Simprabh Automobiles (P) Ltd, Rudrapur v. ITO Ward-II, Nainital

ITA 3292/DEL/2008 | 2001-2002
Pronouncement Date: 29-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 329220114 RSA 2008
Assessee PAN MODEL3630A
Bench Delhi
Appeal Number ITA 3292/DEL/2008
Duration Of Justice 1 year(s) 2 month(s) 23 day(s)
Appellant Simprabh Automobiles (P) Ltd, Rudrapur
Respondent ITO Ward-II, Nainital
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 29-01-2010
Date Of Final Hearing 07-01-2010
Next Hearing Date 07-01-2010
Assessment Year 2001-2002
Appeal Filed On 05-11-2008
Judgment Text
ITA NO. 3292/DEL/08 A.Y. 2001-02 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER & SHRI SHAMIM YAHYA ACCOUNTANT MEMBER ITA NO. 3292/DEL/2008 A.Y. : 2001-02 M/S SIMPRABH AUTOMOBILES P. LTD. VS. INCOME TAX O FFICER VILL INDERPUR WARD-II HALDWANI (NAINITAL) POST KAUSHALGANJ TEH-BILASPUR DISTT. RAMPUR (UP). [PAN/GIR NO. S-120] (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GURBACHAN SINGH AR DEPARTMENT BY : SHRI KISHORE B. SR. DR O R D E R PER SHAMIM YAHYA : AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDERS OF THE LD. CIT(A) DATED 14.08.2009 PERTAINING TO ASSES SMENT YEAR 2001-02. 2. THE EFFECTIVE ISSUES RAISED ARE AS UNDER:- THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE AD DITION OF RS. 21 40 118/- IN TRADING ACCOUNT ON ACCOUNT OF ALLEG EDLY SUPPRESSED SALES AND GROSS PROFIT. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN N OT ADMITTING ADDITIONAL EVIDENCE UNDER RULE 46A OF THE INCOME TA X RULES. ITA NO. 3292/DEL/08 A.Y. 2001-02 2 THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN U PHOLDING THE DISALLOWANCE OF THE APPELLANTS CLAIM FOR SELLING E XPENSES BY AN AMOUNT OF RS. 2 98 500/- INSPITE OF APPELLANT HA VING PROVED ITS GENUINENESS AND ENTITLEMENT TO FULL EXT ENT. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT CONSIDERING THE COMPARATIVE CHART OF RELATIVE PERFO RMANCES OF THE APPELLANT AND FOUR OF HIS COMPETITORS DURING TH E SAME ASSESSMENT YEAR UNDER CONSIDERATION INSPITE OF THE ASSESSING OFFICER HAVING FAILED TO REBUT THE SAME. THAT THE LD. CIT(A) ERRED ON FACTS AND LAW IN UPHO LDING THE ADDITION OF RS. 44 375/- ON ACCOUNT OF THE INTERES T ACCRUING ON HIS FIXED DEPOSITS WITH BANKS THE SAME HAVING ALREADY BEEN IN THE IMMEDIATELY SUCCEEDING PREVIOUS YEAR. 3. THE ASSESSEE IS A COMPANY AND DEALT IN MODEL NO . FORD-3630 AND 5630 OF TRACTORS. THE REGISTERED OFFICE OF THE ASSESSEE COMPANY WAS SITUATED IN RUDRAPUR UDHAM SINGH NAGAR. DURIN G THE COURSE OF ASSESSMENT AO NOTED THAT TOTAL PURCHASE S IN RESPECT OF FORD TRACTOR MODEL 3630 AND MODEL-5630 HAVE BEEN SH OWN AT RS. 6 89 24 365/- AND RS. 6 98 200/- RESPECTIVELY A ND PURCHASES OF OTHER ITEMS ARE AT RS. 25 35 660/-. THE SALES OF T RACTOR 3630 AND 5630 MODELS HAVE BEEN DISCLOSED AT RS. 6 58 73 894/ - AND RS. 18 68 650/- RESPECTIVELY. THE GP RATE DISCLOSED BY THE ASSESSEE IN RESPECT OF TRACTOR FORD 3630 MODEL IS AT 5.37% A ND IN THE CASE OF MODEL-5630 IT IS 4.84% ONLY. HOWEVER THE OVERA LL GP RATE IN RESPECT OF TRACTORS AND SPARES ETC. IS 5.6%. 3.1 AO ALSO NOTED THAT ASSESSEE HAD INDULGED IN MAK ING SUPPRESSION OF SALES BY WAY OF MAKING UNDER INVOI CING OF BILLS. HE FURTHER OBSERVED THAT ON INVESTIGATION IT HAD C OME TO THE NOTICE THAT ASSESSEE HAS ISSUED BILLS OF HIGHER AMOUNT AS COMPARED TO THE ITA NO. 3292/DEL/08 A.Y. 2001-02 3 BILLS PRODUCED FOR VERIFICATION DURING THE COURSE O F ASSESSMENT. AO FURTHER OBSERVED THAT ASSESSEE HAD DEBITED RS. 5751 11/- UNDER THE HEAD ACCESSORIES CONSUMED AND SHOWN TO HAVE FITTED AND GIVEN FREE OF COST. AO OPINED THAT GENERALLY THE ACCESSORIES IN THE AUTOMOBILE TRADE ARE SOLD TO THE CUSTOMERS AND THESE ARE NEVER FITTED FREE OF COST. AO ALSO OBSERVED THAT THE GP RATE DISCLOSE D BY THE ASSESSEE WAS ON LOWER SIDE. AO FURTHER OBSERVED THAT ON C LOSE SCRUTINY OF THE BILLS IT WAS FOUND THAT THEY WERE PREPARED DUR ING THE COURSE OF ASSESSMENT. HE OPINED THAT THESE WERE INFACT CREAT ED DURING THE ASSESSMENT PROCEEDINGS. AO FURTHER OBSERVED THA T ASSESSEES CUSTOMERS WERE FARMERS AND FARMERS HAVE PURCHASED T RACTORS BY OBTAINING FINANCES FROM THE BANKS. AO OBTAINED TH E BILLS OF PURCHASE SUBMITTED TO THE BANK AND COMPARED WITH T HE BILL PRODUCED BY THE ASSESSEE. HE FOUND DISCREPANCIES I N THE SAME. THE ASSESSEE RESPONDED THAT ASSESSEE HAD LOST THE ORIGINAL PAPERS AND TO COMPLY WITH THE AOS REQUIREMENT HE MADE S ECOND COPY OF THE BILL BOOK. COMPARING THE BILLS SUBMITTED TO BANK AND ON THEIR PRODUCTION BY THE ASSESSEE AO OBSERVED THAT ASSE SSEE HAS SUPPRESS SALES BY UNDER INVOICING THE BILLS. IN R ESPONSE THE ASSESSEE SUBMITTED THAT QUOTATIONS BILLS AND RECEI PTS OF INCREASED VALUE OF TRACTORS HAVE BEEN ISSUED TO THE FARMERS FOR GETTING HIGHER BANK ADVANCE BY THEM TO MEET THE MISC. EXPENSES. AS SESSEE ALSO SUBMITTED THAT 31 AFFIDAVITS OF THE PERSONS WHO HAV E PURCHASED TRACTORS WERE FILED. AO TOOK UP THE CASE OF 12 PER SONS ON TEST CHECK BASIS. AO PICKED 8 PERSONS OUT OF 12 PER SONS FOR FURTHER EXAMINATION. IN THE AFFIDAVITS THE SAID PERSONS ACCEPTED THE FACT ITA NO. 3292/DEL/08 A.Y. 2001-02 4 THAT THEY HAD OBTAINED HIGHER VALUE OF INVOICES. AO DID NOT ACCEPT THE SAME ON THE GROUND THAT THE FARMERS HAD TAKEN A LOAN OF RS. 2 LAC ONLY AGAINST THE COST OF RS. 3 55 650/-. HENCE HE FOUND THAT IT IS APPARENT THAT THERE WAS NO NEED OF SUBMITTING QU OTATIONS BILLS AND RECEIPTS OF HIGHER VALUE. AO FURTHER OBSERVED AS UNDER:- IT HAS BEEN CONCLUDED FROM THE STATEMENTS OF THE FARMERS THAT ALL THE FARMERS HAVE STATED THAT THE QUOTATIONS BILLS AND RECEIPTS OF INCREASED VALUE W ERE OBTAINED FROM THE TRACTOR DEALER AND THE SAME WERE DEPOSITED IN THE BANK TO GET HIGHER AMOUNT OF ADVAN CE. HOWEVER IT IS PERTINENT TO MENTION HERE THAT THE L OAN AMOUNTS COULD HAVE BEEN SANCTIONED BY THE BANKS TO THESE FARMERS BY FURNISHING QUOTATIONS BILLS AND R ECEIPTS OF SALE AMOUNTS RECORDED IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE INSTEAD OF INCREASED VALUE. THE ASSESSEE SUBMISSION THAT THE ARTIFICIAL INVOI CES BILLS AND RECEIPTS WERE PREPARED FOR SUBMITTING IN THE BANK TO GET THE HIGHER ADVANCE BY THE CUSTOMERS IS ABSOLUTELY INCORRECT BECAUSE ALMOST IN ALL CASES TH E FARMERS HAVE TAKEN LOAN OF RS. 1 50 000/- TO RS. 2 00 000/- IN EACH CASE. HENCE THERE WAS NO NEED FOR SUBMITTING QUOTATIONS BILLS AND RECEIPT OF HI GHER AMOUNTS. 3.2 AO OBSERVED THAT ASSESSEES MARGIN PER TRACTOR WAS ALSO VERY LOW. AO PROCEEDED TO REJECT THE BOOKS OF THE ASS ESSEE UNDER ITA NO. 3292/DEL/08 A.Y. 2001-02 5 SECTION 145(3). AO MENTIONED TO THE OVERALL GROSS PROFIT MARGIN REFERRED BY ANOTHER DEALER NAMELY M/S UNITED TRADE RS RUDRAPUR WHERE GP 6.48% WAS SHOWN. HOWEVER IN ASSESSEES C ASE THE OVERALL GP RATE SHOWN WAS 5.6%. AO WAS ALSO OF THE OPINION THAT ASSESSEE SHOULD HAVE HIGHER GROSS PROFIT MARGIN BE CAUSE IT IS ONLY THE NEW BRAND IN THE MARKET. HE FURTHER MENTIONED THAT IT IS TAKEN FOR GRANTED THAT THE PRICE OF TRACTOR MENTIONED IN THE BILL OBTAINED FROM BANK IS INCLUSIVE OF COST OF ACCESSORIES. A O PROCEEDED TO MAKE HIS OWN ESTIMATE AND ADDED RS. 21 41 117.80 ON ACCOUNT OF SUPPRESSION OF SALES. AO FURTHER MADE SOME DISALLO WANCE ON ACCOUNT OF SELLING EXPENSES. AO IN THIS REGARD OB SERVED AS UNDER:- IT IS SEEN THAT THE EXPENSES CLAIMED BY THE ASSESS EE IN CONNECTION WITH LAND DOCUMENTS LAWYER NEC CHARGES AND STAMP PAPERS ARE NOT INCIDENTAL TO THE BUSINESS. BE SIDES THE SAME HAS NOT BEEN INCURRED BY THE ASSESSEE. THIS FA CT HAS COME TO NOTICE FROM THE STATEMENT OF THE FARMERS. THE FARMERS IN THEIR STATEMENTS HAVE ADMITTED THAT THES E EXPENSES LIKE COST OF STAMP PAPERS LAWYER NEC CHARGES AND LAND DOCUMENTS ARE INCURRED BY THEM. HENCE ABOVE REPLY OF THE ASSESSEE IS FOUND TO BE FALSE. SINCE EXPENSES ON ACCOUNT OF LAND DOCUMENTS LAWY ER NEC CHARGES AND COST OF STAMP PAPERS ARE NOT INCIDE NTAL TO BUSINESS AND ALSO THESE EXPENSES HAVE BEEN INCURRED BY THE FARMERS AND NOT BY THE ASSESSEE THEREFORE CANNOT B E ALLOWED. HENCE THIS AMOUNT OF RS. 1 20 500.00 IS DISALLOWED . ITA NO. 3292/DEL/08 A.Y. 2001-02 6 3.3 AO FURTHER FOUND THAT THE VOUCHERS FOR EXPENDIT URE PAID TO DIFFERENT SALESMEN WERE NOT PROPER. HE WENT ON OWN ESTIMATE IN THIS REGARD AND DISALLOWED A FURTHER SUM OF RS. 17 8000/- FROM SALES INCENTIVES. HENCE A TOTAL RS. 2 98 500/- WAS DISALLOWED. AO FURTHER OBSERVED THAT ASSESSEE HAD BANK FIXED DE POSITS OF RS. 5 LACS. REFERRING TO THE BANK CERTIFICATE REGARDING INTEREST RATE AO COMPUTED THAT INTEREST FOR FINANCIAL YEAR 2000-01 A T RS. 44 375/- AND ADDED THE SAME. 4. UPON ASSESSEES APPEAL THE LD. CIT(A) CONFIRMED THE AOS ACTION. LD. CIT(A) INTER-ALIA NOTED THAT ASSESSEE HAS FURNISHED THE TRADE TAX ASSESSMENT ORDER OF THE RELEVANT PERIOD WHEREIN THERE IS NO MENTION OF ANY ENQUIRY BEING CONDUCTED TO CHECK THE VERACITY OF SALES DECLARED BY THE ASSESSEE. HE ALSO NOTED TH AT THE COUNSEL OF THE APPELLANT HAS ALSO GIVEN THE GP RATE OF SOM E OTHER DEALERS TO MAKE A COMPARISON WITH THE APPELLANTS CASE. HOWEVE R THESE EVIDENCES HAVE BEEN PRODUCED DURING THE COURSE OF A PPELLATE PROCEEDINGS AND THE AO HAS STRONGLY OBJECTED TO ADM ISSION OF SUCH EVIDENCE UNDER THE PROVISION OF RULE 46A OF IT RUL ES 1962 BECAUSE SUFFICIENT OPPORTUNITIES WERE PROVIDED TO T HE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO FUR NISH SUCH EVIDENCE. IN SPITE OF SUCH OPPORTUNITIES SINCE TH E APPELLANT FAILED TO PRODUCE THE RELEVANT EVIDENCE I AM NOT IN A POS ITION TO ADMIT SUCH EVIDENCE UNDER THE PROVISION OF RULE 46A OF I T RULE 1962. ITA NO. 3292/DEL/08 A.Y. 2001-02 7 4.1 AS REGARDS THE DISALLOWANCE WITH REGARD TO LAN D DOCUMENTS COST OF STAMP PAPERS ETC. CIT(A) CONFIRMED THE AO S DISALLOWANCE OF RS. 1 20 500/-. 4.2 AS REGARDS THE SALES INCENTIVE HE DIRECTED THE AO TO TAKE THE INCENTIVE PAID AT RS . 2 600/- PER TRACTOR INSTEAD OF RS. 2500/- PER TRACTOR AS TAKEN BY THE AO. AS REGARDS INTEREST ACCRUED ON FIXED DEPOSITS HE CONFIRMED AOS ACTION. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BE FORE US. 6. LD. COUNSEL OF THE ASSESSEE INTER-ALIA CONTENDED THAT ASSESSEE HAD SUBMITTED PERFORMANCE CHART WHICH CLEARLY SHOW S THAT THE PERFORMANCE SHOWN BY THE ASSESSEE COMPARED WELL WIT H THAT SHOWN BY OTHER DEALERS IN THIS REGARD. FURTHER HE REFERR ED COMPARATIVE CHART OF SELLING EXPENSES AND CONTENDED THAT SELLI NG EXPENSES OF ASSESSEE WAS QUITE REASONABLE. HE FURTHER REITERAT ED THE CONTENTION THAT THE BANK INVOICES WERE IN FACT DUMMY AND BOGU S AND WERE ERRONEOUSLY CONSIDERED AS ACTUAL SALES INVOICES. 6.1 LD. DR ON THE OTHER HAND RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE THE HEARD LD. SR. DR OF THE DEPARTMENT A ND AUTHORISED REPRESENTATIVE/ DIRECTOR OF THE ASSESSEE COMPANY AND PERUSED THE RECORDS. WE FIND THAT THE MAIN CLAI M OF THE AO IN THIS REGARD IS THAT THE BILLS SUBMITTED TO THE BANK WERE OF HIGHER AMOUNT THAN THE ACTUAL BILL ACCOUNTED FOR BY THE AS SESSEE. THE CONTENTION OF THE ASSESSEE IN THIS REGARD AND WHICH WAS DULY ITA NO. 3292/DEL/08 A.Y. 2001-02 8 ACCEPTED BY THE CUSTOMERS (FARMERS) WHO WERE PRODUC ED BEFORE THE AO WAS THAT INFLATED AMOUNT OF BILLS WERE OBTAINED FOR BANK FINANCE PURPOSES. AO HAS DISREGARDED THIS STATEMENT MADE BY THE FARMERS BEFORE THE AO ON THE GROUND THAT ACTUAL BANK FINAN CE WAS OBTAINED WAS OF LOWER AMOUNT. HENCE THERE IS NO NEED TO SUB MIT THE BILLS OF HIGHER AMOUNTS. 7.1 IN OUR CONSIDERED OPINION OVER INVOICING FOR O BTAINING THE BANK FINANCES IS AN NOT UNHEARD PHENOMENON. MOREO VER IN THIS CASE THE BUYERS HAVE GIVEN AFFIDAVITS AND STATEME NTS BEFORE THE AO THAT THEY HAD OBTAINED BILLS OF HIGHER AMOUNT. AO HAS NOT ACCEPTED THESE STATEMENTS AND AT THE SAME TIME WHILE DENYING THE ASSESSEES CLAIM OF REGARDING LAND DOCUMENTS STAMP PAPERS COSTS ETC. HE HAS ACCEPTED STATEMENT OF BUYERS WHEREIN T HEY HAD MENTIONED THAT THESE COST WERE BORNE BY THEM. WE FIND THAT THE COMMON LAW MAXIM OF APPROBATE AND REPROBATE IS APPL ICABLE WHICH MANDATES THAT WHEN A DOCUMENT HAS TO BE RE LIED IT HAS TO BE RELIED AS A WHOLE. THE REVENUE CANNOT RELY ON TH E STATEMENTS OF THE FARMERS REGARDING THE EXPENSES AND AT THE SAME TIME REFUSE TO RELY ON THE STATEMENT REGARDING SALE PRICE. WE FUR THER FIND THAT IN SITUATION WHERE ASSESSEES BOOKS OF ACCOUNT ARE REJ ECTED. THE ESTIMATED PROFITS HAS TO BE ON THE BASIS OF COGENT AND VALID MATERIALS. IN THIS REGARD DESPITE ASSESSEE OF PR ODUCING COMPARABLE INSTANCES THE DATA WERE NOT ACCEPTED B Y THE LD. CIT(A) AS ADDITIONAL EVIDENCE. IT IS NOT THE CASE THAT AO HAS COMPARED THE ASSESSEES PERFORMANCE WITH OTHER COMPARATIVE CASES . ITA NO. 3292/DEL/08 A.Y. 2001-02 9 7.1 IN THIS REGARD WE FIND THAT THE HONBLE APEX COURT IN THE CASE OF CIT VS. REALEST BUILDERS & SERVICES LTD. 216 CT R 345 HAS HELD THAT IF THE AO COMES TO THE CONCLUSION THAT THERE I S UNDER ESTIMATION OF PROFITS ON ACCOUNT OF ONE REASON OR THE OTHER HE MUST GIVE RELEVANT FACTS AND FIGURES IN THAT REGARD BASED ON PAST HISTORY OF THE CASE AND DEMONSTRATE THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE RESULTS IN UNDER-ESTIMATION OF PROFITS. 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AN D PRECEDENT IN OUR OPINION THE INTEREST OF JUSTICE WILL BE SE RVED IF THE ISSUE IS REMITTED TO THE FILES OF AO TO EXAMINE THE SAME AFR ESH IN THE LIGHT OF THE SUBMISSIONS AND COMPARATIVE CHART PRODUCED BY T HE ASSESSEE. ACCORDINGLY THE ISSUES PERTAINING TO PROFITS AND D ISALLOWANCE OF EXPENSE ARE REMITTED TO THE FILES OF THE AO TO CONS IDER THE SAME AFRESH. NEEDLESS TO ADD THAT THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 9. AS REGARDS THE ISSUE OF ADDITION ON ACCOUNT OF INTEREST ON STDR WE ARE OF THE OPINION THAT ASSESSEE FOLLOWIN G THE MERCANTILE SYSTEM OF ACCOUNTING IS LIABLE TO ACCOUNT FOR INTE REST ACCRUED THEREON. ASSESSEES PLEA THAT HE HAS ACCOUNTED INT EREST IN THE NEXT ITA NO. 3292/DEL/08 A.Y. 2001-02 10 YEAR WILL NOT COME TO THE ASSESSEES RESCUE IN THIS REGARD. ACCORDINGLY WE CONFIRM THE ORDERS OF THE AUTHORIT IES BELOW ON THIS ISSUE. 10. IN THE RESULT THE APPEAL FILED BY TH E ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29/01/2010. SD/- SD/- [RAJPAL YADAV] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 29/01/ 2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES