The ACIT,(OSD)Circle-8, Ahmedabad V. Symphony Comfort Systems Limited, Ahmedabad

ITA 3952/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6305 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Assessee Lawyers: S N SOPARKAR
• Keywords: Gross profit estimation; Depreciation
• Section: 6; 2

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE S/SHRI G. D. AGARWAL, VP AND BHAVNESH SAINI , JM) ITA NO.3952/AHD/2008 A. Y.: 2005-06 THE A. C. I. T. (OSD), CIRCLE-8, 4 TH FLOOR, AJANTA COMMERCIAL CENTRE, A WING, ASHRAM ROAD, AHMEDABAD VS SYMPHONY COMFORT SYSTEM LTD., SASKRUT BUILDING, 1 ST FLOOR, OLD HIGH COURT ROAD, OFF. ASHRAM ROAD, AHMEDABAD PA NO. AACCS 6739 B (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ALBINUS TIRKEY, DR RESPONDENT BY SHRI S. N. SOPARKAR, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-XI V, AHMEDABAD DATED 30-09-2008, FOR ASSESSMENT YEAR 2005-06. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIALS AVAILABLE ON RECORD. 3. THE REVENUE ON GROUND NO.1 OF THE APPEAL, CHALLE NGED THE DELETION OF ADDITION OF RS.61,21,033/- ON ACCOUNT O F LOW GROSS PROFIT. DURING THE ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO PRODUCE PURCHASE REGISTER, STOCK REGISTER, INWARD A ND OUTWARD REGISTER FOR VERIFICATION. THE ASSESSEE STATED BEFO RE THE AO THAT DAY ITA NO.3952/AHD/2008 ACIT (OSD), CIR-8, AHMEDABAD VS SYMPHONY COMFORT SY STEM LTD. 2 TO DAY SOCK REGISTER AND INWARD AND OUTWARD REGISTE R WERE MAINTAINED ON COMPUTER AS PER EXCISE RECORDS AND FURNISHED THE COPY OF THE SAME BEFORE THE AO. IT WAS FURTHER STATED THAT ENTR IES ARE MADE ON THE COMPUTER AND NO SEPARATE BOOKS FOR DAY TO DAY S TOCK OR INWARD AND OUTWARD REGISTER WAS MAINTAINED. THE AO REJECTE D THE SUBMISSION OF THE ASSESSEE SAYING THAT UNLESS SEPAR ATE BOOKS ARE MAINTAINED FOR STOCK REGISTER, NO ENTRY COULD BE PA SSED IN COMPUTER AND, THEREFORE, ORIGINAL BOOKS AND REGISTERS ARE RE QUIRED FOR VERIFICATION WHICH THE ASSESSEE DID NOT PRODUCE. TH E ASSESSEE HAS SHOWN GROSS PROFIT RATE AT 17.63% AS COMPARED TO GR OSS PROFIT RATE SHOWN AT 21.63% IN THE PRECEDING ASSESSMENT YEAR. I T WAS SUBMITTED BEFORE THE AO THAT ALL THE RECORDS OF EXCISE ARE AU DITED AND QUANTITATIVE DETAILS ARE MAINTAINED WHICH ARE SUBJE CTED TO EXAMINATION BY EXCISE AUTHORITIES. IT WAS SUBMITTED THAT PRICES OF RAW MATERIALS HAVE INCREASED AND THERE IS A COMPETITION IN THE MARKET. THEREFORE, THERE WAS FALL IN THE GROSS PROFIT. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND NOTED THAT THE P ROFIT OF THE ASSESSEE HAS FALLEN DOWN. BOOK RESULTS WERE ACCORDI NGLY REJECTED DUE TO MAINLY THE ASSESSEE HAS NOT MAINTAINED THE S TOCK REGISTER AS WAS SUPPOSED TO MAINTAINED BY ENHANCING THE GROSS P ROFIT, ADDITION WAS ACCORDINGLY MADE. THE ASSESSEE REITERATED THE S AME SUBMISSIONS BEFORE THE LEARNED CIT(A) AND SUBMITTED THAT THE ASSESSEE MAINTAINED PROPER BOOKS OF ACCOUNTS AND DA Y TO DAY STOCK REGISTER ON COMPUTER AND COMPLETE DETAILS HAVE BEEN PRODUCED BEFORE THE AO, THEREFORE, ADDITION IS UNJUSTIFIED. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE NOTED T HAT THE AO HAS NOT BEEN ABLE TO POINT OUT ANY MISTAKE OR ERROR IN THE BOOKS OF ITA NO.3952/AHD/2008 ACIT (OSD), CIR-8, AHMEDABAD VS SYMPHONY COMFORT SY STEM LTD. 3 ACCOUNTS MAINTAINED BY THE ASSESSEE. THE REASONS FO R FALL IN GROSS PROFIT WERE ALSO ACCEPTED. SINCE THE ASSESSEE MAINT AINED RECORDS IN THE COMPUTER, THEREFORE, NO FAULT WAS FOUND. ACCORD INGLY, ADDITION WAS DELETED. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LE ARNED CIT(A) IN DELETING THE ADDITION. THE AO MERELY GONE BY THE FACT THAT T HERE WAS A FALL IN THE GROSS PROFIT RATE AS COMPARED TO THE PRECEDING ASSESSMENT YEAR WHICH ITSELF IS NO GROUND TO REJECT THE BOOKS OF AC COUNTS OF THE ASSESSEE. NO SPECIFIC DEFECT IN THE MAINTENANCE OF THE BOOKS OF ACCOUNTS BY THE ASSESSEE HAS BEEN POINTED OUT AO. T HE AO FURTHER NOTED THAT DAY TO DAY STOCK AND INWARD AND OUTWARD REGISTERS ARE MAINTAINED ON COMPUTER. PERHAPS, THIS WAS THE SOLE REASON WHICH SWAYED THE AO TO REJECT THE BOOKS OF ACCOUNTS AND M AKE THE ADDITION. NOW-A-DAYS IT IS COMMON KNOWLEDGE THAT AL L THE RECORDS ARE MAINTAINED ON COMPUTER INCLUDING BY THE GOVERNMENT AND SEMI- GOVERNMENT ORGANIZATIONS. EVEN IF, RECORDS ARE MAIN TAINED ON COMPUTER IS NOT GROUND TO REJECT THE EXPLANATION OF THE ASSESSEE. THE AO SHOULD HAVE VERIFIED THE ENTRIES FROM THE COMPUT ERIZED RECORDS ALSO TO POINT OUT ANY DEFECT THEREON. IN THE ABSENC E OF ANY SPECIFIC DEFECT POINTED OUT IN THE BOOKS OF ACCOUNTS AND THE RECORDS MAINTAINED ON COMPUTER, THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS, OR TO ENHANCE THE GROSS PROFIT R ATE. ACCORDINGLY, THERE IS NO MERIT IN THIS GROUND OF APPEAL OF THE R EVENUE. THE SAME IS ACCORDINGLY DISMISSED. ITA NO.3952/AHD/2008 ACIT (OSD), CIR-8, AHMEDABAD VS SYMPHONY COMFORT SY STEM LTD. 4 5. ON GROUND NO.2 OF THE APPEAL, THE REVENUE CHALLE NGED THE DELETION OF ADDITION OF RS.45,19,044/- ON ACCOUNT O F EXCESSIVE EXPENSES. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE TURNOVER OF THE ASSESSEE HAS DECREASED AS COMPARED TO THE PRECEDING YEAR, HOWEVER, INDIRECT EXPENSES WERE ON THE HIGHER SIDE. IT WAS SUBMITTED THAT ALL THE EXPENSES WERE INCURRE D FOR THE PURPOSE OF BUSINESS. THE AO DID NOT ACCEPT THE CONTENTION O F THE ASSESSEE AND BY COMPARING THE EXPENSES FROM THE PRECEDING AS SESSMENT YEAR NOTED THAT THE EXPENSES CLAIMED IN THE YEAR UNDER C ONSIDERATION ARE HIGHER AS IT IS AT 1.89%. THEREFORE, ADDITION WAS M ADE BY DISALLOWING THE EXPENSES. THE LEARNED CIT(A) NOTED THAT THE ADD ITION IS MADE WITHOUT ANY REASONS AND WITHOUT POINTING OUT ANY EX PENDITURE TO BE BOGUS AND NON-GENUINE. ADDITION WAS ACCORDINGLY DEL ETED. 6. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE AO MERELY MADE COMPARATIVE STUDY OF THE EXPENSES FOR THE YEAR UNDE R CONSIDERATION WITH THE PRECEDING ASSESSMENT YEAR AND FOUND THAT E XPENSES INCURRED IN THE PRECEDING ASSESSMENT YEAR WERE 2.89 % ON TURNOVER BUT IN THE ASSESSMENT YEAR UNDER APPEAL IT WAS 4.78 % ON THE TURNOVER. THE EXPENSES WERE, THEREFORE, FOUND EXCES SIVE WITHOUT POINTING OUT AS TO WHICH OF THE EXPENSES INCURRED B Y THE ASSESSEE WAS NOT CONNECTED WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. THE AO HAS NOT POINTED OUT WHICH OF THE EXPENDITURE WERE NOT ADMISSIBLE IN LAW. IN THE ABSENCE OF ANY POINTING O UT INADMISSIBLE EXPENSES, THE AO CANNOT MAKE ADDITION MERELY BY COM PARING THE EXPENDITURE WITH THE PRECEDING YEARS EXPENDITURE. THE LEARNED ITA NO.3952/AHD/2008 ACIT (OSD), CIR-8, AHMEDABAD VS SYMPHONY COMFORT SY STEM LTD. 5 CIT(A) ON PROPER APPRECIATION OF THE FACTS AND MATE RIAL ON RECORD RIGHTLY DELETED THE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 7. ON GROUND NO.3 OF THE APPEAL, THE REVENUE CHALLE NGED THE DELETION OF ADDITION OF RS.24,42,330/- ON ACCOUNT O F EXCESSIVE CLAIM OF DEPRECIATION ON MOULDS AND DYES AT 25% INSTEAD O F 40% CLAIMED BY THE ASSESSEE. THE LEARNED CIT(A) NOTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT AHME DABAD BENCH FOR ASSESSMENT YEAR 1991-92 AND ACCORDINGLY DIRECTED TO ALLOW HIGHER DEPRECIATION AS CLAIMED BY THE ASSESSEE. THE LEARNE D COUNSEL FOR THE ASSESSEE SUBMITTED THAT ORDER OF THE TRIBUNAL F OR ASSESSMENT YEAR 1991-92 IS FILED AT PAGE 3 OF THE PAPER BOOK T O SHOW THAT CLAIM OF THE ASSESSEE IS ALLOWED FOR HIGHER DEPRECIATION. THE LEARNED DR CONCEDED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL (SUPRA). 8. ON CONSIDERATION OF THE ABOVE FACTS WE ARE OF TH E VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF THE TRIBUNAL MENTIONED BY THE LEARNED CIT(A) IN THE APPELLATE OR DER. THE SAME ORDER IS FOLLOWED BY THE TRIBUNAL IN THE CASE OF SA ME ASSESSEE IN ASSESSMENT YEAR 2002-03 IN ITA NO.113/AHD/2006 AND DEPARTMENTAL APPEAL HAS BEEN DISMISSED ON IDENTICAL GROUNDS VIDE ORDER DATED 21- 11-2008. THIS GROUND OF APPEAL OF THE REVENUE HAS N O MERIT AND IS DISMISSED. ITA NO.3952/AHD/2008 ACIT (OSD), CIR-8, AHMEDABAD VS SYMPHONY COMFORT SY STEM LTD. 6 9. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-06-2011 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 30-06-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD