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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI RAVISH SOOD
This appeal by the revenue is directed against order of Ld. CIT- A , dated 09.07.2014 and pertains to assessment year 2004-05. 2. The grounds of appeal read as under: i) On the facts, in the circumstances of the case and in law the Ld. CIT-A erred in restricting the addition on account of Gross Atlas Export (Paper Division) ITA no.2646/Mum./2013 Profit @ 5.81% instead of Gross Profit @8.11% as determined by the AO, thereby granting the relief to the tune of Rs.53,28,168/-. ii) For these and other reasons it is submitted that the order of the CIT-A may be set aside and that of the AO restored.
3. The brief facts of the case and the adjudication by the Ld. CIT as emanating from the order of Ld. CIT appeals is as under; It is seen that in the original assessment order Assessing Officer noted that the Gross Profit of the appellant has drastically fallen from 8.11% to the in the immediately preceding year to 4.88% in the relevant previous year. Simultaneously, he issued letters of enquiry to M/s.Balarpur Industries Limited from whom more than 95% of the purchases were made by the appellant. No reply was received from M/s. Balarpur Industries Limited. The Assessing Officer held that in view of the sharp fall in the Gross Profit coupled with non-compliance from M/s. Balarpur Industries Ltd, the purchases shown form these parties were not genuine to some extent and accordingly he added 3.23% of turnover i.e., fall in gross profit as unexplained expenditure u/s.69C of the I.T. Act amounting to Rs.77,17,481/-. During first appellate proceedings the appellant has pleaded that its representative kept them in dark and did not make proper compliance before the Assessing Officer. It was also submitted that Assessing Officer should have taken average ratio of the last three years which comes to 5.81%. It was claimed that noncompliance on the part of the M/s.Balarpur Industries Limited was beyond the control of appellant and no adverse 2 Atlas Export (Paper Division) ITA no.2646/Mum./2013 decision should be taken on that basis in the appellant's case. The Hon’ble ITAT in the earlier year noted that rejection of books of accounts was not correct as the same were produced before the Assessing Officer. However, In this year the Ld. ITAT has not deleted the addition and has restored the matter to the file of the AO for deciding the issue afresh. It is seen from the observations made in the original assessment as well as reassessment proceedings that there has been continuous non-compliance on the part of the appellant. Even the penalty uIs.271(1)(c) was also levied. Neither during reassessment proceedings nor during appellate proceedings any justification or explanation has been given by the appellant for explaining the sharp decrease in the Gross Profit in this year. As some fresh evidences were submitted by the appellant, the case was remanded back to the Assessing Officer during appellate proceedings. Even though the appellant produced computerized books of accounts before the Assessing Officer during remand proceedings, there is no reason given for fall in the Gross Profit along with substantiating explanations and evidences. Looking to this fact and also appellants submission before CIT(A) during first appellate proceedings of taking the Gross Profit at 5.81%, it is held that appellant has not disclosed the Gross Profit correctly during the year. Now coming to the estimation of Gross Profit, it is seen that following is the Gross Profit earned by the appellant during various years.
Atlas Export (Paper Division) ITA no.2646/Mum./2013 Asst. Year G.P 2001-02 4% 2002-03 5.32% 2003-04 8.11% 2004-05 4.88% 2005-06 5.23% 2006-07 4.89% From the above chart it can be seen that only in AY.2003-04 Gross Profit was earned at an exceptionally higher rate i.e., 8.11% and for the remaining years it is in the range of 4 to 5.3%. Therefore, taking the Gross Profit at 8.11% every year would not be justifiable. Therefore, appellant's submission of taking Gross Profit of last three years which comes to 5.81% is acceptable. Therefore, Gross Profit of the appellant is estimated at 5.81%. Appellant has already shown Gross Profit at 4.88% reflecting a difference of 0.93% i.e., approximately 1%. Therefore, the addition to the extent of 1% of Gross Profit which comes to Rs,23,89,313/- is confirmed. The assessee gets a relief of Rs.53,28,168/- [77,17.481 - 23,89,313].
Against above order revenue is in appeal before us.
We are of the learned departmental representative. Despite several notices none has appeared on behalf of the assessee on several occasions. Today when in the case was called up nobody appeared on behalf of the assessee. Hence we proceed to adjudicate the issue by hearing the learned departmental representative and perusing the records. 4 Atlas Export (Paper Division) ITA no.2646/Mum./2013 6. In this case we find that assessee has not cooperated in the assessment. Proper books of accounts have not been produced. The assessing officer has noted that profit for the year has fallen from 8.11% to 4.88%. No reason for the same has been submitted by the assessee. The assessee only wanted that average ratio of past three years which we said to come to 5.81% should be adopted for estimate of profit. On the basis of the chart reproduced above learned Commissioner of income tax accepted his submission. We find that it is beyond comprehension as to how the above chart depicts the average ratio as 5.81% for the immediately past preceding three years. It is clear that the data pertaining to past three years were never brought on record. Hence the learned Commissioner of income tax finding in this regard lacks cogency. Further more what is the reason of for fall in the profit ratio from 8.1% to 4.88% needs an explanation from the assessee. In absence of these details and explanations in our considered opinion learned Commissioner of income tax has erred in setting aside the order of the assessing officer. Hence in our considered opinion the order of the assessing officer in this case needs to be restored. Accordingly, we restore the order of the assessing officer in this case. the order of the LD. CIT-A is accordingly set aside.