DCIT, New Delhi V. Smt. Kiran Sehgal, New Delhi

ITA 4840/DEL/2011

• Counselvise Citation: 484020114 RSA 2011
• Duration Of Justice: 3 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 03-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Assessee Lawyers: VIBHU SEHGAL
• Keywords: Gross profit estimation
• Section: 143(3)

Judgement Text

ITA NO. 4840/ DEL/ 2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI B.C. MEENA , ACCOUNTANT MEMBER I.T.A. NO. 4840 / DEL/201 1 A.Y. : 200 7 - 0 8 DY. COMMISSIONER OF INCOME TAX, CIRCLE 26(1), NEW DELHI D - 9, VIKAS BHAVAN, NEW DELHI VS. SMT. KIRAN SEHGAL, J - 12/5, RAJOURI GARDEN, NEW DELHI 110 027 (PAN: AATPS5864P) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. GAURAV D U DEJA, SR. DR ASSESSEE BY : SH. SHAILENDER BAJAJ, CA AND SH. VIBHU SEHGAL, CA DATE OF HEARING : 1 7 - 0 3 - 201 5 DATE OF ORDER : 2 0 - 0 3 - 201 5 ORDER PER H.S. SIDHU, J M REVENUE HAS FILED THIS APPEAL AGAINST THE O RDER DATED 4 . 8 .201 1 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) - XXIV , NEW DELHI P ERTAINING TO ASSESSMENT YEAR 200 7 - 0 8 . 2. THE GROUNDS RAISED BY THE DEPARTMENT READ AS UNDER: - (I) . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE TRADING ADDITION OF RS. 18,92,680/ - MADE BY THE AO ON ACCOUNT OF LOW GP. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN GIVING A FINDING THAT THE ITA NO. 4840/ DEL/ 2011 2 AO HAD NEITHER INVESTIGATED THE ISSUE NOR HAS BROUGHT ANY EVIDENCE ON RECORD TO PROVE THAT EXPENDITURE WAS BOGUS. THIS IS CONTRARY TO FACTS ON RECORD. (III) THE ORDER OF THE AO MAY BE RESTORED AND THE ORDER OF THE CIT(A) MAY BE SET ASI DE WITH RESPECT TO THE ABOVE MENTIONED GROUND(S). (IV) THE APPELLANT CRAVES TO BE ALLOWED TO AMEND, DELETE OR ADD ANY OTHER GROUND(S) OF APPEAL DURING THE COURSE OF HEARING OF THIS APPEAL. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE FILED HER RETURN OF INCOME ON 3 1. 10.2007 DECLARING A TOTAL INCOME OF RS.17,37,330/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE APPELLANT. THE APPELLANT IS THE PROPRIETOR OF M / S. KIRAN ASSOCIATES, WHICH WAS ENGA GED IN THE BUSINESS OF MANUFACTURING OF GARMENTS FOR EXPORT IN INTERNATIONAL MARKETS. DURING THE YEAR UNDER CONSIDERATION, M/S. KIRAN ASSOCIATES REMAINED A PROPRIET A RY CONCERN OF THE APPELLANT FOR ELEVEN MONTHS TILL 28.02.2007 AND THEREAFTER, IT BECAME A P ARTNERSHIP FIRM BY THE SAME NAME W.E.F. 01.03.2007 . THE ASSESSING OFFICER FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT THE APPELLANT HAD DEBITED SALARY AND WAGES EXPENSES IN THE BOOKS OF ACCOUNT WHICH WERE AT A RATIO OF 22%, AS COMPARED TO THE AV ERAGE OF LAST TWO YEARS AT 15.4%, LEADING TO A DECLINE IN THE PROFIT OF THE CONCERN. WHEN HE CALLED FOR THE DETAILS OF THE EMPLOYEES, HE FOUND. THAT THE APPELLANT HAD SUBMITTED A LIST OF 516 EMPLOYEES FOR CLAIMING SALARY/WAGES OF RS.84,11,438/ - , OUT OF WHI CH ONLY 34 EMPLOYEES WERE STILL CONTINUING TO WORK IN THE FACTORY , WHILE THE REST OF THEM HAD LEFT. BASED ON THIS INFORMATION, THE AO CAME TO A ITA NO. 4840/ DEL/ 2011 3 CONCLUSION THAT THE APPELLANT HAS INFLATED THE EXPENSES UNDER THE HEAD SALARY AND. WAGES TO REDUCE TAX INCIDENC E AND TO DECLARE A REDUCED GP RATIO AT 10.42% AS AGAINST 18.53% IN THE LAST YEAR. HE INCREASED THE GP RATIO BY 5% AND MADE AN ADDITION OF RS.18,9 2, 6 80/ - TO THE INCOME OF THE A SSESSEE VIDE HIS ASSESSMENT ORDER DATED 2.12.2009 PASSED U/S 143(3) OF THE I.T. ACT, 1961. 4. AGAINST THE AFORESAID ASSESSMENT ORDER OF THE ASSESSING OFFICER, ASSEESSEE APPEALED BEFORE THE LD. FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER 4.8.2011 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESEE AND DELETED THE ADDITION OF RS. 18,92,680/ - . 5. AGGRIEVED BY THE AFORESAID ORDER DATED 4.8.2011, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6 . AT THE TIME OF HEARING LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND REITERATED ON THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL FILED BY THE REVENUE . 7. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND ALSO FILED A COMPARATIVE GROSS PROFIT AND NET PROFIT OF KIRAN ASSOCI ATES FOR 5 YEARS I.E. FINANCIAL YEARS 2002 - 03 TO 2006 - 07 AND STATED THAT THE L D. CIT(A) HAS PASSED A WELL REASONED ORDER ON THE BASIS OF THE PREVIOUS RECORDS OF THE ASSESSEE, THEREFORE, THE APPEAL FILED BY THE REVENUE MAY BE DISMISSED BY UPHOLDING THE ORD ER OF THE LD. CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS, ESPECIALLY THE IMPUGNED ORDER DATED 4.8.2011, WE FIND THAT LD. CIT(A) HAS CAREFULLY CONSIDERED THE SUBMISSIONS OF THE A SSESSEE , THE DOCUMENTS AND EVIDENCES PLACED O N RECORD, AS WELL AS THE REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER FOR MAKING THE ADDITION. ITA NO. 4840/ DEL/ 2011 4 WE FIND CONSIDERABLE COGENCY IN THE LD. CIT(A) S OPINION THAT THE A SSESSEE HAS PLACED SUFFICIENT EVIDENCES ON RECORD IN THE FORM OF MONTHLY EXPENDITURE O N SALARIES AND WAGES, MONTHLY DETAILS OF EMPLOYEES AND THE COMPLETE LIST OF EMPLOYEES WHO HAD LEFT THE JOB. THE APPELLANT HAS BEEN ABLE TO PROVE THAT THERE IS A DIRECT NEXUS BETWEEN THE EXPENDITURE INCURRED ON SALARIES/WAGES OF RS.84,11,438/ - AND THE BUSIN ESS OF THE APPELLANT WHOSE TOTAL TURNOVER OF EXPORTS DURING THE YEAR WAS RS.3.78 CRORES. LD. CIT(A) OBSERVED THAT O N THE OTHER HAND, THE AO HAS NEITHER INVESTIGATED THE ISSUE, NOR HAS BROUGHT ANY EVIDENCE ON RECORD TO PROVE THAT THE EXPENDITURE INCURRED WA S BOGUS AND THAT THE LIST OF EMPLOYEES WAS FABRICATED. WE NOTE THAT THE LD. CIT(A) WAS RIGHT IN OBSERVING THAT HE HAD NO JUSTIFICATION FOR INVOKING SECTION 145(3) AND RE JECTING THE AUDITED BOOKS OF A CCOUNTS OF THE A SSESSEE . LD. CIT(A) FURTHER OBSERVED T HAT T HE AO HAS ALSO NOT POINTED OUT ANY OTHER MISTAKE IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE A SSESSEE . IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT LD. CIT(A) HAS RIGHTLY HELD THAT THE ADDITION MADE BY THE AO TO THE INCOME OF THE ASSESSE E TO THE TUNE OF RS. 18,92,680/ - BY INCREASING THE GP RATIO BY 5% AFTER REJECTION OF TRADING RESULTS U/S. 145(3) OF THE ACT WAS NOT JUSTIFIED. IN THE BACKGROUND OF THE AFORESAID DETAILED DISCUSSIONS, WE FIND THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.18,92,680/ - ON THIS COUNT. THEREFORE, W E DO NOT SEE ANY REASON TO INTERFERE WITH THE ITA NO. 4840/ DEL/ 2011 5 WELL REASONED ORDER OF THE LD. CIT(A), ACCORDINGLY, WE UPHOLD THE SAME AND DECIDE THE ISSUE AGAINST THE REVENUE BY DISMISSING THIS GROUND OF APPEAL. 9. IN THE R ESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE O PEN C OURT ON 2 0 / 0 3 /20 1 5 . SD / - S D / - [ B.C. MEENA] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 2 0 / 3 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 4840/ DEL/ 2011 6