9911796707
TMI Blog2015 (3) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee - CIT(A) deleted part addition - Held that:- 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. 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 expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 verification of impounded documents could have been st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the finding in paragraph 45(iii) that the appellant had deployed the labour not accounted for in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 Commissioner of Income-tax (Appeals) is totally misconceived that the assessee was given sufficient opportunity. 6. On the other hand, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 of the industrial policy was filed and submissions made before the Assessing Officer were reiterated. It was further pointed out that in parag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 218 (Uttarakhand). 13. We have gone through the rival submissions carefully and find force in the submissions of learned counsel for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for installation of plant and machinery whereas in the scheme given by Gujarat Government various conditions were also imposed. The decision in case of Vardhman Acr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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 would be allowed for the persons present and calculated total payment as under : Salary/ wages paid as per physical list ₹ 22,81,250 No. of persons as per physical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rever, 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 something, which has never happened or which is not going to happen and, therefore, the whole basis of addition made by the Assessing Officer is totally faulty and deserves to be quashed." The assessee further requested for admission of additional evidence which was forwarded to the Assessing Officer and the Assessing Officer reported that additional evidence should not be admitted. However, considering the fact that the learned Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor-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 duplication. 13 workers belong to the contractor and 10 workers to whom no salary was not paid. Accordingly he worked out the disallowance as under : Salary/ wages paid as per physical list ₹ 22,81,250 No. of persons as per physical list 122 Average salary/wages as per physical list for 5 months Rs.18,699 No. of actual excess workers reworked out 83 Average salary/wages Rs.18,699 Actual salary/wages paid to 83 absentees : ₹ 15,52,017 The total expenditure of salary an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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 of 11 cases reported by the assessee. 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 Assessing Officer 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 learned Commissioner of Income-tax (Appeals) has not given any findings. In our opinion, the assessee has successfully explained the existence of extra attendance cards in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 ₹ 20.02 as per books. Since actual salary as discussed in paragraph 9 above is ₹ 1,94,40,257, then actual sales by applying the same ratio is ₹ 38,91,93,945. Hence sales of ₹ 17,32,56,817 (i.e., 38,91,93,945 -21,59,37,128) is to be treated as unaccounted. The assessee has shown gross profit of 24.42 per cent. for the assessment year 2009-10 and hence income of ₹ 4,23,09,315 (i.e., 24.42 per cent. of ₹ 17,32,56,817) is to be treated as unaccounted income of the assessee." 24. On appeal before the learned Commissioner of Income-tax (Appeals), it was mainly submitted that annexure A-II contained list of C-Forms which was obtained from different parties against which sales have already been recorded in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 per cent. then total stock would be ₹ 6,68,12,586. Balance of the difference was explained by way of difference in valuation. 26. The learned Commissioner of Income-tax (Appeals) sent these submissions to the Assessing Officer for his remand report. The Assessing Officer in turn furnished his comments on January 22, 2013. Relevant portion is 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 involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 agent M/s. Vish wakarma Industries, Khandwa through its proprietor Shri Ashok Kumar Malviya. This settlement is dated September 18, 2010. As per this settlement signed by both parties, 12,683 numbers of bicycles were kept in godown in perfect condition valuing ₹ 2,24,71,842. The assessee has also filed a complete reconciliation chart showing the total orders received from the Madhya Pradesh Government, cycles supplied, cycles not lifted by the Madhya Pradesh Government and balance quantity lying at Madhya Pradesh. The assessee has also filed relevant documents through which orders were placed by the Madhya Pradesh Government and sales bills through which cycles were supplied to the Madhya Pradesh Government. The assessee has also filed voucher/evidence through which the sales return was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 with the alleged shortage in stock and alleged excess workers on the basis of 141 attendance cards and for which the assessee was confronted by virtue of the show-cause notice served on December 29, 2011 for which the time was allowed only up to December 30, 2011 and, thus, allowing the assessee only few hours to reply to the detailed and which was totally unjustified. (v) Though, we had tried to furnish the reply on December 30, 2011 afternoon, but that reply was not accepted by the Assessing Officer and the order containing 53 pages was served upon the asses see on December 30, 2011 itself and, thus, it is proved that the Assessing Officer was pre-determined to make the addition, because that order could not have been prepared within a span of time of few hours and, now, since in the remand pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28). 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 respect of undisclosed sales and the Revenue has raised ground No. 2 against part of addition deleted by the learned Commissioner of Income-tax (Appeals). 28. Before us, learned counsel for the assessee reiterated the submissions made before the learned Commissioner of Income-tax (Appeals). He further pointed out that unaccounted sales which were worked out on account of C-Forms list found during survey, was confronted to the assessee for the first time on December 29, 2011. The assessee sent reply on December 30, 2011, by speed post. Before the learned Commissioner of Income- tax (Appeals) detailed reconciliation of actual sales conducted in the previous years with C-Form was furnished. It was sent for the comments of the assessee. These details were verified by the Assessing Officer and ultimately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted 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 comments on this and simply observed that it is difficult to reach at a correct price. He contended that when copies of the bills for a particular rate were also field then how it was not possible for the Assessing Officer to value the stock, is not clear. He pointed out that on this account there is under valuation of closing stock amounting to ₹ 1,27,76,887 for which detailed list is filed at pages 323 to 329 of the paper book. 30. The second reason for lower stock was explained before the learned Commissioner of Income-tax (Appeals) was because of the reason that same stock was lying at Madhya Pradesh with the agent, it was pointed out that the assessee has participated in tender for supply of bicycles by the Government of Madhya Pradesh and was awarded contract and bicycles were supplied. But b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 during survey proceedings and is tremendously under pressure, he may remember certain facts and may be under wrong impression of actual position regarding stock lying at Madhya Pradesh. In any case the question was whether there is any godown and since the assessee had no other godown in Ludhiana and therefore it was stated that no stock is in the godown. 33. We have gone through the rival submissions carefully and find force in the submissions of learned counsel for the assessee. First of all it has to be noted that survey was conducted in the premises of the assessee on September 26, 2008. The list of stock filed at pages 925 to 952 clearly show that no rate has been mentioned which makes it clear that stock was not valued during the survey. Normally the stock should have been valued du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls 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 following observations in this regard : "(i) The comparison of C-Form Register impounded during the course of survey and the ledger produced by the appellant during the course of assessment proceedings revealed that there was a discrepancy in the sales recorded in the books of account inasmuch as sales amounting to ₹ 1,86,32,561 shown in the C-Form was not recorded in the ledger." We fail to understand how the learned Commissioner of Income-tax (Appeals) can make this observation despite having received remand report which states that C-Forms list matches with the sales effected by the assessee. This clearly shows our earlier doubt as alleged by the assessee that the Revenue has made all efforts to make only high pitched addition. 35. Thirdly with respect to objection of the assessee in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 have preferred to bring back all the bicycles which were earlier reduced from the original orders. These unsold bicycles were located at various places and therefore they had to be collected at one place for which the assessee entered into an agreement with its agent Vishwakarma Industries (copy of this agreement is placed at pages 302 to 304 of paper book). The agent was responsible for removal of bicycles through this settlement it is stated that certain bicycles became surplus on amendment/reduction of the orders. Out of total 22,643 surplus bicycles 9,557 bicycles required refurnishing due to mishandling during transportation and the same were returned to Ludhiana to the assessee-company. Balance 12,683 bicycles valuing ₹ 2,24,71,842 which were kept in the godown for safe custody of the agent at Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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