M /S Western Gum & Chemicals Inds, Ahmedabad v. The I T O, Ahmedabad

ITA 1161/AHD/1999 | 1995-1996
Pronouncement Date: 25-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 116120514 RSA 1999
Bench Ahmedabad
Appeal Number ITA 1161/AHD/1999
Duration Of Justice 11 year(s) 10 month(s) 11 day(s)
Appellant M /S Western Gum & Chemicals Inds, Ahmedabad
Respondent The I T O, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 25-03-2011
Date Of Final Hearing 21-03-2011
Next Hearing Date 21-03-2011
Assessment Year 1995-1996
Appeal Filed On 14-05-1999
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D. C. AGRAWAL AM) ITA NO.1161/AHD/1999 A. Y.: 1995-96 M/S. WESTERN GUM & CHEMICAL INDUSTRIES 4/4111 G. I. D. C. NARODA AHMEDABAD VS THE INCOME TAX OFFICER WARD 2(5) INSURANCE BUILDING ASHRAM ROAD AHMEDABAD PA NO. FQ 7441 (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. N. DIVETIA AR RESPONDENT BY SHRI S. K. JHA SR. DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-II AHMEDABAD DATED 22-03-1999 FOR ASSESSMENT YEAR 1995-96. 2. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT GROUND NO.1 OF THE APPEAL IS GENERAL AND HE WOULD NOT RELY UPON GROUND NO.2 OF THE APPEAL. THESE GROUNDS ARE ACCORDINGLY DISMIS SED. 3. ON GROUNDS NO.3 4 AND 5 THE ASSESSEE CHALLENGE D THE ADDITIONS OF RS.1 00 000/- ON ACCOUNT OF PROFIT ON SALE OF FIRE WOOD AND RS.1 90 000/- ON ACCOUNT OF PROFIT ON SALE OF M ACHINERY SPARE PARTS. ITA NO.1161/AHD/2009 WESTERN GUM & CHEMICAL INDUSTRIES VS ITO WARD 2(5) AHMEDABAD 2 4. THE FACTS OF THE CASE ARE THAT A SURVEY ACTION U /S 133A OF THE IT ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE A SSESSEE ON 16-11-1994. AS PER THE ASSESSMENT ORDER DURING THE COURSE OF SURVEY IT WAS NOTICED THAT THE ASSESSEE WAS NOT ACC OUNTING FULLY AND TRULY THE JOB WORK RECEIPTS OF CRUSHING OIL SEEDS F OR MANUFACTURING AND PROCESSING OF MUSTARD OIL. DURING THE COURSE OF SUR VEY A STATEMENT OF SHRI PRABHUDAS VACHHANI DESCRIBED AS THE MAIN PART NER OF THE ASSESSEE FIRM IN THE ASSESSMENT ORDER WAS RECORDED AND HE HAS SURRENDERED RS.7 00 000/- AS ADDITIONAL INCOME ON B EHALF OF THE ASSESSEE FIRM: (A) ADDITIONAL LABOUR CHARGES NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS RS.2 50 000/- (B) PROFIT ON SALE OF FIREWOOD NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS RS.1 00 000/- (C ) PROFIT ON SALE OF MACHINERY SPARE-PARTS NOT ACCOUNTED IN THE BOOKS OF ACCOUNTS RS.1 90 0 00/- (D) PROFIT EARNED ON TRANSACTION OF CERTAIN SHARES NOT ACCOUNTED IN THE BOOKS RS.1 60 000/- RS.7 00 000/- IT APPEARS THAT SUBSEQUENTLY ON 18-11-1994 SHRI PR ABHUDAS VACHHANI FILED AN AFFIDAVIT RETRACTING FROM THE ADD ITIONAL INCOME DISCLOSED BY HIM EXCEPT REGARDING THE ADDITIONAL IN COME EARNED ON JOB WORK OF RS.2 50 000/-. IT IS STATED THAT SHRI P RABHUDAS VACHHANI IS THE MAIN PARTNER ALONG WITH OTHER PARTNERS AND HAS OVERALL SUPERVISION. IT WAS NOTED IN THE ASSESSMENT ORDER T HAT DISCLOSURE OF ITA NO.1161/AHD/2009 WESTERN GUM & CHEMICAL INDUSTRIES VS ITO WARD 2(5) AHMEDABAD 3 THE ADDITIONAL INCOME WAS MADE WITHOUT ANY PRESSURE . THE ASSESSMENT ORDER ALSO STATED RETRACTION HAS BEEN MA DE ON SOME OF THE ISSUES BECAUSE THE DEPARTMENT DID NOT HAVE ANY EVIDENCE TO SHOW THAT ADDITION IS JUSTIFIED. IT WAS STATED THAT THE ADDITION IS MADE OF RS.4 50 000/- ONLY ON THE STATEMENT OF ONE OF TH E PARTNERS AND NEITHER ANY DISCREPANCY IN THE STOCK OR CASH WAS F OUND NOR ANY SUPPRESSION IN THE PURCHASES AND SALES WAS FOUND. I T WAS SUBMITTED THAT THE DEPARTMENT PUT HARRASMENT AND IRRELEVANT Q UESTIONS WERE ASKED AND THE ASSESSEE WAS FORCED TO DECLARE ADDITI ONAL INCOME WITHOUT ANY BASIS. CERTAIN DECISIONS WERE RELIED UP ON IN SUPPORT OF THE SAME THAT IF THE ASSESSEE EXPLAINS THE ISSUE TH EN ADDITION CANNOT BE MADE MERELY ON ADMISSION MADE AT THE TIME OF SUR VEY. IT WAS ALSO EXPLAINED THAT THE ASSESSEE DID NOT RETRACT FROM TH E STATEMENT FOR ADDITIONAL LABOUR CHARGES OF RS.2 50 000/-. IT WAS EXPLAINED THAT ON OTHER ITEMS ADDITION IS MADE WITHOUT ANY BASIS. 5. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE NOTED WITH REGARD TO RETRACTION FROM THE S TATEMENT THAT ONCE RETRACTION HAS BEEN MADE FROM THE SURRENDER MADE BY THE ASSESSEE DURING THE COURSE OF SURVEY IT WOULD NOT BE REASON ABLE TO UPHOLD THE ADDITION MERELY ON THE BASIS OF SURRENDER MADE IN T HE ABSENCE OF ANY SUPPORTING EVIDENCE. THE LEARNED CIT(A) THEREAFTER DISCUSSED THE ISSUE OF SALE OF UNACCOUNTED FIRE WOOD IN THE ASSES SMENT YEAR UNDER APPEAL AND THE OTHER YEARS AND ON COMPARISON NOTED THAT THE ASSESSEE HAS CALCULATED CONSUMPTION OF FIRE WOOD EX CESSIVELY AND VARIATION IN CONSUMPTION OF FIRE WOOD IN THE ASSESS MENT YEAR AS COMPARED WITH THE EARLIER YEARS IS NOT EXPLAINED. H E HAS ALSO NOTED ITA NO.1161/AHD/2009 WESTERN GUM & CHEMICAL INDUSTRIES VS ITO WARD 2(5) AHMEDABAD 4 THAT THE AO REJECTED THE BOOKS OF ACCOUNTS AND THE ASSESSEE FAILED TO PRODUCE COMPLETE RECORD. THE ASSESSEE SHOULD EXPLAI N IN WRITING THE FIRE WOOD USED IN PRODUCTION IN RESPECT OF JOB WORK AND INVESTMENT AND WITHDRAWAL SHOULD ALSO BE EXPLAINED. THE LEARNE D CIT(A) ALSO NOTED WITH REGARD TO CONSUMPTION OF FIRE WOOD THAT NO STOCK REGISTER AND MOVEMENT OF FIRE WOOD HAVE BEEN PRODUCED AND TH ERE IS CHANGE IN THE ACCOUNTING SYSTEM. THEREFORE ADDITION OF RS .1 00 000/- IS CORRECTLY MADE. AS REGARDS THE ADDITION OF RS.1 90 000/- THE LEARNED CIT(A) ALSO NOTED THAT THOUGH THERE IS POSITIVE EVI DENCE THAT THE ASSESSEE WAS INDULGING IN CONSUMPTION OF MACHINERY SPARE PARTS BUT THE CIRCUMSTANTIAL EVIDENCE IS SUFFICIENT TO UPHOLD THE ADDITION. SIMILARLY COMPARISON OF THE JOB WORK WITH CONSUMPT ION OF MACHINERY SPARE PARTS IN THE ASSESSMENT YEAR UNDER APPEAL AND PRECEDING ASSESSMENT YEAR WAS MADE AND ADVERSE INFERENCE WAS DRAWN AGAINST THE ASSESSEE FOR MAKING THE ADDITION. IT WA S ALSO NOTED THAT CONSIDERING THE COMPARISON WITH THE EARLIER YEARS THE STATEMENT OF THE MAIN PARTNER CANNOT BE IGNORED AND ACCORDINGLY ADDITION OF RS.1 90 000/- WAS CONFIRMED ON ACCOUNT OF SALE OF M ACHINERY SPARE PARTS. WITH REGARD TO THE ADDITION OF RS.1 60 000/- THE LEARNED CIT(A) NOTED THAT THERE WAS NO EVIDENCE ON RECORD TO SUPP ORT THE ADDITION AND ACCORDINGLY ADDITION WAS DELETED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE LEARNED CIT(A) IN THE BEGINNING OF THE IMPUGNED ORD ER HELD THAT ONCE RETRACTION HAS BEEN MADE FROM THE SURRENDER MADE D URING THE COURSE OF SURVEY IT WILL NOT BE REASONABLE TO UPHO LD THE ADDITIONS MERELY ON THE BASIS OF SURRENDER MADE IN THE ABSENC E OF ANY ITA NO.1161/AHD/2009 WESTERN GUM & CHEMICAL INDUSTRIES VS ITO WARD 2(5) AHMEDABAD 5 SUPPORTING EVIDENCE. HE HAS SUBMITTED THAT THE ADDI TION OF RS.1 60 000/- ON ACCOUNT OF UNACCOUNTED PROFIT EARN ED ON TRANSACTION ON SHARES WAS DELETED BECAUSE NO EVIDENCE WAS FOUND EXCEPT ORAL STATEMENT OF THE PARTNER OF THE ASSESSEE. HE HAS T HEREFORE SUBMITTED THAT SINCE DEPARTMENT IS NOT IN APPEAL T HEREFORE ON THE SAME REASONS THE LEARNED CIT(A) SHOULD HAVE DELETED BOTH THE ADDITIONS BECAUSE NO EVIDENCE WAS FOUND DURING THE COURSE OF SURVEY AGAINST THE ASSESSEE FOR SALE OF FIRE WOOD O R SALE OF MACHINERY SPARE PARTS. HE HAS SUBMITTED THAT THE AS SESSEE EARNED INCOME ON ACCOUNT OF JOB CHARGES AND FIRE WOOD AND MACHINERY SPARE PARTS ARE CONSUMABLE ITEMS WHICH CANNOT BE SOLD IN THE MARKET TO EARN PROFIT. HE HAS FILED AUDITED PROFIT & LOSS ACC OUNT TO SHOW THAT THE ASSESSEE HAS MAIN SOURCE OF INCOME FROM JOB CHARGES AND THAT INVENTORY OF THE FIRE WOOD AND MACHINERY SPARE PART S HAVE BEEN MAINTAINED TO SHOW THAT BOTH THE ITEMS WERE CONSUME D FOR EARNING JOB CHARGES. HE HAS SUBMITTED THAT ASSESSEES PARTN ER RETRACTED FROM THE STATEMENT PRECISELY ON THE REASON THAT ON BOTH THE ADDITIONS NO EVIDENCE WAS FOUND DURING THE COURSE OF SURVEY AND THAT BOTH THE ITEMS WERE CONSUMED FOR EARNING JOB CHARGES. THEREF ORE ON MERE DECLARATION OF ADDITIONAL INCOME IS NOT SUFFICIENT TO MAKE THE ADDITIONS. HE HAS SUBMITTED THAT DESPITE THE ASSESS EE TOOK SPECIFIC OBJECTION IN HIS REPLY AND IN THE AFFIDAVIT THAT NO EVIDENCE OF SALE OUTSIDE THE BOOKS HAS BEEN FOUND THE AUTHORITIES B ELOW WITHOUT DISCUSSING ANY EVIDENCE OR MATERIAL IN THE ASSESSME NT ORDER OR THE APPELLATE ORDER MADE THE ADDITIONS WITHOUT ANY BASI S. HE HAS RELIED UPON THE ORDER OF THE ITAT AHMEDABAD BENCH IN THE C ASE OF B. RAMAKRISHNAIAH VS ITO 39 SOT 379 IN WHICH IT WAS HE LD THAT NO ITA NO.1161/AHD/2009 WESTERN GUM & CHEMICAL INDUSTRIES VS ITO WARD 2(5) AHMEDABAD 6 SUBSTANTIVE EVIDENCE WAS FOUND THEREFORE ADDITION IS UNJUSTIFIED. HE HAS ALSO RELIED UPON THE ORDER OF THE ITAT AHMEDABAD BENCH IN THE CASE OF ACIT VS JORAWAR SING H M. RATHOD 94 TTJ 867 IN WHICH IT WAS HELD THAT ADDITION MADE BY THE AO MERELY ON THE BASIS OF RETRACTED STATEMENT UNDER S. 132(4) COULD NOT BE SUSTAINED IN THE ABSENCE OF ANY EVIDENCE MA TERIAL OR RECOVERY OF ANY MOVABLE OR IMMOVABLE ASSETS AT THE TIME OF SEARCH TO CORROBORATE THE DISCLOSURE MADE BY THE AS SESSEE. HE HAS SIMILARLY RELIED UPON THE DECISION REPORTED IN 128 ITD 75 (TM) AGRA. 7. THE LEARNED DR ON THE OTHER HAND RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT STATEMENT OF T HE PARTNER OF THE ASSESSEE FIRM WAS RIGHTLY TAKEN INTO CONSIDERATION FOR THE PURPOSE OF MAKING THE ADDITIONS. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD. IT IS NOT IN DISPUTE THAT ONE OF THE PARTN ERS OF THE ASSESSEE FIRM SHRI PRABHUDAS VACHHANI MADE STATEMENT DURING THE COURSE OF SURVEY DECLARING ADDITIONAL INCOME ON 4 COUNTS NOTE D ABOVE. THE MAIN SOURCE OF INCOME OF THE ASSESSEE IS FROM JOB W ORK. THE PARTNER OF THE ASSESSEE FIRM LATER ON RETRACTED FROM THE ST ATEMENT WITH REGARD TO THE 3 ITEMS OF UNACCOUNTED PROFIT ON SALE OF FIR E WOOD SALE OF MACHINERY SPARE PARTS AND TRANSACTION OF SHARES BE CAUSE NO EVIDENCE WAS FOUND DURING THE COURSE OF SURVEY AGAI NST THE ASSESSEE. IT WAS THEREFORE PLEADED THAT THE ASSES SEE HAS A RIGHT TO RETRACT FROM THE STATEMENT. IT WAS ALSO EXPLAINED I N THE AFFIDAVIT THAT ITA NO.1161/AHD/2009 WESTERN GUM & CHEMICAL INDUSTRIES VS ITO WARD 2(5) AHMEDABAD 7 THE NEVER DID ANY TYPE OF BUSINESS OF PURCHASE AND SALE OF FIRE WOOD OR MACHINERY SPARE PARTS NEITHER DOING ANY BUSINESS OF SHARE PURCHASING. THE ASSESSEE IN THE EXPLANATION BEFORE THE AO ALSO EXPLAINED THAT FIRE WOOD AND MACHINERY SPARE PARTS ARE CONSUMABLE ITEMS USED BY THE ASSESSEE FOR COMPLETING JOB WORK AND THAT NO EVIDENCE WAS FOUND DURING THE COURSE OF SURVEY FOR SALE OF FIRE WOOD OR MACHINERY SPARE PARTS. THE LEARNED CIT(A) ON CON SIDERATION OF THE EXPLANATION OF THE ASSESSEE ACCEPTED THE CONTENTION OF THE ASSESSEE THAT ONCE RETRACTION HAS BEEN MADE FROM THE SURREND ER MADE DURING THE COURSE OF SURVEY IT WILL NOT BE REASONABLE TO UPHOLD THE ADDITION ON THE BASIS OF SURRENDER MADE IN THE ABSENCE OF AN Y SUPPORTING EVIDENCE. THE LEARNED CIT(A) WITH REGARD TO ADDITIO N OF RS.1 60 000/- ON ACCOUNT OF UNACCOUNTED PROFIT EARNED ON SHARE TR ANSACTION NOTED THAT THERE IS NO EVIDENCE ON RECORD TO SUPPORT THE ADDITION OF RS.1 60 000/-. SUCH ADDITION WAS DELETED. NOTHING W AS BROUGHT ON RECORD TO SHOW IF THE DEPARTMENT HAS PREFERRED ANY APPEAL AGAINST THE ABOVE FINDINGS OF THE LEARNED CIT(A) IN DECIDIN G THE ISSUE IN FAVOUR OF THE ASSESSEE. AS IS NOTED ABOVE ALSO IT IS SETTLED LAW THAT THE ADDITION CANNOT BE MADE ON MERE ADMISSION IN TH E ABSENCE OF ANY SUPPORTING EVIDENCE OR MATERIAL. THE ASSESSEE C AN EXPLAIN LATER ON THAT ADMISSION IS INCORRECT OR BASED ON NO EVIDE NCE OR THAT SUCH ADMISSION DOES NOT SHOW CORRECT STATE OF THE FACTS. WE RELY UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PULLANGODE RUBBER PRODUCE CO. LTD. VS STATE OF KERALA 91 ITR 1 8 AND THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KISHAN LAL SHIV CHAND RAI VS CIT 88 ITR 293. CONSID ERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE FINDINGS OF T HE LEARNED CIT(A) ITA NO.1161/AHD/2009 WESTERN GUM & CHEMICAL INDUSTRIES VS ITO WARD 2(5) AHMEDABAD 8 IT IS CLEAR THAT THERE WAS ALSO NO EVIDENCE WITH RE GARD TO SALE OF FIRE WOOD OR MACHINERY SPARE PARTS MADE BY THE ASSESSEE IN THE ASSESSMENT YEAR UNDER APPEAL. DESPITE THE ASSESSEE TOOK A SPECIFIC OBJECTION IN THIS REGARD THE AUTHORITIES BELOW HAV E NOT POINTED OUT OR REFERRED TO IN THE IMPUGNED ORDERS IF THERE WAS ANY EVIDENCE OR MATERIAL FOUND DURING THE COURSE OF SURVEY THAT THE ASSESSEE MADE UNACCOUNTED SALES OF FIRE WOOD OR MACHINERY SPARE P ARTS. THE LEARNED CIT(A) ON THE FACE OF HIS OWN FINDINGS WAS BOUND TO FOLLOW HIS FINDINGS ON THESE ISSUES ALSO IN ORDER TO DELET E THE ADDITIONS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE ABSENCE OF ANY EVIDENCE OR MATERIAL FOUND DURING TH E COURSE OF SURVEY AGAINST THE ASSESSEE WE ARE OF THE VIEW ON MERE STATEMENT OF THE PARTNER OF THE ASSESSEE FIRM NO SUCH ADDITI ONS COULD BE MADE. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORI TIES BELOW AND DELETED THE ADDITION OF RS.1 00 000/- AND RS.1 90 0 00/-. IN THE RESULT GROUNDS NO.3 4 AND 5 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. 9. ON GROUNDS NO.6 AND 7 THE ASSESSEE CHALLENGED T HE DISALLOWANCE OF RS.3 000/- OUT OF TELEPHONE EXPENSE S AND RS.5 000/- OUT OF VEHICLE EXPENSES. THE LEARNED COUNSEL FOR TH E ASSESSEE DID NOT ARGUE THESE GROUNDS. WE FIND THAT THE LEARNED C IT(A) ON PROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD RI GHTLY SUSTAINED PART OF THE ADDITIONS. WE THEREFORE DO NOT FIND ANY JU STIFICATION TO INTERFERE IN GROUNDS NO.6 AND 7 OF THE APPEAL OF THE ASSESSEE . SAME ARE ACCORDINGLY DISMISSED. 10. NO OTHER POINT IS ARGUED OR PRESSED. ITA NO.1161/AHD/2009 WESTERN GUM & CHEMICAL INDUSTRIES VS ITO WARD 2(5) AHMEDABAD 9 11. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-03-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 25-03-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD