CRYSTAL LACE (I) LTD, NAVI MUMBAI V. ASST CIT CIR 10(3), MUMBAI

ITA 6141/MUM/2011

• Counselvise Citation: 614119914 RSA 2011
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A
• Assessee Lawyers: RAKESH JOSHI IZRFKHZ DH LS

Judgement Text

M/S CRYSTAL LACE (INDIA ) LTD. - 1 - VK;DJ VIHYH; VF/KDJ.K LH U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI JH JKTSUNZ FLAG YS[KK LNL; ,OA JH LAT; XXZ U;KF;D L NL; DS LE{K BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI SANJAY GARG JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO.6141/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2008-09 M/S CRYSTAL LACE (INDIA ) LTD. PLOT NO 27, MILLENNIUM BUSINESS PARK TTC INDUSTRIAL AREA, MIDC MAHAPE NAVI MUMBAI 400701. PAN: AAACC2118G CUKE@ VS. ASSISTANT CIT 10 (3) MUMBAI. VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VIHYKFKHZ DH VKSJ LS @ APPELLANT BY SHRI RAKESH JOSHI IZR;FKHZ DH VKSJ LS @ RESPONDENT BY SHRI R.A PANT VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 29.6.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2008-09. THE ONLY DI SPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING ADDITION MADE BY AO TO THE VALU E OF CLOSING STOCK WHICH HAS BEEN UPHELD BY CIT(A) 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORTING OF LACE AND EMBROIDERY FABRICS, HAD SHOWN THE CLOSING STOCK OF FINISHED GOODS AT 70,962 YARDS AND THE SA ME HAD BEEN VALUED AT RS. LQUOKBZ DH RKJH[K@ DATE OF HEARING 30-7-2013 ?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT 7-8-2013 M/S CRYSTAL LACE (INDIA ) LTD. - 2 - 49,12,445/- AFTER EXCLUDING THE WASTAGE OF 3350 YAR DS. AO ALSO NOTED THAT RAW MATERIAL CONSUMED WAS RS. 2,94,32,217/- AND MANUFACTURING EX PENSES WERE RS. 1,62,21,384/-. HE THUS COMPUTED THE COST OF PRODUCTION PER YARD A T RS. 155.70 WHICH GAVE THE VALUE OF CLOSING STOCK AT RS. 1,10,48,783/-. THE DIFFEREN CE OF RS. 61,36,338 WAS ADDED BY THE AO TO THE CLOSING STOCK. THE EXPLANATION OF THE ASS ESSEE THAT THE GOODS PRODUCED ALSO INCLUDED JOB WORK WAS NOT ACCEPTED BY THE AO ON THE GROUND THAT CLOSING STOCK VALUE IN THAT CASE WOULD HAVE FURTHER INCREASED. THE PLEA OF DEFECTIVE GOODS, OLD STOCK WAS ALSO NOT ACCEPTED IN THE ABSENCE OF ANY SUPPORTING EVIDE NCE. THE AO THUS MADE THE ADDITION OF RS. 61,33,338/-. 3. IN APPEAL THE ASSESSEE SUBMITTED BEFORE CIT(A) T HAT THE FIGURES OF RAW MATERIAL CONSUMED AND MANUFACTURING EXPENSES HAD BEEN INCORR ECTLY TAKEN BY THE AO AND SUBMITTED A FRESH WORKING OF COST OF PRODUCTION WHI CH WAS NOT ACCEPTED BY CIT(A) ON THE GROUND THAT THE ASSESSEE COULD NOT EXPLAIN AS TO WH Y THESE FACTS AND ARGUMENTS WERE NOT TAKEN UP BEFORE AO. CIT(A) ACCORDINGLY CONFIRME D THE ADDITION MADE BY AO, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 4. BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMIT TED THAT THE ASSESSEE WAS NOT ONLY PRODUCING IS OWN GOODS BUT ALSO PRODUCING GOOD S ON BEHALF OF OTHERS ON JOB WORK BASIS. THE TURNOVER IN RESPECT OF JOB WORK WAS RS. 8.15 CRORE WHEREAS THE TURNOVER IN RELATION TO LOCAL SALES AND EXPORT WERE ONLY AT RS. 1.78 CRORE AND RS. 12.33 LAKH RESPECTIVELY. IT WAS POINTED OUT THAT WHILE COMPUTI NG THE COST OF PRODUCTION PER YARD, THE AO HAD TAKEN INTO ACCOUNT THE ENTIRE MATERIAL CONSU MED AND THE MANUFACTURING EXPENSES RELATING TO OWN PRODUCTION ONLY WHEREAS PA RT OF THESE EXPENSES ALSO IN RELATION TO JOB WORK DONE. IT WAS SUBMITTED THAT SUCH PLEA T AKEN BEFORE THE AUTHORITIES BELOW HAD BEEN REJECTED. THE LEARNED AR ALSO REFERRED THE TO THE STATEMENTS OF FACTS SUBMITTED BEFORE CIT(A) WHICH CLEARLY STATED THAT THE AO HAD ADOPTED THE ENTIRE RAW MATERIAL CONSUMED AND MANUFACTURING EXPENSES WITHOUT EXCLUDI NG THE PROPORTIONATE RAW MATERIAL AND MANUFACTURING EXPENSES RELATING TO JOB WORK. IT WAS POINTED OUT THAT CORRECT COST OF PRODUCTION WAS ONLY RS. 69.23 PER Y ARD. THE LEARNED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF AUTHORITIES B ELOW. 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION MADE BY AO ON ACCOUNT OF CLOSING STOCK VALUATION. THE ASSESSEE HAD DECLARED THE CLOSING STOCK OF FURNISHE D GOODS AT 70,962 YARDS AFTER M/S CRYSTAL LACE (INDIA ) LTD. - 3 - EXCLUDING THE WASTAGE, WHICH HAD BEEN VALUED AT RS. 4912445/-. THE AO HAS COMPUTED THE COST OF PRODUCTION PER YARD AT RS. 155.70 AFTER TAKING INTO ACCOUNT THE TOTAL QUANTITY PRODUCED AND TOTAL RAW MATERIAL CONSUMED AND MANUFA CTURING EXPENSES INCURRED. THE CASE OF THE ASSESSEE IS THAT IN ADDITION TO MANUFAC TURING OWN GOODS, THE ASSESSEE WAS ALSO PRODUCING GOODS ON BEHALF OF OTHERS ON JOB WOR K BASIS WHICH IS CLEAR FROM THE FACT THAT TURNOVER IN RESPECT OF JOB WORK WAS RS. 8.15 C RORE WHEREAS ITS OWN TURNOVER WAS RS. 1.78 CRORE IN RESPECT OF LOCAL SALE AND RS. 12.33 L AKH IN RESPECT OF EXPORTS. RAW MATERIAL CONSUMED AND MANUFACTURING EXPENSES INCURRED THEREF ORE ALSO RELATED TO THE JOB WORK DONE. SUCH PLEA FOR REDUCTION OF EXPENSES ON RAW MA TERIAL CONSUMED AND MANUFACTURING EXPENSES PROPORTIONATE TO JOB WORK DONE HAD BEEN MA DE BEFORE THE AO. WHICH IS CLEAR FROM THE FACT THAT REFERENCE TO JOB WORK HAS BEEN M ADE IN THE ASSESSMENT ORDER. THESE FACTS HAVE ALSO BEEN HIGHLIGHTED IN THE STATEMENTS OF FACTS FILED BEFORE CIT(A) BUT EVEN THE CIT(A) HAS FAILED TO CONSIDER THESE FACTS. IN O UR VIEW THE COMPUTATION OF COST OF PRODUCTION PER YARD IS REQUIRED TO BE DONE AFRESH A FTER EXCLUDING THE EXPENSES INCURRED INCLUDING THE MATERIAL CONSUMED RELATING TO THE JOB WORK DONE. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND RESTORE THIS ISSUE TO THE F ILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF OBSERVATION M ADE IN THIS ORDER AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED ON 7-8-2013 SD/- SD/- (SANJAY GARG) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 7.8.2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI