The ITO, Ward-4(4),, Surat v. M/s. Shree Sai Krupa Dyg. & Ptg. Mills Pvt. Ltd.,, Surat

ITA 2466/AHD/2004 | 2001-2002
Pronouncement Date: 22-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 246620514 RSA 2004
Bench Ahmedabad
Appeal Number ITA 2466/AHD/2004
Duration Of Justice 5 year(s) 5 month(s) 1 day(s)
Appellant The ITO, Ward-4(4),, Surat
Respondent M/s. Shree Sai Krupa Dyg. & Ptg. Mills Pvt. Ltd.,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 22-01-2010
Date Of Final Hearing 20-01-2010
Next Hearing Date 20-01-2010
Assessment Year 2001-2002
Appeal Filed On 20-08-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD - AHMEDABAD B BENCH (BEFORE DR.O.K. NARAYANAN VICE-PRESIDENT AND SHRI MAHAVIR SINGH JUDICIAL MEMBER) ITA NO.2392/AHD/2004 [ASSTT.YEAR : 2001-2002] SHREE SAIKRUPA DYG. & PTG. MILLS PVT. LTD. A/1/393 GIDC PANDESARA SURAT. VS. ITO WARD-4(4) SURAT. ITA NO.2466/AHD/2004 [ASSTT.YEAR : 2001-2002] ITO WARD-4(4) SURAT. VS. SHREE SAIKRU PA DYG. & PTG. MILLS PVT. LTD. A/1/393 GIDC PANDESARA SURAT. ASSESSEE BY : SHRI J.P. SHAH REVENUE BY : SMT. NEETA SHAH DATE OF ORDER RESERVED : 20-01-2010 O R D E R PER DR. O.K. NARAYANAN VICE-PRESIDENT : THESE ARE TWO CROSS APPEALS AND RELATE TO THE ASSESSMENT YEAR 200 1-2002. THE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER OF THE CIT(A )-III AT SURAT DATED 5-4- 2004 AND ARISE OUT OF THE ASSESSMENT COMPLETED UNDE R SECTION 143(3) OF THE INCOME TAX ACT 1961. 2. IN THE APPEAL FILED BY THE ASSESSE THE FIRST GR OUND RAISED IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3 70 531/- MADE BY THE ASSESSING AUTHORITY ALLEGING BOGUS PURCHASE OF PLAN T AND MACHINERY. 2.1 THE ASSESSEE HAD STATED IN ITS ACCOUNTS THAT IT HAD PURCHASED PLANT AND MACHINERY WORTH RS.2 96 425/- FROM M/S.BH ARAT STEEL PAGE - 2 ITA NO.2392 AND 2466/AHD/2004 -2- INDUSTRIES. THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.74 106/- ON THE ABOVE AMOUNT. THE MATTER OF PURCHASING PLAN T AND MACHINERY WAS REJECTED BY THE ASSESSING AUTHORITY F OR THE REASON THAT NO DOCUMENTS BY WAY OF EVIDENCES WERE PRODUCED BY THE ASSESSEE TO PROVE THE PURCHASE OF PLANT AND MACHINE RY. THE CIT(A) ALSO AGREED TO THE FINDING OF THE ASSESSING AUTHORITY REITERATING THE ABSENCE OF ANY EVIDENCE TO SUPPORT THE ARGUMENTS OF THE ASSESSEE THAT THE ASSESSEE HAD PURCHASED PLANT AND MACHINERY WORTH RS.2 96 425/-. FOR THE ABSENCE OF DOCUMENTAR Y EVIDENCES THE ASSESSEE HAD EXPLAINED THAT THERE WAS A FIRE IN THE PREMISES OF THE SUPPLIER COMPANY M/S.BHARAT STEEL INDUSTRIES AS A RESULT OF WHICH ENTIRE RECORDS WERE PERISHED. THIS EXPLANATI ON WAS ALSO NOT ACCEPTED BY THE CIT(A) ON THE GROUND THAT THE ASSES SEE HAS NOT PRODUCED ANY SURROUNDING EVIDENCES TO PROVE THE FIR E ACCIDENT IN THE PREMISES OF M/S.BHARAT STEEL INDUSTRIES. 2.2 WE HEARD BOTH SIDES ON THIS POINT. IT IS TRUE TO SAY THAT THE ASSESSEE HAS NOT SUPPORTED ITS CLAIM OF PURCHASE OF PLANT AND MACHINERY WITH ANY SORTS OF DIRECT OR INDIRECT EVID ENCE. THE CASE OF FIRE ACCIDENT WAS ALSO NOT PROVED EITHER BY DIRE CT OR ANY INDIRECT MEANS LIKE POLICE REPORT OR INSURANCE SURVEYORS RE PORT OR LIKE THAT. THE FIRE ACCIDENT ACCORDING TO THE ASSESSEE HAD TAK EN PLACE IN THE PREMISES OF M/S.BHARAT STEEL INDUSTRIES AND AT THE MAXIMUM THE RECORDS MAINTAINED BY THAT COMPANY WOULD HAVE PERIS HED IN THE FIRE ACCIDENT. THE ASSESSEE COMPANY WOULD HAVE SOM ETHING IN ITS POSSESSION TO SUPPORT ITS THEORY OF PURCHASING PLAN T AND MACHINERY. THE ASSESSEE DID NOT PRODUCE THAT EITHER. THEREFOR E IN THE FACTS AND CIRCUMSTANCES WE AGREE WITH THE LOWER AUTHORIT IES THAT THE PAGE - 3 ITA NO.2392 AND 2466/AHD/2004 -3- CLAIM OF PURCHASE OF PLANT AND MACHINERY OF RS.2 96 425/- HAS TO BE REJECTED. THE ORDER OF THE CIT(A) ON THIS POINT IS CONFIRMED RESULTING IN CONFIRMING THE DISALLOWANCE OF THE DEP RECIATION OF RS.74 106/-. 2.3 WHILE THE DISALLOWANCE OF THE DEPRECIATION OF R S.74 106/- IS JUSTIFIED THE ADDITION OF RS.2 96 425/- IS NOT JUS TIFIED. WE HAVE ALREADY FOUND THAT THE PURCHASE OF PLANT AND MACHIN ERY WORTH RS.2 96 425/- WAS NOT PROVED BY THE ASSESSEE. THAT IS WHY THE AO HAS HELD THE PURCHASE AS BOGUS. WHEN THE PURCHASE ITSELF IS CHARACTERTISED AS BOGUS HOW IT IS POSSIBLE TO PRES UME ANY OUTFLOW OF CASH FROM THE HANDS OF THE ASSESSEE. THE CASH F LOW ALSO NEED BE TREATED AS BOGUS. WHEN THE PURCHASE IS NOT ACCEPTE D THERE IS NO QUESTION OF ANY PAYMENT OF PURCHASE PRICE. THEREFO RE THE ADDITION OF RS.2 96 425/- MADE BY THE ASSESSING AUTHORITY IS WITHOUT ANY BASIS AND HIS REASONING IS CONTRADICTORY. THE CAU SE AND EFFECT MUST EXPLAIN EACH OTHER. WHEN THERE IS NO PURCHASE THERE WOULD NOT BE ANY PAYMENT FOR PURCHASE. THERE IS NO NEED TO EXPLAIN FURTHER. WE DELETE THE ADDITION OF RS.2 96 425/-. 2.4 IN RESULT THE ADDITION OF RS.3 70 531/- IS RED UCED TO RS.74 106/-. THE ASSESSEE GETS A RELIEF OF RS.2 96 425/-. 3. THE NEXT GROUND RAISED BY THE ASSESSEE IS AGAINS T ADDITION OF RS.10 405/- CONFIRMED BY THE CIT(A) IN THE CONTEXT OF CASH PAYMENTS MADE TO M/S.MUGATLAL B & SONS. WE ARE NOT CONVINCE D BY THE EXPLANATIONS OFFERED BY THE ASSESSEE TOWARDS JUSTIF ICATION OF CASH PAYMENTS AND THEREFORE THE ADDITION IS CONFIRMED. PAGE - 4 ITA NO.2392 AND 2466/AHD/2004 -4- 4. THE THIRD GROUND RAISED BY THE ASSESSEE IS AGAIN ST THE DISALLOWANCE OF RS.6 000/- MADE UNDER SECTION 40A(3) AT 20% OF T HE CASH PAYMENT OF RS.30 000/- PAID TO M/S.SHIV FAB. WE CONFIRM THE D ISALLOWANCE AS WE ARE NOT SATISFIED WITH THE EXPLANATIONS OFFERED BY THE ASSESSEE. 5. THE NEXT GROUND RAISED BY THE ASSESSE IS AGAINST THE DISALLOWANCE MADE UNDER SECTION 43B IN RESPECT OF PF AND ESI PAY MENTS AMOUNTING TO RS.1 43 678/-. THE HONBLE SUPREME COURT IN THE C ASE OF CIT VS. ALOM EXTRUSIONS LTD. 319 ITR 306 HAS HELD THAT WHERE SU CH PAYMENTS WERE MADE BEFORE THE DUE DATE OF FILING OF RETURN OF INC OME SUCH PAYMENTS WOULD NOT BE HIT BY SECTION 43B. IN THE PRESENT CA SE PAYMENTS HAVE BEEN MADE BEFORE THE DUE DATE OF FILING OF THE RETURN. ACCORDINGLY THE ADDITION OF RS.1 43 678/- IS DELETED. 6. THE LAST GROUND RAISED BY THE ASSESSEE IN ITS AP PEAL IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.8 4 025/- BEING THE INTEREST PAID ON ACCOUNT OF LATE PAYMENT OF EXCISE DUTY AND ESI. 6.1 THE INTEREST AMOUNT PAID FOR BELATED PAYMENT OF STATUTORY DUES ARE NOT PENAL IN NATURE AND THE INTERESTS PART AKE THE CHARACTER OF THE DUES ITSELF. THEREFORE THERE IS NO JUSTIFI CATION IN MAKING THE ADDITION. THE ADDITION OF RS.84 025/- IS ACCORDING LY DELETED. 7. THE ASSESSEE IS PARTLY SUCCESSFUL IN ITS APPEAL FILED BEFORE US. 8. NEXT WE WILL CONSIDER THE APPEAL FILED BY THE RE VENUE. 9. THE FIRST GROUND RAISED BY THE REVENUE IS THAT T HE CIT(A) HAS ERRED IN DELETING RS.5 40 221/- BEING THE ADDITION BY WAY OF DISALLOWANCE OF PAGE - 5 ITA NO.2392 AND 2466/AHD/2004 -5- 50% OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE AND TREATED BY THE ASSESSING AUTHORITY AS INCURRED FOR PERSONAL USER. 9.1 THE CIT(A) HAS DELETED THE ADDITION IN LIGHT OF THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON ENGINEERING CO. LTD. 253 ITR 749 HOLDING THAT THER E CANNOT BE A PERSONAL USER IN THE CASE OF CORPORATE ASSESSEE. 9.2 BUT WE HAVE TO SEE THAT IN THE PRESENT CASE TH E DETAILS WERE NOT AVAILABLE IN RESPECT OF SO MANY EXPENSES AND IT WAS NOT POSSIBLE TO ASCERTAIN WHETHER THE EXPENSES WERE INC URRED BY THE ASSESSEE COMPANY IN THE COURSE OF ITS BUSINESS OR T HE MONEY HAS BEEN MADE BY WAY OF REIMBURSEMENT TO THE CONCERNED PARTIES FOR INCURRING PERSONAL EXPENSES. WHERE THE EXPENSES AR E NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS CARRIED O N BY THE ASSESSEE SUCH EXPENSES ARE DISALLOWABLE UNDER SECT ION 37 READ WITH PROVISO THERETO. THEREFORE THERE CANNOT BE A N ETERNAL PROPOSITION OF LAW THAT A LIMITED COMPANY IS ENJOYI NG IMMUNITY FROM DISALLOWANCE OF EXPENDITURE UNDER SECTION 37. 9.3 AFTER CONSIDERING THE ABOVE LEGAL PROPOSITION INCLUDING THE BINDING DECISION OF THE JURISDICTIONAL HIGH COURT IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) HAS ERRED IN DELETING THE ENTIRE AM OUNT OF DISALLOWANCE MADE BY THE ASSESSING AUTHORITY. PAGE - 6 ITA NO.2392 AND 2466/AHD/2004 -6- 9.4 TO BE FAIR AND REASONABLE WE SET ASIDE THE ORD ER THE CIT(A) ON THIS POINT AND RESTORE THE ADDITION/DISALLOWANCE TO THE EXTENT OF RS.2 00 000/- 10. THE NEXT GROUND RAISED BY THE REVENUE IS THAT T HE CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS.6 39 478/- TO RS. 5 85 028/- MADE BY THE AO AGAINST THE DIFFERENCE FOUND IN THE CONTRA ACCOU NTS OF ELEVEN PARTIES. IT IS THE ARGUMENT OF THE REVENUE IN THIS CONTEXT T HAT THE CIT(A) HAS VIOLATED THE PROVISIONS OF RULE 46A. 10.1 WE CONSIDERED THIS ISSUE. THE ORDER OF THE CI T(A) ON THIS POINT IS SPEAKING AND HE HAS GONE THROUGH ALL THE D ETAILS PLACED BEFORE HIM. WHEN THE ASSESSEE HAS PRODUCED CONVINC ING EVIDENCES SUPPORTED BY ACCOUNTS AND BUSINESS DOCUMENTS IT IS WITHIN THE POWERS OF THE CIT(A) TO ACCEPT THE CONTENTIONS OF T HE ASSESSEE AND GRANT APPROPRIATE RELIEF. IN SUCH CIRCUMSTANCES A NY ALLEGED VIOLATION OF RULE 46A IS ONLY TECHNICAL IN NATURE. WE DO NOT FIND ANY FORCE IN THIS GROUND RAISED BY THE REVENUE. 10.2 THE REVENUE IS PARTLY SUCCESSFUL IN ITS APPEAL . 11. IN RESULT THE APPEALS FILED BY THE ASSESSEE AN D THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON FRIDAY THIS 22 ND DAY OF JANUARY 2010. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (DR.O.K. NARAYANAN) VICE-PRESIDENT PAGE - 7 ITA NO.2392 AND 2466/AHD/2004 -7- PLACE : AHMEDABAD DATE : 22-01-2010 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR ITAT AHMEDABAD