Shree Sati Tex Prints Pvt.Ltd., Surat V. The Dy.CIT.,Cent.Circle-2, Surat

ITA 814/AHD/2009

• Counselvise Citation: 81420514 RSA 2009
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 14-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH A R SHRI B L YADAV
• Keywords: Gross profit estimation; Income from undisclosed sources; Loose papers; Document seized; Principle of natural justice; Documents seized
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI A.N. PAHUJA, ACCOUNTANT MEMBER APPEAL(S) BY SL. NO(S). ITA NO(S) ASSESSMENT YEAR APPELLANT (S) RESPONDENT 1. 814/AHD/2009 2006-07 SHREE SATI TEX PRINTS PVT.LTD. 127, GIDC PANDESARA, SURAT PAN : AADCS 3530K THE DY.CIT CENTRAL CIRCLE-2 SURAT 2. 1552/AHD/2009 2006-07 REVENUE ASSESSEE 3. 815/AHD/2009 2006-07 RANI SATI PROCESSORS PVT.LTD. 88, GIDC PANDESARA SURAT PAN : AADCS 3531 J REVENUE 4. 1554/AHD/2009 2006-07 REVENUE ASSESSEE DATE OF HEARING : 14/07/2011 DATE OF PRONOUNCEMENT : 09/09/2011 ASSESSEE(S) BY: SHRI RASESH SHAH, A.R. REVENUE BY : SHRI B.L.YADAV D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE APPEALS PERTAIN TO TWO APPELLANTS, HOWEVER, ARISING FROM THE ORDERS OF LD.CIT(A)-II, AHMEDABAD, BOTH DATED 0 2/02/2009. SINCE THESE APPEALS RELATE TO THE SAME GROUP AND TH E FACTS, PRIMA FACIE , APPEARED TO BE IDENTICAL, THEREFORE CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDER. ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 2 - (A) ITA NO.814/AHD/2009 (SHREE SATI TEX PRINTS PVT.LTD. ) 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE A SSESSEE IN THIS APPEAL, REPRODUCED HEREUNDER :- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED CIT (APPEALS) HAS E RRED IN PARTLY CONFIRMING THE ADDITION OF RS.1,71,816/- OUT OF RS.13,90,747/- MADE BY ASSESSING OFFICER ON ACCOUNT OF LOW G.P. ON ACCOUNTED TURNOVER BY ESTIMATING G.P. RATIO @ 10%. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED CIT (APPEALS) HAS E RRED IN PARTLY CONFIRMING THE ADDITION OF RS.6,83,475/ - OUT OF RS.23,23,550/- MADE BY ASSESSING OFFICER ON ACCOUNT OF LOW G.P. ON UNACCOUNTED TURNOVER BY ESTIMATING G.P. RATIO @ 18%. 2.1. A SEARCH ON RAJESH PODDAR GROUP WAS CONDUCTED ON 18/01/2006. FACTS NOTED BY THE AO IN THE IMPUGNED ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT DATED 17/06/2008 WERE THAT THE GROUP HAD DISCLOSED UNACCOUNTED INCOME OF RS.20 CRORES FOR AY 2006-07. AS PER THE BIFURCATION OF THE SAID DISCLOSURE, A SUM OF RS.95 LACS OF THE SAID DISCLOSURE OF UNACCOUNTED IN COME PERTAINED TO THIS APPELLANT. CONSEQUENCE THEREUPON, FOR AY 2006 -07, A RETURN WAS FILED DECLARING AN INCOME OF RS.60,17,582/-. THE AO HAS ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 3 - NOTED THAT THE SAID DISCLOSURE OF RS.95 LACS WAS PA RT OF THE INCOME OFFERED FOR ASSESSMENT AS PER THE RETURN FILED. 2.2. IT WAS ALSO AN ADMITTED FACT THAT THE ASSESSE E WAS INDULGED IN UNACCOUNTED PRODUCTION ON JOB-WORK BASIS, THEREFORE, UNACCOUNTED JOB-CHARGES WERE OFFERED AS PER THE SAI D DISCLOSURE. IT IS ALSO AN ADMITTED FACTUAL POSITION THAT GP @ 9.58% WAS DISCLOSED BY THE ASSESSEE. AS PER AO, ON THE TOTAL TURNOVER OF RS.4,06,31,087/- GP WAS DISCLOSED AT RS.38,91,293/- . AOS ALLEGATION WAS THAT VERY LOW GP WAS SHOWN BY THE AS SESSEE. IN HIS OPINION, IN THE SAID LINE OF BUSINESS, AVERAGE GP WAS 13%. HE HAS PROPOSED TO COMPUTE THE ASSESSEES GP AT 13%. BY A PPLYING THE GP RATE AT 13%, THE GROSS PROFIT WAS COMPUTED AT RS.52 ,82,040/-, AS AGAINST THE PROFIT DISCLOSED BY THE ASSESSEE AT RS. 38,91,293/-, HENCE THE DIFFERENCE OF RS.13,90,740/- WAS TAXED . THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LD.CIT(A) HAS EXAMINED THE FACTS OF THE CASE AND THEREUPON HE HAS NOTICED THAT THE HONBLE ITAT IN ASSESSEES OWN CASE FOR A.Y. 2003-04 HAS ADOPTED GP RATE AT 10%, ACCORDINGLY HE HAS HELD AS UNDER:- 4. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS. F ROM THE EVIDENCE FOUND DURING THE SEARCH OPERATION AND SEIZ ED DOCUMENTS, IT IS EVIDENT THAT ASSESSEE HAS INDULGED IN UNACCOUNTED PRODUCTION AND SALE. HENCE, THE A.O. W AS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND APP LYING G.P. RATE. HOWEVER, THE MOST APPROPRIATE G.P. RATE WOUL D BE G.P. ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 4 - RATE OF ASSESSEE HIMSELF IN EARLIER YEARS. IN A.Y. 2003-04 THE A.O. APPLIED G.P. RATE AT 11.61% WHICH WAS REDUCED TO 10% BY THE HONBLE I.T.A.T. HENCE, IT IS REASONABLE TO APPLY G.P. RATE OF 10% FOR THIS YEAR ALSO. THE GROSS PRO FIT AT THE RATE OF 10% ON TURNOVER OF RS.40631087/- COMES TO RS.40,63,109/- AS AGAINST RS.38,91,293/- SHOW BY TH E ASSESSEE. HENCE THE ADDITION IS RESTRICTED TO THE DIFFERENCE OF RS.1,71,816/- AND THE BALANCE AMOUNT IS DELETED. 4. AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES, ONCE A RESPECTED CO-ORDINATE BENCH HAS ALREADY TAKEN A VIE W TO ADOPT GP RATE AT 10% AND THAT VERDICT HAS BEEN FOLLOWED BY LD.CIT(A), THEREFORE, TOTALITY OF THE CIRCUMSTANCES DO NOT WAR RANT TO TAKE ANY OTHER VIEW BUT TO FOLLOW THE SAME. WITH THESE REMA RKS, WE ARE NOT INCLINED TO INTERFERE WITH THE DIRECTIONS OF LD.CIT (A), HENCE, THIS GROUND OF THE ASSESSEE IS HEREBY DISMISSED. 5. APROPOS GROUND NO.2, THE OBSERVATION OF THE AO WAS THAT UNACCOUNTED JOB CHARGES OF RS.5,63,02,638/- WAS FOUND FOR THE YEAR UNDER CONSIDERATION. FROM THE SIDE OF THE AS SESSEE, IT WAS CONTESTED THAT THE GP SHOULD BE ESTIMATED AFTER COM BINING BOTH THE TYPES OF THE TURNOVER, I.E. ACCOUNTED TURNOVER AS W ELL AS THE UNACCOUNTED TURNOVER. HOWEVER, THAT PLEA WAS NOT ACCEPTED BY THE AO. AS PER AOS VERSION, THE RATIO OF PROFIT WOU LD ALWAYS BE HIGHER IN RESPECT OF UNACCOUNTED TURNOVER. AFTER CONSIDERING THE ARGUMENTS OF THE ASSESSEE, THE AO HAS FINALLY HELD AS UNDER:- ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 5 - IN VIEW OF THE ABOVE FACTS THE ARGUMENTS RAISED BY THE ASSESSEE ARE NOT ACCEPTABLE. IT CAN BE SEEN THAT T HE ASSESSEE HAS RECEIVED UNACCOUNTED JOB CHARGES OF RS.5,63,02, 638/- AND HAS DISCLOSED UNACCOUNTED INCOME OF RS.95,00,000/- WHICH COMES TO 16.87% OF THE UNACCOUNTED JOB RECEIPTS. A S DISCUSSED EARLIER THE DISCLOSURE MADE BY THE ASSESS EE IS ON LOWER SIDE SINCE THE PROFIT MARGIN IS CONSIDERABLY HIGH ON THE UNACCOUNTED JOB RECEIPTS AND THEREFORE THE SAME IS HEREBY TAKEN AT 21% WHICH COMES TO RS.1,18,23,550/-. SINCE THE ASSESSEE HAS ALREADY OFFERED RS.95,00,000/- FOR TAX ATION REMAINING RS.23,23,550/- IS HEREBY ADDED IN THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT ARE HEREB Y INITIATED FOR CONCEALMENT OF INCOME DONE BY THE ASSESSEE. 6. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE LD.CIT(A) HAS AFFIRMED THE ACTION OF THE AO, HOWEVER, INSTEAD OF ADOPTING THE RATE OF 21%, AS APPLIED BY A.O., HE HAS ADOPTED THE GP RATE AT 18% BY ASSIGNING THE FOLLOWING REASONS:- 6. I HAVE CONSIDERED FACTS AND SUBMISSIONS. I FIN D THAT THE A.O. WAS JUSTIFIED IN APPLYING G.P. RATE BUT THE RA TE OF 21% IS NOT REASONABLE. FOR ACCOUNTED TURNOVER THE A.O. HA S APPLIED 13% WHICH HAS BEEN RESTRICTED TO 10% ON THE BASIS O F ITATS FINDING FOR A.Y. 2003-04, IN THE FIRST GROUND OF AP PEAL. FOR UNACCOUNTED TURNOVER OF JOB CHARGES THE A.O. HAS APPLIED G.P. RATE OF 21%, BUT IN MY VIEWS IT IS REASONABLE TO APPLY G.P. RATE OF 18%. BY APPLYING G.P. RATE OF 18% ON UNACCOUNTED JOB CHARGES OF RS.5,63,02,638/- THE GRO SS PROFIT COMES TO RS.1,01,34,475/- AS AGAINST DISCLOSURE OF RS.94,51,000/-. THUS THE ADDITION IS RESTRICTED TO THE DIFFERENCE AMOUNT OF RS.6,83,475/- AND THE ASSESSEE IS ALLOWED RELIEF FOR THE BALANCE AMOUNT. ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 6 - 6.1. IN RESPECT OF THIS GROUND, WE HAVE EXAMINED TH E FACTS IN DETAIL AND HAVE NOTICED THAT UNACCOUNTED JOB CHARGES WERE UNEARTHED CONSEQUENCE UPON THE SEARCH. THE ASSESSEE HAS REFL ECTED THE JOB CHARGES IN THE BOOKS OF ACCOUNTS AT RS.4,06,31,087/ -. IT WAS ALSO NOTICED THAT IN RESPECT OF UNACCOUNTED JOB CHARGES AS PER THE PURCHEES SEIZED THERE WAS AN OPENING BALANCE OF T HE JOB CHARGES RECEIVABLE. DURING THE COURSE OF ASSESSMENT PROCEED INGS FEW CALCULATIONS HAVE BEEN FURNISHED AND IT WAS CONTEST ED THAT THE JOB CHARGES AS PER THE LOOSE-PAPERS, WHICH WERE UNACCOU NTED JOB CHARGES, WERE TO THE EXTENT OF RS.4,33,85,511/-. THE TOTAL OF THE TWO WAS COMPUTED AND BY ALSO TAKING INTO ACCOUNT TH E DISCLOSURE OF RS.95 LACS, THE MAIN ARGUMENT OF THE ASSESSEE WAS T HAT THE OVERALL GP RATE WAS 15.94% WHICH WAS COMPARABLE AND REASON ABLE. IN THIS REGARD, THE CALCULATION WAS AS UNDER:- PARTICULARS AMOUNT (RS.) JOB-CHARGES AS PER BOOKS JOB-CHARGES AS PER LOOSE PAPERS TOTAL JOB-CHARGES G.P.AS PER BOOKS DISCLOSED INCOME TOTAL G.P.AS A % OF TOTAL JOB-CHARGES 4,06,31,087 4,33,85,511 8,40,16,598 38,91,293 95,00,000 1,33,91,293 15.94% ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 7 - 6.2. IF WE ANALYZE THE TOTALITY OF THE CIRCUMSTAN CES OF THE CASE, A SUBSTANTIAL AMOUNT OF RS.20 CR. WAS DISCLOSED BY TH E GROUP AND ACCORDINGLY THE INCOME WAS OFFERED BY THIS ASSESSEE AT RS.95 LACS, THUS ADMITTEDLY THE RETURNED INCOME WAS 60,17,582/- . THIS FACT IS TO BE JUDGED IN THE LIGHT OF THE ORDER OF THE TRIBUNAL WHERE THE GP RATE AT 10% WAS FOUND REASONABLE IN ASSESSEES OWN CASE. SINCE THIS IS AN ACCEPTED FACTUAL POSITION, THEN WE HAVE TO APPRECIA TE THAT ON THE TOTAL UNACCOUNTED JOB CHARGES OF RS.5,63,02,638/- , (AS DETERMINED BY THE A.O.), THE DISCLOSURE OF RS.95 LACS GIVES TH E PROFIT RATIO AT 16.87%. THE AO AS WELL AS THE CIT(A) BOTH HAVE NOT ED THE SAID HIGH PERCENTAGE OF THE PROFIT. HOWEVER, BOTH THE LO WER AUTHORITIES HAVE PROCEEDED TO ESTIMATE THE SAME. ON ONE HAND, THE AOS ESTIMATION WAS AT 21%, AS AGAINST THAT CIT(A)S EST IMATION WAS AT 18%. ACCORDING TO US, THERE WAS NO COGENT OR JUDIC IOUS BASIS FOR SUCH AN ESTIMATION. EVEN IT WAS NOT THE CASE OF THE REVENUE THAT TO COVER-UP ANY UNDISCLOSED ASSET OR STOCK DETECTED AT THE TIME SEARCH, SUCH HIGH PERCENTAGE WAS REQUIRED TO BE DETERMINED. ONCE A DISCLOSURE WAS SUFFICIENT TO COVER UP THE DISCREPAN CY AND CLOSE TO THE MARGIN OF PROFIT IN THIS LINE OF BUSINESS, THE N NATURAL JUSTICE DEMANDS TO ACCEPT THE SAME. FEW INSTANCES OF COMPAR ABLE CASES AS GATHERED BY THE A.O. WERE ALSO DEPICTING THE LOWER RATE OF PROFIT. IN THE RESULT, WE ARE NOT CONVINCED TO AFFIRM ANY OF T HE ESTIMATED RATE OF PROFIT ADOPTED BY THE LOWER AUTHORITIES AND DIRE CT TO ACCEPT THE DISCLOSURE AS MADE BY THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS THEREFORE ALLOWED. ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 8 - 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE, I.E. ITA NO.814/AHD/2009 IS PARTLY ALLOWED. (B) 1552/AHD/2009 (REVENUES APPEAL - IN THE CASE OF S HREE SATI TEX PRINTS LTD.) IN THIS REVENUES APPEAL, THE FOLLOWING SUBSTANTI VE GROUNDS WERE RAISED:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCO UNT VARIATION IN GROSS PROFIT. THE LD. CIT(A) HAS ERRE D IN LAW AND FACTS OF THE CASE WITHOUT APPRECIATING THE FACT THA T ESTIMATION OF GROSS PROFIT WAS MADE BY THE ASSESSING OFFICER A FTER DULY INVOKING THE PROVISIONS OF SECTION 145 OF THE I.T. ACT AND REJECTING THE BOOKS OF ACCOUNTS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOU NT OF ESTIMATION OF PROFIT. THE LD. CIT(A) FAILED TO APP RECIATE THE FACT THAT THE ADDITION WAS MADE BY THE ASSESSING OF FICER SINCE IT WAS NOTICED BY HIM THAT THERE WAS DISCREPANCY IN THE DISCLOSURE MADE BY THE ASSESSEE ON ACCOUNT OF UNACC OUNTED TURNOVER AND THE NET PROFIT SHOWN BY HIM IN HIS BOO KS OF ACCOUNTS. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY NOT CONSIDERING THE PROFIT MARGINS DECLARED BY THE ASSE SSEE DISCUSSED BY OTHER BUSINESS ENTERPRISES INVOLVED IN THE SAME BUSINESS WHICH HAS BEEN CORRECTLY POINTED OUT BY TH E ASSESSING OFFICER IN HIS ASSESSMENT ORDER. ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 9 - 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY ADOPTING THE GROSS PROFIT 1@ 18% WITHOUT GIVING AN Y COGENT REASONS OR WITHOUT ANY BASIS. 8. AT THE OUTSET, TWO THINGS WERE INFORMED, FIRST T HAT GROUND NOS.1 TO 3 ARE NOT SPECIFIC GROUNDS AGAINST ANY QUA NTUM ADDITION AND GENERAL IN NATURE. SECOND THAT THE REVENUE HA S NOT CHALLENGED THE PART RELIEF GRANTED BY LD.CIT(A) IN RESPECT OF THE ACCOUNTED TURNOVER. EVEN THOUGH ABOUT GROUND NOS 1 TO 3 OUR O BSERVATION IS THAT MERELY BY THE INVOCATION OF THE PROVISIONS OF SEC.145 THE A.O. DO NOT GET THE ABSOLUTE RIGHTS TO APPLY ANY RATE OF PROFIT. IN OUR HUMBLE UNDERSTANDING OF LAW THE PURPOSE IS TO DETER MINE INCOME CORRECTLY AND THAT AN INCOME WHICH IS SUSTAINABLE I N THE EYES OF LAW. THE BASIC PURPOSE OF CONDUCTING SEARCH OR SURVEY IS TO DETECT AN INCOME WHICH HAS NOT BEEN DISCLOSED. THIS ASSESSEE WAS ALSO SUBJECTED TO SUCH AN ACTION AND THEREUPON UNACCOUNT ED JOB-CHARGES WERE DETECTED. THERE IS A PROVISION IN THE STATUTE OF MAKING A DISCLOSURE, THEREFORE, THIS ASSESSEE HAD MADE A DIS CLOSURE AS DISCUSSED HEREINABOVE. THAT DISCLOSURE WAS MADE IN THE CONTEXT OF THE UNACCOUNTED JOB-CHARGES UNEARTHED IN CONSEQUENC E OF THE SEARCH. FACTS OF THE CASE AS ALSO THE ORDERS OF TH E AUTHORITIES BELOW DO NOT INDICATE ANY OTHER DETECTION OF UNACCOUNTED ASSETS WHICH WERE MADE THE BASIS OF DETERMINING THE UNACCOUNTED INCOME. THEREAFTER THE REVENUE HAD PROCEEDED TO APPLY A RAT E OF PROFIT EXPECTED TO HAVE BEEN EARNED ON THE SAID JOB-CHARGE S. NOW THE SIMPLE QUESTION IS THAT WHAT SHOULD BE A REASONABLE PROFIT WHICH ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 10 - OUGHT TO HAVE BEEN EARNED BY THIS ASSESSEE. AS FAR AS THE COMPARABLE INSTANCES ARE CONCERNED, AN ORDER OF THE TRIBUNAL I N ASSESSEES OWN CASE IS ENOUGH TO SET A GUIDE LINE FOR ADOPTION OF A REASONABLE RATE OF PROFIT. BUT IF THE PROFIT DISCLOSED BY THE ASSESSEE ITSELF IS HIGHER AND THERE IS NO OTHER INCRIMINATING MATERIAL IN REVENUE S POSSESSION THEN IT IS JUDICIOUS AND SENSIBLE TO ACCEPT THAT DI SCLOSURE. IN THE PRESENT CASE, CONSIDERING THE TOTALITY OF THE CIRCU MSTANCES , WE HAVE TAKEN A DECISION, WHILE DECIDING ASSESSEES APPEAL HEREINBOVE, THAT THE DISCLOSURE WAS ADEQUATE SPECIALLY WHEN NO OTHER INFORMATION OR OBJECTIONABLE MATERIAL WAS REFERRED BY THE A.O. 8.1. IN THE LIGHT OF THE FOREGOING DISCUSSION, THOU GH GROUND NOS.1 TO 3 ARE GENERAL IN NATURE, ARE HEREBY DISMISSED. 8.2. IN RESPECT OF GROUND NO.4, WE HAVE ALREADY DISCUSSED THE FACTS HEREINABOVE WHILE DECIDING GROUND NO.2 OF THE ASSESSEE. IN THIS REGARD, THE COMPARABLE INSTANCES AS MENTIONED BY THE A.O. WERE AS UNDER:- SR.NO. NAME OF THE UNIT ADDRESS/ASSESSED WITH TURNOVER G.P. 1. RAINBOW DEYING & PRINTING MILLS PVT.LTD. 285, GIDC, PANDESARA, SURAT CENTRAL CIRCLE-1, SURAT 13,77,00,854 14.35% 2. PRATIK PROCESSORS PVT.LTD. 522, GIDC, PANDESARA, SURAT CIRCLE-6, SURAT 12,67,89,343 11.40% ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 11 - 3. RACHNA ART PRINTS PVT.LTD. 243/1, GIDC, PANDESARA, SURAT CENTRAL CIRCLE-2, SURAT 26,57,59,352 12.17% 4. PRAGATI FASHIONS PLOT NO.53-B, PANDESARA, SURAT CIRCLE-6, SURAT 11,64,95,363 13.79% 5. RAJLAXMI DYEING & PRINTING MILLS PVT.LTD. PLOT NO.155, GIDC, PANDESARA, SURAT CIRCLE-4, SURAT 10,22,92,123 14.68% 8.3. WE HAVE HELD THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE LD.CIT(A) TO ESTIMATE THE GP RATE AT 18%. WE HAVE ALSO HELD THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE AO TO ESTIMATE THE GP AT 21%. WE HAVE HELD THAT THE DISCLOSURE OF THE ASSES SEE WAS APPROPRIATE. EVEN THE RATIO OF PROFIT OF OTHER COMP ARABLE UNITS WAS FOUND TO BE LOWER THAN THE RATIO OF PROFIT 15.94% A S DISCLOSED BY THE ASSESSEE AFTER ADDING THE UNACCOUNTED JOB-CHARGES IN VIEW OF THIS, WE HEREBY HOLD THAT THERE IS NO FORCE IN THIS GROUN D OF THE REVENUE. THE SAME IS HEREBY DISMISSED. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED, WHEREAS REVENUES APPEAL IS DISMISSED . (C) ITA 815/AHD/2009 (RANI SATI PROCESSORS PVT.LTD.) 10. GROUNDS READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(APPEALS) HAS ER RED IN PARTLY CONFIRMING THE ADDITION OF RS.1,60,933/- OUT OF ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 12 - RS.17,43,145/- MADE BY ASSESSING OFFICER ON ACCOUNT OF LOW G.P. ON ACCOUNTED TURNOVER BY ESTIMATING G.P. RATIO @ 10%. 10.1. FACTS OF THE CASE AS EMERGED FROM THE CORRESP ONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT DATED 16/06/2008 WERE THAT THE ASSESSEE WAS SUBJECTED TO A SURVEY U/ S.133A OF THE ACT WHICH WAS IN PURSUANT TO A SEARCH CONDUCTED ON A RA JESH PODDAR GROUP ON 18/01/2006. OUT OF THE TOTAL DISCLOSURE OF RS.20 CRORES FOR A.Y. 2006-07, THE ASSESSEES UNDISCLOSED INCOME WAS RS.1,35,00,000/-. IT WAS NOTED BY THE AO THAT AS P ER THE SEIZED DOCUMENTS, THE UNACCOUNTED JOB CHARGES WERE RS.7,62 ,64,651/-, AS AGAINST, THAT THE ASSESSEE HAS REFLECTED THE JOB CH ARGES IN THE BOOKS OF ACCOUNTS AT RS.5,27,41,278/-. THE GP AS SHOWN BY THE ASSESSEE WAS 9.69%. THE AO WAS NOT CONVINCED WITH THE EXPLA NATION AND APPLIED THE GP RATE AT 13%, WITH THE RESULT, ADDITI ON WAS MADE AS UNDER:- IT CAN BE SEEN THAT THE ASSESSEE HAS SHOWN G.P. OF RS.51,13,195/- ON TURNOVER OF RS.5,27,41,278/- WHIC H COMES TO 9.69%. AS DISCUSSED EARLIER THE G.P. SHOWN BY THE ASSESSEE IS VERY LOW AND IT REQUIRES UPWARD REVISION. FROM THE G.P. OF OTHER PLAYERS OF THE FILED AND AS A RESULT OF OPEN INQUIRIES IN THIS REGARDS IT IS NOTICED THAT INDUSTRY AVERAGE OF THE G.P. IS 13% AND ACCORDINGLY IT IS PROPOSED TO COMPUTE G.P. OF THE ASSESSEE AT 13%. ACCORDINGLY, THE G.P. OF THE ASSESSEE ON TURNOVER O F RS.5,27,41,278% @ 13% COMES TO RS.68,56,370/-. SIN CE THE ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 13 - ASSESSEE HAS ALREADY SHOWN PROFIT OF RS.51,13,195/- IN ITS ROIU, ADDITION OF RS.17,43,175/- IS HEREBY MADE IN THE INCOME OF THE ASSESSEE ON ACCOUNT OF VERY LOW G.P. ON THE ACCOUNTED TURNOVER. PENALTY PROCEEDINGS U/S.271(1) (C) OF THE I.T. ACT ARE HEREBY INITIATED FOR CONCEALMENT OF IN COME DONE BY THE ASSESSEE. 11. THE MATTER WAS CARRIED BEFORE THE FIRST APPELL ATE AUTHORITY WHO HAS REDUCED THE GP RATE FROM 13% TO 1 0% AND RESTRICTED THE ADDITION TO RS.1,60,933/- FOLLOWING AN ORDER OF THE TRIBUNAL; RELEVANT PORTION REPRODUCED BELOW:- 4. I HAVE CONSIDERED THE FACTS AND SUBMISSIONS. FROM THE EVIDENCE FOUND DURING THE SEARCH OPERATION AND SEIZ ED DOCUMENTS, IT IS EVIDENT THAT ASSESSEE HAS INDULGED IN UNACCOUNTED PRODUCTION AND SALE. HENCE, THE A.O. W AS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT AND APP LYING G.P. RATE. HOWEVER, THE MOST APPROPRIATE G.P. RATE WOUL D BE G.P. RATE OF ASSESSEE HIMSELF IN EARLIER YEARS. IN A.Y. 2003-04 THE A.O. APPLIED G.P. RATE AT 14.54% WHICH WAS REDUCED TO 10% BY THE HON'BLE I.T.A.T. HENCE, IT IS REASONABLE TO APPLY G.P. RATE OF 10% FOR THIS YEAR ALSO. THE GROSS PROFIT A T THE RATE OF 10% ON TURNOVER OF RS.527,41,278/- COMES TO RS.52,7 4,128/- AS AGAINST RS.51,13,195/- SHOWN BY THE ASSESSEE. H ENCE THE ADDITION IS RESTRICTED TO THE DIFFERENCE OF RS.1,60 ,933/- AND THE BALANCE AMOUNT IS DELETED. 12. WHILE DECIDING THE CONNECTED APPEAL HEREINABOVE , WE HAVE ALREADY TAKEN A STAND THAT THERE WAS NO FALLACY I N THE VIEW TAKEN BY LD.CIT(A) SINCE HE HAS SIMPLY FOLLOWED A VERDICT OF THE RESPECTED CO-ORDINATE BENCH PRONOUNCED IN ASSESSEES OWN GROU P OF CASES. ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 14 - ON THE SAME LINES FOR THIS YEAR AS WELL, WE HEREBY AFFIRM THE VIEW OF THE LD.CIT(A) AND THIS GROUND OF THE ASSESSEE IS HEREBY DISMISSED. 13. APROPOS GROUND NO.2 AS AGAINST THE RATE OF PROFIT WHICH WAS AT 17.70% ON THE UNACCOUNTED JOB CHARGES, THE AO HA S ADOPTED 21% WHICH HAS RESULTED INTO A FOLLOWING ADDITION, REPRO DUCED BELOW:- IN VIEW OF THE ABOVE FACTS THE ARGUMENTS RAISED BY THE ASSESSEE ARE NOT ACCEPTABLE. IT CAN BE SEEN THAT T HE ASSESSEE HAS RECEIVED UNACCOUNTED JOB CHARGES OF RS.7,62,64, 651/- AND HAS DISCLOSED UNACCOUNTED INCOME OF RS.1,35,00,000/- ON THESE JOB CHARGES WHICH COMES TO 17.70% OF THE UNACCOUNTED JOB RECEIPTS. AS DISCUSSED EARLIER THE DISCLOSURE MADE BY THE ASSESSEE IS ON LOWER SIDE SINCE THE PRO FIT MARGIN IS CONSIDERABLY HIGH ON THE UNACCOUNTED JOB RECEIPT S AND THEREFORE THE SAME IS HEREBY TAKEN AT 21% W HICH COMES TO RS.1,60,15,580/-. SINCE THE ASSESSEE HAS ALREADY O FFERED RS.1,35,00,000/- FOR TAXATION REMAINING RS.25,15,58 0/- IS HEREBY ADDED IN THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. PENALTY PROCEEDINGS U/S.271(1)(C) O F THE I.T. ACT ARE HEREBY INITIATED FOR CONCEALMENT OF INCOME DONE BY THE ASSESSEE. 14. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST AP PELLATE AUTHORITY, THE LD.CIT(A) HAS REDUCED THE GP FROM 21 % TO 18% AS IT WAS ADOPTED IN THE CASE OF THE SISTER-CONCERN, RELE VANT PARAGRAPH NO.6 REPRODUCED BELOW:- 6. I HAVE CONSIDERED FACTS AND SUBMISSIONS. I FI ND THAT THE A.O. WAS JUSTIFIED IN APPLYING G.P. RATE BUT THE RA TE OF 21% IS NOT REASONABLE. FOR ACCOUNTED TURNOVER THE A.O. HA S APPLIED ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 15 - 13% WHICH HAS BEEN RESTRICTED TO 10% ON THE BASIS O F ITATS FINDING FOR A.Y. 2003-04, IN THE FIRST GROUND OF AP PEAL. FOR UNACCOUNTED TURNOVER OF JOB CHARGES THE A.O. HAS AP PLIED G.P. RATE OF 21%, BUT IN MY VIEWS IT IS REASONABLE TO APPLY G.P. RATE OF 18%. BY APPLYING G.P. RATE OF 18% ON UNACCOUNTED JOB CHARGES OF RS.7,62,64,651/- THE GRO SS PROFIT COMES TO RS.137,27,637/- AS AGAINST DISCLOSURE OF RS.1,35,00,000/-. THUS THE ADDITION IS RESTRICTED TO THE DIFFERENCE AMOUNT OF RS.2,27,637/- AND THE ASSESSEE IS ALLOWED RELIEF FOR THE BALANCE AMOUNT. 15. ON IDENTICAL FACTS, WE HAVE ALREADY TAKEN A VIE W WHILE DECIDING AN APPEAL HEREINABOVE OF THIS GROUP THAT T HERE WAS NO JUSTIFICATION FOR ESTIMATION OF HIGHER RATE OF PROF IT ESPECIALLY WHEN THE DISCLOSURE MADE CONSEQUENCE UPON THE SEARCH/SUR VEY WAS ADEQUATE AND CLOSE TO THE MARGIN OF PROFIT IN THIS LINE OF BUSINESS. THERE IS NO DISPUTE THAT AN OFFER OF RS.1,35,00,000 /- WAS MADE AND THEREUPON A RETURN OF INCOME WAS FILED AT RS.93,30, 194/-. AFTER THE SAID DISCLOSURE; THE GP RATE OF THE ASSESSEE OVER T HE UNACCOUNTED JOB CHARGES WAS FOUND TO BE AT 17.70%. TO SUBSTANTIATE THE REASONABLENESS OF THE SAID DISCLOSURE, A CHART IS P LACED BEFORE US TO DEMONSTRATE THAT THE AVERAGE GP PERCENTAGE WAS AS U NDER:- CHART SHOWING G.P. RATIO FOR VARIOUS YEARS YEAR TURNOVER (RS.) G.P.% 31.03.2004 43639842 9.60 31.03.2005 47544376 9.61 31.03.2006 52741278 9.69 ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 16 - 31.03.2007 57569582 10.40 16. DUE TO THESE FACTS, WE ARE NOT INCLINED TO AFFI RM THE ESTIMATED PROFITS AS ADOPTED BY THE LOWER AUTHORITIES AND HEN CE REVERSE THE FINDINGS OF LD. CIT(A) IN THIS REGARD. THIS GROUND OF THE ASSESSEE IS THEREFORE ALLOWED. 17. IN THE RESULT, ASSESSEES APPEAL, I.E. ITA 815/ AHD/2009 IS PARTLY ALLOWED. (D) ITA NO.1554/AHD/2009 (REVENUES APPEAL) 18. SUBSTANTIVE GROUNDS ARE AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCO UNT OF VARIATION IN GROSS PROFIT. THE LD. CIT(A) HAS ERRE D IN LAW AND FACTS OF THE CASE WITHOUT APPRECIATING THE FACT THA T ESTIMATION OF GROSS PROFIT WAS MADE BY THE ASSESSING OFFICER A FTER DULY INVOKING THE PROVISIONS OF SECTION 145 OF THE I.T. ACT AND REJECTING THE BOOKS OF ACCOUNTS. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOU NT OF ESTIMATION OF PROFIT. THE LD. CIT(A) FAILED TO APP RECIATE THE FACT THAT THE ADDITION WAS MADE BY THE ASSESSING OF FICER SINCE IT WAS NOTICED BY HIM THAT THERE WAS DISCREPANCY IN THE DISCLOSURE MADE BY THE ASSESSEE ON ACCOUNT OF UNAC COUNTED TURNOVER AND THE NET PROFIT SHOWN BY HIM IN HIS BOO KS OF ACCOUNTS. ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 17 - 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS B Y NOT CONSIDERING THE PROFIT MARGINS DECLARED BY THE ASSE SSEE DISCUSSED BY OTHER BUSINESS ENTERPRISES INVOLVED IN THE SAME BUSINESS WHICH HAS BEEN CORRECTLY POINTED OUT BY TH E ASSESSING OFFICER IN HIS ASSESSMENT ORDER. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY ADOPTING THE GROSS PROFIT 1@ 18% WITHOUT GIVING ANY COGENT R EASONS OR WITHOUT ANY BASIS. 19. AT THE OUTSET, TWO THINGS WERE INFORMED, FIRST THAT GROUND NOS.1 TO 3 ARE NOT SPECIFIC GROUNDS AGAINST ANY QUA NTUM ADDITION AND GENERAL IN NATURE. SECOND THAT THE REVENUE HA S NOT CHALLENGED THE PART RELIEF GRANTED BY LD.CIT(A) IN RESPECT OF THE ACCOUNTED TURNOVER. 19.1. THE GROUNDS RAISED BY THE REVENUE ARE IDENTIC ALLY WORDED, AS WE HAVE ALREADY DISCUSSED AND DECIDED HEREINABOVE. FOLLOWING THE SAME VIEW GROUND NOS.1 TO 3 ARE THEREFORE DISMISSE D. 20. IN RESPECT OF GROUND NO.4, WE HAVE ALREADY DISC USSED THE FACTS HEREINABOVE WHILE DECIDING GROUND NO.2 OF THE ASSESSEE HEREINABOVE. IN THIS REGARD, THE CALCULATION WAS AS UNDER:- PARTICULARS AMOUNT (RS.) JOB-CHARGES AS PER BOOKS JOB-CHARGES AS PER LOOSE PAPERS 5,27,41,278 6,40,18,529 ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 18 - TOTAL JOB-CHARGES G.P.AS PER BOOKS DISCLOSED INCOME TOTAL G.P.AS A % OF TOTAL JOB-CHARGES 11,67,59,807 51,13,195 1,35,00,000 1,86,13,195 15.94% 20.1. WE HAVE HELD THAT THERE WAS NO JUSTIFICAT ION ON THE PART OF THE LD.CIT(A) TO ESTIMATE THE GP RATE AT 18%, ESPEC IALLY UNDER THE CIRCUMSTANCES WHEN THE REVENUE HAD NOT CITED ANY CO MPARABLE CASE OF THAT HIGH PERCENTAGE OF PROFIT. THE COMPARABLE I NSTANCES HAVE SHOWN MAXIMUM RATE OF PROFIT AT 14.68% , BUT THE AS ESSEES PROFIT WAS AT 15.94%. EVEN THE REVENUE HAD NO INFORMATION IN ITS POSSESSION TO RELY UPON FOR SUCH A HIGH PERCENTAGE OF PROFIT. WE HAVE ALSO HELD THAT THERE WAS NO JUSTIFICATION ON T HE PART OF THE AO TO ESTIMATE THE GP AT 21%. WE HAVE HELD THAT THE D ISCLOSURE OF THE ASSESSEE WAS APPROPRIATE. IN VIEW OF THIS AS ALSO CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE, WE HEREB Y HOLD THAT THERE IS NO FORCE IN THIS GROUND OF THE REVENUE. THE SAME I S HEREBY DISMISSED. 21. IN THE RESULT, REVENUES APPEAL IS DISMISSED . ITA NOS.814,1552/AH D/09 & 815, 1554/AHD/09 ASST.YEAR 2006-07 - 19 - 22. WE SUMMARIZE THE RESULT AS UNDER: 1.ASSESSEES APPEAL, I.E.ITA NO.814/AHD/2009 IS PAR TLY ALLOWED. 2.REVENUES APPEAL, I.E. ITA NO.1552/AHD/2009 IS D ISMISSED. 3.ASSESSEES APPEAL, I.E.ITA NO.815/AHD/2009 IS PA RTLY ALLOWED. 4. REVENUES APPEAL, I.E.ITA NO.1554/AHD/2009 IS D ISMISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 9/ 9 /2011. SD/- SD/- ( A.N.PAHUJA ) ( MU KUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 9 / 9 /2011 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-II, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD 1. DATE OF DICTATION..08/08/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 09/08/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S9.9.2011 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S9.9.2011 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9.9.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER