Shri Syed Hafazat Ali, Kasrawad v. The ITO, Khargone

ITA 259/IND/2008 | misc
Pronouncement Date: 28-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 25922714 RSA 2008
Assessee PAN ACYPA8533E
Bench Indore
Appeal Number ITA 259/IND/2008
Duration Of Justice 1 year(s) 7 month(s) 23 day(s)
Appellant Shri Syed Hafazat Ali, Kasrawad
Respondent The ITO, Khargone
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 28-01-2010
Assessment Year misc
Appeal Filed On 05-06-2008
Judgment Text
PAGE 1 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI KASRAWAD IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : ACYPA8533E. I.T.A.NO. 259/IND/2008 A.Y. : 2003-04 SHRI SYED HIFAZAT ALI INCOME-TAX OFFICER KASRAWAD VS KHARGONE. DISTRICT KHARGONE APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPANDE C. A. RESPONDENT BY : SMT.APARNA KARAN SR. DR DATE OF HEARING : 20.01.2010 O R D E R PER BENCH THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORDER OF THE LD. CIT(A)-II INDORE DATED 15.2.2008 FOR THE ASSESS MENT YEAR 2003-04. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED BY THE D ECISION OF THE LD. CIT(A) BY CONFIRMING THE ADDITION OF RS. 11 81 595/- AT THE NET PROFIT RATE OF 5 %. PAGE 2 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI KASRAWAD 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS WORKI NG AS AN ELECTRICAL CONTRACTOR. THE A.O. COMPARED THE PERCEN TAGE OF GROSS PROFIT AND NET PROFIT OF THE YEAR UNDER CONSIDERATION WITH THAT OF ASSESSMENT YEARS 2001-02 AND 2002-03. THE A.O. FOUND THAT GROS S PROFIT AND NET PROFIT RATE IN THE YEAR UNDER CONSIDERATION WAS MUC H LESS. THEREAFTER THE A.O. REQUIRED THE ASSESSEE TO SUBMIT THE SIMILAR DE TAILS FOR ASSESSMENT YEAR 2004-05 AND 2005-06. FOR THE SAKE OF READY REF ERENCE THESE DETAILS ARE REPRODUCED AS UNDER :- A.Y. 2001-02 2002-03 2003-04 2004-05 2005-06 GROSS RECEIPT 40 21 796 34 10 555 3 32 07 625 3 93 41 158 6 12 13 228 GROSS PROFIT 3 37 655 3 06 950 13 42 070 40 65 187 64 14 187 PERCENTAGE GROSS PROFIT 8.40 % 9.00 % 4.04 % 10.33 % 10.36 % NET PROFIT 1 80 100 1 68 430 4 67 850 19 68 662 30 96 411 PERCENTAGE NET PROFIT 4.48 % 4.94 % 1.40 % 5.00 % 5.00 % 5. THE ASSESSEE EXPLAINED THAT IN THIS YEAR THE HIGH VALUE CONTRACTS HAD BEEN TAKEN FOR THE FIRST TIME AT VERY COMPETITI VE RATES HENCE THE GROSS PROFIT/NET PROFIT WAS LESS. HOWEVER IN THE S UBSEQUENT YEAR THE GROSS PROFIT AND NET PROFIT WAS HIGHER AND WHICH FA CT PROVED THE PAGE 3 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI KASRAWAD GENUINENESS OF THE CLAIMS OF THE ASSESSEE. THE A.O. HOWEVER REJECTED THIS CONTENTION OF THE ASSESSEE BECAUSE NO DOCUMEN TARY EVIDENCE HAD BEEN PRODUCED IN SUPPORT OF THIS CONTENTION. THE A. O. THEREAFTER ALSO WORKED OUT THE RATIO OF COST OF MATERIAL CONSUMED W ITH THAT OF GROSS RECEIPT WHICH SHOWED THAT THERE WAS A RISE IN THE COST OF CONSUMPTION OF MATERIAL AS COMPARED TO EARLIER YEARS AS WELL AS SU CCEEDING YEARS. HOWEVER THE A.O. ASKED THE ASSESSEE TO PRODUCE STO CK RECORDS AND OTHER DETAILS. THE A.O. FURTHER FOUND THAT PURCHASES WORT H RS. 25 49 260/- HAD BEEN SHOWN AS ON 31.3.2003 AND STOCK AS ON DATE WAS ONLY RS. 3 25 000/- FOR WHICH THE ASSESSEE REPLIED THAT THOUGH BILLS WE RE RECEIVED FOR THAT DATE HOWEVER MATERIAL HAD ALREADY BEEN RECEIVED E ARLIER AND CONSUMED. THE A.O. HOWEVER BASED UPON THE ENQUIRIES MADE B Y HIM HELD THAT THE ASSESSEE HAD DELIBERATELY INFLATED THE COST OF MATE RIAL CONSUMED AND SUPPRESSED THE GROSS PROFIT AND NET PROFIT. ACCORDI NGLY HE REJECTED THE BOOK RESULTS BY APPLYING PROVISIONS OF SECTION 145( 3) AND ADOPTED A RATE OF 8 % OF GROSS RECEIPTS AND COMPUTED THE INCOME FR OM BUSINESS AT RS. 26 56 610/-. AGGRIEVED BY THIS THE ASSESSEE CARRIE D THE MATTER INTO APPEAL BEFORE THE LD. CIT(A) WHEREIN SUBMISSIONS MADE BEF ORE THE A.O. WERE REITERATED. THE LD. CIT(A) HOWEVER FOUND THAT THE EXPENSES ON ACCOUNT OF MATERIAL CONSUMED AND LABOUR AGGREGATED TO 97 % OF THE TOTAL EXPENSES FOR WHICH THE ASSESSEE WAS NOT HAVING STO CK PAGE 4 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI KASRAWAD RECORDS/DOCUMENTARY EVIDENCES. HENCE HE CONFIRMED THE ACTION OF THE A.O. IN REGARD TO REJECTION OF BOOKS OF ACCOUNT/BOO K RESULTS. HOWEVER THE LD. CIT(A) HELD THAT PROPER BASIS TO WORK OUT T HE TRADING RESULT WOULD BE NET PROFIT @ 5% AS AGAINST 8 % ADOPTED BY THE AS SESSING OFFICER AND GAVE A RELIEF OF RS. 9 96 229/- TO THE ASSESSEE. AG GRIEVED BY THIS THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE F ACTS AND ARGUED THE MATTER AT LENGTH BESIDES REITERATING THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 8. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 9. IT IS NOTED THAT THE ASSESSEE IS A CONTRACTOR. THE TURNOVER IN THE YEAR UNDER CONSIDERATION HAS INCREASED IN A VERY SU BSTANTIAL MANNER AS AGAINST THE TURNOVER OF EARLIER TWO YEARS. IT IS FU RTHER NOTED THAT IN THE SUBSEQUENT TWO YEARS NET PROFIT @ 5% OF THE GROSS RECEIPTS HAS BEEN SHOWN ON THE SIMILAR VOLUME AND IN RESPECT OF SIMIL AR BUSINESS ACTIVITIES WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT. THE COST OF MATERIAL HAS ALSO INCREASED IN THE YEAR UNDER CONSIDERATION WHICH FA CT GIVES SOME CREDENCE TO THE CLAIMS MADE BY THE ASSESSEE REGARDING GETTIN G OF CONTRACTS AT PAGE 5 OF 5 I.T.A.NO. 259/IND/2007. SYED HIFAZAT ALI KASRAWAD COMPETITIVE PRICE. THE LD. CIT(A) HAS TAKEN A BASE OF 5% AS SHOWN BY THE ASSESSEE IN SUBSEQUENT YEAR. HOWEVER IN OUR OP INION SOME MORE RELIEF SHOULD BE GIVEN TO THE ASSESSEE FOR THE REAS ON THAT IT IS THE FIRST YEAR OF SUCH OPERATIONS. ACCORDINGLY IN OUR VIEW INTER ESTS OF JUSTICE WOULD BE MET IF THE RATE OF NET PROFIT IS REDUCED TO 4 %. AC CORDINGLY GROUND NOS. 1 & 2 OF THE ASSESSEE ARE ACCEPTED. WE NEED NOT EXPRE SS ANY OPINION ON GROUND NOS. 3 & 4 IN VIEW OF OUR DECISION AS ABOVE. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :28 TH JANUARY 2010. CPU* 25271