DCIT 8(1), MUMBAI V. AVION EXIM P. LTD, MUMBAI

ITSSA 33/MUM/2010

• Counselvise Citation: [2011] 124 COUNSELVISE.COM (IT) 7853 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 23-08-2011
• Assessment Year: misc
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Loose papers; Document seized; Block assessment; Documents seized
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G, MUMBAI BEFORE SHRI R.S. SYAL (A.M.) AND SHRI D.K.AGARWAL ( JM) IT(SS)A NO.33/MUM/2010 (BLOCK ASSESSMENT PERIOD : 1.4.1990 TO 14.11.2000) ASSISTANT COMMISSIONER OF INCOME TAX 8(1), ROOM NO.210, 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020. M/S AVION EXIM PVT.LTD., 101B, TODI COMPLEX, 35, SAKI VIHAR ROAD, ANDHERI (E), MUMBAI-400072 PAN: AABCA8726D APPELLANT V/S RESPONDENT DATE OF HEARING : 21.12.2011 DATE OF PRONOUNCEMENT : 23.12.2011 APPELLANT BY : SHRI PAVAN VED RESPONDENT BY : SHRI RAKESH JOSHI O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 3.2.2010 PASSED BY THE LD. CIT(A) FOR THE BLOCK ASSESSMENT PERIOD 1.4.1990 TO 14.11.2 000. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF STATIONERY ITEMS. A SEARCH ACT ION U/S 132 OF THE INCOME TAX ACT, 1961 (IN SHORT THE IT(SS)A NO.33/MUM/2010 2 ACT) WAS CARRIED OUT ON TIME GROUP CASES ON 14.11.2000. AFTER RECEIPT OF THE SEIZED DOCUMENTS, A NOTICE U/S 158BC READ WITH SECTION 158BD WAS ISSUE D TO THE ASSESSEE ON 27.8.2004 AND IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED RETURN DISCLOSING UNDISC LOSED INCOME AT RS.NIL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT FROM THE PERUSAL OF LOOSE PAPERS AS PER ANNEXURE A-1, IT IS FOUND T HAT PAGE NO.1 TO 39 REFER TO PROFIT AND LOSS ACCOUNT OF M/S ACE MOULDINGS LTD. AND AVION IMPEX PVT.LTD. T HE AO FURTHER OBSERVED THAT IT IS SEEN FROM THESE PAP ERS THAT THE AVERAGE GROSS PROFIT OF ITEMS SOLD IS SH OWN AT 23%, WHEREAS THE ASSESSEE HAS SHOWN GROSS PROFI T AT 8%. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE TO EXPLAIN AS TO WHY THE GROSS PROFIT MAY NOT BE ADOPTED AT 23% IN PLACE OF 8% AS SHOWN BY THE ASSESSEE. IN RESPONSE, THE ASSESSEE INTERALIA SUBMITS THAT 23% OF THE PROFIT IS MERELY THE PROJEC TED FIGURES AND HAS NOTHING TO DO WITH THE ACTUAL WORK ING OF THE COMPANY. IN THE SET OF SEIZED MATERIAL ON PA GE 39 THE ACTUAL WORKING OF THE COMPANY HAS BEEN GIVEN SHOWING A NET LOSS OF RS.1,96,457/-. HOWEVER, THE A O DID NOT ACCEPT THE ASSESSEES EXPLANATION. THE AO IT(SS)A NO.33/MUM/2010 3 ADOPTED THE GP RATE AT 23% IN PLACE OF 8.06% SHOW N BY THE ASSESSEE AND ACCORDINGLY MADE ADDITION OF RS.12,09,403/- AS UNDISCLOSED INCOME FOR THE BLOCK ASSESSMENT PERIOD. 3. ON APPEAL, THE LD.CIT(A), AFTER EXAMINING THE INVOICES HAS HELD THAT THE AVERAGE GROSS PROFIT RAT E ADOPTED BY THE AO AT 23% IS NOT SUSTAINABLE AND ACCORDINGLY, HE DELETED THE ADDITION MADE BY THE A O. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWIN G GROUNDS OF APPEAL: 1. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS.12,09,403/- MADE BY THE A.O. AS UNDISCLOSED INCOME FOR THE BLOCK PERIOD ON THE BASIS OF SUPPORTING DOCUMENTARY EVIDENCE FOUND DURING THE COURSE OF SEARCH U/S. 132. 2. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN NOT ADOPTING THE GROSS PROFIT RATE @ 23% ON THE TURNOVER OF THE ASSESSEE DETERMINED BY THE A.O. ON THE BASIS OF DOCUMENTARY EVIDENCE FOUND DURING THE COURSE OF SEARCH. 5. AT THE TIME OF HEARING, THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDE R, THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE AD DITION IT(SS)A NO.33/MUM/2010 4 OF RS.12,09,403/- MADE BY THE AO. HE, THEREFORE, SUBMITS THAT THE ADDITION MADE BY THE AO BE RESTORE D. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE AO AND THE LD. CIT(A) FURTHER SUBMITS THAT IN THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH THE GROSS PROFIT RATE AT THE RATE OF 23% IS MERELY PROJECTED FIGURE AND HAS NOTHING TO D O WITH THE ACTUAL WORKING OF THE COMPANY. HE FURTHER SUBMITS THAT IN VIEW OF THE PROFIT AND LOSS ACCO UNT FOR THE PERIOD ENDED ON 14.11.2000, COPY OF SALES SUMMARY ALONG WITH THE LEDGER ACCOUNT OF RESPECTIVE HEADS AND COPY OF PARTIES LEDGER ACCOUNT ALONG WIT H THE INVOICES APPEARING AT PAGES 12 TO 49 OF THE ASSESSEES PAPER BOOK, ALL THE PURCHASE AND SALES A RE VOUCHED AND VERIFIABLE AND IT IS NOT THE CASE OF T HE AO THAT THE ASSESSEE HAS MADE PURCHASES OR SALES OUTSIDE THE BOOKS OF ACCOUNT, THEREFORE, THE LD. CI T(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. HE, THEREFORE, SUBMITS THAT THE ORDER PAS SED BY THE LD. CIT(A) BE UPHELD. IT(SS)A NO.33/MUM/2010 5 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABL E ON RECORD. WE FIND THAT THERE IS NO DISPUTE THAT THE AO HAS WORKED OUT THE GP AT 23% ON THE BASIS OF COSTI NG DETAILS I.E. PROJECTED DETAILS APPEARING AT PAGES 1 TO 11 OF THE ASSESSEES PAPER BOOK AND HAS APPLIED THE SAME ON THE SALES DISCLOSED BY THE ASSESSEE. THER E IS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS ACTUALLY EARNED SUCH GROSS PROFIT AT THE RATE OF 2 3% ON THE PURCHASES AND SALES RECORDED IN THE PROJECTE D DETAILS. THE LD. CIT(A) AFTER EXAMINING THE COPIES OF THE BILLS AND VOUCHERS IN RESPECT OF PURCHASE AND S ALES HAS DELETED THE ADDITION MADE BY THE AO VIDE FINDIN G RECORDED IN PARAGRAPH 1.4 OF ITS ORDER, WHICH ARE REPRODUCED BELOW: 1.4 DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT HAS SUBMITTED THE COPIES OF ALL BILLS AND VOUCHERS AND OTHER RELATED EVIDENCES BEFORE THE AO TO JUSTIFY HIS CLAIM THAT THE APPELLANT HAS SHOWN PROFIT OF 20.9% ON SOME ITEMS AND 2 TO 6% ON THE OTHER ITEMS. SINCE THE NUMBER OF ITEMS WHICH HAS SHOWN MORE THAN 20% GP IS LESS AND THE NUMBER OF ITEMS FOR WHICH GP HAS BEEN SHOWN 2 TO 6% IS MORE. THE COPIES OF ALL THESE DOCUMENTS ARE ALSO SUBMITTED BEFORE ME. I HAVE PERUSED THE DOCUMENTS AND NOTICED THAT THE CONTENTION OF THE APPELLANT WILL PROVE THAT IT HAS SHOWN PROFIT ON SOME ITEMS MORE THAN 20% AND IN OTHER ITEMS THE GROSS PROFIT HAS BEEN SHOWN FROM 2 TO 6%. THE SEALED DOCUMENTS SHOW THE GROSS PROFIT OF 23% CANNOT BE TAKEN AS THE GROSS PROFIT IT(SS)A NO.33/MUM/2010 6 ON THE WHOLE TURNOVER. THE APPELLANT HAS SHOWN GROSS PROFIT MORE THAN 20% ON THESE ITEMS IN THE P & L A/C AND ALSO SHOWN GROSS PROFIT OF 2 TO 6% ON MAJOR PART OF THE TURNOVER. KEEPING IN VIEW ALL THESE FACTS AND CIRCUMSTANCES, IT IS HELD THAT THE AO IS NOT JUSTIFIED IN ADOPTING GP RATE @23% ON THE WHOLE TURNOVER BECAUSE THE P & L A/C CANNOT BE ALTERED WITH FEW TRANSACTION WHERE THE GROSS PROFIT HAS BEEN SHOWN AT THE HIGHER RATE. MOREOVER, THE INVOICES SUBMITTED BEFORE AO AND BEFORE ME PROVE THAT THE APPELLANT HAS SHOWN GROSS PROFIT ON SOME ITEM MORE THAN 23% BUT FOR BULK OF ITEMS SHOWN @2 TO 6%. THUS, THE AVERAGE ADOPTED BY THE AO AT 23% IS NOT SUSTAINABLE, HENCE, THE ADDITION MADE OF RS.12,09,403/- IS DELETED AND GROUND OF APPEAL IS ALLOWED. IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE AGAINST THE FINDING OF THE L D. CIT(A) AND KEEPING IN VIEW THAT ALL THE PURCHASES A ND SALES ARE VOUCHED AND VERIFIABLE AND NO DEFECT WAS POINTED OUT BY THE AO IN THE BOOKS OF ACCOUNT INASMUCH AS THE AO HAS ACCEPTED THE SALES AS DISCLOSED BY THE ASSESSEE AND ALSO IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS MADE PURCHASES AND SALES OUTSIDE THE BOOKS, WE ARE OF THE VIEW THA T THE ESTIMATED GP RATE APPLIED AT 23% IS NOT SUSTAINABLE IN LAW AND ACCORDINGLY THE ORDER PASSE D BY THE LD. CIT(A) IN DELETING THE ADDITION OF RS.12,09,403/- DOES NOT CALL FOR ANY INTERFERENCE. THE IT(SS)A NO.33/MUM/2010 7 GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 8. IN THE RESULT, THE REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD DEC.2011. SD SD (R.S. SYAL) (D.K.AGA RWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, 23RD DECEMBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI