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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
PER Ms. MADHUMITA ROY - JM: Both the appeals filed by the assessee are directed against the orders both dated 18.04.2016 passed by the Ld. CIT(A)-2, Ahmedabad arising out of the orders both dated 01.04.2015 passed by the Ld. DCIT, Sabarkantha Circle, Himatnagar under Section 154 of the Income Tax Act, 1961 for A.Y. 2007-08 and 2008-09 respectively. Since both the appeals relate to the same assessee and of the identical grounds these are heard analogously and are being disposed of by a common order.
ITA No. 630/Ahd/2018 (A.Y. 2007-08):- 2. It appears that there is delay of 604 days in preferring the instant appeal before us. The Ld. Counsel appearing for the assessee submitted that mainly due to discontinuation of the business and shifting of papers and/or documents the order
- 2 - ITA Nos. 630&631/Ahd/2018 M/s. Samay Tiles Ltd. vs. DCIT A.Ys. 2007-08 & 2008-09 passed by the Ld. CIT(A)-2 got misplaced and/or not found and ultimately the appeal could not be filed before the Hon’ble Tribunal in due time. Initially when the matter was heard no such documents was available on behalf of the assessee to substantiate the reason for delay in filing the appeal late before us. On 12.01.2020 this Bench granted liberty to the Ld. Counsel appearing for the assessee to file documents in support of the prayer for condoning delay substantiating the statement made in the affidavit affirmed by the assessee on 16.04.2018 before the Notary public, Surajpura, S. K. Circle (Gujarat) which was on record before us.
In terms of such liberty granted by us the appellant filed certain corroborating documents in regard to the statement made in the application for condonation of delay particularly the fact of discontinuance of business. An application dated 28.02.2018 addressed to the AO requesting for copy of the order passed by the Ld. CIT(A)-2 for A.Y. 2007-08 & 2008-09 has been annexed to such reply in regard to the clarification wherefrom it appears that due to discontinuation of business and shifting of papers/documents the appellant had not been able to find out the copy of the order dated 18.04.2016 passed by the Ld. CIT(A) which was received by the department on 01.03.2018. Apart from that a memo dated 10.06.2013 issued by the Uttar Gujarat Vij Company Limited (UGVCL) was filed whereby and whereunder the power supply of the appellant company had been permanently discontinued as per the request of termination made by the appellant on 21.05.2013. It appears that power supply agreement executed by and between the appellant and the government company stood terminated w.e.f. 01.08.2013 as available at Page 2 of such reply filed by the appellant. Furthermore, the auditors note specifically mentioning that the appellant company had disposed and/or were in the process of disposing of major part of its fixed asset and had almost discontinued the business activities appearing in Note No. 10 of Page 18 of the audited accounts of the appellant for F. Y. 2014-15 has been made available before us.
- 3 - ITA Nos. 630&631/Ahd/2018 M/s. Samay Tiles Ltd. vs. DCIT A.Ys. 2007-08 & 2008-09 The above documents including memo that too issued by the Government Companies is sufficient to substantiate the plea taken by the assessee for preferring the instant appeal before us with the delay of 604 days due to discontinuation of business and shifting of papers and documents. We do not find any laches on the part of the assessee in preferring the appeal late keeping in view the above facts. Hence, taking into consideration the entire aspect of the matter we do not hesitate to allow the said application for condonation of delay for substantial justice.
On merit the assessee has challenged the order passed by the Ld. First Appellate Authority in not determining the profit @ 20% on unaccountable sales as already held by the Hon’ble Tribunal in assessee’s own case for A.Y. 2005-06 and 2006-07. It is relevant to mention that the AO has been directed to take profit @ 27.86% of the unaccountable sales of the appellant.
The brief facts leading to the case is this that the assessment under Section 143(3) r.w.s. 147 of the Act has been completed with the addition of Rs. 65,75,864/- on account of suppression of sales price by taking G. P. rate of 40% on unaccounted cash receipts of Rs. 1,64,39,660/-. Subsequently it was brought to the notice of AO that the G. P. rate for the year has mistakenly taken at 40% instead of 27.86% as declared in the audit report by the appellant. The order under Section 154 was, therefore, passed by the Ld. AO revising the G. P. rate @ 27.86% as declared by the assessee. Appeal was preferred by the assessee against the said order before the First Appellant Authority on the ground that in assessee’s own case the Hon’ble Tribunal in ITA Nos. 788 & 789/Ahd/2013 for A.Ys. 2005-06 and 2006-07 has been pleased to adopt the G. P. rate @ 20% on the suppressed sales. In that view of the matter according to the appellant the G. P. rate ought to have been applied @ 20% in the case in hand which was rejected by the Ld. CIT(A). Hence, the instant appeal before us.
- 4 - ITA Nos. 630&631/Ahd/2018 M/s. Samay Tiles Ltd. vs. DCIT A.Ys. 2007-08 & 2008-09
We have heard the Ld. Counsel appearing for the parties, and we have also perused the relevant materials available on record before us including the order passed by the Coordinate Bench dated 10.01.2014 in ITA Nos. 788&789/Ahd/2013 for A.Ys. 2005-06 & 2006-07. The relevant portion of the said order on the identical issue is reproduced herein below:-
“8. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the Assessee had suppressed sales and also suppressed the expenses and in view of these facts, the books of accounts of the Assessee cannot be relied and was therefore rightly rejected u/s 145(3) of the Act by the A.O. Once the books of accounts of the Assessee are rejected, a fair estimate of the profits needs to be made. A.O. while estimating the profits of Assessee has noted even DGCEI has noted that not only MRP was reduced for the purpose of excise duty but also complete expenses/costs with respect to purchase of raw materials and other expenses were shown at a lesser amount which therefore showed that the entire expenses were also not recorded in the books of account. This finding of A.O. could not be controverted by Assessee by bringing any tangible material on record. The A.O. thereafter worked out the income earned on suppression of MRP on unaccounted cash received by applying the Gross Profit of 40%. CIT(A) however directed the addition to be computed by applying net profit rate of 19.51% of A.Y. 05-06 and 15.51% for A.Y. 06-07 for which reliance was placed on the decision in the case of President Ind. 258 ITR 654 (Guj) and Tribunal decision in the case of Vrundvan Ceramics Pvt. Ltd. vs. DCIT, Gokul Ceramics Pvt. Ltd. vs. DCIT. We find that the facts in the case of President Ind. (supra) were different than that in the case of Assessee as in that case, based on the survey and examination of excise records, unrecorded sales were found. In that case there was no finding with respect to unrecorded expenses. We therefore feel that the ratio of the decision in the case of President Ind. (supra) cannot be applied to the facts of present case. With respect to the other decisions relied by CIT(A), the facts of those case are not before us nor have been placed by Assessee before us and therefore we are unable to comment about the applicability of the decisions of those cases to the facts in the present case. Further, we find that CIT(A) has adopted Net Profit rate of 15.15% for A.Y. 06-07 as compared to 19.51% for A.Y. 05-06. When the books are rejected, we do not find any justification for adopting the Net Profit of 15.15% for A.Y. 06-07 which is lower then the rate of 19.51% for A.Y. 05-06 which has been considered for estimation of income. Considering the totality of the aforesaid facts we are of the view that the estimate of G.P. made by A.O. @ 40% was on a higher side but at the same time the action of CIT(A) in considering the Net Profit rate was also not fully justified and the fact that the present appeal is of Revenue and Assessee is not in appeal. Considering the totality of facts, and in the peculiar circumstances of the case, we feel that the ends of justice shall be met by estimating the profits for both the years on the basis of 20% of Gross profits as against 40% made by A.O. We therefore direct accordingly. 9. In the result, the appeals of the Revenue are partly allowed.”
We, therefore, find no difficulty in accepting the G. P. rate @ 20% of the unaccountable sales, respectfully relying upon the order passed by the Coordinate Bench instead of 27.86 as taken by Revenue. Hence, we direct the AO to take profit
- 5 - ITA Nos. 630&631/Ahd/2018 M/s. Samay Tiles Ltd. vs. DCIT A.Ys. 2007-08 & 2008-09 at 20% of the unaccountable sales in the instant case and to pass orders accordingly. This ground of appeal is allowed.
The appellant does not wish to proceed with the Ground No. 2. Hence, the same is dismissed as not pressed.
In the result, assessee’s appeal is partly allowed.
ITA No. 631/Ahd/2018 (A.Y. 2008-09):- 9. These ground of appeals are identical to that of the issues already been dealt with by us in ITA No.630/Ahd/2018 for A.Y. 2007-08 and in the absence of any changed circumstances the same shall apply mutatis mutandis. Hence, this appeal preferred by the assessee is also partly allowed.
In the combined result, both appeals filed by the assessee are partly allowed. This Order pronounced in Open Court on 17/03/2021
Sd/- Sd/- (WASEEM AHMED) (Ms. MADHUMITA ROY) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 17/03/2021 Tanmay आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The PCIT- Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad