The ACIT, Sabarkantha Circle, Sabarkantha V. Spenta Cera Tiles Pvt. Ltd., Sabarkantha

ITA 2723/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9346 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 22-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RICHA RASTOGI
• Section: 143(3)

Judgement Text

ITA NO.2 723 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH, SMC , AHMEDABAD [CORAM: PRAMOD KUMAR AM] ITA NO. 2723 /AHD/2013 ASSESSMENT Y EAR : 200 8 - 09 ASSTT. COMMISSIONER OF INCOME TAX , SABARKANTA CIRCLE, HIMATNAGAR. .... ................ APPEL LANT VS. SPENTA CERA TILES PVT. LTD., .......... . RESPONDENT HAJIPUR, NEAR SABAR DAIRY, HIMATNAGAR, DIST. SABARKANTHA. [PAN: AABCS 5605 H ] APPEARANCES BY: RICHA RASTOGI FOR THE APPELLANT NONE FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARIN G : 2 8 . 12 .201 6 DATE OF PRONOUNCING THE ORDER : 03 . 0 2 .2017 O R D E R 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 30.08 .2013, PASSED BY THE LEARNED CIT(A) , IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 200 8 - 09 . 2. GRIEVANCES RAISED BY THE REVENUE ARE AS FOLLOWS: 1. THE LD . CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE AD D ITIO N OF RS.34,30,512/ - MADE ON SUPPRESSED PRODUCTION AND RS.10,84,285/ - ON UNDERVALU ATION OF CLOSING STOCK, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2. ON THE F A CTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING O FFICER. 3. IT IS THEREFO RE PRAYED THAT THE ORDER OF THE LD . CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING O FFICER MAY BE RESTORED TO THE ABOVE EXTENT. ITA NO.2 723 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 2 OF 4 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESS E E BEFORE US IS ENGAGED IN THE BUSINESS OF MANUF ACTURING CERAMIC GLAZES TILES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A SSESSING OFFICER N OTICED, BASED ON THE QUANTITATIVE DETAILS SUBMITTED TO HIM, THAT TOTAL PRODUCTION OF BOXES TO 297726 WHEREAS IT WAS SHOWN AT ONLY 219600 . WHEN THE ASSESSEE WAS ASKED T O EXPLAIN THIS DISCREPANCY, HE SUBMITTED THA T THE NEW KILN INSTALLED BY THE ASSESSE E WAS NOT WORKING PROPERLY AND MOST OF THE GOODS MANUFACTURED WERE BROKEN AND IN BEND CONDITION RESULTING IN LOSSES AND EXCESSIVE CONSUMPTION OF RAW MA T E R IAL. TH IS EXPLANATION WAS , HOWE V ER , REJECTED BY TH E A SSESSING OFFICER AND THE A SSESSING OFFICER OB SERVED TH A T THE ASSESSEE WAS IN THIS BUSINESS FOR THE LAST SEVERAL YEARS AND IT IS NOT BELIEVABLE THAT HE DOES NOT KNOW THE PROCESS OF MANUFACTURING TILES PROPERLY. HE THUS PROCEEDED TO TREAT 78126 BOXES AS SUPPRESSED PRODUCTION. IT WAS IN THIS BACKDROP ADDITION OF RS.34 , 30 , 512 / - WAS MADE. THE ASSESSING OFFICER FURTHER NOTED THAT THE VALUATION OF CLOSING STOCK IS SHOWN @ RS.20/ - PER BOX WHEREAS OPENING STOCK HAS BE EN VALUED @ RS.55.59 PER BOX. WHEN THE ASSESSEE WAS ASKED TO EXPLAIN THIS DISCREPANCY, ONCE AGAIN HE SUBMITTED THAT THERE WERE SOME PROBLEM IN THE FUNCTIONING OF NEW KILN AND THE PRODUCTION WAS OF SUBSTANDARD QUALITY RESULTING IN VALUATION OF CLOSING STOC K AT LOWER PRICE AT NET REALIZABLE VALUE. ONCE AGAIN ASSESSING OFFICER REJECTED THE EXPLANATION AS IMPROBABLE AND MADE AN ADDITION OF RS.10,84,285/ - AS UNDER VALUATION OF CLOSING STOCK. AGGRIEVED BY THESE TWO ADDITIONS, I.E. RS. 34 , 30 , 512 / - ON ACCOUNT OF SUPPRESSED PRODUCTION AND RS.10,84,285/ - ON ACCOUNT OF UNDERVALUATION OF CLOSING SOCK , THE A SSESSEE CARRIED THE MAT T ER IN APPEAL BEFORE THE LEARNED CIT(A). LEARNED CIT(A) WAS OF THE VIEW TH A T SINCE BOOK RESULTS HAVE NOT BEEN REJECTED BY THE ASSESSING OFFI CE AND SINCE THE ASSESSING OFFICER HAS NOT FOUND ANY DEFECT IN THE REGULAR BOOKS OF ACCOUNT, HE CANNOT RESORT TO ESTIMATION OF THE PRODUCTION. HE WAS ALSO OF THE VIEW THAT SALES TAX AND EXCISE AUTHORITIES HAVE ALSO NOT INITIATED ANY PROCEEDINGS AGAINST TH E ASSESSEE FOR THE SHORTFALL IN THE PRODUCTION AND THAT THE REASON ITA NO.2 723 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 3 OF 4 GIVEN BY THE ASSESSEE FOR DROP IN PRODUCTION WERE ALSO LOGICAL. HE THUS PROCEEDED TO DELETE THE ADDITION ON ACCOUNT OF SUPPRESSED PRODUCTION . AS REGARDS VALUATI O N OF THE CLOSING STOCK, TH E LEARNED C I T(A) ACCEPTED THE EXPLANATION OF THE ASSESSEE AND HELD THAT IN THE S UBSEQUENT YEAR SINCE PART OF THE STOCK W A S SOLD ON WEIGHT BASIS INSTEAD OF PACKED BOX BASIS, WHICH INDICATES THE POOR QUALITY OF PRODUCTIONS. THE EXPLANATION OF THE ASSESSEE IS PRIMA FACIE REASONABLE. THERE WAS NO DISCUSSION , HOWE V ER , ON THE BASIS OF VALUATI ON OF THE CLOSING STOCK. THE LEARNED CIT(A) SIMPLY DELETED THE ADDITION MADE BY THE ASSESSING O FFICER ON ACCOUNT OF UNDER - VALUATION OF CLOSING STOCK. ACCORDINGLY , THE SE COND AD D ITI ON OF RS.10,84,285/ - WAS ALSO DELETED BY THE LEARNED CIT(A). THE ASSESSING O FFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE LEARNED CIT(A) AND IS IN APPEAL BE F ORE ME. 4. I HAVE NOTED T HAT IN THIS CASE SE V ERAL EFFORTS WERE MADE BY FIELD AU THORITIES TO SERVE NOTICE TO THE ASSESSEE BUT FINALLY A NOTICE W A S SERVED ON 07.11.2016 BY AFFIX TURE . NO NE , HOWEVER , APPEARED FOR THE ASSESS E E EVEN AFTER SUCH SERVICE OF NOTICE. I HAVE, HOWEVER, HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE , PERUSED THE MATERIAL ON RECORD , FAIRLY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. I FIND THAT THE LEARNED CIT(A) HAS BEEN SOMEWHAT SUPERFICIAL IN HIS APPROACH INASMUCH AS THE VAGUE EXPLANATION GIVEN BY THE ASSESSEE WAS ACCEPTED WITHOU T REASONABLE VERIFICATION. ONCE THE ASSESSING OFFICE R HAS POINTED OUT THE SPECIFIC REASONS FOR COMING TO THE CONCLUSION THAT THERE IS SUPPRESSION OF PRODUCTION , A LL THE S E QUAN TITATIVE DETAILS CANNOT BE BRUSHED ASIDE ON THE GROUND THAT NO ACTI O N HAS BEEN I NITIATED BY E X CISE D EPARTMENT OR SALES TAX DEPARTMENT FOR UNAUTHORIZED REMOVAL OF GOODS AND AS SUCH SUPPRESSION OF PRODUCTION CANNOT BE PRE SUMED. I N MY CONSIDERED VIEW , THE A SSESSING OFFICER HAS MADE OUT A REASONABLE CASE TO S HOW THAT PRODUCTION OF CERAMI C TILES WAS NOT FULLY ACCOUNTED FOR. THERE IS NO MATERIAL WHATSOEVER TO DEMONSTRATE THAT THERE WAS ITA NO.2 723 /AHD/201 3 A SSESSMENT Y EAR: 20 0 8 - 09 PAGE 4 OF 4 INDEED PROBLEM IN THE FUNCTIONING OF NEW UNIT. IN THESE CIR CUMSTANCES, THE CONCLUSIONS DRAWN BY THE LEARNED CIT(A) THAT THER E WAS NO SUPPRESSION OF PRODUCT ION, EVEN IF CORRECT, WAS DEVOID OF REASONABLE BASIS. THE ONUS ON THE ASSESSEE HAS NOT BEEN PR OPERLY DISCHARGED . SIMILARLY , AS FAR AS VALUATI O N OF CLOSING STOCK IS CONCERNED, THE LEARNED CIT(A) HAS NOT GIVEN SPECIFIC BASIS ON WHICH VALUATI O N OF CLOSING S TOCK WAS DONE. HE HAS MERELY SAID THAT CLOSING S T OCK WAS SOLD FOR THE SUBSEQUENT YEAR ON WE IGHT BASIS RATHER THAN ON THE BASIS OF BOXES BUT THEN IT IS NOT CLEAR AS TO WHAT WAS THE RATE AT WHICH THE STOCK WAS SOLD OR WHAT WAS THE RELEVANT QUANTITATIVE DETA ILS. IN VIEW OF THESE DISCUSSIONS , IN MY CONSIDERED VIEW, THE RELIEF GRANTED BY THE LEARNED CIT(A) DOES NOT MERIT MY APPROV A L. I WOULD , T HEREFORE , DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF LEARNED CIT(A) WITH THE DIRECTI O N TO ADJUDICATE T HIS APPEAL AFRESH BY OBTAINING THE SPECIFIC QUANTITATIVE PARTICULARS AND RECONCILE WITH RESPECT TO THE SUPP R ESSED PRODUCTION AS WORKED OUT BY THE ASSESSING OFFICER , ALSO BY MAKI N G PROPER ENQUIRY AND BY A PEAKING ORDER. 5. IN THE RESULT, APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF FEBRUARY , 2017 . SD/ - PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 3 RD DAY OF FEBRUARY , 2017 . PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD