The ITO, Ward-4(3), Surat V. M/s. Swaraj Syntex Pvt. Ltd., Surat

ITA 579/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6292 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-06-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 23-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Keywords: Gross profit estimation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.579/AHD/2009 A. Y.: 2002-03 THE INCOME TAX OFFICER, WARD 4(3), SURAT, ROOM NO.220, 2 ND FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S. SWARAJ SYNTEX PVT. LTD., 108, SHREE SHYAM CHAMBERS, RING ROAD, OPP. J. K. TOWER, SURAT PA NO. AADCS 3539 A (APPELLANT) (RESPONDENT) APPELLANT BY SHRI H. K. LAL, DR RESPONDENT BY NONE O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II I, SURAT DATED 22 ND DECEMBER, 2008, FOR ASSESSMENT YEAR 2002-03, CHALLE NGING THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF R S.12,98,235/- ON ACCOUNT OF LOW GROSS PROFIT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT ASSESSM ENT IN THIS CASE WAS SET ASIDE BY THE TRIBUNAL VIDE ORDER DATED 17-1 1-2006 WITH OBSERVATION THAT THE LEARNED CIT(A) HAS NOT COMMENT ED ABOUT THE EXCISE RECORDS AND VERIFICATION OF PROFIT WITH RESP ECT TO THESE RECORDS. DURING THE FRESH ASSESSMENT PROCEEDINGS, THE AO OBS ERVED THAT THERE WAS A FALL OF 2.13% IN GROSS PROFIT AND REQUI RED THE ASSESSEE TO FURNISH MONTH WISE DETAILS OF PURCHASES OF RAW MATE RIAL AND ITA NO.579/AHD/2009 ITO, WARD 4(3), SURAT VS M/S. SWARAJ SYNTEX PVT. LT D. 2 PRODUCTION. FROM THE TABLE REPRODUCED ON PAGE 3 OF THE ASSESSMENT ORDER, THE AO CONCLUDED THAT PRODUCTION WAS 79% OF THE RAW MATERIAL CONSUMED IN NOVEMBER AS AGAINST 131% IN THE MONTH O F SEPTEMBER. THE ASSESSEE COULD NOT FURNISH QUANTITATIVE DETAILS OF DAILY CONSUMPTION AND THERE WAS ALSO DIFFERENCE IN RATIO OF EXPENSES AND PRODUCTION. THE ASSESSEE STATED THAT GROSS PROFIT D ECREASED DURING THE YEAR AND THE AVERAGE SALE PRICE PER KG DECREASE D TO RS.89.64 FROM RS.93.68 BUT THE AVERAGE COST OF RAW MATERIAL REMAINED SAME. FURTHER, THE AVERAGE COST OF POWER ALSO INCREASED. HOWEVER, THE AO DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND HELD THAT FALL IN GROSS PROFIT OF 1% WOULD BE REASONABLE. THE AO ESTI MATED THE GROSS PROFIT AT 10.18% AND MADE THE ADDITION. IT WAS SUBM ITTED BEFORE THE LEARNED CIT(A) THAT WHILE WORKING OUT THE CONSUMPTI ON OF RAW MATERIAL AND PRODUCTION, THE AO DID NOT TAKE INTO A CCOUNT THE MONTH WISE SOCK OF WORK IN PROGRESS. THE ASSESSEE WAS ENG AGED IN THE BUSINESS OF TEXTURISING IN YARN AND IT FULLY EXPLAI NED THE REASONS OF FALL IN GROSS PROFIT WITH DOCUMENTARY EVIDENCE. THE AO A CCEPTED THE FALL IN GROSS PROFIT TO THE EXTENT OF 1% WITHOUT POINTIN G OUT ANY REASON FOR RETAINING THE ADDITION OF 1.13% TO THE DECLARED GRO SS PROFIT. IT WAS SUBMITTED THAT THE AO MADE THE SAME ADDITION AGAIN WHICH WAS MADE IN THE ORIGINAL ASSESSMENT ORDER. THE LEARNED CIT(A) ON GOING THROUGH THE RECORD AND THE DETAILS FOUND HAT THE IM PUGNED ASSESSMENT ORDER IS EXACTLY A COPY OF THE ORIGINAL ORDER DATED 24-12-2004 WHICH MEANS THAT THE DIRECTION OF THE T RIBUNAL HAVE NOT BEEN FOLLOWED BY THE AO. THE AO HAS ALSO NOT CONSID ERED THE ACTUAL MONTH WISE CONSUMPTION OF RAW MATERIAL VIS--VIS PR ODUCTION AND HAS ONLY CONSIDERED THE QUANTITY OF RAW MATERIAL ISSUED WITHOUT TAKING INTO ITA NO.579/AHD/2009 ITO, WARD 4(3), SURAT VS M/S. SWARAJ SYNTEX PVT. LT D. 3 THE WORK IN PROGRESS. THE MONTH WISE DETAILS OF FIN ISHED GOODS AS PER EXCISE RECORDS WERE FURNISHED BEFORE THE LEARNED CI T(A) IN WHICH THE LEARNED CIT(A) DID NOT FIND ANY DEFECT AND EVEN NO DEFECT HAS BEEN POINTED OUT BY THE AO. THE LEARNED CIT(A), THEREFOR E, HELD THAT THERE WAS NO JUSTIFICATION OF REJECTING THE BOOK RESULTS ONLY OF FALL OF GROSS PROFIT WITHOUT SPECIFYING ANY DEFECT IN THE AUDITED BOOKS OF ACCOUNTS. IT WAS FOUND THAT FALL IN GROSS PROFIT BY 1% IS AD HOC ADDITION. ADDITION WAS ACCORDINGLY DELETED. 3. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT THE ASSESSEE DID NOT FURNISH EXCISE RECORDS AS PER THE DIRECTION OF THE TRIBUNAL BEFORE THE AO, THEREFORE, ADDITION IS JUSTIFIED. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE ASSESSEE IS , THEREFORE, PROCEEDED EX-PARTE. 4. ON CONSIDERATION OF THE ABOVE FACTS IN THE LIGHT OF THE SUBMISSION OF THE LEARNED DR, WE DO NOT FIND ANY JU STIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). COP Y OF THE ORDER OF THE TRIBUNAL DAT4ED 17-11-2006 IS FILED ON RECORD IN WH ICH THE TRIBUNAL DIRECTED THE AO TO VERIFY THE EXCISE RECORDS, ASCER TAIN THE IMPACT OF NON-MAINTENANCE OF REQUIRED CONSUMPTION AND PRODUCT ION DETAILS AND DECIDE THE ISSUE ABOUT THE GROSS PROFIT ON THE BASI S OF THESE CONSIDERATIONS. COPY OF THE ORIGINAL ASSESSMENT OR DER IS ALSO FILED. THE LEARNED CIT(A) ON GOING THROUGH THE SAME RIGHTL Y NOTED THAT THE IMPUGNED ASSESSMENT ORDER IS EXACTLY COPY OF THE OR IGINAL ASSESSMENT ORDER THAT MEANS DIRECTIONS OF THE TRIBU NAL HAVE NOT BEEN COMPLIED WITH. WE DO NOT FIND ANY INFIRMITY IN SUCH FINDINGS OF ITA NO.579/AHD/2009 ITO, WARD 4(3), SURAT VS M/S. SWARAJ SYNTEX PVT. LT D. 4 THE LEARNED CIT(A). IT WOULD, THEREFORE, SHOW THAT THE AO REPEATED THE SAME ASSESSMENT ORDER WHICH WAS PASSED IN THE O RIGINAL ASSESSMENT ORDER AND MADE THE ADDITION AGAIN WITHOU T CONSIDERING AND EXAMINING THE DETAILS FURNISHED BY THE ASSESSEE . THE LEARNED CIT(A), THEREFORE, RIGHTLY NOTED THAT THE AO HAS NO T CONSIDERED THE DETAILS PRODUCED BEFORE HIM WITH REGARD TO MONTH WI SE CONSUMPTION OF RAW MATERIAL AND PRODUCTION AND ALSO WORK IN PRO GRESS. THE ASSESSEE ALSO PRODUCED MONTH WISE DETAILS OF FINISH ED GOODS AS PER THE EXCISE RECORDS BEFORE THE LEARNED CIT(A) IN WHI CH NO DEFECT WAS FOUND. THUS, THE LEARNED CIT(A) CONSIDERED THE ISSU E IN THE LIGHT OF THE DIRECTION OF THE TRIBUNAL AND VERIFIED THE EXC ISE RECORDS. NOTHING SPECIFIC IS ARGUED AGAINST THE FINDINGS OF THE LEAR NED CIT(A) AND NO INFIRMITY HAS BEEN POINTED OUT ON THE BASIS OF ANY MATERIAL ON RECORD. IT, THEREFORE, APPEARS THAT BOOK RESULTS HAVE BEEN REJECTED WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE MAINTENANC E OF BOOKS OF ACCOUNTS BY THE ASSESSEE. THE AO APPLIED GROSS PROF IT RATE OF 10.18% INSTEAD OF 9.05% WHICH IS JUST MARGINAL DIFF ERENCE. CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED ABOVE , WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF TH E LEARNED CIT(A). WE CONFIRM HIS FINDINGS AND DISMISS THE APPEAL OF THE REVENUE. ITA NO.579/AHD/2009 ITO, WARD 4(3), SURAT VS M/S. SWARAJ SYNTEX PVT. LT D. 5 5. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-06-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 30-06-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD