Shri Chaturbhuj Goyal S/o Hiralal Goyal., Indore V. The ITO, Indore

ITA 558/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2789 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 08-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: ASHISH GOYAL CAS; GIRISH AGRAWAL
• Keywords: Gross profit estimation

Judgement Text

PAGE 1 OF 5 - I.T.A.NO. 558/IND/2009 SHRI CHATURBHUJ GOYAL, BARWAHA IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : ADOPG3375P I.T.A.NO. 558/IND/2009 A.Y. : 2004-05 CHATURBHUJ GOYAL, INCOME-TAX OFFICER, S/O HIRALAL GOYAL, VS 5(2), NARMADA MARG, BARWAHA INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI GIRISH AGRAWAL AND SHRI ASHISH GOYAL, CAS RESPONDENT BY : SMT.APARNA KARAN, SR. DR DATE OF HEARING : 03.06.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-II, INDORE, DATED 13.10.2009, FOR THE ASSESS MENT YEAR 2004-05. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE DE CISION OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF RS. 2.50 L AKHS OUT OF GROSS PROFIT ESTIMATION. PAGE 2 OF 5 - I.T.A.NO. 558/IND/2009 SHRI CHATURBHUJ GOYAL, BARWAHA 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS DEALI NG IN GINNING, PRESSING AND MANUFACTURING SEEDS OIL. THERE WAS A S URVEY ACTION AGAINST THE ASSESSEE ON 29.1.2004, WHEREIN THE ASSESSEE SUR RENDERED A SUM OF RS. 2 LAKHS. THE AO, THEREAFTER, IN THE COURSE OF ASSES SMENT PROCEEDINGS ANALYZED THE GROSS PROFIT RATE SHOWN BY THE ASSESSE E IN EARLIER YEARS AS WELL AS IN THIS YEAR AND ALSO EXAMINED THE OTHER RE CORDS, WHICH REVEALED THAT THE ASSESSEE WAS NOT HAVING PROPER EVIDENCES F OR EXPENSES INCURRED BY IT IN THE COURSE OF ITS BUSINESS ACTIVITIES. THE AO, THEREAFTER, DRAWING SUPPORT FROM A COMPARABLE CASE VIZ. M/S. R. K. PROD UCTS MADE AN ADDITION OF RS. 10,26,375/- ON ACCOUNT OF LOW GROSS PROFIT. THE AO ALSO MADE SOME DISALLOWANCES OUT OF KARKHANA KHARCHA AND KARKHANA EXPENSES. HOWEVER, HAVING REGARD TO OVER ALL GROSS PROFIT ADDITION, THE AO DID NOT MAKE ANY SEPARATE ADDITION ON ACCOUNT OF KARKHANA KHARCHA. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHEREIN THE ASSESSEE MADE DETAILED SUBMISSIONS. THE LD. CIT(A) CALLED THE REMAND REPORT FROM THE AO, WHO, IN THE SAID REP ORT STATED THAT THE FACTS OF TWO CONCERNS WERE ENTIRELY DIFFERENT. HENC E, THE GROSS PROFIT RATE OF THAT CONCERN COULD NOT BE APPLIED. THE LD. CIT(A ), HOWEVER, SUSTAINED AN ADDITION OF RS. 2,50,000/- BY TAKING OVER ALL VI EW OF THE MATTER. THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER :- PAGE 3 OF 5 - I.T.A.NO. 558/IND/2009 SHRI CHATURBHUJ GOYAL, BARWAHA 4.6.3 THE AO IN HIS REMAND REPORT HAS ALSO CLEARL Y NOTED THAT THE LINE OF BUSINESS OF THE TWO CONCERNS WERE DIFFERENT. HENCE ON OVERALL CONSIDERATION OF THE FACT AND CIRC UMSTANCES OF THE CASE, IT IS FELT THAT GROSS PROFIT ADDITION OF RS.2.50 LAKHS IS CALLED FOR AS ON HUGE TURNOVER OF MORE THA N RS. 6 CRORES, THE OVERALL NET PROFIT DISCLOSED AT RS. 2.6 5 LAKHS, INCLUDING ADDITIONAL INCOME SURRENDERED IN SURVEY O PERATION AT RS. 2 LAKHS, INCLUDING ADDITIONAL INCOME SURREND ERED IN SURVEY OPERATION AT RS. 2 LAKHS, IS TOO LOW TO BE A CCEPTABLE ON SUCH HUGE TURNOVER. ACCORDINGLY, THE GROSS PROF IT ADDITION IS DIRECTED TO BE RESTRICTED TO RS.2.5 LAK HS SO THAT NET PROFIT WOULD WORK OUT TO APPROXIMATELY 1 % OF GROSS TURNOVER OF RS. 6.1 CRORES CONSIDERING OTHER DISALL OWANCES MADE AND ACCEPTED BY THE APPELLANT. THE APPELLANT W OULD BE ENTITLED TO CONSEQUENTIAL RELIEF. 5. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEF ORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T BOTH GROSS PROFIT AS WELL AS NET PROFIT INCLUDING THE AMOUNTS SURRENDERED DURING THE COURSE OF SURVEY WERE BETTER IN THE YEAR UNDER CONS IDERATION AS COMPARED TO EARLIER ASSESSMENT YEAR. HENCE, THERE WAS NO JUS TIFICATION FOR MAKING ANY DISALLOWANCE OUT GROSS PROFIT IN THIS MANNER. T HE LEARNED COUNSEL FURTHER DREW OUR ATTENTION TO GROSS PROFIT AND NET PROFIT RATE IN THE EARLIER YEARS TO SUPPORT HIS CLAIM. THE LEARNED COUNSEL AL SO DREW OUR ATTENTION TO COMPUTATION OF INCOME, WHEREIN THE ACTUAL NET PR OFIT WAS SHOWN AT RS. 3.60 LAKHS APPROX. BEFORE DEDUCTION U/S 80IA OF THE ACT. HE ALSO DREW OUR ATTENTION TO THE FIGURES OF TURNOVERS OF EARLIE R YEARS AND NET PROFIT SHOWN THEREIN TO SHOW THAT THE NET PROFIT RATE WAS AROUND 0.4 % IN THOSE PAGE 4 OF 5 - I.T.A.NO. 558/IND/2009 SHRI CHATURBHUJ GOYAL, BARWAHA YEARS AND WHICH HAD BEEN ACCEPTED BY THE DEPARTMENT . THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE LD. CIT(A) DID NOT GIVE ANY SPECIFIC REASONS FOR SUSTAINING SUCH DISALLOWANCE AND, THERE FORE, SUCH VIEW OF LD. CIT(A) WAS NOT JUSTIFIED. 7. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT THE RETURNS OF EARLIER YEARS H AD BEEN ACCEPTED U/S 143(1). HENCE, THE RESULTS THEREOF COULD NOT BE CON SIDERED AS SACROSANCT. SHE ALSO SUBMITTED THAT THERE WERE SOME EXPENSES, W HICH WERE CLAIMED FOR THE FIRST TIME AND DISALLOWED, HOWEVER, NO SEPA RATE ADDITION WAS MADE BY THE LD. CIT(A) ON THAT ACCOUNT, SINCE THE LD. CI T(A) SUSTAINED THE ADDITION IN OVERALL MANNER, HENCE, IF SUCH EXPENSES WERE ALSO TAKEN INTO CONSIDERATION, THEN THE DISALLOWANCE SUSTAINED BY T HE LD. CIT(A) WAS TO BE CONFIRMED. SHE FURTHER PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 9. IT IS NOTED THAT THAT THE NET PROFIT RATE SHOWN BY THE ASSESSEE ON A TURN OVER OF RS. 4 CRORES APPROX. IN EARLIER TWO YEARS IS 0.4 % AND THE NET PROFIT RATE OF THE YEAR UNDER CONSIDERATION BEF ORE 80IA DEDUCTION AND INCLUDING THE AMOUNT SURRENDERED BY THE ASSESSEE IN THE COURSE OF SURVEY IS 0.60% ON A TURNOVER OF RS. 6 CRORES. THE CLAIM O F AMOUNT SURRENDERED PAGE 5 OF 5 - I.T.A.NO. 558/IND/2009 SHRI CHATURBHUJ GOYAL, BARWAHA IN THE COURSE OF SURVEY IS RS. 2 LAKHS AND, THEREFO RE, IF THE RATE OF NET PROFIT RATE EXCLUDING THOSE AMOUNT IS TAKEN INTO CO NSIDERATION, THEN, THE SAME COMES TO ROUGHLY 0.25%, WHICH IS MARGINALLY LO WER THAN THE PROFIT SHOWN IN THE EARLIER YEARS. THUS, TAKING INTO CONSI DERATION, THIS FACTUAL POSITION, WE HOLD THAT THE RATE OF NET PROFIT OF E ARLIER YEAR I.E. 0.4 % SHOULD BE APPLIED ON THE TURNOVER OF THE YEAR AND T HE INCOME OF THE ASSESSEE SHOULD BE COMPUTED ON THAT BASIS. THUS, TH IS GROUND OF THE ASSESSEE STANDS ALLOWED IN TERMS INDICATED ABOVE. 10. IN THE RESULT, THE ASSESSEES APPEAL STANDS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 4 TH JUNE, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 4 TH JUNE, 2010. CPU* 346