ACIT, CHENNAI v. M/s. Subhan Sanitary Stores, CHENNAI

ITA 726/CHNY/2011 | 2001-2002
Pronouncement Date: 13-07-2011 | Result: Dismissed

Appeal Details

RSA Number 72621714 RSA 2011
Assessee PAN AAAFS2307J
Bench Chennai
Appeal Number ITA 726/CHNY/2011
Duration Of Justice 2 month(s) 23 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. Subhan Sanitary Stores, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 13-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 19-07-2011
Assessment Year 2001-2002
Appeal Filed On 20-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D : CHENNAI [BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER] I.T.A NO. 726/MDS/2011 ASSESSMENT YEAR : 2001-02 THE ACIT CIRCLE IX CHENNAI VS M/S SUBHAN SANITARY STORES 6 SINGANNA NAICKEN STREET CHENNAI [PAN AAAFS2307J ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B RENGARAJAN JR. STANDING COUNSEL RESPONDENT BY : SHRI N.QUADIR HOSEYN ADVOCATE O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE FOR ASSESSMENT YEA R 2001-01 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 20.1.2011. 2. THE FACTS LEADING TO THIS APPEAL ARE THAT A SURV EY U/S 133A OF THE ACT WAS CONDUCTED IN THE BUSINESS PREMISES OF T HE ASSESSEE ON 26.2.2001 AND PHYSICAL INVENTORY OF STOCK WAS TAKEN . THE GROSS PROFIT UPTO THE DATE OF SURVEY WAS CALCULATED AT 27.75%. ON THAT BASIS THE ALREADY COMPLETED ASSESSMENT FOR ASSESSMENT YEAR 2 001-02 WAS REOPENED U/S 147 BY ISSUANCE OF NOTICE U/S 148 AND THE RE-ASSESSMENT ITA 726/11 :- 2 -: WAS PASSED ON 28.3.2005. THE ASSESSING OFFICER ADO PTED THE GROSS PROFIT RATE AT 27.75% AND DETERMINED THE TAXABLE IN COME OF THE YEAR AT ` 21 05 653/- AS AGAINST THE INCOME RETURNED AT ` 6 15 421/-. THE ASSESSEE HAD ADOPTED GROSS PROFIT RATE AT 16.52%. AGGRIEVED THE ASSESSEE PREFERRED APPEAL AND THE LD. CIT(A) HAS DE LETED THE ENTIRE ADDITION. NOW THE REVENUE IS AGGRIEVED AND HAS RA ISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT (A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THE LD CIT(A) ERRED IN DELETING THE SUM OF ` 14 90 232/- BY RESTRICTING THE G.P IN TO 16.52% AS ADMITTED BY ASSESSEE INSTEAD OF 27.75% ADOPTED BY AO. 2.1. THE LEARNED CIT(A) FAILED TO OBSERVE THAT T HE VARIATION IN GP RATE IS A FACT ADMITTED BY THE ASSESSEE. 2.2 THE LEARNED CIT(A) HAS FAILED TO OBSERVE THA T THE THREE PARTNERS OF THE FIRM HAVE GIVEN LETTER WITH SIGNATU RE OF WITNESS THAT THE CLOSING STOCK WAS ARRIVED AT IN A SEPARATE ROUGH SHEET FAIR STOCK WAS NOT WRITTEN T HE LIST WAS DESTROYED AND DISCLOSED THE CLOSING STOCK BASED ON MEMORY OF PARTNERS. 2.3 THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE A.O HAS CLEARLY MENTIONED IN THE ASSESSMENT ORDER THAT THE BILLS HAD BEEN RECEIVED BEFORE SURVEY AND HAD ALSO BEEN P AID AND THE ASSESSEE HAD NOT INTENTION OF BRINGING THIS STOCK INTO THE BOOKS IF AT ALL BUT FOR THE SURVEY . 2.4 THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE GP RATIO ADOPTED BY THE APPELLANT IN THE RETURN OF INCOME I S IN ORDER WITHOUT CONSIDERING THE OPENING STOCK IS AN ESTIMATED ONE AND IN THE ABSENCE OF STOCK REGISTER AND INVENTORY BOOK THE REAL PHYSICAL STOCK ON THE DAY O F SURVEY WAS CORRECT FIGURE AND THIS WAS AGREED BY TH E PARTNERS IN WRITING ON THE DAY OF SURVEY. 3. THE LEARNED CIT(A) FAILED TO NOTE THAT THE DIFFE RENCE IN STOCK WHICH AFFECTS THE G.P CANNOT BE BRUSHED ASID E BY FIXING PARAMETER ON THE BASIS OF THE EARLIER ORDER OF THE CIT(A). ITA 726/11 :- 3 -: FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE P ERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE FIRM DEALS IN SANITARYWARE. IT IS TRUE THAT DURING SURVEY ON 20. 6.2001 WHEN A TRADING ACCOUNT WAS PREPARED AFTER TAKING INTO ACCO UNT THE PHYSICAL INVENTORY OF STOCK THE GROSS PROFIT RATE WAS WORKE D OUT AT 27.75% AS AGAINST 16.52% RETURNED BY THE ASSESSEE. THIS RESU LTED INTO THE REOPENING OF THE ASSESSMENT. IT WAS NOTICED THAT B EFORE RE- ASSESSMENT PROCEEDINGS THE ASSESSMENT FOR ASSESSM ENT YEAR 200-01 SUFFERED APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A)-IX CHENNAI HAD HELD THAT THE GROSS PROFIT RATE OF THE ASSESSEE BE DETERMINED AT 19.46%. THUS THE LD. CIT(A) IN HIS ORDER HAS OPINED THAT THE CLOSING STOCK OF ASSESSMENT YEAR 2000-01 WILL BECOME THE OP ENING STOCK OF ASSESSMENT YEAR 2001-02 AND THIS WOULD COME TO ` 19 61 687/- AS AGAINST ` 11 83 200/- REPORTED IN THE PROFIT & LOSS ACCOUNT. THE LD. CIT(A) HAS OBSERVED THAT IF THIS RATE OF 19.46% IS ADOPTED THEN THE GROSS PROFIT WILL RISE TO ` 25 83 987/- AND IF CLOSING STOCK OF THE PREVIOUS YEAR ARRIVED AT IN EARLIER YEAR BY USING S TOCK TURNOVER RATIO WHICH BECOMES THE OPENING STOCK OF THE YEAR UNDER A PPEAL IS SUBSTITUTED THE ULTIMATE GROSS PROFIT RATE WILL C OME DOWN BY ` 3 89 445/-[DIFFERENCE IN OPENING STOCK INCREASED PROFIT BY ADOPTING ITA 726/11 :- 4 -: GROSS PROFIT @ 19.46%] AND THIS WILL GIVE A GROSS P ROFIT RATE OF 10.66% WHICH IS FURTHER A DISTORTED FIGURE. ON TH IS BASIS THE LD. CIT(A) HAS ACCEPTED THE GROSS PROFIT DISCLOSED BY T HE ASSESSEE IN ORDER TO SETTLE THE ASSESSMENTS FOR THESE YEARS. APART F ROM THIS WE ARE OF THE OPINION THAT THE GROSS PROFIT RATE COMPUTED AT THE TIME OF SURVEY ON THE BASIS OF PHYSICAL INVENTORY TAKEN ON A PARTI CULAR DATE MAY NOT APPLY FOR THE ENTIRE YEAR AND IF SUCH METHOD IS UNI FORMALLY ADOPTED IT WILL BECOME A NEVER ENDING PROCESS. THE LD. CIT(A) HAS EXTRACTED THE ENTIRE RELEVANT PORTION OF THE LD. CIT(A)S ORDER P ASSED FOR ASSESSMENT YEAR 2000-01 AND THEREAFTER HE HAS GIVEN HIS CLEAR FINDING. THEREFORE IN OUR CONSIDERED OPINION THERE IS NO CHANCE FOR I NTERFERENCE IN THE GROSS PROFIT RATE ONLY ON THE BASIS OF CALCULATION DONE ON A PARTICULAR DATE OF SURVEY. WE THEREFORE CONFIRM THE ORDER O F THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE APPEAL OF THE REVENUE. 4. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3.7.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 19 TH JULY 2011 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR