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TMI Blog2003 (3) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... The G.P. % and the N.P. % of 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 fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here are other defects also which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 drawn by him that the cost of wages is highest in case of the assessee-firm, whereas after considering the correct facts and figures it is seen that the cost of wages is least in the case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 that the assessee had not produced wage registers, the learned counsel submitted that it was always explained by the assessee's representative to the Assessing Officer that these separate registers are in respect of 508 depots and the Assessing Officer was requested to state the exact depots in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 in the case of Pandit Bros. v. CIT [1954] 26 ITR 159, wherein it has been held as under: "Held that there was no definite finding by the ITO that the case falls within the proviso to section 13. Even if such finding were to be implied from his order it could not be said that there was material before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 centres, it will not be possible for the assessee to produce all the records which will be in truck loads, but we would like the assessee to produce some of the most important relevant records in support of its claim. Accordingly, we set aside the orders of the authorities below on the issue and restore the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (3) The Assessing Officer has not pointed out any defects in the books or in other records and that the assessee had been showing a range of consumption of .769 to 1.082 in the earlier years and the same had been accepted. 18. Shri Rajkumar, the ld. CIT (Sr. D.R.) strongly supported the order of Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 of CIT v. Ranchi Club Ltd. [2001] 247 ITR 209. 23. Shri Rajkumar, the ld. CIT (DR) submitted that the judgment of the Hon'ble Supreme Court in the case of the Ranchi Club Ltd. is a brief judgment of two lines and further that sections 234A and 234B have been amended with retrospective effect by the Finance Act, 2001 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'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 of the Land. 25. We have perused the assessment order and find that the Assessing Officer did not specifically mention about charging of interest under sections 234B and 234C. Accordingly, following the aforesaid judgment of the Hon'ble Supreme Court, we hold that the Assessing Officer is not justified in charging interest u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer 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 --------------------------------------------------------------------------------------- 1. Copy of tender notice issued by APFDC Ltd., Hyderabad 50 to 55 17-11-1989 2. Copy of letter issued certifying tender rates of bidis 56 to 89 per kg obtained by conservator of forest, STC, Hyderabad from 1988 to 1992 3. Copies of documents in support of bidi leaves 90 to 94 purchased at Rs. 35.86 per kg by the assessee during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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. 17. Copy of certificate issued by Surpunch of Grampanchayat 114 to 115 Mutyam Pet village confirming payment of wages with bidi leaves for the months 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. 18. A copy of part of the records duly verified by the 116 to 117 Asstt. Commissioner of Labour, Karimnagar in support 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied upon by the Tribunal for the purpose of coming to any conclusion adverse to the assessee, because there is a procedure prescribed in rules 29, 30 and 31 of the Income-tax Appellate Tribunal Rules for taking additional evidence before the Tribunal 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 concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chance to go through these documents, co-relate and/or to verify the correctness and authenticity of the said documents. Moreover, few of the documents are photocopies only so without verification from the originals thereof, these cannot be considered/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 documentar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, it is found imperative to set aside that this issue also and restore the matter back on the file of the Assessing Officer so that proper assessment in that regard could be made in the light of fresh evidence adduced/to be adduced in fresh 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal'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 find that the Assessing Officer did not specifically mention about charging of interest under section 234B. Accordingly, following the aforesaid judgment of the Hon'ble Supreme Court, we hold that the Assessing Officer is not justified in charging interest under section 234B. The additional ground accordingly succeeds." And as per the assessment order in this case, at the end of computation of total income, following narration appears. "Assessed under section 143(3). Issue notice and challan accordingly. Sd/- Nasik (D.P. Sharma) Dated 31-3-1993 Dy. CIT SR., Nasik" 43. So it is amply clear Assessing Officer omitted to have charged or to calculate the interest under section 234B in the above noted case of Taparia Tools Ltd. Since there was no mention about charging/ calculation of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt view and keeping in view the latest authoritative pronouncement of the Hon'ble Supreme Court as noted above, on the line of applying precedents, I decide this issue against the assessee while dismissing the additional ground of appeal. 45. Since, both the issues are being set aside on the file of the Assessing Officer to be decided afresh, and one of the issues is being dismissed, therefore, the appeal of the assessee as well as of the revenue would be treated to have been accepted partly. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 V.B.S. Bedi, Judicial Member.--As there is a difference of opinion between the Members on the Bench, following points of difference are being referred to Hon'ble President for hearing on such points or for nominating the Third Member or to pass such orders as the Hon'ble President may deem fit and proper: 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 G.P. addition aspect as directed by A.M. or order in this regard could be set aside in its entirety and restored to Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in the paper book. It is mentioned that page Nos. 50 to 119 are the additional evidences. But most of 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. 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 - 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 honours. Appellant" 4. From the perusal of the aforesaid note it is clear that the assessee treated the papers bearing Nos. 50 to 119 appended in the Paper Book as additional evidence. The assessee has also stated in the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the learned JM took a correct view in the matter. I am, therefore, inclined to agree with his view on this aspect. 7. Apropos the second issue, both the parties agreed that it is inter-linked with the first issue. The first issue was set aside by both the Members. Therefore, this was rightly set aside by the learned JM. I am, therefore, inclined with the view expressed by the learned JM on this issue. 8. Coming now to the last issue, I find that the learned AM deleted the interest in the light of the decision of the Apex Court rendered in the case of Ranchi Club Ltd. The Hon'ble Supreme Court in this case has held that it is incumbent on the Assessing Officer to give a specific direction in the order in regard to the charge of interest. The learned AM deleted the addition on the ground that the Assessing Officer did not give any specific instruction to charge the interest. 9. It transpires from the perusal of facts that the Assessing Officer did calculate the interest chargeable under sections 234B and 234C of the Act, in the order of assessment itself. Once the Assessing Officer himself charged interest in the body of the order, learned JM held that there is no need to give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Pune Bench". 2. The learned Vice-President, Shri M.K. Chaturvedi, sitting as Third Member by his opinion dated 3-3-2003 concurred with the view of the Judicial Member on the first issue. As regards second issue also, the learned Vice-President has agreed with the J.M. As regards third issue also, the learned V ..... X X X X Extracts X X X X X X X X Extracts X X X X
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