DCIT 22(3), NAVI MUMBAI V. RISHABH OIL INDUSTRIES, NAVI MUMBAI

ITA 4168/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8880 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 07-08-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 20-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K MEHTA
• Assessee Lawyers: B V JHAVERI
• Keywords: Gross profit estimation; Business income

Judgement Text

PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI G. E. VEERABHADRAPPA, PRESIDENT, & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO. 4168/MUM/2011 ASSESSMENT YEAR : 2006-07 DCIT 22(3), 3 RD FLOOR, TOWER NO.6, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI VS. M/S. RISHABH OIL INDUSTRIES SHOP NO. 18, SHANTI CENTRE, SEC. 17, VASHI, NAVI MUMBAI PAN NO: AAEFR 1398 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N. K. MEHTA RESPONDENT BY : SHRI B. V. JHAVERI DATE OF HEARING: 06.08.2012 DATE OF PRONOUNCEMENT: 05.09.2012 O R D E R PER VIVEK VARMA, J.M. : THE INSTANT APPEAL ARISES FROM THE ORDER OF CIT(A) 33, MUMBAI, DATED 15.03.2011, WHEREIN, THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A) ERRED IN GRANTING RELIEF IN RESPECT OF ADDITION U/S 41(1) OF RS. 30,49,113/- ON ACCOUNT OF SUNDRY CREDITORS FOR WHICH NO CONFIRMATI ONS WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND MOREOVER IN TH E REMAND REPORT IT WAS MERELY STATED BY THE A.O. THAT THE PAYMENTS WER E MADE BY A/C PAYEE CHEQUES AND GENUINENESS THEREOF WERE NOT VERIFIED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A) ERRED IN GIVING THE ABOVE RELIEF MERELY ON THE GROUND THAT C HEQUE PAYMENTS WERE MADE WITHOUT CONSIDERING THE FACT THAT EVEN DURING THE REMAND PROCEEDINGS, THE ASSESSEE COULD NOT ESTABLISH THE G ENUINENESS OF THE CREDIT BALANCE OF ITS CREDITORS. M/S. RISHABH OIL INDUSTRIES I.T.A. NO. 4168/MUM/2011 PAGE 2 OF 8 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A) ERRED IN GRANTING RELIEF ON ACCOUNT OF ADDITIONS MADE OF RS. 20,25,535/- BEING DIFFERENCE IN CREDIT BALANCES OF SUNDRY CREDITORS, ON THE BASIS OF REMAND REPORT WHICH MERELY STATED THAT THE DIFFERENCES HAV E BEEN RECONCILED BY THE ASSESSEE WITHOUT ACTUALLY VERIFYING THE GENUINENESS OF CREDITS AND THEIR DIFFERENCES FROM SUCH CREDITORS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE HAD ALREADY DECLARED RS. 45 LAKHS DURING A.Y. 06- 07 AS A RESULT OF SURVEY AND THEREBY DELETING RS. 6 0,60,000/- ON ACCOUNT OF FALL IN G.P. WITHOUT ACTUALLY VERIFYING AS TO WHETH ER THE SAID DISCLOSURE WAS MADE OUT OF BUSINESS INCOME WHEN THE A.O. HAD FAILE D TO COMMENT ON THIS ASPECT IN THE REMAND REPORT. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RESTO RED. 2. THE FACTS OF THE CASE ARE, THAT, THE APPELLANT I S A PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF CRUSHING OF OIL SEEDS A ND EXTRACTION OF OIL. THE APPELLANT FILED ITS RETURN OF INCOME DECLARING TOTA L INCOME OF RS. 80,95,090. THE ASSESSMENT HAS BEEN COMPLETED ON THE TOTAL INCOME O F RS. 1,93,15,840. THE DISPUTE CENTERS ON THE FOLLOWING ADDITIONS. I) CESSATION OF LIABILITY U/S 41(1) RS. 50,64,748/- (30,49,113 + 20,25,535) II) FALL IN G P RS. 60,60,000. 3. GROUND NOS. 1, 2 & 3. AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSE E WAS REQUIRED TO FILE CONFIRMATIONS, LETTERS TO SOME OF THE CREDITORS WER E SENT BY THE A.O., WHICH WERE RETURNED UNSERVED. AS SOME OF THESE LETTERS C AME BACK UNSERVED, THE ASSESSEE WAS ASKED TO PRODUCE THOSE CREDITORS TO FI LE CONFIRMATIONS, THE ASSESSEE COULD NOT PRODUCE THEM, AT THIS POINT, THE AO CAME TO THE CONCLUSION THAT CREDIT BALANCES SHOWN WERE ACTUALLY RELATING T O ON NON EXISTENT PERSONS, M/S. RISHABH OIL INDUSTRIES I.T.A. NO. 4168/MUM/2011 PAGE 3 OF 8 THEREFORE, INVOKING SECTION 41(1), THE AO ADDED BAC K THE CREDIT BALANCE OF RS. 30,49,113. 4. THE AO ALSO NOTICED THAT CONFIRMATIONS RECEIVED FROM APAR INDUSTRIES AND SARVODYA BLENDING PVT. LTD. WERE AT VARIANCE WITH T HE CREDIT BALANCES SHOWN BY THE ASSESSEE IN ITS BOOKS. ACCORDING TO THE ASSESSE E BOOKS, THE CREDIT BALANCE AGAINST APAR INDUSTRIES WERE AT RS. 42,51,432 BUT AS PER CONFIRMATION RECEIVED FROM THEM, THE CREDIT BALANCE WERE AT RS. 28,57,537 , I.E. A DIFFERENCE OF RS. 13,93,895. SIMILARLY, IN THE CASE OF SARVODAYA, THE BALANCE SHOWN BY THE ASSESSEE WAS AT RS. 13,53,113 AND BALANCE CONFIRMATION RECEIVED FROM TH AT PARTY SHOWED RS . 6,80,866, I.E. DIFFERENCE OF RS. 6,72,265, BOTH DIF FERENCES AGGREGATING TO RS. 20,25,535 (RS. 13,93,895 + RS. 6,72,265). THE IMPUGNED, AGGREGATING TO RS. 50,64,748/-, DETAI LS ARE AS FOLLOWS : A CESSATION LIABILITY U/S. 41(1) RS. 5064748 I CHETAN ENGG. CO. RS. 8491 DEEPAK SOLANKI RS. 17268 RAKHEE PACKAGING MALEGAON RS. 657121 SELECTION HARDWARE & MACHINE TOOLS RS. 19911 SPARK METAL RS. 39225 GANDHEAR OIL REFINERY (I) LTD. RS. 661293 NILISH TRANSPORT RS. 23000 SANJAY ROADLINES RS. 136460 SRIE ARUNA ENTERPRISES RS. 1483986 VINAYAGAN OIL INDUSTRIES RS. 23587 TOTAL RS. 3049113 B APAR INDUSTRIES RS. 1393895 C SARVODAYA BLENDING PVT. LTD. RS. 672265 THE SUBMISSIONS MADE BEFORE THE CIT(A) ARE AS UNDER : A) WITH A VIEW TO VERIFYING THE GENUINENESS OF THE CRE DITORS, LETTERS WERE SENT TO THE ABOVE MENTIONED PERSONS WHICH CAME BACK UNSERVE D. THIS FACT WAS INTIMATED TO THE ASSESSEE AND WAS ASKED TO PRODUCE THESE PERSONS AND FILE CONFIRMATIONS. THE ASSESSEE HAS FAILED TO COMPLY. HENCE ADDITIONS WERE MADE ON THIS SCORE. THE ASSESSEE SUBMITTED A PAPER SHOWING PAYMENTS MAD E BY THE ABOVE 10 PARTIES AS SPECIFIED IN THE ASSESSMENT ORDER. PAYMENTS ARE MA DE BY ACCOUNT PAYEE CHEQUE, IN CERTAIN CASES PAYMENTS HAVE BEEN MADE BY THE BANK A ND THE STATEMENTS ARE FILED IN THE PAPER BOOK. THE STATEMENTS FILED IN RESPECT OF THE ABOVE PARTIES IN THE PAPER BOOK HAS BEEN VERIFIED AND FOUND TO BE IN ORDER. M/S. RISHABH OIL INDUSTRIES I.T.A. NO. 4168/MUM/2011 PAGE 4 OF 8 B) THE ASSESSEE HAS SHOWN APAR INDUSTRIES AS SUNDRY CR EDITORS AT RS. 42,51,432. DURING THE COURSE OF SCRUTINY ASSESSMENT NOTICE U/S .133(6) SENT TO APAR INDUSTRIES LTD. IN RESPONSE TO THE NOTICE U/S.133(6), APAR INDUSTRI ES SUBMITTED COPY OF ACCOUNT STATEMENT THE OUTSTANDING WAS RS. 2,85,77,537 OUT O F RS. 42,51,432. IN THIS REGARD THE ASSESSEE SUBMITTED CONFIRMATION COPIES OF LEDGER A/C, COPIES OF BILL DISCOUNTED BY APAR INDUSTRIES LTD., OF RS. 7,16,626 & RS. 6,82,001. THE STATE BANK OF INDIA, VASHI TURBHE, BRANCH HAD ACCEPTED THE BILL OF EXCHANGE (LC) DATED 27.03.2006 & 16.03.2006 RESPECTIVELY. THE STATE BANK OF INDIA , VASHI- TURBHE, BRANCH HAS DIRECTLY DEBITED FROM THE ACCOUNT ON THE DUE DATE OF THE (HU NDI) BILL OF EXCHANGE. A COPY OF THE BANK ACCOUNT STATEMENT IS AVAILABLE IN THE PAPER BO OK. BI) SAME IS THE CASE WITH SARVODAYA BLENDING PVT. L TD. SARVODAYA SHOWS RS 6,80,866 AGAINST WHICH THE ASSESSEE HAS SHOWN RS. 1 3,53,131. THE ASSESSEE COULD NOT EXPLAIN THE DISCREPANCY IN THE FIGURES. AND THE DI FFERENCE OF RS.6,72,265 WAS ADDED. IN THIS REGARD THE ASSESSEE SUBMITTED CONFIRMATION COPIES OF LEDGER A/C, COPIES OF BILL DISCOUNTED BY SARVODAYA BLENDING PVT. LTD. OF RS. 6 ,72,265. THE STATE BANK OF INDIA, VASHI TURBHE, BRANCH HAD ACCEPTED THE BILL OF EXC HANGE (LC) DATED 18.04.2006. THE STATE BANK OF INDIA, VASHI TURBHE, BRANCH HAVE DI RECLY DEBITED FROM THE ACCOUNT ON THE DUE DATE OF THE (HUNDI) BILL OF EXCHANGE. A CO PY OF THE BANK ACCOUNT STATEMENT IS AVAILABLE IN THE PAPER BOOK. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS AND T AKING INTO ACCOUNT THE EVIDENCE BROUGHT ON RECORD, DELETED THE ADDITION MA DE AT RS. 50,64,748/-. 5. GROUND NO. 4 THIS GROUND PERTAINS TO DELETION OF ADDITION OF RS . 60,60,000 ON ACCOUNT OF LOW GROSS PROFIT. 6. THE FACTS AS AVAILABLE IN THE ORDERS OF THE REVE NUE AUTHORITIES AS WELL AS THE EVIDENCE BROUGHT ON RECORD, WE FIND THAT THE AO NOTICED THAT THERE HAD BEEN A SUDDEN DROP OF GP BY 5% AS COMPARED TO THE P RECEDING YEAR, WHERE IT WAS AT 17.76%. ACCORDING TO THE AO, AS WELL AS THE CIT(A), NO PLAUSIBLE EXPLANATIONS WERE GIVEN BY THE ASSESSEE ON THE REAS ONS FOR FALL IN GP RATE. THE AO, THEREFORE, COMPUTED THE GP AT 15.91% AND ADDED BACK RS. 60,60,000. THE CIT(A), IN PRINCIPAL, SUSTAINED THE ADDITION ON ACC OUNT RECOMPUTED GP. BUT, THE M/S. RISHABH OIL INDUSTRIES I.T.A. NO. 4168/MUM/2011 PAGE 5 OF 8 CIT(A) OBSERVED THAT THE ASSESSEE HAD MADE A DECLAR ATION OF RS. 45,00,000 IN THE CURRENT YEAR, DURING SURVEY OPERATION AND HAD A LSO PAID TAXES. TAKING THAT INTO CONSIDERATION, THE CIT(A) DELETED THE ADDITION . 7. AGAINST THESE OBSERVATIONS ON BOTH THE ISSUES, T HE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 8. BEFORE US, THE DR SUPPORTED THE ORDER OF THE AO, WHILE ON THE OTHER HAND, THE AR SUBMITTED THAT NO DOUBT THE CONFIRMATI ONS AND RECONCILIATIONS WERE NOT AVAILABLE WITH IT AT THE ASSESSMENT STAGE, BUT SINCE THE SAME WERE AVAILABLE AT THAT TIME, THE COMMENTS COULD BE CALLE D FOR FROM THE AO. THE CIT(A) THUS CALLED FOR THE REMAND REPORT, WHEREIN T HE ASSESSEE WAS ABLE TO FILE ALL THE REQUIRED DETAILS AND ALSO FILED RECONCILIAT IONS IN THE CASES OF APAR AND SARVODYA. 9. THE AR ALSO POINTED OUT THAT THE CIT(A) TOOK COG NIZANCE OF THE FACT THAT THE ASSESSEE HAD MADE A DECLARATION OF RS. 45,00,00 0 AND ON THAT BASIS, THE ADDITION OF RS. 60,00,000 WAS DELETED, AS THE GP, WITH THE INCLUSIO N OF RS. 45,00,000 CAME TO 16.29%, MORE THAN WHAT WAS ESTIMA TED BY THE AO. 10. WE HAVE HEARD THE ARGUMENTS FROM BOTH THE SIDES AND HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD. IT IS EVIDENT FROM T HE ORDER OF THE CIT(A) THAT THE ASSESSEE WAS UNABLE TO PRODUCE CONFIRMATIONS AND RE CONCILIATIONS AT THE TIME OF ASSESSMENT PROCEEDINGS AND SINCE THE DETAILS WAS PR ODUCED BEFORE THE CIT(A), THE CIT(A), CALLED FOR THE REMAND REPORT. DURING TH E REMAND PROCEEDINGS, THE M/S. RISHABH OIL INDUSTRIES I.T.A. NO. 4168/MUM/2011 PAGE 6 OF 8 ASSESSEE WAS ABLE TO RECONCILE THE SAME. THE CIT(A) , ON THE BASIS OF THE REMAND REPORT, WHERE THE AO ACCEPTED ON FACTS WITH THE OBSERVATION THAT THE STATEMENTS FILED IN RESPECT OF THE ABOVE PARTIES IN THE PAPER BOOK HAS BEEN VERIFIED AND FOUND TO BE IN ORDER , WHICH WERE IN FACT, THE CONFIRMATIONS ON TEN PARTIES, AMOUNTING TO RS. 30,49,113 AND RECONCILIAT IONS OF AMOUNTS STANDING IN THE NAMES OF APAR & SARVODYA AGGREGATING TO RS. 20, 25,535, DELETED THE ADDITIONS MADE BY THE AO AT RS. 50,64,748, U/S 41(1 ) OF THE ACT. WE ARE IN AGREEMENT WITH THE OBSERVATIONS MADE BY THE CIT(A), THAT SINCE THE DETAILS AND RECONCILIATIONS HAD BEEN PROVIDED TO THE AO AND THE AO FINDS THEN TO BE IN ORDER, THE QUESTION OF SUSTAINING THE ADDITION DOES NOT ARISE. 11. WE HAVE ALSO GONE THROUGH THE FACTS OF ADDITION OF RS. 60,60,000, WE FIND THAT THE AO HAD FACTORED THE GP AT 15.91% AND WHEN THE ADDITIONAL DISCLOSURE OF RS. 45,00,000 IS GIVEN EFFECT IN THE RESULTS OF THE ASSESSEE, THE GP GOES TO 16.29% AS, MENTIONED BY THE AR AND WHICH HA S NOT BEEN OBJECTED TO BY THE DR. WE, THEREFORE, AGREE WITH THE CONCLUSION DRAWN BY THE CIT(A) ON THIS ISSUE AS WELL. 12. IN THE RESULT, WE DO NOT FIND ANY REASON TO DIS TURB THE FINAL OUTCOME OF THE DECISION OF CIT(A), DELETING THE ADDITIONS BOTH ON THE ISSUE OF 41(1) AND GROSS PROFIT. WE, SUSTAIN THE ORDER OF THE CIT(A). 13. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 05/09/2012. M/S. RISHABH OIL INDUSTRIES I.T.A. NO. 4168/MUM/2011 PAGE 7 OF 8 SD/- (G.E. VEERABHADRAPPA) PRESIDENT SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE: 05/09/2012 P/-* COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY/ ASST.REGISTRAR,ITAT MUMBAI.