TMI Blog2011 (11) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by the Department cannot be departed. - The impugned addition has been made merely on conjectures, surmises and guesswork. 2.1. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) r.w.s. 145(3) of the I.T. Act, 1961 dated 28/12/2007 were that the assessee-company is in the business of processing of Art Silk Fabrics. At the start of the assessment order, it was recorded by the Assessing Officer that on the turnover of ₹ 4,86,80,174/- the appellant had shown ratio of Gross Profit at 19.02% during the year under consideration. As against that on the turnover of ₹ 3,97,01,608/-, the ratio of Gross Profit disclosed by the assessee at 17.83% during preceding assessment year. The Learned Authorised Representative of the assessee has, therefore, pointed out at this juncture that the turnover as well as the Gross Profit ratio, both were better in the assessment year under appeal. 2.1. The Assessing Officer has issued a show-cause notice asking the assessee to provide quantitative details of stock and to inform whether day-to-day register was maintained or not. The assessee has furnished an inventory of closing stock as follows:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue is determined in the manner prescribed u/s 144 of the I.T.Act. The assessee has processed 7181664 meters during the year under consideration. Taking into consideration 360 days as working days per year, the average of process of cloth per day works out to 19949 meters. It is common knowledge that to complete a circle of process in textile processing unit, it takes at least five days. Therefore, a lot of grey cloth put to process on first day comes out on the 6th day duly processed. Therefore, it can be held that the assessee must have five days work-in-process as on 31.03.2005. This works out to 19949 meters x 5 days = 99745 meters. The average cost of processing charges per meter works out at ₹ 5.49 (Gross receipt Gross Profit = cost/meter processed = 48680174 9257502 = 39422672 / 7181664 = ₹ 5.49). Considering the various stages of process, it would be reasonable to adopt 50% i.e. ₹ 2.75/- per meter for arriving at value of work-in-process. Therefore, the closing stock of work-in-process. Therefore, the closing stock of work-in-process in this case is worked out at ₹ 2,74,298/- (99745 meters x ₹ 2.75-). Since the assessee company itself has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating certain percentage on adopting a hypothetical method. It was therefore suggested by the parties that considering the smallness of the quantum in question, i.e. ₹ 1,82,338/-, it is better to keep the brevity in mind and determine a reasonable figure of addition. By accepting the said suggestion, we have perused the relevant paragraph of the Assessing Officer (already reproduced supra) and have noticed that the Assessing Officer has worked out an average of cloth processing per day at 19,949 meters. Then the Assessing Officer had also opined on the basis of a common knowledge that to complete a circle of processing of textile, it generally takes about five days. Therefore in Assessing Officer s opinion about 99,745 meters cloth would be under work-in-progress. On that estimated meters of cloth he has further applied an average of cost of processing charges at ₹ 2.75/- per meter. The Learned Authorised Representative of the assessee has therefore contested that the working of the availability of cloth in meters as work-in-process was a hypothetical figure. As well as, the cost applied at ₹ 2.75 per meter was also merely an estimated average cost alleged to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... August and November. This is impossibility. There cannot be negative balance of coal. Hence, the addition made by the A.O. In respect of shortage of coal is from conservative and correct. The addition made by the A.O. is therefore, confirmed. This ground of appeal is dismissed. 7. We have heard both the sides on this issue. The preliminary argument of Learned Authorised Representative of the assessee was that the purchase and consumption of the coal was duly recorded in the books of account of the assessee and on that basis the stock was valued at the end of the accounting period at ₹ 11,01,223/-. However the strong contention of Learned Departmental Representative was that on verification of quantitative details of purchase, it was evident that there was a shortfall in the available quantity of coal for two months. That shortfall was admitted by the assessee and no convincing reason of the said shortfall was given to the Assessing Officer. The assessee has filed a chart of month-wise consumption of coal vis- -vis month-wise purchase of the coal. That chart as submitted by the assessee has itself disclosed the impugned deficit of stock of coal. Even at this stage of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not on the basis of any volume of sale but was on the negotiation against bad quality of job or loss of material of the parties happened in our factory due to carelessness of the technicians. Hence, seeing the confirmations it can be proved the genuineness of the compensation given to the parties in the form of discount. Finally we have done the business with profit and better gross profit compared to earlier years. On this ground we beg to state that allow the expenditures in the account of discount which is just 0.94% of the overall job income. 8.2. However, the Assessing Officer was not convinced and held that in respect of the confirmations produced by the assessee, the claim was admissible and in respect of remaining parties in the absence of confirmation the claim of discount expenses remained unexplained. The Assessing Officer has thereafter on that basis worked out a party-wise discount at ₹ 2,41,265/- and taxed in the hands of the assessee. The said addition was challenged before the first appellate authority who has affirmed the addition barring an amount of ₹ 17,035/- which was found to be an amount representing opening balance of the said party. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March-2005. On these facts, now this issue stood settled by the decision in the case of CIT v/s. Aimil Ltd. 321 ITR 508 (Del), the Hon'ble Court has applied the decision of CIT v/s. Vinay Cement CIT vs. Vinay Cement Ltd. 313 ITR 01 (SC) and held that where the assessee had deposited employer s contribution as well as employees contribution towards PF ESI after the due date, as prescribed under the relevant Act but before the due date of filing of the return under I.T. Act, then no disallowance could be made in view of the provisions of section 43-B of the I.T.Act. In a latest decision of ITAT D Bench Ahmedabad in the case of Agew Steel Manufacturers Pvt.Ltd. vs. Dy.CIT bearing ITA No.488/Ahd/2011 order dated 22/07/2011 wherein one of us, i.e. JM, is the co-signatory, the provisions of sections 43-B, 2(24)(x) and 36(1)(va) have been considered in the following manner:- 5. We have heard both the parties and gone through the facts of the case as also the aforesaid decisions. As regards employer s and employees contribution towards PF , we find that the ITAT Ahmedabad Benches have been consistently following the decision of the Hon ble Delhi High Court in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that sec. 2(24)(x) provides that amounts received by an assessee from employees towards PF contributions etc. shall be income . S. 36 (1) (va) provides that if such sums are contributed to the employees account in the relevant fund on or before the due date specified in the PF legislation, the assessee shall be entitled to a deduction. The second Proviso to s. 43B (b) provided that any sum paid by the assessee as an employer by way of contribution to any provident fund shall be allowed as a deduction only if paid on or before the due date specified in 36(1)(va) of the Act. After the omission of the second Proviso w.e.f 1.4.2004, the deduction is allowable under the first Proviso if the payment is made on or before the due date for furnishing the return of income. The Hon ble High Court while considering whether the benefit of s. 43B can be extended to employees contribution as well, which are paid after the due date under the PF law but before the due date for filing the return, held that (i) Though the Revenue has argued that a distinction is to be made between employers contribution and employees contribution and that employees contribution being in the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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