Income Tax Appellate Tribunal - Ahmedabad
Dev Colour Lab, Surat vs Income Tax Officer,Ward-7(1),, Surat on 10 March, 2017
ITA No.1111/ Ahd/2013 Assessment Year: 2009-10 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, "SMC", AHMEDABAD [Coram: Pramod Kumar AM] ITA No.1111/Ahd/2013 Assessment Year: 2009-10 Dev Colour Lab, ......................Appellant C/o. Madhav & Associates Chartered Accountants, S-124-125, Belgium Square, Opp. Linear Bus Sand, Near Delhi Gate, Surat - 395 003.
[PAN: AAEFD 1489 Q] Vs. Income Tax Officer, Ward 7(1), Surat. .................Respondent Appearances by:
M.J. Shah, for the appellant Kailash Dan Ratnoo, for the respondent Date of concluding the hearing: 27.02.2017 Date of pronouncing the order: 10.03.2017 O R D E R
1. By way of this appeal, the assessee has challenged correctness of the order dated 4th March 2013, passed by the learned CIT(A), for the assessment year 2009-10.
2. In the first ground of appeal, the assessee has raised the following ground of appeal :-
"1. That the learned CIT (Appeals) erred in law and on facts in confirming addition made by Ld. Assessing Officer on account of Low Gross Profit amounting to Rs.419175. The Ld. CIT (Appeals) has compared Gross profit Ratio without sorting abnormal/accidental/casual income of Rs.250000/- in AY 2008-09, received on account of purchase of Printing machinery as payments towards as paper/chemical discount for test checking printing on new machine. The Ld. CIT (Appeals) has wrongly calculated Gross profit Ratio @ 21.49% by not deducting trade discount of Rs.419175 from ITA No.1111/ Ahd/2013 Assessment Year: 2009-10 Page 2 of 5 Purchases for Ay 2009-10 and thereby inflating purchase and thus Lowering Gross profit and comparing it with Gross Profit Ratio of AY 2008-09 by deducting trade discount of Rs.305827 from purchase which is absurd. On the facts and circumstances of case the addition of Rs.419175 on account of Low Gross Profit is without any base, illegal and unlawful."
3. To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee before us is engaged in the business of Photo Processing Lab. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that there is a substantial fall in gross profit rate. As against gross profit rate of 30.46% in the immediately preceding assessment year, the gross profit rate in the current year was only 27.13%. The explanation given by the assessee was rejected, and, without pointing out any defects in the books of accounts, the Assessing Officer made a gross profit addition of Rs.4,19,175/- by observing as follows :-
"6.1. The submission of the assessee have been carefully considered and the same is found to be self serving and devoid of any merits in law considering the following facts of the case.
The AR of the assessee has stated as mentioned above that the calculation shown for comparing Gross Profit is not correct. For the comparison of Gross Profit item the trading account has to be taken on equal footing. Abnormal/Accidental/Casual Income or Expenditure has to be sorted out. The discount of Rs.4,19,175/- is trade discount received from Purchase parties. The comparative figure of trade of trade discount of A.Y. 2008-09 is Rs.3,05,827/- which is separated from purchase then same item in A.Y. 2008-09 has to be separated from purchase and the Gross Profit ratio has to be compared. Further Rs.2,50,000/- Recd. in A.Y. 2008-09 is special discount received from Noritsu Koki Ltd. (Machinery purchase Party) which is abnormal income (Indirect Income) and which shown as Direct Income in Audit Report due to which the Gross Profit ratio has been seen on higher side @ 30.46% in A.Y. 2008-09 which is not true. The Calculation of Gross Profit Ratio on comparative basis while nullifying the abnormalities is shown. :
The contention of the AR of the assessee which is mentioned in his reply dtd. 16.12.2011, is incorrect and self serving as well as not acceptable. As per the audit report - Annexure -I, Part-A, clearly shows that the Gross Profit is decreased by 3.15% compared to the immediate preceding year. If the said debit note amount of Rs.4,19,175/-, included in purchases, your G.P. comes @ 21.49% which is very Low compared to immediate preceding year.ITA No.1111/ Ahd/2013
Assessment Year: 2009-10 Page 3 of 5 The AR of the assessee has not given any cogent evidences or satisfactorily explanation in respect of fallen down gross profit. As per the Audit Report- 3CD, Annexure - I, Part-A, during the year assessee has shown total turnover of Rs.72,00,347/- and G.P. shown of Rs.19,66,4157- @ 27.31%, as compared to immediate preceding year assessee was shown total turnover of Rs.43,16,827/- and G.P. shown of Rs.13,14,742/- @ 30.46%, the ratio of Gross Profit is fallen down from 30.46% to 27.31%, i.e. this current Financial Year G.P. fallen down @ 3.15%. If the said debit note amount (Discount) of Rs.4,19,175/-, included in purchases, your G.P. comes @ 21.49% which is very Low compared to immediate preceding year.
Therefore, after considering all the submissions and arguments put forth by the assessee, the assessee has not explained the fall in G.P fully with supporting evidence. Therefore, the debit note (discount received by the assessee from the purchase parties and the assessee has manipulated/increased ratio of G.P. from this debit note amount) Rs.4,19,175-, which is most reasonable addition against discrepancies noticed and thus the same is added to the total income of the assessee.
[Addition of Rs.4,19,175/-]"
4. Aggrieved, assessee carried the matter in appeal before the learned CIT(A) but without any success. While doing so, the learned CIT(A) observed as follows :-
"6.1 I have considered the assessment order as well as the submissions of the appellant. The Grounds of appeal - Ground No. 1 pertains to addition of account of low G.P. of Rs.4,19,175-. The appellant during the appellate proceedings made the same submissions regarding the G.P. rate as made before the Assessing Officer. The details filed show that the G.P. has decreased by 3.15% in comparison to immediate preceding year. The Audit Report in the 3CD Report, Annexure-1, Part-A has shown a fall of G.P. of 3.15%. The appellant has not brought on record any reason or explanation regarding the fall in the G.P. except for his contention that the debit note amount (discount) of Rs.4,19,175/- was received as trade discount from the purchase party which is abnormal/accidental/casual income and needs to be sorted out. The contention of the appellant is erroneous and misplaced on facts and law. If the said discount of Rs.4,19,175/- is included in the purchases, the G.P. falls further to 21.49% which is very low. In view of the facts, the addition made by the Assessing Officer of Rs.4,19,175/- is upheld and the ground of appeal is dismissed. (Confirmed - Rs.4,19,175/-)"
5. The assessee is not satisfied and is in further appeal before me.
6. I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position. ITA No.1111/ Ahd/2013
Assessment Year: 2009-10 Page 4 of 5
7. I find that there is no finding by any of the authority below about any specific defects in the books of account, and yet an addition has been made to the profit disclosed by the assessee. The business situations can never be so static as to permit a uniform gross profit rate over the years. The gross profit rate being too low cannot be reason enough to reject the books of account, and make gross profit addition. I cannot, therefore, uphold the action of the authorities below in adding the value of debit notes of Rs.4,19,175/- only on the ground that such an addition will result in reasonable gross profit. There is no reason to doubt genuineness and bonafides of these debit notes. I, therefore, delete the impugned addition of Rs.4,19,175/-.
8. Ground no.1 is thus allowed.
9. In the second and third grounds of appeal, the assessee has raised the following grievances:
"2. That the learned CIT (Appeals) has confirmed addition of Rs.43640/- on account of personal use of electricity by partner of firm assuming that partner has carried on his business from the premises of firm. However, the Ld CIT (Appeals) has not brought on records that partner is actually carrying business from the firm premises. The ld. CIT(A) has while confirming disallowance fails to segregate the expenses of Three Phase Electricity Consumption of Rs.197618 and Single Phase Electricity Consumption of Rs.20592 and disallowed 20% of gross amount (Rs.218200) of electricity which is baseless, illegal and bad in law.
3. That the learned CIT (Appeals) has confirmed disallowance of Rs.11489 on account of General Expenses under general remarks that assessee has not produced complete bill and vouchers. Not a single specific defect in any vouchers has been pointed out and disallowance is made simply on adhoc basis which is baseless, illegal and unlawful."
10. Looking to the smallness of amounts involved, learned Counsel did not make much submission on these grounds beyond stating that disallowances are excessive and ITA No.1111/ Ahd/2013 Assessment Year: 2009-10 Page 5 of 5 could be lowered down. I do not see any reasons to interfere in these disallowances and confirm the same.
11. Ground nos. 2 & 3 are thus dismissed.
12. In the result, the appeal is partly allowed. Pronounced in the open Court on this 10th day of March, 2017.
Sd/-
Pramod Kumar
(Accountant Member)
Dated: the 10 t h day of March, 2017.
PBN/*
Copies to: (1) The appellant
(2) The respondent
(3) CIT
(4) CIT(A)
(5) DR
(6) Guard File
By order
Assistant Registrar
Income Tax Appellate Tribunal
Ahmedabad benches, Ahmedabad