Shri Ratnesh metal Industries (P) Ltd.,, Ahmedabad v. The Dy.CIT.,Circle-5,, Ahmedabad

ITA 2513/AHD/2010 | 2006-2007
Pronouncement Date: 11-03-2011 | Result: Allowed

Appeal Details

RSA Number 251320514 RSA 2010
Assessee PAN AAACR9219H
Bench Ahmedabad
Appeal Number ITA 2513/AHD/2010
Duration Of Justice 6 month(s) 29 day(s)
Appellant Shri Ratnesh metal Industries (P) Ltd.,, Ahmedabad
Respondent The Dy.CIT.,Circle-5,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 11-03-2011
Assessment Year 2006-2007
Appeal Filed On 13-08-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' BEFORE SHRI D K TYAGI JM & SHRI A N PAHUJA AM ITA NO.2513/AHD/2010 (ASSESSMENT YEAR:-2006-07) RATNESH METAL INDUSTRIES (P) LTD. 327/A AKSHAR ARCADE OPP. MEMNAGAR FIRE STATION NAVRANGPURA AHMEDABAD V/S DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-5 AHMEDABAD PAN: AAACR 9219 H [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI N C AMIN AR REVENUE BY:- SHRI P R GHOSH DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 12- 07-2010 OF THE LD. CIT(APPEALS)-XXI AHMEDABAD FOR THE ASSESSMENT YEAR (AY) 2006-07 RAISES THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND O N THE FACTS OF THE CASE IN CONFIRMING THE PENALTY U/S 271(1)(C) LE VIED BY THE LEARNED A.O. THE ORDER OF THE LEARNED CIT(A) DESERV ES TO BE CANCELLED. 2. THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACTS THAT THE TAX IS LEVIED U/S 115JB AND PENALTY IS LEVIED ON TA X WORKED OUT ON THE INCOME OF RS.58 46 274/- U/S. 143(3) OF THE I.T . ACT WHICH IS NOT PERMISSIBLE AS PER THE PROVISIONS OF THE ACT AND OR DER OF PENALTY AND CONFIRMED BY LEARNED CIT(A) DESERVES TO BE CANC ELLED. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT S THAT QUANTUM OF PENALTY U/S 271(1)(C) IS LEVIABLE OF TAX SOUGHT TO BE EVADED AND NOT ON CONCEALED INCOME WHICH WAS VITAL POINT OF DETER MINATION WHICH THE LEARNED CIT(A) FAILED TO DECIDE HENCE THE ORDE R OF THE LEARNED CIT(A) IS NOT VALID WHICH REQUIRES TO BE CANCELLED. 4. THAT THERE IS NEITHER CONCEALMENT OF INCOME NOR FILING INACCURATE PARTICULARS OF INCOME AND AS SUCH PENALTY ORDER DES ERVES TO BE CANCELLED. 5. THAT THE ASSESSED TAX AND TAX AS PER RETURN OF I NCOME ARE THE SAME AND ACCEPTED AS IT IS BY THE LEARNED A.O. HOWE VER THE ITA NO.2513/AHD /2010 2 PENALTY ORDER PASSED BY LEARNED A.O. AND CONFIRMED BY CIT(A) REQUIRES TO BE CANCELLED. 6. ON FACTS AND CIRCUMSTANCES OF THE CASE OF THE AP PELLANT THE PENALTY ORDER CONFIRMED BY LEARNED CIT(A) BE DELETED. 7. THAT THE ORDER PASSED BY LEARNED LEARNED CIT(A) IS NOT SPEAKING ORDER WHICH DESERVES TO BE CANCELLED. 8. YOUR APPELLANT CRAVES LEAVE TO ADD ALTER OR AME ND ANY OF THE GROUNDS TILL THE APPEAL IS FINALLY HEARD AND DECIDE D. 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.41 44 850/- AND FRINGE BENEFITS OF RS .5 73 608/- WAS FILED ELECTRONICALLY ON 25-12-2006 AND A HARD COPY WAS FILED ON 28.12.2006. THE BOOK PROFIT U/S 115JB OF THE INCOME -TAX ACT 1961 [HEREINAFTER REFERRED TO AS THE ACT] WORKED OUT T O RS.3 37 89 345/-. AFTER PROCESSING ON 17-02-2008 U/S 143(1) OF THE A CT THE RETURN WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF A NOTIC E U/S 143(2) OF THE ACT ON 03-10-2007. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 18.6.2008 ON AN INCOME OF RS.58 46 274/- WITH THE FOLLOWING ADDITIONS / DISALLOWANCES :- DONATION RS.8 99 264/- GIFT EXPENSES RS. 43 503/- RELIGIOUS / CHARITY EXPENSES RS. 54 640/- ADDITION U/S 40A(3) RS. 24 997/- EXCESSIVE DEPRECIATION @ 20% RS.5 74 039/- DISALLOWANCE OF INTEREST RS. 72 000/- OUT OF FOREIGN TRAVELING RS.1 22 550/- THE BOOK PROFITS IN TERMS OF PROVISIONS OF SEC. 1 15JB OF THE ACT WERE ACCEPTED AS RETURNED. INTER ALIA PENALTY PROC EEDINGS WERE INITIATED U/S 271(1)(C) OF THE ACT FOR FURNISHING I NACCURATE PARTICULARS OF INCOME RESULTING IN THE AFORESAID DISALLOWANCE S. SUBSEQUENTLY IN RESPONSE TO A SHOW CAUSE NOTICE BEFORE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT THE ASSESSEE REQUESTED VIDE L ETTER DATED 17.12.2008 TO DROP THE PENALTY PROCEEDINGS AS THERE WAS NEITHER CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS ITA NO.2513/AHD /2010 3 THEREOF. HOWEVER THE AO DID NOT ACCEPT THE SUBMISS IONS OF THE ASSESSEE AND OBSERVED AS UNDER: 3. IN THE ASSESSMENT MADE U/S. 143(3) OF THE ACT THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.8 99 264/- BEIN G DONATION MADE TO VARIOUS CHARITABLE TRUSTS/INSTITUTIONS DEBITED TO PROFIT & LOSS ACCOUNT. IT WAS ALSO SEEN THAT THE INDIRECT EXPENSES ACCOUNT IN CLUDED DONATION EXPENSES OF RS.1 400/-. ON VERIFICATION OF STATEMEN T OF INCOME IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80G(5) OF THE ACT OF RS.2 18 150/-. HOWEVER IT WAS FURTHER NOTICED THAT NO DISALLOWANCE OF ANY DONATION DEBITED TO PROFIT & LOSS ACCOUNT WAS MADE IN THE STATEMENT OF TOTAL INCOME. THE DONATION IS OBVIOUSLY DISALLOWABL E ITEM OF EXPENSES AND WAS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE I NCOME. THE ASSESSING OFFICER THEREFORE DISALLOWED THE CLAIM OF ASSESSEE COMPANY. 3.1. IT WAS NOTICED THAT IN THE INDIRECT EXPENSES A CCOUNT THE ASSESSEE HAD DEBITED RS.43 503/- AS GIFT EXPENSES. ON BEING ASKED THE DETAILS AND TO EXPLAIN HOW THESE EXPENSES ARE IN THE NATURE OF BUSINESS EXPENSES THE ASSESSEE HAS NOT GIVEN ANY DETAILS OF THESE EXPENSE S OR GIVEN ANY PLAUSIBLE EXPLANATION SO AS TO TREAT THE EXPENSES A S BUSINESS EXPENSES. THEREFORE THE ASSESSEE'S CLAIM IN THIS BEHALF WAS DISALLOWED IN THE ASSESSMENT. 3.2. ON VERIFICATION OF FACTORY EXPENSES IT WAS NO TICED THAT THE ASSESSEE HAD PAID RS.46 000/- TO ONE CHANDUBHAI FOR RELIGIOU S WORK. ALSO THE ASSESSEE HAD DEBITED RS.8 640/- FOR JUWAR. ALL THE ABOVE EXPENSES WERE IN THE NATURE OF CHARITY EXPENSES AND THE ASSESSEE HAS ALSO NOT PUT FORTH ANY PLAUSIBLE EXPLANATION IN THIS REGARD. THE ASSES SING OFFICER THEREFORE DISALLOWED THE ABOVE EXPENSES TREATING THE SAME AS NOT MEANT FOR BUSINESS PURPOSES. 3.3. THE ASSESSEE HAD DEBITED RS.1 00 000/- IN WEIG HTMEN EXPENSES ON 31.03.2006 MAKING PIECEMEAL ENTRIES UNDER THE SAME HEAD. THE EXPENSES WERE MADE AND DEBITED ON 31.03 2006 ONLY F OR SIMILAR EXPENSES. ALSO IN FREIGHT CHARGES ACCOUNT EXPENSES IN CASH WAS MADE ON 26.04.2005 AND AMOUNT OF RS.24 988/- WAS EXPENDED. THESE EXPENSES WERE IN CONTRAVENTION OF PROVISIONS OF SEC. 40A(3) OF THE IT. ACT 1961 THEREFORE AS PER THE PROVISIONS OF SEC 40A(3) SIN CE THE PAYMENTS WERE MADE OTHERWISE THAN ACCOUNT PAYEES DRAFT/CHEQUES 2 0% OF SUCH EXPENSES WHICH COMES TO RS.24 997/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME. 3.4. THE ASSESSEE HAS INCURRED NET INTEREST EXPENSE S OF RS.87 40 462/- ON TERM LOANS TAKEN FROM BANKS AND UNSECURED LOANS OBTAINED. ON VERIFICATION OF THE ADVANCES GIVEN BY THE ASSESSEE TO OTHERS IT WAS SEEN THAT THE ASSESSEE HAS NOT CHARGED INTEREST ON ADVAN CES GIVEN TO SHRI JAYESH VAIDYA OF RS.4 00 000/-. THE ASSESSEE DID NO T CHARGE ANY INTEREST THOUGH IT HAD PAID HUGE INTEREST TO OTHERS. IN OTHE R WORDS THE ASSESSEE ITA NO.2513/AHD /2010 4 HAD DIVERTED ITS INTEREST BEARING FUNDS OTHERWISE T HAN ITS BUSINESS NEEDS. THE ASSESSEE HAS NOT EXPLAINED THE BUSINESS NEED FO R THE ADVANCE GIVEN. THEREFORE INTEREST TO THE EXTENT CHARGEABLE ON RS. 4 00 000/- WHICH WORKED OUT AT RS.72 000/- WAS DISALLOWED AND ADDED TO THE TOTAL INCOME. 3.5. ON VERIFICATION OF THE TRAVELING EXPENSES ACCO UNT AND FOREIGN TRAVELING EXPENSES A/C IT WAS FOUND THAT THE DIREC TORS WITH THEIR FAMILY TRAVELLED TOGETHER TO BOMBAY/BAH/CA/ BAH/BOMBAY. TH E ASSESSEE WAS ASKED TO FURNISH THE DETAILS AND EXPLAIN AS TO HOW THE EXPENSES INCURRED ON FOREIGN TOUR FOR THE FAMILY MEMBERS OF THE DIREC TORS CAN BE TREATED AS BUSINESS EXPENSES. AS THE ASSESSEE HAS NOT FURNISHE D ANY EVIDENCES TO ESTABLISH/PROVE THAT THE ABOVE EXPENSES WERE INCURR ED EXCLUSIVELY FOR BUSINESS PURPOSES THE AMOUNT OF RS.1 22 580/-WAS D ISALLOWED. 3.6. THE ASSESSEE HAS CLAIMED ADDITIONAL DEPRECIATI ON OF RS.34 59 336/- @20% ON PLANT & MACHINERY WORTH RS.1 72 96 681/- IN ADDITION TO NORMAL DEPRECIATION CLAIMED AT 15% THEREON. ON VERIFICATIO N OF PLANT & MACHINERY ACCOUNT AND THE PURCHASE BILLS IN THIS REGARD IT W AS HOWEVER NOTICED THAT THE ADDITION IN PLANT & MACHINERY ACCOUNT INCLUDED CERTAIN PURCHASES OF SCRAP MATERIALS I.E. ON 5.7.2005 PURCHASED FROM K UMAR STEEL (INDIA) OF RS.14 99 410/-. SIMILARLY FROM OTHER PARTIES SCRA P MATERIALS / IRON PLATES ETC. WERE PURCHASED IN SCRAP AND UTILIZED IN ERECTI NG MACHINERIES. AS PER THE PROVISIONS OF SEC. 32(1)(IIA) OF THE IT ACT TH E ADDITIONAL DEPRECIATION IS ADMISSIBLE ON NEW MACHINERIES. THE OLD AND USED MAC HINERY OR PART OF OLD MACHINERY AND THE SCRAP ITEMS CANNOT BE ELIGIBL E FOR ADDITIONAL DEPRECIATION EVEN IF THE PARTS OF THE SCRAP WERE U SED IN FABRICATION AND INSTALLATION/ERECTION OF THE PLANT AND MACHINERY. T HE ASSESSEE HAS THUS CLAIMED EXCESS ADDITIONAL DEPRECIATION ON THE COST OF RS.33 81 900/- WHICH WAS NOT ADMISSIBLE. THEREFORE THE EXCESS DEPRECIAT ION CLAIMED ON RS.33 81 900/- WHICH WORKED OUT TO RS.5 74 039/- AFTER TAKING INTO ACCOUNT THE DATES OF .PURCHASES OF SUCK OLD ITEMS WAS DISALLOWED OUT OF THE CLAIM OF DEPRECIATION ON PLANT & MACHINERY. 3.. IN THE LIGHT OF AFORESAID FACTS WHILE REFERRI NG TO EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT THE AO OBSERVED THAT IT WAS A CASE OF INTENTIONAL CONCEALMENT OF FACTS AND FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THEREFORE RELYING UPON THE DECISIONS IN THE CASE O F CIT VS. MOHD. MOHTRAN FAROOQUI 259 ITR 132 (RAJ) CIT VS. GURBACHAN LAL 250 ITR 157(DEL.) CIT VS. JEEVAN LAL SAH (1994) 205 ITR 244(SC) DDIT VS. SUR ESH KUMAR (2002) 253 ITR 640 (KERALA) K P MADHUSUDAN VS CIT 251 (TR 199 (S C) AND CIT VS. SREE KRISHNA TRADING COMPANY 253 ITR 645 (KER) CIT VS. JUGAL KISHORE HARGOPAL DAS (2000) 243 ITR 220 (KER) A V THOMAS & CO. VS. CIT (1996) 59 ITR 499(MAD.) AND CIT VS. MUSSADI LAL RAM BHAROSE (1987 ) 165 ITR 14(SC) RAGHUVIR SONI VS. ACIT 258 ITR 239 (RAJ) CIT VS. N NANDKUMAR 279 ITR 80 ITA NO.2513/AHD /2010 5 (KER) VIDVA SHANKAR DIXIT VS. CIT 277 ITR 285 (ALL) VIDVAGAURI NATWARIAL & OTHERS [238 ITR 910 (GUI.) AND D & H SECHERON ELECT RODES PVT. LTD. F281 ITR 4211 (MP) THE AO CONCLUDED THAT INFLATED CLAIM O F EXPENSES AMOUNTED TO FURNISHING INACCURATE PARTICULARS OF INCOME AND IMP OSED A PENALTY OF RS.5 72 700/- @ 100% OF THE TAX SOUGHT TO EVADED ON THE INCOME OF 17 01 424/- U/S 271(1)(C) OF THE ACT. 4 ON APPEAL THE ASSESSEE CONTENDED THAT SINCE THE TAX ON THE ASSESSED INCOME WAS LOWER THAN THE TAX PAID AND CALCULATED UNDER MAT PROVISIONS THERE WAS NO FURNISHING OF INACCURATE P ARTICULARS OF INCOME . INTER ALIA THE ASSESSEE RELIED ON THE DECISION OF HON. SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158(SC) . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE LEARNED CIT(A) UPH ELD THE ORDER OF THE AO WITH THE FOLLOWING OBSERVATIONS:- 6. AFTER A COMPARATIVE STUDY OF PENALTY ORDER AND A BOVE WRITTEN SUBMISSIONS I AM INCLINED TO AGREE WITH THE PENALT Y ORDER PASSED BY THE LD. ASSESSING OFFICER. IN MY HUMBLE OPINION THE CA SE LAW OF HON'BLE APEX COURT QUOTED BY A.R CANNOT BE APPLIED IN THIS CASE IN VIEW OF THE SEVERAL CASE LAWS QUOTED BY THE ASSESSING OFFICER IN HIS OR DER INCLUDING MANY CASE LAWS OF HON. SUPREME COURT HENCE THE PENALTY ORDER PASSED BY THE LD. ASSESSING OFFICER IS APPROVED AS IT IS. 5 THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE REITERATED THEIR SUBMISSIONS BEFORE THE L D. CIT(A) AND RELIED ON THE DECISIONS IN THE CASE OF CIT VS. NAL WA & SONS INVESTMENTS LTD. 327 ITR.543(DEL.) AND CIT VS. REL IANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158(SC).THE LEARNED DR ON THE OTHER HAND SUPPORTED THE FINDINGS OF THE LEARNED CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE DECISIONS RELIED UPON . AS IS APPARENT FROM THE IMPUGNED ORDER IN THE INSTANT CASE THE LD. CIT(A) WHILE UPHOLDING THE LEVY OF PENALTY DID NOT ANALYSE THE ISSUES RAISED BY TH E ASSESSEE IN THEIR EXPLANATION NOR EVEN BROUGHT OUT AS TO HOW THE PENA LTY IS LEVIABLE ITA NO.2513/AHD /2010 6 FOR FURNISHING INACCURATE PARTICULARS OF INCOME A ND WHICH SPECIFIC PARTICULARS WERE FURNISHED INACCURATE. MOREOVER TH E LD. CIT(A) DID NOT HAVE BENEFIT OF FINDINGS OF THE HONBLE DELHI H IGH COURT IN CIT VS. NALWA & SONS INVESTMENTS LTD. 327 ITR.543(DEL. ). A MERE GLANCE AT THE IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE NAMELY THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS REASONED ORDER WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEFORE IT. TH E APPLICATION OF MIND TO THE MATERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST IT SELF IN THE ORDER. SECTION 250(6) OF THE INCOME TAX ACT 1961 MANDATES THAT TH E ORDER OF THE CIT(A) WHILE DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHA LL STATE THE POINTS FOR DETERMINATION THE DECISION THEREON AND THE REASON FOR THE DECISION. THE REQUIREMENT OF RECORDING OF REASONS AND COMMUNICATI ON THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PROCEDUR E. THE REQUIREMENT OF RECORDING OF REASONS BY THE QUASI-JUDICIAL AUTHORITIES IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARIT Y CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERATIONS AND MINIMIZ ES ARBITRARINESS IN THE DECISION-MAKING PROCESS. WE MAY REITERATE THAT A D ECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB (1995)1SCC 760(SC)]. AS IS APPARENT THE IMPUGNED ORDER SUFFERS FROM LACK OF R EASONING AND IS NOT A SPEAKING ORDER. IN VIEW OF THE FOREGOING ESPECIA LLY WHEN THE LD. CIT(A) HAS NOT PASSED A SPEAKING ORDER ON THE ISSUES RAISED IN T HIS APPEAL WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. C IT(A) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE VARIOUS ISSUES IN RELATI ON TO LEVY OF PENALTY AFRESH IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPO RTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL T HE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER KEEPING IN MIND INTER ALIA THE MA NDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT AND VARIOUS JUDICIAL PRONOUNCEMEN TS ON THE ISSUE. WITH THESE OBSERVATIONS GROUND NOS. 1 TO 7 IN THE APPEAL AR E DISPOSED OF. ITA NO.2513/AHD /2010 7 7. NO ADDITIONAL GROUND HAVING BEEN RAISED BEF ORE US IN TERMS OF THE RESIDUARY GROUND NO.8 IN THE APPEAL ACCORDINGL Y THIS GROUND IS DISMISSED. 8. IN THE RESULT APPEAL IS ALLOWED BUT FOR STATI STICAL PURPOSES ORDER PRONOUNCED IN THE COURT TODAY ON 11-03-2011 SD/- SD/- (D K TYAGI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 11-03-2011 COPY OF THE ORDER FORWARDED TO: 1. RATNESH METAL INDUSTRIES (P) LTD. 327/A AKSHAR ARCADE OPP. MEMNAGAR FIRE STATION NAVRANGPURA AHMEDABAD 2. THE DCIT CIRCLE-5 AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XXI AHMEDABAD 5. DR ITAT AHMEDABAD BENCH-B AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD