M/s Asia Metals, GANDHIDHAM v. The Income Tax Officer, Ward 3 (3), RAJKOT-GUJARAT

ITA 16/RJT/2011 | 2005-2006
Pronouncement Date: 11-11-2011 | Result: Allowed

Appeal Details

RSA Number 1624914 RSA 2011
Assessee PAN ABSPS7231E
Bench Rajkot
Appeal Number ITA 16/RJT/2011
Duration Of Justice 9 month(s) 21 day(s)
Appellant M/s Asia Metals, GANDHIDHAM
Respondent The Income Tax Officer, Ward 3 (3), RAJKOT-GUJARAT
Appeal Type Income Tax Appeal
Pronouncement Date 11-11-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 11-11-2011
Date Of Final Hearing 01-11-2011
Next Hearing Date 01-11-2011
Assessment Year 2005-2006
Appeal Filed On 21-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI T.K. SHARMA (JM) AND SHRI A.L. GEHLOT ( AM) I.T.A. NO.05/RJT/2011 (ASSESSMENT YEAR 2005-06) ITO WD.2(4) VS ASIA METALS RAJKOT PLOT NO.123 SECTOR 3 MATRU SHAKTI GANDHIDHAM PAN : ABSPS7231E (APPELLANT) (RESPONDENT) I.T.A. NO.16 /RJT/2011 (ASSESSMENT YEAR 2005-06) M/S ASIA METALS VS THE ITO WD.3(3) GANDHIDHAM RAJKOT DATE OF HEARING : 01-11-2011 DATE OF PRONOUNCEMENT : 11-11-2011 REVENUE BY : SHRI SL MEENA ASSESSEE BY : SHRI SANJAY SHAH O R D E R PER AL GEHLOT (AM) THESE ARE CROSS APPEALS. THEY ARE DIRECTED AGAIN ST THE ORDER OF CIT(A)- III RAJKOT DATED 15/10/2010 FOR THE ASSESSMENT YEA R 2005-06. 2. THE COMMON GROUND RAISED IN THE CROSS APPEALS PE RTAINS TO ADDITION OF RS. 63 12 097 MADE BY THE ASSESSING OFFICER U/S 69 OF THE ACT. THE CIT(A) DELETED THE ADDITION OF RS. 50 68 457 AND SUSTAINE D THE REMAINING ADDITION OF RS.12 43 640. ITA NO.05/RJT/2011 ITA NO.16/RJT/2011 2 3. THE FIRST GROUND IN THE APPEAL FILED BY THE ASSE SSEE CHALLENGES THAT THE ORDER PASSED U/S 143(3) IS BAD IN LAW. THE LD.AR S UBMITTED THAT THIS IS A GENERAL GROUND AND REQUIRES NO FINDING. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A 100% EXPORT ORIENTED UNIT. THE ASSESSMENT OF THE ASSESSEE WAS REOPENED ON THE GROUND THAT THE ASSESSEE INDULGED IN DIVERSION OF IMPORTED RAW MATE RIAL VIZ. NON FERROUS METAL SCRAP PRODUCED DUTY FREE UNDER EOU SCHEME IN THE LO CAL MARKET IN CLANDESTINE MANNER. AS PER THE INFORMATION RECEIVED FROM THE C ENTRAL EXCISE DEPARTMENT THE EXCISE DUTY INVOLVED IN THE SAID DIVERTED GOODS IS 34 01 349 FOR THE ASSESSMENT YEARS 2003-04 TO 2004-05. REJECTING THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER MADE ADDITION OF RS .63 12 097 ON THE BASIS OF ORDER OF COMMISSIONER OF CENTRAL EXCISE AHMEDABAD DATED 05-01-2009. THE ASSESSING OFFICER RELIED UPON THE ORDER F.NO.V.74/1 5-83/OA.II/2008 DTD.05.01.2009 OF COMMISSIONER OF CENTRAL EXCISE A HMEDABAD AT PAGE NO.49 WHEREIN IT IS STATED THAT RAW MATERIALS TOTALLY WE IGHING 203.428 MTS VALUED AT RS.63 12 097/- IMPORTED DUTY FREE UNDER NOTIFICATIO N NO.53/97-CUS DTD 03.06.1997 AND NO.52/2003 CUS DTD.31.03.2003 AND U TILIZED IN FINISHED GOODS. 5. ON APPEAL THE CIT(A) OBSERVED THAT THE ASSESSIN G OFFICER HAS NOT PROPERLY UNDERSTOOD THE TRANSACTION AND ITS EFFECTS WHILE IN VOKING PROVISIONS OF SECTION 69 OF THE ACT. AGREEING WITH THE ORDER OF COMMISSIONE R OF CENTRAL EXCISE WHEREIN IT WAS HELD THAT THE ASSESSEE HAS SOLD THE GOODS IN LO CAL MARKET IN CLANDESTINE ITA NO.05/RJT/2011 ITA NO.16/RJT/2011 3 MANNER AND DEEMED EXPORT AND SALE AGAINST ADVANCE L ICENCE SHOWN IN BOOKS IS JUST A COVER UP FOR FULFILLMENT OF EXPORT OBLIGATIO N TO ENJOY CUSTOMS DUTY CONCESSION. THE CIT(A) WHILE EXAMINING PROVISIONS OF SECTION 69 HAS OBSERVED THAT THE AMOUNT OF INVESTMENT NOT RECORDED IN THE B OOKS OF ACCOUNT IS REQUIRED TO BE CONSIDERED UNDER THAT SECTION. THE CIT(A) NOTED THAT IN THE INSTANT CASE THE DISPUTE IS NOT WITH REGARD TO RECORDED OR UNRECORDE D IMPORT PURCHASES. THE CIT(A) NOTICED FROM THE DETAILS FILED BY THE ASSESS E THAT PURCHASE AND SALES WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS. QUANTITY D ETAILS ARE ALSO MAINTAINED WHICH WERE TALLIED. HE FURTHER NOTED THAT EVEN THE EXCISE DEPARTMENT HAS ALSO NOT RAISED ANY SUCH ISSUE AS TO WHETHER THE IMPUGNE D PURCHASES OR SALES WERE RECORDED IN THE BOOKS OR NOT. UNDER THE CIRCUMSTAN CES THE INVOCATION OF SECTION 69 AND ADDITION OF WHOLE AMOUNT OF RS. 63 12 097/- WAS UNWARRANTED. HOWEVER THE CIT(A) EXAMINED THE FACT TO THIS TRANSACTION UN DER THE INCOME-TAX ACT. THE CIT(A) DID NOT ACCEPT THE CONTENTIONS OF THE ASSESS EE THAT SINCE BOTH PURCHASES AND SALES WERE RECORDED IN THE BOOKS OF ACCOUNT TH ERE CANNOT BE ANY FINANCIAL EFFECT OF IMPUGNED TRANSACTION IN THE PROFIT AND LO SS ACCOUNT. THE CIT(A) WAS OF THE VIEW THAT NO PRUDENT PERSON WILL ENTER INTO ANY TRANSACTION VIOLATING THE PROVISIONS OF LAW UNLESS HE HAS RECEIVED SOME MORE BENEFIT AS COMPARED WITH THE TRANSACTIONS IN CONFORMITY WITH THE LAW. THE C IT(A) HELD THAT THE REAL BENEFIT OF SUCH TYPE OF TRANSACTION IS PREMIUM EARNED FOR S ALE IN LOCAL MARKET TO THE EXTENT OF SALVAGE OF CUSTOMS DUTY WHICH ARE MUTUALL Y SHARED BY THE PARTY TO SUCH TRANSACTION. IN THE CASE UNDER CONSIDERATION THE B ENEFIT OF CUSTOMS DUTY AMOUNTING TO RS.24 87 281 WOULD HAVE BEEN SHARED BY THE PARTIES VIZ. ITA NO.05/RJT/2011 ITA NO.16/RJT/2011 4 ASSESSEE THE NAME LENDER IN WHOSE NAME SALES IS SH OWN IN THE BOOKS AND THE ACTUAL PURCHASER OF THE GOODS. HENCE THERE HAS TO BE AN ESTIMATION OF INCOME FROM PREMIUM EARNED TO THE EXTENT OF BENEFIT OF CUS TOMS DUTY OF RS.24 87 281 IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAS IMPORT ED THE GOODS AND SOLD IN THE LOCAL MARKET AND ARRANGED THE BILLS FOR DEEMED EXPORT / SALES AGAINST ADVANCE LICENCES. THEREFORE HIS SHARE CANNOT BE L ESS THAN 50% IN THE OPINION OF THE CIT(A). THE CIT(A) ACCORDINGLY DIRECTED THE ASSESSING OFFICER TO REPLACE THE ADDITION OF RS.12 43 640 BEING 50% OF RS.24 87 281 IN PLACE OF RS.63 12 097 MADE BY THE ASSESSING OFFICER. THUS THE CIT(A) AL LOWED RELIEF OF RS.50 68 457. THE CIT(A) HOWEVER UPHELD THE REJECTION OF BOOKS OF ACCOUNT AND FURTHER HELD THAT THE ASSESSEE IS A 100% EXPORT ORIENTED UNIT. HOWEVER FOR LOCAL SALE MADE AND PROFIT THEREON EARNED TO THE EXTENT OF ADDITION CONFIRMED AT RS.12 43 640 NO BENEFIT OF SECTION 10B WILL BE AVAILABLE BECAUSE SU CH SALES ARE NEITHER EXPORT SALES NOR DEEMED EXPORT SALES. 6. AS REGARDS THE ADDITION OF RS.35 000 ON ACCOUNT OF UNDERSTATMENT OF CONSIDERATION OR UNRECORDED TRANSACTION THE CIT(A) NOTICED THAT IT IS A CASE OF RATE DIFFERENCE. ON THE BASIS OF DETAILS FURNISHED BY THE ASSESSEE THE CIT(A) FOUND THAT THE TRANSACTION IS ROUTED THROUGH THE BO OKS OF ACCOUNT AND IMPUGNED AMOUNT IS INCLUDED IN THE SALES SHOWN IN THE BOOKS. THEREFORE THE ADDITION OF RS.35 000 IS NOT WARRANTED. HE ACCORDINGLY DELETED THE ADDITION OF RS.35 000. ITA NO.05/RJT/2011 ITA NO.16/RJT/2011 5 7. THE REVENUE IS IN APPEAL AGAINST THE DELETION OF ADDITIONS OF RS. 50 68 457 MADE U/S 69 OF THE ACT AND RS. 35 000 ON ACCOUNT OF UNDERSTATEMENT OF CURRENCY FLUCTUATION WHEREAS THE ASSESSEE IS IN APPEAL AGAIN ST SUSTENANCE OF ADDITION TO THE EXTENT OF RS.12 43 640. 8. THE LD.AR OF THE ASSESSEE REITERATED THE SUBMISS IONS WHICH WERE MADE BEFORE THE CIT(A) AND SUBMITTED THAT THE IMPUGNED T RANSACTIONS WERE RECORDED IN THE BOOKS OF ACCOUNT. THE LD.AR IN SUPPORT OF HIS CONTENTION DREW OUR ATTENTION TO PAGE 13 OF THE ASSESSEES PAPER BOOK WHERE DETAI LS OF THE GOODS OF RS.63 12 097 WERE GIVEN. THE LD.AR FURTHER SUBMITT ED THAT THE GOODS HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT. HOWEVER A NOTIO NAL CALCULATION WAS CARRIED OUT FOR THE PURPOSE OF GETTING BENEFIT OF EXCISE DU TY. THE LD.AR SUBMITTED THAT WHEN THE GOODS ARE RECORDED IN THE BOOKS OF ACCOUNT THE ADDITION U/S 69 IS NOT WARRANTED. WITHOUT PREJUDICE TO THE FACTS OF THE C ASE THE CONTENTION OF THE LD.AR IS THAT THE ASSESSING OFFICER IS NOT CORRECT IN INV OKING PROVISIONS OF SECTION 69 AS PURCHASES IN QUESTION WERE DULY ACCOUNTED FOR IN RE GULARS BOOKS ACCOUNT. IT IS ALSO THE SUBMISSIONS OF THE LD.AR THAT THE ORDER OF THE CENTRAL EXCISE DEPARTMENT HAS NO EFFECT ON FISCAL OF THE ASSESSEE AND INTER-A LIA ON TAXABLE INCOME OF THE ASSESSEE. THE LD.AR SUBMITTED THAT THE ISSUE BEFOR E THE EXCISE DEPARTMENT IS STILL PENDING. 9. THE LD.DR ON THE OTHER HAND RELIED UPON THE ORDE R OF THE ASSESSING OFFICER AND SUBMITTED THAT WHETHER THE TRANSACTION HAS BEEN RECORDED IN THE BOOKS OF ITA NO.05/RJT/2011 ITA NO.16/RJT/2011 6 ACCOUNT OR NOT IS SUBJECT TO VERIFICATION. HE SUBM ITTED THAT THE FINAL OUTCOME OF EXCISE DEPARTMENT WILL HAVE EFFECT TO THE TAXABLE I NCOME OF THE ASSESSEE. 10. WE HAVE HEARD THE LD.REPRESENTATIVES OF THE PAR TIES RECORD PERUSED. THE CASE OF THE ASSESSING OFFICER IS THAT THE TRANSACTI ONS ARE COVERED BY SECTION 69 OF THE ACT WHEREAS THE SUBMISSION OF THE ASSSESSE IS T HAT THE IMPUGNED TRANSACTIONS HAVE BEEN RECORDED IN THE REGULAR BOOK S OF ACCOUNT. THE AMOUNT NOTED BY THE ASSESSING OFFICER IS NOTIONAL CALCULAT ION FOR THE PURPOSE OF BENEFIT OF EXCISE DUTY. THE CIT(A) HAS CLEARLY RECORDED THE FACT THAT THE IMPUGNED TRANSACTION HAS BEEN RECORDED IN THE BOOKS OF ACCOU NT. THE REVENUE HAS FAILED TO POINT OUT ANY CONTRARY MATERIAL TO THE FINDING O F THE CIT(A) ON THIS ISSUE WE THEREFORE DO NOT FIND ANY INFIRMITY IN DELETING TH E ADDITION OF RS. 50 68 457 IN RESPECT OF PURCHASES FOUND RECORDED IN THE BOOKS OF ACCOUNT. HOWEVER WHETHER FINAL OUTCOME OF THE CASE OF THE CENTRAL EXCISE DEP ARTMENT WILL HAVE ANY BEARING ON THE INCOME OF THE ASSESSEE OR NOT IS SUBJECT TO VERIFICATION. WE THEREFORE SEND THIS ISSUE TO THE FILE OF THE ASSESSING OFFICE R TO VERIFY THE FACTS WHETHER FINAL OUTCOME OF CENTRAL EXCISE DEPARTMENT HAS ANY BEARIN G TO THE INCOME OR PROFIT OF THE ASSESSEE OR NOT. THEREFORE ISSUE RELATING TO ADDITION SUSTAINED BY THE CIT(A) OF RS.12 43 640 IS SET ASIDE TO THE FILE OF ASSESSING OFFICER. 11. AS REGARDS DELETION OF ADDITION OF RS.35 000 WE FIND THAT THE CIT(A) AFTER EXAMINING THE ORDER OF COMMISSIONER OF CENTRAL EXCI SE AND THE DETAILS OF SALES FURNISHED BY THE ASSESSEE FOUND THAT THE TRANSACTIO N WAS ROUTED THROUGH THE ITA NO.05/RJT/2011 ITA NO.16/RJT/2011 7 BOOKS OF ACCOUNT. THEREFORE THE ADDITION OF RS.35 000 IS NOT WARRANTED. THE REVENUE HAS FAILED TO POINT OUT ANY CONTRARY MATERI AL TO THE FINDING OF THE CIT(A). IN THE LIGHT OF THE FACT WE UPHOLD THE ORDER OF CI T(A) ON THIS ISSUE. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR ST ATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE AS M ENTIONED ABOVE. SD/- SD/- (T.K. SHARMA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DT : 11 TH NOVEMBER 2011 PK/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CIT(A)-III RAJKOT 4. THE CIT-II RAJKOT 5. THE DR I.T.A.T. RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT