M/s. Dhar Automotives Pvt. Ltd., Indore V. The ACIT, Indore

ITA 58/IND/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6636 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 03-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: LALIT JAIN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AABCD4418K I.T.A.NO.58/IND/2010 A.Y. : 2006-07 M/S.DHAR AUTOMOTIVES ACIT, PRIVATE LIMITED, VS 2(1), INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI LALIT JAIN, C. A. RESPONDENT BY : SHRI ARUN DEWAN, SR. DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 16.11.2009 FOR THE ASSESSMENT YEAR 2006-07, IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INC OME-TAX ACT, 1961. 2. THE ONLY GRIEVANCE OF THE ASSESSEE RELATES TO TRADI NG ADDITION BY INCREASING THE GROSS PROFIT BY 1 % AS A GAINST GROSS PROFIT OF 22.82 % DISCLOSED BY THE ASSESSEE. -: 2: - 2 3. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAG ED IN MANUFACTURING OF FORGINGS AND INCOME FROM GENERATIO N THROUGH WIND TURBINE. IN RESPECT OF ITS INCOME FROM MANUFACTURE OF FORGINGS, THE AO FOUND THAT GROSS PR OFIT FOR THE YEAR UNDER CONSIDERATION WAS DISCLOSED AT 22.82 % A S AGAINST GROSS PROFIT OF 25 % IN THE PRECEDING YEAR. COMPLET E SET OF BOOKS OF ACCOUNT WERE PRODUCED BEFORE HIM FOR VERIF ICATION, WHEREIN NO PARTICULAR DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER EITHER WITH REGARD TO THE SYSTEM OF ACCOUNT ING OR WITH REGARD TO THE TRANSACTIONS ENTERED DURING THE YEAR. ON AOS QUERY REGARDING DECLINE IN GROSS PROFIT RATE, IT WA S EXPLAINED THAT THERE WAS INCREASE IN COST OF RAW MATERIALS. S UPPLIER-WISE, COMPARATIVE CHART OF RAW MATERIAL PURCHASED DURING THE YEAR ENDING ON 31 ST MARCH, 2005, AND 31 ST MARCH, 2006, WERE FURNISHED, WHICH INDICATED INCREASE IN PRICE OF STE EL DURING THE YEAR UNDER CONSIDERATION. AS PER CHART, THE AVERAGE COST PER M. T. DURING THE YEAR WORKED OUT AT RS. 40,521/- PE R M. T. AS AGAINST AVERAGE COST OF RS. 38,848/- PER M. T. IN T HE IMMEDIATELY PRECEDING YEAR. OUT OF STEEL SO PURCHAS ED, THE ASSESSEE WAS PRODUCING FORGINGS OF MORE THAN 150 TY PES OF -: 3: - 3 DIFFERENT DRAWINGS SPECIFIED BY ITS CUSTOMERS M/S. GAJRA GEARS PRIVATE LIMITED. THE FORGINGS WERE SUPPLIED IN UMBE RS WHEREIN RAW MATERIAL IS PURCHASED IN TERMS OF M.TONS. THE A SSESSEE WAS MAINTAINING FULL QUANTITATIVE DETAILS IN RESPEC T OF RAW MATERIALS, FINISHED GOODS AND SCRAP, NO DEFECT WAS POINTED OUT WITH RESPECT TO SUCH DETAIL, WHICH HAVE BEEN EXAMIN ED BY THE ASSESSING OFFICER ON TEST CHECK BASIS. THERE IS NO DISPUTE TO THE WELL SETTLED LEGAL PROPOSITION THAT BOOKS OF AC COUNT MAINTAINED IN REGULAR COURSES CANNOT BE REJECTED LI GHT HEARTEDLY WITHOUT POINTING OUT PRECISELY DEFECTS IN SUCH BOOKS. THE BOOKS OF ACCOUNT REGULARLY MAINTAINED IN THE CO URSE OF BUSINESS, WHICH ARE DULY AUDITED UNDER THE PROVISIO NS OF THE INCOME-TAX ACT, 1961, AND WHICH ARE FREE FROM ANY QUALIFICATION BY THE AUDITORS SHOULD BE TAKEN AS CO RRECT UNLESS THERE ARE SUFFICIENT REASON TO INDICATE THAT THEY A RE UNRELIABLE. WHILE REJECTING THE BOOKS OF ACCOUNT, THE ONUS LIES ON THE REVENUE TO PROVE THAT EITHER THE BOOKS OF ACCOUNT M AINTAINED BY THE ASSESSEE ARE NOT CORRECT AND COMPLETE OR THE METHOD OF ACCOUNTING IS SUCH THAT TRUE PROFITS CANNOT BE DEDU CED THERE FROM. AS THE ONUS TO MAKE OUT A CASE FOR REJECTION OF BOOKS OF -: 4: - 4 ACCOUNT IS ON THE REVENUE, THE AO IS REQUIRED TO IN DICATE SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT WHICH CLIN CHES THE PROFITS SHOWN BY THE ASSESSEE OR ITS STATE OF AFFAI RS. THE BOOKS OF ACCOUNT SHOULD NOT BE REJECTED LIGHT HEARTEDLY. IN THE INSTANT CASE, MERELY BECAUSE THERE WAS SLIGHT DECLI NE IN THE GROSS PROFIT RATE, WHICH HAS BEEN EXPLAINED BY THE ASSESSEE DUE TO INCREASE IN THE PRICE OF RAW MATERIAL, THERE WAS NO JUSTIFICATION ON THE PART OF THE AO TO REJECT THE B OOK RESULT AND MAKE ADDITION BY ESTIMATING GROSS PROFIT AT A HIGHE R RATE. 4. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTA NCES OF THE CASE VIS--VIS PAST RESULTS OF THE ASSESSEE, AS PER OUR CONSIDERED VIEW, AN ADDITION OF % GROSS PROFIT WI LL SERVE THE END OF JUSTICE. ACCORDINGLY, THE AO IS DIRECTED TO RESTRICT THE TRADING ADDITION BY ESTIMATING GROSS PROFIT RATE AT % ABOVE THE GROSS PROFIT DISCLOSED BY THE ASSESSEE. WE DIRE CT ACCORDINGLY. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. -: 5: - 5 THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 5TH JULY, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 5 TH JULY, 2011. CPU* 45