Principal Commissioner Of Income ... vs M/S Kabra Plastics Pvt Ltd
2022 Latest Caselaw 6026 Guj

      C/TAXAP/274/2022                              ORDER DATED: 07/07/2022




              IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                         R/TAX APPEAL NO. 274 of 2022

==========================================================
                 PRINCIPAL COMMISSIONER OF INCOME TAX
                                 Versus
                       M/S KABRA PLASTICS PVT LTD
==========================================================
Appearance:
MRS KALPANAK RAVAL(1046) for the Appellant(s) No. 1
for the Opponent(s) No. 1
==========================================================

     CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
           and
           HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                               Date : 07/07/2022

                        ORAL ORDER

(PER : HONOURABLE MR. JUSTICE N.V.ANJARIA)

Heard learned advocate Mr. Nikunt Raval with learned advocate Ms. Kalpana Raval for the appellant.

2. The present Tax Appeal under section 260A of the Income Tax Act, 1961 seeks to challenge judgment and order dated 5.12.2019 of the Income Tax Appellate Tribunal, Surat Bench, Surat, in ITA No. 2539 of 2014.

2.1 The following substantial questions of law are proposed by the appellant department contending that they arise as substantial questions of law in relation to the impugned judgment.

(i) Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT is justified in deleting the addition of Rs. 4,87,61,536/- made on account of low GP in manufacturing activity as well as trading activity as compared to previous years,

C/TAXAP/274/2022 ORDER DATED: 07/07/2022

without appreciating that the books of accounts alongwith the supporting evidences of bills/vouchers including day to day stock register was not produced and evidenced before the A.O. during the assessment proceedings as evident from the assessment order and therefore the provisions of section 145(3) is rightly invoked by the A.O.?

(ii) Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT is justified in upholding the order of the Ld. CIT(A) without appreciating that the A.O. has estimated the G.P. after rejecting the books of accounts u/s. 145(3) of the IT Act as assessee has not produced the books of accounts along with the supporting evidences of bills/vouchers including day to day stock register during the assessment proceedings nor the A.O. was given any opportunity by way of remand proceedings to make further submission on the assessee's claim before the Ld. CIT(A) and therefore, the order of the Hon'ble ITAT is perverse ?

3. The respondent assessee company filed its e-return on 28.09.2010 for the Assessment Year 2010-2011. The Assessment was finalised on 14.3.2013 under section 143(3) of the Income Tax Act, 1961. The Assessment Officer made addition of Rs. 4,87,61,536/- in the total income treating such amount chargeable to income tax.

3.1 The Assessing Officer found that in the year under consideration, the manufacturing and trading activity had plummeted compared to the previous years. In the Assessment Year 2008-2009, the manufacturing activity was 3.21% which jumped to 15.53% in the Assessment Year 2009-2010. It got reduced to 8.06% in the year under consideration, i.e.

C/TAXAP/274/2022 ORDER DATED: 07/07/2022

Assessment Year 2010-2011. The trading activity also witnessed fall for the Assessment Year 2008-2009 from 19.34% to 5.20% in the Assessment Year 2009-2010 and 0.79% in the Assessment Year 2010- 2011. The overall decline was 8.93 % and 8.44% in the manufacturing activity and trading activity respectively.

3.2 The Assessing Officer upon forming such opinion adopted gross profit rate by taking average gross profit of preceding three years including current year in respect of manufacturing and trading activity and by adopting the gross profit rate, estimated gross profit for manufacturing activity to be of Rs. 57,89,194/- and in the trading activity, estimated gross profit at Rs. 4,29,72,342/-. Thus, total amount of Rs. 4,87,61,537/- was added to the total income on account of low gross profit.

3.3 In the appeal preferred by the Assessee, the Commissioner of Income Tax (Appeals)-the Appellate Authority observed that Assessing Officer had rejected the Books of Accounts on the ground that the appellant had not maintained the day-to-day register and quantity-wise register; the appellant had not furnished the complete details with supporting evidence in respect of various expenses and that the appellant had not produced complete set of books of accounts etc.. The details which were not before the Assessing Officer, however, were furnished in the appellate proceedings.

3.4 All the relevant materials was available before the Appellate Authority. The Appellate Authority was therefore satisfied on the basis of such material to observe in its order as under,

"...it is clear that appellant furnished all the relevant details as mentioned by the AO and produced the complete books of account during the assessment proceedings. The appellant has filed the copy of letter dated 8.3.2013, submitted to AO during assessment proceedings, wherein at

C/TAXAP/274/2022 ORDER DATED: 07/07/2022

page-8 of Exhibit-A, appellant has clearly mentioned that complete books of account, alongwith excise records, were produced before AO. On the same page, it is also mentioned that the appellant maintained quantitative records of goods, both manufacturing and trading, and such records have been audited by excise authorities also and no discrepancy was found by them".....

3.5 It was further noted by the Appellate Authority that the Assessee had furnished the purchase book, sales book, sales bills and such other evidences with quantitative details. The appellant in his letter also mentioned the details of expenses supported by bills, vouchers and challans. It was accordingly observed that the Assessing Officer was not justified in coming to the conclusion that the details were not available and supporting documents were not produced as subsequently they were produced in the appellate proceedings.

3.6 The Appellate Authority recorded further,

"...The appellant has reconciled the difference in transactions with the parties to whom notices u/w. 133(6) were issued by AO and also justified the allowance of expenses u/s. 40(a)(ia) of the Act. From the above, it is evident that reasons given by the AO for rejecting the books of account u/s. 145(3) are based on wrong facts and against the truth. Complete books of account and supporting evidence were produced before him and he failed to find any defect irregularity in them. The conclusion drawn by AO that the assessee has not maintained day to day register and quantity-wise quality register is also not correct which is evidence from the submission of appellant. In absence of any defect or irregularity found in the books of account and other details produced by appellant or submissions made by it, the provisions of section 145(3) cannot be invoked."

4. When the Revenue preferred appeal before Income Tax Appellate Tribunal, the Tribunal concurred with the findings recorded by the Commissioner of Income Tax (Appeals). The Tribunal noted the observations in paragraph No.5 of the appellate authority in the order and confirmed the findings recorded by the Appellate Authority taking the view that provisions of section 145(3) of the Act were not applicable and

C/TAXAP/274/2022 ORDER DATED: 07/07/2022

fall in the gross profit was explained as turnover during the year also had increased from Rs. 14 crores to 38 crores. It was further noted that similarly in the Assessment Year 2012-2013, gross profit dropped from 2.19% to 1.41%. The Tribunal also recorded that any defect in the maintenance of the Books of Accounts was not found. Therefore, the addition of profit made by the Assessing Officer was rightly deleted by the Appellate Authority, the Tribunal concluded.

5. The concurrent findings were recorded by the Appellate Authority as well as the Income Tax Appellate Tribunal in holding that the invocation of section 145(3) of the Act and the consequential addition in respect of gross profit by the Assessing Officer was not proper. The findings arrived at were based on the material before the Appellate Authority in the appeal proceedings. The material was appreciated and therefrom the Commissioner of Income Tax (Appeals) could justify fall in the gross profit. The addition was accordingly directed to be deleted by the Appellate Authority and was confirmed by the Tribunal. The finding recorded based on appreciation of materials and documentary evidence are in the realm of finding of fact.

6. The view of the Appellate Authority and the Tribunal requires no interference.

7. The appeal does not raise any substantial question of law proposed by the appellant much less any other substantial questions of law. The appeal stands dismissed.

(N.V.ANJARIA, J)

(BHARGAV D. KARIA, J) C.M. JOSHI