Shivam Metal Shaper, Jammu V. The Dy Commissioner of Income Tax, Jammu

ITA 123/ASR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7802 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Corroborative evidences
• Section: 143(3); 234B; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO. 123/(ASR)/2017 ASSESSMENT YEAR: 2012-13 PAN: AADFS4066K SHIVAM METAL SHAPER INDUSTRIES, PLOT NO.12,13 PHASE-II, INDUSTRIAL ESTATE GANGYAL, JAMMU. VS. DY. C. I. T., CENTRAL CIRCLE, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA ( ADV.) RESPONDENT BY: SH. RAHUL DHAWAN (D. R.) DATE OF HEARING: 21.08.2017 DATE OF PRONOUNCEMENT: 15.09.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LD. CIT(A), LUDHIANA DATED 23.12.2016 FOR ASST. YEAR: 2012-13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ASSESSMENT ORDER AS WELL AS THE OR DER OF LD. CIT(A) ARE BOTH AGAINST THE FACTS OF CASE AND ARE UNTENABLE UNDER T HE LAW. 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OUT OF THE EXPENSES CLAIMED UNDER THE HEAD CONSUMABLE STORES AND THEREBY CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN TRADING ACCOUNT TO THE TUNE OF RS.40,00, 000/-. IT WAS EXPLAINED BEFORE THE AUTHORITIES BELOW THAT THE COS T OF CONSUMABLE GOODS HAS GONE UP MUCH MORE THAN THE PURCHASES MADE IN THE EARLIER YEARS WHICH RESULTED IN INCREASE OF EXPENSES IN CON SUMABLE STORES A/C. THE ADDITION CONFIRMED BY THE WORTHY CIT(A) IS UNJU STIFIED, UNCALLED FOR AND THE SAME IS LIABLE TO BE DELETED. ALTERNATIVELY , THE ADDITION MADE IS VERY HIGH & EXCESSIVE. ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 2 3. THAT AGAIN THE WORTHY CIT(A) HAS GROSSLY ERRED IN C ONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER TH E HEAD CAR REPAIR & MAINTENANCE EXPENSES AND THEREBY MAKING A N ADDITION OF RS.90,361/-. THE AUTHORITIES BELOW DID NOT APPRECIA TE THAT THESE EXPENSES ARE INCURRED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSE OF BUSINESS AND THE SAME SHOULD HAVE BEEN ALLOWED IN T OTO. AS SUCH THE ADDITION CONFIRMED BY THE WORTHY CIT(A) IS UNJUSTIF IED, UNCALLED FOR AND THE SAME IS LIABLE TO BE DELETED. ALTERNATIVELY, TH E ADDITION MADE IS VERY HIGH & EXCESSIVE. 4. THAT THE ASSESSING OFFICER HAS GROSSLY ERRED IN HOL DING THAT INTEREST PAID ON EXCISE DUTY REFUND IS PENAL IN NATURE AND D ISALLOWED THE EXPENSES TO THE TUNE OF RS.20,000/-. SIMILARLY, THE LD. CIT(A) WAS ALSO NOT JUSTIFIED IN CONFIRMING THE SAME. IT WAS EXPLAI NED BEFORE THE AUTHORITIES BELOW THAT THE ASSESSEE INADVERTENTLY C LAIMED SOME EXCESS EXCISE REFUND WHICH WAS SUBSEQUENTLY CREDITED BACK TO THE GOVT. ACCOUNT AND THIS INTEREST AMOUNTING TO RS.20000/- W AS PAID ONLY FOR THE PERIOD FOR WHICH FUNDS REMAINED WITH THE ASSESS EE. AS SUCH THE SAID INTEREST IS COMPENSATORY IN NATURE AND NOT PEN AL IN NATURE AND THE SAME SHOULD HAVE BEEN ALLOWED IN TOTO. ALTERNATIVEL Y, THE ADDITION MADE IS VERY HIGH & EXCESSIVE. 5. THAT FURTHER THE ASSESSING OFFICER HAS GROSSLY ERRE D IN CHARGING INTEREST U/S 234B AND 234D OF THE IT ACT, 1961. THE INTERES T CHARGED IS NOT AT ALL CALLED FOR AND THE SAME IS LIABLE TO BE DELETED . ALTERNATIVELY, THE INTEREST CHARGED IS VERY HIGH & EXCESSIVE. 6. THAT ANY OTHER GROUND OF APPEAL WHICH MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. THE BRIEF FACTS AS NOTED IN THE ASSESSMENT ORDER ARE THAT ASSESSEE IS A MANUFACTURER OF SCREW, NUT BOLTS, HARDWARE ITE MS ETC. AND DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RE TURN OF INCOME DECLARING AN INCOME OF RS.38,41,610/-. DURING ASSES SMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT GROSS PROFIT RA TE DECLARED DURING THE YEAR WAS 7.3% ONLY AS AGAINST G.P. RATE OF 12.7% DE CLARED IN THE EARLIER YEAR. A COMPARISON OF THE TRADING ACCOUNT OF THIS Y EAR WITH THAT OF EARLIER REVEALED THAT THE EXPENDITURE ON CONSUMABLE STORES WAS INCURRED AT RS.82,26,251/- AS AGAINST RS.40,97,314/- IN THE EAR LIER YEAR. ON A QUARRY FROM THE ASSESSEE, THE ASSESSEE EXPLAINED TH AT THE ITEMS ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 3 MANUFACTURED DURING THE YEAR UNDER CONSIDERATION WE RE DIFFERENT FROM THE LAST YEAR AND THEY NEEDED THE PURCHASE OF SPECI FIC ITEMS SUCH AS J- HOOK/SCREW, NUT BOLTS, HARDWARE ITEMS, DRILL BIT, F OUNDATION BOLT, WELDING RODS, RIVET ETC. THE ASSESSING OFFICER HOWE VER DID NOT AGREE WITH THE CONTENTIONS OF ASSESSEE AND MADE AN ADHOC ADDIT ION OF RS.40 LAKHS OUT OF EXPENSES CLAIMED UNDER THE HEAD OF CONSUMABL E STORES. HE FURTHER DISALLOWED AN EXPENDITURE OF 90361/- WHICH THE ASSE SSEE HAD CLAIMED ON ACCOUNT OF CAR EXPENSES. FURTHER DISALLOWANCE OF RS .20,000/- WAS MADE WHICH THE ASSESSEE HAD CLAIMED AS INTEREST ON EXCIS E DUTY REFUND. AGGRIEVED WITH THE ADDITIONS, THE ASSESSEE FILED AP PEAL BEFORE LD. CIT(A) AND SUBMITTED VARIOUS SUBMISSIONS BUT THE LD. CIT(A ) UPHELD THE ADDITIONS BY HOLDING AS UNDER: 3.3 GROUND OF APPEAL NO. 3 PERTAINS TO ADDITION OF RS. 40 LAKHS ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED UNDER T HE HEAD CONSUMABLES STORES. THE AO MENTIONED THAT DURING THE YEAR THE A SSESSEE HAS SHOWN G.P. RATE OF ONLY 7.3% ON SALES OF RS. 999.33 LACS AS AGAINST A G.P. RATE OF 12.7% ON SALES OF RS.963.53 LACS IN THE IMMEDIATELY PRECEDING YEAR. WHEN CONFRONTED, THE ASSESSEE IN ITS REPLY CLAIMED THAT THE FALL IN G.P. RATE WAS DUE TO INCREASE IN RATE OF RAW MATERIAL WITHOUT A C ORRESPONDING INCREASE IN THE SELLING PRICE. HOWEVER, AS PER AO THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THIS ARGUMENT WITH DOCUMENTARY EVIDENC ES. THE AO MENTIONS THAT COMPARISON OF THE TRADING ACCOUNT OF THE YEAR UNDER CONSIDERATION WITH THAT OF THE PRECEDING YEAR REVEALS THAT THE MA IN REASON FOR FALL IN G.P. RATE WAS INCREASE IN THE EXPENSES ON ACCOUNT OF CON SUMABLE STORES WHICH HAVE BEEN CLAIMED AT RS.82,26,251/- DURING THE YEAR AS AGAINST RS.40,97,314/- CLAIMED DURING THE LAST YEAR. AS PER THE AO IT WAS THIS SINGLE FACTOR WHICH LED TO THE DRASTIC FALL IN THE G.P. RATE. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME BY THE AO AND AS PER REPLY DATED 21.01.2015 IT WAS EXPLAINED THAT DURING THE YEAR, T HE ITEMS MANUFACTURED WERE DIFFERENT FROM THE LAST YEAR AND THEY NEEDED T HE PURCHASE OF SPECIFIC ITEMS SUCH AS J-HOOK/SCREW, NUT BOLTS ETC. LEADING TO INCREASE IN COST OF CONSUMABLE ITEMS. THIS ARGUMENT DID NOT SEEM CONVIN CING TO THE AO AND AS PER THE AO IF THE MANUFACTURING OF ANY ITEM NEED ED SPECIAL PURCHASES, THEN THE SALE PRICE OF THE SAME WOULD ALSO BE MORE. THE AO CONCLUDED THAT SINCE THE SALES HAVE NOT INCREASED CORRESPONDING TO THE INCREASE IN EXPENSE OF THE CONSUMABLES ITEM, IT WAS OBVIOUS THA T THE ASSESSEE HAD INFLATED THE EXPENSES UNDER THIS HEAD TO REDUCE THE PROFITS. THUS A SUM OF ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 4 RS. 40 LAKHS WAS ADDED BACK OUT OF THE EXPENSES CLA IMED UNDER THE HEAD CONSUMABLE STORES. THE FACTS OF THE CASE, THE BASIS OF DISALLOWANCE & ADDITION MADE BY THE AO AND THE ARGUMENTS OF THE AR DURING THE APPELLATE PROCEEDINGS HAVE BEEN CONSIDERED. THE AR REPEATED THE ARGUMENTS AS W ERE TAKEN BEFORE THE AO AND SUBMITTED THAT EACH AND EVERY ITEM OF PURCHA SE IS DULY VOUCHED AND THE AO HAS NOT POINTED OUT ANY ITEM/BILL WHICH WAS DOUBTFUL. DURING THE APPELLATE PROCEEDINGS, THE AR WAS ASKED TO PROD UCE THE BOOKS OF ACCOUNTS AND STOCK REGISTER OF THE PRECEDING YEAR, YEAR UNDER CONSIDERATION AND THE SUCCEEDING YEAR. THE AR PRODU CED THE BOOKS OF ACCOUNTS ALONG WITH THE STOCK REGISTER OF VARIOUS I TEMS EXCEPT THE STOCK REGISTER IN RESPECT OF CONSUMABLES ITEMS. WHEN ASKE D ABOUT THE SAME IT WAS SUBMITTED THAT THE STOCK REGISTER IN RESPECT OF CONSUMABLES ITEMS IS NOT MAINTAINED BY THE ASSESSEE. IN THE ABSENCE OF T HE STOCK REGISTER IT IS NOT POSSIBLE TO CROSS VERIFY THE CONSUMPTION OF THE SE ITEMS WITH THE PRODUCTION AND CORRESPONDING SALES SHOWN BY THE ASS ESSEE. IT IS DULY MENTIONED BY THE AO THAT THE SALES DURING LAST YEAR WERE RS.963.53 LACS WHEN THE COST OF CONSUMABLE STORE DEBITED WAS RS.40 ,97,314/- ONLY. ALTHOUGH THE SALES HAVE INCREASED ONLY MARGINALLY T O RS. 999.33 LACS DURING THE YEAR UNDER CONSIDERATION BUT THE AMOUNT DEBITED ON ACCOUNT OF CONSUMABLE STORE HAS MORE THAN DOUBLED AT RS.82,26, 251/-. THERE IS MERIT IN THE OBSERVATION OF THE ASSESSING OFFICER T HAT IF DURING THE YEAR THE CONSUMABLE ITEMS USE WERE COSTLY THAN THE PRODUCTS FORMED MUST ALSO BE CORRESPONDINGLY OF HIGHER VALUE AND THIS FACT SHOUL D HAVE BEEN REFLECTED IN THE INCREASED SALES RESULTING FROM INCREASED VALUE OF THE ITEMS SOLD. HOWEVER, THIS IS NOT SO IN THIS CASE. THE COST OF C ONSUMABLE ITEM HAS INCREASED BY 100.77% WHERE AS THE SALES HAVE INCREA SED BY 3.71% ONLY. THERE IS ANOTHER IMPORTANT POINT MENTIONED BY THE A O THAT THE GP RATE DURING THE PRECEDING YEAR WAS 12.7% AS AGAINST THE GP OF ONLY 7.3% SHOWN DURING THE YEAR UNDER CONSIDERATION. THERE IS NO VALID EXPLANATION FOR SUCH A DRASTIC FALL IN THE GP RATE SHOWN DURING THE CURRENT YEAR. THE ONLY EXPLANATION AS POINTED OUT BY THE AO ALSO CAN BE THAT THE ASSESSEE HAS SHOWN INFLATED CONSUMPTION OF THE CONSUMABLE ST OCK. THIS IS FURTHER STRENGTHENED BY THE FACT THAT THE ASSESSEE HAD NOT PRODUCED THE STOCK REGISTER OF THE CONSUMABLE STOCK ITEMS WHEN IT IS M AINTAINING THE STOCK REGISTER IN RESPECT OF ALL OTHER ITEMS. THE RATIO O F CONSUMABLE STOCK TO SALES DURING THE LAST YEAR WAS 4.25% (4097314 X100 /96353 000) AND IF THIS RATIO IS APPLIED TO THE CURRENT YEAR'S SALE OF RS.9 99.33, THEN THE CONSUMPTION OF THE CONSUMABLE STORE COMES TO RS.42, 49,550/- AS AGAINST RS.82,26,251/- SHOWN BY THE ASSESSEE. ACCORDINGLY, THE EXCESS EXPENSES DEBITED ON ACCOUNT OF CONSUMABLE STORES DURING THE YEAR COMES TO AROUND RS.40,00,000/-. IT IS NOT UNDERSTOOD HOW THE PRICE OF ITEMS SOLD CAN REMAIN THE SAME WHEN THE ASSESSEE CLAIMS THAT COST OF CONSUMABLE STOCK INPUTS HAVE GONE UP. THE LOGIC OF SELLING THE ITEMS AT SAME PRICE WITH COSTLY INPUTS IS BEYOND COMPREHENSION. IT IS A GENERAL PRI NCIPLE THAT WITH THE INCREASE IN COST OF INPUT THE SALE PRICE SHOULD ALS O GO UP. WITH THE COSTLY ITEMS OF CONSUMABLE STOCK AS INPUT THE PRODUCT FORM ED WILL ALSO BE OF HIGHER VALUE AND WILL FETCH MORE PRICE. IT IS BEYON D COMPREHENSION THAT FOR THE SAME PRICE THE ASSESSEE WILL PUT IN COSTLY INPU TS. THE ASSESSEE IS IN THE MANUFACTURING OF STEEL DOORS, WINDOWS FRAME AND POLES ETC. THESE ITEMS ARE EITHER MADE ON ORDER OR THE PRICE TAG PUT UP INCLUDES CERTAIN ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 5 MARGIN. THEREFORE, IF THE INPUT COST IS MORE THE QU OTED PRICE WILL ALSO BE MORE. BY ADOPTING THE RATIO OF LAST YEAR THE EXCESS EXPENSES DEBITED ON ACCOUNT OF CONSUMABLE STORES DURING THE YEAR COMES TO AROUND RS.40 LACS WHICH HAVE BEEN RIGHTLY DISALLOWED AND ADDED BACK B Y THE AO. THE AR HAS NOT SATISFACTORILY EXPLAINED THE ABSENCE OF STO CK REGISTER IN RESPECT OF CONSUMABLE STOCK AND IT COULD ALSO NOT EXPLAIN THE EXTRA CONSUMPTION OF THESE ITEMS DURING THE YEAR WHEN THE SALES HAVE NOT INCREASED. THERE WAS NO SATISFACTORY EXPLANATION TO THE OBSERVATION OF T HE AO THAT IF THE COSTS OF CONSUMABLE HAVE BEEN INCREASED THEN THE ITEMS MANUF ACTURED WOULD ALSO BE COSTLY AND THE SALES SHOULD HAVE INCREASED IN TH E SAME PROPORTION. SINCE, THE AR HAS NOT BEEN ABLE TO REBUT THE CONCLU SIONS OF THE AO, THEREFORE THE SUBMISSIONS ARE FOUND DEVOID OF MERIT AND THE ADDITION MADE BY THE AO IS FOUND SUSTAINABLE AND HENCE CONFIRMED. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. 3.5 GROUND OF APPEAL NO. 5 PERTAINS TO MAKING AN ADDITION OF RS. 90,360/- ON ACCOUNT OF DISALLOWANCE OF CAR REPAIR A ND MAINTENANCE EXPENSES. THE AO MENTIONED THAT THE THERE IS NO CAR IN THE DETAIL OF ASSETS OF THE COMPANY. THE ASSESSEE CLAIMED BEFORE THE AO THAT THE EXPENSES FOR THE CAR WERE INCURRED AND PAYMENT WAS MADE ON 02.04 .2012. THIS CLAIM OF THE ASSESSEE APPEARED ILLOGICAL TO THE AO WHO DI SALLOWED THE ABOVE EXPENSES. THE FACTS OF THE CASE, THE BASIS OF ADDITION/DISALL OWANCE MADE BY THE AO AND THE ARGUMENTS OF THE AR DURING THE APPELLATE PR OCEEDINGS HAVE BEEN CONSIDERED. THE AO HAS OBSERVED THAT THE CAR WAS NO T APPEARING AS ASSETS OF THE COMPANY DURING THE YEAR HENCE THE REL ATED EXPENSES CANNOT BE ALLOWED. THE AR HAS NOT BEEN ABLE TO REBUT THE A BOVE FINDINGS OF THE AO. IT IS LOGICAL THAT WHEN THE CAR IS NOT A PART O F THE ASSETS OF THE ASSESSEE THEN THE QUESTION OF INCURRING OR ALLOWING THE EXPENSES ON THE SAME DOES NOT ARISE. DURING THE APPELLATE PROCEEDIN GS ALSO THE AR COULD NOT PROVE THAT THE ASSESSEE WAS OWING ANY CAR DURIN G THE YEAR BECAUSE NO SUCH ASSET IS APPEARING IN THE BALANCE SHEET AS ON 31.03.2012. ADMITTEDLY THE PAYMENT FOR THE CAR HAS BEEN MADE AFTER THE END OF THE F.Y. (ON 02.04.2012) AND HENCE NO EXPENSES CAN BE ALLOWED ON ACCOUNT OF CAR REPAIR/MAINTENANCE EXPENSES DURING THE YEAR UNDER C ONSIDERATION. THEREFORE, THE SUBMISSIONS OF THE AR ON THE ISSUE A RE NOT FOUND ACCEPTABLE AND THE DISALLOWANCE MADE BY THE AO IS UPHELD. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. GROUND OF APPEAL NO. 6 PERTAINS TO DISALLOWANCE OF RS. 20,000/- ON ACCOUNT OF INTEREST PAID ON EXCISE DUTY REFUND. THE AO MENTIONED THAT A SUM OF RS. 20,000/- IS DEBITED TO THE P&L ACCOUNT A S INTEREST ON EXCISE DUTY REFUND. IN HIS REPLY BEFORE THE AO THE ASSESSE E CLAIMED THAT THE INTEREST WAS PAID ON THE AMOUNT OF THE EXCESS CLAIM OF EXCISE DUTY REFUNDED WITHOUT CENVAT CREDIT THAT TIME. THE AO OB SERVED THAT SINCE THE PAYMENT IS PENAL IN NATURE AND HENCE CANNOT BE ALLO WED AS A DEDUCTION. THE FACTS OF THE CASE, THE BASIS OF ADDITION/DISALL OWANCE MADE BY THE AO AND THE ARGUMENTS OF THE AR DURING THE APPELLATE PR OCEEDINGS HAVE BEEN CONSIDERED. THE AR REPEATED THE SAME ARGUMENT AS WE RE TAKEN BEFORE THE AO AND SUBMITTED THAT THE INTEREST RELATES TO EXCES S OF EXCISE DUTY REFUND ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 6 WRONGLY CLAIMED WITHOUT CENVAT CREDIT. AS THE AR IS NOT ABLE TO REBUT THE FINDINGS OF THE AO REGARDING THE PENAL NATURE OF TH E AMOUNT, THEREFORE, THE SUBMISSIONS ARE NOT FOUND ACCEPTABLE. THE DISALLOWA NCE MADE BY THE AO IS UPHELD. ACCORDINGLY, THIS GROUND OF APPEAL IS DISMISSED. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LD. AR SUBMITTED THAT THE RE ASON FOR INCREASE IN CONSUMPTION OF CONSUMABLE STORES WAS EXPLAINED TO T HE ASSESSING OFFICER AND IN THIS RESPECT OUR ATTENTION WAS INVIT ED TO P.B. PAGE 657 TO 663. IT WAS SUBMITTED THAT BILL WISE DETAIL OF ALL ITEMS OF CONSUMABLE STORES ALONGWITH THIER BILLS WERE SUBMITTED. THE LD . AR SUBMITTED THAT ALL THE PAYMENTS WERE MADE THROUGH CHEQUES AND ASSESSIN G OFFICER WAS NOT ABLE TO POINT OUT ANY DISCREPANCY IN SUCH BILLS AND PAYMENTS. THE LD. AR FURTHER SUBMITTED THAT THE AUTHORITIES BELOW DID NOT DOUBT THE EXPENSES AND DID NOT HELD THE BILLS TO BE BOGUS OR NOT GENUINE AS EACH ITEMS OF CONSUMABLE STORES WAS HAVING PROPE R BILL EXPENSE. THE LD. AR SUBMITTED THAT NO DISCREPANCY WAS DISCOVERED BY THE ASSESSING OFFICER. MERELY BECAUSE THERE WAS A FALL IN RATE OF PROFIT COULD NOT BE MADE THE BASIS OF MAKING AN ADDITION WITHOUT POINTI NG OUT ANY SPECIFIC REASON. THE LD. AR SUBMITTED THAT IN SUCCEEDING YEA RS, THE GROSS PROFIT RATIO HAD COME DOWN TO 5.21%, 5.48% AND 5.3% AND 4. 89% RESPECTIVELY FOR THE ASSESSMENT YEAR 2013-14 TO 2016-17 AND OUT OF WHICH THE ASSESSMENT WERE COMPLETED FOR ASSESSMENT YEAR 2013- 14 AND 2015-16 U/S 143(3) AND NO ADDITION WAS MADE FOR FALL IN G.P . RATIO. THE LD. AR SUBMITTED THAT ASSESSING OFFICER DID NOT REJECT THE BOOKS OF ACCOUNTS AND ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 7 MADE ADHOC ADDITION WITHOUT OBSERVING ANY DISCREPAN CY AND WHICH WAS NOT PERMISSIBLE AND RELIANCE WAS PLACED ON THE FOLL OWING JUDGMENTS: 1. DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.S. BHATIA REPORTED IN 269 ITR 577. 2. DECISION OF CHATTISGARH HIGH COURT IN THE CASE O F ACIT, RAIPUR VS. ROOP CHAND THARANI REPORTED IN 249 CTR 326. 3. DECISION OF ITAT, AMRITSAR BENCH, AMRITSAR, IN T HE CASE OF DCIT VS. SH. HARPREET SINGH GULATI IN ITA NO. 317 (ASR)/2013, OR DER DATED 28.02.2014 RELATING TO ASSESSMENT YEAR 2009-10. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE LD. AR SUBMITTED THAT THE ADDITIONS SUSTAINED BY LD. CIT(A) MAY BE D ELETED. AS REGARDS THE DISALLOWANCE OUT OF CAR EXPENSES AN D CONFIRMATIONS OF DISALLOWANCE OUT OF INTEREST ON EXCISE DUTY, THE LD. AR SUBMITTED THAT THE SAME MAY BE DECIDED BY THE BENCH ON THE BASIS O F MATERIAL ON RECORD. 6. THE LD. DR ON THE OTHER HAND SUBMITTED THAT ASSE SSING OFFICER AND LD. CIT(A) HAS OBSERVED THAT THERE WAS A CONSID ERABLE INCREASE IN THE ITEMS OF CONSUMABLE STORES WITHOUT A CORRESPOND ING INCREASE IN THE SALES AND THEY HAVE PASSED A REASONED AND SPEAKING ORDER IN DISALLOWING A PART OF CONSUMABLE STORES AND HE HEAVILY PLACED H IS RELIANCE ON THE ORDER OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THOUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS AN UNDISPUTED FACT THAT BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT REJECTED U/S 145(3 ) OF THE ACT. THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE ONLY BY HOLDING THAT ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 8 CONSUMABLE STORES IN THE YEAR UNDER CONSIDERATION W ERE MORE THAN THE EARLIER YEAR. THE ASSESSEE HAD PRODUCED COMPLETE BO OKS OF ACCOUNT INCLUDING VOUCHERS, BILLS AND ASSESSING OFFICER DID NOT FIND ANY DISCREPANCY IN THE DOCUMENTS. THE LD. AR HAS FILED A PAPER BOOK CONSISTING OF 634 PAGES WHEREIN THE DETAILS OF CONS UMABLE STORES ALONGWITH COPIES OF BILLS AND ALSO THE COMPARATIVE CHART OF CONSUMABLE STORES IS PLACED AND WHICH WAS BEFORE THE ASSESSING OFFICER ALSO. THE MAKING OF DISALLOWANCE WITHOUT REJECTION OF BOOKS O F ACCOUNT IS NOT WARRANTED AS HAS BEEN HELD IN A NUMBER OF CASES. TH E HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF I NCOME TAX VS. K.S. BHATIA HAS HELD THAT IN THE ABSENCE OF A DEFINITE F INDING THAT THE CASE OF ASSESSEE COMES WITHIN THE PROVISIONS OF SECTION 145 (1) THAT IT WAS NOT POSSIBLE FOR ASSESSING OFFICER TO MAKE ADDITIONS TO THE GROSS PROFIT. IT HAS BEEN FURTHER HELD THAT MERE FACT THAT PROFITS AS CO MPARED TO EARLIER YEAR WERE LOWER DOES NOT WARRANT AN ADDITION. SIMILARLY THE HON'BLE HIGH COURT OF CHATTISGARH IN THE CASE OF ACIT, RAIPUR VS . ROOP CHAND THARANI 249 CTR 0326 (2012) 66 DTR 0104 HAS ALSO HELD THAT WITHOUT POINTING OUT ANY SPECIFIC MISTAKE IN THE BOOKS OF ACCOUNT, T HE ASSESSING OFFICER CANNOT REJECT THE BOOKS OF ACCOUNT. THE AMRITSAR BENCH IN THE CASE OF DCIT VS. SH. HARP REET SINGH GULATI IN ITA NO. 317 (ASR)/2013 VIDE ORDER DATED 2 8.02.2014 HAS MADE SIMILAR FINDINGS. THE HON'BLE AMRITSAR BENCH IN TH E CASE OF P.M.S. DIESELS VIDE ITS ORDER DATED 30.08.2017 HAS FOLLOWE D THE ORDER IN THE CASE ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 9 OF HARPREET SINGH GULATI IN ITA NO. 317/ASR/2013 AN D HAS DELETED SIMILAR ADDITIONS BY HOLDING AS UNDER: 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSING OFFICER HAS FAILED TO RECORD ANY FINDING IN THE ASS ESSMENT ORDER THAT THE CASE OF THE ASSESSEE IS AKIN TO THE PROVISIONS OF S ECTION 145(3) OF THE ACT. THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSES SEE BEFORE THE LD. CIT(A) ARE THAT THE ASSESSEE FURNISHED AUDITED ACCO UNTS/TAX AUDIT REPORT ALONGWITH BOOKS OF ACCOUNT AND BILLS/VOUCHERS FOR P URCHASE/SALES OF LIQUOR AND RELATING TO EXPENSES WERE PRODUCED FOR VERIFICA TIONS. THE DETAILS AND BASIS OF VALUATION OF CLOSING STOCK WERE PLACED ON RECORD DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE STATE EXCISE AND TAX ATION DEPARTMENT KEEPS STRICT CONTROL AND SUPERVISION OVER THE LIQUO R TRADE CARRIED OUT BY THE ASSESSEE. THE PURCHASES OF LIQUOR CAN BE MADE BY T HE ASSESSEE AGAINST THE PERMITS ISSUED BY THE STATE EXCISE DEPARTMENT A ND SIMILARLY THE SALES OF THE LIQUOR BY THE ASSESSEE TO THE RETAILERS HAVI NG 1-2 LICENSES CAN ONLY BE MADE AGAINST THE PERMITS ISSUED BY THE STATE EXC ISE DEPARTMENT. THE ASSESSING OFFICER FAILED TO REBUT THE CONTENTION OF THE ASSESSEE THAT THAT THE NET REBATE OF RS.16586467/- IS A PART OF THE TR ADING RESULTS AND ALSO THE GROSS PROFIT. THE ASSESSING OFFICER HAS TRIED T O MAKE OUT A CASE THAT THE ABOVE STATED AMOUNT OF RS.16586467/- IS THE INC OME OF THE ASSESSEE AS PER HIS OWN VERSION BY TWISTING THE CONTENTIONS OF THE ASSESSEE IN WRITTEN REPLY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY RECORDING THE FINDING THAT A FACT THAT EMERGES IS THAT WHETHER THE REBATE RECEIVED BY THE ASSESSEE IS ULTIMATELY PASSED IN TO TO TO THE RETAILERS AS PER THE ASSESSEES WON VERSION AS STATED ABOVE OR NOT BECAUSE THE WORD IN TOTO HAS BEEN INTRODUCED BY THE ASSESSING OFFICER B UT THE COUNSEL OF THE ASSESSEE DID NOT USE THIS WORD IN THE WRITTEN REPLY . THE DETAILS OF REBATE RECEIVED FROM THE SELLERS FROM WHOM THE LIQUOR WAS PURCHASED AND PAID TO THE PURCHASERS L-2 LICENSE HOLDERS TO WHOM THE LIQU OR WAS SOLED, ALONGWITH THE SUPPORTING EVIDENCE WAS FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NO DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER EITHER DURING THE COUR SE OF THE ASSESSMENT PROCEEDING OR IN THE ASSESSMENT ORDER. NO OPPORTUNI TY WAS ALLOWED BY THE ASSESSING OFFICER TO THE ASSESSEE BEFORE MAKING THE ADDITION OF RS.48,16,438/-. 6.1. AS MENTIONED HEREINABOVE, WE CONCUR WITH THE F INDINGS OF THE LD. CIT(A) THAT THE CASE OF THE ASSESSEE IS COVERED BY THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.S. BHATIA REPORTED IN 269 ITR 577 AND THE JUDGMENT OF THE HON'BLE CHHA TTISGARH HIGH COURT IN THE CASE OF ACIT, RAIPUR VS. ROOP CHAND THARANI REPORTED IN 249 CTR 326 IN WHICH IT HAS BEEN HELD THAT THE PROFITS CANN OT BE ESTIMATED WITHOUT REJECTING THE BOOKS OF ACCOUNT BY POINTING OUT THE SPECIFIC DEFECTS AND RECORDING THE FINDING REGARDING THE SAME. THE CONTE NTIONS OF THE AR OF THE ASSESSEE ARE FACTUALLY CORRECT AND THE ASSESSING OF FICER HAS FAILED TO POINT OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT TO JUST IFY HIS ACTION OF ESTIMATING THE INCOME OF THE ASSESSEE AT RS.1658646 7/- AS AGAINST THE INCOME OF RS.11770029/- DECLARED IN THE PROFIT AND LOSS ACCOUNT. ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 10 6.2. THUS, IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE DISCUSSED ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY DELETED THE ADDITION OF RS.48,16,438/-. WE ACCORDIN GLY, UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REV ENUE. THE AMRITSAR BENCH IN THE CASE OF KASHMIR STEEL RO LLING MILLS HAS RECORDED SIMILAR FINDINGS BY FOLLOWING THE DECISION OF AMRITSAR BENCH IN THE CASE OF BATALA CO-OP. SUGAR MILLS. THE FINDINGS OF HON'BLE TRIBUNAL AS RECORDED IN KASHMIR STEEL ROLLING MILLS IN ITA NO. 509/ASR/2016 VIDE ITS ORDER DATED 04.09.2017 ARE REPRODUCED: 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THOUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSING OFFICER MA DE THE DISALLOWANCE @ 1/10 OF THESE EXPENSES BY HOLDING AS UNDER: 6. IT IS FURTHER NOTICED THAT THE ASSESSEE HAS CLA IMED HEAVY EXPENSES UNDER THE FOLLOWING HEADS:- ELECTRIC REPAIRS RS.13,52,689/- MACHINERY REPAIRS RS.32,73,639/- TOTAL RS.46,26,328/- DURING THE COURSE OF EXAMINATION OF BOOKS OF ACCOU NTS THE ASSESSEE WAS NOT ABLE TO PRODUCE SOME OF THE EXPEND ITURE VOUCHERS IN RESPECT OF THE ABOVE. THUS A DISALLOWANCE @ 1/10 OF THESE EXPENSE IS BEING MADE WHICH LEADS TO AN ADDITION OF RS.4,62,630/- WE FIND THAT ASSESSING OFFICER HAS NOT MADE ANY AD VERSE FINDING REGARDING THESE EXPENSES EXCEPT THAT EXPENSES WERE HEAVY AND ASSESSEE WAS NOT ABLE TO PRODUCE SOME OF THE EXPENDITURE VOU CHERS. WHEREAS WE FIND THAT ASSESSEE INCURRED LOWER EXPANSES DURING T HE YEAR UNDER CONSIDERATION AS COMPARED TO EARLIER YEARS AS IS AP PARENT FROM THE SUBMISSIONS OF ASSESSEE RECORDED BY LD. CIT(A) AT P AGE 6 OF HIS ORDER. THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACC OUNT AND NEITHER HAD POINTED OUT ANY DISCREPANCY IN THE EXPENSES. THEREF ORE THE ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF ASSESSING OFFICE R IS NOT JUSTIFIED. THE HON'BLE AMRITSAR BENCH IN THE CASE OF M/S. THE BATA LA CO-OPERATIVE SUGAR MILLS LTD. VIDE ITS ORDER DATED 3 RD JULY, 2008, UNDER SIMILAR FACTS AND CIRCUMSTANCES HAS HELD THAT WITHOUT REJECTION OF BO OKS OF ACCOUNT AD-HOC DISALLOWANCE IS NOT WARRANTED. THE FINDINGS OF THE HON'BLE TRIBUNAL ARE REPRODUCED BELOW: 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE ASSESSEES BOOKS OF ACCOUNT ARE AUDITED UNDER SECTION 44AB OF THE INCOME-TAX ACT, 1961 AND AT THE TIME OF ASSESSMENT, THE ASSESSEE HAD PRODUCED BOOKS OF ACCO UNT, ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 11 DOCUMENTS AND VARIOUS DETAILS AND INFORMATION NECES SARY FOR THE PURPOSE OF ASSESSMENT. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT. THERE IS CATEGORICAL FINDING GIVEN BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS PRODUCED BOOKS OF ACC OUNT IN SUPPORT OF THE CLAIM OF THE ASSESSEE. THE ASSESSING OFFICER IN ITS ASSESSMENT ORDER DATED 28.12.2006 HAD NOT REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THERE IS NO FINDING GIV EN BY THE ASSESSING OFFICER IN ITS ASSESSMENT ORDER THAT THE BOOKS OF ACCOUNT ARE NOT RELIABLE OR UNVERIFIABLE. HENCE, IT IS INFE RRED THAT THE ASSESSEES BOOKS OF ACCOUNT ARE NOT AT ALL REJECTED . THE ASSESSING OFFICER CANNOT MAKE ANY ESTIMATE ADDITION WITHOUT R EJECTING THE BOOKS OF ACCOUNT. IF THE ASSESSING OFFICER WAS TO M AKE ANY ADDITION FIRST OF ALL HE WAS REQUIRED TO REJECT THE BOOKS OF ACCOUNT WHICH HE HAS FAILED TO DO SO. HENCE, IN OUR OPINION, THERE I S NO QUESTION OF MAKING ANY AD-HOC DISALLOWANCE TOWARDS CONSUMPTION OF BAGASSE. ACCORDINGLY, THE ADDITION IS UNWARRANTED. THE GROUN D TAKEN BY THE ASSESSEE IS ALLOWED. IN THE PRESENT CASE ALSO THE ASSESSING OFFICER HAS NOTED IN PARA 1 OF HIS ASSESSMENT ORDER THAT BOOKS OF ACCOUNTS AND VOUCHERS WERE PRODUCED AND TEST CHECKED AND AT NO POINT OF TIME B OOKS OF ACCOUNTS WERE REJECTED. THEREFORE FOLLOWING THE ABOVE JUDICIAL PRECEDENTS A ND IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT D ISALLOWANCE WAS NOT WARRANTED AND THEREFORE GROUND NO.2 IS ALLOWED. AS REGARDS GROUNDS NO. 3 & 4, NOTHING WAS ARGUED BE FORE US AND BEFORE LD. CIT(A) ALSO NO NOTABLE ARGUMENTS OR EVID ENCES WERE FILED AND THEREFORE GROUND NO. 3 AND 4 ARE REJECTED. GROUND NO. 5 RELATES TO CHARGING OF INTEREST U/S 23 4B AND 234D OF THE ACT WHICH ARE CONSEQUENTIAL AND DO NOT CALL FOR ANY ADJUDICATION AND HENCE DISMISSED. ITA NO. 123(ASR)/2017 ASSESSMENT YEAR: 2012-13 12 GROUND NO. 1 AND 6 ARE GENERAL AND DO NOT REQUIRE A NY ADJUDICATION AND HENCE DISMISSED. 8. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.09.2017 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15.09.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER