Smt. Asha Mehra, Amritsar. V. The Addl. Commissioner of Income-tax, Amritsar.

ITA 420/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0765 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Keywords: Business income; Reasonable cause; Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER [ I.T.A NO. 420(ASR)/2014 ASSESSMENT YEAR: 2006-07 SMT. ASHA MEHRA PROP. M/S. SH. GANPATI FASHION, 102, KATRA SHER SINGH, AMRITSAR. PAN:AAZPM2158G VS. ACIT, RANGE-I, AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SALIL KAPOOR, SH. SUMIT LAL CHA NDANI (ADVS.) RESPONDENT BY: SH. S.S. KANWAL (DR.) DATE OF HEARING: 12.05. 2016 DATE OF PRONO UNCEMENT: 17.05.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LEARNED CIT(A), DATED 03.12.2013, FOR ASST. YEAR:2006-07. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) AMRITSAR HAS, IN VIEW OF THE FACTS & CIRCUMSTANCES OF THE CASE, G ROSSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE ADDITION OF RS.3,61,6 56/-, WHICH WAS MADE BY THE A.O BY REJECTING THE TRADING RESULTS AN D BY APPLYING G.P. RATE OF 27.73% AS AGAINST 23.65% DECLARED BY T HE APPELLANT AS PER BOOKS OF ACCOUNT MAINTAINED IN THE REGULAR COUR SE OF BUSINESS. 2. THAT THE ACCOUNT BOOKS OF THE APPELLANT WERE COR RECT & COMPLETE AND THERE WAS NO DEFECT AND THE SAME HAVE BEEN WRONGLY REJECTED. THE LOWER AUTHORITIES HAVE ERRED IN HOLDI NG THAT THE CASE OF ITA NO 420 (ASR)/2014 ASST. YEAR: 2006-07 2 THE APPELLANT IS COVERED BY THE PROVISIONS OF SECTI ON 145(3) OF THE INCOME TAX ACT. 3. THAT THE OBSERVATION MADE ARE AGAINST FACTS AND ARE BASED ON SURMISES & CONJECTURES AND DO NOT AFFORD ANY LEGAL JUSTIFICATION TO THE ESTIMATE MADE FOR G.P RATE. THE DETAILS & EXPLA NATIONS FILED, SUBMISSIONS MADE AND THE EVIDENCE PLACED ON RECORD HAVE NOT BEEN PROPERLY CONSIDERED AND JUDICIALLY INTERPRETED. 4. THAT THE ESTIMATE MADE FOR G.P RATE IS UNJUST, U NLAWFUL AND UNREASONABLE AND HIGHLY EXCESSIVE AND IS NOT SUPPOR TED BY ANY MATERIAL ON RECORD. 5. THAT THE CASE LAW HAS BEEN WRONGLY QUOTED AND WR ONGLY RELIED UPON. 6. THAT THE PROCEEDINGS U/S 271(1)(C) HAVE BEEN WRO NGLY INITIATED AND INTEREST U/S.234B/234C HAVE ALSO BEEN WRONGLY CHARGED AND WRONGLY COMPUTED AND ARE ALSO EXCESSIVE . 3. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT THE APPEAL FILED BY ASSESSEE IS DELAYED BY 115 DAYS AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO AN APPLICATION FOR CONDONATION OF DELAY ALONG WITH AFFIDAVIT NARRATING THERE IN THE REASONS FOR DELAY IN FILING OF APPEAL. THE LEARNED AR SUBMITTED THAT THE ACCOUNTANT OF THE ASSESSEE HA D GONE TO HIS NATIVE VILLAGE IN RAJSTHAN AND HAD FORGOTTEN TO HANDOVER T HE ORDER TO THE COUNSEL OF ASSESSEE OR TO THE ASSESSEE AND WHEN THE ASSESSEE RECEIVED NOTICE FOR PENALTY PROCEEDINGS U/S 271(1) (C), THE ASSESSEE CAME TO KNOW ABOUT THE ORDER OF LEARNED CIT(A) AND THEREFORE, TH E FILING OF APPEAL HAS BEEN DELAYED. THE LEARNED AR SUBMITTED THAT IN THE INTEREST OF SUBSTANTIAL JUSTICE THE DELAY MAY BE CONDONED. 4. THE LEARNED DR, HOWEVER OBJECTED TO THE CONDONAT ION OF DELAY, BUT FINDING THE REASON FOR DELAY AS A REASONABLE CAUSE AND IN THE INTEREST OF ITA NO 420 (ASR)/2014 ASST. YEAR: 2006-07 3 JUSTICE WE CONDON THE DELAY AND LEARNED AR WAS ASKE D TO PROCEED WITH HIS ARGUMENTS. 5. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT THE ASSESSEE WAS CARRYING OUT THE BUSINESS OF PROCESSING THE DRESS M ATERIAL ON EMBROIDERY MACHINE. DURING THE YEAR UNDER CONSIDERATION, THE A SSESSEE FILED HER RETURN OF INCOME WHEREIN THE TOTAL SALES OF THE BUS INESS WAS DECLARED AT RS.88,64,118/- AND GP WAS DECLARED @ OF 23.65% OF S ALES. THE ASSESSING OFFICER, DURING ASSESSMENT PROCEEDINGS OBSERVED THA T ASSESSEE HAD VALUED YARN AT DIFFERENT RATES RANGING FROM RS.144 KG TO RS.310/- PER KG, AND DRESS MATERIAL WAS VALUED AT VARIOUS RATES FROM RS.19.75 PER METER TO RS.30/- PER METER. HE FURTHER OBSERVED THAT EMBR OIDERY CLOTH WAS VALUED AT AN AVERAGE RATE OF RS.49 PER KG. IN VIEW OF THESE FACTS THE ASSESSEE WAS ASKED TO FILE THE VALUATION OF CLOSING STOCK AND RECONCILIATION OF CLOSING STOCK WITH OPENING STOCK. THE ASSESSEE WAS ALSO ASKED AS TO WHETHER STOCK REGISTER WAS BEING MAINTA INED REFLECTING QUALITY AND QUANTITY WISE DETAILS OF SALES, PURCHAS E AND STOCK. IN REPLY, THE LEARNED AR VIDE SUBMISSIONS DATED 10.11.2008 SU BMITTED THAT PURCHASE/SALES REGISTER ARE KEPT AND STOCK IS RECOR DED IN TERMS OF QUANTITY AND STOCK TALLY HAS BEEN MADE ON THIS BASI S. IT WAS ALSO SUBMITTED THAT QUALITY WISE STOCK REGISTER WAS NOT MAINTAINED. IN VIEW OF THESE FACTS THE ASSESSEE WAS ASKED TO EXPLAIN THE R EASONS FOR LOWER GP AS COMPARED TO LAST YEAR AND IN RESPONSE IT WAS EXPLAI NED THAT IN EARLIER ITA NO 420 (ASR)/2014 ASST. YEAR: 2006-07 4 YEAR THE ASSESSEE HAS DONE JOB WORK TO THE TUNE OF RS.18,80,430/- WHERE THE PERCENTAGE OF PROFIT WAS MORE AND ASSESSEE HAD NOT CARRIED OUT ANY JOB WORK IN THE PRESENT YEAR. THE ASSESSEE FURTHER EXPLAINED VIDE LETTER DATED 10.11.2008 THAT THERE WAS CHANGE IN MARKET TR END, INCREASE IN MANUFACTURING EXPENSES AND NO INCREASE IN THE SALES PRICES AND THEREFORE, G.P RATIO HAD DECREASED. THE ASSESSING O FFICER OBSERVED THAT ASSESSEE HAD NOT MAINTAINED STOCK REGISTER REFLECTI NG QUALITY WISE STOCK AND NO RECONCILIATION WAS MADE WITH THE AMOUNT OF C LOSING STOCK AND THEREFORE, HE HELD THAT TRADING RESULTS WERE NOT VE RIFIABLE AND THEREFORE, HE REJECTED THE BOOKS OF ACCOUNT AND MADE ADDITION OF RS.3,61,656/- BY APPLYING GP RATE OF 27.73% AS AGAINST 23.65/% DECLA RED BY ASSESSEE. 6. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LEARN ED CIT(A) AND REITERATED THE SUBMISSIONS AND ALSO BROUGHT TO HIS NOTICE OF LEARNED CIT(A) THAT IN SUCCEEDING YEAR I.E. ASST. YEAR: 200 7-08 SIMILAR ADDITION WAS MADE AND THE HONBLE ITAT HAD ALLOWED THE RELIE F TO THE ASSESSEE, HOWEVER THE LEARNED CIT(A) WAS NOT SATISFIED WITH T HE SUBMISSIONS AND THEREFORE, HE UPHELD THE ADDITION BY HOLDING AS UND ER: I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMIS SIONS, AND HAVE ALSO GONE THROUGH THE AOS FINDINGS CONTAINED IN HIS ASS ESSMENT ORDER. SHOW UTMOST REGARD TO THE DECISIONS OF THE JURISDICTION HONBLE ITAT, AMRITSAR IN THE APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 20 07-08, IT IS WELL SETTLED LAW THAT PRINCIPLE OF RES JUDICATA IS NOT A PPLICABLE IN INCOME TAX PROCEEDINGS, AS EACH ASSESSMENT YEAR IS INDEPENDENT AND SEPARATE TO EACH OTHER. IT IS AN ADMITTED FACTS AS PER MATERIAL ALREADY ON RECORD THAT NO QUALITATIVE AND QUANTITATIVE DETAILS ARE MAINTAI NED. FURTHER, IN THE ABOVE QUOTED ITAT, AMRITSARS ORDER, NO EXPLANATION IN RESPECT OF VALUATION OF CLOSING STOCK WAS INVOLVED. I FIND THAT THE CASE IS FULLY COVERED BY THE RULINGS AND RATIO LAID DOWN BY THE HONBLE SUPREME COURTS JUDGMENT IN ITA NO 420 (ASR)/2014 ASST. YEAR: 2006-07 5 THE CASE OF CIT VS. BRITISH PAINTS, CITED AT (19991 ) 188 ITR 44(SC). THE A.O HAS MADE ADDITION OF ONLY 4% AS COMPARED TO FALL OF ALMOST 15% FROM LAST YEAR AND LESS THAN 31.81% G.P SHOWN LAST WITHOUT CO NSIDERING JOB WORK EVEN. A.O HAS CARRIED OUT G.P ADDITION ON REASONABL E BASIS AND AFTER FINDING OUT DEFECTS IN THE BOOKS OF ACCOUNTS AS THE Y ARE NOT RELIABLE TO COMPUTE TRUE PROFIT OF THE BUSINESS. 7. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFO RE US. 8. AT THE OUTSET, THE LEARNED AR SUBMITTED TH AT ASSESSEE HAD BEEN MAINTAINING COMPLETE BOOKS OF ACCOUNTS INCLUDING ST OCK REGISTERS AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO AUDIT REP ORT SIGNED BY AUDITORS PLACED AT (PB-40-60) WHERE OUR ATTENTION WAS INVITE D TO QUANTITATIVE DETAILS CERTIFIED BY THE AUDITORS. THE LEARNED AR F URTHER SUBMITTED THAT THE DETAILED SUBMISSIONS WERE MADE TO LEARNED CIT(A ) FOR THE REASON OF DECREASE IN G.P RATIO AND IN THIS RESPECT OUR ATTEN TION WAS INVITED TO (PB- 34-36). THE LEARNED AR SUBMITTED THAT MERELY BECAUS E THERE IS A FALL IN G.P RATIO THE ADDITION CANNOT BE MADE WITHOUT POINT ING OUT ANY DISCREPANCY IN THE AMOUNTS OF PURCHASES SALES AND S TOCKS. THE LEARNED AR FURTHER SUBMITTED THAT IN SUCCEEDING ASST. YEAR 2007-08 SIMILAR ADDITION WAS MADE AND HONBLE TRIBUNAL HAS DELETED THE SAME IN ITA NO.122(ASR)/2012 VIDE ITS ORDER DATED 10.10.2012 AN D IN THIS RESPECT FILED A COPY OF SUCH ORDER. THE LEARNED AR SUBMITTE D THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF KOHINOOR FOODS LTD. VS. CIT IN ITA NO.685 & 686 OF 2009 HAD ALSO DELETED SIMILAR TYPE OF ADDITION AND IN THAT CASE THE CASE LAW OF SMT. ASHA MEHRA FOR ASST. YEAR 2007-08 WAS RELIED. THE LEARNED AR SUBMITTED THAT IN THE CASE O F KOHINOOR FOODS ITA NO 420 (ASR)/2014 ASST. YEAR: 2006-07 6 LTD.(SUPRA) THE ASSESSING OFFICER HAD MADE ADDITION OF 1% OF SALES WHICH THE HONBLE COURT HAD DELETED. 9. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED TH AT THE CASE LAW RELATING TO ASSESSEE ITSELF FOR THE SUBSEQUENT YEAR CANNOT BE RELIED AS THE FACTS IN THIS CASE ARE DISTINGUISHABLE AS IN THE PR ESENT YEAR THE ASSESSEE WAS NOT ABLE TO JUSTIFY THE VALUATION OF STOCK WHIC H WAS NOT IN THE EARLIER YEAR. AS REGARDS THE CONTENTION OF LEARNED AR THAT THE ASSESSING OFFICER AND LEARNED CIT(A) HAS NOT CONSIDERED THE SUBMISSIO NS OF ASSESSEE, THE LEARNED DR INVITED OUR ATTENTION TO THE LEARNED CIT (A)S ORDER AT PAGE 5 AND SUBMITTED THAT THE LEARNED CIT(A) HAD CONSIDERE D THE SUBMISSIONS OF THE ASSESSEE. 10. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSEE BE SIDES INCOME FROM THE EMBROIDERY AND YARN BUSINESS HAD DECLARED A HUGE AM OUNT AND HAD OFFERED ADDITIONAL INCOME OF RS.2.7 CRORES UNDER TH E HEAD INCOME FROM OTHER SOURCES IN HER RETURN OF INCOME. THE ACTION O F THE ASSESSING OFFICER IN MAKING ADDITION ON THE BASIS OF APPLYING HIGHER G.P RATIO IS NOT JUSTIFIED AT ALL SPECIFICALLY KEEPING IN VIEW THE F ACT THAT ASSESSEE HERSELF HAD OFFERED A HUGE OF AMOUNT FOR TAXING AS INCOME F ROM OTHER SOURCES. HAD THE ASSESSEE WAS TO HIDE HER INCOME FROM BUSINE SS BY TAKING LOWER G.P RATIO, THERE WAS NO POINT IN OFFERING A HUGE IN COME AS INCOME FROM OTHER SOURCES AS THE ASSESSEE HAD THE OPTION OF DEC LARING ADDITIONAL ITA NO 420 (ASR)/2014 ASST. YEAR: 2006-07 7 INCOME AT A LOWER FIGURE. THE ASSESSEE HAD SUBMITTE D BEFORE THE AUTHORITIES BELOW THAT IF THERE IS ANY SHORT FALL I N G.P RATIO THE ALLEGED PROFITS MAY BE CONSIDERED AS PART OF ADDITIONAL INC OME OFFERED BY HER BUT AUTHORITIES BELOW DID NOT CONSIDER THIS PROPOSITION 11. FURTHER WE FIND THAT ASSESSEE HAD MAINTAINED ST OCK REGISTER AND COMPLETE BOOKS OF ACCOUNTS AND THE QUANTITATIVE DET AILS HAS BEEN CERTIFIED BY AUDITORS. THE AUTHORITIES BELOW HAS MA DE ADDITION BY HOLDING THAT THE QUALITY WISE STOCK REGISTER WAS NOT MAINTA INED. IN OUR OPINION, IT IS PRACTICALLY NOT POSSIBLE TO MAINTAIN QUALITY WIS E STOCK REGISTER IN THIS TYPE OF TRADE. 12. FURTHER, WE FIND THAT THE ASSESSEE IN THE EARLI ER YEAR HAD DECLARED A HUGE AMOUNT ON ACCOUNT OF JOB WORK AND WHICH IS N OT IN THE PRESENT YEAR, THEREFORE, G.P RATIO WAS BOUND TO FALL AS JOB WORK GENERALLY CARRIES BETTER G.P MARGIN. WE FURTHER FIND THAT IN THE SUBS EQUENT YEAR THE ASSESSEE HAD DECLARED G.P RATIO OF 14.82% AND WHICH THE ASSESSING OFFICER HAD INCREASED TO 17.7% AND WHICH THE TRIBUN AL HAD DELETED. WE FIND THAT EVEN 17.7% RATE OF PROFIT IS QUITE LOWER AS COMPARED TO 23.5% DECLARED BY ASSESSEE IN THE PRESENT YEAR. THE REVEN UE AUTHORITIES IF CAN ACCEPT THE G.P RATE OF 17.7 % IN THE SUCCEEDING YEA R OF 2007-08 FOR THE SAME BUSINESS UNDER SAME FACTS AND CIRCUMSTANCES, T HERE WAS NO POINT IN NOT BELIEVING THE RATE OF 23.65% DECLARED BY ASS ESSEE IN THE PRESENT YEAR, SPECIALLY KEEPING IN VIEW THE FACT THAT TRIBU NAL ORDER FOR ASST. YEAR ITA NO 420 (ASR)/2014 ASST. YEAR: 2006-07 8 2007-08 HAS BEEN PASSED ON 10-10-2012 MUCH BEFORE T HE DATE OF PASSING OF ORDER BY LEARNED CIT(A) IN THE PRESENT Y EAR ON 3.12.2013 AND LEARNED CIT(A) ON THE BASIS OF THIS TRIBUNAL ORDER WAS AWARE OF THE FACT THAT IN ASST. YEAR 2007-08 THE REVENUE HAD INCREASE D G.P RATIO FROM 14.82% TO 17.71% AND WHICH WAS LOWER FROM 23.65% DE CLARED BY ASSESSEE IN THE PRESENT YEAR. THE CONTINUOUS FALL O F G.P RATIO IN SUCCEEDING YEARS STRENGTHS THE ARGUMENT OF ASSESSEE THAT IN THIS TRADE THE MARGIN ARE DECREASING. 13. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE HOLD THAT THE ADDITION WAS NOT WARRANTED IN THE SPECIFIC SET OF C IRCUMSTANCES AND THEREFORE, WE DELETE THE SAME. 14. IN VIEW OF THE ABOVE, GROUND NO.1 TO 5 ARE ALLO WED. 15. GROUND NO.6 IS PREMATURE AND DO NOT REQUIRE ANY ADJUDICATION. 16. IN VIEW OF THE ABOVE APPEAL FILED BY ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2016. SD/- SD/- (A.D. JAIN) (T . S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED: 17.05.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE ITA NO 420 (ASR)/2014 ASST. YEAR: 2006-07 9 (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER