Income Tax Appellate Tribunal - Delhi
Vijay Industries, vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H' : NEW DELHI
BEFORE SHRI A.D.JAIN, JM AND SHRI R.C.SHARMA, AM
ITA No.4420/Del/2007
Assessment Year : 2004-05
M/s Vijay Industries, Vs. Income Tax Officer,
MSK Road, Shamli, Ward-1,
Distt. Muzaffarnagar. Shamli,
PAN No.AAAFV7142F. Distt. Muzaffarnagar.
(Appellant) (Respondent)
Appellant by : Shri Ashok Kumar Garg, Advocate.
Respondent by : Ms.Anusha Khurana, DR.
ORDER
PER R.C.SHARMA, AM :
This is an appeal filed by the assessee against the order of CIT(A) dated 20.8.2007 in the matter of order passed by the AO u/s 143(3) and 154 of the IT Act.
2. The only grievance of the assessee relates to trading addition made by rejecting books of account.
3. Rival contentions have been heard and record perused. Facts in brief are that assessee is engaged in manufacturing and sale of wheels and rims. Return of income was filed alongwith the audited balance sheet, profit & loss account and the audit report in the prescribed format. During the course of scrutiny assessment, the assessee was called upon to furnish month-wise quantitative details of stock in respect of finished goods, raw materials, fuel, power, gas etc. 2 ITA-4420/Del/2007 The AO observed that vide written reply dated 27.5.2005, the assessee has submitted month-wise quantitative details of finished goods, consumption of raw materials, fuel, power, gas, paint and nut bolts alongwith opening and closing stock. The details furnished by the assessee were examined. The AO stated that there is variation in the consumption of raw material, fuel etc. in manufacture of single rim from month to month. On the basis of this objection, the AO rejected books of account and made trading addition of Rs.6,13,927/-. Thereafter, on an application filed by the assessee u/s 154, after verifying the records, the AO rectified his assessment order wherein trading addition was restricted to the extent of Rs.3,42,576/-. By the impugned order, CIT(A) confirmed the action of the AO, against which the assessee is in further appeal before us.
4. We have considered the rival contentions, carefully gone through the orders of the authorities below and found from the record that alongwith the return of income, assessee filed audited accounts, audit report in the prescribed form etc. Various details with regard to monthly consumption of raw materials of various items, power and fuel etc. were filed. The AO himself observed in the scrutiny assessment order that the assessee has filed month-wise quantitative details of finished goods, consumption of raw materials, fuel/power, gas, paints and nut bolts alongwith opening and closing stock. On subsequent queries by the AO, the assessee has also submitted month-wise total production of finished goods and weight of wheels produced in the month as well as consumption of raw materials, consumption of power fuel, gas cylinders etc. The only objection of the AO was that there was a variation in the consumption of raw materials without pointing out any defect in the books of account with regard to purchase, sale etc. From the record, we found that assessee firm was manufacturing wheels and rims of 15 types whose weight varies from 12 Kgs. To 16.25 Kgs. The assessee has manufactured different types of wheels and rims in different months according to demand. The objection of the AO was that assessee has manufactured heavy rims in March in comparison to other months. The production of heavy rims was done 3 ITA-4420/Del/2007 on the basis of supply order with the assessee and the prevailing demand in the market. Thus, merely on the basis of variation in the production which was as per supply order with the assessee, which lead to variation in the consumption of raw material etc. cannot lead to adverse view resulting into rejection of books of account. We also found that one of the objections of the AO was that stock register was not filed. During appellate proceedings before the CIT(A), the assessee has filed stock register and same was sent by him to the AO for verification. The AO on page 2 & 3 of the remand report accepted the furnishing of stock register of raw materials etc. We found that AO has not found any discrepancy in the purchase and sale. The books of account for the year under consideration were also accepted by the sales tax department. The assessee was also maintaining proper stock register, consumption of raw materials, consumption of finished goods and scrap, which were fully verifiable from the production and sales register. We found that assessee has manufactured heavy rims in October and March and sale price of heavy rims are much more than the sale price taken by the AO. As per the working furnished by the assessee, the sale price of production for the month of October and March were Rs.76.40 lakhs whereas the AO has wrongly taken the value at Rs.69.74 lakhs. Thus, the assessee had shown more turnover as sales in the months of October and March in comparison to what has been stated by the AO, there is no justification for rejection of books of account without pointing out any specific defect therein. Even the GP shown by the assessee was not doubted nor the same was lower than the GP shown by the assessee in the earlier year. As per our considered view, the books of account maintained by the assessee in regular course of business which are duly audited by the auditor as per the requirement of the IT Act cannot be rejected light heartedly without pointing out specific defects therein. The reasoning given by the AO regarding variation in the production was duly explained by the assessee and it is on the basis of various type/size of product, the assessee was going to manufacture that the quantity of consumption of raw materials, power, electricity etc. varied, and the same was properly explained before the lower authorities. Accordingly, 4 ITA-4420/Del/2007 we do not find any justification for rejection of books of account and thereby making trading addition.
5. In the result, the appeal of the assessee is allowed.
Decision pronounced in the open Court on 20th August, 2010.
Sd/- Sd/-
(A.D.JAIN) (R.C.SHARMA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 20.08.2010.
VK.
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
Deputy Registrar
5 ITA-4420/Del/2007