9911796707
TMI Blog2011 (9) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. 4) That the ld. CIT (A) has erred in law as well on the facts and circumstances of the case in deleting the disallowance of reimbursement of freight expenses of ₹ 6,94,186/- ignoring the fact that the assessee did not deliver scrap on FOR basis and the freight was borned by the purchaser parties. 2. In Cross Objection the assessee is objecting in confirming the action of the AO in issuing notice under section 148. 3. The brief facts of the case are that the assessee is a limited company engaged in manufacturing of LPG cylinders. The assessee filed its return of income for the relevant period declaring income, which was assessed u/s 143(3) of the Act after proper scrutiny and a detailed reasoned order was passed vide order dated 28.03.2003 . The income was assessed at ₹ 26932932/- as against the declared income of ₹ 2,63,05,760/- . A survey u/s 133A of the Act was carried out at the business premises of appellant at Bhiwadi and Head Office at Delhi on 22-11-2004 by the Investigation Wing, Jaipur. During the course of survey certain loose papers, bills of purchases of goods were found which were impounded. 4. Subsequent after the receipt of intimatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 3,41,279/- 21.4.2000 ₹ 2,85,527/- 21.4.2000 ₹ 2,84,416/- ₹ 24,35,022/- Closing balance Nil As per above working the inflated purchases shown in the current year comes at ₹ 24,35,022-11,74,751= ₹ 12,60,271/-. In the reasons recorded inflated purchases have been shown from Laxmi Steel, Faridabad of ₹ 16,78,191/- which is not correct and accordingly the figure of ₹ 12,60,271/- is being taken. 4.1.2 M/s Laxmi Steels, Delhi-₹ 2,85,400/- 4.1.3 M/s R. K. Steels Trading Corpn., Delhi-₹ 18,282/- 4.1.4 M/s R. K. Steels, Delhi ₹ 1, 33,522.95/-. Total purchases shown from the above parties comes to ₹ 16, 97,475/- In respect of the above purchases shown the assessee has submitted that the purchases are actual and the observations as mentioned in the reasons are not correct. 7. Detailed submissions were filed before ld. CIT (A) which has been tabulated at pages 10 to 13. After considering the submissions and perusing the material on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is principle of natural justice that any inquiry either from the department or out side agency, is used against the assessee the authority has to give reasonable opportunity on it which has not been complied by the AO. Purchase for ₹ 3,22,897/- dated 20.04.2000 , for which the AR submitted the photocopy of the purchase bills where all the formalities of other law has been met by the assessee. Further the assessee also produced the photocopy of bills for purchase of ₹ 2,85,400/- (2,85,800/-) in case of Laxmi Steel Delhi and ₹ 18,282/- in case of R.K. Steel Trading Corporation, Delhi which has all authenticated ingredient. The ld. AO even have added 1,33,522.95 in case of R.K.Steel, Delhi which includes cancellation of cheque for ₹ 55,045.05, double addition of purchase for ₹ 18,282/- by the AO. This account only contains remaining four bills of purchase of spare parts for ₹ 60,195/- for which the ld. AR produced the photocopy of purchase bills and confirmation from the party before the AO at the time of re-assessment which had not been considered by the ld. AO at the time of framing re-assessment. The same has also been verified by me and found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. In view of these facts and circumstances we hold that the ld. CIT (A) was justified in deleting the addition made by AO. Accordingly we confirm the order of ld. CIT (A). 12. Second issue is in respect of deleting the addition of ₹ 1,12,82,308/- and ₹ 5,61,198/- made on account of suppression of sale of scrap and on account of under valuation of closing stock of scrap respectively. 13. The AO made the impugned addition by recording the following reasons :- In this case it was found that the assessee company has shown sales of Scrap amounting to ₹ 137,60,422/-. It was also observed that in the preceding year i.e 1999-2000 scrap of 779.989 MT was sold @ 5800/- PMT as against market rate of ₹ 10700 PMT and the balance amount thereof was taken in cash as was done in past also. During the course of survey operation on 22-11-2004 certain loose paper were found and impounded wherein it was found that the assessee company is selling scrap at higher rate but the billing was made at the lower rate. The difference in the billing price and actual price was taken in cash. Similar entries were also found in subsequent year i.e. FY 2003-04 and 2004-05 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded in para 7.2 at page 16 of the order of ld. CIT (A) as under :- 7.2 The learned AR has made submissions and filed paper book . the main contention made by him that During the course of original assessment proceedings the Assessee has submitted comprehensive details and records in respect of sale of scrap which are as follows: a) Vide para 3 of the quarry letter dated 2.01.2003 the learned AO has asked the details of scrap , commission paid on scrap . Same was examined in details and the particulars were furnished to him in respect of generation of scrap , sale of scrap alongwith the bills raised on the parties , closing stock of scrap and valuation thereof . The copy of account confirmation of the parties were also submitted alongwith their PAN , address for test check , which were as follows : 1. Om Engg Indsutries 2. Raby Castings Pvt Limited 3. Seth Alloys Pvt Limited b) During reassessment proceedings for AY 1999-2000, the assessee has submitted the bills of various other scrap generating and selling units and also produced the scrap trader for deposition before AO in remand proceedings . The attention was also drawn at rates of scra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which has been arrived at without considering the element of Excise duty. In the reasons recorded by him he has taken the figure of ₹ 6673.35 per MT , by dividing the figure of 15365480/- by quantity of 2302.512 MT , But while making the assessment he has taken the rate of 5800/- for the reasons referred for AY 1999-2000. The AO s action is not justifiable as to the facts while working out the figure of ₹ 11282308/- .It shows not applying the mind by AO. Moreover he has not come out with any supporting evidence of assessee selling the scrap @ ₹ 10700/- per MT. he has not kept in mind that sale is subject to supervision of excise authorities and levy of excise duty. The bills for sale of scrap contain excise duty and sales tax as well . It would be pertinent to quote the finding of learned CIT Appeal in the case of assessee for the assessment year 1999-2000 which are as follows : para 9.1 During the assessment proceedings the AO noted that the appellant had sold 779.898 MT scrap at the rate of 5800/- PM. He observed that the market rate of scrap during the relevant period was at 10700/- PMT. Therefore, he concluded that the appellant collected & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the excise element. After charging excise on ₹ 5800/- per MT it becomes ₹ 6819/- per MT. 7.3(b) I have considered the facts of the case and submissions of the AR of the appellant carefully in A.Y. 1999- 2000 Honh ble ITAT Jaipur ITA No. 513/JP/2007 order dated 26.10.2007 on the same issue, has upheld the order of the CIT(A), Alwar. The AO, while estimating market rate of ₹ 10700/- PMT has not brought on record any evidence to show that how he arrived at that figure. This is a case of survey during the course of which a number of incriminating documents pertaining to appellant s business were impounded. The AO has failed to bring on record references to any document wherein sales of scrap has been worked out by the appellant at ₹ 10,700/- during the relevant period. The AO has referred that certain loose papers were found and impounded on which entries were found for A.Y. 2003-2004 and 2004-2005 in this regard. However, he has failed to bring any material or record to show that how the notings made on the papers pertaining to financial year 2003-2004 and 2004-2005 are relevant to assessment year under reference. The AO has not brought on any material to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleted. 18. After considering the orders of the AO and ld. CIT (A) on which reliance has been placed by respective parties, we find no infirmity in the finding of ld. CIT (A) in respect to both the additions deleted by him. The ld. CIT (A) has deleted the addition of ₹ 1.12 crores or odd on account of suppression of sale of scrap following the order of Tribunal for earlier year i.e. 1999-2000 where similar additions were made by the AO. The finding of ld. CIT (A) are based on the finding of Tribunal for earlier year, therefore, we see no reason to interfere with this finding. 19. Regarding deletion of ₹ 5,61,198/-, again ld. CIT (A) has deleted the addition by giving a finding of fact which remained uncontroverted, therefore, we confirm the order of ld. CIT (A) in this respect also. 20. Next issue relates to deleting the addition of ₹ 4,60,502/- on account of disallowance of commission expenses. 21. The AO made the addition by observing as under :- Commission expenses: In the assessee s case it is found that it has claimed commission expenses @ ₹ 200 PMT on scrap sold. During the year under consideration the assessee has shown scrap sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w: Freight outward claimed ₹ 8700782/- Freight reimbursed ₹ 8006597/- Balance ₹ 694186/- 26. After considering the submissions, the ld. CIT (A) found that similar addition was made in earlier year and the Tribunal has deleted the addition. Accordingly he deleted this addition also. Finding of ld. CIT (A) have been recorded in para 10.3 at page 21 of his order are as under :- 10.3 I have considered the finding of learned AO and submissions of learned AR Carefully when actual freight charges for different destinations and are supported with GR of the transporters and copy of bills of scrap also contain the mode of transport and truck No. etc. which were produced before the AO for verification at the time assessment but the ld. AO has not taken pain to verify the facts. This issue was also involved in A.Y. 1999-2000. The Hon ble ITAT has deleted the addition made on this issue. Under the facts and circumstances the action of AO for addition of an amount of ₹ 694186/- is not justified and deleted . Accordingly the ground of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons have been recorded after expiry of four years which is not permissible as per provisions of law and on account of various judgments pronounced by the Hon ble Apex Court as well as various High Courts. Various High Courts have decided this issue that reopening of the assessment after expiry of four years is bad in law where no income has escaped assessment on account of failure of the assessee to disclose truly and fully all material facts. Various decisions decided by Hon ble High Courts are reported in case of Indian Farmers Fertilizers Co-op. Ltd., 171 Taxman 379 (Del.), in case of Tanna Builders Pvt. Ltd., 283 ITR 448 (Bom.), in case of K.C.P, Ltd. 146 ITR 284 (AP), in case of Vareli Weavers Pvt. Ltd., 240 ITR 77 (Guj.) etc. therefore, without going into detail further, we hold that reopening of assessment was bad in law as the same was reopened after expiry of four years as the original assessment was completed under section 143(3) of the Act, that too without bringing any material on record that any income has escaped assessment on account of failure of the assessee to disclose truly and fully all material facts. Accordingly we quash the assessment by holding that the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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