The ITO, Ward-6(4),, Surat v. M/s. Sawagat Synthetics, Surat

ITA 4089/AHD/2007 | 2002-2003
Pronouncement Date: 28-02-2011 | Result: Dismissed

Appeal Details

RSA Number 408920514 RSA 2007
Assessee PAN AAKFS0504R
Bench Ahmedabad
Appeal Number ITA 4089/AHD/2007
Duration Of Justice 3 year(s) 3 month(s) 20 day(s)
Appellant The ITO, Ward-6(4),, Surat
Respondent M/s. Sawagat Synthetics, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 28-02-2011
Date Of Final Hearing 08-02-2011
Next Hearing Date 08-02-2011
Assessment Year 2002-2003
Appeal Filed On 08-11-2007
Judgment Text
ITA.NO.4089/AHD/2007 ASSTT. YEAR: 2002-03 ITA.4089/AH D/07. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL C BENCH AH MEDABAD BEFORE SHRI G.D. AGARWAL V.P. & SHRI MUKUL KUMAR SH RAWAT) ITA NO.4089 /AHD/2007 (ASSESSMENT YEAR: 2002-03) INCOME TAX OFFICER WARD 6(4) ROOM NO.613 AAYAKAR BHAVANMAJURA GATE SURAT. (APPELLANT) VS. M/S. SWAGAT SYNTHETICS C-1 568 G.I.D.C. PANDESARA SURAT. (RESPONDENT) PAN: AAKFS 0504 R APPELLANT BY : SHRI SUMAN R. DARSI SR. D.R . RESPONDENT BY : NONE (WRITTEN SUBMISSION) ( (( ( )/ )/)/ )/ ORDER PER: SHRI MUKULKUMAR SHRAWAT JUDICIAL MEMBER. THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE ARI SING FROM THE ORDER OF THE LD. C.I.T.(A)-IV SURAT DATED 20-8-2007. 2. GROUNDS RAISED ARE HEREBY DECIDED AS FOLLOWS:- GROUND NO.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND I N LAW THE LD. C.I.T(A) HAS ERRED IN DELETING THE ADDITION OF RS.3 84 .000/ - U/S. 68 OF THE ACT MADE BY THE A.O. 3. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 147 DATED 29-12-2006 WERE THAT THE ASSESSEE FIRM IS IN THE BUSINESS OF TRADING AND EXPORT OF CLOTH. IT WAS OBSERVED BY THE A.O. ON PERUSAL OF CAPITAL ACCOUNT OF THE PARTNER THAT A SUM OF RS.3 8 4 000/- WAS INTRODUCED. IN RESPECT OF THE BOOKS OF ACCOUNTS IT WAS REPORTE D TO THE A.O. THAT ITA.NO.4089/AHD/2007 ASSTT. YEAR: 2002-03 ITA.4089/AH D/07. 2 THE ACCOUNTS WERE DESTROYED DUE TO FLOOD IN THE CIT Y. HOWEVER COPIES OF THE BALANCE SHEET OF THE EARLIER YEARS AS WELL AS THE B ALANCE SHEET OF THE CURRENT ALONG WITH THE ACKNOWLEDGEMENT OF THE RETURN AND TH E OTHER DETAILS WERE FURNISHED. IT WAS ALSO EXPLAINED THAT THE PARTNERS WERE REGULARLY SUBJECT TO TAX. IT WAS ALSO EXPLAINED THAT IN THE PAST THE OTHER INVES TMENT AS WELL CREDITWORTHINESS HAD ALSO BEEN ESTABLISHED. HOWEVER THE ASSESSING OFFICER WAS NOT CONVINCED AND BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT THE SAID AMOUNT WAS TAXED IN THE HANDS OF THE FIRM. 4. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLAT E AUTHORITY WHO HAS GRANTED RELIEF AS PER THE FOLLOWING PARAGRAPH :- I HAVE CONSIDERED THE SUBMISSIONS AND I DO NOT UND ERSTAND THE AOS CONCLUSION THAT THE CREDITWORTHINESS OF TRANSACTION WAS NOT ESTABLISHED. THE BALANCE SHEETS OF THE PARTNERS TAX AUDIT REPOR T OF THE FIRM COPIES OF ACKNOWLEDGEMENT OF THE RETURNS OF THE PARTNERS WERE FILED BEFORE THE ASSESSING OFFICER AND THERE SHOULD BE NO REASON TO HOLD THAT THE CREDITWORTHINESS OF THE PARTNERS OR THEIR IDENTITY WAS NOT ESTABLISHED. FURTHER THE CAPITAL ACCOUNT OF THE PARTNERS TALLIE D WITH THE OUTSTANDING IN THEIR CAPITAL ACCOUNT IN THE FIRM. ONCE IT IS ESTA BLISHED THAT THE PARTNERS HAVE INTRODUCED CAPITAL THERE CAN BE NO ADDITION U/ S.68 OF THE I.T. ACT IN THE CASE OF THE FIRM SINCE THE CAPITAL INTRODUCED WOULD NO LONGER BE UNEXPLAINED CASH CREDITS. ADDITION ON THIS ACCOUNT IS THEREFORE DIRECTED TO BE DELETED. 5. IT IS WORTH TO MENTION THAT ON THE DATE OF HEARI NG NO ONE HAS APPEARED FROM THE SIDE OF THE RESPONDENT-ASSESSEE BUT A WRIT TEN SUBMISSION WAS FURNISHED TO CONSIDER THE SAME FOR DECIDING THIS AP PEAL. 6. FROM THE SIDE OF THE REVENUE LD. D.R. SRI. SUMAN R. DARSI APPEARED AND PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFIC ER. 7. THE FACTUAL POSITION WAS ADMITTEDLY NOT CONTROVE RTED AS APPEARED FROM THE ORDERS OF THE AUTHORITIES BELOW THAT THE CAPIT AL WAS INTRODUCED BY THE PARTNERS. THE ISSUE WAS WHETHER SUCH AN INTRODUCTIO N OF CAPITAL BY THE PARTNERS WAS SUBJECT TO TAX IN THE HANDS OF THE FIRM BY INVO KING THE PROVISIONS OF 68 OF THE ITA.NO.4089/AHD/2007 ASSTT. YEAR: 2002-03 ITA.4089/AH D/07. 3 ACT. FACTS OF THE CASE HAVE ALSO REVEALED THAT THE PARTNERS HAVE FILED CONFIRMATION OF THE CAPITAL INTRODUCED BY THEM BY R EFERRING THEIR RESPECTIVE PAN AS ALSO COPY OF FINANCIAL STATEMENTS. THEY HAVE ALS O FURNISHED THEIR RESPECTIVE ACKNOWLEDGEMENTS OF THE RETURN OF INCOME. IN VIEW O F THESE FACTS THE ISSUE AS RAISED BY THE REVENUE STOOD COVER BY THE DECISION O F HONBLE RAJASTHAN HIGH COURT CITED AS CIT VS. KEWAL KRISHAN & PARTNERS (2 009) 26 (1) ITCL 254 (RAJ- HC) . 8. IN VIEW OF THE ABOVE CITED DECISION WE HEREBY CO NFIRM THE FINDINGS OF THE LD. C.I.T. (A). THIS GROUND OF THE REVENUE IS THERE FORE DISMISSED. 9. GROUND NO.2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. C.I.T. (A) HAS ERRED IN DELETING THE ADDITION OF RS .78 704/- IN RESPECT OF DISALLOWANCE OF DEPRECIATION MADE BY THE A.O. ON NE W MACHINERY. 9. ON GOING THROUGH THE BALANCE SHEET IT WAS OBSERV ED BY THE A.O. THAT THE ASSESSEE HAS PURCHASED A NEW MACHINERY DURING THE Y EAR UNDER CONSIDERATION. THE ASSESSEE WAS ASKED TO FURNISH THE SUPPORTING EV IDENCES AND SOURCES OF INVESTMENT. AS PER A.O. PROPER EVIDENCE WAS NOT PLA CED ON RECORD THEREFORE THE DEPRECIATION WAS DISALLOWED. 10. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLA TE AUTHORITY AND VIDE FOLLOWING PARAGRAPH THE VIEW TAKEN BY THE A.O. WAS REVERSED :- BEFORE ME THE LD. A.R. SUBMITTED THAT THE COPIES OF BILLS ETC. FOR PURCHASE OF NEW MACHINERY COULD NOT BE FILED SINCE THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS WERE DESTROYED IN FLOODS. HOWEV ER THE TAX AUDIT REPORT WAS FURNISHED AND THE ADDITION TO PLANT AND MACHINERY WAS CONFOUNDED BY THE AUDITORS. THEREFORE THE AOS ACT ION IN DISALLOWING DEPRECIATION WAS NOT IN ORDER SINCE PHOTOGRAPHS AN D COPY OF THE POLICE COMPLAINT REGARDING COMPLETE DESTRUCTION OF BOOKS A ND OTHER DOCUMENTS WAS FURNISHED BEFORE THE A.O. ITA.NO.4089/AHD/2007 ASSTT. YEAR: 2002-03 ITA.4089/AH D/07. 4 I HAVE CONSIDERED THE SUBMISSIONS AND FIND THAT THE AUDITORS REPORT IN FORM 3 CB SPECIFICALLY INDICATES THE ADDITION TO PL ANT AND MACHINERY BEFORE 30-9-2001. SIMPLY BECAUSE THE BILLS COULD NO T BE PRODUCED FOR REASONS BEYOND THE CONTROL OF THE APPELLANT IT IS NOT FAIR TO DISALLOW THE GENUINE CLAIM OF DEPRECIATION. ADDITION ON THIS GRO UND IS THEREFORE DIRECTED TO BE DELETED. 11. ONCE THE FIRST APPELLATE AUTHORITY HAS CONSIDER ED THE AUDITORS REPORT WHO HAS CONFIRMED THE ADDITION TO PLANT AND MACHINERY A ND IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE WAS HANDICAPPED IN PRODUCTION OF BILLS BEING DESTROYED DUE TO FLOOD AND THEREFORE CONSIDERING THE CORROBORATIVE EVIDENCE WE ARE ALSO OF THE VIEW LD. CIT(A) HAS RIGHTLY ALLOWED THE CLAIM. IN VIEW OF THIS WE FIND NO FORCE IN THIS GROUND OF THE REVENUE HENCE DISMISSED. 12. GROUND NO.3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. C.I.T.(A) HAS ERRED IN DELETING THE ADDITION OF RS. 32 21 055/- PROPORTIONATE VALUE OF EXCESS FABRICS IMPORTED U/S. 69B OF THE AC T MADE BY THE A.O. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT HAD COME TO THE NOTICE OF THE A.O. THAT THERE WERE SOME IRREGULARITIES IN RES PECT OF IMPORT OF POLYESTER FABRICS FROM DUBAI. IT WAS NOTICED THAT THE CLOTH M EASURING 27783 MTRS. WAS IN EXCESS FOUND IN THE CONTAINER. THE ASSESSEE HAS EXP LAINED THAT SINCE IT HAD COME TO THE NOTICE THAT EXCESS FABRICS HAD BEEN DIS PATCHED THE SAME WAS INFORMED TO THE CUSTOMS AUTHORITIES. THE MAIN CONTE NTION OF THE ASSESSEE WAS THAT SINCE THE GOODS WERE NOT DEMANDED BY HIM AND T HE GOODS SUPPLIED WERE OF DIFFERENT QUALITY. THEREFORE THE ASSESSEE HAS NOT MADE ANY ATTEMPT TO RECEIVE THOSE GOODS AND EVEN NOT MADE ANY PAYMENT TO THE SU PPLIER. THE GOODS WERE NOT ACQUIRED AND HE HAS REQUESTED TO SEND BACK THE SAME BUT THE GOODS WERE SEIZED BY THE CUSTOMS AUTHORITIES. THE GOODS WERE NEITHER ACQUIRED NOR SOLD BY THE ASSESSEE. THEREFORE IT WAS PLEADED THAT THE RE WAS NO QUESTION OF ADDING THE VALUE OF THE GOODS IN THE HANDS OF THE ASSESSEE . HOWEVER THE A.O. WAS OF THE VIEW THAT AFTER THE SAID DETECTION THE ASSESSEE CONCOCTED THE SAID STORY AND BY INVOKING THE PROVISIONS OF SECTION 69B TAXED THE AMOUNT AT RS.32 21 055/- IN ITA.NO.4089/AHD/2007 ASSTT. YEAR: 2002-03 ITA.4089/AH D/07. 5 THE HANDS OF THE ASSESSEE. THE MATTER WAS CARRIED O UT BEFORE THE FIRST APPELLATE AUTHORITY. 14. THE LD. C.I.T.(A) HAS EXAMINED THE FACTS OF THE CASE DULY AND THEREAFTER GRANTED RELIEF AS PER THE FOLLOWING PARAGRAPH:- I HAVE CONSIDERED THE SUBMISSIONS AND HAVE GONE T HROUGH FACTS OF THE CASE AND THE DOCUMENTS FURNISHED BEFORE ME. IT IS SEEN THAT THE APPELLANT INFORMED THE CUSTOM AUTHORITIES ABOUT THE EXCESS MATERIAL SENT BY THE DUBAI PARTY ON 27-8-2001 AFTER RECEIPT OF A FAX MESSAGE DATED 24- 8-2001 FROM THE SUPPLIER. IT IS ALSO SEEN THAT 25 TH AND 26 TH AUGUST WERE SATURDAY AND SUNDAY AS POINTED OUT BY THE APPELLANT AND THE NEXT WORKING DAY WAS ONLY 27 -8-2001 ON WHICH DATE A HAND WRITTEN LETTER SIGNED BY ONE OF THE PARTNERS OF THE FIRM ALONG WITH COPIE S OF FAX MESSAGE FROM THE FOREIGN SUPPLIER WAS GIVEN TO THE CUSTOM AUTHOR ITIES WHO OPENED THE CONTAINER ON THIS VERY DAY AT 12.00 HOURS AND DREW A PANCHNAMA. THIS WOULD MEAN THAT THE AOS OBSERVATION THAT THE DETEC TION WAS DONE BY THE CUSTOMS AUTHORITIES IS NOT CORRECT. IT IS ONLY WHEN THE APPELLANT INFORMED THE AUTHORITIES ABOUT THE DISCREPANCY THAT THE CON TAINER OPENED BY THEM. IT IS ALSO SEEN THAT THE APPELLANT BEING A 100% EOU COULD HAVE IMPORTED THE EXCESS QUANTITY LEGALLY ALSO WITHOUT PAYMENT OF ANY DUTY. IT IS ALSO A FACT THAT SECTION 69B OF THE I. T. ACT IS ABOUT AMO UNT OF INVESTMENT NOT FULLY DISCLOSED IN THE BOOKS OF ACCOUNTS AND IN THAT CASE THE APPELLANT SHOULD HAVE BEEN THE OWNER OF ANY ARTICLE AND THE AMOUNT E XPENDED ON MAKING SUCH INVESTMENT WAS NOT REFLECTED IN THE BOOKS OF A CCOUNTS. IN THE INSTANT CASE THE APPELLANT IS NOT THE OWNER OF SUCH EXCESS STOCK AND HAS NOT CLAIMED TO HAVE MADE ANY PAYMENT FOR SUCH STOCK. TH E POSSESSION OF GOODS WAS NEVER TAKEN BY THE APPELLANT NOR WAS ANY PAYMENT MADE. THERE WAS NO INVESTMENT FOR PURCHASE OF THESE GOODS AND THEREFORE SECTION 69B OF THE I. T. ACT CANNOT BE INVOKED ON T HIS ACCOUNT. IT IS ALSO A FACT THAT THE APPELLANT AND THE SUPPLIER REQUESTED FOR RE-EXPORT OF SUCH GOODS AS SOON AS THEY REALIZED THAT EXCESS MATERIAL WAS SENT BY MISTAKE AND THEREFORE NO ADDITION ON THIS GROUND CAN BE MAD E U/S. 69B OF THE I. T. ACT. THE SAME IS HEREBY DIRECTED TO BE DELETED. 15. AFTER HEARING THE SUBMISSIONS OF THE LD. D.R. W HO HAS PLACED RELIANCE ON THE ORDER OF THE A.O. WE HAVE NOTICED THAT ON RECE IVING AN INFORMATION THROUGH FAX FROM FOREIGN SUPPLIER THE ASSESSEE HAS INFORMED THE CUSTOM AUTHORITIES WHO HAVE OPENED THE CONTAINER AND DREW A PANCHNAMA. THE CATEGORICAL FINDING HAS BEEN GIVEN BY THE LD. C.I.T. (A) ON APPRECIATION O F THE CORRESPONDENCE AND OTHER CORROBORATIVE EVIDENCE THAT THE EXCESS SUPPL Y OF GOODS WAS NOT DETECTED ITA.NO.4089/AHD/2007 ASSTT. YEAR: 2002-03 ITA.4089/AH D/07. 6 BY THE CUSTOM AUTHORITIES. FURTHER THIS FACT HAS A LSO BEEN CONFIRMED BY LD. C.I.T.(A) THAT THE ASSESSEE HAD NEVER TAKEN OVER TH E POSSESSION OF THE GOODS NOR ANY PAYMENTS HAVE BEEN MADE BY THE ASSESSEE. ON CE IT WAS AN ESTABLISHED FACTUAL POSITION THAT NO PAYMENT HAS BEEN MADE TOWA RDS THE PURCHASE OF THE GOODS THEREFORE THE CONSEQUENCE IS THAT THERE WAS NO UNEXPLAINED INVESTMENT FOR THE INVOCATION OF THE PROVISIONS OF SECTION 69B OF THE I. T. ACT. IN VIEW OF THIS WE HEREBY CONFIRM THE FINDINGS ON FACTS OF LD. C.I. T. (A) AND DISMISS THIS GROUND OF THE REVENUE AS WELL. 16. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 28 / 02 /2011. SD/- SD/- (G.D. AGARWAL) (MUKUL KUMAR SHRAWAT) VICE PRESIDENT JUDICI AL MEMBER. AHMEDABAD. DATED: 28/02/2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-IV SURAT. 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD. ITA.NO.4089/AHD/2007 ASSTT. YEAR: 2002-03 ITA.4089/AH D/07. 7 1.DATE OF DICTATION 8/2/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 14/2/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 28 -2-2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 28 -2-2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 28 -2-2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28 -2-2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..