ACIT CIR 6(3), MUMBAI V. H.K. IMPEX P. LTD, MUMBAI

ITA 4019/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48693 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H : MUMBAI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA. NO. 4019/MUM/2009 ASSESSMENT YEAR 2006-2007 ACIT, CIR. 6 (3) MUMBAI 400 020 VS. M/S. HK IMPEX P. LTD. MUMBAI 400 013 PAN AABCH3542G (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI GOLI SRINIVAS RAO (CIT-DR) FOR RESPONDENT : SHRI JAYANT R. BHATT ORDER PER V.DURGA RAO, J.M. 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE CIT(A)-VI, MUMBAI DATED 27-04-2009 FOR THE ASSESSMENT YEAR 2006-2007. THE ONLY GROUND URGED BY THE REVENU E READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LEARNED CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE ON ACCO UNT OF SCRAP GENERATION TO THE EXTENT OF 41% OF RAW MATERIAL CON SUMED AMOUNTING TO RS.5,74,23,943/- AND IGNORING THEREBY THE FACTS OF COMPARABLE TRADE BROUGHT OUT BY THE ASSESSING OFFIC ER WHEREIN THE SCRAP GENERATED IS IN THE RANGE OF 19% TO 22%. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE AO, I N THE ASSESSMENT ORDER, HAD NOTED THAT THE ASSESSEE HAD UNDER ESTIMA TED ITS PROFITS BY SHOWING EXCESS SCRAP. AS ACCORDING TO HIM, THE SCRA P SHOULD BE IN THE RANGE OF 18% TO 22% IN MANUFACTURING OF STEEL UTENS ILS. HE HAD FURTHER NOTED THAT THE ASSESSEE HAD NOT SUBMITTED Q UANTITIATE DETAILS OF PURCHASES, CONSUMPTION, CLOSING STOCK AND DETAIL S OF SCRAP GENERATION TO SUBSTANTIATE ITS OWN CLAIM. IN THE A BSENCE OF THE SAID DETAILS AND FOLLOWING THE DETAILED REASONING GIVEN BY HIS PREDECESSOR IN ASSESSMENT ORDER FOR AY 2005-06, THE AO ESTIMATE D THE PROFIT AND MADE AN ADDITION OF RS. 5,74,23,943/- TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE CIT(A) DIRECTED THE AO TO DELETE THE ADDITION ITA NO. 4019/MUM/09 M/S HK IMPEX P. LTD. 2 MADE FOLLOWING THE EARLIER YEARS (2005-06) ORDER I N ASSESSEES OWN CASE PLACING RELIANCE ON THE DECISION OF ITAT, AMRI TSAR IN THE CASE OF JCIT VS. VXL 9(INDIA) LTD. IN ITA NO. 54/ASR/1999. 2. AT THE TIME OF HEARING, LEARNED COUNSEL, APPEAR ING ON BEHALF OF THE ASSESSEE, HAS SUBMITTED THAT THE ISSU E INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF ITAT IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2005-06 IN ITA. NO. 4465/M/2008 DATED 28-2- 2011. THE LEARNED DR HAS FAIRLY ACCEPTED THAT THE GROUND URGED BY THE REVENUE IS COVERED BY THE SAID DECISION. 3. AFTER HEARING THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE I SSUE IS COVERED BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR 200 5-06 (SUPRA) WHEREIN THE ITAT HELD AS UNDER:- 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED TH E RIVAL CONTENTIONS CAREFULLY. THE ASSESSEE IS IN THE BUSIN ESS OF MANUFACTURING OF UTENSILS BY USING RAW MATERIAL SUC H AS STAINLESS STEEL PATTA/ PATTI. THE ASSESSEE HAD SHOW N WASTAGE OF 41.61%. THE AO HAS ALLOWED WASTAGE ONLY AT 25%. AS PER HIM, THE WASTAGE WAS ONLY IN CUTTING OF THE SQUARE SHAPE PATTA/ PATTI IN WHICH ONLY THE CORNERS WERE LOST WHICH CAME TO 2 1.5%. HE HAS OBSERVED THAT THE WASTAGE COULD NOT EXCEED IN A NY CASE 25% AND THEREFORE ALLOWED 25% AND THE BALANCE WASTA GE SHOWN WAS TREATED AS FINISHED PRODUCTS SOLD UNACCOU NTED. IN THIS PROCESS ADDITION HAD BEEN MADE OF RS.3,64,27,4 08/-. THE CLAIM OF THE ASSESSEE IS THAT THE PATTA/ PATTI ARE NOT OF THE SQUARE SHAPE. THESE ARE IRREGULAR IN SHAPE WHICH IS SUPPORTED BY PHOTOGRAPHS PLACED IN THE PAPER BOOK. THEREFORE IN THE CUTTING ITSELF THERE IS LOT OF WASTAGE. THERE IS AL SO WASTAGE WHEN THE CIRCULAR PATTA/ PATTI IS PASSED THROUGH A VERY HIGH PRESSURE AND IN THE PROCESS OF BREAKAGE OCCURS MANY A TIMES. THERE IS SOME WASTAGE IN THE MANUFACTURING ALSO. THE ASSESSE E HAD ALSO SUBMITTED THAT ENTIRE PRODUCTION PROCESS AS WELL AS EXPORT IS MONITORED BY THE EXCISE AUTHORITIES WHO ALLOW EXPOR T ONLY AFTER PROPER VERIFICATION. THE ASSESSEE HAD FILED A COPY OF LETTER DATED 14.12.2004 OF THE SUPERINTENDENT, CENTRAL EXCISE IN WHICH INPUT OUTPUT RATIO IN CASE OF PRODUCTION OF GOODS OUT OF SS PATTA PATTI HAD BEEN ACCEPTED AS 1.73 : 1 WHICH GIVES WASTAGE O F 42.19%. THE ASSESSEE HAS ALSO REFERRED TO THE DECISION OF T HE TRIBUNAL IN CASE OF JCIT VS VXL INDIA LTD. (SUPRA) IN WHICH IN AN IDENTICAL SITUATION ON THE BASIS OF LETTER OF EXCISE AUTHORIT IES WASTAGE UPTO 42% HAVE BEEN ACCEPTED. THUS THE WASTAGE IS SUPPORT ED BY CERTIFICATE FROM THE EXCISE AUTHORITIES WHO ARE IN CHARGE OF MONITORING THE ENTIRE PRODUCTION PROCESS AND THE EX PORT OF GOODS BY THE ASSESSEE. THEREFORE THE WASTAGE SHOWN BY THE ASSESSEE AT 41.67% CANNOT BE HELD TO BE EXCESSIVE. WE THEREF ORE SEE NO ITA NO. 4019/MUM/09 M/S HK IMPEX P. LTD. 3 INFIRMITY IN THE ORDER OF CIT(A) IN ALLOWING THE RE LIEF AND THE SAME IS THEREFORE UPHELD. 2. SINCE THE ISSUE UNDER CONSIDERATION IS IDENTICA L TO THAT OF THE CASE DECIDED BY THE ITAT IN ASSESSEES OWN CASE FOR AY 2005-06, WE RESPECTFULLY FOLLOW THE DECISION OF THE COORDINA TE BENCH OF THE TRIBUNAL IN THAT YEAR AND CONFIRM THE ORDER OF THE CIT(A) DISMISSING THE APPEAL FILED BY THE REVENUE. 3. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 2 7 TH DAY OF APRIL, 2011. SD/- SD/- (R.S.SYAL) (V.DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATE 27 TH APRIL, 2011 VBP/- COPY TO 1. ACIT, CIRCLE 6 (3), 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 020. 2. M/S. HK IMPEX P. LTD., 459-A/2, SHAH & NAHAR IND S. ESTATE, DHANRAJ MILLS COMPOUND, SITARAM JADHAV MARG, LO WER PAREL (W), MUMBAI 400 013 PAN AABCH3542G 3. CIT(A)-VI, MUMBAI 4. CIT, CITY-6, MUMBAI 5. DR H BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI