ITO, WD-29(2), KOLKATA, Kolkata v. Nirmala Porwal, Kolkata

ITA 922/KOL/2015 | 2009-2010
Pronouncement Date: 21-10-2016

Appeal Details

RSA Number 92223514 RSA 2015
Assessee PAN AEYPP7160G
Bench Kolkata
Appeal Number ITA 922/KOL/2015
Duration Of Justice 1 year(s) 3 month(s) 29 day(s)
Appellant ITO, WD-29(2), KOLKATA, Kolkata
Respondent Nirmala Porwal, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 21-10-2016
Appeal Filed By Department
Bench Allotted SMC
Tribunal Order Date 21-10-2016
Assessment Year 2009-2010
Appeal Filed On 22-06-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENC H KOLKATA BEFORE SHRI K. NARASIMHA CHARY JM & DR. A.L.SAINI AM ./ ITA NO.922/KOL/2015 ( / ASSESSMENT YEAR :2009-2010) ITO WARD-29(2) KOLKAT AAYAKAR BHAVAN DAKSHIN 2 GARIAHAT ROAD ( SOUTH) 4 TH FLOOR KOLKATA-700068 VS. NIRMALA PORWAL 50B HARISH MUKHERJEE ROAD KOLKATA-700025 ./ ./PAN/GIR NO. : AEYPP 7160 G ( /APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI BANIBRATA DUTTA ADCIT /ASSESSEE BY : SHRI MANOJ KATARUKA ADVOCATE / DATE OF HEARING : 19/10/2016 /DATE OF PRONOUNCEMENT 21/10/2016 / O R D E R PER DR. ARJUN LAL SAINI AM: THE CAPTIONED APPEAL FILED BY THE REVENUE PERTAINI NG TO THE ASSESSMENT YEAR 2009-2010 IS DIRECTED AGAINST AN O RDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-8 KOLKATA IN APPEAL NO.17/CIT(A)-8/WARD-29(2)/KOL/14-15 DATED 01.04.20 15 WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFI CER (AO) UNDER SECTION143(3) OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT) DATED 30.12.2011. 2. THE FACTS OF THE CASE QUA THE ASSESSEE ARE THAT THE ASSESSEE FILED HER ELECTRONIC RETURN OF INCOME ON 30.09.2009 DECLA RING NET LOSS OF RS.13 58 284/-. THE RETURN WAS PROCEEDED U/S.143(1) OF THE I.T.ACT. LATER ON THE CASE WAS SELECTED FOR SCRUTINY U/S.143(3) OF THE ACT AND THE ASSESSEE OFFICER HAS COMPLETED THE ASSESSMENT BY MA KING THE ADDITION ITA NO.922/15 NIRMALA PORWAL 2 OF RS.36.05 LAKHS. THE AO MADE THE ADDITION OBSERVI NG THAT IT WAS REASONABLE TO ADOPT THE TURN OVER AT RS.482 LAKHS A ND HAVING REGARD TO THE PAST RESULTS OF COMPARATIVE G.P.% AS EXPLAINED HE ADOPTED GP PERCENTAGE AT 20% FOR THE YEAR UNDER CONSIDERATION AND WORKED OUT THE ADDITION OF RS.36.05 LAKHS. 3. AGGRIEVED FROM THE ORDER OF AO THE ASSESSEE FIL ED AN APPEAL BEFORE THE CIT(A) WHO HAS REDUCED THE GP% TO 7% FR OM 20% OBSERVING THE FOLLOWINGS :- 6.2. THE RIVAL SUBMISSIONS ON THE MATTER HAVE BEEN CONSIDERED AND ANALYZED. I FIND THAT THE WHOLE ISSUE IS ON THE ESTIMATE OF GP @ 20% ON THE ESTIMATED TURNOVER OF RS.482.00 LAKHS AS AGAINST THE ASSESSEE'S REPORTED TURNOVER OF RS.480.51 LAKHS RES ULTING IN THE ADDITION OF RS.36.05 LAKHS. THIS IS A CASE WHERE TH E APPELLANT'S ACCOUNTS HAVE BEEN AUDITED U/S 44AB OF THE ACT. IT IS REPORTED BY THE AO THAT AS PER THE TAX AUDIT REPORT U/S 44AB IN FORM 3CD THE GP SHOWN WAS RS.53 93 828/- AS AGAINST THE GP OF RS .29 86 822/- SHOWN IN THE TRADING ALC FILED DURING THE COURSE OF APPELLATE PROCEEDINGS. IN THE REMAND PROCEEDINGS THE MATTER H AS BEEN EXPLAINED BY THE ACCOUNTANT OF THE APPELLANT AS TO HOW SUBSTANTIAL LOSS WAS INCURRED DURING THE YEAR UNDER CONSIDERATI ON WHICH LED TO LOW GP RATE. IT IS THE CONTENTION OF THE APPELLANT THAT THE RAW MATERIALS WERE SOLD BY GOVT. ORGANIZATIONS LIKE SAI L THROUGH TENDER BIDS UNDER SPECIFIED TERMS AND CONDITIONS AND THAT THERE WAS NO SCOPE OF APPOINTING OUTSIDE TECHNICAL EXPERTS TO VE RIFY THE QUALITY OF THE MATERIALS AS WELL AS THERE WAS NO POINT IN MAKI NG CORRESPONDENCES WITH THE SUPPLIERS AS THE COMPLAINT S WOULD NEVER BE ENTERTAINED. FURTHER THERE WAS NO GUARANTEE THAT THE SAMPLE INSPECTED PRIOR TO PARTICIPATING IN THE TENDER WOUL D BE SIMILAR TO THE PRODUCT WHICH WOULD GET DISPATCHED. HOWEVER THE FA CT REMAINED THAT THE LOSS DUE TO HEAVY SLUDGE IN LIGHT CREOSOTE OIL PURCHASED FROM ROUKELLA STEEL PLANT WAS NOT VERIFIABLE. IN SU CH CIRCUMSTANCES THE AO WAS CORRECT IN ESTIMATING THE GROSS PROFIT F ROM THIS BUSINESS BASED ON THE PAST TRENDS. THE AO HAD COMPUTED THE I NCOME APPLYING 20% AS GP MARGIN. HOWEVER FROM THE DOCUMEN TS SUBMITTED AND REMAND REPORT IT IS SEEN THAT THE GP MARGIN IN THE PAST YEARS WAS IN THE RANGE OF 6.22% TO 17%. THUS T HE ESTIMATE OF INCOME AT 20% IS NOT FAIR. KEEPING IN MIND THE POSS IBILITY OF THE SUBMISSION OF THE APPELLANT THAT THERE WAS HEAVY SL UDGE IN THE RAW MATERIAL I AM OF THE VIEW THAT THE ESTIMATE OF INCO ME SHOULD BE DONE @ 7% GROSS PROFIT MARGIN. I THEREFORE DIRECT T HE AO TO ESTIMATE THE INCOME APPLYING GROSS MARGIN OF 7% INS TEAD OF 20%. ITA NO.922/15 NIRMALA PORWAL 3 THE AO IS DIRECTED TO TREAT THE TURNOVER AT RS.480. 51 LAKH INSTEAD OF RS.482 LAKH AS THERE IS NO MATERIAL TO SUBSTANT IATE THE INCREASE IN TURNOVER. THIS WAY THE LD CIT(A) HAS REDUCED THE GP% TO 7% F ROM 20%. BEFORE THE LD CIT(A) THE ASSESSEE APART FROM THE SUBMISSIONS MADE BEFORE THE AO SUBMITTED THE EXPLANATION ABOUT THE GP% AS TO HOW I T HAS DECREASED. 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) THE REVENUE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN THE FOLLOWIN G GROUNDS OF APPEAL :- 1. THAT THE LD. COMMISSIONER OF INCOME TAX(A) HAS ERRED IN LOWERING THE GROSS PROFIT ESTIMATED BY THE ASSESSIN G OFFICER FROM 20% TO 7% OF TURNOVER. 2. THAT THE LD. CIT(A) ERRED IN LOWERING THE GROSS PROFIT WITHOUT VERIFYING ANY EVIDENCE CONTRARY TO THE FINDINGS OF THE ASSESSING OFFICER. 5. FROM THE ABOVE CITED GROUNDS OF APPEALS IT APPE ARS TO US THAT THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LEARN ED COMMISSIONER OF INCOME TAX (APPEAL) HAS REDUCED THE GROSS PROFIT PE RCENTAGE FROM 20% TO 7% OF TURNOVER. 6. LD. DR FOR THE REVENUE HAS VEHEMENTLY STATED THA T THE LD. CIT(A) HAS REDUCED THE GROSS PROFIT RATIO FROM 20% TO 7% W ITHOUT BRINGING ANY COGENT MATERIAL ON RECORD. THE REDUCTION OF A GROSS PROFIT FORM 20% TO 7% BY THE LD. CIT(A) IS BASED ON SURMISE CONJECTURE A ND GUESS. HE DID NOT GIVE THE WEIGHTAGE OF THE FINDINGS OF THE AO AND HE DID ONLY GUESS WORK. APART FROM THIS THERE IS DIFFERENCE OF GROSS PROFI T RATIO WORKED OUT IN TAX AUDIT REPORT AND THE GROSS PROFIT RATIO SUBMITTED B Y THE ASSESSEE. HOWEVER LATER ON THE TAX AUDITOR OF THE ASSESSEE H AS SUBMITTED A RECTIFICATION LETTER ADMITTING THAT THERE WAS A MIS TAKE IN THE TAX AUDIT ITA NO.922/15 NIRMALA PORWAL 4 REPORT. LD. DR POINTED OUT THAT THE TAX AUDIT REPOR T BEING A STATUTORY DOCUMENT THEREFORE THE FIGURES CONTAINED IN THE TAX AUDIT REPORT SHOULD BE RELIED ON. THE ARGUMENT OF THE ASSESSEE THAT HE HAS PURCHASED INFERIOR QUALITY OF THE RAW MATERIALS AND THE PURCHASE PRICE OF THE RAW MATERIALS ARE SUPPORTED FROM THE PUBLIC BID IS NOT TENABLE. L D. DR ALSO POINTED OUT THAT THE LD. CIT(A) DID NOT ASSIGN ANY REASONS TO R EDUCE THE GROSS PROFIT RATIO FROM 20% TO 7%. 7. LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT DURIN G THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS PURCHASED RAW MATERI AL WHICH IS OF INFERIOR QUALITY. LD. AR ALSO SUBMITTED THAT THERE WAS HUGE PROCESSING LOSS AND MORE WASTE/SUB-STANDARD GOODS WERE BEING GENERA TED THROUGH THE MANUFACTURING PROCESS THEREFORE THE GROSS PROFIT AND THE NET PROFIT HAS COME DOWN. MERELY BECAUSE THE SALES/TURNOVER HAS I NCREASED DOES NOT MEAN THAT GROSS PROFIT AND THE NET PROFIT WOULD INC REASED SIMULTANEOUSLY BECAUSE IN THE YEAR UNDER CONSIDERATION THE ASSESSE E HAS INCURRED MORE OPERATING LOSS MORE OPERATING EXPENSES PROCESS LO SS ETC. IN THE REMAND PROCEEDINGS THE MATTER HAS BEEN EXPLAINED BY THE A CCOUNTANT OF THE ASSESSEE AS TO HOW SUBSTANTIAL LOSS WAS INCURRED DU RING THE YEAR UNDER CONSIDERATION WHICH LED TO LOW GROSS PROFIT RATE. THE ASSESSEE SUBMITTED THAT RAW MATERIALS WERE SOLD BY THE GOVERNMENT ORGA NIZATIONS LIKE SAIL THROUGH TENDER BIDS UNDER SPECIFIC TERMS AND CONDIT IONS AND THAT THERE WAS NO SCOPE OF APPOINTING OUTSIDE TECHNICAL EXPERT S TO VERIFY THE QUALITY OF MATERIAL AS WELL AS THERE WAS NO POINT IN MAKING CORRESPONDENCES WITH THE SUPPLIERS AS THE COMPLAINTS WOULD NEVER BE ENTE RTAINED. FURTHER THERE ITA NO.922/15 NIRMALA PORWAL 5 WAS NO GUARANTEE THAT THE SAMPLE INSPECTED PRIOR TO PARTICIPATING IN THE TENDER WOULD BE SIMILAR TO THE PRODUCT WHICH WOULD GET DISPATCHED. 8. HAVING HEARD THE RIVAL CONTENTIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMISSIONS OF THE ASSESSEE AS THE PROPOSITIONS CA NVASSED BY THE LD. AR OF THE ASSESSEE HAS SUPPORTED BY THE FACTS NARRATED ABOVE. AS THE LD. AR FOR THE ASSESSEE HAS POINTED OUT THAT HOW SUBSTANTI AL LOSS WAS INCURRED DURING THE YEAR UNDER CONSIDERATION WHICH LED TO LO W GROSS PROFIT RATIO. THE RAW MATERIALS PURCHASED BY THE ASSESSEE ARE NOT DIS PUTED BY THE AO BECAUSE THE SAME HAVE BEEN PURCHASED THROUGH TENDER BIDS UNDER SPECIFIED TERMS AND CONDITIONS. WHEN THE GOVERNMENT AGENCIES IS INVOLVED THEN THERE IS NOT POINT TO APPOINT OUTSIDE TECHNICAL EXPERTS TO VERIFY THE QUALITY OF THE MATERIAL AS WELL AS THERE IS NO POINT IN MAKING CORRESPONDENCE WITH THE SUPPLIERS AS THE COMPLAINTS WOULD NEVER BE ENTERTAINED. BESIDES THERE WAS NO GUARANTEE THAT T HE SAMPLE INSPECTED PRIOR TO PARTICIPATING IN THE TENDER WOULD BE SIMIL AR TO THE PRODUCT WHICH WOULD GET DISPATCHED. THE AO HAS COMPUTED THE INCOM E APPLYING 20% AS GROSS PROFIT RATIO HOWEVER FROM THE DOCUMENTS SUB MITTED AND THE REMAND REPORT AND BASED ON THE OTHER DOCUMENTS LD.CIT(A) OBSERVED THAT GROSS PROFIT MARGIN IN THE PAST YEARS WAS IN THE RANGE OF 6.22% TO 17%. THEREFORE ESTIMATING INCOME BY APPLYING THE 20% GR OSS PROFIT RATIO IS NOT FAIR. THEREFORE BASED ON THE ABOVE CITED FACTUAL P OSITION WE DO NOT FIND ITA NO.922/15 NIRMALA PORWAL 6 ANY REASON TO DISTURB THE ORDER OF LD. CIT(A). ACCO RDINGLY WE CONFIRM THE ORDER PASSED BY THE LD. CIT(A). 9. IN THE RESULT THE APPEAL FILED BY REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21/ 10/2016. SD/ - (NARASIMHA CHARY) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; $% DATED 21/10/2016 & ()* /PRAKASH MISHRA . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER / ( ASSTT. REGISTRAR) & ' / ITAT 1. / THE APPELLANT ITO WARD-29(2) KOLKATA 2. / THE RESPONDENT.-NIRMALA PORWAL 3. 4 ( ) / THE CIT(A) KOLKATA. 4. 4 / CIT 5. 56 7 8 8 / DR ITAT KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//