The ITO, Ahmedabad Ward-3(4), Ahmedabad V. M/s. Jai Industries, Ahmedabad

ITA 528/AHD/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8941 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-09-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 02-03-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A C SHAH AR SHRI M C PANDIT
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI H. L. KARWA, JM AND N. S. SAINI, AM) ITA NO.528/AHD/2006 A. Y.: 2002-03 THE INCOME TAX OFFICER, WARD-3 (4), 4 TH FLOOR, INSURANCE BUILDING, ASHRAM ROAD, AHMEDABAD VS M/S. JAI INDUSTRIES, PLOT NO.52, PHASE III, NR. RUBY COACH, GIDC, NARODA, AHMEDABAD PA NO. AAYPL 2599 L (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI A. C. SHAH, AR DEPARTMENT BY SHRI M. C. PANDIT, DR O R D E R PER H. L. KARWA: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VII, AHMEDABAD DATE D 07-12-2005 RELATING TO ASSESSMENT YEAR 2002-03. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF SUPPRESSED PRODUCTI ON OF MUG DAL OF RS.11,75,658/-. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN MANUFACTURING MUNG DAL AS WELL AS TRADING IN ADA D DAL AND TUVER DAL. IN THIS CASE, A SURVEY OPERATION U/S 133A OF THE IN COME TAX ACT, 1961 (IN SHORT THE ACT) WAS CARRIED OUT ON 04-02-2002 IN WHI CH CERTAIN DISCREPANCIES WERE NOTICED IN RESPECT OF STOCK & CA SH. DURING THE SURVEY PROCEEDINGS, FOR ASCERTAINING THE CORRECT YIELD OF MAIN PRODUCT AND BI- ITA NO.528/AHD/2006 JAI INDUSTRIES 2 PRODUCTS, A SAMPLE OF MILLING OF 1250 KG OF MUNG WA S DONE. THE ABOVE MILLING OPERATION HAS SHOWN THE FOLLOWING RESULTS: ROUGH MUNG 25 BAGS OF 50 KG X 24 1250 KG. MUNGDAL 19 BAGS X 50 KG 950.000 CHUNI KG. 59.00 11.000 961.000 WASTE STONE ETC. 41.550 100.500 MUNGDAL STOCK IN MACHINE 188.000 1250 KG. FROM THE ABOVE, THE AO NOTICED THAT PERCENTAGE OF C HUNI AND WASTAGE ETC. WAS 8% OF THE TOTAL CONSUMPTION WHEREAS THE AS SESSEE HAS SHOWN PERCENTAGE OF BYE-PRODUCT AT 11.44%. THE AO TOOK TH E VIEW THAT THERE WAS SHORTAGE OF PRODUCTION AND A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE. THE AO HAS ISSUED EXHAUSTIVE QUESTIONNAIR E TO EXPLAIN THE SAME. THE ASSESSEE SUBMITTED A DETAILED REPLY, WHIC H READS AS UNDER: 3.1 THE ASSESSEE FURTHER CONTENDED THAT, '.... ....... 8% WASTE IS CALCULATED WITH REFERENCE TO 1250 KG. OF M UNG BUT IN REALITY, THE MUNG CONSUMED IS ONLY 1062 KG. SIN :E THE MUNG OF 188 KG. LEFT IN THE MACHINE CANNOT BE CONSIDERED . ACCORDINGLY, IT IS ' LEARLY STATED THAT OUT OF 100 KG. OF MUNG, THE PRODUCTION OF MUNG DAL IS 90.5 KG. AN L BI-PROD UCTS 9.5 KG. I.E. FOTRI AND DUST. IN OTHER WORDS BI-PRODUCT IS F OTRI. THE FOTRI IS HUSK. THE FOTRI IS ALSO KNOWN AS KURMA OR CHUNI. TH E FOTRI OR KURMA OR CHUNI IS BI-PRODUCTS AND NOT A WASTAGE OR PROCESS LOSS. FOTRI OR KURMA OR CHUNI IS SOLD IN OPEN MARKE T AND SALE PROCEEDS IS CREDITED IN THE BOOKS OF ACCOUNTS. H OWEVER, THE WASTAGE WHEN STATED AT 9.5 % INCLUDED THE WASTE IN THE FORM OF FOTRI & DUST. IN FACT, THE REAL WASTE IS DUST O R STONE AND NOT FOTRI. THE REAL WASTE IN THE FORM OF DUST OR STONE IS 3.9% AND NOT 8% AS POINTED OUT IN AS MUCH AS THE FOTRI OR KU RMA OR CHUNI IS 5.6% AND THAT IT IS ACTUALLY SOLD. FURTH ER, IT MAY PLEASE BE NOTED THAT THE SALE A PROCEEDS OF FOTRJ OR KURMA IS 3954.300 QTS. AND THE SALE PROCEEDS OF 22,55,7527- IS CREDITED INTO BOOKS OF ACCOUNTS. THEREFORE, THE FOTRI CANNOT BE TAKEN INTO CONSIDERATION IS WASTE OR PR OCESS LOSS SINCE THERE IS NO LOSS WHATSOEVER OF FOTRI. THE FOT RI OR KURMA OR CHUNI IS USED AS CATTLE FEED. ITA NO.528/AHD/2006 JAI INDUSTRIES 3 FURTHER THE WASTAGE OF 3.9% IS TO BE CONSIDERED WIT H REFERENCE THE DEDUCTION MADE FOR QUALITY DIFFERENCE AND QUANT ITY DIFFERENCE. THE AMOUNT DEDUCTED FOR SHORTAGES [14.3 0 QTS] AND THE QUALITY DIFFERENCE OF RS.30726/- IS CREDITE D IN THE P & L ACCOUNT. FURTHER IT MAY PLEASE BE NOTED THAT THE PHYSICAL ST OCK FOUND AT THE TIME OF (SURVEY WAS IN AGREEMENT WITH THE BO OK STOCK. .....' 3.2 THE ASSESSEE ALSO CONTENDED THAT HE HAS MAINTAI NED DAY TO DAY QUANTITY DETAILS WHICH WERE PERIODICALLY INS PECTED BY THE CIVIL SUPPLIES DEPARTMENT AND ALSO AVAILABLE AT THE TIME OF SURVEY, MORE THAT AUDITORS HAVE EXAMINED THIS ASPEC T AND CERTIFIED THAT THE DETAILS IN FORM OF THREE CD WHIC H IS REPRODUCED BELOW : CONSUMPTION OF MUNGDAL 55505.77 QUINTAL PRODUCTIO N RESULT: 3.3 THE ASSESSEE, FURTHER IN PARA 8 CONTENDED T HAT, '........... NOW, THE DEFICIT IS 2.93% DURING A.Y. 2002-03 AS AG AINST 3.9% AT THE TIME OF SAMPLE PROCESSING. THE DEFICIT OF 3. 9% WAS AS A RESULT OF SAMPLE PROCESSING OF MUNG FROM GUJARAT WH ICH CONTAINS MORE DUST. HOWEVER, OVERALL DEFICIT IS ONL Y 2.93% AS AGAINST 3/32% IN A.Y. 2001-02. IN OTHER WORDS, THE QUESTION OF ANY ADDITION DOES NOT ARISE SINCE THE DEFICIT IS LOWER AS COMPARED TO LAST YEAR AND THAT DAY TO DAY COMPLETE QUANTITY DETAILS AI E MAINTAINED AND THAT BOOKS OF ACCOUNTS ARE AUDITED......' 4. AS REGARDS THE SUBMISSIONS OF THE ASSESSEE DATED 4-3-2005 , THE AO OBSERVED THAT THE MUNG DAL CONSUMPTION FOR THE W HOLE YEAR WAS SHOWN AT 55505.77 QUINTALS , PRODUCTION OF MUNG DAL WAS 49923.85 QUINTALS, KURMA AND CHUNI 3954.30 QUINTALS AND WAST AGE ON ACCOUNT OF STONE/DUST AT I1627.62 QUINTAL. THEREFORE, THE YIEL D RATIO IN RESPECT OF 49923.35 3954.30 1627.62 89.94% 7.13% 2.93% MUNG DAL KURMA DEFICIT 55505.77 100% ITA NO.528/AHD/2006 JAI INDUSTRIES 4 MAIN PRODUCT AND BYE-PRODUCT IS 89.94% : 07.13%. TH E LOSS ON ACCOUNT OF STONE/DUST COMES TO 2.93% AS PER THE ASSESSEE. T HE AO DID NOT ACCEPT THE REPLY OF THE ASSESSEE AND MADE ADDITION OF RS.1 1,75,658/- FOR THE REASONS STATED IN PARA, 5, 6, 7, 8, 9 AND 9.2 OF TH E ASSESSMENT ORDER. 5. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE ASSESSEES MAIN ARGUM ENTS BEFORE THE CIT(A) WAS THAT ENTIRE ADDITION IS BASED ON AOS PR ESUMPTION THAT SHORTAGE IN PRODUCTION OF MUNG DAL AS REFLECTED IN PRODUCTION OF KURMA WHICH IS WITHOUT ANY EVIDENCE. IT WAS ALSO STATED B Y THE ASSESSEE BEFORE THE CIT(A) THAT THE SHORTAGE IS WORKED OUT ON THE B ASIS OF PURCHASE DISCOUNT OF RS.14,26,679/- THOUGH ACTUAL SHORTAGE W AS OF RS.33,726/- I.E. 14.30 QUINTALS ONLY. YIELD OF MUNG DAL WAS SHO WN AT 89.94% AS AGAINST 91.06 % WORKED OUT BY THE AO. IT WAS BROUGH T TO THE NOTICE OF THE CIT(A) BY THE ASSESSEE THAT THERE WAS A MISTAKE IN CALCULATION MADE BY THE AO AND THE CORRECT WORKING SHOULD BE AS UNDE R: PARTICULARS RESULT AS PER SAMPLE PROCESSING AT THE TIME OF SURVEY RESULT OF AVERAGE WORKING AS PER AUDITED ACCOUNTS MUGDAL 90.50% 90.88% KURMA 5.60% 7.20% DUST, STONE 3.90% 1.92% TOTAL 100% 100% THE ASSESSEE ALSO SUBMITTED BEFORE THE CIT(A) THAT THE ADDITION IS BASED ON PRODUCTION OF MUNG DAL AT 89.94%. ACCORDING TO T HE ASSESSEE EVEN THIS WORKING WAS INCORRECT IN AS MUCH AS WEIGHT OF BARDAN AND SHORTAGE IN QUANTITY SHOULD BE REDUCED FROM MUNG DAL CONSUME D BY IT TO ARRIVE AT CORRECT YIELD. IT WAS ALSO SUBMITTED THAT THE AO HA S NOT CONSIDERED THE WEIGHT OF BARDAN BUT DISCOUNT FOR THE PURPOSE OF AR RIVING AT ACTUAL MUNG DAL CONSUMPTION. ACCORDINGLY, IT WAS SUBMITTED THAT DEDUCTION OF WEIGHT OF BARDAN AND SHORTFALL OF QUANTITY SHOULD BE MADE IN PRINCIPLE. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE CIT(A) TH AT THE FIGURES ADOPTED ITA NO.528/AHD/2006 JAI INDUSTRIES 5 BY THE AO WERE ERRONEOUS. THE ASSESSEE FURNISHED A CORRECT WORKING AS MENTIONED HEREINABOVE. THE ASSESSEE ALSO SUBMITTED A CHART COMPARING BETWEEN SURVEY RESULT AND THE AVERAGE WORKING FOR T HE WHOLE YEAR WHICH READS AS UNDER: PARTICULARS RESULT AS PER SAMPLE PROCESSING AT THE TIME OF SURVEY RESULT OF AVERAGE WORKING AS PER AUDITED ACCOUNTS MUGDAL 90.50% 90.88% KURMA 5.60% 7.20% DUST, STONE 3.90% 1.92% TOTAL 100% 100% 5. IN VIEW OF THE ABOVE, THE ASSESSEE SUBMITTED BEF ORE THE CIT(A) THAT AVERAGE WORKING IS BETTER THAN THE SURVEY RESULT AN D THEREFORE, THERE WAS NO QUESTION OF ANY SUPPRESSED PRODUCTION. THE ASSES SEE ALSO SUBMITTED THAT THE PHYSICAL STOCK AND BOOK STOCK WAS IN AGREE MENT AS PER PANCHNAMA PREPARED ON THE DATE OF SURVEY. ACCORDING TO THE ASSESSEE THE STOCK OF BARDAN WAS NOT TAKEN INTO ACCOUNT FOR THE PURPOSE OF ARRIVING AT BOOK STOCK. IF THE SAID STOCK IS TAKEN INTO ACCOUNT THEN THE BOOK STOCK AND PHYSICAL STOCK ARE IN AGREEMENT. THE ASSESSEE ALSO SUBMITTED BEFORE THE CIT(A) THAT IS HAS MAINTAINED DAY TO DAY COMPLETE QUANTITY DETAILS WHICH WAS CERTIFIED BY CIVIL SUPPL Y DEPARTMENT AND WERE AVAILABLE AT THE TIME OF SURVEY. THIS STOCK REGISTE R HAS BEEN CONSIDERED BY THE AUDITORS AND THE QUANTITATIVE DETAILS ARE ME NTIONED IN THE AUDIT REPORT ON THE BASIS OF STOCK REGISTER. THE ACCOUNTS ARE AUDITED AND THAT NO DEFECTS ARE POINTED OUT. PHYSICAL STOCK AND BOOK STOCK ARE IN AGREEMENT AT THE TIME OF SURVEY. NO INCRIMINATING D OCUMENTS WERE FOUND AT THE TIME OF SURVEY IN REGARD TO SUPPRESSION. 6. IN VIEW OF THE ABOVE, IT WAS SUBMITTED BY THE AS SESSEE BEFORE THE CIT(A) THAT THE IMPUGNED ADDITION MAY BE DELETED. ITA NO.528/AHD/2006 JAI INDUSTRIES 6 7. THE CIT(A) DELETED THE ADDITION OBSERVING AS UND ER: 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE LD. A.R. AND I HAVE ALSO GONE THROUGH THE ASSES SMENT ORDER. IT IS TO BE NOTICED THAT AT THE TIME OF SURV EY THE SURVEY OPERATION ITSELF WAS CALLED OUT BY THE SURVEY PARTY WHICH REFLECTED AN YIELD OF 90.5%. IN RESPECT OF DAL AND THE BYE- PRODUCTS WERE AT THE RATE OF 9.5%. IT IS DIFFICULT TO UNDERSTAND THE METHODOLOGY ADOPTED BY TH8E AO BECAUSE WHILE WO RKING THE ACTUAL YIELD HE HAS WORKED OUT CONSUMPTION OF M UNG AFTER DEDUCTING WASTAGE IN WEIGHT AND THUS NET AMOUNT USE FOR CONSUMPTION WAS 94824.39 KGS. HOWEVER, WHILE WORKIN G OUT THE EXCESS SHORTAGE, HE HAS TAKEN THE GROSS AMOUNT SHOWN AS CONSUMPTION AT 55505.77 QUINTALS. HE HAS NOT CARED TO DEDUCT THE SHORTAGE IN WEIGHT AND WEIGHT OF BARDAN WHILE W ORKING OUT THE ACTUAL ADDITION. THUS THE ENTIRE BASIS ADOP TED BY THE AO IS INCORRECT. IN PARA-5 OF THE ORDER THE AO HAS HIMSELF POINTED OUT THAT WEI0GHT LOSS AND WEIGHT OF BARDAN IS TO BE REDUCED FRO THE ACTUAL WORKING OF YIELD. IF THAT BE THE POSITION, THEN FOR WORKING OUT THE ACTUAL YIELD AS WELL AS TH 8E YIELD AS PER AUDIT REPORT, THESE WEIGHTS WERE TO BE REDUCED. I ALSO FIND THAT IN THE GROUP CASE OF M/S. JAI PULSE MILLS, IN WHICH SIMULTANEOUSLY SURVEY WAS CARRIED OUT MY PREDECESSO R VIDE ORDER DATED 5.3.2004 FOR A. YS. 1995-96 TO 1998-99 HAS HELD THAT PROPER WASTAGE ALLOWABLE TO THE APPELLANT FIRM WAS 9.5% MEANING THEREBY THAT THE YIELD WOULD BE 90.5% IF TH E YIELD IS CORRECTLY WORKED OUT AS SHOWN IN SUBMISSIONS OF THE ASSESSEE, THE YIELD FOR THE YEAR ACTUALLY WORKS OUT TO 90.88% AS UNDER: CONSUMPTION OF MUG AS PER STOCK RECORD 55505.77 QTL LESS: WEIGHT OF BARDAN 555.00 QTL SHORTAGE IN WEIGHT 14.30 QTL 569.30 QTL NET CONSUMPTION OF MUG 54936.47QTL PRODUCTION OF MUGDAL 49923.85 90.88% KURMA 3954.30 7.20% DEFICIT 1058.32 1.92% THEREFORE, EVEN ON THIS BASIS THERE IS NO CASE FOR ANY ADDITION IN THE APPELLANTS CASE I ALSO FIND THAT IN A. Y. 1 999-2000 AND 2000-01, THE LD. CIT(A) HAS DELETED SUCH ADDITIONS VIDE HIS ITA NO.528/AHD/2006 JAI INDUSTRIES 7 ORDER DATED 5.12.2003 IN APPELLANTS OWN CASE. IN V IEW OF THE ABOVE FACTS, ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED. 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AT LENGTH. SHRI M.C. PANDIT, LEARNED DR RELIED ON THE ORDER OF THE AO. ON THE OTHER HAND SHRI A. C. SHAH, LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE CIT(A) HAS PASSED A WELL REASONED ORDER AFTER APPRECIATING THE FACTS OF THE CASE AND EVIDENCE AVA ILABLE ON RECORD. HE, THEREFORE, SUBMITTED THAT THE ORDER OF THE CIT(A) M AY BE UPHELD. IT IS SEEN THAT DURING THE COURSE OF SURVEY, BASIC OPERAT ION ITSELF WAS CARRIED OUT BY THE SURVEY PARTY WHICH REFLECTED IN YIELD OF 90.50% IN RESPECT OF DAL AND BYE-PRODUCT @9.5%. IN OUR VIEW, THE CIT(A) HAS CORRECTLY REJECTED THE METHODOLOGY ADOPTED BY THE AO. WHILE WORKING THE ACTUAL YIELD , THE AO HAS WORKED OUT CONSUMPTION OF MUNG AFTER DEDUCTING SHORTAGE IN WEIGHT AND THUS NET AMOUNT USED FOR CON SUMPTIN WAS 55880.34 KGS. . HOWEVER, WHILE WORKING OUT EXCESS S HORTAGE THE AO HAS TAKEN THE GROSS AMOUNT SHOWN AS CONSUMPTION AT 5550 5.77 QUINTALS. THE AO HAS NOT CONSIDERED THE WEIGHT OF BARDAN WHIL E WORKING OUT ACTUAL ADDITION. WE ARE IN AGREEMENT WITH THE OBSERVATIONS OF THE CIT(A) THAT THE ENTIRE BASIS ADOPTED BY THE AO WAS INCORRECT. T HE CIT(A) HAS ALSO OBSERVED THAT IN THE GROUP CASES OF M/S. JAI PULSE MILLS IN WHICH SIMULTANEOUSLY SURVEY WAS CARRIED OUT, HIS PREDECES SOR HAS HELD THAT PROPER WASTAGE ALLOWABLE TO THE ASSESSEE FIRM WAS 9 .5% MEANING THEREBY THAT THE YIELD WOULD BE 90.5%. THE CIT(A) HAS CORRE CTLY STATED IN THE INSTANT CASE THAT THE YIELD IN THE YEAR UNDER CONSI DERATION WORKED OUT TO 90.88%. IT IS ALSO SEEN THAT IN THE AY 1999-2000 AN D 2000-01 THE CIT(A) HAS DELETED SUCH ADDITION VIDE HIS ORDER DATED 05-1 2-2003 IN ASSESSEES CASE. IT SEEMS THAT THE REVENUE HAS NOT CHALLENGED THE ORDERS OF THE CIT(A) IN APPEAL BEFORE THE TRIBUNAL RELATING TO AY 1999-2000 AND 2000- 01. THUS, CONSIDERING THE ENTIRE FACTS AND CIRCUMST ANCES OF THE PRESENT CASE, WE DO NOT SEE ANY VALID GROUND FOR INTERFERIN G WITH THE ORDER OF THE ITA NO.528/AHD/2006 JAI INDUSTRIES 8 CIT(A). WE FIND THAT THE CIT(A) HAS PASSED A WELL R EASONED ORDER AFTER APPRECIATING THE FACTS OF THE CASE AS WELL AS MATER IALS AVAILABLE ON RECORD. WE DO NOT SEE ANY REASON FOR DISAGREEING WITH THE C IT(A). IN THAT VIEW OF THE MATTER, WE UPHOLD THE ORDER OF THE CIT(A) AND D ISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25-09 -09. SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (H. L. KARWA) JUDICIAL MEMBER DATE : 25-09-2009 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD