ECOGREE CLEANTECH PVT LTD (FORMALLY KNOWN ASADSORBENT CARBONS PRIVATE LIMITED), TUTICORIN V. DCIT CENTRAL CIRCLE 2, MADURAI

CO 7/CHNY/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 5117 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-02-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 13-02-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Tax effect
• Section: 13

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं Įी मनोज क ु मार अĒवाल, लेखा सदèय के सम¢ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.:2997 & 2999/CHNY/2018 िनधाᭅरण वषᭅ /Assessment Years: 2012 – 13 & 2015-16 The DCIT, Central Circle – 2, Madurai. v. M/s. Ecogreen Cleantech Pvt. Ltd., (formerly known as M/s. Adsorbent Carbons Pvt. Ltd.,) No.C-92, SIPCOT Industrial Complex, Tuticorin – 628 008. PAN: AABCV 0223A (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) & C.O. No.: 07/CHNY/2019 (in I.T.A. No. 2997/CHNY/2018 िनधाᭅरण वषᭅ /Assessment Year: 2012 – 13 M/s. Ecogreen Cleantech Pvt. Ltd., (formerly known as M/s. Adsorbent Carbons Pvt. Ltd.,) No.C-92, SIPCOT Industrial Complex, Tuticorin – 628 008. PAN: AABCV 0223A v. The DCIT, Central Circle – 2, Madurai. राजˢ की ओर से /Revenue by : Shri P. Sajit Kumar, JCIT Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri T. Banusekar, CA स ु नवाई कȧ तारȣख/Date of Hearing : 24.02.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 25.02.2022 2 I.T.A. Nos.2997 & 2999/Chny/2018 & C.O No.07/Chny/2019 आदेश /O R D E R PER MAHAVIR SINGH, VP: These two appeals by the Revenue are arising out of the different orders of Commissioner of Income Tax (Appeals)-19, Chennai in ITA No.432 & 434/17-18, vide orders of even date 17.07.2018. The assessments were framed by the DCIT, Central Circle 2, Madurai u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 28.12.2017 for the assessment years 2012-13 & u/s.143(3) of the Act, vide order dated 31.12.2017 for the assessment year 2015-16. The assessee has also filed cross objection for the assessment year 2012-13. ITA 2997/Chny/2018 2. During the course of hearing before us, the learned AR for the assessee pointed out that the tax effect in this appeal is below Rs.50.00 lakhs. The learned AR for the assessee further submitted that in view of the CBDT Circular No.17/2019, dated 08.08.2019 brought out by the Central Board of Direct Taxes, Department of Revenue, Ministry of Finance, Government of India, the appeal was not maintainable and be dismissed. The Ld. Senior DR also agreed to the facts stated by the Ld.AR for the assessee. 3 I.T.A. Nos.2997 & 2999/Chny/2018 & C.O No.07/Chny/2019 3. We have heard the rival submissions and perused the material on record. We find from the records before us that the tax involved in the disputed issue is below Rs.50 lakhs and therefore, in view of the CBDT Circular No. 17/2019 dated 08.08.2019 no appeal should be filed by the Revenue before the Tribunal which has tax effect of Rs. 50.00 lakhs or less and this circular is also applicable retrospectively to all pending appeals. Therefore, the appeal filed by the Revenue is dismissed. C.O No.07/Chny/2019 4. Since we have dismissed the appeal filed by the Revenue on monetary limits, the cross objection filed by the assessee has become infructuous and hence, dismissed. ITA 2999/Chny/2018 5. The only issue in this appeal of Revenue is as regards to the order of CIT(A) deleting addition made by AO being difference in stock as worked out on the basis of materials impounded during the course of survey in regard to weight of raw material bought directly 4 I.T.A. Nos.2997 & 2999/Chny/2018 & C.O No.07/Chny/2019 from the market. For this Revenue has raised various grounds which need not to be reproduced. 6. Briefly stated facts are that the assessee is a private limited company and engaged in the manufacturing activity of activated carbon. A search & seizure action was conducted u/s.132 of the Act on 17.11.2015 on the main group company M/s. VVD & Sons (P) Ltd. Subsequently a survey u/s.133 of the Act was conducted on the business premises of the assessee and during survey the Department verified various record and income tax returns. At the time of survey, the assessee company has filed its return of income up to assessment year 2014-15 ie., the relevant assessment year. The assessee’s factory is situated at Tuticorin and its marketing office is located at Egmore, Chennai. The AO during the course of assessment proceedings noted that the Revenue during the course of survey on the assessee’s premises on 17.11.2015 found that there was quantitative variation in input between books of accounts and that shown in the return of income and sale suppression of the quantity. The AO noted that there are discrepancies noticed in the input of raw material and sale of finished goods as the impounded material to the extent of 22,10,466 Kgs. The AO has pointed out 5 I.T.A. Nos.2997 & 2999/Chny/2018 & C.O No.07/Chny/2019 the discrepancy in the tabular which need not be reproduced. The AO by applying the rate per Kg of Rs.14.5 as on 31.03.2014 quantified the variation at Rs.3,09,30,583/-. The AO required the assessee to explain the same and assessee vide its reply stated that the total work charcoal was shown at 2,13,943 kgs and coconut shell charcoal at 20,73,007 kgs and thereby total was at 42,12,460 kgs. According to assessee, the coconut shell charcoal was used for making granulated charcoal, which is not activated. According to assessee, it had disclosed the consumption of coconut shell charcoal of 20,73,007, which yielded finished goods at 19,43,444 kgs which was sold during the financial year 2014-15 relevant to this assessment year 2015-16. It was further explained that as per tax audit report the manufacturer granulated charcoal of 19,43,444 kgs has been sold during the year. Hence, the consumption of activated carbon is to the extent of 21,39,453 kgs as per detail furnished in the return of income. Thereby the assessee confirmed that the input for making activated carbon is only 21,39,453 kgs. Thereby, the difference in granulated charcoal of 1,33,559 kgs is due to difference between consumed charcoal and the sales made. The AO was not convinced with the reply, but no reasons cited and added the difference in input of raw material i.e., charcoal shells 6 I.T.A. Nos.2997 & 2999/Chny/2018 & C.O No.07/Chny/2019 amounting to Rs.3,09,30,583/- and added to the total income of the assessee. Aggrieved assessee preferred appeal before the CIT(A). 7. The CIT(A) deleted the addition by observing in para 5.5, 5.6 & 5.7 as under:- 5.5 The submissions of the appellant are plausible in that, the A.O. had taken the weight of the raw material recorded in the Kiln register which underwent curing process resulting in weight reduction. Whereas, the appellant has reported in the ROI, the weight of the raw material before the purification process was undertaken i.e., at the first stage of process. Hence, there is every possibility of difference in weightage. This cannot be termed as discrepancy in weight as comprehended by the A.O. 5.6 Further, the assessee had maintained complete details of stock in the ledger account. The same was produced before the A.O. The assessee further emphasized that the accounts of the assessee were audited and audited accounts contained quantitative details of opening stock, purchases, sales and closing stock. The audit report was filed in the asst. proceedings. Sales and purchases are fully vouched and the stock account could be verified both in quantity and in terms of money. There is no change in the valuation of stock or in method of account. The AO has not rejected the accounts and there is no any material defect in the books of accounts pointed out by the A.O. 5.7 The quantitative details of goods purchased and sold have been maintained by the assessee. Further, day-to-day stock register was available. There was further no change in the method of accounting employed by the assessee. Value of stock was duly reflected in the report of auditors filed with the return. 7 I.T.A. Nos.2997 & 2999/Chny/2018 & C.O No.07/Chny/2019 Aggrieved, now Revenue is in appeal before the Tribunal. 8. We have heard rival contentions and gone through facts and circumstances of the case. Before us, the ld.AR for the assessee explained the quantity of input of raw material as given in Form No.3CA & 3CD along with the relevant annexures. The ld.AR for the assessee Shri T. Banusekar took us through the quantitative details of raw material at 35 (bA) & 35 (bB) which is as under:- 35 bA Raw materials : Item Name Unit Opening Stock Purchase during the previous year Consumpt ion during the previous year Sales during the previous year Closing stock Yield of finished products Percen -tage of yield Shortage/ excess, if any WOOD CHARCOA L kilo- grams 24301 2181160 2139453 0 66008 443669 21.00 0 COCONUT CHARCOA L kilo- grams 535958 1830725 2073007 0 2936761943444 94.00 0 35 bB Finished products : Item Name Unit Opening Stock Purchas e during the previous year Quantity manufactu red during the previous year Sales during the previous year Closing stock Shortage/ excess, if any WOOD CARBON kilo- grams 111077 12580 443669 413611 153715 0 COCONUT SHELL CARBON kilo- grams 681026 86560 0 177189 589047 1350 GRANULAT ED CHARCOAL kilo- grams 0 0 1943444 1943444 0 0 8 I.T.A. Nos.2997 & 2999/Chny/2018 & C.O No.07/Chny/2019 From the above, the ld.AR explained that there is slight difference in wood charcoal, finished product wood carbon but there is no difference between the raw material of coconut charcoal and the end product granulated charcoal. He compared their quantities given in regard to coconut charcoal, the input and finished product granulated charcoal which is same with 19,43,444 kgs. He matched these figures. The ld.AR for the assessee also filed details of summary of Kiln Feeding Input Data for the financial year 2014-15 and enclosed in assessee’s paper-book pages 14 to 23 to support this audit results. The ld.AR admitted that there is slight difference, which is very negligible, in the wood charcoal i.e., input item and the wood carbon i.e., finished goods and that is also around 30,000 kgs approx. For this also, the ld.AR explained that this difference is due to wastage, removing impurities and weight loss. In these reasons there are some impurities which industry accepts that there will be some wastage. We are in agreement with the argument of the ld.AR that the impurities are according to industry standards and for this even ld. Senior DR has not controverted. 8.1 We find that the assessee is able to explain the difference which is very negligible, hence, we find no infirmity in the order of 9 I.T.A. Nos.2997 & 2999/Chny/2018 & C.O No.07/Chny/2019 CIT(A) and the same is affirmed. This appeal filed by the Revenue is dismissed. 9. In the result, both the appeals of the Revenue and the cross objection of the assessee are dismissed. Order pronounced in the court on 25 th February, 2022 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 25 th February, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. िनधाᭅᳯरती/Assessee 2. राज᭭व/Revenue 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.