M/s. Mahashakti Machines Pvt. Ltd., Ghaziabad V. ACIT, Ghaziabad

ITA 2832/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4141 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 17-04-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 07-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y KAKKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO.2832/DEL/2010 ASSESSMENT YEAR : 2005-06 M/S MAHASHAKTI MACHINES PVT. LTD., C/O AKHILESH KUMAR, ADVOCATE, 206-207, ANSAL SATYAM, RDC RAJ NAGAR, GHAZIABAD. PAN : AABCM-4007B VS. ACIT, CIRCLE-1, GHAZIABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AKHILESH KUMAR, ADVOCATE REVENUE BY : MS Y. KAKKAR, SR. DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER OF THE CIT (A) DATED 9 TH MARCH, 2010 FOR ASSESSMENT YEAR 2005- 06. THE GROUNDS OF APPEAL READ AS UNDER:- 1. BECAUSE THE ORDER OF LEARNED LOWER AUTHORITY IS BA D IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND HENCE IS UNSUSTAINABLE. 2. BECAUSE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE ADDITION ON ACCOUNT O F ESTIMATED EXCESS SCRAP GENERATION PRESUMED TO THE TUNE OF 18,382.2 KG. IN TOTAL DISREGARD TO FACTS ON THE RECORD A ND WITHOUT ANY EVIDENCE/BASIS AGAINST THE ASSESSEE. 3. BECAUSE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE FACTS ON THE REC ORD LIKE NO DEFECT IN AUDITED ACCOUNTS, DA Y TO DAY STOCK RECORDS ITA NO.2832/DEL/2010 2 LIKE NO DEFECT IN AUDITED ACCOUNTS, DAY TO DAY STOCK REC ORDS ACCEPTED BY EXCISE/TRADE TAX AUTH. ETC IS OVERLOOKED AND ABSENCE OF QUANTITY DETAILS OF FINISHED GOODS IS AN IMPOSSIBILITY AS THESE ARE SOLD IN NUMBERS. AS SUCH, THE TOTAL ADDITION SUSTAINED AMOUNTING TO RS.2,20,586/- IS ARBITRARY AND BAD IN THE LAW, HENCE PRAYED TO BE QUASHED IN TOTO. 2. THE SOLE ISSUE RAISED IN THE PRESENT APPEAL IS REGARDI NG ADDITION BY THE ASSESSING OFFICER ON ACCOUNT OF EXCESS GENERATION OF SCRAP AMOUNTING TO ` 2,57,351/-. IT WAS NOTICED BY THE ASSE SSING OFFICER THAT SCRAP OF ` 8,400/- WAS GENERATED DURING THE YEAR AND ON GOING THROUGH DETAILS, HE FOUND THAT 600 KGS OF SCRAP WAS GENERATED A ND BY APPLYING THE RATE OF ` 14 PER KG., THE CLOSING STOCK VALUE OF THE SCRAP WAS TAKEN AT ` 8400/-. ADDING THERETO THE OPENING BALANCE OF `72000, THE CLOSING BALANCE OF SCRAP WAS TAKEN AT ` 80,400/- AS AT THE END OF THE YEAR. THE ASSESSING OFFICER ALSO NOTICED THAT THE RATE OF GENERATI ON OF SCRAP IN SUBSEQUENT YEARS WAS MUCH HIGHER THAN THE RATE OF GENER ATION OF SCRAP IN THE YEAR UNDER CONSIDERATION. THIS POSITION H AS BEEN TABULATED BY THE ASSESSING OFFICER AS FOLLOWS:- F.Y. RAW MATERIAL CONSUMED (IN KG.) SCRAP GENERATED (IN KG.) PERCENTAGE. 2005-06 14,34,215 3,760 0.26% 2006-07 33,22,115 6,520 0.19% 2007-08 (UPTO NOV.,07) 7,58,362 7,518 0.99% 2004-05 (AS DISCUSSED ABOVE) 9,49,110.5 600 0.06% 3. REFERRING TO THESE FACTS, THE ASSESSING OFFICER HAS TAK EN SCRAP GENERATION OF 2% OF 9,49,110.5 KGS. OF RAW MATERIAL CONSUMED WHICH HAS BEEN WORKED OUT AT 18982.2 KGS AND AFTER REDUCING 600 KGS. THEREFROM, THE EXCESS SCRAP GENERATED HAS BEEN TAKEN AT 18382.2 KGS ITA NO.2832/DEL/2010 3 WHICH HAS BEEN VALUED AT ` 14 PER KG. AND ADDITION O F `2,57,351/- IS MADE ON ACCOUNT OF UNDISCLOSED SCRAP AND THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT ` 5,15,205/- AGAINST RETURNED INCOME OF ` 2,57,854/-. 4. BEFORE CIT (A) IT WAS THE CASE OF THE ASSESSEE THAT TH E AUDIT REPORT FILED BY THE ASSESSEE WAS SUPPORTED BY THE BOOKS OF ACCOUNT MAINTAINED IN THE REGULAR COURSE OF BUSINESS. THE ASSESSIN G OFFICER DID NOT POINT OUT ANY DEFECT IN THE ACCOUNTS/STOCK RECORD MAINTAINED BY THE ASSESSEE. THE BOOKS OF ACCOUNT AND TRADING RESULTS HA VE BEEN ACCEPTED. THUS, IT WAS PLEADED THAT THERE WAS NO BASIS WHATSOEVER WITH THE ASSESSING OFFICER TO ADOPT 2% SCRAP GENERATION AND IN THE ABSENCE OF REJECTION OF BOOKS OF ACCOUNT AND CONTEMPO RARY EVIDENCE SUBMITTED BY THE ASSESSEE, SUCH ADDITION COULD NOT BE MAD E. REFERENCE WAS MADE TO VARIOUS DECISIONS WHICH ARE FOUND MENTIONED IN THE ORDER OF THE CIT (A) AND, IN THIS MANNER, THE CORRECTNESS OF ADDITION WAS AGITATED. HOWEVER, LEARNED CIT (A) HAS UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE FIGURES OF SUBSEQUENT YEARS CLEARLY REVEALED THAT SCRAP GENERATION IN THE C ASE OF THE ASSESSEE WAS HIGHER THAN THE FIGURE SHOWN FOR THE YEAR U NDER CONSIDERATION. HE OBSERVED THAT THE ASSESSEE DOES NOT HAV E ANY RECORD OF QUANTITATIVE DETAILS OF FINISHED GOODS AND I N THE ABSENCE OF SUCH DETAILS, THE GENERATION OF SCRAP SHOWN BY THE ASSESSEE IS NOT OPEN TO VERIFICATION. HE OBSERVED THAT IN PLACE OF 600 KGS. GENERATION OF SCRAP, THE ACTUAL SCRAP GENERATED WAS 700 KGS AS PER RG-1 AND HE HAS DIRECTED THE ASSESSING OFFICER TO TAKE THAT FIGURE I NTO ACCOUNT. HE ALSO REDUCED THE AVERAGE RATE OF SCRAP TO ` 12/- INSTE AD OF ` 14 PER KG AND, THUS, PART RELIEF HAS BEEN GIVEN BY THE CIT (A). THE ASSESSEE IS STILL AGGRIEVED, HENCE, IN APPEAL. ITA NO.2832/DEL/2010 4 5. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY LEAR NED AR THAT THE ASSESSEE HAS BEEN MAINTAINING REGULAR BOOKS OF ACCOUNT. THE SALES AND PURCHASES OF THE ASSESSEE HAVE NOT BEEN DISTURBED AND , THUS, THE TRADING RESULTS OF THE ASSESSEE HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE BOOKS OF ACCOUNT HAVE ALSO NOT BEEN REJECTED. IN THE ABSENCE OF ANY DEFECT FOUND IN THE BOOKS OF ACCOUNT, THE ADDITION MADE BY THE ASSESSING OFFICER WITH REGARD TO SCRAP GENERATION WAS NOT JUSTIFIED. HE DREW OUR ATTENTION TO THE RECORD MAINTAINED BY THE ASSESSEE WHICH, ACCORDING TO HIM, CLE ARLY REVEALED THAT THE ASSESSEE WAS MAINTAINING STOCK REGISTERS EVEN FOR SCRAP GENERATION AND THOSE REGISTERS HAVE BEEN VERIFIED BY T HE EXCISE AUTHORITIES. THUS, HE PLEADED THAT LEARNED CIT (A) H AS WRONGLY UPHELD THE PART ADDITION AND THE ADDITION SHOULD HAVE BEEN DELETED IN ITS ENTIRETY. 6. ON THE OTHER HAND, RELYING UPON THE ORDER OF CIT (A), IT WAS PLEADED BY LEARNED DR THAT THE ADDITION HAS RIGHTLY BEEN PARTLY SUSTAINED AND THE ORDER OF CIT (A) SHOULD BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. WE FIND SUBSTANCE IN T HE SUBMISSION OF LEARNED AR THAT THERE WAS NO MATERIAL TO COME TO A F INDING THAT ANY EXCESS SCRAP WAS GENERATED DURING THE YEAR UNDER CONSIDE RATION. IT WAS ONLY AN INFERENCE DRAWN BY THE ASSESSING OFFICER ON THE BASIS OF SCRAP GENERATION FIGURES OF SUBSEQUENT YEARS. IN OUR OP INION, THAT COULD GIVE RISE TO A SUSPICION, BUT IN THE ABSENCE OF A NY MATERIAL TO SHOW THAT ANY EXCESS SCRAP WAS GENERATED DURING THE YEAR UNDER CONSIDERATION, IT CANNOT BE SAID THAT ANY ADDITION WA S CALLED FOR PARTICULARLY IN THE FACTS OF THE CASE WHEN IT IS THE C ASE OF THE ASSESSEE THAT IT HAS BEEN MAINTAINING STOCK REGISTER WITH RESPEC T TO MANUFACTURING AND ALSO FOR GENERATION OF SCRAP. IT I S OBSERVED THAT THE ITA NO.2832/DEL/2010 5 TRADING RESULT OF THE ASSESSEE HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AND NO ADDITION WHATSOEVER HAS BEEN MADE ON T HAT ACCOUNT. IN THE ABSENCE OF ANY MATERIAL TO SUGGEST THAT ANY EXCESS SC RAP EITHER WAS GENERATED DURING THE YEAR UNDER CONSIDERATION OR ANY EXCESS SCRAP WAS SOLD BY THE ASSESSEE DURING THE YEAR UNDER CONSID ERATION, WE FIND NO JUSTIFICATION IN THE UPHOLDING OF THE ADD ITION BY THE CIT (A). FINDING SUBSTANCE IN THE SUBMISSION OF LEARNED AR, WE DE LETE THE ADDITION IN ITS ENTIRETY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.20 11. SD/- SD/- [K.G. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 29.04.2011. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES ITA NO.2832/DEL/2010 6 DATE OF DICTATION 25.4.2011 DATE OF PRESENTATION OF THE DRAFT ORDER TO THE MEMBER 26.4.2011 DATE OF RETURN FROM THE BENCH AFTER PRONOUNCEMENT &SIGNING DATE OF DISPATCH OF THE ORDER TO THE BENCH