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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: Shri Pramod Kumar]
SMC-ITA No. 876/Ahd/2016 MJB India Industrial Repairs Pvt Ltd Vs. ITO AY : 2012-13 Page 1 of 3 IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD [ Before Shri Pramod Kumar, Accountant Member ] ITA No. 876/Ahd/2016 Assessment Year : 2012-13 MJB India Industrial Repairs Pvt Ltd ......…………......Appellant 22, Dhara Centre, Vijay Char Rasta, Navrangpura, Ahmedabad-380 009 [PAN : AAECM 5416 F] Vs. Income Tax Officer .......................Respondent Ward 2 (1)(4), Ahmedabad
Appearances by: GC Pipara, for the appellant VK Singh, for the respondent Date of concluding the hearing : 20.06.2018 Date of pronouncing the order : 14.09.2018 O R D E R
By way of this appeal, the assessee appellant has challenged correctness of the order dated 16th March 2016 passed by the CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2012-13.
In the first ground of appeal, the assessee has raised the following grievance:
“1. The ld. CIT(A) has erred in confirming the lump sum addition of Rs.4,00,000/- out of total addition of Rs.21,11,600/- made by the AO on account of alleged low G.P. worked on the basis of three (3) years average GP merely on surmises, assumptions and without proper consideration and appreciation of the facts. In view of facts and submissions filed coupled with legal position relied upon, the impugned addition of Rs.4,00,000/- requires to be deleted.
1.1. The Id. CIT(A) has erred in not appreciating the fact that the books of accounts of appellant company are audited under the provision of Companies Act, 1956 as well as under the provisions of Income Tax Act, 1961 and there is no adverse remark by any of the auditors in respective audit report.
1.2. The Id. CIT(A) has further erred in not appreciating the fact that G.P. ratio is not a static/constant figure for all the years, the impugned addition
SMC-ITA No. 876/Ahd/2016 MJB India Industrial Repairs Pvt Ltd Vs. ITO AY : 2012-13 Page 2 of 3 requires to be deleted more particularly when the G.P. ratio of previous years duly accepted by the A.O, during the course of pervious year's scrutiny assessment proceedings.”
To adjudicate on this issue, only a few material facts need to be taken note of. The assessee company is engaged in the business of repairs, refurbishment and overhauling of industrial gas turbines, sales and maintenance of components thereof and providing field maintenance and engineering support staff for maintenance of industrial gas turbines. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that there is a fall in the gross profit rate inasmuch as the present year’s GP is 34% as against 51.50% in immediately preceding year and 45.75% in the year preceding thereto. The explanation of the assessee was that there is an inadvertent error in stating the GP at 34% and the actual GP rate is 44.6%, that the accounts are duly audited and there are no errors in accounts employed by the assessee and that the GP rate has marginally changed due to business conditions. The Assessing Officer, however, brushed aside these submissions and proceeded to adopt the average of last three years (i.e. 47.28%) as against the GP of the assessee at 44.60%. Accordingly, an addition of Rs.21,11,600 was made. When matter was carried in appeal before the CIT(A), the CIT(A) noted that there is admittedly a fall in the GP rate and since such a fall is not reasonably explained, an ad-hoc addition of Rs.4,00,000 is justified to check “the leakage of revenue”. The disallowance was thus sustained to the extent of Rs 4,00,000. The assessee is not satisfied and is in further appeal before the Tribunal. 4. I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
I find that there is a fall of 2.68% in the GP rate vis-à-vis the average of last three years. While the assessee has earned the GP of 44.60% in this year, the average of last three years is only 47.28%. This fall is GP rate is only marginal and there are no defects noticed, or even alleged, in the books of accounts of the assessee. The business situations can never be so static that the GP rate will be uniform, or almost uniform, over a period of time. The very approach adopted by the Assessing Officer is devoid of any legally sustainable substance. The mere fall in GP rate, without anything else- particularly when the fall in GP rate is only marginal, cannot be reason enough to make an adhoc addition, I, therefore, deem it fit and proper to delete the impugned disallowance of Rs 4,00,000 as well. The assessee succeeds on this point.
Ground no. 1 is thus allowed.
In ground no. 2 the assessee has raised the following grievance:
“2. The learned CIT(A) has erred in law and on facts in confirming the addition of Rs.1,27,110/- on account of delayed payment of employees contribution to P.F relying upon the decision of the Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation [2014] 41 taxmann.com 100 (Guj.). It is submitted with due respect to the above
SMC-ITA No. 876/Ahd/2016 MJB India Industrial Repairs Pvt Ltd Vs. ITO AY : 2012-13 Page 3 of 3 decision that subsequently the Hon'ble Karnataka High Court in the case of Essae Teraoka (P.) Ltd. vs. DCIT [2014] 43 taxmann.com 33 (Karnataka) has taken a view in favor of the assessee while disagreeing with the decision of the Hon'ble Gujarat High Court. That apart, since the SLP filed against the said decision before the Hon'ble Supreme Court having been admitted, the issue in dispute being addition of Rs.1,27,110/- be decided accordingly.”
Learned representatives fairly agree that the issue is covered against the assessee by Hon’ble jurisdictional High Court’s judgment in the case of CIT vs. Gujarat State Road Transport Corporation, 366 ITR 170 (Guj.). Learned counsel for the assessee nevertheless relies upon Hon’ble Karnataka High Court judgment, as referred to in the ground of appeal above, and the fact that the SLP on this issue is admitted by Hon’ble Supreme Court.
9, Respectfully following the views of Hon’ble jurisdictional High Court in the case of Gujarat State Road Transport Corporation (supra), I confirm the disallowance and decline to interfere in the matter.
Ground no. 2 is thus dismissed.
In the result, the appeal is partly allowed in the terms indicated above. Pronounced in the open court today on the 14th day of September, 2018.
Sd/-
Pramod Kumar (Accountant Member) Ahmedabad, the 14th day of September, 2018 **pk-bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad 1. Date of dictation: ......14.09.2018.......... 2. Date on which the typed draft is placed before the Dictating Member: ... 14.09.2018... 3. Date on which the approved draft comes to the Sr. P.S./P.S.: …14.09.2018….. 4. Date on which the fair order is placed before the Dictating Member for Pronouncement: .. 5. Date on which the file goes to the Bench Clerk : .. 15.09.2018……. 6. Date on which the file goes to the Head Clerk : ……15.09.2018………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: …. 8. Date of Despatch of the Order: ………………......