The ITO, Ward-12(4), Ahmedabad V. Shri Balmukund Sitaram Agrawal, Ahmedabad

ITA 2865/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50827 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-09-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 15-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure
• Section: 143(3); 147

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , , , , !' !' !' !', , , , #$ #$ #$ #$ %&' ( %&' ( %&' ( %&' (, , , , ) ) ) ) & ' & ' & ' & ' BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.2865/AHD/2009 [ASSTT.YEAR : 2002-03] ITO, WARD-12(4) AHMEDABAD. /VS. SHRI BALMUKUND SITARAM AGRAWAL PROP: OF S.K. COLLECTION 1187/1, CALICO DYEING COMPOUND OPP: DHOR BAZAR, SUEZ FARM ROAD, BEHRAMPURA, AHMEDABAD. PAN : ACSPA 3809 K ( (( (+, +, +, +, / APPELLANT) ( (( (-.+, -.+, -.+, -.+, / RESPONDENT) ) / 0 &/ REVENUE BY : SHRI VINOD TANWANI 23 / 0 &/ ASSESSEE BY : SHRI TUSHAR HEMANI 45 / 36/ DATE OF HEARING : 29 TH SEPTEMBER, 2011 789 / 36/ DATE OF PRONOUNCEMENT : 14 TH OCTOBER, 2011 &' / O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS IS REVENUES APPEAL AGAINST ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS)-XX DATED 20.07.2009 ARISING OUT OF THE ORDER OF THE ASSESSIN G OFFICER UNDER SECTION 147 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ONLY GROUND RAISED IN THE REVENUES APPEAL R EADS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.33,48,664/- MADE BY THE AO ON ACCOUN T OF UNEXPLAINED EXPENDITURE U/S,.69C OF THE IT ACT WITH OUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND MATERIAL BRO UGHT O RECORD BY THE AO. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. THE AO FOUND THAT THE RATIO OF COST OF MATERIA L CONSUMED WAS 66.4%. ON THIS BASIS HE WORKED OUT THAT THE ASSESSEE SOLD THE EXCESS CLOTH THAN WHAT WAS ITA NO.2865/AHD/2009 -2- PURCHASED BY HIM. ACCORDINGLY, HE MADE ADDITION OF RS.33,48,664/- BEING UNRECORDED EXPENDITURE. ON APPEAL, THE CIT(A) DELE TED THE ADDITION WITH THE FOLLOWING FINDINGS: 2.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND SUBMISSION MADE BY THE LD. COUNSEL OF THE APPELLANT. IN THIS CASE, IT IS AN UNDISPUTED FACT THAT THE APPELLANT HAD MAINTAINED P ROPER VOUCHERS ALONGWITH INVOICES/DOCUMENTS FOR EACH AND EVERY EXP ENSES AND ALSO MAINTAINED COMPLETE AND CORRECT BOOKS OF ACCOUNTS. WHILE MAKING THE ADDITION OF RS.33,48,664/- ON ACCOUNT OF UNEXPLAINE D EXPENDITURE U/S.69C OF THE IT ACT, THE AO HAS NOT POINTED OUT A NY DISCREPANCY/DEFECTS IN THE BOOKS OF ACCOUNT OF THE APPELLANT AND ALSO NOT REJECTED THE BOOKS OF THE APPELLANT. THE ASSESSING OFFICER HAD MADE THIS UNEXPLAINED EXPENDITURE ONLY ON ASSUMPTION AND PRES UMPTION BASIS. AS PER BOOK OF THE APPELLANT, THE QUANTITY OF FINISHED GOODS I.E. DYED & PRINTED CLOTH PRODUCED IS 461975 METERS FROM RAW MA TERIALS I.E. GREY CLOTH OF 466023 METERS. HOWEVER, WHILE MAKING THE ASSESSMENT, THE AO HAS TAKEN Q2UANTITY OF FINISHED GOODS IS 309440 AFT ER ADOPTING YIELD @ 66.4% INSTEAD OF YIELD @ 98.41%. THE APPELLANT HAS FURNISHED ALL THE DETAILS I.E. COPIES OF EARLIER YEARS TAX AUDIT REP ORT GIVING THE RATIO OF YIELD AND SHRINKAGE, THE ACCOUNT COPIES OF PURCHASE OF RAW MATERIALS AND READY GOODS, JOB WORK CHARGES WITH QUANTITY, CO PIES OF EXCISABLE BILLS OF JOB WORK AND ACCOUNT COPY OF PACKING MATER IALS BEFORE THE AO. MOREOVER, IT IS ALSO NOTICED FROM THE ASSESSMENT OR DER THAT THE AO HAS NOT POINTED OUT ANY SUPPRESSION OF SALES OR PURCHAS E, THE BOOKS OF ACCOUNTS ARE AUDITED AND EVEN THE SAME HAVE NOT BEE N REJECTED BY THE AO. THEREFORE, THE AO COULD NOT HAVE TAKEN THE AUD IT REPORT AS THE TRUE STATE OF AFFAIRS OF THE APPELLANT. IT IS NOW WELL SETTLED LAW THAT UNLESS ANY DISCREPANCY IN THE BOOKS OF ACCOUNTS HAVE BEEN FOUND BY AO AND THE SAME HAVE BEEN REJECTED BY HIM, NO ADDITION COU LD BE MADE. IN VIEW OF THE FACTS AND CIRCUMSTANCES STATED ABOVE, I AM O F THE OPINION THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.3 3,48,664/- ON ESTIMATE BASIS. THE ADDITION MADE IS NOT WELL ESTA BLISHED. THUS, THE AO IS DIRECTED TO DELETE THE ADDITION. THIS GROUND OF APPEAL IS THEREFORE ALLOWED. REVENUE AGGRIEVED WITH THE ORDER OF THE CIT(A) IS I N APPEAL BEFORE US. 4. HEARD BOTH THE SIDES AND PERUSED THE ORDERS OF T HE AUTHORITIES BELOW. THE CIT(A) HAS RECORDED THE FINDING THAT THE ASSESS EE HAS OBTAINED FINISHED ITA NO.2865/AHD/2009 -3- GOODS OF 461975 METERS FROM THE RAW MATERIAL OF GRE Y CLOTH OF 466023 METERS. BUT THE AO HAS WRONGLY TAKEN THE QUANTITY OF FINISH ED GOODS AT 309440 METERS. IT WAS EXPLAINED BY THE LEARNED COUNSEL THAT THE AS SESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS WHICH ARE DULY AUDITED. THE DATE -WISE STOCK REGISTER IS ALSO MAINTAINED AND THE QUANTITATIVE DETAILS IS DULY VER IFIABLE FROM THE STOCK REGISTER. THE ASSESSEE HAS ALSO FURNISHED MONTH-W ISE STOCK REGISTER OF FINISHED GOODS WHICH IS AT PAGE NO.30 OF THE ASSESSEES PAPE R BOOK WHICH SHOWED THAT THE FINISHED GOODS OBTAINED BY THE ASSESSEE WAS 461 975 METERS. THAT THE AO HIMSELF WORKED OUT THE QUANTITY OF FINISHED GOODS O N THE GROUND THAT CONSUMPTION OF RAW-MATERIAL TO FINISHED GOODS IS 66 .4%. IT WAS EXPLAINED BY THE LEARNED COUNSEL THAT SUCH PERCENTAGE WAS NOT OF THE QUANTITY OF RAW- MATERIAL USED, BUT WAS IN TERMS OF AMOUNT. THE DET AILS GIVEN BY THE ASSESSEE IN THIS REGARD WHICH IS ALSO REPRODUCED IN THE ASSESSM ENT ORDER READS AS UNDER: A. RATIO OF COST OF MATERIALS CONSUMED/COST OF FINI SHED GOODS REPRODUCED. COST OF MATERIALS CONSUMED RAW MATERIALS COST 4949385 PACKING & FOLDING MATERIALS 139407 5088792 COST OF FINISHED GOODS PRODUCED RAW MATERIAL COST 4949385 PACKING & FOLDING MATERIALS 139407 PROCESS JOB CHARGES PAID 2401969 FREIGHT & TRANSPORTATION EXPS. 177253 7668014 RATIO OF COST OF MATERIALS CONSUMED/COST OF FINISHED GOODS PRODUCED = (5088792/76688014) 66.36% FROM THE ABOVE, IT IS CLEAR THAT THE COST OF RAW-MA TERIAL TO FINISHED GOODS IS 66.2% BECAUSE OTHER ITEMS IS COST OF THE PACKING MA TERIAL, JOB CHARGES, FREIGHT TRANSPORTATION ETC. THUS, IN THE VALUE TERM, THE C OST OF THE RAW-MATERIAL TO THE FINISHED GOODS WAS 66.4%. BUT THAT DOES NOT MEAN T HAT IN TERMS OF THE QUANTITY OF FINISHED GOODS, THE ASSESSEE WILL GET 66.4% OF M ATERIAL CONSUMED. THE ITA NO.2865/AHD/2009 -4- ENTIRE ADDITION MADE BY THE AO BASED UPON THIS WRON G PRESUMPTION. THE AO HAS NOT FOUND ANY SINGLE EVIDENCE OF PURCHASE OF AN Y MATERIAL OUTSIDE THE BOOKS OF ACCOUNTS. THEREFORE, THE ENTIRE ADDITION MADE BY THE AO FOR UNACCOUNTED EXPENDITURE IS BASED UPON THE INCORRECT PRESUMPTION OF THE FACT. THE SAME WAS RIGHTLY DELETED BY THE CIT(A). WE THE REFORE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVE NUE. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&' ( %&' ( %&' ( %&' ( /BHAVNESH SAINI ) ) ) ) ) /JUDICIAL MEMBER ( . .. . . .. . G.D. AGARWAL) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD