MJB India Industrial Repairs Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-2(1)(4), Ahmedabad

ITA 876/AHD/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7884 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: G C PIPARA
• Section: 143(3)

Judgement Text

SMC-ITA NO. 876/AHD/2016 MJB INDIA INDUSTRIAL REPAIRS PVT LTD VS. ITO AY : 2012-13 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD [ BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ] ITA NO. 876/AHD/2016 ASSESSMENT YEAR : 2012-13 MJB INDIA INDUSTRIAL REPAIRS PVT LTD ....... .....APPELLANT 22, DHARA CENTRE, VIJAY CHAR RASTA, NAVRANGPURA, AHMEDABAD-380 009 [PAN : AAECM 5416 F] VS. INCOME TAX OFFICER .......................RESPONDENT WARD 2 (1)(4), AHMEDABAD APPEARANCES BY: GC PIPARA, FOR THE APPELLANT VK SINGH, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 20.06.2018 DATE OF PRONOUNCING THE ORDER : 14.09.2018 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 16 TH MARCH 2016 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2012-13. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: 1. THE LD. CIT(A) HAS ERRED IN CONFIRMING THE LUMP SUM ADDITION OF RS.4,00,000/- OUT OF TOTAL ADDITION OF RS.21,11,600 /- MADE BY THE AO ON ACCOUNT OF ALLEGED LOW G.P. WORKED ON THE BASIS OF THREE (3) YEARS AVERAGE GP MERELY ON SURMISES, ASSUMPTIONS AND WITHOUT PROP ER CONSIDERATION AND APPRECIATION OF THE FACTS. IN VIEW OF FACTS AND SUB MISSIONS FILED COUPLED WITH LEGAL POSITION RELIED UPON, THE IMPUGNED ADDITION O F RS.4,00,000/- REQUIRES TO BE DELETED. 1.1. THE ID. CIT(A) HAS ERRED IN NOT APPRECIATIN G THE FACT THAT THE BOOKS OF ACCOUNTS OF APPELLANT COMPANY ARE AUDITED UNDER THE PROVISION OF COMPANIES ACT, 1956 AS WELL AS UNDER THE PROVISIONS OF INCOME TAX ACT, 1961 AND THERE IS NO ADVERSE REMARK BY ANY OF THE A UDITORS IN RESPECTIVE AUDIT REPORT. 1.2. THE ID. CIT(A) HAS FURTHER ERRED IN NOT AP PRECIATING THE FACT THAT G.P. RATIO IS NOT A STATIC/CONSTANT FIGURE FOR ALL THE Y EARS, THE IMPUGNED ADDITION SMC-ITA NO. 876/AHD/2016 MJB INDIA INDUSTRIAL REPAIRS PVT LTD VS. ITO AY : 2012-13 PAGE 2 OF 3 REQUIRES TO BE DELETED MORE PARTICULARLY WHEN THE G .P. RATIO OF PREVIOUS YEARS DULY ACCEPTED BY THE A.O, DURING THE COURSE O F PERVIOUS YEAR'S SCRUTINY ASSESSMENT PROCEEDINGS. 3. TO ADJUDICATE ON THIS ISSUE, ONLY A FEW MATERIA L FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINES S OF REPAIRS, REFURBISHMENT AND OVERHAULING OF INDUSTRIAL GAS TURBINES, SALES A ND MAINTENANCE OF COMPONENTS THEREOF AND PROVIDING FIELD MAINTENANCE AND ENGINEE RING SUPPORT STAFF FOR MAINTENANCE OF INDUSTRIAL GAS TURBINES. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE RE IS A FALL IN THE GROSS PROFIT RATE INASMUCH AS THE PRESENT YEARS GP IS 34% AS AG AINST 51.50% IN IMMEDIATELY PRECEDING YEAR AND 45.75% IN THE YEAR PRECEDING THE RETO. THE EXPLANATION OF THE ASSESSEE WAS THAT THERE IS AN INADVERTENT ERROR IN STATING THE GP AT 34% AND THE ACTUAL GP RATE IS 44.6%, THAT THE ACCOUNTS ARE DULY AUDITED AND THERE ARE NO ERRORS IN ACCOUNTS EMPLOYED BY THE ASSESSEE AND THAT THE G P RATE HAS MARGINALLY CHANGED DUE TO BUSINESS CONDITIONS. THE ASSESSING O FFICER, HOWEVER, BRUSHED ASIDE THESE SUBMISSIONS AND PROCEEDED TO ADOPT THE AVERAGE OF LAST THREE YEARS (I.E. 47.28%) AS AGAINST THE GP OF THE ASSESSEE AT 44.60%. ACCORDINGLY, AN ADDITION OF RS.21,11,600 WAS MADE. WHEN MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A), THE CIT(A) NOTED THAT THERE IS ADMITTEDLY A FALL IN THE GP RATE AND SINCE SUCH A FALL IS NOT REASONABLY EXPLAINED, AN AD-HOC ADDITION OF RS.4,00,000 IS JUSTIFIED TO CHECK THE LEAKAGE OF REVENUE. THE DI SALLOWANCE WAS THUS SUSTAINED TO THE EXTENT OF RS 4,00,000. THE ASSESSEE IS NOT S ATISFIED AND IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 5. I FIND THAT THERE IS A FALL OF 2.68% IN THE GP R ATE VIS--VIS THE AVERAGE OF LAST THREE YEARS. WHILE THE ASSESSEE HAS EARNED THE GP O F 44.60% IN THIS YEAR, THE AVERAGE OF LAST THREE YEARS IS ONLY 47.28%. THIS FA LL IS GP RATE IS ONLY MARGINAL AND THERE ARE NO DEFECTS NOTICED, OR EVEN ALLEGED, IN T HE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE BUSINESS SITUATIONS CAN NEVER BE SO S TATIC THAT THE GP RATE WILL BE UNIFORM, OR ALMOST UNIFORM, OVER A PERIOD OF TIME. THE VERY APPROACH ADOPTED BY THE ASSESSING OFFICER IS DEVOID OF ANY LEGALLY SUST AINABLE SUBSTANCE. THE MERE FALL IN GP RATE, WITHOUT ANYTHING ELSE- PARTICULARLY WHE N THE FALL IN GP RATE IS ONLY MARGINAL, CANNOT BE REASON ENOUGH TO MAKE AN ADHOC ADDITION, I, THEREFORE, DEEM IT FIT AND PROPER TO DELETE THE IMPUGNED DISALLOWAN CE OF RS 4,00,000 AS WELL. THE ASSESSEE SUCCEEDS ON THIS POINT. 6. GROUND NO. 1 IS THUS ALLOWED. 7. IN GROUND NO. 2 THE ASSESSEE HAS RAISED THE FOLL OWING GRIEVANCE: 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ADDITION OF RS.1,27,110/- ON ACCOUNT OF DELAYED PAY MENT OF EMPLOYEES CONTRIBUTION TO P.F RELYING UPON THE DECISION OF TH E HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT C ORPORATION [2014] 41 TAXMANN.COM 100 (GUJ.). IT IS SUBMITTED WITH DUE RE SPECT TO THE ABOVE SMC-ITA NO. 876/AHD/2016 MJB INDIA INDUSTRIAL REPAIRS PVT LTD VS. ITO AY : 2012-13 PAGE 3 OF 3 DECISION THAT SUBSEQUENTLY THE HON'BLE KARNATAKA HI GH COURT IN THE CASE OF ESSAE TERAOKA (P.) LTD. VS. DCIT [2014] 43 TAXMANN. COM 33 (KARNATAKA) HAS TAKEN A VIEW IN FAVOR OF THE ASSESSEE WHILE DIS AGREEING WITH THE DECISION OF THE HON'BLE GUJARAT HIGH COURT. THAT AP ART, SINCE THE SLP FILED AGAINST THE SAID DECISION BEFORE THE HON'BLE SUPREM E COURT HAVING BEEN ADMITTED, THE ISSUE IN DISPUTE BEING ADDITION OF RS .1,27,110/- BE DECIDED ACCORDINGLY. 8. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE IS SUE IS COVERED AGAINST THE ASSESSEE BY HONBLE JURISDICTIONAL HIGH COURTS JUD GMENT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRANSPORT CORPORATION, 366 ITR 1 70 (GUJ.). LEARNED COUNSEL FOR THE ASSESSEE NEVERTHELESS RELIES UPON HONBLE K ARNATAKA HIGH COURT JUDGMENT, AS REFERRED TO IN THE GROUND OF APPEAL AB OVE, AND THE FACT THAT THE SLP ON THIS ISSUE IS ADMITTED BY HONBLE SUPREME COURT. 9, RESPECTFULLY FOLLOWING THE VIEWS OF HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF GUJARAT STATE ROAD TRANSPORT CORPORATION (S UPRA), I CONFIRM THE DISALLOWANCE AND DECLINE TO INTERFERE IN THE MATTER . 10. GROUND NO. 2 IS THUS DISMISSED. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 14 TH DAY OF SEPTEMBER, 2018. SD/- PRAMOD KUMAR (ACCOUNTANT MEMBER) AHMEDABAD, THE 14 TH DAY OF SEPTEMBER, 2018 **PK-BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ......14.09.2018.......... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ... 14.09.2018... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 14.09.2018.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : .. 15.09.2018. 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : 15.09.2018. 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : . 8. DATE OF DESPATCH OF THE ORDER: ......