TaxTMI 
TaxTMI 
2015 (3) TMI 889
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....red 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 considering and rejecting the norms of material consumption....
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....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 TDS. The contention of the Assessing Officer that the claim of expenses is n....
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....ls) 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 made under sec tion 40(a)(ia) for the present assessment year even though the tax deducted ....
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....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 impounded on November 23, 2007, raw material weighing 802.825 M.T. has been purchased which gives rise to difference of 12.825 M.T. (as per annexure "A" (4 pages)). Hence show cause why purchases of 12.825 M.T. should not be disallowed at average rate of Rs. 24,803 per M.T....
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.... 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 40.00 M.T. 199.00 M.T. (C) Closing stock : 121.00 M.T. G. Total: 931.00 M.T. 931.00 M.T. Closing stock details : Finished goods 44.00 M.T. Semi finished 37.00 M.T. Round steel as on 31.03.2005 30.00 M.T. Scrap as on 31.03.2005 10.00 M.T. Total 121.00 M.T. Comparison of ....
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....; (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 invoices shows that items of these specifications have not been sold to any other party by the assessee during the assessment year. Then it is not correct to say that these were goods which failed to pass the required standard at laboratory. Secondly, this sale involved 50056 pieces given the quantity of 16 ton average weight per piece works out to 320 grams. It is impossible and beyond any imagination that wheel nut with specifications of 22 Ã- 1.5 of A/F 32 31 mm length would weigh 320 grams given 7.8 gms for 1 cubic centimetre volume of steel. In this regard reference is made to the following : Bibliographic Resu (w/surrounding Standar....
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....eby 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 (i) Purchase raw material 1,98,65,206 798 M.T. (ii) Purchase goods 5,29,789 Purchase semi-finished goods 54,65,891 60 M.T. Total 2,58,60,886 8858 M.T. Average rate, therefore, comes to Rs. 30,140 per M.T. This would result in addition of Rs. 2,79,398 on this account. Since the assessee has knowingly concealed particulars of her income in this respect, penalty proceedings under section 271(1)(c) are hereby initiated. 3.3.1 Next comes the issue of irrecoverable and invisible loss of 66 M.T. on account of heat treatment de-scaling, grinding, cutting, etc. In this regard while preparing chart furnished on November 13, 2007 purchases and consumption of raw material the a....
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....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 further loss of 66 M.T. on account of heat treatment de-scaling, grinding, cutting, etc., and loss of 40 M.T. on account of weight variation during export sales in cartons. The issue of weight variation of 40 M.T. during export sales in cartons will be discussed in forthcoming paragraphs. This kind of justification in the absence of any documentary evidence cannot be held valid. Secondly, the assessee has taken recourse to the standard input and output laid down by the Ministry of Commerce and Industries in connection with duty exemption scheme and the assessee has produced permissible wastage as follows : Item Raw material of weight Finished goods Wastage weight 1. Nyloc self locking nuts, steel locking nuts, wheel nuts made from steel (item S.No. C-739 page 1.939 M.T. ....
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....he 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 March should be about 69 M.T. Average consumption per day = total consumption as claimed 31/365, i.e., 810 31/365 = 365 = 69 M.T. Given the purchase of 221.52 M.T. closing stock of raw material at 30 M.T. and consumption of 69 M.T. the purchase of 122.52 M.T. are unexplained in the most favourable condition to the assessee that on March 1, 2005, the assessee had no raw material in stock. It is this amount which is tried to be explained by the assessee by overstatement of central sales to the tune of 9.23 M.T. irrecoverable loss of 66 M.T. on account of descaling heat treatment, grinding cutting, etc., and further loss of 40 M.T. on account of variation in weight in cartons. In view of these facts declaration of invisible loss of 66 M.T. is totally unjustified and equivalent purchase/consumption amounting to Rs. 19,89,240 at the average rate of Rs. 30,140 worked out as above in pa....
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....hich 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 2 100.000 S-cam 2000 14 420.000 Semi-finished - 37 962.000 Round steel - 30 690.000 Scrap - 14 140.000 Oil and lub. oil packing and other 4620 lts - 92.000 - 51.000 Total 121 43,87,400 Since purchase of 115.23 M.T. do not find any place in closing stock these are either bogus or sold out of books of account. Even in the alternative equivalent addition would result on account of undervaluation of closing stock. With these remarks income of the assessee is recomputed as under : Income returned Rs. 4,70,945 Add : (i) Addition on account of disallowance of expenses discussed in paragraph 2.3.2 above Rs. 9,09,421 (ii) Addition as discussed in paragraph 3.2.3. above Rs. 2,79,398 (iii) Addition as discussed in paragraph 3.3.3 above Rs. 19,89,240 (iv) Addition as discussed in paragraph 3.4.3 Rs. 12,05,600 Total income Rs. 48,54,604 S....
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....cal discussion stated that the average weight per piece of all the items cannot work out to 320 cms. In this regard, it is submitted that we have the drawing of that piece available with us and this drawing has been approved by the chartered engineer by taking into consi deration the same piece as taken by the Assessing Officer, the weight comes to 350 gms to 370 gms per piece and how the Assessing Officer is stating that the weight should be far less is not understand able merely on the basis of certain theoretical working. b. The Assessing Officer though has reproduced certain so called standard results on the basis of theoretical working but no weight per piece has been calculated and neither any technical report was called from the assessee and, thus, the reliance on such theoretical basis is not in order. Besides, the Assessing Officer has taken into consideration, perhaps, the size of front portion without the back portion and steel washer, which is part of the piece. Some samples of drawing certified by chartered engineer, which clearly shows weight of items is being produced herewith along with sample pieces exported. (pages 9 and 10). c. The second basis of adoption of t....
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....application for admission of additional evidence in sup port of his submissions as under : 1. We have to very humbly submit in the above said case that we are filing the separate submission and paper books which are sup porting of our arguments. It may be stated that issue in the above appeal mainly relates to the wastage generated from the manufacturing activity in respect of different auto parts manufactured by us and during the course of assessment proceedings, we had given quantitative details in weight giving the figures of irrecoverable wastage from the manufacturing activity. 2. However, there have been certain calculations mistakes both by the Assessing Officer and the assessee and we have amended the figures of wastage by taking correct figures and which were slightly different on the basis of which addition have been made by the Assessing Officer. In order to further dispel of any doubts, we have enclosed in the paper book report of the chartered engineer in respect of different auto parts manufactured during the year and this report of the chartered engineer are very much necessary to decide the issue in hand in order to determine the wastage. Then, again the Assessing....
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....arned counsel for the assessee mainly submitted that the assessee was maintaining excise record which has been accepted by the excise authorities. It was further stated that the assessee was manufacturing specific auto parts for export purposes and was trying to maintain good quality so that ultimate brand name can be built up and initial efforts have brought dividend in the latter years where the assessee's brand has got wider approval. Further son of the assessee, Shri Gurpreet Singh was also present in the court and he along with learned counsel for the assessee demonstrated various parts manufactured by the assessee and tried to explain how the wastage and invisible losses were higher but still within the norms prescribed by the Government body. It was further explained that one of the reason the Assessing Officer has not been able to appreciate actual wastage was because raw material was being purchased in terms of weight but the final product was sold in terms of pieces. He referred to the Government norms which were given before the lower authorities also and tried to justify the wastages. 15. On the other hand, the learned Departmental representative for the Revenue su....