Asstt. Comm. Of Income Tax Circle 1(1), Panaji V. M/S. Ahilibai Sardesai, Panaji

ITA 78/PAN/2012

• Counselvise Citation: 7824114 RSA 2012
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 09-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHA DESAI
• Assessee Lawyers: D E ROBINSON
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 78/PNJ/2012 : (ASST. YEAR : 2007 - 08) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(1), PANAJI, GOA (APPELLANT) VS. M/S. AHILIABAI SARDESAI, E - 365,MAHATMA GANDHI ROAD, PANAJI, GOA (RESPONDENT) PAN : AAGFA9044G APPELLANT BY : SMT. ASHA DESAI , DR RESPONDENT BY : D.E. ROBINSON , ADV. DATE OF HEARING : 30/07/2013 DATE OF PRONOUNCEMENT : 08 /08/2013 O R D E R PER P.K. BANSAL : 1. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DT. 31.7.2012 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1. THE ORDER NO. IN ITA NO.148/PNJ/ 0 9 - L 0 DATED: 31.07.2012 IN THE ABOVE CASE IS OPPOSED TO LAW AND FACTS OF THE CASE REGARDING UNEXPLAINED STOCK OF IRON ORE. 2. THE LEARNED CIT (A) HAS ERRED IN APPRECIATING THE ISSUE OF ADDITION OF VALUE OF U NEXPLAINED STOCK FOR ASSESMENT YEAR 2007 - 08. 3. IN THIS CASE LEARNED CIT (A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE HAS FAILED TO PROVE THE DIFFERENCE OF STOCK BETWEEN THE PLANT FEED REPORT VIS - A - VIS THE MACHINERY OPERATION REPORT FOR THE MONTHS O F APRIL, 2006 AND FEBRUARY, 2007 THAT WAS DISCOVERED IN THE RECORDS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 4. IN THIS CASE LEARNED CIT (A) HAS FAILED TO APPRECIATE WHY THERE IS DISCREPANCY ONLY IN THE MONTH OF APRIL, 2006 AND FEBRUARY, 2007 BUT NOT I N THE OTHER MONTHS OF THE PARTICULAR ASSESSMENT YEAR. NO CORROBORATIVE 2 ITA NO. 78/PNJ/2012 (ASST. YEAR : 2007 - 08) EVIDENCE FOR HAVING TRANSPORTED THE CRUDE IRON ORE OF 4779 M.T ONLY IN THE MONTH OF APRIL, 2006 AND 3141 M.T IN THE MONTH OF FEBRUARY, 2007 DIRECTLY FROM MINING AREA TO THE PLANT HAS BE EN FURNISHED. 2. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MINING OF IRON ORE AND OTHER ALLIED ACTIVITIES. THE ASSESSMENT WAS COMPLETED ON TOTAL INCOME OF RS.10,70,99,159/ - BY MAKING AN ADDITION OF RS.1,14,32,846/ - WHICH INCLUDES UNEXPLAINED STOCK OF RS.75,24,000/ - AND THE DISALLOWANCE OF ADDITIONAL DEPRECIATION AMOUNTING TO RS.38,39,846/ - . THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). CIT(A) DELETED THE ADDITION OF RS.75,24,000/ - AGAINST WHICH T HE REVENUE IS IN APPEAL BEFORE US. THE AO NOTED THAT THE ASSESSEE IS MINING ORE AND SELLING IT AFTER PERFORMING CERTAIN BASIC OPERATIONS. THE ASSESSEE WAS MAINTAINING DETAILS OF THE ORE USED AT TWO PLACES IN THE FORM OF MACHINERY OPERATION REPORT AND PLA NT FEED REPORT. THE AO NOTED THE FOLLOWING DETAILS OF THE QUANTITY OF THE CRUDE IRON ORE MENTIONED IN THE MONTHLY MACHINERY OPERATION REPORT AND THE PLANT FEED REPORT : SL. NO. MONTH ORE CONSUMED AS PER PLANT FEED REPORT ORE CONSUMED AS PER MACHINERY OPERATION REPORT DIFFERENCE 01 APRIL, 2006 90927M.T 86148M.T 4779M.T 02. MAY, 2006 73566 M.T 73566 M.T NIL 03. JUNE, 2006 0 0 NIL 04. SEPTEMBER, 06 0 0 NIL 05. OCTOBER, 2006 48321 M.T 48,321 M.T NIL 06. NOVEMBER, 06 55413 M.T 55413 M.T NIL 07. DECEMBER, 06 49869 M.T 49869 M.T NIL 08. JANUARY, 07 57492 M.T 57492 M.T NIL 09. FEBRUARY,07 61551M.T 58410M.T 3 1 4 1 M.T ON THE BASIS OF THE SAID INFORMATION, IT WAS NOTED THAT DURING THE MONTH OF APRIL , 2006 AND FEBRUARY , 2007 THE CRUDE ORE CONSUMED AS PER THE PLANT FEED REPORT WAS MORE IN APRIL, 2006 AND FEBRUARY, 2007. THE CONSUMPTION WAS 3 ITA NO. 78/PNJ/2012 (ASST. YEAR : 2007 - 08) MORE IN APRIL, 2006 BY 4779 MT AND IN FEBRUARY, 2007 BY 3141 MT. WHEN ASKED FOR THE CLARIFICATION, THE ASSESSEE SUBMITTED THAT DURI NG APRIL, 2006 AS PER THE MACHINERY OPERATION REPORT, MACHINERY WAS USED TO EXTRACT 42741 MT OF CRUDE IRON ORE AND 86148 MT OF ORE WAS LOADED FROM THE STOCKS TO FEED THE PLAN. OUT OF 42741 MT OF IRON ORE MINED, 4779 MT WAS DIRECTLY TRANSPORTED TO FEED THE PLAN AND THE BALANCE 37962 MT WAS TRANSPORTED TO STOCK PILE. SIMILARLY, FOR FEBRUARY, 2007 IT WAS MENTIONED THAT 56255 MT OF IRON ORE WAS EXTRACTED. 58410 MT OF ORE WAS LOADED FROM THE STOCK TO FEED THE PLANT. OUT OF 56255 MT OF IRON ORE MINED, 3141 MT WAS DIRECTLY TRANSPORTED TO FEED THE PLANT AND BALANCE 53114 MT WAS TRANSPORTED TO THE STOCK PILE. THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND HE , THEREFORE , BY WORKING OUT THE AVERAGE RATE PER MT @ RS. 950/ - , MADE THE ADDITION OF 7920 MT AMOUNT ING TO RS.75,24,000/ - IN THE INCOME OF THE ASSESSEE AS VALUE OF THE UNEXPLAINED CRUDE IRON ORE CONSUMED. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) DELETED THE ADDITION ACCEPTING THE EXPLANATION OF THE ASSESSEE. 2.1 BEFORE US, THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF THE AO. IT WAS CONTENDED THAT AS SOON AS THE ORE IS EXTRACTED, MACHINERY OPERATION REPORT IS PREPARED AND TO THE EXTENT THE CRUDE ORE IS FOUND, IT IS BEING SENT TO THE PLANT FOR FURTHER PROCE SSING ON WHICH THE PLANT FEED REPORT IS BEING PREPARED. THE AO COLLECTED THE DATA FOR EACH OF THE MONTH. DURING THE MONTH APRIL, 2006 AS PER THE MACHINERY OPERATION REPORT, THE CRUDE IRON ORE CONSUMED WAS 86148 MT WHILE AS PER THE PLANT FEED REPORT, THE ORE CONSUMED WAS 90927 MT. SIMILARLY, IN THE MONTH OF FEBRUARY, 2007, THE ORE CONSUMED AS PER MACHINERY OPERATION REPORT WAS 58410 MT WHILE AS PER THE PLANT FEED REPORT, IT WAS 61551 MT. THE CONSUMPTION IN PLANT FEED REPORT CANNOT BE MORE THAN THE CRUDE IRON ORE EXTRACTED BY THE ASSESSEE. THE MORE CRUDE IRON ORE CONSUMED SHOWN IN THE PLANT FEED REPORT CLEARLY PROVES THAT THE ASSESSEE HAS PURCHASED 4 ITA NO. 78/PNJ/2012 (ASST. YEAR : 2007 - 08) THE CRUDE IRON ORE FROM SOURCES OUTSIDE THE BOOKS OF ACCOUNTS. THE AO, THEREFORE, HAS RIGHTLY MADE THE ADDI TION IN RESPECT OF INVESTMENT MADE BEING MADE IN THE CRUDE IRON ORE NOT DISCLOSED IN THE BOOKS OF ACCOUNTS. THE CIT(A) WAS NOT CORRECT IN LAW IN DELETING THE ADDITION. THE ONUS IS ON THE ASSESSEE TO PROVE HOW HE HAS USED THE EXCESS QUANTITY OF CRUDE IRON ORE. THE EXCESS QUANTITY NATURALLY WOULD HAVE COME OUTSIDE THE UN EXPLAINED SOURCES. THE VALUE OF SUCH UNEXPLAINED CRUDE IRON ORE MUST BE ADDED IN THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS MERELY SUBMITTED AN EXPLANATION THAT THE CRUDE IRON ORE HAS D IRECTLY BEEN SENT TO FEED THE PLANT IN THE MONTHS OF APRIL, 2006 AND FEBRUARY, 2007 TO THE EXTENT THERE IS EXCESS CONSUMPTION BUT NO EVIDENCE IN THIS REGARD HAS BEEN BROUGHT ON RECORD OR PRODUCED BEFORE THE AO. THE CIT(A) HAS DELETED THE ADDITION WITHOUT THERE BEING ANY EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE. HE SIMPLY PRESUMED THAT THE CRUDE IRON ORE HAS BEEN SENT OUT OF THE PILED STOCK. 2.2 THE LD. AR, ON THE OTHER HAND, EXPLAINED THE PROCEDURE TO US. IT WAS POINTED OUT THAT WHENEVER THE EXTRACTION IS MADE, MACHINERY OPERATION REPORT IS PREPARED. THE EXTRACTION CONSISTS OF REJECTION AND CRUDE IRON ORE WHICH IS NOTED IN THE MACHINERY OPERATION REPORT. ONLY THE CRUDE IRON ORE IS SENT TO THE PLANT FOR FURTHER PROCESSING AND TO THE EXTENT TH E CRUDE IRON ORE IS FED INTO THE PLANT, THE PLANT FEED REPORT IS BEING MADE. IT WAS POINTED OUT THAT TO THE EXTENT THE EXCESS CONSUMPTION IN THE PLANT FEED REPORT IN THE MONTH OF APRIL, 2006 AND FEBRUARY, 2007, THE SAME HAS BEEN SENT OUT OF THE REJECTION BEING ACCUMULATED AT THE SITE. ON A QUERY FROM THE BENCH WHETHER ANY RECORD IS BEING MAINTAINED TO ASCERTAIN THE QUANTITY OF REJECTION OR THE ASSESSEE CAN COMPILE THE QUANTITY OF SUCH REJECTION OUT OF THE MACHINERY OPERATION REPORT, THE LD. AR EXPRESSED H IS INABILITY. HE SAID NO SUCH RECORD IS BEING KEPT AND EVEN NO SUCH INFORMATION CAN BE COMPILED. THE LD. AR VEHEMENTLY CONTENDED THAT THE ONUS 5 ITA NO. 78/PNJ/2012 (ASST. YEAR : 2007 - 08) IS ON THE REVENUE TO PROVE THAT THE ASSESSEE HAS NOT SENT THE REJECTION TO THE PLANT . THE ACCOUNTS OF THE ASSE SSEE ARE DULY AUDITED. WHEN THE BENCH ASKED THE LD. AR THAT THERE MUST BE SOME STANDARD HOW THE REJECTIONS COULD BE USED AS CRUDE IRON ORE AND UPTO WHAT EXTENT IT CAN BE REJECTED, HOW THE REJECTIONS COULD BE RE - USED AS CRUDE IRON ORE, THE LD. AR COULD NOT EXPLAIN SUCH STANDARDS BUT VEHEMENTLY CONTENDED THAT WHENEVER IT IS FOUND THAT THE REJECTION CONSISTS OF LOW GRADE CRUDE IRON ORE, IT IS BEING SENT TO PLANT FEED FOR FURTHER PROCESSING. THE REJECTION DOES NOT HAVE ANY VALUE AND THEREFORE IT IS NOT BEING ACCOUNTED FOR NOR VALUED FOR VALUING THE CLOSING STOCK. 2.3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE ALSO GONE THROUGH THE ORDER OF THE TAX AUTHORITIES AS WELL AS THE CIT(A). IT IS AN UNDISPUTED FACT THAT WHENEVER EXTRACTION IS MADE F ROM THE MINES, MACHINERY OPERATION REPORT IS BEING PREPARED BY THE ASSESSEE. MACHINERY OPERATION REPORT AS PER THE ASSESSEE DISCLOSES THE REJECTION AS WELL AS THE CRUDE IRON ORE. IT IS ONLY THE CRUDE ORE WHICH IS BEING SENT FOR FURTHER PROCESSING TO THE PLANT. TO THE EXTENT ORE IS CONSUMED, PLANT FEED REPORT IS BEING PREPARED AND QUANTITY IS DULY MAINTAINED THEREIN. THE QUANTITY CONSUMED AS PER THE PLANT FEED REPORT IN THE MONTH OF APRIL, 2006 AND FE BRUARY, 2007 IS IN EXCESS OF THE QUANTITY AS HAS BEEN SHOWN IN THE MACHINERY OPERATION REPORT. THE DIFFERENCE IN THE QUANTITY IN THE MONTH OF APRIL, 2006 IS 4779 MT WHILE THE DIFFERENCE IN THE MONTH OF FEBRUARY, 2007 IS 3141 MT. IN OUR OPINION, THE ONUS IS ON THE ASSESSEE TO PROVE HOW THE ASSESSEE HAS CONSUMED EXCESS CRUDE ORE IN THE PLANT WHILE AS PER THE MACHINERY OPERATION REPORT, THE CRUDE ORE EXTRACTED IS LESS. ALTHOUGH THE ASSESSEE HAS CONTENDED BEFORE THE AO THAT SUCH EXCESS CRUDE ORE IN THE MONTH S OF APRIL, 2006 AND FEBRUARY, 2007 HAS DIRECTLY BEEN TRANSPORTED TO FEED THE PLANT, BUT BEFORE US, THE LD. AR CONTENDED THAT THE SAID EXCESS HAS BEEN DIRECTLY TRANSPORTED OUT OF THE REJECTION BEING PILED UP AT THE SITE WITHOUT 6 ITA NO. 78/PNJ/2012 (ASST. YEAR : 2007 - 08) PREPARING ANY MACHINERY OPER ATION REPORT . THUS, PROVES THAT THERE ARE CONTRADICTIONS IN THE CONTENTION OF THE ASSESSEE. IN OUR OPINION, IF THE EXCESS CRUDE ORE HAS DIRECTLY BEEN TRANSPORTED WITHOUT PREPARING THE MACHINERY OPERATION REPORT OR HAS BEEN DIRECTLY TRANSPORTED OUT OF THE REJECTION, THE ONUS IS ON THE ASSESSEE TO PROVE IT. EXCEPT THE SUBMISSIONS, NO COGENT EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE EITHER BEFORE THE AUTHORITIES BELOW OR BEFORE US. THE ASSESSEE BEFORE US VEHEMENTLY CONTENDED THAT THE RECORD OF TH E REJECTION IS NOT BEING MAINTAINED AS IT DOES NOT HAVE ANY VALUE BUT IF THE REJECTION DOES NOT HAVE ANY VALUE, HOW THE ASSESSEE HAS SENT IT AS CRUDE ORE FOR FURTHER PROCESSING TO THE PLANT. IT IS AN OPEN FACT THAT MINING WAS BEING CARRIED OUT OUTSIDE THE BOOKS OF ACCOUNTS. THE SAHA COMMISSION HAS ALSO ACCEPTED THIS FACT. IF THE REJECTION CAN BE RE - USED, THE ASSESSEE WOULD HAVE KEPT THE RECORD AND HE WOULD NOT HAVE KEPT THE REJECTION JUST LYING AT THE SITE. THIS IS A CASE WHERE THE CONSUMPTION IS MUCH M ORE THAN THE CRUDE ORE BEING EXTRACTED. THEREFORE, IN OUR OPINION, THE AO HAS RIGHTLY MADE THE ADDITION IN RESPECT OF EXCESS QUANTITY OF CRUDE ORE CONSUMED BY THE ASSESSEE. WE HAVE ALSO LOOKED INTO HOW THE VALUE OF SUCH EXCESS HAS BEEN COMPUTED BY THE AO . WE NOTED THAT THE AO HAS WORKED OUT THE AVERAGE RATE PER METRIC TON AT WHICH THE IRON ORE HAS BEEN SOLD BY THE ASSESSEE. THE COST AND THE REALIZABLE VALUE ARE DIFFERENT TERMS. THE ASSESSEE INVESTS ONLY AT THE COST. THE VALUE REALIZED CONSISTS THEREIN THE PROFIT EARNED BY THE ASSESSEE ALSO. THE AO, THEREFORE, IN OUR OPINION, IS NOT RIGHT IN MAKING THE ADDITION BY WORKING OUT THE AVERAGE RATE/MT ON THE BASIS OF THE SALE PRICE REALIZED. THE AO SHOULD HAVE REDUCED THEREFROM THE PROFIT EARNED BY THE ASSE SSEE. THE ADDITION COULD HAVE BEEN MADE ONLY IN RESPECT OF THE COST. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND RESTORE THIS ISSUE SO FAR THE VALUE OF THE ADDITION IS CONCERNED TO THE FILE OF AO WITH THE DIRECTION THAT THE AO SHALL WORK OUT THE COS T PER MT IN RESPECT OF 4779 MT CRUDE ORE AND 3141 MT BEING CONSUMED EXCESS IN THE MONTH OF APRIL, 2006 AND 7 ITA NO. 78/PNJ/2012 (ASST. YEAR : 2007 - 08) FEBRUARY, 2007 AND THE COST SO WORKED OUT SHALL BE ADDED IN THE INCOME OF THE ASSESSEE. THUS, THE APPEAL OF THE REVENUE IS ALLOWED TO THE EXTENT HER EINABOVE. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED. 4. ORDER PRONOUNCED IN THE OPEN COURT ON 08 /08/2013. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 08 /08/ 2013 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA