ACIT CEN CIR 2, MUMBAI v. MEDIORAL LABORATORIES LTD, MUMBAI

ITA 5425/MUM/2012 | 2009-2010
Pronouncement Date: 31-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 542519914 RSA 2012
Assessee PAN AAACA5146M
Bench Mumbai
Appeal Number ITA 5425/MUM/2012
Duration Of Justice 1 year(s) 2 month(s) 1 day(s)
Appellant ACIT CEN CIR 2, MUMBAI
Respondent MEDIORAL LABORATORIES LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-10-2013
Assessment Year 2009-2010
Appeal Filed On 29-08-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUM BAI BEFORE SHRI SANJAY ARORA AM AND DR. S. T. M. PAVAL AN JM ! ' I.T.A. NO. 5425/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) ASST. CIT CENTRAL CIRCLE-2 R. NO. 904 PRATISTHA BHAVAN MARINE LINES MUMBAI-400 020 ' VS. MEDIORAL LABORATORIES LTD. 12 GUNBOW STREET HORNBY VIEW BLDG. FORT MUMBAI-400 001 # '!$! ./PAN/GIR NO. AAACA 5146 M ( #% /APPELLANT ) : ( &'#% / RESPONDENT ) #%( / APPELLANT BY : SHRI ASHWANI SINHA &'#% )( / RESPONDENT BY : SHRI V. MOHAN * + ) / DATE OF HEARING : 22.10.2013 - ./ ) / DATE OF PRONOUNCEMENT : 31.10.2013 !0' O R D E R PER SANJAY ARORA A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-36 MUMBAI (CIT(A) FOR SH ORT) DATED 19.06.2012 PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2009-10 VIDE ORDER DATED 04.11.2011. 2 ITA NO. 5425/MUM/2012 (A.Y. 2009-10) ASST. CIT VS. MEDIORAL LABORATORIES PVT. LTD. 2. THE APPEAL RAISES TWO ISSUES PER ITS TWO GROUNDS WHICH WE SHALL TAKE UP IN SERIATIM. THE FIRST GROUND CONCERNS THE NON-ALLOWAN CE OF DEDUCTION IN THE SUM OF RS.18 56 884/- BY THE ASSESSING OFFICER (A.O.) BEI NG THE ADDITION TO THE CLOSING STOCK FOR THE IMMEDIATELY PRECEDING YEAR I.E. A.Y. 2008 -09. THOUGH THERE IS NO REFERENCE TO THE SAME IN THE ASSESSMENT ORDER; THE A.O. ACCEPTIN G THE INCOME AS RETURNED THE FACTS AND THUS THE ISSUE BASED THEREON ARE NOT DISPUTE D. AS WE GATHER AND WERE GIVEN TO UNDERSTAND DURING HEARING AN UPWARD ADJUSTMENT AP PLYING U/S.145A OF THE ACT WAS MADE TO THE VALUE OF THE CLOSING STOCK FOR THE IMME DIATELY PRECEDING YEAR WHICH STANDS SINCE CONFIRMED BY THE TRIBUNAL. THE ASSESSEES CLA IM IS THEREFORE ONLY WITH REGARD TO THE SAID VALUE BEING ALLOWED TO BE CARRIED OVER IN THE OPENING STOCK FOR THE CURRENT YEAR AND ITS INCOME FOR THE CURRENT YEAR DETERMINED ON THAT BASIS. THE LD. CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE FOLLOWING THE DECISION IN TH E CASE OF MELMOULD CORPORATION LTD. VS. CIT [1993] 202 ITR 789 (BOM). 3. LIKE CONTENTIONS WERE RAISED BEFORE US; EACH PAR TY RELYING ON THE ORDER OF THE AUTHORITY BELOW AS FAVOURABLE TO IT WITH THE ASSES SEE ALSO PLACING RELIANCE ON THE DECISION IN THE CASE OF CIT VS. MAHALAXMI GLASS WORKS P. LTD. [2009] 318 ITR 116 (BOM). 4. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. 4.1 WE FIND NO MERIT IN THE REVENUES CASE; THE ASS ESSEE ONLY SEEKING THE CORRESPONDING UPWARD REVISION IN THE VALUE OF ITS O PENING STOCK ON THE BASIS OF AN ADDITION SINCE CONFIRMED TO THE VALUE OF THE CLOS ING STOCK FOR THE IMMEDIATELY PRECEDING YEAR. FURTHER WE MAY ALSO CLARIFY THAT THE PRESCRI PTION OF SECTION 145A MANDATING THE VALUATION OF INVENTORIES AT INCLUSIVE OF ALL TAXES OR DUTIES PAID OR INCURRED IN RELATION THERETO IS APPLICABLE NOT ONLY FOR THE VALUATION O F THE CLOSING STOCK I.E. AS AT THE YEAR END BUT EQUALLY FOR THE OPENING STOCK AS WELL AS T HE PURCHASE AND SALES MADE DURING THE YEAR. THE ASSESSEES CASE IS THUS MERITORIOUS NOT ON THE GROUNDS OF EQUITY BUT IN LAW AS WELL. FURTHER AS AFORE-STATED THERE BEING NO REFE RENCE TO THIS ASPECT IN THE ASSESSMENT ORDER; WE ONLY CONSIDER IT RELEVANT AND INCUMBENT U PON THE A.O. TO VERIFY THE VALUE OF THE 3 ITA NO. 5425/MUM/2012 (A.Y. 2009-10) ASST. CIT VS. MEDIORAL LABORATORIES PVT. LTD. CLOSING STOCK WITH REFERENCE TO SECTION 145A OF THE ACT AS WELL. THIS IS AS BOTH THE OPENING AS WELL AS THE CLOSING STOCK ARE TO BE VALU ED ON THE SAME BASIS WHICH IS ALSO THE RATIO OF THE DECISIONS CITED BY AND ON BEHALF OF TH E ASSESSEE. 4.2 OUR SECOND OBSERVATION IN THE MATTER IS THAT TH OUGH THE ASSESSEE CLAIMS DEDUCTION QUA THE VALUE OF THE OPENING STOCK AT RS.18 56 884/- THE LD. CIT(A) HAS HELD FOR AN ADDITION TO THE OPENING STOCK FOR THE CURRENT AT RS .10 84 556/- ON THE BASIS OF AN ADDITION IN THE VALUE OF THE CLOSING STOCK FOR THE IMMEDIATE LY PRECEDING YEAR TO THAT EXTENT (REFER PARA 5.2 OF THE IMPUGNED ORDER). WE BRING THIS MATT ER TO THE FORE AS THE LD. CIT(A) HAS NEVERTHELESS ALLOWED THE ASSESSEES GROUND IN FULL WHICH IS INEXPLICABLE. NO CLAIM WITH REGARD TO THE DIFFERENCE STOOD MADE BEFORE US; THE ASSESSEES CASE BEING EVEN OTHERWISE LIMITED TO A CORRESPONDING ENHANCEMENT IN THE VALUE OF OPENING STOCK CONSEQUENT TO AN UPWARD REVISION IN THE VALUE OF THE CLOSING STOCK F OR THE IMMEDIATELY PRECEDING YEAR SO THAT NO CASE APART THERE-FROM IS EVEN OTHERWISE MAI NTAINABLE. WE CONFIRM THE SAME AND THE A.O. SHALL ALLOW RELIEF IN TERMS OF AND BY FOLL OWING THE RATIO OF THE DECISION. WE DECIDE ACCORDINGLY. 5. THE SECOND ISSUE ARISING PER THE INSTANT APPEAL IS THE DISALLOWANCE U/S.14A IN THE SUM OF RS.1 21 757/-. THE A.O. ACCEPTING THE SUO MOTU DISALLOWANCE BY THE ASSESSEE AT THE SAID AMOUNT MADE NO ADJUSTMENT TO THE RETURNED INCOME ON THAT COUNT UPON CONFIRMING THE DISALLOWANCE TO BE IN TERMS OF SECTI ON 14A AS UNDER: A) INTEREST (INDIRECT) (*) RS. 370/- B) INDIRECT EXPENDITURE (OTHER) RS.1 21 387/- RS.1 21 757/- (*) [THE TOTAL INTEREST EXPENDITURE BEING RS.6 097/ -] THE ASSESSEE HOWEVER RAISED A GROUND BEFORE THE L D. CIT(A) CONTENDING THE SAID DISALLOWANCE TO BE NOT WARRANTED IN THE FACTS AND C IRCUMSTANCES OF ITS CASE AND WHO DECIDED THUS : 4 ITA NO. 5425/MUM/2012 (A.Y. 2009-10) ASST. CIT VS. MEDIORAL LABORATORIES PVT. LTD. 6.1 IT IS SUBMITTED BY THE APPELLANTS THAT IN THE EARLIER YEAR THE MATTER HAS BEEN RESTORED BACK TO THE FILE OF THE AO BY THE CIT(A). THEREFORE SINCE THE FACTUAL ASPECT REMAINS THE SAME AS THEY WERE IN THE EARLIER YEARS I FIND NO JUSTIFICATION TO DIFFER WITH THE FINDINGS AS GIV EN IN MY ORDER AND ACCORDINGLY FOR SIMILAR REASONS THE APPELLANT MAY BE GIVEN AN OPPORTUNITY TO FURNISH THE RELEVANT DETAILS. THEREFORE THIS GRO UND OF APPEAL IS PARTLY ALLOWED. 5. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL ON RECORD. WE ARE UNABLE TO APPRECIATE THE ASSESSEES CASE. NO DISALLOWANCE U/S.14A STOOD MADE BY THE A.O.; HE ACCEPTING THE DISALLOWANCE MAD E SUO MOTU BY THE ASSESSEE. HOW COULD THEN THE ASSESSEE CLAIM TO BE AGGRIEVED WHIC H IS A NECESSARY PRECONDITION FOR THE INVOCATION OF SECTION 246A OF THE ACT ? THE ASSESSEES APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WAS EVEN AS THE LD. DEPARTMENTAL REPRESE NTATIVE (DR) WOULD ARGUE BEFORE US ITSELF NOT MAINTAINABLE. TRUE AS STATED BY THE LD. AUTHORIZED REPRESENTATIVE (AR) THERE COULD BE DEVELOPMENT/S IN LAW WHICH THE ASSESSEE MA Y PERCEIVE TO ITS ADVANTAGE. HOWEVER FIRSTLY CONCLUDED MATTERS COULD BE REOPEN ED ONLY ACCORDING TO AND BY FOLLOWING THE DUE PROCESS OF LAW. WHERE A PREJUDICE IS SHOWN THE ASSESSEE COULD TAKE RECOURSE TO SECTION 264 WHILE WHERE THE IMPUGNED O RDER SUFFERS FROM ANY MISTAKE MAY MOVE U/S.154. IT IS NOT THE CASE WHERE A CLAIM HAS BEEN ALLOWED OR DISALLOWED AS THE CASE MAY BE AS PER THE EXISTING LAW WHICH STANDS SUBSE QUENTLY REVERSED BY THE APEX COURT OR THE JURISDICTIONAL HIGH COURT. EVEN SO THE CORRESP ONDING AMENDMENT COULD BE MADE ONLY U/S.154. COULD ONE MAY ASK THE ASSESSEE OR THE R EVENUE FOR THAT MATTER SEEK TO AMEND AN ORDER OR MAKE A CLAIM ON THE BASIS OF SUCH A DEC ISION AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR? IN OTHER WORDS AN A MENDMENT TO BE VALIDLY SOUGHT HAS TO FALL WITHIN THE PARAMETERS OF THE RELEVANT PROVISIO N. WE MAY HOWEVER HASTEN TO ADD THAT BY STATING SO W E ARE NOT IN ANY MANNER PROVIDING ANY STRAIT JACKET FORMULA FOR RAISING CLA IMS BEFORE THE APPELLATE AUTHORITIES. THE POWER OF THE APPELLATE TRIBUNAL UNDER THE ACT IS CA ST IN THE WIDEST TERMS AND THE APPELLATE PROCEEDINGS IT IS WELL-SETTLED ARE ONLY A CONTINUATION OF THE ASSESSMENT PROCEEDINGS SO THAT IT WOULD ALL DEPEND AND TURN O N THE FACTS AND CIRCUMSTANCES OF THE 5 ITA NO. 5425/MUM/2012 (A.Y. 2009-10) ASST. CIT VS. MEDIORAL LABORATORIES PVT. LTD. CASE. THE MATTER HAS BEEN CONSIDERED BY THE APEX CO URT ON MORE THAN ONE OCCASION AS IN THE CASE OF ADDL. CIT V. GURJARGRAVURES P. LTD . [1978] 111 ITR 1 (SC) AND JUTE CORPN. OF INDIA LTD. V. CIT [1991] 187 ITR 688 (SC) CLARIFYING THAT IT WOULD ALL DEPEND ON THE FACTS OF THE CASE AND THAT NO RIGID PRINCIPLES OR H ARD AND FAST RULES COULD BE LAID OUT FOR THE PURPOSE. AS SUCH WHERE THERE ARE JUSTIFIABLE REASO NS FOR RAISING A CLAIM BY AN APPELLANT AT A LATER STAGE RAISED BONA FIDE THE APPELLATE AUTHORITY ON A DUE CONSIDERATION O F THE FACTS AND CIRCUMSTANCES WOULD ADMIT THE CLAIM. THE LD. AR THOUGH ARGUES SO HAS NOT POINTED OUT A NY DEVELOPMENT IN LAW WITH REFERENCE TO WHICH IT CLAIMS THE DISALLOWANCE TO BE EITHER WHOLLY OR PARTLY IN EXCESS OF THAT PERMISSIBLE UNDER THE LAW (SECTION 14A). AS AF ORE-NOTED IN THE FACTS OF THE INSTANT CASE THE ASSESSEE HAS APPLIED RULE 8D BEING MANDAT ORY FOR THE CURRENT YEAR WHICH STOOD ACCEPTED BY THE A.O. ON CONFIRMATION OF THE CORRECT NESS OF THE COMPUTATION THEREUNDER. IN FACT THE BULK OF THE DISALLOWANCE I.E. RS.1 2 1 387/- OUT OF THE TOTAL OF THE DISALLOWANCE EFFECTED (RS.1 21 757/-) IS IN RESPEC T OF INDIRECT EXPENDITURE MADE AT 0.5% AT THE AVERAGE INVESTMENT AND TOWARD WHICH THERE I S NO CLAIM BEFORE EITHER AUTHORITY. THE LD. AR ON AN ENQUIRY BY THE BENCH WOULD SUBMIT TH AT THE DIVIDEND INCOME FOR THE YEAR IS TUNE OF RS.0.85 LACS WHILE THE DISALLOWANCE WOR KS TO RS.1.22 LACS. THE SAME HOWEVER WOULD BE TO NO MOMENT. AS CLARIFIED BY THE SPECIAL BENCH IN THE CASE OF CHEMINVEST LTD. V. ITO [2009] 121 ITD 318 (DEL-SB) ALSO REFERRED TO BY T HE LD. DR THE DISALLOWANCE U/S.14A IS OF THE EXPENDITURE CLAIMED IN RESPECT OF INCOME NOT FORMING PART OF THE TOTAL INCOME. THE SAME MAY NOT NECESSARILY RESULT IN INCO ME MUCH LESS TO THE SAID EXTENT. AS SUCH CORRELATING THE TWO I.E. THE INCOME AND THE EXPENDITURE INCURRED IN ITS RESPECT WOULD BE INAPPOSITE. REFERENCE FOR THE PURPOSE MAY ALSO BE MADE TO THE DECISION IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM). THE ASSESSEE BEFORE US RELIED ON THE DECISION IN TH E CASE OF CIT VS. RELIANCE INDUSTRIES LTD . [2011] 339 ITR 632 (BOM). THE SAME CLARIFIES THAT NO DISALLOWANCE U/S. 14A WOULD BE EXIGIBLE IN THE ABSENCE OF ANY EXPENDI TURE BEING INCURRED AND CLAIMED. THAT IN FACT REPRESENTS THE FUNDAMENTAL CONDITION F OR THE APPLICATION OF S. 14A THE ONUS TO PROVE WHICH THOUGH AND WITH REFERENCE TO ITS AC COUNTS IS ON THE ASSESSE FAILING WHICH 6 ITA NO. 5425/MUM/2012 (A.Y. 2009-10) ASST. CIT VS. MEDIORAL LABORATORIES PVT. LTD. THE PRESCRIPTION OF R. 8D WHICH IS ONLY A RULE OF ESTIMATION WOULD APPLY (REFER: GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT (SUPRA)). THE DECISION IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD . (SUPRA) IS BASED ON A FINDING OF FACT BY THE TRIB UNAL. IN THE INSTANT CASE THE ASSESSEES CASE IS DE HORS ANY FACTS. THE LD. CIT(A) HAS ALSO SIMPLY RESTORED THE MATTER BACK TO THE FILE OF THE AO WITHOUT IN ANY MANNER EI THER ADDRESSING THE ISSUE OF ADMISSIBILITY OF THE ASSESSEES CLAIM WHICH IS APP ARENTLY CONTRARY TO THE CLEAR PROVISION OF LAW NOR IN ANY MANNER STATING THE FACTUAL BASIS ON WHICH THE ASSESSEES CASE WAS RESTORED FOR THE EARLIER YEAR/S. THE SAID DECISION WOULD THUS BE OF LITTLE ASSISTANCE TO THE ASSESSEE WHOSE CASE WE FIND TO BE WITHOUT MERIT. W E DECIDE ACCORDINGLY. 6. IN THE RESULT THE REVENUES APPEAL IS PARTLY AL LOWED. 1/ 2 )!30 4 ) 567 ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 31 2 013 SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * + MUMBAI; 8 DATED : 31.10.2013 ' ROSHANI SR. PS ! ' #$%& ' &$ ' COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. ! ! * 9 : ; / THE CIT(A) 4. ! ! * 9 / CIT CONCERNED 5. <= >& ?@ ! ?@ / * + / DR ITAT MUMBAI 6. > AB + ' GUARD FILE ! ( / BY ORDER )/(* + (DY./ASSTT. REGISTRAR) * + / ITAT MUMBAI