M/s. Archana Dyg. Ptg. Mills Pvt.Ltd., Surat V. The Income tax Officer,Ward-1(1), Surat

ITA 1853/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85702 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-02-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 22-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER ITA NO . 1853 /AHD/20 1 1 A. Y. 200 5 - 0 6 M/S. ARCHANA DYG. & PTG. MILLS PVT. LTD., 810/3A GIDC SACHIN ROAD, N O.8, SURAT. PAN: AABCA 9865H VS ITO WARD - 1 (1), SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI DINESH SINGH , SR. D.R. ASSESSEE(S) BY : WRITTEN SUBMISSION / DATE OF HEARING : 1 3 / 0 2 /201 5 / DATE OF PRONOUNCEMENT: 20 / 0 2 /201 5 / O R D E R PER MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN A PPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF THE L EA RNED CIT (A) - I , SURAT , DATED 15 .0 6 . 20 11 AGAINST THE CONFIRMATION OF PENALTY LEVIED U/S.271(1)(C) OF RS.1,83, 271/ - . 2. ON THE DATE OF HEARING , A WRITTEN SUBMISSION IS FURNISHED WITH A REQUEST TO DECIDE THIS APPEAL ACCORDINGLY. 3. FROM THE SIDE OF THE RE SPONDENT, LEARNED SR.D.R., MR. DINESH SINGH APPEARED AND PLACED RELIANCE ON THE FACTS AS MENTIONED IN THE ASSESSMENT ORDER PASSED U/S.143(3) R.W.S. 145(3) DATED 28.12.2007 AND THE PENALTY ORDER U/S.271(1)(C) DATED 25.03.2010. A NIL RETURN WAS FILED BY THE ASSESSEE - COMPANY WHO IS IN THE BUSINESS OF PROCESSING OF ART SILK ITA NO. 1853 /AHD/201 1 M/S. ARCHANA DYG. & PTG. MILLS PVT. LTD. VS. ITO, WARD - 1(1),SURAT . FOR A.Y. 200 5 - 0 6 - 2 - FABRICS. FEW ADDITIONS HAVE BEEN MADE NAMELY UNDER VALUATION OF CLOSING STOCK OF RS.1,82,338/ - , SUPPRESSION OF MONTHLY CONSUMPTION OF RS.94,274/ - AND DISCOUNT EXPENSES OF RS.2,24,230/ - . THOS E ADDITIONS WERE CHALLENGED BEFORE THE TRIBUNAL AND VIDE A N ORDER BEARING ITA NO.268/AHD/2009 FOR A.Y.2005 - 06 ITAT D BENCH IN ASSESSEE S CASE ORDER DATED 25.11.2011 HAS DECIDED THE ISSUE OF VALUATION OF WORKING IN PROGRESS AS FOLLOWS: 5. THOUGH BOTH THE SIDES HAVE INITIALLY CONTESTED THIS LEGAL ASPECT BUT LATER ON, AFTER SOME DISCUSSION, IT WAS FOUND THAT ULTIMATELY THE ASSESSING OFFICER HAD MADE THE IMPUGNED ADDITION BY ESTIMATING CERTAIN PERCENTAGE ON ADOPTING A HYPOTHETICAL METHOD. IT WAS THEREFORE SU GGESTED BY THE PARTIES THAT CONSIDERING THE SMAL LN ESS OF THE QUANTUM IN QUESTION, I.E. RS.1,82,338/ - , IT IS BETTER TO KEEP THE BREVITY IN MIND AND DETERMINE A REASONABLE FIGURE OF ADDITION. BY ACCEPTING THE SAID SUGGESTION, WE HAVE PERUSED THE RELEVANT PAR AGRAPH OF THE ASSESSING OFFICER (ALREADY REPRODUCED SUPRA) AND HAVE NOTICED THAT THE ASSESSING OFFICER HAS WORKED OUT AN AVERAGE OF CLOTH PROCESSING PER DAY AT 19,949 METERS. THEN THE ASSESSING OFFICER HAD ALSO OPINED ON THE BASIS OF A COMMON KNOWLEDGE THA T TO COMPLETE A CIRCLE OF PROCESSING OF TEXTILE, IT GENERALLY TAKES ABOUT FIVE DAYS. THEREFORE IN ASSESSING OFFICER'S OPINION ABOUT 99,745 METERS CLOTH WOULD BE UNDER WORK - IN - PROGRESS. ON THAT ESTIMATED METERS OF CLOTH HE HAS FURTHER APPLIED AN AVERAGE OF COST OF PROCESSING CHARGES AT RS.2.75/ - PER METER. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS THEREFORE CONTESTED THAT THE WORKING OF THE AVAILABILITY OF CLOTH IN METERS AS WORK - IN - PROCESS WAS A HYPOTHETICAL FIGURE. AS WELL AS, THE COST APPL IED AT RS.2.75 PER METER WAS ALSO MERELY AN ESTIMATED AVERAGE COST ALLEGED TO HAVE BEEN INCURRED PRESUMING THAT ALL THE FIVE STAGES OF PROCESSING WAS COMPLETED. AS AGAINST THAT PRESUMPTION, IT HAS BEEN INFORMED THAT THE VALUE OF FINISHED GOODS AN STOCK IN PROGRESS DECLARED AT RS.9 1 ,960/ - WAS ON PHYSICAL VERIFICATION AT THE CLOSE OF THE ACCOUNTING PERIOD. IT IS TRUE THAT THE PROCESSING OF ART SILK FABRICS HAS VARIOUS STAGES OF PROCESSING AND A PARTICULAR STAGE ON THE LAST DAY OF THE ACCOUNTING PERIOD IS ONLY KNOWN TO THE ASSESSEE WHILE PREPARING THE INVENTORY OF THE STOCK. BUT THERE IS ALWAYS A SCOPE OF VARIATION IN RESPECT OF SUCH ESTIMATED AVERAGE COST INCURRED AT A PARTICULAR STAGE OF PROCESSING. CONSIDERING THE NATURE O F THE MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE AND THE ALTERNATE PLEA OF BOTH THE SIDES, WE HEREBY, AS A RESULT, EXERCISE OUR DISCRETION AND GRANT 50% RELIEF TO THIS ASSESSEE IN RESPECT OF THE TOTAL ADDITION MADE BY THE ASSESSING OFFICER. RESULTANTLY, ASSESSEE SHALL BE ENTITLED FOR A RELIEF OF RS.9 1 ,1 70/ - . THIS GROUND IS PARTLY ALLOWED. ITA NO. 1853 /AHD/201 1 M/S. ARCHANA DYG. & PTG. MILLS PVT. LTD. VS. ITO, WARD - 1(1),SURAT . FOR A.Y. 200 5 - 0 6 - 3 - 4. IN RESPECT OF SUPPRESSION OF COAL ON THE BASIS OF MONTHLY CONSUMPTION THE ASSESSEE S G ROUND WAS DISMISSED AS FOLLOWS: 1. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE PRELIMINARY ARGUMENT OF LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS THAT THE PURCHASE AND CONSUMPTION OF THE COAL WAS DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ON THAT BASIS THE STOCK WAS VALUED AT THE END OF THE ACCOUNTING PERIOD AT RS.11,01,223 / - . HOWE VER THE STRONG CONTENTION OF LEARNED DEPARTMENTAL REPRESENTATIVE WAS THAT ON VERIFICATION OF QUANTITATIVE DETAILS OF PURCHASE, IT WAS EVIDENT THAT THERE WAS A SHORTFALL IN THE AVAILABLE QUANTITY OF COAL FOR TWO MONTHS. THAT SHORTFALL WAS ADMITTED BY THE AS SESSEE AND NO CONVINCING REASON OF THE SAID SHORTFALL WAS GIVEN TO THE ASSESSING OFFICER. THE ASSESSEE HAS FILED A CHART OF MONTH - WISE CONSUMPTION OF COAL VIS - A - VIS MONTH - WISE PURCHASE OF THE COAL. THAT CHART AS SUBMITTED BY THE ASSESSEE HAS ITSELF DISCLOS ED THE IMPUGNED DEFICIT OF STOCK OF COAL. EVEN AT THIS STAGE OF APPEAL, WE HAVE NOTICED THAT NO COGENT MATERIAL IS PLACED IN DEFENSE BY THE ASSESSEE. THE ONLY ARGUMENT OF LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE IS THAT THE CONSUMPTION OF COAL WAS WORKED OUT ON AN ESTIMATE BASIS BUT ONE FACT SHOULD ALSO NOT BE IGNORED THAT THE FIGURES OF CONSUMPTION HAS ALSO BEEN GIVEN BY THE ASSESSEE HIMSELF FOR EACH MONTH. THROUGH THE SAID CHART IT WAS VERY MUCH EVIDENT THAT THERE WAS A SHORTFALL IN THE STOCK OF COAL FOR THE TWO MONTHS, I.E. AUGUST AND NOVEM B ER 2004. IN THE ABSENCE OF ANY CONVINCING ARGUMENT OR MATERIAL FROM THE SIDE OF THE ASSESSEE, WE ARE NOT INCLINED TO DISTURB THE SAID ADDITION; HENCE, THE SAME IS HEREBY CONFIRMED. THIS GROUND IS, THEREFORE, D ISMISSED. 5. IN RESPECT OF THIRD ADDITION ABOUT THE DISCOUNT EXPENSES , THE TRIBUNAL HAS ALLOWED THE ASSESSEE S CLAIM AS UNDER: 9. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES AND AFTER DUE CONSIDERATION OF THE PARTY - WISE DETAILS AS DISCUSSED BY THE AS SESSING OFFICER, WE ARE OF THE CONSIDERED VIEW THAT IN RESPECT OF THE IMPUGNED PARTIES, MERELY FOR NON - FURNISHING OF CONFIRMATION THE SAID ADDITION WAS MADE, HOWEVER, IN RESPECT OF MOST OF THE PARTIES NO SUCH ADDITION WAS MADE. BY FURNISHING THE EVIDENCE A ND DETAILS, THE ASSESSEE HAS EXPLAINED ABOUT THE COMMON PRACTICE AS ALSO THE TREND OF THE BUSINESS. AS PER THE KNOWN BUSINESS PRACTICE, THE ASSESSEE WAS GRANTING CASH DISCOUNT AS WELL AS A DAMAGE - DISCOUNT, IF A DEFECT IN THE PRINTING PROCESS WOULD BE NOTIC ED BY THE CUSTOMER. THE ALLEGATION OF THE ASSESSING OFFICER WAS NOT THAT THE GRANT OF DISCOUNT WAS NOT IN PRACTICE OR THAT THE PARTIES WERE BOGUS. BUT THE MAIN REASON FOR THE IMPUGNED ADDITION WAS THAT THE REQUISITE CONFIRMATIONS COULD NOT BE FILED. IN THI S REGARD, THE ASSESSEE HAD EXPLAINED THAT SOME OF THE PARTIES WERE NOT TRACEABLE HOWEVER, THEIR RESPECTIVE ACCOUNTS HAVE SHOWN THE CORRECT AMOUNT RECEIVED BY THEM AND FINALLY THE ACCOUNT WAS SETTLED BY TRANSFERRING THE 'BALANCE - DIFFERENCE' IN THE 'VATAV K A SAR' ACCOUNT. ACCORDING TO US, CONSIDERING PARTY - WISE DETAILS AS DISCUSSED BY THE ASSESSING OFFICER AND OTHER COGENT MATERIAL MENTIONED BY ITA NO. 1853 /AHD/201 1 M/S. ARCHANA DYG. & PTG. MILLS PVT. LTD. VS. ITO, WARD - 1(1),SURAT . FOR A.Y. 200 5 - 0 6 - 4 - THE AUTHORITIES BELOW, IT WAS NOT FAIR ON THE PART OF THE ASSESSING OFFICER TO DISALLOW THE EXPENDITURE IN RESPECT OF SOME OF THE PARTIES AND TO ALLOW IN RESPECT OF THE OTHER PARTIES. AFTER DUE CONSIDERATION OF THE COMMON BUSINESS PRACTICE AS EXPLAINED AND THE COGENT MATERIAL, WE ACCORDINGLY DIRECT TO ALLOW THE EXPENDITURE. RESULTANTLY, THIS GROUND IS HEREBY ALLOWED. 6 . IN THE WRITTEN SUBMISSION, IT IS PLEADED THAT THE ADDITION IN CLOSING STOCK IS REVENUE NEUTRAL; HENCE PENALTY IS NOT REQUIRED TO BE L E V I E D U/S.271(1)(C) AND FOR THIS LEGAL PROPOSITION RELIANCE IS PLACED AT MECON BUILDERS AND ENGINEERS, 248 ITR 159 (DELHI ) . 7. IN RESPECT OF SUPPRESSION OF COAL ADDITION , THE ARGUMENT OF THE ASSESSEE IS THAT THE MONTH - WISE DETAIL OF CONSUMPTION OF COAL WAS BEFORE THE REVENUE AUTHORITIES AND THEREFORE WHEN THE RELEVANT PARTICULARS WERE AVAILABLE ON RECORD THEN IT IS NOT PROP ER TO ALLEGE THAT THE SAME WERE CONCEALED BY THE ASSESSEE. IN RESPECT OF DISCOUNT EXPENSE DISALLOWANCE ; SINCE IT WAS ALREADY ALLOWED BY THE TRIBUNAL HENCE NO PENALTY IS TO BE LEVIED. 8. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., MR. DINESH SINGH HAS PLACED RELIANCE ON THE ORDER S OF THE AUTHORITIES BELOW. 9. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , SPECIALLY THE ORDER OF RESPECTED CO - ORDINATE BENCH, WE HEREBY HOLD THAT IN RESPECT OF UNDER V ALUATION OF CLOSI NG STOCK A PART RELIEF HAD ALREADY BEEN GRANTED BY THE TRIBUNAL AND IN RESPECT OF SUPPRESSION OF COAL THE ASSESSEE HAS FURNISHED NECESSARY INFORMATION; THEREFORE, PLACING RELIANCE ON THE JUDGMENTS AS CITED SUPRA THIS IS NOT A FIT CASE TO LEVY THE CONCEALME NT PENALTY. ITA NO. 1853 /AHD/201 1 M/S. ARCHANA DYG. & PTG. MILLS PVT. LTD. VS. ITO, WARD - 1(1),SURAT . FOR A.Y. 200 5 - 0 6 - 5 - 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - (ANIL CHATURVEDI ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 20 / 0 2 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD