Navyug Pharmachem Pvt. Ltd., Bhavnagar V. The Asstt. Commissioner of Income Tax, Circle-1, Bhavnagar

ITA 1218/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3264 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Keywords: Depreciation; Tax effect
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 1218/AHD/2017 (ASSESSMENT YEAR: 2010-11) NAVYUG PHARMACHEM PVT. LTD. SURVEY NO. 260/2, NAVA GAM, KARDEJ, BHAVNAGAR-364060 V/S ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, JASHONATH CHOWK, BHAVNAGR-364001 (APPELLANT) (RESPONDENT) PAN: AAACN 7217M APPELLANT BY : SHRI ANIL KSHATRIYA, AR RESPONDENT BY : SHRI S. K. DEV, SR. D.R. ( )/ ORDER DATE OF HEARING : 26-12-201 8 DATE OF PRONOUNCEMENT : 18 -02-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-6, AHMEDABAD DATED 28.02.2017 PERTAINING TO A.Y. 2010-11 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 1218 /AHD/2017 . A.Y. 2010-1 1 2 1. ON FACTS AS WELL AS IN THE CIRCUMSTANCES OF THE CASE OF THE APPELLANT, THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) IS BAD IN L AW AND THEREFORE, IT MAY KINDLY BE QUASHED. 2. ON FACTS AND IN LAW AS WELL AS IN THE CIRCUM STANCES OF THE CASE OF THE APPELLANT, THE LD. CIT(A) HAS ERRED IN SUSTAINING D ISALLOWANCE OF SUNDRY EXPENSES TO THE EXTENT OF 10% I.E. RS.23,000/- ON ACCOUNT OF CAR VEHICLE REPAIRING, RS.1,700/- ON ACCOUNT OF SCOOTER REPAIRING, RS.10,0 00/- ON ACCOUNT OF PETROL, DIESEL AND MAINTENANCE EXPENSES, RS.11,250/- ON ACC OUNT OF TRAVELLING EXPENSES AND RS.7,000/- ON ACCOUNT OF TELEPHONE EXPENSES, WH EN THERE IS NO JUSTIFICATION IN CONFIRMING SUCH ADHOC EXPENSES BEING A CASE OF COMP ANY ASSESSEE IN VIEW OF DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE O F SAYAJI IRON & ENGG. CO. VS. CIT 253 ITR 339(GUJ.). THE SAME MAY BE DELETED. 3. ON FACTS AND IN LAW AS WELL AS IN THE CIRCU MSTANCES OF THE CASE OF THE APPELLANT, THE LD. CIT(A) HAS ERRED IN SUSTAINING D ISALLOWANCE OF RS.33,288/- ON ACCOUNT OF DIFFERENCE IN BANK BALANCE, WHEN THERE I S NO JUSTIFICATION IN CONFIRMING SUCH DISALLOWANCE. THE SAME MAY BE DELETED. 4. ON FACTS AND IN LAW AS WELL AS IN THE CIRCU MSTANCES OF THE CASE OF THE APPELLANT, THE LD. CIT(A) HAS ERRED IN SUSTAINING D ISALLOWANCE OF RS.10,800/- ON ACCOUNT OF DEPRECIATION ON FACTORY SHED, WHEN THERE IS NO JUSTIFICATION IN CONFIRMING SUCH DISALLOWANCE. THE SAME MAY BE DELET ED. 5. ON FACTS AND IN LAW AS WELL AS IN THE CIRCU MSTANCES OF THE CASE OF THE APPELLANT, THE LD. CIT(A) HAS ERRED IN SUSTAINING D ISALLOWANCE OF RS.33,58,214/- ON ACCOUNT OF DIFFERENCE IN CASH FLOW U/S 68 OF THE ACT, WHEN THERE IS NO JUSTIFICATION IN CONFIRMING SUCH DISALLOWANCE. THE SAME MAY BE DELETED. 6. ON FACTS AND IN LAW AS WELL AS IN THE CIRCU MSTANCES OF THE CASE OF THE APPELLANT, THE LD. CIT(A) HAS ERRED IN SUSTAINING D ISALLOWANCE OF RS.4,39,034/- ON ACCOUNT OF CASH SHORTAGE, WHEN THERE IS NO JUSTIFIC ATION IN CONFIRMING SUCH DISALLOWANCE. THE SAME MAY BE DELETED. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HUMANLY IMPOSSIBLE TO PHYSICALLY PREPARED THE INVENTORY OF RELATED ITEMS OF STOCK IN THE TIME AVAILABLE DURING THE SURVEY PROCEEDINGS AS ON 19/09/2009 I.E. BEFORE 2.00 A.M. IN SUCH AN EVENTUALITY, NO RELIANCE CAN BE PLACED ON SUCH INVE NTORY SO PREPARED BY SITTING ON AN ARM-CHAIR AND IT MAY KINDLY BE HELD SO. 8. ON FACTS AND IN LAW AS WELL AS IN THE CIRCU MSTANCES OF THE CASE OF THE APPELLANT, THE LD. CIT(A) HAS ERRED IN SUSTAINING D ISALLOWANCE OF RS.64,25,896/- ON ACCOUNT OF STOCK DIFFERENCE, WHEN THERE IS NO JU STIFICATION IN CONFIRMING SUCH DISALLOWANCE. THE SAME MAY BE DELETED. 9. ON FACTS AND IN LAW AS WELL AS IN THE CIRCU MSTANCES OF THE CASE OF THE APPELLANT, THE LD. CIT(A) HAS ERRED IN SUSTAINING D ISALLOWANCE OF RS.94,000/- ON ACCOUNT OF UNEXPLAINED REPAIR CHARGES, WHEN THERE I S NO JUSTIFICATION IN CONFIRMING SUCH DISALLOWANCE. THE SAME MAY BE DELET ED. ITA NO. 1218 /AHD/2017 . A.Y. 2010-1 1 3 2. OUT OF NINE GROUNDS, GROUND NOS. 1,2,3,4 & 9 HAVE N OT PRESSED BY THE ASSESSEE ON ACCOUNT OF SMALLNESS OF TAX EFFECT. 3. BRIEFLY FACTS OF THE CASE ARE THAT THE APPELLANT IS A DOMESTIC COMPANY AND IS ENGAGED IN THE BUSINESS IN MANUFACTURING OF BULK DR UGS, PHARMACEUTICALS AND FINE CHEMICALS. THE APPELLANT MAINTAINS REGULAR BOO KS OF ACCOUNTS WHICH ARE DULY AUDITED BOTH UNDER THE COMPANY'S ACT AS WELL A S U/S 44AB OF THE ACT. 4. FOR THE A.Y.2010-11, THE APPELLANT SUBMITTED ITS VO LUNTARY RETURN OF INCOME ON 15/10/2010, ELECTRONICALLY DECLARING THEREIN TOTAL INCOME OF RS.20,52,760/-. THE RETURN OF INCOME HAVING BEEN SELECTED FOR SCRUT INY, A NOTICE U/S 143(2) WAS ISSUED ON 19/09/2011. THEREAFTER, THE A.O. HAS FINALIZED THE REGULAR ASSESSMENT U/S 143(3) OF THE ACT ON A TOTAL INCOME OF RS.L,58,18,081/-. WHILE DOING SO, A.O. MADE ADDITION TOTALING TO RS. 1,37,6 5,321/- ON ACCOUNT OF 19 VARIOUS COUNTS. 5. BEING AGGRIEVED, APPELLANT CHALLENGED THE IMPUGNED ASSESSMENT ORDER AND LD. CIT(A) GRANTED PARTLY RELIEF TO THE APPELLANT. 6. NOW WE COME TO GROUND NO. 5 RELATING TO ADDITION OF RS. 33,58,214/- ON ACCOUNT OF DIFFERENCE IN CASH FLOW. 7. AS PER LD. A.O., THERE WAS A DEVIATION OF CASH OF R S. 33,58,214/- BETWEEN OUTFLOW INFLOW AND OUTFLOW AND ASSESSEE GAVE HIS R EPLY IN DETAILS BUT THAT COULD NOT SATISFIED THE LOWER AUTHORITIES. HENCE, THEY MA DE THE ADDITION. ITA NO. 1218 /AHD/2017 . A.Y. 2010-1 1 4 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED RECORD. WE CAN SEE, THAT ASSESSEE HAS SUPPLIED THE COMPUTER GENERATED S TATEMENTS AND IT WAS HISTORICALLY DERIVED FROM THE FIGURES FROM PROFIT A ND LOSS ACCOUNT AND BALANCE SHEET WHICH ARE VERY MUCH AVAILABLE ON RECORD IN TH E FORM OF AUDIT REPORT U/S. 44AB OF THE ACT, THE SAME IS AT PAGE 143 & 144 OF T HE PAPER BOOK. SINCE THE AUDITED BOOKS OF ACCOUNTS WERE NOT REJECTED AND THE BOOK RESULTS STAND ACCEPTED AND ALSO THE ALLEGED DISCREPANCY STAND DUL Y RECONCILED. THEREFORE, WE HAVE NO HESITATION IN DELETING THE ADDITION MADE OF RS. 33,58,214/-. THUS THIS GROUND OF APPEAL IS ALLOWED. 9. NOW WE COME TO GROUND RELATING TO CONFIRMING THE DI SALLOWANCE OF RS. 4,39,034/- ON ACCOUNT OF CASH SHORTAGE BY THE LD. C IT(A). 10. LD. A.O. HAS DISCUSSED THE ISSUE IN PARA 21 OF THE ASSESSMENT ORDER. AS PER A.O. THERE WAS A DIFFERENCE OF CASH OF RS. 4,39,03 4/- FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE. HOWEVER, THE ASSESSEE STA TED SOME OF THE AMOUNT WAS LYING AT THE RESIDENCE OF THE DIRECTOR. AS PER IMPU GNED ORDER STATEMENT OF HARKANTBHAI P. VYAS ACCOUNTANT OF THE ASSESSEE COMP ANY WAS RECORDED AND SAME IS AT PAGE 192 TO 194 OF THE PAPER BOOK AND HE STATED IN REPLY OF QUESTION NO. 15 THAT CASH BOOK (NAVYCHEM ORGANICS) WAS WRITT EN UP TO 17/09/2009 WHICH REVEALED CLOSING CASH BALANCE OF RS. 2,14,322 /- AND AS PER PREVAILING SYSTEM IT IS KEPT AT THE RESIDENCE OF THE SAME DIRE CTOR OF THE COMPANY. REVENUE OUGHT TO HAVE DEPUTED TO VERIFY THE STATEMENT OF TH E ACCOUNTANT BUT DEPARTMENT DID NOT DEPUTED ANYONE SO IN THESE CIRCU MSTANCES OF THE DEPARTMENT CANNOT BE ACCEPTED. THUS, THIS GROUND OF APPEAL IS ALLOWED. 11. NOW WE COME TO GROUND RELATING TO SUSTAINING DISALL OWANCE OF RS. 64,25,896/- ON ACCOUNT OF STOCK DIFFERENCE BY THE LD. CIT(A). O N THIS COUNT, A STATEMENT OF ITA NO. 1218 /AHD/2017 . A.Y. 2010-1 1 5 DIRECTOR WAS RECORDED WHERE HE ALLEGEDLY SUBMITTED THE EXCESS VALUE OF STOCK AS ITS INCOME AND SAME IS PART OF PAPER BOOK PAGE NO. 33 TO 39 AND ON THAT BASIS, ADDITION WAS MADE. THOUGH, ASSESSEE REPLIED IN DETA IL BUT HIS CONTENTION WAS NOT ACCEPTED BY THE LOWER AUTHORITIES. 12. AS WE CAN SEE, APPELLANT WAS NOT PROVIDED A COPY OF ALLEGED SURVEY INVENTORY NOR A STATEMENT OF RECORDED BY THE SURVEY PARTY AND ASSESSEE RETRACTED HIS SUBMISSION BY WAY OF LETTER AND SAME STATEMENT WAS ALSO REFERRED IN THE ORDER OF LD. CIT(A) AND FOLLOWING STOCK TRANSACTION WAS R ECORDED BY THE SURVEY PARTY. WE JUST FAIL TO UNDERSTAND HOW IN A SHORT SPAN OF T IME SURVEY PARTY MADE THE STATEMENT AFTER CALCULATING AND WEIGHING THE ITEM A ND ADDITION HAS BEEN MADE SOLELY ON THE ACCOUNTING AND WEIGHING OF THE STOCK. 13. ASSESSEE CITED AN ORDER OF JURISDICTIONAL HIGH COUR T IN THE MATTER OF K. CHOKSHI WHEREIN IT IS MENTIONED THAT THE STATEMENT WAS TAKEN IN THE COURSE OF SURVEY PROCEEDING WHICH IS LEGALLY BUT NO BINDING F ORCE, AS ASSESSEE HAS ALSO RETRACTED THE STATEMENT AND ASSESSEE IS SUBJECT TO EXCISE DUTY AND EXCISE DEPARTMENT HAS NOT FOUND ANY DISCREPANCY IN THE STO CK OF THE ASSESSEE. THEREFORE, IN THESE CIRCUMSTANCES, AN ADDITION MADE BY THE DEPARTMENT CANNOT SUSTAIN. THEREFORE, WE DELETE THE ADDITION OF RS. 6 4,25,896/-. 14. HOWEVER, ON REFERRING TO PAPER BOOK PAGE 309 TO 311 , WE FIND THAT IN RESPECT OF THE FOLLOWING ITEM, THERE IS STILL REMAINS DISCR EPANCY INASMUCH AS THERE IS NO QUANTITY/VALUE DISCLOSED AS PER ASSESSEE STOCK RECO RD VIS--VIS STOCK AS PER SURVEY INVENTORY: ITEM QUANTITY AS PER INVENTORY QUANTITY AS PER BOOKS DIFFERENCE IN VALUE BENZYL BENZOATE 890 KG 0 10680/ - ITA NO. 1218 /AHD/2017 . A.Y. 2010-1 1 6 MITHAI BENZOIC LIQUID 300 KG 0 3000/ - BIO MASS FUEL 175MT 23250 KG 0 42,245/ - TOTAL 5 6,925 15. SINCE ASSESSEE HAS NOT GIVEN ANY EXPLANATION WITH R EGARD TO AFORESAID DISCREPANCIES IN THE TOTAL STOCK, THEREFORE, WE CON FIRMED THE ADDITION OF RS. 56,925/-. 16. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18- 02- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 18/02/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD