The DCIT, Circle-6, Surat V. Shri Sudhir Kapoorchand Gandhi, Mumbai

ITA 442/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89749 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 17-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Keywords: Gross profit estimation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD .. , ( .) , BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.442/AHD/2012 ( / ASSESSMENT YEAR : ) DY.CIT CIRCLE-6 SURAT / VS. SHRI SUDHIR KAPOORCHAND GANDHI 5/3, PARIKH MARKET, FRENCH BRIDGE OPERA HOUSE MUMBAI 400 004 % & ./ ./ PAN/GIR NO. : ABGPG 4775 P ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %( + / APPELLANT BY : SHRI NARENDRA SINGH, SR.DR )*%( , + / RESPONDENT BY : -NONE- -. , /& / DATE OF HEARING 20/07/2015 0123 , /& / DATE OF PRONOUNCEMENT 23/07/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-IV, SURAT [CIT(A) IN SHORT] DATED 31/10/2011 PERTAINING TO ASSESSMENT YEAR (AY) 2008-09. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO.442/AHD/ 2012 DCIT VS. SHRI SUDHIR KAPOORCHAND GANDHI ASST.YEAR 2008-09 - 2 - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A)-IV, SURAT HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF SUPPRESSION OF INCOME OF RS.11,86,022/- MADE BY THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A)-IV, SURAT HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF LOW G.P. OF RS.25,55,907/- MADE BY THE ASSESSING OF FICER. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A)- IV, SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE ASS ESSING OFFICER. 4. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE CIT-I V, SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER RESTORE D. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 17/12/2010, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE ADDITION(S) OF RS.11,86,022/- ON ACCOUNT OF SUPPRES SION OF INCOME AND OF RS.25,55,907/- ON ACCOUNT OF LOW GROSS PROFIT. AGA INST THE SAID ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE D ELETED THE ADDITIONS MADE BY THE AO. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE US. 3. NO ONE APPEARED ON BEHALF OF ASSESSEE. THE NOTI CE OF HEARING HAS BEEN SENT TO THE ASSESSEE BY REGD POST A.D. (AS PE R EVIDENCE ON RECORD RG 272985248 IN) AND THE SAME WAS RETURNED BY THE P OSTAL AUTHORITIES WITH REMARKS NOT KNOWN. THEREFORE, THE APPEAL WA S TAKEN UP FOR HEARING IN THE ABSENCE OF THE ASSESSEE. ITA NO.442/AHD/ 2012 DCIT VS. SHRI SUDHIR KAPOORCHAND GANDHI ASST.YEAR 2008-09 - 3 - 4. THE FIRST GROUND IS AGAINST THE DELETION OF ADDI TION MADE ON ACCOUNT OF SUPPRESSION OF INCOME OF RS.11,86,022/-. THE LD.SR.DR SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN D ELETING THE ADDITION. HE VEHEMENTLY SUPPORTED THE ORDER OF THE AO. 5. WE HAVE HEARD THE LD.SR.DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE AO HAS MADE THE ADDITIONS ON THE BASIS THAT THE ASSESSEE H AD SHOWN THE LABOUR INCOME DURING THE YEAR IN THE MONTHS OF APRIL, MAY, JUNE, JULY, AUGUST, NOVEMBER AND JANUARY AT BELOW THE AVERAGE RATE. HO WEVER, THE LD.CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDE R:- 2.2. I HAVE GONE THROUGH THE FACTS OF THE CASE. T HE APPELLANT HAD MAINTAINED THE DETAILS OF LABOUR CHARGES PAID AND R ECEIVED. THESE DETAILS WERE PROVIDED TO THE A.O. THE A.O. MADE A N ANALYSIS ON THE BASIS OF AVERAGE PER CARAT PROCESSING RATES CHARGED TO THE PRINCIPAL IN DIFFERENT MONTHS AND HELD THAT PROCESSING CHARGES H AD BEEN SUPPRESSED AS THERE WAS DIFFERENCE IN RATES CHARGED IN DIFFERE NT MONTHS AND HENCE REJECTED THE BOOKS AND ESTIMATED THE PROCESSING CHA RGES RECEIVED. IN MY OPINION, THE REJECTION OF THE BOOKS ON THE BASIS OF SUCH AN ANALYSIS IS NOT CORRECT AS IT DOES NOT SHOW ANY SPECIFIC DEFECT IN THE BOOKS. SUCH MACRO ANALYSIS DOES NOT POINT OUT ANY SPECIFIC DEFE CTS BUT DOES RAISE DOUBTS AND CAN BE THE STARTING POINT FOR AN INVESTI GATION AND NOT CONCLUSION. AS FULL DETAILS OF THE RECEIPT AND EXP ENSES WERE PROVIDED TO THE A.O. ALONGWITH THE BASIS OF PAYMENTS AND RECEIP TS AND THESE HAVE NOT BEEN SHOWN TO BE INCORRECT, THERE WAS NO REASON TO CONCLUDE THAT BOOKS WERE NOT PROPERLY MAINTAINED OR THAT INCOME H AD BEEN SUPPRESSED. THE REJECTION OF THE BOOKS ON THE BAS IS OF SUCH ANALYSIS IS HELD TO BE NOT PROPER. THE ADDITION MADE ON ACCOUN T OF SUPPRESSION OF INCOME IS DELETED. THIS GROUND IS ALLOWED. ITA NO.442/AHD/ 2012 DCIT VS. SHRI SUDHIR KAPOORCHAND GANDHI ASST.YEAR 2008-09 - 4 - 5.1. WE FIND THAT THE AO HAS OBSERVED THAT THE AUTH ORIZED REPRESENTATIVE OF THE ASSESSEE FILED THE DETAILS AN D OTHER DOCUMENTS. THE AO REJECTED THE BOOKS OF ACCOUNT BY OBSERVING THAT THERE WAS VARIATION IN RATES FOR DIFFERENT BILLS OF DIAMONDS JOB-WORK LACK S ANY SOUND REASONING AND THERE IS NO BASIS ON WHICH THE ASSESSEE HAS REC EIVED THE RATES FROM THE PRINCIPAL. THE AO FURTHER OBSERVED THAT THE AS SESSEE HAS FAILED TO OFFER ANY OBJECTIVE BASIS OF VARIATION OF RATES OF DIAMOND JOB-WORK RECEIVED ON DIFFERENT INSTANCES. HOWEVER, WE FIND NO OTHER BASIS FOR REJECTING THE BOOKS OF ACCOUNT. IT IS SETTLED POS ITION OF LAW THAT THE ASSESSEE SHOULD MAINTAIN SUCH BOOKS OF ACCOUNT, WHI CH WOULD GIVE TRUE PICTURE OF PROFIT. THE AO DOUBTED THE BOOKS OF ACC OUNT SOLELY ON THE GROUND THAT THERE WAS VARIATION IN THE LABOUR CHARG ES. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT MERELY DIFFERENCE IN PR OCESSING CHARGES WOULD NOT IPSO FACTO RENDER THE BOOK OF ACCOUNT AS NOT RELIABLE. IN TH E CASE IN HAND, THE ASSESSEE BEFORE THE LD.CIT(A) HAS EXPLAINED AND THE LD.CIT(A) HAS GIVEN A FINDING ON FACT ON THE DETAIL S SO SUBMITTED BEFORE HIM. THE REVENUE HAS NOT PLACED ANY MATERIAL TO RE BUT THE FINDING OF THE LD.CIT(A), THEREFORE WE DO NOT SEE ANY REASON TO IN TERFERE WITH THE ORDER OF THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GRO UND NO.1 OF REVENUES APPEAL IS REJECTED. ITA NO.442/AHD/ 2012 DCIT VS. SHRI SUDHIR KAPOORCHAND GANDHI ASST.YEAR 2008-09 - 5 - 6. THE SECOND GROUND IS AGAINST THE DELETION MADE O N ACCOUNT OF LOW GROSS PROFIT OF RS.25,55,907/-. THE LD.SR.DR SUPPO RTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFI ED IN DELETING THE ADDITION. 7. WE HAVE HEARD THE LD.SR.DR, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. WE FIND THAT THE LD.CIT(A) HAS EXAMINED THE ISSUE IN THE APPELLA TE PROCEEDINGS AND HAS GIVEN A FINDING ON FACT IN PARA-3.2 OF HIS ORDE R, WHICH IS REPRODUCED HEREUNDER:- 3.2. I HAVE GONE THROUGH THE FACTS OF THE CASE. T HE ASSESSEE HAS BEEN ABLE TO SHOW THAT THE FALL IN GROSS PROFIT RATES IN TRADING OF DIAMONDS WAS ATTRIBUTABLE TO EXCHANGE RATE FLUCTUATION. IN ANY CASE, THE TURNOVER OF THE APPELLANT HAS GONE UP SEVERAL TIMES AND IT I S COMMONLY ACCEPTED PRINCIPLE THAT WITH RISE IN TURNOVER THE GROSS PROF IT RATE COMES DOWN. IN THE CASE OF THE ASSESSEE THE GROSS PROFIT IN TRADIN G BUSINESS IN ABSOLUTE TERMS HAS GONE UP FROM 6,03,441/- IN THE PRECEDING YEAR TO 16,07,716/- FOR THE YEAR UNDER CONSIDERATION. IT I S THEREFORE NOT A CASE WHERE GROSS PROFIT IN ABSOLUTE TERMS HAS FALLEN. T HE A.O. HAS NOT SHOWN ANY DEFECT IN THE BOOKS AND HAS ALSO NOT GIVEN ANY REASON FOR NOT ACCEPTING THE EXPLANATION OF THE APPELLANT. I THER EFORE FIND NO REASON FOR SUSTAINING THE ADDITION MADE. THE ADDITION OF 25,55,907/- IS THEREFORE DELETED. THIS GROUND IS ALLOWED. 7.1. IT IS EVIDENT FROM THE AFORESAID FINDING OF TH E LD.CIT(A) THAT HE HAS GIVEN A FINDING ON FACT THAT THE ASSESSEE HAS B EEN ABLE TO SHOW THAT THE FALL IN GROSS PROFIT RATES IN TRADING OF DIAMON DS WAS ATTRIBUTABLE TO EXCHANGE RATE FLUCTUATION. IN THE ASSESSEES CASE, THE TURNOVER HAS GONE ITA NO.442/AHD/ 2012 DCIT VS. SHRI SUDHIR KAPOORCHAND GANDHI ASST.YEAR 2008-09 - 6 - UP SEVERAL TIMES. SINCE THE FINDING OF THE LD.CIT( A) IS NOT CONTROVERTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON RECORD, THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER O F THE LD.CIT(A), SAME IS HEREBY UPHELD. THUS, GROUND NO.2 OF REVENUES AP PEAL IS REJECTED. 8. GROUND NOS.3 & 4 ARE GENERAL IN NATURE WHICH REQ UIRE NO INDEPENDENT ADJUDICATION. 9. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN THE COURT ON THURSDAY, THE 23 RD DAY OF JULY, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( . ) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 23/ 07 /2015 6/..-, .-../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-IV, SURAT 5. ;< )-89 , / 893 , 7 / DR, ITAT, AHMEDABAD 6. <= >. / GUARD FILE. / BY ORDER, *; ) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD