THE ACIT CIR-23(2), MUMBAI v. M/S. M.D. INDUSTRIES, MUMBAI

ITA 6166/MUM/2007 | 1998-1999
Pronouncement Date: 23-03-2011 | Result: Dismissed

Appeal Details

RSA Number 616619914 RSA 2007
Assessee PAN AAMFM4441R
Bench Mumbai
Appeal Number ITA 6166/MUM/2007
Duration Of Justice 3 year(s) 5 month(s) 18 day(s)
Appellant THE ACIT CIR-23(2), MUMBAI
Respondent M/S. M.D. INDUSTRIES, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 23-03-2011
Assessment Year 1998-1999
Appeal Filed On 05-10-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH MUMBAI BEFORE SHRI D. MANMOHAN VICE PRESIDENT AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 6166/MUM/2007 (ASSESSMENT YEAR: 1998-99) ACIT CIRCLE 23(2) M/S. M.D. INDUSTRIES C1- PRATAYAKSHA KAR BHAVAN ROW HOUSE NO. 4 AFGA BKC BANDRA (E) VS. NEAR VARDHAMAN NAGAR MUMBAI 400051 MULUND (W) MUMBAI 400080 PAN - AAMFM 4441 R APPELLANT RESPONDENT APPELLANT BY: MR. HARI GOVIND SINGH RESPONDENT BY: NONE O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) XXIII MUMBAI DATED 30.07.2007 IN WHICH THE REVENUE HAS RA ISED THE FOLLOWING GROUNDS: - I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN ACCEPTING THE SALE OF THE ASSES SEE AT A FIGURE OF RS.9 30 30 452/- AS RETRIEVED FROM THE COMPUTER AS AGAINST RS.10.30.00 000/- ESTIMATED BY THE AO IN VIEW OF A SSESSEES FAILURE TO PRODUCE THE BOOKS OF ACCOUNTS SURRENDER OF RS.20 LACS (BEING PART OF TOTAL SURRENDER OF RS.200 LACS BY TH E GROUP) VIDE REVISED SURRENDER DT. 04/02/2003 STATING THAT THE ENTIRE INCOME EARNED BY THE ASSESSEE SINCE A.YR. 1998-99 TO THE A SSESSMENT YEAR 2003-04 WAS COVERED IN THE DECLARATION MADE P ARTICULARLY WHEN THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUN TS VOUCHERS BANK PASS BOOKS ETC. ON THE GROUND THAT T HESE WERE NOT TRACEABLE THUS NECESSITATING REJECTION OF TURN OVER BY THE AO. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN ACCEPTING AS RELIABLE THE COMPU TERIZED ACCOUNTS RETRIEVED BY THE DEPTT. FROM THE COMPUTER OF THE ASSESSEE THOUGH THESE WERE INCOMPLETE IN SO FAR AS NEITHER THE OPENING STOCK HAD BEEN CONSIDERED IN THE P & L A/C. RETRIEVED BY THE DEPTT. NOR THE CORRECTNESS OF WHICH WAS VOUCHSA FED BY THE ASSESSEE IN THE AFFIDAVIT FILED. ONCE THE ASSESSEE ITSELF DOUBTED THE CORRECTNESS OF THE FIGURES OF SALES THE TURNOV ER ACCEPTED BY THE CIT(A) AT RS.9 30 30 452/- IS QUITE ERRONEOUS. ITA NO. 6166/MUM/2007 M/S. M.D. INDUSTRIES 2 2. BRIEFLY STATED THERE WAS A SURVEY CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 21.01.2003 AND DURING THE COURSE OF SUR VEY THE ASSESSEES PARTNER MR. GULAB J. GALA DECLARED AN UNDISCLOSED I NCOME OF ` 2 CRORES ON BEHALF OF VARIOUS CONCERNS FOR A.Y. 2003-04 WITH A SPECIFIC MENTION THAT SUCH INCOMES HAD BEEN DECLARED TO COVER UP OMISSION S AND COMMISSIONS AND ALSO TO COVER UP INCOME NOT DECLARED OF EARLIER YEARS BY NON-FILING OF RETURNS FROM A.Y. 1998-99 TO A.Y. 2003-04. IT APPEA RS THAT THE ASSESSEE HAD DISCHARGED ITS LEGAL OBLIGATION OF PAYING DUE TAXES FOR THESE YEARS. ORIGINALLY THE ASSESSEE DECLARED ` 2 CRORES IN VARIOUS CONCERNS AND AN AMOUNT OF ` 60 00 000/- IN ASSESSEES CASE. HOWEVER THEY FILED A REVISED DECLARATION RESTRICTING THE SAME TO FOUR CONCERNS BUT TOTALLING TO ENTIRE AMOUNT OF ` 2 CRORES BUT IN ASSESSEES CASE IT WAS ONLY AT ` 20 00 000/-. THE RETURN WAS FILED ADMITTING RS. 19 LAKHS ONE LAKH BELOW THE RE VISED DECLARATION. IN THE COURSE OF SEARCH COPY OF TRIAL BALANCE P & L ACCOU NT AND CASH SUMMARY HAD BEEN RETRIEVED FROM THE COMPUTER AND ACCORDINGL Y PROVISIONS OF SECTION 147 WERE INITIATED. ASSESSEE FILED A RETURN DECLARI NG INCOME OF ` 10.52 LAKHS ADOPTING THE ESTIMATED NET PROFIT RATE OF 1.10% ON THE SALES OF ` 9 30 30 452/- FOR A.Y. 1998-99. THE A.O. IN THE COU RSE OF SCRUTINY ESTIMATED THE SALES TURNOVER AT ` 10.30 CRORES THEREBY ENHANCING THE SALES FIGURE BY ALMOST ` 1 CRORE AND ALSO ADOPTING THE NET PROFIT OF 2.5% AS AGAINST 1.10% ADMITTED BY THE ASSESSEE. THE ASSESSEE CONTES TED THE REOPENING OF THE ASSESSMENT ESTIMATION OF SALES FIGURE AND ESTI MATION OF NET PROFIT. WHILE UPHOLDING THE REOPENING THE CIT(A) RESTRICTED THE SALES TURNOVER TO THE AMOUNT FOUND IN THE COMPUTER AND ADMITTED BY THE A SSESSEE AND FURTHER AFTER ANALYSING THE RATIO OF NET PROFIT IN EARLIER YEARS AND ALSO THE FACT THAT THE ASSESSEE HAS NOT FILED RETURNS IN EARLIER YEARS RESTRICTED THE NET PROFIT AT 2.20%. HE DIRECTED THE A.O. ACCORDINGLY. REVENUE IS AGGRIEVED ON THE REDUCTION OF TURNOVER BY THE CIT(A) IN THE ABOVE GR OUNDS. 3. IN SPITE OF SENDING VARIOUS NOTICES TO THE ASSESSEE NONE APPEARED ON BEHALF OF THE ASSESSEE AND AS SEEN FROM THE RECORD EVEN THE NOTICES WERE SERVED BY AFFIXTURE AND THERE WAS NO RESPONSE TO AN Y OF THE NOTICES ISSUED. IN VIEW OF THIS THE APPEAL IS CONSIDERED EXPARTE R ESPONDENT. ITA NO. 6166/MUM/2007 M/S. M.D. INDUSTRIES 3 4. THE LEARNED D.R. EXPLAINED THE FACTS OF THE CASE AN D SUBMITTED THAT THE CIT(A) HAS NO BASIS TO REDUCE THE ESTIMATION MA DE BY THE A.O. ON THE TURNOVER. HE RELIED ON THE ORDERS OF THE A.O. 5. WE HAVE CONSIDERED THE ISSUE. THE LEARNED CIT(A) HA S CAREFULLY CONSIDERED THE ISSUE OF REOPENING THE ISSUE ASSESS EES DISCLOSURE AND ADOPTING A FAIR PROFIT RATE IN HIS ORDER. HIS FIND INGS ON THE SALES TURNOVER DISPUTED BY THE REVENUE IN PARA 29 & 30 ARE AS UND ER: - 29. HOWEVER SEEING THE TOTALITY OF THE FACTS I H OLD THAT THE A.O. HAD NO SPECIAL MATERIAL TO JACK UP ANY FURTHER THE SALES FIGURE RETRIEVED FROM THE ASSESSEES COMPUTER. THE SURVEY OPERATION HAD NO FINDING ALSO THAT THERE HAD BEEN ANY SALES FIGURE W HICH THE APPELLANT MIGHT HAVE SUPPRESSED. THEREFORE HE SHOULD NOT HAV E JUST ENHANCED THE FIGURE BY ONE CRORE WITHOUT ANY CREDIBLE LOGIC. SECONDLY THERE WAS ALSO NO BASIS MENTIONED BY THE A.O. FOR ADOPTIN G A NET PROFIT RATE OF 2.55. I AM OF THE VIEW THAT THE SAME CAN BE KEPT AT A REASONABLE FIGURE OF 2.2% KEEPING IN MIND THAT THE APPELLANT HAD AT LEAST IN ONE YEAR CLOSE TO THIS YEAR (IF NOT IN THE IMMEDIATELY PRECEDING ONE) ADMITTED OF HAVING 2.2% OF NET PROFIT. THIS SHOWS T HAT IN THE CONSPICUOUS ABSENCE OF ALL MATERIAL DOCUMENT TO SUP PORT EITHER THE A.O.S PERCENTAGE OF 2.5% OR THE APPELLANTS PERCEN TAGE OF 1.1% A NET PROFIT OF 2.2% IS NOT THAT FAR-FETCHED. 30. THEREFORE I HOLD THAT THE SALES FIGURE OF THE YEAR SHOULD BE RESTRICTED TO RS.9 30 30 452/- AS HAD BEEN RETRIEVE D FROM THE COMPUTER AND THE NET PROFIT BE SLASHED DOWN TO 2.2% THEREIN AFTER TAKING INTO CONSIDERATION ALL STATUTORY ALLOWANCES DEBITABLE TO THE P & L A/C. THE ASSESSMENT SHALL BE MODIFIED ACCORDINGLY HOLDING THE SAID NET PROFIT AS THE TOTAL INCOME OF THE YEAR. THE GRO UNDS ARE THUS PARTLY ALLOWED. 6. THE A.O. HAS NOT SHOWN ANY BASIS FOR ESTIMATING THE TURN OVER AT A HIGHER FIGURE THAN WHAT WAS FOUND IN THE COMPUTER S TATEMENT. THE TURNOVER WAS ACCEPTED BY THE ASSESSEE. WE DO NOT SEE ANY REA SON TO INTERFERE WITH THE ORDER OF THE CIT(A) AS FAR AS THE TOTAL SALE FIGURE IS CONCERNED. EVEN THE A.O. HAS NOT GIVEN ANY BASIS FOR ESTIMATING THE SALES OF THE ASSESSEE AT ` 10 30 00 000/- AND SIMPLY STATED THAT I ESTIMATE T HE SALES OF THE ASSESSEE AT ` 10 30 00 000/- WITHOUT GIVING A RATIONALE WHY THE ASSESSEES SALES AS FOUND OUT IN THE COMPUTER DURING THE COURSE OF SURV EY WERE NOT ACCEPTABLE. ITA NO. 6166/MUM/2007 M/S. M.D. INDUSTRIES 4 IN VIEW OF THIS THERE IS NO MERIT IN REVENUES GRO UNDS AND ACCORDINGLY THE GROUNDS ARE DISMISSED. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH 2011. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED: 23 RD MARCH 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXIII MUMBAI 4. THE CIT XXIII MUMBAI CITY 5. THE DR B BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.