RAM PRAKASH JOKUKHANI, MUMBAI v. ASST CIT CIR 19(3), MUMBAI

CO 209/MUM/2014 | 2006-2007
Pronouncement Date: 31-07-2015 | Result: Dismissed

Appeal Details

RSA Number 20919923 RSA 2014
Assessee PAN AFUPJ1521Q
Bench Mumbai
Appeal Number CO 209/MUM/2014
Duration Of Justice 10 month(s)
Appellant RAM PRAKASH JOKUKHANI, MUMBAI
Respondent ASST CIT CIR 19(3), MUMBAI
Appeal Type Cross Objection
Pronouncement Date 31-07-2015
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted Not Allotted
Tribunal Order Date 31-07-2015
Date Of Final Hearing 07-05-2015
Next Hearing Date 07-05-2015
Assessment Year 2006-2007
Appeal Filed On 30-09-2014
Judgment Text
J IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH MUM BAI BEFORE SHRI G. S. PANNU AM AND SHRI SANJAY GARG JM ./ I.T.A. NO. 1973/MUM/2011 ( / ASSESSMENT YEAR: 2006-07) ./ I.T.A. NO. 1974/MUM/2011 ( / ASSESSMENT YEAR: 2007-08) ASST. CIT-19(3) ROOM NO. 305 3 RD FLOOR PIRAMAL CHAMBERS PAREL MUMBAI-400 012 / VS. SHRI RAM PRAKASH JOUKANI 281 KHUSHAL BHAVAN 36 TH ROAD BANDRA (WEST) MUMBAI-400 050 ./ ./PAN/GIR NO. AFUPJ1521Q ( /APPELLANT ) : ( / RESPONDENT ) ./ CROSS OBJECTION NO. 209/MUM/2014 (ARISING OUT OF ITA NO. 1973/MUM/2011) ( / ASSESSMENT YEAR: 2006-07) ./ CROSS OBJECTION NO. 210/MUM/2014 (ARISING OUT OF ITA NO. 1974/MUM/2011) ( / ASSESSMENT YEAR: 2007-08) SHRI RAM PRAKASH JOUKANI 281 KHUSHAL BHAVAN 36 TH ROAD BANDRA (WEST) MUMBAI-400 050 / VS. ASST. CIT-19(3) ROOM NO. 305 3 RD FLOOR PIRAMAL CHAMBERS PAREL MUMBAI-400 012 ./ ./PAN/GIR NO. AFUPJ1521Q (/ CROSS OBJECTOR ) : ( / RESPONDENT ) ITA 1973/M/11 & ITA 1974/M/11 & C.O. NO. 209/M/2014 & C. O. 210/M/2014 2 / REVENUE BY : SHRI R.A. DHYANI !'# / ASSESSEE BY : SHRI NARESH JAIN $ % #& / DATE OF HEARING : 28.07.2015 '()* #& / DATE OF PRONOUNCEMENT : 31 .07.2015 + / O R D E R PER BENCH : . THE APPEALS FILED BY THE REVENUE BEING ITA NO. 197 3/MUM/2011 & ITA NO. 1974/MUM/2011 ARE DIRECTED AGAINST TWO SEPA RATE ORDERS BOTH DATED 7-12-2010 PASSED BY THE LD. CIT(A) -21 MUMBAI FOR THE ASSESSMENT YEARS 2006-07 & 2007-08 AND THE CROSS OBJECTIONS BEING C.O. NO. 209/MUM/2014 & 210/MUM/2014 HAVE BEEN FILED BY THE ASSESSEE. SINCE COMMON ISSUES ARE INVOLVED IN THE CAPTIONED APPEALS THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS SINGLE C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. COMMON GROUNDS HAVE BEEN TAKEN BY THE DEPARTMENT IN BOTH THESE APPEALS (ONLY DIFFERENCE IN THE AMOUNTS). THE GROUN DS TAKEN IN ITA NO. 1973/MUM/2011 FOR THE A.Y. 2006-07 WHICH IS TAKEN AS LEAD CASE READ AS UNDER:- (1) ON THE FACT AND IN THE CIRCUMSTANCE OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN REDUCING THE G.P FROM 30% TO 15 % CONSIDERING THE SUBMISSION OF COPIES OF INVOICE OF EXPORTS INDICAT ING SALES PRICE HAND EMBROIDERY AND JOB WORK CHARGES AND CORRESPONDING P URCHASE AS WELL AS JOB WORK BILLS IGNORING THE FACT THAT: A) THE ASSESSING OFFICER REJECTED THE ASSESSEE'S BO OKS AND ESTIMATED GP AT 30% AS AGAINST 11.11 % DECLARED BY THE ASSESSEE ITA 1973/M/11 & ITA 1974/M/11 & C.O. NO. 209/M/2014 & C. O. 210/M/2014 3 B) ADMITTING THE ADDITIONAL EVIDENCE WITHOUT GIVING THE AO AN OPPORTUNITY IS VIOLATION OF RULE 46A OF THE I.T RUL ES. (2) ON THE FACT AND IN THE CIRCUMSTANCE OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE DISALLOWANCE O F FOREIGN EXPORT COMMISSION OF RS.38 09 985/- CONSIDERING THE SUBMI SSION OF VARIOUS EVIDENCES DURING THE APPELLATE PROCEEDINGS IGNORING THE FACT THAT: A) THE ASSESSEE HAS FAILED TO PRODUCE THE SUPPORTIN G EVIDENCE BEFORE THE AO AT THE TIME OF ASSESSMENT PROCEEDINGS B) ADMITTING THE ADDITIONAL EVIDENCE WITHOUT GIVING THE AO AN OPPORTUNITY IS VIOLATION OF RULE 46A OF I.T RULES. (3) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUND BE SET SIDE AND THAT OF THE AO BE RESTORED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S TRINITY INTERNATIONAL WHICH IS ENGAGED IN THE BUSINESS OF EXPORT OF TEXTILE FABRICS. DURING THE FINANCIAL YEAR RELEVANT TO A.Y. 2006-07 THE TOTAL TURNOVER OF THE CONCERN HAS BEEN SHOWN AT RS. 3.83 CRORES AND AFTER DEDUCTING THE EXPENSE NET PROFIT FROM BUSINESS HAS BEEN SHOWN AT RS. 1.87 LACS. THIS IS THE FIRST YEAR OF BUSINESS OF THE ASSESSEE. THE A.O. INVOKED THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT AND REJECTED THE BOOK RESULT S OF THE ASSESSEE ON THE GROUND THAT THIS IS THE FIRST YEAR OF BUSINESS OF T HE ASSESSEE THE DETAILS AS REQUIRED WERE NOT FURNISHED BY THE ASSESSEE MAJORI TY OF PURCHASES MADE BY THE ASSESSEE WERE UNVERIFIABLE EMBROIDERY CHARGES/ JOB WORK/PROCESSING FEES COULD NOT BE SUBSTANTIATED AS THE PARTIES WERE UNTR ACEABLE THE PAYMENTS WERE MADE BY BEARER CHEQUES. THE A.O. ALSO OBSERVED THAT THERE WERE VARIOUS DISCREPANCIES IN THE ACCOUNTS OF THE ASSESSEE WHICH THE ASSESSEE WAS NOT ABLE TO RECONCILE. THE A.O. ACCORDINGLY ESTIMATED THE G ROSS PROFITS OF THE YEAR AT THE RATE OF 30% OF THE TOTAL SALES WHICH WORKED OU T TO RS. 1 15 09 884/-AS AGAINST THE GP OF RS. 43 47 715/- SHOWN BY THE ASSE SSEE. AGGRIEVED BY THE DECISION OF THE A.O. THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) AND ITA 1973/M/11 & ITA 1974/M/11 & C.O. NO. 209/M/2014 & C. O. 210/M/2014 4 SUBMITTED ITS DETAILED SUBMISSIONS. THE ASSESSEE C ONTENDED THAT THE TWELVE PARTIES TO WHOM THE A.O. ISSUED SUMMONS MIGHT HAVE LEFT AND NON-SERVICE OF THE SUMMONS ON THEM SHOULD NOT BE CONSIDERED TO DRA W AN ADVERSE INFERENCE AGAINST THE ASSESSEE AND IT DOES NOT MEAN THAT THE PURCHASES WERE NOT GENUINE AND THE A.O. HAS WRONGLY SUBSTITUTED THE G. P. RATE OF 30% AGAINST THE GP RATE OF 11.333% ACTUALLY EARNED BY THE ASSES SEE. THE ASSESSEE ALSO SUBMITTED THAT THE PAYMENTS WERE MADE THROUGH BANKI NG CHANNEL AND THE ADDITION HAS BEEN WRONGLY MADE BY THE A.O. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS UPHELD THE A.O.S ACTION IN INVOKIN G THE PROVISIONS OF SECTION 145(3) OF THE ACT AS THE BOOKS OF ACCOUNT DO NOT PR OVIDE THE CORRECT FIGURE AND CAME TO THE CONCLUSION THAT THE A.O. CANNOT ACT IN AN ARBITRARY MANNER AND HAS TO JUSTIFY THE ESTIMATION OF GROSS PROFIT. THE ASSESSE WAS CALLED UPON TO FURNISH THE GROSS PROFIT RATIO IN GREY PURCHASES. THE ASSESSEE FURNISHED A CHART SHOWING THE DETAILS OF THE SAME FOR A.Y. 2005 -06 AS UNDER:- BILL NO. DATE SALES PRICE GREY PURCHASE PRICE OTHER EXPENSES PROFIT GROSS PROFIT 3 17.02.2006 18 78 348.49 13 65 733.24 3 47 080.62 1 65 534.63 8.81 4 17.02.2006 14 52 790.47 9 50 947.80 3 70 593.08 1 31 249.59 9.03 9 04.03.2006 16 90 912.83 7 57 719.36 7 44 372.00 1 88 821.47 11.17 14 08.03.2006 18 32 919.04 11 22 486.34 4 34 110.74 2 76 321.96 15.08 17 08.03.2006 18 32 783.16 9 71 212.30 6 64 110.74 1 97 231.09 10.76 22 11.03.2006 19 57 360.00 10 60 819.65 6 01 105.00 2 95 435.35 15.09 23 13.03.2006 22 54 169.08 12 39 579.60 7 62 930.00 2 51 659.48 11.16 27 27.03.2006 17 78 151.00 9 76 739.84 5 35 952.00 2 65 459.16 14.93 BASED UPON THIS CHART THE LD. CIT(A) ESTIMATED THE GROSS PROFIT RATIO @ 15% AS AGAINST 30% ADOPTED BY THE A.O. AGGRIEVED BY TH E DECISION OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 3. THE LD. D.R. SUBMITTED THAT THE A.O. HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT TO VERIFY THE GENUINEN ESS OF THE PURCHASES MADE BY THE ASSESSEE BUT THESE PARTIES DID NOT TURN UP A ND HENCE THERE WERE SEVERAL DISCREPANCIES IN THE TRANSACTION AND THE A. O. HAS RIGHTLY REJECTED THE ITA 1973/M/11 & ITA 1974/M/11 & C.O. NO. 209/M/2014 & C. O. 210/M/2014 5 BOOKS OF ACCOUNT. HOWEVER THOUGH THE LD. CIT(A) U PHELD THE ACTION OF A.O. IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T HAS WRONGLY ADOPTED THE GROSS PROFIT RATIO AT 15% INSTEAD OF 30% ADOPTED BY THE A.O. THE LD. D.R. ALSO STATED THAT THE LD. CIT(A) HAS NOT GIVEN OPPORTUNIT Y TO THE A.O. WHILE ADMITTING THE ADDITIONAL EVIDENCES UNDER 46A OF THE INCOME TAX RULES 1962. HE STRONGLY RELIED UPON THE ORDER OF THE A.O. 4. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE RELIED UPON THE ORDER OF THE LD. CIT(A) PARTICULARLY TO PARA 12 AT PAGE 10 AND STATED THAT THE LD. CIT(A) HAS GIVEN A CONSIDERABLE THOUGHT TO THE WORKING OF THE ASSESSEE AND HAS ARRIVED AT A FIGURE OF G.P. RATIO OF 15% CORREC TLY BASED UPON THE DATA AVAILABLE IN RESPECT OF THE GREY PURCHASES DEALT WI TH BY THE ASSESSEE. HE ALSO RELIED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF ITO VS. INDUSTRIAL ROADWAYS (2008) 112 ITD 293. AND STATE D THAT THE FIRST APPELLATE AUTHORITY HAS THE POWERS TO DIRECT THE ASSESSEE TO PRODUCE ADDITIONAL EVIDENCE TO DISPOSE OF THE APPEALS ON MERITS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL CAREFULLY. IN OUR VIEW THE LD. CIT(A) AND THE A.O. HAVE RIGHTLY REJECTED THE BOOKS OF ACCOUNT BECAUSE THERE WERE DISCREPANCIES IN THE BOOKS OF ACCOUNT AND THE PURCHASES WERE NOT FOUND TO BE VERIFIABLE. WE ALSO IN AGREEMENT WITH THE LD. CIT(A) ON THE ADOPTION OF GP RATIO OF 15% A S AGAINST 30% ADOPTED BY THE A.O.IN A.Y. 2006-07 AND GP RATIO OF 28% AS AGAI NST 30% IN A.Y. 2007-08 AS AGAINST GP RATE OF 27.18% DECLARED BY THE ASSESS EE BASED UPON THE WORKING FURNISHED BY THE ASSESSEE. ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE GROUND RAISED BY THE REV ENUE. 6. IN GROUND NO. 2 THE REVENUE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN ALLOWING THE DISALLOWANCE OF FOREIGN EXPORT COMMISS ION OF RS. 38 09 985/- IN A.Y. 2006-07 AND RS. 33.65 LACS IN A.Y. 2007-08. ITA 1973/M/11 & ITA 1974/M/11 & C.O. NO. 209/M/2014 & C. O. 210/M/2014 6 7. THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 38 09 985/- IN HIS P&L ACCOUNT AS FOREIGN EXPORT COMMISSION IN A.Y. 2006-0 7 AND RS. 33.65 LACS IN A.Y. 2007-08. THE ENTIRE AMOUNT IS SHOWN AS LIABILI TY UNDER THE HEAD SUNDRY CREDITORS. THE A.O. ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THE EXPENSES ALONG WITH CONFIRMATION AND RELEVANT INVOICES REAS ONABLENESS OF SUCH COMMISSION AND DETAILS OF PAYMENT. IN REPLY THE A SSESSEE SUBMITTED THAT HE HAS PAID COMMISSION TO ONE PARTY NAMELY SINAR MANDI RI FROM INDONESIA BEING HIS EXPORT COMMISSION AGENT. THE A.O. HELD T HAT THE ENTIRE FOREIGN EXCHANGE COMMISSION WAS A FICTITIOUS EXPENSES DEBIT ED BY THE ASSESSEE TO REDUCE TAX LIABILITY. THE A.O. ALSO HELD THAT THE A SSESSEE HAS NEITHER GIVEN FULL DETAILS OF THE FOREIGN EXPORT COMMISSION NOR IS GIV EN ANY REASON FOR SUCH PAYMENT GIVEN. THE ASSESSEE CARRIED THE MATTER BEF ORE THE LD. CIT(A) AND CONTENDED THAT THE ENTIRE AMOUNT OF RS. 38 09 985/- & RS. 33.65 LACS IN AYS 2006-07 & 2007-08 WERE PAID THROUGH TELEGRAPHIC TRA NSFER FROM BANK AND THE EVIDENCE TO THIS EFFECT WERE GIVEN. THE ASSESSEE CO NTENDED THAT THE FOREIGN EXPORT COMMISSION HAS PAID TO ONE AGENT NAMELY SIN AR MANDRI WHO IS SELLING THE PRODUCTS OF THE ASSESSEE IN INDONESIA AND ALSO OTHER COUNTRIES. THE ASSESSEE ALSO SUBMITTED THAT SPECIFIC INVOICE DETAI LS ON WHICH FOREIGN EXPORT COMMISSION IS PAID WERE FURNISHED THROUGH ANNEXURE 7. THE ASSESSEE ALSO SUBMITTED THAT THESE PAYMENTS WERE MADE UNDER THE R EGULATION OF RESERVE BANK OF INDIA AND WHICH ARE MONITORED AND REGULATED BY THE RBI WHICH PERMITS FOREIGN COMMISSION @ 12%. THE ASSESSEE ALS O SUBMITTED THAT HE IS DEALING IN HIGH FASHION PRODUCTS WHEREBY FASHION CH ANGES VERY FAST AND HENCE HE NEEDS FOREIGN COMMISSION AGENT WHO CAN GUI DE THE ASSESSEE ON THE COLOUR TEXTURE AND DESIGN ETC. AND CAN OBTAIN THE ORDERS FOR THE ASSESSEE. THE LD. CIT(A) BASED ON THE SUBMISSIONS MADE BY TH E ASSESSEE HELD THAT THE AGENT SINAR MANDIRI WHO HELPS THE ASSESSEE TO KNOW THE BUYER AND ALSO THE FASHION TREND OF DIFFERENT COUNTRIES. SINCE THE TEX TILE FABRIC WHICH IS HIGHLY FASHION ORIENTED AND KEEPS ON CHANGING FROM TIME TO TIME AND IS DIFFERENT IN VARIOUS COUNTRIES IT IS THE FOREIGN COMMISSION AGE NT WHO GUIDES THE ASSESSEE ITA 1973/M/11 & ITA 1974/M/11 & C.O. NO. 209/M/2014 & C. O. 210/M/2014 7 ON THE COLOUR TEXTURE AND DESIGN OF ITEMS ETC. TO BE EXPORTED. THE PAYMENTS WERE MADE THROUGH BANKING CHANNEL WHICH IS ON RECO RD. THESE PAYMENTS WERE MADE AS PER THE REGULATION OF RBI. THE LD. CIT (A) ACCORDINGLY CONCLUDED THAT IT CANNOT BE SAID THAT THE FOREIGN EXPORT COMM ISSION CLAIMED BY THE ASSESSEE WAS UNVERIFIABLE AND ACCORDINGLY DIRECTED THE A.O. TO DELETE THE SAME. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ON THIS ISSUE THE REVENUE IS IN APPEAL BEFORE US. 8. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. WHILE THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON THE ORDER OF THE LD. C IT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. CIT(A) HAS CONCLUDED THAT THE AS SESSEE HAS ENGAGED FOREIGN COMMISSION AGENT I.E. SINAR MANDIRI AND HAS PAID FO REIGN EXPORT COMMISSION UNDER THE REGULATIONS OF RBI THROUGH BANKING CHANNE L @ 12% ON WHICH COPIES OF INVOICES WERE FURNISHED DURING THE APPELL ATE PROCEEDINGS. IN OUR CONSIDERED OPINION THE LD. CIT(A) IS QUITE JUSTIFI ED IN DELETING THE DISALLOWANCE MADE BY THE A.O. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY WE UPHOLD THE SAME D ISMISS THIS GROUND RAISED BY THE REVENUE. 10. SINCE WE HAVE UPHELD THE ORDER OF THE LD. CIT(A ) THE C.O. NO. 209/MUM/2014 & 210/MUM/2014 FILED BY THE ASSESSEE H AVE BECOME INFRUCTUOUS AND ACCORDINGLY DISMISSED. ITA 1973/M/11 & ITA 1974/M/11 & C.O. NO. 209/M/2014 & C. O. 210/M/2014 8 11. IN THE RESULT THE APPEALS FILED BY THE DEPARTM ENT AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY 2015. + '()* $ - ./ 0+ 1 31-7-2015 ( 2% 3 SD/- SD/- (SANJAY GARG) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER . $ 4% MUMBAI ; 0+ DATED 31-07-2015 [ .../ R.K. R.K. R.K. R.K. SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ 5# () / THE CIT(A)- 30 MUMBAI 4. $ 5# / CIT- CITY -19 MUMBAI 5. 672 #8 & 8 * . $ 4% / DR ITAT MUMBAI J BENCH 6. 2:! ;% / GUARD FILE. ' / BY ORDER 6# # //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) . $ 4% / ITAT MUMBAI