ITO 25(2)(2), MUMBAI V. YOGESH R. SANCHETI, MUMBAI

ITA 8053/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3850 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 06-03-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 23-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNALMUMBAI BENCHES G , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. : 8053/MUM/2010 ASSESSMENT YEAR : 2007-08 ASSESSEE BY : NONE REVENUE B Y : MR. D. K. SINHA / DATE OF HEARING 16.05.2013 / DATE OF ORDER 16.05.2013 O R D E R PER AMIT SHUKLA, J.M. THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AGAINS T ORDER DATED 9.9.2010 PASSED BY CIT(APPEALS)-35, MUMBAI FOR THE QUANTUM O F ASSESSMENT PASSED UNDER SECTION 143(3), FOR THE ASSESSMENT YEAR 2007- 08 ON THE FOLLOWING GROUNDS OF APPEAL:- I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ESTIMAT E THE GROSS PROFIT AT 0.40% OF THE TOTAL SALES INSTEAD OF 1% AS ADOPTED BY ITO-25(2)(2), C-11, ROOM NO. 106, PRATYAKSHA KAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA(EAST), MUMBAI-400051 SHRI YOGESH R. SANCHETI PRATAMESH TOWER, 1603, 16 TH FLOOR, NEW LINK ROAD, OPP. DON BOSCO SCHOOL, BORIVALI(W), MUMBAI-400092 PAN NO: AMEPS6566L (APPELLANT) VS. (RESPONDENT) 2 ITA NO. 8053/M/2010 A.Y 2007-08 SHRI YOGESH R SANCHETI THE AO WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT COMPLETE AND CO RRECT. II) THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUNDS TO BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2. THE ASSESSEE IS AN INDIVIDUAL AND HE ENGAGED IN THE BUSINESS OF TRADING OF DIAMOND AND GOLD UNDER THE NAME AND STYLE OF M/S RATAN EXPORTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DECLARED A SALES TURN OVER OF RS.66,84 ,61,999/- AND PURCHASES AT RS.65,84,27,144/-. THE ASSESSEE WAS REQUIRED TO FUR NISH THE QUANTITATIVE DETAILS OF PURCHASES AND SALES TOGETHER WITH THE LIST OF SA LES AND PURCHASE. IN RESPONSE THE ASSESSEE SUBMITTED SALES/PURCHASE REGISTER WITH OUT THE QUANTITATIVE DETAILS AND SUBMITTED FEW COPIES OF SALES AND PURCHASE BILL . THE ASSESSING OFFICER FURTHER OBSERVED THAT SCHEDULE- E OF FORM NO. 3CD G IVING THE QUANTITATIVE DETAILS WAS NOT ATTACHED TO THE AUDIT REPORT. HE FU RTHER REQUIRED THE ASSESSEE TO FURNISH THE CONFIRMATIONS OF SUNDRY CREDITORS AND S UNDRY DEBTORS, HOWEVER THE ASSESSEE FURNISHED A COPY OF CONFIRMATIONS OF SUNDR Y CREDITORS ONLY WITH REGARD TO FIVE PARTIES. THUS, HE CAME TO THE CONCLUSION TH AT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE SUNDRY CREDITORS. THE ASSESSEE ALSO FURNISHED THE REASONS FOR FALL OF GROSS PROFIT FROM 0.37% TO 0.25 % AS COMPARED TO IMMEDIATE PRECEDING YEAR. HOWEVER, THIS EXPLANATION OF THE AS SESSEE WAS ALSO NOT ACCEPTED. ACCORDINGLY THE ASSESSING OFFICER ESTIMAT ED THE GROSS PROFIT MARGIN OF THE ASSESSEE @ 1% OF THE TOTAL SALES TURNOVER OF RS.66,84,61,999/- WHICH WORKS OUT TO RS.66,84,620/- AND ADDED THE SAME TO T HE INCOME OF THE ASSESSEE. 3. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT H E HAS BEEN MAINTAINING REGULAR BOOKS OF ACCOUNTS WHICH WERE SUBJECT TO AUD IT UNDER SECTION 44AB AND 3 ITA NO. 8053/M/2010 A.Y 2007-08 SHRI YOGESH R SANCHETI SALE AND PURCHASE DETAILS ALONGWITH THE BILLS WERE PRODUCED BEFORE THE AO, WHICH HAS BEEN BRUSHED ASIDE. REGARDING CONFIRMATIO N FROM OF THE SUNDRY CREDITORS, IT WAS SUBMITTED THAT THE AO HAD GIVEN V ERY SHORT TIME TO FILE THE CONFIRMATION AND WITHIN THE TIME ALLOWED IT WAS NOT POSSIBLE TO FILE ALL THE CONFIRMATIONS. WITHOUT PREJUDICE IT WAS SUBMITTED T HAT THE AO HAS ESTIMATED THE G.P AT 1% AND ADDED THE ENTIRE SUM TO THE TOTAL INCOME WITHOUT EVEN CONSIDERING THE FACT THAT G.P SHOWN BY THE ASSESSEE WAS AT 0.24% AND ONLY THE DIFFERENCE AMOUNT OF G.P COULD HAVE BEEN ADDED. 4. THE LEARNED CIT(A) REDUCE THE GROSS PROFIT RATE TO 0.40% FROM 1% AFTER TAKING INTO CONSIDERATION THE EARLIER YEARS G.P RAT E OF 0.37%. THE RELEVANT FINDING AND OBSERVATION OF THE LEARNED CIT(A) ARE A S UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE REPRESENTA TIVE AND THE STAND TAKEN BY THE AO. IT IS TRUE THAT THE APPELLAN T HAS PRODUCED PURCHASE/SALE REGISTER BEFORE THE AO BUT THE QUANTI TATIVE DETAILS OF GOODS PURCHASED AND SOLD WERE NOT ENTERED IN THE SA LE/PURCHASE REGISTER. FURTHER THE APPELLANT DID NOT SUBMIT SCHE DULE-E OF AUDIT REPORT CONTAINING QUANTITATIVE DETAILS OF PURCHASE AND SALES. FURTHER IT IS NOTICED THAT THE APPELLANT HAS FILED ONLY 5 C ONFIRMATION OUT OF 21 PARTIES AND THAT TOO WITHOUT PAN NUMBER IN 2 CASES. IN THE CIRCUMSTANCES, I CONCUR WITH THE AO THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT WERE NOT COMPLETE AND C ORRECT AND, THEREFORE THE INCOME OF THE APPELLANT IS TO BE ESTI MATED BY INVOKING SECTION 145 OF THE IT ACT. HOWEVER, WHILE DOING SO THE AO HAS TO ESTIMATE THE G.P REASONABLY ON THE BASIS OF G.P ADM ITTED IN THE EARLIER YEAR. IT IS SEEN THAT THE APPELLANT HAS ADM ITTED 0.37% GROSS PROFIT IN THE EARLIER YEAR AND, THEREFORE, IT WOULD BE JUSTIFIED TO ESTIMATE THE G.P OF THE APPELLANT AT 0.40% IN THIS YEAR. WHILE DOING SO THE G.P OF THE APPELLANT WORKS OUT TO RS.26,73,848/ -(0.4% OF RS.66,84,61,999) WHEREAS THE APPELLANT HAS ADMITTED G.P OF RS.16,11,360/- AS G.P IN THE P&L A/C AND, THEREFORE , THE DIFFERENCE OF RS.10,62,488/- (26,73,848-16,11,360) SHALL ONLY BE ADDED AS AGAINST 4 ITA NO. 8053/M/2010 A.Y 2007-08 SHRI YOGESH R SANCHETI RS.66,84,620/- IN THE ASSESSMENT ORDER. THE APPELLA NT ACCORDINGLY GETS PARTIAL RELIEF. 5. BEFORE US THE LEARNED DR SUBMITTED THAT IN VIEW OF THE DISCREPANCIES POINTED OUT BY THE AO, THE APPLICATION OF G.P RATE OF 1% CANNOT BE HELD TO BE EXCESSIVE. THUS HE STRONGLY RELIED UPON THE ORDER O F THE ASSESSING OFFICER. NO ONE APPEARED ON BEHALF OF THE ASSESSEE. 6. AFTER CAREFULLY CONSIDERING THE RELEVANT FINDING S OF THE AO AND THE CIT(A), WE FIND THAT SO FAR AS REJECTION OF BOOKS O F ACCOUNT AND INVOKING OF SECTION 145 IS CONCERNED, THE CIT(A) HAS RIGHTLY UP HELD THE CONCLUSION OF THE AO. HOWEVER, HE HAS REDUCED THE ESTIMATION OF G.P R ATE FROM 1% TO 0.40% ON THE GROUND THAT IN THE EARLIER PRECEDING YEAR THE A SSESSEE HAD SHOWN GROSS PROFIT OF 0.37%. WITHOUT THEIR BEING ANY COMPARABLE CASE OR ANY ADVERSE MATERIAL BROUGHT ON RECORD BY THE DEPARTMENT REGARD ING APPLICATION OF G.P RATE OF 1%, WE DO NOT FIND ANY REASON TO DEVIATE FROM TH E CONCLUSION DRAWN BY THE CIT(A). ACCORDINGLY THE ORDER OF THE CIT(A) CONFIRM ATION THE ADDITION TO THE EXTENT OF RS.10,62,488/- AND DELETING THE BALANCE A DDITION IS AFFIRMED. 9. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED ON 16TH MAY, 2013. SD/- SD/- (RAJENDRA SINGH) ACCOUNTANT MEMBER (AMIT SHUKLA) JUDICIAL MEMBER MUMBAI, DATED : 16. 05. 2013 5 ITA NO. 8053/M/2010 A.Y 2007-08 SHRI YOGESH R SANCHETI / COPY OF THE ORDER FORWARDED TO : (1) !'# / THE ASSESSEE; (2) $% / THE REVENUE; (3) & &' ( # ) / THE CIT(A)-8, MUMBAI (4) & &' / THE CIT, MUMBAI CITY CONCERNED; (5) ()#& , & ##& , / THE DR, ITAT, MUMBAI; (6) )*! + / GUARD FILE. (7) ,& / TRUE COPY / BY ORDER SUBODH KUMAR PRIVATE SECRETARY - / .& $# / (DY./ASSTT. REGISTRAR) & ##& , / ITAT, MUMBAI