The ACIT, Circle-5, Surat V. M/s. Eastern Enterprise, Surat

ITA 3027/AHD/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2156 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S CHAUDHARY
• Assessee Lawyers: RASESH SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH D DD D BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI, , , , ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING :3 2 2011 DRAFTED ON: 3-2-20 11 I TA NO. 3027 /AHD/ 208 ASSESSMENT YEAR : 2005-06 THE ASSISTANT COMMISSIONER OF INCOMETAX,CIRCLE-5, ROOM NO.309, AAYAKAR BHAVAN, MAJURA GATE, SURAT. VS. M/S. EASTERN ENTERPRISE, 4/3150, MAIN ROAD, SALABATPURA, SURAT. PAN/GIR NO. : AAAFE 6427 H (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHR I D.S. CHAUDHARY, SR. D.R. RESPONDENT BY: SHRI RASESH SHAH. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-III,SURAT DATE D 20-6-2008. 2. GROUND NO.1 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-III, S URAT HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF `.7,33,327/- ON ACCOUNT OF SUPPRESSION OF PRODUCTION DUE TO OIL GAI N. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER OBSERVED THAT TH E ASSESSEE IN THE BUSINESS OF TRADING OF YARN AND MANUFACTURING THE CRIMPED YA RN. HE OBSERVED THAT THE ASSESSEE HAS SHOWN YIELD AT THE RATE 99.93% OF THE CONSUMPTION ONLY SAND THEREFORE, ASKED THE ASSESSEE TO EXPLAIN WHY THE YI ELD SHOULD NOT BE TAKEN AT 101.62% APPLYING THE RATIO OF THE TRIBUNAL IN THE C ASE OF MARMO TEXTURISER PVT. LTD. THE ASSESSEE REPLIED VIDE LETTER DATED 30-11-2 007 TO THE LEARNED PAGE 2 OF 6 ASSESSING OFFICER THAT HE WAS RELYING ON THE CASE F OR ASSESSMENT YEAR 1990-91 AND THAT THEREAFTER THERE HAS BEEN SO MANY CHANGES IN TEXTURISING MACHINERY IN WHICH USE OF OIL CONSUMPTION WAS NOMINAL. THE AS SESSEE SUBMITTED THAT IN THE CASE OF MARMO TEXTURISING PVT. LTD., THE CONSUM PTION OF OIL WAS 6295 KGS ON CONSUMPTION OF YARN OF 122866.895 KGS. WHICH IS 5.12% OF TOTAL PRODUCTION WHEREAS IN THE CASE OF ASSESSEE THE OIL USED WAS ON LY 4810 KGS ON PRODUCTION OF 615542.88 KGS WHICH WAS 0.7% ONLY. THE LEARNED A SSESSING OFFICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND BY ADOPT ING THE OIL GAIN RATE OF 1.62% IN THE CASE OF M/S. MARMO TEXTURISING PVT. LT D., MADE ADDITION OF `.7,33,327/- TO THE INCOME OF THE ASSESSEE ON ACCOU NT OF SUPPRESSED PRODUCTION. 4. IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION AND WHILE DOING SO HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS AND FIND THAT T HE ONLY BASIS FOR MAKING THE ADDITION WAS THE DECISION OF HONBLE ITA T IN THE CASE OF MARMO TEXTURISERS. THE A.O. HAS NOT BROUGHT ANY MAT ERIAL ON RECORD IN SUPPORT OF HER VIEW THAT THE APPELLANT PURCHASED OI L IN CASH FROM THE OPEN MARKET. FURTHER, I AM ALSO INCLINED TO AGREE WITH THE APPELLANT THAT THE TECHNOLOGY IN THE PRODUCTION PROCESS WOULD BE M ORE ADVANCED THAN AT THE TIME OF PRODUCTION MADE BY MARMO TEXTURISERS . THE A.O. HAS ALSO NOT ENABLE TO ESTABLISH THAT THE APPELLANT HAD MADE ANY SALES OF FINISHED GOODS OUT OF BOOKS OF ACCOUNTS AND HAS ALSO NOT CON FRONTED THE APPELLANT WITH DETAILS OF OTHER ASSESSEES RELIED ON BY HER IN SUPPORT OF THE CLAIM THAT MORE OIL GAIN WAS SHOWN BY THEM. THIS ADDITION BASED ON HYPOTHETICAL WORKING OUT OF PRODUCTION IS NOT SUSTA INABLE AND IS DIRECTED TO BE DELETED. 5. WE FIND THAT NO MATERIAL WAS BROUGHT ON RECORD B Y THE LEARNED ASSESSING OFFICER TO SHOW THAT THE ASSESSEE HAD IN FACT MADE AN OIL GAIN OF 1.61% ON USE OF OIL IN THE PRODUCTION OF YARN. WE FIND THAT THE ASSESSEE EXPLAINED THAT IN THE CASE RELIED UPON BY THE LEARNED ASSESSING OFFICER T HE ASSESSEE HAD USED OIL WHICH WAS 5.12% OF THE TOTAL CONSUMPTION OF YARN WH EREAS IN THE CASE OF THE ASSESSEE THE OIL USED WAS 0.7% OF THE TOTAL CONSUMP TION OF YARN AND THEREFORE, IN THE CASE OF THE ASSESSEE THERE WAS NO OIL GAIN A ND THE YIELD WAS 99.93% OF THE TOTAL CONSUMPTION. THIS EXPLANATION OF THE ASSE SSEE WAS NOT FOUND TO BE FALSE BY THE LEARNED ASSESSING OFFICER. FURTHER, TH E OTHER COMPARABLE CASES PAGE 3 OF 6 USED BY THE LEARNED ASSESSING OFFICER WERE NOT CONF RONTED TO THE ASSESSEE AND THEREFORE IN OUR CONSIDERED OPINION WITHOUT CONFRON TING THE SAME TO THE ASSESSEE THE SAME SHOULD NOT HAVE BEEN USED AGAINST THE ASSESSEE. WE THEREFORE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WHICH IS CONFIRMED AND THE GRO UND OF APPEAL OF THE REVENUE IS DISMISSED. 6. GROUND NO.2 READS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) III,SU RAT HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF `.2,27,764/- ON ACCOUNT OF SUPPRESSION OF PRODUCTION DUE TO DIFFERE NCE IN STORK OF RAW MATERIALS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT FROM THE M ONTHLY STATEMENT OF STOCK AT MACHINE AND AT GODOWN AS GIVEN AT PAGE-11 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAD RAW MATERIAL AT GODOWN AT 27,580.8 2 KGS HOWEVER, THE ASSESSEE HAS SHOWN CLOSING STOCK OF RAW MATERIAL IN GODOWN AT 23,486.62 THUS THERE WAS EXCESS STOCK OF 4094.42 KGS OF RAW MATERI AL NOT SHOWN IN THE BOOKS. THE ASSESSEE EXPLAINED THAT 3575 KGS OF RAW MATERIA LS HAS BEEN SOLD BY THE ASSESSEE DURING THE YEAR AND DUE OVERSIGHT THE SAME WAS NOT TYPED IN THE AUDIT REPORT. THE ASSESSEE FURNISHED CERTIFICATE F ROM THE AUDITOR DATED 1-12- 2007 COPY OF WHICH IS PLACED AT PAGE-13 OF THE PAPE R BOOK. THE LEARNED ASSESSING OFFICER OBSERVED THAT THIS IS A ROUTINE R EPLY TRYING TO DEFEND THE DEFICIENCIES POINTED OUT. HE ALSO OBSERVED THAT EVE N IF THE EXPLANATION OF THE ASSESSEE WAS ACCEPTED THEN ALSO THERE WAS EXCESS ST OCK OF 519.42 KGS AND THE ASSESSEE HAD TRIED TO EXPLAIN THE SAME BY SHOWING R ETURN FROM MACHINE ROOM. NOT BEING SATISFIED WITH THE EXPLANATION OF THE ASS ESSEE HE MADE ADDITION OF `.3,27,764/- ON ACCOUNT OF UNRECORDED PRODUCTION BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. 8. IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE ADDITION AND WHILE DOING SO HE HELD AS UNDER:- PAGE 4 OF 6 I HAVE CONSIDERED THE SUBMISSIONS AND PERUSED THE DETAILS. THE APPELLANTS CONTENTION THAT THE AUDITOR DID NOT MEN TION THE SALE OF RAW MATERIAL BY OVERSIGHT IS APPARENTLY IN ORDER. THE A PPELLANT ALSO FURNISHED COPY OF THE BILL IN SUPPORT OF SALE OF 3575 KGS. OF RAW MATERIAL WHICH HAS ALSO BEEN CERTIFIED SUBSEQUENTLY BY THE C.A. VIDE H IS LETTER DATED 1-12- 2007. FURTHER, THE ASSESSING OFFICER HAS ALSO NOT T AKEN INTO ACCOUNT THE GOODS RETURNED BY WORKING OUT THE SUPPRESSED CLOSIN G STOCK OF RAW MATERIAL ON THE BASIS OF WHICH SHE HAS WORKED OUT T HE SUPPRESSED PRODUCTION. SINCE THE CLOSING STOCK OF RAW MATERIAL IS THE SAME AS SHOWN BY THE APPELLANT, THERE IS NO JUSTIFICATION IN PRES UMING THAT THERE WAS SUPPRESSION OF RAW MATERIAL AND THEREBY SUPPRESSION OF PRODUCTION OF FINISHED GOODS. NO ADDITION ON THIS ACCOUNT IS CALL ED FOR AND THE SAME IS DIRECTED TO BE DELETED. 9. WE FIND THAT THE EXCESS STOCK WAS ADDED BY THE L EARNED ASSESSING OFFICER BY NOT ACCEPTING THE EXPLANATION OF THE ASS ESSEE THAT 3575 KGS OF POY RAW MATERIAL WAS SOLD ONLY ON THE GROUND THAT THE E XPLANATION WAS GIVEN BY THE ASSESSEE ON POINTING OUT OF THE DISCREPANCY. HENCE WE FIND THAT NO DISCREPANCY IN THE EXPLANATION GIVEN BY THE ASSESSEE COULD BE P OINTED OUT BY THE LEARNED ASSESSING OFFICER. NO ERROR IN THE ORDER OF THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS)COULD BE POINTED OUT BY THE LEARNED DE PARTMENTAL REPRESENTATIVE. THEREFORE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSE D. 10. GROUND NO.3 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-III,SU RAT HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER OF `.26,97,383/- ON ACCOUNT OF SUPPRESSION OF PRODUCTION DUE TO EXCESS CONSUMPTION OF ELECTRIC POWER. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER OBSERVED THAT IN THE CURR ENT YEAR THE ASSESSEE HAS MANUFACTURED 1.057 KGS OF YARN BY CONSUMING ONE UNI T OF ELECTRICITY. LAST YEAR, THE ASSESSEE HAS MANUFACTURED 1.14 KG OF YARN IN ON E UNIT OF ELECTRICITY. HE THEREFORE MADE ADDITION FOR UNRECORDED PRODUCTION O F 34057.865 KGS VALUED AT `.26,97,383/-. PAGE 5 OF 6 12. IN APPEAL, THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) DELETED THE ADDITION AND WHILE DOING SO HE HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS AND GONE THROUG H THE DETAILS. THE ASSESSING OFFICER HAS PREPARED A MONTH WISE PRO DUCTION CHART VIS-- VIS CONSUMPTION OF UNITS OF ELECTRICITY AND HAS THE ORETICALLY WORKED OUT THE CONSUMPTION PER KG OF PRODUCTION. THE ELECTRICI TY CONSUMPTION AS STATED BY THE APPELLANT WOULD VARY DUE TO SO MANY F ACTORS IN THE PRODUCTION PROCESS. THIS KIND OF WORKING OUT THE PR ODUCTION AND COMPARING THE SAME WITH CONSUMPTION DURING LAST YEA R WITHOUT BRINGING ANY EVIDENCE ON RECORD TO SHOW THE SALE OF SO CALLE D UNRECORDED PRODUCTION IS ONLY A MATTER OF CONJECTURES AND SURM ISES AND ADDITION ON THIS ACCOUNT BEING NOT SUSTAINABLE IS DIRECTED TO B E DELETED. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD N OT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX (APPEALS). WE AGREE WITH THE REASONING GIVEN BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT CONSUMPTION OF ELECTRICIT Y MAY VARY DUE TO HUNDREDS OF FACTORS. WE THEREFORE, DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS). IT IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE I S DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 4 TH DAY OF FEBRUARY, 2011. SD/- SD/- ( MAHAVIR SINGH) (N.S. S AINI) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED: AHMEDABAD,4 TH DAY OF FEBRUARY, 2011. COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-III, SURAT. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// PAGE 6 OF 6 (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 3-2-2011 ---------------- --- 2. DRAFT PLACED BEFORE AUTHORITY 3-2-2011 ------ ------------- 3. DRAFT PROPOSED & PLACED 3-2-2011 ------------- ------ JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 3-2-2011 ------------ ------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 4-2-2011 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 4-2-2011 ---------- ---------- 7. FILE SENT TO THE BENCH CLERK 4-2-2011 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- A.R. 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------