The ACIT,B.K.Circle, Banaskantha V. M/s. Amizara Exports Pvt. Ltd., Surat

ITA 2777/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9146 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JIMIT R SHAH
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2777/AHD/2013 (ASSESSMENT YEAR: 2010-11) ASSTT. CIT, B.K. CIRCLE, PALANPUR V/S M/S. AMIZARA EXPORTS PVT. LTD., GROUND FLOOR, JIVANDHARA BUILDING, VARACHHA ROAD, OPP- GITANJALI CINERMA AT- SURAT-395006 (S. GUJ) (APPELLANT) (RESPONDENT) PAN: AAGCA 1230M APPELLANT BY : SHRI JIMIT R. SHAH, AR RESPONDENT BY : SHRI ASHISH POPHARE, SR. D.R . ( )/ ORDER DATE OF HEARING : 27 -02-201 7 DATE OF PRONOUNCEMENT : 28 -02-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)- XX, AHMEDABAD DATED 27.09.2013 PERTAINING TO A.Y. 2 010-11. ITA NO. 2777 /AHD/2013 . A.Y. 2010-1 1 2 2. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DELETING THE ADDITION OF RS. 82.85 LACS MADE ON ACCOUNT OF UNACC OUNTED SALES. 3. THE ASSESSEE IS INTO THE BUSINESS OF TRADING & MANU FACTURING OF POLISHED MARBLE, GRANITE AND STONES. THE RETURN OF INCOME WA S FILED ON 07.10.2010 DECLARING INCOME AT A LOSS OF RS. 7,68,709/-. THE R ETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTIC ES WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE A.O. FOUND DISPARITY BETWEEN THE E LECTRICITY EXPENSES CLAIMED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDER ATION QUA THE ELECTRICITY EXPENSES CLAIMED IN THE IMMEDIATELY PRECEDING ASSES SMENT YEAR. 4. THE A.O. ASKED THE ASSESSEE TO JUSTIFY THE INCREASE IN THE ELECTRICITY EXPENSES WITHOUT THERE BEING ANY CORRESPONDING INCR EASE IN THE SALES MADE DURING THE YEAR. THE DETAILED EXPLANATION FILED BY THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE A.O. WHO COMPLETED THE ASSESSME NT BY MAKING ADDITION OF RS. 82,85,346/- ON ACCOUNT OF SUPPRESSE D SALES. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT( A) AND REITERATED WHAT HAS BEEN STATED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. 6. AFTER CONSIDERING THE FACTS AND THE DETAILED SUBMIS SIONS, THE LD. CIT(A) OBSERVED AS UNDER:- 3.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSION MADE BY THE APPELLANT. IN THIS CASE, THE A.O. HAS MADE THE ADDI TION OF RS. 82,85,346/- ON ACCOUNT OF SUPPRESSION OF SALES PRESUMING THAT THE APPELLANT HAS SUPPRESSED ITS ITA NO. 2777 /AHD/2013 . A.Y. 2010-1 1 3 PRODUCTION BASED UPON THE HIGH CLAIM OF ELECTRICITY EXPENSES. NO WORKING OF THE QUANTUM OF ADDITION HAS BEEN GIVEN BY THE A.O. AND THE SAME IS UNABLE TO BE WORKED OUT IN ABSENCE OF ANY BASIS. FOR MAKING THE ADDITION ON ACCOUNT OF SALES OF SUPPRESSION, THE A.O. HAS NOT INVOKED THE PROVIS IONS OF SECTION 145 AND HAS NOT REJECTED THE BOOK RESULTS DECLARED BY THE APPEL LANT. 3.4. DURING SCRUTINY ASSESSMENT, HE HAS NOT COME TO ANY INSTANCE OF UNACCOUNTED PURCHASES MADE OR ANY UNACCOUNTED SALES MADE BY THE APPELLANT. NEITHER ANY DISCREPANCY IN THE INVENTORY OF OPENING AND CLOSING STOCK HAS BEEN NOTICED. THE SOLE INFERENCE OF THE ADDITION WAS THE HIKE IN ELEC TRICITY EXPENSES IN THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS CLAIMED THAT THERE WAS HIKE IN THE ELECTRICITY RATE DURING THE YEAR UNDER CONSIDERATIO N WHICH WAS ABOUT 1.78% AS COMPARED TO THE ELECTRICITY RATE IN THE PRECEDING Y EAR. THE APPELLANT CLAIMED THAT THE ASSESSEE WAS HAVING THE BUSINESS OF TWO TYPES O NE WAS THE TRADING OF SIZED MARBLE/GRANITE/STONE UNDER WHICH NO MANUFACTURING/P ROCESSING ACTIVITY WAS CARRIED OUT. THE OTHER ACTIVITY INVOLVING THE MANUF ACTURING WAS TO PROCURE THE BLOCK OF MARBLE/GRANITES AND GETTING THEM INTO SLAB S AS PER THE TAILOR MADE SIZING OF REQUIREMENTS OF THE CUSTOMERS AND THEN POLISHING OR FINISHING FOR ULTIMATE SALE. SO THE SECOND ACTIVITY WAS INVOLVING MANUFACT URING PROCESSES AT VARIOUS STAGES FOR WHICH CONSUMPTION OF POWER WAS A MAJOR F ACTOR. 3.5 DURING THE YEAR UNDER CONSIDERATION, THE SALE OF SUCH MANUFACTURED GOODS (SECOND TYPE) WAS OF RS.51,33,050/- AS AGAINST SUCH SALES IN THE IMMEDIATELY PRECEDING YEAR AT RS.19,55,013/-. SO THERE WAS INCR EASE OF 162% FOR THE YEAR UNDER CONSIDERATION IN RESPECT OF SUCH MANUFACTURED GOODS. THE A.O. HAS NOT GIVEN ANY ADVERSE FINDING ABOUT SUCH INCREASE OF THE SALE OF SECOND CATEGORY OF GOODS I.E. MANUFACTURED' GOODS WHICH INVOLVED VARIO US MANUFACTURING PROCESS ON WHICH THE MARGIN OF PROFIT WAS HIGHER THAN THE TRAD ING ACTIVITIES WHICH WAS EVIDENT FROM THE FACTS THAT DURING THE YEAR UNDER CONSIDERATION THE G.P. RATE WAS 10,51% AS AGAINST 8.81% IN THE IMMEDIATELY PRECEDIN G YEAR. OBVIOUSLY THIS HAS CONSUMED MORE POWER AND CONSEQUENTLY RESULTED INTO THAT INCREASE OF ELECTRICITY EXPENSES, SO THERE WAS SUBSTANTIAL INCREASE IN THE G.P. RATE IN SPITE OF THE SUBSTANTIAL FALL IN SALES IN THE YEAR UNDER CONSIDE RATION. MOREOVER, THE COST OF GOODS SOLD HAS ALSO; DECREASED FROM 88.89% OF THE S ALES IN THE IMMEDIATELY PRECEDING YEAR TO 83.08% IN THE YEAR UNDER CONSIDER ATION. THE A.O, HAS ACCEPTED THE G.P, RATE DECLARED BY THE APPELLANT AS WELL AS THE COST OF GOODS SOLD TO SALE AND NOT GIVEN ANY ADVERSE FINDING THEREUPON. IF THI S ADDITION OF RS.82,85,346/- IS CONSIDERED INTO THE TRADING ACCOUNT IN THAT CASE TH E (G.P. RATE COMES TO 42,21% ITA NO. 2777 /AHD/2013 . A.Y. 2010-1 1 4 OF THE SALES WHICH IS ABNORMALLY EXCESSIVE ARID IN COMPARISON NO CASES OF THAT LEVEL OF G.P. HAVE BEEN BROUGHT ON RECORD. THE APPE LLANT HAS ALSO SUBMITTED THAT DURING THE YEAR HE HAS INSTALLED SOME NEW MACHINERI ES AND TRIAL RUN OF THOSE MACHINERIES HAVE ALSO TAKEN PLACE. SO THE CONSUMPTI ON OF POWER WAS OBVIOUSLY HIGHER BECAUSE OF THAT REASON. THE A.O. HAS OBSERVE D THAT THE ASSESSEE HAS PRODUCED THE DETAILS OF PURCHASES OF RS.2,15,178/- FROM KAILASH CORPORATION AND NO OTHER DETAILS ARE FURNISHED IS CONTRADICTORY TO ITS OWN FINDING IN PARA-2 OF THE ASSESSMENT ORDER WHEREBY HE HIMSELF HAS OBSERVED TH AT THE 'C.A. SHRI SUSHIL GOENKA DULY AUTHORIZED REPRESENTATIVE OF THE ASSESS EE ATTENDED THE OFFICE FROM TIME TO TIME AND PRODUCE THE BOOKS OF ACCOUNTS AND SUPPORTING VOUCHERS WHICH WERE EXAMINED ON TEST CHECK BASIS AND SUBMISSION WE RE PLACED ON RECORD'. SO FROM THE ABOVE, IT IS APPARENT THAT THE BOOKS OF AC COUNTS ARE PRODUCED DURING THE ASSESSMENT PROCEEDINGS WHICH WERE DULY EXAMINED BY THE A.O. 7. AFTER CONSIDERING CERTAIN JUDICIAL DECISIONS, THE L D. CIT(A) CONCLUDED BY HOLDING THAT THE ADDITION MADE BY THE A.O. IS WITHO UT ANY BASIS AND ACCORDINGLY DELETED THE ADDITIONS MADE BY THE A.O. 8. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 9. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN S TATED BEFORE THE FIRST APPELLATE AUTHORITY. 10. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. IT APPEARS THAT THE A.O. HAS BEEN CARRIED AW AY BY THE NOMENCLATURE GIVEN IN THE FINANCIAL STATEMENTS OF THE ASSESSEE F OR ITS INCOME AS JOB WORK. IT IS TRUE THAT THE ASSESSEE IS NOT DOING JO B WORK FOR OUTSIDE PARTIES AND IS INTO THE BUSINESS OF TRADING & MANUFACTURING OF POLISHED MARBLE, GRANITE AND STONES. WE FIND THAT THE ASSESSEE ALSO PROCURES ITA NO. 2777 /AHD/2013 . A.Y. 2010-1 1 5 GRANITE/MARBLE AND STONE BLOCKS DIRECTLY FROM THE Q UARRY, WHICH IS THEN CUT TO SIZES AND DIMENSIONS REQUIRED BY THE CUSTOME RS, WHICH IS SEGREGATED AND SHOWN UNDER THE HEAD SALES OF GRANITE. THE CU T TO SIZE MATERIAL FROM RAW BLOCKS ARE MANUFACTURED AS PER THE CUSTOMERS DI MENSIONAL AND PROJECT REQUIREMENTS. THIS MATERIAL IS ALSO HAS TO PASS THROUGH STRINGENT QUALITY APPROVAL OF ARCHITECTS AND HENCE REQUIRES B ETTER FINISHING AND ALSO RE-FINISHING. THIS REQUIRES RE-CUTTING, FINISHING A ND POLISHING OF MATERIAL, WHICH CAUSES HUGE ELECTRICITY CONSUMPTION ON THE SA ME MATERIAL. THE ENTIRE PROCESS HAS TRIGGERED THE CONSUMPTION OF ELE CTRICITY ADDED BY ESCALATION OF POWER TARIFF. THERE IS NOTHING ON REC ORD TO SHOW THAT THE ASSESSEE HAS ACTUALLY SOLD GOODS OUTSIDE ITS BOOKS OF ACCOUNTS. THE FINDINGS OF THE A.O. ARE BASED ONLY AS ON THE PRESUMPTION TH AT SINCE THE ELECTRICITY EXPENSES ARE HIGHER THAN THE IMMEDIATE PRECEDING AS SESSMENT YEAR, THE ASSESSEE MUST HAVE SOLD GOODS OUTSIDE ITS BOOKS OF ACCOUNTS. IN OUR CONSIDERED OPINION, THE ADDITION CANNOT BE MADE ON THE BASIS OF ASSUMPTIONS AND PRESUMPTIONS. CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF T HE FIRST APPELLATE AUTHORITY. 11. APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 28 - 02- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 28/02/2017