INCOME TAX OFFICER-3(3)(2), MUMBAI v. M/S. SHREE VENKATESH STEELS LTD., MUMBAI

ITA 82/MUM/2009 | 1996-1997
Pronouncement Date: 25-11-2011 | Result: Dismissed

Appeal Details

RSA Number 8219914 RSA 2009
Assessee PAN TANOS6673O
Bench Mumbai
Appeal Number ITA 82/MUM/2009
Duration Of Justice 2 year(s) 10 month(s) 18 day(s)
Appellant INCOME TAX OFFICER-3(3)(2), MUMBAI
Respondent M/S. SHREE VENKATESH STEELS LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 25-11-2011
Date Of Final Hearing 02-11-2011
Next Hearing Date 02-11-2011
Assessment Year 1996-1997
Appeal Filed On 06-01-2009
Judgment Text
ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 1 OF 13 IN THE INCOME TAX APPELLATE TRIBUNAL 'E' BENCH MUMBAI BEFORE SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NOS.6673/MUM/2008 AND ITA NOS.82 83 84 & 85/MUM/2009 (ASSESSMENT YEARS: 1996-97 TO 2000-01) INCOME TAX OFFICER 3(3)2 VS SHREE VENKATESH STEELS LTD ROOM NO.602 6 TH FLOOR KIRAN VILLA 3 RD FLOOR AAYAKAR BHAVAN 301 DR.DESHMUKH ROAD MK ROAD MUMBAI 400020 MUMBAI 400026 PAN AABCS 9241 D APPELLANT RESPONDENT CO NO.106/MUM/2009 (IN ITA NOS.6673/MUM/2008) (ASSESSMENT YEAR 1999-2000) SHREE VENKATESH STEELS LTD VS KIRAN VILLA 3 RD FLOOR INCOME TAX OFFICER 3(3)2 301 DR.DESHMUKH ROAD ROOM NO.602 6 TH FLOOR MUMBAI 400026 PAN AABCS 9241 D AAYAKAR BHAVAN MK ROAD MUMBAI 400020 APPELLANT RESPONDENT APPELLANT BY: MR.G.P.TRIVEDI/B.JAYA KUMAR-DR RESPONDENT BY: MR.LAL CHAND CHOUDHARY DATE OF HEARING: 02/11/2011 DATE OF PRONOUNCEMENT: 25/11/2011 O R D E R PER B. RAMAKOTAIAH A.M. THESE APPEALS BY THE REVENUE ARE AGAINST THE ORDERS OF THE CIT (A)-3 MUMBAI DATED 14.8.2008 AND 06.10.2008 RESPECT IVELY IN A.Y 1996-97 TO 2000-01. THE CROSS OBJECTION FILED BY TH E ASSESSEE WAS FOR THE A.Y 1999-2000. THE LEAD ORDER IN THIS GROUP OF APPEALS IS IN THE A.Y 1999-2000 IN WHICH THE ASSESSING OFFICER EN QUIRED ABOUT THE LEASING UNDERTAKEN BY THE ASSESSEE COMPANY AND DISALLOWED THE ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 2 OF 13 LEASE RENTALS PAID. FOLLOWING THE ORDER IN THE A.Y 1999-2000 THE ASSESSING OFFICER REOPENED THE ASSESSMENTS IN OTHER YEARS FROM 1996-97 TO 1998-99 TO DISALLOW THE LEASE RENTALS CL AIMED IN THOSE YEARS BASED ON THE FINDINGS IN THE A.Y 1999-2000. I N THE SCRUTINY ASSESSMENT FOR A.Y 2000-01 THE ASSESSING OFFICER S IMILARLY DISALLOWED SUCH LEASE RENTALS. IN APPEAL THE CIT (A ) ALLOWED THE LEASE RENTS. THEREFORE THE REVENUE HAS RAISED COMM ON GROUNDS IN ALL THE YEARS. FOR THE SAKE OF CLARITY THE GROUNDS RAISED IN A.Y 1999-2000 ARE EXTRACTED AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT (A) ERRED IN ALLOWING THE EXPENDITURE OF ` 92 64 538/- BEING THE LEASE RENTAL CHARGES. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. EVEN THOUGH THE GROUND MENTIONED THE AMOUNT OF LEAS E AS ` 92 64 538/- THE ACTUAL AMOUNT INVOLVED IN DISPUTE WAS ONLY ` 75 84 538/-. ACCORDINGLY THE AMOUNT WAS CONSIDERED AS ABOVE. IN OTHER A.YS LEASE RENTS INVOLVED ARE AS UNDER: A.Y 1996-97 - ` 1 41 68 967/- A.Y 1997-98 - ` 1 77 51 583/- A.Y 1998-99 - ` 1 27 88 439/- A.Y 2000-01 - ` 25 06 524/- 3. BRIEFLY STATED THE ASSESSEE IS IN THE MANUFACTURIN G OF INGOTS AND BILLETS AND IS RUNNING ROLLING MILLS. IN THE PR OCESS OF MANUFACTURING THE ASSESSEE UTILIZED VARIOUS STEEL R OLLS. THE ASSESSEE PURCHASED SOME STEEL ROLLS IN ITS OWN AMOUNT AND AL SO OBTAINED STEEL ROLLS ON LEASE FROM VARIOUS PARTIES. THERE WA S SEARCH IN THE BUSINESS PREMISES OF THE ASSESSEE ON 10-02-2000 AND PROCEEDINGS UNDER SECTION 158BC WERE INITIATED TO ASSESS UNDISC LOSED INCOMES ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 3 OF 13 BASED ON THE STATEMENT GIVEN BY THE DIRECTOR. HOWEV ER IN THE SCRUTINY ASSESSMENTS ON THE RETURNS FILED IN REGULA R COURSE THE ASSESSING OFFICER AMONGST VARIOUS OTHER ISSUES EXAM INED THE CLAIM OF LEASE RENTALS PAID RELATING TO A.Y 1999-2000. IN THIS ASSESSMENT YEAR THE ASSESSEE PAID AND CLAIMED LEASE RENTALS OF ` .92 64 538/- TO VARIOUS PARTIES. AS THERE ARE CERTAIN CLAIMS OF PAY MENT OF LEASE RENTALS IN WHICH THE LEASE PERIOD HAS ALREADY EXPIR ED THE ASSESSEE AGREED FOR DISALLOWANCE OF SOME LEASE RENT ON THAT ACCOUNT. THEREFORE THE ACTUAL AMOUNT IN DISPUTE WAS ONLY ` 75 84 538/-. 3.1 AS PER THE ANNEXURE-A TO THE ASSESSMENT ORDER T HE ASSESSING OFFICER ENQUIRED FROM VARIOUS PARTIES AND FOUND THA T EVEN THOUGH THE IMMEDIATE SUPPLIERS ARE AVAILABLE HE ENQUIRED A BOUT THEIR SUPPLIERS AND ULTIMATELY CAME TO THE CONCLUSION THA T THE ULTIMATE SUPPLIERS OF THE ROLLS WERE NOT TRACEABLE. THEREFOR E THE TRANSACTIONS OF LEASE WERE HELD TO BE NOT GENUINE. MOREOVER ON T HE BASIS OF THE STATEMENT OF THE DIRECTOR AND FOREMAN THE ASSESSIN G OFFICER ANALYZED THE STEEL ROLLS CONSUMPTION AND CAME TO TH E CONCLUSION THAT THERE IS NO UNIFORMITY IN THE ROLL CONSUMPTION . THE ANALYSIS OF THE ASSESSING OFFICER IN RESPECT OF THE A.YS AS STA TED IN THE PAGE 14 OF THE ASSESSMENT ORDER IS AS UNDER: ANALYSIS OF STEEL ROLL CONSUMPTION F.Y SELF ROLLS LEASED ROLLS TOTAL AVAIL (4+8) ROLL CON. PER DAY TOTAL PROD. MTS PRODUCTION ELECTRICITY CONS O/ B ADD TOT AL RET/ SOLD O/B ADD TOTAL RET/ SOLD ELEC. CONSUMED KWH 1 2 3 4 5 6 7 8 9 10 11 12 13 94-95 41 68 109 5 ----- 761 1245 40 1354 3.71 27 76 7 78.89 95-96 104 127 237 87 1205 285 1490 31 1727 4.79 23 473 83.45 96-97 144 189 333 156 1459 183 1642 54 1975 5.48 26 290 94.56 97-98 177 99 276 226 1488 34 1522 957 1798 4.99 23 449 85.91 98-99 50 49 99 - 565 47 612 243 711 1.97 24 007 79.66 99-00 99 90 184 44 369 0 369 11 553 1.53 24 389 82.24 00-01 145 29 174 - 358 0 358 80 532 1.47 15 700 106.26 ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 4 OF 13 3.2 NOT ONLY THAT THE ASSESSING OFFICER ALSO REL YING ON THE STATEMENT OF SHRI TILAKRAJ THAKUR FOREMAN WHICH WA S RECORDED DURING THE COURSE OF SEARCH CAME TO THE CONCLUSION THAT THE ASSESSEE REQUIRES ONLY 300 TO 350 ROLLS FOR RUNNING THE STEEL MILLS AND ACCORDINGLY HIRING OF SO MANY ROLLS WAS NOT REQ UIRED WHEN PRODUCTION WAS ALMOST STAGNATED AT THE SAME EVERY Y EAR AND ELECTRICITY CONSUMPTION WAS ALSO MORE OR LESS SAME. HE ALSO CONCLUDED THAT THE ASSESSEE HAS NOT MAINTAINED ANY PROPER RECORD FOR THE RECEIPT OF THE MILL ROLLS ACTUAL USE OF IT BREAKAGE OF THE ROLLS AND ALSO NOTICED THAT THE MILL ROLL REGISTERED SHOW S ONLY THE DATE OF RECEIPT AND ITS IMMEDIATE ISSUANCE WITHOUT MAINTAIN ING ANY STOCK RECORDS. HE ALSO ANALYZED THAT MR. ANIL GOYAL EXIM (P) LTD. SAROJ ANIL STEELS PVT. LTD. & SAROJ STEEL TRADERS ARE TH E SELLERS TO WHITON CHEM. PVT. LTD THE SUPPLIERS TO THE ASSESSEES LES SORS AND THE ENQUIRIES WITH RESPECT TO THE PARTIES SHOWED THAT T HEY ARE NOT MANUFACTURERS AND SO THE ASSESSEE FAILED TO PROVE T HE EXISTENCE OF THE ROLLS UTILIZATION OF THE ROLLS AND JUSTIFICATI ON FOR PAYMENT OF LEASE RENTALS. ACCORDINGLY HE DISALLOWED THE LEASE RENTALS OF ` 92 64 538/- IN A.Y 1999-2000 WHICH INCLUDED THE AMO UNT AGREED BY THE ASSESSEE ALSO. 3.3 THE CIT (A) CONSIDERED THE SUBMISSIONS OF TH E ASSESSEE AND OBTAINING REMAND REPORT HAS DELETED THE SAID DISALL OWANCE BY GIVING THE FACTUAL FINDINGS AS UNDER: I HAVE PURSUED THE FACTS OF THE CASE AND I FIND TH AT THERE ARE SPECIFIC LEASE AGREEMENTS BETWEEN THE FIR ST STAGE LESSER AND THE APPELLANT. ALL THE PARTIES IN THE FIRST STAGE OF SUPPLY ACTING AS LESSORS HAVE CONFIRMED TH E TRANSACTIONS AND THERE IS NO DISPUTE ABOUT THAT. AL SO THERE IS NO DISPUTE ABOUT THE SECOND STAGE PARTIES WHERE ALSO ASSESSING OFFICER WAS SATISFIED. THE ADDITION HAS BEEN MADE BY MAKING ENQUIRIES FROM THE ULTIMATE SUPPLIERS WHICH IN THE INSTANT CASE ARE TH E THIRD STAGE PARTIES. IN THE ASSESSMENT PROCEEDINGS THESE PARTIES HAD NOT RESPONDED TO THE LETTERS SENT TO THEM. HOWEVER IN THE REMAND PROCEEDINGS ALL THESE ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 5 OF 13 PARTIES HAVE APPEARED BEFORE ASSESSING OFFICER AND HAVE CONFIRMED THE TRANSACTION. IT IS A FACT THAT DISCREPANCIES EXIST BETWEEN THE QUANTITIES CLAIM SUPPLIED BY ULTIMATE SUPPLIERS AND EVIDENCE OF THE SAME AVAILABLE WITH THEM. BUT THAT TO MY MIND IS A VERY REMOTE DISCREPANCY WHICH CANNOT ON ITS OWN LEAD TO THE ADDITION MADE BY THE ASSESSING OFFICER. IT IS ALSO RELEVANT TO POINT OUT THAT THIS ENQUIRY HAS BEEN UNDERTAKEN AFTER SEVERAL YEARS OF TRANSACTION AND I N CASE OF ONE OF THE SUPPLIERS D.K. ENTERPRISES THE PROPRIETOR HAD ALREADY EXPIRED AND HIS WIFE HAS APPEARED BEFORE THE ASSESSING OFFICER. TO ACCEPT VERIFICATION AS EXPECTED BY THE ASSESSING OFFICER W OULD BE GOING TOO FAR ON THE ISSUE. IN OTHER CASES ALSO THE DISCREPANCY POINTED IN THE REMAND REPORT ARE REMOTE AND CANNOT LEAD TO CONCLUSION THAT THE ENTIRE TRANS ACTION OF LEASE OF APPELLANT IS NOT GENUINE WHEN BOTH THE LESSORS AND THE FIRST STAGE SUPPLIERS TO LESSORS HA VE CONFIRMED THE TRANSACTIONS AND NO DISCREPANCY HAS BEEN OBSERVE BY THE ASSESSING OFFICER IN RESPECT OF THESE STAGES. I ALSO NOTICE THAT THE CONCLUSION DRA WN BY THE ASSESSING OFFICER BASED UPON THE STATEMENT RECORDED AND ROLL REGISTERS ARE NOT LOGICAL BECAUSE ASSESSING OFFICER HAS TOTALLY MISSED THE FACT THAT APPELLANT IS MANUFACTURING A VARIETY OF SECTION AND LARGE NUMBER OF SIZES OF FINISHED PRODUCTS. THIS FA CT WAS TOTALLY IGNORED BY THE ASSESSING OFFICER WHILE DRAWN THESE CONCLUSIONS. THE CONSUMPTION OF ROLLS P ER DAY OVER SEVEN PREVIOUS YEARS IS VARYING BETWEEN 1. 47 AND 5.48. IT DOES NOT HAVE ANY SANCTITY SINCE THIS CONSUMPTION WOULD DEPEND ON A VARIETY OF FACTORS INCLUDING THE NUMBER OF TYPE OF SECTIONS AND THE NU MBER OF SIZES BEING MANUFACTURED AS ALSO THE BREAKAGE DURING THE MANUFACTURING PROCESS. FOR ALL THESE REASONS I AM OF THE VIEW THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE CONCLUSION DRAWN BY THE ASSESSING OFFICER IS NOT JUSTIFIED AT ALL. IT IS BA SED UPON INCORRECT APPRECIATION OF TOTALITY OF FACTS. PARTIC ULARLY THE VARIETY OF SECTIONS AND SIZES OF FINISHED PRODUCTS BEING MANUFACTURED. THE CONCLUSION OF ASSESSING OFFICER IS ALSO BASED UPON REMOTE DISCREPANCIES OBSERVED BY HI M IN ENQUIRIES UNDERTAKEN FROM ULTIMATE SUPPLIERS THA T ALSO AFTER SEVERAL YEARS OF TRANSACTION. IT IS NOT A CASE WHERE THE ENTIRE SET OF ROLLS OBTAINED BY APPELLANT ON LEASE ARE THE ONES BELONGING TO APPELLANT AT SOME S TAGE OF TIME I.E. NOT A CASE WHERE THERE IS A CYCLICITY OF ROLLS COMING BACK TO APPELLANT. IT IS EVIDENT FROM THE FA CT THAT ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 6 OF 13 THE MAJORITY OF THE PARTIES INVOLVED IN THE TRANSAC TION ARE OUTSIDERS. THEREFORE IN SUCH A SITUATION TO M Y MIND THE CONCLUSION DRAWN BY THE ASSESSING OFFICER CANNOT SURVIVE. THE ADDITION CONSEQUENTLY MADE BY T HE ASSESSING OFFICER IS DELETED. 4. SIMILAR ORDERS WERE PASSED BY THE ASSESSING OFFICER IN OTHER A.YS BASED ON THE FINDINGS IN A.Y 1999-2000 AND CIT (A) ALSO GAVE RELIEF ON THE BASIS OF THE DECISION TAKEN IN A.Y 19 99-2000 IN OTHER YEARS ALSO. 5. IT WAS THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSEE HAS NOT JUSTIFIED THE EXISTENCE OF THE STEEL ROLLS AND THERE ARE INDICATIONS THAT THE SOLD STEEL ROLLS AS SCRAP WERE BROUGHT IN THE GUISE OF LEASE THROUGH VA RIOUS FIRMS SO AS TO PAY HEAVY LEASE CHARGES AND RELIED ON THE FIN DINGS OF THE ASSESSING OFFICER TO SUBMIT THAT THE PARTIES INVOLV ED ARE ASSESSEES SISTER CONCERNS. ANALYZING THE TABLE GIVEN BY THE A SSESSING OFFICER HE INDICATED THAT THERE IS NO INCREASE IN THE PRODU CTION IN VARIOUS YEARS EVEN THOUGH THE ASSESSEE HAS TAKEN MANY ROLL S ON LEASE PURPORTEDLY TO CLAIM BOGUS EXPENDITURE ON LEASE. IT WAS HIS SUBMISSION THAT THE CIT(A) HAD ERRED IN DELETING TH E DISALLOWANCE AS THE ENQUIRIES DURING THE COURSE OF SEARCH INDICATED THAT ONLY 300 TO 350 ROLLS ARE REQUIRED WHEREAS THE ASSESSEE HAS TA KEN MANY ROLLS WHICH ARE NOT REQUIRED AND SO THE TRANSACTIONS INDI CATE THAT THE LEASING IS NOT GENUINE AND THE CLAIM CANNOT BE ALLO WED AS IT IS NOT NECESSARILY AND EXCLUSIVELY FOR THE PURPOSE OF BUSI NESS. 6. THE LEARNED AUTHORIZED REPRESENTATIVE HOWEVER IN R EPLY SUBMITTED THAT ALL ASPECTS HAVE BEEN EXAMINED BY TH E CIT (A) ON THE BASIS OF THE INFORMATION FURNISHED AND REFERRED TO THE REMAND REPORT AND THE FINDINGS OF THE CIT (A). IT WAS FURTHER SUB MITTED THAT THE ASSESSING OFFICER CONDUCTED ENQUIRIES TWO STEPS BEY OND THE FIRST LESSOR THEIR SUPPLIERS OF THE ROLLS TO THE LESSORS AND TO THEIR ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 7 OF 13 SUPPLIERS. HE REFERRED TO THE LESSORS CHART PLACED BEFORE THE CIT (A) ENCLOSED IN THE PAPER BOOK AT PAGE 31 TO STATE THAT THE ASSESSING OFFICER ENQUIRED AT THE 3 RD STAGE OF THE SUPPLIERS ON WHICH THE ASSESSEE HAS NO CONTROL AND STILL INSPITE OF DIFFIC ULTIES MOST OF THEM APPEARED BEFORE THE ASSESSING OFFICER IN THE REMAND PROCEEDINGS AND ON THE BASIS OF THAT ENQUIRY ONLY THE CIT (A) H AD ACCEPTED THAT THE LEASE UNDERTAKEN BY THE ASSESSEE WAS GENUINE AN D LEASE RENTALS WERE PAID. HE RELIED ON THE FINDINGS OF THE CIT (A) . HE ALSO REFERRED TO VARIOUS DOCUMENTS PLACED BEFORE THE AUTHORITIES PLACED IN THE PAPER BOOK FROM PAGE NO.1 TO 104 INCLUDING BILLS L ORRY RECEIPTS GOODS RECEIPTS NOTES PAYMENT OF TRANSPORT CHARGES ETC TO SUPPORT THAT THE LEASE WAS UNDERTAKEN IN THE COURSE OF BUSI NESS AND THE LEASE PAYMENTS HAVE BEEN GENUINELY MADE. 7. WE HAVE CONSIDERED THE ISSUES RIVAL ARGUMENTS AND FINDINGS ON RECORD AND DOCUMENTS PLACED IN PAPER BOOK. THE O NLY BASIS FOR ANALYZING THE LEASE RENTALS WAS THE STATEMENT OF TH E FOREMAN AND THE DIRECTOR GIVEN IN FEBRUARY 2000 ABOUT THE USE O F ROLLS AND ITS AVAILABILITY IN THE FACTORY PREMISES. AS SEEN FROM THE TABLE PREPARED BY THE ASSESSING OFFICER HIMSELF WHICH WAS EXTRACTE D ABOVE IN THE YEAR 2000-01 THE ASSESSEE HAS 174 ROLLS OF OWN AND ABOUT 238 ROLLS ON LEASE TOTALING ABOUT 532. STATEMENT OF THE FORE MAN DO INDICATE THAT THEY ARE RUNNING TWO ROLLING MILLS ONE 10 AND ANOTHER 16. 10ROLLING MILL CAN PRODUCE SMALLER SIZES BELOW 100 MM WHERE THE OUTPUT OF THE FINISHED PRODUCTS VARIES FROM 16MM TO 30MM DIA ROLL PRODUCTS. IN THE 16MILLS THE BILLET SIZE IS BIGGER I.E. 100 MM TO 160 MM AND THE DIAMETER FOR ALL THE PRODUCTS RANGED FRO M 30 MM TO 90 MM. THE STATEMENT ALSO INDICATE THAT THE NUMBER OF ROLLS WHICH ARE BEING UTILIZED AND REQUIRED. QUESTION NO.17 IT WAS STATED THAT HE HIMSELF WAS HAVING 300 TO 350 ROLLS IN RUNNING COND ITION IN THE PLANT. IT WAS THE CONTENTION OF THE ASSESSEE THAT T HEY MANUFACTURE VARIOUS SIZES OF THE FINAL PRODUCTS FOR WHICH DIFFE RENT ROLLS ARE ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 8 OF 13 REQUIRED AND THESE WERE KEPT AS STAND BY. THIS FACT UAL ASPECT OF MANUFACTURING DIFFERENT PRODUCTS OF DIFFERENT SIZES FOR WHICH DIFFERENT STEEL ROLLS ARE REQUIRED HAS BEEN ESTABLI SHED BY THE ASSESSEE ON THE BASIS OF THE MANUFACTURING OF DIFFE RENT PRODUCTS. NOT ONLY THAT THE ASSESSEE ALSO RELIED ON THE STATE MENT BY THE FOREMAN THAT CERTAIN ROLLS HAVE BEEN BROKEN AND THE LIFE OF THE ROLL IS ABOUT 2 MONTHS. CONSIDERING THESE ASPECTS THERE IS NO BASIS FOR THE ASSESSING OFFICER TO ANALYZE THE ROLL CONSUMPTI ON PER DAY AS WAS DONE IN THE TABLE THE BASIS OF WHICH THE ASSES SING OFFICER CONSIDERED THE LEASE AS NOT GENUINE. 8. IT IS ALSO SEEN THAT THERE WERE MISTAKES IN THE AN ALYSIS STATEMENT ITSELF. THE TOTALS IN VARIOUS COLUMNS OF THE LEASE ROLLS WERE NOT STATED CORRECTLY. FOR EXAMPLE FOR A.Y 1994 -95 IT WAS SUBMITTED THAT THERE WERE OPENING ROLLS OF 484 WHIC H WAS NOT STATED IN THE TABLE BUT HOWEVER TAKEN INTO CONSIDERATIO N IN THE TABLE. A TOTALING MISTAKE HAPPENED IN THE F.Y 1997-98 THE O PENING BALANCE DULY DIFFERS BY 100. THE AMOUNT SHOULD HAVE 1588 RA THER THAN 1488 STATED. AFTER THAT THE ASSESSING OFFICER ACCEP TS 957 ROLLS WERE RETURNED OR SOLD. THUS THE TOTAL OF THE AVAILABLE L EASE ROLLS SHOULD BE 665 AND THE OWN ROLLS 50 TOTALING TO 715 AND NOT 1 798 TAKEN FOR CALCULATIONS. IN 1998-99 THE OPENING BALANCE WAS T AKEN WRONGLY AT 565 INSTEAD OF 665 AND THE MISTAKE CARRIED FURTHER TO SUBSEQUENT CALCULATIONS. THIS INDICATES THAT THE BASIS FOR WOR KING VARIOUS ROLLS CONSUMPTION PER DAY ITSELF IS NOT CORRECT AND NOT R ELIABLE. 9. APART FROM THAT THE SCHEDULE 1 ENCLOSED TO THE ASS ESSMENT ORDER FOR THE A.Y 1997-98 INDICATE THE TOTAL NUMBER OF ROLLS LEASED IN VARIOUS A.YS 1997-98 1998-99 AND 2000-01. AS SE EN FROM THE COLUMN FOR A.Y 1997-98 I.E. F.Y 1996-97 THE LEASE R OLLS TOTAL TO ONLY TO 1138 EVEN THOUGH THE TOTAL WAS AGAIN WRONGLY ST ATED AS 1975. THE TOTAL OF THE ROLLS STATED IN THE STATEMENT WERE 1138 FOR THE F.Y 1996-97 939 FOR THE F.Y 1998-99. THESE FIGURES ARE NOT TALLYING ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 9 OF 13 WITH THE FIGURES STATED IN THE ANALYSIS OF STEEL RO LLS CONSUMPTION MADE IN THE ASSESSMENT ORDER. THIS ALSO INDICATE TH AT THE ASSESSING OFFICER HAD NOT BOTHERED TO EXAMINE THE ACTUAL AMOU NT OF STEEL ROLLS TAKEN ON LEASE AND UTILIZED IN THE BUSINESS. SINCE THE VERY BASIS FOR ASSESSING OFFICER ANALYSIS IS NOT CORRECT WHICH AL SO IGNORED THE NUMBER OF DIFFERENT PRODUCTS BEING MANUFACTURED BY THE ASSESSEE AND REQUIREMENT OF VARIOUS ROLLS SIZES FOR THAT AND ALSO THE FACT THAT THE ASSESSEE FURNISHED NECESSARY EVIDENCES OF LEASE AND ITS UTILIZATION IN THE REMAND PROCEEDINGS WHICH WERE NO T CONTRADICTED BY THE ASSESSING OFFICER WE ARE OF THE OPINION THA T NO CASE WAS MADE OUT BY THE REVENUE TO ESTABLISH THAT THE LEASE UNDERTAKEN BY THE ASSESSEE IS NOT GENUINE. IN VIEW OF THE ABOVE WE UPHOLD THE FINDINGS OF THE CIT (A) AND REJECT THE GROUNDS RAIS ED BY THE REVENUE IN THE RESPECTIVE ASSESSMENT YEARS. C.O NO.106/MUM/2009 : 10. IN THIS CROSS OBJECTION THE ASSESSEE IS CONTESTING THE AMOUNT OF ` 58 54 538/- IN RESPECT OF PRIOR PERIOD ADJUSTMENTS WHICH WERE NOT ALLOWED BY THE ASSESSING OFFICER AND THE CIT(A) . THE ONLY ISSUE IS ABOUT THE CLAIM OF PRIOR PERIOD EXPENSES OF ` 58 54 538/-. BRIEFLY STATED THE ASSESSEE CLAIMED PRIOR PERIOD EXPENSES O F ` 82 31 639/- DURING THE YEAR. THE ASSESSING OFFICER ASKED FOR DE TAILS AND NOTICED THAT THE AMOUNT OF ` .51 42 565/- WAS CLAIMED TO HAVE BEEN BOOKED AS INCOME EARLIER BY WAY OF CREDIT NOTES AND JOB WO RK CHARGES ENTERED AT A HIGHER FIGURE DUE TO PUNCHING ERRORS A ND MISUNDERSTANDING OF THE JOB CHARGES. THESE MISTAKES WERE RECTIFIED BY PASSING PROPER ENTRIES IN THE IMPUGNED YEAR AND AS AMOUNTS HAVE GONE INTO COMPUTATION OF INCOME IN THE EARLIER YEARS THE ASSESSEE CLAIMED THE SAME AS DEDUCTIBLE AMOUNT. AN AMOUNT OF ` 8 74 942/- PERTAINS TO 5 PARTIES TOWARDS RATE DIFFE RENCE LATE PAYMENT/INTEREST CHARGES FREIGHT ETC. AND AN AMOU NT OF ` 68 505/- ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 10 OF 13 PERTAINS TO THE BILLS RECEIVED FROM GOYAL ROADLINES CRYSTALISED DURING THE YEAR. THE ASSESSING OFFICER AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE INCLUDING THE DETAILS F ILED VIDE LETTER DATED 15-3-2002 REJECTED THE CLAIM TO AN EXTENT OF ` .58 54 538/- AFTER ADJUSTING AN AMOUNT OF RS 2 31 472 CREDIT BAL ANCES RETURN BACK WHILE ALLOWING THE BALANCE OF PRIOR PERIOD EX PENSES. THE MATTER WAS CARRIED TO THE CIT (A) WHO AFTER EXAMINI NG THE ISSUE AND CONSIDERING SUBMISSIONS BY THE ASSESSEE REJECTED TH E CLAIM AS UNDER: I HAVE PURSUED THE FACTS OF THE CASE AND IT IS AN ADMITTED FACT THAT THE EXPENSES OR LOSSES UNDER CONSIDERATION DO NOT PERTAIN TO THE PREVIOUS YEAR U NDER CONSIDERATION. THE ISSUE THEN IS WHETHER SUCH LOSSE S CAN BE ALLOWED IN COMPUTATION OF INCOME FOR THE CURRENT YEAR. THIS ISSUE WAS RAISED BEFORE THE LEARNED COUNSEL OF THE APPELLANT. HIS ONLY ARGUMENT IS IT IS A LOSS WHICH HAS OCCURRED AND SHOULD BE ALLOWABLE ON ANY PARTICULAR DATE. THE LEARNED COUNSEL OF APPELLANT WAS ALSO ASK ED TO EXPLAIN AS TO WHY FOR IRREGULARITIES IN THE RECO RDS OF EARLIER YEARS THE PROFIT AND LOSS ACCOUNT AND BALA NCE SHEETS OF THESE RESPECTIVE YEARS WERE NOT REVISED. HIS ONLY ARGUMENT IS THAT SUCH A RECTIFICATION REQUIRES APPROVAL OF THE HIGH COURT. TO MY MIND THE COMPANI ES ACT PROVIDES A SPECIFIC PROCEDURE FOR TAKING CARE O F SUCH MISTAKES THAT MIGHT HAVE OCCURRED IN THE ACCOUNTS. IN THE SITUATION AS OF THAT APPELLANT THAT PRESCRIBED PROCEDURE OUGHT TO HAVE BEEN FOLLOWED. THIS HAS NOT BEEN DONE AND INSTEAD ALL ADJUSTMENTS HAVE BEEN MAD E IN THE CURRENT YEAR. THIS IS NOT JUSTIFIED AT ALL. FURTHER IT IS NOT DISPUTED THAT THE LOSSES/EXPENSES PERTAIN TO EARLIER YEARS. THESE CANNOT BE ALLOWED DURING THE CURRENT YEAR UNLESS IT CAN BE ESTABLISHED THAT THES E HAVE ACCRUED OR ARISEN DURING THE YEAR. THAT IS NOT THE SITUATION IN THE FACTS OF THE CASE. IT IS NOT A CAS E WHERE THE LOSS HAD OCCURRED IN THE PAST BUT FOR SOME REAS ONS IT IS ARISING DURING THE YEAR. IT IS A LOSS PERTAINING TO EARLIER YEARS AND HAS TO BE TREATED AS LOSS OF THOSE YEARS . 11. REFERRING TO THE FACTS AS STATED IN THE ASSESSMENT ORDER AND THE REJECTION BY THE CIT (A) IT WAS THE SUBMISSION OF THE LEARNED ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 11 OF 13 COUNSEL THAT THE ASSESSEE HAS WRONGLY ENTERED THE A MOUNTS IN THE EARLIER YEARS AND OFFERED AS INCOME THE MISTAKES O F WHICH WERE IDENTIFIED DURING THE YEAR AND ACCORDINGLY THE NECE SSARY ENTRIES WERE PASSED IN THE BOOKS OF ACCOUNT AND THE COMPANY HAS CATEGORISED THEM AS PRIOR PERIOD EXPENDITURE EVEN THOUGH EXPENDITURE WAS CRYSTALISED DURING THE YEAR. THE LE ARNED COUNSEL RELIED ON THE ITAT CUTTACK BENCH IN THE CASE OF THE NATIONAL ALUMINIUM CO. LTD 153 TAXMAN 18 FOR THE PROPOSITIO N THAT THE MISTAKES FOUND OUT DURING THE YEAR COULD BE ALLOWED AS EXPENDITURE OF THE YEAR. WITH REFERENCE TO THE OTHER EXPENDITUR E IT WAS SUBMITTED THAT NECESSARY DETAILS WERE FURNISHED BEF ORE THE ASSESSING OFFICER AND THERE IS NO REASON TO DISALLO W THE AMOUNT IN THE A.Y UNDER CONSIDERATION. HOWEVER THE LEARNED D EPARTMENTAL REPRESENTATIVE OBJECTED TO THE ALLOWING THE PRIOR P ERIOD EXPENDITURE AS THERE IS NO CAUSE OF ACTION IN THIS YEAR AND THE AMOUNT SHOULD HAVE BEEN ADJUSTED IN THE EARLIER YEARS. 12. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RECOR D. AS SUBMITTED THERE SEEMS TO BE SOME PUNCHING ERRORS AT THE TIME OF ENTERING THE FIGURES AND THESE WERE IDENTIFIED SUBS EQUENTLY DURING THE YEAR AND THE ASSESSEE PASSED NECESSARY DEBIT EN TRIES IN THE BOOKS OF ACCOUNT. WHEN CLAIMS ARE NOT MADE ON OTHER PARTIES AND THE MISTAKES HAVE BEEN COMMITTED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT WE ARE UNABLE TO UNDERSTAND THE STAND OF T HE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT FURNISHED THIRD P ARTY EVIDENCE WITH REFERENCE TO THE CLAIM. HOW CAN THERE BE THIRD PARTY EVIDENCE WHEN THE ASSESSEE ADMITTED THAT IT WAS ITS BOOKS OF ACCOUNT WHICH SHOWED THE AMOUNTS WRONGLY AND REALISING THE SAME T HEY HAVE RECTIFIED. THE ORIGINAL AMOUNT ENTERED IN THE RESPE CTIVE A.YS AND THE CORRECTIONS THAT WERE MADE WERE PLACED BEFORE THE A SSESSING OFFICER. NOT ONLY THAT THE EXPENDITURE CLAIMS WITH REFERENCE TO THE 5 PARTIES AND THE TRANSPORT CLAIM OF M/S GOYAL TRANSPORT WERE ALSO NOT ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 12 OF 13 CORRECTLY ANALYZED BY THE ASSESSING OFFICER. WE ARE OF THE VIEW THAT THE ASSESSEE HAS DISCHARGED ONUS OF ESTABLISHING TH AT THE NECESSARY ENTRIES HAVE BEEN MADE ON REALIZING MISTAKES AND CE RTAIN CLAIMS WERE CRYSTALISED DURING THE YEAR EVEN THOUGH THEY PERTAIN TO EARLIER YEARS. BEFORE US THOSE ASSESSMENT YEARS WERE ALSO OPEN FOR CONSIDERATION. THEREFORE WITHOUT GOING TO THE LEGA L PROVISIONS WE ARE OF THE OPINION THAT THE AMOUNTS COULD HAVE BEEN ALLOWED IN EITHER OF THE ASSESSMENT YEARS WHEN ALL THE ASSESSM ENTS ARE OPEN BEFORE AUTHORITIES. BE THAT AS IT MAY THE CLAIM IS AN ALLOWABLE CLAIM ON THE BASIS OF THE REASON THAT THE MISTAKES WERE I DENTIFIED DURING THE YEAR AND NECESSARY ENTRIES HAVE BEEN PASSED IN THIS YEAR. 13. IN THE CASE OF NATIONAL ALUMINIUM CO. LTD( SUPRA) RELIED ON BY THE ASSESSEE FACTS AND DECISION WAS AS UNDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE COMPANY H AD SHOWN PRIOR PERIOD EXPENSES UNDER THE HEAD PRIOR P ERIOD ADJUSTMENTS ON THE FOLLOWING ITEMS; OTHER MANUFACT URING EXPENSES EMPLOYEES REMUNERATION AND BENEFITS DEPRECIATION INTEREST AND FINANCE CHARGES MISCELL ANEOUS EXPENSES WRITTEN OFF. THE ASSESSEE SUO MOTU HAD ADD ED BACK AN AMOUNT ON ACCOUNT OF DEPRECIATION AND ALSO CERTAIN AMOUNT ON ACCOUNT OF MISCELLANEOUS EXPENSES . HOWEVER IN ABSENCE OF ANY SATISFACTORY EXPLANATION BY THE ASSESSEE THE ASSESSING OFFICER ALSO ADDED THE REMAINING ITEMS TO THE TOTAL INCOME. ON APPEAL THE COMMISSIONER (APPEALS) DISCUSSED AND DECIDED EACH A ND EVERY ITEM INCLUDED IN THE PRIOR PERIOD ADJUSTMENTS AND HE DELETED THE ADDITION ON ACCOUNT OF EMPLOYEES REMUNERATION AND BENEFITS AND INTEREST AND FINANCE CHARGES. HOWEVER HE UPHELD THE ADDITION ON ACCOUNT OF OTHER MANUFACTURING EXPENSES. ON APPEAL: THE COMMISSIONER (APPEALS) HAD CONFIRMED AN AMOUNT UNDER OTHER MANUFACTURING EXPENSES. THE ASSESSEE HAD ISSUED 18 675 KG OF NITRIC ACID FOR CONSUMPTION DUR ING THE FINANCIAL YEAR 1992-93. HOWEVER BY MISTAKE THE IS SUE VOUCHER WAS PREPARED AT 1867.5 KG. SAID DIFFERENCE WAS FOUND OUT DURING THE INVENTORY VERIFICATION IN THE FINANCIAL YEAR 1993-94 AND THE AMOUNT SHORT CHARGED DURING TH E ITA NOS 6673 OF 2008 82 TO 85 OF 2009 AND CO 106 OF 2009 SHREE VENKATESH STEELS LTD MUMBAI PAGE 13 OF 13 FINANCIAL YEAR 1992-93 WAS DEBITED TO THE PROFIT & LOSS ACCOUNT DURING THE FINANCIAL YEAR 1993-94 AS PRIOR PERIOD EXPENSES. THIS WAS THE ONLY WAY IN WHICH THE ASSESS EE COULD RECTIFY THAT MISTAKE BY DEBITING THE PRIOR PE RIOD EXPENSES. ACCORDINGLY THE ASSESSING OFFICER WAS DIR ECTED TO DELETE THE ABOVE ADDITION. 14. SINCE FACTS ARE MORE OR LESS SIMILAR IN THIS CASE THE AMOUNTS ARE LIABLE TO BE ALLOWED AS DEDUCTION AS ASSESSEE O FFERED MORE INCOME IN EARLIER YEAR AND NOW RECTIFIED DURING THE YEAR. THE BALANCE AMOUNT HAD CRYSTALLISED DURING THE YEAR. WE DIRECT THE ASSESSING OFFICER TO ALLOW THE AMOUNTS AS CLAIMED. HE HOWEVER CAN RECTIFY THE ORDERS IF ABOVE AMOUNTS ARE CLAIMED AND ALLOWED IN ANY OTHER YEAR(S). THE CROSS OBJECTION FILED BY THE ASS ESSEE IS THEREFORE ALLOWED. 15. IN THE RESULT THE REVENUES APPEALS ARE DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH NOVEMBER 2011. SD/- SD/- (VIJAY PAL RAO) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER VNODAN/SPS MUMBAI DATED 25 TH NOVEMBER 2011. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR E BENCH ITAT MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI