Saaken Alloys Pvt. Ltd., Ahmedabad V. The Income tax Officer, Ward-8(1), Ahmedabad

ITA 2180/AHD/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 2897 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 22-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M J SHAH
• Keywords: Reasonable cause
• Section: 143(3); 148

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 2179 AND 2180/AHD/2016 / ASSESSMENT YEAR: 2007-08 AND 2008-09 SAAKEEN ALLOYS P.LTD. 15, CRYSTAL FLATS BH. NID, SARITA KUNJ SOCIETY PALDI, AHMEDABAD. PAN : AAFCS 5636 Q VS ITO, WARD-8(1) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M.J. SHAH, AR REVENUE BY : SHRI VIRENDRA SINGH, SR.DR / DATE OF HEARING : 05/03/2019 /DATE OF PRONOUNCEMENT : 06/03/2019 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST CO MMON ORDERS OF THE LD.CIT(A)-9, AHMEDABAD DATED 5.4.2016 PASSED FOR TH E ASSTT.YEARS 2007- 08 AND 2008-09. 2. REGISTRY HAS POINTED OUT THAT BOTH THE APPEALS F ILED BY THE ASSESSEE ARE TIME BARRED BY 33 DAYS EACH. IN ORDER TO EXPLA IN THE DELAY, THE ASSESSEE HAS FILED COMMON DELAY CONDONATION APPLICA TION SUPPORTED BY THE AFFIDAVIT OF SHRI MUSTAKAHMED M. MANIAR BEING A DMINISTRATIVE HEAD OF THE COMPANY. IT IS PLEADED IN THE APPLICATION T HAT DUE TO HOLY MONTH ITA NO.2179 AND 2180 /AHD/2016 - 2 - OF RAMADAN, THE COMMON ORDER PASSED BY THE LD.CIT(A ) 5.4.2016 COULD NOT BE BROUGHT TO THE NOTICE OF BOARD OF DIRECTORS BY THE CONCERNED STAFF FOR TAKING DECISION TO FILE APPEAL BEFORE THE TRIBU NAL, AND THEREFORE, DELAY BEING MINIMAL AND THAT TOO CAUSED DUE TO BONA FIDE MISTAKE, THE DELAY IN FILING BOTH THE APPEALS BE CONDONED AND TH E APPEALS OF THE ASSESSEE MAY BE ADMITTED FOR ADJUDICATION ON MERIT. 3. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE A SSESSEE IS PREVENTED BY BONA FIDE REASONABLE CAUSE AND DUE TO WHICH DELAY WAS CAUSED IN FILING APPEALS BEFORE THE TRIBUNAL IN TIME. THEREF ORE, IN THE INTEREST OF JUSTICE, DELAY IN FILING BOTH THE APPEALS OF THE AS SESSEE IS CONDONED, AND BOTH THE APPEALS ARE TAKEN UP FOR HEARING ON MERIT. 4. NOW WE PROCEED TO DECIDE BOTH THE APPEALS OF THE ASSESSEE ON MERIT. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN UPHOLDING REASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY HAD FILED ITS RETURN OF INCOME ON 29.10.2007 AND 28.9.2008 DECLAR ING TOTAL INCOME AT RS.72,700/- AND RS.5,81,456/- IN THE ASSTT.YEAR 200 7-08 AND 2008-09. THE ASSESSEE COMPANY AT THE RELEVANT TIME WAS ENGAGED I N THE BUSINESS OF MANUFACTURING OF IRON, IRON BARS ETC. CENTRAL EXCI SE DEPARTMENT CONDUCTED A SEARCH AT THE FACTORY PREMISES OF THE A SSESSEE-COMPANY ON 22/23.11.2007 AND IT CAME OUT IN THE SEARCH THAT TH E ASSESSEE HAD MADE UNACCOUNTED SALES OF HOT ROLLED TWISTED BARS OF 2,2 1,190 KGS. AMOUNTING TO RS.50,50,390/- FOR THE FINANCIAL YEAR 2006-07 AN D 2007-08. SINCE THE ASSESSEE DID NOT DISPUTE ABOUT THE SALES OUTSIDE TH E BOOK, PAID EXCISE ITA NO.2179 AND 2180 /AHD/2016 - 3 - DUTY, INTEREST AND PENALTY ETC. ON THOSE UNACCOUNTE D SALES. ON THE BASIS OF THAT INFORMATION NOTICE UNDER SECTION 148 WAS IS SUED AND ASSESSMENTS WERE REOPENED. REOPENING HAS BEEN UPHELD BY THE LD .CIT(A). 6. BEFORE US, ARGUMENTS HAVE NOT BEEN ADVANCED EMPH ATICALLY, AND THEREFORE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD.CIT(A) FOR UPHOLDING REOPENING OF THE ASSESSMENT. 7. IN THE SECOND GROUND OF APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.74,931/- AND RS.11,87,667/- BEING 25% OF ALLEGED UNACCOUNTED SAL ES IN THE ASSTT.YEAR 2007-08 AND 2008-09 RESPECTIVELY. AS STATED ABOVE, EXCISE DEPARTMENT HAS ABLE TO LAY ITS HAND ON UNACCOUNTED SALES ON WH ICH THE ASSESSEE AVOIDED PAYMENT OF EXCISE DUTY. ON THE BASIS OF EV IDENCE TRANSMITTED BY CENTRAL EXCISE DEPARTMENT, THE AO HAS WORKED OUT UNACCOUNTED SALES OF RS.47,50,666/- IN THE ASSTT.YEAR 2007-08 AND RS.2,99,724/- IN THE ASSTT.YEAR 2008-09. HE ESTIMATED THE PROFIT ON SUC H SALES AT 25% AND MADE ADDITION OF RS.11,87,667/- IN THE ASSTT.YEAR 2 007-08 AND RS.74,931/- IN THE ASSTT.YEAR 2008-09. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED THIS ADDITION. THE RELEVANT FINDING IN P ARAGRAPH 5.4 IS WORTH TO NOTE IN THIS CONNECTION. IT READS AS UNDER: 5.4 IN THE LIGHT OF ABOVE REFERRED FACTS AND CIRCU MSTANCES, I AM OF THE CONSIDERED; OPINION THAT A.O. HAS RIGHTLY CONSIDERE D THE AMOUNT OF RS.47,50,666/- AS SALES OUTSIDE OF THE BOOKS OF ACC OUNT, AT THE SAME TIME CONSIDERING 25% OF THE SAME AMOUNTING TO RS 11,87,6 67/- FOR A:Y. 2007- 08 AS THE INCOME OF THE APPELLANT. AS THE APPELLANT HAD ALREADY CLAIMED THE COST OF RAW MATERIAL AS WELL AS INDIRECT EXPENS ES IN PRODUCTION, I AM OF THE CONSIDERED OPINION THAT A.O HAS RIGHTLY APPL IED THE RATE OF 25% FOR CALCULATING THE INCOME EARNED BY THE APPELLANT ON N SALE OF GOODS AMOUNTING TORS.47,50,666/- FOR A.Y 2007-08, SIMILAR LY, FOR A.Y.2008-09 I AGREE WITH THE AO FOR APPLYING THE RATE OF 25% FO R ARRIVING THE INCOME ITA NO.2179 AND 2180 /AHD/2016 - 4 - OF THE APPELLANT ON SALE OF ILLEGALLY REMOVED EXCIS ABLE GOODS WHICH WERE NOT REFLECTED IN THE BOOKS OF ACCOUNT AS DISCUSSED ABOVE. FOR A.Y, 2008-09 THE A.O. HAS ASSESSED THE INCOME AT RS.74,931/- ON SALES OUTSIDE THE BOOKS OF ACCOUNT FOR RS.2,99,724/-. ACCORDINGLY, GROUND N OS.2,3 & 6 ARE HEREBY DISMISSED FOR BOTH A.Y.2007-08 & 2008-09. 8. WHILE IMPUGNING ORDER OF THE LD.CIT(A),THE LD.CO UNSEL FOR THE ASSESSEE HAS SUBMITTED THAT GROSS SALES CANNOT BE A DDED. ONLY GP INVOLVED IN THIS SALE IS ONLY TO BE ADDED. HE POIN TED OUT THAT GP DURING THIS YEAR WAS 5.4% AND THEREFORE, THE LD.CIT(A) OUG HT TO HAVE UPHELD THE ADDITION TO THE EXTENT OF 5.4% OF THE UNACCOUNTED S ALES DETERMINED BY THE AO IN BOTH THE YEARS. FOR BUTTRESSING HIS CONT ENTIONS, HE RELIED UPON THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. PRESIDENT INDUSTRIES, 258 ITR 654 (GUJ) AND IN THE CASE OF CIT VS. GURUBACHHAN SINGH J. JUNEJA, 302 ITR 63 (GUJ). HE TO OK US THROUGH BOTH THESE DECISIONS. ON THE OTHER HAND, THE LD.DR RELI ED UPON THE FINDING OF THE LD.CIT(A) RECORDED IN PARA 5.4 EXTRACTED (SUPRA ). 9. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE WAS THAT WHENEVER ANY INCOME HAS TO BE DETERMINED IN TH IS TYPE OF SITUATION, THEN INSTEAD OF ADDING GROSS SALES, ONLY PROFIT ELE MENT INVOLVED IN THIS SALE IS TO BE IDENTIFIED AND ADMITTED. HE BROUGHT TO OUR NOTICE JUDGMENT OF HONBLE GUJARAT HIGH COURT AND EMPHASISED THAT H ONBLE HIGH COURT IN BOTH THE OCCASIONS WERE UNANIMOUS IN THEIR CONCLUSIONS THAT GROSS SALES CANNOT BE ADDED. FROM THE JUDGMENTS IN THE CASE OF PRESIDENT INDUSTRIES (SUPRA) EMPHASIS WAS SUPPLIED ON THE FOLLOWING FINDING: HAVING PERUSED THE ASSESSMENT ORDER MADE BY THE A SSESSING OFFICER, THE ORDER MADE BY THE COMMISSIONER OF INCOME-TAX (A PPEALS) AND THE ITA NO.2179 AND 2180 /AHD/2016 - 5 - INCOME-TAX APPELLATE TRIBUNAL, WE ARE SATISFIED THA T THE TRIBUNAL WAS JUSTIFIED IN REJECTING THE APPLICATION UNDER SECTIO N 256(1). IT CANNOT BE MATTER OF AN ARGUMENT THAT THE AMOUNT OF SALES BY I TSELF CANNOT REPRESENT THE INCOME OF THE ASSESSEE WHO HAS NOT DISCLOSED TH E SALES. THE SALES ONLY REPRESENTED THE PRICE RECEIVED BY THE SELLER OF THE GOODS FOR THE ACQUISITION OF WHICH IT HAS ALREADY INCURRED THE COST. IT IS TH E REALISATION OF EXCESS OVER THE COST INCURRED THAT ONLY FORMS PART OF THE PROFIT INCLUDED IN THE CONSIDERATION OF SALES. THEREFORE, UNLESS THERE IS A FINDING TO THE EFFECT THAT INVESTMENT BY WAY OF INCURRING THE COST IN ACQUIRIN G THE GOODS WHICH HAVE BEEN SOLD HAS BEEN MADE BY THE ASSESSEE AND TH AT HAS ALSO NOT BEEN DISCLOSED. IN THE ABSENCE OF SUCH FINDING OF FACT T HE QUESTION WHETHER THE ENTIRE SUM OF UNDISCLOSED SALE PROCEEDS CAN BE TREA TED AS INCOME OF THE RELEVANT ASSESSMENT YEAR ANSWERS BY ITSELF IN THE N EGATIVE. THE RECORD GOES TO SHOW THAT THERE IS NO FINDING NOR ANY MATER IAL HAS BEEN REFERRED ABOUT THE SUPPRESSION OF INVESTMENT IN ACQUIRING TH E GOODS WHICH HAVE BEEN FOUND SUBJECT OF UNDISCLOSED SALES. 10. WE HAVE DULY CONSIDERED THIS SUBMISSION OF THE ASSESSEE; BUT IN THE PRESENT CASE TO OUR MIND THIS DECISION GOES AGA INST THE ASSESSEE. IF THE ABOVE FINDING OF THE HONBLE HIGH COURT IS READ , THEN IT WOULD REVEAL THAT HONBLE HIGH COURT HAS SPECIFICALLY OBS ERVED THAT SALES IS THE REALIZATION OF THE EXCESS OVER THE COST INCURRED AN D THAT ONLY FORM PART OF THE PROFIT INCLUDED IN THE CONSIDERATION FOR THE SA LES. LET US EXPLAIN THIS CONCEPT WITH AN EXAMPLE. SAY, AN ASSESSEE IS ENGAG ED IN MANUFACTURING OF A PRODUCT; FOR EXAMPLE, IRON BAR. IT HAD INCURR ED COST OF RS.100/- ON MATERIAL AND OTHER INDIRECT COST WHICH HAS RESULTED IN FINISHED PRODUCTS OF HAVING VALUE OF RS.130/-. THE ASSESSEE HAS RECO GNIZED THE SALES AT RS.110/- IN ITS BOOKS OF ACCOUNTS AND KEPT REMAININ G RS.20/- OUT OF BOOKS AS UNRECORDED SALES. NOW THE COST REPRESENTI NG THE VALUE OF FINISHED GOODS HAS ALREADY BEEN DEBITED BY THE ASSE SSEE IN THE BOOKS AND CLAIMED UNDER INFLATED EXPENDITURE. IN THIS SI TUATION, THE EXCESS REALIZATION BY THE ASSESSEE AT RS.20/- UNDER THE HE AD UNRECORDED SALES THAN THAT TOTAL HAS TO BE ADDED. THIS JUDGMENT DOE S NOT SAY THAT IN EVERY ITA NO.2179 AND 2180 /AHD/2016 - 6 - SITUATION AN ESTIMATED PROFIT IS TO BE CALCULATED. IN THE PRESENT CASE, WE HAVE EXTRACTED THE FINDING OF THE LD.CIT(A) WHICH W AS NOT CHALLENGED BEFORE US BY INVITING OUR ATTENTION TO ANY ASPECT. THE LD.CIT(A) HAS OBSERVED THAT AS THE APPELLANT HAD ALREADY CLAIMED THE COST OF RA W MATERIAL AS WELL AS INDIRECT EXPENSES IN PRODUCTION, I AM OF TH E CONSIDERED OPINION THAT AO HAS RIGHTLY APPLIED THE RATE OF 25%... THE LD.CIT(A) HAS SPECIFICALLY RECORDED A FINDING THAT COST HAS BEEN DEBITED BY TH E ASSESSEE IN THE REGULAR BOOKS AND ONLY SALE CONSIDERATION KEPT OUTS IDE THE BOOKS. IN THIS SITUATION HIGHER RATE OF PROFIT DESERVES TO BE APPL IED UPON THE ASSESSEE. BOTH THESE JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT ARE NOT APPLICABLE ON THE GIVEN FACTS. HENCE, WE DO NOT FI ND ANY MERIT IN THESE APPEALS. THEY ARE DISMISSED. 11. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 6 TH MARCH, 2019. SD/- SD/- (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER