M/s. Raghuvir Cotton Ginning & Pressing Pvt. Ltd., V. The Deputy Commissioner of Income Tax, Circle-1, RAJKOT-GUJARAT

ITA 571/RJT/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76439 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 19-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT B JHAVERI DR
• Assessee Lawyers: CHETAN AGARWAL
• Section: 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM AND SHRI B. R. JAIN, A M ITA NO. 571/RJT/2012 / ASSESSMENT YEAR : 2006-07 M/S. RAGHUVIR COTTON GINNING & PRESSING PVT. LTD., HADAMTALA, TAL: KOTDA SANGANI PAN : AABCR 4140 G ( / APPELLANT) DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, RAJKOT / RESPONDENT ! ' #$ / ASSESSEE BY SHRI CHETAN AGARWAL, CA % ! ' #$ / REVENUE BY DR. JAYANT B. JHAVERI, DR # & ' ! ( / DATE OF HEARING 10.01.2014 ) ! ( / DATE OF PRONOUNCEMENT 07.03.2014 / ORDER .. , / T. K. SHARMA, J. M.: THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 24.08.2012 OF LD. CIT(A) , GANDHINAGAR, AHMEDABAD FOR THE ASSESSMENT YEAR 2006-07. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND JOB WORK OF GINNING AND PRESSI NG OF COTTON AND ALLIED. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED RETURN OF IN COME ON 31.10.2006 DECLARING TOTAL INCOME AT RS.8,52,741/-. ALONGWITH THIS RETURN OF I NCOME, AUDIT REPORT IN FORM NO.3CA AND 3CD, BALANCE SHEET, P&L A/C. AND OTHER RELEVANT ACCOUNTS AND PAPERS WERE ALSO FILED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED FOR THE DETAILS OF MONTH-WISE ELECTRICITY CONSUMPTION VIS- -VIS JOB WORK. ON VERIFYING THESE DETAILS, THE ASSESSING OFFICER NOTICED THAT JOB WOR KS FROM MONTH TO MONTH WERE UNEVEN AND THERE WERE IRREGULARITIES. THE PICTURE EMERGED IS REPRODUCED BY THE ASSESSING OFFICER IN PARAGRAPH 3 OF THE ASSESSMENT ORDER. ACC ORDING TO WHICH THE AVERAGE JOB WORK PER UNIT OF ELECTRICITY WORKS OUT TO 0.0585 GA NSADI. IN PARAGRAPH 4 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER OBSERVED TH AT THE AVERAGE JOB FROM MONTH TO MONTH VARIES FROM 0.0512 GANSADI TO 0.0681 GANSADI PER UNIT. AFTER NOTICING THE VARIOUS DISCREPANCIES IN CONSUMPTION OF ELECTRICITY , THE ASSESSING OFFICER IN PARAGRAPH 7 571-RJT-2012 - RAGHUVIR COTTON GINNING & PRESSING PVT LTD 2 OF THE ASSESSMENT ORDER CONCLUDED THAT THERE IS UNE VEN JOB WORK AND CAUSING THE SUPPRESSION OF JOB WORK. THE AVERAGE JOB WORK PRICE IS TAKEN AT 261.38 PER GANSADI (RS.1,85,13,939 JOB WORK CHARGES / 70,831 GANSADI) AND HE ACCORDINGLY WORKED OUT TOTAL VALUE OF SUPPRESSED JOB WORK AT RS.5,37,397/ - (2056 GANSADI X 261.38 AVERAGE JOB WORK PRICE) AND ADDED THE SAME TO THE TOTAL INC OME OF THE ASSESSEE. FROM THE ABOVE SAID ADDITION, IN PARAGRAPH 8 OF THE ASSESSME NT ORDER, THE ASSESSING OFFICER DISALLOWED THE MACHINERY RENOVATION/REPAIRS EXPENSE S AND BUILDING REPAIRS EXPENSES OF RS.2,85,807/-. ON APPEAL, IN THE IMPUGNED ORDER, TH E LD. CIT(A) CONFIRMED THE ADDITION OF RS.5,37,397/- WHICH WAS MADE BY THE ASSESSING OF FICER ON ACCOUNT OF ALLEGED SUPPRESSED JOB WORK RECEIPTS BUT DELETED THE ADDITI ON OF RS.2,85,807/- WHICH WAS MADE BY THE ASSESSING OFFICER BY DISALLOWING PART OF MAC HINERY RENOVATION/REPAIRS EXPENSES AND BUILDING REPAIRS EXPENSES. AGGRIEVED WITH THE ORDER OF LD. CIT(A) CONFIRMING THE ADDITION OF RS.5,37,397/-, THE ASSESSEE IS NOW IN A PPEAL BEFORE THIS TRIBUNAL, ON THE FOLLOWING GROUNDS:- 1] THE GROUNDS RAISED IN THIS APPEAL ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2] THE LEARNED ACIT, CIRCLE-1, RAJKOT (HEREINAFTER REFERRED TO AS AO) ERRED IN LAW AND ON FACTS IN MAKING THE ADDITION OF RS.53739 7/- ALLEGED TO BE ON ACCOUNT OF SUPPRESSED JOB WORK RECEIPTS WHEN THERE WERE NO SUCH RECEIPTS EVER EARNED BY THE APPELLANT OR FOUND BY THE REVENUE; THE LEARN ED CIT(APPEALS) ERRED IN UPHOLDING THE DECISION OF THE AO IN THIS REGARD. TH E ADDITION OF RS.537397/- DESERVED TO BE DELETED ON ALL COUNTS. 3] THE LEARNED AO AND THE LEARNED CIT(APPEALS) IN T HIS REGARD PROCEEDED ON ERRONEOUS PRESUMPTION AND PREMISES AND THE ADDITION MADE IS ONLY ON SUSPICION AND SURMISES AND DESERVES TO BE DELETED. 4] THE ASSESSEE HAS DENIED OF HAVING SUPPRESSED ANY JOB WORK OR HAVING RECEIVED/EARNED ANY JOB WORK AS ALLEGED BY THE LOWE R AUTHORITIES. NO SUCH SUPPRESSED JOB WORK NOT RECORDED IN THE BOOKS HAS B EEN FOUND BY THE REVENUE AND THE ADDITION MADE DESERVES TO BE DELETED. 5] THE LEARNED AO AND THE LEARNED CIT (APPEALS) IN THIS REGARD PROCEEDED ON ERRONEOUS PRESUMPTION WHILE MAKING/HOLDING THE A DDITION OF RS.537397/-. 6] A) THE LEARNED CIT(APPEALS) FURTHER ERRED ON LAW AND ON FACTS IN INVOKING SEC. 145(3) IN PARA 8 OF THE ASSESSMENT ORDER WHEN THE SAME WAS NOT WARRANTED ON FACTS OF THE CASE AND WAS NOT IN ACCORDANCE WITH LAW. THIS ACTION OF THE LEARNED CIT (APPEALS) IS OBJECTED TO AS NOT IN ACCO RDANCE WITH LAW AND UNWARRANTED ON FACTS OF THE CASE. B) THAT EVEN OTHERWISE THE ACTION OF THE LEAR NED CIT(APPEALS) IN INVOKING SEC. 145 (3) WITHOUT OPPORTUNITY BEING GIVEN TO THE ASSESSEE IS NOT IN ACCORDANCE WITH LAW. 571-RJT-2012 - RAGHUVIR COTTON GINNING & PRESSING PVT LTD 3 3. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI CHETAN AGARWAL, CA, APPEARED AND POINTED OUT THAT THE ASSESSEE IS O PERATING A GINNING FACTORY. HE SUBMITTED THAT THE VARIATION IN THE CONSUMPTION OF ELECTRICITY FROM MONTH TO MONTH (AVERAGE ELECTRICITY CONSUMED PER GASADI) DEPENDS UPON NUMBER OF FACTORS LIKE THE QUALITY OF COTTON WHICH IS BEING PROCESSED, USE OF VACUUM-BLOWER OF 60HP WHICH IS USED WHEN THERE IS A SHORTAGE OF LABOUR, AMOUNT OF QUANT ITY PROCESSED PER DAY BECAUSE EVEN WHEN THE PRODUCTION IS SLOW, THE MACHINE WOULD BE W ORKING AND CONSUMING ELECTRICITY WHICH GIVES A LOWER AVERAGE PER UNIT OF ELECTRICITY CONSUMED. IT WAS ALSO SUBMITTED THAT ELECTRICITY BY ITSELF ALONE CANNOT BE YARDSTICK FOR ESTIMATING THE JOB WORK OF GASADI. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER APPLIED A S TRAIGHT JACKET FORMULA FOR ESTIMATING JOB WORK AND PROCEEDED ON ERRONEOUS PREMISES AND MA DE THE ADDITION OF RS.5,37,397/- ON DOUBT AND SUSPICION WHICH DESERVES TO BE DELETED . 4. CONTINUING HIS ARGUMENTS, LD. COUNSEL OF THE ASS ESSEE POINTED OUT THAT BOOKS OF ACCOUNTS OF THE ASSESSEE ARE DULY AUDITED U/S 44AB OF THE INCOME-TAX ACT, 1961. NO DEFECTS ARE POINTED OUT BY THE AUDITORS IN ITS REPO RT U/S 44AB. THE GP DECLARED IN THE ASSESSMENT YEAR IS BETTER AS COMPARED TO THE IMMEDI ATE PRECEDING YEAR. THE VARIATION IN ELECTRICITY CONSUMPTION IS MARGINAL AND NOT HIGH ER THAN THE AVERAGE. SUCH VARIATIONS OCCUR IN EVERY INDUSTRY AND UNIFORMITY IN CONSUMPTI ON OF ELECTRICITY CAN NEVER BE EXPECTED. IN SUPPORT OF THIS, THE LD. COUNSEL OF T HE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS WHERE CONSUMPTION OF ELECTRICITY IS ABNOR MALLY HIGH VIS--VIS THE YIELD OF THE PRODUCT:- I) ITO V. PRAGATI FASHIONS, [2012] 18 TAXMANN.COM 269 (AHD.) II) N. RAJA PULLAIAH V. DY. CTO, [1969] 73 ITR 224 (AP) III) VISHAL PAPER INDUSTRIES V. JCIT, [2013] 32 TA XMANN.COM 247 (CHAND TRIB) IV) ACIT V. KHAMBHATTA FAMILY TRUST [1998} 62 TTJ AHD 685 FINALLY, IT WAS POINTED OUT THAT SOLELY ON THE BAS IS OF VARIATION IN ELECTRICITY CONSUMPTION, THE BOOKS OF ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTED U/S 145. APART FROM THE ALLEGED VARIATION IN THE ELECTRICITY CONSU MPTION, NO DEFECTS IN THE BOOKS OF ACCOUNTS ARE POINTED OUT BY THE ASSESSING OFFICER I N THE ASSESSMENT ORDER. THEREFORE, THE ADDITION OF RS.5,37,397/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A) BE DELETED. 571-RJT-2012 - RAGHUVIR COTTON GINNING & PRESSING PVT LTD 4 5. ON THE OTHER HAND, DR. JAYANT B. JHAVERI, DR, AP PEARED ON BEHALF OF REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). HE FU RTHER POINTED OUT THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS DISCUSSE D THE AVERAGE ELECTRICITY CONSUMPTION AND ELECTRICITY VARIATION IN PRODUCTIO N VIS--VIS ELECTRICITY CONSUMPTION FROM MONTH TO MONTH BASIS. THESE VARIATION IS HUGE AND IN THE MONTH OF SEPTEMBER 2005, THERE WAS SUBSTANTIAL ELECTRICITY CONSUMPTION BUT NO PRODUCTION WAS SHOWN; THEREFORE, THE ASSESSING OFFICER RIGHTLY REJECTED T HE BOOKS OF ACCOUNTS U/S 145 OF THE ACT AND MADE ADDITION OF RS.5,37,397/- ON ACCOUNT OF SU PPRESSION OF JOB WORK RECEIPTS. 6. IN REJOINDER, THE LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT THE ASSESSEE IS ENGAGED IN ITS OWN MANUFACTURING ALSO APART FROM DO ING THE MANUFACTURING FOR OTHERS ON JOB WORK BASIS. IN SOME MONTHS THERE WAS SELF PRODU CTION AND THERE WERE NO JOB WORK CHARGES. THE ASSESSING OFFICER HAS WORKED OUT THE AVERAGE ELECTRICITY CONSUMPTION ONLY WITH REFERENCE TO JOB WORK AND IGNORED THE SEL F PRODUCTION. APART FROM THIS, THE ASSESSEES OFFICE IS ALSO SITUATED IN THE FACTORY P REMISES. EVEN IF THERE IS NO PRODUCTION, THE ELECTRICITY IS ALSO CONSUMED IN THE OFFICE. TO SUM-UP, THE ASSESSING OFFICER ANALYZED ONLY JOB WORK CHARGES ONLY IGNORING THE SE LF PRODUCTION MADE BY THE ASSESSEE AND THE FACT THAT THE ELECTRICITY IS ALSO CONSUMED FOR OFFICE; THEREFORE, THE ADDITION OF RS.5,37,397/- MADE BY THE ASSESSING OFFICER ON DOUB T AND SUSPICION BE DELETED. 7. RIVAL SUBMISSIONS WERE CONSIDERED. WE HAVE ALSO CAREFULLY GONE THROUGH THE VARIOUS DECISIONS CITED BY THE LD. COUNSEL OF THE A SSESSEE. FROM THE PERUSAL OF THESE DECISIONS, IT CAN BE SEEN THAT THE MERE FACT THAT T HERE WAS WIDE DISPARITY IN CONSUMPTION OF ELECTRICITY WOULD NOT JUSTIFY THE REJECTION OF B OOKS OF ACCOUNTS WITHOUT ANY SUPPORTING MATERIAL. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SHAYM RICE MILLS V. CST (1998) UPTC 375 (ALL) HELD THUS: CONSUMPTION OF ELECTRICITY DISPROPORTIONATE TO PRO DUCTION BY ITSELF NO GROUND FOR REJECTING ACCOUNT BOOKS. THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE O F N. RAJA PULLAIAH V. DY. CTO, REPORTED IN 73 ITR 224 (AP) AND KERALA HIGH CO URT IN THE CASE OF ST. TERESAS OIL MILLS V. STATE OF KERALA, REPORTED IN 76 ITR 365 (K ERALA) HAS ALSO HELD THAT BOOKS OF ACCOUNT CANNOT BE REJECTED, ON THE GROUND OF CONSUM PTION OF ELECTRICITY BEING 571-RJT-2012 - RAGHUVIR COTTON GINNING & PRESSING PVT LTD 5 ABNORMALLY HIGH VIS--VIS THE UNITS OF PRODUCTION. IN THE IMPUGNED ORDERS, THE ASSESSING OFFICER AND THE LD. CIT(A) IN SUBSTANCE REJECTED TH E AUDITED BOOKS OF ACCOUNTS OF THE ASSESSEE ON THE BASIS OF CONSUMPTION OF HIGH ELECTR ICITY VIS--VIS THE PRODUCTION THEREFROM. NO OTHER DEFECTS IN THE BOOKS OF ACCOUN TS ARE POINTED OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. NO CROSS-VERIFICAT ION IN THIS REGARD WAS MADE BY THE ASSESSING OFFICER FROM THE PERSON WHOSE JOB WORK IS DONE BY THE ASSESSEE. WITH REGARD TO CONSUMPTION OF ELECTRICITY IN THE MONTH OF SEPTE MBER 2005, IT IS TRUE THAT THERE WAS NO JOB WORK BUT CONSUMPTION OF ELECTRICITY IN THAT MON TH IS MEAGER ONLY WHICH IS DUE TO THE FACT THAT THE ASSESSEES OFFICE IS ALSO SITUATED IN THE FACTORY BUILDING. EVEN WHEN REPAIR OF MACHINERY IS BEING CARRIED OUT, THERE WILL BE CO NSUMPTION OF ELECTRICITY WITHOUT ANY PRODUCTION. CONSIDERING ALL THESE FACTORS, WE ARE O F THE VIEW THAT NO CASE IS MADE OUT FOR REJECTING THE BOOKS OF ACCOUNTS AND FOR SUSTAIN ING THE ADDITION AS PROPOSED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER; WE, THER EFORE, DELETE THE ADDITION OF RS.5,37,397/- MADE IN THE ASSESSMENT ORDER. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 10. SINCE ONE OF US (THE AM) IS NOT AVAILABLE AT RA JKOT, THIS ORDER SHALL BE DEEMED TO HAVE BEEN PRONOUNCED ON THE DATE ON WHICH IT IS NOT IFIED ON THE NOTICE BOARD OF RAJKOT BENCH IN TERMS OF RULE 34 OF THE INCOME-TAX (APPELL ATE TRIBUNAL) RULES. SD/- SD/- (B. R. JAIN) (T. K. SHARM A) $( #*% / ACCOUNTANT MEMBER #*% /JUDICIAL MEMBER *$+ ,*-/ ORDER DATE 07.03.2014 /RAJKOT *BT / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- M/S. RAGHUVIR COTTON GINNING & PRESSIN G PVT. LTD., AL: KOTDA SANGANI 2. /RESPONDENT- DY. COMMISSIONER OF INCOME-TAX, CIRCLE -1, RAJKOT 3. #-2- & 3 / CIT CONCERNED 4. & 3 - / CIT(A), GANDHINAGAR, AHMEDABAD 5 . 678 , , / DR, ITAT, RAJKOT 6 . 89 :; / GUARD FILE. *$+ #$ / BY ORDER , PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, RAJKOT.