Kusum Silk Mills Pvt.Ltd., Surat V. The Dy.CIT., Circle-1, Surat

ITA 921/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62926 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-07-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 29-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: SAPENSH R SHETH
• Keywords: Gross profit estimation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO. 921/ AHD/2010 (ASSESSMENT YEAR 2004-05) KUSUM SILK MILLS PVT. LTD., V-2144, 1 ST FLOOR, SURAT SILK MARKET, RING ROAD, SURAT VS. DCIT, CIRCLE 1, SURAT PAN/GIR NO. : AABCK0234G (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI SAPENSH R. SHETH, AR RESPONDENT BY: SHRI B L YADAV, SR. DR DATE OF HEARING: 19.07.2012 DATE OF PRONOUNCEMENT: 31.08.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) I, SURAT DATED 10.02.2010 FOR THE ASSESSMENT YEAR 2004 -05. THE ONLY GROUND RAISED BY THE ASSESSEE IS AS UNDER: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE WELL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN MAKING ADDITION OF RS.6,06,394/- ON ACCOUNT OF LOW GROSS PROFIT. IT IS THEREFORE, PRAYED THAT ABOVE ADDITIO NS MADE BY THE A.O. AND CONFIRMED BY CIT(A) MAY PLEASE BE DELETED. 2. THE BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NO TED BY LD. CIT(A) IN PARA 2.1 OF HIS ORDER WHICH IS REPRODUCED BELOW: 2.1 THIS IS REGARDING ADDITION OF RS.6,06,394/- ON ACCOUNT OF LOW G.P. IN THE ASSESSMENT ORDER, THE A.O, HAS STATED THAT THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 28.12.2 006 BY I.T.A.NO.921 /AHD/2010 2 MAKING ADDITION OF RS.7,59,671/- ON ACCOUNT OF CLOS ING STOCK OF WORK-IN-PROGRESS AND RS.6,06,394/- ON ACCOUNT OF LO W G.P. THE A.O. FURTHER OBSERVED THAT SINCE THE ADDITION ON A CCOUNT OF CLOSING STOCK OF WORK-IN-PROGRESS WAS HIGHER THAN THE ADDIT ION MADE ON ACCOUNT OF ESTIMATION OF ADDITIONAL G.P., NO SEPAR ATE ADDITION WAS MADE ON ACCOUNT OF ADDITIONAL G.P. IN THE COMPUTATI ON OF INCOME. DURING THE APPELLATE PROCEEDINGS, THE CIT(A) UPHELD THE FINDING OF THE A.O. AND CONFIRMED THE ADDITION OF RS.7,59,671/ - ON ACCOUNT OF CLOSING STOCK OF WORK-IN-PROGRESS. HOWEVER, NO FI NDING WAS GIVEN BY THE CIT(A) IN RESPECT OF ADDITION OF RS.6, 06,394/- MADE ON ACCOUNT OF ADDITION OF G.P. ESTIMATED BY THE A.O . AFTER REJECTING THE BOOKS OF ACCOUNT. THE A.O. THAT IN FACT THE ASS ESSEE DID NOT CHALLENGE THIS ISSUE BEFORE THE CIT(A). THE A.O. FURTHER STATED THAT THE ASSESSEE WENT BEFORE THE HON'BLE ITAT AGAI NST THE CIT(A) IN RESPECT OF ADDITION OF RS.7,59,671/- WHICH WAS CONFIRMED BY HIM. THE HON'BLE ITAT, VIDE ITS ORDER IN ITA NO.469/AHD/2007 DATED 31.03.2008 SET ASIDE THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO THE A.O. TO RECOMPUTE THE INCOME AFTER APPLYING THE PROCESSING CHARGES AT RS. 3.02 PER METER ON UNACCOUNTED STOCK OF GREY CLOTH PROCESSED BY THE ASSESSEE BY TAKING AVERAGE PROCESSING OF CLOTH PER DAY AT 5,000 METERS. THE A.O., THEREFORE, ISSUED A NOTICE U/S. 143(2) AN D THE ASSESSEE WAS ASKED TO FURNISH THE REWORKING OF THE I NCOME IN ACCORDANCE WITH THE ORDER OF THE HON'BLE I.T.A.T. THE ASSESSEE DID NOT REPLY TO THIS LETTER AND THE A.O., THEREFOR E, WORKED OUT THE ADDITION OF WORK-IN-PROGRESS FOLLOWING THE ORDER OF THE HON'BLE ITAT AS UNDER:- '4. IN PARA NO.4 OF THE ORDER, THE HON'BLE I.T.A.T. , AHMEDABAD HAS DIRECTED THE ASSESSING OFFICER TO REC OMPUTE THE INCOME AFTER APPLYING THE PROCESSING CHARGES AT RS.3.02 PER METER ON UNACCOUNTED STOCK OF GREY DOTH PROCESS ED BY THE ASSESSEE BY TAKING AVERAGE PROCESSING OF CLOTH PER DAY AT 5000 METER. HERE IT IS PERTINENT TO NOTE THAT THE A SSESSING OFFICER HAS APPLIED THE PROCESSING CHARGES AT RS.4. 9 PER METER (I.E. 50% OF RS.9.8) AND THE AVERAGE OF PROCE SSING OF CLOTH PER DAY AT 31007 METERS AND DETERMINED TOTAL UNDISCLOSED INCOME ON THIS ACCOUNT AT RS.7,59,671/- (31,007 X 5 DAYS X 4.9). AFTER CONSIDERING THE FINDINGS OF THE HON'BLE I.T.A.T. TOTAL UNDISCLOSED INCOME ON THIS ACCOUNT W OULD BE REDUCED TO RS.75,500/- (5000 X 5 DAYS X 3.02).' THE A.O. FURTHER AN ADDITION OF G.P. OF RS.6,08,394 /- AS IN ORIGINAL ORDER THE ASSESSEE NOT RAISED THIS GROUND BEFORE TH E CIT(A) OR I.T.A.NO.921 /AHD/2010 3 HON'BLE 1TAT. THE A.O. STATED THAT THE HON'BLE I.T. A.T. HAS GIVEN DIRECTION ONLY IN RESPECT OF THE ADDITION OF WORK-I N-PROGRESS AND NOT OF G.P. ADDITION WHICH MEANS THAT THE A.O. HAS ACCEPTED THE G.P. ADDITION. THE A.O. FURTHER STATED THAT SINCE T HE G.P. ADDITION AMOUNTING TO RS.5,06,394/- BEING MORE THAN THE WORK -IN-PROGRESS OF RS.7,59,671/- HE RETAINED THE G.P. ADDITION OF R S.6,06,394/- BY GIVING TELESCOPING TO THE WORK-IN-PROGRESS ADDITION . 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A). BEFORE LD. CIT(A), IT WAS SUBMITTED BY THE ASSESS THAT GP ADDITION SHOULD NOT BE MADE BECAUSE IN THE ORIGINAL ORDER, GP ADDITION HAS NOT BEEN MADE AND ONLY W.I.P. ADDITION WAS MADE . IT IS NOTED BY LD. CIT(A) THAT IN THE ORIGINAL ASSESSMENT ORDER, THE A .O. REJECTED THE BOOKS OF ACCOUNT AND MADE GP ADDITION OF RS.6,06,394/-. HE HAS FURTHER NOTED THAT THE A.O. HAS ALSO MADE ADDITION OF CLOSING STO CK OF W.I.P. OF RS.7,59,671/- AND, THEREAFTER, THE A.O. STATED THAT THE ADDITION FOR W.I.P. WAS MORE AND BECAUSE OF TELESCOPYING EFFECT, ADDITI ON OF ONLY W.I.P. IS RETAINED. LD. CIT(A) HAS GIVEN A FINDING THAT A.O. HAS MADE GP ADDITION AS WELL AS W.I.P. ADDITION AND HAD GIVEN TELESCOPYI NG EFFECT AND THEREFORE, NET ADDITION WAS ONLY W.I.P. ADDITION. HE HAS ALSO NOTED THAT DURING THE ORIGINAL APPELLATE PROCEEDINGS, ASSESSEE HAS RAISED ONLY GROUND REGARDING W.I.P. ADDITION OF CLOSING STOCK AND NO GROUND WAS RAISED REGARDING GP ADDITION AND, THEREFORE, IN THE TRIBUNAL ORDER ALSO , THE TRIBUNAL HAS DISCUSSED ONLY W.I.P. ADDITION AND NOT THE GP ADDIT ION. LD. CIT(A) HAS GIVEN A FINDING THAT BY NOT RAISING SEPARATE GROUND FOR GP ADDITION, IT APPEARS THAT THE ASSESSEE HAS ACCEPTED THE GP ADDIT ION AND, THEREFORE, IN THE SECOND ROUND, NO SUCH GROUND CAN BE ENTERTAINED . NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. LD. A.R. REITERATED THE SAME ARGUMENTS, WHICH WE RE RAISED BEFORE LD. CIT(A). LD. D.R. SUPPORTED THE ORDER OF LD. CI T(A). I.T.A.NO.921 /AHD/2010 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE TRIBUNAL ORDER IN THE 1 ST ROUND IS AVAILABLE IN THE PAPER BOOK ON PAGES 3-5 IN I.T.A.NO. 4091/AHD/2007 DATED 31.03.20 08. AS PER THIS, THE ONLY GROUND RAISED BY THE ASSESSEE WAS REGARDING TH E ADDITION OF RS.7,59,671/- ON ACCOUNT OF CLOSING STOCK OF W.I.P. AND THIS ISSUE WAS SET AIDE BY THE TRIBUNAL TO THE FILE OF THE A.O. FOR A FRESH DECISION. THE ORIGINAL ASSESSMENT ORDER DATED28.12.2006 IS ALSO A VAILABLE IN THE PAPER BOOK ON PAGES 21-28. IN THE SAME, WE FIND THAT AS PER PARS 5.9, IT WAS HELD BY THE A.O. THAT BOOK RESULTS ARE REJECTED AND ADDITION OF RS.6,06,394/- IS MADE BY ADOPTING GP RATE @ 14.32% AS AGAINST 13.59% SHOWN BY THE ASSESSEE. HE FURTHER STATED IN THE SA ME PARA OF THE ASSESSMENT ORDER THAT SINCE THIS ADDITION ON ACCOUN T OF CLOSING STOCK OF W.I.P. IS MORE THAN THE ADDITION MADE ON THIS ACCOU NT, NO SEPARATE ADDITION ON G.P. ACCOUNT IS MADE. THE RELEVANT PAR A OF THIS ASSESSMENT ORDER I.E. PARA 5.9 AT PAGE 26 IS REPRODUCED BELOW: 5.9 IN VIEW OF THE ABOVE FACTS, I AM NOT SATISFIED ABOUT THE CORRECTNESS AS WELL AS COMPLETENESS ABOUT THE ACCOU NT OF THE ASSESSEE. THEREFORE, RESORTING TO THE SECTION 145( 3) R.W.S. 144 OF THE ACT, THE BOOK RESULTS ARE REJECTED AND FURTHER PROFIT OF RS.6,06394/- (14.32% SHOWN BY BAJAJ FASHION PVT. LT D. LESS 13.59% SHOWN BY THE ASSESSEE = 0.73%) IS ESTIMATED AND ADDED TO THE TOTAL INCOME. HOWEVER, THE ADDITION ON ACCOUNT OF CLOSING STOCK OF W.I.P. IS MADE WHICH IS MORE THAN THIS AMO UNT, NO SEPARATE ADDITION ON THIS ACCOUNT IS MADE. 6. ORDER OF LD. CIT(A) IN ORIGINAL PROCEEDING IS AL SO AVAILABLE ON PAGES 6-9 OF THE PAPER BOOK WHICH IS DATED 16.08.20 07 AND AS PER THIS ORDER OF LD. CIT(A), ONLY ONE GROUND WAS RAISED BEF ORE HIM I.E. REGARDING ADDITION MADE BUY THE A.O. OF RS.7,59,671 /- FOR UNDERVALUATION OF CLOSING STOCK OF W.I.P. THIS GOES TO SHOW THAT THE ASSESSEE HAS I.T.A.NO.921 /AHD/2010 5 ACCEPTED THE GP ADDITION AND NO SUCH GROUND WAS RAI SED BEFORE LD. CIT(A) OR BEFORE THE TRIBUNAL IN THE 1 ST ROUND OF QUANTUM PROCEEDINGS. THEREFORE, SINCE IN THE SET ASIDE PROCEEDINGS, THE A.O. HAS NOT MADE ADDITION IN RESPECT OF CLOSING STOCK OF W.I.P., G.P . ADDITION MADE BY THE A.O. IN THE 1 ST ROUND STANDS AND THE SAME CANNOT BE DISPUTED NOW I N THE 2 ND ROUND. WE, THEREFORE FIND NO MERIT IN THE GROUND RAISED BEFORE US. THE SAME IS REJECTED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 22/08/12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 23/08/12.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 31/08/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.31/8/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31/08/2012 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. .