ITO 4(2)(2), MUMBAI V. KANAKSHREE FABRICS P.LTD, MUMBAI

ITA 4040/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70850 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 08-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Section: 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , . ! , '# ' $ BEFORE SHRI I.P. BANSAL, JM AND SHRI SANJAY ARO RA, AM ./ I.T.A. NO. 4040/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR: 2008-09 THE ACIT, CIR.4(2), ROOM NO.642, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400020 % % % % / VS. M/S.KANAKSHREE FABRICS PVT. LTD., 204,VINOD VILLA, 66, JAGRUTI MATA MANDIR MAR, RAMWADI, MUMBAI 400002 ' '# ./ ( ./ PAN/GIR NO. : AAACK 4756E ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) C.O. NO.125/MUM/2013 (ARISING OUT OF ITA NO.4040/MUM/2012, A.Y.2008-09) M/S.KANAKSHREE FABRICS PVT. LTD., 204,VINOD VILLA, 66, JAGRUTI MATA MANDIR MAR, RAMWADI, MUMBAI 400002 % % % % / VS. THE ITO, WARD 4(2)(2), MUMBAI. ' '# ./ ( ./ PAN/GIR NO. : AAACK 4756E CROSS OBJECTOR .. APPELLANT IN APPEAL REVENUE BY SHRI S.S.RANA ASSESSEEBY SHRI C.V.JAIN % 3 4# / DATE OF HEARING : 02/09/2013 5 & 3 4# / DATE OF PRONOUNCEMENT : 02/09/2013 '6 / O R D E R PER I.P.BANSAL,J.M: THE APPEAL IS FILED BY THE REVENUE AND CROSS OBJE CTION IS FILED BY THE ASSESSEE. BOTH ARE DIRECTED AGAINST ORDER PASSED B Y LD. CIT(A)-8, MUMBAI DATED 10/3/2012 FOR ASSESSMENT YEAR 2008-09. GROUNDS OF APPEAL READ AS UNDER: ./ I.T.A. NO. 4040/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR: 2008-09& C.O. NO.125/MUM/2013 2 GROUNDS OF REVENUES APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN REDUCING THE ADDITION TO 3% WHEN ASSESSEE DID NOT PRODUCE ANY DETAILS OF EXPENSES DURING ASSESSMENT PROCEEDINGS, INSPITE OF SUFFICIENT OPPORTUNITY GIVEN FOR BEING HEARD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT A.O. HAS NOT POINTED ANY DEFE CTS IN BOOKS OF ACCOUNT DURING REMAND PROCEEDINGS WHEN THE A.O. WAS NOT ASKED SO I N THE REMAND PROCEEDINGS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW TO BE SET ASIDE AND TH AT OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER A NY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. GROUNDS OF ASSESSEES CROSS OBJECTIONS: 1. ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE PART ADDITION BY REDUCING TH E ADDITION TO 3% OF NET PROFIT WITHOUT CONSIDERING THE FACT THAT ALL THE DESIRED D ETAILS WERE PRODUCED BEFORE HIM AT THE TIME OF APPEAL, WHICH WERE SENT BY HIM TO THE L EARNED ASSESSING OFFICER FOR GIVING A REMAND REPORT ON THE SAME AND THE LEARNED CIT(A) HAS FURTHER ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSMENT PROCEEDING S WERE TIME BARRED AND NO PROPER OPPORTUNITY OF HEARING WAS GIVEN. 2. THE LEARNED CIT(A) HAS FURTHER ERRED IN UPHOLDIN G THE PART ADDITION WITHOUT CONSIDERING THE FACT THAT THE LEARNED ASSESSING OFF ICER HAD FAILED TO GIVE ANY OPPORTUNITY TO THE RESPONDENT - ASSESSEE EVEN AT TH E TIME OF REMAND PROCEEDINGS AND HAD FURTHER FAILED TO CONSIDER THE DETAILS OF E XPENSES ETC. FURNISHED WITH THE PAPER BOOK. 3. WITHOUT PREJUDICE THE LEARNED CIT (A) HAS ERRED IN UPHOLDING A TIME BARRED ORDER. 2. THE IMPUGNED ASSESSMENT ORDER IS DATED 16/12/201 0 PASSED UNDER SECTION 144 OF THE INCOME TAX ACT, 1961(THE ACT). THE AO ASKED THE ASSESSEE TO FILE VARIOUS INFORMATION WHICH WAS PARTLY FILED VI DE LETTER DATED 26/10/2010. HOWEVER, THE AO WAS NOT SATISFIED WITH THE DETAILS AND NO FURTHER DETAILS WERE FILED. TAKING NOTE OF THE FACTS THAT NET PROFIT W AS DECLARED BY THE ASSESSEE AT 2.38% , WHICH ACCORDING TO AO WAS AT LOWER SIDE, HE ESTIMATED NET PROFIT RATE AT 5% OF THE SALES WHICH WAS COMPUTED AT RS.37,53,344/ -. GIVING CREDIT TO THE RETURNED INCOME OF RS.17,89,340/- AN AMOUNT OF RS.19,64,004/- WAS ADDED AND ASSESSMENT WAS FRAMED AT RS.37,53,334/- IN PLA CE OF RETURNED INCOME OF RS.17,89,340/-. ./ I.T.A. NO. 4040/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR: 2008-09& C.O. NO.125/MUM/2013 3 3.1 AN APPEAL WAS FILED BEFORE LD. CIT(A) IN WHICH THE ASSESSEE CONTESTED THE ACTION OF AO IN PASSING ORDER UNDER SECTION 144 OF THE ACT. THE ADDITION WAS ALSO CONTESTED ON THE GROUND THAT NET PROFIT RATE OF 5% ON SALE HAS BEEN APPLIED ARBITRARILY WITHOUT CONSIDERING THE FACT THAT THE N ET PROFIT RATE RATIO AT 2.38% FOR THE YEAR UNDER CONSIDERATION WAS HIGHER THAN THE NE T PROFIT RATE RATIO OF IMMEDIATE PROCEEDING ASSESSMENT YEAR WHICH WAS 2.14 %. IT WAS ALSO CONTENDED THAT ACCOUNTS OF THE ASSESSEE COMPANY WERE FULLY MA INTAINED AND THERE WAS NO FAULT FOUND BY THE A.O, THEREFORE, THERE IS NO REAS ON TO APPLY NET PROFIT RATE ON ESTIMATE BASIS. 3.2 CONSIDERING ALL THESE SUBMISSIONS LD. CIT(A) CA LLED FOR REMAND REPORT FROM THE AO BY SENDING ALL THE DETAILS FILED BY THE ASS ESSEE BEFORE HIM WHICH CONSISTED 196 PAGES. IN THE REMAND REPORT AO CONFI RMED HIS EARLIER ACTION STATING THAT AMPLE OPPORTUNITY WAS GIVEN TO THE AS SESSEE AND IN VIEW OF NON- COMPLIANCE BY THE ASSESSEE THE ESTIMATION MADE SHO ULD BE UPHELD. THE FINAL CONCLUSION OF THE AO IN THE REMAND REPORT IS REPR ODUCED IN THE ORDER OF LD. CIT(A). IN RESPONSE, THE ASSESSEE HAS SUBMITTED TH AT IT IS A DEALER AND MANUFACTURER OF GREY FABRICS. IT IS IN THE SAME LI NE OF BUSINESS SINCE 1997 AND ALSO BEING REGULARLY ASSESSED FOR ALL THE PRECEDING YEARS. FOR ASSESSMENT YEAR 2006-07 THE ASSESSEE WAS ASSESSED BY WAY OF SCRUTIN Y ASSESSMENT ORDER AND NO SUBSTANTIAL ADDITIONS WERE MADE EXCEPT DISALLOWA NCE UNDER SECTION 40A(2)(B) OF THE ACT AND ADDITION WAS MADE ON ACCOUNT OF AIR INFORMATION, THESE ADDITIONS WERE DELETED IN APPEALS. THE GROSS PROFIT RATIO A ND NET PROFIT RATIO OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION TWO PRE CEDING YEARS IS AS FOLLOWS: ASSESSMENT YEAR SALES T.O GROSS PROFIT RATIO NET PROFIT RATIO 2008-09 75066895 7382335 9.83% 1789339 2.38% 2007-08 94542163 8401565 8.89% 2022480 2.13% 2006-07 106764304 8937839 8.37% 2497608 2.34% IT WAS SUBMITTED THAT AO HAS FAILED TO APPRECIATE T HAT ASSESSEE IS MAINTAINING PROPER BOOKS OF ACCOUNTS FOR WHICH AUDIT REPORT HAS BEEN OBTAINED UNDER SECTION ./ I.T.A. NO. 4040/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR: 2008-09& C.O. NO.125/MUM/2013 4 44B OF THE ACT AND WHICH WAS FILED BEFORE THE AO. THE AO SHOULD NOT HAVE MADE ANY ADDITION. IT WAS FURTHER SUBMITTED THAT DUE TO THE DEATH OF FATHER-IN-LAW OF THE DIRECTOR, ASSESSEE COULD NOT ATTEND BEFORE AO A S THE DIRECTOR OF THE ASSESSEE COMPANY WAS TO RUSH TO JODHPUR. ALL THE DETAILS WH ICH WERE REQUIRED BY THE AO WERE FURNISHED BEFORE LD. CIT(A), WHICH HAVE BEEN F ORWARDED TO AO DURING THE REMAND PROCEEDINGS AND NO REASON HAS BEEN ASSIGNED BY THE AO FOR MAKING HIGHER ESTIMATION OF PROFIT. 3.3 CONSIDERING ALL THESE SUBMISSIONS OF THE ASSESS EE, LD. CIT(A) THOUGH HAS UPHELD THE AOS ACTION OF PASSING THE EX-PARTE ASS ESSMENT ORDER BUT HAS REDUCED THE NET PROFIT RATE FROM 5% TO 3%. ACCORD INGLY ADDITION OF RS.15,01,338/- HAS BEEN DELETED. AGGRIEVED, REVE NUE HAS FILED AFOREMENTIONED GROUNDS APPEAL. 4. THE ASSESSEE IN ITS CROSS OBJECTIONS HAS AGITATE D THE CONFIRMATION OF 3% NET PROFIT RATE. 5. AFTER NARRATING THE FACTS LD. DR SUBMITTED THAT AO WAS RIGHT IN ESTIMATING NET PROFIT RATE AT 5% ON THE BASIS OF DEFAULT OF TH E ASSESSEE TO FURNISH DETAILS. HE SUBMITTED THAT A LETTER WAS RECEIVED FROM AO D ATED 23/8/2012, IN WHICH AO HAS MAINLY STATED THAT THE DEFECT IN THE BOOKS OF A CCOUNTS COULD NOT BE POINTED OUT AS THE AO WAS NOT ASKED BY LD. CIT(A) TO DO SO IN THE REMAND PROCEEDINGS. HOWEVER, AO ADMITS THAT ALL THE DOCUMENTS WHICH HAV E BEEN FILED IN THE PAPER BOOK WERE PRODUCED BEFORE LD. CIT(A) EXCEPT WRITTE N SUBMISSIONS MADE BEFORE LD. CIT(A). IT IS FURTHER SUBMITTED BY THE AO THA T WHILE UPHOLDING NET PROFIT RATE AT 3% LD. CIT(A) HAS NOT GIVEN ANY BASIS. REFERRIN G TO THE SAID LETTER OF AO IT WAS SUBMITTED BY LD. DR THAT ORDER OF LD. CIT(A) SHOULD BE SET ASIDE AND THAT OF AO BE RESTORED. 6. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. AR T HAT ALL THE DETAILS REQUIRED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDIN GS WERE FURNISHED IN THE PAPER BOOK FILED BEFORE LD. CIT(A) AND ALL THESE DO CUMENTS WERE FORWARDED BY LD. ./ I.T.A. NO. 4040/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR: 2008-09& C.O. NO.125/MUM/2013 5 CIT(A) TO THE AO. HE SUBMITTED THAT THOUGH THE COP Y OF LETTER VIDE WHICH THE AO WAS ASKED TO FURNISH REMAND REPORT HAS NOT BEEN SUP PLIED TO THE ASSESSEE BUT IT HAS NOT BEEN SHOWN ANYWHERE BY THE REVENUE THAT LD. CIT(A) PREVENTED THE AO TO GO THROUGH THE DOCUMENTS WITH REFERENCE TO BOOKS O F ACCOUNTS WHICH ARE DULY MAINTAINED BY THE ASSESSEE. HE SUBMITTED THAT THE BASIS TO ADOPT NET PROFIT RATE CAN BE SEEN FROM THE ORDER OF LD. CIT(A), WHERE HE HAS RELIED UPON EARLIER YEARS NET PROFIT RATE. THUS IT WAS SUBMITTED BY LD. AR T HAT LD. CIT(A) WAS RIGHT IN NOT SUSTAINING THE NET PROFIT RATE ADOPTED BY THE AO. HE SUBMITTED THAT SO FAR AS IT RELATES TO CROSS OBJECTIONS FILED BY THE ASSESSEE T HE SAME ARE NOT PRESSED. HENCE, THE SAME MAY BE DISMISSED AS NOT PRESSED. 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. WHEN ALL THE DETAILS HAVE BEEN FORWARD ED BY LD. CIT(A) TO THE AO, WE DO NOT SEE ANY FORCE IN THE CONTENTION OF LD. A O THAT LD. CIT(A) DID NOT ASK HIM TO EXAMINE THE BOOKS OF ACCOUNT. SUCH CONTENTI ON OF AO IS LIABLE FOR REJECTION AND IS ACCORDINGLY REJECTED. IT IS ADMIT TED BY THE AO THAT ALL THESE DOCUMENTS WERE FORWARDED TO HIM BY THE LD. CIT(A). THE CHART REPRODUCED ABOVE IS ALSO NOT DISPUTED, ACCORDING TO WHICH EARLIER YE ARS NET PROFIT RATE WAS AROUND 2.5%. TAKING THE SAME AS BASIS, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) VIDE WHICH HE HAS UPHELD THE A PPLICATION OF NET PROFIT RATE OF 3%. WE DECLINE TO INTERFERE AND THE APPEAL FILED B Y THE REVENUE IS DISMISSED. 8. IT HAS ALREADY BEEN MENTIONED THAT LD. AR DID NOT PRESS THE CROSS OBJECTIONS, THE SAME ARE ALSO DISMISSED AS NOT PRES SED. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE BOTH ARE DISMISSED IN THE MANNER AFORESA ID. ORDER PRONOUNCED IN THE OPEN COURT ON 02/09/2013 . '6 3 & #' 7 8%9 02/09/2013 3 : SD/- SD/- ( SANJAY ARORA) (I.P.BANSAL) /ACCOUNTANT MEMBER '# /JUDICIAL MEMBER MUMBAI; 8% DATED 02/09/2013 ./ I.T.A. NO. 4040/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR: 2008-09& C.O. NO.125/MUM/2013 6 '6 '6 '6 '6 3 33 3 *4;< *4;< *4;< *4;< ='<&4 ='<&4 ='<&4 ='<&4 / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. > ( ) / THE CIT(A)- 4. > / CIT 5.