The ITO, Patan Ward -4, Mehsana v. M/s Shiv Shakti Ginning & Pressing Factory, Kadi

ITA 1635/AHD/2005 | 2001-2002
Pronouncement Date: 08-01-2010 | Result: Dismissed

Appeal Details

RSA Number 163520514 RSA 2005
Assessee PAN ENTOF4283K
Bench Ahmedabad
Appeal Number ITA 1635/AHD/2005
Duration Of Justice 4 year(s) 6 month(s) 21 day(s)
Appellant The ITO, Patan Ward -4, Mehsana
Respondent M/s Shiv Shakti Ginning & Pressing Factory, Kadi
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 08-01-2010
Date Of Final Hearing 05-01-2010
Next Hearing Date 05-01-2010
Assessment Year 2001-2002
Appeal Filed On 17-06-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI T K SHARMA AND N S SAINI) ITA NO.1635/AHD/2005 (ASSESSMENT YEAR:- 2001-02) THE INCOME-TAX OFFICER PATAN WARD-4 MEHSANA V/S M/S SHIV SHAKTI GINNING & PRESSING FACTORY KALYANPURA ROAD NANI KADI [APPELLANT] [RESPONDENT] APPELLANT BY :- SMT. NEETA SHAH SENIOR DR RESPONDENT BY:- SHRI P M MEHTA O R D E R PER N S SAINI (ACCOUNTANT MEMBER) : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME-TAX (APPEALS) DATED 07-03-2005 RAISING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- 1 THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.20 53 455/- MAD E ON ACCOUNT OF UNEXPLAINED INVESTMENT MADE IN SHANKER ROO REPRESEN TING SUPPRESSION OF STOCK / SALES. 2 THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.22 16 599/- MAD E ON ACCOUNT OF DIFFERENCE IN CLOSING STOCK OF SHANKER ROO. 3 THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.1 51 626/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK OF PUNDI U/S 69 OF THE ACT. 4 THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.1 98 223/- MADE ON ACCOUNT OF SUPPRESSION OF SALES OF PUNDI. 2 5 THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.1 66 951/- MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT IN STOCK / SALES OF KALYAN R OO U/S 69 OF THE ACT. 6 THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.1 72 993/- MAD E ON ACCOUNT OF SUPPRESSION OF SALES OF KALYAN ROO. 7 THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.4 776/- MADE ON ACCOUNT OF SUPPRESSION OF SALE OF COTTON SEED OIL. 2 SINCE THE ISSUE AND FACTS INVOLVED IN ALL THE AB OVE GROUNDS OF APPEAL ARE COMMON THEY ARE BEING CONSID ERED AND DECIDED TOGETHER AS FOLLOWS. 3 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF GINNING OF COTTON AND CR USHING OF COTTON SEEDS. DURING THE YEAR UNDER CONSIDERATION THE ASS ESSEE HAS SHOWN TURNOVER OF RS.30.27 CRORES AND GROSS PROFIT OF RS. 1.09 CRORES WHICH WORKED OUT TO 3.63%. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS THE ASSESSEE WAS ASKED TO SUBMIT QUANTITY DETAILS O F MONTH-WISE PURCHASES SALES AND CONSUMPTION AND PRODUCTION. TH E ASSESSEE SUBMITTED THE DETAILS OF MONTH-WISE PURCHASES AND S ALES BUT DETAILS OF MONTH-WISE CONSUMPTION AND PRODUCTION WERE NOT M ADE AVAILABLE AND HENCE THE MONTH-WISE PRODUCTION OF SOFT COTTON COTTON SEEDS AND PUMDI WAS WORKED OUT ADOPTING THE AVERAGE YIELD SHO WN BY THE ASSESSEE AND ADOPTING TOTAL PURCHASES AS CONSUMPTIO N. AFTER DOING SO THE LEARNED ASSESSING OFFICER CONFRONTED THE AS SESSEE WITH THE FACT THAT THE ASSESSEE HAS EFFECTED SALE OF COTTON ROO IN EXCESS OF THE STOCK AVAILABLE TO THE EXTENT OF 12 710 KGS. IN THE MONTH OF JULY 3 2000 AND 24216 KGS. IN THE MONTH OF AUGUST 2000 TO TALING TO 36926 KGS. FURTHER THE LEARNED ASSESSING OFFICER REQUIRE D THE ASSESSEE TO EXPLAIN THAT THE CLOSING STOCK OF COTTON ROO SHOULD BE 73159 KGS. BUT THE SAME WAS SHOWN AS 33300 KGS. WHICH IS LESS TO THE EXTENT OF 39859 KGS. FROM THIS THE LEARNED ASSESSING OFFICER INFERRED THAT THE ASSESSEE HAS EFFECTED SALES WHICH ARE NOT REFLECTED IN THE BOOKS OF ACCOUNT AND REQUIRED THE ASSESSEE TO EXPLAIN WHY TH E SAME SHOULD NOT BE TREATED AS SUPPRESSION OF SALES. FURTHER THE LE ARNED ASSESSING OFFICER ALSO POINTED OUT TO THE ASSESSEE THAT SALE OF PUMDI WAS IN EXCESS OF STOCK AVAILABLE TO THE EXTENT OF 3372 KGS . IN THE MONTH OF APRIL 2000 AND 279 KGS. IN THE MONTH OF MAY 2000 TOTALING 3651 KGS. THE LEARNED ASSESSING OFFICER ALSO POINTED OUT TO THE ASSESSEE THAT CLOSING STOCK OF PUMDI SHOULD BE 13273 KGS. BU T THE SAME WAS SHOWN AS 8500 KGS. AND THUS THE CLOSING STOCK WAS S HOWN LESS TO THE EXTENT OF 4773 KGS. AND WHY THE SAME SHOULD NOT BE TREATED AS SUPPRESSED SALES. THE LEARNED ASSESSING OFFICER FUR THER OBSERVED THAT THERE WAS EXCESS SALE OF KALYAN ROO TO THE EXT ENT OF 4283 KGS. IN THE MONTH OF MAY 2000. HE ALSO POINTED OUT THAT CLOSING STOCK OF COTTON ROO SHOULD BE 11838 KGS. BUT THE SAME WERE S HOWN AS 7400 KGS. THUS CLOSING STOCK WAS SHOWN LESS TO THE EXTEN T OF 4438 KGS AND REQUIRED THE ASSESSEE TO EXPLAIN WHY THE SAME SHOUL D NOT BE TREATED AS SALES NOT REFLECTED IN THE BOOKS OF ACCOUNT. SIM ILARLY THE LEARNED ASSESSING OFFICER ALSO POINTED OUT THAT CLOSING STO CK OF COTTON SEED OIL SHOULD HAVE BEEN 42199 KGS. BUT THE SAME WAS SH OWN AS 42000 KGS THEREBY THE CLOSING STOCK WAS SHOWN LESS BY 199 KGS. FURTHER THE LEARNED ASSESSING OFFICER POINTED OUT THAT CLOS ING STOCK OF COTTON SEED KALYAN SHOULD BE 298751 KGS. WHICH WAS SHOWN AS 36100 KGS. I.E. THE CLOSING STOCK WAS SHOWN EXCESS BY 7349 KGS. THE ASSESSEE WAS REQUIRED TO EXPLAIN THE SAME. 4 4 THE ASSESSEE EXPLAINED THAT PERCENTAGE YIELD DOE S NOT REMAIN CONSTANT. IN REPLY TO QUERY REGARDING THE ST OCK RECORDS THE ASSESSEE SUBMITTED VIDE LETTER DATED 25-2-2004 THAT NO STOCK RECORDS ARE BEING MAINTAINED. 5 THE LEARNED ASSESSING OFFICER THEREFORE VIEWED T HAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NEITHER COMPLE TE NOR CORRECT AND HENCE THE BOOK RESULTS WERE REJECTED BY APPLYING PR OVISIONS OF SUB- SECTION (3) OF SECTION 145 OF THE INCOME-TAX ACT 1 961. THE AUDIT REPORT SUBMITTED U/S 44AB WAS ALSO HELD TO BE NOT R ELIABLE AS THE CHARTERED ACCOUNTANT OF THE FIRM HAS NOT MENTIONED IN THE AUDIT REPORT THAT THERE IS ANY VARIATION IN SUCH YIELD AT THE DIFFERENT TIME OF PRODUCTION. THEREFORE HE MADE THE FOLLOWING ADDITI ONS TO THE INCOME OF THE ASSESSEE: (I) UNEXPLAINED INVESTMENT IN STOCK U/S 69 OF THE ACT AS DISCUSSED ABOVE RS.20 53 455/ - (II) SUPPRESSION OF SALES RS.22 16 599/- (III) UNEXPLAINED INVESTMENT IN STOCK OF PUMDI U/S 69 RS. 1 51 626/- (IV) SUPPRESSION OF SALES OF PUMDI RS. 1 98 223/- (V) UNEXPLAINED INVESTMENT IN STOCK OF KALYAN ROO U/S 69 RS. 1 66 951/- (VI) SUPPRESSION OF SALES OF KALYAN ROO RS. 1 72 993/- (VII) SUPPRESSION OF SALES OF COTTON SEED OIL RS. 4 776/- 6 ON APPEAL THE LEARNED COMMISSIONER OF INCOME-TA X (APPEALS) DELETED THE ADDITIONS. 5 7 THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTE D THE ORDER OF THE LEARNED ASSESSING OFFICER WHEREAS THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). 8 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS A VAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GINNING OF COTTON AND CRUSHING OF COTTON SEEDS. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS NOT MAINTAINI NG DAY TO DAY CONSUMPTION AND PRODUCTION REGISTER. THE LEARNED AS SESSING OFFICER THEREFORE FOUND THE YIELD OF THE ASSESSEE AS PER TH E BOOKS OF THE ASSESSEE FOR THE MONTHS OF APRIL AND MAY AND TAKING THE SAME AS A STANDARD FOR THE WHOLE YEAR CALCULATED THE YIELD OF THE FULL YEAR AND THEREBY MADE ADDITIONS OF THE FOLLOWING AMOUNTS:- (I) UNEXPLAINED INVESTMENT IN STOCK U/S 69 OF THE ACT AS DISCUSSED ABOVE RS.20 53 455/ - (II) SUPPRESSION OF SALES RS.22 16 599/- (III) UNEXPLAINED INVESTMENT IN STOCK OF PUMDI U/S 69 RS. 1 51 626/- (IV) SUPPRESSION OF SALES OF PUMDI RS. 1 98 223/- (V) UNEXPLAINED INVESTMENT IN STOCK OF KALYAN ROO U/S 69 RS. 1 66 951/- (VI) SUPPRESSION OF SALES OF KALYAN ROO RS. 1 72 993/- (VII) SUPPRESSION OF SALES OF COTTON SEED OIL RS. 4 776/- 9 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) DELETED THE ABOVE ADDITIONS BY OBSERVING AS UNDER:- 6 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND PERUSED THE RELEVANT FACTS OF THE CASE. I FIND THAT THE AO WORKED OUT THE AMOUNT OF PRODUCTION FOR ALL THE MON THS ADOPTING THE AVERAGE PERCENTAGE OF YIELD OF COTTON AND COTTON SEEDS OF SHANKAR KAPAS AND KALYAN KAPAS ETC. ON THI S BASIS THE AO ALSO CALCULATED THE AVAILABILITY OF STOCK AN D MATCHING THE AMOUNT OF SALES OF SHANKAR ROO AND KALYAN ROO A ND ALSO PUMDI THE AO CAME TO THE CONCLUSION THAT THE APPEL LANT HAS EFFECTED SALES OF MORE QUANTITY OF STOCK THAN AVAIL ABLE WITH IT. AS MENTIONED IN THE SUBMISSIONS OF THE APPELLANT BE FORE THE AO AND REPEATED AT THE APPELLATE STAGE THE DISCREP ANCY WAS EXPLAINED BY THE APPELLANT BY STATING THAT THE YIEL D PERCENTAGE DEPENDS ON QUALITY OF KAPAS AS WELL AS THE WEATHER CONDITIONS. FURTHER THE APPELLANT STATED THAT IN THE FIRST FEW MONTHS OF THE FY I.E. APRIL MAY ETC. THE PRODUCTION YIELD IS ALW AYS HIGHER THAN THAT COMPARED TO IN THE MONTHS FOLLOWING MONSO ON PERIOD. ON THIS BASIS THE APPELLANT ALSO PREPARED CHART OF CONSUMPTION OF SHANKAR KAPAS AND KALYAN KAPAS AND PRODUCTION OF ROO AND COTTON SEEDS AND OIL. THE ABOVE CONTENTION OF THE A PPELLANT WAS NOT ACCEPTED BY THE AO BECAUSE THE APPELLANT HAD NO T MAINTAINED DAY TO DAY RECORD OF CONSUMPTION AND PRO DUCTIONS. THE AVERAGE OF SEVERAL FIGURES ITSELF INDICATES IT IS MEAN VALUE AND THEREFORE THERE HAVE TO BE INSTANCES OF HIGHER AND LOWER FIGURES THAN THE FIGURE OF AVERAGE. THEREFORE IT IS QUITE POSSIBLE THAT THE PERCENTAGE YIELD SHOWN IN THE FIR ST TWO MONTHS OF THE YEAR I.E. APRIL & MAY WOULD HAVE BEEN HIGHER PERCENTAGE YIELD THAN THE AVERAGE YIELD WORKED OUT FOR THE YEAR. IT IS A COMMON FACT THAT THE AGRICULTURAL PRO DUCES ARE AFFECTED BECAUSE OF WEATHER CONDITIONS. IN CASE OF COTTON WHICH HAS HIGH TENDENCY OF ABSORBING HUMIDITY THE CLAIM OF THE APPELLANT THAT IN THE MONTH OF APRIL AND MAY PRODUC TION YIELD WAS BETTER WHICH IS NOT ABNORMALLY HIGH APPEARS TO BE ACCEPTABLE BECAUSE THESE ARE THE MONTHS OF VERY DRY PERIOD OF THE YEAR. I ALSO AGREE WITH THE CONTENTION OF THE A PPELLANT THAT WHEN THE AO HAS NOT BROUGHT OUT ANY OTHER FACTS OR INFORMATION TO CONTROVERT THE ABOVE EXPLANATION OF THE APPELLANT THERE IS NO JUSTIFICATION FOR DISTURBING THE BOOK RESULTS SHOWN BY THE APPELLANT. FURTHER IT IS NOTE D THAT DURING THE YEAR THE APPELLANT HAS SHOWN GP PERCENTAGE OF 3 .63 WHICH IS BETTER THAN THAT OF IMMEDIATE PREVIOUS YEAR OF 2 .44%. HENCE IN VIEW OF THE ABOVE DISCUSSION I HOLD THAT THE VAR IOUS ADDITIONS MADE BY THE AO MENTIONED AS UNDER ARE NOT JUSTIFIED AND SAME ARE DELETED. (I) UNEXPLAINED INVESTMENT IN SHANKER ROO RS.20 53 45 5/- REPRESENTING SUPPRESSION OF STOCK / SALES 7 AS DISCUSSED IN PARA 6(I) OF ASSESSMENT ORDER U/S 69 OF THE IT ACT. (II) DIFFERENCE IN CLOSING STOCK OF SHANKER RS.22 16 59 9/- ROO AS DISCUSSED IN PARA 6(II). (CORRECT FIGURE AS SHOWN JIN PARA 6(II) IS 22 16 559) (III) UNEXPLAINED INVESTMENT IN STOCK OF PUMDI RS. 1 51 626/- U/S 69 OF THE ACT AS DISCUSSED IN PARA 6(V) (IV) SUPPRESSION OF SALES OF PUMDI AS RS. 1 98 223/- DISCUSSED IN PARA 6(VI) (V) UNEXPLAINED INVESTMENT IN STOCK RS. 1 66 95 1/- /SALES OF KALYAN ROO U/S 69 OF THE ACT AS DISCUSSED IN P.ARA 6(VII) (VI) SUPPRESSION OF SALES OF KALYAN ROO RS. 1 72 993/- AS DISCUSSED IN PARA 6(IV) (VII) SUPPRESSION OF SALE OF COTTON SEED OIL RS. 4 776/- AS DISCUSSED IN PARA 6(VII) 10 WE FIND THAT THE REVENUE COULD NOT POINT OUT AN Y SPECIFIC ERROR IN THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME- TAX (APPEALS). NO MATERIAL WAS BROUGHT ON RECORD TO CONTROVERT THE FINDING OF THE LEARNED COMMISSIONER OF INCOME-TAX ( APPEALS). WE FIND THAT THE LEARNED ASSESSING OFFICER ACCEPTED TH E ASSESSEES BOOK RESULTS FOR THE MONTHS OF APRIL AND MAY. WE FIND TH AT THE BOOKS OF ACCOUNT WERE MAINTAINED ON THE SIMILAR BASIS FOR TH E REMAINING 10 MONTHS. THUS THERE WAS NO REASON FOR THE LEARNED A SSESSING OFFICER TO ACCEPT THE BOOK RESULTS FOR TWO MONTHS AND REJEC T IT FOR REMAINING 10 MONTHS. THE FINDING OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE YIELD VARIES ACCORDING TO THE SE ASON IN THE LINE OF THE BUSINESS OF THE ASSESSEE COULD NOT BE DISPUTED BY THE REVENUE BY BRINING ANY MATERIAL TO SHOW THAT THE YIELD REMAINE D STATIC FOR 8 THROUGHOUT THE YEAR. FURTHER THE FINDING OF THE LE ARNED COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE GROSS PROFIT DECLARED BY THE ASSESSEE COMPARES FAVOURABLY WITH THE GROSS PROFIT OF THE ASSESSEE OF THE PRECEDING YEAR ALSO COULD NOT BE DI SPUTED BY THE REVENUE. IN THE ABOVE FACTS AND CIRCUMSTANCES WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED COMMISSIONER OF I NCOME-TAX (APPEALS). THEREFORE THESE GROUNDS OF APPEAL FILED BY THE REVENUE ARE DISMISSED. 11 GROUND NO.8 OF THE APPEAL OF THE REVENUE READS AS UNDER: THE CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF TH E CASE IN DIRECTING THE AO TO DELETE THE ADDITION OF RS.19 302/- MADE ON AC COUNT OF TELEPHONE EXPENSES OF RS.25 210/-. 12 THE BRIEF FACTS ARE THAT THE LEARNED ASSESSING OFFICER DISALLOWED 1/5TH OF TELEPHONE EXPENSES OF RS.96 505 /- INCURRED AT FACTORY RS.11210/- INCURRED AT RESIDENCE AND RS.18 333/- INCURRED ON MOBILE ON ACCOUNT OF PERSONAL USE. 13 ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME- TAX (APPEALS) THE ASSESSEE SUBMITTED THAT DISALLOWA NCE OF 1/5TH OF ENTIRE EXPENSES OF TELEPHONE IS UNJUSTIFIED IN PAR TICULAR THERE CANNOT BE ANY DISALLOWANCE IN RESPECT OF TELEPHONE AT FACT ORY. 14 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE O BSERVED THAT IN VIEW OF THE DETAILS FILED THE DISALLOWANCE OF 1/5TH OF TELEPHONE EXPENSES IS RESTRICTED TO THE TELEPHONE EXPENSES OF RESIDENCE AND MOBILE WHICH WORKS OUT TO RS.5908/-. 9 15 AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSIN G THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE LEA RNED DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY MATERIAL ON REC ORD TO SHOW THAT EXPENSES ON ACCOUNT OF PERSONAL USE FOR TELEPHONE W AS MORE THAN RS.5900/- AS DETERMINED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). IN ABSENCE OF ANY SUCH MATERIAL BROUGHT ON RECORD WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDE R OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). IT IS CONFIRM ED AND THE GROUND OF REVENUE IS DISMISSED. 16 IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 0801-20 10 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (N S SAINI) ACCOUNTANT MEMBER DATE : 08-01-2010 COPY OF THE ORDER FORWARDED TO : 1. M/S SHIV SHAKTI GINNING & PRESSING FACTORY KALY ANPURA ROAD NANI KADI 2. THE ITO PATAN WARD-4 MEHSANA 3. CIT CONCERNED 4. CIT(A) - XXI AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABA