Dyal Steel Industries, Khanna V. ITO, Khanna

ITA 689/CHANDI/2015

• Counselvise Citation: 68921514 RSA 2015
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 20-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: ALOK AGGARWAL
• Keywords: Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT ITA NO. 689/CHD/2015 (ASSESSMENT YEAR: 2010-11) DAYAL STEEL INDUSTRIES, VS. THE INCOME TAX OFFICER , KHANNA. WARD 1, KHANNA. PAN NO. AAGFD5905M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ALOK AGGARWAL RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 20.11.2015 DATE OF PRONOUNCEMENT : 20.11.2015 O R D E R PER H.L.KARWA, VP : THIS APPEAL FILED BY THE ASSESSEE IS DIR ECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-2, LUDHIANA DATED 18.5.2015 RELATING TO ASSESSMENT YEAR 2010-11. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.C.I.T.(APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS.1,25,930/-, MADE BY DISALLOWING THE EXPENDITURE INCURRED ON BUNDLING AND BINDING OF FINISHED GOODS, AS CLAIMED BY THE APPELLANT IN THE 2 RELEVANT MANUFACTURING AND TRADING ACCOUNT. THE SUSTAINANCE OF THE AFORESAID ADDITION OF RS.1,35,930/- IS UNJUSTIFIED, UNWARRANTED AND UNCALLED FOR, AS THE SAID EXPENDITURE IS BONAFIDE AND GENUINE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.C.I.T.(APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF RS.1,25,930/- ON PRESUMPTION AND CAPRICE BY IGNORING THE DOCUMENTARY EVIDENCE BROUGHT ON RECORD BY THE APPELLANT. IT IS, THEREFORE, PRAYED THAT THE SAID ADDITION OF RS.1,25,930 MAY KINDLY BE STRUCK OUT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT IN THE MANUFACTURING ACCOUNT, THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS.1,10,536/- ON ACCOUNT OF BUNDLING MATERIAL. AS THE CONSUMPTION AND SALE OF BUNDLING MATERIAL WAS NOT VERIFIABLE IN THE TRADING RESULTS, THEREFORE, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE NATURE AND JUSTIFICATION THEREOF. IN THIS REGARD, THE ASSESSEE SUBMITTED THAT THE BUNDLING MA TERIAL IS CONSUMED AT THE TIME OF DISPATCH OF THE FINISHE D GOODS. FURTHER, AT NO STAGE, ANY MONEY CONSIDERATION IS RE CEIVED FROM THE BUYER OF THE GOODS FOR THE BUNDLING MATERI AL USED FOR BINDING THE FINISHED GOODS. IT WAS ALSO STATE D BY THE ASSESSEE THAT THE SELLER CLAIMS THE AMOUNT SPENT ON BUNDLING THE MATERIAL AS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT. DURING THE END OF THE ACCOUNTING YEAR, T HE ASSESSEE WAS HOLDING CLOSING STOCK OF BUNDLING MATE RIAL 3 AMOUNTING TO RS.7,562/-. THE ASSESSING OFFICER DI D NOT ACCEPT THE EXPLANATION OF THE ASSESSEE STATING THAT BECAUSE ON THE ONE HAND, THE ASSESSEE IS CLAIMING T HAT IT HAS MADE SALE OF BUNDLING AND BINDING MATERIAL AT T HE RATE OF FINISHED GOODS, BUT ON THE OTHER HAND, IT H AS NOT DECLARED SALE VALUE OF BUNDLING MATERIAL. THE ASS ESSING OFFICER FURTHER OBSERVED THAT THE BUNDLING AND BIND ING MATERIAL IS NOT A CONSUMABLE/MERGED WITH ANY FINISH ED GOODS. HE ALSO OBSERVED THAT FROM THE BOOKS OF AC COUNT IT WAS NOT ASCERTAINED WHERE ITS PURCHASE ENTERED A ND WHERE SALE VALUE OF SUCH MATERIAL WAS ACCOUNTED FOR . ACCORDINGLY, ON QUANTITY OF 4.505 MT OF BUNDLING AN D BINDING CONSUMED/CLAIMED, THE ASSESSING OFFICER APP LIED AN AVERAGE SALE RATE OF RS.27,950/- PER MT OF FINIS HED GOODS AND WORKED OUT THE SALES AT RS.1,25,930/-. T HUS, AN ADDITION OF RS.1,25,930/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, THE LEARNED CIT (APPEALS) CONFIRMED THE ORDER, AND HENCE THE ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL. 5. I HAVE HEARD SHRI ALOK AGGARWAL, LEARNED COUNSEL FOR THE ASSESSEE AND SHRI S.K.MITAL LEARNED D.R. AT LENGTH AND HAVE ALSO PERUSED THE MATERIALS AVAIL ABLE ON RECORD. THE ASSESSEE IS ENGAGED IN THE MANUFACTUR ING OF FINISHED GOODS (I.E. M.S. FLAT BAR) OUT OF ROLLING MATERIALS OF VARIOUS KINDS, SUCH AS MS BILLETS, STEEL INGOTS ETC. ALL SUCH PURCHASES ARE ACCOUNTED FOR IN THE CENTRAL EXC ISE 4 FORM IV REGISTER AND ITS CONSUMPTION AND PRODUCTION OF FINISHED GOODS ARE DULY ACCOUNTED FOR ON DAY-TO-DAY BASIS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD PURCHASED 4.505 MT IRON PATTI/HOOPS, WHICH ARE UTIL IZED FOR BINDING TOGETHER FINISHED GOODS IN SMALL BUNDLE S TO FACILITATE THE INTACTNESS, HANDLING, LOADING AND UN LOADING OF FINISHED GOODS. SHRI ALOK AGGARWAL, LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT BUNDLING MATERIAL C ANNOT BE UTILIZED AS RAW MATERIAL FOR ROLLING PURPOSES. CONSEQUENTLY, THE PURCHASE OF BUNDLING MATERIAL CAN NOT BE ACCOUNTED FOR IN THE CENTRAL EXCISE FORM IV RAW MATERIAL REGISTER. HE FURTHER POINTED OUT THAT IT IS A GENERAL PRACTICE IN EVERY TRADE AND INDUSTRY THAT T HE EXPENDITURE ON ACCOUNT OF THE PACKING OF GOODS IS ALWAYS BORNE BY THE SELLER OF THE GOODS AND THE BUYERS ARE NEVER REQUIRED TO PAY ANY MONEY CONSIDERATION TO THE SELL ER IN THIS RESPECT. HE, THEREFORE, SUBMITTED THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE IS GENUINE AND THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN MAKING AN A DDITION OF RS.1,25,930/- AGAINST QUANTITY OF 4.505 MT OF BU NDLING AND BINDING CONSUMED IN THE PROCESS OF SALE OF THE FINISHED GOODS. IN SUPPORT OF THE ABOVE CONTENTIO N, SHRI ALOK AGGARWAL, LEARNED COUNSEL FOR THE ASSESSEE INV ITED MY ATTENTION TO A COPY OF THE ASSESSMENT ORDER IN T HE CASE OF SIRI RAM JAIN STEEL ROLLING MILLS, MANDI GOBIND GARH FOR THE ASSESSMENT YEAR 2007-08, WHICH HAD BEEN SCRUTINIZED AND COMPLETED UNDER SECTION 143(3) OF T HE INCOME TAX ACT, 1961 (IN SHORT THE ACT). IN THE SAID 5 CASE, THE EXPENDITURE OF RS.3,30,149/- UNDER THE HE AD BUNDLING AND BINDING HAS DULY BEEN ALLOWED AS REVEN UE EXPENDITURE. SHRI ALOK AGGARWAL, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE COPY OF THE ASSESSMENT ORDER AND OTHER RELEVANT DOCUMENTS OF THE ABOVE PARTY WER E PRODUCED BY THE ASSESSEE BEFORE THE LOWER AUTHORITI ES. HE FURTHER POINTED OUT THAT IN THE CASE OF SIRI RAM J AIN STEEL ROLLING MILLLS, MANDI GOBINDGARH FOR ASSESSME NT YEAR 2009-10, THE ASSESSING OFFICER HAD ALLOWED THE EXPENDITURE CLAIMED ON ACCOUNT OF BUNDLING AT RS.7,16,372/- AND THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE ACT. IN SUPPORT OF THE ABOV E CONTENTION, THE ASSESSEE FILED THE COPY OF MANUFACT URING AND TRADING ACCOUNT FOR THE YEAR ENDING 31.3.2010 I N THE CASE OF SIRI RAM JAIN STEEL ROLLING MILLLS, MANDI GOBINDGARH AND ALSO FOR THE YEAR ENDING 31.3.2007. THE COPIES OF THE ASSESSMENT ORDERS OF THE ABOVE PARTY FOR THE ASSESSMENT YEARS 2007-08 AND 2009-10 ARE AVAILABLE IN ASSESSEES PAPER BOOK AT PAGE [PAGES 18 TO 20 AND 2 2 TO 24). BESIDES THE ABOVE, THE ASSESSEE HAS ALSO SUB MITTED A CONFIRMATION LETTER FROM ALL INDIA STEEL RE-ROLLE R ASSOCIATION, MANDI GOBINDGARH ([PAGE 16 OF THE PAPE R BOOK), VIDE WHICH IT IS CONFIRMED THAT ACCORDING TO THE TRADE PRACTICE IN THE INDUSTRY OF ROLLING MILLS AT MANDI GOBINDGARH, KHANNA, IT IS THE RESPONSIBILITY OF THE MANUFACTURER OF GOODS TO SUPPLY THE MATERIAL AFTER BUNDLING OF GOODS SOLD, WHEREVER SO REQUIRED, AT TH EIR OWN COST AND THE ENTIRE EXPENDITURE ON BUNDLING EXPENSE S IS 6 BORNE BY THE MANUFACTURER AND IS CLAIMED AS REVENUE EXPENDITURE IN THEIR MANUFACTURING ACCOUNTS. THEY ALSO CONFIRMED THAT THE BUYER OF GOODS IS NOT LIABLE TO MAKE ANY PAYMENT TOWARDS BUNDLING CHARGES. THEY HAVE A LSO STATED THAT THE AFORESAID PRACTICE HAS ALWAYS BEEN PREVALENT IN THE HISTORY OF STEEL ROLLING MILLS. IN VIEW OF THE ABOVE, I AGREE WITH THIS CONTENTION OF SHRI ALO K AGGARWAL, LEARNED COUNSEL FOR THE ASSESSEE THAT IT IS THE RESPONSIBILITY OF THE SELLER OF THE FINISHED GOODS TO DISPATCH THE FINISHED GOODS SOLD TO ITS CUSTOMERS A T OWN EXPENSE DULY TIED IN SOME BUNDLE WITH IRON PATTI FO R CARRIAGE PURPOSES AND AS SUCH, THE EXPENDITURE CLAI MED BY THE ASSESSEE FOR PURCHASING THE BUNDLING MATERIA L HAS CORRECTLY BEEN INCURRED AS REVENUE EXPENDITURE IN T HE MANUFACTURING AND TRADING ACCOUNT OF THE ASSESSEE I N THE YEAR UNDER CONSIDERATION. THEREFORE, THE REVENUE AUTHORITIES WERE NOT JUSTIFIED IN MAKING THE ADDITI ON OF RS.1,25,930/- AND ACCORDINGLY, I DELETE THE SAME. 6. NO OTHER POINT WAS RAISED OR ARGUED BEFORE ME. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF NOVEMBER, 2015. SD/- (H.L.KARWA) VICE PRESIDENT DATED : 20 TH NOVEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7