NEELAM KOTHARI, Kolkata V. ACIT, Range-45/Kolkata, Kolkata

ITA 2092/KOL/2013

• Counselvise Citation: 209223514 RSA 2013
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 10-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P NAG
• Assessee Lawyers: DEEPAK C HATURVEDI
• Keywords: Reasonable cause
• Section: 154

Judgement Text

I.T.A. NO . 2 092 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 1 OF 7 N THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI MAHAVIR SINGH , JUDICIAL MEMBER I.T.A. NO. 2 092 / KOL / 20 1 3 ASSESSMENT YEAR : 200 9 - 20 10 NEELAM KOTHARI,.... ............. ...... .......... ........ ........... . APPELLANT 184, JAMUNALAL BAJAJ STREET, 3 RD FLOOR, KOLKATA - 700 007 [PAN : A FMPK 2684 R ] - VS. - ADDITIONAL COMMISSIONER OF INCOME TAX, .......... ..... ..... . RESPONDENT RANGE - 45 , KOLKATA , 3, GOVERNMENT PLACE, KOLKATA - 700 001 APPEARANCES BY: SHRI DEEPAK C HATURVEDI , ADVO CATE , FOR THE ASSESSEE S H RI R .P. NAG , JCIT, FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JU LY 1 6 , 2 01 5 DATE OF PRONOUNCING THE ORDER : AUGUST 06 , 201 5 O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME TAX (APPEALS) - XXX , KOLKATA IN APPEAL NO. 234 / CIT(A) - XXX/ RANGE - 45/2011 - 12 DATED 31 . 0 8 .20 1 2 FOR THE ASSESSMENT YEAR 200 9 - 10 . 2. THE APPEAL IS TIME BARRED BY 207 DAYS AND THE ASSESSEE HAS FILED A CONDONATION PETITION FOR CONDONING THE DELAY IN SUBMITTI NG THE APPEAL BEFORE THE TRIBUNAL. IT WAS BROUGHT TO MY NOTICE BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE AFTER AGGRIEVED WITH THE ORDER OF ASSESSMENT DATED 21.12.2011 FOR THE ASSESSMENT YEAR 2009 - 10 READ WITH ORDER OF RECTIFICATION UNDER SECTIO N 154 DATED 17.02.2012 FILED APPEAL BEFORE THE LD. CIT(APPEALS) - XXX, KOLKATA. THAT THE LD. CIT(APPEALS) ADJUDICATED THE MATTER VIDE ORDER DATED 31.08.2012, AND THE COPY OF ORDER WAS NOT DIRECTLY SERVED TO HIM, I.E. THE ASSESSEE, RATHER IT WAS HANDED OVER TO THE I.T.A. NO . 2 092 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 2 OF 7 BROTHER - IN - LAW OF THE ASSESSEE WHILE THE ASSESSEE WAS UNDER TREATMENT. THE ASSESSEE WAS BED RIDDEN DUE TO ISCHEMIC HEART DISEASE PROBLEM AND SINCE 07.12.2012 WAS BED - RIDDEN AND WAS UNDER THE CARE AND TREATMENT OF DR. D.D. KOTHARI TILL 02.07.2013. TH E BROTHER - IN - LAW OF THE ASSESSEE, WHO RECEIVED THE ORDER, MISPLACED IT. IN RESPONSE TO THIS, THE LD. D.R. DID NOT RAISE ANY OBJECTION FOR CONDONATION OF DELAY. 3. I HAVE HEARD THE ASSESSEE IN REGARD TO THE CONDONATION PETITION FILED UNDER SECTION 253(5) O F THE INCOME TAX ACT, 1961. THE ASSESSEE HAS PRODUCED VARIOUS DOCUMENTS INCLUDING PRESCRIPTIONS BY DR. D.D. KOTHARI, M.D., ELECTROCARDIOGRAPHY REPORTS AND OTHER SUPPORTING DOCUMENTS WHICH CLEARLY PROVE THAT THE ASSESSEE WAS UNDER - GOING REGULAR TREATMENT FO R ISCHEMIC HEART DISEASE DURING THE PERIOD 07.12.2012 TO 02.07.2013. THIS BEING A REASONABLE CAUSE AND BEYOND THE CONTROL, OF THE ASSESSEE, I CONDONE THE DELAY IN FILING THE APPEAL. THE ASSESSEE S APPEAL IS ADMITTED. 4. THE ONLY GROUND RAISED BY THE ASSES SEE IS FOR SUSTAINING THE ADDITION OF RS.8,81,679/ - TOWARDS SHORTAGE OF 4349.35 KGS. ON ACCOUNT OF DYING AND BLEACHING OF SEMI - FINISHED HOSIERY CLOTH ALSO TERMS AS GREY CLOTH BY THE LD. CIT(APPEALS). 5 . THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS CLAI MED SHORTAGE OF 4349.35 KG. ON ACCOUNT OF PROCESS OF MANUFACTURING OF HOSIERY ITEMS, WHICH WAS NOT ALLOWED BY THE ASSESSING OFFICER AND THEREBY MAKING THE ADDITION OF RS.34,80,073/ - AS THE VALUE OF SUPPRESSED STOCK. THEREAFTER THE ASSESSEE MOVED AN APPLICA TION UNDER SECTION 154 FOR WRONG CALCULATION OF THE VALUATION OF CLOSING STOCK AND THE ASSESSING OFFICER VIDE HIS ORDER UNDER SECTION 154 DATED 17.02.2012 MODIFIED THE ASSESSMENT AND BROUGHT DOWN FROM RS.34,80,073/ - TO RS.8,81,679/ - . THIS MISTAKE ARISES DU E TO TECHNICAL MISTAKE IN CALCULATION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THEREAFTER THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(APPEALS) FOR THE ADDITION OF RS.8,81,679/ - ON ACCOUNT I.T.A. NO . 2 092 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 3 OF 7 OF DISALLOWANCE OF SHORTAGE OF STOCK BY THE ASSES SING OFFICER OF 4349.35 KG. 6. DURING THE ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT THE NATURE OF BUSINESS CARRIED ON BY HIM, I.E. MANUFACTURING OF READYMADE GARMENTS, THE BASIC RAW MATERIAL IS HOSIERY CLOTH (THAN). IT IS NOT POSSIBLE TO MANUFACTURE 100% OF CLOTH GARMENTS OUT OF HOSIERY THAN WITHOUT WASTAGE IN CUTTING OF CLOTH, ETC. DEFECTIVE PORTION OF CLOTH APPEARS AS IN REGULAR NATURE ON BOTH THE SIDES OF THE CLOTH (THAN) AND SOMETIMES DUE TO WEAVING DEFECT OF THE CLOTH, ONE CANNOT EXPLORE 100% PRODUCTION OUT OF THIS MATERIAL. DUE TO THIS REASON, WEIGHT OF THE CLOTH IS REDUCED, WHICH THEREBY INCURRED SHORTAGE OF RAW MATERIAL. THE ASSESSEE FURTHER SUBMITTED THAT INCURRING OF SUCH LOSS IS QUITE NORMAL AND FURTHER CASH BOOK, LEDGER, JOURNAL, SALE BILL BOOK, PURCHASE BILLS AND EXPENSES BILLS DULY PRODUCED ALONG WITH BOOKS OF ACCOUNT FOR BEING EXAMINATION BY THE TAX AUDITOR AND THE STOCK BILL SHOWING OPENING , PURCHASE , CONSUMPTION, CLOSING STOCK AND SHORTAGE HAS BEEN DULY CERTIFIED BY THE TAX AUDITOR IN HIS TAX AUDIT REPORT. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF SHORTAGE MADE BY THE ASSESSEE BECAUSE THERE WAS NO DOCUMENTARY EVIDENCE EXCEPT DECLARATION OF SUCH LOSS STATED BASED ON INVENTORY TAKEN AT THE CLOSE OF THE YEAR. HOSIERY THAN AND GOODS AS REPORTED AND CONSIDERED DOES NOT INCLUDE ANY GOODS UNDER PROCESS OR LYING WITH THE PROCESS OR AND AS SUCH SUGGEST ING TO BE OF SUCH NATURE A S NOT INVOLVING ANY MAJOR OPERATION. THE ASSESSING OFFICER ALSO REFERRED TO THE PREVIOUS ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 2008 - 09 AND FIND THAT IN BOTH THE ASSESSMENT YEARS, THE FEATURES WERE IDENTICAL AND COMMON AND AS SUCH LOSS APPEARS NOT NORMAL AS SUGGESTED BY THE ASSESSEE S PAST RECORDS ITSELF AND ACCORDINGLY DISALLO WED. THEREAFTER ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(APPEALS). 7. THE ASSESSEE GAVE THE FOLLOWING SUBMISSIONS BEFORE THE LD. CIT(APPEALS): - I.T.A. NO . 2 092 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 4 OF 7 FACTUALLY IT IS UNJUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS SUCH NATURE OF READYMADE GARMENT S BUSINESS; IT IS NOT POSSIBLE TO MANUFACTURE 100% OF CLOTH GARMENTS OUT OF HOSIERY THAN WITHOUT WASTAGE IN CUTTING OF CLOTH, ETC. MATHEMATICALLY ONE CANNOT EXPLAIN WITHOUT CONSIDERING THE LOSS OF RAW MATERIALS IN THE COURSE OF PROCESSING AND/OR MANUFACTU RING THE GOODS WITHOUT HAVING CONSIDERING THE SHORTAGE. IT IS QUITE NATURAL IN THIS TYPE OF BUSINESS. THE APPELLANT AGAIN SUBMIT THAT DUE TO AFORESAID FACT, THE SHORTAGE OF RAW MATERIAL IS THE QUITE NATURAL. THE APPELLANT HAS ALREADY BEEN FILED THE ABOVE S UBMISSION ABOUT THE REASONS OF SHORTAGE OF CLOSING STOCK BEFORE THE LD. AO VIDE LETTER DATED 15.12.2011, A COPY OF THE SAME APPENDED HEREWITH. IN THE AFORESAID CIRCUMSTANCES YOUR HONOUR MAY KINDLY RECONSIDER THE ADDITION OF RS.8,81,679/ - WHICH IS EXCESSIVE AND OUT OF PROPORTION IN THE FACTS AND CIRCUMSTANCES OF THE CASE . 8. THE LD. CIT(APPEALS), HOWEVER, DID NOT ACCEPT THE SUBMISSIONS OF THE ASSESSEE BY GIVING THE FOLLOWING FINDINGS WHICH READS AS FOLLOWS: - HOWEVER, COMING TO THE AO S CONTENTION THAT EVEN THIS ADDITION IS NOT JUSTIFIED, IT IS SEEN THAT THE AO HAS CONSIDERED CERTAIN ISSUES INCLUDING THE FACT THAT THE APPELLANT IS NOT MAINTAINING STOCK REGISTER AND IS ONLY CALCULATING CLOSING STOCK ON THE BASIS OF INVENTORY CARRIED OUT AT THE END OF THE FINA NCIAL YEAR ON WHICH BASIS A SHORTAGE OF 4349.35 KGS HAS BEEN DISCLOSED. IT IS ALSO SEEN THAT THE AO HAS CONSIDERED THE APPELLANT S OWN RESULTS IN THE EARLIER ASSESSMENT YEAR, I.E. 2008 - 09, WHEN AGAINST CLOSING STOCK OF 8238 KG NIL SHORTAGE HAD BEEN DISCLOS ED. NOW, THE SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CONSIDERED BUT IT IS NOT BEEN ABLE TO JUSTIFY AS TO WHY THERE WAS NO SUCH SHORTAGE IN THE EARLIER YEAR, WHEN THE NATURE OF BUSINESS OF THE APPELLANT REMAINED THE SAME. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE APPELLANT S SUBMISSIONS IN RESPECT OF THE DISALLOWANCE CANNOT BE ACCEPTED AND THE DISALLOWANCE OF RS.8,81,679/ - RECTIFIED BY ORDER U/S 154 DATED 17.02.2012 TOWARDS SHORTAGE OF 4349.35 KGS OF CLOSING STOCK IS HELD TO BE JUSTIFIED AND THE SAME IS CONFIRMED TO THIS EXTENT . 9. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. I.T.A. NO . 2 092 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 5 OF 7 10. THE ONLY ISSUE BEFORE ME IS REGARDING DISALLOWANCE OF SHORTAGE OF 4349.35 KG. CLAIMED BY THE ASSESSEE IN THE PROCESS OF MAKING HOSIERY GOODS OUT OF GREY CLOTH. LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED VARIOUS DETAILS TO JUSTIFY THE CLAIM OF THE ASSESSEE. COPIES OF VARIOUS ARTICLES AS WELL AS TECHNICAL ANALYSIS OF THE PROCESS OF MANUFACTURING/PROCESSING OF GREY CLOTH HAVE BEEN SHOWN, WHICH SAYS THA T ABOUT 5 - 10% IS NORMAL FOR WASTAGE OF CLOTH. I WOULD LIKE TO REFER TO THE ARTICLE ON INFLUENCE OF WET PROCESSING OF PROPERTIES OF SINGLE JERSEY KNITTED FABRICS DATED 04.03.2013, WHICH SAYS THAT THE RESULTS OF DIMENSIONAL STABILITY ANALYSIS OF RTS FABRICS AFTER REPEATED WASHING SHOW THAT MERCERIZED RTS FABRICS HAS HIGHER LENGTH WISE SHRINKAGE COMPARED TO SCOURED RTS FABRICS. THE DYEING BEHAVIOUR OF RTS FABRIC SHOW THAT FABRIC DYED WITH MERCERIZED RFD FABRIC HAS GREATER COLOUR STRENGTH COMPARED TO RTS FABRIC DYED WITH SCOURED RFD FABRIC. THE CHANGES OBSERVED IN THE FABRIC WEIGHT AT DIFFERENT PROCESSING STAGES ARE PRIMARILY DUE TO THE PRE - TREATMENT PROCESSES ADOPTED AND THE FABRIC SHRINKAGE OBSERVED DURING THE PROCESSING. DURING PRE - TREATMENT OF THE GREIGE FAB RIC, THERE IS A CERTAIN AMOUNT OF WEIGHT LOSS IN THE MATERIAL. THE WEIGHT LOSS OBSERVED IN THE GREIGE FABRIC DURING PRE - TREATMENT PROCESS IS DUE TO REMOVING OF IMPURITIES PRESENT IN THE FABRIC. GREIGE KNITTED COTTON FABRIC MADE OF COTTON FIBRES CONSISTS OF APPROXIMATELY 10% BY WEIGHT NON - CELLULOSIC SUBSTANCES SUCH AS LIPIDS, WAXES, ORGANIC ACIDS, PROTEIN SUBSTANCES, AND OTHER UNIDENTIFIED COMPOUNDS. IN ORDER TO REMOVE THESE NON - CELLULOSIC MATERIALS OR IMPURITIES FROM THE FABRIC/FIBRES, SCOURING IS NORMALLY CARRIED OUT WITH STRONG ALKALI AT HIGH TEMPERATURE FOR A CERTAIN SPECIFIED TIME. TOTAL AMOUNT OF IMPURITIES TO BE REMOVED IS LESS THAN 10% (ABOUT 5% TO 10%) OF THE TOTAL WEIGHT. 11. SIMILAR TYPES OF ARTICLE WITH TECHNICAL CALCULATION AS GIVEN BY BHOWMIK D YEING & BLEACHING PVT. LTD. (J. INNOV. DEV. STRATEGY). 12 . LD. D.R. FOR THE REVENUE VEHEMENTLY SUPPORTED THE ORDERS OF LOWER AUTHORITIES. I.T.A. NO . 2 092 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 6 OF 7 1 3 . FURTHER THE ASSESSEE HAS ALSO TO MAKE HOSIERY ITEMS OF VARIOUS SHAPES AND SIZES FROM GREY CLOTHS. CERTAINLY FOR C UTTING CLOTH IN SOME SHAPES, SOME WASTAGE/ SHORTAGE OUGHT TO ARRIVE. THE ASSESSING OFFICER HAS RIGHTLY POINTED OUT THAT NO STOCK REGISTER HAVE BEEN MAINTAINED BY THE ASSESSEE FOR CALCULATION OF THE SHORTAGE. BUT WE CANNOT IGNORE THE SHORTAGE/LOSS/WASTAGE W HICH NORMALLY ARISES IN THE PROCESS OF MAKING HOSIERY ITEMS AS DISCUSSED ABOVE. THE ASSESSEE HAS TAKEN THE STOCK AT THE END OF THE YEAR AND AS DULY SUPPORTED FOR SHORTAGE OF CLAIM WITH THE TAX AUDIT REPORT DATED 22.09.2009. THE ASSESSEE HAS ALSO SUBMITTED THE DETAILS OF QUANTITY OF GREY CLOTH RECEIVED , QUANTITY OF PROCESS ING AS WELL AS THE SHORTAGE ARISING IN THE PROCESS. COPIES OF BILLS FROM VARIOUS SUPPLIERS OF GREY CLOTH HAVE BEEN SHOWN IN SUPPORT OF THE QUANTITY - WISE PURCHASE DETAILS SUBMITTED BY THE AS SESSEE. 14. I HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF SHORTAGE OF STOCK OF 4349.35 KG. OF RAW MATERIAL AMOUNTING RS.8,81,679/ - WITHOUT GIVING COGNIZANCE TO THE FACTS OF THE MANUFACTURING PROCESS OF SUCH GOODS WHICH HAS RESULT OF SHORTAGE/WASTAGE WHICH COMES IN THE PROCESS OF MAKING GREY CLOTH READY FOR MAKING HOSIERY GOODS AS WELL AS CUTTING OF GREY CLOTH FOR MAKING HOSIERY ITEMS. THIS FA CT HAS N EITHER BEEN TAKEN CARE BY THE ASSESSING OFFICER AND NOR BY THE LD. CIT(APPEALS) IN THEIR ORDERS. I, THEREFORE, DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES AND ALLOW THE CLAIM OF THE ASSESSEE. 15 . IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 06 TH , 201 5 . SD/ - MAHAVIR SINGH ( JUDICIAL MEMBER) KOLKATA, THE 6 TH D AY OF AUGUST , 201 5 I.T.A. NO . 2 092 / KOL ./20 1 3 ASSESSMENT YEAR: 200 9 - 20 10 PAGE 7 OF 7 COPIES TO : (1) NEELAM KOTHARI, 184, JAM UNALAL BAJAJ STREET, 3 RD FLOOR, KOLKATA - 700 007 (2) ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE - 45, KOLKATA, 3, GOVERNMENT PLACE, KOLKATA - 700 001 (3) COMMISSIONER OF INCOME - TAX (APPEALS) , KOLKATA (4) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA B ENCHES, KOLKATA LAHA/SR. P.S .