M/S. ARADHANA TEXTILE MILLS, Ahmedabad V. THE INCOME TAX OFFICER, WARD-6(4), Ahmedabad

ITA 1322/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63086 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 27-09-2012
• Assessment Year: 1992-1993
• Appeal Filed On: 27-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: S N DIVATIA
• Keywords: Depreciation
• Section: 143(3); 142(1)

Judgement Text

ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AH MEDABAD (BEFORE SHRI D. K. TYAGI,JM & SHRI ANIL CHATURVEDI A.M.) I.T.A. NO.132 2/AHD/2010. (ASSESSMENT YEAR: 1992-93) M/S. ARADHANA TEXTILE MILLS, NEAR JADISH FACTORY, PLOT NO.299, VATVA-ISANPUR RD., NAROL, AHMEDABAD. (APPELLANT) VS. INCOME TAX OFFICER, WARD 6(4), AHMEDABAD . (RESPONDENT) I.T.A. NO.1904/AHD/2010. (ASSESSMENT YEAR: 1992-93) INCOME TAX OFFICER, WARD 6(4), AHMEDABAD . (APPELLANT) VS. M/S. ARADHANA TEXTILE MILLS, NEAR JADISH FACTORY, PLOT NO.299, VATVA-ISANPUR RD. NAROL, AHMEDABAD. (RESPONDENT) PAN: AACFA6598B APPELLANT BY : SHRI S.N.DIVATIA. RESPONDENT BY : SHRI D.K.SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 27-09-2 012 DATE OF PRONOUNCEMENT : 27-11-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 2 OUT OF THESE TWO APPEALS ONE IS FILED BY THE REVEN UE AND THE OTHER IS FILED BY THE ASSESSEE. BOTH THESE APPEALS ARE FILED AGAINST THE ORDER DATED 18-11-2009. SINCE BOTH THE APPEALS ARE HEARD TOGETH ER AND INVOLVE THE ISSUES WHICH ARE INTER-CONNECTED FOR THE SAKE OF CO NVENIENCE THESE APPEALS ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. THE FACTS OF THE PRESENT CASE AS CULLED OUT FROM THE ORDER ARE AS UNDER: 3. ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF JO B WORK PROCESSING OF GREY CLOTH. IT FILED ITS RETURN OF INCOME ON 21-10- 1992 DECLARING TOTAL INCOME OF RS.2,08,026/-.THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS FRAMED U/S. 143(3) VIDE ORDER DATED 31-1-1994 AND T HE INCOME WAS ASSESSED AT RS.2,15,773/-. THEREAFTER THE CASE WAS REOPENED AND ORDER U/S. 143(3) R.W.S. 147 WAS PASSED ON 25-3-1998 AND THE INCOME WAS ASSESSED AT RS.37,61,994/- AFTER MAKING VARIOUS ADD ITIONS. ASSESSEE CARRIED THE MATTER BEFORE CIT (A). CIT (A) VIDE ORD ER DATED 8-1-2009 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGAINST THE AFORESAID ORDER OF CIT (A) CROSS APPEALS WERE FILED BEFORE HONBLE ITAT BY ASS ESSEE AND REVENUE. ITAT VIDE ORDER DATED 7-1-2006 (ITA NOS.280 & 699 O F 1999) REMITTED THE MATTER BACK TO THE FILE OF A.O., WITH CERTAIN DIREC TIONS. PURSUANT TO THE DIRECTIONS OF ITAT, A.O. VIDE ORDER DATED 30-10-200 9 PASSED ORDER U/S. 143(3) R.W.S.254 AND DETERMINED THE TOTAL INCOME AT RS.35,58,881/-. AGAINST THE AFORESAID ORDER OF A.O., ASSESSEE PREFE RRED APPEAL BEFORE CIT (A). CIT (A) VIDE ORDER DATED 30-3-2010 GRANTED PAR TIAL RELIEF TO THE ASSESSEE. AGAINST THE ORDER OF CIT (A), THE ASSESS EE AND REVENUE ARE NOW IN APPEAL BEFORE US. ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 3 ITA NO.1322/AHD/2010 (ASSESSEES APPEAL) 4. ASSESSEE HAS RAISED THE FOLLOWING GROUND IN ITS APPEAL WHICH READS AS UNDER: 2.1. THE LD. CIT (A) HAS GRIEVOUSLY ERRED IN LAW A ND ON FACTS IN UPHOLDING THAT THERE WAS A SURPLUS CLOTH OF 21,49,8 88 MTRS., ON COMPARING PRODUCTION AS PER RG.1 WITH GREY CLOTH FO LDED. 2.2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LD. CIT (A) HAS GRIEVOUSLY ERRED IN UPHOLD ING THAT THERE WAS A SURPLUS OF 21,49,888 MTRS. AND THEREBY CONFIRMING THE ADDITION OF RS.21,28,389/-. 2.3. THE LD. CIT (A) HAS GRIEVOUSLY ERRED IN COMPUT ING ALLEGED SURPLUS PROCESSED CLOTH OF 21,49,888 MTRS., AND THE INCOME FROM ALLEGED UNACCOUNTED PROCESS CHARGES AT RS.21,28,839 /-. ITA NO.1904/AHD/2010 (REVENUES APPEAL) 5. SECOND GROUND OF THE REVENUE READS AS UNDER: 2. THE LD. CIT (A)-XVI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION TO RS.21,28,289/- FROM RS.32,24,831/- MADE ON ACCOUNT OF PROCESSING CHARGES, THEREBY ALLOWED A RELIEF OF RS.10,74,844/-. 6. SINCE THE GROUND OF THE REVENUE AND ASSESSEE ARE CONNECTED, THE SAME ARE DISPOSED TOGETHER. ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 4 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. OBSERVED THAT GREY CLOTH CHECKED AND FOLDED BY THE FOLDERS ON THE BASIS OF BILLS RAISED DID NOT TALLY WITH THE PRODUCTION WITH RG-1 REGISTER AN D THERE WAS EXCESS STOCK OF CLOTH. ASSESSEE COULD NOT RECONCILE THE EXCESS S TOCK. A.O. WORKED OUT EXCESS STOCK TO BE 21,49,888 MTRS. A.O. ACCORDINGLY HELD THAT THE ASSESSEE HAS OMITTED TO RAISE BILLS FOR SURPLUS CLOTH AND PR OCESSED AND DISPATCHED AND COLLECTED THE PROCESSING CHARGES FROM THE PARTI ES AND THUS CONCEALED THE REAL INCOME. A.O. AFTER CONSIDERING THE AVERAGE RATE OF PROCESSING FOR THE MONTH OF MARCH, 1992, ADOPTED THE RATE OF PROCE SSING AT RS.1.50 / MTR. AND ACCORDINGLY WORKED OUT THE CONCEALED PROCESSING CHARGES AT RS.32,24,832/- (2149888 X RS.1.50). THE AFORESAID ADDITION MADE BY A.O. WAS DELETED BY CIT (A). IN SECOND APPEAL BEFORE ITA T, THE MATTER WAS SET ASIDE TO THE FILE OF A.O. FOR DECIDING THE ISSUE AF RESH. PURSUANT TO THE DIRECTION OF ITA, A.O. AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE, VIDE ORDER DATED 30-10-2009 CONFIRMED THE ADDITION MADE IN THE ORIGINAL ORDER BY HOLDING AS UNDER: 7.3. IN THIS REGARD, THE ASSESSEE VIDE LETTER DATE D 20-07-2009 HAS SUBMITTED ITS REPLY. THE REPLY OF THE ASSESSEE HAS BEEN PERUSED CAREFULLY, BUT THE SAME ARE NOT TENABLE IN LAW AND WITHOUT ANY SUPPORTING. THE ASSESSEE HAS MERELY SUBMITTED THAT THE DIFFERENCE IS DUE TO THE FACT THAT THE GREY CLOTH RECEIVED DURING THE COURSE OF PROCESS IN STOCK AT THE END OF THE YEAR IS DELIVERE D IN THE SUBSEQUENT YEAR. HOWEVER, THE ASSESSEE COULD NOT FURNISH ANY D OCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM. FURTHER THE ASS ESSEE TIME AND AGAIN RELIED ON THE EXCISE REGISTER. HOWEVER, THE A SSESSEE HAS NOT FURNISH ANY RECONCILIATION OR WORKING IN SUPPORT OF THE SURPLUS CLOTHS FOUND, AS REQUISITIONED VIDE NOTICE U/S. 142(1) DAT ED 13-7-2009,WHICH PROVES THAT THE ASSESSEE HAS NO IDEA ABOUT THE EXC ESS STOCK FOUND. MERE SUBMISSION OF FACTS DOES NOT ACCOMPLISH THE PA RT OF THE ASSESSEE TO PROVE THE PLEA AS GENUINE; IT SHOULD BE ACCOMPANIED BY ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 5 PLAUSIBLE SUPPORTING DOCUMENTARY EVIDENCE AND PROPE R WORKING/RECONCILIATION OF THE EXCESS STOCK FOUND, W HICH THE ASSESSEE HAS TOTALLY FAILED. UNDER THE CIRCUMSTANCES, THE PL EA OF THE ASSESSEE IS NOT TENABLE IN LAW AND IT WAS RIGHTLY CALCULATED THE PROCESS CHARGES DURING THE COURSE OF ASSESSMENT PROCEEDINGS AT THE RATE OF RS.1.5 PER METER ON THE SURPLUS CLOTH OF 2149888 METERS AN D MADE ADDITION OF RS.32,24,832/-, AS THE SAME WERE NOT ACCOUNTED I N THE BOOKS OF ACCOUNTS. THEREFORE, THE SAME IS ADDED BACK TO THE TOTAL INCOME. 8. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT (A). CIT (A) AFTER CONSIDERING THE SUBMISSIONS GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 4.3. THE ABOVE MENTIONED ORDER OF THE CIT (A) FOR A.Y. 1993-94 HAS BEEN ACCEPTED BY THE ASSESSEE BUT THE DEPARTMENT HA S FILED SECOND APPEAL BEFORE THE ITAT. BEFORE ME THE CONTENTION OF THE A.R. IS THAT THERE WAS A SHORTAGE OF TOTAL; 21,349,888 MTRS O F CLOTH FOR WHICH THE RATE OF RS.1.50 PER MTR. HAS BEEN TAKEN BY THE A.O. ACCORDING TO THE A.R. THE A.O. HAS TAKEN THE RATE OF PROCESS OF RS.1 .50 WHICH WAS PREVALENT IN THE MONTH OF MARCH,92. IF THE AVERAGE PROCESS RATE OF THE WHOLE YEAR IS CONSIDERED THEN IT COMES TO RS.0.99 P ER MTRS. FURTHER IT WAS CONTENDED THAT THE A.O. WAS NOT JUSTIFIED IN TA XING THE WHOLE AMOUNT OF PROCESSING INCOME. IN FACT ONLY THE G.P. ADDITION SHOULD HAVE BEEN MADE BY THE A.O. WHICH COMES TO AROUND 12 .45% IN A.Y. 1992-93. IN MY VIEW THE GP ADDITION IS APPLICABLE O NLY WHEN THE APPELLANT HAS BEEN DOING PARALLEL BUSINESS OF UNACC OUNTED PROCESSING I.E. NEITHER OF THE PROCESSING INCOME NO R THE EXPENSES INCURRED TO EARN SUCH PROCESSING INCOME HAS BEEN SH OWN IN THE BOOKS OF ACCOUNT. BUT IF THE APPELLANT HAS DEBITED THE EXPENSES BUT DID NOT ACCOUNT FOR THE PROCESSING INCOME THEN THE BENEFIT OF ADDITION OF GP ONLY CANNOT BE GIVEN. IN THAT EVENT THE WHOLE PROCESSING CHARGES WOULD BE LIABLE TO BE ADDED IN THE TOTAL IN COME OF THE APPELLANT. THE A.R. WAS THEREFORE ASKED TO STATE ON WHAT BASIS HE CAN SAY THAT THE APPELLANT WAS DOING PARALLEL BUSIN ESS OF UNACCOUNTED PROCESSING ALSO. TO THIS THE A.R. REPLI ED THAT THE G.P. IS THE INDICATOR TO KNOW ABOUT THIS. HAD THE APPELLANT ACCOUNTED FOR THE ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 6 EXPENSES BUT DID NOT ACCOUNT FOR THE PROCESSING INC OME THEN THE G.P. COULD BE IN THE NEGATIVE. FROM THE ASSESSMENT ORDER, IT IS NOTICED THAT THE SHORTAGE IN CLOTH WAS NOTICED BY T HE A.O. AT THE TIME OF THE SCRUTINY ON THE BASIS OF BOOKS OF ACCOUNTS M AINTAINED BY THE APPELLANT. THIS CLEARLY SHOWS THAT THE EXPENSES FOR PROCESSING WERE DULY ACCOUNTED FOR BY THE APPELLANT IN HIS BOOKS OF ACCOUNTS. THE ALTERNATIVE CONTENTION OF THE A.R. THAT ONLY G.P. A DDITION SHOULD BE MADE IN THIS CASE, THEREFORE, CANNOT BE ACCEPTED IN THIS CASE. THEREFORE THE A.O., IS JUSTIFIED IN MAKING THE TOT AL ADDITION ON ACCOUNT OF PROCESSING CHARGE. HOWEVER SINCE THE AVERAGE PR OCESSING CHARGES RECEIVED BY THE APPELLANT IS RS.0.99 PER MT R.,THE ADDITION WOULD BE RESTRICTED TO RS.21,49,888 X 0.99 = 21,28, 289/-. IN OTHER WORDS, OUT OF THE TOTAL ADDITION OF RS.32,24,832/- MADE BY THE A.O. ADDITION OF RS.21,28,389/- ONLY IS CONFIRMED. 9. AGGRIEVED BY THE ORDER OF CIT (A), ASSESSEE AND REVENUE ARE IN APPEAL BEFORE US. 10. BEFORE US, THE LD. A.R. SUBMITTED ON IDENTICAL ISSUE FOR A.Y. 1993-94, CIT (A) HAS RESTRICTED THE ADDITION TO A LUMP SUM A MOUNT OF RS. 3,50,000/- AGAINST THE ADDITION OF RS.22,64,800/- MADE BY THE A.O. THE ADDITION OF RS.3,50,000/- WAS ALSO CONFIRMED BY HONBLE ITAT VI DE ORDER DATED 13-5- 2011(ITA NO.968 & C.O. NO.106 OF 2009). HE PLACED O N RECORD THE COPY OF THE ORDER OF THE TRIBUNAL. HE FURTHER SUBMITTED TH AT ONLY INCOME OR NET PROFIT COULD BE BROUGHT TO TAX AND NOT TNE ENTIRE P ROCESSING CHARGES. HE ALSO PLACED AT PAGE 70 OF THE PAPER BOOK THE COPY O F THE WORKING OF G.P. HE ALSO RELIED ON THE DECISION IN THE CASE OF CIT V S. SAMIR SYNTHETICS MILLS 326 ITR 410 (GUJ.). 11. THE LD. A.R. ON THE OTHER HAND SUPPORTED THE OR DER OF A.O. ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 7 12. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE A.O. HAD WORKED OUT THE SHORTAGE O F CLOTH AND ON THE BASIS OF TOTAL SHORTAGE WORKED OUT THE INCOME ON ACCOUNT OF UNACCOUNTED PROCESSING CHARGES. WE FIND THAT ON SIMILAR FACTS A ND ON IDENTICAL ISSUE IN A.Y.1993-94, THE CO-ORDINATE BENCH HAD RESTRICTED T HE DISALLOWANCE TO A LUMP SUM FIGURE OF RS.3,50,000/-. IT IS AN UNDISPUT ED FACT THAT THE ISSUE IN PRESENT APPEAL IS IDENTICAL TO THAT OF A.Y. 1993-94 AND THE MATTER BEFORE US HAS COME FOR SECOND TIME AFTER BEING REMITTED TO TH E FILE OF A.O. IN VIEW OF THE AFORESAID FACTS, RESPECTFULLY FOLLOWING THE DEC ISION OF CO-ORDINATE BENCH, WE ARE OF THE VIEW THAT IN THE PRESENT CASE A LUMP SUM ADDITION OF RS.3,50,000/- WILL MEET THE END OF JUSTICE. WE THER EFORE DIRECT ACCORDINGLY. THE DECISION RELIED UPON BY THE LD. A.R. IS DISTING UISHABLE ON FACTS AND THEREFORE CANNOT BE APPLIED TO THE PRESENT CASE. T HUS THIS GROUND OF ASSESSEE IS PARTLY ALLOWED AND THE GROUND OF REVENU E IS DISPOSED OF ACCORDINGLY. ITA NO.1904/AHD/2010 (REVENUES APPEAL). 13. FIRST GROUND READS AS UNDER: 1. THE LD. CIT (A)-XVI, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS. 59,138/- ON AC COUNT OF DEPRECIATION. 14. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEE DINGS,. A.O. NOTICED THAT ASSESSEE HAD CONSTRUCTED FACTORY PREMISES DURI NG THE YEAR AND AS PER THE LETTER DATED 23-9-92 RECEIVED FROM R.K. ELECTRI CALS, THE ELECTRICAL INSTALLATION WAS COMPLETED BY 20-3-92 AND THEREFORE HE PRESUMED THAT THE ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 8 FACTORY PREMISES WERE NOT USED IN THE ABSENCE OF EL ECTRICAL INSTALLATIONS. HE ACCORDINGLY DISALLOWED DEPRECIATION OF RS.59,138/-. CIT (A) RELYING ON THE ORDER DATED 8-1-99 OF HIS PREDECESSOR ALLOWED THE A PPEAL OF THE ASSESSEE BY HOLDING THAT SINCE THE ASSESSEE HAS USED THE FAC TORY PREMISES, THE ASSESSEE WAS ENTITLED TO DEPRECIATION. AGGRIEVED BY THE AFORESAID ORDER OF CIT (A), REVENUE IS NOW IN APPEAL BEFORE US. 15. BEFORE US, THE LD. D.R. RELIED ON THE ORDER OF A.O. WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF CIT (A). 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT (A) IN ITS ORDER DATED 8-1 -99 HAS GIVEN A FINDING THAT INDEPENDENT EVIDENCE OF AHMEDABAD ELECTRICITY CO. IN THE NATURE OF ELECTRICITY BILL IS EVIDENCE FOR USE OF POWER FOR B USINESS PURPOSE. FURTHER THE DISALLOWANCE OF DEPRECIATION FOR A.Y. 1993-94 MADE BY THE A.O. WAS SUBSEQUENTLY ALLOWED BY CIT (A) ALSO CONFIRMS THE U SE OF PREMISES FOR THE PURPOSE OF BUSINESS. THE AFORESAID FINDINGS OF CIT (A) HAVE BEEN RELIED UPON BY CIT (A) IN THE PRESENT APPEAL. REVENUE HAS NOT BROUGHT ANY MATERIAL TO REBUT THE FINDINGS OF CIT (A). IN VIEW OF THESE FACTS WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT (A) AND T HUS CONFIRM HIS ORDER ON THIS ISSUE. THUS THIS GROUND OF REVENUE IS DISMISSE D. ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 9 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED WHEREAS APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 27 - 11 - 2012 . SD/- SD/- (D. K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-XVI, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO 1322 & 1904/AHD/2010 A.YR.. 1992 -93 10 1.DATE OF DICTATION 23 - 11 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 26 / 11 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -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..