Shree Gajanand Motors, Godhra V. The Income tax Officer,Ward-2, Dahod

ITA 3960/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9660 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-12-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Keywords: Gross profit estimation
• Section: 145; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 30/09/2010 DRAFTED ON: 01 /10/2010 ITA NO.3960/AHD/2008 ASSESSMENT YEAR : 2005-06 SHREE GAJANAND MOTORS OPP.GIC & SRP LUNAWADA ROAD GODHRA 389 001 VS. THE INCOME TAX OFFICER WARD-2 DAHOD PAN/GIR NO. : AATFS 0396 J ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SAKAR SHARMA RESPONDENT BY: SHRI K.M. MAHESH, SR.D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-VI, BARODA DATED 16/09/2008 PASSED FOR ASSESSMENT YEAR 2005-06. 2. GROUND NO.1 READS AS UNDER: 1. THE LD. CIT(A) ERRED ON FACT AND IN LAW IN CO NFIRMING ACTION OF ASSESSING OFFICER MAKING ASSESSMENT U/S.1 44 INSPITE OF THE FACT THAT APPELLANT APPEARED AND FUR NISHED ALL INFORMATION AS CALLED FOR BY THE ASSESSING OFFICER. ITA NO. 3960/AHD/2008 SHREE GAJANAND MOTORS VS. ITO ASST.YEAR - 2005-06 - 2 - 2.1. AFTER HEARING BOTH THE SIDES, WE ARE OF THE VI EW THAT THIS GROUND HAS NO SUBSTANCE BECAUSE ON CAREFUL PERUSAL OF ASSE SSMENT ORDER, IT IS EVIDENT THAT NUMBER OF OPPORTUNITIES HAVE BEEN GRAN TED AND ON SOME OCCASIONS THE AUTHORISED REPRESENTATIVE OF THE ASSE SSEE DID APPEAR BUT FAILED TO PRODUCE BOOKS OF ACCOUNT, DETAILS/VOUCHER S FOR THE PURPOSE OF COMPLETION OF ASSESSMENT. A CATEGORICAL FINDING WA S MADE BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS FAILED TO P RODUCE THE BOOKS OF ACCOUNT, ETC. AT ANY TIME DURING THE ASSESSMENT PROCEEDINGS. EVEN VIDE PARAGRAPH NO.3.5, THE ASSESSING OFFICER HAS EXPRESS ED HIS HELPLESSNESS BY STATING THAT HE HAD NO OPTION BUT ALSO TO INVOKE THE PROVISIONS OF SECTION 145 OF THE I.T.ACT. SO AS TO COMPUTE THE RE ASONABLE PROFIT OF THE ASSESSEE FOR ASSESSMENT PURPOSES. IN VIEW OF THE T OTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS NOTED BY US HEREINABOV E, WE FIND NO FALLACY IN THE ACTION OF THE ASSESSING OFFICER AND HEREBY CONFIRM THE SAME. THIS GROUND IS, THEREFORE, DISMISSED. 3. GROUND NO.2 READS AS UNDER: 2. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CO NFIRMING ADDITION OF RS.11,07,818/- ON ACCOUNT OF LOW GROSS PROFIT RATE. 3.1. FACTS OF THE CASE HAVE REVEALED THAT FOR THE Y EAR UNDER CONSIDERATION ON THE SALES OF RS.5,26,34,537/-, THE GROSS PROFIT WAS DECLARED AT RS.1,30,724/- GIVING A RATE OF 0.24%. WHEREAS IN THE PAST, I.E. FOR ASSESSMENT YEAR 2004-05 ON THE SALES OF RS .2,18,19,108/- THE GROSS PROFIT WAS DECLARED AT RS.7,92,071/- GIVING R ATE OF 3.63%. DUE TO FALL IN GROSS PROFIT RATE, A SHOW-CAUSE NOTICE WAS ISSUED. AS NOTED ITA NO. 3960/AHD/2008 SHREE GAJANAND MOTORS VS. ITO ASST.YEAR - 2005-06 - 3 - ABOVE, THERE WAS NO PROPER COMPLIANCE FROM THE SIDE OF THE ASSESSEE. IT HAS ALSO BEEN REVEALED FROM THE ASSESSMENT ORDER TH AT DUE TO FAILURE ON THE PART OF THE ASSESSEE EVEN PENALTY PROCEEDINGS U /S.271(1)(B) WAS ALSO INITIATED. THE ASSESSING OFFICER HAS DISCUSSED AT LENGTH ABOUT THE BUSINESS OF THE ASSESSEE AND THEREAFTER ARRIVED AT THE CONCLUSION THAT THE GROSS PROFIT RATE FOR THE YEAR UNDER CONSIDERATION CAN ALSO BE ADOPTED AT 3.63% AS IT WAS DECLARED IN THE IMMEDIATELY PRECEDI NG ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 2004-05. AFTER AN ELABORATE DISCUSSION VIDE PARAGRAPH NOS.3.4 & 3.6 OF THE ASSESSMENT ORDER, TH E ASSESSING OFFICER HAS ADOPTED THE SAID RE-COURSE AND, ACCORDINGLY, TH E DIFFERENCE IN THE GROSS PROFIT OF RS.17,79,909/- WAS ASSESSED. 4. THE FIRST APPELLATE AUTHORITY HAS CONSIDERED SE VERAL ASPECTS OF THE CASE AND THEREAFTER HELD THAT IT WOULD BE FAIR TO A DOPT THE GROSS PROFIT RATE AT 2.5%. THEREFORE, PART RELIEF WAS GRANTED AND T HE ADDITION WAS RESTRICTED TO RS.11,07,818/- AS AGAINST THE ADDITI ON MADE BY THE ASSESSING OFFICER OF RS.17,79,909/-. NOW THE ASSES SEE IS FURTHER IN APPEAL BEFORE US. 5. AS WE HAVE NOTED IN ABOVE PARAGRAPHS WHILE DECID ING GROUND NO.1, THE APPELLANT HAS NOT FURNISHED THE BOOKS OF ACCOUNT AND OTHER DETAILS BEFORE THE ASSESSING OFFICER. DURING THE S CRUTINY PROCEEDINGS OF ASSESSMENT, IT WAS THE RESPONSIBILITY OF THE ASSESS EE TO PLACE ON RECORD ALL THE REQUISITE INFORMATION SO THAT THE CORRECT INCOM E SHOULD BE ASSESSED. IN THE ABSENCE OF BOOKS OF ACCOUNT AND OTHER EVIDEN CE, THE ASSESSING OFFICER HAD NO OPTION BUT TO ADOPT A FAIR PERCENTAG E OF PROFIT. A TAXPAYER MUST NOT POINT HIS FINGER AT THE REVENUE IF HE HIMS ELF IS AT FAULT. RATHER ITA NO. 3960/AHD/2008 SHREE GAJANAND MOTORS VS. ITO ASST.YEAR - 2005-06 - 4 - IN THE PRESENT CASE, THE APPROACH OF THE ASSESSING OFFICER CAN BE SAID TO BE GENEROUS. THE FIRST APPELLATE AUTHORITY HAS AGA IN GIVEN SOME RELIEF BUT EVEN THEN THE ASSESSEE IS NOT SATISFIED AND PREFERR ED SECOND APPEAL BEFORE US. HOWEVER, THE STRANGE BEHAVIOUR OF THE ASSESSEE IS THAT EVEN BEFORE US, NO DOCUMENTARY EVIDENCE OR BOOKS OF ACCOUNT HAV E BEEN PLACED TO DEMONSTRATE THAT THERE WAS A REASONABLE BASIS FOR L OWER RATE OF PROFIT, WHICH RESULTED INTO FALL IN GROSS PROFIT RATE DURI NG THE YEAR UNDER CONSIDERATION. IN VIEW OF THIS, WE FIND NO FORCE IN THIS GROUND OF THE ASSESSEE, AS WELL, HENCE DISMISSED. 6. GROUND NOS.3 & 4 READ AS UNDER: 3. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN C ONFIRMING DISALLOWANCE PARTNERS REMUNERATION AMOUNTING TO RS.1,20,000/- BY INVOKING PROVISIONS OF SECTION 184 (5) OF THE ACT. HE OUGHT TO HAVE ALTERNATIVELY ALLOWED DEDUCTION OF THIS REMUNERATION U/S.37 OF THE ACT TREATING THE PARTNERS TO BE ORDINARY EMPLOYEE OF THE FIRM. 4. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING INTEREST PAID TO PARTNERS AMOUNTING TO RS.65,355/- BY INVOKING PROVISIONS OF SECTION 184(5 ) OF THE ACT. HE OUGHT TO HAVE ALTERNATIVELY ALLOWED DEDUCT ION OF INTEREST U/S.36(1)(III)/37(1) OF THE ACT TREATING T HE PARTNERS CAPITAL TO BE BORROWINGS MADE BY THE FIRM AND UTILI ZED FOR THE PURPOSE OF APPELLANTS BUSINESS. 6.1. THE ASSESSING OFFICER HAS NOTED THAT THE FIRM HAD FAILED TO COMPLY WITH THE NOTICES ISSUE U/S.142(1) OF THE I.T.ACT. IT HAS ALSO BEEN NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD REFRAIN ED FROM PRODUCING BOOKS OF ACCOUNT. ON ACCOUNT OF THOSE FAILURE ON THE PART OF THE ASSESSEE-FIRM, THE ASSESSING OFFICER HAD TO INVOKE THE PROVISIONS OF ITA NO. 3960/AHD/2008 SHREE GAJANAND MOTORS VS. ITO ASST.YEAR - 2005-06 - 5 - SECTION 184(5) OF THE I.T.ACT, ACCORDING TO WHICH T HE ASSESSEE IS NOT ENTITLED FOR THE AMOUNT OF INTEREST ON THE CAPITAL OF THE PARTNERS I.E. RS.65,355/- AND THE AMOUNT OF REMUNERATION TO PARTN ERS OF RS.1,20,000/-. WITH THE RESULT, TOTAL OF THE TWO, I.E. RS.1,85,355 /- WAS TAXED IN THE HANDS OF THE ASSESSEE. THE FIRST APPELLATE AUTHORITY HA S AFFIRMED THE ASSESSING OFFICERS ACTION PRIMARILY ON THE GROUND THAT THE DISALLOWANCE WAS DIRECTLY COVERED BY THE PROVISIONS OF SECTION 184(5 ) OF THE I.T.ACT. 7. ON HEARING THE SUBMISSION OF BOTH THE SIDES, WE FIND NO MISTAKE IN THE ORDERS OF THE AUTHORITIES BELOW BECAUSE SECTION 184(5) OF THE I.T.ACT. PRESCRIBES THAT INSPITE OF ANYTHING CONTAINED IN AN Y OTHER PROVISIONS OF THIS ACT, WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THERE IS ON THE PART OF A FIRM A FAILURE WAS COMMITTED AS MENTIONED IN SECTIO N 144 OF THE I.T.ACT., THEN THE FIRM SHALL BE SO ASSESSED THAT NO DEDUCTIO N BY WAY OF ANY PAYMENT OF INTEREST, SALARY, BONUS, COMMISSION OR R EMUNERATION, BY WHATEVER NAME CALLED, MADE BY SUCH FIRM TO ANY PART NER OF SUCH FIRM SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS . ONCE THE SECTION CLEARLY PRESCRIBES THAT CERTAI N EXPENSES, SUCH AS, INTEREST, SALARY, BONUS, ETC. SH OULD NOT BE ALLOWED IN CASE OF NON-COMPLIANCE FROM THE SIDE OF THE ASSESSE E, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY INVOKED THE PROVISION S OF SECTION 184(5) OF THE I.T.ACT TO COMPUTE THE CORRECT INCOME OF THE AS SESSEE. LIKEWISE, THE DISALLOWANCE OF INTEREST PAID TO PARTNERS BY INVOKI NG SECTION 184(5) OF THE I.T.ACT WAS CORRECTLY MADE SINCE THE NON-ATTEND ANCE OF THE APPELLANT WAS AN ACCEPTED FACT. LIKEWISE, THE ALTERNATE CLAI M OF ALLOWANCE OF INTEREST U/S.36(1)(VIII) & U/S.37(1) OF THE I.T.ACT HAVE AN ALTOGETHER ITA NO. 3960/AHD/2008 SHREE GAJANAND MOTORS VS. ITO ASST.YEAR - 2005-06 - 6 - DIFFERENT CRITERIA WHICH WAS NOT PLACED BEFORE THE LOWER AUTHORITIES. THEREFORE, THESE GROUNDS ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 8/ 10 /2010. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED / /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VI, BARODA 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..30/09/2010 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 04/10/2010 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 08/10/10 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 08/10/10 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER