The Income-tax Officer, Faridkot V. M/s. Chandu Mal Cotton Factory, Faridkot

ITA 489/ASR/2010

• Counselvise Citation: 48920914 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 15-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: R S BANSAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.489(ASR)/2010 ASSESSMENT YEAR:2007-08 PAN :AACFC0702B THE INCOME TAX OFFICER, VS. M/S. CHANDU MAL COTTON FACTORY, WARD-III(3), FARIDKOT. JAITU, DISTT. FARIDKOT. (APPELLANT) (RESPONDENT) C.O. NO.02(AS)/2011 (ARISING OUT OF I.T.A. NO.489(ASR)/2010) ASSESSMENT YEAR:2007-08 M/S. CHANDU MAL COTTON FACTORY VS. INCOME TAX OFFIC ER, JAITU, DISTT. FARIDKOT. WAD III(3), FARIDKOT. (APPELLANT) (RESPONDENT) APPELLANT BY:AMRIK CHAND, DR RESPONDENT BY:SH. R.S. BANSAL, CA DATE OF HEARING: 03 /12/2012 DATE OF PRONOUNCEMENT:11/12/2012 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), BHATINDA, DATED 15.09.2010 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: ITA NO.489(ASR)/2010 C.O. NO.2(ASR)/2011 2 1. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.12, 86,329/- OUT OF TOTAL ADDITION OF RS.13,17,960/- MADE BY THE AO ON ACCOUNT OF EXCESSIVE SHORTAGE IN NARMA ACCOUNT. 2. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.26, 552/- MADE BY THE AO ON ACCOUNT OF SHORTAGE IN COTTON. 3. THAT IT IS PRAYED THAT THE GROUNDS OF APPEAL OF THE APPELLANT ON THE ABOVE ISSUES MAY KINDLY BE HEARD AND DECIDED IN FAVOUR OF THE APPELLANT AND THAT THE ORDER OF THE LD. CIT(A) IN DELETING THE ABOVE ADDITIONS BE SET ASIDE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 3. IN THE C.O. ASSESSEE HAS RAISED FOLLOWING GROUND S: 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ADDITION OF RS.31,631/- ON ACCOUNT OF SHORTAGE OF NARMA PROCESSING. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ADDITION OF RS.2,00,000/- ON ACCOUNT OF SHORTAG E IN COTTON SEEDS. 3. IT IS, THEREFORE, PRAYED THAT THE ADDITION CONFI RMED BY THE LD. CIT(A) MAY KINDLY BE DELETED. 4. THE BRIEF FACTS IN THE APPEAL OF THE REVENUE AND THE C.O. OF THE ASSESSEE ARE THAT THE ASSESSEE IS ENGAGED IN THE TR ADING OF COTTON. THE AO OBSERVED THAT GROSS PROFIT HAS FALLEN DOWN TO 5.5% AS COMPARED TO 6.02% IN THE IMMEDIATE PRECEDING YEAR. THE JUSTIFICATION OF THE SAME WAS SUBMITTED ITA NO.489(ASR)/2010 C.O. NO.2(ASR)/2011 3 BY THE ASSESSEE THAT THE SAID FALL IS DUE TO FLUCTU ATION OF RATES OF COTTON AND COTTON SEED, WHICH CHANGE EVERY MOMENT. THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND ACCORDINGLY MADE TH E TRADING ADDITION ON ACCOUNT OF FALL OF G.P. RATE ON AD-HOC BASIS AT RS. 1 LAC. 5. THE AO ALSO NOTED DOWN THE SHORTAGE OF 639.06 QT LS OF NARMA WHICH WAS 2.5% OF TOTAL NARMA PURCHASED. THE ASSESSEE SUB MITTED THE EXPLANATION WHICH WAS NOT FOUND SATISFACTORY BY THE AO AND ACCO RDINGLY MADE THE TOTAL ADDITION OF RS.13,17,960/-, AS REPORTED BY THE AUDI TORS. ALSO THE AO MADE THE ADDITION OF RS.2,92,000/- BEING SHORTAGE OF 292 QTLS. OF COTTON SEED AS REPORTED IN THE AUDIT REPORT. 6. THE LD. CIT(A) FOLLOWING THE PERCENTAGE ADOPTED BY THE CCI AT 2.44% ALLOWED THE RELIEF TO THE ASSESSEE AND SUSTAI NED ACCORDINGLY RS.31,631/- BY DELETING THE ADDITION OF RS.12,86,32 9/- ON ACCOUNT OF SHORTAGE OF NAMA. 6.1. THE LD. CIT(A) FURTHER ALLOWED THE RELIEF OFRS .26,552/- BY SUSTAINING RS.2 LACS ON ESTIMATE BASIS ON ACCOUNT OF SHORTAGE OF COTTON SEED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. IT IS PERTINENT TO MENTION THAT THE A.O. HAS TAKEN INTO ACCOUNT THE FALL OF THE GROSS PROFIT RATE DURING THE IMPUGNED YEAR AS COMPA RED TO THE LAST YEAR. FOR THE SAKE OF CLARITY, THE FINDING OF THE AO IN PARA 4 IS REPRODUCED HEREUNDER: ITA NO.489(ASR)/2010 C.O. NO.2(ASR)/2011 4 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS POINTED OUT TO THE ASSESSEE THAT THE GP RATE WHICH WAS 6.02% LAST YEAR HAS BEEN FALLEN DOWN TO 5.5%. IN REPLY TO THE SAME, IT WAS S TATED THAT IT WAS DUE TO FLUCTUATION OF RATES OF COTTON AND COTTON SEE. T HESE RATES CHANGE EVERY MOMENT SO THE GP RATE HAS FALLEN. HOWEVER, I AM OF THE OPINION THAT IN ANY LINE OF BUSINESS, THE GROSS PROFIT EARN ED BY ASSESSEE IS GENERALLY REMAINS CONSTANT. HENCE, THERE ARE POSSIB LE LEAKAGES AND TO PLUG THE SAME, AN ADHOC ADDITION OF RS.1,00,000/- I S MADE TO THE RETURNED INCOME. 7.1. FROM THE PERUSAL OF THE FINDING OF THE AO HERE INABOVE, IT IS EVIDENT THAT AO THOUGH HAS NOT MENTIONED OF REJECTION OF BO OKS OF ACCOUNT U/S 145(3) OF THE ACT, BUT AT THE SAME TIME HAS ESTIMAT ED THE TRADING ADDITION WHICH ULTIMATELY, AO IS REQUIRED TO DO AFTER REJECT ING BOOKS OF ACCOUNT U/S 145(3) OF THE ACT. SIMPLY NOT MENTIONING THE REJECT ION OF BOOKS OF ACCOUNT DOES NOT CHANGE THE FACTS WHICH ARE EVIDENT FROM TH E FINDING OF THE AO IN PARA 4 AS REPRODUCED HEREINABOVE. 7.2. HAVING REJECTED THE BOOKS OF ACCOUNT AND HAVIN G MADE TRADING ADDITION ON AD-HOC BASIS OF RS. 1 LAC AS MENTIONED HEREINABOVE, NO FURTHER ADDITION ON ACCOUNT OF TRADING OF NARMA OR COTTON S EED , AS IN THE PRESENT CASE, CAN BE MADE BY THE AO. THEREFORE, OUT-RIGHTLY , THE AO IS NOT JUSTIFIED IN MAKING SPECIFIC ADDITIONS OUT OF TRADING ACCOUNT , ONCE HAVING MADE THE ADDITIONS ON ACCOUNT OF FALL IN GP RATE AS IN PARA 4 ABOVE OF AOS ORDER. THEREFORE, ALL THE ADDITIONS SO MADE BY THE AO ARE DIRECTED TO BE DELETED. THUS, IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND OUR FINDINGS ITA NO.489(ASR)/2010 C.O. NO.2(ASR)/2011 5 HEREINABOVE, NO ADDITION SHOULD HAVE BEEN MADE BY T HE AO AND THE ADDITION SO MADE IS DIRECTED TO BE DELETED. ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED AND C.O. OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL THE REVENUE IN ITA NO .489(ASR)/2010 IS DISMISSED AND THE C.O.NO.02(ASR)/2011 OF THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH DECEMBER, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11TH DECEMBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. CHANDU MAL COTTON FACTORY, JAITU. 2. THE ITO WARD III(3), FARIDKOT. 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.