The ITO, Ward-2(4), Surat V. Shri Fulabhai Ranchhodbhai Rakholia, Surat

ITA 777/AHD/2009

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6972 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 09-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M K PATEL
• Keywords: Gross profit estimation; Sale consideration of property below Jantri Value; Corroborative evidences
• Section: 50C

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.777/AHD/2009 [ASSTT.YEAR : 2005-2006] AND ITA NO.454/AHD/2010 [ASSTT.YEAR : 2006-2007] ITO, WARD-2(4) SURAT. /VS. SHRI FULABHAI RANCHHODBHAI RAKHOLIA PROP. OF M/S. KRISHNA SYNTHETICS SACHIN UDYOGNAGAR SAHAKARI MANDLI GIDC, SACHIN, SURAT. PAN : ADAPR 4167 N ( (( ( -. -. -. -. / APPELLANT) ( (( ( /0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 ) / REVENUE BY : SMT. SONIA KUMAR, SR.DR 4& 1 2 ) / ASSESSEE BY : SHRI M.K. PATEL 5 1 &(* / DATE OF HEARING : 5 TH NOVEMBER, 2014 678 1 &(* / DATE OF PRONOUNCEMENT : 12/12/2014 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE APPEALS BY THE REVENUE FOR THE ASSTT.YEAR 2005-06 AND 2006-07 ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.777/AHD/2009 (ASSTT.YEAR 2005-2006) 2. THE GROUNDS OF THE APPEAL OF THE REVENUE ARE AS UNDER: ITA NO.777/AHD/09 AND 454/AHD/2010 -2- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.11,48,510/- ON ACCOUNT OF LOW GP HOLDING THAT MERELY FOR NON-MAINT ENANCE OF STOCK REGISTER, THE BOOK RESULT DISCLOSED BY THE ASSESSEE CANNOT BE REJECTED IGNORING THE MATERIAL FACTS THAT COUPLED WITH OTHER FACTORS LIKE NON- VERIFIABLE OF PURCHASES U/S.133(6), LOW YIELD OF OI L GAIN, FAILURE ON THE PART OF THE ASSESSEE TO FURNISH CONVINCING EXPL ANATION FOR FALL IN GP AS COMPARED TO IMMEDIATELY EARLIER YEAR, FAILURE ON THE PART OF THE ASSESSEE TO FURNISH SUPPORTING EVIDENCES SO SUB STANTIATE ITS TRADING RESULT, THE ASSESSEE HAS ALSO NOT MAINTAINE D ANY STOCK REGISTER/PRODUCTION RECORDS AND THEREBY A TRUE AND CORRECT PROFIT OF THE ASSESSEE CANNOT BE DEDUCED FROM THE BOOKS OF AC COUNT OF THE ASSESSEE WHICH HAD RIGHTLY LEADS TO THE AO TO REJEC T THE BOOK RESULT DISCLOSED BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.11,48,510/- ON ACCOUNT OF LOW GP ACCEPTING THE BOOK RESULT OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS THAT AFTER REJECTION BOOK RE SULT, THE AO HAD ESTIMATED AND ADOPTED A FAIR AND REASONABLE RATE OF GROSS PROFIT AT AN AVERAGE RATE OF GP DISCLOSED BY THE ASSESSEE IN THE IMMEDIATE EARLIER THREE PREVIOUS YEARS. 3. THE LEARNED DR SUBMITTED THAT THERE IS A FALL IN GP OF THE ASSESSEE FROM 11.24% IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2004-05 TO 6.87% IN THE RELEVANT ASSTT.YEAR 2005-06. SHE SUBM ITTED THAT THE ASSESSEE WAS NOT MAINTAINING ANY STOCK REGISTER, WHO IS ENGA GED IN THE BUSINESS OF JOB PROCESSING OF YARN. SHE SUBMITTED THAT NO CONS UMPTION REGISTER OR MANUFACTURING REGISTER WAS MAINTAINED BY THE ASSESS EE. THE ASSESSEE COULD NOT EXPLAIN THE BASIS FOR VALUATION OF CLOSIN G STOCK BEFORE THE AO. SHE SUBMITTED THAT THE NOTICE ISSUED TO FOUR PARTIE S OF THE ASSESSEE WERE RETUNED UNSERVED, AND THEREFORE, THE TRANSACTION RE CORDED BY THE AO REMAINED UNVERIFIABLE. SHE REFERRED TO THE RELEVAN T PORTIONS OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVE NUE. SHE RELIED ON THE ORDER OF THE AO. ITA NO.777/AHD/09 AND 454/AHD/2010 -3- 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THERE WERE NO DEFECTS IN THE ACCOUNT BOOKS MAINTAINED BY THE ASSE SSEE IN THE REGULAR COURSE OF BUSINESS. HE SUBMITTED THAT THE BOOKS OF ACCOUNTS WERE AUDITED UNDER SECTION 44AB OF THE ACT, AND THERE WAS NO ADV ERSE COMMENT BY THE AUDITOR. HE SUBMITTED THAT THERE WAS NO REQUIREMEN T TO MAINTAIN ANY PRODUCTION OR STOCK REGISTER, SINCE BOTH THE PURCHA SES AND SALES MADE BY THE ASSESSEES WERE OF SAME PRODUCT I.E. YARN AND BO TH WERE RECORDED IN TERMS OF KILOGRAMS. HE SUBMITTED THAT THE ASSESSEE HAS MAINTAINED DAILY RECORDS IN KILOGRAMS OF THE PURCHASE AND SALES OF Y ARN, AND ALSO OIL AND MAINTAINED CORRESPONDING RECORD OF FINISHED GOODS, WASTAGE AND PRODUCTION LOSS DURING THE YEAR. HE SUBMITTED THAT QUANTITATIVE DETAILS OF YARN PRODUCTS AND WASTAGE THEREOF WAS MAINTAINED AN D ALSO THE CONSUMPTION OF OIL. HE SUBMITTED THAT THE ASSESSEE HIMSELF HAS DECLARED BETTER TRADING RESULT IN THE IMMEDIATELY PRECEDING ASSTT.YEAR 2004-05, AS COMPARED TO THE TRADING RESULT IN THE ASSTT.YEAR 20 03-04, WHICH SHOWS THE BONA FIDE OF THE ASSESSEE. HE REFERRED TO THE VARIOUS DOCUM ENTARY EVIDENCES OF THE DIFFERENT PARTIES TO WHOM THE NOTI CE WAS SENT AND REMAINED UNSERVED IN THE COMPILATION AT PAGE NO.36 TO 53 BEFORE THE TRIBUNAL, WHICH SHOWS THE GENUINENESS OF THE TRANSA CTION WITH THESE PARTIES. THE LEARNED COUNSEL FOR THE ASSESSEE REFE RRED TO PAGES 60 AND 61 OF THE COMPILATION BEFORE THE TRIBUNAL, WHEREIN COM PLETE DETAILS OF ITS ACCOUNTS ARE MENTIONED. HE RELIED ON THE ORDER OF THE CIT(A). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND ALSO VARIOUS COPIES OF THE PA PERS FILED BY THE ASSESSEE IN THE COMPILATION BEFORE US. WE FIND TH AT THE ONLY FAULT OF THE ASSESSEE WAS THAT ITS GP WAS FALLEN FROM 11.24% OF THE ASSTT.YEAR 2004- 05 TO 6.87% DURING THE YEAR RELEVANT PERIOD. WE FI ND THAT NO OTHER COGENT DEFECT IN THE AUDITED ACCOUNTS OF THE ASSESSEE COUL D BE POINTED OUT BY THE ITA NO.777/AHD/09 AND 454/AHD/2010 -4- AO. THE ASSESSEE HAS ESTABLISHED BONA FIDE BY SHOWING THAT THE ASSESSEE HAS DECLARED MUCH BETTER GP RATE IN THE ASSTT.YEAR 2004-05 AS COMPARED TO THE EARLIER ASSTT.YEAR 2003-04 ON ITS OWN. FRO M THE PERUSAL OF THE ACCOUNTS SUPPORTED BY INVOICES OF VARIOUS PARTIES F ILED IN THE COMPILATION BY THE ASSESSEE FROM PAGES 36 TO 53 OF DIFFERENT PA RTIES, WE FIND THAT THESE SEEM TO BE GENUINE TRANSACTIONS MADE BY THE ASSESSE E WITH THESE PARTIES, AND THERE IS NO MATERIAL BEFORE US TO DISBELIEVE DO CUMENTARY EVIDENCE PLACED BEFORE THE REVENUE AUTHORITIES. WE HAVE PER USED VARIOUS DETAILS OF THE RAW-MATERIAL, FINISHED PRODUCTS, CLOSING STOCK, MONTH-WISE DETAILS OF MATERIAL PURCHASES, CONSUMPTION AND WASTAGE THEREOF , AND ALSO MONTH- WISE DETAILS OF FINISHED PRODUCTS ETC. AS FILED IN THE COMPILATION BEFORE US, AND NO MISTAKE THEREIN COULD BE POINTED OUT BY THE REVENUE. IN THESE FACTS OF THE CASE, WE ARE OF VIEW THAT THERE IS NO MISTAK E IN THE ORDER OF THE CIT(A) IN HOLDING THAT THERE WAS SIMPLY NO BASIS FO R THE AO TO REJECT THE ASSESSEES BOOKS OF ACCOUNTS, AND THEREFORE, NO GRO UND TO MAKE ANY ADDITION ON ACCOUNT OF LOW GP. ACCORDINGLY, THE OR DER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND GROUNDS OF THE APPEAL O F THE REVENUE ARE DISMISSED. ITA NO.454/AHD/2010 (ASSTT.YEAR 2006-07) 6. THE GROUND NO.1 OF THE APPEAL OF THE REVENUE IS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE B Y THE AO OF RS.13,61,402/- ON ACCOUNT OF LOW DISCLOSURE OF GROS S PROFIT. 7. BOTH THE PARTIES BEFORE US SUBMITTED THAT THE FA CTS OF THE CASE ARE SIMILAR TO THE FACTS OF THE CASE OF THE ASSESSEE IN IMMEDIATELY PRECEDING ASSTT.YEAR 2005-06. WE HAVE CONSIDERED RIVAL SUBMI SSIONS. IN VIEW OF OUR DECISION CONFIRMING THE ORDER OF THE CIT(A) IN HOLDING THAT THE ITA NO.777/AHD/09 AND 454/AHD/2010 -5- ACCOUNT BOOKS OF THE ASSESSEE COULD NOT BE REJECTED , AND NO CASE FOR TRADING ADDITION COULD BE MADE OUT BY THE AO, IN FO REGOING PARAS OF THIS ORDER, WHILE DISPOSING OF THE APPEAL OF THE REVENUE FOR A.Y.2005-06, WE HOLD THAT THERE IS NO MERIT IN THE GROUND NO.1 OF T HE APPEAL OF THE REVENUE, WHICH IS ACCORDINGLY DISMISSED. 8. THE GROUND NO.2 OF THE REVENUE IS AS UNDER: 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE B Y THE AO OF RS.2,32,700/- ON ACCOUNT OF ADDITION U/S.69B OF THE ACT. 9. THE LEARNED DR SUBMITTED THAT THE ADDITION WAS M ADE UNDER SECTION 69B OF THE ACT ON ACCOUNT OF PURCHASE OF A PIECE OF LAND BY THE ASSESSEE AT RS.4,51,000/- WHEREAS THE STAMP VALUATION AUTHORITY HAD VALUED THE PROPERTY AT RS.6,83,700/-, AND THEREFORE, THE DIFFE RENCE OF RS.2,32,700/- WAS RIGHTLY ADDED AS INCOME IN THE HANDS OF THE ASS ESSEE. SHE REFERRED TO THE RELEVANT PORTIONS OF THE ASSESSMENT ORDER IN SU PPORT OF THE CASE OF THE REVENUE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT PROVISION OF SECTION 50C DOES NOT APPLY TO THE CASE OF THE PURCH ASER (ASSESSEE), AS THE AMENDMENT IN LAW HAS COME AFTERWARDS, AND THEREFORE , NO ADDITION ON ACCOUNT OF DIFFERENCE BETWEEN JANTRI VALUE AND APPARENT CONSIDERATION COULD BE MADE. HE RELIED ON THE ORDER OF THE CIT(A ). 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE PROVISION OF S ECTION 50C WERE NOT APPLICABLE TO THE CASE OF THE ASSESSEE-PURCHASER DU RING THE RELEVANT YEAR. HOWEVER, JANTRI VALUE POINTED OUT BY THE AO WAS RS.6,83,700/- AS AG AINST THE PURCHASE PRICE OF RS.4,51,000/- SHOWN BY THE AS SESSEE. THE ASSESSEE HAS NOT LED ANY EVIDENCE TO SHOW THAT THE JANTRI VALUE (VALUE AS PER THE ESTIMATE OF THE STAMP VALUATION AUTHORITY) WAS ON A HIGHER SIDE. IN THE ITA NO.777/AHD/09 AND 454/AHD/2010 -6- ABSENCE OF ANY EVIDENCE PLACED ON RECORD BY THE ASS ESSEE OR THE REVENUE EXCEPT THE JANTRI VALUE, WE ARE OF THE VIEW THAT ENDS OF JUSTICE SHA LL BE MET IF THE ADDITION OF RS.1,00,000/- IS SUSTAINED OUT O F ADDITION OF RS.2,32,700/- MADE BY THE AO, AND ACCORDINGLY, GROU ND NO.2 OF THE REVENUE IS PARTLY ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE FOR TH E ASSTT.YEAR 2005-06 IS DISMISSED AND FOR THE ASSTT.YEAR 2006-07 IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD