Varalaxmi Granites P.Ltd, Hyderabad V. DCIT, Hyderabad

ITA 1437/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61950 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 19-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: P MURALI MOHAN RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1435/HYD/2010 : ASSESSMENT YEAR 2002-03 ITA NO.1436/HYD/2010 : ASSESSMENT YEAR 2003-04 ITA NO.1437/HYD/2010 : ASSESSMENT YEAR 2004-05 ITA NO.1438/HYD/2010 : ASSESSMENT YEAR 2005-06 M/S. VARALAXMI GRANITES ( P ) LTD, HYDERABAD. ( PAN - AABCV 2394 N ) V/S DY. COMMISSION ER OF INCOME - TAX, CENTRAL CIRCLE 4, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.MURALI MOHAN RAO RESPONDENT BY : SHRI V.SRINIVAS DATE OF HEARING 8.5.2012 DATE OF PRONOUNCEMENT 28.6.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINS T A COMMON ORDER OF THE CIT(A) I, HYDERABAD DATED 22.1.2010 IN SOFAR AS IT RELATES TO ASSESSMENT YEARS 2002-03 TO 2005-06. SINCE COMMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.1435/HYD/2010 : ASSESSMENT YEAR 2002-03 ITA NO.1436/HYD/2010 : ASSESSMENT YEAR 2003-04 ITA NO.1437/HYD/2010 : ASSESSMENT YEAR 2004-05 2. EFFECTIVE GROUNDS OF THE ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 2002-03 ARE REPRODUCED BELOW- 1. THE ORDER OF THE HONBLE COMMISSIONER OF INCOME TAX, APPEALS-I IS ERRONEOUS IN LAW AND CONTRARY TO THE F ACTS AND ON BOTH FACTS AND IN LAW. ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 2 2. THE HONBLE COMMISSIONER OF INCOME-TAX(APPEALS) I HAS ERRED WHILE CONFIRMING THE ORDER OF THE ASSESSING O FFICER WHEREIN THE A.O. IS NOT JUSTIFIED IN MAKING THE ADD ITION OF RS.15,15,492/- ON THE CHARGE OF UNDER INVOICING WHI CH HAS BEEN MADE ON THE BASIS OF ANNEXURE-D OF SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER OF CUSTOMS & CENTRAL EXC ISE III, HYDERABAD FOR THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. 3. THE HONBLE COMMISSIONER OF INCOM E TAX, APPEALS-I HAS DIRECTED TO THE ASSESSING OFFICER FOR VERIFICATION AND REVISION OF THE UNACCOUNTED SALES WITH REFERENCE TO THE REVI SED DUTY AND TURNOVER ON THE BASIS OF ANNEXURE-E AND ANNEXUR E E1 OF SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER OF CUSTOMS & CENTRAL EXCISE III, HYDERABAD. 4. AS ON DATE, WHICH IS PENDING, AND WE ARE IN APPE AL SUBJECT TO WHATEVER ADDITIONS/DISALLOWANCES WHICH MAY BE MA DE IN THE ORDER AFTER VERIFICATION OF THE SAME. 5. WE, HEREBY, NOT AGREED FOR DISALLOWANCES MADE IN THAT RESPECT. BUT FOR THE AMOUNT INVOLVED IN GROUND NO.2 ABOVE, T HE GROUNDS RAISED BY THE ASSESSEE IN THE APPEALS FOR THE ASSESSMENT YEAR S 2003-04 AND 2004- 05 ARE ALSO IDENTICAL TO THOSE EXTRACTED ABOVE. 3. BRIEFLY STATED, RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN CUTTING AND POLISHING OF RAW BLOCKS O F GRANITES EXCAVATED FROM ITS QUARRIES BESIDES PURCHASING RAW BLOCK FROM OTHERS. THERE WAS SEARCH ACTION UNDER S.132 OF THE ACT IN THE MADHUCO N GROUP CONCERNS, INCLUDING THE ASSESSEE ON 20.10.2005 AND ON SUBSEQU ENT DATES. DURING THE SEARCH PROCEEDINGS, REVENUE CAME ACROSS A LETTE R, VIDE ANNEXURE A/MGL/3, WHICH IS A SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER OF CUSTOMS III, HYDERABAD DATED 3.3.2005. THIS LETTER /NOTICE INDICATES THE UNDER-INVOICING AND SUPPRESSION OF SALES BY THE ASS ESSEE TO THE TUNE OF RS.2,77,99,210 COVERING THE PERIOD SPANNING OVER 2 000-01 TO 2003-04. 4. ON ENQUIRY, ASSESSEE INFORMED THAT THE CENTRAL EXCISE SETTLEMENT COMMISSION CHENNAI, WAS SEIZED OF THE MA TTER AS IT ADMITTED THE APPLICATION FILED BEFORE THE COMMISSION, WHEREI N THE ASSESSEE HAS ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 3 OFFERED ADDITIONAL TURNOVER ON ACCOUNT OF ANNEXURES D, E AND E-I TO THE TUNE OF RS.1,02,43,939, THE BREAK-UP OF WHICH IS AS FOLLOWS- ANNEXURE D RS.69,72,468 ANNEXURE E RS.18,10,690 ANNEXURE E-1 RS.15,60,781 5. AFTER HEARING THE ASSESSEE, THE ASSESSING OFFI CER REJECTED THE CONTENTS APPEARING IN THE APPLICATION FILED BEFORE THE SETTLEMENT COMMISSION AND PROCEEDED TO ADOPT THE DIFFERENTIAL VALUE REALISED AS MENTIONED IN THE ABOVE FOUR ANNEXURES, NAMELY, D, D-1, E AND E-1, WHICH IS WORKED OUT AT RS.2,77,99,210 ON ACCOUNT OF D AND D-1, RS.2,44,516 ON ACCOUNT OF E AND RS.19,26,506 ON ACC OUNT OF E-1. IN FACT, ANNEXURES D AND D-1 RELATE TO UNDER-INVOICING AND ANNEXURES E AND E1 RELATE TO UNACCOUNTED SALES , AS MADE OUT BY THE ASSESSING OFFICER. THE BREAK-UP OF THE QUANTUM OF UNDER-INVOICING TABULATED BY THE ASSESSING OFFICER YEAR WISE IS AS UNDER- ASSESSMENT YEAR ANNEXURE D (RS.) ANNEXURE D-1 (RS.) TOTAL (RS.) 2000-01 NIL 4078428 4078428 2002 - 03 1515492 4876650 6392142 2003-04 7143602 1703205 8846807 2004 - 05 1815379 6666454 8481833 AS OBSERVED ABOVE, ASSESSEE RAISED GROUNDS IN APPEA L BEFORE THE CIT(A) DISPUTING THE ADDITIONS MADE ON ACCOUNT OF UNDER-IN VOICING FOR THE ABOVE YEARS, AND THE SAME WAS ADJUDICATED VIDE PARA 3.3 T O 3.5 OF THE IMPUGNED ORDER. ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 4 6. AGGRIEVED BY THE ADDITIONS MADE ON THE BASIS OF THE ABOVE WORKINGS, ASSESSEE RAISED THE RELEVANT GROUNDS BEFO RE THE CIT(A). 7. SO FAR AS THESE ADDITIONS BASED ON ANNEXURES D AND D-1 ARE CONCERNED, THE CIT(A) RELYING ON CONTENTS OF THE PA RA 6 OF THE ORDER OF SETTLEMENT COMMISSION DELETED THE SAME FOR ALL THE YEARS UNDER CONSIDERATION, STATING THAT THE ASSESSING OFFICER M ERELY RELIED ON THE ORAL EVIDENCE AND THERE IS NOTHING TO PROVE THE ALLEGATI ON WITH ANY CORROBORATIVE EVIDENCE. THUS, THE ADDITION OF RS.1 ,73,24,732 OUT OF THE TOTAL ADDITION OF RS.2,77,99,210 INVOLVING ASSESSME NT YEARS 2001-02 TO 2004-05 STOOD DELETED, LEAVING THE ADDITION OF RS.1 ,04,74,478 ATTRIBUTABLE TO ADDITIONS BASED ON ANNEXURE D TO TH E SHOW CAUSE NOTICE. THUS, THE CIT(A) ACCEPTED THE CONTENTIONS OF THE AS SESSEE THAT UNLESS THERE IS DIRECT CORROBORATIVE EVIDENCE TO SUPPORT T HE CONTENTS OF ANNEXURES, THERE IS NO BASIS FOR MAKING THE ADDITIO N TO THE TURNOVER. IN THE PROCESS, THE CIT(A) MERELY RELIED ON THE ORDER OF THE SETTLEMENT COMMISSION. 8. THE NEXT CLAIM RELATES TO ADDITION OF RS.1,04, 74,478 ATTRIBUTABLE TO ANNEXURE D-1, THE CIT(A) CONFIRMED THE ADMITTED ADDITIONAL LIABILITY OF RS.14,15,920 FOR ALL THE AS SESSMENT YEARS UNDER CONSIDERATION AGAINST THE ALLEGED ADDITION OF RS.1, 04,74,478 RELYING ON THE ADMISSION OF THE ASSESSEE, BEFORE THE SETTLEMEN T COMMISSION, WHICH HAS BEEN FINALLY ACCEPTED BY THE SETTLEMENT COMMISS ION. THE ASSESSEE OBJECTED TO THE SUSTAINING OF THE ADDITION TO THE E XTENT ADMITTED LIABILITY OF RS.14,15,020, AS ACCORDING TO HIM, IT IS ONLY TH E PROFIT RELATABLE TO THE SAID ADDITIONAL TURNOVER, WHICH SHOULD ONLY BE SUST AINED. THE CIT(A) DID NOT ENTERTAIN THE SAID REQUEST OF THE ASSESSEE FOR THE REASONS GIVEN IN PARA 3.5 OF HIS ORDER, WHICH INCLUDES THAT UNDER I NVOICING DOES NOT REFLECT SUPPRESSION OF QUANTUM OF SALE. THEREFORE, DIFFEREN TIAL VALUE ARRIVED AT IS THE VALUE WHICH IS SUPPRESSED BY THE ASSESSEE ON TH E QUANTITY SOLD BY IT. ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 5 IF SUCH DIFFERENTIAL VALUE IS TAKEN TO THE PROFIT A ND LOSS ACCOUNT, NET PROFIT OF THE ASSESSEE WOULD OBVIOUSLY INCREASE TO THE EXT ENT OF RS.14,15,020 FOR ALL THE YEARS PUT TOGETHER, AS ADMITTED BY THE ASSESSEE HIMSELF BEFORE THE SETTLEMENT COMMISSION. THE CIT(A) CONFIRMED THE OFFER OF THE DIFFERENTIAL LIABILITY TO THE TUNE OF RS.14,15,020 FOR ALL THE THREE ASSESSMENT YEARS AGAINST THE ADDITION OF RS.1,04,74 ,478. 9. DURING THE FIRST APPELLATE PROCEEDINGS, THE AS SESSEE FURNISHED COPY OF THE ORDER OF THE SETTLEMENT COMMISSION, WHI CH WAS NOT THERE DURING THE PROCEEDINGS BEFORE THE ASSESSING OFFICER . HENCE, AFTER OBTAINING THE REMAND REPORT FROM THE ASSESSING OFFI CER ON THE SAID ORDER OF THE SETTLEMENT COMMISSION, THE CIT(A) AGAINST TH E WISHES OF THE ASSESSING OFFICER, ADMITTED THE SAID ORDER AS ADDIT IONAL EVIDENCE AND ADJUDICATED THE GROUNDS OF THE ASSESSEE BEFORE HIM IN THE FOLLOWING MANNER. 03.4 THE AO HAS MADE THE ADDITION OF RS.2,77,99,2 10/- BEING THE AMOUNT OF UNDER INVOICING BASED ON THE AN NEXURE D AND D-1. THE HONBLE SETTLEMENT COMMISSION HAVE OBSERV ED IN THEIR ORDER THAT HE APPELLANT HAD NOT ADMITTED ANY AMOUNT OF DUTY IN RESPECT OF ANNEXURE D-1, THOUGH THE DUTY WAS COMPUT ED BY THE REVENUE AT RS.27,71,959/-. IN THE FINAL ORDER, TH E HONBLE SETTLEMENT COMMISSION HAS SETTLED THE DUTY AT RS.16 ,79,674/- WHICH PRECISELY INCLUDES THE DUTY ADMITTED BY THE A PPELLANT BASED ON THE ANNEXURE D, E AND E-1 OF RS.16,39,030/- AND AN ADDITIONAL RS.40,544/- PAID BY THE APPELLANT DUE TO CALCULATIO N MISTAKE. AS REGARDS ANNEXURE D-1, THE SETTLEMENT COMMISSION AT PARA 6 OF THE ORDER OBSERVED THAT EXCEPT PROVIDING ORAL EVIDE NCE THE DEPARTMENT HAS NOT BEEN ABLE TO PROVE THEIR CASE WI TH ANY CORROBORATIVE EVIDENCE. EVEN THE CIT(INV) HAD ALSO STATED THAT DUTY UNDER THIS ANNEXURE IS NOT DEMANDABLE. ACCORDI NGLY, THE HONBLE COMMISSION ACCEPTED THE PLEA OF THE APPELLA NT. IN VIEW OF THE ABOVE ORDER OF THE SETTLEMENT COMMISSION, THE A DDITION MADE BY THE AO FOR THE A.Y. 2001-02 TO 20040-05 IN SO FA R AS ANNEXURE D-1 IS CONCERNED DOES NOT STAND. THUS, THE AMOUNT ADDED BY THE AO OF RS.40,78,428/-, RS.48,76,650/-, RS.17,03,205 /- AND RS.66,66,454/- FOR THE ASSESSMENT YEARS 2001-02 TO 2004-05 BASED ON ANNEXURE D-1 IS DIRECTED TO BE DELETED. 03.5 AS REGARDS THE ADDITION BASED ON ANNEXURE D I S CONCERNED, THE DUTY ADMITTED BY THE APPELLANT WAS R S.11,55,595/- WHICH WAS FINALLY COMPUTED AT RS.14,15,020/-. THE APPELLANT IN THE WRITTEN SUBMISSION HAS SUBMITTED THAT THE AMOUN T ABOVE WAS ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 6 ACCEPTED BY THE ASSESSEE COMPANY AND THE ADDITIONAL LIABILITY OF RS.14,15,020/- HAS BEEN ACCEPTED AND PAID BY THE CO MPANY. ACCORDINGLY, IN MY VIEW, THE ADDITION MADE BY THE A O FOR UNDER INVOICING BASED ON ANNEXURE D IS NOT IMPROPER. THE QUESTION ARISES WHETHER THE ENTIRE DIFFERENTIAL AMOUNT NEEDS TO BE BROUGHT TO TAX. IT IS THE APPELLANTS CONTENTION THAT THE ENTIRE AMOUNT SHOULD NOT BE BROUGHT TO TAX AND ONLY THE PROFIT EL EMENT THEREOF SHOULD BE TAXED. I DO NOT AGREE WITH THE CONTENTIO N OF THE APPELLANT. IT IS TO BE BORNE IN MIND THAT THE AMOU NT INDICATED BY THE AO IS ONLY UNDER INVOICING I.E. THE REAL SALE V ALUE HAS BEEN UNDERVALUED BY THE APPELLANT WHILE COMMITTING THE S ALE. IT IS NOT THAT THE QUANTUM OF SALE WAS SUPPRESSED. WHATEVER EXPENDITURE PERTAINING TO SALES AND DISTRIBUTION OF THE QUANTUM HAD ALREADY BEEN CLAIMED BY THE APPELLANT IN ITS PROFIT AND LOS S ACCOUNT. THE APPELLANT HAS NOT BEEN ABLE TO PROVE THAT ANY EXPEN DITURE OVER AND ABOVE WHAT HAS BEEN DISCLOSED IN THE P&L ACCOUN T HAS ACTUALLY BEEN INCURRED. THEREFORE, THE DIFFERENTIA L VALUE ARRIVED BY THE AO IS THE VALUE WHICH IS SUPPRESSED BY THE A PPELLANT ON THE QUANTITY SOLD BY IT. IF THAT DIFFERENTIAL IS TAKEN TO THE PROFIT AND LOSS ACCOUNT, THE NET PROFIT OF THE APPELLANT WOULD OBVIOUSLY INCREASE TO THAT EXTENT. I THEREFORE AGREE WITH TH E AO THAT THE ENTIRE DIFFERENTIAL AMOUNT NEEDS TO BE TAXED AS IT IS. ACCORDINGLY, THE ADDITION MADE BY THE AO BASED ON ANNEXURE D FOR THE A.Y. 2002-03, 03-04 AND 04-05 IS SUSTAINED. IN THE RESU LT, THIS EFFECTIVE GROUND OF APPEAL IS PARTLY ALLOWED. 10. NOW, WE SHALL TAKE UP THE FACTS RELATING TO TH E ADDITIONS UNDER THE UNACCOUNTED SALES VIDE ENTRIES IN ANNEXURES E AND E-1 TO THE SHOW CAUSE NOTICE. THE AMOUNTS OF ADDITIONS BASED ON ANN EXURE E AND E-1 ARE ALREADY TABULATED- ASSESSMENT YEAR ANNEXURE D (RS.) ANNEXURE D-1 (RS.) TOTAL (RS.) 2002-03 166586 --- 166586 2003 - 04 684044 974072 1658116 2004 - 05 1394532 952435 2346967 TOTAL 4171669 VIDE ORDER OF THE SETTLEMENT COMMISSION, THE QUANTI FICATION ISSUES ARE REFERRED TO THE COMMISSIONER OF THE EXCISE DEPARTME NT. DURING THE PROCEEDINGS BEFORE THE CIT(A), NO SPECIFIC EXPLANAT ION WAS FURNISHED, ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 7 EXCEPT STATING THAT THIS ADDITION HAS BEEN MADE WIT HOUT ANY BASIS. IN THE CIRCUMSTANCES, THE CIT(A) DIRECTED THE ASSESSING OF FICER TO FACTUALLY VERIFY AND MODIFY THE TURNOVER ADDITION, IF ANY MA DE BY THE DEPARTMENT. IN EFFECT, THE CIT(A) DIRECTED THE ASSESSING OFFIC ER TO REVISE OR MODIFY THE ADDITIONS BASED ON ANNEXURES E AND E-1, CONSEQU ENT UPON THE ORDER OF THE SETTLEMENT COMMISSION AND ITS DIRECTIONS TO THE OFFICERS OF THE EXCISE DEPARTMENT. RELEVANT OBSERVATIONS OF THE CI T(A) IN PARA 04.4. OF THE IMPUGNED ORDER ARE AS UNDER- 04.0 .. I FIND FROM THE ORDER OF THE SETTLEMENT C OMMISSION THAT IN RESPECT OF ANNEXURE E THE DUTY DEMANDED BY THE D EPARTM ENT WAS INITIALLY RS.3,59,225/- WHICH WAS SUBSEQUENTLY COMPUTED AT RS.2,71,540/-. AS AGAINST THIS FINAL DEMAND, THE AP PELLANT HAD ADMITTED DUTY OF RS.2,57,710/-. SINCE THE DUTY REL ATING TO UNACCOUNTED SALES HAS UNDERGONE REVISION BY THE EXC ISE DEPARTMENT AND HAS BEEN ACCEPTED BY THE APPELLANT M ORE OR LESS WITH A SLIGHT VARIATION, THE TURNOVER AS WAS ORIGIN ALLY DETERMINED IN ANNEXURE E, THE REVISED UNACCOUNTED SALES, NEEDS TO BE VERIFIED WITH REFERENCE TO THE REVISED DUTY. THE ASSESSING O FFICER IS DIRECTED TO FACTUALLY VERIFY THE SAME AT THE TIM E OF GIVING EFFECT OF HIS ORDER AND MODIFY THE TURNOVER AFTER OBTAINING T HE BASIS OF CALCULATION OF REVISED DUTY. SAME EXERCISE IS ALSO TO BE DONE BY THE AO IN RESPECT OF THE TURNOVER AS PER ANENSXDUR5E E- 1 SINCE THE INITIAL DEMAND RAISED BY THE COMMISSIONER OF CENTRA L EXCISE HAS UNDERGONE CHANGE AS NOTED IN THE ORDER OF THE SETTL EMENT COMMISSION. IN SO FAR AS ADOPTING OF RATE OF PROFIT IS CONCERNED THE AO HAS ADOPTED THE RATE AS DISCLOSED BY THE APPELLA NT FOR ITS ACCOUNTED (DISCLOSED ) TURNOVER. TO THAT EXTENT I D O NOT FIND ANY INFIRMITY IN THE SAME. THIS EFFECTIVE GROUND OF APP EAL IS PARTLY ALLOWED SUBJECT TO FACTUAL VERIFICATION BY THE AO AND DIRECTION MADE AS ABOVE. 11. AGGRIEVED BY THE ABOVE DIRECTION AND THE ADDI TIONS SUSTAINED BY THE CIT(A), ASSESSEE FILED APPEALS BEFORE US WI TH THE GROUNDS EXTRACTED ABOVE. 12. DURING THE PROCEEDINGS BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THERE ARE COUPLE OF ISSUES, VIZ. (1) RELATING TO THE SUSTENANCE OF ADDITION ON ACCOUNT OF UNDER-INVOICIN G; AND (2) DIRECTION TO THE ASSESSING OFFICER FOR VERIFICATION AND REVISION ON ACCOUNT OF UNACCOUNTED SALES RELATING TO ANNEXURE E AND E-1. REGARDING THE FIRST ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 8 ISSUE, LEARNED COUNSEL MENTIONED THAT THE PROCEEDIN GS UNDER INCOME-TAX ARE ENTIRELY DIFFERENT VIS-A-VIS THAT OF THE PROCEE DINGS UNDER THE EXCISE LAWS. THE CONCESSIONS/ADMISSIONS MADE BY THE ASSESS EE BEFORE THE SETTLEMENT COMMISSION RELATE TO EXCISE DUTY LEVIABL E UNDER THE RELEVANT EXCISE LAWS AND THEY DO NOT RELATE TO THE INCOME OR TURNOVER. THE ASSESSING OFFICER HAS ERRED IN DEEMING IT AS INCOME OF THE ASSESSEE, IGNORING THE FACT THAT THE OFFER BEFORE SETTLEMENT COMMISSION REFERS TO THE INCREASED EXCISE DUTY ATTRIBUTABLE TO THE DIFFE RENT CLASSIFICATION OF THE SAME PRODUCT UNDER EXCISE LAWS. EVEN THE CIT(A) DI D NOT APPRECIATE THIS ASPECT OF THE MATTER AND MERELY FOLLOWED THE ORDER OF THE SETTLEMENT COMMISSION. REFERRING TO THE ORDER OF THE SETTLEME NT COMMISSION DATED 25.1.2008, LEARNED COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE TABLE ON PAGE 2 OF THE SAID ORDER AND MENTIONED THA T THE DIFFERENCE IN ANNEXURE D RELATES TO THE DISPUTE IN THE CALCULATION AND OTHERWISE, THERE IS NO DIFFERENCE ON ACCOUNT OF SUPPRESSION OF TURNOVER. DEMONSTRATING THE POSSIBILITY OF DIFFERENCE IN RATE S APPLICABLE TO GRANITE SLABS OF DIFFERENT SIZES, THE LEARNED COUNSEL MENTI ONED THAT RATE APPLICABLE VARIES FROM ONE SIZE OF THE MARBLE TO TH E OTHER SIZE, AS THE DUTY CALCULATED IS BASED ON THE CLASSIFICATION OF VARIOUS SLABS, AND THAT BEING SO, HE PLEADED THAT THERE IS NO TURNOVER DIFF ERENCE. HE THEREFORE, SUBMITTED THAT THE ADDITION ON ACCOUNT OF ADDITIONA L TURNOVER IS UNWARRANTED. ACCORDINGLY, NO ADDITION BASED ON ANNE XURE D, E AND E-1 ARE CALLED FOR. FINALLY, LEARNED COUNSEL MENTIONED THAT THE ABOVE FACT OF ABSENCE OF ANY SUPPRESSION OF TURNOVER AND THEREFOR E, THE ABSENCE OF UNDER INVOICING WILL BE DEMONSTRATED BEFORE THE LOW ER AUTHORITIES, IF AN OPPORTUNITY IS GIVEN BY THE TRIBUNAL IN THAT BEHALF . HE ALSO PLEADED THAT EXISTENCE OF RATE DIFFERENCE ON ACCOUNT OF SIZES OF GRANITE SLABS WILL ALSO BE DEMONSTRATED IN SUCH PROCEEDINGS. LEARNED COUN SEL FOR THE ASSESSEE, RELIED UPON THE FOLLOWING CASE-LAW IN SUPPORT OF TH E ABOVE PROPOSITIONS, DULY FURNISHING COPIES THEREOF IN THE PAPER-BOOK BE FORE US. ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 9 (A) AHMEDABAD BENCH DECISION OF THE TRIBUNAL IN THE CAS E OF RAJHANS BUILDERS V/S. DCIT(ITA NO.3172-3288 /AHD/ 2009) DAT ED 4 TH JUNE, 2010 (B) AHMEDABAD BENCH DECISION OF THE TRIBUNAL IN THE CAS E OF JAI PULSE MILLS V/S. ITO(ITA NOS.1317-1319/AHD/2004 DAT ED MAY 7, 2010. (C) COCHIN BENCH DECISION OF THE TRIBUNAL IN THE CASE O F P.M.ABDUL RAZAK V/S. ITO (63 ITD 398) (D) AHMEDABAD BENCH DECISION OF THE TRIBUNAL IN THE CAS E OF DCIT V/S. ASSOCIATED PETROLEUM CORPORATION (44 SOT 45) 13. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL R EPRESENTATIVE FOR THE REVENUE RELIED ON THE ORDER OF THE SETTLEME NT COMMISSION AS WELL AS THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES. 14. WE HEARD BOTH THE SIDES. LIMITED ISSUE ON TH E ISSUES OF UNDER-INVOICING THAT IS REQUIRED TO BE SORTED OUT R ELATES TO FINDING OUT THE SUPPRESSION OF ADDITIONAL TURNOVER IF ANY, INDULGED BY THE ASSESSEE, WHICH LED TO THE IMPUGNED ADDITIONS. IT IS A FACT THAT T HERE IS NO DIRECT EVIDENCE ON RECORD TO DEMONSTRATE EITHER A CASE OF UNDER-INV OICING. WHATEVER ARE THE ADDITIONS MADE BY THE ASSESSING OFFICER, ARE BA SED ON THE ANNEXURES TO THE SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE, AND THE IMPUGNED ORDER OF THE CIT(A ) IS ALSO BASED ON THE ORDER OF THE SETTLEMENT COMMISSION FOR CUSTOMS AND CENTRAL EXCISE. THE REQUEST OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR AN OPPORTUNITY TO GO BACK TO THE REVENUE AUTHORITIES TO DEMONSTRATE HOW AND WHY THE ASSESSEE ADMITTED IN THE APPLICATION BEFORE THE SET TLEMENT COMMISSION THE ADDITIONAL LIABILITY, AND HOW IT DOES NOT RELAT E TO EITHER SUPPRESSED TURNOVER OR UNDER-INVOICING OR SALE PRICE; BUT HOW THEY ARE RELATED TO RATE DIFFERENCES ONLY. WHICH VARY DEPENDING ON THE SIZES OF THE SLABS OF VARIOUS GRANITES. IN PRINCIPLE, WE FIND THERE IS N O CASE OF ADDITIONAL ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 10 TURNOVER WARRANTING ANY ADDITION TO THE TURNOVER DI SCLOSED BY THE ASSESSEE. AS SUCH, THE ALLEGATION OF UNDER-INVOICIN G IS ALSO NOT FULLY SUPPORTED BY THE ORDERS OF THE CENTRAL EXCISE AUTHO RITIES. PRIMA FACIE, WE ARE NOT AGREEING WITH THE CIT(A)S DECISION IN RELY ING ON THE ORDER OF THE SETTLEMENT COMMISSION, AS MERELY ON THE BASIS OF SH OW-CAUSE NOTICE ISSUED BY THE COMMSISIONER, OF CENTRAL EXCISE, ADDI TIONS MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. IN OUR OPINI ON, THERE IS REQUIREMENT OF GOING INTO FACTUAL CALCULATIONS ARIS ING OUT OF DIFFERENCE OF RATES APPLICABLE TO SLABS OF GRANITE OF VARIOUS SIZ ES. WE ALSO FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE CONCLUSIONS ARRIVED AT IN THE PROCEEDINGS UNDER CENTRAL EXCISE LAWS DO NOT HAVE A DIRECT BEARING ON THE PROCEEDINGS UNDER THE INCOME-TAX ACT, INASMUCH AS T HE PROCEEDINGS UNDER THE EXCISE LAWS DETERMINE THE CORRECT DUTY LE VIABLE TO GOODS OF THE TRADED, WHEREAS THE OBJECTIVE OF THE PROCEEDINGS UN DER THE INCOME-TAX ACT IS TO ARRIVE AT THE CORRECT INCOME OF THE ASSES SEE. 15. SO FAR AS THE ADDITIONS SUSTAINED IN RELATION TO ANNEXURES E AND E-1 ARE CONCERNED, WE FIND THAT IT IS ONLY A CA SE OF DIRECTION GIVEN BY THE CIT(A) TO FOLLOW THE CONSEQUENTIAL ORDERS, IF A NY TO BE PASSED CONSEQUENT UPON THE ORDER OF THE SETTLEMENT COMMISS ION. SUCH DIRECTION OF THE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE, E XCEPTING A WORD OF CAUTION THAT APPLICATION OF INCOME-TAX LAWS MUST BE CAREFULLY FOLLOWED, BEFORE ARRIVING AT THE FIGURES BASED ON THE FIGURES MODIFIED OR REVISED BY THE CENTRAL EXCISE AUTHORITIES. 16. IN THE LIGHT OF THE ABOVE DISCUSSION, WE SET ASIDE THE IMPUGNED ORDER OF THE CIT(A), AND RESTORE THE MATTE R TO THE FILE OF THE ASSESSING OFFICER, FOR FRESH EXAMINATION OF THE MAT TER AND FOR MAKING ANY ADDITION THAT MAY BE WARRANTED ON ACCOUNT OF UNDER- INVOICING IF ANY INDULGED IN BY THE ASSESSING OFFICER, IN ACCORDANCE WITH LAW AND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE. ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 11 17. IN THE RESULT, THESE THREE APPEALS OF THE ASS ESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1438/HYD/2010 : ASSESSMENT YEAR 2005-06 18. NOW, WE SHALL TAKE UP THE APPEAL FOR ASSES SMENT YEAR 2005-06. 19. EFFECTIVE GROUNDS OF THE ASSESSEE IN THIS APPE AL READ AS FOLLOWS- 1. THE ORDER OF THE HONBLE COMMISSIONER OF INCOME - TAX(APPEALS) I IS ERRONEOUS IN LAW AND CONTRARY TO FACTS ON BOTH FACTS AND IN LAW. 2. THE HONBLE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED WHILE CONFIRMING THE ORDER OF THE ASSESSING O FFICER WHEREIN THE ASSESSING OFFICER HAS ESTIM ATED THE GROSS PROFIT @ 25% ON TOTAL TURNOVER WHICH IS NOT CORRECT AND NO T JUSTIFIED. 3. THE HONBLE COMMISSIONER OF INCOME-TAX(APPEALS) I HAS ERRED WHILE CONFIRMING THE ORDER OF THE ASSESSING O FFICER WHEREIN THE A.O. IS NOT JUSTIFIED IN COMPARING THE TRADING RESULTS OF THE APPELLANT WITH THAT OF MADHUCON GRAN ITES LTD., WHICH UNIT DEALS WITH SUPERIOR QUALITY OF GRANITE B LOCKS AND EXPORTS BESIDES THE MEAGER DOMESTIC SALES, WHILE IN THE CASE OF THE APPELLANT THE SALES ARE DOMESTIC AND AR E OF SUB- STANDARD AND POOR QUALITY GRANITES. 20. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE DECLARED LOSS OF RS.25,38,447 IN THE RETURN FILED ON THE TU RNOVER OF RS.1,52,66,362 FOR THE YEAR UNDER CONSIDERATION, WHEREAS THE ASSES SING OFFICER NOTICED THAT THE SAME IS TOO LOW VIS--VIS THE G.P. RATE OF 25.51% FOR THE ASSESSMENT YEAR 2004-05 AND 26.27% FOR ASSESSMENT Y EAR 2003-04. THE ASSESSING OFFICER ALSO COMPARED THE ABOVE LOSS RESULT WITH THAT OF ITS SISTER CONCERN, NAMELY MADHUCON GRANITES LTD., WHOS E G.P. RATES FOR ASSESSEE 2003-04 AND 2004-05 WERE 44.11.% AND 43.4 8% RESPECTIVELY. THE ASSESSEE EXPLAINED THE REASONS FOR THE POOR PER FORMANCE FOR THE YEAR ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 12 UNDER CONSIDERATION, ATTRIBUTING THE LOSS TO THE SU BSTANDARD QUALITY OF SLABS EXCAVATED FOR THE YEAR UNDER CONSIDERATION. THIS EXPLANATION WAS REJECTED BY THE ASSESSING OFFICER, BEFORE RESORTING TO ESTIMATION. HE APPLIED A RATE OF 25% , AND MADE A G.P. ADDITION OF RS.38,16,590. ON APPEAL, THE CIT(A), HELD THE G.P. RATE OF 25% APPLI ED BY THE ASSESSING OFFICER AS REASONABLE. 21. AGGRIEVED BY THE ORDER OAF THE CIT(A) ON THIS ASPECT, ASSESSEE IS IN APPEAL BEFORE US. 22. LEARNED COUNSEL TOOK OBJECTION TO THE ASSESSI NG OFFICERS ACTION OF RESORTING TO ESTIMATION WITHOUT POINTING OUT ANY MISTAKE IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND CON SEQUENTLY WITHOUT REJECTING THE BOOKS OF ACCOUNT AS PER THE PROVISION S OF S.145(3) OF THE ACT. LEARNED COUNSEL TOOK STRONG OBJECTION TO THE MANNER OF ESTIMATION, WITHOUT HAVING ANY BASIS WHATSOEVER, AND WITHOUT HA VING SEIZED MATERIAL RELATING TO THE YEAR UNDER CONSIDERATION, IN HIS PO SSESSION. REFERRING TO THE PROVISIONS OF S.143A OF THE ACT, LEARNED COUNSE L MENTIONED THAT SEARCH ASSESSMENT MUST BE BASED ON SEIZED MATERIAL OR INCRIMINATING MATERIAL, IF ANY, AND ONE SHOULD NOT RESORT TO ESTI MATION IN SUCH PROCEEDINGS. 23. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OT HER HAND, STRONGLY SUPPORTED THE ORDERS OF THE LOWER AUTHORIT IES. 24. WE HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT. IT IS EVI DENT FROM THE IMPUGNED ASSESSMENT ORDER THAT THE ASSESSING OFFICE R HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS MAINTAINED BY THE ASSESSEE . IN THE CIRCUMSTANCES, WE AGREE WITH THE LEARNED COUNSEL F OR THE ASSESSEE THAT IT ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 13 IS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO RES ORT TO ESTIMATION OF THE INCOME OF THE ASSESSEE IN TERMS OF S.145(3) ACT, WI THOUT REJECTING THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE, A DEC ISION THAT FOLLOWS THE DISCOVERY OF INCOMPLETENESS, INACCURACY, ETC. IN TH E SAID BOOKS. IT ALSO APPEARS THAT THE MATERIAL SEIZED AT THE TIME OF SEA RCH PROCEEDINGS IN THE CASE OF THE ASSESSEE, HAS NO BEARING OR RELEVANCE T O THE DETERMINATION OF THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER APPEA L. THERE IS NO SCOPE FOR ESTIMATED ADDITIONS IN MATTERS OF SEARCH ASSESS MENT S MADE UNDER S.153A OF THE ACT. IN THE CIRCUMSTANCES, WE FIN D NO JUSTIFICATION FOR THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER BY RESORTING TO ESTIMATION. WE ACCORDINGLY SET ASIDE THE ORDERS O F THE LOWER AUTHORITIES ON THIS ISSUE, AND DELETE THE IMPUGNED ADDITION MAD E BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). CONSEQUENTLY, GROUNDS OF THE ASSESSEE IN THIS APPEAL ARE ALLOWED. 25. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALLOWED. 26. TO SUM UP, WHILE FIRST THREE OF THESE APPEALS OF THE ASSESSEE, BEING ITA NOS.1435 TO 1437/HYD/2010, ARE PARTLY ALL OWED FOR STATISTICAL PURPOSES, THE LAST OF THESE APPEALS OF THE ASSESSEE , BEING ITA NO.1438/HYD/2010 FOR ASSESSMENT YEAR 2005-06, IS A LLOWED. ORDER PRONOUNCED IN THE COURT ON 28 TH JUNE, 2012 SD/- SD/- (SAKTIJIT DEY) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 28 TH JUNE 2012 ITA NO.1435-1438/HYD/2010 M/S. VARALAXMI GRANITES (P) LTD, HYDERABAD . 14 COPY FORWARDED TO: 1. 2. 3 4. 5. M/S. VARALAXMI GRANITES (L) LTD, C/O. M/S.P.MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-6755/2/3,1ST FLOOR, SOMA JIGUDA, HYDERABAD-82 ASST COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 4, H YDERABAD COMMISSIONER OF INCOME-TAX(APPEALS) I HYDERABAD COMMISSIONER OF INCOME-TAX CENTRAL, HYDERABAD DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD B.V.S.