DCIT, Jaipur V. CERAMIC TABLEWARE PVT. LTD., Jaipur

ITA 767/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5564 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Revenue expenditure

Judgement Text

ITA NO. 767/JP/2014 THE DCIT, CENTRAL CIRCLE- 4, JAIPUR VS. M/S. CERAMIC TABLEWARE (P) LTD. , JAIPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE:SHRI R.P.TOLANI, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA-@ ITA NO. 767 & 768/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 & 2011-12 THE DCIT CIRCLE- 4 JAIPUR CUKE VS. M/S. CERAMIC TABLEWARE (P) LTD. F-707(A), ROAD NO.6, VKI AREA JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AADCC 3190 M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT - DR & SHRI M.S. MEENA, CIT DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 04/12/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 28 /01/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE A GAINST SEPARATE ORDERS OF THE LD. CIT(A)-II, JAIPUR DATED 15-09-20 14 & 30-09-2014 FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12 RESPECTIVELY. 2.1 THE REVENUE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL FOR THE ASSESSMENT YEAR 2010-11. ITA NO. 767/JP/2014 THE DCIT, CENTRAL CIRCLE- 4, JAIPUR VS. M/S. CERAMIC TABLEWARE (P) LTD. , JAIPUR 2 (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETIN G TRADING ADDITION OF RS. 2,20,13,250/- AND ALSO NOT CONFIRMI NG THE REJECTING OF BOOK RESULTS DONE AFTER POINTING OUT S PECIFIC DEFECTS IN ITS BOOKS. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETIN G THE DISALLOWANCE OF RS. 82,778/- MADE ON ACCOUNT OF PE NALTY ON LATE SUPPLY OF GOODS. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETIN G THE DISALLOWANCE OF RS. 5,650/- MADE ON ACCOUNT OF PRO VISION FOR COMMISSION. (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETIN G THE DISALLOWANCE OF RS. 24,72,851/- MADE ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEES CONTRIBUTION TO PF. 3.1 THE SOLITARY GROUND RAISED BY THE REVENUE IN IT S APPEAL FOR THE ASSESSMENT YEAR 2011-12 IS AS UNDER: - (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING TR ADING ADDITION OF RS. 3,30,15,176/- MADE BY THE AO WITHOU T APPRECIATING THAT THE ESTIMATION OF WASTAGE MADE BY THE AO WAS ON THE BASIS OF CGCRI WHICH IS AN INDEPENDENT A GENCY HAVING EXPERTISE IN THE RELATED FIELD. 4.1 DURING THE COURSE OF HEARING LD. DR RELIED ON T HE ORDER OF THE AO. 4.2 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE AT THE OUTSET CONTENDS THAT THE ISSUE OF REJECTION OF BOOKS OF AC COUNTS AND DELETION OF ITA NO. 767/JP/2014 THE DCIT, CENTRAL CIRCLE- 4, JAIPUR VS. M/S. CERAMIC TABLEWARE (P) LTD. , JAIPUR 3 CONSEQUENT ADDITIONS IS COVERED IN FAVOUR OF THE AS SESSEE BY A SERIES OF ITAT JAIPUR BENCH IN ASSESSEES OWN CASE. BY CONSOLIDAT ED ORDER DATED 30-01-2014 FOR THE ASSESSMENT YEARS 2008-09 AND 20 09-10 (ITA NO. 460/JP/12 ASSESSEE AND 551/JP/12 REVENUE ) ITAT , JAIPUR BENCH RELYING ON THE ORDER DATED 16-03-2007 FOR THE ASSESSMENT YE AR 2001-02 IN ASSESSEE'S OWN CASE AFTER DISCUSSING THE ISSUE IN GREAT DETA ILS HELD AS UNDER:- 3.3 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAV E FOUND THAT THE ISSUE INVOLVED IN THIS APPEAL FILED BY THE REVENUE IN ITA NO.551/JP/2012 STANDS SQUARELY COVERED IN FAVOUR O F THE ASSESSEE BY THE AFOREMENTIONED ORDER OF ITAT. IN THE ORDER OF T HE TRIBUNAL IN ITA NO. 258/JP/2005 FOR THE ASSESSMENT YEAR 2001-02 DAT ED 16-03-2007, IT HAS BEEN HELD AS UNDER:- 6. WE HAVE PERUSED THE FACTS OF THE CASE. THE LD. AR MR. H.M. SINGHVI ARGUED THAT THE ASSESSEE HAS PRODUCED ALL THE BOOKS OF ACCOUNT , VOUCHERS AND THE ASSESSEE'S ACCOUNTS ARE AUDITED AND ALL THE PRODUCTION IS SUBJECT TO EXCISE DUTY AND NOT EVEN A SINGLE UNIT OF PRODUCTION CAN GO OUT OF THE FACTORY WITHOUT RECORD ING THE SAME IN THE EXCISE REGISTERS WHICH ARE REGULARLY AND CONTIN UOUSLY VERIFIED BY THE EXCISE DEPARTMENT AND ARE UNDER THEIR CONTROL. THE AO HAS NOT POINTED OUT ANY DEFECT IN THE PURCHASES , SALES , O PENING STOCK AND CLOSING STOCK AND AS EXPLAINED BEFORE THE AO AND TH E LD. CIT(A) THAT M/S. BHARAT POTTERIES LTD. I.E. A SISTER CONCERN IS MANUFACTURING MORE OF MAXIMUM STONEWARE CROCKERY AND THE ASSESSEE IS M ANUFACTURING MORE OF BONE CHINA CROCKERY AND THE DIFFERENCE IN Y IELD AND THE WASTAGE AND THE GROSS PROFIT HAD BEEN EXPLAINED VID E OUR LETTER DATED 26-3-04 BEFORE THE AO AND SIMILARLY THE OUTPUT/INPU T RATIO HAS ALSO BEEN EXPLAINED BEFORE THE AO THROUGH THE SAME LETTE R AND THE AO HAS NOT COMMENTED UPON THE SAME AND HAS NOT FOUND OUT A NY DEFECT IN OUR EXPLANATION . THE ASSESSEE HAS ALSO FILED BEFORE T HE AO FOLLOWING DOCUMENTS / PUBLICATIONS TO SUPPORT THE WASTAGE DEC LARED BY THE ITA NO. 767/JP/2014 THE DCIT, CENTRAL CIRCLE- 4, JAIPUR VS. M/S. CERAMIC TABLEWARE (P) LTD. , JAIPUR 4 ASSESSEE IS REASONABLE AND ACCORDING TO THE STANDAR D PRACTICE ADOPTED IN THE COUNTRY AS UNDER:- 1. C.G.C.R.I., KHURJA (PB NO. 13 TO 1) 2. PUBLICATION OF ARTICLE IN WHITE WARES (P.B. NO. 18) 3. PHOTOCOPY OF HAND BOOK OF CERAMICS VOLUME 2 (EDITORS. KUMAR ) SHOWING TYPICAL COMPOSITION OF BO NE CHINA 4. PHOTOCOPY OF THE CHAPTER 5 OF STONEWARE IN THE BOOK S PUBLISHED BY THE INSTITUTE OF MATERIALS (P.B. NO. 2 1 TO 22). IN THE REPORT OF CGCRI, KHURJA, (REFER P.B. NO. 17) , THE WASTE WORKED OUT TO 28.31% TO 38.7% INTEREST HE BON E CHINA CROCKERY AND IN THE CASE OF STONEWARE CROCKERY IT W ORKD OUT TO 24% TO 34.8%. WE AGREE WITH THE ARGUMENTS OF THE LD. AR THAT THAT THE MAIN OBJECTION RAISED BY THE AO WAS THAT INPUT/OUTPUT RA TIO IN VARIOUS MONTHS HAS THE INCONSISTENCY WHICH HAS BEEN DULY EXPLAINED BY THE ASSESSEE VIDE LETTER DATED 26-3-04 AND THE SECOND OBJECTION BY THE AO WAS THAT THE SISTER CONC ERN M/S. BHARAT POTTERIES LTD. HAS DECLARED MORE YIELD AND M ORE GROSS PROFIT , HAS ALSO BEEN EXPLAINED BY THE ASSESSEE VI DE THE SAME LETTER DATED 26-3-04. THEREFORE, THE INCONSISTENCY IN THE INPUT/OUTPUT RATIO IN VARIOUS MONTHS THE REASONS FO R WHICH HAS BEEN EXPLAINED BY THE ASSESSEE , CANNOT BE THE BAS IS FOR REJECTION OF BOOKS OF ACCOUNT.THE YIELD AND GROSS P ROFIT RATE DECLARED BY THE SISTER CONCERN M/S. BHARAT POTTERIE S LTD. WHICH HAVE ALSO BEEN EXPLAINED BY THE ASSESSEE CAN ALSO N OT BE THE BASIS FOR REJECTION OF BOOKS OF ACCOUNT SINCE M/S. BHARAT POTTERIES LTD. IS MANUFACTURING MAXIMUM OF STONEWAR E CROCKERY AND FOR MANY OTHER REASONS WHICH WERE EXPL AINED BY THE ASSESSEE VIDE ITS LETTER DATED 26-3-04 WHICH WA S IGNORED BY THE AO AND THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE PURCHASES, SALES, OPENING STOCK AND CLOSING STO CK OF THE ITA NO. 767/JP/2014 THE DCIT, CENTRAL CIRCLE- 4, JAIPUR VS. M/S. CERAMIC TABLEWARE (P) LTD. , JAIPUR 5 ASSESSEE AND THE AO HAS NOT BROUGHT ON RECORD ANY C OGENT MATERIAL TO PROVE THAT THE ASSESSEE HAS SOLD THE UN DER- PRODUCTION OUT OF THE BOOKS OF ACCOUNT. THEREFORE , IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE , THE AO IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT BY INVOKING PROVISI ONS OF SECTION 145(3) OF THE ACT AND THE ADDITIONS MADE BY THE AO ARE LIABLE TO BE DELETED. THE OBJECTION OF THE LD. DR T HAT THE LD. CIT(A) HAS NOT RELIED UPON THE CGCRI REPORT, CALCUT TA , THE LD. AR HAS POINTED OUT THAT THE IN THE SAME REPORT IT HAS BEEN MENTIONED THAT THE SAID ORGANIZATION IS NOT INVOLVE D PRODUCTION PRACTICE AND THE ARE NOT SURE TO WHAT EXTENT THEIR OPINION WILL BE USEFUL FOR THE PURPOSE OF THE ASSESSEE AND IN SU CH CIRCUMSTANCES AND FACTS OF THE CASE, THE REPORT OF CGCRI, CALCUTTA ALONE CANNOT BE THE BASIS FOR REJECTION OF BOOKS OF ACCOUNT AND MAKING AN ESTIMATION OF WASTAGE AND THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING OTHER MATERIAL WHICH WAS PLACED BEFORE HIM AS MENTIONED HEREINBEFORE. THEREF ORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE APPLICAB ILITY OF SECTION 145(3) OF THE ACT AND ADDITION OF RS.11,15, 087/-. THUS GROUND NO. 1 OF THE ASSESSEE IS ALLOWED AND THE SOL ITARY GROUND OF THE REVENUE IS DISMISSED. ACCORDINGLY, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED, BY RESPECTFULLY FOLLOWING THE ABOVE ORDER. 4.3 LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDS T HAT THE CONTRADICTION IN REVENUES APPROACH IS FURTHER EVIDENT FROM THE FACT THAT IN ASSESSMENT YEAR 2011-12, THE REVENUE HAS NOT CHALLENGED THE ORDER O F LD. CIT(A) UPHOLDING OF BOOKS OF ACCOUNT OF THE ASSESSEE. THIS INDICATES THAT REVENUE HAS ACCEPTED THE FACTS AND CIRCUMSTANCES IN THIS BEHALF WHICH AR E SIMILAR IN ALL THE YEARS. IN VIEW OF THESE JUDGEMENTS, THE RELEVANT ISSUES IN QUESTION I.E. REJECTION OF ITA NO. 767/JP/2014 THE DCIT, CENTRAL CIRCLE- 4, JAIPUR VS. M/S. CERAMIC TABLEWARE (P) LTD. , JAIPUR 6 BOOKS AND DELETION OF CONSEQUENT ADDITIONS ARE SQUA RELY COVERED IN FAVOUR OF THE ASSESSEE. 4.4 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FIND MERIT IN THE CONTENTIONS OF THE LD. AR OF THE ASSESSEE THAT THE IMPUGNED ISSUES ABOUT UPHOLDING OF THE BOOKS OF ACC OUNT OF THE ASSESSEE AND DELETION OF CONSEQUENT ESTIMATION OF INCOME ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY SERIES OF ITAT ORDERS AS MENTIONED ABOVE. RESPECTFULLY FOLLOWING THE ORDERS OF ITAT (SUPRA), THE GROUND NO. 1 OF THE REVENUE FOR BOTH THE YEARS ARE DISMISSED. 5.1 ADVERTING TO GROUND NO. 2 OF THE REVENUE FOR TH E ASSESSMENT YEAR 2010-11, THE LD. AR OF THE ASSESSEE CONTENDS THAT T HE WORD PENALTY HAS BEEN LOOSELY UNDERSTOOD BY THE LD. AO INASMUCH AS T HE AMOUNT WAS PAID FOR DELAY IN SUPPLY OF GOODS AND IS ESSENTIALLY IN THE NATURE OF COMPENSATORY PAYMENTS. RELIANCE IS PLACED IN THE CASE OF CIT VS. S.A. BUILDERS (P) LTD. 299 ITR 88 (P&H) WHEREIN IT HAS BEEN HELD THAT COMP ENSATION FOR DELAY IN EXECUTION OF CONTRACT WORK IS NOT FOR BREACH OF LAW AND THUS PENAL BUT A CLEAR COMPENSATION FOR BREACH OF CONTRACTUAL OBLIGATION A ND THEREFORE, THE SAME BEING COMPENSATORY IN NATURE IS ALLOWABLE AS DEDUCT ION. THE LD. CIT(A) AS ITA NO. 767/JP/2014 THE DCIT, CENTRAL CIRCLE- 4, JAIPUR VS. M/S. CERAMIC TABLEWARE (P) LTD. , JAIPUR 7 BY A CORRECT FINDING OF FACT HAS HELD IT TO BE COMP ENSATORY IN NATURE, WHICH IS UPHELD. 6.1 APROPOS GROUND NO. 3 OF THE REVENUE QUA DELETIO N OF SMALL DISALLOWANCE OF RS. 5,650/- MADE ON ACCOUNT OF PROV ISION FOR COMMISSION, THE ORDER OF THE LD. CIT(A) IS RELIED ON, ALLOWING PAYMENT TO BE ACCRUED LIABILITY ALLOWABLE ON MERCANTILE SYSTEM. 7.1 IN RESPECT OF GROUND NO. 4 I.E. PAYMENT OF EMPL OYEES PF CONTRIBUTION, THERE IS NO DISPUTE THAT THE AMOUNT I N QUESTION WAS PAID BY ASSESSEE BEFORE DUE DATE OF FILING OF THE RETURN. T HEREFORE, THERE IS NO INFIRMITY IN THE ORDER OF LD. CIT(A) WHICH IS RELIE D. 8.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE CONTENTIO N OF THE LD. AR THAT THE AMOUNT OF RS. 82,778/- RAISED IN GROUND NO. 2 WAS P AID AS COMPENSATORY PAYMENT FOR LATE SUPPLY OF GOODS AND CANNOT BE EQUA TED WITH PENALTY FOR INFRACTION OF LAW. THEREFORE, THE LD. CIT(A) HAS RI GHTLY DELETED THIS DISALLOWANCE. 8.2 APROPOS GROUND NO. 3 FOR DISALLOWANCE OF RS. 5, 650/- MADE ON ACCOUNT OF PROVISION FOR COMMISSION IS ACCRUED LIAB ILITY WHICH IS ALLOWABLE ITA NO. 767/JP/2014 THE DCIT, CENTRAL CIRCLE- 4, JAIPUR VS. M/S. CERAMIC TABLEWARE (P) LTD. , JAIPUR 8 AS REVENUE EXPENDITURE IN MERCANTILE SYSTEM. THE DI SALLOWANCE THEREOF IS UPHELD. 8.3 APROPOS GROUND NO. 4, SINCE EMPLOYEES PF CONTRI BUTION HAS BEEN PAID BEFORE DUE DATE OF FILING OF RETURN, THE SAME IS ALLOWABLE DEDUCTION AND THE ORDER OF THE LD. CIT(A) IS UPHELD. 9.0 IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 /01/201 6. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER FNUKAD@ DATED:- 28 /01/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE- 4, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. CERAMIC TABLEWARE (P) LTD. JA IPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 767/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR