M/s. Sankalp Silk Mills Pvt.Ltd.,, Surat v. The ACIT.,Circle-4,, Surat

ITA 383/AHD/2010 | 2006-2007
Pronouncement Date: 18-11-2011 | Result: Allowed

Appeal Details

RSA Number 38320514 RSA 2010
Assessee PAN AADCS3931L
Bench Ahmedabad
Appeal Number ITA 383/AHD/2010
Duration Of Justice 1 year(s) 9 month(s) 10 day(s)
Appellant M/s. Sankalp Silk Mills Pvt.Ltd.,, Surat
Respondent The ACIT.,Circle-4,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 18-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 18-11-2011
Assessment Year 2006-2007
Appeal Filed On 08-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT JUDICIAL MEMBER AND SHRI A. K. GARODIA ACCOUNTANT MEMBER I.T.A. NO.383 / AHD/2010 (ASSESSMENT YEAR 2006-07) M/S. SANKALP SILK MILLS PVT. LTD. U-3223 SURAT TEXTILE MARKET RING ROAD SURAT VS. ACIT CIRCLE 4 SURAT PAN/GIR NO. : AADCS3931L (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI HARDIK VORA AR RESPONDENT BY: SHRI B L YADAV DR DATE OF HEARING: 09.11.2011 DATE OF PRONOUNCEMENT: 18.11.2011 O R D E R PER SHRI A. K. GARODIA AM:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) IV SURAT DATED 14.12.2009 FOR THE ASSESSMEN T YEAR 2006-07. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN MAKING ADDITION OF RS.6 74 460/- ON ACC OUNT OF LOW GROSS PROFIT BY REJECTING BOOK RESULT U/S 145(3) OF THE INCOME TAX ACT 1961. 2) IT IS THEREFORE PRAYED THAT ABOVE ADDITIONS MA DE BY A.O. AND CONFIRMED BY CIT(A) MAY PLEASE BE DELETED. 2. THE BRIEF FACTS OF THE CASE TILL THE ASSESSMENT STAGE ARE NOTED BY THE LD. CIT(A) IN HIS ORDER AT PAGES 1 & 2 AND THE RELE VANT PARAS OF HIS ORDER ARE BEING REPRODUCED BELOW: I.T.A.NO.383 /AHD/2010 2 THE FACTS OF CASE ARE THAT THE AO OBSERVED THAT TH E GROSS PROFIT RATIO FOR THE YEAR UNDER CONSIDERATION HAS DECREASE D TO 12.64% FROM 20.05% IN IMMEDIATELY PRECEDING YEAR. THE AO A SKED THE APPELLANT TO STATE REASON FOR THE FALL IN GROSS PRO FIT RATIO AS COMPARED TO PRECEDING YEAR. THE APPELLANT EXPLAINED THAT THERE IS HEAVY RECESSION IN TEXTILE INDUSTRY SINCE FY 2004-0 5 WHICH HAD RESULTED FALL IN SELLING RATE OF CLOTH SO GAP BETWE EN COST & SALES PRICE HAD REDUCED MARGINALLY. THE APPELLANT HAD ALS O PRODUCED 4 SHEETS AS ITS REASON THAT RESULTED IN FALL IN GP RA TE ESPECIALLY IN CASE OF GREY CLOTH. WITH FIGURES OF SUBMITTED SHEETS APP ELLANT ALSO STATED THAT COST PER METER OF FINISHED CLOTH HAD REDUCED O N ONE ON HAND AND SELLING RATE HAD INCREASED ON OTHER HAND THAT A LSO RESULTED IN FALLING GP RATE. THE AO REJECTED THE EXPLANATION OF THE APPELLANT. T HE MAIN CONTENTION OF THE AO IS THAT THE ARGUMENT OF THE AP PELLANT RELATING TO HEAVY RECESSION IN TEXTILE INDUSTRIES SINCE YEAR 2004-05 IS FACTUALLY INCORRECT BECAUSE FINANCIAL STATISTICS PU BLISHED BY TEXTILE INDUSTRIES SHOWS THAT THERE WAS REMARKABLE GROWTH I N THE TEXTILE INDUSTRIES. HE OBSERVED THAT EXPLANATION OF APPELLA NT IS GENERAL IN NATURE AND IT IS NOT UNDERSTOOD AS TO WHY THE APPEL LANT IS CONFUSING BY GIVING MANY STATISTICS. HE FURTHER OBSERVED THAT THERE ARE VARIOUS ASSESSEE ENGAGED IN SIMILAR LINE OF BUSINES S IN SURAT WHO ARE SHOWING BETTER PROFIT MARGIN AS COMPARED TO THE APPELLANT. IN SUPPORT OF THIS CONTENTION THE AO PLACED RELIANCE IN CASE OF M/S. VIDHATA SILK MILL WHERE GROSS PROFIT HAS BEEN SHOWN AT 29.98%. HE THEREAFTER REJECTED THE BOOK RESULT BY INVOKING THE PROVISION OF SECTION 145 OF THE I.T ACT. HE PLACED RELIANCE ON V ARIOUS CASE LAWS FOR REJECTING BOOK RESULT. AFTER REJECTING BOOK RES ULT HE ESTIMATED GROSS PROFIT AT THE RATE OF 16.34% ON THE BASIS OF AVERAGE GROSS PROFIT RATIO OF TWO YEARS AND THEREBY MADE ADDITION OF THE DIFFERENTIAL AMOUNT OF RS. 6 74 460/-. 3. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 4. IT WAS THE SUBMISSION OF THE LD. A.R. OF THE ASS ESSEE THAT NO REASON IS GIVEN BY THE A.O. IN THE ASSESSMENT ORDER FOR RE JECTING THE BOOKS OF I.T.A.NO.383 /AHD/2010 3 ACCOUNT OF THE ASSESSEE AS REQUIRED U/S 145(3) OF T HE INCOME TAX ACT 1961 AND HENCE THE REJECTION OF THE BOOKS IS NOT V ALID AND THEREFORE THE ADDITION MADE BY THE A.O. IS NOT SUSTAINABLE. RELI ANCE WAS PLACED BY HIM ON THE TRIBUNAL DECISION RENDERED IN THE CASE O F CHOKSI METAL REFINERY VS ACIT IN I.T.A.NO. 2734/AHD/2010 DATED 1 7.06.2011 AND HE SUBMITTED A COPY OF THIS TRIBUNAL DECISION. OUR AT TENTION WAS DRAWN TO PARA 4 OF THIS TRIBUNAL DECISION AND IT WAS ALSO SU BMITTED THAT AS IN THAT CASE IN THE PRESENT CASE ALSO BOOKS WERE REJECTED AND ADDITION WAS MADE MERELY ON THE BASIS OF FALL IN G.P. RATE AND IN THA T CASE IT WAS HELD BY THE TRIBUNAL THAT THE ORDER OF THE A.O. IS NOT SUSTAINA BLE. 5. AS AGAINST THIS LD. D.R. OF THE REVENUE SUPPORT ED THE ORDERS OF AUTHORITIES BELOW AND IT IS ALSO SUBMITTED THAT THE RE IS SUBSTANTIAL DECREASE IN G.P. RATE AND NO SUCH GROUND WAS TAKEN BY THE AS SESSEE BEFORE LD. CIT(A) AND HENCE IT IS AN ADDITIONAL GROUND WHICH SHOULD NOT BE ADMITTED AND DECIDED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL DECISION CITED BY THE LD. A.R. OF THE ASSE SSEE. WE FIND THAT IT WAS VERY MUCH SUBMITTED BY THE ASSESSEE BEFORE LD. CIT(A) ALSO THAT A.O. HAD ERRED IN REJECTING THE BOOK RESULTS BY INV OKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT 1961 WITHOUT POINTING OUT ANY SATISFACTORY DISCREPANCY IN THE BOOKS OF ACCOUNT. HENCE THIS ARGUMENT OF THE LD. D.R. OF THE REVENUE IS NOT VALID THAT THIS ISSUE WAS NOT RAISED BEFORE LD. CIT(A). WHEN WE GO THROUGH THE ORDERS O F AUTHORITIES BELOW WE FIND THAT NO DISCREPANCY IN THE BOOKS OF ACCOUNT IS BROUGHT OUT BY THE A.O. OR BY LD. CIT(A) AND THE ADDITION WAS MADE BY INVOKING THE PROVISION OF SECTION 145(3) MERELY FOR THE REASON T HAT THERE IS FALL IN G.P. I.T.A.NO.383 /AHD/2010 4 RATE. IN THE LIGHT OF THESE FACTS NOW WE CONSIDE R THE APPLICABILITY OF THE TRIBUNAL DECISION CITED BY THE LD. A.R. IN THAT CA SE ALSO THE FACTS ARE IDENTICAL BECAUSE IN THAT CASE ALSO THE PROVISIONS OF SECTION 145(3) WERE INVOKED AND THE BOOKS WERE REJECTED MERELY FOR THIS REASON THAT THERE WAS FALL IN G.P. RATE AND NO DEFECT AS SUCH IN THE BOOK S OF ACCOUNT WAS POINTED OUT BY THE AUTHORITIES BELOW. UNDER THESE FACTS T HE ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AS PER PARA 4 OF THIS TRIBUNAL ORDER WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REF ERENCE: WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE COMPILATION F ILED BEFORE US. IT IS EVIDENT FROM THESE ORDERS THAT MERELY ON THE BAS IS OF FALL IN GP RATE FOR THE YEAR UNDER CONSIDERATION THE IMPUGNED ADDITION WAS MADE. IT IS NOT THE CASE OF THE REVENUE THAT SOME S UPPRESSIONS OF SALES WERE DETECTED AS PER THE BOOKS OF ACCOUNT. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE BOOKS OF ACCOUNTS WERE INCOMPLETE OR THE CORRECT PROFIT COULD NOT BE DEDUCED. RATHER ON THE OTHER HAND THE ASSESSEE HAS FURNISHED THE REQUISITE DETAILS AN D CLAIMED THAT ALL THE SALES AS WELL AS PURCHASES WERE FULLY VOUCHED A ND VERIFIABLE. IT WAS ALSO CLAIMED THAT ALL THE EXPENDITURE WERE SUPP ORTED BY BILLS/VOUCHERS. FACTS OF THE CASE HAVE REVEALED THA T THE ASSESSEE IS ALSO SUBJECT TO ASSESSMENT BY EXCISE DEPARTMENT. DU E TO THE SAID REASON THE PRODUCTION REGISTER AND REQUISITE DETAI LS WERE MAINTAINED BY THE ASSESSEE AND ALSO PLACED BEFORE T HE AO FOR VERIFICATION. THE IMPUGNED ASSESSMENT ORDER IS SILE NT ABOUT THE REASONS FOR INVOCATION OF THE PROVISIONS OF SECTION 145 OF THE IT ACT. NO SPECIFIC FINDING OR REASON WAS GIVEN FOR NO T ACCEPTING THE BOOK RESULTS. IN NUMBER OF DECISIONS IT WAS HELD BY HON'BLE COURTS THAT IF ACCOUNTS WERE NOT FOUND DEFECTIVE THEN PROF IT MUST NOT BE ESTIMATED. RATHER IT WAS HELD THAT IT IS NOT PERMIS SIBLE TO REJECT THE BOOKS OF ACCOUNTS MERELY ON THE GROUND OF LOW GP RA TE AS COMPARED TO THE EARLIER YEARS. TO BUTTRESS THESE LE GAL POSITIONS CASE LAWS CITED ARE CIT VS. K. BHATIA (2004) 269 ITR 577 (P&H) AND CIT VS. JAS JACK ELEGANCE EXPORTS (2010) 324 ITR 93 (DEL). UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE NOT INCLINED TO AFFIRM THE FINDINGS OF THE AUTHORITIES BELOW AND REVERSE THE SAME. BOTH THE GROUNDS RAISED BY THE ASSESSEE A RE HEREBY ALLOWED. I.T.A.NO.383 /AHD/2010 5 7. SINCE IN THE PRESENT CASE THE FACTS ARE IDENTICA L WITH THE FACTS IN THE CASE OF CHOKSI METAL REFINERY (SUPRA) WE HOLD THAT THIS TRIBUNAL DECISION IS SQUARELY APPLICABLE IN THE PRESENT CASE AND BY R ESPECTFULLY FOLLOWING THIS TRIBUNAL DECISION WE HOLD THAT WE ARE NOT INC LINED TO UPHOLD THE FINDINGS OF THE AUTHORITIES BELOW AND WE REVERSE TH E SAME. GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT APPEAL OF THE ASSESSEE STANDS ALL OWED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; 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 BY ORDER 6. THE GUARD FILE AR ITAT AHMEDABAD 1. DATE OF DICTATION 15/11 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16/11 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 17/11 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 18/11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.18/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 18/11/2011 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. ..