THE DCIT-1(1), Indore V. M/s. FERRO CONCRETE CONSTRUCTION (INDIA) PVT. LTD., Indore

ITA 672/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5317 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 17-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: C P RAWKA
• Section: 40A(3); 133A

Judgement Text

ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., ..!', #$ # !% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. NO. 509/IND/2016 ASSESSMENT YEAR: 2011-12 FERRO CONCRETE CONSTRUCTION INDIA PVT. LTD., INDORE PAN AAACF -2726K :: APPELLANT VS ACIT 4(1) INDORE :: RESPONDENT I.T.A. NO. 672/IND/2016 ASSESSMENT YEAR: 2011-12 ACIT 4(1) INDORE :: APPELLANT VS FERRO CONCRETE CONSTRUCTION INDIA PVT. LTD., INDORE :: RESPONDENT REVENUE BY SHRI MOHD. JAVED ASSESSEE BY SHRI C.P. RAWKA ! ' #$ DATE OF HEARING 7.12.2016 %&'( #$ DATE OF PRONOUNCEMENT 15.12.2016 ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 2 * O R D E R PER SHRI D.T. GARASIA, JM THESE APPEALS HAVE BEEN PREFERRED BY THE REVENUE AND THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-I I, INDORE, DATED 31.3.2016. 2. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12 ON 30.9.2011 DECLARING TOTAL INCOME OF RS.7,59,97,540/-. IN THIS CASE SURVEY PROCEEDINGS WERE CONDUCTED U/S 133A OF THE ACT ON 2.8.2011. THE ASSESSEE MAINTAINED BOOKS OF ACCOUNTS IN COMPUTER AT THE BUSINESS PREMISES SITUATED AT 5A, INDUSTRIAL AREA, BHAGIRATHPURA, INDORE. THE ASSESSEE HAS SURRENDERED RS. 5,27,17,556/- ON THE BASIS OF NET PROFIT AND RS. 1,51,27,608/- U/S 40A(3) OF THE ACT. WHEN THE ASSESSEE FILED RETURN OF INCOME AFTER ONE AND HALF MONTH OF SURVEY ON 30.9.2011 IT SHOWED INCOME FROM B BUSINESS AT RS.3,65,38,115/- AND ADDITIONAL INCOME ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 3 SURRENDERED DURING SURVEY OF RS. 1,51,80,793/- AND RS.2,42,98,628/-. THUS, THE ASSESSEE HAS SHOWN THE G ROSS TOTAL INCOME OF RS.7,60,17,536/-. ON PERUSAL OF PROF IT AND LOSS ACCOUNT FOR THE YEAR ENDED ON 31 ST MARCH, 2011 IT WAS NOTICED THAT THE ASSESSEE HAS SHOWN RECEIPTS OF RS.760370368.25. THE NET PROFIT RATIO SHOWN BY THE ASSESSEE ON TOTAL RECEIPTS WASS @ 4.84% WHILE IN THE L AST FINANCIAL YEAR THE ASSESSEE HAS SHOWN NET PROFIT AT THE R ATE OF 5.32% ON TOTAL RECEIPTS. THE NET PROFIT SHOWN BY THE ASSESSEE IS VERY LOW. THEREFORE, SHOW CAUSE NOTICE WAS GIVEN ASKING THE COMPANY AS TO WHY THE NET PROFIT SHOW N BY THE COMPANY DURING THE SURVEY WAS NOT ACCORDING TO THE RETURN OF INCOME. THE ASSESSEE SUBMITTED THE WRITTE N SUBMISSIONS AND SUBMITTED THAT AT THE TIME OF SURVEY THE RECEIPTS WERE OF RS.74.87 CRORES WHILE FILING THE R ETURN OF INCOME IT INCREASED TO RS.2.19 CRORES. THE ASSESSEE SUBMITTED THAT THE TOTAL EXPENDITURE OF RS. 213 CRORE S WAS ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 4 NOT DEBITED IN THE BOOKS OF ACCOUNTS, THEREFORE, THE DIFFERENCE WAS SURRENDERED AND IT WAS SHOWN IN THE RET URN OF INCOME AND AFTER QUERY THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS CARRIED OUT THE WORKING ACTIVITIES AT DIFFERENT SITES OF INDORE, DHAR, BEORA, RAJASTHAN, ETC. AND HAS CLAIMED EXCESSIVE EXPENSES IN RESPECT OF ALL THE SITES. NO REGISTER IS MAINTAINED FO R SEPARATE SITES, THEREFORE, THE ASSESSING OFFICER HAS R EJECTED THE BOOKS OF ACCOUNTS AND INCREASED THE NET PROFIT TO 2% OF THE RECEIPTS WHICH COMES TO RS.1,25,64,214/-. 3. AGGRIEVED WITH THE ABOVE ACTION OF THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT(A) WHO OBSERVED AS UNDER :- 3.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND OBSERVED THAT THE A.O. ALTHOUGH HAS REJECTED BOOKS OF ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 5 ACCOUNTS ON REASONABLE AND SPECIFIC GROUNDS YET WHI LE ESTIMATING THE PROFITS, HAS NOT BROUGHT ON RECORD A NY MATERIAL AND BASIS TO ENHANCE THE PROFIT BY 2% ON T HE TOTAL RECEIPTS MINUS RECEIPTS FROM MUMBAI. THE CONTENTION OF THE APPELLANT HAS BEEN FOUND REASONAB LE TO THE EXTENT THAT DURING THE YEAR UNDER CONSIDERAT ION THE NET PROFIT HAS BEEN SHOWN AT 5.14% AS AGAINST 4.84% STATED BY THE A.O. IN THE ASSESSMENT ORDER. THE NET PROFIT FOR THE A.Y. 09-10 AND A.Y. 10-11 HAS BE EN SHOWN AT 5.28% AND 5.75% RESPECTIVELY. THEREFORE, I F THE 2% INCREASED IS CONSIDERED, THE NET PROFIT FOR THE RELEVANT ASSESSMENT YEAR WITH GO UPTO 7.14% WHICH I S MUCH HIGHER THAN THE AVERAGE NET PROFIT IN THE ABOV E MENTIONED ASSESSMENT YEARS. IN MY CONSIDERED OPINIO N, THE ESTIMATION OF PROFITS BY THE A.O. HAS NOT BEEN FOUND BASED ON SOME COGENT AND RELEVANT MATERIAL. THEREFO RE, ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 6 IT SHALL BE REASONABLE TO INCREASE THE PROFIT BY 1% WHICH WILL TAKE THE NET PROFIT FOR THE RELEVANT YEAR AT 6 .14% WHICH WILL STILL BE MUCH HIGHER THAN 5.5%, THE AVER AGE OF TWO PRECEDING ASSESSMENT YEARS. IN VIEW OF THE ABOVE DISCUSSION AND THE FACTS AND CIRCUMSTANCES OF THE CASE, THE A.O. IS DIRECTED TO RE-COMPUTE THE PR OFITS BY INCREASING THE SAME @ 1% AS AGAINST 2% APPLIED I N THE ASSESSMENT ORDER. THEREFORE, THE GROUND NO. 1 I S DISMISSED AND THE GROUND NO. 2 & 3 ARE PARTLY ALLOWED. 4. NOW THE DEPARTMENT IS IN APPEAL AGAINST REDUCING THE NET PROFIT BY 1% AS AGAINST 2% APPLIED BY THE ASSES SING OFFICER AND THE ASSESSEE IS IN APPEAL AGAINST 1% RETENTI ON. 5. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN CONTROVE RY IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE ASSESS EES ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 7 OWN CASE FOR THE ASSESSMENT YEAR 2008-09 WHEREIN THE TRIBUNAL HAS ACCEPTED THE NET PROFIT @ 5.39%. THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ASSESSM ENT YEARS 2006-07, 2007-08, 2008-09, 2009-10 AND 2010-11 6. THE NET PROFIT RATIO COMES TO 4.88%, 4.42%, 5.42%, 5.39%, 5.28% AND 5.75% AND THE TRIBUNAL HAS APPLIED 4% NET PROFIT RATE FOR THE ASSESSMENT YEAR 2005-06, THER EFORE, IT MAY BE ACCEPTED AND THE LEARNED CIT(A) IS NOT JUST IFIED IN GIVING RELIEF OF ONLY 1%. ON THE OTHER HAND, THE LE ARNED DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES. WE FIND THAT THE NET PROFIT FOR THE A.Y. 09- 10 AND A.Y. 10-11 HAS BEEN SHOWN BY THE ASSESSEE AT 5.28% AND 5.75% RESPECTIVELY. THEREFORE, IF 2% INCREASE IS CON SIDERED, THE NET PROFIT FOR THE RELEVANT ASSESSMENT YEAR WITH GO UPTO 7.14% WHICH IS MUCH HIGHER THAN THE AVERAGE NET PROFIT IN ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 8 THE ABOVE MENTIONED ASSESSMENT YEARS. WE ARE, THEREFORE , OF THE OPINION THAT THE ESTIMATION OF PROFITS BY THE A.O. HAS NOT BEEN FOUND BASED ON SOME COGENT AND RELEVANT MATERIAL. THEREFORE, THE LEARNED CIT(A) WAS REASONABLE I N INCREASING THE PROFIT BY 1% WHICH WILL TAKE THE NET P ROFIT FOR THE RELEVANT YEAR AT 6.14% WHICH WILL STILL BE MUCH HI GHER THAN 5.5%, THE AVERAGE OF TWO PRECEDING ASSESSMENT YEAR S. IN VIEW OF THE ABOVE DISCUSSION AND THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LEARNED CI T(A) WAS JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO RE- COMPUTE THE PROFITS BY INCREASING THE SAME @ 1% AS AGAINST 2% APPLIED BY THE ASSESSING OFFICER. WE, THERE FORE, CONFIRM THE ORDER OF THE LEARNED CIT(A). 8. IN VIEW OF THE ABOVE DISCUSSION, WE FIND NO FLAW IN THE ORDER OF THE LEARNED CIT(A) AND CONFIRM THE SAME. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE ASSESSEE STAND DISMISSED. ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 9 THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 15 TH DECEMBER, 2016. SD/- SD/- ( ..!') (..) #$ (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER J UDICIAL MEMBER (') / DATED : 15 TH DECEMBER, 2016. DN/ ITA NO. 509/IND/2016 & 672/IND/2016 FERRO CONTRETE 10