The DCIT, Circle-4, Ahmedabad V. Heavy Metal & Tubes Ltd., Ahmedabad

ITA 622/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1139 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Corroborative evidences; Condonation of delay
• Section: 14A

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ ITA.NO.622/AHD/2011 WITH CO NO.96/AHD/2011 / ASSTT. YEAR: 2007-2008 THE DCIT, CIR.4 AHMEDABAD. VS HEAVY METAL AND TUBES LTD. HEAVY METAL HOUSE 1, VIJAY VIHAR SOCIETY NR.VIJAY CROSS ROAD NAVRANGPURA, AHMEDABAD. PAN : AAACH 3882 Q ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI JAMESH KURIAN, SR.DR ASSESSEE BY : SHRI DHIREN SHAH, AR / DATE OF HEARING : 07/07/2016 / DATE OF PRONOUNCEMENT: 11/07/2016 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF THE LD.CIT(A)-VIII, AHMEDABAD DATED 16.12.2010 PASSED F OR THE ASSTT.YEAR 2007-08. ITA NO.622/AHD/2011 WITH CO 2 2. ON RECEIPT OF NOTICE IN REVENUES APPEAL, THE AS SESSEE HAS FILED CO BEARING NO.96/AHD/2011. 3. REGISTRY HAS POINTED THAT CO FILED BY THE ASSESS EE IS TIME BARRED BY SEVEN DAYS. THE ASSESSEE HAS FILED AN APPLICATI ON FOR CONDONATION OF DELAY WHEREIN IT HAS PLEADED THAT THE ACKNOWLEDGEME NT-CUM-NOTICE WAS SERVED UPON THE RESPONDENT-COMPANY AT ITS OLD ADDRE SS AND DUE TO THAT IT COULD NOT LAY ITS HAND ON THIS NOTICE IN REASONABLE TIME. IT HAS RESULTED THE FILING OF THE CO TIME-BARRED BY SEVEN DAYS. AF TER CONSIDERING THE APPLICATION OF THE ASSESSEE, WE CONDONE THE DELAY I N FILING OF THE CO AND PROCEED TO DECIDE THE APPEAL AS WELL AS CO ON MERIT . 4. IN THE FIRST GROUND OF APPEAL, THE REVENUE HAS P LEADED THAT THE CIT(A) HAS ERRED IN DELEING THE ADDITION OF RS.60,2 2,234/-. 5. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 27.10.2007 DECLARING TOTAL INCOME AT RS.7 ,26,66,963/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSUED ON 28.7.2008 WHICH WAS DULY SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS MADE SALE OF SCRAP TO 21 PART IES. HE DIRECTED THE ASSESSEE TO FILE CONFIRMATION FROM ALL THE PURCHASE RS. THE ASSESSEE HAS FIELD CONFIRMATION FROM 19 PARTIES. HOWEVER, IT FA ILED TO FILE ANY CONFIRMATION FROM M/S.TUBE MAN TO WHOM SCRAP SALE O F RS.8,20,320/- WAS CLAIMED BY THE ASSESSEE. SIMILARLY, IT COULD N OT FILE CONFIRMATION FROM M/S.TUBE INC CORPORATION TO WHOM SCRAP SALES O F RS.6,08,788/- WAS MADE. THE LD.AO FORMED AN OPINION THAT THE ASS ESSEE MUST HAVE ITA NO.622/AHD/2011 WITH CO 3 SOLD FINISHED GOODS TO THEM INSTEAD OF SCRAP, AND T HEREFORE, HE CALCULATED THE SUPPRESSED SALE OF RS.60,22,234/-. 6. ON APPEAL, THE LD.CIT(A) HAS DELETED THE ADDITIO N BY OBSERVING AS UNDER: 4. I HAVE CAREFULLY CONSIDERED THE FINDINGS OF THE A.O AS WELL AS SUBMISSIONS OF THE APPELLANT. THE APPELLANT COMPANY FILED ITS RETURN OF INCOME ON 27/10/2007 FOR THE A.Y. 2007-08 DECLARING TOTAL INC OME OF RS. 7,26,66,963/-. THE RETURN WAS PROCESSED U/S. 14 3(1) OF THE ACT. THE CASE OF THE APPELLANT COMPANY WAS SELE CTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSU ED. IN RESPONSE TO THE SAME, THE APPELLANT COMPANY HAS FRO M TIME TO TIME SUBMITTED ALL THE DATA/DETAILS AND INFORMATION/EXPLANATIONS AS CALLED FOR BY THE A.O. 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E A.O ASKED TO FURNISH CONFIRMATION IN RESPECT OF ALL PARTIES TO W HOM SCRAP IS STATED TO BE SOLD. THE ASSESSEE COULD NOT PRODUCE C ONFIRMATION IN RESPECT OF THE FOLLOWING TWO PARTIES OUT OF TOTAL 2 1 PARTIES. 1. M/S.TUBE MAN - SCRAP SALES RS.820320 FOR 35770 OF STAINLESS/CARBON STEEL TUBES. 2. M/S.TUBE INC CORPORATION - SCRAP SALES RS .608788 FOR 18440 KGS OF STAINLESS/CARBON STEEL TUBES. FURTHER, SUMMONS U/S.131 WERE ISSUED BY A.O TO SOME OF THE SCRAP SALE PARTIES. IN RESPONSE TO THE SUMMONS, THE PARTI ES APPEARED BEFORE A.O AND FURNISHED THE DETAILS CALLED FOR. HO WEVER, NO ONE APPEARED ON BEHALF OF M/S.DEEPAK STEEL AT CHATTRAL, DIST. GANDHI NAGAR. THE ASSESSEE HAS SUBMITTED THE LEDGER COPIES AND BILLS OF ALL SCRAP PARTIES DURING ASSESSMENT PROCEEDINGS . ITA NO.622/AHD/2011 WITH CO 4 THE NON-FURNISHING OF CONFIRMATIONS OF TWO PARTIES AND NON- ATTENDANCE OF ONE OF THE PARTIES TO WHOM SCRAP TUBE S HAVE BEEN SOLD, WAS TREATED AS SALE OF FINISHED GOODS BY THE A.O. 4.2 ON THE OTHER HAND, THE LD. A.R SUBMITTED THAT T HE APPELLANT COMPANY HAS SUBMITTED THE CONFIRMATION OF ACCOUNTS FROM 19 PARTIES OUT OF TOTAL 21 PARTIES TO WHOM SCRAP SALE IS MADE DURING THE YEAR UNDER ASSESSMENT. THE SCRAP GENERATED AND SOLD BY THE APPELLANT IS SUBJECT TO EXCISE DUTY AND SALES TAX A ND ALL THE RECORDS PERTAINING TO QUANTITY OF GENERATION, SALES AND STOCK OF SCRAP IS MAINTAINED BY THE APPELLANT ON DAY-TO-DAY BASIS. THE APPELLANT ALSO SUBMITTED THE COPY OF DAILY REC ORDS MAINTAINED BY IT FOR PRODUCTION, CONSUMPTION, STOCK ETC. RELATING TO RAW MATERIALS, FINISHED GOODS, AND SCRAP ON SAMPLE BASIS BEFORE THE A.O VIDE LETTER DATED 24/12/2009. THAT APART TH E DETAILS OF MANUFACTURING PROCESS, MONTHWISE PRODUCTION OF SCRA P AND FINISHED GOODS, PARTY WISE SALES OF SCRAP, MONTHLY RETURN OF EXCISE IN FORM ER-1, ETC WERE ALSO SUBMITTED TO THE A.O. T HE A.O HAS NOT FOUND ANY DEFECT IN THE RECORDS PRODUCED BEFORE HIM . 4.3 THE APPELLANT FURTHER SUBMITTED THAT IT IS AN I SO 9001 : 2000 COMPANY-AND IT IS A RED CERTIFIED COMPANY, AND EVEN THE GOVERNMENT AUTHORITIES AS WELL AS THE AUDITORS HAVE NOT FOUND OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS MAINTAINED BY I T. THE APPELLANT COMPANY HAS ALSO OBTAINED THE CERTIFICATE IN RESPEC T OF MANUFACTURING PROCESS AND GENERATION OF SCRAP FROM M/S. GERMANISHER LLYOD. M/S. GEREMANISHER LLYOD IS A REP UTED INTERNATIONALLY RECOGNIZED CERTIFICATION AGENCY OF PIPES AND TUBES INDUSTRY. THEY PERSONALLY VISITED THE PLANT O F APPELLANT COMPANY ON 23/2/2009 AND AFTER DUE VERIFICATION OF THE DIFFERENT PROCESS HAVE ISSUED THE CERTIFICATE REGARDING BURNI NG LOSSES AND SCRAP GENERATION IN MANUFACTURING PROCESS OF THE AP PELLANT COMPANY. THE COPY OF SAID CERTIFICATE WAS SUBMITTED BEFORE THE A.O FOR HIS PERUSAL. THE CERTIFICATE ISSUED BY M/S. GERMANISHER LLYOD, ESTABLISH THAT THE PROCESS LOSS AND SCRAP GE NERATION OF THE APPELLANT COMPANY AS SHOWN IN THE AUDITED BOOKS OF ACCOUNTS IS. TRUE AND CORRECT. ITA NO.622/AHD/2011 WITH CO 5 THE BOOKS OF ACCOUNTS OF THE APPELLANT ARE AUDITED UNDER THE COMPANIES ACT AS WELL AS UNDER THE INCOME TAX ACT A ND THE AUDITORS HAVE GIVEN THEM REPORTS UNDER THE COMPANIE S ACT AND IN FORM NO. 3CA AND 3CD UNDER THE INCOME TAX ACT AND T HEY HAVE NOT FOUND ANY DEFECT THEREIN. 4.4 ON THE BASIS OF FACTS DISCUSSED ABOVE, I AM OF THE CONSIDERED OPINION THAT THE A.O HAS MADE THE ADDITION MERELY O N A PRESUMPTION THAT CONFIRMATION OF TWO PARTIES ARE NO T RECEIVED AND ONE PARTY DID NOT APPEAR AGAINST SUMMONS ISSUED WER E NOT SOLD SCRAP BUT THOSE WERE SOLD FINISHED GOODS. THE SAID PRESUMPTION OF THE A.O IS BASED ON CONJECTURE AND SURMISES AND WIT HOUT ANY SUPPORTING EVIDENCE. THE A.O HIMSELF HAS CONSIDERED THE BOOKS OF ACCOUNT AS TRUE AND CORRECT AND HAS NOT REJECTED TH E BOOKS OF ACCOUNT AND ON THE OTHER HAND, HE HAS ON PRESUMPTIO N BASIS MADE AN ADDITION CONSIDERING THE SCRAP SALES AS SALE OF FINISHED GOODS WHICH IS CONTRARY TO THE FACTS. THE A.O HAS NOT CONSIDERED THE FACT THAT ALL THE QU ANTITATIVE EXCISE RECORDS WERE SUBJECT TO AUDIT BY EXCISE DEPA RTMENT AND EXCISE DEPARTMENT HAS NOT FOUND ANY DEFECT IN THE R ECORDS AND HAS NOT CONSIDERED THE SCRAP SALES AS SALE OF FINISHED GOODS. IT IS SURPRISING TO NOTE THAT HOW A.O IMAGINED THAT THE P ARTIES WHO WERE NOT FILED CONFIRMATION WERE SOLD FINISHED GOOD S RATHER THAN SCRAP. THE A.O HAS NOT BROUGHT ON RECORD ANY COGENT MATERIAL EVIDENCE IN SUPPORT OF THE ARBITRARY ADDITION MADE BY HIM. 4.5 IN VIEW OF THE DETAILED DISCUSSION HELD ABOVE, THE ADDITION MADE BY THE A.O ON ACCOUNT OF SUPPRESSION OF SALES OF RS. 60,22,234/- IS NOT JUSTIFIED AND THEREFORE, A.O IS DIRECTED TO DELETE THE SAME. AS SUCH, THE APPELLANT GETS RELIEF OF RS. 60,22,234/-. 7. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE ASS ESSMENT ORDER, WE FIND THAT THE AO FAILED TO BRING ANY EVIDENCE ON RECORD WHICH CAN SUGGEST SUPPRESSION OF SALES MADE BY THE ASSESSEE. THE ASS ESSEE WAS SHOWING AN ITA NO.622/AHD/2011 WITH CO 6 INCOME OF MORE THAN RS.7 CRORES IN ITS RETURN. IT COULD NOT FILE CONFIRMATION FROM TWO SCRAP PURCHASES HAVING VALUE ROUGHLY OF RS.40 LAKHS ONLY. THE LD.AO HAS CALCULATED THIS ASPECT I N SUCH MANNER SUGGESTING THAT THE ASSESSEE HAS SOLD FINISHED GOOD S, BUT THERE IS NO EVIDENCE WITH THE AO TO THAT EFFECT. WE FAILED TO UNDERSTAND ON WHAT BASIS THE AO HAS DRAWN THIS INFERENCE. ON THE OTHE R HAND, THE LD.CIT(A) HAS OBSERVED THAT QUANTITATIVE EXCISE RECORD WAS MA INTAINED BY THE ASSESSEE, AND THEY WERE SUBJECT TO THE AUDIT BY THE EXCISE DEPARTMENT. ITS PRODUCT IS EXCISABLE. IT IS NOT THE CASE THAT THE ASSESSEE HAS AVOIDED EXCISE DUTY OR SOME EVIDENCE WAS FOUND, EXHIBITING THE AVOIDANCE OF EXCISE DUTY. THEREFORE, AFTER TAKING INTO CONSIDER ATION THE ABOVE FINDING, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ER OF THE LD.CIT(A) ON THIS ISSUE. THEREFORE, GROUND NO.1 OF THE APPEAL O F THE REVENUE IS REJECTED. 8. IN GROUND NO.2, THE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE MADE BY T HE AO UNDER SECTION 14A OF THE ACT AT RS.2,78,700/- AS AGAINST RS.3,60, 204/- MADE BY THE AO. 9. THE ASSESSEE HAD MADE INVESTMENT IN TAX FREE SEC URITIES HAVING VALUE OF RS.96,90,525/-. IT HAS CONTENDED BEFORE TH E REVENUE AUTHORITIES THAT DURING THIS YEAR, IT HAS NOT EARNED ANY TAX FR EE INCOME, AND THEREFORE, NO DISALLOWANCE SHOULD BE MADE. THIS PL EA OF THE ASSESSEE WAS REJECTED, AND THE AO HAS ESTIMATED THE EXPENDIT URE FOR DISALLOWANCE ITA NO.622/AHD/2011 WITH CO 7 AT RS.3,06,204/-. THIS AMOUNT HAS BEEN CALCULATED ON THE STRENGTH OF RULE 8D. 10. ON APPEAL, THE LD.CIT(A) HAS REDUCED THE DISALL OWANCE TO RS.2,78,700/-. THE LD.CIT(A) ALSO MADE COMPUTATION ON THE BASIS OF RULE 8D. ACCORDING TO THE LD.CIT(A), THERE IS AN E RROR IN WORKING OF THE DISALLOWANCE. THE ORDER OF THE LD.CIT(A) NEED NOT TO BE INTERFERED WITH FOR TWO REASONS, VIZ. (I) HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. CIT V/S CORRETECH ENGINEERING (P) LTD, 372 ITR 97 HAS HELD THAT IF NO EXEMPT INCOME IS THERE DURING THE YEAR, NO DISAL LOWANCE UNDER SECTION 14A CAN BE MADE. SIMILARLY, RULE 8D WAS NO T APPLICABLE IN THE ASSTT.YEAR 2007-08. THE HONBLE DELHI HIGH COURT I N THE CASE OF MAXO MAXOPP INVESTMENT LTD. VS. CIT, 347 ITR 272 AND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. L TD. 328 ITR 81 HAS HELD THAT RULE 8D CANNOT BE APPLIED WITH RETROSPECT IVE EFFECT. IT IS APPLICABLE FROM THE ASSTT.YEAR 2008-09. THEREFORE, NO DISALLOWANCE CAN BE ON THE BASIS OF RULE 8D. IN VIEW OF THE ABOVE D ISCUSSION, THE GROUND RAISED BY THE REVENUE IS REJECTED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. 12. SO FAR AS CROSS OBJECTION OF THE ASSESSEE IS CO NCERNED, THE SAME IS IN SUPPORT OF THE LD.CIT(A)S ORDER. EVEN ON ISSUE NO.2 WITH RESPECT TO THE DISALLOWANCE RESTRICTED UPTO RS.2,78,700/- THE ASSESSEE HAS NOT CHALLENGED THE ORDER OF THE LD.CIT(A). SUB-SECTION 4 OF SECTION 253 AUTHORIZES THE RESPONDENT TO FILE CO AGAINST ANY PA RT OF ORDER IMPUGNED IN THE APPEAL. IN THE PRESENT CO, THE ASSESSEE HAS NOT SHOWN ITS ITA NO.622/AHD/2011 WITH CO 8 GRIEVANCES AGAINST ANY PART OF THE CIT(A)S ORDER, THEREFORE, IT IS NOT MAINTAINABLE. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL AS WELL AS CO, BOTH ARE DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E CO OF THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 11 TH JULY, 2016 AT AHMEDABAD. SD/- SD/- ( N.K. BILLAIYA ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 11/07/2016