ACIT CENT CIRCLE, Dhanbad V. M/s Maa kali Alloys Udyog Pvt Ltd, Kolkata

ITSSA 93/RAN/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7799 (ITAT-RANCHI)
• Duration Of Justice: 3 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-07-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 26-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: INDERJEET SINGH
• Section: 143(3); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI, BENCH, RANCHI BEFORE SHRI S.S. GODARA, JM &DR. A.L.SAINI, AM ./IT(SS)A NO.93/RAN/2016 ( / ASSESSMENT YEAR:2012-13) ACIT,CC-DHANBAD VS. M/S MAA KALI ALLOYS UDYOG PVT. LTD. 46-A, RAFI AHMED KIDWAI ROAD, 2 ND FLOOR, KOLKATA-16 ./ ./PAN/GIR NO.: AADCM 3424 C (APPELLANT) .. (RESPONDENT) APPELLANTBY :SHRI DEVESH PODDAR, ADVOCATE RESPONDENT BY :SHRI INDERJEET SINGH, CIT (DR) / DATE OF HEARING : 06/03/2020 /DATE OF PRONOUNCEMENT : 08/07/2020 / O R D E R PER BENCH: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTAI NING TO ASSESSMENT YEAR 2012-13, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-3, PATNA, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT) DATED 29/03/2014. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AR E AS FOLLOWS: 1. DURING THE COURSE OF SURVEY ON 22.06.2011 AT MAN UFACTURING UNIT AT GERWANI, RAIGARH, STOCK WAS MEASURED BY SH. B. P. JAISWAL, S R. MANAGER, SURVEY, S.E. C.L. RAIGARH, WHO IS AN EXPERT IN THE FIELD OF SURVEY AN D INVENTORY WAS PREPARED IN PRESENCE OF SHRI LINGRAJ PARIDA, CIVIL H.O.D. OF MA A KALI ALLOYS PVT. LTD. BOTH OF THEM HAVE RECORDED THEIR SIGNATURE ON THE INVENT ORY AND DETAILS OF CALCULATION MADE AT TIME OF SURVEY. THEREFORE, ASSESSEES PLEA AFTER SURVEY THAT HOPPERS WILL HAVE 650 MT AND KILN WILL HAVE 150 MT IRON ORE WAS NOT RECORDED DURING THE COURSE OF SURVEY IS BASELESS AND IT IS AN AFTERTHOU GHT ONLY TO GET RELIEF. M/S MAA KALI ALLOYS UDYOG LTD. IT(SS)A NO. 93/RAN/2016 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 2 22 2 2. THE LD. CIT(A) HAS ERRED BY ALLOWING THE RELIEF ON THE PLEA OF THE ASSESSEE WHICH WAS NEITHER SUPPORTED BY ANY DOCUMENTS/EVIDEN CES NOR HAVE ANY CIRCUMSTANTIAL EVIDENCE. 3. ANY OTHER GROUND THAT MAY BE RAISED DURING THE C OURSE OF HEARING. 3. BRIEF FACTS QUA THE ISSUE ARE THAT A SURVEY WAS CONDUCTED AT THE MANUFACTURING UNIT AT GERWANI, RAIGARH. STOCK WAS INVENTORISED PH YSICALLY BY THE SURVEYORS OF SECL, RAIGARH. THE VOLUME OF STOCK FOUND WAS CONVER TED INTO TONNAGE AND WEIGHT WAS CALCULATED AS UNDER: STOCK OF IRON ORE FOUND PHYSICAL VERIFICATION 3073. 15 MT STOCK OF IRON ORE AS PER BOOKS 6251.27 MT THUS, THE SHORTAGE OF STOCK COMES TO 3178.12 MT ( 6251.27 MT-3073.15 MT) THE ASSESSEE EXPLAINED SAID SHORTAGE OF STOCK TO TH E ASSESSING OFFICER. THE ASSESSEE STATED THAT STOCK OF 2150.000 MT RECEIVED FROM M/S JSPL WAS NOT CONSIDERED BY THE SURVEYORS. SECONDLY 600 MT IRON WAS INSIDE HOPP ERS AND 150 MT WAS IN THE KILN WHICH SHOULD HAVE BEEN ACCOUNTED FOR. THE ASSE SSEE ALSO ENCLOSED A COPY OF LETTER SENT ON 19.08.2011 TO THE ADIT (INV.), DHANB AD IN THIS REGARD. HOWEVER,THE APPRAISAL REPORT IS SILENT ABOUT THE LETTER AND AS SUCH THE CASE IS DECIDED ON MERIT. THE CONTENTION OF THE ASSESSEE THAT A HEAP CONTAINI NG THE ORE FROM M/S JSPL WAS NOT CONSIDERED BY THE SURVEYORS IS NOT ACCEPTABLE B ECAUSE SUCH A HEAP WILL NOT GO UNNOTICED ESPECIALLY WHEN THE REPRESENTATIVE OF THE ASSESSEE WAS PRESENT ON THE SPOT AND SIGNED THE DOCUMENT. SECONDLY, IT HAS BEEN NOTICED THAT THE ASSESSEE GROUP CONSIDERS STOCK ISSUED AND TAKEN IN FINISHED GOODS ONCE IT IS ISSUED FOR THE PRODUCTION PROCESS. THUS, THE STOCK OF IRON ORE ON PHYSICAL VERIFICATION SHALL BE TAKEN AS 2,323.150 MT. CONSEQUENTLY, THE SHORTAGE OF IRON SHALL BE TO THE TUNE OF 3928.07M.T. ( 6251.27 MT 2323.15 MT). THIS INDICA TES THAT THE SAME WAS SOLD OUTSIDE BOOKS. THE SALE PRICE OF IRON ORE COMES TO RS. 7329/- (36,17,91,181 / 49,365.29) PER MT. THUS, TOTAL UNDISCLOSED INCOME O F THE ASSESSEE IN THE TRANSACTION SHALL BE RS. 2,87,88,825/-( 3928.07M.T. X RS.7329) WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE BY THE ASSESSIN G OFFICER. M/S MAA KALI ALLOYS UDYOG LTD. IT(SS)A NO. 93/RAN/2016 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 3 33 3 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY ASSESSING OFFICER BUT MADE ADDITION BASED ON THE GROSS PROFIT RATIO @ 4.38%, OBSERVING THE FOLLOWING: AFTER CONSIDERING THE FINDINGS OF THE ASSESSING OF FICER IN THE ASSESSMENT ORDER AND THE APPELLANTS SUBMISSION, I FIND THAT THE MAI N DIFFERENCE IN STOCK HAS BEEN WORKED OUT WITH RESPECT TO IRON ORE PHYSICALLY FOUN D AT 3073.15 MT AS AGAINST THE BOOK STOCK OF 6251.27 MT. THE SHORTAGE OF STOCK WAS THUS WORKED OUT AT 3178.12 MT. THE ASSESSING OFFICER FURTHER ADDED THE STOCK O F 600 MT IRON ORE INSIDE THE HOPPER AND 150 MT STOCK IN THE KILN BASED ON THE AP PELLANTS REPLY DURING THE ASSESSMENT PROCEEDINGS. THE APPELLANT ALSO EXPLAINE D THAT STOCK PURCHASE OF 2150 MT FROM M/S JSPL WAS NOT CONSIDERED BY THE SURVEYOR S AND THIS FACT WAS BROUGHT TO THE NOTICE OF THE ADIT VIDE LETTER DATED 19.08.2 011. BASED ON THE APPELLANTS REPLY, THE ASSESSING OFFICER WORKED OUT SHORTAGE OF STOCK AT 3178.12 MT PLUS 750 MT LYING IN THE HOPPERS AND THE KILN. THIS WORKING OF THE AO IS INCORRECT FOR THE REASON THAT THE STOCK INSIDE THE HOPPER AND THE KIL N WAS NOT TAKEN INTO ACCOUNT AT THE TIME OF PHYSICAL STOCK TAKING AND APPELLANT CLA IMED THAT THE MANUFACTURING PROCESS BEING CONTINUOUS, AT ANY POINT OF TIME, THE HOPPERS WILL HAVE 650 MT AND KILN WILL HAVE 150 MT IRON ORE. THEREFORE, IF THE S TOCK LYING INSIDE THE HOPPERS AND KILN TOTALING TO 750 MT IS CONSIDERED, THIS WIL L ADD UP TO THE STOCK AS PER PHYSICAL VERIFICATION THEREBY REDUCING THE STOCK SH ORTAGE BY 750 MT AS AGAINST THE SHORTAGE IN STOCK INCREASED BY THE AO. CONSIDER ING THIS FACT, THE SHORTAGE IN STOCK WILL WORK OUT TO 2428.12 MT OF IRON ORES (317 8.12 MT - 750 MT). THE SECOND MISTAKE COMMITTED BY THE AO IS THAT THE SHOR TAGE OF STOCK HAS BEEN TREATED AS UNDISCLOSED SALES AND THE WHOLE OF THE SALE CONS IDERATION PERTAINING TO THE SHORTAGE OF STOCK HAS BEEN ADDED TO THE TOTAL INCOM E OF THE APPELLANT AS UNDISCLOSED INCOME. THIS IS TOTALLY AGAINST THE PRI NCIPLES OF ACCOUNTING AS THE APPELLANT HAS SHOWN THE PURCHASES OF STOCK AS IS AP PARENT FROM THE STOCK AS PER BOOKS AND IF AT ALL, ANY SHORTAGE OF STOCK IS FOUND , THERE CAN BE ADDITION ONLY PERTAINING TO GROSS PROFIT ON SUCH UNDISCLOSED SALE S. THERE CAN NEVER BE UNDISCLOSED INCOME EQUIVALENT TO THE UNDISCLOSED SA LES IN SUCH A SITUATION. THE APPELLANT HAS CONTROVERTED THE STOCK DIFFERENCE AND RECONCILED THE SHORTAGE IN STOCK BY CLAIMING THAT ONE HEAP OF STOCK PERTAINING TO PURCHASE FROM M/S JSPL WAS NOT CONSIDERED. THIS CONTENTION OF THE APPELLAN T IS UNVERIFIABLE AS AT THE TIME OF PHYSICAL STOCK TAKING PROCESS, THE APPELLANTS R EPRESENTATIVE DID NOT POINT OUT ANY SUCH LAPSE IN STOCK TAKING. HENCE, THE NET SHOR TAGE OF STOCK OF IRON ORE CAN BE WORKED OUT AT 2428.12 MT AND THIS CAN BE TREATED AS UNDISCLOSED SALE. AFTER APPLYING THE AVERAGE RATE OF RS. 7,329/- PER MT OF IRON ORES ( AS TAKEN BY THE AO IN THE ASSESSMENT ORDER) THE TOTAL UNDISCLOSED SALE S WORK OUT TO RS. 1,77,95,691/-. THE GROSS PROFIT OF 4.38 % SHOWN BY THE APPELLANT C AN BE TAKEN AS THE RATE OF GROSS PROFIT ON UNDISCLOSED SALES OF RS. 1,77,95,69 1/-. THUS, THE UNDISCLOSED INCOME PERTAINING TO STOCK SHORTAGE, WORK OUT OF RS . 7,79,451/- (4.38% OF RS. 1,77,95,691/-). ACCORDINGLY, UNDISCLOSED INCOME IN RESPECT OF STOCK SHORTAGE CAN BE ADDED TO THE TUNE OF RS. 7,79,451/- ONLY. HENCE, THE ADDITION OF RS. 2,87,88,825/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF STOCK SHORTAGE IS HEREBY REDUCED TO RS. 7,79,451/-.( 4.38% OF RS. 1,7 7,95,691). M/S MAA KALI ALLOYS UDYOG LTD. IT(SS)A NO. 93/RAN/2016 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 4 44 4 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 6. LEARNED DR FOR THE REVENUE HAS PRIMARILY REITERA TED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OU R EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY AND ON T HE OTHER HAND THE LD COUNSEL FOR THE ASSESSEE DEFENDED THE ORDER PASSED BY THE LD. C IT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GON E THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCU MENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS AVAILABLE ON RECORD. WE NOTE THAT THE LEARNED ASSESSING OFFICER HAS MADE ADDITIONS OF RS. 2,87,88 ,825/- ALLEGING THE SAME AS UNDISCLOSED SALES FOR THE INSTANT YEAR. HE HAS OBSE RVED THAT STOCK FOUND ON PHYSICAL VERIFICATION DURING SURVEY OPERATIONS WAS LESS THAN THE STOCK AS PER BOOKS AND HE HAS ACCORDINGLY CONSIDERED THE ALLEGED STOCK DIFFERENCE AS SALES OUTSIDE BOOK. HAVING GONE THROUGH THE ORDER OF THE LD. CIT( A) WE NOTICED THAT THE LD. CIT(A) HAS WORKED OUT THE NET SHORTAGE OF STOCK OF IRON ORE AT 2428.12 MTAND THIS CAN BE TREATED AS UNDISCLOSED SALES AND AFTER APPLY ING THE AVERAGE RATE OF RS.7329 PER MT OF IRON ORE, THE LD CIT(A)HAS COMPUTED THE T OTAL UNDISCLOSED SALES AT RS. 1,77,95,691/- ( 2428.12 MT X RS.7329) ON WHICH HE APPLIED GROSS PROFIT RATIO @ 4.38% AND THUS, COMPUTED THE ADDITION WHICH IS TO B E SUSTAINED AT RS. 7,79,451/-. WE NOTE THAT BECAUSE OF NET SHORTAGE OF STOCK OF IR ON ORE AT 2428.12 MT,THE TOTAL UNDISCLOSED SALES COMES AT RS. 1,77,95,691/- ( 2428 .12 MT X RS.7329). THE PROPER WAY TO TAX THE UNDISCLOSED SALES, IN ASSESSE E`S CASE, IS THE GROSS PROFIT RATIO. WE NOTE THAT AS PER BOOKS OF ACCOUNTS OF THE ASSESS EE THE GROSS PROFIT RATIO IS @ 4.38% WHICH THE LD CIT(A) HAS TAKEN AS A BASE TO TA X UNDISCLOSED SALES. WE NOTE THAT THERE IS NO ANY INFIRMITY IN THE ORDER OF LD C IT(A) IN TAKING THE GROSS PROFIT RATIO AS A BASE TO TAX UNDISCLOSED SALES. WE NOTE T HAT LD CIT(A) COMPUTED THE ADDITION TAKING INTO ACCOUNT NATURE OF BUSINESS AND FACTS AND CIRCUMSTANCES OF THE ASSESSEE`S CASE. THAT BEING SO, WE DECLINE TO INTER FERE IN THE ORDER PASSED BY THE LD. M/S MAA KALI ALLOYS UDYOG LTD. IT(SS)A NO. 93/RAN/2016 ASSESSMENT YEAR:2012-13 P PP PA AA AG GG GE EE E | || | 5 55 5 CIT(A), HIS ORDER ON THIS ISSUE, IS HEREBY UPHELD A ND THE GROUNDS OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 8. BEFORE PARTING, IT IS NOTED THAT THE ORDER IS BE ING PRONOUNCED AFTER 90 DAYS OF HEARING. HOWEVER, TAKING NOTE OF THE EXTRAORDINARY SITUATION IN THE LIGHT OF THE COVID-19 PANDEMIC AND LOCKDOWN, THE PERIOD OF LOCKD OWN DAYS NEED TO BE EXCLUDED. FOR COMING TO SUCH A CONCLUSION, WE RELY UPON THE DECISION OF THE CO- ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE O F DCIJT VS JCB LIMITED IN ITA NO 6264/MUM/2018 AND ITA NO. 6103/MUM/2018 FOR A.Y. 2013-14 ORDER DATED 14.05.2020. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 08.07.2020 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 08/07/2020 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. ACIT,CC-DHANBAD 2. M/S MAA KALI ALLOYS UDYOG PVT. LTD. 3. C.I.T(A)- 4. C.I.T.- RANCHI 5. CIT(DR), RANCHI BENCH, RANCHI . 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, RANCH I BENCH