Shri Pravinchandra Vasantlal Shah, Surat V. The Income tax Officer,Ward-8(4), Surat

ITA 4016/AHD/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0358 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 27-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 12-12-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ITA NO AHD
• Assessee Lawyers: ASSESSMENT YEAR ITO WARD SURA
• Keywords: Gross profit estimation; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER DATE OF HEARING : 27/8/09 DRAFTED ON: 14/ 09/09 1. ITA NO.3969/AHD/2008 (BY REVENUE) 2. ITA NO.4016/AHD/2008 (BY ASSESSEE) ASSESSMENT YEAR : 2005-06 1. THE ITO WARD-8(4) SURAT 2. SHRI VASANTLAL PARSHOTTAMDAS SHAH SURAT VS. 1.SHRI VASANTLAL PARSHOTTAMDAS SHAH (DECD) TRHOUGH SON PRAVINBHAI V.SHAH, 202-B, PARSHWANATH APARTMENT LIMBACHIA FALIA KATARGAM, SURAT 2. THE ITO, WARD-8(4) SURAT PAN/GIR NO. : ACTPS 6592 G (APPELLANT) .. (RESPONDENT) ASSESSEE BY: SHRI NIRAV P.SHAH, A.R. REVENUE BY: SHRI C.K.MISHRA, D.R. O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THESE CROSS APPEALS; ONE BY THE REVENUE AND THE OTHER BY THE ASSESSEE ARE AGAINST THE ORDER OF THE CIT(APPEALS)- V, SURAT DATED 29/09/2008 PASSED FOR ASSESSMENT YEAR 2005-06. 2. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE IN ITA NO.4016/AHD/2008. ITA NOS.3969 & 4016/AHD/2008 ITO VS. SHRI VASANTLAL PARSHOTTAMDAS SHAH ASST.YEAR 2005-06 - 2 - 3. THE FIRST ISSUE IN ASSESSEES APPEAL IS AGAINST ASSESSMENT FRAMED U/S.144 OF THE I.T. ACT, 1961. 4. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE, HAS NOT PRESSED THIS ISSUE, ACCORDINGLY, THE SAME IS DISMI SSED AS NOT PRESSED. 5. THE NEXT ISSUE IN ASSESSEES APPEAL IS AGAINST REJECTION OF BOOK RESULTS AND APPLICATION OF GROSS PROFIT RATE CONFIR MED BY THE CIT(APPEALS) AT 6%. FOR THIS, THE ASSESSEE HAS RAI SED THE FOLLOWING GROUNDS:- B. ADDITION ON ACCOUNT OF G.P.RATE: 5. THE LEARNED CIT(A), ERRED IN CONFIRMING THE AD HOC ADDITION OF G. P. AT 6%. 6. THE LEARNED CIT(A), FAILED TO APPRECIATE TH AT, THE APPELLANT WAS SENIOR CITIZEN BEING REGULAR ASSESSED WITH THE SAME LINE O F BUSINESS SINCE YEARS AT THE G.P.RATE RANGING FROM 1.50%-2.00%. 7. FURTHER, THE ASSESSEE HAD BEEN AUDITED U/S .44AB IN THE NEARER ASSESSMENT YEARS 2001-2002 AND 2002-2003 WHEN G.P. RATE WAS ASSESSED 2.023% AND 1.969% RESPECTIVELY. 8. FURTHER, THE ASSESSEE WAS GIVEN LOWER RATE TDS CERTIFICATE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION LOOKING AT THE LOW PROFITABILITY OF THE ASSESSEE. 9. IT WAS THE LAST YEAR OF OPERATION OF THE ASSESSEE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDI TION MADE IS UNJUSTIFIED AND REQUIRED TO BE DELETED. ITA NOS.3969 & 4016/AHD/2008 ITO VS. SHRI VASANTLAL PARSHOTTAMDAS SHAH ASST.YEAR 2005-06 - 3 - 6. THE FACTS LEADING TO THE ABOVE ISSUES, BRIEFLY, ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, NOTICED THAT THE ASSESSEE IS IN THE LINE OF MANUFAC TURING OF DIAMONDS OF LABOUR JOB AND HIS GROSS PROFIT IS AT 2.64%. TH E ASSESSING OFFICER, FURTHER NOTED THAT IN THE DIAMOND BUSINESS LINE, THE GROSS PROFIT IS AROUND 6% AS CONFIRMED BY JURISDICTIONAL ITAT IN THE CASE OF BHADIYADRA DIAMONDS VS. DCIT [ IT (SS)A NO.16/ AHD/1999 ]. ACCORDINGLY, THE ASSESSING OFFICER ONLY ON THE BASI S OF LOW GROSS PROFIT, REJECTED THE BOOKS OF ACCOUNT U/S.145(3) A ND APPLIED GROSS PROFIT AT 6%. 7. AGGRIEVED ASSESSEE PREFERRED THE APPEAL BEFORE T HE CIT(APPEALS). 8. THE CIT(APPEALS) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY STATING THE REASON THAT THE A SSESSEE IS UNABLE TO PRODUCE THE DETAILS REGARDING LABOUR EXPENSES AND, ACCORDINGLY, THE ASSESSING OFFICER WAS LEFT WITH NO CHOICE BUT TO ES TIMATE THE INCOME. THE RELEVANT FINDINGS OF THE LEARNED CIT(APPEALS) R EADS AS UNDER:- ITA NOS.3969 & 4016/AHD/2008 ITO VS. SHRI VASANTLAL PARSHOTTAMDAS SHAH ASST.YEAR 2005-06 - 4 - .IN THE INSTANT CASE THE AO HAS TAKEN THE DATA FR OM THE ORDER OF THE ITAT AHD. WHICH TO THE BEST OF HIS INF ORMATION WAS CORRECT ESTIMATE OF INCOME. THOUGH THE APPELLANT HAS ALSO RELIED ON THE DECISION OF SAME JURISDICTIONAL ITAT I AM NOT INCLINED TO ACCEPT THE ARGUMENT OF THE APPELLANT SI NCE IN BOTH THE CASES ARE DISTINGUISHABLE ON FACTS. IN CASE O F ANISH B SHAH (HUF) THE APPELLANT WAS MERELY ACTING AS AN AG ENT AND THE NECESSARY DETAILS TO PROVE HIS CLAIM WAS PRODUC ED BEFORE THE AUTHORITIES BELOW AND THAT ACCOUNTS OF THE ASSE SSEE CLEARLY DEPICT THAT THE PRINCIPLES WERE MADE AWARE OF SUCH LABOUR CHARGES SO PAID. THEREFORE IT IS IN THESE CIRCUMST ANCES THEIR LORDSHIP HAD HELD THAT IN CASE OF MERE COMMISSION I NCOME MARGIN OF 6% APPEARED TO BE HIGH AND THAT 2# OF COM MISSION WAS REASONABLE. SIMILARLY IN CASE OF SHRI BHARAT KUMAR R MEHTA ALSO THE ASSESSEE HAD IDENTIFIED THE PRINCIPL ES AND AGENTS ON CASE TO CASE BASIS AND THEREFORE THE APPE LLANTS CASE CANNOT BE EQUATED WITH THAT OF THESE TWO CASES REFE RRED TO BY THE APPELLANT AND THUS IN ABSENCE OF MATERIAL PRODU CED BEFORE THE AO TO JUSTIFY SUCH CLAIM ADDITION MADE BY THE AO NEEDS NO INTERFERENCE AND HENCE ADDITION MADE BY THE APPE LLANT IS CONFIRMED. 9. AGGRIEVED ASSESSEE, CAME IN APPEAL BEFORE US AND STATED THAT THE ASSESSEE IS REGULARLY ASSESSED WITH INCOME TAX DEPARTMENT AND HE IS IN THE SAME LINE OF BUSINESS SINCE LAST MANY YEARS. IT WAS CLAIMED BEFORE US THAT THE GROSS PROFIT RATE OF THE ASSESSEE IS 1.5% TO 2% AND, MOREOVER, THE ASSESSEES ACCOUNTS HAVE BEE N AUDITED U/S.44AB OF THE I.T. ACT, 1961 IN ASSESSMENT YEARS 2000-01 TO 2002-03, WHERE GROSS PROFIT RATE DECLARED BY THE AS SESSEE AS PER ACCOUNTS IS AT 2.023% AND 1.969% RESPECTIVELY. FU RTHER THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE ONLY REASO N FOR REJECTING THE ITA NOS.3969 & 4016/AHD/2008 ITO VS. SHRI VASANTLAL PARSHOTTAMDAS SHAH ASST.YEAR 2005-06 - 5 - BOOK RESULTS IS LOW GROSS PROFIT AND THE ASSESSEE I S UNABLE TO PRODUCE THE DETAILS REGARDING LABOUR CHARGES. HE STATED TH AT THE COMPLETE DETAILS IN RESPECT OF LABOUR CHARGES WERE PRODUCED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER HAS JUS T REJECTED THE BOOK RESULTS ONLY ON LOW GROSS PROFIT WITHOUT COMP ARING THE GROSS PROFIT RATE IN THE DIAMOND BUSINESS OF SURAT. BUT T HE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY INSTANCE THAT THE GROSS PROFIT RATE IN DIAMOND INDUSTRY IS AT 6%. IN VIEW OF THES E ARGUMENTS, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THIS I S NOT A CASE FOR REJECTING THE BOOK RESULTS U/S.145(3) OF THE I.T. ACT, 1961 AND THE BOOK RESULT MAY BE UPHELD. 11. ON THE OTHER HAND, THE LD.DR COULD NOT CONTROVE RT THE ARGUMENTS ADVANCED BY THE LD.COUNSEL FOR THE ASSESS EE AND HE HAS JUST RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOI NG THROUGH THE FACTS OF THE CASE, WE FIND THAT NEITHER OF THE AUT HORITIES HAS GIVEN ANY FINDING AS REGARDS TO THE REASONS FOR REJECTION OF BOOK RESULTS U/S.145 OF THE ACT. WE FIND THAT ONLY REASON FOR REJECTIN G THE BOOK RESULTS WAS THAT THE ASSESSING OFFICER ON PRESUMPTION BASIS NOTED IN THE ITA NOS.3969 & 4016/AHD/2008 ITO VS. SHRI VASANTLAL PARSHOTTAMDAS SHAH ASST.YEAR 2005-06 - 6 - ASSESSMENT ORDER THAT THE GROSS PROFIT RATE IN THE LINE OF BUSINESS IS AT 6%. EVEN THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY COMPARABLE INSTANCE WHERE HE CAN SHOW THAT GROSS PR OFIT RATE IN THE LINE OF BUSINESS IS MORE THAN WHAT THE ASSESSEE HAS DECLARED, I.E. AT 2%. IN VIEW OF ABOVE FACTS AND IN VIEW OF THE FAC T THAT THERE IS NO DEFECT IN THE BOOKS OF ACCOUNT POINTED OUT BY THE L D.DR OR THE ASSESSING OFFICER, THE BOOK RESULTS DECLARED BY THE ASSESSEE SHOULD HAVE BEEN ACCEPTED. ACCORDINGLY WE DIRECT THE ASSE SSING OFFICER TO ACCEPT THE BOOK RESULT AND THIS ADDITION OF GROSS P ROFIT IS DELETED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. REVENUES APPEAL, ITA NO.3969/AHD/2008 14. THE FACTS IN THIS APPEAL OF THE REVENUE IS THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS , NOTED FROM THE BALANCE-SHEET THAT THE LIABILITIES APPEARING AS ON 31.03.2005 ARE EITHER CEASED OR ARE BOGUS AND THE ASSESSEE HAS NOT FILED ANY DETAILS REGARDING SUCH LIABILITIES. ACCORDINGLY, THE ASSE SSING OFFICER ADDED THESE CREDITORS ARE NON-EXISTENT LIABILITIES TO TH E RETURNED INCOME OF THE ASSESSEE. ITA NOS.3969 & 4016/AHD/2008 ITO VS. SHRI VASANTLAL PARSHOTTAMDAS SHAH ASST.YEAR 2005-06 - 7 - 15. AGGRIEVED ASSESSEE PREFERRED THE APPEAL BEFORE THE CIT(APPEALS) AND THE CIT(APPEALS) DELETED THE ADDI TION BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE AO. UNDISPUTEDLY THE FACT REMAINS THA T BY ESTIMATING INCOME ON THE GROSS PROFIT MARGIN ON SAL ES THE FIGURES OF BALANCING PURCHASE TAKES THE CHARACTER O F GENUINE AND THEREFORE WHERE IN CASE THE ADDITION IS MADE ON THE BASIS OF GROSS PROFIT MARGIN BY REJECTING THE BOOKS THE A O CANNOT MAKE FURTHER ADDITION IN RESPECT OF SUCH CREDITORS WHICH ARE PRIMARILY RELATED TO SUCH PURCHASES. IN THE INSTA NT CASE THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THOSE CREDITORS WERE NOT RELATED TO THE SAME ACTIVITIES I N MY OPINION NO ADDITION COULD BE MADE ON SUCH OUTSTANDING CREDI TORS ONCE THE INCOME IS ASSESSED ON THE BASIS OF ESTIMATED GP . THUS CONSIDERING THESE FACTS ADDITION MADE BY THE AO IS DELETED. 16. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING T HROUGH THE FACTS OF THE CASE, WE FIND THAT THE CIT(APPEALS) HAS R IGHTLY HELD THAT THE CREDITORS ARE PRIMARILY RELATED TO PURCHASES MADE B Y THE ASSESSEE AND THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SHOW THAT THOSE CREDITORS WERE NOT RELATED TO PURCHASES AND, ACCORDINGLY, ITA NOS.3969 & 4016/AHD/2008 ITO VS. SHRI VASANTLAL PARSHOTTAMDAS SHAH ASST.YEAR 2005-06 - 8 - THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION. WE CONFIRM THE SAME. 17. AS A RESULT, ASSESSEES APPEAL IS PARTLY ALLOWE D, WHEREAS REVENUES APPEAL IS DISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 09/102009. SD/- SD/- ( D.C. AGRAWAL ) ( MAHAV IR SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 09/10/2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT . 2. THE RESPONDENT. 3. THE CIT CO NCERNED 4. THE LD. CIT(APPEALS)-V, SURAT. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD