Tall Boy Stationery P. Ltd., CHENNAI v. ACIT, CHENNAI

CO 146/CHNY/2011 | 2008-2009
Pronouncement Date: 15-12-2011 | Result: Dismissed

Appeal Details

RSA Number 14621723 RSA 2011
Assessee PAN AAACT2935J
Bench Chennai
Appeal Number CO 146/CHNY/2011
Duration Of Justice 2 month(s) 22 day(s)
Appellant Tall Boy Stationery P. Ltd., CHENNAI
Respondent ACIT, CHENNAI
Appeal Type Cross Objection
Pronouncement Date 15-12-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 15-12-2011
Assessment Year 2008-2009
Appeal Filed On 23-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENNAI [BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER] I.T.A NO.1555/MDS/2011 (ASSESSMENT YEAR : 2008-09 ) THE ACIT COMPANY CIRCLE III(1) CHENNAI VS M/S TALL BOY STATIONERY PVT. LTD NO.130 NELSON MANICKAM ROAD AMINJIKARAI CHENNAI - 29 [PAN AAACT2935J ] (APPELLANT) (RESPONDENT) C.O. NO.146/MDS/2011 (ASSESSMENT YEAR : 2008-09 ) M/S TALL BOY STATIONERY PVT. LTD NO.130 NELSON MANICKAM ROAD AMINJIKARAI CHENNAI - 29 VS THE ACIT COMPANY CIRCLE III(1) CHENNAI (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : DR.I.VIJAYAKUMAR CIT/DR ASSESSEE BY : SHRI B.RAMAKRISHNAN CA DATE OF HEARING : 01-12-2011 DATE OF PRONOUNCEMENT : 15-12-2011 O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THIS APPEAL BY THE REVENUE AND THE CROSS OBJE CTION BY THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 ARE DIRECTE D AGAINST THE ORDER OF THE LD. CIT(A)-III CHENNAI DATED 30.6.2011. ITA 1555/11 CO 146/11 :- 2 -: 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE- COMPANY DERIVES ITS INCOME FROM THE BUSINESS OF MAN UFACTURING OF STATIONERY ITEMS. THE COMPANY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2008-09 ON 30.9.2008 SHOWING A LOSS OF ` 85 30 446/- AGAINST THE TURNOVER OF ` 2 61 98 435/-. THIS RETURN WAS REVISED ON 12.1.2009. THE FIRST ISSUE OF REVENUES APPEAL RELATES TO DELETION OF DISALLOWANCE MADE IN RESPECT OF LABOUR CHARGES TO THE TUNE OF ` 12.63.333/-. THE FACTS APROPOS THIS ISSUE ARE THA T THE ASSESSEE- COMPANY DEBITED A SUM OF ` 12 63 333.- AS LABOUR CHARGES UNDER THE HEAD COST OF GOODS VIDE SCHEDULE P OF PROFIT & LO SS ACCOUNT FOR THE YEAR ENDED 31.3.2008. THE ASSESSEE-COMPANY ALSO CL AIMED A SUM OF ` 27 54 154/- TOWARDS WAGES AND SALARIES. THE ASSES SING OFFICER EXAMINED THE EXPENSES INCURRED UNDER THIS HEAD IN E ARLIER YEARS AND FOUND THEM TO BE ON HIGHER SIDE. ON FURTHER EXAMIN ATION IT WAS FOUND THAT THE ASSESSEE HAD ENGAGED M/S APARAJITHA CORPOR ATE SERVICES PVT. LTD CHENNAI FOR SUPPLY OF LABOUR SERVICES. THE A SSESSEE-COMPANY WAS ALSO INCURRING EXPENDITURE ON SALARIES AND WAGE S ON ITS OWN EMPLOYEES. THE ASSESSING OFFICER FOUND THAT ALTHOU GH THE TURNOVER HAS DOUBLED IN THIS YEAR BUT LABOUR CHARGES HAVE IN CREASED BY 234%. THE ASSESSING OFFICER HAS FOUND THE LABOUR CHARGES ABNORMALLY EXCESSIVE. ON EXAMINATION OF THE MUSTER ROLL IT WA S NOTICED THAT SOME ITA 1555/11 CO 146/11 :- 3 -: OF THE EMPLOYEES WERE FOUND TO BE ON THE ROLLS OF M /S APARAJITHA CORPORATE SERVICES PVT. LTD. IN ADDITION TO ASSESSE ES ROLLS. THE ASSESSEE HAS PAID LUMPSUM TOWARDS LABOUR CHARGES IN CURRED IN THE CASE OF M/S APARAJITHA CORPORATE SERVICES PVT. LTD EVERY MONTH AND ALSO CLAIMED LABOUR CHARGES ON THE SAME VERY EMPLOY EES ON ITS ROLLS. IN THIS BACKGROUND THE ASSESSING OFFICER FOUND LAB OUR CHARGES TO BE INFLATED. THAT IS WHY THE ASSESSEE WAS ASKED TO SU BSTANTIATE ITS CLAIM OF LABOUR CHARGES OF ` 12 63 333/- PAID TO ITS ASSOCIATED CONCERN M/S CHENNAI MICRO PRINT PVT. LTD AND TO VARIOUS THIRD P ARTIES. THE ASSESSEE COULD NOT PRODUCE ANY BILLS/INVOICES FROM THESE PAR TIES AND COULD ONLY FURNISH LEDGER ACCOUNTS FOR THE ABOVE EXPENDITURE A S APPEARING IN ITS BOOKS OF ACCOUNT. ACCORDINGLY THE ASSESSING OFFIC ER HAS TREATED HE ENTIRE LABOUR CHARGES OF ` 12 63 333/- AS UNPROVED AND INFLATED AND HAS ADDED BACK THE SAME TO THE ASSESSEES TOTAL INC OME. ON THE CONTRARY THE LD. CIT(A) HAS DELETED THIS ADDITION ON THE PREMISE THAT THE ASSESSING OFFICER HAS NOT FOUND THE PAYMENT OF LABOUR CHARGES EITHER TO BE BOGUS OR EXCESSIVE. HE HAS OBSERVED T HAT ONLY A SUM OF ` 62 886/- WAS PAID TO THE SISTER CONCERN VIZ. CHENN AI MICRO PRINT PVT. LTD. REGARDING M/S APARAJITHA CORPORATE SERVICES P VT. LTD IT WAS FOUND THAT IT WAS ENGAGED ONLY TO CATER TO THE MANP OWER NEEDS OF THE ASSESSEE IN ITS FACTORY INSTEAD OF EXPENDING ITS OW N WORK FORCE. ITA 1555/11 CO 146/11 :- 4 -: 3. BEFORE US THE LD.DR HAS CONTENDED THAT IT IS THE PR IMARY DUTY OF THE ASSESSEE TO PROVE ITS CLAIM. THE ASSES SEE HAS NOT PRODUCED ANY EVIDENCE TO PROVE THIS EXPENDITURE AND THEREFORE IN THE OF PROOF THE LD. CIT(A) HAS INCORRECTLY HONOURED T HE PAYMENTS TO BE GENUINE AND NOT EXCESSIVE. ON THE OTHER HAND THE LD.AR HAS SUPPORTED THE FINDINGS OF THE LD. CIT(A). 4. AFTER CONSIDERING THE ARGUMENTS OF BOTH SIDES WE A RE UNABLE TO GO WITH THE LD. CIT(A)S APPROACH. IT IS CLEARLY MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE-COMPANY WAS UNABLE TO PRODUCE PROOF TO ESTABLISH THE GENUINENESS OR OTHER WISE OF THIS EXPENDITURE. HE HAS NOT ANSWERED THE OBJECTION OF THE ASSESSING OFFICER AS TO WHY SAME EMPLOYEES WERE FOUND ON THE ROLLS OF THE ASSESSEE-COMPANY AS WELL AS ON THE ROLLS OF M/S APA RAJITHA CORPORATE SERVICES PVT. LTD. RATHER HE HAS TRIED TO CONVEY T HAT THE ONUS TO PROVE THE EXPENSES ARE BOGUS AND EXCESSIVE LIES ON THE RE VENUE. IT IS TRUE THAT IF THE PRIMARY ONUS TO PROVE THE EXPENSES IS DISCHARGED BY THE ASSESSEE THE ONUS TO DISPROVE THE SAME SHIFTS ON T HE REVENUE. BUT IN THE GIVEN CASE THE PRIMARY ONUS HAS NOT BEEN DISCH ARGED. WE ARE THEREFORE NOT IN AGREEMENT WITH THE LD. CIT(A)S F INDINGS AND IT IS NOT ONLY THE RIGHT OF THE ASSESSING OFFICER BUT IT IS H IS BOUNDEN DUTY TO ITA 1555/11 CO 146/11 :- 5 -: EXAMINE THE CLAIM OF THE ASSESSEE. IN OUR CONSIDE RED OPINION THE FINDING OF THE LD. CIT(A) IS NOT WELL SUPPORTED BY REASONS AND PROOFS AND THEREFORE DESERVES TO BE REVERSED. RESULTANTL Y WE SET ASIDE THE FINDING OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. THIS RESULTS IN ALLOWING GROUND NOS.2 AND 2.1 OF THIS APPEAL. 5. THE NEXT ISSUE RAISED VIDE GROUND NO.3 3.1 RELATES TO ADDITION MADE IN RESPECT OF INFLATION OF PURCHASES OF ` 1 22 07 573/- WHICH HAS BEEN RESTRICTED TO ` 21 98 179/- BY THE LD. CIT(A). THE FACTS OF THIS ISSUE ARE THAT THE ASSESSING OFFICER ON EX AMINATION OF THE AUDITED ACCOUNTS AND DETAILED FURNISHED BEFORE HIM NOTICED THAT THE ASSESSEE-COMPANY HAS CLAIMED PURCHASE OF ASSETS IN THE FORM OF RAW MATERIALS FINISHED GOODS MACHINERY AND LAND FROM M/S ARIES INDUSTRIES PVT. LTD. TO PROVE THE ABOVE PURCHASES THE ASSESSEE- COMPANY FURNISHED A COPY OF LEDGER FROM M/S ARIES I NDUSTRIES PVT. LTD AS APPEARING IN ITS BOOKS AND A COPY OF INVOICES IN RESPECT OF PURCHASE OF MACHINERY. IN THE BOOKS OF M/S ARIES INDUSTRIE S PVT. LTD THE LEDGER ACCOUNT IS AS UNDER: PURCHASE OF RAW MATERIALS ` 15 94 569 FINISHED GOODS ` 6 03 610 MACHINERY ` 9 98 452 LAND ` 90 10 942 TOTAL ` 1 22 07 573 ITA 1555/11 CO 146/11 :- 6 -: 6. THE ASSESSEE WAS ASKED TO PROVIDE INVOICES/BILLS IN ADDITION TO CONFIRMATORY LETTERS FROM M/S ARIES INDUSTRIES P VT. LTD. IN SUPPORT OF THE ABOVE CLAIM OF PURCHASE OF RAW MATERIALS AND F INISHED GOODS. THE ASSESSEE FURNISHED A STATEMENT ON 30.12.2010 CONTAI NING DETAILS OF THE TRANSACTION UNDERTAKEN WITH M/S ARIES INDUSTRIES PV T. LTD. THIS DOCUMENT REVEALED THAT A SUM OF ` 58 13 968/- WAS EXPENDED ON BEHALF OF ARIES INDUSTRIES PVT. LTD BY THE ASSESSEE -COMPANY. A FURTHER PAYMENT OF ` 31 96 631/- TOWARDS PURCHASE OF RAW MATERIAL AND FINISHED GOODS WHICH ALSO INCLUDED MACHINERY OF ` 9 98 452/- HAS BEEN CLAIMED. THUS TOTAL PAYMENTS TO M/S ARIES INDUSTR IES PVT. LTD AMOUNTED TO ` 90 10 599/- . AS PER THE DEPARTMENTAL RECORD M /S V HAS RETURNED NIL INCOME FOR THIS ASSESSMENT YEAR REBUTTING ANY TRANSACTION HAVING BEEN MADE BY IT DURING THE RELEV ANT PERIOD. DESPITE AMPLE OPPORTUNITIES GIVEN TO ASSESSEE TO FU RNISH CONFIRMATION/EVIDENCE FROM THIS COMPANY THE ASSESS EE COULD NOT FURNISH ANY CONFIRMATION LETTERS OR EVIDENCE(S). A CCORDINGLY THE ASSESSING OFFICER FOUND THEE PURCHASES AS BOGUS AND ADDED BACK ` 21 98 719/- TO THE ASSESSEES TOTAL INCOME. LIKE W ISE REGARDING PURCHASE OF MACHINERY AND LAND FROM THE STATEMENT FILED BY THE ASSESSEE-COMPANY IN RESPECT OF TRANSACTIONS UNDERT AKEN BETWEEN THE ASSESSEE-COMPANY AND M/S ARIES INDUSTRIES PVT. LTD DURING THE ITA 1555/11 CO 146/11 :- 7 -: FINANCIAL YEAR 2007-08 IT WAS NOTICED THAT APART F ROM PAYING ` 58 13 968/- MADE BY THE ASSESSEE TOWARDS LIABILITIE S OF M/S ARIES INDUSTRIES PVT. LTD MACHINERY WORTH ` 9 98 452/- HAD ALSO BEEN PURCHASED AND STOCK OF RAW MATERIALS AND FINISHED G OODS WORTH ` 21 98 719/- WAS ALSO PURCHASED. THUS TOTAL VALUE OF TRANSACTIONS DURING THE RELEVANT PERIOD COMES TO ` 90 10 599/-. BUT STRANGELY IT WAS NOTICED THAT THERE WAS NO MENTION OF PURCHASE O F LAND VALUED AT ` 90 10 942/- PURCHASED FROM ARIES INDUSTRIES PVT. LT D AS RECORDED IN ITS BOOKS OF ACCOUNT. A COPY OF SALE DEED PRODUCED SHO WS THAT THE LAND WAS PURCHASED IN THE MONTH OF JUNE 2006 WHICH IS NO T RELEVANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE CONSIDERA TION FOR THE LAND IS ` 41 LAKHS AS AGAINST THE COST OF ACQUISITION OF LAN D AT ` 90 10 942/- SHOWN BY THE ASSESSEE IN THE SCHEDULE TO FIXED ASSE TS. AS STATED EARLIER THE COMPANY M/S ARIES INDUSTRIES PVT. LTD HAS RETURNED NIL INCOME FOR ASSESSMENT YEAR 2008-09. NO CONFIRMATIO N FROM THE SELLER WAS FILED. SO THE ASSESSING OFFICER HAS CONCLUDED THAT THE ASSESSEE- COMPANY HAS CREATED FICTITIOUS ASSETS IN ITS BOOKS OF ACCOUNT BY CLAIMING PURCHASE OF ASSETS FROM M/S ARIES INDUSTRI ES PVT. LTD. THUS IN THE ABSENCE OF PROPER EVIDENCE THE ENTIRE CLAIM OF ASSETS AMOUNTING TO ` 1 00 09 394/- HAS BEEN DISALLOWED AND ADDED BACK T O THE ASSESSEES INCOME HENCE TOTAL EXPENSES UNDER THE HEAD INFLATION ITA 1555/11 CO 146/11 :- 8 -: OF PURCHASES AS DISCUSSED ABOVE HAS BEEN WORKED OUT TO ` 1 22 07 573/- AND HAS BEEN ADDED. THE CLAIM OF DEP RECIATION OF ` 3 49 458/- HAS ALSO BEEN DISALLOWED AND ADDED BACK TO THE ASSESSEES TOTAL INCOME. THIS CLAIM OF DEPRECIATION INCLUDES DEPRECIATION ON ASSETS OF THE VALUE OF ` 9 98 452/- CLAIMED @ 35% INCLUDING ADDITIONAL DEPRECIATION ON ASSETS PURCHASED FROM M/ S ARIES INDUSTRIES PVT. LTD. AGGRIEVED THE ASSESSEE CHALLENGED THIS ADDITION AND THE LD. CIT(A) HAS CONFIRMED THE CLAIM OF PURCHASE OF RAW MATERIAL AND FINISHED GOODS TOTALING TO ` 21 98 719/-. THE REMAINING AMOUNT OF ` 90 10 942/- TOWARDS PURCHASE OF ASSETS AND A SUM OF ` 9 98 452/- PERTAINING TO MACHINERY WHICH WERE NOT DEBITED TO T HE PROFIT & LOSS ACCOUNT BUT HAS GONE TO THE BAS HAVE BEEN ACCEPTED BUT NO DEPRECIATION HAS BEEN ALLOWED THEREON. ON THIS ISS UE BOTH THE PARTIES ARE AGGRIEVED. THE ASSESSEE HAS RAISED CROSS OBJEC TION CHALLENGING THE SUSTAINED ADDITION. 7. AFTER HEARING THE RIVAL CONTENTIONS IN THE LIGHT OF THE OBTAINING EVIDENCE WE DO NOT FIND ANY REASON TO DIS TURB THE FINDING OF THE LD. CIT(A) PARTICULARLY BECAUSE WITHOUT THE PUR CHASE OF RAW MATERIAL THERE CANNOT BE HIGHER PRODUCTION AS HAS BEEN NOTICED IN THIS CASE. MOREOVER REGARDING SUSTAINED ADDITION THER E IS NO PROOF ON ITA 1555/11 CO 146/11 :- 9 -: RECORD TO SUBSTANTIATE THE SAME AND THEREFORE THE SAME CANNOT BE DELETED. 8. IN SO FAR AS PURCHASE OF MACHINERY AND LAND IS CONC ERNED I.E ITEM REGARDING MACHINERY AND LAND HAVE BEEN RE FLECTED IN THE BALANCE SHEET ALTHOUGH THERE ARE DEBITED IN THE PRO FIT & LOSS ACCOUNT. THEREFORE TO THAT EXTENT THIS CLAIM OF THE HAS TO BE CONFIRMED. ACCORDINGLY WE CANNOT ALLOW GROUND NO.3 AND 3.1 OF REVENUES APPEAL AND DISMISS THE GROUNDS TAKEN IN THE CROSS O BJECTION. 9. IN THE RESULT THE APPEAL OF THE REVENUE AND CROS S OBJECTION OF THE ASSESSEE BOTH STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT O N THURSDAY 15 TH DECEMBER 2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 15 TH DECEMBER 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR