Nilkanth Specific Family Trust, Mehsana V. The` Dy.CIT.,Mehsana Circle, Mehsana

ITA 234/AHD/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6169 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 25-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMADABAD , BEFORE: SHRI RAJPALYADAV, JUDICIAL MEMBER SHRI AMARJIT SINGH , ACCOUNTANT MEMBER ITA NOS. 234 & 154/AHD/2010 ASSESSMENT YEAR : 2006-07 NILKANTH SPECIFIC FAMILY TRUST 1074/B,1075 TO 1078, KADI KALOL ROAD, CHHATRAL DIST. MEHSANA V/S. DCIT, MEHSANA CIRCLE, MEHSANA. DCIT, MEHSANA CIRCLE, MEHSANA. V/S . NILKANTH SPECIFIC FAMILY TRUST, PROP. OF KARAN PAPER MILL, 1074/B 1075 TO 1078. KADI-KALOL ROAD, CHHATRAL. PAN NO. AAATN1399K (APPELLANT) .. (RESPONDENT) /BY ASSESSEE SHRI S.N. SOPARKAR & HIMANSHU SHAH, A/R / BY REVENUE SHRI K. MADHUSUDAN, SR. D.R. /DATE OF HEARING 15.03.2017 /DATE OF PRONOUNCEMENT 20.04.2017 O R D E R PER : AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 234 & 154/AHD/10A.Y. 06-07 (NILKANTH SPECI FIC FAMILY TRUST VS. DCIT) PAGE 2 IN THIS CASE RETURN OF INCOME DECLARING INCOME OF RS. 1,90,60,144/- WAS FILED ON 31/12/2006. SUBSEQUENTLY THE CASE WAS SELE CTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S 143(2) OF THE ACT ON 20/07/20 07. BRIEF FACTS OF THE CASE UNDER THE DIFFERENT GROUNDS OF APPEAL OF THE ASSESS EE ARE DISCUSSED AS UNDER:- GROUND NO. 2- IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME TAX(A) HAS GROSSLY E RRED IN DISMISSING APPELLANTS GROUND REGARDING TAKING THE STATUS OF THE APPELLANT AS DISCRETIONARY TRUST INSTEAD OF CORRECT STATUS OF THE APPELLANT AS THAT OF INDIVIDU AL. 2. IN THE ASSESSMENT ORDER U/S 143(3) OF THE ACT MADE IN THE CASE OF THE ASSESSEE THE ASSESSING OFFICER ASSESSED THE ASS ESSEE IN THE STATUS OF DISCRETIONARY TRUST. THERE WAS NO DISCUSSION MAD E ANYWHERE IN THE ASSESSMENT ORDER THAT WHY THE ASSESSEE WAS ASSE SSED AS DISCRETIONARY TRUST. 3. IN THIS CONNECTION WE HAVE PERUSED THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) AND HE HAD DISCUSSED AT PARA 3.2 OF THIS ORDER STATING THAT AS PER THE COPY OF THE ACKN OWLEDGE OF THE RETURN FILED AS THE ASSESSEE DURING THE CASE OF APPELLATE PROCEEDINGS BEFORE HIM HE NOTICED OVERWRITING AGAINST THE ENTIRE FOR S TATUS AND CONCERNED THAT IF WAS NOT CLEAR WHETHER LIKE PREVIOUS YEAR TH E STATUS IN THE RETURN HAD BEEN CLAIMED AS AOPOR NOT. THE LD. COMMISSIONER OF INCOME TAX(A) HAS DISMISSED THE GROUND O APPEAL OF THE ASS ESSEE ON THE BASIS OF THE LAST YEAR. 4. WE HAVE CONCERNED THE RETURN CONTENTIONS. WE HAV E NOTICED THAT THE A.O. HAS NOT GIVEN ANY FINDING AND REASONS FOR TREATING THE ASSESSEE AS DISCRETIONARY TRUST IN THE ASSESSMENT O RDER. FURTHER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO NOT C ALCULATED ITA NO. 234 & 154/AHD/10A.Y. 06-07 (NILKANTH SPECI FIC FAMILY TRUST VS. DCIT) PAGE 3 REASONS FOR TREATING THE ASSESSEE AS DISCRETIONARY TRUST. WE CONCERNED IT WILL HE APPRECIATE TO RESTORE THIS ISSUE TO THE FILE OF THE A.O. TO DECIDE THIS ISSUE AFTER CONSIDERING THE SUPPORTING DETAIL FILED BY THE ASSESSEE AND PASS SEPARATELY ORDER ON THIS ISSUE. GROUND NO. 3- IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THE LEARNED COMMISSIONER OF INCOME TAX(A) HAS GROSSLY E RRED IN CONFIRMING ADDITION OF RS. 19,70,102/-. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. HAD MADE ADDITION OF RS. 33,63,192/- BY REJECTING THE BOOKS OF ACCOUNT 145 OF THE ACT STATING THAT ASSESSEE HAD NOT PRODUCED DOCU MENTARY EVIDENCE REGARDING WASTAGE/SHORTAGE OF THE LOCAL WASTAGE. TH E LD. COMMISSIONER OF INCOME TAX(APPEALS) HAD COMPUTED TH E ADDITION TO RS. 19,70,102/- INSTEAD OF RS. 33,63,192/- MADE BY THE A.O. THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX(APPEA LS) IS REPRODUCED AS UNDER:- 4.6. THE MATTER AND THE RELEVANT ISSUES HAVE BEEN CONSIDERED. AS FAR AS THE ISSUE OF TDS CERTIFICATE OF M/S. NIRMA LTD. IS CONCERNED, TH E SAME CANNOT LEAD TO REJECTION OF BOOKS. THE APPELLANT HAS SHOWN HIGHER RECEIPTS THAN THE CE RTIFICATE AND HAS GIVEN AN EXPLANATION WHICH LIAS NOT BEEN CONTRADICTED BY THE ASSESSING OFFICER. IF THERE ARE CERTAIN RECEIPTS WHICH HAVE NOT BEEN SUBJECT TO TDS BUT SHOULD HAVE BEEN, THE ACTION IS REQUIRED TO BE TAKEN IN THE HANDS OF THE DEFAULT ER AND NOT THE ASSESSEE. 4.7. SIMILARLY THE TABLE IN PARA 3.3 ON WHICH THE ASSESSING OFFICER HAS RELIED IS BASICALLY ARITHMETICALLY INACCURATE. AS RIGHTLY POI NTED OUT BY THE AUTHORISED REPRESENTATIVE, THE CLOSING STOCK HAS BEEN COMPUTED BY ADDING 'CONSUMPTION' RATHER THAN DEDUCTING IT, SO THAT THE DIFFERENCE ON ALL TH E FOUR DATES COMES TO DOUBLE THE VALUE OF CONSUMPTION. HENCE THAT BASIS IS ALSO MISC ONCEIVED AND ERRONEOUS. 4.8. THEREFORE, THE ONLY GROUND THAT REMAINS IS TH E DETAILS OF INVENTORY FILED ON 19/12/2008 WHICH IS REPRODUCED IN THE ORDER. AS ALR EADY STATED, WE HAVE A FIGURE OF STOCK OF RS.1,33,10,037/- AS PER THIS CHART, WHICH ALSO INCLUDED A NEGATIVE VALUE OF STOCK OF (-) RS.33,63,192/- ON ONE ACCOUNT AS AGAIN ST A TOTAL STOCK OF RS.1,33,10,037/- SHOWN IN THE BALANCE SHEET. ALTHOUGH THE APPELLANT' S STAND IS THAT THE ACTUAL VALUE IS ITA NO. 234 & 154/AHD/10A.Y. 06-07 (NILKANTH SPECI FIC FAMILY TRUST VS. DCIT) PAGE 4 REFLECTED IN THE AUDITED BALANCE SHEET, THERE IS NO WAY ONE CAN IGNORE THE VALUE AND DETAILS FURNISHED IN THE ASSESSMENT PROCEEDINGS. NO T ONLY THE FIGURE OF RS.1,33,10,037/- WAS PROVIDED BY THE APPELLANT TO T HE ASSESSING OFFICER, THIS HAS ALSO NOT BEEN CHALLENGED AT THE APPELLATE STAGE WHEN THE ASSESSING OFFICER HAS PROCEEDED WITH IT. FROM THIS SEQUENCE OF EVENTS IT IS FAIR TO ASSUME THAT THE STOCK DETAILS AS PROVIDED FOR AUDIT AS ACTUAL WERE DIFFERENT AND CON SEQUENTLY THE CONSUMPTION OF RAW MATERIAL SHOWN IS NOT THE ACTUAL. 4.9. HENCE, IN THE FACTS OF THE CIRCUMSTANCES, ADD ITION WAS CALLED FOR. THE ENTIRE ISSUE STEMS FROM THE STATEMENT PROVIDED BEFORE THE ASSESSING OFFICER. H IS SEEN THAT THE VALUATION OF THE CLOSING STOCK OF IMPORTED WAST E PAPER OF RS. 1,64,54,046 - RS.33,63,192/- = RS. 1 ,30,90,854/- @ RS.7/- PER K. G. WOULD MEAN THE PHYSICAL CLOSING STOCK FOR THIS RAW MATERIAL AT RS.17,99,235, I.E. T HE SAME AS SHOWN IN THE ANNEXURES TO THE BALANCE SHEET. THEREFORE, THE AUTHORISED REPRES ENTATIVE'S EXPLANATION THAT THE NEGATIVE FIGURE SHOWN IS MERELY AN ADJUSTMENT ATTEM PTED BY THE ACCOUNTANT APPEARS PROBABLE. BUT IT DOES SHOW THE UNRELIABILITY OF STO CK REGISTER MAINTAINED BY THE APPELLANT AND THE CONSUMPTION FIGURE. THEREFORE, IN MY VIEW, THE CORRECT MEASURE OF EXCESS CONSUMPTION HAS TP BE DIFFERENCE AS THE TOTA L OF THE TABLE IN THE ASSESSMENT ORDER AS AGAINST THE FIGURE AS APPEARING IN THE BAL ANCE SHEET. CLEARLY THE DETAILS GIVEN BEFORE THE ASSESSING OFFICER WERE ONTHE BASIS OT' BOOKS AS MAINTAINED AND THAT APPEARING IN THE BALANCE SHEET WERE, AS PER PRACTIC E, PHYSICAL VERIFICATION. HENCE THE DIFFERENCE HAS TO BE THE EXCESS CONSUMPTION. 4.10. KEEPING THAT FRAMEWORK IN MIND, THE ADDITION IS COMPUTED AS RS.19,70,102/-, INSTEAD OF RS. 33,63,192/-. THE ASSESSING OFFICER MAY GIVE BALANCE RELIEF TO THE ASSESSES. ` 6. WE HAVE CONSIDERED THE RIVAL CONTENTION. WE HAVE NOTICED THAT THE A.O. MADE ADDITION ON THE BASIS OF DETAIL FURNI SHED BY THE ASSESSEE SHOWING FIGURE OF ( RS. 33,63,192/-) AGAINST THE LO CAL WASTE STOCK. THE A.O. MADE FURTHER TEST CHECKED BY HIMSELF WORKI NG OUT STOCK ON 16/07/2005, 24/08/2005, 01/09/2008 AND 27/09/2008 A ND OBSERVED THE DIFFERENCES WITH THE ACTUAL STOCK AFTER MAKING CALC ULATION AS THE ABOVE DATE BY TAKING INTO ACCOUNT OPENING STOCK, PURCHASE D, CONSUMED ETC. THEREAFTER THE A.O REJECTED THE WORKS OF ACCOUNTS U /S 145 OF THE ACT ITA NO. 234 & 154/AHD/10A.Y. 06-07 (NILKANTH SPECI FIC FAMILY TRUST VS. DCIT) PAGE 5 AND MADE THE ABOVE REFERRED ADDITION OF RS. 33,63,1 92/- TREATING THAT IT WAS SHOWN AS THE NEGATIVE FIGURE IS THE DETAILS OF THE CLOSING STOCK AS STATED IN PAGE 2 TO 7 OF THE LD. COMMISSIONER OF IN COME TAX(APPEALS) ORDER. 7. WE HAVE NOTICED THAT THE ASSESSEE HAD EXPLAINED THAT THERE WAS NO WASTAGE OR SHORTAGE OF THE PAPER WHICH WERE ADDE D BY THE A.O. THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING PAPER FROM TWO PRODUCT NAMED AS IMPORTED WASTE MATERIAL AND LOCAL WASTE MATERIAL AND MAINTAINED CONSOLIDATED ACCOUNT OF PAPER. IN TH E CONSOLIDATED STOCK, ONE ITEM LOCAL PURCHASE WAS NEGATIVE WHICH S HOW THAT THERE WAS EQUIVALENT LOAN OF THE ANOTHER CATEGORY THAT WA S IMPORTED WASTE ITEM. WE HAVE ALSO NOTICED THE SUBMISSION MADE BY T HE LD. COUNSEL REGARDING WORKING OUT OF ACTUAL STOCK ON FOUR DATES BY THE A.O. STATING THAT THE A.O, HAD ERRED IN ADDING CONSUMPTI ON INSTEAD OF DEDUCTING THE SAME. FURTHER THEY HAVE OBSERVED THAT THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS SUSTAINED T HE ADDITION TO THE EXTENT OF RS. 19,70,102/- BY ON THE BASIS THAT AS PER THE TAX AUDIT REPORT THE CLOSING STOCK WAS TAKEN AT RS 11,39,935/ - WHEREAS AS PER THE DETAILS FURNISHED BEFORE THE A.O THE CLOSING ST OCK WAS AT RS. 1,13,10,037/-. 8. DURING THE COURSE OF APPELLATE PROCEEDINGS THE L D. COUNSEL HAS SUBMITTED THE PAPER BOOK CONTAINING INFORMATION ABO UT STOCK REGISTER OF LOCAL WASTE MATERIAL AND IMPORTED WASTE MATERIAL PARTY WISE RECEIPT OF LOCAL WASTE PAPER PARTY WISE RECEIPT OF IMPORTED WASTE PAPER, ENGLISH TRANSLATION OF STOCK REGISTER ETC. ITA NO. 234 & 154/AHD/10A.Y. 06-07 (NILKANTH SPECI FIC FAMILY TRUST VS. DCIT) PAGE 6 9. HE HAS ALSO CONTENDED THAT THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS NOT CONSIDERED THE SUBMISSION OF T HE ASSESSEE BEFORE COMPUTING THE ADDITION OF RS. 19,70,102/- 10. AFTER CONSIDERING THE ABOVE FACTS AND FINDINGS WE OBSERVED THAT THE A.O. HAD MADE THE ADDITION OF RS. 33,63,192/- R EGARDING SHORTAGE/WASTAGE OF STOCK ON THE BASIS OF OWN ANALY SIS WITHOUT SUBMITTING THE SUPPORTING DETAILS FURNISHED BY THE ASSESSEE. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HAD COMPUTED TH E ADDITION ON THE DIFFERENT BASIS AS STATED ABOVE IN THIS ORDER W ITHOUT CONSIDERING THE EXPLANATION WERE RELATED DETAILS FURNISHED BY T HE ASSESSEE. 11. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES A S ELABORATED ABOVE ARE IN THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX(APPEALS) AT PAGE 2 TO 7, WE CONSIDERED THAT THI S MATTER IS REQUIRED NECESSARY RECONCILIATION AT THE LEVEL OF A.O. AFTER PROVIDING DUE OPPORTUNITY TO THE ASSESSEE. THEREFORE, WE RESTORE THIS MATTER TO THE FILE OF THE A.O TO DECIDE A FRESH AFTER TAKING INTO ACCOUNT THE RELEVANT MATERIAL AND RECONCILIATION MADE BY THE ASSESSEE AT THE TIME OF RE- ADJUDICATING PROCEEDINGS. GROUND 4 - IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISA LLOWANCE OF RS.40,554/- OUT DEPRECIATION OF VEHICLES TREATING AS PERSONAL EXPEN SE. GROUND 5 - IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPEL LANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISA LLOWANCE OF RS.27,265/- OUT TELEPHONE AND POSTAGE EXPENSES TREATING AS PERSONAL EXPENSE. GROUND 6- IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING DISA LLOWANCE OF RS. 63,163/-OUT OF VEHICLE EXPENSES TREATING AS PERSONAL EXPENSE. ITA NO. 234 & 154/AHD/10A.Y. 06-07 (NILKANTH SPECI FIC FAMILY TRUST VS. DCIT) PAGE 7 12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O HAS DISALLOWED 1/5 TH OF THE DEPRECIATION CLAIMED ON VEHICLES TO THE AMO UNT OF RS. 81,100/- BEWARE OF PERSONAL ELEMENTS IN USED OF VEHICLES. 13. THE A.O. HAD ALSO DISALLOWED 1/5 TH OF THE TELEPHONE EXPENSES TO RS. 54529/- BECAUSE OF PERSONAL NATURE OF THESE EXP ENSES. 14. THE A.O. HAD 1/5 TH OF THE VEHICLE EXPENSES TO THE AMOUNT OF RS. 1,26,325/- ON THE GROUND THAT PERSONAL USE CANNOT B E RULED OUT. 15. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HE LD THAT 10% OF DISALLOWANCE WAS HELD TO BY A REASONABLE MEASURE TO COVER PERSONAL USE. 16. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, WE TH AT THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HAD ALREADY RED UCED THE ABOVE NATURE AD-HOC ADDITION TO THE EXTENT OF 10% F ROM THE 20% MADE BY THE A.O. WE FIND THAT LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS PROVIDED REASONABLE RELIEF TO THE ASSESSEE. THE REFORE WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). GROUND -1 THE LD. COMMISSIONER OF INCOME TAX(APPEAL S) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION OF TO RS. 19, 70,102/- AS AGAINST THE ADDITION OF RS. 33,63,192/- MADE IN RESPECT OF TRAD ING ADDITIONS BY REJECTING THE BOOKS OF ACCOUNTS U/S 154 OF THE IT A CT. 17. THIS GROUND OF APPEALS, WE HAVE ALREADY ADJUDIC ATED AS PER GROUND NO. 3 IN THE APPEAL OF THE ASSESSEE AS SUPRA IN THIS ORDER, ITA NO. 234 & 154/AHD/10A.Y. 06-07 (NILKANTH SPECI FIC FAMILY TRUST VS. DCIT) PAGE 8 THEREFORE NO SEPARATE ADJUDICATION IS REQUIRED ON T HIS ISSUE WHICH HAS BEEN ALREADY SET-ASIDE FOR FRESH ADJUDICATION TO TH E FILE OF THE A.O. 18. IN THE RESULT THE APPEAL OF THE ASSESSEE AND TH E REVENUE ARE PARTLY ALLOWED. . THIS ORDER PRONOUNCED IN OPEN COURT ON 20/04/2017 SD/- SD/- ( RAJPALYADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ! '# $ / CONCERNED CIT 4. $ - / CIT (A) 5. %&'(('# , '# , )*! / DR, ITAT, AHMEDABAD 6. '+,-. / GUARD FILE. 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