M/s. Sanghvi Ispat Industries,, Indore v. The I.T.O., Indore

ITA 232/IND/2010 | 2004-2005
Pronouncement Date: 17-05-2010 | Result: Allowed

Appeal Details

RSA Number 23222714 RSA 2010
Assessee PAN AAZFS2186E
Bench Indore
Appeal Number ITA 232/IND/2010
Duration Of Justice 25 day(s)
Appellant M/s. Sanghvi Ispat Industries,, Indore
Respondent The I.T.O., Indore
Appeal Type Income Tax Appeal
Pronouncement Date 17-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 17-05-2010
Assessment Year 2004-2005
Appeal Filed On 22-04-2010
Judgment Text
PAGE 1 OF 5 - I.T.A.NO. 232/IND/2010 SANGHVI ISPAT INDUSTRIES INDORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE (S.M.C.) BENCH : INDORE BEFORE SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : AAZFS2186E I.T.A.NO. 232/IND/2010 A.Y. : 2004-05 M/S.SANGHVI ISPAT INDUSTRIES INCOME-TAX OFFICER 5-B SECTOR A VS WARD 1(1) SANWER ROAD SECTOR A INDORE. INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI AIREN SALUJA C.A. RESPONDENT BY : SMT. APARANA KARAN SR. DR DATE OF HEARING : 14.5.2010 O R D E R THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-I INDORE DATED 19.01.2010 FOR THE ASSESSM ENT YEAR 2004-05. 2. I HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. IN THIS APPEAL THE ASSESSEE IS AGGRIEVED BY THE DE CISION OF LD. CIT(A) IN CONFIRMING THE LEVY OF PENALTY OF RS. 95 000/- U/S 271(1)(C) OF THE INCOME-TAX ACT 1961. PAGE 2 OF 5 - I.T.A.NO. 232/IND/2010 SANGHVI ISPAT INDUSTRIES INDORE. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAG ED IN MANUFACTURING AND TRADING OF STEEL STRUCTURE TOR S TEEL GIRDERS ETC. AND THE MAIN RAW MATERIAL USED BY THE ASSESSEE IS SCRAP . THERE WAS A SURVEY U/S 133A WHEREIN PHYSICAL QUANTITY OF STOCK WAS TA KEN WHICH WAS COMPARED WITH THE BOOKS OF ACCOUNT PREPARED UP TO T HAT DATE AND THE AO FOUND THAT THERE WAS A SHORTAGE OF STOCK BOTH IN RE SPECT OF RAW MATERIAL AS WELL AS FINISHED GOODS. THE AO HELD THAT BOOKS OF A CCOUNT WERE ALSO INCOMPLETE. HENCE THE ASSESSEES BOOK RESULTS COUL D NOT BE ACCEPTED. THE AO ALSO REJECTED THE CLAIM OF THE ASSESSEE THAT STO CK IN PROCESS WAS NOT VALUED DURING THE COURSE OF SURVEY HENCE THE SAME SHOULD BE CONSIDERED IN ARRIVING AT THE QUANTUM OF STOCK FOR THE REASON THAT SUCH CLAIM HAD NOT BEEN MADE IN THE COURSE OF SURVEY. THE ASSESSEE ALS O PLEADED THAT THE VALUATION OF THE STOCK DONE BY THE ASSESSEE WAS ON WEIGHT BASIS WHEREAS THE STOCK WAS VALUED BY THE DEPARTMENT ON MEASUREME NT BASIS. HENCE THE QUANTUM OF STOCK ARRIVED IN THE COURSE OF SURVE Y WAS NOT CORRECT. THE AO HOWEVER MADE ADDITION FOR UNRECORDED SALES OF BOTH RAW MATERIALS AS WELL AS OF FINISHED GOODS AGGREGATING TO RS. 2 6 3 315/-. THE AO ALSO INITIATED PROCEEDINGS U/S 271(1)(C) OF THE ACT WH EREIN THE ASSESSEE SUBMITTED THAT THERE WAS NEITHER A CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AS SUCH ADDITIONS WERE MADE MERELY ON ACCOUNT OF DIFFERENCE IN VALUATION OF METHODOLOGY A DOPTED BY THE PAGE 3 OF 5 - I.T.A.NO. 232/IND/2010 SANGHVI ISPAT INDUSTRIES INDORE. DEPARTMENT. IT WAS ALSO CONTENDED THAT THE ASSESSEE WAS HAVING SUBSTANTIAL UNABSORBED LOSSES AND THEREFORE THE A SSESSEE DID NOT PREFER TO FURTHER CONTEST THE ISSUE. THE ASSESSEE ALSO CON TENDED THAT IN TOR INDUSTRIES THE VALUATION SHOULD HAVE BEEN DONE ON THE BASIS OF WEIGHT INSTEAD OF MEASUREMENT AND THERE COULD BE 10 15 % VARIATION. HENCE IT COULD NOT BE SAID THAT THE VALUATION ADOPTED BY THE REVENUE AUTHORITIES WAS IN FACT CORRECT PARTICULARLY WHEN WORK IN PRO CESS WAS NOT VALUED AT ALL. THE AO HOWEVER REJECTED THESE EXPLANATIONS O F THE ASSESSEE AND LEVIED A PENALTY OF RS. 95 000/-. AGGRIEVED BY THIS THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO ALSO CONFIRMED THE ACTION OF THE AO RELYING ON THE DECISION OF THE HON'BLE SUPREME COUR T IN THE CASE OF DHARMENDRA TEXTILES AS REPORTED IN 306 ITR 277. STI LL AGGRIEVED BY THIS THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE F ACTS AND REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. THE LEARNED COUNSEL FURTHER PLACED RELIANCE ON THE DEC ISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PRIVATE LIMITED AS REPORTED IN 322 ITR 158. THE LEARNED CO UNSEL ALSO CONTENDED THAT IN THIS DECISION THE FINDINGS OF TH E HON'BLE SUPREME COURT IN REGARD TO THE MEANING OF THE WORD CONCEAL AN D INACCURATE PARTICULARS AS GIVEN IN THE CASE OF DILIP & SHROFF AS REPORTED IN 291 ITR PAGE 4 OF 5 - I.T.A.NO. 232/IND/2010 SANGHVI ISPAT INDUSTRIES INDORE. 519 WERE CONFIRMED AND HAVING REGARD TO THOSE FIND INGS IT WAS NEITHER A CASE OF CONCEALMENT NOR OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. 6. THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND PREFERRED TO RELY ON THE ORDER OF THE LD. CI T(A). 7. I HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT IN THE COURSE OF SURVEY THE PHYSI CAL STOCK HAS BEEN TAKEN ON THE MEASUREMENT BASIS WHEREAS THE AS SESSEE IS VALUING STOCK ON WEIGHT BASIS WHICH IS A COMMON PRACTICE I N THE LINE OF THE BUSINESS OF THE ASSESSEE. IT IS FURTHER NOTED THAT THE MATERIAL IN PROCESS IN THE FURNACE WAS NOT VALUED DURING THE COURSE OF SUR VEY AND ASSESSEES EXPLANATION IN THIS REGARD HAS BEEN REJECTED BY THE ASSESSING OFFICER FOR THE REASON THAT SUCH CLAIM WAS NOT MADE IN THE COUR SE OF SURVEY WHICH IN OUR OPINION IS NOT A CORRECT VIEW ESPECIALLY W HEN NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT FURNACE WAS NOT OPERATIONAL AT THAT TIME. I FURTHER FIND THAT E VEN THE SALE OF RAW MATERIAL HAS BEEN PRESUMED OUTSIDE THE BOOKS OF ACC OUNT WHICH APPEARS TO BE AN IMAGINATION ONLY AS THERE IS NO INCENTIVE TO SELL THE RAW MATERIALS. FURTHER NO EVIDENCE HAS BEEN BROUGHT ON RECORD IN SUPPORT OF SUCH OWN RECORDED SALES. I FURTHER FIND THAT THE AS SESSEE IS HAVING SUFFICIENT LOSSES AND BECAUSE OF THAT IT HAS NOT PR EFERRED TO PURSUE THE PAGE 5 OF 5 - I.T.A.NO. 232/IND/2010 SANGHVI ISPAT INDUSTRIES INDORE. MATTER FURTHER. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEES VALUING SUCH STOCK OF WEIGHT BASIS CONSISTENTLY. THUS IN MY OPI NION THE IMPUGNED ADDITION HAS BEEN MADE ON THE BASIS OF DIFFERENT VI EW OF THE MATTER AND THEREFORE IT IS NOT A FIT CASE FOR LEVY OF PENALT Y U/S 271(1)(C) OF THE ACT. I FURTHER FIND THAT THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS PRIVATE LIMITED (SUPRA) SQU ARELY APPLIES HERE. ACCORDINGLY THIS GROUND OF THE ASSESSEE IS ALLOWE D. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 17 TH MAY 2010. SD/- (V. K. GUPTA) ACCOUNTANT MEMBER DATED :17 TH MAY 2010. CPU* 145