Orient Steel and Industries Limited, Kolkata V. D.C.I.T Cir - 3,Kolkata, Kolkata

ITA 1572/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5026 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 03-03-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2013
• Court: TRIBUNAL
• Department Lawyers: N O N E
• Keywords: Business income; Audit objection; Assessment record; Tax effect
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO.1572/KOL/2013 ASSESSMENT YEAR: 2008-09 ORIENT STEEL & INDUSTRIES LTD. VS. DEPUTY COMMI SSIONER OF INCOME-TAX, (PAN:AAACO3183F) CIRCLE-3, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 03.03.2016 DATE OF PRONOUNCEMENT: 09.03.2016 FOR THE APPELLANT: SMT. NILIMA JOSHI, FCA FOR THE RESPONDENT: N O N E ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF CIT, KOLKATA DATED 28.03.2013. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-3, KOLKATA U/ S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2008-09 VIDE HIS ORDER DATED 20.12.2010. 2. WE HAVE HEARD THIS MATTER EX PARTE BECAUSE NONE IS PRESENT FOR AND ON BEHALF OF THE REVENUE. REVENUE HAS FILED A PETITION FOR ADJOURNME NT ASKING FOR ADJOURNMENT IN EIGHT MATTERS. THE REASON GIVEN BY REVENUE IN ITS PETITION DATED 0 2.03.2016. LD. COUNSEL SMT. NILIMA JOSHI VEHEMENTLY OPPOSED THE ADJOURNMENT PETITION STATING THE REASONS THAT THIS IS APPEAL AGAINST REVISION ORDER PASSED U/S. 263 OF THE ACT BY THE CI T AND APPEAL WAS FILED IN 2013 AND EVEN THE EFFECT GIVING ORDER TO THE ORDER OF CIT HAS ALREADY PASSED BY THE AO CREATING HUGE DEMAND. ACCORDING TO HER, THIS MATTER WAS ALREADY HEARD ON NUMBER OF OCCASIONS AND ON NONE OF THE OCCASIONS ASSESSEE ASKED FOR ADJOURNMENT. IN VIEW OF THESE FACTS, WE PROCEED TO HEAR THE MATTER EX PARTE FOR THE REASON THAT THE REVENUE IS SEEKING ADJOURNMENT ON FRIVOLOUS GROUND AND THIS IS A REGULAR FEATURE. HENCE, WITHOUT GIVING ADJOURNMENT , AS THE APPEAL IS PENDING SINCE 2013, WE PROCEEDED TO DECIDE IT EX PARTE. 3. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE REVISION ORDER OF CIT U/S. 263 OF THE ACT REVISING THE ASSESSMENT FRAMED BY AO U/S. 1 43(3) OF THE ACT DIRECTING THE AO TO CARRY OUT NECESSARY VERIFICATION AND ASSESS THE INCOME ON ACCOUNT OF INCLUSION OF EXCISE DUTY AND SALES TAX/VAT FROM THE TOTAL TURNOVER. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS E NGAGED IN THE MANUFACTURING OF HOT ROLLED, COLD STRIPS, FLAT ROLLED PRODUCTS, IRON AND NON-ALL OY STEEL AND VARIOUS COMPONENTS OF RAILWAYS. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCO UNTING. ORIGINAL ASSESSMENT WAS COMPLETED BY DCIT, CIRCLE-3, KOLKATA U/S. 143(3) OF THE ACT F OR RELEVANT AY 2008-09 AFTER SCRUTINIZING THE 2 ITA NO.1572/KOL/2013 ORIENT STEEL & IND. LTD. AY 2008-09 2 BOOKS OF ACCOUNT AND VARIOUS DETAILS AND DOCUMENTS FURNISHED BY ASSESSEE AS PER REQUISITION OF THE AO FROM TIME TO TIME. SUBSEQUENTLY, THE CIT-1, KOLKATA ON EXAMINATION OF ASSESSMENT RECORDS AND AUDITED ACCOUNTS OF THE ASSESSEE OBSERV ED THAT THE SALE IS EXCLUSIVE OF EXCISE DUTY AND SALES TAX/VAT. ACCORDING TO CIT, TOTAL EXCISE DUTY PAYABLE IS RS.20,22,78,780/- WHEREAS THE ASSESSEE HAS DEBITED A SUM OF RS.22,18,24,714/- ON ACCOUNT OF SUCH EXCISE DUTY. ACCORDING TO CIT, THE AO HAS FAILED TO APPLY HIS MIND TO THE FACTS STATED IN THE RETURN OF INCOME AND ACCOMPANYING ACCOUNTS WITHOUT CARRYING OUT NECESSAR Y VERIFICATION IN SPITE OF INCONSISTENCIES AND INACCURACY IN THE AUDITED ACCOUNTS IN RESPECT T O EXCISE DUTY AND SALES TAX. ACCORDING TO HIM, THE ORDER PASSED BY AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THEREFORE, HE SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO C ARRY OUT NECESSARY VERIFICATION AND FRAME ASSESSMENT. AGGRIEVED, ASSESSEE CAME IN APPEAL BEF ORE TRIBUNAL. 5. LD. COUNSEL FOR THE ASSESSEE BEFORE US, FIRST OF ALL, STATED THAT THIS REVISION PROCEEDING CARRIED OUT BY THE CIT U/S. 263 OF THE ACT IS IN TE RM OF AUDIT OBJECTION RAISED BY AUDIT PARTY AND THE RELEVANT NOTE PUT UP BY AUDIT PARTY READS AS UN DER: 1. AS PER SECH.-26: NOTES ON ACCOUNTS ATTACHED WI TH THE ANNUAL A/C.'S FOR THE A.V. 2008-09. IT WAS STATED THAT SALES IS EXCLUSIVE OF EXCISE DUTY, SALE S TAX. HOWEVER FROM THE DETAILS OF SALES AS GIVEN I N SEC.-13, IT WAS SEEN THAT SALES IS INCLUSIVE OF SAL ES TAX. A RECONCILIATION IS REQUIRED. AS PER SECH,-20 : NOTES ON ACCOUNTS & ANNEXURE-X OF TAR IT WAS STATED THAT CENVAT CREDIT AVAILED & UTILIZED WERE ADJUSTED IN RAW MATERIAL TO STORES CONSUMPTION A/C. NOW IF SALES IS INCLUSIVE OF EXCISE DUTY THAN TOTAL EXCISE DUTY PAYABLE BY THE ' A' FOR SALES WAS RS.20,22,78,780/-. BUT AS PER ANNEXURE-X PAID EXCISE DUTY OF RS.18,72,25,716/- BY DEDUCTING CENVAT A/C. 'A' FURTHER DEBITED OF RS.3,45,98,998/- ON A/C. OF EXCISE DUTY IN THE P&L. HENCE A DEBITED TOTAL AMOUNT OF RS.21,88,24,714/- (18,72,25,716 + 3,15,98,998), SO THIS WAS AN EXCESS DEBITED OF RS.1,95,45,934/- (22,18,24,714 - 20,22,78,780), SO THESE WAS UNDER A SST. IT OF INCOME OF RS.1,95,45,934/- HAVING TAX EFFECT OF RS.66,43,663 & INTT. U/S.234B RS.21,92,40 9/-, TOTAL TE RS.88,36,072. 2. AS PER SECH.-11 : LOANS & ADVANCES OF BALANCE SH EET A HAS SHOWN OF RS.1,41,77,134/- AS BALANCE WITH EXCISE & CUSTOMS DEPTT. FURTHER AS PER NOTE IN ANNEXURE- 'X' OF TAR CLOSING BALANCE OF CENVAT CREDIT LYING IN RG23A & RG23C AT THE YEAR AND ARE S HOWN AS LOANS & ADVANCES IN THE BALANCE SHEET. TOTAL BALANCE OF CENVAT CREDIT AS PER ANNEXU RE-'X' WAS RS.75,23,312/- (RG23A - RS.74,98,L06/- OF RG 23C - RS.25,206/-). A CAN AVAI L ON BY 50% CREDIT OF EXCISE DUTY IN THE PT YEAR ON PURCHASE OF CAPITAL GOODS IN RG23C A/C. IN THE B ALANCE 50% CAN BE AVAILED ON THE FIRST DAY OF THE NEXT YEAR. SINCE 'A' HAD AVAILED CREDIT OF RS.1 3,02,456/- IN RG23C, THERE WAS BALANCE OF EQUAL AMOUNT WAS TO BE ADDED BACK IN THE LOANS & ADVANCES A/C. THUS TOTAL BALANCE UNDER THE HEAD LOANS & ADVANCES WOULD BE RS.88,25,768/- ( 75,23,31 2/- + 13,02,456/-). HENCE EXCESS AMOUNT OF RS.53,51,366/- (1,41,77,134 - 88,25,768) UNDER THE HEAD LOANS & ADVANCES REQUIRED TO BE ADDED BACK, OMISSION OF RS.53,51,366/- HAVING TAX EFFECT OF RS.18,18,929/- & INTT. U/S.234B RS.6,00,247/- (TOTAL RS.24,19,176). 6. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE CITS ORDER WHEREIN IT IS OBSERVED THAT THE AO HAS ERRONEOUSLY ALLOWED THE CLAIM OF RS .22,1824,714/- INSTEAD OF RS.20,22,78,780/- 3 ITA NO.1572/KOL/2013 ORIENT STEEL & IND. LTD. AY 2008-09 3 UNDER THE HEAD EXCISE DUTY WHICH RESULTED IN UNDER ASSESSMENT OF INCOME BY A SUM OF RS.1,95,45,934/- AND ALSO THE AO OMITTED TO ADD BAC K AN AMOUNT OF RS.53,51,366/- BEING THE DIFFERENCE AS PER SCHEDULE 11 OF THE ACCOUNTS UNDER THE HEAD LOANS AND ADVANCES. LD. COUNSEL FOR THE ASSESSEE STATED THAT ONLY CLERICAL MISTAKE ON ASSESSEES PART WAS THAT AS PER SCHEDULE 20 NOTES ON ACCOUNT IN THE ACCOUNTING POLICIES OF THE COMPANY UNDER THE HEAD SALES IT HAS BEEN MENTIONED AS, SALES ARE INCLUSIVE OF EXCISE DUTY ... SHE ARGUED THAT THIS MISTAKE WAS ADMITTED BUT THIS DOES NOT MAKE ANY DIFFERENCE IN T HE FIGURES OR FACTS BUT THIS EXCISE DUTY WAS NOT EXCLUSIVE BUT THIS WAS INCLUSIVE. THE DETAILS O F SALE IS GIVEN IN SCHEDULE 13 AND AUDITORS CERTIFICATE TO THIS EFFECT WAS ALSO FILED AND WHICH IS NOW ALSO ENCLOSED IN ASSESSEES PAPER BOOK AT PAGE 41, WHICH READS AS UNDER: TO WHOM IT MAY CONCERN WE HEREBY CERTIFY THAT SALES OF RS.1,40,54,30,011/ - (RUPEES ONE FORTY CRORES FIFTY FOUR LACS THIRTY THOUSAND & ELEVEN ONLY) IS INCLUSIVE OF EXCISE DUTY AS GIVEN IN SCHEDULE-13-SALES OF THE STATEMENT OF ACCOUNTS OF ORIENT STEEL & INDUSTRIES LTD. FOR THE FINANCIAL YEAR 2007-08 RELATING TO THE ASSESSMENT YEAR 2008-09. SD/- S. C. CHATURVEDI PARTNER MEMO NO. 12705 7. IT WAS EXPLAINED BY THE LD. COUNSEL THAT HOW THE EXCISE DUTY ON SALE ARISEN AT RS.20,22,78,780/- @ 16.32% OF SALES OF RS.144,17,32 ,087/-. SHE EXPLAINED THAT OUT OF TOTAL SALES OF RS.147,37,10,849/- THE CIT ONLY COMPUTED O R DEDUCTED PROCESSING CHARGES OF RS.3,19,78,762/- TO ARRIVE AT SALES FIGURE OF RS.14 4,17,32,087/-. ACCORDING TO HER, ACTUALLY AN AMOUNT OF RS.3,63,02,076/- RECEIVED FOR SCRAP AND W ASTE PRODUCT INCLUDES CAPTIVE CONSUMPTION OF RS.2,80,000/-, WHICH DOES NOT ATTRACT EXCISE DUT Y AND CANNOT BE TAKEN FOR CALCULATION OF EXCISE DUTY PAYABLE. SHE EXPLAINED THAT THERE WAS CHANGE IN EXCISE DUTY RATES FROM APRIL, 2007 TO FEBRUARY, 2008 AND THE RATE WAS 16% PLUS CE SS AND THEREAFTER FROM 2 ND MARCH, 2008, RATE WAS 14% PLUS CESS. HENCE, THE TOTAL EXCISE DUTY PA YABLE ON FINISHED GOODS AND WASTE PRODUCTS EXCLUDING CAPTIVE CONSUMPTION WAS RS.20,16,90,721/- NOT RS.20,22,78,780/- AS COMPUTED BY CIT. SHE ALSO EXPLAINED BY FACTS AND FIGURES THAT HOW CIT HAS ERRONEOUSLY ADDED THE CENVAT CREDIT TAKEN AT RS.1,87,22,55,716/-, WHICH SHOULD H AVE BEEN AT RS.18,79,57,899/- AND PAYMENT IN CASH OF RS.3,45,98,998/- AND ARRIVED AT RS.22,18,24 ,714/- FROM WHICH CIT HAS DELETED ONLY EXCISE DUTY PAYABLE ON FINISHED GOODS AND WASTAGE. ACCORDING TO HER, CIT HAS NOT CONSIDERED THE EXCISE DUTY PAID IN CASH OF RS.2,08,66,176/- ON RAW MATERIAL, STORES, CAPITAL GOODS ETC. AND 4 ITA NO.1572/KOL/2013 ORIENT STEEL & IND. LTD. AY 2008-09 4 THUS, HE HAS ERRONEOUSLY COMPUTED THE EXCISE AMOUNT OF RS.1,95,44,934/-. SHE ALSO EXPLAINED THAT THE DIFFERENCE OF RS.53,51,366/- BEING THE AMO UNT OF DIFFERENCE BETWEEN BALANCE LYING WITH EXCISE & CUSTOMS DEPARTMENT AS ON 31.03.2008 AND AS DECLARED IN THE ACCOUNTS AT RS.1,41,77,131/- I.E. RS.88,25,768/- COMPUTED BY CI T. SHE EXPLAINED THAT ONLY PART OF BALANCE OF RG23A AND RG23C I.E. OF OTHER CAPITAL GOODS BEIN G ONLY THE CRM UNIT AND NOT ADDED THE BALANCE OF WEST BENGAL UNIT AND OTHER SERVICE TAX RECEIVABLE AND CENVAT RECEIVABLE ON RAW MATERIAL PURCHASED IN MARCH, 2008. SHE HAS GIVEN CO MPLETE COMPUTATION IN ITS PAPER BOOK AT PAGE 14. ACCORDINGLY, THERE IS NO UNDER-ASSESSMENT OF EXCISE DUTY/SALES TAX/VAT PAYABLE AMOUNTING TO RS.1,95,45,934/- AND ALSO UNDER ASSESS MENT IN LOANS AND ADVANCES OF RS.53,51,366/-. SHE HAS EXPLAINED ON MERITS, FACTS WISE AND FIGURE WISE AND TALLIED THE FIGURES. ONCE THIS IS THE POSITION, THERE ARE NO SALES, WHIC H IS EXCLUSIVE OF EXCISE DUTY/SALES TAX/VAT AND THERE IS NO INFIRMITY IN THE LOANS AND ADVANCES BECAUSE THERE IS NO DIFFERENCE IN BALANCE LYING IN EXCISE AND CUSTOMS DEPARTMENT AND IN ITS A CCOUNTS. IN VIEW OF THE ABOVE EXPLANATION, WE FEEL THAT THE CIT HAS WRONGLY GONE ON PRESUMPTIO NS AND NOT GONE INTO THE FACTS. IN TERM OF THE ABOVE, THE ORDER OF AO IS PERFECTLY ALRIGHT AND CIT HAS COMPLETELY ERRED IN REVISING THE ASSESSMENT, WHICH WAS NEITHER ERRONEOUS NOR PREJUDI CIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, THE ORDER OF CIT(A) IS REVERSED AND APPEAL OF ASSES SEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.03.2016 SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9 TH MARCH, 2016 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ORIENT STEEL & INDUSTRIES LTD., 2, BRAB OURNE ROAD, 5 TH FLOOR, KOLKATA-700 001. 2. RESPONDENT DCIT, CIRCLE-3, KOLKATA. 3. CIT(A), KOLKATA 4. CIT, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .