The ITO, Ward-4,, Navsari v. M/s. Shree Sainath Photochem, Navsari

ITA 369/AHD/2011 | 2007-2008
Pronouncement Date: 14-11-2014 | Result: Dismissed

Appeal Details

RSA Number 36920514 RSA 2011
Assessee PAN AAJFS9455Q
Bench Ahmedabad
Appeal Number ITA 369/AHD/2011
Duration Of Justice 3 year(s) 9 month(s) 2 day(s)
Appellant The ITO, Ward-4,, Navsari
Respondent M/s. Shree Sainath Photochem, Navsari
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 14-11-2014
Date Of Final Hearing 03-11-2014
Next Hearing Date 03-11-2014
Assessment Year 2007-2008
Appeal Filed On 11-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI A.M.) I. T. A. NO. 369 / AHD/ 20 1 1 (A SSESSMENT YEAR: 2007 - 08) THE I.T.O. WARD - 4 NAVSARI V/S M/S. SHREE SAINATH PHOTOCHEM SURVEY NO. 454/P N.H. NO. 8 NR. HOTEL ALMASS AT ALIPORE DIST. N AVSARI (APPELLANT) (RESPONDENT) PAN: AAJFS 9455Q APPELLANT BY : SMT. SONIA KUMAR SR. D.R. RESPONDENT BY : SHRI RAJESH M. UPADHYAY A.R. ( )/ ORDER DATE OF HEARING : 03 - 11 - 2014 DA TE OF PRONOUNCEMENT : 14 - 11 - 2014 PER SHRI ANIL CHATURVEDI A.M. 1. THIS APPEAL IS FILED BY THE REVE NUE AGAINST THE ORDER OF CIT(A) VALSAD GUJARAT DATED 18.11.2010 FOR A.Y. 2007 - 08. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS U NDER. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF MANUFAC TURING OF PHOTOGRAPHIC CHEMICALS . ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 07 - 08 ON 25.10.2007 DECLARING TOTAL INCOME AT RS. 2 31 190/ - . THE CASE WAS SELECTED FOR SC RUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER ITA NO 369/AHD/2011 . A.Y. 2007 - 08 2 SECTION 143(3) VIDE ORDER DATED 04.12.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 19 06 870/ - . AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 18.11 2 010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS; - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS.9 53 260/ - MADE BY THE ASSESSING OFFICER IN RESPECT OF LOW GROSS PROFIT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS. 1 45 274/ - MADE BY THE ASSESSING OFFICER IN RESPECT OF UN VERIFIABLE EXPENSES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LEARNED CIT(A) OU GHT TO HAVE UPHELD THE ORDER OF THE A.O. 1 ST GROUND IS WITH RESPECT TO DELE TION OF ADDITION ON ACCOUNT OF LOW G ROSS P ROFIT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O NOTICED THAT INSPITE OF THE INCREASE IN TURNOVER F OR THE YEAR UNDER CONSIDERATION T HE GROSS PROFIT OF THE ASSESSEE HAS REDUCED IN TERMS OF VALUE AS ALSO IN TERMS OF PERCENTAGE. THE ASSESSEE WAS ASKED TO FURNISH THE REASONS FOR FALL IN GP TO WHICH ASSESSEE INTERALIA SUBMITTED THAT DUE TO THE INCREASE IN THE PRICE OF POWER AND DIESEL T HE COST HAS INCREASED BUT THE SALES PRICE COULD NOT BE INCREASED DUE TO MARKET FORCES AND FURTHER O NE OF THE MAJOR CUSTOMER WAS ONGC AND THE SALES TO IT WERE MADE AT THE RATES AGREED EARLIER AND T HEREFORE THE INCREASE IN COST CO ULD NOT BE PASSED ON TO THE ONGC . THE SUBMISSION OF THE ASSESSEE WAS NO T FOUND ACCEPTABLE TO THE A.O. A S HE WAS OF THE VIEW THAT WHEN COST INCREASES BEYOND CERTAIN LIMIT THE SALE PRICE ARE ALSO INCREASED TO MEET THE INCREASE D COST. A.O THEREAFTER ESTIMATED THE G.P OF THE ASSESSEE AT 31.23% ( BEING THE GP OF A.Y. 06 - 07 ) AND WORKED OUT THE GROSS PROFIT FOR THE YEAR AT RS. 39 12 404 AND AFTER GIVING THE CREDIT OF GP OF RS 29 59 144/ - THAT WA S SHOWN BY THE ASSESSEE CONSIDERED THE DIFFERENCE OF RS. 9 53 2 60/ - AS INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO DELETED THE ADDITION MADE BY THE A.O BY HOLDING AS UNDER: - 5.1 DECISION : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE OBSERVATIONS MADE BY THE AO IN THE ASSESSMENT ORDER. I HAVE ALSO CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT. THE AO COMPARED THE G.P. RATES OF EARLIER YEARS AND NOTICED THAT THE G.P. RATES SHOWN BY THE APPELLANT IS LESS THAN EARLIER YEARS AND THE DIFFERENCE IN RATE WAS ADDED TO THE TOTAL INCOME OF THE APPELLANT. ON THE OTHER HAND THE APPELLANT SUBMITTED THAT THE REASONS FOR FALL IN G.P. WAS DUE TO THE INCREASE IN THE MATERIAL COST AND ITA NO 369/AHD/2011 . A.Y. 2007 - 08 3 OTHER COSTS. THE ID. AR ALSO SUBMITTED COMPARATIVE COST OF MATERIALS POWER CHARGES FREIGHT CHARGES ETC. WHICH SHOW THAT THERE WAS MARKED INCREASED IN THE PRICES IN THOSE ITEMS. ONE SHOULD BEAR IN MIND THAT THE APPELLANT HAS BUSINESS DEAL OF 36% OF ITS TOTAL B USINESS WITH THE ONGC A PSU WITH WHOM RATE CONTRACT IS TENDERED DOES NOT ALLOW TO RAISE SELLING RATE EVEN THOUGH COST OF MATERIAL RISEN DURING THE TENDERED PERIOD. THE CASE LAW CITED BY THE ID. AR IS ALSO APPLICABLE IN THIS CASE. NO DOUBT THAT THERE SHOU LD BE CLEAR FINDING ON EVIDENCE THAT ACCOUNTS MAINTAINED BY THE ASSESSEE ARE EITHER DEFECTIVE OR INCOMPLETE AND WITHOUT CORROBORATIVE EVIDENCES TO SUPPORT SUCH FINDING G.P. ADDITION CANNOT BE MADE. THUS THE AO IS NOT JUSTIFIED TO REJECT BOOK RESULT AND M AKE ADDITION ONLY ON THE BASIS OF COMPARISON OF PROFIT WITH THAT OF EARLIER YEARS. IN THIS CIRCUMSTANCES I FIND THAT THE AO HAS NO VALID REASONS AND EVIDENCE TO MAKE SUCH ADDITIONS. THEREFORE THE AO IS DIRECTED TO DELETE THE ADDITION MADE IN THIS GROUND. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US LD. D .R. TOOK US THROUGH THE ORDER O F A.O AND SUPPORTED HIS ORDER. ON THE OTHER HAND T HE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) AND FURTHER SUBMITTED THAT ASSESSEE HAD GIVEN THE REASONS FOR LOW GP AND NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO DISPROVE THE SUBMISSIONS OF ASSESSEE . HE FURTHER SUBMITTED THAT WHILE FRAMING THE ASSESSMENT U/S 1 43(3) FOR A.Y. 08 - 09 T HE GP OF 24.5% HAS BEEN ACCEPTED BY THE REVENUE . HE THEREFORE SUBMITTED THAT THERE WAS NO JUSTIFICATION FOR MAKING ADDITION ON ACCOUNT OF LOW G.P. HE THUS SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD. IN THE PRE SENT CASE WE FIND THAT ASSESSEE HAS FURNISHED THE REASONS FOR FALL IN GP. FURTHER IT IS ALSO A FACT AS NOTED BY CIT(A) THAT ASSESSEE S BUSINESS WITH ONGC IS ALMOST 36% OF THE TOTAL BUSINESS WITH WHOM THE RATE CONTRACT HAS BEEN ENTERED BY THE ASSESSEE AND THEREF ORE THE ASSESSEE COULD NOT INCREASE THE SELLING RATE EVEN THOUGH THE COST OF MATERIAL HAD RISEN. WE FURTHER FIND THAT CIT(A) HAS NOTED THAT THERE IS NO CLEAR FINDING OF THE A.O THAT THE ACCOUNTS MAINTAINED BY THE ASSESSEE WERE EI THER DEFECTIVE OR INCOMPLETE. LD. CIT(A) HAS FURTHER HELD THAT A.O WAS NOT JUSTIFIED TO MAKE ADDITION ONLY ON THE BASIS OF COMPARISON OF PROFIT WITH THAT OF EARLIER YEARS. BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVE RT THE FINDINGS OF CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A)AND THUS THIS GROUND OF REVENUE IS DISMISSED. ITA NO 369/AHD/2011 . A.Y. 2007 - 08 4 2 ND GROUND IS WITH RESPECT TO DELETION IN RESPECT OF UNVERIFIABLE EXPENSES. 8. DURING THE COURSE OF ASSESSMENT PROCEE DINGS A.O NOTICED THAT ASSESSEE HAD INCURRED VARIOUS EXPENSES AGGREGATING TO RS. 1 4 52 74 0 / - . THE ASSESSEE WAS ASKED TO FURNISH THE VOUCHERS WHICH A.O HAS NOTED THAT ASSESSEE COULD NOT FURNISH . HE ACCORDINGLY CONSIDERED 10% OF THE EXPENSES AGGREGATING TO RS. 1 45 274/ - (AS LISTED AT PAGE 8 OF THE ORDER) AS UNVERIFIABLE AND ADDED TO THE INCOME. . AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO DELETED THE ADDITION BY HOLDING AS UNDER: - 9.2 D ECISION : I HAVE CAREFULLY CONSIDE RED THE OBSERVATION OF THE AO AND THE SUBMISSIONS MADE BY THE ID ID. AR. THE ADDITION MADE IN THIS GROUND BY THE AO WAS ON ADHOC BASIS. AT THE SAME TIME THE APPELLANT HAD MADE A FORCEFUL ARGUMENT AGAINST THE ADHOC ADDITION. CONSIDERING THE FACTS AND CIRCU MSTANCES I AM INCLINED TO AGREE WITH THE CONTENTION OF THE APPELLANT BECAUSE THE AO HAS NOT GIVEN ANY COGENT REASONS FOR MAKING SUCH ADDITIONS. IN THE INTEREST OF JUSTICE THE AO SHOULD BROUGHT OUT THE DEFICIENCY IN ANY PARTICULAR EXPENSES AND THEIR RECOR D KEEPING FOR MAKING THE ADDITION WHICH IN THIS CASE HAD NOT HAPPENED. THEREFORE THE ADDITION IS NOT SUSTAINABLE IN THE EYES OF LAW. ACCORDINGLY THE AO IS DIRECTED TO DELETE THE ADDITIONS. THUS THIS GROUND OF APPEAL IS ALLOWED 9. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US. 10. BEFORE US LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A) AND FURTHER SUBMITTED THAT THE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND NO DISC REPANCY OR DEFECTS HAVE BEEN POINTED OUT BY THE AUDITORS. HE FURTHER SUBMITTED THAT THE AD - HOC DISALLOWANCE HAS BEEN MADE EVEN FOR EXPENDITURE LIKE OFFICE SALARY WAGES PACKING EXPENSES ETC WHICH ARE INCURRED FOR RUNNING OF THE BUSINESS. HE THEREFORE SUBMI TTED THAT THE A.O WAS NOT JUSTIFIED IN MAKING AN AD - HOC DISALLOWANCE. HE THUS SUPPORTED THE ORDER OF CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE NATURE OF EXPENSES DISALLOWED BY THE A.O IT IS SEEN THAT THE D ISALLOWANCE HAS BEEN MADE FROM WAGES ACCOUNT OFFICE SALARY FREIGHT INWARD EXPENSES ETC. WE FURTHER FIND THAT THE DISALLOWANCE HAS BEEN MADE ON AD - HOC BASIS AND A.O HAS NOT POINTED ANY EXPENSES WHICH WERE NOT FOR THE PURPOSE OF BUSINESS. BEFORE US REVENU E HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE ITA NO 369/AHD/2011 . A.Y. 2007 - 08 5 FINDINGS OF CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 12. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 14 - 11 - 201 4 . SD/ - SD/ - (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RA JESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD