KOYNA GLASS WORKS P.LTD, MUMBAI V. ITO WD 1(2)(2), MUMBAI

ITA 4854/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9987 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-05-2016
• Assessment Year: 2000-2001
• Appeal Filed On: 24-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Business income
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.4853/MUM/2013, (A.Y. 1999-2000) ITA NO.4854/MUM/2013, (A.Y. 2000-01) KOYNA GLASS WORKS PVT. LTD. 2/C, LAWRENCE & MAYO HOUSE, 276, DR.D.N.ROAD, FORT, MUMBAI 400 001 PAN: AACCK7983K ...... APPELLANT VS. THE I.T.O, WARD 1(2)(2), MUMBAI ..... RESPONDENT ITA NO.5360/MUM/2013, (A.Y. 1999-2000) ITA NO.5361/MUM/2013, (A.Y. 2000-01) THE I.T.O, WARD 1(2)(2), MUMBAI .... APPELLANT VS. KOYNA GLASS WORKS PVT. LTD. 2/C, LAWRENCE & MAYO HOUSE, 276, DR.D.N.ROAD, FORT, MUMBAI 400 001 PAN: AACCK7983K ..... RESPONDENT ASSESSEE BY : SHRI VIMAL PUNMIYA REVENUE BY : SHRI RAJES H KUMAR YADAV DATE OF HEARING : 10/08/2017 DATE OF PRONOUNCEMENT : 30/08/2017 2 ITA NO.4853& 4854/MUM/2013, (A.Y. 1999-2000) ITA NO. 5360&5361/MUM/2013, (A.Y. 2000-01) ORDER PER G.S.PANNU,A.M: THE CAPTIONED ARE FOUR APPEALS, TWO EACH BY THE ASS ESSEE AND THE REVENUE PERTAINING TO THE SAME ASSESSEE FOR ASSESSM ENT YEARS 1999-2000 AND 2000-01 AND INVOLVES CERTAIN COMMON ISSUES, THEREFO RE, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND ACCORDINGLY, A CONSO LIDATED ORDER IS PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. AT THE TIME OF HEARING, THE LD. REPRESENTATIVE F OR THE ASSESSEE EXPLAINED THAT THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEA RS OF 1999-2000 AND 2000-01 HAVE BEEN COMPLETED BY THE ASSESSING OFFICE R AFTER BEING SET-ASIDE BY THE TRIBUNAL EARLIER VIDE ORDER IN ITA NOS.3885&392 1/MUM/2008 DATED 20 TH AUGUST, 2010. 3. THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPORT OF GARMENTS AND T HE ENTIRE ADDITION IS BECAUSE OF AN INFORMATION RECEIVED FROM DRI MUMBAI AND ENFORCEMENT DIRECTORATE MUMBAI THAT ASSESSEE WAS ONE OF THE CON CERNS INDULGING IN FRAUDULENT IMPORT EXPORT ACTIVITIES. AT THE STAGE OF ASSESSMENT THE CHARGE MADE BY THE DRI AND ENFORCEMENT DIRECTORATE PERSIST ED AND THE ASSESSING OFFICER ALSO NOTED THE NON-COMPLIANCE OF THE ASSESS EE TO FURNISH VARIOUS DETAILS AND INFORMATION CALLED FOR BY HIM. AS A C ONSEQUENCE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT TO THE BEST OF HIS JUDGMENT UNDER SECTION 144 R.W.S. 254 OF THE ACT AND DETERMINED THE PROFI T FROM THE EXPORT BUSINESS AT RS. 86,58,600/- FOR ASSESSMENT YEAR 1999-2000 AN D RS.5.30,93,790/- FOR ASSESSMENT YEAR 2000-01. ADDITIONALLY, THE DUTY DR AW BACK CLAIMED AND RECEIVED BY THE ASSESSEE FOR THE TWO YEARS AMOUNTIN G TO RS.15,35,760/- AND 3 ITA NO.4853& 4854/MUM/2013, (A.Y. 1999-2000) ITA NO. 5360&5361/MUM/2013, (A.Y. 2000-01) RS.98,91,467/- FOR ASSESSMENT YEARS. 1999-2000 AND 2000-01 RESPECTIVELY WAS ALSO ASSESSED TO TAX. AS A CONSEQUENCE, THE ASSESS ING OFFICER ASSESSED THE TOTAL INCOME AT RS.1,01,94,360/- FOR ASSESSMENT YEA R 1999-2000 AND RS.6,29,85,437/- FOR ASSESSMENT YEAR 2000-01. 4. THE CIT(A) NOTED THAT THE CHARGES MADE BY THE EN FORCEMENT DIRECTORATE HAVE BEEN DROPPED BY WAY OF THE ORDER OF THE SPECIA L DIRECTOR OF ENFORCEMENT DATED 26/05/2010. ON THIS BASIS, THE CIT(A) CONCLUD ED THAT THERE IS NO EVIDENCE AVAILABLE ON RECORD TO SUBSTANTIATE THE ALLEGATION OF OVER-INVOICING OF EXPORTS CONSIDERED BY THE ASSESSING OFFICER. HOWEVER, THE CIT(A) PROCEED TO EXAMINE WHETHER THE TOTAL INCOME DETERMINED BY THE ASSESSIN G OFFICER BY BEST JUDGMENT UNDER SECTION 144 OF THE ACT IS CORRECT OR NOT. THE CIT(A) NOTED THAT THE ESTIMATION MADE BY THE ASSESSING OFFICER WAS ON A VERY HIGH SIDE AS THE PROFIT DETERMINED WORKED OUT TO 875%, WHICH IS UNRE ALISTIC . THE CIT(A) SCALED DOWN THE ESTIMATE OF BUSINESS INCOME BY ESTIMATING IT @10% OF DECLARED SALES. FOR THIS PURPOSE, THE CIT(A) REFERRED TO THE FINANC IAL RESULTS OF ONE, M/S. GOKALDAS EXPORT LTD., A COMPARABLE CASE AS PER THE CIT(A). THE CIT(A), THUS, DETERMINED THE INCOME IN ASSESSMENT YEARS 1999-2000 AND 2000-01 AS UNDER:- ASSESSMENT YEAR : 1999-2000: (I) NET PROFIT AT 10% OF RS.1,02,38,400/- RS. 10,23,840/- (II)DUTY DRAW BACK RS. 15,35,76 0/- TOTAL INCOME RS.25,59,600/- ASSESSMENT YEAR : 2000-2001: (I) NET PROFIT AT 10% OF RS.10,62,,71,242/- - RS. 1,06,27,124/- (II) PROFIT FROM TRADING IN BEARING (RS.3,13,36,612 RS.1,45,55,10) - RS. 1,67,81,602 /- (III) DUTY DRAW BACK - RS. 1,69 ,22,691/- TOTAL INCOME - RS.4,43,31,417/- 4 ITA NO.4853& 4854/MUM/2013, (A.Y. 1999-2000) ITA NO. 5360&5361/MUM/2013, (A.Y. 2000-01) 4.1 IN THIS BACKGROUND, ASSESSEE AS WELL AS REVENUE IS IN APPEAL BEFORE US BY WAY OF CROSS APPEALS. ASSESSEE HAS CONTESTED THAT THE ESTIMATION OF PROFIT MADE BY CIT(A) AT 10% IS UNJUSTIFIED, WHEREAS THE R EVENUE IN ITS CROSS APPEAL CONTENDS THAT THE SCALING DOWN OF ESTIMATE OF PROFI T BY THE CIT(A) IS NOT JUSTIFIED. SINCE THE CROSS APPEALS RELATE TO THE SI NGULAR ISSUE OF DETERMINATION OF PROFIT OF BUSINESS, THE SAME ARE BEING TAKEN UP TOG ETHER. 5. BEFORE US, THE LD.REPRESENTATIVE FOR THE ASSESSE E, AT THE OUTSET SUBMITTED THAT THE ASSESSEE WOULD BE SATISFIED FOR THE PRESENT IF THE MATTER OF DETERMINATION OF PROFIT IS RESTORED BACK TO THE FIL E OF ASSESSING OFFICER SINCE THE CIT(A) HAS SUSTAINED THE ADDITION IN AN ADHOC MAN NER, WHICH IS IMPERMISSIBLE. 6. ON THE CONTRARY, THE LD. DEPARTMENTAL REPRESENTA TIVE CONTESTED THAT THE ESTIMATION OF PROFIT MADE AT 10% OF THE TURNOVER BY THE CIT(A) IS UNJUSTIFIED, INASMUCH AS, IT WAS BASED ON THE UNAUDITED P&L ACC OUNT FILED BEFORE THE CIT(A). THOUGH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT SERIOUSLY OPPOSED THE PRAYER OF THE ASSESSEE FOR RESTORATION OF ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR REDETERMINATION OF INCOME, BUT POINTED OUT THAT THE ASSESSEE DID NOT PRODUCE THE REQUISITE BOOKS OF ACCOUNT, EITHER IN THE ORIGINAL ASSESSMENT PROCEEDINGS OR IN THE PROCEEDINGS CARRIED OUT AFTER SET-ASIDE BY THE TRIBUNAL. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS WITH REGARD TO THE PRELIMINARY PLEA OF THE ASSESSEE FOR REMANDING THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR REDETERMINATION OF THE PROFIT S FROM BUSINESS. AS THE FACT- SITUATION REVEALS, IN THE INSTANT CASE, THE ASSESSM ENT MADE BY THE ASSESSING OFFICER PROCEEDED ON THE FOUNDATION THAT ASSESSEE W AS INDULGING IN OVER- INVOICING OF EXPORTS WITH A VIEW TO UNJUSTLY EARNIN G DUTY DRAWBACKS, ETC. THE 5 ITA NO.4853& 4854/MUM/2013, (A.Y. 1999-2000) ITA NO. 5360&5361/MUM/2013, (A.Y. 2000-01) AFORESAID PREMISE OF THE ASSESSING OFFICER WAS BASE D ON THE PROCEEDINGS INITIATED BY THE DRI AND THE ENFORCEMENT DIRECTORAT E. THE IMPUGNED ORDER OF ASSESSMENT ALSO REVEALS THAT THERE WAS NO RETURN OF INCOME FILED BY THE ASSESSEE AND THAT THE ASSESSING OFFICER COLLECTED T HE DETAILS FROM THE OFFICE OF DRI IN ORDER TO ASCERTAIN THE SALES MADE, ETC. ON SUCH BASIS, THE ASSESSING OFFICER PROCEEDED TO WORK OUT THE COST OF SALES, OFFICE EXPENSES, ETC. AND, THEREAFTER HE ESTIMATED THE PROFITS FROM BUSINESS . OSTENSIBLY, AS NOTED BY THE CIT(A), THE PROFIT WORKED OUT BY THE ASSESSING OFFI CER WAS ALMOST 875% OF THE SALE PRICE, WHICH IS QUITE UNREALISTIC. THE CIT(A) HAS NOTICED THAT THE CHARGES MADE BY THE DRI AND THE ENFORCEMENT DIRECTORATE HAS SINCE BEEN DROPPED AS PER DIRECTION OF THE SPECIAL DIRECTOR. UNDER THESE CIRCUMSTANCES, THE ESTIMATION OF PROFIT MADE BY THE ASSESSING OFFICER COULD NOT HAVE BEEN UPHELD BY THE CIT(A) SINCE THE SAME WAS IN THE BACKGROUND OF THE CHARGE OF OVER- INVOICING OF EXPORTS STATED TO HAVE BEEN UNDERTAKEN BY THE ASSESSEE. NEVERTHELESS, AS CIT(A) HAS RIGHTLY OBSERVED, THE ONUS REMAINS ON THE ASSESSEE TO SUBSTANTIATE ITS INCOME ASSESSABLE FOR THE YEAR UNDER CONSIDERATION. TO THIS EXTENT, WE FIND NO FAULT IN THE APPROACH OF THE CIT(A). HOWEVER, THEREAFTER, THE CIT(A) HAS REFERRED TO THE FINANCIAL RESULTS OF ONE GOKULDAS EXPORT LTD, WHEREIN NET PROFIT RATIO FOR T HE FINANCIAL YEAR ENDING 31/3/2009 AND 31/03/2000 WERE 3.07% AND 3.43% RESP ECTIVELY. THE CIT(A) COMPARED THE RESULTS OF GOKULDAS EXPORTS LTD. AND F OUND THAT ASSESSEES BUSINESS BEING SIMILAR, THE NET PROFIT DETERMINATIO N COULD BE JUSTIFIABLY MADE AT 10% OF THE SALES. IN OUR CONSIDERED OPINION, TH E METHODOLOGY ADOPTED BY THE CIT(A) IS FAR FROM REASONABLE BECAUSE, THERE IS NO MATERIAL BROUGHT OUT BY HIM TO SHOW HOW THE GOKULDAS EXPORTS LTD. WAS COMP ARABLE TO THE OPERATIONS CARRIED OUT BY THE ASSESSEE. THEREFORE, UNDER THES E CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE MANNER OF ESTIMATION MADE B Y THE CIT(A) CANNOT BE 6 ITA NO.4853& 4854/MUM/2013, (A.Y. 1999-2000) ITA NO. 5360&5361/MUM/2013, (A.Y. 2000-01) SUSTAINED. IT IS ALSO OBSERVED THAT BEFORE THE CIT (A) ASSESSEE FURNISHED AN UNAUDITED P&L ACCOUNT, WHICH FORMED THE BASIS FOR T HE CIT(A) TO APPLY THE PROFIT PERCENTAGE ON THE DECLARED SALES. IN OUR VI EW, BEFORE TAKING INTO ACCOUNT SUCH UNAUDITED P&L ACCOUNT, IT WAS IMPERATI VE TO EXAMINE ITS AUTHENTICITY AND IN THAT RESPECT WE DO NOT FIND ANY PARTICULAR FINDING BY THE CIT(A). PERTINENTLY, THIS UNAUDITED P&L ACCOUNT WA S NOT BEFORE THE ASSESSING OFFICER IN THE COURSE OF THE ASSESSMENT PROCEEDINGS . THUS, CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DEEM IT FIT AND PROPER TO SET-ASIDE THE ORDER OF CIT(A) AND RESTORE THE ASSES SMENT FOR THE TWO CAPTIONED ASSESSMENT YEARS BACK TO THE FILE OF ASSESSING OFFI CER FOR DETERMINATION AFRESH IN ACCORDANCE WITH LAW. WE MAY CLARIFY HERE THAT I N THE ENSUING REMAND PROCEEDINGS THE ONUS SHALL ENTIRELY BE ON THE ASS ESSEE TO CREDIBLY JUSTIFY THE RESULTS DECLARED IN UNAUDITED P&L ACCOUNT AND THAT THE ASSESSING OFFICER SHALL CONSIDER THE CONTENTIONS PUT-FORTH BY THE ASSESSEE AND ONLY THEREAFTER RECOMPUTE THE TOTAL INCOME FOR THE YEAR UNDER CONS IDERATION IN ACCORDANCE WITH LAW. 8. IN THE RESULT, FOR STATISTICAL PURPOSES, THE CRO SS APPEALS OF THE ASSESSEE AND REVENUE ARE FOR ASSESSMENT YEARS 1999-2000 AND 2000-01 ARE TREATED AS ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30/08/2017 SD/- SD/- (AMARJIT SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 30/08/2017 VM , SR. PS 7 ITA NO.4853& 4854/MUM/2013, (A.Y. 1999-2000) ITA NO. 5360&5361/MUM/2013, (A.Y. 2000-01) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI