2013 (7) TMI 82 - AT - Income Tax

Condonation of delay - Held that - As decided Vijayeswari Textiles Ltd. vs. CIT 2001 (10) TMI 36 - MADRAS High Court Tribunal did not stop with the order declining to condone the delay, but considered the matter on the merits and has practically treated the appeal as being properly before it and has answered the question brought before it with reference to the material placed on record. Thus delay in filing the appeal before the CIT(A) is deemed to have been condoned by the CIT(A). Estimation of GP - @ 21.61% as reported by assessee or @ 32% as per AO as comparing with other concerns engaged in the same line of business - Held that - As the assessee could not produce the vouchers in respect of various expenses claimed by it AO was justified in rejecting the book results. As Gross Profit rate disclosed by other concerns engaged in the similar line of business was in the range of 28.92% to 31.22% & before the tax authorities, the assessee has stated that the sale of inferior quality items was high vis-a-vis the high quality items & the profit margin in respect of inferior quality item is usually low, since the assessee could not substantiate the said explanation the rate of gross profit is required to be estimated on the basis of other external information - the issue would meet the ends of justice, if the rate of gross profit in the instant case is estimated at 28%. Partly in favour of assessee.

Summary

Issues:
1. Delay in filing the appeal and condonation of delay.
2. Estimation of income by the Assessing Officer based on Gross Profit ratio.
3. Disposal of the appeal on merits after refusing to condone the delay.

Issue 1: Delay in filing the appeal and condonation of delay:
The assessee challenged the decision of the Ld. CIT(A) for refusing to condone the delay in filing the appeal and confirming the estimated income by the Assessing Officer. The delay of 58 days was attributed to a change in management, preventing timely appeal filing. The Ld. Counsel argued that a reasonable cause existed for the delay, emphasizing that the Ld. CIT(A) erred in dismissing the appeal solely on technical grounds. The Ld. DR, however, supported the Ld. CIT(A)'s decision. The Tribunal, referencing a similar case before the High Court of Madras, held that by disposing of the appeal on merits despite refusing to condone the delay, the delay was deemed condoned. Consequently, the delay in filing the appeal was considered condoned.

Issue 2: Estimation of income by the Assessing Officer based on Gross Profit ratio:
The Assessing Officer calculated the Gross Profit ratio at 32% instead of the reported 21.61% by the assessee, citing industry standards where ratios ranged from 28.92% to 31.22%. The Tribunal noted that the assessee failed to provide vouchers for claimed expenses, justifying the rejection of book results. Despite the argument that the sale of inferior quality items impacted profit margins, the Tribunal found insufficient substantiation. Considering comparable cases and external information, the Tribunal determined a fair Gross Profit rate of 28%, differing from the Assessing Officer's estimation. Consequently, the Tribunal partially allowed the appeal based on this revised Gross Profit rate.

Issue 3: Disposal of the appeal on merits after refusing to condone the delay:
The Tribunal deliberated on whether the Ld. CIT(A) was justified in deciding the appeal on merits post refusing to condone the delay. Citing the High Court of Madras case, the Tribunal concluded that by addressing the appeal's merits despite the delay, the delay was effectively condoned. The Tribunal's decision aligned with the Madras High Court's ruling, indicating that by proceeding with the appeal on merits, the delay was implicitly forgiven. As a result, the Tribunal upheld the appeal partially based on the merits of the case and the deemed condonation of the delay.

In conclusion, the judgment addressed the issues of delay in filing the appeal, estimation of income based on Gross Profit ratio, and the disposal of the appeal on merits following the refusal to condone the delay. The Tribunal's decision provided clarity on these matters, referencing relevant legal precedents and industry standards to arrive at a fair resolution for the parties involved.