Bhupinder Machines Pvt. Ltd, Amritsar. V. The Dy Commissioner of Income Tax, Amritsar.

ITA 56/ASR/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2742 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 27-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMAR PAL MEENA
• Keywords: Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR SMC BENCH, AMRITSAR BEFORE SH. B. R. BASKARAN, ACCOUNTANT MEMBER I.T.A. NO. 56/ASR/2017 AS SESSMENT YEAR: 2013-14 BHUPINDRA MACHINES PVT. LTD., RANI KA BAGH, AMRITSAR [PAN: AADCB 4077G] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-III, AMRITSAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VINAMAR GUPTA ( C.A.) RESPONDENT BY: SH. AMAR PAL MEENA (D.R.) DATE OF HEARING: 29.08.2019 DATE OF PRONOUNCEMENT: 30.08.2019 ORDER PER B. R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 30-11-2016 PASSED BY LD CIT(A)-1, AMRITSAR FOR ASSESSMENT YEAR 2013-14 IN RESPECT OF THE FOLLOWING TWO ISSUES (A) ADDITION OF RS.76649/- ON ACCOUNT OF LOWER GROSS PR OFIT. (B) ADDITION OF RS.238400 ON ACCOUNT OF DIFFERENCE IN E XPORT SALE REVENUE. 2. I HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF MACHINES AND COMPONENTS OF TRACTOR PARTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED TH AT THE GROSS SALES AND GROSS PROFITS HAS FALLEN DURING THE YEAR UNDER CONSIDERAT ION WHEN COMPARED WITH THE IMMEDIATELY PRECEDING YEAR. THE GP RATIO WAS SHOWN AT 14.13% DURING THE YEAR ITA NO. 56/ASR/2017 (AY 2013-14) BHUPINDRA MA CHINES PVT. LTD. V. DY. CIT 2 UNDER CONSIDERATION, WHILE THE SAME WAS SHOWN AT 14 .21% IN THE IMMEDIATELY PRECEDING YEAR. HE NOTICED THAT THE ASSESSEE HAS VA LUED THE STOCK OF FINISHED GOODS AS WELL AS SEMI FINISHED GOODS BY DISCOUNTING THE S ELLING VALUE. HE ALSO NOTICED THAT THE ASSESSEE DID NOT MAINTAIN DAY TO DAY PRODU CTION RECORDS AND NO COST ANALYSIS HAS BEEN MADE TO VALUE THE SEMI-FINISHED S TOCK. ACCORDINGLY HE TOOK THE VIEW THAT THE BOOKS RESULTS ARE NOT CORRECT AND COM PLETE SO FAR AS THE VALUATION OF STOCK OF SEMI FINISHED GOODS ARE CONCERNED. ACCOR DINGLY HE MADE ADDITION OF RS.5.00 LAKHS ON LUMP SUM BASIS. 3. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS EXPORTED GOODS TO M/S. LAND CRAFT INDUSTRIES LTD. NIGERIA ON TWO OCCASIONS FOR A VALUE OF US $69700 AND US $65000. THE AO NOTICED THAT THE ASSESSEE HAS ACCOUN TED RS.69,70,000/- AS SALE CONSIDERATION AT INDIAN RUPEE VALUE IN RESPECT OF T HE ABOVE SAID TWO INVOICES IN ITS BOOKS OF ACCOUNT. THE AO NOTICED FROM THE SHIPPING DOCUMENTS FURNISHED TO THE CUSTOM AUTHORITIES THAT THE ASSESSEE HAS DECLARED T HE SALE VALUE OF ABOVE TWO EXPORTS AT INDIAN RUPEE VALUE OF RS.72,08,840/-. AC CORDINGLY THE AO TOOK THE VIEW THAT THE ASSESSEE HAS SUPPRESSED THE VALUE OF SALES IN ITS BOOKS OF ACCOUNTS AND ACCORDINGLY ADDED THE DIFFERENCE OF RS.2,38,840/- ( RS.72,08,840 LESS RS.69,70,000/-) TO THE INCOME OF THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, IN RESPECT OF LUMP SUM ADDITION OF RS.5.00 LAKHS ON ACCOUNT OF G.P DIFFERENCE, THE LD CIT(A) T OOK THE VIEW THAT THE AO WAS NOT JUSTIFIED IN MAKING ADDITION ON LUMP SUM BASIS. HE TOOK THE VIEW THAT AO SHOULD HAVE ESTIMATED GROSS PROFIT BY APPLYING A GR OSS PROFIT RATE. ACCORDINGLY THE LD CIT(A) ADOPTED THE GP RATE OF 14.21%, BEING THE G.P RATE SHOWN BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR, DURING THE INSTANT YEAR ALSO AND CALCULATED THE GROSS PROFIT. THE DIFFERENCE BETWEE N THE GROSS PROFIT AMOUNT WORKED ITA NO. 56/ASR/2017 (AY 2013-14) BHUPINDRA MA CHINES PVT. LTD. V. DY. CIT 3 OUT BY LD CIT(A) AND GROSS PROFIT DECLARED BY THE A SSESSEE WAS RS.76,649/-. ACCORDINGLY THE LD CIT(A) CONFIRMED THE ADDITION TO THE EXTENT OF RS.76,649/-. WITH REGARD TO THE ADDITION OF RS.2,38,840/- RELATI NG TO SUPPRESSION OF SALES, THE LD CIT(A) AGREED WITH THE VIEW TAKEN BY THE AO AND ACC ORDINGLY CONFIRMED THE SAME. 5. THE FIRST ISSUE RELATES TO THE ADDITION OF RS.76 ,649/- RELATING TO THE ADDITION OF GROSS PROFIT. I NOTICED THAT THE ASSESSEE HAS BE EN FOLLOWING A CONSISTING METHOD OF VALUING OF FINISHED STOCK AND THE SEMI FINISHED STOCK FOR THE PAST SEVERAL YEARS. THE LD AR SUBMITTED THAT THE GROSS PROFIT MARGIN OF THE ASSESEE IS TAKEN AT 14% FOR THE PURPOSE OF VALUATION OF STOCK. ACCORDINGLY , THE FINISHED STOCK IS VALUED AT 86% OF THE SALE VALUE OF THE MACHINES. THE SEMI FIN ISHED STOCKS ARE CLASSIFIED INTO TWO CATEGORIES ACCORDING TO THE STAGE OF COMPLETION OF THE MACHINES. THE FIRST CATEGORY IS 75% AND SECOND CATEGORY IS 50% DEPENDIN G UPON STAGE OF COMPLETION OF MACHINES. ACCORDINGLY, IN RESPECT OF 75% CATEGOR Y, THEIR VALUE IS COMPUTED AT 75% OF THE 86% OF THE SALES VALUE OF MACHINES. IN RESPECT OF 50% CATEGORY, THE VALUE OF SEMI FINISHED STOCK IS COMPUTED AT 50% OF 86% OF SALE VALUE OF MACHINES. THE LD A.R FURTHER SUBMITTED THAT THIS VALUATION OF METHOD HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE PAST. I NOTICED THAT T HE ASSESSING OFFICER, IN THE INSTANT YEAR, DID NOT BRING ON RECORD ANY MATERIAL IN NOT T O SHOW THAT THE ABOVE SAID METHOD OF VALUING CLOSING STOCK FOLLOWED BY THE ASS ESSEE DOES NOT RESULT IN SHOWING THE CORRECT AMOUNT OF PROFIT. IT IS WELL SE TTLED PROPOSITION THAT THE METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED BY THE ASSESSE E SHOULD BE ACCEPTED UNLESS THE AO IS ABLE TO SHOW THAT THE SAME IS NOT RESULTING I N DETERMINATION OF CORRECT AMOUNT OF PROFIT. IN THE INSTANT CASE, THE AO HAS NOT DEMONSTRATED SO. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE TAX AUTHORITIES ARE NOT ENTITLED TO REJECT THE METH OD OF VALUATION ADOPTED BY THE ITA NO. 56/ASR/2017 (AY 2013-14) BHUPINDRA MA CHINES PVT. LTD. V. DY. CIT 4 ASSESSEE FOR VALUING THE STOCK. ACCORDINGLY, I DO N OT FIND ANY MERIT IN THE ORDER PASSED BY THE LD CIT(A) ON THIS ISSUE. ACCORDINGL Y I SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DEL ETE IMPUGNED ADDITION. 6. THE NEXT ISSUE RELATES TO THE ADDITION MADE ON A CCOUNT OF SUPPRESSION OF SALES. I NOTICED THAT THE SALES VALUE SHOWN IN DOLL ARS TERMS IS THE SAME BOTH IN THE SALES INVOICE AND IN THE SHIPPING BILLS FURNISHED T O THE CUSTOMS AUTHORITIES. THE DIFFERENCE POINTED OUT BY THE AO HAS ARISEN ON ACCO UNT OF FLUCTUATION IN THE RATES OF US $, I.E., DUE TO THE DIFFERENCE IN THE CONVERS ION RATE OF THE DOLLAR INTO RUPEE VALUE. IT IS IN THE COMMON KNOWLEDGE OF EVERYONE TH AT THE VALUE OF DOLLAR IN RUPEE TERMS FLUCTUATES DAY BY DAY AND ALSO IN BETWEEN THE DAY ITSELF. HENCE THE DIFFERENCE POINTED OUT BY THE ASSESSING OFFICER IS ON ACCOUNT OF FLUCTUATION OF DOLLARS AND HENCE THE SAME IS NOTIONAL ONE. ACCORDINGLY I AM OF THE VIEW THAT THE SAID DIFFERENCE CANNOT BE CONSIDERED AS SUPPRESSED SALES VALUE. ACCORDINGLY I AM OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIR MING THIS ADDITION. ACCORDINGLY I SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIREC T THE AO TO DELETE THE ADDITION RELATING TO SALES SUPPRESSION. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN CO URT ON AUGUST 30, 2019 SD/- (B. R. BASKARAN) ACCOUNTANT MEMBER DATE: 30.08.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: (2) THE RESPONDENT: ITA NO. 56/ASR/2017 (AY 2013-14) BHUPINDRA MA CHINES PVT. LTD. V. DY. CIT 5 (3) THE CIT(APPEALS) (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER