DCIT, Ludhiana V. M/s Sharman Udyog Pvt. Ltd., Ludhiana

ITA 679/CHANDI/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8246 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 15-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 01-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHIL KUMARCIT
• Assessee Lawyers: ASHWANI KUMARCA
• Keywords: Rejection of books of accounts; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 679/CHD/2016 ASSESSMENT YEAR: 2011-12 THE DCIT, VS M/S SHARMAN UDYOG PVT.LTD., CENTRAL CIRCLE-III D-43, PHASE-V, FOCAL POINT, MANDI GOBINDGARH. LUDHIANA. PAN: AACCS5208F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL KUMAR,CIT -DR RESPONDENT BY : SHRI ASHWANI KUMAR,CA DATE OF HEARING : 15.02.2017 DATE OF PRONOUNCEMENT : 01.03.2017 O R D E R PER BHAVNESH SAINI,JM THIS DEPARTMENTAL APPEAL HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-5 LUDHIANA DATED 18.03.2016 FOR ASSESSMENT YEAR 2011-12 CHALLENGING THE DELETION OF ADDITION OF RS. 35,24,925/- ON ACCOUNT OF FALL IN GP. 2. THIS ISSUE PERTAINS TO REJECTION OF THE BOOKS OF ACCOUNT BY ASSESSING OFFICER AND MAKING OF ADDITION BY APPLYING HIGHER GROSS PROFIT RATE. THE ASSESSING O FFICER HAS MENTIONED THAT THE ASSESSEE HAS SURRENDERED 2 ADDITIONAL INCOME OF RS. 250 LACS U/S 132(4) UNDER VARIOUS HEADS, HOWEVER, THE RETURN WAS FILED AT RS. 2,08,19,701/-. THE AO ACCORDINGLY ISSUED A SHOW CAU SE NOTICE TO THE ASSESSEE TO JUSTIFY THE RETURNED INCO ME BEING LESS THAN SURRENDERED INCOME. IN THE REPLY, T HE MAIN REASON MENTIONED BY THE ASSESSEE WAS THE ADDIT ION TO FIXED ASSET DURING THE YEAR WHICH HAS RESULTED I N INCREASE IN DEPRECIATION CLAIM BY RS.2,10,83,260/- IN THIS ASSESSMENT YEAR. IT WAS ALSO EXPLAINED THAT FINANCIAL EXPENSES TOO HAVE INCREASED, AND DUE TO T HESE TWO FACTORS, THE RETURNED INCOME WAS LESS THAN THE SURRENDERED INCOME. THE AO CONSIDERED THE REPLY BUT THE JUSTIFICATION WAS NOT FOUND ACCEPTABLE. AS PER AO THE MAIN REASON FOR FALL IN INCOME WAS A FALL IN GP RATE AT 35.75% COMPARED TO 37.1% FOR THE LAST YEAR. THE AO ALSO NOTICED THAT POWER AND FUEL CONSUMPTION HAS AL SO INCREASED MORE AS COMPARE TO INCREASE IN SALE. THE AO ALSO MENTIONS THAT QUANTITY WISE DETAIL OF PURCHASE S AND DETAIL OF CLOSING STOCK HAS NOT BEEN FILED AND ACCORDINGLY, A SHOW CAUSE NOTICE WAS GIVEN TO THE ASSESSEE FOR REJECTION OF THE BOOKS. AFTER CONSIDER ING THE REPLY OF THE ASSESSEE, THE BOOKS WERE REJECTED AND THE GROSS PROFIT WAS DETERMINED BY APPLYING A GP RATE O F 37% RESULTING IN ADDITION OF RS. 35,24,925/-. FURTH ER, THE AO MADE DISALLOWANCE OF 15% OUT OF TOTAL VEHICL E EXPENSES ON ACCOUNT OF PERSONAL USE, RESULTING IN ADDITION OF RS. 2,01,830/- 3 3. THE LD. CIT(APPEALS), HOWEVER, DELETED THE ENTIR E ADDITION. HIS FINDINGS IN PARAS 3.1.1 TO 3.1.3 ARE REPRODUCED AS UNDER : 3.1.1 THE FACTS OF THE CASE, THE BASIS OF ASSESSM ENT AND ADDITIONS MADE BY THE A.O. AND THE SUBMISSIONS/ARGUMENTS OF THE AR DU RING THE APPELLATE PROCEEDINGS HAVE BEEN CONSIDERED. THE AR HAS SUBMIT TED THAT ADDITIONAL INCOME OF RS. 250 LACS SURRENDERED DURING SEARCH HA S BEEN DULY REFLECTED IN THE BOOKS OF ACCOUNT; RS. 220 LACS AS ADDITIONAL IN COME UNDER THE HEAD MISCELLANEOUS INCOME AND RS. 30,00,000/- DECLARED I N COMPUTATION AS UNEXPLAINED EXPENSES/INCOME U/S 132(4). THE AR SUBM ITTED THAT OUT OF THE ABOVE; RS. 140 LACS WAS TOWARDS UNDISCLOSED/UNREALI ZED SALE/DEBTOR AND RS. 30,00,000/- TOWARDS DIFFERENCE IN STOCKS/MATERI ALS THUS TOTALING 170 LACS, WHICH IS MORE THAN ADDITION OF RS. 35,24,925/ - MADE TOWARDS FALL IN GP RATE. FURTHER, RS. 30,00,000/- WAS SURRENDERE D TOWARDS UNEXPLAINED DOCUMENTS/EXPENSES WHICH IS MORE THAN T HE DISALLOWANCE OF RS.2,01,830/- FOR PERSONAL USE OF VEHICLES BY THE D IRECTOR 3.1.2 THE AR HAS ALSO SUBMITTED THAT THE GP RATE DURING T HE YEAR IS 35.75 % AGAINST 37.10% OF EARLIER YEAR AND DECREASE IS ONLY BY 1.3%. THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNTS S UPPORTED BY PURCHASE AND SALES BILLS AND VOUCHERS FOR EXPENSES AND NO DEFECT WAS POINTED BY THE AO IN THIS REGARD. ALL THE QUANTITAT IVE DETAILS WERE AVAILABLE AND SUPPLIED TO THE AO VIDE REPLY DATED 1 8.01.2013. THE BOOKS ARE DULY AUDITED. THE REASON FOR INCREASE IN POWER AND FUEL EXPENSES IS DUE TO THE INCREASE IN POWER RATES AND ELECTRICITY CUT RES ULTING IN MORE USE OF GENERATOR AND CONSUMPTION OF MORE DIESEL. TH E NET GROSS PROFIT FOR THE YEAR IS RS. 10,11,34,992/- AS AGAINST RS.8, 73,16,675/- OF THE EARLIER YEAR. HENCE, THERE IS A PROGRESSION IN GROS S PROFIT WHICH CANNOT REMAIN CONSTANT YEAR AFTER YEAR IN REALISTIC SITUAT ION. THE AR CONTENDED THAT THE AO HAS NOT POINTED OUT ANY DEFECT OR FAULT IN BOOKS OF ACCOUNT OR BILLS OR VOUCHERS ETC. ONLY ON ACCOUNT OF FALL IN GP OR INCREASE IN ONE EXPENSE CANNOT BE A BASIS FOR REJECTION OF BOOKS OF ACCOUNTS. THE AR HAS QUOTED CASE LAWS ALSO IN HIS FAVOUR. 3.1.3 AFTER EXAMINATION THE DOCUMENTS FILED WITH THE SUBM ISSIONS IT IS SEEN THAT VIDE LETTER DATED 18.01.2013 QUANTITATIVE AND VALUE WISE DETAILS OF OPENING AND CLOSING STOCK AND BASIS OF VALUATION WAS GIVEN TO THE AO. 4 ALSO MONTH WISE DETAILS OF PURCHASES AND SALE (VALU E WISE) AND YEARLY SALES & PURCHASE QUANTITY WISE WAS ALSO GIVEN. DURING THE APPELLATE PROCEEDINGS, A COPY OF THE SAME HAS BEEN FILED AND PLACED ON RECORD. THE AR HAS GIVEN A DETAILED ANALYSIS OF POWER AND FUEL CONSUMPTION FOR THE CURRENT YEAR COMPARED WITH LAST YEAR ALONG WITH ITS RELATION WITH THE PRODUCTION/SALE. AFTER EXAMINATION OF THE FACTS REL ATING TO THE CASE AND THE DOCUMENTS FILED BY THE AR INCLUDING THE REPLY F ILED BEFORE THE AO DURING ASSESSMENT, THE CONTENTION OF THE ASSESSEE A PPEARS ACCEPTABLE THAT THE AO WAS NOT CORRECT IN REJECTING THE BOOKS WITHO UT POINTING OUT SPECIFIC DEFECTS, ONLY ON THE BASIS OF FALL IN GP. THEREFORE, THE ACTION OF THE AO IS NOT FOUND SUSTAINABLE AS PER LAW. THE REJECTI ON OF THE BOOKS IS THEREFORE, HELD UNJUSTIFIED AND THE RESULTANT ADDIT ION, OF RS. 35,24,925/- BY APPLYING GP RATE @37% IS ACCORDINGLY DELETED. 4. AFTER CONSIDERING RIVAL SUBMISSIONS, WE DO NOT F IND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THERE IS ONLY SMALL DECREASE IN THE GROSS PROFIT RA TE AS COMPARED TO THE EARLIER YEAR. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT SUPPORTED BY PURCHASE AND SALE BILLS AND VOUCHERS OF EXPENSES. NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN MAINTENAN CE OF THE BOOKS OF ACCOUNT AND VOUCHERS. ALL THE QUANTIT ATIVE DETAILS WERE SUPPLIED TO THE ASSESSING OFFICER. BO OKS ARE AUDITED. NET GROSS PROFIT HAS INCREASED AS AGA INST EARLIER YEAR. IT IS ADMITTED FACT THAT ASSESSEE HA D ALREADY SURRENDERED ADDITIONAL INCOME DURING THE CO URSE OF SEARCH WHICH WAS TOWARDS THE DISCREPANCY FOUND DURING THE COURSE OF SEARCH AND FOR FALL IN GP WHIC H WERE MORE THAN SUFFICIENT TO MEET THE ABOVE ADDITIO N. SINCE NO SPECIFIC DEFECTS HAVE BEEN POINTED OUT IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT, THEREFORE, 5 ASSESSING OFFICER WAS NOT JUSTIFIED IN ENHANCING TH E PROFIT RATE OF THE ASSESSEE FOR THE PURPOSE OF MAKI NG THE ADDITION. THE LD. CIT(APPEALS) AFTER PROPERLY ANAL YZING THE FACTS AND MATERIAL ON RECORD, CORRECTLY DELETED THE ADDITION. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 5. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( ANNAPURNA GUPTA) (BHAVNESH S AINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 ST MARCH,2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD