DCIT, Circle - 16(2), Hyderabad V. M/s Maruthi Tubes P Ltd, Secunderabad

ITA 1344/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98385 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: S RAMA RAO
• Keywords: Opportunity of being heard; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1344/HYD/2014 ASSESSMENT YEAR: 2007-08 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 16(2), HYDERABAD. VS. MARUTHI TUBES P. LTD., SECUNDERABAD. PAN AABCM5529J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.J. RAO ASSESSEE BY : SHRI S. RAMA RAO DATE OF HEARING : 04-08-2015 DATE OF PRONOUNCEMENT : 12-08-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL BY DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 30/01/2014 OF LD. CIT(A) V, HYDERABAD FOR THE AY 2007-08. 2. AS COULD BE SEEN FROM THE GROUNDS RAISED, DEPART MENT IS BASICALLY AGGRIEVED WITH THE DECISION OF LD. CIT(A) IN DELETING ADDITION OF RS. 2,74,15,771 ON ACCOUNT OF SHORT ACCOUNTING O F SALES. 3. BRIEFLY THE FACTS ARE, ASSESSEE A COMPANY IS ENG AGED IN THE BUSINESS OF MANUFACTURING OF HDPE PIPES. ASSESSEE A LSO UNDERTAKES EXECUTION OF WORKS CONTRACT. FOR THE AY UNDER CONSI DERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 01/02/2008 D ECLARING TOTAL INCOME OF RS. 72,05,099. DURING THE ASSESSMENT PROC EEDING, AO WHILE VERIFYING RETURN OF INCOME OF ASSESSEE, NOTIC ED THAT ASSESSEE 2 ITA NO. 1344 /HYD/2014 MARUTHI TUBES P. LTD. HAS DISCLOSED SALES OF HDPE PIPES AT RS. 6,03,25,70 4. HOWEVER, AS PER THE QUANTITATIVE DETAILS OF PRODUCTION STOCK SA LES OF HDPE PIPES WAS SHOWN AT RS. 8,77,41,511. THUS, ACCORDING TO AO , THERE WAS SHORT ACCOUNTING OF SALES TO THE EXTENT OF RS. 2,74 ,15,771. HE, THEREFORE, CALLED UPON ASSESSEE TO EXPLAIN THE DIFF ERENCE IN SALES. IN RESPONSE TO THE QUERY RAISED BY AO, ASSESSEE SUBMIT TED A WRITTEN REPLY EXPLAINING THE DIFFERENCE BY STATING THAT AS PER THE ACCOUNTING TREATMENT ADOPTED BY ASSESSEE DIRECT SALES ARE RECO RDED AS SALES OF HDPE PIPES, WHICH AMOUNTED TO RS. 6,03,25,704 AS S HOWN IN P&L A/C WHEREAS, THE PIPES MANUFACTURED AND UTILIZED IN CONTRACT WORKS ARE RECORDED AS PROJECT DIVISION SALES, WHICH AMO UNTED TO RS. 2,74,15,771. IT WAS FURTHER SUBMITTED, PROJECT DIVI SION SALES SHOWN IN P&L A/C AT RS. 16,57,85,698 INCLUDES THE PIPES MAN UFACTURED AND SOLD OF RS. 2,74,15,771. IN SUPPORT OF SUCH CONTENT ION, ASSESSEE ALSO SUBMITTED BREAK UP OF PROJECT DIVISION SALES ALONG WITH LEDGER COPY. AO, HOWEVER, DID NOT FIND MERIT IN THE EXPLANATION SUBMITTED BY ASSESSEE IN VIEW OF THE FACT THAT ASSESSEE WAS NOT ABLE TO SUBMIT THE REQUISITE RA BILLS PERTAINING TO THE RELEVANT FY TO SHOW THE QUANTITY OF HDPE PIPES UTILIZED IN THE WORKS CONTRACT AND DETAI LS OF AMOUNT RECEIVED FROM VARIOUS GOVT. DEPARTMENTS TOWARDS HDP E PIPES AND WORKS CONTRACT SEPARATELY. THUS, AO ALLEGING THAT A SSESSEE HAS NOT FURNISHED SUFFICIENT EVIDENCE TO SUBSTANTIATE ITS C LAIM, TREATED THE DIFFERENCE OF RS. 2,74,15,771 AS SUPPRESSION OF SAL ES AND ADDED TO THE INCOME OF THE YEAR. BEING AGGRIEVED OF SUCH ADD ITION, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 4. IN COURSE OF HEARING OF APPEAL BEFORE LD. CIT(A) , ASSESSEE SUBMITTED RA BILLS IN RESPECT OF EXECUTION OF WORKS CONTRACT FOR M/S LARSEN & TOUBRO TO SUBSTANTIATE ITS CLAIM THAT HDPE PIPES WERE UTILIZED IN WORKS CONTRACT. ON THE BASIS OF ADDITIO NAL EVIDENCE FILED BY ASSESSEE, LD. CIT(A) CALLED FOR A REMAND REPORT FRO M AO. IN THE REMAND REPORT, AO OBSERVED THAT THERE ARE DIFFERENC ES IN QUANTUM OF HDPE PIPES SOLD AS PER THE RA BILLS AND AS PER THE LEDGER ACCOUNT. 3 ITA NO. 1344 /HYD/2014 MARUTHI TUBES P. LTD. HE ALSO MENTIONED THE EXACT DIFFERENCE IN THE REMAN D REPORT. FURTHER, AO OBSERVED THAT RA BILLS DO NOT CONTAIN VOUCHER NO S. NOR LEDGER ACCOUNTS HAVE A REFERENCE OF RA BILLS TO FACILITATE VERIFICATION. THUS, AO NOTED THAT SALES AS PER RA BILLS DO NOT CORRELAT E WITH THE DATES OR AMOUNTS UNDER ANY HEADS SUBMITTED IN THE LEDGER EXT RACTS OF ASSESSEE. WHEN LD. CIT(A) CONFRONTED THE REMAND REP ORT TO ASSESSEE, HE SUBMITTED A REPLY EXPLAINING DISCREPANCIES POIN TED OUT BY AO. LD. CIT(A) ULTIMATELY DELETED THE ADDITION WITH THE FOL LOWING OBSERVATIONS: 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF T HE APPELLANT, ASSESSMENT ORDER, REMAND REPORT. AFTER GOING THROUGH THE SUBMISSIONS OF THE APPELLANT, I FIND F ORCE IN THE CONTENTIONS OF THE APPELLANT AND FULLY AGREE WITH ITS SUBMISSIONS. I, THEREFORE, HOLD THAT THE AO WAS NO T JUSTIFIED IN MAKING AN ADDITION OF RS. 2,74,15,771 AND HENCE DE LETE THE ADDITION. 5. LD. DR SPECIFICALLY DRAWING OUR ATTENTION TO THE AFORESAID FINDING OF LD. CIT(A) SUBMITTED, LD. CIT(A)S ORDER IS A NON-SPEAKING ONE WITHOUT SHOWING ANY REASONS ON THE BASIS OF WHI CH HE DELETED THE ADDITION. LD. DR SUBMITTED, WHEN ASSESSEE DID NOT S UBMIT THE REQUISITE EVIDENCE BEFORE AO DURING THE ASSESSMENT PROCEEDING AND ONLY SUBMITTED SUCH EVIDENCES BEFORE LD. CIT(A). FU RTHER, WHEN AO IN THE REMAND REPORT POINTED OUT DISCREPANCIES BETWEEN RA BILLS AND THE LEDGER ACCOUNT, LD. CIT(A) SHOULD HAVE DISCUSSED IN DETAIL HOW HE FOUND THE DIFFERENCE/DISCREPANCY POINTED OUT BY AO TO HAVE BEEN EXPLAINED BY ASSESSEE. HE, THEREFORE, SUBMITTED, A S THE ORDER PASSED BY LD. CIT(A) IS WITHOUT ANY REASON, THE SAM E IS REQUIRED TO BE SET ASIDE WITH A DIRECTION TO PASS A REASONED ORDER . 6. LD. AR, ON THE OTHER HAND, JUSTIFYING THE DECISI ON OF LD. CIT(A) IN DELETING THE ADDITION SUBMITTED BEFORE US, ASSES SEE APART FROM DIRECT SALES OF HDPE PIPES HAS ALSO UTILIZED HDPE P IPES MANUFACTURED BY IT IN EXECUTION OF WORKS CONTRACT. IT WAS SUBMITTED, THIS FACT WAS NOT ONLY BROUGHT TO AO DURING ASSESSM ENT PROCEEDING BUT ALSO BEFORE LD. CIT(A) ASSESSEE HAS PRODUCED AL L RELEVANT DETAILS INCLUDING RA BILLS TO SUBSTANTIATE ITS CLAIM OF ALL EGED SHORT ACCOUNTING 4 ITA NO. 1344 /HYD/2014 MARUTHI TUBES P. LTD. OF SALES TO THE TUNE OF RS. 2,74,15,771 WHICH ACTUA LLY REPRESENTS HDPE PIPES UTILIZED IN EXECUTION OF WORKS CONTRACT. IT WAS SUBMITTED, LD. CIT(A) AFTER VERIFYING THE SUBMISSIONS OF ASSES SEE WITH THE EVIDENCES BROUGHT ON RECORD HAVING BEEN SATISFIED W ITH THE FACT THAT THERE IS NO SHORT ACCOUNTING OF SALES, DELETED THE ADDITION. THEREFORE, ONLY BECAUSE LD. CIT(A)S FINDING IS BRIEF, IT CANN OT BE SAID THAT HE HAS NOT GONE INTO THE DETAILS OF THE ISSUE. HE, THEREFO RE SUBMITTED THAT THE ORDER OF LD. CIT(A) DESERVED TO BE SUSTAINED. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS THE MA TERIALS ON RECORD. THOUGH, IT IS EVIDENT FROM THE ASSESSMENT ORDER THA T DURING THE ASSESSMENT PROCEEDING ASSESSEE DID SUBMIT AN EXPLAN ATION STATING THEREIN THAT ALLEGED SHORT ACCOUNTING OF SALES OF H DPE PIPES TO THE TUNE OF RS. 2,74,15,771 WAS ACTUALLY UTILIZED IN EX ECUTION OF WORKS CONTRACT, BUT, IT IS ALSO EVIDENT THAT ASSESSEE DID NOT SUBMIT THE NECESSARY EVIDENCE TO SUBSTANTIATE SUCH CLAIM. ONLY IN COURSE OF HEARING BEFORE LD. CIT(A), ASSESSEE COULD PRODUCE R A BILLS TO SUPPORT ITS CLAIM THAT HDPE PIPES WERE UTILIZED IN EXECUTIO N OF WORKS CONTRACT. HOWEVER, IT APPEARS THAT IN THE REMAND REPORT AO AF TER EXAMINING THE ADDITIONAL EVIDENCE SUBMITTED BY ASSESSEE HAS POINT ED OUT CERTAIN DISCREPANCIES IN THE QUANTUM OF SALES AS PER THE RA BILLS AND AS PER THE LEDGER ACCOUNT. THOUGH, ASSESSEE HAS TRIED TO R ECONCILE DISCREPANCIES POINTED OUT BY AO IN ITS REJOINDER, AS CLAIMED BY ASSESSEE, HOWEVER, IN OUR VIEW, THE FINDING OF LD. CIT(A) IS NOT ONLY CRYPTIC BUT BEREFT OF REASONS. AS COULD BE SEEN FRO M THE OPERATIVE PORTION FROM THE ORDER OF LD. CIT(A) EXTRACTED HERE INABOVE, HE HAS NOT RECORDED ANY REASONS FOR ACCEPTING ASSESSEES CLAIM . LD. CIT(A) WHILE EXERCISING APPELLATE JURISDICTION IS EXPECTED TO PASS REASONED ORDERS. THE SIMPLE REASON FOR DOING SO IS, THE AGGR IEVED PARTY MUST KNOW THE REASONS ON THE BASIS OF WHICH THE ISSUE HA S BEEN DECIDED AGAINST HIM FOR ENABLING HIM TO TAKE EFFECTIVE GROU NDS, IN CASE HE DECIDES TO CHALLENGE THE DECISION OF THE APPELLATE AUTHORITY BEFORE 5 ITA NO. 1344 /HYD/2014 MARUTHI TUBES P. LTD. HIGHER FORUM. UNFORTUNATELY, IN THE PRESENT CASE, W E DO NOT FIND ANY REASONING OF LD. CIT(A) AT ALL WHILE DELETING ADDIT ION MADE BY AO. THOUGH, ASSESSEES EXPLANATION IN THE ULTIMATE ANA LYSIS MAY TURN OUT TO BE ACCEPTABLE, BUT, WHEN APPELLATE AUTHORITY IS DECIDING A PARTICULAR ISSUE, HE MUST GIVE REASONS FOR ARRIVING AT HIS DECISION. AS THE IMPUGNED ORDER OF LD. CIT(A) IS MECHANICAL, NON SPEAKING AND BEREFT OF ANY REASONS, WE ARE INCLINED TO SET ASID E THE SAME AND REMIT THE ISSUE BACK TO HIS FILE FOR DECIDING AFRES H AFTER CONSIDERING ALL FACTS AND MATERIALS ON RECORD. LD. CIT(A) MUST CONS IDER THE REMAND REPORT, SUBMITTED BY AO AS WELL AS THE FACTS AND MA TERIALS AND SUBMISSIONS BROUGHT ON RECORD BY ASSESSEE AND PASS A WELL REASONED ORDER AFTER DUE OPPORTUNITY OF BEING HEARD TO ASSES SEE. AS WE HAVE REMITTED THE ISSUE BACK TO LD. CIT(A) FOR DECIDING AFRESH, WE DESIST FROM EXPRESSING ANY OPINION ON THE VALIDITY OF ADDI TION MADE BY AO. 8. IN THE RESULT, DEPARTMENTS APPEAL IS ALLOWED FO R STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 12 TH AUGUST, 2015 KV COPY TO:- 1) DCIT, CIRCLE 16(2), HYDERABAD. 2) M/S MARUTHI TUBES PVT. LTD., 133, A BLOCK, AL-KA RIM TRADE CENTRE, RANIGUNJ, SECUNDERABAD 500 003. 3) CIT(A) V, HYDERABAD 4) CIT-IV, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.