M/S DAGINA JEWELLERS,MUMBAI V. ACIT CIRCLE 2(1)(1) AHMEDABAD, AHMEDABAD

ITA 395/AHD/2025

AI Insights

M/s Dagina Jewellers appealed against the order of the National Faceless Appeal Centre (NFAC), which had partly allowed their appeal concerning the assessment year 2017-18. The primary contention was the restriction of their claimed labor charges to Rs. 3,88,382, despite their claim of Rs. 31,04,000. The Assessing Officer had earlier made an addition of Rs. 1,20,01,333 to the assessee's income, citing a low gross profit ratio compared to previous years. The tribunal noted that the CIT(A) had not adequately considered the changes in expense grouping and the increase in manufacturing costs that affected the gross profit ratio. The tribunal also acknowledged the delay in filing the appeal, which was condoned based on the affidavit from the managing partners of the assessee firm.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 653030 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B.P. SRIVASTAVA
• Assessee Lawyers: ADJOURNMENT APPLICATION FILED
• Keywords: Condonation of delay; Business income; Gross profit estimation
• Section: 142(1)

Judgement Text

"THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before Dr. BRR Kumar, Vice President And Ms. Suchitra Kamble, Judicial Member M /s Dagina Jewellers, Shop No. 7/8 353 Dedhia Estate, Bhandarkar Road Matunga (E), Mumbai-400019, Maharashtra, India PAN: AAAFD1292M (Appellant) Vs The ACIT, Circle-2(1)(1), Ahmedabad (Respondent) Assessee by: Adjournment Application Filed Revenue by: Shri B.P. Srivastava, Sr. D.R. Date of hearing : 07-05-2025 Date of pronouncement : 18-06-2025 आदेश/ORDER Per Suchitra Kamble, Judicial Member: This is an appeal filed against the order dated 20-03- 2023 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2017-18. 2. The grounds of appeal are as under:- “1. The order dated 20/03/2023 bearing No. ITBA/NFAC/250/2022- 23/1050964254[1] passed under section 250 of Income Tax Act 1961 by the Hon’ble CIT(Appeal), National Faceless Appeal Centre [NFAC], Delhi is unreasonable arbitrary, against the provisions of Income Tax Act 1961 and therefore liable to be quashed. 2. The delay in filing the present appeal, being beyond the control of the Appellant and in the interest of the justice may kindly be condoned and appeal be decided on the basis of merits of the case. ITA No. 395/Ahd/2025 Assessment Year 2017-18 I.T.A No. 395/Ahd/2025 M/s. Dagina Jewellers, A.Y. 2017-18 2 3. On the facts and in circumstance of the case and in law, the Hon’ble CIT(A) has erred in restricting the Appellants claim of labour charge at Rs 3,88,382/- even though no such disallowance/addition was made by the Assessing Officer and the same was not even part of the grounds of appeal before the Hon'ble CIT (Appeal). 4. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary.” 3. The assessee is a partnership firm and engaged in the business of trading of gold, silver and diamond ornaments. During the year under consideration, it has shown gross profit of Rs. 2,10,75,870/- and made profit of Rs. 87,63,550/- against the total gross receipts of Rs. 12,94,60,836/-. The assessee filed return of income on 18- 10-2017 declaring total income of Rs. 87,69,640/-. The case of the assessee was selected for complete scrutiny and notice u/s. 143(2) was issued on 13-08-2018 which was duly served to the assessee. Notice u/s. 142(1) was issued on 03-12-2019, 17-12-2019 and 27-12-2019. In response to the notice, the necessary details and information was filed by the assessee. The Assessing Officer observed that there was a shortfall in gross profit ratio from assessment year 2015-16 till the relevant assessment year. After taking into consideration of the assessee’s reply that there was a labour charges and increase in cost of manufacturing jewellary, the gross profit ratio has decreased. The Assessing Officer did not accept the assessee’s submissions. The Assessing Officer therefore calculated the gross profit ratio of three years taken as average and calculated it to 25.55% amounting to Rs. 3,30,77,243/-. Thus, the Assessing Officer made addition of Rs. 1,20,01,333/- on account of low gross profit. I.T.A No. 395/Ahd/2025 M/s. Dagina Jewellers, A.Y. 2017-18 3 4. Aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. At the time of hearing when the matter was called, the assessee filed adjournment application but since the issue is only related to the assessee’s claim of labour charges which was restricted to Rs. 3,88,382/-, we are taking up this matter. The assessee’s submissions before the CIT(A) and A.O. are taken into account while deciding this appeal. There is a delay of 630 days which has been explained by the assessee by filing condonation of delay along with the affidavit filed by the Managing Partners of the assessee firm, the same is taken on record. The reason explained for delay appears to be genuine, hence delay condoned. 6. Ld. D.R. relied upon the assessment order and the order of the CIT(A). 7. We have heard ld. D.R. and perused all the relevant material available on record. It is pertinent to note that the CIT(A) has taken the ratio of labour cost to total sales in the present assessment year thereby pointing out the same at para 9 (page 17) of the CIT(A)’s orders which was increased to 2.4% from 0.003% in the previous assessment year. But the assessee’s specific statement that merely fall in gross profit ratio cannot be the same for rejection of books appears relevant and in fact variation in GP was due to the change in grouping of expenses and certain selling and I.T.A No. 395/Ahd/2025 M/s. Dagina Jewellers, A.Y. 2017-18 4 distribution expenses which were treated as part of manufacturing cost along with the labour cost which was increased during the relevant assessment year has not been taken into account either by the Assessing Officer as well as by the CIT(A). Thus, rejecting the labour charges to the extent of Rs. 3,88,382/- as against assessee’s claim of Rs. 31,04,000/- is not justifiable and therefore the CIT(A) was not right in giving finding without taking proper cognizance of the assessee’s details such as the purchase details, sales and stock details which were recorded in the books of accounts and in fact the same was accepted by the Sales Tax Department (VAT Authorities) and therefore the appeal of the assessee is allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 18-06-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 18/06/2025 आदेश क\u0006 \u0007\bत ल प अ\u000fे षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील\u0012य अ\u0013धकरण, अहमदाबाद "