ITO, Kollam V. P.P.Sisupalan, Kollam

ITA 476/COCH/2006

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58260 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 17-08-2006
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Keywords: Source of fund; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM I.T.A NO. 476 /COCH/2006 ASSESSMENT YEAR: 2003-04 I.T.O., WARD-3, KOLLAM VS. SHRI P.SISUPALAN, KARTHIKA RUBBERS, KARAVALOOR, ANCHAL, KOLLAM. [PAN:AAYPP 7082R] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) ASSESSEE BY NONE REVENUE BY MS. S. VIJAYAPRABHA, DR DATE OF HEARING 28/11/2011 DATE OF PRONOUNCEMENT 31/01/2012 O R D E R PER SANJAY ARORA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, TRIVANDRUM (CIT(A) FOR SHORT) DATED 30-05-2006, AND THE ASSESSMENT YEAR (A.Y.) UNDER REFERENCE IS 2003-04. 2. THIS IS THE THIRD ROUND IN THE TRIBUNAL. IN THE FIRST ROUND, IT DISMISSED THE REVENUES APPEAL AS NOT MAINTAINABLE, RELYING ON TH E DECISION IN THE CASE OF CIT V. ITAT (1998) 232 ITR 207 (DEL.). THE HONBLE JURISDICTIO NAL HIGH COURT VIDE ITS ORDER DATED 17-02-2009 (IN I.T.A. NO. 31 OF 2008/COPY ON RECORD ) SET ASIDE THE SAME, AND RESTORED THE APPEAL BACK TO THE TRIBUNAL FOR A DISPOSAL ON MERIT S. THE APPEAL WAS ADJUDICATED BY THE TRIBUNAL VIDE ITS ORDER DATED 16-10-2009 (IN I.T.A. NO. 476/COCH/2006/COPY ON RECORD). THE REVENUE HAVING NOT RAISED ANY GROUND ON QUANTUM ; ITS SOLE GROUND RAISING ONLY A LEGAL GROUND, ON WHICH THE LD. CIT(A) HAD ALLOWED T HE ASSESSEES APPEAL, THE MATTER WAS I.T.A. NO. 476/COCH/2006 2 RESTORED BACK BY IT TO THE FILE OF THE FIRST APPELL ATE AUTHORITY FOR A DECISION ON MERITS. THE MATTER, WAS AT THE INSTANCE OF THE REVENUE, AGAIN C ONSIDERED BY THE HONBLE HIGH COURT, AND VIDE ITS JUDGEMENT DATED 02-02-2010 (IN I.T.A. NO. 1775 OF 2009/COPY ON RECORD) RESTORED BACK TO THE FILE OF THE TRIBUNAL FOR CONSI DERING THE APPEAL ON MERITS, I.E., QUA THE ASSESSMENT OF THE GROSS PROFIT, AFTER PROVIDING OPP ORTUNITY OF HEARING TO BOTH THE SIDES. HENCE THE INSTANT APPEAL. 3. NONE APPEARED FOR OR ON BEHALF OF THE ASSESSEE N OR ANY ADJOURNMENT APPLICATION BY THE ASSESSEE STANDS RECEIVED, DESPITE PROPER SERVIC E OF NOTICE OF HEARING. 4.1 WE HAVE HEARD THE LD. DEPARTMENTAL REPRESE NTATIVE (DR), AND PERUSED THE MATERIAL ON RECORD, WHICH COMPRISES ONLY THE ORDERS BY THE A UTHORITIES BELOW. THE ASSESSING OFFICER (AO) FOUND THE ASSESSEE, A DEALER IN RUBBER , TO HAVE DISCLOSED A GROSS PROFIT (G.P.) OF 0.58% FOR THE CURRENT YEAR AS AGAINST THE G.P. RATE AT 1.1% FOR THE IMMEDIATELY PRECEDING YEAR, I.E., A.Y. 2002-03. THE ASSESSEE E XPLAINED THAT THE DECLINE IN THE GROSS PROFIT WAS ON ACCOUNT OF HIGH COMPETITION. THE INCR EASE IN TURNOVER, WHICH WAS AT ` 961.59 LAKHS, AS AGAINST ` 494 LAKHS FOR THE PRECEDING YEAR, WAS MAINLY DUE TO THE INCREASE IN THE SELLING PRICE, THE QUANTITY-WISE IN CREASE BEING ONLY AT ABOUT 50%, I.E., AT 25,59,967 KGS., AS AGAINST 16,53,800 KGS. FOR THE I MMEDIATELY PRECEDING YEAR. THE SAME WAS NOT FOUND CONVINCING BY THE AO, WHO ESTIMATED T HE GROSS PROFIT FOR THE YEAR BY ADOPTING THE G.P. RATE FOR THE IMMEDIATELY PRECEDIN G YEAR (A.Y. 2002-03), I.E., AT 1.1%, MAKING AN ADDITION OF ` 2,01,970/- TO THE RETURNED INCOME, FURTHER SUPPORTI NG THE SAID ADDITION ON THE BASIS THAT THE WITHDRAWALS FOR PERS ONAL AND DOMESTIC PURPOSES FOR THE YEAR WERE ONLY AT ` 30,000/- AND, THUS, GROSSLY INADEQUATE. THE LD. CI T(A), HOWEVER, DELETED THE SAME ON THE BASIS THAT THE AO HAD NOT DOUBTED T HE CORRECTNESS OR THE COMPLETENESS OF THE ACCOUNTS, AND HAD NOT GIVEN ANY FINDING WITH RE GARD TO THE VIOLATION OF S. 145(3) OF THE ACT. 4.2 WE HAVE FOR THE PURPOSE PERUSED THE MATERIAL ON RECORD. WE ARE NOT IMPRESSED BY THE REASON/S GIVEN BY THE LD. CIT(A) IN DELETING TH E ADDITION. THIS IS FOR THE REASON THAT I.T.A. NO. 476/COCH/2006 3 THE ASSESSEES ACCOUNTS ARE BEING MAINTAINED ON THE SAME BASIS, AND FOLLOWING THE SAME METHOD OF ACCOUNTING, AS WAS DONE FOR THE PRECEDING YEARS, AND FOR WHICH THE TRADING RESULTS HAVE BEEN ACCEPTED AT A GROSS PROFIT OF OVE R 1.0% FOR THE SAME TRADE. IN THE FACTS OF THE CASE, THE ASSESSE COULD NOT REASONABLY EXPLA IN THE DECLINE IN THE TRADING PROFIT WITH REFERENCE TO ITS ACCOUNTS. THE ANSWER FOR THE SAME OUGHT TO BE NORMALLY PROVIDED BY THE ACCOUNTS THEMSELVES, IF TRUE AND CORRECT. HOWEVER, THE EXPLANATION FURNISHED BY THE ASSESSEE IS JUST TO THE CONTRARY. IT CLAIMS AN INC REASE IN QUANTITY AT OVER 50% (WHICH WE HAVE FOUND TO BE IN FACT AT CLOSE TO 55%), WHILE TH E INCREASE IN THE TURNOVER IS AT OVER 100% (WHICH WE HAVE FOUND TO BE AT OVER 95%). AS SU CH, TAKING INTO ACCOUNT THE INCREASE IN QUANTITY, THERE HAS BEEN A PRICE RISE, I.E., ON AN AVERAGE, AT OVER 25%, FOR THE CURRENT YEAR VIS--VIS THE PRECEDING YEAR. ONLY A CORRESPO NDING PRICE RISE IN THE PURCHASE COST AS WELL, WOULD LEAD TO THE GROSS PROFIT BEING MAINTAIN ED AT THE SAME RATE. NO DOUBT, AN INCREASE IN EXCESS OF THE SAME WOULD LEAD TO A DECL INE IN THE GROSS PROFIT RATIO. HOWEVER, THE ASSESSEE HAS NOT FURNISHED ANY INFORMATION WITH REGARD THERE-TO. ALSO, CLEARLY, WITHDRAWALS FOR SELF AND FAMILY FROM THE BUSINESS A RE INADEQUATE CONSIDERING THE FAMILY PROFILE, AND THE FACT THAT THE ASSESSEE HAS NO AGRI CULTURAL INCOME OR OTHER SOURCES OF INCOME. THE ASSESSEE HAS ALSO NOT FURNISHED ANY EXP LANATION IN THIS REGARD. ALSO, IT NEEDS TO BE BORNE IN MIND THAT THE ASSESSMENT IS FRAMED U /.S 144, INVOCATION OF WHICH HAS NOT BEEN CHALLENGED, SO THAT THERE WAS NO PRODUCTION OF BOOKS OF ACCOUNT BY THE ASSESSEE BEFORE THE AO. 5. IN VIEW OF THE FOREGOING, WE CONSIDER THAT THE AO HAS UNDER THE CIRCUMSTANCES BEEN REASONABLE IN ADOPTING THE GROSS PROFIT RATE AS OBT AINING FOR THE IMMEDIATELY PRECEDING YEAR, AND WHICH, AS OBSERVED EARLIER, IMPLY A CORRE SPONDING INCREASE PERCENTAGE TERMS IN THE PURCHASE COST AS WELL. SO, HOWEVER, IN OUR VIE W, IT WOULD BE REASONABLE TO RESTRICT THE ESTIMATE OF THE TRADING PROFIT FOR THE YEAR AT 1%, I.E., AS AGAINST 1.1% FOR THE IMMEDIATELY PRECEDING YEAR; SOME VARIATION THEREIN FROM YEAR TO YEAR BEING INEVITABLE. WE, ACCORDINGLY, SET ASIDE THE IMPUGNED ORDER DELETING THE ADDITION ON ACCOUNT OF LOW TRADING PROFIT, AND DIRECT IT TO BE WORKED OUT BY ADOPTING A GP RATE OF 1%. WE DECIDE ACCORDINGLY. I.T.A. NO. 476/COCH/2006 4 5. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED. SD/- S D/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 31ST JANUARY, 2012 GJ COPY TO: 1. SHRI P.SISUPALAN, KARTHIKA RUBBERS, KARAVALOOR, ANCHAL, KOLLAM. 2. THE INCOME TAX OFFICER, WARD-3, KOLLAM. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, TR IVANDRUM. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE . BY ORDER ( ASSISTANT REGISTRAR) ITAT, COCHIN BENCH