Appeal details
Counselvise Citation
[2010] 136 COUNSELVISE.COM (IT) 5927 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 10 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-06-2010
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Next Hearing Date
26-05-2010
Assessment Year
2005-2006
Appeal Filed On
08-05-2008
Judgement Text
ITA.1583-84/AHD/08 A.YS. 2004-05 & 05-06. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , SURAT CAMP. BEFORE SHRI T.K. SHARMA AND SHRI D.C. AGRAWAL. ITA. NO.1583 & 1584/AHD/2008 (ASSESSMENT YEARS:2004-05 & 2005 -06 ) JAISAL SILK MILLS PVT. LTD., 1001-02, GOLWALA MARKET, RING ROAD, SURAT. VS INCOME TAX OFFICER, WARD 1(3), AAYAKAR BHAVAN, MAJURA GATE, SURAT. (APPELLANT) (RESPONDENT) PAN: AAAFJ 3759 B APPELLANT BY : SHRI DENNIS CHOKSI RESPONDENT BY : SMT. JYOTI LAXMI, SR. D.R. ( )/ ORDER PER SHRI D.C. AGRAWAL. THESE ARE THE TWO APPEALS FILED BY THE ASSESSEE FO R THE ASSESSMENT YEARS 2004-05 & 2005-06. AS THEY INVOLVE COMMON ISS UES, THEY ARE TAKEN UP TOGETHER FOR THE SAKE OF CONVENIENCE. I.T.A. NO.1583/AHD/2008 (A.Y.2004-05) . FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE :- ITA.1583-84/AHD/08 A.YS. 2004-05 & 05-06. 2 1. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.I.T.(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF COMMISSION E XPENSES, AMOUNTING TO RS.5,.15,541/- AS MADE BY THE A.O. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.I.T.(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.1,84,601/- AS MADE BY THE A.O., BY ALLEGING UNDERVALUATION OF CLOSING STOCK O F WIP. 3. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.I.T(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.47,563/-, AS MADE BY THE A.O. OUT OF DEPRECIATION ON VEHICLES (OTHER THA N MOTOR-CAR) BY ERRONEOUSLY STATING THAT INCORRECT RATE OF DEPRE CIATION HAS BEEN APPLIED. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS OF PROCESSING OF RAW SILK CLOTH ON JOB WOR K BASIS AND TRADING TEXTILE CLOTH. 3. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF C OMMISSION EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. NO TICED THAT ASSESSEE HAS CLAIMED A SUM OF RS. 5,15,541/- AS COMMISSION PAID TO VARIOUS PARTIES AS UNDER:- NAME OF THE PARTY PARTICULARS. AMOUNT (RS.) PUKHRAJ SETHUIA FOR SALE OF MATERIAL 2,32,185 OM PRAKASH SHARMA -DO- 50,200 DIPAK M.SHARMA -DO- 49,220 LALCHAND -DO- 49,596 L. KISHANCHAND -DO- 1,10,290 ITA.1583-84/AHD/08 A.YS. 2004-05 & 05-06. 3 LALIT TEX -DO- 24,050 TOTAL 5,15,541 4. THE A.O. REQUIRED THE ASSESSEE TO FILE CONFIRMAT ION AND EVIDENCE WITH REGARD TO EXACT NATURE AND QUANTUM OF SERVICES REND ERED BY THE PERSONS TO WHOM THE COMMISSION IS PAID FOR PROCURING SALES. HO WEVER, NO EVIDENCE WAS FURNISHED. THE A.O. ACCORDINGLY, HELD THAT THIS EXPENDITURE WAS NOT INCURRED EXCLUSIVELY FOR THE PURPOSES OF ASSESSEES BUSINESS AND IN SPITE OF THE OPPORTUNITY PROVIDED NO EVIDENCE IN SUPPORT OF THE CLAIM HAS BEEN FILED. HE ACCORDINGLY, DISALLOWED THIS SUM U/S. 37 OF THE ACT. 5. THE LD. C.I.T.(A) CONFIRMED THE ADDITION ON THE GROUND THAT ASSESSEE FAILED TO SHOW ANY EVIDENCE REGARDING SERVICES REN DERED BY THESE PARTIES. HE REFERRED TO THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF LAXMINARAYAN MADANLAL (86 ITR- 418). 6. BEFORE US LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED FOLLOWING EVIDENCE IN SUPPORT OF THE CLAIM OF COMMI SSION. CONFIRMATION OF THE AGENTS, GIVING THEIR NAME, ADD RESS AND PAN; DETAIL OF TDS ON THE SAID PAYMENTS; PROOF THAT THE PAYMENT S HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES; DETAIL OF SALES (I.E. JOB-CHARGE INCOME) EFFECTED THROUGH THESE AGENTS. 7. HE SUBMITTED THAT THE ASSESSEE HAS THUS FULLY DI SCHARGED ITS ONUS OF PROVING THE COMMISSION PAYMENT. HE FURTHER SUBMITT ED THAT PAYMENT OF COMMISSION HAS WORKED IN ITS FAVOUR SINCE TURNOVER HAS INCREASED ITA.1583-84/AHD/08 A.YS. 2004-05 & 05-06. 4 SUBSTANTIALLY IN THE CURRENT YEAR AND AMOUNT OF GRO SS PROFIT AND NET PROFIT HAS ALSO IMPROVED. FURTHER, NONE OF THE COMMISSION AGENTS ARE RELATED PERSONS COVERED U/S. 40A (2) (B). HE SUBMITTED THAT THE A.O. HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTRADICT THE DETAILS SU BMITTED BY THE ASSESSEE. FURTHER TDS HAS BEEN MADE ON THESE PAYMENTS. 8. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT TH E ASSESSEE HAS NOT EXPLAINED AND FURNISHED EVIDENCE TO SHOW WHY PAYMEN TS WERE MADE AND WHAT THE AGENTS HAVE DONE FOR THE ASSESSEE. WHATEV ER DOCUMENTS WERE FILED WERE IN-COMPLETE. THE QUESTION OF TDS MADE BY THE A SSESSEE IS IRRELEVANT BECAUSE IT DOES NOT PROVE RENDERING OF SERVICES. TH E PAYMENT IS CERTAINLY NOT FOR BUSINESS PURPOSES. THE LD. D.R. SUBMITTED THAT THERE IS NO CONFIRMATION FROM THE RESPECTIVE PARTIES THAT AGENTS HAVE PROCUR ED THE ORDERS FROM THEM. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW WHAT ASSESSEE HAS DO NE IS TO COMPLETE PAPER WORK GIVING NAME AND ADDRESSES AND PAN OF THE COMMI SSION AGENTS AND PAYMENT TO THEM THROUGH ACCOUNT PAYEE CHEQUE. THIS NO-DOUBT SHOWS THE TRANSFER OF MONEY TO THE IDENTIFIED PERSONS BUT DOE S NOT SHOW AS TO WHAT EXACTLY THE SERVICES HAVE DONE FOR THE ASSESSEE. TH ERE IS NO CONFIRMATION OR DETAILS OF SERVICES RENDERED BY THE AGENTS TO THE A SSESSEE SUCH AS CONFIRMATION FROM PARTIES WHO HAVE MADE PURCHASES F ROM THE ASSESSEE THROUGH THESE AGENTS. WE WOULD THEREFORE, REQUIRE T HE ASSESSEE TO PRODUCE THESE AGENTS BEFORE THE A.O. SO THAT A.O. WOULD SAT ISFY HIMSELF AS TO WHAT EXACTLY HAS BEEN DONE FOR THE ASSESSEE. THE ASSESSE E IN TURN WILL PRODUCE CONFIRMATION FROM THE PARTIES WHO HAVE PURCHASED FR OM THE ASSESSEE THROUGH THESE AGENTS AND A.O. WILL SATISFY HIMSELF ABOUT GE NUINENESS OF SUCH CLAIM. ITA.1583-84/AHD/08 A.YS. 2004-05 & 05-06. 5 WE ACCORDINGLY RESTORE THE MATTER TO THE FILE OF TH E A.O. FOR SATISFYING HIMSELF ABLOUT THE GENUINENESS OF THE CLAIM. THIS G ROUND OF THE ASSESSEE IS ALLOWED ACCORDINGLY BUT FOR STATISTICAL PURPOSES. 10. THE NEXT ISSUE IS ABOUT UNDER VALUATION OF CLOS ING WORK IN PROGRESS OF RS.1,84,601/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS A.O. FOUND THAT ASSESSEE HAD 1,06,092.750 MTRS OF FINISHED FABRICS WHICH WAS VALUED BY THE ASSESSEE AT RS.1,32,616/- I.E. @ 1.25 PER MTR. THE A.O. WORKED OUT THAT COST OF PRODUCTION COMES TO RS.2.99 PER METER. THEREFORE , THERE WAS UNDER VALUATION OF WIP. IN THIS REGARD WE REFER TO FOLLOW ING FINDING GIVEN BY THE LD. C.I.T. (A) :- HOWEVER, IT IS SEEN THAT THE JOB CHARGES REALIZATI ON ARE OF RS.37,74,752/- IN THE MONTH OF MARCH,2004 ON A TOTA L OF 10,91,335 METERS OF CLOTH. THIS SHOWS THAT THE AVERAGE JOB CH ARGES REALIZATION DURING THE MONTH OF MARCH WAS AT RS.3.46 PER METER. AFTER DEDUCTING THE GP RATIO OF 13.71% SHOWN BY THE ASSESSEE THE CO ST OF PRODUCTION COMES TO RS.2.99 PER METER. THE A.O. HAS STATED THA T SINCE THE ASSESSEE HAS SHOWN WORK-IN-PROGRESS AT THE RATE OF RS.1.25 PER METER, THEREFORE, THE VALUE OF WORK-IN-PROGRESS SHOWN BY T HE ASSESSEE IS LESS BY RS.1.74 PER METER ON A CLOSING STOCK OF 1,06,092 .75 METERS OF FINISHED FABRICS. THE A.O. ASKED THE ASSESSEE AS TO WHY THE ADDITION BE NOT MADE. THE ASSESSEE DID NOT GIVE ANY EXPLANAT ION AND THE AO THEREFORE, STATED THAT THE ASSESSEE HAS UNDERVALUED THE CLOSING STOCK BY RS.1.74 PER METER AND HE THEREFORE, MADE ADDITION O F RS.1,84,601/-. THE LD. C.I.T. (A) CONFIRMED THE ADDITION ON THE AB OVE REASONING. ITA.1583-84/AHD/08 A.YS. 2004-05 & 05-06. 6 11. BEFORE US LD. A.R. FOR THE ASSESSEE SUBMITTED T HAT IT IS INCORRECT TO ADOPT THE JOB WORK RATE OF RS.3.46 PER METER IN THE MONTH OF MARCH, 2004 WHICH IS ACTUALLY AROUND RS.2 PER METER. FURTHER IN VALUATION OF STOCK, NOT ONLY GROSS PROFIT, BUT ALSO SALES AND ADMINISTRATIV E EXPENDITURE HAVE TO BE EXCLUDED. 12. ON THE OTHER HAND, LD. D.R. RELIED ON THE ORDER OF LD. C.I.T.(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD. C.I.T.(A) AS THE ASSESSEE IS UNABLE TO SUBS TANTIATE EXPLANATION THAT RATE OF AVERAGE JOB WORK SHOULD BE TAKEN AT RS.2 P ER METER AND NOT RS.3.46 PER METER AS TAKEN BY THE A.O. THE ADDITION IS ACC ORDINGLY CONFIRMED BUT A.O. WILL GIVE EFFECT TO THE OPENING STOCK IN THE N EXT YEAR. WITH THIS RIDER THIS GROUND OF THE ASSESSEE IS REJECTED. 14. THE LAST ISSUE IS ABOUT DISALLOWANCE OF DEPRECI ATION ON VEHICLES. THE ASSESSEE COMPANY CLAIMED DEPRECIATION @ 25% ON VEHI CLES OTHER THAN MOTOR CAR. THE A.O. HOWEVER APPLIED RATE OF 20% WHICH IS APPLICABLE FOR MOTOR CAR. THE ASSESSEE HAS HIMSELF APPLIED DEPRECIATION RATE OF 20% ON MOTOR CARS AND 25% ON VEHICLES OTHER THAN MOTOR CARS. 15. AFTER HEARING THE PARTIES WE RESTORE THE MATTER TO THE FILE OF THE A.O. TO VERIFY THE SAME AND IF CONTENTION IS FOUND CORRECT NO INTERFERENCE IS CALLED FOR. AS A RESULT THIS GROUND IS ALLOWED BUT FOR STA TISTICAL PURPOSES. ITA.1583-84/AHD/08 A.YS. 2004-05 & 05-06. 7 AS A RESULT APPEAL FILED BY THE ASSESSEE IS ALLOWE D BUT FOR STATISTICAL PURPOSES. I.T.A. NO.1584/AHD/08 A.Y.2005-06 . 16. IN THIS YEAR, THE FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE. 1. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.I.T.(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF COMMISSION E XPENSES, AMOUNTING TO RS.10,57,119/-, AS MADE BY THE A.O. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C.I.T.(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.41,465/-, AS MADE BY THE A.O. OUT OF DEPRECIATION ON VEHICLES (OTHER THA N MOTOR CAR) BY ERRONEOUSLY STATING THAT INCORRECT RATE OF DEPRE CIATION HAS BEEN APPLIED. 17. THE FIRST ISSUE IS REGARDING THE COMMISSION EXP ENSES OF RS.10,57,119/-. THE PARTIES TO WHOM THE PAYMENTS AR E MADE ARE SHOWN BY THE A.O. IN PARAGRAPH 3 OF HIS ASSESSMENT ORDER. T HE FACTS OF THE CASE, ARGUMENTS OF THE PARTIES AND ORDER OF THE LD. C.I.T . (A) ARE THE SAME AS IN THE ASSESSMENT YEAR 2004-05. FOR THE REASONS GIVEN BY US IN THE ASSESSMENT YEAR 2004-05 WE RESTORE THIS ISSUE TO TH E FILE OF THE A.O. TO GIVE OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE COMMISSI ON AGENTS. THE A.O. WILL SATISFY HIMSELF ABOUT THE NATURE OF SERVICES RENDER ED BY THEM AND ALSO IF CONSIDERED NECESSARY TO INQUIRE FROM THE PURCHASERS AS TO WHETHER THEY HAVE PURCHASED THE GOODS FROM THE ASSESSEE THROUGH THESE AGENTS. WE ITA.1583-84/AHD/08 A.YS. 2004-05 & 05-06. 8 ACCORDINGLY, RESTORE THIS MATTER TO THE FILE OF THE A.O. THIS GROUND OF THE ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. 18. THE NEXT GROUND IS REGARDING THE CLAIM OF DEPRE CIATION ON VEHICLES OTHER THAN MOTOR CARS. FOR THE REASONS STATED BY US IN THE A.Y. 2004-05, WE RESTORE THIS MATTER TO THE FILE OF THE A.O. TO VERI FY WHETHER DEPRECIATION ON MOTOR CAR IS CLAIMED AT 20% AND ON VEHICLES OTHER T HAN MOTOR CARS AT 25%. IF IT IS CORRECT THEN NO ADDITION IS CALLED FOR. 19. THUS, FOR THIS VERIFICATION WE RESTORE THE MATT ER TO THE FILE OF THE A.O. 20. AS A RESULT APPEAL FILED BY THE ASSESSEE IS ALL OWED BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 18/06/2010. SD/- SD/- (T.K. SHARMA ) (D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER. AHMEDABAD. DATED: 18/06/2010. S.A.PATKI. ITA.1583-84/AHD/08 A.YS. 2004-05 & 05-06. 9 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD.
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