ITO, Ludhiana V. M/s T. W. Fastener, Ludhiana

ITA 424/CHANDI/2011

• Counselvise Citation: 42421514 RSA 2011
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: ASHWANI KUMAR
• Keywords: Unexplained expenditure; Assessment record
• Section: 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.424/CHD/2011 ASSESSMENT YEAR: 2007-08 ITO, WARD 1(3), V M/S T.W.FASTENER, LUDHIANA. E-280, PHASE-IV, FOCAL POINT,LUDHIANA. PAN: AADFT-8510H (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT. JAISHREE SHARMA ASSESSEE BY : SHRI ASHWANI KUMAR DATE OF HEARING : 05.03.2012 DATE OF PRONOUNCEMENT : 22.03.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 21.02.2011 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION MADE BY AO ON ACCOUNT OF RAW MATERIAL PURCHASED/CONSUMED OUTSIDE BOOKS OF ACCOUNT/UNEXPLA INED INVESTMENT (RS.14,50,014/-) AND UNDISCLOSED GP ON T HE UNDISCLOSED RAW MATERIAL (RS.5,49,275/-) SIMPLY BY RELYING ON THE ASSESSEE'S SUBMISSION AND WITHOUT GIVING ANY COGENT REASON FOR DELETING THE ADDITION. 2. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE OUTS IDE BOOKS OF ACCOUNTS ON PACKING (RS.1,15,418/-) WHEN NO REPLY H AD BEEN FURNISHED BY ASSESSEE TO THE AO DURING ASSESSMENT P ROCEEDINGS AND WITHOUT ASSIGNING ANY REASON. 2 3. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE OUTS IDE BOOKS OF ACCOUNTS ON TELEPHONE & CONVEYANCE/ TRAVELING (RS.1 ,30,OOO/-) WHEN NO REPLY HAD BEEN FURNISHED BY ASSESSEE TO THE AO DURING ASSESSMENT PROCEEDINGS AND WITHOUT ASSIGNING ANY RE ASON. 4. THE ID. C1T(A) HAS ERRED IN DIRECTING AO TO RE-W ORK OUT THE ALLOWANCE OF SALARY PAYABLE TO PARTNERS AS PER PROV ISIONS OF SECTION 40B WHEN THE AO HAS ALREADY W ORKED OUT THE DISALLOWANCE ON THIS ACCOUNT IN VIEW OF PROVISIONS OF SECTION 40(B)(II) OF THE INCOME TAX ACT, 1961. 5. THAT THE ORDER OF THE LD. CTT(A) BE SET ASIDE AN D THAT OF THE A.O. BE RESTORED. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'DR' PLACED RELIANCE ON THE ASSESSMENT ORDER WHEREAS, LD . 'AR' PLACED RELIANCE ON THE ORDER PASSED BY THE CIT(A). 4. IN THE FIRST GROUND, THE REVENUE CHALLENGED THE DELETION OF ADDITION MADE BY THE AO ON ACCOUNT OF RAW MATERI AL PURCHASED/CONSUMED OUTSIDE THE BOOKS OF ACCOUNT AND CONSEQUENT UNDISCLOSED GP ON THE UNDISCLOSED RAW MA TERIAL ON THE GROUND OF ASSESSEE'S VERSION. IN THE COURSE OF ASSESSMENT PROCEEDINGS, AO FOUND THAT THE ASSESSEE HAD SHOWN LESS CONSUMPTION OF RAW MATERIAL VIZ-A-VIZ TH E CONSUMPTION OF ELECTRICITY FOR THE PURPOSE OF FINIS HED PRODUCTION. THE AO WORKED OUT THE SAME AT RS.45,72, 292/- AND SOUGHT ASSESSEE'S EXPLANATION FOR THE SAME. THE ASSESSEE WAS REQUIRED TO EXPLAIN THAT WHY THE GP @ 12% MAY NOT BE APPLIED AND ACCORDINGLY, RS.5,49,275/- M AY NOT BE BROUGHT TO TAX. THE ASSESSEE FILED DETAILED SUBM ISSIONS TO REBUT THE ISSUES RAISED BY THE AO. BEFORE THE LD. CIT(A), 3 DETAILED SUBMISSION WAS FILED BY THE ASSESSEE. LD. CIT(A) DELETED THE IMPUGNED ADDITIONS. RELEVANT FINDINGS OF THE CIT(A), AS CONTAINED IN PARA 4 & 4.1 ARE REPRODUCED HEREUNDER : 4. I HAVE GONE THROUGH THE CONTENTION OF THE APPEL LANT'S COUNSEL AND ALSO PERUSED THE RELEVANT ASSESSMENT RE CORD AS WELL AS WRITTEN SUBMISSIONS FILED BY THE APPELLANT IN TH IS REGARD. THE A.O. HAS MADE AN ADDITION BY LINKING THE QUANTUM OF PRODUCTION WITH ELECTRICITY CONSUMED IN A PARTICULAR MONTH AND HAS EXTRAPOLATED THE VALUE OF ACTUAL PRODUCTION. THOUGH THE APPELLANT'S COUNSEL HAS SUBMITTED THAT I THE A.O. H AS EXAMINED THE BOOKS AND ALL THE RELEVANT VOUCHERS, BOOKS OF A CCOUNTS F AND BILLS WHICH WERE PRODUCED BEFORE HIM FOR VERIFICATI ON AND HE HAS NOT BEEN ABLE TO PIN POINT ANY SPECIFIC DEFECT IN T HE ACCOUNTS. HE ALSO CONTENDED THAT REGULAR BOOKS OF ACCOUNTS ARE M AINTAINED AND GET AUDITED FROM THE CHARTERED ACCOUNTANTS. CONSIDE RING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , I AM INCLINED WITH THE COUNSEL'S VIEW THAT THE CONSUMPTION OF ELE CTRICITY VARIES BECAUSE OF SEVERAL FACTORS AND CANNOT BE CALCULATED ON AN UNIFORM BASIS WHICH HAS BEEN EXPLAINED BY HIM IN AP PEAL IN HIS SUBMISSIONS STAND TO LOGIC. NO SPECIFIC ITEM OF PUR CHASE OR SALE HAVING BEEN MADE BY THE APPELLANT HAS BEEN POINTED BY THE A.O. THEREFORE, KEEPING IN VIEW THE ABOVE FACTUAL POSITI ON OF THE CASE, THE ADDITION MADE OF RS. 14,50,014/- ON ACCOUNT OF EXCESS CONSUMPTION OF RAW MATERIAL IS NOT SUSTAINABLE AND IS HEREBY DELETED. 4.1 AS FAR AS ADDITION OF RS.5,49,2757- ON ACCOUNT OF UNDISCLOSED G.P. IS CONCERNED, SINCE THE GROUND ON WHICH THE SAID ADDITION IS MADE HAS ALREADY BEEN DELETED, THE REFORE, THE ADDITION UNDER CONSIDERATION IS ALSO HEREBY DELETED . THIS GROUND OF THE APPELLANT IS THEREFORE, ALLOWED. 5. A BARE PERUSAL OF THE ADDITION MADE BY THE AO RE VEALS THAT THE SAME IS FOUNDED ON MERE SURMISES AND CONJE CTURES AND THE AO INDULGED INTO SPECULATIVE EXERCISE IN TA XING THE 4 IMPUGNED AMOUNT, WITHOUT BRINGING ANY MATERIAL ON R ECORD. SUCH EVIDENCE OF THE AO CANNOT BE SUSTAINED, IN VIE W OF VARIOUS DECISIONS OF THE HON'BLE SUPREME COURT. TH EREFORE, FINDINGS OF THE CIT(A) ARE UPHELD AND GROUND OF APP EAL OF THE REVENUE IS DISMISSED. 6. IN GROUND NOS. 2 & 3, THE REVENUE MADE A CHALLEN GE TO THE DELETION OF UNEXPLAINED EXPENDITURE OUTSIDE THE BOOKS OF ACCOUNT ON PACKING AND TELEPHONE & TRAVELING. 7. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND FOUND THAT THE ADDITIONS MADE IN TH ESE GROUNDS OF APPEAL ARE PURELY ON ADHOC BASIS, WITHOU T BRINGING ANY CORROBORATIVE AND SUPPORTING MATERIAL ON RECORD. THEREFORE, FINDINGS OF THE CIT(A), AS CONT AINED IN PARA 8, REPRODUCED HEREUNDER, ARE UPHELD : 8. I HAVE GONE THROUGH THE ABVOESAID WRITTEN SUBM ISSIONS FILED BY THE APPELLANT'S COUNSEL AND ALSO PERUSED T HE RELEVANT ASSESSMENT RECORD OF THE CASE. THE APPELLANT IS AGI TATING AGAINST THE ADDITION OF RS 1,15,418/- EXPENDITURE I NCURRED OUTSIDE THE BOOKS OF PACKING AND RS. 1,30,000/-. TE LEPHONE AND TRAVELING BY RESORT TO PROVISIONS TO SECTION 69C OF THE ACT. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES , I AM OF THE OPINION THAT NOTHING HAS BEEN BROUGHT ON RECORD BY THE A.O. WHILE FRAMING ASSESSMENT TO PROVE THAT ANY SUCH EXP ENDITURE HAS BEEN ACTUALLY INCURRED. THESE ADDITIONS HAVE BEEN M ADE MERELY ON SURMISES AND CONJECTURES. AFTER GIVING MY THOUGH TFUL CONSIDERATION, I HOLD THAT THAT THE ADDITION OF RS. 1,15,418/- ON PACKING AND RS. 1,30,000/- ON TELEPHONE AND TRAVELI NG IS UNCALLED FOR, AS THERE IS NOTHING ON RECORD TO SHOW THAT THESE EXPENSES HAVE ACTUALLY BEEN INCURRED BY THE APPELLA NT OUTSIDE THE BOOKS OF ACCOUNTS. KEEPING IN VIEW THE ABOVE FA CTUAL POSITION, BOTH THE ADDITIONS MADE ON ABOVESAID GROU NDS ARE NOT SUSTAINABLE AND ARE HEREBY DELETED. THEREFORE, THIS GROUND OF APPELLANT IS ALLOWED. 5 8. IN GROUND NO.4, REVENUE CONTENDED THAT THE CIT(A ) ERRED IN DIRECTING THE AO TO RE-WORK THE ALLOWANCE OF SALARY, PAYABLE TO PARTNERS AS PER PROVISIONS OF SECTION 40 (B)(II) OF THE ACT. WE DO NOT FIND ANY GROUND TO INTERFERE IN THE DIRECTIONS ISSUED BY THE CIT(A). 9. GROUND NOS. 5 & 6 ARE GENERAL IN NATURE AND NEED NO SEPARATE ADJUDICATION. 10. IN THE RESULT, APPEAL IS ALLOWED, AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22 ND MARCH,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH