M/s Sudan Steel Corporation, RAJKOT-GUJARAT V. The Income Tax Officer, Ward 5(2), RAJKOT-GUJARAT

ITA 1335/RJT/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1265 (ITAT-RAJKOT)
• Duration Of Justice: 5 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 20-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Assessee Lawyers: CHETAN L AGARWAL
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: S H RI ANIL CHATURVEDI , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] M/S. SUDAN STEEL CORPORATION, GORDHANDAS CHAMBER, GONDAL ROAD, RAJKOT PAN: AAHFS4506J (APPELLANT) VS THE ITO, WARD - 5(2), RAJKOT (RESPONDENT) REVENUE BY : S H RI AVINASH KUMAR , SR. D . R. ASSESSEE BY: S H RI CHETAN L. AGARWAL , A.R. DATE OF HEARING : 14 - 06 - 2 016 DATE OF PRONOUNCEMENT : 17 - 06 - 2 016 / OR DER P ER : S. S. GODARA , JUDICIAL MEMBER : - THI S ASSESSEE S APPEAL FOR A.Y. 2002 - 03 , AR ISES FROM ORDER OF THE CIT(A) - IV, RAJKOT DATED 2 9 - 09 - 2010 IN APPEAL NO. CIT(A) - IV/0506/04 - 05 , UPHOLDING EXCESS SHORTAGE ADDITION OF RS. 3,42,538/ - AS TREATED BY THE AS SESSING OFFICER IN THE NATURE OF UNRECORDED SALES, I T A NO . 1335 / RJT /20 1 0 A SSESSMENT YEAR 200 2 - 03 I.T.A NO. 1335 /RJT /20 10 A.Y. 2002 - 03 PAGE NO M/S. SUDAN STEEL CORPORATION VS. ITO 2 IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. WE COME TO FACTS OF THE INSTANT APPEAL. THE ASSESSEE - FIRM TRADES IN IRON SHEETS AND ANGLES. THE DEPARTMENT COND UCTED A SURVEY IN ITS CASE ON 21 - 12 - 2001. IT ALLEGEDLY FOUND SHORT PHYSICAL STOCK OF PATRA/PLATES ETC. BY 16,991 KGS AND THAT OF ANGLES BY 19 , 102 KGS. THE ASSESSEE FILED RETURN ON 23 - 10 - 2002 DECLARING NIL INCOME. IT ALSO CLAIMED CARRY FORWARD OF UNABSORB ED BUSINESS LOSS OF RS. 17,596/ - OF ASSESSMENT YEAR 1998 - 99 AND UNABSORBED DEPRECIATION OF RS. 4,35,439/ - PERTAINING TO ASSESSMENT YEARS 2001 - 02 TO 2002 - 03. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE SOUGHT FOR REASONS OF SHORT FALL IN ABOVE STATED PHYSI CAL STOCK. THE ASSESSEE CITED ITS NATURE OF BUSINESS AND CUTTING/WEIGHING ACTIVITIES IN IRON SALES AS REASON OF SHORT FALL. IT CLAIMED TO HAVE EXPLAINED THE VERY REASONS BEFORE THE SURVEY PARTY AND IN OATH STATEMENT. THE ASSESSEE HIGHLIGHTED THE VERY SH ORTAGE TO BE 0.27%, 0.38% AND 0.53% IN ASSESSMENT YEARS 1999 - 2000 TO 2001 - 02 RESPECTIVELY. THE LATTER TWO ASSESSMENT YEARS INVOLVED GROSS PROFITS OF 3.83% AND 3.99% AS AGAINST GP OF THE IMPUGNED ASSESSME NT YEAR @ 3.64% INCLUDING THAT @ 3.78% AND 3.2% PRIO R AND AFTER THE SURVEY. THE ASSESSING OFFICER PROCEEDED TO VERIFY ASSESSEE S STATEMENT CLAIMING INCREASE IN SHORTAGE TO BE A DIRECT RESULT OF INCREASE IN IRON RETAIL SALES. 3. IT IS EVIDENT TO US THAT ASSESSING OFFICER AGAIN ISSUED A LETTER DATED 21 - 12 - 2004 ASKING FOR FALL IN GP RATIO, QUANTITATIVE I.T.A NO. 1335 /RJT /20 10 A.Y. 2002 - 03 PAGE NO M/S. SUDAN STEEL CORPORATION VS. ITO 3 SALE/PURCHASE DETAILS, SCRAP RATIO AND RETAIL SALE BILLS. THE ASSESSEE SUBMITTED THAT GP HAD FALLEN DUE TO DECLINING MARKET AND INCREASE IN SHORTAGE RATIO. HE CONTENDED THAT THE SHORTAGE RATIO WAS 0.9% & 0. 81% BEFORE AND AFTER SURVEY AS ACCEPTED BY THE SURVEY PARTY. THE ASSESSING OFFICER OBSERVED IN ASSESSMENT ORDER DATED 02 - 02 - 2005 THAT INCREASE RETAIL SALES WOULD NOT FORM REASON FOR CORRESPONDING INCREASE IN SHORTAGE. HE COMPARED SHORTAGE RATIO TO HOLD T HE SAME AS UNACCEPTABLE. THE ASSESSING OFFICER HOWEVER RESTRICTED THE SHORTAGE RATIO @ 0.53% AND MADE CONSEQUENTIAL ADDITION QUA 0.40% COMING TO 20 , 610 KGS HAVING WORTH OF RS. 3,42,538/ - IN QUESTION. ALL THIS LED TO THE IMPUGNED ADDITION AS CONFIRMED IN THE LOWER APPELLATE PROCEEDINGS. 4 . WE HAVE HEARD BOTH THE PARTIES. RELEVANT FACTS NARRATED IN THE PRECEDING PARAGRAPHS ARE NOT REPEATED FOR THE SAKE OF BREVITY. THE ASSESSEE SUBMITS BEFORE US THAT 1% SHORTAGE IN HIS PECULIAR BUSINESS OF PURCHASING WHOLE IRON ITEMS AND ITS SALE ON RETAIL MARGIN IS VERY MUCH A NORMAL THING. HE STATES THAT THE IMPUGN ED ASSESSMENT YEAR SHOW S RETAIL SALES INCREASING FROM 36% IN THE PRECEDING ASSESSMENT YEAR TO 71% IN THE IMPUGNED ASSESSMENT YEAR. IT IS REITERATED THAT ASSESS EE S RETAIL SALE RANGED FROM 500 GMS TO 10 KGS RESULTING IN ENORMOUS CUTTING IN IRON ITEMS BEING RENDERED UNFIT FOR FURTHER SALE. THE REVENUE STRONGLY SUPPORT S THE IMPUGNED FINDINGS UNDER CHALLENGE. THERE IS NO DISPUTE BETWEEN THE PARTIES THAT THE ASSESS ING OFFICER HAS ALREADY ALLOWED THE IMPUGNED SHORTAGE @ 0.53% FROM 0.93% IN IRON STOCK MEANT FOR RETAIL SALE. IT HAS COME ON I.T.A NO. 1335 /RJT /20 10 A.Y. 2002 - 03 PAGE NO M/S. SUDAN STEEL CORPORATION VS. ITO 4 RECORD THAT ASSESSEE S BOOKS DULY AUDITED HAVE NOWHERE BEEN REJECTED. NOR THE SURVEY PARTY FOUND ANYTHING CONTRARY TO HIS EXPLANA TION IN SURVEY EXERCISE. WE OBSERVE IN THESE PECULIAR FACTS AND CIRCUMSTANCES THAT ASSESSEE HAS BEEN ABLE TO EXPLAIN ITS EXCESS SHORTAGE AS FLOWING FROM HIS SMALL QUANTITY RETAIL SALE INVOLVING CUTTING OF IRON ITEMS. WE ACCEPT HIS CASE SEEKING TO DELET E THE IMPUGNED ADDITION OF RS. 3,42,538/ - ADDED AS EXCESS SHORTAGE TREATED AS UNACCOUNTED SALES. IT IS MADE CLEAR THAT OUR INSTANT ADJUDICATION SHALL NOT FORM A PRECEDENT IN ANY PRECEDING OR SUCCEEDING ASSESSMENT YEAR. 5. THIS ASSESSEE S APPEAL IS ALLOWE D. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 17 - 06 - 201 6 SD/ - SD/ - (ANIL CHATURVEDI ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 17 /06 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT