K.D. Bhatia Dyeing & Printing Mills,Pvt.Ltd., Surat V. The Dy.CIT.,Circle-1, Surat

ITA 1387/AHD/2010

• Counselvise Citation: 138720514 RSA 2010
• Duration Of Justice: 3 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 30-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Assessee Lawyers: ASHWIN PAREKH A R
• Keywords: Opportunity of being heard; Assessment record; Retraction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD , , , , BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND .., SHRI T.R. MEENA, ACCOUNTANT MEMBER .. , ! ! ! ! ITA NO. 1387/AHD/2010 ASSESSMENT YEAR : 2003-04 & ITA NOS. 2326/AHD/2012 ASSESSMENT YEAR : 2003-04 K.D.BHATIA DYEING & PRINTING MILLS PVT. LTD. 1015, MILLENIUM MARKET, RING ROAD, SURAT V/S . DCIT, CIRCLE-1, SURAT PAN NO. AABCK0204A (APPELLANT) .. (RESPONDENT) '# $ % BY REVENUE SHRI P. L. KUREEL, SR.D.R. # $ % /BY ASSESSEE SHRI ASHWIN PAREKH, A.R. &'#( $ ) /DATE OF HEARING 16.12.2013 *+, $ ) /DATE OF PRONOUNCEMENT 20.12.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THESE QUANTUM APPEAL AND PENALTY APPEAL ARE FILED B Y THE ASSESSEE. THESE APPEALS ARE EMANATED FROM THE ORDER OF THE LD . CIT(APPEALS)-I, SURAT, ORDER DATED 23.03.2010 IN QUANTUM APPEAL AND ORDER DATED 02.08.2012 IN PENALTY APPEAL FOR A.Y. 2003-04. BOTH APPEALS WERE HEARD TOGETHER AND ARE ITA NOS. 1387/AHD/2010 & 2326/AHD/2012, A.Y. 03-04 PAGE 2 BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR T HE SAKE OF CONVENIENCE. THE EFFECTIVE GROUNDS OF BOTH APPEALS ARE AS UNDER: GROUNDS OF ITA NO. 1387/AHD/2010 (QUANTUM APPEAL) I. THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.58,52,840/- MADE BY A SSESSING OFFICER ON ACCOUNT OF ENTIRE JOB CHARGES ON ALLEGED CLEARANCE OF 836120 MTS. OF MAN MADE PROCESSED FABRICS WORKED OU T BY THE CENTRAL EXCISE AUTHORITIES DURING THE SEARCH PROCEE DINGS ON 24.10.2002 WITHOUT APPRECIATING THE FACTS OF AFFIDA VIT FILED BEFORE EXECUTIVE MAGISTRATE ON 28.10.2002 FOR RETRACTION O F STATEMENT & APPEAL FILED AGAINST THE ORDER OF CENTRAL EXCISE AU THORITIES ON THE BASIS OF WHICH NO ADDITION IS CALLED FOR. THE ADDI TION OF RS.58,52,540/- SHOULD BE DELETED. II. THE LEARNED CIT(A) FURTHER ERRED IN CONFIRMING THE ADDITION OF ENTIRE JOB-WORK RECEIPTS OF DYING & PTG. OF 836120 MTS. OF GREY CLOTH WITHOUT APPRECIATING THE FACTS THAT ON UNACCO UNTED JOB WORK RECEIPTS, IN VIEW OF UNACCOUNTED EXPENSES ON DYEING AND PRINTING OF CLOTH, ONLY NET PROFIT IS TO BE CHARGED TO TAX. THE ADDITION OF RS.58,52,840/- SHOULD THEREFORE, BE RED UCED TO RS.156270/- @ NET PROFIT OF 2.67% OF RS.58,52,840/- . GROUNDS OF ITA NO. 2326/AHD/2012 (PENALTY APPEAL) I. THE LEARNED CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF TH E ACT AT RS.21,50,919/- WITHOUT APPRECIATING THE FACTS OF NO CONCEALMENT OF INCOME BY ANY ALLEGED UNACCOUNTED PRODUCTION, TH E FACT OF INCOME ESTIMATED IN ASSESSMENT ORDER AND OVERLOOKIN G THE COMPLETE EVIDENCES OF PURCHASES, SALES AND PRODUCTI ON ITA NOS. 1387/AHD/2010 & 2326/AHD/2012, A.Y. 03-04 PAGE 3 SUBMITTED TO ASSESSING OFFICER AND CIT(A). THE PEN ALTY OF RS.21,50,919/- SHOULD THEREFORE, BE DELETED. 2. THE A.O. OBSERVED THAT THE ASSESSEE IS IN PROCES SING OF FABRIC. THERE WAS AN INFORMATION FROM THE JOINT COMMISSIONER (PRE V.), CENTRAL EXCISE & CUSTOMS, SURAT-I VIDE LETTER F.NO.IV/12-HPIU-I/01/2 006-07-PT-II DATED 07.03.2008 THAT THERE WAS ACTION BY CENTRAL EXCISE OFFICERS ON THE ASSESSEE NAMELY M/S. K.D. BHATIA DYEING & PRINTING MILLS PVT . LTD., HAVING ITS OFFICE AT P-3098, SURAT TEXTILE MARKET, RING ROAD, SURAT HAD CLEARED/REMOVED TOTAL 836120 METRES OF MANMADE FABRICS (PROCESSED) VALUED AT RS.2,25,75,240/- @ RS.27 PER METRE ILLICITLY WITHOUT PAYMENT OF CENTRA L EXCISE DUTY, WITHOUT ISSUE OF CENTRAL EXCISE INVOICE AND WITHOUT ENTERING/ACCO UNTING FOR THE SAID QUANTITY OF PROCESSED MANMADE FABRICS IN THEIR RECORDS, TO T HE CONCERNED PARTIES DURING THE PERIOD FROM MAY,2002 TO OCTOBER, 2002. SHRI GULSHAN MANOHARLAL BHATIA, THE DIRECTOR OF THE COMPANY STATED IN HIS S TATEMENT BEFORE EXCISE AUTHORITY ON 24/25.10.2002, AS PER PANCHNAMA DRAWN BY THEM, THAT THE COMPANY HAD RECEIVED THE PAYMENT OF JOB CHARGES FOR SUCH ILLICITLY CLEARED/REMOVED PROCESSED MANMADE FABRICS IN CASH F ROM THE RESPECTIVE CONCERNED PARTIES AND NOT KEPT ANY RECORD OF THE SA ID CLEARANCE/REMOVAL AND PAYMENT OF JOB CHARGES. THE A.O. REOPENED THE CASE U/S.147 OF THE IT ACT AND THEREAFTER ISSUED NOTICE U/S.148 OF THE IT ACT. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD WHICH WAS AVAILED BY THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REPLY, THE A.O. HELD THA T RETRACTION MADE BY THE DIRECTOR HAD NOT BEEN ACCEPTED BY THE EXCISE AUTHOR ITIES. SHORTAGE OF ITA NOS. 1387/AHD/2010 & 2326/AHD/2012, A.Y. 03-04 PAGE 4 MANMADE FABRICS WAS NOT EXPLAINING WITH THE SUPPORT ING EVIDENCE, ADDITION MADE BY THE EXCISE AUTHORITIES WERE PENDING BEFORE THE APPELLATE AUTHORITIES. THE ASSESSEE CLEARED/REMOVED THIS MANMADE FABRIC WI THOUT PAYING EXCISE DUTY AND WITHOUT RECORDING IT IN THE REGULAR BOOKS OF ACCOUNT AND HAD RECEIVED SERVICE CHARGES IN CASH @ RS.7/- PER METRE. THE NE T PROFIT PROPOSED BY THE APPELLANT BEFORE THE A.O. AT THE TIME OF ASSESSMENT WAS NOT ACCEPTED IN ABSENCE OF NO DIRECT AND INDIRECT EXPENSES HAD BEEN DEBITED IN THE P&L ACCOUNT IN RESPECT UNACCOUNTED JOB CHARGES RECEIPTS . THUS, HE MADE ADDITION OF RS.58,52,840/-. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE HONBLE CIT(A) WHO HAD DISMISSED THE ASSESSEES APPEAL BY OBSERVING AS UNDER : - 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE A PPELLANT AND THE OBSERVATION OF THE A.O. DURING THE ACTION OF THE CENTRAL EXCISE & CUSTOM AUTHORITIES THEY FOUND THAT THE ASSESSEE HAD ILLICITLY REMOVED 836120 METERS OF MAN MADE FABRIC WITHOUT ENTERING THEM IN THE EXCISE RECORDS AND WITHOUT ENTERING INTO THE BOOKS OF ACCOUNT. THE APP ELLANT HAD AGREED DURING THE COURSE OF ACTION WHEREBY ITS DIRECTOR, MR. BHATA, GAVE A STATEMENT AGREEING TO H AVE REMOVED THE SAID FABRIC WITHOUT ENTERING IN THE EXC ISE RECORDS AND WITHOUT ENTERING INTO THE BOOKS OF ACCO UNT. LATER ON IT SEEMS THIS STATEMENT WAS RETRACTED. HOW EVER, NO EVIDENCE OR DOCUMENTS HAVE BEEN GIVEN TO SHOW TH AT THE QUANTITY ACTUALLY TALLIED AND THERE WAS NO MIST AKE IN THE SHORTAGE OF STOCK AND HENCE THE STATEMENT GIVEN WAS ITA NOS. 1387/AHD/2010 & 2326/AHD/2012, A.Y. 03-04 PAGE 5 WRONG. THE RETRACTION OF THE STATEMENT IS, THEREFOR E, NOT BASED ON ANY DOCUMENTARY EVIDENCE. HENCE THIS RETRACTION CANNOT BE ACCEPTED. HAVING SAID THAT IT IS SEEN THAT THE A.O. HAD AGREED THAT THE ASSESSEE HAS ONLY DOING JOB WORK AND NOT PROCESSING THE GOODS, HENCE JOB WORK I NCOME HAS ESCAPED ASSESSMENT. THE DECISIONS RELIED UPON B Y THE APPELLANT ARE NOT APPLICABLE BECAUSE THE APPELLANT HAS BROUGHT NO EVIDENCE ON RECORD THAT EXPENSES ON PROC ESSING THIS FABRIC WAS NOT DEBITED TO THE PROFIT & LOSS AC COUNT. THE APPELLANT HAS FAILED TO SHOW THAT THE EXPENDITURE I NCURRED ON PROCESSING THIS UNCOUNTED CLOTH WAS NOT DEBITED TO THE PROFIT & LOSS ACCOUNT. IT IS A COMMON KNOWLEDGE THAT THE ASS ESSEE DEBITS THE ENTIRE EXPENSES AS THERE IS NO WAY TO KE EP SEPARATE ACCOUNT OF COLOUR, CHEMICALS, LABOUR, ELEC TRICITY, WATER, FUEL, ETC. HENCE THE EXPENDITURE INCURRED ON FABRIC ILLICITLY REMOVED ALREADY STANDS DEBITED. HENCE, AS DONE BY THE A.O. FULL PROCESSING CHARGES ARE TO BE TAXED. THIS GROUND OF APPEAL IS, THEREFORE, DISMISSED. 4. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT CONTENDED THAT ALL THE FACTS MENTIONED BY THE A.O. ARE CORRECT, BUT THE ASSESSEE WAS IN JOB WORK AND WAS GETTING ONLY JOB C HARGES FROM THE MATERIAL BELONGED TO OUTSIDER FROM WHERE THEY GET RAW MATERI AL. THE LD. A.R. ALSO DREW OUR ATTENTION ON PAGE NO. 17 OF THE SUBMISSION AND ARGUED THAT THE APPELLANT HAD SUBMITTED ALL THE INFORMATION BEFORE THE A.O. A T THE TIME OF ASSESSMENT PROCEEDING. HE FURTHER ARGUED THAT VARIOUS CASES W ERE DETECTED BY THE EXCISE DEPARTMENT OF SIMILAR NATURE ON WHICH GROSS PROFIT @ 23% WAS APPLIED AND HE RELIED UPON IN ITAT, AHMADABAD A BENCH DEC ISION IN CASE OF ITA NOS. 1387/AHD/2010 & 2326/AHD/2012, A.Y. 03-04 PAGE 6 SANGAM PRINTS PVT. LTD. VS. ACIT, SURAT, IN ITA NOS . 1897 & 2282/AHD/2007 FOR A.Y. 2003-04, WHEREIN HE PROPOSED GROSS PROFIT IN P&L ACCOUNT @ 2 3% WHICH HAS ACCEPTED BY THE ITAT. 4(I). AT THE OUTSET, LD. SR. D.R. ARGUED THAT A.O. AS WELL AS CIT(A) HAS HELD THAT THE ASSESSEE HAS ALREADY DEBITED ALL THE EXPEN SES ON PROCESSING CHARGES, THE APPELLANT HAD NOT PRODUCED ANY EVIDENC E THAT IT HAS INCURRED EXPENDITURE SEPARATELY . THUS, THE SERVICE CHARGED CALCULATED BY THE A.O. MAY BE CONFIRMED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF HEARING, WHEN LD. A.R . SPECIFICALLY ASKED TO CLARIFY WHETHER PAGE NO. 17 OF PAPER BOOK HAD BEEN SUBMITTED BEFORE THE A.O. AT THE TIME OF ASSESSMENT OR NOT. HE ADMITTED THAT THIS ARGUMENT OF PAGE NO. 17 OF PAPER BOOK WAS SUBMITTED BEFORE THE A.O. AT T HE TIME OF ASSESSMENT. THE SAME IS REPRODUCED AS UNDER: GROSS PROFIT WORKING (REVISED) P ARTICULARS A.Y. 2003/04 A.Y. 2002 - 0 3 JOB CHARGES INCOME 33663158 27678164 TOTAL RS. 33663158 27678164 MATERIAL CONSUMPTION 11654519 6192505 MANFACTURING EXPENSES 10700465 10398898 SALARY & WAGES RELATED TO MANUFACTURING 3457303 2282338 TOTAL METER PROCESSED (AS PER BOOKS) 4523955 3600337 PER METER COST 5.71 5.24 ITA NOS. 1387/AHD/2010 & 2326/AHD/2012, A.Y. 03-04 PAGE 7 JOB RECEIPT PER MTS. 7.44 7.69 UNACCOUNTED JOB MTS. 836120 - TOTAL MTS. 5360075 - PER MTS. COST IF UNACCOUNTED JOB MTS ARE CONSIDERED 4.81 - DIFFERENCE IN COST (5.71-4.81) 0.90 - COST FOR UNACCOUNTED JOB WORK 4824068 - PROFIT ON UNACCOUNTED JOB WORK 1028772 - NOTE: THE ABOVE WORKING CLEARLY PROVES THAT ASSESSEE HAS NOT CLAIMED ANY EXPENSES RELATING TO UNACCOUNTED JOB WORK IN TH E BOOKS OF ACCOUNT AND HAS INCURRED THE COST OF PROCESSING OF UNACCOUNTED JOB WORK OUTSIDE THE BOOKS OF ACCOUNTS AND THEREFORE, T HE EXPENSES FOR UNACCOUNTED JOB WORK IS REQUIRED TO BE REDUCED FROM UNACCOUNTED JOB RECEIPT. IF, THE ASSESSEE HAD CLAIMED EXPENSES FOR JOB WORK OF UNACCOUNTED METERS IN THE BOOKS OF ACCOUNTS, THE CO ST WOULD HAVE BEEN REDUCED SUBSTANTIALLY PER METER WHICH IS NOT P OSSIBLE IN THE PROCESSING WHERE THE COST INCREASES PER YEAR ON ACC OUNT OF PRICE RISE OF RAW MATERIAL AND LABOUR. THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE A BOVE SUBMISSION OF THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW. IN CASE, THIS PAPER IS NOT AVAILABLE IN THE ASSESSMENT RECORD, THE ADDITION ALREADY MADE WILL BE TREATED AS SUSTAINED BY US. THIS APPEAL IS ALLOWED FOR STATIS TICAL PURPOSE. ITA NO. 2326/AHD/2012 (PENALTY APPEAL) 6. THE QUANTUM APPEAL HAS BEEN SET ASIDE TO THE A.O . IN ABOVE ORDER IN ITA NO.1387/AHD/2010. THEREFORE, WE, ACCORDINGLY, SET ASIDE THE PENALTY ITA NOS. 1387/AHD/2010 & 2326/AHD/2012, A.Y. 03-04 PAGE 8 APPEAL TO THE A.O. AND DIRECTED HIM TO TAKE DECISIO N AFTER DECIDING QUANTUM APPEAL AS PER LAW. 7. IN THE RESULT, THE ASSESSEES APPEALS IN QUANTUM AND PENALTY, BOTH ARE ALLOWED FOR STATISTICAL PURPOSE. THESE ORDERS PRONOUNCED IN OPEN COURT ON 20.12.2013 SD/- SD/- ( D.K.TYAGI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA - - - - $ $$ $ .)/ .)/ .)/ .)/ 0/,) 0/,) 0/,) 0/,) / COPY OF ORDER FORWARDED TO:- 1. '# / REVENUE 2. # / ASSESSEE 3. 44 ) &5 / CONCERNED CIT 4. &5- / CIT (A) 5. /#9 .)' , , / DR, ITAT, AHMEDABAD 6. ; <= / GUARD FILE. BY ORDER/ - , >/ 4' , !