TEJA INDSUTRIES, MUMBAI v. ACIT (OSD)-1, CR-7, MUMBAI

CO 111/MUM/2010 | 2004-2005
Pronouncement Date: 28-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 11119923 RSA 2010
Assessee PAN AABFT5807D
Bench Mumbai
Appeal Number CO 111/MUM/2010
Duration Of Justice 1 year(s) 4 month(s) 18 day(s)
Appellant TEJA INDSUTRIES, MUMBAI
Respondent ACIT (OSD)-1, CR-7, MUMBAI
Appeal Type Cross Objection
Pronouncement Date 28-09-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 28-09-2011
Date Of Final Hearing 26-09-2011
Next Hearing Date 26-09-2011
Assessment Year 2004-2005
Appeal Filed On 10-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIB UNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI R.S. SYAL AM AND SHRI R.S.PADVEKAR JM ITA NO.3846/MUM/2009 :ASST.YEAR 2004-2005 THE INCOME TAX OFFICER WARD 12(3)(2) MUMBAI. VS. M/S.TEJA INDUSTRIES 306 VASAN UDYOG BHAVAN SENAPATI BAPAT MARG LOWER PAREL MUMBAI 400 013. PAN :AABFT5807D. (APPELLANT) (RESPONDENT) CO NO.111/MUM/2010 :ASST.YEARS 2004-2005 M/S.TEJA INDUSTRIES 306 VASAN UDYOG BHAVAN SENAPATI BAPAT MARG LOWER PAREL MUMBAI 400 013. VS. THE INCOME TAX OFFICER WARD 12(3)(2) MUMBAI. (CROSS OBJECTOR) (RESPONDENT) REVENUE BY : SHRI D.S.SUNDER SINGH ASSESSEEBY : SHRI SUSHIL LAKHANI DATE OF HEARING : 26.09.2011 DATE OF PRONOUNCEMENT :28.09.2011 O R D E R PER R.S. SYAL AM : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 20.03.2009 IN RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. THE CROSS OBJECTION FILED BY THE ASSESSEE IS LAT E BY 116 DAYS. WE HAVE GONE THROUGH THE AFFIDAVIT FILED BY THE PARTNER OF THE A SSESSEE FIRM GIVING THE REASONS FOR DELAY IN FILING CROSS OBJECTION. WE ARE CONVINCED W ITH THE REASONS FOR THE DELAY WHICH IS ACCORDINGLY CONDONED AND CROSS OBJECTION I S ADMITTED FOR HEARING ON MERITS. 3. FIRST GROUND OF THE REVENUES APPEAL WHICH HAS BEEN SPLIT INTO FOUR SUB- GROUNDS IS AGAINST THE DELETION OF CERTAIN DISALL OWANCES. BRIEFLY STATED THE FACTS OF ITA NO.3846/M/2009 & CO 111/M/2010 M/S.TEJA INDUSTRIES. 2 THIS GROUND ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF LEATHER GOODS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF FOLLOWING EXPENSES:- SR. NO. PARTICULARS AMOUNT (RS.) I) FACTORY MAINTENANCE 6 28 324 II) MACHINERY CHARGES PAID 46 02 328 III) LABOUR CHARGES 8 68 181 IV) JOB WORK CHARGES 2 94 76 311 V) ADVERTISEMENT 2 61 258 VI) REPAIR & MAINTENANCE 7 57 532 VII) COMMISSION 1 30 621 VIII) CONVEYANCE 7 09 540 IX) INCENTIVE TO WORKERS 13 09 275 X) BUSINESS PROMOTION 19 71 341 XI) STAFF WELFARE 1 17 815 XII) MISCELLANEOUS EXPENSES 4 32 431 XIII) BAD DEBTS 1 64 834 4 14 29 791 4. SINCE NO BILLS AND VOUCHERS ETC. IN RESPECT OF A BOVE EXPENSES WERE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND FUR THER THE ASSESSEE EXPRESSED HIS INABILITY VIDE ORDER SHEET ENTRY DATED 05.12.2006 T O PRODUCE SUCH DETAILS THE ASSESSING OFFICER DISALLOWED 90% OF SUCH EXPENSES WHICH RESULTED INTO ADDITION OF RS.3 72 86 812. WHEN THE MATTER CAME UP BEFORE T HE LEARNED CIT(A) IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT VARIOUS DETAI LS WERE FURNISHED BEFORE THE ASSESSING OFFICER ALONG WITH THE RELATED BILLS AND VOUCHERS. SUCH DETAILS WERE AGAIN FURNISHED BEFORE THE LEARNED CIT(A) WHO SENT THEM TO THE ASSESSING OFFICER FOR VERIFICATION. AFTER DUE VERIFICATION THE A.O. SENT THE REMAND REPORT A COPY OF WHICH IS AVAILABLE AT PAGE 3 ONWARDS OF THE PAPER B OOK. AFTER CONSIDERING THE REMAND REPORT AND OTHER RELEVANT MATERIAL THE LEA RNED CIT(A) TOOK UP THE ADDITION IN RESPECT OF JOB WORK CHARGES FOR WHICH THE A.O. ISSUED SUMMONS U/S.133(6) TO THE PARTIES OUT OF WHICH FOUR SUMMONS WERE RETURN ED BY THE POSTAL AUTHORITIES ITA NO.3846/M/2009 & CO 111/M/2010 M/S.TEJA INDUSTRIES. 3 INCLUDING TWO WITH THE REMARKS LEFT IN RESPECT OF NARMADA LEATHERS PRIVATE LIMITED (JOB WORK CHARGES RS.4 27 036) AND KURINJI EXPORTS (JOB WORK CHARGES RS.1 21 122); BAB (JOB WORK CHARGES RS.1 08 675) THE NOTICE WAS RETURNED AS `UNCLAIMED; AND BHAVANI LEATHERS (JOB WORK CHARGE S RS.19 01 475) THE NOTICE WAS RETURNED WITH THE REMARKS `INCOMPLETE ADDRESS. THE LEARNED CIT(A) SUSTAINED THE ADDITION IN RESPECT OF BAB LEATHERS AND BHAVANI LEATHERS AMOUNTING TO RS.20 10 149 AND DELETED THE REMAINING ADDITION. TH E REVENUE IS AGGRIEVED AGAINST THE SUSTENANCE OF ADDITION IN RESPECT OF NA RMADA LEATHERS PRIVATE LIMITED AND KURINJI EXPORTS AS WELL. THE ASSESSEE IN ITS CR OSS OBJECTION IS AGGRIEVED AGAINST THE CONFIRMATION OF JOB WORK CHARGES TO THE EXTENT OF RS.20 10 149. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE TAKE UP GROUND NO. 1(I) FIRST. INSOFAR AS THE DELETION OF ADDITION IN RESPECT OF NARMADA LEATHERS PRIVATE LIMITED IS CONC ERNED WE FIND THAT THE COPY OF ACCOUNT OF THIS PARTY IS AVAILABLE ON PAGES 28 AND 29 OF THE PAPER BOOK. PAGE NO. 30 ONWARDS ARE THE COPIES OF INVOICES RAISED BY NARMAD A LEATHERS PRIVATE LIMITED ON ASSESSEE. COPY OF ACCOUNT OF THE SECOND PARTY NAME LY KURINJI EXPORTS IS AVAILABLE ON PAGE 59 OF THE PAPER BOOK FROM WHICH IT CAN BE SEEN THAT JOB WORK CHARGES WERE CREDITED TO ITS ACCOUNT AND THEREAFTER THE PAY MENTS WERE MADE THROUGH BANKING CHANNEL. THERE ARE TWO TRANSACTIONS OF JOB CHARGES CREDITED TO THEIR ACCOUNT AND EQUAL AMOUNT HAS BEEN PAID THROUGH BANK . ALL THESE DETAILS WERE FILED BEFORE THE AUTHORITIES BELOW. IN OUR CONSIDERED OPI NION THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION TO THIS EXTENT. 6. INSOFAR AS THE SUSTENANCE OF ADDITION IN RESPECT OF BAB LEATHERS AND BHAVANI LEATHERS IS CONCERNED THE LEARNED A.R. HAS FILED COPIES OF CONFIRMATIONS FROM THESE TWO PARTIES WHICH IS ADMITTEDLY AN ADD ITIONAL EVIDENCE. AS THESE CONFIRMATIONS WERE NOT FILED BEFORE THE AUTHORITIES BELOW IN OUR CONSIDERED OPINION IT WOULD BE JUST AND FAIR IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE THE MATTER IS RESTORED TO THE FILE OF A.O. WE ORDER ACC ORDINGLY AND DIRECT THE ASSESSING ITA NO.3846/M/2009 & CO 111/M/2010 M/S.TEJA INDUSTRIES. 4 OFFICER TO DECIDE THIS ISSUE AFRESH AS PER LAW AFTE R ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. NEEDLES S TO SAY THE ASSESSEE WILL BE AT LIBERTY TO LEAD ANY EVIDENCE IN SUPPORT OF ITS CLAI M. 7. GROUND NO.1(II) OF THE REVENUES APPEAL AND GROU ND NO. B OF THE ASSESSEES CROSS OBJECTION IS AGAINST CONVEYANCE EXPENSES. THE A.O. MADE DISALLOWANCE AT RS.1 11 118 OUT OF THE TOTAL CONVEYANCE PAID BY THE ASSESSEE AMOUNTING TO RS.7 09 540. THIS ADDITION WAS MADE AT 90% OF SUCH CONVEYANCE EXPENSES FOR WANT OF EVIDENCE FILED. THE LEARNED CIT(A) SENT TH IS MATTER TO THE A.O. FOR RE- EXAMINING AND SENDING THE REMAND REPORT. THE AO RAI SED CERTAIN OBJECTIONS IN RESPECT OF SOME OF THE ITEMS INCLUDED UNDER THIS HE AD. THE LEARNED CIT(A) SUSTAINED ADDITION AT 10% OF TOTAL EXPENDITURE OF R S.70 954. BOTH THE SIDES ARE IN APPEAL WITH THEIR RESPECTIVE STANDS. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED FROM THE REMAND REPORT ALONG WITH THE ASSESSMENT ORDER AND ALSO THE IMPUGNED ORDER THAT CERTAIN EXPENSES REMAI NED UNSUBSTANTIATED. IN OUR CONSIDERED OPINION THE LEARNED CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDITION TO THIS EXTENT. NO INTERFERENCE IS WARRANTED ON THIS I SSUE. THE GROUNDS RAISED BY THE ASSESSEE AS WELL AS REVENUE ARE DISMISSED. 9. GROUND NO.1(III) OF THE REVENUES APPEAL IS AGAI NST ALLOWING DEDUCTION IN RESPECT OF CASH EXPENSES AMOUNTING TO RS.13 09 275 SHOWN AS INCENTIVE TO WORKERS. THE ASSESSING OFFICER MADE DISALLOWANCE AT THE RATE OF 90% OF EXPENDITURE. DURING THE REMAND PROCEEDINGS THE ASSE SSEE FURNISHED NECESSARY DETAILS. IN PARA (J) OF THE REMAND REPORT THE AO D ID NOT DISPUTE THE DETAILS FURNISHED BEFORE HIM BY MENTIONING : THE ISSUE MAY BE DECIDED ON THE MERITS OF THE CASE. THE LEARNED CIT(A) DELETED THE ADDITION. ITA NO.3846/M/2009 & CO 111/M/2010 M/S.TEJA INDUSTRIES. 5 10. HAVING HEARD BOTH SIDES AND PERUSED THE RELEVAN T MATERIAL ON RECORD IT IS OBSERVED THAT THE ASSESSING OFFICER DID NOT POINT OUT ANY DISCREPANCY IN RESPECT OF INCENTIVE PAID BY THE ASSESSEE TO WORKERS. IN SU CH A SITUATION WE ARE SATISFIED THAT THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING T HE ADDITION IN ENTIRETY. 11. GROUND NO.1(IV) OF THE REVENUES APPEAL IS AGAI NST THE CONFIRMATION OF DISALLOWANCE AT 10% OUT OF BUSINESS PROMOTION EXPEN SES. THE ASSESSEE IS ALSO AGGRIEVED AGAINST SUSTENANCE OF DISALLOWANCE TO THI S EXTENT. THE A.O. DISALLOWED 90% OF EXPENDITURE IN THE ORIGINAL ASSESSMENT ORDER . IN REMAND PROCEEDINGS IT WAS OBSERVED THAT CERTAIN PAYMENTS WERE MADE THROUGH CR EDIT CARDS WHICH WERE PERSONAL IN NATURE. THE LEARNED CIT(A) SUSTAINED TH E ADDITION AT 10% OF THE BUSINESS EXPENSES ON ACCOUNT OF PERSONAL USE. 12. HAVING REGARD TO THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT THE DISALLOWANCE SUSTAINED BY THE LEARNED CIT(A) IS IN ORDER AND NO INTERFERENCE IS WARRANTED THEREIN. BOTH THE GROUNDS ARE DISMISSED. 13. GROUND (D) OF THE ASSESSEES CROSS OBJECTION IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF BAD DEBT OF RS.1 64 834. THE ASSESS EE CLAIMED DEDUCTION FOR RS.1 64 834 AS BAD DEBT. NO DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER IN SUPPORT OF BAD DEBT EVEN DURING THE REMAND PROCEEDI NGS. THE LEARNED CIT(A) SUSTAINED THE ADDITION. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE DID NOT FU RNISH ANY DETAIL ABOUT THE BAD DEBT WRITTEN OFF EITHER BEFORE THE ASSESSING OFFICER OR DURING THE REMAND PROCEEDINGS. NO DOUBT DEDUCTION ON ACCOUNT OF BAD DEBT IS PERMIS SIBLE U/S 36(1)(VII) ON WRITING OFF OF THE AMOUNT OF BAD DEBT OR PART THEREOF HOW EVER IT IS IMPORTANT TO NOTE THAT THIS DEDUCTION IS SUBJECT TO SECTION 36(2) WHICH I N TURN PROVIDES THAT NO SUCH ITA NO.3846/M/2009 & CO 111/M/2010 M/S.TEJA INDUSTRIES. 6 DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR. EXCEPT FOR THE LIST OF BAD DEBT FILED ON PAGE 127 OF THE PAPER BOOK THERE IS NO OTHER EVIDENCE TO SUBSTANTIATE THE SATISFACTION OF THE CONDITION OF SECTION 36(2). IN OUR CONSIDERED OPINION IN THE ABSENCE OF SATISFYIN G THE CONDITION OF SECTION 36(2) NO DEDUCTION CAN BE ALLOWED U/S 36(1)(VII) AS NO SU CH EVIDENCE IS AVAILABLE EVEN IN THE PROCEEDINGS BEFORE US. AS SUCH WE HOLD THAT THI S ADDITION HAS BEEN RIGHTLY SUSTAINED. 15. GROUND NO.2 OF THE REVENUES APPEAL IS AGAINST THE DELETION OF ADDITION AMOUNTING TO RS.2 77 55 942. THE FACTS APROPOS THIS GROUND ARE THAT THE ASSESSEE SHOWED A SUM OF RS.3 06 14 723 AS LIABILITY TOWARDS ITS CREDITORS. IN ORDER TO TEST CHECK THE GENUINENESS OF THE LIABILITY BY WAY OF SU NDRY CREDITORS INQUIRY LETTERS WERE ISSUED U/S 133(6) RANDOMLY TO SOME OF THESE PA RTIES. IN MOST OF THE CASES THE LETTERS WERE RETURNED UNSERVED EXCEPT M/S.PRACHI LE ATHER PRIVATE LIMITED WHO CONFIRMED THE BALANCE OF RS.28 58 781. REDUCING THI S AMOUNT OF THE TOTAL SUNDRY CREDITORS RS.3.06 CRORE THE A.O. MADE ADDITION OF RS.2.77 CRORE. IN THE REMAND PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD FURNISHED CONFIRMATIONS IN RESPECT OF 23 PARTIES. AS IT WAS N OT POSSIBLE TO VERIFY ALL THE SUNDRY CREDITORS THE A.O. ISSUED SUMMONS NOTICE U/ S 133(6) RANDOMLY TO CERTAIN PARTIES. SOME OF THE PARTIES REPLIED CONFIRMING THE BALANCE OUTSTANDING. FOUR PARTIES WHICH HAVE BEEN DISCUSSED IN THE CONTEXT OF GROUND NO.1(I) OF THE REVENUES APPEAL SUPRA DID NOT REPLY AS THE LETTERS WERE RETURNED BY THE POSTAL REMARKS LEFT / INCOMPLETE ADDRESS / UNCLAIMED. WH ILE DISPOSING OFF GROUND NO.1(I) OF THE REVENUES APPEAL WE HAVE HELD THAT T HE ADDITION IN RESPECT OF NARMADA LEATHERS PRIVATE LIMITED AND KURINJI EXPORT S HAS BEEN RIGHTLY DELETED BY THE LEARNED FIRST APPELLATE AUTHORITY. THESE CREDIT BALANCES WHICH ARE THE SUBJECT MATTER OF GROUND NO.2 REPRESENT THE RESPECTIVE DEBI TS BEING JOB CHARGES WHICH ARE ITA NO.3846/M/2009 & CO 111/M/2010 M/S.TEJA INDUSTRIES. 7 SUBJECT MATTER OF GROUND NO.1(I). ONCE AN ADDITION HAS BEEN MADE BY DISALLOWING CERTAIN EXPENDITURE IT IS NOT PERMISSIBLE TO MAKE ONE MORE ADDITION FOR THE EQUAL AMOUNT BY CONSIDERING THE CREDIT BALANCE APPEARING IN THE NAME OF PARTY TO WHOM EXPENDITURE HAS BEEN CLAIMED TO HAVE BEEN MADE AS B OGUS. IF THIS COURSE OF ACTION IS ADOPTED IT WOULD AMOUNT TO DOUBLE ADDITION. AS WE HAVE RESTORED THE MATTER TO THE FILE OF A.O. IN RESPECT OF BAB LEATHERS AND BHA VANI LEATHERS WHILE DISPOSING GROUND NO.1(I) OF THE REVENUES APPEAL IN OUR CONS IDERED OPINION THE ADDITION BY TREATING THESE CREDITORS AS BOGUS IS UNCALLED FOR. IN OTHER WORDS IF THE JOB CHARGES PAID ARE GENUINE THEN THE RESPECTIVE CREDITS WOULD ALSO BECOME GENUINE AND IF THE JOB CHARGE ARE GENUINE AND ADDITION IS MADE ON THAT COUNT THEN NO FURTHER ADDITION FOR ITS CREDIT IS REQUIRED TO BE MADE ONCE AGAIN. W E THEREFORE APPROVE THE VIEW TAKEN BY THE LEARNED CIT(A) ON THIS ISSUE. 16. IN THE RESULT THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 28 TH DAY OF SEPTEMBER 2011. SD/- SD/- (R.S.PADVEKAR) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 28 TH SEPTEMBER 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XII MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.