Asst. Commissioner of Income Tax, Circle-9, Pune, Pune V. M/s Mittal Precision Steel Tubes Pvt Ltd., Pune

ITA 951/PUN/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5915 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 10-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Business income; Income from undisclosed sources; Onus to prove
• Section: 69C; 133A; 80IB; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 951 /PN/20 1 2 ASSESSMENT YEAR : 200 8 - 09 ASST. COMMISSIONER OF INCOME TAX , C IRCLE - 9, PUNE VS. M/S. MITTAL PRECISION STEEL TUBES PVT. LTD., PLOT NO. T - 30, 11, MIDC, D - II BLOCK, TELCO ROAD, CHINCHWAD, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAACY0704E APPELLANT BY: SHRI S.P. WALIMBE RESPONDENT BY: SHRI PRAMOD SHINGTE ORDER P ER R.S. PADVEKAR , JM : - THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - V, PUNE DATED 17 - 02 - 2012 F OR THE A.Y. 200 8 - 09. T HE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND S IN THE APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D. CIT(A) ERRED IN HOLDING THAT THE BURDEN OF PROOF LIES ON THE ASSESSING OFFICER TO PROVE THAT THE UNACCOUNTED STOCK FOUND DURING SURVEY WAS ON ACCOUNT OF UNACCOUNTED PURCHASES MADE BY THE ASSESSEE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING WITHOUT ANY EVIDENCE, THAT THE UNACCOUNTED STOCK FOUND IN THE PREMISES OF THE ASSESSEE DURING SURVEY WAS PRODUCED BY THE ASSESSEE ITSELF. 3. ON THE BASIS OF THE ABOVE INC ORRECT PREMISE, THE CIT(A) FURTHER ERRED IN HOLDING THAT THE UNACCOUNTED STOCK SHOULD BE TREATED AS BUSINESS STOCK ELIGIBLE FOR DEDUCTION U/S. 80IB(3) DE HORS THE A.O.S FINDING THAT DECLARATION OF SUCH INCOME WAS INCOME FROM OTHER SOURCES AND, THEREFORE , NOT ELIGIBLE FOR DEDUCTION U/S. 80IB(3). 2 ITA NO. 951/PN/2012, M/S. MITTAL PRECISION STEEL TUBES PVT. LTD., PUNE 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMOBILE COMPONENTS, ENGINEERING JOB WORK AND ERW STEEL TUBES. THE ASSESSEE HAS CLAIMED TH E DEDUCTION FOR THE A.Y. 2008 - 09 U/S. 80IB(3) OF THE INCOME - TAX ACT AMOUNTING TO RS.66,70,432/ - WHICH INCLUDES DEDUCTION @ 30% ON THE INCOME DECLARED DURING THE COURSE OF SURVEY ACTION U/S. 133A OF THE INCOME - TAX ACT ON 26 - 03 - 2008 I N THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY ACTION, THE ASSESSEE DECLARED ADDITIONAL INCOME TO THE EXTENT OF RS.1,40,69,000/ - AND THE SAID DECLARATION COMPRISE D OF THE DECLARATION PERTAINING TO THE EXCESS STOCK FOUND DURING THE COURSE OF SURVEY ACTION WH ICH WAS TO THE EXTENT OF RS.80.54 LA C S. DURING THE COURSE OF SURVEY ACTION , THE INVENTORY OF STOCK WAS PREPARED AND EXCESS STOCK TO THE EXTENT OF RS.80.54 LACS WAS DETERMINED AFTER TAKING G.P. RATE OF EARLIER YEARS BY PREPARING TENTATIVE TRADING ACCOUNTS. THE ASSESSEE ACCEPTED AND OFFERED THE SAME IN THE RETURN OF INCOME. HOWEVER, THE ASSESSEE CLAIMED THE DEDUCTION U/S. 80IB(3) OF THE ACT ON THE ADDITIONAL INCOME PERTAINING TO EXCESS STOCK DECLARED IN THE RETURN OF INCOME. THE ASSESSING OFFICER TREATED THE ADDITIONAL INCOME DEC LARED BY THE ASSESSEE TOWARDS EXCESS STOCK FOUND DURING THE COURSE OF SURVEY AS INCOME FROM THE OTHER SOURCES. THE ASSESSING OFFICER RELIED ON THE DECISION OF THE HON'BLE PATNA HIGH COURT AS WELL AS HON'BLE PUNJAB AND HARYANA HIGH COURT. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE EXCESS STOCK WAS UNACCOUNTED STOCK AND SAME IS TO BE ASSESSED U/S. 69C OF THE INCOME - TAX ACT. 3. THE ASSESSEE CARRIED THE ISSUE BEFORE THE LD. CIT(A) AND LD. CIT(A) OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE MANUFACTURING OF AUTOMOBILE COMPONENTS AND ERW STEEL TUBES. THE UNACCOUNTED STOCK WAS FOUND IN THE PREMISES OF THE ASSESSEE. IN THE OPINION OF THE LD. CIT(A) IF THE ASSESSEE WOULD HAVE BEEN TRADER THEN THE ASSESSING OFFICER WAS RIGHT TREAT ING UNACCOUNTED STOCK AS INCOME FROM THE OTHER SOURCES 3 ITA NO. 951/PN/2012, M/S. MITTAL PRECISION STEEL TUBES PVT. LTD., PUNE U/S. 69C OF THE ACT BUT AS THE ASSESSEE WAS IN THE MANUFACTURING, THE ASSESSING OFFICER COULD NOT PROVE THAT THE UNACCOUNTED STOCK WAS TOWARDS THE UNACCOUNTED PURCHASE OF THE RAW MATERIALS. HE HELD TH AT THE UNACCOUNTED STOCK IS FOUND IN THE INDUSTRIAL UNDERTAKING THE N SAME HAS TO BE TREATED AS BUSINESS STOCK AS IT WILL ENTER IN THE TRADING AS WELL AS P & L A/C. THE LD. CIT(A) ALSO DISTINGUISHED THE DECISION IN THE CASE OF M/S. VIMLA STORES VS. CIT 308 ITR 89 (PAT) AND NATIONAL LEGGUARD WORKS VS. CIT 288 ITR 18 (P&H) WHICH ARE RELIED ON BY THE ASSESSING OFFICER. THE LD. CIT(A) HAS OBSERVED THAT IN THE CASE OF M/S. VIMLA STORES (SUPRA) THE SAID ASSESSEE WAS A TRADER AND EXCESS STOCK WAS FOUND AT SHOP PR EMISES AS WELL AS AT GODOWN AND ACCORDINGLY THE EXCESS STOCK WAS TREATED AS INCOME U/S. 69 OF THE ACT. IT IS FURTHER OBSERVED THAT IN THE CASE OF NATIONAL LEGGUARD WORKS (SUPRA) THE SAID ASSESSEE HAS CLAIMED THE DEDUCTION U/S. 80 HHC OF THE ACT IN RESPECT OF UNACCOUNTED STOCK DECLARED WHICH WAS DENIED. THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. NOW THE REVENUE IS IN APPEAL BEFORE US. 4 . WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD. COUNSEL ARGUES THAT THE ASSE SSEE WAS ALSO DENIED THE DEDUCTION ON THE UNACCOUNTED JOB CHARGES WHICH WERE DECLARED DURING THE COURSE OF SURVEY ACTION AS ADDITIONAL INCOME AND ON WHICH DEDUCTION U/S. 80IB(3) OF THE ACT WAS CLAIMED . THE TRIBUNAL ALLOWED THE DEDUCTION TO THE ASSESSEE ON THE UNACCOUNTED INCOME TOWARDS THE JOB WORK CHARGES OF RS.60.75 LACS DECLARED BY THE ASSESSEE DURING THE COURSE OF SURVEY ACTION . HE ALSO RELIED ON THE FOLLOWING PRECEDENTS : (I). CIT VS. ALLIED INDUSTRIES 229 CTR (HP) 462 (II). CIT VS. N.R. PAPER & BOARD LTD. 313 ITR 359 (III). CIT VS. SUMAN PAPER & BOARDS LTD. 314 ITR 119 5 . WE HAVE ALSO HEARD THE LD. DR, WHO SU BMITS THAT THE ASSESSEE HAS DECLARED THE ADDITIONAL INCOME IN RESPECT OF EXCESS STOCK FOUND 4 ITA NO. 951/PN/2012, M/S. MITTAL PRECISION STEEL TUBES PVT. LTD., PUNE DURING THE COURSE OF SURVEY ACTION AND THE SAME WAS RIGHTLY ASSESSED BY THE ASSESSING OFFICER U/S. 69 OF THE ACT AS INCOME FROM OTHER SOURCES. HE SUBMITS THAT HOW THE ASSESSEE CAN CLAIM THE BENEFIT OF DEDUCTION U/S. 80IA(3) OF THE ACT IN RESPECT OF UNDISCLOSED INCOME . HE SUPPORTED THE ORDER OF THE ASSESSI NG OFFICER. 6 . IN ASSESSEES OWN CASE FOR THE A.Y. 2008 - 09, AS THE LD. CIT(A) HAS NOT ALLOWED THE CLAIM OF DEDUCTION IN RESPECT OF ADDITIONAL INCOME DECLARED TOWARDS JOB WORK CHARGES OF RS.60.75 LACS DURING THE COURSE OF SURVEY , T HE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) BEFORE THE TRIBUNAL BEING ITA NO. 393/PN/2012 AND ORDER DATED 28 - 06 - 2013 TH E TRIBUNAL HAS HELD AS UNDER: 6. AFTER GOING THROUGH THE ABOVE SUBMISSIONS AND MATERIAL ON RECORD , WE FIND THAT DURING THE COURSE OF SUR V EY CERTAIN VOUC HERS WERE FOUND CLAIMED TO BE ON ACCOUNT OF JOB WORK CHARGES. THE CIT(A) HELD THAT THE CLAIM OF ASSESSEE WAS THAT JOB WORK CHARGES ARE BUSINESS INCOME COULD NOT BE ACCEPTED FOR REASON THAT CHARGES ARE LABOUR CHARGES AND NOT JOB WORK CHARGES AS CLAIMED BY THE ASSESSEE. ACCORDING TO THE REVENUE AUTHORITIES, ASSESSEE COULD NOT ESTABLISH THAT ABOVE PROFIT FROM JOB WORK IS DERIVED FROM INDUSTRIAL UNDERTAKING. ACCORDING TO REVENUE AUTHORITIES, IT WAS SIMPLY LABOUR CHARGES WHICH WERE NOT DERIVED FROM UNDERTAKIN G AND, THEREFORE, CLAIM OF SECTION 80IB SHOULD NOT BE ALLOWED. WE FIND THAT ITAT PUNE A BENCH IN THE CASE OF MEDICORE LABORATORIES PVT. LTD. (SUPRA), FOLLOWING THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MANGAL ALLOY CASTING PVT. LTD . VS. ACIT IN ITA.NO.779/PN/2006 ORDER DATED 29.08.2008, HELD THAT ADDITIONAL INCOME OFFERED BY THE ASSESSEE DURING THE COURSE OF SURVEY ON ACCOUNT OF EXCESS CASH, EXCESS STOCK AND INFLATED EXPENSES WAS ELIGIBLE FOR DEDUCTION U/S.80IB. IN THE CASE BEFORE US, THERE IS NOTHING ON RECORD TO SUGGEST THAT THE ASSESSEE WAS HAVING ANY OTHER INCOME OTHER THAN MANUFACTURING/JOB WORK IN QUESTION. IN THIS SITUATION, THE JOB WORK CHARGES ARE ATTRIBUTABLE TO UNDERTAKING EVEN IF DECLARED DURING THE COURSE OF SURVEY ARE ELIGIBLE FOR DEDUCTION U/S.80IB AS HELD IN MANGAL ALLOY CASTING PVT. LTD. (SUPRA). ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM U/S.80IB(3) WITH REGARDS TO JOB WORK CHARGES OF RS.60.75 LAKHS DECLARED DURING THE SURVEY AS INCOME FROM OTHER SOURCES AS AGAINST BUSINESS INCOME AS CLAIMED BY THE ASSESSEE. 7 . IN DECIDING THE ISSUE , THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE ITAT, PUNE IN THE CASE OF ACIT VS. MEDICORE LABORATORIES PVT. LTD. BEING 5 ITA NO. 951/PN/2012, M/S. MITTAL PRECISION STEEL TUBES PVT. LTD., PUNE ITA NO. 402/PN/2009. IN THE CASE OF MEDI CORE LABORATORIES PVT. LTD. (SUPRA) THE SAID ASSESSEE HAS DECLARED ADDITIONAL INCOME OF RS. 1,01,91,579/ - IN RESPECT OF EXCESS CASH, EXCESS STOCK AND EVIDENCE OF INFLATED EXPENSES FOUND DURING THE COURSE OF SURVEY. THE ASSESSEE WAS NOT ALLOWED THE DEDUCTIO N U/S. 80IB OF THE ACT. IN THE SAID CASE ALSO THE ASSESSING OFFICER HAS RELIED UPON THE DECISION IN THE CASE OF AKHTARI BEGUM & SONS VS. CIT, 145 ITR 295 (MP) . T HE TRIBUNAL RELIED ON THE DECISION IN THE CASE OF MANGAL ALLO Y CASTING PVT. LTD. VS. ACIT, IT A NO. 779/PN/2006 DATED 29 - 08 - 2008 AND HELD AS UNDER: 5. HAVING GONE THROUGH THE CITED DECISIONS, WE FIND THAT THE ISSUE RAISED IN THE GROUND IS FULLY COVERED BY THE DECISION OF CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MANGAL ALLOY CASTING PVT. LT D. V/S. ACIT (SUPRA) HOLDING AS UNDER: 7. WE ARE IN CONSIDEDRED AGREEMENT WITH THE PROPOSITION ADVANCED BY THE LEARNED COUNSEL AND HIS CONTENTION THAT, ON THE FACTS OF THIS CASE, IT IS REASONABLE TO CONCLUDE THAT THE INCOME DECLARED DURING SURVEY PROCEED INGS WAS BUSINESS INCOME IN NATURE. WHAT HAS BEEN FOUND IS BUSINESS ASSETS , WHETHER BY WAY OF STOCK OR BY WAY OF CASH, WHICH WERE NOT ACCOUNTED FOR EARLIER. THE ONLY BUSINESS THAT THE ASSESSEE IS CARRYING ON IS THE BUSINESS OF MANUFACTURING OF ALLOY CAST INGS AND THIS BUSINESS IS ADMITTEDLY ELIGIBLE TO DEDUCTION UNDER SECTION 80 IB. WE ARE ALIVE TO A LARGE NUMBER OF DECISIONS BY THIS BENCH OF THE TRIBUNAL WHEREIN IT IS HELD THAT WHEN ADDITION IS MADE IN RESPECT OF STOCK AND CASH, AT THE TIME OF SURVEY, THE DECLARATION SO MADE WILL BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 40 (B). THE SAME PRINCIPLE WILL APPLY HERE AS WELL. ONCE WE HOLD, AS IS HELD BY THE COORDINATE BENCHES IN SUCH CASES OF DECLARATION, THAT THIS INCOME IS BUSINESS INCOME, THE ONLY BUSINESS THAT THE ASSESSEE IS ENGAGED IN IS ELIGIBLE BUSINESS. ACCORDINGLY, THE AMOUNT DECLARED AS INCOME ON ACCOUNT OF STOCK AND CASH IS ALSO TO BE INCLUDED IN ELIGIBLE PROFITS. THIS IS FURTHER EVIDENT FROM THE FACT THE DEC LARED AMOUNT HAS BEEN INCLUDED, AND RIGHTLY SO, IN THE TRADING AND PROFIT LOSS ACCOUNT O THE ELIGIBLE BUSINESS. FOR ALL THESE REASONS, AND BEARING IN MIND ENTIRETY 6 ITA NO. 951/PN/2012, M/S. MITTAL PRECISION STEEL TUBES PVT. LTD., PUNE OF THE CASE, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GRANT D EDUCTION UNDER SECTION 80 IB IN RESPECT OF ENTIRE PROFITS, INCLUDING PROFITS REFLECTED BY DECLARATION MADE DURING SURVEY. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 6. FOLLOWING THE ABOVE DECISION , WE ARE OF THE VIEW THAT LD CIT(A) HAS RIGHTLY DECIDED T HE ISSUE IN FAVOUR OF THE ASSESSEE WITH THIS FINDING THAT ADDITIONAL INCOME OFFERED BY THE ASSESSEE DURING THE COURSE OF SURVEY ON ACCOUNT OF EXCESS CASH, EXCESS STOCK AND INFLATED EXPENSES WAS ELIGIBLE FOR DEDUCTION U/S. 80 IB OF THE ACT. THE ACTION O F THE LD CIT(A) IN DIRECTING THE A.O TO RECOMPUTE THE DEDUCTION ALLOWOABLE U/S. 80 IB(3) (II) OF THE ACT AFTER INCLUDING ADDITIONAL INCOME OFFERED BY THE ASSESSEE, THUS DOES NOT CALL FOR ANY INTERFERENCE. THE SAME IS UPHELD. 7. THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF AKHTARI BEGUM & SONS (SUPRA) IS HAVING DISTINGUISHABLE FACTS AND DIFFERENT ISSUE. IN THAT CASE, ASSESSEE WAS INVOLVED IN THE BUSINESS OF PLYING PASSENGER BUS, AND AFTER REJECTING ASSESSEES BOOKS, THE A.O DEDUCTED THE NET PROFIT AT THE RATE OF 20%. THE LD CIT(A) THOUGH REDUCED THE ESTIMATED NET PROFIT AT THE RATE OF 19% BUT SEPARATELY ADDED LUGGAGE RECEIPT OF RS. 30,192/ - . THE TRIBUNAL FURTHER REDUCED THE NET PROFIT RATE TO 17.5% BUT MAINTAINED THE FIRST APPELLA TE ORDER WHEREBY LUGGAGE RECEIPT WAS ADDED SEPARTELY. THE QUESTION BEFORE THE HONBLE MADHYA PRADHESH HIGH COURT WAS AS TO WHETHER THE TRIBUNAL WAS JUSTIFIED IN CONFIRMING SEPARATE ADDITION OF LUGGAGE RECEIPT TO THE TOTAL INCOME PARTICULARLY WHEN THE PROV ISO TO SECTION 145 WAS APPLIED. THE ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE HONBLE HIGH COURT WITH THIS FINDING THAT NO MATERIAL WAS PLACED BY THE ASSESSEE ON RECORD TO SHOW THAT ANY EXPENSES WAS INCURRED BY IT IN DERIVING THE LUGGAGE RECEIPT. 8 . LIKEWISE THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S. RAJIV KUMAR MADAN (SUPRA) RELIED UPON BY THE LD. D.R. IS ALSO NOT HELPFUL TO THE REVENUE AS HAVING DIFFERENT FACTS. IN THAT CASE, THE ASSESSEE COULD NOT PRODUCE ANY C ONCRETE EVIDENCE THAT THE ASSET WAS GIVEN ON RENT ON 01.10.1999 AS CLAIMED, HENCE IT WAS NOT ACCEPTED THAT RENT PERIOD COMMENCED ON 01.10. 1999. ASSESSEE HAD SURRENDERED INCOME IN THE BUILDING ACCOUNT AND PLANT & MACHINERY ACCOUNT WHICH WERE CREDITED UNDE R THE HEAD MISCELLANEOUS INCOME. THE TRIBUNAL HELD THAT 7 ITA NO. 951/PN/2012, M/S. MITTAL PRECISION STEEL TUBES PVT. LTD., PUNE MISCELLANEOUS INCOME CANNOT BE SAID TO BE DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. 9. UNDER THE ABOVE CIRCUMSTANCES AND ESPECIALLY WHEN THERE IS NO ANY ADVERSE FINDING AGAINST THE CONTENTION OF THE ASSESSEE THAT IT HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY OTHER THAN MANUFACTURE OF PHARMACEUTICAL AND FOOD PRODUCTS, WE ARE NOT INCLINED TO INTERFERE WITH THE FIRST APPELLATE ORDER ON THE ISSUE. THE SAME IS UPHELD. THE GROUND IS ACCO RDINGLY REJECTED. 8 . IN THE PRESENT CASE, ADMITTEDLY THE EXCESS STOCK IS WORKED OUT BY THE SURVEY PARTY ON THE BASIS OF THE GP OF THE PRECEDING YEARS AND BY PREPARING THE TENTATIVE TRADING ACCOUNT ON THE BASIS OF WHICH THE ASSESSEE OFFERED THE INCOME. I T CANNOT BE SAID THAT THE SOURCE IS UNEXPLAINED BUT THERE IS ALSO POSSIBILITY THAT THE ASSESSEE HAS NOT PROPERLY DECLARED THE INCOME FROM HIS BUSINESS ACTIVITY IN PAST AS THERE IS VARIATION IN THE GP RATE. IN OUR OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, SAME IS CONFIRM. 9 . IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 03 - 03 - 201 4 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 3 RD MARCH, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - V, PUNE 4 THE CIT - V, PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME T AX APPELLATE TRIBUNAL PUNE