SARVESH MERCANTILE P.LTD, MUMBAI V. DCIT 2(3), MUMBAI

ITA 7164/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93207 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPT
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , , BEFORE SHRI A.D. JAIN , JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 7164/MUM/2012 ( / ASSESSMENT YEAR : 2008 - 09 M/S. SARVESH MERCANTILE PVT. LTD., M/S. N.S. VIRANI & CO.C.AS 28, BHANUSHALI BLDG., 35, MINT ROAD, MUMBAI - 400 001 / VS. THE DCIT, 2(3)(OSD), AAYAKAR BHAVAN, MUMBAI - 400 020 ./ ./ PAN/GIR NO. : AAICS 1651C ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI DR. K. SHIVARAM SHRI RAHUL R. SARDA / RESPONDENT BY : SHRI NAVEEN GUPT / DATE OF HEARING : 15 . 0 7 .2015 / DATE OF PRONOUNCEMENT : 15 .0 7 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) - 6, MUMBAI DT. 1.10.2012 PERTAINING TO ASSESSMENT YEAR 2008 - 09. 2. THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO THE REJECTION OF BOOK RESULT AND ESTIMATION OF INCOME @ 3%. 3. THE ASSESSEE IS DEALING IN MACHINERIES, MACHINERY PARTS AND SCRAP ETC. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED THAT THE ITA. NO 7164 /M/201 2 2 ENTIRE PURCHASES OF THE ASSESSEE ARE MADE BY WAY OF SLUMP SALE WITH NO VALUE ASSIGNED TO INDIVIDUAL ITEMS ONE SINGLE P RICE IS PAID FOR ENTIRE BLOCK OF ASSETS. THE AO FURTHER OBSERVED THAT THE ASSESSEE DISMANTLED, SORTED AND SOLD BY PIECES, WEIGHT AND LOTS OF THE SAID BLOCK OF ASSETS. ACCORDING TO THE AO, THE ASSESSEE HAS ESTIMATED THE COST OF SALE . THE AO FURTHER FOUN D THAT THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED IN EARLIER YEAR FINDING THAT THE METHOD OF ESTIMATING COST OF SALE IS NOT ON RATIONALE BASIS. THE AO DECLINED TO ACCEPT THE BOOK RESULTS AND ESTIMATE D THE PROFIT @ 8% OF THE SALES AND MADE AN ADDITION OF RS. 23,43,071/ - . THE AO FURTHER ADDED OTHER INCOME BEING INTEREST INCOME OF RS. 8,09,573/ - . 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) . THE LD. CIT(A) AT PARA 5.2 OF HIS ORDER OBSERVED THAT IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR I.E. A.Y. 2006 - 07, THE ASSESSEE HAS DISCLOSED NET INCOME AT 3% OF THE NET TURNOVER. FOLLOWING THE ACCEPTED RESULTS IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE LD. CIT(A) HELD THAT THE NET PROFIT OF THE ASSESSEE SHOULD BE ASSESSED AT 3% OF THE NET TURNOVER. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE AO HAS NO REASON TO REJECT THE BOOK RESULTS AND ESTIMATE THE PROFIT @ 8%. 7. PER CONTRA, THE LD. DEPART MENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE RELEVANT DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 6396 & 6896/M/2010. A PERUSAL OF THE SAID ORDER OF THE TRIBUNAL SHOWS ITA. NO 7164 /M/201 2 3 THAT THE TRIBUNAL FOUND THE NET PROFIT RATE OF 3% ADOPTED BY THE LD. CIT(A) AS FAIR AND REASONABLE. RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH (SUPRA), WE DECLINE TO INTERFERE WITH THIS FINDING OF THE LD. CIT(A). GROUND NO. 1 IS ACCORDINGLY DISMISSED. 9. GROUND NO. 2 RELATES TO SEPARATELY TAXING INTEREST INCOME OF RS. 8,09,573/ - . 10. THE LD. COUNSEL STRONGLY CONTENDED THAT THE INTEREST OF RS. 8,09,573/ - IS PART OF BUSINESS INCOME WHICH HAS BE EN ESTIMATED @ 3% THEREFORE NO SEPARATE ADDITION IS REQUIRED. 11. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THIS SUBMISSION OF THE C O UNSEL. AN IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN A.Y 2007 - 08 IN ITA NO S . 6396 & 6896/M/2010. AT PARA 12 OF ITS ORDER, THE OBSERVATION OF THE TRIBUNAL READ S AS UNDER: AFTER ESTIMATING THE INCOME OF THE ASSESSEE FROM ITS BUSINESS BY APPLYING A NET PROFIT RATE, OTHER INCOME CREDITED BY THE ASSESSEE TO ITS PROFIT & LOSS ACCOUNT AMOUNTING TO RS.1,73,645/ - WAS SEP ARATELY BROUGHT TO TAX BY THE AO UNDER THE HEAD INCOME FROM OTHER SOURCES. ALTHOUGH THE LEARNED CIT(APPEALS) HAS NOT DEALT WITH THIS ISSUE SEPARATELY IN HIS IMPUGNED ORDER, HE HAS DIRECTED THAT THE INCOME OF THE ASSESSEE SHOULD BE ASSESSED AT 3% OF RS.15 93.27 LAKHS + INTEREST OF RS.23,129/ - SUBJECT TO CERTAIN DIRECTIONS GIVEN IN PARAGRAPH NO. 5.3 OF HIS IMPUGNED ORDER. AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE DETAILS OF OTHER INCOME GIVEN ON P AGE NO.3 OF HIS PAPER BOOK WHICH SHOW THAT OTHER INCOME COMPRISES OF INTEREST RECEIVED OF RS.32,230/ - , REFUND OF ELECTRICITY AMOUNTING TO RS.1,38,941/ - AND SUNDRY BALANCES WRITTEN OFF OF RS.2474/ - . AS THIS ISSUE HAS NOT BEEN PROPERLY EXAMINED EITHER BY TH E AO OR BY THE LEARNED CIT(APPEALS), WE RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION THAT OTHER INCOME TO THE EXTENT FOUND TO BE CONSTITUTED BUSINESS INCOME OF THE ASSESSEE, NO SEPARATE ADDITION FOR THE SAME CAN BE MADE. IF THE SAID INCOME HAS ITA. NO 7164 /M/201 2 4 NO NEXUS WITH THE BUSINESS OF THE ASSESSEE, THE SAME CAN BE BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. ACCORDINGLY, WE DIRECT THE AO TO VERIFY THE EXACT NATURE OF EACH ITEM OF OTHER INCOME EARNED BY THE ASSESSEE AND DECIDE THIS ISSUE ACCO RDINGLY. GROUND NO. 4 OF THE REVENUES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. CONSIDERING THE FACTS OF THE PRESENT CASE, IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL (SUPRA), WE FIND THAT DURING THE YEAR UNDER CONSIDERATION , THE ASSESSEE HAS RECEIVED INTEREST INCOME OF RS. 8,09,773/ - FROM M/S. HIMALAYA TRADING CORPN. 12. WE HAVE CAREFULLY GONE THROUGH THE BALANCE SHEET OF THE ASSESSEE AND THE PROFIT AND LOSS ACCOUNT EX HIBIT ED FROM PAGE - 2 TO 10 OF THE PAPER BOOK. WE COUL D NOT FIND ANY NEXUS BETWEEN THIS INTEREST INCOME AND THE BUSINESS OF THE ASSESSEE. THE FINDING OF THE TRIBUNAL IN EARLIER YEAR IS VERY CLEAR WHEN IT SAYS THAT IF THE SAID INCOME HAS NO NEXUS WITH THE BUSINESS OF THE ASSESSEE, THE SAME CAN BE BROUGHT TO T AX UNDER THE HEAD INCOME FROM OTHER SOURCES. 12.1. AS MENTIONED ELSEWHERE, WE FAILED TO FIND ANY NEXUS OF INTEREST INCOME WITH THE BUSINESS OF THE ASSESSEE. WE CONFIRM THE FINDINGS TREATING THE SAME AS INCOME FROM OTHER SOURCES. GROUND NO. 2 IS ACCORD INGLY DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. OR DER PRONOUNCED IN THE OPEN COURT ON 15TH JU LY , 2015 SD/ - SD/ - ( A.D. JAIN ) (N.K. BILLAIYA) /JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 15 TH JU LY , 2015 . . ./ RJ , SR. PS ITA. NO 7164 /M/201 2 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI