MAA CHINTPURNI IRON & STEEL (INDIA ) P LTD, MUMBAI V. ITO WD 6(30(3), MUMBAI

ITA 4634/MUM/2011

• Counselvise Citation: 463419914 RSA 2011
• Duration Of Justice: 3 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: SUBODH L RATNAPARKHI
• Keywords: Additional evidence

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI I.P. BANSAL, (JM) AND B.R.BASKARAN (AM) . . , . . , ./ I.T.A. NO.4634/MUM/2011 ( / ASSESSMENT YEAR : 2006-07) MAA CHINTPURNI IRON AND STEEL (INDIA) PVT.LTD., SHOP NO.5, SACHINAM APARTMENT, MAJIWADA GAON. THANE (W)-400610 / VS. INCOME TAX OFFICER -6(3)(3), 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( / APPELLANT) .. ( ! / RESPONDENT) ./ I.T.A. NO.5133/MUM/2011 ( / ASSESSMENT YEAR : 2006-07) ASSTT. COMMISSIONER OF INCOME TAX CIR -6(3), R NO.522, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. MAA CHINTPURNI IRON AND STEEL (INDIA) PVT.LTD., SHOP NO.2, SACHINAM CHS LTD., THANE (W)-400601 ( / APPELLANT) .. ( ! / RESPONDENT) ./ '# ./PAN/GIR NO. :AABCM9597N $ / ASSESSEE BY: SHRI SUBODH L RATNAPARKHI ! % $ / REVENUE BY:: SHRI PREMANAND J & ' % ( ) / DATE OF HEARING : 7.1.2015 *+ % ( ) / DATE OF PRONOUNCEMENT : 7.1.2015 ITA NO5133/MUM/11 AND 4634/M/11. 2 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 20-01- 2009 PASSED BY LD CIT(A)-12, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2006-07. 2. THE FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF MILD STEEL ROLLED PRODUCTS SUCH AS A NGLES, CHANNELS, BEAMS, CTD BARS ETC. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING VARIOUS ADDITIONS AND THE LD CIT(A) GAVE PARTIAL RE LIEF. HENCE BOTH THE PARTIES HAVE FILED THESE APPEALS BEFORE US. 3. THE ASSESSING OFFICER MADE AN ADDITION OF RS.12 ,30,08,609/- RELATING TO EXCESS STOCK DETERMINED BY HIM AS PER THE WORKIN GS FURNISHED IN THE ASSESSMENT ORDER. IN THE APPELLATE PROCEEDINGS, TH E LD CIT(A) CONFIRMED THE WORKINGS OF THE ASSESSING OFFICER WITH REGARD T O THE QUANTITY OF EXCESS STOCK DETERMINED. HOWEVER, WITH REGARD TO THE RATE ADOPTED FOR WORKING OUT THE VALUE OF EXCESS STOCK, THE LD CIT(A) GAVE P ARTIAL RELIEF. AGGRIEVED, THE ASSESSEE HAS RAISED BOTH THE ISSUES RELATING TO QUANTITY AS WELL AS VALUE IN ITS APPEAL AND THE REVENUE IS CHALLENGING THE ORDER OF LD CIT(A) IN REDUCING THE VALUE IN GROUND N. 1(D). 4. THE LD A.R SUBMITTED THAT THE ASSESSEE IS A MA NUFACTURER OF MILD STEEL ROLLED PRODUCTS. HE SUBMITTED THAT THE ASSES SING OFFICER HAS WORKED OUT THE ALLEGED EXCESS STOCK BY CONSIDERING THE ASS ESSEE AS A TRADER, I.E., THE QUANTITY OF RAW MATERIALS PURCHASED AND T HE QUANTITY OF FINAL PRODUCT PRODUCED BY THE ASSESSEE HAVE BEEN TREATED ALIKE BY THE AO. THE LD A.R SUBMITTED THAT THE RAW MATERIAL AND FINISHED PRODUCTS ARE TWO DIFFERENT ITEMS. THE RAW MATERIAL IS USED FOR MANU FACTURE OF PRODUCTS, ITA NO5133/MUM/11 AND 4634/M/11. 3 WHICH INVOLVE CONSIDERABLE WASTAGE DUE TO MANUFACTU RING PROCESS. THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER IGNORED TH IS VITAL FACT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS MAINTAINED QUANTITY DETAILS AND THE SAME HAS NOT BEEN CONSIDERED BY THE TAX AUTHORITIES. HE ALSO SUBMITTED THAT THE RATE ADOPTED BY THE AO AS WELL AS LD CIT(A) ARE ONL Y ESTIMATES NOT COMPARABLE WITH THE ACTUALS. ACCORDINGLY HE SUBMIT TED THAT THE IMPUGNED ADDITION IS LIABLE TO BE DELETED. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FAILED TO FURNISH RELEVANT DETAILS BEFORE THE AO AND HENCE THE ASSESSING OFFICER WAS CONSTRAINED TO DETERMINE THE EXCESS STOCK ON TH E BASIS OF AVAILABLE MATERIAL. HE FURTHER SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN REDUCING THE VALUE OF EXCESS STOCK BY ADOPTING DIFF ERENT RATE. 6. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE ASSESSING OFFICER, SINCE THE VITAL FACT THAT THE ASSESSEE IS A MANUFACTURER HAS BEEN MISSED OUT BY THE ASSESSING OFFICER. WE AGREE WITH THE CONTENTIO NS OF THE ASSESSEE THAT THE QUANTITY OF RAW MATERIAL AND THE QUANTITY OF FI NISHED GOODS CANNOT BE TREATED ALIKE. IN OUR VIEW, THE RAW MATERIAL STOCK SHOULD BE SEPARATELY DETERMINED BY CONSIDERING THE OPENING STOCK, PURCHA SES, CONSUMPTION AND CLOSING STOCK. THE QUANTITY RAW MATERIALS CONSUMED SHOULD BE CONSIDERED TO DETERMINE THE VERACITY OF THE PRODUCTION QUANTIT Y DECLARED BY THE ASSESSEE BY DULY TAKING INTO ACCOUNT THE PERCENTAGE OF NORMAL LOSS. THE VALUATION TO BE APPLIED FOR THE RAW MATERIAL STOCK AS WELL WE THE PRODUCTION QUANTITY SHOULD BE DETERMINED ON THE BAS IS OF PURCHASES AND RELATED EXPENSES. HOWEVER, WE NOTICE THAT THE ASSE SSING OFFICER HAS NOT EXAMINED THIS ISSUE IN A SCIENTIFIC WAY AND THE LD CIT(A) HAS ALSO CONFIRMED THE ADDITION WITHOUT ANALYZING THE FACTS PROPERLY. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE A ND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTIO N TO EXAMINE THIS ISSUE ITA NO5133/MUM/11 AND 4634/M/11. 4 AFRESH BY CONSIDERING THE FACT THAT THE ASSESSEE IS A MANUFACTURER AND ALSO BY CONSIDERING THE VARIOUS INFORMATION AND EXPLANAT IONS THAT MAY BE FURNISHED BY THE ASSESSEE IN THIS REGARD. THE ASSE SSEE IS ALSO DIRECTED TO FULLY CO-OPERATE WITH THE ASSESSING OFFICER BY FUR NISHING ALL THE DETAILS THAT MAY BE CALLED FOR BY THE ASSESSING OFFICER. 7. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN DELETING THE ADDITION OF RS.1.35 CRORES REPRESENTING THE DIF FERENCE BETWEEN UNEXPLAINED SALES AND UNEXPLAINED PURCHASES. DURIN G THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE FURNISHED THE D ETAILS OF PURCHASES AND SALES ONLY TO THE EXTENT OF RS.34.86 CRORES AND RS.36.58 CRORES RESPECTIVELY, WHERE AS THE ASSESSEE HAD DECLARED PU RCHASES AND SALES IN THE BOOKS OF ACCOUNT AT RS.48.97 CRORES AND RS.50.2 7 CRORES RESPECTIVELY. ACCORDINGLY, THE AO CAME TO THE CONCLUSION THAT THE DIFFERENCE BETWEEN THE ACCOUNTED FIGURE AND THE DETAILS FURNISHED BY T HE ASSESSEE REPRESENTED UNEXPLAINED, I.E., THE PURCHASES STAND UNEXPLAINED TO THE TUNE OF RS.14.10 CRORES AND THE SALES STAND UNEXPLAINED TO THE TUNE OF RS.15.46 CRORES. THE DIFFERENCE BETWEEN THE TWO UNEXPLAINED FIGURES WAS WORKED OUT BY THE ASSESSING OFFICER AT RS.1.36 CRORES AND THE SAME WAS ASSESSED BY THE AO AS UNEXPLAINED INCOME. THE LD CIT(A) DEL ETED THE SAME. 8. A PERUSAL OF THE PRECEDING PARAGRAPH WOULD BRIN G OUT THE ABSURDITY IN THE APPROACH ADOPTED BY THE ASSESSING OFFICER. WHEN THE ASSESSING OFFICER IS ACCEPTING THE PURCHASES AND SALES DECLAR ED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT, WE ARE NOT ABLE TO UNDERSTAND AS TO HOW THE INCOMPLETE DETAILS RELATING TO THE SAME WOULD GIVE RISE TO ANY UNEXPLAINED INCOME. THE SAID APPROACH OF THE ASSESSING OFFICER ONLY REVEALS THE INEXPERIENCE OF THE AO OR IT MAY BE THE INTENTION O F THE AO TO HARASS THE ASSESSEE. CERTAINLY THE SAID ACTION OF THE ASSESSI NG OFFICER IS HIGHLY CONDEMNABLE AND THE SUPERIOR AUTHORITIES SHOULD TAK E SUITABLE ACTION AGAINST THE ASSESSING OFFICER. DESPITE THE ABSURDI TY POINTED ABOVE, WE ARE ITA NO5133/MUM/11 AND 4634/M/11. 5 SHOCKED TO SEE THAT THE LD CIT HAS ALSO AUTHORIZED THE AO TO FILE APPEAL AGAINST THE RELIEF GRANTED BY THE LD CIT(A). THE S AID ACTION ONLY SHOWS THAT THERE IS COMPLETE LACK OF APPLICATION OF MIND ON THE PART OF THE ADMINISTRATIVE COMMISSIONER ALSO. IN OUR VIEW, THE LD CIT(A) WAS JUSTIFIED IN DELETING THIS ADDITION FOR THE REASONS DISCUSSED ABOVE. 9. THE NEXT ISSUE URGED BY THE REVENUE RELATES TO T HE ADDITION OF RS.10,11,580/- RELATING TO THE DIFFERENCE BETWEEN T HE BANK BALANCE BETWEEN THE BOOKS OF ACCOUNT AND THE BANK STATEMENT . THE CONTENTION OF THE REVENUE IS THAT THE LD CIT(A) HAS DELETED THE A DDITION BY CONSIDERING ADDITIONAL EVIDENCES IN VIOLATION OF RULE 46A OF TH E IT RULES. WE NOTICE THAT THE ASSESSEE HAS RECONCILED THE DIFFERENCE CIT ED ABOVE BY PREPARING A BANK RECONCILIATION STATEMENT AND IT WAS FURNISHED BEFORE THE LD CIT(A). THE FIRST APPELLATE AUTHORITY ACCORDINGLY DELETED T HE ADDITION BY CONSIDERING THE BANK RECONCILIATION STATEMENT. SIN CE THE ASSESSING OFFICER WAS NOT GIVEN OPPORTUNITY TO EXAMINE THE BANK RECON CILIATION STATEMENT, WE ARE OF THE VIEW THAT THE LD CIT(A) HAS VIOLATED THE PROVISIONS OF RULE 46A OF THE IT RULES. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH BY DULY CONS IDERING THE BANK RECONCILIATION STATEMENT AND TAKE APPROPRIATE DECIS ION IN ACCORDANCE WITH THE LAW. 11. THE NEXT GROUND URGED BY THE REVENUE RELATES T O THE RATE ADOPTED FOR VALUING THE EXCESS STOCK. WE HAVE ALREADY REST ORED THIS MATTER TO THE FILE OF THE AO WHILE CONSIDERING THE APPEAL OF THE ASSESSEE AND HENCE THIS GROUND REQUIRES NO FRESH ADJUDICATION. ITA NO5133/MUM/11 AND 4634/M/11. 6 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS TREATED AS ALLOWED AND THE APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 7TH JAN, 2015. *+ & , - . 7TH JAN, 2015 + % /' 0 SD SD ( . . /I.P. BANSAL ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & ' MUMBAI: 7TH JAN,2015. . . ./ SRL , SR. PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. & 2( ( ) / THE CIT(A)- CONCERNED 4. & 2( / CIT CONCERNED 5. 6. 34 / (5 , ) 5 , & ' / DR, ITAT, MUMBAI CONCERNED / 6 7 ' / GUARD FILE. 8 & / BY ORDER, TRUE COPY 9 ' (ASSTT. REGISTRAR) ) 5 , & ' /ITAT, MUMBAI