ITO, Rohtak v. M/s. Deshwal Bricks Co., Jhajjar

ITA 1394/DEL/2010 | 2005-2006
Pronouncement Date: 30-07-2010 | Result: Dismissed

Appeal Details

RSA Number 139420114 RSA 2010
Assessee PAN AADFD5855H
Bench Delhi
Appeal Number ITA 1394/DEL/2010
Duration Of Justice 3 month(s) 30 day(s)
Appellant ITO, Rohtak
Respondent M/s. Deshwal Bricks Co., Jhajjar
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-07-2010
Date Of Final Hearing 20-07-2010
Next Hearing Date 20-07-2010
Assessment Year 2005-2006
Appeal Filed On 31-03-2010
Judgment Text
ITA NOS. 1394 & 1395/DEL/2010 A.YRS. 2005-06 & 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NOS. 1394 & 1395/DEL/2010 A.YRS. : 2005-06 & 2006-07 THE INCOME TAX OFFICER WARD-4 ROHTAK VS. M/S DESHWAL BRICKS CO. V&P.O. KABLANA DISTT. JHAJJAR (PAN: AADFD5855H) (APPELLANT ) (RESPONDENT ) ASSEESSEE BY : SH. C.S. GUPTA ADVOCATE DEPARTMENT BY : SH. B. KISHORE. DR PER SHAMIM YAHYA: AM THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FOR A. YRS. 2005-06 & 2006-07 DATED 29.1.2010. 2. THE COMMON ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF C LOSING STOCK FOUND DURING THE COURSE OF SURVEY U/S 133A. 3. IN THIS CASE THE ASSESSEE DERIVED INCOME FROM BR ICK KILN OWNERSHIP. SURVEY U/S 133A OF THE IT ACT WAS CARRIED ON AT THE BUSINE SS PREMISES OF THE ASSESSEE ON 4.8.2005. THE STOCK INVENTORY WAS PREPARED AT THE TIME OF SURVEY ON THE BASIS OF ITA NOS. 1394 & 1395/DEL/2010 A.YRS. 2005-06 & 2006-07 2 DOCUMENTS AVAILABLE AT THE TIME OF SURVEY. STOCK OF RS. 20 47 943/- AS ON 31.3.2005 WAS CALCULATED AS AGAINST THE CLOSING STO CK DECLARED BY THE ASSESSEE AT RS. 8 69 941/- RESULTING IN DIFFERENCE OF RS. 11 7 8 002/-. THE ASSESSEE RESPONDED THAT IN THE CLOSING STOCK COMPUTED BY THE REVENUE O N THE BASIS OF STOCK REGISTERS WASTAGE HAD NOT BEEN CONSIDERED FOR VALUATION. HE NCE ASSESSEE ENCLOSED ITS OWN CALCULATION OF STOCK FOR VERIFICATION. ASSESSIN G OFFICER OBSERVED THAT PERUSAL OF THE STOCK CALCULATED BY THE ASESSEE REVEALED THA T HE CLAIMED THE WASTAGE OF 4 60 300/- NUMBER OF BRICKS OUT OF TOTAL 7 45 660 B RICKS IN THE KILN. HENCE ASSESSING OFFICER HELD THAT THE CLAIM OF ASSESSEE THAT 62% OF BRICKS IN KILN WASTAGE CANNOT BE ACCEPTED. FURTHER THE ASSESSING OFFICER HELD AS UNDER:- FURTHER THE ASSESSEE HAS CLAIMED THE PRICE OF II C LASS BRICKS AT RS. 1 000/- AGAINST RS. 1050/- PER THOUSAND BRICKS OF BURADA A T RS. 105/- AGAINST RS. 125/- PER QUINTAL OF TURI AT RS. 100/- AGAINST RS . 150/- PER QUINTAL AND OF COAL AT RS. 1 150/- AGAINST RS. 5200/- PER TON ADOP TED BY THE DEPARTMENT. THIS PLEA OF THE ASSESSEE IS NOT ACCEPTABLE AS THE ASSESSEE HAS FAILED TO GIVE THE BASIS OF THE RATES APPLIED BY HIM AND TO ADDUC E ANY EVIDENCE IN SUPPORT OF THE RATES CLAIMED BY HIM WHEREAS THE RAT ES ADOPTED BY THE DEPARTMENT ARE BASED ON THE RATE PRESCRIBED BY THE DEPUTY COMMISSIONER JHAJJAR AND INDEPENDENT MARKET ENQUIRIES. 3.1 ASSESSING OFFICER FURTHER OBSERVED THAT ASSESS EE HAS NOT CHALLENGED THE QUANTITATIVE DETAILS OF STOCK SO HE HELD THAT THE VALUE OF CLOSING STOCK TAKEN AT RS. 2047943/- WAS CORRECT. HENCE HE MADE THE ADDIT ION OF RS. 1178002/- FOR A.Y. 2005-06. 4. FOR THE ASSESSMENT YEAR 2006-07 THE ASSESSING OF FICER REFERRED TO THE SAME SURVEY AND NOTED THAT PHYSICAL INVENTORY WAS PREPARED WHICH CAME TO RS. 8 31 235/- ON THE BASIS OF DOCUMENTS AVAILABLE THE STOCK WAS CALCULATED AS PER THE BOOKS WAS AT RS. 17 85 952/-. THUS THERE WAS A DIFFERENCE OF RS. 954171/-. ITA NOS. 1394 & 1395/DEL/2010 A.YRS. 2005-06 & 2006-07 3 ASSESSEE EXPLAINED THAT IN THE STOCK VALUATION DONE WASTAGE HAS NOT BEEN CONSIDERED FOR VALUATION. ASSESSING OFFICER OBSE RVED THAT ASSESSEE HAS CLAIMED 60% OF WASTAGE OF STOCK. HE DID NOT ACCEPT THE ASSE SSEES CONTENTION AND MADE THE ADDITION OF RS. 954171/-. ASSESSING OFFICER F URTHER NOTED THAT ASSESSEE HAS INCURRED THE FOLLOWING EXPENSES:- LABOUR WELFARE EXPENSES = RS. 16 080/- MISC. EXPENSES = RS. 9 151/- TRAVELLING = RS. 16 026/- REPAIR AND MAINTENANCE = RS. 32 830/- 4.1 ASSESSEE WAS ASKED THE DETAILS OF THE ABOVE. ASSESSEE FILED THE DETAILS AND INFORMED THAT HE HAS TO DEAL WITH THE UNEDUCATE D LABOUR AND SOME OF THE BILLS ARE NOT PREPARED AND ARE PETTY IN NATURE. ASSESSING OFFICER OBSERVED THAT FEW OF THE BILLS PRODUCED WERE NOT SUPPORTED BY NAR RATION OF INCURRING OF EXPENSES. ASSESSING OFFICER FURTHER OBSERVED THAT VOUCHERS PRODUCED WERE NOT SERIALLY NUMBERED AND THERE IS NOTHING ON THE VOUCH ERS FROM WHERE IT COULD BE VERIFIED WHO INCURRED THE EXPENSES AND FOR WHAT PU RPOSE. HOWEVER HE OBSERVED THAT SUBMISSION OF THE ASSESSEE CANNOT BE IGNORED IN-TOTO. HENCE HE MADE THE DISALLOWANCE OF RS. 15 000/- ON ADHOC EXPENSES. 5. AGAINST THE ABOVE ASSESSING OFFICER S ORDER TH E ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND SU BMITTED THAT ASSESSING OFFICER HAD MADE ADDITION BY ADOPTING 60% AND 62% OF WASTAGE OF CLOSING OF STOCK. IT WAS SUBMITTED THAT ASSESSING OFFICER HAS NOT APPRECIATED THE WORKING OF ITA NOS. 1394 & 1395/DEL/2010 A.YRS. 2005-06 & 2006-07 4 THE BRICK KILN. IT WAS SUBMITTED THAT FOR THE BR ICKS TO REACH FINAL STAGE I.E. A SALEABLE COMMODITY IT HAD TO PASS THROUGH THE F OLLOWING STAGES:- (A) PATHAI LABOUR PREPARES MUD FOR FILING IN THE SANCHA THE NUMBER OF KACHA BRICKS TURNED OUT OF THE SANCHA IS MAINTAINED IN THE BOOKS. (B) BHARAI AFTER PATHAI BRICKS ARE PUT IN THE SHA PE OF CHATTA KACHA BRICKS ARE PUT UP IN REHRIES CARRIED TO BRICK KI LN; - THEN PUT UP INSIDE THE KILN THEN THE BRICK KILN IS PUT ON FIRE IN THE ENTIRE PROCESS THERE MAY BE BREAKAGE OF 8 10%. 5.1 IT WAS FURTHER SUBMITTED THAT RECORD IS MAINTAI NED FROM THE STAGE OF PATHAI FURTHER ADDITION IS ENTERED IN AND THE FIG URE ALREADY MAINTAINED AND AFTER THAT OUTLET IS DEDUCTED IN THE FORM OF NIKASI. T HE RECORD IS KEPT IN THIS WAY ON DAY TO DAY BASIS. THE FINAL FIGURE REMAINING AT TH E END OF THE YEAR IS TAKEN AS CLOSING STOCK. THE RECORD OF PATHAI HAS TO BE MAINT AINED CAREFULLY BECAUSE LABOUR PAYMENT IS MADE ON THE BASIS OF ACTUAL PATHAI FIGUR E. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER NOTED THAT HE HAD SEEN THE DAILY REGISTER FROM 5.3.2005 TO 20.4.2005 IMPOUNDED DURING THE COURSE O F SURVEY OPERATION TO ASCERTAIN THE POSITION WHETHER THE AFORESAID METHOD IS BEING FOLLOWED TO MAINTAIN THE RECORD. LD. COMMISSIONER OF INCOME TA X (APPEALS) FOUND THAT ASSESSEES SUBMISSION IS CORRECT. HE OBSERVED THA T FROM THE PATHAI THERE IS WASTAGE IN THE VARIOUS STAGES. ASSESSSEE ALSO SU BMITTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CERTIFICATE FR OM BRICK KILN ASSOCIATION JHAJJAR CONVEYING THAT IN THE ENTIRE SEASON BREAKAG E MAY BE TO THE EXTENT OF 8% TO 10% AND FURTHER THAT NO RECOVERY IS MADE FROM TH E LABOUR FOR THE BREAKAGE OF ITA NOS. 1394 & 1395/DEL/2010 A.YRS. 2005-06 & 2006-07 5 BRICKS AND THAT THE LABOUR IS PAID ACCORDING TO TH E PATHAI RATE. ASSESSEE FURTHER SUBMITTED THAT IN ITS OWN COST THE WAGES WORKS OUT TO ABOUT 7.1%. LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT THE ASSESSEES SUBMISSIONS THAT IT WAS NOT POSSIBLE TO MAINTAIN THE SEPARATE RECORD S YEAR-WISE. AS SUCH THE RECORD KEEPING IN VIEW OF THE ABOVE PROCESS FROM PATHAI TO THE TURNING OUT OF BRICKS HAD TO BE KEPT FOR TWO CONSECUTIVE YEARS. THIS IS BECAUSE THE BRICK KILN WORKS FOR A PARTICULAR NUMBER OF MONTHS DURING THE YEAR. THEREAFTER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) REFERRED TO TH E COMPUTATION WITH THE HELP OF ASSESSING OFFICER AND THE ASSESSEE AS UNDER:- THEREFORE THE TOTAL PATHAI FIGURE FOR THE TWO YEA RS I.E. A.Y. 2005-06 AND 2006-07 COMING OUT OF 1 50 00 000/- HAS BEEN BIFURC ATED AT 70 00 000 APPROXIMATELY FOR THE A.Y. 2005-06 AND 80 00 000 AP PROXIMATELY FOR THE A.Y. 2006-07. KEEPING IN VIEW THE AFORESAID FIGUR ES THE ESTIMATES TURNOVER IS WORKED OUT AS UNDER FOR BOTH THE A.YRS. WITH TH E ASSISTANCE OF ASSESSING OFFICER AND THE APPELLANT:- 2005-06 2006-07 PATHAI 70 00 000 80 00 000 LESS WASTAGE @7% 4 90 000 5 60 000 6 51 000 74 40 000 LESS OTHER MATERIAL LIKE RODA ETC. 90 607 95 800 64 19 393 73 44 200 ITA NOS. 1394 & 1395/DEL/2010 A.YRS. 2005-06 & 2006-07 6 IT HAS BEEN SEEN THAT THE TURN OUT FROM THE PATHAI LEVEL TO 1 ST CLASS 2 ND CLASS AND 3 RD CLASS BRICKS IS 50% 30% AND 20% RESPECTIVELY. A PPLYING THE AFORESAID RATES THE TURN OUT OF DIFFERENT TYPE OF BRICKS ARE WORK OUT AS UNDER FOR THE RELEVANT A.Y.RS WITH THE HELP OF TH E ASSESSING OFFICER AND THE APPELLANT 2005-06 VALUE (IN RS.) 2006-07 VALUE (IN RS.) 1 ST CLASS 3209696 4333090 3672100 4957335 2 ND CLASS 1925818 1925818 2203260 2203260 3 RD CLASS 1283878 513551 6772459 1468840 587536 7748131 LESS SALES AS PER ASSESSEE 6091948 6964807 CLOSING STOCK 680511 6964807 VALUE OF C/STOCK OF BRICKS SHOWN BY THE ASSESSEE 507630 455426 DIFFERENCE IN STOCK 173387 327898 FOR WORKING OUT THE VALUE OF VARIOUS TYPE OF BRICKS AS 1 ST 2 ND AND 3 RD CLASS THE RATES ADOPTED ARE @ 1.350 RS. 1000/- & 4 00/- PER THOUSAND RESPECTIVELY. AS REGARDS THE VALUATION OF CLOSING STOCK PERTAININ G TO BURADA TURI COAL DIESEL WOOD AND SAND THE SAME HAS BEEN SUBM ITTED TO BE MADE AT VERY EXORBITANT RATES E.G. IN THE CASE OF COAL THE APPELLANT SHOWING THE ITA NOS. 1394 & 1395/DEL/2010 A.YRS. 2005-06 & 2006-07 7 RATES APPLIED BY THE ASSESSING OFFICER FOR WORKING OUT THE CLOSING STOCK. THUS NO DIFFERENCE HAS BEEN SEEN ON THE BASIS OF RE CORD SO FAR AS THE ITEMS SHOWN BY THE ASSESSING OFFICER FOR WORKING OUT THE FIGURE OF 20 47 943/-. IN VIEW OF THE ABOVE ADDITION OF RS. 11 78 000/- MADE BY THE ASSESSING OFFICER IS DELETED AND ADDITION OF RS. 1 00 000/- IS BEING MADE AS SALES BEYOND BOOKS OF ACCOUNTS AND THAT ALSO ON ESTIMATE BASIS. AS REGARDS THE A.Y. 2006-07 ADDITION OF RS. 9 54 71 7/- IS DELETED AND ADDITION OF RS. 1 00 000/- IS BEING MADE AS DISCUSS ED ABOVE. AS REGARDS DISALLOWANCE OF RS. 15 000/- THE SAME HAS BEEN MADE BY THE ASSESSING OFFICER PURELY ON ADHOC WITHOUT POINTING OUT A SIN GLE ITEM OF EXPENDITURE WHICH HAS NOT BEEN SHOWN IN THE ACCOUNTS OR FOR WHI CH DETAILS HAVE NOT BEEN MAINTAINED. THEREFORE THIS DISALLOWANCE IS DEL ETED. 6. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BE FORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE AGREE WITH THE LD. COUNSEL OF THE ASSESSEE THAT ASSESSING OFFI CER HAS FOUND THE WASTAGE PERCENTAGE AS 60% 62% BY TAKING THE QUANTITY OF W ASTAGE AS PERCENTAGE OF CLOSING STOCK. THE WASTAGE HAS TO BE COMPUTED ON T HE BASIS OF TOTAL INPUT AND NOT AS PERCENTAGE OF CLOSING STOCK. HENCE THE VERY BASI S OF ASSESSING OFFICERS REJECTION OF ASSESSEES COMPUTATION DOES NOT SURVIVE . 7.1 AS REGARDS THE STOCK AS ON 31.3.2005 THE STOCK HAS BEEN COMPUTED ON THE BASIS OF SURVEY CONDUCT ON 4.8.2005. THERE IS NO WO RKING IN ASSESSING OFFICER S ORDER AS TO HOW STOCK AS ON 31.3.2005 HAS BEEN ARRI VED AT ON THE BASIS OF STOCK ITA NOS. 1394 & 1395/DEL/2010 A.YRS. 2005-06 & 2006-07 8 FOND ON 4.8.2005. MOREOVER WHEN STOCK IS FOUND IN EXCESS BY RS. 1178002 AS ON 31.3.2005 THE OPENING STOCK FOR F.Y. 2005-06 WOUL D AUTOMATICALLY BE IN EXCESS BY THAT AMOUNT. HENCE THERE WOULD BE NO QUESTION OF ADDITION OF RS. 954171/- FOR UNDISCLOSED STOCK FOR F.Y. 2005-06. FURTHER F OR VALUATION OF STOCK NO COGENT OR COMPARABLE BASIS HAS BEEN DISCLOSED. IN THESE CIRC UMSTANCES THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE DEVOID OF COGENCY AND CANNOT BE SUSTAINED. 7.2 LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE OTHER HAND GIVEN A FINDING THAT HE HAS INSPECTED TO THE IMPOUNDED BOOK S AND FOUND ASSESSEES SUBMISSIONS REGARDING THE PROCESS OF WORKING OF BRI CK KILN TO BE CORRECT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)S COMPUTATION IS BASED UPON RELEVANT BOOKS. THE ASSESSEES PERCENTAGE OF WASTAGE HAS ALS O BEEN FOUND TO BE COMPARABLE TO INDUSTRY AVERAGE AND THE LD. COMMISS IONER OF INCOME TAX (APPEALS) ACCORDINGLY HAS MADE A COMPUTATION BASED ON COGENT PARAMETERS AND FOUND THAT ADDITION MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. HE HAS SUSTAINED RS. 100 000/- ADDITION FOR EACH YEAR FOR DISCREPANCY BETWEEN THE COMPUTATION MADE BY HIM AND THAT REFLECTED BY THE ASSESSEE. 7.3 THE REVENUE HAS AGITATED AGAINST LD. COMMISSION ER OF INCOME TAX (APPEALS) WITHOUT BRINGING ANY SPECIFIC SHORTCOMING IN HIS OR DER. IT HAS BEEN MERELY ALLEGED THAT LD. COMMISSIONER OF INCOME TAX (APPEALS)S HAS MADE VARIOUS ASSUMPTIONS AND ESTIMATES. IT HAS NOT BEEN SPELLED OUT WHICH ASPECT OF LD. COMMISSIONER OF INCOME TAX (APPEALS)S FINDING IS NOT CORRECT AND F OR WHAT REASON. ITA NOS. 1394 & 1395/DEL/2010 A.YRS. 2005-06 & 2006-07 9 7.4 IN THE BACKGROUND OF THE AFORESAID DISCUSSION A ND PRECEDENT WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF TH E LD. COMMISSIONER OF INCOME TAX (APPEALS). ACCORDINGLY WE UPHOLD THE SAME. 8. IN THE RESULT BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/07/2010. SD/- SD/- [R.P. TOLANI ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 30/07/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES