HARSHCHANDRA D. RANE, MUMBAI V. ACIT CIR 20(1), MUMBAI

ITA 90/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3924 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 23-07-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 06-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation
• Section: 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H B ENCH, MUMBAI . . , !'#$ , % &' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./ I.T.A. NO. 90/MUM/2011 ( ( ( ( ( / ASSESSMENT YEAR : 2007-08 SHRI HARISHCHANDRA D. RANE, 29-BM GIRIKUNJ INDUSTRIAL ESTATE, OFF MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI-400 093 THE ACIT, CIR 20(1), MUMBAI ') % ./ *+ ./PAN/GIR NO. : AAAPR 4697Q ( ), /APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY : ` SHRI KIRAN MEHTA -.), 0 / /RESPONDENT BY : SHRI ABHINAY KUMBHAR 0 12% / DATE OF HEARING :23.07.2013 34( 0 12% / DATE OF PRONOUNCEMENT :23.7.2013 &5 / O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A)-31, MUMBAI DT.30.8.2010 PE RTAINING TO A.Y. 2007-08. THE APPEAL IS LATE BY 8 DAYS. REASONS HAVE BEEN GIVEN IN THE AFFIDAVIT FILED PRAYING FOR THE CONDONATION OF DELA Y. WE HAVE PERUSED THE CONTENTS OF THE AFFIDAVIT AND FIND THAT THE ASSESSE E WAS PREVENTED BY ITA NO.90/M/2011 2 REASONABLE AND SUFFICIENT CAUSE FOR NOT FILING THE APPEAL ON TIME, THEREFORE THE DELAY IS CONDONED. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSING OFFI CER WAS JUSTIFIED IN REJECTING THE BOOK RESULTS AND ASSESSING THE GROSS PROFIT AT 10% OF TURNOVER. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN TURNOVER AT RS . 6.12 CRORES FOR THE YEAR UNDER CONSIDERATION ON WHICH HE HAS DECLARED A LOSS AT RS. 15,86,338/- AND AFTER CLAIMING DEPRECIATION AS PER INCOME TAX ACT LOSS HAS BEEN SHOWN AT RS. 26,16,111/-. ON FURTHER VERI FYING THE TRADING RESULTS, THE AO OBSERVED THAT IN THE IMMEDIATELY PR ECEDING ASSESSMENT YEAR THE ASSESSEE HAS SHOWN NET PROFIT AT 7.4% OF S ALES WHEREAS FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN LO SS OF 20.61 LACS ON TURNOVER OF RS. 6.12 CRORES. ON FURTHER VERIFICATI ON, THE AO OBSERVED THAT THE ASSESSEE HAS SHOWN CONSUMPTION OF RAW MATERIAL AT 83% OF SALES WHEREAS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEA R, THE CONSUMPTION WAS SHOWN AT 74% OF SALES. THE AO FURTHER FOUND TH AT THE EXPENSES ON ACCOUNT OF CARRIAGE INWARD/OUTWARD AND TRANSPORT CH ARGES ARE ALSO ON THE HIGHER SIDE. AFTER CONSIDERING THE SUBMISSIONS MAD E BY THE ASSESSEE IN THIS RESPECT, THE AO REJECTED THE BOOK RESULTS AND BY APPLYING THE PROVISIONS OF SEC. 145 ADOPTED THE GROSS PROFIT RAT E OF 10% OF SALES AND COMPUTED THE BUSINESS INCOME AT RS. 35,08,272/-. 4. BEING AGGRIEVED BY THIS FINDING, THE ASSESSEE CA RRIED THE MATTER BEFORE THE LD. CIT(A). IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT THE AO SHOULD HAVE ALLOWED/ADJUSTED THE INDIRECT AND AD MINISTRATIVE EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT WHI LE COMPUTING THE TOTAL ITA NO.90/M/2011 3 INCOME. IT WAS ALSO CONTENDED THAT THE GP RATE ADO PTED BY THE AO AT 10% IS VERY MUCH ON THE HIGHER SIDE. THE LD. CIT(A ) OBSERVED THAT AGAINST THE GP SHOWN BY THE ASSESSEE AT RS. 38,88,3 35/-, THE AO HAS WORKED OUT THE GP AT RS. 61,24,383/- AND AFTER REDU CING THE LOSS OF RS. 26,16,111/- AGAINST THE GP OF RS. 61,24,383/-, THE AO HAS WORKED OUT A NET ADDITION OF RS. 35,08,272/-. THE LD. CIT(A) WA S OF THE OPINION THAT THE AO SHOULD HAVE MADE THE ADDITION ON ACCOUNT OF DIFFERENCE IN GP AND ON THAT NOTE, THE LD. CIT(A) CONFIRMED THE ADD ITION OF RS. 22,36,048/- THAT IS THE DIFFERENCE BETWEEN THE GP A PPLIED AND GP SHOWN. 5. AGGRIEVED BY THIS FINDING OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THA T THE GP RATE ADOPTED BY THE LOWER AUTHORITIES IS VERY MUCH ON TH E HIGHER SIDE CONSIDERING THE FACTS OF THE CASE. 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE AO. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES. IT IS NOT IN DISPUTE THA T THE AO HAS ADOPTED GP RATE ON THE TOTAL SALES OF THE ASSESSEE. IT IS ALS O NOT IN DISPUTE THAT THE AO HAS NOT ALLOWED INDIRECT EXPENSES AND OVERHEADS FRO M THE GP SO COMPUTED. THE AO HIMSELF HAS ADMITTED THAT IN THE PRECEDING ASSESSMENT YEAR THE ASSESSEE HAS SHOWN PROFIT AT 7%. CONSIDER ING ALL THESE FACTS IN TOTALITY, IN OUR CONSIDERATE VIEW, THE GP RATE OF 7 .25% , IF ADOPTED, WOULD MEET THE ENDS OF JUSTICE. THE AO IS ACCORDINGLY DI RECTED TO ADOPT THE GP RATE AT 7.25% AND THEREAFTER FOLLOW THE FINDINGS OF THE LD. CIT(A). TO THIS EXTENT, THE FINDINGS OF THE LD. CIT(A) ARE MOD IFIED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.90/M/2011 4 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.7.2013 . &5 0 4( % 6 7&8 23.7.2013 4 0 9 SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) /PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 23/07/2013 . . ./ RJ , SR. PS &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! :!(1 :!(1 :!(1 :!(1 / COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. !<9 -1 , , / DR, ITAT, MUMBAI 6. 9= > / GUARD FILE. &5 &5 &5 &5 / BY ORDER, .!1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ * * * * (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI