Shri Bhupendra Singh Karnavat, Mumbai V. The Income Tax Officer, Ward-6(1), Surat

MA 206/AHD/2014

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3362 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 16-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Assessee Lawyers: SHAH
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD , BEFORE SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER , AND SHRI RAJPAL YADAV , JUDICIAL MEMBER . M. A. NO. 20 6/AHD/20 14 (IN IT A. NO . 2 366/ AHD/20 1 0) (ASSESSMENT YEAR:200 6 - 0 7 ) SHRI BHUPENDRA SINGH KARNAVAT , 210A, PANCHRATNA, OPERA HOUSE, CHARNI ROAD, MUMBAI - 400004 APPELLANT VS. INCOME TAX OFFICER, WARD - 6(1), SURAT .. RESPONDENT [ PAN: A IKPK8272C ] / BY ASSESSEE : SHRI M. R. SHAH , A.R. / BY REVENUE :SHRI D. C. MISHRA , SR .D.R. / DATE OF HEARING : 1 7 .0 7 .2015 / DATE OF PRONOUNCEMENT : 21 .08.2015 O R D E R PER PRAMOD KUM AR , A . M.: BY WAY OF THIS RECTIFICATION PETITION, THE ASSESSEE APPLICANT SEEKS MODIFICATION OF OUR ORDER DATED 28 TH AUGUST, 20 14, TO THE EXTENT THAT NO SEPARATE ADDITION, IN RESPECT OF INTEREST INCOME IS WARRANTED AFTER ESTIMATING NET PROFIT @ 0.09%. M. A. NO. 20 6 /AHD/2014 ( SHRI BHUPENDRA SINGH KARNAVAT VS. IT O) A.Y. 2006 - 07 - 2 - 2. THE PETITION FILED BY THE ASSESSEE IS REPRODUCED BELOW FOR READY REFERENCE: 1. THIS MISCELLANEOUS APPLICATION U/S 254(2) IS DIRECTED AGAINST THE ORDER OF THE HONOURABLE TRIBUNAL 'A' BENCH DATED 28.08.2014 IN ITA NO. 2366/A/2010. 2. THE ORDER RELATES TO A PPEAL FILED BY THE REVENUE RAISING THE FOLLOWING GROUND: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CLT(A) - IV, SURAT HAS ERRED IN DELETING THE ADDITION OF RS. 25,77,981/ - MADE BY THE AO ON ACCOUNT OF INCOME FROM OTHER SOURCES.' 3. THE HONOURABLE TRIBUNAL DISMISSED THIS GROUND OF THE REVENUE BY GIVING FINDING AT PARA NO. 11 BY HOLDING THAT THE HONOURABLE TRIBUNAL DIDN'T FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN RESPECT OF T HIS ISSUE. ACCORDINGLY, THE INTEREST INCOME WAS ASSESSED AS BUSINESS INCOME BY TRIBUNAL AND ACTION OF THE CIT(A) IN DELETING THE ADDITION WAS CONFIRMED.: 4. THE REVENUE HAS ALSO RAISED ADDITIONAL GROUND WHICH IS AS UNDER: 'ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE AND IN THE LAW, THE LD. CIT(A) - IV, SURAT , HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ESTIMATION OF NET PROFIT.' 5. THE HONOURABLE TRIBUNAL ON THIS ISSUE DIRECTED TO ESTIMATE THE NET PROFIT RATIO AT 0.09% ON THE BASIS OF THE NET PROFIT OF A.Y. 2008 - 09 ASSESSED BY THE ASSESSING OFFICER. HOWEVER, THE HONOURABLE TRIBUNAL FURTHER DIRECTED TO ADD INTERES T INCOME OF RS. 25,22,639/ - . THE INTEREST INCOME OF RS. 25,22,639 / - IS A PART OF NET PROFIT 0.03% DISCL OSED BY THE ASSESSEE AGAINST WHICH THE HONOURABL E TRIBUNAL HAS DIRECTED TO ADOPT THE NET PROFIT AT 0.09% WHICH ALSO INCLUDES INTEREST INCOME. HOWEVER, AS STATED ABOVE THE INTEREST INCOME WAS ASSESSED BY THE HONOURABLE TRIBUNAL AND CIT(A) AS BUSINESS INCOM E AND SO HONOURABLE TRIBUNAL HAS ERRED IN GIVING FURTHER DIRECTION TO ADD INTEREST INCOME OF RS.25,22,639/ - . IT IS TO BE NOTED THAT NET PROFIT RATIO OF 0.09% OF A.Y. 2008 - 09 ON THE BASIS OF WHICH THE ESTIMATION WAS MADE ALSO INCLUDE THE INTEREST INCOME OF RS.15,79,352/ - . 6. IN VIEW OF THE ABOVE, THE HONOURABLE TRIBUNAL IS REQUESTED TO DELETE THE ADDITION OF RS.25,22,639/ - ADDED WHILE DEALING WITH THE ADDITIONAL GROUND OF APPEAL FILED BY REVENUE IN REGARD TO THE ESTIMATION OF THE PROFIT WHICH INFACT WAS DE LETED BY THE HONOURABLE TRIBUNAL WHILE DEALING WITH THE GROUND RAISED IN THE APPEAL MEMO BY REVENUE. M. A. NO. 20 6 /AHD/2014 ( SHRI BHUPENDRA SINGH KARNAVAT VS. IT O) A.Y. 2006 - 07 - 3 - 3. LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE ORDER DATED 28 TH AUGUST, 2014, THE TRIBUNAL HAS NOTED THAT THE FINDING OF THE CIT(A) IS THAT INT EREST INCOME IS ASSESSABLE UNDER THE HEAD BUSINESS AND PROFESSION AND CONFIRMED THE SAME BY HOLDING THAT WE FIND THAT NO MATERIAL HAS BEEN BROUGHT BEFORE US TO CONTROVERT THE FINDINGS OF THE CIT(A) THAT IN THE INSTANT CASE, THE INTEREST INCOME WAS DERIV ED FROM BUSINESS FUNDS WHICH WERE AVAILABLE LIMIT THE ASSESSEE . IT WAS ALSO POINTED OUT THAT THE TRIBUNAL THEN ALSO PROCEEDED TO ADOPT 0.09% OF SALES AS NET PROFIT. YET WHEN IT CAME TO GIVE DIRECTIONS IN THE LIGHT OF THESE FINDINGS , TRIBUNAL DECIDED T O DIRECT THE ASSESSING OFFICER TO ESTIMATE THE NET PROFIT DERIVED FROM SALES DURING THE YEAR UNDER CONSIDERATION AT 0.09%, AND, AFTER THAT, ADD THEREWITH INTEREST INCOME OF RS.25,22,639/ - TO DETERMINE THE TOTAL INCOME OF THE ASSESSEE. LEARNED COUNSEL TH EN INVITES OUR ATTENTION TO THE FOLLOWING CHART WHICH SHOWS PROFIT FOR ASSESSMENT YEARS 2004 - 05 TO 2008 - 09. A.Y. TURNOVER (IN RS.) GROSS PROFIT G. P. RATIO % NET PROFIT N. P. RATIO% 2004 - 05 64,50,74,393 1,14,98,424 1.78 1,35,101 0.02 2005 - 06 77,41,58, 338 1,24,74,722 1.61 1,52,077 0.02 2006 - 07 44,48,32,587 84,52,078 1.90 1,42,663 0.03 2007 - 08 27,48,60,537 53,28,563 1.94 1,38,482 0.05 2008 - 09 41,62,10,587 75,64,532 1.82 2,41,163 0.06 NOTE : - NO ADDITION WAS MADE IN THE CASE OF ASSESSEE IN SCRUTINY ASSESSMENT FOR A.Y. 2007 - 08 ON ACCOUNT OF GROSS PROFIT OR NET PROFIT IN SCRUTINY ASSESS MENT U/S 143(3) IN A.Y 2008 - 09, THE NET PROFIT WAS ASSESSED AS RS. 4,03,600/ - @ 0.09 % WHICH INCLUDES INTEREST INCOME OF RS. 15,79,352/ - AS BUSINESS INCOME 4. IT IS TH US SUBMITTED THAT DIRECTIONS FOR ADDING INTEREST INCOME OF RS.25,22,639/ - IS A MISTAKE APPARENT ON RECORD WHICH NEEDS TO BE RECTIFIED. 5. LEARNED DEPARTMENTAL REPRESENTATIVE RELIES ON THE ORDER OF THE TRIBUNAL, JUSTIFIES THE SAME AND SUBMITS THAT IT DOES NOT SUFFER FROM ANY MISTAKE APPARENT ON RECORD. HE SUBMITS THAT IN THE GARB OF RECTIFICATION OF M. A. NO. 20 6 /AHD/2014 ( SHRI BHUPENDRA SINGH KARNAVAT VS. IT O) A.Y. 2006 - 07 - 4 - MISTAKE, THE ORDER OF THE TRIBUNAL CANNOT BE REV I E W ED. HE FURTHER SUBMITS THAT IT WAS A CONSCIOUS DECISION OF THE TRIBUNAL TO ADD INTEREST INCOME OF RS.25,22 ,639/ - TO THE ESTIMATE PROFIT @ 0.09% ON SALES, AND IT CANNOT BE REVISITED AT THIS STAGE. WE ARE THUS URGED TO DISMISS THE RECTIFICATION P E TI TION. 5. IN BRIEF REJOINDER, LEARNED COUNSEL POINTED OUT THAT THE TRIBUNAL EXPRESSLY FOLLOWED THE TREATMENT GIV EN BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2008 - 09 IN WHICH THE INTEREST INCOME WAS INCLUDED IN NET PROFIT. IT WAS, THEREFORE, CLEARLY AN INADVERTENT ERROR TO HAVE AGAIN ADDED THE INTEREST INCOME TO ESTIMATED PROFITS @ 0.09%. IT WAS, ACCORDING TO THE LEARNED COUNSEL, AN INADVERTENT ERROR APPARENT ON RECORD TO HAVE MADE FURTHER ADDITION OF RS.25,22,639/ - . WE ARE URGED TO RECTIFY THE SAME. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION S, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. WE FIND THAT IN THE IMPUGNED ORDER, THE TRIBUNAL HAS SIMPLY ADOPTED THE APPROACH AS TAKEN BY APPROACH ASSESSING OFFICER HIMSELF IN THE ASSESSMENT YEAR. THIS APPROACH IS EVIDENT FROM THE FOLLOWING OB SERVATIONS: 13. IN OUR CONSIDERED OPINION, INTERNAL COMPARABLES ARE ALWAYS BETTER THAN EXTERNAL COMPARABLES. THERE MAY BE VARIOUS REASONS LIKE AMOUNT OF CAPITAL EMPLOYED, BUSINESS POLICY REGARDING PERIOD OF CREDIT AVAILED FOR PURCHASES, PERIOD OF CREDIT ALLOWED IN RESPECT OF SALES, TIME DEVOTED BY THE DIRECTOR OR PROPRIETOR IN THE BUSINESS ETC. WHICH MAY CAUSE SIGNIFICANT DIFFERENCE IN THE RATE OF NET PROFIT VIS - - VIS SALES OF TWO TRADERS ENGAGED IN SAME LINE OF BUSINESS. AS IN THE INSTANT CASE THE RATE OF NET PROFIT OF SALES ACCEPTED IN ASSESSMENT MADE U/S.143(3) IN THE CASE OF THE ASSESSEE ITSELF IS AVAILABLE, IN OUR CONSIDERED OPINION, THE SAME IS A BETTER GUIDE FOR ESTIMATING THE NET PROFIT OUT OF SALES. NO MATERIAL HAS BEEN BROUGHT BEFORE US TO SHOW THAT THERE WAS ANY SIGNIFICANT DIFFERENCE IN THE ECONOMY OF THE YEAR UNDER CONSIDERATION AND THAT OF THE ASSESSMENT YEAR 2008 - 09 SO AS TO CAUSE A SIGNIFICANT DIFFERENCE IN NET PROFIT TO SALES IN THE TWO YEARS. M. A. NO. 20 6 /AHD/2014 ( SHRI BHUPENDRA SINGH KARNAVAT VS. IT O) A.Y. 2006 - 07 - 5 - 8. HOWEVER, WHILE GIVING SHAPE TO THE ABOVE DECISION BY WAY OF DIRECTIONS TO THE ASSESSING OFFICER, THE TRIBUNAL DID DIRECT THE ASSESSING OFFICER TO ADD INTEREST INCOME TO THE PROFITS SO ARRIVED AT. THIS DIRECTION WAS CONTRARY TO, AND DEVIATED FROM, THE DECISION OF THE TRIBUNAL INASMUCH AS NO SEPA RATE INTEREST ADDITION IN THE ASSESSMENT YEAR. WE, THEREFORE, SEE MERITS IN THE PRESENT PETITION. ACCORDINGLY, THE WORDS AND AFTER THAT ADD THEREWITH INTEREST INCOME OF RS.25,22,639/ - TO DETERMINE TOTAL INCOME OF THE ASSESSEE STAND EXPUNGED FROM SECO ND LAST SENTENCE IN PARAGRAPH NUMBER 13 OF THE ORDER. TO THAT EXTENT, THE ORDER DATED 28.08.2014 STANDS MODIFIED. 9 . IN THE RESULT, THE RECTIFICATION PETITION IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 21 ST DAY OF AUGUST, 2015. SD/ - SD/ - ( RAJPAL YADAV ) ( PRAMOD KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 21 /08/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. BY ORDER/ , / ,