ACIT Circle 1(1), Jabalpur V. M/s. Perfect Sanitary Weres Ltd., Jabalpur

ITA 7/JAB/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5609 (ITAT-JABALPUR)
• Duration Of Justice: 3 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R LATHORIYA
• Keywords: Rejection of books of accounts; Additional evidence
• Section: 143(3); 145

Judgement Text

1 I.T.A. NO. 07/JAB/2013 (ASSESSMENT YEAR :2008-09 ) IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BEFORE S/SHRI N.S. SAINI (AM) N. K. CHOUDHRY (JM ) I.T.A. NO. 07/JAB/2013 (ASSESSMENT YEAR :2008-09) ACIT, CIRCLE -1(1),JABALPUR VS. M/S. PERFECT SANITARY WARES LTD., 408, SHRI BALDAUJI MANDIR COMPOUND KOTWALI ROAD,, JABALPUR PAN/GIR NO. : AABCP 3538 N ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SH. D.R.LATHORIYA RESPONDENT BY : SHRI ANIL GUPTA DATE OF HEARING : 07-04-2016 DATE OF PRONOUNCEMENT : 07 -04. 2016 O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE EMANATING FR OM AN ORDER OF THE LD CIT(A), JABALPUR DATED 17.2.2012 FOR THE ASSESSMENT YEAR 2008- 09. 2. THE ONLY GROUND RAISED BY THE REVENUE IS AS UNDER: ON FACTS AND CIRCUMSTANCES, LD CIT(A) HAS ERRED IN ACCEPTI NG THE FACT THAT THE ADDITIONAL EVIDENCE IN THE FORM OF TEST CERTIFICATE R EGARDING IGNITION OF LOSS BY HEATING FROM TWO DIFFERENT LABS COULD BE UPTO THE ASSESS EE COMPANY ONLY. FURTHER, THE ASSESSEE COULD HAVE SENT SUITABLE SAMPLES FOR TESTING TO OBTAIN THE DESIRABLE CERTIFICATE. 3. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOW N PRODUCTION LOSS OF 44% IN THE MANUFACTURE AND SALE OF INSULATING CLAY BRICKS. THEREFORE, THE AO REJECTED 2 I.T.A. NO. 07/JAB/2013 (ASSESSMENT YEAR :2008-09 ) THE BOOKS OF ACCOUNT BY INVOKING PROVISIONS OF SECTION 145 OF THE ACT AND OPINED THAT THE ASSESSEE MUST HAVE ATLEAST SHOWN 90% FINISHED GOODS PR ODUCTION AND, THEREFORE, THE ASSESSEE HAD SUPPRESSED ITS SALES BY 34% AND, THEREBY MA DE AN ADDITION OF RS.1,25,41,508/- TO THE INCOME OF THE ASSESSEE. 4. ON APPEAL BEFORE THE LD CIT(A), IT WAS CONTENDED B Y THE ASSESSEE THAT THE ASSESSMENT ORDER IS NOT A SPEAKING ORDER AND THE SUBMISSION S MADE BY THE ASSESSMENT HAVE NOT BEEN DISCUSSED. IN VIEW OF ABOVE, LD CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER AND AFTER CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE AND ALSO THE REMAND REPORT, LD CIT(A) DELETED THE SAM E, INTER ALIA, OBSERVING AS UNDER: I HAVE GONE THROUGH THE MATERIAL ON RECORD AND THE SUBMISSIONS OF THE COUNSEL CAREFULLY. THE ADDITIONAL EVIDENCES SUBMITTED BY THE COUNSEL ARE AD MITTED. THE AO HAS NOT MADE ANY ADVERSE INFERENCE TO THEIR ADMITTANCE. I FIND FROM THE ASSESSMENT ORDER THAT THE AO HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS WHICH HA VE BEEN AUDITED AS PER SECTION 44AB OF THE IT ACT. NOR HAS THE AUDITOR POINTED OUT A NY DEFECT OR SHORTCOMING IN THE MAINTENANCE OF THOSE BOOKS OF ACCOUNTS BECAUSE OF WHICH TH E TRUE AND CORRECT INCOME COULD NOT HAVE BEEN DEDUCED. THE AO HAS REJECTED THE BOOKS OF ACCOUNTS, ON THE BASIS OF THE MANUFACTURING PROCESS ON THE SURMISE THAT CLAY WHICH COMES F ROM THE MINES IS HIGHLY INERT MATERIAL WHICH COULD NOT LEAD TO A PRODUCTION LOSS OF 4 4%. HE HAS ALSO RELIED ON THE LETTER OF DR. S. GHATAK, SCIENTIST, ON BEHALF OF HEAD OF CENTRA L GLASS AND CERAMIC RESEARCH INSTITUTE WHEREIN IT WAS STATED THAT IT WAS DIFFICULT TO RUN A PL ANT WITH 45 TO 50 % PRODUCTION LOSS AND IN GENERAL PRODUCTION LOSS IS LESS THAN 15%. I FIND FROM THE COPY OF THE LETTER, WHICH IS PLACED ON RECORD THAT THE LETTER ALSO MENTIONS THAT IT IS NOT V ERY CLEAR THE ACTUAL PRODUCTS AND THEIR PROCESS OF MANUFACTURING. IT ALSO STATES THAT IT IS ALSO N OT CLEAR WHY SUCH AN EXCESSIVE LOSS IN PRODUCTION ACTUALLY OCCURS. THE LETTER FURTHER STATES THAT CONSIDERING THIS INSUFFICIENT INFORMATION, WE MAY FURNISH SOME GENERAL REMARKS ON T HE MANUFACTURING LOSS IN REFRACTORY INSULATING BRICKS. TAKING THIS LETTER TO BE THE BASE, T HE AO DISAGREED WITH THE 44% LOSS CLAIMED AND REJECTED THE BOOKS OF ACCOUNTS. THE AO HAS NOT FURNISHED THE COMPLETE DETAILS TO THE CONCERNED RESEARCH INSTITUTE TO GET THEIR SPECIFIC O PINION. THE AO, WITHOUT ANY EVIDENCE OR TECHNICAL ADVICE HAS ALSO ARRIVED AT THE CONC LUSION THAT CLAY WHICH IS AN INERT MATERIAL WOULD RENDER IT IMPOSSIBLE THAT 1 MT OF CLAY FED INTO THE MANUFACTURING PROCESS, THE SAME QUANTITY MUST RESULT IN TERMS OF WEIGHT OF FINISHED GOODS. ONGOING THROUGH THE SUBMISSIONS OF THE COUNSEL AND ADDI TIONAL EVIDENCES, I TEND TO AGREE WITH THE COUNSEL. THE AO IN THE REMAND REPORT HAS STATE D THAT THE ADDITIONAL EVIDENCES COULD NOT BE RELIED UPON, AS THE TYPE OF SAMPLES SENT BY THE APPELLANT WAS UP TO APPELLANT ONLY AND FOR ITS BENEFIT IT COULD HAVE SENT SUITABLE SAMPLES TO OB TAIN THE DESIRED CERTIFICATES. EVEN IF 3 I.T.A. NO. 07/JAB/2013 (ASSESSMENT YEAR :2008-09 ) CERTAIN CONSIDERATION TO THIS OPINION OF THE AO IS GIVE N, THE FACT REMAINS, THAT THE BOOKS OF ACCOUNTS WERE REJECTED WITHOUT POINTING OUT A SINGLE DE FECT ON A GENERAL OPINION OF A RESEARCH INSTITUTE. THE AO HAS NOT BROUGHT ON RECORD AN Y EVIDENCE TO REFUTE THE APPELLANT'S CLAIM REGARDING LOSS IN PRODUCTION. THE AO HAS ALSO NOT B ROUGHT FORTH ANY EVIDENCE THAT THERE IS SUPPRESSION OF PRODUCTION BY THE APPELLANT COMP ANY. IN THE LIGHT OF THESE FACTS, THE ADDITION MADE IS HELD TO BE A SPECULATIVE ONE AND DEVO ID OF MERIT. ON SIMILAR FACTS AND ISSUES IN THE APPELLANT'S OWN CASE FOR A. YR. 07-08 THE C IT (APPEALS), JABALPUR, HAS DELETED THE ADDITION. RESPECTFULLY FOLLOWING THE SAME AND IN VIEW OF THE ABOVE, THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED SALE OF RS.1,25,41,508/- IS HEREBY DELETED. 5. LD D.R. SUPPORTED THE ORDER OF THE AO. 6. ON THE OTHER HAND, LD A.R. OF THE ASSESSEE SUBMITTED THAT IN THE ASSESSMENT YEAR 2004-05, THE ASSESSEE HAD SHOWN LOSS FROM RAW MATER IALS AND SAW DUST AT 53.16%, WHICH WAS ALLOWED IN APPEAL BY THE LD CIT(A). THE DEPARTMENT HAS NOT FILED ANY APPEAL THERE AGAINST TO THE TRIBUNAL. FURTHER I N THE ASSESSMENT YEAR 2005-06, THE ASSESSEE HAD SHOWN LOSS FROM RAW MATERIALS AND SAW DUST AT 4 0.39%, WHICH WAS ACCEPTED UNDER SECTION 143(1) OF THE ACT. STILL FURTHER , IN THE ASSESSMENT YEAR 2006-07, THE ASSESSEE HAD SHOWN LOSS AT 47.17% ON ACCOUNT OF RAW MA TERIALS AND SAW DUST, WHICH WAS ACCEPTED BY THE AO HIMSELF IN AN ASSESSMENT MADE U NDER SECTION 143(3) OF THE ACT. FOR THE ASSESSMENT YEAR 2007-08, THE ASSESSEE H AD SHOWN LOSS AT 46.65%, WHICH HAS BEEN ACCEPTED BY LD CIT(A). HENCE, IT WAS THE SUBMISSION OF THE LD A.R. THAT CONSISTENCY SHOULD BE FOLLOWED IN ASSESSMENT PROCEEDINGS AN D, THEREFORE, THE LOSS CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL AT 44% SHOULD BE ALLOWED AND THE APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING TH E MATERIAL ON RECORD, WE FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF R ADHASOAMI SATSANG VS CIT (1991) 193 ITR 321 (SC) HELD THAT THE PRINCIPLE OF RESJUDICA TA IS NOT APPLICABLE IN THE INCOME 4 I.T.A. NO. 07/JAB/2013 (ASSESSMENT YEAR :2008-09 ) TAX MATTER. BUT FINDINGS OF EARLIER YEARS ON THE SAME MATTER ARE RELEVANT WHERE ALL FUNDAMENTAL FACTS PERMITTING THROUGH DIFFERENT ASSESSMEN T YEARS HAVE BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED T HAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROP RIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. WE FIND THAT IN THE INS TANT CASE ALSO, IN ASSESSMENT YEAR 2004-05, THE LOSS ON ACCOUNT OF RAW MATERIAL AND SA W DUST CLAIMED BY THE ASSESSEE AT 53.16% WAS ALLOWED BY THE LD CIT(A) AND THE DEPARTMENT ACCEPTED THE SAME BY NOT AGITATING THE MATTER FURTHER IN APPEAL B EFORE THE TRIBUNAL. FURTHER, IN ASSESSMENT YEAR 2005-06, THE LOSS ON ACCOUNT OF RAW MATERIA L AND SAW DUST CLAIMED AT 40.39% WAS ACCEPTED UNDER SECTION 143(1) OF THE ACT. FUR THER, IN A.Y. 2006-07, THE AO HIMSELF HAS ACCEPTED IN ASSESSMENT U/S.143(3) OF THE ACT T HE LOSS FROM RAW MATERIAL AND SAW DUST AT 47.17%. THE LOSS FOR ASSESSMENT YEAR AT 46.65% HAS ALSO BEEN ACCEPTED BY LD CIT(A). IN THE PRESENT YEAR OF APPEAL , IT IS NOT DISPUTED THAT THE ASSESSEE HAD SHOWN CLAY LOSS AT 44% WHICH COMPARES FAVOURABL E WITH THE LOSS CLAIMED AND ACCEPTED BY THE DEPARTMENT IN THE PAST ASSESS MENT YEARS., HENCE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG (SUPRA), WHEREIN, IT HAS BEEN HELD THAT THE FI NDINGS OF EARLIER YEARS ON THE SAME MATTER ARE RELEVANT WHERE ALL FUNDAMENTAL FACTS PERM ITTING THROUGH DIFFERENT ASSESSMENT YEARS HAVE BEEN FOUND AS A FACT ONE WAY OR THE OTHER A ND PARTIES HAVE ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT WOULD NOT BE AT ALL APPROPRIATE TO ALLOW THE POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A), WHICH IS HEREBY CONFIRMED. 5 I.T.A. NO. 07/JAB/2013 (ASSESSMENT YEAR :2008-09 ) 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 /4/2016 . SD/- SD/- (N.K.CHOUDHRY) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER JABALPUR, DATED 7 / 4/2016 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : ACIT, CIRCLE -1(1),JABALPUR 2. THE RESPONDENT: M/S. PERFECT SANITARY WARES LTD., 408, SHRI BALDAUJI MANDIR COMPOUND KOTWALI ROAD,, JABALPUR 3. THE CIT(A). JABALPUR 4. CIT . JABALPUR 5. DR, ITAT, JABALPUR 6. GUARD FILE. BY ORDER, //TRUE COPY// SR. PS, ITA T, CAMP: JABALP UR