Jayashri Shailesh Maniyar, Jalgaon V. Income-tax Officer, Ratnagiri

ITA 941/PUN/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1896 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Unexplained investment
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , A M . / ITA NO. 94 1 /PN/201 3 / ASSESSMENT YEAR : 20 0 8 - 0 9 JAYASHRI SHAILESH MANIYAR, INDRAPRASTHA, MANIYAR ESTATE, PALDHI, JALGAON 425103 . / APPELLANT PAN: A CJPJ6689H VS. THE INCOME TAX OFFICER , WARD 2( 3 ) , JALGA ON . / RESPONDENT / APPELLANT BY : NONE / RESPONDENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 07 . 0 4 .201 6 / DATE OF PRONOUNCEMENT: 27 . 0 4 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - II , NASHIK , DATED 01 . 03 .20 1 3 RELATING TO ASSESSMENT YEAR 20 0 8 - 0 9 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1) ON FACTS AND IN CIRCUMSTANCES OF CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT (A)] ERRED IN SUSTAINING & FURTHER ENHANCING THE ADDITION MADE BY THE LEARNED ASSESS ING OFFICER (AO), ON A/C OF ALLEGED UNRECORDED PRODUCTION & SALE OF MATS AND INVESTMENT IN RAW MATERIAL MERELY BY RELYING ON THE CASE OF ANOTHER MAT MANUFACTURER DECIDED BY HIM EARLIER, WITHOUT APPRECIATING FACTS OF THE CASE, SUBMISSIONS AND DOCUMENTS PLAC ED ON RECORD. ITA NO. 941 /PN/20 1 3 SMT. JAYASHRI SHAILESH MANIYARHRI 2 2) THE LEARNED AO ERRED IN ARRIVING AT THE ALLEGED UNRECORDED PRODUCTION & SALES OF MATS BY APPLYING THE UNREALISTIC STATISTICAL FORMULA UNIFORMLY TO THE PRODUCTION UNIT, BASED ON ELECTRICITY CONSUMPTION, WITHOUT TAKING COGNIZANCE OF OTHER FACTORS, PLAYING A VITAL ROLE IN ANY PRODUCTION PROCESS/UNIT, AND THAT ARE SUBJECT TO VARIATION DUE TO SOME INHERENT AND SOME EXTRANEOUS FACTORS AS WELL. 3) THE LEARNED AO ERRED IN DRAWING THE INFERENCE AND CONCLUSIONS ABOUT SUPPRESSED PRODUCTION OF T HE APPELLANT WITHOUT DRAWING SUPPORT FROM/GETTING SUBSTANTIATED BY ANY OTHER CORROBORATIVE EVIDENCE. 4) THE LEARNED CIT (A) FAILED TO APPRECIATE THE ADDITIONAL COMPARABLE CASES ON RECORD, WHEREIN THE ELECTRICITY CONSUMPTION RATE PER MAT IS MUCH HIGHER T HAN THE RATE ADOPTED BY THE AO. 5) SINCE THE VERY BASIS TO ARRIVE AT UNRECORDED SALES AND CONSEQUENTLY GROSS PROFIT THEREON IS NOT JUSTIFIED, THE ADDITION ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN RAW MATERIAL FOR THE ALLEGED UNRECORDED PRODUCTION IS NOT CALLED FOR. 6) WITHOUT PREJUDICE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN TAKING GROSS PROFIT RATE @ 45% FOR ALLEGED UNRECORDED SALES INSTEAD OF 42.29% DECLARED BY THE APPELLANT, ON AD HOC BASIS. 3. DESPITE SERVICE OF NOTICE, THE ASSESSEE FAILS TO APPEAR ON THE APPOINTED DATE S OF HEARING ON 30.12.2015 & 07.04.2016 AND ALSO NO APPLICATION FOR ADJOURNMENT WAS FILED . HENCE, WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 4. THE ISSUE I N THE PRESENT APPEAL IS AGAINST THE ADDITION MADE ON ACCOUNT OF UNRECORDED PRODUCTION AND SALE OF MATS AND INVESTMENT IN RAW MATERIAL RELYING ON THE CONSUMPTION OF ELECTRICITY AND ALSO ON THE CASE OF ANOTHER MAT MANUFACTURER. 5. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE INDIVIDUAL WAS ENGAGED IN THE MANUFACTURE OF PLASTIC MATS UNDER THE NAME OF LAXMI VENKATSH INDUSTRIES . AS PER THE STATEMENT OF FACTS OF THE ASSESSEE , SHE HAD USED REPROCESSED PLASTIC GRANULES, ROAD WASTE, PLASTIC TAPE AN D YARN AS MAIN INGREDI E NTS FOR THE MANUFACTURE OF PLASTIC MATS WITH THE AID OF ELECTRICITY. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DECLARED INCOME AT RS. 67,940/ - ITA NO. 941 /PN/20 1 3 SMT. JAYASHRI SHAILESH MANIYARHRI 3 THE TOTAL TURNOVER OF THE ASSESSEE WAS RS.18,07,052/ - , ON WHICH HE HAD DECLARED GROSS PROFIT OF RS. 7,64,273/ - . THE ASSESSING OFFICER ON VERIFICATION OF TRADING ACCOUNT WAS OF THE VIEW THAT ELECTRICITY CHARGES OF RS. 4,25,543/ - PAID BY THE ASSESSEE , WAS ON HIGHER SIDE WITH REFERENCE TO SALES OF RS. 18,07,052/ - . FURTHER, SINCE THERE WER E 12 LOOMS OWNED BY THE ASSESSEE , WHICH RAISED A DOUBT THAT THE ASSESSEE HAD INDULGED IN UNACCOUNTED PRODUCTION. THE ASSESSEE WAS ASKED TO PRODUCE COMPLETE DETAILS OF PRODUCTION IN THIS REGARD. THE ASSESSEE IN RESPONSE, FURNISHED QUANTITATIVE DETAILS OF FINISHED PRODUCTS AND ALSO EXPLAINED THE MANUFACTURING PROCESS UTILIZING VARIOUS RAW MATERIALS. THE ASSESSEE ADMITTED THAT HE WAS NOT MAINTAINING DAY - TO - DAY PRODUCTION RECORDS. THE DETAILED EXPLANATION FILED BY THE ASSESSEE WITH REGARD TO PRODUCTION, SAL ES AND INVENTORY MAINTAINED BY IT, IS REPRODUCED AT PAGES 2 TO 4 OF THE ASSESSMENT ORDER. IN ORDER TO VERIFY THE PRODUCTION OF ASSESSEE, INFORMATION WAS CALLED FOR UNDER SECTION 133(6) OF THE ACT FROM THE OTHER MANUFACTURERS IN THE SAME LINE OF BUSINESS A BOUT THE CONSUMPTION OF ELECTRICITY BY THE ASSESSING OFFICER. THE ASSESSING OFFICER CONSIDERED THE EXPLANATION OF ONE SHAGUN POLYPLAST INDUSTRIES, JALGAON, WHEREIN IT WAS STATED THAT ELECTRICITY CONSUMPTION COULD VARY DEPENDING ON MACHINERY CONDITIONS, QU ALITY OF RAW MATERIAL AND MAT UNDER PRODUCTION . THE ASSESSING OFFICER THUS, ADOPTED THE AVERAGE CONSUMPTION RATE OF 1.3 UNIT OF ELECTRICITY FOR PRODUCTION OF ONE 4X6 SQ.FT. SIZE OF MAT AS AGAINST 1.45 UNITS PER MAT AS CLAIMED BY THE ASSESSEE AND RE - WORKED THE GROSS PROFIT BY APPLYING THE GP RATE AT RS. 1,07,853/ - . THE INITIAL INVESTMENT IN RAW MATERIAL FOR THE UNRECORDED PRODUCTION WAS WORKED OUT AT RS. 1,20,412/ - RESULTING IN ADDITION OF RS. 1,20,265/ - . 6. THE CIT(A) THEREAFTER, ENHANCED THE ADDITION IN TH E HANDS OF ASSESSEE, IN T URN, RELYING ON THE DECISION IN THE CASE OF SHRI MANOJ SADANAND ADVANCE ITA NO. 941 /PN/20 1 3 SMT. JAYASHRI SHAILESH MANIYARHRI 4 AND SHRI SUMANT ADVANI, WHO WERE ALSO ENGAGED IN THE PRODUCTION OF PLASTIC MATS IN JALGAON . THE CIT(A) WAS OF THE VIEW THAT SINCE THE FACTS WERE IDENTICAL, VI DE ORDER SHEET DATED 11.06.2012, THE ASSESSEE WAS ASKED AS TO WHY THE INCOME SHOULD NOT BE ENHANCED BY TAKING ELECTRICITY CONSUMPTION @ 1 UNIT FOR PRODUCTION OF PLASTIC MAT OF 6X4 SQ. FT. THE CONTENTION OF THE ASSESSEE THAT THE CONSUMPTION OF ELECTRICITY UNIT WAS SHOWN @ 1.30 TO 2.00 , WAS NOT ACCEPTED BY THE CIT(A). IT IS FURTHER NOTED BY THE CIT(A) VIDE PARA 6 THAT THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE VIDE ORDER SHEET DATED 11.01.2013 AGREED FOR TAKING ELECTRICITY CONSUMPTION @ 1.10 UNI TS FOR PRODUCTION OF ONE MAT OF 6X4 SQ.FT. SIZE. TAKING INTO CONSIDERATION THE PRODUCTION AND SALES SHOWN BY THE ASSESSEE OF 6X4 SQ.FT. SIZE MATERS, UNRECORDED SALES WERE WORKED AT RS. 23,159/ - AND GP ADDITION WAS COMPUTED AT RS. 3,09,207/ - . IN VIEW OF TH E VOLUME OF BUSINESS OF ASSESSEE, NO SEPARATE ADDITION WAS MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT. AS AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER AT RS. 1,20,265/ - , THE INCOME OF THE ASSESSEE WAS ENHANCED BY RS. 1,88,942/ - . 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN ESTIMATING ADDITIONAL INCOME IN THE HANDS OF ASSESSEE. 8. ON PERUSAL OF RECORD, WE FIND THAT THE ISSUE IN THE PRESENT APPEAL IS AGAINST THE ESTIMATION OF UNRECORDED PRODUCTION AND ITS SALES THEREAFTER AND THE PROFIT A RISING ON SUCH UNRECORDED PRODUCTION AND ALSO THE INVESTMENT IN RAW MATERIAL FOR SUCH PRODUCTION. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PLASTIC MATS. THE TOTAL TURNOVER SHOWN BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS RS. 18 ,07,052/ - . BOTH THE AUTHORITIES BELOW WERE OF THE VIEW THAT THE ASSESSEE HAD INDULGED IN UNACCOUNTED PRODUCTION. THE BASIS FOR SUCH ASSUMPTION WAS THE ELECTRICITY CONSUMPTION BY THE ASSESSEE AND ITA NO. 941 /PN/20 1 3 SMT. JAYASHRI SHAILESH MANIYARHRI 5 ALSO RESULTS SHOWN BY THE OTHER CONCERNS IN THIS REGARD. T HE CASE OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT THE CONSUMPTION OF ELECTRICITY VARIES ON VARIOUS FACTORS AND ALSO THE RESULTS SHOWN BY THE OTHER CONCERNS COULD NOT BE APPLIED FOR COMPUTING INCOME OF THE ASSESSEE. WE FIND MERIT IN THE CLAIM O F ASSESSEE IN THIS REGARD. FIRST OF ALL, WITHOUT COMING TO A FINDING THAT THE OTHER CONCERNS ARE WORKING IN THE SAME CONDITIONS , THE RESULTS OF ONE CONCERN CANNOT BE APPLIED TO THE RESULTS OF ANOTHER CONCERN IN ORDER TO COMPUTE MANUFACTURING RESULTS OF ON E PART VIS - - VIS OTHER. IN CASE WHERE PARTIES ARE WORKING UNDER IDENTICAL CONDITIONS AND THEN, SUCH AN ESTIMATE MAY BE RESORTED TO AFTER TAKING THE ENTIRE GAMUT OF FACTS IN CONSIDERATION. HOWEVER, MERELY BECAUSE ONE CONCERN HAS SHOWN HIGHER PROFITS, IS N O MERIT TO ESTIMATE THE INCOME IN THE HANDS OF ANOTHER CONCERN, WHICH IS ENGAGED IN SIMILAR LINE OF BUSINESS. THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF RUBBER MATS AND BOTH THE AUTHORITIES BELOW HAVE NOT COME TO A FINDING THAT QUALITY OF MATS MANUFA CTURED BY THE ASSESSEE ARE IDENTICAL TO THE MATS MANUFACTURED BY THE OTHER CONCERNS. IN VIEW OF THIS, WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN REJECTING THE RESULTS SHOWN BY THE ASSESSEE. 9. NOW, COMING TO THE SECOND ASPECT OF ESTIMATION OF UNACCOUNTED PRODUCTION ON THE BASIS OF CONSUMPTION OF ELECTRICITY. WE FIND THAT WE HAVE DECIDED BUNCH OF APPEALS OF FURNACE CASE S AND RE - ROLLING MILLS, WHEREIN ESTIMATION OF UNRECORDED PRODUCTION WAS MADE ON THE BASIS OF ELECTRICITY CONSUMPTION. WE HA VE HELD IN THE HANDS OF THE SAID CONCERNS THAT IN THE ABSENCE OF ANY EVIDENCE FOUND OF UNRECORDED PRODUCTION, THE ASSESSING OFFICER CANNOT MAKE THE AFORESAID ADDITION ON MERE SURMISES THAT THE ELECTRICITY CONSUMED BY THE ASSESSEE IS ERRATIC AND IS NOT IN C ONSONAN CE WITH ELECTRICITY CONSUMED BY OTHER CONCERNS. THE LEAD CASE BEFORE THE TRIBUNAL IN THIS REGARD ITA NO. 941 /PN/20 1 3 SMT. JAYASHRI SHAILESH MANIYARHRI 6 WAS SRJ PEETY STEELS PVT. LTD. VS. ACIT IN ITA NO.1429/PN/2012 AND ACIT VS. SRJ PEETY STEELS PVT. LTD. IN ITA NO.1474/PN/2012, RELATING TO ASSESSMENT Y EAR 2009 - 10, ORDER DATED 12.08.2015. IN VIEW THEREOF, WE HOLD THAT THERE IS NO MERIT IN ESTIMATION OF GP IN THE HANDS OF ASSESSEE AND THE SAME IS DIRECTED TO BE DELETED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 10 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 27 TH DAY OF APRIL , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 27 TH APRIL , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APP ELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - II , NASHIK ; 4. / THE CIT - II, NASHIK ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE