Income Tax Appellate Tribunal - Delhi
Addl. Cit, Ghaziabad vs M/S. Chw Forge (P) Ltd., Ghaziabad on 1 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'B' NEW DELHI
BEFORE SHRI R.S. SYAL, VICE PRESIDENT
AND
MS SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No. 2177/Del/2014
Assessment Year: 2010-11
Addl CIT CHW Forge (P) Ltd.
Range-1 Vs. Maliwara Road, Near
Ghaziabad Hapur Road Flyover,
Ghaziabad
PAN : AAACC6049C
(Appellant) (Respondent)
-
Department by : Smt. Reecha Singh, CIT DR
Respondent by : Mr. Akhilesh Garg, Adv &
: Mr. Vipin Garg, CA
Date of hearing : 01-03-2018
Date of pronouncement : 01 -03-2018
ORDER
PER R.S.SYAL, V.P.:
This appeal by the Revenue is directed against the order passed by the CIT(A) on 10.1.2014 in relation to the AY. 2010-11.2 ITA No.2177 /Del/2014
2. The first ground is against the deletion of addition of Rs. 12,52,16,415/- in respect of application of gross profit rate by the AO by rejecting book results. Briefly stated, the facts of the case are that the assessee is a private limited company engaged in the manufacturing of tailor made flanges as per the specifications, dimensions and designs required by the customers. The Assessing Officer observed that gross profit rate of 26.17% declared by the assessee in this year was substantially lower than the gross profit rate of preceding years ranging from 37.64% to 43.04%. The AO observed that though the turnover of the assessee declined by 17% vis-a-vis the preceding year, but the expenses on account of Job work payment, Wages and labour, Excise/custom duty and Late delivery charges increased by 131%, 85%, 229% and 107% respectively. On being called upon to explain the reasons for increase in the expenses, the assessee furnished the details in respect of each item. Not convinced with the assessee's submissions, the Assessing Officer invoked the provisions of Section 145 of the Act and rejected the book results. Thereafter, he calculated average of GP rate of the preceding three years at 40.12%. Such rate was applied to make a 3 ITA No.2177 /Del/2014 trading addition of Rs. 12.52 crore. The learned CIT(A) deleted the addition. The Revenue is aggrieved against such deletion of addition.
3. Having heard both the sides and perused the relevant material on record, it is noticed that though the turnover of the assessee decreased in comparison with the preceding year, the Assessing Officer did not conduct any enquiry as to the genuineness of sales made. Similarly as regards Job work payment, there was an increase to the tune of 131% and the assessee also furnished the details of job work payment. The Assessing Officer noticed that some of the addresses of the job workers were common. He, however, stopped short of conducting any further enquiry for ascertaining the genuineness of payment. Similarly, as regards Wages and labour, Excise/custom duty and Late delivery charges, the Assessing Officer rejected the assessee's contention on whims and fancies without adducing any logical rationale. It can be seen from the reasons given by the Assessing Officer for rejecting the book results that he considered higher expenses/consumption as foundation for such rejection. Such types of issues are starting point and not a conclusion to reject books of accounts. If certain expenses are more, the Assessing Officer should get alert and try to find out the reasons for 4 ITA No.2177 /Del/2014 increase in the expenses. Mere fact that the sales are low or the expenses are higher, cannot be a ground for rejecting the books of accounts. The Special Bench of the Tribunal in Shankar Rice Company vs. ITO 72 ITD 139 (Asr) (SB) has considered almost similar facts in which the books of accounts were rejected by the Assessing Officer. The Tribunal finally held that such rejection of books of accounts and thereafter estimation of income, was not appropriate. This Special Bench decision has been followed by the Hon'ble Punjab & Haryana High Court in CIT vs. R.K. Rice Mills (2009) 319 ITR 173 (P&H) and the Hon'ble Delhi High Court in CIT vs. Kohinoor Foods Limited (2015) 373 ITR 682 (Delhi). The learned CIT(A), in our considered opinion, has rightly appreciated the facts in coming to the conclusion that the books of accounts were properly maintained and the same could not be rejected. We, therefore, hold that the learned CIT(A) was justified in deleting the addition.
4. The only other ground in this appeal is against deletion of addition of Rs.3,05,25,795/- in respect of additional excise duty. The Assessing Officer made the addition of the amount on the ground that the same was in the nature of penalty and hence hit by the explanation to Section 37(1) of the Act. The learned CIT(A) deleted the addition. 5 ITA No.2177 /Del/2014
5. Having heard both the sides and perused the relevant material on record, it is observed that a sum of Rs. 3.05 crore was paid by the assessee as an additional excise duty because of the higher rates. Earlier it was clearing the goods from EOU to DTA units on normal rate of excise duty at 10.3%, whereas on violation of stipulated limit of 50% of clearance limits, excise duty was calculated at 24.4%, which was paid by the assessee under protest. Under these circumstances, the payment of additional excise duty can neither be characterized as violation of law to be hit by the explanation to section 37(1) of the Act nor as a breach of section 43B of the Act. We, therefore, approve the view taken learned CIT(A).
6. In the result, the appeal is dismissed.
(Order pronounced in the open court on 01.03.2018.) Sd/- Sd/-
(SUCHITRA KAMBLE) (R.S. SYAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated, 01.3.2018
SH
6
ITA No.2177 /Del/2014
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR,
ITAT NEW DELHI