DCIT, Cir-3(1), Kolkata, Kolkata V. M/s. Darpan Vinimay Pvt. Ltd, Kolkata

ITA 704/KOL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3065 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 10-04-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside

Judgement Text

ITA NO. 704/KOL/2017 A.Y. 2012 -2013 M/S. DARPAN VINIMAY PVT. LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA D BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 704/KOL/2017 ASSESSMENT YEAR: 2012-2013 DEPUTY COMMISSIONER OF INCOME TAX,................. ................APPELLANT CIRCLE-3(1), KOLKATA, AAYAKAR BHAWAN, 4 TH FLOOR, ROOM NO. 19, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. DARPAN VINIMAY PVT. LIMITED,.................. ....................RESPONDENT 1/H/23, RAMESH DUTTA STREET, KOLKATA-700 006 [PAN: AACCD 0992 M] APPEARANCES BY: SHRI SHANKAR HALDER, JCIT, SR. D.R. , FOR THE APPELLANT N O N E, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : MARCH 04, 2019 DATE OF PRONOUNCING THE ORDER : MARCH 04, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ):- THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-12, KOL KATA DATED 27.12.2016 AND THE GROUNDS RAISED THEREIN BY THE RE VENUE READ AS UNDER:- (1) WHETHER IN THE FACTS AND CIRCUMSTANCES AND LA W POINTS OF THE CASE, THE LD. CIT(A) IS JUSTIFIED IN DELETI NG THE ADDITION OF DISALLOWANCE OF EXPENDITURE @ 20% OF MA JOR EXPENSES AMOUNTING TO RS.53,56,168/-. (2) WHETHER IN THE FACTS AND CIRCUMSTANCES AND LAW POINTS OF THE CASE, THE LD. CIT(A) IS JUSTIFIED IN DELETING A DDITION OF SUPPRESSION OF PROFIT FOR RS.73,00,000/-. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF TRADING OF IRON & STEEL ITEMS. THE RETURN OF INCOME FOR THE ITA NO. 704/KOL/2017 A.Y. 2012 -2013 M/S. DARPAN VINIMAY PVT. LIMITED 2 YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.09.2 012 DECLARING TOTAL INCOME OF RS.55,04,320/-. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNT , BILLS AND VOUCHERS FOR THE EXAMINATION OF THE ASSESSING OFFICER. IN TH E ABSENCE OF THE SAID RELEVANT MATERIAL, THE ASSESSING OFFICER TREATED TH E EXPENSES CLAIMED BY THE ASSESSEE UNDER THE MAJOR HEADS AS UNVERIFIABLE AND MADE A DISALLOWANCE OF RS.53,56,168/- BEING 20% OF THE TOT AL MAJOR EXPENSES CLAIMED BY THE ASSESSEE. ON APPEAL, THE LD. CIT(APP EALS) DELETED THE SAID DISALLOWANCE FOR THE FOLLOWING REASONS GIVEN IN PAR AGRAPH NO. 3.2 OF HIS IMPUGNED ORDER:- 3.2. I HAVE PERUSED THE ASSESSMENT ORDER AND ALSO THE SUBMISSIONS OF THE APPELLANT. THE AO HAS DISALLOWED ON ESTIMATE BASIS AN AMOUNT EQUAL TO 20% OF TOTAL EXPE NSES CLAIMED UNDER THE HEADS OF ADVERTISEMENT, LOADING/U NLOADING EXPENSES, MISCELLANEOUS EXPENSES, TRANSPORTATION INWARD/TRANSPORTATION OUTWARD, TRAVELLING EXPENSES, SALES PROMOTION EXPENSES. THE AO STATED THAT SINCE ASSESS EE DID NOT PRODUCE BOOKS OF ACCOUNT, BILLS & VOUCHER ETC., 20% OF MAJOR EXPENSES WERE BEING DISALLOWED. THE ASSESSEE IS A T RADER IN A IRON AND STEEL ITEMS HAVING A TURNOVER OF OVER RS.1 37 CRS. THE APPELLANT IS THUS A VERY BIG BUSINESS HOUSE AND MAI NTAINING RECORDS AND BOOKS OF ACCOUNT AND SUITABLE EVIDENCES FOR ALL EXPENSES INCURRED. SUITABLE EVIDENCE DEPENDS ON VAR IOUS FACTORS LIKE NATURE OF PAYMENT, NATURE OF CLAIMANT, NATURE OF BUSINESSES AND ORGANIZATIONS, THERE IS SUITABLE INT ERNAL CHECK AND CONTROL. BUSINESS IS USUALLY CARRIED ON IN A PR OFESSIONAL MANNER. THERE IS DELEGATION OF POWERS FOR INCURRING OF EXPENDITURE, APPROVAL OF THE SAME AND THEN PAYMENT IS MADE BY AUTHORIZED CASHIERS. I FIND THAT THE ADDITION ON ACCOUNT OF VARIOUS ABOV E HEADS WAS TOTALLY BASED ON SURMISES AND CONJECTURES . THE AO HAS NOT BROUGHT ON RECORD ANY COGENT BASIS AS TO WH Y THESE EXPENDITURES WERE TO BE DISALLOWED. IT IS NOT THE C ASE THE EXPENDITURES WERE CONSIDERED TO BE BOGUS OR ANY SHO RTCOMINGS WERE POINTED OUT TO THE ASSESSEE. THE AO HAS SIMPLY STATED THAT NOTHING WAS PRODUCED. 'THESE ARE AUDITED BOOKS OF A CCOUNTS AND AS PER THE STATEMENTS OF THE APPELLANT, THE ASS ESSEE WAS ALWAYS READY TO SUBMIT AND PRODUCE WHATEVER WAS NEE DED. BUT IT LOOKS LIKE THE AO WAS IN A HURRY AND COMPLETED T HE ASSESSMENT WITHOUT PROPER OPPORTUNITY BEING GIVEN T O THE ASSESSEE. HENCE I DELETE THE DISALLOWANCE MADE BY T HE AO AS IT HAS NO BASIS. ITA NO. 704/KOL/2017 A.Y. 2012 -2013 M/S. DARPAN VINIMAY PVT. LIMITED 3 3. AS NOTED BY THE ASSESSING OFFICER DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, A NET PROFIT OF RS.54.12 LAKHS WAS SHO WN BY THE ASSESSEE ON A TOTAL TURNOVER OF RS.137.39 CRORES GIVING A NET P ROFIT OF ONLY 0.39%. SINCE THE PROFIT SO SHOWN WAS SUBSTANTIALLY LESS TH AN THE NET PROFIT OF 0.93% DECLARED BY THE ASSESSEE IN THE IMMEDIATELY P RECEDING YEAR AND NO BOOKS OF ACCOUNT AND OTHER SUPPORTING DOCUMENTS WER E PRODUCED BY THE ASSESSEE TO JUSTIFY THE NET PROFIT DECLARED DURING THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER HELD THAT THER E WAS A SUPPRESSION OF PROFIT TO THE EXTENT OF RS.0.73 CRORE BY APPLYING T HE NET PROFIT RATE OF 0.93% DECLARED BY THE ASSESSEE IN THE IMMEDIATELY P RECEDING YEAR AND MADE AN ADDITION TO THAT EXTENT TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(APPEALS) DELETED THE SAID ADDIT ION FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 4.2 OF HIS IMPUGNED ORDER:- 4.2. I HAVE PERUSED THE ASSESSMENT ORDER AND ALSO THE SUBMISSIONS OF THE APPELLANT. THE AO HAS SIMPLY STA TED THAT IN THE ASSESSMENT YEAR 2011-12 THE NET PROFIT RATIO OF THE ASSESSEE WAS 0.93%. IF THE SAME PERCENTAGE OF PROFI T IS MAINTAINED THIS YEAR, THE AO STATES THAT THE PROFIT WOULD HAVE BEEN 1.27 CRS. THE ASSESSEE HAS SHOWN A NET PROFIT OF RS.54.12 LACS SO THE AO HAS CALCULATED THAT RS.0.73 CRORE( 1 .27 - 54.12) HAS ESCAPED TAXATION AS NO BUSINESS CAN SURVIVE IN SUCH PROFIT. IT IS ALSO A FACT THAT THE AO HAS DISALLOWED 20% OF SOME EXPENSES WHICH WERE CLAIMED BY THE ASSESSEE AND YET HAS INCREASED THE NET PROFIT RATIO SIMPLY ON THE GROUND THAT NO BUSINESS CAN SURVIVE WITH SUCH LOW PROFIT. IT IS AL SO A FACT THAT THE DEPARTMENT OR RATHER THE SAME ASSESSING OFFICER HAS ACCEPTED THE NET PROFIT 0.2781% RETURNED FOR ASST Y EAR 2013- 14. THE MERE FACT THAT THERE WAS A LESS RATE OF GRO SS PROFIT DECLARED BY AN ASSESSEE AS COMPARED TO THE PREVIOUS YEAR WOULD NOT BY ITSELF BE SUFFICIENT TO JUSTIFY THE AD DITION. IT IS EQUALLY IMPORTANT TO BASE THE ESTIMATION ON SOLID F ACTS. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFECT IN THE ACCOUNTS BOOKS. A LOW PROFIT MARGIN PER SE CAN NEIT HER CONSTITUTE A VALID GROUND FOR REJECTION OF BOOKS NO R FOR ESTIMATION OF PROFIT. THE ASSESSEE HAS SUBMITTED TH AT NET PROFIT VARIES YEAR TO YEAR AND CAN NEVER BE CONSTAN T. A COMPARATIVE CHART WAS SUBMITTED. IN THE CASE OF CIT V. EASTERN COMMERCIAL ENTERPRISES [1994] 210 ITR 103 (CAL.) IT WAS HELD THAT WHERE THE ASSESSEE HAS GIVEN A COMPARATIVE INS TANCE OF GROSS PROFIT RATE, IT IS NECESSARY FOR THE DEPARTME NT TO COME TO A FINDING AS TO THE NORM OF THE GROSS PROFIT ON THE BASIS OF COMPARATIVE CASES. THEREFORE, IT IS THE DUTY OF THE ASSESSING OFFICER TO COUNTER THE COMPARATIVE STATEMENT CITED BY THE ASSESSEE BEFORE HE CAN HAVE THE OPTION TO ESTIMATE THE GROSS ITA NO. 704/KOL/2017 A.Y. 2012 -2013 M/S. DARPAN VINIMAY PVT. LIMITED 4 PROFIT. IT WAS OBSERVED BY HON'BLE COURT IN CASE OF ALUMINIUM INDUSTRIES (P.) LTD. V. CIT [1995] 80 TAXMAN 184 (G AUHATI) THAT ADDITIONS TO THE PROFITS OF THE ASSESSEE MADE SOLELY ON THE GROUND THAT IT WAS LOW WITHOUT GIVING A SPECIFIC FI NDING THAT THE ACCOUNTS OF THE ASSESSEE WERE NOT CORRECT AND C OMPLETE, OR THAT THE INCOME COULD NOT BE PROPERLY DETERMINED AN D DEDUCED FROM THE ACCOUNTING METHOD EMPLOYED BY THE ASSESSEE, IS NOT JUSTIFIED. THEREFORE, I SEE NO BASIS FOR CONCURRING WITH THE FINDINGS OF THE AO AND DELETE THE ADDITION MADE BY THE AO. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS) GIVI NG RELIEF TO THE ASSESSEE ON BOTH THE ISSUES, THE REVENUE HAS PREFER RED THIS APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US FIXED TODAY, I. E. 04.03.2019, NONE HAS APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF T HE FACT THAT THE NOTICE OF THE SAID HEARING WAS SERVED ON THE ASSESSEE THRO UGH THE DEPARTMENT BY AFFIXTURE. IT IS OBSERVED THAT THERE WAS A SIMILAR NON-COMPLIANCE ON THE PART OF THE ASSESSEE WHEN ITS APPEAL WAS FIXED FOR HEARING BEFORE THE TRIBUNAL ON EARLIER SEVEN OCCASIONS. THIS APPEAL OF THE ASSESSEE IS, THEREFORE, BEING DISPOSED OF EX-PARTE QUA THE RESPONDENT ASSESSEE AFTER HEARING THE ARGUMENTS OF THE LD. D.R. AND PERUSING THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE ADDITI ONS ON ACCOUNT OF DISALLOWANCE OF 20% OF THE MAJOR EXPENSES AND THE A LLEGED SUPPRESSION OF PROFIT WERE MADE BY THE ASSESSING OFFICER FOR THE F AILURE OF THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER RELEVANT DOCUMENTARY EVIDENCE IN THE FORM OF BILLS, VOUCHERS, ETC. IN OR DER TO ENABLE THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESS EE FOR THE MAJOR EXPENSES AND SUBSTANTIAL FALL IN THE NET PROFIT AS DECLARED FOR THE YEAR UNDER CONSIDERATION AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR. AS RIGHTLY CONTENDED BY THE LD. D.R., IT APPEARS THAT THIS VITAL ASPECT, HOWEVER, WAS OVERLOOKED BY THE LD. CIT(APPEALS) WHI LE DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER BY WAY OF D ISALLOWANCE OUT OF MAJOR EXPENSES. THE LD. CIT(APPEALS) HELD THAT THE ASSESSEE WAS A VERY ITA NO. 704/KOL/2017 A.Y. 2012 -2013 M/S. DARPAN VINIMAY PVT. LIMITED 5 BIG BUSINESS HOUSE AND WAS MAINTAINING THE BOOKS OF ACCOUNT REGULARLY WHICH WERE DULY AUDITED. HE ALSO NOTED THAT THERE W AS A SUITABLE INTERNAL CHECK AND CONTROL. HE, HOWEVER, IGNORED THE VITAL F ACT THAT THE ONUS WAS ON THE ASSESSEE TO SUPPORT AND SUBSTANTIATE ITS CLA IM FOR THE MAJOR EXPENSES BY PRODUCING THE BOOKS OF ACCOUNT CLAIMED TO BE MAINTAINED REGULARLY ALONG WITH SUPPORTING BILLS AND VOUCHERS AND SINCE THE ASSESSEE HAD FAILED TO DISCHARGE THE SAID ONUS, THE CLAIM MA DE FOR THE SAID EXPENSES REMAINED UNVERIFIABLE BY THE ASSESSING OFF ICER. SIMILARLY THE ADDITION ON ACCOUNT OF SUPPRESSION OF PROFIT WAS MA DE BY THE ASSESSING OFFICER FOR THE FAILURE OF THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER SUPPORTING DOCUMENTS TO JUSTIFY THE SUBSTANTI AL FALL IN THE NET PROFIT DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR. KEEPING IN VIEW THIS SPECIFIC REASON GIVEN BY THE ASSESSING OFFICER FOR MAKING THE IMPUGNED TWO ADDITIONS TO THE TOTAL INCOME OF THE ASSESSEE, THE LD. CIT(APPEALS), IN OUR OPINION, OUGHT TO HAVE DIRECTED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER SUPPORTING DOCUMENTS CLAIMED TO B E MAINTAINED BY THE ASSESSEE AND REMANDED THE MATTER TO THE ASSESSING O FFICER FOR GIVING THE ASSESSING OFFICER AN OPPORTUNITY TO EXAMINE/VERIFY THE SAME. HE WAS ALSO NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUPPRESSION OF PROFIT ON THE GROUND THAT NO DEFECTS WERE POINTED OUT BY THE ASSESSING OFFICER IN THE BOOKS O F ACCOUNT OF THE ASSESSEE AND WITHOUT GIVING THE SPECIFIC FINDING TH AT THE ACCOUNTS OF THE ASSESSEE WERE NOT CORRECT AND COMPLETE OR THE INCOM E COULD NOT BE PROPERLY DETERMINED AND DEDUCED FROM THE ACCOUNTING METHOD EMPLOYED BY THE ASSESSEE. IN OUR OPINION, WHEN THERE WAS A F AILURE ON THE PART OF THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND OT HER RELEVANT RECORDS, THE ASSESSING OFFICER WAS NOT EXPECTED MUCH LESS RE QUIRED TO POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND IT WAS NOT POSSIBLE FOR HIM TO GIVE A FINDING THAT THE ACCOUNTS OF THE ASSESSEE WERE NOT CORRECT AND COMPLETE. KEEPING IN VIEW ALL THESE FAC TS AND CIRCUMSTANCES OF THE CASE, WE CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE TO ITA NO. 704/KOL/2017 A.Y. 2012 -2013 M/S. DARPAN VINIMAY PVT. LIMITED 6 SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT( APPEALS) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WIT H A DIRECTION TO THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER RELEVANT RECORD FOR EXAMINATION/VERIFICATION OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL GIVE PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE SAID BOOKS OF ACCOUNT AND OTHER RECORD AND REFR AME THE ASSESSMENT AFTER EXAMINING/VERIFYING THE SAME. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 4 TH , 2019. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 4 TH DAY OF MARCH, 2019 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), KOLKATA, AAYAKAR BHAWAN, 4 TH FLOOR, ROOM NO. 19, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. DARPAN VINIMAY PVT. LIMITED, 1/H/23, RAMESH DUTTA STREET, KOLKATA-700 006 (3) COMMISSIONER OF INCOME TAX (APPEALS)-12, KOLK ATA, (4) COMMISSIONER OF INCOME TAX , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.