NEW BOMBAY ISPAT UDYOG P. LTD, MUMBAI V. DCIT 10(2), MUMBAI

ITA 761/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49400 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 01-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T T JACOB
• Assessee Lawyers: G C LALKA; T M GOSHER

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI V.DURGA RAO, JM ITA NO.761/MUM/2010 : ASST.YEAR 2004-2005 M/S.NEW BOMBAY ISPAT UDYOG PVT. LTD. C/O.T.M.GOSHER & CO., CAS 12 SHIVAJI FORT CO-OP. HO.SOCIETY LTD. N.S.MANKIKAR MARG, SION (EAST) MUMBAI 400 022. PAN : AAACN1731C. VS. THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 10(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI T.M.GOSHER & G.C.LALKA RESPONDENT BY : SHRI T.T.JACOB O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 16.12.2009 IN RELATI ON TO THE ASSESSMENT YEAR 2004-2005. 2. FIRST GROUND IS AGAINST THE CONF IRMATION OF ADDITION OF RS.3,34,905 ON ACCOUNT OF NON-RECOVERY OF ADVANCE GIVEN TO SUPPLIER OF GOODS. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE WAS ENGAGED IN TH E BUSINESS OF IRON AND STEEL. A SUM OF RS.15 LAKHS WAS GIVEN AS ADVANCE TO M/S.JINDAL STEEL & POWER LIMITED FOR SUPPLY OF SPONGE IRON LUMPS, BEING TH E RAW-MATERIAL OF THE ASSESSEE. 95.62 TONS OF RAW MATERIAL WORTH RS.11,65,095 WAS SUPPLIED TO THE ASSESSEE. THEREAFTER THE RATES WENT DOWN. THE ASS ESSEE REQUESTED THE SUPPLIER TO REDUCE THE RATES FOR THE BALANCE ORDER. THEY DID NOT AGREE A ND THE REMAINING AMOUNT OF RS.3,34,905 WAS FORFEITED FOR WHICH THE ASSE SSEE CLAIMED DEDUCTION IN ITS PROFIT AND LOSS ACCOUNT. THE ASSESSEE WAS CALLED UPON TO ADDUCE EVIDENCE TO SHOW THAT THE PARTY HAD FORFEITED THE ADVANCE GIVEN. AS THE ASSESSEE COULD NOT LEAD ANY DIRECT EVIDENCE, THE ASSESSING OFFICER MADE ADD ITION. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. ITA NO.761/MUM/2010 M/S.NEW BOMBAY ISPAT UDYOG PRIVATE LIMITED. 2 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. IT IS NOT DISPUTED THAT THE AS SESSEE ADVANCED A SUM OF RS.15 LAKHS TO M/S.JINDAL STEEL & POWER LIMITED FOR SUPPL Y OF RAW MATERIAL. RAW MATERIAL WORTH RS.11.65 LAKHS WAS SUPPLIED AND ACCORDING TO THE ASSESSEE THE REMAINING AMOUNT OF RS.3.35 LAKHS WAS FORFEITED BY THE SUPPLIER BECAUSE OF CE RTAIN DISPUTE. THE LEARNED A.R. WAS REQUIRED TO SHOW SOME DIRECT EV IDENCE ABOUT THE FORF EITURE OF THE SAID AMOUNT OF RS.3.35 LAKHS IN THE SHAPE OF SOME COMMUNICATI ON WITH THE SUPPLIER INDICATING THE FORFEITURE OF THE AMOUNT OR THE COPY OF ASSESS EES ACCOUNT IN THEIR BOOKS OF ACCOUNT ETC. THE LE ARNED A.R. SUBMITTED THAT THOUGH THE EVIDENCE WAS THERE, BUT HE WAS NOT IN POSITION TO PRESENT THE SAME INSTANTLY. IT IS CLEAR THAT THE PAYMENT WAS MADE TO THE SUPPLIER FOR THE SU PPLY OF RAW MATERIAL. IF THE AMOUNT IN QUESTION HAS IN FACT BEEN FORFEITED BY THE SUPPLIER, THEN IT WOULD CALL FOR DEDUCTION FROM INCOME AND VICE VERSA. IN OUR CONSIDERED OPINION THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER IS SE T ASIDE AND THE MATTER IS RESTORED TO THE FILE OF A.O. FOR GIVING AN OPPORTUNITY TO THE ASSESSEE FO R LEADING SOME EVIDENCE IN SUPPORT OF FORFEITURE OF RS .3.35 LAKHS. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 4. GROUND NO.2 IS AGAINST THE SUSTENANCE OF ADDITION OF RS.5,24,065 AT THE RATE OF 10% OF EXPENSES CLAIME D UNDER THE HEAD `CARTAGE AND LABOUR CHARGES WHICH WERE INCURRED BY THE ASSES SEE IN CASH. GROUND NO.3 IS AG AINST THE CONFIRMATION OF ADDITION OF RS.5,64,459 BEING 10% OF TH E `CASH PURCHASES. GROUND NO.4 IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS .1,86,288 BEING 10% OF `LABOUR AND PROCESSING CHARGES INCURRED IN CASH. TH E ASSESSING OFFICER MA DE THESE ADDITIONS ON THE GROUND THAT THE ASSESSEE COULD NOT LEAD PROPER EVIDEN CE IN SUPPORT OF THE DEDUCTION. 10% OF THE TOTAL EXPENDITURE UNDER THESE TH REE HEADS WAS DISALLOWED, WHICH CAME TO BE SUSTAINE D IN THE FIRST APPEAL. ITA NO.761/MUM/2010 M/S.NEW BOMBAY ISPAT UDYOG PRIVATE LIMITED. 3 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. ON A SPECIFIC QUERY FROM THE BENC H THE LEARNED A.R. STATED THAT THE GROSS PROFIT RATE IN THIS YEAR WA S 2.59% AS AGAINST THE PRECEDI NG YEARS G.P. AT 5.49%. IT WAS ALSO ACCEPTED THAT ALL THESE THRE E ITEMS UNDER THE HEADS LABOUR CHARGES, PURCHASES AND LABOUR AND PROCESSING CHARGES WERE THE ITEMS DEBITED TO THE MANUFACTURING / TRADING ACCOUNT. THE LEARNE D A.R. EXPLAINED TH AT THE REASON FOR THE DECLINE IN THE G.P. RATE AS THE SUBSTAN TIAL INCREASE IN THE TURNOVER. IT IS OBSERVED THAT THE ASSESSEE DID NOT HAVE ADEQUATE EVIDENCE IN RESPECT OF THE EXPENSES BOOKED BY IT IN ITS BOOKS OF ACCOUNT UNDER THESE THREE HEADS. WHEN WE CONSIDER THE G.P. RATE AT 2.59% IN THIS YEAR AS AGAINST 5.49% IN THE PRECEDING YEAR IT COMES TO LIGHT, THAT THERE IS DRASTIC DECLINE AND AS SUCH THE CHANCES OF BOOKING NON-GENUINE EXPENSES UNDER THESE THREE HEADS CANNOT BE RULED OUT. IF THESE THREE DISALLOWANCES ARE SUSTAINED, STILL THE GROS S PROFIT RATE FOR THIS Y EAR WOULD REMAIN BELOW 3%, WHICH IS MUCH LOWER THAN TH AT OF THE PRECEDING YEAR. IN OUR CONSIDERED OPINION, THE AUTHORITIES WERE JUSTIFIED IN MAKING AND SUSTAINING ALL THESE THREE ADDITIONS. WE, THEREFORE, UPHOLD THE SAME. 6. IN THE RESULT, THE APPEAL IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 8 TH DAY OF JULY, 2011. SD/- SD/- ( V.DURGA RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 8 TH JULY, 2011. DEVDAS*` COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. ITA NO.761/MUM/2010 M/S.NEW BOMBAY ISPAT UDYOG PRIVATE LIMITED. 4 3. THE CIT CONCERNED 4. THE CIT(A) - XXII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.