M/s ATO Exims Pvt. Ltd., Kanpur V. Dy.Commissioner Of Income Tax-6, Kanpur

ITA 694/LKW/2013

• Counselvise Citation: 69423714 RSA 2013
• Duration Of Justice: 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 27-09-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 694 /LKW/201 3 ASSESSMENT YEAR:200 6 - 07 M/S ATO EXIMS PVT. LTD., 184/167, WAJIDPUR, JAJMAU, KANPUR. PAN:AABCA2271K VS. DCIT - 6, KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY SHRI AJAY KUMAR, D.R. DATE OF HEARING 2 7 /02/2014 DATE OF PRONOUNCEMENT 1 1 /04/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II , KANPUR DATED 2 7 / 06 /2013 FOR ASSESSMENT YEAR 200 6 - 07. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE THE CIT(APPEALS) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ADDITION OF RS.3,00,000/ - MADE BY THE ASSESSING OFFICER ON AD HOC BASIS OUT OF VARIOUS EXPENSES, WHICH ADDITION IS CONTRARY TO FACTS, BAD IN LAW AND BE DELETED. 2. BECAUSE THE ADDITION OF RS.3,00,000/ - OUT OF EXPENSES MADE BY T HE ASSESSING OFFICER AND UPHELD BY THE CIT(APPEALS) RELATING TO GROSS PROFIT RATE IS CONTRARY TO FACTS AND THE PROVISIONS OF LAW AND AS SUCH, ON PROPER APPRAISAL OF THE MATERIAL, SPECIALLY, THE TRADING RESULTS FOR LAST THREE YEARS, IT WOULD BE FOUND THAT T HE ADDITION MADE IS BAD IN LAW AND BE DELETED. 2 3. BECAUSE THE BOOKS OF ACCOUNT AS MAINTAINED, DULY AUDITED AND PRODUCED, HAVE NOT BEEN REJECTED BY THE ASSESSING OFFICER, NOR BY THE CIT(APPEALS), THE PURCHASES AND SALES HAVING BEEN ACCEPTED, THERE WAS NO RE ASONS FOR MAKING AD HOC ADDITION OF RS.3,00,000/ - OUT OF EXPENSES ON ACCOUNT OF LOW GROSS PRO F IT RATE. 4. BECAUSE THE ADDITION MADE IS CONTRARY TO FACTS, BAD IN LAW AND BE DELETED. 5. BECAUSE THE CIT(APPEALS) HAS ERRED ON FACTS AND IN LAW IN ARBITRARILY HOLDING THAT THE APPELLANT IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80 IB OF THE ACT. 6. BECAUSE THE CIT(APPEALS) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE DEDUCTION UNDER SECTION 801B AT RS.4,01,035/ - AS AGAINST RS.7,48,805 CLAIMED. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT GROUND NO. 5 & 6 ARE COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA VS COMMISSIONER OF INCOME - TAX [2009] 317 ITR 218 (SC) . REGARDING GROUND NO. 1 TO 4, IT WAS SUBMITTED THAT AD HOC DISALLOWANCE IS NOT JUSTIFIED. 4. AS AGAINST , THIS LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. GROUND NO. 5 & 6 ARE REJECTED BECAUSE THE ISSUE INVOLVED IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE APEX COURT R ENDERED IN THE CASE OF LIBERTY INDIA (SUPRA). REGARDING GROUND NO. 1 TO 4, WE FIND THAT THE ONLY ISSUE INVOLVED IS MAKING ADDITION OF RS.3,00,000/ - FOR THE REASON THAT THE GROSS PROFIT IS LOW. THIS 3 ISSUE HAS BEEN DECIDED BY CIT(A) AS PER PARA 2 TO 7 OF H IS ORDER AND FOR THE SAKE OF REFERENCE THE SAME ARE REPRODUCED BELOW: 2. IN RESPONSE TO NOTICES ISSUED U/S 250 OF THE I.T. ACT, 1961, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SHRI RAKESH GANG, ADVOCATE CAME AND ATTENDED. THE CASE HAS BEEN DISCUSSED WITH HIM. 3. THE ASSESSEE IS ENGAGED IN MANUFACTURING OF BAGS, SADDLER AND PET ARTICLES AND HAS FILED ITS RETURN OF INCOME ON 29 - 11 - 2006, DECLARING INCOME AT RS.25,24,838/ - . 4. GROUND NO. 1 & 2 RELATE TO ADDITION OF RS.3 LACS ON ACCOUNT OF FALL IN G.P. RATE. THE AO HAS ANALYSED THE G.P. FOR THE LAST THREE YEARS I.E. FOR A.Y. 2004 - 05 @ 36.67%, A.Y. 2005 - 06 @ 34.85% AND FOR A.Y. 206 - 07 @ 29.40%. THEREBY, THERE HAS BEEN SHARP FALL IN G.P. RATE DURING THE YEAR. THE SUBMISSION MADE BY THE ASSESSEE HAS BEEN CONSIDER ED BY THE AO BUT THE SOME HAS NOT BEEN FOUND SATISFACTORILY AS THE INCREASE IN TOTAL SALES, THE INCREASE IN MATERIAL CONSUMED AND OTHER EXPENSES LIKE DISPROPORTIONATE WHICH HAS NOT BEEN EXPLAINED SATISFACTORILY. MOREOVER, THE ASSESSEE HAD ACCEPTED THAT THE EXPENSES AS DEBITED TO MANUFACTURING AND PROFIT & LOSS ACCOUNT ARE NOT FULLY VERIFIABLE E.G. INCREASE IN WAGE, PROCESSING CHARGES ETC. CANNOT BE VERIFIED FROM THE BILLS AND VOUCHERS WHICH HAS NOT BEEN PRODUCED BEFORE THE AO. THE AUDITOR HAS ALSO MARKED IN COLUMN NO.28(B) IN TAX AUDIT REPORT AS UNDER : - 'THE LARGE NUMBER OF ITEMS PRODUCED DOES NOT POSSIBLE FOR THE COMPANY TO PROVIDE QUANTITATIVE DETAILS' 5. AFTER DETAILED DISCUSSION AND VERIFICATION, THE AO HAS NOT FOUND ANY SATISFACTORY EXPLANATION IN SHARP REDUCTION IN G .P. AND THEREBY HAS RIGHTLY REACHED TO THE CONCLUSION OF ADDITION OF RS.3 LACS. DURING THE APPEAL PROCEEDINGS ALSO, THE DETAILS AND EVIDENC ES IN SUPPORT OF THE GROUNDS OF APPEAL ARE NOT PRODUCED. THEREFORE, THE AO HAS RIGHTLY CALCULATED THE PROFIT WITH THE G .P. ADDITION OF RS.3 LACS. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. M C MILAN & COMPANY, 33 ITR 182 - SC, 1958 AND UNITED COMMERCI AL BANK VS CIT 240 ITR 355 (SC), 1999, HAS HELD THAT THE AO MAY DETERMINE THE CORRECT PROFIT OF 4 THE ASSESSEE. THE HON'BLE SUPREME COURT IN THE CASE OF NUND AND SAMONT COMPANY PVT . LTD. VS CI T 78 ITR 268 (SC), 1970, HAS UPHELD THE G .P. ADDITION, ON THE BASIS OF PERFORMANCE OF PAST THREE YEARS. 6. THE HON'BLE SUPREME COURT IN THE CASE OF CST VS. H.M. ESUFA L I, K H.M . ABDULALI, 90 ITR 271 (SC), 1973, HAS HELD THAT THE ESTIMATE MADE BY THE AO CANNOT BE DISTURBED. T H E AO IS THE BEST JUDGE OF THE SITUATION AN D THE HIGH COURT COULD NOT SUBSTITUTE ITS BEST JUDGMENT. 7. ON OVER ALL FACTS AND CIRCUMSTANCES OF THE CASE AND THE JUDICIAL PRONOUNCEMENTS, THE G.P. ADDITION OF RS.3 LACS IS HEREBY CONFIRMED. 6. WE FIND THAT A CLEAR FINDING IS GIVEN BY LEARNED CIT(A) THAT NEITHER BEFORE THE ASSESSING OFFICER NOR BEFORE THE CIT(A), THE ASSESSEE HAS PRODUCED BILLS AND EVIDENCE IN SUPPORT OF THIS CLAIM THAT THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE IS REASONABLE . WE ALSO FIND THAT THIS FINDING IS ALSO GIVEN BY CIT(A) THAT INCREASE IN MATERIAL CONSUMED AND OTHER EXPENSES ARE DISPROPORTIONATE WHICH HAS NOT BEEN EXPLAINED SATISFACTORILY. HE HAS ALSO NOTED THAT THE ASSESSEE HAS ACCEPTED THAT THE EXPENSES AS DEBITED TO MANUFACTURING AND PROFIT & LOSS ACCOUNT ARE NOT FULLY VERIFIABLE E.G. INCREASE IN WAGE, PROCESSING CHARGES ETC. CANNOT BE VERIFIED FROM THE BILLS AND VOUCHERS WHICH HAS NOT BEEN PRODUCED BEFORE THE AO. HE HAS ALSO MENTIONED THAT THE AUDITORS HAVE ALSO GIVEN A REMARK IN COLUMN NO.28(B) IN TAX AUDIT REPORT THAT QUANTITATIVE DETAILS ARE NOT AVAILABLE BECAUSE OF LARGE NUMBER OF ITEMS PRODUCED. WE HAVE TO KEEP IN MIND ALL THESE FACTORS WHILE DECIDING THE ISSUE. WE FIND THAT IT IS NOTED BY THE ASSESSING OF FICER IN THE ASSESSMENT ORDER ON PAGE NO. 2 THAT GROSS PROFIT RATE FOR A.Y. 2004 - 05 WAS 36.67%, FOR A.Y. 2005 - 06 34.85% AS AGAINST @29.40% IN THE PRESENT YEAR. HENCE, WE FIND THAT EVEN COMPARED TO LAST YEAR, THE FALL IN GROSS PROFIT RATE IS TO THE EXTENT OF 5.45%. IF THIS FALL IS APPLIED TO THE SALES IN THE PRESENT YEAR 5 OF RS.352.87 LAC S, THE DISALLOWANCE WILL BE MORE THAN 19 LAC BUT THE ASSESSING OFFICER HAS MADE THE ADDITION OF ONLY RS. 3 LAC. CONSIDERING THESE FACTS, WE ARE OF THE CONSIDERED OPINION TH AT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LEARNED CIT(A). THIS GROUND IS ALSO REJECTED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 1 /04/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR