DCIT, New Delhi v. M/s. Eastern Medikit Ltd., New Delhi

ITA 4596/DEL/2010 | 2005-2006
Pronouncement Date: 15-07-2011 | Result: Dismissed

Appeal Details

RSA Number 459620114 RSA 2010
Assessee PAN AAACE0706G
Bench Delhi
Appeal Number ITA 4596/DEL/2010
Duration Of Justice 8 month(s) 27 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Eastern Medikit Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 15-07-2011
Date Of Final Hearing 15-06-2011
Next Hearing Date 15-06-2011
Assessment Year 2005-2006
Appeal Filed On 18-10-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A. NO.4596/DEL/2010 ASSESSMENT YEAR : 2005-06 D.C.I.T. D.C.I.T. D.C.I.T. D.C.I.T. VS. VS. VS. VS. M/S EASTERN MEDIKIT LIMITE M/S EASTERN MEDIKIT LIMITE M/S EASTERN MEDIKIT LIMITE M/S EASTERN MEDIKIT LIMITED D D D CIRCLE CIRCLE CIRCLE CIRCLE- -- -11(1) 11(1) 11(1) 11(1) 3 33 3 RD RDRD RD DR. G.C. NARANG MARG DR. G.C. NARANG MARG DR. G.C. NARANG MARG DR. G.C. NARANG MARG NEW DELHI NEW DELHI NEW DELHI NEW DELHI NEW DELHI NEW DELHI NEW DELHI NEW DELHI PAN NO.AAACE 0706G (APPELLANT) (RESPONDENT) APPELLANT BY : MS. Y. KAKKAR DR RESPONDENT BY : SHRI ANOOP SHARMA ADVOCATE ORDER PER RAJPAL YADAV:JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LEARNED CIT(A) DATED 26-08-2010 PASSED FOR ASSESSME NT YEAR 2005-06. 2. GROUND NOS.1 & 3 ARE GENERAL IN NATURE. THEY DO NOT REQUIRE ANY SPECIFIC FINDING TO BE RECORDED HENCE THEY ARE REJECTED. 3. IN GROUND NO.2 REVENUE HAS PLEADED THAT LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF `1 6 44 217/- 2 WHICH WAS ADDED BY THE ASSESSING OFFICER BY MAKING DISALLOWANCE OUT OF THE CLAIM OF PRIOR PERIOD EXPEN SES. 3.1 THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE C OMPANY AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF MEDICAL DISPOSABLES. IT HAS FILED ITS RETURN OF INCOME ON 31 ST OCTOBER 2005 DECLARING TOTAL INCOME OF `5 22 73 660/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S 1 43(2) AND 142(1) WERE SERVED UPON THE ASSESSEE. SHRI PARKASH AGGARWAL CA AUTHORIZED REPRESENTATIVE OF THE ASSES SEE APPEARED BEFORE THE ASSESSING OFFICER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT REVEALED TO THE ASSESSIN G OFFICER THAT ASSESSEE HAS DEBITED A SUM OF `16 44 217/- UND ER THE HEAD PRIOR PERIOD EXPENSES. HE DISALLOWED THIS AMO UNT BY RECORDING A VERY BRIEF FINDING ON PAGE 4 OF THE ASS ESSMENT ORDER WHICH READS AS UNDER:- PRIOR PERIOD EXPENSES: FROM THE ACCOUNTS FILED AND COMPUTATION OF INCOME IT IS OBSERVED THAT ASSESSEE HAS DEBITED BEING PRIOR PERIOD EXPENSES TO THE EXTENT OF `16 44 217/-. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE TAX AUDITORS HAVE POINTED OUT THAT THE EXPENSES ARE PERTAINING TO EARLIER YEARS. THE ASSESSEE HAS CLAIMED THE EXPENSES IN THE COMPUTATION OF INCOME ON THE GROUND THAT THE LIABILITY HAS CRYSTALLIZED DURING T HE YEAR. THE ARGUMENT PUT FORTH BY THE ASSESSEE ARE 3 NOT ACCEPTABLE BECAUSE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE FACT HAS ALSO BEEN CERTIFIED BY THE TAX AUDITORS. HENCE THE PRIOR PERIOD EXPENSES ARE NOT ALLOWABLE. THE SAME IS ADDUCED TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME-TAX ACT ARE INITIATED ON THIS POINT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 3.2 DISSATISFIED WITH THE DISALLOWANCE ASSESSEE CA RRIED THE MATTER BEFORE THE CIT(A) AND SUBMITTED THAT ASSESSI NG OFFICER HAS MADE THE DISALLOWANCE WITHOUT VERIFYING THE ACTUAL NATURE OF EXPENSES AND HOW THEY HAVE BEEN CRYSTALLIZED DURING THE ACCOUNTING PERIOD RELEVANT TO THIS ASSESSMENT YEAR. THE ASSESSEE HAS SUBMITTED THE D ETAILS OF EXPENSES IN A TABULAR FORM AND MADE A REFERENCE TO THE DOCUMENTS FILED IN SUPPORT OF JUSTIFICATION OF ITS CLAIM. LEARNED FIRST APPELLATE AUTHORITY HAS TAKEN COGNIZA NCE OF SUCH DETAILS ON PAGE NOS. 9 & 10 OF THE IMPUGNED OR DER. LEARNED CIT(A) HAS CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER ON THE EXPLANATION SUBMITTED BY T HE ASSESSEE. LEARNED ASSESSING OFFICER DID NOT RESPON D TO THE NOTICE OF CIT(A) FOR 16 MONTHS AND THEN SUBMITTED A HALF BACKED REPORT. HE FURTHER SOUGHT TIME BUT THAT WAS NOT ALLOWED BY THE LEARNED FIRST APPELLATE AUTHORITY. THE LEARNED FIRST APPELLATE AUTHORITY HAS GONE THROUGH EACH ITEM INCLUDED BY THE ASSESSEE IN THE PRIOR PERIOD EXPENS ES. THE CIT(A) HAS CONFIRMED THE DISALLOWANCE OF SALE COMMI SSION. SIMILARLY CERTAIN SMALL AMOUNTS RELATING TO REBATE AND 4 DISCOUNT TENDER FEES INSURANCE TELEPHONE SUBSCR IPTION AND REPAIR EXPENSES STAFF WELFARE SECURITY DEPOSIT WE RE NOT PRESSED BY THE ASSESSEE. THE LEARNED FIRST APPELLA TE AUTHORITY HAS CONSIDERED FOUR MAJOR ITEMS WHICH WE RE DEBITED UNDER THE HEAD EXCISE DUTY `2 85 949/- ELE CTRICITY EXPENSES `3 41 749/- LEAVE TRAVEL ALLOWANCE `6 58 920+`3 10 477/- AND BONUS PAID AT `42 455/-. HE ALLOWED THESE ITEMS TO THE ASSESSEE. 3.3 LEARNED DR WHILE IMPUGNING THE ORDER OF CIT(A) SUBMITTED THAT LEARNED FIRST APPELLATE AUTHORITY OU GHT TO HAVE GIVEN MORE TIME TO THE ASSESSING OFFICER FOR R EBUTTING THE EXPLANATION SUBMITTED BY THE ASSESSEE. SHE REL IED UPON THE ASSESSMENT ORDER. ON THE OTHER HAND LEARNED C OUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF CIT(A). 3.4 WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AN D GONE THROUGH THE RECORD CAREFULLY. THE FIRST TIME WHICH HAS BEEN INCLUDED BY THE ASSESSEE IN THE PRIOR PERIOD EXPENS ES AND CONSIDERED BY THE LEARNED CIT(A) IS CLAIM OF EXCISE DUTY PAYMENT AT `2 85 949/-. THE ASSESSEE HAS SUBMITTED THAT LIABILITY ON ACCOUNT OF EXCISE DUTY ON MEDIFIN APH A PERTAINS TO PREVIOUS YEARS. THE ASSESSEE WAS UNDER THE BONA FIDE BELIEF THAT THIS ITEM IS NON EXCISABLE AND ACCORDIN GLY IT DID NOT MAKE ANY PAYMENT ON THIS ACCOUNT. HOWEVER ON INSPECTION BY THE EXCISE DEPARTMENT THE ASSESSEE W AS 5 MADE AWARE OF THE LIABILITY AND ACCORDINGLY IT WAS PAID. THE LEARNED CIT(A) HAS ALLOWED THIS LIABILITY ON THE GR OUND THAT DEDUCTION OF SUCH TYPE OF SUMS IS ADMISSIBLE TO THE ASSESSEE U/S 43B OF THE ACT ON THE BASIS OF ACTUAL PAYMENT SUCH DEDUCTION MUST RELATE TO ANY SUM PAYABLE BY WAY OF TAX DUTY CESS OR FEES AND THE ASSESSE MUST HAVE INCUR RED LIABILITY IN RESPECT OF SUCH TAXES/DUTY. THE LEARN ED FIRST APPELLATE AUTHORITY HAS REFERRED THE ORDER OF THE I TAT IN THE CASE OF MARUTI UDYOG LIMITED VS. DCIT REPORTED IN 9 2 ITD PAGE 119. AFTER TAKING INTO CONSIDERATION THE FIND ING OF LEARNED FIRST APPELLATE AUTHORITY WE DO NOT SEE AN Y REASON TO INTERFERE IN IT. THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT ITEM IS NON EXCISABLE HENCE DID NOT PAY THE EXCIS E DUTY WHEN IT WAS APPRISED ABOUT THIS OBLIGATION IT HAS MADE THE PAYMENT AND SUCH LIABILITY DO FALL U/S 43B OF THE A CT. 4. THE NEXT ITEM IS ELECTRICITY EXPENSES. IT EMERG ES OUT FROM THE RECORD THAT DAKSHIN HARYANA BIJALI VITRAN NIGAM LTD. HAD INTIMATED THE ASSESSEE ABOUT THE SHORT ASS ESSMENT OF ELECTRICITY CHARGES. THIS NOTICE WAS GIVEN ON 1 2 TH JULY 2004. IT PERTAINS RECOVERY OF `3 41 949/-. LEARNE D CIT(A) HAS OBSERVED THAT LIABILITY TO PAY THIS AMOUNT HAS BEEN CRYSTALLIZED DURING THE PREVIOUS YEAR 2004-05 HENC E IT IS AN ALLOWABLE DEDUCTION IN ASSESSMENT YEAR 2005-06. CONSIDERING THE FINDING OF LEARNED CIT(A) BASED ON DOCUMENTARY EVIDENCE WE DO NOT FIND ANY ERROR IN I T. THE 6 ASSESSEE HAS DEMONSTRATED ON THE RECORD AS TO HOW T HIS LIABILITY HAS BEEN CRYSTALLIZED IN THIS ASSESSMENT YEAR. AS AGAINST THE FACTUAL FINDING THE ASSESSING OFFICER HAS NOT MADE ANY REFERENCE TO ANY CIRCUMSTANCES OR DOCUMENT IN THE FINDING EXTRACTED ABOVE. 5. THE NEXT ITEM IS LEAVE TRAVEL ALLOWANCES. IT EM ERGES FROM THE ORDER OF LEARNED CIT(A) THAT LEAVE TRAVEL ALLOWANCE WAS NOT PROVIDED BY THE ASSESSEE IN THE ACCOUNTS AF TER THE DECISION OF THE MANAGEMENT BUT UNION WENT ON STRIKE AND THE PLANT WAS CLOSED DOWN. A DISPUTE WAS REFERRED TO LABOUR COMMISSIONER GURGAON IN THE MONTH OF SEPTEMBER 200 4. AFTER THE INTERVENTION OF LABOUR COMMISSIONER GURG AON THE DISPUTE HAS TO BE SORTED OUT AND THE ASSESSEE HAS M ADE THE PAYMENT OF LTA TO THE EMPLOYEES. THUS THIS LIABIL ITY HAS ALSO BEEN CRYSTALLIZED IN THE ACCOUNTING PERIOD REL EVANT TO THIS ASSESSMENT YEAR. LEARNED CIT(A) HAS RIGHTLY D ELETED THE DISALLOWANCE. 6. THE NEXT ITEM RELATES TO BONUS PAID. THE LEARNE D CIT(A) HAS ALLOWED THIS CLAIM OF THE ASSESSEE U/S 43B ON T HE GROUND THAT SUCH BONUS PAYABLE TO THE EMPLOYEES FOR FINANC IAL YEAR 2003-04 WAS PAID DURING THE ACCOUNTING YEAR RELEVAN T TO THIS ASSESSMENT YEAR IT WAS ALLOWABLE TO THE ASSESSEE I F PAID BEFORE FILING OF RETURN U/S 139(1). 7 6.1 WE HAVE GONE THROUGH THE ORDER OF LEARNED CIT(A ) AND ARE OF THE OPINION THAT LEARNED FIRST APPELLATE AUT HORITY HAS CONSIDERED EACH ISSUE IN DETAIL. SHE HAS ALLOWED D EDUCTIONS TO THE ASSESSEE AFTER VERIFYING THE FACT THAT THE E XPENSES CLAIMED BY THE ASSESSEE ARE OTHERWISE ADMISSIBLE IN LAW AND THEIR LIABILITY HAS BEEN CRYSTALLIZED IN THIS ACCOU NTING YEAR. THE ORDER OF LEARNED CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. IN VIEW OF THE ABOVE DISCUSSION THI S APPEAL OF THE REVENUE IS DISMISSED. 7. IN RESULT APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 15.0 7.2011. SD/- SD/- ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 15.07.2011. NS COPY FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. TRUE COPY. BY ORDER (ITAT NEW DELHI).