INDO BUILT STORAGE SYSTEMS P.LTD, MUMBAI V. ACIT 10(2), MUMBAI

ITA 6112/MUM/2010

• Counselvise Citation: 611219914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 03-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR SINGH
• Keywords: Gross profit estimation
• Section: 145; 144; 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH(A .M ) ITA NO.6112/MUM/2010 (ASSESSMENT YEAR : 2007-08) M/S INDO BUILT STORAGE SYSTEMS PVT.LTD. 130, RUNWAL COMMERCIAL COMPLEX, L.B.S.MARG, MULUND (WEST), MUMBAI400080. PAN:AAACI4993H ASSISTANT COMMISSIONER OF INCOME TAX 10(2), AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020. APPELLANT V/S RESPONDENT DATE OF HEARING : 5.10.2011 DATE OF PRONOUNCEMENT : 12.10.2011 APPELLANT BY : NONE RESPONDENT BY : SHRI SUNIL KUMAR SI NGH O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 14.7.2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. 2. AT THE TIME OF HEARING, THE ASSESSEES REPRESENT ATIVE SOUGHT ADJOURNMENT. HOWEVER, IN THE ABSENCE OF ANY LETTER OF AUTHORITY IN FAVOUR OF THE ASSESSEES REPRESENTATIV E, THE BENCH REJECTED THE ADJOURNMENT PETITION AND IT WAS DECIDED TO DISPOSE OF THE APPEAL EX-PARTE, QUA THE ASSESSE E, ON MERITS AFTER HEARING THE LEARNED D.R. ITA NO.6112/MUM/2010 (ASSESSMENT YEAR : 2007-08) 2 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF STORAGE RACKING SYSTEMS, FILED RETURN SHOWING AN INCOME OF RS.68,96,920/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE GROSS PROFI T IN ATGAON UNIT (NON 80IB UNIT) IS 26.94% AND THAT OF DAMAN UNIT (80IB UNIT) IS 34.55%. THE ASSESSEE WAS ASKE D TO EXPLAIN AS TO WHY THERE IS A DIFFERENCE IN THE GP RATE OF BOTH THE UNITS AND WHY THE BOOKS OF ACCOUNTS SHOULD NOT BE REJECTED AND GP MAY BE ENHANCED BY 1% MORE THAN TH E GP DECLARED. THE ASSESSEE HAS STATED THAT IN RESPECT O F ATGAON UNIT, THE COMPANY HAD BAGGED A BIG ORDER FROM M/S BHEL AT THE COMPETITIVE RATE. THE INCLUSION OF BHEL IN THE CLIENT LIST, BEING A PRESTIGIOUS ONE, THE ASSESSEE OFFERED THEM LOWER RATE. THE ASSESSEE WAS ASKED TO FILE PROPER DOCUM ENTARY EVIDENCE TO SUPPORT ITS CLAIM. HOWEVER, THE ASSESSE E HAS NOT FILED ANY DOCUMENTARY EVIDENCE TO SUPPORT ITS CLAIM . ACCORDING TO THE AO, IT IS THE DUTY OF THE ASSESSE E TO FURNISH THE DETAILS CALLED FOR AND SATISFY THE AO IN RESPE CT OF CORRECTNESS OF ITS CLAIM. THE ASSESSEE COMPANY HAV ING FAILED TO DO SO, THE AO REJECTED THE BOOK RESULT AN D ENHANCED GP BY 1% I.E. RS.9,67,428/- AND THEREBY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.78,64,348/- VIDE ORD ER DATED 14.12.2009 PASSED U/S 143(3) OF THE INCOME TAX ACT , 1961 (THE ACT). ITA NO.6112/MUM/2010 (ASSESSMENT YEAR : 2007-08) 3 4. ON APPEAL, BEFORE THE LD. CIT(A), THE ASSESSEE W HILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED EARL IER FURTHER SUBMITTED THAT THE TURNOVER OF RS.907.48 LAKHS INCLUDED RS.692.44 LAKHS PERTAINING TO BHEL WHIL E BALANCE TURNOVER OF RS.215.04 LAKHS WAS OF 53 CUSTOMERS. T HE ASSESSEE HAS ALSO FILED COMPARATIVE RATES OF SALE BILLS OF TWO PARTIES I.E. M/S VITAL THERAPEUTICS AND M/S J AIN IRRIGATION TO SUBSTANTIATE THE RATES OF THE GOODS S OLD TO BHEL AT LOWER RATE IN COMPARISON TO OTHER UNIT. HOWEVER , THE LD. CIT(A) WHILE OBSERVING THAT THE ASSESSEE HAS AGAIN FAILED TO JUSTIFY THE DIFFERENCE IN THE RATE AS COMPARED TO T WO UNITS UPHELD THE GP ADDITION MADE BY THE AO. 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THE SUSTENANCE OF GP ADDITION OF RS.9,67,4 28/-. 6. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO AND LD. CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD.DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS FI LED THE RETURN ALONG WITH THE AUDITED ANNUAL ACCOUNT, TAX A UDIT REPORT AND OTHER PRESCRIBED FORMS. IT IS ALSO NOT IN DI SPUTE THAT ITA NO.6112/MUM/2010 (ASSESSMENT YEAR : 2007-08) 4 THE ASSESSEE HAS FURNISHED ALL OTHER INFORMATION, D ETAILS OF DOCUMENTS ETC. AS REQUIRED BY THE AO FROM TIME TO TIME. WE FURTHER FIND THAT THE AO ON COMPARISON OF GP RATE AT 26.94% OF ATGAON UNIT (NON 80IB UNIT) WITH THAT OF DAMAN UNIT (80IB UNIT) AT 34.55% HAS ASKED THE ASSESSE E TO EXPLAIN THE SAME AND WHY LOW GP OF ATGOAN UNIT MAY NOT BE ENHANCED BY 1%. THE ASSESSEE FILED REPLY INTERALI A STATING THAT ATGAON UNIT THE ASSESSEE BAGGED BIGGER O RDER FROM BHEL AT THE COMPETITIVE RATES RESULTING LOWER GP. H OWEVER, IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, THE AO REJECTED THE BOOK RESULT AND ENHANCED THE GP BY 1 %. WE FURTHER FIND THAT BEFORE THE LD. CIT(A), THE ASSESS EE HAS ALSO FILED COMPARATIVE SALE RATES OF TWO PARTIES VIZ. M /S VITAL THERAPEUTICS AND M/S JAIN IRRIGATION TO SUBSTANTIA TE THE RATES OF THE GOODS SUPPLIED TO BHEL AT LOWER RATE I N COMPARISON TO OTHER UNIT. HOWEVER, THE LD. CIT(A) IN THE ABSENCE OF ANY OTHER BILLS UPHELD THE ADDITION MADE BY THE AO. 8. UNDER SUB-SECTION (3) OF SECTION 145 OF THE ACT, IF THE AO IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLE TENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD O F ACCOUNTING HAS NOT BEEN REGULARLY EMPLOYED BY THE A SSESSEE OR THE ASSESSEE HAS NOT FOLLOWED THE ACCOUNTING STANDARD AS NOTIFIED, THE AO MAY REJECT THE BOOKS OF ACCOUN T AND ITA NO.6112/MUM/2010 (ASSESSMENT YEAR : 2007-08) 5 COMPLETE THE ASSESSMENT IN THE MANNER PROVIDED IN S ECTION 144 OF THE ACT. IN THE PRESENT CASE, THE ASSESSI NG OFFICER HAS NOT FOUND OUT OR POINTED OUT ANY ADVERSE FINDIN G REGARDING THE AUDITED VERSION OF THE BOOKS OF ACCO UNT NOR IN THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE COMPANY. THUS, THE COMPLETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT COMPAN Y ARE IN NO WAY IN DISPUTE OR DOUBT BY THE ASSESSING OFFICE R AND HENCE THE PROVISIONS OF SECTION 145 HAVE BEEN INCO RRECTLY AND INDISCREETLY APPLIED BY THE AO ON THE FACTS AN D CIRCUMSTANCES OF THIS CASE. AS TO THE BOOKS OF ACCO UNT AND VOUCHERS MAINTAINED, THEY, THEREFORE REFLECT A TRUE PICTURE OF THE ACCOUNTS OF THE APPELLANT-COMPANY. HENCE, THE BUSINESS RESULTS DECLARED BY THE APPELLANT-COMPANY NEED NOT HAVE BEEN INTERFERED WITH BY THE ASSESSING OFFICER IN ES TIMATING THE PROFIT BY APPLYING AN ARBITRARY RATE OF G. P. AT 1%. MERELY BECAUSE THE GP RATE OF ONE UNIT IS LOW COMPARED TO THE OTHER UNIT OF THE SAME ASSESSEE IS NOT A CIRCUMSTAN CE OR MATERIAL TO JUSTIFY AN ESTIMATE I.E. ADHOC ADDITIO N OF GP BY 1% IN THE CIRCUMSTANCES AND FACTS OF THE CASE. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT THE GP ADDI TION OF RS.9,67,428/- MADE BY THE AO AND SUSTAINED BY THE L D. CIT(A) IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY, T HE SAME IS DELETED. THE GROUNDS TAKEN BY THE ASSESSEE ARE, THE REFORE, ALLOWED. ITA NO.6112/MUM/2010 (ASSESSMENT YEAR : 2007-08) 6 9. IN THE RESULT, THE ASSESSEES APPEAL STANDS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH OCTOBE R,2011. SD SD (RAJENDRA SINGH) (D .K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 12TH OCTOBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI