DCIT - 16(1), MUMBAI v. Sri. MAHESH VALIRAM MIRANI, MUMBAI

ITA 237/MUM/2007 | 2003-2004
Pronouncement Date: 27-07-2011 | Result: Dismissed

Appeal Details

RSA Number 23719914 RSA 2007
Assessee PAN AFXPM6883L
Bench Mumbai
Appeal Number ITA 237/MUM/2007
Duration Of Justice 4 year(s) 6 month(s) 17 day(s)
Appellant DCIT - 16(1), MUMBAI
Respondent Sri. MAHESH VALIRAM MIRANI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted K
Tribunal Order Date 27-07-2011
Date Of Final Hearing 07-07-2011
Next Hearing Date 07-07-2011
Assessment Year 2003-2004
Appeal Filed On 09-01-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER A ND SMT. ASHA VIJAYRAGHAVAN JUDICIAL MEMBER ITA NO. 237/MUM./2007 (ASSESSMENT YEAR : 2003-04 ) DATE OF HEARING 7.7.2011 DY. COMMISSIONER OF INCOME TAX CIRCLE-16(1) MATRU MANDIR TARDEO ROAD MUMBAI 400 007 .. APPELLANT V/S MR. MAHESH VALIRAM MIRANI PROP. METRO IMPEX 408 ARUN CHAMBERS TARDEO MUMBAI 400 034 PAN AFXPM6883L .... RESPONDENT REVENUE BY : MR. P. NAIK ASSESSEE BY : MR. PRAKASH PANDIT O R D E R PER J. SUDHAKAR REDDY A.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 23 RD OCTOBER 2006 PASSED BY THE COMMISSIONER (APPEALS)-XVI MUMBAI FOR ASSESSMENT YEAR 2003-04. 2. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD AS WELL AS THE CASE LAWS CITED BEFORE US WE HOLD AS FOLLOWS:- 3. THE FIRST APPELLATE AUTHORITY AT PARA-3.7 OF HIS O RDER HELD AS FOLLOWS:- 2 3.7 SUBMISSIONS OF THE APPELLANT AND AVAILABLE FACT S HAVE BEEN CAREFULLY CONSIDERED. IN THE INSTANT CASE THE ASSE SSING OFFICER HAS MADE THE ADDITION TO THE GROSS PROFIT WHICH SHOWS T HAT HE HAD REJECTED THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT AN D CONSEQUENTLY THE BOOK RESULT AS DISCLOSED IN THE RETURN OF INCOM E. SUCH REJECTION IS POSSIBLE BY APPLYING PROVISIONS OF SEC. 145(3) ONLY . THE ASSESSING OFFICER HAS NOWHERE MENTIONED THE SAID SECTION IN T HE IMPUGNED ORDER. PRESUMING THAT THE ASSESSING OFFICER HAD APPLIED SE C. 145(3) IN IMPLIED MANNER IT HAS TO BE SEEN WHETHER CONDITION S FOR INVOKING THE SAID SECTION WHERE FULFILLED. THE ASSESSING OFFICER HAS NOT POINTED OUT A SINGLE INSTANCE AGAINST THE CORRECTNESS OR COMPLETE NESS OF THE ACCOUNTS OF THE APPELLANT. SIMILARLY THE ASSESSING OFFICER HAS ALSO NOT PROVED THAT THE METHOD OF ACCOUNTING CLAIMED TO BE FOLLOWED BY THE APPELLANT HAD NOT BEEN REGULARLY FOLLOWED BY HIM. I N THIS BACKGROUND IT IS FOUND THAT THOUGH THERE WAS SHARP FALL IN GRO SS PROFIT RATE FROM 7.96% IN A.Y. 2002-03 TO 1.04% IN A.Y. 2003-04 THE ASSESSING OFFICER HAS NOT POINTED OUT A SINGLE DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE APPELLANT OR IN THE METHOD OF ACC OUNTING EMPLOYED BY HIM. SECONDLY THE APPELLANT WAS DEALING WITH LA RGE NUMBER OF ITEMS AND HIS EXPLANATION AS TO OF NON-MAINTENANCE OF DAY-TO-DAY STOCK REGISTER ON THAT GROUND CANNOT BE BRUSHED ASI DE. IT IS FOUND THAT THE APPELLANT HAD FILED NECESSARY DETAILS IN SUPPOR T OF THE VALUATION OF CLOSING STOCK AGAINST WHICH ALSO NO DEFECT OR IRREG ULARITY WAS FOUND. THIRDLY THE ASSESSING OFFICER HAS CITED RATIO OF S TOCK-IN-TRADE TO TURNOVER OF THE APPELLANT WHICH WAS 1:10 AS AGAINST MARKET AND TRADE STANDARDS OF 30-40:100 AS ONE OF THE REASONS FOR AF ORESAID ADDITION AND OBSERVED THAT STOCK OF ` 1.45 CRORES WAS WOEFULLY SHORT FOR A TURNOVER OF ` 14.63 CRORES. THE ASSESSING OFFICER HAS NOT GIVEN ANY COMPARABLE INSTANCE OR STANDARD PRESCRIBED BY ANY A UTHORITY TO SUPPORT SUCH FINDING. FOURTHLY THE ASSESSING OFFIC ER HAS NOT FOUND ANYTHING INCORRECT OR DEFECTIVE IN THE DETAILS OF C LOSING STOCK FILED BY THE APPELLANT AND THEREFORE HIS OBSERVATION THAT T HE CLOSING STOCK WAS UNRELIABLE AND WITHOUT ANY BASIS IS NOT TENABLE. LA STLY IT IS FOUND THAT THE ASSESSING OFFICER HAS MENTIONED HIS OWN SUSPICI ONS AND SURMISES TO LINK THE FALL IN GROSS PROFIT WITH DEPB AND DUTY DRAWBACK BENEFITS. NONE OF THESE GROUNDS INDIVIDUALLY OR COLLECTIVELY CAN BE A REASON FOR HOLDING THAT THE ACCOUNTS MAINTAINED BY THE APPELLA NT WAS INCORRECT OR INCOMPLETE OR THE METHOD OF ACCOUNTING FOLLOWED WAS SUCH THAT INCOME COULD NOT BE PROPERLY DEDUCTED THEREFROM SO AS TO W ARRANT APPLICATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. THE CAS E LAWS CITED BY THE APPELLANT HAVE ALSO BEEN CAREFULLY CONSIDERED. IT I S FOUND THAT IN THE ABSENCE OF FINDING OF SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT OR IN THE METHOD OF ACCOUNTING FOLLOWED BY THE APPELLANT THE APPELLANT WAS JUSTIFIED IN PLACING RELIANCE ON THE DECISIONS NOTE D EARLIER TO ARGUE AGAINST APPLICATION OF SEC. 145(3) AND CONSEQUENT R EJECTION OF HIS BOOKS OF ACCOUNT AND BOOK RESULT. IN VIEW OF THIS IT IS HELD THAT THE A.O. HAS REJECTED THE BOOKS OF ACCOUNT BY CITING GE NERALISED REASONS AND WITHOUT SPECIFYING THE DEFECTS SHOWING ABSENCE OF COMPLETENESS OR CORRECTNESS OF THE ACCOUNTS OR FAILURE IN FOLLOW ING THE ADMITTED METHOD OF ACCOUNTING REGULARLY. THEREFORE THE VERY BASIS OF THE AFORESAID ADDITION BY IMPLIED APPLICATION OF SEC. 1 45(3) IS UNSUSTAINABLE AND THE ADDITION OF ` 1 08 19 204 IS DELETED. THUS GROUND NO.1 IS ALLOWED. 3 3. WHEN THE ASSESSING OFFICER HAS NOT INVOKED THE PROV ISIONS OF SECTION 145(3) OF THE INCOME TAX ACT 1961 (FOR SHORT 'THE ACT' ) AND HAS NOT REJECTED THE BOOKS OF ACCOUNT THE QUESTION OF DETE RMINATION OF GROSS PROFIT RATIO ON AN AD-HOC BASIS DOES NOT ARISE. LEARNED C IT(A) HAS RECORDED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT EVEN A SI NGLE INSTANCE AGAINST THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS OF THE ASSESSEE. WHILE SO THE BOOK RESULTS CANNOT BE DISTURBED. THESE FINDINGS OF THE FIRST APPELLATE AUTHORITY HAVE NOT BEEN CHALLENGED BEFORE US BY THE REVENUE. WHEN THE REVENUE DOES NOT CHALLENGE THE FINDING ON SECTION 1 45(3) THE QUESTION OF RESTORING THE ADDITION UNDER SECTION 68 ON THE GRO UND THAT THERE IS A FALL IN GROSS PROFIT SIMPLY DOES NOT ARISE. WE ALSO DO NOT UNDERSTAND AS TO WHY AN ADDITION CAN BE MADE UNDER SECTION 68 ON THE FACTS AND CIRCUMSTANCES OF THE CASE. CONSEQUENTLY THE GROUND RAISED BY THE REVENU E IS DISMISSED. 4. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2011 SD/- ASHA VIJAYRAGHAVAN JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 29.7.2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR K BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI