Asstt. Commissioner of Income Tax, V. Blue Precision Ltd.,

ITA 957/DEL/2005

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9955 (ITAT-DELHI)
• Duration Of Justice: 10 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-04-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 28-02-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Keywords: Gross profit estimation; Opportunity of being heard; Fair market value

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. INTURI RAMA RAO, ACCOUNTANT MEMBER I.T.A .NO.-957/DEL/2005 (ASSESSMENT YEAR-2000-01) ACIT, RANGE-II, FARIDABAD. APPELLANT) VS M/S BLUE PRECISION LTD., PLOT NO.-111, SECTOR-59, FARIDABAD (RESPONDENT) CO-26/DEL/2007 (IN I.T.A .NO.-957/DEL/2005) (ASSESSMENT YEAR-2000-01) M/S BLUE PRECISION LTD., PLOT NO.-111, SECTOR-59, FARIDABAD (APPELLANT) VS ACIT, RANGE-II, FARIDABAD (RESPONDENT) APPELLANT BY SH.GAURAV DUDEJA, SR.DR RESPONDENT BY NONE ORDER PER DIVA SINGH, JM THE PRESENT APPEAL IS LISTED BEFORE US AS A RESULT OF ORDER DATED 03.08.2012 IN MA.NO.-580/DEL/2009 BY WHICH ORDER DA TED 06.09.2007 IN ITA NO.957/DEL/2005 IN THE FIRST ROUND WAS RECALLED BY THE CO-ORDINATE BENCH. 2. BY THE PRESENT APPEAL FILED BY THE REVENUE THE C ORRECTNESS OF THE ORDER DATED 29.12.2007 OF CIT(A)-FARIDABAD IN 2000-01 HAS BEEN ASSAILED ON THE FOLLOWING GROUNDS:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHE R THE COMMISSIONER OF INCOME TAX(APPEALS) WAS RIGHT IN LAW:- 1. IN DELETING THE ADDITION OF RS.19,24,207/- ON ACCOU NT OF UNEXPLAINED LOW GROSS PROFIT RATE. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD , DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. DATE OF HEARING 29 .0 4 .2015 DATE OF PRONOUNCEMENT 13 .05.2015 I.T.A .NO.-957/DEL/2005 & CO-26/DEL/2007 2 3. THE CO-ORDINATE BENCH AS OBSERVED VIDE ITS ORDER DATED 06.09.2007 HAD DISMISSED THE APPEAL OF THE REVENUE AGAINST THE SAI D ORDER. THE DEPARTMENT THEREAFTER HAD FILED AN MA NO.-580/DEL/2009 ON THE FOLLOWING GROUNDS BEFORE THE CO-ORDINATE BENCH ON 09.01.2009:- THAT THERE IS PRIMA FACIE MISTAKE IN THE ORDER OF ITAT AS THE ASSESSING OFFICER HAS CONSIDERED THE ISSUE OF PURCHASES MADE FROM ITS SISTER CONCERN TO THE TUNE OF RS.16458685/- [RS.1,47,74,25 5/- FROM M/S BLUE STAMPING & FORGINGS LTD.+RS.1684430/- FROM M/S BLUE FORGINGS (P.) LTD.] WHICH ASSESSEE FAILED TO JUSTIFY THE MARKET R ATE VIS--VIS PURCHASE PRICE PAID TO SISTER CONCERN BY THE ASSESSEE AND TH IS WAS THE ONE OF THE MAIN REASONS FOR FALL IN G.P. THE ITAT HAS NOT DISC USSED OR OPINED ON THIS ISSUE. IN VIEW OF ABOVE, AS THE ITAT HAS NOT ANSWERED ALL THE ISSUE BEFORE IT. IT IS, THEREFORE, RESPECTFULLY PRAYED THAT THE TRIB UNAL DECIDE THE ISSUE REFERRED TO ABOVE AND/OR ANY OTHER ISSUE AS THE TRI BUNAL MAY DEEM FIT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND DECIDE THE CASE IN FAVOUR OF THE APPELLANT AND ACCORDINGLY THE M.A. BE ALLOWED. 3.1. CONVINCED WITH THE PLEA TAKEN, THE MA FILED B Y THE DEPARTMENT WAS ALLOWED BY THE CO-ORDINATE BENCH HOLDING THAT THERE WAS A MISTAKE IN THE AFORESAID ORDER OF THE TRIBUNAL IN AS MUCH AS IT DI D NOT CONSIDER THIS CONTENTION OF THE REVENUE BASED ON THE FINDINGS IN THE ASSESSMENT ORDER THAT ASSESSEE FAILED TO JUSTIFY THE MARKET RATE VIS--VI S THE PURCHASE PRICE PAID TO SISTER CONCERN AND THIS WAS ONE OF THE MAIN REASONS FOR FALL IN GP. THE CO- ORDINATE BENCH ON A PERUSAL OF THE ORDER UNDER CHAL LENGE ACCEPTED THAT THIS FACT HAS NOT BEEN CONSIDERED BY THE CO-ORDINATE BEN CH BEFORE ARRIVING AT A CONCLUSION. CONSIDERING THIS TO BE A MISTAKE OF FAC T THE ORDER UNDER CHALLENGE WAS RECALLED. 4. ON THE DATE OF HEARING, NO ONE WAS PRESENT ON BE HALF OF THE ASSESSEE. ON A PERUSAL OF THE ORDER PASSED BY THE CO-ORDINATE BENCH IN THE MISCELLANEOUS APPLICATION AND THE ORDER PASSED BY T HE ITAT IN THE FIRST ROUND, THE ASSESSEE WAS REPRESENTED BY SH.R.A.GUPTA, FCA. THUS THE RECALL OF THE ORDER IS KNOWN TO THE ASSESSEE AS THE SAME COUNSEL REPRESENTED IN THE M.A. ALSO. HOWEVER, IN THE PRESENT PROCEEDINGS PURSUANT TO THE ORDER IN MA, THE ASSESSEE REMAINED UNREPRESENTED. THE RECORD SHOWS T HAT NOTICE FOR THE SPECIFIC DATE OF HEARING HAS BEEN ISSUED TO THE ASSESSEE ON 03.03.2015 FOR BOTH THE ASSESSEES APPEAL AS WELL AS THE CO FILED BY THE A SSESSEE. DESPITE THIS, NO ONE WAS PRESENT OF BEHALF OF THE ASSESSEE. THE RECORD FURTHER SHOWS THAT EVEN ON I.T.A .NO.-957/DEL/2005 & CO-26/DEL/2007 3 EARLIER OCCASION I.E. IN RESPONSE TO NOTICE DATED 0 9.12.2014 INTIMATING THE DATE OF HEARING ON 05.02.2015, THE ASSESSEE REMAINED UNR EPRESENTED. ACCORDINGLY CONSIDERING THE MATERIAL AVAILABLE ON RECORD, THE A PPEAL OF THE REVENUE IS BEING DECIDED AFTER HEARING THE SR. DR, MR. GAURAV DUDEJA WHO POINTING TO THE SPECIFIC FINDING OF THE AO IN PAGE 2 & 3 OF THE ASS ESSMENT ORDER SUBMITTED THAT THE ASSESSEE HAD FAILED TO JUSTIFY THE PURCHASE PRI CE PAID TO THE SISTER CONCERN BLUE STAMPING AND FORGING LTD ON ACCOUNT OF WHICH T HE GP OF THE ASSESSEE HAD FALLEN. FOR READY-REFERENCE, WE REPRODUCE THE RELEVANT PORTION FROM THE ASSESSMENT ORDER:- .THE ASSESSEE COMPANY HAS NO OTHER EXPLANATIO N TO OFFER FOR THE STEEP FALL IN G.P. THE ASSESSEE COMPANY WAS AL SO REQUESTED TO JUSTIFY THE PURCHASE PRICE PAID TO SISTER CONCERNS AS UNDER:- (I) BLUE STAMPING AND FORGING LTD. : RS.1,47,74,255/- (II) BLUE FORGING PVT. LTD. : RS.16,84,430/- THE ABOVE MENTIONED TWO COMPANIES ARE PERSONS REFER RED TO IN SECTION 40A(2B). AS MENTIONED ABOVE HUGE PURCHASES HAVE BE EN MADE FROM SISTER CONCERNS, THE ASSESSEE COMPANY WAS REQUESTED TO JUSTIFY THE MARKET RATE VIS--VIS PURCHASE PRICE PAID TO THE TW O SISTER CONCERNS. THE ASSESSEE COMPANY IN REPLY TO THIS QUERY HAS SIM PLY FILED COPIES OF PURCHASE ORDERS ISSUED BY THE ASSESSEE FOR PURCHASE S FROM BOTH THE ABOVE MENTIONED COMPANIES. IN SUB-SECTION (2) OF SECTION 40A, EXPENDITURE INCU RRED IN A BUSINESS OR PROFESSION FOR WHICH PAYMENT HAS BEEN OR IS TO BE M ADE IN THE TAX PAYERS RELATIVE OR ASSOCIATE CONCERN IS REQUIRED TO BE DISALLOWED IN COMPUTING ITS PROFIT OF THE BUSINESS OR PROFESSION TO THE EXTENT THE EXPENDITURE IS CONSIDERED TO BE EXCESSIVE OR UNREAS ONABLE. THE REASONABLENESS OF ANY EXPENDITURE IS TO BE JUDGED HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILIT IES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSI NESS OR PROFESSION OR THE BENEFIT DERIVED BY, OR ACCORDING TO THE TAX PAYERS FROM THE EXPENDITURE. SUCH PORTION OF THE EXPENDITURE WHICH IS EXCESSIVE OR UNREASONABLE ACCORDING TO THESE CRITERIAS IS TO BE DISALLOWED IN COMPUTING THE PROFIT OF THE BUSINESS OR PROFESSION. RELIANCE IS PLACED ON CIT VS SKY LINE INDS. PVT. LTD. 154 ITR 373 AND GA NESH SOAP WORKS VS. CIT 161 ITR 876 AND KUMAR ENGINEERS VS CIT 223 ITR 18. HOWEVER, NO SEPARATE ADDITION IS MADE ON THE ACCOUN T OF PURCHASES FROM SISTER CONCERNS AS THE PAYMENT ABOVE FAIR MARK ET VALUE HAS ALSO CONTRIBUTED TO THE FALL IN GROSS PROFIT AND ADDITIO N IS BEING DONE ON THAT ACCOUNT. IN VIEW OF THE ABOVE DOCUMENT AND DISCUSSION, IT I S HELD THAT THE ASSESSEE COMPANY HAS NOT SATISFACTORILY EXPLAINED T HE STEEP FALL IN G.P. RATE. AFTER GIVING CREDIT TO THE EXPLANATION OF TH E ASSESSEE, THE DIFFERENCE ON ACCOUNT F FALL IN GROSS PROFIT DURING THE YEAR, WHICH AMOUNTS TO RS.19,24,207, IS THEREFORE ADDED TO THE INCOME OF THE ASSESSEE COMPANY FROM BUSINESS. I.T.A .NO.-957/DEL/2005 & CO-26/DEL/2007 4 5. REFERRING TO THE ORDER OF THE CIT(A) WHICH FINDI NG HAS BEEN UPHELD BY THE ITAT WHICH HAS BEEN RECALLED IT WAS POINTED OUT THA T THE IMPUGNED ORDER DOES NOT MAKE REFERENCE TO THOSE FACTS AT ALL ACCORDINGL Y THE FINDING ARRIVED AT NOT CONSIDERING THE RELEVANT FACTS AS PER THE PRECEDENT LAID DOWN BY THE ITAT IN THE REVENUES MA THE SAME INFIRMITY ON FACTS IS GLARING IN THE IMPUGNED ORDER ALSO. ACCORDINGLY IT WAS HIS PRAYER THAT SINCE THE ISSUE STANDS CONCLUDED WHEREIN THIS FACT HAS NOT BEEN CONSIDERED IN THE IM PUGNED ORDER WHICH WAS INITIALLY ACCEPTED BY THE ITAT THEREAFTER REVERSED THE ONLY COURSE OF ACTION IS THAT THE ISSUE MAY BE RESTORED TO THE FILE OF THE C IT(A) WHO MAY BE DIRECTED TO CONSIDER THE SPECIFIC FINDINGS OF THE AO AND CALL A REMAND REPORT IF NEED FROM THE AO BEFORE DECIDING THE ISSUE. 6. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. TAKING INTO CONSIDERATION THE ORDER OF THE CO-ORDINATE BENCH PASSED WHILE DECIDING THE APPEAL AND THEREAFTER THE MA OF THE REVENUE ON A CONSIDERATION THEREOF WE FIND THAT THE FINDINGS ARR IVED AT BY THE CIT(A) IN PARA 3.3 OF THE IMPUGNED ORDER SUFFERS FROM THE DEFECT T HAT IT DOES NOT MAKE REFERENCE TO THE FINDINGS IN THE ASSESSMENT ORDER, THE ISSUE HAS NOT BEEN ADDRESSED. FOR READY-REFERENCE WE REPRODUCE THE FI NDING UNDER CHALLENGE:- 3.3. THE ISSUE HAS BEEN EXAMINED AND THE ADDITION MADE BY THE AO IS DELETED IN AS MUCH AS THE SAME HAS BEEN MADE WIT HOUT ANY MATERIAL OR EVIDENCE ON RECORD. THE APPELLANT HAS WITH THE AID OF FACTS AND FIGURES GIVEN AN ADEQUATE AND REASONABLE EXPLANATIO N FOR THE FALL IN GROSS PROFIT BOTH REGARDING THE JOB WORK CHARGES AS ALSO ON ACCOUNT OF SALES TURN OVER. ON THE OTHER HAND THE AO HAS SIMP LY POINTED OUT TO THE PURCHASES BEING MADE FROM SISTER CONCERNS WHICH IN- ISOLATION CANNOT BECOME ANY GROUND FOR ENHANCING THE PROFIT OF THE A PPELLANT COMPANY. THE ADDITION MADE BY THE AO IS DELETED. 7. ACCORDINGLY CONSIDERING THE JUDICIAL PRECEDENT L AID DOWN BY THE ITAT IN ASSESSEES OWN CASE WHEREIN THE M.A. FILED BY THE R EVENUE STANDS ALLOWED ON SIMILARITY OF FACTS, WE FIND THAT THE IMPUGNED ORDE R DESERVES TO BE SET ASIDE. ORDERED ACCORDINGLY. THE ISSUE IS RESTORED BACK TO THE FILE OF THE CIT(A) WITH THE DIRECTION TO DECIDE THE ISSUE AGAIN AFTER CONSI DERING THE RELEVANT POINTS BROUGHT OUT BY THE AO IN HIS ORDER. NEEDLESS TO S AY THAT THE ASSESSEE SHALL BE AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD. IN THE RESULT THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A .NO.-957/DEL/2005 & CO-26/DEL/2007 5 8. A PERUSAL OF THE CONSOLIDATED ORDER DATED 06.09. 2007 BY WHICH THE APPEAL OF THE REVENUE AND THE CO OF THE ASSESSEE WE RE DECIDED IT IS SEEN THAT THE CO OF THE ASSESSEE WAS ALLOWED AND THE MA WAS F ILED BY THE DEPARTMENT ONLY QUA ITS APPEAL. WE FIND THAT THE CO HAS WRONG LY BEEN LISTED BY THE REGISTRY IN THE CAUSE LIST AND SHOWN AS PENDING AS THE ORDER DATED 06.09.2007 WAS CONCLUDED IN ASSESSEES FAVOUR VIDE PARA 3, REL YING UPON THE ORDER OF THE TRIBUNAL IN ASESSEES OWN CASE FOR EARLIER ASSESSME NT YEAR DATED 29.12.2006 IN ITA NO.-4759 & 4560/DEL/2004. IN THE RESULT THE AP PEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND THE CO FILED B Y THE ASSESSEE WRONGLY INCLUDED IN THE CAUSE LIST AS A PENDING APPEAL IN T ERMS OF THE AFORE-MENTIONED ORDER OF THE TRIBUNAL STANDS ALLOWED AS ORIGNILLY C ONCLUDED. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOW ED FOR STATISTICAL PURPOSES AND CO OF THE ASSESSEE IS ALSO ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 13 TH OF MAY 2015. SD/- SD/- (INTURI RAMA RAO) (DIVA SINGH) ACCOUNTANT MEMBER JU DICIAL MEMBER DATED: 13/05/2015 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI I.T.A .NO.-957/DEL/2005 & CO-26/DEL/2007 6 DATE 1. DRAFT DICTATED ON 30.04.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 05.05.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS .05.2015 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK .05.2015 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.