ACIT, Madurai V. Aruna Alloy Steels Private Ltd., Madurai

ITA 933/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4879 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: K RAVI
• Keywords: Reopening of assessment; Depreciation; Transfer pricing; International transaction; Reason to believe; Reassessment proceedings
• Section: 143(3); 92E; 147; 131; 148; 139

Judgement Text

, , [ : ] IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI [ CAMP: MADURAI ] . . . , ! ' # $% .'('), + ' , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER #./ ITA NOS.3, 933 & 847/MDS/2016 ! ) .) / ASSESSMENT YEARS : 2006-07, 2008-09 & 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE I, MADURAI. V. M/S ARUNA ALLOY STEELS (P) LTD., SUPER B-3, INDUSTRIAL ESTATE, K-PUDUR, MADURAI 625 007. PAN : AAECA 6781 D (01/ APPELLANT) (2301/ RESPONDENT) 01 4 5 / APPELLANT BY : SH. PATHLAVATH PEERYA, CIT 2301 4 5 / RESPONDENT BY : SHRI K. RAVI, ADVOCATE 4 6+ / DATE OF HEARING : 16.02.2017 78. 4 6+ / DATE OF PRONOUNCEMENT : 20.04.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: ALL THE APPEALS OF THE REVENUE ARE DIRECTED AGAI NST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, MADURAI, FOR THE ASSESSMENT YEARS 2006-07, 2008-09 AND 2007-08. SINCE COMMON ISSUES ARISE FOR CONSIDERATION IN ALL THESE APPEALS, WE HEARD THESE APPEALS TOGETHER AND DISPOSING OF TH E SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.3, 933 & 847/MDS/16 2. FIRST LETS TAKE I.T.A. NO.3/MDS/2016 FOR ASSESS MENT YEAR 2006-07. 3. THE FIRST ISSUE ARISES FOR CONSIDERATION IS REOP ENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AND NON-ISSUE OF NOTICE UNDER SECTION 14 3(2) OF THE ACT. 4. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE CIT(APPEALS) FOU ND THAT THE ASSESSING OFFICER HAS NOT APPLIED HER MIND WHILE RE CORDING THE REASONS FOR REOPENING THE ASSESSMENT AND THE ASSESS ING OFFICER HAS SIMPLY REPRODUCED THE DIRECTION OF THE JOINT CO MMISSIONER OF INCOME TAX IN VERBATIM AS REASON FOR REOPENING THE ASSESSMENT. THE NON APPLICATION OF MIND INDEPENDENTLY BY THE AS SESSING OFFICER WOULD VITIATE THE REOPENING OF ASSESSMENT AND SUBSE QUENT REASSESSMENT ORDER. MOREOVER, THE ASSESSING OFFICE R HAS NOT ISSUED NOTICE UNDER SECTION 143(2) OF THE ACT. THE ASSESSING OFFICER HAS SIMPLY ISSUED LETTERS DATED 17.10.2010 AND 09.11.2010. ACCORDING TO THE LD. D.R., THE VERY FACT THAT THE A SSESSING OFFICER RECORDED REASONS FOR REOPENING SHOWS THAT SHE APPLI ED HER MIND INDEPENDENTLY AND MERELY BECAUSE THE ASSESSING OFFI CER 3 I.T.A. NOS.3, 933 & 847/MDS/16 REPRODUCED THE OBSERVATION OF JOINT COMMISSIONER OF INCOME TAX IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NOT A PPLIED HER MIND INDEPENDENTLY. 5. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBM ITTED THAT IN FACT, THE ASSESSING OFFICER APPLIED HER MIND IND EPENDENTLY. THE OBSERVATION MADE BY THE JOINT COMMISSIONER OF INCOM E TAX WHO IS ALSO AN OFFICER UNDER THE INCOME-TAX ACT, HAD NOTED THAT THE INCOME OTHERWISE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. IN FACT, THE N OTICE ISSUED UNDER SECTION 143(2) OF THE ACT WAS FOR THE PURPOSE OF GI VING AN OPPORTUNITY TO THE ASSESSEE TO APPEAR BEFORE THE AS SESSING OFFICER WITH BOOKS OF ACCOUNT AND OTHER RELEVANT DOCUMENTS. AN OPPORTUNITY WAS GIVEN TO THE ASSESSEE BY WAY OF LET TERS DATED 12.10.2010, 08.11.2010 AND 30.12.2010. IN FACT, TH IS WAS REPRODUCED BY THE CIT(APPEALS) IN HIS ORDER. THE O BJECT OF ISSUING OF NOTICE UNDER SECTION 143(2) OF THE ACT IS COMPLI ED WITH BY THE ASSESSING OFFICER BY WAY OF LETTERS AS REPRODUCED B Y THE CIT(APPEALS). THEREFORE, THE CIT(APPEALS) IS NOT J USTIFIED IN HOLDING THAT THE REASSESSMENT PROCEEDINGS ARE NOT VALID. 4 I.T.A. NOS.3, 933 & 847/MDS/16 6. ON THE CONTRARY, SHRI K. RAVI, THE LD.COUNSEL FO R THE ASSESSEE, SUBMITTED THAT THE INCOME OF THE ASSESSEE AS RETURNED WAS ACCEPTED BY THE ASSESSING OFFICER UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, THE JOINT COMMISSIONER OF INCOM E TAX, RANGE- III, MADURAI, BY A LETTER DATED 04.01.2010, DIRECTE D THE ASSESSING OFFICER TO TAKE THE MATTER UNDER SCRUTINY. AS PER THE DIRECTION OF THE JCIT, RANGE-III, MADURAI, THE ASSESSING OFFICER REC ORDED THE REASONS FOR REOPENING. REFERRING TO PAGES 2 AND 3 OF THE ORDER OF THE CIT(APPEALS), THE LD.COUNSEL SUBMITTED THAT THE ASSESSING OFFICER BY VERBATIM REPRODUCED THE REASONS FOR REOP ENING AS OBSERVED BY THE JOINT COMMISSIONER OF INCOME TAX. REFERRING TO SECTION 147 OF THE ACT, THE LD.COUNSEL SUBMITTED TH AT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY IN COME CHARGEABLE TO TAX ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY ASSESS OR RE-ASSESS SUCH INCOME WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT. 7. ACCORDING TO THE LD. COUNSEL, THE PROCEEDING BEF ORE THE ASSESSING OFFICER IS A JUDICIAL PROCEEDING, THEREFO RE, THE ASSESSING OFFICER HIMSELF SATISFY THAT THE INCOME HAS ESCAPED ASSESSMENT. THE JCIT, WHO IS AN OFFICER HIGHER IN RANK THAT OF ASSESSING OFFICER, 5 I.T.A. NOS.3, 933 & 847/MDS/16 CANNOT DIRECT THE ASSESSING OFFICER TO REOPEN THE A SSESSMENT. IF THERE WAS ANY ERROR, A MECHANISM HAS BEEN PROVIDED UNDER THE ACT FOR REVISION. IN ANY CASE, THE ASSESSING OFFICER H AS TO APPLY HIS MIND INDEPENDENTLY AND IF HE IS SATISFIED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR AN ASSESSMENT YEA R, HE MAY ASSESS OR RE-ASSESS THE INCOME. IN THIS CASE, SUCH AN EXERCISE WAS NOT DONE. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY FOUND THAT THE REASSESSMEN T IS INVALID. 8. REFERRING TO NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT AFTE R REOPENING ASSESSMENT, IT IS A STATUTORY REQUIREMENT OF THE AS SESSING OFFICER TO ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT BEFORE PROCEEDING FURTHER. MERE LETTERS MAY NOT SATISFY THE REQUIREM ENT OF THE PROCEDURE PRESCRIBED UNDER SECTION 143(2) OF THE AC T. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY FOUND THAT THE PROCEEDING INITIATED BY THE ASSESSING OFFICER F OR REASSESSMENT IS NOT VALID. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE MATERIAL AVAILABLE ON RECORD IT APPEARS THAT THE RE TURN FILED BY THE 6 I.T.A. NOS.3, 933 & 847/MDS/16 ASSESSEE WAS PROCESSED INITIALLY UNDER SECTION 143( 1) OF THE ACT. SUBSEQUENTLY, THE JOINT COMMISSIONER OF INCOME TAX, RANGE III, MADURAI, FOUND THAT INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT WITHIN THE MEANING AND SCOPE OF SECTION 147 OF THE ACT. HENCE, HE DIRECTED THE ASSESSING OFFICER TO I SSUE NOTICE UNDER SECTION 148 FOR REOPENING. ACCORDINGLY, THE ASSESS ING OFFICER BY VERBATIM REPRODUCING REASONS RECORDED BY JCIT, REOP ENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF T HE ACT. FOR THE PURPOSE OF CONVENIENCE, WE ARE REPRODUCING THE DIRE CTION OF JCIT, RANGE-III, MADURAI AND THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING, AS REPRODUCED BY THE CIT(APP EALS) IN THE IMPUGNED ORDER:- REASONS FOR REOPENING THE CASE U/S.147 OF THE IT AC T,1961. NAME : M/S. ARUNA ALLOY STEELS P.LTD. STATUS : COMPANY PAN : AAECA6781D ASST.YEAR : 2003-04,2004-05,2005-06,2006-07 & 20 08-09 DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASST YEAR 2007-08, THE ISSUE OF SECTION 145A UNDER THE INCOME-TAX ACT, 1961 WAS EXA MINED AND CERTAIN DISCREPANCIES WERE FOUND. THE ASSESSEE COMPANY WAS ASKED TO RECON CILE THE ABOVE ISSUE. AFTER RECONCILING THE ISSUE, THE ASSESSEE COMPANY FURNISH ED THE FOLLOWING WORKING: 7 I.T.A. NOS.3, 933 & 847/MDS/16 FROM THE ABOVE WORKING, IT IS CLEARLY VISIBLE THAT THE TAX OF RS. 31,12,455/- HAS ESCAPED ASSESSMENT BEGINNING FROM THE FINANCIAL YEA R 2002-03 TILL 2008-09. ANY ADJUSTMENT U/S.145A CANNOT BE DONE IN ISOLATION AS IT IS CONNECTED WITH THE VALUATION OF CLOSING STOCK, SINCE THE CLOSING STOCK FOR ANY R ELEVANT FINANCIAL YEAR WILL BECOME THE OPENING STOCK OF THE SUCCEEDING FINANCIAL YEAR. THEREFORE, ANY ADJUSTMENT U/S. 145A HAS TO BE MADE FROM THE BEGINNING OF THE FINAN CIAL YEAR WHICH CAN BE REOPENED AS ON DATE TILL THE LAST FINANCIAL YEAR FOR WHICH T HE ASSESSEE HAS FILED THE RETURN. THEREFORE, KEEPING THE ABOVE FACTS AND VIEW, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING AND SCOPE OF SECTION 147 OF THE INCOME TAX ACT, 1961. IN THE INTEREST OF REVENUE, THE ACIT, COMPANY CIRCL E-IT, MADURAI IS HEREBY DIRECTED AND ACCORDED APPROVAL ON THIS ISSUE. ISSUE NOTICE U /S.148(2) FOR THE A Y-2003-04, 2004-05, 2005-06,2006-07 & 2008-09. THE ACIT, COMPA NY CIRCLE-II, MADURAI IS ALSO DIRECTED THAT THE SAME ISSUE HAS TO BE TAKEN U P IN THE AY 2009-10 UNDER SCRUTINY ASSESSMENT FOR WHICH TIME FOR SELECTING WILL BE AS PER ACTION PLAN TARGET 2010-11. SD/- 04.01.2010 S.S.HARI RAO, JCIT,RANGE-III,MADURAI'. 3. AFTER THE RECEIPT OF THE ABOVE LETTER, THE ASSES SING OFFICER RECORDED THE REASONS ON 11.01.2010 AS SHOWN BELOW :- 'DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR TH E ASST. YEAR 2007-08, THE ISSUE OF SEC.145A UNDER THE IT ACT,1961 WAS EXAMINED AND CER TAIN DISCREPANCIES WERE FOUND. THE ASSESSEE COMPANY WAS ASKED TO RECONCILE THE ABO VE ISSUE. AFTER RECONCILING THE ISSUE, THE ASSESSEE COMPANY FURNISHED THE FOLLOWING WORKING: 8 I.T.A. NOS.3, 933 & 847/MDS/16 FROM THE ABOVE WORKING, IT IS CLEARLY VISIBLE THAT THE TAX OF RS.31124551/- HAS ESCAPED ASSESSMENT BEGINNING FROM FINANCIAL YEAR 20 02-03 TILL 2008-09. ANY ADJUSTMENT ULS.145A CANNOT BE DONE IN ISOLATION AS IT IS CONNECTED WITH THE VALUATION OF CLOSING STOCK, SINCE THE CLOSING STOCK FOR ANY R ELEVANT FINANCIAL YEAR WILL BECOME THE OPENING STOCK OF THE SUCCEEDING FINANCIAL YEAR. THEREFORE, ANY ADJUSTMENT U/S. 145A HAS TO BE MADE FROM THE BEGINNING OF THE FINAN CIAL YEAR WHICH CAN BE REOPENED AS ON DATE TILL THE LAST FINANCIAL YEAR FOR WHICH T HE ASSESSEE HAS FILED THE RETURN. HENCE, I HAVE REASONS TO BELIEVE THAT INCOME HAS ESCAPED A SSESSMENT. NOTICE U/S. 148 IS HEREBY ISSUED. SD/- ACIT 11.01.2010 10. FROM THE ABOVE, IT IS OBVIOUS THAT THE SATISFAC TION WAS RECORDED BY THE JCIT, RANGE-III, MADURAI. IN FACT, THE JCIT FOUND THAT HE HAS REASON TO BELIEVE THAT INCOME CHARGEABL E TO TAX ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 14 7 OF THE ACT. 11. NOW THE QUESTION ARISES FOR CONSIDERATION IS FO R THE PURPOSE OF REOPENING ASSESSMENT UNDER SECTION 147 OF THE AC T, WHETHER THE ASSESSING OFFICER HAS TO BELIEVE THAT THE INCOME CH ARGEABLE TO TAX ESCAPED ASSESSMENT OR ANY OTHER AUTHORITY ESTABLISH ED UNDER THE INCOME-TAX ACT. FOR THE PURPOSE OF CONVENIENCE, WE ARE REPRODUCING SECTION 147 OF THE ACT:- INCOME ESCAPING ASSESSMENT. 147 . IF THE ASSESSING OFFICER, HAS REASON TO BELIEVE T HAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISI ONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN 9 I.T.A. NOS.3, 933 & 847/MDS/16 THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, O R RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESS MENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SE CTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE REL EVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A R ETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED U NDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DIS CLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THAT ASSESSMENT YEAR. PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRS T PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESS MENT FOR ANY ASSESSMENT YEAR : PROVIDED FURTHER THAT THE ASSESSING OFFICER MAY ASS ESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVI NG MATTERS WHICH ARE THE SUBJECT-MATTERS OF ANY APPEAL , REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AN D HAS ESCAPED ASSESSMENT. EXPLANATION 1. PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVE RED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT T O DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROV ISO. EXPLANATION 2. FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY:-- (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INC OME OF 10 I.T.A. NOS.3, 933 & 847/MDS/16 ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSAB LE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMU M AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDE RSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN; (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REP ORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE W AS SO REQUIRED UNDER SECTION 92E ; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT-- (CA) WHERE A RETURN OF INCOME HAS NOT BEEN FURNISHE D BY THE ASSESSEE OR A RETURN OF INCOME HAS BEEN FURNISHED B Y HIM AND ON THE BASIS OF INFORMATION OR DOCUMENT RECEIVE D FROM THE PRESCRIBED INCOME-TAX AUTHORITY, UNDER SUB-SECTI ON (2) OF SECTION 133C, IT IS NOTICED BY THE ASSESSING OFFIC ER THAT THE INCOME OF THE ASSESSEE EXCEEDS THE MAXIMUM AMOUNT NOT CHARGEABLE TO TAX, OR AS THE CASE MAY BE, THE AS SESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RAT E; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCES SIVE RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INCL UDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE I NDIA. EXPLANATION 3. FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFI CER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISS UE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE 11 I.T.A. NOS.3, 933 & 847/MDS/16 SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDE R SUB- SECTION (2) OF SECTION 148. EXPLANATION 4. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION, AS A MENDED, BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR A NY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012 12. ADMITTEDLY, THE PROCEEDING BEFORE THE ASSESSING OFFICER OR ANY OTHER AUTHORITY UNDER THE INCOME-TAX ACT, IS A JUDICIAL PROCEEDING AS PROVIDED IN SECTION 136 OF THE ACT. A READING OF SECTION 147 OF THE ACT CLEARLY SAYS THAT IF THE ASS ESSING OFFICER HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY SUBJECT TO PROVISIONS OF SECTION 143 TO 148 OF THE ACT, ASSESS OR RE-ASSE SS SUCH INCOME OR ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESC APED ASSESSMENT. THEREFORE, THE BELIEF SHALL BE THAT OF THE ASSESSING OFFICER AND NOT THAT OF ANY OTHER OFFICER ESTABLISH ED UNDER THE INCOME-TAX ACT. 13. IN THE CASE BEFORE US, ADMITTEDLY, THE ASSISTAN T COMMISSIONER OF INCOME TAX IS THE ASSESSING OFFICER . THE JOINT COMMISSIONER OF INCOME TAX, RANGE-III MADURAI MAY B E AN OFFICER HIGHER IN RANK THAN THAT OF ASSESSING OFFICER. IF THE JCIT FOUND THAT 12 I.T.A. NOS.3, 933 & 847/MDS/16 THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT , HE CANNOT DIRECT THE ASSESSING OFFICER TO REOPEN THE ASSESSME NT UNDER SECTION 147 OF THE ACT. AT THE BEST, HE MAY PUT UP A NOTE TO CONCERNED ADMINISTRATIVE COMMISSIONER OR PRINCIPAL COMMISSIONER OF INCOME TAX AS THE CASE MAY BE, FOR REVISING THE INTIMATION ISSUED UNDER SECTION 143(1) OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN THE GUISE OF EXERCISING ADMINISTRAT IVE CONTROL OVER THE ASSISTANT COMMISSIONER OF INCOME TAX, THE JOINT COM MISSIONER OF INCOME TAX CANNOT INTERFERE IN THE JUDICIAL ADMINIS TRATION OF ASSESSING OFFICER UNLESS AND OTHERWISE PROVIDED IN THE INCOME-TAX ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION TH AT FOR THE PURPOSE OF REOPENING THE ASSESSMENT, IT IS THE BELIEF OF AS SESSING OFFICER THAT IS RELEVANT AND NOT THE BELIEF OF ANY OTHER OF FICER OR AUTHORITY ESTABLISHED UNDER THE INCOME-TAX ACT. IN THE CASE BEFORE US, THE ASSESSING OFFICER SIMPLY REPRODUCED THE REASONS VER BATIM RECORDED BY THE JCIT, RANGE-III, MADURAI. THE DIRECTION OF JCIT FOR REOPENING OF ASSESSMENT IS BEYOND HIS JURISDICTION. THERE IS NO PROVISION IN THE INCOME-TAX ACT ENABLING THE JCIT O R ANY OTHER AUTHORITY FOR DIRECTING THE ASSESSING OFFICER FOR R EOPENING THE ASSESSMENT. 13 I.T.A. NOS.3, 933 & 847/MDS/16 14. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISI ONS OF SECTION 144A OF THE ACT, WHICH READS AS FOLLOWS:- POWER OF JOINT COMMISSIONER TO ISSUE DIRECTIONS IN CERTAIN CASES 144A . A JOINT COMMISSIONER MAY, ON HIS OWN MOTION OR ON A REFERENCE BEING MADE TO HIM BY THE ASSESSING OFFICE R OR ON THE APPLICATION OF AN ASSESSEE, CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING IN WHICH AN ASSESSMENT IS PENDING AND, I F HE CONSIDERS THAT, HAVING REGARD TO THE NATURE OF THE CASE OR TH E AMOUNT INVOLVED OR FOR ANY OTHER REASON, IT IS NECESSARY O R EXPEDIENT SO TO DO, HE MAY ISSUE SUCH DIRECTIONS AS HE THINKS FI T FOR THE GUIDANCE OF THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT AND SUCH DIRECTIONS SHALL BE BINDING ON THE ASSESSING OFFICER: PROVIDED THAT NO DIRECTIONS WHICH ARE PREJUDICIAL TO THE AS SESSEE SHALL BE ISSUED BEFORE AN OPPORTUNITY IS GIVEN TO T HE ASSESSEE TO BE HEARD. EXPLANATION FOR THE PURPOSES OF THIS SECTION, NO DIRECTION AS T O THE LINES ON WHICH AN INVESTIGATION CONNECTED WITH THE ASSESSMENT SHOULD BE MADE, SHALL BE DEEMED TO BE A DIRECTION PREJUDICIAL TO THE ASSESSEE. 15. THIS SECTION ENABLES THE JOINT COMMISSIONER OF INCOME TAX EITHER ON HIS OWN MOTION OR ON A REFERENCE BEING MA DE BY THE ASSESSING OFFICER OR ON AN APPLICATION MADE BY THE ASSESSEE, CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDING IN WH ICH AN ASSESSMENT IS PENDING AND IF HE CONSIDERS THAT HAVI NG REGARD TO THE NATURE OF THE CASE OR THE AMOUNT INVOLVED OR FOR AN Y OTHER REASON, HE MAY ISSUE SUCH DIRECTION AS HE MAY THINK FIT FOR THE GUIDANCE OF 14 I.T.A. NOS.3, 933 & 847/MDS/16 THE ASSESSING OFFICER TO ENABLE HIM TO COMPLETE THE ASSESSMENT. THIS SECTION ENABLES THE JOINT CIT TO ISSUE DIRECTI ON WHEN THE ASSESSMENT PROCEEDING IS PENDING BEFORE THE ASSESSI NG OFFICER. THIS SECTION DOES NOT ENABLE THE JCIT TO DIRECT THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT. THE ASSESSMENT CAN BE REOPENED PROVIDED THE SAME WAS CO MPETED EITHER UNDER SECTION 143(3) OF THE ACT OR THE PROCE EDING COMING TO END ON EXPIRY OF TIME LIMIT FOR ISSUE OF NOTICE UND ER SECTION 143(2) OF THE ACT. IN THIS CASE, THE TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 143(2) HAS ADMITTEDLY EXPIRED. THEREFORE, IT AT AL L THERE WAS ANY ESCAPEMENT OF INCOME, THE ASSESSING OFFICER HIMSELF SATISFIES AND BELIEVES THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, SECTION 144A OF THE ACT DOES NOT EMPOWER THE JCIT T O DIRECT THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT. THE PO WER OF JCIT TO GIVE DIRECTION IS CONFINED ONLY TO A PENDING PROCEE DING AND NOT TO COMPLETED ASSESSMENT PROCEEDING EITHER BY AN ORDER UNDER SECTION 143(3) OF THE ACT OR BY OPERATION OF LAW. IN THIS CASE, THE ASSESSMENT PROCEEDING HAS COME TO AN END BY OPERATI ON OF LAW ON EXPIRY OF TIME LIMIT TO ISSUE NOTICE UNDER SECTION 143(2) OF THE ACT, THEREFORE, THE JCIT HAS NO AUTHORITY OR JURISDICTIO N TO ISSUE ANY DIRECTION EVEN UNDER SECTION 144A OF THE ACT. 15 I.T.A. NOS.3, 933 & 847/MDS/16 16. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE REOPENING OF ASSESSMENT UNDER SECT ION 147 OF THE ACT IS NOT JUSTIFIED. ACCORDINGLY, THE ORDER OF TH E CIT(APPEALS) IS CONFIRMED. 17. NOW COMING TO ASSESSMENT YEAR 2007-08, THE FIRS T ISSUE ARISES FOR CONSIDERATION IS ADDITION OF ` 1,39,80,000/- ON ACCOUNT OF SHORT VALUATION OF FINISHED GOODS. 18. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF IRON AND STEEL CASTINGS. THE ASSESSING OFFICER VALUED THE C LOSING STOCK OF FINISHED GOODS ON THE BASIS OF MONTHLY PRODUCTION R EPORT AT 432.80 MTS FOR ALL THE THREE UNITS. HOWEVER, THE ASSESSEE ADMITTED THE CLOSING STOCK ONLY AT 372.40 MTS. THEREFORE, ACCOR DING TO THE LD. D.R., THE ASSESSING OFFICER WORKED OUT THE DIFFEREN CE BETWEEN THE MONTHLY PRODUCTION REPORT AND THAT OF ADMITTED BY T HE ASSESSEE AT ` 1,39,80,000/-. THE CIT(APPEALS) FOUND THAT THE ASS ESSING OFFICER ACCEPTED THE REVISED CALCULATION OF THE ASSESSEE AF TER CORRECTING CERTAIN CLERICAL ERRORS AND ADMITTED THE QUANTITY O F FINISHED GOODS AT 411.784 TONNES CORRESPONDING TO THE VALUATION OF ` 491.05 LAKHS. 16 I.T.A. NOS.3, 933 & 847/MDS/16 ACCORDING TO THE LD. D.R., THE ASSESSEE ADMITTED TH E DIFFERENCE OF CLOSING STOCK AT ` 500.54 LAKHS. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN SAYING THAT THE ASSESSING OFFICER ARRI VED THE CLOSING STOCK AT ` 491.05 LAKHS. HENCE, ACCORDING TO THE LD. D.R., TH E CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 19. ON THE CONTRARY, SHRI K. RAVI, THE LD.COUNSEL F OR THE ASSESSEE, SUBMITTED THAT DURING THE PENDENCY OF THE APPEAL BEFORE THE CIT(APPEALS), THE CIT(APPEALS) CALLED FOR REMAN D REPORT. IN THE REMAND REPORT DATED 1.10.2014, THE ASSESSING OFFICE R ACCEPTED THE MISTAKE AND ADMITTED THE QUANTITY OF FINISHED GOODS AT 411.784 MTS CORRESPONDING VALUE OF CLOSING STOCK WAS ` 491.05 LAKHS. IN RESPONSE TO THE REMAND REPORT FILED BY THE ASSESSIN G OFFICER, THE ASSESSEE HAS ALSO FILED A LETTER DATED 24.09.2014 W HICH WAS REPRODUCED BY THE CIT(APPEALS) AT PAGE 8 OF HIS ORD ER. IN THE LETTER, THE ASSESSEE INVITED THE ATTENTION OF THE CIT(APPEA LS) AND SUBMITTED THAT THE CLOSING STOCK OF FINISHED GOODS WAS ARRIVED ONLY AT 411.784 MTS INSTEAD OF 432.80 MTS AND THE DIFFER ENCE WAS ONLY 21.920 MTS. THE VALUE OF CLOSING STOCK OF FINISHED GOODS ON PHYSICAL VERIFICATION WAS ` 500.69 LAKHS INSTEAD OF ` 491.05 LAKHS AS PER PRODUCTION REPORT. ACCORDINGLY, THE ASSESSEE OFFERED ONLY THE 17 I.T.A. NOS.3, 933 & 847/MDS/16 EXCESS VALUE OF ` 9.64 LAKHS IN THE BOOKS OF ACCOUNT AND NO VALUE HAS BEEN SUPPRESSED. BASED ON THIS REPLY OF THE AS SESSEE, THE CIT(APPEALS) RIGHTLY FOUND THAT THE CLOSING STOCK O F FINISHED GOODS WAS ONLY 411.78 MTS, THE VALUE OF WHICH IS ` 491.05 LAKHS. BY TAKING THIS INTO CONSIDERATION, THE CIT(APPEALS) FO UND THAT THE ASSESSEE HAS OFFERED A HIGHER VALUE, THEREFORE, ACC ORDING TO THE LD. COUNSEL, THE CIT(APPEALS) FOUND THAT NO ADDITION WA S WARRANTED. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE CIT(APPEALS) FOUND THAT THE ASSESSING OFFICER IN TH E REMAND REPORT DATED 1.10.2014 ACCEPTED THE REVISED CALCULATION OF THE ASSESSEE AFTER CORRECTING THE MISTAKE AND ADMITTED THE CLOSI NG STOCK OF FINISHED GOODS AT 411.78 MTS AND VALUED THE SAME AT ` 491.05 LAKHS. SUBSEQUENTLY, AFTER REPRODUCING THE LETTER OF THE ASSESSEE DATED 24.09.2014, THE CIT(APPEALS) FOUND THAT THE A SSESSING OFFICER SUBMITTED IN THE REMAND REPORT THE DIFFEREN CE WAS ONLY 21.92 TONNES. WE HAVE CAREFULLY GONE THROUGH THE REMAND REPORT DATED 01.10.2014. THE ASSESSING OFFICER HAS NOT SAID ANYW HERE IN THE REMAND REPORT THAT THE DIFFERENCE WAS REDUCED BY 21 .92 TONNES AS OBSERVED BY THE CIT(APPEALS). IN FACT, IT WAS STAT ED SO IN THE LETTER 18 I.T.A. NOS.3, 933 & 847/MDS/16 DATED 24.09.2014 WHICH WAS REPRODUCED BY THE CIT(AP PEALS). THEREFORE, THERE WAS A CONFUSION WHETHER THE ASSESS ING OFFICER HIMSELF ADMITTED OR THE CIT(APPEALS) CAME TO A CONC LUSION THAT THE DIFFERENCE WAS REDUCED BY 21.92 TONNES. FURTHER, T HE REMAND REPORT, A COPY OF WHICH IS AVAILABLE ON RECORD, DOE S NOT SAY ANYTHING REGARDING THE VALUATION OF CLOSING STOCK. THEREFOR E, IT IS NOT KNOWN FROM WHERE THE CIT(APPEALS) FOUND THAT THE ASSESSIN G OFFICER ARRIVED THE CLOSING STOCK AT ` 491.05 LAKHS AS AGAINST THE OMISSION MADE BY THE ASSESSEE AT ` 500.54 LAKHS. SINCE THERE WAS NO REFERENCE ABOUT THE FIGURES EITHER THE QUANTITY OR VALUATION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE OBSE RVATION MADE BY THE CIT(APPEALS) IN THE ORDER IS NOT SUPPORTED BY T HE REMAND REPORT FILED BY THE ASSESSING OFFICER. THEREFORE, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS NOT CO NSIDERED THE REPORT IN CORRECT PERSPECTIVE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE CIT(APPEALS) AFTER CONSIDERING THE REMAND REPORT FI LED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDER OF THE C IT(APPEALS) IS SET ASIDE AND THE ENTIRE ISSUE OF VALUATION OF FINISHED GOODS IS REMITTED BACK TO THE FILE OF THE CIT(APPEALS). THE CIT(APPE ALS) SHALL RE- EXAMINE THE ISSUE AFTER CONSIDERING THE REMAND REPO RT FILED BY THE 19 I.T.A. NOS.3, 933 & 847/MDS/16 ASSESSING OFFICER AND THEREAFTER DECIDE THE ISSUE I N ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 21. THE NEXT ISSUE ARISES FOR CONSIDERATION IS ADDI TION OF ` 3,43,20,013/- ON ACCOUNT OF EXCESS CLAIM OF CONSUMP TION OF RAW MATERIALS. 22. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICER FOUND THAT THE MELTING CHARGE BOOK IN WHICH THE RAW MATERIAL INCLUDING FOUNDRY RE TURNS TAKEN FROM THE STORES LEDGER FOR CONSUMPTION WERE ENTERED. TH E ASSESSING OFFICER, ACCORDING TO THE LD. D.R., HAS NOT CONSIDE RED THE SUPPRESSION OF CLOSING STOCK TO THE EXTENT OF 158.2 52 MTS AS ACCEPTED BY THE ASSESSEE ITSELF. THEREFORE, ATLEAS T THE CIT(APPEALS) HAS TO SUSTAIN THE ADDITION TO THE EXT ENT OF ` 1,60,25,100/-. SINCE THE OMISSION OF THE WAS NOT C ONSIDERED, ACCORDING TO THE LD. D.R., THE ADDITION TO THE EXTE NT OF ` 1,60,25,100/- HAS TO BE SUSTAINED. 23. ON THE CONTRARY, SHRI K. RAVI, THE LD.COUNSEL F OR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER FOUN D THAT THE MATERIAL TAKEN FOR CONSUMPTION DURING THE YEAR UNDE R CONSIDERATION 20 I.T.A. NOS.3, 933 & 847/MDS/16 AS PER THE STORE REGISTER DID NOT TALLY WITH MATERI AL CONSUMPTION AS PER ENTRIES IN THE MELTING CHARGE BOOK. THE DIFFER ENCE OF 314.013 MTS WAS ADDED AS EXCESS CLAIM OF RAW MATERIAL ON TH E ASSUMPTION THAT THE ASSESSEE DID NOT ACTUALLY CONSUME THE MATE RIAL DRAWN FROM THE STORES. THE ASSESSEE EXPLAINED BEFORE THE ASSE SSING OFFICER AND THE CIT(APPEALS) THAT THE ENTRIES RELATING TO F OUNDRY RETURN WAS NOT ENTERED IN THE MELTING CHARGE SHEET BOOK EVEN T HOUGH THE SAME WAS USED FOR PRODUCTION. THE ASSESSEE ALSO CLAIMED BEFORE THE ASSESSING OFFICER AND THE CIT(APPEALS) THAT THE MEL TING CHARGE SHEET BOOK WAS MAINTAINED BY THE ASSESSEE ONLY TO A NALYSE THE CHEMICAL COMPOSITION OF FINAL PRODUCT AND NOT AS ST OCK REGISTER. 24. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT MELTING CHARGE BOOK SHOWS THAT THE CONSUMPTION OF M ATERIAL HAS TO BE ENTERED BY TECHNICAL PERSON AND THEREFORE, THE M AINTENANCE OF MELTING CHARGE BOOK IS ONLY TO STUDY THE CHEMICAL C OMPOSITION OF MATERIAL. THIS CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE CIT(APPEALS). MOREOVER, ACCORDING TO THE LD. COUNS EL, THE CIT(APPEALS) ALSO FOUND THAT THE ASSESSEE HAS DEMON STRATED BEFORE THE ASSESSING OFFICER IN THE COURSE OF REMAN D PROCEEDING THAT ENTRIES MADE IN THE MELTING CHARGE SHEET BOOK IS NOT CORRECT 21 I.T.A. NOS.3, 933 & 847/MDS/16 AND COMPLETE ESPECIALLY IN RESPECT OF FOUNDRY RETUR NS. ACCORDING TO THE LD. COUNSEL, WHEN THERE WAS LESS CONSUMPTION IN MELTING CHARGE BOOK COMPARED TO STORES LEDGER, THE ASSESSIN G OFFICER FOUND THAT THE ASSESSEE DID NOT ACTUALLY CONSUMED THE MAT ERIAL BUT WOULD HAVE SOLD IN THE OPEN MARKET. ACCORDING TO THE LD. COUNSEL, WHEN THE ASSESSING OFFICER FOUND THAT ACTUAL CONSUMPTION AS PER MELTING CHARGE BOOK IS HIGHER WHEN COMPARED TO STORES LEDGE R, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE ASS ESSEE HAS SUPPRESSED THE CLOSING STOCK IN THE BEGINNING OF TH E YEAR AND REOPENED THE ASSESSMENT FOR EARLIER ASSESSMENT YEAR . ACCORDING TO THE LD. COUNSEL, WHEN THE MELTING CHARGE BOOK IS ADMITTEDLY INCOMPLETE AND INCORRECT WHICH CANNOT BE RELIED UPO N FOR THE PURPOSE OF MAKING ADDITION. THE CIT(APPEALS) ALSO FOUND THAT THE ASSESSING OFFICER FOUND THAT THE MELTING SHEET WAS INCOMPLETE. 25. THE LD.COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT THE CONSUMPTION AS PER MELTING CHARGE BOOK IS HIGHER IN RESPECT OF UNITS 1 AND 3. THEREFORE, THERE CANNOT BE ANY ADDITION T OWARDS EXCESS CONSUMPTION IN RESPECT OF SCRAP MATERIALS IN UNITS 1 AND 3. THERE WAS SHORTAGE OF CONSUMPTION TO THE EXTENT OF 86.748 MTS IN RESPECT OF UNIT 2. THE LD.COUNSEL SUBMITTED THAT THERE ARE CERTAIN INSTANCES 22 I.T.A. NOS.3, 933 & 847/MDS/16 IN WHICH THE RAW MATERIALS WERE NOT ENTERED IN THE BOOKS. THE IMPOUNDED MATERIAL SHOWS THAT SCRAP MATERIAL CONSUM ED WAS 6900 KGS AS PER STORES LEDGER, WHEREAS THE ENTRY WAS MAD E ONLY FOR 6200 KGS IN THE MELTING CHARGE BOOK. THIS IS ONLY BECAUSE OF RAW MATERIALS CONSUMED WERE NOT ENTERED IN THE MELTING CHARGE BOOK. THEREFORE, IT CANNOT BE SAID THAT THERE WAS ANY EXC ESS CONSUMPTION OF SCRAP MATERIAL. COMING TO THE FOUNDRY RETURN, T HE LD.COUNSEL SUBMITTED THAT THE CONSUMPTION WAS LESS BY 71.984 M TS. THE OVERALL DIFFERENCE, INCLUDING SCRAP MATERIAL AND FO UNDRY RETURNS, HAVE BEEN WORKED OUT BY THE ASSESSEE. AS PER THE W ORK SHEET SUBMITTED BY THE ASSESSEE, THE SHORTAGE WAS 0.491% IN RESPECT OF UNIT 1. IN UNIT 3, THE MELTING CHARGE BOOK IS HIGH ER BY 1.23%. THEREFORE, THE DIFFERENCE IS AT 3.02%. THIS WAS DU E TO OMISSION TO ENTER SCRAP MATERIAL AND FOUNDRY RETURNS IN UNIT 2. REFERRING TO THE ORDER OF THE CIT(APPEALS), THE LD.COUNSEL SUBMITTED THAT THE ASSESSING OFFICER IN THE REMAND REPORT DATED 01.10. 2014 ACCEPTED THE MELTING CHARGE BOOK AS INCOMPLETE AND THE STORE ENTRIES REGARDING FOUNDRY WERE ONLY ON ESTIMATE BASIS. IN VIEW OF THE ABOVE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADD ITION OF ` 3,43,20,013/-. 23 I.T.A. NOS.3, 933 & 847/MDS/16 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSING OFFICER MADE ADDITION OF ` 3,43,20,013/-. THE REVENUE CONTENDED BEFORE THE TRIBUNAL THAT THE ASSESSEE ITS ELF ACCEPTED THE ADDITION TO THE EXTENT OF ` 1,60,25,100/-, THEREFORE, TO THAT EXTENT THE ADDITION HAS TO BE SUSTAINED. FROM THE ORDER OF TH E CIT(APPEALS), IT APPEARS THAT THERE WAS NO DISCUSSION ABOUT THE OMIS SION MADE BY THE ASSESSEE TO THE EXTENT OF 158.252 MTS OF CONSUM PTION OF RAW MATERIAL THE VALUE OF WHICH COMES TO ` 1,60,25,100/-. THE CIT(APPEALS) BY REFERRING TO REMAND REPORT DATED 1. 10.2004, FOUND THAT THE ASSESSING OFFICER HAS NOT DISPUTED THAT TH E MELTING CHARGE BOOK WAS INCOMPLETE. IN FACT, THE ASSESSING OFFICE R IN THE REMAND REPORT HAS OBSERVED AS FOLLOWS:- THE ASSESSING OFFICER HAS COMPARED THE STORES LEDGER AND STORES ISSUE SLIP WITH THE DAILY MATERIA L CHARGE SHEET AND THE DIFFERENCE BOTH NEGATIVE AND POSITIVE WERE CONSIDERED FOR ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. THE REASON BEING STATED AS THAT EXCESSIVE CONSUMPTIO N REFLECTED IN THE STORES LEDGER IS TO DISALLOW EQUIV ALENT AMOUNT OF SUMS FROM THE HEAD PURCHASE AS ASSESSEE H AS TAKEN OUT FROM THE STOCK AN EQUIVALENT SUMS OF MONI ES. WHEREAS THE NEGATIVE STOCK OF MATERIAL IS EVIDENCE BY ITSELF WHICH SPEAKS ON ITS OWN THAT THE CORRESPONDING MATE RIAL WAS SUPPRESSED AS A CLOSING STOCK IN THE PREVIOUS STOCK . AS FAR AS THE STORES LEDGER ISSUE SLIP AND THE MEL TING CHARGE SHEET FIGURES ARE CONCERNED, BOTH ARE BASED ON THE 24 I.T.A. NOS.3, 933 & 847/MDS/16 ACTUAL WEIGHING AND THERE IS NO CALCULATION INVOLVE D. SO NATURALLY THERE IS NO SCOPE FOR THE DIFFERENCE. TH E MAN CONTENTION OF THE ASSESSEE IS THAT THE MELTING CHAR GE SHEET IS A TECHNICAL DOCUMENT TO HAVE A CONTROL OVER THE CHEMICAL COMPOSITION OF THE PRODUCT AND IT IS NOT SCRUPULOUS LY PREPARED AND HENCE IT IS INCOMPLETE. THEREFORE, HE ASSESSEE CLAIMS THAT THE INCOMPLETE DOCUMENT IS COM PARED WITH THE ISSUE SLIPS OF THE STORES LEDGER WHICH IS A COMPLETE DOCUMENT. IT IS PERTINENT TO NOTE THAT BOTH THESE DOCUMENTS ARE DEVOID OF ANY CALCULATION FIGURES OR ADOPTION OF TH E ESTABLISHED WEIGHT. THE ASSESSEE CLAIMED THAT THER E IS DIFFERENT PURPOSE OF MAINTENANCE OF BOTH THE DOCUME NTS. THE ASSESSEE DID NOT GIVE ADEQUATE REASON FOR THE A LLEGED INCOMPLETE OR SKIPPING OF THE ENTRIES IN THE MELTIN G CHARGE SHEET. 27. FROM THE ABOVE REMAND REPORT, IT APPEARS THAT T HE ASSESSING OFFICER COMPARED THE STORES LEDGER AND STORES ISSUE SLIP WITH THE DAILY MATERIAL CHARGE SHEET AND THE DIFFERENCE BOTH NEGATIVE AND POSITIVE WERE CONSIDERED FOR ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO OBSERVED IN THE REMAND REPORT THAT THE STORES LEDGER ISSUE SLIP AND MELTIN G CHARGE SHEET FIGURES ARE BASED UPON THE ACTUAL WEIGHING AND THER E IS NO CALCULATION INVOLVED. THEREFORE, THERE WAS NO SCOP E FOR ANY DIFFERENCE. REFERRING TO THE CLAIM OF THE ASSESSEE THAT MELTING CHARGE BOOK WAS NOT ACCURATE AND IT WAS INCOMPLETE, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE COULD NOT GIVE ANY ADEQUATE REASON FOR SO-CALLED INCOMPLETE OR SKIPPING OF THE ENTRIES IN THE MELTING 25 I.T.A. NOS.3, 933 & 847/MDS/16 CHARGE SHEET. NOWHERE IN THE ALLEGED REPORT, THE A SSESSING OFFICER ADMITTED THAT THE MELTING CHARGE BOOK WAS INCOMPLET E. THE ASSESSING OFFICER SIMPLY REFERRED THE CLAIM OF THE ASSESSEE THAT IT WAS INCOMPLETE AND OBSERVED THAT THERE WAS NO ADEQU ATE REASON OFFERED BY THE ASSESSEE FOR THE ALLEGED INCOMPLETE MELTING CHARGE BOOK. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERE D OPINION THAT THE CIT(APPEALS) HAS NOT CONSIDERED THE REMAND REPORT F ILED BY THE ASSESSING OFFICER IN THE CORRECT PERSPECTIVE. HE P ROCEEDED ON THE PRESUMPTION THAT THE ASSESSING OFFICER HAS ACCEPTED THAT THE MELTING CHARGE SHEET WAS INCOMPLETE AND MANY ENTRIE S AS SKIPPED. NOWHERE IN THE REPORT, THE ASSESSING OFFICER HAS AC CEPTED SO. THE ASSESSING OFFICER HAS SIMPLY RECORDED THE CLAIM OF THE ASSESSEE AND FOUND THAT THE ASSESSEE COULD NOT GIVE ADEQUATE REASON FOR THE ALLEGED INCOMPLETE OR SKIPPING OF ENTRIES IN THE ME LTING CHARGE BOOK. THIS DOES NOT ANYWAY MEAN THAT THE ASSESSING OFFICE R ACCEPTED THAT MELTING CHARGE BOOK IS INCOMPLETE. 28. THE VERY FACT THAT THE ASSESSING OFFICER OBSERV ED THAT THE ASSESSEE DID NOT GIVE ADEQUATE REASON FOR INCOMPLET E OR SKIPPING OF ENTRIES IN MELTING CHARGE BOOK SHOWS THAT THE ASSES SING OFFICER HAS NOT ACCEPTED THAT THE MELTING CHARGE BOOK WAS INCOM PLETE. 26 I.T.A. NOS.3, 933 & 847/MDS/16 THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE REMAND REPORT OF THE ASSESSING OFFICER NEEDS TO BE APPRECI ATED IN RIGHT PERSPECTIVE SO AS TO COME TO A RIGHT CONCLUSION. S INCE THE CIT(APPEALS) OBSERVED THAT THE ASSESSING OFFICER AC CEPTED THE MELTING CHARGE BOOK WAS INCOMPLETE AND SOME OF THE ENTRIES SKIPPED, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED. ACCORDINGLY, THE ORDER O F THE CIT(APPEALS) IS SET ASIDE AND THE ISSUE OF MELTING CHARGE BOOK IS REMITTED BACK TO THE FILE OF THE CIT(APPEALS). THE CIT(APPEALS) SHALL RE-EXAMINE THE ISSUE AFRESH, AFTER CONSIDERIN G THE REMAND REPORT FILED BY THE ASSESSING OFFICER AND ALSO THE ADMISSION MADE BY THE ASSESSEE AND THEREAFTER DECIDE THE SAME IN A CCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE A SSESSEE. 29. THE NEXT ISSUE ARISES FOR CONSIDERATION IS ADDI TION OF ` 3,89,66,308/- TOWARDS SHORT VALUATION OF CLOSING ST OCK OF RAW MATERIALS. 30. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R FOUND THAT THE ASSESSEE TOOK PHYSICAL INVENTORY OF RAW MATERIAL AT THE END OF THE YEAR BASED UPON THE CLOSING STOCK VALUE AS ADMITTED IN THE PROFIT & 27 I.T.A. NOS.3, 933 & 847/MDS/16 LOSS ACCOUNT. THERE CANNOT BE ANY VARIATION BETWEE N THE STORES LEDGER AND PHYSICAL STOCK OF RAW MATERIALS. THE FI GURES ADMITTED IN THE STORES LEDGER WERE FINAL, THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER FOUND THAT THE ASSESSEE UNDERVALU ED THE CLOSING STOCK IN THE NAME OF PHYSICAL VERIFICATION. THE CL OSING STOCK OF RAW MATERIALS INCLUDING FOUNDRY RETURNS, AS PER THE STO RES LEDGER, WAS 537.42 MTS WHICH WAS VALUED AT ` 13,11,83,521/-. HOWEVER, THE ASSESSEE ON THE BASIS OF PHYSICAL VERIFICATION HAS ADMITTED ONLY 339.65 MTS WHICH WAS VALUED AT ` 9,22,17,213/-. THE DIFFERENCE BETWEEN TWO VALUATIONS WAS TAKEN AT ` 3,89,66,308/- AND THE ASSESSING OFFICER MADE ADDITION TOWARDS UNDER VALUA TION OF CLOSING STOCK. REFERRING TO THE OBSERVATION MADE BY THE CI T(APPEALS) THAT THE ASSESSEE CLAIMED THAT THE FOUNDRY RETURNS WERE ENTERED ON ESTIMATE BASIS IN THE STORES LEDGER, THEREFORE, THE SAME COULD NOT BE TAKEN AS CORRECT, THE LD. D.R. SUBMITTED THAT NOWHE RE IN THE REMAND REPORT THE ASSESSING OFFICER RECORDED THAT THE ASSE SSEE WAS CLAIMING THE FOUNDRY RETURNS WERE ENTERED ON ESTIMA TE BASIS. ACCORDING TO THE LD. D.R., WHAT WAS RECORDED BY THE ASSESSING OFFICER IN THE REMAND REPORT IS THAT IT IS NOT PHYS ICALLY POSSIBLE FOR THE ASSESSEE TO WEIGH THE HOT AND HEAVY FOUNDRY RET URNS TO ADOPT THE FIGURES IN THE STOCK REGISTER. 28 I.T.A. NOS.3, 933 & 847/MDS/16 31. THE ASSESSING OFFICER, ACCORDING TO THE LD. D.R ., FURTHER OBSERVED IN THE REMAND REPORT THAT THE FOUNDRY RETU RNS WERE TAKEN INTO RECORD AND CALCULATED VALUE, THEREFORE, IT WAS ONLY APPROXIMATE FIGURES. THEREFORE, THE CLOSING STOCK AS PER THE STOCK LEDGER WILL BE DIFFERENT FROM PHYSICAL VERIFICATION. THE CIT(APPE ALS) FOUND THAT THE TOTAL VARIATION WAS 197.767 MTS AND THE PERCENTAGE OF DIFFERENCE WORKS OUT TO 1.16%. THIS IS WITHIN THE PERMISSIBLE LIMIT. ACCORDING TO THE LD. D.R., THERE WAS A DIFFERENCE OF FOUNDRY RETURNS BETWEEN THE STORES LEDGER AND PHYSICAL VERIFICATION AS ACCE PTED BY THE ASSESSEE ITSELF. WHEN THE ASSESSEE ACCEPTED THE DI FFERENCE, THE CIT(APPEALS) OUGHT NOT TO HAVE DELETED THE ADDITION . ACCORDING TO THE LD. D.R., THE CIT(APPEALS) IGNORED THE ADMISSIO N MADE BY THE ASSESSEE. 32. ON THE CONTRARY, SHRI K. RAVI, THE LD.COUNSEL F OR THE ASSESSEE, SUBMITTED THAT THE DIFFERENCE IN CLOSING STOCK OF RAW MATERIALS AS PER THE STORES LEDGER AND PHYSICAL VER IFICATION WAS FOUND APPROXIMATELY WHICH IS ADMITTED BY THE ASSESS ING OFFICER IN THE REMAND REPORT. DUE TO SOME PRACTICAL DIFFICULT IES, THERE ARE SOME VARIATIONS IN THE CLOSING STOCK FIGURES OF STO RES LEDGER AND PHYSICAL VERIFICATION. THEREFORE, THE ASSESSING OF FICER HIMSELF 29 I.T.A. NOS.3, 933 & 847/MDS/16 ADMITTED THAT THERE SHOULD BE SOME VARIATIONS. THE CIT(APPEALS), ACCORDING TO THE LD. COUNSEL, AFTER CONSIDERING THE REMAND REPORT FILED BY THE ASSESSING OFFICER, FOUND THAT THE ASSE SSING OFFICER HIMSELF ADMITTED THAT THE ASSESSEE ITSELF ADMITTED THAT THE FOUNDRY RETURNS WERE RECORDED APPROXIMATELY DUE TO PRACTICA L DIFFICULTIES AND VARIATION WAS ADJUSTED AT THE YEAR END BY TAKING TH E PHYSICAL STOCK. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(AP PEALS) BY TAKING THE WORKING MADE BY THE ASSESSING OFFICER, FOUND TH AT OVERALL SHORTAGE WORKS OUT TO 1.16% AND THIS IS WITHIN PERM ISSIBLE LIMIT. HENCE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADD ITION. 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER IN THE REMAND REPORT FOUND THAT FOUNDRY RET URNS WERE TAKEN IN THE RECORD ON AN APPROXIMATE FIGURE. THE ASSESSING OFFICER HAS ALSO FOUND THAT IT IS NOT PRACTICALLY POSSIBLE FOR THE ASSESSEE TO WEIGH HOT AND HEAVY FOUNDRY RETURNS TO ADOPT THE FI GURE IN THE STOCK REGISTER. BY TAKING INTO CONSIDERATION OF THE PRAC TICAL DIFFICULTIES FACED BY THE ASSESSEE, THE ASSESSING OFFICER HIMSEL F FOUND THAT PHYSICAL VERIFICATION ITSELF INVOLVES APPROXIMATION . HOWEVER, THE ASSESSING OFFICER FOUND THAT EVEN AT THIS SITUATION , THERE ARE SOME 30 I.T.A. NOS.3, 933 & 847/MDS/16 INCONSISTENCIES IN THE POLICIES AND THE PRACTICES A DOPTED BY THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT THE CLO SING BALANCE NEVER TALLIED WITH PHYSICAL STOCK. THE ASSESSEE HA S ALSO STARTED PRACTICE OF MAKING TRANSFER ENTRY ON ACCOUNT OF DIF FERENCE IN THE STOCK LEDGER AND PHYSICAL STOCK. THE ASSESSING OFF ICER FURTHER FOUND THAT THE PHYSICAL VERIFICATION OF RAW MATERIA L AND FINISHED STOCK WAS NOT MADE SCRUPULOUSLY DURING THE YEAR END. THE ASSESSING OFFICER HAS ALSO FOUND THAT THE PHYSICAL VERIFICATI ON FOR THE YEAR 31.03.2014 WAS NOT COMPLETED AND THE LAST VERIFICAT ION WAS ONLY IN THE MONTH OF NOVEMBER, 2013. THE ASSESSEE ALSO CLA IMED BEFORE THE ASSESSING OFFICER THAT THE FOUNDRY RETURNS ARE ENTERED IN ROUND FIGURES FOR CONSUMPTION WITHOUT RECORDING THE ACTUA L WEIGHT. THIS MAY ALSO BE ONE OF THE FACTORS FOR VARIATION IN THE STOCK REGISTER. 34. ULTIMATELY, THE CIT(APPEALS) ACCEPTED THAT THE OVERALL SHORTAGE IS ONLY 197.767 MTS WITHOUT CONSIDERING TH E ADMISSION MADE BY THE ASSESSEE UNDER SECTION 131 OF THE ACT D URING SURVEY OPERATION. THE CIT(APPEALS) HAS ALSO NOT CONSIDERE D MATERIAL FOUND DURING THE COURSE OF SURVEY OPERATION. WHEN THE ASSESSEE- COMPANY ACCEPTED THE DIFFERENCE IN THE CLOSING STOC K, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) OUGHT TO HAVE 31 I.T.A. NOS.3, 933 & 847/MDS/16 TAKEN INTO CONSIDERATION THE MATERIAL FOUND DURING THE COURSE OF SURVEY OPERATION AND THE EXPLANATION / ADMISSION MA DE BY THE ASSESSEE. SINCE THE CIT(APPEALS) HAS NOT CONSIDERE D THE SAME, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED. ACCORDINGLY, THE ORDER OF THE CIT(AP PEALS) IS SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE CIT(APPEALS). THE CIT(APPEALS) SHALL RECONSIDER TH E ISSUE AFRESH IN THE LIGHT OF THE MATERIAL FOUND DURING THE COURS E OF SURVEY OPERATION AND ADMISSION/ EXPLANATION OFFERED BY THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 35. THE NEXT ISSUE ARISES FOR CONSIDERATION IS ADDI TION OF ` 56,38,378/- MADE ON ACCOUNT OF ADJUSTMENT TOWARDS V ALUATION OF FINISHED GOODS AS PER SECTION 145A OF THE ACT. 36. WE HAVE HEARD BOTH THE LD. DEPARTMENTAL REPRESE NTATIVE AND THE LD.COUNSEL FOR THE ASSESSEE. SINCE THE MAI N ISSUE WITH REGARD TO ADDITION ON ACCOUNT OF VALUATION OF FINIS HED GOODS AND RAW MATERIAL AND EXCESS CLAIM OF CONSUMPTION OF RAW MAT ERIAL, WAS REMITTED BACK TO THE FILE OF THE CIT(APPEALS), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THIS ISSUE HAS ALSO TO BE R ECONSIDERED BY 32 I.T.A. NOS.3, 933 & 847/MDS/16 THE CIT(APPEALS). ACCORDINGLY, THE ORDER OF THE CI T(APPEALS) IS SET ASIDE AND THE ISSUE OF ADDITION OF ` 56,38,378/- IS ALSO REMITTED BACK TO THE FILE OF THE CIT(APPEALS). 37. NOW COMING TO ASSESSMENT YEAR 2008-09 IN I.T.A. NO.933/MDS/2016, THE ISSUE ARISES FOR CONSIDERATION IS ADDITION OF ` 60,66,929/- MADE ON ACCOUNT OF EXCESS CLAIM OF CONS UMPTION OF RAW MATERIALS. 38. THIS ISSUE WAS DISCUSSED FOR THE ASSESSMENT YEA R 2007-08 AND THE MATTER WAS REMITTED BACK TO THE FILE OF THE CIT(APPEALS). IN THE LIGHT OF THE OBSERVATION MADE BY THIS TRIBUNAL FOR ASSESSMENT YEAR 2007-08, THIS TRIBUNAL IS OF THE CONSIDERED OP INION THAT FOR THE ASSESSMENT YEAR 2008-09 ALSO THE MATTER REQUIRES TO BE REMITTED BACK TO THE FILE OF THE CIT(APPEALS) FOR RECONSIDER ATION. ACCORDINGLY, THE ORDER OF THE CIT(APPEALS) IS SET A SIDE AND THE ADDITION OF ` 60,66,929/- IS REMITTED BACK TO THE FILE OF THE CIT(APPEALS). THE CIT(APPEALS) SHALL RECONSIDER TH E MATTER AFRESH IN ACCORDANCE WITH LAW AND DECIDE THE SAME AS DIREC TED BY THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08. 33 I.T.A. NOS.3, 933 & 847/MDS/16 39. IN THE RESULT, THE REVENUES APPEAL FOR ASSESSM ENT YEAR 2006-07 IN I.T.A. NO.3/MDS/2016 IS DISMISSED. HOWE VER, I.T.A. NO.933/MDS/2016 AND I.T.A. NO.847/MDS/2016 ARE ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 20 TH APRIL, 2017 AT CHENNAI. SD/- SD/- ($% .'(') ) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GANESAN) + '/ ACCOUNTANT MEMBER ! ' /JUDICIAL MEMBER /CHENNAI, :# /DATED, THE 20 TH APRIL, 2017. KRI. 4 2!6 ;.6 /COPY TO: 1. 01 /APPELLANT 2. 2301 /RESPONDENT 3. <6 () /CIT(A)-1, MADURAI 4. PRINCIPAL CIT-1, MADURAI 5. = 2!6! /DR 6. >) ? /GF.