ITO, Sawai Madhopur V. M/S GRAMIN LAGHU UDYOG, Hindaun City

ITA 142/JPR/2012

• Counselvise Citation: 14223114 RSA 2012
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 80IB

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 142/JP/2012 ASSTT. YEAR- 2008-09 PAN NO. AAFFG 0787 M THE I.T.O. M/S GRAMIN LAGHU UDHYOG, WARD-3, SAWAI MADHOPUR. VRS. F-10-A, INDUSTRIAL ARE A, HINDAUN CITY. (APPELLANT) (RESPONDENT) C.O. NO. 21/JP/2012 (ARISING OUT OF ITA NO. 142/JP/2012) ASSTT. YEAR- 2008-09 PAN NO. AAFFG 0787 M M/S GRAMIN LAGHU UDHYOG, THE I.T.O. F-10-A, INDUSTRIAL AREA, VRS. WARD-3, SAWAI MADHO PUR. HINDAUN CITY. (OBJECTOR) (RESPONDENT) DEPARTMENT BY :- SHRI D.C. SHARMA. ASSESSEE BY :- SHRI P.C. PARWAL. DATE OF HEARING : 15/09/2014 DATE OF PRONOUNCEMENT : 14/11/2014 O R D E R PER: T.R. MEENA, A.M. THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISE FROM THE ORDER DATED 29/12/2011 OF LD. CIT (A), KOT A. RESPECTIVE GROUNDS OF APPEAL AS WELL AS C.O. ARE AS UNDER:- ITA 142/JP/2012 & C.O. 21/JP/2012_ ITO VS. GRAMIN LAGHU UDHYOG 2 GROUNDS IN REVENUE APPEAL. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN:- (I) DELETING ADDITION OF RS. 14,04,154/- MADE ON AC COUNT OF INCREASED VALUE OF CLOSING STOCK OF FINISHED GOO DS; (II) DELETING ADDITION OF RS. 3,50,000/- MADE ON A CCOUNT OF INCREASED VALUE OF SEMI FINISHED STOCK; (III) DELETING ADDITION OF RS. 3,37,335/- MADE ON ACCOUNT OF DISALLOWANCE OF WAGES; (IV) DELETING DEDUCTION OF RS. 3,21,721/- CLAIMED BY THE ASSESSEE U/S 80IB; (V) THE APPELLANT CRAVES LIBERTY TO RAISE ADDITION AL GROUND AND TO MODIFY/AMEND THE GROUND OF APPEAL AT THE TIME OF HEARING? GROUNDS IN CROSS OBJECTION 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN FACTS AND IN LAW BY CONFIRMING THE TRADING ADDITION OF RS. 1,17,350/- MADE ON ACCOUNT OF ALLEGED UNDER VALUATION OF CLOSING STOCK OF FINI SHED GOODS. 2. THE ASSESSEE CRAVES TO ADD, AMEND, ALTER OR MODI FY ANY OF THE GROUNDS OF CROSS OBJECTION. 2. GROUNDS NO. 1 TO 3 OF THE REVENUES APPEAL AND G ROUND NO. 1 OF THE CROSS OBJECTION ARE AGAINST DELETING THE ADDITI ON OF RS. 14,04,154/- MADE ON ACCOUNT OF INCREASED VALUE OF CLOSING STOCK OF FINISHED GOODS AND PARTLY CONFIRMATORY OF RS. 1,17,350/-, RS. 3,50 ,000/- MADE ON ACCOUNT OF INCREASED VALUE OF SEMI FINISHED STOCK A ND RS. 3,37,335/- MADE ON ACCOUNT OF DISALLOWANCES OF WAGES. THE ASSESSE E IS ENGAGED ITA 142/JP/2012 & C.O. 21/JP/2012_ ITO VS. GRAMIN LAGHU UDHYOG 3 IN THE BUSINESS OF MANUFACTURING AND SELLING OF THE SCHOOL CHILDREN SLATE. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASS ESSEE HAD SHOWN TOTAL SALE DURING THE YEAR AT RS. 2,59,93,906/- ON WHICH GROSS PROFIT OF RS. 47,42,559/- WAS SHOWN @ 18.4% G.P., WHICH IS SLIGH TLY MORE COMPARED TO PRECEDING YEARS. THE ASSESSEE PRODUCED B OOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER AND LEARNED ASSESSING OFFICER FOUND THAT THE ASSESSEE DID NOT MAINTAIN DAY TO DAY RECORD FOR FINISHED STOCK AS WELL AS SEMI FINISHED GOODS. SIMILARLY, THE STOCK OF FINAL PRODUCT WAS NOT GET ON DAY TO DAY BASIS AND THE CLOSING STOCK OF RA W MATERIAL WAS ESTIMATED ON CLOSING DAY. THE ASSESSEE USED GATTA AN D TIN FOR MANUFACTURING OF SLATE. THE ASSESSEE HAD NOT SHOWN A NY SHORTAGE ON ACCOUNT OF MANUFACTURING PROCESS, WHICH IS NOT ACCEP TABLE. THE LEARNED ASSESSING OFFICER HAD NOT FOUND OPENING AND CLOSING STOCK OF SEMI PRODUCT VERIFIABLE. THE ASSESSEE HAD CLAIMED RS. 33, 73,350/- UNDER THE HEAD WAGES, WHICH WAS CLAIMED ON THE BASIS OF SELF MAD E VOUCHERS., WHICH IS ALSO NOT VERIFIABLE. HE FURTHER OBSERVED TH AT IN PARTICULAR DATES OF SALE, AVAILABLE STOCK WAS LESS AND SALE WAS MORE. HE GAVE THE VARIOUS EXAMPLES OF SALES BILL AND STOCK AVAILABLE FOR SALE ON PAGE 3 OF THE ASSESSMENT ORDER UNDER THE HEAD RAJDOOT HBC 10X12 AND JYOTI H.B.C. 8X10, THUS HE REJECTED THE BOOK RESULT U/S 145(3) OF THE ACT. HE ITA 142/JP/2012 & C.O. 21/JP/2012_ ITO VS. GRAMIN LAGHU UDHYOG 4 FURTHER OBSERVED THAT ON 31/3/2008, COMPLETE FINISH ED GOODS OF CLOSING STOCK WAS RS. 76,07,519/- AND SEMI FINISHED GOODS WAS RS. 3,47,440/-. THE ASSESSEE WAS ASKED TO EXPLAIN THE VALUATION OF CL OSING STOCK SHOWN IN THE P&L ACCOUNT ON THE BASIS OF EVIDENCES. LEARN ED ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD ESTIMATED CLOSING STOCK BY 48% ON SALE PRICE OF FINISHED PRODUCT. FURTHER IN 48%, 25% AS D ISCOUNT, 5% FREIGHT AND 18% GROSS PROFIT IS REDUCED FROM IT. AFTER MAKI NG VARIOUS PERMUTATIONS AND COMBINATIONS MADE ON PAGES 3 AND 4 OF THE ASSESSMENT ORDER, HE INCREASED CLOSING STOCK BY 20% . THUS, HE MADE ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK O N FINISHED GOODS AT RS. 15,21,54/- AND RS. 3,50,000/- UNDER THE HEAD SE MI FINISHED GOODS. HE FURTHER FOUND THAT THE ASSESSEE HAS DEBITED WAGES AT RS. 33,73,350/- IN P&L ACCOUNT. AS MENTIONED ABOVE, IT IS CLAIMED ON THE BASIS OF SELF MADE VOUCHERS. HE COMPARED WAGES PAYME NT TO PRODUCTION MADE IN THE MONTH OF APRIL AND JULY. HE FOUND THE WAGES EXPENSES DISPROPORTIONATE TO PRODUCTION, THEREFORE, HE DISALLOWED 10% WAGES AT RS. 3,37,335/- AND ADDED IN THE INCOME OF T HE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT(A ), WHO HAD DELETED ITA 142/JP/2012 & C.O. 21/JP/2012_ ITO VS. GRAMIN LAGHU UDHYOG 5 THE ADDITION PARTLY. THE FINDINGS OF THE LEARNED CI T(A) ARE REPRODUCED AS UNDER:- I HAVE GONE THROUGH THE ASSESSING OFFICERS FINDIN G AND ASSESSEES SUBMISSIONS. THE ASSESSING OFFICER HAS TA KEN AN EXAMPLE WHERE IN THE VALUE OF CLOSING STOCK WAS COMPU TED AFTER REDUCING DISCOUNT OF 14-15% AND G.P. OF 40% WHEREAS, AS PER THE ASSESSEE, THE ASSESSEE WAS EARNING G.P. OF 40% O N HARD BOARD ITEMS AND 3% ON CARD BOARD ITEMS. TO ARRIVE AT CORRECT WORKING THE ASSESSEE WAS ASKED TO PREPARE A CHART OF CLOSING STOCK ON ACTUAL VALUATION. AS PER THIS CHART THE VA LUE OF CLOSING STOCK CAME TO RS. 77,24,869/- AS AGAINST RS. 76,07, 579/- DECLARED BY ASSESSEE. FOR READY REFERENCE THE SAME IS PRODUCED BELOW:- GRAMIN LAGHU UDYOG COMPARATIVE CHART CARD BOARD SIZE OPENING MANUFACTURED TOTAL SALES SALES VALUE SALE RATE CLOSING VALUE OF CL. STOCK AT SELLING RATE 6X8 93600 276260 369860 308160 949765 3.08 61700 19 0,036 7X9 100000 524900 624900 535700 1861810 3.48 89200 310,416 8X10 768080 2107600 2875680 2178750 13219439 6.07 696930 4,230,365 9X11 68800 161800 230600 158700 1366210 8.61 71900 619,059 OTHERS 5X7 9000 124200 133200 133200 181215 1.36 0 - 1039480 3194760 4234240 3314510 17578439 5.30 919730 5,349,876 HARD BOARD 7X9 8200 12500 20700 10500 122550 11.67 10200 119,034 8X10 210680 320420 531100 355360 5588196 15.73 175740 2,764,390 9X11 95690 185850 281540 178570 3247323 18.19 102970 1,873,024 10X12 96240 191720 287960 174550 3802582 21.79 113410 2,471,204 ITA 142/JP/2012 & C.O. 21/JP/2012_ ITO VS. GRAMIN LAGHU UDHYOG 6 410810 710490 1121300 718980 12760651 17.75 402320 7,227,652 TOTAL 1450290 3905250 5355540 4033490 30339090 1322050 12,577,528 COMPUTATION OF VALUATION OF CLOSING STOCK AT COST CARD BOARD HARD BOARD TOTAL VALUE OF STOCK OF SELLING PRICE 5349876 7227652 12577528 LESS: DISCOUNT/FREIGHT @ 14.32% 766102 1035000 GROSS PROFIT @ 3%/40% 160496 2891061 926598 .. 3926061 4852659 . . VALUE OF STOCK AT COST 4423278 3301591 7724869 .. .. ACCORDINGLY THE DIFFERENCE OF RS. 1,17,350/- ONLY I S REQUIRED TO BE ADDED TO THE INCOME OF ASSESSEE. ADDITION OF RS. 1,17,350 /- IS CONFIRMED. THE BALANCE ADDITION OF RS. 14,04,154/- IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS, THEREFORE, PARTLY ALLOWED. 4. NOW THE REVENUE IS IN APPEAL AS WELL THE ASSESSEE IS IN C.O. BEFORE US. THE LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT THE OUTSET, THE A.R. FOR THE ASSESSEE S UBMITTED THAT THE ASSESSEE RELIED ON THE FINDINGS OF CIT(A) SO FAR AS THE GROUNDS OF THE DEPARTMENT ARE CONCERNED. SO FAR AS THE C.O. OF THE ASSESSEE IS CONCERNED, IT IS SUBMITTED THAT THE CIT(A) HAS WORKED OUT THE VALUE OF ITA 142/JP/2012 & C.O. 21/JP/2012_ ITO VS. GRAMIN LAGHU UDHYOG 7 CLOSING STOCK AFTER REDUCING DISCOUNT/FREIGHT BY 14 .32%. THIS IS MUCH LESS THAN 16.75% ALLOWED BY THE A.O. THE CLOSING STOC K OF ONE YEAR BECOMES THE OPENING STOCK OF THE NEXT YEAR. IN NEXT YEAR THE A.O. IN THE ASSESSMENT MADE U/S 143(3) HAS ADOPTED THE VALU E OF OPENING STOCK AT THE SAME AMOUNT AS DECLARED BY THE ASSESSE E IN THE CLOSING STOCK OF THE YEAR. HENCE, ANY ADDITION MADE ON ACCO UNT OF VALUATION OF CLOSING STOCK WOULD TANTAMOUNT TO DOUBLE ADDITION IN ASMUCH AS, THE VALUE OF OPENING STOCK FOR THE NEXT YEAR CANNOT BE INCREASED. IN THESE CIRCUMSTANCES, THE ADDITION CONFIRMED BY THE CIT(A) BE DELETED. THE ASSESSEE IS ENGAGING TWO TYPES OF LABOUR. ONE IS PER MANENT LABOUR AND ANOTHER IS TEMPORARY LABOUR ACCORDING TO THE REQUIR EMENT. FOR TEMPORARY LABOUR, MONTHLY ATTENDANCE CARDS ARE MAIN TAINED. PAYMENTS TO BOTH THE LABOURS ARE MADE BY GETTING SIGNATURES/ THUMB IMPRESSIONS OF WORKERS ON PAYMENT VOUCHERS. THESE VOUCHERS WERE PR ODUCED BEFORE THE A.O. IN WHICH NO DISCREPANCY WAS FOUND. THE PAYMENT OF WAGES IS NOT BASED ON PRODUCTION BUT ON THE BASIS OF THE WORKING DAYS OF THE WORKER. NO INFLATION IN EXPENSES HAS BEEN EST ABLISHED. IN THESE FACTS, CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LEARNED CIT(A) HA S CALCULATED THE ITA 142/JP/2012 & C.O. 21/JP/2012_ ITO VS. GRAMIN LAGHU UDHYOG 8 CLOSING STOCK OF FINISHED AS WELL AS SEMI FINISHED G OODS ON THE BASIS OF FACTS AND FIGURES MENTIONED IN THE ACCOUNTS BOOK. H E EXAMINED THIS ISSUE THOROUGHLY, WHICH HAS NOT BEEN CONTROVERTED B Y THE LEARNED D.R.. FURTHER ANY INCREASE IN CLOSING STOCK GIVE RISE IN THE OPENING STOCK OF SUBSEQUENT YEAR. THEREFORE, IF ANY DISCREPANCY IS FO UND IN THE CLOSING STOCK HARDLY AFFECT THE REVENUE. THE ASSESSEE HAS CO NSISTENTLY FOLLOWING THE SAME METHOD OF VALUATION. THE ASSESSING OFFICER IS NOT ALLOWED TO DISTURB THE VALUATION METHOD FOLLOWED BY THE ASSESSE E ON THE BASIS OF CONSISTENCY. THE LEARNED ASSESSING OFFICER HAD FOUN D DISPROPORTIONATE WAGES WITH PRODUCTION. THE LEARNED CIT(A)S OBSERVATIO N MADE IT CLEAR THAT SOMETIMES EXPENSES TOOK MORE BUT PRODUCTION I S LESS, WHICH IS POSSIBLE IN THE PRODUCTION LINE. THEREFORE, WE DO NOT FIND ANY INCONSISTENCY IN THE ORDER OF THE LEARNED CIT(A). AC CORDINGLY, WE CONFIRM THE ORDER OF THE LEARNED CIT(A). 6. THE FOURTH GROUND OF REVENUES APPEAL IS AGAINST DELETING DEDUCTION OF RS. 3,21,721/- CLAIMED BY THE ASSESSEE U/S 80IB OF THE ACT. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80IB AT RS. 3,21,721/-. THE ASSESSEE H AS NOT FULFILLED THE CONDITION FOR CLAIMING DEDUCTION U/S 80IB OF THE AC T DURING THE YEAR UNDER CONSIDERATION. IN A.Y. 2006-07, THE DETAILED FINDINGS WERE GIVEN ITA 142/JP/2012 & C.O. 21/JP/2012_ ITO VS. GRAMIN LAGHU UDHYOG 9 ON DEDUCTION U/S 80IB OF THE ACT. THE ASSESSING OFFI CER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE , WHICH WAS RESPONDED BY THE ASSESSEE. AFTER CONSIDERING THE AS SESSEES REPLY, HE DISALLOWED THE DEDUCTION U/S 80IB OF THE ACT ON THE BASIS OF FINDINGS GIVEN IN A.Y. 2006-07. ON APPEAL, THE LEARNED CIT(A) HAD ALLOWED THIS CLAIM BY OBSERVING THAT HONBLE ITAT HAD DECIDED THI S ISSUE IN ITA NO. 488/JP/2009 A.Y. 2005-06 IN FAVOUR OF THE ASSESSEE. BEING IDENTICAL ISSUE, HE DECIDED THIS ISSUE IN FAVOUR OF THE ASSES SEE. THE LEARNED DR AND AR FAIRLY ACCEPTED THAT THIS ISSUE HAS ALREADY BEEN DECIDED BY THE HONBLE ITAT IN FAVOUR OF THE ASSESSEE. WE ALSO FIN D THIS ISSUE IDENTICAL TO A.Y. 2005-06 AND SUBSEQUENT YEAR, THEREFORE, RES PECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH ON THIS ISSUE IN ASSESSEES OWN CASE, WE ALSO CONFIRM THE ORDER OF THE LEARNED CIT(A). 7. IN THE RESULT, THE REVENUES APPEAL AS WELL AS C .O. OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/11/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 14 TH NOVEMBER, 2014 * RANJAN ITA 142/JP/2012 & C.O. 21/JP/2012_ ITO VS. GRAMIN LAGHU UDHYOG 10 COPY FORWARDED TO :- 1. ITO, WARD-3, SAWAI MADHOPUR. 2. M/S GRAMIN LAGHU UDHYOG, HINDAUN CITY. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 142/JP/2012 & C.O. 21/JP/2012 ) BY ORDER, AR ITAT JAIPUR.