The ITO, Ward-2(1), Surat V. M/s. Shree M.D. Industries, Surat

ITA 871/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63280 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-11-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 20-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A TIRKEY
• Assessee Lawyers: U S BHATI
• Keywords: Business income; Depreciation; Cost of acquisition
• Section: 143(3); 133(6); 68; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH BEFORE: SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI ANIL CHATURVEDI, ACCOUNTANT ME MBER I.T.A. NO.871/AHD/2009 A.Y.2004-05 THE I.T.O., WARD-2(1), SURAT APPELLANT VS. SHREE M.D. INDUSTRIES, D-137, UMA INDL. ESTATE, UDGOGNAGAR, UDHNA, SURAT RESPONDENT DEPARTMENT BY : SHRI A. TIRKEY, SR. D.R. ASSESSEE BY : SHRI U.S. BHATI, A.R. DATE OF HEARING : 29.11.2012 DATE OF PRONOUNCEMENT 28.12.2012 / ORDER PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-II, SURAT DATED 31.12.2008. 2. THE FACTS OF THE PRESENT CASE, AS CULLED OUT FRO M THE ASSESSMENT ORDER ARE AS UNDER:- THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF GREY FABRICS. IT FILE D ITS RETURN OF INCOME ON 01.11.2004 DECLARING NIL INCOME. THE CASE WAS TAKE N UP FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) VID E ORDER DATED 29.12.2006 AND TOTAL INCOME BEFORE ADJUSTING DEPRECIATION WAS DETERMINED AT RS.1,40,42,143/-. AFTER ADJUSTING THE DEPRECIATION THE TOTAL INCOME WAS DETERMINED AT NIL. AFORESAID INCOME WAS DETERMINED AFTER MAKING VARIOUS ADDITIONS. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE I.T.A. NO.871/AHD/2009 A.Y.2004-05 2 CIT(A). CIT(A) VIDE HIS ORDER DATED 31.12.2008 ALL OWED THE APPEAL OF THE ASSESSEE AND THEREFORE, THE REVENUE IS IN APPEAL BE FORE US. 3. BEFORE US THE REVENUE HAS RAISED FOLLOWING FOUR GROUNDS OF EFFECTIVE APPEAL:- I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDI TION OF RS.20,79,247/- ON ACCOUNT OF UNEXPLAINED SALES HOLD ING THAT SALES MADE BY THE ASSESSEE OF RS.20,79,247/- IS NOT DISPU TED BY THE ASSESSEE AND ON SUCH AMOUNT, THE ASSESSEE HAS PAID THE EXCISE DUTIES TOO. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDI TION OF RS.32,17,801/- ON ACCOUNT OF ESTIMATION OF SUPPRESS ED SALES HOLDING THAT ON SUCH SALES, THE ASSESSEE WAS CHARGEABLE FOR EXCISE DUTY AND HAVE ALSO AVAILED BENEFIT OF CENVAT CREDITS ON THE PURCHASES MADE BY IT. III. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDI TION OF RS.12,62,288/- OUT OF TWISTING AND BUTTA CUTTING CH ARGES MADE BY THE A.O. HOLDING THAT THE A.O. HAS NOT BROUGHT ON RECOR DS ANY COMPARATIVE CASE TO SHOW THAT TWISTING AND BUTTA CUTTING CHARGE S MADE BY THE ASSESSEE WERE EITHER UNREASONABLE OR ON HIGHER SIDE . IV. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN DELETING THE ADDI TION OF RS.14,37,907/- U/S 145A HOLDING THAT THE ASSESSEE H AD DULY COMPLIED WITH THE PROVISIONS OF SUB SECTION 145A OF THE ACT AND THERE APPEARS NO ERROR IN THE WORKING OF THE ASSESSEE. 4. GROUND NO.1:- UNEXPLAINED SALES OF RS.20,79,247/ -. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O., ON VERIFICATION OF BOO KS OF ACCOUNTS, NOTICED THAT ASSESSEE HAD RECEIVED PAYMENTS IN CASH FROM VARIOUS PARTIES LISTED AT PAGE-2 AND 3 OF HIS ORDER. THE TOTAL AMOUNT WAS RS.20,79, 247/-. HE NOTICED THAT THE LIST CONTAINS NAMES OF FEW IMPORTANT PERSONS OF THE CITY. TO VERIFY AS TO WHETHER SALES OF GOODS IN CASH WERE ACTUALLY MADE BY THE AS SESSEE HE ASKED THE ASSESSEE TO SUBMIT THEIR ACCOUNT ALONG WITH CONFIRMATION AND FURNISH THE SOURCE OF CASH DEPOSIT ALONG WITH EVIDENCES. SINCE NO SATISFACTOR Y EXPLANATION WAS OFFERED BY I.T.A. NO.871/AHD/2009 A.Y.2004-05 3 THE ASSESSEE, HE CONSIDERED THE AMOUNT OF RS.20,79, 247/- CREDITED IN THE BOOKS OF ACCOUNTS IN THE NAME OF VARIOUS PARTIES AS CASH RECEIPTS FROM UNDISCLOSED SOURCE AND THEREBY TREATED THE INCOME UNEXPLAINED C ASH CREDIT U/S 68 AND ADDED TO THE TOTAL INCOME. 5. AGGRIEVED BY THE ADDITION MADE BY THE A.O. ASSES SEE CARRIED THE MATTER BEFORE CIT(A). AFTER CONSIDERING THE SUBMISSIONS M ADE BY THE ASSESSEE CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER:- 6. I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY T HE AO AS ALSO THE WRITTEN SUBMISSIONS OF THE AR AND THE JUDICIAL PRON OUNCEMENTS RELIED UPON. FROM THE FACTS OF THE CASE AS LAID OUT IN THE PRECEDING PARAGRAPHS, IT IS SEEN THAT THE ASSESSEE HAD RECEIV ED THE SAID CASH FROM THE SAID SALES PARTIES, IN RESPECT OF SALES MA DE BY IT DURING THE CURRENT YEAR AS ALSO IN THE EARLIER YEAR(S). THE F ACT OF SALES HAVING BEEN MADE TO THE SAID PARTIES BY THE ASSESSEE, IS N OT AT ALL DISPUTED BY THE AO. FURTHER, THE FACT THAT EXCISE DUTY HAD ALSO BEEN PAID ON THE SALES MADE, ALSO SUPPORTS THE ARGUMENTS OF THE AR. SINCE, IT AMPLY CLEAR THAT THE ASSESSEE HAD ALREADY OFFERED I NCOME IN THE FORM OF SALES AND HENCE, THE AMOUNTS REALIZED IN RESPECT OF INCOME ALREADY OFFERED COULD NOT BE ONCE AGAIN TREATED AS UNEXPLAI NED INCOME OF THE ASSESSEE AND THIS WOULD CLEARLY RESULT INTO DOUBLE TAXATION OF THE SAME INCOME, I.E. ONCE IN THE FORM OF SALES AND OTHER U/ S 68 OF THE ACT. 6.1 FURTHER, IT IS ALSO SEEN THAT THE FACTS OF THE ASSESSEES CASE ARE EXACTLY IDENTICAL TO THE FACTS IN THE CASE OF SOJIT RA TEXTILES PVT. LTD. (ITA NO.3125/A/2007 AND 3159/A/2007), WHEREIN THE J URISDICTIONAL AHMEDABAD BENCH OF THE ITAT HAS HELD THAT: THE CONSIDERATION RECEIVED AGAINST THE SALES CANNOT BE REGARDED TO BE THE CASH CREDITS TO WHICH THE PROVISIONS OF SECTION 68 WOULD APPLY. IT IS NOT DENIED BY THE REVENUE THAT THE ASSESSEE H AS NOT CREDITED THE SALE PROCEEDS TO ITS P & L ACCOUNT. WHILE COMPUTIN G THE NET INCOME OF THE ASSESSEE THE SALE PROCEEDS HAVE BEEN CONSIDERED BEING THE DIFFERENCE BETWEEN THE SALES AND THE COST OF SALES AND VARIOUS EXPENSES INCURRED BY THE ASSESSEE FOR CARRYING ON T HE BUSINESS. WE HAVE ALSO GONE THROUGH THE DECISION OF THE BOMBA Y HIGH COURT CITED SUPRA. WE FIND THAT THE BOMBAY HIGH COURT IN THE CASE OF R B JESSARAM FATEHCHAND (SUPRA) HAS CATEGORICALLY HELD THAT THERE IS NO NECESSITY FOR THE ASSESSEE TO MAINTAIN THE SAME OR TO SUPPLY THEM AS AND WHEN CALLED FOR CANNOT GIVE RISE TO SUSPICION W ITH REGARD TO GENUINENESS OF TRANSACTIONS. WE, THEREFORE, DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A). I.T.A. NO.871/AHD/2009 A.Y.2004-05 4 6. AGGRIEVED BY THE ACTION OF CIT(A) THE REVENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND, LD. A.R. SUBMITTED THAT THE ASSESSEE ADMITS SALES IN CASH AN D SALES MADE BY THE ASSESSEE HAVE NOT BEEN DISPUTED BY A.O. FURTHER, THE ASSESS EE HAS ALREADY OFFERED INCOME AND THEREFORE, THE SAME AMOUNT CANNOT BE ONC E AGAIN TREATED AS UNEXPLAINED INCOME AS THAT WOULD RESULT IN DOUBLE T AXATION OF THE SAME INCOME I.E. ONCE IN THE FORM OF SALES AND OTHER U/S 68 OF THE ACT. HE THUS SUPPORTED THE ORDER OF CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PRODUCED BEFORE US. WE FIND THAT THE A.O. HAD NOTICED THAT THE ASSESSEE HAD RECEIVED PAYMENT IN CASH IN RESPECT OF SALES MADE DURING THE YEAR AND ALSO THE SALES MADE IN THE EARLIER YEARS AND THUS THE ASSESSEE HAD ALREADY OFFERED THE INCOME AS SALES. FURTHER, THE SALES MADE BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE A.O. SINCE THE ASSESSEE HAS ALREADY OFFERED THE IN COME AS SALES, TAXING THE SAME INCOME ONCE AGAIN U/S 68 WILL AMOUNT TO TAXING THE SAME INCOME TWICE, ONCE AS SALES AND THE OTHER AS UNEXPLAINED CASH CRE DIT. THE ASSESSEES CLAIM OF MAKING PAYMENT OF EXCISE DUTY ON THE SALES MADE HAS ALSO NOT BEEN DISPUTED BY THE REVENUE. FURTHER, THE CO-ORDINATE BENCH IN THE CASE OF SOJITRA TEXTILES PVT. LTD. (SUPRA) HAS HELD THAT CONSIDERATION RECEIVED A GAINST SALES CANNOT BE REGARDED AS CASH CREDIT TO WHICH THE PROVISIONS OF S. 68 WOULD APPLY. THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO C ONTROVERT THE FINDING OF CIT(A). IN VIEW OF THESE FACTS, WE FIND NO NECESSI TY TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS UPHOLD THE ORDER ON THIS GROUND. TH US THIS GROUND OF THE REVENUE IS REJECTED. 9. GROUND NO.2:- ADDITION ON ACCOUNT OF SUPPRESSED SALE OF RS.32,17,801/-. THE A.O. ON VERIFYING THE MONTH-WISE DETAILS OF YAR N PURCHASED AND SALE OF YARN I.T.A. NO.871/AHD/2009 A.Y.2004-05 5 NOTICED (WHICH ARE LISTED AT PAGE 5 AND 6 OF THE OR DER) THAT THE AVERAGE SALE PRICE WAS LOWER IN THE MONTH OF JULY, OCTOBER AND D ECEMBER, 2003 TO MARCH, 2004 IN COMPARISON TO THE OTHER MONTHS OF THE ORDER WHEREAS THE PURCHASE COST OF YARN REMAINED ALMOST SAME OR INCREASED THE LAST PART OF THE YEAR. THE ASSESSEE WAS THEREFORE ASKED TO SHOW CAUSE AS TO WH Y THE TOTAL SALES SHOULD NOT BE ESTIMATED AFTER REJECTING THE BOOK RESULTS. THE CONTENTIONS OF THE ASSESSEE WERE NOT FOUND ACCEPTABLE BY THE A.O. HE FOUND THA T DURING THE MONTH OF APRIL TO JUNE, 2003, AUGUST, SEPTEMBER AND NOVEMBER, 2003 THE ASSESSEE HAD SHOWN TOTAL 17,52,969.5 METERS OF GREY SALES FOR RS.5,96, 38,646/- AND THE AVERAGE SALE PRICE WAS RS.34.02 PER METER WHEREAS DURING THE MON TH WHILE THE SALE WERE LOWER THE ASSESSEE HAD SHOWN TOTAL SALES OF 8,39,46 8.75 METER OF GREY FOR RS.2,32,62,022/- AT THE AVERAGE SALES RATE OF RS.27 .71 PER METER. HE ACCORDINGLY COMPUTED THE DIFFERENCE IN SALES RATE F OR THE MONTH OF JULY, OCTOBER TO DECEMBER AND JUNE TO MARCH AFTER CONSIDERING THE RATES OF RS.6.31 PER METER. HE ACCORDINGLY ESTIMATED THE TOTAL SALES AT RS.8,83 ,67,321/-. SINCE THE ASSESSEE HAD SHOWN SALES OF RS.8,30,70,273/- HE CONSIDERED THE DIFFERENCE AMOUNT OF RS.52,97,048/- TO BE ADDED IN THE TOTAL INCOME. BU T SINCE HE HAD ALREADY MADE ADDITION OF RS.20,79,247/- U/S 68 OF THE ACT, HE W ORKED OUT THE DIFFERENCE OF RS.32,17,801/-AS THE ESTIMATED SUPPRESSED RECEIPTS AND ADDED IT TO THE INCOME. 10. AGGRIEVED BY THE ACTION OF THE A.O. ASSESSEE CA RRIED THE MATTER BEFORE CIT(A). CIT(A), AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 10. I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY THE AO AS ALSO THE WRITTEN SUBMISSIONS OF THE AR. FROM THE FACTS OF T HE CASE AS LAID OUT IN THE PRECEDING PARAGRAPHS, IT IS SEEN THAT THE TU RNOVER OF THE ASSESSEE HAD INCREASED BY AROUND 8 TIMES IN THE CUR RENT YEAR AS COMPARED TO THE PRECEDING YEAR AND CORRESPONDINGLY, THE G.P. OF THE ASSESSEE IN VALUE TERMS HAD ALSO INCREASED VERY SIG NIFICANTLY. I ALSO FIND MERIT IN THE ARS ARGUMENT THAT THE WORKING OF THE ASSESSEE HAD I.T.A. NO.871/AHD/2009 A.Y.2004-05 6 SUFFERED DUE TO THE STRIKE IN THE ENTIRE WEAVING IN DUSTRY IN SURAT, WHICH HAD LASTED FOR 51 DAYS, AND WHICH HAD ULTIMAT ELY RESULTED IN THE FALL IN THE G.P. MARGIN. THIS WAS THE FACTUAL POSI TION WHICH CANNOT BE DENIED. INSPITE OF SUCH CLOSURE OF BUSINESS, THE B OOK RESULTS OF THE ASSESSEE HAD IN FACT IMPROVED DURING THE CURRENT YE AR AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR AND HENCE, NO ADVERS E VIEW TAKEN BY TAKEN SIMPLY BECAUSE THE GP HAD FALLEN IN PERCENTAG E TERMS. IT WAS BOUND TO HAPPEN BECAUSE OF THE 8 TIMES INCREASE IN THE TURNOVER. 10.1 MOREOVER, IT IS NOTICED THAT THE SALES OF THE ASSESSEE WERE CHARGEABLE TO EXCISE DUTY AND THE ASSESSEE HAD ALSO AVAILED OF CENVAT CREDIT ON THE PURCHASES MADE. IT IS ALSO N OTICED THAT THE ASSESSEE HAD MAINTAINED QUANTITY DETAILS OF PURCHAS ES AND SALES WHICH HAD EVEN BEEN ACCEPTED BY THE EXCISE DEPARTMENT. I F THERE HAD BEEN ANY SUPPRESSION OF SALES THE EXCISE DEPARTMENT WOUL D HAVE NOT ACCEPTED THE SALES AS SHOWN BY THE ASSESSEE, WHICH IS NOT THE CASE. 10.2 I ALSO FIND MERIT IN THE ASSESSEES ARGUMENT T HAT WHEN THE STRIKE WAS CALLED OFF IN THE MONTH OF MAY-JUNE, THE SALES PRICE WAS HIGH SINCE, AT THAT POINT OF TIME THE SUPPLY WOULD HAVE BEEN VERY LOW AS COMPARED TO THE DEMAND, AND THIS FACT IS AMPLY EVID ENT FROM THE MONTH-WISE COMPARISON OF SALE PRICES, AS IS GIVEN O N PAGE 6 OF THE ASSESSMENT ORDER, FROM WHEREIN IT IS NOTICED THAT I N THE MONTH OF JUNE 2003 THE AVERAGE SALES PRICE WAS RS.35.31 PER MT. I .E. 2 ND HIGHEST IN THE YEAR (HIGHEST RATE RS.35.78 WAS IN SEPTEMBER 20 03) AND THE AVERAGE SALES PRICE FOR APRIL 2003 WHEN THE STRIKE WAS ON, WAS RS.33.71 PER MT. WHICH WAS ALSO ON THE HIGHER SIDE. THE AOS ACTION IN REJECTING THIS ARGUMENT OF THE ASSESSEE WAS NOT REALLY JUSTIFIED. 10.3 APART FROM HIS ALLEGATION REGARDING SUPPRESSI ON OF SALES ON THE BASIS OF THE MONTH-WISE ANALYSIS, THE AO WAS NOT AB LE TO BRING ANY MATERIAL ON RECORD TO PROVE THAT THE ASSESSEE HAD A CTUALLY SUPPRESSED ITS SALES. 10.4 IN VIEW OF SUCH FACTS, I AM OF THE CONSIDERED OPINION THAT THE AO WAS NOT JUSTIFIED IN MAKING THE SAID ADDITION FOR A LLEGED SUPPRESSION OF SALES AND THEREFORE, THE ADDITION OF THE SUM OF RS. 32,17,801 WILL STAND DELETED. 11. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US. 12. BEFORE US, LD. D.R. RELIED ON THE ORDER OF THE A.O. ON THE OTHER HAND, LD. A.R. SUBMITTED THAT THE A.O. HAS FAILED TO BRING AN Y MATERIAL ON RECORD TO JUSTIFY THE ALLEGED SUPPRESSED SALES. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN MAINTAINING COMPLETE QUANTITY OF DETAILS AS REQUIRE D BY CENTRAL EXCISE RULES AND HAS PAID THE EXCISE DUTIES ON SALES MADE AND THE SA ME HAS BEEN ACCEPTED BY THE I.T.A. NO.871/AHD/2009 A.Y.2004-05 7 CENTRAL EXCISE DEPARTMENT. IN VIEW OF THESE FACTS THE ESTIMATION MADE BY THE A.O. WAS WITHOUT ANY MATERIAL AND ONLY ON THE BASIS OF GUESS WORK. HE THUS, SUPPORTED THE ORDER OF CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACT THAT THE GOODS MANUFACTURED BY THE ASSESSE E ARE CHARGEABLE TO EXCISE DUTIES, THE ASSESSEE HAS PAID THE APPLICABLE EXCISE DUTY AND HAS MAINTAINED QUANTITY DETAILS ON PURCHASE AND SALES AND WHICH HA S BEEN ACCEPTED BY THE EXCISE DEPARTMENT HAS NOT BEEN CONTROVERTED BY THE REVENUE BY BRINGING ANY MATERIAL ON RECORD. FURTHER, CIT(A) HAS GIVEN FIND ING THAT A.O. WAS NOT ABLE TO BRING ANY MATERIAL ON RECORD TO PROVE THAT THE ASSE SSEE HAD ACTUALLY SUPPRESSED SALES. CIT(A) HAS FURTHER GIVEN A FINDING THAT DES PITE STRIKE WHICH LASTED FOR 51 DAYS IN THE ENTIRE WEAVING INDUSTRY IN SURAT THE TU RN OVER OF THE ASSESSEE HAD INCREASED BY EIGHT TIMES IN THE YEAR UNDER APPEAL A S COMPARED TO THAT OF PRECEDING YEAR AND G.P. OF THE ASSESSEE ALSO INCREA SED SIGNIFICANTLY. HE HAS FURTHER OBSERVED THAT INSPITE OF CLOSURE OF THE BUS INESS, THE BOOK RESULTS OF THE ASSESSEE HAD IN FACT IMPROVED DURING THE CURRENT YE AR AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR. THESE FINDING OF FACTS OF CIT(A) HAS NOT BEEN CONTROVERTED BY THE REVENUE BY BRINGING ANY CONTRAR Y MATERIAL ON RECORD. IN VIEW OF THESE FACTS, WE FIND NO NECESSITY TO INTERF ERE WITH THE ORDER OF CIT(A) AND THUS UPHOLD CIT(A)S ORDER. THUS THIS GROUND OF TH E REVENUE IS REJECTED. 14. THIRD GROUND:- ADDITION OF RS.12,62,288/- ON AC COUNT OF TWISTING AND BUTTA CUTTING CHARGES. A.O. NOTICED THAT THE ASSESSEE HA S DEBITED RS.59,09,310/- AS TWISTING JOB CHARGES AND RS.4,02,131/- AS BUTTA CUT TING CHARGES AGGREGATING TO RS.63,11,441/-. THE A.O. ASKED THE ASSESSEE TO PRO DUCE THE JOB WORKERS FOR EXAMINATION AS HE WAS OF THE VIEW THAT THE JOB CHAR GES PAID BY THE ASSESSEE APPEARED TO BE OF HIGHER SIDE IN VIEW OF THE FACT T HAT THE ASSESSEE ITSELF WAS I.T.A. NO.871/AHD/2009 A.Y.2004-05 8 HAVING TWISTING MACHINES. IN RESPONSE TO THE QUERY OF A.O., ASSESSEE SUBMITTED CONFIRMATION OF THE PARTIES BUT DID NOT PRODUCE THE M PERSONALLY FOR EXAMINATION EXCEPT ONE PARTY. THE SUBMISSIONS MADE BY THE ASSE SSEE WERE NOT FOUND ACCEPTABLE TO THE A.O. HE WAS OF THE VIEW THAT THE JOB CHARGES PAYMENT APPEAR TO BE ON THE HIGHER SIDE IN VIEW OF THE FACT THAT T HE ASSESSEE ITSELF WAS HAVING TWISTING MACHINES. HE, THEREFORE, CONCLUDED THAT T HE ASSESSEE DID NOT WANT TO SHARE THE INFORMATION WITH RESPECT TO THE QUANTITY OF JOB WORK AND THE RATE OF JOB CHARGES PAID BY THE ASSESSEE. HE ACCORDINGLY CONSI DERED 20% OF THE JOB CHARGES AMOUNTING TO RS.12,62,288/- AS EXCESSIVE AND ADDED IT TO THE INCOME. 15. AGGRIEVED BY THE ACTION OF THE A.O. ASSESSEE CA RRIED THE MATTER BEFORE CIT(A). CIT(A), AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 14. I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY THE AO AS ALSO THE WRITTEN SUBMISSIONS OF THE AR. FROM THE FACTS OF T HE CASE AS LAID OUT IN THE PRECEDING PARAGRAPHS, IT IS SEEN THAT THE ASSES SEE HAD COMPLETELY DISCHARGED ITS ONUS OF PROVING THE GENUINENESS OF T HE EXPENDITURE CLAIMED, BY FURNISHING THE NAMES, ADDRESSES, PAN AN D CONFIRMATIONS OF THE JOB WORK PARTIES TO WHOM THE PAYMENTS WERE MADE . THE ASSESSEE HAD EVEN DEDUCTED AND PAID THE TDS ON THE PAYMENTS MADE TO THE JOB WORKERS. THUS, IN SUCH CIRCUMSTANCES, THE BURDEN H AD CLEARLY SHIFTED TO THE AO, AND IF THE AO HAD ANY DOUBT REGARDING THE G ENUINENESS OF THE EXPENSES, HE HIMSELF HAD AMPLE POWER UNDER THE PROV ISIONS OF THE ACT TO VERIFY THE SAME. HE COULD HAVE CALLED THE JOB W ORK PARTIES BY ISSUING SUMMONS OR NOTICES U/S 133(6) OF THE ACT, WHICH HE A.O. FAILED TO DO. THEREFORE, HE WAS NOT AT ALL JUSTIFIED IN HOLDING T HE ASSESSEE RESPONSIBLE FOR NOT PRODUCING THE JOB WORK PARTIES BEFORE HIM F OR VERIFICATION, AND MAKING THE DISALLOWANCE OUT OF THE SAID EXPENDITURE . 14.1 IT IS FURTHER NOTICED THAT NONE OF THE PERSONS TO WHOM THE PAYMENTS WERE SISTER CONCERNS OF THE ASSESSEE, WHO COULD BE COVERED U/S 40A(2)(B) OF THE ACT. THERE COULD BE NO REASON TO INFLATE SUCH EXPENDITURE AND SUPPRESS INCOME, IN THE GUISE OF MA KING HIGHER JOB WORK PAYMENTS. 14.2 THE AO HAD COMPLETELY IGNORED THE FACT THAT TH E ASSESSEE DID NOT HAVE THE REQUISITE FACILITY OF BUTTA CUTTING AND TW ISTING, TO COPE WITH ITS REQUIREMENTS AND HENCE, THE AOS ALLEGATION THAT TH E ASSESSEE COULD NOT HAVE INCURRED THE EXPENSES AS IT HAD TWISTING MACHI NES OF ITS OWN SEEMS TO BE OUT OF PLACE. THE TURNOVER OF THE ASSE SSEE HAD INCREASED I.T.A. NO.871/AHD/2009 A.Y.2004-05 9 BY MORE THAN 8 TIMES IN THE CURRENT YEAR, WHEREAS, THERE WAS SIGNIFICANT ADDITION TO THE PLANT AND MACHINERY DURING THE YEAR . THIS FACT AMPLY JUSTIFIES THE ASSESSEES CLAIM THAT IT DID NOT HAVE SUFFICIENT PRODUCTION CAPACITY, WHICH FORCED SUCH WORK TO BE DONE BY OUTS IDE PARTIES. FURTHER, IT IS SEEN THAT THE AO HAD COMPLETELY FAIL ED TO BRING ANY MATERIAL OR ANY COMPARATIVE INSTANCE ON RECORD, TO JUSTIFY HIS ALLEGATION THAT THE RATES AT WHICH THE PAYMENTS WERE MADE WERE EXCESSIVE. 14.3 TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANCE S AS DISCUSSED ABOVE, THE AOS ACTION IN DOUBTING THE GENUINENESS OF THE SAID EXPENSES AND TREATING THEM AS EXCESSIVE IS HELD TO BE NOT SU STAINABLE. HE IS DIRECTED TO DELETE THE ADDITION OF RS.12,62,288/-. 16. AGGRIEVED BY THE ACTION OF CIT(A) THE REVENUE I S IN APPEAL BEFORE US. 17. BEFORE US LD. A.R. SUBMITTED THAT IT HAD SUBMIT TED COMPLETE PARTIWISE ALONG WITH THE CONFIRMATIONS. HE FURTHER SUBMITTED THAT PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES AND HAS ALSO DEDUCTED TDS. HE FURTHER SUBMITTED THAT THE ENTIRE JOB CHARGES HAS BEEN PAID TO PARTIES AND NONE OF THEM WAS SISTER CONCERN U/S 40A(2)(B). THUS, THE ASSESS EE HAS DISCHARGED ITS ONUS AND THEREFORE NO DISALLOWANCE WAS REQUIRED. HE, TH US, SUPPORTED THE ORDER OF CIT(A). 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT CIT(A) HAS GIVEN A FINDING TH AT ASSESSEE HAS COMPLETELY DISCHARGED ITS ONUS OF PROVING THE GENUINENESS OF E XPENDITURE CLAIMED, THE ASSESSEE HAD DEDUCTED AND PAID THE TDS ON THE PAYME NTS MADE TO THE WORKERS. HE FURTHER HELD THAT THE A.O. DID NOT ISSUE ANY SUM MONS OR NOTICE U/S 133(6) TO THE JOB WORKER PARTIES AND THEREFORE WAS NOT JUSTIF IED IN HOLDING THE ASSESSEE RESPONSIBLE FOR NOT PRODUCING THE JOB WORKERS PARTI ES BEFORE HIM FOR VERIFICATION. IT IS ALSO AN UNDISPUTED FACT THAT PAYMENTS HAVE BE EN MADE TO OUTSIDE PARTIES AND NONE OF THE PARTIES WERE COVERED U/S 40A(2)(B). CIT(A) HAS FURTHER GIVEN A FINDING THAT THE ASSESSEE DID NOT HAVE THE REQUISIT E FACILITY FOR BUTTA CUTTING AND TWISTING AND THE AOS ALLEGATION THAT THE ASSESSEE COULD NOT HAVE INCURRED THE I.T.A. NO.871/AHD/2009 A.Y.2004-05 10 EXPENSES AS IT HAS TWISTING MACHINE SEEMS TO BE OUT OF PLACE. THE AFORESAID FINDING OF CIT(A) HAS NOT BEEN CONTROVERTED BY REVE NUE BY BRINGING ANY MATERIAL ON RECORD. IN VIEW OF THESE FACTS, WE FIND NO REAS ONS TO INTERFERE WITH THE ORDER OF THE A.O. THEREFORE THIS GROUND OF THE REVENUE I S DISMISSED. 19. GROUND NO.4:-ADDITION OF RS.14,37,907/- U/S 145 A. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. OBSERVED THAT WHEN COMPUTING THE TOTAL INCOME ASSESSEE HAD MADE ADJUSTMENT U/S 145A BY RED UCING A SUM OF RS.14,37,907/-. THE A.O. OBSERVED THAT ASSESSEE HA S DEBITED THE COMPONENT OF TAX DUTY IN CESS TO ITS OPENING STOCK. HE OBSERVED THAT WHILE VALUING THE CLOSING STOCK THE ASSESSEE HAD ONLY INCLUDED RS.7,98,808/- INSTEAD OF CLOSING BALANCE OF CENTRAL EXCISE AS APPEARING IN RG-23A BEING RS.22,3 6,715/-. ACCORDING TO THE A.O. THE ENTIRE BALANCE ON CENVET CREDIT WAS PART O F THE CLOSING STOCK AND THE SAME SHOULD HAVE BEEN ADDED TO ARRIVE AT THE VALUAT ION OF CLOSING STOCK. HE ACCORDINGLY CONSIDERED THE DIFFERENCE OF RS.14,37,9 07/- (RS. 22,36,715 RS.7,98,808/-) WHICH HAS BEEN DEDUCTED FROM TOTAL I NCOME AS NOT ALLOWABLE UNDER THE PROVISIONS OF SECTION 145A. AGGRIEVED BY THE ACTION OF A.O. THE ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 18. I HAVE CAREFULLY CONSIDERED THE VIEW TAKEN BY THE AO AS ALSO THE WRITTEN SUBMISSIONS OF THE AR AND THE JUDICIAL PRON OUNCEMENT RELIED UPON. FROM THE FACTS OF THE CASE AS LAID OUT IN TH E PRECEDING PARAGRAPHS, IT IS SEEN THAT THE BOOKS OF ACCOUNTS O F THE ASSESSEE WERE MAINTAINED AS PER EXCLUSIVE METHOD, WHEREBY THE DUT Y ELEMENT WAS EXCLUDED FROM THE VALUE OF OPENING STOCK, PURCHASES AND CLOSING STOCK. AS PER THE PROVISIONS OF SECTION 145A, THE APPELLANT WAS REQUIRED TO INCLUDE THE AMOUNT OF EXCISE DUTY IN IT S CLOSING STOCK AND OFFER THE SAME AS ITS INCOME. AS AGAINST THIS, THE ASSESSEE WOULD BE ENTITLED TO AVAIL EXPENSE IN RESPECT OF EXCISE DUTY PAID ON PURCHASES AND REMAINING UNUTILIZED AS AT THE YEAR END, WHICH IS REPRESENTED BY THE BALANCE IN THE RG-23A REGISTER. ACCORDINGLY, T HE INCOME OF THE ASSESSEE WOULD STAND ALTERED ON MAKING THESE ADJUST MENTS U/S 145A OF THE ACT. ON VERIFICATION OF THE WORKING OF THE ADJUSTMENT U/S 145A IT IS CLEARLY SEEN THAT THE ASSESSEE HAS DULY COMPL IED WITH THE I.T.A. NO.871/AHD/2009 A.Y.2004-05 11 PROVISIONS OF SECTION 145A AND THERE APPEARS TO BE NO ERROR IN THE WORKING OF THE ASSESSEE. I AM ALSO INCLINED TO AGR EE WITH THE AR THAT THE AOS VIEW THAT PROVISIONS OF SECTION 145A ARE N OT REVENUE NEUTRAL SINCE, IF IT HAD BEEN SO THE LEGISLATURE WOULD NEVE R HAVE INSERTED SUCH PROVISIONS IN THE ACT. THE ASSESSEES CONTENTIONS ARE ALSO SUPPORTED BY THE DECISION OF THE HIGH COURT OF PUNJAB AND HAR YANA IN THE CASE OF CIT V. NAHAR SPG. MILLS LTD. (SUPRA), WHEREIN IT HA S BEEN HELD THAT NO UNDUE ADVANTAGE WAS TAKEN BY THE ASSESSEE BY ADJUST ING THE UNUTILIZED MODVAT CREDIT IN THE REVALUATION OF OPEN ING STOCK AS IT WAS IN ACCORDANCE WITH THE LAW LAID DOWN BY THE SUPREME COURT IN THE CASE OF CIT V. INDO-NIPPON CHEMICALS (2003) 261 ITR 275 (SC). 18.1 I AM OF THE OPINION THEREFORE THAT THE AO WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND MAKING THE ADDITION U/S 145A OF THE ACT. THE ADDITION OF RS.1 4,37,907/- MADE U/S 145A OF THE ACT IS DIRECTED TO BE DELETED. 20. AGGRIEVED BY THE ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US. 21. BEFORE US LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND LD. A.R. SUBMITTED THAT ASSESSEE WAS MAINTAINING ITS BOOKS O F ACCOUNTS AS PER EXCLUSIVE METHOD WHEREBY DUTY ELEMENT WAS EXCLUDED FROM THE P URPOSE OF VALUATION OF OPENING STOCK PURCHASES AND CLOSING STOCK. HOWEVER , AS PER THE PROVISION OF SECTION 145A THE ASSESSEE FIRST INCLUDED THE AMOUNT OF EXCISE DUTY IN THE CLOSING STOCK AND OFFERED THE SAME AS INCOME. IT ACCORDING LY ALSO MADE ADJUSTMENT TO THE OPENING STOCK BY INCLUDING THE EXCISE DUTY ELEM ENT. THE ASSESSEE FURTHER SUBMITTED THAT THE CLOSING BALANCE AND UTILIZED CEN VET CREDIT CLAIMED AS EXPENSES IN EARLIER YEARS HAS BEEN OFFERED AS INCOME IN THE CURRENT YEAR. HE, THUS RELIED ON THE ORDER OF CIT(A). 22. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) HAS GIVEN A FINDING THAT THE AS SESSEE HAS COMPLIED WITH THE PROVISIONS OF SECTION 145A AND HE HAS FURTHER HELD THAT THERE APPEARS TO BE NO ERROR IN WORKING OF THE ASSESSEE. HE HAS FURTHER H ELD THAT THE A.O. WAS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNTS AND MA KING AN ADJUSTMENT U/S 145A. THE REVENUE HAS BROUGHT NOTHING ON RECORD TO CONTRO VERT THE FINDING OF CIT(A). I.T.A. NO.871/AHD/2009 A.Y.2004-05 12 WE THEREFORE FIND NO REASON TO INTERFERE WITH THE O RDER OF CIT(A) ON THIS GROUND AND THUS UPHOLD HIS ORDER. WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 23. IN THE RESULT, THIS APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 28.12.2012 SD/- SD/- (G.C. GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# *