ACIT, Sangrur V. M/s S.M. Pulp Packaging Pvt. Ltd., Sangrur

ITA 672/CHANDI/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5000 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 31-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Assessee Lawyers: ASHWANI KUMAR SH ADITYA KUMAR
• Keywords: Rejection of books of accounts
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.672/CHD/2016 ASSESSMENT YEAR: 2011-12 ASSTT. CIT VS. M/S S.M. PULP PACKAGING PVT. LTD . CIRCLE, SANGRUR JIND ROAD, SANGRUR PAN NO. AADCS9516R (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ASHWANI KUMAR SH. ADITYA KUMAR REVENUE BY : SH. MANJEET SINGH DATE OF HEARING : 28/05/2018 DATE OF PRONOUNCEMENT : 28/05/2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 14/03/2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS), PATIALA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. IN THE PRESENT APPEAL REVENUE HAS RAISED THE FOL LOWING GROUNDS: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 79,43,215/- M ADE BY THE ASSESSING OFFICER AFTER REJECTING ASSESSEES BOOKS OF ACCOUNT U/S 145 (3) OF THE INCOME TAX ACT, 1961. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN NOT UPHOLDING THE REJECTION OF BOOKS OF AC COUNT U/S 145(3) OF THE INCOME TAX ACT, 1961, DESPITE THE FACT THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE AO HAS POINTED OUT CERTAIN DEFICIENCIES IN ASSE SSEES BOOKS. 3. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET AS IDE AND THAT OF THE AO RESTORED. 3. THE REVENUE IS AGGRIEVED BY THE ACTION OF THE LD . CIT(A) IN DELETING THE ADDITION MADE BY THE AO ON ESTIMATE OF THE G.P. RAT E AFTER REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE DURING THE YEAR HAD SHOWN A G.P. RATE OF 27.17%, THE AO, HOWEVER, OBSERVED THAT THE SAME WAS SLIGHTLY ON THE LOWER SIDE THAN THAT OF EARLIER A.Y. 2010-11 WHICH WAS DE CLARED AT 27.90%. 2 4. THE ASSESSEE EXPLAINED TO THE AO THAT THE BOOKS OF ACCOUNT WERE DULY AUDITED AND THAT G.P. RATE WAS DECLARED AS PER BOOK S OF ACCOUNT. HOWEVER, THE AO REJECTED THE BOOKS OF ACCOUNT ON THE FOLLOWI NG GROUNDS: I. THE APPELLANT HAS NOT PRODUCED SEPARATE STOCK REGIS TER, PRODUCTION REGISTER AND DAY TO DAY RECORD OF CONSUMPTION OF CONSUMABLE ITEMS, II. NO QUANTITATIVE DETAILS OF THE OPENING STOCKS AS WE LL CLOSING STOCK ALONGWITH THE BASIS OF VALUATION OF OPENING STOCK AND CLOSING STOCK RESPEC TIVELY DULY SUPPORTED BY DOCUMENTARY EVIDENCE I.E, SALE BILLS, PURCHASES BIL LS, STOCK REGISTERS HAS BEEN FURNISHED, AND III. NO SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED. 5. IN FIRST APPEAL, THE LD. CIT(A) DELETED THE ADDI TION SO MADE BY THE AO AND ACCEPTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THEREBY THE G.P. RATE DECLARED BY THE ASSESSEE, OBSERVING AS UNDER: 4.2 I HAVE CONSIDERED THE FACTS OF THE CASE, THE RE ASONING OF THE ASSESSING OFFICER AND SUBMISSIONS OF THE APPELLANT. ADMITTEDL Y, THE ITEMS PRODUCED BY THE APPELLANT ARE DEFENSE ITEMS AND SOLD TO GOVT, DEPAR TMENT AS PER THEIR SPECIFICATION AND AS PER SECRECY CLAUSE. THE ITEMS ARE VERIFIED BY THE OFFICIALS OF THE GOVT. DEPARTMENT AT DIFFERENT STAGES AND ARE EXCISA BLE GOODS SUBJECTED TO VERIFICATION BY EXCISE OFFICIALS. BRIEFLY STATED THE ASSESSING OFFICER REJECTED THE B OOKS OF ACCOUNTS BECAUSE: (I) THE APPELLANT HAS NOT PRODUCED SEPARATE STOCK R EGISTER, PRODUCTION REGISTER AND DAY TO DAY RECORD OF CONSUMPTION OF CONSUMABLE ITEM S, (II) NO QUANTITATIVE DETAILS OF THE OPENING STOCKS AS WELL CLOSING STOCK ALONGWITH THE BASIS OF VALUATION OF OPENING STOCK AND CLOSING STO CK RESPECTIVELY DULY SUPPORTED BY DOCUMENTARY EVIDENCE I.E. SALE BILLS, PURCHASES BILLS, STOCK REGISTERS HAS BEEN FURNISHED, AND (III) NO SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED. NOW, ADMITTEDLY THE ACCOUNTS OF THE APPELLANT ARE D ULY AUDITED. NO ADVERSE OBSERVATION IS MADE BY THE AUDITORS. THE APPELLANT AVERRED THAT DURING ASSESSMENT PROCEEDINGS IT HAD BEEN BRINGING THE CASH BOOK, LED GER ALONG WITH SALES/PURCHASE VOUCHERS, STOCK REGISTER, EXCISE REGISTER BEFORE TH E ASSESSING OFFICER FOR VERIFICATION. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY DEFEC T IN THE PURCHASES, SALES OR OTHER EXPENSES. DURING THE APPELLATE PROCEEDINGS, T HE APPELLANT HAS FURNISHED CERTIFIED PHOTOCOPIES OF FORM R.G. 23A PART-I WHERE IN ENTRIES FOR DIFFERENT PRODUCTS ARE MADE UNDER DIFFERENT SHEETS WITH REFERENCE TO I NPUTS. SIMILARLY, DAILY STOCK REGISTER IN FORM RG-I REFLECTS SEPARATE RECORD MAIN TAINED FOR SEPARATE FINISHED PRODUCTS AS WELL. THE LAW NOWHERE MANDATES THAT THE TAX PAYER IS OBLIGED TO MAINTAIN SEPARATE MANUFACTURING ACCOUNT/PROFIT & LO SS ACCOUNT IN RESPECT OF EACH FINISHED PRODUCT-COMBUSTIBLE CARTRIDGE CASES (CCC) AND BULLET PROOF JACKETS (BPJ) IN THIS CASE. THE CASE LAWS RELIED ON BY THE ASSESSING OFFICER HA VE AISO BEEN PERUSED AND THE FOLLOWING IS OBSERVED : BHARAT MILK PRODUCTS VS. CIT [(1981) 128 ITR 682 (A LL.) (WRONGLY CITED BV THE A.O. AS 81ITR 609 (BOMBAV)] IN THAT CASE ASSESSEE'S PURCHASES AND CASH SALES WE RE NOT VERIFIABLE AS THE ASSESSEE HAD NOT MAINTAINED DAY TO DAY PRODUCTION AND MANUFA CTURING RECORD. STEELSWORTH LTD. VS. CIT 69 ITR 366 (GAU.) 3 IN THAT CASE ALTHOUGH THERE WERE SEPARATE TRADING A CCOUNTS FOR THE SEVERAL ITEMS OF GOODS DEALT WITH AND MANUFACTURED BY THE ASSESSEE, ALL THE PURCHASES RELATING TO VARIOUS ACCOUNTS WERE DEBITED BY THE APPELLANT TO O NE CONSOLIDATED ACCOUNT AND THAT THE ALLOCATION OF THESE PURCHASES TO THE VARIO US TRADING ACCOUNTS WAS NOT ON ANY SCIENTIFIC BASIS BUT THAT THE APPORTIONMENT WAS MADE PURELY ON ADHOC BASIS. B.N.MAHESHWARI VS. CIT 210 ITR 438 (BOM.) IN THIS CASE THE ASSESSEE, A BIDI MANUFACTURER HAD NOT MAINTAINED RECORD OF DAY TO DAY MANUFACTURING OF BIDIS. HERE T HE APPELLANT HAS BEEN MAINTAINING SUCH RECORDS IN THE FORM OF FORM RG 23A PART I, FORM RG 23C PART I, DAILY STOCK REGISTER IN FORM RG-1 WHICH CONTAIN DET AILS INTER ALIA W.R.T DAY TO DAY MANUFACTURING. THUS ALL THE THREE CASE LAWS RELIED ON THE ASSESSIN G OFFICER ARE DISTINGUISHABLE ON FACTS. ON THE OTHER HAND THE CASE LAW VIZ. PCIT VS. BHAWANI SILICATE INDUSTRIES 65 TAXMANN.COM RELIED ON BY THE APPELLANT CLEARLY HOLD S THAT MERELY BECAUSE QUALITATIVE RECORD WAS NOT MAINTAINED BOOKS OF ACCO UNTS CANNOT BE REJECTED. IN VIEW OF THE ABOVE-STATED FACTS OF THE CASE AND T HE LEGAL POSITION REJECTION OF BOOKS OF ACCOUNTS OF THE APPELLANT IS NOT WARRANTED ON MERITS. THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE BOOK RESULTS OF THE APPEL LANT. THESE GROUNDS OF APPEAL ARE, THEREFORE, ALLOWED. IN THE RESULT, THE APPEAL IS ALLOWED. 6. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND THE CONSIDERING THE FACTS THAT FOR THE SUBSEQUENT ASSES SMENT YEAR 2012-13 THE G.P. AT A MUCH LOWER RATE OF 19.06% HAS BEEN ACCEPTED AN D FOR A.Y. 2013-14 @ 6.6% AND FURTHER IN THE EARLIER A.Y. 2009-10 @ 12.48% H AS BEEN ACCEPTED IN THE ASSESSMENT PROCEEDINGS CARRIED OUT UNDER SECTION 14 3(3) OF THE ACT, WE ARE OF THE VIEW THAT THERE WAS NO JUSTIFICATION FOR THE AO IN MAKING FURTHER ADDITION IN G.P. RATE ON ESTIMATION BASIS FOR THE YEAR UNDER CO NSIDERATION. WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT (A). 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28/05/2018 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR