The DCIT, Circle-2(2),, Baroda v. M/s. Shanpur Industries, Baroda

ITA 864/AHD/2009 | 2005-2006
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 86420514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 864/AHD/2009
Duration Of Justice 2 year(s) 4 month(s) 3 day(s)
Appellant The DCIT, Circle-2(2),, Baroda
Respondent M/s. Shanpur Industries, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 22-07-2011
Date Of Final Hearing 18-07-2011
Next Hearing Date 18-07-2011
Assessment Year 2005-2006
Appeal Filed On 19-03-2009
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI JM AND A. MOHAN ALANK AMONY AM DY. CIT CIR.2(2) BARODA. VS. M/S SHANPAR INDUSTRI ES 303/5 GIDC MAKARPURA BARODA-10. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI P. R. GHOSH DR RESPONDENT BY:- NONE O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE AGGRIEVED B Y THE ORDER OF THE LD.CIT(A)-II BARODA IN APPEAL NO. CAB/II-447/07 -08 DATED 19/12/2008 RAISING THE FOLLOWING GROUNDS:- (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN GRANTING RELIEF OF RS.25 13 098 /- OUT OF THE TOTAL ADDITION OF RS.27 72 765/- MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT 1 961. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) ERRED IN ESTIMATING THE PROFIT FROM PURC HASE OF RS.830 934/- AT 31.25% I.E. RS.2 59 667/- AND CONFI RMED THE ADDITION TO THIS EXTENT AND GRANTED RELIEF OF RS.25 13 098/-. (3) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER THE A BOVE GROUNDS AS MAY BE DEEMED NECESSARY. ITA NO.864/AHD/2009 ASST. YEAR 2005-06 ITA NO.864/AHD/2009 ASST. YEAR 2005-06 2 2. NONE APPEARED ON BEHALF OF THE ASSESSEE HO WEVER THE LD. DR WAS PRESENT. SINCE THE ISSUE INVOLVED WAS SIMPLE WE DEC IDED TO PROCEED WITH THE CASE FOR ADJUDICATION ON MERITS BASED ON THE MA TERIALS BEFORE US. THE FIRST TWO GROUNDS OF THE REVENUE ARE BEING CONSIDER ED HEREIN BELOW WHILE AS GROUND NO. THREE IS GENERAL IN NATURE AND DOES N OT SURVIVE FOR ADJUDICATION. 3. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF FINE CHEMICALS. THE ASSESSEE FILED RETURN OF INCOME ON 27.10.2005 DECLARING TOTAL INCOME AT RS.67 83 630/-. THE ASSES SEE ALSO FURNISHED TAX AUDIT REPORT U/S 44AB ACCOMPANIED WITH BALANCE SHEE T AND PROFIT AND LOSS ACCOUNT IN RESPECT OF FY UNDER REVIEW. THE ASS ESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 28.12.2007 BY MAKING CERTAIN ADDITIONS LIKE DISALLOWANCE OF TELEPHONE EXPENSES TO THE EXTENT OF RS.25 000/- 1/5 TH OF VEHICLE EXPENSES AMOUNT TO RS.14 780/- 1/10 TH OF TRAVELING EXPENSES AMOUNTING TO RS.22 650/- ETC. TH E AO ALSO MADE AN ADDITION OF RS.27 72 765/- DUE TO FALL IN GP AND CO UPLED WITH NON- MAINTENANCE OF RECORD OF STOCK OR PRODUCTION IN RES PECT OF NON-EXCISABLE GOODS BY INVOKING PROVISIONS OF SECTION 145(3) OF T HE ACT. AND ADDITION OF RS.1 85 950/- U/S 68. 4. THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A ) WHO AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND THE ASS ESSMENT ORDER CONFIRMED THE DISALLOWANCE OF TELEPHONE AND TRAVELI NG EXPENSES. AS REGARDS THE DISALLOWANCE REGARDING VEHICLE EXPENSES IT WAS CONSIDERED FAIR TO DISALLOW 1/10 TH OF THE EXPENSES AND ACCORDINGLY DIRECTED THE AO. WITH RESPECT TO THE ADDITIONS U/S. 68 OF THE ACT. THE LD.CIT(A) DELETED THE ADDITION. ITA NO.864/AHD/2009 ASST. YEAR 2005-06 3 5.1 AS REGARDS THE ADDITION OF RS.27 72 765/- IT WA S SUBMITTED BY THE LD. AR BEFORE THE LD. CIT(A) THAT ASSESSEE HAS BEEN MAINTAINING BOOKS OF ACCOUNTS REGULARLY WHICH ARE SUBJECT TO AUDIT INSPE CTION BY VARIOUS AUTHORITIES. ALL THE RECORDS UNDER THE EXCISE LAW A RE MAINTAINED AND NECESSARY AUDIT OF PRODUCTION IS REGULARLY CONDUCTE D BY THE EXCISE DEPARTMENT. BOOKS OF ACCOUNTS ARE SUPPORTED BY NECE SSARY BILLS AND EVIDENCES. THE LD. AR ALSO SUBMITTED THAT THE MAIN REASON FOR DECREASE IN GP WAS THE COST OF RAW MATERIAL HAD INCREASED SUBST ANTIALLY IN THE CURRENT YEAR. THE COST OF RAW MATERIAL FOR AY 2004-05 WAS 4 2.87% WHILE FOR AY 2005-06 IT HAD INCREASED TO 47.42%. THE LD. AR IN THIS REGARD SUBMITTED FOLLOWING CHART SHOWING THE TURNOVER/GROSS PROFIT A ND GP RATIO AS UNDER:- SL.NO. ASSESSMENT YEAR TURNOVER (RS.) GROSS PROFIT (RS.) G.P. RATIO (%) 1. 2005-06 5 54 55 381/- 1 73 30 224/- 31.25 2 2004-05 4 57 14 353/- 1 55 77 656/- 34.07 3 2003-04 4 05 05 505/- 94 72 332/- 23.39 4 2002-03 4 02 06 852/- 78 66 344/- 19.56 5. 2001-02 3 41 85 312/- 50 35 603/- 14.73 THE LD. AR ALSO SUBMITTED THAT TO BRING ABOUT AN IN CREASE IN TURNOVER FROM 4.57 CRORE IN AY 2004-05 TO 5.54 CRORE IN AY 2 005-06 PRICES HAVE BEEN DECREASED TO ENSURE SALES IN AN EXTREMELY COMP ETITIVE MARKET. THE ASSESSEE FURTHER SUBMITTED THAT IN THE YEAR UNDER C ONSIDERATION THE TOTAL PURCHASE OF RAW MATERIAL WAS OF RS.2 46 63 975/-. A GAINST THIS PURCHASE ON WHICH MODVAT CREDIT HAS BEEN AVAILED AMOUNTS TO RS.2 38 33 041/-. THE PURCHASE FROM TRADERS WAS OF RS.8 30 934/- ONLY I.E. 3.37% OF THE TOTAL PURCHASE. THEREFORE FOR RAW MATERIALS VALUED AT RS.8 30 934/- STOCK REGISTER HAS NOT BEEN MAINTAINED. THERE WAS NO REQU IREMENT UNDER THE ITA NO.864/AHD/2009 ASST. YEAR 2005-06 4 EXCISE LAW TO DO SO. THE BOOKS OF ACCOUNTS HAVE BEE N AUDITED. NO DEFECT HAS BEEN POINTED OUT BY THE AO. 5.2 THE LD. CIT(A) CONSIDERED THE SUBMISSIONS OF LD . AR AND THE CONTENTIONS RAISED IN THE ASSESSMENT ORDER. THE LD. CIT(A) OBSERVED THAT THE COMPARISON OF THE GP OF LAST 5 YEARS REVEALS TH AT THE CURRENT YEARS GROSS PROFIT IS FAVORABLE. THE AVERAGE OF GROSS PRO FIT FROM ASSESSMENT YEAR 2001-02 TO 2004-05 WORKS OUT TO 22.93%. AGAINS T THIS THE CURRENT YEARS GROSS PROFIT HAS BEEN DECLARED AT 31.25%. ME RELY BECAUSE THE GP DECLARED LAST YEAR WAS 34.07% CANNOT LEAD TO THE CO NCLUSION THAT THE BOOKS OF ACCOUNTS ARE NOT CORRECT AND DESERVE TO BE REJECTED. NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO WITH REGARD TO ANY DISCREPANCY IN PURCHASE PRICE SALE PRICE OR THE VALUATION OF STOC K. HENCE INCREASING THE GP BY 5% CANNOT BE JUSTIFIED. THE PRODUCTS MANUFACT URED BY THE ASSESSEE ARE SUBJECT TO EXCISE DUTY FOR WHICH RECORDS ARE MA INTAINED AND AUDITED. THE ONLY DISCREPANCY LIES IN NON-MAINTENANCE OF REC ORDS ON PURCHASE FROM TRADERS AMOUNTING TO RS.8 30 934/-. HOWEVER N OTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THESE PURCHASES HAVE NOT BEEN USED IN MANUFACTURING OF PRODUCTS WHICH HAVE BEEN SOLD IN T HE REGULAR CAUSE OF BUSINESS AND PROFITS HAVE BEEN BOOKED. HOWEVER TO ENSURE THAT THERE IS NO LEAKAGE OF REVENUE IT WOULD BE FAIR TO ESTIMATE THE PROFITS FROM PURCHASE OF RS.8 30 934/- AT 31.25% I.E. RS.2 59 66 7/-. HENCE THE APPELLANT GETS RELIEF OF RS.25 13 098/-. THE BALANC E IS CONFIRMED. AGAINST THIS OBSERVATION OF LD. CIT(A) THE REVENUE IS AGGRI EVED AND HAS COME IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE LD.DR AND PERUSED OVER THE MAT ERIALS ON RECORD. THE FACTS OF THE CASE REVEAL THAT THE LD.CI T(A) HAS ANALYSED THE ISSUE IN DETAIL AND CAME TO A FINDING THAT THE ASSE SSEE HAS PURCHASES FOR ITA NO.864/AHD/2009 ASST. YEAR 2005-06 5 ONLY RS. 8 30 934/- FOR WHICH THE RECORDS ARE NOT M AINTAINED. THEREAFTER THE LD.CIT(A) HAS APPLIED THE CURRENT GP RATIO FOR THE PURCHASES AT 31.25% AND SUSTAINED AN ADDITION OF RS. 2 59 667/- THUS GRANTED RELIEF FOR RS.25 13 098/-. IN OUR OPINION THE LD.CIT(A) HA D A VERY REASONED APPROACH ON THE ISSUE. ON THE OTHER HAND THE LD.AO S FINDING ON THE ISSUE WAS THAT THE APPELLANTS PROFIT AND LOSS ACCO UNT SHOWED FALL IN GP AND FURTHER THE APPELLANT HAD NOT MAINTAINED STOCK OR PRODUCTION RECORD IN RESPECT OF NON-EXCISABLE GOODS BY INVOKING PROVISIO NS OF SECTION 145(3) OF THE ACT AND THEREBY MADE A WHOOPING ADDITION FOR RS. 27 72 765/- BY INCREASING THE OVERALL GP RATE TO 5% WHICH IS EXCE SSIVE AND NOT REASONABLE. WITH OUR ABOVE VIEW WE HAVE NO HESITATI ON TO CONFIRM THE ORDER OF THE LD.CIT(A) ON THIS COUNT. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 22/7/11. SD/- SD/- (BHAVNESH SAINI) (A. MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 22/7/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD ITA NO.864/AHD/2009 ASST. YEAR 2005-06 6 1.DATE OF DICTATION 18/7/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 18/7/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..