Satyam Steel, Surat v. The ACIT.,Circle-2,, Surat

ITA 3104/AHD/2008 | 2005-2006
Pronouncement Date: 24-12-2010 | Result: Dismissed

Appeal Details

RSA Number 310420514 RSA 2008
Assessee PAN AAGHM4982F
Bench Ahmedabad
Appeal Number ITA 3104/AHD/2008
Duration Of Justice 2 year(s) 3 month(s) 23 day(s)
Appellant Satyam Steel, Surat
Respondent The ACIT.,Circle-2,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 24-12-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 24-12-2010
Date Of Final Hearing 08-12-2010
Next Hearing Date 08-12-2010
Assessment Year 2005-2006
Appeal Filed On 01-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.3104/AHD/2008 ASSESSMENT YEAR:2005-06 DATE OF HEARING:8.1210 DRAFTED:213.12.10 M/S. SATYAM STEEL PROP.VIJAY JAGMOHANDAS MEHTA (HUF) PLOT NO.5419 NR. WATER TANK GIDC SACHIN SURAT PAN NO.AAGHM4982F V/S . ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-2 AAYAKAR BHAVAN A MAJURA GATE SURAT (APPELLANT) .. (RESPONDENT) APPELLANT BY :- NONE (WRITTEN SUBMISSION) RESPONDENT BY:- SHRI ROHIT MOHRA SR-DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-II SURAT IN APPEAL NO.CAS/II/ 211/07-08 DATED 20-06-2008. THE ASSESSMENT WAS FRAMED BY ACIT CIRCLE-2 SURAT U/S143(3) R.W.S. 145(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 30- 11-2007 FOR ASSESSMENT YEAR 2005-06. 2. THE FIRST GROUND RAISED BY ASSESSEE IS GENERAL I N NATURE HENCE REQUIRE NO ADJUDICATION. 3. THE FIRST EFFECTIVE ISSUE IN THIS APPEAL OF ASSE SSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY ASSESSING OF FICER ON ACCOUNT OF LOW GROSS PROFIT. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.2 :- ITA NO.3104/AHD.2008 A.Y 2005-06 M/S. SATYAM STEELS V. ACIT CIR-2 SRT PAGE 2 (2) THE LEARNED CIT(APPEALS) OUGHT TO HAVE FOUND T HAT THE LEARNED AO HAS WRONGLY APPLIED THE GP OF THE OTHER CONCERN HAVING HIGHEST GP WITH DIFFERENT ITEMS FOR TRADING AS THAT OF TRADED BY THE APPELLAN T AND INSTEAD OF TAKING INTO ACCOUNT THE GP OF THE APPELLANT FOR THE LAST THREE YEARS AVAILABLE ON HIS RECORDS AND THEREFORE THE ADDITION OF RS.9 30 350/ - MADE ARBITRARILY ON ACCOUNT OF ALLEGED LOW GP WITHOUT CONSIDERING IN T HE RIGHT PERSPECTIVES THE EXPLANATIONS/EVIDENCES PLACED BEFORE HIM DESERVES T O BE DELETED. 4. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER D URING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAD SHOWN A G ROSS PROFIT (GP) OF 3.14% ON A TURNOVER OF RS.13 29 07 214/- AS AGAINST THE GP OF 3.19% ON A TURNOVER OF RS.1 06 60 715/- IN THE IMMEDIATELY PROCEEDING YEAR . THERE WAS A FALL IN THE GP RATIO BY 0.05% AND ASSESSEE EXPLAINED THAT THE GP EARNED DURING THE YEAR WAS ALMOST THE SAME AS IN THE PREVIOUS YEAR IN TERMS OF PERCEN TAGE AND THE TURNOVER HAD INCREASED DRASTICALLY FROM 1.06 CRORES IN THE PRECE DING YEAR TO RS.13.29 CRORES IN THE YEAR UNDER CONSIDERATION LEADING TO A GP OF RS.41.6 9 LAKH AS AGAINST RS.3.39 LAKH EARNED IN THE PRECEDING YEAR. THE AO COMPARED THE G P RATIO OF OTHER CONCERNS OF THE SAME GROUP WITH THAT OF THE ASSESSEE AND NOTED THAT THE GP RATIO OF THE ASSESSEE WAS LESSER THAN THE AVERAGE GP RATIO OF TH E GROUP ENTITIES EVEN THOUGH THEY WERE ALL ENGAGED IN THE SAME LINE OF BUSINESS. THIS WAS NOT ACCEPTED BY THE AO ESPECIALLY WHEN THE ASSESSEE HAD FAILED TO PRODU CE ANY BOOKS OF ACCOUNT OR DOCUMENTS IN SUPPORT OF THE CLAIM OF THE GP RATIO APART FROM THE FACT THAT THE OTHER CONCERNS OF THE GROUP WERE ENGAGED IN THE SAME LINE OF BUSINESS THE BUSINESS CONDITION OF ALL THE CONCERNS HAD REMAINED THE SAME OVER THE YEARS. THE AO THEREFORE REJECTED THE EXPLANATION FURNISHED BY THE ASSESSEE AND ESTIMATED THE GP RATIO AT 3.84% WHICH WAS THE AVERAGE GP RATIO OF TH E OTHER CONCERNS OF THE SAME GROUP AND MADE THE ADDITION OF THE SUM OF RS.9 30 3 50/-. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) CONFIRME D THE ACTION OF ASSESSING OFFICER BY GIVING FOLLOWING FINDINGS IN PARA-6& 6.1 OF HIS APPELLATE ORDER:- 6. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. THE AR HAS PLACED STRONG RELIANCE ON THE FACT THAT THE ASSESSEE HAS BEEN ASS ESSED TO TAX FOR SEVERAL YEARS AND HAS ALWAYS CO-OPERATED WITH THE DEPARTMEN T. WHAT HE HAS CONVENIENTLY AVOIDED TO MENTION IS THAT OVER THE P AST COUPLE OF YEARS THE ASSESSEE HAS SOMEHOW OR THE OTHER AVOIDED PRODUCING THE RELEVANT BOOKS OF ACCOUNT AND OTHER RECORDS. RELIANCE HAS ALWAYS BEEN PLACED ON THE AUDIT REPORT. IF THE AUDIT REPORT IS TO BE TREATED CORREC T THEN THERE OUGHT TO BE BOOKS OF ACCOUNT HAS TRIED TO SHOW THAT NO PRUDENT BUSINESSMAN WILL DESTROY ITA NO.3104/AHD.2008 A.Y 2005-06 M/S. SATYAM STEELS V. ACIT CIR-2 SRT PAGE 3 HIS BOOKS TO AVOID TAX SINCE THAT WOULD CREATE DI FFICULTIES IN RECOVERING THE DUES FROM THE SUNDRY DEBTORS. INSTEAD OF LECTURING AND POSTURING THE AR WOULD HAVE DONE WELL TO PRODUCE THE BOOKS OF ACCOUN T FOR THE YEAR UNDER CONSIDERATION. AS IN THE PRECEDING YEAR THE EXCUSE MADE BEFORE THE AO WAS THE LOSS OF THE BOOKS IN THE FLOOD OF AUGUST 2006. EVEN THOUGH IT HAS BEEN VERY SUBTLY HINTED IN APPELLATE PROCEEDINGS THAT TH E BOOKS HAD BEEN DESTROYED SUCH REPEATED NON-PRODUCTION OF BOOKS OF ACCOUNT CLEARLY EXPOSES THE STRATEGY ADOPTED NOT ONLY BY THE ASSESSEE BUT A LSO THE OTHER CONCERNS OF THE SAME GROUP WHICH IS THE TO LET THE INCOME-TAX DEPARTMENT TO DO WHATEVER IT CAN SINCE THE ESTIMATES WOULD ALWAYS FALL SHORT OF THE ACTUAL PROFITS EARNED BY SUCH ENTITIES. IT IS FOR THIS REASON PERHAPS THA T THE AR HAS NOT CONTESTED THE REJECTION OF THE BOOK RESULTS BUT HAS ONLY CONT ESTED THE ESTIMATION OF THE GROSS PROFIT. 6.1 THE AR REPEATEDLY ARGUED THAT THE AO WAS NOT JU STIFIED IN APPLYING THE GP RATIO OF MSC A SISTER CONCERN AND HAS ATTEMPTED TO DISTINGUISH THE FACTS OF THE CASE OF MSC FROM THAT OF THE ASSESSEE. THE POIN T TO NOTE IS THAT THE AO DID NOT APPLY THE GP RATIO OF MSC BUT THE AVERAGE G P RATIO OF ALL THE SISTER CONCERNS FOR THE YEAR (PARA-5) WHICH WORKED OUT TO 3.84% AS AGAINST THE GP RATIO OF 3.14% DISCLOSED BY THE ASSESSEE. THE DIFFE RENCE WAS OF 0.70% WHICH HAD RESULTED IN THE ADDITION OF RS.9 30 350. THE AO HAS CLEARLY BROUGHT OUT THE FACT THAT ALL THE SISTER CONCERNS WERE ENGAGED IN THE SAME LINE OF BUSINESS AND OPERATED DURING THE YEAR UNDER THE SA ME CONDITIONS. THUS THERE WAS ABSOLUTELY NO GUESS WORK NOR WAS THERE AN Y BASELESS PRESUMPTION OR ASSUMPTION. IN FACT THE AR HAS GOT THE FACTS AL L WRONG. IT IS FOR THIS REASON PERHAPS THAT THE WRITTEN SUBMISSIONS OF THE AR IS V ERY GENERAL AND VAGUE IN NATURE AND TOTALLY INCAPABLE OF REBUTTING THE POSI TION TAKEN BY THE AO.I HAVE THEREFORE NO OTHER OPTION BUT TO CONFIRM THE ADDITI ON OF THE SUM OF RS.9 30 350/-. AGGRIEVED ASSESSEE CAME IN SECOND APPEAL BEFORE US . ON THE OTHER HAND LD DR SHRI ROHIT MEHRA RELIED ON THE ORDERS OF LOWER AUTH ORITIES. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSE E HAS NOT PRODUCED THE BOOKS OF ACCOUNT EVEN THOUGH AS CLAIMED BY THE ASSESSEE TH E BOOKS WERE DESTROYED DURING THE FLOOD. ONCE THE BOOKS OF ACCOUNT ARE NOT PRODUC ED OR ARE NOT AVAILABLE FOR VERIFICATION THE AO HA NO OPTION EXCEPT TO ESTIMAT E THE GP. NOW WE WILL EXAMINE THE FINDINGS OF THE LOWER AUTHORITIES THAT THE COURSE O F ASSESSMENT PROCEEDINGS AND ALSO APPELLATE PROCEEDINGS LOWER AUTHORITIES NOTED THAT THE ASSESSEE HAD SHOWN A GROSS PROFIT (GP) OF 3.14% ON A TURNOVER OF RS.13 29 07 2 14/- AS AGAINST THE GP OF 3.19% ON A TURNOVER OF RS.1 06 60 715/- IN THE IMMEDIATEL Y PROCEEDING YEAR AND ACCORDINGLY THERE WAS FALL IN THE GP RATIO BY 0.05 % AND ASSESSEE EXPLAINED THAT THE ITA NO.3104/AHD.2008 A.Y 2005-06 M/S. SATYAM STEELS V. ACIT CIR-2 SRT PAGE 4 GP EARNED DURING THE YEAR WAS ALMOST THE SAME AS IN THE PREVIOUS YEAR IN TERMS OF PERCENTAGE AND THE TURNOVER HAD INCREASED DRASTICAL LY FROM 1.06 CRORES IN THE PRECEDING YEAR TO RS.13.29 CRORES IN THE YEAR UNDER CONSIDERATION LEADING TO A GP OF RS.41.69 LAKH AS AGAINST RS.3.39 LAKH EARNED IN THE PRECEDING YEAR. WE FIND FROM THE EXPLANATION OF THE ASSESSEE SUBMITTED BEFORE TH E LOWER AUTHORITIES THAT THERE IS DEFINITELY FALL IN GP AT 0.05%. THIS IS ALSO A FACT THAT THE AO COMPARED THE GP RATIO OF OTHER CONCERNS OF THE SAME GROUP WITH THAT OF THE A SSESSEE AND NOTED THAT THE GP RATIO OF THE ASSESSEE WAS LESSER THAN THE AVERAGE G P RATIO OF THE GROUP ENTITIES EVEN THOUGH THEY WERE ALL ENGAGED IN THE SAME LINE OF BUSINESS. EVEN BEFORE US NOW THE ASSESSEE COULD NOT ADDUCE ANY REASON THAT THE B USINESS CONDITIONS OF THE ASSESSEE COMPARED WITH OTHER CONCERNS WERE DIFFEREN T AND THE LINE OF BUSINESS AND METHOD OF BUSINESS IS DIFFERENT. ACCORDINGLY WE AR E OF THE VIEW THAT THE CIT(A) HAS RIGHTLY UPHELD THE ACTION OF THE AO REJECTING THE E XPLANATION FURNISHED BY THE ASSESSEE AND ESTIMATED THE GP RATIO AT 3.84% WHICH WAS THE AVERAGE GP RATIO OF THE OTHER CONCERNS OF THE SAME GROUP AND MADE THE A DDITION OF THE SUM OF RS.9 30 350/-. ACCORDINGLY THIS ISSUE OF ASSESSEE S APPEAL IS DISMISSED. 6. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING AD HOC DISALLOWANCE ON DIRECT OR INDIREC T SELLING AND ADMINISTRATIVE EXPENSES AT RS 1 40 047/-. FOR THIS ASSESSEE HAS R AISED THE FOLLOWING GROUND NO.3 AND 4 :- (3) THE LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMI NG THE LUMP SUM DISALLOWANCES OF DIRECT AND SELLING AND ADMINISTRAT IVE EXPENSES TO THE EXTENT OF RS.1 26 826/- AND HENCE NOT JUSTIFIED. (4) THE LEARNED CIT(APPEALS) HAS ERRED IN OVERLOOKI NG AND IN SUMMARILY REJECTING THE DETAILED STATEMENT OF FACTS SUBMITTED ALONG WITH MEMORANDUM OF APPEAL VARIOUS DOCUMENTS AND EVIDENCES PLACED IN T HE PAPER BOOK FILED AND OTHER MATERIALS PRODUCED DURING THE COURSE OF HEARI NG WHILE ACCEPTING THE LOP-SIDED AND FACTUALLY INCORRECT VERSION OF THE LE ARNED AO AND HENCE THE ORDER PASSED BY THE CIT(APPEALS) BEING PERVERSE AR BITRARY BASELESS AND MISLEADING LIABLE TO BE QUASHED. 7. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE TRIBUNAL IN ASSESSEES ASSOCIATE CONCERN IN THE CASE OF M/S. SHREEJI STEELS (SUPRA) CONFIRMED THE ADDITION OF ADMINISTRATIVE EX PENSES IN PARA-13 WHICH REPRODUCED AS UNDER:- ITA NO.3104/AHD.2008 A.Y 2005-06 M/S. SATYAM STEELS V. ACIT CIR-2 SRT PAGE 5 13. THE THIRD GROUND IS REGARDING DISALLOWANCES OF SELLING AND ADMINISTRATIVE EXPENSES OF RS.1 55 869/-. THE AO HAS DISALLOWED 5% OF THE CLAIM WHICH HAS BEEN CONFIRMED BY LD. CIT(A) ON THE GROUND THAT ENT IRE EXPENDITURE HAS NOT BEEN PROVED TO BE INCURRED FOR BUSINESS PURPOSES. E VEN BEFORE US NO EVIDENCE IS SUBMITTED AS TO BUSINESS PURPOSES OF TH E EXPENSES ON THE GROUND THAT THE ASSESSEE DOES NOT HAVE BOOKS OF ACCOUNT V OUCHERS ETC. THE DISALLOWANCE SO MADE BY THE AUTHORITIES BELOW IS RE ASONABLE AND THEREFORE CONFIRMED. WE FOLLOWING THE TRIBUNALS DECISION WHICH IS EXAC TLY ON SIMILAR ISSUE AND THE FACTS BEING EXACTLY IDENTICAL AS ADMITTED BY ASSESSEE WE CONFIRM THE ADDITION. 8. IN THE RESULT ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24/12/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 24/12/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-II SURAT 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD