The ACIT, Circle-1, Ahmedabad V. The Aditya Polymers Limited, Ahmedabad

ITA 1303/AHD/2005

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0339 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-08-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 05-05-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S GEHLOT
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI R.V.EASWAR, VICE-PRESIDENT AND P.K. BANSAL, ACCOUNTANT MEMBER) ITA NO.1084/AHD/2005 [ASSTT.YEAR : 2001-2002] ADITYA POLYMERS LTD. 5/3, SILVER SPRING B/H. ST. XAVIERS LADIES HOSTEL NAVRANGPURA, AHMEDABAD. PAN : AABCA 5947 K VS. ITO, WARD-1(1) AHMEDABAD. ITA NO.1303/AHD/2005 [ASSTT.YEAR : 2001-2002] ITO, WARD-1(1) AHMEDABAD. VS. ADITYA POLYMERS LTD. 5/3, SILVER SPRING B/H. ST. XAVIERS LADIES HOSTEL NAVRANGPURA, AHMEDABAD. ASSESSEE BY : NONE REVENUE BY : SHRI B.S.GEHLOT O R D E R PER R.V.EASWAR, VICE-PRESIDENT : THESE ARE CROSS APPEALS RELATING TO THE ASSESSMENT YEAR 2001-2002. NOTICE POSTING T HE APPEALS FOR HEARING ON 20-8-2009 WAS SERVED ON THE ASSESSEE ON 29-7-2009 B Y WAY OF AFFIXTURE. HOWEVER, THERE IS NO APPEARANCE BY THE ASSESSEE. W E ACCORDINGLY PROCEED TO DISPOSE OF THE APPEALS IN THE ABSENCE OF THE ASSESS EE AND AFTER HEARING THE LEARNED CIT-DR. 2. THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE MANUFACTURE OF HDPE WOVEN SACKS. THE APPEALS ARISE OUT OF THE ASS ESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT ON 29-3- 2004. 3. DEPARTMENTS APPEAL: PAGE - 2 ITA NO.1084 AND 1303/AHD/2005 -2- THE ONLY GROUND IS THAT THE CIT(A) ERRED IN DELETI NG THE ADDITION OF RS.9,41,222/- OUT OF THE TOTAL ADDITION OF RS.41,41 ,222/- MADE ON ACCOUNT OF DIFFERENCE BETWEEN ACTUAL SALES AND QUANTITY OF SAL ES SHOWN IN THE TAX AUDIT REPORT. THIS GROUND IS CONNECTED WITH GROUND NO.4 IN THE ASSESSEES APPEAL WHERE THE ASSESSEE HAS CHALLENGED THE ADDITION OF R S.9,41,222/-. IT APPEARS THAT THERE IS A MISTAKE IN THE FIGURES MENTIONED IN THE GROUND TAKEN BY THE ASSESSEE. THE ADDITION SUSTAINED BY THE CIT(A) IS RS.40 LAKHS OUT OF ADDITION OF RS.49,41,222/- AS IS CLEAR FROM THE LAST SENTENCE I N PARA-7.3 OF THE IMPUGNED ORDER OF THE CIT(A). THE BRIEF FACTS IN THIS CONNEC TION ARE THAT THE AO NOTICED THAT A DIFFERENCE IN THE SALE BETWEEN THE ACCOUNTS OF THE COMPANY AND THE TOTAL ORDERS RECEIVED BY IT. IN THE AUDITED ACCOUNTS THE SAME WERE SHOWN AT 1105.294 M.TS. WHEREAS AS PER THE ORDERS, DETAILS O F WHICH ARE GIVEN IN PAGES 22 AND 23 OF THE ASSESSMENT ORDER, THE TOTAL SALES CAME TO 1154.71 M.TS. WHEN CONFRONTED WITH THE DIFFERENCE THE ASSESSEE SUBMITT ED THAT THE QUANTITY OF THE ORDERS RECEIVED WAS MORE BUT WHILE EXECUTING THE OR DERS A LESSER QUANTITY WAS SUPPLIED. DETAILED SUBMISSIONS WERE MADE BEFORE TH E AO WHO HOWEVER REJECTED THEM. HE FOUND THAT THE ACTUAL DIFFERENCE , MEASURED BY THE NUMBER OF BAGS CAME TO 8,12,701 AND MULTIPLYING THE SAME BY T HE SALE PRICE OF RS.6.08 PER BAG ARRIVED AT THE SALES OUTSIDE THE BOOKS AT R S.49,41,222/-. THE ADDITION HAVING BEEN CONFIRMED PARTLY BY THE CIT(A), BOTH TH E REVENUE AND THE ASSESSEE ARE IN APPEAL. THUS, THE DEPARTMENTS APPEAL AS WE LL AS GROUND NO.4 IN THE ASSESSEES APPEAL ARE DEALT WITH TOGETHER. 4. WE HAVE HEARD THE LEARNED CIT-DR AT LENGTH. IT IS SEEN THAT THE ASSESSEE ADMITTED THAT THE DIFFERENCE WAS 54.51 MTS. IN THE LIGHT OF THE ADMISSION, IT SEEMS TO US THAT THE AO WAS RIGHT IN HOLDING THAT 8 ,12,701 BAGS WERE SOLD OUTSIDE THE BOOKS OF ACCOUNT. THE CIT(A) HOWEVER F OUND SOME FORCE IN THE SUBMISSION OF THE ASSESSEE THAT THE WEIGHT PER BAG AFTER REDUCING THE WEIGHT OF STITCHING MATERIAL MAY SOMETIMES VARY. IT WAS ALS O SUBMITTED BEFORE HIM THAT THE AO WAS NOT JUSTIFIED IN TAKING THE AVERAGE WEIG HT AT 67 GRAMS PER BAG WITHOUT APPRECIATING THAT THE ACTUAL WEIGHT VARIED FROM 65.5 GRAMS TO 68 GRAMS PAGE - 3 ITA NO.1084 AND 1303/AHD/2005 -3- AS CAN BE SEEN FROM THE RELEVANT SALE BILLS. TAKI NG NOTE OF THESE SUBMISSIONS AND GIVING SOME CREDENCE TO THEM THE CIT(A) REDUCED THE ADDITION TO RS.40 LAKHS, THEREBY GIVING A RELIEF OF RS.9,41,222/-. O N A CAREFUL CONSIDERATION OF THE MATTER, WE ARE INCLINED TO AGREE WITH THE DECIS ION OF THE CIT(A). IN VIEW OF THE ADMISSION MADE BY THE ASSESSEE THAT THERE WAS A DIFFERENCE OF 54.51 M.TS. BETWEEN THE QUANTITY MENTIONED IN THE ORDERS AND TH E SALE SHOWN IN THE BOOKS OF ACCOUNT FOR WHICH THERE WAS NO EXPLANATION, THE ADDITION WAS RIGHTLY MADE IN PRINCIPLE. HOWEVER, THE CIT(A) HAS TAKEN NOTE OF T HE ASSESSEES PLEA REGARDING WEIGHT OF THE BAG AFTER REMOVING THE STITCHING MATE RIAL AND HAS ALSO SHOWN THE SALE BILLS IN SUPPORT OF THE PLEA. HE HAS IN OUR OPINION RIGHTLY ACCEPTED THAT A UNIFORM WEIGHT OF 67 GRAMS CANNOT BE TAKEN FOR THE BAGS. SINCE EXAMINING EACH AND EVERY BILL WOULD BE A TIME CONSUMING EXERC ISE THE CIT(A) ON ESTIMATE REDUCED THE ADDITION TO RS.40 LAKHS GIVING RELIEF OF RS.9,41,222/-. WE DO NOT SEE ANY FACTUAL OR LEGAL INFIRMITY IN HIS DE CISION. THE SAME IS UPHELD. THE ASSESSEE HAS ALSO NOT ADDUCED ANY MATERIAL TO S HOW THAT THERE WAS NO DIFFERENCE. ACCORDINGLY, THE DEPARTMENTS APPEAL A S WELL AS GROUND NO.4 IN THE ASSESSEES APPEAL ARE DISMISSED. 5. ASSESSEES APPEAL: THE FIRST GROUND IS AGAINST THE REJECTION OF THE B OOKS UNDER SECTION 145(3). WE HAVE GONE THROUGH THE ORDERS OF THE INC OME TAX AUTHORITIES AND CONSIDERED THE MATTER CAREFULLY. A VERY SERIOUS DE FECT POINTED OUT BY THE AO IS THAT THE WORK-IN-PROGRESS, WHICH IS A SUBSTANTIAL P ART OF THE ASSESSEES INVENTORY, WAS ADMITTEDLY BEING VALUED BY THE ASSES SEE ON ESTIMATE. THIS IS NOT A RECOGNISED METHOD OF VALUING THE WORK-IN-PROGRESS . THE OTHER DEFECT MENTIONED BY THE AO WAS THAT THE ASSESSEE SOLD THE SAME MATERIAL TO THREE DIFFERENT PARTIES AROUND THE SAME TIME FOR DIFFEREN T RATES RANGING FROM RS.3.94 PER BAG TO RS.5.20 PER BAG. SOME SALES WERE SHOWN TO HAVE BEEN MADE AT A PRICE WHICH IS LESS THAN THE COST. FOR THESE DEFE CTS THE AO REJECTED THE BOOK PAGE - 4 ITA NO.1084 AND 1303/AHD/2005 -4- RESULTS. WE ARE UNABLE TO FIND FAULT WITH THE DECI SION OF THE AO AND THE CIT(A). THE GROUND IS ACCORDINGLY REJECTED. 6. THE SECOND GROUND IS AS UNDER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE AOS STANDOFF NOT CONSIDERING THE DEPOSITS OF RS.11 .00 LACS IN THE NAME OF 8 PERSONS, WHICH HAS BEEN OFFERED FOR TAXATION B Y THE APPELLANT COMPANY, AS THE INCOME EARNED OUTSIDE BOOKS FROM TH E BUSINESS, FOR THE PURPOSE OF ADDITION. IN VIEW OF THE FACTS AND SUBM ISSIONS FILED, THE APPELLANT COMPANY PRAYS THAT THE SAID DEPOSIT OF RS .11.00 LACS RECEIVED IN CASH, FOR WHICH NO CONFIRMATIONS WERE FURNISHED, REQUIRES TO BE CONSIDERED AS INCOME OF THE APPELLANT COMPANY, AS O FFERED FOR TAXATION, DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WHILE DISPOSING OF THE ABOVE GROUND, THE CIT(A) HAS OBSERVED THAT NO SUCH INCOME WAS RETURNED BY THE ASSESSEE AND THE AO HAS ALSO NOT MADE ANY SUCH ADDITION OF RS.11 LAKH IN THE ASSESSMENT ORDER. HE HAS ACCORDINGLY REJECTED THE GROUND. HAVING REGARD TO THE REASONS GIVEN BY THE CIT(A), WE SEE NO REASON TO INTERFERE. THE GROUND IS DISMISSED. 7. THE THIRD GROUND IS DIRECTED AGAINST THE ADDITIO N OF RS.3,04,72,790/- FOR UNDERSTATEMENT OF SALES TREATED AS SALES OUTSIDE TH E BOOKS. THE GROUND TAKEN BY THE ASSESSEE IS THAT THE ADDITION IS BASED ON SURMI SES, CONJECTURES, INCORRECT WORKING AND HYPOTHESIS. HOWEVER, A PERUSAL OF THE ORDERS OF THE DEPARTMENTAL AUTHORITIES SHOWS THAT THE ADDITION HAS BEEN MADE F OR THE FOLLOWING REASONS: I) THE ASSESSEE HAS SOLD HDPE SACKS AT A PRICE LESS TH AN THE COST. THE COST WAS WORKED OUT BY THE ASSESSEE AT RS.5.57 PER SACK AGAINST WHICH AT LEAST 30 INSTANCES WERE SHOWN BY T HE AO WHERE THE ASSESSEE HAS SOLD THE SACKS FOR PRICES BELOW TH E COST PRICE. II) THE TABULATED INFORMATION GIVEN IN PAGES 22, 23, 32 AND 33 OF THE ASSESSMENT ORDER HAVE BEEN GATHERED FROM THE ORDERS RECEIVED BY THE ASSESSEE AND THE RELEVANT DELIVERY SCHEDULES AN D NO FAULT CAN BE FOUND WITH THE SAME. PAGE - 5 ITA NO.1084 AND 1303/AHD/2005 -5- III) THE RATES ADOPTED BY THE AO PER BAG IS ALSO WELL SU PPORTED BY RELEVANT DATA AND REASONING GIVEN AT PAGES 26, 27 A ND 30 OF THE ASSESSMENT ORDER. IV) THE ASSESSEE WAS UNABLE TO POINT OUT ANY MISTAKES I N THE FIGURE OF BAGS SOLD AND THE WEIGHT THEREOF. IN FACT THESE FI GURES WERE TAKEN FROM THE INFORMATION FURNISHED BY THE ASSESSEE ITSE LF. V) THERE IS NO EXPLANATION GIVEN BY THE ASSESSEE AS TO WHY THE BAGS WERE SOLD AT PRICES EVEN BELOW THE COST. EVEN IN THE GROUND OF APPEAL BEFORE US NO MATERIAL HAS BEEN ADDUCED TO SHOW HOW THE FIGURES ADOPTED BY THE AO IN THE ASSESSMENT ORDER WERE INCORRECT AND IT HAS NOT BEEN EXPLAINED AS TO HOW THE ASSESSEE IS ELIGIBLE FOR ANY RELIEF. THERE IS ONLY A VAGUE ASSERTION IN THE GROUND THAT THE AD DITION IS BASED ON CONJECTURE, SUSPICION ETC. THE ASSERTION HAS NO BASIS HAVING R EGARD TO THE DETAILED DISCUSSION APPEARING IN THE ASSESSMENT ORDER WHICH IS BASED ON THE FACTS AND FIGURES FURNISHED BY THE ASSESSEE ITSELF. WE THERE FORE SEE NO MERIT IN THE GROUND. THE ADDITION IS CONFIRMED AND THE GROUND I S DISMISSED. 8. THE FIFTH AND LAST GROUND IS AGAINST THE OBSERVA TIONS OF THE AO THAT THE EXCESS WASTAGE AMOUNTED TO 58.583 M.TS. HOWEVER, NO SEPARATE ADDITION HAS BEEN MADE BY HIM ON THIS ACCOUNT. THERE CAN BE NO APPEAL AGAINST THE MERE OBSERVATIONS OF THE AO AS RIGHTLY HELD BY THE CIT(A ) IN PARA 7.4 OF HIS ORDER. WE CONFIRM HIS DECISION AND DISMISS THE GROUND. 9. IN THE RESULT, BOTH THE ASSESSEES APPEAL AND TH E DEPARTMENTS APPEAL ARE DISMISSED WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT 9 TH OCTOBER, 2009. SD/- SD/- (P.K. BANSAL) ACCOUNTANT MEMBER (R.V.EASWAR) VICE-PRESIDENT PAGE - 6 ITA NO.1084 AND 1303/AHD/2005 -6- PLACE : AHMEDABAD DATE : 09-10-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD