Sanjib Lochan Sahoo, Cuttack V. ITO, Cuttack

ITA 484/CTK/2012

• Counselvise Citation: 48422114 RSA 2012
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 05-10-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D K SHETHM SHETH ARS
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 484/CTK/2012 / ASSESSMENT YEAR 2008 - 09 SANJIB LOCHAN SAHOO, PROP.SAHOO TRADERS,ATGARH, DIST.CUTTACK 754 029 PAN: ACTPS 8307 B - - - VERSUS - INCOME - TAX OFFICER, WAR D 2(2), CUTTACK. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SHETH/M.SHETH, ARS / FOR THE RESPONDENT: / SHRI S.C.MOHANTY, DR / DATE OF HEARING: 13.12.2012 / DATE OF PRONOUNCEMENT: 14.12.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE RAISES THE SOLITARY ISSUE WITH RESPECT TO THE ENHANCEMENT IN GROSS MARGIN RATE WHEN TAXES HAVE B EEN PAID ON THE NET PROFIT IN ACCORDANCE WITH THE PROVISIONS OF THE AUDITED FINANCIAL STATEMENTS FILED WHEN NO CORRESPONDING DISALLOWANCE HAS BEEN MADE FOR CLAIMING EXPENSES ON A FINDING THAT THE GROSS PROFIT RETURNED WAS MORE THAN THE GROSS MARGIN WHICH H AS BEEN PARTLY REDUCED THAT TOO LOWER THAN WHAT THE ASSESSING OFFICER HAS COMPUTED. 2. THE BRIEF FACTS ARE THAT THE ASSESSEE DERIVES INCOME FROM TRADING IN FERTILIZERS, PESTICIDES AND CEMENT IN WHOLESALE BASIS. IT FILED ITS RETURN OF INCOME OF 3,00,698 WHEN THE ASSESSING OFFICER APPLYING THE PROVISIONS OF SECTION 145(3) REJECTED THE BOOK RESULT AND SOUGHT TO COMPUTE THE GROSS MARGIN OF 4% OF THE TOTAL TURNOVER BEING 2.24 CRORES. THE ASSESSING OFFICER I.T.A.NO. 484/CTK/2012 2 TOOK COGNIZANCE OF THE NET PROFIT RETURNED BY THE ASSESSEE WHICH WAS ACCEPTABLE TO IT ON THE GROSS MARGIN WHICH WAS RETURNED BY THE ASSESSEE AT 5.59%. THE LEARNED COUNSEL OF THE ASSESSEE CLARIFIED THAT THE AMOUNT OF DISCOUNT AVAILED BY THE ASSESSEE ON THE PURCHASES MADE BY IT WAS ORIGINALLY SHOWN A FTER THE GP WOULD LEAD TO FINDING THAT THE ASSESSEE HAS BEEN RENDERING MORE GROSS MARGIN THEN AS COMPUTED BY THE ASSESSING AUTHORITIES. THEREFORE, PRIMA FACIE IT IS THE CASE OF THE ASSESSEE TO SUBMIT THAT THE GROSS MARGIN HAS TO BE CONSIDERED ON THE BASIS OF COST OF SALES AND NOT BECAUSE THE DISCOUNT AVAILED BY THE ASSESSEE WAS ON THE BASIS OF PURCHASES MADE BY IT COMPUTED AT THE END OF THE YEAR. THE LEARNED CIT(A) THEREFORE CONSIDERING THESE FACTS PARTLY REDUCED THE GROSS MARGIN SO COMPUTED BY THE ASSESSIN G OFFICER AT 3.5% FROM 4% ADOPTED BY THE ASSESSING OFFICER. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT IT BECOMES PRIMARILY A MISTAKE COMMITTED BY THE ASSESSING AUTHORITIES INSOFAR AS NO CONTROVERSY HAS BEEN BROUGHT ON RECORD THAT THE DISCOUNT AVA ILED BY THE ASSESSEE WAS NOT FORMING PART OF THE NET PROFIT. 3. THE LEARNED DR HAS SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE GROSS MARGIN AS RETURNED BY THE ASSESSEE WAS LOWER THAN THE GROSS MARGIN AS COMPUTED BY THE ASSESSING A UTHORITIES WHO HAVE CATEGORICALLY REJECTED THE BOOK RESULT U/S.145(3) INSOFAR AS THE NET PROFIT AS DERIVED BY THE ASSESSEE COULD NOT BE RELIED UPON. 4. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSAL OF THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE CON SIDERED VIEW THAT IT IS MISINTERPRETATION OF THE FINANCIAL STATEMENTS B Y THE AUTHORITIES BELOW TO THE EXTENT THAT THE DISCOUNT RECEIVED BY THE ASSESSEE AMOUNTING TO 6,49,783 FOR I.T.A.NO. 484/CTK/2012 3 THE IMPUGNED ASSESSMENT YEAR WAS TO BE REDUCED FROM THE PURCHASES WAS A REGUL AR PRACTICE ADOPTED BY THE ASSESSEE INSOFAR AS THE VALUATION OF THE CLOSING STOCK HAS NOT BEEN DISTURBED TO RESULT DISTORTION IN GROSS MARGIN AS SOUGHT TO BE COMPUTED BY THE ASSESSING OFFICER AFTER HAVING REJECTED THE BOOK RESULT U/S.145(3) INDICATING THA T THE NET PROFIT DECLARED BY THE ASSESSEE COULD NOT BE RELIED UPON. ON OUR PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT THE ASSESSING OFFICER HAS ADOPTED THE VERY NET PROFIT AS RETURNED BY THE ASSESSEE THAT TOO ENHANCED THE SAME BY THE DIFFERENCE BETWEEN THE GROSS MARGIN RETURNED BY THE ASSESSEE WHICH ASSESSEE SUBMITS AS PER THE FINDING OF THE ASSESSING OFFICER FOR THE PAST SEVERAL YEARS HAS NEVER BEEN LESS THAN 4%. THIS CLEARLY INDICATES THAT THE ENHANCEMENT OF 4% GROSS MARGIN AS COMPUTED BY THE ASSESSING OFFICER ON THE SAME TURNOVER WHICH THE ASSESSEE HAS BEEN DECLARING WAS A MISTAKE APPARENT ON RECORD INSOFAR AS THE ASSESSING OFFICER HAD NOT TAKEN INTO CONSIDERATION THE DISCOUNT AVAILED BY THE ASSESSEE AFTER THE CLOSE OF THE BUSINESS DULY ACCOUNTED FOR B EING A TURNOVER REBATE ALLOWED TO THE ASSESSEE TO BE CLAIMED AGAINST THE GROSS MARGIN. THEREFORE, THE LEARNED CIT(A) AFTER TAKING COGNIZANCE OF THE REJECTION OF BOOKS OF ACCOUNT U/S.145(3) OUGHT TO HAVE CONSIDERED THIS ASPECT WHICH PART RELIEF OF 0.5% WOUL D RATHER LEAN IN FAVOUR OF THE ASSESSEE TO THE EXTENT THAT THE DISCOUNT BEING THE PART OF THE COST OF SALES WOULD ALSO REDUCE THE CLOSING STOCK VALUE WHICH WOULD BE A NULLITY. IN OTHER WORDS, THE LEARNED CIT(A) CONSIDERED THE ISSUE IN ITS ENTIRETY BY HOLDI NG PART RELIEF GRANTED TO THE ASSESSEE BUT WAS IN FACT REDUCING THE INCOME RENDERED BY THE ASSESSEE AS PER ITS RETURN. IN THIS VIEW OF THE MATER, THE COMPUTATION OF GROSS MARGIN OF 1,01,272 AS SUBMITTED BY THE LEARNED COUNSEL OF THE ASSESSEE IS DIRECTED T O BE REDUCED FROM THE ASSESSED INCOME UNDER THE PROVISIONS OF SECTION 143(3) FOR THE IMPUGNED BY THE ASSESSING OFFICER. I.T.A.NO. 484/CTK/2012 4 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO ), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 14.12.2012 - COPY OF THE O RDER FORWARDED TO: 1 . / THE APPELLANT : SANJIB LOCHAN SAHOO, PROP.SAHOO TRADERS,ATGARH, DIST.CUTTACK 754 029 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 2(2), CUTTACK. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 13.12.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14.12.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.12.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.