TMI Blog2015 (3) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of duplication of attendance cards in respect of 35 workers but still he did not mention that this was a mistake. Similarly even after having records in respect of payment to contractor no comments were offered. However, the learned Commissioner of Income- tax (Appeals) mentioned that 26 persons have left job in the month of August and 14 in the month of September and this was verified by the AO but the same does not explain the discrepancy. We fail to understand if the workers have left and that fact has been verified then how it can be said that the assessee has failed to explain the discrepancy. Finally the assessee has produced wages and salary register for verification and for which no comments were given and even the CIT (Appeals) has not given any findings. In our opinion, the assessee has successfully explained the existence of extra attendance cards in respect of the number of the cards found during the survey but however, at the same time if we consider the case of 26 persons who had left the job in the month of August and September 2008 full explanation is not available. Therefore inflation of salary and wages cannot be ruled out totally. Ends of justice would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T. A. No. 253/Chd/2013-Assessee's appeal 2. In this appeal, the assessee has raised the following grounds : 1. (a) That the worthy Commissioner of Income-tax (Appeals)-II, Ludhiana, has erred in holding that the reasonable opportunity was provided to the appellant during the course of assessment proceedings as per finding given by him in paragraph 3.4 of his order. (b) That the worthy Commissioner of Income-tax (Appeals) has erred in not considering the fact that on all the dates as mentioned by the learned Assessing Officer, the assessee has been making the compliances, filing requisite details from time to time and photo copies of the impounded documents (excluding the list of the stock drawn at the time of survey and the attendance cards of the workers) were given on December 19, 2011 and the verification started there after, on some dates and for which the due compliance was made. (c) That the worthy Commissioner of Income-tax (Appeals) has ignored the fact that show-cause notice had been issued on November 29, 2011 and the delay in issuing the show-cause notice was not attributable to the assessee, since the process of ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) to 7 (xi) starting from page 34 of the order and the above confirmation of the part addition is against the facts and circumstances as under : (a) The finding of the worthy Commissioner of Income-tax (Appeals) regarding the alleged sales outside the books of account as given at page 45 paragraph (i) is totally against the finding given in the remand report of the learned Assessing Officer that all such sales as per C-Form register had been found to be matching with the sales reflected in the books of account which findings have been reproduced in paragraph 9.6 at page 40 of the order. (b) The worthy Commissioner of Income-tax (Appeals) has also erred in not considering the remand report wherein, no objection has been raised by the learned Assessing Officer with regard to the explanation/evidence tendered by the appellant in respect of the discrepancies in the valuation of stock as made by the learned Assessing Officer earlier while framing the assessment and the observation of the Commissioner of Income-tax (Appeals) at page 45 paragraph (ii) is against the facts and circumstances of the case. (c) The worthy Commissioner of Income-tax (Appeals) has also erred in giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer. The contention of the appellant that reasonable opportunity was not provided is therefore without any basis and is not sustainable. These grounds of appeal are accordingly dismissed. It was mainly contended with reference to pages 812 to 819 which is a copy of the noting sheet during assessment proceedings that the assessee had made appearance on whatever dates given by the Assessing Officer and filed various details as called for which have also been included in the paper book. It was contended that a survey was conducted in the premises of the assessee on September 24, 2008, but various documents impounded during survey were examined from December 15, 2011. Before that various dates were granted to the assessee but the Assessing Officer did not bother to look at the documents. The issue regarding value of closing stock was never confronted to the assessee and a final questionnaire was issued on December 29, 2011 and the assessee was asked to give response on December 30, 2011. The assessee appeared at about 12 o'clock on December 30, 2011, with a reply which was not taken and the assessment order was finalised. Therefore finding of the learned Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the hon'ble Punjab and Haryana High Court in the case of Jamna Das Rameshwar Das v. CIT [1952] 21 ITR 109 (P H) that there cannot be any estoppel in such matters, therefore the Revenue has right to investigate the issue in each case on its own merits. Then the Assessing Officer went on to examine the scheme and noted that the scheme was applicable at post production stage and that an industry becomes eligible only after same is started. It is only the maximum limit which has been fixed with reference to investment of capital. The scheme provided for entitlement of 20 per cent. of the amount of investment subject to limit of ₹ 30 lakhs which means that the amount was given on percentage basis but the same was not to compensate capital expenditure. The Scheme was applicable to whole of the State and not in a specific area. He further relied on various decisions including the decision of the hon'ble Supreme Court in the case of Sahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253 (SC) and held that subsidy received was of a Revenue nature and accordingly same was subject to tax. 9. On appeal before the learned Commissioner of Income-tax (Appeals) copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Learned counsel for the assessee had taken a short adjournment and later on pointed out that it has distinguishing features in the case of Vardhman Acrylics Ltd v. Addl. CIT. He submitted that in the case of Vardhman Acrylics Ltd v. Addl. CIT the subsidy was related to sale tax subsidy which is definitely for augmentation of profits. Further there were certain features which were required to be complied with and features were contribution of 2 per cent. of the sales tax incentives and 3 per cent. of deferred amount to Gokul Gram Yojna. In any case the decision in the case of Vardhman Acrylics Ltd v. Addl. CIT was taken by the Bench on similar issue in the assessee's own case in the earlier years. 12. On the other hand, the learned Departmental representative for the Revenue strongly supported the order of the learned Commissioner of Income-tax (Appeals) and submitted that subsidy was not restricted to a particular area. She referred to various observations by the learned Commissioner of Income-tax (Appeals) and supported the same. She also relied on the decisions of Abhishek Industries Ltd. [2006] 286 ITR 1 (P H) and CIT v. Kisan Sahkari Chini Mills Ltd. [2009] 318 ITR 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered as export oriented unit on June 8, 1999, which becomes clear from the certificate of registration placed at page 871 of paper book. Page 876 gives list of machinery installed by the assessee. Thus it becomes clear that subsidy was provided to the export oriented unit under which category the assessee became eligible and subsidy was for installation of plant and machinery which has been installed by the assessee. 14. Though recently we have held in case of Vardhman Acrylics Ltd. where the assessee has received sales tax subsidy from the Government of Gujarat that same is in the nature of revenue subsidy but that decision is distinguishable because firstly nature of the subsidy defined as capital subsidy which was granted against the installation of plant and machinery. In case of Vardhman Acrylics Ltd. the nature of subsidy was sales tax subsidy which is payable from year to year by way of exemption from sales tax whereas in the case before us, it is one-time incentive for setting up of the industry. The subsidy has been received as per Industrial Policy of the Government of Punjab 1996. No conditions were imposed by the Government of Punjab for grant of subsidy except ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised through ground No. 4 pertains to addition on account of various workers employed by the assessee. The Assessing Officer had made addition of ₹ 86,57,239 which has been reduced by the learned Commissioner of Income-tax (Appeals) to ₹ 43,69,886. The assessee has filed the appeal through ground No. 4 for this addition and the Revenue has challenged the order of the learned Commissioner of Income-tax (Appeals) for deleting the part of the addition. 17. Brief facts of the case in respect of this issue are that during survey employees drawing salary and wages were physically counted and it was found that 122 persons were present. Up to the date of survey total salary and wages paid was ₹ 22,81,250 for which a list has been given by the Assessing Officer at pages 12 to 15 of assessment order. On the basis of this list average salary/wages per person was calculated at ₹ 18,699. Further during survey some more attendance cards were found and such workers were not present. For such workers a list of 141 persons has been given at pages 15 to 18 of the assessment order. During the assessment proceedings the Assessing Officer observed that salary and wages wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the cards, some of the cards appear to be for the earlier year. Even otherwise, for getting certain job work, we have engaged contractors as and when required for the purpose of business, who would supply the labour to us and their attendance cards were also found along with attendance cards relating to our business and, such payments to the contractors have been made from the books of account after deducting the TDS, wherever, applicable, detail of such payment to the contractors for deployment of the labour is being filed herewith for the financial year 2008-09. (iv) Therefore, the estimation of any payment outside the books of account on the basis of such attendance cards as unaccounted payment of salary and wages is wholly unjustified and the formula as developed by the Assessing Officer will not stand to test of evidence as furnished by us. Even otherwise, it may be stated that the very basis of estimation is not justified because, the survey was conducted on September 26, 2008 and any expenditure under section 69C could have been estimated only up to the date of survey and not of any later date and the Assessing Officer is not an astrologer to predict s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stly it was contended that salary wages were paid as per register and for this the assessee filed copies of the salary and wages register. On this issue also no further comments have been made. This report was given to the assessee for comments. The assessee furnished the following comments : (a) Duplicate (35 workers)-It was submitted that the Assessing Officer has accepted this position because no comments have been given in this regard. (b) Workers working under the contractor-It was submitted that all the evidences in this regard were furnished before the Assessing Officer and the Assessing Officer has simply noted the submissions and has not offered any comments. Therefore this plea should be accepted. (c) Works to whom no wages paid-In this regard also it was submitted that necessary evidence was furnished before the Assessing Officer who has verified the same. (d) Workers who left the job in August and September-It was submitted that necessary evidence was filed before the Assessing Officer. 19. The learned Commissioner of Income-tax (Appeals) examined this position and ultimately accepted the contention in respect of 35 workers that this was because of duplic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rkers who had left the job and production of salary and wages register would show that there was no wages or salary paid outside the register. The learned Commissioner of Income-tax (Appeals) without rejecting the record in the form of salary and wages register, has confirmed the disallowance partly on the basis of assumption which is not justified in the eye of law. 21. On the other hand, the learned Departmental representative for the Revenue carried us through the contents of the assessment order and strongly relied on the same. 22. We have gone through the rival submissions carefully and find that the Assessing Officer has clearly accepted the position in respect of duplication of attendance cards in respect of 35 workers but still he did not mention that this was a mistake. Similarly even after having records in respect of payment to contractor no comments were offered. Same is the case with reference to other points raised by the assessee. Though the learned Commissioner of Income-tax (Appeals) has accepted the duplicity of attendance cards in respect of 35 persons, the payment through contractor in cases of 13 workers and no payments in case of paltry attendance 10 out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prepared with the support of the accountant of the assessee and from purchase bills. The detail of valuation has been incorporated at pages 27 to 52. According to the Assessing Officer the total closing stock as per this valuation was ₹ 4,93,12,586 whereas as per trading account furnished by the assessee on the date of survey, closing stock should be ₹ 7,96,82,674. This means there was a shortage of closing stock to the tune of ₹ 3,03,70,088. According to the Assessing Officer this clearly proves that the assessee has indulged in unaccounted sales which is not recorded in the books of account. According to the Assessing Officer this was further proved because the assessee had employed certain workers outside the books of account because of availability of extra attendance cards. Therefore unaccounted sales were determined at which gross profit rate of 24.12 per cent. for the assessment year 2009-10 was applied. Calculation in this regards is as under : The sales as per profit and loss account is ₹ 21,59,37,128 and the total salary and wages expenses is ₹ 1,07,83,018. This means that for every one rupee of salary/wages there is sales of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r discrepancies were pointed out. Finally it was contended that the assessee has participated in a tender with the Government of Madhya Pradesh and ultimately a contract was signed with Madhya Pradesh Laghu Udyog Nigam Ltd. Central procurement agency of Madhya Pradesh Government. The Government of Madhya Pradesh through various Departments announced scheme of distribution of bicycles for school girl students as a welfare measures and this order was placed on the assessee for that purpose. Later on because of changed circumstances the orders were revised by various schools which were numbering nearly 2,000 in 48 districts of Madhya Pradesh. Since bicycles were sold through different bills and copies of the same were enclosed showing that same have been accounted for in the books of account. Ultimately stock amounting to ₹ 2,24,71,842 was not lifted by the Madhya Pradesh Government and sales to this extent was reversed during the year in the sales account. Since the assessee had entered into contract for supply of cycles in the next years, therefore this stock was kept in Madhya Pradesh only and that stock was valued at ₹ 1,75,00,000 after reducing gross profit rate of 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee further con tended that due to reduction in the purchase order placed by the Madhya Pradesh Government, the bicycles sent to Madhya Pradesh were not lifted by the Madhya Pradesh Government. Since the assessee was hoping to get further orders from the Madhya Pradesh Govern ment, the assessee did not lift the material/bicycles and stocked the same at Madhya Pradesh. In support of the above contention, the assessee has filed photocopies of the initial orders placed by the Madhya Pradesh Government, various amendments reducing orders, next year rate contract issued with Madhya Pradesh Government and agreement signed with agent-cum-distributor and stock audit report from chartered accountants deputed by the assessee's bankers. The assessee has also filed photocopies of the sales bills raised. In this regard, the main contention of the assessee is that due to reduction of supply orders from the Madhya Pradesh Government, 12,683 bicycles valuing ₹ 2,24,71,842 remained unsold and the same were lying with the agent at Madhya Pradesh. In support of this contention, the assessee has filed a copy of the settlement reached between M/s. Safari Bikes Ltd., Ludhiana, and the agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the bicycles comes to ₹ 1,75,00,000 out of sales of ₹ 2,24,71,842 by reducing gross profit of 22 per cent. (ii) Thus, the difference of ₹ 3,03,70,088 stands reduced by ₹ 1,75,00,000 and the balance difference remain to the tune of ₹ 1,28,00,000 and for the balance difference, we have submitted that the valuation of stock in respect of 248 items out of 1,202 items of stock had not been done correctly and for which, it has been observed by the Assessing Officer that we have filed the photostat copies of all the purchase and sale bills and they are contained from pages 323 to 414 of the paper book submitted before your goodself also. (iii) The official of the Department had verified such rates during the course of remand proceedings and nothing adverse has been stated in the remand report. Therefore, from the above said submis sion of the assessee, it is clear that the addition as made by the Assessing Officer is unjustified and same may, please be deleted. (iv) Lastly, it may be submitted that the Assessing Officer, had based to addition on the basis of alleged sales outside the books of account, inferred from the C-Forms register coupled wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary and wages have been revised by him therefore he correspondingly reduced the sales. Ultimately the addition on account of profit was also reduced in the following paragraph : Now coming to the issue of computation of sales outside the books of account. In this regard the Assessing Officer has computed the total sales at ₹ 38,91,93,945 on the basis of the salary worked out in paragraph 9.0 of the order at ₹ 1,94,40,257. As discussed in paragraph 8 above, this salary/wages have been computed at ₹ 1,51,52,904. Based on this recomputation of salary and applying the formula applied by the Assessing Officer, the total sales works out at ₹ 30,33,61,138. The unaccounted sales accordingly work out to ₹ 8,74,24,010 (Rs. 30,33,61,138 minus ₹ 21,59,37,128). Applying the gross profit rate of 24.42 per cent. the unaccounted income works out to ₹ 2,13,48,943. This amount is held to be unaccounted income of the appellant from unaccounted sales. This ground of appeal is accordingly partly allowed. The assessee has raised ground Nos. 5, 6 and 7 regarding addition confirmed by the learned Commissioner of Income-tax (Appeals) in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 1,000 items in a factory spread over at about 7,000 sq.yd. and this becomes clear that from the fact that most of the items taken in the stock list, are in round figures. Later on during the assessment proceedings, the accountant was asked to give rates of various items without specifying the size and the quality of the items and stock has been valued on the basis of such rates. It was pointed out that there can be a difference in rates of various items depending on specification size and stage of production. For example, a frame of raw condition may cost ₹ 200 and with phosphate coating the same would cost ₹ 250 and after painting and finishing operation this will cost ₹ 400. Therefore even if the item remain same, i.e., frame prices can be different. When ultimately list was confronted to the assessee, it was pointed out that at least in cases of 248 items out of total 1,202 items, the rates have not been applied correctly. In this regard copies of the bills for the rates applied by the Department for actual cost filed before the Assessing Officer during assessment proceedings at page 323 to 414 of paper book. The Assessing Officer has not given any adverse co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is considered then stock would come to ₹ 3,02,76,887 which would explain the shortage in stock. From this fact it becomes clear that there is no shortage of stock and there was no occasion to estimate undisclosed sales and ultimately application of gross profit rate. While concluding his argument on this issue he emphasised that this addition has been made purely on conjectures and surmises and no evidence was found during survey or sales outside the books of account. 31. On the other hand, the learned Departmental representative for the Revenue submitted that the assessee was specifically asked during survey that whether any stock was lying anywhere other than the factory premises and the assessee has clearly stated that there was no other stock except for whatever was lying in the factory premises. He also referred to various observations of the Assessing Officer and the learned Commissioner of Income-tax (Appeals) and strongly supported the orders of the Assessing Officer and the learned Commissioner of Income-tax (Appeals) in this regard. 32. In the rejoinder learned counsel for the assessee submitted that firstly when the assessee is awake for whole of the night ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the C-Forms have been reconciled with the sales made in the earlier years, the Assessing Officer in this regard mentioned in the remand report which has been reproduced by the learned Commissioner of Income-tax (Appeals) in paragraph 9.6 and the relevant portion reads as under : To prove the contention that all the sales which have been treated as unverified by the Assessing Officer, the assessee has filed copies of the ledgers accounts appearing in the books of account of the assessee of the different parties in respect of whom sales have been treated as unverified. In these ledger accounts, the assessee has shown the details of issue of particular sale bills, amount involved and payments received in respect of the same. These ledger accounts have been examined which shows the details of bills raised and payments received. The assessee has also filed photocopies of the relevant CForms which matches with the sales effected. From the highlighted portion it becomes clear that from the details filed by the assessee, C-Forms list match with the sales effected by the assessee. Despite this remand report, the learned Commissioner of Income-tax (Appeals) made follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee received orders from Government of Madhya Pradesh for supply of bicycles of various sizes on account of various schemes and one sample order is placed at paper book at page 230 of paper book. Bicycles were supplied to various offices as per the directions of the Government in various locations. Copies of bills are placed at pages 231 to 257. These bills show that bicycles have been delivered to Chief Executive Officer, Jila, (Satna), Burhanpur, Satna, Rewa Morena, Seoni and various other locations. Later on some of the orders were amended and in this regard certain documents have been filed at pages 258 to 300 of the paper book which are the copies of supply order amendment . For example at page 258 there is supply order amendment which shows that original order for bicycles of ladies 18 was 3,054 units which was amended to 2,841 units. The original order was indent No. 1683 dated July 17, 2007. Thus it becomes clear that from original order some quantity was reduced. Since the assessee was assured of further supply and fresh agreement was entered (copy of which is placed at pages 306 to 310 which is dated June 2, 2008). Therefore obviously the assessee may not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation. Above facts clearly show that all the ingredients because of which the Assessing Officer suspected that the assessee has indulged in unaccounted sales, are not there. The first ingredient in this regard is impounding of list of C-Form which was matched by the assessee with the actual sales conducted in the earlier years. Secondly there was no proper application of the rates for which proper evidence was furnished and proper objections were filed before the Assessing Officer which was simply rejected because same were numerous. Thirdly some stock was lying in Madhya Pradesh for which proper evidence has been filed. One more aspect was considered for determining of undisclosed sales and it was that the assessee had employed more workers then actually shown in the books of account and for which addition of ₹ 86,57,239 was made on that account which was reduced to ₹ 43,69,886 by the learned Commissioner of Income-tax (Appeals) because he accepted the contention regarding duplication of workers and contractor workers. However, we have already adjudicated this ground in abovenoted paragraphs and addition has been reduced to only ₹ 8 lakhs which was made only ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
