M/S. MUNGAD ALUMINIUM P. LTD., Indore V. THE ITO-WARD 2(2), Indore

ITA 88/IND/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5696 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 22-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: K C AGRAWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER I.T.A. NO.88/IND/2016 ASSESSMENT YEAR: 2010-11 M/S.MUNGAD ALUMINIUM P.LIMITED, 6, NAGRACHI BAKHAL, INDORE. PAN: AAGCM1447E VS. ITO, WARD 2(2), INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI K.C.AGRAWAL, C. A. RESPONDENT BY : SHRI MOHD. JAVED, DR O R D E R PER D.T.GARASIA, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, INDORE, DATED 30/10/2015 FOR THE ASSE SSMENT YEAR 2010-11. 2. THE ONLY EFFECTIVE GROUND IS GROUND NO.2, WHICH READ S AS UNDER :- DATE OF HEARING : 25 . 0 7 .2016 DATE OF PRONOUNCEMENT : 25 . 0 7 .2016 M/S. MUNGAD ALUMINIUM P.LTD., INDORE VS. ITO, INDOR E I.T.A.NO. 88/IND/2016 A.Y. 2010-11 2 2 THE PETITIONER SUBMITS THAT THE LD. CIT(A)-I, INDO RE, HAS ERRED IN MAINTAINING THE ESTIMATION OF THE GROS S PROFIT @ 6% INSTEAD OF 4.23 % AS SHOWN AND THEREBY MAINTAINING AN ADDITION OF RS. 3,36,048/-, WITHOUT ANY BASIS. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS CARRYING ON THE BUSINESS OF ALUMINUM UTENSILS. DURI NG THE YEAR THE COMPANY WAS DOING ONLY TRADING ACTIVITIES A ND NO MANUFACTURING ACTIVITIES WERE CARRIED ON. THE ACCOU NTS ARE AUDITED U/S 44AB. THE DETAILS WERE FURNISHED BEFORE THE A.O. SUCH AS AUDITED ACCOUNTS ON 22/05/2012. D UE TO IGNORANCE OF PREVIOUS COUNSEL, CASE BEFORE THE A.O. COULD NOT BE EXPLAINED PROPERLY AND THEREFORE, BOOKS WERE REJECTED AND GRO SS PROFIT WAS ESTIMATED. THE A.O. IN HIS ORDER OBSERVED AS UND ER:- 'II. THE ASSESSEE IS ENGAGED IN MANUFACTURING OF UTENSILS OF ALUMINUM FROM DROSS I.E. SCRAPE OF ALUMINIUM PURCHASED FROM BALCO, NALCO, STARLIGHT, VEDANTA, ON TENDER BASIS. BUT, ON PERUSAL OF THE PR OFIT & LOSS ACCOUNT SUBMITTED BY THE ASSESSEE IT WAS SEEN THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENSES ON FREIGHT, LABOUR CHARGES, SALARIES, STATIONERY AN D PRINTING, LEGAL AND PROFESSIONAL AND AUDIT FEES. FURTHER, THE COMPANY REPEATEDLY ASKED TO PRODUCE TH E BOOKS OF ACCOUNTS, BILLS, AND VOUCHERS. BUT THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNTS , M/S. MUNGAD ALUMINIUM P.LTD., INDORE VS. ITO, INDOR E I.T.A.NO. 88/IND/2016 A.Y. 2010-11 3 3 BILLS AND VOUCHERS AND OTHER DOCUMENTS. AS SUCH THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS REJECTED AND KEEPING IN VIEW ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE DISCUSSIONS MADE WITH THE AR OF THE ASSESSEE THE GP OF THE ASSESSEE IS CONSIDERED AT 6% WHICH COMES TO RS.11,38,446/-. THE ASSESSEE HAS ALREADY SHOWN GP AT RS.8,02,398/-. AS SUCH RS. 3,36,048/- WAS ADDED TO THE INCOME OF THE ASSESSEE AND PENALTY PROCEEDINGS U/S 271(1) (C) OF INCOME TAX ACT, 1961 WAS INITIATED FOR FURNISHING INACCURATE PARTICULARS OF ITS INCOME.' THE DETAILS WERE FURNISHED BEFORE THE LEARNED CIT ( A) ALSO AND THE SAME WAS SENT FOR REMAND REPORT. THE A.O. DURIN G REMAND PROCEEDING, DID NOT CALL FOR ANY INFORMATION TO VERIFY THE CONTENTION AND REMAND REPORT SUBMITTED VAGUELY. THE LD.CIT(A) HAS UPHELD REJECTION OF BOOKS AS WELL AS E STIMATION OF PROFIT ON THE BASIS OF REMAND REPORT. THE LD. CIT(A ) WHILE ADJUDICATING APPEAL FOR PENALTY LEVIED U/S 271(1)(C ), WHERE COMPLETE DETAILS RELATED TO PURCHASES AND SALES WER E FURNISHED, DELETED THE PENALTY SO LEVIED ON THE AMO UNT OF ADDITION ON ACCOUNT OF ESTIMATION OF PROFIT ON MERI TS. 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS CONFIRMED THE ADDITION OF RS. 3,36,048/- BY OBS ERVING AS UNDER :- M/S. MUNGAD ALUMINIUM P.LTD., INDORE VS. ITO, INDOR E I.T.A.NO. 88/IND/2016 A.Y. 2010-11 4 4 IN THE SUBSEQUENT YEAR THE GROSS PROFIT HAS BEEN SHOWN AT RS. 8,02,398/- WHICH IN TERMS OF PERCENTAGE COMES TO 4.23 % HOWEVER THE NET PROFIT IS ONLY RS. 19,125/-. THE ENTIRE PURCHASE APPARENTLY APPEARS TO BE FROM SISTER CONCERN AND IN THE ABSENC E OF QUANTITATIVE DETAILS OF ITEMS PURCHASED/SOLD THE RATE OF PURCHASE/SALE CANNOT BE VERIFIED TO ARRIVE AT THE GROSS PROFIT MARGIN. IN THE LIGHT OF ABOVE THE ESTIMATION OF GROSS PROFIT @ 6% AND THE CONSEQUENT ADDITION OF RS. 3,36,048/- TO THE TOTAL INCOME IS CONFIRMED IN APPEAL. 5. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THE WRITTEN SUBMISSIONS, WHICH READ AS UN DER :- THAT ACCOUNTS OF THE COMPANY ARE AUDITED U/S 44AB. THAT ALL PURCHASES AND SALES ARE VOUCHED. THAT PERUSAL OF BALANCE SHEET REVEALS THAT THERE WAS NO INVESTMENT IN FACTORY BUILDING AND MACHINERY. THE SAME IS SUPPORTED THE CONTENTION THAT THERE WAS NO MANUFACTURING ACTIVITY DURING THE YEAR. THAT ALL TH E PURCHASES AND SALES HAVE PROPERLY BEEN ACCEPTED BY THE COMMERCIAL TAX AUTHORITY, AND THUS, THERE WAS NO QUESTION OF ENHANCEMENT OF GROSS PROFIT BY ESTIMATI NG AS AGAINST SHOWN IN SUCH BOOKS OF ACCOUNTS. THE LD.CIT(A) IN HIS ORDER OBSERVED AS UNDER:- THE BOOKS OF ACCOUNT, BILLS, VOUCHERS WERE NOT SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT HAS NOT PLACED ANY DOCUMENTS ON RECORDS OR EVIDENCE TO SHOW THAT ABOVE HAVE BEEN FURNISHED BEFORE THE ASSESSING OFFICER. THE APPELLANT DID NOT GIVE THE QUANTITY DETAILS OF PURCHASE. NO FURTHER WORKING OF STOCK DETAILS WERE FURNISHED. IN THIS REGARD, OUR COMMENTS/ REMARKS ARE AS M/S. MUNGAD ALUMINIUM P.LTD., INDORE VS. ITO, INDOR E I.T.A.NO. 88/IND/2016 A.Y. 2010-11 5 5 UNDER :- THAT ACCOUNTS ARE AUDITED AND THE RECORDS SO STIPULATED IN AUDIT REPORT ARE MAINTAINED AND ONLY AFTER VERIFICATION OF SUCH RECORDS, AUDITORS MUST HAVE GIVEN HIS REPORT. AND THUS, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHERE DETAILS AND SUBMISSIONS WERE SENT FOR REMAND. IT WAS FOR THE LEARNED ASSESSING OFFICER TO CALL UPON THE RECORDS AS PER DETAILS FURNISHED TO REBUT THE SUBMISSION OF THE APPELLANT. UNLESS VERIFICATION IS DONE BY THE LEARNED ASSESSING OFFICER SUCH ASSUMPTION IS NOT VALID IN THE EYES OF LAW. THAT WHEN DETAILS AND EVIDENCES WERE FURNISHED BEFORE THE APPELLANT AUTHORITIES AND THE SAME WERE SUBJECT TO VERIFICATION BY THE ASSESSING OFFICER BY WAY OF REMAND, SUCH OBSERVATION THAT THE APPELLANT COULD NOT PLACE ANY EVIDENCE FOR FURNISHING OF SUCH DETAILS, WAS HAVING NO FORCE. THAT QUANTITY DETAILS ARE SIMULTANEOUSLY BEEN MAINTAINED IN THE BOOKS OF ACCOUNTS AND THUS, THERE WAS NO REQUIREMENT TO MAINTAIN SEPARATE RECORDS. THE SOFTWARE CONTAINS ALL DETAILS RELATED TO FINANCIAL AND QUANTITY. ALL DETAILS ARE MAINTAINED AS STATED HEREINABOVE AND WE ARE AGAIN SUBMITTING HEREWITH QUANTITY DETAILS IN PURCHASE AND SALES ACCOUNT FOR YOUR KIND PERUSAL AND SO ALSO, VALUATION OF CLOSING STOCK. THAT THE LEARNED CIT (A) IN THE ORDER PENALTY HAS CONSIDERED ALL SUCH FACTS AND M/S. MUNGAD ALUMINIUM P.LTD., INDORE VS. ITO, INDOR E I.T.A.NO. 88/IND/2016 A.Y. 2010-11 6 6 DELETED PENALTY LEVIED ON ADDITIONS ON A/C OF ESTIMATION OF PROFIT ON MERITS. IT IS A SETTLED LAW THAT WHERE BOOKS OF ACCOUNT ARE AUDITED AND QUANTITY DETAILS ARE AVAILABLE IN BOOKS OF ACCOUNTS AND UNLESS THERE IS ANY EVIDENCE TO MAKE OUT ANY DEFECT IN IT, ONLY ON PRESUMPTIONS, BOOKS OF ACCOUNTS CANNOT BE REJECTED AND THUS, GROSS PROFIT SO DETERMINED ARE AS PER BOOKS OF ACCOUNTS IN ACCEPTABLE. IT IS ALSO SUBMITTED THAT WITHOUT PREJUDICE TO THE ABOVE, AS FAR AS APPLICATION OF 6% OF G.P. RATE IS CONCERNED IT IS SUBMITTED THAT ADOPTION OF ABNORMALLY HIGHER RATE OF PROFIT ON THE ADMITTED TURNOVER CANNOT BE SAID TO BE CORRECT. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF DHAKESWARI COTTON MILLS LIMITED VS. CIT, (1954) 26 ITR 775 (S.C.) AND SURESH CHANDRA TALERA VS. UNION OF INDIA, (2006) 282 ITR 341 (MP). IN VIEW OF THE ABOVE, THE BOOKS OF ACCOUNTS SO REJECTED U/S 145(3) WAS WRONG AND SO ALSO ESTIMATION OF GROSS PROFIT. IT IS PRAYED THAT THE ADDITION OF RS. 3,36,048/- SO MADE WAS PLEASED BE DELETED. 6. THE LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. M/S. MUNGAD ALUMINIUM P.LTD., INDORE VS. ITO, INDOR E I.T.A.NO. 88/IND/2016 A.Y. 2010-11 7 7 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE HAS NOT PRODUCED THE BOOKS OF ACC OUNTS, BILLS, VOUCHERS, REGISTERS AND QUANTITATIVE DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE DETAILS OF PU RCHASE AND SALE FILED BY THE ASSESSEE DID NOT GIVE THE DETAILS OF QUANTITY PURCHASED AND SOLD. THE QUANTITY DETAILS WERE AVAIL ABLE IN THE TAX AUDIT REPORT AND IN TAX AUDIT REPORT, CLOSING T OCK WAS VALUED AT COST CERTIFIED BY THE DIRECTOR AND NO FU RTHER WORKING OF STOCK VALUATION WAS GIVEN. PROFIT AND LOSS ACCOUN T DOES NOT GIVE ANY QUANTITATIVE DETAILS. THE ASSESSEE HAS NOT PRODUCED ANY STOCK REGISTER OR OTHER QUANTITATIVE DETAILS OF THE ITEMS, WHICH THE ASSESSEE HAS TRADED. THEREFORE, WE ARE OF T HE VIEW THAT THE AO WAS JUSTIFIED IN REJECTING THE BOOK RESU LT. THE AO HAS ESTIMATED GROSS PROFIT AT 4.23 %, BUT NET PROFI T WAS ON THE LOWER SIDE. THEREFORE, THE GROSS PROFIT WAS CONFIRME D AT 6%. WE ARE OF THE VIEW THAT 6% GROSS PROFIT IS ALSO ON ESTI MATED BASIS. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY , WE DIRECT THE M/S. MUNGAD ALUMINIUM P.LTD., INDORE VS. ITO, INDOR E I.T.A.NO. 88/IND/2016 A.Y. 2010-11 8 8 AO TO TAKE GROSS PROFIT RATE OF 5% INSTEAD OF 6% AP PLIED BY THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 25 TH JULY,2016. SD/- (O.P.MEENA) ACCOUNTANT MEMBER SD/- (D.T.GARASIA) JUDICIAL MEMBER DATED : 25 TH JULY, 2016. CPU* COPY TO: 1. THE ASSESSEE. 2. THE A.O. CONCERNED. 3. THE LD. PCIT CONCERNED 4. THE LD. CIT(A) 5. THE D.R., INDORE 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., INDORE