M/s Ratnamani Technocast Ltd., Ahmedabad V. The Dy. CIT.,Circle-5, Ahmedabad

CO 205/AHD/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8845 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-09-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 27-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J P JANGID
• Assessee Lawyers: N C AMIN
• Keywords: Fair market value; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO. 1797/AHD/2010 A.Y: 2005-06 DCIT, CIRCLE-5, AHMEDABAD VS M/S. RATNAMANI TECHNOCAST LTD. PAN: AAACR 9279B (APPELLANT) (RESPONDENT) AND CO NO. 205/AHD/2010 (ARISING OUT OF ITA NO.1797/AHD/2010) A.Y: 2005-06 M/S. RATNAMANI TECHNOCAST LTD. PAN: AAACR 9279B VS DCIT, CIRCLE-5, AHMEDABAD (APPELLANT) (RESPONDENT) REVENUE BY : SHRI J.P. JANGID, SR. D.R. ASSESSEE(S) BY : SHRI N.C. AMIN, A.R. DATE OF HEARING : 05/09/ 2013 DATE OF PRONOUNCEMENT : 13/09/2013 O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THE REVENUE HAS FILED THIS APPEAL AND THE RESPONDEN T ASSESSEE HAS FILED A CROSS OBJECTION, BOTH ARISING FROM THE ORDE R OF LEARNED CIT(A)- XIV, AHMEDABAD, DATED 16.3.2010. GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS:- THE LD. COMMISSIONER OF INCOME TAX(A)-XI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.13,26,846/- ON ACCOUNT OF LOW G.P. ITA NO.1797/AHD/2010 AND CO NO.205/AHD/2010 DCIT AHMEDABAD VS. M/S. RATNAMANI TECHNOCAST L TD. A.Y. 2005-06 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3), DATED 12.10.2007 WERE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURING OF CAST ING. IT WAS NOTED BY THE AO THAT THE G.P. FOR THE YEAR UNDER CONSIDERATI ON WAS 15.16%. AS AGAINST THE G.P. OF THE PRECEDING YEAR 18.17%, A SH OW CAUSE WAS ISSUED TO JUSTIFY THE FALL IN GP RATE. THE AO HAS COMPARED THE BOOK RESULTS OF PAST YEARS. THE MAIN EXPLANATION OF THE ASSESSEE WA S THAT THE AVERAGE SALE PRICE OF THE ASSESSEE HAD GONE UP BY 17.91%. AS AGA INST THAT THE AVERAGE PRICE OF THE RAW MATERIAL HAD GONE UP FROM 30% TO 9 0%. BECAUSE OF THE PRICE INCREASE OF RAW MATERIAL, THE G.P. HAD GONE D OWN. THE ASSESEE HAS ALSO POINTED OUT THAT THE POWER AND FUEL EXPENSES H AVE ALSO GONE UP DURING THE YEAR UNDER CONSIDERATION. THE OBJECTION OF THE AO WAS THAT THE MAIN RAW MATERIAL WAS PURCHASED FROM A SISTER CONCE RN, NAMELY, RATNAMANI METALS AND TUBES LTD. THE TOTAL PURCHASES OF THE RAW MATERIAL WAS TO THE TUNE OF RS.2,23,05,254/- OUT OF WHICH TH E PURCHASES MADE FROM THE SISTER CONCERN WERE TO THE TUNE OF RS. 1,2 9,48,912/-. ON ACCOUNT OF THE SAID FACT, THE AO HAS ALLEGED THAT THE ASSES SEE HAD PURCHASED THE MATERIAL FROM SISTER CONCERN AT HIGHER PRICE THAN T HE PRICE PREVAILING IN THE MARKET. AFTER ASSIGNING THOSE REASONS, THE AO H AD ESTIMATED THE GP @ 20% ON THE TOTAL TURNOVER WHICH WAS WORKED OUT AT RS.1,09,02,503/-. SINCE, THE ASSESSEE HAD SHOWN THE G.P. OF RS.95,75, 657/-, THEREFORE, THE BALANCE RS.13,26,846/- WAS TAXED IN THE HANDS OF TH E ASSESSEE. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE LEARNED CIT(A). 3. LEARNED CIT(A) HAS REVERSED THE FINDINGS OF THE AO IN THE FOLLOWING MANNER:- ITA NO.1797/AHD/2010 AND CO NO.205/AHD/2010 DCIT AHMEDABAD VS. M/S. RATNAMANI TECHNOCAST L TD. A.Y. 2005-06 - 3 - I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AR O F THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER. I AM INCLINED TO ACCEPT THE CONTENTIONS PUT FORTH BY THE AR OF THE A PPELLANT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS SEEN THAT THE BOOK S OF ACCOUNTS OF THE APPELLANT ARE AUDITED UNDER THE PROVISIONS OF SECTI ON 44AB OF THE IT ACT.1961. WHILE APPLYING SECTION 145(3) OF THE ACT, THE ASSES SING OFFICER HAS NOT BROUGHT ON RECORD ANY DISCREPANCIES WITH REGARD TO THE BOOK S OF ACCOUNTS MAINTAINED BY THE APPELLANT. THE APPELLANT CONTENDED THAT THE FALL IN G.P. IS ATTRIBUTABLE TO INCREASED RAW-MATERIAL COST AND NO COMMENSURATE RISE IN SALE-PRICE. THE NECESSARY SUPPORTING EVIDENCE WAS FILED BEFORE THE AO. THEREFORE, HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DECISIONS RELIED BY THE AR OF THE APPELLANT. I AM O F THE VIEW THAT THE AO IS NOT JUSTIFIED IN REJECTING BOOKS OF ACCOUNTS AND MAKING ADDITION ON ACCOUNT OF LOW G.P. HENCE, THE ADDITION MADE BY THE AO ON THIS COU NT IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 4. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED TH E MATERIAL PLACED BEFORE US. THE APPLICABILITY OF THE PROVISIO NS OF SECTION 40A(1)(2)(A) HAVE BEEN DISCUSSED DURING THE COURSE OF HEARING. AS PER THIS SECTION, WHERE THE ASSESSEE INCURS ANY EXPENDI TURE IN RESPECT OF PAYMENT MADE TO ANY PERSON AS DEFINED IN THIS SECTI ON (SISTER CONCERN IN THIS CASE) AND THE AO IS OF THE OPINION THAT SUCH E XPENDITURE IS EXCESSIVE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS FOR WHICH THE PAYMENT IS MADE THEN SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED TO BE EXCESSIVE IS TO BE DISALLOWED AS DEDUCTION. THE FACT IS THEREFORE, ASKED THAT WHETHER THE AO HAS PLACED ON RECORD THE FAIR M ARKET VALUE OF THE GOODS TO COMPARE THE SAME WITH THE PRICE WHICH WAS PAID BY THE ASSESSEE TO ITS SISTER CONCERN. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAD PROCURED THE MATERIAL PARTLY FROM THE OPEN MARKET AND PARTLY FROM THE SISTER CONCERN. THEREFORE, THE AO WAS REQUIRED TO PLACE ON RECORD THE COMPARABLE RATES. THE ONUS WAS ON THE AO TO ESTABLI SH THAT THE ASSESSEE HAD INCURRED THE EXPENDITURE EXCESSIVELY. IN THE AB SENCE OF ANY SUCH MATERIAL FROM THE SIDE OF THE REVENUE, IT IS UNJUST IFIABLE TO INVOKE THE ITA NO.1797/AHD/2010 AND CO NO.205/AHD/2010 DCIT AHMEDABAD VS. M/S. RATNAMANI TECHNOCAST L TD. A.Y. 2005-06 - 4 - PROVISIONS OF SECTION 40A(1) OF IT ACT. AS FAR AS T HE FALL IN THE G.P. IS CONCERNED, THE ASSESSEE HAS ASSIGNED SO MANY REASON S PRIMARILY REVOLVING AROUND THE FACT THAT THE COST OF PRODUCTI ON HAD GONE HIGH DURING THE YEAR UNDER CONSIDERATION IN COMPARISON T O THE PRICE FETCHED ON SALE OF THE MATERIAL. THE ASSESSEE HAS ALSO PLACED ON RECORD THAT THE BOOKS OF ACCOUNT WERE DULY AUDITED AND NO DEFECT WAS FOUN D IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAS ALSO SUBMITTED THAT THE P URCHASES AS WELL AS SALES WERE FULLY VOUCHED WHICH WERE ALSO ACCEPTED B Y SALES TAX DEPARTMENT AS WELL AS BY THE CENTRAL EXCISE DEPARTM ENT. FOR THE SAKE OF BREVITY, FEW CASE LAWS CITED BEFORE LEARNED CIT(A) ARE NOT HEREBY DISCUSSED BY US. RESULTANTLY, THE VIEW TAKEN BY LEA RNED CIT(A) IS HEREBY CONFIRMED. THIS GROUND OF THE REVENUE IS DISMISSED. 6. GROUND NO.2 IS REPRODUCED BELOW: THE LD. COMMISSIONER OF INCOME TAX(A)-XI, AHMEDABA D HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.1,49,841/- ON ACCOUNT OF SUPPRESSION OF PRODUCTION. 7. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF THE YIELD ALONG WITH THE DET AILS OF THE CONSUMPTION OF RAW MATERIAL VIS--VIS PRODUCTION OF FINISHED GO ODS. IT WAS NOTED THAT THERE WAS A DECLINE IN THE YIELD TO THE EXTENT OF 0 .20%. ACCORDING TO THE AO, THE ASSESSEE HAS UNDERSTATED THE PRODUCTION BY 0.525 MT. THE PRICE OF THE ALLEGED UNDERSTATED PRODUCTION WAS WORKED OU T BY THE AO AT RS.1,49,841/- WHICH WAS TAXED IN THE HANDS OF THE A SSESSEE. ITA NO.1797/AHD/2010 AND CO NO.205/AHD/2010 DCIT AHMEDABAD VS. M/S. RATNAMANI TECHNOCAST L TD. A.Y. 2005-06 - 5 - 8. BEFORE LEARNED CIT(A), IT WAS VEHEMENTLY ARGUED THAT THE MONTH- WISE DETAILS OF PURCHASE AND SALE WAS PLACED BEFORE THE AO. THERE WAS NO EVIDENCE BROUGHT ON RECORD BY THE AO THAT THE GO ODS HAVE BEEN SOLD OUTSIDE THE BOOKS OF ACCOUNT. ACCORDING TO THE ASSE SSEE, IT WAS EXPLAINED THAT THERE WAS INCREASE IN STORE AND SPARE PARTS BY ABOUT 42%. THERE WAS INCREASE IN POWER AND FUEL BY 111%. THERE WAS INCREASE IN REPAIRS AND MAINTENANCE BY 52% AND THERE WAS INCREASE IN TE STING CHARGES OF ABOUT 190%. IN THE ABSENCE OF ANY SPECIFIC EVIDENCE AGAINST THE ASSESSEE LEARNED CIT(A) HAS REVERSED THE FINDING OF AO AND D IRECTED TO DELETED THE ADDITION. 9. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND AFTER CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, WE FIND NO INFIRMITY IN THE AFORESAID FINDINGS ON FACT S OF LEARNED CIT(A). FROM THE SIDE OF THE RESPONDENT-ASSESSEE, THE COMPI LATION HAS BEEN FILED CONTAINING THE VARIOUS DETAILS WHICH WERE FILED BEF ORE THE AO. THROUGH THOSE DETAILS THE ASSESSEE HAS EXPLAINED THE INCREA SE IN VARIOUS EXPENDITURE SUCH AS POWER AND FUEL CONSUMPTION. THE COMPILATION ALSO CONTAINED THE MONTH-WISE QUANTITATIVE DETAILS OF TH E FINISHED GOODS AND THE MATERIAL PURCHASED, ETC. WE, THEREFORE, HOLD TH AT IN THE ABSENCE OF ANY SPECIFIC INSTANCE OR EVIDENCE AGAINST THE ASSESSEE IT WAS NOT JUSTIFIABLE ON THE PART OF THE AO TO MAKE THE ADDITION MERELY ON P RESUMPTION. IN THE RESULT, THIS GROUND OF THE REVENUE IS ALSO DISMISSE D. B. CO NO. 205/AHD/2010 (FOR A.Y. 2005-06) ITA NO.1797/AHD/2010 AND CO NO.205/AHD/2010 DCIT AHMEDABAD VS. M/S. RATNAMANI TECHNOCAST L TD. A.Y. 2005-06 - 6 - 10. FROM THE SIDE OF THE CROSS OBJECTOR, MR. N.C. A MIN, LEARNED AR APPEARED AND PLEADED NOT TO PRESS THE PRESENT CRO SS OBJECTION. THE CROSS OBJECTION IS HEREBY DISMISSED BEING NOT PRESS ED. 11. IN THE RESULT, THE APPEAL AS WELL AS CROSS OBJE CTION ARE DISMISSED. SD/- SD/- (ANIL CHATURVEDI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 13/09/2013 PRABHAT KR. KESARWANI, SR.P.S. TRUE COPY COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A)-III, AHMEDABAD 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, (DY./ASSTT.REGISTRAR) ITAT, AHMEDABAD