DCIT, CHENNAI v. M/s. Mahtani Clothing Company P Ltd., CHENNAI

ITA 1292/CHNY/2010 | 2006-2007
Pronouncement Date: 25-03-2011 | Result: Allowed

Appeal Details

RSA Number 129221714 RSA 2010
Assessee PAN AACEM0981D
Bench Chennai
Appeal Number ITA 1292/CHNY/2010
Duration Of Justice 7 month(s) 19 day(s)
Appellant DCIT, CHENNAI
Respondent M/s. Mahtani Clothing Company P Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted D
Tribunal Order Date 25-03-2011
Date Of Final Hearing 17-03-2011
Next Hearing Date 17-03-2011
Assessment Year 2006-2007
Appeal Filed On 06-08-2010
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL:D- BENCH: CHENNAI (BEFORE SHRI HARI OM MARATHA JM & SHRI AB RAHAM P GEORGE AM) ITA NO.1292/MDS/10 ASST. YEAR 2006-07 THE DCIT M/S MAHTANI CLOTHING CO. P.LT D CO.CIR.IV(1) CHENNAI 32 NELSON MANICKAM RD. AMINJ IKARI CHENNAI 600029 (PAN AACEM0981D/MA541) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.E.B.RANGARAJAN JR.STA NDING COUNSEL RESPONDENT BY: SHRI T.BANUSEKAR ORDER PER ABRAHAM P.GEORGE ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE REVENUE IT HAS RAISED FIVE GROUNDS IN TOTAL. GROUND NOS. 1 AND 5 ARE GENERAL IN NATURE NEEDING NO ADJUD ICATION. OTHER GROUNDS ARE REPRODUCED HEREUNDER: 2.1 THE LD.CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF PURCHASES OF ` 1 19 42 728/-. 2.3 HAVING FOUND THAT THERE HAVE BEEN DISCREPANCIES IN THE PURCHASE BILLS DURING THE YEAR THE CIT(A) OUGHT NOT TO HAVE RELIED ON AN AFFIDAVIT BY THE PARENT COMPANY THAT NO CLAIM WAS MADE BY IT FOR SUC H PURCHASES AND DELETE THE ADDITION. 3.1 THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF ` 7 39 253/- MADE TOWARDS STITCHING AND WASHING CHARGES. ITA NO.1292/MDS/10 2 3.2 HAVING FOUND THAT THERE WERE DISCREPANCIES IN THE P URCHASE BILLS DURING THE YEAR THE CIT(A) OUGHT NOT TO HAVE RELIED ON AN AFFIDAVIT BY THE PARENT COMPANY THAT NO CLAIM WAS MADE BY IT FOR SUCH PURCH ASES AND DELETE THE ADDITION. 3.3 THE CIT(A) SHOULD HAVE AT LEAST REMANDED THE ISSUE OF VERIFICATION EXPENSES TOWARDS STITCHING AND WASHING CHARGES TO T HE AO. 4.1 THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DEPRECIATION ON BUILDING OF ` 34 88 977/- ON THE BASIS OF EVIDENCES PRODUCED BEFO RE THE LD.CIT(A) FOR THE FIRST TIME WITHOUT GIVING THE AO A REASONABLE OPPORTUNITY TO EXAMINE THE SAME EVIDENCE. 4.2 HAVING REGARD TO THE PROVISIONS OF RULE 46A OF I.T. RULES THE LD.CIT(A) OUGHT TO HAVE GIVEN THE AO A REASONABLE OPPORTUNITY TO EXAMINE THE EVIDENCE PRODUCED BEFORE THE LD.CIT(A). 2. ASSESSEEE ENGAGED IN THE BUSINESS OF MANUFACTURI NG AND EXPORT OF GARMENTS HAD FILED A RETURN ADMITTING LOSS OF ` 14890224/- FOR THE IMPUGNED A.Y. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO MADE A DISALLOW ANCE OF 40% OF THE CLAIM OF PURCHASES ` 29856820/- FOR A REASON THAT CERTAIN BILLS TOTALING ` 264943/- RELATING TO SOME OF THE PURCHASES WERE IN THE NAME OF A PARENT COMPANY OF THE ASSESSEE. SIMILARLY AGAINST LABOUR BILL FOR STITCHING AND WASHING CHARG ES AO FOUND THAT THE BILLS TOTALING TO ` 738353/- AND ` 900/- RESPECTIVELY WERE IN THE NAME OF PARENT COMPA NY. THIS CLAIM WAS ALSO THEREFORE DISALLOWED. ASSESSEE HAD CLAIMED DE PRECIATION ON BUILDING TO THE TUNE OF ` 8031091/- AND AO WAS OF THE OPINION THAT INVOICE FO R THE BUILDING CONSTRUCTION RAISED BY ONE M/S BHAGGYAM CONSTRUCTIONS WAS AGAIN IN THE NAME OF THE PARENT COMPANY AND THEREFORE SUCH DEPRECIATION COULD NOT BE ALLOWED. 3. IN ITS APPEAL BEFORE CIT(A) SUBMISSION OF THE ASSESSEE WAS THAT BOTH THE PARENT COMPANY OF THE ASSESSEE NAMED M/S MEDIDENT INDIA P. LTD. AS WELL AS THE ASSESSEE WERE FUNCTIONING FROM THE SAME PREMISES AND ALSO E NGAGED IN SIMILAR LINES OF ITA NO.1292/MDS/10 3 BUSINESS.. AS PER THE ASSESSEE SOME BILLS WHICH WE RE ISSUED BY THE VENDORS FOR RAW MATERIAL AND ALSO FOR LABOUR INVOICES WERE INADVERT ENTLY ADDRESSED IN THE NAME OF PARENT COMPANY THOUGH RELATED PURCHASES OR SERVICES WERE ENJOYED BY THE ASSESSEE COMPANY. VIS--VIS THE CLAIM OF DEPRECIATION SUBMI SSION OF THE ASSESSEE WAS THAT THERE WAS A REGISTERED LEASE DEED FOR THE FACTORY LAND IN FAVOUR OF THE ASSESSEE AND THEREFORE THE CONSTRUCTION WHICH WAS DONE THEREIN BY ASSESSEE WAS ELIGIBLE FOR CLAIM OF DEPRECIATION. ASSESSEE ALSO FILED AFFIDAVITS FROM THE PARENT COMPANY TO THE EFFECT THAT NONE OF THE ABOVE CLAIMS WERE MADE IN THE RELEVANT PREVIOUS YEAR BY THE SAID COMPANY IN THEIR RETURN OF INCOME. LD.CIT(A) BASED ON THIS AFFIDAVIT DELETED LTHE DISALLOWANCES. 4. NOW BEFORE US LD. DR SUBMITTED THAT THE CIT(A) OUGHT NOT HAVE RELIED ON THE AFFIDAVIT OF THE PARENT COMPANY WITHOUT FIRST PUTT ING IT TO THE AO AND THEREFORE THE ORDER OF THE CIT(A) REQUIRED TO BE SET ASIDE AND THAT OF THE AO RESTORED. PER CONTRA LD. AR SUPPORTED THE ORDER PF THE AO. 5. WE HAVE CAREFULLY PERUSED THE ORDERS AND HEARD B OTH THE PARTIES. THE DISALLOWANCES WERE MADE FOR THE REASON THAT BILLS R ELEVANT TO THE CLAIM WERE IN THE NAME OF PARENT COMPANY. IT IS NOT DISPUTED THAT PA RENT COMPANY AS WELL AS THE ASSESSEE COMPANY WERE FUNCTIONING FROM THE SAME PRE MISES. IT IS ALSO NOT DISPUTED THAT IN RESPECT OF FACTORY LAND THERE WAS A LEASE DEED IN FAVOUR OF THE ASSESSEE. ASSESSEE HAD ALSO FILED AN AFFIDAVIS FROM THE PAREN T COMPANY BEFORE LD.CIT(A). NEVERTHELESS WE FIND FROM THE ORDER OF LD. CIT(A) T HAT THE AO WAS NEVER GIVEN AN OPPORTUNITY FOR VERIFYING THE CLAIM OF THE ASSESSEE AND THE AFFIDAVITS WERE NEVER ITA NO.1292/MDS/10 4 BROUGHT TO HIS NOTICE. WE ARE THEREFORE OF THE OPIN ION THAT THE MATTER NEEDS A REVISIT BY THE AO. WE THEREFORE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE MATTER BACK TO THE AO FOR CONSIDERATION AFRESH. AO SHALL BE FREE TO CONSIDER THE AFFIDAVITS FILED BY THE PARENT COMPANY AND IF THE C LAIMS WERE NOT PREFERRED BY THE PARENT COMPANY IN THEIR RETURN AND IF THE GENUINEN ESS OF THE CLAIMS ARE PROVED NO DOUBT IT WOULD HAVE BE ALLOWED. WITH THESE OBSERVAT IONS WE ALLOW THE APPEAL OF THE REVENUE FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 25 - 03-201 1. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 25TH MARCH 2011. CC: THE ASSESSEE 2)THE ASSESSING OFFICER 3)THE C IT(A) 4) THE CIT 5)THE D.R 6)GUARD FILE. NBR ITA NO.1292/MDS/10 5