ITO, CHITTORGARH V. M/s. Exclusive Marmo Pvt. Ltd., CHITTORGARH

ITA 385/JODH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70316 (ITAT-JODHPUR)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 12-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN
• Keywords: Business income
• Section: 133A; 145

Judgement Text

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.385/JODH/2013 (A.Y. 2008-09) ITO, WARD-1, VS. M/S. EXCLUSIVE MARMOT PVT. LTD. , CHITTORGARH. G-21, RIICO INDUSTRIAL AREA, CHITTORGARH. PAN NO. AAACE 3328 G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI AMIT KOTHARI. DEPARTMENT BY : SHRI N.A. JOSHI- D.R. DATE OF HEARING : 21/11/2013. DATE OF PRONOUNCEMENT : 25/11/2013. O R D E R PER N.K.SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 28/03/2013 OF LD. CIT (A), UDAIPUR. THE ONLY GROUN D RAISED IN THIS APPEAL READS AS UNDER:- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN:- 2 1. DELETING THE TRADING ADDITION OF RS. 44,96,730/- DE SPITE THE FACT THAT THE LD. CIT(A) HIMSELF HAS UPHELD THE PROVISIONS OF SEC TION 145(3) OF THE I.T. ACT. IN THE CASE OF THE ASSESSEE & FURTHER ERRED IN DELETING THE ADDITION BY MERELY OBSERVING THAT INVESTMENT IN EXCESS STOCK IS NOT INCOME FROM OTHER SOURCES AND ADDITION IS MADE ON ESTIMATED BAS IS, DESPITE THE FACT THAT THE AO HAS MADE ADDITION BY ESTIMATING THE TUR NOVER IN WELL REASONED MANNER. THAT THE APPELLANT CRAVES TO ADD, AMEND, ALTER, D ELETE OR MODIFY ANY OR ALL THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FI LED ITS RETURN OF INCOME THROUGH E-FILING ON 27/09/2008 DECLARING AN INCOME OF RS. 11,37,250/-, WHICH WAS PROCESSED UNDER SECTION 143( 1)(A) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT ) ON 16/06/2009. IN THIS CASE, A SURVEY UNDER SECTION 133A OF THE ACT WAS CA RRIED OUT ON 10/03/2008, THEREFORE, CASE WAS SELECTED FOR SCRUTI NY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NO TICED THAT AT THE TIME OF SURVEY OPERATION, CERTAIN DISCREPANCIES WERE FOU ND BY THE SURVEY TEAM AND DUE TO FAILURE ON THE PART OF THE ASSESSEE TO E XPLAIN SUCH DISCREPANCIES, AN AMOUNT OF RS. 25,54,148/- WAS SUR RENDERED AS UNDER:- 1. EXCESS CASH FOUND ON THE DATE OF SURVEY RS. 01 ,10,588/- 2. EXCESS MARBLE BLOCK ON PHYSICAL VERIFICATION R S. 15,14,830/- 3. EXCESS STOCK OF MARBLE SLABS ON PHYSICAL VERIF ICATION RS. 09,03,730/- 4. UNDISCLOSED STOCK OF CONSUMABLES RS. 25, 000/- ----------------- TOTAL RS. 25,54,148/- ----------------- 3 3. AGAINST THE ABOVE MENTIONED SURRENDERED INCOME WHI LE FILING THE RETURN, THE ASSESSEE HAD DECLARED A SUM OF RS. 18,3 5,571/- AS UNDER:- 1. EXCESS CASH RS. 1,10,588/- 2. EXCESS MARBLE BLOCKS RS. 9,13,486/- 3. EXCESS FINISHED GOODS RS. 8,11,437/- ------------------ TOTAL RS. 18,35,571/- ------------------- 4. THE ASSESSING OFFICER POINTED OUT THAT THE ASSESSE E HAD SHOWN TOTAL SALES OF RS. 1,32,43,820/- AND GROSS PROFIT (GP) OF RS. 20,92,767/-, WHICH INCLUDED DECLARED INCOME OF RS. 18,35,571/-. AS RE GARDS TO THE VARIATION IN THE SURRENDERED AMOUNT AT THE TIME OF SURVEY AND OFFERED FOR TAXATION IN THE INCOME-TAX RETURN, THE ASSESSEE SUBMITTED TH AT AS PER THE INVENTORY PREPARED BY THE SURVEY TEAM, EXCESS STOCK OF MARBLE BLOCK OF 9710.71 CU.FT. AND OF MARBLE SLABS OF 4430.05 SQ.MT R. WAS FOUND AND THE ASSESSEE SURRENDERED THE VALUE OF THE MARBLE BLOCK AT RS. 15,14,830/- BEING VALUED @ RS. 156/- PER CU.FT. AND STOCK OF MA RBLE SLABS OF RS. 9,03,730/- BEING VALUED @ 204/- PER SQ.MTR. THOSE R ATES WERE TAKEN ON ESTIMATE BASIS AND NOT ON ACTUAL COST BASIS. HOWEVE R, THE ACTUAL RATES OF MARBLE BLOCKS AS PER BOOKS OF ACCOUNTS WERE RS. 94. 07 PER CU.FT. AND OF MARBLE SLABS WERE RS. 183.18 PER SQ.MTR. THEREFORE , THE ASSESSEE DECLARED THE VALUE OF EXCESS STOCK FOUND AT THE TIM E OF SURVEY BEING 4 VALUED AT THE ACTUAL COST PRICE AS PER BOOKS OF ACC OUNTS, WHICH WAS ONLY FAIR AND REASONABLE. THE ASSESSING OFFICER, HOWEVE R, DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE BY STATING THAT DURING THE COURSE OF SURVEY PROCEEDINGS SHRI PRADEEP BHANDARI HIMSELF HAD SURRE NDERED RS. 25,54,148/-, WHICH WAS TO BE ADDED DIRECTLY TO THE INCOME AS INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER POINTED OUT THAT THE STOCK IN TRADE OVER TURNOVER RATIO SHOWN BY THE ASSESSEE AT 8.87%, BUT STOCK OF RS. 8,11,437/- OF FINISHED GOODS FOUND DURING THE COURS E OF SURVEY WAS INCLUDED AND IF THE SAME IS REDUCED, THEN THE STOCK IN TRADE RATIO/TURNOVER RATIO CAME TO 2.74%. THE ASSESSING OFFICER, WORKED OUT THE UNDISCLOSED TURNOVER UTILIZED BY THE ASSESSEE O N THE UNDISCLOSED STOCK OF FINISHED GOODS OF RS. 9,03,730/- BY APPLYING THE RATIO OF 2.74% AT RS. 3,29,82,847/-. THE ASSESSING OFFICER APPLIED THE A VERAGE GP RATE OF 12.10% ON THE BASIS OF GP RATES FOR THE A.Y. 2007-0 8 & 2006-07, WHICH WERE AT 12.84% & 11.36% RESPECTIVELY. IN THIS MANN ER, GP ON UNDISCLOSED STOCK WAS WORKED OUT AT 39,90,924/-. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECT ION 145(3) OF THE ACT AND COMPUTED THE INCOME OF THE ASSESSEE AT RS. 68,2 7,170/- IN THE FOLLOWING MANNER:- 5 S.NO. HEAD WISE PARTICULARS AS DISCUSSED ABOVE AMOUNT . 1. GROSS PROFIT @ 12.10% ON THE DISCLOSED TURNOVER RS. 1,32,64,549/- (AS DISCUSSED IN PARA-7 ABOVE) RS. 16,04,768/ - 2. LESS: EXPENSES CLAIMED IN THE P & L ACCOUNT TO CALCULATE N.P. FROM G.P. (AS DISCUSSED IN PARA-7 ABOVE) ( - ) RS. 13,22,709/ - 3. UNDISCLSOED G.P. EARNED ON UNDISCLOSED STOCK OF FINISHED OF GOODS OF RS. 9,03,730/- FOUND DURING THE COURSE OF SURVEY @ 12.10% (AS DISCUSSED IN PARA-6 ABVOE) (+) RS. 39,90,924/ - 4. THE UNDISCLOSED STOCK OF ;MARBLE BLOCKS AND FINISHED GOODS AND EXCESS CASH FOUND DURING THE COURSE OF SURVEY AND TO BE ADDED BACK AS INCOME FROM OTHER SOURCES (AS DISCUSSED IN PARA-4 ABOVE) (+) RS. 25,54,188/ - TOTAL INCOME RS. 68,27,171/ - OR RS. 68,27,170/- 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LEARNED CIT(A) AND SUBMITTED THAT THE RATIO OF POWER COST P ER UNIT OF PRODUCTION DEPENDS ON MANY FACTORS, BUT THE ASSESSING OFFICER CONSIDERED ONLY ONE FACTOR I.E. PRODUCTION BY WAY OF CUTTING OF MARBLE BLOCKS ON GANGSAW MACHINE AND IGNORED THAT MANY MACHINES WERE NOT DIR ECTLY RELATED TO PRODUCTION LIKE GANTRY CRANE, DRESSING MACHINE, MAR BLE CUTTING MACHINE AND MUD PUMP ETC. IT WAS FURTHER STATED THAT POWER CONSUMPTION ALSO VARIES FROM LOT TO LOT DEPENDING UPON HARDNESS OF T HE MARBLE BLOCKS, WHICH CAME FROM DIFFERENT PLACES OF MINES. IT WAS ALSO STATED THAT CONSUMPTION OF BLADES AND SEGMENTS DEPENDS ON SO MA NY FACTORS AND 6 ONCE THE BLADES ARE FIXED ON MACHINE, THE SAME ARE TREATED AS CONSUMED. IT WAS EMPHASIZED THAT COMPLETE DETAILS WERE FURNIS HED BY THE ASSESSEE AS DESIRED BY THE ASSESSING OFFICER AND THE STOCK R EGISTER WAS DULY MAINTAINED. IT WAS CONTENDED THAT THE ASSESSEE DUL Y MAINTAINED DAY TO DAY RECORDS OF ALL TRANSACTIONS OF PURCHASES & SALE S AND EXPENSES AND THAT NO DEFECT IN THE BOOKS OF ACCOUNTS, WHICH WAS DULY AUDITED AS POINTED OUT BY THE ASSESSING OFFICER. IT WAS FURTHER STATED TH AT THE ASSESSEE HAD ALREADY OFFERED A SUM OF RS. 18,35,571/- OUT OF RS. 25,54,148/- BEING THE VALUE OF EXCESS STOCK AND CASH FOUND DURING SURVEY FOR TAXATION IN ITS RETURN OF INCOME AND HAD GIVEN DUE EXPLANATION FOR DIFFERENTIAL AMOUNT OF RS. 7,18,577/- IN THE STOCK VALUATION BASED ON T HE ACTUAL COST SHEET TO THE EFFECT THAT AT THE TIME OF SURVEY, THE UNIT RAT E WAS TAKEN ON AD-HOC BASIS INSTEAD OF ACTUAL COST. IT WAS ALSO STATED T HAT THE STATEMENT RECORDED DURING THE SURVEY WAS SUBJECT TO REBUTTAL AND THAT THE ASSESSEE CAN FILE HIS RETURN OF INCOME WITHOUT DISCLOSING, I F THE SAME IS EXPLAINABLE. IT WAS CONTENDED THAT THE ASSESSEE FU RNISHED THE COST SHEET ON RECORD WITH PLAUSIBLE EXPLANATION, BUT THE ASSES SING OFFICER SIMPLY BRUSHED ASIDE THE SAME WITHOUT POINTING OUT ANY MIS TAKE THEREIN, THEREFORE, THERE WAS NO POINT IN MAKING ADDITION. IT WAS EXPLAINED THAT THE GOODS PURCHASED OR SOLD BY THE ASSESSEE WERE BE ING PASSED THROUGH 7 SALE TAX CHECK POSTS, WHERE COPY OF THE BILLS WERE KEPT AND THE VALUE AND QUANTITY OF GOODS WERE VERIFIED FOR EACH AND EVERY CONSIGNMENT. 6. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE UPHELD THE REJECTION OF THE BOOKS OF ACCOU NTS UNDER SECTION 145(3) OF THE ACT BY OBSERVING THAT THE BOOKS OF AC COUNTS MAINTAINED BY THE ASSESSEE SUFFERED FROM VARIOUS DEFECTS. AS REGARDS TO THE TRADING ADDITION, LD. CIT(A) OB SERVED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ESTIMATING T HE UNDECLARED TURNOVER AT RS. 3,29,82,847/- OVER AND ABOVE THE DECLARED TU RNOVER OF RS. 1,32,62,549/-. HE WAS OF THE VIEW THAT SUCH A HIGH PITCH ESTIMATION OF TURNOVER WITHOUT ANY BASIS OR EVIDENCE WAS QUITE UN JUSTIFIED AND UNREASONABLE. LD. CIT(A) POINTED OUT THAT THE CAPA CITY OF THE UNIT WAS ONLY 85000 CU.FT. FOR CUTTING OF MARBLE BLOCKS AND AS PER AUDIT REPORT AND BALANCE SHEET, THE ASSESSEE HAD SHOWN PRODUCTION OF 55091.98 CU.FT., WHICH WAS APPROXIMATELY 64.80% OF TOTAL CAPACITY. THEREFORE, THE ENHANCEMENT OF 3.5 TIMES OF DECLARED TURNOVER WAS V ERY UNREASONABLE. LD. CIT(A) ALSO POINTED OUT THAT THE UNIT OF THE AS SESSEE WAS SITUATED AT RIICO INDUSTRIAL AREA WHERE THE COMMERCIAL TAX DEPA RTMENT HAD ESTABLISHED A CHECK POST AND EACH CONSIGNMENT OF SA LE WAS BEING VERIFIED 8 AT THE SALES TAX CHECK POST, WHERE RECORD OF EACH S ALES BILL WAS MAINTAINED AND NO CONSIGNMENT COULD BE DISPATCHED W ITHOUT PRIOR DEPOSIT OF SALES TAX AT SUCH CHECK POSTS AND THERE WAS NO E VIDENCE OF ANY UNDECLARED TURNOVER. ACCORDINGLY, LD. CIT(A) HELD THAT THE ESTIMATION OF TURNOVER AT RS. 4,62,45,396/- AS AGAINST DISCLOSED TURNOVER OF RS. 1,32,43,820/- WAS UNJUSTIFIED AND UNREASONABLE, THE REFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 37,78,110/- BY ESTIMATING THE GP RATE AT 12.10% ON THE ESTIMATED T URNOVER OF RS. 3,29,82,847/- WITHOUT CONSIDERING THE EXPLANATION O F THE ASSESSEE. LD. CIT(A) OBSERVED THAT THE ASSESSEE HAD DULY EXECUTED SURRENDERED INCOME OF RS. 18,35,571/- IN THE P & L ACCOUNT, THE SURREN DERED INCOME WAS THE BUSINESS INCOME OF CURRENT YEAR AND IF IT IS TO BE TAKEN INTO CONSIDERATION, THE GP OF THE ASSESSEE WAS AT RS. 36,40,998/- ON TH E DECLARED GROSS SALES OF RS. 1,32,43,820/-. THE LD. CIT(A) FURTHER OBSER VED THAT IF THE GP RATE ESTIMATED AT 12.10% WAS TO BE APPLIED ON THE DECLAR ED TURNOVER, IT WOULD COME TO RS. 16,04,768/- ONLY. THUS, IT WAS EVIDENT THAT THE GP DECLARED BY THE ASSESSEE WAS HIGHER THAN THE GP ESTIMATED BY THE ASSESSING OFFICER. LD. CIT(A) ALSO OBSERVED THAT INCOME OF R S. 18,35, 571/- WAS DECLARED BY THE ASSESSEE ON THE BASIS OF EXCESS STO CK AND CASH FOUND AT THE BUSINESS PREMISES, THEREFORE, IT WAS ESSENTIALL Y THE BUSINESS INCOME 9 OF THE ASSESSEE. LD. CIT(A) POINTED OUT THAT THE PR OVISIONS OF SECTION 145 OF THE ACT WERE INVOKED BY THE ASSESSING OFFICER ON THE BASIS OF INFERENCE DRAWN THAT THE PROFIT OF BUSINESS HAD BEEN SUPPRESS ED ON ACCOUNT OF EXCESS STOCK AND CASH WAS FOUND AT THE TIME OF SURV EY, WHICH PROVED THAT THE ALLEGED DECLARED INCOME WAS BUSINESS INCOME. H E, THEREFORE, OPINED THAT THE ADDITIONAL INCOME OFFERED FOR TAXATION ON ACCOUNT OF EXCESS CASH AND STOCK FOUND DURING THE COURSE OF SURVEY OPERATI ON WAS THE BUSINESS INCOME AS THERE WAS NO OTHER SOURCE OF INCOME. LD. CIT(A) DELETED THE ADDITION OF RS. 44,96,730/- MADE BY THE ASSESSING O FFICER . NOW THE DEPARTMENT IS IN APPEAL. 7. LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE AS SESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSM ENT ORDER DATED 13/12/2010. 8. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LEARNED CIT(A). 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT 10 CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE OFFE RED A SUM OF RS. 18,35,571/- OUT OF RS. 25,54,148/- BEING THE VALUE OF EXCESS STOCK AND CASH FOUND DURING THE COURSE OF SURVEY FOR TAXATION IN ITS RETURN OF INCOME AND HAD GIVEN PROPER EXPLANATION FOR DIFFERENTIAL A MOUNT OF RS. 7,18,577/-, WHICH WAS MAINLY ON ACCOUNT OF THE DIFF ERENCE IN RATES APPLIED ON ESTIMATE BASIS AT THE TIME OF SURVEY AS AGAINST THE ACTUAL RATES MENTIONED IN THE BOOKS OF ACCOUNTS . THEREFORE, IN OUR OPINION, THE EXPLANATION OF THE ASSESSEE WAS A PLAUSIBLE AND RIG HTLY ACCEPTED BY LD. CIT(A). IN THE PRESENT CASE, THE ASSESSING OFFICER ESTIMATED THE UNDECLARED TURNOVER AT RS. 3,29,82,847/-WHICH WAS A PPROXIMATELY 3.5 TIMES OF THE TURNOVER DECLARED AS PER BOOKS OF ACCO UNTS. IN OUR OPINION, TURNOVER ESTIMATED BY THE ASSESSING OFFICER WAS UNF AIR/UNREASONABLE AND UNJUSTIFIED BECAUSE THE SAID ESTIMATE WAS VERY MUCH ABOVE THE CAPACITY OF THE UNIT OF THE ASSESSEE. IN THE INSTANT CASE, NOTHING WAS BROUGHT ON RECORD THAT THE ASSESSEE WAS HAVING SUPPRESSED SALE S, MOREOVER, THE UNIT OF THE ASSESSEE WAS SITUATED IN THE INDUSTRIAL AREA WHERE THE COMMERCIAL TAX DEPARTMENT HAD ESTABLISHED A CHECK POST AND EAC H CONSIGNMENT OF SALE WAS BEING VERIFIED. SO, IT WAS VERY DIFFICULT TO DISPATCH ANY CONSIGNMENT WITHOUT PRIOR PAYMENT OF SALES TAX AT S UCH CHECK POST, THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ESTIMATING THE 11 TURNOVER AND MAKING THE ADDITION ON THE BASIS OF TH E SAID ESTIMATED UNDECLARED TURNOVER. IN OUR OPINION, LD. CIT(A) RI GHTLY DELETED THE IMPUGNED ADDITION MADE BY THE ASSESSING OFFICER. W E DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 10. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISS ED. (ORDER PRONOUNCED IN THE COURT ON 25 TH NOVEMBER, 2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25 TH NOVEMBER , 2013. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.