DCIT, Cir.1,, v. Sameer Leasing Co.Ltd.,,

ITA 4549/DEL/2005 | 1996-1997
Pronouncement Date: 11-11-2011 | Result: Dismissed

Appeal Details

RSA Number 454920114 RSA 2005
Bench Delhi
Appeal Number ITA 4549/DEL/2005
Duration Of Justice 5 year(s) 11 month(s) 9 day(s)
Appellant DCIT, Cir.1,,
Respondent Sameer Leasing Co.Ltd.,,
Appeal Type Income Tax Appeal
Pronouncement Date 11-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 11-11-2011
Date Of Final Hearing 28-10-2011
Next Hearing Date 28-10-2011
Assessment Year 1996-1997
Appeal Filed On 02-12-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NO. 4549(DEL)/2005 ASSESSMENT YEAR: 1996-97 DEPUTY COMMISSIONER OF INCOME M/S SA MEER LEASING CO. LTD. TAX CIRCLE 1 MUZAFFARNAGAR. VS. 72- B NEW MANDI MUZAFFARNAGAR. ITA NO. 4592(DEL)/2005 ASSESSMENT YEAR: 1996-97 M/S SAMEER LEASING CO. LTD. D EPUTY COMMISSIONER OF 72-B NEW MANDI MUZAFFARNAGAR. VS. INCOME-T AX CIRCLE -1 MUZAFFARNAGAR. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI MOHANISH VERMA CIT DR ASSESSEE BY : SHRI K.L. ANEJA ADVOCATE DATE OF HEA RING : 28.10.2011 DATE OF PRO NOUNCEMENT : 11.11.2011 ORDER PER K.G. BANSAL : AM THESE CROSS APPEALS WERE ARGUED IN A CONSOLID ATED MANNER BY THE LD. CIT DR AND THE LD. COUNSEL FOR THE ASSESSEE. THEREFORE A CONSOLIDATED ORDER IS PASSED. THE BACKGROUND FACT S ARE THAT THE RETURN WAS FILED ON 29.01.1996 DECLARING LOSS OF RS. 1 22 22 430/-. THE RETURN WAS REVISED ON 21.05.1997 DECLARING LOSS OF RS. 83 1 7 897/-. ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147 WAS COMPLETED ON ITA NOS. 4549 & 4592(DEL)/2005 2 24.03.21003 AT TOTAL INCOME OF RS. 1 22 13 247/-. THIS ASSESSMENT WAS SET ASIDE BY THE COMMISSIONER OF INCOME-TAX MUZA FFARNAGAR ON 31.03.2003 UNDER THE PROVISIONS OF SECTION 264 OF THE INCOME-TAX ACT 1961 (THE ACT FOR SHORT). 2. COMING TO THE RELEVANT FACTS THE AO OBTAINE D INFORMATION FROM CENTRAL INFORMATION BRANCH (CIB FOR SHORT) OF THE DEPARTMENT THAT THE PREMISES OF THE ASSESSEE WERE SEARCHED BY THE CEN TRAL EXCISE DEPARTMENT ON 02.02.1996. THEREAFTER A FINDING WAS RECORDED THAT THE ASSESSEE PRODUCED 4028.215 MT OF THE INGOTS VALUED AT RS . 3 73 77 745/-. THESE GOODS WERE NOT RECORDED IN THE BOOKS OF ACCOUNT . CONSEQUENTLY PENALTY OF RS. 56 06 662/- WAS LEVIED. IT MAY BE MENTIO NED HERE THAT THESE FINDINGS WERE CONFIRMED AND THE APPEAL IS NOW PEN DING BEFORE THE HIGH COURT. 2.1 ON THE BASIS OF THIS INFORMATION THE AO RECAST THE MANUFACTURING ACCOUNT WORKING OUT THE GROSS PROFIT AT RS. 2 1 31 214/-. ON THIS BASIS THE NET PROFIT WAS WORKED OUT AT RS. 83 13 580/ -. FURTHER ADJUSTMENTS WERE MADE IN RESPECT OF BROUGHT FORWARD LOSSES FROM EARLIER YEARS UNDER SECTION 43B DEPRECIATION AND A FURTHER SUM OF RS. 10.00 LAKH WAS ADDED ITA NOS. 4549 & 4592(DEL)/2005 3 REPRESENTING INVESTMENT MADE IN THE COURSE OF THE PRODUCTION OF UNACCOUNTED GOODS. THUS THE TOTAL INCOME WAS CO MPUTED AT RS. 44 27 530/-. 2.2 THE MATTER WAS AGITATED BEFORE THE LD. CIT(AP PEALS). HE EXAMINED THE MANUFACTURING ACCOUNT AS RECAST BY THE AO. AFTER HEARING THE ASSESSEE IT WAS CONCLUDED THAT CREDITS OF RS. 3 73 77 745/- AND RS. 56 08 662/- MADE IN THE RECAST ACCOUNT IN RESPECT OF SALE NOT RECORDED IN THE BOOKS AND EXCISE DUTY COLLECTED FROM THE CU STOMERS BUT NOT RECORDED IN THE BOOKS HAD BEEN CORRECTLY TAKEN INTO ACCO UNT BY THE AO. FURTHER HE FOUND THAT THE AO HAD ALLOWED BURNING LOSS AT ABOUT 5% ONLY. THE BURNING LOSS SHOWN IN THE BOOKS MAINTAINED IN THE REGULA R COURSE OF BUSINESS FOR THIS YEAR WAS ABOUT 16.72%. IT WAS ALSO FOUND T HAT THE BURNING LOSS ALLOWED IN THE IMMEDIATELY PRECEDING YEAR WAS A BOUT 14.56%. IT WAS HELD THAT THE LOSS SHOULD BE ALLOWED AT 14.56% AS LOSS TO THIS EXTENT HAD BEEN ALLOWED BY THE TRIBUNAL. THE AO WAS ACCORDI NGLY DIRECTED TO REVISE THE TOTAL INCOME ON THIS GROUND. 2.3 HE ALSO CAME TO THE CONCLUSION THAT CREDIT ENT RY OF RS. 31 60 366/- AND DEBIT ENTRY OF RS. 15 80 183/- MADE BY THE AO IN RECAST ACCOUNT WERE ITA NOS. 4549 & 4592(DEL)/2005 4 WITHOUT ANY BASIS. IN FACT THIS WAS IN THE NAT URE OF DOUBLE ADDITION BECAUSE OF THE FINDING OF THE CENTRAL EXCISE AUTHOR ITIES THAT ACTUAL SUPPRESSED PRODUCTION AND SALE AMOUNTED TO 4028 .215 MT. THEREFORE BOTH THESE ENTRIES WERE DELETED FROM THE RECAST ACCOUNT. 2.4 COMING TO THE ISSUE OF INVESTMENT IN UNACCOUNTE D BUSINESS IT WAS SUBMITTED THAT AVERAGE MONTHLY PURCHASE IN RESPEC T OF UNACCOUNTED GOODS COMES TO RS. 26 33 640/-. THUS THE CORRESPONDING FIGURE FOR A FORTNIGHT IS RS. 13 16 820/-. THE CHAIN OF MANUFACTURE AND SA LE GETS COMPLETED IN FIVE DAYS AND THUS ALL PAYMENTS IN RESPECT OF GOODS MANUFACTURED IN THIS PERIOD ARE RECEIVED WHICH ARE AVAILABLE FO R NEXT CYCLE OF UNACCOUNTED PRODUCTION. THIS WAS NOT ACCEPTED B Y THE LD. CIT(APPEALS) AND HE CONFIRMED THE ADDITION OF RS. 10.00 LAKH MADE BY THE AO ON THIS GROUND. 3. IN THE CONTEXT OF AFORESAID FACTS THE REVE NUE HAS TAKEN THREE GROUNDS WHICH ARE REPRODUCED BELOW:- (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING A RELIEF OF RS. 17 70 321/- ON THE GROUND OF BUSINESS LOSS ALLOWABLE AS FAR AS AUDI TED MANUFACTURING ACCOUNT IS CONCERNED I.E. LEAVING ASIDE THE ASPECT OF BURNING LOSS TO BE APPLIED TO THE OUT OF BO OKS PURCHASES AND PRODUCTION AS DEDUCTED DURING THE CENTRAL EXCISE RAID. ITA NOS. 4549 & 4592(DEL)/2005 5 (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN ALLOWING BURNING LOSS @ 16.72% CL AIMED BY THE ASSESSEE AS AGAINST 5% ALLOWED BY THE AO. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 15 80 183/- MADE BY THE AO IN RECAST MANUFACTURING ACCOUNT (CREDIT ENTRY OF RS. 31 60 366/- AND DEBIT ENTRY OF RS. 15 80 183/-). 3.1 AS AGAINST THE AFORESAID THE ASSESSEE HAS T AKEN UP FOUR GROUNDS IN ITS APPEAL. GROUND NOS. 1 AND 2 WERE SOUGHT TO BE SUBSTITUTED ON 16.03.2010. HOWEVER THE SUBSTITUTED GROUNDS WER E NOT PRESSED IN THE COURSE OF HEARING BEFORE US. IT MAY BE MENTIONED HERE THAT THESE GROUNDS RELATED TO INCLUSION OF UNACCOUNTED SALES OF RS. 3 73 77 745/- AND UNACCOUNTED EXCISE DUTY COLLECTED BY THE ASSESSEE OF RS. 56 08 662/-. IN VIEW OF THE FACT THAT THESE GROUNDS HAVE NOT BEEN PRESSED ORIGINAL GROUND NOS. 1 AND 2 WHICH ALSO DEAL WITH THE SAME IS SUE DO NOT SURVIVE. THE LD. COUNSEL ALSO DID NOT PRESS GROUND NO. 4 IN REGA RD TO ALLEGED CONCEALED SALES AND BURNING LOSS OF RS. 4 91 333/- AND RS. 1 5 80 183/- RESPECTIVELY. THEREFORE THE ONLY GROUND WHICH SURVIVES FOR ADJ UDICATION IS REGARDING THE UNACCOUNTED INVESTMENT OF RS. 10.00 LAKH QUANTIF IED BY THE AO AND ADDED TO THE TOTAL INCOME WHICH WAS CONFIRMED BY THE L D. CIT(APPEALS). ITA NOS. 4549 & 4592(DEL)/2005 6 4. IN THE COURSE OF HEARING BEFORE US THE LD. C IT DR SUBMITTED THAT ALL THE THREE GROUNDS IN THE APPEAL OF THE REVENUE RELATE TO THE QUANTIFICATION OF BURNING LOSS AT 14.64% AGAINST THE ALLOWANCE OF 5% MADE BY THE AO. IN THIS CONNECTION HE RELIED ON THE ORDER OF THE AO AND IN PARTICULAR THE RECAST MANUFACTURING ACCOUNT. ON THE OTHER HAND THE LD. COUNSEL PLACED BEFORE US INFORMATION ABOUT BURNING LOSS IN THIS AND EARLIER YEARS IN A TABULAR FORM. ACCORDING TO THE INFORMATION THE BURNING LOSS IN ASSESSMENT YEAR 1993-94 WAS 10.3% 20.34% IN ASS ESSMENT YEAR 1994-95 AND 16.72% IN ASSESSMENT YEAR 1995-96. THE FIG URE FOR ASSESSMENT YEAR 1993-94 IS AS PER ASSESSMENT ORDER. HE MADE AN AD-HOC ADDITION OF RS. 5.00 LAKH IN ASSESSMENT YEAR 1994-95 ON THIS IS SUE. HE ESTIMATED THE BURNING LOSS AT 12.56% IN ASSESSMENT YEAR 1995 -96 WHICH WAS INCREASED TO 14.56% BY THE CIT(APPEALS). THE ORDER WAS UPHELD BY THE INCOME- TAX APPELLATE TRIBUNAL. THEREFORE HIS CONTENTION IS THAT THE BURNING LOSS TAKEN BY THE LD. CIT(APPEALS) AT 14.64% IS CONSI STENT WITH THE ORDER OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSESSM ENT YEAR 1995-96 BEING THE IMMEDIATELY PRECEDING YEAR. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE FIND THAT THE AO WHILE PLACING VA RIOUS FIGURES IN THE RECAST ITA NOS. 4549 & 4592(DEL)/2005 7 ACCOUNT TOOK BURNING LOSS AT 5%. THERE IS NO B ASIS TO SUPPORT THIS FIGURE. ON THE OTHER HAND THE LD. CIT(A) HAS DECIDED TH E LOSS AT 14.64% AS PER THE ORDER OF THE TRIBUNAL IN THE IMMEDIATELY PRE CEDING YEAR. THE LD. CIT DR HAS NOT BEEN ABLE TO SUBMIT ANY REASON TO SUP PORT THE BURNING LOSS AT 5% COMPUTED BY THE AO. ACCORDINGLY LOOKING TO TH E DECISION IN THE IMMEDIATELY PRECEDING YEAR WE ARE OF THE VIEW T HAT HIS ORDER BEING BASED UPON PAST HISTORY HAS TO BE UPHELD. IT IS ORDERED ACCORDINGLY. 5.1 COMING TO THE UNACCOUNTED INVESTMENT IN CLAND ESTINE PRODUCTION IT IS MENTIONED IN THE ASSESSMENT ORDER THAT MONTHLY PURCHASES COME TO RS. 26 33 640/- WHICH MEANS THAT FORTNIGHTLY PURCHA SES COMES TO RS.13 16 682/-. IT WAS SUBMITTED THAT THE CYCLE OF PRODUCTION AND SALE GETS COMPLETED IN FIVE DAYS. THIS SUBMISSION WAS REJECTED WITHOUT ASSIGNING ANY REASON. THE LD. CIT(APPEALS) CONFI RMED THE ADDITION BY MENTIONING THAT THE FIGURE ADOPTED BY THE AO IS REASONABLE AND CORRECT. HOWEVER NO REASON HAS BEEN ASSIGNED AS TO HOW HIS WORKING IS CORRECT. IN THESE CIRCUMSTANCES THE ADDITION MADE ON THI S GROUND IS EXCESSIVE. THE AVERAGE PURCHASES FOR FIVE DAYS COME TO RS. 4 3 8 940/-. IN ABSENCE OF REBUTTAL OF THE CONTENTION OF THE ASSESSEE AT ANY STAGE IT IS HELD THAT ITA NOS. 4549 & 4592(DEL)/2005 8 ADDITION OF RS. 4 38 940/- ON THIS GROUND WILL MEE T THE ENDS OF JUSTICE. THEREFORE THE ADDITION IS REDUCED TO RS. 4 38 94 0/- FROM RS. 10.00 LAKH. 6. THE RESULT OF AFORESAID DISCUSSION IS THAT THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (C.L. SETHI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- 1. M/S SAMEER LEASING CO. LTD. MUZAFFARNAGAR . 2. DCIT CIRCLE-1 MUZAFFARNAGAR. 3. CIT 4. CIT(A) 5. THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.