Srinivasa Jute Mills P Ltd, Vizianagaram V. Addl, Visakhapatnam

ITA 204/VIZ/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2804 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-09-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 30-04-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR

Judgement Text

ITA NO.204/VIZAG/2009 SRINIVASA JUTE MILLS P LTD., VIZIANAGARAM PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.204/VIZAG/2009 ASSESSMENT YEAR: 2005-06 SRINIVASA JUTE MILLS P LTD., VIZIANAGARAM VS. AD. CIT RANGE-4, VISAKHAPATNAM (APPELLANT) PAN NO:AADC S 1080 L (RESPONDENT) APPELLANT BY: SHRI Y.A. RAO, CA RESPONDENT BY: SHRI J. SIRI KUMAR, (DR) ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 19.3.2009 PASSED BY LD. CIT(A), VISAKHAPATNAM AND I T RELATES TO THE ASSESSMENT YEAR 2005-06. THE ASSESSEE IS CHALLENGI NG THE DECISION OF LEARNED CIT(A) IN SUSTAINING THE ESTIMATION OF INCO ME AT RS.7,94,518/-. 2. THE FACTS RELATING TO THE ISSUE ARE STATED I N BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF JUTE, T WINE AND YARN. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONS IDERATION WAS FILED DECLARING NIL INCOME. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND PROCEEDED TO ESTIMATE THE INCOME. THE ASSESSING OFFICER COMPARED THE RES ULTS SHOWN BY ANOTHER ITA NO.204/VIZAG/2009 SRINIVASA JUTE MILLS P LTD., VIZIANAGARAM PAGE 2 OF 5 COMPANY NAMED M/S SSL JUTE MILLS, WHICH WAS ENGAGED IN THE SIMILAR LINE OF TRADE IN THE SAME LOCALITY WITH THAT OF THE ASSE SSEE AND NOTICED THAT THE AVERAGE GROSS PROFIT MARGIN SHOWN BY OTHER COMPANY WAS MORE TO THE TUNE OF RS.796/- PER MT. HENCE THE ASSESSING OFFICER CO MPUTED THE TOTAL INCOME OF THE ASSESSEE BY MULTIPLYING THE DIFFERENCE IN TH E AVERAGE MARGIN (RS.796/-) WITH THE SALES QUANTITY (2797.6 MT) AT R S.22,26,412/-. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTED THAT IT HAD COMMITTED FOLLOWING MISTAKES WHILE WORKING OUT THE MARGIN. (A) THE SAID MARGIN WAS WORKED OUT WITHOUT TAKING I NTO CONSIDERATION OF OPENING AND CLOSING STOCK OF FINIS HED GOODS. (B) IN ORDER TO ARRIVE AT THE COST OF THE PROFIT, THE COST OF PRODUCTION SHALL HAVE TO BE DIVIDED WITH THE TOTAL QUANTITY OF PRODUCTION, BUT IN THE STATEMENT FILED BEFORE THE ASSESSING OFFICER, T HE APPELLANT COMPUTED THE MARGIN OF THE APPELLANT COMPANY BY DIV IDING THE COST OF PRODUCTION WITH SALES QUANTITY TO ARRIVE AT THE COST OF THE PRODUCT WHICH IS INCORRECT. IN VIEW OF THE ABOVE, THE ASSESSEE SUBMITTED A REVIS ED COMPUTATION OF PROFIT MARGIN AND THE SAME WAS FORWARDED BY LEARNED CIT(A) TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE REPLY SUBM ITTED BY THE ASSESSING OFFICER WAS GENERAL IN NATURE AND HENCE THE LEARNED CIT(A) PROCEEDED TO VERIFY THE COMPUTATION SUBMITTED BEFORE HIM AND CON CLUDED THAT THE DIFFERENCE IN MARGIN BETWEEN THE ASSESSEE COMPANY A ND M/S SSL JUTE MILLS LTD, ACTUALLY WORKS OUT TO RS.284/- PER MT. THE LE ARNED CIT(A), BY ADOPTING THE ABOVE SAID AMOUNT, DETERMINED THE TOTA L INCOME OF THE ASSESSEE AT RS.7,94,518/-. (2797.6 MT X RS.284/-). STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.204/VIZAG/2009 SRINIVASA JUTE MILLS P LTD., VIZIANAGARAM PAGE 3 OF 5 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE LEARNED CIT(A) HAS RESTED HIS DECISION ON THE FOLLO WING COMPARATIVE COMPUTATIONS: COMPONENTS SSL JUTE MILLS ASS ESSEE DIFFERENCE RS./MT RS./MT 1. AVG. SALES VALUE 20074 19658 416 2. AVG. COST OF PRODUCTION 15146 15014 132 3. MARGIN (1 () 2) 4928 4644 284 THE SUBMISSION OF LEARNED A.R BEFORE US IS THAT THE DIFFERENCE IN THE MARGIN IS DUE TO THE UNDER REALIZATION OF IN THE SA LES VALUE TO THE TUNE OF RS.416/- PER MT AND THE SAID FACT SUFFICIENTLY EXPL AINS THE DIFFERENCE IN THE MARGIN POINTED OUT BY LEARNED CIT(A). HE FURTHER SU BMITTED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY MISTAKE I N THE SALES BY WAY OF SUPPRESSION AND HENCE NO ADDITION IS CALLED FOR IN THE HANDS OF THE ASSESSEE. HOWEVER THE LEARNED DEPARTMENTAL REPRES ENTATIVE POINTED OUT THAT THE A.O HAS SPECIFICALLY POINTED OUT THAT THE PURCHASES RECORDED BY THE ASSESSEE ARE INFLATED AND FURTHER THE EXPENSES ACCO UNTED FOR DO NOT HAVE ANY SUPPORTING VOUCHERS. WE NOTICE THAT THE ASSES SEE HAS ADVANCED SIMILAR ARGUMENTS BEFORE THE LEARNED CIT(A) AND THE FIRST APPELLATE AUTHORITY HAS ADDRESSED THE SAID CONTENTIONS WITH T HE FOLLOWING OBSERVATIONS: IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING TO THE EFFECT THAT THE SALE PRICE IN THE CA SE OF APPELLANT COMPANY WAS SUPPRESSED. HOWEVER, THIS AR GUMENT OF THE APPELLANT COMPANY IS NOT ACCEPTABLE. THE PR OFIT MARGIN CAN BE LOW EITHER BECAUSE OF SUPPRESSION OF SALE PRICE OR INFLATION OF COST PRICE. IN THE INSTANT CASE, T HE ASSESSING OFFICER THROUGH SUFFICIENT EVIDENCES AND ELABORATE DISCUSSION ITA NO.204/VIZAG/2009 SRINIVASA JUTE MILLS P LTD., VIZIANAGARAM PAGE 4 OF 5 HAVE CLEARLY ESTABLISHED THAT THE COST OF PRODUCTIO N WAS INFLATED IN AS MUCH AS THE PURCHASE VALUE WAS INFLA TED AND THE EXPENDITURES WERE NOT SUPPORTED BY PROFIT BILLS & VOUCHERS LEADING TO THE POSSIBILITY OF INFLATION OF EXPENDITURES 3.1 WE FIND MUCH FORCE IN THE OBSERVATIONS OF T HE LEARNED CIT(A). THERE CANNOT BE ANY DISPUTE THAT THE AVERAGE PROFIT MARGI N WAS COMPUTED BY DEDUCTING THE AVERAGE COST OF PRODUCTION FROM THE A VERAGE VALUE OF SALES REALIZATION. THUS, THE UNDER REALIZATION POINTED OU T BY LEARNED A.R WAS AUTOMATICALLY TAKEN INTO ACCOUNT WHILE ARRIVING AT THE AVERAGE MARGIN. HENCE, IN OUR VIEW, THERE IS NO NECESSITY TO CONSID ER THE DIFFERENCE IN SALES REALIZATION ALONE IN ISOLATION. BEFORE US, THE ASS ESSEE HAS FILED A STATEMENT SHOWING GROSS PROFIT WORKINGS OF THE ASSESSEE COMPA NY AND M/S SSL JUTE MILLS FOR THE YEAR UNDER CONSIDERATION. IN THE SAI D STATEMENT, WE NOTICE THAT THE ASSESSEE HAS NOT CARRIED OUT REQUIRED ADJU STMENT FOR THE CLOSING STOCK VALUE OF FINISHED GOODS ON HAND WHILE ARRIVIN G AT THE GROSS PROFIT. THE LEARNED CIT(A) HAS PROCEEDED ON THE BASIS OF AVERAG E MARGIN, (I.E. AVERAGE SALES REALIZATION LESS AVERAGE COST OF PRODUCTION), WHICH IS THE AVERAGE GROSS PROFIT REALIZED BY THE ASSESSEE AND THE OTHER COMPANY. THUS THE STATEMENT NOW FILED CONTAINS DETAILS WHICH HAVE ALR EADY BEEN CONSIDERED BY THE LEARNED CIT(A). 3.2 IN THE INSTANT CASE, THERE IS NO DISPUTE W ITH REGARD TO THE REJECTION OF BOOKS OF ACCOUNT. AFTER SUCH REJECTION, THE ASS ESSING OFFICER HAS TO ESTIMATE THE INCOME OF THE ASSESSEE ON A REASONABLE BASIS. WE NOTICE THAT THE A.O HAS TAKEN THE RESULTS SHOWN BY ANOTHER COMP ANY OPERATING THE IN SAME PLATFORM AS A COMPARATIVE CASE AND ACCORDINGLY DETERMINED THE TOTAL INCOME OF THE ASSESSEE. THE SAID ACTION OF THE A.O CANNOT BE FOUND FAULT WITH. WHEN THE ASSESSEE HAS POINTED OUT THE ERROR I N THE WORKINGS ITA NO.204/VIZAG/2009 SRINIVASA JUTE MILLS P LTD., VIZIANAGARAM PAGE 5 OF 5 SUBMITTED BEFORE THE A.O., THE LEARNED CIT(A) CARRI ED OUT DUE VERIFICATION HIMSELF AND FINALLY DETERMINED THE DIFFERENCE IN TH E PROFIT MARGIN AT RS.284/- AND ACCORDINGLY THE DETERMINED THE TOTAL I NCOME OF THE ASSESSEE AT RS.7,94,518/-. WE ARE NOT CONVINCED WITH THE CO NTENTION OF THE LEARNED A.R TO CONSIDER THE DIFFERENCE IN SALES REALIZATION IN ISOLATION, AS WE FIND FORCE WITH THE OBSERVATION OF THE LEARNED CIT(A) ON THAT POINT. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) HAS ARRIVED AT HIS DECISION IN A JUDICIOUS MANNER AND HENCE WE DO NOT FIND ANY NECESSITY TO INTERFERE WITH HIS DECISION. ACCORDINGLY WE UPHOLD THE ORDER OF LEARNED CIT(A). 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 28-09-2010. COPY TO 1 M/S SRINIVASA JUTE MILLS (P) LTD., VIZIANAGARAM C /O M/S ROWE & PAL, CHARTERED ACCOUNTANTS, 14-36-1 KRISHNANAGAR, VISAKH APATNAM 2 THE ADDITIONAL COMMISSIONER OF INCOME TAX RANGE- 4, VISAKHAPATNAM 3 4. THE CIT 2, VISAKHAPATNAM THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM