Manoj Sadanand Adwani, Jalgaon V. ITO, Ward 2(3), Jalgaon

ITA 719/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1854 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 22-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Unexplained investment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 7 19 /PN/201 3 / ASSESSMENT YEAR : 20 08 - 09 SHRI MANOJ SADANAND ADWANI, RAJA POLYMER , 83 - 84, FULE MARKET, JALGAON 425001 . / APPELLANT PAN: AAWPA4068P VS. THE INCOME TAX OFFICER, WARD 2(3), JALGAON . / RESPONDENT . / ITA NO. 791 /PN/201 2 / ASSESSMENT YEAR : 20 07 - 08 SHRI SUMANT SADANAND ADWANI, SAI SAGAR, 83 - 84, FULE MARKET, JALGAON 425001 . / APPELLANT PAN: AAVPA6123B VS. THE JT. COMMISSIONER OF INCOM E TAX, RANGE 2, JALGAON . / RESPONDENT / APPELLANT BY : SHRI SUNIL GANOO / RESPONDENT BY : SHRI ANIL CHAWARE / DATE OF HEARING : 12 . 0 5 .201 6 / DATE OF PRO NOUNCEMENT: 13 . 0 5 .201 6 ITA NO. 791 /PN/20 1 2 ITA NO.7 19 /PN/201 3 MANOJ ADWANI & ANR 2 / ORDER PER SUSHMA CHOWLA, J M : BOTH THE APPEALS FILED BY DIFFERENT ASSESSEE S ARE AGAINST SEPARATE ORDER S OF CIT (A) - II , NASHIK , DATED 1 6 . 0 1 .20 1 2 AND 01.03.2013 RELATING TO ASSESSMENT YEAR S 20 07 - 08 AND 2008 - 09 AGAINST R ESPECTIVE ORDER S PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . BOTH T HE APPEALS RELATING TO DIFFERENT ASSESSEES ON IDENTICAL ISSUES WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. IN ORDER TO ADJUDICATE THE ISSUE, WE REFER TO THE FACTS IN ITA NO.719/PN/2013. 3 . THE ASSESSEE IN ITA NO. 719 /PN/201 3 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - OF APPEAL: - 1) ON FACTS AND IN CIRCUMSTANCES OF CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT (A)] ERRED IN SUSTAINING & FURTHER ENHANCING THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER (AO), ON A / C OF ALLEGED UNRECORDED PRODUCTION & SALE OF MATS AND INVESTMENT IN RAW MATERIAL MERELY BY RELYING ON THE CASE OF ANOTH ER MAT MANUFACTURER DECIDED BY HIM EARLIER, WITHOUT APPRECIATING FACTS OF THE CASE, SUBMISSIONS AND DOCUMENTS PLACED ON RECORD. 2) THE LEARNED AO ERRED IN ARRIVING AT THE ALLEGED UNRECORDED PRODUCTION & SALES OF MATS BY APPLYING THE UNREALISTIC STATISTIC AL FORMULA UNIFORMLY TO THE PRODUCTION UNIT, BASED ON ELECTRICITY CONSUMPTION, WITHOUT TAKING COGNIZANCE OF OTHER FACTORS, PLAYING A VITAL ROLE IN ANY PRODUCTION PROCESS/UNIT, AND THAT ARE SUBJECT TO VARIATION DUE TO SOME INHERENT AND SOME EXTRANEOUS FACT ORS AS WELL. 3) THE LEARNED AO ERRED IN DRAWING THE INFERENCE AND CONCLUSIONS ABOUT SUPPRESSED PRODUCTION OF THE APPELLANT WITHOUT DRAWING SUPPORT FROM/GETTING SUBSTANTIATED BY ANY OTHER CORROBORATIVE EVIDENCE. 4) THE LEARNED CIT (A) FAILED TO APPRECI ATE THE ADDITIONAL COMPARABLE CASES ON RECORD, WHEREIN THE ELECTRICITY CONSUMPTION RATE PER MAT IS MUCH HIGHER THAN THE RATE ADOPTED BY THE AO. 5) SINCE THE VERY BASIS TO ARRIVE AT UNRECORDED SALES AND CONSEQUENTLY GROSS PROFIT THEREON IS NOT JUSTIFIED, THE ADDITION ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN RAW MATERIAL FOR THE ALLEGED UNRECORDED PRODUCTION IS NOT CALLED FOR. ITA NO. 791 /PN/20 1 2 ITA NO.7 19 /PN/201 3 MANOJ ADWANI & ANR 3 6) WITHOUT PREJUDICE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN TAKING GROSS PROFIT RATE @ 17% FOR ALLEGED UNRECORDED SALES INSTEAD OF 13.22% DECLARED BY THE APPELLANT, ON AD HOC BASIS. 4. THE ONLY ISSUE ARISING IN THE PRESENT SET OF APPEALS IS AGAINST ESTIMATION OF INCOME IN THE HANDS OF ASSESSEE ON ACCOUNT OF ALLEGED UNRECORDED PRODUCTION OF SALE OF MATS AND INVESTMENT IN RA W MATERIAL. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF TRIBUNAL IN THE CASE OF ANOTHER MANUFACTURER OF MATS, WHEREIN THE ADDITION WAS MADE ON ACCOUNT OF UNRECORDED PRODUCTION AND SALE OF MATS AND INVESTMENT IN RAW MATERIAL. 6. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE OF PLASTIC MATS UNDER THE NAME AND STYLE OF M/S. RAJA POLYMERS. FOR THE YE AR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED RETURN POLYMERS. FOR THE YE AR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.4,73,210/ - . THE ASSESSEE WAS USING RE - PROCESSED PLASTIC GRANULES, YARN, TAPE AS MAIN INGREDIENTS WITH THE AID OF ELECTRICITY FOR THE MANUFACTURE OF PLASTIC MA TS. THE TOTAL TURNOVER DECLARED BY THE ASSESSEE WAS RS. 67,36,483/ - , ON WHICH IT HAD DECLARED GROSS PROFIT OF RS.8,90,758/ - DECLARING GP RATE OF 13.22%. ON VERIFICATION OF PROFIT & LOSS ACCOUNT AND THE BALANCE SHEET, THE ASSESSING OFFICER NOTED THAT THE E LECTRICITY CHARGES PAID BY THE ASSESSEE WERE VERY HIGH WITH REGARD TO SALES OF RS.67.36 LAKHS. FURTHER, THE ASSESSEE OWNED 24 LOOMS WHICH RAISED A DOUBT THAT THE ASSESSEE HAD INDULGED IN UNACCOUNTED PRODUCTION. THE EXPLANATION OF THE ASSESSEE IS INCORPOR ATED IN THE ASSESSMENT ORDER AND AFTER PERUSING THE SAME AND AFTER CONFIRMING VARIOUS FACTORS IN MANUFACTURING ACTIVITY OF THE ASSESSEE, THE ASSESSING OFFICER ADOPTED THE CONSUMPTION OF 1.30 UNIT OF ELECTRICITY FOR THE PRODUCTION OF 4X6 FT SIZE OF MAT AS A GAINST 1.45 UNITS SHOWN BY THE ASSESSEE. ITA NO. 791 /PN/20 1 2 ITA NO.7 19 /PN/201 3 MANOJ ADWANI & ANR 4 THE ASSESSING OFFICER THUS, RE - WORKED THE GROSS PROFIT OF UNRECORDED SALES @ 15% INSTEAD OF 13.22% SHOWN BY THE ASSESSEE AND WORKED OUT THE ADDITION OF RS. 4,96,830/ - . FURTHER, ADDITION WAS MADE ON ACCOUNT OF INVES TMENT IN RAW MATERIAL FOR UNRECORDED PRODUCTION AT RS. 2,34,613/ - . 7. THE CIT(A) ENHANCED THE ADDITION IN THE HANDS OF ASSESSEE IN TURN, RELYING ON HIS APPELLATE ORDER IN ANOTHER CASE, SINCE THE FACTS OF THE TWO CASES WERE SAME AND CONSEQUENTLY, WORKED OUT THE ADDITION ON ACCOUNT OF GP @ 17% AMOUNTING TO RS.9,29,060/ - . FURTHER, ADDITION WAS MADE ON ACCOUNT OF RAW MATERIAL FOR UNRECORDED PRODUCTION AT RS. 3,87,110/ - RESULTING IN ENHANCEMENT OF RS. 5,84,729/ - . 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN THIS REGARD . 9. WE FIND THAT IDENTICAL ISSUE OF ESTIMATION OF GROSS PROFIT IN RESPECT OF A PERSON ENGAGED IN THE MANUFACTURE OF PLASTIC MATS AROSE BEFORE THE TRIBUNAL IN PERSON ENGAGED IN THE MANUFACTURE OF PLASTIC MATS AROSE BEFORE THE TRIBUNAL IN JAYASHRI SHAILESH MANIYAR VS. ITO IN ITA NO.941/PN/2013, RELATING TO ASSES SMENT YEAR 2008 - 09, ORDER DATED 27.04.2016 , WHEREIN THE ADDITION WAS MADE BY ESTIMATING THE CONSUMPTION OF ELECTRICITY AND THEREAFTER, WORKING OUT THE PRODUCTION AND THE ADDITION IN THE HANDS OF ASSESSEE. THE FACTS ARISING IN THE SAID CASE ARE IDENTICAL T O THE FACTS BEFORE US IN THE PRESENT APPEAL, WHEREIN ALSO THE ASSESSING OFFICER HAD ADOPTED THE AVERAGE CONSUMPTION RATE OF ELECTRICITY AT 1.30 UNITS FOR PRODUCTION OF 4 X 6 FT. SIZE OF MAT AND THE CIT(A) HAD ENHANCED THE ADDITION BY ADOPTING CONSUMPTION OF ELECTRICITY @ 1.10 UNITS FOR PRODUCTION OF ONE MAT OF 4X6 FT. SIZE OF MAT. FURTHER, ADDITION WAS MADE ON ACCOUNT OF RAW MATERIAL UTILIZED FOR SAID ADDITIONAL PRODUCTION. THE TRIBUNAL AFTER CONSIDERING THE ISSUE OBSERVED AS UNDER: - 8. ON PERUSAL OF RECOR D, WE FIND THAT THE ISSUE IN THE PRESENT APPEAL IS AGAINST THE ESTIMATION OF UNRECORDED PRODUCTION AND ITS SALES THEREAFTER AND THE PROFIT ARISING ON SUCH UNRECORDED PRODUCTION AND ALSO THE INVESTMENT IN RAW ITA NO. 791 /PN/20 1 2 ITA NO.7 19 /PN/201 3 MANOJ ADWANI & ANR 5 MATERIAL FOR SUCH PRODUCTION. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PLASTIC MATS. THE TOTAL TURNOVER SHOWN BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS RS.18,07,052/ - . BOTH THE AUTHORITIES BELOW WERE OF THE VIEW THAT THE ASSESSEE HAD INDULGED IN UNACCOUNTED PRODUCTION. T HE BASIS FOR SUCH ASSUMPTION WAS THE ELECTRICITY CONSUMPTION BY THE ASSESSEE AND ALSO RESULTS SHOWN BY THE OTHER CONCERNS IN THIS REGARD. THE CASE OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT THE CONSUMPTION OF ELECTRICITY VARIES ON VARIOUS FACTO RS AND ALSO THE RESULTS SHOWN BY THE OTHER CONCERNS COULD NOT BE APPLIED FOR COMPUTING INCOME OF THE ASSESSEE. WE FIND MERIT IN THE CLAIM OF ASSESSEE IN THIS REGARD. FIRST OF ALL, WITHOUT COMING TO A FINDING THAT THE OTHER CONCERNS ARE WORKING IN THE SAM E CONDITIONS, THE RESULTS OF ONE CONCERN CANNOT BE APPLIED TO THE RESULTS OF ANOTHER CONCERN IN ORDER TO COMPUTE MANUFACTURING RESULTS OF ONE PART VIS - - VIS OTHER. IN CASE WHERE PARTIES ARE WORKING UNDER IDENTICAL CONDITIONS AND THEN, SUCH AN ESTIMATE MAY BE RESORTED TO AFTER TAKING THE ENTIRE GAMUT OF FACTS IN CONSIDERATION. HOWEVER, MERELY BECAUSE ONE CONCERN HAS SHOWN HIGHER PROFITS, IS NO MERIT TO ESTIMATE THE INCOME IN THE HANDS OF ANOTHER CONCERN, WHICH IS ENGAGED IN SIMILAR LINE OF BUSINESS. THE A SSESSEE IS ENGAGED IN THE MANUFACTURING OF RUBBER MATS AND BOTH THE AUTHORITIES BELOW HAVE NOT COME TO A FINDING THAT QUALITY OF MATS MANUFACTURED BY THE ASSESSEE ARE IDENTICAL TO THE MATS MANUFACTURED BY THE OTHER CONCERNS. IN VIEW OF THIS, WE FIND NO ME RIT IN THE ORDERS OF AUTHORITIES BELOW IN REJECTING THE RESULTS SHOWN BY THE ASSESSEE. 9. NOW, COMING TO THE SECOND ASPECT OF ESTIMATION OF UNACCOUNTED PRODUCTION ON THE BASIS OF CONSUMPTION OF ELECTRICITY. WE FIND THAT WE HAVE DECIDED BUNCH OF APPEALS OF FURNACE CASES AND RE - ROLLING MILLS, WHEREIN ESTIMATION OF UNRECORDED PRODUCTION WAS MADE ON THE BASIS OF ELECTRICITY CONSUMPTION. WE HAVE HELD IN THE HANDS OF THE SAID CONCERNS THAT IN THE ABSENCE OF ANY EVIDENCE FOUND OF UNRECORDED PRODUCTION, THE AS SESSING OFFICER CANNOT MAKE THE AFORESAID ADDITION ON MERE SURMISES THAT THE ELECTRICITY OFFICER CANNOT MAKE THE AFORESAID ADDITION ON MERE SURMISES THAT THE ELECTRICITY CONSUMED BY THE ASSESSEE IS ERRATIC AND IS NOT IN CONSONANCE WITH ELECTRICITY CONSUMED BY OTHER CONCERNS. THE LEAD CASE BEFORE THE TRIBUNAL IN THIS REGARD WAS SRJ PEE TY STEELS PVT. LTD. VS. ACIT IN ITA NO.1429/PN/2012 AND ACIT VS. SRJ PEETY STEELS PVT. LTD. IN ITA NO.1474/PN/2012, RELATING TO ASSESSMENT YEAR 2009 - 10, ORDER DATED 12.08.2015. IN VIEW THEREOF, WE HOLD THAT THERE IS NO MERIT IN ESTIMATION OF GP IN THE HAN DS OF ASSESSEE AND THE SAME IS DIRECTED TO BE DELETED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 10. THE ISSUE AS POINTED OUT IN THE PARAS HEREINABOVE AND THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY IDENTICAL TO THE ISSUE BE FORE THE TRIBUNAL IN JAYASHRI SHAILESH MANIYAR VS. ITO (SUPRA) AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THERE IS NO MERIT IN THE AFORESAID ADDITION MADE IN THE HANDS OF ASSESSEE BY ESTIMATING THE PRODUCTION ON ACCOUNT OF CONSUMPTION OF ELEC TRICITY, IN THE ABSENCE OF ANY EVIDENCE FOUND TO THE CONTRARY AGAINST THE ASSESSEE VIS - - VIS CONSUMPTION OF ELECTRICITY AND THE ALLEGED PRODUCTION OF PLASTIC MATS. IN THE ABSENCE OF ANY EVIDENCE FOUND TO THE CONTRARY, THERE IS NO MERIT IN THE ESTIMATED AD DITION IN THE HANDS OF ASSESSEE ON ACCOUNT OF ITA NO. 791 /PN/20 1 2 ITA NO.7 19 /PN/201 3 MANOJ ADWANI & ANR 6 ESTIMATED CONSUMPTION OF ELECTRICITY VIS - - VIS PRODUCTION. REVERSING THE ORDER OF CIT(A), WE DELETE THE ADDITION OF RS. 9,29,060/ - ON ACCOUNT OF ESTIMATED PRODUCTION AND RS.3,87,110/ - ON ACCOUNT OF CONSUMPTION OF RAW MATERIAL FOR UNRECORDED PRODUCTION. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 11. THE FACTS AND ISSUES IN ITA NO.791/ PN/2012 ARE IDENTICAL TO THE FACTS AND ISSUES IN ITA NO.719/PN/2013 AND OUR DE CISION IN ITA NO.719/PN/2013 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.791/PN/2012. 1 2 . IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 13 TH DAY OF MAY , 201 6 . SD/ - SD/ - SD/ - SD/ - ( R. K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 13 TH MAY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APP ELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - II , NASHIK ; 4. / THE CIT - II, NASHIK ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE