MASKARA PLASTIC INDUSTRIES, MUMBAI V. ITO 24(2)(4), MUMBAI

ITA 693/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6634 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income; Tax effect
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND , SHRI SANJAY ARORA, ACCOUNTANT MEMBER . / ITA NO.693/MUM/2013 / ASSESSMENT YEAR 2009-10. M/S.MASKARA PLASTIC INDUSTRIES, 302/303, SUNIT APARTMENT, S.V.ROAD, MALAD (W), MUMBAI 400 064. / VS. THE INCOME TAX OFFICER 24(2)(4), ROOM NO.605, BLD.NO.C-13, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI 400 051. ! ./ ' ./ PAN/GIR NO. : AAEFM 8098C ( !# / APPELLANT ) .. ( $%!# / RESPONDENT ) !# & / APPELLANT BY: SHRI HARESH P. SHAH $%!# ' & / RESPONDENT BY : SHRI S.M.KESH KAMAT ' () / DATE OF HEARING : 16/04/2014 * ' () / DATE OF PRONOUNCEMENT : 23/04/2014 + / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-34, MUMBAI DATED 27/11/ 2012 F OR THE ASSESSMENT YEAR 2009-10. 2. TWO GROUNDS HAVE BEEN TAKEN IN THE GROUNDS OF A PPEAL. GROUND NO.1 RELATED TO GRIEVANCE OF THE ASSESSEE AGAINST REJECT ION OF BOOKS OF ACCOUNT UNDER THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 (THE ACT). AT THE . / ITA NO.693/MUM/2013 / ASSESSMENT YEAR 2009-10. 2 TIME OF HEARING LD. AR DID NOT PRESS THIS GROUND, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 2.1 GROUND NO.2, WHICH IS PRESSED IS REPRODUCED BE LOW: 2. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A ) ESTIMATING NET PROFIT @ 3.5% WAS EXCESSIVE / ON HIGHER SIDE LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANT. 2.1 THE LD. CIT(A) HAS NOT CONSIDERED AUDITED RESUL TS REASONABLY (THOUGH MENTIONED ON PAGE 6 PARA 3.2) AS UNDER: A.Y TOTAL SALES GROSS PROFIT NET PROFIT GPM NPM 2009-10 5,33,62,730 77,14,340 7,43,655 14.46% 1.39% 2008-09 3,21,90,004 44,99,621 5,91,655 13.98% 1.84% 2007-08 2,02,33,725 32,52,407 5,05,441 16.07% 2.50% THE ABOVE NET PROFIT /NPM RATE WAS SUBJECT TO DEDU CTION OF INTEREST & REMUNERATION TO PARTNERS WHICH IS ALLOWABLE DEDUCT ION. 2.2 THE LD. CIT(A) ESTIMATED NET PROFIT @ 3.5% HOW EVER ALLOWABLE DEDUCTION FOR INTEREST TO PARTNERS RS.2,01,022/- & REMUNERATION T O PARTNERS RS.2,69,553/- WAS NOT CONSIDERED / ALLOWED. 2.3 THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF RS.50,594 & RS.49,914/-. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANU FACTURING AND RESALE OF PLASTIC GOODS AND DERIVED INCOME FROM THE SAID ACT IVITY. NOTICING VARIOUS DEFECTS IN THE ACCOUNT BOOKS MAINTAINED BY THE ASSE SSEE AND FURTHER ENQUIRES THE AO ARRIVED AT A CONCLUSION THAT THE BOOK RESUL TS COULD NOT BE ACCEPTED. THEREFORE, RELYING UPON THE PROVISIONS OF SECTION 1 45(3), THE AO REJECTED THE BOOKS OF ACCOUNT AND APPLIED 5% NET PROFIT RATE ON THE TURNOVER OF THE ASSESSEE WHICH WAS A SUM OF RS.5,33,62,730/-. THUS, IN THIS MANNER AN ADDITION OF RS.24,10,056.50 WAS CALCULATED IN ADDITION TO NET P ROFIT SHOWN BY THE ASSESSEE AT A SUM OF RS.2,58,080/-. 3.1 AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A) WHO HAS UPHELD THE REJECTION OF BOOKS OF ACCOUNTS. HOWEVER, CONSI DERING THE SUBMISSIONS OF THE ASSESSEE AND RELYING UPON THE NET PROFIT RATE A CCEPTED IN A.Y 2007-08 @ . / ITA NO.693/MUM/2013 / ASSESSMENT YEAR 2009-10. 3 2.5% LD. CIT(A) HAS APPLIED NET PROFIT RATE OF 3.5% AND IN THIS MANNER PART RELIEF WAS GRANTED TO THE ASSESSEE. 4. LD. AR AFTER NARRATING THE FACTS RELYING UPON TH E GROUNDS OF APPEAL IN WHICH FIGURES OF TURNOVER, NET PROFIT RATE ETC. HAV E BEEN GIVEN, SUBMITTED THAT APPROPRIATE RELIEF SHOULD BE GRANTED TO THE ASSESSE E ON THE BASIS OF HISTORY OF THE CASE. HE SUBMITTED THAT FOR A.Y 2007-08 THE AS SESSMENT ORDER IS PASSED UNDER SECTION 143(3) OF THE ACT. 5. ON THE OTHER HAND, IT WAS SUBMITTED BY LD. DR TH AT LD. CIT(A) HAS PASSED A SPEAKING AND REASONABLE ORDER AND ESTIMAT ION MADE BY HIM SHOULD BE UPHELD. 6. BEFORE PROCEEDING FURTHER IT MAY BE MENTIONED HE RE THAT WHEN THE HEARING OF THIS APPEAL TOOK PLACE WE ASKED BOTH TH E PARTIES TO STATE THAT WHETHER OR NOT THE DEPARTMENT HAS ALSO FILED ANY AP PEAL AGAINST THE RELIEF GRANTED BY LD. CIT(A) AND DURING THE COURSE OF DIS CUSSION IT WAS REVEALED THAT THE TAX EFFECT ON THE RELIEF GRANTED BY LD. CIT(A), THE REVENUE MAY NOT BE PREFERRED ANY APPEAL AND IN THIS MANNER WE PROCEED TO DECIDE THE PRESENT APPEAL. IT MAY ALSO BE MENTIONED HERE THAT ONLY GROUND NO.2.1 WAS ARGUED BY LD. AR AND NO SUBMISSIONS, WHATSOEVER, WERE MADE BY LD. AR IN RESPECT OF GROUND NO.2.2 AND 2.3. 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE BOOKS OF ACCOUNT OF THE ASSESSEE W ERE REJECTED ON ACCOUNT OF VARIOUS DEFECTS FOUND BY THE AO. THE ASSESSEE DID NOT CONTEST THE REJECTION OF BOOKS OF ACCOUNT. THEREFORE, IT IS CLEAR THAT BOOK S OF ACCOUNT MAINTAINED BY THE ASSESSEE CANNOT BE RELIED UPON IN ASSESSMENT OF ASSESSEES INCOME. IN SUCH A SITUATION AN ESTIMATE HAS TO BE MADE. EXCE PT MENTIONING THE FIGURES OF PAST TWO YEARS NO MATERIAL HAS BEEN BROUGHT ON R ECORD TO SUGGEST THAT THE . / ITA NO.693/MUM/2013 / ASSESSMENT YEAR 2009-10. 4 APPLICATION OF NET PROFIT RATE 3.5% UPHELD BY LD. CIT(A) WAS IN ANY MANNER INCORRECT. THE AO APPLIED 5% NET PROFIT RATE WHICH HAS BEEN REDUCED TO 3.5%. IN ABSENCE OF ANY CONCRETE MATERIAL SUBMITTED BY THE ASSESSEE TO SUPPORT ITS CASE FOR ACCEPTANCE OF NET PROFIT RATE LOWER THAN 3.5%, WE DECLINE TO INTERFERE IN THE FINDINGS RECORDED BY LD. CIT(A) AND HIS ORDE R ON THIS ASPECT RAISED IN GROUND NO.2.1 IS UPHELD. 8. IT HAS ALREADY BEEN MENTIONED THAT IN RESPECT OF GROUND NO.2.2 AND 2.3 NO ARGUMENTS, WHATSOEVER, WERE SUBMITTED . THEREFO RE, ON THESE ASPECTS ALSO WE DECLINE TO INTERFERE IN THE FINDS RECORDED BY LD . CIT(A) AND THESE GROUNDS ARE ALSO DISMISSED. 9. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL FILE D BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/04/2014 + ' * - ./ 23/04/2014 ' 0 1 SD/- SD/- ( / SANJAY ARORA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; . DATED 23/04/2014 + + + + ' '' ' $(2 $(2 $(2 $(2 32 ( 32 ( 32 ( 32 ( / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 250 $( , , / DR, ITAT, MUMBAI 6. 06 7 / GUARD FILE. + + + + / BY ORDER, %2( $( //TRUE COPY// 8 88 8 / 9 9 9 9 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI