High Court Of Madras
Salem Steel Company vs. CIT
Section 44AB, 145
Asst. Year 2002-03
K. Raviraja Pandian & Mrs. Chitra Venkataraman, JJ.
Tax Case (Appeal) No. 1304 of 2007
4th October, 2007
Counsel Appeared :
T.N. Seetharaman, for the Appellant
JUDGMENT
Mrs. Chitra Venkataraman, J. :
The appeal is filed against the order of the Tribunal made in ITA No. 1916/Mad/2005 seeking admission on the following substantial questions of law :
“1. Whether the Tribunal is right in law in merely upholding the order of the CIT(A) without giving any independent reasoning or finding on the issue raised before it ?
2. Whether the Tribunal is right in law in confirming the addition to gross profit without considering the contention that the appellant had furnished its return of income for the year based on the books of account duly audited under s. 44AB of the Act and no defects or omissions were found in the books of account in the course of the assessment proceedings by the AO ?”
2. The assessee is a partnership firm carrying on the business as wholesale dealer in cement. In respect of the asst. yr. 2002-03, the assessee filed its return admitting a total income of Rs. 8,62,790. A survey under s. 133A of the Act was conducted in the business premises of the assessee on 18th March, 2002, just 13 days prior to go for completion of accounts. At the time of survey, it was found that the accounts were maintained in the computer and as against the various entries posted in the computer primary evidence in the form of vouchers or receipts were not available. Further, it was also stated at the time of survey that an accounting data entry operator was working on the computer, but no accounts were produced before the assessing authority. It is stated that no documents were produced before the assessing authority even on the next day of survey or within a reasonable time of 15 days either in the correct computerised format or manual accounts with relevant primary evidence. Hence, the AO took the view that the printout of account books were produced only during the assessment proceedings long after the date of survey taking enough time to make convenient entries. It was also found that the assessee was not in the habit of maintaining the statutory accounts in the course of business but conveniently entering into the computer after the close of the year making only necessary entries to suit its convenience. On the face of these facts, the assessing authority found that the gross profit as per the computer data on the date of survey was nowhere near the profit shown to the Department. Considering the same, the assessing authority went in for comparable cases, where the GP rate was admitted to be around at 4 per cent to 6 per cent, and proceeded to estimate the gross profit of the assessee at 4 per cent as against the gross profit disclosed by the assessee at 2.77 per cent.
Aggrieved by the same, the assessee filed an appeal before the appellate authority, the CIT(A), who went into the question of estimation as well as on the maintenance of accounts. The appellate authority found that there was no
legal infirmity in the assessment proceedings and that the AO was justified in rejecting the book results and estimating the GP at 4 per cent of the turnover as against 2.77 per cent declared by the assessee by placing reliance on the similar comparable cases. The appellate authority found that the gross profit in the case of the appellant worked out to 5.157 per cent and in the case of Ms. MRL Agencies it worked out 5.872 per cent and there was difference of 0.715 per cent It was found that the contention of the assessee to ignore the aforesaid difference of 0.715 per cent might not be of much help to the assessee on the ground that the appellant has several advantages over the other comparable cases. In these circumstances, the CIT(A) confirmed the order of the assessing authority and thereby dismissed the appeal.
The assessee went on further appeal before the Tribunal, who after confirming the order of the CIT(A) came to the conclusion that there was no infirmity in the order of the authorities below and the CIT(A) had rightly increased the GP by 0.715 per cent. Accordingly the Tribunal dismissed the appeal filed by the assessee. The correctness of the said order is now put in issue before this Court by framing the substantial questions of law as stated above.
Learned counsel appearing for the appellant submitted that the Tribunal erred in not dealing with the various grounds raised in the appeal and the arguments advanced at the time of hearing regarding rejection of books of account. He submitted that the Tribunal has not considered the various grounds raised in the appeal in the judicial manner. Learned counsel appearing for the appellant placed reliance on the decision in South India Surgical Co. (P) Ltd. vs. Asstt. CIT (2004) 186 CTR (Mad) 685 : (2003) 263 ITR 5 (Mad), wherein this Court remanded the matter to the Tribunal for fresh consideration of the specific issue alone and sought for similar reliefs.
We have gone through the judgment of this Court, wherein one of the contentions raised by the assessee was that the Tribunal had not dealt with the specific issue raised in the appeal. This Court after going into the grounds taken in the appeal came to the conclusion that the matter merited remand for fresh consideration by the Tribunal. We do not find any justification to extend the decision to the benefit of the assessee in this case. A perusal of the assessment order clearly shows that the AO had pointed out categorically that the accounts of the assessee had not been maintained regularly and properly supported by basic materials. The survey was conducted in the fag end of the accounting year only to point out that the statutory accounts maintained in the company were incomplete or not updated for several months. The books of account were incomplete. Huge, discrepancies were noticed during the survey which remained unexplained. There were no contemporary evidence to support the data produced at the time of survey. Consequently, the AO went for comparison of cases similar to that of the assessee and ultimately came to the conclusion that the gross profit admitted by the assessee at 2.77 per cent could not be accepted. The CIT(A) found that the difference of 0.715 per cent, has to be added in the gross profit of the assessee on the basis of the comparable cases produced by the assessee and the relative advantage that the assessee enjoyed over others. In the circumstances, rightly the Tribunal held that there was no infirmity in the order of the CIT(A) in arriving at the gross profit. The Tribunal ultimately upheld the order of the authorities below. Considering the analytical manner, in which the CIT(A) has considered the case, the Tribunal rightly confirmed the findings on facts. As the issue involved is one of fact, we do not find any justification to accept the plea of the assessee that the Tribunal had not independently considered the claim of the assessee to pass an order. Considering the nature of the jurisdiction of this Court under s. 260A and there being no question of law arising out of the impugned order of the Tribunal, we do not find any grounds to admit the appeal.
For the foregoing reasons, we do not find any reason to entertain the tax case appeal and the same is liable to be dismissed and accordingly the same is dismissed.
[Citation : 322 ITR 349]
