M/s. Sujana Universal Industries Ltd., Hyderabad V. ACIT, Circle-3(2), Hyderabad

ITA 304/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69730 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Rejection of books of accounts; Depreciation; Opportunity of being heard
• Section: 142(1); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.304/HYD/2013 ASSESSMENT YEARS 2009-2010 M/S. SUJANA UNIVERSAL INDUSTRIES LTD. HYDERABAD PAN AACCS8630H VS. ACIT, CIRCLE 3 (2) HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO.305/HYD/2013 ASSESSMENT YEARS 2009-2010 M/S. SUJANA METAL PRODUCTS LTD. HYDERABAD PAN AACCS8614H VS. ACIT, CIRCLE 3 (2) HYDERABAD (APPELLANT) (RESPONDENT) ITA.NO.474/HYD/2013 ASSESSMENT YEAR 2009-2010 ACIT, CIRCLE 3 (2) HYDERABAD VS. M/S. SUJANA METAL PRODUCTS LTD. HYDERABAD 500 082. PAN AACCS8614H (APPELLANT) (RESPONDENT) ITA.NO.475/HYD/2013 ASSESSMENT YEAR 2009-2010 ACIT, CIRCLE 3 (2) HYDERABAD VS. M/S. SUJANA UNIVERSAL INDUSTRIES LTD. HYDERABAD 500 082. PAN AACCS8630H (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI P.MURALIMOHAN RAO (AR) FOR REVENUE : SHRI D. SUDHAKAR RAO (DR) DATE OF HEARING : 13.08.2013 DATE OF PRONOUNCEMENT : 13.08.2013 ORDER PER SAKTIJIT DEY, J.M. THESE ARE CROSS-APPEALS FILED BY TWO DIFFERENT ASS ESSEES AND REVENUE AGAINST SEPARATE ORDERS OF THE CIT(A)-IV, HYDERABAD DATED 2 2.01.2013 FOR THE ASSESSMENT YEAR 2009-2010. SINCE, COMMON ISSUES ARE INVOLVED I N THESE APPEALS, THEY WERE CLUBBED AND HEARD TOGETHER AND ARE BEING DISPOSED O F BY THE SINGLE CONSOLIDATED ORDER. 2 2. ALL THE AFORECITED APPEALS HAVE BEEN FILED RAISI NG A COMMON ISSUE RELATING TO THE REJECTION OF BOOKS OF ACCOUNTS AND E STIMATION OF PROFIT AT 1.5% OF THE TURNOVER BY THE ASSESSING OFFICER AND SUSTAIN ED AT 1% BY THE CIT(A). SINCE, FACTS ARE IDENTICAL IN ALL THESE APPEALS, FO R THE SAKE OF CONVENIENCE, WE WILL TAKE-UP THE FACTS AS INVOLVED IN ITA.NO. 304/H YD/2013. 3. ITA.NO.304/HYD/2013 A.Y. 2009-2010 : BRIEFLY, THE FACTS RELATING TO THE ISSUE IN DISPUTE ARE THE ASSESSEE A LIMITED COMPANY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF BEARING S, HOME APPLIANCES AND TRADING OF STEEL PRODUCTS. THE ASSESSEE FILED ITS R ETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 30.09.2009 DECLARING A L OSS OF RS.8,08,13,432/- UNDER NORMAL PROVISIONS AND RS.8,0 0,62,073/- UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE ASSESSE ES CASE WAS SELECTED FOR SCRUTINY ASSESSMENT BY ISSUING NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT. IN RESPONSE TO THE NOTICE ISSUED, THOUGH T HE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER BUT DID NOT FURNISH AL L THE INFORMATION CALLED FOR BY THE ASSESSING OFFICER. THE ASSESSING OFFICER NOTI CED THAT ASSESSEES TURNOVER DURING THE YEAR IS RS.1047,85,56,529/- WHIC H INCLUDES EXPORT TURNOVER OF RS.173,32,10,932/- THAT BESIDES THE ASS ESSEE HAD OTHER INCOME OF RS.5,06,48,483/- ON THE CREDIT SIDE OF THE P & L ACCOUNT. THE ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE HAS CLAIM ED TOTAL EXPENDITURE OF RS.1087,16,40,659/-. THE ASSESSING OFFICER, THEREFO RE, ISSUED A LETTER DATED 15.12.2001 TO THE ASSESSEE CALLING UPON TO PRODUCE VARIOUS DETAILS MENTIONED THEREIN FOR VERIFYING THE GENUINENESS OF T HE EXPENDITURE CLAIMED. ON THE DATE FIXED, THE ASSESSEE DID NOT PRODUCE ANY O F THE INFORMATION CALLED FOR BY THE ASSESSING OFFICER BUT REQUESTED FOR TWO M ORE DAYS TIME FOR SUBMITTING THE INFORMATION. ACCEDING TO SUCH REQUES T, THE ASSESSING OFFICER ALLOWED FURTHER TWO DAYS TIME TO THE ASSESSEE FOR FU RNISHING THE INFORMATION CALLED FOR. INSPITE OF THAT, ASSESSEE DID NOT PRODU CE THE INFORMATION CALLED FOR AND SINCE THE ASSESSMENT WAS GETTING TO BE TIME BAR RED, THE ASSESSING OFFICER PROCEEDED TO COMPLETE THE ASSESSMENT BY REJEC TING THE BOOK RESULTS UNDER SECTION 145(1) OF THE ACT AND ESTIMATED THE I NCOME. THE REASONS FOR REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATING THE I NCOME AS ENUMERATED IN THE ASSESSMENT ORDER ARE AS UNDER : 3 1. THE ASSESSEE FAILED TO PRODUCE THE DETAILS OF T HE PURCHASE AS CALLED FOR IN THE ABOVE REFERRED QUESTIONNAIRE. 2. THE ASSESSEE FAILED TO PRODUCE THE DETAILS OF T HE SALES AS CALLED FOR IN THE ABOVE REFERRED QUESTIONNAIRE. 3. THE ASSESSEE FAILED TO PRODUCE THE DETAILS OF TH E PLACES OF PURCHASE AND MODE OF TRANSPORTATION OF THE GOODS PURCHASED. 4. THE ASSESSEE FAILED TO PRODUCE THE DETAILS OF TH E PLACES OF SALE AND MODE OF TRANSPORTATION OF THE GOODS SOLD. 5. THE ASSESSEE FAILED TO PRODUCE DETAILS OF OPERAT ING STOCK, PURCHASES, SALES AND CLOSING STOCK OF MANUFACTURED GOODS AND TRADED GOODS SEPARATELY IN TERMS OF QUANTITY AN D COST. 6. THE ASSESSEE FAILED TO PRODUCE THE DETAILS OF WH ERE AND HOW THE ADDITIONAL MACHINERY WAS PUT TO USE AND THE INCREASE IN PRODUCTION AND ELECTRICITY CONSUMPTION AFTER THE INSTALLATION OF THE MACHINERY CLAIMED TO HAVE B EEN PUT TO USE DURING THE YEAR. THUS THE ASSESSEE COULD NOT JUSTIFY IT DEPRECIATION CLAIM. 7. THE ASSESSEE FAILED TO PRODUCE THE DAY-TO-DAY CONSUMPTION OF RAW MATERIAL DETAILS AND THE CORRESPONDING PRODUCTION DETAILS RELATING TO MANUFA CTURED GOODS. THUS, THE ACTUAL PRODUCTION AND THE CORRESPO NDING RAW MATERIAL CONSUMPTION DETAILS COULD NOT BE VERIF IED. 8. THE NET PROFIT RATE (PBT/NET SALES) DECLARED BY T HE ASSESSEE AT 0.764% FOR THE CURRENT FINANCIAL YEAR I S NOT EVEN HALF OF THE RESULT DECLARED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR AT 1.056%. 4. THE ASSESSING OFFICER ON THE AFORESAID BASIS CAM E TO A CONCLUSION THAT DUE TO VARIOUS DISCREPANCIES NOTICED, IT IS NOT POS SIBLE TO ARRIVE AT THE CORRECT INCOME OF THE ASSESSEE AND THE BOOKS OF ACC OUNTS CANNOT BE SAID TO BE EITHER CORRECT OR COMPLETE. HENCE, BOOK RESULTS CANNOT BE ACCEPTED. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE H AS NOT MAINTAINED PRODUCTION REGISTER OR CONSUMPTION REGISTER IN ABSE NCE OF WHICH IT IS DIFFICULT TO VERIFY THE PRODUCTION DETAILS. THE ASSESSING OFFI CER FURTHER OBSERVED THAT THE ASSESSEE WAS ALSO NOT ABLE TO SUBMIT DELIVERY CH ALLANS/DELIVERY MODE OF PURCHASE OF GOODS AND DELIVERY OF GOODS. WITH THE AF ORESAID OBSERVATION, THE ASSESSING OFFICER PROCEEDED TO ESTIMATE THE PROFIT @ 1.50% OF THE TOTAL TURNOVER AND ACCORDINGLY, DETERMINED THE INCOME AT R S.17,08,18,479/-. THE 4 ASSESSEE BEING AGGRIEVED OF THE ASSESSMENT ORDER, P REFERRED AN APPEAL BEFORE THE CIT(A). 5. IN THE COURSE OF HEARING BEFORE THE CIT(A), IT W AS CONTENDED BY THE ASSESSEE THAT NOT ONLY THE ASSESSEE IS A LISTED COMP ANY BUT ITS BOOKS OF ACCOUNTS HAVE BEEN REGULARLY MAINTAINED AND DULY AUDI TED BOTH UNDER THE COMPANIES ACT AS WELL AS INCOME TAX ACT. IT WAS FURT HER CONTENDED THAT THE ASSESSING OFFICER WITHOUT POINTING OUT ANY DEFICIENC Y IN THE BOOKS OF ACCOUNTS, COULD NOT HAVE REJECTED THE SAME BY SIMPLY O BSERVING THAT THE BOOKS OF ACCOUNTS ARE INCORRECT AND INCOMPLETE. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF MAT ERIALS ON RECORD, UPHELD THE REJECTION OF BOOKS OF ACCOUNTS BY HOLDING AS UNDE R : 4.5. I HAVE CONSIDERED THE SUBMISSIONS OF THE AR A ND THE FACTS ON RECORD. THERE IS NO DISPUTE THAT THE BOOKS OF AC COUNT HAVE BEEN DULY AUDITED OR THAT THE APPELLANT IS A L ISTED COMPANY. HOWEVER, THAT NEITHER ABSOLVES THE APPELLA NT FROM THE OBLIGATION TO PRODUCE THE BOOKS OF ACCOUNT AND ALL SUPPORTING DOCUMENTS BEFORE THE ASSESSING OFFICER F OR VERIFICATION NOR BARS THE ASSESSING OFFICER FROM MA KING SUCH VERIFICATION. THE APPELLANT HAVING ENTIRELY FA ILED TO PRODUCE THE BOOKS OF ACCOUNT AND THE SUPPORTING DOCUMENTS FOR VERIFICATION, THE DECISION OF THE ASS ESSING OFFICER TO REJECT THE BOOKS IS EMINENTLY JUSTIFIED AND IS UPHELD. 6. HOWEVER, SO FAR AS THE ESTIMATION OF INCOME IS C ONCERNED, THE LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO ESTIMATE T HE INCOME AT 1% OF THE TURNOVER. BEING AGGRIEVED OF THE ORDER OF THE CIT(A ), THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD SUBMISSIONS OF PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS THE CONTENTION OF THE LEARNED A.R. TH AT THE ESTIMATION OF PROFIT AT 1% IS HIGH AND EXCESSIVE CONSIDERING THE FACT THAT T HE ACTUAL PROFIT MARGIN OF THE ASSESSEE IS IN THE RANGE OF 0.9%. IT HAS FURTHE R BEEN CONTENDED BY THE LEARNED A.R. THAT THE ASSESSEE HAS MAINTAINED ALL T HE BOOKS OF ACCOUNTS IN ITS REGULAR COURSE OF BUSINESS AND THE BOOKS OF ACC OUNTS WERE ALSO AUDITED BOTH UNDER THE PROVISIONS OF THE COMPANIES ACT AS W ELL AS UNDER THE INCOME TAX ACT. IT WAS FURTHER CONTENDED THAT THE ASSESSING OFFICER WITHOUT GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE TO PRODUCE TH E BOOKS OF ACCOUNTS 5 AND EXPLAIN THE ENTRIES, HAS HURRIEDLY COMPLETED THE ASSESSMENT AT THE LAST MOMENT WHEN IT WAS GETTING TIME BARRED BY RAISING DO UBT WITH REGARD TO THE CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUN TS. THE LEARNED A.R. HOWEVER, SUBMITTED THAT THE ASSESSEE UNDERTAKES TO PRODUCE ALL THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS AND EXPLAIN THE ENTRIES MADE THEREIN WITH REGARD TO THE EXPENDITURE CLAIMED AND REQUESTED FOR ANOTHER OPPORTUNITY TO BE GIVEN BEFORE THE ASSESSING OFFICER. 8. THE LEARNED CIT/DR APPEARING FOR THE DEPARTMENT DID NOT HAVE ANY SERIOUS OBJECTION TO THE CONTENTION OF THE ASSESSEE FOR AFFORDING ANOTHER OPPORTUNITY FOR PRODUCTION OF THE BOOKS OF ACCOUNTS AND SUBMITTED THAT THE MATTER CAN BE REMITTED BACK TO THE FILE OF ASSESSIN G OFFICER FOR DENOVO ASSESSMENT. 9. ON PERUSAL OF THE ASSESSMENT ORDER WE FIND THAT SEVERAL OPPORTUNITIES WERE GRANTED TO THE ASSESSEE BY THE ASSESSING OFFICE R. THEREFORE, THE COMPLAINT OF THE ASSESSEE THAT THE ASSESSMENT WAS C OMPLETED HURRIEDLY WITHOUT AFFORDING AN OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS AND EXPLAIN IT PROPERLY, IS WITHOUT ANY BASI S. HOWEVER, AT THE TIME OF HEARING BEFORE US, THE LEARNED A.R. SUBMITTED AN UNDERTAKING BY ONE OF THE DIRECTOR OF THE ASSESSEE-COMPANY WHICH READS AS UNDER : WE HEREBY CONFIRM THAT WE SHALL REGULARLY ATTEND T HE HEARINGS IN RESPECT OF OUR ASSESSMENT FOR THE A.Y. 2009-2010 AN D SUBMIT ALL THE NECESSARY DOCUMENTS, RECORDS AND INFORMATION AS REQ UIRED BY THE ASSESSING OFFICER FOR THE COMPLETION OF THE ASSESSM ENT. 10. CONSIDERING THE SUBMISSIONS OF THE PARTIES AND KEEPING IN VIEW THE INTEREST OF JUSTICE, WE ALLOW ONE MORE OPPORTUNITY TO THE ASSESSEE FOR PRODUCTION OF ITS BOOKS OF ACCOUNTS AND OTHER DOCUM ENTS BEFORE THE ASSESSING OFFICER TO SUBSTANTIATE ITS CLAIM AND ACC ORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THE MATTER TO THE FIL E OF THE ASSESSING OFFICER FOR DENOVO ASSESSMENT AFTER EXAMINING THE BOOKS OF A CCOUNTS AND OTHER DOCUMENTS. WE ALSO DIRECT THE ASSESSEE TO PRODUCE A LL ITS BOOKS OF ACCOUNTS, DOCUMENTS, BILLS, INVOICES AND ANY OTHER INFORMATIO N CALLED FOR BY THE ASSESSING OFFICER AND COOPERATE IN FINALISATION OF THE PROCEEDING. IN THE EVENT, THE ASSESSEE DOES NOT CO-OPERATE BY PRODUCING THE BOOKS OF ACCOUNTS 6 AND OTHER INFORMATION CALLED FOR BY THE ASSESSING OF FICER OR IF THE ASSESSING OFFICER ON EXAMINATION OF THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS FINDS THAT THERE ARE DISCREPANCIES WHICH THE ASSESSEE IS NOT ABLE TO EXPLAIN, THE ASSESSING OFFICER WOULD BE AT LIBERTY TO TAKE AN IND EPENDENT DECISION IN THE MATTER IN ACCORDANCE WITH LAW. THE ASSESSING OFFICE R SHALL AFFORD A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSE E. 11. ACCORDINGLY, ITA. NO. 304/HYD/2013 OF THE ASSESSE E IS ALLOWED FOR STATISTICAL PURPOSES. SINCE, THE FACTS ARE IDENTICA L IN ITA. 305/HYD/2013, THIS APPEAL OF THE ASSESSEE IS ALSO ALLOWED FOR STA TISTICAL PURPOSES. 12. ITA.NO.474 & 475/HYD/2013 A.Y. 2009-2010 : SINCE WE HAVE SET ASIDE THE RESPECTIVE ORDERS OF THE CIT(A) AND REMIT TED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR ASSESSMENT DENOVO WHI LE DECIDING ASSESSEES APPEAL IN ITA.NO.304 & 305/HYD/2013, THE PRESENT APP EALS OF THE DEPARTMENT HAVE BECOME INFRUCTUOUS AND ACCORDINGLY D ISMISSED. 13. IN THE RESULT, ITA.NO.304 & 305/HYD/2013 OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES AND ITA.NO.474 & 475/HYD/20 13 OF THE REVENUE ARE DISMISSED HAVING BECOME INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 13.08.2013. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATE 13 TH AUGUST, 2013. VBP/- COPY TO 1. M/S. SUJANA UNIVERSAL INDUSTRIES LTD. C/O. P.MURALI & CO. CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 2. M/S. SUJANA METAL PRODUCTS LTD. C/O. P.MURALI & CO. CHARTERED ACCOUNTANTS, 6-3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 3. ACIT, CIRCLE 3 (2), HYDERABAD. 4. CIT(A)-IV, HYDERABAD. 5. CIT-III, HYDERABAD. 6. DR A BENCH, ITAT, HYDERABAD.