TMI Blog2003 (3) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is very low. (b) The assessee is claiming higher wages than others. The Assessing Officer 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 1000 bidis. The Assessing Officer 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 Assessing Officer observed that there was an agreement for payment of wages at Rs. 12.50 per 1000 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 G.P. rate, he drew our attention to the details in assessee's submissions to the Assessing Officer on pages 9 to 15 of the paper book and submitted that the assessee had brought to the notice of the Assessing Officer that the selling price of its bidis was comparatively lower than the selling price of the other two concerns. The news paper cuttings are given on pages 46 to 49 of the paper book and on page 11 the assessee has analysed that the difference in G.P. 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts 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 Thakur Sable Desai Bidi Works Savdekar Waghire Bidi ------------------------------------------------------------------------------------ Wages 3,55,03,390 13,21,63,831 18,79,36,330 2,21,23,108 Commission 24,20,823 56,80,748 - Sales 17,22,44,444 51,47,51,338 56,55,67,000 7,89,42,122 Percentage 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 Assessing Officer had made a mistake in not considering the production commission of the other concerns and by adopting wrong figure of wages, the conclusion was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 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 1akhs, 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 Assessing Officer that all these payments were genuine. He drew our attention to the entire evidence from pages 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 Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wages claimed by the assessee. As regards the addition on account of alleged low G.P. 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 G.P. in the preceding years placed at page 119 of the paper book, it is noted that the G.P. has never been constant. In assessment year 1987-88 a G.P. 16.54% was declared and accepted on turnover of Rs. 8,47,11,512. In assessment year 1988-89 a G.P. of 16.02% was declared and accepted on turnover of Rs. 10,59,77,270. Thus, it is clear that G.P. 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 Assessing Officer has not found out any specific defect for rejecting such books of account, merely because there is slight fluctuation in G.P. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 Assessing Officer was supplied to the Assessing Officer from time to time and as per "Noting of hearing from time to time" referred to supra. On 21-12-1992 "Ledger account of the labour for wages" was produced before the Assessing Officer. From the same sheet, we also find that on 7-12-1992 "Ledger account of wages payable individual party wise" was also filed. On 19-1-1993, the assessee also filed "ledger accounts of labour in support of wages and registers maintained by the commission agents". On 10-2-1993 the assessee filed "daily bidi collection reports in respect of all labours". We asked the ld. CIT (DR) to produce the order sheet from the records of the Assessing Officer, 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 Assessing Officer. In any case, since the assessee has as many as 508 production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years consumption of tobacco is uniform at 224 gms. Since this figure was constant, there was a reason to hold the varying rate of consumption of leaves can only be on account of varying nature of this product. The consumption of 1082 kgs. was shown in the assessment year 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 case of B.F. Varghese v. State of Kerala [1969] 72 ITR 726 (Ker.), International Forest Co.'s and R.B. Bansilal Abirchand Spg. Wvg. Mills Ltd. 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 Assessing Officer 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dated 12-2-2001, 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, 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 Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. and Uday Mistanna Bhandar Complex 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. has two aspects. One aspect is that interest under section 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 promulgamating 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. has become the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these papers first of all do not constitute the additional evidence because either they have been submitted before the Assessing Officer or the information therein was available in our accounts. However, some of them may constitute the additional evidences. 30. Our difficulty is that the counsel who attended before the Assessing Officer 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 pages 50 to 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 honour. 31. The detail of documents which are sought to be admitted as additional evidence is enumerated as under: --------------------------------------------------------------------------------------- Sr. No. Particulars Page No --------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the months of December 1989, January 1990 and February 1990 have been paid in three instalments in the months of April, May and June 1990 and further action be dropped. 14. Copy of letter of Assistant Commissioner of Labour, 109 Karimnagar stating that payment of wages with excess of bidi leaves amount for the period Dec. 1989, January 1990 and February 1990 has been verified by him from the wages register for the period April, May and June 1990. 15. Copy of Certificate issued by Surpunch of Grampanchayat 110 to 111 Mayal Distt. Karimnagar, confirming payment of wages with bidi leaves for the month 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. 16. Copy of certificate issued by Surpunch of Grampanchayat 112 to 113 Kodmial Distt. Karimnagar, confirming payment of wages With bidi leaves for the month of December 1989 to March 1990 at the rate of Rs. 34.65 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the party to produce the evidence but is dependent solely on 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 Roshan Lal when he was questioned by the Members of the Tribunal at the hearing of the appeal. It must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r thereafter up to the date of assessment. Besides, the documents at pages 107, 108, 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 pages 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 page 118 is leaves consumption statement of various years and on page 116 G.P. analysis is there which was not before the Assessing Officer. 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 Assessing Officer 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), be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a comparative table to give necessary figures of other concerns cited above to justify or cumpare the low profit of the assessee vis-a-vis other concerns." Since entire issue is being set aside, so Assessing Officer will adjudicate upon this also afresh. Needless to mention, the Assessing Officer 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 year as compared to the year under consideration, which was 0.769 grams in assessment year 1989-90 and it is 1.003 grams in the assessment year 199091 and again it is 0.885 grams in assessment year 1991-92 as per chart enclosed at page 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 consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (U.E. Trimal) Asstt. CIT Cir. 2(3), Pune" As per Pune Bench decision (authored by Accountant Member) in ITA No. 381/PN/1993 dated 20th August, 2001, while not applying the ratio of Hon'ble Supreme Court decision in the case of 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 Assessing Officer 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. 247 ITR 209. A perusal of the order reveals that in the order itself the Assessing Officer has specifically calculated interest under section 234B at Rs. 69,840. So, it is not a case where the Assessing Officer has specifically omitted to charge interest. Accordingly, the ratio laid down by the Hon'ble Supreme Court in Ranchi Club Ltd. is of no assistance to the assessee. This ground is accordingly dismissed." 40. Similarly, in ITA No. 264/PN/94 dated 14-8-2001, same view has been upheld. Yet in another case, in ITA No. 1078/PN/ 1994 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 Accountant Member and the case in hand, 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 Corpn. 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 discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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. THIRD MEMBER ORDER Per Shri M.K. Chaturvedi, Vice President.--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 Assessing Officer 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 Assessing Officer 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 accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same are not available, therefore, all these papers should be considered as additional evidence. 5. The Learned Accountant Member restored the issue to the file of Assessing Officer for the limited purposes of verifying the facts and figures submitted by the learned counsel. He directed the Assessing Officer to call for a few wage registers for test check and re-adjudicate on the issue, after giving an opportunity of being heard to the assessee. Learned Judicial Member 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 Assessing Officer and these were produced before the Tribunal for the first time, as such the learned JM directed the Assessing Officer to verify the correctness and authenticity of the said documents. It was further stated in the order that after ascertaining the veracity, Assessing Officer 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 10. I have perused the reasoning given by the learned JM in this regard. I have seen the order of assessment. I find that the Assessing Officer at his own made the calculation in the body of the order. Once the interest is computed by the Assessing Officer 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 Assessing Officer 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 [2001] 252 ITR 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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