Viking Garments, Ambala City V. Addl. CIT, Ambala City

ITA 391/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80953 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-10-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 391/CHD/2014 ASSESSMENT YEAR: 2009-10 M/S VIKING GARMENTS, VS. ADDL. ACIT HARI PALACE ROAD CENTRAL CIRCLE- I AMBALA CITY AMBALA CITY PAN NO.AABFV9764D (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI RAVI SHANKAR, B.M.MONGA, ROHIT KAURA RESPONDENT BY : SHRI. J.S. NAGAR DATE OF HEARING : 13/10/2014 DATE OF PRONOUNCEMENT : 14/10/2014 ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 12.02.2104 OF LD. CIT(A), PANCUKULA. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS:- 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF 3% A GAINST 5% DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF PURCHASES WITH OUT APPRECIATING THE FACTS THAT ASSESSEE HAD DECLARED PROGRESSIVE GP RAT E OF 23.78% DURING THE YEAR UNDER APPEAL AGAINST 18.90% SHOWN IN THE IMMED IATE PRECEDING YEAR AND THAT AFTER FURTHER DISALLOWANCE OF 3% IT WOULD BE 24.87%, WHICH IS IMPROBABLE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF RS. 4,36 ,100/- ON ACCOUNT OF ALLEGED DIFFERENCE IN VALUATION OF CLOSING STOCK IG NORING THE VITAL FACT THAT 2 AFTER ITS CONSEQUENTIAL EFFECT IN THE OPENING STOCK OF THE FOLLOWING YEAR THE TAX EFFECT WOULD HAVE BEEN NIL. 3. AT THE TIME OF HEARING GROUND NO.2 WAS NOT PRESS ED BEFORE US AND THEREFORE THE SAME IS DISMISSED AS NOT PRESSED. 4. GROUND NO.1 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS SHOWN PURCHASES OF SHEEP / GOATS SKIN FROM PHERIWALAS AMO UNTING TO RS. 2,90,21,098/- THE PAYMENTS WERE ALSO MADE IN CASH EXCEEDING RS. 20,000/-. IN RESPONSE TO THE QUERY, IT WAS SUBMITTED THAT CASH PAYMENT WERE COVERED BY RULE 60-DD OF THE I.T. RULES BECAUSE PAYMENTS WERE MADE TO THE PH ERIWALAS. IT WAS FURTHER SUBMITTED THAT IT WAS NOT POSSIBLE IN VIEW OF THE T RADE PRACTICE TO PROCURE BILLS, NAMES AND ADDRESSES OF SUCH PHERIWALAS. THE ASSESSI NG OFFICER AFTER EXAMINING THESE SUBMISSIONS NOTICED THAT ALMOST 50% PURCHASES HAVE BEEN MADE FROM PHERIWALAS FOR WHICH NO BILLS OR NAMES AND ADDRESSE S WERE AVAILABLE AND THE SAME COULD NOT BE VERIFIED, THEREFORE, HE DISALLOWE D 5% OF SUCH PURCHASES AND DISALLOWED A SUM OF RS. 14,51,055/-. 5. ON APPEAL, IT WAS MAINLY SUBMITTED THAT ACCOUNTS WERE AUDITED. IT WAS ALSO SUBMITTED THAT GP RATE HAS INCREASED DURING THE YEA R FROM 18.90% OF 23.78% AND, THEREFORE, ADHOC ADDITION WAS NOT JUSTIFIED. T HE LD CIT(A) EXAMINED THESE SUHMISSIONS AND AFTER DETAILED DISCUSSION REDUCED T HE DISALLOWANCE TO 3%. 6. BEFORE US, LD CIT(A) REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND CIT(A). HE ALSO FILED A COPY OF THE COMPARATIVE GP RATE WHICH IS AS UNDER:- ASST. YEAR SALE (IN LACS) GROSS PROFIT (IN LACS) GROSS PROFIT (AFTER DISALLOWANCE OF PURCHASES) G.P. RATE (BEFORE ADDITION) 2007-08 268.68 57.07 57.07 21.24% 2008-09 384.21 72.60 72.60 18.90% 3 2009-10 795.09 189.05 197.75 23.78% 7. ON THE OTHER HAND, LD DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE PART IALLY AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IT IS AN ADHOC ADDITION. HOWEVER, AT THE SAME TIME THE ASSESSEE IS DUTY BOUN D TO SUPPORT THE PURCHASES. IN THESE CIRCUMSTANCES, ONLY ESTIMATED ADDITION CAN BE MADE BECAUSE NAMES AND ADDRESSES OF SUPPLIERS AS WELL AS BILLS ARE NOT AVA ILABLE FOR VERIFICATION. CONSIDERING THE OVER ALL FACTS AND PARTICULARLY THE IMPROVEMENT IN GP DURING THE YEAR WE ARE OF THE OPINION THAT IF 1 % PURCHASES A RE DISALLOWED THE SAME WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DISALLOW 1% OF THE PURCHASES. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN TH OPEN COURT ON 14.10.2014 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14 TH OCTOBER, 2014 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR