Papcon (Indore) Private Limited, Indore V. The ACIT Circle 1(2), Indore

ITA 302/IND/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5704 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: N D PATWA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO. 302/IND/2013 A.Y. : 2007-08. M/S.PAPCON (INDORE)PRIVATE LIMITED, ACIT, 1(2), INDORE VS. INDORE APPELLANT RESPONDENT PAN NO. AAADCP2416K APPELLANTS BY : SHRI ASHISH GOYAL AND SHRI N. D. PATWA, ADV. RESPONDENT BY : SHRI R. A. VERMA, DR O R D E R PER D.T.GARASIA, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-7,MUMBAI (CONCURRENT JURISDICTION OVER TH E CHARGE OF DATE OF HEARING : 01 . 12 .201 5 DATE OF PRONOUNCEMENT : 29 .0 2 .2016 M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 2 2 CIT(A)-I, INDORE.) DATED 22.02.2010 FOR THE ASSESSM ENT YEAR 2007-08. 2. SINCE GROUND NOS. 1 & 2 ARE CONNECTED, THEY ARE, THEREFORE, DISPOSED OF TOGETHER. 3. THE ASSESSEE COMPANY FILED RETURN DECLARING THE INCOME OF RS. 3,66,014/- ON 15.11.2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF JOB WORK, IT WAS NOTICED THAT THE ASSESSEE COMPANY ISSUED THE BILL FOR JOB C HARGES IN CASH IN SOME INDIVIDUAL NAMES WHICH HAVE AMOUNT MOR E THAN RS. 20,000/-. THE AO ASKED TO GIVE THE DETAIL OF TH ESE PARTIES WHO GOT THE JOB WORK DONE AND PAID JOB WORK CHARGES IN CASH FOR MORE THAN 20,000/-. IT WAS ALSO NOTICED THAT BI LL NO. 135A AFTER 135 AND 136A AFTER 136 WHICH CLEARLY SHOW THA T THE ASSESSEE ISSUED THE BILLS AS PER HIS WISHES. FURTHE R, IT WAS NOTICED THAT BILL ISSUED IN CASH FOR JOB WORK IS OF LOW RATE THAN BILLS ISSUED TO OTHER PARTIES. THIS WAS DONE IN THI RD QUARTER OF FINANCIAL YEAR. THEREFORE, THE ASSESSEE WAS ASKED T O PRODUCE THE INWARD AND OUTWARD REGISTERS AND PRODUCTION REG ISTER, BUT THE SAME WERE NOT PRODUCED STATING THAT THESE ARE N OT M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 3 3 TRACEABLE. AS THE CASH BILLS ARE ISSUED IN THE THIR D QUARTER A QUARTERLY ANALYSIS IS MADE WHICH SHOWS THAT THERE I S LOWER RECEIPT DURING THE QUARTER AND EXPENSES ARE ON HIGH ER SIDE. THE RATIO ANALYSIS OF JOB WORK, WAGES AND SALARY IS AS UNDER :- QUARTER JOB RECEIPTS (IN RS.) WAGES AND SALARY (IN RS.) RATIO I 13,95,649 5,62,866 248% II 33,25,919 9,26,403 350% III 12,17,404 9,46,387 129% IV 24,54,468 11,53,737 213% 36,71,872 THE RATIO ANALYSIS OF JOB WORK AND ELECTRICITY CONS UMPTION, IS AS BELOW :- QUARTER QUANTITY OF JOB WORK IN NUMBERS CONSUMPTION OF ELECTRICITY UNITS RATIO I 13673 56667 102% II 18126 73485 183% III 15388 64963 79% IV 17596 71471 139% 4. FROM THE ABOVE TABLE, IT WAS CLEAR THAT THE RATIO W ORKS TO ELECTRICITY IS MUCH LOW IN THE THIRD QUARTER. 5. FROM THE ANALYSIS, IT WAS TRANSPIRED THAT THE RATIO OF WAGES AND SALARY TO JOB RECEIPT WERE LOWER IN THE T HIRD QUARTER IN WHICH ONLY CASH BILLS OF JOB CHARGES WERE RECEIV ED. THE RATIO OF JOB WORK AND ELECTRICITY CONSUMPTION WAS ALSO SH OWN IN THE M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 4 4 TABLE. THE AO, THEREFORE, HELD THAT THE RATIO OF EL ECTRICITY IS MUCH LOW IN THIRD QUARTER. IN VIEW OF THIS, THE ASS ESSEES BOOKS DO NOT GIVE THE CORRECT PICTURE OF ITS INCOME AND A S SUCH THE PROVISIONS OF SECTION 145(3) WERE APPLIED AND THE B OOKS OF THE ASSESSEE WERE REJECTED. THE MAIN EXPENSES OF THE AS SESSEE WHICH ARE DIRECTLY RELATED TO THE PRODUCTION ARE WA GES AND ELECTRICITY. THE ASSESSEE HAS DECLARED CORRECT JOB RECEIPT IN FIRST TWO QUARTERS AND SUPPRESSED RECEIPTS OF LAST TWO QUARTER, AS SUCH THE TOTAL RECEIPTS IS ESTIMATED BY TAKING R ATIO OF WAGES, SALARY AND ELECTRICITY. 6. THE ASSESSEE HAS RECEIVED JOB RECEIPT OF RS. 25,33,237/- BUT SUPPRESSED THE RECEIPTS AND DECLARE D RECEIPTS OF RS. 12,17,404/- WHILE THE ENTIRE EXPENSES HAD BE EN DEBITED TO PROFIT AND LOSS ACCOUNT AND, THEREFORE, THE ADDI TION OF RS. 13,15,833/- IS MADE TO THE TOTAL INCOME OF THE ASSE SSEE. 7. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE ON THIS GR OUND. 8. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT TH E ASSESSEE WAS PRODUCING READYMADE GARMENTS ON JOB WO RK M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 5 5 BASIS FOR THREE WELL KNOWN PUBLIC LIMITED COMPANIES HAVING THEIR WELL ESTABLISHED BRANDS, NAMELY, PRATIBHA SYN TEX LIMITED, MARAL OVERSEAS LIMITED AND ARVIND MILLS LI MITED. THESE COMPANIES MAINTAIN GOOD QUALITY AND ALSO PAY GOOD PRICES FOR THE WORK DONE. IN FIRST, SECOND AND FOUR TH QUARTER, THE ASSESSEE HAD CARRIED OUT THE WORK, BUT IN THIRD QUARTER NOT WORKED EVEN FOR A SINGLE PIECE. THE STATEMENT SHOWI NG THE JOB WORK AND BILL-WISE JOB WORK CHARGES WERE SUBMITTED AND ON RECORD OF PAPER BOOK. WHERE THE ASSESSEE HAS TO PAY WORKERS FOR NO WORK AND MINIMUM ELECTRICITY CHARGES, THERE WAS NO OPTION WITH THE ASSESSEE BUT TO ACCEPT OTHER WORK A T LOW PRICE TO MEET ITS OVERHEADS. IF THE ASSESSEE HAS NOT ACCE PTED THE JOB FROM SMALL PARTY AT LOW RATE, HE WOULD HAVE TO LOSS ES. REGARDING BILL NO. 135A AND 136A, IT WAS SUBMITTED THAT THE BOOK IS NOT IN LOOSE FORMS. DUE TO MISTAKE OF THE B ILL CLERK, BILL NO.135 AND 136 WERE PREPARED TWICE AND THIS IS NOT SUPPRESSION OF INCOME. THE ASSESSEE HAD NOT PRODUCE D INWARD AND OUTWARD REGISTERS, WHICH WERE MISPLACED. THE LD . AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE QUANTI TY OF JOB M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 6 6 WORK AND CONSUMPTION OF ELECTRICITY AS PER TABLE IS INCORRECT. THE ASSESSEE HAS PRODUCED THE TWO CHARTS SHOWING TH E QUARTERLY PERCENTAGE, WAGES AND ELECTRICITY CHARGES AND MONTHLY ELECTRICITY CONSUMPTION. IT SHOWS THAT PROD UCTION DEPENDS UPON VARIOUS FACTORS SUCH AS QUALITY OF FAB RICS, ITEMS PRODUCED, ITS SIZE AND QUALITY MAINTAINED. THEREFORE, THE ADDITION CANNOT BE SUSTAINED. 9. THE LD. DR RELIED UPON THE ORDER OF THE AO. 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE JOB WORK VOUCHERS WERE ISSUED IN CASH IN SOME INDIV IDUAL NAMES, WHICH WERE AMOUNT OF MORE THAN RS. 20,000/-. THE ASSESSEE COULD NOT PRODUCE THE DETAILS OF THESE PAR TIES, WHO GET THE JOB WORK DONE AND JOB WORK CHARGES IN CASH OF MORE THAN RS. 20,000/-. IT WAS ALSO NOTICED THAT THERE A RE BILL NOS. 135A AND 136A, WHICH WERE THE BILLS PAID IN CASH. T HEREFORE, THE AO HAS REJECTED THE BOOK RESULT OF THE ASSESSEE . THE LD. DR DID NOT BRING ANY CONTRARY EVIDENCE TO SHOW THAT THE M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 7 7 ASSESSEE HAS ACCOUNTED ALL THESE CASH CHARGES IN HI S BOOKS OF ACCOUNT, AS THE ASSESSEE COULD NOT GIVE DETAILS OF THESE PARTIES, WHO GET JOB WORK DONE AND JOB WORK CHARGES PAID IN CASH MORE THAN RS. 20000/-. THEREFORE, OUR INTERFERENCE IS NOT REQUIRED IN REJECTING THE BOOK RESULT BY THE AO U/S 145(3). 11. IN RESPECT OF JOB WORK AND SALARY IN THIRD QUARTER, THE ASSESSEE HAD PAID JOB WORK OF RS. 12,17,404/-, WHIL E THE SALARY WAS PAID RS. 9,46,387/- I.E. 129 %. THE AO H AS COMPARED THE WAGES IN THE ASSESSMENT ORDER AND FOUN D THAT IN THE YEAR UNDER CONSIDERATION IN THE THIRD QUARTE R, THE RATIO OF SALARY WAS LESS, BECAUSE THE CASH BILLS OF JOB W ORK WERE RECEIVED. MOREOVER, THE RATIO OF ELECTRICITY CONSUM PTION WAS ALSO VERIFIED BY THE ASSESSING OFFICER AND AO HAS V ERIFIED ALL THE JOB WORK RECEIPT, WAGES, SALARY AND ELECTRICITY CONSUMPTION IN ASSESSMENT ORDER REPRODUCED IN PARA 5, WHICH REA DS AS UNDER :- 5. THE MAIN EXPENSES OF THE ASSESSEE DIRECTLY RELATED TO THE PRODUCTION ARE WAGES AND ELECTRICITY. AS IT IS CLEAR THAT THE ASSESSEE HAS M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 8 8 DECLARED CORRECT JOB RECEIPTS IN FIRST TWO QUARTERS AND SUPPRESSED THE RECEIPT OF LAST TWO QUARTER AS SUCH THE TOTAL RECEIPTS IS ESTIMATED BY TAKING RATIO OF WAGES AND SALARY AND ELECTRICITY. WAGES AND SALARY PAID FOR 1 ST , 2 ND AND 4 TH QUARTER 26,47,006 ELECTRICITY EXPENSES FOR 1 ST , 2 ND AND 4 TH QUARTER 2,01,256 TOTAL 28,48,262 JOB WORK RECEIPT FOR 1 ST , 2 ND AND 4 TH QUARTER 71,76,036 RATIO OF RECEIPTS TO DIRECT EXPENSES 2.51 TIMES WAGES AND SALARY PAID FOR 3 RD QUARTER 9,46,387 ELECTRICITY CONSUMED FOR 3 RD QUARTER 62,871 TOTAL 10,09,258 JOB WORK FOR 3 RD QUARTER AS PER ABOVE RATIO 25,33,237 JOB WORK DECLARED BY THE ASSESSEE FOR 3 RD QUARTER 12,17,404 ADDITION TO THE INCOME 13,15,833 AS SUCH THE ASSESSEE HAS RECEIVED JOB RECEIPT OF RS . 25,33,237/- BUT SUPPRESSED THE RECEIPTS AND DECLARED RECEIPTS ONLY RS. 12,17,404/- WHILE THE ENTIRE EXPENSES HAS BEEN DEBITED TO PROFIT AND LOSS ACCOUNT. AS SUCH TRADING ADDITION OF RS. 13,15,833/ - IS MADE TO THE INCOME OF THE ASSESSEE. M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 9 9 12. WE ARE OF THE VIEW THAT THE AO HAS WORKED OUT THE ANALYSIS OF JOB WORK RECEIPT, SALARY AND WAGES WITH QUARTERLY JOB WORK IN NUMBERS AND CONSUMPTION OF ELECTRICITY. THE WORKING OF AO CLEARLY DEPICTED THAT THE ASSESSEES BOOKS OF ACCOUNT ARE NOT RELIABLE AND CANNOT BE ACCEPTED IN VIEW OF THE DEFECTS POINTED OUT BY THE ASSESSING OFFICER, WHICH IS BASED ON ASSESSEES BOOKS OF ACCOUNT AND AUDITED BOOKS OF AC COUNT. THEREFORE, WE ARE OF THE VIEW THAT THE REJECTION OF BOOKS OF ACCOUNT IS COMPLETELY JUSTIFIED AND CORRECT. 13. DURING THE COURSE OF HEARING OF THE APPEAL, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ASSESS EE WAS PRODUCING READYMADE GARMENTS ON JOB WORK BASIS FOR PUBLIC LIMITED COMPANIES AND COMPANIES MAINTAIN GOOD QUALI TY AND ALSO PAY GOOD PRICES FOR WORK DONE. THE ASSESSEE DI D NOT GET GOOD JOB WORK IN QUARTER III. THEREFORE, THE ASSESS EE HAS WORKED OUT THE JOB WORK ON CASH BASIS. WE FOUND THA T THE ASSESSEE DID NOT MAINTAIN THE ADDRESSES OF THE PERS ONS FOR WHOM THE WORK HAS BEEN CARRIED OUT BY THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT GIVEN M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 10 10 ANY CONCRETE EVIDENCE THAT IN QUARTER III, THE ASSE SSEE HAS CARRIED OUT THE WORK ON CASH BASIS FROM OUTSIDE PAR TIES. THEREFORE, WE ARE OF THE VIEW THAT THE AO AND LD. C IT(A) ARE JUSTIFIED IN THEIR ACTION AND OUR INTERFERENCE IS N OT REQUIRED. 14. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED O N THIS GROUND. GROUND NO.2: 15. IN THE SECOND GROUND, THE ASSESSEE HAS AGITATED TH AT THE AO HAS DISALLOWED DEPRECIATION OF RS. 24,900/-. ON PERUSAL OF DEPRECIATION CHART, THE AO FOUND THAT TH E ASSESSEE HAS DEBITED BUILDING ACCOUNT WITH ONLY COST OF MATE RIAL I.E. ON CEMENT CEMENT PURCHASE OF RS. 95,250/- AND STEEL PU RCHASE OF RS. 3,86,581/-. THE LABOUR EXPENSES ARE ALSO NEC ESSARY FOR CONSTRUCTING THE BUILDING. AS SUCH NO CONSTRUCTION EXPENSES WERE INCURRED. THEREFORE, BUILDING WAS NOT CONSTRUC TED IN THE YEAR AND ONLY MATERIAL WAS PURCHASED. THEREFORE, DE PRECIATION WAS NOT ALLOWED. 16. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS DISALLOWED THE CLAIM. M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 11 11 17. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES O F THE CASE, WE FIND THAT IT IS NOT THE CONTENTION OF THE ASSESS EE THAT THE ASSESSEE HAD INCURRED THE LABOUR EXPENSES IN PREVIO US YEAR 2006-07 AND SAME WAS DEBITED IN NEXT FINANCIAL YEAR , WHEN THE PAYMENT WAS MADE. THEREFORE, IT IS NOT CORRECT TO CONCLUDED THAT THE CONSTRUCTION WAS NOT COMPLETE BU T WE ARE OF THE VIEW THAT DURING THE COURSE OF HEARING BEFOR E US, THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL TO SHOW THAT BUILDING IN QUESTION WAS CONSTRUCTED DURING THE YEAR UNDER CONSIDERATION. THEREFORE, WE DISMISS THE APPEAL OF THE ASSESSEE ON THIS GROUND. 18. GROUND NO. 3 IS OF CONSEQUENTIAL NATURE. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. 20. GROUND NO. 4 IS OF CONSEQUENTIAL NATURE. M/S.PAPCON(INDORE)PVT.LTD.,INDORE VS. ACIT,1(20, IN DORE- I.T.A.NO. 302/IND/2013 A.Y. 2007-08 12 12 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMIS SED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH FEBRUARY, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 29 TH FEBRUARY, 2016. CPU*