The ACIT,(OSD) Circle-5, Ahmedabad V. Premium Pulman Pvt.Ltd., Ahmedabad

ITA 635/AHD/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6255 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 08-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: S K SUDHWANI
• Keywords: Rejection of books of accounts

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.635/AHD/2011 ( / ASSESSMENT YEAR : 2007-08) ACIT (OSD) CIRCLE-5 AHMEDABAD / VS. PREMIUM PULMAN PVT.LTD. PLOT NO.2009, PHASE-IV, GIDC VATVA AHMEDABAD ' ./ ./ PAN/GIR NO. : AAACP 7064 N ( '% / APPELLANT ) .. ( &''% / RESPONDENT ) '%( / APPELLANT BY : SMT. SONIA KUMAR, SR.DR &''%)( / RESPONDENT BY : SHRI S.K. SUDHWANI, AR *) / DATE OF HEARING 08/01/2015 +,-.) / DATE OF PRONOUNCEMENT 23/01/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABA D (CIT(A) IN SHORT) DATED 20/12/2010 PERTAINING TO ASSESSMENT Y EAR (AY) 2007-08. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN REJECTING THE ASSESSING OFFICER TO ACCEPT THE LOSS OF ITA NO.635/AHD/ 2011 ACIT (OSD) VS. PREMIUM PULMAN PVT.LTD. ASST.YEAR 2007-08 - 2 - RS.23,49,394/- AS DECLARED BY THE ASSESSEE AS AGAIN ST THE TOTAL LOSS REDUCED TO RS.NIL BY THE ASSESSING OFFICER. 2. THE LD.COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO ACCEPT THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C OMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASS ESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE A SSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 03/11/2009, THEREBY THE ASSESSING OFFICER (AO IN SHORT) REJECTE D THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND DISALLOWE D THE LOSS CLAIMED BY THE ASSESSEE AND ASSESSED INCOME AT RS.NIL. AGAINS T THIS, THE ASSESSEE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CON SIDERING THE SUBMISSIONS OF THE ASSESSEE ALLOWED THE APPEAL. WH ILE ALLOWING THE APPEAL OF THE ASSESSEE, THE LD.CIT(A) HELD THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOK RESULTS. CONSEQUENTLY, HE DELETE D THE ADDITION. AGAINST THE ORDER OF THE LD.CIT(A), NOW THE REVENUE IS IN A PPEAL BEFORE US. ITA NO.635/AHD/ 2011 ACIT (OSD) VS. PREMIUM PULMAN PVT.LTD. ASST.YEAR 2007-08 - 3 - 3. GROUND NOS.1 & 2 ARE INTER-CONNECTED AND, THEREF ORE, THE SAME ARE BEING DECIDED TOGETHER. THE LD.SR.DR SMT. SONIA KU MAR STRONGLY SUPPORTED THE ORDER OF THE AO. SHE SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE ASSESSEES APPEAL. 3.1. ON THE CONTRARY, THE AUTHORIZED REPRESENTATIVE ON BEHALF OF THE ASSESSEE-COMPANY SUPPORTED THE ORDER OF THE LD.CIT( A) AND DREW OUR ATTENTION TOWARDS PARA-3 OF THE ASSESSMENT ORDER AN D SUBMITTED THAT THE ONLY BASIS OF REJECTION OF THE BOOKS OF ACCOUNTS IS THAT THE ASSESSEE HAS NOT PASSED ON THE INCREASED PRICE OF RAW-MATERIAL T O THE CUSTOMERS BY INCREASING SALE PRICE OF FINISHED GOODS. HE SUBMIT TED THAT THE AO FAILED TO TAKE NOTE OF THE FACT THAT THE TURNOVER OF THE C OMPANY DECLINED DUE TO THE FACT THAT THERE WAS NO SALE CERTAIN MAJOR EQUI PMENTS LIKE TURMERIC PROCESSING MACHINE, PIN CALSSIFFIER MILL AND ROTO S IFTERS WHICH ACCOUNTED FOR ABOUT 23% OF THE SALES AND CONTRIBUTE D TO GROSS MARGINS SUBSTANTIALLY. HE SUBMITTED THAT IT IS NOT THE AO WHO WOULD DETERMINE THE MANNER IN WHICH THE BUSINESS-MAN HAS TO CARRY O UT THE BUSINESS. HE SUBMITTED THAT THE FINDING AND THE REASONING OF THE AO ARE CONTRARY TO THE SETTLED PRINCIPLE OF LAW. HE PLACED ON THE RELIANC E OF VARIOUS JUDICIAL PRONOUNCEMENTS WHICH WERE MADE BEFORE THE LD.CIT(A) . 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO IN PARA-3 OF HIS ORDER HAS OBSE RVED AS UNDER:- ITA NO.635/AHD/ 2011 ACIT (OSD) VS. PREMIUM PULMAN PVT.LTD. ASST.YEAR 2007-08 - 4 - 3. ON PERUSAL OF DETAILS FILED DURING THE COURSE OF HEARING, IT IS SEEN THAT THE ASSESSEE HAS SHOWN GROSS LOSS OF 8.68 % AS AGAINST 20.37% PROFIT SHOW LAST YEAR. THE TURNOVER HAS GON E DOWN FROM RS.1.09 CRORES TO RS.71.5 LACS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUESTED TO FURNISH REASONS FOR ALL IN GP AND THE SAME HAS BEEN DULY FURNISHED BY ASSES SEE VIDE SUBMISSION DATED 25.08.2009 AND 31.08.2009. ON GOI NG THROUGH THE SAME, IT IS SEEN THAT THE LOS HAS BEEN ATTRIBUT ED BY ASSESSEE TO RISE IN PRICES OF RAW MATERIAL, INCREASE IN SALARY AND WAGES AND LABOUR CHARGES. HOWEVER, THE SUBMISSION IS SILENT AS TO WHY THE INCREASE IN ABOVE FACTORS COULD NOT BE PASSED ON TO CUSTOMERS BY INCREASING SALES PRICE OF FINISHED GOODS SOLD BY AS SESSEE, BECAUSE THE VOLUME OF SALES HAS GONE DOWN DURING THE YEAR. THE ASSESSEE HAS NOT CITED ANY INSTANCE AS TO HOW THE SALES PRIC E HAS BEEN DETERMINED, HOW THE ORDER IS RECEIVED, WHAT IS THE TIME LAG BETWEEN RECEIPT OF ORDER, QUOTATION AND EXECUTION O F THE ORDER. IT IS ALSO NOT CLARIFIED AS TO HOW THE ASSESSEE WAS QU OTING THE SALES PRICE, KNOWING DEFINITELY THAT INPUT COST HAS GONE UP. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH CASE-TO-CASE EXPLANATION FOR FALL IN GP, THE CONTENTION FOR ALL IN GP IS REJECTE D, BY INVOKING PROVISIONS OF SECTION 145(2) OF THE ACT, AND ACCORD INGLY, THE TOTAL INCOME IS TAKEN AT RS.NIL. 4.1. HOWEVER, THE LD.CIT(A) AFTER CONSIDERING THE S UBMISSIONS OF THE ASSESSEE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E IN PARA-2.1 OF HIS ORDER, BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A.R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFF ICER IN THE ASSESSMENT ORDER. I AM INCLINED TO ACCEPT THE CONT ENTIONS PUT FORTH BY THE A.R. OF THE APPELLANT. WHILE REJECTING THE BOOKS OF ACCOUNT U/S.145(2) OF THE ACT, THE A.O. HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. A.OS ITA NO.635/AHD/ 2011 ACIT (OSD) VS. PREMIUM PULMAN PVT.LTD. ASST.YEAR 2007-08 - 5 - OBSERVATIONS ARE GENERAL, VAGUE AND BESIDE THE POIN T. THE REASONS ADVANCED BY THE A.R. OF THE APPELLANT FOR FALL IN G .P. ARE TENABLE. IN THESE CIRCUMSTANCES, I AM INCLINED TO DIRECT THE A.O. TO ACCEPT THE LOSS RETURNED BY APPELLANT. THESE TWO GROUNDS OF APPEAL ARE ALLOWED. 4.2. THE UNDISPUTED FACTS EMERGE FROM RECORDS ARE T HAT THE AO REJECTED THE BOOKS OF ACCOUNTS ON THE BASIS THAT THE ASSESSE E HAS NOT PASSED ON THE INCREASED COST OF RAW-MATERIAL TO CUSTOMERS BY INCR EASING SALES PRICE OF FINISHED GOODS. AND ALSO THE ASSESSEE DID NOT CLAR IFY AS TO HOW THE ASSESSEE WAS QUOTING THE SALE PRICE, KNOWING DEFINI TELY THAT INPUT COST HAS GONE UP. THEN PROCEEDED TO REJECT THE CLAIM O F THE ASSESSEE IN RESPECT OF FALL IN GP BY INVOKING THE PROVISIONS OF SECTION 145(2) OF THE ACT AND ASSESSED THE INCOME OF THE ASSESSEE AT NIL. IN OUR CONSIDERED VIEW, THIS FINDING OF THE AO CANNOT BE APPROVED IN VIEW OF THE FACT THAT THE AO HAS NOT GIVEN ANY SPECIFIC INSTANCE FOR NOT ACCEPTING THE BOOK RESULTS. MOREOVER, THE AO HAS NOT MADE ANY ENQUIRY WITH REGARD TO CORRECTNESS OF THE CLAIM IN RESPECT OF INCREASE IN COST OF THE RAW-MATERIAL AND DECLINE IN SALE OF THE SPECIFIC EQUIPMENTS SUBM ITTED BY THE ASSESSEE. IN THE ABSENCE OF SUCH ENQUIRY, BRINGING ANY MATERI AL TO PROVE THE CLAIM OF THE ASSESSEE BEING FALSE, THE ACTION OF THE AO F OR REJECTING THE BOOKS OF ACCOUNTS IS NOT JUSTIFIED. FURTHER, IT IS OBSERV ED THAT AFTER REJECTION OF BOOKS OF ACCOUNTS, THE AO HAS TAKEN TOTAL INCOME AS NIL AND THE BASIS OF TAKING SUCH INCOME AT NIL IS NOT EXPLAINED IN THE A SSESSMENT ORDER. IT IS SETTLED PRINCIPLE OF LAW THAT IN THE EVENT OF REJEC TION OF BOOKS OF ACCOUNTS, ITA NO.635/AHD/ 2011 ACIT (OSD) VS. PREMIUM PULMAN PVT.LTD. ASST.YEAR 2007-08 - 6 - THE AO HAS TO MAKE BEST JUDGEMENT ASSESSMENT AND SU CH ASSESSMENT SHOULD BE BASED ON FAIR ESTIMATE COMPARING TO THE M ARKET CONDITIONS. THERE IS NOTHING ON RECORD SUGGESTING THAT THE AO H AS CARRIED OUT SUCH EXERCISES. UNDER THESE FACTS, WE DO NOT SEE ANY RE ASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A), HENCE GROUND NOS.1 & 2 OF REVENUES APPEAL ARE REJECTED. 5. GROUND NOS.3 & 4 ARE GENERAL IN NATURE REQUIRE N O INDEPENDENT ADJUDICATION. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 23 RD OF JANUARY, 2015 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 23/ 01 /2015 2..,.../ T.C. NAIR, SR. PS !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-XI, AHMEDABAD 5. 78& 45 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 8:;<* / GUARD FILE. ! / BY ORDER, '7 & //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD