2015 (6) TMI 6 - AT - Income Tax

Tax Tribunal Affirms Findings, Rejects Assessee's Appeal

M/s. Mundra Woolen Mills (P) Ltd. Versus The ACIT Circle- 2, Ajmer

M/s. Mundra Woolen Mills (P) Ltd. Versus The ACIT Circle- 2, Ajmer - TMI Issues Involved:1. Validity of survey proceedings.2. Discrepancies in stock valuation and trading addition.3. Decline in Gross Profit (G.P.) rate and trading addition.4. Service of notice under Section 143(2) of the Income Tax Act.Detailed Analysis:1. Validity of Survey Proceedings:The assessee challenged the survey proceedings as unlawful, arbitrary, hypothetical, fabricated, unfair, and unreliable. The tribunal found that the survey was conducted under proper authorization as per Section 133A of the Income Tax Act. The survey team showed the authorization to the Director, who signed it. The tribunal noted that the assessee was non-cooperative, as evidenced by the three-day duration of the survey and the impounding of 51 books of account. The tribunal upheld the findings of the lower authorities, stating that the survey proceedings were conducted in a normal manner and the allegations of harassment were unfounded.2. Discrepancies in Stock Valuation and Trading Addition:The assessee contested the discrepancies in stock valuation and the resultant trading addition of Rs. 18,46,187. The tribunal noted that the stock inventory was prepared by the survey team with the assistance of the assessee's employees and was duly signed by the Director. The tribunal found that the assessee failed to reconcile the differences in stock figures generated from the computer and the stock register. The tribunal upheld the rejection of the books of account under Section 145(3) of the Act and confirmed the addition based on the gross profit rate of 16.22%, which was the rate declared by the assessee in the previous year.3. Decline in Gross Profit (G.P.) Rate and Trading Addition:The assessee did not provide satisfactory reasons for the decline in the G.P. rate during the year. The tribunal noted that the Assessing Officer had applied the G.P. rate of the preceding year (16.22%) on the declared sales, resulting in a trading addition of Rs. 16,53,869. The tribunal upheld the findings of the lower authorities, stating that the assessee had not given any cogent reply to explain the reasons for the decline in G.P. rate.4. Service of Notice under Section 143(2) of the Income Tax Act:The assessee claimed that the notice under Section 143(2) was not served, making the assessment order invalid. The tribunal noted that the notice was issued and dispatched by speed post, and the assessee had cooperated in the assessment proceedings. The tribunal referred to Section 292BB of the Act, which precludes the assessee from raising objections regarding the service of notice if they have cooperated in the proceedings. The tribunal also cited the Punjab & Haryana High Court's ruling in VRA Cotton Mill Pvt. Ltd. Vs. Union of India, which states that a notice is deemed to be served once it is signed and put in the course of transmission unless proven otherwise. The tribunal concluded that the notice was properly served, and the assessment order was valid.Conclusion:The tribunal dismissed the appeal of the assessee, upholding the findings of the lower authorities on all grounds, including the validity of survey proceedings, discrepancies in stock valuation, decline in G.P. rate, and the service of notice under Section 143(2) of the Income Tax Act.