Appeal Details
Counselvise Citation
235420514 RSA 2010
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 5 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-01-2014
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
D
Next Hearing Date
07-01-2014
Assessment Year
2002-2003
Appeal Filed On
19-07-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO.2354/AHD/2010 A.Y. 2002-03 MARUTI KOATSU CYLINDERS PVT. LTD., 2 ND FLOOR, VIP APARTMENTS, NEAR ATMAJYOTI ASHRAM, ELLORAPARK, BARODA PAN: AABCM 4108P V/S. ITO, WARD 4(1), BARODA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.C. MATHEWS, SR.D.R. ASSESSEE(S) BY : SHRI S.N. SOPARKAR, AR / DATE OF HEARING : 07/01/2014 / DATE OF PRONOUNCEMENT: 10/01/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M AN ORDER OF LEARNED CIT(A)-III, BARODA DATED 06.05.2010 AND THE GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS: LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING REJECTION OF BOOKS OF ACCOUNTS U/S.145(3) OF THE ACT AND FURT HER CONFIRMING ADDITION OF RS.39,19,000/- MADE BY AO ESTIMATING GP FOR THE YEAR UNDER CONSIDERATION @15.10% INSTEAD OF 10.10% DISCL OSED BY THE APPELLANT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3), DATED 18.03.2005 WERE THAT THE ASSESSEE COMPANY IS IN THE BUSINESS OF MANUFACTURING OF GAS CYLINDERS. IT WAS NOTED BY THE AO THAT THE ASSESSEE HAS SUFFERED A LOSS OF RS.1.94 CRORES ON GROSS RECEIPTS OF RS.9.33 CRORE. IT WAS FURTHER ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 2 - NOTED BY THE AO THAT THERE WAS DECLINE IN THE GP RA TE FROM 17.97% OF A.Y. 2001-02 TO 10.10% FOR THE YEAR CONSIDERATIO N, I.E., A.Y. 2002-03. THE AO HAS ASKED REASONS FOR THE FALL IN G .P. BY 7.87% FOR THE YEAR UNDER CONSIDERATION. THE EXPLANATION O F THE ASSESSEE WAS AS UNDER: A. RISE IN COST OF MAIN RAW MATERIAL BY 13.36% AS COMPARED TO THE IMMEDIATE PRECEEDING YEAR. THE LANDED COST OF RAW M ATERIAL IN F.Y. 2001-02 WAS RS.63645/- PER MT AS AGAINST RS.56144/- PER MT DURING F.Y. 2000-01. B. INCREASE IN COST OF DOLLAR BY 3.60% AS COMPARED TO THE IMMEDIATE PRECEEDING YEAR. C. INCREASE IN CUSTOM DUTY BY 6.71% ON IMPORTED MAI N RAW MATERIAL AS COMPARED TO THE IMMEDIATE PRECEEDING YEAR. D. COST OF REPAIRS & MAINTENANCE INCREASED DURING A .Y. 2002-03 AS COMPARED TO A.Y.2001-02. E. MAN POWER COST REMAINED THE SAME INSPITE OF DECR EASE IN SALES. F. INCREASE IN OTHER OPERATING COST. 2.1 IT WAS NOTED BY THE AO THAT THERE WAS INCREASE IN THE SALE PRICE BY 21% PER TON OF CYLINDERS. THE ASSESSEE HAS ALSO EMPHASIZED THAT THE FALL IN THE PROFIT RATE WAS DUE TO HIGHER COST OF MAN POWER. THAT EXPLANATION WAS FOUND NOT TENABLE A S PER AO. ACCORDING TO AO, THE MAIN REASON OF MAN POWER COS T WAS INCORRECT BECAUSE BY IGNORING THE MAN POWER COST TH E PROPORTION OF THE FALL IN THE GP RATE REMAINED THE SAME. THE AO H AS ALSO HELD THAT COMPARING THE CONSUMPTION AND LOSS DUE TO WAST AGE THE SAME HAD NO EFFECT ON THE HUGE LOSS DECLARED BY THE ASSE SSEE. THE AO HAD INVOKED THE PROVISIONS OF SECTION 145(1) OF IT ACT AND ASSESSED THE IMPUGNED AMOUNT IN THE HANDS OF THE AS SESSEE IN THE FOLLOWING MANNER: THE RATION OF PRODUCTION TO CONSUMPTION IN TERMS OF WEIGHT IS ALMOST THE SAME FOR THESE TWO YEARS I.E. 98% FOR A.Y. 2001 -02 AND 96% FOR A.Y. 2002-03. THE RATIO OF WORK IN PROGRESS TO CONS UMPTION IS ALSO ALMOST SAME FOR THESE TWO YEARS I.E. 12% FOR A.Y. 2 001-02 & 9% FOR A.Y.2002-03. CONSUMPTION RATIO IN TERMS FOR VALUE I S ALMOST THE SAME ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 3 - FOR THESE TWO YEARS I.E. 54.56% FOR A.Y. 2001-02 AN D 52.85% FOR A.Y. 2002-03 AS COMPARED TO THE SAME IN A.Y. 2001-02. TH E ASSESSEE COULD NOT EXPLAIN THE ALMOST DOUBLE INCREASE IN AVERAGE W EIGHT OF CYLINDERS PRODUCED IN A.Y. 2002-03 AS COMPARED TO THAT IN A.Y . 2001-02. THE INCREASE IN SALE PRICE HAS BEEN SHOWN BY 21% ONLY A S COMPARED TO THE A.Y.2001-02, WHEREAS IN TERMS AS AVERAGE WEIGHT PER CYLINDER THERE IS ALMOST 100% INCREASE DURING A.Y. 2002-03 AS PER DAT A REFLECTED IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE COMPANY WHICH IS VERY MUCH DISPROPORTIONATE. IN VIEW OF THE ABOVE DISCUSSION B OOK RESULT IS NOT ACCEPTABLE AND THE SAME IS REJECTED INVOKING PROVIS IONS OF SECTION 145(3) OF THE ACT. CONSIDERING THE OTHER FACTORS, I ADOPT THE G.P. RATE FOR THE PREVIOUS YEAR UNDER REFERENCE AT 15.10% AND THEREFORE, AN ADDITION OF RS.39,19,000/- (5% OF RS.783.86 LACS) I S MADE TO THE TOTAL INCOME COMPUTED BY THE ASSESSEE COMPANY. 3. WHEN THE MATTER WAS CARRIED BEFORE LEARNED CIT(A ), THE ACTION OF THE AO WAS CONFIRMED ARE AS UNDER: IT WAS ALSO STATED BEFORE THE AO THAT THE MAIN REA SON FOR THE FALL OF GROSS PROFIT RATE WAS MAN POWER EXPENDITURE WHICH R EMAINED CONSTANT AS IN THE LAST YEAR DURING THE YEAR EVEN THOUGH THE CAPACITY UTILIZATION DURING THE YEAR UNDER CONSIDERATION WAS LESS THAN T HE EARLIER YEAR. THE AO HAS NOT ACCEPTED THE APPELLANTS CONTENTION FOR THE VARIOUS REASONS. HE HAS POINTED OUT SEVERAL DISCREPANCIES . HE ALSO NOTED THAT THE APPELLANT WAS NOT ABLE TO EXPLAIN VARIOUS QUERI ES RAISED IN THIS REGARD AND THEREFORE HE REJECTED THE BOOK RESULT. I T WAS POINTED OUT BY THE AO THAT IF THE MAN POWER EXPENDITURE IS IGNORED FOR THE PURPOSE OF WORKING OF GROSS PROFIT FOR BOTH THE ASSESSMENT YEA R 2000-01 & 2002- 03, THE GROSS PROFIT FOR A.Y.2001-02 COMES TO 30.47 % AND FOR THE CURRENT YEAR IT COMES TO 22.71% . THE FALL IN THE G ROSS PROFIT REMAINS AT MORE THAN 7%. THEREFORE, THIS REASON OF MAN POWE R EXPENDITURE GIVEN BY THE APPELLANT REGARDING FALL IN THE GROSS PROFIT WAS NOT A PROPER EXPLANATION. HE HAS FURTHER POINTED OUT THAT THE LOSS OF MATERIAL HAS INCREASED DURING THE YEAR BY 1.66% FRO M 0.77% IN A.Y.2001-02 TO 2.43% DURING THE A.Y.2002-03. THIS, WHEN SEEN AGAINST THE FACT THAT DURING THE YEAR ADMITTEDLY CO STLY RAW MATERIAL HAS BEEN USED GIVES A DISTORTED PICTURE WHICH IS NO T FULLY EXPLAINED. HE HAS FURTHER POINTED OUT THAT THE PERCENTAGE OF C ONSUMPTION WITH REFERENCE TO PRODUCTION HAS INCREASED TO ALMOST 100 % I.E. FROM 17.69% TO 34.83%. HE HAS FURTHER POINTED OUT THAT T HOUGH THE RATIO OF PRODUCTION TO CONSUMPTION IN TERMS OF WEIGHT IS ALM OST THE SAME FOR THIS TWO YEAR I.E. 98% FOR A.Y.2001-02 AND 96% FOR A.Y.2002-03 BUT THE AVERAGE WEIGHT OF CYLINDER IS SHOWN ALMOST DOUB LE IN A.Y.2002-03 AS COMPARED TO WEIGHT SHOWN IN A.Y. 01-02. ALL THES E DISCREPANCIES HAVE NOT BEEN PROPERLY EXPLAINED EITHER BEFORE THE AO OR BEFORE THE UNDERSIGNED. THE APPELLANT HAS STATED THAT THE PROD UCT MIX HAS ALSO A BEARING ON GROSS PROFIT RATE. BY PRODUCT MIX, THE A PPELLANT HAS MEANT ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 4 - THAT DURING THE YEAR MORE BIG CYLINDERS (12146 THIS YEAR AS AGAINST 7795 LAST YEAR) HAS BEEN PRODUCED. HOWEVER, THIS EX PLANATION IS ALSO NOT CONVINCING. IN FACT, THIS ARGUMENT IS SELF DEFE ATING. IN FACT IT IS VERY INSTRUCTIVE TO NOTE THAT IN A.Y.98-99, ENTIRELY OPP OSITE ARGUMENT WAS TAKEN TO JUSTIFY THE FALL IN THE GROSS PROFIT IN TH AT YEAR. IT WAS STATED DURING THAT YEAR THAT SINCE PRODUCTION OF BIG CYLIN DER FELL TO ALMOST HALF AND PRODUCTION OF SMALL CYLINDER INCREASED BY MORE THAN FIVE TIMES, THIS LED TO FALL IN THE GROSS PROFIT BECAUSE PROFIT MARGIN ON BIG CYLINDER WAS RS.725 PER CYLINDER WHILE IN THE CASE OF SMALL CYLINDER IT WAS ONLY RS.150/- PER CYLINDER (PLEASE REFER TO CIT (A) PARA 3.2.1 OF A.Y.98-99). APPARENTLY, THE SUBMISSION MADE BY THE APPELLANT IS CONTRADICTORY TO ITS EARLIER YEAR'S SUBMISSION. THI S YEAR MORE BIG CYLINDERS HAVE BEEN PRODUCED. THEREFORE THE GROSS P ROFIT SHOULD HAVE BEEN HIGHER THIS YEAR. THE VARIOUS DISCREPANCIES AS NOTED ABOVE HAVE NOT BEEN RECONCILED EITHER BEFORE THE AO OR DURING APPELLATE PROCEEDINGS AND THEREFORE, THE AO WAS JUSTIFIED IN REJECTING THE BOOK RESULT. 4. FROM THE SIDE OF THE APPELLANT, LEARNED AR, MR. S.N. SOPARKAR APPEARED AND ARGUED THAT IN THE ABSENCE OF ANY DEFECT NOTED BY THE AO IN THE BOOKS OF ACCOUNT, THE SAME W ERE WRONGLY REJECTED BY INVOKING THE PROVISIONS OF SECTION 145( 3) OF IT ACT. HE HAS ARGUED THAT THE ACCOUNTS WERE DULY AUDITED A S PER TAX AUDIT REPORT. IN THE SAID AUDITED ACCOUNTS, NO SPECIFIC D EFECT WAS POINTED OUT BY THE AO; HENCE, REJECTION WAS BAD IN LAW. HE HAS PLACED RELIANCE UPON AN ORDER OF ITAT B BENCH AHMEDABAD PRONOUNCED IN THE CASE OF M/S. ASSOCIATED PETROLEUM CORPORATION (ITA NO.2308 AND 2333/AHD/2008 A.Y. 2004-05), VIDE ORDER DATED 31 ST OF AUGUST, 2010 WHEREIN RELIANCE WAS PLACED UPON C IT VS. JAS JACK ELEGANCE EXPORTS, (2010) 324 ITR 95 (D EL) AND CIT VS. K. BHATIA, (2004) 269 ITR 577 (P & H). HIS MAIN PLANK OF ARGUMENT WAS THAT MERELY BY COMPARING THE PERCENTAG E OF CERTAIN EXPENSES AND THE PRODUCTION RESULT, THE AO HAS DIST URBED THE PROFIT OF THE AO BUT FAILED TO PLACE ON RECORD ANY ADEQUAT E MATERIAL TO DEMONSTRATE THAT THERE WAS ANY IRREGULARITY OR DEFE CT IN THE BOOKS ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 5 - OF ACCOUNT. LEARNED AR HAS ALSO PLACED RELIANCE UPO N A DECISION OF ITAT AHMEDABAD CAMP AT VADODARA PRONOUNCED IN ASS ESSEES OWN CASE TITLED AS DCIT VS. M/S. MARUTI KOATSU CYLI NDERS PVT. LTD. BEARING ITA NO.45/AHD/2008 FOR A.Y.1998-99, OR DER DATED 20 TH JUNE, 2010 WHEREIN IT WAS HELD THAT IN THE ABSENCE OF ANY SPECIFIC INSTANCES REGARDING INCORRECTNESS OR INCOM PLETENESS OF THE ACCOUNTS THE REJECTION OF BOOKS OF ACCOUNT WAS NOT JUSTIFIABLE. 5. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE , LEARNED DR HAS PLACED RELIANCE ON THE OBSERVATION OF THE AO AND VEHEMENTLY ARGUED THAT THE FALL IN GP AND ABRUPT IN CREASE IN EXPENSES AS WELL AS INCREASE IN THE CONSUMPTION HAS RAISED DOUBTS IN THE MIND OF THE AO AND THEREFORE CERTAIN INQUIRI ES WERE MADE. AT THE ASSESSMENT STAGE, THE REPLY OF THE ASSESSEE WAS VERY CRYPTIC AND HE HAS NOT EXPLAINED CERTAIN DISCREPANCIES WHIC H WERE POINTED OUT BY THE AO. THEREFORE, THE AO HAD NO OPTION BUT TO INVOKE THE PROVISIONS OF SECTION 145(3) OF IT ACT. LEARNED DR HAS PLACED RELIANCE UPON A DECISION OF HONBLE SUPREME COURT I N THE CASE KACHWALA GEMS VS JCIT, 288 ITR 10 (2007)(SC) . ACCORDING TO LEARNED DR, IF IT WAS A MISMANAGEMENT THEN THE ASSE SSEE HAS TO SUFFER AND NOT THE REVENUE DEPARTMENT. 6. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED OPINION THAT THE DECISION OF M/S. AS SOCIATED PETROLEUM CORPORATION (SUPRA) CANNOT BE APPLIED ON THE PRESENT SET OF FACTS AND CIRCUMSTANCES OF THE CASE. IN THAT CAS E, THE ASSESSEE WAS RUNNING A PETROL PUMP AND SELLING PETROL AND DI ESEL. IT WAS ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 6 - NOTED THAT THERE WAS A SHORTAGE IN THE PETROL AND D IESEL AND THAT SHORTAGE WAS ALLEGED TO BE EXCESSIVE AS COMPARED TO OTHER PETROL PUMP DEALERS. A FINDING WAS GIVEN THAT THE AO HAD M ADE A GENERAL STATEMENT WITHOUT ACTUALLY LOOKING INTO THE BOOKS. IT WAS ALSO HELD THAT THE DELAYED STOCK REPORT WAS NOT PREPARED IN O NE SITTING. BECAUSE OF THOSE REASONS, THE RESPECTED CO-ORDINATE BENCH HAS HELD THAT IT WAS NOT FAIR TO REJECT THE BOOKS OF AC COUNT MERELY BECAUSE THE PROFIT WAS LOW AS COMPARED TO EARLIER Y EARS. AS AGAINST THAT IN THE PRESENT CASE, THE AO HAS EXAMINED THE B OOKS OF ACCOUNT BEING PROMPTED BY THE ABRUPT FALL IN THE GROSS PROF IT RATE. CERTAIN DEFECTS AS NOTED BY THE AO WERE THAT THERE WAS DISP ROPORTIONATE INCREASE IN CERTAIN ITEMS. IN A SITUATION WHEN THE AO IS RAISING CERTAIN DOUBTS, THE ASSESSEE IS DUTY BOUND TO PLACE ON RECORD THE COMPLETE INFORMATION IN RESPECT OF THE REASONS FOR SUCH SHARP FALL OF PROFIT RATIO. IF THE ASSESSEE WANTED TO SAY THAT THERE WAS RISE IN THE COST OF RAW MATERIAL THEN HE SHOULD HAVE PLACED ON RECORD THE SUPPORTING EVIDENCE. ALTHOUGH THE ASSESSEE HAS STAT ED THAT THERE WAS AN INCREASE IN THE COST OF THE RAW MATERIAL BUT THAT REMAINED UNSUBSTANTIATED. LIKEWISE IT WAS STATED THAT THE CU STOM DUTY HAD GONE UP BUT AGAIN THE SAME REMAINED UNSUBSTANTIATED . AS FAR AS THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IS CONCERNED, WE ARE OF THE VIEW THAT ESTOPPLE DOES NOT OPERATE IN A SITUATION WHEN IN A PARTICULAR YEAR THE AO HAS JUDGED THAT THE ACC OUNTS ARE NOT REFLECTING THE CORRECT PROFIT OF THE YEAR UNDER CON SIDERATION. RATHER, THE INCOME TAX DEPARTMENT IS ENTITLED TO JUDGE THE ACCOUNTS FOR EACH YEAR AND THE MERITS ARE TO BE EXAMINED INDEPEN DENTLY IN EACH YEAR. RATHER MERELY AN ACCEPTANCE IN A PARTICULAR Y EAR IS NOT SUFFICE ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 7 - TO DEBAR THE AO FROM HOLDING THAT IN A LATER YEAR T HE ACCOUNTS WERE REQUIRED TO BE REJECTED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF IT ACT. SO LONG AS THE JUDGMENT OF THE AO HAS A NEXUS WITH THE MATERIAL ON RECORD AND THE AO HAD EXERCISE D THAT DISCRETION IN A JUSTIFIED MANNER WHICH WAS NEITHER ARBITRARY NOR CAPRICIOUS THEN SUCH ACTION OF THE AO IS REQUIRED T O BE UPHELD. WE, THEREFORE, HOLD THAT THE REJECTION OF BOOKS OF ACCO UNT IN THE PRESENT SITUATION WHEN THE ASSESSEE HAS NOT DISCHARGE THE R ESPONSIBILITY TO EXPLAIN THE STEEP FALL IN THE GP RATE THE INVOCATIO N OF REJECTION OF BOOKS U/S. 145(3) WAS JUSTIFIED ON THE PART OF THE AO. IN THIS CASE, THE LOW GROSS PROFIT WAS A SUFFICIENT GROUND FOR TH OROUGH INVESTIGATION. BUT DUE TO LACK OF PROPER COMPLIANCE AO HAD NOT BEEN IN A POSITION TO DEDUCE THE CORRECT PROFIT. HE NCE, THIS IS NOT A CASE WHERE ON STAND ALONE BASIS OF LOW PROFIT THE P ROVISION OF SECTION 145(3) WERE INVOKED. BUT THIS IS A CASE WHE RE LOW GROSS PROFIT WAS COUPLED WITH OTHER DISCREPANCIES AS EARM ARKED IN THE ASSESSMENT ORDER; HENCE, IN OUR CONSIDERED OPINION THE SAID SECTION WAS RIGHTLY INVOKED. 6.1 AFTER HEARING BOTH THE SIDES ON THE LEGAL SIDE OF THE PROVISIONS OF SECTION 145(3); WE HAVE ALSO HEARD BO TH THE SIDES ON THE MERITS OF THE QUANTUM ADDITION. AS WE HAVE MADE AN OBSERVATION THAT THE REPLY OF THE ASSESSEE WAS VERY CRYPTIC AND THE ASSESSEE HAS NOT DEALT WITH ALL THE POINTS WHICH WE RE RAISED BY THE AO, THEREFORE, UNDER THE TOTALITY OF THE CIRCUMSTAN CES IT IS A FIT CASE TO RESTORE THAT PART OF THE ISSUE BACK TO THE STAGE OF THE AO SO THAT THE ASSESSEE CAN NOW GET AN OPPORTUNITY TO PLACE ON RECORD THE ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 8 - EVIDENCE IN RESPECT OF THE CONSUMPTION OF RAW MATER IAL, CHANGE IN THE CUSTOM DUTY RATES, THE IMPACT OF THE WASTAGE; T HE VARIATION IN DUTY RATES, THE EFFECT OF THE COST OF MAN POWER ETC ., ALONG WITH CORROBORATIVE EVIDENCES. IT IS THE PRIMARY DUTY OF THE ASSESSEE TO RECONCILE THE FALL IN THE GROSS PROFIT RATE. NO SUC H RECONCILIATION WAS FURNISHED. THE ASSESSEE IS EXPECTED TO BE SPECI FIC AS ALSO PRECISE IN RESPECT OF EACH ITEM WHILE EXPLAINING TH E REASON OF FALL IN GP RATE. HENCE, WITH THESE OBSERVATIONS WE HEREB Y RESTORE THIS GROUND, WHICH IS PARTLY ALLOWED, BACK TO THE STAGE OF THE AO FOR DE NOVO CONSIDERATION. GROUND IS ALLOWED FOR STATISTIC AL PURPOSE ONLY. 7. GROUND NO.2 IS REPRODUCED BELOW: LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN NOT ALL OWING SET OFF OF THE SALES TAX REFUND AGAINST SALES TAX LIABILITY DE TERMINED WHILE CONFIRMING DISALLOWANCE U/S. 43B OF THE ACT. LD. CI T(A) OUGHT TO HAVE ALLOWED SET OFF OF THE AMOUNT REFUNDABLE AGAINST TH E TOTAL LIABILITY IN WORKING OUT THE DISALLOWANCE U/S. 43B OF THE ACT. 8. THE AO HAS NOTED THAT THERE WAS SALES TAX LIABIL ITY AS PER THE BALANCE SHEET OF RS.21,17,667/- AS ON 31 ST OF MARCH, 2002. IN THE ABSENCE OF THE REQUISITE DETAILS, THE AO HAS TAXED THE SAME AS UNDER:- SALES TAX REFUND IS PART OF INCOME AS SALES TAX PA ID IS AN ALLOWABLE EXPENSE. IT IS NOT CLEAR WHETHER THE ABOVE AMOUNT O F RS.21,17,667/- IS AFTER ADJUSTING THE REFUND. HENCE, SET OFF THE SAME AS CLAIMED BY THE ASSESSEE COMPANY IS NOT ALLOWED. HENCE, ADDITION OF RS.26,19,061/- (2117667 + 501394) IS MADE U/S. 43B OF THE ACT, TO THE TOTAL INCOME COMPUTED BY THE ASSESSEE COMPANY. PENALTY PROCEEDIN GS U/S.271(1)(C) OF THE ACT IS INITIATED ON THIS ISSUE. 9. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, A PART RELIEF WAS GRANTED IN THE FOLLOWI NG MANNER: I HAVE GONE THROUGH THE FACTS OF THE CASE AS WELL A S THE DETAILS FURNISHED BEFORE ME. IT HAS BEEN CONTENDED BY THE A PPELLANT THAT AS ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 9 - PER THE ORDER OF ASSESSMENT FOR SALES TAX, THE SALE S TAX LIABILITY OF RS.21,17,667/- WAS DETERMINED AND FURTHER RS.5,01,3 94/- WAS DETERMINED AS REFUNDABLE FOR OTHER YEARS. THE NET S ALES TAX PAYABLE WAS ONLY RS.16,16,273/-. IT HAS BEEN CONTENDED THAT THE REFUND IS A PART OF INCOME AND THEREFORE THIS AMOUNT SHOULD BE SET OFF FROM THE TOTAL AMOUNT OF RS.21,17,667/-. ACCORDING TO THE AP PELLANT ONLY RS.16,16,273/- IS DISALLOWABLE. THUS THE DISPUTE RE MAINS ONLY ABOUT RS.5,01,394/-. IN MY CONSIDERED OPINION, THIS AMOUN T CAN BE ALLOWED ONLY IF IT IS SHOWN AS INCOME RECEIVABLE DURING THE YEAR. IT HAS NOT BEEN INFORMED BY THE APPELLANT IF IT HAS SHOWN THIS AMOUNT AS INCOME AND THEREFORE, IT WILL AMOUNT TO DOUBLE DEDUCTION I F THE AMOUNT IS SET OFF AGAINST THE AMOUNT OF SALES TAX PAYABLE. THEREF ORE, THIS GROUND IS REJECTED. 10. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE VIEW THAT THIS GROUND AS WELL IS REQUIRED TO BE RE-ADJUDICATED BY THE AO BECAUSE THE LEARNED AR HAS MADE A SUBMISSION BEFORE US THAT THE AMOUNT IN QUESTION WAS OFFERED AS INCOME I N THE PAST BUT THAT FACT WAS NOT EXAMINED BY THE AO. WE, THEREFORE , HOLD THAT THE AO SHOULD EXAMINE THE PAST ASSESSMENT RECORD AND IF THE AMOUNT IN QUESTION IN RESPECT OF THE SALES TAX LIABILITY H AS ALREADY BEEN OFFERED TO TAX THEN THE SAME SHOULD NOT BE TAXED AG AIN IN THE YEAR UNDER CONSIDERATION. WITH THESE REMARKS, THIS GROUN D MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 11. GROUND NO.3 IS REPRODUCED BELOW: LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING ADDITION OF RS.2,00,000/- MADE BY AO U/S 68 OF THE ACT DESPI TE THE APPELLANT HAVING DISCHARGED THE ONUS BY FILING THE CONFIRMATI ON LETTERS WITH PAN NUMBER OF THE DEPOSITORS. LD. CIT(A) OUGHT TO HAVE DELETED THE ADDITION WHEN THE APPELLANT DISCHARGED THE ONUS OF PROVING THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE D EPOSITORS. 12. THE ASSESSEE HAS RECEIVED UNSECURED LOAN FROM T HE FOLLOWING TWO PERSONS: 1. BHUP-EN-BROS RS.1,00,000/- 2. KALAWATI G. KESHWANI RS.1,00,000/- ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 10 - 12.1 ACCORDING TO AO, THE ASSESSEE HAS NOT DISCHARG ED THE ONUS AS PRESCRIBED U/S.68 OF IT ACT; HENCE, TAXED THE SA ME IN THE HANDS OF THE ASSESSEE. WHEN THE MATTER WAS CARRIED BEFORE LEARNED CIT(A), ALTHOUGH THE CONFIRMATION AND PAN DETAILS W ERE FURNISHED BUT LEARNED CIT(A) HAS HELD THAT THE SAID CONFIRMAT ION DID NOT CARRY THE INFORMATION AS TO HOW THE MONEY HAD BEEN RECEIVED. IN THE ABSENCE OF THAT INFORMATION, THE ACTION OF THE AO CONFIRMED. 13. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED T HE REQUISITE INFORMATION PLACED IN THE PAPER BOOK. AS PER THE AC COUNTS FURNISHED BEFORE THE AUTHORITIES, IT IS EVIDENT THA T THE REQUISITE DETAIL WAS VERY MUCH AVAILABLE ON THOSE ACCOUNTS IT SELF. UNDER THE HEAD PARTICULARS THE DETAILS OF THE BANK TRANSACT ION AND THE PAN OF THOSE PARTIES HAVE CLEARLY BEEN DISCLOSED BUT AP PEARED TO HAVE LOST SIGHT OF LEARNED CIT(A); HENCE, HIS FINDING WA S INCORRECT, THEREFORE, REVERSED AND THIS GROUND OF THE ASSESSEE IS HEREBY ALLOWED. 14. GROUND NO.4 IS REPRODUCED BELOW: LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING ADDITION OF RS.2,06,696/- MADE BY THE AO ON ACCOUNT OF CUSTO M DUTY. BOTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THE FACT THA T THE AMOUNT WAS OFFERED AS INCOME IN EARLIER YEARS UNDER THE HEAD O F CUSTOM DUTY RECEIVABLE ACCOUNT THAT HAD TO BE WRITTEN OFF DURIN G THE YEAR UNDER CONSIDERATION DUE TO EXPIRY OF THE LICENSE. LD. CIT (A) OUGHT TO HAVE DELETED THE ADDITION. 15. THE ASSESSEE CLAIMED AN EXPENDITURE OF RS.2,06, 696/- ON ACCOUNT OF UNRECOVERABLE CUSTOM DUTY. AS PER AO ALT HOUGH CUSTOM DUTY IS AN ALLOWABLE EXPENDITURE BUT IF THER E IS ANY EXCESS ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 11 - PAYMENT OF CUSTOM DUTY IN EARLIER YEARS THEN THAT S HOULD APPEAR AS AN ASSET IN THE BOOKS OF ACCOUNT. FURTHER, ACCORDIN G TO AO IF THE ASSESSEE WANTED TO WRITE OFF THEN IT SHOULD HAVE BE EN SHOWN AS AN INCOME IN EARLIER YEARS. HE HAS HELD THAT THE ASSES SEE HAD NOT SHOWN THE SAID AMOUNT AS AN INCOME IN THE PAST. THE CLAIM OF THE ASSESSEE TO WRITE OFF THE SAID AMOUNT OF CUSTOM DUT Y WAS DISALLOWED. 15.1 WHEN THE MATTER WAS CARRIED BEFORE LEARNED CIT (A), IT WAS ARGUED THAT THE IMPUGNED AMOUNT HAD ACTUALLY BEEN S HOWN AS AN INCOME IN EARLIER YEARS UNDER THE HEAD CUSTOM DUTY RECEIVABLE. IT WAS ALSO EXPLAINED THAT AT THE TIME WHEN THE LICENS E WAS ISSUED BY DIRECTOR GENERAL OF FOREIGN TRADE, THE CUSTOM DUTY WAS TREATED AS RECEIVABLE AND NOW IT IS WRITTEN OFF BECAUSE THE SA ID LICENSE HAD EXPIRED. A CATEGORICAL FINDING WAS GIVEN BY LEARNED CIT(A) THAT IT WAS IN DISPUTE WHETHER THE IMPUGNED AMOUNT HAD ACTU ALLY BEEN SHOWN AS INCOME IN EARLIER YEARS. THE ARGUMENT OF T HE ASSESSEE THAT IMPORT OF THE MATERIAL WAS NOT MATERIALIZED AG AINST THE SAID LICENSE BUT THE CUSTOM DUTY PAID WAS AMOUNTING TO A N INCOME OF EARLIER YEARS, THEREFORE, TO BE ALLOWED TO WRITE OF F DURING THE YEAR, WAS ALSO NOT ACCEPTED BY LEARNED CIT(A). ACCORDING TO LEARNED CIT(A), IT WAS A FAR FETCHED ARGUMENT IN THE ABSENC E OF ANY EVIDENCE. THE ACTION OF THE AO WAS CONFIRMED. 16. HAVING HEARD THE SUBMISSION OF BOTH THE SIDES, WE HEREBY AFFIRM THE FINDING OF LEARNED CIT(A). EVEN BEFORE U S, IT WAS ARGUED THAT THE QUESTION WHETHER IT WAS SHOWN AS AN INCOME IN THE PAST YEAR WAS YET TO BE SEEN BY THE REVENUE DEPARTM ENT. ITA NO.2354/AHD/2010 MARUTI KOATSU CYLINDERS PVT. LTD. VS. ITO WARD 4(1) , BARODA A.Y. 2002- 03 - 12 - HOWEVER, THE ASSESSEE GOT AMPLE OPPORTUNITY TO PLAC E ON RECORD THE SUPPORTING MATERIAL IN RESPECT OF THE SAID CLAI M BUT EVEN AT THIS STAGE OF SECOND APPEAL NO SUCH EVIDENCE HAS BEEN FU RNISHED BUT ONLY REQUESTED TO RESTORE THE ISSUE BACK TO THE STA GE OF THE AO. HOWEVER, WE ARE NOT IN AGREEMENT WITH THE SAID REQU EST, PRIMARILY BECAUSE OF THE REASON THAT NO PRACTICAL PURPOSE SHA LL BE SERVED BECAUSE THE AMOUNT IN QUESTION IS SUBJECT TO TAX AS PER LAW, ESPECIALLY WHEN THE ASSESSEE WAS PROVIDED AMPLE OPP ORTUNITY IN THE PAST BY THE REVENUE DEPARTMENT BUT NOT AVAILED BY THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 10/01/2014 PRABHAT KR. KESARWANI, SR. P.S. TR TRTR TRUE COPY UE COPY UE COPY UE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD
Other Referred Cases
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Laws Referred To
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1:1 Consultation on FEMA Compliance
₹1
1:1 Consultation on Business Development
₹1
Master The Pitch-Deck Game
₹0
Initial LLP Agreement
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Declaration of Gift
Mehul₹500
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