ACIT, New Delhi v. M/s Punjab Stainless Steel Industries, New Delhi

ITA 5225/DEL/2010 | 2007-2008
Pronouncement Date: 27-01-2011 | Result: Dismissed

Appeal Details

RSA Number 522520114 RSA 2010
Bench Delhi
Appeal Number ITA 5225/DEL/2010
Duration Of Justice 2 month(s) 2 day(s)
Appellant ACIT, New Delhi
Respondent M/s Punjab Stainless Steel Industries, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 27-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 27-01-2011
Date Of Final Hearing 27-01-2011
Next Hearing Date 27-01-2011
Assessment Year 2007-2008
Appeal Filed On 24-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F DELHI) BEFORE SHRI G.E. VEERABHADRAPPA HONBLE VICE PRESIDENT AND SHRI A.D. JAIN JUDICIAL MEMBER ITA NO. 5078(DEL)2010 ASSESSMENT YEAR: 2007-08 PUNJAB STAINLESS STEEL INDUSTRIES ASSTT.C OMMISSIONER OF INCOME TAX B-61 WAZIRPUR INDUSTRIAL AREA V. CIRCLE 19 (1) VIKAS BHAWAN N.DELHI. NEW DELHI. ITA NO. 5225(DEL)2010 ASSESSMENT YEAR: 2007-08 ASSTT.COMMISSIONER OF I. TAX PUNJAB STAINLESS STEEL INDUSTRIES CIRCLE 19(1) NEW DELHI. V. WAZIR PUR INDL. AREA NEW DELHI. (APPELLANT) (RESPONDENT ) ASSESSEE BY: SHRI H. MITTER CA DEPARTMENT BY: SHRI H.K. LAL SR. DR ORDER PER A.D. JAIN J.M . THESE ARE CROSS APPEALS FOR ASSESSMENT YEAR 2007-08 . ITA NO. 5078(DEL)2010 HAS BEEN FILED BY THE ASSESSEE WHERE AS ITA NO. 5225(DEL)2010 HAS BEEN PREFERRED BY THE DEPARTMENT. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- ITA NOS. 5078 & 5225(DEL)10 2 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN CONFIRMING DISALLOWANCE OF ` 1 29 829/- OUT OF INTEREST BEING THE INTEREST NOTIONALLY ATTRI BUTABLE TO THE INTEREST FREE ADVANCES TO THE SISTER CONCERN. THE LD. CIT( A) HAS ERRED IN NOT GIVING FINDING ON THE ISSUE THAT WHERE THE INTEREST FREE ADVANCES WERE OUT OF MIXED FUNDS FROM OVERDRAFT ACCOUNT IN WHICH ALL THE BUSINESS REALIZATIONS CONSISTING OF SALE PROCEEDS ALL BANK REALIZATION ACCUMULATED PROFIT ETC. WERE DEPOSITED NO INTEREST COULD BE DISALLOWED IF THE ASSESSEES OWN FUNDS FAR EXCEED T HE BORROWED FUNDS. 1.2 THAT WHILE THE APPELLANT WAS BOUND BY THE DECIS IONS OF THE HONBLE TRIBUNAL AND OF THE HONBLE HIGH COURT THE APPELLANT WAS ENTITLED TO RAISE AN INDEPENDENT GROUND AND ISSUE N OT RAISED CONSIDERED AND ADJUDICATED UPON AND WHICH ON STAND ALONE BASIS WOULD ENTITLE THE APPELLANT TO DEDUCTION. 2.1 THAT THE LD. CIT(A) HAS ON FACTS AND IN THE CI RCUMSTANCES OF THE CASE ERRED IN LAW IN CONFIRMING DISALLOWANCE OF ` 17 69 235/- OUT OF POLISHING CHARGES PAID TO PETTY ARTISANS. 2. THE DEPARTMENTS GROUNDS ARE AS UNDER:- 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN RED UCING THE DISALLOWANCE MADE BY THE AO AMOUNTING TO ` 58 97 452/- FROM 50% OF CLAIMED POLISHING EXPENSES OF ` 1 17 94 903/- TO 15% OF CLAIMED POLISHING EXPENSES OF ` 1 17 94 903/- RESULTING IN CONFIRMATION OF DISALLOWANCE TO ` 17 69 235/- AND RELIEF TO THE ASSESSEE AMOUNTING T O ` 41 28 216/-. 2. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN RED UCING THE DISALLOWANCE MADE BY THE AO AMOUNTING TO ` 58 97 452/- FROM 50% OF CLAIMED POLISHING EXPENSES OF ` 1 17 94 903/- TO 15% OF CLAIMED POLISHING EXPENSES OF ` 1 17 94 903/- RESULTING IN CONFIRMATION OF DISALLOWANCE TO ` 17 69 235/- AND RELIEF TO THE ASSESSEE AMOUNTING TO ` 41 28 216/- WITHOUT APPRECIATING THE FACT THAT TH E ASSESSEE HAD FAILED TO PRODUCE NECESSARY EVIDENCES IN SUPPORT OF THE CLAIM MADE BY IT. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN C ONDONING THE DELAY OF ALMOST TWELVE YEARS IN ADMITTING THE APPEAL FIELD B Y THE ASSESSEE. ITA NOS. 5078 & 5225(DEL)10 3 3. AT THE OUTSET THE LD. DR HAS CONTENDED THAT THE LAST SENTENCE IN GROUND NO.2 TAKEN BY THE DEPARTMENT DOES NOT ARISE FROM THE IMPUGNED ORDER AND THE SAME MAY BE TAKEN AS DELETED. THIS CONTENTION OF THE LD. DR IS FOUND TO BE CORRECT. ACCORDINGLY THE LAST SEN TENCE IN GROUND NO.2 RAISED BY THE DEPARTMENT IS TAKEN AS DELETED. 4. AS PER THE FIRST GROUND RAISED BY THE ASSESSEE THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF ` 1 29 829/- OUT OF INTEREST BEING INTEREST WITH REGARD TO NOTIONALLY ATTRIBUTABLE TO INTEREST FREE ADVANCES TO SISTER CONCERN. 5. THE ASSESSEE HAS DEBITED A SUM OF ` 1 67 83 730/- ON ACCOUNT OF INTEREST PAYMENT MADE TO M/S. KESHO RAM INDUSTRIES. THE AO OBSERVED THAT FOR THIS PROPORTIONATE INTEREST OF ` 1 29 829/- HAD NOT BEEN CHARGED. OBSERVING THAT HAD THE INTEREST FREE LOANS NOT BEEN ADVANCED THE NEED TO BORROW INTEREST BEARING FUNDS WOULD HAVE DECREASED BY AN EQUAL DEGREE THE AO MADE DISALLOWANCE OF ` 1 29 829/- OUT OF THE INTEREST EXPENDITURE CLAIMED. BEFORE THE LD. CIT(A) THE ASSESSEE PLEA DED THAT THE ADVANCES TO M/S. KESHO RAM INDUSTRIES HAD BEEN MADE OUT OF CAS H CREDIT ACCOUNT WITH THE BANK OUT OF MIXED FUNDS INCLUDING THE ASSESSEE S OWN INTEREST FUNDS EXPORT PROCEEDS AND ACCUMULATED PROFITS; THAT THE P ARTNERS IN BOTH THE ITA NOS. 5078 & 5225(DEL)10 4 CONCERNS WERE MOSTLY COMMON; THAT THE INTEREST FREE ADVANCES HAD BEEN MADE FOR COMMERCIAL EXPEDIENCY; THAT THE PARTNERS D ID NOT CHARGE ANY INTEREST ON THEIR CREDIT BALANCE IN CURRENT/DEPOSIT ACCOUNT; AND THAT AS SUCH THE ADVANCES HAD BEEN MADE TO SAVE THE HEAVY BURDEN OF INTEREST PAYABLE TO THE PARTNERS. 6. UPHOLDING THE AOS ACTION ON THIS ISSUE THE LD . CIT(A) OBSERVED THAT IN EARLIER YEARS ALSO I.E. ASSESSMENT YEARS 2001- 02 TO 2005-06 THE ADDITIONS HAD BEEN CONFIRMED IN FIRST APPEAL AND THAT FOR ASS ESSMENT YEAR 2001-02 EVEN THE TRIBUNAL HAD CONFIRMED THE ADDITION VIDE O RDER DATED 3.8.2007 IN ITA NO. 5533(DEL)2004. THE LD. CIT(A) ALSO DISAGR EED WITH THE ASSESSEES CONTENTION THAT THE INTEREST FREE ADDITIONS WERE MA DE OUT OF MIXED FUNDS AND FOR COMMERCIAL EXPEDIENCY. THE LD. CIT(A) FOLLOWE D THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ELMER HAV ELL ELECTRICS & OTHERS 277 ITR 549(DEL). IT WAS OBSERVED THAT THERE WAS A CLEAR NEXUS BETWEEN THE BORROWING MADE AND THE MONIES ADVANCED TO THE SIST ER CONCERN SINCE THE ADVANCES WERE OUT OF CASH CREDIT ACCOUNT ON WHICH THE ASSESSEE WAS PAYING INTEREST. 7. IN THIS REGARD IT IS SEEN THAT THE ISSUE HAS BE EN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL FOR ASSESSMENT YEAR 2005- 06 VIDE ORDER DATED 26.11.2009(COPY AT PAGES 26 TO 41 OF THE ASSESSEES PAPER BOOK RELEVANT ITA NOS. 5078 & 5225(DEL)10 5 PORTION AT PAGE 27 PARA 3 TO PAGE 33 END OF RUNNI NG PARA I.E. PARA 6.3). PARA 6 THEREOF READS AS FOLLOWS:- 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF BO TH THE PARTIES PERUSED THE RECORDS AND CAREFULLY GONE THROUGH THE ORDERS OF TAX AUTHORITIES BELOW. IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT IN ASSESSMENT YEAR 2001-02 THE PROPORTIONATE INTEREST TO THE DEBIT BALANCE IN THE NAME OF SISTER CONCERN M/S. KESHO RA M INDUSTRIES WAS DISALLOWED BY THE ASSESSING OFFICER BY CALCULATING THE SAME @ 14% APPLICABLE TO THE CASH CREDIT ACCOUNT BECAUSE THER E WAS A DIRECT NEXUS BETWEEN THE ADVANCES TO THE SISTER CONCERN AN D THE INTEREST BEARING FUNDS. THE DISALLOWANCE WAS UPHELD BY THE CIT(A) AND THE SAME WAS CONFIRMED IN THE CASE OF THIS VERY ASSESSE E BY ITAT NEW DELHI BENCH E VIDE CONSOLIDATED ORDER DATED 3.8. 2007 IN ITA NO. 5533(DEL)2004 AND CO NO. 5514(DEL)2004 FOR ASSESSME NT YEAR 2001- 02. IN THE YEAR UNDER CONSIDERATION THERE IS NO CHANGE IN FACTS IN THE PROPORTIONATE DISALLOWANCE MADE BY THE AO AS THE DE BIT BALANCE IN THE CASE OF SAME SISTER CONCERN M/S. KESHO RAM IND USTRIES WAS REDUCED ON ACCOUNT OF WHICH THE PROPORTIONATE DISAL LOWANCE WAS ALSO REDUCED TO ` 2 69 637/- AGAINST THE PROPORTIONATE DISALLOWANCE O F ` 30 92 266/- MADE DURING THE ASSESSMENT YEAR 2001-02 . 8. UNDISPUTEDLY IN THE YEAR UNDER CONSIDERATION AL SO THE FACTS REMAIN THE SAME. THEREFORE RESPECTFULLY FOLLOWING THE S AID TRIBUNAL ORDER IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2005-06 GR OUND NO. 1 RAISED BY THE ASSESSEE IS REJECTED. 9. AS PER GROUND NO.2 RAISED BY THE ASSESSEE THE L EARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF ` 17 69 235/- OUT OF POLISHING CHARGES PAID BY THE ASSESSEE TO PETTY ARTISANS. ITA NOS. 5078 & 5225(DEL)10 6 10. THE GROUNDS RAISED BY THE DEPARTMENT IN ITS AP PEAL ARE ALSO RELEVANT TO THIS ISSUE. AS PER THESE GROUNDS THE LD. CIT( A) HAS ERRED IN REDUCING THE DISALLOWANCE MADE BY THE AO AMOUNTING TO ` 58 97 452/- FROM 50% OF THE CLAIMED POLISHING EXPENSES OF ` 1 17 94 903/- TO 15% RESULTING IN A RELIEF OF ` 41 28 216/- TO THE ASSESSEE FAILING TO APPRECIATE THAT THE ASSESSEE DID NOT PRODUCE NECESSARY EVIDENCE TO SUPPORT ITS CLAIM. 11. THE ASSESSEE CLAIMED AN EXPENDITURE OF ` 1 17 94 903/- ON ACCOUNT OF POLISHING JOB WORK. THE AO FOUND THE POLISHING CH ARGES TO HAVE BEEN PAID TO ABOUT 150 PERSONS IN RESPECT OF WHOM THE NAMES ADDRESSES AND CONFIRMATIONS HAD NOT BEEN FULLY PRODUCED BY THE AS SESSEE. RATHER ONLY 6 PARTIES HAVE BEEN PRODUCED AND THE ADDRESSES OF ONL Y 14 PARTIES WERE PROVIDED. OBSERVING THAT POLISHING WAS A NECESS ARY COMPONENT OF THE MANUFACTURING PROCESS CARRIED ON BY THE ASSESSEE T HE AO ALLOWED 50% OF THE CLAIMED EXPENSES. A SUM OF ` 58 97 452/- WAS DISALLOWED. BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED THAT THE GOODS M ANUFACTURED BY IT COULD NOT BE SOLD WITHOUT POLISHING; THAT THE POLISHING C HARGES PAID BY THE ASSESSEE WERE COMPARABLE WITH THOSE PAID BY OTHER MANUFACTUR ERS IN THE SAME LINE OF BUSINESS; THAT AS PER THE CERTIFICATE [WHICH WAS SU BMITTED BEFORE THE LD. ITA NOS. 5078 & 5225(DEL)10 7 CIT(A) ] FROM THE STAINLESS STEEL EXPORTER WELFARE ORGANIZATION THE POLISHING CHARGES FOR STAINLESS STEEL ITEMS DURING FINANCIAL YEAR 2003-04 RANGED FROM ` 17 TO 20 PER KG.; THAT THE ASSESSEE HAD CLAIMED AN AVERAGE RATE OF ` 16/- PER KG. AND AS SUCH THE POLISHING CHARGES CLA IMED WERE REASONABLE; THAT THE POLISHING LABOURERS WERE GENERALLY MIGRANT S AND RESIDENTS OF SLUMS WHO FREQUENTLY CHANGED FROM PLACES OF WORK AND RESI DENCE; THAT HENCE IT WAS NOT POSSIBLE TO GIVE THEIR CURRENT ADDRESSES OR TO GET CONFIRMATIONS FROM THEM; AND THAT MOREOVER TAX HAD BEEN DEDUCTED AT S OURCE WHEREVER DUE FROM THE POLISHING CHARGES PAID. 12. THE LD. CIT(A) OBSERVED THAT THE TRIBUNAL HAD D ECIDED THIS ISSUE FOR ASSESSMENT YEAR 2005-06 VIDE ORDER DATED 26.11.2009 IN ITA NO. 2747(DEL)09 AND FOR ASSESSMENT YEAR 2004-05 VIDE O RDER DATED 18.6.2010 IN ITA NO.120(DEL)2010 ON IDENTICAL FACTS; THAT FO R ASSESSMENT YEAR 2005- 06 THE TRIBUNAL HAD HELD THAT THE ASSESSEE HAD FAI LED TO DISCHARGE THE ONUS OF PROVING THE IDENTITY OF THE WORKERS AND THE GENU INENESS OF THE ENTIRE CLAIM OF PAYMENT OF POLISHING CHARGES; THAT THE TRIBUNAL HAD AGREED WITH THE FINDINGS OF THE LOWER AUTHORITIES; THAT HOWEVER TH E TRIBUNAL HAD CONFIRMED THE DISALLOWANCE TO THE EXTENT OF 15% OF THE TOTAL EXPENSES UPHOLDING THE ORDER OF THE LD. CIT(A); THAT FOR THE YEAR UNDER CO NSIDERATION THE ASSESSEE HAD PROVIDED THE ADDRESSES OF ONLY 14 OUT OF ABOUT 150 WORKERS; THAT ITA NOS. 5078 & 5225(DEL)10 8 PAYMENTS EXCEEDING ` 50 000/- HAD BEEN MADE TO 61 PERSONS; AND THAT THE ASSESSEE DID NOT HAVE DETAILS OF EVEN THOSE PARTIES IN WHOSE CASES TDS HAD BEEN MADE. THE LD. CIT(A) THUS RESTRICTED THE DIS ALLOWANCE MADE BY THE AO TO 15% OF THE CLAIM. THIS WORKED OUT TO ` 17 69 235/- GIVING A RELIEF OF ` 41 28 216/- TO THE ASSESSEE. 13. IT IS SEEN THAT THE FACTS FOR THE YEAR UNDER CO NSIDERATION REMAIN THE SAME AS THOSE BEFORE THE TRIBUNAL FOR ASSESSMENT YE ARS 2005-06 AND 2004- 05. FOR ASSESSMENT YEAR 2005-06 VIDE ITS ORDER D ATED 26.11.2009(SUPRA) THE TRIBUNAL HELD INTER ALIA AS FOLLOWS:- 9.8 FROM FACTS DISCUSSED ABOVE IT IS CLEAR THAT THE ASSESSEE HAS NOT LED SUFFICIENT EVIDENCE TO PROVE THE GENUINENESS OF ITS CLAIM OF POLISHING EXPENSES OF ` 3 02 74 918/-. FROM THE ORDERS OF TAX AUTHORITIES BELOW IT BECOMES CLEAR THAT THEY HAVE NOT DISPUTED THAT IN THE MANUFACTURING BUSINESS OF UTENSILS THE ASSESSE E HAS TO INCUR THE POLISHING EXPENSES. ON THE FACE OF IT 50% OF DIS ALLOWANCE MADE BY THE AO OUT OF THE TOTAL ASSESSEES CLAIM OF POLISHI NG ESPECIALLY WITHOUT ANY BASIS IS DEFINITELY ON A HIGHER SIDE WHEREAS 15% DISALLOWANCE MADE BY THE LD. CIT(A) APPEARS TO BE Q UITE FAIR AND REASONABLE. ACCORDINGLY THE ORDER OF THE LD. CIT (A) IN RESTRICTING THE DISALLOWANCE @ 15% AS DETAILED IN HIS ORDER IS UPHELD AND GROUND OF APPEAL TAKEN BY THE REVENUE AND GROUND OF THE APPEAL OF THE ASSESSEE ARE REJECTED. 14. FOR ASSESSMENT YEAR 2004-05 THE TRIBUNAL VIDE ITS ORDER DATED 18.6.2010(SUPRA) (COPY AT PAGES 14 TO 17 OF THE ASS ESSEES PAPER BOOK) FOLLOWING THE TRIBUNAL DECISION FOR ASSESSMENT YEAR 2005-06 (SUPRA) ITA NOS. 5078 & 5225(DEL)10 9 DIRECTED THE AO TO MAKE DISALLOWANCE TO THE EXTENT OF 15% OF THE TOTAL EXPENSES INCURRED BY THE ASSESSEE ON POLISHING CHAR GES AS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ENTIRE DISALLOWAN CE OF 50% OF THE EXPENSES. 15. THE FACTS REMAINING THE SAME FOR THE YEAR UNDER CONSIDERATION ALSO WE DO NOT FIND ANY JUSTIFICATION IN TAKING ANY VIEW DIFFERENT FROM THAT OF THE LD. CIT(A). ACCORDINGLY RESPECTFULLY FOLLOWING T HE AFORESAID TRIBUNAL DECISIONS IN THE ASSESSEES CASE FOR ASSESSMENT YEA RS 2005-06 AND 2004-05 THE CIT(A)S ORDER IN THIS REGARD IS CONFIRMED AND THE GROUNDS RAISED QUA THIS ISSUE BY BOTH THE PARTIES ARE REJECTED. 16. IN THE RESULT BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.01.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 27.01.2011. *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY ITA NOS. 5078 & 5225(DEL)10 10 BY ORDER DEPUTY REGISTRAR