The ACIT, Circle-7, Surat V. Shri Mohanlal Jethabhai Reshamwala, Surat

ITA 1666/AHD/2005

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9157 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-07-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 23-06-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K PANDIT
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI A.N.PHAUJA, ACCOUNTANT MEMBER ITA NO.1666/AHD/2005 ASSESSMENT YEAR:2002-03 DATE OF HEARING: 23.7.09 DRAFTED: 27.7.09 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-7, SURAT V/S. SHRI MOHANLAL JATHABHAI RESHAMWALA, PROP. M/S. SUNIL TEXTILES, 7/2319, DHADHARA SHERI, RAMPURA, SURAT PAN NO.ABNPR3567K (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M.K. PANDIT, SR DR RESPONDENT BY:- NONE O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-V, SURAT IN APPEAL NO.CAS-V/102 /04-05 DATED 22-02-2005. THE ASSESSMENT WAS FRAMED BY THE ACIT, CIRCLE-7 U/S .143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED 29-11-2004 FOR THE ASSESSMENT YEAR 2002-03. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO TAX GROSS PROFIT DISCLOSED BY THE ASSESSEE ON THE SALES. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO P ERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). WE FIND THAT THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS NOTICED FROM THE REGISTER OF ITA NO.1666/AHD/2005 A.Y. 2002-03 ACIT, CIR-7 SURAT V. MOHANLAL J RESHAMWALA PAGE 2 LABOUR PAYMENT IN RESPECT OF CLOTH MANUFACTURED AT THE FACTORY PREMISES, WHEREIN HE HAS SHOWN THE DETAILS LIKE CLOTH WOVEN BY INDIVIDUA L KARIGAR (IN TERMS OF METERS), RATE OF WEAVING (IN TERMS OF METERS) AND THE TOTAL AMOUN T OF MAJURI PAID DURING THE MONTH AND FURTHER VERIFYING THESE DETAILS ON THE BASIS OF DETAILS CONTAINED IN WAGES PAYMENT REGISTER, THE AO WORKED OUT THE TOTAL PRODU CTION OF CLOTH AT THE FACTORY PREMISES DURING THE YEAR AT 2,49,769 MT. AGAIN, THE AO AS PER THE DETAILS PROVIDED BY THE ASSESSEE REGARDING CLOTH PRODUCTION SHOWN BY THE ASSESSEE ON OUTSIDE JOB WORK BASIS, FOUND THAT THE CLOTH PRODUCTION WAS SHO WN AT 2,21,608 MT. AND THUS, HE WORKED OUT THE TOTAL CLOTH PRODUCTION DURING THE YE AR AT 4,71,377 MT. (2,49,769 MT. + 221608 MT). THE ASSESSING OFFICER HAS FURTHER FOUND OUT THAT THE TOTAL SALES SHOWN BY THE ASSESSEE DURING THE YEAR WAS AT 394294 MT. A FTER TAKING INTO ACCOUNT, THE OPENING STOCK AND THE CLOSING STOCK OF MANUFACTURED CLOTH, WHICH WAS SHOWN AT 4760 MT. AND 3190 MT RESPECTIVELY, THE AO ARRIVED A T THE CONCLUSION THAT THE SALES SHOWED HAVE BEEN SHOWN AT 472947 MT. AS AGAINST 394 294 MT. SHOWN BY THE ASSESSEE. IN THIS WAY, THE AO HAD WORKED OUT THE QU ANTITY OF SALES NOT SHOWN IN THE BOOKS OF ACCOUNT BY 78651 MT. THE AO HAD PREPARED A DETAILED CHART TO WORK OUT THE DEFICIENCY IN SALES, WHICH HAS BEEN SHOWN ON PAGE 3 & 4 OF THE ASSESSMENT ORDER, BY TAKING THE AVERAGE SALE PRICE OF THE WHOLE YEAR WHICH WAS ARRIVED AT RS.11.65 PER MT, WORKED OUT THE CONCEALED AMOUNT OF SALES AT RS. 9,16,284/- (78651 X 11.65). THE AO HAD ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE R EQUESTED HIM TO SHOW CASE AS TO WHY AN ADDITION OF RS.9,16,284/- SHOULD NOT BE M ADE IN RESPECT OF CONCEALED SALES NOT SHOWN IN THE REGULAR BOOKS OF ACCOUNT. A CCORDINGLY, THE ASSESSING OFFICER MADE ADDITION OF RS.9,16,284/- AT THE AVERAGE SALE PRICE WORKED OUT ON ACCOUNT OF UNACCOUNTED SALES OF GOODS OBTAINED BY SUPPRESSION OF PRODUCTION. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 4. THE CIT(A) DELETED THE ADDITION PARTLY BY GIVING FOLLOWING FINDINGS IN PARA-6.5 AND 6.8 TO 6.11 AS UNDER:- 6.5 I HAVE CAREFULLY GONE THROUGH THE FINDINGS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND ALSO PERUSED THOROUGHLY THE SU BMISSION AS MADE BY THE A.R AND THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY HIM. AFTER GOING THROUGH THE WORKING OF THE ASSESSING OFFICER TO ARR IVE AT A FIGURE OF 78,651 METERS OF CLOTH AND TREATING THE SAME AS UNACCOUNTE D SALES, IT IS FOUND THE SAME IS BASED ON LOGICAL COMPARISON OF PAYMENT OF W AGES MADE TO KARIGARS AND THE RATE OF WAGES PER METER AS AGREED BETWEEN T HE KARIGAR AND THE APPELLANT AND THE SAME IS FOUND IN ORDER. HOWEVER, I AGREE WITH THE SUBMISSION OF THE A.R THAT THE ISSUE IN THE CASE OF THE APPELLANT IS FOUND SQUARELY COVERED BY THE FINDINGS OF HOPNBLE GUJARA T HIGH COURT IN THE CASE OF ITA NO.1666/AHD/2005 A.Y. 2002-03 ACIT, CIR-7 SURAT V. MOHANLAL J RESHAMWALA PAGE 3 PRESIDENT INDUSTRIES 258 ITR 654 (SUPRA). AFTER GOI NG THROUGH THE ABOVE REFERRED JUDGEMENT OF THE HONBLE COURT, IT IS FOUN D THAT THE FACTS OF THE CASE WERE AS UNDER:- IN THE COURSE OF SURVEY CONDUCTED IN THE PREMISES OF THE ASSESSEE, EXCISE RECORDS WERE FOUND WHICH DISCLOSED GODOWN SALES NOT DISCLOSED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER M ADE ADDITION OF UNDISCLOSED INCOME OF THE ENTIRE SALE PROCEEDS THER EOF. THE COMMISSIONER (APPEALS) AFFIRMED THE ADDITION BUT THE APPELLATE T RIBUNAL FOUND THAT THERE WAS NO MATERIAL TO INDICATE THAT THE ASSESSEE MADE INVESTMENTS OUTSIDE THE BOOKS OF ACCOUNT TO MAKE THE ALLEGED SALES AND HELD THAT THE ENTIRE SALE PROCEEDS COLD NOT HAVE BEEN ADDED AS UNDISCLOSED IN COME OF THE ASSESSEE BUT THE ADDITION COULD BE ONLY OF THE PROFITS EMBED DED IN THE SALES. THE TRIBUNAL HAVING DECLINED TO STATE A CASE, THE DEPAR TMENT APPLIED TO THE HIGH COURT FOR AN ORDER CALLING FOR A REFERENCE. 6.8 DUURING THE APE PROCEEDINGS, THE A.R. ALSO SUB MITTED A CERTIFICATE FROM AN INSTITUTE KNOWN AS MAN MADE TEXTILES RESEARCH A SSOCIATION, LINKED TO THE MINISTRY OF TEXTILES, GOVERNMENT OF INDIA, IN W HICH IT HAS BEEN INDICATED THAT ON THE BASIS OF THE CAPACITY OF THE LOOMS INST ALLED IN THE FACTORY PREMISES OF THE APPELLANT, MAXIMUM PRODUCTION OF CLOTH CAN B E MADE AT 162998 METERS BY UTILIZING FULL CAPACITY FOR THE WHOLE YEAR AT AN EFFICIENCY OF 100%. THE A.R FURTHER SUBMITTED THAT THE TOTAL PRODUCTION SHOWN I N THE FACTORY PREMISES OF THE APPELLANT IS AT 172736.75 METERS, ACCORDING TO THE WORKING CAPACITY OF THE LOOMS AND THE SAME SHOULD BE ACCEPTED AS CORRECT. 6.9 ON BEING ENQUIRED AS TO WHETHER THE SAID CERTIF ICATE WAS SUBMITTED BEFORE THE ASSESSING OFFICER OR NOT AND IN RESPONSE TO THI S, THE A.R HAS SUBMITTED THE SAID CERTIFICATE WAS NOT PRODUCED BEFORE THE AS SESSING OFFICER FOR HIS CONSIDERATION. DURING THE APPELLANT PROCEEDINGS, TH E A.R WAS ASKED TO SUBMIT THE REASONS FOR NOT SUBMITTING THE SAME BEFORE THE ASSESSING OFFICER. IN HIS REPLY, THE A.R HAS STATED THAT AT THE TIME OF ASSES SMENT PROCEEDINGS, THE ASSESSING OFFICER WAS INFORMED ABOUT THE CERTIFICAT E BUT HAS NOT MADE IT CLEAR AS TO WHY THE SAME WAS NOT PRODUCED BEFORE HIM. THE REQUEST OF THE A.R FOR ADMITTING THE SAID CERTIFICATE UNDER CONSIDERATION AS EVIDENCE IN THE ABSENCE OF ANY PROPER REPLY FOR NOT SUBMITTING THE SAME BEF ORE THE ASSESSING OFFICER IS REJECTED AND WILL NOT BE CONSIDERED WHILE ADJUDICAT ING THE MATTER RELATING TO PRODUCTION OF CLOTH, IN VIEW OF PROVISIONS OF RULE 46A(2) OF THE I.T. RULES, 1962. 6.10 IN VIEW OF THE ABOVE FACTS AND JUDGEMENTS, I A GREE WITH THE ALTERNATE SUBMISSION AS MADE BY THE A.R AND DIRECT THE ASSESS ING OFFICER TO WORK OUT THE ADDITION BY APPLYING THE GROSS PROFIT RATE AS D ISCLOSED BY THE APPELLANT DURING THE YEAR TO THE AMOUNT OF UNACCOUNTED SALES AND TAX THE SAME ACCORDINGLY. 6.11 IN THE RESULT, THIS GROUND OF APPEAL IS PARTLY ALLOWED. AGGRIEVED, THE REVENUE CAME IN APPEAL BEFORE US. ITA NO.1666/AHD/2005 A.Y. 2002-03 ACIT, CIR-7 SURAT V. MOHANLAL J RESHAMWALA PAGE 4 5. AFTER HEARING THE LD. DR AND GOING THROUGH THE C ASE RECORDS, THE SUBMISSIONS AND THE DETAILS FILED BY THE ASSESSEE SHOWING COMPA RATIVE GP OF LAST THREE YEARS, SHOWING PARTICULARS OF SALES OF CLOTH, PURCHASES OF YARN INCLUDING QUANTITATIVE STATEMENT AS ON 31-03-2002 AND ACTUALLY QUANTITATIV E TALLY. THE ASSESSEE HAS ALSO FILED STATEMENT SHOWING CONSUMPTION OF ELECTRICITY UNITS AND ANNUAL PRODUCTION OF CLOTH. WE FIND FROM THE ARGUMENTS PUT FORTH BY THE ASSESSEE BEFORE THE CIT(A) THAT THE FIGURES OF PRODUCTIONS AND SALES AS RECORDED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNT WERE CORRECT AND THE ASSESSING OFFICER BY A DOPTING WRONG WORKING AND BUY NOT FULLY APPRECIATING THE DETAILS OF WAGES AS RECO RDED IN THE WAGE PAYMENT REGISTER, HAS WRONGLY WORKED OUT THE FIGURES OF 78,651 MT. OF CLOTH AND INCORRECTLY TREATED THE SAME AS SALES OUTSIDE THE BOOKS OF ACCOUNT. IT WAS THE ARGUMENT OF THE ASSESSEE THAT FOR MAKING THIS ADDITION THE AO HAS SIMPLY REL IED ON THE WAGE REGISTER AND HAS NOT CONSIDERED THE VIABILITY OF THE UNIT AND ALSO N OT CONSIDERED THE LOGICAL CAPACITY OF THE MACHINERIES INSTALLED IN THE UNIT BY THE ASSESS EES SUBMISSION DATED 24-11-2004 TO THE ASSESSING OFFICER. IT WAS SPECIFICALLY MENT IONED THAT THE ASSESSEE OWNS MACHINERY AS UNDER:- WEAVING LOOMS - 10 BOBBIN MACHINE - 01 IT WAS ALSO STATED, THAT LIGHT WAS THROWN TO THE FA CTS THAT ON 10 WEAVING LOOMS ONLY 40 TO 50 MT. CLOTH PER DAY CAN BE WOVEN. IT CAN ALS O BE SEEN BY THE ASSESSEE FROM THE CERTIFICATE ISSUED BY MAN MADE TEXTILES RESEAR CH ASSOCIATION ONLY 50.30 MT. CAN BE PRODUCED ON ONE WEAVING LOOM. A PHOTOSTATE C OPY OF THE CERTIFICATE IS ATTACHED HEREWITH AND FURTHER SUBMITTED THAT THE AO HAS GIVEN HIS FINDING THAT THE ASSESSEE HAS CONCEALED THE SALE OF 78,651 MT. FOR T HESE HE HAS SIMPLY RELIED ON WAGS REGISTER BUT HE HAS NOT CONSIDERED THE NUMBER OF LOOMS CONSUMPTION OF ELECTRICITY POWER UNIT. WHEN THE ASSESSEE SUBMITTED THE TOTAL NUMBER OF MACHINERIES, THE AO COULD HAVE SENT SOME INSPECTOR TO VERIFY THE NUMBER OF LOOMS BECAUSE THE ASSESSEE HAVE MORE PRODUCTION THERE MAY BE MORE LOO MS AND AS STATED ABOVE, MANTRA HAS CERTIFIED THE MAXIMUM PRODUCTION AVAILAB LE ON 10 LOOMS CAN BE 162998 MT. AT THE EFFICIENCY OF 100%, WHEREAS IN TH E CASE OF THE ASSESSEE, PRODUCTION IS 173886.50 MT. WHICH IS ABSOLUTELY AS PER THE WORKING CAPACITY OF THE LOOMS. THAT THE SALES ONLY REPRESENT THE PRICE REC EIVED BY THE SELLER OF THE GOODS, ONLY THE REALIZATION OF THE EXCESS OVER THE COST I NCURRED COLD FORM PART OF THE PROFIT ITA NO.1666/AHD/2005 A.Y. 2002-03 ACIT, CIR-7 SURAT V. MOHANLAL J RESHAMWALA PAGE 5 INCLUDED IN THE CONSIDERATION FOR THE SALE, BASED O N ABOVE REFERRED SUBMISSION, IT WAS ARGUED BY THE ASSESSEE BEFORE CIT(A) THAT THE A CTION OF THE AO, TO TREAT THE ALLEGED SALE PRICE OF 78651 MT. AMOUNTING TO RS.9,1 6,284/- AS SALES NOT DISCLOSED IN THE BOOKS OF ACCOUNT IS PATENTLY WRONG AS THE SAME WAS WORKED OUT BY IGNORING THE SUBMISSION OF THE ASSESSEE REGARDING THE DETAILS OF WAGE FOUND REFLECTED IN THE LABOUR PAYMENT REGISTER AND WAGE REGISTER. ALTERNA TIVELY, THE LD. COUNSEL FOR THE ASSESSEE MADE SUBMISSION BEFORE CIT(A) THAT AT THE MOST, ONLY GP EARNED BY THE ASSESSEE CAN BE APPLIED AND NOT THE ENTIRE SALE PRI CE OF THE ALLEGED UNACCOUNTED CLOTH STATED TO BE SOLD OUTSIDE THE BOOKS OF ACCOUN T. WE FIND THAT THE CIT(A) HAS ONLY DIRECTED THE ASSESSING OFFICER TO APPLY GP RAT E TO THE UNACCOUNTED SALES, WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY, THIS AP PEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 04/09 /2009 SD/- SD/- (A.N.PHAUJA) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 04/09/2009 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-V, SURAT 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD