ACIT 23(3), MUMBAI v. SACHIN P. ADIACHA, MUMBAI

ITA 543/MUM/2009 | 2005-2006
Pronouncement Date: 30-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 54319914 RSA 2009
Assessee PAN AAGPA5794B
Bench Mumbai
Appeal Number ITA 543/MUM/2009
Duration Of Justice 1 year(s) 2 month(s) 3 day(s)
Appellant ACIT 23(3), MUMBAI
Respondent SACHIN P. ADIACHA, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 30-03-2010
Date Of Final Hearing 22-01-2010
Next Hearing Date 22-01-2010
Assessment Year 2005-2006
Appeal Filed On 27-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI N.V. VASUDEVAN JM AND SHRI T.R. SOO D AM I.T.A.NO.543/MUM/2009 ASSESSMENT YEAR :2005-06 THE ASST. COMMISSIONER OF INCOME- TAX- 23(3) 4 TH FLOOR C-10 PRATYAKSHAKAR BHAVAN BANDRA (E) MUMBAI 400 051 . PAN: AAGPA 5794 B VS. SHRI SACHIN P. ADIACHA 18 KHIMJI MAHARAJ BLDG. M.G. ROAD MULUND (W) MUMBAI 400 081. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NAVEEN GUPTA RESPONDENT BY : SHRI VIJAY MEHTA O R D E R PER T.R. SOOD AM: IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOWI NG GROUND: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ESTIMATING GROSS PROFIT @ 0.8% I.E. RS.6 78 664/- WHILE THE A.O. HAS ESTABLISHED IN ASSESSMENT ORDER THAT THE PROFIT AT 2% OF THE GROSS TURNOVER AT RS. 34 87 201/-. 2. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD CLAIMED LOSS ON TURNOVER OF APPROXIMA TELY OF RS. 17 CRORES IN TEXTILES. FROM THE TAX AUDITED REPORT THE ASSESSIN G OFFICER WORKED OUT THE TOTAL QUANTITY OF FABRIC PURCHASED AND SOLD AND REACHED T HE CONCLUSION THAT THE ASSESSEE HAD SOLD THE CLOTH AT A LOSS OF RS. 11.28 PER METER WHICH WAS NOT A NORMAL THING. IN RESPONSE TO THE SHOW CAUSE NOTICE IT WAS SUBMIT TED THAT IT WAS NOT PROPER TO CALCULATE THE AVERAGE RATES BECAUSE FABRIC WAS OF D IFFERENT QUALITY. FURTHER IT WAS STATED AS UNDER: PLEASE REFER TO YOUR LETTER DATED 18.11.2007 POINT NO. 4 REGARDING SALES PURCHASE AND VALUATION OF CLOSING STOCK. PLE ASE NOTE THAT THERE IS NO SINGLE ITEM OF PURCHASE OR SALE. WE DEA L IN VARIOUS TYPES OF FABRICS AND ALL FABRICS ARE TRADED AT DIFFERENT PRICE AS PER PRODUCT. SO IT IS NOT POSSIBLE AND ADVISABLE TO TAKE AVERAGE OF TOTAL PURCHASE VALUE AND PURCHASE QUALITY OF VARIOUS TYPES. WE HAV E THROUGH OUR REPRESENTATIVE SUBMITTED TO YOU FULL DETAILS OF ITE MIZED STOCK DETAILS ON DATED 19.11.22007 FOR CLARIFICATION PURPOSE. ITA NO. 543/MUM/2009 SHRI SACHIN P. ADIACHA 2 THERE IS VARIOUS ITEMS IN STOCK WITH DIFFERENT QUAN TITY AND THEREFORE AVERAGE OF DIFFERENT TYPES OF STOCK SHOULD NOT BE T AKEN FOR ARRIVING AVERAGE PER METER AS PRODUCTS ALL TOGETHER ARE DIFF ERENT. YOU HAVE STATED THAT IT WELL ESTABLISHED FACT THAT THE PRUDENT BUSINESSMAN WOULD SUFFER SUCH A LOSS EXCEPT FOR THE REASONS BEYOND HIS CONTROL. EVEN I HAD DONE BUSINESS WITH ANTICIPA TION OF PROFIT. IN FACT ALL BUSINESSMAN DOES BUSINESS WITH AIM TO EARN PROFIT. SAME WAS THE CASE WITH ME. HOWEVER SOME OF MY CALCULATIONS WENT WRONG AND I H AD TO SUFFER LOSS. THERE ARE VARIOUS FACTORS WHICH GONE AGAINST ME LIKE INABILITY TO VALUE PROPERTY AVAILABLE GOODS QUANTITY OF GOOD S RUNNING ITEMS ETC. ONE OF THE MAIN REASONS OF LOSS WAS INABILITY TO VA LUE PROPERTY THE MATERIALS AVAILABLE. I HAD STARTED BUSINESS IN LAST FINANCIAL YEAR ONLY. I HAD DONE BUSINESS WITH ANTICIPATION OF PROFIT WI TH BULLISH PRICES EXPECTATION. HOWEVER I WENT WRONG MAINLY ON TWO FR ONTS FIRSTLY VALUATION OF AVAILABLE GOODS AND SECONDLY EXPECTING BULLISH MARKET I TRIED TO CORNER GOODS BY PURCHASING AVAILABLE GOODS EVEN AT LITTLE HIGHER PRICE EXPECTING BULLISH MARKET AND TRIED TO HOLD MY STOCKS. BUT MY ANTICIPATION FAILED AND HAS TO SUFFER LOSS. SECONDLY SOME OF THE ITEM WHICH I HAD PURCHASED WE RE LOOSING ITS PRICE AND I HAD COMPULSION OF NOT TO HOLD STOCKS B UT TO SALE AT BEST PRICE AVAILABLE AT THAT TIME. I TRIED TO SALE MY PR ODUCT AT BEST HIGH PRICE IN WHICH I SUCCEEDED AT SOME TIME. HOWEVER NOT RESULT WAS LOSS AS EVEN BEST PRICE AT THAT TIME COULD NOT COV ER MY COST OF PURCHASE. OTHER SMALL REASONS WERE QUANTITY DIFFERENCE AND NE ED OF FINANCE. HOWEVER THIS HAS A LIMITED IMPACT. YOU ARE REQUESTED TO NOTE THAT I HAVE NOT MADE LOSS ES IN EACH AND EVERY ITEM. IN SOME OF THE ITEMS I HAVE MADE PROFI TS AND IN SOME OF THE ITEMS I HAVE MADE LOSSES. THE NET RESULT IS LOSS. AS A PRUDENT BUSINESSMAN I NEVER WELCOME LOSSES BUT I HAVE TO ACCEPT THE FACT THAT THERE IS A LOSS SUFFERED BY ME IN MY BUSINESS SIN THE RELEVANT FINANCIAL YEAR. 3. ASSESSING OFFICER MADE FURTHER ENQUIRIES AND ULT IMATELY SUMMONED THE ASSESSEE WHO DID NOT APPEAR BEFORE HIM EVEN THE BOO KS OF ACCOUNT WERE NOT PRODUCED. THE ASSESSING OFFICER ALSO DEPUTED AN INS PECTOR FOR VERIFICATION OF THE GENUINENESS OF THE BUSINESS ESTABLISHMENT. THE INSP ECTOR REPORTED THAT THE BUSINESS ADDRESS GIVEN BY THE ASSESSEE IS BEING USE D AS HIS RESIDENTIAL PREMISES. THOUGH THE ASSESSEE HAD INDUSTRIAL GALA NO. 302 NA VYUG INDUSTRIAL ESTATE ITA NO. 543/MUM/2009 SHRI SACHIN P. ADIACHA 3 SEWERI MUMBAI BUT THE SAME WAS GIVEN ON RENT. ACC ORDING TO THE ASSESSING OFFICER FOR STORING CLOSING STOCK OF RS.3.14 CRORES A BIG PREMISES WAS REQUIRED WHICH WAS NOT THERE. CONSIDERING THE OVERALL FACTS THE AO ESTIMATED 2% OF THE TURNOVER OF RS.17 43 60 087/- AS NET PROFIT AND MAD E AN ADDITION OF RS. 34 87 201/- AS INCOME OF THE ASSESSEE. 4. ON APPEAL DETAILED SUBMISSIONS WERE MADE BEFORE THE CIT(A) AND THE SAME WERE SENT TO THE AO FOR A REMAND REPORT. THOU GH IT IS NOT CLEAR IN WHAT RESPECT THE REMAND REPORT WAS SOUGHT. BUT ULTIMATEL Y THE LEARNED CIT(A) HELD THAT THE A.O. WAS JUSTIFIED TO REJECT THE BOOKS OF ACCOU NT OF THE ASSESSEE. HOWEVER SHE ESTIMATED THE PROFIT AT THE RATE OF GROSS PROFI T OF 0.8% VIDE PARA 15 WHICH READS AS UNDER: DURING THE COURSE OF HEARING THE APPELLANTS REPRE SENTATIVE HAS VIDE LETTER DATED 25/11/2008 STATED THAT G.P. OF 0. 8% (BEING G.P. DECLARED FOR EARLIER YEAR BE ADOPTED FOR THE RELEVA NT ASSESSMENT YEAR. IN VIEW OF THE DISCUSSED ABOVE AND IN THE FAC TS AND CIRCUMSTANCES THE A.O. IS DIRECTED TO ADOPT INCOME FOR THE YEAR AT RS.6 78 664/- (I.E. AT0.80% OF TOTAL TURNOVER LESS EXPENSES). 5. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATI VE TOOK US THROUGH THE ASSESSMENT ORDER AND POINTED OUT THAT VARIOUS DEFEC TS NOTED BY THE ASSESSING OFFICER. IT WAS VEHEMENTLY ARGUED THAT THE ASSESSE E DID NOT PRODUCE THE BOOKS OF ACCOUNT ASSESSEE DID NOT HAVE PROPER PREMISES TO D O SUCH BUSINESS AND THEREFORE THE ASSESSING OFFICER WAS JUSTIFIED IN M AKING THE ESTIMATED ADDITION. 6. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE A SSESSEE MADE DETAILED ARGUMENTS AND PARTICULARLY SUBMITTED THAT IN THE NE XT TWO YEARS NO ADDITION HAS BEEN MADE BY THE A.O. AND FOR THAT PURPOSE HE FILED COPIES OF THE ASSESSMENT ORDER. HE ALSO FILED THE CHART SHOWING THE GROSS P ROFIT AND NET PROFIT RATIO AND *MOST OF WHICH HAVE BEEN ACCEPTED UNDER SECTION 143 (3) AND CLEARLY SHOWS THT THE NET PROFIT WAS ALMOST SIMILAR AS ASSESSED BY TH E CIT(A). THEREFORE THE ORDER OF THE CIT(A) WAS JUSTIFIED. ITA NO. 543/MUM/2009 SHRI SACHIN P. ADIACHA 4 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT SO MANY DEFICIENCIES HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER. THE BOOKS OF ACCOUNT WERE NOT PRODUCED AND O THER DETAILS WERE ALSO NOT AVAILABLE. EVEN IT IS DOUBTFUL THAT THE ASSESSEE HAVE PROPER PREMISES TO CONDUCT HIS BUSINESS AND WE FURTHER FIND THAT EVEN THE LEAR NED CIT(A) CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT AGAINST THAT FINDING THE ASSESSEE IS NOT IN APPEAL. IT IS VERY SURPRISING TO SEE THAT ASSESSEE HAD A TURNO VER OF RS.17 CRORES AND STILL THE ASSESSEE KEPT ON SELLING THE GOODS AT LOSS. THE NET PROFIT CHART FOR FUTURE YEARS READS AS UNDER: ASSESSMENT YEAR SALES (RS.) G.P.(%) N.P.(%) ASSESSED U/S. 2004-05 25 83 33 669 0.80% 0.28% 143(3) 2005-06 17 43 60 088 -1.21% -1.62% (143(3) 2006-07 7 78 71 407 0.87% 0.34% 143(3) 2007-08 12 15 50 762 0.24% 0.13% 143(3) SINCE THE CHART BELONGS TO THE FUTURE YEARS THE SA ME CANNOT BE FOLLOWED. CONSIDERING THE OVERALL CIRCUMSTANCES OF THE CASE WE FEEL 0.75% NET PROFIT IS REASONABLE BECAUSE ASSESSEE IS IN TEXTILE TRADE NOR MALLY GENERATES GOOD PROFIT. THEREFORE WE SET ASIDE THE ORDER OF THE LEARNED CI T(A) AND DIRECT THE A.O. TO ASSESS 0.75% AS NET PROFIT ON THE GROSS TURNOVER OF THE ASSESSEE. 8. IN THE RESULT THE REVENUES APPEAL IS PARTLY AL LOWED. ORDER PRONOUNCED ON THIS 30 TH DAY OF MARCH 2010. SD. SD. (N.V. VASUDEVAN) (T. R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 30 TH _MARCH 2010. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT-XXIII MUMBAI 4. THE CIT(A)-XCIII MUMBAI 5. THE DR E BENCH MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR ITAT MUMBAI ITA NO. 543/MUM/2009 SHRI SACHIN P. ADIACHA 5 ITA NO. 543/MUM/2009 SHRI SACHIN P. ADIACHA 6 ORDER PRONCOUNCED ON . 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE- APPELLANT AS WELL AS NO PETITION FOR ADJOURNMENT WA S FILED. WE FIND FROM THE RECORDS THAT ASSESSEE-APPELLANT WAS SERVED NOTICE B Y REGISTERED POST ACKNOWLEDGEMENT DUE TWICE AND THE ACKNOWLEDG EMENT CARDS DULY SIGNED BY THE ASSESSEE ON 25.07.2007 AND 16.11.2 007 RECEIVED BACK. IT IS THEREFORE PRESUMED THAT THE ASSESSEE IS NOT INT ERESTED IN PURSUING THE APPEAL FILED BY IT. IT HAS BEEN HELD BY THE HONBLE MADHYA PRADESH HIGH COURT IN ESTATE OF LATE TUKOJIRAO HOLKAR VS. CWT (2 23 ITR 480)(MP) THAT IF THE PARTY AT WHOSE INSTANCE THE REFERENCE IS MADE FAILS TO APPEAR AT THE HEARING OR FAILS IN TAKING STEPS FOR PREPARATION OF PAPER-BOOKS SO AS TO ENABLE HEARING OF THE REFERENCE THE COURT IS NOT B OUND TO ANSWER THE REFERENCE. THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN CIT VS. MULTIPLAN (INDIA) PVT. LTD. 38 ITD 320 (DEL.) IS A LSO TO THE SAME EFFECT. IN THE FACTS OF THE CASE WE HOLD THAT THE ASSESSEE IS NOT INTERESTED IN PURSUING THE PRESENT APPEAL BEFORE THE TRIBUNAL ACCORDINGLY THE APPEAL OF THE ASSESSEE IS DISMISSED AS UNADMITTED. THE ASSESSEE IF SO ADVISED SHALL BE FREE TO MOVE THE TRIBUNAL PRAYING FOR RECALLING OF THIS ORDER PROVIDED THE ASSESSEE IS ABLE TO ESTABLISH THE REASONABLE CAUSE BEHIND THE NON- APPEARANCE ON THE DATE OF HEARING AND IN THAT CASE THE TRIBUNAL MAY IN ITS DISCRETION RECALL THIS ORDER AND THE APPEAL MAY BE RESTORED FOR RE-HEARING. 3. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.12.2 007. ITA NO. 543/MUM/2009 SHRI SACHIN P. ADIACHA 7 2. FROM THE GROUNDS FILED BY THE ASSESSEE BEFORE TH E LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) WE FIND THAT THE LEVY PERTA INED TO CONCEALMENT OF INCOME OF RS. 1 02 744/- AND THE PENALTY LEVIED WAS RS. 22 248/-. THEREFORE IN VIEW OF CBDT CIRCULAR F.NO. 279/MISC.142/2007-IT DATED 15 TH MAY 2008 THE APPEAL IS NOT MAINTAINABLE TAX EFFECT BEING LESS THAN RS. 2 LAKH S. VIDE PARA 4 OF THIS CIRCULAR IT IS CLEARLY MENTIONED THAT THE TAX EFFECT IN ASCERTA INING MONETARY LIMITS FOR FILING OF APPEALS IN THE CASE OF PENALTY ORDERS WOULD MEAN QUANTUM OF PENALTY DELETED OR REDUCED. 3. THEREFORE APPEAL OF THE REVENUE IS DISMISSED AS NOT MAINTAINABLE. ORDER PRONOUNCED ON THIS _______ DAY OF MAY 2009 . (G.C. GUPTA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE ______MAY 2009. KN COPY TO: 6. THE ASSESSEE 7. THE ITO-26(1)(2) MUMBAI. 8. THE CIT CITY-XXVI MUMBAI 9. THE CIT(A)-XXVIII MUMBAI 10. THE DR G BENCH MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR ITAT MUMBAI S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 18.05.09 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 18.05.09 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS ITA NO. 543/MUM/2009 SHRI SACHIN P. ADIACHA 8 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER ITA NO. 543/MUM/2009 SHRI SACHIN P. ADIACHA 9