Income Tax Appellate Tribunal - Ahmedabad
Ishan Dyes & Chemicals Ltd.,, Baroda vs Department Of Income Tax on 10 June, 2013
1 ITA No 442/Ahd/2013
. A.Y. 2004-05
IN THE INCOME TAX APPELLATE TRIBUNAL " D " BENCH, AHMEDABAD
(BEFORE SHRI MUKUL Kr. SHRAWAT J.M. & SHRI ANIL CHATURVEDI, A.M.)
I.T. A. No. 442 /AHD/2013
(Assessment Year: 2004-05
The ACIT, Circle-3, 3rd Floor, Vs. M/s Ishan Dyes & Chemicals
Aaykar Bhavan Race Course Ltd.
Circle, Baroda 1st, Dinshaw Chamber,
Borsad.
(Appellant) (Respondent)
PAN: AAACI 4911 R
Appellant by : Shri T. Sankar Sr. D.R.
Respondent by : Shri B.T. Thakkar A.R
आदे श)/ORDER
(आदे Date of hearing : 10-06-2013 Date of Pronouncement : 05-07-2013 PER SHRI ANIL CHATURVEDI,A.M.
1. This appeal is filed by the Revenue against the order of CIT(A)-V, Baroda dated 16.11.2012 for A.Y. 2004-05.
2. The facts as culled out from the order of lower authorities are as under.
3. The Assessee is a public limited company engaged in the business of manufacture and sale of chemicals. It filed its return of 2 ITA No 442/Ahd/2013 . A.Y. 2004-05 income on 01.11.2004 declaring total loss of Rs. 3,15,44,144/-. The case was selected for scrutiny and thereafter the assessment was framed under Section 143(3) vide order dated 27.12.2006 and the total business loss was determined 2,85,67,144/-. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) vide order dated 16.11.2012 granted partial relief to the Assessee. Aggrieved by the aforesaid order of CIT(A) Revenue is now in appeal before us and has raised the following ground:-
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 29,77,000/-
without appreciating the fact that the assessee failed to explain the reasons for the fall in GP considerably during the year compared to the immediately preceding year even though there was no change in the line of activity of assessee company or there was no any change in the products being manufactured by the assessee.
4. During the course of assessment proceedings, Assessing Officer noticed that the gross profit for the year had fallen to 10.84% as against 12.56% for A.Y. 2003-04. He also noticed that there was no change in the line of activity for manufacturing process and therefore according to him the GP should not have varied in large proportion. The Assessee was therefore asked to explain the fall in GP of 1.72%. Assessee interalia submitted that due to the fall in sales, there was fall in GP. He further submitted that during the year the company had done job work and the margins in job work are less as compared to the sales on own account. The aforesaid submissions of the Assessee was not found acceptable to the Assessing Officer. He noticed that on comparison of expenses, 3 ITA No 442/Ahd/2013 . A.Y. 2004-05 major manufacturing expenses had not gone down. He thus concluded that the Assessee could not prove and substantiate its claim for fall in GP. He further noted that for A.Y. 2002-03 a lump sum addition was made to compensate fall in GP. He accordingly following the decision of his predecessor for A.Y. 2002-03 made a lump sum addition of Rs. 29.77 lacs by applying GP of 1.72% on the total sales of 17.30 crores. Aggrieved by the order of Assessing Officer, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee deleted the addition by holding as under:-
"4.2 I have given my careful consideration to the facts of the case as also the observation of the AO and the arguments put forth by the AR. The AO has failed to point out any specific defect in the books of account maintained by the appellant. Even the books of account have not been rejected. There is a decline in the turnover of the appellant, cost of certain raw materials has gone up sharply and average realisations from finished goods have decreased between 1% and 2%. Moreover, the appellant has done a lot of job work during the year(current year Rs.3,96,35,674/- preceding year Rs.76,98,040/-) which may also be a contributing factor to decline in GP. Looking to the facts mentioned in the submission of the appellant and also looking to the fact that the AO has not brought out any material on record to show that books of account maintained by the appellant are not correct or complete, I'm of the opinion that the AO was not justified in making a lump sum addition of Rs.29,77,000/- to the total income of the appellant. Addition made by the AO is hereby delete".
5. Aggrieved by the aforesaid order of CIT(A) Revenue is now in appeal before us.
6. Before us, the learned D.R. relied on the order of Assessing Officer. The learned A.R. on the other hand reiterated the 4 ITA No 442/Ahd/2013 . A.Y. 2004-05 submissions made before CIT(A). He further submitted that during the year income from job charges was higher as compared to the earlier assessment years and the margins in job work charges were less as compared to manufacturing on own account. He further submitted that the job work was undertaken due to the financial crunch and it was difficult for the Assessee to produce goods on its own account by purchase of raw materials. He thus submitted that since the margins in job work charges are less and the same was included in turnover for calculating GP margins, it has directly affected the total GP margins and the fall in GP ratio is therefore well explained.
7. The learned A.R. further submitted that the books of ac count are audited under the Companies Act as well as under Section 44AB of the Act. All the transactions are duly supported by proper bills and vouchers. He further submitted that the Assessing Officer has not found any defect in the books or there is no finding about unrecorded sales or inflated purchases or expenses. The method of accounting and stock valluation are also similar as compared to earlier years. He further submitted that the books of account were not rejected by the Assessing Officer and therefore no lump sum addition on account of fall in GP could be made in the case of assessee. He further submitted that in assessee's own case for A.Y. 2005-06, the Hon. Tribunal in ITA NO. 1582/Ahd/2010 (order dated 4.01.2013) dismissed the appeal of the Revenue. He placed on record the aforesaid order of Tribunal. He thus supported the order of CIT(A).
5 ITA No 442/Ahd/2013
. A.Y. 2004-05
8. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the assessee's income from job work in the year under appeal was Rs. 3.96 Crore as compared to Rs. 76.98 lacs in the immediately preceding year. Before us, the learned A.R. has submitted that the margin in job work charges are less as compared to the sales made on own account. In the written submissions before CIT(A), the Assessee has submitted that the sales (including job work) has reduced by 32.13% whereas on the other hand, the expenses on account of salary and wages have increased by 10.06%. The aforesaid factual position has not been controverted by Revenue by bringing any contrary material on record. We further find that CIT(A) while granting relief has given the finding that there is a decline in turnover and the cost of certain raw materials have gone up sharply and the average realization from finished goods have decreased between 1 and 2%. Further Assessing Officer has not brought any material on record to prove that the books of account are incomplete or are incorrect. We further find that the Co- ordinate Bench in ITA NO. 1582/Ahd/2010 order dated 4.01.2013 on identical facts had deleted the addition by holding as under:-
17. In the present case the books of accounts have not been rejected by Assessing Officer nor has any defect been pointed out in the books of accounts. CIT(A) though has granted partial relief to the assessee has held that in the context of reduced turnover in the current year, increased expenditure partly explains the negative G.P. during the year. Considering the aforesaid factual position and in the light of aforesaid decisions, of High Court and CO-ordinate bench of Tribunal, we are of the view that in the present case the Assessing Officer was not 6 ITA No 442/Ahd/2013 . A.Y. 2004-05 right in making addition. Thus this ground of the assessee is allowed and that of Revenue is dismissed.
9. Before us, the Revenue has not brought any material on record to prove that the facts of the case in the year under appeal are different than that of earlier years. Thus considering the totality of facts and following the aforesaid decision in the assessee's own case for A.Y. 2005-06, we find no reason to interfere with the order of CIT(A) and thus this ground of Revenue is dismissed.
10. In the result the appeal of the Revenue is dismissed.
Order pronounced in Open Court on 05 -07- 2013.
Sd/- Sd/-
(MUKUL KR. SHRAWAT) (ANIL CHATURVEDI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
TRUE COPY
Ahmedabad.
Rajesh
Copy of the Order forwarded to:-
1. The Appellant.
2. The Respondent.
3. The CIT (Appeals) -
4. The CIT concerned.
5. The DR., ITAT, Ahmedabad.
6. Guard File.
By ORDER
Deputy/Asstt.Registrar
ITAT,Ahmedabad