M/s Atam Dyeing & Finishing Mills, Ludhiana V. ITO, Ludhiana

ITA 540/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5363 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 19-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Depreciation
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: A BENCH: CH ANDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS. SUSHMA CHOWL A, JM ITA NO. 540/CHANDI/2011 ASSESSMENT YEAR: 2005-06 ATAM DYEING & FINISHING MILLS V. I.T.O. WARD III( 2), LUDHIANA PURANA BAZAR, LUDHIANA PAN: AABFA 8906 C APPELLANT BY: SHRI ASHWANI KUMAR RESPONDENT BY: SMT. JAISHREE SHARMA ORDER D K SRIVASTAVA : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE LD. CIT(A) ON 1.4.2011. THE APPEAL RE LATES TO AY 2005-06. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF RUNNING DYEING AND FINISHING MILL. SEARCH U/S 132 WAS CARRIED OUT ON 8 .2.2005 AT THE BUSINESS PREMISES OF PRINCE KNITWEARS, LUDHIANA LEADING TO THE RECOVERY OF CERTAIN INCRIMINATING DOCUMENTS. PROCEEDINGS U/S 153-C OF THE INCOME-TAX ACT WERE AC CORDINGLY INITIATED PURSUANT TO WHICH THE ASSESSEE FILED ITS RETURN OF INCOME ON 7.5.2007 RETURNING TOTAL LOSS AT RS.2,81,945/-. IN THE SAID RETURN, THE ASSESSEE SURRENDERED ADDITIONA L INCOME OF RS.7,500/- BEING THE DYEING CHARGES RECEIVED BY THE ASSESSEE ON GOODS WEIGHING ABOUT 1500 KG FROM PRINCE KNITWEARS. THE AO PROCEEDED TO RECORD THE STATEMENT OF SHRI SU BHASH JAIN DURING THE COURSE OF WHICH SHRI JAIN ADMITTED TO HAVE DONE DYEING RECEIVED DYE ING CHARGES FROM THE AFORESAID GROUP. IT WAS HOWEVER THE CASE OF THE ASSESSEE THAT HE HAD SURRENDERED DYEING CHARGES @ RS. 5/- PER KG ON THE AFORESAID GOODS WEIGHING ABOUT 1500 K G IN THE RETURN OF INCOME. IN RESPONSE TO Q. NO. 13, SHRI JAIN STATED THAT THE RA TE OF DYEING OF YARN VARIED BETWEEN RS.16 AND 25 PER KG. ON THE BASIS OF THE AFORESAID MATERIAL, THE AO TREATED THE BOOKS OF ACCOUNT AS INCORRECT AND INCOMPLETE AND THUS PROCEE DED TO ESTIMATE THE SALES AT RS. 85.00 LACS AS AGAINST RS. 80.05 LACS SHOWN BY THE ASSESSE E. HE APPLIED GROSS PROFIT RATE OF 20.2% ON THE ESTIMATED SALES RESULTING IN ADDITION OF RS. 98,649/-. 3. AGGRIEVED BY THE ORDER PASSED BY THE ASSESSING O FFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) WITHOUT SUCCESS. THE ASSESSEE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. 4. IN SUPPORT OF APPEAL, THE LD. AUTHORIZED REPRESE NTATIVE FOR THE ASSESSEE REITERATED THE SUBMISSIONS EARLIER MADE BEFORE THE LD. CIT(A). HE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN ESTIMATING THE SALES OF RS. 85.00 LACS AS AGAINST RS. 80.05 LACS DECLARED BY THE ASSESSEE. HE SUBMITTED THAT THE AO COULD IDENTIFY O NLY 1500 KG OF GOODS ON WHICH DYEING WAS CARRIED OUT BY THE ASSESSEE AND THEREFORE THE A DDITION SHOULD HAVE BEEN RESTRICTED TO THE AFORESAID QUANTITY. 5. IN REPLY THE DR SUPPORTED THE ORDER PASSED BY TH E LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS. THE ASSESSING OFFICER HAS GIVEN NO BASIS FOR ESTIMATING THE SALES AT RS.85 LAKHS. HIS ORDER IN THIS BEHALF IS THEREFORE VACATED. IT IS HOWEVER UND ISPUTED THAT THE ASSESSEE HAS NOT RECORDED DYEING CHARGES FULLY AND CORRECTLY IN ITS BOOKS OF ACCOUNT. THIS IS EVIDENT FROM THE FACT THAT THE DEPARTMENT HAD RECOVERED DOCUMENTS IN DICATING NON-RECORDING OF DYEING CHARGES IN RESPECT OF GOODS WEIGHING 1500 KGS, WHIC H WERE DYED BY THE ASSESSEE FOR 2 2 PRINCE KNITWEARS. IN HIS STATEMENT SHRI SUBHASH CHA ND JAIN HAS ADMITTED THAT DYEING CHARGES VARIED FROM RS. 16 TO 25/- PER KG. IT WOULD THEREFORE, BE APPROPRIATE TO RESTRICT THE ADDITION TO THE EXTENT OF RS. 37,500/- (RS. 25/- PE R KG X 1500 KG). THE ADDITION THUS STANDS REDUCED FROM RS. 98,649/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) TO RS. 37,500/-. GROUND NO. 1 TAKEN BY THE ASSESSEE IS PAR TLY ALLOWED. 7. APROPOS GROUND NO. 2, THE AO HAS DISALLOWED CAR EXPENSES @ 20% FOR PERSONAL USER WHICH APPEARS TO BE EXCESSIVE. IT IS THEREFORE REDUCED TO 10% ON CAR EXPENSES AND DEPRECIATION ON CAR. GROUND NO. 2 TAKEN BY THE ASSE SSEE IS PARTLY ALLOWED. 8. APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 29 TH JUNE 2011 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVAST AVA) JUDICIAL MEMBER ACCOUNT ANT MEMBER CHANDIGARH: THE 29 TH JUNE 2011 SURESH COPY TO: 1. THE APPELLANT, ATAM DYEING & FINISHING MILLS, LU DHIANA 2. THE RESPONDENT, I.T.O. WARD III(2), LUDHIANA 3. THE CIT(A), LUDHIANA 4. THE LD. CIT, LUDHIANA 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH ASSISTANT REGISTRAR, ITAT, CHANDIGARH