DCIT 23(3), MUMBAI V. RAVI TRADING CO., MUMBAI

ITA 6042/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62427 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 10-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 05-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C M VAZE
• Keywords: Gross profit estimation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI D BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI VIJAY PAL RAO, JM & SHRI N K BILLAIYA , AM ITA NO. 6042/MUM/2010 (ASSESSMENT YEAR 2007-08 ) THE ASST COMMR OF INCOME TAX 23(3), MUMBAI VS M/S RAVI TRADING CO 1K KONARK AGENCY LINK ROAD MULUND (W) MUMBAI 80 (APPELLANT ) (RESPONDENT) PAN NO. AAJFR9954M ASSESSEE BY SH C M VAZE REVENUE BY SH K R VASUDEVAN DT.OF HEARING 10 TH MAY 2012 DT OF PRONOUNCEMENT 16 TH , MAY 2012 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.5.2010 OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE AS SESSMENT YEAR 2007-08. 2 THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GR OUND IN THIS APPEAL: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 39,38,872/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUPPRESSION OF GP AS THE ASSESSEE FAI LED TO JUSTIFY THE GP RATE. 2.1 THE ASSESSEE IS ENGAGED IN THE BUSINESS AS DEAL ER AND COMMISSION AGENT OF VARIOUS BRANDS OF CEMENTS AND BUILDING MATERIAL. D URING THE YEAR, THE ASSESSEE HAS ARCHIVED THE TURNOVER OF ` 19.69 CRORES AND DECLARED THE G P AT ` 61.47 LACS, WHICH COMES TO 3.12%. THE ASSESSING OFFICER NOTED THAT T HE ASSESSEE IS HAVING ANOTHER COMPANY IN THEIR GROUP WHEREIN SOME OF THE PARTNERS ARE COMMON AND ALSO ENGAGED IN THE SAME BUSINESS ACTIVITIES. THE GP RA TIO OF THE GROUP COMPANY NAMELY M/S RAVI COMBINES, WAS FOUND BY THE ASSESSIN G OFFICER AT 4.68% IN COMPARISON TO THE ASSESSEES GP RATIO OF 3.12%. TH E ASSESSING OFFICER FURTHER NOTED THAT IN THE EARLIER YEAR I.E. ASSESSMENT YEAR 2006- 07, THE GP RATIO OF THE ASSESSEE M/S RAVI TRADING CO ITA NO. 6042/MUM/2010 2 GROUP COMPANY M/S RAVI COMBINES WAS 7.09%. ACCORDI NGLY, THE ASSESSING OFFICER MADE THE ADDITION OF 2% TO THE GP RATIO OF THE ASSE SSEE AND THE ADDITION OF ` 39,38,872/- WAS MADE ON ACCOUNT OF SUPPRESSION OF GP RATIO. 2.2 ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPE ALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF GP RATI O. 3 WE HAVE HEARD THE LD DR AS WELL AS LD AR OF THE A SSESSEE AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD DR HEAVILY REL IED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT IN COMPARISON TO THE GRO UP COMPANY OF THE ASSESSEE, THE ASSESSEE HAS DECLARED LOW GP RATE; THEREFORE, T HE ASSESSING OFFICER IS JUSTIFIED IN MAKING THE ADDITION ON ACCOUNT OF GP RATIO. 3.1 THE LD AR OF THE ASSESSEE, ON THE OTHER HAND HA S SUBMITTED THAT WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT REJECTED A ND THE ASSESSING OFFICER HAS NOT CONSIDERED THE ACTUAL MATERIAL ON RECORD, THEN THE ADHOC ADDITION IS NOT JUSTIFIED ON THIS ACCOUNT. IN SUPPORT OF HIS CONTENTION, THE LD AR OF THE ASSESSEE HAS RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH C OURT IN THE CASE OF CIT VS OM OVERSEAS REPORTED IN 173 TAXMAN 0185(P&H) AS WELL A S THE ORDER OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF VIVEK IPSAT UDYOG VS ITO REPORTED IN 2 SOT 65 (DEL). THE LD AR HAS ALSO REFERRED THE COMPARATIVE GP RATIO AD MITTED BY THE ASSESSEE AND SUBMITTED THAT FOR THE ASSESSMENT YEAR 2006-07, THE GP RATE ADMITTED BY THE ASSESSEE WAS 2.67% AND FOR THE YEAR UNDER CONSIDERA TION IT IS 3.12% WHICH IS MORE THAN THE EARLIER YEAR. HE HAS FURTHER SUBMITTED TH AT THE TURNOVER OF THE ASSESSEE IS MORE THAN ` 19.69 CRORES; THEREFORE, IT CANNOT BE COMPARED WIT H THE OTHER COMPANIES. 4 AFTER CONSIDERING THE RIVAL CONTENTION AND OTHER RELEVANT MATERIAL ON RECORD, WE FIND THAT THERE IS A SUBSTANTIAL INCREASE IN THE TURNOVER OF THE ASSESSEE IN M/S RAVI TRADING CO ITA NO. 6042/MUM/2010 3 COMPARISON TO THE EARLIER YEAR AND THE TURNOVER IS DOUBLE IN THE YEAR UNDER CONSIDERATION FROM ` 10.20 CRORES TO ` 19.96 CRORES. SIMILARLY, THE GP RATIO IS ALSO INCREASED FROM 2.67% TO 3.12%. 4.1 HAVING REGARD TO THESE FACTS AND WHEN THE BOOKS OF ACCOUNT OF THE ASSESSEE HAS NOT BEEN REJECTED BY THE ASSESSING OFFICER, THE N MAKING AN ADHOC GP ADDITION ON THE BASIS OF COMPARISON OF THE OTHER COMPANIES WITHOUT CONSIDERING THE RELEVANT MATERIAL, DETAILS, REVENUE AND EXPENSES AS RECORDED IN THE BOOKS OF ACCOUNT, IS NOT JUSTIFIED. 4.2 WE FURTHER NOTE THAT THE ADDITION MADE BY THE A SSESSING OFFICER IN THE CASE OF M/S RAVI COMBINES FOR THE ASSESSMENT YEAR 2007-08, WHICH WAS RELIED AND COMPARED BY THE ASSESSING OFFICER IN MAKING THE AD DITION IN THE CASE OF THE ASSESSEE WAS DELETED BY THE COMMISSIONER OF INCOME TAX(APPEALS) VIDE ITS ORDER DATED 4.10.2010, COPY OF WHICH WAS FURNISHED BY TH E LD AR OF THE ASSESSEE. 5 IN VIEW OF THE ABOVE DISCUSSION, WE AGREE WITH TH E VIEW OF THE COMMISSIONER OF INCOME TAX (APPEALS) THAT LOW PROFIT BY ITSELF C ANNOT BE A REASON FOR ESTIMATION OF THE GP RATIO WHEN THE ASSESSING OFFICER IS NOT DOUB TED THE PURCHASE AND EXPENSES BOOKED BY THE ASSESSEE. ACCORDINGLY, WE UPHOLD TH E ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE. 6 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 16 TH , DAY OF MAY 2012 SD/- SD/- ( N K BILLAIYA ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 16 TH , MAY 2012 M/S RAVI TRADING CO ITA NO. 6042/MUM/2010 4 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI