The ITO, Ward-3(1),, Surat v. Shri Sushilkumar T.Poddar, Surat

ITA 3967/AHD/2007 | 2004-2005
Pronouncement Date: 22-03-2010 | Result: Dismissed

Appeal Details

RSA Number 396720514 RSA 2007
Bench Ahmedabad
Appeal Number ITA 3967/AHD/2007
Duration Of Justice 2 year(s) 4 month(s) 23 day(s)
Appellant The ITO, Ward-3(1),, Surat
Respondent Shri Sushilkumar T.Poddar, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 22-03-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 22-03-2010
Date Of Final Hearing 22-03-2010
Next Hearing Date 22-03-2010
Assessment Year 2004-2005
Appeal Filed On 29-10-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI D.T. GARASIA JUDICIAL MEMBER AND A.N. PAHUJA ACCOUNTANT MEMBER) ITA.NO.3967/AHD/2007 ASSTT.YEAR : 2004-2005 ITO WARD-3(1) SURAT. VS. SHRI SUSHILKUMAR T. PODDAR PROP: M/S.SHEETAL EXPORTS 411 TURNING POINT GHOD DOD ROAD SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : MS.SMITI SAMANT ASSESSEE BY : WRITTEN SUBMISSIONS O R D E R PER D.T. GARASIA JUDICIAL MEMBER: THIS IS REVENUES APPEAL AGAINST ORDER OF THE CIT(A)-II SURAT DATED 22-8-20 07. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT9A) ERRED IN DELETING THE ADDITION OF RS.16 64 030/- MADE BY WAY OF ESTIMATION OF GROSS PROFIT. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE WHO WAS ENGAGED IN THE EXPORT OF PROCESSED CLOTH HAD SHOWN TOTAL EXPORT SALES OF RS.37 36 50 216 AND DOMESTIC SALES OF RS.1 34 03 423/-. THE GP SHOWN WAS AT RS.70 50 324 WHICH WAS 1.82% OF THE TOTAL SALES. THIS WAS THE FIRST YEAR OF THE ASSESSEES BUSINESS. THE NET PROFIT DECLARED WAS 0.22% OF THE TOTAL TURNOVER. THE ASSESSEE PRODUCED THE REL EVANT BOOKS OF ACCOUNT BEFORE THE AO FOR VERIFICATION. THE AO NOTED THAT THE EXP ENDITURE INCURRED ON JOB WORK OF EMBOSSING AND OF DYEING AND PRINTING WERE O N THE HIGH SIDE AND WERE NOT PROPERLY VOUCHED. SOME OF THE EXPENSES WERE I NCURRED IN CASH. THE AO ALSO VERIFIED THE ASSESSEES BANK ACCOUNT. THE AO HOWEVER TOOK THE VIEW THAT SOME OTHER ASSESSEES IN SIMILAR LINE OF BUSINESS HA D BEEN SHOWING HIGHER GP RATE. HE THEREFORE ISSUED A SHOW CAUSE NOTICE TO TH E ASSESSEE ON 13-12-2006 ASKING THE ASSESSEE TO EXPLAIN THE FALL IN THE GP R ATIO AND WHY THE GP SHOULD ITA.NO.3967/AHD/2007 -2- NOT BE ESTIMATED OF 2.25% ON THE TOTAL TURNOVER OF RS.38 70 53 639/-. THE ASSESSEE SUBMITTED IN HIS REPLY THAT SINCE IT WAS T HE FIRST YEAR OF BUSINESS AND SINCE THE ASSESSEE WAS NEW TO THIS LINE OF BUSINESS SOME OF THE EXPENSES INCURRED COULD HAVE BEEN ON THE HIGHER SIDE IN COMP ARISON TO OTHER ESTABLISHED BUSINESSES. WITH REGARD TO THE NON-AVAILABILITY O F SOME OF THE VOUCHERS FOR PETTY EXPENSES AND SOME BILLS FOR PACKING MATERIAL S IT WAS SUBMITTED THAT THESE PURCHASES WERE MADE ON URGENT BASIS AND SINCE THE AMOUNTS WERE SMALL THE CONCERNED PARTIES HAD NOT ISSUED ANY BILLS OR R ECEIPTS. IT WAS CONTENDED THAT THE BOOKS OF ACCOUNT HAD BEEN PROPERLY MAINTAI NED AND AUDITED. COMPLETE QUANTITATIVE DETAILS HAD BEEN FURNISHED AN D NO ADVERSE COMMENT HAD BEEN MADE BY THE AUDITORS. IT WAS SUBMITTED THAT THE PACKING EXPENSES WHICH WAS IN THE NATURE OF SELLING EXPENSES HAD BEEN SHO WN IN THE TRADING ACCOUNT. HOWEVER IT COULD NOT BE CONSIDERED AS A COST OF SA LES. IF SUCH EXPENSES WERE EXCLUDED FROM THE TRADING ACCOUNT THE GP RATE WOUL D BE ALMOST THE SAME AS ESTIMATED BY THE AO. THE AO REJECTED THE SUBMISSI ONS OF THE ASSESSEE AND MADE ADDITION. THE MATTER CARRIED TO THE CIT(A) AN D THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: 5. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. THE POINT TO NOTE HERE IS THAT THIS WAS THE FIRST YEAR OF THE ASSESS EES BUSINESS AND THE GP RATE DISCLOSED WAS 1.82%. THE AO CLAIMED THAT THIS WAS ON THE LOWER SIDE AND THAT OTHERS IN THE SAME LINE OF BUSINESS INCLUDING THE ASSESSEES SISTER CONCERNS HAD HIGHER GP RATE. HOW EVER NOT EVEN THE NAMES OF THE SUCH ENTITIES WITH WHOM THE AO SOUGHT TO MAKE THE COMPARISON WAS BROUGHT ON RECORD NOT TO SPEAK OF A NY DETAIL ABOUT THEIR NATURE OF BUSINESS OR THE GP RATE DISCLOSED B Y THEM DURING THE RELEVANT YEAR OR IN EARLIER YEARS. SECONDLY THE AO FAILED TO POINT OUT ANY DEFECT IN THE BOOK RESULTS. THE BOOKS WERE DUL Y AUDITED. THIRDLY HE OBSERVED THAT THE MARKET RATES OF JOB WORK OF EMBOS SING AND OF DYEING AND PRINTING WERE 20-25% AND 5-10% RESPECTIVELY. THE SOURCE OF SUCH INFORMATION WAS NOT BROUGHT ON RECORD. PERSONAL IN FORMATION HAS NO EVIDENTIARY VALUE UNLESS BACKED UP BY CONCRETE DOCU MENTARY EVIDENCE. FOURTHLY THE JOB WORK EXPENSES OF EMBOSSING DISCLO SED BY THE ASSESSEE WAS 26% OF THE TOTAL SALES WHICH WAS ALMOST SIMILAR TO THE RANGE OF 20- 25% AS PER THE AOS INFORMATION. THE RATES OF JOB WORK OF DYEING AND PRINTING DISCLOSED BY THE ASSESSEE WAS 75 WHICH WAS WELL WITHIN THE RANGE OF 5-10% AS OBSERVED BY THE AO. ITA.NO.3967/AHD/2007 -3- 5.1 THUS THE FACTS OF THE CASE AS DETAILED ABOVE WOULD CLEARLY SHOW THAT THE AO HAD SIMPLY NO BASIS FOR ESTIMATING THE GP RATE FOR THE YEAR UNDER CONSIDERATION AT 2.25% AS AGAINST THE GP RATE OF 1.82% DISCLOSED BY THE ASSESSEE. THE AO COULD NOT HAVE MADE ANY AD DITION TO THE GP WITHOUT INVOKING THE PROVISIONS OF SEC. 145(3) OF T HE IT ACT. SINCE HE HAD FAILED TO POINT OUT ANY DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE HE WAS UNABLE TO INVOKE THE PROVISIONS 1 OF THE SAID SECTION. CONSEQUENTLY NO ADDITION COULD BE MADE ON ACCOUNT OF LOW GP. THIS VIEW IS SUPPORTED BY THE DECISION OF THE AHMEDABAD BENCH OF THE ITAT (3 RD MEMBER0 IN THE CASE OF ITO VS. SKYJET AVIATION P. LTD. 71 ITD 95. THE AO IS THEREFORE DIRECTED TO DELETE THE ADDITIO N OF THE SUM OF RS.16 64 330/-. 3. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND FIND THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAD NOT BEEN REJECTED UNDER THE PROVISIONS OF THE SECTION 145(3) OF THE I.T.ACT.. WE ALSO FIND THAT NO ADDITION CAN BE MADE ON ACCOUNT OF GP RATIO. WE FURTHER FIN D THAT THE ASSESSEE HAS SUBMITTED ALL THE BOOKS OF ACCOUNTS AND GOT THEM VE RIFIED. ALL THE BOOKS OF ACCOUNTS ALONG WITH BILLS VOUCHERS ETC. WERE ALSO PRODUCED BEFORE THE AO WHICH WERE DULY VERIFIED BY HIM. NO DEFECTS OR DEF ICIENCY OR INCORRECTNESS WERE NOTICED. ONCE THE BOOK RESULTS HAVE NOT BEEN REJECTED THAT MEANS THAT BOOKS OF ACCOUNTS ARE ACCEPTED TO BE CORRECT AND NO ADDITION CAN BE MADE BY ESTIMATING GP RATIO AT HIGHER SIDE. WE ALSO FIND THAT THE AO HAS MADE A COMPARISON WITH OTHER ENTITIES WHICH WAS NEITHER BR OUGHT TO THE NOTICE OF THE ASSESSEESS NOR BROUGHT ON RECORD. THEREFORE WE AR E OF THE VIEW THAT THE CIT(A) IS JUSTIFIED IN HIS ACTION AND OUR INTERFERE NCE IS NOT REQUIRED ON THIS ISSUE. 4 . IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND MARCH 2010. SD/- SD/- (A.N.PAHUJA) ACCOUNTANT MEMBER (D.T. GARASIA) JUDICIAL MEMBER ITA.NO.3967/AHD/2007 -4- PLACE : AHMEDABAD DATE : 22-03-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR ITAT AHMEDABAD