The ITO, Ward-1, Bharuch V. M/s. J.K. Jewellers, Bharuch

ITA 391/AHD/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9311 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 08-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SONIA KUMAR
• Keywords: Gross profit estimation
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, A HMEDABAD , (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI KUL BHARA T, J.M.) ( , !'# $ , ! %& ) ITA NO. 391/AHD/2010 (ASSESSM ENT YEAR: 2006-07) INCOME-TAX OFFICER, WARD-1, BANK OF BARODA BUILDING, STATION ROAD, BHARUCH. VS. M/S. J. K. JEWELLERS, NR. RUNGTA SCHOOL, STATION ROAD, BHARUCH, DIST: BHARUCH PAN NO. AAEFJ5951F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VARTIK CHOKSI, A.R. RESPONDENT BY : SMT. SONIA KUMAR, SR. D.R. DATE OF HEARING : 19 -01 -20 16 DATE OF PRONOUNCEMENT : 16 -02 -2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDER O F CIT(A)-VI, BARODA , DATED 30.11.2009 FOR THE ASSESSMENT YEAR 2006-07 . 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF TRADING OF JEWELLERY. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2006-07 ON 30.12.2006 DECLARING TAXABLE INCOME OF RS.3,69,829 /-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.1 43(3) R.W.S. 145(3) OF THE ACT VIDE ORDER DATED 23.12.2008 AND THE TOTAL INCOME WA S DETERMINED AT RS. 43,76,720/-. AGGRIEVED BY THE ORDER OF ASSESSING O FFICER, ASSESSEE CARRIED THE ITA NO.391/AHD/10 A.Y. 2006-07 (ITO VS. M/ S. J. K. JEWELLERS) 2 MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 3 0.11.2009 GRANTED RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), RE VENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS. 33,68,919/- ON ACCOUNT OF LOW G ROSS PROFIT. 2. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THA T THE REPLY OF THE ASSESSEE CLARIFYING THE FALL IN GP WAS GENERAL IN NATURE AND WITHOUT ANY SU PPORTING EVIDENCES. WHEN THERE IS UPWARD TREND IN THE MARKET THE VALUE OF CLOSING STOCK OF T HE ASSESSEE AUTOMATICALLY RAISED DUE TO HIGH PRICE AND THEREBY THE ASSESSEE IS GETTING BENEFIT O F FLUCTUATION OF MARKET. THEREFORE, THE ASSESSEE HAD FAILED TO PRODUCE THE EVIDENCES HOW AND IN WHIC H FLUCTUATING MARKET THE GP IS AFFECTED. FURTHER, THE ASSESSEE HAS NOT MAINTAINED STOCK REGI STER AND QUANTITATIVE DETAILS. THEREFORE, THE ASSESSING OFFICER WAS RIGHT IN HOLDING THAT THE BOO KS OF ACCOUNT OF THE ASSESSEE COULD NOT GIVE THE CORRECT AFFAIRS OF THE BUSINESS OF THE ASSESSEE AND IS DEFECTIVE AND THEREFORE, CLEARLY JUSTIFIED IN ESTIMATING THE GP AT 8.39% BEING AVERAGE RATE OF LA ST 3 YEARS AS AGAINST 4.61% SHOWN BY THE ASSESSEE. 4. BEFORE US, AT THE OUTSET, LD. D.R. SUBMITTED THA T THE SOLITARY ISSUE IS WITH RESPECT TO DELETING ADDITION OF RS.33,68,919/- ON A CCOUNT OF LOW GROSS PROFIT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AS SESSING OFFICER NOTICED THAT ON THE SALES OF RS.8.90 CRORES, ASSESSEE HAD SHOWN GROSS PROFIT OF RS.11,86,628/- WHICH WAS 4.61% AS AGAINST THE GROSS PROFIT OF 7.33 % AND 12.24% IN THE IMMEDIATE TWO PRECEDING ASSESSMENT YEARS. THE ASSE SSEE WAS ASKED TO EXPLAIN THE FALL IN GP. THE SUBMISSIONS OF THE ASSESSEE WAS NO T FOUND ACCEPTABLE TO THE ASSESSING OFFICER. HE WAS OF THE VIEW THAT THE BOO KS OF ACCOUNTS OF THE ASSESSEE DO NOT SHOW A CORRECT STATE OF AFFAIRS AND THEREFOR E, PROVISIONS OF SECTION 145 OF THE ACT ARE APPLICABLE IN VIEW OF THE FACT THAT THE AUD ITOR IN THE TAX AUDIT REPORT HAD POINTED OUT ABOUT THE NON MAINTENANCE OF THE STOCK REGISTER AND NON FURNISHING OF QUANTITATIVE DETAILS WITH RESPECT TO THE PAYMENT OF JOB WORK CHARGES PAID TO THE KARIGARS AND NON FURNISHING OF ANY VALID REASONS F OR FALL IN GP. HE ACCORDINGLY REJECTED THE BOOK RESULTS OF THE ASSESSEE AND THERE AFTER ESTIMATED THE GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION @ 8.39% (BEING THE AVERAGE GROSS PROFIT FOR 3 YEARS) AMOUNTING TO RS.74,69,869/- AND AFTER GIVING THE CREDIT OF THE GROSS PROFIT OF ITA NO.391/AHD/10 A.Y. 2006-07 (ITO VS. M/ S. J. K. JEWELLERS) 3 RS.41,00,950/- THAT WAS SHOWN BY THE ASSESSEE MADE THE ADDITION OF BALANCE AMOUNT OF RS.33,68,919/-. 5. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO DELETED THE ADDITION BY H OLDING AS UNDER: 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. A R AND FACTS OF THE CASE. THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIM ATED THE GROSS PROFIT MAINLY ON THE GROUND THAT THERE WAS GROSS PROFIT FALL COMPARED TO PRECEDING Y EAR AND ALSO THE QUANTITATIVE DETAILS WERE NOT MAINTAINED. ALSO THE DETAILS FOR LABOUR CHARGES WER E NOT PROPERTY PROVIDED. THE APPELLANT HAD FURNISHED IN APPEAL ATE PROCEEDINGS THE ITEM-WISE D ETAILS OF TRADED ITEMS WITH QUANTITY AND VALUE. THE QUANTITATIVE DETAILS OF MATERIAL FOR WHICH LABO UR JOB WAS CARRIED OUT WAS ALSO PROVIDED. IT WAS ARGUED THAT THE SAME WERE ALSO PROVIDED BEFORE THE ASSESSING OFFICER, THE COPY OF THE LETTER WAS FILED IN THE PAPER BOOK. THE REASON FOR FALL IN GROSS PROFIT WAS ALSO EXPLAINED THAT HIM BULLION TRADING WHICH IS A LOW MARGIN BUSINESS ACCO UNTED FOR MORE THAN 76% OF THE TOTAL TURNOVER WHICH IS 13% MORE COMPARE TO THE PRECEDING YEAR. FU RTHER NO DEFECT HAS BEEN FOUND BY THE ASSESSING OFFICER IN THE PURCHASE AND SALES FIGURES WHICH WERE SUPPORTED BY ADEQUATE BILLS AND WERE ALSO AUDITED U/S 44AB OF I.T ACT. IT IS A WELL SETTLED PROPOSITION IN LAW THAT LOW GP RATE IS NOT A GROUND FOR REJECTION OF BOOKS OF ACCOUNT. IT IS ALSO A WELL SETTLED PROPOSITION IN LAW THAT NON MAINTENANCE OR ABSENCE OF STOCK ACCOUNT BY ITSELF I S NOT A SUFFICIENT GROUND FOR REJECTING THE BOOKS OF ACCOUNT, PROVIDED THAT THERE ARE NO OTHER DEFECTS. TAKING INTO ACCOUNT THESE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE AO WAS NOT JUSTIFIED IN RESORTING TO ESTIMATION ON THE GROUND THAT THERE WAS A SIMPLE FA LL IN GROSS PROFIT AND THAT THE APPELLANT WAS NOT MAINTAINING THE STOCK REGISTER, WITHOUT POINTIN G OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT. HENCE, REJECTI ON OF ACCOUNTS AND CONSEQUENT ESTIMATION OF GROSS PROFIT IS NOT APPRECIABLE. THUS THE ASSESSING OFFICER IS HEREBY DIRECTED TO DELETE THE ADDITION OF RS. 33,68,919/- MADE TOWARDS THE ESTIMA TION OF GROSS PROFIT RATIO. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF ASSE SSING OFFICER. ON THE OTHER HAND, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFO RE THE ASSESSING OFFICER AND LD. CIT(A) AND FURTHER SUBMITTED THAT QUANTITATIVE DETA ILS OF MATERIAL FOR WHICH LABOUR JOB WORK CARRIED OUT WAS PROVIDED TO THE ASSESSING OFFICER AS HAS BEEN NOTED BY LD. CIT(A) IN HIS ORDER. HE, THUS, SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, ASSESSING OFFICER HAD PROCEEDED T O REJECT THE BOOKS OF ACCOUNT U/S.145(3) OF THE ACT AND THEREAFTER ON THE BASIS O F THE GROSS PROFIT OF THE ASSESSEE ITA NO.391/AHD/10 A.Y. 2006-07 (ITO VS. M/ S. J. K. JEWELLERS) 4 IN THE YEAR UNDER CONSIDERATION AND TWO IMMEDIATE A SSESSMENT YEARS ESTIMATED THE GROSS PROFIT TO BE @ 8.39% AND MADE ADDITION. WE F IND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT ASSESSEE HAD F URNISHED ITEM-WISE DETAILS OF TRADED ITEMS WITH QUANTITY AND VALUE AND HAD ALSO F URNISHED THE QUANTITATIVE DETAILS OF MATERIAL FOR WHICH LABOUR JOB WAS CARRIED OUT. HE HAS FURTHER NOTED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS AND WITHOUT POINTING OUT ANY DEFECTS, ASSESSING OFF ICER WAS NOT JUSTIFIED IN REJECTING THE BOOKS AND RESORTING THE ESTIMATION OF PROFITS. BEFORE US, REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT TH E FINDINGS OF LD. CIT(A) NOR POINTED ANY FALLACY IN HIS FINDINGS. IN VIEW OF TH E AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AN D THUS, THE GROUND OF REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 02 - 2016. SD/- SD/- (KUL BHARAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 16/02/2016 S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD