Gujarat High Court
Commissioner Of Income Tax I vs M D Industries....Opponent(S) on 4 March, 2014
Author: Sonia Gokani
Bench: Akil Kureshi, Sonia Gokani
O/TAXAP/120/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 120 of 2014
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COMMISSIONER OF INCOME TAX I....Appellant(s)
Versus
M D INDUSTRIES....Opponent(s)
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Appearance:
MR MANAV A MEHTA, ADVOCATE for the Appellant(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 04/03/2014
ORAL ORDER
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI) Following are the substantial questions of law proposed by the Revenue challenging the order dated 28th December 2012 of Income Tax Appellate Tribunal (for short `the Tribunal') in the present Tax Appeal:-
"1. Whether on the facts and circumstances of the case, and as per law, the Tribunal is right in upholding the decision of CIT(A) of deleting the addition made on account of unexplained cash credits u/s. 68 of the Income Tax Act of Rs.20,79,247/- as the assessee failed to furnish either contra account or confirmation from various parties?
2. Whether on the facts and circumstances of the case, and as per law, the Tribunal is right in upholding the decision of CIT(A) of deleting the addition made on account of suppressed sales of Rs.32,17,801/- as the assessee failed to explain the huge variation in the sale price?Page 1 of 5
O/TAXAP/120/2014 ORDER
3. Whether on the facts and circumstances of the case and as per law, the Tribunal is right in upholding the decision of CIT(A) of deleting the addition made on account of inflated job charges of Rs.12,62,288/- as the assessee failed to furnish evidence to prove its genuineness?
4. Whether on the facts and circumstances of the case, and as per law, the Tribunal is right in upholding the decision of CIT(A) of deleting the disallowance u/s. 145A of Rs.32,17,801/- as the assessee has erred in its valuation of closing stock and included only Rs.7,98,808/- the modvat credit, whereas it has modvat credit of Rs.22,36,715/- balance at the end of the year. Therefore, the assessee has made deviation under Section 145A of the Income Tax Act?"
2. We have heard learned counsel for the Revenue and examined the papers with his assistance.
3. The first question pertains to deletion of addition made on account of unexplained cash credits under Section 68 of the Income Tax Act, 1961 of Rs.20,79,247/- (rounded of). The Assessing Officer on verification of books of accounts noticed the receipts of certain payments in cash from various parties. Details were called for from the respondent-assessee and were asked to furnish the source of cash deposits along with evidence. Not being satisfied with the details furnished, the Assessing Officer deleted the unexplained cash credits under Section 68 of the Act, and added the same to the income of the assessee. When this was challenged before the C.I.T. (Appeals), the same was reversed by the C.I.T. (Appeals) by detailed discussion. C.I.T. (Appeals) was of the opinion that the assessee had received such cash from the sales parties in respect of the sales made during the year under consideration as also for the earlier years. It was not disputed that the sales had not been made to the said parties by the assessee and the excise duty has also been paid on such sales. The assessee had Page 2 of 5 O/TAXAP/120/2014 ORDER already offered the income in the form of sales, and therefore, the amount realised in respect of income already offered, according to C.I.T. (Appeals), could not be once again taxed.
4. When challenged by the Revenue before the Tribunal, it agreed with the findings of the C.I.T. (Appeals) by holding that no new material was brought to controvert such findings, and the income cannot taxed twice.
We find no reason to interfere as no question of law much less any substantial question of law arises. Both the C.I.T. (Appeals) and the Tribunal have correctly appreciated the issue and decided the same.
5. So far as the second question is concerned, the Assessing Officer had made an addition on account of suppressed sales of yarn to the extent of Rs. 32,17,801/- (rounded of) on the ground that the assessee failed to explain the huge variation in the sale price. The Assessing Officer verified the monthly details and yarn purchase and sales, and on account of the alleged variation, he worked out the difference of Rs.32,17,801/- (rounded of), and added the same to the income of the assessee. The C.I.T. (Appeals) when approached did not find such action of the Assessing Officer justifiable, and accordingly, deleted the entire amount on the ground that there was no sufficient explanation in the material produced on record. He noted that the assessee had suffered due to strike in the entire industry in Surat, which had lasted for 51 days, and despite such closure of business, the book results of the assessee had in fact improved during the current year as compared to the preceding year, and therefore, no adverse view can be taken on the fall of gross profit.
6. When approached the Tribunal confirmed such version. The Tribunal noted that the goods manufactured by the respondent assessee was chargeable to excise duty, and assessee had paid excise duty, and maintained the details of quantity of purchase and sales, and the same has not been controverted by the Revenue by bringing on record any contrary material. The factum of strike was Page 3 of 5 O/TAXAP/120/2014 ORDER also not under challenge, and accordingly such deletion was confirmed. We see no reason to interfere as no question of law arises.
7. The third issue pertains to the addition made by the Assessing Officer to the tune of Rs.12,62,288/- (rounded of) on the ground of absence of cogent material. The Assessing Officer noted that the assessee had not produced the job worker parties, except in one case, and had submitted no details in respect of rate of job charges and quantity of job work and the quantum of job charges paid by the assessee, and that the assessee himself was having twisting machines. Accordingly, such addition was made. The C.I.T. (Appeals) deleted the addition on the ground that when the assessee had already discharged its onus of genuineness of the expenditure by offering the names and addresses of job workers and confirmation of the job work, it was for the Assessing Officer to prove that it was not a genuine expense. Despite having ample powers, he did not exercise the same, and instead, blamed that the assessee had not produced the job worker parties. Being satisfied with the further details available on record as also on the ground that the turnover of the assessee had increased eight times in the year in question, he deleted the amount.
8. The Tribunal while concurring with the C.I.T. (Appeals) held thus:
"18. We have heard the rival submissions and perused the material available on record. We find that CIT(A) has given a finding that assessee had completely discharged its onus of proving the genuineness of expenditure claimed, the assessee had deducted and paid the TDS on the payments made to the workers. He further held that the A.O. did not issue any summons or notice u/s 133(6) to the job worker parties and therefore was not justified in holding the assessee responsible for not producing the job workers parties before him for verification. It is also an undisputed fact that payments have been made to outside parties and none of the parties were covered u/s 40A(2)(b). CIT(A) has further given a finding that the assessee did not have the requisite facility for Page 4 of 5 O/TAXAP/120/2014 ORDER butta cutting and twisting and the AO's allegation that the assessee could not have incurred the expenses as it has twisting machine seems to be out of place. The aforesaid finding of CIT(A) has not been controverted by Revenue by bringing any material on record. In view of these facts, we find no reasons to interfere with the order of the A.O. Therefore this ground of the Revenue is dismissed.
This issue also is predominantly based on facts. No question of law much less any substantial question of law arises, and therefore, the same is not entertained.
9. We notice that as afar as the fourth question is concerned, the same has been admitted by this court in Tax Appeal No. 26 of 2014. Therefore, this issue requires consideration, and the present Tax Appeal requires to be admitted only for the purpose of considering the fourth question, which is as follows:
"Whether the Appellate Tribunal has substantially erred in deleting the disallownace under Section 145A and also in holding that the modvat credit is not to be included in the valuation of the closing stock?
10. Resultantly, Tax Appeal is admitted only for the purpose of considering question No.4. To be heard with Tax Appeal No. 26 of 2014 and other such Tax Appeals.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) sndevu Page 5 of 5