The K T M Jewellery Limited, Coimbatore V. DCIT, Coimbatore

ITA 989/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8147 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 18-01-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 30-04-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: T VASUDEVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C' BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.989/MDS/2015 / ASSESSMENT YEAR : 2011-12 M/S THE KTM JEWELLERY LTD NO.6, 1 ST STREET, BHARATHI COLONY PEELAMEDU COIMBATORE 641004 VS. THE DY. COMMIS SIONER OF INCOME-TAX CORPORATE CIRCLE 2 COIMBATORE [PAN AABCK 7104 P] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI T.VASUDEVAN, ADVOCATE /RESPONDENT BY : SHRI A.V SREEKANTH, J CIT / DATE OF HEARING : 18 - 01 - 2016 ! / DATE OF PRONOUNCEMENT : 05 - 02 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-1, COIMBA TORE, DATED 17.3.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. SHRI T.VASUDEVAN, LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ASSESSEE-COMPANY IS ENGAGED IN VARIOUS BUS INESSES INCLUDING ITA NO. 989/15 :- 2 -: TRADING IN BULLION. DURING THE COURSE OF ASSESSMEN T, THE ASSESSING OFFICER FOUND CERTAIN CLERICAL ERRORS IN THE ANNUAL REPORT OF THE ASSESSEE-COMPANY. THE ASSESSEE EXPLAINED BEFORE T HE ASSESSING OFFICER THAT THESE ARE CLERICAL ERRORS WHICH DO NOT HAVE IMPACT ON THE PROFIT OF THE COMPANY. EVEN THOUGH THERE IS NO ERR OR IN THE BOOKS OF ACCOUNT OF THE COMPANY, BASED UPON THE CLERICAL ERR ORS IN THE ANNUAL REPORT, THE ASSESSING OFFICER FOUND THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT RELIABLE. THEREFORE, BY REJECTING THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER ESTIMATED THE PROFIT IN ALL BUSINESS OF THE ASSESSEE. ACCORDING TO THE LD. COUNSEL, THE A SSESSING OFFICER ESTIMATED THE NET PROFIT AT 2% IN THE BUSINESS OF B ULLION TRADING AND ALL OTHER BUSINESSES AT 4%. ON APPEAL BY THE ASSESSEE , THE CIT(A), AFTER CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE , ESTIMATED THE PROFIT FROM BULLION TRADING AT 1%, GOLD ORNAMENTS A T 1.30%. SIMILARLY, PROFIT FROM WINDMILL WAS ESTIMATED AT 44.34%, PROFI T FROM TEXTILE BUSINESS WAS ESTIMATED AT 3.5% AND PROFIT FROM SILV ER BUSINESS WAS ESTIMATED AT 1.5%. ACCORDING TO THE LD. COUNSEL, T HE ERROR IN THE ANNUAL REPORT IS WITH REGARD TO BULLION TRADING AND NOT WITH REGARD TO OTHER BUSINESS OF THE ASSESSEE. MERELY BECAUSE TH ERE WAS A DIFFERENCE/DISCREPANCY IN THE LEDGER ACCOUNT OF THE SELLER WITH REGARD TO BULLION TRADING, THE BOOKS OF ACCOUNT OF THE AS SESSEE CANNOT BE REJECTED IN TOTO. THE LD. COUNSEL FURTHER SUBMITTE D THAT THE ENTIRE ITA NO. 989/15 :- 3 -: PURCHASE OF JEWELLERY WAS RECORDED IN THE BOOKS OF ACCOUNT. THE BULLION PURCHASE WAS ALSO RECORDED IN THE BOOKS OF ACCOUNT. THE SALES OF BULLION WERE ALSO RECORDED IN THE BOOKS OF ACCOU NT. SINCE THERE WAS NO DIFFERENCE IN THE PURCHASE AND SALES OF BULLION IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THERE IS NO JUSTIFICATION FOR REJECTING THE BOOKS OF ACCOUNT MERELY BECAUSE THERE WAS A DIFFERE NCE IN THE BOOKS OF ACCOUNT OF THE PURCHASER NAMELY, M/S GAJAANAND J EWELLERY MART PVT. LTD, COIMBATORE. THE LD. COUNSEL FURTHER SUBM ITTED THAT THE DIFFERENCE IN PURCHASE ACCOUNT WAS DUE TO A CLERICA L MISTAKE ON THE PART OF THE ACCOUNTANT, THEREFORE, THERE WILL NOT B E ANY IMPACT ON THE PROFIT OF THE ASSESSEE HENCE, REJECTION OF THE BOO KS OF ACCOUNT AND ESTIMATING THE PROFIT MAY NOT BE JUSTIFIED. 3. ON THE CONTRARY, SHRI AV SREEKANTH, LD. DEPARTMENTA L REPRESENTATIVE SUBMITTED THAT ON EXAMINATION OF FOR M 3CD REPORT, DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFI CER FOUND THAT THE ASSESSEE PURCHASED GOLD BULLION TO THE EXTENT OF ` 1,85,34,411/- FROM M/S GAJAANAND JEWELLERY MART PVT. LTD, COIMBATORE. THE ASSESSING OFFICER AFTER EXAMINING THE LEDGER ACCOUNT APPEARIN G IN THE BOOKS OF ACCOUNT OF THE ASSESSEE-COMPANY, FOUND THAT M/S GAJ AANAND JEWELLERY MART PVT. LTD HAS SOLD GOLD BULLION TO THE EXTENT O F ` 2,23,39,087/-. SINCE THERE WAS A DIFFERENCE WITH REGARD TO PURCHAS E OF GOLD BULLION FROM M/S GAJAANAND JEWELLERY MART PVT. LTD, COIMBAT ORE, THE ITA NO. 989/15 :- 4 -: ASSESSING OFFICER FOUND THAT THERE WAS A POSSIBILIT Y OF CHANGE IN THE PROFITABILITY. ACCORDINGLY, THE ASSESSING OFFICER ESTIMATED THE PROFIT IN BULLION TRADING AT 2% AND OTHER BUSINESS AT 4%. TH E CIT(A) AFTER CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE , ESTIMATED THE PROFIT REASONABLY AT 1% IN BULLION TRADING. IN RES PECT OF OTHER BUSINESSES, VIZ., GOLD ORNAMENTS, THE PROFIT WAS ES TIMATED AT 1.30%, SILVER BUSINESS AT 1.50%, TEXTILE BUSINESS AT 3.5% AND WINDMILL BUSINESS AT 44.34%. SINCE THE CIT(A) ESTIMATED THE PROFIT REASONABLY, ACCORDING TO THE LD. DR, NO INTERFERENCE IS CALLED FOR. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSEE ENGAGED ITSELF IN DIVERSIFIED BUSINESS IN SALE OF B ULLION, JEWELLERY, TEXTILE, SILVER AND GENERATION OF POWER THROUGH WIN DMILL. IN RESPECT OF THE BUSINESS FROM GOLD JEWELLERY, SILVER, TEXTILE A ND WINDMILL NO ERROR/MISTAKE WAS FOUND BY THE ASSESSING OFFICER. T HE ONLY MISTAKE POINTED OUT BY THE ASSESSING OFFICER IS WITH REGARD TO PURCHASE OF GOLD BULLION. THEREFORE, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT WHEN THERE WAS NO ERROR OR MISTAKE POINTED OUT BY T HE ASSESSING OFFICER IN RESPECT OF OTHER BUSINESSES, REJECTION O F THE ENTIRE BOOKS OF ACCOUNT IS NOT JUSTIFIED. EVEN WITH REGARD TO TRAD ING IN BULLION, THE ASSESSEE-COMPANY PURCHASED GOLD BULLION TO THE EXTE NT OF ` 1,85,34,411/- FROM M/S GAJAANAND JEWELLERY MART PVT . LTD, ITA NO. 989/15 :- 5 -: COIMBATORE. THE LEDGER ACCOUNT APPEARING IN THE BO OKS OF ACCOUNT OF THE ASSESSEE SHOWS SALE OF ` 2,23,39,087/-. THE ASSESSING OFFICER HAS NOT CONSIDERED THE OPENING BALANCE OF THE BULLI ON FOR THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS NOT CONSIDERED THE PROFIT ON SALE OF THE BULLION. WHEN THE ASSESSEE PURCHASED BULLION TO THE EXTENT OF ` 1,85,34,411/-, THE SALE CONSIDERATION ON SALE OF B ULLION WOULD BE MORE THAN ` 1,85,34,411/-. IF THERE IS A STOCK OF GOLD BULLIO N IN THE EARLIER ASSESSMENT YEAR WHICH WAS TAKEN AS O PENING BALANCE FOR THE YEAR UNDER CONSIDERATION, THEN NATURALLY THE SA LE OF SUCH BULLION HAS TO BE REFLECTED IN THE LEDGER ACCOUNT OF THE AS SESSEE-COMPANY. IN THOSE CIRCUMSTANCES, BY CONSIDERING THE PROFIT RATI O OF THE ASSESSEE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT REJ ECTION OF BOOKS OF ACCOUNT IS NOT JUSTIFIED. MERELY BECAUSE THERE WAS AN ERROR IN THE ANNUAL REPORT, AS RIGHTLY SUBMITTED BY THE LD. COUN SEL FOR THE ASSESSEE, THIS WILL NOT HAVE ANY IMPACT ON THE PROFIT OF THE ASSESSEE. WHEN THE ASSESSEE HAS RECORDED THE ENTIRE PURCHASES AND SALE S OF THE BULLION IN THE BOOKS OF ACCOUNT, THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT ESTIMATING PROFIT AFTER REJECTING THE BOOKS OF ACCO UNT IS NOT JUSTIFIED. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. ITA NO. 989/15 :- 6 -: 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 5 TH FEBRUARY, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF