Moflex Suspensions Pvt.Ltd., Baroda V. The Dy.CIT.,Circle-4(1), Baroda

ITA 1307/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62916 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 19-06-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 22-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD A BENCH BEFORE: SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEM BER MOFLEX SUSPENSIONS PVT. LTD., 301 SILVER POINT, B/H EXPRESS HOTEL, R.C. DUTT ROAD, ALKAPURI, BARODA-390 007 PAN NO. AABCM8271B (APPELLANT) VS. DY COMMISSIONERS OF INCOME- TAX, CIRCLE 04(1), BARODA, 4 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE CIRCLE, BARODA-390 007 (RESPONDENT) REVENUE BY : SHRI RAHUL KUMAR, SR. D.R. ASSESSEE BY : SHRI M.K. PATEL, A.R. DATE OF HEARING : 19-06-2012 DATE OF PRONOUNCEMENT : 24-08-2012 / ORDER PER : KUL BHARAT, JUDICIAL MEMBER:- THESE TWO APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE TWO DIFFERENT ORDERS OF LD.COMMISSIONER OF INCOME-TAX ( APPEALS)-III, BARODA OF EVEN DATE I.E. 02-02-2009 FOR THE ASSESSMENT YEA RS 2004-05 AND 2005-06. FIRST WE TAKE UP ITA NO. 1307/AHD/2009 FOR A.Y. 04- 05 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- I.T.A. NOS1307-1308/AHD/2009 ASSESSMENT YEARS: 2004-05 & 2005-06 ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 2 1 THE LD. COMMISSIONER OF INCOME-TAX(APPEALS)-III , BARODA[HEREINAFTER REFERRED TO AS CIT(APPEALS)], ER RED IN CONFIRMING THE FINDINGS OF THE ASSESSING OFFICER IN DISALLOWING RS. 30,000 OUT OF STAFF WELFARE & OFFICE EXPENSES A ND RS. 20,000 OUT OF SALES PROMOTION EXPENSES; BOTH ON AD HOC BAS IS. IT IS PRAYED THAT SUCH DISALLOWANCE IS NOT WARRANTED ON T HE FACTS OF THE CASE, THEREFORE, THE SAME MAY BE DELETED. 2. THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE FI NDINGS OF THE ASSESSING OFFICER IN DISALLOWING RS. 58,377 OUT OF PETROL & VEHICLES EXPENSES (INCLUDING DEPRECIATION ON VEHICL ES). IT IS SUBMITTED THAT SUCH DISALLOWANCE IS NOT TENABLE AS YOUR APPELLANT IS A CORPORATE AND, THEREFORE, IT IS HUMB LY PRAYED THAT THE SAME MAY BE DELETED. 3. THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE FIN DINGS OF THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS. 3,76,571 ON ACCOUNT OF ALLEGED DIFFERENCE IN THE RATE OF SALE O F SCRAP. IT IS RESPECITFULLY SUBMITTED THAT THERE BEING NO BASIS F OR SUCH ADDITION, THE SAME MAY BE DELETED. 4. THE LD. CIT(APPEALS) ERRED IN PARTLY CONFIRMING THE FINDINGS OF THE ASSESSING OFFICER IN RESPECT OF AD DITION ON ACCOUNT OF CONSUMPTION OF STORES. IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF YOUR APPELLANT, THERE IS NO JUSTIFICATION FOR CONFIRMING ADDITION ON THIS ACCOU NT TO THE EXTENT OF 10% OF CONSUMPTION OF STORES, AMOUNTING T O RS. 4,35,430. IT IS, THEREFORE, PRAYED THAT THE SAME M AY BE DELETED. 3. THE BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PRIVATE-LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF AUTO LEAF SPRINGS. THE CASE OF ASSESSEE WAS PICKED UP FOR SC RUTINY ASSESSMENT AND THE ASSESSMENT U/S 143(3) OF THE INCOME-TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) WHILE FRAMING THE ASSESSMENT, THE ASSESS ING OFFICER MADE DISALLOWANCE ON ACCOUNT OF MEMBERSHIP FEE, STAFF WE LFARE EXPENSES, PETROL AND VEHICLE EXPENSES OF THE DIRECTORS, GRATUITY, SC RAP SALES AND CONSUMPTION ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 3 OF STORES. THE ASSESSEE FEELING AGGRIEVED BY THE O RDER OF ASSESSING OFFICER FILED APPEAL BEFORE LD. CIT(A) WHO AFTER CONSIDERIN G THE SUBMISSIONS OF ASSESSEE PARTLY ALLOWED THE APPEAL. 4. NOW, ASSESSEE FEELING AGGRIEVED BY THE ORDER OF LD. CIT(A) CAME IN SECOND APPEAL BEFORE US. 5. FIRST GROUND IS AGAINST THE CONFIRMATION OF DISA LLOWANCE OF RS. 30,000/- OUT OF STAFF WELFARE & OFFICE EXPENSES AND RS.20,000/- OUT OF SALES PROMOTION EXPENSES. LD.AUTHORIZED REPRESENTATIVE O F THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER DISALLOWED THE STA FF WELFARE & OFFICE EXPENSE ON THE BASIS THAT MOST OF THE EXPENSES DEBI TED UNDER THESE HEADS ARE MOSTLY INCURRED IN CASH AND ARE NOT AMENABLE TO PRO PER CHECK AND MAJORITY OF THE EXPENSES ARE CLAIMED TO HAVE BEEN INCURRED O N PROVIDING THE, SNACKS, LUNCH, DINNER, UNIFORM, SWEETS ETC. IT IS CONTENDE D BY LD. AR THAT WELFARE EXPENSES ETC. ARE DULY VERIFIABLE AND SUBJECT TO CO MPLETE CHECK. ON THE CONTRARY, LD. DR OF THE REVENUE SUPPORTED THE ORDER S OF AUTHORITIES BELOW AND SUBMITTED THAT IN EARLIER YEARS ALSO SUCH AD HO C DISALLOWANCE WAS MADE BY THE AO BUT THE ASSESSEE HAD NOT PREFERRED ANY AP PEAL AGAINST SUCH AD HOC DISALLOWANCE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND PAPER BOOK FILED BY THE ASS ESSEE. WE FIND THAT ASSESSING OFFICER WHILE MAKING DISALLOWANCE HAD GIV EN FINDING THAT IN THE ABSENCE OF COMPLETE DETAILS AND ALSO WANT OF COMPLE TE VERIFICATION OF THESE EXPENSES MADE AS AD HOC DISALLOWANCES. WE FIND THA T IN EARLIER YEARS ALSO SUCH DISALLOWANCES WAS NOT CHALLENGED BY THE ASSES SEE. SINCE THE REASONING ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 4 GIVEN BY THE AO IS JUSTIFIED, THEREFORE NO INTERFER ENCE IS CALLED FOR. HENCE, THIS GROUND OF ASSESSEES APPEAL IS DISMISSED. 7. NEXT GROUND IS WITH REGARD TO CONFIRMATION OF TH E DISALLOWANCE OF PETROL AND VEHICLE EXPENSE OF RS.58,377/-. THE CON TENTION OF THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE IS THAT O UT OF THE TOTAL EXPENSE OF RS.2,30,211/- UNDER THE HEAD OF PETROL AND VEHICLE EXPENSES INCURRED TOWARDS PETROL ON CAR USED BY THE DIRECTORS IS TO T HE TUNE OF RS.73,567/- ADDITION THAT OF VEHICLE REPAIRS IS RS.32,306/-, TH EREFORE IF AT ALL THE DISALLOWANCE HAS TO BE MADE OF RS.1,05,873/-. LD. AR RELIED UPON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDE RED IN THE CASE OF SAYAJI IRON & ENG. CO. LTD V. CIT (200) 253 ITR 749 (GUJ). ONE THE CONTRARY, LD. DR OF THE REVENUE STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND CASE LAW CITED BY LD. AR OF THE ASSES SEE. WE FIND THAT ASSESSING OFFICER MADE THE ADDITION ON THE GROUND T HAT PERSONAL USE OF VEHICLE BY DIRECTORS AND THEN ON THE BUSINESS CANNO T BE RULED OUT FOR EACH. THE ASSESSEE HAS NOT MAINTAINED ANY SEPARATE REGIST ER OR LOG BOOK. WE FIND FORCE INTO THE CONTENTION OF LD. AR OF THE ASSESSEE THAT EXPENSES TOWARDS PETROL AND VEHICLE IN RESPECT OF THE USE OF THE VEH ICLE BY DIRECTORS ARE TO THE EXTENT OF RS.1,15,105/- AND DISALLOWANCE ON THIS BA SIS THAT THE PERSONAL USE FOR DIRECTORS AND VEHICLE CANNOT BE RULED OUT. THE DISALLOWANCE SHOULD BE MADE OUT OF RS.1,05,873/-. HENCE, WE RESTRICT THE DISALLOWANCE @ 10% FOR RS.1,05,873/- I.E. WORKS OUT TO RS.10,580/- AND ASS ESSING OFFICER IS DIRECTED TO RE-COMPUTE ACCORDINGLY. THIS GROUND OF ASSESSEE S APPEAL IS PARTLY ALLOWED. ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 5 9. NEXT GROUND IS AGAINST THE CONFIRMATION OF ADDIT ION OF RS.3,76,571/- ON ACCOUNT OF ALLEGED DIFFERENCE IN THE RATE OF SAL E ON SCRAP. LD. A.R. OF THE ASSESSEE SUBMITTED THAT AS PER THE ASSESSING OFFICE R, THE ASSESSEE VALUED THE CLOSING STOCK OF SCRAP AT RS.11,000/- PER MT WHEREA S IN THE SALES MADE OF SCRAP WEIGHING 164.35 MT, THE VALUE IS RS.14,40774/ - WHICH IS AT AVERAGE RATE OF RS.8,764.09 PER MT. FURTHER, LD. AR STATED THAT AO CONSIDERED THAT THE AVERAGE COST OF STEEL PURCHASED WORKS OUT TO RS .30,000/- PER MT AND THE SALES OF SCRAP WERE MADE TO UNORGANIZED PERSON WHO ARE DEALING IN THESE TYPES OF THINGS. LD. AR SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE SOLD SCRAP AT VARIOUS RATES. HE FURTH ER SUBMITTED THAT THE ASSESSEE VALUED CLOSING STOCK SCRAP AT THE NET REAL IZABLE VALUE ON THE DATE OF VALUATION. HE SUBMITTED THAT THE AVERAGE RATE MADE FOR VALUATION OF CLOSING STOCK CANNOT BE ADOPTED FOR THE PURPOSE OF DETERMIN ING THE AVERAGE RATE OF SALE OF SCRAP. THE AO HAS CONSIDERED THE AVERAGE C OST OF STEEL AT THE AVERAGE AT RS.11,000/- PER MT AS SALE OF SCRAP. HE SUBMITT ED THAT THE OBSERVATION OF THE AO THAT THE SALES WERE MADE TO THE UNORGANIZED PERSONS IS EX-FACIE WRONG AS IS EVIDENT FROM THE FACT THAT SALES WERE M ADE TO TWO PUBLIC LIMITED COMPANIES WHO ARE ENGAGED IN THE BUSINESS OF MANUFA CTURING AND SELLING OF RAW- MATERIAL. HE SUBMITTED THAT IF ANY, ADDITION TO THE TOTAL INCOME IS SOUGHT TO MADE IT MUST BE MADE AFTER INVOKING THE P ROVISIONS OF SECTION 145 OF THE ACT. HE SUBMITTED THAT NO DEFECT HAS BEEN P OINTED OUT BY THE AO IN RESPECT OF INCOME DERIVED BY THE ASSESSEE FROM THE SALE OF FINISHED GOODS AND TRADING SALES WHICH IS THE MAJOR SOURCE OF BUSI NESS INCOME. AS SOON AS THE FINISHED GOODS ARE READY, THE BILLING IS MADE A LONG WITH DELIVERY OF SUCH GOODS. SUCH METHOD IS IN CONSONANCE WITH THE MERCA NTILE SYSTEM OF ACCOUNTING. THE FACTUM OF INCOME FROM THE SCRAP IS NOT DISPUTED BY AO. ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 6 THOUGH CASUAL OBSERVATION HAS BEEN MADE BY THE ASSE SSING OFFICER TO THE EFFECT THAT THERE IS NO CONTROL OVER THE RATE AT WH ICH SALE IS EFFECTED YET HE HAS ACCEPTED THE SALE OF SCRAP AS SHOWN BY THE AS SESSEE. HENCE, NO ADVERSE INFERENCE CAN BE DRAWN. ON THE CONTRARY, LD. DR SU BMITTED THAT THE ORDERS OF AUTHORITIES BELOW IS WELL-REASONED AS SAME IS ON TH E BASIS VALUE ADOPTED BY THE ASSESSEE FOR CLOSING OF STOCK. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. THE BASIS OF NOT ACCEPTING THE VALUE OF SALE OF SCRAP BY THE ASSESSING OFFICER IS TWO FOLD, ONE IS THAT IN TAX A UDIT REPORT, ASSESSEE HAS VALUED CLOSING STOCK AT RS.11,000 PER MT, WHEREAS S ALES MADE IN SCRAP WEIGHING 164.35 MT, THE ASSESSEE HAS SHOWN THE VALU E AT AVERAGE RATE OF RS.8,764.09 PER MT AS AGAINST THE VALUE OF RS.11,00 0 PER MT. ANOTHER OBJECTION OF ASSESSING OFFICER IS THAT SALES WERE M ADE TO UNORGANIZED PERSONS WHO ARE DEALING IN THESE TYPES OF THINGS. THEREFORE, THERE IS NO CHECK-OVER THE RATES OF SALES MADE BY THE ASSESSEE IS POSSIBLE. WE FIND THAT LD. CIT(A) HAS CONFIRMED THE ADDITION ON THE BASIS THAT THE APPELLANT CLAIMED THAT SCRAP PRICE ARE LINKED WITH THE PRICE OF FINIS HED PRODUCT AND RAW- MATERIAL. HOWEVER, THE SALE OF SCRAP AT LOWER RATE IN FIRST 11 MONTHS IS NOT PROVED BY LINKING THE SAME WITH THE RAW-MATERIAL PR ICE ON INCREASE IN THE FINISHED PRODUCTS. SINCE THE SCRAP WAS VALUED AT R S.11,000/- ON THE BASIS OF SALE PRICE IN THE MONTH OF MARCH, THE ASSESSING OFF ICERS ACTION WAS FOUND TO BE JUSTIFIED IN TAKING THE RATE @ RS.11,000/- PE R MT. ONE OF THE OBJECTIONS OF THE ASSESSING OFFICER WAS THAT THE SA LE HAS BEEN MADE TO THE UNORGANIZED PERSON, THIS IS CONTROVERTED BY THE LD. AR FOR THE ASSESSEE BY PRINTING OUT THAT THE SCRAPS WERE SOLD TO PUBLIC LI MITED AND LISTED COMPANIES. IT IS NOT DISPUTED BY THE REVENUE THAT THE SALES AR E DULY SUPPORTED BY BILLS ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 7 AND VOUCHERS. THE ONLY BASIS ON WHICH CIT(A) HAS C ONFIRMED THE ADDITION IS THAT THE SALE OF SCRAP AT LOWER RATE IN FIRST 11 MONTHS IS NOT PROVED BY LINKING THE SAME WITH RAW-MATERIAL PRICE ON THE INC REASE IN FINISHED PRODUCTS. IT IS REVEALED FROM THE RECORDS THAT LD . CIT(A) HAS NOT ADVERTED TO THE SUBMISSION OF THE ASSESSEE THAT ALL SALES ARE S UBJECT TO CENTRAL EXCISE CLEARANCE AND SALES-TAX. THE SALE OF SCRAP IS MAIN LY TO THE SUPPLIER OF THE RAW-MATERIAL, IF ANY ADDITION TO THE TOTAL INCOME I S SOUGHT TO BE MADE, IT MUST BE MADE AFTER INVOKING THE PROVISIONS OF SECTI ON 145 OF THE IT ACT. ADMITTEDLY, NO DEFECTS INTO THE ACCOUNTS OF THE ASS ESSEE IS POINTED OUT BY THE ASSESSING OFFICER AND BY THE LD. CIT(A). MOREOVER, THE CONTENTION OF THE ASSESSEE IS THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IF ANY ADDITION SOUGHT TO BE MADE TO THE TOTAL INCOME, IT SHOULD BE MADE AFTER INVOKING THE PROVISIONS OF SECTION 145 OF THE I.T. ACT IS NOT CONSIDERED BY THE LD. CIT(A). THEREFORE, THIS ISSUE IS REMITTED BACK TO THE LD. CIT(A) TO DECIDE AFRESH. THEREFORE, THIS GROUND OF ASSESSEE S APPEAL IS ALLOWED BUT FOR THE STATISTICAL PURPOSES. 11. THE FOURTH GROUND OF ASSESSEES APPEAL READS A S UNDER:- 4. THE LD. CIT(APPEALS0 ERRED IN PARTLY CONFIRMIN G THE FINDINGS OF THE ASSESSING OFFICER IN RESPECT OF ADDITION ON ACC OUNT OF CONSUMPTION OF STORES. IN THE FACTS AND CIRCUMSTANCES OF THE C ASE OF YOUR APPELLANT, THERE IS NO JUSTIFICATION FOR CONFIRMING ADDITION O N THIS ACCOUNT TO THE EXTENT OF 10% OF CONSUMPTION OF STORES, AMOUNTING T O RS.4,35,430/-. IT IS, THEREFORE, PRAYED THAT THE SAME MAY BE DELET ED. 11. 1. IT IS SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE THAT THE APPROACH ADOPTED BY THE ASSESSING OFFICER IS IMPROPER AND IN CORRECT BOTH ON FACTS AND IN LAW. ON FACTS, IT IS SUBMITTED THAT THE FIGURES ADOPTED ARE FROM WORKING OF CONVERSION COST OF WIP AND FINISHED GOODS AS ON 31/03/2003 WHICH WAS ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 8 USED ONLY FOR THE PURPOSES OF COMPUTING THE VALUE O F CLOSING STOCK OF FINISHED GOODS AND SEMI-FINISHED GOODS. THE FOLLOW ING WOULD CLARIFY THE FACTUAL POSITION. PARTICULAR A.Y. 2004-05 A.Y.2003-04 A. OPENING STOCK (10,60,486+61605 REFER WORKING OF CONVERSION COST OF WIP AND FINISHED GOODS AS ON 31/03/2003 RS. 11,22,091 RS. 9,33,944 B. TOTAL PURCHASE (REFER FINANCIAL STATEMENT) RS. 49,58,661 RS. 53,26,255 C. LESS CLOSING STOCK - WORKING OF CONVERSION COST OF WIP AND FINISHED GOODS AS ON 31/03/2005 RS. 14,03,308 RS. 11,22,091 D. CONSUMPTION (INCLUDING CENTRAL EXCISE) [(A+B)-C] RS. 46,77,444 RS.51,38,108 E. LESS: CENTRAL EXCISE RS. 1,57.240 (CM- FORMC)+RS.51,775(CM- WITHGST)+RS. 91,774- (CM-FORM 19)+RS. 1936 (CM-FORM 19)+RS. 11074(M- OTHERS)] RS. 3,13,799 F DIFFERENCE RS. 9,300 NET CONSUMPTION OF CONSUMABLE STORES [D-E- F] RS. 43,54,344 BY CONTRAST FOR THE YEAR ENDING 31 MARCH 2003, WHIC H WAS USED FOR COMPARISON, THE ASSESSING OFFICER CONSIDERED THE ST ATEMENT TITLED WORKING OF CONVERSION COST OF WIP AND FINISHED GOODS WHICH IS NET OF EXCISE AND ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 9 USED FOR THE PURPOSES OF COMPUTING THE CLOSING STOC K OF FINISHED GOODS AND SEMI FINISHED GOODS. FURTHER, TO THIS AMOUNT THE V ALUE OF EXCISE WAS REDUCED TO DETERMINE THE AMOUNT OF INVENTORY OF FINISHED AN D SEMI FINISHED GOODS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 145A. IT IS CONTENTED BY THE LD. A.R. FOR THE ASSESSEE TH AT THE CONSUMPTION OF PURCHASE OTHERS WAS NOT INCLUDED IN THE WORKING OF CONVERSION COST OF WIP AND FINISHED GOODS AS NO PURCHASES WERE EFFECT ED UNDER THE THAT HEAD AFTER OCTOBER 2002 AND THE CLOSING STOCK OF PURCHA SE OTHERS WAS NIL. HE POINTED OUT THAT MONTH-WISE EXTRACT OF PURCHASE OT HERS IS AS UNDER: FINANCIAL YEAR 2002-03 (A.Y. 2003-04-NOT THE A.Y. I N APPEAL) PARTICULARS AMOUNT OPENING STOCK 2,58,386 APRIL 02 1,72,450 MAY 02 2,83,914 JUNE 02 5,90,178 JULY 02 86,065 AUG 02 4,60,150 SEP 02 7,59,696 OCT 02 16,408 NOV 02-MARCH03 NIL 12. ON THE CONTRARY, LD. DR OF THE REVENUE STRONGLY RELIED ON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE THERE I S NO DEFECT IN THE VALUE OF THE STOCK AS ADOPTED BY THE AUTHORITIES BELOW. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIALS AVAILABLE ON RECORD AND PERUSED THE PAPER BOOK SUBMITTED BY A SSESSEE. WE FIND THAT LD. CIT(A) HAS DECIDED THIS ISSUE IN PARA-6.3 OF HI S ORDER, WHICH IS REPRODUCED HEREINBELOW:- ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 10 6.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNS EL AND FACTS OF THE CASE. THE APPELLANT SUBMITTED THAT THE COMP ARISON MADE BY THE ASSESSING OFFICER IS NOT CORRECT SINCE OVERA LL CONSUMPTION OF RAW MATERIAL AND CONSUMABLES HAVE IN CREASED AS COMPARED TO LAST YEAR. THE CONSUMPTION HAS INCR EASED AS COMPARED TO SALES BY ALMOST 7.5%. THE INCREASE IS ON ACCOUNT OF INCREASE IN CONSUMPTION OF STEEL BY 22 % AND INC REASE IN AVERAGE RATE OF STEEL BY 20%. SINCE THEREFORE, INC REASE IN CONSUMPTION OF RAW MATERIAL AND OTHER MATERIALS IS AFFECTED BY PRICE INCREASE AS WELL AS QUANTITY INCREASE, THE AD DITION OF 20% OF CONSUMPTION OF STORES IS ON HIGHER SIDE. CONSID ERING ALL THEREFORE, FACTORS RESPONSIBLE FOR INCREASE IN COST AND APPELLANTS SUBMISSION THE DISALLOWANCE IS RESTRICT ED TO 10% OF CONSUMPTION OF STORES. 14. THE SUBMISSIONS OF THE ASSESSEE BEFORE LD. CIT (A) ON THIS ISSUE ARE AVAILABLE ON PAGES 113-116 OF THE PAPER BOOK. IN TH ESE SUBMISSIONS, IT IS SUBMITTED BY THE ASSESSEE THAT IN THE PRESENT YEAR, THE CONSUMPTION OF CONSUMABLE STORES AS PER P & L ACCOUNT SCHEDULE NO. IV ON PAGE 21 OF THE PAPER BOOK IS OF RS.45,75,232/- WHEREAS IN THE PREC EDING YEAR I.E. IN ASSESSMENT YEAR 2003-04, THE SAME WAS OF RS.27,26,9 23/- AND IN THAT YEAR, THERE WAS CONSUMPTION OF WIP AND OTHERS ALSO OF RS. 26,27,247/- WHEREAS THE SAME IS NIL IN THE PRESENT YEAR. IT IS SUBMI TTED THAT TAKING BOTH TOGETHER I.E. CONSUMPTION OF CONSUMABLE STORES AND WIP OTHERS, THE CONSUMPTION IN THE PRECEDING YEAR WAS OF RS.52,54,1 95/- WHICH IS TO THE EXTENT OF 5.43% OF THE SALES OF THAT YEAR AS COMPAR ED TO CONSUMPTION OF RS.45,75,232/- IN THE PRESENT YEAR WHICH IS ONLY 3. 61% OF THE SALES IN THE PRESENT YEAR. IT IS THE MAIN SUBMISSION THAT THE A .O. HAS NOT CONSIDERED THE CONSUMPTION OF WIP OTHERS IN THE PRECEDING YEAR AND MADE THE COMPARISON ON A WRONG BASIS. THE DETAILS OF CONSUMPTION OF WI P OTHERS IN THE ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 11 PRECEDING YEAR IS NOT AVAILABLE BEFORE US AND THE S AME WAS NOT CONSIDERED BY ANY OF THE AUTHORITIES BELOW AND HENCE, WE FEEL THA T IN THE INTEREST OF JUSTICE, THIS MATTER SHOULD GO BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION AFTER EXAMINING THIS ASPECT AND HENCE, WE SET ASIDE THE O RDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE A.O. FORE A FRESH DECISION. THIS GROUND IS ALLOWED FOR STATISTICAL P URPOSES. 15. IN THE RESULT, ASSESSEES APPEAL, I.E.ITA NO.13 07/AHD/2009 FOR A.Y. 2004-05 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . COMING TO ITA NO. 1308/AHD/2009 FOR A.Y. 05-06 16. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- 1. THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-II I BARODA [HEREINAFTER REFERRED TO AS CIT(APPEALS)], ERRED IN PARTLY CONFIRMING THE FINDINGS OF THE ASSESSING OFFICER IN RESPECT OF ADDITION ON ACCOUNT OF ALLEGED DIFFERENCE IN RATE OF SALE OF SC RAP AND CONFIRMING THE ADDITION TO THE EXTENT OF RS. 10,560. IT IS RE SPECTFULLY SUBMITTED THAT THERE BEING NO BASIS FOR SUCH ADDITION, THE SA ME MAY BE DELETED. 2. THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE FIN DINGS OF THE ASSESSING OFFICER IN DISALLOWING RS. 30,000 OUT OF STAFF WELFARE & OFFICE EXPENSES AND RS. 20,000 OUT OF SALES PROMOTI ON EXPENSES; BOTH ON AD HOC BASIS. IT IS PRAYED THAT SUCH DISALLOWAN CE IS NOT WARRANTED ON THE FATS OF THE CASE AND, THEREFORE, T HE SAME MAY BE DELETED. 3. THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE F INDINGS OF THE ASSESSING OFFICER IN DISALLOWING RS. 88,950 OUT OF PETROL & VEHICLES EXPENSES (INCLUDING DEPRECIATION ON VEHICLES). IT IS SUBMITTED THAT SUCH DISALLOWANCE IS NOT TENABLE AS YOUR APPELLANT IS A CORPORATE AND, THEREFORE, IT IS HUMBLY PRAYED THAT THE SAME M AY BE DELETED. 17. FIRST GROUND IS AGAINST THE ALLEGED DIFFERENCE IN SALE OF SCRAP. THE COMMON ISSUE HAS BEEN RAISED BY ASSESSEE EXCEPT AMO UNT IN ITA NO. ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 12 1307/AHD/2009 AND WE HAVE ALREADY DISCUSSED IN PARA S 9 TO 11 OF THIS ORDER AND TAKING A CONSISTENT VIEW WE CONFIRM THE ORDER O F LD. CIT(A) AND THIS GROUND OF ASSESSEES APPEAL IS DISMISSED. 18. SECOND GROUND IS WITH REGARD TO DISALLOWANCE OF STAFF WELFARE & OFFICE EXPENSES AND SALES PROMOTION EXPENSES. THE COMMON HAS ALSO BEEN RAISED BY ASSESSEE IN ITA NO. 1307/AD/2009 AND TAKING A CO NSISTENT VIEW IN PARA-5 & 6 OF THIS ORDER THIS GROUND OF ASSESSEES APPEAL IS DISMISSED. 19. THIRD GROUND OF APPEAL IS AGAINST CONFIRMATION OF DISALLOWANCE OF PETROL AND VEHICLE MAINTENANCE EXPENDITURE. WE FIN D THAT IDENTICAL GROUND WAS RAISED IN ITA NO.1307/AHD/2009. NO CHANGE IN F ACTS AND CIRCUMSTANCES IS POINTED OUT BY THE REVENUE, THEREF ORE TAKING CONSISTENT VIEW THIS GROUND OF APPEAL IS PARTLY ALLOWED IN THE TERMS OF OUR ORDER CONTAINED IN PARAGRAPH NO.7 PASSED IN ITA NO.1307/A HD/2009(SUPRA). 20. IN THE RESULT, ASSESSEES APPEAL, I.E. ITA NO.1 308/AHD/2009 FOR A.Y. 2005-06 IS PARTLY ALLOWED. 21. AS A RESULT, ASSESSEES APPEALS FOR BOTH THE A.YS. I.E.2004-05 & 2005-06 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE S. SD/- SD/- (A.K. GARODIA) (KUL BHARAT) ACCOUNTANT MEMBER JU DICIAL MEMBER AHMEDABAD : DATED 24 /08 /2012 A.KUMAR, P.S./TCN ITA NO. 1307-1308/AHD/2009 - A.YS. 2004-05 & 05-06 RESPECTIVELY PAGE NO. MOFLEX SUSPENSIONS PVT. LTD. V. DCIT 13 / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A)-III, BARODA 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , TRUE CO PY ( / ' ) ! , '# *