Dy.CIT, Circle-3(1), Hyderabad V. Sanghi Jewellers Private Limited, Hyderabad

ITA 284/HYD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2918 (ITAT-HYDERABAD)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 04-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIV BENJWAL
• Assessee Lawyers: B SATYANARAYANA MURTHY
• Keywords: Depreciation; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.280 AND 284/HYD/2013 ASSESSMENT YEARS:2004-05 & 2009-10 DY. CIT, CIR-3(1), HYDERABAD VS SANGHI JEWELLERS PVT. LTD. HYDERABAD. PAN:AAFCS 5934D {APPELLANT) (RESPONDENT) APPELLANT BY : SRI RAJIV BENJW AL RESPONDENT BY SRI B. SA TYANARAYANA MURTHY DATE OF HEARING : 29-5-2013 DATE OF PRONOUNCEMENT : 31- 5-2013 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER. BOTH THESE APPEALS FILED BY THE DEPARTMENT ARE DIRE CTED AGAINST SEPARATE ORDERS OF CIT (A)-VI, HYDERABAD AN D THEY PERTAIN TO THE ASSESSMENT YEARS 2004-05 AND 2009-10. SINCE TH E ASSESSEE IS COMMON, GROUNDS INVOLVED IN THESE APPEALS ARE IDENT ICAL, THESE TWO APPEALS ARE TAKEN UP TOGETHER AND DISPOSED OF BY TH IS COMBINED ORDER FOR THE SAKE OF CONVENIENCE.. 2. THE ONLY EFFECTIVE GROUND IN APPEAL NO.280/HYD/1 3 PERTAINING TO THE ASSESSMENT YEAR 2004-05 WHICH IS ALSO ONE OF THE EFFECTIVE GROUNDS RAISED IN APPEAL NO.284/HYD/13 RELATING TO ASSESSMENT YEAR 2009-10 IS WITH REGARD TO DISALLOWANCE MADE BY TH E AO ON THE CLAIM OF WASTAGE. 3. BRIEFLY THE FACTS ARE THE ASSESSEE A PRIVATE LI MITED COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE O F STUDDED GOLD ITA NOS. 280 AND 284 OF 2013 SANGHI JEWELLERS PVT. LTD., HYD. ================== 2 AND SILVER JEWELLERY AND TRADING IN BULLION. IN CO URSE OF ASSESSMENT PROCEEDINGS, THE AO WHILE EXAMINING THE AUDITED ACC OUNTS OF THE ASSESSEE NOTICED THAT THE ASSESSEE HAS CLAIMED LO SS OF GOLD AND SILVER IN THE FORM OF WASTAGE IN THE PROCESS OF MAN UFACTURING OF JEWELLERY. THE ASSESSING OFFICER WHEN PROPOSED TO DISALLOW THE CLAIM OF WASTAGE IN THE ABSENCE OF SUPPORTING EVIDENCE , THE ASSESSEE SUBMITTED ITS REPLY STATING THEREIN THAT IT HAD IN CURRED WASTAGE IN GOLD AND SILVER WHICH WAS QUANTIFIED ON THE BASIS O F THE OPERATIONAL SHEETS FOR ISSUE AND RECEIPT OF MATERIAL FROM KARIG ARS AND ON THE BASIS OF PHYSICAL STOCK TAKEN EVERY MONTH FOR THE IN-HOU SE PRODUCTION. THE ASSESSING OFFICER ALSO RECORDED A STATEMENT OF THE MD OF THE COMPANY IN THIS REGARD. ULTIMATELY, HOWEVER THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE CLAI M OF LOSS ON WASTAGE. BEING AGGRIEVED OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). 4. DURING THE COURSE OF HEARING BEFORE THE CIT (A), THE ASSESSEE APART FROM REITERATING THE STAND TAKEN BEFORE THE A SSESSING OFFICER ALSO BROUGHT TO THE NOTICE OF THE CIT (A) THE ORDER PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL ON SIMILAR ISSUE REL ATING TO ASSESSMENT YEAR 2008-09 WHEREIN THE INCOME-TAX APPE LLATE TRIBUNAL HAD ALLOWED THE WASTAGE OF 5%. THE CIT (A) FOLLO WING THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL PASSED FOR ASSES SMENT YEAR 2008- 09 DELETED THE ADDITIONS MADE BY THE ASSESSING OFFI CER AND ALLOWED THE CLAIM OF THE ASSESSEE. 5. WE HAVE HEARD THE CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAD DISA LLOWED ASSESSEES CLAIM OF LOSS OF GOLD AND SILVER DUE TO WASTAGE OF AN AMOUNT OF RS.36,22,990/- AND RS.3,75,96,000/- FOR THE ASSESSM ENT YEARS 2004- 05 AND 2009-10 RESPECTIVELY. AS IT APPEARS FROM RE CORDS, SIMILAR DISALLOWANCE WAS ALSO MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT COMPLETED FOR THE ASSESSMENT YEAR 2008-0 9 IN CASE OF THE ASSESSEE. THE ASSESSEE CHALLENGED THE SAME BEFORE THE CIT (A) AND ITA NOS. 280 AND 284 OF 2013 SANGHI JEWELLERS PVT. LTD., HYD. ================== 3 BEING UNSUCCESSFUL BEFORE THE FIRST APPELLATE AUTHO RITY, CARRIED THE MATTER IN APPEAL BEFORE THE INCOME-TAX APPELLATE TR IBUNAL, HYDERABAD BENCH IN ITA NO.1326/HYD/2011. A CO-ORDINATE BENCH OF THIS TRIBUNAL DISPOSED OF THE APPEAL VIDE ORDER DATED 26-12-2011 BY ALLOWING THE CLAIM OF THE ASSESSEE. THE INCOME-TAX APPELLATE TR IBUNAL HELD AS UNDER:- WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, THE AS SESSING OFFICER MADE DISALLOWANCE TOWARDS WASTAGE ON THE RE ASON THAT THE ASSESSEE DID NOT MAINTAIN DAY TO DAY ACCOUNT OF WASTAGE. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE IS MAKING ENTRIES REGARDING WASTAGE AS PER HIS CONVENIENCE AN D NO CONTEMPORANEOUS RECORDS HAVE BEEN MAINTAINED REGARD ING QUANTIFICATION. BUT THE ASSESSING OFFICER LOST SIG HT OF THE FACT THAT THERE IS WASTAGE WHILE MANUFACTURING GOLD JEWE LLERY AND THE WASTAGE CLAIMED BY THE ASSESSEE HAS TO BE ALLOW ED AND IT SHOULD BE ON REASONABLE BASIS. AS SEEN FROM THE NE T PROFIT DECLARED BY THE ASSESSEE, THE NET PROFIT FOR THE PR ESENT ASSESSMENT YEAR IS AT 1.92%. HOWEVER, THE SAME IS 2.25 FOR ASSESSM ENT YEAR 2010-11. FURTHER WASTAGE CLAIMED BY THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 IS 5.4%. HOWE VER, THE SAME FOR ASSESSMENT YEAR 2009-10 IS 4.36% AND THE WASTAGE CLAIMED BY THE ASSESSEE IS AS FOLLOWS: PARTICULARS ASSESSMENT YEAR 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010 - 11 COMMODITY GOLD GOLD GOLD GOLD GOLD GOLD UNIT OF MEASUREMENT GRAMS GRAMS GRAMS GRAMS GRAMS GRAMS OPENING STOCK 11586.79 45631.02 52709.08 65933.60 102800.88 79419.36 ADD: PURCHASE DURING YEAR (LESS PURCHASE RETURN 426791.89 641507.26 726790.82 1090582.13 661054.93 604977.27 438778.68 687138.28 779499.89 1156515.73 763855.81 684396.63 LESS CLOSING STOCK 45128.45 52709.08 65933.60 102800.88 79419.35 64446.56 PRODUCTION DURING THE YEAR (INCLUDING PRODUCTION LOSS) 393250.23 634429.21 713566.30 1053714.85 684436.46 619950.07 PRODUCTION LOSS (WASTAGE) 13519.76 30400.00 46415.72 56940.06 29851.36 23240. 62 PERCENTAGE (%) 3.44 4.79 6.50 5.40 4.36 3.75 THE AVERAGE WASTAGE WORKS OUT AT 4.71%. CONSIDERIN G THE RATE OF NET PROFIT AT 1.92% FOR THE PRESENT ASSESSM ENT YEAR ITA NOS. 280 AND 284 OF 2013 SANGHI JEWELLERS PVT. LTD., HYD. ================== 4 WHICH IS HIGHER THAN ALL EARLIER YEARS GIVING WEIGH TAGE TOWARDS THIS, WE MAKE WASTAGE AT A ROUND FIGURE OF 5% CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . FURTHER, WE MAKE IT CLEAR THAT OUR OBSERVATION IS ONLY TO TH E PRESENT YEAR UNDER CONSIDERATION AND THIS FINDING SHALL NOT PREJUDICE THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT FOR ANY OTHER ASSESSMENT YEAR. THIS GROUND OF THE ASSE SSEE IS PARTLY ALLOWED. AS IS EVIDENT FROM THE AFORESAID ORDER OF THE CO-OR DINATE BENCH, THE TRIBUNAL HAD ALLOWED WASTAGE OF 5%. IT APPEARS FR OM RECORDS THAT THE WASTAGE FOR THE ASSESSMENT YEAR 2004-05 WORKS OUT TO 2.82% AND THAT FOR THE ASSESSMENT YEAR 2009-10 IS 4.01% . THUS,THE WASTAGE CLAIMED BY THE ASSESSEE ARE WITHIN THE PERM ISSIBLE LIMIT. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE WAS AL SO NOT ABLE TO BRING ANY MATERIAL TO CONTROVERT THE AFORESAID FACT UAL POSITION. IN THESE FACTS AND CIRCUMSTANCES, WE FIND NO INFIRMI TY IN THE ORDER OF THE CIT (A) IN DELETING THE ADDITION MADE BY THE AS SESSING OFFICER BY FOLLOWING THE ORDER OF THE INCOME-TAX APPELLATE TRI BUNAL FOR THE ASSESSMENT YEAR 2008-09. ACCORDINGLY, WE UPHOLD TH E ORDER OF THE CIT (A) ON THIS ISSUE AND DISMISS THE GROUND RAISED BY THE DEPARTMENT. 7. THE ONLY OTHER SURVIVING ISSUE IN ITA NO.284/HYD /13 IS WITH REGARD TO CIT (A) ALLOWING DEPRECIATION AT THE RATE OF 50% ON MOTOR CAR. DURING THE ASSESSMENT PROCEEDINGS, FROM THE D EPRECIATION STATEMENT FILED BY THE ASSESSEE, THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 50% ON VEHICLES AMOUNTING TO RS.3,32,125/-. THE ASSESSING OFFICE R BEING OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO DEPRECIATI ON ON VEHICLES AT THE RATE OF 15% DISALLOWED AN AMOUNT OF RS.2,32,488/-. THE ASSESSEE BEING AGGRIEVED OF THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER PREFERRED AN APPEAL BEFORE THE CIT (A). ITA NOS. 280 AND 284 OF 2013 SANGHI JEWELLERS PVT. LTD., HYD. ================== 5 8. ON APPEAL, THE CIT (A) ACCEPTED THE CLAIM OF THE ASSESSEE BY ALLOWING DEPRECATION AT THE RATE OF 50%. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIAL ON RECORD. IT IS THE CONTENTION OF L EARNED AR THAT THE VEHICLE PURCHASED IS A COMMERCIAL VEHICLE AND HENCE THE ASSESSEE IS ENTITLED FOR DEPRECIATION AT THE RATE OF 50% AS PER CLAUSE (VIA) FORMING PART OF NEW APPENDIX-I TO THE INCOME-TAX RULES, 196 2. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION AT THE RATE OF 15% ON MOT OR CAR AS PER SCHEDULE. 10. ON PERUSAL OF THE ASSESSMENT ORDER, IT APPEARS THAT THE ASSESSING OFFICER HAS GIVEN NO REASON AS TO WHY THE ASSESSEE S CLAIM OF DEPRECIATION AT THE RATE OF 50% IS NOT ALLOWABLE . SINCE THE DISALLOWANCE OF DEPRECIATION CLAIMED IS NOT SUPPORT ED BY ANY REASON, THE DISALLOWANCE SO MADE, CANNOT BE SUSTAINED. HOW EVER, IT IS SEEN FROM THE ORDER OF THE CIT (A) THAT THE ASSESSEE HA S PURCHASED THE MOTOR CAR ON 26-2-2009 WHICH IN OTHER WORDS MEAN TH AT THE ASSET HAS BEEN USED FOR LESS THAN 180 DAYS AND AS SUCH THE A SSESSEE IS NOT ENTITLED FOR FULL DEPRECIATION BUT 50% OF AMOUNT C OMPUTED. WE THEREFORE DIRECT THE ASSESSING OFFICER TO COMPUTE D EPRECIATION ON MOTOR CAR ACCORDINGLY. THE ORDER OF THE CIT (A) IS MODIFIED TO THE EXTENT INDICATED ABOVE. HENCE, THE GROUND RAISED B Y THE REVENUE IS ALLOWED IN PART. 11. IN THE RESULT, ITA NO.280/HYD/13 IS DISMISSED A ND ITA NO.284/HYD/13 IS ALLOWED IN PART. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31 -05-20 13. SD/- (B. RAMAKOTAIAH ) SD/- (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 31 ST MAY, 2013. ITA NOS. 280 AND 284 OF 2013 SANGHI JEWELLERS PVT. LTD., HYD. ================== 6 COPY FORWARDED TO: 1. DY. CIT, CIR-3(1), HYDERABAD. 2. SANGHI JEWELLERS PVT. LTD.,3-6-290, SADHANA BUILDIN G, HYDERBAAD-500 029. 3. CIT (A)-IV, HYDERABAD. 4. CIT CONCERNED, HYDERABAD. 5. THE DR, ITAT, HYDERABAD JMR*