First Vac Met Corporation Pvt.Ltd.,, Surat v. The Income tax Officer,Ward-1(2),, Surat

ITA 864/AHD/2010 | 2007-2008
Pronouncement Date: 09-07-2010 | Result: Allowed

Appeal Details

RSA Number 86420514 RSA 2010
Bench Ahmedabad
Appeal Number ITA 864/AHD/2010
Duration Of Justice 3 month(s) 17 day(s)
Appellant First Vac Met Corporation Pvt.Ltd.,, Surat
Respondent The Income tax Officer,Ward-1(2),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 09-07-2010
Date Of Final Hearing 02-07-2010
Next Hearing Date 02-07-2010
Assessment Year 2007-2008
Appeal Filed On 23-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD A BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND MUKUL SHRAWAT JUDICIAL MEMBER) ITA.NO.864/AHD/2010 ASSTT.YEAR : 2007-2008 FIRST VAC MET CORPORATION PVT. LTD. CENTRAL ROAD NO.3 UDHNA UDYOGNAGAR UDHNA SURAT 394 210. VS. ITO WARD-1(2) SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.S.TALATI REVENUE BY : SHRI SAMIR TEKRIWAL O R D E R PER G.D. AGARWAL VICE-PRESIDENT: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT(A)-I SURAT DATED 28.0 1.2010 FOR A.Y.2007-2008 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER P ASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. GROUND NO.1 OF THE ASSESSEES APPEAL BEING GENER AL IN NATURE NEEDS NO ADJUDICATION. GROUND NO.2 OF THE APPEAL READS AS U NDER: 2. THAT THE LD.CIT(A) ERRED IN CONFIRMING RS.1 40 991/- I.E. 50% OF THE TOTAL ADDITION OF RS.2 81 982/- MADE BY THE AO ON ACCOUNT OF LOW GP RATE. THE ENTIRE ADDITION NEEDS TO BE DELETED AS I T WAS MADE WITHOUT SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS ARBITRAR ILY AND ON AD HOC BASIS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND JOB WORK OF METALISED/LACQUERED P OLYESTER PLASTIC FILMS AND METALLIC YARN. DURING THE ACCOUNTING YEAR RELEVAN T TO THE ASSESSMENT YEAR UNDER CONSIDERATION THERE WAS FALL IN THE GP. THE AO REJECTED THE BOOKS OF ACCOUNTS ON THE GROUND THAT THE ASSESSEE HAS NOT MA INTAINED THE REGISTER ON DAY- TO-DAY CONSUMPTION OF COLOUR AND CHEMICALS. HE THER EFORE REJECTED THE BOOKS OF ITA.NO.864/AHD/2010 -2- ACCOUNTS AND APPLIED GP RATE OF 8.66% WHICH RESULTE D IN ADDITION OF RS.2 81 982/-. ON APPEAL THE CIT(A) HELD THAT DEF ECTS IN THE BOOKS OF ACCOUNTS WERE NOT SUCH AS TO JUSTIFY THE REJECTION OF ACCOUNTS. HOWEVER HE WAS OF THE OPINION THAT THE FALL IN GP WAS SUBSTANTIAL FOR WHICH NO SATISFACTORY EXPLANATION WAS GIVEN THEREFORE HE RESTRICTED THE A DDITION TO 50% OF THE ADDITION MADE BY THE AO. THE REVENUE HAS ACCEPTED THE ORDER OF THE CIT(A) WHILE THE ASSESSEE IS IN APPEAL AGAINST THE GP ADDI TION OF RS.1 40 991/- SUSTAINED BY THE LEARNED CIT(A). 4. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE FINDING OF THE CIT(A) IS AS UNDER: 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE AO. THE AO HAS BROUGHT NO MATER IAL ON RECORD TO SHOW THAT EITHER THE PURCHASES WERE INFLATED OR BOG US OR THE SALES WERE UNDERVALUED OR UNRECORDED. THE APPELLANT HAD PURCH ASED THE SALE BILLS IN WHICH NO DEFECT HAS BEEN FOUND. THE ONLY REASON THAT CONSUMPTION OF COLOUR & CHEMICAL HAS NOT BEEN MAINTAINED ON DAY-TO -DAY BASIS. AS PER THE SETTLED POSITION OF LAW NON-MAINTENANCE OF SUCH STOCK REGISTER WHEN THERE IS A FALL IN GP RATE IS NOT ENOUGH TO REJECT THE BOOKS OF ACCOUNT. THERE SHOULD BE SOME OTHER FACTORS WHICH SHOULD RES ULT IN THE OPINION THAT THE CORRECT PROFITS CANNOT BE SUSTAINED. I AG REE WITH THE APPELLANT THAT NO SUCH DEFECTS HAVE BEEN POINTED OUT. HOWEVE R IN THE ENTIRE SUBMISSION OF THE APPELLANT THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN AS TO WHY THE SALES PRICE HAS DECREASED. THE TURNO VER IN A.YS.2005-06 2006-07 AND IN THE CURRENT YEAR ARE ALMOST SAME AMO UNT OF RS.1.01 CRORE OR SO. HOWEVER THE GP RATE IN THE CURRENT Y EAR IS AT 6% WHEREAS IN THE EARLIER YEAR IT WAS 11.16%. WHILE THE APPEL LANT HAS BEEN ABLE TO EXPLAIN THAT THERE ARE INCREASE IN THE COST PRICE. I AGREE WITH THE APPELLANT THAT THOUGH THERE ARE NO DEFECTS IN THE B OOKS OF ACCOUNT BUT CONSIDERING THE OVERALL FALL IN GP RATE AND THE FAC T THAT DECREASE IN SALE PRICE IS TOTALLY UNEXPLAINED THE ADDITION MADE BY THE AO IS CONFIRMED UPTO 50%. FROM THE ABOVE IT IS EVIDENT THAT THE CIT(A) HAS R ECORDED THE FINDING THAT MERE NON-MAINTENANCE OF THE STOCK REGISTER IS NOT ENOUGH TO REJECT THE BOOKS OF ACCOUNTS AND IN THE CASE OF THE ASSESSEE EXCEPT THE NON-MAINTENANCE OF THE STOCK REGISTER FOR COLOUR AND CHEMICALS NO OTHER DEFECT I S FOUND. HOWEVER HE SUSTAINED THE GP ADDITION PARTLY BECAUSE THERE WAS A FALL IN THE GP RATE. IN OUR OPINION ITA.NO.864/AHD/2010 -3- UNLESS THERE IS SUFFICIENT MATERIAL TO REJECT THE B OOKS OF ACCOUNTS NO GP ADDITION CAN BE MADE EVEN IF THERE IS A FALL IN THE GP. TH E QUESTION OF APPLICATION OF PROPER RATE OF GP WOULD ARISE ONLY AFTER REJECTION OF THE BOOKS OF ACCOUNTS. SINCE IN THIS CASE THE CIT(A) HAS RECORDED THE FINDING T HAT THERE WAS NO SUFFICIENT MATERIAL TO REJECT THE BOOKS OF ACCOUNTS IN OUR OP INION HE WAS NOT JUSTIFIED IN CONFIRMING THE GP ADDITION EVEN PARTIALLY. WE THER EFORE DELETE THE GP ADDITION OF RS.1 40 991/- SUSTAINED BY THE CIT(A). 5. GROUND NO.3 OF THE ASSESSEES APPEAL READS AS UN DER: THAT THE AO AND CIT(A) BOTH ERRED IN DISALLOWING CONTRIBUTION OF RS.17 370/- OF PF/ESI. THEREFORE THE SAME SHOULD BE ALLOWED. 6. IT IS SUBMITTED BY THE LEARNED COUNSEL THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. P.M.ELECTRONICS LTD. (2008) 220 CTR 635 (DELHI) WH EREIN THE HON'BLE DELHI HIGH COURT HAS DISCUSSED IN PARA-4 AS UNDER:- 4. ON 27 TH NOV. 1998 THE ASSESSEE HAD FILED A RETURN OF INCO ME DECLARING A LOSS OF RS.8 92 888. ON 11 TH MAY 1999 THE RETURN WAS PROCESSED UNDER S. 143(1)(A) OF THE ACT. THE CASE O F THE ASSESSEE WAS SELECTED FOR SCRUTINY. ACCORDINGLY A NOTICE DT. 27 TH SEPT. 1999 UNDER S. 143(2) OF THE ACT WAS ISSUED TO THE ASSESSEE. IN RE SPONSE TO THE NOTICE AND ON EXAMINATION OF THE DETAILS SUBMITTED BY THE ASSESSEE WITH RESPECT TO PROVIDENT FUND PAYMENTS MADE BOTH ON ACC OUNT OF EMPLOYERS AND EMPLOYEES SHARE REVEALED THAT PAYME NTS IN THE SUM OF RS.17 94 042 WERE LATE AS PER THE PROVISIONS OF S. 36(1)(VA) R.W S. 2(24)(X) AND S. 43B. CONSEQUENTLY THE AO DISALLOW ED THE DEDUCTION AND ADDED A SUM OF RS.17 94 042 TOWARDS EPF CONTRIB UTION. AND SUBSEQUENTLY DECIDE THIS ISSUE IN PARA-10 TO 14 OF HON'BLE DELHI HIGH COURT WHICH READ AS UNDER:- 10. IN VIEW OF THE ABOVE IT IS QUITE EVIDENT THAT THE SPECIAL LEAVE PETITION WAS DISMISSED BY A SPEAKING ORDER AND WHIL E DOING SO THE SUPREME COURT HAD NOTICED THE FACT THAT THE MATTER IN APPEAL BEFORE IT PERTAINS TO A PERIOD PRIOR TO THE AMENDMENT BROUGHT ABOUT IN S. 43B OF THE ACT. THE AFORESAID POSITION AS REGARDS THE STAT E OF THE LAW FOR A PERIOD PRIOR TO THE AMENDMENT TO S. 43B HAS BEEN NO TICED BY A DIVISION BENCH OF THIS COURT IN DHARMENDRA SHARMA (SUPRA) . APPLYING THE RATIO ITA.NO.864/AHD/2010 -4- OF THE DECISION OF THE SUPREME COURT IN VINAY CEMENT (SUPRA) A DIVISION BENCH OF THIS COURT DISMISSED THE APPEALS OF THE REVENUE. IN THE PASSING WE MAY ALSO NOTE THAT A DIVISION BENCH OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. NEXUS COMPUTER (P) LTD. BY A JUDGMENT DT. 19 TH AUG. 2008 PASSED IN TAX CASE (APPEAL) NO.1192/20 08 [REPORTED AT (2008) 219 CTR (MAD.) 54 ED.] DISCUSSED THE IM PACT OF BOTH THE DISMISSAL OF THE SPECIAL LEAVE PETITION IN THE CASE OF GEORGE WILLIAMSON (ASSAM) LTD. (SUPRA) AND VINAY CEMENT (SUPRA) AS WELL AS A CONTRARY VIEW OF THE DIVISION BENCH OF ITS OWN COURT IN SYNERGY FINANCIAL EXCHANGE (SUPRA). THE DIVISION BENCH OF THE MADRAS HIGH CO URT HAS EXPLAINED THE EFFECT OF THE DISMISSAL OF A SPECIAL LEAVE PETITION BY A SPEAKING ORDER BY RELYING UPON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF KUNHAYAMMED & ORS.VS. STATE OF KERALA & ANR. (2000) 162 CTR (SC) 97: 119 STC 505 AT P. 526 IN PARA 40 A ND NOTED THE FOLLOWING OBSERVATIONS : IF THE ORDER REFUSING LEAVE TO APPEAL IS A SPEAKIN G ORDER I.E. GIVES REASONS FOR REFUSING THE GRANT OF LEAVE THEN THE ORDER HAS TWO IMPLICATIONS. FIRSTLY THE STATEMENT OF LAW CON TAINED IN THE ORDER IS A DECLARATION OF LAW BY THE SUPREME COURT WITHIN THE MEANING OF ART. 141 OF THE CONSTITUTION. SECONDLY OTHER THAN THE DECLARATION OF LAW WHATEVER IS STATED IN THE ORDER ARE THE FINDINGS RECORDED BY THE SUPREME COURT WHICH WOULD BIND THE PARTIES THERETO AND ALSO THE COURT. TRIBUNAL OR AUT HORITY IN ANY PROCEEDINGS SUBSEQUENT THERETO BY WAY OF JUDICIAL D ISCIPLINE THE SUPREME COURT BEING THE APEX COURT OF THE COUNTRY. BUT THIS DOES NOT AMOUNT TO SAYING THAT THE ORDER OF THE COU RT. TRIBUNAL OR AUTHORITY BELOW HAS STOOD MERGED IN THE ORDER OF THE SUPREME COURT REJECTING SPECIAL LEAVE PETITION OR T HAT THE ORDER OF THE SUPREME COURT IS THE ONLY ORDER BINDING AS RES JUDICATA IN SUBSEQUENT PROCEEDINGS BETWEEN THE PARTIES. 11. UPON NOTING THE OBSERVATIONS OF THE SUPREME COU RT IN KUNHAYAMMED & ORS. (SUPRA) THE DIVISION BENCH OF THE MADRAS HIGH COURT IN THE CASE OF NEXUS COMPUTER (P) LTD. (SUPRA) CAME TO THE CONCLUSION THAT THE VIEW TAKEN BY THE SUPREME COURT IN VINAY CEMENT (SUPRA) WOULD BIND THE HIGH COURT AS IT WAS LAW DEC LARED BY THE SUPREME COURT UNDER ART. 141 OF THE CONSTITUTION. 12. WE ARE IN RESPECTFUL AGREEMENT WITH THE REASONI NG OF THE MADRAS HIGH COURT IN NEXUS COMPUTER (P) LTD. (SUPRA). JUDICIAL DISCIPLINE REQUIRES US TO FOLLOW THE VIEW OF THE SUPREME COURT IN VINAY CEMENT (SUPRA) AS ALSO THE VIEW OF THE DIVISION BENCH OF T HIS COURT IN I DHARMENDRA SHARMA (SUPRA). 13. IN THESE CIRCUMSTANCES WE RESPECTFULLY DISAGRE E WITH THE APPROACH ADOPTED BY A DIVISION BENCH OF THE BOMBAY HIGH COUR T IN PAMWI TISSUES LTD. (SUPRA). ITA.NO.864/AHD/2010 -5- 14. IN THESE CIRCUMSTANCES INDICATED ABOVE WE ARE OF THE OPINION THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSI DERATION IN THE PRESENT APPEAL. THE APPEAL IS THUS DISMISSED. 7. WE FIND THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF P.M. ELECTRONICS LTD. (SUPRA) HAS DECIDED THIS ISSUE OF PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS PROVIDENT FUND AFTER CONSIDERI NG THE DECISION OF HON'BLE APEX COURT IN THE CASE OF VINAY CEMENT (SUPRA) AND ALSO DISTINGUISHED THE CASE LAW REFERRED BY THE LD. DR OF BOMBAY HIGH COUR T IN PAMWI TISSUES LTD. (SUPRA). EVEN NOW THIS ISSUE HAS BEEN CONSIDERED B Y HONBLE APEX COURT IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) / (2009) 185 TAXMAN 416 (SC) WHEREIN IT IS HELD THAT CON TRIBUTION TO PROVIDENT FUND MADE BEFORE DUE DATE OF FILING OF RETURN ALLOWABLE AS DEDUCTION. THE DELETION OF THE SECOND PROVISO TO SECTION 43B AND THE AMENDMEN T TO THE FIRST PROVISO BY THE FINANCE ACT 2003 WAS TO OVERCOME IMPLEMENTATIO N PROBLEMS. CONSEQUENTLY THE AMENDMENTS THOUGH MADE APPLICABL E BY PARLIAMENT ONLY WITH EFFECT FROM 1-4-2004 WERE CURATIVE IN NATURE AND WOULD APPLY RETROSPECTIVELY W.E.F. 1-4-1988. ACCORDINGLY FOLL OWING APEX COURT IN THE CASE OF ALOM EXTRUSIONS LTD. (SUPRA) AND DELHI HIGH COU RT IN P.M. ELECTRONICS LTD. (SUPRA) WE ALLOW THE CLAIM OF THE ASSESSEE. 8. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 9 TH JULY 2010. SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 09-07-2010 VK* COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT ITA.NO.864/AHD/2010 -6- 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER AR ITAT AHMEDABAD