ITO, Ward-1,, v. Madan Lal,,

ITA 5170/DEL/2004 | 2001-2002
Pronouncement Date: 28-01-2011 | Result: Allowed

Appeal Details

RSA Number 517020114 RSA 2004
Bench Delhi
Appeal Number ITA 5170/DEL/2004
Duration Of Justice 6 year(s) 1 month(s) 27 day(s)
Appellant ITO, Ward-1,,
Respondent Madan Lal,,
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted F
Tribunal Order Date 28-01-2011
Date Of Final Hearing 20-01-2011
Next Hearing Date 20-01-2011
Assessment Year 2001-2002
Appeal Filed On 01-12-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH F BENCH F BENCH F BENCH F : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA VICE PRESIDENT AND SHRI C.L.SETHI JUDICIAL MEMBER SHRI C.L.SETHI JUDICIAL MEMBER SHRI C.L.SETHI JUDICIAL MEMBER SHRI C.L.SETHI JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO. 5170/DEL/2004 5170/DEL/2004 5170/DEL/2004 5170/DEL/2004 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2001 2001 2001 2001 - -- - 02 0202 02 INCOME TAX OFFICER INCOME TAX OFFICER INCOME TAX OFFICER INCOME TAX OFFICER WARD WARD WARD WARD- -- -1 1 1 1 PANIPAT. PANIPAT. PANIPAT. PANIPAT. VS. VS. VS. VS. SHRI MADAN LAL SHRI MADAN LAL SHRI MADAN LAL SHRI MADAN LAL PROP. M/S GANPATI OVERSEAS PROP. M/S GANPATI OVERSEAS PROP. M/S GANPATI OVERSEAS PROP. M/S GANPATI OVERSEAS G.T.ROAD G.T.ROAD G.T.ROAD G.T.ROAD PANIPAT. PANIPAT. PANIPAT. PANIPAT. PAN NO.AAIPT6895J. PAN NO.AAIPT6895J. PAN NO.AAIPT6895J. PAN NO.AAIPT6895J. (APPELLANT) (RESPONDENT) ITA NO. ITA NO. ITA NO. ITA NO. 5184/DEL/2004 5184/DEL/2004 5184/DEL/2004 5184/DEL/2004 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2001 2001 2001 2001 - -- - 02 0202 02 SHRI MADAN LAL SHRI MADAN LAL SHRI MADAN LAL SHRI MADAN LAL PROP. M/S GANPATI OVERSEAS PROP. M/S GANPATI OVERSEAS PROP. M/S GANPATI OVERSEAS PROP. M/S GANPATI OVERSEAS G.T.ROAD G.T.ROAD G.T.ROAD G.T.ROAD PANIPAT. PANIPAT. PANIPAT. PANIPAT. PAN NO.AAIPT6895J. PAN NO.AAIPT6895J. PAN NO.AAIPT6895J. PAN NO.AAIPT6895J. VS. VS. VS. VS. INCOME TA INCOME TA INCOME TA INCOME TA X OFFICER X OFFICER X OFFICER X OFFICER WARD WARD WARD WARD- -- -1 1 1 1 PANIPAT. PANIPAT. PANIPAT. PANIPAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI H.K.LAL SR.DR. ASSESSEE BY : SHRI AJAY WADHWA CA. ORDER ORDER ORDER ORDER PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI PER C.L.SETHI J J J JM : M : M : M : THESE ARE CROSS-APPEALS FILED BY THE ASSESSEE AS W ELL AS BY THE REVENUE AGAINST THE LEARNED CIT(A)S ORDER DATED 22 .9.2004 PASSED IN THE MATTER OF ASSESSMENT MADE U/S 143(3) OF THE INC OME-TAX ACT 1961 (THE ACT) FOR THE AY 2001-02. 2. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE R EVENUE. 3. IN THIS APPEAL FILED BY THE REVENUE THE FOLLOWI NG GROUND HAS BEEN TAKEN:- ITA-5170 & 5184/D/2004 2 ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW IN DIRECTING THE AO TO A LLOW DEDUCTION U/S 80IB ON THE AMOUNT OF DUTY DRAW BACK OF RS.17 82 651/- BY IGNORING THE PRINCIPLE EXPOSITED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. STERLI NG FOODS LTD. 237-ITR-579 AND THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. VISHWANATHAN & CO. 261-ITR- 737 AND CIT VS. JAMEEL LEATHERS AND UPPERS 246-ITR-97 WHER EIN IT IS HELD THAT EXPORT INCENTIVES DO NOT FORM PART OF PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING AND ARE THEREFO RE ONE NOT INCLUDIBLE IN INCOME FOR COMPUTING SPECIAL DEDU CTION. 4. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE THR OUGH THE ORDERS OF AUTHORITIES BELOW. THE ISSUE WHETHER AMO UNT OF DUTY DRAWBACK IS ELIGIBLE FOR DEDUCTION U/S 80IB IS NOW SQUARELY COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F LIBERTY INDIA 317 ITR 218 WHERE IT HAS BEEN HELD THAT THE AMOUNT OF DUTY DRAWBACK AND OTHER INCENTIVES ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE SUPR EME COURT IN THE ABOVE REFERRED CASE WE REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE AO BY HOLDING THAT THE ASSESSEE IS NOT ELIGIBLE TO A DEDUCTION U/S 80IB IN RESPECT OF DUTY DRAWBACK AMOUNTING TO `17 8 2 651/-. THEREFORE THIS GROUND RAISED BY THE REVENUE IS ALL OWED AND DECIDED IN FAVOUR OF THE REVENUE. 5. NOW WE SHALL COME TO THE APPEAL FILED BY THE AS SESSEE. 6. THE FIRST ISSUE RAISED BY THE ASSESSEE IS WITH R EGARD TO ADDITION OF `5 32 756/- MADE BY THE AO BY ESTIMATING THE GROSS PROFIT RATE AT 22%. IN THIS CASE THE ASSESSEE HAD SHOWN GROSS PROFIT O F `53 17 568/- ON SALES OF `2 65 87 835/- WHICH GIVES A GP RATE OF 20 % AS AGAINST GP RATE OF 20% ON SALES OF `70 88 731/- DURING THE PREVIOUS YEAR RELEVANT TO THE AY 2000-01 AND GP RATE OF 28.21% SHOWN DURING T HE AY 1999-2000 ON SALES OF `33 46 663/-. THE AO POINTED OUT CERTA IN DEFECTS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND STATED THAT TH E ASSESSEE FAILED TO ITA-5170 & 5184/D/2004 3 FURNISH THE REQUISITE DETAILS. THE AO THEREFORE APPLIED GP RATE OF 22% AND MADE THE ADDITION OF `5 32 756/- TO THE DECLARE D PROFIT OF THE ASSESSEE. CIT(A) CONFIRMED THE AOS ACTION. 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE THR OUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE HAS NOT BEEN ABLE TO POINT OUT ANY IRREGULARITY IN THE AOS ORDER IN REJ ECTING THE ASSESSEES BOOKS OF ACCOUNT IN THE LIGHT OF SPECIFIC DEFECTS P OINTED OUT BY THE AO. WE THEREFORE HOLD THAT THE AO WAS JUSTIFIED IN ESTI MATING THE GP. HOWEVER KEEPING IN VIEW THE FACT THAT THE ASSESSEE S TURNOVER HAS BEEN INCREASED FROM `33 46 663/- AND `70 88 731/- I N THE AY 1999- 2000 & 2000-01 RESPECTIVELY TO `2 65 87 835/- IN TH E CURRENT YEAR AND IN THE LIGHT OF THE FACT THAT THE GP RATE SHOWN IN AY 2000-01 WAS 20% ONLY AND IN AY 1999-2000 GP RATE WAS 28.21% WE HOL D THAT ESTIMATION OF GP AT 21% WILL BE JUSTIFIED. IT IS WELL SETTLED THAT WHEN TURNOVER INCREASES MARGIN OF PROFIT DECREASES. THE RATE OF GP IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR WAS 20% BUT DUE TO CERTAI N DEFECTS IN THE YEAR UNDER CONSIDERATION SOME ADDITION IS CALLED F OR. WE THEREFORE ESTIMATE THE GP AT 21% WHICH IS TO BE APPLIED FOR M AKING ADDITION ON ACCOUNT OF OMISSION OF PROFIT IN THE YEAR UNDER CON SIDERATION. THE AO SHALL MODIFY THE ASSESSMENT ORDER ACCORDINGLY. 8. NEXT GROUND IS DIRECTED AGAINST CIT(A)S ORDER I N CONFIRMING THE ADDITION OF `10 000/- ON ACCOUNT OF PACKING EXPENSE S. 9. WE HAVE HEARD BOTH THE PARTIES. IT IS NOT IN DI SPUTE THAT PACKING EXPENSES ARE PART OF TRADING ACCOUNT. THE TRADING ADDITION HAS ALREADY BEEN MADE BY ESTIMATING THE GP AT 21%. THAT WOULD TAKE CARE OF THIS ADDITION OF `10 000/-. WE THEREFORE HOLD THAT NO SEPARATE ADDITION OF `10 000/- IS CALLED FOR. HENCE THE SAME STANDS DE LETED. ITA-5170 & 5184/D/2004 4 10. NEXT GROUND IS AGAINST THE ADDITION OF `10 423/ - ON ACCOUNT OF TELEPHONE EXPENSES AND ADDITION OF `10 620/- ON ACC OUNT OF VEHICLE EXPENSES. IN THIS CASE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED AND THE GROSS PROFIT HAS BEEN ESTIMATED BY APPLYING THE GP RATE. THEREFORE NO SEPARATE ADDITION IS CALLED FOR ON AC COUNT OF DISALLOWANCE OF EXPENSES. MOREOVER THE DISALLOWANCE HAS BEEN M ADE BY THE AO ON AD-HOC BASIS TO THE EXTENT OF 1/5 TH OF THE TOTAL EXPENSES WHICH HAS BEEN REDUCED BY THE CIT(A) TO 1/10 TH . SINCE THE BOOKS OF ACCOUNT HAVE BEEN REJECTED AND ADDITION ON ACCOUNT OF GP HAS BEE N MADE THESE ADDITIONS ARE NOT SEPARATELY CALLED FOR. WE THERE FORE DELETE THESE ADDITIONS. 11. LAST GROUND RAISED BY THE ASSESSEE IS WITH REGA RD TO ASSESSEES CLAIM OF DEDUCTION U/S 80IB IN RESPECT OF SALE OF D EPB LICENSE. THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BL E SUPREME COURT IN THE CASE OF LIBERTY INDIA 317 ITR 218 WHEREIN IT HAS BEEN HELD THAT DEPB AND DUTY DRAWBACK DO NOT FALL WITHIN THE EXPRE SSION PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING U/S 80IB OF TH E ACT AND THEREFORE THEY ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IB. RESP ECTFULLY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT THIS GROUND RAISED BY THE ASSESSEE IS REJECTED. 12. IN THE RESULT THE APPEAL OF THE REVENUE IS ALL OWED AND THAT OF THE ASSESSEE IS PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY 2011. SD/- SD/- (G.E.VEERABHADRAPPA (G.E.VEERABHADRAPPA (G.E.VEERABHADRAPPA (G.E.VEERABHADRAPPA ) )) ) (C.L.SETHI (C.L.SETHI (C.L.SETHI (C.L.SETHI ) )) ) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 28.01.2011. VK. COPY FORWARDED TO: - ITA-5170 & 5184/D/2004 5 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT ASSISTANT REGISTRAR