Assistant Commissioner of Income tax, Bangalore V. M/s Sunvik Steels P Ltd, Bangalore

MA 108/BANG/2015

• Counselvise Citation: [2015] 124 COUNSELVISE.COM (IT) 3546 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 30-09-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

MP.108/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAYPAL RAO, JUDICIAL MEMBER MISC. PETITION NO.108/BANG/2015 (IN I.T.A NO.725/BANG/2013) (ASSESSMENT YEAR : 2006-07) ASST. COMMISSIONER OF INCOME TAX, CIRCLE -6(1)(2), BANGALORE .. APPLICANT V. M/S. SUNVIK STEELS P. LTD, G-1/11, PLATINUM CITY, HMT MAIN ROAD, YESHWANTPURA, BANGALORE 560 022 .. RESPONDENT PAN : ACGPD6747B ASSESSEE BY : SMT. SHEETAL BORKAR, ADVOCATE REVENUE BY : DR. P. K. SRIHARI, ADDL. CIT HEARD ON : 27.11.2015 PRONOUNCED ON : 30.11.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : GROUNDS RAISED BY REVENUE IN THIS MISCELLANEOUS PE TITION READ AS UNDER : MP.108/BANG/2015 PAGE - 2 THE HONBLE ITAT HAS ERRED IN DELETING THE ADDITIO N MADE BY THE ASSESSING OFFICER BY PLACING RELIANCE UPON THE RULI NG IN CIT V. SUBHASH CHAND (273 ITR 216), WHICH IS TOTALLY UNREL ATED TO THE FACTS OF THE CASE ON HAND. THE CASE LAW SO RELIED UPON, IS ACTUALLY A RULING ON CLUBBING OF INCOME UNDER SECTION 64(1)(I II), WHICH HAS NO BEARING IN THIS CASE. 02. HEARD THE RIVAL CONTENTIONS. ISSUE RAISED IN T HE APPEAL OF THE ASSESSEE WAS AN ADDITION MADE ON ACCOUNT OF ALLEGED SUPPRESS ION OF TURNOVER FOR THE IMPUGNED ASSESSMENT YEAR. FINDING OF THE TRIBUNAL APPEAR AT PARAS 12 TO 17 WHICH ARE REPRODUCED HEREUNDER FOR BREVITY : 12. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. WHAT WE NOTE IS THAT AO ALL THROUGH T HE ASSESSMENT ORDER HAS NOT BROUGHT OUT ANY SPECIFIC DEFECT IN TH E BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE. NO DOUBT HE MENT IONED THAT ASSESSEE HAD CONSUMED 34897.80 MT OF COAL AND 32008 .50 MT OF IRON ORE BUT HAD GIVEN PRODUCTION OF ONLY 29082 MT OF SPONGE IRON. IT IS NOT KNOWN FROM WHERE THE AO FOUND THE NORM TH AT 1 TO 1.1 MT OF COAL AND 1.3 TO 1.4 MT OF IRON ORE WAS THE STAN DARD REQUIREMENT FOR PRODUCING 1 MT OF SPONGE IRON. ASSESSEE HAD ST ATED THAT CONSUMPTION OF THESE RAW MATERIAL WAS DEPENDENT ON THE MOISTURE AND DUST CONTENT, OPERATIONAL ENVIRONMENT AND PLAN T TECHNOLOGY USED. ASSESSEE HAD ALSO STATED THAT IT WAS OPERATI ONALISING A SECOND KILN AND THIS FACT WAS NOT DISPUTED BY THE L OWER AUTHORITIES. WHEN A NEW KILN IS BEING OPERATIONALISED FOR WHICH THE ASSESSEE HAD PRODUCED INVOICES IN SUPPORT OF PROCUREMENT OF MACHINERY AND ALSO POINTED OUT THE REQUIREMENT OF INJECTING WASHE D IRON ORE FOR THE NEW KILN, AND POINTED OUT THESE TO BE THE REAS ON WHY THERE WERE EXCESS CONSUMPTION OF COAL AND ELECTRICITY DURING T HE MONTHS OF OCTOBER TO DECEMBER 2005, THESE SHOULD NOT HAVE BEE N BRUSHED ASIDE LIGHTLY BY THE LOWER AUTHORITIES. THE MONTHW ISE PRODUCTION AND CONSUMPTION OF COAL, DIESEL AND POWER GIVEN AT PAGE 7 OF THE ASSESSMENT ORDER IS REPRODUCED HEREUNDER : MP.108/BANG/2015 PAGE - 3 MONTH PRODUCT- ION IN MT IRON ORE CONSUM PTION IN MT RATIO (%) COAL CONSUM PTION IN MT RATIO (%) POWER IN LACS RATIO (%) DIESEL IN LACS RATIO (%) APR05 2448 2696 110 2937 120 0 - 21.82 0.89 MAY05 4385 4827 110 5262 120 4.02 0.16 18.19 0.40 JUNE05 3253 3581 110 3903 119.90 8.49 0.19 3.55 0. 10 JULY05 1576 1732 109.80 1891 119.90 10.29 0.60 3.8 1 0.24 AUG05 2210 2432 110 2652 120 13.38 0.60 3.96 0.17 SEPT05 3125 3439 110 3750 120 14.40 0.46 4.24 0.13 OCT05 1040 1144 110 1248 120 13.27 1.20 4.24 0.40 NOV05 1540 1695 110 1848 120 14.40 0.90 4.24 0.27 DEC05 1985 2190 110 2382 120 13.87 0.60 8.48 0.40 JAN06 2760 3036 110 3312 120 10.41 0.30 8.48 0.30 FEB06 2170 2387 110 2604 120 13.01 0.50 8.48 0.39 MAR06 2590 2849 110 3108 120 16.04 0.6 - - TOTAL 29082 32008 34897 13. THE RATIO OF CONSUMPTION OF 0.90% AND 0.60% FO R THE MONTHS OF NOVEMBER AND DECEMBER 2005, CANNOT BE TER MED AS EXCESSIVE WHEN COMPARED TO THE RATIOS FOR THE OTHER MONTHS, WHEN THE NEW KILN WAS BEING OPERATIONALISED. THE CONSUM PTION OF OCTOBER 2005 ALONE WAS HIGHER, BUT THIS ALONE IN OU R OPINION, COULD NOT BE A GOOD ENOUGH REASON TO REJECT THE BOOKS OF ACCOUNTS. ADMITTEDLY, THIS WAS THE PERIOD WHEN THE SECOND KIL N WAS BEING SET- UP. STATISTICAL DATA BY ITSELF CANNOT BE USED AS A REASON FOR REJECTING THE BOOKS OF ACCOUNT UNLESS SUCH STATISTI CAL DATA ARE STRIKING ENOUGH TO SHOW THAT THE BOOK RESULTS HAVE BEEN EXAGGERATED AND NO MAN WITH COMMON PRUDENCE WILL AC CEPT SUCH BOOK RESULTS. ASSESSEE NO DOUBT HAD PURCHASED LARG E QUANTITY OF COAL DURING THE MONTHS OF OCTOBER AND NOVEMBER, 200 5, BUT IN THE SAME TWO MONTHS, THE PURCHASE OF IRON ORE WAS MUCH LOWER. PURCHASE OF LARGE QUANTITY OF COAL AND MAINTENANCE OF IRON ORE STOCK CANNOT BE TERMED AS DEFECT IN ACCOUNTS WHEN T HE PURCHASES WERE DULY REFLECTED IN THE BOOKS AND THE STOCK REGI STER. AS TO THE LETTER RECEIVED BY THE AO FROM DGCEI IT IS NOT DISP UTED THAT THE SURVEY DONE BY THE CENTRAL EXCISE WERE AFTER THE RE LEVANT PREVIOUS MP.108/BANG/2015 PAGE - 4 YEAR. ASSESSEE CANNOT BE SADDLED WITH ANY ADDITION FOR SUPPRESSED SALE BASED ON A SURVEY CONDUCTED IN A SUCCEEDING YE AR WHEN THE EXCESS STOCK FOUND AT THE TIME OF SURVEY IS NOT COL LATED WITH THE PRODUCTION DATA FOR THE PRECEDING YEAR. IN ANY CAS E, THE SALES-TAX ASSESSMENT ORDER FOR THE RELEVANT PREVIOUS YEAR PLA CED AT PAPER BOOK PAGES 82 TO 85 SHOW THAT BOOKS OF ACCOUNT OF T HE ASSESSEE WERE MAINTAINED IN THE USUAL COURSE OF BUSINESS, WE RE VERIFIED, AND NO DEFECTS WERE FOUND. RELEVANT PARAS OF THE ORDER DT.25.03.2010 IS REPRODUCED HEREUNDER : THE DEALER IS A MANUFACTURER OF SPONGE IRON, STEEL INGOTS & TMT BARS. FOR THE PROCESS OF MANUFACTURE, THE MAIN RAW MATERIALS ARE IRON ORE WHICH IS PURCHASED LOCALLY F ROM LOCAL REGISTERED DEALERS. THE OTHER RAW MATERIALS ARE COA L WHICH IS PURCHASED FROM LOCAL REGISTERED DEALERS, INTERSTATE AND BY WAY OF HIGH SEA SALE. THE LIME STONE WHICH IS ONE OF THE O THER RAW MATERIALS IS PURCHASED FROM INTERSTATE DEALERS. ALL THESE RAW MATERIALS ARE HEATED IN THE KILN AND AFTER SUITABLE PROCESSING SPONGE IRON IS OBTAINED AND THE SAME IS GOT CONVERT ED TO INGOTS AND TMT BARS BY USING SUITABLE PROCESS. AS REGARDS THE MANUFACTURE OF INGOTS THE DEALER HAS PURCHASED SCRA P WHICH GO INTO THE PROCESS OF MANUFACTURE AND THE SAME IS PUR CHASED FROM LOCAL REGISTERED DEALERS AND BY WAY OF IMPORT. THE DEALER HAS ALSO EFFECTED PURCHASES OF PIG IRON FROM LOCAL REGI STERED DEALERS AND INTERSTATE DEALERS. HOWEVER THE SPONGE IRON USE D IN THE MANUFACTURE OF INGOTS IS MANUFACTURED BY THE DEALER . AS REGARDS THE MANUFACTURE OF TMT BARS, THE MS INGOTS MANUFACT URED BY THE DEALER ARE USED APART FROM PURCHASES FROM LOCAL REG ISTERED DEALERS. FOR THE PROCESS OF MANUFACTURE OF TMT BARS , THE DEALER HAS ALSO EFFECTED PURCHASES OF MS BILLETS FROM LOCA L REGISTERED DEALERS. THE DEALER HAS ALSO EFFECTED PURCHASES OF CONSUMABLES LIKE SILICO MANGANESE, FERRO MANGANESE, MOULDS FROM LOCAL REGISTERED DEALERS AND INTERSTATE DEALERS, AND PURC HASE OF BP SETS (BRICKS) AND RUNNING MASS FROM LOCAL REGISTERE D DEALERS. THE DEALER HAS ALSO EFFECTED PURCHASES OF CAPITAL GOODS LIKE MACHINERY AND THEIR SPARES. AS REGARDS ALL LOCAL RE GISTERED DEALER PURCHASES INPUT TAX DEDUCTION AT 4 AND 12.5% AS APPLICABLE TO THE COMMODITY IS CLAIMED. THE DEALER HAS ALSO EFFECTED PURCHASES OF GOODS NOT USED FOR MANUFACTUR E OR TRADING. MP.108/BANG/2015 PAGE - 5 HOWEVER THESE GOODS ARE CLASSIFIED UNDER THE CATEGO RY OF EXEMPT GOODS AND NO INPUT TAX DEDUCTION IS CLAIMED. FOR ALL THE PROCESS OF MANUFACTURE, THE DEALER HAS USED ELECTRICITY, COAL AND DIESEL. THE ELECTRICITY USED FOR HEATING THE FURNACE, COAL IS USED FOR RE-ROLLING PLANT AS FUEL & AS RAW MATERIAL FOR MANUFACTURE OF SPONGE IRON. THE DIESEL IS USED FOR D.G. SETS FOR GENERATION OF POWER. HOWEVER NO INPUT TAX DEDUCTION IS CLAIMED AS REGARDS PURCHASE OF DIESEL. THE DEALER HAS EFFECTED SALES OF SPONGE IRON, INGOT S AND TMT BARS. THE DEALER HAS EFFECTED LOCAL AND INTERST ATE SALES OF SPONGE IRON, LOCAL SALE OF INGOTS AND LOCAL INTERST ATE SALES OF TMT BARS. ON ALL THE LOCAL SALES OF DEALER, VAT IS CHAR GED AND COLLECTED AT 4% ON SALE OF SPONGE IRON, MS INGOTS, TMT BARS ETC. THE DEALER HAS ALSO EFFECTED INTERSTATE SALES AND H AS CHARGED AND COLLECTED CST AT 4% AGAINST C FORMS. THE BOOKS OF ACCOUNTS OF THE DEALER ARE MAINTAINED IN THE USUAL COURSE OF BUSINESS AND IN A VERIFIABLE MANNER . NO DISCREPANCIES ARE NOTICED EXCEPT FOR THE BELOW MENT IONED ANOMALY. 14. READING OF THE ABOVE ORDER ALSO GO TO SHOW THAT ASSESSEE WAS NOT A SIMPLE PRODUCER OF SPONGE IRON BUT THEY WERE DOIN G MANY OTHER ACTIVITIES AND THERE WAS NO DEFECTS OR LACUNA NOTED BY THE SALES-TAX AUTHORITIES. HONBLE ALLAHABAD HIGH COURT IN CIT V . SUBHASH CHAND (SUPRA) HAS CLEARLY HELD THAT THE RECORDS OF THE AS SESSEE ONCE ACCEPTED BY THE SALES-TAX AUTHORITIES, COULD NOT BE GIVEN A GO-BY BY THE INCOME- TAX AUTHORITIES. REJECTION OF THE BOOKS OF ACCOUNT U/S.145(3) OF THE ACT HAS GOT VERY SERIOUS CONSEQUENCE ON AN ASSESSEE AND CANNOT BE DONE IN A LIGHT HEARTED MANNER UNLESS SUCH DEFECTS ARE M ANIFESTED IN THE BOOKS OF ACCOUNT AND CAN BE POINTED OUT WITH CERTAI NTY. WE ARE OF THE OPINION THAT THERE WAS NO OCCASION OR INSTANCES OF THIS NATURE POINTED OUT BY THE AO IN THE ASSESSMENT ORDER, EXCEPT FOR G ENERALISATIONS BASED ON HYPOTHETICAL STANDARDS, THE SOURCE OF WHIC H WAS NEVER AUTHENTICATED. THE ADDITIONS, IN OUR OPINION, HAD N O LEGS TO STAND. SUCH ADDITIONS STAND DELETED. MP.108/BANG/2015 PAGE - 6 03. A READING OF THE ABOVE ORDER CLEARLY SHOW THAT THE TRIBUNAL HAD DELETED THE ADDITION BY NOT RELYING ON ANY JUDGMENT S, FOR A REASON THAT AO COULD NOT SPOT ANY SPECIFIC DEFECTS BUT AND HAD GON E BY GENERALISATION. AS FOR THE ERROR IN CITATION, WHAT HAS BEEN POINTED OU T BY THE REVENUE IS CORRECT. THE CORRECT CITATION WAS JUDGMENT OF HON BLE MADRAS HIGH COURT IN THE CASE OF CIT V. ANANDHA METAL CORPORATION [(2 005) 273 ITR 262] AND NOT THAT OF HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT V. SUBHASH CHAND [273 ITR 216]. SECOND SENTENCE IN PARA 14 OF THE ORDER SHALL THEREFORE BE READ AS UNDER : HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. AN ANDHA METAL CORPORATION [(2005) 275 ITR 262] HAS CLEARLY HELD THAT THE RECORDS OF THE ASSESSEE ONCE ACCEPTED BY T HE SALES- TAX AUTHORITIES, COULD NOT BE GIVEN A GO-BY, BY THE INCOME- TAX AUTHORITIES. TO THIS EXTENT THE ORDER STANDS CORRECTED. THERE W ILL BE NO OTHER CHANGES IN THE ORDER. MP.108/BANG/2015 PAGE - 7 04. IN THE RESULT, MP OF THE REVENUE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH DAY OF N OVEMBER, 2015. SD/- SD/- (VIJAYPAL RAO) (ABRAH AM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR