ACIT 9(3), MUMBAI V. TELETRONICS DEALING SYSTEMS P.LTD, MUMBAI

ITA 7775/MUM/2011

• Counselvise Citation: 777519914 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 11-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY KOTHARI
• Keywords: Rejection of books of accounts; Capital asset; Business income; Additional evidence
• Section: 142(1); 28; 144

Judgement Text

, , , , , ,, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI , , ! BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.7775/MUM/2011 ASSESSMENT YEAR:2008-09 ACIT - 9(3) , 2 ND FLOOR, ROOM NO.229, AAYKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ' ' ' ' / VS. TELETRONICS DEALI N G SYSTEMS P. LTD. 71, RANWAR WARODA ROAD. BANDRA(W), MUMBAI-400050 ( / REVENUE) ( ' %&' /ASSESSEE) P.A. NO.AAACT2603H ( ) ( ) ( ) ( ) / REVENUE BY SHRI NEIL PHILIP - DR ' %&' ( ) ( ) ( ) ( ) / // / ASSESSEE BY): SHRI VIJAY KOTHARI ' ( '* / / / / DATE OF HEARING : 09/02/2015 + + + + ( '* /DATE OF ORDER 09/02/2015 + + + + / / / / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) : THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 27/09/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITIO N OF RS.39,12,321/- WITH REGARD TO SUPPRESSION OF GROSS PROFIT, DESPITE THE FACT THAT NO QUANTITATIVE DETAILS AS PE R TELETRONICS DEALIG SYSTEMS P. LTD . 2 COL.NO.22 OF FORM 3CD OF THE TAX AUDIT REPORT WERE FURNISHED AT ANY STAGE OF THE ASSESSMENT PROCEEDING S, AND ALSO OVERLOOKING THE FACT THAT THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNTS AND PRIMARY DOCUMENTS TO SUPPORT THE BOOK RESULT DECLARED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE PRO FIT ON SLUMP SALE OF RS.35,00,000 ARISING FROM TRANSFER OF SERVICE BUSINESS DIVISION OF THE ASSESSEE TO M/S. SPECRKERBUS COMMUNICATIONS PVT. LTD., AS LONG TERM CAPITAL GAINS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT THE PRO FIT ON SLUMP SALE OF RS. 35,00,000 ARISING FROM TRANSFER O F SERVICE BUSINESS DIVISION OF THE ASSESSEE CONSISTIN G OF 4 CLIENTS OF THEIR BUSINESS DEVELOPED AND MARKED BY T HE ASSESSEE SINCE MANY YEARS ON A SLUMP SALE BASIS WIT HOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS MERELY TRANSFERRED THE BUSINESS PERTAINING TO CERTAIN CLIE NTS AND THE SAME CANNOT BE SAID TO BE TRANSFER OF ANY UNDER TAKING AND NON-COMPETE CLAUSE ENTERED INTO BY THE ASSESSEE IS NOT FOR TRANSFERRING ANY UNDERTAKING BUT RESTRICTIN G ITSELF FOR CARRYING OUT BUSINESS FOR A PERIOD OF 3 YEARS. 2. AT THE TIME OF HEARING, LD. DR, SHRI NEIL PHILIP BROADLY DEFENDED THE CONCLUSION ARRIVED AT IN THE ASSESSMEN T ORDER FOR WHICH OUR ATTENTION WAS INVITED TO PARA-4 (PAGE-2) OF THE ASSESSMENT ORDER AND PARA-6.2 OF THE IMPUGNED ORDER . 2.1. ON THE OTHER HAND, SHRI VIJAY KOTHARI, LD. COUN SEL FOR THE ASSESSEE DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER BY EXPLAINING THAT NECESSARY DETAILS WERE DUL Y FURNISHED BY THE ASSESSEE FOR WHICH OUR ATTENTION WAS INVITED TO PAGES 1 TO 5 OF THE PAPER BOOK AND ALSO THE ORDER OF THE TR IBUNAL. TELETRONICS DEALIG SYSTEMS P. LTD . 3 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE CRUX OF ARGU MENT ADVANCED ON BEHALF OF THE REVENUE IS THAT QUANTITAT IVE DETAILS WERE NOT FURNISHED BY THE ASSESSEE, AT ANY STAGE/DU RING ASSESSMENT PROCEEDINGS, AND EVENT THE ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS AND PRIMARY DOCUMENTS IN SUPPORT OF BOOK RESULTS AND FURTHER ERRED IN HOLDING THAT T HE PROFIT ON SLUMP SALE ARISING FROM SERVICE BUSINESS DIVISION O F THE ASSESSEE TO M/S SPEAKERBUS COMMUNICATIONS PVT. LTD. AS LONG TERM CAPITAL GAINS. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE COMPANY IS ENGAGED AS DEALER IN BOARDS USED IN COMMUNICATION SYSTEM, DECLARED INCOME OF RS. 4,20,8 9,010/-. THE ASSESSEE FURNISHED THE NECESSARY DETAILS, AS RE QUIRED BY THE ASSESSING OFFICER. NOTICE U/S 142(1) OF THE IN COME TAX ACT, 1961(HEREINAFTER THE ACT), ALONGWITH QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE. THE ASSESSEE VIDE LETTER DATED 02/ 11/2010 AND 08/11/2010 FURNISHED THE REQUISITE INFORMATION. THIS FACTUAL MATRIX EVEN FIND PLACE IN PARA-2 OF THE ASS ESSMENT ORDER ITSELF. FURTHER IN PARA-4 OF THE ASSESSMENT ORDER (ORDER SHEET NOTING DATED 25/10/2010) THE ASSESSEE WAS ASK ED TO FURNISH VARIOUS DETAILS INCLUDING BOOKS OF ACCOUNTS ALONG WITH VOUCHERS AND NOTE ON COMPARISON OF GROSS PROFIT. T HESE DETAILS WERE ALSO FILED. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS DULY TAKEN NOTE OF LETTER DATED 23/11/2010 AND 24/11/2010 (FILED IN THE PAPER BOOK BEFORE HIM) I.E . THE NECESSARY DETAILS WERE DULY FURNISHED BY THE ASSESS EE. EVEN THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THUS, THERE WAS NO JUSTIFICATION TO E STIMATE THE TELETRONICS DEALIG SYSTEMS P. LTD . 4 PROFIT OF THE ASSESSEE, CONSEQUENTLY, WE FIND NO IN FIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) MORE SPECIFICALLY WHEN, FOR ASSESSMENT YE AR 2007-08 IDENTICALLY ESTIMATION/ADDITION WAS MADE BY THE ASS ESSING OFFICER AND THE TRIBUNAL VIDE ORDER DATED 31/03/201 2, DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER:- 3. ISSUE OF REJECTION OF BOOKS OF ACCOUNT AND G.P. ADDITION : THE FIRST ISSUE IS RAISED AS GROUND NUMBER 1 IN TH E ASSESSEES APPEAL AND GP ADDITION AS GROUND NUMBER 1 IN REVENU E APPEAL. BRIEFLY STATED, THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO FURNISH VARIOUS D ETAILS. HOWEVER, HE WAS OF THE OPINION THAT THE ASSESSEE HA S NOT PRODUCED THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS FULLY AND THEREFORE, THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNT CANNOT BE ACCEPTED AND INVOKING THE PROVISIONS OF SECTION 145(3) OF TH E INCOME TAX ACT, PROCEEDED TO ESTIMATE THE GP. VIDE PARA 6 OF T HE ASSESSMENT ORDER HE NOTICED THAT THE ASSESSEES GP IN EARLIER YEAR WAS AT 47.51%, WHEREAS IN THIS YEAR IT WAS AT 38.11%. THER EFORE, HE ADOPTED THE SAME RATIO. HOWEVER, WHILE DOING SO HE GROSSED UP THE TURNOVER AND ARRIVED AT UNDISCLOSED SALES OF `.2,84 ,89,101/- AND TOOK THAT FIGURE AS ADDITION TO GROSS PROFIT. THE I SSUE WAS CONTESTED BEFORE THE CIT (A). THE ASSESSEE ALSO FILED ADDITIO NAL EVIDENCE BEFORE CIT(A), WHICH WAS SENT TO THE ASSESSING OFFI CER ON REMAND. THE CIT (A) AFTER ADMITTING THE ADDITIONAL EVIDENCE AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, UPHELD THE REJECTION OF BOOKS OF ACCOUNT, BUT DELETED THE GP ADDITION. HIS REASONING FOR TELETRONICS DEALIG SYSTEMS P. LTD . 5 UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT IN PARA 6 OF THE ORDER, IS AS UNDER: 6.I FIND NO MERIT IN THE CONTENTION OF THE APPELLA NT. THE ASSESSING OFFICER RIGHTLY EXERCISED THE POWERS GIVEN UNDER SE CTION 145(3). SECTION 145(3) PROVIDES THAT WHERE THE ASSESSING OF FICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF ACCOUNTING PRO VIDED IN SUB- SECTION 91) OR ACCOUNTING STANDARDS AS NOTIFIED IN SUB-SECTION 92), HAVE NOT REGULARLY BEEN FOLLOWED BY THE ASSESSEE, T HE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVID ED IN SECTION.144. IT IS TRUE THAT THE ACCOUNTS REGULARLY MAINTAINED BY AN ASSESSEE IN THE COURSE OF BUSINESS ARE NORMALLY TAK EN AS CORRECT, UNLESS THERE ARE COGENT REASONS TO INDICATE THAT TH EY ARE NOT RELIABLE. IT IS BASICALLY A QUESTION OF FACT TO BE DECIDED ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE INSTANT CASE , THE APPELLANT DID NOT FURNISH THE QUANTITATIVE DETAILS OF THE STO CK, PURCHASES AND SALES APART FROM NOT PRODUCING THE BOOKS OF ACCOUNT IN ORDER TO VERIFY THEM. EVEN THOUGH THE FORM 3CD REPORT SHOWED THAT THE QUANTITATIVE DETAILS WERE GIVEN IN ANNEXURE E TO THE REPORT, NO SUCH ANNEXURE WAS FILED BEFORE THE ASSESSING OFFICE R NOR HAS IT BEEN FILED EVEN IN THE ADDITIONAL EVIDENCES. HOWEVER, TH E LEDGER ACCOUNTS OF VARIOUS ITEMS SHOWING STOCK AND OTHER DETAILS HA VE BEEN FURNISHED ONLY THROUGH THE ADDITIONAL EVIDENCE BEFO RE ME. IN THE ABSENCE OF STOCK DETAILS BOTH QUANTITATIVE AND QUAL ITATIVE WITH THEIR MOVEMENT AND FURTHER WITHOUT PRODUCING THE SUPPORTI NG BOOKS OF ACCOUNT IT WAS NOT POSSIBLE FOR THE ASSESSING OFFIC ER TO SATISFY HIMSELF WITH THE CORRECTNESS OF THE PROFIT SHOWN IN THE RETURN. IT WAS NOT POSSIBLE FOR HIM TO KNOW WHETHER THE APPELLANT HAD MAINTAINED AND KEPT DAY TO DAY QUANTITATIVE DETAILS/STOCK REGI STER FOR THE GOODS MANUFACTURED AND TRADED BY IT. THERE WAS ALSO NO WA Y TO VERIFY THE BASIS OF THE VALUATION OF THE CLOSING STOCK SHOWN B Y THE ASSESSEE. IN TELETRONICS DEALIG SYSTEMS P. LTD . 6 MY OPINION, NO ASSESSMENT WOULD BE COMPLETE IF THE BOOKS OF ACCOUNT ARE NOT PHYSICALLY SEEN, EXAMINED AND VERIF IED WITH REFERENCE TO REPORTS, DOCUMENTS, EVIDENCES RELIED U PON TO SUPPORT THE INCOME RETURNED. THE INCOME RETURNED CANNOT BE ACCEPTED UNLESS IT IS SHOWN THAT IT IS IN CONFORMITY WITH TH E BOOKS OF ACCOUNT MAINTAINED. IN THIS VIEW OF THE MATTER, IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER TO ACCEPT THE PROFITS SHOWN BY TH E APPELLANT. PROVISIONS OF SECTION 145(3) ARE CLEARLY ATTRACTED TO THIS CASE AND THE ASSESSING OFFICER RIGHTLY REJECTED TO BOOKS OF ACCOUNT AND RESORTED TO THE ASSESSMENT IN THE MANNER PROVIDED U NDER SECTION 144 OF THE ACT. I, THEREFORE, UPHOLD THE ASSESSMENT . THE DELETION OF GP ADDITION WAS CONSIDERED AS UNDER : 10. I FIND MERIT IN THE CONTENTION OF THE APPELLAN T. THE RELEVANT DATA GIVEN ABOVE ARE NOT IN DISPUTE. IN MY OPINION, THE GP RATE OF LAST YEAR IS NO MATCH WHEN THE TURNOVER OF THE CURR ENT YEAR HAS GONE UP FIVE TIMES BY RS.12.8 CRORES AS COMPARED TO LAST YEAR. I AGREE WITH THE APPELLANT THAT THE GP REDUCES WHEN T URNOVER INCREASES. NOT ONLY THIS, THERE IS FIVEFOLD INCREAS E IN QUANTUM OF NET PROFIT AS WELL FROM RS.1.19 CRORES LAST YEAR TO RS.5.48 CRORES THIS YEAR. IT WOULD, THEREFORE, BE NOT REASONABLE T O DISTURB THE GROSS PROFIT RATIO OF THE CURRENT YEAR. I, THEREFOR E, DELETE THE ADDITION MADE ON THIS ACCOUNT OF RS.2,84,89,101/-. SINCE THESE ISSUES ARE INTER-RELATED, THE ARGUMENT S OF THE LEARNED COUNSEL AND THE LEARNED DEPARTMENTAL REPRESENTATIVE WERE CONSIDERED. WE FIND THAT THERE IS NO REASON TO REJE CT THE BOOKS OF ACCOUNT AS WAS DONE BY THE ASSESSING OFFICER AND CO NFIRMED BY THE CIT (A). THERE IS NO DISCUSSION AT ALL WHY THE BOOK S OF ACCOUNT ARE NOT COMPLETE AND CORRECT. THE ASSESSEE HAS FURNISHE D LOT OF DETAILS BEFORE ASSESSING OFFICER AND AS ADDITIONAL EVIDENCE FURNISHED FURTHER DETAILS ASKED BY AO BEFORE THE CIT (A) WHIC H WERE SENT ON REMAND TO THE ASSESSING OFFICER. THERE IS NO WHISPE R ABOUT TELETRONICS DEALIG SYSTEMS P. LTD . 7 ACCOUNTING METHOD OR WHY INCOMES CANNOT BE COMPUTED ON THE BASIS OF BOOKS OR ANY PERCEPTIBLE REASONS FOR REJEC TING THE BOOKS OF ACCOUNT. JUST BECAUSE QUANTITATIVE DETAILS ARE NOT ENCLOSED WITH THE REPORTS AND A STOCK REGISTER IN THE REQUIRED SENSE WAS NOT MAINTAINED, THE BOOKS OF ACCOUNT CANNOT BE REJECTED . AS SEEN FROM THE ORDERS OF THE CIT (A), THE ASSESSEE HAS FURNISH ED LEDGER ACCOUNTS OF VARIOUS ITEMS AND IT WAS SUBMITTED THAT THE ASSESSEE PURCHASES AND SELLS THEM BY LOTS AND LEDGER ACCOUNT DO INDICATE BOTH THE QUANTITY AND THE VALUE OF THE ITEMS TRADED BY THE ASSESSEE AND THEREFORE, NO SEPARATE QUANTITATIVE DETAILS OR STOCK REGISTER WAS NECESSARY TO BE MAINTAINED. THE ASPECTS ON WHIC H THE CIT (A) CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT ARE NOT MATERIAL IN THE SENSE THAT THE ASSESSEE HAD COMPLETE CONTROL OVER T HE STOCK INVENTORY AND DID MAINTAIN LEDGER ACCOUNT WITH QUAN TITATIVE DETAILS. THE ASSESSING OFFICER HAS NOT EVEN ATTEMPT ED TO EXAMINE OR CORELATE THE CLOSING STOCK WITH THE STOCKS AVAIL ABLE IN THE REGISTER AND ITS VALUATION. ON EXAMINATION OF THE D ATA FURNISHED BEFORE THE AUTHORITIES AND ON THE SUBMISSIONS, WE A RE OF THE OPINION THAT THERE IS NO NECESSITY TO REJECT THE BO OKS OF ACCOUNT WHEN THE ASSESSEE HAD MAINTAINED BOOKS OF ACCOUNT A CCORDING TO THE PRESCRIBED PROCEDURE AND THE BOOKS OF ACCOUNT W ERE ALSO DULY AUDITED. EVEN THOUGH THE ASSESSING OFFICER SUBMITS THAT THE INFORMATION WAS NOT FURNISHED BEFORE HIM AS MENTION ED UNDER SECTION 142(1) AND THE NOTICE DATED 6.11.2009, ASSE SSEES COUNSEL ARGUED THAT MOST OF THE DATA WAS FURNISHED AND WHAT EVER BALANCE WAS LEFT, WAS FURNISHED BY WAY OF ADDITIONAL EVIDEN CE BEFORE THE CIT (A). IT WAS FURTHER SEEN THAT VARIOUS ASSESSING OFFICERS HAVE ISSUED NOTICES TO THE ASSESSEE. THE DY. CIT, 9(3) I SSUED NOTICE UNDER SECTION 143(2) ON 15.9.2008 WHICH WAS THE STA TUTORY NOTICE TELETRONICS DEALIG SYSTEMS P. LTD . 8 FOR SCRUTINY, ISSUED WITHIN ONE YEAR OF FILING THE RETURN. AFTERWARDS NO PROCEEDINGS WERE INITIATED TILL 17.7.2009 WHEREI N THE ACIT, 9(3) HAS ISSUED NOTICE UNDER SECTION 142(1). SUBSEQUENTL Y, ADD.CIT RANGE-3 HAS ISSUED NOTICE ON 4.8.2009. THERE WAS RE SPONSE TO VARIOUS POSTINGS SUBSEQUENTLY AND ON HEARING ON 8.1 2.2009, THE AUTHORIZED REPRESENTATIVE WAS CALLED UPON TO FURNIS H FURTHER DETAILS BY 9.12.2009. SINCE THE PROCEEDINGS CONCLUD ED LATE IN THE EVENING ON 8.12.2009, THE ASSESSEE COULD COMPILE VA RIOUS DETAILS TRIED TO FURNISH THE SAME ON 10.12.2009, WHICH ACCO RDING TO THE AFFIDAVIT ON RECORD, WAS REJECTED BY THE ASSESSING OFFICER. EVEN THOUGH THE ASSESSING OFFICER STATED TO HAVE REJECTE D SUCH INFORMATION, THE ORDER WAS PASSED ON 16.12.2009 REJ ECTING THE BOOKS OF ACCOUNT ON THE REASON THAT INFORMATION CAL LED FOR WAS NOT FURNISHED. THE ASSESSEE HAD NO OTHER OPTION THAN TO FILE THEM AS ADDITIONAL EVIDENCE BEFORE THE CIT (A) WITH AN AFFI DAVIT OF WHAT TRANSPIRED BEFORE THE ASSESSING OFFICER ON 8.12.200 9 AND 10.12.2009 AND THE CIT DID ADMIT THE ADDITIONAL EVI DENCE AND SENT INFORMATION ON REMAND. KEEPING THESE FACTS IN MIND AND ALSO NOTICING THAT THE ASSESSEE WAS ABLE TO FURNISH ALL THE INFORMATION WHATEVER WAS REQUIRED BY THE ASSESSING OFFICER, WE ARE OF THE OPINION THAT THERE IS NO NEED TO REJECT THE BOOKS O F ACCOUNT. 4. THE PROVISIONS OF 145(3) CAN ONLY BE INVOKED IN THE FOLLOWING CONDITIONS. SECTION.145(3): (3) WHERE THE ASSESSING OFFICER IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE, OR WHERE THE METHOD OF AC COUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB-SECTION (2), HAVE NOT BEEN REGUL ARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVIDED IN SECTION 144.] TELETRONICS DEALIG SYSTEMS P. LTD . 9 AS CAN BE SEEN FROM THE AUDITED ACCOUNTS AND THE R EPORT OF THE AUDIT IN FORM 3CD AND FURTHER NOTICING THE VOLUMINO US PAPERS ENCLOSED IN THE PAPER BOOK FROM PAGE NOS.1 TO 453, WE ARE OF THE OPINION THAT ASSESSEES BOOKS OF ACCOUNT WERE REJEC TED FOR EXTRANEOUS CONSIDERATION BY THE ASSESSING OFFICER, BUT NOT BASED ON THE PROVISIONS OF LAW. THE REASONING GIVEN BY TH E CIT (A) WHILE UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT CANNOT ALSO BE UPHELD. HE, AFTER REJECTING THE BOOKS OF ACCOUNT, THE ONLY ADDITION MADE BY THE ASSESSING OFFICER IS THE GP ADDITION, WHICH IS THE MATERIAL FOR THE ISSUE UNDER CONSIDERATION, THE ADDITION OF WHIC H WAS DELETED BY THE CIT (A). ACCEPTANCE OR REJECTION OF THE BOOKS O F ACCOUNT DOES NOT REALLY MATTER AS FAR AS THE GP ADDITION IS CONC ERNED. SINCE BOTH THE ASSESSEE IS CONTESTING THE REJECTION OF BO OKS OF ACCOUNT AND THE REVENUE CONTESTING DELETION OF GP ADDITION, OUR CONSIDERED OPINION IS THAT THE REVENUE AUTHORITIES HAVE ERRED IN REJECTING THE BOOKS OF ACCOUNT. THEREFORE, THE ASSE SSEE GROUND IS ALLOWED. 5. AS FAR AS THE GP ADDITION IS CONCERNED, WE ARE OF THE OPINION THAT THE CIT (A) HAS CORRECTLY REJECTED GP ADDITION. EVEN THOUGH THE ORDER WAS BRIEF, THE ENTIRE DETAILS FILE D BEFORE THE CIT (A) DO INDICATE THAT HE HAS CONSIDERED SUBMISSIONS AND DELETED THE ADDITION ON PROPER GROUNDS. THE LEARNED DEPARTMENTA L REPRESENTATIVE MADE EFFORTS TO SUPPORT THE ACTION O F THE ASSESSING OFFICER BUT AFTER CONSIDERING THE ORDER OF THE ASSE SSING OFFICER, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAD N OT CONSIDERED THE FACTS WHILE MAKING THE ADDITION. FIRST OF ALL, REJE CTION OF BOOKS OF ACCOUNT ITSELF WAS NOT CORRECT AND WAS DONE BY NOT GIVING PROPER OPPORTUNITY TO ASSESSEE AND BY REJECTING HIGHHANDED LY, FILING OF INFORMATION ON 10- 12-2009. THE CONTENTS/ AVERMENTS OF AFFIDAVIT TELETRONICS DEALIG SYSTEMS P. LTD . 10 FILED BEFORE CIT(A) WERE NOT CONTROVERTED. THEREFOR E MAKING ADDITION OF GP ITSELF WAS NOT WARRANTED. MOREOVER, THE COMPARISON OF GP ITSELF WAS WRONG. THE ASSESSING OFFICER ARRIV ED AT THE GROSS PROFIT RATIO FOR ASSESSMENT YEAR 2006-07 AT 47.51%. THE ASSESSEE VIDE LETTER DATED 10.12.2009 ADDRESSED TO THE ADD. CIT (WHICH WAS NOT ACCEPTED BY HIM) BUT FILED AS ADDITIONAL EVIDEN CE BEFORE THE CIT (A) SUBMITTED THAT THE OPERATIONAL INCOME EXCLU DING THE OTHER INCOME WILL YIELD ONLY 40.15% GP RATIO IS COMPARED TO 38.62% IN THE CURRENT YEAR. HOWEVER, THE TURNOVER WAS 5 TIMES MORE THAN THE EARLIER YEAR THEREBY THERE IS SOME FALL IN THE GP. SO THE ASSESSING OFFICER COMPARISON OF GP ITSELF WAS WRONG AS HE TOO K IN TO ACCOUNT GROSS INCOME BUT NOT THE OPERATIONAL PROFITS OF THE ASSESSEE. THE OTHER INCOMES WHICH ALSO WERE THERE IN THE PROFIT & LOSS A/C WERE NOT EXCLUDED BY THE ASSESSING OFFICER. THEREFORE, T HE AMOUNTS TAKEN FOR COMPARISON ITSELF WAS BASICALLY WRONG. AS SEEN, THE FALL IN GP MARGINALLY WAS DUE TO INCREASE IN TURNOVER. 6. AFTER CONSIDERING THAT COMPARISON FOR GROSS PRO FIT, THE ASSESSING OFFICER WENT ON A DIFFERENT METHOD. ON A TURNOVER OF `100/- IF THE GP IS CONSIDERED AT 47.51%, AND IN AN OTHER YEAR, IF THE GP WAS AT 38.11%, THE GP ADDITION WOULD BE 47.5 % MINUS 38.11% ON `.100/-TURNOVER. HOWEVER, THE ASSESSING O FFICER AS PER HIS OWN WORKING ARRIVED AT THE GP AS UNDISCLOSED S ALES BY GROSSING UP THE TURNOVER WHICH IS NOT CORRECT. THER EFORE, EVEN WHILE WORKING THE ADDITION UNDER GP, INSTEAD OF ADD ING THE DIFFERENCE OF 9.4%, IN GP ON THE TURNOVER WHICH COM ES TO `.1,49,53,929/-, ASSESSING OFFICER MADE AN ADDITION OF `.2,84,89,101/-. THIS ITSELF IS VERY ARBITRARY, EXC ESSIVELY HIGH AND CANNOT BE SUSTAINED. IT IS UNFORTUNATE THAT THE REV ENUE WITHOUT EXAMINING THE BASIC PARAMETERS FOR REJECTION OF THE BOOKS OF TELETRONICS DEALIG SYSTEMS P. LTD . 11 ACCOUNT AND AMOUNT OF GP ADDITION MADE, COMES IN AP PEAL CONTESTING DELETION BY THE CIT (A). THE ORDER OF TH E ASSESSING OFFICER, REJECTING THE BOOKS OF ACCOUNT AND MAKING THE ADDITION UNDER GP IS VERY ARBITRARY AND CAPRICIOUS. THIS ACT ION OF THE ASSESSING OFFICER CANNOT BE JUSTIFIED ON ANY PARAME TERS. THEREFORE, WE HAVE NO HESITATION IN REJECTING THE GROUND OF TH E REVENUE. THE ORDER OF LD. CIT(A) IS CONFIRMED. ACCORDINGLY GROUN D NO.1 OF THE REVENUE IS REJECTED. THE TRIBUNAL DELIBERATED UPON THE ISSUE IN DETAIL EVEN AFTER CONSIDERING THE TOTALITY OF FACTS AND EVEN BE FORE US, THERE IS UNCONTROVERTED FINDING IN THE IMPUGNED ORD ER THAT NECESSARY DETAILS/INFORMATION, AS REQUIRED BY THE ASSESSING OFFICER, WERE DULY FILED BY THE ASSESSEE . THE ASSESSING OFFICER ADOPTED THE FIGURES OF 37.76%, BA SED ON LAST YEAR GROSS PROFIT, WHICH HAS BEEN DECIDED IN F AVOUR OF THE ASSESSEE. THE CURRENT YEAR GORSS PROFIT RATE IS 45.57% WHICH IS HIGHER THAN THE LAST YEAR. EVEN THE ASSESS ING OFFICER DID NOT REJECT BOOKS OF ACCOUNT AS NO DISCR EPANCY WAS FOUND. THE ACCOUNTS OF THE ASSESSEE ARE DULY AU DITED THUS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 3. THE NEXT GROUND PERTAINS TO PROFIT ON SLUMP SALE OF RS.35 LAKH ARISING FROM TRANSFER OF SERVICE BUSINESS DIVI SION OF THE ASSESSEE TO M/S SPEAKERBUS COMMUNICATION PVT. LTD. AS LONG TERM CAPITAL GAIN. BEFORE COMING TO ANY CONCLUSION , WE ARE REPRODUCING HEREUNDER THE RELEVANT FROM THE IMPUGNE D ORDER FOR READY REFERENCE:- TELETRONICS DEALIG SYSTEMS P. LTD . 12 I HAVE PERUSED THE ASSESSMENT ORDER AND WRITTEN SUBMISSIONS OF THE APPELLANT. THE FACT THAT IT IS A SLUMP SALE IS NOT DISPUTED BY WHICH CAPITAL ASSETS HAVE B EEN TRANSFERRED AT A LUMP SUM PRICE. SLUMP SALE IS COV ERED UNDER THE PROVISIONS OF SECTION 50B WHICH COMES UND ER THE HEAD CAPITAL GAINS. IN THESE CIRCUMSTANCES, THERE WAS NO REQUIREMENT TO CHANGE THE HEAD OF BUSINESS F ROM CAPITAL GAINS TO BUSINESS INCOME. THE ASSESSIN G OFFICER IN HIS ENTHUSIASM TO CHANGE THE HEAD TO BUS INESS FAILED TO TAKE NOTICE OF PROVISO TO SECTION 28(VA). IT CLEARLY SAYS THAT SUB-CLAUSE(A) DOES NOT APPLY WHERE THE TR ANSFER IS CHARGEABLE UNDER THE HEAD CAPITAL GAINS. THIS EXCLUSIONARY CLAUSE WAS INTRODUCED TO TAKE CARE OF SUCH SLUMP SALE WHICH IS SPECIFICALLY MEANT FOR TAXATION UNDER THE HEAD CAPITAL GAINS. THE ASSESSING OFFICER HAS ERRONEOUSLY APPLIED THE PROVISIONS OF SECTION 28(VA ). THERE IS NO CASE FOR CHANGING THE HEAD. THIS GROUND OF A PPEAL IS ALLOWED IN FAVOUR OF APPELLANT. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, CO NCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD AND THE ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITION, WE NOTE THAT THE ASSESSING OFFICER A SSESSED THE GAIN ARISING OF RS. 35 LAKH WAS ASSESSED AS BUSINE SS INCOME ON THE PLEA THAT THE SLUMP SALE AGREEMENT DATED 16/ 08/2007 PROVIDES FOR A NON-COMPIT CLAUSE (CLAUSE-6), THUS, THE CONSIDERATION WS ASSESSABLE U/S 28 (VA) OF THE ACT. EVEN, THE ASSESSING OFFICER HAS NOT DENIED THAT THE ASSESSEE ENTERED INTO A SLUMP SALE AGREEMENT AND TRANSFERRED ITS SERVICE BUSINESS DIVISION UNDER SLUMP SALE AGREEMENT AND THERE IS A TRANSFER OF TELETRONICS DEALIG SYSTEMS P. LTD . 13 CAPITAL ASSET UNDER THIS AGREEMENT. SLUMP SALE IS COVERED UNDER THE PROVISIONS OF SECTION 50B OF THE ACT, COM ES UNDER THE HEAD, CAPITAL GAINS, THEREFORE, THERE WAS NO REQUIREMENT TO CHANGE THE HEAD OF BUSINESS FROM CAPITAL GAINS TO BUSINESS INCOME WITHOUT CONSIDERING PROVISO TO SE CTION 28(VA), WHICH SAYS THAT SUB-CLAUSE (A) DOES NOT APP LY WHERE THE TRANSFER IS CHARGEABLE UNDER THE HEAD CAPITAL GAIN. WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMIS SIONER OF INCOME TAX (APPEALS), ON THIS ISSUE ALSO. HIS STAN D IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS, THEREFORE , DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDE, AT THE CONCLUSION OF THE HEARING, ON 09/02/2015. SD/ - (RAJENDRA) SD/ - (JOGINDER SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; ,' DATED : 09/02/201 5 F{X~{T? P.S/. '.. + ( .'/ 0/1' + ( .'/ 0/1' + ( .'/ 0/1' + ( .'/ 0/1'/ COPY OF THE ORDER FORWARDED TO : 1. 23 / THE APPELLANT 2. .423 / THE RESPONDENT. 3. 5 ( ) / THE CIT, MUMBAI. 4. 5 / CIT(A)- , MUMBAI 5. /78 .'' , , / DR, ITAT, MUMBAI 6. 89% : / GUARD FILE. +' +' +' +' / BY ORDER, 4/' .' //TRUE COPY// ; ;; ;/ // /< < < < (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI