Gujarat High Court
Principal Commissioner Of Income Tax-2 vs M/S. Gopal Glass Works ... on 21 February, 2017
Author: M.R. Shah
Bench: M.R. Shah, B.N. Karia
O/TAXAP/39/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 39 of 2017
With
TAX APPEAL NO. 40 of 2017
TO
TAX APPEAL NO. 43 of 2017
==========================================================
PRINCIPAL COMMISSIONER OF INCOME TAX-2....Appellant(s)
Versus
M/S. GOPAL GLASS WORKS LTD.....Opponent(s)
==========================================================
Appearance:
MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1
MR BS SOPARKAR, ADVOCATE for the Opponent(s) No. 1
==========================================================
CORAM:HONOURABLE MR.JUSTICE M.R. SHAH
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 21/02/2017
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.00. As common question of law and facts arise in this group of appeals and as such the are with respect to same assessee but with respect to different assessment years, all these appeals are decided and disposed of by this common order.
2.00. Feeling aggrieved and dissatisfied with the impugned judgement and order passed by the learned Income Tax Appellate Tribunal in respective Appeals being Tax Appeal Nos.247, 275, 667, 668 and 276 of 2010 for the A.Y. 2001-
Page 1 of 7
HC-NIC Page 1 of 7 Created On Sun Aug 13 20:20:57 IST 2017
O/TAXAP/39/2017 ORDER
2002, 2002-2003 and 2004-2005, revenue has preferred present Tax Appeals to consider the following common question of law :-
"Whether the learned Appellate Tribunal has substantially erred in directing to Assessing Officer to working the net profit @ of 5% on sales worked out by the learned CIT(A) and assessee by ignoring the specific documents seized in search & seizure operation by excise department on 23/9/2003 containing unaccounted sales material therein and confirmed on oath by Director, Sales Manager and Liason Officer of assessee company in search."
3.00. For the sake of convenience, facts in Tax Appeal No.39 of 2017 arising out of the impugned judgement and order passed by the learned ITAT in appeal being ITA No.274/AHD/2010 for A.Y. 2001-2002 are narrated.
3.01. The assessee engaged in the business of manufacturing of Glass and carrying out the job work of M/s. Haryana Glass Sheet Ltd. The excise department carried out search operation in the premises of M/s. Haryana Glass Sheet Ltd. on 23/9/2003. The Excise Department had seized various records both in respect of assessee Company as well as M/s. Haryana Glass Sheet. The Excise Department also seized a document inventoried as Annexure-A-7. The said document contained both recorded and unrecorded transaction in respect of both the parties. A statement of one Mr.Sanjay Murlidhar Joshi, Sales Manager at Haryana Glass Sheet Ltd. from whose possession the documents were recovered was recorded on Page 2 of 7 HC-NIC Page 2 of 7 Created On Sun Aug 13 20:20:57 IST 2017 O/TAXAP/39/2017 ORDER 23/9/2003 and he confirmed the authenticity of the documents and stated that the said documents contained the actual details of business carried out by the assessee during the period on which the group firm namely M/s. Sagar Glass Enterprise had been associated with the business activity of the assessee.
3.02. The assessee filed return of income for the A.Y. 2001-2002 declaring total income of Rs.12,37,087/-. Subsequently, a survey under section 133A of the Act had been carried out on 18/12/2006 and the assessment in A.Y. 2001-2002 had been reopened under section 148 of the Act. The assessee filed its return of income on 8/2/2008 declaring income of Rs.1,19,59,550/- declaring a net profit before tax. During the course of assessment proceedings the A.O. compared the profit declared in the ROI vis-a-vis the profit as per Annexure-A-7. The A.O. observed that the net profit before tax was Rs.1,47,14,587/-, there was a short fall of Rs.50,66,521/- in the profit declared by the assessee in its ROI vis-a-vis the profit arrived as per Annexure-A-7 which reflected the true state of affairs of the assessee Company, the assessee was asked to explain the same.
3.03. In response to the same, the assessee stated that the assessee company had derived the profits by adopting the Peak Theory. The A.O. held that when Annexure-A-7 reflects the actual sales as confirmed by the Settlement Commission of Excise it should obviously be taken as a base which reflect the actual profit of the assessee. Therefore, while finalizing the scrutiny assessment, A.O. determined the income of the assessee of Rs.1,47,14,587/- as the total income of the Page 3 of 7 HC-NIC Page 3 of 7 Created On Sun Aug 13 20:20:57 IST 2017 O/TAXAP/39/2017 ORDER assessee.
3.04. Feeling aggrieved and dissatisfied with the order passed by the A.O. determining the income of the assessee at Rs.1,47,14,587/- as the total income of the assessee, the assessee preferred appeal before the learned CIT(A). The learned CIT(A) estimated profit at 8% of the total turnover, by observing that the Settlement Commission of Excise has accepted the same. Therefore, the CIT(A) adopted net profit at 8% of the total turnover / sales on estimate profit earned by the assessee on record as well as unrecorded.
3.05. Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A), both, the assessee as well as the revenue preferred appeals before the learned tribunal being Appeal Nos.247/2010 and 667/2010. On considering the particulars mentioned in Annexure-A-7 as well as net profit determined by the Settlement Commission of Central Excise, which was also based on Annexure-A-7, and considering the fact that even the Settlement Commission arrived at the net profit at 5%, by the impugned judgement and order the learned tribunal has adopted / determined net profit at 5% instead of 8% as arrived at by the learned CIT(A). Consequently, the learned tribunal has dismissed the appeal preferred by the revenue and partly allowed the appeal preferred by the assessee.
3.06. Feeling aggrieved and dissatisfied with the impugned judgement and order passed by the learned tribunal in determining the net profit at 5%, the revenue has preferred the present appeal with the aforesaid proposed Page 4 of 7 HC-NIC Page 4 of 7 Created On Sun Aug 13 20:20:57 IST 2017 O/TAXAP/39/2017 ORDER question of law.
3.07. Similar order has been passed by the learned tribunal determining the net profit at 5% with respect to A.Y. 2002-2003 and 2004-2005 which are subject matters of other appeals being Tax Appeal Nos.40, 42 and 43 of 2017 and similar question of law is proposed in the said appeals.
4.00. Ms.Mauna Bhatt, learned counsel appearing on behalf of the appellant - revenue has vehemently submitted that once unaccounted sale was found which was admitted by the representatives of M/s. Haryana Glass Sheet Ltd. and the undisclosed / unaccounted sales were found as per the Annexure-A-7 and thereafter considering the same when the A.O. has considered the net profit and made addition, the same was not required to be interfered with either by the learned CIT(A) or even by the learned tribunal.
4.01. Ms.Mauna Bhatt, learned counsel appearing on behalf of the appellant - revenue has further submitted that the learned tribunal has materially erred in reducing the net profit to 5% from 8% as determined by the learned CIT(A).
Making above submissions it is requested to admit / allow the present appeals.
5.00. All these appeals are opposed by Mr.B.S. Soparkar, learned advocate appearing on behalf of the assessee. It is submitted that in the facts and circumstances of the case, as such, no substantial question of law arise as sought to be contended on behalf of the revenue. It is submitted that considering the material on record when the learned tribunal, Page 5 of 7 HC-NIC Page 5 of 7 Created On Sun Aug 13 20:20:57 IST 2017 O/TAXAP/39/2017 ORDER by giving cogent reasons, has determined the net profit, it can be said to be a question of facts and therefore, no substantial question of law arise. It is submitted that even otherwise on merits also, it cannot be said that the learned tribunal has committed any error in determining the net profit at 5%. It is submitted that considering the mean as per the Annexure-A-7 with respect to unaccounted transactions / sales and considering the fact that even the Settlement Commission of Central Excise determined net profit at 5%, considering Annexure-A-7, which were with respect to Assessment Years 2000-2001 and 2003-2004, it cannot be said that for the assessment years under consideration i.e. A.Ys. 2002-2002, 2002-2003 and 2004-2005, the learned tribunal has committed any error in estimating / determining the net profit at 5%.
Making above submissions it is requested to dismiss the present appeals.
6.0. Heard the learned advocates appearing on behalf of the respective parties at length.
6.01. At the outset, it is required to be noted that the sole question posed before this Court is with respect to estimation / determination of net profit by the learned tribunal at 5%. It is required to be noted that considering the material on record, more particularly Annexure-A-7 and the order passed by the Settlement Commission, Central Excise, by which, on appreciation and/or considering the Annexure-A-7, the learned Settlement Commission has determined and/or arrived at net profit at 5% with respect to A.Ys. 2000-2001 and 2003-2004 and thereafter with respect to A.Ys. 2001-2002, 2002-2003 and Page 6 of 7 HC-NIC Page 6 of 7 Created On Sun Aug 13 20:20:57 IST 2017 O/TAXAP/39/2017 ORDER 2004-2005, when the learned tribunal has determined the net profit at 5%, it cannot be said that the learned tribunal has committed any error which calls for interference of this Court. It is required to be noted that on the basis of the material on record, the learned tribunal has estimated net profit at 5%. The estimation of net profit on the basis of the material on record is, as such, can be said to be a question of facts. When on appreciation of material on record, the learned tribunal has estimated net profit, unless any perversity is found, it cannot be said to be any question of law. Even considering Annexure-A-7 and taking mean of the same, net profit would be worked out to 5%. Considering the overall facts and circumstances of the case it cannot be said that any substantial question of law arise in the present appeals.
7.00. In view of the above and for the reasons stated above, all the appeals fail and the same deserve to be dismissed and are accordingly dismissed.
Sd/-
(M.R. SHAH, J.) Sd/-
(B.N. KARIA, J.) Rafik..
Page 7 of 7HC-NIC Page 7 of 7 Created On Sun Aug 13 20:20:57 IST 2017