Income Tax Appellate Tribunal - Pune
Charbhai Bidi Works vs Assistant Commissioner Of Income Tax on 7 March, 2003
Equivalent citations: [2003]87ITD189(PUNE), [2003]264ITR94(PUNE), (2003)80TTJ(PUNE)483
ORDER
B.L. Chhibber, A.M.
1. These cross-appeals arise out of the order of the CIT(A)-II, Pune.
2. The assessee-firm is a Bidi manufacturer. It has manufacturing centres in Andhra Pradesh and sales depots at Bhavngar and in Pune.
3. We first take up the assessee's appeal i.e., ITA No. 557/Pn/1994 where the only ground raised relates to the addition of Rs. 23,64,940 on account of alleged excess payment to Bidi workers. During the course of assessment proceedings, the AO observed that the total sales during the year were Rs. 17,22,44,444 on which the assessee had declared GP at 16.8 per cent as against 17.14 per cent declared in the immediate preceding year. The AO compared the case of the assessee with the cases of other Bidi manufacturers assessed in Pune, namely, M/s Thakur Savdekar & Co. and M/s Desai Brothers and came to the conclusion that :
(a) The GP per cent and the NP per cent of the assessee is very low.
(b) The assessee is claiming higher wages than others. The AO observed that the wages in Andhra Pradesh were same for all the areas and for all the manufacturers. The assessee had claimed that higher wages were paid as compared to others as from the month of December, 1989 onwards the assessee had paid wages to the workers at an amount which included cost of leaves as well, as the leaves had been supplied by workers also. This meant that the assessee had supplied only tobacco to the workers and the workers had utilised their own leaves for the production of Bidis. The assessee, therefore, claimed wages at a higher rate i.e., 33.40 per 1,000 Bidis. The AO made further enquiry into the case and came to the conclusion that the wages paid by the assessee were actually higher as compared to other manufacturers in the same trade. The AO observed that there was an agreement for payment of wages at Rs. 12.50 per 1,000 Bidis with the union, whereas no such agreement had been entered into for payment of wage in case of "leaves with wages". He also observed that though the rates may be mutually fixed, they could not be in excess of the present market price. According to the AO he asked the assessee to produce daily Bidi collection reports in respect of all the works in support of its claim of wages, but the assessee did not produce any register or record in respect of the workers and its production, wages paid. The AO accordingly held that the wages at the rate of Rs. 4.20 per kg. for 5,63,081 kgs. were paid excessive. He accordingly made an addition of Rs. 23,64,940.
4. The assessee appealed to the learned CIT(A) and submitted that the assessee had maintained regular books of account which had been audited under Section 44AB of the Act. It was further stated that proper quantitative particulars had been maintained and produced for verification of the AO. The purchases and sales were also fully supported and there was no change in the method of accounting. It was further submitted that there was no allegation in the order that any expenditure had been claimed falsely or the production or sales had been suppressed. It was also emphasised before the learned CIT(A) that the assessee had made available all the information and statements from time to time and gave complete explanation on the points raised by the AO in paras 27 and 32 of the order. Reliance was placed on the decisions in the cases of Godavan Sugar Mills Ltd. v. CIT (1985) 155 ITR 306 (Bom) and CIT v. Udhoji Shrikisandas (1983) 139 ITR 827 (MP).
5. The learned CIT(A) confirmed the addition observing as under:
"I have given due consideration to the submissions of the appellant and the material on record. On perusal of the order, it is seen that the AO has made the addition on account of excess wages after considering the facts of the case and after making full enquiries into the matter. The assessee was unable to produce the relevant records in support of its claim of higher wages. The other defects noted are also discussed in the assessment order. The assessee was also not able to justify the expenditure on account of higher wages with reference to the facts of the case. The assessee contended that in few months the higher wages had been paid as the leaves had been supplied by the workers. However, no record was produced to show that how much leaves had been given by the workers and what was the agreed rate in such a case. There are other defects also which have already been discussed in the order. The facts of the assessee's case are also not similar to the cases cited by the authorised representative of the appellant. The addition made for excess payment of wages of Rs. 23,64,940 is supported by valid reasons and material gathered in the course of assessment. In view of these facts, the addition of Rs. 23,64,940 is confirmed and the grounds of appeal are rejected."
6. Dr. S.U. Pathak, the learned counsel for the assessee, submitted that there is no justification for the impugned addition. As regards the alleged low GP rate, he drew our attention to the details in assessee's submissions to the AO on pp. 9 to 15 of the paper book and submitted that the assessee had brought to the notice of the AO that the selling price of its Bidis was comparatively lower than the selling price of the other two concerns (p. 10). The newspaper cuttings are given on pp. 46 to 49 of the paper book and on p. 11 the assessee has analysed that the difference in GP because of the higher sale price in the case of the other two concerns itself was to the tune of following percentages (assessee's being lower than the other concerns) :
Assessee and Thakur Savdekar 17.91 per cent and assessee and Desai Bros. 11.29 per cent Thus, the assessee in its submissions had analysed that its GP was lower than that of the other two concerns basically because of the higher price realisation by the other two. The learned counsel submitted that the selling price had not been challenged by the Revenue and that the other two concerns may be able to get a higher sale price because of their brand value, the quality of Bidis, etc. while the assessee is unable to realise that much price and, therefore, the GP of the assessee is lower.
7. On the second point that the assessee had debited higher wages in the accounts, the learned counsel submitted that the wages of the assessee-firm are including the production commission paid by the assessee-firm to its labour. The following analysis will confirm that the cost of wages incurred by the assessee-firm is lesser than those of the other three parties relied upon by the AO :
(A) Chart A on p. 22 of the paper book (p, 2 of the assessment order) the AO has not considered the production commission of M/s Thakur Savdekar. In the trading account supplied by the AO (p. 14) it is shown that M/s Thakur Savdekar had debited Rs. 56,80,748 as commission whereas the AO has not considered this in the comparative chart and has considered only the wages debited in the account of M/s Thakur Savdekar. If the commission amount is added to the wages debited by M/s Thakur Savdekar, then the amount is Rs. 13,78,44,579 and percent of this cost is 26.78 per cent.
(B) Similarly, wages shown in the trading account of M/s Sable Waghire were Rs. 18,79,36,330 (pp. 14 & 15) whereas there seems to be a mistake committed by the AO considering the same at Rs. 15,39,66,165 (p. 22).
(C) The total wages of Rs. 4,89,04,224 claimed by the assessee-firm contain the Bidi leaves supplied by the labours. The Bidis for which the labours supplied the leaves were 56,30,81,600 as calculated by the AO himself as appearing on p. 23 of the paper book (p. 3 of the assessment order). The amount paid to the labours for 1,000 Bidis for the leaves was Rs. 19.50. The total amount paid for the leaves which the labours supplied comes to Rs. 1,09,80,091. This amount is already included in the wages of Rs. 4,89,04,224 as considered by the AO. After considering this, the actual wages paid to the labours amount to Rs. 3,79,24,133 (Rs. 4,89,04,224 - 1,09,80,091).
(D) The analysis of the assessment order as dealt with above aspects after putting in a chart form gives the following picture :
Particulars Charbhai Bidi Works Thakur Savdekar Sable Waghire Desai Bidi Wages 3,55,03,390 13,21,63,831 18,79,36,330 2,21,28,108 Commission 24,20,823 56,80,748 Sales 17,22,44,444 51,47,51,338 56,55,67,000 7,89,42,122 Percantage of wages/sales 25.66% 26.78% 33.22% 28% The learned counsel submitted that as seen from the above chart, it is clear that since the AO had made a mistake in not considering the production commission of the concerns and by adopting wrong figures of wages, the conclusion was drawn by him that the cost of wages is highest in case of the assessee-firrn, whereas after considering the correct facts and figures it is seen that the cost of wages is least in the case of the assessee-firm.
8. Referring to para. 10 of the assessment order wherein the AO has observed that the assessee had paid wages at the higher rate than Rs. 12.50 per 1,000 Bidis as agreed with the union, the learned counsel submitted that it is not correct because the assessee was required to pay the following amounts over and above the wages at the above rate and these amounts are given on p. 19 of the paper book :
Bonus to labour 8.33% Leave with wages 5% National festival holidays 2% Total including the wages (the percentages are of the wages) 15.33% According to the learned counsel, the above contention of the AO is not correct.
9. Referring to para 13 of the assessment order where the AO has observed that the assessee's calculations are based on hypothetical figures and surmises, the learned counsel submitted that it is not correct because the entire analysis given by the assessee in its reply to the AO is based on the statistics submitted by the AO of the various concerns and, therefore, this is not correct.
10. Referring to para 15 of the assessment order where the AO has observed that the assessee's cost of manufacturing 1,000 Bidis would be Rs. 43 while in the case of M/s Thakur Savdekar & Co. it is Rs. 42.04, the learned counsel submitted that the cost of production of the assessee-firm is also lower than that of others. The AO had supplied the assessee-firm with the trading accounts of M/s Thakur Savdekar and M/s Sable Waghire. The AO in the assessment order had drawn the conclusion that the cost of production of the assessee-firm is higher by 96 paise per thousand Bidis. The conclusion drawn by the AO is on misapprehension of facts.
11. Referring to paras 17, 27 and 28 of the assessment order where the AO has observed that the assessee had not paid the wages for the period from December, 1989 to March, 1990 before March, 1990 and it cannot be accepted that a heavy amount of Rs. 1,47,94,808 was outstanding amount for four months, the learned counsel submitted that it is a fact that the assessee had not paid this amount till March, 1990, i.e., the end of the year, but it was paid in the later months before filing of the return for 1990-91. In fact, it was contended by the assessee that generally in this line of business, the payments remain outstanding for a longer period. He drew our attention to the balance-sheet of the assessee and submitted that it is to be seen that the capital of the assessee was only Rs, 25.94 lakhs (p. 137 of the paper book) while the turnover was to the tune of Rs. 17 crores and no one could manage such a large turnover in such a small capital unless such credit facility was made available. The learned counsel submitted that the assessee had explained to the AO that all these payments were genuine. He drew our attention to the entire evidence from pp. 50 to 119 in the paper book for indicating that these amounts were outstanding. The learned counsel further submitted that thus just because the assessee had not paid wages along with the leaves payments in time, it does not mean that these payments were bogus.
12. As regards the allegation of the AO that the assessee had not produced wage registers, the learned counsel submitted that it was always explained by the assessee's representative to the AO that these separate registers are in respect of 508 depots and the AO was requested to state the exact depots in respect of which these registers should be produced, but instead of appreciating the difficulty of the assessee in producing this truckload of registers, the AO has assigned mala fide intentions to the assessee in para 27 of the assessment order. In fact, the same reasoning was also there for not giving all day-to-day production registers for all the depots to the AO because that would also be a truckload of registers. According to the learned counsel, all these registers were maintained by the assessee in Andhra Pradesh and, therefore, bringing all these registers would have been a tremendous problem for the assessee and in fact on the last hearing, the AO did not insist on production of these registers. The learned counsel filed before us "Notings of hearing from time to time" recorded by the assessee (assessee's version of order-sheet) and submitted that whatever information was called for by the AO, was supplied from time to time.
13. Shri Rajkumar, the learned CIT (Departmental Representative) strongly supported the orders of the authorities below. He drew our attention to para 27 of the assessment order and submitted that the AO had specifically asked the assessee to produce daily Bidi collection reports and other relevant records, but the assessee did not produce the same in spite of adequate opportunity given to the assessee. He submitted that the evidence now being filed before the Tribunal is additional evidence which cannot be admitted in view of Rule 29 of the ITAT Rules, 1963. He further submitted that no evidence was even furnished before the CIT(A) in support of the claim of the assessee that charges paid were not excessive. Quoting Rule 29, he submitted that the matter may be restored back to the AO to verify the veracity of the evidence being furnishing before the Tribunal.
14. We have considered the rival submissions and perused the facts on record. The impugned addition has been made for two reasons, firstly, because of alleged low GP and, secondly, excess wages claimed by the assessee. As regards the addition on account of alleged low GP it is noted that the assessee-firm has maintained regular books of account. The books were found to be duly audited. The assessee has an accepted history. From the chart of sales and GP in the preceding years placed at p. 119 of the paper book, it is noted that the GP has never been constant. In asst. yr. 1987-88 a GP 16.54 per cent was declared and accepted on turnover of Rs. 8,47,11,512. In asst. yr. 1988-89 a GP of 16.02 per cent was declared and accepted on turnover of Rs. 10,59,77,270. Thus, it is clear that GP cannot be a constant one in this age of cut-throat competition and if the assessee has maintained regular books of account which are duly audited and the AO has not found out any specific defect for rejecting such books of account, merely because there is slight fluctuation in GP rate cannot be the cause for the impugned addition, when the assessee has maintained quantitative details of major items like tobacco and tobacco leaves and sales' and purchases are duly vouched. In this connection, reference is invited to the judgment of the Hon'ble Punjab High Court in the case of Pandit Bros. v. CIT (1954) 26 ITR 159 (Pun)), wherein it has been held as under :
"Held that there was no definite finding by the ITO that the case falls within the proviso to Section 13. Even if such finding were to be implied from his order it could not be said that there was material before him which would enable him to come to such a finding. The fact that the profits appeared to him to be insufficient and the fact that no stock register was maintained by the assessee were not materials upon which such a finding could be given, but there were circumstances which might provoke an enquiry. The ITO must discover evidence or material alunde before he could give such a finding. Increasing the taxable income the ITO did not adopt any method or basis and he was not acting according to the provisions of the statute."
Further, in the case of Jhandu Mal Tara Chand Rice Mills v. CIT (1969) 73 ITR 192 (P&H), the Hon'ble Punjab & Haryana High Court has held as under :
"The accounts of the assessee were accepted in all years up to and inclusive of 1957-58 but in 1958-59 the ITO rejected the accounts and applied the proviso to Section 13 on the grounds that no day-to-day dryage register had been maintained and that in another case the yield proposed to be adopted by him was held to be reasonable by Tribunal and added Rs. 32,053 to the income disclosed by the assessee. The AAC on appeal confirmed the applicability of the proviso to Section 13 but reduced the addition to Rs. 15,000. The appeal to the Tribunal was dismissed. On a reference :--
Held : (1) that the method of accounting adopted by the assessee having been accepted by the Department in the previous years and the income computed on that basis, there were not sufficient grounds for applying the proviso to Section 13 to the facts of the case.
(2) that even assuming that the proviso was attracted, the IT authorities not having determined in any basis of manner of computation of the true income, profits and gains of the assessee-firm, were not justified in arbitrarily adding Rs. 15,000 in round figure to the income of the assessee-firm."
A similar ratio has been laid down in the case of International Forest Co. v. CIT (1975) 101 ITR 721 (J&K). Accordingly, we hold that no addition is called for the alleged low GP rate.
15. Now coming to the specific addition on account of alleged excess claim of wages, we find sufficient force in the arguments of the learned counsel reproduced supra, which are supported by facts and figures. The contention of the learned counsel is that whatever information called for by the AO was supplied to the AO from time to time and as per "Nothing of hearing from time to time" referred to supra. On 21st Dec., 1992, "ledger account of the labour for wages" was produced before the AO. From the same sheet, we also find that on 7th Dec., 1992, "ledger account of wages payable individual party-wise" was also filed. On 19th Jan., 1993, the assessee also filed "ledger accounts of labour in support of wages and registers maintained by the commission agents". On 10th Feb., 1993, the assessee filed "daily Bidi collection reports in respect of all labours". We asked the learned CIT (Departmental Representative) to produce the order-sheet from the records of the AO, but he did not produce the same, though sufficient time was given to him. So, we could not cross-verify the submissions of the learned counsel with requisite registers in respect of wages were produced before the AO. In any case, since the assessee has as many as 508 production centres, it will not be possible for the assessee to produce all the records which will be in truckloads, but we would like the assessee to produce some of the most important relevant records in support of its claim. Accordingly, we set aside the orders of the authorities below on the issue and restore the same to the file of the AO for the limited purpose of verifying the facts and figures given by the learned counsel and reproduced supra. He is further directed to call for a few wage registers for test check and readjudicate on the issue after giving an opportunity of being heard to the assessee.
16. Now we take up the Revenue's appeal. The only grievance projected by the Revenue is that the CIT(A) is not justified in deleting the addition of Rs. 16,89,216 on account of excess consumption of leaves. The AO made an addition of Rs. 16,89,216 at Rs. 15.30 per kg. for excess claim of leaves consumption. The AO gave the following reasons for making the impugned addition ;
"In absence of such records assessee's claim of 1,000 gms. of leaves for production of 1,000 Bidis cannot be accepted. There is no reason for the assessee to utilise more leaves for the same amount of Bidis than others, during the year under consideration. As mentioned earlier the production of small Bidis is 93 per cent of total production, which require lesser quantity of leaves. The assessee is claiming 100 gms. of leaves, in excess than others. However, considering the fact there may be some wastage while sorting and cutting of the leaves, I give an additional credit for 50 gms. to the assessee, but for remaining amount of 50 gms. and excess consumption of leaves, the assessee has shown in respect of leaves provided by it to the workers for manufacturing there is no justification. Considering the above facts, I disallow an excess consumption of 50 gms. of leaves claimed by the assessee for the production of 1,000 Bidis where assessee has supplied the leaves. The assessee has claimed to have consumed 22,08,126 kgs. of leaves for the production of 2,20,09,98,800 Bidis, Disallowing at the rate of 50 gms./1,000 Bidis the quantum of disallowance comes to 1,10,406.3 kgs. resulting in an addition of Rs. 16,89,216 @ Rs. 15.30 per kg. for excess claim of leaves consumption."
17. The assessee appealed to the learned CIT(A) and submitted that in all the years consumption of tobacco is uniform at 224 gms. Since this figure was constant, there was a reason to hold that varying rate of consumption of leaves can only be on account of varying nature of this product. The consumption of 1,082 kgs. was shown in the asst. yr. 1988-89, while smaller consumption is also shown. It was further stated that when the accounts were supported by quantity details, there should be no difficulty in accepting the actual figures and that there was no justification for making huge addition of Rs, 16,89,216 on the assumed excess consumption of leaves. Reliance was placed on the decision in the cases of B.F. Vatghese v. State of Kerala (1969) 72 ITR 726 (Ker), International Forest Co. v. CIT (supra) and R.B. Bansilal Abirchand Spg. & Weaving Mills v. CIT (1970) 75 ITR 260 (Bom), The CIT(A), after taking into consideration the facts and circumstances of the case, deleted the impugned addition holding as under :
(1) Addition for excess consumption of leaves cannot be made only on surmises and conjectures.
(2) The AO has not brought out any evidence or material to show that the actual consumption of leaves was not the same as shown in the records.
(3) The AO has not pointed out any defects in the books or in other records and that the assessee had been showing a range of consumption of 0.769 to 1.082 in the earlier years and the same had been accepted.
18. Shri Rajkumar, the learned CIT (Senior Departmental Representative), strongly supported the order of the AO.
19. Dr. Pathak, the learned counsel for the assessee, submitted that there is no straight formula for consumption of leaves in this business. He drew our attention to p. 118 of the paper book and submitted that the assessee had given consumption chart for a number of years and it is to be seen that in the case of the assessee also it has been varying widely from 0.786 gms. to 1.082 gms. He further submitted that leaves consumption depends upon the driage of the leaves in the process of manufacture, soaking them in water, size of the leaves, natural factors like wind, rain, humidity, heat, colour, etc. Hence, in this year if the assessee has consumed more leaves, it must be because of the various reasons above. The learned counsel further submitted that had the assessee consumed deliberately extra leaves, the GP would have been lower than that of the other concerns, but as has been submitted by him earlier, the cost of production is lesser than that of the other concerns. The learned counsel, in support of his contentions, relied upon the decisions relied upon before the CIT(A) and referred to supra in para. 17.
20. We have considered the rival submissions and perused the facts on record. From the observations of the AO reproduced supra in para 16, it is noted that the AO has made the impugned addition as he found the consumption excessive as compared to other manufactures, but he has not brought out any evidence or material to show that the actual consumption of leaves was not the same as shown in the records. He has also not pointed out any defects in the books or in other records. The assessee has been showing a range of 0.786 gms. to 1.082 gms. in the earlier years and the same has been accepted. The Bidi leaves are agricultural product and the consumption of such an agricultural product will depend upon the driage of the leaves in the process of manufacture, soaking them in water, size of the leaves, natural factors like wind, rain, humidity, heat, colour, etc. and there cannot be any tailor-made formula for consumption of leaves. Accordingly, we agree with the observations of the CIT(A) that the addition has been made on surmises and conjectures and the CIT(A) rightly deleted the same. We accordingly decline to interfere.
21. Vide letter dt. 12th Feb., 2001, the assessee moved the following additional ground :
"On facts and circumstances prevailing in the case and as per provisions of law, interest imposed under Section 234B and that under Section 234C without passing any order for imposition of any interest is bad in law, the interest so imposed be cancelled. The appellant be granted just and proper relief in this respect." After hearing both the parties and in view of the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 97 Taxman 358 (SC), we admit the additional ground. 22. Dr. S.U. Pathak, the learned counsel for the assessee, drew our attention to the assessment order and submitted that in the assessment order the AO did not order charging of interest under Sections 234B and 234C and hence, no interest could be recovered from the assessee merely by way of demand notice as held by the Hon'ble Supreme Court in the case of CIT and Ors. v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC).
23. Shri Rajkumar, the learned CIT (Departmental Representative), submitted that the judgment of the Hon'ble Supreme Court in the case of Ranchi Club Ltd. (supra) is a brief judgment of two lines and further that Sections 234A and 234B have been amended with retrospective effect by the Finance Act, 2001, and the ratio of the judgment of the Hon'ble Supreme Court stands nullified by the aforesaid amendment.
24. We have considered the rival submissions and perused the facts on record. No doubt the judgment of the Hon'ble Supreme Court in the case of Ranchi Club Ltd. (supra) is a brief one, but it has affirmed the earlier two judgments of the Patna High Court, i.e., Ranchi Club Ltd v. CIT and Ors. (1996) 217 ITR 72 (Pat) and Uday Mistanna Bhandar & Complex v. CIT and Ors. (1996) 222 ITR 44 (P&H). In the above two judgments, the Hon'ble Patna High Court have laid down the following two principles :
(1) Interest under Sections 234A and 234B is levied on the tax on the total income as declared in the return and not on the income as determined by the assessing authority.
(2) In the absence of any specific mention of the assessing authority in the assessment order charging interest under Sections 234A and 234B, no interest could be recovered from the assessee merely by way of demand notice.
The Hon'ble Supreme Court, vide its judgment in CIT v. Ranchi Club Ltd. (supra) has affirmed the above two judgments of the Hon'ble Patna High Court by stating, "We have heard learned counsel for the appellant. We find no merit in the appeals." The Hon'ble Supreme Court in the case of V.M. Salgaocar & Bros. (P) Ltd. v. CIT (2000) 243 ITR 383 (SC) has held that when a Special Leave Petition is summarily dismissed under Article 136 of the Constitution, such dismissal would not lay down any law, rather it would be deemed that the Supreme Court had simply held that it was not a fit case where Special Leave Petition could be granted. It was further held that the same principle will not apply in a case where a Civil Appeal was dismissed by the Supreme Court holding that the appeal had no merit and when once the Civil Appeal was dismissed after hearing the parties holding that the appeal had no merit, then such order becomes one which attracts Article 141 of Constitution of India, which provides that the law declared by the Supreme Court will be binding on all the Courts within the territory of India. In the light of above decision of the apex Court, the law laid down by the Hon'ble Patna High Court in the cases of Ranchi Club Ltd. (supra) and Uday Mistanna Bhandar & Complex (supra) which have been affirmed by the Supreme Court in their order (though brief) has become the law of the land. Viewed in the above perspective, the ratio laid down by the Hon'ble Supreme Court in the case of Ranchi Club Ltd. (supra) has two aspects. One aspect is that interest under Sections 234A and 234B is leviable on the returned income and not on the income as determined by the assessing authority. The second aspect is that in the absence of any specific mention by the assessing authority in the assessment order charging interest under Sections 234A/234B and 234C, no interest could be recovered from the assessee merely by way of demand notice. While the first aspect has been nullified by the amendment introduced by the Finance Act, 2001, the second facet of the judgment has not been nullified either by the amendment introduced by the Finance Act, 2001, or by promulgating any Central Ordinance by the Union Government. Thus, the decision of the Hon'ble Supreme Court on the second facet in the case of Ranchi Club Ltd. (supra) has become the law of the land.
25. We have perused the assessment order and find that the AO did not specifically mention about charging of interest under Sections 234B and 234C. Accordingly, following the aforesaid judgment of the Hon'ble Supreme Court, we hold that the AO is not justified in charging interest under Sections 234B and 234C. Further, this Tribunal has taken a similar view in ITA No. 404/Pn/1994 & 36/Pn/1995 in the case of Taparia Tools Ltd v. Dy. CIT.
26. In the result, assessee's appeal is allowed in part and the appeal of the Revenue is dismissed.
U.B.S. Bedi, J.M.
27. On having gone through the proposed order of learned AM, placed before me on 2nd April, 2002, despite best persuasion of myself, I have not been able to agree with the findings and conclusion as drawn by him with respect to assessee's appeal as well as Revenue's appeal except the conclusion portion with regard to setting aside the issue of allowability of expenditure on wages of Rs. 23,64,940 to the file of the AO but in that regard also I do not agree with further stipulations and restrictions as imposed by learned AM. I give my reasons for the same as under.
28. Assessment in this case was made on 15th March, 1993, at Rs. 50,12,250 against revised returned income of Rs. 9,51,791 and the learned CIT(A) confirmed first addition of Rs. 23,64,940 but deleted other addition of Rs. 16,89,216 vide order dt. 25th Feb., 1994.
29. In order to contest first addition of Rs. 23,64,940 made by the AO and confirmed by the learned CIT(A) and to defend the action of the learned CIT(A) in deleting the second addition of Rs. 16,89,216 made by AO, which is challenged by the Revenue, the assessee has filed paper book containing pp. 1 to 153 and a certificate given at the end of index attached with paper book is as under :
"Certified that paper Nos. contained in the paper book form part of the record of the Department other than page Nos. 50 to 119"
30. Further to this, assessee filed an application under Rule 29 of the ITAT Rules, 1993, inter alia, contending as under:
"In the above referred cases, the assessee has submitted the additional evidence in the paper book. It is mentioned that page Nos. 50 to 119 are the additional evidences. But most of these papers first of all do not constitute the additional evidence because either they have been submitted before the AO or the information therein was available in our accounts. However, some of them may constitute the additional evidence.
Our difficulty is that the counsel who attended before the AO and the CIT(A) is no longer engaged by us before the Hon'ble Tribunal and, therefore, we are not sure as to which exact papers constitute the additional evidence. To be on a safer side, therefore, we are of the opinion that the request be made to your honour for admission of such additional evidence as contained in pp. 50 to 119 of the paper book and accordingly, we are making this request under Rule 29 of the ITAT Rules. The justification for admission of such evidence would be submitted during the course of hearing before your honour."
31. The detail of documents, which are sought to be admitted as additional evidence is enumerated as under :
Sr. Wo.1.
Particulars Copy of tender notice issued by APFDC Ltd., Hyderabad, 17th Nov., 1989.
Page Nos.
50 to 55
2.
Copy of letter issued certifying tender rates of Bidis per kg. Obtained by conservator of forest, STC, Hyderabad, from 1988 to 1992.
56to 89
3. Copies of documents in support of Bidi leaves purchased at Rs. 35.86 per kg by the assessee during 1990 season 90 to 94
4. Copies of Gherao, Dharna and protest incidents reported in local local newspapers at various places in Andhra Pradesh.
95to 97
5. Copy of letter addressed by labour union demanding labour payment for the month of December, 1989 and threatening strike.
986. Copy of letter addressed by labour union demanding labour payment for the month of December, 1989, January, 1990 and February, 1990.
997. Memorandum of understanding entered into by union and assessee and English translation thereof for payment of wages including cost of Bidi leaves.
100 to 102
8. Copy of letter dt. 4th Oct., 1993, issued by the Enforcement Officer, Provident Fund asking clarification and break up of wages paid at Rs.
34.65, Rs. 38.75 and Rs. 34.90.
1039. Copy of letter submitted to the Enforcement Officer giving necessary details and break up in reply to letter dt. 4th Oct., 1993.
10410. Copy of letter dt, 15th Oct., 1993, issued by the Enforcement Officer, Provident Fund, asking further clarifications on reply submitted earlier.
10511. Copy of letter submitted to the Enforcement Officer giving such further clarifications.
10612. Copy of letter dt. 23rd July, 1991, issued by Asstt. Commr. of Labour, Karimnagar, regarding non-payment of wages for the months of December, 1989, January, 1990 and February, 1990.
10713. Copy of letter dt. 27th July, 1991, addressed to Asst. Commr. of Labour, Karimnagar, in reply to his letter dt. 23rd July, 1991, informing him that the wages for the months of December, 1989, January, 1990, and February, 1990 have been paid in three installments in the months of April, May and June, 1990, and further action be dropped.
10814. Copy of letter of Asstt. Commr. of Labour, Karimnagar, stating that payment of wages with excess of Bidi leaves amount for the period December, 1989, January, 1989 and February, 1990 has been verified by him from the wages register for the periods April, May and June, 1990.
10915. Copy of certificate issued by Sarpanch of Grampanchayat Mayal, Dist. Karimnagar, confirming payment of wages with Bidi leaves for the months of December, 1989 to March, 1990, at the rate of Rs. 34.65 disbursed during the months of April, May and June, 1990 and English translation thereof.
110 to 111
16. Copy of certificate issued by Sarpanch of Grampanchayat Kodmial, Dist. Karimnagar, confirming payment of wages with Bidi leaves for the months of December, 1989 to March, 1990 at the rate of Rs. 34.65 disbursed during the months of April, May and June, 1990 and English translation thereof.
112 to 113
17. Copy of certificate issued by Sarpanch of Grampanchayat, Mutyam Pet village confirming payment of wages with Bidi leaves for the months of December, 1989 to March, 1990 at the rate of Rs. 34.65 disbursed during the months of April, May and June, 1990, and English translation thereof.
114 to 115
18. A copy of part of the records duly verified by the Asstt. Commr. of Labour, Karimnagar, in support of wages with Bidi leaves payments made.
116 to 117
19. Copy of details giving consumption of Bidi leaves per 1,000 Bidis for 1986-87 to 1992-93.
11820. Comparative gross profit chart for asst. yrs. 1987-88 to 1992-93.
11932. As per proposed order, application of the assessee under Rule 29 is found to have not been dealt with at all as there is no specific order to this effect whereas as per decided cases, Tribunal cannot avoid to dispose of application of the assessee made in this regard and useful reference can be made to the following decisions with respect to this issue.
(1) CIT v. Travancore Titanium Products Ltd (No. 1) (1993) 203 ITR 685 (Ker):
"The Tribunal is the final fact-finding authority. However wide the powers of the Tribunal may be, as the final fact-finding authority, it has to discharge its functions only in accordance with law. If the finding of fact is entered in a wrong way, it will be unfair and unreasonable.
Ordinarily, the Tribunal should dispose of the appeal only on the basis of materials on record and available before it and about which parties to the appeal--the assessee and the Revenue--had notice or knowledge. It is competent to the Tribunal to admit additional or new evidence in the appeal in accordance with law and for reasons stated. But the parties to the appeal should have fair and proper notice and opportunity in relation thereto. "Ad hocism" in that regard cannot be countenanced in law."
(2) Velji Deorai & Co. v. CIT (1968) 68 ITR 708 (Bom):
"The admission of additional evidence at the appellate stage is not referable to any right of the party to produce the evidence but is dependent solely on a requirement of the Court and what the Court has to decide is whether it requires such evidence for pronouncing its judgment or for any other substantial cause. The mere fact that the evidence sought to be produced is vital and important does not provide a substantial cause to allow its admission at the appellate stage, especially when the evidence was available to the party at the initial stage and had not been produced by him.
Held also, the assessee's duty to prove that an unexplained credit entry in his account books does not represent undisclosed income, is not discharged by merely showing that the entry appears in the account of a third party and that the party in whose name the amount is credited is not a fictitious party but a real party. He has to prove further that the entry made in the account books is a genuine entry".
(3) Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC): Relevant observations of the Hon'ble Supreme Court are reproduced as under :
"The Tribunal also relied upon certain answers given by Roshal Lal when he was questioned by the Members of the Tribunal at the hearing of the appeal. It must be pointed out straightaway that these answers given by Roshan Lal could not be relied upon by the Tribunal for the purpose of coming to any conclusion adverse to the assessee, because there is a procedure prescribed in Rules 29, 30 and 31 of the ITAT Rules for taking additional evidence before the Tribunal and if the Members of the Tribunal wanted to examine Roshan Lal on any aspect of the case, they should have followed this procedure. But unfortunately the Members of the Tribunal disregarding the prescribed procedure, put questions to Roshan Lal in an informal manner unauthorised by the rules. The answers given, by Roshan Lal could not in the circumstances form part of the record and the Tribunal was not entitled to rely upon the same in arriving at its findings of fact. It may be noted that the High Court also took the view that the procedure adopted by the Tribunal was irregular and the answers given by Roshan Lal should be left out of account".
33. Therefore, in the light of specific provision and case law discussed above, I proceed to decide the application of the assessee made under Rule 29 of the ITAT Rules. Assessee's counsel pleaded for admission of these documents as these are very material for arriving at correct conclusion in the case because some important facts did escape attention of the AO and details and materials contained in these documents can certainly support please taken by the assessee which are very relevant also. The learned Departmental Representative has also been heard on the point of admission of additional evidence.
34. After hearing both the sides and looking into the details, I find that though the assessee undertook to give justification for admission of additional evidence, yet no such effort has been made by the assessee inasmuch as even when few of the above documents were available with the assessee before the conclusion of assessment proceedings, no reason whatsoever, has been advanced as to why these were not filed before the AO. However, as per record, the documents at page Nos. 56 to 89, 103, 104, 105 and 106 of above list are found to have been issued on 13th Nov., 2000, 4th Oct., 1993, 15th Oct., 1993, 8th Oct., 1993, and 19th Oct., 1993, respectively- i.e., after the date of assessment in this case. So obviously these could not have been produced before the AO during hearing of the case or thereafter upto the date of assessment. Besides, the documents at pp. 107, 108 and 109 are the correspondence by/with Labour Department in which there is no specific indication about the amount outstanding and even in the certificates/translation at pp. 110/111, 112/113 and 114/115 are just copies of certificates issued by Sarpanchs in which also no specific amount is mentioned. Similarly, document at p. 118 is leaves consumption statement of various years and on p. 116 GP analysis is there which was not before the AO.
35. Keeping in view of the entirety of facts and circumstances, nature and importance of the documents and the issues involved in these appeals, I find it appropriate to admit these documents for the purposes of these appeals as these are very material and relevant for disposal of the present appeals.
36. Now adverting to the facts of the case, I find that determination of income of the assessee by AO and confirmation/deletion of the same by learned CIT(A), has direct link with some of the documents and these having not been produced before lower authorities (as some of these could not be produced for obvious reasons) being produced before the Tribunal for the first time, so AO did not have a chance to go through these documents, co-relate and/or to verify the correctness and authenticity of the said documents. Moreover, few of the documents are photocopies only so without verification from the originals thereof, these cannot be considered/accepted as such. Therefore, in view of peculiar facts and the circumstances of the case, to meet the ends of justice and to have a fair play in the matter, I find it just and appropriate to set aside the orders of the authorities below and restore the matter back on the file of the AO for readjudication of the issue/additions involved afresh with further direction to the assessee to furnish all the fresh documents furnished before this Bench before the AO, who shall not only look into authenticity and correctness of these documents furnished/to be furnished but also make further enquiries in order to ascertain whether in fact, Rs. 1,42,94,808 was actually payable to labourers by the assessee for the months of December, 1989, January, February, March, 1990, upto 31st March, 1990, and also whether they have the capacity to keep such huge amount due from the assessee for months together. Since in the documentary evidence furnished, few of them comprise of copies of the correspondence (and not the original documents) where even specific amount is also not mentioned, so it becomes all the more important to specifically look into this aspect and for that matter, if need be, the AO may collect necessary information and evidence even by issuing commission or to have a report of the AO concerned who has jurisdiction over the area, in which such labourers are working/residing. So far as decline in the gross profit is concerned, it was 17.14 per cent in asst. yr. 1989-90 on the sales of Rs. 19.04 crores and it came down to 16.80 per cent on sales of Rs. 17.22 crores in the year under consideration, "whereas in the comparable cases of Thakur Savdekar & Co., M/s Sable Waghire & Co. and M/s Desai Bidi Works it is 24.82 per cent, 23.00 per cent and 25.24 per cent on the sales of 51.47 crores, Rs. 50.55 crores and Rs. 7.89 crores, respectively, for the year under consideration. These details were supplied to the assessee but while submitting the paper book, assessee has not filed a comparative table to give necessary figures of other concerns cited above to justify or compare the low profit of the assessee vis-a-vis other concerns." Since entire issue is being set aside, so AO will adjudicate upon this also afresh. Needless to mention, the AO shall afford necessary and reasonable opportunity of being heard to the assessee before deciding all these issues afresh. I hold and direct accordingly .
37. As regards addition on consumption of leaves, which is made at Rs. 16,89,216 and deleted by the learned CIT(A) is concerned, it is noted that the consumption of leaves in Bidi manufacturing for the earlier years as compared to the year under consideration, which was 0.769 gms, in asst. yr. 1989-90 and it is 1.003 gms. in the asst. yr. 1990-91 and again it is 0.885 gms. in asst. yr. 1991-92 as per chart enclosed at p. 118 of the paper book (sought to be admitted as fresh evidence). Moreover, the issue of expenditure on wages is being set aside by both the Members in their respective orders and my order with respect to first issue includes verification of supply of leaves which has also direct link with the consumption of leaves for which a separate addition has been made by the AO. Therefore, it is found imperative to set aside that this issue also and restore the matter back on the file of the AO so that proper assessment in that regard could be made in the light of fresh evidence adduced/to be adduced in fresh proceedings. In this background and in the light of relevant facts of the case, I set aside the orders of, authorities below with regard to addition of Rs. 16,89,216 and restore the matter back on the file of the AO. It is also directed that the AO will decide the issue afresh with respect to consumption of leaves because the same is interlinked and related to procurement of leaves from labourers and wages outstanding.
38. As regards the additional ground raised with respect to chargeability of interest under Sections 234B and 234C is concerned, I fully agree with the learned AM for admission of such ground being a legal one. But so far as deletion of interest component by applying the precedent of Pune Bench decision is concerned, I do not agree with the learned AM on this issue and my reasons for the same are as under :
39. On perusal of p. 10 of the assessment order, I find the following narration under the caption "Tax calculations" :
"Tax Calculations :
Rs.
Rs.
Tax on above income 12,84,055 Less : prepaid tax TDS 1,70,000 Adv. Tax 25,000 140A 40,000 (-) 2,35,000 10,49,055 Add interest 234B 7,74,016 234C 1,934 7,75,950 Net payable 18,25,005 Pune dated 15th March, 1993 Sd/-
(U.B. Trimal) Asstt. CIT, Cir. 2(3), Pune"
As per Pune Bench decision (authored by AM in ITA No. 381/Pn/1993, dt. 20th Aug., 2001, while not applying the ratio of the Hon'ble Supreme Court decision in the case of CIT v. Ranchi Club Ltd., conclusion with regard to interest issue has been drawn in para 9 of the order which reads as under :
"The learned counsel submitted that the AO is not justified in charging interest under Section 234B in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC). A perusal of the order reveals that in the order itself the AO has specifically calculated interest under Section 234B at Rs. 69,840, So, it is not a case where the AO has specifically omitted to charge interest. Accordingly, the ratio laid down by the Hon'ble Supreme Court in Ranchi Club Ltd (supra) is of no assistance to the assessee. This ground is accordingly dismissed."
40. Similarly, in ITA No. 264/Pn/1994, dt. 14th Aug., 2001, same view has been upheld. Yet-in another case, in ITA No. 1078/Pn/1994, dt. 29th Aug., 2001, the Division Bench of the same constitution took the same view.
41. Since the facts of the present case are entirely different, so it would be imperative to note that in the case in hand, interest under Sections 234B and 234C at Rs. 7,74,016 and Rs. 1,934, respectively, has specifically been calculated in the body of the assessment order. So, it is not a case where the AO has specifically omitted to charge the interest. Accordingly the ratio laid down by the Supreme Court decision in the case of Ranchi Club Ltd. (supra) would not apply in this case as per view taken in various decisions by this Bench and few of them are cited above, Therefore, in my considered view the additional ground of assessee's appeal being devoid of merits is liable to be dismissed in view of precedent referred to above.
42. So far as reliance placed by the learned AM on Tribunal's decision in the case of Taparia Tools Ltd. in ITA Nos. 404/Pn/1994 and 36/Pn/1995, dt. 31st Aug., 2001, for the asst. yrs. 1990-91 and 1991-92 is concerned, it is found that this Bench of the Tribunal, while accepting the additional ground of appeal of the assessee, has concluded to delete interest under Section 234B for the asst. yr. 1990-91 as per para 16 of the order which reads as under:
"16. We have perused the assessment order and find that the AO did not specifically mention about charging of interest under Section 234B. Accordingly, following the aforesaid judgment of the Hon'ble Supreme Court, we hold that the AO is not justified in charging interest under Section 234B. The additional ground accordingly succeeds".
And as per the assessment order in this case, at the end of computation of total income, following narration appears :
"Assessed under Section 143(3). Issue notice and challan accordingly.
Nasik Sd/- Dated 31-3-1993 (D.P. Sharma) Dy. CIT Sr, Nasik".
43. So it is amply clear AO omitted to have charged or to calculate the interest under Section 234B in the above noted case of Taparia Tools Ltd. (supra). Since there was no mention about charging/calculation of interest in the body of assessment order in the above case, therefore, following the Supreme Court decision in the case of Ranchi Club Ltd. (supra), this Bench has taken a view in favour of the assessee. But in the present case, the factual aspect is entirely different. Therefore, in my considered view, the ratio of the decision in the case of Taparia Tools Ltd. (supra) cannot be held to be applicable to the facts of the present case and rather the facts of the present case are covered by other decisions of this Bench as. noted above in paras 39 to 40, As there are distinguishing features between the case relied upon by the assessee and applied by the learned AM and the case in land, as has been brought out as above, so there are valid reasons for not following the said decision. In order to deal with proposition of applying the precedents, Hon'ble Supreme Court in a recent pronouncement in the case of State Financial Corporation and Ors. v. Jagdamba Oil Mills AIR 2002 SC 834 has opined as under:
"Circumstantial flexibility, one additional or different fact may make a word of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper".
The Hon'ble Supreme Court further observed in the said judgment as under :
"Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed....."
In the matter of applying precedents Lord Denning's words have further been noted in the said judgment as under :
"Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of another. To decide therefore, on which side of the line a case falls, the broad resemblance to another case is at all decisive".
xxx xxx "Precedent should be followed only so far as it marks the path of justice, but you must cut the dead wood and trim off the side branches else you will find yourself lost in thickets and branches. My plea is to keep the path to justice clear of obstructions which could impede it".
44. Therefore, in view of facts and circumstances, following precedents referred, taking consistent view and keeping in view the latest authoritative pronouncement of the Hon'ble Supreme Court as noted above, on the line of applying precedents, I decide, this issue against the assessee while dismissing the additional ground of appeal.
45. Since both the issues are being set aside on the file of the AO to be decided afresh, and one of the issues is being dismissed, therefore, the appeal of the assessee as well as of the Revenue would be treated to have been accepted partly.
REFERENCE UNDER Section 255(4) OF THE IT ACT, 1961 U.B.S. BEDI, J.M. 10th June, 2002 As there is a difference of opinion between the Members on the Bench, following points of difference are being referred to Hon'ble President for hearing on such points or for nominating the Third Member or to pass such orders as the Hon'ble President may deem fit and proper :
Whether in view of the facts and circumstances of the case,
(a) issue of addition of Rs. 23,64,940 could be set aside to the file of the AO for the limited purposes without even looking into GP addition aspect as directed by AM or order in this regard could be set aside in its entirety and restored to AO to be made afresh after considering the fresh material furnished before Tribunal as decided by JM.
(b) Issue of addition of Rs. 16,89,216 on account of consumption of leaves is. related and interlinked to the issue of wages outstanding which includes procurement of leaves with wages and requires to be set aside along with first addition or deletion of addition in this regard is liable to be confirmed ?
(c) While accepting additional ground, interest under Sections 234B and 234C specifically calculated in the body of assessment order could still be deleted in the light of Ranchi Club decision or it needs to be confirmed in view of precedents of Pune Bench.
M.K. CHATURVEDI, VICE-PRESIDENT (AS THIRD MEMBER): 3rd March, 2003 These appeals came before me as a Third Member to express my opinion on the following question :
"Whether in view of the facts and circumstances of the case,
(a) issue of addition of Rs. 23,64,940 could be set aside to the file of the AO for the limited purposes without even looking into GP addition aspect as directed by AM or order in this regard could be set aside in its entirety and restored to AO to be made afresh after considering the fresh material furnished before Tribunal as directed by JM ?
(b) Issue of addition of Rs. 16,89,216 on account of consumption of leaves is related and interlinked to the issue of wages outstanding which includes procurement of leaves with wages and requires to be set aside along with first addition or deletion of addition in this regard is liable to be confirmed.?
(c) While accepting additional ground, interest under Sections 234B and 234C specifically calculated in the body of assessment order could still be deleted in the light of Ranchi Club decision or it needs to be confirmed in view of precedents of Pune Bench.?"
2. In regard to the first issue, I have noted that so far as restoring the issue to the file of AO is concerned, both the Members concurred. There is no difference of opinion on this aspect.
3. The assessee did file additional evidence before the Tribunal. The following note was submitted by the assessee before the Tribunal on 4th Sept., 2001.
"Before the Hon'ble Members, ITAT Pune Bench, Pune, In the case of M/s Charbhai Bidi Works v. Asstt. CIT, ITA Nos. 593, 557/Pn/94.
In the above referred cases, the assessee has submitted the additional evidence in the paper book. It is mentioned that page Nos. 50 to 119 are the additional evidence. But most of these papers first of all do not constitute the additional evidence because either they have been submitted before the AO or the information therein was available in our accounts. However, some of them may constitute the additional evidence.
Our difficulty is that the counsel who attended before the AO and the CIT(A) is no longer, engaged by us before the Hon'ble Tribunal and, therefore, we are not sure as to which exact papers constitute the additional evidence. To be on a safer side, therefore, we are of the opinion that the request be made to your honour for admission of such additional evidence as contained in pp. 50-119 of the paper book and accordingly, we are making this request under Rule 29 of ITAT Rules. The justification for admission of such evidence would be submitted during the course of hearing before your honours.
Appellant"
4. From the perusal of the aforesaid note it is clear that the assessee treated the papers bearing No. 50 to 119 appended in the paper book as additional evidence. The assessee has also stated in the said note that some of the papers might have been given before the Revenue authorities, but as because details of the same are not available, therefore, all these papers should be considered as additional evidence.
5. The learned AM restored the issue to the file of AO for the limited purposes of verifying the facts and figures submitted by the learned counsel. He directed the AO to call for a few wage registers for test check and readjudicate on the issue, after giving an opportunity of being heard to the assessee. Learned JM agreed with the order. But he simply elongated the scope of examination. He admitted the additional evidence for the purpose of appeal, These documents were found to be very material and relevant for adjudicating the matter. As these documents were not available before the AO and these were produced before the Tribunal for the first time, as such the learned JM directed the AO to verify the correctness and authenticity of the said documents. It was further stated in the order that after ascertaining the veracity, AO will ascertain whether in fact Rs. 1,42,94,808 was actually payable to the labourers by the assessee for the months of December, 1989, January, February and March, 1990, upto 31st March, 1950 and also whether they have the capacity to keep such huge amount due from the assessee for months together. The evidence produced comprised of copy in which specific amount was not mentioned, as such the learned JM felt that it is necessary to examine this aspect. AO was empowered to collect necessary information and evidence even by issuing commission or to have a report of the AO concerned who had jurisdiction over the area. The learned JM also took into consideration the GP rate. He mentioned the comparable cases in the order. Law is trite on the point that just because GP is low addition cannot be sustained. But if the low GP is caused due to certain defects pointed out, then of course it is necessary to make proper examination of the whole thing. The learned JM held that since the entire issue is being set aside, so the AO will adjudicate GP issue also afresh, after providing adequate opportunity to the assessee of being heard.
6. Having heard both the parties on the point I am of the opinion that the learned JM took a correct view in the matter. I am, therefore, inclined to agree with his view on this aspect.
7. Apropos the second issue, both the parties agreed that it is interelinked with the first issue. The first issue was set aside by both the Members. Therefore, this was rightly set aside by the learned JM. I am, therefore, inclined with the view expressed by the learned JM on this issue.
8. Coming now to the last issue, I find that the learned AM deleted the interest in the light of the decision of the apex Court rendered in the case of CIT v. Ranchi Club Ltd. (2001) 247 ITR 209 (SC). The Hon'ble Supreme Court in this case has held that it is incumbent on the AO to give a specific direction in the order in regard to the charge of interest. The learned AM deleted the addition on the ground that the AO did not give any specific instruction to charge the interest.
9. It transpires from the perusal of facts that the AO did calculate the interest chargeable under Sections 234B and 234C of the Act, in the order of assessment itself. Once the AO himself charged interest in the body of the order, learned JM held that there is no need to give directions to charge the interest. Directions need to be given when the interest is not charged in the body of the order. As such, the case of the assessee is not coming within the ambit of the ratio laid down by the apex Court in the case of Ranchi Club Ltd (supra).
10. I have perused the reasonings given by the learned JM in this regard. I have seen the order of assessment, I find that the AO at his own made the calculation in the body of the order. Once the interest is computed by the AO himself, in my opinion, there is no need to issue separate directions. If you need a glass of water you can take it either by yourself or you can instruct somebody to get the glass of water. Once you have taken glass of water by yourself, where is the need to issue instruction to get the glass of water ? The purpose of the statute gets served when the AO at his own makes the computation. It is also to be noted that the apex Court in the case of CIT v. Anjum M.H. Ghaswala and Ors. (2001) 252 ITR 1 (SC) has held that the interest for delay in filing the return and interest for deficiency or deferment of advance tax are mandatory in nature. The expression "shall" used in Sections 234A, 234B and 234C cannot be construed as "may".
11. In the case of Vinod Khurana v. CIT (2002) 253 ITR 578 (P&H) the assessee challenged the charging of interest on the ground that no definite order for payment of interest under Section 234B of the Act had been passed in the assessment order and that the direction given in the assessment order for charging interest was vague and not specific. Hon'ble High Court has held that since the same officer had passed on the same day the assessment order and the demand notice specifying the quantum of interest charged under Section 234B of the Act, the charge of interest was valid.
12. Having regard to the facts and in view of the precedents available on the point, I am inclined to agree with the view taken by the learned JM.
13. The matter will now go before the regular Bench for deciding the appeals in accordance with the opinion of the majority.
U.B.S. BEDI, J.M.: 7th March, 2003 As there was a difference of opinion between the AM and the JM, following question was referred to a Third Member :
"Whether in view of the facts and circumstances of the case,
(a) issue of addition of Rs. 23,64,940 could be set aside to the file of the AO for the limited purposes without even looking into GP addition aspect as directed by AM or order in this regard could be set aside in its entirety and restored to AO to be made fresh after considering the fresh material furnished before Tribunal as directed by JM.
(b) issue of addition of Rs. 16,89,216 on account of consumption of leaves is related and interlinked to the issue of wages outstanding which includes procurement of leaves with wages and requires to be set aside along with first addition or deletion of addition in this regard is liable to be confirmed ?
(c) While accepting additional ground, interest under Sections 234B and 234C specifically calculated in the body of assessment order could still be deleted in the light of Ranchi Club decision or it needs to be confirmed in view of precedents of Pune Bench".
2. The learned Vice President, Shri M.K. Chaturvedi, sitting as Third Member by his opinion dt. 3rd March, 2003, concurred with the view of the JM on the first issue.
As regards second issue also, the learned Vice President has agreed with the JM. As regards third issued also, the learned Vice-President has agreed with the view of the JM.
In accordance with the majority view, we direct the AO to adjudicate the issue afresh as per the directions contained in the order of the JM, in respect of first and second issue. As regards issue relating to levy of interest under Sections 234B and 234C, we hold that levy of such interest was valid. Other part of this order remains unchanged.
3. As a result, both the assessee's as will as Revenue's appeal are allowed in part.