ACIT, CHENNAI V. M/s. Sivasakthi Wood Works, CHENNAI

ITA 1506/CHNY/2011

• Counselvise Citation: 150621714 RSA 2011
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 06-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T BANUSEKAR
• Assessee Lawyers: K E B RENGARAJAN JUNIOR
• Keywords: Business income; Additional evidence
• Section: 143(3); 11

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL D BENCH, CHENNAI. BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO.1476/MDS/2011 ASSESSMENT YEAR : 2008-09 M/S. SIVASAKTHI WOOD WORKS, C-4, PHASE III, GUINDY INDUSTRIAL ESTATE, EKKATUTHANGAL, CHENNAI-97. [PAN:AANFS6783M] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE V, CHENNAI 34. (APPELLANT) (RESPONDENT) I.T.A. NO.1506/MDS/2011 ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE V, CHENNAI 34. VS. M/S. SIVASAKTHI WOOD WORKS, C-4, PHASE III, GUINDY INDUSTRIAL ESTATE, EKKATUTHANGAL, CHENNAI-97 (APPELLANT) (RESPONDENT) A PPELLANT BY : SHRI T. BANUSEKAR, C.A. RESPONDENT BY : SHRI K.E.B. RENGARAJAN, JUNI OR STANDING COUNSEL. DATE OF HEARING : 10.10.2012 DATE OF PRONOUNCEMENT : 10.10.2012 ORDER PER S.S. GODARA, JUDICIAL MEMBER THESE CROSS APPEALS BY ASSESSEE AND THE REVENUE EM ANATE FROM ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) V III, CHENNAI DATED 29.06.2011 PASSED IN ITA NO. 97/10-11/A.III FOR THE ASSESSMENT YEAR 2008- 09 IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOM E TAX ACT 1961 [IN SHORT THE ACT]. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 14 44 476 & 1506 76 & 1506 76 & 1506 76 & 1506/M/ /M/ /M/ /M/11 1111 11 2 2. FACTS COMMON TO BOTH CASES ARE THAT THE ASSESSE E FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING FURNITURE AND SHUTTER S. ON 03.03.2008, THE DEPARTMENT CONDUCTED SURVEY IN ASSESSEES PREMISE S. THE ASSESSEE FILED RETURN FOR THE IMPUGNED ASSESSMENT YEAR ON 15.04. 2009 DECLARING INCOME OF ` .1,50,60,810/-. THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER ISSUED NOTICE TO THE ASSESSEE UNDER SECTION 143(2) OF THE ACT. DURING SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT DURING THE COURSE OF SURVEY, THERE WAS SHORTAGE IN ASSESSEE S STOCK OF ` .1,29,84,567/- WHICH POINTED OUT TO SALE OF ASSESSEES GOODS OUTSI DE BOOK ENTRIES. THE ASSESSEE CONTESTED BY RAISING AN EXPLANATION THAT S INCE VERY FEW PERSONS EMPLOYED WITHOUT AWARE OF THE TECHNICALITY OF THE S TOCK IN QUESTION, THEREFORE, THERE COULD BE SOME ERROR IN STOCK COMPU TATION. THE ASSESSING OFFICER NEGATIVED THIS PLEA BY HOLDING THAT ONLY LA CK OF TECHNICAL KNOW-HOW IN ASSESSEES STOCK COULD NOT GIVE RISE TO SUCH A HUGE DIFFERENCE IN THE STOCK SINCE STOCK ITEMS WERE CONCRETE AND DEFINITE WITH N O ELEMENT OF UNCERTAINTY. ACCORDINGLY, THE ASSESSING OFFICER PROCEEDED TO COM PUTE THE UNDISCLOSED CASH SALES OF ` .3,19,35,417/- AS UNDISCLOSED STOCK X TOTAL SALES OPENING STOCK + PURCHASE OF STOCK CLOSING STOCK THE NET PROFIT WAS CALCULATED AT THE NET PROFIT : S ALES RATIO WHICH WAS ` .27,74,214/- [BOOK PROFITS BEING ` .2,03,61,789/-]. 3. AT THE SAME TIME, IN THE SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 14 44 476 & 1506 76 & 1506 76 & 1506 76 & 1506/M/ /M/ /M/ /M/11 1111 11 3 TOOK COGNIZANCE OF AN AMOUNT OF ` .98,73,107/- DEBITED UNDER THE HEAD TRAVEL AND TRANSPORT CHARGES. THE ASSESSING OFFIC ER SOUGHT FOR PROOF OF GENUINENESS BY WAY OF INVOICES REGARDING THE ABOVE EXPENSES. THE ASSESSEE COULD ONLY PRODUCE SELF-VOUCHED BILLS WITH OUT ANY INVOICE FOR ` .23,04,341/-. THE ASSESSING OFFICER DID NOT ACCEPT THE SAME AND ADDED THE ABOVE AMOUNT IN THE ASSESSEES INCOME. 4. SIMILARLY, THE ASSESSEE HAD DEBITED AN AMOUNT O F ` .94,88,519/- AS DISCOUNT CHARGES. TO SUBSTANTIATE THE SAME, THE ASS ESSEE COULD NOT PRODUCE SATISFACTORY EXPLANATION BY WAY OF PRODUCIN G THE LIST OF BENEFICIARIES OR CONFIRMATION LETTERS. THE ASSESSING OFFICER, THE REFORE, GAVE BENEFIT OF DOUBT TO THE ASSESSEE BY ACCEPTING IT PARTLY TO THE EXTENT OF 50% OF THE ABOVE EXPENDITURE AND ADDED THE REST OF 50% AMOUNT BEING ` .47,44,260/- IN ASSESSEES INCOME VIDE ASSESSMENT ORDER DATED 24.12 .2010. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHEREIN THE ASSESSING OFFICERS FINDING REGARDING DISCREPAN CY IN STOCKS ADDITION OF ` .27,74,214/- HAS BEEN RESTRICTED TO ` .23,93,232/- BY HOLDING THAT THE DISCREPANCY TO THE EXTENT OF ` .17,83,169/- STOOD EXPLAINED. SIMILARLY, REGARDING ADDITION ON ACCOUNT OF TRAVEL AND TRANSPORT CHARGES MADE BY THE ASSESSING OFFICER, THE CIT(A) H AS RESTRICTED THE SAME TO THE EXTENT OF 25% OF SELF MADE VOUCHERS BY HOLDI NG THAT THE ASSESSEES LEDGER ACCOUNT HAD MADE CLEAR THAT THEY WERE INCURR ED TOWARDS TRAVEL AND CONVEYANCE OF THE SALES AND MARKETING PERSONNEL FOR WHICH BILLS COULD NOT I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 14 44 476 & 1506 76 & 1506 76 & 1506 76 & 1506/M/ /M/ /M/ /M/11 1111 11 4 BE MADE AVAILABLE. SO, THE SAME WERE SELF VOUCHED. REGARDING DISALLOWANCE OF DISCOUNT CHARGES MADE BY THE ASSESS ING OFFICER (SUPRA), WE FIND THAT THE CIT(A) HAS TAKEN NOTE OF THE SIMILAR EXPENDITURE CLAIMED BY THE ASSESSEE AND ALLOWED BY THE ASSESSING OFFICER IN SC RUTINY ASSESSMENT PROCEEDINGS IN ASSESSMENT YEAR 2006-07 AND 2007-08. PER CIT(A), THE EXPENSES INCURRED WERE NOT HELD TO BE BOGUS BY THE ASSESSING OFFICER. ACCORDINGLY, THE CIT(A) HAS RESTRICTED THE DISALLOW ANCE TO 15% ONLY OF THE EXPENDITURE I.E. ` .14,23,278/-. IT IS, IN THIS BACKGROUND OF FACTS AND CIRCUMSTAN CES THAT THE ASSESSEE ON THE ONE HAND IS IMPUGNING THE ORDER OF THE CIT(A ), WHEREIN ALL THE THREE DISALLOWANCES HAVE BEEN PARTLY CONFIRMED; WHEREAS, THE REVENUE, ON THE OTHER HAND IS AGGRIEVED AGAINST THE ORDER OF THE CI T(A) ON THE GROUND THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HAVE BEEN WRONGLY RESTRICTED. 7. OPENING ARGUMENTS, THE AR FOR THE ASSESSEE REFE RRED TO THE FINDINGS OF THE ASSESSING OFFICER AND CIT(A) AND VEHEMENTLY CONTENDED THAT ON THE BASIS OF MATERIAL AVAILABLE ON RECORD, THE CIT(A) S HOULD HAVE OVERRULED THE FINDINGS OF THE ASSESSING OFFICER IN TOTO INSTEAD O F PARTLY CONFIRMING THE SAME. THE SUBMISSION OF THE REVENUE BEFORE US IS TH AT THE CIT(A) HAS WRONGLY RESTRICTED THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER BY ADMITTING ADDITIONAL EVIDENCE WITHOUT GIVING ANY OP PORTUNITY TO THE ASSESSING OFFICER. TO BUTTRESS HIS PLEA, THE DR HAS REFERRED TO THE RELEVANT PORTION OF I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 14 44 476 & 1506 76 & 1506 76 & 1506 76 & 1506/M/ /M/ /M/ /M/11 1111 11 5 THE CIT(A)S ORDER STATING THAT SOME ADDITIONAL EVI DENCES BY WAY OF DETAILED STATEMENTS HAD BEEN FILED BY THE ASSESSEE IN APPEAL . IN REBUTTAL, THE AR FOR THE ASSESSEE HAS NOT SERIO USLY CONTROVERTED THE SUBMISSIONS OF THE DR WITH REGARD TO FILING OF ADDI TIONAL EVIDENCE BEFORE THE CIT(A). 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AT LEN GTH AND ALSO GONE THROUGH THE ORDERS OF ASSESSING OFFICER AS WELL AS THAT OF THE CIT(A). ADMITTEDLY, THE ASSESSING OFFICER HAS MADE 3 ADDITI ONS I.E. DISCREPANCY IN COMPUTATION OF STOCK, TRAVEL AND TRANSPORT EXPENSES AND DISCOUNT CHARGES (SUPRA). WE FIND THAT IN PARA 4.1 OF CIT(A)S ORDER THAT THE ASSESSEE HAD FILED SOME DETAILED STATEMENT IN RESPECT OF COMPUTATION O F STOCK AND PLACED RELIANCE ON THE SAME TO CONTROVERT THE FINDINGS OF THE ASSESSING OFFICER. IN PARA 4.2, WE FIND THAT THE CIT(A) BY PLACING RELIAN CE ON THE SAID DETAILS HAS TAKEN TO ASSESSEES SUBMISSION TO BE THE CORRECT EX PLANATION. 9. SIMILARLY, WE ALSO FIND THAT REGARDING LEDGER A CCOUNT SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) AS WELL AS SUPPORTING DE TAILS FILED BY THE ASSESSEE QUA DISCOUNTS IN QUESTION, NO OPPORTUNITY HAS BEEN GIVEN TO THE ASSESSING AUTHORITY TO CONTEST THE DETAILS FILED BY THE ASSESSEE IN APPEAL. THIS IN OUR OPINION IS NOT SUBSTANTIVE COMPLIANCE O F RULE 46A (3) OF THE INCOME TAX RULES 1962, WHICH READS AS UNDER: (3) THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE C ASE MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE ASS ESSING I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .1 11 14 44 476 & 1506 76 & 1506 76 & 1506 76 & 1506/M/ /M/ /M/ /M/11 1111 11 6 OFFICER HAS BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS -EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. A BARE PERUSAL OF THE ABOVE SAID RULES MAKES IT C LEAR THAT BEFORE ANY ADDITIONAL EVIDENCE OR DOCUMENT IS TAKEN ON RECORD BY THE CIT(A), NECESSARY OPPORTUNITY OF HEARING HAS TO BE AFFORDED TO THE AS SESSING OFFICER. WE SEE FROM THE IMPUGNED ORDER THAT NO SUCH OPPORTUNITY AS PROVIDED BY THE CIT(A) TO THE ASSESSING OFFICER IS FORTHCOMING. IN THIS MA NNER, IN OUR OPINION, THERE HAS BEEN NON-COMPLIANCE OF THE RULE STATED ABOVE BY CIT(A). IN THESE CIRCUMSTANCES, WE DEEM IT APPROPRIATE THAT THE ASSE SSING OFFICER SHALL REDECIDE THE THREE ADDITIONS MADE IN THE ASSESSMENT PROCEEDINGS AFRESH IN ACCORDANCE WITH LAW AFTER ACCORDING REASONABLE OPPO RTUNITY OF HEARING TO THE ASSESSEE. 10. ACCORDINGLY, BOTH APPEALS STAND ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON WEDNESDAY, THE 10 TH OF OCTOBER, 2012 AT CHENNAI. SD/ - SD/ - (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER CHENNAI, DATED, THE 10.10.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.