ITO, Nahan V. Smt. Megha Dadoo, Paonta Sahib

ITA 646/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68458 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Cost of acquisition; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 646/CHD/2013 ASSESSMENT YEAR:2007-08 THE INCOME TAX OFFICER, VS SMT. MEGHA DADOO, NAHAN. PROP. MATRIX CORPORATION, VILLAGE PATTI NATHA, PAONTA SAHIB, SIRMOUR (H.P.). PAN NO. AJRPD-6559 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI J.S.NAGAR RESPONDENT BY : SH PARIKSHIT A GGARWAL DATE OF HEARING : 27.08.2013 DATE OF PRONOUNCEMENT : 06.09.2013 O R D E R PER SUSHMA CHOWLA, J.M. THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF THE CIT(APPEALS), SHIMLA DATED 18.03.2013 RELATING TO A SSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143( 3) OF THE INCOME- TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE REVENUE ASSESSEE RAISED THE FOLLOWING GROUND S OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. C1T(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10,35,1 19/- MADE BY THE A.O. ON ACCOUNT OF UNDERSTATEMENT OF COST PRICE S OF CERTAIN ITEMS PURCHASED BY THE ASSESSEE. 2. IT IS PRAYED THAT THE ORDER OF THE LD CIT(A) BE SET-ASIDE AND THAT OF THE A.O. RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD ANY OTHER GROU ND OF APPEAL WHICH MAY ARISE AT THE TIME OF HEARING. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAIN ST THE DELETION OF 2 ADDITION OF RS. 10,35,119/- MADE ON ACCOUNT OF UNDE R STATEMENT OF COST PRICE OF CERTAIN ITEMS PURCHASED BY THE ASSESSEE. 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE IS ENGAGED IN THE MANUFACTURE OF MULTIZONE DOOR FRAME METAL DETECTOR. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80 IC OF THE ACT, WHICH HAS BEEN ALLOWED TO THE ASSESSEE BY THE ASSES SING OFFICER. HOWEVER, THE ASSESSING OFFICER NOTED THAT WHILE MAN UFACTURING THE FINISHED PRODUCT, CERTAIN ITEMS BEING THE RAW MATER IALS, WERE CLAIMED AT LOWER COST AS COMPARED TO THE MARKET RATES PREVA ILING AT THE RELEVANT TIME. THE ASSESSING OFFICER TABULATED THE RATES SHOWN BY THE ASSESSEE AND RATES ACQUIRED FROM THE MARKET AND CONFRONTED THE ASSESSEE THAT IT HAD DEFLATED ITS PURCHASERS OF RS. 10,35,119/-. THE TABULATED DETAILS ARE PLACED AT PAGE 6 OF THE ASSES SMENT ORDER. THE CONTENTION OF THE ASSESSEE THAT IT HAD PURCHASED TH E SAID ITEMS AT MARKET PRICES AND WHICH IN-TURN HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT, WERE REJECTED BY THE ASSESSING OFFICER AND ADDITION OF RS. 10,35,119/- WAS MADE IN THIS REGARD. 5. THE CIT(APPEALS) PERUSED THE ASSESSMENT RECORD A ND FOUND THAT NO PAPERS RELATING TO ANY CORRESPONDENCE, IF ANY, M ADE BY THE ASSESSING OFFICER TO CONDUCT ENQUIRIES REGARDING TH E COST PRICE OF VARIOUS ITEMS WERE FOUND IN THE RELEVANT ASSESSMENT FOLDER. THE CIT(APPEALS) FURTHER NOTED THAT NO DETAILS REGARDIN G THE SAID ENQUIRIES HAVE BEEN GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. HOWEVER, THE COPIES OF LETTERS FROM VARIOUS PARTIES QUOTING THE PRICES FOR VARIOUS ITEMS HAD BEEN PROVIDED BY T HE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS WHICH HE CLAIMS TO HAVE OBTAINED FROM THE ASSESSING OFFICER AFTER THE RECEIPT OF ASS ESSMENT ORDER. THE CIT(APPEALS) FURTHER NOTED THAT THE RESULT OF ANY E NQUIRY CONDUCTED BY THE ASSESSING OFFICER, WAS NEVER CONFRONTED TO T HE ASSESSEE DURING 3 THE COURSE OF ASSESSMENT PROCEEDINGS. IN VIEW THER EOF, THE CIT(APPEALS) HELD THAT THE IMPUGNED ADDITION WAS MA DE BY THE ASSESSING OFFICER WITHOUT CONFRONTING THE RESULT OF HIS ENQUIRIES TO THE ASSESSEE. IT WAS FURTHER HELD BY THE CIT(APPEA LS) THAT ALL THE FOUR LETTERS WERE DATED 10/12.12.2009 WHICH CLEARLY SHOWS THAT THE RATES QUOTED WERE THE PREVALENT RATES AS ON-DATE WH EREAS THE ASSESSING OFFICER HAD TO COMPLETE THE ASSESSMENT FO R THE FINANCIAL YEAR 2006-07 I.E. FOR A PERIOD ALMOST THREE YEARS P RIOR TO THE YEAR OF ENQUIRY. IN VIEW THEREOF, THE CIT(APPEALS) HELD TH AT THE CONCLUSION DRAWN BY THE ASSESSING OFFICER THAT THE ASSESSEE HA D UNDER-STATED THE PURCHASE COST OF FIVE ITEMS MENTIONED IN THE ASSESS MENT ORDER WAS WITHOUT MERIT AND THE ADDITION MADE ON THIS ACCOUNT WAS, THUS DELETED BY THE CIT(APPEALS). THE REVENUE IS IN APP EAL AGAINST THE ORDER OF THE CIT(APPEALS). 6. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF THE ASSESSING OFFICER. THE LD. AR FOR THE ASSESSEE PLA CING RELIANCE ON THE ORDER OF THE CIT(APPEALS) POINTED OUT THAT ALL THE PURCHASES MADE BY THE ASSESSEE WERE FULLY VOUCHED AND THE SUPPLIES WERE BEING MADE TO THE MINISTRY OF DEFENCE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WA S ENGAGED IN THE MANUFACTURING OF MULTIZONE DOOR FRAME METAL DETECTO R. THE ASSESSEE WAS FOUND ELIGIBLE FOR THE CLAIM OF DEDUCT ION UNDER SECTION 80IC OF THE ACT. HOWEVER, THE ASSESSING OFFICER NO TED THAT THE PURCHASE COST OF CERTAIN ITEMS OF RAW MATERIAL USED BY THE ASSESSEE WERE ON THE HIGHER SIDE. THE ITEMS UNDER CONSIDERA TION WERE WOODEN FRAME, BATTERY, MAIN PANEL, ENAMELED COPPER WIRE AN D MOULDED TOP/BOTTOM ACCESSORIES. THE ASSESSING OFFICER CLAI MS TO HAVE MADE 4 ENQUIRIES FROM THE MARKET AND RATES AS PER THE ENQU IRIES SO MADE AND THE RATES SHOWN BY THE ASSESSEE WERE COMPARED BY TH E ASSESSING OFFICER AND THE ASSESSEE WAS FOUND TO HAVE DEFLATED ITS PURCHASERS BY RS. 10,35,119/-. THE ASSESSING OFFICER, CONSEQUENT LY MADE AN ADDITION OF RS. 10.35.119/-. THE BASIS OF THE ADDI TION MADE BY THE ASSESSING OFFICER WAS THE ENQUIRY MADE FROM THE MAR KET WHILE COMPLETING ASSESSMENT I.E. IN THE MONTH OF DECEMBER ,2009. THE ASSESSMENT ORDER UNDER CONSIDERATION BEFORE US RELA TES TO FINANCIAL YEAR 2006-07. THE ASSESSING OFFICER HAD SOUGHT THE INFORMATION AND HAD APPLIED THE MARKET RATES OF THE VARIOUS ITEMS A S ON THE DATE OF ENQUIRY TO BE THE COST OF PURCHASE RELATING TO THE FINANCIAL YEAR 2006- 07. ON THE OTHER HAND, THE ASSESSEE CLAIMS THAT AL L THE PURCHASES MADE BY IT WERE FULLY VOUCHED AND AS PER THE MARKET RATES PREVAILING DURING THE FINANCIAL YEAR 2006-07. 8. THE FIRST ASPECT OF THE ISSUE IS NON-CONFRONTATI ON OF THE ENQUIRY, IF ANY MADE BY THE ASSESSING OFFICER. THE CIT(APPEALS), ON PERUSAL OF THE RECORD FOUND NO DOCUMENTS RELATING T O THE ENQUIRY, AVAILABLE IN THE ASSESSMENT FOLDER. HOWEVER, THE LD . AR FOR THE ASSESSEE FILED COPIES OF THE CORRESPONDENCE IN THIS REGARD WHICH IN- TURN WAS RECEIVED AFTER THE COMPLETION OF THE ASSES SMENT. ADMITTEDLY, THE RESULT OF THE ENQUIRIES WAS NEVER C ONFRONTED TO THE ASSESSEE AND IN VIEW THEREOF, THE SAME CANNOT BE US ED AS A BASIS FOR MAKING THE SAID ADDITION. FURTHER, THERE IS NO MER IT IN THE AFORESAID ADDITION MADE IN THE HANDS OF THE ASSESSEE UNDER WH ICH THE RATES PREVAILING IN DECEMBER, 2009 HAVE BEEN APPLIED TO C OME TO THE CONCLUSION THAT THE RATES OF PURCHASES IN THE FINAN CIAL YEAR 2006-07 WERE ON THE LOWER SIDE. IT IS AN ESTABLISHED NORM OF THE MARKET THAT THE RATES OF VARIOUS ITEMS ARE VARYING FROM YEAR TO YEAR AND THE RATES PREVALENT IN 2009 CANNOT BE USED AS A BASIS FOR VER IFYING THE RATES OF 5 RAW MATERIAL USED BY THE ASSESSEE IN THE FINANCIAL YEAR 2006-07. IN THE ENTIRETY OF THE ABOVE FACTS AND CIRCUMSTANCES O F THE CASE, WE FIND NO MERIT IN THE ORDER OF THE ASSESSING OFFICER AND UPHOLDING THE ORDER OF CIT(APPEALS), WE DISMISS THE GROUND OF APP EAL RAISED BY THE REVENUE. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF SEPTEMBER, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 6 TH SEPTEMBER,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH