Assistant Commissioner of Income-tax, Circle - 11, Pune V. M/s. Hirschvogel Components India Pvt.Ltd, Pune

ITA 2285/PUN/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2034 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 29-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 2285 /PUN/20 17 / ASSESSMENT YEAR : 2011 - 12 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 11, PUNE. ....... / APPELLANT / V/S. M/S.HIRSCHVOGEL COMPONENTS INDIA PVT. LTD. E - 84, MIDC, RANJANGAON, TALUKA - SHIRUR, PUNE - 412 209 PAN : AACCH2536H / RESPONDENT A SSESSEE BY : SHRI KISHORE PHADKE REVENUE BY : SHRI SUDHENDU DAS / DATE OF HEARING : 28 .06 .2021 / DATE OF PRONOUNCEMENT : 29 . 0 6 .2021 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - 13, PUNE DATED 19.07.2017 FOR THE ASSESSMENT YEAR 2011 - 12 AS PER THE FOLLOWING GROUNDS OF APPEAL ON RECORD : 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.2,80,80,875/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF HIGH MATERIAL CONSUMPTION 2 ITA NO. 2285 /PUN/20 17 A.Y. 2011 - 12 DECLARED BY THE ASSESSEE, EVEN THOUGH THE ASS ESSEE COMPANY FAILED TO JUSTIFY ITS CONTENTION THAT CORROBORATIVE AND COGENT EVIDENCES. 3. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD. CIT(A) MAY BE VACATED AND THAT OF THE AO BE RESTORED. 4. THE APPELLAN T CRAVES TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUND OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE HONBLE TRIBUNAL. 2. THE SOLITARY GRIEVANCE OF THE REVENUE IS WITH REGARD TO THE DELETION OF ADDITION OF RS.2,80,80,875/ - BY THE LD. CIT(APPEALS) ON ACCOUNT OF HIGH MATERIAL CO N SUMPTION DECLARED BY THE ASSESSEE AS HAD BEEN MADE BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. 3. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MA NUFACTURING OF HOT, WARM AND COLD FORGED PARTS AND CARRY OUT SUBSEQUENT MACHINING OPERATIONS. THE ASSESSEE COMPANY WAS INCORPORATED AS JOINT VENTURE ENT ITY OF KALYANI GROUP AND GERMAN Y BASED HIRSCHVOGEL GROUP. IT WAS SUBMITTED BY THE ASSESSEE THAT THE COMM ERCIAL PRODUCTION OF THE COMPANY STARTED ON 1 ST SEPTEMBER, 2010 I.E. IN THE YEAR UNDER CONSIDERATION. THE ASSESSEES TURNOVER DURING THE YEAR WAS RS.2,67,08,621/ - AS AGAINST THIS, THE ASSESSEE HAD CLAIMED MANUFACTURING EXPENDITURE OF RS.4,03,66,841/ - AND THEREFORE, GROSS LOSS WAS SHOWN AT RS.( - )1,36,58,220/ - I.E. - 269.68% OF THE SALES. SIMILARLY, THE RATIO OF COST O F MATERIAL CONSUMED TO SALES WAS ALSO VERY HIGH I.E. 97%. 4. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THERE WAS A GLARING DIFFERENCE IN THE MANUFACTURING EXPENSES TO SALES RATIO FOR THE TWO COMPARATIVE ASSESSMENT YEARS I.E. A.Y. 2011 - 12 AND A.Y.2012 - 13. FOR ASSESSMENT YEAR 2012 - 13, THE MANUFACTURING EXPENSES WERE SHOWN AT RS.15,14,99,477/ - . AGAINST THE SAME, THE SALES OF RS.21,83,29,964/ - WERE 3 ITA NO. 2285 /PUN/20 17 A.Y. 2011 - 12 SHOWN. WHEREAS FOR THE ASSESSMENT YEAR 2011 - 12, THE MANUFACTURING EXPENSES WERE SHOWN AT RS.4,03,66,841/ - AN D THE SALES WERE SHOWN AT RS.2,67,08,621/ - . THUS, THE PERCENTAGE OF MANUFACTURING EXPENSES TO SALES WAS 69.39% FOR THE ASSESSMENT YEAR 2012 - 13 WHEREAS FOR THE ASSESSMENT YEAR 2011 - 12, IT WAS 151%. 5. THE ASSESSEE THEREAFTER, MADE DETAILED WRITTEN SUBMISSI ONS BEFORE THE ASSESSING OFFICER WHICH ARE AT PARA 8.1 AND 8.2 OF THE ASSESSING OFFICERS ORDER. THE ASSESSING OFFICER VIDE PARA 9 OF HIS ORDER, HAD OBSERVED THAT THE COMPARATIVE INFORMATION EVEN AFTER IGNORING DIRECT MANUFACTURING COST, WAS STILL 97%. THA T AT PARA 9.1 OF THE ASSESSING OFFICER S ORDER, THE ASSESSEE IN ITS SUBMISSION HAS STATED THAT THERE WAS AN ERROR IN MAKING EXCESS PROVISION OF RS.53,15,000/ - . THE COST OF PURCHASE OF FIXED ASSETS IN THE SUBSEQUENT YEAR WERE PROVIDED BY THE ASSESSEE AS CO NSUMABLES AND DEBITED TO P & L ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2011. THUS, MATERIAL COST AS WELL AS LOSS FOR THE YEAR ENDED 31.03.2011 HAS BEEN INFLATED BY THE ASSESSEE BY AN AMOUNT OF RS.53,15,000/ - . 6. THEREAFTER, AT PARA 9.2, THE ASSESSING OFFIC ER CATEGORICALLY FINDS THAT THE ASSESSEE HAD FAILED TO JUSTIFY ITS CONTENTION WITH CORROBORATIVE AND COGENT EVIDENCES AND THEREFORE, THE ASSESSING OFFICER HAD REDUCED THE COST OF MATERIAL TO 46%, TAKING AVERAGE COST OF MATERIAL CONSUMED FOR SUBSEQUENT 3 YE ARS AND THE GROSS PROFIT WAS TAKEN AT 54%. THEREFORE, GROSS PROFIT WAS RECOMPUTED AT RS.1,44,22,655/ - AS AGAINST THE GROSS LOSS CLAIMED IN THE RETURN OF INCOME AT RS.1,36,58,220/ - . THUS, THE DIFFERENTIAL AMOUNT OF RS.2,80,80,875/ - WAS ADDED BACK TO THE TOT AL INCOME OF THE ASSESSEE AND REDUCED FROM THE LOSS CLAIMED TO BE CARRIED FORWARD. 4 ITA NO. 2285 /PUN/20 17 A.Y. 2011 - 12 7. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE DEMONSTRATE D THAT BEFORE THE LD. CIT(APPEALS), AT PAGE 12, PARA 5.3, NOTE NO.2, THE ASSESSEE VIDE ITS SUBMISSION HAS EXPLAINED THE PROVISION ENTRY IN CONSUMABLES AMOUNTING TO RS.53,15,000/ - . 8. WE FIND THAT THE LD. CIT(APPEALS) HAS NOT GIVEN ANY SPECIFIC FINDINGS REGARDING THE OBSERVATION MADE BY THE ASSESSING OFFICER AT PARA 9.1 VIS - - VIS SUBMISSION OF THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AT PARA 5.3, NOTE NO.2 IN THE ASSESSEES SUBMISSION. THAT FURTHER, THE LD. CIT(APPEALS) AT PARA 2.2.7 OF HIS ORDER HAS OBSERVED THAT THE ASSESSE BEFORE THE ASSESSING OFFICER HAS NOT EXPLAINED ITS LOSS PROPERLY AND ITS MATERIAL CONSUMPTION RATIO WAS ALSO ABNORMALLY HIGH. THEREAFTER, AS PER REASONING CONT AINED IN HIS ORDER, THE LD. CIT(APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. HOWEVER, WE OBSERVE THE SUBMISSION OF THE ASSESSEE AT PARA 9.1 OF THE ASSESSING OFFICERS ORDER WHEREIN THE ASSESSEE ITSELF HAS STATED THAT THERE WAS AN ERROR IN MAKING EXCESS PROVISION OF RS.53,15,000/ - AND THE SUBSEQUENT JUSTIFICATION GIVEN BY THE ASSESSEE THEREOF, THIS ISSUE REQUIRES FACTUAL VERIFICATION. THAT FURTHER FROM THE OBSERVATION OF THE LD. CIT(APPEAL), HE HAS ALSO RAISED DOUBTS REGARDING THE CLAIM OF THE ASS ESSEE AND THAT THEY WERE NOT PROPERLY EXPLAINED BEFORE THE ASSESSING OFFICER. WE HAVE OBSERVED IN THE OPEN COURT BEFORE THE PARTIES THAT THE MATTER NEEDS TO BE VERIFIED BY CONDUCTING DETAILED ENQUIRY AND EXAMINATION ON FACTS. 9. IN VIEW THEREOF, WE SET AS IDE THE ORDER OF THE LD. CIT(APPEALS) AND RESTORE THE MATTER TO THE FILE OF ASSESSING OFFICER TO RE - ADJUDICATE THE ISSUE WHILE COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE AS INDICATED HEREINABOVE. 5 ITA NO. 2285 /PUN/20 17 A.Y. 2011 - 12 10. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 29 TH DAY OF JUNE , 20 2 1 . SD/ - SD/ - R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 29 TH JUNE , 202 1 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 13, PUNE. 4. THE PR. CIT - 1, PUNE. 5. , , , / DR, ITAT, B BENCH, PUNE. 6 . / GUARD FILE. / BY ORDER, // TRUE COPY // / PRIVATE SECRETARY , / ITAT, PUNE . 6 ITA NO. 2285 /PUN/20 17 A.Y. 2011 - 12 DATE 1 DRAFT DICTATED ON 2 8.0 6 .2021 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 28.06 .202 1 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER