The ACIT, Circle-5, Ahmedabad V. Neptune Textile Mills Ltd., Ahmedabad

ITA 269/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0421 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-11-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 03-02-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: C N SHAH
• Keywords: Bonafide mistake; Set aside

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI N.S. SAINI, A.M.) I.T.A. NO. 269/AHD./2006 ASSESSMENT YEAR : 2002-2003 ASSISTANT COMMISSIONER OF INCOME TAX, -VS.- N EPTUNE TEXTILES MILLS LTD., AHMEDABAD CIRCLE-5, AHMEDABAD (P.A. NO. AAACN 5339 G) (APPELLANT) (R ESPONDENT) APPELLANT BY : SHRI C.K. MISHRA, SR. D.R. RESPONDENT BY : SHRI C.N. SHAH O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER :- THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 09.11.2005 OF LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) -XI, AHMEDABAD DELETING THE ADDITION OF RS.73,77,700/- MADE BY THE A.O. ON ACCOUNT OF CLOSING STOCK FOR THE ASSESSMENT YEAR 2002-03. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PROCESSING OF YARN, ETC. FOR THE ASSESS MENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME DECLARING LOSS OF RS.1,86,88,282/-. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF POINT NO. 13 OF SCHEDULE-P OF AUDIT REPO RT, THE A.O. NOTICED THAT QUANTITY OF CLOTH PURCHASED (TRADING) IS SHOWN AT 1,52,911 MTRS., THE VALUE OF WHICH WAS SHOWN AT RS.1,11,30,595/-. HOWEVER, FROM THE DETAILS FURNISH ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE QUANTITY OF CLOTH PURCHASED IS SHO WN AT 4,24,879 MTRS. AND THE CORRESPONDING VALUE OF PURCHASE OF CLOTH IS SHOWN AT RS.1,11,39,5 95/-. FROM THE FIGURES OF QUANTITY OF CLOTH PURCHASED AS SHOWN IN THE AUDIT REPORT, VIS--VIS, SHOWN IN THE DETAILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ACCORDING TO A.O., ONE CAN APPRECIATE THAT QUANTITY OF PURCHASE OF GREY CLOTH OF 27,968 REPRESENTING THE VALUE OF RS.73,77, 700/- HAS NOT BEEN SHOWN IN THE AUDIT REPORT WHILE FINALIZING THE SAME. THE A.O. ACCORDINGLY ISS UED A SHOW-CAUSE NOTICE DATED 18.03.2005, WHICH READS AS UNDER :- ON GOING THROUGH THE CASE RECORDS AND DETAILS FILE D DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT IS NOTICED THAT THE POINT NUMBER -13 OF SCHCDUIE-P OF AUDIT REPORT, THE TOTAL CLOTH PURCHASE HAS BEEN SHOWN AT 152911 METR ES VALUING AT RS 1,11,39,595/- WHEREAS WHILE FURNISHING THE DETAILS OF TRADING SAL ES AND PURCHASES DURING THE FINANCIAL -200 1-2002, THE TRADING SALES AND PURCHASES ARE SH OWN AS UNDER:- 2 PURCHASE SALES MTS. AMOUNT MTS. AMOUNT 152911 37,61,895 152911 39,45,064 VALUE OF GOODS VALUE OF GOODS TRANSFERRED TRANSFERRED TO GREY PURCHASES TO GREY SALES 271968 73.77.700 544 173 40,74,249 424879 1,11,39,595/- 699084 180,19,249 IN THIS CONNECTION, YOU ARE REQUIRED LO RECONCILE T HE ABOVE DISCREPANCIES POINTED ALONG WITH RELEVANT DOCUMENTARY EVIDENCES, BILLS, V OUCHERS ETC AT 3.00 P.M ON 22- 03-2005. PLEASE NOTE THAT THAT IF YOU FAIL TO RE CONCILE THE ABOVE DISCREPANCIES, THE APPROPRIATE ADDITIONS WILL BE MADE WITHOUT FURT HER REFERENCE TO YOU AS THIS IS A TIME BARRING ASSESSMENT. 3. THE ASSESSEE FILED REPLY TO AFORESAID SHOW-CAUSE NOTICE, WHICH IS AS UNDER :- SOME OF THE BILLS OF TRADING PURCHASES TO THE EXTE NT OF 271968 MTRS., WHICH WAS CONSUMED FOR MANUFACTURING PURPOSE WAS WRONGLY TAKE N IN TRADING ACCOUNT WAS CORRECTED BY TRANSFERRING 271968 MTRS VALUING RS.7 3,77,700/- FROM TRADING ACCOUNT PURCHASE TO GREY PURCHASE ACCOUNT. LIST OF SUCH BILLS ARE FILED HOWEVER, TRANSFER WAS MADE IN QUANTITY ACCOUNT BUT IN PRESEN TATION EFFECT OF SUCH TRANSFER IN VALUE WAS NOT GIVEN. BIT IT WOULD NOT HAVE ANY EFFE CT ON FINANCIAL RESULTS, I E. ON PROFIT & LOSS ACCOUNT. IF YOU REFER SCHEDULE K OF T HE AUDITED ACCOUNTS, IF THE EFFECT WOULD HAVE BEEN GIVEN IN RS.194279062 AND TRADING P URCHASE IN SCHEDULE L WOULD BE REDUCED BY RS.73,77,700/-, I.E. TRADING PURCHASE WOULD HAVE BEEN RS.1.11,39,595/- MINUS RS.73,77,700/- = RS.37,61,89 5/-. HENCE YOUR HONOUR WOULD APPRECIATE THAT THERE IS NO IMPACT ON PROFIT & LOSS ACCOUNT. SIMILARLY SOME OF THE SALES BILLS OF MANUFACTURING WERE POSTED IN TRADING SALES. HENCE, CORRECTING ENTRY IS PASSED IN TRANSFERRING 5 55173 MTRS. VALUING RS.1,40,74,249/-. IN SALES BOTH TRADING SATES AND M ANUFACTURING SALES ARE PRESENTED IN A CONSOLIDATED FIGURE. HENCE, SUCH DISCREPANCY I S NOT MANIFESTED. LIST OF SUCH 544173 MTRS. VALUING RS. 1,40,74,249/- IS FILED. PL EASE NOTE THAT TRANSFER OF PURCHASE MTRS. OF TRADING AND SALES MTRS. OF TRADI NG HAS NO RELEVANCE. 4. THE ASSESSEE CONTENDED THAT SOME OF THE BILLS OF TRADING PURCHASES TO THE EXTENT OF 2,71,968 MTRS. WHICH WAS CONSUMED, FOR MANUFACTURIN G PURPOSE WAS WRONGLY TAKEN IN TRADING ACCOUNT WAS CORRECTED BY TRANSFERRING 2,71,968 MTRS . VALUING RS.73,77,700/- FROM TRADING ACCOUNT PURCHASE TO GREY PURCHASE ACCOUNT. IT WAS F URTHER STATED THAT TRANSFER WAS MADE IN QUANTITY ACCOUNT BUT IN PRESENTATION EFFECT OF SUCH TRANSFER IN VALUE WAS NOT GIVEN AND IT WOULD NOT HAVE ANY EFFECT ON FINANCIAL RESULTS I.E. ON PR OFIT & LOSS ACCOUNT. 3 5. THE A.O. HAS NOT ACCEPTED THE AFORESAID EXPLANAT ION OF THE ASSESSEE FOR THE REASON THAT IN THE AUDIT REPORT, NO MENTION OF SUCH TRANSFER OF 2, 71,968 MTRS. OF CLOTH VALUING RS.73,77,700/- WAS MADE AND FURTHER THE ASSESSEE HAS NOT PRODUCED THE RELEVANT BILLS/ CONCRETE EVIDENCES/ DOCUMENTS/ PROOF OF PASSING TRANSFER ENTRIES OF SUC H GOODS PURCHASED, THOUGH A LIST GIVING DETAILS THEREOF IS FURNISHED. SINCE THE ASSESSEE HAS NOT FU RNISHED THE LIST OF THE SAID GOODS, WHICH ARE NOT SUPPORTED BY RELEVANT BILLS/ VOUCHERS AND SINCE THE ASSESSEE COMPANY HAS NOT GIVEN THE COPIES OF ACCOUNTS SHOWING THE TRANSFER ENTRIES IN THIS REGAR D, THE A.O. REJECTED THE EXPLANATION AND MADE THE ADDITION OF RS.73,77,700/-TO THE TOTAL INCOME O F THE ASSESSEE. 6. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), THE LD. COUNSEL OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. ACCORDING TO THE LD. COUNSEL OF THE ASSESSEE THAT THERE WAS A MISTAKE IN SHOWING QUANTI TY OF GREY CLOTH AND THE VALUE OF SAID GREY CLOTH IN THE RELEVANT COLUMNS WHILE THERE IS NO MIS TAKE IF THEY ARE EXAMINED AND THREE IS NO NEED TO MAKE ANY ADDITION. ULTIMATELY THERE IS NO IMPACT ON PROFIT & LOSS A/C. IT WAS ALSO POINTED OUT THAT THE CLOTH RATE WAS ARRIVED AT RS.72.98 WHICH I S WRONG. THE QUANTITY OF CLOTH OF 2,71,968 IF INCLUDED TO 1,52,911 METERS, THE VALUE PER METER WO ULD BE AT RS.26.28. 7. AFTER CONSIDERING THE AFORESAID SUBMISSION, IN T HE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADD ITION FOR THE REASONS GIVEN IN PARA 3.2, WHICH IS AS UNDER :- 3.2. 1 HAVE PERUSED THE SUBMISSIONS AND THE DETAI LS PRODUCED BEFORE ME BY THE A. R, OF THE APPELLANT. 1 HAVE ALSO PERUSED THE OBS ERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. AFTER VERIFYING THE TRAD ING ACCOUNT AND P & L A/C., I AM OF THE VIEW THAT THE VALUE OF THE GREY CLOTH PURCHA SED IS VERY MUCH IN STOCK OF RS. 1,16,46,7477- INSTEAD OF PURCHASES. THE CLOTH .VALU E OF RS. 73,77.700/- SHOULD HAVE BEEN ADDED TO RS. 18,55,42,976/- WHICH IS RAW MATER IAL. HOWEVER, IT IS VERY MUCH IN SCHEDULE K R IN PURCHASE OF FINISHED GOODS. IT IS ALSO SEEN TH AT BECAUSE OF ABOVE MISTAKE, THERE IS NO IMPACT ON PROFIT & LOSS ACCOUNT. THEREFORE, THE ADDITION MADE IS DELETED. 8. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER O F INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE US. 9. AT THE TIME OF HEARING, ON BEHALF OF REVENUE SHR I C.K. MISHRA APPEARED AND CONTENDED THAT IN THE ASSESSMENT ORDER, THE A.O. HAS CLEARLY MENTIONED THAT IN THE AUDIT REPORT, THREE IS NO 4 MENTION OF TRANSFER OF 2,71,968 METERS OF CLOTH VAL UING RS.73,77,700/-. BEFORE THE A.O., THE ASSESSEE HAS NOT PRODUCED THE RELEVANT BILLS/ CONCR ETE EVIDENCES/ DOCUMENTS/ PROOF OF PASSING TRANSFER ENTRIES OF SUCH GOODS PURCHASED, THOUGH A LIST GIVING DETAILS THEREOF WAS FURNISHED. SINCE BEFORE THE A.O., THE ASSESSEE HAD NOT FURNISHED THE RELEVANT BILLS/ VOUCHERS AND COPIES OF ACCOUNTS SHOWING THE TRANSFER ENTRIES OF SUCH GOODS PURCHASED, THE EXPLANATION OF THE ASSESSEE WAS RIGHTLY REJECTED. THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) ACCEPTED THE EXPLANATION WITHOUT CALLING A REMAND REPORT. THE LD . D.R. SUBMITTED THAT AT LEAST THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE C ALLED THE REMAND REPORT, I.E. DIRECTING THE ASSESSEE TO PRODUCE BILLS AND VOUCHERS SO THAT A.O. MAY VERIFY THE CORRECTNESS OF BONAFIDE MISTAKE. SINCE THIS WAS NOT DONE EITHER THE ADDITIO N MADE BE RESTORED OR MATTER BE REMANDED TO THE FILE OF A.O. WITH THE DIRECTION THAT ASSESSEE S HOULD PRODUCE RELEVANT BILLS/ VOUCHES, RELEVANT COPIES OF ACCOUNTS HIGHLIGHTING THE TRANSFER ENTRIE S OF GOODS PURCHASED, WHICH A.O. MAY SCRUTINIZE AND RE-ADJUDICATE THIS ADDITION AFRESH. 10. IN REPLY, SHRI C.N. SHAH, LD. COUNSEL OF THE AS SESSEE SUBMITTED THAT CHARTERED ACCOUNTANT OF THE ASSESSEE-FIRM AUDITED THE BOOKS OF ACCOUNTS. THEREFORE, HE CAN MAKE A STATEMENT ABOUT THE VALUE OF RAW MATERIAL CONSUMPTION, I.E. QUANTITY OF GREY CLOTH PURCHASED AND VALUE OF GREY CLOTH IN THE ASSESSMENT YEAR UNDER CONSIDERATION. IT WAS FURTHER STATED THAT TRANSFER WAS MADE IN QUANTITY ACCOUNT BUT IN PRESENTATION EFFECT OF SUCH TRANSFER IN VALUE WAS NOT GIVEN AND IT WOULD NOT HAVE ANY EFFECT ON FINANCIAL RESULTS I.E. ON PR OFIT & LOSS ACCOUNT. WHATEVER THE VALUE OF CLOTH PURCHASED SHOULD BE TAKEN AS RAW MATERIAL FOR MAKIN G THE FINISHED GOODS, BY WHICH IT COULD HAVE BEEN PROVED THAT IT WAS A QUESTION OF BONAFIDE MIST AKE AND IT WILL NOT HAVE ANY IMPACT ON PROFIT & LOSS A/C. HE ACCORDINGLY CONTENDED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) BE UPHELD. 11. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE RELEVANT MATERIAL PLACED ON RECORD. I T IS PERTINENT TO NOTE THAT THE BILLS AND VOUCHERS WHICH THE A.O. IS STATED IN THE ASSESSMENT ORDER WERE NOT EXAMINED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). IT IS ALSO NOT KNOWN WHETHER BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THE ASSESSEE HA S PRODUCED COPIES OF ACCOUNTS SHOWING TRANSFER ENTRIES OF THE GOODS SO THAT ONE CAN EXAMI NE WHETHER IT WAS A CASE OF BONAFIDE MISTAKE. 5 KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FOUND CONSIDERABLE FORCE IN THE SUBMISSION MADE BY THE LD. D.R. THAT THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE CALLED THE REMAND REPORT BEFORE ADJUDICATIN G THE ADDITION OF RS.73,77,700/-. SINCE THIS WAS NOT DONE, WE SET ASIDE THE ORDER OF LEARNED COM MISSIONER OF INCOME TAX(APPEALS) AND RESTORE THE MATTER TO THE FILE OF A.O. WITH THE DIR ECTION THAT THE ASSESSEE SHOULD FURNISH RELEVANT BILLS/ VOUCHERS IN RESPECT OF LIST, WHICH WERE NOT FURNISHED BEFORE THE A.O. THE ASSESSEE IS ALSO DIRECTED TO FURNISH THE COPIES OF ACCOUNTS SHOWING THE TRANSFER ENTRIES AND ALSO A CERTIFICATE FROM THE CONCERNED CHARTERED ACCOUNTANT, WHO HAD AUDITED THE ACCOUNTS, CERTIFYING THAT THIS BONAFIDE MISTAKE WHICH WAS CREPT IN THE BOOKS OF ACCOUNTS, A ND HOW THIS MISTAKE COULD NOT BE DETECTED WHILE CONDUCTING THE AUDIT/ TAX AUDIT OF THE ASSESS EES ACCOUNTS. ON RECEIPT OF THESE DOCUMENTS, THE A.O. WILL RE-ADJUDICATE THE ADDITION OF RS.73,7 7,700/- AFRESH IN ACCORDANCE WITH LAW. 12. IN THE RESULT, FOR STATISTICAL PURCHASE, THE AP PEAL OF THE REVENUE IS TREATED AS ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 20.11.2009 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 / 11 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT 3) CIT(A) CONCERNED; (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.