ITO, SURATGARH V. Smt. Kamal Kanwar, ANOOPGARH

ITA 362/JODH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74936 (ITAT-JODHPUR)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: NEERAJ CHAWLA
• Section: 133(6); 144

Judgement Text

1 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. 362/JODH/2013 (A.Y. 2009-10) ITO, VS SMT. KAMAL KANWAR SURATGARH PROP. M/S KARNI BRICKS INDUSTRIES ANOOPGARH. PAN NO. AVUPK 7311 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NEERAJ CHAWLA, AR DEPARTMENT BY : SHRI N.A. JOSHI, DR. DATE OF HEARING : 13/03/2014. DATE OF PRONOUNCEMENT : 13/03/2014. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE REVENUE, FOR A.Y. 2009-10, IS D IRECTED AGAINST THE ORDER OF LD. CIT(A), BIKANER, DATED 20/03/2013. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A PROPRIETOR OF M/S KARNI BRICK INDUSTRIES, ANOOPGARH AND IS ENGAGED IN THE BUSINESS OF BRICK KILN, I.E. MANUFACTURING AND SALE OF BRICKS. THIS A.Y. IS THE SECOND YEAR OF ASSESSEES BUSINESS. IN THIS YEAR, THE 2 ASSESSEE HAS FILED RETURN OF INCOME [ROI] BY DISCLO SING NET PROFIT OF RS. 2,07,520/- ON TOTAL TURNOVER OF RS. 28.34 LAKHS WHI CH GIVES NET PROFIT RATE OF 7.32%. THE A.O, AFTER REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REF ERRED TO AS 'THE ACT', FOR SHORT] HAS COMPLETED ASSESSMENT U/S 144 OF THE ACT VIDE HIS ORDER DATED 22.12.2011 ON A TOTAL INCOME OF RS. 31,70,147 /-. THE A.O. HAS ESTIMATED PRODUCTION OF BRICKS AT RS. 34.50 LAKHS A ND AFTER ADJUSTING OPENING STOCK/CLOSING STOCK AND WASTAGE, HE HAS ARR IVED AT RS. 3.74 LAKHS OF BRICKS TO HAVE BEEN SOLD BY THE ASSESSEE D URING THE YEAR. THIS CONCLUSION HAS BEEN DRAWN BY THE A.O. ON THE BASIS OF THE AMOUNT OF ROYALTY PAYMENT MADE BY THE ASSESSEE. THE A.O. GAT HERED SOME INFORMATION U/S 133(6) OF THE ACT FROM THE MINING D EPARTMENT FOR THAT PURPOSE. THE A.O. HAS ALSO ESTIMATED SALE PRICE OF BRICKS. THE ASSESSEE HAS SHOWN AVERAGE SALE PRICE OF BRICKS AT RS. 947/- PER THOUSAND BRICKS WHEREAS THE A.O. HAS ADOPTED SALE P RICE AT RS. 700 TO RS. 1900/- PER THOUSAND FOR DIFFER QUALITY OF BRICK S. THESE RATES HAVE BEEN ADOPTED FROM THE RECORD OF ANOTHER BRICK KILN OWNER. THE A.O. HAS MULTIPLIED THE SALE PRICE WITH THE SUPPRESSED S ALE OF BRICKS AND HAS MADE TOTAL ADDITION OF RS. 29,62,627/- IN THE RETUR N OF INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE WENT IN APPEAL A GAINST THE 3 ESTIMATION OF PRODUCTION OF BRICKS AND APPLYING DIF FERENT RATE OF SALE PRICE ON THE BASIS OF SOME OTHER BRICK KILN OWNERS RECORDS. 2.1 BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE FO LLOWING CONTENTIONS AGAINST THE IMPUGNED ADDITION. THESE C ONTENTIONS ARE CONTAINED IN THE LD. CIT(A)S ORDER AT PAGES 3 TO 6 UNDER SUB-HEADS (A) TO (I) AS UNDER: A) AS PER THE ASSESSMENT ORDER THE AO HAS WROTE A LETTER TO THE MINING DEPARTMENT, WHEREIN THE AO HAS ASKED FROM THE MINING DEPARTMENT THAT HOW MUCH BRICKS ARE MANUFACTURED BY THE ASSESSEE DURING THE RELEVANT YE AR. THE SAID DEPARTMENT HAS REPLIED VIDE LETTER DATED, WHEREIN THE MINING DEPARTMENT HAS SPECIFICALLY MENTIONED TH AT 'IT CANNOT BE SAID THAT HOW MUCH PRODUCTION WAS DONE BY THE ASSESSEE IN THE RELEVANT YEAR.' FURTHER IN THIS LET TER IT IS MENTIONED THAT ASSESSEE HAS OBTAINED THE LICENSE TO USE 'MITTI' UPTO THAT EXTENT, BUT NO WHERE IT IS MENTIO NED THAT HOW MUCH MITTI IS ACTUALLY USED BY THE ASSESSEE. ON THE BASIS OF ABOVE SAID LETTER OF MINING DEPARTMENT THE AO CAME TO THE CONCLUSION THAT ASSESSEE HAS MANUFACTUR ED 34.50 LAKHS BRICKS AGAINST 29.97 LAKHS BRICKS AS SH OWN BY THE ASSESSEE. AS PER ASSESSEE THE CONCLUSION ARRIVE D AT BY THE AO IS NOT JUSTIFIED. IT IS CLEARLY MENTIONED IN THE LETTER OF THE MINING DEPARTMENT DATED THAT IT COULD NOT BE SAID THAT HOW MUCH BRICKS WERE MANUFACTURED BY THE ASSES SEE. 4 THIS SAID LETTER ONLY MENTIONED THE EXTENT UPTO WHI CH THE CLAY COULD BE USED THE ASSESSEE BUT DID NOT MENTION ED THE ACTUAL QUANTITY USED THE ASSESSEE. EVEN AFTER THIS TYPE OF CLEAR CUT VERDICT OF THE MINING THE DEPARTMENT THE AO HAS ERRED IN ESTIMATING THE ENHANCED MANUFACTURING OF B RICKS. (B) PAYMENT OF ROYALTY FOR SANCTIONED AMOUNT OF LICENSED CAPACITY DOES NOT MEAN THAT THE ASSESSEE HAS UTILIZ ED HIS 100% CAPACITY. PRODUCTION DEPENDS ON THE FACTS THAT HOW MUCH CAPACITY IS UTILIZED BY THE ASSESSEE. WHEREAS IN THE PRESENT CASE NO EVIDENCE IN BROUGHT ON THE RECORD B Y THE LD. AO THAT INFECT HOW MUCH CAPACITY HAS UTILIZED B Y THE ASSESSEE IN THE RELEVANT YEAR. (C) THAT THE AMOUNT OF ROYALTY IS NOT A CONCLUS IVE PROOF OF QUANTUM OF MANUFACTURING OF BRICKS. IT IS JUST A LICENSE FEE, SUPPOSE A BRICK KILN OWNER RUN THE BHATTA ONLY FOR THREE MONTHS IN A YEAR THEN IN THAT CASE HE ALSO HA S TO PAY COMPLETE AMOUNT OF ROYALTY DEPENDING ON THE AREA OF THE LAND. THE LD. AO HAS NOT FOUND SINGLE INSTANCE OF B OGUS PURCHASE OR SALE THUS ESTIMATION OF HIGH PRODUCTION ON THE BASIS OF ROYALTY PAYMENT IS NOT JUSTIFIED. HON'BLE JAIPUR TRIBUNAL IN THE CASE OF DCIT V/S MAHADEO COTTON MIL LS ( 42 TTJ 77 ) HAS HELD THAT 'MERELY HIGHER CONSUMPTION O F ELECTRICITY EVEN IF IT IS THERE, CAN NOT BY ITSELF LEAD TO THE INFERENCE THAT IN FACT HIGHER PRODUCTION WAS DONE.' (D) THAT SAID TYPE OF ADDITION HAS ALREADY BEEN DEL ETED BY THE H'BLE CIT (APPEALS) BIKANER IN THE CASE OF MIDH A ENTT 5 UDHYOG (APPEAL NO. 226/CIT(A)/ BKN/2010-11 DATED 3.11.2011. (E) THAT FOR PRODUCTION OF BRICKS WE HAVE TO INCUR VARIOUS EXPENDITURE, LIKE FUEL, LABOUR (FAT HER, BHARAI, NIKASI ETC.), WATER, MITTI, RETA, LOADING U NLOADING ETC. THE AO HAS NOT FIND ANY INSTANCES OF ANY EXPEN DITURE BEING INCURRED OUT OF BOOKS OR ENTERED IN THE BOOKS ON INFLATED VALUE. THIS FACT JUSTIFIED THE QUANTITY MANUFACTURED BY THE ASSESSEE AS SHOWN IN THE BOOKS OF ACCOUNT. THAT THE LD. AO WHILE ENHANCING SALE AROUN D TWO TIME OF THE DECLARED SALE HAS NOT WORKED CORRESPOND ING EXPENDITURE REQUIRED FOR MANUFACTURING OF SUCH NUMB ER OF HUGE NUMBER OF BRICKS. THUS AO FAILS TO BRING ON RE CORD ANY OTHER CORROBORATIVE EVIDENCE/MATERIAL TO JUSTIFY TH E ESTIMATION OF EXCESS PRODUCTION. (F) THE SAID ORDER IS PASSED U/S 144. AS PER S ETTLED LEGAL POSITION THE AO HAS TO ESTIMATE THE INCOME OF THE A SSESSEE FAIRLY AND NOT ARBITRARILY. WHEREAS IN THE PRESENT CASE AO HAS MADE ADDITION WHICH WAS TOTALLY ARBITRARILY AND WITHOUT ANY LEGAL & FACTUAL BASE. THE AO HAS NOT FO UND NOT EVEN A SINGLE EVIDENCE THAT ASSESSEE HAS SOLD TILES DURING THE RELEVANT YEAR. (G) THAT ADDITION MADE BY THE AO ON ACCOUNT OF ALLE GED SUPPRESSION OF PRODUCTION AND ON ACCOUNT OF SALE PR ICE OF BRICKS IS ONLY BASED ON CONJECTURES AND SURMISES. N O 6 INSTANCE OF SALE OF EXCESS PRODUCTION COULD BE ESTA BLISHED BY THE AO. THE LD. AO HAS NOT FOUND A SINGLE BILL I NDICATING SALE OUTSIDE BOOKS NOR HAS HE DETECTED SINGLE ITEM OF EXPENDITURE WHICH WAS NOT RECORDED IN BOOKS. NO SUC H SALE PROCEEDS WERE FOUND IN BANK ACCOUNTS OF THE ASSESSE E OR BY WAY OF CASH IN HAND. THUS THE ESTIMATION OF EXCESS PRODUCTION BY THE AO IS TOTALLY UNJUSTIFIED. (H) THAT IT IS THE GENERAL PRINCIPAL OF LAW THAT TH E AO CANNOT MAKE SUCH ADDITION DUE TO WHICH THE ASSESSED INCOME REACHES TO UNREALISTIC AMOUNT. IN THE PRESEN T CASE ASSESSEE'S NET INCOME WAS RS. 207520 ON THE TOTAL T URNOVER OF RS. 28.34 LAKHS, WHICH WAS ASSESSED AT 32.74 LAK H, THE SAME IS NOT POSSIBLE. (I) THAT THE ADDITIONS MADE BY THE LD. AO ARE BASED ON WRONG FACTS AND CONSIDERATION OF IRRELEVANT MATERIA L THUS DESERVES TO BE DELETED. THIS IS ONLY THE SECOND YEA R OF BUSINESS, IT IS JUST IMPOSSIBLE THAT ASSESSEE HAS MANUFACTURED SUCH HUGE NUMBER OF BRICKS OUTSIDE BOO KS WITHOUT SINGLE PIECE OF EVIDENCE. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE LD. CIT(A) HAS UPHELD THE PRODUCTION OF BRICKS TAKEN AT RS. 35 .50 LAKHS AS ESTIMATED BY THE A.O. BUT HE HAS NOT ACCEPTED THE S ALE PRICE WHICH HAS BEEN ADOPTED BY THE A.O. ON THE BASIS OF ANOTHER MA NUFACTURER AT MAXIMUM RATE. TO COVER UP ALL POSSIBLE LEAKAGE, HE HAS ADOPTED TOTAL 7 SALE AT RS. 32.74 LAKHS BRICKS ON THE AVERAGE RATES SHOWN BY THE ASSESSEE AND HAS REDUCED THE ADDITION SUBSTANTIALLY . AGAINST THIS FINDING, THE ASSESSEE HAS NOT FILE ANY APPEAL. HOW EVER, THE REVENUE HAS DISPUTED THE ABOVE FINDING OF THE REVENUE. 4. BEFORE US, BOTH THE PARTIES HAVE REITERATED THE SAME ARGUMENTS AS WERE TAKEN EARLIER. IN OUR CONSIDERED OPINION, THE LD. CIT(A) IS JUSTIFIED IN THE GIVEN FACTS AND CIRCUMSTANCES OF T HE CASE, SPECIFICALLY WHEN THE ASSESSEE HAS NOT ASSAILED THE IMPUGNED FIN DING. IN SOME OTHER CASES OF SIMILAR BUSINESS, WE HAVE TAKEN A VI EW WHERE GROSS PROFIT RATE OF 15.29% HAS BEEN ACCEPTED AS JUSTIFIE D. THIS VIEW WAS TAKEN IN THE CASE OF ITO VS. SHRI ANUPAM GOYAL IN I TA NO. 320/JU/2013 FOR A.Y. 2009-10 VIDE ORDER DATED 9.12.2013, COPY O F WHICH IS ENCLOSED ON RECORD. THEREFORE, IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE IMPUG NED FINDING AND THEREFORE, CONFIRM THE SAME. ACCORDINGLY, THIS APP EAL OF THE REVENUE IS LIABLE TO BE DISMISSED. 8 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH MARCH, 2014. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER VL/ DATED : 13 TH MARCH, 2014. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. DR, ITAT, JODHPUR 6. GUARD FILE BY ORDER AR, ITAT, JODHPUR