SUBSCRIBE FOR FULL CONTENT


The Tax PublishersI.T.A. No. 99/Chandi/1993 2005 TaxPub(DT) 0116 (Chd-Trib) : (2005) 275 ITR 0124 Dy. CIT v. United Vanaspati Ltd. () INCOME TAX --Assessment----Additions to incomeRule of consistency--On alleged suppressed production and suppressed sale of vanaspati ghee, the AO made addition as income from undisclosed sources. The CIT(A) deleted the addition after arriving at a clear finding that during the immediately preceding year 1988-89 the CIT(A) had deleted the addition on similar set of facts and no appeal thereagainst was filed and thus, the said order became final. *Held:* When similar addition for earlier year, i.e., assessment year 1988-89, was deleted by the CIT(A) on the same facts the addition in the relevant assessment was rightly deleted by the CIT(A). Income Tax Act, 1961 s.4 (1999) 157 CTR (Raj) 591 (2005) 275 ITR 0124 (Chd-Trib) Dy. CIT v. United Vanaspati Ltd. The Income Tax Appellate TribunalChandigarh Bench Vimal Gandhi, V.P., P.K. Bansal, A.M. & B.M. Kothari, A.M. I.T.A. No. 99/Chandi/1993 10 December 2003 A.Y. 1989-90 *Counsel:R.L. Chhanalia, for the Revenue. S.S. Rikhy, for the Assessee*. ORDER TWO-MEMBER BENCH Vimal Gandhi, V.P. This appeal by the revenue for the assessment year 1989-90 is directed against the order of the Commissioner (Appeals) dated 26-10-1992, deleting addition of Rs. 96,09,720 made in the trading account. The assessee, a limited company, in the relevant period carried on the business of manufacture and sale of vanaspati ghee. The assessing officer on scrutiny of accounts found that the assessee had disclosed a G.P. rate of 3.73 per cent. on sales of Rs. 66.53 lakhs. It was considered to be low when compared with the G.P. rate of the assessment years 1986-87 and 1987-88. The assessing officer observed that if a claim of depreciation was ignored, the G.P. would come down to 4.14 per cent. against 7.46 per cent. for the assessment year 1986-87. He asked the assessee to show-cause why addition should not be made for fall in the G.P. The assessing officer further found that the previous year of the assessee consisted of 21 months which was divided into two periods-the first period of 12 months up to 30-6-1988, and the second period of 9 months up to 31-3-1989. He further examined consumption of various raw materials and production in the two periods and compared them with the results of the assessment years 1987-88 and 1988-89. The chart is given in para. 5 of the assessment order. On the basis of the above analysis, the assessing officer concluded that the operations of the assessee showed downward productivity. He found that there was increase in consumption of coal, power and other raw material used in the manufacture. He, therefore, asked the assessee to explain the above increase in consumable items. It is observed in the assessment order that no satisfactory explanation was rendered. The assessing officer, therefore, refused to accept increased consumption of electricity and coal without corresponding increase in the manufactured items. He concluded that the production was suppressed in record. The assessing officer further found that there was increase in the by-products from 1188 mt. of last year to 2427 mt. in the year under appeal. He also took into account figures of by-product in the assessment years 1987-88 and 1988-89 to show that increase in by-products was not justified. He insisted on record relating to consumption of different items and production batchwise. Such record, according to the assessing officer, was not produced. The assessing officer also required the assessee to furnish a copy of project report submitted to the financial institutions, banks, etc., as such a report, according to the assessing officer, normally contains figure relating to costs, sales, quantity of consumption, etc. Such a report was also not furnished. The assessing officer also records that a number of opportunities were allowed to the assessee but information sought was not furnished. Having regard to over all consumption of raw material in the assessment year 1987-88 and production figures of that year and of the assessment year 1988-89, the assessing officer worked out suppressed production of 438 mt. of finished product. The above production was held to have been sold outside the books of account and profit on such sale was worked out at Rs. 96,09,720 by applying a flat sale rate of Rs. 21,940 per mt. The above addition was made in the income returned by the assessee. The assessee impugned the above addition in appeal before the Commissioner of Income Tax (Appeals) and made detailed submissions which are noted in para. 1(iii) onwards. The assessee explained circumstances for fall in G.P. and higher cost of production. It was explained that the raw material was not available in the State of H.P. and, therefore, it was brought out of the State on payment of CST and higher carriage cost. The electricity charges and cost of other material had increased. It was explained that the regular accounts as required under law were maintained and all expenditure were fully vouched. The unit was subject to Central excise and those authorities made regular check of purchases, consumption and production and stock available with the assessee. Stock registers maintained were also subject to periodical check by the Excise Department. The assessee further explained that the G.P. had not been constant in different assessment years. It ranged between 2 per cent. to 7 per cent.. The figures are noted by the learned Commissioner (Appeals) in para. 1(iii)(a) of the order. There can be variation in the ratio of production to the consumption of raw material from batch to batch. The assessee furnished figures of consumption ratio in different assessment years. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersI.T.A. No. 99/Chandi/1993
2005 TaxPub(DT) 0116 (Chd-Trib) : (2005) 275 ITR 0124

Dy. CIT v. United Vanaspati Ltd. ()

INCOME TAX

--Assessment----Additions to incomeRule of consistency--On alleged suppressed production and suppressed sale of vanaspati ghee, the AO made addition as income from undisclosed sources. The CIT(A) deleted the addition after arriving at a clear finding that during the immediately preceding year 1988-89 the CIT(A) had deleted the addition on similar set of facts and no appeal thereagainst was filed and thus, the said order became final. Held: When similar addition for earlier year, i.e., assessment year 1988-89, was deleted by the CIT(A) on the same facts the addition in the relevant assessment was rightly deleted by the CIT(A).

Income Tax Act, 1961 s.4

(1999) 157 CTR (Raj) 591

(2005) 275 ITR 0124 (Chd-Trib)

Dy. CIT v. United Vanaspati Ltd.

The Income Tax Appellate TribunalChandigarh Bench

Vimal Gandhi, V.P., P.K. Bansal, A.M. & B.M. Kothari, A.M.

I.T.A. No. 99/Chandi/1993 10 December 2003 A.Y. 1989-90

Counsel:R.L. Chhanalia, for the Revenue. S.S. Rikhy, for the Assessee.

ORDER TWO-MEMBER BENCH

Vimal Gandhi, V.P.

This appeal by the revenue for the assessment year 1989-90 is directed against the order of the Commissioner (Appeals) dated 26-10-1992, deleting addition of Rs. 96,09,720 made in the trading account.

The assessee, a limited company, in the relevant period carried on the business of manufacture and sale of vanaspati ghee. The assessing officer on scrutiny of accounts found that the assessee had disclosed a G.P. rate of 3.73 per cent. on sales of Rs. 66.53 lakhs. It was considered to be low when compared with the G.P. rate of the assessment years 1986-87 and 1987-88. The assessing officer observed that if a claim of depreciation was ignored, the G.P. would come down to 4.14 per cent. against 7.46 per cent. for the assessment year 1986-87. He asked the assessee to show-cause why addition should not be made for fall in the G.P.

The assessing officer further found that the previous year of the assessee consisted of 21 months which was divided into two periods-the first period of 12 months up to 30-6-1988, and the second period of 9 months up to 31-3-1989. He further examined consumption of various raw materials and production in the two periods and compared them with the results of the assessment years 1987-88 and 1988-89. The chart is given in para. 5 of the assessment order. On the basis of the above analysis, the assessing officer concluded that the operations of the assessee showed downward productivity. He found that there was increase in consumption of coal, power and other raw material used in the manufacture. He, therefore, asked the assessee to explain the above increase in consumable items. It is observed in the assessment order that no satisfactory explanation was rendered. The assessing officer, therefore, refused to accept increased consumption of electricity and coal without corresponding increase in the manufactured items. He concluded that the production was suppressed in record.

The assessing officer further found that there was increase in the by-products from 1188 mt. of last year to 2427 mt. in the year under appeal. He also took into account figures of by-product in the assessment years 1987-88 and 1988-89 to show that increase in by-products was not justified. He insisted on record relating to consumption of different items and production batchwise. Such record, according to the assessing officer, was not produced. The assessing officer also required the assessee to furnish a copy of project report submitted to the financial institutions, banks, etc., as such a report, according to the assessing officer, normally contains figure relating to costs, sales, quantity of consumption, etc. Such a report was also not furnished. The assessing officer also records that a number of opportunities were allowed to the assessee but information sought was not furnished. Having regard to over all consumption of raw material in the assessment year 1987-88 and production figures of that year and of the assessment year 1988-89, the assessing officer worked out suppressed production of 438 mt. of finished product. The above production was held to have been sold outside the books of account and profit on such sale was worked out at Rs. 96,09,720 by applying a flat sale rate of Rs. 21,940 per mt. The above addition was made in the income returned by the assessee.

The assessee impugned the above addition in appeal before the Commissioner of Income Tax (Appeals) and made detailed submissions which are noted in para. 1(iii) onwards. The assessee explained circumstances for fall in G.P. and higher cost of production. It was explained that the raw material was not available in the State of H.P. and, therefore, it was brought out of the State on payment of CST and higher carriage cost. The electricity charges and cost of other material had increased. It was explained that the regular accounts as required under law were maintained and all expenditure were fully vouched. The unit was subject to Central excise and those authorities made regular check of purchases, consumption and production and stock available with the assessee. Stock registers maintained were also subject to periodical check by the Excise Department.

The assessee further explained that the G.P. had not been constant in different assessment years. It ranged between 2 per cent. to 7 per cent.. The figures are noted by the learned Commissioner (Appeals) in para. 1(iii)(a) of the order. There can be variation in the ratio of production to the consumption of raw material from batch to batch. The assessee furnished figures of consumption ratio in different assessment years.