Shree Gurjari Industries Ltd.,, Surat v. The ACIT.,Range-4,, Surat

ITA 781/AHD/2008 | 2004-2005
Pronouncement Date: 14-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 78120514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 781/AHD/2008
Duration Of Justice 2 year(s) 2 month(s) 14 day(s)
Appellant Shree Gurjari Industries Ltd.,, Surat
Respondent The ACIT.,Range-4,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 14-05-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 05-06-2009
Date Of Final Hearing 06-05-2010
Next Hearing Date 06-05-2010
Assessment Year 2004-2005
Appeal Filed On 29-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI N.S.SAINI ACCOUNTANT MEMBER DATE OF HEARING: 06.05.10 DRAFTED ON:06.05.10 ITA NO.781/AHD/2008 ASSESSMENT YEAR : 2004-2005 SHREE GURJARI INDUSTRIES LTD. A.M.-4 PRESIDENT PLAZA NEAR RTO RING ROAD SURAT. VS. ADDITIONAL COMMISSIONER OF INCOME TAX AYAKAR BHAVAN MAJURA GATE SURAT. PAN/GIR NO. :AAACG8145N (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI M.K.PATEL A.R. RESPONDENT BY: SHRI ANIL KUMAR CIT D.R. O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I SURA T DATED 31.12.2007. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN REJECTING BOOKS OF ACCOUNT U/S. 145(3) OF THE I.T. ACT 1961. - 2 - 3. AT THE TIME OF HEARING THE LEARNED AUTHORISED R EPRESENTATIVE OF THE ASSESSEE DID NOT MAKE ANY SUBMISSION ON THIS GROUND OF APPEAL. THEREFORE THE SAME IS DISMISSED FOR WANT OF PROSEC UTION. 4. GROUND NOS.2 3 AND 5 OF THE APPEAL READS AS UND ER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN MAKING ADDITION OF COMMISS ION OF RS.37 04 960/-. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.52.63 899/- AS CONTRACT INCOME. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN ESTIMATED THE NET PROFIT @ 8% AND MADE THE ADDITION OF RS.47 14 293/- AS BUSINESS INC OME BY REJECTING BOOKS OF ACCOUNT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSE SSEE WAS UNABLE TO PRODUCE ITS BOOKS OF ACCOUNT AND VOUCHERS ETC. BEFO RE THE LEARNED ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEED INGS ON THE GROUND THAT THE SAME WERE DAMAGED OR DESTROYED IN F LOOD. THE LEARNED ASSESSING OFFICER THEREFORE REJECTED THE B OOK RESULT OF THE ASSESSEE. THE LEARNED ASSESSING OFFICER OBSERVED TH AT THE ASSESSEE WAS HAVING THREE DIFFERENT KINDS OF BUSINESS RECEIP TS AND THOSE WERE FROM ITS MANUFACTURING BUSINESS OF CONCRETE PAVERS CONTRACT WORK AND ALSO COMMISSION INCOME. THE LEARNED ASSESSING OFFICER THEREFORE ESTIMATED NET PROFIT OF THE ASSESSEE FRO M MANUFACTURING AND CONTRACT BUSINESS @ 8% OF GROSS RECEIPTS FROM THOSE BUSINESS AND - 3 - ESTIMATED 20% OF COMMISSION RECEIPTS AS INCOME FROM COMMISSION BUSINESS THEREBY THE LEARNED ASSESSING OFFICER EST IMATED ABOVE BUSINESS INCOME FROM MANUFACTURING BUSINESS AT RS.4 7 14 293/- FROM CONTRACT BUSINESS AT RS.52 63 899/- AND FROM C OMMISSION BUSINESS AT RS.37 04 960/-. THUS THE TOTAL BUSINE SS INCOME WAS WORKED OUT AT RS.1 36 83 152/-. 6. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ABOVE ACTION OF THE LEARNED ASSESSING OFFICER. 7. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE FILED A CHART SHOWING THE PERCENTAGE OF NE T PROFIT FROM BUSINESS ACCEPTED BY THE DEPARTMENT IN THE CASE OF THE ASSESSEE IN OTHER ASSESSMENT YEARS AND SUBMITTED THAT THE ESTIM ATE OF THE INCOME DURING THE YEAR UNDER CONSIDERATION WAS WITH OUT ANY BASIS AND UNREASONABLY EXCESSIVE AND THE LOWER AUTHORITIE S HAVE COMPLETELY LOST CITE OF THE VOLUME OF THE ASSESSEE S BUSINESS AND PAST ACCEPTED POSITION IN ESTIMATING THE RATE OF NET PRO FIT. HE SUBMITTED THAT NET PROFIT RATE BE ESTIMATED IN LINE WITH THE NET PROFIT ACCEPTED BY THE DEPARTMENT IN THE CASE OF THE ASSESSEE IN OTHER ASSESSMENT YEARS. HE ALSO SUBMITTED THAT THE NET PROFIT RATE DECLARED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION BEING 3.56% AND THE SAME IS MORE THAN THE RATE OF NET PROFIT ACCEPTED IN OTHER YEARS THE REVENUE SHOULD HAVE ACCEPTED THE NET PROFIT AS DISCLOSED BY THE ASSESSEE. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. - 4 - 9. WE FIND THAT THE REJECTION OF BOOK RESULT WAS NO T DISPUTED BEFORE US. THE ONLY DISPUTE BEFORE US IS ABOUT THE ESTIMATION OF RATE OF NET PROFIT AFTER REJECTING OF BOOK RESULT. WE FI ND FROM THE CHART FILED BY THE ASSESSEE WHICH WAS NOT CONTROVERTED OR DISPUTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE RATE O F NET PROFIT ACCEPTED IN THE CASE OF THE ASSESSEE IN OTHER ASSES SMENT YEARS WERE AS UNDER:- ASSESSMENT YEAR PERCENTAGE OF NET PROFIT 2002-03 2.44 2003-04 1.80 2004-05 3.56 (UNDER APPEAL) 2005-06 0.80 IN OUR CONSIDERED VIEW AFTER REJECTING THE BOOK RE SULT THE REVENUE SHOULD ESTIMATE NET PROFIT OF THE ASSESSEE ON THE B ASIS OF SOME RELEVANT MATERIAL AFTER KEEPING IN MIND ALL THE FAC TS AND CIRCUMSTANCES OF THE CASE. IN OUR CONSIDERED OPINIO N IF THERE IS NO MATERIAL TO SHOW CHANGE IN THE NATURE OF THE BUSINE SS AND MARKET CONDITION OR OTHER RELEVANT FACTS THEN THE PAST AC CEPTED PROFIT IN THE CASE OF THE ASSESSEE ITSELF PROVIDE A USEFUL GUIDAN CE FOR ESTIMATING THE PROFIT. IT MUST BE KEPT IN MIND THAT THE POWER TO E STIMATE THE PROFIT IS TO BE EXERCISED IN ORDER TO ESTIMATE TO THE EXTENT POSSIBLE REAL INCOME OF THE ASSESSEE AND IT SHOULD NOT BE GUIDED WITH A MOTIVE TO PUNISH OR PENALIZE THE ASSESSEE FOR NOT BEING ABLE TO MAINTAI N PROPER BOOKS OF ACCOUNT. 10. IN THE INSTANT CASE ON VERIFICATION OF THE CHA RT PROVIDED BY THE ASSESSEE WE FIND THAT MAXIMUM RATE OF NET PROFIT ACCEPTED BY THE DEPARTMENT WAS IN THE ASSESSMENT YEAR 2002-03 WHICH WAS 2.44%. - 5 - HOWEVER IT IS OBSERVED THAT AS PER THE CHART THER E WAS NO COMMISSION INCOME EARNED BY THE ASSESSEE IN THAT AS SESSMENT YEAR WHICH IS A RECEIPT DURING THE YEAR UNDER CONSIDERAT ION. THE ASSESSEE STATED THAT HE HAS DISCLOSED NET PROFIT @ 3.56% KEE PING IN VIEW THE ABOVE IN OUR CONSIDERED OPINION IT SHALL BE JUST AND FAIR TO ESTIMATE NET PROFIT FROM MANUFACTURING BUSINESS AND CONTRACT BUSINESS @ 4% OF THE GROSS RECEIPTS OF THE SAID BUSINESS. FURTHER IN RESPECT OF COMMISSION BUSINESS IN OUR CONSIDERED OPINION ENDS OF JUSTICE SHALL BE MET ON ESTIMATING NET PROFIT FROM THE SAID BUSIN ESS @ 10% OF THE GROSS RECEIPTS OF THAT BUSINESS. WE THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE AND DIRECT THE LEARNED ASSESSING OFFICER TO RECOMPUTE THE BUSINESS INCOME OF THE ASS ESSEE IN LIGHT OF THE OBSERVATIONS MADE HEREINABOVE. THUS THE GROUN DS OF APPEAL OF THE ASSESSEE ARE PARTLY ALLOWED. 11. GROUND NOS.4 AND 6 OF THE APPEAL READS AS UNDER :- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN MAKING ADDITION OF RS.1 23 660/- ON ACCOUNT OF DIVIDEND AND INTEREST. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AS WELL AS LAW ON THE SUBJECT THE LEARNED COMMISSIONER OF THE INCOME TAX (APPEALS) HAS ERRED CONFIRMING THE ACTIO N OF THE ASSESSING OFFICER IN DISALLOWING LOSS ARISING F ROM SHARES OF RS.10 06 660/-. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED TO HAVE SUFFERED LOSS FROM SHA RE TRADING TRANSACTIONS AT RS.10 06 600/- AND HAS DECLARED DIV IDEND AND INTEREST - 6 - INCOME OF RS.1 23 660/-. THE LEARNED ASSESSING OFFI CER ON VERIFICATION FOUND THAT THE SHARE TRANSACTION COULD NOT BE ESTABLISHED AND THE SAME WERE NOT GENUINE. HE THEREFORE TREATED THE DIVIDEND AND INTEREST INCOME OF RS.1 06 660/-AS INCOME FROM OTHE R SOURCES AND SHARE LOSS OF RS.10 06 600/- AS INCORRECT. HOWEVER IN THE COMPUTATION OF INCOME HE HAD ADDED RS.10 06 600/- TO THE INCOME OF THE ASSESSEE AS IF THE ASSESSEE HAS EARNED INCOME O F RS.10 06 600/- FROM SHARE TRANSACTIONS OR IN ESTIMATING BUSINESS I NCOME DEDUCTION OF RS.10 06 600/- WAS ALLOWED TO THE ASSESSEE. 13. ON APPEAL LEARNED COMMISSIONER OF INCOME TAX(A PPEALS) CONFIRMED THE ABOVE ACTION OF THE LEARNED ASSESSING OFFICER. 14. THE ONLY SUBMISSION OF THE LEARNED AUTHORISED R EPRESENTATIVE OF THE ASSESSEE WAS THAT AS BUSINESS INCOME WAS EST IMATED AT A HIGHER FIGURE BENEFIT OF TELESCOPING MAY KINDLY BE ALLOWED TO THE ASSESSEE IN RESPECT OF LOSS ON SALE OF SHARES OF RS.10 06 600/- . HOWEVER THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE C OULD NOT EXPLAIN HOW THE BENEFIT OF TELESCOPING IN RESPECT OF SHARE LOSS CAN BE ALLOWED AGAINST THE BUSINESS INCOME. IT IS NOT A CASE WHER E THE MONEY WAS UTILISED AFTER EARNING OF INCOME SO THAT THE BENEFI T OF INVESTMENT FROM ADDITION MADE ON ACCOUNT OF INCREASE IN INCOME CAN BE ALLOWED BY WAY OF TELESCOPING OF SUCH SUBSEQUENT INVESTMENT OR DEPOSIT FROM EARLIER ENHANCED INCOME. THE LEARNED DEPARTMENTAL R EPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES BUT C OULD NOT EXPLAIN THE REASON FOR WHICH THE RS.10.06.600/- WAS ADDED TO TH E INCOME OF THE ASSESSEE AFTER FINDING THAT LOSS OF RS.10 06 600/- CLAIMED BY THE ASSESSEE WAS NOT CORRECT. WE FIND THAT THE INCOME O F THE ASSESSEE WAS - 7 - NOT COMPUTED BY TAKING NET PROFIT FIGURE AS PER PRO FIT AND LOSS ACCOUNT OF THE ASSESSEE. ON THE OTHER HAND THE LEARNED ASS ESSING OFFICER ESTIMATED THE NET BUSINESS INCOME FROM THREE BUSINE SSES CARRIED ON BY THE ASSESSEE. THUS WE FIND THAT DEDUCTION IN R ESPECT OF LOSS ON SALE OF SHARE OF RS.10 06 600/- AS CLAIMED BY THE A SSESSEE WAS NOT CONSIDERED IN ESTIMATING NET BUSINESS INCOME OF THE ASSESSEE THEREFORE IN OUR CONSIDERED OPINION IN VIEW OF TH E FINDING OF THE LOWER AUTHORITIES THAT LOSS OF RS.10 06 600/- FROM SHARE TRANSACTION AS CLAIMED BY THE ASSESSEE WAS NOT CORRECT THEY SHOUL D HAVE NOT ALLOWED ANY DEDUCTION FOR SUCH CLAIM OF LOSS BUT TH IS FINDING DOES NOT AUTHORIZE THEM TO INCREASE THE INCOME OF THE ASSESS EE BY THIS AMOUNT OF RS.10 06 600/-. 15. IN RESPECT OF RS.1 23 660/- TREATED BY THE LEAR NED ASSESSING OFFICER AS INCOME FROM OTHER SOURCES THE LEARNED A UTHORISED REPRESENTATIVE OF THE ASSESSEE HAS MADE THE ONLY SU BMISSION THAT THE DIVIDEND INCOME SHOULD HAVE BEEN TREATED BY THE LOW ER AUTHORITIES AS BUSINESS INCOME AND NOT INCOME FROM OTHER SOURCES. AS WE FIND THAT THE FINDING OF THE LOWER AUTHORITIES TO THE EFFECT THAT ASSESSEE COULD NOT SUBSTANTIATE ITS ACQUISITION OF SHARES AND THIS FINDING BEING NOT CONTROVERTED BY THE ASSESSEE WE DO NOT FIND ANY GO OD REASON TO INTERFERE WITH THE ABOVE TREATMENT OF CLAIM OF DIVI DEND INCOME GIVEN BY THE LOWER AUTHORITIES. AS THE ASSESSEE HAS CLAIM ED A RECEIPT OF RS.1 23 660/- AND COULD NOT ESTABLISHED ITS SOURCE THE ACTION OF THE LOWER AUTHORITIES TO TREAT SUCH SOURCES AS OTHER SO URCES COULD NOT BE SAID TO BE ERRONEOUS. THUS WE DELETE THE ADDITION OF RS.10 06 600/- MADE TO THE TOTAL INCOME OF THE ASSESSEE AND CONFIR M THE ADDITION OF - 8 - RS.1 23 600/-. THUS GROUND NO.4 OF THE APPEAL OF T HE ASSESSEE IS DISMISSED AND GROUND NO.6 OF THE APPEAL OF THE ASSE SSEE IS ALLOWED. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 14 TH DAY OF MAY 2010. SD/- SD/- (BHAVNESH SAINI) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 14 TH DAY OF MAY 2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-I SURAT. 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 06.05.2010 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 11.05.2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 11.05.2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 11.05.2010 ---------- --------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 12.05.2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 14.05.2010 ---------- ---------- 7. FILE SENT TO THE BENCH CLERK 14.05.2010 ------ -------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- -- -------------------