DCIT, Circle-1(1), Hyd, Hyderabad V. Alladi Drilling Equipment Pvt.Ltd., Hyd, Hyderabad

CO 53/HYD/2016

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3426 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 26-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: TALLURI RAJENDRA PRASAD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. A.Y. APPELLANT RESPONDENT 881/HYD/16 2008-09 M/S. ALLADI DRILLING EQUIPMENTS PRIVATE LIMITED, HYDERABAD [PAN: AACCA9420D] DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), HYDERABAD 882/HYD/16 2009 - 10 883/HYD/16 2010 - 11 884/HYD/16 2011 - 12 913/HYD/16 2008-09 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), HYDERABAD M/S. ALLADI DRILLING EQUIPMENTS PRIVATE LIMITED, HYDERABAD [PAN: AACCA9420D] 914/HYD/16 2009 - 10 915/HYD/16 2010 - 11 916/HYD/16 2011 - 12 C.O. NOS. 52, 53, 54 & 55/HYD/2016 (IN ITA NOS. 913, 914, 915 & 916/HYD/2016) ASSESSMENT YEARS: 2008-09, 2009-10, 2010-11 & 2011- 12 M/S. ALLADI DRILLING EQUIPMENTS PRIVATE LIMITED, HYDERABAD [PAN: AACCA9420D] VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), HYDERABAD (CROSS-OBJECTOR) (RESPONDENT) FOR ASSESSEE : SHRI TALLURI RAJENDRA PRASAD, AR FOR REVENUE : SHRI SUNKU SRINIVAS, DR DATE OF HEARING : 03-01-2018 DATE OF PRONOUNCEMENT : 12-01-2018 O R D E R PER BENCH: THESE ARE CROSS-APPEALS BY ASSESSEE AND REVENUE AGA INST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPE ALS)-1, M/S. ALLADI DRILLING EQUIPMENTS PVT. LTD., :- 2 - : HYDERABAD, DATED 04-03-2016. SINCE COMMON ISSUE IS INVOLVED IN ALL THE ASSESSMENT YEARS, THESE APPEALS ARE HEARD TOGE THER AND DISPOSED OF BY THIS ORDER. CROSS-OBJECTIONS ARE BY AS SESSEE IN SUPPORT OF THE ORDER OF CIT(A), THE ISSUE ON WHICH ASS ESSEE HAS GOT RELIEF. 2. BRIEFLY STATED, ASSESSEE, A PRIVATE LIMITED COMPAN Y IS CARRYING ON THE BUSINESS OF MANUFACTURER AND SELLING OF DRILLING EQUIPMENT TO DISTRIBUTORS AND DEALERS. IN THE IMPUGNED ASSESSMENT YEARS, ASSESSEE HAS FILED RETURNS. CONSEQU ENT TO THE INFORMATION FURNISHED BY CENTRAL EXCISE AUTHORITIES, W HO CONDUCTED INVESTIGATION INTO THE BUSINESS OPERATIONS OF ASSESSEE, ASSESSING OFFICER (AO) HAS REOPENED THE ASSESSMENTS AND BASED ON THE INFORMATION FURNISHED BY THE COMMISSIONER OF CUST OMS, CENTRAL EXCISE AND SERVICE TAX, HYDERABAD-III, PARTICULARLY SHOW CAUSE NOTICE DT. 10-04-2012, THE AO CONSIDERED THE TURNO VER DETERMINED BY THE EXCISE AUTHORITIES AS ASSESSEES SA LES AND AFTER EXCLUDING THE TURNOVER ALREADY SHOWN IN THE BOOKS OF A CCOUNT BROUGHT THE DIFFERENCE OF TURNOVER AS INCOME OF ASSES SEE. THE TURNOVERS CONSIDERED IN THE IMPUGNED FOUR YEARS ARE A S UNDER: A.Y. INCOME RETURNED (RS) TURNOVER ALREADY RECORDED IN THE BOOKS (RS) SUPPRESS ED TURNOVER (RS) DETERMINED 2008 - 09 8,85,320 3,13,55,825 3,3 0,53,963 2009 - 10 15,36,706 3,58,57,675 1,78,64,533 2010 - 11 6,66,025 5,84,27,74 2 3,67,70,942 2011 - 12 16,67,520 4,51,27,208 6,32,75,760 2.1. AO BROUGHT THE ENTIRE DIFFERENCE OF TURNOVER, A S QUANTIFIED BY THE EXCISE AUTHORITIES, AS INCOME OF ASS ESSEE. IN M/S. ALLADI DRILLING EQUIPMENTS PVT. LTD., :- 3 - : ADDITION TO THAT IN AY. 2008-09, AO NOTICED THAT ASSESSEE HAS SPENT AN AMOUNT OF RS. 26,25,220/- TOWARDS UNACCOUNTED PURCHASES AS STATED BY THE CENTRAL EXCISE AUTHORITIES . THIS AMOUNT WAS BROUGHT TO TAX. FURTHER, THE SHOW CAUSE NOTI CE INDICATED, VIDE PARA 40.3, THAT ASSESSEE PAID AN AMOU NT OF RS. 10 LAKHS VIDE TR-6 CHALLAN DT. 23-09-2011 TOWARDS CENTRA L EXCISE DUTY. AO HOLDING THAT TO BE A CASH PAYMENT, ADDED THE AMOUNT IN ALL THE IMPUGNED ASSESSMENT YEARS. THUS, THE ASSESS MENTS WERE COMPLETED BY THE AO AND RAISED THE DEMANDS. 3. AGGRIEVED, ASSESSEE PREFERRED APPEALS AND SUBMI TTED THAT ENTIRE TURNOVER CANNOT BE BROUGHT TO TAX. EVEN THOUGH ASSESSEE RELIED ON THE DECISION OF CIT VS. KAMDHENU STEEL & ALLOYS LTD., [248 CTR 33] (DELHI) THAT MERE DEMAND OF DUTY U NDER ANOTHER LAW CANNOT BE THE GROUND TO INCLUDE THE SAME IN ASSES SMENT UNDER THE I.T. ACT, ASSESSEE MAINLY SUBMITTED THAT ENTIRE TURNOV ER CANNOT BE BROUGHT TO TAX AND ONLY INCOME CAN BE BROUGHT TO TA X AND RELIED ON VARIOUS CASE LAW AS STATED IN PARAS 6 & 7 OF THE W RITTEN SUBMISSIONS BEFORE THE CIT(A). ACCEPTING THE CONTENTIONS , LD.CIT(A) DIRECTED THE AO TO ESTIMATE THE INCOME AT 6.2% , STATED TO BE AVERAGE OF THE IMPUGNED YEARS PROFIT ON THE GROSS TU RNOVERS. WHILE GIVING RELIEF ON THE ISSUE OF ADDITION OF TURN OVER, LD.CIT(A), HOWEVER, CONFIRMED THE OTHER ADDITION OF UNACCOUNTED PU RCHASES IN AY. 2008-09 AND PAYMENT OF RS. 10 LAKHS BY WAY OF CASH IN ALL THE YEARS. LD.CIT(A) DID NOT ADJUDICATE THE GROUND OF UNACCOUNTED PURCHASES STATING THAT THE SAME WAS NOT PRESSED (GROUND NOS. 2.7 & 2.8), WHEREAS ASSESSEE HAS CONTESTED THE OTHER ADDITIO N ALSO IN THE SAME GROUNDS. WITH REFERENCE TO THE ADDITION OF RS . 10 LAKHS, M/S. ALLADI DRILLING EQUIPMENTS PVT. LTD., :- 4 - : THE CIT(A) OPINED THAT ASSESSEE HAS PAID THE AMOUNT IN CASH; HENCE NOT AN ALLOWABLE EXPENDITURE. 4. IN ALL THE REVENUE APPEALS, REVENUE IS AGGRIEVE D ON THE CONFIRMATION OF PROFIT AT 6.2%, WHEREAS THE AO HAS TREA TED THE ENTIRE TURNOVER AS INCOME. ASSESSEE IN ALL THE APPEAL S IS MAINLY CONTESTING THE ADDITION OF RS. 10 LAKHS IN ALL THE YEAR S AND ALSO THE UNACCOUNTED PURCHASES IN AY. 2008-09. 5. THE CROSS-OBJECTIONS ARE IN SUPPORT OF THE CIT(A) ORDER, GIVING RELIEF ON THE UNACCOUNTED TURNOVER. 6. WE HAVE HEARD THE LD. COUNSEL AND LD.DR IN DETAIL . 7. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) AS SUCH CANNOT BE U PHELD PARTICULARLY, IN ARRIVING AT THE AVERAGE NET PROFIT AT 6 .2%. THE ORDER OF CIT(A) IS AS UNDER: 9. BEFORE ME, THE ASSESSEE MADE WRITTEN SUBMISSION S THAT AMOUNT OF RS. 3,30,53,963 FOR A.Y. 2008-09, RS. 1,78,64,53 3 FOR A.Y. 2009-10, RS. 3,67,70,942 FOR A.Y. 2010-11 AND RS.6,32,75,760/- F OR A.Y. 2011-12 REPRESENTED SALES TURNOVER AND NOT INCOME. HENCE NE T INCOME HAS TO BE COMPUTED AND NOT AS INCOME RECEIPT. THE ASSESSEE RE LIED UPON THE DECISION OF ITAT, HYDERABAD IN THE CASE OF M/S. OMR S WINES, HYDERABAD VS. DEPARTMENT OF INCOME TAX AND IN THE CASE OF BAD RI PRASAD BHAGVANDAS AND CO. VS. CIT REPORTED IN 82 TAXMAN 10 9 (MP). HOWEVER THESE CASE LAWS MENTIONED ABOVE, DO NOT APP LY TO ASSESSEE CASE AS THE BUSINESS IS OF DIFFERENT NATURE. THE ASSESSE E NET PROFIT TO THE GROSS TURNOVER OVER THE YEARS HAVE BEEN FOR A. 4.0% FOR A.Y. 2008-09, B. 6.8% FOR A.Y. 2009-10, C. 4.7% FOR A.Y. 2010-11 AND D. 9.3% FOR A.Y. 2011-12. M/S. ALLADI DRILLING EQUIPMENTS PVT. LTD., :- 5 - : AVERAGE IS 6.2% 10. THE ARGUMENT OF THE APPLICANT HAS STRENGTH. THE CENTRAL EXCISE ARE CONFIRMED THE FINDINGS AS 'UNACCOUNTED SALES'. ASSESSING OFFICER ALSO ACCEPTS IT TO BE PART OF TURNOVER. AND THE EXPENDIT URE HAS BEEN PRESUMED BY THE ASSESSING OFFICER, TO HAVE BEEN ALLOWED FULL Y. HOWEVER NO ANALYSIS HAS BEEN MADE BETWEEN THE EXPENDITURE ALLOWED WITH SUCH TURNOVER. SINCE NO COMPARATIVE ANALYSIS HAS BEEN DONE, THE UN ACCOUNTED SALES OF RS. 6,32,75,760/- HAS TO BE TAKEN SALES. THE AVERAG E OF 5 YEARS FROM 2007-08 TO 2010-11, WORKS OUT TO BE 6.2%. HENCE, TH IS TURNOVER INCOME HAS TO BE TAKEN AS PART OF SALES AND PROFITS TO BE CALCULATED ON AVERAGE NET PROFIT AT 6.2%. THE UNACCOUNTED SALES TURNOVER TO BE CALCULATED AND THEN TO BE OFFERED AS THE INCOME FOR RELEVANT THE F INANCIAL YEARS. GROUND PARTLY ALLOWED. 7.1. FIRST OF ALL, HOW THESE PERCENTAGES HAVE BEEN AR RIVED AT HAS NOT BEEN STATED AND AO HAS NOT EXAMINED THE RATE OF PROFIT EARNED IN THE RESPECTIVE ASSESSMENT YEARS. THE ORDER OF CIT(A) STATES THAT AVERAGE OF FIVE YEARS IS TAKEN, WHEREAS THE AVERAGE IS TAKEN ONLY FOR FOUR YEARS. IN OUR OPINION, THE ADOPTI ON OF AVERAGE OVER FOUR YEARS MAY NOT RESULT IN ASSESSMENT OF CORRE CT INCOMES IN RESPECT OF THAT YEAR. EITHER CIT(A) SHOULD HAVE DIRECT ED TO ADOPT THE SAME RATIO OR SHOULD HAVE ADOPTED A HIGHER RATE THA N WHAT WAS DECLARED BY ASSESSEE. SINCE AO WAS NOT GIVEN ANY O PPORTUNITY, THE REDUCTION BY CIT(A) SEEMS TO BE ARBITRARY. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER OF CIT(A) IN ADOPTING AVERAGE RA TE OF PROFIT. 7.2. THERE ARE NO SIMILAR INSTANCES, AS ASSESSEES BUSINESS IS UNIQUE IN ITS OWN AND GENERAL RATE OF PROFIT OF OTH ER COMPANIES MAY NOT APPLY TO ASSESSEE. CONSIDERING THAT ASSESSEE HAS MORE OR LESS EVADED SIMILAR TURNOVER IN EACH OF THESE YEARS TH AN WHAT WAS DISCLOSED, IT WOULD BE APPROPRIATE TO ADOPT THE SAME RA TIO OF PROFIT ON THE DISCLOSED TURNOVER TO THE UNACCOUNTED TURNOVER AS WELL. M/S. ALLADI DRILLING EQUIPMENTS PVT. LTD., :- 6 - : ASSESSEE WOULD HAVE GOT AWAY ABOUT UNDISCLOSED TURNOVE RS BUT FOR THE ACTION BY THE CENTRAL EXCISE AUTHORITIES. WE WERE IN FORMED THAT THE ISSUE BEFORE THE CENTRAL EXCISE AUTHORITIES IS PENDING ADJUDICATION IN THE APPELLATE TRIBUNAL THEREIN. HOWEV ER, ASSESSEE HAS NO OBJECTION FOR ADOPTING THE TURNOVERS IN INCOME TAX PROCEEDINGS. THEREFORE, ACCEPTING THE TURNOVERS AS QU ANTIFIED BY THE EXCISE AUTHORITIES, AO IS DIRECTED TO ADOPT THE SAME PROFIT RATIO AS OFFERED BY ASSESSEE ON THE DISCLOSED TURNOVERS TO T HE UNDISCLOSED TURNOVER AS WELL, IN EACH OF THE ASSESSME NT YEARS. ASSESSEE WOULD HAVE GOT AWAY WITH HIGHER PROFIT MARGIN THAN WHAT WAS DISCLOSED BUT NOW THAT IT WAS CAUGHT BY THE CENTRA L EXCISE AUTHORITIES, THE SAVINGS WHICH ASSESSEE COULD HAVE MA DE IS NO LONGER AVAILABLE. KEEPING THAT IN MIND, WE ARE OF TH E OPINION THAT ADOPTING OF THE SAME RATE OF PROFIT WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, MODIFYING THE ORDER OF CIT(A), WE DIRE CT THE AO TO VERIFY THE PROFIT RATIO IN EACH OF THE ASSESSMENT YEARS AND ADOPT THE SAME RATIO ON THE UNDISCLOSED TURNOVER AS WELL. THE O RDER OF CIT(A) IS MODIFIED TO THAT EXTENT. 7.3. REVENUE IS CONTENDING THAT THE ENTIRE UNEXPLAINED TURNOVER HAS TO BE BROUGHT TO TAX, AS THE EXPENDITURES AR E ALREADY ACCOUNTED FOR. AS SEEN FROM THE SHOW CAUSE NOTICE, EXC ISE AUTHORITIES HAVE QUANTIFIED NOT ONLY THE SALES BUT ALSO THE FUND FLOWING IN TO VARIOUS ACCOUNTS IN ARRIVING AT THE TURN OVERS. THERE ARE WITHDRAWALS ALSO FROM THE SAID ACCOUNTS WHICH MAY BE FOR PURCHASE OF MATERIAL. THEREFORE, IT CANNOT BE STATED THAT ASSESSEE HAS NO EXPENDITURE TOWARDS MATERIAL PURCHASE OR LABOU R EXPENDITURE. THEREFORE, BRINGING TO TAX THE ENTIRE TURN OVER IS NOT CORRECT. EVEN THE CASE LAW RELIED ON BY ASSESSEE BEF ORE THE M/S. ALLADI DRILLING EQUIPMENTS PVT. LTD., :- 7 - : LD.CIT(A) SUPPORTS THE VIEW THAT ONLY PROFIT/INCOME CAN BE BROUGHT TO TAX, NOT THE ENTIRE TURNOVER. KEEPING THAT IN MIND, WE AGREE WITH THE FINDINGS OF CIT(A) TO THE EXTENT THAT THE ACCRU ED TURNOVER CANNOT BE BROUGHT TO TAX. REVENUE GROUNDS ARE ACCORDING LY CONSIDERED PARTLY ALLOWED. THE CROSS-OBJECTIONS ON TH IS ARE ACCORDINGLY DISMISSED. 7.4. COMING TO ASSESSEES APPEAL IN AY. 2008-09, TH ERE IS AN ADDITION OF RS. 26,25,220/- TOWARDS UNACCOUNTED PURCH ASES. EVEN THOUGH LD.CIT(A) STATED THAT GROUND IS NOT PRESSED, ASSES SEES COUNSEL INFORMED THAT BOTH THE ISSUES WERE CONTESTED IN GROUND NOS. 2.7 TO 2.9. THEREFORE, ASSESSEE HAS NOT CONSENTE D FOR WITHDRAWAL OF GROUND. IT WAS SUBMITTED THAT ASSESSEE HAD UNACCOUNTED TURNOVERS AND ALSO UNACCOUNTED PURCHASES, THEREFORE ADDITION OF UNACCOUNTED PURCHASE ALONE IS NOT WARRANTE D. AS SEEN FROM THE SHOW CAUSE NOTICE, THE CENTRAL EXCISE AUTHORITIE S HAVE QUANTIFIED THE TURNOVER BASED ON VARIOUS INPUTS LIKE FUND FLOW INTO VARIOUS BANK ACCOUNTS ETC., AO HAS NOT MADE OUT ANY C ASE IN THOSE LINES, BUT THE ENTIRE TURNOVER WAS BROUGHT TO TAX. O NCE THE TURNOVER WAS BROUGHT TO TAX, ANY UNACCOUNTED PURCHASES PERTAINING TO THAT TURNOVER WOULD GET ADJUSTED IN THE SA ME. WE ARE OF THE OPINION THAT THERE IS NO NEED TO SEPARATELY BRI NG TO TAX THE UNACCOUNTED PURCHASES. MOREOVER, AS SEEN FROM THE SH OW CAUSE NOTICE, THERE ARE VARIOUS WITHDRAWALS FROM VARIOUS A CCOUNTS OUT OF THE FUNDS RECEIVED IN THOSE ACCOUNTS. SINCE THOSE WITH DRAWALS COULD BE SOURCE FOR UNACCOUNTED PURCHASES OR EXPENDI TURES, IT IS NOT APPROPRIATE TO IDENTIFY ONE ITEM AND BRING IT TO TAX. SINCE THE ENTIRE TURNOVER IS CONSIDERED FOR ASSESSING THE INCOME , WE ARE OF M/S. ALLADI DRILLING EQUIPMENTS PVT. LTD., :- 8 - : THE OPINION THAT SEPARATE ADDITION OF UNACCOUNTED PURCHA SE IS NOT WARRANTED. ACCORDINGLY, THE SAME IS DELETED. 7.5. IN ALL THE IMPUGNED YEARS, AO MADE THE ADDITION OF RS. 10,00,000/- BASED ON THE SHOW CAUSE NOTICE THAT ASSESS EE HAS PAID AN AMOUNT OF RS. 10 LAKHS BY WAY OF CASH. AS SEEN FROM THE SHOW CAUSE NOTICE, CENTRAL EXCISE AUTHORITIES HAVE QUA NTIFIED THE TAX PAYABLE IN PARA 40.1 & 40.2 AND IN PARA 40.3, THE Y HAVE GIVEN CREDIT FOR RS. 10 LAKHS PAID VIDE TR-6 CHALLAN DT. 23 -09-2011 TOWARDS CENTRAL EXCISE DUTY. IT WAS THE SUBMISSION BEF ORE THE LD.CIT(A) THAT THIS AMOUNT WAS PAID BY WAY OF CHEQUE AND THAT DATE OF PAYMENT IS RELEVANT FOR AY. 2012-13, WHICH IS OUTSIDE THE IMPUGNED ASSESSMENT YEARS. THERE WAS NO OTHER CASH P AYMENT IN ANY OF THE IMPUGNED ASSESSMENT YEARS. BUT LD.CIT(A), W ITHOUT EXAMINING THE FACTS, CONFIRMED THE ADDITION ONLY ON T HE REASON THAT ASSESSEE PAID THE AMOUNT IN CASH. WE ARE UNABLE TO AP PROVE THE FINDINGS OF LD.CIT(A). WHETHER THE PAYMENT IS IN CASH OR BY WAY OF CHEQUE, THE CENTRAL EXCISE AMOUNT PAID WOULD BE ELIGI BLE FOR DEDUCTION, OUT OF THE RECEIPTS OF THE BUSINESS CONCERN. THIS AMOUNT OF RS. 10 LAKHS IN PARA 40.3 CLEARLY STATE TO H AVE BEEN PAID ON 23-09-2011, WHICH IS OUTSIDE THE FOUR IMPUGNE D ASSESSMENT YEARS, MORE SO PERTAINING TO AY. 2012-13. WHY AO BROUGHT THIS AMOUNT TO TAX IN ALL THE ASSESSMENT YEARS I S NOT UNDERSTANDABLE. WE HAVE PERUSED THE SHOW CAUSE NOTI CE. THERE IS ONLY ONE PAYMENT DETERMINED BY THE EXCISE AUTHORITIES AND ACCORDINGLY, WE ARE OF THE OPINION THAT ADDITION OF R S. 10 LAKHS IN EACH OF THE ASSESSMENT YEARS IS NOT CORRECT. THEREFORE, ASSESSEES GROUNDS ON THIS ISSUE ARE ALLOWED. AO IS DIRECTED TO DELETE THE M/S. ALLADI DRILLING EQUIPMENTS PVT. LTD., :- 9 - : AMOUNTS. THE SAME CAN BE CONSIDERED IN AY. 2012-13, IF REQUIRED AS PER THE PROVISIONS OF THE ACT. 8. TO SUM-UP ALL THE REVENUE APPEALS ARE PARTLY ALLO WED, ALL THE ASSESSEES APPEALS ARE ALLOWED AND ALL THE CR OSS-OBJECTIONS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JANUARY, 2018 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 12 TH JANUARY, 2018 TNMM M/S. ALLADI DRILLING EQUIPMENTS PVT. LTD., :- 10 -: COPY TO : 1. M/S. ALLADI DRILLING EQUIPMENTS PRIVATE LTD., PL OT NO. 84, IDA, PHASE-III, CHERLAPALLI, HYDERABAD. 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), HYDERABAD. 3. CIT (APPEALS)-1, HYDERABAD. 4. PR.CIT-1, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.