The ACIT, Central Circle-2, Rajkot V. M/s. Fenix Ceramic, Dhuva, Wakaner

ITA 141/RJT/2021

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 4037 (ITAT-RAJKOT)
• Duration Of Justice: 2 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-01-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 28-10-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH KUMAR PANDEY
• Keywords: Business income; Income from undisclosed sources; Wrong claim; Set aside
• Section: 131; 69; 69C; 133A; 250; 143(2); 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER (Conducted through Virtual Court) ITA No. 141/RJT/2021 Assessment Year: 2018-19 Asst. Commissioner of Income-tax, Central Circle-2, Rajkot बनाम/ Vs. M/s. Fenix Ceramic, Metel Road, 8-A, National High Way, Dhuva, Wankaner Gujarat – 363621 PAN : AACFF 1114 G (Appellant) (Respondent) Assessee by Shri Mehul Ranpura, AR Revenue by Shri Ashish Kumar Pandey, Sr DR Date of Hearing 11.01.2024 Date of Pronouncement 31.01.2024 आदेश/ O R D E R PER MS. SUCHITRA KAMBLE, JUDICIAL MEMBER : This appeal filed by the Revenue is directed against the order of the Commissioner of Income-tax (Appeals)-11, Ahmedabad [hereinafter referred to as "CIT(A)" for short] dated 04.08.2021 passed under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short] for the Assessment Year 2018-19. 2. The Ground of appeal is as under :- “1 On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) erred in considering the facts of the case and in ignoring that the excess stock of row material found during the course of survey has been acquired from undisclosed source of income not from regular business income. Therefore, it should be taxed u/s 115BBE of the I.T. Act. 2. On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) erred in ignoring the facts that the assessee has disclosed such amount on the basis of discrepancies found in stock during the course of survey proceedings. ITA No. 141/Rjt/2021 ACIT Vs. M/s. Fenix Ceramic AY : 2018-19 [2] 3. On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) erred in deleting the addition of Rs.1,07,79,425/- made on account of bogus fuel expense u/s 69C of the I.T. Act. 4. On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) erred in ignoring the facts that the assessee has inflated the fuel expenses as compared to previous year, and not produced the complete details of expenses during the course of assessment proceedings. 5. On the facts and circumstances of the case and in law, the AO has duly investigated and applied his mind on the survey report of the AO, conducting the survey and after satisfying himself in framing the assessment on the basis of cogent material and relevant evidence on record. 6. The appellant prays that the order of the learned Commissioner (Appeals) on the above ground be set aside and the addition made in the Assessment order may kindly be restored” 3. The assessee earned income from manufacturing and trading of ceramic tiles. The assessee filed return of income on 25.08.2018 declaring total income at Rs.27,20,270/-. In the case of assessee a survey u/s 133A was carried out on the business premises of the assessee on 26.03.2018. Statement on oath u/s 131 of the assessee was also recorded and assessee made disclosure of income on account of excess stock of Rs. 22,76,892/- as additional income for the current year over and above the regular income. Assessee assured to pay due taxes thereon as per law in time. The case was selected for compulsory scrutiny and the notice u/s 143(2) of the Income Tax Act, 1961 was issued and served on 24.09.2019. The assessee filed the submissions and details accordingly. The Assessing Officer observed that assessee declared additional income of Rs. 24,24,174/- on account of excess stock which covers u/s 69 of the Act. Assessee has disclosed the excess stock of raw material and claimed that the said excess stock is from the source of additional earned from the business only. The assessee submitted before the Assessing Officer that the yield ITA No. 141/Rjt/2021 ACIT Vs. M/s. Fenix Ceramic AY : 2018-19 [3] percentage in the earlier year was 86.62% and in this current year was 85.67% i.e. almost similar, and therefore the assessee has consumed raw material in the constant ratio. Therefore, the Assessing Officer observed that the excess stock of raw material must have acquired from the income earned from the undisclosed sources not from his regular business and cannot be considered business income. The Assessing Officer further observed that the assessee disclosed the said amount after finding of stock excessive by the Survey team, hence it also cannot have considered as voluntarily disclosed. The Assessing Officer observed that the assessee failed to justify his claim on expenses as well as fuel consumption at 7.5% more as compare to consumption claim on the same head in the immediate preceding year, therefore, the excessive 7.5% of fuel consumption was worked out at Rs. 1,07,79,425/- on total sale of 14,37,25,668/-, therefore, assessee made bogus claim to the extent of Rs. 1,07,79,425/- on account of fuel expenses and disallowed the same u/s 69C of the Income Tax Act, 1961 as bogus fuel expenses by the Assessing Officer. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. DR submitted that during the assessment proceeding assessee was asked as to why the additional income offered on account of unexplained/bogus expenses should not be treated as undisclosed income u/s 69 and taxed as per the provision of Section 115BBE of the Act. In response to the same, the assessee did not furnish any cogent reply and as per Section 69 wherein the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account for any source of income and assessee never offers any explanation about ITA No. 141/Rjt/2021 ACIT Vs. M/s. Fenix Ceramic AY : 2018-19 [4] the nature and source of the investments or the explanation offered by him is not satisfactory then such income is an income of the Assessee. In the present assessee’s case the excess stock was not recorded and the assessee after the survey offered the excess stock, therefore, the Assessing Officer rightly rejected the unexplained / bogus expenses for such additional income. There was no documentary evidence given by the assessee as regards the acquisition of excess stock. The Ld. DR further submitted that the CIT(A) was wrong in allowing the fuel expenses as the assessee could not explain how it has acquired the excess stock. In fact, the assessee only furnished the copy of ledger accounts of the expenses but not all the documents relating to these expenses. The Ld. DR relied upon the decision of Hon’ble Madras High Court in case of SVS Oil Mills vs. ACIT (2020) 113 taxmann.com 388 and the decision of Hon’ble Madhya Pradesh High Court in case of Suraj Bhan Oil (P.) Ltd. vs. DCIT (2022) 138 taxmann.com 19. The Ld. DR further submitted that the Assessing Officer found the ratio of fuel consumption and production was not increased in the present year as well compared to earlier year. In fact, gross profit was suppressed by the Assessee. No vouchers submitted by the assessee which will support the case of the assessee. Thus, the Ld. DR submitted that the CIT(A) was not right in deleting the said disallowance of bogus fuel expenses. 6. The Ld. AR submitted that the Assessing Officer has not pointed out that there was excess claim of fuel consumption and only two years figures were taken into account. But the average of all the past and future figures were not taken into account by the Assessing Officer. The Ld. AR further submitted that the tax cannot be placed at higher rate, once the income has been offered to tax. The Ld. AR submitted that while disallowing the fuel expenses no reasoning has ITA No. 141/Rjt/2021 ACIT Vs. M/s. Fenix Ceramic AY : 2018-19 [5] been given by the Assessing Officer. The Ld. AR relied upon the assessment order and the order of the CIT(A). 7. We have heard both the parties and perused all the relevant material available on record. It is an admitted position that based on the difference in stock the assessee admitted the unaccounted income to the extent of such excess stock and paid its taxes on the said income. The Assessing Officer never disputed that this is the business income of the assessee. Once the position of business income has been taken into account by the Assessing Officer the expenses relating to the said business income has to be taken into account. From the perusal of the assessment order it appears that the assessee provided the ledger and other relevant documents to establish the fuel expenses. In fact, the Assessing Officer acknowledge the same by comparing the figures of earlier year as well as the present assessment year. The CIT(A) has rightly held in para 9.3 of the order that the books were not rejected by the Assessing Officer and thus, the expenses were accepted by the Assessing Officer. In fact, the comparison is made with the sales regarding the fuel expenses which is unwarranted. At this juncture, the decisions relied by the Ld. DR will not be applicable in the present case as the factual aspects are different in those case laws. Thus, the CIT(A) was right in deleting the disallowance of fuel expenses. 8. In result, appeal of the Revenue is dismissed. Order pronounced in the open Court on 31 st January, 2024 at Ahmedabad. Sd/- Sd/- (WASEEM AHMED) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad, Dated 31/01/2024 *Bt ITA No. 141/Rjt/2021 ACIT Vs. M/s. Fenix Ceramic AY : 2018-19 [6] आदेश की /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. संबंिधत आयकर / Concerned CIT 4. आयकर )अपील (/ The CIT(A)- 5. िवभागीय ,आयकर अपीलीय अिधकरण/DR,ITAT, Rajkot, 6. ! फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण ITAT, Rajkot 1. Date of dictation- .... Words processed by Hon’ble JM on her laptop....30.01.2024............... 2. Date on which the typed draft is placed before the Dictating Member ..........30.01.2024...... Other member ......30.01.2024......... 3. Date on which the approved draft comes to the Sr.P.S./P.S. - ...30.01.2024............... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement .31.01.2024... 5. Date on which the file goes to the Bench Clerk...31.01.2024......... 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order..................... 8. Date of Despatch of the Order