Sigma Casting Limited, Kanpur V. Deputy Commissioner of Income Tax- VI, Kanpur

ITA 229/LKW/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0212 (ITAT-LUCKNOW)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 26-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BEFORE SHRI. AND SHRI PARTHA SARATHI CHAUDHURY, ASSESSMENT YEAR: SIGMA CASTING LIMITED 122/235, FAZAL GANJ KANPUR T AN /PAN : AAGCS8962C (APP ELL A NT) APP ELL ANT BY: RESPONDENT BY: DATE OF HEARING: DATE OF PRONOUNCEMENT: PER P ARTHA SARATHI THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF LD. CIT(A) - I, KANPUR DATED 4/1/2018 ON THE FOLLOWING GROUNDS OF APPEAL: - 1.1 BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AND ON FACTS IN UPHOLDING AN ADDITION OF MADE IN THE ASSESSMENT ON LOSS' IN THE COURSE OF PRODUCTION OF M.S. 1.2 BECAUSE NO SUCH ADDITION AS HAS BEEN MADE/SUSTAINED, WAS CALLED FOR AS PRODUCTION RESULTS STOOD FULLY VERIFI RECORDS MAINTAINED UNDER EXCISE DEFECT WAS FOUND AND/OR SPECIFIED BY THE ASSESSING OFFICER. 2. BECAUSE ADDITION IS BASED ON EXTRANEOUS CONSIDERATION AND THE SAME WAS NOT SUSTAINABLE EITHER ON FACTS OR IN LAW 3. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 229/LKW/2018 ASSESSMENT YEAR: 2004 - 05 V. DCIT - VI KANPUR (RESPONDENT) SHRI P. K. KAPOOR, C.A. SHRI C. K. SINGH, D.R. 11 12 201 8 DATE OF PRONOUNCEMENT: 11 12 201 8 O R D E R ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE I, KANPUR DATED 4/1/2018 ON THE FOLLOWING GROUNDS 1.1 BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AND ON FACTS IN UPHOLDING AN ADDITION OF RS.2,00,000/ - THAT HAD BEEN MADE IN THE ASSESSMENT ON THE GROUND OF 'INCREASE IN BURNING LOSS' IN THE COURSE OF PRODUCTION OF M.S. INGOTS. 1.2 BECAUSE NO SUCH ADDITION AS HAS BEEN MADE/SUSTAINED, WAS CALLED FOR AS PRODUCTION RESULTS STOOD FULLY VERIFI ED FROM THE RECORDS MAINTAINED UNDER EXCISE LAWS WHEREIN NO DISCREPANCY OR DEFECT WAS FOUND AND/OR SPECIFIED BY THE ASSESSING OFFICER. 2. BECAUSE ADDITION IS BASED ON EXTRANEOUS CONSIDERATION AND THE SAME WAS NOT SUSTAINABLE EITHER ON FACTS OR IN LAW 3. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE FACTS, LAW AND PRINCIPLES OF NATURAL JUSTICE. JUDICIAL MEMBER THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE I, KANPUR DATED 4/1/2018 ON THE FOLLOWING GROUNDS 1.1 BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AND ON THAT HAD BEEN THE GROUND OF 'INCREASE IN BURNING 1.2 BECAUSE NO SUCH ADDITION AS HAS BEEN MADE/SUSTAINED, ED FROM THE LAWS WHEREIN NO DISCREPANCY OR DEFECT WAS FOUND AND/OR SPECIFIED BY THE ASSESSING OFFICER. 2. BECAUSE ADDITION IS BASED ON EXTRANEOUS CONSIDERATION AND THE SAME WAS NOT SUSTAINABLE EITHER ON FACTS OR IN LAW . 3. BECAUSE THE ORDER APPEALED AGAINST IS CONTRARY TO THE ITA NO.229/LKW/2018 PAGE 2 OF 5 2 . THE CRUX OF THE GRIEVANCE OF THE ASSESSEE IS AD - HOC ADDITION OF RS.2 LAKHS MADE BY THE ASSESSING OFFICER AND UPHELD BY THE LD. CIT(A). 3 . THE FACTS IN THIS CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF M . S INGOTS AT ITS FACTORY SITUATED AT B - 19 AND B - 20, UPSIDC, INDUSTRIAL AREA, MALWA DIS T T. FATEHPUR. THE ASSESSEE COMPANY IS ALSO DOING TRADING BUS INESS UNDER THE BUSINESS N AME , M/ S ARIHANT STEEL TRADERS AS BRANCH OF THE COMPANY. THE RETURN HAS BEEN FILED ON 1/11/2004 DECLARING NIL INCOME AND RS. 6,91,560/ - UNDER S ECTION 115JB OF THE I.T. ACT, 1961. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT COMPUTING TH E INCOM E OF THE ASSESSEE AT RS. 6 , 91 , 560/ - ON 29.12.2004 UNDER SECTION 115JB OF THE ACT, RESULTING IN TO A REFUND OF RS.10 , 09 , 131/ - WHICH WAS ISSUED ON 24.10.2005. LATER ON , THE CASE WAS TAKEN UP FOR SCRUTINY . THE TRADING RESULTS OF THE ASSESSEE FOR THE RELEVANT YEAR WAS CONSIDERED AS COMPARED TO THE LAST TWO A SSESSMENT Y EAR S , WHICH ARE AS UNDER: - A.Y. SALES GROSS LOSS G.L. RATE 2002 - 03 13,11,54,719/ - 1,86,82,493/ - 14.24% 2003 - 04 10,22,38,329/ - 1,27,79,596/ - 12.50% 2004 - 05 7,34,50,173/ - 1,46,54,046/ - 19.95% 4 . A CCORDING TO THE ASSESSING OFFICER , AS PER AFORESAID TRADING RESULTS, THERE WAS A DECLINE IN GROSS LOSS AND ON THAT GROUND AD - HOC ADDITION OF RS.2 LAKHS WAS MADE. 5 . THE LD. CIT(A) AS PER HIS DECISION APPEARING IN THE APPELLATE ORDER , WHICH IS ON RECORD , HAS UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER FOR THE REASONS AND GROUNDS AS APPEARING IN HIS ORDER. 6 . BEING FURTHER AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL AND AT THE TIME OF HEARING, LD. A.R. OF THE ASSESSEE VE HEMENTLY ITA NO.229/LKW/2018 PAGE 3 OF 5 ARGUED THAT ALL THE RELEVANT DOCUMENTARY EVIDENCES WERE PRODUCED AND WERE TEST CHECKED BY THE ASSESSING OFFICER AND MERELY BECAUSE TH ERE WAS A DECLINE IN GROSS LOSS, AD - HOC ADDITION WA S MADE , WHICH IS NOT PERMITTED WITHIN THE PURVIEW OF TAXING STA TUTE. THE LD. A.R. OF THE ASSESSEE FURTHER SUBMITTED THAT THERE WAS DECREASE IN SALES FIGURE FROM ASSESSMENT YEAR 2002 - 03 TO 2004 - 05. WHEN THE SALES HAVE BEEN DECREASED, IT IS NATURAL THAT THE FIGURE OF GROSS LOSS ALSO WILL DECREASE. THE ASSESSING OFFIC ER , WITHOUT ANY SPECIFIC REASONING AND FINDING ANY DEFECT IN THE ACCOUNTS , HA S ON AD - HOC BASIS DISALLOWED THE AMOUNT. 7 . WE HAVE PERUSED THE CASE RECORD AND HEARD THE RIVAL CONTENTIONS AND WE FIND THAT ALL RELEVANT DOCUMENTARY EVIDENCES WERE PLACED BEFORE THE REVENUE AUTHORITIES BY THE ASSESSEE. WE FIND F ROM THE ORDERS OF THE SUBORDINATE AUTHORITIES THAT THEY HAVE N EITHER BROUGHT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT OF THE ASSESSEE , N OR ANY SPECIFIC ENQUIRY IS CONDUCTED TO SUBSTANTIATE THE REASONS FOR DISALLOWANCE BEING MADE. ASSESSEE, ON THE OTHER HAND, HAS DEMONSTRATED DECLINE IN SALES FIGURE AND CORRESPONDING DECLINE IN GROSS LOSS. WITHOUT BRINGING OUT ANY NEXUS, AD - HOC DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER. SIMILAR SITUATIONS HAVE COME UP FOR CONSIDERATION IN ITA NO.722/LKW/2017 IN ASSESSMENT YEAR 2014 - 15 IN THE CASE OF M/S BAJAJ AUTO CENTRE, KANPUR VS. INCOME TAX OFFICER 2(1), KANPUR WHEREIN THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: - 6 . WE HAVE PERUSED THE CASE RECORD AND HEARD THE RIVAL CONTENTIONS AND CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFORE US. ON A PERUSAL OF THE ASSESSMENT ORDER WITH REGARD TO THE DISALLOWANCES MADE ON GENERAL EXPENSES AND STAFF WELFARE EXPENSES OF RS.10 ,000/ - AND DISALLOWANCES ON ACCOUNT OF SALES PROMOTION EXPENSES AND FREIGHT EXPENSES, BOTH AT RS.10,000/ - EACH, ASSESSING OFFICER HIMSELF IN HIS ORDER HAS MENTIONED THAT THESE ADDITIONS ARE MADE ON ADHOC BASIS AND ADDED TO THE INCOME OF THE ASSESSEE. WITH REGARD TO THE DISALLOWANCES ON ACCOUNT OF TRAVELLING EXPENSES, TELEPHONE, ETC., ASSESSING OFFICER HAS ADDED AN AMOUNT OF RS.83,253/ - NOT ON THE BASIS OF ANY SPECIFIC ENQUIRY CONDUCTED BY HIM OR BY PROVIDING ANY EVIDENCE TO THE FACT THAT ITA NO.229/LKW/2018 PAGE 4 OF 5 HOW THESE EXPENSES ARE BORNE OUT OF PERSONAL USE AND ON THE BASIS OF GUESS WORK HAS ADDED THIS AMOUNT TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A), ON THE OTHER HAND, HAS CONFIRMED THESE ADDITIONS MADE BY THE ASSESSING OFFICER SIMPLY ON THE GROUND THAT BOOKS OF ACCOUNT AN D VOUCHERS WERE NOT PRODUCED BEFORE HIM. WE HAVE EXAMINED THE CASE RECORDS AND WE FIND, AS COMING OUT FROM ASSESSMENT ORDER ITSELF, THAT FROM TIME TO TIME ASSESSEE HAS PROVIDED ANSWER TO THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER AND HAS ALSO PRODU CED BOOKS OF ACCOUNT ALONG WITH BILLS AND VOUCHERS, WHICH WERE TEST CHECKED. WHEN ALL THESE DOCUMENTS WERE THERE BEFORE THE DEPARTMENT, ASKING FOR FURTHER PRESENTATION OF THESE DOCUMENTS BEFORE THE LD. CIT(A) SEEMS TO BE A MEANINGLESS EXERCISE. THE POWER OF THE LD. CIT(A) BEING CO - TERMINUS WITH THAT OF THE ASSESSING OFFICER HAS ALSO NOT GONE INTO THE MERITS OF THE CASE REGARDING DISALLOWANCES AND HAS SUMMARILY DISPOSED OF THE APPEAL CONFIRMING THE ADDITIONS MADE BY THE ASSESSING OFFICER. WE TAKE GUIDANCE FROM THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF J.J. ENTERPRISES VS. CIT (SUPRA) WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT ADDITION TO THE INCOME OF THE ASSESSEE MADE ON THE BASIS OF PURE GUESS WORK WAS UNSUSTAINABLE. SAME VIEW HAS BEEN REIT ERATED BY THE CO - ORDINATE ITAT ALLAHABAD BENCH IN ITA NO.1419/ALLD/1997 FOR ASSESSMENT YEAR 1994 - 95 RELYING ON ANOTHER APEX COURT DECISION IN THE CASE OF J.K. ENTERPRISES, 254 ITR 216. SIMILAR ADHOC DISALLOWANCES WERE ALSO DELETED BY RESPECTIVE CO - ORDINAT E ITAT BENCHES OF LUCKNOW AND AMRITSAR IN THE RESPECT CASES REFERRED TO HEREINABOVE IN THIS ORDER. IN THE INSTANT CASE, AS WE HAVE EXAMINED, ALL THE DISALLOWANCES WERE MADE ON ADHOC BASIS AND ON THE BASIS OF PURE GUESS WORK, THEREFORE, RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS ON THE ISSUE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT DELETION OF THESE ADHOC DISALLOWANCES THEREBY ALLOWING THE APPEAL OF THE ASSESSEE. 8 . SIMILAR VIEW HAS BEEN TAKEN BY THE AMRITSAR BENCH OF THE TRIBUNAL IN THE CASE OF M /S BHULLAR OXYGEN PVT. LTD., AMRITSAR VS. INCOME TAX OFFICER 4(1), AMRITSAR IN ITA NO.663/ASR/2015 . 9 . IN THIS VIEW OF THE MATTER, WE HOLD THAT AD - HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT WITHIN THE PERMISSIBLE ARENA OF TAXING STATUTE WHICH IS ES SENTIALLY WELFARE IN NATURE AND IN THIS REALM OF WELFARE LEGISLATION; AD - HOC DISALLOWANCE IS NOT JUSTIFIED. HENCE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT DELETION OF AD - HOC DISALLOWANCE OF RS.2 LAKHS AND ALLOW THE APPEAL OF THE ASSESSEE. ITA NO.229/LKW/2018 PAGE 5 OF 5 10 . IN TH E RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 / 1 2 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH DECEMBER , 201 8 JJ: 1112 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR BY ORDER ASSISTANT REGISTRAR