ITO, SURATGARH v. Shri Suraj Bhan, GHARSANA

ITA 500/JODH/2013 | 2009-2010
Pronouncement Date: 31-07-2014 | Result: Dismissed

Appeal Details

RSA Number 50023314 RSA 2013
Assessee PAN ATPPB8595D
Bench Jodhpur
Appeal Number ITA 500/JODH/2013
Duration Of Justice 8 month(s) 23 day(s)
Appellant ITO, SURATGARH
Respondent Shri Suraj Bhan, GHARSANA
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 09-06-2014
Date Of Final Hearing 09-06-2014
Next Hearing Date 09-06-2014
Assessment Year 2009-2010
Appeal Filed On 07-11-2013
Judgment Text
IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.K. SAINI ACCOUNTANT MEMBER. ITA NO. 500 /JODH/2013 (A.Y. 200 9 - 1 0 ) IT O SURATGARH. VS. SHRI SURAJ BHAN PROP. M/S. SHYAM ENTT UDHYOG CHAK 4 PSD GHARSANA. PAN NO. A TPPB 8595 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NEERAJ CHAW A LA . DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 09 / 0 6 /201 4 . DATE OF PRONOUNCEMENT : 31 /0 7 /201 4 . O R D E R PER N.K. SAINI A.M TH IS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 30 /08 /2013 OF L D . CIT(A) BIKANER . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN: - 1. DELETING ADDITION OF RS. 12 55 643/ - ON ACCOUNT OF SALE OF BRICKS. 2. DELETING ADDITION OF RS. 3 31 500/ - MADE U/S 68 OF THE I.T. ACT 1961 2 3. DELETING ADDITION OF RS. 1 46 000/ - MADE U/S 68 OF THE I.T. ACT 1961 4. DELETING ADDITION OF RS. 2 00 000/ - MADE U/S 69B OF THE I.T. ACT 1961. 2 THE FIRST ISSUE VIDE GROUND NO. 1 RELATES TO THE DELETION OF ADDITION OF RS. 12 55 643/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SALE OF BRICKS. 3. FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 30/09/2009 DECLARING AN INCOME OF RS. 1 48 560/ - . LATER ON THE CASE WAS SELECTED FOR SCRUTINY . THE YEAR UNDER CONSIDERATION WAS NOT THE FIRST YEAR OF ITS BUSINESS AND THE PERIOD OF WORKING WAS ONLY 2 MONTHS 15 DAYS. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DECLARED NET PROFIT RATE OF 5.47% AND GROSS PROFIT RATE OF 13.50% FOR THE A.Y. 2009 - 10. THE ASSESSING OFFICER ALSO POINTED OUT CERTAIN DEFECTS AND INVOKED THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) . THE ASSESSMENT WAS FRAMED U/S 144 OF THE ACT. THE INCOME WAS DETERMINED AT RS. 22 13 040/ - AFTER MAKING THE VARIOUS ADDITIONS . THE ASSESSING OFFICER ESTIMA TED THE QUANTITY OF BRICKS AT 4716600 FOR THE WHOLE YEAR HOWEVER BY CONSIDERING THE WORKING PERIOD OF 2 MONTHS 15 DAYS HALF PORTION HAD BEEN TAKEN FOR ASSESSMENT PURPOSES AND 2358300 BRICKS WERE ESTIMATED 3 TO HAVE BEEN MANUFACTURED AND SOLD FOR RS. 38 00 400/ - BY ADOPTING HIGHER SELLING RATES . WORKINGS HAS BEEN GIVEN BY THE ASSESSING OFFICER AT PAGE NO. 6 OF THE ASSESSMENT ORDER DATED 22/12/2011 FOR THE COST OF REPETITION SAME IS NOT REPRODUCED HEREIN. THE ASSESSING OFFICER OBSERVED THAT RS. 1 77 810/ - WAS DEBITED FOR COST OF SOIL PURCHASED FROM OTHERS AND ROYALTY PAYMEN T OF RS. 57 126/ - WAS MADE WHEREAS ONLY 1575550 BRICKS WERE SHOWN TO HAVE BEEN MANUFACTURED. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE LICENSE GRANTED BY THE MINING DEPA RTMENT REVEALED THAT THE SANCTIONED CAPACITY OF THE KILN WAS OF 21 GHORI (BLOCK) WHICH ENTAILED SOIL WORTH 11025 TONES ON THE BASIS OF 15 X 3.5 X 21 THUS MANUFACTURING IN A YEAR WAS ESTIMATED AT 3150000 BRICKS FROM ITS OWN LAND AND MANUFACTURING OF 1566600 BRICKS FROM THE SOIL PURCHASED FROM OUTSIDE . S OIL WAS ESTIMATED AT RS. 38 00 400/ - FOR 2184000 BRICKS AS UNDER: - TYPE OF BRICKS TOTAL BRICKS RATE SALE VALUE NO.1 7 0 % 152900 1900 2905100 1 & 2 NO. 25% 546000 1500 819000 KHANGAR 5% 109000 700 76300 TOTAL 2184000 4100 3800400 FURTHER COST OF BRICKS W AS ESTIMATED @ RS. 950/ - PER THOUSAND BRICKS AT RS. 21 28 475/ - FOR 22 40 300 BRICKS MANUFACTURED ON THE BASIS OF COMPARABLE CASES AS MENTIONED ON PAGE NO. 6 OF THE ASSESSMENT ORDER. 4 4. THE ASSESSING OFFICER MADE THE ADDITION OF RS. 13 86 979/ - WHICH HAS BEEN SUMMARIZED AT PAGE 4 OF THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND IS REPRODUCED VERBATIM AS UNDER: - S.NO SHOWN ITO DIFFERENCE RS. BRICKS RS. BRICKS RS. BRICKS 1 TOTAL SALES 2719598 1471990 3800400 2184000 1080802 712010 2 G.P. 369396 1756375 1386979 3 G.P. RATE 13.50% 46.22% 4 N.P 148560 1535539 (148560+1386979 5 N.P. RATE 5.46% 40.40% 6 COST OF BRICKS 2473465 1575550 2128475 2240300 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: - (A) THE ID. AO HAS MADE ADDITION IN A ROUTINE AND PERFUNCTORY MANNER. THE LICENSE OF MINING DEPARTMENT IS ONLY AUTHORIZED TO PAY ROYALTY BUT IT DOES NOT MENTIONED ANYTH ING ABOUT THE PRODUCTION OF BRICKS DONE BY THE APPELLANT. ON THE CONTRARY IT SPECIFICALLY STATE THAT AS PER THE NEW POLICY DATED 10.09.1994 ONLY ROYALTY PER BLOCK IS FIXED DUE TO WHICH THERE IS NO NECESSITY TO VERIFY THE PRODUCTION ACHIEVED BY THE LICENSE HOLDER PAYMENT OF ROYALTY FOR SANCTIONED AMOUNT OF LICENSED CAPACITY DOES NOT MEAN THAT THE ASSESSEE HAS UTILIZED HIS 100% CAPACITY. PRODUCTION DEPENDS ON THE FACTS THAT HOW MUCH CAPACITY IS UTILIZED BY THE ASSESSEE AND NO EVIDENCE IN BROUGHT ON THE RECORD BY THE ID. A.O THAT INFECT HOW MUCH CAPACITY HAS UTILIZED BY THE ASSESSEE IN THE RELEVANT YEAR. SINCE KILNS SANCTIONED WAS RUNNING THEREFORE ROYALTY PAYMENT WAS MANDATORY DESPITE SAID LAND WAS NOT ABLE TO YIELD SOILED FOR BRICKS. DURING THE APPELLATE PR OCEEDING THE A/R HAS ALSO STATED THAT LOOKING TO THE BEING FIRST YEAR OF THE ASSESSEE AND BEING 5 SHORT WORKING PERIOD OF BUSINESS OF 2 MONTH AND 15 DAYS THERE ARE MANY ADVERSE CIRCUMSTANCES WHICH HAMPERS THE MANUFACTURING ACTIVITY SUCH AS NON - AVAILABILITY O F LABOUR MACHINERY FOR EXCAVALATION OF SOIL FROM LAND ETC ETC. THEREFORE THE LOGIC OF AO BECOMES IN - APPLICABLE. (B) THAT DURING THE ASSESSMENT PROCEEDING THE APPELLANT HAS FURNISHED COPY OF SALES TAX ASSESSMENT ORDER PASSED BY ASSISTANT COMMERCIAL TAXES OFFICER WARD - ILL ANUPGARH OF THE YEAR UNDER CONSIDERATION IN WHICH THE TURNOVER OF SALES HAS BEEN ASSESSED AT SALE FIGURE OF RS. 27 19 598 AND NUMBER OF BRICKS 14 71 990 WHICH IS A CONCLUSIVE FIGURE AND STRONG EVIDENCE OF ACTUAL SALE EFFECTIVE BY THE APPE LLANT DURING THE YEAR UNDER CONSIDERATION. THEREFORE ADDITION IS NOT JUSTIFIED. HONBLE RAJASTHAN HIGH COURT IN CASE OF CIT VS. MAHAN MARBLE PVT. LTD. DATED OF ORDER 09.01.2013 REPORTED AT 2013 - TAX WORLD - VOLUME 49 - PAGE 149 THAT THE AMOUNT OF ROYALTY OR MIT TI EXPENSES IS NOT A CONCLUSIVE PROOF OF QUANTUM OF MANUFACTURING OF BRICKS. IT IS JUST A LICENSE FEE SUPPOSE A BRICK KILN OWNER RUN THE BHATTA ONLY OF THREE MONTH IN A YEAR THEN IN THAT CASE HE ALSO HAVE TO PAY COMPLETE AMOUNT OF ROYALTY DEPENDING ON THE AREA OF THE LAND. THE ID. A.O. HAS NOT FOUND SINGLE INSTANCE OF BOGUS PURCHASE OR SALES THUS ESTIMATION OF HIGH PRODUCTION ON THE BASIS OF ROYALTY PAYMENT OR MITTI EXPENSES IS NOT JUSTIFIED. HBLE JAIPUR TRIBUNAL IN THE CASE OF DCIT V/S MAHADEO COTTON MIL LS (42 TTJ 77) HAS HELD THAT MERELY HIGHER CONSUMPTION OF ELECTRICITY EVEN IF IT IS THERE CANNOT BY ITSELF LEAD TO THE INFERENCE THAT IN FACT HIGHER PRODUCTION WAS DONE. (C) THAT PAYMENT OF ROYALTY OR PURCHASE OF MITTI ITSELF CANNOT DETERMINE THE QUANTUM OF PRODUCTION AS PER LICENSE OF MINING DEPARTMENT THE ROYALTY AMOUNT IS FIXED ON THE BASIS OF AREA OF LAND. HOW MUCH WAS ACTUALLY UTILIZED BY THE ASSESSEE SHOULD HAVE BEEN PROBED FURTHER BY THE A.O BUT WAS NOT DONE BY THE A.O. SOMETIMES IT ALSO HAPPENS THE MITTI EXCAVATED FROM SELF LAND DOES NOT SUITS AND THE BRICK KILN OWNER HAS TO PURCHASE SOME MITTI (SAND) FORM THE MARKET. THIS FACT IS ALSO NOT CONSIDERED BY THE A.O. 6 . AS REGARDS ADOPTION OF SELLING RATES AND COST AT RS. 950/ - PER THOUSAND BRICKS BY THE ASSESSING OFFICER THE ASSESSEE SUBMITTED AS UNDER: - 6 (A) THE APPELLANT HUMBLY SUBMITTED THAT THIS IS FIRST YEAR OF THE APPELLANT BUSINESS (WORKING PERIOD OF 2 MONTH AND 15 DAYS ONLY). PREVIOUSLY THE PROPRIETOR OF THE FIRM WAS DOING PETTY JOB WORK AND S TARTED BUSINESS OF BRICKS KILN HENCE HAS NOT PRACTICAL EXPERIENCE/KNOWLEDGE ABOUT THIS LINE OF BUSINESS OF BRICKS KILN. FURTHER THAT IN ORDER TO ESTABLISHED BUSINESS HE HAD TO FACE TOUGH COMPETITION IN THE MARKET AND HE HAD SELL THE BRICKS AT COMPRATABLY L OW MARGIN PROFIT. FURTHER THAT THE COMPARABLE CASE MENTIONED IN THE ASSESSMENT ORDER IS NOT APPLICABLE AS IT IS NECESSARY TO COMPARE ALL THE FACT LIKE INVESTMENT PLACE OF BUSINESS AND PERIOD OF ESTABLISHMENT ETC. BUT IN THIS CASE THE ID. A.O NOT CONSIDER ED ALL THESE POINT. FURTHER THAT DUE TO FIRST YEAR WORKING PERIOD OF 2 MONTH AND 15 DAYS OF APPELLANTS BUSINESS THERE IS NO QUESTION OF MAJOR SALES OF BRICKS NO. 2 BRICKS NO. 1. 1/2 AND KHANGAR AS ESTIMATED BY THE ID. A.O. IN THE ASSESSMENT ORDER. (B) THAT FOR PRODUCTION OF BRICKS WE HAVE TO INCURRED VARIOUS EXPENDITURE. LIKE FUEL LABOUR (PATHER BHARAI NIKASI ETC.) WATER MITTI RETA LOADING UNLOADING ETC. THE ID. A.O. HAS NOT FIND ANY INSTANCES OF ANY EXPENDITURE BEING INCURRED OUT OF BOOKS OF ENTERED IN THE BOOKS ON INFLATED VALUE. THUS ONLY ON THE GROUND OF PURCHASE VALUE OF MITTI IT CANNOT BE SAID THAT ASSESSEE HAS SUPPRESSED PRODUCTION. ASSESSEE HAS ALSO PRODUCED BEFORE THE A.O ABOUT THE AGREEMENT WITH LABOUR UNION AND INTT BHATTA OWNERS. THE LABOUR EXPENDITURE ARE DEBITED ACCORDING TO SAID DECIDED RATES. THIS FACT JUSTIFIED THE QUANTITY MANUFACTURED BY THE ASSESSEE AS SHOWN IN THE BOOKS OF ACCOUNT. COPY OF AGREEMENT RATES ARE ENCLOSED HEREWITH. THUS A.O FAILS TO BRING ON RECORD ANY OTHER CORROBORATI VE EVIDENCE/MATERIAL TO JUSTIFY THE ESTIMATION OF EXCESS PRODUCTION AND COST. (C) THE SAID ESTIMATION IS WITHOUT ANY BASIS. THE SAID ORDER IS PASSED U/S 144. AS PER SETTLED LEGAL POSITION THE ID A.O. HAS TO ESTIMATE THE INCOME OF THE ASSESSEE FAIRLY AND NOT ARBITRARILY. WHEREAS IN THE PRESENT CASE A.O HAS MADE ADDITION TOTALLY ARBITRARILY AND WITHOUT ANY LEGAL AND FACTUAL BASIS. (D) THAT A.O HAS TAKEN THE SALE PRICE OF BRICK AT RS. 1900/ - PER THOUSAND BRICKS. WHEREAS APPELLANT HIMSELF ISSUED BILL OF SALE @ RS. 1850 + RS. 50 AS A VAT ON PER THOUSAND BRICKS. THE APPELLANT HAS SOLD MOST OF BRICKS TO GRAM PANCHYAT AT THE RATE OF 1900/ - PER THOUSAND BRICKS (RS. 1850+ VAT RS. 50). THE DETAIL OF SALE COMMENCING FROM 01.02.2009 TO 31.03.2009 WAS A LR EAD Y FURNISHED AT THE TIME OF HEA RING . (E) THAT EXPLANATION OF THE ASSESSEE IS NOT PROPERLY CONSIDERED/ACCEPTED 7 BY THE ID. A.O. BESIDES THIS RATES OF BRICKS MAY VARY ACCORDING TO THEIR QUALITY TO SAY ONE NO BRICK TWO NO BRICK ETC. THUS THE ESTIMATION OF SALE PRICE MADE BY THE ID. A.O. IS WITHOUT ANY BASIS AND WITHOUT PROPER APPRECIATION OF THE EVIDENCE AS THE COMPARABLE CASES ARE OF WELL ESTABLISHED CONCERN AND DOING BUSINESS LAST SO MANY YEARS AND WAS WORKED FOR THE WHOLE YEAR WHEREAS THE APPELLANTS WORKING PERIOD IS ONL Y 2 MONTH AND 15 DAYS BEING FIRST YEAR OF THE BUSINESS. FURTHER ASSESSEE HAS NOT PROVIDED COPIES OF THE BILLS OF THE THIRD PARTIES BEFORE MAKING ADDITION ON THIS COUNT THUS THE ID. A.O HAS VIOLATED THE PRINCIPALS OF NATURAL JUSTICE ALSO. IN VIEW OF JUDGME NT IN CASE OF M/S NANU RAM BHANI RAM VS. ITO (5 - TTJ - 381) BESIDES BY ITAT JAIPUR IN WHICH IT WAS HELD THAT WITHOUT PROVIDING SUCH DETAIL OF COMPARABLE CASES AND WITHOUT ALLOWING OPPORTUNITY TO INTERROGATED AND CROSS EXAMINE SUCH COMPARABLE CASE CANNOT BE M ADE A TOOL TO MAKE ADDITION AND IT WOULD BE AGAINST AND IN CONTRAVENTION OF THE PRINCIPAL OF NATURAL JUSTICE. (F) THE SAID ESTIMATION IS WITHOUT ANY BASIS. THE SAID ORDER IS PASSED U/S 144. AS PER SETTLED LEGAL POSITION THE ID A.O. HAS TO ESTIMATE THE INCOME OF THE ASSESSEE FAIRLY AND NOT ARBITRARILY. WHEREAS IN THE PRESENT CASE A.O HAS MADE ADDITION TOTALLY ARBITRAR ILY AND WITHOUT ANY LEGAL AND FACTUAL BASIS. (G) THAT ADDITION MADE BY THE A.O ON ACCOUNT OF ALLEGED SUPPRESSION OF PRODUCTION AND ON ACCOUNT OF COST - SALE PRICE OF BRICKS ARE ONLY BASED ON CONJECTURES AND SURMISES. NO INSTANCE OF SALE OF EXCESS PRODUCTION CO ULD BE ESTABLISHED BY THE A.O. THE ID. A.O HAS NOT FOUND A SINGLE BILL INDICATING SALE OUTSIDE BOOKS NOR HE HAS DETECTED SINGLE ITEM OF EXPENDITURE WHICH WAS NOT RECORDED IN BOOKS. NO SUCH SALE PROCEEDS WERE FOUND IN BANK ACCOUNTS OF THE ASSESSEE OR BY WAY OF CASH IN HAND. THUS THE ESTIMATION OF EXCESS PRODUCTION BY THE A.O IS TOTALLY UNJUSTIFIED. (H) THAT THE ADDITIONS MADE BY THE ID. A.O. ARE BASED ON WRONG FACTS AND CONSIDERATION OF IRRELEVANT MATERIAL THUS DESERVES TO BE DELETED. THIS IS ONLY THE FIRST YE AR WORKING PERIOD (2 MONTH AND 15 DAYS ONLY) OF BUSINESS IT IS JUST IMPOSSIBLE THAT ASSESSEE HAS MANUFACTURED SUCH HUGE NUMBER OF BRICKS OUTSIDE BOOKS WITHOUT SINGLE PIECE OF EVIDENCE. (I) THAT PERHAPS THE ID. A.O HAS COOKED A STORY OF HIS OWN WITHOUT COLLECTING ANY EVIDENCE IN SUPPORT OF SUCH CONCLUSION DRAWING BY HIM FOR MAKING ASSESSMENT OF INCOME. THE ASSESSEE SUBMITS THAT THE STORY COOKED 8 BY THE ID. A.O DESERVES TO BE QUAS HED AS SAME I S WITHOUT ANY BASIS . IT WAS FURTHER SUBMITTED THAT THE ASSESSEE SOLD THE BRICKS TO GRAM PANCHAYAT @ RS. 1 850/ - + VAT RS. 50/ - TOTALING TO RS. 1 900/ - FOR THOUSAND. IT WAS ALSO STATED THAT ESTIMATION OF PRODUCTION/SALE/COST OF BRICKS MADE BY THE ASSESSING OFFICER WAS WITHOUT ANY BASIS. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - 1. CIT UDAIPUR VS. M/S. SURESH MARBLES PVT. LTD. (2009) (XLI) TAX WOR LD 108 (RAJ.) 2. M/S. SHYAM LATA KAUSHIK VS. ACIT F A RIDABA (2008) 114 ITD 305 (DELHI) 3. (1992) 42 TTJ 77 [ITAT JP] 4. (2013) 49 TAX WORLD 149 (RAJ. HC) ORDER DATED 09/01/2013 5. VOLUME 5 TTJ 381 [ITAT JP] 7 . THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER ESTIMATED THE NUMBER OF BRICKS MANUFACTURED MERELY ON PRESUMPTION BASIS. HE FURTHER OBSERVED THAT WORKING PERIOD WAS OF 2 MONTHS 15 DAYS AND THERE W ERE MANY ADVERSE CIRCUMSTANCES WHI CH HUMPERS THE MANUFACTURING ACTIVITIES SUCH AS NON - AVAILABILITY OF LABOUR MACHINERY FOR EXCLAVATION OF SOIL FROM OWN 9 LAND ETC. HE ALSO MENTIONED THAT THE PAYMENT OF ROYALTY WAS A DEAD RENT BASED ON SPECIFIED AREA OF SPAC E SANCTIONED FOR RUNNING THE KILN HAVING NO CONCERN FOR ACTUAL EXTRACTION OF SOIL FROM THE LAND AND SINCE KILN SANCTIONED WAS RUNNING THEREFORE ROYALTY PAYMENT WAS MANDATORY DESPITE THE LAND WAS NOT ABLE TO YIELD SOIL FOR BRICKS. THE LD. CIT(A) POINTED OUT THAT THE ACCOUNTANT OF THE ASSESSEE IN HIS STATEMENT DURING THE ASSESSMENT PROCEEDINGS NOWHERE STATED THAT ANY SOIL WAS USED FOR MA NUFACTURING FROM THEIR OWN LAND AND THAT THE LI CENSE OF THE MINING DEPARTMENT ONLY CONFIRMED THE PAYMENT OF ROYALTY AND DID NOT MENTION ANYTHING ABOUT PRODUCTION OF BRICKS DONE BY THE ASSESSEE. THE LD. CIT(A) OBSERVED THAT THE ASSESSING OFFICER FAILED TO BRING ON RECORD ANY CORROBORATIVE MATERIAL TO JUSTIFY ESTIMATION OF EXCESS PRODUCTION MADE BY THE ASSESSEE AND THAT THE PAYMENT OF ROYALTY & PURCHASE OF SOIL ITSELF COULD NOT DETERMINE THE QUANTUM OF PRODUCTION AND THAT NO INSTANCE OF SALE OF EXCESS PRODUCTION COULD BE ESTABLISHED BY THE ASSESSING OFFICER . LD. CIT(A) MENTIONED THAT THE EXPLANATION OF THE ASSESSEE FOR E STIMATION REGARDING ENHANCEMENT OF RATE OF BRICKS FROM RS. 1 850/ - TO RS. 1 900/ - WAS AS UNDER: - I) THIS IS FIRST YEAR OF THE BUSINESS OF THE APPELLANT AND THAT IN ORDER TO ESTABLISH BUSINESS HE HAD TO FAC T TOUGH COMPETITION IN THE MARKET AND HE HAD SOLD THE BRICKS AT COMPARABLY LOW MARGIN PROFIT. 10 II) THAT IN THE MARKET THERE ARE VARIOUS TYPE OF BRICKS ONE IS MANUFACTURE FROM GUNA FUEL ANOTHER IS MANUFACTURE OF COAL FUEL. THUS GENERALLY RATE OF BRICKS MANUFACTURED BY USING COAL IS ON HIGHER SIDE. III) THE RATE OF BRICKS IS ALSO DEPENDS UPON QUALITY OF MITTI USED IN BRICKS. IV) WHEREAS THE AO HAS QUOTED THE INSTANCE ON PAGE 5 OF ASSESSMENT ORDER THAT SALE OF GRAM PANCHAYAT VILLAGE 25 H AND VILLAGE 30H MADE BY BHARAT INTT UDYOG VILLAGE 12 O TEHSIL SRI KA RANPUR WAS @ 1900 PER THOUSAND BRICKS. 8 . THE LD. CIT(A) POINTED OUT THAT THE RATE OF RS. 1 900/ - PER THOUSAND WAS INCLUSIVE OF VAT AND OTHER EXPENSES BUT THE ASSESSING OFFICER HAD NOT CONSIDERED THIS FACT. THE LD. CIT(A) HELD THAT THE ESTIMATION OF EXCESS PRODUCTION SALE PRICE AND COST PRICE OF THE BRICKS BY THE ASSESSING OFFICER WAS UNJUSTIFIED AND THE SAME COULD NOT BE TAKEN INTO CONSIDERATION FOR CALCULATION OF THE NET PROFIT. RELIANCE WAS PLACED O N THE JUDGMENT OF THE HON'BLE SUPREME COURT I N THE CASE OF KACHWALA JEMS VS. JCIT REPORTED AT (2007) 158 TAXMAN 71. THE LD. CIT(A) CONSIDERING THE WORKING PERIOD OF 2 MO N THS AND 15 DAYS ESTIMATED THE TOTAL PRODUCTION AT 16 LAC AND WORKED OUT THE BRICKS SOLD AT 15 03 700 AS UNDER: - 11 NUMBER OF BRICKS UNITS ESTIMATED IN APPEAL ORDER 16 00 000 LESS: SHORTAGE/WASTAGE 2.5% ALLOWABLE 40 000 BALANCE 15 60 000 ADD: OPENING STOCK NIL LESS: CLOSING STOCK 56 300 TOTAL BRICKS SOLD DURING THE YEAR 15 03 700 LEARNED CIT(A) HELD THAT THE COMPARISON MADE BY THE ASSESSING OFFICER OF THE ASSESSEE WITH ANOTHER ASSESSEE FOR ESTIMATION OF COST SALE AND PRODUCTION WAS NOT JUSTIFIED FOR THE REASON THAT PERIOD OF WORKING OF ANOTHER COMPARABLE CASE WAS DIFFERENT AND THE SALE DECLARED BY THE ASSESSEE HAD BEEN ACCEPTED BY THE SALES TAX AUTHORITIES AND THAT THE APPLICATION OF GR OSS PROFIT RATE OF 46.22% WAS NOT JUSTIFIED. THE LD. CIT(A) WORKED OUT THE SALE BY APPLYING THE SALE RATE OF RS. 1 850/ - PER THOUSAND ON THE TOTAL BRICKS I.E. 1503700 AND SALE WAS WORKED OUT AT RS. 27 81 845/ - . THE LD. CIT(A) APPLIED GROSS PROFIT RATE OF 18% INSTEAD OF 13.5% DECLARED BY THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO RECAST THE TRADING ACCOUNT. ACCORDINGLY THE ADDITION WAS MODIFIED. NOW THE DEPARTMENT IS IN APPEAL. 9 . LEARNED D.R. STRON GLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT THE LD. CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE WITHOUT ASSIGNING ANY COGENT REASON. 12 10 . IN HIS RIVAL SUBMISSIONS LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 11 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS NOTICED THAT THE ASSESSING OFFICER ESTIMATED THE PRODUCTION OF BRICKS ONLY ON PRESUMPTION BASIS AND ALSO IGNORED THIS FACT THAT SALES TAX DEPARTMENT HAS ACCEPTED THE SALES OF THE ASSESSEE. THE ASSESSING OFFICER HIMSELF HAD ADMITTED THAT THE WORKING PERIOD FOR THE YEAR UNDER CONSIDERATION WAS 2 MONTHS 15 DAYS AND IT WAS THE FIRST YEAR OF PRODUCTION HOWEVER HE CONSIDERED THE PRODUCTION OF THE BRICKS AT 23 58 300 I.E. HALF OF THE TOTAL QUANTIFY ESTIMATED FOR WHOLE OF THE YEAR. THEREFORE ESTIMAT ION OF PROD UCTION BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. FURTHERMORE T HE ASSESSING OFFICER HAD ALSO NOT GIVEN ANY COGENT REASON FOR ADOPTING THE SALE RATE AT RS. 1 900/ - PER THOUSAND BRICKS PARTICULARLY WHEN THE BRICKS WERE SOLD TO THE GRAM PANCHAYAT @ RS. 1 850/ - PER THOUSAND BRICKS IN OUR OPINION THE LD. CIT(A) WAS JUSTIFIED IN ESTIMATING THE TO TAL PRODUCTION OF BRICKS AT 16 LAC FOR THE YEAR UNDER CONSIDERATION BY CONSIDERING THIS VITAL FACT THAT THE WORKING PERIOD WAS ONLY OF 2 MONTHS 15 DAYS. THE LD. CIT(A) ADOPTED THE SALE 13 PRICE AT RS. 1 850/ - FOR THE REASON THAT MOST OF THE SALE WAS DONE TO THE GRAM PANCHAYAT AT THE SAID RATE. IN THE INSTANT CASE THE EXPENSES WERE NOT FULLY VERIFIABLE AND THE B OOKS WERE REJECTED U/S 145(3) OF THE ACT THEREFORE GROSS PROFIT RATE AT 13.5% DECLARED BY THE ASSESSEE WAS RIGHTLY REJECTED. IN OUR OPINION T HE LD. CIT(A) WAS FAIR AND REASONABLE IN APPLYING THE GROSS PROFIT RATE OF 18% TO COVER UP ALL POSSIBLE LEAKAGE . WE THEREFORE CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 12. V IDE GROUND NOS. 2 & 3 THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF RS. 3 31 500/ - AND RS. 1 46 000/ - MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT. 13 FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS DIRECTED THE ASSESSEE TO PRODUCE THE CASH CREDITORS. THE ASSESSING OFFICER ACCEPTED THE CREDITORS WHICH WERE BELOW RS. 20 000/ - . THE ASSESSEE COULD NOT PRODUCE THE FOLLOWING CREDITORS: - S.NO. NAME AMUNT 1 VIJAY KUMAR 19 000 2 RAJ KUMAR 18 500 14 3 SMT. ANITA 18 000 4 SMT. SUMAN 16 000 5 SHRI JASWANT SINGH 17 000 6 SHRI JAGDEESH 10 000 7 SHRI GAJJAN SINGH 18 000 8 SHRI BANTA SINGH 90 000 9 SHRI JAGDEESH 1 25 000 TOTAL 3 31 500 THE ASSESSING OFFICER WAS ALSO NOT SATISFIED REGARDING THE SOURCE OF THE FOLLOWING CREDITORS: - 1. MOOLCHAND S/O TULSI RAM RAWLA MANDI 20 000.00 2 SUBHASH S/O MADANLAL RAWLA MANDI 19 500.00 3 PANNALAL S/O KURDARAM 3 KND 18 000.00 4 KISHANLAL S/O TAKARDAS 8 PSD 19 000.00 5 MADAD ALI 10 DOL 18 500.00 6 CASH (SELF) 51 000.00 1 46 000.00 HE ADDED THE AFORESAID AMOUNTS TO THE INCOME OF THE ASSESSEE. ACCORDINGLY THE ADDITION OF RS. 3 31 500/ - AND RS. 1 46 000/ - WAS MADE U/S 68 OF THE ACT. 14 BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE FURNISHED THE AFFIDAVITS OF THE CREDITORS 15 WHICH WERE ACCEPTED BY THE ASSESSING OFFICER. HE WAS FURTHER STATED THAT SHRI BANTA SINGH DEPOSITED RS. 90 000/ - ON 04/03/2009 THROUGH CHEQUE NO . 277933 ON SBI. THE SAID AMOUNT WAS DEPOSITED BY HIM FROM HIS AGRICULTURAL INCOME EARN E D FROM 14 BIGHA OF AGRICULTURE LAND IN VILLAGE 11 KND TEHSIL RAWLA. IT WAS FURTHER STATED THAT SHRI BANTA SINGH WAS TAKING AGRICULTURE LAND ON RENT BASIS AND HIS AGRICULTURE INCOME WAS OF RS. 3 TO 4 LAC . IT WAS CONTENDED THAT THE STATEMENT WAS RECORDED AFTER LAPS OF TIME OF 30 MONTHS OF RELEVANT TRANSACTION . IT WAS STATED THAT THE ASSESSEE ESTABLISHED THE IDENTIFY/CREDITWORTHINESS AND GENUINENESS OF THE DEPOSITS THEREFORE NO ADDITION COULD HAVE BEEN M ADE . RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - 1 . SARAGOI CREDIT CORPORATION VS. CIT (1976) 103 ITR 344 (PAT.) 2 . ACIT VS. SQUARE BUILDERS & COLONIZERS P. LTD. (2010) XLIII TAX WORLD 193 (ITAT JP) 3 CIT VS. METACHEM INDUSTRIES (2000) 245 ITR 160 (MP) 4 . REWA GROUP VS. ITO (2007) 109 TTJ 657 (ITAT JABALPUR) 5 . BIHARI LAL CHANDAK VS. ITO (2007) 37 TAX WORLD 37 (JODH . ) . 6 BANSHI LAL MALHOTRA VS. DCIT 31 TW 67 7 . PARAS COTTON VS. CIT 30 TW 168 8 . ITO VS. CHANDI RAM CONTRACTOR 21 TAX WORLD 389 9 . CIT VS. AGGARWAL ENGINEERING CO. (JAL.) (2006) CTR 648 (P&H) (HC) 16 15 THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE PROVED THE IDENTITY CREDITWORTHINESS AND THE GENUINENESS OF ALL THE TRANSACTION THEREFORE DELETED THE IMPUGNED ADDITION. NOW THE DEPARTMENT IS IN APPEAL. 16 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT APPEARS THAT THE ASSESSEE FURNISHED THE AFFIDAVITS FROM ALL THE CREDITORS AND SINCE FEW OF THE CREDITORS WERE NOT PRESENT THE ASSESSING OFFICER MADE THE ADDITION. IN THE INSTANT CASE IT IS NOT BROUGHT ON RECORD THAT THE ASSESSING OFFICER ISSUED NOTICE S U/S 131 OF THE ACT TO TH OSE CREDITORS WHO COULD NOT BE PRODUCED THE A SSESSEE FURNISHED THE DETAILS TO PROVE THE IDENTITY CREDITWORTHINESS OF ALL THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS BEFORE THE ASSESSING OFFICER THEREFORE THE ADDITION MADE BY THE ASSESSING OFFICER WA S RIGHTLY DELETED BY THE LD. CIT(A). WE DO NOT SEE ANY V A LID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. 17 LAST ISSUE VIDE GROUND NO. 4 RELATES TO THE DELETION OF ADDITION OF RS. 2 00 000/ - MADE BY THE ASSESSING OFFICER U/S 69B OF THE ACT. 17 18 FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE CLAIMED THE EXPENSES OF RS. 2 78 833/ - ON ACCOUNT OF BHATTA CHIMNI NIRMAN AND BHANDA NIRMAN . THE ASSESSING OFFICER MADE ADHOC ADDITION OF RS. 2 00 000 / - U/S 69B OF THE ACT BY OBSERVING THAT THE ASSESSEE HAD NOT SHOWN THE COST OF THE BRICKS UTILIZED AND ALSO LABOUR CHARGES SHOWN WERE VERY LESS. 19 BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE HAD SHOWN EXPENSES OF BHATTA CHIMNI NIRMAN AND BHANDA NIRMAN AT RS. 2 78 833/ - AND FURNISHED COPIES OF ACCOUNT ALONG WITH BILLS AND VOUCHERS . IT WAS FURTHER STATED THAT THE ASSESSEE HAD SHOWN THE EXPENSES IN RESPECT OF PAKK I BRICKS AND KACCHI BRICKS USED IN MANUFACTURING OF CHIMNI NIRMAN AND BHANDA GADE NIRMAN AND ALSO SHOWN LABOUR CHARGES THEREFORE ADDITION OF RS. 2 00 000/ - WAS NOT JUSTIFIED. THE ASSESSEE ALSO FURNISHED COPY OF VALUATION REPORT BY AN AUTHORIZED ENGINEER DATED 20/02/2009 WHICH DETERMINED THE COST OF CHIMNI NIRMAN AND BHANDA GADE NIRMAN AT RS. 3 06 000/ - AND AFTER DEDUCTING REBATE @ 10% TOWARDS SELF SUPERVISION AMOUNTING TO RS. 30 600/ - THE BALANCE CAME TO RS. 2 75 400/ - . IT WAS STATED THAT THE ASSESSEE HAD SHOWN COST AT RS. 2 78 330/ - WHICH WAS JUST QUITE FAIR AND REASONABLE. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - 18 1. HIND LAMBS LTD. VS. DCIT (2000) 68 TTJ 586 (ITAT - AGRA) 2. CIT VS. PRATAP SINGH AMRO SINGH RAJENDRA SINGH & DE EPAK KUMAR (1993) 200 ITR 788 (RAJ.) 3. ITO VS. TEK CHAND (1995) 85 ITD 197 (ITAT JP) 4. CIT VS. AGGARWAL ENGINEERING CO. (JAL) (2006) 206 CTR 648 (P & H) 5. ITO VS. TAMANNA BEGUM TAX WORLD VOL. 21 PAGE 11 (ITAT - JP) 20 THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT OVER AND ABOVE EXPENSES WERE INCURRED BY THE ASSESSEE AND NO INVESTIGATION WAS MADE BY HIM. THEREF ORE IT WAS NOT FAIR ON THE BASIS OF PRESUMPTION ON THE AMOUNT OF RS. 2 00 000/ - WAS INCURRED HENCE OVER AND ABOVE THE EXPENDITURE SHOWN BY THE ASSESSEE . ACCORDINGLY THE ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED. NOW THE DEPARTMENT IS IN APPE AL . 21 LEARNED D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER WHILE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) . 19 22 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS NOTICED THAT THE ASSESSEE FURNISHED THE VAL U ATION REPORT OF THE AUTH ORIZED OFFICER WHO DETERMINED THE COST OF CHIMNI NIRMAN AND BHANDA GADE NIRMAN AT RS. 3 06 000/ - AND IF REBATE @ 10% AMOUNTING TO RS. 30 600/ - TOWARDS SELF SUPERVIS I ON WAS TO BE ALLOWED COST CAME TO RS. 2 75 400 - WHILE THE ASSESSEE HAD DISCLOSED THE COST IN THE BOOKS OF ACCOUNTS AT RS. 2 78 338/ - WHICH WAS MORE THAN THE AFORESAID VALUATION. IN THE PRESENT CASE THE ASSESSING OFFICER HAD NOT BROUGHT ANY MATERIAL ON RECORD TO SUBSTANTI ATE THAT THE ASSESSEE INCURRED MORE EXPENSES THAN THOSE WERE DISCLOSED IN THE BOOKS OF ACCOUNTS . THEREFORE THE ESTIMATED ADDITION ON THE BASIS OF SURMISES AND CONJECTURES IS NOT SUSTAINABLE AND THE LD. CIT(A) RIGHTLY DELETED THE SAME. WE DO NOT SEE ANY MERIT IN TH IS G R OUND OF THE DEPARTMENT AL APPEAL. 23 IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMISSED . ( ORDER PRONOUNCED IN THE COURT ON 31 ST JULY 201 4) . SD/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST JULY 201 4 . 20 VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY ITAT JODHPUR .