Navnidhi Specific Family Trust, Mehsana V. The ACIT.,Mehsana Circle, Mehsana

ITA 742/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2329 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 06-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Section: 234B; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER DATE OF HEARING : 05/01/2011 DRAFTED ON: 0 7/01/2011 ITA NO.742/AHD/2009 ASSESSMENT YEAR : 2005-06 NAVNIDHI SPECIFIC FAMILY TRUST PROP.OF BHOOMI PACKAGING & BHOOMI ENTERPRISE PLOT NOS.280/281/282 GIDC MODHERA ROAD MEHSANA VS. ASST.CIT MEHSANA CIRCLE MEHSANA PAN/GIR NO. : AAATN 0750E ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI S.N. SOPARKAR RESPONDENT BY: SHRI DILEEP KUMAR, SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-GAN DHINAGAR DATED 17/12/2008 PASSED FOR ASSESSMENT YEAR 2005-06 RAISI NG FOLLOWING GROUNDS: 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN POINTS OF LAW A ND FACTS. 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING THE GROUND OF THE APPELLANT THAT THE STATUS OF THE APPELLANT TRUST AS INDIVIDUAL AS AGAINST AOP AS DETERMINED BY THE LD. ASSESSING OFFI CER. ITA NO .742/AHD/2009 NAVNIDHI SPECIFIC FAMILY TRUST VS. ASST.CIT ASST.YEAR - 2005-06 - 2 - 3. IN LAW AD IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING ADDI TION OF RS.9,30,000 BY ESTIMATING ADDITIONAL 4% OF GROSS PR OFIT BY APPLYING SECTION 145 OF I.T. ACT. 4. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DIRECTING TO RE -COMPUTE THE INTEREST U/S.234A, 234B AND 234C OF I.T. ACT WHILE GIVING TO THE EFFECT OF THE APPELLATE ORDER. 2. GROUND NO.1 IS GENERAL IN NATURE NEEDS NO IND EPENDENT ADJUDICATION. 3. APROPOS GROUND NO.2, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE WANTED TO CONTEST THE STATUS OF A TRUST WH ETHER TO BE ASSESSED AS AOP OR AS AN INDIVIDUAL. HOWEVER, AT THE OUTSE T, WE HAVE ENQUIRED THAT WHAT SPECIFIC GRIEVANCE HAD CAUSED DURING THE YEAR UNDER CONSIDERATION TO THIS APPELLANT OR WHETHER THE ASSE SSEE IS AGGRIEVED BY ANY PECUNIARY LOSS CAUSED BY THE STATUS BEING HELD AS AOP BY THE ASSESSING OFFICER, THE LEARNED AUTHORISED REPRESENT ATIVE MR.SOPARKAR HAS MENTIONED THAT THE ISSUE IS LEGAL IN NATURE AND FOR THE ACADEMIC INTEREST THIS HAS TO BE SETTLED. HOWEVER, AFTER H EARING BOTH THE SIDES, WE HAVE NOTICED THAT NO SPECIFIC GRIEVANCE IS MENTIONE D IN RESPECT OF ANY ADDITION HAVING EFFECT OF TAX ON THE ASSESSEE DUE T O THE STATUS, THEREFORE, IN OUR CONSCIENTIOUS VIEW FOR THE YEAR UNDER CONSI DERATION THIS GROUND NEED NOT TO BE ADJUDICATED BEING ONLY TECHNICAL OR ACADEMIC IN NATURE, AS RIGHTLY HELD BY LD.CIT(A). WE HOLD ACCORDINGLY. 3. APROPOS GROUND NO.3, THE FACTS IN BRIEF AS EMER GED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T.ACT DATED ITA NO .742/AHD/2009 NAVNIDHI SPECIFIC FAMILY TRUST VS. ASST.CIT ASST.YEAR - 2005-06 - 3 - 27/12/2007 WERE THAT THE ASSESSEE IS MANUFACTURING AND TRADING BOXES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESSING OFFICER THAT THERE WERE CERTAIN DISCREPAN CIES IN THE BOXES AS MENTIONED IN THE PRODUCTION AND DISPATCH REGISTER A S AGAINST THE BOXES SOLD. THE ASSESSING OFFICER HAS ALSO NOTICED THAT AS PER THE REVISED AUDIT REPORT, AN ANNEXURE WAS ATTACHED WHICH HAS DEPICTED UNDER THE HEAD FINISHED GOODS TOTAL PRODUCTION OF BOXES AT RS.14 ,69,779/-. AS AGAINST THAT, AS PER THE TAX AUDIT REPORT PREVIOUSL Y FILED UNDER THE HEAD FINISHED GOODS SALES WERE SHOWN OF 12,29,951 BOXE S. THIS DISCREPANCY WAS DISCUSSED AND THEN ASSESSING OFFICE R HAS FOUND THAT IF CONSIDER THE WEIGHT OF EACH BOX, THEN PROPORTIONAT ELY THE KRAFT PAPER MUST HAVE BEEN CONSUMED MORE THAT WHAT WAS DISCLOSE D. AFTER RECORDING THESE DISCREPANCIES, THE ASSESSING OFFICER HAS GIVE N A FINDING THAT THE BOOKS OF ACCOUNT WERE NOT ACCURATE, THEREFORE, TO B E REJECTED, HENCE, INVOKED THE PROVISIONS OF SECTION 145(3) OF THE I.T .ACT. WITH THESE OBSERVATIONS, THE ASSESSING OFFICER HAD TAKEN AN OV ERALL VIEW IN RESPECT OF THE GROSS PROFIT DISCLOSED BY THE ASSESSEE AND H AVE NOTICED THAT FOR THE YEAR UNDER CONSIDERATION THE RATE OF GROSS PROFIT W AS LESS THAN THE GROSS PROFIT RATE DISCLOSED FOR THE PAST. HE HAS COMPUTE D THE DIFFERENCE AT 4% AND APPLYING THE SAME ON THE TOTAL SALES, THE ASSES SING OFFICER HAS WORKED OUT THE DIFFERENCE OF THE GROSS PROFIT AT RS .9,30,000/- AS PER THE FOLLOWING OBSERVATIONS:- 4. AS PER THE AUDIT REPORT OF A.Y. 2003-04 AND A.Y . 2004-05, THE GROSS PROFIT RATIO HAS BEEN WORKED OUT AS 18.43 % FOR A.Y. 2003-04 AND 26.52% FOR A.Y. 2004-05. THE AVERAGE O F THE TWO IS 22.47%. THE GROSS PROFIT OF THE YEAR UNDER HAS BEE N CONSIDERED SHOWN BY THE ASSESSEE AS 18.39%. THE GROSS PROFIT HAS BEEN ITA NO .742/AHD/2009 NAVNIDHI SPECIFIC FAMILY TRUST VS. ASST.CIT ASST.YEAR - 2005-06 - 4 - WORKED OUT IN THE TAX AUDIT REPORT FOR SALES AND JO B WORK INCOME BOTH AND AS THE ERROR HAS BEEN FOUND IN RESPECT OF THE FINANCIAL ACCOUNTS OF THE ASSESSEE IN CASE OF ACCOUNTS RELATE D TO JOB WORK INCOME AS WELL AS IN RESPECT OF MANUFACTURING OF AS SESSEES OWN GOODS, THE GROSS PROFIT IN RESPECT OF JOB WORK INCO ME AND SALES TOGETHER IS ESTIMATED AT 22.47%. THE DIFFERENCE IN GROSS PROFIT OF 22.47 18.39 IS APPROX. 4%. THEREFORE, 4% OF TOTA L SALES + JOB WORK INCOME OF RS.2,32,51,781 I.E. ABOUT RS.9,30,00 0/- IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. BEING AGGRIEVED MATTER WAS CARRIED BEFORE THE FIRS T APPELLATE AUTHORITY. 4. BEFORE THE LEARNED CIT(APPEALS), THE ASSESSEE HA S TRIED TO EXPLAIN THE ALLEGED DISCREPANCY BY FILING RECONCILIATION OF QUANTITATIVE DETAILS. IT HAS ALSO BEEN SUBMITTED THAT THE ASSESSEE HAD THREE SEGMENTS OF INCOME AND THOSE WERE STATED TO BE :- (I) SALES OF MANUFACTURING GOODS, (II) SALE OF TRADING GOODS, AND (III)JOB CHARGES. THEREFORE, IT WAS ARGUED THAT ON THE TOTAL TURNOVE R, THE ASSESSING OFFICER HAS WRONGLY ADOPTED THE GROSS PROFIT RATE A ND THE SAME SHOULD HAVE BEEN CONFINED TO THE MANUFACTURING ACTIVITY. THE LEARNED CIT(APPEALS) WAS NOT CONVINCED AND HELD THAT THE AS SESSING OFFICER HAS RIGHTLY WORKED THE DIFFERENCE OF 4% OF GROSS PROFIT AND THE SAME WAS RIGHTLY APPLIED ON THE CONSOLIDATED ACCOUNTS. THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED. NOW THE ASSESSEE I S FURTHER IN APPEAL. ITA NO .742/AHD/2009 NAVNIDHI SPECIFIC FAMILY TRUST VS. ASST.CIT ASST.YEAR - 2005-06 - 5 - 5. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PERU SED THE COMPILATION FILED BEFORE US IN THE LIGHT OF THE ORD ERS OF THE AUTHORITIES BELOW. UNDISPUTEDLY CERTAIN DISCREPANCIES HAVE BEE N NOTED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS. THOSE DISCREPANCIES WERE CONFINED TO THE PRODUCTION OF BO XES. ON ONE HAND, THE ASSESSING OFFICER HAS PINPOINTED THE DISCREPANC Y IN THE KRAFT PAPER CONSUMED BUT ON THE OTHER HAND, HE HAS NOT MADE AN Y ADDITION ON THIS ACCOUNT. NEXT IS THE QUESTION ABOUT THE ADOPTION OF GROSS PROFIT RATE FOR THE YEAR UNDER CONSIDERATION. IT IS TRUE THAT IN T HE PAST THE AVERAGE GROSS PROFIT RATE AS DISCLOSED BY THE ASSESSEE WAS HIGHER THAN THE GROSS PROFIT RATE DISCLOSED FOR THE YEAR UNDER CONSIDERATION. B UT THIS FACT CAN ALSO NOT BE IGNORED THAT FOR THE YEAR UNDER CONSIDERATION, N O SPECIFIC QUERY WAS RAISED IN THIS REGARD. ON PERUSAL OF THE ASSESSMEN T ORDER AS ALSO THE ORDER OF THE LEARNED CIT(APPEALS), IT IS EVIDENT THAT THE ASSESSEE HAS NOT BEEN CONFRONTED WITH THIS DISCREPANCY. ONCE THE BOOKS O F ACCOUNT WERE BEFORE THE REVENUE AUTHORITIES, THEN IT IS EXPECTED TO CHE CK THE CORRECTNESS OF THE PROFIT DISCLOSED FOR THE YEAR UNDER CONSIDERATI ON. SOMEHOW THE ASSESSEE HAS ALSO NOT MADE ANY EFFORT BEFORE THE FI RST APPELLATE AUTHORITY TO PLACE RELEVANT EVIDENCE TO EXPLAIN THE CORRECTNE SS OF THE GROSS PROFIT RATE DISCLOSED FOR THE YEAR UNDER CONSIDERATION. B ECAUSE OF ALL THESE REASONS, WE ARE LEFT WITH NO OPTION BUT TO CONFINE OUR DECISION ON THE ALTERNATE SUBMISSION OF THE LEARNED AUTHORISED REPR ESENTATIVE THAT IF, AT ALL, THE DIFFERENCE OF THE GROSS PROFIT RATE, I.E. 4% OUGHT TO BE APPLIED, THEN IT SHOULD BE CONFINED TO THE MANUFACTURING ACT IVITY WHICH WAS THE SUBJECT MATTER OF CONTROVERSY. MEANING THEREBY THE ASSESSING OFFICER SHOULD HAVE APPLIED THE DIFFERENCE OF 4% OF GROSS PROFIT RATE ONLY IN RESPECT OF SALE OF MANUFACTURING GOODS AND NOT IN RESPECT OF ITA NO .742/AHD/2009 NAVNIDHI SPECIFIC FAMILY TRUST VS. ASST.CIT ASST.YEAR - 2005-06 - 6 - TRADING ACTIVITY OR JOB-WORK DONE BY THE ASSESSEE. WE HOLD ACCORDINGLY AND DIRECT THAT THE DIFFERENCE OF THE GROSS PROFIT OF 4% BE APPLIED ONLY IN RESPECT OF SALE OF MANUFACTURING GOODS STATED TO BE RS.92,94,531/-. WE ORDER ACCORDINGLY. RESULTANTLY THIS GROUND IS PARTL Y ALLOWED. 6. LAST GROUND IS IN RESPECT OF INTEREST U/S.234A, 234B AND 234C OF THE I.T.ACT , WHICH IS CONSEQUENTIAL IN NATURE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13/ 1 /2011. SD/- SD/- ( A.N. PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED / /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-GANDHINAGAR 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD ITA NO .742/AHD/2009 NAVNIDHI SPECIFIC FAMILY TRUST VS. ASST.CIT ASST.YEAR - 2005-06 - 7 - 1. DATE OF DICTATION..05/01/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 07/01/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 13.1.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13.1.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER