The ACIT, Circle-12, Ahmedabad V. M/s. Western Auto Spares, Ahmedabad

ITA 2591/AHD/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8650 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-08-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 01-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR WITH PARIN SHAH
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBE R AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO. 2591/AHD/2013 (ASSESSMENT YEAR: 2007-08) ASST. COMMISSIONER OF INCOME TAX, CIRCLE-12, AHMEDABAD APPELLANT VS. M/S WESTERN AUTO SPARES 1, AMRITLAL ESTATE, NAGARVEL HANUMAN ROAD, RAKHIYAL, AHMEDABAD 380023 RESPONDENT PAN: AAAFW2498Q /BY REVENUE : SHRI K. MADHUSUDAN, SR. D.R. /BY ASSESSEE : SHRI S. N. SOPARKAR WITH PARI N SHAH, A.R. /DATE OF HEARING : 08.08.2017 /DATE OF PRONOUNCEMENT : 31.08.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2007-08 I S DIRECTED AGAINST THE CIT(A)-XX, AHMEDABADS ORDER DATED 30.08.2013, IN CASE NO. CIT(A)- XX/190/12-13, REVERSING ASSESSING OFFICERS ACTION MAKING ADDITION ON ITA NO. 2591/AHD/13 (ACIT VS. M/S. WESTERN AUTO SPA RES) A.Y. 2007-08 - 2 - ACCOUNT OF DIFFERENCE IN SALES FIGURES OF RS.1,81,5 3,505/- FOLLOWED BY SECTION 40(A)(IA) DISALLOWANCE OF RS.1,03,95,993/-; RESPECT IVELY, IN PROCEEDINGS U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN S HORT THE ACT. 2. WE COME TO THE FORMER ISSUE OF ADDITION OF RS.1, 81,53,505/- ARISING ON ACCOUNT OF DIFFERENCE IN ASSESSEES SALES FIGURES D ECLARED IN VAT RETURN AND THE ONE SHOWN IN ITS BOOKS. THE CIT(A)S FINDINGS UNDER CHALLENGE DISCUSS THE RELEVANT FACTS, ASSESSING OFFICERS OBSERVATION AS WELL AS ASSESSEES EXPLANATION THEREIN AS UNDER: 4.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND S UBMISSION MADE BY ME APPELLANT. IT IS NOTICED THAT THE A.O. HAS TAKEN THE THREE DIF FERENT FIGURES OF THE SALES IN PARA-2 OF THE ASSESSMENT ORDER WHICH ARE RS.39,47,09,63T/S RS.47,67,39,780/- AND RS.45,85,86,275/-. IN THE PROFIT & LOSS ACCOUNT, TH E APPELLANT HAS SHOWN THE SALES OF RS.39,47,69,813/- AND NOT RS.45,85,86,275/- AS M ENTIONED BY THE A.O. THE FIGURE OF RS.45,85,86,275/- IS THE TOTAL OF THE AMO UNT OF RS.39,47,09,631/- I.E. SALES IN THE PROFIT & LOSS ACCOUNT + THE EXCISE DUTY OF R S.6,38,10,012/- + SOME UNKNOWN FIGURE OR DIFFERENCE. WHEREFROM THE FIGURE OF SALES OF RS.45,85,86,275/- HAS BEEN PICKED UP BY THE AO IS NOT KNOWN BUT THE SAME IS IR RELEVANT ALSO AS THIS FIGURE WAS NOT USED BY HIM FOR ANY PURPOSES. HE ACCEPTED THE E XCLUSIVE METHOD ADOPTED BY THE APPELLANT FOR CENTRAL EXCISE, VAT AND CST . FUR THER, THE A.O. OBSERVED THAT THE APPELLANT FAILED TO SUBMIT COPY OF THE EXCISE R ETURN OR PROOF OF PAYMENT OF EXCISE DUTY. THUS, THERE IS NO DISPUTE FROM THE A.O . ABOUT THE EXCLUSIVE METHOD OF ACCOUNTING WITH RESPECT OF CENTRAL EXCISE, VAT AND CST AS FOLLOWED BY THE APPELLANT. IN THE EXCLUSIVE METHOD, THE OPENING STO CK, PURCHASES, SALES AND CLOSING STOCK ARE EXCLUSIVE TO ALL THE TAXES, LEVIES/CESS I N THE FORM OF EXCISE DUTY, VAT & CST. FOR THESE, GOVERNMENT LEVIES SEPARATE ACCOUNTS WERE MAINTAINED AND THE BALANCES THEREOF WERE DIRECTLY TAKEN INTO THE BALAN CE SHEET. 4.4. THE APPELLANT HAS FURNISHED THE RE-CONCILIATIO N OF THE DIFFERENCE IN THE FIGURES OF SALES SHOWN IN THE PROFIT & LOSS ACCOUNT AND THE SALES SHOWN IN THE VAT RETURN BEFORE BOTH THE AUTHORITIES. THIS DIFFERENCE WAS ON ACCOUNT OF THE EXCLUSIVE METHOD FOLLOWED BY THE APPELLANT. IN THE PROFIT & LOSS ACC OUNT, THE SALES FIGURES WERE ON NET BASIS WHILE IN VAT RETURN THESE WERE INCLUSIVE OF EXCISE DUTY, CST, VAT ETC. THE DIFFERENCE IN BOTH THE FIGURES WAS DUE TO THE E XCISE DUTY CLAIM OF RS,6,38,10,012/- AND NO ADDITION OF THIS AMOUNT WAS MADE BY THE AO IN REASSESSMENT ORDER. BUT FOR THE DIFFERENCE OF THE B ALANCE AMOUNT WHICH WAS ON ACCOUNT CST, VAT ETC, THE ADDITION WAS MADE. IN OTH ER WORDS, THE SUBMISSION OF THE APPELLANT RECONCILING PART DIFFERENCE, WITH REG ARD TO EXCISE DUTY WAS ACCEPTED BUT DIFFERENCE ON ACCOUNT OF CST AND VAT WERE NOT A CCEPTED. NO REASONS FOR NON- ACCEPTANCE FOR SUCH DIFFERENCE ON ACCOUNT CST AND V AT PROVIDED IN RECONCILIATION HAVE BEEN GIVEN BY THE A.O. ITA NO. 2591/AHD/13 (ACIT VS. M/S. WESTERN AUTO SPA RES) A.Y. 2007-08 - 3 - 4.5. IT HAS BEEN OBSERVED THAT THE APPELLANT HAS NO T FURNISHED ANNEXURE-G AT THE TIME OF PROCEEDINGS IS NOT CONVINCING FOR THE REASO N THAT IT IS PART AND PARTIAL OF THE AUDIT REPORT IN FORM NO.3CD WHICH WAS AVAILABLE DURING ASSESSMENT PROCEEDINGS BEFORE A.O. SO IT WAS VERY MUCH AVAILAB LE ALONG WITH THE AUDIT REPORT FILED U/S.44AB OF THE ACT. EVEN OTHERWISE, THE ANNE XURE-G HAS BEEN PERUSED WHICH IS PART OF COLUMN NO.22(A) OF THE AUDIT REPORT. THI S CONTAINS THE DETAILS OF THE MODVAT CREDIT OF EXCISE DUTY STATING THE OPENING BA LANCE, BALANCE AVAILED DURING THE YEAR, BALANCE UTILIZED DURING YEAR AND THE CLOS ING BALANCE. SO THE ENTIRE ANNEXURE-G IS PERTAINING TO THE MODVAT CREDITS AVAI LED AND UTILIZED DURING THE PREVIOUS YEAR WITH REGARD TO THE EXCISE DUTY. AS ME NTIONED ABOVE THAT THE AO DURING RE-ASSESSMENT PROCEEDINGS HAS ALREADY ACCEPT ED THE DIFFERENCE OF THE EXCISE DUTY. HENCE EVEN THOUGH ANNEXURE-G NOT FURNISHED BY THE APPELLANT PRESUMING FOR A MOMENT, IS NOT RELEVANT AT ALL BECAUSE THERE WAS NO DISPUTE AS SUCH ON ACCOUNT OF DIFFERENCE DUE TO EXCISE DUTY SUBMITTED IN RECONCIL IATION STATEMENT. MOREOVER, HE ALSO OBSERVED THAT THE ASSESSEE FAILED TO SUBMIT CO PY OF EXCISE RETURN PROVING PAYMENT OF EXCISE DUTY IS ALSO IRRELEVANT FOR THE R EASON THAT IN THE RE-ASSESSMENT PROCEEDINGS A.O. HIMSELF HAS ALREADY ADMITTED THE D IFFERENCE IN. THE TWO FIGURES ON ACCOUNT OF THE EXCISE DUTY AS FURNISHED IN RECONCIL IATION STATEMENT AND NO ADDITION MADE BY THE AO ON THAT ACCOUNT. THEREFORE, THE ARGU MENTS FOR ADDITION MADE GIVEN BY THE A.O. ARE NOT ON THE POINT. 4.6. WITH REGARD TO THE DIFFERENCE IN TWO FIGURES O N ACCOUNT OF VAT & CST, THE APPELLANT HAS ALREADY SUBMITTED THE COPY OF VAT RET URN BEFORE BOTH THE AUTHORITIES. AT PAGE NO.2 OF THE VAT RETURN, TWO AM OUNTS OF RS. 1,75,38,402/- AND RS.6,90,044/- ON ACCOUNT OF CST AND VAT WERE INCLUD ED IN THE TOTAL FIGURES OF RS.47,68,41,626/- WHICH ITSELF PROVES THAT SALES SH OWN IN VAT RETURN WAS INCLUSIVE OF CST AND VAT AMOUNTS. FURTHER, CARRIED FORWARD OF THE AMOUNT OF RS.33,367/- IS ALSO NOTED AT PAGE NO.3 OF THE VAT RETURN. THE ABOV E FIGURE IS ALSO REFLECTED IN THE CST RETURN IN FORM NO.III(B). THE VAT AND CST AMOUN TS ARE ALSO TALLYING WITH THE RESPECTIVE LEDGER ACCOUNTS. IN THE VAT RETURN, THE GROSS VALUE OF THE SALES ARE SHOWN IN ACCORDANCE TO THE PROFORMA PROVIDED TO THE VAT DEPARTMENT FOR FILING OF THE VAT RETURNS. SO THE DIFFERENCE ON ACCOUNT OF TH E CST AND VAT FOR WHICH ADDITION HAS BEEN MADE BY THE AO IS NOT IN ACCORDAN CE WITH THE RE-CONCILIATION STATEMENT FURNISHED. THE DIFFERENCE IN BOTH THE FIG URES OF SALES IS ON ACCOUNT OF EXCLUSIVE METHOD OF ACCOUNTING FOLLOWED BY THE APPE LLANT IN THE BOOKS OF ACCOUNTS. WHILE FOR THE VAT RETURN PURPOSES THE GROSS FIGURES OF THE SALES HAVE BEEN TAKEN. RECONCILIATION ITEMS FOR THE DIFFERENCE IN TWO SALE S FIGURES WERE DULY RECORDED IN BOOKS OF ACCOUNTS AND SAME ARE VERIFIABLE. MOREOVER , NO DETAILS OR SINGLE INSTANCE OF ANY DISCREPANCY IN PURCHASE AND SALE HAVE BEEN N OTICED AND BROUGHT ON RECORD BY THE A.O. FURTHER, NO EVIDENCE OF ANY UNACCOUNTED SALE HAS BEEN BROUGHT ON RECORD BY THE A.O. THEREFORE, THE APPELLANT'S CONTE NTION RECONCILING THE DIFFERENCE IN SALES FIGURES IS ACCEPTED AND THE ADDITION MADE BY THE A.O. IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 3. WE HAVE HEARD BOTH THE PARTIES STRONGLY REITERAT ING THEIR RESPECTIVE STANDS IN THE COURSE OF HEARING. LEARNED DEPARTMEN TAL REPRESENTATIVE SEEKS TO DRAW VEHEMENT SUPPORT FROM THE ASSESSING OFFICER S ACTION MAKING THE ITA NO. 2591/AHD/13 (ACIT VS. M/S. WESTERN AUTO SPA RES) A.Y. 2007-08 - 4 - IMPUGNED ADDITION. HIS CASE IS THAT THE CIT(A) OUG HT TO HAVE ACCEPTED ASSESSEES RELEVANT FIGURES SHOWN IN VAT RETURN GIV ING RISE TO THE IMPUGNED DIFFERENTIAL AMOUNT. WE FIND NO MERIT IN THE INSTA NT PLEA. IT HAS COME ON RECORD THAT THE ASSESSEE HAS ALREADY RECONCILED THE ABOVE DIFFERENCE AS FORMING PART OF THE PAPER BOOK PAGES 32 TO 54. IT IS AN ADMITTED FACT THAT THE DIFFERENCE IN QUESTION BETWEEN ASSESSEES SALES DEC LARED IN P&L ACCOUNT AND VAT RETURN ARISES BECAUSE OF EXCLUSION OF EXCISE DU TY IN ITS BOOKS. THE REVENUE FAILS TO REBUT THIS CLINCHING FINDING IN TH E COURSE OF HEARING BEFORE US. WE THEREFORE AFFIRM CIT(A)S ACTION DELETING T HE IMPUGNED ADDITION. THE REVENUE FAILS IN ITS FIRST SUBSTANTIVE GROUND. 4. THIS LEAVES US WITH REVENUES LATTER SUBSTANTIVE GROUND SEEKING TO REVIVE SECTION 40(A)(IA) DISALLOWANCE OF RS.1,03,95 ,993/- AS MADE IN THE COURSE OF SCRUTINY ASSESSMENT AND DELETED IN LOWER APPELLATE PROCEEDINGS AS UNDER: 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSION MADE BY THE APPELLANT. THE A.O. OBSERVED THAT THE TOTAL EXPENS ES OF RS.4,54,54,115/- WERE DEBITED TOWARDS LABOUR JOB CHARGES AND RAW MATERIAL PURCHASES FROM PARAM CYLINDER PRIVATE LIMITED. THE APPELLANT HAS DEDUCT ED THE TDS U/S.194C OF THE I.T. ACT ON LABOUR JOB ON THE AMOUNT OF RS.3,50,58,122/- . AS PER THE AO, THE TDS ON THE REMAINING AMOUNT THAT WAS RS.1,03,95,993/- (RS. 4,54,54,115 - RS.3,50,58,122) WAS NOT MADE. HENCE, THE SAME WAS LIABLE TO BE DISA LLOWED U/S.40(A)(IA) OF THE I.T. ACT AND THE ADDITION WAS MADE. 5.4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AN D ALSO IN APPELLATE PROCEEDINGS, THE APPELLANT HAS CONTENDED THAT THE T OTAL CLAIM OF RS.4,54,54,115/- INCLUDES TWO CLAIMS WHICH WERE ONE WITH REGARD TO P URCHASE OF RAW MATERIAL OF RS.1,03,95,993/- AND THE OTHER TOWARDS LABOUR JOB O F RS.3,50,58,122/-. THE APPELLANT HAS MADE THE TDS U/S.194C OF THE I.T. ACT ON THE AFORESAID LABOUR JOB PAYMENTS BUT NO TDS WAS REQUIRED TO BE MADE ON PURC HASE OF THE RAW MATERIAL UNDER THE PROVISIONS OF THE ACT. THE APPELLANT SUBM ITTED THAT FROM PARAM CYLINDER LINERS PVT. LTD. APPELLANT HAS PURCHASED THE CI CAS TING FOR THE AMOUNT OF RS.1,03,95,993/-. THOSE WERE DEBITED IN THE PURCHAS E ACCOUNT AND ON THE SAME THE EXCISE DUTY @16% AND EDUCATIONAL CESS OF 2% HAD BEE N PAID AS ALSO WAS EVIDENT FROM THE PURCHASE INVOICES. MOREOVER, THOSE PURCHAS ES HAVE BEEN DULY SHOWN IN THE EXCISE REGISTER I.E. RG-23A PART-II. ITA NO. 2591/AHD/13 (ACIT VS. M/S. WESTERN AUTO SPA RES) A.Y. 2007-08 - 5 - 5.5. IN THE SIMILAR WAY, THE EXCISE RECORD WITH REG ARD TO JOB WORK WERE MAINTAINED SEPARATELY IN FORM NO.RG-23A PART-I. FURTHER, THERE WAS NO LEVY OF EXCISE DUTY OR EDUCATION CESS ON THE JOB WORK CHARGES AS WAS EVIDE NT FROM RETAIL INVOICES OF JOB WORK. EVEN OTHERWISE, APPELLANT HAD THE LOWER TDS C ERTIFICATE OF 25% AND AS PER AO'S STAND THE TDS LIABLE TO BE MADE COMES TO RS.25 990/-. BEING SMALL AMOUNT INVOLVED THE APPELLANT WOULD NOT MAKE THE DEFAULTS. WHEN HE HAD MADE THE TDS ON MAJOR PAYMENTS THEN HE WOULD HAVE MADE THE TDS OF T HE AFORESAID SMALL AMOUNT ALSO IF REQUIRED SO. SO TWO DIFFERENT EXCISABLE REG ISTERS AS PER LAW WERE MAINTAINED I.E. ONE FOR PURCHASE OF GOODS AND ANOTHER FOR LABO UR JOB SEPARATELY. LIKEWISE, THE PURCHASE BILLS FOR RAW MATERIAL RECEIVED WERE ALSO FOUND DIFFERENT FROM THE LABOUR JOB BILLS FOR LABOUR JOB RECEIVED ON WHICH NO EXCIS E DUTY WAS PAYABLE. ON PURCHASE OF GOODS EXCISE DUTY HAS BEEN CHARGED BY T HE SUPPLIER PARTY AS DISCUSSED ABOVE. THESE EXCISE RECORDS HAVE BEEN SCRUTINIZED O N REGULAR BASIS BY THE EXCISE AUTHORITIES. IN THE LEDGER ACCOUNT OF PARAM CYLINDE R LINERS PVT. LTD. PURCHASES AND JOB WORK CHARGES WERE ALSO SEPARATELY CREDITED. HENCE, FOR SUCH RAW MATERIAL PURCHASES NO DEDUCTION OF TDS U/S.194C WAS REQUIRED . 5.6. FOR THE LABOUR JOB CHARGES, THE APPELLANT HAS SENT THE RAW MATERIAL I.E. PIG IRON AND SCRAP IRON. NATURE OF JOB WAS TO MELT THE PIG IRON AND SCRAP TO CONVERT INTO MOLDED CASTING AS PER SPECIFICATION. T HE RAW MATERIAL WAS SENT THROUGH EXCISE CHALLANS AS PRESCRIBED BY THE EXCISE DEPARTMENT ON WHICH THE DETAILS OF THE GOODS SENT AND RECEIVED AFTER JOB WO RK WERE DULY NOTED. ON THE OTHER SIDE, RAW MATERIAL PURCHASED WAS THE READY CI CASTI NG OF DIFFERENT SIZES. 'CONSIDERING THE DETAILED SUBMISSION AND RECORDS MA INTAINED FOR TWO DIFFERENT WORKS, IT IS CLEAR THAT THE PURCHASES OF RAW MATERI AL WAS DIFFERENT FROM THE LABOUR JOB. ON THE LABOUR JOBS, TDS HAVE BEEN DULY DEDUCTE D AND ON PURCHASES OF RAW MATERIAL, NO TDS WAS REQUIRED TO BE MADE, HENCE NOT MADE BY THE APPELLANT. THE A.O. HAS FAILED TO DISTINGUISH THESE TWO DIFFERENT ACTIVITIES AND HENCE THE DISALLOWANCES MADE BY THE A.O. U/S.40(A)(IA) ON THE RAW MATERIAL PURCHASES OF RS. 1,03,95,993/- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. HEARD BOTH PARTIES. RELEVANT CASE RECORDS PERUS ED. THE ASSESSING OFFICER ADMITTEDLY INVOKED THE IMPUGNED DISALLOWANC E PROVISION QUA RAW MATERIAL PURCHASES INVOLVING THE ABOVE AMOUNT OF RS .1,03,95,993/-. MR. MADHUSUDAN FAILS TO DISPUTE THAT ASSESSEE HAS ALREA DY DEDUCTED TDS ON ALL OTHER PAYMENTS OF LABOUR JOB WORKS. THE ISSUE THAT ARISES IN THE INSTANT SUBSTANTIVE GROUND IS THAT OF TDS DEDUCTION QUA ASS ESSEES RAW MATERIAL PURCHASES. WE SOUGHT REVENUES RESPONSE TO ENLIGHT ENMENT AS TO HOW AND UNDER WHAT STATUTORY PROVISION THE ABOVE RAW MATERI AL PURCHASES ARE LIABLE TO BE DEDUCTED TDS UNDER CHAPTER XVIIB OF THE ACT. IT FAILS TO INDICATE ANY SUCH PROVISION AS IS THE CIT(A)S REASON IN ABOVE E XTRACTED FINDING. NO CASE THEREFORE IS MADE OUT IN REVENUES INSTANT SUBSTANT IVE GROUND TO REVIVE THE ITA NO. 2591/AHD/13 (ACIT VS. M/S. WESTERN AUTO SPA RES) A.Y. 2007-08 - 6 - IMPUGNED DISALLOWANCE AS DELETED HEREINABOVE IN LOW ER APPELLATE PROCEEDINGS. 6. THIS REVENUES APPEAL IS ACCORDINGLY DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF AUGUST, 2017.] SD/- SD/- ( MANISH BORAD ) (S. S. GODA RA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 31/08/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0