DCIT Circle-I, v. Kuria Mal & Sons,

ITA 2211/DEL/2008 | 2005-2006
Pronouncement Date: 22-01-2010 | Result: Dismissed

Appeal Details

RSA Number 221120114 RSA 2008
Assessee PAN AGEAT3840K
Bench Delhi
Appeal Number ITA 2211/DEL/2008
Duration Of Justice 1 year(s) 7 month(s) 16 day(s)
Appellant DCIT Circle-I,
Respondent Kuria Mal & Sons,
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 22-01-2010
Date Of Final Hearing 18-01-2010
Next Hearing Date 18-01-2010
Assessment Year 2005-2006
Appeal Filed On 05-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI B.P. JAIN ACCOUNTANT MEMBER I.T.A.NO.120 & 2211/DEL/2008 ASSESSMENT YEARS : 2004-05 & 2005-06 DY. COMMISSIONER OF INCOME-TAX M/S. KURIA MAL & S ONS CIRCLE-1 FARIDABAD. VS. DELHI GATE OLD FARIDABA D. C.O. NO.182/DEL/2008 (IN ITA NO.120/DEL/2008) ASSESSMENT YEAR : 2004-05 M/S. KURIA MAL & SONS DY. COMMISSIONER OF INCOME-TAX DELHI GATE OLD FARIDABAD. VS. CIRILE-1 FARIDABA D. (APPELLANT) (RESPONDENT) ASSESSEE BY : DR. RAKESH GUPTA & SHRI ASHWANI T ANEJA. DEPARTMENT BY : SMT. PRA TIMA KAUSHIK SR. DR. O R D E R PER B.P. JAIN ACCOUNTANT MEMBER THESE APPEALS BY THE REVENUE BY THE ASSESSEE ARE DI RECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) FARIDABAD DATED 26 TH OCTOBER 2007 AND 29 TH MARCH 2008 FOR ASSESSMENT YEARS 2004-05 AND 2005- 06 RESPECTIVELY IN APPEALS AGAINST ASSESSMENTS FRAM ED UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 (THE ACT). THE ASSESSE E HAS FILED CROSS 2 OBJECTION FOR ASSESSMENT YEAR 2004-05 ONLY. THE AP PEALS BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.120/DEL/2008 2. FIRST WE WOULD TAKE APPEAL BY THE REVENUE IN ITA NO.120/DEL/2008. FOLLOWING GROUNDS ARE RAISED:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE ADDITION OF RS.5 85 978/- MADE BY THE AO ON ACC OUNT OF SALE OF GOODS OUTSIDE THE BOOKS OF ACCOUNT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELET ING THE ADDITION OF RS.1 11 157/- IN RESPECT OF INVESTM ENT IN PURCHASE OF MEHANDI PATTA OUTSIDE THE BOOKS OF ACCO UNTS. 3. WITHOUT PREJUDICE TO GROUND NO. (1) & (2) ABOVE LD . CIT(A) HAS ERRED IN HOLDING THAT THE AO WAS NOT RIG HT IN REJECTING THE BOOKS OF ACCOUNTS U/S 145 OF THE INCO ME TAX ACT 1961 EVEN WHEN THE ASSESSEE COULD NOT EXPLAIN THE SHORTAGE IN CHEMICALS AND GENUINENESS OF WASTAGE CL AIMED BY IT AT THE ASSESSMENT STAGE AS WELL AS THE FIRST APPELLATE STAGE. 3. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT F IRM IS CARRYING ON THE BUSINESS OF MANUFACTURING OF MEHENDI AT FARIDABAD F ROM MEHENDI PATTI ETC. AS PER THE ASSESSEES LETTER DATED 30.11.2005 IN TH E LAST YEAR THE FIRM IS ENGAGED IN THE BUSINESS OF 100% EXPORT OF HENNA POW DER WHICH IS THE FAMILY BUSINESS SINCE LAST MANY YEARS. THE MAIN RA W MATERIAL IS HENNA 3 LEAVES WHICH IS PROCURED FROM THE PLACE NAMED SOJA T CITY DISTT. RAJASTHAN. THESE HENNA LEAVES ARE AN AGRICULTURAL PRODUCE AND WHICH AFTER CLEANING ARE CRUSHED AND THEN GRINDED INTO FINE POWDER BY A SPEC IFIC MACHINES KNOWN AS PULVERISERS AND THEN SUITABLY PACKED AS PER THE SPE CIFIC REQUIREMENTS OF THE OVERSEAS BUYERS. IT ALSO MANUFACTURES HENNA BASED PRODUCTS SUCH AS BLACK BROWN HENNA WHICH ARE USED AS HAIR DYES BY MIXING CERTAIN CHEMICALS WITH THE HENNA POWDER. THE PRODUCT OF THE ASSESSEE FIRM IS EXPORTED IN MANY COUNTRIES I.E. JAPAN TURKEY SYRIA SOUTH KOREA ET C. THE ASSESSEE IS NOT MAINTAINING ANY STOCK REGISTER OF PURCHASE AND CONS UMPTION OF RAW MATERIAL AND DAY-TO-DAY PRODUCTION REGISTER. THE ASSESSEE I S NOT ABLE TO RECONCILE THE FIGURES OF CONSUMPTION OF VARIOUS ITEMS OF RAW MATE RIAL I.E. MEHENDI AND CHEMICAL AND PRODUCTION AND SALE OF FINISHED PRODUC TS THEREFROM. THE ASSESSEE HAS ALSO NOT FURNISHED ANY EVIDENCE OF GEN UINENESS OF SHORTAGES SHOWN IN THE CONSUMPTION OF VARIOUS ITEMS OF RAW MA TERIALS I.E. MEHENDI AND CHEMICALS ETC. THE A.O. FOUND THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS IN A SIMILAR CASE OF WELL-KNOWN MEHENDI MANUFACTURER NAMELY M/S. ISHAR DASS AMIR CHAND THE PERCENTAGE OF WASTA GE IN THE CASE OF RED MEHENDI WAS 3.63% ONLY. IN THE ASSESSEES OWN CASE THE WASTAGE OF MEHENDI HAS BEEN SHOWN AT 5.09% COMPARED TO 4.71% A ND 6.13% IN THE PRECEDING YEARS. THUS APPARENTLY IT WAS CLEAR TO THE A.O. THAT THE ASSESSEE 4 HAS SHOWN MORE WASTAGE IN THE PRODUCTION OF MEHENDI AND THE SAME IS ABNORMAL. FURTHER ACCORDING TO THE A.O. THE ASSE SSEES CLAIM OF WASTAGE OF CHEMICALS IS NOT JUSTIFIED AS NO WASTAGE CAN BE SAI D TO HAVE BEEN OCCURRED DURING THE COURSE OF GRINDING OR MIXING OF MEHENDI WITH CHEMICALS. NO RECORDS OF CONSUMPTION AND PRODUCTION OF MEHENDI PA TTA AND CHEMICAL HAVE BEEN FURNISHED. IN VIEW OF THESE DETAILS THE A.O. CONCLUDED THAT THE BOOK RESULTS SHOWN BY THE ASSESSEE WERE NOT RELIABLE. T HEREFORE HE REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE UNDER SEC. 145 OF THE ACT. AFTER REJECTING THE BOOKS OF ACCOUNT THE A.O. PROCEEDED TO DETERMI NE THE CONSUMPTION OF CHEMICALS AT 68662.30 KG. AS AGAINST 64394 KG. THE REBY GIVING A SHORTAGE OF CHEMICALS WORTH 4268.30 KG. (68662.30 64394) WHIC H GIVES SHORTAGE IN CHEMICALS AT 6.21% IN COMPARISON TO SHORTAGES OF 5. 83% AND 6.48% IN THE PRECEDING YEARS. WHILE ACCEPTING THE WASTAGE IN ME HNDI AT 5.09% THE A.O. FOUND NO JUSTIFIABLE REASONS/EVIDENCES HAVE BEEN FU RNISHED BY THE APPELLANT FIRM FOR THE SHORTAGE IN CHEMICALS. AS PER HIS ASS ESSMENT ORDER ON LOCAL ENQUIRIES AND COMPARING THE PRESENT CASE WITH ANOTH ER ONE M/S. ISHAR DASS AMIR CHAND THE A.O. ALLOWED THE SHORTAGE IN CHEMIC ALS AT 428.30 KG. OUT OF 4268.30 KG. WHICH WAS FAIR AND REASONABLE ACCORDIN G TO THE A.O. THUS AFTER DEPENDING ON A FORMULA OF CHEMICAL USED IN TH E PRODUCTION OF KALI MEHANDI SHOWN AS WASTAGE AT 3840 KG. (4268.30 428 .30) AND APPLYING THE 5 SALE RATE AT RS.161.48/- PER KG. THE AO CALCULATED THE SALE OUTSIDE THE BOOKS OF ACCOUNT TO THE EXTENT OF RS.12 40 166/- (7680 KG . X 161.48). THE ASSESSEE FIRM HAD DECLARED G.P. RATE @ 47.25% DURING THE YEA R AND BY APPLYING THIS RATE THE A.O. ARRIVED AT THE SHORT PROFIT DECLARED BY THE ASSESSEE FIRM AT RS.5 85 978/- AND ADDED IT BACK TO THE INCOME OF TH E ASSESSEE FIRM. 4. THE LEARNED CIT(A) VIDE PARA 5.3 TO 5.6 OF HIS O RDER REVERSED THE ACTION OF THE A.O. FOLLOWING THE ORDERS OF HIS PRED ECESSOR IN ASSESSEES OWN CASE. THE LEARNED CIT(A) ACCORDINGLY DELETED THE T RADING ADDITION OF RS.5 85 978/-. 5. WE HAVE PERUSED THE FACTS OF THE CASE. THE CONT ENTION OF THE ASSESSING OFFICER REJECTING THE BOOKS OF ACCOUNT MA INLY WAS THAT THE ASSESSEE HAS NOT PRODUCED STOCK REGISTER AND THERE WAS ABNORMAL SHORTAGE OF 5.09% DURING THE YEAR. THE A.O. HAS RELIED UPON TH E SHORTAGE IN ANOTHER CASE OF ONE ASSESSEE NAMELY M/S. ISHWAR DASS AMIR C HAND. AS REGARDS THE PRODUCTION OF THE STOCK REGISTER IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE STOCK REGISTER WAS PRODUCED BEFORE THE ASS ESSING OFFICER VIDE LETTER DATED 4.12.2006 AND 15.11.2006. THE DETAILS OF OPE NING AND CLOSING STOCK MONTH-WISE PURCHASE OF MEHENDI PATTA AND CHEMICALS MONTH-WISE SALES WERE ALSO FURNISHED. AS REGARDS QUANTITATIVE DETAI LS IN THE CASE OF MEHENDI 6 PATTA OR CHEMICALS IT WAS SUBMITTED THAT THERE WAS NO PRODUCTION OF MEHENDI PATTA OR CHEMICALS BY THE ASSESSEE DURING THE YEAR. AS REGARDS THE SHORTAGE CLAIMED BY ANOTHER ASSESSEE M/S. ISHWAR DAS AMIR CH AND AT 3.63% THE SAID INSTANCE WAS NEVER CONFRONTED BY THE ASSESSING OFFI CER IN THE ASSESSMENT PROCEEDINGS AND SUCH MATERIAL HAS TO BE IGNORED IN VIEW OF THE DECISIONS IN THE CASE OF KISHICHAND CHELLARAM 125 ITR 713 (SC) AND IN THE CASE OF SONA ELECTRIC CO. VS. CIT 152 ITR 507 (DEL). THE SHORT AGE IN AN INDUSTRY CANNOT BE STATIC AND DIFFERENT SHORTAGES HAVE BEEN ACCEPTE D IN THE PRECEDING YEARS BY THE A.O. HIMSELF AT 6.48% IN ASSESSMENT YEAR 200 2-03 AND 6.27% IN ASSESSMENT YEAR 2001-02. THEREFORE IN SUCH CIRCUM STANCES AND FACTS OF THE CASE BOOKS OF ACCOUNT OF THE ASSESSEE CANNOT BE RE JECTED. THERE IS NOTHING ON RECORD TO PROVE THAT THE ASSESSEE HAS MADE SALES OUTSIDE THE BOOKS OF ACCOUNT IN THE LOCAL MARKET MORE SO WHEN THE ASSESS EE IS A 100% EXPORT UNDERTAKING. ON IDENTICAL FACTS IN THE ASSESSMENT YEAR 2006-07 ITAT DELHI BENCH `C IN ITA NO.3043/DEL/2009 DATED 1.9.2009 HA S DISMISSED THE REVENUES APPEAL. IN THE CIRCUMSTANCES AND FACTS O F THE CASE THE ORDER OF THE LEARNED CIT(A) APPEARS TO BE REASONED ONE AND WE FI ND NO INFIRMITY IN HIS ORDER AND HE HAS RIGHTLY REVERSED THE ORDER OF THE A.O. THUS GROUND NO.1 2 & 3 OF THE REVENUE ARE DISMISSED. C.O. NO.182/DEL/2008 7 6. THE LEARNED COUNSEL FOR THE ASSESSEE DR. RAKESH GUPTA HAS NOT PRESSED THE CROSS OBJECTION AND THE SAME IS DISMISS ED AS NOT PRESSED. ITA NO.2211/DEL/2008 7. NOW WE WOULD TAKE APPEAL IN ITA NO.2211/DEL/2008 . THE FACTS ARE IDENTICAL TO THE FACTS OF THE ASSESSEES CASE FOR A SSESSMENT YEAR 2004-05 WHERE THE A.O. INVOKED THE PROVISIONS OF SECTION 14 5(3) OF THE ACT FOR THE REASONS THAT THE ASSESSEE HAS NOT PRODUCED THE STOC K REGISTER TO ESTABLISH EXCESS SHORTAGE DECLARED. ACCORDINGLY HE MADE AN ADDITION OF RS.7 78 020/-. THE LEARNED CIT(A) REVERSED THE ORD ER OF THE A.O. FOLLOWING HIS EARLIER ORDER VIDE PARA 6.8 TO 6.15 OF HIS ORDE R. 8. WE HAVE PERUSED THE FACTS OF THE CASE AND HEARD THE PARTIES. LIKE IN THE PRECEDING YEAR THE ASSESSEE HAD PRODUCED THE ST OCK REGISTER VIDE LETTERS DATED 16.11.2007 AND 13.12.2007. THE A.O. RELIED U PON THE DECISION OF A THIRD PARTY WITHOUT CONFRONTING THE ASSESSEE. NO F INDING WITH REGARD TO THE SALES OUTSIDE THE BOOKS OF ACCOUNT HAVE BEEN GIVEN IN THE PRESENT CASE. MOREOVER THE ASSESSEE HAS DECLARED A G.P. RATE OF 47.27% DURING THE IMPUGNED YEAR AS AGAINST THE PRECEDING YEAR G.P. RA TE 47.25% AND 44.30%. IN THE CIRCUMSTANCES AND FACTS OF THE CASE AND THE FINDINGS OF THE LEARNED CIT(A) AND OUR DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 (SUPRA) WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) WHO 8 HAS RIGHTLY REVERSED THE ORDER OF THE A.O. AND DELE TED THE ADDITION MADE. THUS THE SOLITARY GROUND OF THE REVENUE IS DISMISSE D. 9. IN THE RESULT BOTH THE APPEALS BY THE REVENUE AN D CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY 2010. SD/- SD/- (C.L. SETHI) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22 ND JANUARY 2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.