The Assistant Commissioner of Income TAx Circle-1 , Vijayapur V. Sri Venkatesh V Saka , Bagalkot

ITA 1091/BANG/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8651 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-10-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T CHANDRASEKHAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO.1091/BANG/2018 (ASSESSMENT YEAR : 2011 12) THE ACIT, CIRCLE 1, VIJAYAPUR. APPELLANT VS SHRI VENKATESH V SAKA JOSHI GALLI, ILKAL, TQ. HUNGUND DIST. BAGALKOT PAN. AKLPS2655N RESPONDENT ASSESSEE BY : SHRI V. SRIDHAR, ADVOCATE REVENUE BY : SHRI T. CHANDRASEKHAR, ADDL. CIT ( DR) DATE OF HEARING : 26 10 2018 DATE OF PRONOUNCEMENT : 19 12 2018 O R D E R PER A. K. GARODIA, A.M.: THIS APPEAL IS FILED BY THE REVENUE WHICH IS DIRECT ED AGAINST THE ORDER OF CIT (A) BELAGAVI DATED 18.01.2018 FOR A. Y. 2011 12 . 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- (1) THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS BY DELETING THE ADDITION OF RS. 99,38,940/- AS SUPPRESSED SALES. TH E LD.CIT(A) FAILED TO APPRECIATE THE FACTS AND GROUNDS OF ADDITION ON WHICH THEY WERE MADE AND CONSIDERING THE ASSESSEE'S CONTENTION, THE AO HAD ALREADY GIVEN RELIEF BY DETERMINING THE SUPPRESSION OF SALE S TO THE EXTENT OF 20%. (2) FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE SET ASIDE AND THAT THE ORDER OF THE ASSESSING OFFICER IS RESTORED ON THE A BOVE POINTS. 3. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GRANITE EXTRACTION FROM HIS OWN MINES AND ALSO PURCHASING OF GRANITE BLOCKS FROM THIRD PARTIES AND SELLING IN DOMESTIC AS WELL AS FOREIGN MARKETS. ON PAGE 9 OF T HE ASSESSMENT ORDER, THE AO NOTED THAT THE DETAILS OF MINERAL DISPATCH PERMITS ISSUED BY THE DEPARTMENT OF MINES AND GEOLOGY (DMG) IN RESPECT OF GRANITE BLOCKS MINED FR OM OWN MINE WAS CROSS CHECKED WITH FEW OF THE SALES INVOICES FOR CORRECTNESS OF T HE QUANTITY AND HE NOTED FIVE SUCH INSTANCES AS PER WHICH, TOTAL VOLUME AS PER INVOICE S IS LESSER BY 30.42% MINIMUM TO ITA NO. 1091/BANG/2018 2 47.67 % MAXIMUM. THE AO WAS OF THE VIEW THAT THE AS SESSEE HAS UNDER INVOICED THE SALES QUANTITY AND HE CONFRONTED THE ASSESSEE IN TH IS REGARD. THE REPLY OF THE ASSESSEE IS REPRODUCED BY THE AO ON PAGE 10 OF THE ASSESSMENT O RDER AND AS PER THE SAME, THIS IS THE EXPLANATION OF THE ASSESSEE THAT DEPARTMENT OF MINES AND GEOLOGY (DMG) MEASURES FROM EDGE TO EDGE OF THE GRANITE BLOCK BUT AT THE TIME OF SALE, THE CUSTOMER INSISTS FOR EXCLUSION OF WHITE PATCHES, MODULES, HA IR CRACKS AND NORMAL ALLOWANCE. IT WAS ALSO SUBMITTED THAT UNWANTED PORTION OF THE BLO CK CANNOT BE DETACHED AND IT WAS EXPLAINED THAT IF THE ASSESSEE DO THE DETACHMENT OF UNWANTED PART, IT WILL AFFECT THE REMAINING GOOD PORTION OF THE BLOCK AND THEREFORE, TO AVOID LITIGATION, THE ASSESSEE MAKES PAYMENT OF ROYALTY ON THE MEASUREMENT BY DMG. THE AO WAS NOT FULLY SATISFIED AND HE HELD THAT 20% OF SALES QUANTITY OU T OF OWN MINING IS SUPPRESSED SALES. HE QUANTIFIED THE QUANTITY AND VALUE OF SUCH ALLEGE D SUPPRESSED SALES AT 297.341 CBMS AND RS. 99,38,940/- RESPECTIVELY AND MADE ADDITION OF THIS AMOUNT. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CI T (A) WHO DELETED THIS ADDITION BY OBSERVING AS UNDER IN PARAS 7.2 AND 7.3 OF HIS ORDE R AS REPRODUCED HEREIN BELOW:- 7.2 AR'S ARGUMENT DURING THE ASSESSMENT AND DURING THE APPELLATE PROCEEDINGS IS THAT MEASUREMENT TAKEN BY DMG PERMIT S VARIES WITH ACTUAL MARKETING FOR SALE PURPOSE BY THE CUSTOMER A GENTS, WHICH IS A MARKET PRACTICE. COMPARATIVE CHART SUBMITTED BY THE ASSESSEE, OF THE GRANITE SUPPLIED TO GOVERNMENT AGENCY ALSO SHOWN TH E VARIATION OF DMG REPORT MEASUREMENT AND SALE INVOICES MEASUREMEN T OF THE SAME BLOCKS. THIS IS BECAUSE OF SALEABLE VARIETY. 7.3 IN THE GRANITE INDUSTRY, IT IS AN ACCEPTED PRAC TICE THAT THERE IS CERTAIN ALLOWABILITY OF MEASUREMENTS DUE TO VARIOUS DEFECTS ETC. HENCE MEASUREMENT OF DMG WHICH IS TAKEN FROM EDGE TO EDGE IS NOT ACTUALLY A SALEABLE QUANTITY. SALEABLE QUANTITY IS ALWAYS LE SS THAN THE DMC PERMIT. IN SOME CASES DMG MEASUREMENT TO ACTUAL MEA SUREMENT DIFFERS BY 30-40% DEPENDING ON THE USERS DEFECTS. E VEN DURING THE SURVEY, NO EVIDENCE OF SUPPRESSION WAS FOUND BY THE DEPARTMENT. WHEN THE TRADE PRACTICE ACCEPTS BILLING ON ACTUAL S EALABLE QUANTITY RATHER THAN DMG MARKETING, ADDITION MADE BY THE A.O IS NOT IN ACCORDANCE WITH REGULAR PRACTICE OF TRADE. DEPARTME NT HAD NOT BROUGHT OUT ANY EVIDENCE TO SHOW THAT THERE WAS A S UPPRESSION OF SALE. CONSIDERING THE FACTS AND GROUND REALITY OF THE SPE CIFIC NATURE OF BUSINESS THE SAME IS DELETED. 4. NOW, THE REVENUE IS IN APPEAL BEFORE US. LEARNED DR OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. LEARNED AR OF THE ASSESSEE SUPPOR TED THE ORDER OF CIT (A). THIS APPEAL WAS PARTLY HEARD ON 24.10.2018 AND THE MATTE R WAS POSTED FOR FINAL HEARING ON 26.10.2018 AND BOTH SIDES WERE DIRECTED TO PRODUCE ANY EVIDENCE IN SUPPORT OF THE UNSALABLE QUANTITY REPORTED BY THE ASSESSEE IN THE RANGE OF 30.42% MINIMUM TO 47.67 % MAXIMUM AND THE STAND OF THE AO THAT 20% OF THE A CTUAL SALES QUANTITY REPORTED BY THE ASSESSEE IS UNACCOUNTED SALES. ON 26.10.2018, N EITHER SIDE COULD BRING ANY EVIDENCE ITA NO. 1091/BANG/2018 3 ON RECORD AS WERE ASKED FOR AND HENCE, THE APPEAL W AS TAKEN AS HEARD FOR DECISION ON THE BASIS OF MATERIALS AVAILABLE ON RECORD. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE THROU GH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS IS THE STAND OF THE AO TH AT 20% OF ACTUAL SALES QUANTITY REPORTED BY THE ASSESSEE IS SUPPRESSED SALE. THE AO IS ALSO ACCEPTING THAT THE TOTAL QUANTITY AS PER DMG MEASUREMENTS IS NOT SALEABLE BE CAUSE AS AGAINST THE DIFFERENCE OF 30.42% MINIMUM TO 47.67 % MAXIMUM, THE AO IS ALLEGI NG THAT ONLY 20% OF SALES QUANTITY REPORTED BY THE ASSESSEE IS SUPPRESSED SAL ES. NOW THE QUESTION IS WHAT IS THE BASIS OF THIS ESTIMATE BY THE AO. WE FIND THAT THE SAME IS ARBITRARY BECAUSE NO BASIS IS INDICATED BY THE AO IN THE ASSESSMENT ORDER FOR THI S ESTIMATE. IF THE DIFFERENCE IN THE QUANTITY AS PER DMG MEASUREMENT AND SALES QUANTITY REPORTED BY THE ASSESSEE IS 40% OF DMG MEASUREMENT QUANTITY BEING ROUNDED OFF AVERA GE OF MINIMUM 30.42% AND MAXIMUM 47.67%, THE SALES QUANTITY REPORTED BY THE ASSESSEE IS 60% OF DMG QUANTITY AND 20% OF SUCH SALES QUANTITY IS ESTIMATED BY THE AO AS SUPPRESSED SALES AND THIS MEANS THAT AS AGAINST 60% SALEABLE QUANTITY AS PER THE ASSESSEE, SALEABLE QUANTITY AS PER THE AO IS 72% OF DMG QUANTITY BEING 120% OF 60%. IT IS NOTED BY THE LEARNED CIT (A) IN PARA NO. 7.3 OF HIS ORDER AS REPRODUCED ABOVE TH AT EVEN DURING SURVEY, NO EVIDENCE OF SUPPRESSION WAS FOUND BY THE DEPARTMENT. HENCE, IN OUR CONSIDERED OPINION, IN THIS FACTUAL POSITION THAT THE AO IS ALSO ACCEPTING THE FACT THAT TOTAL DMG QUANTITY IS NOT SALEABLE AND NO BASIS IS GIVEN BY HIM TO ALLEGE SUP PRESSION OF SALES TO THE EXTENT OF 20% OF SALES QUANTITY AS ALLEGED BY HIM AND ALSO IN VIE W OF THIS FACT THAT EVEN IN COURSE OF SURVEY, NO EVIDENCE OF SUPPRESSION WAS FOUND BY THE DEPARTMENT, WE HOLD THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF CIT (A) ON THIS ISSUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DA TE MENTIONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNT ANT MEMBER BANGALORE, DATED, THE 19 TH DECEMBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.