GP ratio as per the audited accounts of the assessee is valid and princle of Resjudicat does not apply to IT proceedings

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “E”, NEW DELHI

BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER

AND

SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

I.T.A. No. 1285/Del/2012

A.Y.: 2007-08

Asstt. Commissioner of Income Tax,

Central Circle-9, New Delhi

Room No. 357, ARA Centre, E-2

Jhandewalan Extn.,

New Delhi

(Appellant)

Vs.

M/s Moets Bar-B-Cue,

50, Defence Colony Market,

New Delhi – 110 024

(PAN/GIR NO.: AAAFM7936M)

 (Respondent)

Assessee by: Sh. Anil Jain & Sh. Rishab Jain, Advocates

Department by: S h. R.S. Negi, Sr. D.R.

ORDER

PER SHAMIM YAHYA: AM

This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XXXII, New Delhi dated 03.1.2012 pertaining to assessment year 2007-08.

2. The grounds raised in the appeal by the Revenue read as under:-

“1. That the Ld. Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of ` 16,20,725/- by holding that the GP rate of 24.54% as shown by the assessee on the basis of audited accounts was to be accepted instead of GP rate of 30% applied by the Assessing Officer for making the addition.

2(a). The order of the Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts.

(b). The appellant craves leave to add, alter or amend any / all of the ground of appeal before or during the course of the hearing of the appeal.”

3. In this case Assessing Officer noted that during the year under consideration the assessee declared GP rate in Restaurant business @ 24.93%. In the absence of complete supporting evidences, and in the absence of justification of GP ratio applied, the GP rate was considered @ 30% as applied in the earlier years. The GP on the total sales of ` 3,19,65,579/- by applying GP ratio 2 30% was worked out at ` 95,90,081/-. The undeclared GP computed in view of the above discussion was worked out as under:-

GP worked out as above - 95,90,081/-

Less GP declared - 79,69,358/-

Undisclosed GP - 16,20,725/-

4. Upon assessee’s appeal Ld. Commissioner of Income Tax (Appeals) noted that Assessing Officer has not given any specific reason for estimation of GP @ 30% as against the GP rate of 24.54% as declared by the assessee. He has simply stated that in absence of justification of the GP declared, the GP is estimated at 30% as in earlier years. Ld. Commissioner of Income Tax (Appeals) further noted that however the estimation made in earlier years has been knocked down in appeal by the Tribunal. The tribunal had found the GP rate declared by the assessee as per their audited accounts as reasonable for the immediately preceding year at 20.53% whereas the assessee has declared GP rate of 24.54% in the instant year which is higher by 4.1% as compared to the immediately preceding year. Ld. Commissioner of Income Tax (Appeals) further observed that though the principle of res judicata does not apply to the income tax proceedings, the Assessing Officer has not brought any adverse material on record to disturb the book results shown by the assessee during the relevant previous year. Like in A.Y. 2006-07, no unrecorded sales have been found during the instant assessment year. Therefore, Ld. Commissioner of Income Tax (Appeals) held that following the reasoning given by the ITAT in the above cited order in the assessee’s own case, it is held that it will not be proper to presume that the assessee earned a GP rate of 30% in the instant A.Y. without there being any material indicating this fact. Ld. Commissioner of Income Tax (Appeals) concluded that the GP rate as declared by the assessee on the basis of audited accounts at 24.54% is to be accepted in the absence of any adverse material on record. Ld. Commissioner of Income Tax (Appeals) observed that the addition made by the Assessing Officer was merely on presumption and therefore, not sustainable and accordingly deleted.

5. Against the above order the Revenue is in appeal before us.

6. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that Assessing Officer in this case has not rejected the books results of the assessee, nor has given any specific reasoning why the GP rate adopted by the assessee should be disturbed. Assessee has shown GP rate 24.54%. 20.53% GP was accepted by the Tribunal in the assessee’s own case in earlier years. Thus, nothing has been brought on record to prove lacunae in the assessee’s books of accounts, neither any reason has been stated why the GP rate should be disturbed and GP should be estimated at 30%. We find that there is no cogent basis in the Assessing Officer’s decision in making the addition in this case. In our considered opinion, Ld. Commissioner of Income Tax (Appeals) has taken a right view in the matter which does not need any interference on our part. Accordingly, we uphold the same.

7. In the result, the appeal filed by the Revenue stands dismissed.

Order pronounced in the open court on 16/5/2012, upon conclusion of hearing.

                                                    Sd/-                                 Sd/-

                                            [A.D. JAIN]               [SHAMIM YAHYA]

                                     JUDICIAL MEMBER   ACCOUNTANT MEMBER

Date 16/5/2012

“SRBHATNAGAR”

Copy forwarded to: -

1. Appellant

2. Respondent

3. CIT

4. CIT (A)

5. DR, ITAT

TRUE COPY

By Order,

Assistant Registrar,

ITAT, Delhi Benches