ITO, SURATGARH V. Smt. Vijeta Mundra, JAITSAR

ITA 298/JODH/2013

• Counselvise Citation: 29823314 RSA 2013
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-11-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Business income
• Section: 144

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.298/JODH/2013 (A.Y. 2009-10) ITO, VS. SMT. VIJETA MUNDRA, SURATGARH. PROP. M/S. GANPATI INT UDYOG, CHAK-7GB, JAITSAR. PAN NO. AJTPM 7983 J (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI N.A. JOSHI- D.R. DATE OF HEARING : 13/11/2013. DATE OF PRONOUNCEMENT : 19/11/2013. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 27/02/2013 OF LD. CIT (A), BIKANER. IN THIS CASE, LEARNED COUNSEL FOR THE ASSESSEE MOVED AN APPLICATION FOR ADJOURNMENT, WHIC H WAS REJECTED AND THE CASE IS DECIDED ON MERIT AFTER HEARING THE LEAR NED D.R. THE ONLY GROUND RAISED IN THIS APPEAL READS AS UNDER: 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO RESTRICT THE ESTIMATED PRODU CTION OF BRICKS TO 33,81,500 AGAINST 65,01,000 ESTIMATED BY THE ASSESS ING OFFICER'. 2. FACTS OF THE CASE RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 09/11/2009 DECLARING AN I NCOME OF RS. 1,71,000/-. LATER ON, CASE WAS SELECTED FOR SCRUTI NY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TICED THAT THE ASSESSEE PAID ROYALTY OF RS. 1,33,415/- FOR 25 BLOC KS SANCTIONED BY THE MINING DEPARTMENT, WHICH WAS FOR MANUFACTURING OF 3 750000 BRICKS. HE FURTHER NOTICED THAT THE ASSESSEE HAD TAKEN 8 BIGHA LAND ON RENT FROM SHRI NIRMAL SINGH FOR RS. 39,500/- AND BRICKS, OUT OF IT S SOIL WERE ALSO MANUFACTURED. HE ESTIMATED TOTAL PRODUCTION OF BRI CKS AT 7084000 (3750000 + 3334000). THE ASSESSING OFFICER WAS ALS O OF THE VIEW THAT THE ASSESSEE HAD SHOWN SALES ON LOWER RATES THAN THE RA TES PREVAILING IN THE MARKET. THEREFORE, BY TAKING SELLING RATES OF RS.70 0/- TO 1900/- PER THOUSAND ON ESTIMATED QUANTITY OF DIFFERENT QUALITY TOTAL SALES WERE ESTIMATED AT RS. 1,10,51,900/- FOR SALE OF 6501000 BRICKS AND AFTER DEDUCTING ESTIMATED COST OF RS. 58,81,585/-, GROSS PROFIT WAS WORKED OUT AT RS. 54,02,315/- AS AGAINST GROSS PROFIT SHOWN BY THE ASSESSEE AT RS. 443810/- AND ACCORDINGLY, AN ADDITION OF RS. 495850 5/- WAS MADE. 3 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED THAT 6 BIGHA LAND WAS TAKEN ON LEASE FROM SHRI SUHIL KUMAR, WHICH WAS USED FOR INSTALLING KILN, LABOUR-H UTS, STORE-ROOM & STACKING OF BRICKS. THEREFORE, ESTIMATION OF PRODUC TION MORE THAN MAXIMUM PRODUCTION OF 3750000 BRICKS AS PER SANCTIO NED CAPACITY OF THE KILN, WHICH WAS APPARENT FROM THE LETTER OF MINING DEPARTMENT, WAS SHEER HYPOTHETICAL ASSUMPTION. IT WAS FURTHER STATED THA T SANCTIONED CAPACITY REFLECTS OPTIMUM EXTENT WHICH MAY CERTAINLY VARY TO THE EXTENT OF 15-20% BECAUSE OF INVOLVEMENT OF SOIL/CLAY WHICH ATTRACTS LESS CARE. IT WAS ALSO EXPLAINED THAT ROYALTY PAYMENT WAS ALIKE DEAD RENT (LEASE) BASED ON SPECIFIED AREA OF SPACE SANCTIONED FOR RUNNING THE KILN WHICH HAD NO RELEVANCE WITH ACTUAL EXTRACTION. IT WAS FURTHER S TATED THAT THE ASSESSING OFFICER IGNORED THIS FACT THAT NO SEPARATE DETAILS BASED ON DIFFERENT BURNING STRENGTH WERE KEPT AND SALES WERE MADE OF M IXED LOT OF BRICKS HAVING USUAL SELLING RATES OF RS. 800 TO RS. 1000/- AND THAT THE RATES WERE DETERMINED ON THE BRICKS SELECTED ON PICK & CHOOSE BASIS AND ALSO DELIVERY ON WORK SITES. IT WAS STATED THAT THE GRO SS PROFIT RATE OF RS. 54,02,315/- WORKED OUT BY ASSESSING OFFICER ON TOTA L SALES OF RS. 1,10,51,900/- WAS 49.50% WHICH WAS HIGHLY EXAGGERAT ED AND UNIMAGINABLE. IT WAS FURTHER STATED THAT NET PROFI T SHOWN BY THE ASSESSEE 4 WAS BETTER THIS YEAR. RELIANCE WAS ALSO PLACED ON THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF ITO, SWAI MADHOPUR VS. M/S. BAJRANG TRADING CO. (TAX WORLD VOL. XLV 33) FOR THE PROPOSITION THAT ADDITION CANNOT BE MADE ON ILL FOUNDED PRESUMPTION WITHOUT APPRECIATIN G POSITION OF ACCOUNTS & WITHOUT BRINGING EVIDENCE ON RECORD IN I TS SUPPORT. 4. LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT NO BRICKS WERE MANUFACTURED FROM 06 B IGHAS OF LAND TAKEN ON LEASE FROM SHRI SUSHIL KUMAR, ON WHICH KILN WAS INSTALLED AND THAT THE LAND OF SHRI NIRMAL SINGH WAS USED FOR SOIL TO BE U SED IN MANUFACTURING OF BRICKS. HE WAS OF THE VIEW THAT THE ASSESSING OFFI CER DID NOT APPRECIATE THE INFORMATION FROM MINING DEPARTMENT AND EMERGING FROM THE STATEMENT OF SHRI BRIJ MOHAN MUNDRA IN TOTALITY AND IN RIGHT PERSPECTIVE AND HIGHLY EXAGGERATED QUANTITY OF BRICKS MANUFACTU RED/SOLD AND THE SELLING RATES PERTINENT FACTS ABOUT SANCTIONED CAPA CITY OF KILN AND SELLING RATES WERE AVAILABLE IN THE STATEMENT TAKEN AND IN THE ASSESSEES BOOKS BUT, ON THE OTHER HAND, PRODUCTION OF 3136000 BRICK S SHOWN BY THE ASSESSEE WAS ALSO NOT ACCEPTABLE, MORE SO, WHEN ACC OUNTS WERE FOUND TO BE INCOMPLETE & PROVISIONS OF SECTION 145(3) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS ACT, IN SHORT) WERE H ELD TO BE RIGHTLY INVOKED. LEARNED CIT(A) CONSIDERED IT REASONABLE I F PRODUCTION TO BE 5 ESTIMATED NEAR TO LICENSE SANCTIONED BY THE MINING DEPARTMENT, HE ACCORDINGLY, ESTIMATED THE PRODUCTION AT 3800000 AN D WORKED OUT THE BRICKS SOLD AT 3381500 AS UNDER:- NUMBER OF BRICKS UNITS ESTIMATED 3800000 LESS: BREAKAGE 5% ALLOWED BY THE A O 190000 3610000 ADD: OPENING S TOCK 527000 4137000 LESS: CLOSING STOCK 755500 TOTAL BRICKS SOLD 3381500 5. LEARNED CIT(A) FURTHER OBSERVED THAT IN THIS TYPE OF TRADE, SALE PRICE OF BRICKS FLUCTUATED NUMBER OF TIMES IN DIFFE RENT SEASONS. HE FURTHER OBSERVED THAT THE ASSESSEE HAD PRODUCED THE SALE BILL OF MINIMUM RATE TO PROVE THE AVERAGE SALE WHEREAS ON THE OTHER SIDE THE ASSESSING OFFICER TOOK SALE BILL OF MAXIMUM RATE FOR THIS PUR POSE. HE THEREFORE, CONSIDERING THE DISCREPANCIES POINTED OUT BY THE AS SESSING OFFICER TO COVER UP ALL POSSIBLE LEAKAGE OF REVENUE DIRECTED T HE ASSESSING OFFICER TO APPLY GROSS PROFIT RATE OF 19% AS AGAINST 15% DECLA RED BY THE ASSESSEE. NOW THE DEPARTMENT IS IN APPEAL. 6 . LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSIN G OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER DATED 21/12/2011. 6 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT APPEARS THAT THE ASSESSING OFFICER WHILE P ASSING THE EXPARTE ORDER UNDER SECTION 144 OF THE ACT, DID NOT APPRECI ATE THE FACTS IN RIGHT PERSPECTIVE. HE WORKED OUT THE PRODUCTION OF BRICK S MORE THAN THE TOTAL CAPACITY OF THE BRICK KILN, WHICH WAS AT 3750000. HE ALSO IGNORED THIS FACT THAT 06 BIGHA LAND TAKEN BY THE ASSESSEE FROM SHRI SUSHIL KUMAR WAS USED FOR INSTALLING KILN, LABOUR HUTS, STORE ROOM E TC. AND NOT FOR MAKING THE BRICKS. THEREFORE, THE ESTIMATE OF PRODUCTION OF BRICKS 7084000 BY THE ASSESSING OFFICER APPEARS TO BE HIGHLY EXCESSIV E. ON THE CONTRARY, LEARNED CIT(A) APPEARS TO BE FAIR AND REASONABLE IN ESTIMATING THE PRODUCTION OF BRICKS AT 3800000, WHICH WAS NEAR TO THE TOTAL CAPACITY OF THE BRICK KILN. IN THE PRESENT CASE, IT IS AN ADMI TTED FACT THAT THE PROVISIONS OF SECTION 145(3) OF THE ACT WERE INVOKE D BY THE ASSESSING OFFICER AFTER CONSIDERING THE VARIOUS DISCREPANCIES AND DEFECTS IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THERE FORE, THE ESTIMATE OF THE GROSS PROFIT RATE AT 19% AS AGAINST 15% DECLARE D BY THE ASSESSEE ALSO APPEARS TO BE REASONABLE. IN THAT VIEW OF THE MATT ER AND BY CONSIDERING THE TOTALITY OF THE CASE, WE DO NOT SEE ANY INFIRMI TY IN THE ORDER OF THE 7 LEARNED CIT(A) AND CONSEQUENTLY DO NOT SEE ANY MERI T IN THE APPEAL OF THE DEPARTMENT. 8. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSE D. (ORDER PRONOUNCED IN THE COURT ON 19 TH NOVEMBER, 2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19 TH NOVEMBER , 2013. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.