TRIBHOVANDAS BHIMJI ZABERI (BOMBAY) P. LTD, MUMBAI V. ACIT 4(3), MUMBAI

ITA 523/MUM/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4622 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2006-2007
• Appeal Filed On: 21-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VANDANA SAGAR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH I, MUMBAI BEFORE SHRI A.L. GEHLOT, A.M. AND SMT. ASHA VIJAYAR AGHAVAN, J.M. ITA NO. 523/M/2010 ASSESSMENT YEAR: 2006-07 TRIBHOVANDAS BHIMJI ZABERI (BOMBAY) P. LTD., A PPELLANT 241-43, ZAVERI BAZAR, MUMBAI 400 002. (PAN AAACT4893P) VS. ASSTT. COMMISSIONER OF INCOME-TAX- 4(3), RESPON DENT MUMBAI APPELLANT BY : MR. SATISH MODY RESPONDENT BY : MS. VANDANA SAGAR ORDER PER A.L. GEHLOT, A.M.: THIS APPEAL IS FILED BY THE ASSESSEE DIRECTED AGAI NST THE ORDER OF CIT(A) 8, MUMBAI PASSED ON 16.12.2009 FOR THE ASS ESSMENT YEAR 2006-07 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) HAS ERRED IN GIVING DIRECTION FOR CALCULATION THE GOLD RATE AT THE AVERAGE RATE PREVAILING ON 1 ST APRIL AND 31 ST MARCH, EVEN THOUGH THE SAME WAS NOT IN DISPUTE WHIL E FILING THE APPEAL BEFORE LEARNED CIT(A). 2. THE LEARNED CIT(A) HAS NOT APPRECIATED THE FACT THAT THE APPELLANT WAS ALWAYS CONSIDERING THE GOLD RATE PREV AILING ON 31 ST MARCH FOR ARRIVING AT THE VALUE OF GOLD LOSS SINCE 1999 AND THE SAME HAS BEEN ACCEPTED BY THE DEPT. WHILE PASSING T HE ORDER U/S 143(3) FOR RELEVANT ASSESSMENT YEAR AND EARLIER YEA RS. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING JEWELLERY FROM THE RAW MATERIAL SUPPLIED BY THE CUSTOMERS. THE ASSESSEE IS DOING ONLY LABOUR JOB. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTIED THAT THE ASSESSEE CLAIMED TOTAL LOSS 8057.144 GRAMS AND DUST WAS ITA NO. 523/M/10 TRIBHOVANDAS ZAVERI PVT. LTD. 2 COLLECTED AND SAME WAS PROCESSED. OUT OF THESE DUST , 4189.627 GMS WAS RECOVERED, THUS, THE ASSESSEE CLAIMED THE TOTAL LOSS 3867.517 GRAMS (8057.144 GMS 4189.627 GMS). THE RATE PER G RAM IS TAKEN AT RS. 832.24 PER GRAM. THE LOSS CLAIMED WAS RS. 32,1 8,701/-. THE AO OBSERVED THAT THE ASSESSEE IS CONCERNED WITH ONLY L ABOUR CHARGES AND EARNED THE INCOME AS LABOUR CHARGES. IF ANY GOLD IS LOST DURING THE GOLD PROCESSING IT SHOULD BE COVERED FROM CUSTOMER WHO SUPPLY THE RAW MATERIAL AS GOLD. IF THE ASSESSEE EARNS INCOME ONLY LABOUR OR MAKING CHARGES THEN THERE IS NO QUESTION OF LOSS. T HE AO FOUND THAT THE ASSESSEE CLAIMED IN-GENUINE LOSS TO AVOID TAX. THE CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSIONS HELD THAT SO FAR AS THE QUANTITY LOSS IS CONCERNED THE ASSESSEE HAS EXPLAINED REASON S FOR LOSS AND, THEREFORE, LOSS IS ALLOWABLE. HOWEVER, THE ASSESSEE HAS CALCULATED LOSS BY APPLYING GOLD RATE OF THE YEAR END I.E. 31 ST MARCH, WHICH IS NOT CORRECT. THE CIT(A) WAS OF THE VIEW THAT VALUE OF G OLD AS ON 1 ST APRIL, 2004 TO 31 ST MARCH, 2005, THE AVERAGE SHOULD BE APPLIED FOR DETERMINING THE LOSS FIGURE. THE CIT(A) DIRECTED TH E AO TO COMPUTE THE LOSS OF 3867.517 GRAMS OF GOLD BY APPLYING THE AVER AGE RATE AT BEGINNING OF PREVIOUS YEAR AND END OF THE PREVIOUS YEAR. 3. THE LEARNED AR SUBMITTED THAT THE ASSESSEE IS FO LLOWING PRACTICE TO VALUE LOSS OF GOD FOR PROCESSING BY APPLYING RAT E AS AT THE END OF THE YEAR. THE DEPARTMENT HAS ACCEPTED THIS PRACTICE OF THE ASSESSEE IN EARLIER YEARS AS WELL AS IN SUBSEQUENT YEARS. TH E LEARNED AR FURTHER SUBMITTED THAT AT THE MOST IF THE AVERAGE R ATE IS TO BE APPLIED, THE AVERAGE RATE SHOULD BE CALCULATED ON THE BASIS OF RATE PREVAILING AT THE END OF EACH MONTH. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF CIT(A). 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE BENCH ASKED THE LEARNED REP RESENTATIVES OF ITA NO. 523/M/10 TRIBHOVANDAS ZAVERI PVT. LTD. 3 THE PARTIES WHETHER REVENUE HAS FILED APPEAL AGAINS T THE ORDER OF CIT(A), IN REPLY, THE LEARNED REPRESENTATIVES OF TH E PARTIES SUBMITTED THAT REVENUE DID NOT FILE ANY APPEAL AGAINST THE OR DER OF CIT(A). THE ISSUE TO BE EXAMINED BEFORE US IS LIMITED IN THE SE NSE THAT WHAT SHOULD BE THE RATE OF GOLD, WHICH IS APPLICABLE TO COMPUTE THE VALUE OF LOSS OF 3867.517 GRAMS OF GOLD. THE CIT(A) WAS OF T HE VIEW THAT THE GOLD RATE PREVAILING IN THE FIRST DAY OF THE PREVIO US YEAR AND END OF THE PREVIOUS YEAR, THE AVERAGE RATE OF BOTH SHOULD BE A PPLIED FOR VALUATION OF GOLD LOSS. THE LEARNED AR PROPOSED THAT AVERAGE GOLD RATE OF EACH MONTH SHOULD BE TAKEN AS THE SAME IS FAIR AND REASO NABLE. THIS PROPOSITION OF LEARNED AR HAS NOT BEEN OBJECTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. WE FIND THAT THERE IS NO DISPUTE REGARDING LOSS OF 3867.517 GRAMS OF GOLD. WE FIND F ORCE IN THE PROPOSITION MADE BY THE LEARNED AR THAT THE AVERAGE GOLD RATE OF EACH MONTH SHOULD BE TAKEN. THE VIEW TAKEN BY THE CIT(A) THAT AVERAGE RATE OF GOLD BEGINNING AND END OF THE YEAR IS NOT F AIR AND REASONABLE. CONSIDERING THE PECULIAR FACTS OF THE CASE, WE FIND THAT FOR CALCULATION OF AVERAGE RATE OF GOLD, IT IS FAIR AND REASONABLE, IF THE GOLD RATE PREVAILING AT THE END OF ACH MONTH WILL BE TAKEN, T HOUGH, WE ARE OF THE VIEW THAT NEITHER THE ASSESSEE NOR THE REVENUE AUTH ORITIES HAVE FOLLOWED PROPER SYSTEM OF DETERMINING VALUATION OF GOLD LOSS DURING THE PROCESSING OF GOLD JOB WORK BASIS. AS STATED AB OVE, THE ISSUE BEFORE US IS LIMITED TO APPLY THE VALUE OF LOSS OF GOLD ON UNDISPUTED LOSS OF GOLD OF 3867.517 GRAMS. THEREFORE, UNDER TH E PECULIAR FACTS OF THIS YEAR THE ISSUE IS DECIDED AS DISCUSSED ABOVE. THE AO IS DIRECTED TO APPLY THE AVERAGE RATE OF GOLD PREVAILING AT THE END OF EACH MONTH OF THE PREVIOUS YEAR UNDER CONSIDERATION AND COMPUT E THE GOLD LOSS ACCORDINGLY AFTER PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO. 523/M/10 TRIBHOVANDAS ZAVERI PVT. LTD. 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER, 2010. SD/- SD/- (ASHA VIJAYARAGHAVAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH SEPTEMBER, 2010 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, I BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV