DCIT CIR 3(3), MUMBAI v. SMITA CONDUCTORS LTD, MUMBAI

ITA 4370/MUM/2009 | 2002-2003
Pronouncement Date: 22-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 437019914 RSA 2009
Assessee PAN AAACS5379K
Bench Mumbai
Appeal Number ITA 4370/MUM/2009
Duration Of Justice 2 year(s) 2 day(s)
Appellant DCIT CIR 3(3), MUMBAI
Respondent SMITA CONDUCTORS LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 22-07-2011
Date Of Final Hearing 18-07-2011
Next Hearing Date 18-07-2011
Assessment Year 2002-2003
Appeal Filed On 20-07-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI R.S.SYAL AM AND SHRI V.DURGA RAO JM ITA NO.4370/MUM/2009 : ASST.YEAR 2002-2003 THE DY.COMMISSIONER OF INCOME-TAX CIRCLE 3(3) MUMBAI. VS. M/S.SMITA CONDUCTORS LIMITED 1402/3 RAHEJA CENTRE NARIMAN POINT MUMBAI 400 021. PAN :AAACS5379K. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.P.TRIVEDI RESPONDENT BY : S/SHRI VIJAY MEHTA & SUNIL HIRAWAT O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 18.03.2009 IN RELATI ON TO THE ASSESSMENT YEAR 2002-2003. 2. BRIEFLY STATED THE FACTS OF THE CASE AR E THAT THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S.143(3) ON 22.12. 2004 DETERMINING TOTAL INCOME OF RS.43 43 497 AS AGAINST RETURNED INCOME OF RS.32 32 557. THEREAFTER THE ASSESSMENT WAS REOPENED BY WAY OF NO TICE U/S.148. FIRST ISSUE ON WHICH THE ASSESSMENT WAS REOPENED WA S THE EXCISE DUTY REFUND RE CEIVABLE FROM DGFT. THIS CONSTITUTES GROUND NO.1 TAKEN BY THE REVE NUE BEFORE US. THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING OF AC ER AND ALUMINIUM CONDUCTORS . FROM SCHEDULE 7 OF THE CURRENT ASSETS LOANS AND ADVANCES APPENDED TO THE BALANCE SHEET IT WAS NOTICED BY THE A.O. THAT A SUM OF RS.30 00 3 50 WAS SHOWN TOWARDS EXCISE DUTY REFUND RECEIVABLE FROM DGFT. THERE WAS DIFFERENTIAL AMOUNT OF EXCISE DUTY REFUND RECEIVABLE BETWEEN CURRENT YEAR AND EARLIER YEAR AMOUNTING TO RS.24 65 273. ACCORDING TO THE ASSESSING OFFICER THIS CONSTITUTED THE CURRENT YEARS INCOME WHICH WAS NOT ROUTED THROUGH PROFIT AND LOSS ACCOUNT. ON BEING CALLED UPON TO EXPLAIN THE POSITION IN THIS REGARD TH E ASSESSEE DID NOT MAKE ANY SUBMISSION. RESULTANTLY THE ASSESSMENT WAS MADE U/S. 144 R.W.S. 147. THE A.O. MADE ADDITION ITA NO.4370/MUM/2009 M/S.SMITA CONDUCTORS LIMITED. 2 OF RS.24 65 273 BY HOLDING THAT EXCISE DUTY REFUND WAS LIABLE TO BE ASSESSED AS CURRENT YEARS INCOME. THE LEARNED CIT(A) ORDERED FOR THE DELETION OF THE ADDITION. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELE VANT MATERIAL ON RECORD IT IS NOTICED THAT THE ASSESSEE SUPPLIED GOODS TO M/S.POWER GRID CORPORATION OF INDIA LIMITED (PGCIL) WHICH WAS IN THE NATURE OF DEEMED EXPORT ON WHICH PGCIL WAS NOT TO BE CHARGED ANY EXCI SE DUTY AND THE EXCISE DUTY PAID BY THE SUPPLIER WAS TO BE CLAIMED BY THE SUPPLIER AS REFUNDABLE FROM DGFT. THE ASSESSEE DID NOT CHARGE THE EXCISE DUTY IN THE SALE B ILLS PREPARED FOR THE GOODS TO PGCIL AND HENCE DEBITED TO THE ACCOUNT OF DGFT W ITH THIS AMOUNT OF RS.24.65 LACS BY CREDITING THE ACCOUNT OF EXCI SE DUTY MODVAT. THE SAID SU M OF RS.24.65 LAKHS WAS INCLUDED BY THE ASSESSEE IN THE BALANCE SHEET AS RECEIVABL E FROM DGFT AND AT THE SAME TIME IT WAS REDUCED TO THE EXCISE DUTY MODVAT AGAIN IN THE BALANCE SHEET. THUS NEITHER ANY AMOUNT WAS CLAIMED AS DEDUCTION ON THIS ACC OUNT NOR WAS OFFERED FOR TAXATION. WE HAVE ALSO NOTICED PAG ES 4 AND 5 OF THE PAPE R BOOK BEING THE ACCOUNT OF DGFT IN RELATION TO CURRENT Y EAR AS WELL AS SUCCEEDING YEAR. IT CAN BE SEEN THAT AS AGAINST OPENING BALANCE OF RS.5.35 LAKHS THE AS SESSEE PASSED THREE ENTRIES TOTALING TO RS.24.65 LAKHS DEBITING THE ACCOUNT OF DGFT AN D CREDITING TO THE ACCOUNT OF EXCISE DUTY MODVAT. IN THE NEXT YEAR THE SAID SUM OF RS.24.65 LAKHS HAS BEEN CREDITED TO THE ACCOUNT OF DGFT WI TH THE DEBIT TO THE HO ACCOUNT. IT THUS SHOWS THAT NEITHER ANY INCOME ACCRUED NOR ANY EXPENDITURE WAS INCURRED BY THE ASSESSEE TOWARDS THIS TRANSACTION WHICH COULD HAVE BEEN ALLOWED AS DEDUCTION OR TAKEN AS INCOME. THE ASSESSING OFFICER TAXING THIS AMOUNT AS INCOME IN OUR CONSIDERED OPINION WAS NOT JUSTIFIED IN HI S ACTION. IT CANNOT BE A ONE WAY TRAFFIC. AS THE EXCISE DUTY WAS NOT CHARGEABLE IN RESPECT OF GOODS SUPPLIED TO PGCIL NEITHER THE ASSESSEE COULD EARN ANY INCOME NOR INCURRED ANY EXPENDITURE ON ACCOUNT OF EXCISE DUTY IN THIS RESPECT. IT WAS ONLY BY WAY OF PASSING A JOURNAL ENTRY IN THIS YEAR THAT THE ACCOUNT OF MODVA T CREDIT WAS CREDITED A ND THAT OF DGFT WAS DEBITED. WE THEREFORE UPHOL D THE IMPUGNED ORDER ON THIS ISSUE. THIS GROUND IS NOT ALLOWED. ITA NO.4370/MUM/2009 M/S.SMITA CONDUCTORS LIMITED. 3 4. GROUND NOS.2 TO 4 ARE AG AINST THE DIRECTION GIVEN BY THE LEARNED CIT(A) TO THE ASSESSING OFFICER FOR REDUCING THE SUM OF RS.55 70 244 FROM THE BUSINESS PROFIT WHICH WAS NOT THE SUBJ ECT MATTER OF EITHER THE AS SESSMENT RE-ASSESSMENT OR THE APPEAL PROCEEDINGS. IT HAS ALSO BEEN ARGUED THROUGH GROUND NO.3 THAT THE LEARNED CIT(A) WAS NOT JUSTIF IED IN DIRECTING THE A.O. TO REDUCE THIS SUM FROM THE BUSINESS PROFITS IN THE RE -ASSESSMENT PROCEEDINGS WH ICH ONLY RELATED TO THE ESCAPEMENT OF INCOME. THE FACTS OF THIS ISSUE ARE THAT TH E ASSESSING OFFICER REOPENED THE ASSESSMENT INTER ALIA ON THE GROUND THAT THE DE TAILS OF OTHER INCOME SHOWED THAT PROFIT ON SALE OF INVESTME NTS NET WAS SHOWN AT RS.29 58 423. FURTHER AS PER SCHEDULE 16 IT WAS SEEN BY THE A.O. THAT THE HE DGING LOSS ON SHARES SHOWN WAS AT RS.NIL BUT IN THE COMPUTATION OF CURRENT YEARS INCOME THE ASSESSEE DEDUCTED A SUM OF RS .26 11 821 ON ACCOUNT OF HEDGIN G LOSS. IN THE OPINION OF THE ASSESSING OFFICER THE ASSESSEE WAS NOT ENTITLED TO DEDUCT RS.26.11 LAKHS. SINCE THERE WAS NO RESPONSE FROM THE SIDE OF THE ASSESSEE AND THE ASSESSMENT WAS COMPLETED U/S.144 R.W.S. 147 THE A.O. MADE ADDITION FOR THIS SUM. WHEN THE MATTER CAME UP BEFORE THE LEARNED CIT( A) IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT DURING THE COURSE OF ORIGIN AL ASSESSMENT PROCEEDINGS U/S.143(3) THE A.O. MADE QUERY ON THIS ASPECT WHICH W AS DULY REPLIED BY FURNIS HING THE DETAILS OF SHARE TRANSACTIONS IN WHICH TH E ASSESSEE INCURRED HEDGING LO SS OF RS.26.11 LAKHS. IT WAS ALSO CONTENDED THAT WHILE FILING TH E RETURN OF INCOME THERE WAS SOME ARITHMETICAL ERROR INASMUCH AS THE ASSESSEE DEDUCTED A SU M OF RS.3 46 602 FROM THE GROSS BUSINESS INCOME OF RS.1 12 88 234. IT WAS STATED THAT THE SAID FIGURE OF RS.3 46 602 WAS DETERMINED BY REDUCING HEDGING LOSS BEING BUSINESS LOSS AMOUNTING TO RS.26 11 821 FROM PROFIT ON SAL E OF INVESTMENT AT RS.29 58 423. IT WAS CONTENDED THAT THERE WAS AN ARITHME TICAL ERROR IN THE SAID ITEM BECAUSE THE HEDGING LOSS WAS A NEGATIVE FIGURE AND THE SAID NEGATIVE FIGURE WAS DEDUCTED AND HENCE IT SHOULD HAVE BEEN ADDE D AND NOT DEDUCTED. IN THIS BACKGROUND OF THE FACTS IT WAS ARGUED THAT A SUM OF RS.55.70 LAKHS WAS REQUIRE D TO BE REDUCED FROM THE BUSINESS PROFITS. THE LEARNED CIT(A) DIR ECTED THE ASSESSING OFFICER TO REDUCE THE ITA NO.4370/MUM/2009 M/S.SMITA CONDUCTORS LIMITED. 4 SUM OF RS.55.70 LAKHS FROM THE BUSINESS PROFITS INSTEAD OF ADDING THE SUM OF RS.26 11 821 AS DONE BY HIM IN HIS ORDER DATED 27.11.2007. TH E REVENUE IS IN APPEAL AGAINST THE SAID DIRECTIO N GIVEN BY THE LEARNED CIT(A). 5. THE LEARNED DEPARTMENTAL REPRESENTATI VE CONTENDED THAT THE ASSESSEE FILED RETURN DECLARING INCOME OF RS.32 32 557 . THE A.O. DETERMINED INCOME U/S.144 R.W.S. 147 AT RS.83.09 LAKHS. IT WAS PUT FORTH TH AT IF THE EFFECT WAS TO BE GIVEN TO THE DIRECTIONS OF THE LEARNED CIT(A) THEN THERE WOULD BE REDUCTION OF INCOME BY RS.24.65 LAKHS (BEING SUBJECT MATTER OF GROUND NO.1) AND RS.55.70 LAKHS (BEING SUBJECT MATTER OF GROUND NOS.2 TO 4) THEREBY MAKING TO TAL DEDUCTION OF RS.79.72 LAKHS. IN THIS WAY THE LEARNED DEPARTMENTA L REPRESENTATIVE AR GUED THAT THE TOTAL INCOME OF THE ASSESSEE AFTE R GIVING APPEAL EFFECT WO ULD COME TO RS.3.37 LAKHS (83.09 LAKHS 79.72 LAKHS). HE ARGUED THAT THAT THE SAID INCOME OF RS.3.37 LAKHS IS BELOW THE INCOME RETURNED BY THE ASSESSEE AT RS.32.32 LA KHS. IT WAS STATED THAT THE COURSE OF ACTION ADOPTED BY THE LEARNED CIT( A) IS INCORRECT INASMUCH AS HE WAS NOT EMPOWERED TO ACCEPT ANY OF THE ASSESSEES CLAIM NOT RELATING TO THE SCOPE OF RE- ASSESSMENT PROCEEDINGS WHICH C OULD REDUCE THE TOTAL INCOME. 6. IN THE OPPOS ITION THE LEARNED COUNSEL FOR TH E ASSESSEE STRONGLY RELIED ON THE JUDGEMENT OF THE HON BLE SUPREME COURT IN CIT VS. SUN ENGINEERING WORKS PVT. LTD. [(1992) 198 ITR 297 (SC)] AND CONTENDED THAT THERE WERE NO FETTERS ON THE POWER OF THE CIT(A) TO RECTIFY THE CALCU LATION MISTAKE IN THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE WHICH LED TO OVER-ASSESSMENT. HE ALSO RELIED ON THE ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN NATHPA JHAKRI JOINT VENTURE VS. ACIT [(2010) 131 TTJ (MUMBAI) 702] IN WHICH IT HAS BEEN HELD THAT IF AN AMOUNT IS NOT CHARGEABLE TO TAX ASSESSE E SHOULD NOT BE CHARGED WITH THAT AMOUNT AND FURTHER THE TECHNICALITIES SHOULD NOT BE ALLOWED TO PREVAIL IN THE COURSE OF DISPENSATION OF JUSTICE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RE LEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE ASSESSING OFFICER MADE ADDITION OF RS.26 11 821 BY ITA NO.4370/MUM/2009 M/S.SMITA CONDUCTORS LIMITED. 5 NOT ALLOWING THE HEDGING LOSS IN THE ASSESSMENT MADE U/S.144 R.W.S. 147. WHEN THE MATTER CAME UP BEFORE THE LEARNED CIT(A) CHALLENGING THIS ADDITION THE ASSESSEE HAS ALSO INTER ALIA CONTENDED THAT THERE WAS A CALCU LATION MISTAKE ON ITS PART IN THE COMPUTATION ATTACHED WITH THE RETURN OF INCOME WHICH LED TO OVER OFFERING OF INCOME BY RS.55.70 LAKHS. THE LEARNED CI T(A) HAS DEALT WITH THE ENTIRE ISSUE BEING THE GROUND AGAINST THE ADDITION OF RS.26.11 LACS AND EXCESS OFFERING OF INCOME BY THE ASSESSEE AM OUNTING TO RS.55.70 LACS IN PARA 3.9 AS UNDER:- I HAVE GONE THROUGH THE FACTS AND AR GUMENTS OF THE APPELLANT AS WELL AS THE ORDER OF THE ASSESSING OFFI CER PASSED ON 27.11.2007. I FIND THAT THE HEDGING LOSS HAS BEEN WRONGLY REDUCED FROM THE PROFITS IN THE COMPUTATION OF TOTAL INCOME. AS PER THE CORRECT CALCUL ATION THE SAME IS REQUIRED TO BE ADDED BACK TO TH E TOTAL INCOME AS DISCUSSED IN PARA- 3 OF THE APPELLANTS LETTER DATED 18. 3.2009. ACCORDINGLY I DIRECT THE ASSESSING OFFICER TO REDUCE THE SU M OF RS.55.70 244/- FROM THE BUSINESS PROFITS INSTEAD OF ADDING TH E SUM OF RS.26 11 821/- AS DONE BY HIM IN HIS ORDER DATED 27.11.2007. 8. IT IS NOTICED FROM THE ASSESSMENT OR DER THAT THE ASSESSING OFFICER DISALLOWED THE HEDGING LOSS ON THE GROUND THAT THIS AMOUNT WAS REDUCED IN THE COMPUTATION OF INCOME BUT AS PER SCHEDULE 16 CONTAINI NG THE DETAILS OF ADVANCE AND OTHER EXPENSES HEDGING LOSS ON SH ARES WAS SHOWN AT NIL. THE ASSESSEE DID NOT CHOOSE TO CLARIFY THE POSITION BEFORE THE A.O. WHICH RESULTED INTO MAKING THE DISALLOWANCE OF HEDGING LOSS. THE LEARNED CIT(A) HAS NOT GIVEN ANY FINDING WHATSOEVER ON THE MERITS OF THIS ISSUE EXCEPT THE LAST LINE IN PARA 3.9 AS EXTRACTED ABOVE. BE THAT AS IT MAY IT IS SEEN THAT THE DEPARTMENT HAS NOT CHALLENGED THIS FINDING OF THE LD. CIT(A) AS REGARDS THE DELETION OF ADDITION OF RS. 26.11 LACS. 9. THAT APART THE LEARNED CIT(A) AL SO ACCEPTED THE ASSESS EES CONTENTION THAT THERE WAS SOME CALCULATION MISTAKE IN TH E COMPUTATION OF INCOME FILED ALONG WITH THE RETURN OF INCOME WHICH LED TO THE OV ER OFFERING OF INCOME BY THE ASSESSEE BY RS.55.70 LAKHS. HE DIRECTED THE A.O. TO REDUCE THIS SUM FROM TH E BUSINESS PROFIT. ITA NO.4370/MUM/2009 M/S.SMITA CONDUCTORS LIMITED. 6 HERE IT IS PERTINENT TO MENTIO N THAT THE ASSESSMENT IN THIS CASE WAS ORIGINALLY MADE U/S.143(3) AND NO SUCH CLAIM WAS MADE BY THE ASSESSEE. EVEN DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS THE ASSESSEE DID NOT LODGE SUCH CL AIM. IT WAS FOR THE FIRST TIME THAT THIS CLAIM WAS MADE BEFORE THE LEARNED CI T(A) WHO VERY GENEROUSLY DIRECTED THE ASSESSING OFFICER TO GRANT THE RELIEF WITHOUT CONSIDERING THE FACT THAT HE WAS DEALING WITH THE ASSESSMENT ORDE R U/S.147. THE SCOPE OF RE-ASSESSMENT HAS BEEN APTLY SET OUT BY THE HONBL E SUPREME COURT IN THE CASE OF SUN ENGINEERING WORKS PVT. LTD. (SUPRA) BY LAYING DOWN THAT : IN REAS SESSMENT PROCEEDINGS IT WAS NOT OPEN TO THE ASSESSEE TO SEEK A REVI EW OF CONCLUDED ITEMS UNCONNECTED WITH THE ESCAPEMENT OF INCOME FOR THE PURPOSE OF COMPUTATION OF THE INCOME ESCAPING ASSESSMENT. THE MANDATE OF THIS J UDGEMENT IS THAT IN THE REASSESSMENT PROCEEDINGS THE ASSESSEE CA NNOT LODGE A CLAIM WHICH FAVOURS HIM UNLESS IT IS CONNECTED WITH THE ESCAPEMENT OF INCOME FOR WHICH ASSESSMENT IS REOPENED. IF IN THE REASSESSMENT PROCEEDINGS THE ASSESSEE IS ALLOWED TO TAKE UP FRESH CLAIMS UNRELATED TO THE ESCAPEMENT OF INCOME IT MAY RESULT INTO THE TOTAL INCOME COMING BELOW THE ORIGINALLY ASSESSED INCOME. AS THE PROVISIONS OF SECTI ON 147 ARE TOOL IN THE HANDS OF THE REVENUE TO TAX THE INCO ME WHICH ALREADY ESCAPED ASSESSMENT IT CANNOT BE USED BY THE ASSES SEE TO ITS ADVANTAGE. TH ERE ARE DIFFERENT SETS OF PROVISIONS WHICH EMPOWER TH E ASSESSEE TO GET THE INFIRMITY CONNECTED WITH HIS HIGHER ASSESSMENT CORRECTED. 10. A DVERTING TO THE FACTS OF TH E INSTANT CASE IT IS NOTI CED THAT THE ASSESSEE TOOK THE PLEA BEFORE THE LEARNED CIT(A) THAT THERE WAS SOME CALCULA TION MISTAKE IN THE ORIGINAL COMPUTATION OF INCOME WHICH LED TO THE OVER DISCLOSURE BY IT OF INCOME BY RS.55.70 LAKHS. IN NO WAY ANY SUCH CALCU LATION MISTAKE CAN BE REGARDED AS CONNECTED WITH ESCAPEMENT OF INCOME FOR WHICH NOTICE WAS ISSUED BY THE A.O. U/S.148. IN FACT THE ASSESSEE LODGED A FRESH CLAIM AND THAT TOO FOR THE FIRST TIME BEFORE THE LEARNED CIT(A) THAT BY MIST AKE IT HAD SHOWN INCOME IN EXCESS OF RIGHTFUL INCOME. THE ABOVE DISCUSSED LEGAL POSITION LEADS US TO SIMPLE CONCLUSION THAT THE REASSESSMENT PROCEEDINGS ARE ALWAY S FOR THE BENEFIT OF THE REVENUE AND THE ITA NO.4370/MUM/2009 M/S.SMITA CONDUCTORS LIMITED. 7 ASSESSEE CANNOT MAKE A FRESH CL AIM FOR THE REDUCTION OF INCOME DE HORS THE ISSUES CONNECTED WITH THE REASSESSMENT NOTICE. IN OUR CONSIDERED OPINION THE LEARNED CIT(A) TRANSGRESSED THE BOUNDARIES OF THE SCOPE OF REASSESSMENT BY ENTERTAINING A CLAIM WHICH COULD NOT HAVE BEEN LEGALLY TA KEN INTO CONSIDERATION. WE THEREFORE OVERTURN THE IMPUGNED ORDER ON THIS ISSU E AND VACATE THE DIR ECTION GIVEN BY THE LEARNED CIT(A) TO THE A.O. FOR REDUCIN G THE SUM OF RS.55. 70 LAKHS FROM THE BUSINESS PROFITS. THESE GROUNDS RAIS ED BY THE REVENUE ARE ACCEPTED. 12. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 22 ND DAY OF JULY 2011. SD/- SD/- ( V.DURGA RAO ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 22 ND JULY 2011. DEVDAS*` COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) - XXXII MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.