Salem Steel Company v. The Commissioner Of Income Tax Chennai

In the High Court of Judicature at Madras Dated : 4.10.2007 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mrs.Justice CHITRA VENKATARAMAN Tax Case (Appeal) No. 1304 of 2007 Salem Steel CompanyNo.83, Arcot RoadRajeswarai NagarPorur, Chennai 600 116. .. Appellant/AppellantVs The Commissioner of Income TaxChennai. .. Respondent/Respondent TAX CASE (APPEAL) under Section 260A of the Income Tax Actagainst the order of the Income Tax Appellate Tribunal Madras 'C'Bench dated 4.5.2007 made in I.T.A.Nos.1916 /Mds/2005 for theassessment year 2002-03 against the order of the Commissioner ofIncome Tax (Appeals) IX dated 24.6.2005 in IT/Appeal No.108/2005-06and against the assessment order of Income Tax officer, Ward I (4)Tambaram dated 31.3.2005 in PAN/GIR.No.AABFS44408. For Appellant : Mr.T.N.SeetharamanJUDGMENT JUDGMENT OF THE COURT WAS DELIVERED BY CHITRA VENKATARAMAN,J The appeal is filed against the order of the Income TaxAppellate Tribunal made in I.T.A.No.1916 /Mds/2005 seekingadmission on the following substantial questions of law:-1. Whether the Appellate Tribunal is rightin law in merely upholding the order of theCommissioner of Income Tax (Appeals) withoutgiving any independent reasoning or finding onthe issue raised before it ? 2. Whether the Appellate Tribunal is rightin law in confirming the addition to GrossProfit without considering the contention thatthe appellant had furnished its return of https://hcservices.ecourts.gov.in/hcservices/ income for the year based on Books of Accountduly audited under Section 44AB of the Act andno defects or omissions were found in the booksof Account in the course of the assessmentproceedings by the assessing officer ?" 2. The assessee is a partnership firm carrying on business aswholesale dealer in cement. In respect of the assessment year2002-03, the assessee filed its return admitting total income ofRs.8,62,790/-. A survey under Section 133A of the Act wasconducted in the business premises of the assessee on 18.3.2002just 13 days prior to go for completion of accounts. At the timeof survey, it was found that the accounts were maintained in thecomputer and as against the various entries posted in thecomputer, primary evidence in the form of vouchers or receiptswere not available. Further, it was also stated at the time ofsurvey that an accounting data entry operator was working onthe computer, but no accounts were produced before the assessingauthority. It is stated that no documents were produced beforethe assessing authority even on the next day of survey or within areasonable time of 15 days either in the correct computerisedformat or manual accounts with relevant primary evidence. Hence,the assessing Officer took the view that the print out of accountbooks were produced only during the assessment proceedings longafter the date of survey taking enough time to make conveniententries. It was also found that the assessee was not in thehabit of maintaining the statutory accounts in the course ofbusiness but conveniently entering into the computer after theclose of the year making only necessary entries to suit itsconvenience. On the face of these facts, the assessing authorityfound that the Gross profit as per the computer data on the dateof survey was nowhere near the profit shown to the department.Considering the same, the assessing authority went in forcomparable cases, where the gross profit rate was admitted to bearound at 4% to 6% and proceeded to estimate the Gross profit ofthe assessee at 4% as against the gross profit disclosed by theassessee at 2.77%. 3. Aggrieved by the same, the assessee filed an appealbefore the appellate authority, the Commissioner of Income Tax(Appeals), who went into the question of estimation as well ason the maintenance of accounts. The appellate authority foundthat there was no legal infirmity in the assessment proceedingsand that the assessing officer was justified in rejecting thebook results and estimating the gross profit at 4% of the turn overas against 2.77% declared by the assessee by placing reliance onthe similar comparable cases. The appellate authority found thatthe gross profit in the case of the appellant worked out to 5.157%and in the case of M/s.MRL Agencies it worked out 5.872% and there was difference of .715%. It was found that the contention of theassessee to ignore the aforesaid difference of .715% might not beof much help to the assessee on the ground that the appellant hasseveral advantages over the other comparable cases. In thesecircumstances, the Commissioner of Income Tax (Appeals) confirmedthe order of the assessing authority and thereby dismissed theappeal. 4. The assessee went on further appeal before the Income TaxAppellate Tribunal, who after confirming the order of theCommissioner of Income Tax (Appeals) came to the conclusion thatthe there was no infirmity in the order of the authorities belowand the Commissioner of Income Tax (Appeals) had rightlyincreased the gross profit by .7.15%. Accordingly the Tribunaldismissed the appeal filed by the assessee. The correctness of thesaid order is now put in issue before this Court by framing thesubstantial questions of law as stated above. 5. Learned counsel appearing for the appellant submittedthat the Tribunal erred in not dealing with the various groundsraised in the appeal and the arguments advanced at the time ofhearing regarding rejection of books of account. He submittedthat the Tribunal has not considered the various groundsraised in the appeal in the judicial manner. Learned counselappearing for the appellant placed reliance on the decision inSOUTH INDIA SURGICAL CO. P. LTD., VS. ASSISTANT COMMISSIONER OFINCOME TAX (263 ITR 5), wherein this Court remanded the matter tothe Appellate Tribunal for fresh consideration of the specificissue alone and sought for similar reliefs. 6. We have gone through the judgment of this Court, whereinone of the contentions raised by the assessee was that theTribunal had not dealt with the specific issue raised in theappeal. This Court after going into the grounds taken in theappeal came to the conclusion that the matter merited remand forfresh consideration by the Tribunal. We do not find anyjustification to extend the decision to the benefit of theassessee in this case. 7. A perusal of the assessment order clearly shows that theassessing officer had pointed out categorically that the accountsof the assessee had not been maintained regularly and properlysupported by basic materials. The survey was conducted in thefag end of the accounting year only to point out that the statutoryaccounts maintained in the Company were incomplete or not updatedfor several months. The books of accounts were incomplete. Hugediscrepancies were noticed during the survey which remainedunexplained. There were no contemporary evidence to support thedata produced at the time of survey. Consequently, the assessing 7. A perusal of the assessment order clearly shows that theassessing officer had pointed out categorically that the accountsof the assessee had not been maintained regularly and properlysupported by basic materials. The survey was conducted in thefag end of the accounting year only to point out that the statutoryaccounts maintained in the Company were incomplete or not updatedfor several months. The books of accounts were incomplete. Hugediscrepancies were noticed during the survey which remainedunexplained. There were no contemporary evidence to support thedata produced at the time of survey. Consequently, the assessing officer went for comparison of cases similar to that of theassessee and ultimately came to the conclusion that the grossprofit admitted by the assessee at 2.77% could not be accepted.The Commissioner of Income Tax (Appeals) found that thedifference of .715% has to be added in the gross profit of theassessee on the basis of the comparable cases produced by theassessee and the relative advantage that the assessee enjoyed overothers. In the Circumstances, rightly the Tribunal held thatthere was no infirmity in the order of the Commissioner of Tax(Appeals) in arriving at the gross profit. The Tribunalultimately upheld the order of the authorities below .Considering the analytical manner, in which the Commissioner ofIncome Tax (Appeals) has considered the case, the Tribunal rightlyconfirmed the findings on facts. As the issue involved is one offact, we do not find any justification to accept the plea of theassessee that the Tribunal had not independently considered theclaim of the assessee to pass an order. Considering the nature ofthe jurisdiction of this Court under Section 260A and there beingno question of law arising out of the impugned order of theTribunal, we do not find any grounds to admit the appeal. 8. For the foregoing reasons, we do not find any reason toentertain the tax case appeal and the same is liable to bedismissed and accordingly the same is dismissed. Krr/Sd/Asst.Registrar/true copy/Sub Asst.Registrar To 1.The Assistant Registrar, Income-Tax Appellate Tribunal, IIIFloor, Rajaji Bhavan, Besant Nagar, Madras 90 2.The Income Tax Officer, Ward -1(4), Tambaram 3. The Commissioner of Income Tax (Appeals) IX, Chennai. 4. The Commissioner of Income Tax, Chennai. + 1 cc to Mr. T. N. Seesharaman, Advocate SR No. 61947 NSM(CO)SR/6.12.2007 Tax Case (Appeal) No.1304 of 2007