Style Syntex Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 535/DEL/2011

• Counselvise Citation: 53520114 RSA 2011
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 29-07-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 01-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Keywords: Business income; Depreciation
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.535/DEL/2011 535/DEL/2011 535/DEL/2011 535/DEL/2011 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2002 2002 2002 2002- -- -03 0303 03 M/S STYLE SYNTEX PVT.LTD., M/S STYLE SYNTEX PVT.LTD., M/S STYLE SYNTEX PVT.LTD., M/S STYLE SYNTEX PVT.LTD., B BB B- -- -1/A 1/A1/A 1/A- -- -20, 20, 20, 20, MOHAN COOPERATIVE INDUS MOHAN COOPERATIVE INDUS MOHAN COOPERATIVE INDUS MOHAN COOPERATIVE INDUSTRIAL TRIAL TRIAL TRIAL ESTATE, ESTATE, ESTATE, ESTATE, MATHURA ROAD, MATHURA ROAD, MATHURA ROAD, MATHURA ROAD, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 044. 110 044. 110 044. 110 044. PAN : AABCS0645R. PAN : AABCS0645R. PAN : AABCS0645R. PAN : AABCS0645R. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -11, 11, 11, 11, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL SHARMA, ADVOCATE. RESPONDENT BY : SMT.RENUKA JAIN GUPTA, SR.DR. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-I, NEW DELHI DATED 12 TH NOVEMBER, 2010 FOR THE AY 2002-03. 2. GROUND NO.1 OF THE ASSESSEES APPEAL IS OF GENERAL NAT URE AND NEEDS NO ADJUDICATION. 3. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS UNDER:- THE LEARNED CIT(APPEAL-I) WAS NOT JUSTIFIED WITH PASSI NG OF THE ORDER WITHOUT GIVING A SECOND CHANCE TO THE APPE LLANT COMPANY OF BEING HEARD SINCE THE ASSESSEE REPRESENTATIVE WAS UNABLE TO ATTEND THE FIRST AND HEARING DATE DUE T O UNAVOIDABLE CIRCUMSTANCES. ITA-535/DEL/2011 2 4. AT THE TIME OF HEARING, GROUND NO.2 WAS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE. ACCORDINGLY, THE SAME IS REJECTED. 5. THE REMAINING GROUNDS OF APPEAL READ AS UNDER:- 3. THE LEARNED CIT(APPEAL-I) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITIONS OF RS.57,38,780/- BEING 5% OF TOTAL SALES OF RS.11,47,75,609/- CONTRARY TO THE ADDITIONAL OF 5% OF TOTAL OVERHEADS OF RS.1,25,96,367/- WHICH WORKS OUT TO BE RS.6,29,818/-. 4. THE LEARNED CIT(APPEAL-I) HAS FURTHER ERRED IN UP HOLDING THE ADDITIONS OF RS.13,71,751/- BEING THE ENHANCEMENT OF GROSS PROFIT BY 13.05% AS AGAINST THE GROSS PROFIT OF 11.85% AS DECLARED BY THE ASSESSEE COMPANY. 5. THE LEARNED CIT(APPEAL-I) FAILED TO APPRECIATE T HAT THE LEARNED AO ON THE ONE HAND HAS DISALLOWED THE EXPENDITURE BY 5% OF THE SALES, AT THE SAME TIME MAKIN G THE FURTHER ADDITIONS OF RS.13,71,751/- BY ENHANCING THE GROSS PROFIT THUS PENALIZING THE APPELLANT COMPANY WIT H THE SAME SUBJECT MATTER. 6. IN VIEW OF THE ABOVE GROUNDS THE APPELLANT COMPA NY HAS PREFERRED THIS APPEAL. 7. THE APPELLANT COMPANY PRAYS TO SET ASIDE THE SAID ORDER PASSED BY THE LEARNED CIT(APPEALS-I) AND THE APPELLANT COMPANY BE GIVEN A FRESH OPPORTUNITY OF BE ING HEARD FOR THE ABOVE THE APPELLANT SHALL ALWAYS REMAIN ED OBLIGED. 8. THE APPELLANT COMPANY PRAYS FOR CONDEMNATION OF DELAY CAUSED IN FILING THE SAID APPEAL. 9. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND, AMPLI FY, ADD ANY OTHER GROUNDS DURING THE HEARING. 6. THE FACTS OF THE CASE ARE THAT IN THIS CASE, ORIGINA L ASSESSMENT WAS COMPLETED UNDER SECTION 144 DUE TO NON-COMPLIANC E OF THE ITA-535/DEL/2011 3 ASSESSEE COMPANY. ON APPEAL, THE ITAT SET ASIDE THE MATT ER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO THE ASSESSE E TO COOPERATE IN ALL RESPECT WITH THE ASSESSING OFFICER AND TO APPEAR BEFORE THE ASSESSING OFFICER WITHIN THREE MONTHS OF THE SERVICE OF THE ORDER OF ITAT. HOWEVER, DESPITE THE SPECIFIC DIRECTION OF THE ITAT IN THE SET ASIDE PROCEEDINGS, AGAIN THE ASSESSEE DID NOT APPEAR. TH EREFORE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT REJECTING THE A SSESSEES BOOKS OF ACCOUNT AND APPLYING GROSS PROFIT RATE AS WEL L AS MAKING DISALLOWANCE OUT OF EXPENSES AS UNDER:- A. TOTAL EXPENSES CLAIMED AS PER THE P&L A/C- FOR THE YEAR ENDING 31.03.2002 IS RS.11,47,75,609 5% THEREOF RS.57,38,780 B. GP WORKED OUT BY THE ASSESSEE IS RS.1,35,97,453 WHICH IS 11.85% OF SALES OF RS.11,47,06,546 13.05% OF RS.11,47,06,546 IS RS.1,49,69,204 DIFFERENCE TO BE DISALLOWED (1,49,69,204 1,35,97 ,453) RS.13,71,751 TOTAL DISALLOWANCE (ADDITION) AS PER THIS ORDER R S.71,10,531 7. ON APPEAL, LEARNED CIT(A) SUSTAINED THE ORDER OF T HE ASSESSING OFFICER. HENCE, THIS APPEAL BY THE ASSESSEE. 8. AT THE TIME OF HEARING BEFORE US, IT IS CONTENDED BY THE LEARNED COUNSEL THAT IN A SHOW CAUSE NOTICE, THE ASSESSING OFFICER HIMSELF HAS MENTIONED THAT HE PROPOSES TO APPLY THE GP RATE OF TH E IMMEDIATELY PRECEDING YEAR AND, ACCORDINGLY, HE APPLIED THE GP RATE OF 13.05%. IT IS SUBMITTED BY THE LEARNED COUNSEL THAT ACTUALLY, THE GP RATE OF THE IMMEDIATELY PRECEDING YEAR IS NOT 13.05% BUT 12.97%. WITH REGARD TO DISALLOWANCE OUT OF EXPENSES, IT IS STATED BY THE LEARNE D COUNSEL THAT THE ASSESSING OFFICER HAS DISALLOWED 5% OF THE EXPENSES AMO UNTING TO ITA-535/DEL/2011 4 ` 11,47,75,609/-, WHICH INCLUDED THE PURCHASES, DEPRECI ATION ETC. HE SUBMITTED THAT WHEN THE GP RATE IS APPLIED, THE PURCH ASES, DEPRECIATION ETC. ARE ALREADY CONSIDERED WHILE APPLY ING THE GP RATE, THEREFORE, FURTHER DISALLOWANCE OUT OF SUCH EXPENSES C ANNOT BE MADE. HE STATED THAT THE ACTUAL EXPENSES AFTER THE WORKING O F THE GP CLAIMED BY THE ASSESSEE WAS ONLY ` 1,25,96,367/- AND, THEREFORE, ONLY 5% OF SUCH EXPENSES CAN BE DISALLOWED WHICH WOULD BE AMOUNTIN G TO ` 6,29,818/-. HE, THEREFORE, SUBMITTED THAT THE ADDIT ION/DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD BE MODIFIED ACCORDI NGLY. 9. LEARNED DR, ON THE OTHER HAND, STATED THAT THE ASSE SSEE DOES NOT DESERVE ANY RELIEF BECAUSE NEITHER IN THE ORIGINA L ASSESSMENT PROCEEDINGS NOR IN THE SET ASIDE ASSESSMENT PROCEEDINGS, A SSESSEE ATTENDED. SHE STATED THAT IN APPEAL AGAINST THE ORIG INAL ASSESSMENT ORDER, THE ITAT GAVE SPECIFIC DIRECTION TO THE ASSESSEE TO APPEAR BEFORE THE ASSESSING OFFICER WITHIN THREE MONTHS OF THE SERVICE OF THE ORDER OF THE ITAT AND COOPERATE IN THE ASSESSMENT PROCEEDINGS. T HAT THE ASSESSEE DID NOT FOLLOW THE DIRECTION OF THE ITAT. THE REFORE, IT DOES NOT DESERVE ANY RELIEF AT THE END OF THE ITAT. 10. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOT H THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. SO FAR AS THE ASSESSEES CONDUCT OF NON-APPEARANCE BEFORE THE ASSESSING OFFICER IS CONCERNED, IT WILL RESULT IN REJECTION OF ASSESSEES BOOKS OF ACCOUNT AND ESTIMATION OF PROFIT BY THE ASSESSING OFFICER WHICH HAS ALREADY BE EN DONE BY THE ASSESSING OFFICER AND THE ASSESSEE HIMSELF HAS NOT OBJECTED T O THE REJECTION OF BOOKS OF ACCOUNT. BUT, AT THE SAME TIME , IF THERE IS ANY MISTAKE IN SUCH ESTIMATE OF PROFIT, THE ASSESSEE WILL CER TAINLY BE AT LIBERTY TO CONTEST THE SAME. SO FAR AS WORKING OF TH E GROSS PROFIT RATE IS CONCERNED, WE FIND THAT IN A SHOW CAUSE NOTICE DATED 10 TH SEPTEMBER, 2009, THE ASSESSING OFFICER HIMSELF HAS PROPOSED AS UNDER:- ITA-535/DEL/2011 5 (A) IN THE ABSENCE OF SUPPORTING DOCUMENTARY EVIDEN CES AVAILABLE WITH THIS OFFICE, IT IS PROPOSED TO DISALLOW 5% OF THE TOTAL EXPENSES CLAIMED IN THE P&L A/C FOR THE YEA R ENDING MARCH 31, 2002 AND TREAT THE SAME AS YOUR INCO ME FOR THE AY 2002-03. (B) AS PER THE MATERIALS AVAILABLE ON RECORD AND THE METHOD OF COMPUTATION ADOPTED BY YOU, THE GP RATE F OR THE IMMEDIATELY PRECEDING AY WAS 13.05% WHEREAS THE SAME FOR THIS AY IS 11.85%. IT IS PROPOSED ADOPT AND APPLY THE GP RATE OF 13.05% FOR THE AY 2002-03 ALSO. 11. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFF ICER PROPOSED TO APPLY THE GP RATE OF THE IMMEDIATELY PRECEDING Y EAR. NOW, WHETHER THE GP RATE OF IMMEDIATELY PRECEDING YEAR IS 13.05% OR 12.97%, IT IS A MATTER OF COMPUTATION FROM THE DETAILS AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICER. WE, THEREFORE, DIRECT HIM TO VERIFY THE GP RATE OF THE IMMEDIATELY PRECEDING YEAR AND APPLY THE SAME. SO F AR AS DISALLOWANCE OF 5% IS CONCERNED, ASSESSING OFFICER HIMSELF HAS PROPOSED TO DISALLOW THE EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT. HOWEVER, WHILE MAKING ACTUAL DISALLOWANCE, THE ASSESSING OFFICER HAS DISALLOWED 5% OF ` 11,47,75,609/-. IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE ABOVE EXPENSES INCLUDE THE EXPENSES ON PURCHASE S, DEPRECIATION ETC. THAT THESE EXPENSES HAVE ALREADY BE EN TAKEN CARE WHILE APPLYING THE GP RATE AND, THEREFORE, THE SAME CANNOT BE CONSIDERED AGAIN WHILE MAKING THE DISALLOWANCE OUT O F EXPENSES. WE AGREE WITH THIS CONTENTION OF THE LEARNED COUNSEL. O NCE A GP RATE IS APPLIED, ALL THE ITEMS OF TRADING ACCOUNT, VIZ., SALE S, PURCHASES, CLOSING STOCK AS WELL AS THE EXPENSES WHICH ARE DEBITED TO TRAD ING ACCOUNT, ARE DEEMED TO HAVE BEEN CONSIDERED WHILE WORKING OUT THE GP RATE. THEREFORE, THE SAME CANNOT BE AGAIN CONSIDERED FOR TH E PURPOSE OF ESTIMATED DISALLOWANCE. IN VIEW OF THE ABOVE, WE DIR ECT THE ASSESSING OFFICER TO DISALLOW 5% OF THE EXPENSES EXCLUDING THE P URCHASES AND ITA-535/DEL/2011 6 OTHER EXPENSES WHICH ARE CONSIDERED WHILE WORKING OUT THE GROSS PROFIT RATE. THE ASSESSING OFFICER WILL RE-WORK OUT THE INCOM E OF THE ASSESSEE ACCORDINGLY. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DEEMED TO BE PARTLY ALLOWED TO THE ABOVE EXTENT. DECISION PRONOUNCED IN THE OPEN COURT ON 2 ND AUGUST, 2013. SD/- SD/- ( (( (I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR I.C.SUDHIR) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 02.08.2013 VK. COPY FORWARDED TO: - 1. APPELLANT : M/S STYLE SYNTEX PVT.LTD., M/S STYLE SYNTEX PVT.LTD., M/S STYLE SYNTEX PVT.LTD., M/S STYLE SYNTEX PVT.LTD., B BB B- -- -1/A 1/A1/A 1/A- -- -20, MOHAN COOPERATIVE INDUSTRIAL ESTATE, 20, MOHAN COOPERATIVE INDUSTRIAL ESTATE, 20, MOHAN COOPERATIVE INDUSTRIAL ESTATE, 20, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI MATHURA ROAD, NEW DELHI MATHURA ROAD, NEW DELHI MATHURA ROAD, NEW DELHI 110 044. 110 044. 110 044. 110 044. 2. RESPONDENT : ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE CENTRAL CIRCLE- -- -11, NEW DELHI. 11, NEW DELHI. 11, NEW DELHI. 11, NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR