Shri Ammar Abdulmutalib Nasir, Surat v. The Dy.CIT.,Circle-2,, Surat

ITA 1134/AHD/2011 | 2007-2008
Pronouncement Date: 21-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 113420514 RSA 2011
Assessee PAN ABTPN1018P
Bench Ahmedabad
Appeal Number ITA 1134/AHD/2011
Duration Of Justice 3 year(s) 7 month(s) 2 day(s)
Appellant Shri Ammar Abdulmutalib Nasir, Surat
Respondent The Dy.CIT.,Circle-2,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 21-11-2014
Date Of Final Hearing 18-11-2014
Next Hearing Date 18-11-2014
Assessment Year 2007-2008
Appeal Filed On 18-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI A.M.) I. T. A. NO. 1134 / AHD/ 20 1 1 (A SSESSMENT YEAR: 2007 - 08) SHRI AMMAR ABDULMUTALIB NASIR C/O. INDIA METAL TRADING COMPANY SHOP NO. 205 OPP. CHITRAKOOT EXPORT MUGAT DYEING GALI UD HNA SURAT 394210 V/S THE D.C.I.T CIRCLE - 2 SURAT (APPELLANT) (RESPONDENT) PAN: ABTPN 1018P APPELLANT BY : SHRI KAMLESH N. BHATT A.R. RESPONDENT BY : SHRI V.K. SINGH SR. D.R. ( )/ ORDER DATE OF HEARING : 18 - 11 - 2014 DATE OF PRONOUNCEMENT : 21 - 11 - 2014 PER SHRI ANIL CHATURVEDI A.M. 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) - I I SURAT DATED 23.02.2011 FOR A.Y. 2007 - 08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A N INDIVIDUAL STATED T O BE ENGAGED IN THE TR ADING BUSINESS OF COPPER WIRES AND CONSTRUCTION WORK. ASSESSEE FILED HI S RETUR N OF INCOME FOR A.Y. 07 - 08 ON 31 .10.2007 DECLARING TOTAL INCOME OF RS. 7 3 8 947 / - . THE CASE WAS SELECTED ITA NO 1134/AHD/2011 . A.Y. 2007 - 08 2 FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SE CTION 143(3) VIDE ORDER DATED 24.12 .2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 23 93 9 40/ - . AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFOR E CIT(A) WHO VIDE ORDER DATED 23.02.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE A FORESAID ORDER OF CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS; - 1. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) OUGHT TO HAVE DISMISSED THE ORDER OF THE LD. A. O. REJECTING THE BOOKS OF ACCOUNTS AND OUGHT TO HAVE DIRECTED THE LD. A. O. TO ACCEPT THE BOOKS OF ACCOUNT OF THE APPELLANT. YOUR APPELLANT THEREFORE PRAYS THAT THE ORDER REJECTING THE BOOKS OF ACCOUNTS BE QUASHED AND THE LD. A. O. BE DIRECTED TO ACCEPT THE BOOKS OF ACCOUNTS OF THE APPELLANT. 2. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN ESTIMATING THE GP @ 7% OF THE TOTAL TURNOVER AND THEREBY CONFIRMING THE ADDI TION TO THE EXTENT OF RS. 9 78 317 ON ACCOUNT OF GP AND HENCE YOUR APPELLANT THEREFORE PRAYS THAT THE ADDITION SO RETAINED BE DELETED. GROUND NO. 1 AND 2 ARE INTERCONNECTED AND THEREFORE CONSIDERED TOGETHER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O NOTICED THAT ASSES SEE HAS SHOWN GROSS PROFIT OF R S. 12 00 072/ - AT 3.86% ON THE TURNOVER OF RS. 3.11 CRORE AS AGAINST THE GROSS PROFIT OF RS. 8 14 238/ - AT 12.69% ON THE TURNOVER OF RS. 64.11 LACS IN THE IMMEDIATELY PRECEDING YEAR AND THUS AS PER THE A.O THERE WAS FALL IN GROSS PROFIT RATIO OF 8.83%. THE ASSESSEE WAS THEREFORE ASKED TO EXPLAIN THE REASONS FOR FALL IN G.P AND IN RESPONSE TO WHICH ASSESSEE INTERALIA SUBMITTED THAT DURING THE YEAR SALES HAS INCREASED BY 4.85 TIMES AS COMPARED TO IMMEDIATE PRECEDING YEAR AND THE COST HAS INCREASED BY 1.9 TIMES WHEREAS THE SALES PRICE HAS INCREASED ONLY BY 1.6 TIMES. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. TO VERIFY THE CONTENTIONS OF ASSESSEE A.O THEREFORE ASKED THE ASSESSEE TO PRODUCE HIS BOOKS OF ACCOUNTS BILLS AND VOUCHERS AND OTHER DETAILS FOR VERIFICATION. A.O NOTED THAT DESPITE VARIOUS OPPORTUNITIES GRANTED TO THE ASSESSEE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS BILLS AND VOUCHERS. HE WAS THEREFORE OF THE VIEW T HAT THE COMPLETENESS AND CORRECTNESS OF THE TRADING RESULTS SHOWN BY THE ASSESSEE COULD NOT BE ASCERTAINED NOR THE ASSESSEE HAS FURNISHED ANY TANGIBLE EVIDENCE IN SUPPORT OF HIS CLAIM FOR FALL IN G.P. HE ACCORDINGLY REJECTED T HE BOOKS RESULTS U/S 145(3) OF THE ACT. A.O THEREAFTER NOTED THAT THE GROSS PROFIT SHOWN BY THE ASSESSEE IN THE ITA NO 1134/AHD/2011 . A.Y. 2007 - 08 3 IMMEDIATE PRECEDING YEAR WAS 12.69% AND IN THE YEAR UNDER CONSIDERATIO N IT WAS 3.86%. HE CONSIDERING THE AVERAGE PROFIT FOR BOTH THE Y EARS AT 8.26% WORKED OUT G.P UNDER CONS IDERATION AT RS. 25 75 563/ - AND AFTER GIVING THE CREDIT OF THE GROSS PROFIT OF RS. 12 00 072/ - THAT WAS SHOWN BY THE ASSESSEE ADDED THE DIFFERENCE AMOUNT OF RS. 13 70 491/ - ON ACCOUNT OF LOW GROSS PROFIT. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: - 4.2 THE SECOND GROUND OF APPEAL IS AGAINST ESTIMATION OF THE GP @ 8.26% THEREBY MAKING AN ADDITION OF RS. 13 70 491/ - .'THE APPELLANT'S SUBMISSION ON THIS GROUND OF A PPEAL IS MAINLY THAT THE BUSINESS OF SELLING AND PURCHASING OF COPPER WIRES RODS AND COILS HAS BEEN DONE ON A WHOLESALE BASIS THE ACCOUNTS ARE AUDITED SALES AND PURCHASES ARE DULY SUPPORTED BY BILLS AND VOUCHERS AND PURCHASES ARE NOT INFLATED. IN RE GARD TO SHORT FALL IN GP THE APPELLANT HAS DURING THE COURSE OF APPELLATE PROCEEDINGS VIDE SUBMISSION DATED 15 - 10 - 2010 ALSO STATED THAT BECAUSE OF MARKET TREND IN THE MONTH OF AUGUST 2006 TO JANUARY 2007 HE FEARED THE RISK OF BAD - DEBTS AND INSTEAD OF EX TENDING THE NORMAL CREDIT PERIOD OF 45 TO 60 DAYS IN THE EARLIER YEAR HE REDUCED THE MARGIN AND RESORTED TO VERY SHORT PERIOD WHICH IS KNOWN IN THE MARKET AS COD (CASH / PAYMENT ON DELIVERY) AND CURTAILING OF CREDIT PERIOD RESULTED IN THE REDUCTION OF MA RGIN HENCE FALL IN GP. THE APPELLANT HAS HOWEVER NOT FURNISHED ANY EVIDENCE TO SUBSTANTIATE HIS CLAIM THAT FROM AUGUST 2006 TO JANUARY 2007 HE RESORTED TO COD (CASH PAYMENT ON DELIVERY). I THEREFORE DO NOT FIND MUCH MERIT IN THIS SUBMISSION OF THE A PPELLANT AND REJECT THE SAME. THE QUESTION THAT ARISES NOW IS WHETHER THE GP RATE ADOPTED BY THE ASSESSING OFFICER IS CORRECT. IN THIS REGARD I FIND THAT THE ASSESSING OFFICER HAS TAKEN AVERAGE OF GP DECLARED DURING THE YEAR UNDER CONSIDERATION AS WELL A S IN THE IMMEDIATE PRECEDING YEAR. SINCE THE REJECTION OF BOOK OF ACCOUNTS OF THE APPELLANT HAS BEEN UPHELD THE GP DECLARED DURING THE YEAR CANNOT BE CONSIDERED. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD THE GP OF ASSESSMENT YEAR PRECEDING THE ASSE SSMENT YEAR 2006 - 07. THEREFORE TAKING ALL FACTORS INTO ACCOUNT I HOLD THAT IT WOULD BE APPROPRIATE TO TAKE GP @ 7.00% DURING THE YEAR UNDER CONSIDERATION. I ACCORDINGLY DIRECT THE ASSESSING OFFICER TO ADOPT GP OF 7.00% ON TURNOVER OF RS. 3 11 20 616/ - . THE ADDITION MADE BY THE ASSESSING OFFICER IS ACCORDINGLY REDUCED TO THE SAID EXTENT. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A) ASSESSEE IS NOW IN APPEAL BEFORE US. 6. BEFORE US LD. A.R. REITERATED THE SUBMI SSIONS MADE BEFORE A.O AND CIT(A) AND FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE HAVE BEEN AUDITED BY CHARTERED ACCOUNTANT AND NO DEVIATION FROM THE ACCEPTED ACCOUNTING PRINCIPALS POLICIES OR ACCOUNTING STANDARDS HAS BEEN POIN TED OUT BY THE AUDITOR . HE FURTHER SUBMITTED THAT THE ASSESSEE MAINTAINS STOCK RECORDS ON DAY TO DAY BASIS AND FURTHER SUBMITTED THAT THE SALES AND PURCHASES OF THE ASSESSEE ARE DULY SUPPORTED BY BILLS AND THERE IS NO FINDING THAT EITHER THE PURCHASES ARE INFLATED OR THE SALES ARE UNDER STATED OR ARE OUT OF THE BOOKS OF ACCOUNTS. HE FURTHER SUBMITTED THAT THE TURNOVER OF THE ASSESSEE HAS INCREASED ITA NO 1134/AHD/2011 . A.Y. 2007 - 08 4 FROM RS. 64 LACS TO RS. 3.11 CRORES AND THE GROSS PROFIT IN ABSOLUTE TERMS HAS ALSO INCREASED. HE THEREFORE SUB MITTED THAT THERE WAS NO JUSTIFICATION FOR REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF GROSS PROFIT AT 7%. THE LD. D.R. ON THE OTHER HAND POINTED TO THE FINDINGS OF A.O AND POINTED TO THE PARA NO. 4.4 ON PAGE 3 OF THE A.O S ASSESSMENT ORDER WHERE A.O HAD NOTED THAT DESPITE PROVIDING SUFFICIENT TIME AND OPPORTUNITY ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNTS BIL LS/VOUCHERS FOR VERIFICATION. HE THEREFORE SUBMITTED THAT IN SUCH CIRCUMSTANCES THE A.O WAS LEFT WITH NO OTHER OPTION BUT TO REJECT T HE BOOKS OF ACCOUNTS. HE FURTHER SUBMITTED THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED THE A.O HAS TO MAKE AN ESTIMATE OF PROFIT AND IN THE GIVEN CIRCUMSTANCES A.O WAS FAIR IN ESTIMATING THE GROSS PROFIT AT THE AVERAGE RATE OF THE EARLIER YEAR AND THE Y EAR UNDER CONSIDERATION. HE THUS SUPPORTED THE ORDER OF A.O. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT A.O IN HIS ORDER HAS NOTED THAT ASSESSEE WAS GRANTED SEVERAL OPPORTUNITIES AND TIME TO PRODUCE THE BOOKS OF ACCOUNTS BILLS AND VOUCHERS AND TO JUSTIFY THE FALL IN GROSS PROFIT WHICH ASSESSEE HAD FAILED TO DO. BEFORE US LD. A.R. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF A.O. IN SUCH CIRCUMSTANCES WE ARE OF THE VIEW THAT A.O WAS FULLY JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS . O NCE THE BOOKS OF ACCOUNTS ARE REJECTED THE PROFIT HAS TO BE ESTIMATED. CONSIDERING THE FACT THAT THE TURNOVER OF THE ASSESSEE HAS INCREASED IN COMPARISON TO THE IMME DIATELY PRECEDING YEAR THERE BEING NO FIN DING OF THE A.O THAT SALES ARE UNDERSTATED OR ARE OUT OF THE BOOKS OF ACCOUNTS AND THE GROSS PROFIT MARGIN IN THE IMMEDIATE PRECEDING YEAR BEING AT 3.86% WE ARE OF THE VIEW THAT THE REASONABLE G.P. ESTIMATED BY CIT(A ) AT 7% TO BE ON A HIGHER SIDE. CONSIDE RING THE TOTALITY OF THE FACTS WE ARE OF THE VIEW THAT THE ENDS OF JUSTICE SHALL BE MET IN THE PRESENT CASE IS THE G.P IS ESTIMATED @ 5% OF THE TURNOVER. WE THUS DIRECT ACCORDINGLY. IN THE RESULT THE GROUNDS OF THE ASSESSEE ARE PARTLY ALLOWED . ITA NO 1134/AHD/2011 . A.Y. 2007 - 08 5 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21 - 11 - 201 4 . SD/ - SD/ - (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDE NT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD