M/S. A& A COMPUTECH, MUMBAI V. THE INCOME TAX OFFFICER-20(1)-1, MUMBAI

ITA 827/MUM/2009

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3089 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 06-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJN EESH K ARVIND
• Assessee Lawyers: SHRI
• Keywords: Gross profit estimation; Rejection of books of accounts; Unexplained investment; Unexplained expenditure
• Section: 69C; 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA. NO.827 /MUM/2009 (ASSESSMENT YEAR : 2005-06) M/S. A& A COMPUTECH, 39, SUNIL SHOPPING CENTER, OPP.NAVRANG CINEMA, 106, J.P.ROAD, ANDHERI (WEST), MUMBAI 400 058 PAN: AABFA 1370J .... APPELLANT VS. THE ITO 20(1)(1), ROOM NO.702, 7 TH PIRAMAL CHAMBER, PAREL,MUMBAI 400 018 ....RESPONDENT ITA.NO.1160 /MUM/2009 (ASSESSMENT YEAR : 2005-06) THE ITO 20(1)(1), ROOM NO.702, 7 TH PIRAMAL CHAMBER, PAREL,MUMBAI 400 018 ... APPELLANT VS. M/S. A& A COMPUTECH, 39, SUNIL SHOPPING CENTER, OPP.NAVRANG CINEMA, 106, J.P.ROAD, ANDHERI (WEST), MUMBAI 400 058 .... RESPONDENT REVENUE BY : SHRI RAJNEESH K. ARVIND ASSESSEE BY : SHRI PANKAJ R. TOPRANI DATE OF HEARING : 06/08/2015 DATE OF PRONOUNCEMENT : ..../09/2015 2 ITA. NO.827& 1160 /MUM/2009 (ASSESSMENT YEAR : 2005-06) ORDER PER G.S. PANNU,AM: THE CAPTIONED CROSS-APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-XX DATED 1 7.11.2008, PERTAINING TO THE ASSESSMENT YEAR 2005-06, WHICH IN -TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER DAT ED 28/12/2007 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 19 61 ( IN SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT APPELLANT IS A PAR TNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING IN COMPUTER HARD WARE, ACCESSORIES, AND CONSUMABLES. A SURVEY ACTION U/S. 133A OF THE ACT WAS CARRIED OUT BY THE DEPARTMENT AND BASED ON THE INFORMATION AND DOCUMENTS FOUND DURING SURVEY AND THE SUBSEQUENT ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND MADE ADDITIONS TO THE TRADING INCOME OF THE APPELLANT OF RS 14,34,407 /- BEING UNEXPLAINED INVESTMENT IN STOCKS; RS. 15,34,867/- ON ACCOUNT OF LOW GROSS PROFIT; AND, RS 22,55,970/- ON ACCOUNT OF UNEXPLAINED EXPE NDITURE U/S 69C OF THE ACT. 2.1 WHEN THE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A), THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE BO OK RESULTS WAS AFFIRMED. HOWEVER, THE CIT(A) SCALED DOWN THE ADDI TION ON ACCOUNT OF 3 ITA. NO.827& 1160 /MUM/2009 (ASSESSMENT YEAR : 2005-06) LOW GROSS PROFIT FROM RS.15,34,867/- TO RS.9,59,383 /- AND THE ADDITIONS ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK R S.14,34,407/- AND UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE AC T RS.22,55,970/- WERE DELETED. IN THIS BACKGROUND, THE ASSESSEE AS WELL AS THE REVENUE ARE IN CROSS APPEALS, ASSESSEE BEING IN APPEAL AGA INST THE ACTION OF THE CIT(A) IN REJECTING THE BOOK RESULTS AND RETAININ G OF AN ADDITION OF RS.9,59,383/- OUT OF LOW GROSS PROFIT, WHEREAS REVE NUE IS IN APPEAL AGAINST THE ACTION OF THE CIT(A) IN DELETING THE AD DITIONS ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCKS RS.14,34,407/- A ND UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT RS.22,55 ,970/- . 3. FIRST, WE TAKE UP ASSESSES APPEAL ITA NO 827/M/2009 WHEREIN THE FIRST GROUND OF APPEAL IS REJECTION OF BOOKS O F ACCOUNTS ASSESSING OFFICER AND SECOND GROUND OF APPEAL IS AGAINST RET ENTION OF AN ADDITION TO GROSS PROFIT OF RS 9,59,383/-. 4. BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IN ASSESSEES OWN CASE, SIMILAR ISSUES WERE DECIDED I N ASSESSMENT YEAR 2004-05 BY THE TRIBUNAL IN ITA NO. 7157 /MUM/2007 AND C.O NO 31/MUM/2008 DATED 05/10/2009. IT WAS POINTED OUT THAT IN ASSESSMENT YEAR 2004-05 THE TRIBUNAL NOTICED THAT THE DEPARTME NT HAD ACCEPTED THE ORDER OF THE CIT(A) FOR THE EARLIER ASSESSMENT YEAR 2003-04, WHERE 4 ITA. NO.827& 1160 /MUM/2009 (ASSESSMENT YEAR : 2005-06) IDENTICAL ADDITIONS MADE BY THE ASSESSING OFFICER W ERE DELETED. THE AFORESAID FACTUAL MATRIX HAS NOT BEEN DISPUTED BY T HE LD. DEPARTMENTAL REPRESENTATIVE BEFORE US. 4.1 IN THIS BACKGROUND, IN SO FAR AS THE FIRST GRIE VANCE OF THE ASSESSEE WITH REGARD TO THE REJECTION OF THE BOOKS OF ACCOUNT IS CONCERNED, THE SAME IN OUR VIEW, DESERVES TO BE DIS MISSED. NOTABLY, THE BOOKS OF ACCOUNT HAVE BEEN HELD TO BE UNRELIABLE ON THE BASIS OF THE INFORMATION AND DOCUMENTS FOUND DURING THE COURSE O F SURVEY ACTION, WHICH WAS ALSO THE POSITION IN THE EARLIER YEARS. IN THE EARLIER TWO ASSESSMENT YEARS OF 2003-04 AND 2004-05, THE BOOKS OF ACCOUNT STAND REJECTED. WE ALSO FIND THAT EVEN BEFORE US NO SPECI FIC ARGUMENTS HAVE BEEN TAKEN BY THE REPRESENTATIVE FOR THE ASSESSEE C HALLENGING THE REJECTION OF THE BOOKS OF ACCOUNT. THEREFORE, THE ASSESSEE HAS TO FAIL ON THIS ASPECT OF THE MATER. 4.2 THE ONLY OTHER ASPECT WHICH HAS BEEN CANVASSE D BEFORE US IS THE ADDITION MADE ON ACCOUNT OF LOW GROSS PROFIT. IN T HIS CONTEXT, THE LD. REPRESENTATIVE APPEARING FOR THE ASSESSEE POINTED O UT THAT IN ASSESSMENT YEARS 2003-04 AND 2004-05, THE ASSESSING OFFICER H AD ESTIMATED THE INCOME BY APPLYING A GROSS PROFIT RATE OF 5.09% IN PLACE OF THE PROFIT 5 ITA. NO.827& 1160 /MUM/2009 (ASSESSMENT YEAR : 2005-06) DECLARED BY THE ASSESSEE, BUT BOTH THE ADDITIONS WE RE DELETED BY THE CIT(A); THAT FOR ASSESSMENT YEAR 2003-04 REVENUE D ID NOT CHALLENGE THE ORDER OF THE CIT(A) AND FOLLOWING THE AFORESAID DECISION, IN ASSESSMENT YEAR 2004-05 THE TRIBUNAL ALSO UPHELD TH E ACTION OF THE CIT(A) IN DELETING THE ADDITION. IN THIS CONTEXT, THE LD. REPRESENTATIVE APPEARING FOR THE ASSESSEE POINTED OUT THAT IN THE CURRENT ASSESSMENT YEAR THE CIT(A) HAS BASED THE ADDITION ON THE AVERA GE OF THE GROSS PROFIT RATIO FOR SIX ASSESSMENT YEARS OF 2001-02 TO 2006- 07, WHICH WORKED OUT TO 4.48%. LD. REPRESENTATIVE APPEARING FOR THE ASSESSEE SUBMITTED THAT THE GROSS PROFIT RATIO IN ASSESSMENT YEARS 200 1-02 AND2002-03 WERE EXCEPTIONALLY HIGH AND FURTHER THAT IN ASSESSM ENT YEARS 2005-06 AND 2006-07 THE GROSS PROFIT RATIO OF 3.48% AND 3.4 5% RESPECTIVELY HAS BEEN ACCEPTED. IT WAS, THEREFORE, CONTENDED THAT T HE AVERAGE GROSS PROFIT RATIO OF THE LAST THREE YEARS BE ADOPTED IN ORDER T O ESTIMATE THE GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION. 5. ON THIS ASPECT, LD. DEPARTMENTAL REPRESENTATI VE FOR THE REVENUE RELIED UP ON THE ORDERS OF LOWER AUTHORITIES AND SUBMITTED THAT ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF GROSS PROF IT BE SUSTAINED. 6 ITA. NO.827& 1160 /MUM/2009 (ASSESSMENT YEAR : 2005-06) 6. HAVING CONSIDERED THE RIVAL SUBMISSIONS, I T IS APPARENT THAT THE ONLY DISPUTE IS WITH REGARD TO THE QUANTIFICATION O F THE GROSS PROFIT FOR THE YEAR UNDER CONSIDERATION, AFTER REJECTION OF TH E RESULTS DECLARED AS PER BOOKS OF ACCOUNT. THE ASSESSEE HAD DECLARED A GROSS PROFIT RATIO OF 3.48% IN THE YEAR UNDER CONSIDERATION, WHEREAS THE ASSESSING OFFICER ESTIMATED THE SUM AT 5.09% ON THE BASIS OF THE GROS S PROFIT RATE SHOWN BY THE ASSESSEE IN ASSESSMENT YEAR 2002-03. THE CI T(A) HAS SCALED DOWN THE ESTIMATION TO 4.48%, BASED ON THE AVERAGE OF THE GROSS PROFIT RATE DECLARED FOR SIX ASSESSMENT YEARS OF 2001-02 T O 2006-07. THE DIFFERENCE BETWEEN THE ESTIMATION BY THE CIT(A) AN D THE ASSESSEE IS 1%, (I.E. 4.48% (-) 3.48%). IN OUR CONSIDERED OPINION, ONCE THE BOOK RESULTS ARE REJECTED THERE IS CERTAIN DEGREE OF ESTIMATION REQUIRED TO COMPUTE THE INCOME, AND IN SUCH AN ESTIMATION IS BOUND TO BE HIGHER THAN THE DECLARED RESULTS. THEREFORE, CONSIDERING THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT THAT THERE IS ANY JUSTIFICATION TO INTERFERE WITH THE GROSS PROFIT RATE ESTIMATED BY THE CIT(A) AS IT CANNOT BE TREATED AS EXCESSIVE OR UNREASONABLE. THE ORDER OF THE CIT(A) IS HEREBY AFFIRMED. THEREFORE, IN SO FAR AS, THE APPE AL OF THE ASSESSEE IS CONCERNED, THE SAME IS LIABLE TO DISMISSED. WE HO LD SO. 7 ITA. NO.827& 1160 /MUM/2009 (ASSESSMENT YEAR : 2005-06) 7. NOW TAKING UP THE APPEAL OF THE REVENUE, WHERE IN THE ISSUES RELATE TO THE DELETION OF ADDITIONS OF RS.14,34,407/- AND RS.22,55,970/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCKS AND UNE XPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT RESPECTIVE LY. 8. IN THE AFORESAID CONTEXT, IT WAS A COMMON P OINT BETWEEN THE PARTIES THAT BOTH THE ISSUES ARE FULLY COVERED IN FAVOUR OF THE ASSSESSEE BY ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSME NT YEAR 2004-05 IN ITA NO. 7157/MUM/2007 WHEREIN THE TRIBUNAL HAS CONF IRMED THE DELETION OF ADDITIONS BY THE CIT(A). IT WAS SUBMIT TED THAT IN ASSESSMENT YEAR 2003-04 ALSO SIMILAR ADDITION WAS MADE WHICH WAS DELETED BY CIT(A) AND SAME REMAINS UNCHALLENGED BY REVENUE. 9. WE HAVE CAREFULLY PERUSED THE ORDERS OF AUTH ORITIES FOR THE PRECEDING ASSESSMENT YEARS 2003-04 AND 2004-05 AND FIND THAT THE ISSUES DECIDED IN THOSE YEARS ARE PARI-MATERIA TO THE ISSUES IN THIS YEAR. OUR CO-ORDINATE BENCH IN THE YEAR 2004-05 VIDE IN ITA NO 7157/M/2007 AND C.O. NO 31/MUM/2008, DATED 05/10/20 09 HAS AFFIRMED THE DELETION OF SIMILAR ADDITIONS BY THE CIT(A) BY OBSERVING AS UNDER :- 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE RECORDS. HAVING REGARD TO THE FACT THAT THE REVENUE 8 ITA. NO.827& 1160 /MUM/2009 (ASSESSMENT YEAR : 2005-06) ACCEPTED THE ORDER PASSED BY CIT (A) PERTAINING TO THE ASSESSMENT YEAR 2003-04 AND ALSO KEEPING IN MIND T HE DETAILED REASON GIVEN BY CIT (A) IN THE IMPUGNED ORDER WHIC H ARE ON THE SAME LINES , AS IN THE EARLIER YEARS CIT (A)S OR DER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) . THE ORDER OF CIT (A) IS HEREBY CONFIRMED. 10. THEREFORE, RESPECTFULLY FOLLOWING THE ORDER O F CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05 O N SIMILAR FACTS, APPEAL OF REVENUE IS DISMISSED. 11. RESULTANTLY, BOTH THE APPEALS ARE DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 30/09/2015 . SD/- SD/- (SANJAY GARG) (G.S.PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI,DATED 30 /09/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBA I VM , SR. PS