THE ITO 3(3(3), MUMBAI v. THE STANDARD INDUSTRIES LTD,

ITA 1504/MUM/2008 | 2003-2004
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 150419914 RSA 2008
Assessee PAN AABCS8888C
Bench Mumbai
Appeal Number ITA 1504/MUM/2008
Duration Of Justice 3 year(s) 5 month(s)
Appellant THE ITO 3(3(3), MUMBAI
Respondent THE STANDARD INDUSTRIES LTD,
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 29-07-2011
Date Of Final Hearing 22-06-2011
Next Hearing Date 22-06-2011
Assessment Year 2003-2004
Appeal Filed On 29-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER ITA NO. 1310/MUM./2008 (ASSESSMENT YEARS : 2003-04 ) DATE OF HEARING 22.6.2011 STANDARD INDUSTRIES LTD. VIJAYLAKSHMI MAFATLAL CENTRE 67A DR. DESHMUKH MARG MUMBAI 400026 PAN AABCS8888C .. APPELLANT V/S INCOME TAX OFFICER WARD-3(3)(3) PIRAMAL CHAMBERS MUMBAI .... RESPONDENT ITA NO. 1504/MUM./2008 (ASSESSMENT YEARS : 2003-04 ) INCOME TAX OFFICER WARD-3(3)(3) PIRAMAL CHAMBERS MUMBAI .. APPELLANT V/S STANDARD INDUSTRIES LTD. VIJAYLAKSHMI MAFATLAL CENTRE 67A DR. DESHMUKH MARG MUMBAI 400026 PAN AABCS8888C .... RESPONDENT REVENUE BY : MR. G.P. TRIVEDI ASSESSEE BY : MR. JAHANGIR D. MISTRI STANDARD INDUSTRIES LTD. ITA NO.1310/M/2008 ITA NO.1504/M/2008 2 O R D E R PER J. SUDHAKAR REDDY A.M. THESE CROSS APPEAL ARE DIRECTED AGAINST THE IMPUGN ED ORDER DATED 25 TH NOVEMBER 2007 PASSED BY THE COMMISSIONER (APPEALS) -XXXII MUMBAI FOR ASSESSMENT YEAR 2003-04. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY AND IT FILED RETURN OF INCOME ON 28 TH NOVEMBER 2003 FOR THE YEAR UNDER ASSESSMENT. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURE AND SALE OF TEXTILE GOODS READYMADE GARMENTS CAUSTIC SODA CA USTIC POTASH CHLORINE HYDROCHLORIC ACID AND OTHER ORGANIC AND INORGANIC C HEMICALS. THE BUSINESS OF THE ASSESSEE IS DIVIDED INTO THREE DIVISIONS I.E. CHEMICAL APPARELS AND TEXTILES. THE ASSESSING OFFICER PASSED ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961 (FOR SHORT THE ACT ) ON 29 TH MARCH 2006 INTER-ALIA MAKING DISALLOWANCES / ADDITIONS UNDER SECTION 41(1 ) OF THE ACT. ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK OF FINISHED GOO DS DELAYED PAYMENT OF PROVIDENT FUND AND DISALLOWANCE OF FOREIGN TRAVEL E XPENSES. THE ASSESSING OFFICER RE-COMPUTED THE LONG TERM CAPITAL GAINS BY REFERRING TO FAIR MARKET VALUE (FMV) OF LAND AS ON 1 ST APRIL 1981 TO THE DISTRICT VALUATION OFFICER AND ADOPTING THE VALUE GIVEN BY THE DVO. 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEA L WHEREIN THE COMMISSIONER (APPEALS) DELETED THE ADDITIONS MADE U NDER SECTION 41(1) AS WELL AS ADDITIONS MADE ON ACCOUNT OF VALUATION OF C LOSING STOCK AND DISALLOWANCE MADE UNDER SECTION 43B. INSOFAR AS THE COMPUTATION OF LONG TERM CAPITAL GAIN IS CONCERNED THE FINDINGS OF THE ASSESSING OFFICER WERE UPHELD. AGGRIEVED THE ASSESSEE AS WELL AS THE REVE NUE ARE IN APPEAL BEFORE THE TRIBUNAL. STANDARD INDUSTRIES LTD. ITA NO.1310/M/2008 ITA NO.1504/M/2008 3 4. WE HAVE HEARD LEARNED COUNSEL MR. JAHANGIR D. MIST RI APPEARING ON BEHALF OF THE ASSESSEE AND LEARNED CIT(A) MR. G.P. TRIVEDI APPEARING ON BEHALF OF THE REVENUE. (I) FIRST WE TAKE UP ASSESSEES APPEAL. THE SOLE GROUND RAISED BY THE ASSESSEE IS WHETHER OR NOT THE COMMISSIONER (APPEA LS) WAS JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN A DOPTING THE FAIR MARKET VALUE OF LAND AT ` 8 36 44 000 AS PER THE VALUATION ARRIVED AT BY TH E DISTRICT VALUATION OFFICER. (II) THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S DA ULAL MOHTA (HUF) ITA NO.1031 OF 2008 JUDGMENT DATED 22 ND FEBRUARY 2008 HELD AS FOLLOWS:- 4 . THE TRIBUNAL IN THE ORDER DATED 23 RD JULY 2004 HAS CATEGORICALLY OBSERVED THUS: 5. THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATI ON IS WHETHER THE REFERENCE MADE BY THE ASSESSING OFFICER TO THE DVO UNDER SECTION 55A IS BAD IN LAW UNDER THE F ACTS AND CIRCUMSTANCES OF THE CASE. THIS ISSUE IN OUR CONSIDERED OPINION IS COVERED IN FAVOUR OF THE ASS ESSEE AND AGAINST THE REVENUE BY THE JUDGMENT IN THE CASE OF RUBAB M. KAZERANI REPORTED IN 91 ITD 429 (MUM.) (TM ). FURTHER THE ASSESSEE ALSO COVERED BY THE THIRD MEM BER DECISION OF THE PUNE BENCH OF THE TRIBUNAL THE CAS E OF KRISHNABHAI TINGORE V/S ITO REPORTED IN 101 ITD 317 (PUNE) (TM) WHEREIN IT HAS BEEN HELD THAT REFERENCE TO DVO CAN ONLY BE MADE IN CASES WHERE THE VALUE OF CA PITAL ASSET SHOWN BY THE ASSESSEE IS LESS THAN ITS FAIR M ARKET VALUE OF LAND AS ON 1 ST APRIL 1981 SHOWN BY THE ASSESSEE ON THE BASIS OF APPROVED VALUERS REPORT BEING MORE THAN ITS FAIR MARKET VALUE REFERENCE UNDER S. 35A WAS NOT VALID. RESPECTFULLY FOLLOWING THE PROPOSITION LAID DOWN THESE TWO CASES BY THE COORDINATE BENCHES WE UPHOLD THE CONTENTION OF THE ASSESSEE AND HOLD THAT THE REFERE NCE MADE BY THE ASSESSING OFFICER TO THE DVO UNDER SECT ION 55A IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE IS BAD IN LAW. THUS ON THE SOLE GROUNDS OF APPEAL OF THE ASSESSEE HAS TO BE ALLOWED. 6. BEFORE PASSING WE HAVE TO MENTION THAT THE ASSESSEE HAS SUBMITTED THE ARGUMENTS. AS ON THE BAS IS OF THE LEGAL ASPECTS ITSELF WE HAVE DECIDED THE ISSUE IN STANDARD INDUSTRIES LTD. ITA NO.1310/M/2008 ITA NO.1504/M/2008 4 FAVOUR OF THE ASSESSEE WE REFRAIN FROM UNDERTAKING THIS ACADEMIC EXERCISE OF DISPOSING THIS CASE ON MERITS. 5. IN VIEW THEREOF THERE IS NO MERIT IN THE APPEAL . APPEAL STANDS DISMISSED. (III) IN VIEW OF THE AFORESAID BINDING DECISION OF THE HO N'BLE JURISDICTIONAL HIGH COURT WE UPHOLD THE CONTENTIONS OF THE ASSESS EE AND DIRECT THE ASSESSING OFFICER TO COMPUTE THE CAPITAL GAINS BY T AKING THE FAIR MARKET VALUE AS ON 1 ST APRIL 1981 AS DECLARED BY THE ASSESSEE. CONSEQUEN TLY WE SET ASIDE THE IMPUGNED ORDER OF THE COMMISSIONER (A PPEALS) AND ALLOW THE GROUND RAISED BY THE ASSESSEE. (IV) IN THE RESULT ASSESSEES APPEAL IS ALLOWED. (V) COMING TO THE REVENUES APPEAL GROUND NO.1 READS AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING AMOUNT OF ` 72 56 739 MADE BY THE A.O. UNDER SECTION 41(1) WITHOUT APPRECIATING T HE WORD ANY LIABILITY INSERTED IN THE EXPLANATION 1 TO SECTION 41(1) OF THE ACT APPLICABLE FROM A.Y. 1998-99 COVERS ALL KINDS OF LI ABILITIES AND THAT THE ASSESSEE FAILED TO PROVE THAT THESE LIABILITIES STI LL EXISTS. 5. THE ASSESSING OFFICER WHILE MAKING THE ADDITION O BSERVED THAT THE ASSESSEE WAS NOT ABLE TO JUSTIFY AS TO WHY THE SAID PAYMENTS WERE OUTSTANDING TILL DATE AND THAT THE ASSESSEE HAS NOT FILED ANY MATERIAL TO INDICATE THE CIRCUMSTANCES UNDER WHICH THE PAYMENTS ARE OUTSTANDING TILL DATE. HE HELD THAT IN THE ABSENCE OF PROPER EXPLANA TION IT CAN BE INFERRED THAT THE LIABILITY IN THE HANDS OF THE ASSESSEE HAS CEASED. ACCORDINGLY HE MADE AN ADDITION UNDER SECTION 41(1). 6. THE ASSESSEE BEING AGGRIEVED CARRIED THE MATTER I N APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN THE COMMISSIONER (APPEALS) AT PAGE-4 / PARA-4.4 OBSERVED THAT THE ASSESSEE DID FURNISH TH E DETAILS BEFORE THE ASSESSING OFFICER. HE OBSERVED THAT SECTION 41(1) C AN BE INVOKED ONLY WHEN STANDARD INDUSTRIES LTD. ITA NO.1310/M/2008 ITA NO.1504/M/2008 5 THE ASSESSEE HAS OBTAINED ANY CASH OR IN ANY OTHER MANNER WHATSOEVER SOME BENEFIT IN RESPECT OF A TRADING LIABILITY BY W AY OF REMISSION OR CESSATION. HE FURTHER RECORDED THAT THE ASSESSEE HAS NOT PASSE D ANY ENTRY WRITING BACK THE OUTSTANDING LIABILITIES. HE GAVE A FINDING THAT THERE IS NEITHER REMISSION NOR CESSATION OF LIABILITY IN ASSESSEES CASE. THE COMMISSIONER (APPEALS) FURTHER OBSERVED THAT DURING THE YEAR ENDED 31 ST MARCH 2007 THE ASSESSEE HAS SUO-MOTO WRITTEN BACK ` 25 61 935 AND THE SAME WAS BROUGHT TO TAX IN THAT YEAR. FOR THESE REASONS HE DELETED THE ADDITI ON. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. LEARNED DEPARTMENTAL REPRESENTATIVE MR. G.P. TRIVE DI APPEARING ON BEHALF OF THE REVENUE RELIED ON THE ORDER OF THE A SSESSING OFFICER AND SUBMITS THAT NON-FURNISHING OF DETAILS LEAD THE ASS ESSING OFFICER TO COME TO A CONCLUSION THAT THERE IS CESSATION OF LIABILITIES. HE POINTED OUT THAT SUBSEQUENT ACT OF THE ASSESSEE IN WRITING BACK CERT AIN OUTSTANDING LIABILITIES ITSELF PROVES THAT THE DECISION OF THE ASSESSING OF FICER WAS CORRECT. 8. LEARNED COUNSEL MR. JAHANGIR D. MISTRI APPEARING ON THE OTHER HAND POINTS OUT THAT THE ASSESSEE HAS NOT WRITTEN-OFF AN Y OUTSTANDING LIABILITY IN ITS BOOKS OF ACCOUNT DURING THE CURRENT ASSESSMENT YEAR AND THERE IS NO REMISSION OF LIABILITIES AND CONSEQUENTLY THERE I S NO DERIVING OF CASH OR BENEFIT BY THE ASSESSEE. HE RELIED ON THE JUDGMENT OF HONBLE P&H HIGH COURT IN CIT V/S SITA DEVI JUNEJA ITA NO.619 OF 20 09. 9. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD AS WELL AS THE CASE LAWS CITED BEFORE US WE FIND THAT THE ADD ITION HAS BEEN MADE FOR THE SOLE REASON THAT THE ASSESSEE WAS NOT ABLE TO E XPLAIN BEFORE THE ASSESSING OFFICER AS TO WHY CERTAIN AMOUNTS REMAINE D OUTSTANDING IN ITS BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS NOT MAD E ANY EFFORT TO ASCERTAIN AS TO WHETHER THESE OUTSTANDING LIABILITIES ACTUALL Y EXIST OR NOT. THE ADDITION IS MADE SOLELY BASED ON PRESUMPTION OF THE ASSESSIN G OFFICER THAT THESE STANDARD INDUSTRIES LTD. ITA NO.1310/M/2008 ITA NO.1504/M/2008 6 LIABILITIES ARE NO MORE PAYABLE. THE MUMBAI BENCH O F THE TRIBUNAL IN DSA ENGINEERS (BOMBAY) V/S ITO (2009) 30 SOT 31 (MUM.) HAS HELD THAT WHEN THE ASSESSEE DISPUTES THE OBTAINING OF A BENEFIT T HE ASSESSING OFFICER IS UNDER STATUTORY OBLIGATION TO ESTABLISH THE SAME BY GATHERING EVIDENCE IN FAVOUR OF SUCH ACCRUAL OF BENEFITS. IT FURTHER HELD THAT WHEN THE ASSESSEE CONTINUES TO REFLECT OR RECORD THE LIABILITIES AS S TILL PAYABLE TO THE CREDITORS AND DECIDES NOT TO WRITE THEM OFF UNILATERALLY THE ASSESSING OFFICER HAS HIGHER LEVEL OF RESPONSIBILITY AND HE HAS TO ESTABL ISH THAT THE EVIDENCE THAT THE SAID BOOK ENTRIES ARE WRONG AND NOT BONAFIDE. I T HELD THAT THE ONUS IS ON THE REVENUE TO PROVE THAT THE LIABILITIES HAVE CEAS ED FINALLY AND THERE IS NO POSSIBILITY OF THEIR REVIVAL. THE TRIBUNAL RELIED O N A NUMBER OF DECISIONS ON THIS ISSUE. APPLYING THE PROPOSITIONS LAID DOWN IN THIS CASE LAW TO THE FACTS OF THE CASE WE UPHOLD THE FINDINGS OF THE COMMISSIONE R (APPEALS) AND DISMISS THE GROUND RAISED BY THE REVENUE AS THE ASSESSING OFFICER HAS NOT DISCHARGED THE ONUS THAT LAY ON HIM. 10. GROUND NO.2 READS AS FOLLOWS:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F AMOUNT OF ` 21 65 575 MADE BY THE A.O. BEING UNUTILIZED MODVAT WITHOUT APPRECIATING THE INTRODUCTION OF SEC. 145A APPLICAB LE FROM A.Y. 1999- 00 AND THAT THE ASSESSEE IS FOLLOWING EXCLUSIVE SYS TEM OF ACCOUNTING. 11. ON THIS ISSUE WE FIND THAT A COORDINATE BENCH OF T HIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.4832/MUM./2009 FOR A SSESSMENT YEAR 2004- 05 ORDER DATED 13 TH OCTOBER 2010 HAD CONSIDERED THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN CIT V/S MAHAVIR ALLUMIN IUM LTD. (2008) 297 ITR 77 (DEL.) AND SET ASIDE THE MATTER TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO RE-COMPUTE THE PROFITS AFTER MAKING AD JUSTMENTS TO THE OPENING STOCK CLOSING STOCK PURCHASES AND SALES AND IN AC CORDANCE WITH LAW. CONSISTENT WITH THE VIEW TAKEN THEREIN WE RESTORE THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR DENOVO ADJUDICATION. THIS GROUND IS THUS ALLOWED FOR STATISTICAL PURPOSES. STANDARD INDUSTRIES LTD. ITA NO.1310/M/2008 ITA NO.1504/M/2008 7 12. GROUND NO.3 READS AS FOLLOWS:- 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F ` 12 42 189 MADE BY THE A.O. ON THE ESTIMATED SALES TAX ON FINISHED GOODS IN THE VALUE OF CLOSING STOCK WITHOUT APPRECIATING THE INTRODUCT ION OF SEC. 145A APPLICABLE FROM A.Y. 1999-00 AND THAT THE ASSESSEE IS FOLLOWING EXCLUSIVE SYSTEM OF ACCOUNTING. 13. WE ALSO RESTORE THIS ISSUE BACK TO THE FILE OF ASSE SSING OFFICER KEEPING IN VIEW THE DECISION TAKEN IN GROUND NO.2 VIDE PAR A-11 ABOVE. 14. GROUND NO.4 READS AS FOLLOWS:- 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE A.O. TO G RANT DEDUCTION OF ` 26 54 824 IN RESPECT OF 43B PAYMENTS WHICH ARE NOT MADE WITHIN THE DUE DATE. 15. AFTER HEARING BOTH THE PARTIES WE FIND THAT THIS I SSUE IS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE B Y THE JUDGMENT OF HON'BLE SUPREME COURT IN ALOM EXTRUSIONS LTD. (200 9) 319 ITR 306 (SC). A COORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 ITA NO.7947/MUM./2004 ORDER DATED 12 TH SEPTEMBER 2008 RELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN VINAY C EMENT 213 CTR 268 AND ALLOWED THE CLAIM OF THE ASSESSEE. CONSISTENT W ITH THE VIEW TAKEN THEREIN WE UPHOLD THE ORDER OF THE COMMISSIONER (A PPEALS) AND DISMISS THE GROUND RAISED BY THE REVENUE. 16. IN THE RESULT REVENUES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2011 SD/- D.K. AGARWAL JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 29.7.2011 STANDARD INDUSTRIES LTD. ITA NO.1310/M/2008 ITA NO.1504/M/2008 8 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR E BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 19.7.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 21.7.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 25.7.2011 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 25.7.2011 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 25.7.2011 SR.PS/PS 6. DATE OF PRONOUNCEMENT 25.7.2011 SR.PS 7. FILE SENT TO THE BENCH CLERK 29.7.2011 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER