Shri Yogesh Nagjibhai Patel, Surat v. The Income tax Offier,Ward-9(4),, Surat

ITA 2149/AHD/2005 | 2002-2003
Pronouncement Date: 22-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 214920514 RSA 2005
Assessee PAN ADSPP3432E
Bench Ahmedabad
Appeal Number ITA 2149/AHD/2005
Duration Of Justice 4 year(s) 4 month(s) 19 day(s)
Appellant Shri Yogesh Nagjibhai Patel, Surat
Respondent The Income tax Offier,Ward-9(4),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 22-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 22-02-2010
Date Of Final Hearing 18-02-2010
Next Hearing Date 18-02-2010
Assessment Year 2002-2003
Appeal Filed On 03-10-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : A HMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 2149/AHD./2005 ASSESSMENT YEAR : 2002-2003 SHRI YOGESH NAGJIBHAI PATEL SURAT -VS.- INCOME TAX OFFICER WARD-9(4) SURAT (PAN : ADSPP 3432 E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.P. SHAH RESPONDENT BY : SMT. NEETA SHAH SR. D .R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 25.07.2005 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-VI SURAT IN UP HOLDING THE ADDITION OF RS.3 97 103/- MADE BY THE A.O. FOR THE ASSESSMENT YEAR 2002-03. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS AN I NDIVIDUAL. HE IS DOING BUSINESS OF MANUFACTURING OF ART SILK GRAY CLOTH IN HIS PROPRIE TORSHIP CONCERN NAMELY M/S. YOGALON FABRICS. FOR THE ASSESSMENT YEAR UNDER APPEAL HE F ILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2 14 143/-. THE A.O. FRAMED THE ASSESS MENT UNDER SECTION 143(3) ON 30.03.2005 WHEREIN HE REJECTED THE BOOKS OF ACCOUNTS BY INVOKI NG THE PROVISIONS CONTAINED UNDER SECTION 145 AND MADE THE ADDITION OF RS.3 97 437/- ON ACCO UNT OF UNACCOUNTED PRODUCTION AS DISCUSSED BY ESTIMATING AVERAGE PRODUCTION RATE PER KG. OF CO NSUMPTION OF YARN @ 11.61 METER PER KG. OF YARN (I.E. 1% MORE THAN THE RATE OF PRODUCTION SHOW N BY THE ASSESSEE). ON THIS BASIS THE A.O. CALCULATED THE EXTRA PRODUCTION OF YARN AT 16664 ME TERS AND MADE THE ADDITION OF RS.3 97 437/-. 3. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS) THE ASSESSEE CONTENDED THAT REJECTION OF BOOKS OF ACCOUNTS UNDER SECTION 145 OF THE INCOME TAX ACT WAS WRONG IN VIEW OF THE JUDGMENT OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF M. DURAJ RAJ VS.- CIT [83 ITR 484] WHEREIN THE HON'BLE HIGH COU RT STATED THAT ABSENCE OF STOCK REGISTER CANNOT BE A GROUND FOR REJECTION OF BOOKS OF ACCOUN TS. APART FROM THIS HE RELIED ON THE VARIOUS 2 ITA NO. 2149/AHD/2005 DECISIONS I.E. DECISION OF HON'BLE ITAT GAUHATI B ENCH IN THE CASE OF ITO VS.- KEDARMAL KESHORDEO [7 TTJ 419] ITAT JAIPUR BENCH IN THE CA SE OF HARLAL HEMRAJ VS.- ITO [16 TTJ 165] ITAT DELHI IN THE CASE OF RAMBAGH PALACE HOT EL (P) LTD. VS.- DCIT [82 TTJ 581]. 4. AFTER CONSIDERING THE VARIOUS SUBMISSIONS IN T HE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHELD THE ACTI ON OF A.O. FOR THE DETAILED REASONS GIVEN IN PARA 2.3.4 WHICH READS AS UNDER :- 2..3.4. IT IS SEEN THAT IN THE CASE OF THE APPELLA NT THE AVERAGE FOR THE WHOLE YEAR IS 10.61 AND THERE IS A WIDE VAR IATION RIGHT FROM 8.56 TO 12.59. SUCH A WIDE VARIATION IS TOO MUCH. B ECAUSE OF THIS REASON THE A.O. HAS ESTIMATED THE YIELD AT 1% HIGHE R. AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE I AGREE WITH THE A.O. THAT THE APPELLANT HAS NOT BEEN MAINTAINED QUANTITATIVE DETAILS WHEREBY TRUE AND FAIR PICTURE OF THE PRODUC TION CAN BE OBTAINED. IT IS ALSO TRUE THAT THE APPELLANT HAS SH OWN BETTER RESULT THAN THE LAST YEAR. STILL IT DOES NOT MEAN THAT IF APPEL LANTS RESULTS ARE BETTER THAN LAST YEAR HE IS FREE TO SUPPRESS THE PRODUCTI ON. THE APPELLANT CANNOT SAY THAT IF HIS RESULTS ARE HIGHER BY MUCH L ARGER PERCENT THAN LAST YEAR THEN HE WILL ONLY SHOW A SMALLER INCREAS E ONLY AND NOT MORE. CONSIDERING ALL FACTS AND CIRCUMSTANCES AND FOLLOW ING THE DECISION OF KOLKATA HIGH COURT CITED ABOVE I AM OF THE VIEW TH AT BOOKS OF ACCOUNTS WERE CORRECTLY REJECTED AND THE ADDITION N EEDS TO BE SUSTAINED IN VIEW OF THE FACT THAT THE APPELLANT HA S NOT BEEN MAINTAINING ANY QUANTITATIVE DETAILS OF YARN CONSUM ED AND YARN GIVEN FOR JOB WORK. THE APPELLANT HAS FAILED TO RECONCILE THE CONSUMPTION OF YARN AS WELL AS WIDE VARIATION IN YIELD. HOW CAN WA GE RATE VARY FROM 4.65 IN APRIL 2001 TO 13.65 IN MAY 2001 TO 11.92 IN JUNE TO 2.25 IN JULY 01 THEN FROM 2.17 IN OCTOBER 2001 TO 16.6 IN NOV.01 AND FROM 11.26 IN DECEMBER 01 TO 2.77 IN JANUARY 2001 (ANN. A OF ASSESSMENT ORDER). SIMILARLY AS STATED ABOVE THE SALE RATE HAS NOT SHOWN ANY TREND OF FALLING OR INCREASING. THE VARIATIONS ARE ADHOC AND UNEXPLAINED. ADMITTEDLY THE RECORDS OF ISSUE OF YARN FOR JOB WOR K PRODUCTION OF CLOTH ARE KEPT ON ROUGH SHEET AND THEN DESTROYED. I N THE LIGHT OF THIS AND READ WITH THE DECISION OF KOLKATA HIGH COURT IN THE CASE OF HOWRAH TRADING CO. (P) LTD. CITED ABOVE IN MY VIEW THE REJECTION OF BOOKS OF ACCOUNTS IS JUSTIFIED AND ALSO THE MARGINA L INCREASE OF 1% YIELD BY THE A.O. IS NOT ONLY REASONABLE BUT JUSTIF IED. THEREFORE THE ADDITION IS SUSTAINED AND GROUND OF APPEALS ARE REJ ECTED. 5. AGGRIEVED BY THIS ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE IS IN APPEAL BEFORE US. 3 ITA NO. 2149/AHD/2005 6. WE HAVE HEARD BOTH THE SIDES. IT IS PERTINENT TO NOTE THAT IN THE TAX AUDIT REPORT AGAINST COLUMN NO. 28A THE AUDITOR HAS MENTIONED AS UNDER :- THE ASSESSEE UNIT HAS NOT MAINTAINED QUANTITATIVE DETAILS OF PRINCIPAL ITEMS OF RAW MATERIAL AND FINISHED PRODUC T. ACCORDING TO A.O. THE DISCREPANCIES CONTAINED IN A NNEXURE A ARE OF THE FOLLOWING NATURE :- (I) THE MONTHLY AVERAGE SALE PRICE SHOWN BY THE ASSESSE E HAS NOT INCREASED SUBSTANTIALLY FOR THE MONTHS IN WHICH THE ASSESSEE HAS SHOWN LESSER RATE OF PRODUCTION (WHICH SHOULD BE OF HIGHER QUALITY). (II) AVERAGE SALE PRICE HAS NOT INCREASED SUBSTANTIALLY IN THE MONTH IN WHICH THE ASSESSEE HAS SHOWN HIGHER RATE OF WAGES O VER PRODUCTION. (III) AVERAGE SALE PRICE HAS NOT INCREASED SUBSTANTIALLY IN THE MONTHS OF APRIL 2001 MAY 2001 AND JUNE 2001 IN WHICH T HE RATES OF CONSUMPTION OF ELECTRICITY OVER THE PRODUCTION IS M ORE. 7. IN THE ASSESSMENT ORDER THE A.O. ASKED THE ASSE SSEE TO EXPLAIN WHY THE BOOKS OF ACCOUNTS CANNOT BE REJECTED. AFTER CONSIDERING THE REPLY OF THE ASSESSEE IN OUR OPINION THE A.O. HAS GIVEN COGENT REASON FOR REJECTING THE BOOKS OF ACCOUNTS. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE MERELY REITERATED THE SU BMISSIONS MADE BEFORE THE ASSESSING OFFICER AND LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AFT ER CONSIDERING EACH AND EVERY CONTENTION IN OUR OPINION HAS GIVEN COGENT REASON FOR REJECTING THE BOOKS OF ACCOUNTS. ONCE THE BOOKS OF ACCOUNTS ARE REJECTED THE ASSESSING OFFIC ER HAS NO OPTION BUT TO ESTIMATE THE INCOME. IT IS PERTINENT TO NOTE THAT GROSS PROFIT AND NET PROF IT DECLARED BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL AS WELL AS IN THE IMMEDIATELY PRECEDIN G ASSESSMENT YEAR IS AS UNDER :- A.Y. 2002-03 A.Y. 2001-02 TURNOVER RS.42 47 499/- RS.50 85 248/- GROSS PROFIT RS. 6 13 333/- RS. 5 12 687/- G.P. RATIO 14.44% 10.08% NET PROFIT RS. 3 63 641/- RS. 2 45 315/- N.P. RATIO 8.56% 4.82% 4 ITA NO. 2149/AHD/2005 8. FROM THE ABOVE IT IS CLEAR THAT NET PROFIT AS W ELL AS GROSS PROFIT IS BETTER IN THE ASSESSMENT YEAR UNDER APPEAL THAN IT WAS IN THE IMMEDIATELY PR ECEDING ASSESSMENT YEAR. WE HAVE ALSO GONE THROUGH THE BASIS OF MAKING THE ADDITION. NOTWITHST ANDING WE NOTICE THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN WIDE VARIATION IN RATES OF WAG ES PAID BY HIM AS POINTED OUT BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). EVEN BEFORE US NO MATERIAL IS PRODUCED DESPITE OUR ASKING FOR IT. FURTHER WE ALSO NOTICE THAT THERE I S NO CONSISTENCY IN PROFIT DECLARED BY THE ASSESSEE WHICH VARIED FROM 8.56% TO 12.59%. THERE IS ALSO NO REASON SUBMITTED BY THE ASSESSEE SHOWING THAT IT IS POSSIBLE TO HAVE SUCH LARGE VARI ATION. FURTHER BETTER PROFIT SHOWN OVER LAST YEAR DOES NOT MEAN CORRECT PROFIT. HENCE EVEN THESE BET TER PROFITS ARE NOT CONVINCINGLY CORRECT AND VARIATIONS IN PROFIT RATES AND WAGES RATES ARE NOT EXPLAINED WHICH NEED TO BELIEVE THAT THE ASSESSEE HAS STILL EARNED HIGHER PROFITS THAN WHAT IS DECLARED. WE FEEL IT PROPER TO SUSTAIN AN ADDITION OF RS.1 00 000/- WHICH WOULD MEET THE ENDS OF JUSTICE FROM ALL POINTS OF VIEW. IT IS AGAINST THE ADDITION OF RS.3 93 437/- CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER. 9. IN THE RESULT FOR STATISTICAL PURPOSES THE APP EAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 22.02.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22/ 02 / 2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.