The Asstt. Commr. Income Tax, Circle-3, JAMNAGAR V. M/s Shree Bhavani Extrusion, JAMNAGAR

ITA 457/RJT/2018

AI Insights

The case revolves around an appeal by the revenue against the order of the Learned Commissioner of Income Tax (Appeals), Rajkot, which had deleted the addition of Rs. 2,12,30,216 made by the Assessing Officer (AO) during the assessment proceedings for the Assessment Year 2015-16. The assessee, a partnership firm engaged in manufacturing brass rods and wires, was subjected to a survey operation under section 133A of the Act, where discrepancies between the physical stock and the book value of the closing stock were noted. The AO added the difference as unexplained expenditure/investment, which the CIT(A) later deleted, leading to the revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135851 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-07-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 30-12-2018
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIBDGUPTA
• Assessee Lawyers: SHRISAGARSHAH

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनायपीप INTHEINCOMETAXAPPELLATETRIBUNAL, (ConductedthroughE-Court,Rajkot) BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRIT.RSENTHILKUMAR,JUDICIALMEMBER आयकरअपीलसं ./ITANo.457/Rjt/2018 निर्धररवरध / Asstt.Year:2015-16 A.C.I.T, Circle-3, Jamnagar. Vs. ShreeBhavaniExtrusion, SurveyNo.82,PlotNo.1, Village-Kansumara, Jamnagar. PAN:ABNFS7561E (Applicant)(Respondent) Revenueby:ShriBDGupta,Sr.D.R Assesseeby:ShriSagarShah,A.R सुिव्ईकीत्रीख/DateofHearing:05/07/2023 घोरर्कीत्रीख /DateofPronouncement:08/09/2023 आदेश /ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheRevenueagainst theorderoftheLearnedCommissionerofIncomeTax(Appeals),Rajkot,(inshort “Ld.CIT(A)”)arisinginthematterofassessmentorderpassedunders.143(3)of theIncomeTaxAct1961(here-in-afterreferredtoas"theAct")relevanttothe AssessmentYear2015-16. ITAno.457/Rjt/2018 Asstt.Year2015-16 2 3.TheonlyeffectiveissueraisedbytherevenueisthattheLd.CIT(A)erred indeletingtheadditionmadebytheAOforRs.2,12,30,216/-onaccountof unexplainedexpenditure/investmentu/s69/69CoftheAct. 4.Brieflystatedfactsarethattheassesseeinthepresentcaseisa partnershipfirmandengagedinthebusinessofmanufacturingofbrassrods& wires.Theassesseewassubjecttosurveyoperationu/s133AoftheAct,dated 27/11/2014.Asonthedateofsurvey,thephysicalquantityofstock359522.33kg valuedatRs.8,89,05,304/-wasfoundwhichwasreconciledbytheassesseewith thebooksofaccounts.Thephysicalvaluationofstockandthevaluationofstock showninthebookswasalsoadmittedbythepartneroffirmbeingtheassesseein thestatementfurnishedu/s131oftheAct.However,theAOduringthe assessmentproceedingsfoundthattheassesseehasshownvalueoftheclosing stockinthebooksofaccountsasonthedateofsurveyforRs.6,76,75,088/-only leadingtodifferenceofRs.2,12,30,216/-only(Rs.8,89,05,304/-minus 6,76,75,088.00).Onquestionaboutsuchdifference,theassesseesubmittedthat therewerecertaingoodsreceivedfromcertainpartiesforthejobwork.But mistakenly,suchgoodswereincludedinthevalueoftheclosingstockshownin thebooksofaccountsasonthedateofsurvey.Theassesseeinsupportofits contentionfurnishedthedetailsofthepartieswhosestockwaslyingasonthe dateofsurveyatitspremisesalongwiththechallanmaintainedforthepurposeof CentralExciseAudit.Theassesseealsofurnishedtheaffidavitstatingthatthe valuewasadmittedasonthedateofsurveyunderpressureandthepartnerwas alsobusyastherewasmarriageinhisfamily. 5.However,theAOdisbelievedthecontentionoftheassesseeonthe reasoningthatphysicalstockfoundasonthedateofsurveywasmatchingwith thevalueofclosingstockshowninthebooksofaccountsatthatrelevantpointof time.Thecorrectnessofthevalueofclosingstockwasalsoadmittedbypartnerof ITAno.457/Rjt/2018 Asstt.Year2015-16 3 theassesseeinthestatementfurnishedonoath.ItwasalsonotedbytheAOthat theassesseeatthetimeofsurveyhasnotpointedoutthatitwasalsoengagedin theactivityofjobwork.AccordingtotheAO,theassesseehasnotfurnishedany explanationforincludingstockreceivedbyitonjobworkinthebooksofaccounts asondateofsurvey.TheAOalsofoundthattherewasnoreasontotakeany confirmationfromthepartieswhosegoodswereclaimedtobelyingforthejob workasonthedateofsurvey.Assuch,aspertheAO,thecontentionofthe assesseeisnothingbutafterthoughtandfurthermoreconsiderabletimeof37 monthhavelapsedfromthedateofsurvey.Accordingly,theAOtreatedthe impugnedamountofRs.2,12,30,216/-asincomeandaddedtothetotalincome oftheassesseeundertheprovisionofsections69oftheAct.Onappeal,the assesseereiteratedthesubmissionsmadebeforetheLd.CIT(A),whohasdeleted theadditionmadebytheAO.Therelevantextractofld.CIT-Afindingisavailable onpages35to47ofhisorder. 6.BeingaggrievedbytheorderoftheLd.CIT(A),therevenueisinappeal beforeus. 7.TheLd.DRbeforeuscontendedthattheassesseehasreceivedgoodson jobworkfromvariouspartiesondifferentdatesindifferentmonthswhichwere claimedtobelyingasonthedateofsurvey,butsuchfactwasnotintimatedin theexcisereturnsfurnishedbytheassessee.Accordingly,itwascontendedbythe Ld.DRthattheassessee’scontentionforhavingreceivedgoodsonjobworkfrom partiesisdevoidofmerits. 8.Ontheotherhand,theLd.ARfiledapaperbookrunningfrompages1to 398andbesidesreiteratingthesubmissionsmadebeforetheauthoritiesbelow, furthercontendedthatthegoodsreceivedonjobworkweredulydisclosedinday- to-dayregisterofquantityreceivedanddispatched.AccordingtotheLd.AR,there wasnocolumninthemonthlyexcisereturntoshowthequantityofstockreceived onjobworkbasisbuttherewerecolumnswithrespecttothequantity ITAno.457/Rjt/2018 Asstt.Year2015-16 4 manufacturedandclearedthereofofthefinalproducts.Thus,thequantityof stockofrawmaterialsreceivedonjobworkbasiswasnotappearinginthe monthlyexcisereturn.TheLd.ARfurthercontendedthatthestockandits valuationshownbytheassesseeinexciserecordweredulyacceptedbythe ExciseDepartmentintheAuditreturnofExcise. 9.Boththeld.ARandDRvehementlysupportedtheorderoftheauthorities belowasfavourabletothem. 10.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Thefactsofthecasehavealreadybeenelaborated intheprecedingparagraphwhicharenotindispute,thereforeforthesakeof brevityandconvenience,wearenotinclinedtorepeatthesame.Thelimited controversybeforeusrevolvesonwhetherthedifferenceinthephysicalvalueof stockvizavizvalueofstockasperauditedbooksofaccountshownasonthe dateofsurveyaspointedoutbytheAOamountingtoRs.2,12,30,216/- representstheunexplainedexpenditure/investmentoftheassesseeandtherefore thesameisliabletobeaddedtothetotalincomeoftheassesseeunderthe provisionsofsection69/69CoftheAct. 10.1Certainly,theassesseehastakenadifferentstandwithrespecttothevalue ofstockrecordedinthebookstillthedateofsurveyandthevalueofstockfinally declaredinauditedbooksasonthedateofsurvey.Itisthetritelawthatthe incomehastobeassessedinthehandsoftheassesseewithinthefourcornersof law.Merely,theassesseehasadmittedsomethingatonepointoftimeand changesatalaterpointoftime,thatdoesnotmeanthattheassesseeisguilty andthereforetheadditionhastobesustained.Assuch,itisthedutyofthe revenuetodisregardtherevised/changedcontentionraisedbytheassesseeafter recordingthecogentreasons.Insimplewords,weexpressthattheassessee shouldnotbemadetosufferwithoutpointingoutthedefectintherevised/ changedcontentionraisedbytheassessee. ITAno.457/Rjt/2018 Asstt.Year2015-16 5 10.2Inthepresentcase,asperthesurveyrecord,thevalueofstockasonthe dateofsurveyi.e.27 th November2014asperregularbooksofaccountwasatRs. 8,89,05,304/-whereasinthefinalbooksofaccount,theassesseehasshownthe valueofstockasonthedateofsurveyatRs.6,76,75,088/-leadingtodifference ofRs.2,12,30,216/-only.Theassesseeduringtheassessmentproceedings explainedtherewerecertainrawmaterialsweighing67,951kgvaluedatRs. 2,12,30,216/-werereceivedfromotherbusinessenterprisesforthepurposeof jobworkonly.Assuchthesestockswerenotbelongingtotheassesseebut mistakenlyandunderthepressureofsurvey,thesamewasincludedinthevalue ofstockshowninthebooksatthetimeofsurvey.Theassesseeinsupportofits explanationfurnishedfollowingdocumentaryevidence: a)Affidavitofpartner. b)CAcertificateforactualquantitywiththeunit. c)Finalauditreportissuedbythecentralexcisedepartmentonthebasisoftherecords maintainedbythefirm. d)Excisejobworkchallansspecifyingthatthegoodsornotforsellbutforjobwork. e)ExcisequantityrecordswhichhasbeenauditedbyindependentCharteredAccountsacted asTaxauditor. f)Quantitativerecordsfordaytodayreceiptanddispatchedofthegoods. 10.3Theassesseehasalsofurnishedthepartywisedetailsfromwhomthe goodswerereceivedforthepurposeofthejobworkwhichwaslyingonits premisesasonthedateofsurveywhichareavailableonpages10to11ofthe assessmentorder. 10.4Alltheabovedetailswerefurnishedbytheassesseeduringtheassessment proceedingsandnodefectofwhatsoeverhasbeenpointedoutbytheAOduring theassessmentproceedings.ItisalsoimportanttonotethattheAOdidnoteven bothertocrossverifythedetailsoftheaforesaidpartieswhosestockswerelying withtheassesseeasonthedateofsurveydespitespecificrequestsmadebythe assesseeinthisregard.Onthecontrary,theAOdeniedissuinganoticeunder section133(6)oftheActonthereasoningthatthereissufficienttimegap ITAno.457/Rjt/2018 Asstt.Year2015-16 6 betweenthedateofsurveyandthedateonwhichthedetailswerefurnishedby theassessee.Toourunderstanding,thetimegapcanbeaseriousmatterof concernbutcannotbethegroundsforrejectingthecontentionoftheassessee. Thus,weareoftheviewthatonthisreasoningalone,theadditionsmadebythe AOarenotsustainable. 10.5Evenonmeritofthecase,fromtheexciserecords,suchasmonthlyexcise return,daytodaystockregistermaintainedforthepurposeofexciselawand deliverychallan,wenotethattheassesseewasengagedintheactivityofjob work.RegardingthecontentionofthelearnedDR,thatthemonthlyexcisereturn doesnotmatchwithquantityofthegoodsreceivedbytheassesseeforthe purposeofthejobwork,wehaveperusedthemonthlyexcisereturnsandnote thatthisreturncontainstheinformationaboutthefinalclearanceoffinished goods.Assuch,theseexcisereturnsshowingthequantityoffinishedgoods manufacturedbytheassesseeandclearancethereof.Suchreturnsalsocontain informationaboutthequantityoffinalgoodsmanufacturedbytheassesseeunder thejobworkcategoryandtheclearancethereof.Thesereturnsdonotspeak aboutthequantityofrawmaterialreceivedbytheassesseeonaccountof purchaseoronaccountofjobworkpurpose.Thus,insuchasituation,the argumentofthelearnedDRthatthegoodsreceivedbytheassesseeonjobwork doesnotmatchwiththeexcisemonthlyreturnsdoesnotholdgood.Itisbecause thereisnopossibilityofmakinganymatch/reconcilewiththequantityreceived bytheassesseeeitheronthepurchaseorforjobworkpurposeswiththemonthly excisereturnasthereisnocolumnorsystemtoreflectsuchquantityinthe monthlyexcisereturn.Alltheexcisereturnsareshowingthedetailsofthefinal productswhereastheassesseeisclaimingthattherewasrawmaterialasonthe dateofsurveyreceivedforthepurposeofthejobworkwhichisalsomatching withtheday-to-daystockregistermaintainedbytheassesseewhichisplacedon pages126to295ofpaperbook. ITAno.457/Rjt/2018 Asstt.Year2015-16 7 10.6Fromtheabovediscussionanddocumentaryevidencefurnishedbythe assessee,itisestablishedthattheassesseewasengagedintheactivityofjob workandreceivedrawmaterialfromotherpartiesforthepurposeofjobwork. TheAOduringtheassessmentproceedingwithoutverifyingandbringingany contrarymaterialonrecordrejectedthedocumentaryevidencefurnishedbythe assesseeinsupportoftheexplanationprovidedbyit.Assuch,theAOmerelyon surmiseandconjectureheldtheexplanationfurnishedbytheassesseeregarding differenceinthevalueofstockasanafterthought. 10.7Inviewoftheaboveandafterconsideringthefactsintotality,wedonot findanyinfirmityintheorderofthelearnedCIT-Aandaccordinglyweupholdthe same.Thus,theAOisdirectedtodeletetheadditionmadebyhim.Hencethe groundofappealraisedbytherevenueisherebydismissed. 11.Intheresult,theappealfiledbytherevenueisdismissed. OrderpronouncedintheCourton08/09/2023atAhmedabad. Sd/-Sd/- (T.RSENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated 08/09/2023 Manish