The ITO, Ward-8(3), Ahmedabad V. Shanti Processors Pvt.Ltd., Ahmedabad

ITA 1216/AHD/2006

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57132 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-01-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 12-05-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SRIVASTAVA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained investment
• Section: 14A

Judgement Text

ITA N O.1216/AHD/2008 ASSES SMENT YEAR 1989-90 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, A HMEDABAD (BEFORE SHRI G.C. GUPTA,VICE PRESIDENT AND SHRI B. R. BASKARAN,AM) I.T.A. NO.121 6 /AHD/2008 (ASSESSMENT YEAR: 1989-90) THE INCOME TAX OFFICER, WARD 8 (3), 4 TH FLOOR, AJANTA COMMERCIAL CENTRE, A-WING, ASHRAMROAD, AHMEDABAD-380 014. (APPELLANT) VS. SHANTI PROCESSORS LTD., CHIRIPAL HOUSE, NR.SHIVRANJANI CROSS ROAD, SATELLITE, AHMEDABAD. (RESPONDENT) PAN: AABCS 5620 G APPELLANT BY : SHRI P. K. SRIVASTAVA. RESPONDENT BY : SHRI S.N. SOPARKAR, SR.ADVOCAT E. ( )/ ORDER DATE OF HEARING : 18-1-2012. DATE OF PRONOUNCEMENT : 25-1-2012 PER: SHRI B.R. BASKARAN, ACCOUNTANT MEMBER. THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 16-02-2006 PASSED BY LD CIT (A)-XIV, AHMEDABAD AND IT RELATES TO THE ASSESSMENT YEAR 2002- 03. 2. THE REVENUE IS ASSAILING THE DECISION OF LD CIT (A) IN DELETING THE FOLLOWING ADDITIONS MADE BY THE A.O:- (A) GROSS PROFIT ADDITION ON SUPPRESSED SALES - RS.65,14,348/- (B) PARTIAL DISALLOWANCE IN MACHINERY REPAIRS - RS. 7,05,788/- (C) PARTIAL DISALLOWANCE ON VARIOUS EXPENSES - RS. 3,25,950/- (D) UNACCOUNTED INVESTMENT IN PURCHASES - RS.39,72,368/- (E) DISALLOWANCE U/S 14A AGAINST DIVIDEND INCOME -RS.1,07,384/-. ITA N O.1216/AHD/2008 ASSES SMENT YEAR 1989-90 2 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE COMPANY IS ENGAGED IN PROCESSING OF CLOTH. THE CEN TRAL EXCISE DEPARTMENT CARRIED OUT A SURVEY OPERATION ON 01.11.2002 IN THE BUSINES S PREMISES OF THE ASSESSEE AND CONSEQUENT THERETO, THE INCOME TAX DEPARTMENT ALSO CARRIED OUT A SURVEY OPERATION UPON THE ASSESSEE ON 07-02-2002. THERE AFTER, THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 25.10.2002 DECLARING LOSS OF RS.65,39,293/-, WHICH WAS REVISED LATER TO RS.60,52 ,185/-. CONSEQUENT TO THE SURVEY OPERATION, THE RETURN OF INCOME CITED ABOVE WAS TAKEN UP FOR SCRUTINY. DURING THE COURSE OF SURVEY BY CENTRAL EXCISE DEPAR TMENT, FOLLOWING DISCREPANCIES WERE NOTICED BY THEM. DISCREPANCIES NOTICED. LINEAL METERS RATE TAKEN BY EXCISE DEP. VALUE (RS.) DUTY INVOKED ILLICIT REMOVAL PRINTED MMF 3177728 MTRS 15.00 4,76,96,920/- 76,26,548/- SHORTAGE OF COTTON FABRICS 281645 MTRS 20.00 56,32,900/- 23,77,747/- SHORTAGE OF MMF HOSIERY 216072 KGS. 165.00 43,01,909/- SHORTAGE OF PRINTED MMF 328404 MTRS. 15.00 49,26,105/- TOTAL 6,25,26,834/- 1,00,04,294/- THE ASSESSEE SUBMITTED THAT THE PRINTED MMF ILLIC ITLY REMOVED BELONG TO THREE CONCERNS VIZ., M/S DEEPAK ENTERPRISES, M/S RAJESH T EXTILES AND M/S RONAK ENTERPRISES. THE ASSESSEE CLAIMED THAT IT CARRIED OUT THE JOB WORKS ONLY IN RESPECT OF PRINTED MMF ON BEHALF OF THE ABOVE SAID THREE PARTIES. THE SHORTAGES FOUND IN THE OTHER THREE STOCKS WERE CLAIMED TO HAVE BEEN SO LD TO TWO CONCERNS VIZ., M/S PUNIT TRADERS AND M/S SADIK ENTERPRISES. AFTER THE EXCISE SURVEY, THE ASSESSEE ACCOUNTED THE JOB WORK CHARGES PERTAINING TO THE P RINTED MMF IN ITS BOOKS OF ITA N O.1216/AHD/2008 ASSES SMENT YEAR 1989-90 3 ACCOUNT. SIMILARLY, IT ACCOUNTED FOR THE SHORTAGE IN OTHER THREE ITEMS AS SALES MADE TO M/S PUNIT TRADERS AND M/S SADIK TRADERS. 4. THE AO ALSO NOTICED THAT THE JOB WORK RATE A CCOUNTED FOR BY THE ASSESSEE IN RESPECT OF PRINTED MMF WAS MUCH LOWER THAN THE US UAL RATE CHARGED FOR JOB WORK. SIMILARLY THE SALES VALUE IN RESPECT OF SHOR TAGE OF STOCK WAS SHOWN AT A LOWER VALUE. HENCE, THE AO, DURING THE COURSE OF A SSESSMENT PROCEEDINGS, CONDUCTED DETAILED ENQUIRIES IN ORDER TO ASCERTAIN THE VERACITY OF THE CLAIMS OF THE ASSESSEE WITH REGARD TO THE ABOVE SAID FIVE PARTIES . HE ISSUED SUMMONS TO THEM, BUT THEY COULD NOT BE SERVED UPON THEM, AS THE SAID PARTIES COULD NOT BE LOCATED. HIS ENQUIRIES CONDUCTED IN THE MARKET ALSO REVEALED THAT THERE ARE NO SUCH PARTIES. THE ASSESSEE ALSO COULD NOT PRODUCE THEM THOUGH THE INCOME TAX RETURNS OF M/S DEEPAK ENTERPRISES, M/S RAJESH TEXTILES AND M/S RON AK ENTERPRISES WERE FILED. THE SAID RETURN OF INCOME ALSO APPEARED TO BE AN EX ERCISE CARRIED AFTER THE SURVEY OPERATION TO SUIT THE REQUIREMENTS OF THE ASSESSEE. THE PAYMENT RECEIVED FROM THESE FIVE PARTIES ALSO APPEARED TO BE AN ARRANGED AFFAIR TO SUIT THE REQUIREMENTS OF THE ASSESSEE. FOR THE DETAILED REASONS RECORDED IN THE ASSESSMENT ORDER, THE AO CONCLUDED THAT THE ASSESSEE ITSELF HAS SOLD PRINTE D MMF AND ACCORDINGLY HE DID NOT BELIEVE THE CLAIM OF CARRYING OF JOB WORK IN RE SPECT OF THE SAME. 5. DURING THE COURSE OF SURVEY OPERATION, THE D EPARTMENT COULD FIND A FILE CONTAINING THE SUGGESTIONS GIVEN BY AN ADVOCATE WIT H REGARD TO THE VARIOUS WAYS IN WHICH THE DEFICIENCIES NOTED BY THE CENTRAL EXCISE AUTHORITIES COULD BE MANAGED IN THE BOOKS OF ACCOUNT. THE SAID SUGGESTION PROVED T HAT THE TRANSACTIONS ENTERED WITH THE FIVE PARTIES CITED ABOVE TO BE A STAGE MAN AGED ONE. HENCE, FOR THE DETAILED REASONS RECORDED IN THE ASSESSMENT ORDER, THE AO WAS NOT SATISFIED WITH THE CORRECTNESS AND COMPLETENESS OF THE ACCOUNTS MA INTAINED BY THE ASSESSEE AND ITA N O.1216/AHD/2008 ASSES SMENT YEAR 1989-90 4 ACCORDINGLY REJECTED THE BOOK RESULTS. THE LD CIT (A) ALSO HELD THAT THE ACTION OF THE AO IN REJECTING THE BOOK RESULTS IS QUIET JUSTI FIED. IT IS PERTINENT TO NOTE THAT THE ASSESSEE DID NOT CHALLENGE THE SAID DECISION OF THE LD CIT (A) AND HENCE THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT HAS ATTA INED FINALITY. 6. IT IS ALSO PERTINENT TO NOTE THAT THE AO HAS PROCEEDED TO DETERMINE THE TOTAL INCOME FOR THE YEAR UNDER CONSIDERATION ON THE BASI S OF PROFIT AND LOSS ACCOUNT FURNISHED BY THE ASSESSEE, EVEN AFTER THE REJECTION OF BOOKS OF ACCOUNT. THE LD CIT (A) ALSO DID NOT FIND FAULT WITH THE SAID ACTIO N OF THE AO. 7. NOW THE IMPORTANT QUESTION THAT ARISES IS WH ETHER THE AO IS ENTITLED TO RELY UPON THE VERY SAME BOOKS OF ACCOUNT, WHICH HE HIMSE LF HAD REJECTED, FOR MAKING VARIOUS ADDITIONS. IN OUR VIEW, THE ANSWER IS CERT AINLY NO. SINCE THE AO WAS NOT SATISFIED WITH THE CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUNT, HE SHOULD NOT RELY UPON THE VERY SAME BOOK FOR DETERMI NING THE INCOME OF THE ASSESSEE, PARTICULARLY AFTER REJECTED THE SAID BOOK S. IN THAT CASE, THE AO SHOULD INDEPENDENTLY DETERMINE THE TOTAL INCOME OF THE ASS ESSEE ON THE BASIS OF THE DOCUMENTS ON WHICH HE COULD PLACE RELIANCE. THIS L EGAL PROPOSITION STATED BY US GETS SUPPORT FROM THE DECISION OF HONBLE ANDHRA PR ADESH HIGH COURT IN THE CASE OF CIT VS. INDWELL CONSTRUCTIONS REPORTED IN 232 I TR 776. 8. IN VIEW OF THE LEGAL PROPOSITION DISCUSSED A BOVE, ONE HAS TO ESTIMATE THE INCOME OF THE ASSESSEE ON THE BASIS OF AVAILABLE EV IDENCES. FROM THE ASSESSMENT ORDER, WE NOTICE THAT THE AO HAS MADE STUPENDOUS EF FORTS TO VERIFY THE TRANSACTIONS RELATING TO THE DEFICIENCIES DETECTED BY THE EXCISE AUTHORITIES. ON A CAREFUL CONSIDERATION OF VARIOUS ENQUIRIES CONDUCTED BY THE AO, WE ARE OF THE VIEW THAT THE CONTENTIONS OF THE ASSESSEE WITH REGARD TO THE SAID DEFICIENCIES ARE NOT PROVED ITA N O.1216/AHD/2008 ASSES SMENT YEAR 1989-90 5 CONCLUSIVELY. ACCORDINGLY, ON A CONSPECTUS OF THE MATTER, WE DIRECT THE AO TO MAKE A LUMP SUM ADDITION OF RS.50.00 LAKHS TO TAKE CARE OF ALL THE DEFICIENCIES NOTICED BY THE AO. THE ORDER OF LD CIT (A) STANDS MODIFIED ACCORDINGLY. 9. THE ASSESSEE HAD DISCLOSED DIVIDEND INCOME OF RS.1,36,184/-, WHICH INCLUDED A SUM OF RS.28,800/- RECEIVED FROM THE CO-OPERATIVE BANK WHICH WAS NOT EXEMPT U/S 10(33). WITH REGARD TO THE REMAINING DIVIDEND INCOME OF RS.1,07,384/-, WHICH IS EXEMPT FROM TAX, THE AO HAS HELD THAT THE EXPENS ES INCURRED IN EARNING THE SAME IS REQUIRED TO BE DISALLOWED U/S 14A OF THE ACT. I N THE ABSENCE OF CLEAR DETAILS, THE AO CONSIDERED THE EXPENSES AS EQUAL TO THE DIVIDEND OF RS.1,07,384/-. THE LD CIT (A) NOTICED THAT THE ASSESSEE WAS HAVING OWN FUNDS TO THE TUNE OF ABOUT RS.8.50 CRORES AND ACCORDINGLY HELD THAT THERE IS NO NECESS ITY TO INVOKE THE PROVISIONS OF SEC. 14A. WE HAVE GONE THROUGH THE ORDER OF LD CIT (A) ON THIS ISSUE. WE ALSO NOTICE THAT THE AO HAS QUANTIFIED THE AMOUNT TO BE DISALLOWED U/S 14A ON AN AD- HOC BASIS WITHOUT BRINGING ANYTHING AGAINST THE ASS ESSEE ON RECORD. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT (A ) ON THIS ISSUE. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25 - 01 - 2012 . SD/- SD/- (G. C. GUPTA) (B.R. BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA N O.1216/AHD/2008 ASSES SMENT YEAR 1989-90 6 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XIV, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 19 - 01 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 19 /01 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 23 -01 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 25 - 01 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 25 -01 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 25 -01 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..