M/s. Maruthi Ceramics P. Ltd, Hyderabad V. DCIT, Circle-1, Warangal

ITA 1496/HYD/2013

• Counselvise Citation: 149622514 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 12-11-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: A V RAGHURAM
• Keywords: Additional evidence
• Section: 143(3)

Judgement Text

-- IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.1496/HYD/2013 ASSESSMENT YEAR 2005-2006 M/S. MARUTI CERAMICS P. LTD., HANAMKONDA, WARANGAL. PAN AABCM3713C VS. THE DCIT, CIRCLE-1 WARANGAL (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. A.V. RAGHURAM FOR REVENUE : MR. S.K. GUPTA DATE OF HEARING : 27 .0 8 .2015 DATE OF PRONOUNCEMENT : 04 .09.2015 ORDER PER P.M. JAGTAP, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-18, MUMBAI HOLDING CONCURRENT JURISDICTION OF CIT(A)-VI, HYDERABAD DAT ED 21.08.2013 AND THE SOLITARY ISSUE ARISING OUT OF TH E SAME FOR OUR CONSIDERATION RELATES TO THE ADDITION OF RS.12,57,688 MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF DIFFERENCE IN SALES AS DECLARE D BY THE ASSESSEE TO THE SALES TAX AUTHORITY AND AS SHOWN IN THE P & L ACCOUNT BY TREATING THE SAME AS UN-RECORDED SAL ES. 2 ITA.NO.1496/HYD/2013 M/S. MARUTHI CERAMICS P. LTD., HANAMKONDA, WARANGAL. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING A ND SALE OF CERAMIC PIPES WHICH ARE MOSTLY USED IN UNDERGROUND DRAINAGE SYSTEM. THE RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 28.10.2005 DECLARING TOTAL INCOME OF RS.10,42,830. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE TURNOVER AS PER THE DECLARATION FILED BY THE ASSESSEE BEFORE THE SALES TAX AUTHORITIES WAS RS.1,65,94,793 AS AGAINST THE TURNO VER SHOWN BY THE ASSESSEE IN THE P & L ACCOUNT OF RS.1,53,37,105. HE THEREFORE REQUIRED THE ASSESSEE TO EXPLAIN THIS DIFFERENCE AND SINCE THE EXPLANATION O FFERED BY THE ASSESSEE IN THIS REGARD WAS NOT FOUND ACCEPT ABLE BY HIM IN THE ABSENCE OF RELEVANT DOCUMENTARY EVIDE NCE TO SUPPORT AND SUBSTANTIATE THE SAME, THE DIFFERENC E OF RS.12,57,688 WAS ADDED BY THE A.O. TO THE TOTAL INC OME OF THE ASSESSEE TREATING THE SAME AS UN-RECORDED SALES IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE ORDE R DATED 10.12.2007. 3. AGAINST THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSE SSEE BEFORE THE LD. CIT(A) CHALLENGING INTER ALIA THE AD DITION OF RS.12,57,688 MADE BY THE A.O. ON ACCOUNT OF ALLEGED UN- RECORDED SALES. DURING THE COURSE OF APPELLATE PROC EEDINGS BEFORE THE LD. CIT(A), THE FOLLOWING SUBMISSION WAS MADE BY THE ASSESSEE IN RESPECT OF ITS CASE ON THIS ISSU E. 3 ITA.NO.1496/HYD/2013 M/S. MARUTHI CERAMICS P. LTD., HANAMKONDA, WARANGAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ENQUIRED AS TO WHY THERE IS DIFFERENCE BETWEEN THE SALES REFLECTED IN FORM - 1 & 2 FILED BEFORE SA LES TAX AUTHORITY AND THE SALES ADMITTED IN THE P & L ACCOUNT. IT WAS SUBMITTED THAT THE SALES ADMITTED BEFORE SATES TAX INCLUDES THE VALUE OF SAFES TAX COLLECTED, VALUE OF PACKING CHARGES AND AN AMOUNT O F AN INVOICE ACCOUNTED FOR TWICE. THE A.O. INSISTED O N ASST. ORDER FROM SALES TAX. SINCE THE APPELLANT HAS NOT RECEIVED THE ASST. ORDER BY THEN IT COULD NOT F ILE SUCH ORDER. THE AO HAS CONCLUDED THAT THERE IS UNACCOUNTED SALES WITHOUT APPRECIATING THE FACT THA T THE APPELLANT IS A COMPANY AND ITS ACCOUNTS ARE AUDITED. THE DISCREPANCY AS PRESUMED BY THE AO IN FACT IS NOT THERE. THE TURNOVER AS PER SALES TAX AS ST. ORDER THAT IS RECEIVED SUBSEQUENTLY IS RS. 1,66,66,050. THIS TURNOVER INCLUDES THE FOLLOWING: 1. VALUE OF FIREWOOD - RS 5,91,140 2. APGST - RS 5,03,441 3. CST - RS 1,70,070 4. PACKAGING MATERIAL RS 68,915 ------------------ TOTAL RS.13,33,566 ------------------ IF THIS AMOUNT OF RS.13,33,566 THAT IS INCLUDED IN THE TURNOVER IS EXCLUDED THE TURNOVER COMES TO RS. 1,53,32,484. AS AGAINST THIS, WE HAVE ADMITTED SALE S OF RS. 1,53,37,105. BESIDES THIS THE FIREWOOD IS DEBITED TO P & L ACCOUNT, THE APGST AND CST IS PAID TO THE GOVERNMENT EXCEPT FOR THE AMOUNTS OF RS.9,79 6 UNDER APGST AND RS. 9,758 UNDER CST SHOWN AS PROVISION AND REFLECTED IN THE BALANCE SHEET UNDER CURRENT LIABILITIES. IF AT ALL ANY ADDITION IS TO B E MADE, IT SHOULD BE TO THIS EXTENT OF RS.19,554 BEING CRED IT BALANCE, BUT FOR MAKING AN ENTRY OF PROVISION. THE VALUE OF PACKAGING MATERIAL OF RS.68,915 IS ADMITTE D AS OTHER INCOME IN THE P & L ACCOUNT. THEREFORE THE APPELLANT SUBMITS THAT THE ADDITION OF UNACCOUNTED SALES BY THE AO IS NOT CORRECT. THE PRESENT APPEAL IS AGAINST THIS ORDER.' 4 ITA.NO.1496/HYD/2013 M/S. MARUTHI CERAMICS P. LTD., HANAMKONDA, WARANGAL. 3.1. THE ABOVE SUBMISSION MADE BY THE ASSESSEE WAS FORWARDED BY THE LD. CIT(A) TO THE A.O. SEEKING LATERS COMMENTS THEREON. IN THE REMAND REPORT SUBMITTED TO THE LD. CIT(A), THE A.O. OFFERED HIS COMMENTS AS UNDER : 'THE AO HAS TAKEN THE TURNOVER AS PER THE MONTHLY RETURNS FILED BY THE ASSESSEE BEFORE THE SALES TAX DEPARTMENT. THE AO HAS NO OCCASION TO CONSIDER THE FINAL ORDER OF THE COMMERCIAL TAX OFFICER. AS PER T HE MONTHLY RETURNS FILED, THE TURNOVER IS AT RS. 1,65,94,793/-. ON THE BASIS OF THE MONTHLY RETURNS, THE FINAL ASSESSMENT WAS FRAMED. IT IS PERTINENT TO NOTE HERE THAT IN THE FINAL ASST. ORDER, THE COMMER CIAL TAX OFFICER HAS DETERMINED FINALLY THE GROSS TURNOV ER FOR THE YEAR 2004-05 AS UNDER : 'GROSS TURNOVER RS 1,66,66,050 EXEMPTED TURNOVER RS 50,91,210 NET TURNOVER RS 1,15,74,840' FROM THE ABOVE, IT IS ANOTHER EVIDENCE THAT THE TURNOVER DETERMINED BY THE AO IS SET TO BE CORRECT BECAUSE IN THE ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE ITSELF PROVES THAT THE GROSS TURNOVER IS RS.1,66,66,050. HENCE, THERE IS NO DISPUTE IN DETERMINATION OF THE TURNOVER BY THE AO. MOREOVER, THE ASSESSEE ALSO DIRECTED TO PAY THE TAXES ON THE NET TURNOVER @ 8% AND 4% OF RS.5,66,920 APART FROM THE EXEMPTED SALES OF RS. 50,91,210/-. IF THE ASSESSEES CONTENTION WILL BE TAKEN INTO CONSIDERATION, THE TURNOVER OF THE ASSESSEE WOULD B E AS UNDER : THE TURNOVER DETERMINED BY THE COMMERCIAL TAX OFFICER VIDE HIS ORDER DT.20.03.2006 RS.1,66,6 6,050 ADD: SALES TAX & APGST & CST RS. 6 ,68,365 --------------------- RS.1,73,34,415 --------------------- 5 ITA.NO.1496/HYD/2013 M/S. MARUTHI CERAMICS P. LTD., HANAMKONDA, WARANGAL. FOR THE PURPOSE OF DETERMINATION OF TURNOVER, THE TURNOVER INCLUDES APGST & CST. HENCE, THE TURNOVER OF THE ASSESSEE MAY BE RS.1,73,34,415. 4. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECOR D INCLUDING THE REMAND REPORT SUBMITTED BY THE A.O., THE LD. CIT(A) HELD THAT THERE WAS NO CLINCHING EVIDENC E FILED BY THE ASSESSEE IN SUPPORT OF THE EXPLANATION OFFER ED AS REGARDS THE DIFFERENCE IN SALES AS DECLARED TO THE SALES TAX AUTHORITIES AND INCOME TAX AUTHORITIES. HE THEREFOR E CONFIRMED THE ADDITION MADE BY THE A.O. ON ACCOUNT OF SUCH DIFFERENCE TREATING THE SAME AS UNRECORDED SAL ES MADE BY THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFO RE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILA BLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS FURNIS HED A RE-CONCILIATION STATEMENT AT PAGE NO. 24 OF HIS PAP ER BOOK EXPLAINING THE DIFFERENCE BETWEEN THE TURNOVER AS F INALLY DETERMINED BY THE SALES TAX AUTHORITIES AND THE TUR NOVER AS DECLARED BY THE ASSESSEE IN THE P & L ACCOUNT AS UNDER: 6 ITA.NO.1496/HYD/2013 M/S. MARUTHI CERAMICS P. LTD., HANAMKONDA, WARANGAL. RECONCILIATION STATEMENT DESCRIPTION RS. TURNOVER DETERMINED BY SALES TAX AUTHORITIES 1,66,66,050 LESS: (I) VALUE OF FIRE WOOD (BEING PURCHASED. (II) PACKING MATERIAL (SHOWN AS OTHER INCOME IN BOOKS) (III) APGST (AS SEPARATE ACCOUNT WAS MAINTAINED AND THE BALANCE PAYABLE/OUTSTANDING WAS SHOWN AS PROVISIONS IN BALANCE SHEET. (IV) CST (FOR THE SAME REASONS AS ABOVE). 5,91,140 68,915 5,03,441 1,70,070 TURNOVER SHOULD BE 1,53,32,484 TURNOVER SHOWN IN P & L ACCOUNT IS RS.1,53,37,105. 6. ALTHOUGH THE LEARNED D.R. HAS CONTENDED THAT DIFFERENT EXPLANATION HAS BEEN OFFERED BY THE ASSES SEE AT DIFFERENT STAGES WHILE EXPLAINING THE DIFFERENCE BE TWEEN THE TURNOVER AS DECLARED TO THE SALES TAX AUTHORITI ES AND TO THE INCOME TAX AUTHORITIES, WE ARE OF THE VIEW T HAT THE EXPLANATION OFFERED BY THE ASSESSEE RECONCILING SUC H DIFFERENCE BEFORE US IS REQUIRED TO BE FINALLY CONS IDERED ON MERIT IN THE LIGHT OF RELEVANT DOCUMENTARY EVIDENCE PRODUCED BY THE ASSESSEE IN SUPPORT. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD FRO M THE RELEVANT ASSESSMENT ORDER PASSED BY THE CONCERNED S ALES TAX AUTHORITY PLACED AT PAGE NOS. 5 TO 8 OF THE PAP ER BOOK, PURCHASE OF FIRE WOOD AMOUNTING TO RS.5,91,140 IS INCLUDED IN THE TURNOVER AS DETERMINED FOR THE PURP OSE OF 7 ITA.NO.1496/HYD/2013 M/S. MARUTHI CERAMICS P. LTD., HANAMKONDA, WARANGAL. LEVYING SALES TAX AND THE SAME AMOUNT HAVING BEEN DEBITED BY THE ASSESSEE TO THE P & L ACCOUNT AND N OT INCLUDED IN THE SALES AS CREDITED TO THE P & L ACCO UNT, THE DIFFERENCE TO THAT EXTENT STANDS EXPLAINED. SIMILAR LY, THE SALE OF PACKAGING MATERIAL OF RS.68,915 HAVING BEEN SEPARATELY DECLARED BY THE ASSESSEE UNDER OTHER IN COME AS EVIDENT FROM SCHEDULE 9 OF THE P & L ACCOUNT PLA CED AT PAGE NO. 79 OF THE PAPER BOOK AND NOT INCLUDED IN T HE SALES, THE DIFFERENCE TO THAT EXTENT, IN OUR OPINIO N, ALSO STANDS EXPLAINED. 7. AS REGARDS THE EXPLANATION OF THE ASSESSEE THAT THE DIFFERENCE IS ALSO ON ACCOUNT OF APGST AND CST AMOUNTING TO RS.5,03,441 AND RS.1,70,070 RESPECTIVE LY, IT IS NOTED FROM THE FINAL ASSESSMENT ORDER PASSED BY THE CONCERNED SALES TAX AUTHORITY THAT THESE TAXES ARE SEPARATELY LEVIED ON THE GROSS TURNOVER OF RS.1,66, 66,050 DETERMINED BY THEM AFTER EXCLUDING THE EXEMPTED TURNOVER OF RS.59,99,210. THE SAID TURNOVER DETERMI NED BY THE SALES TAX AUTHORITIES THUS IS NOT OF SALES T AX AND IT CANNOT BE SAID THAT THERE IS A DIFFERENCE BETWEEN S UCH SALES AND THE SALES AS CREDITED BY THE ASSESSEE TO THE P & L ACCOUNT WHICH AGAIN IS NET OF SALES TAX, ON ACCOU NT OF THE AMOUNT OF SALES TAX. THE EXPLANATION OFFERED BY THE ASSESSEE WHILE RECONCILING THE DIFFERENCE IN SALES TO THIS EXTENT THUS IS NOT ACCEPTABLE. AS SUCH CONSIDERING ALL THE FACTS OF THE CASE AND THE MATERIAL PLACED ON RECORD BEFORE US, WE HOLD THAT THE DIFFERENCE IN SALES TO THE EXT ENT OF RS.5,91,140 BEING PURCHASE OF FIRE WOOD AND RS.68,9 15 8 ITA.NO.1496/HYD/2013 M/S. MARUTHI CERAMICS P. LTD., HANAMKONDA, WARANGAL. BEING SALE OF PACKAGING MATERIAL STANDS EXPLAINED A ND THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON THIS ISSUE IS REQUIRED TO BE DELETED TO T HAT EXTENT. WE THEREFORE, MODIFY THE IMPUGNED ORDER OF THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE PAR TLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.0 9.2015. SD/- SD/- (SAKTIJIT DEY) (P.M. JAGTAP) JUDICIAL MEMBER ACOUNTANT MEMBER HYDERABAD, DATED 04 TH SEPTEMBER, 2015 VBP/- COPY TO : 1. M/S. MARUTHI CERAMICS P. LTD., HANAMKONDA, WARANGAL. C/O. MR. K. VASANTKUMAR & MR. A.V. RAGHURAM, ADVOCATES, 610, 6 TH FLOOR, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD-1. 2. THE DCIT, CIRCLE - 1, WARANGAL. 3. CIT(A) - 18 , ROO M NO.20, 3 RD FLOOR, B - WING, MITTAL COURT, NARIMAN POINT, MUMBAI 400 021. (HAVING CONCURRENT JURISDICTION OVER CIT(A)-VI, HYDERABAD). 4. CIT(A) - VI, HYDERABAD 5. CIT - 5/6, HYDERABAD. 5. D.R. ITAT A BENCH, HYDERABAD. 6. GUARD FILE