Smt Indumati Sanghvi, V. The DCIT 4(1),

ITSSA 35/IND/2009

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2377 (ITAT-INDORE)
• Duration Of Justice: 7 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2000-2001
• Appeal Filed On: 12-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHANEY
• Keywords: Gross profit estimation; Loose papers
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER SMT. INDUMATI J.SANGHVI, PROP. K.JAYANTILAL & CO., 475, JAWAHAR MARG, INDORE. PAN: ASDPS3511K VS. DY. CIT, 4(1), INDORE. APPELLANT RESPONDENT APPELLANT BY SHRI PRAKASH JAIN, CA. RESPONDENT BY SHRI RAJEEV VARSHANEY, CIT DATE OF HEARING 17.08.2016 DATE OF PRONOUNCEMENT 17.08.2016 O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-II, INDORE [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 03.12 .2008 AND PERTAINS TO ASSESSMENT YEAR 2008-09 AS AGAINST APPE AL DECIDED IN ASSESSMENT ORDER U/S 143(3) READ WITH SE CTION I.T.(SS)A.NO.35/IND/2009 ASSESSMENT YEAR : 2000-01 SMT.INDUMATI J.SANGHVI VS. DY. CIT, I.T.(SS)A.NOS.3 5/IND/2015 PAGE 2 OF 7 153C OF THE INCOME-TAX ACT, 1961, DATED 28.12.2006 OF DY. CIT, 4(1), INDORE, [HEREINAFTER REFERRED TO AS THE AO]. 2. GROUND NO.1 IS OF GENERAL NATURE AND DOES NOT REQUI RE ANY ADJUDICATION FROM US. 3. GROUND NO.2 RELATES TO GROSS PROFIT ADDITION OF RS. 1840/- BEING NET PROFIT RATE OF AT 12.50 % ON ALLEG ED SALES OF RS. 14,740/-. 4. FACTS APROPOS OF THIS GROUND ARE THAT THE LOOSE PAP ER PAGE NO. 4 SEIZED VIDE ANNEXURE LPS-1/15 DURING THE COURSE OF SEARCH INDICATED THAT THE ASSESSEE EFFECTED SALE S OF RS. 14,740/- ON 07.01.2000 TO M/S. CHIPALI SALES, WHICH WERE NOT FOUND REFLECTED IN THE REGULAR BOOKS OF THE ASSESSE E. THEREFORE, THE AO CONSIDERED THE NET PROFIT RATE OF 12.5 % ON THE UNACCOUNTED SALES OF RS. 14,740/- AND WORKED OUT NET PROFIT AT RS. 1840/- AND ADDED THE SAME. THE LD. CI T(A) HAS ALSO ECHOED THE ORDER OF THE AO. 5. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE REPEATED THE SAME ARGUMENTS AS TAKEN BEFOR E THE LOWER AUTHORITIES, WHEREAS THE LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED ON THE ORDER OF CIT(A). SMT.INDUMATI J.SANGHVI VS. DY. CIT, I.T.(SS)A.NOS.3 5/IND/2015 PAGE 3 OF 7 6. WE HAVE CONSIDERED THE FACTS AND MATERIALS AVAILABL E ON RECORD. WE FIND THAT THE LOOSE PAPERS SEIZED DU RING THE COURSE OF SEARCH INDICATED SALES IN THE NAME OF CHI PALI SALES, WHICH WERE NOT FOUND REFLECTED IN THE BOOKS OF ACCOU NTS. THE CONTENTION OF THE ASSESSEE THAT HE HAS NOT EFFECTED ANY SALES IS NOT TENABLE AS THE AFORESAID SALES WERE RECORDED ON THE LETTER PAD OF THE ASSESSEE WITH THE DATE AND OTHER DESCRIPT IONS, WHICH MANIFEST THE SALES WERE RELATED TO THE ASSESSE E FIRM. IN VIEW OF THESE FACTS, THIS GROUND OF APPEAL IS DISMIS SED. 7. GROUND NO. 3 RELATES TO ADDITION OF RS. 1,97,490/- BY APPLYING GROSS PROFIT RATE AT 12.26% WITHOUT INVOKIN G THE PROVISIONS OF SECTION 145. 8. FACTS RELATED TO THIS GROUND ARE THAT THE AO NOTIC ED THAT THE AUDITOR IN FORM NO. 3CD HAS CLEARLY STATED THAT QUANTITATIVE DETAILS OF STOCK ARE NOT MAINTAINED AN D THE CLOSING STOCK IS TAKEN AS CERTIFIED BY THE PROPRIET OR. ACCORDINGLY, THE AO INVOKED THE PROVISIONS OF SECTI ON 145(3) OF THE ACT. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS SHOWN GROSS PROFIT RATE OF 12.26% DURING THE ASSESSMENT Y EAR 1997- 98 AND EARLIER YEARS, WHEREAS THE GROSS PROFIT FOR T HE YEAR SMT.INDUMATI J.SANGHVI VS. DY. CIT, I.T.(SS)A.NOS.3 5/IND/2015 PAGE 4 OF 7 UNDER CONSIDERATION WAS AT 10.74 %. IT WAS EXPLAINED THAT THE DISCOUNT FACTOR HAS AFFECTED THE LOWER GROSS PROFIT AS COMPARED TO PREVIOUS YEAR. HOWEVER, THE AO DID NOT SATISFY WITH THE EXPLANATION AND APPLIED GROSS PROFIT RATE OF 12.26% ON SALES OF RS. 1,29,92,564/- AND WORKED OUT THE GROSS PROFIT AT RS. 15,92,890/- AS AGAINST RS. 13,95,400/- DISCLOSED BY THE ASSESSEE. CONSEQUENTLY, THE RESULTANT ADDITION WAS M ADE AT RS. 1,97,490/-. 9. IN APPEAL, THE LD. CIT(A) OBSERVED THAT THE ASSESS EE HAS CLAIMED THAT GROSS PROFIT WOULD WORK OUT IN THE Y EAR UNDER CONSIDERATION AT 13.14 % AS AGAINST 12.59 % DECLAR ED IN ASSESSMENT YEAR 1997-98 AS IF THE DISCOUNT RECEIVED ON PURCHASES AND ALLOWED ON SALES IS CONSIDERED. THE L D. CIT(A) NOTED THAT ON THIS PLEA OF THE ASSESSEE IN ASSESSME NT YEAR 1999-2000, THE ADDITION MADE WAS DELETED, BUT IN TH E YEAR UNDER CONSIDERATION, THE GROSS PROFIT AFTER GIVING EFFECT OF DISCOUNT WORKS OUT TO 13.14 % AS AGAINST 15.32 % WORK ED OUT IN LAST YEAR FOR WHICH NO JUSTIFICATION HAS BEEN GIV EN BY THE ASSESSEE. ACCORDINGLY, THE LD. CIT(A) HAS UPHELD TH E ADDITION. SMT.INDUMATI J.SANGHVI VS. DY. CIT, I.T.(SS)A.NOS.3 5/IND/2015 PAGE 5 OF 7 10. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ARGUED THAT THE AO HAS INVOKED THE PROVISI ONS OF SECTION 145 WITHOUT PIN-POINTING ANY MISTAKES IN DAY TO DAY AND REGULAR BOOKS OF ACCOUNTS. IT WAS ALSO CONTENDED THAT THE FALL IN GROSS PROFIT RATE IS DUE TO HEAVY DISCOUNT RECEIVED ON PURCHASES AT RS. 3,11,952/- AS AGAINST DISCOUNT REC EIVED IN ASSESSMENT YEAR 1997-98 AT RS. 34,188/-. IF THE EFF ECT OF THIS DISCOUNT IS GIVEN, THEN THE GROSS PROFIT RATE FOR A SSESSMENT YEAR 1997-98 WOULD BE 12.59% AND FOR THE YEAR UNDER CONSIDERATION WOULD BE AT 13.14 %, WHICH IS MORE THA N THE GROSS PROFIT OF EARLIER YEARS. THE BOOKS OF ACCOUNT S ARE DULY AUDITED AND NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE AO. THEREFORE, APPLYING THE GROSS PROFIT RATE AT 12.26% AS AGAINST AS AGAINST DISCLOSED GROSS PROFIT OF 10.74 % IS NOT JUSTIFIED. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE A SKED US TO APPLY REASONABLY GROSS PROFIT RATE CONSIDERING THE FACTS OF THE CASE. 11. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIANC E ON THE ORDERS OF THE LOWER AUTHORITIES. SMT.INDUMATI J.SANGHVI VS. DY. CIT, I.T.(SS)A.NOS.3 5/IND/2015 PAGE 6 OF 7 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE AUDITOR HAS MENTIONED THAT THE BOOKS OF ACCOUNTS AR E NOT SUPPORTED BY QUANTITATIVE DETAILS AND CLOSING STOCK IS TAKEN AS CERTIFIED BY THE PROPRIETOR. THEREFORE, WE ARE NOT INCLINED WITH THE PLEA OF THE LD. AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE THAT APPLICATION OF THE PROVISIONS OF SECTION 145(3 ) ARE NOT JUSTIFIED. WE ALSO NOTICED THAT TRADE DISCOUNT ON P URCHASES HAS INCREASED DURING THE YEAR AS COMPARED TO ASSESS MENT YEAR 1997-98. CONSIDERING, THE ALTERNATE PLEA OF THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE AND AFTER GIVING CAR EFUL CONSIDERATION, WE WILL CONSIDER THE GROSS PROFIT RAT E AT 11.5% AS REASONABLE. ACCORDINGLY, THE GROSS PROFIT @11.5% ON SALES OF RS. 1,29,92,564/- COMES TO RS. 14,94,144/- AS AGAIN ST DECLARED GROSS PROFIT OF RS. 13,95,400/-. HENCE, TH E DIFFERENCE IS WORKED OUT AT RS. 98,774/- AND ACCORDINGLY, TO TH IS EXTENT ADDITION IS CONFIRMED AND BALANCE RS. 98,745/- IS D ELETED. THIS GROUND IS, THEREFORE, PARTLY ALLOWED. SMT.INDUMATI J.SANGHVI VS. DY. CIT, I.T.(SS)A.NOS.3 5/IND/2015 PAGE 7 OF 7 13. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 17 TH AUGUST, 2016. SD/- (D.T.GARASIA) JUDICIAL MEMBER SD/- (O.P.MEENA) ACCOUNTANT MEMBER DATED : 17 TH AUGUST, 2016. CPU* COPY OF THE ORDER FORWARDED TO : THE ASSESSEE/ PCIT- INDORE/ CIT(A)-I, INDORE, AO/ D R- INDORE BENCH/ GUARD FILE BY ORDER ASSISTANT REGISTRAR OF ITAT, INDORE BENCH