ACIT, Jabalpur V. M/s. Perfect Stone Ware Pipes Ltd., Jabalpur

ITA 74/JAB/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5613 (ITAT-JABALPUR)
• Duration Of Justice: 5 year(s) 8 month(s) 18 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: 22-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 19-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R LATHORIYA
• Section: 143(3); 145

Judgement Text

1 I.T.A. NO. 74/JAB/2010 (ASSESSMENT YEAR :2007-08 ) IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BEFORE S/SHRI N.S. SAINI (AM) N. K. CHOUDHRY (JM ) I.T.A. NO. 74/JAB/2015 (ASSESSMENT YEAR :2007-08 ) ACIT, CIRCLE -1(1),JABALPUR VS. M/S. PERFECT STONEWAR ES PIPES LTD.,408, SHRI BALDAUJI MANDIR COMPOUND KOTWALI ROAD,, JABALPUR PAN/GIR NO. : AABCP 3539 P ( 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 9.3.2010 FOR THE ASSESSMENT YEAR 2007-08 . 2. THE ONLY GRIEVANCE OF THE REVENUE IS AGAINST THE DE LETION OF ADDITION OF RS.1,10,34,221/- ON ACCOUNT OF UNDISCLOSED SALES. 3. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOW N PRODUCTION LOSS OF 23% IN THE MANUFACTURE AND SALE OF SALT GLAZED STONE W ARE PIPES, ACID RESISTING CLAY BRICKS AND INSULATING BRICKS. THEREFORE, THE AO REJECTED THE BOOKS OF ACCOUNT BY INVOKING PROVISIONS OF SECTION 145 OF THE ACT AND OPINED THAT THE ASSESSEE MUST HAVE ATLEAST SHOWN 95% FINISHED GOODS PRODUCTION AND, THEREF ORE, THE ASSESSEE HAD 2 I.T.A. NO. 74/JAB/2010 (ASSESSMENT YEAR :2007-08 ) SUPPRESSED ITS SALES BY 18% AND, THEREBY MADE AN ADDIT ION OF RS.1,10,34,221/- TO THE INCOME OF THE ASSESSEE. 4. ON APPEAL, LD CIT(A) DELETED THE SAME, INTER ALIA , OBSERVING AS UNDER: NOW THE CONTENTION OF THE APPELLANT IS FOUND TO BE C ORRECT. THE BOOKS OF ACCOUNT WERE AUDITED AS PER THE REQUIREMENT OF SECTION 4 4AB OF THE I.T.ACT IN ADDITION TO THE AUDIT, AS REQUIRED UNDER T HE COMPANIES ACT 1956. THE AUDITORS NOWHERE POINTED OUT ANY DEFECT OR SHORT- COMING IN MAINTENANCE OF THOSE BOOKS OF ACCOUNT BECAUSE OF WHICH THE TRUE AND CORRECT INCOME COULD NOT BE DEDUCED. THE ASSESSEE HAS BEEN M AINTAINING DETAILED RECORD IN RESPECT OF PRODUCTION, KILN REPORT SHO WING THE PRODUCTION, THE STOCK REGISTER, SALES AND DISPATCHES AND SALES BILLS ETC. AND THEY ARE ALL AMENABLE TO VERIFICATION. ALL THE P URCHASES, SALES AND EXPENSES ARE ALSO PROPERLY VOUCHED AND OPEN TO VERIFICA TION. THEREFORE ON THE BASIS OF THESE RECORDS TRUE AND CORRECT INCOME CAN P ROPERLY BE DEDUCED. AS A MATTER OF FACT, THE APPELLANT'S RECORDS A RE SUBJECT TO SCRUTINY BY THE CENTRAL EXCISE DEPARTMENT ALSO AND IF TH ERE IS ANY SUCH DEFECT, IT WOULD BE NOTED BY THEM TOO. THE BOOK RESUL TS HAVE BEEN REJECTED MERELY FOR THE REASON THAT THE CLAY WHICH IS IN ERT MATERIAL AND NOT CONSUMABLE BY FIRE AND CANNOT RESULT INTO SUCH A LOW FIN ISHED PRODUCT AS DECLARED BY THE APPELLANT THAT IS ABOUT 77%. ACCORDING TO HIM, ANY SANE PERSON HAVING BASIC KNOWLEDGE OF THE SCIENCE WOULD NOT AG REE THAT THE CLAY HAD BEEN BURNT IN THE PROCESS OF BAKING. HOWEVER, I T IS FOUND THAT IT AS A FATAL MISTAKE COMMITTED BY THE A.O. TO CONCLUDE THAT THE CLAY DOES NOT BURN IN THE PROCESS OF BAKING WHEREAS IT INDEED BUR NS AND THEREFORE THE WEIGHT OF CLAY GETS REDUCED TO GREAT EXTENT. OBVIO USLY THE A.O. IS NOT A TECHNICAL EXPERT, PARTICULARLY IN THE FIELD WHERE TH E ASSESSEE IS ENGAGED IN MANUFACTURING SINCE THE YEAR 1993. THEREFORE MERELY BECAUSE OF HIS NOTION THAT THE CLAY DOES NOT BURN, THE BOOK RESULTS COUL D NOT HAVE BEEN REJECTED. IT IS A COMMON KNOWLEDGE THAT THE RAW MATERI AL I.E. CLAY NOT ONLY CONTAINS MOISTURE, DRIED WEEDS AND GRASS ETC. APART FROM DIFFERENT MINERALS AND METALS HAVING LOW SPECIFIC GRAVITY WHICH ARE BURNT ON HIGH TEMPERATURE. THUS THE WEIGHT OF THE CLAY REDUCES CONSIDE RABLY. EVEN AT THE STAGE OF FINISHED PRODUCT, SOME PRODUCT GETS OVER-BU RNT, UNDER-BURNT OR THERE IS BREAKAGE AND THUS THEY NEED TO BE REMOVED FROM THE STOCK OF FINISHED PRODUCT, BEING USELESS AND ULTIMATELY WHAT RE MAINS AS TRADABLE FINISHED PRODUCT IS ALWAYS MUCH LESSER THAN THE QUANTUM O F CLAY USED AS RAW MATERIAL. FURTHER THE ASSESSEE HAD PUT-FORTH MANY CERTIFICATES, NOT AS EVIDENCES BUT SIMPLY FOR THE PURPOSE OF ILLUSTRATION AN D AS THEY ARE OLD AND WERE AVAILABLE AT THE TIME OF ASSESSMENT PROCEEDINGS ALSO , THERE IS NO HARM REFERRING TO THEM TO UNDERSTAND AS TO HOW CLAY BU RNS IN THE PROCESS OF BAKING AND HOW IT LOOSES ITS WEIGHT. THESE CERTIFICATE S ARE BASICALLY TEST 3 I.T.A. NO. 74/JAB/2010 (ASSESSMENT YEAR :2007-08 ) RESULTS OF ANALYSIS OF DIFFERENT SAMPLES CARRIED OUT AT D IFFERENT POINT OF TIME AND RELATED TO THE INDUSTRY BEING OPERATED BY THE AP PELLANT. THESE ALSO MAKE IT CLEAR THAT THE RAW CLAY CONTAINS SILICA, ALUMINA, IRON OXIDE, LIME, MAGNESIA, TITANIA, SODA, POTASH ETC. WHICH ARE ALSO BURN T TO SOME EXTENT ON IGNITION THEREBY REDUCING THE WEIGHT OF THE CLAY. NOW THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE PROPERLY DISCLOSED AS TO H OW MUCH CLAY WAS USED, WHAT WAS THE IGNITION LOSS AND WHAT WAS THE QUANTUM OF END-PRODUCT. APPARENTLY 23% LOSS CLAIMED BY THE ASSESSEE APPEARS TO BE EXCESSIVE, BUT BECAUSE OF DETAILED MAINTENANCE OF RECORD S AND FOR WANT OF EVIDENCES TO PROVE THAT BY WAY OF MANIPULATION ACTUAL PRODUCTION WAS SUPPRESSED, THE LOSS CLAIMED HAS TO BE ACCEPTED AND IS ALL OWED. THE A.O. HAS NOT BROUGHT OUT ANY EVIDENCE ON RECORD IN SUPPORT O F HIS PRESUMPTION THAT THERE WOULD NOT BE ANY WEIGHT LOSS OF CLAY EVEN O N ITS BAKING AT HIGH TEMPERATURE . THE APPELLANT HAS ELABORATELY DESCRIBED THE PROCESS OF MANUFACTURING AND HAS TRIED TO DRIVE THE POINT HOME AS TO AT WHAT STAGE WHAT LOSS IS OCCURRED AND AGAINST THIS THERE IS NOT AN IOT A OF EVIDENCE TO REFUTE THE APPELLANT'S CLAIM. EVEN NO EVIDENCE HAS BEE N BROUGHT-FORTH BY THE A.O. THAT THERE WAS ANY SALES OUTSIDE THE BOOKS OF ACC OUNT OUT OF UNDISCLOSED STOCK OF MANUFACTURED FINISHED GOODS. THUS THERE WAS NO REASON FOR REJECTION OF THE BOOK RESULTS AND ESTIMATION O F PROFIT. THERE IS NO EVIDENCE OR ANY BASIS TO CONCLUDE THAT THE ASSESSEE MUST HAV E SHOWN ATLEAST 95% FINISHED GOODS PRODUCED AND THAT THE ASSESSEE HAD SUPPRESSED THE SALES BY 18%. IN FACT, THE BOOK RESULTS HAVE BEEN REJECTED MERELY ON SUSPICION AND SURMISES AND ESTIMATION OF SALES IS ALSO WITHOUT ANY BASIS. THEREFORE THE ADDITION OF RS.L,10,34,221/- 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 CLAY AT 32 .10%, WHICH WAS ALLOWED IN APPEAL BY THE LD CIT(A). THE DEPARTMENT HAS NOT FIL ED ANY APPEAL THERE AGAINST TO THE TRIBUNAL. FURTHER IN THE ASSESSMENT YEAR 2005-06, THE ASSESSEE HAD SHOWN LOSS FROM CLAY AT 29.27%, WHICH WAS ACCEPTED UNDER SECTION 143(1) OF THE ACT. STILL FURTHER, IN THE ASSESSMENT YEAR 2006-07, THE ASSESSEE HAD SHOWN LOSS AT 31.60% ON ACCOUNT OF CLAY, WHICH WAS ACCEPTED BY THE AO HIMSELF IN AN ASSESSMENT MADE U NDER SECTION 143(3) OF THE ACT. HENCE, IT WAS THE SUBMISSION OF THE LD A.R. TH AT CONSISTENCY SHOULD BE FOLLOWED 4 I.T.A. NO. 74/JAB/2010 (ASSESSMENT YEAR :2007-08 ) IN ASSESSMENT PROCEEDINGS AND, THEREFORE, THE LOSS CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL AT 23.33% SHOULD BE ALLOWED AND TH E 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 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 CLAY CLAIMED BY THE ASSESSEE AT 32.10% WAS ALLOWED BY THE LD CIT(A) AND THE DEPARTMENT ACCEPTED THE SAME BY NOT AGITATING THE MATTER FURTHER IN APPEAL BEFORE THE TRIBUNAL. FURT HER, IN ASSESSMENT YEAR 2005-06, THE LOSS ON ACCOUNT OF CLAY CLAIMED AT 29.27% WAS ACCEPTED UNDER SECTION 143(1) OF THE ACT. FURTHER, IN A.Y. 2006-07, THE AO HIMSELF HAS ACCEP TED IN ASSESSMENT U/S.143(3) OF THE ACT THE LOSS FROM CLAY AT 31.60%. IN THE PRESENT YE AR OF APPEAL, IT IS NOT DISPUTED THAT THE ASSESSEE HAD SHOWN LOSS ON ACCOUNT OF CLAY AT 23.3 3% WHICH COMPARES FAVOURABLE WITH THE LOSS CLAIMED AND ACCEPTED BY THE DE PARTMENT IN THE PAST ASSESSMENT YEARS., HENCE, RESPECTFULLY FOLLOWING THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF RADHASOAMI SATSANG (SUPRA), WHEREI N, IT HAS BEEN HELD THE 5 I.T.A. NO. 74/JAB/2010 (ASSESSMENT YEAR :2007-08 ) FINDINGS OF EARLIER YEARS ON THE SAME MATTER ARE RELE VANT WHERE ALL FUNDAMENTAL FACTS PERMITTING THROUGH DIFFERENT ASSESSMENT YEARS HAVE BEE N FOUND AS A FACT ONE WAY OR THE OTHER AND PARTIES HAVE ALLOWED THAT POSITION TO B E 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. HENCE, GROUND OF APPEAL OF REVENU E IS REJECTED. 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 STONE WARES PIPES 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