M/s Mahalakshmi Distributors, Visakhapatnam v. ITO, Ongole

ITA 158/HYD/2009 | 2005-2006
Pronouncement Date: 04-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 15822514 RSA 2009
Assessee PAN AAJFM4590Q
Bench Hyderabad
Appeal Number ITA 158/HYD/2009
Duration Of Justice 2 year(s) 1 month(s) 4 day(s)
Appellant M/s Mahalakshmi Distributors, Visakhapatnam
Respondent ITO, Ongole
Appeal Type Income Tax Appeal
Pronouncement Date 04-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 04-03-2011
Date Of Final Hearing 22-02-2011
Next Hearing Date 22-02-2011
Assessment Year 2005-2006
Appeal Filed On 30-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI G.C.GUPTA VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.158/HYD/2009 : ASSESSMENT YEAR 2005- 06 M/S. MAHALAKSHMI DISTRIBUTORS ONGOLE. ( PAN AAJFM 4590 Q ) V/S. INCOME - TAX OFFICER WARD - 2 ONGOLE. (APP ELL ANT) (RESPONDENT) APPELLANT BY : SHRI C.SUBRAHMANYAM RESPONDENT BY : SMT. NIVEDITA BISWAS O R D E R PER G.C.GUPTA VICE PRESIDENT: THIS APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YE AR 2005-06 IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER O F INCOME-TAX (APPEALS). 2. THERE IS A DELAY OF 47 DAYS IN FILING THE APPEA L BEFORE THE TRIBUNAL. WE HEARD THE PARTIES ON THE ISSUE OF COND ONATION OF DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL. SHRI B.MURA LI VENKATARAMA PRASAD MANAGING PARTNER OF THE ASSESSEE FIRM HAS FILED AN AFFIDAVIT BEFORE US EXPLAINING THE REASONS FOR THE DELAY IN FILING THE APPEAL BEFORE THE TRIBUNAL. CONSIDERING THE CONTENTS OF THE AFFIDAVIT FILED BY THE MANAGING PARTNER OF THE ASSESSEE WE HOLD THAT IT IS A FIT C ASE FOR THE CONDONATION OF DELAY OF 47 DAYS IN FILING THE APPEAL. WE ACCORDING LY CONDONE THE SAME. ITA NO.158/HYD/09 M/S.MAHALAKSHMI DISTRIBUTORS ONGOLE 2 3. GROUNDS OF APPEAL NO.1.0 1.1 1.3 AND 1.4 OF T HE ASSESSEE ARE AS UNDER- 1.0 THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED ASSESSING OFFICER IS NOT CORRECT IN COMPLETING THE ASSESSMENT UNDER THE PROVISIONS OF SECTION 143(3) OF THE I.T. ACT R.W.S. 144. 1.1 THE LEARNED ASSESSING OFFICER ERRED IN OBSERVING THAT THE ASSESSEE HAS NOT COMPLIED WITH THE REQUIREMENT TO ATTEND THE HEARING OF THE CASE WHEN THE ASSESSEE MADE HIMSELF AVAILABLE IN THE PROCEEDINGS. 1.3 THE LEARNED CIT(A) IS NOT CORRECT IN ESTIMATING THE DISALLOWANCE OF EXPENDITURE ON MERE SURMISE. 1.4 FOR THESE AND OTHER REASONS THAT ARE TO BE URGED AT THE TIME OF HEARING OF THE CASE THE APPELLANT PRAYS THAT THE ADDITIONS SUSTAINED BY THE LEARNED CIT(A) NEEDS TO BE DELETED IN THE INTERESTS OF JUSTICE. THE LEARNED COUNSEL OF THE ASSESSEE HAS NOT PRESSED THESE GROUNDS OF APPEAL FOR THE ASSESSEE WHICH ARE ACCORDINGLY REJE CTED. 4. THE ONLY EFFECTIVE GROUND OF APPEAL FOR THE ASS ESSEES GROUND OF APPEAL NO.1.2 WHICH IS REPRODUCED HEREUNDER- THE LEARNED ASSESSING OFFICER ERRED IN ESTIMATING THE G.P. THE LEARNED CIT(A) THOUGH GIVEN PART RELIEF ON ACCOUNT OF G.P. ESTIMATION BUT ERRED IN ESTIMATING THE G.P. ON HIGH ER SIDE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS DISTRIBUTOR OF THREE COMPANIES MAINLY ITS TURNOVER IS FROM ITA NO.158/HYD/09 M/S.MAHALAKSHMI DISTRIBUTORS ONGOLE 3 DISTRIBUTION OF MARICO PRODUCTS WHEREIN THE MARGIN IS NOT MORE THAN 2% OF THE TURNOVER. HE SUBMITTED THAT THE ASSESSING O FFICER WHILE APPLYING THE FLAT G.P. RATE TO THE TURNOVER OF THE ASSESSEE HAS TAKEN THE AVERAGE OF THREE EARLIER ASSESSMENT YEARS INCLUDING THE ASS ESSMENT YEAR 2002-03 DURING WHICH THE ASSESSEE HAS STARTED BUSINESS AND WAS IN BUSINESS ONLY FOR 25 DAYS DURING THAT YEAR EFFECTING A TURNOVER OF RS.1.05 LAKHS GIVING G.P. RATE OF 29.5%. HE SUBMITTED THAT ON THE TURNO VER OF RS.1.03 CRORES FOR THE ASSESSMENT YEAR 2003-04 ASSESSEE HAS DECLA RED A G.P. RATE OF 1.5% AND FOR ASSESSMENT YEAR 2004-05 ON A TURNOVER OF RS.2.74 CRORES THE G.P. WAS DECLARED AT 1.3 PERCENT AND THE SAME W AS ACCEPTED IN SUMMARY ASSESSMENTS UNDER S.143(1) OF THE ACT. HE SUBMITTED THAT THE ASSESSING OFFICER HAS APPLIED A G.P. RATE OF 10.76 PERCENT WHICH WAS REDUCED IN APPEAL BY THE CIT(A) TO 2.5% WHICH IS AL SO EXCESSIVE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REF ERRED TO THE RELEVANT PORTIONS OF THE ASSESSMENT ORDER IN SUPPOR T OF THE CASE OF THE REVENUE. SHE SUBMITTED THAT THE CIT(A) HAS TAKEN T HE AVERAGE OF G.P. OF THE THREE COMPANIES FOR WHOM THE ASSESSEE WAS THE DISTRIBUTOR AND HAS WORKED OUT THE G.P. RATE OF 2.8% AND HAS APPLIED A LESSER G.P. RATE OF 2.5% ONLY. SHE SUBMITTED THAT THE DISALLOWANCE OUT OF EXPENSES WAS ALSO REDUCED IN APPEAL BY THE CIT(A). SHE RELIED O N THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE G.P. RATE OF THE FIRST YEAR OF BUSINESS I.E. ASSES SMENT YEAR 2002-03 WHEREIN THE TOTAL TURNOVER OF THE ASSESSEE WAS MERE LY RS.1.05 LAKHS WAS TOTALLY UN-COMPARABLE AND COULD NOT BE CONSIDERED W HILE APPLYING THE FLAT G.P. RATE TO THE TURNOVER OF THE ASSESSEE. THE CIT( A) HAS RECORDED THAT BULK OF THE ASSESSEES TURNOVER IS FROM THE DISTRIB UTION OF MARICO ITA NO.158/HYD/09 M/S.MAHALAKSHMI DISTRIBUTORS ONGOLE 4 PRODUCTS WHEREIN THE MARGIN IS STATED TO BE 2% ONL Y. DURING THE RELEVANT PERIOD ASSESSEE HAS DECLARED AN INCREASED TURNOVER OF RS.3.56 CRORES AND THE G.P. RATE OF 0.85 %. THE GROSS PROFIT DECL ARED BY THE ASSESSEE DOES NOT INCLUDE CREDIT NOTES/COMMISSION WHICH NEV ER FORMED PART OF THE ASSESSEES TRADING ACCOUNT AS THE SAME WERE ARE CR EDITED DIRECTLY TO THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE. SEPARATE DIS ALLOWANCE HAS ALSO BEEN MADE OUT OF EXPENDITURE CLAIMED BY THE ASSESSE E ON ACCOUNT OF THE EXPENDITURE WHICH IS STATED TO BE SUPPORTED ONLY BY SELF MADE VOUCHERS. IN THESE FACTS OF THE CASE WE HOLD THAT CONSIDERIN G TOTALITY OF FACTS OF THE CASE AND THE FACT THAT CREDIT NOTES/COMMISSION RECE IPTS HAVE NOT FORMED PART OF THE ASSESSEES TRADING ACCOUNT AND APPROPRI ATE DISALLOWANCE HAS BEEN SEPARATELY MADE TOWARDS EXPENDITURE SUPPORTED ONLY BY SELF-MADE VOUCHERS AND CONSIDERING THE G.P. RATE OF THE ASSE SSEE IN THE IMMEDIATELY PRECEDING TWO ASSESSMENT YEARS WHICH H AVE BEEN ACCEPTED BY THE DEPARTMENT IT SHALL BE REASONABLE TO APPLY A FLAT G.P. RATE OF 1.7% AS AGAINST G.P. RATE OF 2.5% APPLIED BY THE CI T(A) ON THE TURNOVER OF RS.3.56 CRORES DECLARED BY THE ASSESSEE FOR THE YEAR UNDER APPEAL. WE DIRECT THE ASSESSING OFFICER TO WORK OUT THE ADDITI ON ACCORDINGLY AND CONSEQUENTLY GROUND OF APPEAL NO.1.2 OF THE ASSESS EE IS PARTLY ALLOWED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 4.3.2011 SD/- SD/- (CHANDRA POOJARI) (G.C.GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT DT/- 4 TH MARCH 2011 ITA NO.158/HYD/09 M/S.MAHALAKSHMI DISTRIBUTORS ONGOLE 5 COPY FORWARDED TO: 1. M/S. MAHALAKSHMI DISTRIBUTORS(ONGOLE) C/O. SRI C.SUBRAHMANYAM FCA CHARTERED ACCOUNTANT 102 LAKSHMI APARTMENT FACOR LAYOUT WALTAIR UPLAN DS VISAKHAPATNAM 530 003. 2. INCOME - TAX OFFICER WARD - 2 ONGOLE. 3. COMMISSIONER OF INCOME - TAX(APPEALS) GUNTUR . 4. COMMISSIONER OF INCOME TAX GUNTUR. 5. THE DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD. B.V.S .