Vaibhav Alloys Ltd., Ahmedabad V. The Income tax Officer, Ward-8(4), Ahmedabad

ITA 3841/AHD/2002

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2007 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-12-2009
• Assessment Year: 1995-1996
• Appeal Filed On: 13-12-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD TANWARI
• Assessee Lawyers: G S PATEL
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, A-BENCH, AHMEDABAD. BEFORE: SHRI T.K. SHARMA, JUDICIAL MEMBER , AND SHRI D.C. AGRAWAL, ACCOUNTANT MEMBER. ITA NO.3841/AHD/2002 ASSESSMENT YEAR : 1995-1996 VAIBHAV ALLOYS LTD. C/O. ABHAY KUMAR THIRANI, 161/1, M.G.ROAD, ROOM NO.61, KOLKATA- 700 007 INCOME TAX OFFICER, WARD 8(4), 4 TH FL. A WING, UPON OSWAL HOTEL, ASHRAM ROAD, AHMEDABAD. (APPELLANT) VERSUS (RESPONDENT) PAN: AAACO 3186 G FOR THE APPELLANT: G.S.PATEL FOR THE RESPONDENT SHRI. VINOD TANWARI, SR.DR ORDER PER T K SHARMA (JUDICIAL MEMBER): THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 19-09-2002, PASSED BY LD. C OMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD, FOR THE ASSESSM ENT YEAR 1995- 96. 2. THE FACTS IN BRIEF IN THE CASE ARE THAT THE ASSE SSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL I GNOTS. THE ASSESSEE PURCHASED SCRAP FROM THE MARKET AND THE SAME IS USE D FOR MANUFACTURING OF THE STEEL IGNOTS. THE BOOKS OF ACC OUNT OF THE ASSESSEE ARE AUDITED UNDER SECTION 44-AB OF THE INCOME TAX A CT, 1961. THE AUDITOR IN HIS STATUTORY REPORT VIDE NOTE NUMBER (I AND VI) PAGE 4 HAS CERTIFIED THAT ALL THE RECORDS WITH REGARD TO THE Q UANTITY AND MANUFACTURING ARE MAINTAINED. THE ASSESSEE COMPANY S PRODUCTS ARE LIABLE TO EXCISE DUTY FOR WHICH IT MAINTAINED STATU TORY EXCISE REGISTER AND DAY TO DAY QUALITY WISE STOCK REGISTER OF RAW MATER IAL FINISHED PRODUCES, WASTAGE RECOVERED AND THE STORES USED IN PRODUCTION . THIS IS THE FIRST YEAR OF PRODUCTION. 2 ITA NO.3841/AHD/2004 3. FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSE SSEE COMPANY FILED RETURN OF INCOME DECLARING LOSS OF RS.9,15,60 0/-. THE ASSESSING OFFICER FRAMED ASSESSMENT UNDER SECTION 143(3) OF T HE ACT, WHEREIN HE MADE ADDITION ON THREE COUNTS: (I) RS.76,152/- ON THE GROUND THAT THE ASSESSEE SH OULD HAVE OFFERED THE CREDIT BALANCE IN THE MODVAT ACCOUNT AS INCOME OR SHOULD HAVE INCLUDED THE EXCISE DUTY PAYABLE ON RUNNER RISER (S CRAP GENERATED IN THE COURSE OF RUNNING OF THE MACHINE WHICH IS REUSE D FOR FINISHED PRODUCTION) WHILE VALUING THE CLOSING STOCK. (II) THE ASSESSING OFFICER FELT THAT THE CLOSING ST OCK DECLARED TO BANK WAS HIGHER AND THERE WAS DIFFERENT IN THE STOCK OF STORES AMOUNTING TO RS.7,57,040/-. AS PER THE ASSESSING OFFICER THE DIF FERENCE IN THE STORE S WAS SUBSTANTIAL AND HENCE ADDED BACK THE AMOUNT OF RS.7,57,040/- AS UNDISCLOSED STOCK. (III) THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN CLOSING STOCK OF RUNNER RISER AT 90.659 MT WHEREAS THE CLOS ING STOCK SHOULD HAVE BEEN 84.258 MT AND FURTHER THE WASTAGE WAS 9.3 0% WHICH WAS EXCESSIVE HENCE HE ADDED BACK RS.1 LAKH FOR THE SAM E. 4. ON APPEAL, IN THE IMPUGNED ORDER, LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF FIRST ISSUE AND ALLOW THE RELIEF OF RS.25,000/- ON THE THIRD ISSUE. AGAINST, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THE A SSESSEE BEFORE US, RAISING VARIOUS GROUNDS WHICH ARE AS UNDER: 1. FOR THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ARBITRARY AND UNJUSTIFIED. 2. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.76 ,152/- FOR VALUATION OF CLOTHING STOCK OF RUNNER RISER WHEN TH E CLOSING STOCK WAS PROPERLY AND CORRECTLY VALUED AND DULY EX PLAINED TO HIM. 3. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.7, 57,040/- ON A/C OF EXCESS VALUATION OF STOCK SHOWN TO THE BA NKER 3 ITA NO.3841/AHD/2004 WHEN THERE WAS NO DIFFERENCE IN THE QUANTITY AS PER STOCK AND AS PER BANK RECORDS THE MOULDS WERE SPECIFICALL Y MENTIONED IN THE BANK STATEMENT THE COST OF WHICH W AS OVER 22 LAKHS AND EVEN OTHERWISE EXCESS VALUE SHOWN TO THE BANKER WITHOUT ANY DIFFERENCE IN QUANTITY CANNO T CALL FOR ANY ADDITION. 4. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN RETAINING THE ADDITION OF RS.75, 000/- FOR EXCESS WASTAGE WHEN THE WASTAGE WAS QUITE NORMAL IN THIS LINE OF BUSINESS. 5. AT THE TIME OF HEARING, ON 14.12.2009 THE LEARNE D COUNSEL ON BEHALF OF THE ASSESSEE SHRI ABHAY KUMAR THISANI, DI RECTOR OF THE ASSESSEE COMPANY APPEARED AND FILED WRITTEN SUBMISS ION. THIS WRITTEN SUBMISSION WAS HANDED OVER TO THE LEARNED DEPARTMEN TAL REPRESENTATIVE FOR HIS COMMENTS AND CASE WAS ADJOUR NED TO 15.12.2009. ON 15.12.2009, BOTH THE SIDES WERE HEAR D. GROUND NO.1 IS GENERAL IN NATURE, HENCE NEEDS NO ADJUDICATION. 6. IN THE WRITTEN SUBMISSION WITH REGARD TO GROUND NO.2, IT WAS SUBMITTED THAT THE MODVAT CREDIT AVAILABLE TO BE AD JUSTED IN FUTURE AS ON 31.03.1995 WAS RS.2,06,233/-. THE UNADJUSTED MODVAT CREDIT CANNOT BE TREATED AS INCOME. WITH REGARD TO NON INCLUSION OF EXCISE DUTY IN THE VALUATION OF THE RUNNER RISER. IT IS SUBMITTED THAT THE AVERAGE PRICE OF THE RUNNER RISER (SCRAP) PURCHASED FROM THE MARKET INCL USIVE OF EXCISE DUTY. CLOSING STOCK OF SCRAP OF I83.460 MT AT THE RATE RS .5,600/- PER MT VALUED WHICH IS ACCEPTED BY THE ASSESSING OFFICER. HOWEVER, THE ASSESSEE VALUED THE CLOSING STOCK OF RUNNER RISER A T RS.7,800/- PER MT WHICH IS AT A HIGHER SIDE. THEREFORE, EVEN IF FOR S AKE OF ARGUMENTS EXCISE DUTY IS TAKEN INTO ACCOUNT WHICH WAS 15% THE N EVEN RS.840/- CAN BE ADDED AND TOTAL OF THE TWO IS MUCH LESS THAN RS.7,800/- PER MT. FURTHER, EXCISE DUTY CAN BE CONSIDERED ONLY ON THE CLEARANCE OF THE GOODS WHEREAS THIS SCRAP FOR AND IN FACT WAS OWN GE NERATED SCRAP KEPT FOR RECYCLED AND USED IN OWN MANUFACTURING PROCESS ON WHICH EXCISE DUTY WILL COME INTO EFFECT AFTER FINAL PRODUCT IS M ANUFACTURED. FURTHER, 4 ITA NO.3841/AHD/2004 SINCE SUFFICIENT MODVAT CREDIT IS AVAILABLE AND NO EXCISE DUTY WAS AT ALL PAYABLE. FURTHER, IF THE MANUFACTURING EXPENSES ARE ADDED WHILE VALUING THE SCRAP AND THEN THE SCRAP IS AGAIN USED FOR MANUFACTURE OF FINAL PRODUCT THEN THE COST SHALL BE DOUBLY INCLUDE D IN SO FAR AS THE FINISHED PRODUCT WHICH WILL BE MANUFACTURED FROM TH E SCRAP. ONCE WITH THE SCRAP AND AGAIN THE FRESH MANUFACTURING EXPENSE S. AS AGAINST THIS, LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE ADDITION OF RS.76,152/- WAS RIGHTLY MADE BY THE ASSESSING OFFIC ER AS PER PROVISIONS CONTAINED IN SECTION 145A OF THE INCOME TAX ACT, 19 61. THEREFORE, THE ADDITION MADE BY ASSESSING OFFICER AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE IMPUGNE D ORDER, BE UPHELD. 7. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. AS PER THE PROVISION CONTAINED IN THE 145A, ASSESSEE WAS REQUIRED TO VALUE THE CLOSING STOCK ON A PRICE INCL USIVE OF EXCISE DUTY. THE ADDITION OF RS.76,152/- MADE BY THE ASSESSING O FFICER IS IN CONFORMITY WITH THE PROVISIONS CONTAINED UNDER SECT ION 145A OF THE INCOME TAX ACT, 1961. WE THEREFORE, DECLINED TO INT ERFERE THE GROUND NO.2 AS REJECTED. 8. WITH REGARD TO ADDITION OF RS.7,57,040/- CONTEST ED IN GROUND NO.3, IN WRITTEN SUBMISSION, IT WAS CONTENDED THAT THE DE TAIL OF STOCK GIVEN TO BANK FOR OVERDRAFT FACILITIES DEFERRED FROM THE STO CK SHOWN IN THE BOOKS OF ACCOUNTS AND ON BEING ASKED, THE ASSESSEE STATED THAT THE ACCOUNTANT MADE A MISTAKE IN SUBMITTING THE STATEME NT TO THE BANK. IN THE WRITTEN SUBMISSION, IT WAS FURTHER SUBMITTED TH AT THERE IS NO DIFFERENCE IN THE STOCK OF RAW MATERIALS, MILD STEE L SCRAP AND RUNNER RISER. THE ASSESSEE DECLARED THE STORE OF RS.11,74, 332/- TO THE BANK WHEREAS AS PER THE BOOKS OF ACCOUNT ALSO THE STORES DECLARED WAS MORE OR LESS SAME. THE ASSESSEE HAS DECLARED MOULD RS.7 ,34,400/- TO THE BANK WHEREAS THE MOULD AS PER BALANCE SHEET WERE OF RS.19,83,908/-. 5 ITA NO.3841/AHD/2004 THEREFORE, DECLARATION GIVEN TO THE BANK WITH REGAR D TO MOULD CANNOT BE TREATED AS UNDISCLOSED. IT WAS FURTHER SUBMITTED TH AT THE ASSESSEE MAINTAINED DAY TO DAY STOCK REGISTER OF ALL THE ITE MS INCLUDING THAT OF STORES. A COMPLETE RECORD OF THE CONSUMPTION IS AL SO MAINTAINED FOR SHOWING MOULD STOCK OF STORE TO THE BANK. THEREFORE , NO ADDITION CAN BE MADE. FOR THIS RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE KOLKATA BENCH OF THE ITAT IN THE CASE OF C.M.ROY AN D SONS VS. ITO IN ITA NO.1503/KOL/2008 IN ASSESSMENT YEAR 2005-06 ORD ER DATED 13.02.2009, WHEREIN AFTER CONSIDERING THE CATENA OF JUDGEMENT, IT WAS ALSO HELD THAT WHEN PURCHASE AND SALE ARE FULLY VOU CHED NO DISCREPANCY IS FOUND IN THE DAY TO DAY STOCK REGISTER, NO ADDIT ION CAN BE MADE EVEN IF SOME HIGHER STOCK IS SHOWN IN THE BANK STATEMENT S FURNISHED TO THE BANK. IT WAS ALSO SUBMITTED THAT IN THE NEXT YEAR, ON THE SAME BASIS, ADDITION OF RS.7,57,040/- WAS MADE WHICH IS DELETED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS). ON THE OTHER HAND, MR.ANAND MOHAN LEARNED DEPARTMENTAL REPRESENTATIVE APPEARED FOR REVENUE SUPPORTED THE ORDER OF THE AUTHORITY BELOW. 9. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. IT IS PERTAINING TO NOTE THAT NO DISCR EPANCY WHATSOEVER IS FOUND IN THE REGULAR BOOKS OF ACCOUNT, STOCK REGIST ER MAINTAINED BY THE ASSESSEE. THE DECISION OF HON'BLE ITAT BENCH OF KOL KATA IN ITA NO.1503/KOL/2008 IN ASSESSMENT YEAR 2005-06 ORDER D ATED 13.02.2009 IS SQUARELY COVERED ON THE FACTS OF THE ASSESSEES CASE. APART FROM THIS, IT APPEARS THAT THE ASSESSEE HAS TRANSFERRED DYES A ND MOULD OF RS.16,38,793/- IN THE FIXED ASSETS SCHEDULED AS ADD ITION DURING THE YEAR. IN VIEW OF THIS, IN OUR OPINION, NO ADDITION IS CARED FOR. THE ADDITION OF RS.7,57,040/- IS ACCORDINGLY, DELETED. THIS GROU ND OF APPEAL IS ALLOWED. 10. WITH REGARD TO LAST GROUND ON BEHALF OF THE ASS ESSEE, IT WAS SUBMITTED THAT THE WASTAGE CLAIMED IN THIS YEAR IS LESS THEN WASTAGE 6 ITA NO.3841/AHD/2004 CLAIMED AND ALLOWED IN THE IMMEDIATELY NEXT YEAR UN DER SECTION 143(3). IN THE NEXT YEAR, WASTAGE WERE 11.9% WHEREAS THIS Y EAR IT WAS 9.36%. IN VIEW OF THIS ADDITION TO THE EXTENT OF 75,000/- SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO BE DELETED. 11. SHRI ANAND MOHAN LEARNED DEPARTMENTAL REPRESENT ATIVE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 12. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE AUTHORITY BELOW. THE ASSESSING OFFICER MADE ADDITION OF RS.1,00,000/ -. IN THE IMPUGNED ORDER, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE SAME TO RS.75,000/-. IN THE IMPUGNED ORDER, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS STATED THAT DIFFERENCE IN WASTAGE AND DIFFERENCE IN VALUE OF QUANTITY OF THE RUNNER AND R ISER IS NOT SATISFACTORILY EXPLAINED. IN THE IMPUGNED ORDER, THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) HAS MENTIONED THAT THE CLAIM OF PERCE NTAGE OF WASTAGE OF 9.32% IS ON HIGHER SIDE IN THIS LINE OF BUSINESS AS COMPARED TO SIMILAR OTHER MANUFACTURING CONCERNED. IN VIEW OF THIS, WE INCLINED TO UPHOLD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THIS GROUND OF APPEAL IS REJECTED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 23 RD DECEMBER, 2009. SD/- SD/- (D.C. AGRAWAL) ( T.K. SHARMA) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED: 23/12/2009 PARAS# 7 ITA NO.3841/AHD/2004 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.