The ITO, Ward-6(1),, Surat v. M/s. Chandrakanta Dyeing And Printing Mills, Surat

ITA 2223/AHD/2011 | 2006-2007
Pronouncement Date: 30-04-2015 | Result: Dismissed

Appeal Details

RSA Number 222320514 RSA 2011
Assessee PAN AABFC7198J
Bench Ahmedabad
Appeal Number ITA 2223/AHD/2011
Duration Of Justice 3 year(s) 7 month(s) 24 day(s)
Appellant The ITO, Ward-6(1),, Surat
Respondent M/s. Chandrakanta Dyeing And Printing Mills, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 30-04-2015
Assessment Year 2006-2007
Appeal Filed On 05-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI SHAILENDRA KR. YADAV J.M. & SHRI ANI L CHATURVEDI A.M.) I.T. A. NO. 2223/AHD/2011 (ASSESSMENT YEAR: 2006-07) THE I.T.O. WARD-6(1) SURAT. V/S M/S. CHANDRAKANTA DYEING AND PRINTING MILLS 197 BHESTAN OPP: OCTROI NAKA UDHANA NAVSARI ROAD SURAT. (APPELLANT) (RESPONDENT) PAN: AABFC7198J APPELLANT BY : SMT. SONIA KUMAR SR. D.R. RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 21-04-2015 DATE OF PRONOUNCEMENT : 30 -04-2015 PER SHRI ANIL CHATURVEDI A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-IV SURAT DATED 31.05.2011 FOR A.Y. 2006-07. 2. ON THE DATE OF HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE AND THEREFORE WE PROCEED TO DECIDE THE APPEAL EX-PARTE QUA THE ASSESSEE AND ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. ITA NO 2223/ AHD/2011 . A.Y. 2006-0 7 2 4. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF DYING AND PRINTING OF GREY FABRICS ON JOB WORK BASIS. ASS ESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2006-07 ON 31.12.2006 DECLARING TOT AL INCOME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER T HE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 22.12.2008 AN D THE TOTAL INCOME WAS DETERMINED AT RS. 83 100/-. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 31.05.2011 ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY T HE AFORESAID ORDER OF LD. CIT(A) REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUND;- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A)-IV SURAT HAS ERRED IN DELETING THE ADDITION OF RS.8 67 106/- MAD E BY THE ASSESSING OFFICER ON ACCOUNT OF LOW GP. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A)-IV SURAT HAS ERRED IN DELETING THE ADDITION OF RS.3 00 000/- MAD E BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S.68 OF THE I. T. ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A)-IV SURAT HAS ERRED IN DELETING THE ADDITION OF RS.1 68 431/- MAD E BY THE ASSESSING OFFICER OUT OF THE INTEREST EXPENSES TO THE EXTENT OF UTILIZATION OF THE INTEREST BEARING FUND TO GIVING INTEREST FREE LOAN. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A)-IV SURAT HAS ERRED IN DELETING THE ADDITION OF RS.81 364/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNRECONCILE DIFFERENCE IN THE BALANCE OF THE CREDITORS 5. 1 ST GROUND IS WITH RESPECT TO ADDITION MADE ON ACCOUNT OF LOW GROSS PROFIT. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O NO TICED THAT THERE WAS FALL IN GROSS PROFIT FROM 20.25% IN A.Y. 2005-06 TO 11.9 1% IN A.Y. 06-07. THE ASSESSEE WAS THEREFORE ASKED TO JUSTIFY THE FALL IN GP TO WHICH ASSESSEE INTERALIA SUBMITTED THAT DUE TO INCURRING OF HEAVY LOSSES THE MILL WAS COMPLETELY CLOSED DOWN SINCE DECEMBER 2005 AND MAI N REASON FOR LOSSES WAS NOT GETTING SUFFICIENT GREY FABRICS WHICH RESUL TED INTO HIGHER PRODUCTION ITA NO 2223/ AHD/2011 . A.Y. 2006-0 7 3 COST. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. A.O ALSO NOTED THAT FOR THE MONTH OF JANUARY THOUGH THE ASSESSEE HAS SHOWN PRODUCTION OF 1 75 446 METER OF GREY BUT THERE WAS NO CONSUMPTION OF COLORS AND CHEMICALS AND OF COAL AND LIGNITE. HE WAS THERE FORE OF THE VIEW THAT THE BOOKS OF ACCOUNTS ARE NOT COMPLETE AND CORRECT. HE ALSO NOTICED THAT ASSESSEE HAD NOT MAINTAINED DAY TO DAY STOCK REGIST ER AS WELL AS CONSUMPTION RECORD OF BASIC RAW MATERIAL COLORS AND CHEMICALS. HE WAS THEREFORE OF THE VIEW THAT THE SUBMISSION OF THE AS SESSEE OF FALL IN GROSS PROFIT CANNOT BE VERIFIED. HE THEREFORE REJECTED TH E BOOKS OF ACCOUNTS. HE THEREAFTER ON THE BASIS OF AVERAGE OF GROSS PROFITS FROM A.Y. 2004-05 TO A.Y. 2006-07 DETERMINED THE GROSS PROFIT FOR THE YEAR UN DER CONSIDERATION AT 16.84% AND MADE AN ADDITION OF RS. 8 67 106/-. AGGR IEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITIO N BY HOLDING AS UNDER:- 5. I HAVE GONE THROUGH THE FACTS OF THE CASE. IT HA S NOT BEEN SHOWN BY THE A.O. THAT THE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT WAS O NE WHICH WAS NOT REGULARLY FOLLOWED. NO SPECIFIC DEFECTS IN THE BOOKS HAVE BEE N POINTED OUT. THE REASON FOR PRODUCTION AND CONSUMPTION OF ELECTRICITY BEING AT VARIANCE HAS BEEN DULY EXPLAINED BY THE APPELLANT. THE POINTS RAISED BY THE A.O. IN HIS SHOW CAUSE HAVE BEEN DULY EXPLAINED AND THE A.O HAS NOT BEEN ABLE TO SHOW THAT THE EXPL ANATIONS ARE FALSE. IN MY OPINION THERE WAS NO REASON TO REJECT THE BOOKS OF ACCOUNTS AND ESTIMATE INCOME OF THE APPELLANT. THE ADDITION MADE IS THEREFORE DELETED. THIS GROUND IS ALLOWED. 7. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A) REV ENUE IS NOW IN APPEAL BEFORE US. 8. BEFORE US LD. D.R. SUPPORTED THE ORDER OF A.O. 9. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED TH AT NO SPECIFIC DEFECTS IN ITA NO 2223/ AHD/2011 . A.Y. 2006-0 7 4 THE BOOKS OF ACCOUNTS WAS POINTED BY THE A.O AND TH E VARIANCE IN THE CONSUMPTION OF ELECTRICITY AND PRODUCTION WAS DULY EXPLAINED BY THE ASSESSEE THE EXPLANATION OF THE ASSESSEE WAS NOT F OUND TO BE FALSE. HE THEREFORE DELETED THE ADDITION. BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD . CIT(A) WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 10. 2 ND GROUND IS WITH RESPECT TO ADDITION OF RS. 3 00 000 /- ON ACCOUNT OF UNEXPLAINED CASH CREDITS U/S. 68. 11. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O NO TICED THAT ASSESSEE HAD TAKEN UNSECURED LOAN AGGREGATING TO RS. 3 00 000/- FROM 3 PARTIES NAMELY ABHA POLYMERS (RS. 50 000) B.R. NAGARSHI (RS. 1 50 000/-) AND SHALIBHADRA SYNTHETICS (RS. 1 00 000/-). THE ASSESS EE WAS ASKED TO EXPLAIN THE NATURE AND SOURCE OF CREDIT A.O NOTICED THAT I N RESPONSE TO THE SUMMONS ISSUED TO THE PARTIES THE PARTIES HAD ONLY SUBMITT ED CONFIRMATION BUT NO DETAILS REGARDING GENUINENESS OF TRANSACTION CAPAC ITY TO LEND WAS PROVED. HE WAS THEREFORE OF THE VIEW THAT THE CASH CREDITS OF RS. 3 00 000/-HAVE REMAINED UNPROVED AND ACCORDINGLY CONSIDERED THE AG GREGATE AMOUNT OF RS. 3 00 000/- AS UNEXPLAINED U/S. 68 OF THE ACT. AGGRI EVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 7. I HAVE GONE THROUGH THE FACTS OF THE CASE. CONFI RMATIONS WITH PAN WERE SUBMITTED BY THE APPELLANT. THE LOANS HAD BEEN RECEIVED BY CHEQU E. THE CREDITORS WERE ASSESSED TO TAX. THE TRANSACTIONS WERE CONFIRMED INDEPENDENTLY BY TH E LOAN CREDITORS TO THE A.O. UNDER THESE CIRCUMSTANCES THE LOANS CANNOT BE HELD AS UN EXPLAINED. NO ADDITION .U/S. 68 WAS WARRANTED. THE ADDITION MADE IS DELETED. THIS GROUN D IS ALLOWED. ITA NO 2223/ AHD/2011 . A.Y. 2006-0 7 5 12. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A) REV ENUE IS NOW IN APPEAL BEFORE US. 13. BEFORE US LD. D.R. SUPPORTED THE ORDER OF A.O. 14. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED TH AT THE LOANS WERE RECEIVED BY CHEQUE THE CREDITORS WERE ASSESSED TO TAX THE TRANSACTIONS WERE CONFIRMED INDEPENDENTLY BY THE LOAN CREDITORS AND C ONFIRMATIONS WITH PAN NUMBERS WERE SUBMITTED BY THE ASSESSEE. BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FI NDINGS OF LD. CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDE R OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 15. 3 RD GROUND IS WITH RESPECT TO ADDITION ON ACCOUNT OF I NTEREST EXPENSES. 16. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O NO TICED THAT ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS. 18 14 370/- AND AT THE SAME TIME ASSESSEE HAD ALSO ADVANCED MONEY TO VARIOUS PARTIES (LISTED AT PAGE 17 & 18) AGGREGATING TO RS. 9 35 729/- ON WHICH NO INTEREST WAS CHARGED TO THE ASSESSEE. A.O WAS OF THE VIEW THAT IN THE ABSENCE O F ANY EVIDENCE OR DETAILS ABOUT THE NATURE OF ADVANCE THE TYPE OF BUSINESS R ELATIONSHIP AND THE REASON FOR ADVANCING INTEREST FREE ADVANCES THE INTEREST EXPENSE CANNOT BE ALLOWED AS INTEREST BEARING FUNDS WERE DIVERTED FOR INTERES T FREE ADVANCE WITHOUT ANY BUSINESS PURPOSE. HE ACCORDINGLY WORKED OUT THE INT EREST ON THE AMOUNT ADVANCED BY THE ASSESSEE AT 18% AND THE INTEREST OF RS. 1 68 431/- WAS DISALLOWED BY HIM. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE ITA NO 2223/ AHD/2011 . A.Y. 2006-0 7 6 MATTER BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 10.1. IN VIEW OF THE SUBMISSIONS OF THE APPELLANT D URING THE COURSE OF APPEAL PROCEEDINGS AND THE ACCOMPANYING SUPPORTING IT IS HELD THAT TH E ADVANCES WERE GIVEN FOR BUSINESS PURPOSES. EVEN OTHERWISE SINCE THE APPELLANT HAD F UNDS IN THE NATURE OF PARTNERS CAPITAL IN EXCESS OF THE FUNDS ADVANCED INTEREST FREE NO D ISALLOWANCE COULD BE MADE. THE ADDITION MADE IS DELETED. THIS GROUND IS ALLOWED . 17. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A) REV ENUE IS NOW IN APPEAL BEFORE US. 18. BEFORE US LD. D.R. SUPPORTED THE ORDER OF A.O. 19. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED TH AT THE ADVANCES WERE GIVEN FOR BUSINESS PURPOSES AND WERE OUT OF THE PAR TNERS CAPITAL WHICH WERE INTEREST FREE IN NATURE. BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD. CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 20. 4 TH GROUND IS WITH RESPECT TO ADDITION OF RS. 81 364 O N ACCOUNT OF UNRECONCILED DIFFERENCE IN THE BALANCE OF CREDITORS . 21. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O NO TICED THAT THE BALANCES OF CREDITORS SHOWN BY THE ASSESSEE IN RESPECT OF 4 PARTIES (LISTED AT PAGE 17) DID NOT TALLY WITH THE CONTRA ACCOUNTS. HE ALSO NOT ICED THAT ASSESSEE WAS UNABLE TO RECONCILE THE DIFFERENCES. HE THEREFORE C ONSIDERED THE DIFFERENCE BETWEEN THE BALANCES SHOWN BY THE ASSESSEE AND THE CONTRA ACCOUNTS ITA NO 2223/ AHD/2011 . A.Y. 2006-0 7 7 AGGREGATING TO RS. 81 364 AND MADE ITS ADDITION. AG GRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITIO N BY HOLDING AS UNDER:- 8. GROUND NO. 4 IS AGAINST THE A.O MAKING AN ADDITION OF RS. 63 492/- ON ACCOUNT OF DIFFERENCE IN BALANCE OF CREDITORS. THE A.O OBTAINE D INFORMATION U/S. 133(6) WHICH SHOW THAT THERE WAS DIFFERENCE IN CLOSING BALANCE OF M/S . SHREEJI INTERNATIONAL M/S. SHARDA PROCESSORS AND M/S. RAJKUNWAR FASHIONS. IT WAS EXPL AINED BY THE APPELLANT THAT THE MISMATCH WAS ON ACCOUNT OF RATE DIFFERENCE. ACCORDI NG TO THE A.O. NO DEBIT/ CREDIT NOTES WERE PRODUCED. HE THEREFORE CONSIDERED THE ACCOUNTS AS UNRECONCILED AND MADE THE ADDITION. DURING THE COURSE OF APPEAL PROCEEDINGS IT WAS SUBMITTED THAT THE THREE PARTIES WERE DEBTORS OF THE APPELLANT AND NOT CREDITORS AS MENTIONED BY THE A.O. AND THAT THE ACCOUNTS HAD BEEN RECONCILED BY THE APPELLANT VIDE HIS LETTER DATED 22.12.2008 BEFORE THE A.O. IT WAS EXPLAINED THAT SHORT AMOUNT OF BALANCE SHOWN AS PAYABLE BY THE DEBTOR TO THE APPELLANT WAS A LOSS AND NOT INCOME. IN VIEW OF THE FACT THAT THE PARTIES WERE DEBTORS AND NOT CREDITORS ANY SHORT PAYMENT WOULD RESULT IN A LOSS TO THE APPELLANT AND THEREFORE CANNOT BE ADDED AS INCOME. EVEN OTHERWISE THE ACCOU NTS HAVE BEEN RECONCILED. THE ADDITION IS DELETED. THIS GROUND IS ALLOWED. 9. GROUND NO.5 IS AGAINST THE A.O. MAKING AN ADDITI ON OF RS. 17 872/- IN RESPECT OF DIFFERENCE IN BALANCE OF M/S. KUSUM DYE-CHEM. THE A .O. FOUND DIFFERENCE IN CLOSING BALANCE IN THE ACCOUNT OF M/S. KUSUM DYE-CHEM A CR EDITOR AS REFLECTED IN THE BOOKS OF THE APPELLANT AND AS OBTAINED U/S. 133(6). HE THERE FORE MADE AN ADDITION OF RS. 17 872/-. DURING THE COURSE OF APPEAL PROCEEDINGS IT WAS SUB MITTED BY THE APPELLANT THAT THE A.O. HAD NOT ASKED THEM TO EXPLAIN THE DIFFERENCE IN THE ACCOUNT OF M/S. KUSUM DYE-CHEM. IT WAS EXPLAINED THAT THE DIFFERENCE AROSE DUE TO DIFF ERENCE IN OPENING BALANCE OF RS. 17 084/- AND THEREFORE PERTAINED TO PRECEDING YEAR IN WHICH IT HAD ALREADY BEEN ADDED IN ASSESSMENT AND CONFIRMED BY THE CIT(APPEALS). IT WA S SUBMITTED THAT THE BALANCE AMOUNT OF RS.788/- CAN ALSO BE RECONCILED IF APPELLANT IS PROVIDED WITH THE COPY OF ACCOUNT OBTAINED BY THE A.O. U/S. 133(6). SINCE THE DIFFERE NCE TO THE EXTENT OF RS. 17 084/- PERTAINED TO EARLIER YEARS AND HAS ALREADY BEEN ADD ED TO THE INCOME IN A.Y. 2005-06 ADDITION TO THIS EXTENT WAS NOT WARRANTED. AS REGAR DS BALANCE AMOUNT OF RS.788/- IS CONCERNED IT IS ALSO DELETED CONSIDERING THE FACT THAT THE A.O. DID NOT PROVIDE' THE APPELLANT WITH THE COPY OF ACCOUNTS OR AN OPPORTUNI TY TO RECONCILE THE SAID ACCOUNT. THE ADDITION OF RS. 17 872/- IS THEREFORE DELETED. THIS GROUND IS ALLOWED 22. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A) REV ENUE IS NOW IN APPEAL BEFORE US. 23. BEFORE US LD. D.R. SUPPORTED THE ORDER OF A.O. ITA NO 2223/ AHD/2011 . A.Y. 2006-0 7 8 24. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) HAS NOTED THAT THE 3 PARTIES WERE DEBTOR S OF THE ASSESSEE AND NOT CREDITORS AND THAT ANY SHORT PAYMENT WOULD RESULT I NTO LOSS TO THE ASSESSEE. WITH RESPECT TO DIFFERENCE IN BALANCE OF KUSUM DYEC HEM CIT(A) HAS NOTED THAT THE DIFFERENCE AROSE DUE TO OPENING BALANCE AN D PERTAINED TO PRECEDING YEAR AND IT WAS ALREADY ADDED IN ASSESSMENT AND ALS O CONFIRMED BY LD. CIT(A) AND FOR THE BALANCE AMOUNT OF RS. 788/- A.O DID NOT PROVIDE OPPORTUNITY TO ASSESSEE TO RECONCILE THE DIFFERENCE . BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT TH E FINDINGS OF LD. CIT(A) WE THEREFORE FIND NO REASON TO INTERFERE WITH THE O RDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 25. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 04 - 2015. SD/- SD/- (SHAILENDRA KR. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AH MEDABAD