M/s. Lipi Boilers Ltd., Meerut V. DCIT, Ghaziabad

ITA 4062/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3378 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 19-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI KANT GUPTA SENIOR
• Keywords: Rule of consistency
• Section: 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE HONBLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4062/DEL./2015 (ASSESSMENT YEAR : 2011-12) M/S. LIPI BOILERS LIMITED, VS. DCIT, CENTRAL CIRCL E, C/O M/S. MALIK & CO., GHAZIABAD. 305, THAPAR NAGAR, MEERUT. (PAN : AAACL1650L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY MALIK, ADVOCATE REVENUE BY : SHRI RAVI KANT GUPTA, SENIOR DR DATE OF HEARING : 07.02.2018 DATE OF ORDER : 19.02.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. LIPI BOILERS LIMITED (HEREINAFT ER REFERRED TO AS THE ASSESSEE COMPANY) BY FILING TH E PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 03.03. 2015 PASSED BY LD. CIT(APPEALS), GHAZIABAD QUA THE ASSESSMENT YEAR 2011-12 ON THE GROUNDS INTER ALIA THAT :- 1. THAT NOTICES OF HEARING ISSUED ON VARIOUS DATES ISSUED BY THE APPELLATE AUTHORITY WERE NOT SERVED O N THE ASSESSEE COMPANY AS REQUIRED U/S 282 OF IT. ACT. TH US ON FACTS AND IN LAW NON-REPRESENTATION BEFORE THE LEAR NED ITA NO.4062/DEL./2015 2 APPELLATE AUTHORITY DID NOT CONSTITUTE A VALID AND LEGAL GROUND WARRANTING AN EX-PARTE DECISION OF THE APPEA L. 2. THAT THE INVENTORY OF STOCK AS PER BOOKS OF ACCO UNTS WAS MADE ON THE METHOD OF ACCOUNTING REGULARLY EMPL OYED IN ALL THE PRECEDING YEARS. SUCH METHOD OF ACCOUNTI NG ADOPTED BY THE ASSESSEE WAS ACCEPTED BY THE DEPARTM ENT IN ALL THE PRECEDING YEARS. THUS ON FACTS AND IN LAW T HE INVENTORY WORKED OUT AS PER BOOKS OF ACCOUNTS OUGHT TO HAVE BEEN ACCEPTED AS CORRECT IN ACCORDANCE TO THE RULE OF CONSISTENCY. 3. THAT THE ASSUMED DIFFERENCE BETWEEN PHYSICAL STO CK AND INVENTORY AS WORKED OUT BY THE DEPARTMENT HAD B EEN FULLY EXPLAINED AND RECONCILED IN THE COURSE OF PRO CEEDING BEFORE THE AUTHORITIES BELOW. 4. THAT ON FACT AND IN LAW THERE WAS NO LEGAL WARRA NT TO MAKE ANY ADDITION REPRESENTING THE ASSUMED DIFFEREN CE BETWEEN THE PHYSICAL STOCK AS ON 31.3.2010 AND THE SAME FIGURE AS ON 7.4.2010. THE ADDITION OF RS.24,08,875 /- MADE BY THE A.D. AND SUSTAINED BY THE LD. CIT(A) DESERVE S TO BE DELETED BEING VOID, ILLEGAL AND UNTENABLE ON FACTS AND IN LAW AND AT ANY RATE VERY EXCESSIVE. 5. THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, NO ADDITION WAS CALLED FOR OUT OF FREIGHT AND CARTA GE. HE ADDITION OF RS.9,46,909/- DESERVES TO BE DELETED BE ING VOID, ILLEGAL AND UNTENABLE ON FACTS AND IN LAW. 6. THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, NO ADDITION WAS CALLED FOR OUT OF FREIGHT AND CARTA GE. THE ADDITION OF RS.1,00,000/-DESERVES TO BE DELETED BEI NG VOID, ILLEGAL AND UNTENABLE ON FACTS AND IN LAW. 7. THAT ON FACT AND IN LAW INTEREST WAS NOT CHARGEA BLE. LEVY OF INTEREST U/S 234A, 2348, 234C & 2340 WAS IL LEGAL WITHOUT JURISDICTION AND AT ANY RATE VERY EXCESSIVE . 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ON THE BASIS OF SEARCH AN D SEIZURE OPERATION CONDUCTED UNDER SECTION 132 OF THE INCOME -TAX ACT, 1961 (FOR SHORT THE ACT) AT THE FACTORY AND RESIDENTIA L PREMISES OF THE ITA NO.4062/DEL./2015 3 UTTAM GROUP OF CASES, GHAZIABAD, NOTICE U/S 153AWAS ISSUED FOR AYS 2005-06 TO 2010-11 AND NOTICE U/S 142 (1) FOR A Y 2011-12 ON 18.01.2012 FOR FILING A RETURN, WHICH THE ASSESSEE HAD FILED ON 17.02.2012 DECLARING ITS INCOME AT RS.2,65,50,750/- . THEN NOTICES U/S 143 (2) AND 142 (1) ALONG WITH QUESTIONNAIRE WE RE ISSUED TO THE ASSESSEE. AS PER THE INVENTORY, STOCK OF RAW MATER IAL, COSTING MATERIAL AND STRUCTURAL STEEL WAS NOTICED OF RS.7,0 7,689,571/- AND FOUND THE EXCESS STOCK OF RS.2,30,89,594/-. DEPUTY MANAGER OF ACCOUNTS ADMITTED THE EXCESS STOCK OF RS.2,30,89,59 4/-. ASSESSEE COMPANY SOUGHT TO EXPLAIN THE EXCESS ACCOUNT AFTER RECONCILIATION. HOWEVER, CONTENTION OF THE ASSESSEE COMPANY THAT TH E INVENTORY CANNOT BE CONSIDERED AS ACTUAL INVENTORY BECAUSE TH E PHYSICAL STOCK TAKEN WAS MADE AT FACTORY PREMISES AT AURANGABAD AN D WORKED OUT AT RS.7,07,69,571/- BUT THE ACTUAL VALUE OF THE STO CK WAS RS.6,83,60,696/-. THEN DIFFERENCE BETWEEN PHYSICAL STOCK AND INVENTORY TAKEN CAME TO BE RS.24,08,875/-. AO AFTE R TAKING THE VALUATION OF THE STOCK AT RS.6,83,60,696/- AS PER A CCOUNTING PRINCIPLES AND METHOD OF VALUATION CONSISTENTLY BEI NG FOLLOWED BY THE ASSESSEE COMPANY DECLINED TO ACCEPT THE CONTENT ION OF THE ASSESSEE AND MADE ADDITION OF RS.24,08,875/-. AO A LSO MADE ADDITION OF RS.9,29,702/- ON ACCOUNT OF FREIGHT AND CARTRIDGE HAVING BEEN MADE BY THE ASSESSEE COMPANY ON ESTIMAT E BASIS AS ITA NO.4062/DEL./2015 4 THE EXPENSES ARE IN ROUND FIGURES AND ALSO ASSESSEE HAD STATED THAT THE CONSUMABLES AND STORES HAVE NOT BEEN ACCOUNTED FOR DURING THE SEARCH TO THE TUNE OF RS.17,207/-, THUS, MAKING A T OTAL ADDITION OF RS.9,46,909/- ON ACCOUNT OF FREIGHT & CARTRIDGE (RS .9,29,702/-) AND CONSUMABLE & STORES (RS.17,207/-. AO ALSO MADE ADD ITION OF RS.1,00,000/- ON FREIGHT AND CARTRIDGE ON FAILURE O F THE ASSESSEE AS MOST OF THE VOUCHERS PRODUCED BY THE ASSESSEE WERE INTERNAL. 3. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO CONFIRMED THE ADDITIONS BY DISM ISSING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME U P BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 5. GROUND NO.1 IS GENERAL IN NATURE, HENCE DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. GROUNDS NO.2, 3 & 4 6. ADDITION OF RS.24,08,875/- IS ON ACCOUNT OF EXCE SS STOCK FOUND DURING THE SURVEY THEN TALLIED WITH THE BOOKS OF ACCOUNT. ITA NO.4062/DEL./2015 5 UNDISPUTEDLY, SURVEY WAS CONDUCTED ON 07.04.2010 AT THE OFFICE AND RESIDENTIAL PREMISES OF UTTAM GROUP OF CASES, G HAZIABAD. IT IS ALSO NOT IN DISPUTE THAT AS ON 31.03.2010, VALUE OF STOCK AS PER INVENTORY WAS OF RS.6,83,60,696/- DULY DESCRIBED AT PAGE 74 SCHEDULE VII, AVAILABLE AT PAGE 74 OF THE PAPER BOO K. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE SAME METHOD OF ACCOUNTING IN ALL THE PRECEDING YEAR S AND HAS BEEN ACCEPTED BY THE REVENUE. 7. MR. RAJORE IN HIS STATEMENT RECORDED DURING SEAR CH AND SEIZURE OPERATION STATED THAT STOCK AS PER PHYSICAL INVENTORY WAS CORRECT AND EXCESS ESTIMATED STOCK WORKED OUT ON TH E BASIS OF APPLYING GP RATE IS NOT CORRECT. 8. THE LD. AR FOR THE ASSESSEE COMPANY CHALLENGING THE IMPUGNED ORDER CONTENDED THAT SINCE NO PURCHASE OF STOCK HAS BEEN MADE BY THE ASSESSEE COMPANY BETWEEN 01.04.2010 TO 07.04.2010, THE INVENTORY AS ON 31.03.2010 AS PER AUDITED ACCOU NTS IS TO BE CONSIDERED AS CORRECT INVENTORY AS ON 07.04.2010. IT IS ALSO CONTENDED BY THE LD. AR FOR THE ASSESSEE COMPANY TH AT THE VALUE OF THE STOCK HAS BEEN TAKEN BY TAKING INTO ACCOUNT MOD VAT BY THE AO. 9. NO DOUBT, EXPLANATION FURNISHED BY THE ASSESSEE THAT THE VALUE OF THE STOCK AS PER INVENTORY INCLUDES MODVAT ALSO IS ITA NO.4062/DEL./2015 6 AVAILABLE AT PAGE 26 OF THE PAPER BOOK BUT HAS NOT BEEN CONSIDERED BY THE AO. SO, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER IS REQUIRED TO BE SENT BACK TO THE AO TO CONSIDER THE EXPLANATION FURNISHED BY THE ASSESSEE, IF THE VALUE OF THE STOC K AS TAKEN BY THE REVENUE INCLUDES MODVAT AND THEN DECIDE THE ISSUE ACCORDINGLY. SO, THIS GROUND IS DETERMINED IN FAVO UR OF THE ASSESSEE FOR STATISTICAL PURPOSES. GROUNDS NO.5 & 6 10. SO FAR AS ADDITION OF AN AMOUNT OF RS.9,29,702/ - AND RS.17,207/- ON ACCOUNT OF FREIGHT &CARTRIDGE AND CO NSUMABLES & STORAGES EXPENSES RESPECTIVELY MADE BY THE AO AND C ONFIRMED BY THE LD. CIT (A) ARE CONCERNED, BOTH AO AS WELL AS L D. CIT (A) HAVE RETURNED CRYPTIC FINDINGS, WHICH ARE MERELY ON THE BASIS OF ESTIMATION. SIMILAR IS THE CASE OF ADDITION OF RS. 1,00,000/- MADE ON ACCOUNT OF FREIGHT AND CARTRIDGE. AO NOTICED TH AT IN THE WORKING PROFIT BY THE ASSESSEE, CONSUMABLES AND STORES HAVE NOT BEEN ACCOUNTED FOR DURING THE SEARCH FOR RS.9,29,702 AND RS.17,207/- RESPECTIVELY. SIMILARLY, AO MADE AN ADDITION ON AC COUNT OF FREIGHT AND CARTRIDGE ON THE BASIS THAT MOST OF THE VOUCHER S PRODUCED BY THE ASSESSEE ARE INTERNAL. SO, ADDITION CANNOT BE MADE ON THE BASIS OF ESTIMATION PARTICULARLY WHEN THE ASSESSEE STATED TO HAVE ITA NO.4062/DEL./2015 7 FURNISHED EXPLANATION AND HAS AUDITED BALANCE SHEET . SO, WE ARE OF THE CONSIDERED VIEW THAT THIS ISSUE IS ALSO REQUIRE D TO BE REMITTED BACK TO THE AO TO PASS SPEAKING ORDER IN THE LIGHT OF THE EXPLANATION FURNISHED BY THE ASSESSEE. GROUND NO.7 11. GROUND NO.7 QUA LEVY OF INTEREST U/S 234A, 234B , 234C AND 234D OF THE ACT NEED NO SPECIFIC FINDING BEING CONS EQUENTIAL IN NATURE. 12. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE. PRESE NT APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 19 TH DAY OF FEBRUARY, 2018. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER DATED THE 19 TH DAY OF FEBRUARY, 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), GHAZIABAD. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.