Shumathy Spinning Mills Private Limited, CHENNAI V. DCIT, Coimbatore

ITA 1375/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8692 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 19-05-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 1 375 /MDS/201 6 / ASSESSMENT YEAR :20 1 0 - 11 M/S. SHUMATHY SPINNING MILLS PVT. LTD., NO. 348C, SATHY ROAD, KARIYAMPALAYAM POST, ANNUR, COIMBATORE 641 653. [PAN:A A KCS1545B ] VS. THE DEPUTY COMM ISSIONER OF INCOME TAX , COMPANY CIRCLE, TIRUPUR [PRESENTLY, THE DCIT, CORPORATE CIRCLE - 1, COIMBATORE.] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI R. VIJAYARAGHAVAN , ADVOCATE / RESPONDENT BY : SHRI S UPRIYO PAL, JCIT / DATE OF HEARING : 03 . 0 8 .201 6 / DATE OF P RONOUNCEMENT : 24 . 0 8 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 , C OIMBATORE , DATED 2 9 . 02 .20 1 6 RELEVANT TO THE ASSESSMENT YEAR 20 1 0 - 11 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 1, C OIMBATORE IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. I.T.A. NO.1 375 /M/16 2 2. THE LD. CIT(A) HAS ERRONEOUSLY CONFIRMED THE ESTIMATED ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF HIGHER INVISIBLE LOSS, WITHOUT DISCUSSING THE ISSUES RAISED BY YOUR APPELLANT I N BOTH STATEMENT OF FACTS AND GROUNDS OF APPEAL. 3. THOUGH A COUPLE OF NOTICES ISSUED BY THE LD. CIT(A) WERE NOT COMPLIED WITH DUE TO THE FACTORS BEYOND THE CONTROL OF THE ASSESSEE ON BONAFIDE GROUNDS, THE LD. CIT(A) OUGHT TO HAVE CONSIDERED ISSUES RAIS ED IN THE STATEMENT OF FACTS AND GROUNDS OF APPEAL BACKED BY JUDICIAL PRONOUNCEMENTS. 4. THE LD. CIT(A) HAS ALSO OMITTED TO CONSIDER THE IMPORTANT FACTS RELATING TO THE SPINNING MILL RUN BY YOUR APPELLANT, SUCH AS OBSOLETE MACHINERY AND LOW PRODUCTIVITY OF SENIOR LABOURERS OF THE TEXTILE MILL. 5. THE LD. CIT(A) HAS ALSO OMITTED TO CONSIDER THE FACT THAT THE ASSESSING OFFICER HAS RELIED ON INDUSTRIAL AVERAGE RELATING TO INVISIBLE LOSS AND HAS NEVER POINTED OUT ANY DEFECTS IN THE ACCOUNTS. WHEN THE ACCO UNTS ARE NOT REJECTED OR WHEN SPECIFIC DEFICIENCY IN THE ACCOUNTS ARE NOT POINTED OUT IN THE ASSESSMENT ORDER, THE RESORT TO ESTIMATED ADDITION IS NOT LEGALLY TENABLE. 6. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS AT THE TIME OF HEARING. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF COTTON YARN AND FILED ITS RETURN OF INCOME ON 09.10.2010 DECLARING INCOME OF .82,83,586/ - . THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS ISSUED ON 23.09.2011. IN RESPONSE THERETO, THE ASSESSEE FILED ALL DETAILS BEFORE THE ASSESSING OFFICER. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER HA S OBSERVED THAT 18,90,427 KGS OF COTTON WAS ISSUED FOR CONVERSION INTO YARN, OUT OF WHICH THE YIELD WAS AS FOLLOWS: YARN 14,82,401.35 KG COTTON WASTE 3,37,164.1 KGS HARD WASTE 14,040.4 KGS AND INVISIBLE LOSS 54,457.15 KGS I.T.A. NO.1 375 /M/16 3 IN VIEW OF THE ABOVE, THE ASS ESSING OFFICER HAS NOTED THAT THE PERCENTAGE OF INVISIBLE LOSS WAS 2.88%, WHICH WAS MORE THAN THE INDUSTRY AVERAGE. THE INVISIBLE LOSS UPTO 2% WAS NORMALLY ALLOWABLE AS INVISIBLE LOSS AS PER THE ACCEPTED INDUSTRY NORMS. THE EXCESS OF 0.88%, WHICH WORKS OUT TO 16,640 KGS AND FOR WHICH NO SATISFACTORY EXPLANATION WAS OFFERED AND THEREFORE, THE ASSESSING OFFICER BROUGHT TO TAX THE EXCESS INVISIBLE LOSS AT THE RATE OF .69.50 PER KG, WHICH IS THE AVERAGE COST OF THE COTTON PURCHASE MADE BY THE ASSESSEE DURING T HE YEAR. ACCORDINGLY, THE EXCESS INVISIBLE LOSS OF .11,56,458/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). DESPITE SERVICE OF NOTICE OF HEARING, NONE APPEARED ON BEHALF O F THE ASSESSEE BEFORE THE LD. CIT(A). THEREFORE, AFTER CONSIDERING THE MATERIALS AVAILABLE ON RECORD, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BY RELYING O N THE GROUNDS OF APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS RELIED ON THE INDUSTRIAL AVERAGE RELATING TO INVISIBLE LOSS AND HAS NEVER POINTED OUT ANY DEFECTS IN THE ACCOUNTS OF THE ASSESSEE. HE ALSO FURTHER ARGUED THAT WHEN THE ACCOUNTS I.T.A. NO.1 375 /M/16 4 ARE NOT REJECTED OR WHEN SPECIFIC DEFICIENCY IN THE ACCOUNTS ARE NOT POINTED IN THE ASSESSMENT ORDER, THE RESORT TO ESTIMATED ADDITION IS NOT LEGALLY TENABLE AND THEREFORE, HE PLEADED THAT THE ESTIMATED ADDITION M ADE BY THE ASSESSING OFFICER MAY BE DELETED. 5. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW . 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS SEEN FROM TH E ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOTED THAT THE PERCENTAGE OF THE INVISIBLE LOSS WAS 2.88%, BUT THE INVISIBLE LOSS UPTO 2% WAS NORMALLY ALLOWABLE AS INVISIBLE LOSS AS PER THE ACCEPTED INDUSTRY NORMS. THEREFORE, THE EXCESS OF 0.88% WAS WORKED O UT TO 16,640 KGS OF INVISIBLE LOSS. MOREOVER, THE AUTHORITIES BELOW HAVE NOT TAKEN INTO CONSIDERATION THE IMPORTANT FACTORS RELATING TO THE SPINNING MILL RUN BY THE ASSESSEE SUCH AS CONDITION OF THE MACHINERY, LOW PRODUCTIVITY, ETC. LEADING THE INVISIBLE L OSS. BUT THE ASSESSING OFFICER HAS NOT MENTIONED ANY OTHER BASIS AND SIMPLY RELIED ON THE INDUSTRIAL AVERAGE RELATING TO INVISIBLE LOSS AND HAS NEVER POINTED OUT ANY DEFECTS IN THE ACCOUNTS. FURTHER, THE ASSESSING OFFICER HAS NOT NOTICED ANY SPECIFIC DEFI CIENCY IN THE ACCOUNTS OF THE ASSESSEE. UNDER THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) I.T.A. NO.1 375 /M/16 5 ON THIS ISSUE AND THE ESTIMATED ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 24 TH AUGUST , 2016 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 24 . 0 8 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.