TaxTMI 
TaxTMI 
2015 (3) TMI 889
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.... learned Commissioner of Income-tax (Appeals) erred in law and facts in deleting the addition of Rs. 2,79,398 made by the Assessing Officer as per paragraph 3.2.3. of the assessment order passed under section 143(3) of the Income-tax Act, 1961. 3. That the order of the learned Commissioner of Income-tax (Appeals) be set aside and that of the Assessing Officer be restored. 3. In I.T.A. No. 215/Chd/2010 the assessee has raised the following grounds : "1. That the learned Commissioner of Income-tax (Appeals), Jalandhar has erred in confirming the addition of Rs. 19,89,240 made by the Assessing Officer as per paragraph 3.3.3 of the order on account of invisible loss. 2. That the learned Commissioner of Income-tax (Appeals), Jalandhar has erred in confirming the addition of Rs. 12,05,600 made by the Assessing Officer on account of excessive consumption as per para graph 3.4.3 of the order. 3. That the learned Commissioner of Income-tax (Appeals), Jalandhar has also erred in not c....
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....e TDS made in respect of the abovesaid parties is to the tune of Rs. 18,379 against the total payment of Rs. 9,09,421 and this TDS had been deposited in the Government account by the assessee to the tune of Rs. 19,708 on July 8, 2005 by including the interest amount also. The assessee had also issued Form No. 16A to the parties concerned as well. (Detail enclosed on pages 1 to 6) (c) It was submitted to the Assessing Officer by way of reply dated December 26, 2007, that this section 40(a)(ia) is not applicable during the year under consideration, and, as such, the assessee was not liable to deduct the TDS, since these provisions with regard to the applicability on the assessee became applicable from the next year. The Assessing Officer has also concurred with the contention of the asses see that the assessee was not obliged to deduct the TDS during the year but still has disallowed the expenses. In this regard, it is sub mitted that since the amount of Rs. 18,379 along with interest stands deposited on July 8, 2005 and as per the Assessing Officer himself, since these provision are not applicable, he is precluded from making any disallowance of expense for late deposit of the TD....
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....ival submissions carefully and find that the learned Commissioner of Income-tax (Appeals) adjudicated this issue, vide paragraph 1.5 which is as under : "I have considered the submission carefully. Section 40(a)(ia) pro ides that if any interest, commission, brokerage, fees for professional services or amount is payable to a contractor or sub-contractor for carrying out any work on which tax is deductible at source and the tax is not paid within the prescribed period, the amount in respect of which the tax was so deductible would not be allowed as deduction in computing the income. The use of the word 'and' in section 40(a)(ia) shows that both conditions, i.e., tax should be deductible and it should not have been paid before the prescribed date, should be satisfied for the corresponding amount to be not allowed as a deduc tion. As pointed out by the appellant and accepted by the Assessing Officer in the remand report, individuals were not required to deduct tax under section 194C prior to June 1, 2007. Hence, since tax was not deductible by the assessee, no disallowances can be mad....
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....00 M.T. Total 121.00 M.T. The Assessing Officer was not satisfied with the above details so therefore, he again requested the assessee vide order sheet entry dated December 6, 2007, to furnish the details supported by the bills, etc. On December 10, 2007, following details were furnished : "Description Amount Quantity (i) Export sale 2,03,00,248 297 M. T. (ii) Indirect export sale 96,62,654 158.484 M.T. (iii) R.D. sale 16,39,475 65 M.T. (iv) Central sale 4,07,113 16 M.T. (v) Scrap sale 16,22,937 117.660 M.T. and made various analysis and worked out various additions on account of invisible loss and wastage, etc. which are incorporated in pages 3 to 10 of his order which are as under : "Again a detailed show-cause notice in this regard was issued to the assessee in the following terms : 'As per details of raw material and consumption thereof filed on November 13, 2007 and December 10, 2007, following discrepancies have been noticed : (a) Purchase of raw material has been shown at 790 M.T. whereas as per vouchers of raw material purchased imp....
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....-finished goods' of Rs. 54,65,891 are proposed to be disallowed." In response to this notice, on December 26, 2007, the assessee has again given revised figures of purchase of raw material, consumption and sale/ utilisation as follows : Opening stock amount produced (input) (weight) Opening balance as on 31-3-2004 73.00 M.T. Raw material purchased 798.00 M.T. Finished + unfinished purchased 60.00 M.T. Total: 931.00 M.T. Utilisation detail (output) (A) Sale Export sale 292.00 M.T. Indirect export 159.00 M.T. R/D sale 27.00 M.T. Central sale 16.00 M.T. Scrap 117.00 M.T. Total 611.00 M.T. (B) Irrecoverable invisible loss : Burning loss, invisible loss, 93.00 M.T. Heat treatment de-scaling, grinding, cutting 66.00 M.T. Weight variation during export sale in cartons ....
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....ods which failed to pass the required standard at laboratory- were sold as central sales after rubbing our trade mark at very very low rate as these goods prepared as per special specification were not easily saleable and hence these were sold at approximately Rs. 25 per kg. instead of selling those as scrap at Rs. 13/50 per kg.' 3.2.3 The reply of the assessee has been carefully considered and found to be unacceptable in the light of the following : (i) All the Central Sales are made to three parties, namely : (a) M/s. Mann Automotive P. Ltd. (b) M/s. Navyug Enterprises (c) M/s. Pardeep and Co. The description of goods as per impounded sale invoices are as fol lows : (i) Wheel nut M22 x 1.5 A/F 32 L31 19006 Taper wheel nut M16 x 1 5175 (ii) Rear/Front H/B Tatra wheel nut 1488 (iii) Volvo wheel nut 784 (iv) Taper nut 16 x 1.5 9771 (v) Caster nut 12 x 1.75 11184 (vi) Bolt M24 x 1.5 AV 2648 Perusal to the sale....
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....ty of 16 ton is said to be sent in these boxes, each box will weigh approximately 131 kg. No other consignment by the assessee match this parameter. Normally wooden box weighing less than 20 kg. have been sent as is evident from bills of lading in respect of direct and indirect export sales. As per description available on sale invoices, most of these items have been despatched through M/s. S.K. Golden Transport. However, though the assessee was specifically asked to file evidence in respect of weight of such items with reference to GRs etc. but the assessee perhaps knowingly have not filed such details. In view of these facts, the weight of 16 M.T. said to be sold on account of central sales is hereby held to be not correct and the quantity in kgs. is recomputed on the average sale rate of Rs. 60.49 as in respect of R.D. sale and it is held that only quantity of 6730 kg. is involved in these sales and the balance quantity of 9.270 M.T. is held to be overstated equivalent purchase/ consumption at the average rate of Rs. 30,140 (worked out) as under is hereby disallowed read with discussion in forthcoming paragraphs : Description of goods Amount (Rs.) Weight....
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....ive details in the absence of day-to-day manufacturing/stock register and weight on sale bills have been pre pared to the best of my knowledge and estimate and difference if any pertains to invisible loss only." 3.3.3 The reply of the assessee has been perused and issue is dis cussed as under : At the first instance vide her reply dated November 13, 2007, entry in this regard read as follows : "IRRECOVERABLE SCRAP : Burning loss, heat treatment, de-scaling, invisible loss, (grinding, cutting) weight variation in cartons weight, etc. Rs. 93.00 M.T. The entry in this respect made vide reply filed on December 26, 2007, read as follows : Irrecoverable invisible loss : Burning loss, invisible loss 93.00 M.T. Heat treatment de-scaling, grinding, cutting 66.00 M. T." From these replies it is very clear that at the first instance total irrecoverable loss of 93 M.T. was stated to be inclusive of everything, i.e., burning loss, heat treatment, de-scaling, invisible loss, (grinding, cutting) weight variation in cartons, etc., but when confronted with the actual quantities of purchases and sales in order to justify the same, the assessee has added furthe....
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....Central sale as discussed in paragraph 3.2.3 above 7.73 M.T. Total 484.73 M.T. Given the above norms 1.3 kg of raw material against 1 kg of finished goods purchase of 629 M.T. are only justified, i.e., balance of 629 âEUR" 484 = 145 M.T. should take care of visible and invisible wastage. As per paragraph 28(a) of audit report in Form No. 3CD the auditor has made following remarks : "Detailed quantitative records are not being maintained as such required particulars cannot be given." Though the assessee is maintaining register of raw material and finished goods and is assessed to Customs and Excise Department since items manufactured by her are chargeable to excise and she has to claim excise exemption in respect of export sales such as statement of the auditor supports the view that quantitative details have been concealed. During the month of March 2005 alone the assessee has purchased 221.52 M.T. of raw material detailed as per annexure "A" to this order. Given the average of consumption of raw material per day calculated as under consumption in....
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....ven if for the sake of argument loss of 40 M.T. is accepted that would translate into weight variation of 1 kg. for each box of about 15 kg which is beyond imagination, hence in view of foregoing dis cussion read with discussion in paragraph 3.3.3 above purchase/consump tion of 40 M.T. of Rs. 12,05,600 at the average rate of Rs. 30,140 is hereby disallowed. Since the assessee has claimed the excess consumption and purchases contrary to evidence, she has concealed particulars of her income, penalty proceedings under section 271(1)(c) are being initiated separately. 4. As regards the addition on account of disallowance of purchases, one argument can be given that the purchases are genuine. There are bills with the assessee and payments have been made through bank or so on. In that case it is held that in view of the foregoing discussion then excessive purchases should be part of the closing stock which is not a fact. The assessee has closing stock of 121 M.T. and the same has been evaluated by herself as under : Description Quantity Quantity in Amount Nuts 12762 28 (includes bolts) 444.000 Bolts 249764 - 14.92.000 Washer 200000....
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....ayments from these three parties were received through normal banking channel and CST at 4 per cent. was also charged on such sales. Thus, there is no doubt about the identity and genuineness of the party. (ii) The Assessing Officer has stated at page 6 of the order that the weight of 16 tons mentioned in respect of the total number of pieces to the tune of 50056 pieces is not correct and according to the Assessing Officer the weight should be 6730 kg. as per page 7 of his order. This, he has calculated by making reverse calculation by taking into consideration the average sale rate of 60.49 in respect of R.D sale (indirect export) made to certain other parties with regard to certain items of auto parts and then has disallowed the excessive purchase/ consumption to the tune of Rs. 2,79,398. This contention of the Assessing Officer is devoid of any valid reasoning because of the fol lowing facts and circumstances : a. The Assessing Officer has without examining the specific parts or without any basis has merely on the basis of certain theoretical discussion stated that the average weight per piece of all the items cannot work out to 320 cms. In this regard, it is submitted tha....
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...., whereas, in respect of these consignments, since there were export rejections and were not sale able at normal rates in India because of different dimensions/sizes, we had no option but to sell the same either as scrap by which we could have got a rate of Rs. 13.50 per kg. but we have been rather successful in selling the same at an average rate of Rs. 25 per kg., and, therefore, the Assessing Officer was not justified in making assumptions after assumptions and trying to draw the conclusion, which is far from reality. The basis of the adoption of weight and rates thus do not survives. d. The Assessing Officer have disallowed the amount from purchases by adopting the average rate of purchases and in this regard, it is submitted that all the purchases are from identifiable parties and the payments have been made by account payee cheques and as such against this background the disallowance of purchases on the assumptions of over-invoicing is not justified and deserves to be deleted. 3.1 The learned authorised representative for the appellant also furnished an application for admission of additional evidence in sup port of his submissions as under : 1. We have to very humbl....
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.... (a) CIT v. Gani Bhai Wahab Bhai [1998] 232 ITR 900 (MP) ; (b) Electro (Jaipur) P. Ltd. v. IAC 263 ITD 236 (sic) ; (c) Paras Rice Mills v. Asst. CIT [2004] 90 TTJ (Chandigarh) 789; (d) Shahrukh Khan v. Deputy CIT [2007] 13 SOT 61 (Mumbai- Trib) ; and (e) UOP LLC v. Addl. Director of Income-tax (International Taxation) [2007] 108 ITD 186 (Delhi). In view of the above said facts, it is prayed before your honour that our request for additional evidence may be accepted under rule 46A, since all the documents are relevant to the issue in hand and also that most of the papers are figures in the chart are already on the file of the Assessing Officer." The above submissions were referred to by the learned Commissioner of Income-tax (Appeals) to the Assessing Officer for remand report and in turn the remand report was confronted to the assessee. 13. After considering the rival submissions, remand report and rejoinder, the learned Commissioner of Income-tax (Appeals) deleted the addition of Rs. 2,79,398 and confirmed addition of Rs. 19,89,240 and Rs. 12,05,600. 14. Before us, learned counsel for the assessee mainly submitted that the assessee was maintaining excise r....