The Income-tax Officer, Jammu V. Smt. Arti Gupta, Samba

ITA 139/ASR/2014

• Counselvise Citation: 13920914 RSA 2014
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V K SINGH
• Keywords: Rejection of books of accounts; Wrong claim
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (JAMMU CAMP; JAMMU ) BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S.KAPOOR, HONBLE ACCOUNTANT MEMBER I.T.A NOS. 139 & 140(ASR)/2014 ASSESSMENT YEARS: 2009-10 & 2010-11 THE INCOME TAX OFFICER, WARD-1(1), JAMMU. VS. SMT. ARTI GUPTA PROP. M/S ARTI INDUSTRIES OLD INDUSTRIAL ESTATE, SAMBA PAN: AONPG0112L (APPELLANT) (RESPONDENT) APPELLANT BY: SH. K.V.K SINGH (DR .) RESPONDENT BY: SH. VINAMAR GUPTA (CA.) DATE OF HEARING: 03.12.2015 DATE OF PRONOUNCEM ENT: 18.12.2015 ORDER PER T.S.KAPOOR (A.M): THESE ARE TWO APPEALS FILED BY THE REVENUE AGAIN ST THE SEPARATE ORDERS OF LEARNED CIT(A), JAMMU BOTH DATED 4.12.2013. THE APP EALS RELATES TO ASST. YEARS 2009-10 & 2010-11. THESE APPEALS WERE HEARD T OGETHER, THEREFORE, FOR THE SAKE OF CONVENIENCE A COMMON AND CONSOLIDATED O RDER IS BEING PASSED. THE REVENUE HAS TAKEN SIMILAR GROUNDS OF APPEAL IN BOTH APPEALS. FOR THE SAKE OF CONVENIENCE THE GROUNDS OF APPEAL TAKEN UP BY REVEN UE IN ASST. YEAR 2009-10 ARE REPRODUCED BELOW: 2. ITA NOS.1 39 & 140 (ASR)/2014 ASST. YEA R 2009-10 & 2010-11 (I) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN NOT REJECTING THE BOOKS OF ACCOUNTS DUE TO LOW POWER CO NSUMPTION AND APPLICATION OF LOW G.P RATE. (II) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWAN CE U/S 80IB OF THE I.T., ACT,1961. (III) ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD . CIT(A) WAS RIGHT IN RELYING UPON THE REMAND REPORT OF THE ASSESSING OFF ICER WHICH IS BASED ON THE SPOT VERIFICATION BY AN OFFICIAL OF THE RANK O F SR. TA ONLY WHO IS A NON TECHNICAL PERSON AND WAS NOT ACCOMPANIED BY ANY TEC HNICAL PERSON. 2. THE BRIEF FACTS AS NOTED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE IS A PROPRIETOR OF M/S. ARTI INDUSTRIES, AT SAMBA. IN THE RETURN OF INCOME, THE ASSESSEE HAS DECLARED INCOME FROM MANUFACTURING OF CEMENT POLES. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERV ED THAT THE EXPENDITURE ON POWER CONSUMPTION WAS MEAGER, THEREFORE, ASSESSEE W AS ASKED TO EXPLAIN THE SAME. IN REPLY THE ASSESSEE SUBMITTED AS UNDER IN A SST. YEAR 2009-10: WITH REGARD TO THE EXPENSES ON POWER BEING MEAGER, IT IS TO SUBMIT THAT THE MANUFACTURING OF THE POLES IS DONE ONLY WHEN THE OR DERS ARE RECEIVED. SO THERE WOULD BE NUMEROUS DAYS IN A YEAR WHEN NO MANUFACTUR ING TAKES PLACE. FURTHER, THE MACHINES ARE USED ONLY FOR THE PERIOD WHEN A SP ECIFIC PROCESS IS TO TAKE PLACE AND THEN SWITCHED OFF. UNLIKE OTHER MANUFACTURING I NDUSTRIES ALL THE MACHINES DO NOT CONTINUOUSLY AND SIMU8LTANEOUSLY RUN, THEREBY U SING THE POWER ONLY AS PER REQUIREMENT. WHEREAS IN ASST. YEAR 2010-11. 4. DURING THE YEAR UNDER ASSESSMENT, POWER CHARGES TO THE TUNE OF RS.13000/- HAS BEEN PAID BY THE ASSESSEE. THE COPIES OF BILLS ARE ATTACHED.(PAGE-3-4). FROM THE BILLS, IT CAN BE VERIFIED THAT THERE IS NO DESCRIPTION OF UNITS CONSUMED BY THE ASSESSEE FOR WHICH THE BILL HAS BEEN RAISED. BU T AS PER THE BILLS RAISED BY THE ELECTRICITY DEPARTMENT AND ACCORDING TO THE RATE OF UNIT (I.E. RS.2.15) AND 3. ITA NOS.1 39 & 140 (ASR)/2014 ASST. YEA R 2009-10 & 2010-11 ELECTRICITY DUTY OF 22% TOTAL UNITS CONSUMED CALCUL ATES TO 4956 UNITS APPROXIMATELY. 5. A DETAILED CHART SHOWING THE POWER REQUIREMENT ( IN UNITS) AT VARIOUS STAGES OF MANUFACTURE OF CEMENT POLES AND TOTAL REQUIREMENT O F THE INDUSTRIAL UNIT DURING THE YEAR ACCORDING TO THE QUANTITY MANUFACTURED IS ATTACHED (PAGE-5). FROM THE CALCULATION AS PER CHART REFERRED ABOVE. IT CAN BE VERIFIED THAT THE TOTAL UNITS OF POWER REQUIRED TO MANUFACTURE THE MA JOR ITEMS DURING THE YEAR WERE 1371 UNITS. THESE CALCULATIONS HAVE BEEN BASED ON THE CERTIFICATE OF A RETD. CHIEF ENGINEER (PDD, J&K GOVT.) REGARDING CONSUMPTI ON OF POWER. THE COPY OF THIS CERTIFICATE IS ATTACHED (PAGE-6). THE ASSESSING OFFICER, HOWEVER, WAS NOT SATISFIED W ITH THE REPLY THEREFORE, HE REJECTED THE BOOKS OF ACCOUNTS AND MADE THE ADDITION BY HOLD ING AS UNDER: 2.16 AS STATED ABOVE, THE ASSESSEE HAS SHOWN INCOM E FROM MANUFACTURING OF CEMENT POLES AND CLAIMED DEDUCTION U/S 80IB OF THE I.T.ACT, 1961. IN ORDER TO GET THE BENEFIT OF MAXIMUM DEDUCTION, THE ASSESSEE HAS TRIED TO INFLATE HER GROSS PROFIT WHICH HAS BEEN SHOWN AT A WHOPPING PERCENTAG E OF 43.21%. THE PROVISIONS OF SE.80IA(11) R.W. SEC 80IB(13) OF THE I.T. ACT, 1 961, DUTYHAS BEEN CAST UPON THE ASSESSING OFFICER TO DETERMINE THE ACTUAL PROFITS W HICH CAN BE DERIVED FROM THE INDUSTRIAL UNDERTAKING. FOR DOING S, THE UNDERSIGNE D HAS GONE THROUGH THE RETURN OF INCOME FILED BY M/S SNAJEEV CONCRETE INDUSTRIES, NEAR BASANTAR BRIDGE, SAMBA. THIS ASSESSEE IS ALSO INVOLVED IN THE MANUFA CTURING OF PCC POLES. IN THIS CASE, THE ASSESSEE HAS SHOWN A GROSS PROFIT PERCENT AGE OF 25% ON SALES OF 39,67,896/-. THEREFORE, APPLYING THE SAME RATIO OF GROSS PROFIT TO THE CASE OF THE ASSESSEE, THE GROSS PROFIT FROM THE MANUFACTURING P ROCESS WILL GET RESTRICTED TO RS.21,44,036/-. THE BALANCE GROSS PROFIT OF RS.15,6 1,740/- IS HELD NOT TO BE DERIVED FROM THE MANUFACTURING PROCESS AND DEDUCTIO N U/S 80IB OF THE I.T. ACT 1961 IS ACCORDINGLY WITHDRAWN BEING FALSE CLAIM MAD E BY THE ASSESSEE AND ADDED TO THE INCOME OF THE ASSESSEE. PENALTY PROCEE DINGS U/S 271(1) OF THE I.T. ACT, 1961 ARE ALSO INITIATED FOR FURNISHING INACCUR ATE THE PARTICULARS OF INCOME. IN ASST. YEAR 2010-11. 4. ITA NOS.1 39 & 140 (ASR)/2014 ASST. YEA R 2009-10 & 2010-11 2.8 AS STATED IN PARA-2 ABOVE, THE ASSESSEE HAS S HOWN INCOME FROM INDUSTRIAL UNDERTAKING ENGAGED IN THE MANUFACTURING OF CEMENT POLES AND CLAIMED DEDUCTION U/S 80IB OF THE INCOME TAX ACT,1961. THE ASSESSEE SHOWN WHOOPING PERCENTAGE OF GROSS PROFIT OF 44.76% IN ORDER TO GE T MAXIMUM BENEFIT OF DEDUCTION U/S 80IB BY INFLATING HER GROSS PROFIT. THE PROVISI ON OF SECTION 80IA(11) READ WITH SECTION 80IB(13) OF THE INCOME TAX ACT, 1961 THE AS SESSING OFFICERHAS BEEN CASTED WITH DUTY TO DETERMINE THE ACTUAL PROFITS WH ICH CAN BE DERIVED FROM THE INDUSTRIAL UNDERTAKING. FOR THIS PURPOSES THE ASSES SEE WAS PROVIDED DETAILS OF GROSS PROFITS SHOWN BY THE THREE OTHER CONCERNS ENG GED IN SIMILAR LINE OF BUSINESS IN DISTRICT SAMBA. THE ASSESSEE INHER REPLY DATED 2 2.10.2012, REPRODUCED ABOVE, HAS OBJECTED TO THE APPLICATION OF GROSS KPROFIT WH ON BY M/S SANJEEV CONCRETE INDUSTRIES, SAMBGA ON THE GROUND THAT THERE IS HUGE DIFFERENCE IN TURNOVER OF THIS ASSESSEE WHICH IS BELOW THE PRESCRIBED LIMIT U/S. 4 4AB. IT MAY BE MENTIONED THAT OUT OF THREE PARTIES WHOSE CASES HAVE BEEN GIVEN A S COMPARABLE CASES, PARTY AS SR. NO.2 & 3 ANY ENJOYING DEDUCTION U/S 80IB. PARTI ES AT SR. NO.1 AND 4 ARE NOT ENJOYING ANY BENEFIT OF DEDUCTION U/S 80IB. IN ORDE R TO MEET THE END OF JUSTICE IT WILL BE FARE TO APPLY AVERAGE G.P RATE OF PARTIES M ENTIONED AT SR. NO.1 AND 4 I.E. 44.73% + 19.49%% 12.11%. THEREFORE, BY APPLYING THE GROSS PROFIT RATE OF 32.11% THE GROSS PROFIT FROM THE MANUFACTURING PROCESS WIL L GET RESTRICTED TO RS.28,47,813/- AND BALANCE GROSS PROFIT OF RS.15,53 ,227/- (RS.4401040- 2847813) IS HELD NOT TO BE DERIVES FROM THE MANUFAC TURING PROCESS AND DEDUCTION U/S 80IB OF THE INCOME TAX ACT,1961 IS ACCORDINGLY WITHDRAWN BEING FALSE CLAIM MADE BY THE ASSESSEE AND ADDED TO THE INCOME. PENAL TY PROCESSING U/S 27(1)(C) FOR FUNCTIONING INACCURATE PARTICULARS OF INCOME AR E BEING INITIATED SEPARATELY. 3. AGGRIEVED THE ASSESSEE FILED APPEALS BEFO RE LEARNED CIT(A) AND SUBMITTED VARIOUS SUBMISSIONS AND LEARNED CIT(A) AF TER OBTAINING REMAND REPORT FROM ASSESSING OFFICER DELETED THE ADDITIONS BY HOLDING SIMILAR FINDINGS IN THE TWO YEARS. FOR THE SAKE OF CONVENIE NCE THE FINDINGS OF LEARNED CIT(A) AS CONTAINED IN ASST. YEAR 2009-10 A RE REPRODUCED BELOW. 5. ITA NOS.1 39 & 140 (ASR)/2014 ASST. YEA R 2009-10 & 2010-11 I HAVE CONSIDERED THE FINDINGS OF THE AO IN THE AS SESSMENT ORDER AND SUBMISSION MADE BEFORE ME BY THE APPELLANT. THE SUB MISSION WAS SENT FOR THE COMMENT OF THE AO AND THE REMAND REPORT OF THE ASSE SSING OFFICER AND REJOINDER TO THE REPORT WERE CONSIDERED. THE AO IN THE ASSESS MENT ORDER DISALLOWED THE DEDUCTION U/S 80IB ON THE GROUND THAT THE APPELLANT FAILED TO CO-RELATE THE TURNOVER WITH THE POWER CONSUMPTION WHICH QUITE NOM INAL. THE APPELLANT IN ITS DETAIL REPLY STATED THAT THIS MANUFACTURING UNIT OF POLES IS NOT A POWER INTENSIVE UNIT. THE ENTIRE MANUFACTURING PROCESS CONSUMES A V ERY LESS AMOUNT OF POWER BECAUSE IT IS NOT REQUIRED CONTINUOUSLY BUT OCCASIO NALLY ON SOME STEPS OF MANUFACTURING. THE APPELLANT ARGUED THAT THE ASSESS ING OFFICER HAS ERRONEOUSLY REJECTED THE BOOKS OF ACCOUNTS WITHOUT GIVING PROPE R OPPORTUNITY TO EXPLAIN AND JUMPED INTO THE CONCLUSION WHICH IS TOTALLY INCORRE CT. THE APPELLANT GAVE THE UNIT CONSUMPTION AND COST OF CONSUMPTION AND OF POWER IN THE MANUFACTURING PROCESS. THIS SUBMISSION OF THE APPELLANT WAS SENT TO THE AS SESSING OFFICER TO RE-EXAMINE THE ISSUE OF PRODUCTION PROCESS AND CONSUMPTION OF POWER. THE AO HAS DEPUTED AN OFFICIAL TO VISIT THE FACTORY AND WITNESS THE MA NUFACTURING PROCESS. HE GAVE A REPORT WHICH IS MENTIONED IN THE REMAND REPORT DATE D 16.11.2013. THIS REPORT WAS CONFRONTED TO THE APPELLANT WHO IN HIS SUBMISSI ON DATED 21/11/2013 HAS SUMMARIZED THE CONSUMPTION OF UNIT IN THE MANUFACTU RING PROCESS AS UNDER: 'THE REQUIREMENT OF POWER FOR MANUFACTURE OF POLES AS GIVEN IN REMAND REPORT; AS SUBMITTED BY THE ASSESSEE; AS CERTIFIED BY A RETD. CHIEF ENGINEER (PDD-J&K GOVT. AN INDEPENDENT VALUER) AND AS TAKEN BY THE ASSESSIN G OFFICER IS TABULATED HERE PARTICULARS NO. OF UNITS OF POWER REQUIRED FOR 16 NOS. - 8 METER POLES AS PER REMAND REPORT AS SUBMITTED BY ASSESSEE AS PER RETIRED CHIEF ENGINEER AS PER ASSESSING OFFICER FOR GIVING TENSION TO WIRES 0.20 0.10. 0.10 96.00 FOR CASTING OF POLES 4.40 4.90 3.50 NOT CALCULATED FOR CUTTING OF WIRES 1.00 1.20 1.50 NOT CALCULATED TOTAL 5.60 6.20 5.10 NOT CALCULATED PER POLE CONSUMPTION 0.35 0.39 0.32 NOT CALCULATED 6. ITA NOS.1 39 & 140 (ASR)/2014 ASST. YEA R 2009-10 & 2010-11 FROM THE ABOVE CHART, IT CAN BE VERIFIED THAT THERE IS HUGE VARIATION IN ACTUAL POWER CONSUMPTION REQUIRED FOR MANUFACTURE OF POLES AS CALCULATED BY THE ASSESSING OFFICER AND AS VERIFIED BY THE OFFICIAL D URING THE REMAND PROCEEDINGS.' THE A/R OF THE APPELLANT HAS FURTHER CONTENTED THAT AO HAS BASED HIS INFORMATION ON A NON TECHNICAL PERSON THAT IS M/S AMAR SINGH BA MRAH AND SONS, NEW DELHI, WHO HAD STATED THAT THE POWER CONSUMPTION IN A SING LE POLE IS 5 TO 7 UNITS. THE APPELLANT ALSO GIVEN IN ITS REJOINDER REPLY, THE QU ANTITY, MANUFACTURED AND THE COST OF POWER CONSUMPTION. I HAVE CONSIDERED THE REMAND REPORT AND REPLY OF TH E APPELLANT AND FIND THAT CONSUMPTION PER UNIT PER POLE AS PER REMAND REPORT IS 0.35 WHEREAS AS PER APPELLANT IT IS 0.39. IN FACT THE APPELLANT IS SHOW ING MORE CONSUMPTION THAN WHAT WAS MENTIONED BY THE AO IN THE REMAND REPORT PROCEE DINGS. IN VIEW OF ABOVE DISCUSSION, I DO NOT FIND ANY JUSTIFICATION FOR REJ ECTING THE CLAIM OF THE APPELLANT THAT THE BOOKS ARE NOT RELIABLE DUE TO EXTREMELY LO W POWER CONSUMPTION AND THUS APPLICATION OF LOWER GP RATE. ACCORDINGLY THE ADDIT ION MADE ON ACCOUNT OF DISALLOWANCE OF 80IB IS DELETED AND THE APPELLANT G ETS A RELIEF OF RS.15,61,740/. 4. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE U S. 5. AT THE OUTSET, THE LEARNED DR INVITED OUR ATTENT ION TO THE OBSERVATIONS MADE BY ASSESSING OFFICER IN HIS ORDER AND SUBMITTE D THAT THE ASSESSEE HAD INFLATED GROSS PROFIT IN CASE OF MANUFACTURING OF C EMENT POLES AS THE INCOME WAS EXEMPTED UNDER THE PROVISIONS OF SECTION 80IB. HE SUBMITTED THAT IN ANOTHER BUSINESS RUN BY ANOTHER ASSESSEE THE G.P RA TIO WAS MUCH LOWER AND THEREFORE ASSESSING OFFICER HAD RIGHTLY APPLIED THE SAME GROSS PROFIT RATIO. 7. ITA NOS.1 39 & 140 (ASR)/2014 ASST. YEA R 2009-10 & 2010-11 6. THE LEARNED AR, ON OTHER HAND, HEAVILY RE LIED UPON THE FINDINGS OF LEARNED CIT(A). 7. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSING OFFICE R HAD ARRIVED AT THE CONCLUSION THAT ASSESSEE HAD INFLATED THE GROSS PRO FIT RATIO OF THE BUSINESS OF MANUFACTURING OF CEMENT POLES ON THE GROUND THAT TH E CONSUMPTION OF POWER DECLARED BY ASSESSEE WAS LESS WHEREAS THE LEARNED C IT(A) HAS MADE A CLEAR FINDING OF FACT THAT THE CONSUMPTION OF POWER DECLA RED WAS MORE THAN THE CONSUMPTION PER UNIT AS PER REMAND REPORT OF ASSESS ING OFFICER. THE LEARNED CIT(A) HAS REPRODUCED THE REQUIREMENTS OF POWER FOR VARIOUS MANUFACTURING ACTIVITIES AS OBTAINED BY THE ASSESSEE FROM A RETD. CHIEF ENGINEER. WE FURTHER FIND THAT ASSESSING OFFICER DURING THE REMAND PROCE EDINGS HAS OBTAINED THE REPORT OF SENIOR TECHNICAL ASSISTANCE WHO HAD CONCL UDED THE NUMBER OF UNIT REQUIRED PER POLE AT RS.0.35. THE GRIEVANCE OF THE REVENUE THAT THE LEARNED CIT(A) HAD ACCEPTED THE REMAND REPORT OF ASSESSING OFFICER WHO HAD DEPUTED A NON TECHNICAL PERSON DURING REMAND PROCEEDINGS DOES NOT HOLD FORCE AS ASSESSING OFFICER IN HIS REMAND REPORT HAS ACCEPTED THAT POWER REQUIREMENT PER UNIT PER POLE WAS 0.35. THE LEARNED CIT(A) HAS MADE A FINDINGS OF FACT THAT THE CONSUMPTION DECLARED BY ASSESSEE WAS 0.39 WHICH WAS ABOVE THAT DETERMINED BY ASSESSING OFFICER DURING REMAND PROCE EDINGS. THE REVENUE HAS NOT BEEN ABLE TO CONTROVERT ANY FINDINGS OF LEARNED CIT(A) AND THEREFORE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A ). 8. ITA NOS.1 39 & 140 (ASR)/2014 ASST. YEA R 2009-10 & 2010-11 8. IN VIEW OF THE ABOVE, THE APPEALS FILED BY T HE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2015. SD/- SD/- (A.D.JAIN) (T.S.KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18.12.2015 PK/PS COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.