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TMI Blog2003 (3) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... (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., Rs. 33.40 per 1,000 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 1,000 bidis with the Union, whereas no such agreement had been entered into for payment of wage in the case of leaves with wages . He also observed that though the rates may be mutually fixed, they could not be in excess of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the workers and what was the agreed rate in such a case. There 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. Dr. S. U. Pathak, 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 (page 10). The newspaper cuttings are given on pages 46 to 49 of the paper book and on page 11 the assessee has analysed that the difference in the G. P. because of the higher sale price in the case of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the leaves which the labour supplied comes to Rs. 1,09,80,091. This amount is already included in the wages of Rs.4,89,04,224 as considered by the Assessing Officer. After considering this, the actual wages paid to the labour amounts to Rs. 3,79,24,133 (Rs. 4,89,04,224 -Rs. 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 Bidi Works Thakur Savdekar Sable Waghire Desai 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 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 the case of the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, 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 lakhs (page 137 of the paper book) 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. 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. 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. As regards the allegation of the Assessing Officer that the assessee had not produced wage registers, learned counsel submitted that it was always explained by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 the assessment year 1987-88 a G. P. 16.54 per cent. was declared and accepted on turnover of Rs. 8,47,11,512. In the assessment year 1988-89 a G. P. of 16.02 per cent. was declared and accepted on turnover of Rs. 10,59,77,270. Thus, it is clear that the 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 the 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 Punjab High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged low G. P. rate. Now coming to the specific addition on account of alleged excess claim of wages, we find sufficient force in the arguments of learned counsel reproduced supra, which are supported by facts and figures. The contention of 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 December 21, 1992, ledger account of the labour for wages was produced before the Assessing Officer. From the same sheet, we also find that on December 7, 1992, ledger account of wages payable individual partywise was also filed. On January 19, 1993, the assessee also filed ledger accounts of labour in support of wages and registers maintained by the commission agents . On February 10, 1993, the assessee filed daily bidi collection reports in respect of all labours . We asked the learned Commissioner of Income-tax (Departmental Representative) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance comes to 1,10,406.3 kgs. resulting in an addition of Rs. 16,89,216 at Rs. 15.30 per kg. for excess claim of leaves consumption. The assessee appealed to the learned Commissioner of Income-tax (Appeals) and submitted that in all the 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 1,082 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 (No. 2) v. State of Kerala [1969] 72 ITR 726 (Ker) ; International Forest Co. v. CIT [1975] 101 ITR 721 (J K) and R. B. Bansilal Abirchand Spg. and Wvg. Mills Ltd. v. CIT [1970] 75 ITR 260 (Bom). The Commissioner of Incometax (Appeals) after taking into consideration the facts and circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gms. to 1.082 gms. in the earlier years and the same has been accepted. The bidi leaves are agricultural product and the consumption of such an agricultural product will depend upon the dryage of the leaves in the process of manufacture, soaking them in water, size of the leaves, natural factors like wind, rain, humidity, heat, colour, etc., and there cannot be any tailor-made formula for consumption of leaves. Accordingly, we agree with the observations of the Commissioner of Incometax (Appeals) that the addition has been made on surmises and conjectures and the Commissioner of Income-tax (Appeals) rightly deleted the same. We accordingly decline to interfere. Vide letter dated February 12, 2001, the assessee moved the following additional ground : On the 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 Supreme Court in the case of National Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 parties holding that the appeal had no merit, then such order becomes one which attracts article 141 of the Constitution of India, which provides that the law declared by the Supreme Court will be binding on all the courts within the territory of India. In the light of above decision of the apex court, the law laid down by the Patna High Court in the cases of Ranchi Club Ltd. [1996] 217 ITR 72 and Uday Mistanna Bhandar and Complex [1996] 222 ITR 44, 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 Supreme Court in the case of Ranchi Club Ltd. [2001] 247 ITR 209 has two aspects. One aspect is that interest under sections 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 numbers contained in the paper book forms part of the record of the Department other than pages Nos. 50 to 119. Further to this, the assessee filed an application under rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, inter alia, contending as under : In the above referred cases, the assessee has submitted the additional evidence in the paper book. It is mentioned that pages 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 counsel who attended before the Assessing Officer and the Commissioner of Income-tax (Appeals) is no longer engaged by us before the Tribunal and, therefore, we are not sure as to which exact papers constitute the additional evidence. To be on a safer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, issued by the Assistant Commis sioner of Labour, Karimnagar, regarding non-payment of wages for the months of December, 1989, January, 1990 and February, 1990. 107 13. Copy of letter dated July 27, 1991, addressed to the Assistant Com missioner of Labour, Karimnagar, in reply to his letter dated July 23, 1991, informing him that the wages for the months of December, 1989, January, 1990 and February, 1990, have been paid in three installments in the months of April, May and June, 1990, and further action be dropped 108 14. Copy of letter of the Assistant Commissioner of Labour, Karim nagar, stating that payment of wages with excess of bidi leaves amount for the period December, 1989, January, 1990, and February, 1990, has been verified by him from the wages register for the period April, May and June, 1990 109 15. Copy of certificate issued by the Surpunch of Grampanchayat, 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 transla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law. (2) Velji Deoraj and Co. v. CIT [1968] 68 ITR 708 (Bom) (headnote) : The admission of additional evidence at the appellate stage is not referable to any right of the party to produce the evidence but is dependent solely on the 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 Supreme Court are reproduced as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on November 13, 2000, October 4, 1993, October 15, 1993, October 8, 1993 and October 19, 1993, respectively, i.e., after the date of assessment in this case. So obviously these could not have been produced before the Assessing Officer during the hearing of the case or 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. 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. Now adverting to the facts of the case, I find that determination of income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Sable Waghire and Co. and Desai Bidi Works it is 24.82 per cent., 23.00 per cent. and 25.24 per cent. on the sales of 51.47 crores, Rs. 50.55 crores and Rs. 7.89 crores respectively for the year under consideration. These details were supplied to the assessee but while submitting the paper book, the assessee has not filed a comparative table to give necessary figures of other concerns cited above to justify or compare the low profit of the assessee vis-a-vis other concerns. Since the entire issue is being set aside, so the 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. As regards addition on consumption of leaves which is made at Rs. 16,89,216 and deleted by the learned Commissioner of Income-tax (Appeals) 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 the assessment year 1989-90 and it is 1.003 grams in the assessment year 1990-91 and again it is 0.885 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccountant Member) in I.T.A. No. 381/PN of 1993 dated August 20, 2001, while not applying the ratio of the Supreme Court decision in the case of Ranchi Club Ltd. [2001] 247 ITR 209, the 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 Supreme Court in the case of CIT v. Ranchi Club Ltd. [2001] 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 Supreme Court in Ranchi Club Ltd. [2001] 247 ITR 209 is of no assistance to the assessee. This ground is accordingly dismissed. Similarly, in I. T. A. No. 264/PN of 1994 dated August 14, 2001, the same view has been upheld. Yet in another case, in I. T. A. No. 1078/PN of 1994 dated August 29, 2001, the Division Bench of the same constitution took the same view. Since the facts of the present case are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my considered view, the ratio of the decision in the case of Taparia Tools Ltd. (supra) 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 (pages 113-114). 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 the proposition of applying the precedents, the Supreme Court in a recent pronouncement in the case of Haryana Financial Corporation v. Jagadamba Oil Mills [2002] 110 Comp Cas 20 ; AIR 2002 SC 834 has opined as under (page 843 of AIR 2002 SC and page 30 of [2002] 110 Comp Cas) : Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. The Supreme Court further observed in the said judgment as under (page 842 of AIR 2002 SC and page 30 of [2002] 110 Comp Cas) : Courts should not place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh after considering the fresh material furnished before Tribunal as directed by the Judicial Member. (b) Issue of addition 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 [2001] 247 ITR 209 (SC) decision or it needs to be confirmed in view of the precedents of Pune Bench. Order of Third Member 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 G. P. addition aspect as directed by the Accountant Member or order in this regard could be set aside in its entirety and restored t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 note that some of the papers might have been given before the revenue authorities, but as because details of the same are not available, therefore, all these papers should be considered as additional evidence. The learned Accountant Member restored the issue to the file of the Assessing Officer for the limited purposes of verifying the facts and figures submitted by learned counsel. He directed the Assessing Officer to call for a few wage registers for test check and readjudicate on the issue, after giving an opportunity of being heard to the assessee. The 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 Judicial Member directed the Assessing Officer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific instruction to charge the interest. It transpires from the perusal of the 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 Judicial Member held that there is no need to give directions to charge the interest. Directions need to be given when the interest is not charged in the body 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. [2001] 247 ITR 209. I have perused the reasonings given by the learned Judicial Member in this regard. I have seen the order of assessment. I find that the Assessing Officer of 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 ge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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