The ACIT, Circle-6,, Ahmedabad v. M/s. Megha Chem Industries, Ahmedabad

ITA 2964/AHD/2011 | 2007-2008
Pronouncement Date: 24-04-2015 | Result: Dismissed

Appeal Details

RSA Number 296420514 RSA 2011
Assessee PAN AAIFM1621R
Bench Ahmedabad
Appeal Number ITA 2964/AHD/2011
Duration Of Justice 3 year(s) 4 month(s) 24 day(s)
Appellant The ACIT, Circle-6,, Ahmedabad
Respondent M/s. Megha Chem Industries, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 24-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 24-04-2015
Date Of Final Hearing 08-04-2015
Next Hearing Date 08-04-2015
Assessment Year 2007-2008
Appeal Filed On 30-11-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI SHAILENDRA KR. YADAV J.M. & SHRI ANIL CHATURVEDI A.M.) I.T. A. NO.2964/AHD/2011 (ASSESSM ENT YEAR: 2007-08) ASSTT. CIT CIRCLE-6 AHMEDABAD V/S M/S. MEGHA CHEM INDUSTRIES PLOT NO. 8 PHASE-II GIDC VATVA AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAIFM1621R APPELLANT BY : SHRI ROOP CHAND SR. D.R RESPONDENT BY : SMT. URVASHI SHODHAN A.R. ( )/ ORDER DATE OF HEARING : 08-04-201 5 DATE OF PRONOUNCEMENT : 24 -04-2015 PER SHRI ANIL CHATURVEDI A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-XI AHMEDABAD DATED 2.09.2011 FOR A.Y. 2007-08. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING OF CHEMICALS. ASSESSEE FILED ITS RETU RN OF INCOME FOR A.Y. 2007-08 ON 31.10.2007 DECLARING TOTAL INCOME OF RS. 20 23 170/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESS MENT WAS FRAMED UNDER ITA NO 2964 /AHD/2011 . A.Y. 2007- 08 2 SECTION 143(3) VIDE ORDER DATED 27.11.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 32 07 350/-. AGGRIEVED BY THE OR DER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 02.09.2011 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEV ED BY THE AFORESAID ORDER OF LD. CIT(A) REVENUE IS NOW IN APPEAL BEFORE US A ND HAS RAISED THE FOLLOWING GROUNDS;- 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11 31 576/- MADE ON ACCOUNT OF LOW G ROSS PROFIT. 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN OBSERVING THAT THE ASSESSEE HAD PRODUCED THE STOCK REGISTER B EFORE THE ASSESSING OFFICER THOUGH NO SUCH REGISTER WAS PRODUCED EITHER BEFORE THE AUDITOR OR THE ASSESSING OFFICER. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE R ESTORED. 4. BEFORE US LD. D.R. SUBMITTED THAT THE ONLY ISSUE I S WITH RESPECT TO THE DELETION OF ADDITION MADE ON ACCOUNT OF LOW GROSS P ROFIT. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O NO TICED THAT ASSESSEE HAS DECLARED GROSS PROFIT @ 16.17% AS AGAINST THE G.P O F 22.52% IN THE IMMEDIATE PRECEDING YEAR. THE ASSESSEE WAS THEREFOR E ASKED TO JUSTIFY THE FALL IN G.P TO WHICH ASSESSEE INTERALIA SUBMITTED T HAT THE MAIN REASON FOR FALL IN G.P WAS DUE TO INCREASE IN TURNOVER AND THE INCR EASE IN THE COST OF RAW MATERIALS. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O FOR THE REASON THAT ASSESSEE HAD NOT MAINTAINED STOCK REGISTER FOR DIFFERENT TYPE OF RE-AGENTS/CHEMICALS REQUIRED FOR MANUFACTURING AND REGISTER FOR ITS CONSUMPTION AND THEREFORE ACCORDING TO THE A.O THE QUANTUM OF CLOSING STOCK WAS ALSO NOT VERIFIABLE. HE WAS ALSO OF THE VIEW THAT IN THE ABSENCE OF PRODUCTION REGISTER/MANUFACTURING REGIST ER THE ACTUAL ITA NO 2964 /AHD/2011 . A.Y. 2007- 08 3 CONSUMPTION OF THE RE-AGENTS AND CHEMICALS AND COST OF FINISHED GOODS AND WORK IN PROGRESS WAS NOT VERIFIABLE. HE FURTHER NOT ICED THAT ASSESSEE HAS CLAIMED EXPENSES ON ACCOUNT OF SHIPPING EXPENSES F REIGHT OCTROI EXCHANGE RATE DOCUMENTS CLEARANCE AND LOADING AND UNLOADING EXPENSES AGGREGATING TO RS. 28 55 802/- AND THAT THE ASSESSEE HAD NOT CO NSIDERED THE AFORESAID EXPENSES WHILE VALUING THE CLOSING STOCK OF RAW MAT ERIALS AND THEREFORE ACCORDING TO HIM THERE WAS A POSSIBILITY OF LEAKAGE OF GROSS PROFIT. HE THEREAFTER RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF S.N. NAMASHIVAYAM CHETTIAR 38 ITR 579 AND IN THE CASE OF CIT VS. A. KRISHNASWAMI MUDALIAR 53 ITR 122 REJECTED THE BOOK S OF ACCOUNTS AND THE BOOK RESULTS OF THE ASSESSEE. HE THEREAFTER ENHANCE D THE GROSS PROFIT BY 0.5% OF THE TURNOVER AND THE ADDITIONAL GROSS PROFI T WAS THUS WORKED OUT AT RS. 11 31 576/- AND THE SAME WAS ADDED TO THE TOTA L INCOME. AGGRIEVED BY THE ORDER OF A.O. ASSESSEE CARRIED THE MATTER B EFORE LD. CIT(A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE D ELETED THE ADDITION MADE BY A.O BY HOLDING AS UNDER:- 3.4 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE A.R. IT IS SEEN THAT THE ENTIRE ARGUMENT OF THE ASSESSING OFFICER IS REVOLVING AROUND THE FACT THAT STOCK REGISTER AS WELL AS QUANTITATIVE TALLIES ARE NOT MAINTAINED. THE ASSESSING OFFICER H AD ALREADY ACKNOWLEDGED IN PARA 1 OF THE ASSESSMENT ORDER THAT THE STOCK REGISTER WAS PR ESENTED FOR VERIFICATION BEFORE HIM. IT IS ALSO A MATTER OF RECORD THAT THE QUANTITATIVE TA LLIES WAS FILED BY THE ASSESSEE VIDE ITS LETTER DATED 12-10-2009 AND THE SAME IS ALSO ACKNOW LEDGED IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS NOT FOUND OUT ANY MATERIAL DE FECTS IN THESE DOCUMENTS. ACCORDINGLY THE ASSESSING OFFICER'S CONCLUSION THA T THE BOOKS OF ACCOUNTS ARE NOT RELIABLE IS UNTENABLE. THE ASSESISNG OFFICER HAS P LACED RELIANCE ON THE CASE OF S.N. NAMASHIVAYAM CHETTIAR (SUPRA) AND CIT VS. A. KRISHN ASWAMI MUDALIAR (SUPRA). I HAVE GONE THROUGH THESE CASES AND THESE CASES HAVE BEEN DELIVERED WITH A SPECIFIC FINDING THAT STOCK REGISTER AND QUANTITATIVE TALLIES ARE NOT MAI NTAINED. THIS IS NOT THE CASE IN THE INSTANT CASE. IN THE INSTANT CASE STOCK REGISTER A ND QUANTITATIVE TALLIES HAS BEEN FILED BEFORE THE ASSESSING OFFICER. ACCORDINGLY THE RATI O OF THESE CASE LAWS WILL NOT APPLY IN THE CASE OF THE ASSESSEE. 3.5 THE ASSESSING OFFICER HAS ALSO MENTIONED THAT E XPENSES LIKE SHIPPING EXPENSES FREIGHT OCTROI EXCHANGE RATE DOCUMENT CLEARANCE AND LOADING & UNLOADING HAS NOT BEEN ITA NO 2964 /AHD/2011 . A.Y. 2007- 08 4 CONSIDERED FOR THE VALUATION OF RAW MATERIAL IN THE CLOSING STOCK. AS DISCUSSED IN THE PRECEDING PARA EXPENSES LIKE SHIPPING EXPENSES EXC HANGE RATE DOCUMENT CLEARANCE AND LOADING AND UNLOADING PERTAINS TO SALES AND ACCORDI NGLY THERE IS NO QUESTION OF APPORTIONING THESE EXPENSES FOR VALUATION OF RAW MA TERIAL. THE FREIGHT AND OCTROI EXPENSES ARE ALREADY ACCOUNTED FOR THE VALUATION OF CLOSING STOCK. IN VIEW THESE CONCLUSION OF THE ASSESSING OFFICER IS UNTENABLE. 3.6 THE APPELLANT HAS PLACED RELIANCE ON THE CASES OF CIT VS. VIKRAM PLASTICS (SUPRA) AND ASHOKE REFRACTORIES P. LTD. VS. CIT(SUPRA). IT IS CLEARLY HELD IN THESE CASES THAT WITHOUT FINDING MATERIAL DEFECTS IN THE STOCK REGIS TER OR THE BOOKS OF ACCOUNTS THE BOOKS CANNOT BE REJECTED. SINCE THE ASSESSING OFFICER HAS NOT POINTED OUT MATERIAL DEFECTS IN THE BOOKS OF ACCOUNTS ACCORDINGLY IN MY CONSIDERED VIE W THE RATIO OF THESE CASES WILL BENEFIT THE CASE OF THE ASSESSEE. 3.7 IN VIEW OF THE ABOVE FACTS I AM OF THE CONSIDE RED VIEW THAT THE BOOKS OF ACCOUNTS WERE REJECTED WITHOUT FINDING MATERIAL DEFECTS IN T HE BOOKS OF ACCOUNTS. THERE IS NO GROUND FOR MAKING ADDITION OF RS.11 31 576/- BY ENH ANCING GROSS PROFIT BY 5%. IN VIEW OF IT A.O. IS DIRECTED TO DELETE ADDITION OF RS.11 31 576/-. THIS GROUND OF APPEAL IS ALLOWED 6. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A) REV ENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US LD. D.R. SUPPORTED THE ORDER OF A.O. AND ON THE OTHER HAND LD. A.R. SUBMITTED THAT ASSESSEE HAS MAINTAINED THE NEC ESSARY RECORDS PRESCRIBED BY EXCISE AUTHORITIES AND THEREFORE THE CONTENTION OF THE A.O OF NON MAINTENANCE OF RECORDS WAS FACTUALLY INCORRECT. SHE THUS SUPPORTED THE ORDER OF LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. LD. CIT(A) WHILE DELETING THE ADDITION HAS NOTED THAT T HE STOCK REGISTER WAS PRESENTED FOR VERIFICATION BEFORE A.O AND THE A.O H AS NOT FOUND ANY MATERIAL DEFECTS IN THE DOCUMENTS SUBMITTED BY THE ASSESSEE. LD. CIT(A) HAS FURTHER HELD THAT THE CASE LAWS RELIED UPON BY A.O FOR MAKING ADDITIONS ARE NOT APPLICABLE TO THE PRESENT FACTS BECAUSE THE ASSESSEE HAS MAINTAINED STOCK REGISTER AND QUANTITATIVE DETAILS TALLIES. W ITH RESPECT TO THE EXPENSES LIKE SHIPPING EXPENSES EXCHANGE RATE DOCUMENTS CL EARANCE AND LOADING AND ITA NO 2964 /AHD/2011 . A.Y. 2007- 08 5 UNLOADING CHARGES LD. CIT(A) HAS GIVEN A FINDING T HAT IT PERTAINS TO SALES AND THEREFORE THERE WAS NO QUESTION OF APPORTIONING THE AFORESAID EXPENSES FOR VALUATION OF RAW MATERIAL AND FURTHER THE FREIGHT A ND OCTROI EXPENSES HAVE ALREADY BEEN CONSIDERED WHILE VALUING CLOSING STOCK . BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT TH E FINDINGS OF LD. CIT(A) AND IN VIEW OF THE AFORESAID FACTS WE FIND NO REAS ON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THUS THE GROUNDS OF REVENUE ARE DISMISSED. 9. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24 - 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 AHME DABAD