M/s. Luthra Dyeing & Printing Mills, Surat v. The DY.CIT., Circle-1,, Surat

ITA 3334/AHD/2008 | 2005-2006
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 333420514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 3334/AHD/2008
Duration Of Justice 2 year(s) 9 month(s) 23 day(s)
Appellant M/s. Luthra Dyeing & Printing Mills, Surat
Respondent The DY.CIT., Circle-1,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 29-07-2011
Date Of Final Hearing 27-07-2011
Next Hearing Date 27-07-2011
Assessment Year 2005-2006
Appeal Filed On 06-10-2008
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI D.K. TYAGI JM AND A. K. GARODIA A. M. LUTHRA DYEING & PRINTING MILLS PROP. LUTHRA CHEM TEX INDUSTRIES (P) LTD. 252/2 GIDC PANDESARA SURAT. DY. CIT CIR-1 SURAT. APPELLANT VS. RESPONDENT APPELLANT BY :- SHRI S. N. SOPARKAR SR.ADVOCATE WITH MRS. URVASHI SHODHAN ADVOCATE. RESPONDENT BY:- SHRI SAMIR TEKRIWAL SR.D.R. O R D E R PER D.K. TYAGI JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) DATED 24.07.2008. THE ASSESSEE HAS TAKEN TWO EFFECTIVE GROUNDS AS UNDER :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ADDITION TO THE TUNE OF RS.8 25 100/- ON ACCOUNT OF ALLEGED UNDER VALUATION OF THE CLOSING STOCK OF WORK IN PRO GRESS. (2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE CREDIT OF RS.7 94 763/- WORTH OF CLOSING STOCK OF W ORK IN PROGRESS ALREADY SHOWN BY THE APPELLANT IN THE BOOK S OF ITA NO.3334/AHD/2008 ASST. YEAR 2005-06 ITA NO.3334/AHD/2008 ASST. YEAR 2005-06 2 ACCOUNTS AGAINST THE ADDITION MADE BY THE LD. AO ON ACCOUNT OF ALLEGED UNDER VALUATION OF CLOSING STOCK OF WORK IN PROGRESS. 2. THE FIRST GROUND RELATES TO ADDITION OF RS.8 25 100/- ON ACCOUNT OF NON-DISCLOSURE OF CLOSING STOCK OF WORK IN PROGRESS . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF PROCESSING OF ART SILK FABRICS O N JOB WORK BASIS. DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAS SHOWN TURNOVER OF RS.16.45 CRORES AND GP RATE AT 12 .19% AS AGAINST TURNOVER OF RS.11.69 CRORES AND GP RATE OF 12.36% I N THE LAST YEAR. THE AO FOUND THAT AS PER SCHEDULE-D OF THE BALANCE SHEE T IT WAS SEEN THAT THE INVENTORY OF CLOSING STOCK DID NOT SHOW ANY WORK IN PROGRESS. ACCORDING TO THE AO FABRIC UNDER PROCESS BEARS VARIOUS EXPENS ES ON ACCOUNT OF COLOUR CHEMICALS WAGES POWER AND FUEL ETC AND T HEREFORE FABRIC UNDER PROCESS AS ON 31.03.2005 WHILE CARRY SUCH EXPENDITU RE WHICH SHOULD HAVE BEEN DISCLOSED AS CLOSING STOCK OF WORK IN PROGRESS . THE AO STATED THAT AS PER THE DECISION OF THE HON. SUPREME COURT IN THE C ASE OF CIT VS. BRITISH PAINTS INDIA LTD. 188 ITR 44 CORRECT PROFIT CANNOT BE DISCLOSED UNLESS THE WORK IN PROGRESS IS CORRECTLY SHOWN. THE AO THEREF ORE ESTIMATED THE WORK IN PROGRESS SAYING THAT THE GREY CLOTH PUT TO PROCESS ON FIRST DAY COMES OUT ON SIXTH DAY AS FULLY PROCESSED. THEREFOR E THE ASSESSEE MUST HAVE FIVE DAYS OF WORK IN PROGRESS AS ON 31.03.2005 . HE ASSUMED 26 ITA NO.3334/AHD/2008 ASST. YEAR 2005-06 3 WORKING DAYS IN A MONTH AND CALCULATED AVERAGE PROD UCTION OF ONE DAY AS 63737 METERS. THE FIVE DAYS PRODUCTION WOULD AMOUNT TO 318685 METERS. THE AO FOUND OUT THE AVERAGE COST OF PROCESSING PER METER AT RS.7.26. HE STATED THAT SINCE GREY CLOTH IS UNDER VARIOUS STAGE S OF PROCESS IT WOULD BE REASONABLE TO ADOPT 50% OF COST OF PROCESSING AS CO ST OF WORK IN PROGRESS. IN VIEW OF THIS HE DETERMINED THE VALUE OF WORK IN PROGRESS IN THE CLOSING STOCK AT RS.11 56 826/-. THE AO STATED THAT IN THE CASE OF ASSESSEE AN ADDITION OF RS.3 31 726/- WAS MADE IN THE LAST YEAR . HE GAVE EFFECT TO THIS AS OPENING STOCK AND MADE ADDITION OF BALANCE AMOUN T OF RS.8 25 100/-. THIS ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT( A) FOLLOWING THE EARLIER ORDER OF LD. CIT(A) AS FACTS IN THE CURREN T YEAR WERE THE SAME AS IN THE LAST YEAR. 4. AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE CONCEDED THAT THIS ISSUE IS COVERED AGAINST THE ASS ESSEE IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASST. YEAR 2003-04 & 2004-05 WHEREIN THE EARLIER ORDER OF THE LD. CIT(A) ON IDENTICAL FACTS WAS UPHELD BY THE HON. TRIBUNAL. IN VIEW OF THIS THE G ROUND TAKEN BY THE ASSESSEE IS DISMISSED. 5. THE SECOND GROUND RELATES TO CLOSING STOCK OF WO RK IN PROGRESS ALREADY SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOU NTS TO THE TUNE OF RS.7 94 763/-. ITA NO.3334/AHD/2008 ASST. YEAR 2005-06 4 6. THE ASSESSEES CONTENTION IN RESPECT OF THIS GRO UND IS THAT THE ASSESSEE HAD SHOWN WORK IN PROGRESS IN ITS BOOKS OF ACCOUNTS TO THE TUNE OF RS.7 94 763/- WHEREAS THE AO HAS STATED THAT AS PER SCHEDULE D OF BALANCE SHEET WITH RESPECT TO INVENTORY OF CLOSING STOCK IT WAS SEEN THAT ASSESSEE HAS NOT SHOWN ANY WORK IN PROGRESS. 7. DURING THE APPELLATE PROCEEDINGS BEFORE LD. CIT( A) THE ASSESSEES CONTENTION WAS THAT ASSESSEE HAS CONSISTENTLY SHOWN WORK IN PROGRESS IN ITS BALANCE SHEET. THE SAME WAS CONSIDERED ALONG WI TH COLOUR CHEMICALS STOCK. THE DETAILS OF INVENTORY WERE PRODUCED DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS ALONG WITH OTHER RECORDS AND THEREFORE THE AO SHOULD HAVE REDUCED THE CLOSING STOCK OF WORK IN PR OGRESS BY THE AMOUNT OF RS.7 94 763/- DISCLOSED BY IT. THE LD. CIT(A) H OWEVER REJECTED THIS CLAIM OF THE ASSESSEE BY OBSERVING AS UNDER :- 3.2 I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND OBSERVATION MADE BY THE AO. I HAVE ALSO PERUSED THE ASSESSMENT RECORDS. SCHEDULE-D OF THE FINANCIAL ACCOUNT PERTAINED TO INVENTORIES THE SCHEDULE-D READS AS UNDER :- SCHEDULE-D INVENTORIES COLOUR & CHEMICALS 45 78 704 STORES 80 685 PACKING MATERIAL 65 556 BACKGREY & BOLTING & DESIGN PHOTOGRAPHY 5 46 64 3 COAL & IDO 2 32 418 -------------- 55 04 006 ======== ITA NO.3334/AHD/2008 ASST. YEAR 2005-06 5 3.3 FROM THE ABOVE IT IS CLEAR THAT THE APPELLANT HAS NOT DISCLOSED OF ANY WORK IN PROGRESS. IT IS ONLY WHEN THE AO ASKED FOR EXPLANATION AS TO WHY ADDITION OF CLOSING STOCK OF WORK IN PROGRESS M AY NOT BE MADE THE ASSESSEE HAS CLAIMED THAT THE COLOUR AND CHEMICAL C LOSING STOCK INCLUDES THE CLOSING STOCK OF WORK IN PROGRESS. FIRST OF ALL THERE IS NO EVIDENCE THAT THE COLOUR & CHEMICAL CLOSING STOCK INCLUDES THE AC TUAL CLOSING STOCK OF COLOUR & CHEMICAL AS WELL AS COLOUR & CHEMICAL CONS UMED AND LYING ON THE FABRIC UNDER PROCESS. THE APPELLANT HAS GIVEN N O SUCH EVIDENCE. SECONDLY THE WORK IN PROGRESS INCLUDES NOT ONLY CO LOUR & CHEMICALS BUT LABOUR CHARGES POWER & FUEL WATER CHARGES AND VAR IOUS OTHER THINGS. THEREFORE IT IS CLEAR THAT THE CLAIM OF THE APPELL ANT IS BOGUS AND MADE UP. THE SAME IS HEREBY REJECTED. FURTHER AGGRIEVED NOW THE ASSESSEE IS IN APPEAL BE FORE US. 8. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE LOWER AUTHORITI ES AND PLACING RELIANCE ON PAGE 15 OF THE PAPER BOOK WHICH SHOWS T HE DETAILS OF STOCK OF COLOUR AND CHEMICALS AS ON 31.3.2005 SUBMITTED THAT STOCK OF WORK IN PROCESS FABRICS OF RS.7 94 763/- IS THE PART OF THE CLOSING STOCK. HE FURTHER SUBMITTED THAT THESE DETAILS ARE PART OF THE BALANC E SHEET SUBMITTED BY THE ASSESSEE ALONG WITH RETURN OF INCOME AND WERE BEFOR E THE AO AS WELL AS THE LD. CIT(A) AND THEREFORE THE AO SHOULD HAVE C ONSIDERED THIS WORK IN PROGRESS SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCO UNT AND SHOULD HAVE REDUCED THE CLOSING STOCK OF WORK IN PROGRESS BY TH IS AMOUNT. 9. THE LD. DR ON THE OTHER HAND RELIED ON THE ORDER S OF AUTHORITIES BELOW. ITA NO.3334/AHD/2008 ASST. YEAR 2005-06 6 10. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESS EE THAT SINCE ASSESSEE HAS SHOWN WORK IN PROGRESS TO THE TUNE OF RS.7 94 763/- IN ITS BALANCE SHEET THE AO SHOULD HAVE REDUCED THE CLOSING STOCK OF WOR K IN PROGRESS BY THIS AMOUNT. HOWEVER THIS CONTENTION OF THE ASSESSEE RE QUIRES VERIFICATION AT THE END OF THE AO. THEREFORE THE MATTER IS RESTORE D BACK TO THE FILE OF AO FOR VERIFICATION AND IF THE CONTENTION IS FOUND COR RECT THE ASSESSEE BE GIVEN RELIEF TO THIS EXTENT. THIS GROUND OF ASSESSE E IS ALLOWED BUT FOR STATISTICAL PURPOSES. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 29/7/11. SD/- SD/- (A. K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 29/7/11. MAHATA/- ITA NO.3334/AHD/2008 ASST. YEAR 2005-06 7 COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 28/7/11. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER 29/7/11. /OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT .. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..