The ACIT, Circle-6,, Surat v. M/s. Rameshwar Synthetics, Surat

ITA 911/AHD/2008 | 2004-2005
Pronouncement Date: 13-09-2010 | Result: Dismissed

Appeal Details

RSA Number 91120514 RSA 2008
Assessee PAN AAJFS8419F
Bench Ahmedabad
Appeal Number ITA 911/AHD/2008
Duration Of Justice 2 year(s) 6 month(s) 2 day(s)
Appellant The ACIT, Circle-6,, Surat
Respondent M/s. Rameshwar Synthetics, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 13-09-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 13-09-2010
Date Of Final Hearing 06-09-2010
Next Hearing Date 06-09-2010
Assessment Year 2004-2005
Appeal Filed On 11-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH C CC C BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI MUKUL SHRAWAT MUKUL SHRAWAT MUKUL SHRAWAT MUKUL SHRAWAT JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI SHRI SHRI SHRI N.S.SAINI N.S.SAINI N.S.SAINI N.S.SAINI ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATE OF HEARING :6-9-10 DRAFTED ON:6-9-10 ITA NO. 911 /AHD/ 2008 ASSESSMENT YEAR :2004-05 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-6 ROOM NO.623 AAYAKAR BHAVAN MAJURA GATE SURAT. VS. M/S. RAMESHWAR SYNTHETICS 373 G.I.D.C. PANDESARA SURAT. PAN/GIR NO. : AAJFS8419F (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI K.M. MAHESH SR. D.R. RESPON DENT BY: SHRI HARDIK VORA. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV SURAT DATED 31-12-2007. 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE I S THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ER RED IN DELETING THE ADDITION OF `.36 57 570/-MADE BY THE L EARNED ASSESSING OFFICER ON ACCOUNT OF DECREASE IN PRODUCT ION AS AGAINST THE HIKE IN THE MANUFACTURING EXPENSES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ONLY GR OUND IS REGARDING ADDITION OF `.36 57 570/- FOR INCREASED P RODUCTION/SALES. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE SEL LS DURING THE YEAR HAD GONE DOWN BY 12% BUT THE CORRESPONDING PAC KING CHARGES INCREASED BY 28%. FURTHER THERE WAS INCREA SE IN DIRECT - 2 - MANUFACTURING AND SELLING EXPENSES BY 0.3% OVER THE PRECEDING YEAR DESPITE THE PRODUCTION BEING REDUCED BY 13%.W HEN REQUIRED TO SHOW CAUSE THE APPELLANT STATED THAT IT SUFFERE D HEAVY LOSSES DURING THE YEAR DUE TO REDUCTION IN MARGIN. THE AVE RAGE SALE PRICE DECREASED FROM `.99.85 PER KG TO 88.7- PER KG WHERE AS THE AVERAGE PURCHASE PRICE INCREASED FROM `.80.50 PER KG TO `.8 2.34 PER KG. THE APPELLANT HAD OUTDATED TEXTURISING MACHINES AND HAD TO SELL OF THE MACHINERIES IN 2006.THE COST OF PACKING MATERIAL AL SO INCREASED BUT THERE WAS CONSIDERABLE REDUCTION IN WAGES AND B ONUS OIL CONSUMPTION AND FACTORY EXPENSES. THE LEARNED ASSES SING OFFICER REJECTED THE EXPLANATION AND HELD THAT THE EXPENDIT URE ON SALES AND MANUFACTURING INCREASED BY 0.3% BUT THERE WAS N O RELEVANT INCREASE IN THE PRODUCTION. HE THEREFORE ESTIMATED THE SALE ON THE BASIS OF INCREASE IN THE EXPENDITURE AND MADE AN AD DITION OF `.36 57 570/- ON THIS ACCOUNT. 4. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS EE SUBMITTED THAT THE ADDITION WAS WRONGLY MADE BY ESTIMATING SA LES ON THE BASIS OF EXPENSES RATIO. THE LEARNED ASSESSING OFFI CER DID NOT INVOKE THE PROVISIONS OF SECTION145 OF THE I. T. AC T MEANING THEREBY THAT HE HAD ACCEPTED THE BOOK RESULTS. THEREFORE N O ADDITION ON THIS ACCOUNT WAS CALLED FOR. COMPLETE DETAILS OF AL L THE EXPENDITURES WERE PLACED BEFORE THE LEARNED ASSESSING OFFICER AN D QUANTITATIVE RECORDS WERE MAINTAINED AS PER THE EXCISE RULES. T HE PRODUCTION DECREASED DUE TO STRIKE IN THE INDUSTRY DURING THE MONTH OF APRIL AND MAY. THE ENTIRE PURCHASES WERE CONSUMED DURING THE YEAR ITSELF AND THE YIELD SHOWN WAS MORE THAN 100%. NO D EFECTS WERE POINTED OUT BY THE LEARNED ASSESSING OFFICER IN THE BOOKS OF ACCOUNTS AND HE ALSO DID NOT CONSIDER THE FACT OF D ECREASE IN WAGES OIL CONSUMPTION FACTORY EXPENSES ETC WHICH WERE DIRECTLY RELATED WITH THE PRODUCTION. - 3 - 5. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE OBSERVED AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS AND GONE THROUGH THE DETAILS. I FAILED TO APPRECIATE THE LEARNED ASSESSI NG OFFICERS ACTION IN ESTIMATING PRODUCTION AND SALES WITHOUT I NVOKING THE PROVISIONS OF SECTION145 OF THE I.T. ACT WHICH WOULD MEAN THAT THE BOOK RESULTS WERE NOT DOUBTED BY HIM. IF THAT IS THE CASE THERE WAS NO JUSTIFICATION IN ESTIMATI NG SALES AT A HIGHER FIGURE THAN DECLARED BY THE APPELLANT. FURTH ER THE LEARNED ASSESSING OFFICER HAS FAILED TO APPRECIATE THE REASONS FOR DECREASE IN SALES EXPLAINED BY THE APPE LLANT. THIS ACTION OF THE LEARNED ASSESSING OFFICER IS TOT ALLY ARBITRARY AND THEREFORE ADDITION MADE ON THIS GROUN D IS NOT SUSTAINABLE AND IS DIRECTED TO BE DELETED. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE LEARNED ASSESSING OFFICER OBSERVED THAT THE EXPENSES CLAIME D BY THE ASSESSEE UNDER THE HEAD ELECTRICITY CHARGES AND PAC KING CHARGES WERE MORE THAN THE AMOUNT CLAIMED UNDER THESE HEADS IN THE PRECEDING YEAR WHEREAS THE SALE IS LESSER THAN THE SALE OF PRECEDING YEAR. THE EXPLANATION FURNISHED BY THE AS SESSEE WAS NOT ACCEPTED AND THE LEARNED ASSESSING OFFICER FOUND TH AT THE EXPENSES WERE 0.3% MORE THAN THE PRECEDING YEAR AND HE THEREFORE ESTIMATED THE ASSESSEES SALE OF THE YEA R UNDER CONSIDERATION AS 0.3% MORE THAN THE SALE OF IMMEDIA TELY PRECEDING YEAR AND THEREBY ESTIMATED THE SALE OF THE YEAR AT `.2 77 50 556/- IN PLACE OF `.2 40 92 985/- SHOWN BY THE ASSESSEE A ND CONSEQUENTLY MADE ADDITION OF `.36 57 570/- TO THE INCOME SHOWN BY THE ASSESSEE. 7. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) OBSERVED THAT THE LEARNED ASSESSING OFFIC ER HAS NOT REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THU S IN THE OPINION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AS CORRECTNESS AND COMPLETENESS OF THE BOOKS OF ACCOUN TS WERE NOT IN DOUBT THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFI ED IN ESTIMATING - 4 - SALES AND THEREBY IN MAKING ADDITION OF `.36 57 570 /-. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THEREFORE DEL ETED THE ADDITION OF `.36 57 570/-. 8. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIV E SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICE R AND SUBMITTED THAT AS THE EXPENSES WERE HIGHER THE ASSE SSEE MUST HAVE PRODUCED GOODS HIGHER IN THE SAME PROPORTION. 9. ON THE OTHER HAND THE LEARNED AUTHORISED REPRESE NTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS). 10. WE FIND THAT NO SPECIFIC DEFECT IN THE COMPLETE NESS OR CORRECTNESS OF THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE COULD BE POINTED OUT BY THE LEARNED ASSESSING OFFIC ER. IN OUR CONSIDERED OPINION BOOKS OF ACCOUNTS CANNOT BE REJ ECTED LIGHTLY. THERE MAY BE HUNDREDS OF REASONS FOR VARIATION IN E XPENSES UNDER A PARTICULAR HEAD AND THAT VARIATION ITSELF DOES NO T CONCLUSIVELY PROVE THAT THE ASSESSEE HAS PRODUCED A PARTICULAR Q UANTITY OF FINISHED GOODS. IN THE INSTANT CASE THE ASSESSEE EXPLAINED THAT COST OF PACKING MATERIAL HAS INCREASED DURING THE Y EAR WHEREAS THE SALE PRICE OF FINISHED GOODS PER UNIT HAS DECREASED . NO ERROR IN THE ABOVE SUBMISSION OF THE ASSESSEE COULD BE POINTED O UT BY THE REVENUE. SIMILARLY IN RESPECT OF ELECTRICITY CHAR GES THE ASSESSEE EXPLAINED THAT DUE TO STRIKE FOR ONE AND HALF MONTH AND ASSESSEE EVEN THOUGH NOT CONSUMED ELECTRICITY BUT HAD TO PAY THE MINIMUM CHARGES. NO DEFECT IN THIS EXPLANATION WAS ALSO PO INTED OUT BY THE REVENUE. NO SCIENTIFIC BASIS COULD BE BROUGHT ON RE CORD BY THE LEARNED ASSESSING OFFICER TO SHOW THAT THE SALE OF THE ASSESSEE WILL BE IN THE EXACT PROPORTION OF THE EXPENDITURE UNDER THE HEAD PACKING MATERIAL AND ELECTRICITY CHARGES. THUS IN OUR OPINION THE LEARNED ASSESSING OFFICER HAD NO AUTHORITY TO REJ ECT THE BOOK RESULT IN THE INSTANT CASE AND ESTIMATE THE SALE OF THE ASSESSEE WITHOUT POINTING OUT ANY SPECIFIC DEFECT IN THE COR RECTNESS OR - 5 - COMPLETENESS OF THE REGULARLY MAINTAINED BOOKS OF A CCOUNT OF THE ASSESSEE. WE THEREFORE DO NOT FIND ANY MERIT IN T HE APPEAL OF THE REVENUE AND THEREFORE IT IS DISMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 13 TH DAY OF SEPTEMBER 2010. SD/- SD/- (MUKUL SHRAWAT) ( N.S. SAINI ) JUDICIAL MEMBER A CCOUNTANT MEMBER AHMEDABAD: ON THIS 13 TH DAY OF SEPTEMBER 2010 COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 6-9-2010 ---------------- - 2. DRAFT PLACED BEFORE AUTHORITY 7-9-2010 ------- ------------ 3. DRAFT PROPOSED & PLACED 7-9-2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 10-9-2010 --- ------------ JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 13-9-2010 -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON 13-9-2010 -- ------------------ 7. FILE SENT TO THE BENCH CLERK 13-9-2010 -------------------- 8. DATE ON WHICH FILE GOES TO THE AR -------------- -- -------------------- 9. DATE OF DESPATCH OF ORDER ---------------- -- -------------------