M/s. Shree Santram Silk Mills Pvt.Ltd.,, Surat v. The ACIT, Range-4,, Surat

ITA 1639/AHD/2008 | 2004-2005
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 163920514 RSA 2008
Assessee PAN AADCS3626A
Bench Ahmedabad
Appeal Number ITA 1639/AHD/2008
Duration Of Justice 2 year(s) 8 month(s) 8 day(s)
Appellant M/s. Shree Santram Silk Mills Pvt.Ltd.,, Surat
Respondent The ACIT, Range-4,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 25-07-2008
Date Of Final Hearing 28-12-2010
Next Hearing Date 28-12-2010
Assessment Year 2004-2005
Appeal Filed On 13-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI D.C. AGRAWAL ACCOUNTANT MEMBER DATE OF HEARING : 12/1/2011 DRAFTED ON: 12/ 1/2011 1. ITA NO.3569/AHD/2007 A.Y. 2004-05 2. ITA NO.1639/AHD/2008 A.Y. 2004-05 M/S.SHREE SANTRAM SILK MILLS (P) LTD. 1 SEEMA ROW HOUSE GHOD DOD ROAD SURAT VS. THE ACIT RANGE-4 SURAT PAN/GIR NO. : AADCS 3626A ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI M.J. SHAH A.R. RESPONDENT BY: SHRI S.S. SHUKLA D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THESE TWO APPEALS HAVE BEEN CONSOLIDATED AND HERE BY DECIDED BY THIS COMMON ORDER. (A) ASSESSEES APPEAL; ITA NO.3569/AHD/2007 A.Y. 2004-05 2. THIS IS AN APPEAL OF THE ASSESSEE WHICH HAS E MANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS)-III SURAT DATED 09/05 /2007 PASSED FOR ASSESSMENT YEAR 2004-05. 2.1. GROUND NO.1 READS AS UNDER:- ITA NO.3569/AHD /2007 & ITA NO.1639/AHD/2008 M/S.SHREE SANTRAM SILK MILLS (P) LTD. VS. ACIT ASST.YEAR 2004-05 - 2 - 1. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISA LLOWING RS.44 200/- BEING ELECTRICITY EXPENSES PERTAINING T O REGISTERED OFFICE OF THE COMPANY. 2.2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT 1961 DATED 3 1/07/2006 WERE THAT THE ASSESSEE-COMPANY IS IN THE BUSINESS OF WEAVING ON JOB-WORK BASIS. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE AS SESSEE HAS CLAIMED ELECTRICITY EXPENDITURE IN RESPECT OF A CONNECTION INSTALLED AT A RESIDENTIAL HOUSE OF A DIRECTOR . DUE TO THAT REASON ASSESSING OFFICER HAS RAISED A QUERY THAT THE ELECTRICITY EXPENDITURE BEING PERSONAL IN NATURE DESERVES TO BE DISALLOWED. THE EXPLANATION OF THE ASSESSEE WAS THAT A SMALL REGISTERED OFFICE IS MAINTAINED AT THE RESIDENTIAL HOUSE THEREFORE THE EXPENDITURE WAS CLAIMED TO BE ALLOWE D. THE MATER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY AND HE HAS GIVEN A FINDING THAT ALTHOUGH A REGISTERED OFFICE IS SITUATED AT ONE OF THE DIRECTORS RESIDENCE BUT THERE IS ONLY ONE PART-TIME EMPLOYEE OF THE COM PANY THEREFORE THE ENTIRE CLAIM OF ELECTRICITY EXPENDITURE WAS NOTHING BUT PERSONAL EXPENDITURE OF THE DIRECTOR. THE ACTION OF THE ASS ESSING OFFICER WAS CONFIRMED. CONSIDERING THE ARGUMENTS OF BOTH THE S IDES AND FACTS OF THE CASE WHEN UNDISPUTEDLY THE ELECTRIC EXPENDITURE IS IN RESPECT OF THE DIRECTORS RESIDENCE THEREFORE WE ARE OF THE VIEW THAT THE SAME WAS RIGHTLY DISALLOWED. THAT PLEA OF THE ASSESSEE IS A LSO NOT ACCEPTABLE THAT REGISTERED OFFICE IS SITUATED AT THE RESIDENCE BECA USE THERE WAS NO RECOGNIZABLE BUSINESS ACTIVITY WAS STATED TO BE CAR RIED OUT FROM THE RESIDENCE. WITH THESE REASONS WE HEREBY DISMISS T HIS GROUND. ITA NO.3569/AHD /2007 & ITA NO.1639/AHD/2008 M/S.SHREE SANTRAM SILK MILLS (P) LTD. VS. ACIT ASST.YEAR 2004-05 - 3 - 3. GROUND NO.2 READS AS UNDER: 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN DISA LLOWING RS.312 076/- OUT OF ELECTRICITY EXPENSES PERTAINING TO FACTORY. 3.1. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT FOR THE YEAR UNDER CONSIDERATION THERE WAS INCREASE IN THE ELECTRICITY EXPENSES COMPARING THE PAST YEAR. HE HAS ALSO MENTIONED THAT THE ELECTRICITY CONNECTION WAS IN THE NAME OF ONE OF THE DIRECTORS . THE EXPLANATION OF THE ASSESSEE WAS THAT THE SAID ELECTRICITY CONNECTION I S INSTALLED AT THE FACTORY PREMISES AND EXCLUSIVELY USED FOR THE PURPOSES OF T HE BUSINESS. IT WAS ALSO EXPLAINED THAT AT THE TIME OF THE START OF THE FACTORY THE CONNECTION TAKEN IN THE NAME OF THE DIRECTOR BUT IT WAS EXCLU SIVELY MEANT FOR THE BUSINESS ACTIVITY OF JOB-WORK OF THE ASSESSEE. TH E ASSESSING OFFICER AS WELL AS THE LEARNED CIT(APPEALS) BOTH FOR NOT CONVI NCED AND THE IMPUGNED ADDITION WAS MADE. 4. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PERU SED THE NATURE OF EXPENDITURE INCURRED IN THE LIGHT OF THE COMPILATIO N FILED BEFORE US. THE EXPLANATION OF THE ASSESSEE WAS THAT A LAND WAS PUR CHASED AT PIPODARA SURAT FOR CONSTRUCTION OF A FACTORY. AT THAT TIME T HE PROMOTER OF THE COMPANY WAS MR. JIGISHBHAI DESAI. THEREFORE TH E POWER CONNECTION WAS OBTAINED IN THE NAME OF THE SAID PROMOTER DIRE CTOR AND ACCORDINGLY INSTALLED AT THE FACTORY PREMISES. MERELY BECAUSE AN ELECTRIC CONNECTION BEING OBTAINED IN THE NAME OF ONE OF THE PROMOTER D IRECTOR SHOULD NOT BE MADE THE BASIS OF DISALLOWANCE PARTICULARLY WHEN IT WAS MEANT FOR THE ITA NO.3569/AHD /2007 & ITA NO.1639/AHD/2008 M/S.SHREE SANTRAM SILK MILLS (P) LTD. VS. ACIT ASST.YEAR 2004-05 - 4 - PURPOSE OF BUSINESS. A DISALLOWANCE CAN ONLY BE M ADE IF IT IS FOUND THAT AN EXPENDITURE IS NOT WHOLLY AND EXCLUSIVELY FOR TH E PURPOSES OF THE BUSINESS OF THE ASSESSEE. HOWEVER IN THE PRESENT CASE THIS IS NOT THE CASE OF THE REVENUE THAT THE ELECTRIC CONNECTION WA S NOT INSTALLED AT THE FACTORY PREMISES OR THE ELECTRICITY EXPENDITURE INC URRED WAS NOT FOR THE JOB-WORK ACTIVITY OF THE ASSESSEE. IN THE COMPIL ATION THE APPELLANT HAS PLACED THE REASONS OF THE VARIATION IN PERCENTAGE O F CONSUMPTION OF ELECTRICITY VIZ-A-VIZ PRODUCTION RATIO. IN THIS RE GARD THE HON'BLE COURTS HAVE HELD THAT MERE DISPARITY IN CONSUMPTION OF ELE CTRICITY SHOULD NOT BE THE REASON FOR REJECTION OF CLAIM. RATHER IT HAS BEEN OBSERVED THAT SUCH VARIATION CAN BE DUE TO VARIOUS FACTORS BEYOND THE CONTROL OF THE ASSESSEE. FOR REFERENCE RELIANCE IS PLACED ON ST.TERESAS OI L MILLS VS. STATE OF KERALA REPORTED AT (1970)76 ITR 365 (KER.). CONSID ERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWI NG THE ABOVE JUDGEMENT WE ARE OF THE CONSCIENTIOUS VIEW THAT IN THE ABSENCE OF ANY SPECIFIC CONTRARY MATERIAL TO DEMONSTRATE THAT THE ELECTRICITY CONSUMPTION WAS NOT MEANT FOR THE BUSINESS OF THE ASSESSEE WE HEREBY REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND DIRECT TO ALL OW THE CLAIM. THIS GROUND IS ALLOWED. 5. IN THE RESULT ASSESSEES APPEAL I.E. 3569/AHD/ 2007 IS PARTLY ALLOWED. (B) ASSESSEES APPEAL; ITA NO.1639/AHD/2008 A.Y. 2004-05 6. THIS APPEAL AT THE BEHEST OF THE ASSESSEE H AS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS)-III SURAT DATED 12/03/2008 PASSED FOR ITA NO.3569/AHD /2007 & ITA NO.1639/AHD/2008 M/S.SHREE SANTRAM SILK MILLS (P) LTD. VS. ACIT ASST.YEAR 2004-05 - 5 - ASSESSMENT YEAR 2004-05 AGAINST CONFIRMATION OF PEN ALTY OF RS.1 27 814/- LEVIED U/S.271(1)(C) OF THE I.T.ACT. 7. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING PENALTY ORDER PASSED U/S. 271(1)(C) OF THE I.T. ACT 1961 DATED 29/06/2007 WERE THAT ON ACCOUNT OF DISALLOWANCE OF ELECTRICITY EXPENSES THE IMPUGNED PENALTY WAS IMPOSED. 8. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY THE ACTION OF THE ASSESSING OFFICER WAS AFFIRMED. 9. WE HAVE HEARD BOTH THE SIDES. FACTS OF THE CASE HAVE ALREADY BEEN DISCUSSED IN ABOVE PARAGRAPHS WHILE DECIDING THE QU ANTUM APPEAL. THE REASON FOR THE IMPOSITION OF THE PENALTY WAS THE DI SALLOWANCE OF ELECTRICITY EXPENDITURE. AS FAR AS THE DISALLOWANC E OF ELECTRICITY EXPENDITURE WAS CONCERNED THE SAME HAS NOW BEEN DE LETED BY US BECAUSE THE BASIS ON WHICH THE SAID DISALLOWANCE WA S MADE WAS NOT FOUND SATISFACTORY AS IS EVIDENT FROM THE ABOVE PAR AGRAPHS. THEREFORE UP TO THIS EXTENT THE IMPUGNED PENALTY HAS TO BE DELE TED. AS FAR AS THE BALANCE AMOUNT OF ELECTRICITY EXPENDITURE OF RS.42 000/- IS CONCERNED THOUGH THE SAME WAS CONFIRMED BY US BUT THAT TOO MU ST NOT BE THE REASON FOR LEVY OF CONCEALMENT PENALTY BECAUSE THE ASSESSE E HAS PLACED THE RELEVANT FACTS BEFORE THE ASSESSING OFFICER AND TRI ED TO EXPLAIN THAT CLAIMED EXPENDITURE RELATED TO THE REGISTERED OFFI CE AT THE RESIDENCE OF THE DIRECTOR. THIS EXPLANATION WAS NOT FOUND FALSE BY THE REVENUE AUTHORITIES BUT HELD THAT THE ELECTRICITY CONSUMPTI ON WAS FOR PERSONAL ITA NO.3569/AHD /2007 & ITA NO.1639/AHD/2008 M/S.SHREE SANTRAM SILK MILLS (P) LTD. VS. ACIT ASST.YEAR 2004-05 - 6 - PURPOSES. THEREFORE THE DISALLOWANCE WAS PRIMARILY BECAUSE OF UNREASONABLENESS OF THE EXPENDITURE. ALL THESE CI RCUMSTANCES THUS INDICATE THAT THIS IS NOT A FIT CASE FOR LEVY OF CO NCEALMENT PENALTY. WE HEREBY DIRECT TO DELETE THE PENALTY. 10. RESULTANTLY THIS APPEAL IS ALLOWED. 11. IN THE RESULT ITA NO.3569/AHD/2007 IS PARTLY A LLOWED WHEREAS ITA NO.1639/AHD/2008 IS ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 21/ 01 /2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 21/ 01 /2011 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DE PARTMENT. 3. THE CIT CONCERNED. 4. THE LD. CIT( APPEALS)-III SURAT 5. THE DR AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD ITA NO.3569/AHD /2007 & ITA NO.1639/AHD/2008 M/S.SHREE SANTRAM SILK MILLS (P) LTD. VS. ACIT ASST.YEAR 2004-05 - 7 - 1. DATE OF DICTATION..12/1/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12/1/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 21.1.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.1.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER