The Commissioner Of Income Tax-18 v. M/S. Vinod Houseware

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.5762 OF 2010WITH INCOME TAX APPEAL NO.895 OF 2012WITHINCOME TAX APPEAL NO.1363 OF 2012 The Commissioner of Income Tax-18. v. M/s. Vinod Houseware. ..Appellant. ..Respondent. Mr.A. R. Malhotra for the Appellant.Mr.Atul K. Jasani for the Respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATE : 15TH JANUARY, 2013 PC: In all the three appeals filed by the revenue in respect of block assessment year 1987-88 to 1997-98, assessment year 1998-99 and assessment year 2001-02 the basic dispute is whether the Tribunal was justified in deleting the additions made by the Assessing officer on account of suppression of finished goods on the basis of the estimation? 2)Since the issues in all these appeals are identical the facts set out in Income Tax Appeal No.1363 of 2012 relating to assessment year 1995-96 is taken into consideration for convenience. 3) The respondent assessee is engaged in the business of manufacturing stainless steel utensils. In the course of manufacturing of stainless steel utensils certain manufacturing loss arises. During the course of assessment proceedings for the assessment years 1995-96 the Assessing officer held that the scrap declared by them in assessment year 1995-96 was approximately 25% of the raw material consumed while for the assessment year 1996-97 the scrap declared by the assessee was approximately 7.5% of the raw material consumed. Considering the above the Assessing officer rejected the books of accounts and estimated that the scrap generated out of the raw material consumed was approximately 8%. Consequently, he held that there was suppression of production and sale of finished goods. The Assessing officer rejected the Books of Accounts under Section 145 of the Act. Thus, adding an amount of Rs.20.18 lacs to arrive at the total income of Rs.34 lacs. 4) In first appeal the Commissioner of Income Tax (Appeals) allowed the respondent-assessee's appeal as it was pointed out before the CIT(Appeals) that the scrap declared for assessment year 1996-97 was only about 7.5% as much of its manufacturing activities were carried out by job workers and the job workers retained the scrap generated. In view of the above the CIT(A) allowed the appeal of the respondent assessee. 5)In appeal filed by the revenue before the Tribunal, the Tribunal by detailed order dated 23/6/2009 considered the submissions in para 6 thereof and pointed out that according to the respondent the percentage of scrap in the assessment year 1996-97 is less because the manufacture work was carried out by job workers and the scrap generated by the job workers was retained by them. Thus, the difference between the scrap generation in 1995-96 and 1996-97 stood explained. The Tribunal without going into the correctness of the above submission held that appropriate method to determine suppression of production, if any, would be yield method i.e. raw material consumed to the finished product obtained. On the basis of the above method in assessment year in 1995-96 and 1996-97 the yield was 73% and 75% respectively. Therefore, the Tribunal concluded that the Assessing Officer was not justified in estimating the final product manufactured was of the raw material consumed 92% of the raw material consumed for assessment year 1995-96 on the basis of the quantitative details of generation of scrap for the assessment year 1996-97. Further, the allegation that RG1 register was manipulated was found to be incorrect by the Tribunal particularly so as when the search was conducted, the search party did not find any significant discrepancy in the stock recorded and the stock found. Further, the Tribunal also records the fact that the revenue did not bring on record a single comparable case wherein yield is higher then that disclosed by ASN ASN the assessee. So far as statement of the person taken during the search was concerned the Tribunal held that the statements were not supplied to the respondent assessee firm d uring assessment proceedings and their explanation was sought. In the circumstances the reliance upon the same was not justified. It is pertinent to note that the respondent assessee had also demonstrated before the Tribunal the manner in which the scrap was generated while cutting of sheets into squares. The assessee's representative had produced before the Tribunal a sheet of stainless steel admeasuring 12”x12”. Its weight was 310 gms. It was cut into one big circle. When the corners of the sheet became scrap. The weight of the circle was 238 gms. and the weight of the scrap was 72 gms. Thus, the scrap generated was 23.12% of the raw material consumed. It was explained by the representative for the assessee before the Tribunal that this was only the first stage in the manufacture of utensils. Therefore, as there are two more stages some further scrap would be generated. 6)In view of the above, we find no fault with the order of the Tribunal in setting aside the estimation arrived at by the Assessing officer. This being essentially a finding of fact in which two concurrent authorities have taken a view that there was no suppression of production and sale finished goods, we see no reason to interfere with the order of the Tribunal. ASN 7)Hence, all the three appeals are dismissed with no order as to costs. (M.S.SANKELCHA, J.) (J.P. DEVADHAR, J.)