Appeal details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 9294 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 2 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
03-04-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2003-2004
Appeal Filed On
19-01-2015
Judgement Text
1 ITA NOS. 98 & 85/KOL/2015 M/S. MERINO PANEL PRODUCTS LTD., AY. 2003-04 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 98/KOL/2015 ASSESSMENT YEAR: 2003-04 DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(2), KOLKATA. VS. M/S. MERINO PANEL PRODUCTS LTD. (PAN: AABCM5672Q) APPELLANT RESPONDENT & I.T.A. NO. 85/KOL/2015 ASSESSMENT YEAR: 2003-04 M/S. MERINO PANEL PRODUCTS LTD. VS. ASSISTANT COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE-IV, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 31.01.2019 DATE OF PRONOUNCEMENT 03.04.2019 FOR THE REVENUE SHRI A. K. SINGH, CIT, DR FOR THE ASSESSEE SHRI SHYAM SUNDER JHA, FCA ORDER PER SHRI A.T.VARKEY, JM THESE CROSS APPEALS PREFERRED BY THE REVENUE AND TH E ASSESSEE ARE AGAINST THE ORDER OF LD. CIT(A), CENTRAL-1, KOLKATA DATED 05.11.2014 FOR AY 2003-04. 2. THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST THE PARTIAL RELIEF GRANTED TO THE ASSESSEE BY RESTRICTING THE ADDITION TO ONLY RS.23,55,288/-, WHEN THE AO MADE AN ADDITION OF RS.6,53,81,975/- WHEREAS, THE ASSESSEE IS AGAINST T HE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION TO RS.23,55,288/-. 2 ITA NOS. 98 & 85/KOL/2015 M/S. MERINO PANEL PRODUCTS LTD., AY. 2003-04 3. BRIEFLY STATED THE FACTS ARE THAT THE AO PASSE D THE ORDER U/S. 147/154 ON 07.12.2010 COMPUTING THE TOTAL INCOME OF RS.8,45,21,950/- AND QUANTIFIED THE TAX THEREON AT RS.3,10,61,817/-. WHILE COMPUTING THE SAID TOTAL I NCOME, THE AO ADDED THE SUM OF RS.6,53,81,975/- BY OBSERVING THAT FROM THE P&L AC COUNT ENDED ON 31.03.2003, THE ASSESSEE HAD SHOWN SALES OF GOODS OF RS.35,96,94,00 0/- AND SALE OF RAW MATERIAL RESPECTIVELY. FURTHER, IN CLAUSE 7(II) OF THE NOT ES ON ACCOUNTS OF SCHEDULE XVII OF BALANCE SHEET IT IS CLAIMED THAT OUT OF THE ABOVE S ALE OF GOODS AND RAW MATERIAL OF RS.10,67,60,000/- WAS SOLD TO ITS HOLDING COMPANY M /S. CENTURY LAMINATING CO. LTD. PRESENTLY KNOWN AS M/S. MERINO INDUSTRIES LIMITED. DURING THE ASSESSMENT PROCEEDINGS FOR AY 2003-04 M/S. CENTURY LAMINATING CO. LTD. HAS FILED DETAILS OF PURCHASE ABOVE RS.50,000/-. FROM THE DETAILS IT IS SEEN THAT M/S. CENTURY LAMINATING CO. LTD. HAS PURCHASED GOODS OF RS.17,21,41,975/- FROM M/S. MERI NO PANEL PRODUCTS LTD. SO ON CROSS VERIFICATION IT TRANSPIRED THAT THE ASSESSEE HAD UN DERSTATED ITS SALES TO THE TUNE OF RS.6,53,81,975/-. THEREFORE, THE AO CONCLUDED THA T THE ASSESSEE HAS SUPPRESSED ITS SALES BY RS.6,53,81,975/- AND BEING SATISFIED THAT INCOME TO THAT EXTENT HAS ESCAPED ASSESSMENT ISSUED NOTICE U/S. 148 OF THE ACT ON 28.10.2009. T HE ASSESSEE RESPONDED BY SUBMITTING THAT THE RETURN FILED U/S. 139 OF THE ACT BE TREATED AS THE RETURN FILED IN COMPLIANCE TO THE NOTICE U/S. 148 OF THE ACT. THE AO COMMUNICATED ON 25.11. 2010 TO THE ASSESSEE THE REASONS FOR THE REOPENING OF THE ASSESSMENT. THE AO NOTED IN T HE IMPUGNED ORDER THAT THE ASSESSEE FILED ITS REPLY IN RESPONSE TO THE NOTICE U/S. 142( 1) BUT FAILED TO RECONCILE THE SUPPRESSION OF SALES. THE AO THEN MADE ADDITION OF RS. RS.6,53,81 ,975/-. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO RESTRICTED THE ADDITION TO RS.23,55,288/- IN PLACE OF RS.6,53,81,975/- BY OBSERVING AS UNDER: 15. THE SUBMISSIONS ALONGWITH THE SUPPORTIVE DOCUM ENTS PRODUCED BY THE ASSESSEE IN COURSE OF THE APPELLATE PROCEEDINGS WERE SENT TO TH E AO FOR VERIFICATION. THE AO IN HIS REMAND REPORT DATED 11-10-2011 REJECTED THE RECONCI LIATION FILED BY THE ASSESSEE AS 'AFTERTHOUGHT. THE AO SUBMITTED ANOTHER REMAND REP ORT ON 27-08-2014 WHEREIN IT WAS ADMITTED THAT THE ASSESSEE FURNISHED IN COURSE OF T HE REMAND PROCEEDINGS CERTIFIED COPY OF BALANCE SHEET (UN-AUDITED) OF THE JAIPUR BRANCH SHO WING TOTAL PURCHASES OF RS.69,15,122/- ONLY; THE LEDGER COPY OF HEAD OFFICE AND HYDERABAD BRANCH SHOWING PURCHASES OF RS.42,70,957/- AND RS.14,702/- AND, THE LEDGER COPY OF KACHCHH ENTERPRISES SHOWING 3 ITA NOS. 98 & 85/KOL/2015 M/S. MERINO PANEL PRODUCTS LTD., AY. 2003-04 PURCHASE OF RS.2,64,352/-. THE AO FURTHER ADMITTED THAT THE ASSESSEE ALSO SUBMITTED A PRINTED BOOKLET CONTAINING THE AUDITED ACCOUNTS OF THE HOLDING COMPANY FOR THE RELEVANT YEAR WHEREIN TOTAL PURCHASE OF RS.10,91,15,000/- FR OM THE ASSESSEE WAS SHOWN UNDER RELATED PARTY TRANSACTIONS (POINT NO. 8 OF NOTES ON ACCOUNTS SCHEDULE-XX). IT ALSO APPEARS FROM THE REPLY OF THE ASSESSEE INCORPORATED BY THE AO IN HIS REMAND REPORT THAT THE CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUN T IN THE FORM OF SPREAD-SHEETS (CONTAINING SEPARATE FIGURES FOR EACH BRANCH AND TH E HEAD OFFICE) WHICH CONSTITUTED THE BASIS FOR PREPARING THE FINANCIAL STATEMENTS OF THE HOLDING COMPANY WAS FURNISHED IN COURSE OF THE REMAND PROCEEDINGS. IT WAS ALSO REITE RATED BEFORE THE AO THAT THE TOTAL FIGURE OF PURCHASES RS.17,21,41,975/- AS ADOPTED BY HIM IN THE IMPUGNED ORDER WRONGLY INCLUDED THE PURCHASE OF RS.2,64,353/- MADE BY THE AHMEDABAD BRANCH FROM KACHCHH ENTERPRISE WHICH WAS NOT RELEVANT TO THE CASE OF THE ASSESSEE. THE AO HAS HOWEVER CONTENDED IN HIS REMAND REPORT THAT THE GENUINENESS OF THE CLAIMS MA DE BY THE ASSESSEE COULD NOT BE VERIFIED AS SUPPORTING BILLS AND VOUCHERS WERE NOT PRODUCED. THE AO HAS THEREFORE ARGUED THAT THE ADDITION ON ACCOUNT OF SUPPRESSED SALES WA S JUSTIFIED. THE LD AR IN HIS REJOINDER HAS REITERATED THE SUBMISSIONS MADE IN COURSE OF TH E APPELLATE PROCEEDINGS AND LAID EMPHASIS ON THE DOCUMENTS ALREADY PLACED ON RECORD. THE LD AR HAS ARGUED THAT THE ASSESSEE HAS FILED THE RECONCILIATION STATEMENTS AN D ALSO PRODUCED SUFFICIENT MATERIAL ON RECORD TO SHOW THAT THERE WAS NO SUPPRESSION OF SAL ES. THE AO HOWEVER HAS NEITHER POINTED OUT ANY DEFECT IN THE RECONCILIATION STATEMENTS NOR DISPROVED THE GENUINENESS OF THE DOCUMENTS PLACED ON RECORD BEFORE HIM. THE LD AR HA S ALSO ARGUED THAT THE AO HAS BROUGHT NO POSITIVE MATERIAL ON RECORD TO PROVE THA T THE ASSESSEE WAS INVOLVED IN SUPPRESSION OF SALES. THE AO HAS MERELY RELIED ON T HE DETAILS FILED BY THE HOLDING COMPANY IN COURSE OF ITS ASSESSMENT PROCEEDINGS TO DRAW ADV ERSE INFERENCE IN THE CASE OF THE ASSESSEE. THE LD AR HAS ARGUED THAT THE AO HAS ERRE D IN LAW IN RELYING ON THE MATERIAL PRODUCED BY A THIRD PARTY TO DRAW ADVERSE INFERENCE IN THE CASE OF THE ASSESSEE WHEN THERE WAS NO CORROBORATIVE MATERIAL ON RECORD. THE LD. AR HAS CONTENDED THAT THERE WAS NO INDEPENDENT MATERIAL WHATSOEVER ON RECORD TO SHOW T HAT THE ASSESSEE WAS INVOLVED IN SUPPRESSION OF SALES. ABOVE ALL, THE AUDITED ACCOUN TS OF THE ASSESSEE AS WELL THOSE OF THE HOLDING COMPANY WERE PLACED ON THE RECORD OF THE AO WHICH DOES NOT SUPPORT HIS FINDING THAT THE ASSESSEE WAS INVOLVED IN SUPPRESSION OF IT S SALES. THE LD AR HAS ARGUED THAT THE AO WAS NOT LEGALLY JUSTIFIED IN DEMANDING PRODUCTIO N OF BILLS AND VOUCHERS PERTAINING TO THE FINANCIAL YEAR 2002-03 IN THE YEAR 2014 AFTER L APSE OF OVER 11 YEARS WHEN THE HOLDING COMPANY WAS REQUIRED UNDER LAW TO KEEP THE SAME FOR 6 YEARS ONLY. THE LD AR HAS CONCLUDED BY SUBMITTING THAT THE ASSESSEE HAS FILED RECONCILIATION BETWEEN THE SALES OF RS.10,67,60(000) AS SHOWN IN THE NOTES OF ACCOUNTS OF THE ASSESSEE COMPANY AND THE PURCHASES OF RS.10,91,15(000) AS SHOWN IN THE NOTES OF ACCOUNTS OF THE HOLDING COMPANY [PARA 5 ABOVE] AND ALSO ITS RECONCILIATION BETWEEN THE PURCHASES OF RS.10,91,15,288/- SHOWN BY THE HOLDING COMPANY IN ITS NOTES ON ACCOUN TS AND THE PURCHASES OF RS.17,21,41,975/ - AS ADOPTED BY THE AO IN THE IMPU GNED ASSESSMENT ORDER [PARA 6 TO 13 ABOVE] AND HAS ALSO PRODUCED SUFFICIENT SUPPORTIVE MATERIAL TO PROVE THAT THERE WAS NO SUPPRESSION OF SALES AND THAT THE ADDITION OF RS.6, 53,81,975/- AS MADE BY THE AO IN THE IMPUGNED ORDER WAS NOT JUSTIFIED ON THE FACTS OF TH E CASE . 16. I HAVE PERUSED THE IMPUGNED ORDER AND THE REMAN D REPORTS OF THE AO. I HAVE ALSO CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND THE MATERIAL PLACED ON RECORD. I FIND THAT THE AO HAS INITIATED THE PROCEEDINGS U/S 147 AND AL SO BASED HIS FINDINGS IN THE IMPUGNED ORDER SOLELY ON THE DETAILS OF PURCHASES PRODUCED B Y THE HOLDING COMPANY IN COURSE OF ITS ASSESSMENT PROCEEDINGS. I FIND SUBSTANCE IN THE ARG UMENT OF THE LD AR THAT THERE IS NO POSITIVE MATERIAL ON RECORD TO EVEN SUGGEST THAT TH E ASSESSEE WAS IN ANY WAY INVOLVED IN 4 ITA NOS. 98 & 85/KOL/2015 M/S. MERINO PANEL PRODUCTS LTD., AY. 2003-04 MAKING UNACCOUNTED SALES TO ITS HOLDING COMPANY, I AGREE THAT THERE IN NOT EVEN AN IOTA OF EVIDENCE TO SUPPORT THE FINDING OF THE AO THAT THE ASSESSEE MADE UNACCOUNTED SALES TO ITS HOLDING COMPANY. THE AO HAS PLACED HIS SOLE RELIANC E ON THE DETAILS OF PURCHASES PRODUCED BY THE HOLDING COMPANY IN COURSE OF ITS AS SESSMENT PROCEEDINGS. I HAVE PERUSED THE RECONCILIATION STATEMENTS AND ALSO THE SUPPORTI VE MATERIAL THAT WAS PLACED ON RECORD IN COURSE OF THE APPELLATE PROCEEDINGS. I FIND THAT TH E ASSESSEE HAS PRODUCED SUFFICIENT MATERIAL TO PROVE THAT ITS CONTENTIONS AS NARRATED IN PARA 6 TO 12 ABOVE AND DULY SUMMARIZED IN PARA 13 ABOVE ARE FACTUALLY CORRECT T HEREBY RECONCILING THE FIGURE OF PURCHASES OF RS.L0,91,15,288/- SHOWN BY THE HOLDING COMPANY IN ITS NOTES ON ACCOUNTS AND THAT OF RS.17,21,41,975/- AS ADOPTED BY THE AO IN T HE IMPUGNED ASSESSMENT ORDER. FOR, THE HOLDING COMPANY IN COURSE OF ITS ASSESSMENT PROCEED INGS DID FURNISH AS REQUIRED DETAILS OF PURCHASES EXCEEDING RS.50,000/ - AS MADE BY ITS BRA NCHES. THE DETAILS HOWEVER DID NOT INCLUDE PURCHASES OF RS.42,70,957/- MADE BY THE KOL KATA HEAD OFFICE AND THOSE OF RS.14,702/- MADE BY THE HYDERABAD BRANCH AS THE SAM E WAS NOT REQUIRED BY THE AO. BUT, THESE PURCHASES WERE OBVIOUSLY INCLUDED IN THE PURC HASES SHOWN IN THE NOTES ON ACCOUNTS. THE LEDGER COPY OF KOLKATA HEAD OFFICE AND HYDERABA D BRANCH SHOWING PURCHASES OF RS.42,70,957/- AND RS.14,702/- FROM THE ASSESSEE WA S PLACED ON RECORD IN SUPPORT OF THE CONTENTIONS. THE DETAILS OF AHMEDABAD BRANCH CONTAI NED PURCHASES OF RS.I0,87,305/- AND RS.78,553/- WHICH THE AO CONSIDERED TO REACH THE FI GURE OF RS.11,65,858/-. THE AO HOWEVER FAILED TO APPRECIATE THAT THE PURCHASE OF R S.78,553/- MADE BY THE AHMEDABAD BRANCH WAS SUBSEQUENTLY TRANSFERRED TO DELHI BRANCH AND CONSEQUENTLY THE SAME WAS RIGHTLY EXCLUDED FROM THE AHMEDABAD BRANCH. THE LED GER COPY OF AHMEDABAD AND DELHI BRANCHES IN THIS REGARD DULY SUPPORT THE CONTENTION S OF THE ASSESSEE. THE DETAILS OF BANGLORE BRANCH WRONGLY INCLUDED PURCHASE OF RS.85, 753/ - WHICH WAS ACTUALLY MADE FROM KUNAL ENTERPRISES THEREBY CAUSING ERROR OF RS.85,75 3/-. THE LEDGER COPY OF BANGLORE BRANCH SHOWING PURCHASES FROM THE ASSESSEE AND FROM KUNAL ENTERPRISES DULY SUPPORT THE CONTENTIONS OF THE ASSESSEE. THE DETAILS OF HAPUR B RANCH CONTAINED PURCHASES OF RS.L,27,10,256/ -. THE AO HOWEVER INCLUDED THE HIGH SEA TRANSACTIONS OF RS.45,38,128/ - WHICH WAS NOT RELATED TO THE ASSESSEE AND FOR WHICH SEPARATE LEDGER WAS MAINTAINED IN THE BOOKS OF THE HOLDING COMPANY. THE MATERIAL ON RECOR D ALSO SUGGESTS THAT THE PURCHASE OF RS.43,196/ - THOUGH DULY RECORDED IN THE PURCHASE L EDGER WAS APPARENTLY NOT INCLUDED IN THE FIGURE FOR THE NOTES ON ACCOUNT; SECONDLY, THE INTEREST COMPONENT OF RS.4,275/- WAS WRONGLY INCLUDED IN THE PURCHASES. THE MAJOR DISCRE PANCY OF RS.6,22,36,100/- RELATED TO JAIPUR BRANCH. THOUGH ACTUAL PURCHASES OF RS.69,15, 122/- WERE MADE FROM THE ASSESSEE, THE DETAILS FURNISHED BY THE HOLDING COMPANY IN COU RSE OF ITS ASSESSMENT PROCEEDINGS INVOLVED TYPOGRAPHICAL ERROR WHEREBY THE PURCHASES WERE SHOWN AT RS.6,91,51,222/-. THE LD AR HAS PLACED SUFFICIENT SUPPORTING MATERIAL ON RECORD TO PROVE THAT THE CORRECT FIGURE OF PURCHASES BY THE HOLDING COMPANY WAS RS.69,15,12 2/- ONLY. THE AO HAS ALSO ADMITTED IN HIS REMAND REPORT THAT THE ASSESSEE PRODUCED BEFORE HIM IN COURSE OF THE REMAND PROCEEDINGS CERTIFIED COPY OF BALANCE SHEET (UN-AUD ITED) OF JAIPUR BRANCH SHOWING TOTAL PURCHASES OF RS.69,15,122/- ONLY. I ALSO FIND THAT THE PROFIT & LOSS ACCOUNT OF JAIPUR BRANCH (PLACED ON RECORD AT PAGE 78 TO 82 OF THE PA PER-BOOK) CLEARLY SHOW PURCHASES OF RS.69,15,122/ - ONLY. THE SPREAD SHEET WHICH CONSTI TUTED THE BASIS FOR PREPARING THE FINANCIAL STATEMENTS OF THE HOLDING COMPANY (PLACED ON RECORD AT PAGE 83 TO 87 OF THE PAPER-BOOK) ALSO SUPPORT THE CONTENTION THAT THE CO RRECT FIGURE OF PURCHASES BY JAIPUR BRANCH WAS RS.69,15,122/-. THIS ALONE HAS EXPLAINED THE DISCREPANCY IN SALES TO THE EXTENT OF RS.622.36 IAKHS AS AGAINST THE ADDITION OF RS.65 3.82 LAKHS MADE BY THE AO IN THE IMPUGNED ORDER ON ACCOUNT OF SUPPRESSED SALES. THE DETAILS OF MUMBAI BRANCH WRONGLY INCLUDED PURCHASE OF RS.70,539/- WHICH WAS ACTUALLY MADE FROM BHAGWATI PLYWOOD THEREBY RESULTING IN ERROR OF RS.70,539/-. THE LEDG ER COPY OF MUMBAI BRANCH SHOWING 5 ITA NOS. 98 & 85/KOL/2015 M/S. MERINO PANEL PRODUCTS LTD., AY. 2003-04 PURCHASES FROM THE ASSESSEE AND FROM BHAGWATI PLYWO OD DULY SUPPORTS THE CONTENTIONS OF THE ASSESSEE. I FIND FROM THE IMPUGNED ORDER THAT T HE AO HAS NOT EXPLAINED AS TO HOW DID HE ARRIVE AT THE PURCHASE FIGURE OF RS.17,21,41,975 /-. THE AO HAS CONTENDED IN HIS REMAND REPORT THAT THE ASSESSEE IN ORDER TO RECONCILE THE FIGURES HAS INTRODUCED UNKNOWN FIGURE OF RS.2,64,352/ -. I HOWEVER FIND THAT IT WAS THE AO W HO ASSERTED THAT SALES OF RS.17,21,41,975/- WAS MADE BY THE ASSESSEE AND THER EFORE IT WAS FOR THE AO TO EXPLAIN THE BASIS OF HIS WORKING. THE AO HOWEVER HAS NOT BEEN A BLE TO EXPLAIN HIS WORKING EXCEPT FOR BLINDLY RELYING ON THE FIGURES FURNISHED BY THE HOL DING COMPANY IN COURSE OF ITS ASSESSMENT PROCEEDINGS. IN CASE THE PURCHASE OF RS.2,64,353/- WAS INCLUDED, THEN THE FIGURE FOR PURCHASES WOULD TALLY AT RS. L7,21,41,975/ - AS ADO PTED BY THE AO IN THE IMPUGNED ORDER. IT THEREFORE APPEARS THAT THE AO HAS POSSIBLY INCLUDED THE FIGURE OF PURCHASE OF RS.2,64,353/- WHICH WAS MADE FROM THE KACHCHH ENTERPRISE BY THE A HMEDABAD BRANCH. IN THE GIVEN FACTUAL BACKGROUND, THE ASSESSEE APPEARS TO HAVE SU CCESSFULLY RECONCILED THE PURCHASE FIGURE OF RS.10,91,15,288/- AS SHOWN BY THE HOLDING COMPANY IN ITS NOTES ON ACCOUNTS AND THE PURCHASE FIGURE OF RS.17,21,41,975/- AS ADOPTED BY THE AO IN THE IMPUGNED ASSESSMENT ORDER. THE ADDITION TO THE EXTENT OF RS.6,30,26,687 /- (RS.17,21,41,975/- MINUS RS.10,91,15,288/-) THEREFORE DOES NOT APPEAR TO BE JUSTIFIED. 17. I HAVE PERUSED THE IMPUGNED ASSESSMENT ORDER. I T APPEARS THAT THE ASSESSEE DID FILE RECONCILIATION STATEMENTS IN COURSE OF THE PROCEEDI NGS U/S. 147. THE AO HAS HOWEVER NOT EXPLAINED IN HIS ASSESSMENT ORDER AS TO WHY THE REC ONCILIATION SUBMITTED BY THE ASSESSEE WAS NOT ACCEPTABLE TO HIM. I FIND THAT THE AO DID N OT EVEN DISCUSS SUCH RECONCILIATION IN THE IMPUGNED ORDER AND SUMMARILY MADE THE ADDITION BY S TATING THAT 'IN RESPONSE TO NOTICE U/S. 142(1) DATED 22-01-2010 THE ASSESSEE FILED THE REPLY BUT FAILED TO RECONCILE THE UNDERSTATEMENT OF SALES TO THE EXTENT OF RS.6,53,81 ,975/-. HENCE THE AMOUNT IS ADDED TO THE INCOME OF THE ASSESSEE'. IT THUS APPEARS THAT THE A O HAS ARBITRARILY MADE THE ADDITION WITHOUT EVEN CONSIDERING THE MATERIAL THAT WAS PLAC ED ON RECORD BEFORE HIM. IN COURSE OF THE REMAND PROCEEDINGS ALSO, THE AO HAS NOT BEEN AB LE TO POINT OUT ANY SPECIFIC DEFECT IN THE RECONCILIATION STATEMENTS OR THE SUPPORTING DOC UMENTS PRODUCED BY THE ASSESSEE. THE AO HAS REJECTED THE RECONCILIATION ON THE GROUND TH AT BILLS OR VOUCHERS WERE NOT PRODUCED BEFORE HIM. THE AO HAS FOUND NO SPECIFIC DEFECT OR DISCREPANCY IN THE BOOKS OF THE ASSESSEE OR IN THE BOOKS OF THE HOLDING COMPANY. I ALSO FIND FROM THE ASSESSMENT ORDER OF THE HOLDING COMPANY FOR THE RELEVANT ASSESSMENT YEAR 20 03-04 MADE U/S 143(3) THAT NO ADVERSE INFERENCE WAS DRAWN BY THE SAME AO IN THE C ASE OF THE HOLDING COMPANY ALSO. IN CASE THE AO WAS SATISFIED THAT THE ASSESSEE HAD MAD E UNACCOUNTED SALES TO ITS HOLDING COMPANY, THEN CORRESPONDING ADDITION FOR UNACCOUNTE D PURCHASES SHOULD HAVE BEEN MADE BY THE AO IN THE HANDS OF THE HOLDING COMPANY. BUT, NO SUCH ADDITION WAS MADE BY THE AO IN THE HANDS OF THE HOLDING COMPANY. THE AO HAS HOW EVER IMPORTED THE DETAILS FILED BY THE HOLDING COMPANY IN COURSE OF ITS ASSESSMENT PROCEED INGS TO DRAW ADVERSE INFERENCE IN THE CASE OF THE ASSESSEE EVEN THOUGH NO SUCH ADVERSE IN FERENCE WAS DRAWN IN THE CASE OF THE HOLDING COMPANY. I FIND THAT THE AO HAS BASED HIS F INDINGS IN THE IMPUGNED ORDER SOLELY ON THE DETAILS OF PURCHASES PRODUCED BY THE HOLDING CO MPANY IN COURSE OF ITS ASSESSMENT PROCEEDINGS. THE AO HAS FAILED TO BRING ANY POSITIV E MATERIAL ON RECORD WHICH COULD EVEN REMOTELY SUGGEST THAT THE ASSESSEE WAS IN ANY WAY I NVOLVED IN MAKING UNACCOUNTED SALES TO ITS HOLDING COMPANY. THE AO HAS FAILED TO BRING ON RECORD EVEN A SINGLE PIECE OF EVIDENCE TO SUPPORT HIS FINDING THAT THE ASSESSEE MADE UNACC OUNTED SALES TO ITS HOLDING COMPANY. THE AO HAS PLACED HIS SOLE RELIANCE ON THE DETAILS OF PURCHASES PRODUCED BY THE HOLDING COMPANY IN COURSE OF ITS ASSESSMENT PROCEEDINGS AND EVEN WHEN THE DISCREPANCIES THEREIN WERE DULY EXPLAINED, THE AO STILL INTENDED TO TAKE ADVANTAGE OF THOSE ERRORS TO DRAW ADVERSE INFERENCE IN THE CASE OF THE ASSESSEE. IT I S A SETTLED LEGAL PROPOSITION THAT EVEN AN 6 ITA NOS. 98 & 85/KOL/2015 M/S. MERINO PANEL PRODUCTS LTD., AY. 2003-04 ADMISSION WHICH IS LATER RETRACTED AND WHICH IS NOT CORROBORATED OR SUPPORTED BY ANY INDEPENDENT MATERIAL CANNOT BE MADE THE BASIS FOR A DDITION. ONCE THE SUBMISSIONS MADE BY THE HOLDING COMPANY WERE RETRACTED AND DULY RECONCI LED, THE ONUS WAS ON THE AO TO BRING POSITIVE MATERIAL ON RECORD TO CORROBORATE OR SUPPO RT HIS FINDING THAT THE ASSESSEE MADE UNACCOUNTED SALES TO ITS HOLDING COMPANY. BUT, IN T HE PRESENT CASE, NO SUCH MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO. ON THE CONTRARY, THE AO HAS SIMPLY REJECTED THE RECONCILIATION STATEMENTS ON THE GROUND THAT IT WAS AN AFTERTHOUGHT. THE AO IN HIS REMAND REPORT HAS ARGUED THAT THE ASSESSEE COULD NOT PRODU CE EVIDENCE TO SUPPORT ITS CONTENTIONS. HOWEVER, I NOTE THAT THE ASSESSMENT OF THE HOLDING COMPANY WAS MADE U/S 143(3) BY THE SAME AO AND THE DETAILS OF PURCHASES WHICH NOW CONS TITUTE THE BASIS OF ADDITION IN THE CASE OF THE ASSESSEE WAS ALSO AVAILABLE BEFORE THE AO BU T NO ADDITION WAS MADE ON ACCOUNT OF UNACCOUNTED PURCHASES IN THE HANDS OF THE HOLDING C OMPANY. I FIND THAT THE ASSESSEE HAS PRODUCED SUFFICIENT MATERIAL IN SUPPORT OF ITS RECO NCILIATION STATEMENTS. I ALSO NOTE THAT THE AO WHO HAS DEMANDED PRODUCTION OF EVIDENCE FROM THE 'ASSESSEE HAS NO EVIDENCE WHATSOEVER IN HIS POSSESSION TO SUPPORT HIS FINDING THAT THE ASSESSEE MADE UNACCOUNTED SALES TO ITS HOLDING COMPANY. IT IS ONLY THE ERRORS IN THE DETAILS SUBMITTED BY THE HOLDING COMPANY THAT THE AO HAS BEEN HAMPERING AROUND. THE AO HAS NO INDEPENDENT MATERIAL ON RECORD TO SUPPORT HIS FINDING BUT HE INTENDED TO RE ST HIS ASSESSMENT ON THE ERRORS WHICH HAVE ALREADY BEEN DULY RECONCILED. IN THIS FACTUAL BACKGROUND, I AM OF THE CONSIDERED VIEW THAT THE AO HAS ERRED IN LAW AS WELL AS ON FACTS IN RESTING HIS ASSESSMENT ON THE DETAILS FILED BY THE HOLDING COMPANY WHEN THE SAME WAS LATE R RETRACTED AND DULY RECONCILED AND WHICH WAS NOT CORROBORATED OR SUPPORTED BY ANY INDE PENDENT MATERIAL ON RECORD. IN VIEW OF THE ABOVE, IT IS TO BE HELD THAT THE ASSESSEE HA S DULY RECONCILED THE PURCHASE FIGURE OF RS.L0,91,15,288/- AS SHOWN BY THE HOLDING COMPANY I N ITS NOTES ON ACCOUNTS AND THE PURCHASE FIGURE OF RS.17,21,41,975/- AS ADOPTED BY THE AO IN THE IMPUGNED ASSESSMENT ORDER. THE ADDITION TO THE EXTENT OF RS.6,30,26,687 /- IS THEREFORE DIRECTED TO BE DELETED. 18. THE AO IN THE IMPUGNED ORDER HAS MADE ADDITION OF RS.6,53,81,975/- FOR WANT OF RECONCILIATION. IT WAS EXPLAINED THAT THE BALANCE D IFFERENCE OF RS.23,55,288/- IS DUE TO THE FACT THAT THE ASSESSEE COMPANY AND ITS HOLDING COMP ANY HAD GIVEN DIFFERENT ACCOUNTING TREATMENT TO CENTRAL & LOCAL SALES TAX, FREIGHT & O THER CHARGES AND EXCISE DUTY IN THEIR NOTES ON ACCOUNTS. IF WAS CLAIMED THAT THE ASSESSEE DID NOT CONSIDER IN ITS SALES THE CENTRAL SALES TAX AND LOCAL SALES TAX (CST &, LST) OF RS.42 ,62,707/- AND FREIGHT & OTHER CHARGES OF RS.9,092/- WHEREAS THE HOLDING COMPANY INCLUDED THE M IN ITS PURCHASES. SIMILARLY, THE EXCISE DUTY OF RS.19,16,797/- WAS CONSIDERED IN ITS PURCHASES BY THE HOLDING COMPANY WHEREAS THE SAME WAS NOT INCLUDED BY THE ASSESSEE I N ITS SALES. IT WAS THUS EXPLAINED THAT WHEN THE FIGURES OF CENTRAL SALES TAX' AND LOCAL SA LES TAX OF RS.42,62,707/-, FREIGHT & OTHER CHARGES OF RS.9,092/- AND EXCISE DUTY OF RS.19,16,7 97/- ARE TAKEN INTO CONSIDERATION, THEN THE FIGURE OF SALES AS SHOWN BY THE ASSESSEE IN ITS NOTES ON ACCOUNTS SHOULD TALLY WITH THAT OF PURCHASES AS SHOWN BY THE HOLDING COMPANY IN ITS NOTES ON ACCOUNTS. THOUGH CERTAIN CALCULATION SHEETS WERE PLACED ON RECORD, NO SUPPOR TING DOCUMENT COULD BE PRODUCED BY THE ASSESSEE. I HAVE PERUSED THE AUDITED ACCOUNTS O F THE ASSESSEE COMPANY AND ALSO THOSE OF THE HOLDING COMPANY. I FIND THAT THE ASSESSEE IN ITS NOTES ON ACCOUNTS UNDER RELATED PARTY DISCLOSURES HAS SHOWN SALES OF RS.10,67,60,(000) TO ITS HOLDING COMPANY WHEREAS THE HOLDING COMPANY HAS SHOWN IN ITS NOTES ON ACCOUNTS PURCHASES FROM THE ASSESSEE AT RS.10,91,15,288/- . I AM OF THE OPINION THAT IN SO FAR AS THE FIGURES CONTAINED IN THE AUDITED ACCOUNTS WERE CONCERNED; THE ONUS WAS ON THE ASSESS EE TO RECONCILE THE SAME. THE ASSESSEE HOWEVER HAS NOT BEEN ABLE TO PRODUCE DOCUMENTS TO S UPPORT ITS RECONCILIATION IN THIS REGARD. I AM THEREFORE UNABLE TO INTERFERE WITH THE IMPUGNED ORDER IN SO FAR AS THE ADDITION OF RS.23,55,288/- WAS CONCERNED. THE ADDITION TO TH E EXTENT OF RS.23,55,288/- IS THEREFORE 7 ITA NOS. 98 & 85/KOL/2015 M/S. MERINO PANEL PRODUCTS LTD., AY. 2003-04 CONFIRMED. IN EFFECT, THE ADDITION MADE BY THE AO I N THE IMPUGNED ORDER ON ACCOUNT OF SUPPRESSED SALES IS RESTRICTED TO RS.23,55,288/-. H OWEVER, I DO NOT FIND MUCH SUBSTANCE IN THE ARGUMENTS MADE BY THE ASSESSEE IN CHALLENGING T HE LEGAL VALIDITY OF THE ASSESSMENT AND THE SAME ARE THEREFORE REJECTED. GROUND NO. 1 TO 6 DISPOSED ACCORDINGLY. AGGRIEVED, BOTH REVENUE AND ASSESSEE ARE IN APPEAL BEFORE US RAISING THE GROUNDS AS AFORESTATED. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. FIRST WE TAKE UP THE ASSESSEES APPEAL AG AINST THE CONFIRMATION OF ADDITION OF RS.23,55,288/-. BEFORE US THE LD. AR FILED A RECONC ILIATION OF RS.23,55,288/-. TAKING NOTE OF THIS RECONCILIATION WHEN THIS APPEAL WAS FIXED F OR HEARING ON 29.01.2019, WE REQUESTED THE LD. CIT, DR TO VERIFY THE RECONCILIATION MADE B Y THE ASSESSEE. SO, TODAY WHEN THE MATTER WAS TAKEN UP FOR HEARING, THE LD. CIT, DR HA S FAIRLY CONCEDED THAT HE HAS CAREFULLY GONE THROUGH THE RECONCILIATION OF THE AMOUNT OF RS .23,55,288/- ALONG WITH OTHER DOCUMENTS AND HAS FOUND IT TO BE IN ORDER. THE REC ONCILIATION GIVEN BY THE ASSESSEE IS AS UNDER: RECONCILIATION OF DIFFERENCE OF RS.23.55 LACS : (RS.000) DISCLOSURE BY MPPL IN THE NOTES OF ACCOUNT. SALE T O CLCL : 10,67,60 DISCLOSURE BY CLCL IN THE NOTES OF ACCOUNT: PURCHASE FROM MPPL : 10,91,15 DIFFERENCE : 23,55 EXPLANATION OF RS. 23.55 LACS: DUE TO CST & GST INCLUDED BY CLCL IN THE FIGURE O F PURCHASE FROM MPPL : 4263/- FREIGHT INCLUDED IN THE PURCHASE BY CLCL : 9/- 4272 LESS : EXCISE DUTY REDUCED BY CLCL IN THE FIGURE OF PURCHASE : 1917 2355 SAY 23.55 LACS. 5. SINCE THE LD. CIT, DR FAIRLY ACCEPTED THAT THE A SSESSEE WAS ABLE TO RECONCILE THE AFORESAID AMOUNT, NOTHING SURVIVES AND AFTER SATISF YING OURSELVES THE RECONCILIATION 8 ITA NOS. 98 & 85/KOL/2015 M/S. MERINO PANEL PRODUCTS LTD., AY. 2003-04 SUBMITTED (SUPRA) WE ARE INCLINED TO ALLOW THE ASSE SSEE A RELIEF OF RS. 23.55 LACS AND WE ORDER DELETION OF THE SAID AMOUNT. 6. COMING TO THE REVENUES APPEAL, WE NOTE THAT THE LD. CIT(A) HAS GIVEN RELIEF AFTER FINDING THE EXPLANATION SUPPORTED BY DOCUMENTS FILE D AS CORRECT AND SO HE HELD THE EXPLANATION BY THE ASSESSEE IT TO BE IN ORDER AND W HEN ASKED BY US, THE LD. CIT DR ALSO COULD NOT POINT OUT ANY MISTAKE/ERROR IN THE IMPUGN ED ORDER WHICH CALLS FOR OUR INTERFERENCE. THEREFORE, WE COMPLETELY CONCUR WITH THE SAME REASO NING OF THE LD. CIT(A) ON THE FACTS WHICH WE FIND ARE CORROBORATED BY DOCUMENTS AS NOTE D BY HIM. THEREFORE, WE DO NOT WANT TO AGAIN REPEAT OUR FINDINGS CONCURRING WITH LD. CI T(A). FOR DOING SO, WE RELY ON THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. K. Y. PILLIAH & SONS (1967) 63 ITR 411, WE CONFIRM THE ORDER OF LD. CIT(A). SO, WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS GROUND. THEREFORE, THE APPEAL OF THE REVENUE IS DIS MISSED AND APPEAL OF ASSESSEE IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED AND APPEAL OF ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 3RD APRI L, 2019. SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 3RD APRIL, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DCIT, CENTRAL CIRCLE-1(2), KOLKATA. 2 RESPONDENT MERINO PANEL PRODUCTS LTD., 5, ALEXAND RA COURT, 60/1, CHOWRINGHEE ROAD, KOLKATA-700 020. 3 4 5 CIT (A), CENTRAL-1, KOLKATA. CIT , KOLKATA. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR
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