ACIT, Salem v. Sri M.Chinnusamy, Erode

ITA 762/CHNY/2010 | 2001-2002
Pronouncement Date: 04-08-2010 | Result: Dismissed

Appeal Details

RSA Number 76221714 RSA 2010
Assessee PAN AERPC1719F
Bench Chennai
Appeal Number ITA 762/CHNY/2010
Duration Of Justice 2 month(s) 15 day(s)
Appellant ACIT, Salem
Respondent Sri M.Chinnusamy, Erode
Appeal Type Income Tax Appeal
Pronouncement Date 04-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 04-08-2010
Date Of Final Hearing 04-08-2010
Next Hearing Date 04-08-2010
Assessment Year 2001-2002
Appeal Filed On 20-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A BEFORE SHRI PRADEEP PARIKH VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER I.T.A. NOS. 624 TO 630/MDS/2010 ASSESSMENT YEARS : 2001-02 TO 2007-08 M. CHINNUSAMY 6/990 KALINGARAYANPALAYAM BHAVANI 638 301. PAN AERPC 1719 F VS. THE ASST. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE SALEM. (APPELLANT) (RESPONDENT) I.T.A. NOS. 762 TO 768/MDS/2010 ASSESSMENT YEARS : 2001-02 TO 2007-08 THE ASST. COMMISSIONER OF INCOME-TAX SALEM. VS. M. CHINNUSAMY BHAVANI 638 301. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. SRIDHAR & SHRI S.RAGHURAMAN DEPARTMENT BY : SHRI SHAJI P. JACOB O R D E R PER BENCH THESE CROSS APPEALS ARE DIRECTED AGAINST THE COMBIN ED ORDER OF THE LD. CIT(A) DATED 26.2.2010 FOR ASSESSM ENT YEARS 2001-02 TO 2007-08. AS COMMON ISSUES ARE INVOLVED I N ALL THE APPEALS THEY ARE BEING DISPOSED OF TOGETHER BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA 624 625 626 ETC./10 2. THE ASSESSEE INDIVIDUAL IS IN THE BUSINESS OF MANUFACTURING BRICKS RUNNING LORRIES AND TRADING I N TYRES. THERE WAS A SEARCH UNDER SEC.132 OF THE ACT THE INC OME-TAX ACT 1961 (THE ACT) AT THE ASSESSEES PREMISES ON 2 7.9.2006. NOTICES UNDER SEC.153A AND 142(1) WERE ISSUED IN RE SPONSE TO WHICH RETURNS WERE FILED AND THE PRESENT ASSESSM ENTS ARE COMPLETED UNDER SEC.143(3) ON THE BASIS OF THE SAID RETURNS. 3. FIRST COMMON GROUND IN THE ASSESSEES APPEALS IS AGAINST SUSTAINING THE NET PROFIT ON SALE OF BRICKS AT 8%. IN ITS CROSS APPEALS THE DEPARTMENT HAS ALSO RAISED A GROUND FOR ADOPTING THE NET PROFIT RATE OF 8% AS AGAINST 2 5% DETERMINED BY THE ASSESSING OFFICER. 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE SEIZED MA TERIAL REVEALED SUPPRESSION OF SALE OF BRICKS TO A LARGE E XTENT. FURTHER ON THE BASIS OF THE SEIZED MATERIAL THE A SSESSING OFFICER DETERMINED THE COST AND THE SALE VALUE OF E ACH BRICK AND CONCLUDED THAT ADOPTION OF NET PROFIT AT 25% WA S REASONABLE. ADDITIONS WERE MADE ACCORDINGLY IN THE YEARS UNDER CONSIDERATION. THE CIT(A) AFTER CONSIDERING THE DECISIONS OF VARIOUS COURTS AND THE BENCHES OF THE TRIBUNAL CONCLUDED THAT IN BRICK MANUFACTURING BUSINESS THE NET PROFIT IS AROUND 8 TO 10%. ACCORDINGLY HE DIRECTED THE AS SESSING OFFICER TO ADOPT 8% NET PROFIT RATE. 5. THE CONTENTION OF THE LD. COUNSEL WAS THAT THE R ATE OF 8% WAS TOO HIGH AND A REASONABLE RATE BE ADOPTED. THE LD. D.R. WAS OF THE VIEW THAT THE NET PROFIT SHOWN BY T HE ASSESSEE AT 3% WAS TOO LOW AND THAT THE RATE OF 8% ADOPTED 3 ITA 624 625 626 ETC./10 BY THE CIT(A) WAS ALSO QUITE LOW. HE TOO PLEADED FO R THE ADOPTION OF A REASONABLE RATE OF NET PROFIT. 6. THE RATE OF 25% TAKEN BY THE ASSESSING OFFICER I S UNDOUBTEDLY VERY HIGH. AT THE SAME TIME THE RATE O F 3% DECLARED BY THE ASSESSEE IS RIDICULOUSLY LOW. OF CO URSE THE CIT(A) DID CONSIDER THE REASONABILITY TO SOME EXTEN T. HOWEVER WHILE DETERMINING THE RATE AT 8% HE DID N OT CONSIDER CERTAIN FACTORS LIKE PARTIALLY SEASONAL NA TURE OF THE BUSINESS SLUMP IN CONSTRUCTION ACTIVITY ON ACCOUNT OF VARIOUS FACTORS AND SO ON. THEREFORE CONSIDERING ALL THESE ASPECTS IN OUR VIEW IT WOULD BE REASONABLE TO ADOPT THE NET P ROFIT RATE OF 5%. WE DIRECT ACCORDINGLY. 7. SECOND GROUND IN THE ASSESSEES APPEALS IS AGAIN ST ALLOWING WASTAGE OF 20% AS AGAINST 30% CLAIMED BY T HE ASSESSEE. IN ITS CROSS APPEALS THE DEPARTMENT IS A LSO AGGRIEVED AGAINST THE ALLOWANCE OF WASTAGE OF 20% A S AGAINST 3% ALLOWED BY THE ASSESSING OFFICER. THE AS SESSING OFFICER ADOPTED 3% RATE ON THE GROUND THAT AS PER T HE SEIZED DOCUMENT ALMOST ALL BRICKS MANUFACTURED WERE SOLD AND THERE WAS HARDLY ANY WASTAGE. THE CIT(A) ADOPTED 20 % RATE NOT ONLY ON THE BASIS OF VARIOUS DECISIONS BUT ALSO RELIED ON THE CERTIFICATE FROM THE BRICK MANUFACTURES ASSOCIA TION ACCORDING TO WHICH THE NORMAL WASTAGE WAS 20 TO 30% . 8. THE LD. COUNSEL PLEADED FOR THE WASTAGE AT 30% W HICH ACCORDING TO HIM WAS REASONABLE. ON THE OTHER HAND ACCORDING TO THE LD. D.R. IF THE NET PROFIT RATE I S TO BE ADOPTED AT 8% OR 5% NO FURTHER RELIEF SHOULD BE GI VEN ON ACCOUNT OF WASTAGE. 4 ITA 624 625 626 ETC./10 9. IN OUR OPINION BESIDES WEATHER CONDITIONS THE RATE OF REJECTION ALSO AFFECTS THE PERCENTAGE OF WASTAGE. C ONSIDERING THE FACT THAT WE HAVE GRANTED RELIEF TO THE ASSESSE E SO FAR AS THE NET PROFIT RATE IS CONCERNED ANY FURTHER RELIE F IN THE RATE OF WASTAGE WOULD BE QUITE UNREASONABLE. IN OUR VIEW THE CIT(A) HAS BEEN REASONABLE BY ADOPTING THE RATE OF 20% ON THE BASIS OF THE CERTIFICATE OF THE ASSOCIATION. WE DO NOT DISTURB THE SAME. 10. THERE IS ONE MORE ISSUE WHICH IS RELEVANT ONLY FOR ASSESSMENT YEAR 2001-02. THIS RELATES TO THE ADDITI ON OF ` 27 70 282/- MADE UNDER SEC.68 OF THE ACT. IT WAS OB SERVED BY THE ASSESSING OFFICER THAT IN THE RETURN FILED I N RESPONSE TO NOTICE UNDER SEC.153A THE ASSESSEE HAD BROUGHT FORWARD THE FOLLOWING BALANCES TO HIS CAPITAL ACCOUNT AS ON 1.4.2000: A) CASH BALANCE ` 4 15 696/- B) FIXED DEPOSITS ` 19 70 795/- C) BALANCE IN SB ACCOUNT ` 3 83 791/- TOTAL ` 27 70 282/- IT WAS STATED BY THE ASSESSEE THAT THE ABOVE BALANC ES WERE IN THE NAMES OF HIS FAMILY MEMBERS PERTAINING TO DI FFERENT YEARS PRIOR TO 1.4.2000 AND THAT THEY WERE EARNED O UT OF UNACCOUNTED INCOME PRIOR TO THE SAID DATE. THE ASSE SSING OFFICER ADDED THE ENTIRE AMOUNT ON THE GROUND THAT THE SAID INCOME HAD NOT SUFFERED TAX IN THE PRIOR YEARS. TH E CIT(A) CONFIRMED THE ADDITION WITHOUT GIVING ANY REASON. 11. THE CONTENTION OF THE LD. COUNSEL WAS THAT ADMI TTEDLY THE ABOVE BALANCES FORMED PART OF THE INCOME FOR TH E YEARS PRIOR TO THE YEARS UNDER CONSIDERATION. THEREFORE THE SAME 5 ITA 624 625 626 ETC./10 CANNOT BE TAXED IN THESE YEARS. HE RELIED ON THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT V. S ATYENDRA KUMAR DOSI (315 ITR 172). THE CONTENTION OF THE LD. D.R. WAS THAT SO FAR AS CASH BALANCE IS CONCERNED THERE IS NO EVIDENCE TO SHOW THAT THE SAME PERTAIN TO EARLIER Y EARS. IT COULD HAVE BEEN GENERATED OUT OF THE INCOME OF THE YEARS UNDER CONSIDERATION. HE RELIED ON THE JUDGMENT OF T HE MADRAS HIGH COURT IN THE CASE OF C. PACKIRISAMY V. ACIT (315 ITR 293). AGAINST THIS CONTENTION OF THE LD. D.R. THE RESPONSE OF THE LD. COUNSEL WAS THAT CASH FLOW STAT EMENT WAS FURNISHED AT THE TIME OF THE ASSESSMENT PROCEEDINGS AND NO DISCREPANCY WAS FOUND BY THE ASSESSING OFFICER. THE REFORE THE DECISION OF THE MADRAS HIGH COURT WILL NOT APPL Y. 12. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND THE MATERIAL ON RECORD. THE JUDGMENTS CITED BY BOTH THE SIDES ARE APPROPRIATE FOR THE FACTS OF THOSE CASES. NEITH ER OF THEM CAN DIRECTLY HELP THE RESPECTIVE PARTIES. IN THE PR ESENT CASE IT IS NOT REBUTTED BY THE DEPARTMENT THAT CASH FLOW STATEMENT WAS FURNISHED BY THE ASSESSEE IN THE COURSE OF ASSE SSMENT PROCEEDINGS. NOTHING IS MENTIONED ABOUT IT IN THE ASSESSMENT ORDER BUT MORE IMPORTANTLY NOTHING ADVE RSE HAS BEEN COMMENTED UPON BY THE ASSESSING OFFICER. FURTH ER THE ASSESSING OFFICER HAS ADDED THE TOTAL SUM ONLY BECA USE THEY WERE NOT TAXED IN THE EARLIER YEARS. BY SAYING SO THE ASSESSING OFFICER INDIRECTLY ADMITS THAT EVEN THE O PENING CASH BALANCE PERTAINS TO THE EARLIER YEARS. THEREFO RE LEAVE ASIDE FIXED DEPOSITS AND BANK BALANCE IN ALL PROBA BILITY EVEN THE CASH BALANCE SEEMS TO BE PERTAINING TO THE EARL IER YEARS. ACCORDINGLY WE DO NOT SEE ANY JUSTIFICATION TO SUS TAIN THE ADDITION OF THE ENTIRE SUM OF ` 27 70 282/-. WE DELETE THE SAME. 6 ITA 624 625 626 ETC./10 13. IN THE RESULT ALL THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND ALL THE APPEALS OF THE DEPARTMENT ARE D ISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 4-8-2010. SD/- SD/- (HARI OM MARATHA) JUDICIAL MEMBER (PRADEEP PARIKH) VICE-PRESIDENT CHENNAI DATED THE 4 TH AUGUST 2010 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR