ACIT, Meerut V. M/s. Pioneer Fabricators (P) Ltd., Meerut

ITA 740/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7283 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 23-09-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 13-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEVI SHARAN SINGH
• Keywords: Rejection of books of accounts; Depreciation; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH. B.C.MEENA, ACCOUNTANT MEMBER I.T.A .NO. - 740/ DEL/201 2 (ASSESSMENT YEAR - 2001 - 02 ) ACIT, CIRCLE - 2, MEERUT (APPELLANT) VS M/S PIONEER FABRICATORS (P.) LTD., VILL. - RITHANI, DELHI ROAD, MEERUT. P AN - AABCP3296R (RESPONDENT) APPELLANT BY SH. DEVI SHARAN SINGH, SR. DR RESPONDENT BY SH. NEERAJ JAIN, ADV. ORDER PER DIVA SINGH, JM THIS IS AN APPEAL FILED B Y THE REVENUE AGAINST THE ORDER DATED 25.11.201 OF CIT(A), MERRUT PERTAINING TO 2001 - 02 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS: - 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDI TION MADE ON ACCOUNT OF REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE IT ACT DESPITE THAT FACT THAT ASSESSEE HAS NOT MAINTAINED PROPER TALLY OF CLOSING STOCK. RELIANCE IS PLACED ON FOLLOWING CASES: - S.N.NAMASIVAYAM CHETTIAR VS. CIT (SC) 38 ITR 579 AWADHESH PRATAP SINGH ABDUL REHMAN & BROS. VS CIT (ALL) 210 ITR 406 DHONDIRAM DALICHAND VS CIT (BOM) 81 ITR 609 PUNJAB TRADING CO. LTD. VS CIT (PUNJ.) 53 ITR 335 RAM CHANDRA SINGH RAMNIK LAL VS CIT (PAT) 42 ITR 780 BHAI SUNDER DAS SARDAR SINGH (P.) LTD. VS CIT (DEL) 84 ITR 106 RAZA TEXTILE LTD. VS CIT(ALL) 86 ITR 673 ROYAL MEDICAL HALL VS. CIT(AP) 46 ITR 748 2. WHETHER IN THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS ERRED IN LAW IN APPRECIATING HIS PREDECESSOR S DECISION IGNORING THE FACT TH AT ON THE BASIS OF DETAILS PROVIDED BY THE ASSESSEE THERE WAS NO CLOSING STOCK IN RESPECT OF TWO UNITS (SURVEY & PROJECT UNITS) AND THE ENTIRE CLOSING STOCK RELATED TO PIONEER UNIT ONLY. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSION ER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN DELETING THE ADDITIONS OF 2 I.T.A .NO. - 740 /DEL/201 2 RS.28,80,390/ - ON ACCOUNT OF PROFIT & WORK IN PROGRESS WHILE CLOSING STOCK OF RAW MATERIAL FOR PROJECT WAS THE TUNE OF RS.1,77,73,978/ - AS ON 31.03.2001, WHICH WAS SHOWN BY THE ASSESS EE AT NIL. 4. I N THE FACT AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASIDE AND THAT OF THE A.O. RESTORED. 2. THE RELEVANT FACT OF THE CASE ARE THAT THE ASSESSEE WHO WAS IN THE BUSINESS OF MANUFACTURING/FABRICATI O N, TRADING AND CONTRACT WORK DECLARED AN INCOME OF RS . 1,11,993/ - . THE AO WAS OF THE VIEW THAT THERE WAS SUPPRESSION OF P R O F I T AS BOOKS OF ACCOUNTS WERE NOT CORRECTLY MAINTAINED H E MADE THE ADDITION OF RS. 25,83,1 10/ - HOLDING AS UNDER : - FROM THE FACTS DISCUSSED ABOVE IT IS BEYOND ANY SHADOW OF DOUBT THAT UNDER PROJECT JOB - WORK - THERE WAS WORK - IN - PROGRESS BOTH AT ANADMAN AND BAREILLY SITES, THE MINIMUM AMOUNT OF RS.9,53,861/ - (EXPENDITURE RS.28,28,861/ - RECEIPTS RS. 18,75,000/ - IN THE MONTH OF MARCH 2001) AND RS.2,36,520/ - (EXPENDITURE RS.30,30,557 - RECEIPTS OF RS.27,94,037) RESPECTIVELY. APART FROM IT, IN CASE EXPENDITURE AT BAREILLY SITE FROM 15 TH MARCH, 2001 TO 31 ST MARCH 2001 UNDER THE HEAD RAW - MATERIAL IS TAKEN INTO A/C, THE SAME ALONE WAS RS.16,29,249/ - . ON ASSUMPTION THAT MINIMUM 15DAYS PAYMENT AGAINST EXPENSES INCURRED WAS RECEIVABLE BY THE ASSESSEE COMPANY ON 31 ST MARCH 2001. HAD THE ASSESSEE RECORDED ITS TRAN SACTIONS CORRECTLY THE PROFIT UNDER THE HEAD CONTRACT WOULD HAVE BEEN DIFFERENT THEN WHAT THE ASSESSEE COMPANY HAD SHOWN. THERE IS THUS CLEAR CUT SUPPRESSION OF PROFIT BY NOT SHOWING THE WORK IN PROGRESS AMOUNTING TO RS.25,83,110 (RS.2,53,861/ - + RS.16,29, 249). THE PROFIT SHOWN BEFORE DEPRECIATION IS 1.65% I.E. RS.6,57,068.37 ON TOTAL RECEIPT OF RS.3,97,19,724/ - (CONTRACT RECEIPTS RS.3,96,74,167 + MISC. INCOME RS.45,557/ - ). SINCE IT IS PROVEN FACT THAT THE BOOKS OF A/CS ARE INCORRECT AND INCOMPLETE, PROFI T RATE OF 7% IS APPLIED. APPLYING 7% ON CONTRACT RECEIPTS, THE PROFIT WILL BE RS.28,80,380/ - IN PLACE OF RS.6,57,068 SHOWN BY THE ASSESSEE. HENCE UNDER THE HEAD PROFIT AN ADDITION OF RS.2,97,270 IS MADE AND THE BALANCE ADDITION OF RS.25,83,110 IS MADE UN DER THE HEAD WORK IN PROGRESS. 2.1. THE RECORD SHOWS THAT THE ISSUE TRAVELLED IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY BEFORE WHOM ADDITIONAL EVIDENCE WAS FILED CONSIDERING WHICH THE ADDITION S MADE WERE DELETED. THIS ORDER DATED 18.3.2005 WAS CHALL ENGED BY THE REVENUE AND THE CO - ORDINATE BENCH WAS PLEASED TO REMAND THE MATTER BACK TO THE CIT(A) WITH THE DIRECTION TO CONFRONT THE EVIDENCE TO THE AO AND CALL F O R TH FOR A 3 I.T.A .NO. - 740 /DEL/201 2 REMAND REPORT FROM THE AO BEFORE DECIDING THE ISSUE . P URSUANT TO TH I S ORDER THE IMP UGNED ORDER HAS BEEN P A S S E D . 2.2 A PERUSAL OF THE S AME SHOWS THAT FACTS WERE SUMM ED BY THE CIT(A) IN THE FOLLOWING MANNER : - 4. THE AO HAD EARLIER INVOKED SECTION 145(3) IN THE CASE OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE COULD NOT EXPLAIN AS TO WHY DESPITE THERE BEING EXPENDITURE OVER AND ABOVE RECEIPT NO WORK IN PROGRESS HAD BEEN SHOWN IN RESPECT OF ANDAMAN AND BAREILLY PROJECTS. HE ALSO OBSERVED THAT THE ASSESSEE DID NOT RECORD ITS TRANSACTION CORRECTLY AND HAD IT DONE SO, THE PROFIT COULD HAVE BEEN DIFFERENT AND THUS IT WAS A CLEAR CUT CASE OF SUPPRESSION OF PROFIT BY NOT SHOWING WORK IN PROGRESS AMOUNTING TO RS. 25,83,110/ - . HE FINALLY MADE ADDITION BY ESTIMATING THE PROFIT RATE AT 7% OF RS. 2,97,270/ - . HE ALSO MADE AN ADDITION OF RS. 25,83,110/ - UNDER THE HEAD WORK IN PROGRESS. THUS, TOTAL ADDITION MADE AMOUNTING TO RS. 28,80,380/ - . 5. MY LD. PREDECESSOR IN HIS VERY DETAILED APPELLATE ORDER IN APPEAL NO. 104.2004 - 05 DATED 18.3.2005 HELD THAT THERE HAD BEEN WORK IN PROG RESS AND OTHER CLOSING STOCK WHICH WERE DULY ENTERED IN THE BOOKS OF ACCOUNTS AND CERTIFIED BY THE AUDITORS IN AUDIT REPORT IN WHICH NO DEFECTS WERE POINTED OUT AND THERE WAS NO CASE FOR REJECTION OF BOOKS OF ACCOUNTS IN TERMS OF THE PROVISIONS OF SECTION 145(3). AFTER A DETAILED ANALYSIS OF WORK IN PROGRESS SHOWN, HE CATEGORICALLY OBSERVED THAT SEMI FINISHED GOODS/WORK IN PROGRESS WERE DULY REFLECTED IN THE BOOKS WHICH FORM PART OF THE CONSOLIDATED CLOSING STOCK OF RS. 1,77,73,978/ - . HE DELETED BOTH THE AD DITIONS. 6. THE AR DURING THE COURSE OF THE CURRENT APPELLATE PROCEEDINGS AGAIN FILED THE DETAILS OF CLOSING STOCK, CLOSING STOCK OF RAW MATERIAL, CLOSING STOCK OF CONSUMABLE STORES/GOODS AND WORK IN PROGRESS OF ANDAMAN PROJECT AND BAREILLY PROJECT. IT WAS ALSO ASSERTED THAT THESE WERE THE SAME PIECES OF INFORMATION WHICH WERE FILED BEFORE THE A.O. THE ENTIRE SET OF DOCUMENTS FILED BY THE AR WHICH SHOWS THE WORKING OF WORK IN PROGRESS OF ANDAMAN AS WELL AS BAREILLY PROJECTS WERE SENT TO THE AO FOR A REMAND REPORT. 7. THE AO HAS SENT HIS REPORT VIDE HIS LETTER DATED 17.3.2011. THE AO HAS ONLY REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER. HE HAS NOT MADE ANY COMMENTS ON THE DOCUMENTS SENT TO HIM. HE HAS ALSO NOT MADE ANY COMMENTS ON THE FACTS AND A NALYSIS BROUGHT OUT BY MY LD. PREDECESSOR IN HIS ORDER DATED 18.3.2005. 2.3 IT IS SEEN THAT AGAINST THE REMAND REPORT THE ASSESSEE FILED ITS DETAILED OBJECTION S ON FACTS AND LAW WHICH IS REPRODUCED IN PARA 8 OF THE IMPUGNED ORDER CONSIDERING WHICH THE RE LIEF HAS BEEN GRANTED. 3. THE LD. SR. DR RELIES UPON THE ASSESSMENT ORDER. THE LD. AR ON THE OTHER HAND RELIES UPON THE IMPUGNED ORDER. 4 I.T.A .NO. - 740 /DEL/201 2 4 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT NO ARGUMENTS HAVE BEEN ADVANCED BY THE REVENUE TO CONTROVERT THE CLAIM OF THE ASSESSEE THAT THE AMOUNT OF CLOSING STOCK, SEMI FINISHED GOODS, FINISHED GOODS AND CONSUMABLE S OF BAREILLY AND ANDAMAN PROJECTS ARE REFLECTED IN THE CONSOLIDATED AMOUNT OF RS. 1,77,73,978/ - . I N THE FACTS AS THEY STAND WE FIND NO REASON ON THE BAS IS OF WHICH THE ADDITION OF RS. 28,80,380/ - CAN BE SUSTAINED. THE REASONING AND FINDING OF THE CIT(A) IN THE PRESENT PROCEEDINGS WHICH RE - CONSIDERS THE EARLIER DECISIONS ON THE BASIS OF REMAND REPORT RE AD S AS UNDER: - 9. DECISION AND REASONS THEREFOR: I HAVE CONSIDERED THE FACTS OF THE CASE AND SCRUTINIZED THE MATERIAL PLACED ON RECORD. I AGREE WITH THE FINDINGS OF MY PREDECESSOR THAT THE ASSESSEE HAS PLACED ON RECORD OVERWHELMING EVIDENCES REGARDING T HE PURCHASES IN THE MONTH OF MARCH AND THEIR TRANSPORTATION TO THE PROJECT SITES, THE COPIES OF BILLS, GRS AND DELIVERY NOTES. AS THE PURCHASES HAD BEEN DONE DURING ALMOST ENTIRE MONTH TILL THE END OF MARCH, IT IS QUITE NATURAL THAT SOME OF THE PURCHASES FORMED PART OF THE CLOSING STOCK AS RAW MATERIAL AND SOME AS SENT FINISHED GOODS AS AT THE PROJECT SITES IT TAKE TIME TO FABRICATE AND ERECT THE RE QUIRED STRUCTURE. THE AO HAS N O T POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS. I ALSO AGREE WITH MY PREDECESSOR S OBSERVATIONS THAT THERE OUGHT TO HAVE BEEN WORK IN PROGRESS WHICH IS EVIDENT FROM AO S ACKNOWLEDGING THE FACT THAT MINIMUM 15 DAYS TIME IS REQUIRED FOR CONVERTING THE R AW MATERIAL INTO FINIS H ED PROJECTS. AS IT IS CLEAR THAT THERE HAD BEEN WORK IN PROGRESS AND OTHER CLOSING STOCK WHICH IS DULY ENTERED IN THE BOOKS OF ACCOUNTS AND CERTIFIED BY THE AUDITORS IN THE AUDIT REPORT IN WHICH NO DEFECTS HAVE BEEN POINTED OUT, THE RE WAS NO CASE FOR REJECTION OF BOOKS OF ACCOUNTS IN TERMS OF THE PROVISIONS OF SECTION 145(3). AS THE SEMI FINISHED GOODS/WORK IN PROGRESS WERE DULY REFLECTED IN THE BOOKS WHICH FORMED PART OF THE CONSOLIDATED CLOSING STOCK OF RS.1,77,73,978/ - , NO ADDITI ON WAS CALLED FOR. THE AO HAS NOT EXAMINED THE BOOKS OF ACCOUNTS PROPERLY. THE ADDITIONS ARE DELETED. 4. 1 ON A CONSIDERATION OF THE ABOVE WE FIND NO INFIRMITY IN THE FACTS AS THEY STAND AND IN THE ABSENCE OF ANY ARGUMENT T O C A N V A S S A CONTRARY VIEW THE DEPARTMENTAL GROUNDS FAIL. THE DEPARTMENTAL APPEAL IS DISMISSED AS PER THE PRONOUN CEMENT MADE IN THE OPEN COURT AT THE TIME OF HEARING . 5 I.T.A .NO. - 740 /DEL/201 2 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. THE ORDER IS PRONOU NCED IN THE OPEN COURT ON 1 0 T H OF OCTOBER 2014. S D / - S D / - ( B.C.MEENA ) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1 0 / 1 0/2014 *AMIT KUMAR/SUBODH KUMAR COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI