The ITO, Ward-2(3),, Bhavnagar v. M/s. Swastik Engineering Stores,, Dist.Bhavnagar

ITA 1907/AHD/2007 | 2003-2004
Pronouncement Date: 15-07-2011 | Result: Dismissed

Appeal Details

RSA Number 190720514 RSA 2007
Assessee PAN AAHFS5005J
Bench Ahmedabad
Appeal Number ITA 1907/AHD/2007
Duration Of Justice 4 year(s) 2 month(s) 7 day(s)
Appellant The ITO, Ward-2(3),, Bhavnagar
Respondent M/s. Swastik Engineering Stores,, Dist.Bhavnagar
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 15-07-2011
Date Of Final Hearing 13-07-2011
Next Hearing Date 13-07-2011
Assessment Year 2003-2004
Appeal Filed On 08-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI A. K. GARODIA ACCOUNTANT MEMBER I.T.A. NO.1907 / AHD/2007 (ASSESSMENT YEAR 2003-04) ITO WARD 2(3) BHAVNAGAR VS. M/S.SWASTSIK ENGINEERING STORES STATION ROAD SIHOR C.O. NO.166/AHD/2007 IN I.T.A.NO. 1907/AHD/2007 (ASSESSMENT YEAR 2003-04) M/S. SWASTIK ENGINEERING STORES VS. ITO WARD 2(3 ) STATION ROAD SIHOR BHAVNAGAR PAN/GIR NO. : AAHFS5005J (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S.K. MEENA SR. DR RESPONDENT BY: SHRI S N SOPARKER SR. ADV. MS. URVASHI SHODHAN ADV. O R D E R PER SHRI A. K. GARODIA AM:- THIS APPEAL OF THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) XVIII AHM EDABAD DATED 27.02.2007 FOR THE ASSESSMENT YEAR 2003-04. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: I.T.A.NO. 1907/AHD/2007 C.O. NO.166/AHD/2007 2 THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.2.88.544/- - MADE BY THE A.O ON ACCOUNT OF G.P. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN GIV ING RELIEF OF RS.9 22 400/- OUT OF TOTAL ADDITION OF RS.11 56 400 /- MADE BY THE A.O. ON ACCOUNT OF UNACCOUNTED INVESTMENTS MADE FOR VARIOUS SALES TRANSACTIONS. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. IT IS THEREFORE PRAYED THAT THE ORDER OF THE ASSES SING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT 3. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJ ECTION ARE AS UNDER: 1.0 THE GROUNDS OF CROSS-OBJECTIONS MENTIONED H EREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS )-XVIII AHMEDABAD [HEREINAFTER REFERRED TO AS THE 'CIT(A)'J ERRED ON FACTS AS ALSO IN LAW IN RETAINING THE ADDITION OF R S. 2 34 0007- OUT OF THE TOTAL ADDITION MADE OF RS. 11 56 2007- ON AC COUNT OF ALLEGED INVESTMENT IN MAKING UNRECORDED SALES. THE ADDITION SUSTAINED MAY KINDLY BE DELETED. 3.0 THE LEARNED CIT(A) ERRED ON FACTS AS ALSO IN LA W IN RETAINING THE DISALLOWANCE OF RS. 10 0007- MADE ON OUT OF EXPENSE S RELATED TO TELEPHONE POST AND COURIER. THE DISALLOWANCE SUSTA INED MAY KINDLY BE DELETED. 4. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT GROUND NO.1 OF THE CROSS OBJECTION IS GENERAL AND GROUND NO.3 OF THE C ROSS OBJECTION IS NOT PRESSED. ACCORDINGLY GROUND NO.3 OF THE CROSS OBJ ECTION IS REJECTED AS NOT PRESSED. 5. IT IS FURTHER SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT GROUND NO.2 OF THE ASSESSEES CROSS OBJECTION AND T HE GROUNDS RAISED BY I.T.A.NO. 1907/AHD/2007 C.O. NO.166/AHD/2007 3 THE REVENUE ARE INTERCONNECTED. HE SUBMITTED THAT ON THE BASIS OF ALLEGATION REGARDING UNACCOUNTED SALES OF THE ASSES SEE OF RS.11 56 400/- THE ADDITION WAS MADE BY THE A.O. FOR THE ENTIRE AM OUNT OF SUCH UNRECORDED SALES AND IN ADDITION TO THIS GROSS PRO FIT OF THE ASSESSEE FOR THE ACCOUNTED SALES WAS ALSO ESTIMATED @ 7% AS AGAI NST 6.19% DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOUNTS. IT WAS H IS FURTHER SUBMISSION THAT THE ADDITION CAN BE MADE ONLY FOR THE GP IN RE SPECT OF UNACCOUNTED SALE AND IN SUPPORT OF THIS CONTENTION RELIANCE WA S PLACED ON THE FOLLOWING TWO JUDICIAL PRONOUNCEMENTS: (A) CIT VS PRESIDENT INDUSTRIES 258 ITR 654 (GUJ.) (B) CIT VS GURBACHAN SINGH J JUNEJA 302 ITR 63 (GUJ.) 6. AS AGAINST THIS THE LD. D.R. SUPPORTED THE ASSESS MENT ORDER. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSED T HE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENTS CITED BY THE LD. A.R. LD. CIT(A) HAS CO NFIRMED THE ADDITION TO THE EXTENT OF RS.2.34 LACS BEING THE AMOUNT OF P EAK SALES. LD. A.R. PLACED RELIANCE ON THE JUDGMENT OF HON'BLE HIGH COU RT OF GUJARAT RENDERED IN THE CASE OF CIT VS PRESIDENT INDUSTRIES (SUPRA) IN SUPPORT OF HIS CONTENTION THAT UNLESS THERE IS A FINDING TO TH E EFFECT THAT INVESTMENT BY WAY OF INCURRING THE COST IN ACQUIRING THE GOODS WHICH HAVE BEEN SOLD HAD BEEN MADE BY THE ASSESSEE AND THAT HAS ALSO NOT BEEN DISCLOSED NO ADDITION CAN BE MADE IN RESPECT OF SUCH ALLEGED UNA CCOUNTED INVESTMENT AND ONLY THE PROFIT ELEMENT OF SUCH SALES CAN BE AD DED. IN THE PRESENT CASE THE ACCOUNTED SALES OF THE ASSESSEE IS OF RS. 257.45 LACS WHEREAS UNACCOUNTED SALES IS AMOUNTING TO RS.11 56 400/-. THE CASE OF THE ASSESSEE IS THIS THAT SOME GOODS LYING IN ACCOUNTED STOCK WERE SOLD AND THE SALES ARE NOT RECORDED AND THE STOCK WAS REPLEN ISHED OUT OF FUNDS I.T.A.NO. 1907/AHD/2007 C.O. NO.166/AHD/2007 4 RECEIVED FROM UNACCOUNTED SALES. HENCE THERE IS N O UNACCOUNTED INVESTMENT IN THE PURCHASES. THE REVENUE HAS NOT B ROUGHT ON RECORD ANY ADVERSE MATERIAL TO SHOW THAT THERE WAS IN FACT ANY UNACCOUNTED INVESTMENT IN PURCHASES IN RESPECT OF UNACCOUNTED S ALES. THE EXPLANATION OF THE ASSESSEE APPEARS TO BE REASONABLE IN THE FAC TS OF THE PRESENT CASE BECAUSE THE UNACCOUNTED SALE IS A SMALL PERCENTAGE OF THE TOTAL ACCOUNTED SALES AND HENCE IT IS VERY MUCH POSSIBLE THAT SOM E GOODS LYING IN STOCK OUT OF THE ACCOUNTED PURCHASES WERE SOLD AND THE SA LES WERE NOT RECORDED AND THIS PROCEEDS WAS USED TO MAKE UNACCOUNTED PURC HASE TO REPLENISH THE DECREASE IN ACCOUNTED STOCK IN RESPECT OF UNACC OUNTED SALES. UNDER THESE FACTS WHERE THE UNACCOUNTED SALE IS A VERY S MALL PERCENTAGE OF ACCOUNTED SALE OF THE SAME ITEM COUPLED WITH THIS FACT THAT THERE IS NO ADVERSE MATERIAL ON RECORD REGARDING INVESTMENT BY THE ASSESSEE IN UNACCOUNTED PURCHASE WE FEEL THAT NO ADDITION SHOU LD BE MADE IN RESPECT OF THE ALLEGED INVESTMENT BY THE ASSESSEE IN UNACCO UNTED PURCHASE AND THEREFORE ADDITION ONLY TO THE EXTENT OF PROFIT IN RESPECT OF UNACCOUNTED SALE IS JUSTIFIED. WE THEREFORE UPHOLD THE ADDIT ION TO THE EXTENT OF PROFIT @ 7% ON UNACCOUNTED SALES OF RS.11 56 400/-. 8. REGARDING ONE MORE ASPECT I.E. REGARDING CASH FO UND OF RS.4.52 LACS WE FIND THAT NO ADDITION WAS MADE BY THE A.O. FOR SUCH CASH FOUND. HENCE OUT OF THE TOTAL ADDITION MADE BY THE A.O. IN RESPECT OF UNACCOUNTED SALES OF RS.11 56 400/- WE CONFIRM THE ADDITION TO THE EXTENT OF 7% OF IT I.E. RS.80 948/- AND DELETE THE BALANCE AMOUNT. 9. REGARDING THE 2 ND ADDITION MADE BY THE A.O. IN RESPECT OF G.P. OF RS.2 88 544/- BY APPLYING 7% G P RATE ON THE ACCOU NTED SALES AS WELL I.T.A.NO. 1907/AHD/2007 C.O. NO.166/AHD/2007 5 UNACCOUNTED SALES OF THE ASSESSEE WE FIND THAT IN RESPECT OF UNACCOUNTED SALES OF RS. 11 56 400/- WE HAVE ALREADY UPHELD TH E ADDITION TO THE EXTENT OF 7% OF IT AND HENCE NO FURTHER ADDITION IS CALLED FOR WITH REGARD TO G P ON THIS UNACCOUNTED SALES. 10. WITH REGARD TO GP ON ACCOUNTED OF SALE OF RS.25 7.45 LACS WE FIND THAT THE GP DECLARED BY THE ASSESSEE IS 6.19% AS CO MPARED TO 6.51% IN THE PRECEDING YEAR. NO OTHER DEFECT IN THE BOOKS O F ACCOUNT OF THE ASSESSEE HAS BEEN POINTED OUT EXCEPT THAT OF SOME U NACCOUNTED SALES AND THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE AUDITED A ND THERE IS NO ADVERSE COMMENT BY THE AUDITORS ALSO. IN THE CASE OF THIS VERY ASSESSEE IN ASSESSMENT YEAR 1997-98 G P RATE WAS ESTIMATED BY THE A.O. @ 5% BUT THE TRIBUNAL ACCEPTED THE GP RATE OF 4.5% IN THAT Y EAR WHEREAS IN THE PRESENT YEAR THE ASSESSEE ITSELF HAS DECLARED G P RATE OF 6.19% AS AGAINST 6.51 % IN THE PRECEDING YEAR. ALTHOUGH THERE IS SO ME MARGINAL FALL OF G P IN THE PRESENT YEAR AS COMPARED TO IMMEDIATE PREC EDING YEAR BUT IN THE ABSENCE OF ANY ADVERSE MATERIAL ON RECORD REGARDING ANY DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE SUCH REVISION IN THE GP RATE IS NOT JUSTIFIED MERELY FOR THIS REASON THAT SOME UNACCOUN TED SALES WERE FOUND. ADDITION ON THIS ACCOUNT I.E. PROFIT ON UNACCOUNTED SALES HAS BEEN SEPARATELY MADE AND CONFIRMED BY US TO THE EXTENT O F 7% OF SUCH UNACCOUNTED SALES BUT THIS ALONE CANNOT BE THE BASI S TO REVISE THE G P RATE OF ACCOUNTED SALES ALSO WITHOUT BRINGING ANY OTHER ADVERSE MATERIAL ON RECORD AND HENCE WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS ASPEC T OF THE MATTER. LD. CIT(A) HAS GIVEN A FINDING THAT THERE IS NO EVIDENC E TO SHOW THAT THE GROSS PROFIT ADMITTED IN THE BOOKS OF ACCOUNT ARE I NCORRECT AND HENCE I.T.A.NO. 1907/AHD/2007 C.O. NO.166/AHD/2007 6 THERE IS NO JUSTIFICATION OF MAKING ADDITION OF RS. 2 88 544/- BECAUSE UNRECORDED SALES ARE NOT FORMING PART OF BOOKS AND THERE IS NO OTHER ADVERSE MATERIAL BROUGHT ON RECORD. WE THEREFORE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. 11. GROUNDS NO. 1 & 2 OF THE REVENUE ARE REJECTED W HEREAS GROUND NO.2 OF THE CROSS OBJECTION OF THE ASSESSEE IS PART LY ALLOWED. 12. IN THE RESULT THE CROSS OBJECTION OF THE ASSES SEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. 13. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JULY 2011. SD./- SD./- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 15 TH JULY 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR AHMEDABAD 6. THE GUARD FILE 1. DATE OF DICTATION 13/7 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14/7 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 14/7 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 15/7 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 15/7 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 15/7/11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..