The ITO, Ward-4(1), Ahmedabad V. Ganesh Chem Tech Pvt.Ltd., Ahmedabad

ITA 1494/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2362 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-01-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 30-04-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANJAY RAI
• Assessee Lawyers: N O N E
• Keywords: Rejection of books of accounts; Income from undisclosed sources; Opportunity of being heard; Wrong claim
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON' BLE SHRI N.S. SAINI, A.M. ) I.T.A. NO. 1494/AHD./2008 ASSESSMENT YEAR : 2003-2004 INCOME TAX OFFICER, WARD-4(1), -VS.- GA NESH CHEM TECH PVT. LTD., AHMEDABAD AHMEDABAD (PAN : AAACG 5446 R) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJAY RAI, D.R. RESPONDENT BY : N O N E O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 29.02.2008 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VIII, AHMEDABA D DELETING THE ADDITION OF RS.1,08,55,810/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF ESTIMATION OF UNACCOUNTED PRODUCTION FOR THE ASSESSMENT YEAR 2005-06. 2. IN THIS CASE, NOTICE OF HEARING WAS SENT THROUGH REGISTERED POST. ON THE DATE FIXED FOR HEARING, NEITHER ANYBODY APPEARED FROM THE SIDE OF THE ASSESSEE NOR AN APPLICATION FOR ADJOURNMENT FILED. WE, THEREFORE, PROCEED TO DECIDE THIS APPEAL ON THE BASIS OF SUBMISSIONS MADE BY THE LD. D.R. AND THE MATERIAL AVAILABLE ON RECOR D. 3. BRIEF FACTS RELATING TO THE CONTROVERSY INVOLVED IN THIS APPEAL ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY. IT IS ENGAGED IN THE BUSIN ESS OF MANUFACTURING OF DYES AND CHEMICALS. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME DECLARING NET LOSS OF RS.9,27,281/-. THE ASSESSING OFFICER FRAMED THE ASS ESSMENT UNDER SECTION 143(3) ON 29.03.2006 AT A TOTAL INCOME OF RS.1,03,09,192/-. IN THIS ASSE SSMENT ORDER, INTER ALIA, THE ASSESSING OFFICER MADE THE ADDITION OF RS.1,08,55,810/- ON ACCOUNT OF ALLEGED UNACCOUNTED PRODUCTION. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS MENTION ED THAT MATERIAL COST HAS INCREASED FROM 90.5% TO 113.56% IN THE ASSESSMENT YEAR UNDER APPEA L. THE DIFFERENCE COMES TO 23.06% AND THIS HAS BEEN USED IN AN UNACCOUNTED WAY WHICH THE ASSES SEE MUST HAVE BEEN UTILIZED FOR THE PURPOSE 2 ITA NO. 1494-AHD-2008 OF UNACCOUNTED PRODUCTION OF FINISHED GOODS. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS ALSO MENTIONED THAT CONSUMPTION OF RAW MATERIAL SHO WN BY THE ASSESSEE IS INCORRECT. THE ASSESSEE HAS EXPRESSED ITS INABILITY TO PRODUCE STO CK REGISTER, PURCHASE AND SALES REGISTER CLAIMING THAT THESE ARE LYING WITH THE CENTRAL EXCISE DEPART MENT. THE ASSESSING OFFICER FURTHER STATED THAT BEFORE HIM THE ASSESSEE HAS NOT PRODUCED PROOF OF I NVENTORY OF BOOKS SEIZED OR SEIZURE LIST BY THE EXCISE DEPARTMENT. ON THIS BASIS, HE REJECTED THE B OOKS OF ACCOUNTS UNDER SECTION 145(3) AND ESTIMATED THE UNACCOUNTED PRODUCTION AND MADE ADDIT ION OF RS.1,08,55,810/-. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE ADDITION FOR THE DETAILED REASONS GIVEN IN PARA 4, WHICH IS RE-P RODUCED HEREUNDER :- 4. I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. C AREFULLY. THE A.O. HAS REJECTED THE BOOKS OF ACCOUNTS OF THE APPELLANT AND HAS ESTIMATED UNACCOUNTED PRODUCTION AND CONSEQUENTLY UNACCOUNTED INCOME OF THE APPELLANT AT RS.1,08,55,810/-. THE BASIC REASON AS TO WHY THE A.O. HAS REJECTED BOOKS OF ACCOUNTS IS THAT THERE WAS INCREA SE IN RAW MATERIALS FROM RS.1,35,60,338/- TO RS.5,23,07,076/- AND THE A PPELLANT COULD NOT PRODUCE STOCK REGISTER, PURCHASE AND SALES REGISTER . THE APPELLANT CLAIMED TO HAVE DEVELOPED TWO OR THREE NEW ITEMS FO R EXPORT PURPOSE, BUT THE APPELLANT COULD NOT SUCCEED DURING R & D AN D TRIAL PRODUCTION OF SUCH ITEMS AND THE APPELLANT INCURRED HEAVY LOSS DUE TO FAILURE OF SUCH PRODUCTS. THIS REPLY OF THE APPELLANT WAS NOT ACCEPTED BY THE A.O., AS THERE WAS CONTINUOUS INCREASE OF RAW MATERIAL CO NSUMPTION FROM THE MONTH OF APRIL, 2002 TO MARCH, 2003 AND THERE WAS N O CORRESPONDING INCREASE IN CONSUMPTION OF ELECTRICITY AND NO R&D E XPENSES WERE DEBITED IN P & L ACCOUNT. THEREFORE, THE A.O. SUSPE CTED THE FIGURE OF CONSUMPTION OF RAW MATERIAL SHOWN BY THE APPELLANT. FURTHER THE APPELLANT COULD NOT PRODUCE THE STOCK REGISTER, PUR CHASES AND SALES REGISTER AS THE SAME WERE SEIZED BY THE CENTRAL EXC ISE DEPARTMENT. IN THE ABSENCE OF THE ABOVE REGISTERS, THE A.O. REJECT ED THE BOOKS OF ACCOUNTS U/S. 145(3) OF THE I.T. ACT AND ESTIMATED THE INCOME OF THE APPELLANT. THE A.O. FOUND THAT THE MATERIAL COST HA S INCREASED BY 23.06% OVER THAT OF THE PRECEDING YEAR AND THIS EXC ESS RAW MATERIAL CLAIMED WAS USED BY THE APPELLANT IN MAKING UNACCOU NTED PRODUCTION, 23.06% OF RAW MATERIAL CONSUMPTION WAS ASSUMED TO B E UNACCOUNTED PRODUCTION. THEN THE A.O. PRESUMED THAT THE APPELLA NT HAS SOLD THE UNACCOUNTED PRODUCTION, AND ACCORDINGLY THE A.O. CO MPUTED UNACCOUNTED INCOME OF THE APPELLANT. 5. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE REVENUE SHRI SANJAY RAI, LD. D.R. APPEARED AND CONTENDED THAT POWERS OF LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) ARE CO- 3 ITA NO. 1494-AHD-2008 TERMINUS WITH THAT OF ASSESSING OFFICER. IN THE IMP UGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION OBSERVING THAT IN THE EVENT OF FRESH FINDING TO BE MADE BY THE CENTRAL EXCISE DEPARTMENT IN THE SET AS IDE PROCEEDINGS, IF IT IS LATER FOUND THAT THE PURCHASE OF LAB, FORMALDEHYDE AND GAMMA ACID ARE NO T GENUINE, OR ON GATHERING INFORMATION BY THE A.O. ABOUT BOGUS CLAIM OF PURCHASES OF RAW M ATERIALS OR ANY OTHER ADVERSE INFORMATION, THEN THE ASSESSMENT OF THE ASSESSEE SHALL BE REOPEN ED TO CONSIDER THE IMPACT OF THE SAID FINDING OR INFORMATION AND THE ASSESSING OFFICER SHALL BE F REE TO TAKE FRESH ACTION AS PROVIDED IN THE ACT. THE LD. D.R. POINTED OUT THAT IT IS AN WELL SETTLED LAW THAT POWER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CO-TERMINUS WITH THAT OF AS SESSING OFFICER AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS.- KANPUR COAL SYNDICATE REPORTED IN 56 ITR 356 (SC). THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) PASSED THE IMPUGNED ORDER ON 29.02.2008. BEFORE PASSING THIS ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE EITHER DIRECTED THE ASSESSING OFFICER TO MAKE NECES SARY VERIFICATION FROM THE EXCISE DEPARTMENT OR HE SHOULD HIMSELF OBTAIN INFORMATION. SINCE THIS WAS NOT DONE, THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE BE SET ASIDE AND HE BE DIRECTED TO EITHER MAKE THE NECESSARY VERIFICATION HIMSELF OR DIRECT T HE ASSESSING OFFICER TO MAKE NECESSARY VERIFICATION FROM THE EXCISE DEPARTMENT AND THEREAF TER RE-ADJUDICATE THE ADDITION OF RS.1,08,55,810/- AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. 6. HAVING HEARD THE LD. D.R., WE HAVE CAREFULLY GON E THROUGH THE ORDERS OF AUTHORITIES BELOW. DESPITE THE NOTICE SENT THROUGH REGISTERED P OST, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. WE FOUND CONSIDERABLE FORCE IN THE SUBMIS SIONS MADE BY THE LD. D.R. THE HON'BLE SUPREME COURT IN THE CASE OF KANPUR COAL SYNDICATE (SUPRA) RELIED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) HELD THAT POWER S OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE CO-TERMINUS WITH THAT OF ASSESSIN G OFFICER. IN THIS JUDGMENT, THE HON'BLE SUPREME COURT HELD THAT FIRST APPELLATE AUTHORITY H AS PLENARY POWER IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER IS CO-TERMINUS WITH THAT OF ASSESSING OFFICER HE CAN DO WHAT ASSESSING OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HA S FAILED TO DO. THE HON'BLE KERALA HIGH COURT IN THE CASE OF ITO-VS.- V. SUBRAMONIA IYER VS.- CI T REPORTED IN [1978] 113 ITR 685 (KER.) HELD THAT THE FIRST APPELLATE AUTHORITY CAN SUBSTITUTE T HE ORDER OF ASSESSING OFFICER BY ONE OF HIS OWN. KEEPING IN VIEW THE RATIO OF JUDGMENT OF THE HON'BL E SUPREME COURT IN THE CASE OF KANPUR COAL 4 ITA NO. 1494-AHD-2008 SYNDICATE (SUPRA) BEFORE DELETING THE ADDITION OF R S.1,08,55,810/- MADE BY THE ASSESSING OFFICER, THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) NEITHER HIMSELF OBTAINED INFORMATION FROM THE EXCISE DEPARTMENT OR HE SHOULD HAVE DIRECTED THE ASSESSING OFFICER TO COLLECT THE INFORMATION AND SUBMIT THE REMAND REPOR T. SINCE THIS WAS NOT DONE, WE SET ASIDE THE IMPUGNED ORDER OF LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ON THIS ISSUE AND DIRECT HIM TO RE-ADJUDICATE THIS ADDITION AFRESH KEEPING IN VI EW OUR DIRECTION GIVEN HEREIN ABOVE AFTER PROVIDING OPPORTUNITY OF BEING HEARD TO BOTH THE SI DES. 7. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL FILED BY THE REVENUE IS TREATED AS ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 19.01.20 11 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19 / 01 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, (4) CIT CONCERNED, (5) D.R. , ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR, ITAT, AHMEDABAD LAHA/SR.P.S.