D.C.I.T Cir - 3,kolkata, Kolkata V. M/s Mantora Oil Products Ltd, Kolkata

ITA 1911/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4658 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 14-06-2013
• Court: TRIBUNAL
• Department Lawyers: S ALLONG YADEN CIT LD
• Assessee Lawyers: MA NISH TIWARI FCA LD A
• Keywords: Unexplained expenditure
• Section: 143(3); 148

Judgement Text

ITA NO. 1911/KOL/2013-A-JM M/S. MANTORA OIL PRODUCTS LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, K OLKATA BEFORE : SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBE R I.T.A NO. 1911/KOL/2013 A.Y : 2005-06 D.C.I.T, CIRCLE-3, KOLKATA VS. M/S. MANTORA OIL P RODUCTS LTD PAN: AABCM 8155E (APPELLANT) (RESPON DENT) FOR THE APPELLANT/DEPARTMENT : SHRI SALLONG YADEN, ADDL. CIT, LD. SR.DR FOR THE RESPONDENT/DEPARTMENT: SHRI MANISH TIWARI, FCA, LD.AR DATE OF HEARING: 31-03-2016 DATE OF PRONOUNCEMENT: 17 - 06-2 015 ORDER SHRI S.S VISWANETHRA RAVI, JM THIS APPEAL OF THE REVENUE ARISES OUT OF THE ORDER OF THE CIT(A)-CENTRAL-I, KOLKATA IN APPEAL NO. 134/CC-VII/CIT(A)C-I/10-11 DA TED 23 RD MAY, 2012 FOR THE ASSESSMENT YEAR 2005-06 AGAINST THE ORDER OF A SSESSMENT FRAMED U/S. 147/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTE R REFERRED TO AS THE ACT). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLL OWING GROUND OF APPEAL:- (I) THE LD. CIT(A) ERRED ON FACTS AND CIRCUMSTANCE S OF THE CASE BY DELETING THE ADDITION OF RS.3,32,75,131/- M ADE BY AO ON ACCOUNT OF UNEXPLAINED EXPENDITURE. (II) THE APPELLANT CRAVES LEAVE TO ADD OR ALTER OR ABROGATE ANY GROUND OF APPEAL AT THE TIME OF HEARING. ITA NO. 1911/KOL/2013-A-JM M/S. MANTORA OIL PRODUCTS LTD 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING VANASPATI GHEE. THE RETURN WAS FILED ON 31-10-2005 DECLARING TOTAL INCOME AT RS.11,38,536/-. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT DETERMINING THE TOTAL INCOME OF RS.11,62,290/- . THE ASSESSMENT WAS RE- OPENED BY ISSUING NOTICE U/S. 148 OF THE ACT ON THE GROUND THAT THE EXPENDITURE TO THE EXTENT OF RS.3,32,75,131/- TOWARDS RAW MATER IAL CONSUMED WAS NOT REFLECTED IN THE PROFIT & LOSS ACCOUNT. THE AO COMP LETED THE ASSESSMENT U/S. 147/143(3) ON 16-12-2010 DETERMINING THE TOTAL INCO ME OF RS.3,44,37,420/- AND OBSERVED THAT THE AMOUNT OF RS.3,32,75,131/- GOES T O SHOW THE INCOME OF THE ASSESSEE WHICH WAS NOT INCLUDED IN ITS PROFIT AND L OSS ACCOUNT. 4. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE FILED APPEAL BEFORE THE CIT-A AND SUBMITTED AS UNDER: 5. THE LED AR CONTENDED, THAT THE ADDITION MADE BY THE AO WAS ARBITRARY AND WITHOUT ANY BASIS. THERE IS NO MATERI AL ON RECORD TO SUPPORT THE ACTION OF THE AO THE AO HAS ARBITRARILY PICKED UP FIGURES FROM THE TAX AUDIT REPORT AND THE NOTES ON ACCOUNTS; AND THEN, C OMPUTED THE IMAGINARY DIFFERENCE OF RS.5,1L,14,650/- WHICH ACTUALLY DOES NOT EXIST. THE AO HAS FOUND NO DEFECT OR DISCREPANCY IN THE AUDITED BOOKS OF ACCOUNT. THE LD AR FILED COPY OF THE TAX AUDIT REPORT IN COURSE OF THE APPELLATE PROCEEDINGS. IT WAS EXPLAINED THAT TOTAL EXPENDITUR E OF RS.1,94,03,13,928/- ON ACCOUNT OF RAW MATERIAL CON SUMED WAS DEBITED TO THE PROFIT & LOSS ACCOUNT. BUT THEN, THE RAW MATER IAL CONSUMED NOT ONLY INCLUDED CRUDE OIL BUT ALSO CHEMICALS AND HYDROGEN GAS WHICH WERE IGNORED BY THE AO. THE DETAILS OF TOTAL RAW MATERIA L CONSUMED AS PER SCHEDULE P TO THE PROFIT & LOSS ACCOUNT AND THOSE OF RAW MATERIAL (CRUDE OIL) CONSUMED AS PER NOTES ON ACCOUNTS WAS SUMMARIZ ED AS UNDER:- ITA NO. 1911/KOL/2013-A-JM M/S. MANTORA OIL PRODUCTS LTD 3 PARTICULARS RAW MATERIAL RAW MATERIAL CONSUMED AS PER (CR UDE OIL) SCHEDULE P CON SUMED AS PER NOTES ON ACCOUNTS OPENING STOCK: RAW MATERIALS 1,94,87,114 1,94,87,114 RAW MATERIALS-GOODS IN TRANSIT 6, 77,33,048 6,77,33,048 CHEMICALS 11,47,449 0 TOTAL (A) 8,83,67,611 8,72,20,162 ADD: PURCHASES RAW MATERIALS 1,78,36,29,836 1,78,36,29,836 RAW MATERIALS-GOODS IN TRANSIT 3,62,71,868 3,62,71,868 CHEMICALS 2,17,81,926 0 HYDROGEN GAS (INCLUDING FREIGHT) 82,80,116 0 CARRIAGE INWARD 5,21,41,597 5,05,61,178 BROKERAGE & COMMISSION ON PURCHASE 16, 53,472 16,53,472 CENVAT CREDIT REVERSAL ON INPUT 14,290 0 LESS : DISCOUNT ON PURCHASE ON CHEMICALS 44,994 0 LESS : DISCOUNT ON PURCHASE ON RAW MATERIAL 15,8 4,936 15,84,936 TOTAL (B) 1,90,21,43,175 1,87,05,31,418 LESS : CLOSING STOCK RAW MATERIALS 1,23,53,579 1,23,53,5 79 RAW MATERIALS-GOODS IN TRANSIT 3,62,71,868 3,62,71,868 CHEMICALS 15,71,411 0 TOTAL ( C) 5,01,96,858 4,86,25,447 TOTAL ( A+B+C) 1,94,03,13,928 1,90,91,26,133 6. THE LD.AR EXPLAINED THAT THE AO COMPUTED THE AMO UNT OF RAW MATERIAL CONSUMED AT RS.1,85,80,11,483/- BY CONSIDE RING ONLY THE FIGURES PERTAINING TO CRUDE OIL. THE COMPUTATION OF THE AO IS ERRONEOUS IN AS MUCH AS HE HAS FAILED TO CONSIDER THE FIGURES FOR C HEMICALS AND HYDROGEN GAS; AND ALSO, THOSE FOR CARRIAGE INWARDS RELATED T O CRUDE OIL AND BROKERAGE & COMMISSION ON PURCHASE OF CRUDE OIL. TH E AO HAS ALSO ERRED IN TAKING THE FIGURE FOR CLOSING STOCK AT RS.1,12,5 3,579/- WHILE THE CORRECT FIGURE WAS RS.1,23,53,579/-. IF THE ABOVE FACTORS A RE TAKEN INTO ACCOUNT, THE DISCREPANCY OF RS.5,11,650/- GETS RECONCILED AS UNDER:- (A) CARRIAGE INWARD (CRUDE OIL) RS.5,05,61,178/- ITA NO. 1911/KOL/2013-A-JM M/S. MANTORA OIL PRODUCTS LTD 4 (B) BROKERAGE/COMMISSION RS. 16,53,472/- RS. 5,22,14,650/- LESS: ( C) UNDER STATEMENT OF CLOSING STOCK (RS.1,23,53,579 RS.1,12,53,579) RS. 11,0 0,000/- RS.5,11,14,650/- 7. THE LD AR FURTHER EXPLAINED THAT THE APPELLANT F OLLOWS THE 'EXCLUSIVE METHOD PRESCRIBED BY THE INSTITUTE OF CHARTERED ACC OUNTANTS OF INDIA IN RESPECT OF MODVAT. ACCORDINGLY, DUTY PAID ON INPUTS IS DEBITED TO A SEPARATE ACCOUNT MODVAT CREDIT RECEIVABLE ACCOUNT WHICH IS UTILIZED AGAINST, PAYMENT OF EXCISE DUTY ON FINISHED GOODS; AND, THE BALANCE IS TAKEN DIRECTLY TO THE BALANCE SHEET. THE TREATMENT OF MODVAT IS REVENUE NEUTRAL WHICH IS ALSO EVIDENT FROM ANNEXURE 1 TO TH E TAX AUDIT REPORT WHEREIN THE DEVIATION FROM SECTION 145A IS CERTIFIE D AS NIL. 5. THE LD. CIT-A AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND CIT- A GAVE FINDING AS UNDER: 8. I HAVE PERUSED THE ASSESSMENT ORDER AND THE MA TERIAL ON RECORD. I HAVE ALSO CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. I FIND MERIT IN THE ARGUMENT THAT THE ADDITION MADE B Y THE AO IS ARBITRARY AND WITHOUT ANY BASIS AS THERE IS NO SUPPORTING MAT ERIAL OR EVIDENCE ON RECORD. IT IS AN ADMITTED FACT THAT THE APPELLANT H AS DEBITED SUM OF RS.L,94,03,13.,928/- TOWARDS RAW MATERIAL CONSUMED IN THE PROFIT & LOSS ACCOUNT; AND, THE DETAILS ARE AVAILABLE IN SCHEDU LE P . IT IS ALSO ADMITTED THAT IN PARA 4 OF THE NOTES ON ACCOUNTS, THE TAX AU DITORS HAVE MENTIONED THAT THE TOTAL EXPENDITURE TOWARDS RAW MATERIAL CON SUMED (CRUDE OIL) WAS RS.1,90,91,26;133/- . HOWEVER, THE AO HAS MISSED T HE VITAL FACT THAT THE FIGURE OF RS. 1,90,91 ,26,133/- MENTIONED IN THE NO TES ON ACCOUNTS RELATES TO CRUDE OIL ONLY WHEREAS THE FIGURE OF RS.1,94, 03,13,928/- DEBITED TO THE PROFIT & LOSS ACCOUNT INCLUDES CRUDE OIL AS WEL L AS CHEMICALS AND HYDROGEN GAS; AND; ALSO, EXPENSES ON CARRIAGE INWAR DS AND BROKERAGE AND COMMISSION. THE AO HAS ALSO ERRED IN TAKING THE FIGURE FOR CLOSING STOCK OF CRUDE OIL AT RS.1,12,53,579/- (INSTEAD OF RS.1,23,53,579/-) AS MENTIONED IN THE TAX AUDIT REPORT) WITHOUT ASSIGNIN G ANY REASONS. THE DECISION OF THE AO IS NOT BASED ON PROPER FINDINGS. THE AO HAS FOUND NO SPECIFIC DEFECTS IN THE AUDITED BOOKS OF ACCOUNT. I FIND THAT THE APPELLANT ITA NO. 1911/KOL/2013-A-JM M/S. MANTORA OIL PRODUCTS LTD 5 HAS SATISFACTORILY EXPLAINED THE DISCREPANCY AS POI NTED OUT BY THE AO. HOWEVER, THE EXPLANATION FILED BY THE APPELLANT WAS SUMMARILY REJECTED BY THE AO MORE ON PRESUMPTIONS THAN ON FACTUAL GRO UND. AN ASSESSMENT HAS TO BE MADE ON THE BASIS OF THE MATERIAL AVAILAB LE ON RECORD. BUT, IN THE PRESENT CASE, PRESUMPTIONS HAVE LED THE AO TO A STATE OF AFFAIRS WHERE SALIENT EVIDENCES WERE OVERLOOKED AND THE MATERIAL ON RECORD WAS IGNORED. ON THE OTHER HAND, THE AO HAS BROUGHT NO POSITIVE MATERIAL ON RECORD TO SUBSTANTIATE OR SUPPORT HIS CONCLUSION TH AT THERE WAS EXCESS EXPENDITURE OF RS.5,11,14,650/- TOWARDS CONSUMPTIO N OF RAW MATERIAL WHICH IS NOT REFLECTED IN THE PROFIT AND LOSS ACCOU NT . THE TREATMENT GIVEN BY THE AO IN RESPECT OF AVAILING OF MODVAT CREDIT I S ALSO NOT IN ORDER. THE ADDITION MADE BY THE AO IS NEITHER SUBSTANTIATE IN LAW NOR ON FACTS. THE ADDITION OF RS.3,32,75,131/- IS DIRECTED TO BE DELETED. GROUND NO. 3 IS ALLOWED. 6. THE REVENUE BY THIS APPEAL BEFORE US, SUBMITS TH AT THE ASSESSEE SPENT A SUM OF RS.L,90,91,26,133/- ON ACCOUNT OF RAW MATERI AL CONSUMED IN THE PROFIT & LOSS ACCOUNT, BUT IT WAS NOTICED A SUM OF RS.1,85,8 0,11,483/- WAS ONLY DEBITED IN THE PROFIT & LOSS ACCOUNT TOWARDS RAW MATERIAL C ONSUMED AND FOUND DIFFERENCE OF RS.5,11,14,650/- AND ALSO REFERRED T O THE AOS ORDER THAT THE ASSESSEE HAS AVAILED MODVAT CREDIT OF RS.1,78,39, 519/- AND THE DIFFERENCE OF RS.3,32,75,131/- (RS.5,11,14,650/- MINUS RS.1,78,39 ,5.L9/-) REMAINED UNEXPLAINED AND RELIED ON THE ORDER OF AO. 7. IN REPLY, THE LD. AR SUBMITS THAT THE THAT THE F IGURE OF RS. 1,90,91, 26,133/- AS ENTERED BY THE AUDITORS IN THE NOTES O N ACCOUNTS RELATES TO CRUDE OIL ONLY WHEREAS THE FIGURE OF RS.1,94,03,13,928/- DE BITED TO THE PROFIT & LOSS ACCOUNT INCLUDES CRUDE OIL AS WELL AS CHEMICALS AND HYDROGEN GAS AND RELIED ON THE ORDER OF CIT-A. 8. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN DISPUTE HEREIN IS REVOLVES AROUND THE RS.5,11, 14,650/- AND QUESTIONS ITA NO. 1911/KOL/2013-A-JM M/S. MANTORA OIL PRODUCTS LTD 6 REMAINS BEFORE US THAT WHETHER SUCH DIFFERENCE WAS PROPERLY EXPLAINED BEFORE THE AUTHORITIES BELOW BY SHOWING RELEVANT EVIDENCE. IN THIS REGARD, THE FINDING OF THE CIT-A EXAMINED THE PROFIT AND LOSS ACCOUNT AND SCHEDULES ANNEXED THERETO, WHEREIN HE AGREED WITH THE CONTENTION OF THE ASSESS EE THAT AN AMOUNT OF RS.1,94,03,13,928/- INCLUDES THE VALUE OF CRUDE OIL AND OTHER RELATED ITEMS SUCH AS CHEMICALS AND HYDROGEN GAS AND FOUND THE SAME IN SCHEDULE P WHICH WAS ANNEXED TO THE PROFIT AND LOSS ACCOUNT. IN THIS REG ARD WE MAY REFER TO CHART OF PARTICULARS AS REFLECTING IN THE PAGE NO-4 OF CIT-A WHERE IT SHOWS THE RAW MATERIAL AS PER SCHEDULE-P AND RAW MATERIAL AS PER NOTES ON ACCOUNTS WHEREIN WE FOUND THAT AN AMOUNTS RS.2,17,81,926/- AND 82,80 ,116/- TO BE PURCHASE VALUES OF CHEMICALS AND HYDROGEN GAS RESPECTIVELY T OTALING TO 3,32,75,131/- AND REGARDING MODVAT, WHICH CAN BE AVAILED TOWARDS PAYM ENT OF EXCISE DUTY ON FINISHED GOODS AND IT IS PERTINENT TO STATE THAT T HE BALANCE WILL BE ENTERED DIRECTLY TO THE BALANCE SHEET AS PER THE PROCEDURE PRESCRIBED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THEREFORE , WE ARE OF THE VIEW, THAT THE ORDER OF CIT-A IS JUSTIFIED AND WE FIND NO INFIRMITIES, GROU ND NO-(I) RAISED BY THE REVENUE FAILS, ACCORDINGLY DISMISSED. GROUND NO-(II) BEING GENERAL NEEDS NO ANSWER AND THEREFORE, ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 17 / 06 /2016 SD/- WASEEM AHMED ACCOUNTANT MEMBER SD/- S.S. VISWANETHRA RAVI J JU DICIAL MEMBER DATE 17 / 06 /2016 ITA NO. 1911/KOL/2013-A-JM M/S. MANTORA OIL PRODUCTS LTD 7 COPY OF THE ORDER FORWARDED TO: 1.. THE APPELLANT/REVENUE : THE DCIT, CIR-3, KOLKA TA, P-7 CHOWRINGHEE SQUARE, AAYKAR BHAWAN, KOLKATA-69. 2 THE RESPONDENT/ASSESSEE: M/S. MANTORA OIL PRODUC TS LTD 16 TARACHAND DUTTA STREET, 2 ND FL., KOL-73. 3 4. . /THE CIT, /THE CIT(A) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR ** PRADIP SPS