M/S SIDDH JEWELLERS PVT. LTD.,KOLKATA V. ACIT, CC, VARANASI

ITA 2/VNS/2019

AI Insights

The case involves Siddhi Jewellers Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals), Varanasi, concerning an addition made to their income for the Assessment Year 2010-11. The addition was based on an estimated excess profit, where the AO applied a GP rate of 19.19% (used by a sister concern) to the assessee's sales, which had a significantly lower GP rate of 10.71%. The Tribunal found that the AO's comparison was flawed as it did not consider the competitive and operational differences between the businesses in Varanasi and Delhi.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 26045 (ITAT-VARANASI)
• Duration Of Justice: 5 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Next Hearing Date: 12-09-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 01-01-2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMALENDU NATH MISHRA
• Assessee Lawyers: A.K. PANDEY
• Keywords: Business income
• Section: 153C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, VARANASI BEFORE: SHRI B.R. BASKARAN, ACCOUNTANT MEMBER & SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA No.2/VNS/2019 (Assessment Year :2010-11) M/s. Siddhi Jewellers Pvt. Ltd. Room No.613,32, Ezra Street, 6th Floor Kolkata – 700 020 Vs. The Asst. Commissioner of Income Tax, Central Circle, Varanasi PAN/GIR No.AABCL0874F (Appellant) .. (Respondent) Assessee by Shri A.K. Pandey Revenue by Shri Amalendu Nath Mishra Date of Hearing 09/09/2024 Date of Pronouncement 29/11/2024 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 23/08/2018 passed by Commissioner of Income Tax (Appeals), Varanasi for the quantum of the assessment passed u/s 153C r.w.s.143(3) for the Assessment Year 2010-11. 2. Before us ld. Counsel has raised validity of notice u/s.153C and on merits has challenged addition of Rs.15,10,721/- on account of excess profit estimated by the AO. ITA No.02/VNS/2019 Siddh Jewellers Pvt.Ltd. 2 3. The brief facts are that Assessee Company is engaged in the business of manufacturing and trading of jewellery in Chandani Chowk Delhi and this was the second year of business. The ld. AO noted that assessee had shown gross profit of Rs.19,09,486/- on total sales of Rs.1,78,22,860/-. Thus, GP rate was 10.71% which according to ld. AO was too low as compared to other jewelers in this business. He further, noted that sister concern of the assessee, M/s Banaras Swarn Kala Kendra Pvt. Ltd. has declared GP rate of 19.19% and accordingly, ld. AO applied the same GP rate of 19.19% and made addition of Rs.15,10,721/- as the gross profit worked out on GP rate of 19.19% comes to Rs.34,20,207/-. The ld. CIT (A) too has confirmed the said addition. 4. After hearing both the parties and on perusal of the material placed on record it is seen that ld. AO has neither rejected books of accounts nor examined the purchases, sales or the stock and has simply proceeded to compare the trading results of sister concern, M/s. Banaras Swarn Kala Kendra Pvt. Ltd. which was doing business in Varanasi and has earned more GP rate of 19.19% therefore, GP rate of 10.71% shown by the assessee is low. Before us, ld. Counsel has pointed out that, firstly, this was the second year of business and from the subsequent year there is an increase in the GP rate and in A.Y. 2011-12 the GP rate declared by the assessee was 18.50%. Further, Banaras Swarn Kala Kendra Pvt Ltd is situated in Varanasi whereas assessee’s business placed at Chandini Chowk, Delhi which is highly competitive market. Thus, there can be no comparison. ITA No.02/VNS/2019 Siddh Jewellers Pvt.Ltd. 3 5. On the other hand ld. DR relied upon the order of the ld. AO and submitted that before the AO assessee has not produced any details, therefore, AO had no option but to make estimate the GP. 6. From the perusal of submissions made before the ld. AO and the records, it is seen that no basis has been given by the ld. AO to estimate gross profit rate even if assessee could not furnish complete books of accounts, bills and vouchers, etc., then also while making best judgment assessment and bringing in comparables, AO has to see the comparability factors whether the GP or trading result has to be disturbed and whether the factors of comparability matches with the assessee. Here the comparison fails because, the Banaras Swarn Kala Kendra Pvt Ltd is an old established shop in Varanasi, whereas assessee has started its business in Chandini Chowk, Delhi which is highly competitive market and was new in this line therefore to compare the GP in these circumstances may not be appropriate. It has been brought on record that, later years assessee had declared higher GP almost comparable to Banaras Swarn Kala Kendra Pvt Ltd. Thus, merely comparing the GP rate of established jewellery business in Varanasi with newly started business in Delhi is unreasonable. Thus, we do not find any reason for estimating the GP rate of 19.19% and accordingly, addition of Rs.15,10,100/- is deleted. Since, we have deleted the addition on merits, we are not going into the issue of validity of jurisdiction u/s.153C. ITA No.02/VNS/2019 Siddh Jewellers Pvt.Ltd. 4 7. In the result, appeal of the assessee is allowed on merits. Order pronounced on 29/11/2024. Sd/- (B.R. BASKARAN) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Varanasi; Dated 29/11/2024 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Varanasi 1. The Appellant 2. The Respondent. 3. The CIT(A), Varanasi. 4. CIT 5. DR, ITAT, Varanasi 6. Guard file. //True Copy// "