Asst.Commissioner of Income Tax-1(2), RAIPUR (CG) V. M/s Rija Steel & Power Pvt .Ltd, RAIPUR (CG)

ITA 164/BIL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2439 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 10-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 145

Judgement Text

, RA IPUR IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BEFORE S/SHRI MUKUL SHRAW AT (JM) SHAMIM YAHYA (AM) , , ./ I.T.A. NO.164/BIL /2012 ( / ASSESSMENT YEAR :2008 - 2009 ) ACIT - 1(2) CENTRAL REVENUE BUILDING, CIVIL LINES,RAIPUR. / VS. M/S. RIJA STEEL & POWER PVT LTD., C - 27, SECTOR - 1, DEVENDRA NAGAR, RAIPUR ./ ./ PAN/GIR NO. : AACCR 9685 H ( / APPELLANT ) .. ( / RESPONDENT ) C.O.NO.08/BIL/2013 (ARISING OUT OF ./ I.T.A. NO.164/BIL/2012 ( / ASSESSMENT YEAR :2008 - 2009 ) M/S. RIJA STEEL & POWER PVT LTD., C - 27, SECTOR - 1, DEVENDRA NAGAR, RAIPUR / VS. ACIT - 1(2) CENTRAL REVENUE BUILDING, CIVIL LINES,RAIPUR ./ ./ PAN/GIR NO. : AACCR 9685 H CROSS OBJECTOR .. APPELLANT) / APPELLANT BY : SRI D.K.JAIN CROSS OBJECTOR BY : SHRI SUNIL AGARWAL / DATE OF HEARING : 11 - 02 - 2016 / DATE OF PRONOUNCEMENT : 12 - 02 - 2016 / O R D E R PER MUKUL SHRAWAT, JM 2 I.T.A. NO.164 /BIL/2012 CO NO.08/BIL.2013 ASSESSMENT YEAR :2008 - 09 THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 21.06.2012 OF THE LD CIT(A), RAIPUR, PERTAINING TO THE ASSESSMENT YEAR 2008 - 09. 2. THE GROUNDS RAISED BY THE REVENUE ARE DECIDED AS FOLLOWS: 3. G ROUND NO.1 IS AS UNDER: 1. WH ETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.57,36,072/ - MADE BY THE AO ON ACCOUNT OF ALLEGED VALUE OF UNRECORDED SALES THEREBY NO ACCEPTING THE EXCESSIVE BUR NING LOSS CLAIMED BY THE ASSESSEE COMPANY., 4. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE I.T.ACT, 1961 DATED 31/12/2010 WERE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF RE - ROLLED ITEMS & ANGLES, CHANNELS, ETC. I T IS WORTH TO MENTION THAT THIS CASE WAS SELECTED FOR SCRUTINY IN THE LIGHT OF THE DIRECTION ISSUED B Y CBDT. T HE ASSESSING OFFICER HAS EXAMINED THE BOOKS OF ACCOUNT AND THEREUPON CAME TO KNOW THAT THE YIELD O F THE FINISHED PRODUC TS WAS 87.90% AND YIELD OF SCRAP WAS 5.77%. THE BALANCE PERCENTAGE I.E. 6. 33% WAS CLAIMED AS BURNING LOSS. I N COMPLIANCE TO SHOW CAUSE NOTICE, THE ASSESSEE HAD FURNISHED MONTH - WISE DETAILS OF PRODUCTION. THE AO HAS REPRODUCED THE M ONTH - WISE CHART, WHEREIN, THE ASSESSEE HAS FURNISHED QUANTITATIVE DETAILS OF THE PRODUCTION OF THE FI NISHED GOODS AND MONTH - WISE PERCENTAGE OF BURNING LOSS, WHICH HAD VARIED FROM 7% TO 3.97%, HENCE THE AVERAGE OF THE YEAR WAS 6.32% . A S AGAINST THAT , THE AO HAS APP LIED UNIFORM BURNING LOSS @ 4% FOR EVERY MONTH AND DUE TO THAT REASON, HE HAS HELD THAT 3 I.T.A. NO.164 /BIL/2012 CO NO.08/BIL.2013 ASSESSMENT YEAR :2008 - 09 THERE WAS EXCESS PRODUCTION IN SOME OF THE MONTHS. AS PER SAID CHART, THE TOTAL EXCESS PRODUCTION AS PER THE AO WAS 155.880 MT . 4.1 THE ASSESSEE HAS PLEADED THAT IN THE IMMEDIATE PAST ASSESSMENT YEAR I..E A. Y. 2007 - 08, THE REVENUE DEPARTMENT HAD ACCEPTED THE BURNING LOSS AS DISCLOSED BY T HE ASSESSEE. IT HAS ALSO BEEN INTIMATED THAT THE BURNING LOSS AS DISCLOSED BY THE ASSESSEE HAS ALSO BEEN ACCEPTED BY THE E XCISE DEPARTMENT. THERE WAS A QUERY ABOUT THE CONSUMPTION OF THE ELECTRICITY. I N COMPLIANCE, THE ASSSESSEE HAS STATED THAT THE ELECTRICITY CONSUMPTION DEPENDS UPON THE BREAKDOWN OF THE ELECTRICITY AS WELL AS THE QUALITY OF THE RAW MATERIAL USED FOR MANUF ACTURING. T HE AO WAS NOT CONVINCED AND HELD THAT IN THIS LINE OF INDUSTRY, THE BURNING LOSS WAS GENERALLY ABOUT 4%. T HE ASSESSEE HAS ALSO INFORMED THAT IN THE SUBSEQUENT ASSESSMENT YEAR I.E. A.Y. 2009 - 2010, THE YIELD WAS 96.99%, WHICH HAS RESULTED INTO A BURNING LOSS OF 3.01%. A CCORDING TO THE AO, THE BURNING LOSS FOR T HE YEAR UNDER CONSIDERATION WAS EXCESSIVE. T HE AO HAS THEREFORE HELD THAT THE ASSESSEE HAS SUPPRESSED THE SALES BY SHOWING EXCESSIVE BURNING LOSS. T HE AO HAS COMPUTED THE ALLEGED UNRECOR DED SALES AS PER THE FOLLOWING CALCULATION: SL.NO. BURNING LOSS CLAIMED BURNING LOSS ALLOWABLE @ 4% EXCESS BURNING LOSS 1. 416.780 263.44 155.880 2. VALUE OF UNRECORDED SALES @ RATE ADOPTED FOR CLOSING STOCK 36798 MT 3. TOTAL ADDITION 57,36,072/ - 4 I.T.A. NO.164 /BIL/2012 CO NO.08/BIL.2013 ASSESSMENT YEAR :2008 - 09 BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE LD CIT(A) HAS EXAMINED THE RECORD IN THE LIGHT OF FEW CASE LAWS AND THEREUPON HELD AS UNDER: I FIND THAT THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE APPELLANT HAS MAINTAINED QUANTITATIVE DETAILS. IN THE CASE OF CIT VS. SMT POONAM RANI 326 ITR 223 (DELHI) IT WAS HELD THAT WHERE AN ADDITION WAS MADE BECAUSE OF MERE FALL IN GROSS PROF IT WITHO UT ANY DEF ECT IN THE ACCOUNTS EXCEPT FOR THE ABSENCE OF STOCK REGISTER - DELETION OF ADDITION WAS UPHELD BY THE HIGH COURT. IN ASHOK REFRACTORIES PVT LTD. VS. CIT (2005) 148 TAXMAN 635 (CAL.) IT WAS HELD THAT THE REJECTION OF THE BOOKS OF ACCOUNT ONLY IN TH E ABSENCE OF STOCK REGISTER HAVING REGARD TO THE AVAILABILITY OF THE OTHER MATERIALS FROM WHICH THE INCOME COULD BE DEDUCED, WAS CONTRARY TO THE PROVISO TO SECTION 145 UNLESS THERE WAS A FINDING OR OPINION EITHER THAT THE RECORDS WERE INCORRECT AND INCOMPL ETE OR THAT THE METHOD OF A CCOUNTING APPLIED WAS SUCH THAT THE INCOME COULD NOT BE DEDUCED FROM THE ACCOUNTS SO MAINTAINED BY THE APPELLANT. T HE GROUND THAT THE ITEM WISE STOCK REGISTER WAS NOT MAINTAINED AND, THEREFORE, THE ACCOUNTS WERE SOUGHT TO BE REJ ECTED ,WAS ABSOLUTELY PERVERSE AND COULD NOT BE SUSTAINED IN THE ABSENCE OF ANY OPINION EXPRESSED OR ANY FINDING ARRIVED AT TO THE EFFECT THAT THE ACCOUNTS MAINTAINED WERE INCORRECT OR THAT THE METHOD OF ACCOUNTING APPLIED WAS SUCH THAT THE INCOME COULD N OT BE DEDUCED. IN THE ABSENCE ANY SUCH FI NDING, THE ACCOUNT BOOKS COULD NOT BE REJECTED MERELY ON THE GROUND THAT ITEM WISE STOCK WAS NOT MAINTAINED IN THE STOCK REGISTER. THUS THE REJECTION OF ACCOUNT BOOKS WAS NOT JUSTIFIED. IN ITO V. BOTHRA INTERNATIONA L |2008] 117 TTJ (JD.) 672 IT WAS HELD THAT WHERE THE A.O LAID NO MATERIAL ON RECORD TO SUGGEST THAT THERE HAD BEEN ANY SUPPRESSION OF INCOME NOR THAT THE APPELLANT CARRIED ANY ACTIVITY OUTSIDE THE BOOKS, MERELY BECAUSE OF DECLINE IN GP RATE, BOOKS OF ACCO UNT COULD NOT BE REJECTED. IN DELHI SECURITIES PRINTERS V. DY . CIT [2007] 15 SOT 353 (DELHI) IT WAS HELD THAT REJECTION OF BOOKS OF ACCOUNT MERELY BECAUSE APPELLANT HAS NOT MAINTAINED STOCK REGISTER, WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN BOOKS OF AC COUNT OF ANY NATURE WHATSOEVER, COULD NOT BE SAID TO BE JUSTIFIED. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, AS ALSO DECISIONS RELIED UPON BY THE APPELLANT AND THOSE CITED ABOVE, I AM OF THE VIEW THAT THERE WAS NO FIN DING TO THE EXTENT THAT THE ACCOUNTS WERE NOT CORRECT AND COMPLETE OR THAT THE A.O WAS OF THE OPINION THAT THE INCOME COULD NOT BE DEDUCED FROM THE ACCOUNTS MAINTAINED BY THE APPELLANT. IN THE ABSENCE OF SUCH CONCLUSIONS, SUCH ESTIMATED ADDITION, PARTICULARLY WITHOUT BRINGING ON RECO RD ANY INSTANCE OF UNDERVALUATION OF CLOSING STOCK OR SUPPRESSION IN SALES OR INF LATION IN PURCHASES OR EXPENSES, CANNOT BE MADE TO THE INCOME RETURNED BASED ON AUDITED ACCOUNT, HENCE, THE ESTIMATED ADDIT ION - BEING WITHOUT ANY EVIDENCE IS DELETED. 6. FR OM THE SIDE OF THE REVENUE, SHRI D.K.JAIN, LD D.R. APPEARED AND ARGUED THAT THE AO HAS VERIFIED THE COMPARABLE CASES AND THEREUPON ARRIVED AT THE CONCLUSION THAT THE BURNING LOSS WAS ABOUT 4% IN THIS LINE OF INDUSTRY. T HE 5 I.T.A. NO.164 /BIL/2012 CO NO.08/BIL.2013 ASSESSMENT YEAR :2008 - 09 ASSESSEE HAS NOT GIVEN ANY SATISF ACTORY EVIDENCE IN SUPPORT OF CLAIMING BURNING LOSS AT 6.33%. HE HAS PLEADED TO REVERSE THE FINDINGS OF THE LD CIT(A). 7. FROM THE SIDE OF THE RESPONDENT - ASSESSEE, SHRI SUNIL AGARWAL, LD A.R. APPEARED A ND VEHEMENTLY PLEADED THAT THERE WAS NO BASIS OR IN FORMATION IN THE POSSESSION OF THE AO TO REJECT BOOK RESULTS OF THE ASSESSEE. T HE ASSESSEE WAS HAVING COMPLETE QUANTITATIVE DETAILS AND ON THE BASIS OF EXCISE - DEPARTMENT RECORD, FURNISHED THE MONTHWISE EXACT DETAILS OF BURNING LOSS. I T WAS MERELY PRESUMP TION THAT IN THIS LINE OF INDUSTRY, THE BURNING LOSS IS 4%. T HE AO HAS NOT CONFRONTED THE ASSESSEE OF ANY SUCH COMPARABLE CASE. T HE ELECTRICITY CONSUMPTION DEPENDS UPON VARIOUS FACTORS SUCH AS FR EQUENT BREAKDOWN AS WELL AS QUALITY OF RAW MATERIAL USED FO R THE MANUFACTURING PURPOSES. L D A.R. HAS DRAWN OUR ATTENTION TO THE ASSESSMENT ORDER PASSED U/S.143(3) DATED 18.12.2009 PRONOUNCED IN THE CASE OF THIS ASSESSEE, WHEREIN, NO SUCH ADDITION WAS MADE BY THE AO. H E HAS ALSO MENTIONED THAT EVEN IN THE SUBSEQU ENT YEAR, THE BOOK RESULTS OF THE ASSESSEE HAVE NOT BEEN DISTURBED. L D A.R. HAS ALSO INFORMED THAT THE MANUFACTURING ACTIVITY IS ALSO UNDER SCRUTINY OF THE EXCISE DEPARTMENT, HENCE, THE ASSESSEE HAS MAINTAINED PROPER STOCK REGISTER, WHICH WAS NOT REJECTED BY THE AO. R ELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS.CIT VS. SHRI GIRIJA SMELTERS (P) LTD.(2015) 54 TAXMANN.COM 322 (A NDHRA PRADESH). 6 I.T.A. NO.164 /BIL/2012 CO NO.08/BIL.2013 ASSESSMENT YEAR :2008 - 09 8. WE H AVE HEARD BOTH THE SIDES AT SOME LENGTH IN THE LIGHT OF COM PILATION FILED AND THE ORDERS OF THE AUTHORITIES BELOW. A T THE OUTSET, IT APPEARS THAT THE ASSESSEE WAS MAINTAINING THE DETAILS OF PRODUCTION SO AS TO SATISFY THE SUPERVISION OF THE EXCISE DEPARTMENT. W E HAVE BEEN INFORMED THAT THE STOCK REGISTER AS MAIN TAINED BY THE ASSESSEE WAS NOT DISCARDED BY THE EXCISE DEPARTMENT. O N THE BASIS OF THE RECORD, THE ASSESSEE WAS IN A POSITION TO FURNISH THE MONTH - WISE DETAILS OF THE PRODUCTION, AS WELL AS INFORMED THE PERCENTAGE OF BURNING LOSS PRECISELY. I T IS WORTH T O MENTION THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. W E HAVE ALSO NOTED THAT THERE WAS NO SUCH FINDING IN THE ASSESSMENT ORDER THAT THE BOOKS OF ACCOUNT WERE DEFECTIVE, HENCE, TO BE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(1) OF THE ACT. A NOTHER IMPORTANT FEATURE HAS ALSO BEEN BROUGHT TO OUR NOTICE THAT IN THE PAST, THE ASSESSMENT WAS COMPLETED AFTER SCRUTINY AND NO SUCH DISALLOWANCE WAS MADE. 8.1 THE ONLY REASON GIVEN BY THE AO FOR THE IMPU GNED DISALLOWANCE WAS THAT IN THIS LINE OF INDUSTRY, THE BURNING LOSS WAS GENERALLY DECLARED AT 4%. HOWEVER, WE HAVE BEEN INFORMED THAT NO COMPARABLE CASE OR ANY EVIDENCE WAS CONFRONTED TO THE ASSESSEE. O N THE OTHER HAND, THE ARGUMENT OF THE ASSESSEE WAS THAT IN THE SUBSEQUENT ASSESSMENT YEAR I.E. A.Y., 2009 - 2010, THE BOOK RESULTS HAVE SHOWN THE BURNING LOSS OF ABOUT 3.01%, WHICH WAS LOWER THAN 4% AS ALLOWED BY THE AO. HENCE, THE ARGUMENT IS THAT WHATEVER WAS THE TRUE PICTURE ABOUT BURNING LOSS HAS ALWAY S BEEN DISCLOSED BY THE ASSESSEE TO ALL THE 7 I.T.A. NO.164 /BIL/2012 CO NO.08/BIL.2013 ASSESSMENT YEAR :2008 - 09 CONCERNED DEPARTMENTS. T HEREFORE, THE BOOK RESULTS FOR THE YEAR UNDER CONSIDERATION SHOULD HAVE BEEN ACCEPTED. 8.2 CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE REASONS GIVEN, WE H EREBY CONFIRM THE RELIEF GIVEN BY THE LD CIT(A). IT IS ALSO WORTH TO MENTION THAT THE HONBLE A.P. HIGH COURT IN THE CASE OF SHRI GIRIJA SMELTERS (P) LTD(SUPRA) HAVE OPINED THAT THE REVENUE DEPARTMENT CANNOT CARRY OUT THE FUNCTIONS OF AN AUTHORITY UNDE R CENTRAL EXCISE ACT TO DETERMINE THE QUANTITY OF PRODUCTION. THE MANUFACTURING PROCESS IS INTRICATE PROCESS, THEREFORE, WITHOUT REFERRING ANY RELIABLE MATERIAL, THE AO HIMSELF N OT DOUBTED THE ACCURACY OF THE FIGURES MENTIONED IN THE REGISTER MAINTAINED BY THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE DECISION (SUPRA),WE HEREBY REJECT THIS GROUND OF THE REVENUE. 9. GROUND NO.,2 READS AS UNDER: W HETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LD CIT(A) `HAS ERRED IN DELETING THE DISALLOWANCE OF RS.10,69,527/ - MADE BY THE AO ON ACCOUNT OF CLAIM OF DEPRECIATION ON MILL RILLS AT 100%. 10. THE OBSERVATION OF THE AO WAS THAT THE DEPRECIATION ON ROLLING MILL ROLLS WAS CLAIMED @ 100% BUT THE DEPRECIATION AS PER SCHEDULE IS ALLOWABLE AT 80%. DUE T O SAID REASON, THE EXCESS CLAIM OF DEPRECATION IN RESPECT OF ROLLING MILL ROLLS WAS COMPUTED AND FINALLY AN AMOUNT OF RS.10,69,527/ - WAS DISALLOWED. 10.1 WH EN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LD CIT(A) HAS PASSED A CRYPTIC ORDER AND REVERSED THE DISALLOWANCE. 8 I.T.A. NO.164 /BIL/2012 CO NO.08/BIL.2013 ASSESSMENT YEAR :2008 - 09 11. NOW BEFORE US, THE REVENUE DEPARTMENT HAS DEMONSTRATED THAT THE DELETION WAS LEGALLY INCORRECT. E VEN LD A.R. OF THE ASSESSEE HAS NOT SERIOUSLY CONTESTED RATHER FAIRLY INFORMED THE CORRECT LEGAL POSITION . IT APPEARS THAT THE RELIEF WAS WRONGLY GRANTED BY THE LD CIT(A). A S A RESULT, THE FINDINGS OF THE LD CIT(A) ARE HEREBY REVERSED AND THIS GROUND OF THE REVENUE IS ALLOWED. 12. LD A.R. DID NOT PRESS CROSS OBJECTION FILED BEFORE THE TRIBUNAL, HENCE, SAME I S DISMISSED AS NOT PRESSED. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 /2/2016 . SD/ - SD/ - ( , ) ( , ) SHAMIM Y AHY A , ACCOUNT ANT MEMBER MUKUL SHRA WA T , JUDICIAL M EM BER RAIPUR , DATED 12 / 02/2016 . . ./ PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : INCOME TAX OFFICER, W ARD 1(2), CENTRAL REVENUE BUILDING, CIVIL LINES,RAIPUR. 2. / THE RESPONDENT: A.S .ADVERTISER, GURUNANAK CHOW, STATION ROAD, RAIPUR 3. ( ) / THE CIT(A) - RAIPUR 4. / CIT , RAIPUR 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SR. PS, ITAT, CAMP: RAIPUR