The ACIT, Circle-9, Surat V. M/s. Navjivan Synthetics, Surat

ITA 1632/AHD/2011

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2370 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 15-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: J P SHAH
• Keywords: Income from undisclosed sources
• Section: 143(3); 147; 148

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 1632/AHD/2011 / ASSESSMENT YEAR: 2006-07 ACIT, CIRCLE-9, SURAT .. APPELLANT VS M/S. NAVJIVAN SYNTHETICS, SURVEY NO.414-416, RESHAMWALA COMPOUND, VASTA DEVDI ROAD, SURAT .. RESPONDENT PAN : AABFN 9913 E REVENUE BY : SMT. SONIA KUMAR, SR.DR ASSESSEE(S) BY : SHRI J.P. SHAH, AR / DATE OF HEARING 25/02/2016 /DATE OF PRONOUNCEMENT 31/03/2016 / O R D E R PER SHAILENDRA K. YADAV, JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, SURA T DATED 28.02.2011 FOR ASSESSMENT YEAR 2006-07, ON THE FOLL OWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.6,81,352/- MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE IN COLOUR CHEMICALS STOCK DESPITE THE FA CT THAT THE A.O. HAS CORRECTLY COMPUTED THE SAME ON TH E ITA NO. 1632/AHD/2011 ACIT VS. NAVJIVAN SYNTHETICS AY 2006-07 - 2 - BASIS OF DISCREPANCIES FOUND FOR WHICH NO EXPLANATI ON COULD BE OFFERED BY THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.25,05,350/- MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE IN EXCESS GREY STOCK DESPITE THE FACT TH AT THE A.O. HAS CORRECTLY VALUED THE GREY CLOTH OF 156585 @ RS.16 AMOUNTING TO RS.25,05,350/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.98,49,862/- MADE BY THE A.O. OUT OF UNACCOUNTED JOB WORK RECEIPT OF RS.1,06,82,382/- DESPITE THE FA CT THAT THE A.O. CORRECTLY COMPUTED THE SAME ON THE BA SIS OF JOB WORK CARRIED OUT BY THE ASSESSEE. 4. IT IS, THEREFORE, PRAYED THAT THE APPELLATE ORDER O F THE LD. CIT(A) MAY BE CANCELLED AND THE ORDER OF THE A. O. RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF DYING, FINISHING AND PRINTING JO B WORK OF ART SILK GREY CLOTH. IT FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 28.12.2006 DECLARING TOTAL INCOME AT RS.13,16,126. THE CASE OF THE ASSESSEE WAS REOPEN ED U/S 147 OF THE INCOME-TAX ACT AND NOTICE U/S 148 WAS ISSUED ON 11.08.2008 AND SERVED UPON THE ASSESSEE. SUBSEQUE NTLY, THE ASSESSMENT WAS FINALIZED U/S 143(3) R.W.S. 147 OF T HE ACT ON 24.12.2009 BY THE ASSESSING OFFICER, BY MAKING ADDI TION ON FOLLOWING COUNTS:- I. DIFFERENCE IN COLOUR CHEMICAL STOCK RS. 6,81,3 52/- II. EXCESS GREY STOCK - RS. 25,05,350/- III. UNACCOUNTED JOB WORK RECEIPT - RS.1,06,82,382 TOTAL - RS.1,38,69,084 ITA NO. 1632/AHD/2011 ACIT VS. NAVJIVAN SYNTHETICS AY 2006-07 - 3 - 2.1 THE FIRST ISSUE BEFORE US IS WITH REGARD TO THE DIFFERENCE IN COLOUR CHEMICALS STOCK AT RS.6,81,352/- MADE BY ASS ESSING OFFICER. MATTER WAS CARRIED BEFORE THE FIRST APPEL LATE AUTHORITY WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND IT WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSING OFFICER HAS NOT CONSIDERE D THE EXPLANATIONS GIVEN BY THE ASSESSEE. BEFORE THE CIT (A), THE ASSESSEE SUBMITTED THE COLOUR CHEMICAL ACCOUNT AS O N 09.03.2006, RECTIFIED COLOUR CHEMICAL ACCOUNT UPTO 09.03.2006 AND THE COLOUR CHEMICAL ACCOUNT OF WHOLE FY 2005-06 . BESIDES, THE ASSESSEE ALSO SUBMITTED BEFORE THE CIT(A) THE C HART OF FY 2002-03 TO 2005-06, SHOWING OPENING STOCK, PURCHASE S, CONSUMPTION CLOSING STOCK, DYING PRINTING JOB WORK RECEIPTS AND CONSUMPTION IN PERCENTAGE WHICH IS AS UNDER:- FINANCIAL YEAR 2002-03 RS. 2003-04 RS. 2004-05 RS. 2005-06 RS. OPENING STOCK 6,19,790 4,16,641 10,25,815 4,18,389 PURCHASES 44,82,278 36,98,950 30,32,346 36,48,830 TOTAL 51,02,068 41,15,591 40,58,161 40,67,219 CONSUMPTION 46,85,427 30,89,776 36,39,772 36,01,754 CLOSING STOCK 4,16,641 10,25,815 4,18,389 4,65,465 DYEING/PRINTING JOB WORK 2,07,05,463 1,79,67,636 1,96,07,365 2,41,84,300 CONSUMPTION IN% 22.63% 17.20% 18.56% 14.89% 2.2 THE ASSESSEE CLAIMED THAT THE ASSESSING OFFICER HAS NOT VERIFIED THE INVENTORY OF STOCK OF COLOUR CHEMICALS AS ON 08.03.2006 AND THE ASSESSEE BROUGHT TO THE NOTICE O F THE ASSESSING OFFICER THAT SR. NO.71,76,78,79,81,88,89, 102,103 & 106 THE AMOUNT OF COLOUR CHEMICAL NOT STATED. THE ASSESSING ITA NO. 1632/AHD/2011 ACIT VS. NAVJIVAN SYNTHETICS AY 2006-07 - 4 - OFFICER DID NOT CONSIDER THE STATEMENT THAT CERTAIN GOODS WERE RECEIVED BUT BILLS WERE RECEIVED AFTER SURVEY, DIFF ERENCE IN BILL AMOUNT AND WRONG POSTING MISTAKE IN ENTRY. THE ASS ESSEE SUBMITTED ALL THE MATERIAL FACTS BEFORE THE CIT(A) WHO, AFTER CONSIDERING THE SAME, HAS RIGHTLY DELETED THE ADDIT ION MADE ON ACCOUNT OF DIFFERENCE IN COLOUR CHEMICAL STOCK. THE REFORE, IN OUR CONSIDERED OPINION, THE REASONED FACTUAL FINDIN G OF THE CIT(A) ON THIS ISSUE NEEDS NO INTERFERENCE FROM OUR SIDE WHICH IS CONFIRMED. THUS, THIS GROUND OF THE REVENUE IS D ISMISSED. 3. NEXT ISSUE IS WITH REGARD TO THE ADDITION OF RS. 25,05,350 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERE NCE IN EXCESS GREY STOCK. IN THIS REGARD, THE STAND OF TH E ASSESSEE HAS BEEN THAT THE ASSESSING OFFICER NEITHER CONSIDERED THE NATURE OF BUSINESS NOR PROPERLY TAKEN THE STOCK OF GREY CL OTH AS PER REGISTER. THE ASSESSING OFFICER STATED THAT THE STO CK OF GREY CLOTH AS PER INVENTORY AS ON 08.03.2006 OF 5,90,696 METERS, WHEREAS THE LOT REGISTER SHOWED THE STOCK OF 7,47,2 81 METERS, MEANING THEREBY LESS STOCK OF GREY CLOTH WAS FOUND AT 1,65,585 METER. THE ASSESSEE EXPLAINED TO THE ASSES SING OFFICER THAT THE DIFFERENCE WAS NOT OF 1,65,585 MET ERS BUT IT WAS 1,56,585 METERS. HE ALSO SUBMITTED THE STATEMEN T SHOWING THE LOTS ISSUED BEFORE 09.03.2006 BUT BILLS WERE NO T ISSUED. THE STATEMENT SHOWED THE DETAILS LIKE DATE, INVOICE NO. , NAME OF THE PARTY, PIECES, FINISHED METERS, RATE, RS., LOT NO., PAN NO. AND POSTAL ADDRESS. THE ASSESSEE EXPLAINED 1,56,585 MET ERS AS UNDER:- ITA NO. 1632/AHD/2011 ACIT VS. NAVJIVAN SYNTHETICS AY 2006-07 - 5 - 1,32,545 METERS FINISHED GOODS AS PER STATEMENT (THE BILLS ISSUED AFTER SURVEY I.E. 09.03.2006) 24,040 METERS SHORTAGE / SHRINKAGE AT 15.35% ----------- 1,56,585 TOTAL GREY CLOTH METERS ======== 3.1 THE ASSESSING OFFICER MADE AN ADDITION OF RS.25 ,05,350/- (1,56,585 METERS X RS.16 PER METER VALUE OF CLOTH). IN THIS BACKGROUND, THE CIT(A), HAVING CONSIDERED THE SUBMI SSIONS OF THE ASSESSEE, CONFIRMATION LETTERS FROM FEW PARTIES MENTIONING THE DELIVERY TIME OF GREY CLOTH AFTER DYING AND PRI NTING JOB WORK AND ALSO CONSIDERING THE DATE ON WHICH THEY RECEIVE D BILLS OF THE SAME AS FURTHER EVIDENCE OF THE ASSESSEE, RIGHT LY DELETED THE ADDITION MADE ON THIS COUNT BY THE ASSESSING OF FICER ON THE GROUND THAT THE METERS OF GREY CLOTH WAS EXPLAINED BY THE ASSESSEE. THESE REASONED FACTUAL FINDINGS OF THE CI T(A) ON THIS ISSUE NEED NO INTERFERENCE FROM OUR SIDE; WE UPHOLD THE SAME. ACCORDINGLY, THIS GROUND OF THE REVENUE IS REJECTED . 4. NEXT ISSUE IS WITH REGARD TO ADDITION OF RS.98,4 9,862/- MADE BY THE ASSESSING OFFICER OUT OF UNACCOUNTED JO B WORK RECEIPT OF RS.1,06,82,382/-. IT WAS NOTICED THAT T HE ASSESSING OFFICER HAS CONSIDERED THE GROSS RECEIPT AS NET PRO FIT. THE ASSESSEE SHOWED THE 2 BILLS BOX FILES AND NOTE BOOK NO. BF 8 FOR EXPENSES INCURRED FOR EARNING UNACCOUNTED JOB WORK RECEIPTS WHICH WERE FOUND AT THE TIME OF SURVEY AT THE OFFIC E PREMISE OF ASSESSEE, WHEREIN IT WAS MENTIONED IN THE LIST 'BOO KS FOUND BUT NOT SEIZED'. THE CIT(A) PERUSED THE NOTE BOOK A S WELL AS 2 BILLS BOX FILES WHICH CLEARLY CONTAINED DETAILS LIK E RATE PER ITA NO. 1632/AHD/2011 ACIT VS. NAVJIVAN SYNTHETICS AY 2006-07 - 6 - METER, THE MONTH OF UNACCOUNTED DYING PRINTING JOB WORK WITH TOTAL WORK DONE IN METER AND EXPENSES LIKE COAL, CH EMICALS, REPAIRING, AMOUNT PAID TO LABOUR FOR DYING PRINTING JOB WORK, TEMPO HIRING CHARGES AND SALARY PAID TO THE OTHER W ORKING PERSONS TO EARN UNACCOUNTED INCOME. AFTER CONSIDERI NG THE FACTS, CIT(A) HAS RIGHTLY COME TO THE CONCLUSION TH AT AS UNACCOUNTED RECEIPTS WERE TAXABLE AND ACCORDINGLY UNACCOUNTED EXPENSES INCURRED FOR EARNING UNACCOUNT ED INCOME SHOULD BE DEDUCTIBLE. HE HAS ALSO CONSIDERE D THE SUMMARY OF G.P. WORKING AND P & L A/C. MADE FOR UNACCOUNTED JOB WORK RECEIPTS AND UNACCOUNTED EXPEN SES. THE ASSESSING OFFICER HAD NOT CONSIDERED THE 2 BILLS BO X FILES AND NOTE BOOK NO. AS 6,7 & 8 WHICH WAS IN THE ANNEXURE BF-1 I.E. 'INVENTORY OF BOOK OF A/C. ETC. FOUND' AT THE TIME OF SURVEY WHILE FRAMING THE ASSESSMENT ORDER THOUGH HE HAS CH ECKED THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER DID NOT F IND ANY DEFECT IN THE REGULAR BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, WHICH SHOWS THAT THE UNACCOUNTED JOB RECE IPT AND UNACCOUNTED EXPENSES INCURRED MIGHT HAVE CONSIDERED . THE ASSESSEE HAS SHOWN GROSS PROFIT AT 21.97% AND NET P ROFIT OF RS.13,29,375/- I.E. 13.72% OF UNACCOUNTED INCOME, I .E., OUT OF BOOKS OF ACCOUNTS WAS FOUND REASONABLE BY THE CIT(A ). ACCORDINGLY, ADDITION OF RS.8,32,520/- (RS.13,29,37 5/- NET PROFIT LESS RS.4,96,855/- SHOWN AS DYEING AND PRINT ING NET INCOME IN THE TRADING ACCOUNT AT THE TIME OF FILING RETURN) OUT OF ADDITION MADE ON ACCOUNT OF RS.1,06,82,382/- WAS CO NFIRMED BY THE CIT(A) AND BALANCE WAS DELETED. THESE REASO NED FACT BASED FINDINGS OF THE CIT(A) NEED NO INTERFERENCE F ROM OUR SIDE; ITA NO. 1632/AHD/2011 ACIT VS. NAVJIVAN SYNTHETICS AY 2006-07 - 7 - WE UPHOLD THE SAME. THUS, THIS GROUND OF THE REVENU E IS ALSO DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE COURT ON 31 ST OF MARCH 2016 AT AHMEDABAD. SD/- SD/- ( MANISH BORAD ) ACCOUNTANT MEMBER (SHAILENDRA K . YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 31/03/2016 *BT / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT. 3. && ' / CONCERNED CIT 4. ' ( ) / THE CIT(A), 5. ()* $++ , , / DR, ITAT, AHMEDABAD 6. *, / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) ! ' , / ITAT, AHMEDABAD