DeLavel Private Ltd., v. DCIT,

ITA 609/PUN/2006 | 2002-2003
Pronouncement Date: 13-08-2010 | Result: Allowed

Appeal Details

RSA Number 60924514 RSA 2006
Assessee PAN AABCA5137A
Bench Pune
Appeal Number ITA 609/PUN/2006
Duration Of Justice 4 year(s) 2 month(s) 25 day(s)
Appellant DeLavel Private Ltd.,
Respondent DCIT,
Appeal Type Income Tax Appeal
Pronouncement Date 13-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 13-08-2010
Assessment Year 2002-2003
Appeal Filed On 18-05-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 609/PN/2006 (ASSTT. YEAR : 2002-03) DELAVAL PRIVATE LTD. A-3 ABHIMANSHRI SOCIETY DR HOMI BHABHA (PASHAN ROAD) PUNE 411008 PAN:AABCA5137A .. APPELLANT V. DY COMMISSIONER OF INCOME TAX CIRCLE I PUNE . RESPONDENT APPELLANT BY : SHRI ABHAY AVCHAT RESPONDENT BY : SHRI. ABHAY DAMLE ORDER PER D. KARUNAKARA RAO AM THIS IS THE APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF CIT(A)- I PUNE DATED 22.03.2006 FOR THE A.Y. 2002-03: G ROUNDS TAKEN BY THE ASSESSEE READ AS UNDER : 1. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1) PUNE (DCIT) HAS ERRED IN DISALLOWING AND LEARNED COMMISS IONER OF INCOME TAX (APPEALS)-I PUNE HAS ERRED IN CONFIRMING DEDUCT ION ON ACCOUNT OF LOSS OF STOCK VALUE FOR NON MOVING AND SLOW MOVING ITEMS. 2. THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX C IRCLE 1(1) PUNE (DCIT) HAS ERRED IN DISALLOWING AND LEARNED COMMISS IONER OF INCOME TAX (APPEALS)-I PUNE HAS ERRED IN CONFIRMING DISALL OWANCE OF RS.11 523 OUT OF TRANSPORT EXPENSES PAID TO KWICKTRACKERS & LIFTERS. 3. WITHOUT APPRECIATING FACTS CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1 (1) PUNE (DCIT) HAS ERRED IN MAKING ADDITION AND LEARNED COMMISSION ER OF INCOME TAX (APPEALS)-I PUNE HAS ERRED IN CONFIRMING THE SA ME OF RS.9 97 539 IN RESPECT OF PURCHASES FROM GOEL POWER CONTROLS PVT. LTD. 4. WITHOUT APPRECIATING FACTS CIRCUMSTANCES OF THE CASE AND LAW THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1 (1) PUNE (DCIT) HAS ERRED IN MAKING ADDITION AND LEARNED COMMISSION ER OF INCOME TAX (APPEALS)-I PUNE HAS ERRED IN CONFIRMING THE SAME O F RS.1 19 844 IN RESPECT OF PURCHASES FROM ALLIED PRODUCTS . 2. REGARDING THE FIRST GROUND RELATING NON MOVING AND SLOW MOVING ITEMS THE FINDINGS OF THE CIT(A) ARE RELEVANT AND THEY ARE DI SCUSSED IN PARA 5 TO 5.9 OF THE IMPUGNED ORDER. CIT(A) GRANTED PART RELIEF IN THIS REGARD. FOR THE SAKE OF ITA NO 609/PN/2006 DELAVAL PRIVATE LTD. A.Y.2002-03 PAGE OF 4 2 CONVENIENCE THE RELEVANT CONCLUDING PARAS I.E. PA RA 5.3 TO 5.9 ARE REPRODUCED AS UNDER : 5.3 THE FACTS OF THE CASE WERE DULY CONSIDERED. T HE APPELLANT IS MANUFACTURING MILKING MACHINERY AND SPARES USED IN DAIRY SECTOR. THE MAJORITY OF THE CLIENTS OF THE APPELLANT ARE MILK C O-OPERATIVE SOCIETIES. THESE CLIENTS PLACE ORDERS AND AGAINST THE ORDERS THE AP PELLANT MANUFACTURES OR PROCURES THE MACHINERY FOR THE SUPPLY TO THE CLIENT S. IN NUTSHELL THE APPELLANT KNOWS HIS CLIENTS AND THEIR REQUIREMENTS BEFORE HE UNDERTAKES TO MANUFACTURE THE MACHINERY OR PROCURES FROM ABROAD O R LOCAL MARKET. GENERALLY IN SUCH SITUATION WHEN THE SALE IS GUARA NTEED THERE IS NO CASE FOR SALE NOT TAKING PLACE OF SLOW MOVING GOODS. THE G OODS SOLD ARE CUSTOM BUILT AND THAT THEY ARE NOT SOLD OFF THE SELF. THESE FAC TS DO NOT SUPPORT THE CASE OF THE APPELLANT OF OBSOLESCENCE AND THE SLOW MOVING G OODS. 5.4 THE PERUSAL OF THE ACCOUNTS OF THE APPELLANT SH OWS THAT THE APPELLANT TAKES ADVANCES FROM CUSTOMERS. AS PER SCHEDULE 12 TO THE ACCOUNTS THE ADVANCES FROM CUSTOMERS DURING THE RELEVANT YEAR IS RS.1 40 09 033/-. THE ADVANCES IN THE PRECEDING YEAR WAS RS.1 87 02 057/- . THE TURNOVER OF THE APPELLANT DURING THE RELEVANT YEAR IS 18.94 CRORES AND IN THE PRECEDING YEAR IT WAS 16.28 CRORES. IT WILL BE SEEN THAT THE ADVANCE S TAKEN IS A SIGNIFICANT PROPORTION OF THE SALE. THIS PROVES THE FACT THAT THE APPELLANT IS MAINLY DEALING IN CUSTOM BUILT SALES. 5.5 IT IS APPARENT THAT THE APPELLANT IS NOT FOLLOW ING ACCEPTED ACCOUNTING POLICY OF VALUING THE STOCK AT COST OR MARKET PRICE WHICHEVER IS LOWER. THE POLICY FOLLOWED BY THE APPELLANT DOES NOT GO TO PRO VE THAT THE APPELLANT IS ARRIVING AT THE MARKET PRICE. THE APPELLANT IS FOLLOWING A FORMULAE WHICH IS SELF DESIGNED BUT IT IS NOT BASED ON THE INPUT FROM THE MARKET. HENCE IT IS DIFFICULT TO SAY THAT THE REDUCED VALUE WORKED OUT BY THE APPELLANT FOR THE STOCK IS THE MARKET PRICE. 5.6 THE INCIDENCE OF TAXATION IS ON THE INCOME OF A PERSON OF A YEAR. THE INCOME OF A YEAR CAN BE CORRECTLY WORKED OUT IF THE STOCK IS CORRECTLY VALUED. IN THE INSTANT CASE THE APPELLANT HAS APPLIED ITS OWN METHOD OF VALUATION OF A STOCK WHICH IS NOT IN COMMENSURATE WITH NORMAL AC COUNTING PRACTICE AND HENCE THE INCOME CANNOT BE CORRECTLY WORKED OUT FOR THE YEAR. 5.7 NEITHER AT THE TIME OF ASSESSMENT NOR AT THE TI ME OF REMAND PROCEEDINGS THE APPELLANT COULD SUPPORT ITS CASE B Y ADDITIONAL EVIDENCE. THE ASSESSING OFFICER CALLED FOR THE VALUATION REPORT B Y EXPERT OF THE STOCK. NO SUCH VALUATION REPORT COULD BE PRODUCED EITHER AT T HE TIME OF ASSESSMENT OR AT THE TIME OF REMAND PROCEEDINGS. THE REPORT NOW PRODUCED OF DEP. GENERAL MANAGER-TECHNICAL IS AGAIN NOT A VALUATION REPORT BUT A REPETITION OF THE PRACTICE FOLLOWED BY THE COMPANY. OTHERWISE AL SO THIS REPORT CANNOT BE CONSIDERED AS THE SAME WAS NOT THERE BEFORE THE ASS ESSING OFFICER. 5.8 THE CONTENTION OF THE APPELLANT THAT DEBIT OF T HE PROVISION WAS ONLY RS.43 43 506/- AND NOT RS. 49 56 321/- DESERVES CON SIDERATION. 5.9 IN VIEW OF THE FACTS ABOVE IN PRINCIPLE THE A DDITION PROPOSED BY THE ASSESSING OFFICER IS UPHELD. HOWEVER HE IS DIRECT ED TO VERIFY THE CLAIM OF THE APPELLANT THAT THE ACTUAL DEBIT IS ONLY RS.43 43 50 6/- AND NOT RS.49 56 321/-. THE ASSESSING OFFICER WILL GIVE A RELIEF OF RS.6 12 815/- SUBJECT TO VERIFICATION BY HIM. THE GROUND TAKEN PARTLY SUCCEEDS. ITA NO 609/PN/2006 DELAVAL PRIVATE LTD. A.Y.2002-03 PAGE OF 4 3 FROM THE IT IS EVIDENT THAT THE ASSESSEE IS FOLLOWI NG A FORMULAE BASED APPROACH AND NOT THE ACTUAL FACTS AND FIGURES BASED VALUATION. FURTHER ASSESSEE HAS NOT FILED ANY OTHER EVIDENCE BEFORE US WHICH MAY HELP US TO REVER SE THE FINDING OF THE CIT(A). IN VIEW OF THE SAME WE FIND NO REASON TO DISAGREE WIT H HIS VIEW IN THE MATTER AND THEREFORE THE GROUND 1 IS DISMISSED . 3. WITH REFERENCE TO GROUNDS 2 TO 4 WE FIND THAT T HE BASIC INFORMATION WHICH GOES TO THE ROOT OF THE MATTER ARE NOT BROUGHT TO T HE RECORDS EITHER BY THE A.O OR BY THE CIT(A). FURTHER IT IS THE PRAYER OF THE COUNS EL OF THE ASSESSEE THAT HE SHALL SUPPLY THE REQUISITE INFORMATION BEFORE THE REVENUE AUTHORITY IF THE MATTER IS SET ASIDE TO THEIR FILES. WE FIND THAT NO COPIES OF B ILLS/INVOICES WERE PRODUCED FOR VERIFICATION IN RESPECT OF GROUND NO. 2 BEFORE THE REVENUE AUTHORITIES. GROUND NO. 3 & 4 ARE RELATED TO THE ADDITION OF RS.9 97 539/- IN RESPECT OF PURCHASES FROM GOEL POWER CONTROLS PVT. LTD. AND RS. 1 19 844/- RELAT ED TO PURCHASES FROM M/S. ALLIED PRODUCTS BEING EXCESS BILLS. THE A.O HAS OBSERVED THAT THE APPLICANT PRODUCED BILLS FOR THE PURCHASES OF RS.53 03 961/- IN THE CASE OF GEOL POWER CONTROLS PVT. LTD. AND THE BILLS WERE PRODUCED IN EXCESS BY RS.9 97 5 39/-. TOTAL PURCHASES FROM M/S. ALLIED PRODUCTS AMOUNTED TO RS.43 07 813/- AND THE BILLS ACTUALLY PRODUCED BY THE ASSESSEE WAS FORRS.41 87 969/- LEADING TO EXCESS BI LLS OF RS.1 19 844/-. IN THE REMAND REPORT THE A.O HAS REMARKED THAT THE BILLS WERE NOT PRODUCED IN FULL. BEFORE CIT(A) APPELLANT HAS SUBMITTED THAT THE AD DITION CANNOT BE MADE ON THE BASIS OF EXCESS BILLS AS EXCESS BILLS DO NOT AMOUNT TO INCOME OF THE APPELLANT. THE MISSING BILLS ARE NOTED IN THE REMAND REPORT AND T HE APPELLANT HAS ALSO NOTED IN ITS LETTER THAT IT HAS ALL THE BILLS. ASSESSEE APPELLA NT HAD STATED BEFORE THE A.O THAT EXCESS BILLS RESULTED DUE TO THE PURCHASE RETURNS THOUGH DETAILS COULD NOT BE FURNISHED. AFTER DUE CONSIDERATION OF THE FACTS OF THE CASE CIT(A) CONFIRMED THE ADDITION BY OBSERVING AS UNDER : AFTER DUE CONSIDERATION OF THE FACTS OF THE CASE IT APPEARS THAT THE APPELLANT HAS FAILED TO RECONCILE THE DISCREPANCY P OINTED OUT BY THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT ORDER. BILLS IN EXCESS THAN THE BOOKED PURCHASES WILL MEAN THAT THE PURCHASES WERE MADE OU TSIDE THE BOOKS LEADING TO AN INFERENCE THAT THE PURCHASES ARE UNEXPLAINED. I AM QUITE SURE THAT THE APPELLANT BEING AN ESTEEMED COMPANY WILL NEVER RESO RT TO THAT. HOWEVER AT THE SAME TIME THE BURDEN LIES ON THE APPELLANT TO PROVE ITS CASE ON FACTS WHICH IT HAS FAILED NOT ONLY AT THE TIME OF ASSESSM ENT PROCEEDINGS BUT ALSO AT THE TIME OF REMAND PROCEEDINGS. IN VIEW OF THE FACTS ABOVE THAT THE APPELLANT HAS F AILED TO PROVE THE DISCREPANCY THE ADDITIONS PROPOSED ARE UPHELD. GR OUNDS NO. 4 AND 5 ARE PARTLY ALLOWED. ITA NO 609/PN/2006 DELAVAL PRIVATE LTD. A.Y.2002-03 PAGE OF 4 4 CONSIDERING THE LARGER INTEREST OF THE JUSTICE WE ARE OF THE OPINION THAT THE MATTER IN RESPECT OF GROUNDS 2 TO 4 SHOULD BE SET ASIDE FOR DECIDING THE ISSUES DE NOVO AFTER GRANTING REASONABLE OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE. 4. IN THE RESULT THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH AUGUST 2010 SD/- SD/- (I.C. SUDHIR) JUDICIAL MEMBER (D. KARUNAKARA RAO ) ACCOUNTANT MEMBER PUNE DATED THE 13TH AUGUST 2010 US COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT -I PUNE 4. THE CIT(A)-I PUNE 4. THE D.R. A BENCH PUNE 5. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE