOD OF VALUATION OF OPENING/CLOSING STOCK ETC. FURTHER, IT IS 4 OBSERVED THAT IN THE REMAND REP ORT THE A.O. HAS MENTIONED THAT THE APPELLANT HAS NOT PRODUCED BILLS IN RESPECT OF PURCHASES MADE FROM THE UNREGISTERED DEALERS AND ONLY COPIES OF SELF MADE BILLS WERE PRODUCED WHICH CANNOT BE GIVEN MUCH CREDENCE. THUS IN SUCH A SITUATION THE PROPER RECOUR SE IS TO APPLY G.P. RATE @ 55% ON THE SALES ACCEPTED, BY THE SALES TAX DEPARTMENT AT ` 8,18,742/ - WHICH WORKS OUT TO ` 4,50,308/ - AS AGAINST ` 4,07,420/ - DECLARED BY THE APPELLANT AND ` 6,00,000/ - DETERMINED BY THE A.O. THUS , THE APPELLANT IS ENTITLED FOR RELI EF AT ` 1,49,692/ - ON THIS SCORE. 5. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSION, WE ARE OF THE OPINION THAT THE ESTIMATION OF GROSS PROFIT WITHOUT BRINING AN Y COGENT AND CORROBORATIVE EVIDENCE ON RECORD, CANNOT BE SUSTAINED. THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 03/07/2012 ) SD/. SD/. ( S. K. YADAV ) ( MEHAR SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 03/07/2012 *SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR