Income Tax Appellate Tribunal - Amritsar
The Asstt. Commissioner Of Income-Tax, ... vs M/S. Laggar Industries Ltd,, Jalandhar on 15 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR
BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND
SH. T.S. KAPOOR, ACCOUNTANT MEMBER
(CAMP AT JALANDHAR)
I.T.A No.91(Asr)/2011
Assessment Year: 2007-08
M/s Laggar Industries Vs. Dy. CIT,
Limited, Range-IV, Jalandhar.
Sobti Building,
Mandir Marg, Tanda
Road, Jalandhar.
PAN:AAACL-40309
(Appellant) (Respondent)
I.T.A No.89(Asr)/2011
Assessment Year: 2007-08
Asst. CIT, Vs. M/s Laggar Industries
Circle-IV, Limited,
Jalandhar. Sobti Building, Mandir
Marg, Tanda Road,
Jalandhar.
PAN:AAACL-40309
(Appellant) (Respondent)
Appellant by: Sh. Sudhir Sehgal & Anil Miglani (Adv.)
Respondent by: Sh. Bhawani Shankar (DR)
Date of hearing: 16.01.2017
Date of pronouncement: 15.03.2017
ORDER
PER T. S. KAPOOR (AM):
These are cross appeals filed by assessee as well as by Revenue against the order of Ld. CIT(A), Jalandhar, dated 31.12.2010 for Asst. Year: 2007-08.2 I TA Nos.91 & 89 (Asr)/2011
Asst. Year: 2007-08
2. The appeal was earlier disposed off by the Hon'ble Tribunal vide its order dated 20.11.2012. The Tribunal in its order dated 20.11.2012 had allowed relief to the assessee on its appeal and had dismissed the appeal of Revenue.
3. Aggrieved the Revenue had approached the Hon'ble Punjab & Haryana High Court and the Hon'ble Punjab & Haryana High Court has set aside the order of the Tribunal and has directed the Tribunal to decide the cases afresh. While setting aside the order the Hon'ble Punjab & Haryana High Court has held as under:
"5. A perusal of the orders passed by the authorities below show that the assessment order was passed by the Assessing Officer on the ground that there was variation in the ratios of production to raw material consumptions, of scrap generation, of invisible loss and even negative losses in two months. The assessee was asked to show cause as to why the production should not be worked out on the basis of normal ratios of production by other mills. The assessee submitted that there were mistakes in the figures committed by its accountant. The assessee submitted a fresh chart giving revised figures. The Assessing Officer did not accept the same. It was noticed that such mistake could not have been committed by the accountant since the assessee was maintaining excise records of purchase and sales. The source of the revised figures of raw material consumption was not entered into the stock register produced by the assessee before him. Further it was held that the revised figures were manipulated and the assessee's books were not reliable and the same were rejected. On appeal by the assessee, the CIT(A) recorded that the Assessing Officer was not justified in taking the rate of goods in the closing stock as the rate of sale of goods for estimating the unaccounted sales since the sale rates may vary during the year and the closing stock rates are only the rates at the end of the year. When the unaccounted production and sales had taken place throughout the year, application of the average rate of sales during the year should give a better picture of the unaccounted sales. Since the entire cost of raw material and manufacturing cost had been debited to the profit and loss account by the assessee and the addition was only on account of suppression of sales, no further deduction of expenditure against the aforesaid computed suppressed sales was allowed. Hence addition of Rs.5,59,50,097/- was sustained out the addition of Rs.17,31,59,753/- made by the Assessing Officer. Both the assessee and the revenue filed appeals before the Tribunal.The Tribunal after considering the matter allowed the appeal filed by the assessee and dismissed that of the revenue holding that the revised figures submitted by the assessee having not been considered, the books of account could not be rejected and no addition on that account could be made. Thus, the Tribunal deleted the additions. The relevant finding recorded by the Tribunal reads thus:3 I TA Nos.91 & 89 (Asr)/2011
Asst. Year: 2007-08 "13.2 As a matter of fact, controversy has arisen only for non consideration of the revised chart, which has been submitted and of course perused by both the authorities below but not considered for the reasons best known to them, though the revised figures were found to be correct but the same having not been considered, the books of account cannot be rejected and no addition on this account can be made. Therefore, the learned CIT(A) is not justified in confirming the action of the AO with regard to rejection of books of account and sustaining the additions accordingly."
6. From the perusal of the order passed by the Tribunal, we find that the Tribunal being a final fact finding authority has not examined the material and evidence on record. Detailed reasons have not been given for deleting the additions. Consequently, the impugned order is set aside and the matter is remanded to the Tribunal to decide it afresh after hearing learned counsel for the parties in accordance with law and giving detailed and cogent reasons. The appeals stand disposed of."
Therefore, the parties are again before us.
4. The Ld. AR, at the outset, invited our attention to the written submissions in the form of brief synopsis and submitted that Assessing Officer had rejected the books of accounts u/s 145(3) of the Act. It was submitted that Assessing Officer during the assessment proceedings had noted down various alleged mistakes in the raw material consumptions, which the assessee had clarified that the Accountant of the assessee firm had committed certain mistakes and thereafter, had filed a revised chart. The Assessing Officer did not consider the revised chart and made the additions after rejecting the books of accounts and after working out the unrecorded sales out of books of accounts. It was submitted that Hon'ble High Court has noted down the Tribunal has not made a finding of facts while allowing relief to the assessee. The Ld. AR submitted that the Hon'ble Tribunal had made detailed findings and in this respect our attention was invited to the order of Tribunal.
4 I TA Nos.91 & 89 (Asr)/2011
Asst. Year: 2007-08
5. The Ld. DR, on the other hand heavily placed his reliance on the order of authorities below.
6. We have heard the rival parties and have gone through the material placed on record. We find that Assessing Officer in the assessment order had rejected the second chart prepared and submitted by assessee by observing as under:
"The assessee's contention in Para 3 reproduced at pages 3 of the order is not genuine at the face itself. The company is running eight (8) units at different places in India i.e., 4 at Jalandhar, 1 at Imphal, 2 at Gagret and 1 at Patna doing production of different types. It produces excisable goods and proper records of escisable purchase/sales are prescribed to be maintained under Central Excise Act/ Rules on day to day basis. Is such a ridiculous plea of "miscalculation by the accountant" in the earlier reply filed on 22.10.09 at such colossal scale maintainable in such a case ? No. Even if it is maintainable let us examine the authenticity of such a bold and cavalier claim.
i) Please pursue the month wise quantum of consumption of raw material of Ingot, Billet and Heavy Round as per Data Chart "A" on page 2 of the order confronted to the assessee on 18.12.09 and compare it with the fresh quantum of inputs of the items furnished by the assessee on 22.12.2009 as per para 3 of the reply referred to the above. The facts after examination emerge as under:
a) Consumption in April 2006 as per Para 3 of the reply filed on 22.12.2009 has changed from 857.940 MTS to 893.040 MTS i.e. increase of 35.1 MTS. It was the opening month of the financial year and where the complicated calculation was involved in the very first month of operation for the year under assessment? And that too of items in quantum ol MTS not in any lesser units.
b) Similarly, consumption quantities have increased by 21.72 MTS, 50 MTS, 49.470 MTS, 69.605 MTS, 54.950 MTS, 130.005 MTS, 109.955 MTS, 110.220MTS, 95.550 MTS, 9.438 MTS in the months of May 2006 to Feb 2007 respectively and has alarmingly decreased by 735.623 MTS in the month of march 2007 as per this reply in comparison to month wise quantities of consumption as per original reply iilcd on 22.10.2009 on the basis of which show cause notice dated 18.12.2009 was issued.
In above quantity of finished goods and scrap remain the same for the month of April 06but the burning / invisible loss has increased from 4.56% to 8.295% i.e. by 3.735%. It means that out of quantity of increased raw material i.e. 35.10 MTS, 33.355 MTS has been shown as consumed by burning loss and still difference of 1.765 MTS. between the increased quantum of 35.100 MTS and consumed by burning loss at 33.355 MTS is unexplained. Quantum of Production in the revised version has been kept the same but 5 I TA Nos.91 & 89 (Asr)/2011 Asst. Year: 2007-08 the %age of production of finished goods has come down from 69.16 to 66.44 and scarp to 25.26% from 26.29% as per the original reply on this issue. Similarly the increase of raw material consumption of shifted quantum (735.623 Mts from March 2007) of 21.72 MTS, 50 MTS, 49.47 MTS, 69.60 MTS, 54.950 MTS 130.005 MTS, 109.955 MTS, 110.220 MTS, 95.550 MTS and 9.438 MTS respectively in the months of May 2006 to Feb 2007 has been consumed by increase of burning/ invisible loss by %age of 2 013, 4.274, 3.843, 7.166, 4.725, 11.531, 9.812, 13.853, 11.59], 1.624 respectively.
By some mysterious happening burning loss which was 91.14% in march 2007 as per original reply filed on 22.10.2009 has come down to petty 14.051% in the reply filed on 22.12.09 with the distribution of 755.623 MTS of raw material by shifting from the quantum consumption of 820.199 MTS in march 2007 as per bifurcation sorted out in Para 1(b) above.
Quantum of finished goods/scrap has remained unchanged in all the months in which quantum of 735.623 MTS was apportioned with a view to make the things look less manipulated. Is the assessee asking me to take his presentation of make- believe arrangements of affairs of M/s Sobti Steel Rolling Mills & Castings Prop. M/s Luggar Ind. Ltd. after receiving the show cause notice dated 18.12.09 as authentic ? If I ask the assessee to clarify it further, I am afraid, it may take the stand that this quantity of 735.623 MTS was in fact that of wood mistakenly supplied by the dealer and also wrongly taken as that of BNillet/Ingot/Heavy Roound, when put into Bhatti got reduced into ash and nothing came out of this quantum in the concerned months in which it was interpolated in the books of account as a quantum of raw material of the billets/ingots to give a correct quantum of the billets/ingots to give a correct quantum chart to exorcise the evil of" miscalculation by rhe accountant" committed in the reply filed on 22.10.2009". What is the source of the revised quantum figures of raw material consumption? Stock register produced by the assessee is silent on this issue. Only production figures, being same as per reply filed on 22.10.2009 and the reply under discussion, tally with the stock register produced on 24.12.2009. Quantum of raw material inputs issued as per excise register Form No.RO-23A has not been entered in the stock register. Only purchase quantum is there which does not tally with quantum issued as per the said excise register.
Revised version of assessee on the issue of quantum figures of consumption is manipulated and the sad\ aspect is that the surgery of books of account not only does not come to the rescue of the assessee, .rather worsen the already rotten state of health of the books of accounts. Justification of shocking discrepancies on this issue plea of "miscalculation by the accountant" is rejected as utterly untenable, fuitile and vain attempt.
Percentage of burning loss claimed by the assessee as per reply filed on 22.10.2009 analysed in Chart A of the show cause notice vary from 1.87% on the lower side for the month of Jan 2007 to 91.4% on the higher side for the month of March 2007, with of course the miraculous exceptions when production is 1.27% and 2.32% mere than the 6 I TA Nos.91 & 89 (Asr)/2011 Asst. Year: 2007-08 quantum of input of raw material. Something only magic wand can do. May be, so is the case of this unit.
e) Wage rate per MTS consumption of raw material also vary from 113.81 for the month of March 2007 on the lower side to Rs. 280.18 on the higher for the month of April 2006. Assessee's reply on this issue in Para 4 has been considered. It is useless and rejected as such.
Ratio of consumption value of Furnace Oil per PMT consumption of raw material also varies from Zero for the month of Dee.2006 to Ks.1247.54 for the month of April 2006. It is a drastic & horrifying situation. Assessee's explanation at Para 7 of the said reply is further confounding and horrifying No defence on this issue has been given & there is no justification at all except evasive and hawal observations. With the forgoing discussion of facts it is concluded that books of account, being not reliable at all, not maintained in the routine flow of business and of no help in ascertaining the true and correct assessable income of the assessee are rejected u/s 145(3) of the I T Act 1961 on all the issues as discussed above"
The Tribunal while deciding the issues in favour of assessee had observed as under:
"13. We have heard the rival contentions and perused the facts of the case. The assessee is carrying on the business of running a Rolling Mill, apart from other businesses. The Rolling Mill is being run under the name and style of M/s. Sobti Rolling Mills. There is no dispute to the fact that the assessee unit is an excisable unit and the trading results as compared to the earlier years are as under:
Asstt. Year Sales G.P. Rate
2006-07 26,22,98,186/- 4.18%
2007-08 31,03,39,457/- 4.75%
13.1 It is pertinent to mention here that the AO in the present case has not pointed out any defect in the purchases, sales, opening stock and closing stock. The AO on the basis of records submitted before him and explanation given thereto has opined that the scrap generated is at 4%, which is an estimate by the AO as compared to 47.97% claimed by the assessee. Also the burning loss has been estimated by the AO at 2.5% as against 10.005% claimed by the assessee. The detail of the consumption and production submitted by the assessee initially as compared to Data chart 'A' at page 2 of the assessment order was furnished as required by the AO. Since certain mistakes crept in as explained by the assessee during the assessment proceedings itself, the same was amended and the amended chart of the production and consumption was produced, which is available at page 4 of the assessment order. The assessee had submitted the explanation for wrong chart having been prepared due to miscalculation by the accountant which was inadvertent In support of the revised chart as well as earlier chart in which mistakes had crept in, the assessee had produced books of account, stock and excise records showing the correct consumption & production as 7 I TA Nos.91 & 89 (Asr)/2011 Asst. Year: 2007-08 declared in the books of account. It is pertinent to mention here that the books of account of the assessee are statutorily required to be audited which have been audited by the statutory auditors and no defect have been pointed out or has been reported by the statutory auditor in his audit report or even as the Notes to the Account. It was submitted by the assessee that all the figures in the subsequent chart/amended chart given to the AO tallied with the books of account. As regards the consumption and production are concerned, it was also pointed out before the Ld. CIT(A) that the mistake can be done by any person and in the present case, the AO himself has made many totaling mistakes, which is borne from the corrected Data Chart 'D' furnished subsequently before the AO and is a matter of fact available in the assessment order. It was also pointed out before the ld. CIT(A) in his explanation that if the AO can make mistakes in totaling, any person can genuinely make mistakes in totaling and it is the corrected figure which tallied with the books of account and such records ought to have been considered.
13.2. As a matter of fact, controversy has arisen only for non-consideration of the revised chart, which has been submitted and of course and perused by both the authorities below but not considered for the reasons best known to them. Though the revised figures were found to be correct but the same having not been considered, the books of account cannot be rejected and no addition on this account can be made. Therefore, the Ld. CIT(A) is not justified in confirming the action of the AO with regard to rejection of books of account and sustaining the additions accordingly.
13.3 As per the order of the AO, raw-material issued for production is 6358.945 MT whereas the consumption of raw-material as per books of account is 10820.83 MTS. The assessee has submitted the explanation before the Ld. CIT(A), which is available at pages 10 and onwards with Data Chart 'D' prepared by the AO was never confronted to the assessee, certain wrong monthly totals of issue of raw material have been taken by the AO, moreover while preparing the Data Chart 'D' the AO has not included the figures of three months from September, 2006 to December, 2006 and left these columns blank, whereas the assessee had maintained a computerized Form RG23A Par-1, Register. Copies whereof were given to the AO in a separate file alongwith the other vouchers & books of account, which is a matter of record and cannot be denied. The AO has not considered totals of raw material purchased and issued during these three months in Data Chart 'D'. The AO has not considered many other items which have been referred by the assessee in his explanation available vide paras 8, 9, 10, 11 & 12 at pages 10 to 12 of Ld. CIT(A)'s order.
13.4 It was also submitted and explained by the assessee time and again that the assessee has special product which is sold through approved parties to the Govt. of India, Ministry of Defence, which are minutely inspected by the Officials of the Defence Department, Govt. of India and as such there is a lot of rejection. The rejected goods had to be cut into small pieces and have to be sold as scrap only. Such rejected goods for the security reasons of the nation cannot be sold as a matter of agreement and as a matter of rule of the Defence Department, Govt. of 8 I TA Nos.91 & 89 (Asr)/2011 Asst. Year: 2007-08 India. It was stated by Mr. Sudhir Sehgal, the ld. counsel for the assessee that such iron angle & rods are sold by the assessee, are for the use alongwith India and Pakistan border or any other border for wire fencing. This is the reason that higher scrap is bound to be generated in such a unit. Therefore, the generation of scrap can be compared only by such a unit who is manufacturing identical product for supply to the parties for the use at the borders as mentioned hereinabove. On perusal, we have found no comparable case on record, neither brought out by the AO nor by the Ld. CIT(A). The Ld. CIT(A) himself has observed vide para 8 of his order at page 29 that the information collected by the AO from M/s. Mukesh Steels Ltd; without confronting the assessee cannot be used for the purpose of assessment, which is against the provisions of section 142(3) of the Act. and violation of principle of natural justice in view of the decision of Kishinchand Chellaram vs. CIT 125 ITR 713 (SC).
13.5 As regards the variation in the monthly chart observed by the AO and the ld. CIT(A), on perusal, we are of the view that there is no mistake or error as per revised chart submitted by the assessee, which tallies with the books of account or records.
13.6. As regards the re-use of the rejections, there is nothing on record that the assessee has re-used the whole of the rejections, since the assessee was not having any furnace, be that a rotary or an induction furnace, but was having a regular furnace in the Rolling Mill. The Ld. CIT(A) relied upon the scrap generated by M/s. Mukesh Steels Ltd; who does not produce the product as the assessee does. Therefore, such reliance by the ld. CIT(A) or by the AO has resulted into absurd results and cannot be accepted.
13.7. The Ld. CIT(A) was quite aware as is evident from the findings in his order in paras 8 to 8.7 (pages 29 to 32) that the assessee has maintained regular books of account showing details of purchases and sales including that sale of scrap. The findings thereafter in the said paras are based on surmises and conjectures. The reliance is placed by the ld. CIT(A) on the decisions of various courts of law, therefore, cannot help the Revenue. There is no evidence with any of the authorities below that the assessee has made the sales of the production which have been produced by the assessee and had made sales outside the books of account. The reliance is placed on the decision of ITAT, Amritsar Bench in the case of M/s. Atam Valves (P) Ltd; Jalandhar vs. Income Tax Officer, Ward II(3), Jalandhar, in ITA No.442(Asr)/2008 for the assessment year 2005-06, dated 30th Dec; 2008. The said order of the Tribunal stated to have been confirmed by the Hon'ble Punjab & Haryana High Court in IT Appeal No.358 of 2009 vide its order dated 22nd July, 2009 reported in (2009) 184 Taxman 6 (P & H). In the facts and circumstances of the case and to repeat our decision, the learned CIT(A) is not justified in confirming the invocation of provisions of section 145(3) of the Act and no additions can be made accordingly, as discussed hereinabove. Thus, grounds No. 1 to 11 of the assessee are allowed and all the grounds of the Revenue are dismissed.
14. In ground No.12, the ld. counsel for the assessee had argued that the assessee has filed Nil returned income whereas the AO while making the 9 I TA Nos.91 & 89 (Asr)/2011 Asst. Year: 2007-08 computation had taken the returned income at Rs.9,29,133/- and it is apparent from the record.
15. On perusal of the facts, it has been observed that the assessee had filed nil income and the AO has taken computation of income wrongly as income declared by the assessee at Rs.9,29,133/- at page 14 of his order. The AO is directed to take income as declared Nil by the assessee. Thus, ground No.12 of the assessee is allowed."
In the above order of Tribunal, we find that Hon'ble Tribunal has held that the revised chart was not considered by the authorities below for the reasons best known to them and therefore, the Hon'ble Tribunal had held that books of accounts cannot be rejected and no addition on this ground can be made. However, from the order of assessment as reproduced above, we find that Assessing Officer had noted down certain crucial aspects in not accepting revised chart and therefore, it is wrong to say that the revised chart was not considered by the authorities below. We further find that the assessee had various units located in various parts of the country and all the units of the assessee are excisable units and the mistakes even if committed by Accountant can be verified with the records which has not been done by the authorities below. The Assessing Officer has particularly noted that quantum of raw material inputs as per Excise Register Form No. RQ-23A has not been entered in the Stock Register. He has further held that purchase quantum does not tally with the quantum issued as per excise register. The Hon'ble Tribunal on the other hand had held that assessee had submitted explanation for wrong chart obtained from excise records and stock register. Therefore, we deem it appropriate to remit back issue to the office of Assessing Officer, who should re- 10 I TA Nos.91 & 89 (Asr)/2011
Asst. Year: 2007-08 adjudicate the additions on the basis of figures to be obtained excise records and stock record. The difference if any between the original chart and revised chart should be explained by assessee in the light of excise records maintained by it.
Needless to say that assessee will be provided sufficient opportunity of being heard.
7. In view of the above, the appeal filed by assessee and Revenue are allowed for statistical purposes.
Order pronounced in the open Court on 15.03.2017.
Sd/- Sd/-
(A.D. JAIN) (T. S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated:15.03.2017.
/PK/Ps.
Copy of the order forwarded to:
(1) The Assessee:
(2) The
(3) The CIT(A),
(4) The CIT,
(5) The SR DR, I.T.A.T.,
True copy
By Order