The ITO, Ward-3(3), Surat V. Shri Ashokkumar C.Dharewa,HUF, Surat

ITA 2156/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0350 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAMESH KUMAR MAL
• Keywords: Difference of opinion
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI, JM, & SHRI MANISH BORAD , AM. ITA NO.2155 & 2156/AHD/2012 ALONG WITH CO NOS.222 & 223/AHD/2012 ASST. YEARS:2007-08 & 2008-09 INCOME-TAX OFFICER, WD-3(3), SURAT. VS. SHRI ASHOKKUMAR C. DHAREWA, HUF, PROP. SHUBHAM POLYMERS, A- 601, SHILP BUILDING, BEHIND SIDDHI VINAYAK TEMPLE, VESU, SURAT. APPELLANT RESPONDENT PAN AABHD 5827P APPELLANT BY SHRI SUMIT KUMAR VERMA, SR.DR RESPONDENT BY SHRI RAMESH KUMAR MALPANI, AR DATE OF HEARING: 13/10/2016 DATE OF PRONOUNCEMENT: 17/10/2016 O R D E R PER BENCH THESE TWO APPEALS BY REVENUE AND CROSS OBJECTIONS B Y ASSESSEE FOR ASST. YEARS 2007-08 & 2008-09 ARE DIRE CTED AGAINST TWO SEPARATE ORDERS OF LD. CIT(A)-II, SURAT OF EVEN DAT E 23.7.2012 VIDE APPEAL NOS.CAS-II/347/10-11 & CAS-II/288/11-12 RESP ECTIVELY. ASSESSMENT ORDERS U/S 143(3) OF THE IT ACT, 1961 (I N SHORT THE ACT) WERE FRAMED ON 30.12.2010 BY ITO, WD- 3(3), SURAT. AS THE ISSUE INVOLVED IN THESE APPEALS AND THE CROSS OBJECTIONS ARE SIMILAR, THESE ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 2 WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL TAKE REVENUES APPEAL IN ITA NO.21 55/AHD/2012. REVENUE HAS RAISED FOLLOWING GROUNDS:- [1] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW, THE LD. CIT(A)-I, SURAT HAS ERRED IN DELETING THE ADDITION OF RS.1,13,24,749/- MADE BY THE A.O. AND IN DIRECTING THE A.O. TO ADD T HE NET PROFIT OF RS.2,27,573/- OF SWASTIK POLYMERS, WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE HAS SUPPRESSED SALE DETAILS BY SHOWING DECREASED TURNOVER. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. [3] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT (A) MAY BE SET-SIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO TH E ABOVE EXTENT. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT ASSESS EE IS AN HUF RUNNING A PROPRIETARY CONCERN NAMELY M/S SUBHAM POL YMERS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G PACKING MATERIAL. RETURN OF INCOME FOR ASST. YEAR 2007-08 W AS FILED ON 21.08.2007 DECLARING TAXABLE INCOME AT RS.90,416/-. THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER ON THE BASIS OF INFORMATION FROM CENTRAL EXCISE AND CUSTOMS, SURAT, MENTIONING THAT ASSESSEE HAS SUPPRESSED SALES BY RS.1,13,24,749/-, ASSESSING OFFICER ISSUED NOTICE U/S 148 OF THE ACT ON 19.05.2 009 AFTER RECORDING REASONS. ACCORDINGLY, ASSESSMENT PROCEEDINGS U/S 14 3(3) R.W.S. 147 OF THE ACT WERE INITIATED AND CARRIED OUT. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER ON THE BASIS OF INFORMATION RECEIVED FROM CENTRAL EXCISE DEPARTMENT WITH REGARD TO ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 3 SUPPRESSED SALES CARRIED OUT FURTHER INVESTIGATION AND OBSERVED THAT THERE WERE TWO PROPRIETORSHIP FIRMS OUT OF WHICH ON E NAMED M/S SUBHAM POLYMERS OWNED BY SHRI ASHOKKUMAR C. DHAREWA HUF, (THE ASSESSEE) AND THE OTHER NAMED M/S SWASTIK POLYMER, OWNED BY SHRI BIMALKUMAR CHAINROOP DHAREWA (BROTHER OF SHRI ASHOK CHAINROOP DHAREWA) KARTA OF HUF. BOTH WERE CARRYING OUT SIMIL AR KIND OF BUSINESS. THE EXCISE DEPARTMENT TREATED BOTH THE CO NCERNS AS SINGLE CONCERN AND CLUBBED THE TURNOVER OF SWASTIK POLYMER S WITH THE ASSESSEE FIRM. THE TURNOVER SHOWN BY THE ASSESSEE F IRM WAS OF RS.87,76,159/-. THE LD. ASSESSING OFFICER FURTHER R ELIED ON THE SHOW CAUSE NOTICE ISSUED BY THE EXCISE DEPARTMENT AND TH E RELEVANT PART OF THE SHOW CAUSE NOTICE READS AS UNDER:- 'IN YOUR CASE, A SEARCH ACTION WAS CARRIED OUT BY T HE CENTRAL EXCISE DEPARTMENT WHEREIN IT WAS FOUND THAT FOR THE PERIOD 01.04.2006 TO 31.03.2007, M/S. SHUBHAM POLYMERS SOLD FINISHED PRODUCTS BOPP/PLASTIC BAGS U NDER THE GUISE OF BOPP/BOPP FILM ETC AND HAS SUPPRESSED SALE. AS PER DETAILS GI VEN IN THE LETTER DURING THE F.Y. 2006-07, YOU HAVE CLEARED THAT THE TOTAL QUANTITY O F 193497.114KGS. IT WAS REPORTED THAT THE CLEARANCE VALUE OF ABOVE MENTIONED GOODS W AS RS.51,00,908/- OVER/'EXCESS EXEMPTION LIMIT, THE EXEMPTION LIMIT FOR SSI WAS RS .1.5 CRORE, WHICH INDICATED THAT TOTAL SALE WAS OF RS.2,01,00,908/~ DURING ABOVE MEN TIONED PERIOD. YOU HAVE SHOWN THE TURNOVER OF RS.87,76,159/- IN THE ROI FILED FOR A.Y. 2007-08 ON 21.08.2007. THUS, YOU HAVE SHOWN/SUPPRESSED THE SALE BY RS. 1,13,24,7 49/-.YOU ARE, THEREFORE, REQUESTED TO SHOW CAUSE AS TO WHY AN AMOUNT OF RS.1 ,13,24,749/- SHOULD NOT BE CONSIDERED AS YOUR UNACCOUNTED SALE AND ADDED TO YO UR TOTAL INCOME' ON THE BASIS OF ABOVE SHOW CAUSE NOTICE LD. ASSESSI NG OFFICER WENT AHEAD TO MAKE ADDITION TOWARDS SUPPRESSED SALES AT RS.1,13,24,749/-. ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 4 4. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) AGAINST THE IMPUGNED ADDITION TOWARDS SUPPRESSED SALES AND AGAINST THE RE- ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 147 OF THE ACT BEING WRONG, INVALID, BAD IN LAW AND BEYOND THE LAW. LD. CIT(A) DISMISSED THE GROUND RELATING TO RE-ASSESSMENT PROCEEDINGS U/ S 143(3) R.W.S. 147 OF THE ACT AND RESTRICTED THE ADDITION TOWARDS SUPPRESSED SALES TO RS.2,27,573/- BY OBSERVING THAT THERE WAS NO SUP PRESSED OR UNACCOUNTED SALES RATHER SALES OF OTHER PROPRIETARY CONCERN OWNED BY BROTHER OF KARTA OF HUF WAS CLUBBED WITH THAT OF THE ASSESSEE AND AT THE MOST ADDITION SHOULD BE SUSTAINED ONLY TO TH E EXTENT OF RS.2,27,573/- SHOWN BY PROPRIETARY CONCERN OF SHRI BIMALKUMAR CHAINROOP DHAREWA. 6. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 7. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER. 8. LD. AR SUBMITTED THAT THE SOLE REASON MENTIONED BY LEARNED A.O. IN THE ASSESSMENT ORDER FOR MAKING THIS HUGE A DDITION IS THAT THE CENTRAL EXCISE DEPARTMENT IN CONSEQUENCE OF SEARCH CONDUCTED BY THEM ON 20-08-2008 AND FURTHER INVESTIGATION CARRIE D OUT BY THEM FOUND THAT THE APPELLANT SUPPRESSED THE SALES OF RS . 1,13,24,749/-. IT IS ON THIS SOLE BASIS THAT THE LEARNED A.O. HAS MAD E SUCH A HUGE ADDITION IN THE NAME OF SUPPRESSED SALES. IT IS THE HUMBLE SUBMISSION OF YOUR APPELLANT THAT THIS BASIS OF LEARNED A.O. I S FACTUALLY INCORRECT. THERE HAS BEEN NO CASE OF EXCISE DEPARTMENT THAT TH E APPELLANT HAS SUPPRESSED ANY SALES. THERE HAS BEEN NO CASE OF THE EXCISE ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 5 DEPARTMENT THAT THE APPELLANT HAD DONE ANY UNACCOUN TED SALES. THE ONLY TECHNICAL CASE OF THE CENTRAL EXCISE DEPARTMEN T IS THAT THEY HAVE DENIED THE BENEFIT OF SSI EXEMPTION TO THE APP ELLANT BY CLUBBING THE TURNOVER OF THE APPELLANT AND HIS SISTER CONCER N. HENCE, THE CASE OF EXCISE DEPARTMENT IS PURELY TECHNICAL CASE. THER E IS NO ALLEGATION OF ANY UNACCOUNTED OR SUPPRESSED SALES IN THE SAME. 9. THE LD. AR ALSO REFERRED AND RELIED ON THE JUDGM ENT OF HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES (2002) 124 TAXMAN 654 (GUJ) WHEREIN IT HAS BEEN HELD AS UN DER :- 3. HAVING PERUSED THE ASSESSMENT ORDER MADE BY THE ASSESSING OFFICER, THE ORDER MADE BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL, WE ARE SATISFIED THAT THE TRIBUNAL WAS JUSTIFIED IN REJECTING THE AP PLICATION UNDER SECTION 256(1). IT CANNOT BE A MATTER OF AN ARGUMENT THAT THE AMOUNT OF SALES BY ITSELF CANNOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAS NOT DISCLOSED THE SALES. THE SALES ONLY REPRESENT THE PRICE RECEIVED BY THE SELLER OF THE GOODS FOR THE ACQUISITION OF WHICH IT HAS ALREADY INCURRED THE COST. IT IS THE R EALISATION OF EXCESS OVER THE COST INCURRED THAT ONLY FORMS PART OF THE PROFIT INCLUDE D IN THE CONSIDERATION OF SALES. THEREFORE, UNLESS THERE IS A FINDING TO THE EFFECT THAT INVESTMENT BY WAY OF INCURRING COST IN ACQUIRING GOODS WHICH HAVE BEEN S OLD HAS BEEN MADE BY THE ASSESSEE AND THAT HAS ALSO NOT BEEN DISCLOSED, THE QUESTION, WHETHER ENTIRE SUM OF UNDISCLOSED SALE PROCEEDS CAN BE TREATED AS INCO ME OF THE RELEVANT ASSESSMENT YEAR ANSWERS BY ITSELF IN THE NEGATIVE. THE RECORD GOES TO SHOW THAT THERE IS NO FINDING NOR ANY MATERIAL HAS BEEN REFER RED TO ABOUT THE SUPPRESSION OF INVESTMENT IN ACQUIRING THE GOODS WHICH HAVE BEEN F OUND SUBJECT OF UNDISCLOSED SALES. 10. THE LD. AR SUBMITTED THAT THE ADDITION CANNOT B E MADE FOR THE GROSS SALES AND CAN BE ONLY MADE TO THE EXTENT OF N.P. EMBEDDED IN THE SALES. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL PLACED ON RECORD. THROUGH THIS APPEAL FOR ASST. YEA R 2007-08 SOLITARY ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 6 GRIEVANCE OF REVENUE IS AGAINST THE ORDER OF LD. CI T(A) AGAINST DELETION OF RS.1,13,24,749/- AND DIRECTING THE ASSE SSING OFFICER TO ADD NET PROFIT OF SISTER CONCERN M/S SWASTIK POLYME RS AT RS.2,27,573/- WITHOUT APPRECIATING THE FACTS THAT A SSESSEE HAS SUPPRESSED SALES AS WELL AS BY SHOWING DECREASED TU RNOVER. WE OBSERVE FROM THE RECORDS THAT CASE OF THE ASSESSEE WAS REOPENED BY ISSUING NOTICE U/S 148 OF THE ACT ON THE BASIS OF I NFORMATION RECEIVED FROM CENTRAL EXCISE AND CUSTOMS, SURAT AND ASSESSME NT PROCEEDINGS U/S 143(3) R.W.S. 147 OF THE ACT WERE C ARRIED OUT. AS PER INFORMATION OF CENTRAL EXCISE DEPARTMENT, DURING TH E COURSE OF SEARCH AT ABHISHEK MARKET, RING ROAD, SURAT, IT WAS FOUND THAT THE SAME PREMISES WAS USED AS OFFICE OF M/S SUBHAM POLY MERS PROPRIETARY CONCERN OF SHRI ASHOKKUMAR C. DHAREWA, HUF(ASSESSEE) AS WELL AS M/S SWASTIK POLYMERS BEING TRADING FIRM OWNED BY SHRI BIMALKUMAR C. DHAREWA WHO IS BROTHER OF ASHOKKUMAR C. DHAREWA, KARTA OF HUF. CENTRAL EXCISE DEPARTMENT WAS OF THE VIEW THAT ASSESSEE AND THE SISTER CONCERN I.E. SUBHAM POLYMER S AND SWASTIK POLYMERS WHICH ARE BEING RUN FROM THE SAME OFFICE P REMISES HAS BIFURCATED THE TURNOVER IN ORDER TO KEEP THE TOTAL TURNOVER BELOW THE MINIMUM EXEMPTION LIMIT OF RS.1 CRORES LEADING TO E VASION OF EXCISE DUTY. ACCORDINGLY, CENTRAL EXCISE DEPARTMENT CLUBBE D THE TURNOVER OF BOTH THE CONCERNS AND CALCULATED THE EXCISE DUTY PA YABLE AT RS.8,10,795/- FOR ASST. YEAR 2007-08 (F.Y.2006-07) BY CALCULATING IN FOLLOWING MANNER :- 18. THE CLEARANCE VALUE OF THE UNIT AND M/S. SWASTI K AND THE CENTRAL EXCISE DULY PAYABLE BY THE UNIT IS CALCULATED ON THE BASIS OF D OCUMENTS RECOVERED DURING ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 7 PANCHNARNA DT. 20.08.08 AND THE LEDGERS AND SALE TA X RETURNS SUBMITTED BY THE UNIT VIDE LETTER DATED 03.09.08. THE DETAILED CALCU LATION IS AS UNDER: . FOR THE YEAR 2006-07 . . (A) SALE OF SHUBHAM POLYMER 8770992.00 (B) SALE OF SWASTIK POLYMER 6467823.00 (C) TOTAL CLEARANCE VALUE (A+B) 15238813.00 (D) MINUS SALE OF (A) SHUBHAM POLYMER TO SWASTIK 19 6908.00 (B) SWASTIK TO GANESH SILK MILL 73798.00 (E) NET SALE FOR DUTY CALCULATION [C-(A+B)] 14968109.00 (F) MINUS EXEMPTION RS. 1 CRORE 10000000.00 (G) TAXABLE ASSESSABLE VALUE 4968109.00 (H) CENTRAL EXCISE DUTY @ 16.32% 810795.00 12. FURTHER DURING THE COURSE OF RE-ASSESSMENT PROC EEDINGS VARIOUS DETAILS, COPIES OF SHOW CAUSE NOTICE AND ST ATEMENTS OF THE OWNERS OF BOTH THE FIRMS AND BUYERS WERE CONSIDERED . THERE CAME ACROSS A CALCULATION OF CENTRAL EXCISE DUTY EVADED FOR FY 2006-07, 2007-08 & 2008-09 (UPTO 2.8.2008) WHICH SHOWED QUAN TITY CLEARED IN KG., CLEARANCE VALUE IN EXCESS OF EXEMPTION LIMIT A ND CENTRAL EXCISE DUTY EVADED AND THE RELEVANT DETAILS ARE SUMMARIZED BELOW :- ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 8 YEAR QUANTITY CLEARED (IN KGS.) CLEARANCE VALUE (RS.) IN EXCESS OF EXEMPTION LIMIT C. EX. DUTY EVADED (RS.) 2006-07 193497.114 5100908 @ 16.32% RS. 8,32,468/ - 2007-08 352703.58 24553655 @16.48% RS. 40,46,442/ - 2008- 09 (UP TO 2.08.2008) 188844.751 2119461 @14.42% RS. 3,05,626/ - TOTAL 735045.445 31774024 51,84,536 THE ASSESSING OFFICER TOOK THE BASIS OF CLEARANCE V ALUE OF RS.51,00,908/- AND ADDED THE EXEMPTED SSI EXCISE L IMIT WRONGLY AT RS.1.5 CRORES (RATHER THAN CORRECT EXCISE LIMIT OF RS.1 CRORES) WHICH GAVE A FIGURE OF RS.2,01,00,908/- (51,00,908 + 1,50 ,00,000) AND FROM THIS FIGURE LD. ASSESSING OFFICER REDUCED THE TURNO VER DISCLOSED BY ASSESSEE IN THE AUDITED FINANCIAL STATEMENT FOR F.Y .2006-07 AT RS.87,76,159/- AND THE RESULTANT FIGURE CAME TO RS. 1,13,24,749/-. LD. ASSESSING OFFICER TREATED THIS AMOUNT OF RS.1,13,24 ,749/- AS INCOME FROM SUPPRESSED SALES AND MADE ADDITION THEREOF. 13. WE FURTHER OBSERVE THAT LD. CIT(A) DELETED THE IMPUGNED ADDITION BY OBSERVING AS UNDER :- 4. I HAVE CONSIDERED THE FACTS OF THE CASE, BASIS O F ADDITION MADE BY AO AND SUBMISSIONS OF APPELLANT. THE SOLE BASIS OF ADDITIO N MADE BY AO IS SEARCH ACTION UNDERTAKEN BY EXCISE DEPARTMENT AT THE BUSINESS PRE MISES OF APPELLANT AND HIS BROTHER'S PROPRIETARY CONCERN AND TAX EVASION WORKE D OUT BY THEM IN THOSE CASES. AFTER THE SEARCH ACTION, SHOW CAUSE NOTICE WAS ISSUED BY EXCISE DEPARTMENT ON 25.11.2010 AND EVASION OF EXCISE DUTY WAS WORKED OUT AS UNDER: ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 9 FOR THE YEAR 2006-07 (A) SALE OF SHUBHAM POLYMER 8770992.00 (B) SALE OF SWASTIK POLYMER 6467823.00 (C) TOTAL CLEARANCE VALUE(A+B) 15238813.00 (D) MINUS SALE OF (A) SHUBHAM POLYMER TO SWASTIK 1 96908.00 (B) SWASTIK TO GANESH SILK MILL 73798.00 (E) NET SALE FOR DUTY CALCULATION [C-(A+B)] 14968 109.00 (F) MINUS EXEMPTION RS.L CRORE 10000000,00 (G) TAXABLE ASSESSABLE VALUE 4968109.00 (H) CENTRAL EXCISE DUTY @ 16.32% 810795.00 4,1 IN THE SHOW CAUSE NOTICE, ALL THE RELEVANT FACT S ARE DISCUSSED BY ADDL. COMMISSIONER, CENTRAL EXCISE AND CUSTOMS, SURAT-1 F OR WORKING OUT . THE EVASION OF EXCISE DUTY. IT HAS BEEN MENTIONED THAT THE STATEME NTS OF BUYERS OF BOPP FILMS HAVE BEEN RECORDED AND THEY HAVE CONFIRMED TO HAVE PURCH ASED THE BOPP BAGS FROM BOTH THE PROPRIETARY CONCERNS AND THIS FACT IS SUBSEQUEN TLY AFFIRMED BY SHRI BIMAL DHAREWA BY AGREEING WITH THE STATEMENTS OF SHRI ASHOK DHARE WA, THE APPELLANT. HOWEVER, AS PER INCOME TAX RECORDS, APPELLANT'S BROTHER WHO IS PROP RIETOR OF M/S. SWASTIK POLYMERS IS ENGAGED IN TRADING ACTIVITIES ONLY, NOT THE MANUFAC TURING OF BOPP BAGS. BUT, THE OBSERVATION OF EXCISE DEPARTMENT IS THAT BOTH THE C ONCERNS HAVE BEEN ENGAGED IN THE MANUFACTURING OF BOPP BAGS WHICH ARE EXCISABLE GOOD S AND THE PURPOSE OF CREATING THE TRADING ENTITY OF PROPRIETOR WAS TO BIFURCATE THE C LEARANCE OF BOPP BAGS BETWEEN THE TRADING FIRM AND THE MANUFACTURING UNIT TO KEEP THE CLEARANCE VALUE WITHIN EXEMPTION LIMIT, WHICH IS RS.L CRORE PER UNIT, WITH AN INTENT TO EVADE CENTRAL EXCISE DUTY. IN VIEW OF THIS CONCLUSION, THE TURNOVERS OF BOTH THE CONCERNS WERE MERGED AND PENAL EXCISE DUTY WAS CALCULATED AT RS. 8,10,795/- ON THE TAXABLE ASS ESSABLE VALUE OF RS.49,68,109/- IN EXCESS OF EXEMPTION LIMIT OF RS.L CRORE. IN THIS PR OCESS, THE TOTAL TURNOVER OF BOTH THE CONCERNS AS WORKED OUT AT RS.L,52,38,813/-(RS.87,70 / 992/- + RS.64,67,823/-) WAS CONSIDERED AS TURNOVER OF ONE ENTITY. HOWEVER, FOR THE PURPOSE OF INCOME TAX, WHILE WORKING OUT THE SUPPRESSED SALES OF RS.1,13,24,749/ - BY APPELLANT, AO HAS TAKEN THE CLEARANCE VALUE OF GOODS AT RS.51,00,9087- (193497. 114 KG IN QUANTITY) WHICH WAS EVADED BY APPELLANT. BY ADDING THIS AMOUNT TO EXEMP TION LIMIT OF RS.1.5 CRORES, AO HAS WORKED OUT TOTAL TURNOVER AT RS.2,01,00,908/-. SINC E, THE APPELLANT HAS ALREADY SHOWN TURNOVER OF RS.87,76,159/- IN THE RETURN OF INCOME THEREFORE THE DIFFERENCE OF BOTH THE AMOUNTS, WHICH COMES TO RS.1,13,24,749/-, HAS BEEN TREATED BY AO AS SUPPRESSED SALES AND ADDED TO THE INCOME OF APPELLANT. ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 10 4.2 THE AFORESAID SEARCH ACTION CONDUCTED AND CONSE QUENTLY SHOW CAUSE NOTICE ISSUED BY CENTRAL EXCISE DEPARTMENT HAS BEEN CHALLENGED BY APPELLANT AND THE DECISION IS STILL PENDING WITH THE JUDICIAL AUTHORITY. THE SHOW CAUSE NOTICE HAS BEEN ISSUED BY ADDL. COMMISSIONER OF EXCISE ON THE BASIS OF INVESTIGATIO N MADE AND STATEMENTS OF PURCHASERS AS WELL AS BOTH THE PROPRIETORS RECORDED . IN THE SHOW CAUSE NOTICE, THE TURNOVERS SHOWN BY BOTH THE PROPRIETORS IN THE INCO ME TAX RECORDS HAVE NOT BEEN CHALLENGED. THEY HAVE TAKEN THE SAME FIGURES OF SAL ES FOR CALCULATION OF EVASION OF EXCISE DUTY WHICH HAVE BEEN SHOWN IN THE INCOME TAX RETURNS FILED BY BOTH PROPRIETORS. THE ONLY DIFFERENCE OF OPINION HAS BEEN THAT THE EX CISE AUTHORITY TREATED BOTH THE ENTITIES AS ONE MANUFACTURING UNIT WHICH HAS BEEN DIVIDED IN TO TWO ENTITIES WITH THE INTENTION OF EVADING EXCISE DUTY AND KEEPING THE TURNOVER BELOW RS.L CRORE, WHICH IS EXEMPTION LIMIT FOR LEVY OF EXCISE DUTY. IN THE ASSESSMENT PROCEEDI NGS, AO ALSO HAS TAKEN THE SAME FIGURES AS WORKED OUT BY EXCISE DEPARTMENT FOR ESTI MATING THE TURNOVER OF APPELLANT. BUT IN THE CALCULATION OF TURNOVER, AO HAS IGNORED MANY CRUCIAL FACTS. FIRST OF ALL, AO HAS CALCULATED THE TOTAL TURNOVER BY TAKING THE EXEMPTI ON LIMIT OF EXCISE DUTY AT RS.1.5 CRORES WHEREAS IN THE SHOW CAUSE LETTER ITSELF THE ADDL. C OMMISSIONER, CUSTOM AND EXCISE HAS MENTIONED THE EXEMPTION LIMIT AT RS.L CRORE, AO HAS CALCULATED THE TURNOVER OF APPELLANT BY INCREASING THE AMOUNT OF RS.L.50 CRORES ON CLEAR ANCE VALUE OF RS.51,00,908/- WORKED OUT BY EXCISE DEPARTMENT WHEN THE EXEMPTION LIMIT I S RS. 1.00 CRORE. THUS, HE HAS WRONGLY INCREASED THE TURNOVER BY RS. 50 LAKHS. IN SUCH SITUATION, TO ASCERTAIN THE CORRECT FIGURE OF EXEMPTION LIMIT OF A UNIT, AO IS DIRECTED TO MAKE INQUIRY FROM CENTRAL EXCISE AND CUSTOM DEPARTMENT AND RECALCULATE THE FI GURE OF TURNOVER IF THE VARIATION IN EXEMPTION LIMIT IS FOUND. FURTHER, WHILE COMPUTING THE INCOME OF APPELLANT, AO HAS TAKEN THE FIGURES OF TURNOVER AS WORKED OUT BY EXCISE AUT HORITIES WHO, IN TURN HAVE TAKEN THE TURNOVERS OF BOTH THE ENTITIES AND MERGED TOGETHER CONSIDERING THEM ONE ENTITY. THE NET RESULT IS THAT TO WORK OUT THE SUPPRESSION OF SALES IN THE CASE OF APPELLANT, AO HAS INDIRECTLY TAKEN THE TURNOVER OF APPELLANT'S BROTHE R'S CONCERN NAMELY M/S. SWASTIK POLYMERS AND MERGED WITH THE PROFIT OF APPELLANT FO R THE PURPOSE OF MAKING ADDITION. WHILE MERGING THIS FIGURE OF SALES, AO HAS TAKEN TH E VALUE OF GROSS TURNOVER OF M/S, SWASTIK POLYMERS BUT IGNORED THE FIGURES OF PURCHAS ES AND OTHER EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. THE GENUINENESS OF PUR CHASES AND OTHER EXPENSES CLAIMED BY M/S. SWASTIK POLYMERS HAVE NOT BEEN DOUBTED BY A O. EXCISE AUTHORITIES ALSO HAVE NOT COMMENTED UPON OR DOUBTED THE GENUINENESS OF PU RCHASES AND OTHER EXPENSES OF BOTH THE ENTITIES. THEY HAVE JUST MERGED THE TURNOV ERS OF BOTH THE ENTITIES CONSIDERING ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 11 THEM ONE MANUFACTURING UNIT ARID WORKED OUT THE EVA SION OF EXCISE DUTY IN EXCESS OF EXEMPTION LIMIT. THEY HAD LIMITED PURPOSE OF WORKIN G OUT THE TURNOVER IN EXCESS OF EXEMPTION LIMIT FOR LEVY OF PENAL DUTY. BUT, FOR IN COME TAX PURPOSES, TAX IS LEVIED ON INCOME NOT ON TURNOVER. TURNOVER CAN BE TERMED AS I NCOME ONLY IN THE CONDITIONS WHEN PURCHASES ARE BOGUS OR ALREADY TAKEN INTO CONSIDERA TION FOR COMPUTING INCOME. IN THE CASE OF APPELLANT, AT ONE HAND AO HAS COMPUTED THE INCOME BY INCLUDING THE TURNOVER OF HIS BROTHER'S PROPRIETORSHIP CONCERN; ON THE OTHER HAND HE HAS IGNORED THE GENUINE PURCHASES AND OTHER EXPENSES OF THAT CONCERN. UNLES S THESE PURCHASES AND EXPENSES ARE TREATED BOGUS OR IN-GENUINE, EFFECT TO THESE HA S TO BE GIVEN FOR COMPUTING THE INCOME. THE GROSS TURNOVER OF OTHER ENTITY CANNOT B E TAKEN FOR COMPUTING THE NET INCOME, WHICH THE AO HAS WRONGLY TAKEN. IN MY OPINION, GIVING EFFECT BY REDUCING THE PURCHA SES AND EXPENSES FROM THE GROSS TURNOVER OF OTHER CONCERN FOR ADDING TO THE INCOME OF M/S. SHUBHAM POLYMERS WOULD BE CORRECT METHOD TO COMPUTE THE TOTAL INCOME OF APPEL LANT. IN OTHER WORDS, ADDING THE NET PROFIT OF SWASTIK POLYMERS TO THE INCOME OF APPELLA NT WOULD BE CO-RECT AND REASONABLE METHOD OF COMPUTING THE INCOME. THIS METHOD WOULD B E IN SYNCHRONIZATION WITH THE V CONCLUSIONS DRAWN BY EXCISE AUTHORITIES/ALSO. IN VI EW OF THIS DISCUSSION, AO IS DIRECTED TO TAKE THE NET PROFIUOF RS.2,27,57/-, NOT THE GROSS TURNOVER, OF SWASTIK POLYMERS TO BE ADDED TO THE INCPFNE OF APPELLANT. 4.3 THIS GROUND IS PARTLY ALLOWED. 14. FROM PERUSAL OF THE DETAILS AS MENTIONED ABOVE IN PARA 11 & 12 AND THE OBSERVATIONS MADE BY LD. CIT(A), WE OBSERVE THAT EXCISE DEPARTMENT HAS MAINLY CLUBBED THE GROSS TURNOVER OF TWO CONCERNS M/S SUBHAM POLYMERS AND M/S SWASTIK POLYMERS AND HA VE TAKEN THE CLEARANCE VALUE OF RS.1,52,38,813/- AS AGAINST TOTA L TURNOVER OF RS.1,52,43,382/- (TURNOVER OF SUBHAM POLYMERS RS.87 ,76,159/- + TURNOVER OF SWASTIK POLYMERS RS.64,67,823/-) AS SHO WN IN THEIR RESPECTIVE AUDITED FINANCIAL STATEMENTS. THERE CANN OT BE A CASE AGAINST THE ASSESSEE OF SUPPRESSED SALES OR UNACCOU NTED SALES, ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 12 WHEN THE TURNOVER AS CALCULATED BY EXCISE DEPARTMEN T HAS BEEN SHOWN IN SEPARATE BOOKS OF ACCOUNT AND THEY ARE PAR T OF AUDITED BOOKS OF ACCOUNT AND INCOME-TAX RETURN FURNISHED. F URTHER WE ALSO OBSERVE THAT LD. ASSESSING OFFICER HAS GROSSLY ERRE D IN TAKING THE EXCISE LIMIT OF RS.1.5 CRORES WHEREAS FOR THE YEAR UNDER APPEAL EXCISE LIMIT WAS AT RS.1 CRORE. FURTHER DURING THE COURSE OF HEARING LD. AR HAS RELIED ON THE JUDGMENT OF HON. GUJARAT HIGH COU RT IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES (SUPRA) WHEREIN IT HAS BEEN HELD THAT SALE PROCEEDS ITSELF CANNOT BE TREATED AS UNDISCLOS ED INCOME RATHER THE NET PROFIT EMBEDDED IN THE SALE SHOULD BE TREAT ED AS UNDISCLOSED INCOME. 14.1 WE OBSERVE THAT LD. CIT(A) WHILE ADJUDICATING THE APPEAL OF ASSESSEE HAS RIGHTLY GIVEN EFFECT TO THE JUDGMENT O F HON. GUJARAT HIGH COURT IN THE CASE OF CIT VS. PRESIDENT INDUSTR IES (SUPRA) AND HAS TAKEN THE NET PROFIT OF RS.2,27,573/- SHOWN BY M/S SWASTIK POLYMERS IN THE AUDITED PROFIT AND LOSS ACCOUNT PLACED AT PA GE 24 OF THE PAPER BOOK AS AN ADDITION TO THE INCOME OF ASSESSEE AT TH E PLACE OF ADDITION TOWARDS SUPPRESSED SALES OF RS.1,13,24,749 /- TAKEN BY LD. ASSESSING OFFICER. WE, THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). WE UPHOLD THE SAME. ACCORDINGL Y THIS GROUND OF REVENUE IS DISMISSED. 15. GROUND NOS. 2 & 3 ARE OF GENERAL NATURE WHICH N EED NO ADJUDICATION. ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 13 16. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.2156/ AHD/2012 FOR ASST. YEAR 2008-09. WE FIND THAT SIMILAR ISSUE ON IDENTICAL FACTS HAVE BEEN DEALT BY US FOR ASST. YEAR 2007-08. LD. C IT(A) HAS RESTRICTED THE ADDITION TO RS.2,46,433/- BY APPLYIN G NET PROFIT OF SISTER CONCERN SWASTIC POLYMER AND HAS DELETED THE ADDITIO N OF SUPPRESSED SALES OF RS.2,54,29,100/- MADE BY LD. ASSESSING. FO LLOWING THE DECISION TAKEN BY US FOR ASST. YEAR 2007-08 IN ITA NO.2155/AHD/2012, WE UPHOLD THE DECISION OF LD. CIT (A) AND DISMISS THE GROUND OF REVENUE. 17. CROSS OBJECTIONS FOR ASST. YEARS 2007-08 & 2008 -09 BY ASSESSEE BEARING NOS.222 & 223/AHD/2012 ARE NOT PRE SSED AND THEREFOR, DISMISSED AS NOT PRESSED. 18. IN THE RESULT, APPEALS OF REVENUE AND THE CROSS OBJECTIONS OF ASSESSEES ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER, 2016 SD/- SD/- (R.P.TOLANI) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 17/10/2016 MAHATA/- ITA NO. 2155 & 2156 ALONG WITH COS 222 & 223/AHD/20 12 ASST. YEAR 2007-08 & 2008-09 14 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 14/10/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 17/10/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 17/10/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: