M/s Divya Jewellers (P) Ltd.,, Agra v. The A.C.I.T.-4(1), Agra

MA 16/AGR/2010 | 2004-2005
Pronouncement Date: 27-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 1620324 RSA 2010
Assessee PAN AAACD5594K
Bench Agra
Appeal Number MA 16/AGR/2010
Duration Of Justice 3 month(s) 9 day(s)
Appellant M/s Divya Jewellers (P) Ltd.,, Agra
Respondent The A.C.I.T.-4(1), Agra
Appeal Type Miscellaneous Application
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 27-08-2010
Date Of Final Hearing 23-07-2010
Next Hearing Date 23-07-2010
Assessment Year 2004-2005
Appeal Filed On 18-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER M.A. NO.16/AGR/2010 (IN ITA NO.522/AGR/2008 ASST. YEAR: 2004-05 M/S DIVYA JEWELLERS (P) LTD. VS. THE A.C.I.T. 4(1) AGRA. 27/77 NORTH VIJAYNAGAR COLONY AGRA. (PAN : AAACD 5594 K). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ GARGH ADVOCATE RESPONDENT BY : SHRI VINOD KUMAR JR. D.R. ORDER PER P.K. BANSAL A.M.: THIS MISCELLANEOUS APPLICATION (M.A.) HAS BEEN FILE D BY THE ASSESSEE AGAINST THE ORDER OF THIS TRIBUNAL DATED 26.08.2009 PASSED IN ITA NO.522 /AGR/2008. 2. THE LD. A.R. POINTED OUT THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF GOLD AND SILVER JEWELLERY AND ALSO DO ING JOB WORK OF GOLD JEWELLERY FOR OTHERS. THE A.O. REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) OF THE INCOME-TAX ACT 1961 (THE ACT HEREINAFTER) AND APPLIED A GROSS PROFIT (GP) RATE O F 26.92% AT PAR WITH THE GP RATE IN THE PREVIOUS YEAR. THE ASSESSEE ALSO HAD GROSS RECEIPT S AMOUNTING TO RS.4 84 12 780/- ON ACCOUNT OF JOB WORK CHARGES. THE INCOME FROM JOB WORK CHARGES WAS ESTIMATED AT RS.2 35 81 865/- AND THE A.O. EXCLUDED THE SAID ESTIMATED JOB WORK FROM THE PROFITS OF THE BUSINESS ON THE GROUND PROFIT 2 FROM JOB WORK RECEIPTS DOES NOT QUALIFY FOR DEDUCTI ON UNDER SECTION 80HHC OF THE ACT. THE A.O. FURTHER REDUCED THE TOTAL TURNOVER BY GROSS RECEIPTS OF RS.4 84 12 780//- ON ACCOUNT OF JOB WORK CHARGES. THE ASSESSEE WENT IN APPEAL BEFORE T HE CIT(A). THE CIT(A) WAS SETTING ASIDE THE ORDER HOLDING THAT THE JOB WORK CHARGES CONSTIT UTE INTEGRAL PART OF THE MAIN BUSINESS OF THE ASSESSEE AND DIRECTED THE A.O. TO RECOMPUTE THE DED UCTION UNDER SECTION 80HHC OF THE ACT AFTER INCLUDING THE JOB WORK CHARGES AS PART OF TOTAL TU RNOVER. THE CIT(A) ALSO REVERSED THE ORDER OF THE A.O. ON THE REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF G.P. THE REVENUE CAME IN APPEAL BEFORE THE TRIBUNAL. THE REVENUE HAS TAKEN GROUNDS NO.2 & 3 FOR THE COMPUTATION OF DEDUCTION UNDER SECTION 80HHC WHICH READ AS UNDER : - 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DIRECTING THE ASSESSING OFFICER TO RE-COMPUTE THE DEDUCTION UNDER SECTION 80HHC AFTER INCLUDING THE JOB WORK CHARGES AS PART OF THE TOTAL TURNOVER PARTICULARLY WHEN SUCH JOB CHARGES WERE RECEIVED FOR RENDERING SERVIC ES WITHIN COUNTRY AND HAVE NO DIRECT NEXUS WITH EXPORT ACTIVITY. 3. THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE JO B WORK CHARGES ARE INTEGRAL PART OF MAIN BUSINESS AND THE CHARGE RECEIVED FOR J OB WORK UNDERTAKEN CAN BE HELD AS SIMILAR TO WORK CHARGES APPEARING IN SUCH CLAUSE(1) OF CLAUSE (BAA) OF SUB SECTION (4B) OF SECTION 80HHC OF THE IT ACT 19 61. 3. THE TRIBUNAL IN PARA 18 OF ITS ORDER WHILE DEALI NG WITH THE ISSUE OF DEDUCTION UNDER SECTION 80HHC INADVERTENTLY BY APPLYING THE JUDGEME NT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. K. RAVINDRANATHAN NAIR 295 ITR 228 (SC) HELD THAT 90% OF THE JOB WORK RECEIPTS HAVE TO BE EXCLUDED IN TERMS OF CLAUSE (BAA) OF EXP LANATION TO SECTION 80HHC AND TO THAT EXTENT IT WILL NOT FORM PART OF PROFITS OF BUSINESS FOR TH E PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC. AS A CONSEQUENCE OF THE AFORESAID THE REA L DISPUTE BETWEEN THE PARTIES AS EVIDENT FROM THE GROUNDS OF APPEAL RAISED BY THE REVENUE ASSAILI NG THE ORDER OF THE CIT(A) TO THE EXTENT OF 3 DIRECTING THE A.O. TO INCLUDE THE JOB WORK CHARGES IN THE TOTAL TURNOVER AND DIRECTION TO INCLUDE INCOME FROM JOB WORK IN PROFITS OF BUSINESS FOR C OMPUTING DEDUCTION UNDER SECTION 80HHC OF THE ACT PRACTICALLY REMAINED UN-ADJUDICATED THOUGH THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT(A) AND RESTORED THE ORDER OF THE A.O. THE NON- ADJUDICATION OF THE ASPECT/ISSUE AS TO WHETHER THE JOB WORK CHARGES WOULD FORM PART OF THE TOTAL TURNOVER OR NOT CONSTITUTES A MISTAKE APPARENT FROM RECORD. 4. LD. D.R. ON THE OTHER HAND CONTENDED THAT THER E IS NO MISTAKE APPARENT ON RECORD. THE HONBLE SUPREME COURT HAS CATEGORICALLY SETTLED THE LAW SO FAR AS COMPUTATION UNDER SECTION 80HHC IS CONCERNED. IN THE CASE OF CIT VS. K. RAVI NDRANATHAN NAIR THE RELEVANT LAW PRONOUNCED BY THE HONBLE SUPREME COURT AT PAGES 24 1 & 242 HAS BEEN REPRODUCED BY THE TRIBUNAL AT PAGES 12 & 13 OF ITS ORDER AND ACCORDIN GLY THE JOB WORK RECEIPTS HAVE TO BE EXCLUDED IN TERMS OF CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC AND TO THAT EXTENT IT WILL NOT FORM PART OF PROFITS OF BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE GROUND OF APPEAL OF THE REVENUE RE LATES TO THE ISSUE WHETHER THE JOB WORK CHARGES ARE INTEGRAL PART OF THE MAIN BUSINESS OR N OT AND THE OTHER GROUND RELATES TO WHETHER THE JOB WORK CHARGES WILL FORM PART OF THE TOTAL TURNOV ER OR NOT. THE HONBLE TRIBUNAL NO DOUBT HAS RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS K. RAVINDRANATHAN NAIR 295 ITR 228 (SC) UNDER PARA 18 OF ITS ORDER H AD ALSO REPRODUCED THE RELEVANT PARA OF THE SAID JUDGEMENT. IN THE SAID JUDGMENT THE HONBLE SUPREME COURT HAS CATEGORICALLY HELD THAT 90% OF THE INDEPENDENT INCOME HAD TO BE DEDUCTED FROM GROSS TOTAL INCOME IN TERMS OF CLAUSE 4 (BAA) TO ARRIVE AT THE BUSINESS PROFITS TO WHICH TH E FRACTION HAD TO BE APPLIED. IN THIS JUDGMENT THE HONBLE SUPREME COURT HAS HELD THAT PROCESSING CHARGES IS AN INDEPENDENT INCOME. TO THAT EXTENT THE TRIBUNAL IN THE CASE OF THE ASSESSEE HAS HELD BY FOLLOWING DECISION OF HONBLE SUPREME COURT THAT 90% OF THE JOB WORK RECEIPTS HAV E TO BE EXCLUDED IN TERMS OF CLAUSE (BAA) OF EXPLANATION TO SECTION 80HHC AND TO THAT EXTENT IT WILL NOT FORM PART OF PROFIT OF BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC. THE HONBLE SUPREME COURT IN THAT JUDGEMENT HAS ALSO HELD THAT THE SAID PROCESSING CH ARGES ARE INCLUDABLE IN THE TOTAL TURNOVER IN THE FORMULA UNDER SECTION 80HHC(3) OF THE ACT. IN THE CASE OF THE ASSESSEES WE NOTED FROM PAGE 13 OF THE ORDER THAT THE TRIBUNAL HAS NOT GIVE N ANY FINDING WHETHER JOB WORK CHARGES WILL BE INCLUDED AS PART OF THE TOTAL TURNOVER WHILE COMPUT ING THE DEDUCTION UNDER SECTION 80HHC OR NOT. TO THAT EXTENT WE FIND THAT THERE HAD BEEN A M ISTAKE IN THE ORDER OF THIS TRIBUNAL. WE ACCORDINGLY ALLOW THE M.A. FILED BY THE ASSESSEE ON THIS ISSUE AND RECALL THE ORDER OF THIS TRIBUNAL ONLY FOR THE PURPOSE OF DISPOSING OF THE P ART OF GROUND NO.2 TAKEN BY THE REVENUE IN ITS APPEAL WHETHER THE CIT(A) WAS CORRECT IN DIRECTING THE A.O. TO RECOMPUTE THE DEDUCTION UNDER SECTION 80HHC AFTER INCLUDING THE JOB WORK CHARGES AS PART OF THE TOTAL TURNOVER. 6. THE SECOND ISSUE TAKEN BY THE ASSESSEE IN ITS M. A. RELATES TO PARA 17 OF THE ORDER OF THE TRIBUNAL. IT WAS POINTED OUT THAT THE TRIBUNAL IN ITS ORDER AT PARA NO.17 DEALT WITH THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS WHEREBY IT WAS HELD THAT THE ASSESSING OFFICER WAS COMPETENT TO REJECT THE INCOME COMPUTED ON THE BASIS OF BOOK RES ULT AND ESTIMATE THE GROSS PROFIT. IT WAS POINTED OUT THAT THE TRIBUNAL DID NOT DEAL WITH THE ISSUE OF ESTIMATION OF THE GROSS PROFIT RATE AT ALL AND THE EXPLANATIONS AND THE EVIDENCES BROUGHT BY THE ASSESSEE ON RECORD REMAINED COMPLETELY OVERLOOKED. THUS THIS ISSUE HAS REMAIN ED PRACTICALLY UN-ADJUDICATED. 5 7. LD. D.R. ON THE OTHER HAND CONTEND THAT THERE IS NO MISTAKE APPARENT ON RECORD IN RESPECT OF THIS ISSUE. THE REVENUE HAS CHALLENGED BEFORE THE CIT(A) THE DELETION OF THE ADDITION OF RS.3 16 99 883/- BY HOLDING IT AS BAD IN LAW. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. WE FIND THAT THE TRIBUNAL HAS GIVEN A CATEGORICAL FINDING UNDER PARA 17 IN WHICH IT WAS HELD THAT WE FIND THAT SINCE THE METHOD OF ACCOUNTING INCLUDING THE METHOD OF VALUATION OF STO CK IS NOT PROPER THE ASSESSING OFFICER WAS COMPETENT TO REJECT THE INCOME COMPUTED ON THE BASI S OF BOOK RESULT AND ESTIMATED THE GROSS PROFIT. ACCORDINGLY THE ACTION THE A.O. IS UPHELD AND THE ORDER OF CIT(A) IN THIS REGARD IS SET ASIDE. WE NOTED THAT THE REVENUE HAS TAKEN THE GRO UND AGAINST THE ORDER OF CIT(A) RELATING TO DELETION OF THE ADDITION OF RS.3 16 99 883/-. THE REVENUE HAS ALSO TAKEN THE GROUND AGAINST THE ORDER OF CIT(A) BY WHICH THE CIT(A) HAS HELD THE RE JECTION OF THE BOOKS OF ACCOUNTS TO BE BAD IN LAW. THE TRIBUNAL HAS SET ASIDE THE ORDER OF CIT(A ) AND RESTORED THE ORDER OF THE A.O. REJECTING THE BOOKS OF ACCOUNTS AFTER APPRECIATING THE FACTS OF THE CASE ON RECORD. THE REVENUE HAS CHALLENGED THE DELETION OF THE ADDITION WHICH WAS C ONFIRMED BY THE TRIBUNAL. THE TRIBUNAL HAS UPHELD THE ESTIMATION OF THE G.P. THE QUESTION OF APPLICATION OF THE RAT OF G.P. WAS NOT BEFORE THE TRIBUNAL. EVEN THE ASSESSEE HAS ALSO NOT FILED ANY APPEAL BEFORE THE TRIBUNAL ON THE ESTIMATION OF THE G.P. RATE. THUS THE ISSUE RELAT ING TO THE APPLICATION OF G.P. RATE IN OUR OPINION DOES NOT ARISE OUT OF THE ORDER OF THE TRIBUNAL. T HE ISSUE BEFORE THE TRIBUNAL WAS RELATING TO THE DELETION OF THE ADDITION WHICH WAS DEALT WITH BY TH E TRIBUNAL AND THE TRIBUNAL HAS GIVEN FINDING RESTORING THE ORDER OF THE A.O. UNDER SECTION 254( 2) THE TRIBUNAL CAN RECTIFY MISTAKE APPARENT ON RECORD BUT CANNOT REVIEW ITS ORDER OR RECONSIDER ITS ORDER AT THE GARB OF MISTAKE. MISTAKE MUST BE APPARENT ON RECORD. IF THE ESTIMATION WAS NOT B EFORE THE TRIBUNAL THE TRIBUNAL CANNOT DECIDE 6 THE ISSUE AS THE JURISDICTION OF THE TRIBUNAL IS RE LATED ONLY TO THE GROUNDS OF APPEAL BEFORE THE TRIBUNAL. WE THEREFORE DO NOT FIND ANY MISTAKE A PPARENT ON RECORD ON THE ISSUE OF APPLICATION OF G.P. RATE. THUS THIS GROUND TAKEN IN M.A. STAN DS DISMISSED. 9. IN HE RESULT M.A. FILED BY THE ASSESSEE IS PART LY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 27.08.2010) . SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 27 TH AUGUST 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY