9911796707
TMI Blog2003 (3) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee 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 exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er considering this, the actual wages paid to the labour 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above contention of the Assessing Officer is not correct. 9. Referring to para 13 of the assessment order where the Assessing Officer 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 his reply to the Assessing Officer is based on the statistics submitted by the Assessing Officer of the various concerns and, therefore, this is not correct. 10. Referring to para 15 of the assessment order where the Assessing Officer has observed that the assessee's cost of manufacturing 1000 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 Assessing Officer had supplied the assessee-firm with the trading accounts of M/s. Thakur Savdekar & M/s. Sable Waghire. The Assessing Officer 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 Assessing Officer is on mis-apprehension of fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been a tremendous problem for the assessee and in fact on the last hearing, the Assessing Officer 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 Assessing Officer was supplied from time to time. 13. Shri Rajkumar, the learned CIT (DR) strongly supported the orders of the authorities below. He drew our attention to para 27 of the assessment order and submitted that the Assessing Officer 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 Income-tax Appellate Tribunal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, the Honble 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 reasonably 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 income-tax 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of leaves consumption. The Assessing Officer gave the following reasons for making the impugned addition: "In absence of such records assessee's claim of 1000 gms. of leaves for production of 1000 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 1000 bidis where assessee has supplied the leaves. The assessee has claimed to have consumed 2208126 kgs. of leaves for the production of 2200998800 bidis. Disallowin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 G.P. 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 Assessing Officer reproduced supra in para 16, it is noted that the Assessing Officer has made the impugned addition as he found the consumption excessive as compared to other manufacturers, 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 .786 gms. to 1.082 gms. in the earlier years and the same has been accepted. The bidi leaves are agricultural product and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 Ranchi Club Ltd.'s case 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 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 Assessing Officer but in that regard also I do not agree with further stipulations and restrictions as imposed by learned A.M. I give my reasons for the same as under: 28. Assessment in this case was made on 15-3-1993 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 dated 25-2-1994. 29. In order to contest first addition of Rs. 23,64,940 made by the Assessing Officer 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 Assessing Officer, which is challenged by the revenue, the assessee has filed paper book containing pages 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 forms part of the record of the department other than page Nos. 50 to 119." Further to this, assessee filed an application under Rule 29 of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 90 to 94 purchased at Rs. 35.86 per kg by the assessee during 1990 season 4. Copies of Gherao, Dharna and Protest incidents 95 to 97 reported in local news papers at various places in Andhra Pradesh 5. Copy of letter addressed by labour union demanding 98 labour payment for the month of December 1989 and threatening strike 6. Copy of letter addressed by labour union demanding 99 labour payment for the month of December 1989, Ja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 90. 13. Copy of letter dated 27-7-1991 addressed to Assistant 108 Commissioner of Labour, Karimnagar in reply to his letter dated 23-7-1991 informing him that the wages 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 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; of wages with bidi leaves payments made 19. Copy of details giving consumption of bidi leaves 118 per 1000 bid is for 1986-87 to 1992-93 20. Comparative gross profit chart for assessment years 119 1987-88 to 1992-93 --------------------------------------------------------------------------------------- 32. 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 off 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal 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 una1.lthorised 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 provisions and case law discussed above, I proceed to decide the application of the assessee made under rule 29 of the I.T.A.T. 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 Assessing Officer and details and materials contained in these documents can certainly support pleas taken by the assessee which are very relevant also. The learned D.R. ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered/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 Assessing Officer for re-adjudication of the issue/additions involved afresh with further direction to the assessee to furnish all the fresh documents furnished before this Bench before the Assessing Officer, 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 and March, 1990 up to 31-3-1990 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer. It is also directed that the Assessing Officer 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 A.M. for admission of such ground being a legal one. But so far as, deletion of interest component by applying the precedent of rune Bench decision is concerned I do not agree with the learned A.M. on this issue and my reasons for the same are as under: 39. On perusal of page 10 of the assessment order, I find the following narration under the caption "Tax calculations". "Tax Calculations: Tax on above income &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; -------------- Rs. 7,75,950 -------------- Net payable Rs. 18,25,005 &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer has specifically omitted to charge the interest. Accordingly the ratio laid down by the Supreme Court decision in the case of Ranchi Club Ltd. 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 Accountant on Tribunal's decision in the case of Taparia Tools Ltd., for the assessment years 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 assessment year 1990-91 as per para 16 of the order which reads as under: "16. We have perused the assessment order and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 account of consumption of leaves is related and inter-linked 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 rune Bench." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 March 1990, up to 31-3-1990 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. Assessing Officer was empowered to collect necessary information and evidence even by issuing commission or to have a report of the Assessing Officer concerned who had jurisdiction over the area. The learned JM also took into conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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 ITR 578 (Punj. & Har.) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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