Shanta Sizewell Pvt.Ltd., Surat V. The ACIT.,Circle-4, Surat

ITA 2139/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5716 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-05-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 04-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: R N VEPARI
• Keywords: Rejection of books of accounts

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AT SURAT CAMP BEFORE S/SHRI T.K.SHARMA, JM AND D.C.AGRAWAL, AM SHANTA SIZEWELL PVT. LTD., 19/1542, OUTSIDE KAMELA DARWAJA, PIMTEX SUB- STATION COMPOUND, UMARWADA TEKRA, SURAT. VS. THE ASSTT. CIT, CIR-4, SURAT. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI R. N. VEPARI, AR REVENUE BY:- SHRI H. P. MEENA, SR. DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- I. ADDITION OF RS.15 LACS TO NET PROFIT : (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS.15,00,000/- TOWA RDS NET PROFIT. (2) THE APPELLANT SUBMITS THAT THE LD. CIT(A) WAS NOT J USTIFIED IN CONFIRMING ADDITION OF RS.15,00,000/- WHEN IT IS NOT CLEAR HOW IT HAS BEEN WORKED OUT AND FOR WHICH OF T HE TWO DIVISIONS IT WAS MADE PARTICULARLY WHEN IN CASE OF TEXTURISING UNIT COMPLETE DETAILS OF PRODUCTION, CONSUMPTION AND EXCISE RECORDS HAVE BEEN MAINTAINED . ITA NO.2139/AHD/2008 ASST. YEAR :2002-03 2 (3) THE APPELLANT FURTHER SUBMITS THAT THE LD. CIT(A) W AS NOT JUSTIFIED IN CONSIDERING BOTH THE UNITS AS COMBINED WHEN BOTH OF THEM ARE INDEPENDENT. II. MISCELLANEOUS : (1) THE LD. CIT(A) OUGHT TO HAVE DELETED INTEREST U/S 2 34B OF THE ACT. THUS ONLY ISSUE INVOLVED IS THE ADDITION OF RS.15,0 0,000/- IN THE NET PROFIT. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SIZED YARN AND TEXTURISED YARN. THE ASS ESSEE SHOWED FOLLOWING TRADING RESULTS :- A.Y. 1 ST SET SIZING ACTIVITY 2 ND SET (TEXT. ACTIVITY) SALES GP % OF GP SALES GP % OF GP 2000-01 6,08,385 62,669 10.30% 474,24,927 35,14,008 7.40% 2001-02 23,15,275 1,98,785 -8.58% 647,68404 84,66,518 13% 2002-03 2,24,29,444 31,55,036 14.06% 702,60,749 48,95,095 6.96% THE AO NOTICED THAT ASSESSEE HAS SOLD THE GOODS AT MUCH REDUCED RATES IN THE MONTH OF JANUARY, FEBRUARY AND MARCH AS AGAINST AVERAGE FOR THE WHOLE YEAR OF RS.105.15. HE PROVIDED FOLLOWING DATA :- MONTH TURNOVER MONTHLY AVERAGE AVERAGE FOR THE WHOLE YEAR JANUARY RS.10.77,014/- RS.100.75 RS.105.15 FEBRUARY 53,61,667 RS.98.77 RS.105.15 MARCH RS.68,57,298 RS.97.59 RS.105.15 3 ACCORDING TO HIM ASSESSEE DID NOT FURNISH THE DETAI LS OF DAY TO DAY OF CONSUMPTION OF OIL. FURTHER IN THE CASE OF SIZING U NIT THE AO NOTICED THAT ASSESSEE IS USING DIFFERENT TYPES OF CHEMICALS FOR THE SIZING OF YARN. THE ASSESSEE USED SPECIFIC FORMULA WITH SPECIFIC PROPOR TION. HE REQUIRED THE ASSESSEE TO GIVE OPENING STOCK, PURCHASES, CONSUMPT ION AND CLOSING STOCK OF CHEMICALS, BUT THESE DETAILS WERE NOT SUBMITTED ON THE GROUND THAT THE CONCERNED KARIGARS HAVE LEFT THE JOB. SUBSEQUENTLY CERTAIN FORMULAS FOR SIZING WAS GIVEN WHICH SHOWED CONSUMPTION OF VARIOU S TYPES OF CHEMICALS AS UNDER :- KGS. (1) P.V.A. 20/- (2) RASIN 3/- (3) A.S.P. 5000 90/- (4) 782 2/- (5) 783 J/500 (6) D.K. 120 0/100 116/600 (NOTE: VARIATION 10% TO 15% OF USING CHEMICALS.) THE AO NOTICED THAT IT IS NOT CLEAR WHAT QUANTITY O F YARN CAN BE SIZED FROM THE ABOVE MIXTURE OF CHEMICALS OF 116.60 KGS. SUBSEQUENTLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICE D THAT THERE WAS EXCESS CONSUMPTION OF CHEMICALS WHEN COMPARED TO TH E PRODUCTION OR SIZE OF YARN BY THE ASSESSEE. THE AO ACCORDINGLY IN VOKED PROVISIONS OF SECTION 145(3) AND PROPOSED AN ADDITION OF RS.15 LA CS ON ESTIMATE BASIS. 3. THE LD. CIT(A) CONFIRMED THE ADDITION BY OBSERVI NG AS UNDER :- 2.6 I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND OBSERVATION OF THE AO. THE ADDITION MADE BY THE AO IS NOT SIMPLY BASED ON THE FACT THAT THE AO HAS MADE THE STATEMENT IN T HE ORDER THAT THE ASSESSEE HAS MADE SALES AT LOWER RATE DURING THE MO NTHS OF JANUARY, 4 FEBRUARY & MARCH THAN THE AVERAGE OF THE WHOLE YEAR . THE AO HAS BEEN ABLE TO BRING ON RECORD THAT IN THE SIZING UNIT THE ASSESSEE HAD MANIPULATED ITS ACCOUNTS AND IT DID NOT SHOW THE EN TIRE PICTURE. THE AO HAS RELIED ON THE FORMULATION OF VARIOUS CHEMICALS REQUIRED FOR PRODUCTION AS GIVEN BY THE APPELLANT. THEREAFTER TH E AO HAS BEEN ABLE TO SHOW THAT IN RESPECT OF AT LEAST ONE CHEMICAL VIZ. PVA POWDER, THE ASSESSEE HAS SHOWN CONSUMPTION OF ONLY 1200 KGS. WH EREAS EVEN AFTER TAKING INTO ACCOUNT 215% VARIATION THE ASSESSEE MUS T HAVE AT LEAST CONSUMED 3946 KGS. OF PVA POWDER. THIS SHOWS THAT T HE ASSESSEES BOOKS OF ACCOUNTS ARE NOT RELIABLE. FURTHER THE APPELLANT HAS ADMITTEDLY NOT MAINTAINED DAY TO DAY CONSUMPTION REGISTER OF VARIO US CHEMICALS ETC. I AGREE WITH THE AO THAT THE BOOKS OF ACCOUNTS ARE NO T RELIABLE AND THEREFORE REJECTION OF THE SAME IS IN ORDER. HAVING SAID THAT, THE ESTIMATION OF INCOME HAS TO BE BASED ON SOME BASIS AS STATED BY THE HON. SUPREME COURT IN THE CASE OF KACHWALA GEMS (288 ITR 10) AS UNDER :- IT IS WELL SETTLED THAT IN A BEST JUDGEMENT THERE IS ALWAYS A CERTAIN DEGREE OF GUESS WORK. NO DOUBT THE AUTHORITIES SHOULD TRY TO MAKE AN HONEST AND FAIR ESTIMATE OF THE INCOME EVEN IN A BEST JUDGEMENT ASS ESSMENT AND SHOULD NOT ACT TOTALLY ARBITRARILY, BUT THERE IS NECESSARILY SOME AMOUNT OF GUESS WORK INVOLVED IN A BEST JUDGEMENT ASSESSMENT. THE AO RESORTED TO BEST JUDGEMENT OF THE ASSESSEE ON THE FOLLOWING GROUNDS :- I) THE ASSESSEE HAD NOT MAINTAINED QUANTITATIVE DETAIL S/STOCK REGISTER; II) THERE WAS NO EVIDENCE TO VERIFY CLOSING STOCK; III) THE GENUINENESS OF PURCHASES WAS NOT PROVED WITHOUT ANY DOUBT. ..THERE WAS NO ARBITRARINESS IN THIS CASE IN RESO RTING TO BEST JUDGEMENT ASSESSMENT. IT WAS THE ASSESSEE HIMSELF WHO WAS TO BLAME AS HE DID NOT SUBMIT PROPER ACCOUNTS. HENCE, IN VIEW OF THE ABOVE DECISION, IT IS CLEAR T HAT AFTER THE REJECTION OF BOOKS OF ACCOUNTS THE INCOME IS ESTIMATED ALWAYS ON SOME GUESS WORK BUT THE GUESS WORK HAS TO BE DONE ON SOME BASIS. IN THE PRESENT CASE IT IS SEEN THAT THE TOTAL TURNOVER OF THE ASSESSEE IS RS.9.26 CRORES AND GP SHOWN IS RS.80.5 LACS. IF THE GP RATE OF LAST YEAR I.E. 12.3 1% IS ADOPTED THEN THE TOTAL GP SHOULD HAVE BEEN RS.1.14 CRORES AND HENCE THE ASSESSEE HAS SHOWN LESS GP BY 33.6 LACS. HOWEVER, IF THE GP RATE OF CURRENT YEAR AND LAST YEAR IS TAKEN THEN THE SAME IS ABOUT 10.5%. IF THIS GP RATE IS ADOPTED THEN ALSO THE ADDITION COULD HAVE BEEN TO THE EXTEN T OF RS.16.86 LACS. THE 5 AO HAS MADE THE ADDITION OF RS.15 LACS WHICH IS REA SONABLE. IN THE ENTIRE ASSESSMENT PROCEEDINGS OR APPEAL PROCEEDINGS THE AP PELLANT HAS ALSO NOT BEEN ABLE TO GIVE ANY COGENT REASON AS TO WHY THERE IS DISCREPANCY IN THE CONSUMPTION OF PVA POWDER. THE APPELLANT HAS ALSO F AILED TO GIVE DAY TO DAY CONSUMPTION DETAILS OF THE CHEMICALS. THE APPEL LANT HAS ALSO NOT BEEN ABLE TO EXPLAIN BY GIVING DOCUMENTARY EVIDENCE AS TO WHY THE GP RATE HAS FALLEN IN RESPECT OF TEXTURISING UNIT FROM 13% IN THE LAST TO 6.96% IN THE CURRENT YEAR. IN VIEW OF THE ABOVE THE ADDIT ION OF RS.15 LACS IS SUSTAINED AND THIS GROUND OF APPEAL IS DISMISSED. THE GIST OF THE ABOVE DECISION IS THAT BOOKS OF ACC OUNT ARE NOT RELIABLE AND THAT GP HAS SUBSTANTIALLY FALLEN IN TEXTURISING UNIT FROM 13% TO 6.96% THIS YEAR. 4. AGAINST THIS, THE LD. AR FOR THE ASSESSE E SUBMITTED THAT BOOKS OF ACCOUNTS OF THE ASSESSEE ARE AUDITED AND NO SPECIFI C DEFECT HAS BEEN POINTED OUT. ALL THE DETAILS REQUIRED BY THE AO ARE FURNISHED. THE ASSESSEE HAS BEEN MAINTAINING SEPARATE BOOKS OF ACC OUNT FOR TWO TYPES OF BUSINESS. THERE IS EXCISE DUTY PAYABLE OF TEXTURISI NG UNIT AND RECORDS ARE MAINTAINED ACCORDINGLY. THERE IS NO ALLEGATION THAT ASSESSEE HAS SOLD ANY GOODS OUTSIDE THE BOOKS OR SOLD AT LOWER PRICE. 5. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). THE REASON S ARE THAT FIRSTLY ASSESSEE IS USING DIFFERENT TYPES OF CHEMICALS AND IN DIFFERENT PROPORTION FOR DIFFERENT PROCESSES. THERE IS NO CO-RELATION OF CHEMICALS USED AND OUTPUT OBTAINED. THE ASSESSEE HAD FAILED TO GIVE DA Y TO DAY CONSUMPTION DETAILS OF THE CHEMICALS. THE ASSESSEE ALSO FAILED TO GIVE THE REASONS WHY 6 THERE IS A DISCREPANCY IN THE CONSUMPTION OF PVA PO WDER. FURTHER NO EVIDENCE WAS FURNISHED TO VERIFY CLOSING STOCK. GEN UINENESS OF PURCHASES WERE ALSO NOT ESTABLISHED TO THE SATISFACTION OF TH E AUTHORITIES. THEREFORE, FROM THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSES SEE IT IS NOT POSSIBLE TO DEDUCE INCOME CORRECTLY AND ACCORDINGLY AUTHORIT IES WERE JUSTIFIED IN INVOKING PROVISIONS OF SECTION 145(3). SO FAR AS TH E ADDITION PROPOSED IN THE GP IS CONCERNED, IN OUR CONSIDERED VIEW IT IS R EASONABLE BECAUSE ASSESSEE HAS NOT EXPLAINED THE FALL IN GP FROM 13% TO 6.96%. THE ADDITION OF RS.15 LACS PROPOSED BY THE AO IN THE TR ADING RESULTS WILL ONLY ENHANCE GP RATE BY ABOUT 2% ON THE DECLARED SALES O F RS.7,02,60,749/-. TAKING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE INTO CONSIDERATION WE CONFIRM THE ORDER OF LD. CIT(A) AND DISMISS THE APP EAL FILED BY THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 02/07/2010 SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 02/07/2010 MAHATA/- 7 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD