PROOFEX PACKAGING PVT. LTD., Jaipur V. ITO, Alwar

ITA 803/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5221 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 20-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R S DANGUR CIT DHK
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI T.R.MEENA, AM VK;DJ VIHY LA -@ ITA NO. 803/JP/2015 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 M/S PROOFEX PACKAGING PVT. LTD., J-102, INDUSTRIAL AREA, BHIWADI, ALWAR. CUKE VS. I.T.O., WARD 2(3), ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AABCP 1715 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S. DANGUR (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 31/05/2016. MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 06/06/2016. VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 08/09/2015 PASSED BY THE LD. CIT(A), ALWAR FOR THE AS SESSMENT YEAR 2011-12, WHEREIN THE ASSESSEE RAISED FOLLOWING GROUN DS AS UNDER: 1. THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE REJECTION OF THE BOOKS OF ACCOUNT BY APPLYING PROVISIONS OF SECTION 145(3). ITA NO. 803/JP/2015 M/S PROOFEX PACKAGING P LTD. VS ITO 2 1.1 THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE LUMP SUM TRADING ADDITION OF RS. 2,00,000/- TO THE TRADING RESULTS DECLARED BY THE ASSESSEE. 2. THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE LUMP SUM DISALLOWANCE OF RS. 75,000/- OUT OF VARIOUS EXPENSES. 2. THE ASSESSEE FILED RETURN ON 11/9/2011 DECLARING TOTAL INCOME OF RS. 2,66,660/- FOR THE YEAR UNDER CONSIDERATION. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THE ASSESSEE IS A COMPANY AND DEALS IN MANUFACTURING OF EP LINES/SHEETS AND TRADING THEREOF. GROUND NO. 1 OF T HE ASSESSEES APPEAL IS AGAINST UPHOLDING THE REJECTION OF BOOKS OF ACCOUNT, CONFIRMING THE LUMP SUM TRADING ADDITION OF RS. 2,0 0,000/- BY THE LD CIT(A). THE LD ASSESSING OFFICER OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, GROSS PROFIT HAS DECLINED COMPARED T O PRECEDING YEAR, THEREFORE, HE GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE. AFTER CONSIDERING THE ASSESSEES REPLY, THE LD ASSE SSING OFFICER HELD THAT THE ASSESSEE DID NOT MAINTAIN REGISTER FOR RAW MATER IAL USE AND FINISHED GOODS PRODUCED. THERE IS NO DETAILS OF WASTAGE OF RAW MATERIAL. THE ASSESSEE IS IN MANUFACTURING SINCE 1997. AFTER RELY ING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS BRITISH PAINT INDIA LTD. 188 ITA NO. 803/JP/2015 M/S PROOFEX PACKAGING P LTD. VS ITO 3 ITR 44, HE REJECTED THE BOOK RESULT U/S 145(3) OF TH E ACT AND APPLIED G.P. RATE @ 21.43%, WHICH HAS BEEN DISCLOSED IN IMMED IATE PRECEDING YEAR AND ADDITION OF RS. 11,27,839/- WERE MADE IN TH E TRADING ACCOUNT. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A). A FTER CONSIDERING THE ASSESSEES REPLY, HE ALLOWED THE APPEAL PARTLY BY OB SERVING THAT THE SUBMISSION MADE BY THE ASSESSEE AND CLAIMED THAT IT MANUFACTURES EPE LINES AND EPE SHEETS, WHICH WAS SOLD IN THE DOMESTI C MARKET AS WELL AS MADE EXPORT ALSO. THE FINISHED GOODS MANUFACTURED BY THE ASSESSEE COMPANY ARE SUBJECT TO THE LEVY OF EXCISE DUTY AND EXPORT DUTY. THE COMPANY WAS MAINTAINING DAY TO DAY STOCK REGISTER OF THE RAW MATERIAL, FINISHED GOODS AND SCRAP. THE PRICES OF RAW MATERIAL ARE VERIFIABLE, THUS, NO FIXED GP CAN BE ACHIEVED. THEREAFTER, THE ASSESSE E CLAIMED THAT AVERAGE PURCHASE PRICE OF RAW MATERIAL INCREASED BUT SALE PRICE HAS NOT GONE UP PROPORTIONATELY. THE SALES HAD BEEN INCREASE D BY 33%, WHICH IS ALSO ONE OF THE REASON IN DECLINE IN GP RATE. THE BOOKS OF ACCOUNT WERE AUDITED. THE LD ASSESSING OFFICER FAILED TO POIN T OUT SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT. THE LD CIT(A) HELD THAT THE APPELLANT HAD BEEN MAINTAINING RECORD OF PURCHASE, SALES AND STOCK ETC .. THE MANUFACTURING ITA NO. 803/JP/2015 M/S PROOFEX PACKAGING P LTD. VS ITO 4 ACTIVITIES ARE LEVY OF EXCISE DUTY. THE GP RATE DEC LINED DURING THE YEAR UNDER CONSIDERATION IS GOVERNED BY THE MARKET FORCE S. HOWEVER, HE FOUND THAT WITH REGARD TO MANUFACTURING LOSS IN THE PROCESS OF PRODUCTION, THE APPELLANT COULD NOT PRODUCE SUFFICI ENT EVIDENCE SO AS TO JUSTIFY THE DECLINE OF PROFIT, THEREFORE, HE UPHELD THE REJECTION OF BOOKS OF ACCOUNT. HOWEVER, HE HELD THE GP APPLIED BY THE A SSESSING OFFICER I.E. 21.43% IS HIGHER SIDE. THEREFORE, HE CONFIRMED THE LUMP SUM ADDITION OF RS. 2.00 LACS. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS MADE BEFORE T HE LD CIT(A) AND SUBMITTED THAT THE ASSESSEE HAD MAINTAINED DAY TO DAY ACCOUNTS INCLUDING QUANTITATIVE DETAILS OF STOCK, WHICH IS S UBJECT TO AUDIT. THESE BOOKS ARE DULY SUPPORTED WITH BILLS AND VOUCHERS. TH E ASSESSEE HAD SUBMITTED TAX AUDIT REPORT ALONGWITH COMPLETE QUANTI TATIVE DETAILS OF RAW MATERIAL, FINISHED GOODS AND SCRAP. THESE FACTS HAVE BEEN ACCEPTED BY THE LD CIT(A). THE ASSESSEE HAS EXPLAINED THE REAS ONS OF DECLINE OF GP COMPARED TO PRECEDING YEAR. THEREFORE, REJECTION OF BOOKS OF ACCOUNT IS NOT JUSTIFIED. HE RELIED ON THE DECISION IN THE CASE OF DCIT VS BHAWANI SILICATE INDUSTRIES (2016) 236 TAXMAN 596 (RA J). HE FURTHER ITA NO. 803/JP/2015 M/S PROOFEX PACKAGING P LTD. VS ITO 5 ARGUED THAT OVERALL GROSS PROFIT WAS RS. 60,24,661/- AGAINST RS. 54,08,734/- SHOWN IN THE PRECEDING YEAR. THERE WAS A S LIGHT DECLINE IN THE GP RATE. IT IS DUE TO INCREASE IN RAW MATERIAL P RICE AND NOT INCREASE PROPORTIONATELY SALE PRICE OF THE FINISHED GOODS H E FURTHER RELIED ON THE FOLLOWING DECISIONS. (I) MALANI RAMJIVAN JAGANNATH VS. ACIT 207 CTR (RAJ) . 19/319 ITR 120. (II) CIT VS SMT. POONAM RANI (2010) 41 DTR 194 (DEL ). (III) CIT VS. GOTAN LIME KHANIZ UDYOG 256 ITR 243 ( RAJ) THEREFORE, HE PRAYED TO DELETE THE ADDITION CONFIRME D BY THE LD CIT(A). 5. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSEES GP HAS GONE DOWN MORE THAN3% COMPARED TO PRECEDING YEAR. SALES ALSO INCREASED COMPARED TO PRECEDING YE AR BUT THERE IS NO EVIDENCE TO EXPLAIN THE REASONS FOR DECLINE IN GP WI TH EVIDENCES. THERE WAS NO STOCK REGISTER FOR REDUCTION. THE LD AR OF THE ASSESSEE HAS NOT CONTROVERTED THE FINDING GIVEN BY THE LD CIT(A), ACC ORDINGLY, WE CONFIRM ITA NO. 803/JP/2015 M/S PROOFEX PACKAGING P LTD. VS ITO 6 THE REJECTION OF BOOKS U/S 145(3) OF THE ACT. THE LD CIT(A) WAS REASONABLE TO UPHOLD THE LUMP SUM ADDITION OF RS. 2 .00 LACS WHICH GIVES G.P. RATE @ 18.65%, ACCORDINGLY, WE DISMISS THE APPEAL OF ASSESSEE ON THIS GROUND. 7. GROUND NO. 2 OF THE ASSESSEES APPEAL IS AGAINST DISALLOWANCE OF LUMP SUM ADDITION OUT OF VARIOUS EXPENSES. THE LD A SSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS DEBITED VARIOUS EXPE NSES UNDER THE HEADS WAGES AND LABOUR CHARGES, DIWALI EXPENSES, MISC . EXPENSES, STAFF WELFARE EXPENSES, OFFICE EXPENSES, TELEPHONE EXPENSE S, TRAVELLING EXPENSES, VEHICLE RUNNING, INSURANCE, REPAIR AND MA INTENANCE EXPENSES. HE MADE TOTAL DISALLOWANCE OF RS. 2,55,000 /- ON THE BASIS OF SELF MADE VOUCHERS, MADE CASH PAYMENTS AND OTHER DE FECTS POINTED OUT BY THE ASSESSING OFFICER, WHICH WAS CHALLENGED BEFORE THE LD CIT(A), WHO HAD RESTRICTED THE DISALLOWANCE AT RS. 75,000/- B Y OBSERVING THAT THE LD AR HAD NOT CONTROVERTED THE FINDING GIVEN BY THE LD ASSESSING OFFICER. THE LD AR OF THE ASSESSEE HAS ARGUED THAT THE ASSES SEE HAS MADE PROPER ACCOUNTS EXPENSES WISE AND CLAIMED THESE EXPENSES ON THE BASIS OF BILLS AND VOUCHERS. THE EXPENDITURES AR E WHOLLY AND ITA NO. 803/JP/2015 M/S PROOFEX PACKAGING P LTD. VS ITO 7 EXCLUSIVELY INCURRED FOR THE BUSINESS PURPOSES. NO DISALLOWANCE CAN BE MADE JUST FOR THE SAKE OF DISALLOWANCE. HE RELIED ON THE FOLLOWING CASE LAWS: (I) ACIT VS GANPATI ENTERPRISES LTD. (2013) 142 ITD 118 (DELHI)(TRIB). (II) CIT VS ORACLE INDIA (P) LTD. 199 TAXMAN 181 (DE L)(HC) (MAG.) (III) SEASONS CATERING SERVICES (P) LTD. VS. DCIT 43 DTR 397 (DEL)(TRIB). (IV) AUTHUR AND ANDERSON & CO. VS. ACIT (2010 TIOL 4 16 ITAT) THEREFORE, HE PRAYED TO DELETE THE ADDITION. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LD CIT(A). 8. AFTER CONSIDERING BOTH SIDES, THE LD ASSESSING O FFICER HAS NOT POINTED OUT SPECIFIC EXPENSES THAT CLAIM WITHOUT ANY VOUCHERS AND MADE CASH PAYMENT. FURTHER ALL THE BILLS VOUCHERS WE RE PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WHEN THE B OOKS HAVE BEEN REJECTED U/S 145(3) OF THE ACT, NO OTHER DISALLOWANC ES CAN BE MADE UNDER THE VARIOUS HEADS AS HELD BY THE VARIOUS ITAT S AS WELL AS HON'BLE ITA NO. 803/JP/2015 M/S PROOFEX PACKAGING P LTD. VS ITO 8 HIGH COURTS. ACCORDINGLY, WE DELETE THE ADDITION CON FIRMED BY THE LD CIT(A). 9. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/06/2016. SD/- SD/- DQYHKKJR VH-VKJ-EHUK (KUL BHARAT) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06 TH JUNE, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S PROOFEX PACKAGING PVT. LTD., ALWAR . 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD 2(3), ALWAR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 803/JP/2015) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR