ITO, New Delhi v. M/s Khemka Ispat Ltd., New Delhi

ITA 5813/DEL/2010 | 2004-2005
Pronouncement Date: 01-11-2011 | Result: Dismissed

Appeal Details

RSA Number 581320114 RSA 2010
Assessee PAN AAACK1210F
Bench Delhi
Appeal Number ITA 5813/DEL/2010
Duration Of Justice 10 month(s) 11 day(s)
Appellant ITO, New Delhi
Respondent M/s Khemka Ispat Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 01-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 01-11-2011
Date Of Final Hearing 01-11-2011
Next Hearing Date 01-11-2011
Assessment Year 2004-2005
Appeal Filed On 20-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI B.C. MEENA ITA NO. 5813/DEL/2010 ASSTT. YR: 2004-05 INCOME-TAX OFFICER VS. M/S KHEMKA ISPAT LTD. WARD 5(3) NEW DELHI. 1748/55 NAIWALAN 2 ND FLOOR ARYA SAMAJ ROAD KAROL BAGH NEW DELHI. PAN/GIR NO. AAACK1210F (APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI ROHIT GARG RESPONDENT BY : NONE O R D E R PER R.P. TOLANI J.M : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DAT ED 2-11-2010 RELATING TO A.Y. 2004-05. SOLE EFFECTIVE GROUND RA ISED IS AS UNDER: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1 9 72 865/- MADE BY THE AO ON ACCOUNT OF LOW G.P. 2. NONE PUT IN APPEARANCE ON BEHALF OF THE ASSESSEE DESPITE ISSUE OF NOTICE FOR HEARING. WE PROCEED TO DISPOSE OF THE AP PEAL EX PARTE QUA THE ASSESSEE ON MERITS AND IN THAT PROCESS WE HAVE HEA RD THE LEARNED DR AND PERUSED THE RECORD. 2 3. BRIEF FACTS ARE: ASSESSEE IS MANUFACTURER OF STE EL STRIPS OF VARIOUS KINDS. REGULAR BOOKS OF ACCOUNT ARE MAINTAINED WHI CH INCLUDED DETAILS OF RAW-MATERIAL CONSUMPTION STOCK REGISTER ETC. WHILE COMPLETING THE ASSESSMENT FOR THE ASSESSMENT YEAR IN QUESTION AO O BSERVED THAT ASSESSEE HAD EARNED G.P. IN LAST THREE YEARS AS UNDER: FINANCIAL YEAR G.P. RATIO 2003-04 9.40% 2002-03 10.90% 2001-02 9.50% 3.1. ACCORDING TO AO AS COMPARED TO IMMEDIATELY PR ECEDING YEAR THE G.P. EARNED BY THE ASSESSEE WAS LOW AND ESTIMATED I T TO BE 10% AND ACCORDINGLY THE ADDITION WAS MADE. 3.2. AGGRIEVED ASSESSEE PREFERRED FIRST APPEAL TO THE CIT(A) WHO DELETED THE ADDITION BY FOLLOWING OBSERVATION: I HAVE CONSIDERED THE FINDINGS RECORDED BY THE LD. AO AND REPLY SUBMITTED BY THE APPELLANT COMPANY. ON CONSID ERATION I FIND THAT THE LD. AO HAS MADE THE SUBJECT ADDITION MERELY BECAUSE OF THE FACT THAT THE GP DURING THE YEAR UND ER CONSIDERATION HAS GONE DOWN AS COMPARED TO THE IMME DIATELY PRECEDING FY. I ALSO FIND THAT THE LD. AO HAS BRUSH ED ASIDE THE EXPLANATION FURNISHED BY THE APPELLANT COMPANY TO T HE EFFECT THAT AS AGAINST MARGINAL INCREASE IN THE SALES PRIC E OF HR COLD ROUND STEEL STRIPS AND ZINK ROLLS THERE HAS BEEN S UBSTANTIAL INCREASE IN THE VALUE OF COST OF RAW MATERIAL. IT W AS POINTED OUT THAT AS AGAINST THE COST OF HR COLD STEEL STRIPS @ RS. 13849 PMT IN THE IMMEDIATELY PRECEDING YEAR THE COST OF PURCHASE HAS GONE UP TO RS. 19754 PMT DURING THE YEAR UNDER CONSIDERATION. LIKEWISE COST OF ZINC HAS ALSO INCR EASED FROM 3 RS. 51834 PMT TO RS. 68069 PMT DURING THE YEAR UNDE R CONSIDERATION. THEREFORE THE AO WAS NOT JUSTIFIED IN IGNORING THE FACTUAL POSITION OF THE PRESENT CASE. FURTHER HE HAS CONCENTRATED ONLY ON THE DECLINE IN GP RATE AS COMP ARED TO THE IMMEDIATELY PRECEDING 4YAR AND AHS NOT TAKEN INTO A CCOUNT THE FACT THAT IN THE FY 01-02 THE GP WAS 9.50% ONLY WH ICH FAIRLY COMPARES WITH THE GP DECLARED BY THE APPELLANT DURI NG THE YEAR UNDER CONSIDERATION. APART FROM THE ABOVE FACTUAL POSITION THE LD. AO H AS ALSO IGNORED THE FACT THAT THE ASSESSEE IS A LIMITED COM PANY HAD MAINTAINED BOOKS OF ACCOUNTS WHICH ARE DULY AUDITED BY THE QUALIFIED CHARTERED ACCOUNTANTS AND THE PURCHASE AN D SALES ARE SUBJECT MATTER OF EXCISE DUTY AND SALES TAX AND RET URNS UNDER THE AFORESAID TAX LAWS HAVE BEEN DULY SUBMITTED FULL DE SCRIPTION OF THE RAW MATERIAL PURCHASED GOODS MANUFACTURED AND SOLD BY THE APPELLANT COMPANY. ALL NECESSARY DETAILS/ DOCUM ENTS WERE MADE AVAILABLE TO THE LD. AO IN THE COURSE OF ASSES SMENT PROCEEDINGS AND NO DEFECTS/ DISCREPANCIES WERE POIN TED OUT BY HIM WARRANTING REJECTION OF BOOKS OF ACCOUNTS OR TR ADING RESULTS DECLARED BY THE APPELLANT COMPANY. THEREFORE IN MY VIEW THE AO WAS NOT JUSTIFIED IN MAKING THE SUBJECT ADDITION ON AN AD HOC/PURELY GUESS WORK BASIS IN A UNILATERAL FASHION . IN VIEW OF THE AFORESAID AND KEEPING IN VIEW THE FACT THAT THE ABNORMAL INCREASE IN THE COST OF RAW MATERIAL WAS MAINLY RES PONSIBLE FOR DECLINE IN GP THE ADDITION IN QUESTION IS BEING DE LETED. AGGRIEVED REVENUE IS BEFORE US. LEARNED DR IS HEARD WHO SUPPORTS THE ORDER OF AO. O N QUERY FROM THE BENCH LD. DR WAS FAIR ENOUGH IN CONCEDING THAT NO DEFECTS WERE FOUND IN THE ASSESSEES BOOKS OF ACCOUNT AND NO INTERFERENCE WAS MADE BY THE AO IN THE BOOK RESULTS. DUE TO LOW GP AS COMPARED TO IMM EDIATELY PRECEDING YEAR THE ADDITION HAS BEEN MADE BY AO. 4 IN VIEW OF THESE FACTS CIRCUMSTANCES AND RECORD W E SEE NO INFIRMITY IN THE ORDER OF CIT(A) DELETING THE ADDITION AND HOLDING THAT THERE WERE NEITHER DEFECT IN THE BOOKS OF ACCOUNT NOR THE ADDITION WA S JUSTIFIED. G.P. CANNOT BE A STATIC FIGURE AND IT MAY CHANGES FROM YEAR TO YE AR DEPENDING ON CIRCUMSTANCES. BESIDES IN ASSESSEES OWN CASE IN F .Y. 2001-02 DECLARED G.P. RATE OF 9.5% HAS BEEN ACCEPTED BY THE DEPARTME NT; IN COMPARISON THE PRESENT YEARS G.P. AT 9.4% CANNOT BE SAID TO BE UNS ATISFACTORY. IN OUR VIEW THE ADDITION MADE BY THE AO WAS BEREFT OF ANY SUBST ANCE WHICH HAS BEEN RIGHTLY DELETED BY THE CIT(A). WE UPHOLD HIS ORDER. 5. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 01-11-2011. SD/- SD/- (B.C. MEENA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 01--11-2011. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 5