DCIT 8(1), MUMBAI V. GLOBAL INDIA HOSPITALITY SERVICES P.LTD, MUMBAI

ITA 4473/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2936 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 04-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 27-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNADR
• Keywords: Business income
• Section: 133A

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./ITA/4473/MUM/2014, /AY.S: 2006-07 DCIT-8(1) ROOM NO.260A, 2 ND FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-20. VS. M/S. GLOBAL (INDIA) HOSPITALITY SERVICES PVT. LTD. PLOT NO.205-206, MEERA HARI NIWAS OPP. DHANALAXMI BUILDING, NEAR VERSOVA TELEPHONE EXCHANGE SVP NAGAR, ANDHERI (W) MUMBAI-400 053. PAN:AABCP 6881 C ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI VIVEK PERAMPURNA-DR ASSESSEE BY: NONE / DATE OF HEARING: 04.08.2016 / DATE OF PRONOUNCEMENT: 14.09.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.18.03.2014 OF CIT(A)-16,MU MBAI,THE ASSESSING OFFICER (A.O.) HAS FILED APPEAL THE PRESENT APPEAL.ASSESSEE-COMPANY, E NGAGED IN THE BUSINESS OF CATERING AND HOSPITALITY AND ALLIED SERVICES RENDERING INDUSTRIA L TYPE CATERING AT OFFSHORE IN BARGES, RIGS, PLATFORMS, VESSELS AND ONSHORE LAND PROJECTS. IT FI LED ITS RETURN OF INCOME ON 31.10.2006 DECLARING TOTAL AT RS.90.25 LAKHS.THE AO COMPLETED ASSESSMENT,ON 29.12.2009,U/.S143(3) R.W.S. 147 OF THE ACT,DETERMINING INCOME OF THE ASS ESSEE AT RS.3.62 CRORES. 2. THE EFFECTIVE GROUND OF APPEAL IS ABOUT ADOPTING TH E AVERAGE GROSS PROFIT MARGIN. A SURVEY ACTION UNDER SECTION 133A WAS CARRIED OUT AT THE BU SINESS PREMISE OF THE ASSESSEE ON 21/09/2006. DURING THE SURVEY PROCEEDINGS, IT WAS N OTICED THAT THE ASSESSEE HAD NOT ACCOUNTED SOME OF THE SALES TO THE TOTAL TURNOVER. ACCORDINGLY AN ADDITION OF RS. 71.17 LAKHS WAS MADE.THE MATTER TRAVELLED UP TO THE TRIBUNAL.VI DE ITS ORDER,DATED 19/12/2012, THE TRIBUNAL HELD AS UNDER: 6. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTION SKILFULLY. THE DISPUTE RAISED IN THIS APPEAL IS REGARDING ADDITION ON ACCO UNT OF EXCESS SALES FOUND ON THE DATE OF SURVEY ON 29. 9. 2006 WHICH WERE NOT ACCOUNTED. THE TOTAL TURNOVER AS PER P&L ACCOUNT FOUND ON THE DATE OF SURVEY FOR THE YEAR ENDING ON 31. THREE. 2006 WAS RS. 14, 47, 96, 577-. HOWEVER AFTER TOTALLING OF SALE INVOICES THE SURVEY PARTY FOUND TOTAL SALES AT RS. 15, 19, 14, 380/-, THEY BEING THUS EXCESS SALE OF RS. 71, 17, 8 08/-. THE DIRECTOR OF THE COMPANY IN THE 4473/M/14 GLOBAL INDIA HOSPITALITY SERVICES P.LTD. 2 STATEMENT AT THE TIME OF SURVEY OFFERED SOME OF RS. 71, 17, 808-AS ADDITIONAL INCOME, BUT IN THE RETURN OF INCOME, THE SAID ADDITIONAL INCOME WA S NOT DECLARED. THE CASE OF THE ASSESSEE IS THAT IN THE RETURN OF INCOME TOTAL SALES DECLARED B Y THE ASSESSEE WAS RS. 15, 55, 40, 281-WHICH WAS MORE THAN TOTAL SALES FOUND BY THE SURVEY PARTY . THE PROFIT WAS ALSO DECLARED MORE THAN THE TOTAL PROFIT SHOWED AT THE TIME OF SERVICE. THE AO HAS HOWEVER NOT ACCEPTED THE CLAIM ON THE GROUND THAT THE P&L ACCOUNT FILED WITH THE RETU RN OF INCOME, THE ASSESSEE HAD ALSO CLAIMED ADDITIONAL EXPENSES INCLUDING PURCHASES AMO UNTING TO RS.2,81, 87, 045/-. THE AO HAS NOT ACCEPTED THE CLAIM OF THESE EXPENSES IS THE ASSESSEE COULD NOT FILE ANY RECONCILIATION TOWARDS THE FIGURE OF PURCHASE AND SALES SHOWN IN T HE P&L ACCOUNT FOUND AT THE TIME OF SURVEY AND P&L ACCOUNT FILED AT THE TIME OF RETURN WILL STOP HE, THEREFORE, ADDED A SUM OF RS. 71, 17, 808/-AS DECLARED BY THE DIRECTOR AS ADDITIO NAL INCOME AT THE TIME OF SURVEY. CIT (A) HAS TAKEN HIGHVIEW THAT ONLY THE NET PROFIT ON SALE S FOUND EXCESS AT THE TIME OF SURVEY COULD BE ADDED AS THERE WAS NO MATERIAL TO SHOW THAT THE CORRESPONDING INVESTMENT IN THE PURCHASES WAS UNACCOUNTED. HE HAS THUS CONFIRMED TH E ADDITION OF RS. 2, 84, 712/-BEING 4% OF RS. 71, 17, 808/-. 6.1. ON CAREFUL CONSIDERATION OF ALL ASPECTS OF THE MATTER, WE ARE UNABLE TO SUSTAIN THE ORDER OF THE CIT (A). ONCE, CERTAIN SALES WERE FOUND TO B E UNACCOUNTED IN THE P&L ACCOUNT AT THE TIME OF SURVEY, THE PARDON LAY ON THE ASSESSEE TO S HOW THAT THE CORRESPONDING PURCHASES HAD BEEN ACCOUNTED WHICH HAS NOT BEEN DONE. THE ASSESSE E HAD ALSO CLAIMED ADDITIONAL EXPENSES INCLUDING PURCHASES OF RS. 2, 81, 87, 045/-. DESPIT E THE SPECIFIC REQUISITION BY THE AO, THE ASSESSEE HAD NOT GIVEN ANY RECONCILIATION BETWEEN T HE PURCHASES AND SALES WHICH WERE NOT ACCOUNTED IN THE P&L ACCOUNT FOUND AT THE TIME OF S URVEY. THOUGH THE DIRECTOR AT THE TIME OF SURVEY HAD ALSO STATED THAT SOME PURCHASE BILLS WER E ALSO UNACCOUNTED, THE ASSESSEE WAS REQUIRED TO GIVE THE CONCILIATION BETWEEN ALL THE P URCHASES AND THE SALES WHICH REMAINED UNACCOUNTED EVEN AFTER BASIS OF SEVEN MONTHS AFTER THE CLOSE OF THE ACCOUNTING YEAR WHEN THE SURVEY WAS CONDUCTED. THEREFORE, IN OUR VIEW, THE A CCOUNTS OF THE ASSESSEE CANNOT BE TAKEN AS RELIABLE AND IN THE ABSENCE OF COMPLETELY CONCILIAT ION BETWEEN PURCHASE AND SALES, THE ACCOUNT HAVE TO BE REJECTED AS NOT RELIABLE AND GRO SS PROFIT HAS TO BE ESTIMATED. THE TOTAL SALES DECLARED BY THE ASSESSEE IS MUCH MORE THAN TO TAL SALES FOUND BY THE SURVEY PARTY AND, THEREFORE, NO ADDITION COULD BE MADE ON ACCOUNT OF SALES. HOWEVER,GP RATE HAS TO BE ESTIMATED AFTER CONSIDERING THE PAST RECORDS OF THE ASSESSEE ON CARRY RAISED BY THE BENCH, THE LD.AR FILED COMPETITIVE RATE OF GP AND NP FROM WHIC H IT IS FOUND THAT GP RATE FOR THE IMPUGNED AY. WAS 28.83% WHEREAS IN THE IMMEDIATE PR ECEDING AY. I.E. 2005-06, THE GP RATE WAS 36.81%. THE ASSESSEE IS REQUIRED TO EXPLAIN THE STEEP FALL IN GP RATE WITH SUPPORTING MATERIAL AND THEREAFTER A VIEW HAS TO BE TAKEN ABOU T ADDITION IF ANY TO BE MADE ON ACCOUNT OF GP RATE. SINCE THIS ASPECT HAS NOT BEEN EXAMINED BY THE LOWER AUTHORITIES AND COMPETITIVE STATEMENT WAS ALSO NOT AVAILABLE BEFORE THEM, WE CO NSIDER IT APPROPRIATE TO SET ASIDE THE 4473/M/14 GLOBAL INDIA HOSPITALITY SERVICES P.LTD. 3 ORDER OF THE CIT(A) AND RESTORE THE MATTER BACK TO HIM FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATIONS MADE ABOVE, IF REQUIRED, BY DEMANDING THE MATTER BACK TO THE AO AND AFTER ALLOWING THE OPPORT UNITY OF HEARING TO THE ASSESSEE. 3 .AS PER THE DIRECTION OF THE TRIBUNAL,THE FIRST APP ELLATE AUTHORITY(FAA),COMPLETED THE ADJUDICATION.HE HELD THAT THE ASSESSEE HAD FURNISHE D ITS AUDITED FIGURES FOR THE AY.S 2005-06 TO 2008-09, THAT DURING THE COURSE OF APPEAL PROCEE DINGS, IT HAD STATED THAT IT WAS AGREEABLE TO ADDITION ON THE BASIS OF AVERAGE GROSS PROFIT RATE OF THE FOUR AY.S I.E. 2005-06 TO 2008-09,THAT THE TRIBUNAL HAD CONCLUDED THAT ACCOUNTS FOR AY. 20 06 SEVEN WERE NOT RELIABLE,THAT THE AVERAGE OF THE THREE AY.S 2005-06, 2007-08 AND 2008 -09 HAD TO BE CONSIDERED. TAKING THE EVEREST OF THE ABOVE REFERRED THREE AY.S, OTHER THA N AY. 2006 SEVEN, HE ARRIVED AT THE GROSS PROFIT OF 30.37%.APPLYING THE RATE OF 30.37%, THE FAA UPHELD THE ADDITION TO THE EXTEN T OF RS. 26.45 LAKHS ON ACCOUNT OF LOWER GP. 4 .BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR)SUPPO RTED THE ORDER OF THE AO.AS STATED EARLIER,NONE APPEARED ON BEHALF OF THE ASSESSEE. WE FIND THAT THE TRIBUNAL HAD DIRECTED THE FAA TO C ONSIDER THE PAST RECORDS AND DECIDE THE ISSUE,THAT HE HAD CONSIDERED THE GP RATE OF SUBSEQU ENT YEARS,THAT IN THE IMMEDIATE PRECEDING YEAR THE ASSESSEE HAD SHOWN GP AT THE RATE OF 36.81 % ,THAT FOR THE YEAR UNDER APPEAL IT HAD SHOWN GP @ 28.83%,THAT THE IT HAD NOT EXPLAINED THE REASONS FOR FALL IN GP.THE FAA HAS NOT COMPARED THE STATISTICS OF EARLIER YEARS, EVEN IF HE WANTED TO IGNORE THE RESULT OF AY.2006- 07. HE SHOULD HAVE CONSIDERED THE GP RATE OF AY. 20 04-05.IT WOULD HAVE GIVEN HIM A REASONABLE BASE FOR ARRIVING IT AT ESTIMATED GP RAT E.IN SUCH CASES SOME KIND OF GUESS-WORK HAS TO BE CARRIED OUT AND SAME SHOULD NOT BE AN EXT REME.GP RATES CANNOT BE COMPARED TO A MATHEMATICAL FORMULA WHEREIN AN EXACT ANSWER IS TO FOUND.MANY A FACTORS AFFECT IT. TURNOVER CANNOT BE SOLE CRITERIA FOR DETERMINING THE RATE-IT CAN BE ONE OF THE IMPORTANT DECISIVE FACTORS. THE SUBSEQUENT AND EARLIER YEARS RATES CAN BE HELPF UL TO ARRIVE AT THE FINAL GUESS WORK.BUT,THE ONUS IS THE ASSESSEE TO EXPLAIN FALL OR RISE IN THE GP RATE.NORMALLY,THERE SHOULD NOT BE MUCH VARIATION IN THE GP RATE,IF ALL THE CIRCUMSTANCES R EMAIN SAME.A SLIGHT VARIATION IN RATES SHOULD NEVER BE QUESTIONED.IN THE CASE UNDER CONSIDERATION VARIATION IS OF 8%(APPROXIMATE) AND THE ASSESSEE HAD NOT FILED ANY EXPLANATION IN THAT REGA RD.THEREFORE,CONSIDERING THE FACT THAT THE TRIBUNAL HAD DIRECTED THE FAA TO TAKE NOTICE OF EAR LIER PERIOD AND TAKING NOTE OF THE GP RATE OF EARLIER AND SUBSEQUENT YEARS WE WANT TO RESTRICT THE GP RATE,FOR THE YEAR UNDER APPEAL,TO 32%.IN OUR OPINION,IT WILL MEET THE END OF JUSTICE. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE AO,IN PART. 4473/M/14 GLOBAL INDIA HOSPITALITY SERVICES P.LTD. 4 AS A RESULT,APPEAL FILED BY THE AO STANDS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER,2016. 14 2016 SD/- SD/- ( / R.L.NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 14.09.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.