ACIT, Meerut V. M/s. Rastogi Publications Shivaji Road, Meerut

ITA 1036/DEL/2009

• Counselvise Citation: 103620114 RSA 2009
• Duration Of Justice: 6 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 22-07-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 20-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI I.C.SUDHIR, JM AND SHRI J.SUDHAKAR REDDY, A.M. ITA NO. 1036 /DEL/20 09 ASSESSMENT YEAR : 20 03 - 04 ACIT, CIRCLE 2, MEERUT V VS. RASTOGI PUBLICATIONS SHIVAJI ROAD, MEERUT (APPELLANT) (RESPONDENT ) APPELLANT BY : - SHRI VIKRAM SAHAY, SR.D.R. RESPONDENT BY : - SH. SANJAY MALIK, ADV. O R D E R PER J.SUDHAKAR REDDY, AM T HIS IS AN APPEAL FILED BY THE REVENUE AND IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A), MEERUT DT. 12.1.2009 FOR THE A.Y. 2003 - 04. 2. FACTS IN BRIEF : - THE FACTS ARE BROUGHT OUT AT PARA 2 OF THE ORDER OF THE LD.CIT(A), WHICH IS EXTRACTED FOR READY REFERENCE. 2. THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE IN RESPONSE TO QUERIES MADE BY A O FURNISHED WRITTEN EXPLANATION IN JUSTIFICATION OF THE VALUATION OF STOCK AS REFLECTED IN THE BOOKS OF ACCOU NT AND RECONCILIATION OF STOCK FIGURES REFLECTED IN THE BANK ALE WITH THE STOCKS SHOWN IN THE BOOKS OF ACCOUNT. THE A O AFTER SCRUTINY OF DETAILS FILED BY THE ASSESSEE COMPUTED THE PRODUCTION OF THE YEAR BASED ON VALUE OF STOCK OF RS.L,32,16,650 / - AS ON 01. 04.02 AS PER MONTHLY STATEMENT SUPPLIED TO THE BANK AS UNDER: - OPENING STOCK OF BOOKS AS ON 01.04.2002 RS. 1,32,16,650/ - RECEIPT/PRODUCTION DURING THE YEAR IN R/O 255,000 BOOKS (EXHIBIT II - MONTHLY LIST 12) RS. 1,68, 62,100 ------------------------ RS. 3,00,78,750 LESS: CLOSING STOCK AS PER BANK RS. 99,65,100 ------------------------ PRODUCTION DURING THE YEAR ISSUED FOR SALE RS. 2,01,13,650 ======== ====== ITA NO. 1036/DEL/2009 A.Y. 2003 - 04 RASTOGI PUBLICATIONS SHIVAJI ROAD 2 B ASED ON ABOVE COMPUTATION, THE AO WORKED OUT THE TURNOVER AT RS.2,98,90,465/ - WITH THE FOLLOWING OBSERVATION: - 'THE FIGURES OF OPENING STOCK, RECEIPTS, CLOSING STOCK ARE TAKEN ON THE BASIS OF 60% AS GIVEN TO THE BANK. IN CASE, THE PRODUCTION MEAN T FOR RS.2,01,13,650 / - , WHICH WAS ACTUALLY BEEN SOLD DURING THE YEAR IS 60% THEN THE TOTAL TURNOVER UNDER THE HEAD OWN PUBLICATION AT 100% SHALL BE 3,35,22,750 / - AS AGAINST THE RECORDED SALES AS PER BOOKS OF ACCOUNT AT RS.2,78,78,376/ - . THE SALES OF RS.2, 78,78,376/ - ARE INCLUSIVE OF U.P. BOARD'S BOOKS SALE AT RS.47,48,403/ - . THE AMOUNT OF RS.3,35,22,750 / - BEING 100% SHALL BE THE PRINTED PRICE SUBJECT TO DISCOUNT. DEDUCTION 25% FROM 3,35,22,750, THE RESULTED SALE WOULD BE RS.2,51,42,062/ - (3,35,22,750 - 83, 80,688). ON ADDING SALES OF LT.P. BOARD'S BOOKS SHOWN AT RS.47,48,403/ - , THE ASSESSEE'S TURNOVER SHALL BE RS.2,98,90,465/ - AS AGAINST THE SALES SHOWN AT RS.2,78,78,376/ - . HENCE, IT CANNOT BE SAID THAT PART OF STOCK HAS BEEN GIVEN TO THE BANK.' IN THE ULTIMATE ANALYSIS, THE AO COMPUTED SALES OUTSIDE THE BOOKS AT RS.20,12,090 / - WITH THE FOLLOWING OBSERVATION: 'HAVING DISCUSSED IN ENTIRELY THE ALL FACTS AS ABOVE AND ALSO KEEPING IN VIEW THAT THE STOCK POSITION GIVEN TO THE 3RD PARTY I.E. TO BANK IS SUPE RIOR IN NATURE OF EV IDENCE. I AM NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNT OF THE ASSESSEE AND APPLY PROVISIONS OF SEC. 145(3) OF THE LT. ACT. THE SALES AS PER BANK RECORD HAS BEEN WORKED OUT AT RS.2,51,42,062/ - AS AGAINST SALES SHOWN BY THE ASSESSEE UNDER OWN PUBLICATION AT RS. 2,31,29,972/ - . THE DIFFERENCE AMOUNT OF RS.20,12,090/ - IS THEREFORE ADDED FOR SALES OUTSIDE THE BOOKS OF ACCOUNT. SINCE THE ASSESSEE HAS ALREADY DEBITED EACH EXPENDITURE IN HIS BOOKS OF ACCOUNTS IS ALLOWE D. THE AO FURTHER NOTED THAT THE ASSESSEE INCURRED AN EXPENDITURE OF RS.25,52,456/ - UNDER THE HEAD JOB CHARGES.PAID TO M / S PIONEER PRINTERS IN WHICH SHRI VIKASRASTOGI ONE OF THE PARTNER OF ASSESSEE FIRM IS ALSO PARTNER. A DISALLOWANCE OF RS.7,64,702/ - WA S MADE OUT OF THE CLAIMED EXPENDITURE WITH THE FOLLOWING OBSERVATION: 'HENCE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE NUMBER OF BOOKS ON WHICH THE M / S PIONEER PRINTERS DID THE JOB WORK COULD NOT BE SAID TO BE 3,35,495 BUT ONLY 2,55,000 AS DECLARED IN THE MONTHLY STATEMENT GIVEN TO THE ITA NO. 1036/DEL/2009 A.Y. 2003 - 04 RASTOGI PUBLICATIONS SHIVAJI ROAD 3 BANK UNDER OWN PUBLICATION AND OTHER BOOKS AT 1,06,815. HENCE, THE PAYMENT OF JOB CHARGES ARE RESTRICTED TO 3,61,815 BOOKS (2,55,000 + 1,06,815). THUS, THERE HAS BEEN EXCESS PAYMENT IN RESPECT OF 80,495 BOOKS, WHICH I S NOT ALLOWED @ 9.50/ - PER BOOK AT RS.7,64,702/ - , KEEPING IN VIEW THE AVERAGE RATE OF PAYMENT OF JOB CHARGES.' 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY GRANTED RELIEF. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS. 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE COMPU TATION OF PRODUCTION N MADE BY THE IT O AS IMPROPER AND DELETED THE ADDITION OF RS.20,12,090/ - ON THIS BASE. 2. WHETHER IN T E ACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) HAD ERRED IN NOT CONSIDERING THE FACT THAT THE ASSESSEE IS NOT MAINTAINING ANY STOCK REGISTER AND DIFFERENT ACCOUNTS ARE GIVEN TO THE BANK. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) HAD ERRED IN DELETING THE ADDITION OF RS.7,64,702/ - FOR THE ONLY REASON THAT THE FIGURE OF 46037 HAS BEEN TAKEN TWICE IN TOTAL AND NOT CONSIDERED THE FACT THAT DIF FERENCE OF 34458 BOOKS STILL REMAINED AND EXCESS PAYMENT WAS MADE TO A RELATED PARITY. 4. IN THE FACT AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASIDE AND THAT OF THE A O RESTORED. 4. WE HAVE HEARD SHR I VIKRAM SAHAY, LD.SR.D.R. ON BEHALF OF THE REVENUE AND SHRI SANJAY MALIK, LD.COUNSEL FOR THE ASSESSEE. 5. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF PAPERS ON RECORD AND ORDERS OF THE AUTHORITIES BELOW, WE HOLD AS FOLLOWS. 6. THE LD.CIT(A), AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE, AT PARA 4.2 HELD AS FOLLOWS. 4.2. FACTS OF THE CASE AND SUBMISSIONS OF THE ID.AR HAVE BEEN CONSIDERED. THE ADDITION MADE BY AO REPRESENTS THE DIFFERENCE BETWEEN RS.25 142062/ - AND THE DECLARED TURNOVER OF OWN PUBLICATION AT RS. 23129972 / - . THE DETERMINATION OF TURNOVER AT RS.25142062/ - IS BASED ON THE REALIZABLE VALUE ITA NO. 1036/DEL/2009 A.Y. 2003 - 04 RASTOGI PUBLICATIONS SHIVAJI ROAD 4 OF PARTIAL STOCK PLEDGED WITH THE BANK FOR THE PURPOSES OF AVAILING OVERDRAFT FACILITY. THE REALIZABLE VALUE OF RS.13216650/ - HAS BEEN COMPUTED BY DEDUCTING 40% ON THE PRINTED PRICE. THE REALIZABLE VALUE AS ASCERTAINED BY THE BANK FOR THE PURPOSES OF DRAWING POWER COULD NOT BE MADE THE BASIS FOR DETERMINING THE PRODUCTION VALUE OF THE YEAR, FIRSTLY BECAUSE THE REALIZABLE VALUE IS FOR PART OF STOCK AND NOT TOTAL STOCK HELD BY THE ASSESSEE AND SECONDLY BECAUSE COMPUTATION OF REALIZABLE VALUE HAS BEEN MADE BY DEDUCTING 40% OF THE PRINTED PRICE THOUGH AS PER SALE INVOICE, DISCOUNT @ 25% IS ALLOWED FROM THE PRINT ED PRICE. PRODUCTION VALUE HAS TO BE DETERMINED BY AGGREGATING THE TURNOVER AND THE CLOSING STOCK REDUCED BY OPENING STOCK BECAUSE ONLY PART OF THE STOCKS WAS PLEDGED BY WAY OF SECURITY TO THE BANK FOR OVERDRAFT FACILITY GRANTED BY THE BANK. AS AGAINST THE REALIZABLE VALUE OF RS.13216650 / - , THE NET DISCOUNTED SALE PRICE OF SUCH STOCK AMOUNTED TO RS.17134277/ - . THIS FIGURE ALONE COULD FORM THE BASIS FOR DETERMINING THE PRODUCTION AND ACCORDINGLY, THE COMPUTATION OF PRODUCTION MADE BY THE IT O IS HELD TO BE IMPROPER. THE PRODUCTION VALUE OF THE YEAR WAS TO BE COMPUTED .ON ACTUAL FIGURE OF TURNOVER AND NOT ON THE BASIS OF REALIZABLE VALUE OF PART OF STOCK PLEDGED WITH THE BANK. THE PRODUCTION VALUE ON SUCH BASIS WOULD WORK OUT AT RS.28272232/ - A S PER TABULATION IN THE PRECEDING PARAGRAPH AND SUCH FIGURE BEING MORE THAN THE FIGURE ADOPTED BY AO AS PER ASSESSMENT ORDER OR REVISED TABULATION SUBMITTED BY ACIT IN THE COURSE OF APPELLATE PROCEEDINGS DID NOT WARRANT ANY ADDITION. THE A O HAS NOT DISPUT ED THE CORRECTNESS OF PURCHASES AND SALES, WHICH ARE STATED TO BE SUPPORTED BY PURCHASE INVOICES AND SALE MEMOS. THE DECLARED GROSS PROFIT RATE COMPARED FAVOURABLY WITH THE PRECEDING ASSESSMENT YEAR. NO SPECIFIC DEFECT IN THE METHOD OF ACCOUNTING HAS BEEN POINTED OUT. FOR PRODUCTION OF BOOKS THE INGREDIENTS ARE PAPER, JOB WORK CHARGES IN THE NATURE OF PRINTING AND BINDING ETC AND OTHER INCIDENTAL EXPENSES. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE ASSESSEE EFFECTED PURCHASES AND SALES OVER AND ABOVE THE RECORDED FIGURE IN THE BOOKS ACCOUNT OR INCURRED EXPENDITURE IN THE NATURE OF WORK CHARGES, ROYALTY ACCOUNT, TRANSPORTATION CHARGES ETC. FOLLOWING WITH RESPECT, THE RATIO LAID DOWN BY THE HON BLE TRIBUNAL, ITAT AHMEDABAD D BENCH IN SURAT D ISTRICT CO - OPERATIVE MILK PRODUCERS UNION LTD. VS. JCIT CASE, THE ASSUMPTION OF SALES OUTSIDE THE BOOKS OF ACCOUNT CANNOT BE SUSTAINED. THE ADDITION OF RS.20,12,090/ - IS HEREBY DELETED. 7. WE FIND NO INFIRMITY IN THIS FINDING FOR THE FOLLOWING REASONS. (A) THE A.O. HAS BASED HIS ADDITION ON A HYPOTHETICAL CALCULATION. THE TURNOVER WAS DETERMINED AT RS.2,51,42,062/ - , BASED ON REALISABLE VALUE OF PART IAL STOCK PLEDGED WITH THE BANK, FOR AVAILING OVERDRAFT FACILITY. THE BANK ADOPTED A PARTICULAR METHOD O F VALUATION OF STOCK, FOR THE PURPOSE OF ITA NO. 1036/DEL/2009 A.Y. 2003 - 04 RASTOGI PUBLICATIONS SHIVAJI ROAD 5 DETERMINING THE DRAWAL POWER FROM THE OVERDRAFT FACILITY GRANTED TO THE ASSESSEE. THE ASSESSEE HAS BEEN CONSISTENTLY , OVER THE YEARS, VALUING THE CLOSING STOCK AT COST, AFTER PHYSICAL VERIFICATION , AT THE CLOSE OF THE FINANCIAL YEAR AND PREPARATION OF INVENTORY OF BOOKS AVAILABLE ON SUCH VERIFICATION. THIS METHOD HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE AND HAS BEEN ACCEPTED BY THE A.O. IN THE EARLIER YEARS. (B) THE REALISABLE VALUE TAKEN BY THE BANK, IS ONLY FOR PART OF THE STOCK WHICH HAS BEEN PLEDGED TO IT. HENCE APPLYING THE SAME TO THE FULL STOCK IS ERRONEOUS. (C ) COMPUTATION OF REALISABLE VALUE IS ALSO ERRONEOUS, AS THE A.O. HAS DEDUCTED 40% O N PRINTED PRICE , THOUGH AS PER SALE INVOICE, DISCOUNT OF 25% HAS BEEN ALLOWED FROM THE PRINTED PRICE. (D) THE REALISABLE VALUE SHOULD BE WORKED OUT. (E) PRODUCTION VALUE HAS TO BE DETERMINED BY THE FOLLOWING FORMULA: TURNOVER + CLOSING STOCK ( - ) OPENING STOCK. SUCH FIGURE SHOULD BE COMPUTED FROM THE ACTUAL FIGURE OF TURNOVER AND NOT ON THE BASIS OF REALISABLE VALUE OF PART OF THE STOCK PLEDGED WITH THE BANK. (F) ALL THE PURCHASES AND SALES ARE SUPPORTED BY THE PURCHASE INVOICES AND SALES MEMOS AND THESE FIGURES ARE NOT DISPUTED BY THE A.O. NO SPECIFIC DEF ECTS HAVE BEEN POINTED OUT IN THE BOOKS OF ACCOUNTS BY THE A.O. THE BOOKS OF ACCOUNTS ARE DULY AUDITED U/S 44AB OF THE ACT AND NO DISCREPANCY HAS BEEN REPORTED BY THE AUDITORS. WHEN BOOKS OF ACCOUNTS ARE NOT REJECTED, THE QUESTION OF REJECTING THE DECLA RED TURNOVER AND ADOPTING AN ASSUMED TURNOVER DOES NOT ARISE. (G) THE GROSS PROFIT RATE DECLARED BY THE ASSESSEE DURING THE IMPUGNED A.Y. IS 41.52% AND THIS IS MORE THAN THE GROSS PROFIT RATE DECLARED FOR THE A.YS 2001 - 02 AND 2002 - 03. THIS GROSS PROFIT RA TE HAS NOT BEEN DISPUTED BY THE A.O. ITA NO. 1036/DEL/2009 A.Y. 2003 - 04 RASTOGI PUBLICATIONS SHIVAJI ROAD 6 7.1. THE FACTS AS FOUND BY THE LD.CIT(A), COULD NOT BE CONTROVERTED BY THE LD.SR.D.R. THE FIRST APPELLATE AUTHORITY HAS RIGHTLY RELIED ON THE DECISION OF THE ITAT AHMEDABAD BENCH IN THE CASE OF SURAT DISTRICT CO - OPERA TIVE MILK PRODUCERS UNION LTD. VS. JCIT (SUPRA). 7.2. THUS WE UPHOLD THE FINDING OF THE FIRST APPELLATE AUTHORITY AND DISMISS GROUND NOS. 1 AND 2 OF THE REVENUE. 8. ON GROUND NO.3, THE FIRST APPELLATE AUTHORITY HAS RECORDED THAT THE FITURE OF RS.46,037/ - , NUMBER OF BOOKS , WAS TAKEN TWICE BY THE A.O. WHILE ARRIVING AT A FIGURE OF RS.4,42,310/ - . THIS ARITHMETICAL MISTAKE HAS BEEN CORRECTED BY THE LD.CIT(A). THE LD.SR.D.R. COULD NOT CONTROVERT THE FACTUAL FINDINGS OF THE FIRST APPELLATE AUTHORITY. IN THE RESULT WE UPHOLD THE SAME AND DISMISS GROUND NO.3 OF THE REVENUE. 9. GROUND NO.4 IS GENERAL IN NATURE WHICH DO NOT REQUIRE ANY ADJUDICATION. 10. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER , 2015. SD/ - SD/ - ( I.C. SUDHIR ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 16 TH SEPTEMBER , 2015 *MANGA ITA NO. 1036/DEL/2009 A.Y. 2003 - 04 RASTOGI PUBLICATIONS SHIVAJI ROAD 7 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST.REGISTRAR