The ACIT, Central Circle-3, Surat V. M/s. Jalaram Corporation, Surat

ITSSA 63/AHD/2010

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9390 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 03-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-08-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 29-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Keywords: Gross profit estimation; Business income
• Section: 40A(3)

Judgement Text

, , , , , , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT (AZ) AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER (SS) ./ I.T(SS).A. NO.63/AHD/2010 ( / / / / ASSESSMENT YEAR : 2005-06) THE ASST.CIT CENTRAL CIRCLE-3 SURAT / VS. M/S.JALARAM CORPORATION GROUND FLOOR DHULIA CHAR RASTA BARDOLI, SURAT ! ./'# ./ PAN/GIR NO. : AAEFJ 3445 Q ( $ / // / APPELLANT ) .. ( %&$ / RESPONDENT ) $ ' / APPELLANT BY : SHRI O.P.VAISHNAV, CIT-DR %&$ ( ' / RESPONDENT BY : -NONE- )* ( +,! / / / / DATE OF HEARING : 01/08/2013 -. ( +,! / DATE OF PRONOUNCEMENT : 03/09/2013 / / O R D E R PER SHRI G.C.GUPTA, VICE PRESIDENT (AZ) : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF LD.CIT(A)-II, AHMEDABAD DATED 04/11/2009 FOR TH E ASST.YEAR 2005-06. 2. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE- RESPONDENT. ACCORDINGLY, WE PROCEED TO DECIDE THE REVENUES APPEAL ON MERITS QUA THE ASSESSEE-RESPONDENT, AFTER HEARING T HE LD.DR. ISSUE NO.1 OF THE REVENUES APPEAL IS DECIDED OUT OF FOLLOWIN G THREE GROUNDS:- IT(SS)A NO.63/A HD/2010 THE ASST.CIT VS. M/S.JALARAM CORPORATION ASST.YEAR - 2005-06 - 2 - 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS AND IN DELETING THE ADDITION OF RS.17,72,895/- MADE ON ACCOUNT OF E STIMATION OF GP TAKING THE GP OF A SIMILAR PROJECT SINCE THE BOO KS OF THE ASSESSEE WERE NOT VERIFIABLE AND REJECTION OF THE S AME WAS UPHELD BY LD.CIT(A). 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS AND IN DELETING THE ADDITION MADE ON ACCOUNT OF LOW GP HOLDING THAT THE ASSESSEES GP COMES TO 22.75% ON ADDING THE DISCLOSURE OF RS.8 0,00,000/- ON THE TOTAL TURNOVER IGNORING THAT NET FINANCIAL RESU LT TURNED OUT BE NET LOSS, IF SURVEY DISCLOSURE IS EXCLUDED FROM THE TOTAL PROFIT. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS AND IN NOT APPRECIATING THE RATIO LAID DOWN IN THE JUDGEMENT O F THE HONBLE ITAT AHMEDABAD IN THE CASE OF WHILE LINE CHEMICALS, ITA NO.3509/2004 VIDE ORDER DATED 30.08.2005 WHEREIN TH E HONBLE ITAT HAS HELD THAT FAIR AND REASONABLE ESTIMATION O F TOTAL INCOME SHOULD BE NORMAL CURRENT YEAR PROFIT PLUS DISCLOSUR E. 2.1. THE LD.DR HAS REFERRED TO PARA-6 OF THE ASSESS MENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. HE SUBMITTED THAT IN T HE CASE OF SISTER- CONCERN OF THE ASSESSEE - M/S.ARIHANT CORPORATION, THE GROSS PROFIT RATE COMES TO 6.53% OF THE THREE ASSESSMENT YEARS AND, T HEREFORE, THERE WAS NO VALID REASON FOR DISCLOSING A NEGATIVE FIGURE OF PROFIT ON THE SALES OF RS.2.71 CRORES BY THE ASSESSEE. HE RELIED ON THE O RDER OF THE ASSESSING OFFICER. 3. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD.DR AND HAVE PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FI ND THAT THE ASSESSEE IT(SS)A NO.63/A HD/2010 THE ASST.CIT VS. M/S.JALARAM CORPORATION ASST.YEAR - 2005-06 - 3 - HAS ADMITTED THAT IT WAS NOT SHOWING THE CORRECT FI GURE IN ITS BOOKS OF ACCOUNT AS DISCOVERED AT THE TIME OF SURVEY AND HAS AGREED FOR NET INCOME OF RS.80 LACS. IN THESE FACTS, THE CIT(A) HELD THA T THERE IS NO JUSTIFICATION FOR THE AO TO MAKE A FURTHER ADDITION OF RS.17.72 L ACS BY APPLYING A GP RATE AS THE ASSESSEE HAS ALREADY AGREED TO BE ASSES SED AT NET INCOME OF RS.80 LACS ON TOTAL SALES OF RS.2.71 CRORES. THE C IT(A) HAS FURTHER OBSERVED THAT GP RATE OF THE ASSESSEE COMES TO RS. 22.75% WHICH IS QUITE REASONABLE. IN THESE FACTS, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN HOLDING THAT AFTER TAKING INTO ACC OUNT THE NET INCOME OF RS.80 LACS, NO FURTHER ADDITION IS JUSTIFIED AND, T HEREFORE, GROUND NOS.1 TO 3 OF REVENUES APPEAL ARE DISMISSED. 4. THE OTHER GROUNDS OF REVENUES APPEAL READ AS UN DER:- ADDITION DELETED ON ACCOUNT OF DISALLOWANCE U/S.40A (3) 4. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.12,26,.606/- MADE ON AC COUNT OF DISALLOWANCE U/S.40A(3) OF THE ACT, IN RESPECT OF P AYMENT OF MORE THAN RS.20,000/- IN CASH. 5. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS AND IN LAW IN HOLDING THAT SINCE THE BOOKS OF ACCOUNTS ARE REJECT ED AND NET INCOME IS ESTIMATED, NO FURTHER DISALLOWANCE IS CAL LED FOR, IGNORING THAT SECTION 40A(3) IS A MANDATORY PROVISION IN THE I.T.ACT AND EVEN IF ALL OTHER FACTORS CONTRIBUTING THE COMPUTAT ION OF TOTAL INCOME IS ACCEPTED IN SCRUTINY ASSESSMENT, DISALLOW ANCE OF CASH PAYMENTS IN EXCESS OF RS.20,000/- IS MANDATORY AS P ER THE PROVISIONS OF SECTION 40A(3). IT(SS)A NO.63/A HD/2010 THE ASST.CIT VS. M/S.JALARAM CORPORATION ASST.YEAR - 2005-06 - 4 - 6. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS AND IN LAW IN HOLDING THAT SINCE THE BOOKS OF ACCOUNTS ARE REJECT ED AND NET INCOME IS ESTIMATED, NO FURTHER DISALLOWANCE IS UNC ALLED FOR, IGNORING THAT SECTION 40A(3) IS A MANDATORY PROVISI ON IN THE I.T.ACT AND ASSESSEE HAS ADMITTEDLY MADE CASH PAYME NTS OF RS.51,39,032/- OUT OF THE TOTAL CASH PAYMENTS OF RS .61,33,032/- WORKED OUT BY THE ASSESSING OFFICER. 7. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS AND IN LAW IN HOLDING THAT SINCE THE BOOKS OF ACCOUNTS ARE REJECT ED AND NET INCOME IS ESTIMATED, NO FURTHER DISALLOWANCE IS UNC ALLED FOR, IGNORING THAT SECTION 40A(3) IS A MANDATORY PROVISI ON IN THE I.T.ACT AND ASSESSEE HAS ADMITTEDLY MADE CASH PAYME NTS OF RS.61,33,032/- TO DIFFERENT PERSONS WHOSE IDENTITY COULD NOT BE ESTABLISHED BY THE ASSESSEE IN SPITE OF SEVERAL OPP ORTUNITIES GIVEN BY THE ASSESSING OFFICER. 4.1. THE LD.DR HAS RELIED ON THE ORDER OF THE AO AN D HAS REFERRED TO THE RELEVANT PORTION OF THE ORDER OF THE AO IN SUPPORT OF THE CASE OF THE REVENUE. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD.DR AND HAVE PERUSED THE ORDERS OF THE AO AND CIT(A). WE FIND T HAT THE BOOKS OF ACCOUNT HAVE BEEN REJECTED IN THIS CASE AND THE NET INCOME ESTIMATED AND, THEREFORE, THE CIT(A) HAS HELD THAT NO FURTHER DISA LLOWANCE FOR CASH PAYMENTS U/S.40A(3) OF THE ACT WAS CALLED FOR. TH E CIT(A) HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN THE CASE O F CIT VS. PADAM CHAND BHANSALI REPORTED AT 85 TTJ 215 (JODHPUR) AND HAS DELETED THE ADDITION. WE BEING IN AGREEMENT WITH THE DECISION OF THE CO-O RDINATE BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF PADAM CHAND BHANSA LI (SUPRA) HOLD THAT IT(SS)A NO.63/A HD/2010 THE ASST.CIT VS. M/S.JALARAM CORPORATION ASST.YEAR - 2005-06 - 5 - THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) WHIC H IS CONFIRMED AND THE GROUND NOS.4 TO 7 OF THE REVENUES APPEAL ARE DISM ISSED. 6. IN THE RESULT, REVENUES APPEAL STANDS DISMISS ED. SD/- SD/- ( A.K.GARODIA ) ( G.C. GUPTA) ACCOUNTANT MEMBER VICE PRESID ENT (AZ) AHMEDABAD; DATED 03/ 09 /2013 0,.., .../ T.C. NAIR, SR. PS / ( %+1 2 1+ / ( %+1 2 1+ / ( %+1 2 1+ / ( %+1 2 1+/ COPY OF THE ORDER FORWARDED TO : 1. $ / THE APPELLANT 2. %&$ / THE RESPONDENT. 3. + )3 / CONCERNED CIT 4. )3() / THE CIT(A)-II, AHMEDABAD 5. 167 %+ , , / DR, ITAT, AHMEDABAD 6. 78 9* / GUARD FILE. /) /) /) /) / BY ORDER, &1+ %+ //TRUE COPY// : :: :/ // / ' ' ' ' ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 1.8.13 (DICTATION-PAD 7 P AGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 1.8.13 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 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.03.09.13 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 03.09.13 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER