ACIT, UDAIPUR v. M/s. Shree Rajasthan Syntex Ltd.,, UDAIPUR

ITA 374/JODH/2007 | 2003-2004
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 37423314 RSA 2007
Bench Jodhpur
Appeal Number ITA 374/JODH/2007
Duration Of Justice 4 year(s) 10 month(s) 19 day(s)
Appellant ACIT, UDAIPUR
Respondent M/s. Shree Rajasthan Syntex Ltd.,, UDAIPUR
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 30-03-2012
Date Of Final Hearing 20-03-2012
Next Hearing Date 20-03-2012
Assessment Year 2003-2004
Appeal Filed On 11-05-2007
Judgment Text
1 ITA 374(2)-07 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH JODHPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI SANJAY ARORA ) ITA NO. 374/JODH/2007 ASSTT. YEAR : 2003-04. THE ACIT CIRCLE-2 VS. SHREE RAJASTHAN SYNTEX LTD. UDAIPUR. PULLA BHUWANA ROAD N. H. NO. 8 UDAIPUR. (APPELLANT) (RESPONDENT) C.O. NO. 36/JODH/2007 ( ARISING OUT OF ITA NO. 374/JODH/2007 ) ASSTT. YEAR : 2003-04. SHREE RAJASTHAN SYNTEX LTD. VS. THE ACIT CIRCL E-2 UDAIPUR. UDAIPUR. (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI SUNIL MATHUR ASSESSEE BY : SHRI AMIT KOTHA RI DATE OF HEARING : 20.03.2012. DATE OF PRONOUNCEMENT : 30.3.2012. ORDER DATED : 30/03/2012. PER R.K. GUPTA J.M. THIS IS AN APPEAL BY DEPARTMENT AND CROSS OBJECTIO N BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2003-04. 2. FIRST GROUND IN APPEAL OF THE DEPARTMENT IS AGAI NST DELETING THE DISALLOWANCE OF DEPRECIATION ON LEASED ASSETS TO THE TUNE OF RS. 64 16 478/-. 2 3. THE LD. D/R STATED THAT THIS ISSUE IS COVERED BY THE ORDER OF TRIBUNAL IN CASE OF ASSESSEE ITSELF IN FAVOUR OF THE ASSESSEE. HOWEVE R HE PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 4. ON THE OTHER HAND THE LD. A/R OF THE ASSESSEE P LACED RELIANCE ON THE ORDER OF LD. CIT (A). 5. AFTER CONSIDERING THE ORDERS OF AUTHORITIES BELO W AND ORDER OF TRIBUNAL DECIDED IN ITA NO. 159/JU/2006 AND OTHERS DATED 9.12.2011 IT IS FOUND THAT IDENTICAL ISSUE WAS INVOLVED FOR ASSESSMENT YEAR 2002-03 ALSO. THE LD. CIT (A) DELETED THE DISALLOWANCE ON THE BASIS OF EARLIER ORDER OF TRIBUNAL OR LD. CIT ( A). THE TRIBUNAL ALSO CONFIRMED THE ORDER OF LD. CIT (A) BY OBSERVING THAT FOR ASSESSME NT YEARS 1998-99 AND 2000-01 THE REVENUES APPEAL HAS BEEN DISMISSED BY THE TRIBUNAL ON THE SAME ISSUE. SINCE THE FACTS ARE SIMILAR THEREFORE FOR THE REASON GIVEN BY TRI BUNAL WHILE DECIDING THE APPEAL FOR ASSESSMENT YEAR 2002-03 WE CONFIRM THE ORDER OF LD . CIT (A) WHO DELETED THE DISALLOWANCE. 6. SECOND ISSUE IS AGAINST DELETING THE DISALLOWANC E OF RS. 3 69 228/- IN RESPECT OF PRIOR PERIOD EXPENSES. 7. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 8. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSESS EE PLACED RELIANCE ON THE ORDER OF LD. CIT (A). 9. THE ASSESSING OFFICER MADE ADDITION OF RS. 3 69 228/- BY OBSERVING THAT ASSESSEE HAS CLAIMED THE EXPENSES WHICH ARE RELATING TO PRIO R PERIOD. THE LD. CIT (A) DELETED THE ADDITION BY FINDING OUT THAT THOUGH THE EXPENSES AR E RELATED TO EARLIER YEAR BUT THEY CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. THE DETAILS OF EXPENSES AND PAYMENTS HAVE 3 ALSO BEEN CONSIDERED BY THE LD. CIT (A). IT WAS AL SO NOTED BY HIM THAT NO EXPENDITURE WAS CLAIMED IN EARLIER YEAR. THE FINDING OF LD. CI T (A) ARE FINDING OF FACT. THEREFORE WE SEE NO REASON TO INTERFERE WITH THE FINDING THAT TH E EXPENSES HAVE BEEN CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. ACCORDINGLY WE CONF IRM THE ORDER OF LD. CIT (A) ON THIS ASPECT ALSO. 10. GROUND NO. 3 RELATES TO DELETING ADDITION OF RS . 24 97 000/- MADE ON ACCOUNT OF VALUATION OF CLOSING STOCK. 11. THE ASSESSING OFFICER HAS OBSERVED THAT AS PER SCH. 13 NOTES ON ACCOUNTS POINT NO. 6 THE AUDITORS REMARKED AS UNDER :- THE COMPANY HAS CHANGED SOME ACCOUNTING POLICIES TO BRING IN LINE WITH THE REQUIREMENTS OF THE COMPANIES ACT AND ACCOUNTING STANDARD ISSUED BY THE ICAI. THE COMPANY WAS VALUIN G ITS STOCK OF WIP AT ESTIMATED COST AND FINISHED GOODS AT NET REA LIZABLE VALUE. TO BRING THE VALUATION IN LINE WITH THE REQUIREMENT OF AS-2 THE COMPANY HAS VALUED THESE STOCK AT LOWER OF COST AND NET RELIAZABLE VALUE. THE PROFITS FOR THE YEAR AND THE STOCKS OF WIP AND FINISHED GOODS ARE LOWER BY 24.97 LACS. THE ASSESSING OFFIC ER ASKED THE ASSESSEE TO EXPLAIN THE POSITION. IN RESPONSE TO W HICH THE ASSESSEE JUST REITERATED THE TEXT OF THE NOTES OF THE AUDITO RS BUT DID NOT PROVIDE ANY BASIS OR EXPLANATION. THE ASSESSING OF FICER CONSIDERED THE FACTS OF THE CASE AND HELD THAT THE REASONS FOR TAKING THE LESSER VALUE OF THE INVENTORY WERE NOT ASCERTAI NABLE FROM THE RETURN OF INCOME. THEREFORE THE ASSESSING OFFICER INCREASED THE INVENTORIES BY RS. 24.97 LACS AND ADDED IT TO THE T OTAL INCOME. 12. IT WAS CONTENDED BEFORE LD. CIT (A) THAT THE AS SESSING OFFICER HAS MADE THE ADDITION MERELY ON THE BASIS OF AUDIT REMARKS. THE COMPANY HAS VALUED THE STOCKS OF WIP AND FINISHED GOODS AT LOWER OF COST AND NET REL IZABLE VALUE AS PER AS-2. HE FURTHER 4 STATED THAT COMPLETE QUANTITATIVE DETAILS AND VALUA TION THEREOF HAS ALSO BEEN PROVIDED IN THE AUDIT REPORT BUT THE SAME HAS NOT BEEN CONSIDER ED. WITHOUT PREJUDICE TO THE ABOVE THE LD. A/R CONTENDED THAT IT IS A SETTLED LAW THAT VALUATION OF CLOSING STOCK AND OPENING STOCK OF THE NEXT YEAR HAS TO BE TAKEN AS SAME AND IF THIS IS NOT DONE THEN THIS WOULD TANTAMOUNT TO DOUBLE ADDITION. THE LD. CIT (A) AFT ER CONSIDERING THE SUBMISSIONS AND PERUSING THE ORDER OF LD. CIT (A) FOR ASSESSMENT YE AR 2002-03 FOUND THAT SIMILAR ADDITIONS WERE MADE IN THE EARLIER ALSO WHERE THE V ALUATION OF CLOSING STOCK WAS MORE. IF THAT ASPECT IS TAKEN INTO CONSIDERATION THEN IT IS FOUND THAT IN THE YEAR UNDER CONSIDERATION VALUATION OF STOCK IS ON LOWER SIDE AND IF THE SAME IS DISTURBED THEN IT WILL GIVE A DISTORTED PICTURE. ACCORDINGLY HE DELETED THE ADDITION. 13. THE LD. D/R SUBMITTED THAT THOUGH THIS ISSUE WA S INVOLVED IN EARLIER YEAR ALSO AND TRIBUNAL HAS CONFIRMED THE ORDER OF LD. CIT (A) FOR ASSESSMENT YEAR 2002-03 HOWEVER VALUATION OF STOCK OF EACH YEAR IS INDEPENDENT AND THAT SHOULD BE CONSIDERED INDEPENDENTLY. IT WAS SUBMITTED THAT THE VALUATION OF WORK-IN-PROGRESS IS NOT ASCERTAINABLE AND THEREFORE THIS NEEDS RE-VERIFIC ATION. ATTENTION OF THE BENCH WAS DRAWN AT PAGES 2 & 3 OF THE ORDER OF THE ASSESSING OFFICE R WHERE THE ASSESSING OFFICER HAS CATEGORICALLY STATED THAT THE ASSESSEE HAS NOT PROV IDED ANY BASIS AND EVIDENCE FOR VALUING THE STOCK AT LOWER VALUE. THE REASONS FOR TAKING A LESSER VALUE OF THE INVENTORIES ARE NOT ASCERTAINABLE FROM THE RETURN OF INCOME AND THE DOC UMENTS ACCOMPANYING THE SAME NOR HAS IT BEEN EXPLAINED DURING THE ASSESSMENT PROCEED INGS. IN VIEW OF THESE OBSERVATIONS AND IN VIEW OF ABSENCE OF COMPLETE DETAILS THE ASS ESSING OFFICER MADE ADDITION OF RS. 24.97 LACS ON THE BASIS OF OBSERVATION MADE BY AUDI TORS. ACCORDINGLY IT WAS SUBMITTED 5 THAT EITHER ORDER OF ASSESSING OFFICER SHOULD BE RE STORED OR THE MATTER CAN BE SENT BACK TO ASCERTAIN THE FACTUAL ASPECTS. 14. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSES SEE PLACED RELIANCE ON THE ORDER OF LD. CIT (A) AND THE ORDER OF TRIBUNAL FOR ASSESSMEN T YEAR 2002-03. IT WAS STATED THAT MERELY ON THE BASIS OF OBSERVATION OF AUDITORS NO ADDITION CAN BE MADE. HOWEVER IF ANY ADDITION CAN BE MADE THAT CAN BE MADE ON THE BASIS OF FACTUAL ASPECTS. EACH AND EVERY DETAILS WERE FILED BEFORE THE ASSESSING OFFICER. O N A QUERY FROM THE BENCH THAT THE ADDITION IS ONLY ON THE BASIS OF THE IMPACT ON THE PROFIT FOR THE YEAR SO THAT VALUATION OF BOTH OPENING AND CLOSING STOCK WOULD HAVE BEEN ONLY TAKEN INTO ACCOUNT AS ALSO QUA THE BASIS FOR ADOPTING THE NET REALIZABLE METHOD FOR VA LUATION OF WIP WHICH IS ONLY FOLLOWED IN CASE OF FINISHED GOODS HAVING A READY MARKET T HE LD. COUNSEL OF THE ASSESSEE HAS FILED A BRIEF NOTE APPARENTLY ADDRESSING THE SAME WHICH IS PLACED ON RECORD. 15. AFTER TAKING INTO CONSIDERATION THE RESPECTIVE CASES OF BOTH THE PARTIES WE ARE OF THE VIEW THAT THE MATTER SHOULD GO BACK TO THE FILE OF ASSESSING OFFICER TO PASS A FRESH ORDER AFTER TAKING INTO CONSIDERATION THE BRIEF NOT E FILED ON BEHALF OF THE ASSESSEE. CLEARLY THE ORDER BY THE TRIBUNAL FOR ASSESSMENT Y EAR 2002-03 WHICH WAS PASSED ON THE BASIS OF NO IMPACT ON PROFIT WOULD NOT HOLD FOR TH E CURRENT YEAR IN VIEW OF THE AUDITORS REPORT. IT IS NOT HIS REMARKS PER SE BUT THE FACTS STATED THEREIN THAT ARE RELEVANT AND IN FACT HAD FORMED THE BASIS OF THE ASSESSEES ARGUME NT BEFORE US. THE QUESTION OF VALUATION OF WIP ON NET REALIZABLE BASIS ALSO REMAI NS TO BE ADDRESSED. THE ASSESSEE CLAIMS ITS VALUATION TO BE CONSISTENT WITH AND IN FACT CHANGED ONLY TO CONFORM WITH AS- 2 AND ON WHICH AGAIN THEREFORE A PROPER FINDING HAS TO BE ISSUED. THE BASIC REQUIREMENT OF A VALID VALUATION IS THAT IT SHOULD LEAD TO DETERMINATION OF CORRECT PROFITS 6 AND HAS TO BE EVALUATED ON THAT TOUCHSTONE (REFER : CIT VS. BRITISH PAINTS (INDIA) LTD. (1991)188 ITR 44 (S.C.). IN VIEW OF THESE FACTS AND CIRCUMSTANCES AS STATED ABOVE WE SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER FO R PASSING A FRESH ORDER AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. WE ORDER ACCORDINGLY. 16. GROUND NO. 4 IS AGAINST RESTRICTING DISALLOWANC E OUT OF INTEREST PAYMENT TO RS. 4 63 755/- AS AGAINST THAT OF RS. 11 97 065/- MADE BY ASSESSING OFFICER ON ACCOUNT OF LOWER INTEREST BEARING ADVANCES GIVEN BY THE ASSESS EE. 17. THE ASSESSING OFFICER MADE ADDITION OF RS. 11 9 7 065/- ON ACCOUNT OF LOWER INTEREST BEARING EXPENSES. THE LD. CIT (A) CONSIDE RING THE FACTS AND TAKING INTO CONSIDERATION THE PAST HISTORY RESTRICTED THE ADDIT ION TO RS. 4 63 755/-. 18. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 19. ON THE OTHER HAND THE LD. COUNSEL OF THE ASSES SEE STATED THAT SIMILAR DISALLOWANCES WERE MADE IN EARLIER YEAR BY THE ASSE SSING OFFICER. THE LD. CIT (A) RESTRICTED THE DISALLOWANCE AND PART ADDITION WAS S USTAINED AND TRIBUNAL HAS CONFIRMED THE ORDER OF LD. CIT (A). FACTS ARE SIMILAR THERE FORE IT WAS REQUESTED THAT THE ORDER OF LD. CIT (A) MAY BE SUSTAINED. IT WAS ALSO CLARIFIED TH AT THE ASSESSEE HAS ALSO CHALLENGED THE PART ADDITION SUSTAINING DISALLOWANCE OF INTEREST. THEREFORE THE GROUND OF THE ASSESSEE MAY BE DISPOSED OFF ACCORDINGLY. 20. AFTER CONSIDERING THE ORDERS OF THE ASSESSING O FFICER LD. CIT (A) AND THE TRIBUNAL FOR IMMEDIATELY PRECEDING YEAR I.E. ASSESS MENT YEAR 2002-03 IT IS NOTICED THAT A SIMILAR DISALLOWANCE WAS MADE IN EARLIER YEAR. ASS ESSING OFFICER MADE DISALLOWANCE OF RS. 13 85 024/- LD. CIT (A) RESTRICTED THE DISALLO WANCE TO THE EXTENT OF RS. 2 80 490/- AND TRIBUNAL AFTER DISCUSSING THE ISSUE IN DETAIL CONFI RMED THE ORDER OF LD. CIT (A). FACTS ARE 7 SIMILAR IN THE PRESENT YEAR ALSO AS IN PRESENT YEAR THE ASSESSING OFFICER MADE DISALLOWANCE OF RS. 11 LACS OR ODD. THE LD. CIT (A) HAS RESTRICTED RS. 4 LACS OR ODD. THEREFORE WE SEE NO UNREASONABLENESS IN THE ORDER OF LD. CIT (A) AS THE SAME BASED ON THE LAST YEARS FINDING. ACCORDINGLY WE CONFIRM T HE ORDER OF LD. CIT (A) ON THIS ISSUE. THE GROUND OF THE DEPARTMENT AS WELL AS OF THE ASSE SSEE IS DISMISSED. 21. GROUND NO. 5 RELATES TO ALLOWABILITY OF DEDUCTI ON UNDER SECTION 80IA ON MILLS NO. 2 & 3 AS CLAIMED BY THE ASSESSEE. 22. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF 8 0IA ON UNIT 2 & 3. THE LD. CIT (A) ALLOWED RELIEF BY OBSERVING THAT IN EARLIER YEA R THE DEDUCTION WAS ALLOWED THEREFORE FOR THIS YEAR ALSO HE ALLOWED THE CLAIM. THE ORDER OF LD. CIT (A) HAS BEEN CONFIRMED BY TRIBUNAL FOR ASSESSMENT YEAR 2002-03. 23. THE LD. D/R HAS PLACED RELIANCE ON THE ORDER OF ASSESSING OFFICER AND THE LD. COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE ON THE ORDER OF LD. CIT (A). 24. AFTER CONSIDERING THE ORDERS OF ASSESSING OFFIC ER AND LD. CIT (A) WE NOTED THAT TRIBUNAL HAS NOT GIVEN ANY FINDING ON MERIT AS UPTO ASSESSMENT YEAR 2002-03 THE CLAIM WAS NOT ALLOWABLE BEING LOSS IN RESPECTIVE UNIT AND IT WAS OBSERVED BY THE TRIBUNAL THAT THE CLAIM WILL BE CONSIDERED IN THE YEAR WHEN IN FA CT THE DEDUCTION IS CLAIMED ON THE BASIS OF PROFIT ARRIVED. IN THE YEAR UNDER CONSIDERATION THERE ARE PROFITS IN THE UNITS. THE LD. CIT (A) HAS NOT GIVEN ANY FINDING. THIS ISSUE ALSO AROSE FOR THE ASSESSMENT YEAR 2001-02 AND THE TRIBUNAL HAS CONSIDERED THIS ISSUE AS ACADE MIC IN NATURE AS THERE WAS NO POSITIVE INCOME. AS STATED ABOVE AS THERE IS A POSITIVE IN COME DURING THE YEAR UNDER CONSIDERATION AND DEDUCTION IS ALLOWABLE AS HELD IN EARLIER YEAR HOWEVER THE FACTS HAS TO BE ASCERTAINED AND THE CONDITION FOR ALLOWABILITY O F DEDUCTION UNDER SECTION 80IA HAS TO 8 BE CONSIDERED AFRESH. THEREFORE IN VIEW OF THESE F ACTS AND CIRCUMSTANCES WE RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO PASS A FR ESH ORDER AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 25. LAST ISSUE IS AGAINST ALLOWING DEDUCTION UNDER SECTION 80HHC. 26. DEDUCTION UNDER SECTION 80HHC IS ALLOWABLE IN T HE PRESENT CASE. THE LD. CIT (A) HAS ALLOWED THE DEDUCTION BY OBSERVING THAT FOR ASS ESSMENT YEAR 1998-99 THE DEDUCTION WAS ALLOWED TO THE ASSESSEE AND ORDER OF LD. CIT (A ) HAS BEEN AFFIRMED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 1998-99. THEREFORE WE SEE NO UNREASONABLENESS IN THE ORDER OF LD. CIT (A) ALLOWING DEDUCTION UNDER SECTION 80HHC FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY WE CONFIRM HIS ORDER ON THIS ISSUE. 27. IN CROSS OBJECTION OF THE ASSESSEE GROUND NO. 1 HAS ALREADY BEEN TAKEN UP AND THE SAME HAS BEEN DISMISSED. 28. GROUND NO. 2 WAS NOT PRESSED THEREFORE THE SA ME IS DISMISSED AS NOT PRESSED. 29. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED PARTLY FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. 30. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30 .3.2012. SD/- SD/- ( SANJAY ARORA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR 9 COPY FORWARDED TO :- THE ACIT CIRCLE-2 UDAIPUR. SHREE RAJASTHAN SYNTEX LTD. UDAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 374(2)/JODH/2007) BY ORDER AR ITAT JODHPUR.