DCIT, Madurai V. Tamil Nadu Jaibharath Mills Ltd., Aruppukottai

ITA 7/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9686 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR VARMA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.7/MDS/2016 ' (' / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, MADURAI. V. M/S TAMIL NADU JAIBHARATH MILLS LTD., NO.212, RAMASAMY NAGAR, ARUPPUKOTTAI 626 159. PAN : AABCT 0158 J (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH. AJIT KUMAR VARMA, CIT ,-*+ . / / RESPONDENT BY : NONE ./ ITA NO. 8/MDS/2016 ' (' / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, MADURAI. V. M/S SHRI GOVINDARAJA MILLS (P) LTD., R.S. NO.1, SAYALKUDI ROAD, SAVVASPURAM, ARUPPUKOTTAI. PAN : AAHCS 7005 D (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH. P. RADHAKRISHNAN, JCIT ,-*+ . / / RESPONDENT BY : NONE 0 . 1$ / DATE OF HEARING : 06.04.2016 2!( . 1$ / DATE OF PRONOUNCEMENT : 13.04.2016 2 I.T.A. NOS.7 & 8/MDS/16 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS FILED BY THE REVENUE IN RESPECT OF TWO INDEPENDENT ASSESSEES ARE DIRECTED AGAINST THE ORDE RS OF THE COMMISSIONER OF INCOME TAX (APPEALS) 1, MADURAI, DATED 09.10.2015 AND 13.10.2015 RESPECTIVELY, PERTAINING TO ASSESSMENT YEAR 2009-10. SINCE COMMON ISSUE ARISES FOR CONSID ERATION IN BOTH THE APPEALS, WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. NO ONE APPEARED FOR THE ASSESSEES INSPITE OF ISS UE OF NOTICE. THE ASSESSEE IN I.T.A. NO.7/MDS/2016, HAS FILED WRI TTEN SUBMISSION AND REQUESTED TO DISPOSE THE APPEAL ON MERIT. HOWE VER, NO ONE APPEARED FOR THE ASSESSEE IN I.T.A. NO. 8/MDS/2016 NOR ANY WRITTEN SUBMISSION WAS FILED. THEREFORE, WE HEARD THE LD. D.R. AND DISPOSING THE APPEALS ON MERIT. 3. SH. AJIT KUMAR VARMA, THE LD. D.R. SUBMITTED THA T THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND SELLING OF COTTON YARN. DURING THE COURSE OF ASSESSMENT PR OCEEDING, THE ASSESSING OFFICER FOUND THAT THERE IS HUGE VARIATIO N IN THE 3 I.T.A. NOS.7 & 8/MDS/16 EXPENDITURE CLAIMED FOR ELECTRICITY AND FUEL BY THE ASSESSEE, WHILE COMPARING THE SAME WITH THAT OF OTHER 14 TEXTILE MI LLS. IN VIEW OF THE VARIATION, THE ASSESSING OFFICER FOUND THAT THE AVE RAGE PERCENTAGE OF EXPENDITURE OF POWER AND FUEL WITH REFERENCE TO GROSS TURNOVER OF OTHER 14 MILLS IS 15.60. IN THE CASE OF TAMIL NADU JAIBHARATH MILLS LTD., IT WAS 19.3. IN THE CASE OF TAMIL NADU JAIBH ARATH MILLS LTD., THE AVERAGE COST OF DIESEL FOR PRODUCTION OF ONE UN IT ELECTRICITY IS ` 10.12, WHEREAS THE ASSESSEE IS CLAIMING ` 10.33. SINCE IN NORMAL MANUFACTURING CONDITIONS, THE AVERAGE POWER AND FUE L EXPENDITURE CANNOT VARY, THE ASSESSING OFFICER FOUND THAT THE C LAIM OF POWER AND FUEL EXPENDITURE WAS CONSIDERABLY EXCESS. ACCO RDINGLY, THE DIFFERENCE BETWEEN THE EXCESS EXPENDITURE CLAIMED B Y THE ASSESSEE WAS DISALLOWED. 4. WE HAVE HEARD SH. P. RADHAKRISHNAN, THE LD. DEPA RTMENTAL REPRESENTATIVE ALSO. IN I.T.A. NO.8/MDS/2016, THE LD. D.R. SUBMITTED THAT HE PLACES HIS RELIANCE ON THE GROUND S OF APPEAL. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE L D. DEPARTMENTAL REPRESENTATIVES AND PERUSED THE RELEVA NT MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUG H THE WRITTEN SUBMISSION FILED BY THE ASSESSEE IN I.T.A. NO.7/MDS /2016. THIS 4 I.T.A. NOS.7 & 8/MDS/16 TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ACTU AL EXPENDITURE HAS TO BE CONSIDERED WHILE COMPUTING THE TOTAL INCOME. WHEN THE ASSESSEES ARE MAINTAINING BOOKS OF ACCOUNT, THERE I S NO GROUND FOR ESTIMATION OF EXPENDITURE. THE BOOKS OF ACCOUNT MA INTAINED BY THE ASSESSEES WERE NOT REJECTED AND THE ASSESSING OFFIC ER HAS NOT RAISED ANY DOUBT. THE ASSESSING OFFICER SIMPLY COM PARING THE EXPENDITURE INCURRED BY THE ASSESSEES IN FUEL AND P OWER WITH THAT OF THE 14 OTHER MILLS, FOUND THAT THE CLAIM OF THE ASS ESSEES FOR MANUFACTURING / PRODUCTION OF ONE UNIT OF ELECTRICI TY AT ` 10.33 IS HIGHLY EXCESSIVE. MANUFACTURING EXPENDITURE AND CO NSUMPTION OF FUEL OR POWER WOULD DEPEND UPON VARIOUS FACTORS DEP ENDING UPON THE MACHINERY USED AND MAINTENANCE OF MACHINERY IN A PROPER CONDITION, ETC. IF THE MACHINE / PARTS WERE NOT WO RKING, IT NEEDS TO BE REPLACED OR MAINTAINED IN A CONDITION THAT IT IS USED FOR PRODUCTION. THEREFORE, ESTIMATION OF EXPENDITURE F OR PRODUCTION OF ELECTRICITY PER UNIT WHILE COMPARING WITH OTHER 14 MILLS, IS NOT JUSTIFIED. THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT WHEN THE ASSESSEES ARE MAINTAINING THE BOOKS OF ACCOUNT, IN THE ABSENCE OF ANY OTHER MATERIAL, THE ASSESSING OFFICER CANNOT RE JECT THE SAME BY COMPARING THE EXPENDITURE WITH OTHER 14 MILLS. THE REFORE, THIS 5 I.T.A. NOS.7 & 8/MDS/16 TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDERS OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME ARE CONFIR MED. 6. NOW COMING TO THE EXCESS PURCHASE PRICE PAID FOR GINNED COTTON, THE LD. D.R. SUBMITTED THAT THE ASSESSING O FFICER HAS TAKEN 55 NUMBERS ON RANDOM BASIS FOR EXAMINATION. THE PR ICE PAID BY THE ASSESSEES WAS COMPARED WITH AVERAGE MONTHLY PRI CE ANNOUNCED BY THE CAI. OUT OF 55 PURCHASES MADE, FO R 19 PURCHASES, THE ASSESSEES HAVE PURCHASED AT A PRICE LESS THAN THE AVERAGE MONTHLY PRICE OF CAI. FOR REMAINING 36 PUR CHASES, THE PRICE PAID BY THE ASSESSEES WAS EXCESS OF PRICE ANN OUNCED BY CAI. THEREFORE, THE EXCESS PRICE PAID BY THE ASSESSEES F OR 36 PURCHASES WAS TAKEN AS INCOME OF THE ASSESSEE. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DEPARTMENTAL REPRESENTATIVES AND PERUSED THE RELEVA NT MATERIAL AVAILABLE ON RECORD, INCLUDING THE WRITTEN SUBMISSI ON FILED BY THE ASSESSEE. ADMITTEDLY, THE ASSESSEES ARE MAINTAININ G BOOKS OF ACCOUNT. THE CAI FIXED A RATE FOR PURCHASE OF COTT ON BY TAKING THE CONDITION PREVAILING IN A PARTICULAR LOCALITY. HOW EVER, THE PRICE OF THE COTTON WOULD VARY DEPENDING UPON THE MOISTURE CONDI TION AND THE QUALITY. THE ASSESSEES HAVE PURCHASED SOME OF THE COTTON AT CAI 6 I.T.A. NOS.7 & 8/MDS/16 RATE AND THE ASSESSEES HAVE ALSO PURCHASED SOME OF THE COTTON AT LESSER THAN THE PRICE FIXED BY CAI. IN SOME OF THE PURCHASES, THE RATES WERE HIGHER THAN THE RATE FIXED BY CAI. THES E ARE ALL THE PRICES PAID BY THE ASSESSEES IN PURCHASING THE RAW MATERIAL. THE PURCHASE IS NOT IN DISPUTE. THE FACT THAT THE BOOK S OF ACCOUNT MAINTAINED BY THE ASSESSEES IS NOT IN DISPUTE. THE ASSESSING OFFICER HAS NOT TAKEN ANY PAIN TO EXAMINE THE VENDO RS AND FARMERS FROM WHOM THE COTTON WAS PURCHASED BY THE ASSESSEES . SIMPLY BY PLACING RELIANCE ON THE RATE FIXED BY CAI, THE ASSE SSING OFFICER FOUND THAT THE ASSESSEES HAVE PAID EXCESS PRICE. T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE RATE FIXED BY TH E CAI IS ONLY A GUIDELINE RATE FOR PURCHASING THE COTTON. THE GUID ELINE RATE WOULD VARY DEPENDING UPON THE QUALITY AND OTHER FACTORS W HICH IS RELEVANT IN PURCHASING THE COTTON. THE ASSESSEES HAVE, IN S OME CASES, PAID PRICE LESSER THAN WHAT WAS FIXED BY CAI. IT MEANS THAT THE QUALITY OF COTTON PURCHASED BY THE ASSESSEES IN SUCH CASES IS NOT NORMAL. IN SOME CASES, THE ASSESSEES HAVE ADMITTEDLY PAID LITT LE MORE THAN WHAT WAS FIXED BY THE CAI. THEREFORE, IT MEANS THA T THE QUALITY OF COTTON MAY BE ABOVE THE AVERAGE OR NORMAL. THESE A RE THE ITEMS WHICH HAVE TO BE DECIDED BY THE BUSINESSMAN AND THE ASSESSING OFFICER CANNOT STEP INTO THE SHOES OF BUSINESSMAN A ND EXPECT THAT 7 I.T.A. NOS.7 & 8/MDS/16 THE ASSESSEE HAS TO PURCHASE A PARTICULAR MATERIAL FOR A PARTICULAR COST. IN THE ABSENCE OF REGULARITY MECHANISM GOVER NING THE VENDORS AND FARMERS SELLING THE MATERIAL/COTTON AT A PRICE OVER AND ABOVE THE RATE FIXED BY CAI, THIS TRIBUNAL IS OF TH E CONSIDERED OPINION THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE ADDITION ON THE BASIS OF THE RATE FIXED BY CAI. TH E RATE FIXED BY CAI IS ONLY A GUIDELINE AND THERE IS NO RESTRICTION FOR THE ASSESSEES TO PURCHASE COTTON EITHER AT LESSER OR HIGHER RATE THA N THE ONE FIXED BY THE CAI. IN THOSE CIRCUMSTANCES, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED ON 13 TH APRIL, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 13 TH APRIL, 2016. KRI. 8 I.T.A. NOS.7 & 8/MDS/16 . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A) 4. 0 81 /CIT, 5. 69 ,1 /DR 6. :' ; /GF.