ACIT 17(2), MUMBAI V. VARSHA P. SHAH, MUMBAI

ITA 4489/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2776 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR SONI
• Assessee Lawyers: SANJAI PARIKH
• Keywords: Gross profit estimation; Cost of acquisition; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 4489/MUM/2013 (ASSESSMENT YEAR: 2009-10) A C I T - 17(2) VS. SMT. VARSHA P. SHAH ROOM NO. 217, 2 ND FLOOR PIRAMAL CHAMBERS, PAREL MUMBAI 400012 234/26, 2 ND FLOOR, OM NIWAS 1 KARTAK ROAD, WADALA MUMBAI 400031 PAN - AAQPS4783G APPELLANT RESPONDENT APPELLANT BY: SHRI VIJAY KUMAR SONI RESPONDENT BY: SHRI SANJAI PARIKH DATE OF HEARING: 14.09.2016 DATE OF PRONOUNCEMENT: 23.09.2016 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF THE CIT(A)-29, MUMBAI DATED 12.03.2013 FOR A.Y. 2009-10. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE, PROP. OF M/S. DYNAMO STAMPING IND USTRY, AND ENGAGED IN THE BUSINESS OF WHOLESALE TRADING IN IMP ORTED COLD ROLLED GRAIN ORIENTED AND COLD ROLLED NON GRAIN ORIENTED MATERIA L IN THE FORM OF SHEETS, COILS, ETC. FILED HER RETURN OF INCOME FOR A.Y. 2009-10 ON 29.09.2009 DECLARING LOSS OF ` 47,02,672/- . THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (I N SHORT 'THE ACT') AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. TH E ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDE R DATED 09.12.2011, WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED A T ` 3,05,24,970/- IN VIEW OF THE FOLLOWING ADDITIONS/DISALLOWANCES: - (I) ON ACCOUNT OF LOW GROSS PROFIT (GP) ` 1,56,28,9650/- (II) ON ACCOUNT OF DOLLAR FLUCTUATION ` 1,01,98,459/- ITA NO. 4489/MUM/2013 SMT. VARSHA P. SHAH 2 (III) INTEREST EXPENSES DISALLOWED U/S. 36(1)(III) ` 91,663/- 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DATED 09.1 2.2011 FOR A.Y. 2009-10, THE ASSESSEE PREFERRED AN APPEAL BEFORE TH E CIT(A) 29, MUMBAI ON ALL THE ABOVE THREE ISSUES ON WHICH ADDITIONS/DI SALLOWANCES WERE MADE. THE LEARNED CIT(A) DISPOSED OFF THE ASSESSEES APPE AL VIDE THE IMPUGNED ORDER DATED 12.03.2013 ALLOWING THE ASSESSEE PARTIA L RELIEF; BY DELETING THE ADDITIONS MADE IN RESPECT OF THE TWO ITEMS LISTED A T (I) AND (II) IN PARA 2.1 OF THIS ORDER AN UPHELD THE DISALLOWANCE OF THE INTERE ST EXPENDITURE OF ` 91,663/- LISTED AT (III). 3.1.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CIT(A)-29, MUMBAI DATED 12.03.2013 HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUND: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .1,56,28,960/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOW GP WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE WAS UNABLE T O SATISFACTORILY EXPLAIN THE REASON FOR LOW GP IN COM PARISON TO PREVIOUS YEAR. 3.1.2 THE LEARNED D.R. FOR REVENUE WAS HEARD IN SUP PORT OF THE GROUNDS RAISED (SUPRA). STRONG RELIANCE WAS PLACED BY HIM O N THE ORDER OF THE ASSESSING OFFICER (AO) WHEREIN THE ADDITION OF ` 1,56,28,960/- ON ACCOUNT OF LOW GP WAS MADE. IT WAS CONTENDED THAT SINCE THE LEARNED CIT(A) HAD ERRED IN DELETING THE ADDITION OF ` 1,56,28,960/- MADE BY THE AO ON ACCOUNT OF LOW GP WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE WAS NOT ABLE TO SATISFACTORILY EXPLAIN THE REASON FOR LOW G P IN COMPARISON TO THE PREVIOUS YEAR, THE FINDING OF THE LEARNED CIT(A) BE REVERSED AND THAT OF THE AO BE RESTORED. 3.2.1 PER CONTRA, THE LEARNED A.R. FOR THE ASSESSEE SUPPORTED THE IMPUGNED ORDER OF THE LEARNED CIT(A), CONTENDING THAT THE LE ARNED CIT(A)S DIRECTION TO DELETE THE ADDITION ON ACCOUNT OF LOW GP MADE BY TH E AO WAS IN ORDER, IN VIEW OF THE SUBMISSIONS PUT FORTH BY THE ASSESSEE. THE LEARNED A.R. REITERATED THE CONTENTIONS PUT FORTH BEFORE THE AUT HORITIES BELOW; THAT THE DECREASE IN GP FROM 15.38% IN THE IMMEDIATELY PRECE DING YEAR TO 5.93% IN THE YEAR UNDER CONSIDERATION WAS, INTER ALIA, DUE T O WORLDWIDE RECESSION, ITA NO. 4489/MUM/2013 SMT. VARSHA P. SHAH 3 LOSSES INCURRED DUE TO FLUCTUATION IN THE RATE OF D OLLAR AND ALSO SINCE THERE WERE HIGH SEAS SALES IN THIS YEAR WHICH EARNED A PR OFIT OF ONLY 2%. 3.2.2 THE LEARNED A.R. ALSO REITERATED THE SUBMISSI ONS MADE BEFORE THE LEARNED CIT(A) WHICH ARE AS UNDER: - (1) THE ACCOUNTS ARE AUDITED AS PER THE PROVISIONS OF SECTION 44AB OF THE INCOME TAX ACT AND THE AUDITORS HAVE NOT GIVEN ANY ADVERSE COMMENTS AS TO THE ACCOUNTS. (2) ENTIRE PURCHASES OF THE APPELLANT IS THROUGH IMPORT S AND PAYMENTS FOR THE SAME HAVE TO BE MADE THROUGH BANKING CHANNE LS ONLY. FURTHER, THE IMPORTS ARE REGULATED BY THE GOVERNMENT AS TO T HE PRICE OF GOODS, QUALITY, ETC. FURTHER, THE SALES OF THE APPELLANT I S TO REPUTED PARTIES AND THE PAYMENTS FOR THE SAME HAS ALSO BEEN RECEIVED BY CHEQUE. THERE IS ONE TO ONE CORRELATION OF PURCHASE AND SALES, WHICH HAS BEEN FILED WITH THE ASSESSING OFFICER AND ASSESSING OFFICER HAS NOT NOTICED ANY DEFECTS THEREIN. (3) THE ASSESSING OFFICER HAS WITHOUT REJECTING THE BOO KS OF ACCOUNTS OR WITHOUT FINDING OUT ANY FLAWS IN THE ACCOUNTS OF THE APPELLANT OR EVEN WITHOUT BRINGING OUT ANY COMPARABLE CASES IN T HE SAME LINE OF BUSINESS WHERE THE PARTIES HAVE SHOWN A HIGHER GROS S PROFIT, ESTIMATED THE GROSS PROFIT OF THE APPELLANT AS PER LAST YEAR. YOUR HONOUR WOULD APPRECIATE THAT THE FIGURES OF LAST YE AR CANNOT BE COMPARED WITH THAT OF THE CURRENT YEAR DUE TO ADVER SE FACTORS. THE ASSESSING OFFICER HAS HIMSELF IN THE ORDER NOTED TH AT THE APPELLANT HAD SOLD 2800 MT LAST YEAR FOR RS.31.86 CRORES AS AGAIN ST 2060 MT DURING THE CURRENT YEAR FOR RS.33.08 CRORES. YOUR HONOUR W OULD APPRECIATE FROM THE ABOVE THAT THE APPELLANT HAD SOLD GOODS DU RING THE YEAR AT THE AVERAGE RATE OF RS.160.58 PER KG AS AGAINST THE RAT E OF RS.113.78 PER KG. LAST YEAR. FURTHER, THOUGH THE APPELLANT HAS SO LD LESSER QUANTITY DURING THE YEAR AS COMPARED TO LAST YEAR, THE TURNO VER HAS INCURRED FROM RS.31.86 CRORES TO RS.33.08 CRORES DURING THE YEAR. (4) THE APPELLANT SUBMITS THAT HAVING ACCEPTED RECESSIO N AND ADVERSE MARKET CONDITIONS THIS YEAR, ASSESSING OFFICER HIMS ELF HAS GIVEN 50% REDUCTION. HOWEVER, THERE WAS NO JUSTIFICATION FOR EVEN THE BALANCE 50% ADDITION OF THE DIFFERENCE IN GROSS PROFIT, ESP ECIALLY WHEN NO DEFECTIONS WERE FOUND IN EARLIER THE BOOKS OF ACCOU NT OR IN THE DETAILS FIELD BY THE APPELLANT BY THE APPELLANT. IT MAY BE APPRECIATED THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACC OUNTS OF THE APPELLANT. (5) THE APPELLANT RELIES ON THE FOLLOWING DECISIONS. A) DHAKESHWARI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 (SC) - THE ASSESSING OFFICER IS NOT ENTITLED TO MAKE A P URE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL AT ALL. THERE MUST BE SOMETHING MORE THAN BARE SUSPICI ON TO SUPPORT THE ASSESSMENT UNDER SECTION 143(3). ITA NO. 4489/MUM/2013 SMT. VARSHA P. SHAH 4 B) UMACHANARAN SHAH & BROS. VS. C1T (1959) 37 1TR 271 (SC) - AS ASSESSMENT BASED ON MERE CONJECTURE, SURMISE OR SUSPICION OR IRRELEVANT AND INADMISSIBLE EVIDENCE AND MATERIAL I S INVALID AND UNSUSTAINABLE IN LAW. C) HIRABAI D. DESAI & SONS VS. CIT (1936) 4 ITR 95 (BOM) - THERE IS NO PRESUMPTION OF BAD FAITH AGAINST AN ASSESSEE UNLESS THERE BE SUFFICIENT MATERIAL ON RECORD TO ESTABLISH AND SUST AIN BAD FAITH. IT CANNOT BE PRESUMED THAT AN ASSESSEE WAS SELLING BY SHORT WEIGHS. (6) YOUR HONOUR WOULD FURTHER APPRECIATE THAT THE HON'B LE ALLAHABAD HIGH COURT IN THE CASE OF C1T VS. LUCKY LABORATORIES LTD. (2006) 284 ITR 435 (ALL) HELD THAT ADDITION ON ACCOUNT OF STEEP FALL IN PROF ITS WAS NOT JUSTIFIED WHERE ASSESSEE CLAIMED THAT IT HA D TO SELL GOODS AT LOWER THAN MARKET PRICE BECAUSE OF INABILITY TO SEL L AT NORMAL PRICE. YOUR HONOUR WOULD APPRECIATE THAT IN THE PRESENT CA SE, DUE TO INCREASE IN DOLLAR, THE COST OF IMPORTS INCREASED SUBSTANTIA LLY. HOWEVER, DUE TO RECESSION, THE APPELLANT WAS UNABLE TO GET THE BEST SELLING PRICE. THIS HAS LED TO A SUBSTANTIAL FALL IN GROSS PROFIT. (7) YOUR HONOUR WOULD APPRECIATE THAT EVEN IN THE CASE OF BEST JUDGMENT ASSESSMENT, IT HAS BEEN HELD BY THE HON'BL E SUPREME COURT IN THE CASE OF STATE OF KERALA VS. C. VELUKUTTY (1966) 17 STC 465 (SC) THAT THE GUESS WORK SHALL NOT BE A WILD ONE, BUT SH ALL HAVE REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF EACH CASE. 3.2.3 IT IS SUBMITTED BY THE LEARNED A.R. THAT IT I S IN VIEW OF THE ABOVE SUBMISSIONS AND CORROBORATIVE EVIDENCES THAT THE LE ARNED CIT(A) FOUND ACCEPTABLE, HE HAD ALLOWED THE ASSESSEES APPEAL ON THIS ISSUE, AND DIRECTED DELETION OF THE ADDITION OF ` 1,56,28,916/- ON ACCOUNT OF LOW GP IN THE YEAR UNDER CONSIDERATION FOR THE REASONS CITED AT (1) TO (VII) OF PARA 3.3 OF THE IMPUGNED ORDER. IT IS SUBMITTED THAT SINCE THERE IS NO ERROR IN THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE, REVENUE S APPEAL MAY BE DISMISSED. 3.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH T HE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. TH E FACTS OF THE MATTER AS EMANATE FROM THE RECORD ARE THAT IN THE COURSE OF A SSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE GP OF THE PERIOD UNDER CON SIDERATION SHOWN AT 5.93% WAS LESS THAN THE GP OF 15.38% DECLARED IN TH E IMMEDIATELY PRECEDING YEAR. ON BEING QUERIED IN THIS REGARD, TH E ASSESSEE SUBMITTED THAT THE MAIN REASON FOR FALL IN GP WAS MAINLY DUE TO WORLDWIDE MARKET RECESSION, DUE TO FLUCTUATION IN THE RATE OF THE DO LLAR AND ALSO DUE TO HIGH SEA SALES THAT EARNED ONLY 2% PROFITS, WHICH WERE N OT THERE IN THE LAST ITA NO. 4489/MUM/2013 SMT. VARSHA P. SHAH 5 YEAR. THE EXPLANATIONS PUT FORTH BY THE ASSESSEE FO R LOW GP IN THIS YEAR DID NOT FIND FAVOUR WITH THE AO AND HE PROCEEDED TO EST IMATE THE GP @ 15.38%, BEING THE GP OF THE IMMEDIATELY PRECEDING Y EAR; AND THEREBY MADE AN ADDITION OF ` 1,56,28,960/- ON ACCOUNT OF LOW GP, AFTER GIVING REDUCTION OF 50% FOR RECESSION AND ADVERSE MARKET C ONDITIONS. 3.3.2 ON APPEAL BEFORE THE LEARNED CIT(A), THE ASSE SSEE, INTER ALIA, CONTENDED THAT THE AO HAD WRONGLY ESTIMATED THE GP @15.38% OF THE EARLIER. ACCORDING TO THE ASSESSEE THE AO HAD NOT P OINTED OUT ANY DEFECTS IN THE ASSESSEES BOOKS OF ACCOUNT THAT WERE AUDITE D AS PER PROVISIONS OF SECTION 44AB OF THE ACT; THAT THE AO DID NOT FIND A NY DECECT IN THE ASSESSEES ENTIRE PURCHASES WHICH WERE THROUGH IMPO RTS FOR WHICH PAYMENTS WERE MADE THROUGH BANKING CHANNELS; SIMILA RLY NO ERRORS WERE DETECTED BY THE AO IN RESPECT OF SALES, BOTH PURCHA SE AND SALES DETAILS HAVING BEEN CO-RELATED BEFORE HIM; THAT THE AO HAD WITHOUT REJECTING THE ASSESSEES BOOKS OR POINTING OUT DEFECTS THEREIN OR WITHOUT BRINGING OUT ANY COMPARABLE CASES OF PARTIES IN THE SAME LINE OF BUSINESS SHOWING HIGHER GROSS PROFITS HAD ESTIMATED THE GP OF THIS Y EAR AT THE RATE OF GP OF THE EARLIER YEAR; WHEN THE ADVERSE FACTORS OF THIS YEAR WERE NOT PREVALENT IN THE EARLIER YEAR AND FOR WHICH THE AO HIMSELF HAD A LLOWED 50% REDUCTION. THE LEARNED CIT(A) AFTER CONSIDERING THE AOS VIEWS AND THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF LOW GP HOLDING THE SAME TO BE UNJUSTIFIED. 3.3.3 IN THE IMPUGNED ORDER AT PARA 3.3 THEREOF THE LEARNED CIT(A) HAS DELETED THE ADDITION OF ` 1,56,28,916/- MADE ON ACCOUNT OF LOW GP HOLDING AS UNDER: - 3.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, ARGUMENTS OF THE ASSESSING OFFICER AND THE WRITTEN SUBMISSION S OF THE AUTHORISED REPRESENTATIVE OF THE APPELLANT. THE CON TENTION OF THE APPELLANT IS FOUND ACCEPTABLE BECAUSE OF THE FOLLOW ING REASONS. (I) THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFEC TS IN THE BOOKS OF THE ACCOUNT OF THE APPELLANT. WITHOUT REJE CTING THE BOOKS OF ACCOUNTS OF THE APPELLANT, THE FIGURES OF PROFIT CALCULATED ON THE BASIS OF THESE BOOKS OF ACCOUNT CANNOT BE DISTURBED AND THE ASSESSING OFFICER CANNOT MAKE ANY ESTIMATION ON THI S ACCOUNT. ITA NO. 4489/MUM/2013 SMT. VARSHA P. SHAH 6 (II) IT IS SEEN THAT THERE WERE HIGH SEAS SALE OF RS.45, 75,575/- ON WHICH ONLY 2% GP WAS EARNED BY THE APPELLANT. ON TH E OTHER HAND IN THE EARLIER YEAR THERE WERE NO HIGH SEAS SA LES WHICH WOULD HAVE ADVERSELY AFFECTED ON THE GP OF THAT YEA R. (III) DURING APPELLATE PROCEEDINGS APPELLANT WAS ASKED TO SUBMIT ITEMWISE DETAILS OF GP EARNED ON VARIOUS MATERIALS. IT IS SEEN THAT THE GP EARNED BY THE APPELLANT ON DIFFERENT ITEMS H AS A VERY WIDER RANGE AND IT VARIES FROM 20% TO 30%. IN SUCH A CASE IT IS NOT POSSIBLE FOR THE APPELLANT TO HAVE A CONSISTENT GP EVERY YEAR. THIS IS ALSO CLEAR FROM THE GP FIGURES GIVEN BY THE APPE LLANT FOR 5 YEARS WHICH IS AS BELOW: AY. GP 2007-08 7.66% 2008-09 15.38% 2009-10 5.9% 2010-11 4.6% 2011-12 9.62% FROM THE ABOVE IT IS CLEAR THAT IN THE APPELLANT'S LINE OF BUSINESS THE GP VARIES CONSIDERABLY YEAR AFTER YEAR. (IV) ONE OF THE MAIN REASONS FOR REDUCTION IN GP IS EXCH ANGE FLUCTUATION LOSS SUFFERED DURING THE YEAR. IN THIS YEAR APPELLANT HAS SUFFERED LOSS OF RS.1,01,98,459/-, ON ACCOUNT O F FOREIGN EXCHANGE RATE FLUCTUATION, WHEREAS IN THE NEXT THER E IS A GAIN IN THE FOREIGN EXCHANGE RATE ACCOUNT AMOUNTING TO RS.1 ,92,85,685/-. SUCH A HUGE AMOUNT OF FOREIGN EXCHANGE LOSS/GAIN IS A VERY IMPORTANT REASON FOR FLUCTUATION IN GP IN YEAR AFTE R YEAR. IF IN THIS YEAR THE FOREIGN EXCHANGE FLUCTUATION LOSS OF RS,1, 01,98,459/- IS EXCLUDED THEN THERE WOULD BE NET PROFIT OF RS.42,08 ,882/-. (V) THE ASSESSING OFFICER HAS NOTED FEW INSTANCES IN TH E ASSESSMENT ORDER WHERE APPELLANT HAS EARNED HIGHER RATES OF GP . DURING APPELLATE PROCEEDINGS APPELLANT HAS GIVEN MANY INST ANCES OF SALES WHERE A VERY LOW GP HAS BEEN EARNED. THERE AR E INSTANCE OF LOSS ALSO. THE APPELLANT HAS SUBMITTED A LIST OF 22 SUCH INSTANCES OUT OF WHICH SOME OF THE INSTANCES ARE REPRODUCED H ERE BELOW: S. NO. SUPPLIER NAME AND ADDRESS PURCHASE QTY TOTAL PURCHASE COST CUSTOMER NAME SALES QTY SALES AMT GP AMOUNT GP (%) 1 HENRIK BRUNBJERG APS VESTERGADE 113 7400 HERMING, DENMARK 23205 3295463 BABJI LAMITRONICS 10913 14763255 KATYANI PRODUCTS PVT. LTD. 12292 2089640 23205 3295463 23205 3562985 267432 7.51 2 HENRIK BRUNBJERG APS VESTERGADE 113 7400 HERMING, DENMARK 14860 1458509 SHREE GANPATI IMPEX 13590 1359000 ADITYA 1270 127000 14860 1458509 14860 1486000 27491 1.85 ITA NO. 4489/MUM/2013 SMT. VARSHA P. SHAH 7 3 AGILE ENTERPRISES INC 303 FIFTH AVE. SUITE 1608 NEW YORG, NY 10016USA 24655 3744685 VIKARSH STAMPING INDIA 17325 2425500 AUTOMATIC ELECTRIC LTD. 4210 785291 METALITA 3120 468000 24655 3744685 24655 3678791 -65894 -1.79 4 HENRIK BRUNBJERG APS VESTERGADE 113 7400 HERMING, DENMARK 23854 4035078 PREMIER CORE INDUSTRIES 4224 718080 PREMIER CORE INDUSTRIES 6645 1029975 KATYANI PRODUCTS PVT. LTD. 4975 870625 AUTOMATIC ELECTRIC LTD. 7036 1453145 PREMIER CORE INDUSTRIES 974 160710 23854 4035078 23854 4232535 197457 4.67 5 HENRIK BRUNBJERG APS VESTERGADE 113 7400 HERMING, DENMARK 21804 2094672 POWER CORE INDUSTRIES 4370 589950 KATYANI PRODUCTS PVT. LTD. 16315 2447250 21804 3094672 20685 3037200 101357 3.34 6 HENRIK BRUNBJERG APS VESTERGADE 113 7400 HERMING, DENMARK 40520 3945092 ADITYA 13675 1367500 EVERGREEN METAL WORKS 13220 1322000 SHREE GANPATI IMPEX 13625 1294375 40520 3945092 40520 3983875 38783 0.97 7 HENRIK BRUNBJERG APS VESTERGADE 113 7400 HERMING, DENMARK 24240 3876811 VIKARSH STAMPING INDIA 24240 3878400 24240 3876811 2420 3878400 1589 0.04 8 HENRIK BRUNBJERG APS VESTERGADE 113 7400 HERMING, DENMARK 19840 1928413 SHREE GANPATI IMPEX 16450 1727250 ADITYA 3390 322050 19840 1928413 19840 2049300 120887 5.90 9 HENRIK BRUNBJERG APS VESTERGADE 113 7400 HERMING, DENMARK 25505 4731110 KATYANI PRODUCTS PVT. LTD. 23855 4341610 KRYSF POWER COMPONENT 1650 344537 25505 4731110 25505 4686147 -44964 -0.96 1 0 HENRIK BRUNBJERG APS VESTERGADE 113 7400 HERMING, DENMARK 19430 1794409 PREMIER CORE INDUSTRIES 3700 333000 SHREE GANPATI IMPEX 7990 759050 PARSHWA LAM & CORE 4765 476500 BABJI LAMITRONICS 2975 282625 19430 1794409 19430 1851175 56766 3.07 (VI) IN ORDER TO MAKE THE ADDITION BY ESTIMATING GROSS P ROFIT OF THE APPELLANT, THE ASSESSING OFFICER IS REQUIRED TO FIR ST REJECT THE BOOKS OF ACCOUNT OF THE APPELLANT. FOR THIS, ASSESS ING OFFICER IS ITA NO. 4489/MUM/2013 SMT. VARSHA P. SHAH 8 REQUIRED TO NOTICE AND POINT OUT SOME SPECIFIC DEFE CTS IN THE BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE APPELL ANT. WITHOUT FINDING ANY DEFECTS IN THE BOOKS OF ACCOUNT S AND WITHOUT REJECTING THE BOOKS, IT IS NOT POSSIBLE FOR THE ASSESSING OFFICER TO DISREGARD THE GROSS PROFIT CALCULATED ON THE BASIS OF THE ENTRIES IN THE REGULAR BOOKS OF ACCOUNTS AND MA KE HIS OWN ESTIMATION OF GP EARNED BY THE APPELLANT. A SYSTEM OF ACCOUNTING CONSISTENTLY FOLLOWED AS ORD INARILY EXPRESSED TO BE ACCEPTED, UNLESS THE SYSTEM DOES NO T REFLECT TRUE PROFITS. (VII) RELIANCE IS PLACED ON FOLLOWING JUDICIAL DECI SIONS :- (A) METHOD OF ACCOUNTING REGULARLY MAINTAINED BY AN ASS ESSEE SHOULD BE ACCEPTED. MD.UMER V. CIT (1975) 101 ITR 525 (PAT) WHERE THE GENUINENESS AND REGULARITY OF THE ACCOUNT S ARE NOT CHALLENGED, THE ACCOUNTS ARE RELEVANT AND A RE PRIME FACIE PROOF OF THE ENTRIES AND OF THE CORRECTNESS T HEREOF UNDER SECTION 34 OF THE EVIDENCE CT. ST.TERESA'S OIL MILLS V. STATE OF KERALA (1970) 76 ITR 365 (KER.) (B) WHERE THERE IS NO QUALITATIVE TALLY BETWEEN THE STO CK PURCHASED AND THE STOCK SOLD THE BOOKS OF ACCOUNTS CANNOT BE REJECTED AND THIS VIEW IS AFFIRMED AT THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF KISHINCHAND CHELLARAM - 115 ITR 654. (C) WHERE THE ASSESSEE GIVES SOME REASONS FOR A FALL IN THE RATE OF PROFIT, IT IS FOR THE OFFICER TO GATHER AND PLAC E ON RECORD SUFFICIENT MATERIAL TO SHOW THAT AN ADDITION TO THE RETURNED PROFIT SHOULD STILL BE MADE. INTERNATIONAL FOREST CO. V CIT (1975) 101 ITR 721 (J&K). (D) THE MAINTENANCE OF A STOCK REGISTER IS OF GREAT IMP ORTANCE IN A BUSINESS BUT THE ABSENCE OF A STOCK REGISTER CANN OT PER SE LEAD TO AN INFERENCE THAT THE ACCOUNTS ARE FALSE AND ENTAIL THE REJECTION OF BOOK RESULTS. PANDIT BROS V CIT (1954) 26 ITR 159 (PUNJ). IN THE CASE OF THE APPELLANT STOCK RECORDS ARE MAINTAINED. IN VIEW OF THE ABOVE OBSERVATIONS AND VARIOUS JUDIC IAL PRONOUNCEMENTS, IT IS HELD THAT ASSESSING OFFICER W AS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.1,56,28,916/- ON ACCOUNT OF LOW GP AND THE SAME IS DELETED. THIS GROUND IS ALLOWED. 3.4 ON A CAREFUL CONSIDERATION OF THE FACTS OF THE CASE, THE AOS VIEWS, THE SUBMISSIONS OF THE ASSESSEE, THE IMPUGNED ORDER OF THE LEARNED CIT(A), WE ARE INCLINED TO CONCUR WITH THE VIEWS AND OBSERV ATIONS OF THE LEARNED CIT(A) AT (I) TO (VII) AT PARA 3.3 (EXTRACTED SUPRA ). APPARENTLY, NO DEFECT HAS BEEN POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WHICH ITA NO. 4489/MUM/2013 SMT. VARSHA P. SHAH 9 HAD BEEN AUDITED AS PER THE PROVISIONS OF SECTION 4 4AB OF THE ACT, NOR HAVE THE SAME BEEN REJECTED AND THEREFORE IN OUR VI EW THE AO COULD NOT HAVE DISTURBED THE PROFITS DECLARED AND PROCEEDED T O ESTIMATE THE GP. WE ALSO FIND THAT THE LEARNED CIT(A) HAD, ON FACTUAL E XAMINATION, OBSERVED THAT THE GP EARNED BY THE ASSESSEE ON DIFFERENT ITE MS HAD A VERY WIDE GP RANGE AND THEREFORE THE ASSESSEE COULD NOT HAVE EAR NED CONSISTENT GP YEAR AFTER YEAR. DETAILS ON RECORD IN THIS RESPECT SHOW THAT THE ASSESSEES GP VARIED FROM 7.66% IN A.Y. 2007-08 TO 15.38% IN A.Y. 2008-09, 5.9% IN A.Y. 2009-10 (I.E. THE YEAR UNDER CONSIDERATION), 4 .6% IN A.Y. 2010-11 AND 9.6% IN A.Y. 2011-12. IT IS SEEN THAT THE LEARNED C IT(A) HAD ALSO OBSERVED THAT APART FROM HUGE FOREIGN EXCHANGE FLUCTUATION L OSS SUFFERED, I.E. OF ` 1,01,98,459/- IN THE YEAR UNDER CONSIDERATION, THER E WERE ALSO INSTANCES OF HIGH SEA SALES WHICH RESULTED IN GP @ 2% AND THA T SUCH SALES WERE NOT THERE IN THE IMMEDIATELY PRECEDING YEAR. LASTLY, WE ALSO FIND THAT THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE WAS ABLE TO PLACE ON RECORD MANY INSTANCES OF CASES IN THE SIMILAR LINE OF BUSI NESS IN WHICH MAY INSTANCE OF SALE HAD RESULTED IN LOW GP AND IN LOSS ALSO. IN THE PECULIAR FACTUAL MATRIX OF THE CASE, AS DISCUSSED ABOVE, WE CONCUR WITH AND UPHOLD THE FINDING OF THE LEARNED CIT(A) THAT THE AO WAS N OT JUSTIFIED IN MAKING THE ADDITION OF ` 1,56,28,916/- ON ACCOUNT OF LOW GP. CONSEQUENTLY, T HE GROUND RAISED BY REVENUE IS DISMISSED. 3. IN THE RESULT, REVENUES APPEAL FOR A.Y. 2009-10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2016. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 23 RD SEPTEMBER, 2016 ITA NO. 4489/MUM/2013 SMT. VARSHA P. SHAH 10 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -29, MUMBAI 4. THE CIT - 17, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.