The ACIT, Circle-1,, Bhavnagar v. M/s. Vallabhbhai Dhanjibhai & Co.,, Bhavnagar

ITA 853/AHD/2008 | 2004-2005
Pronouncement Date: 19-08-2010 | Result: Partly Allowed

Appeal Details

RSA Number 85320514 RSA 2008
Assessee PAN AACFV2572J
Bench Ahmedabad
Appeal Number ITA 853/AHD/2008
Duration Of Justice 2 year(s) 5 month(s) 12 day(s)
Appellant The ACIT, Circle-1,, Bhavnagar
Respondent M/s. Vallabhbhai Dhanjibhai & Co.,, Bhavnagar
Appeal Type Income Tax Appeal
Pronouncement Date 19-08-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 19-08-2010
Date Of Final Hearing 29-07-2010
Next Hearing Date 29-07-2010
Assessment Year 2004-2005
Appeal Filed On 07-03-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND A. N. PAHUJA AM) ITA NO.853/AHD/2008 A. Y.: 2004-05 THE A. C. I. T. CIRCLE-1 BHAVNAGAR AAYAKAR BHAVAN NAKUBAUG JASHONATH CHOWK BHAVNAGAR 364 001 VS M/S. VALLABHBHAI DHANJIBHAI & CO. T-7/8 DARSHAN COMPLEX NR. NILAMBAUG BHAVNAGAR PA NO. AACFV 2572 J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI K. M. MAHESH DR RESPONDENT BY SHRI SANJAY R. SHAH AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-XX AHMEDABAD DATED 13-11-2007 FOR ASSESSMENT YEAR 2004-05. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE P ARTIES PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERE D THE MATERIAL ON RECORD POINTED OUT BY THE PARTIES. 3. ON GROUND NO.1 OF THE APPEAL THE REVENUE CHALLENGE D THE DELETION OF ADDITION ON ACCOUNT OF DIAMONDS WITHDRAWN BY PAR TNERS FOR SELF USE OF RS.11 46 598/-. THE AO OBSERVED THAT THE ASSESSEE H AD SHOWN WITHDRAWALS OF 228.11 CARAT POLISHED DIAMONDS FOR S ELF USE. EXPLANATION TO THIS EFFECT WAS CALLED FOR IN RESPONSE TO WHICH THE ASSESSEE SUBMITTED THAT SAME HAS BEEN DEDUCTED FROM CLOSING STOCK AND THEREAFTER CLOSING STOCK HAS BEEN VALUED. IT WAS FURTHER STATED THAT I T WAS NOT SALE OF CUT AND POLISHED DIAMONDS AS SUCH NO CONSIDERATION IS S HOWN IN THE ACCOUNT. THE SAID WITHDRAWAL OF DIAMONDS IS THE WIT HDRAWAL OF CAPITAL FROM THE FIRM OF HIS OWN FUNDS. THE AO CONSIDERING THE EXPLANATION ITA NO.853/AHD/2008 CIT CIR-1 BHAVNAGAR VS VHALLABHBHAI DANJIBHAI & C O. 2 ADDED THE SUM OF RS.11 46 598/- TO THE ASSESSEES I NCOME AS ALSO INCLUDED IN THE TOTAL TURNOVER OF THE ASSESSEE IN W ORKING OUT THE CLAIM OF DEDUCTION U/S 80 HHC OF THE IT ACT. IT WAS FURTHER SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ABOVE AMOUNT HAS BEEN DEDUC TED FROM THE CLOSING STOCK AND THEREAFTER CLOSING STOCK HAS BEEN VALUED. FURTHER IT WAS NOT SALE OF CUT AND POLISHED DIAMONDS AS SUCH N O CONSIDERATION IS SHOWN. SINCE WITHDRAWALS OF DIAMONDS ARE FROM THE C APITAL OF THE FIRM ALSO OF ITS OWN FUNDS NO PROFIT HAS BEEN CHARGED. IT WAS FURTHER SUBMITTED THAT IN THE ASSESSMENT YEAR 2003-04 THE L EARNED CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT IN THE ASSESSMENT YEAR 2001-02 ALSO IDENTICAL ISSUE WAS INVOLVED AND ADDITION MADE ON ACCOUNT OF PARTNERS WITHDRAWAL OF DIAMONDS OF RS.1 50 873/- WAS CONSIDERED AS SALES AND INCLUDED IN THE TOTAL TURNOVER AND THE LEARNED CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LEARNED CIT(A) CONSIDERING HIS EARLIER APPELLATE OR DER PARTICULARLY IN ASSESSMENT YEAR 2001-02 IN WHICH IDENTICAL ISSUE HA S BEEN DECIDED IN FAVOUR OF THE ASSESSEE DELETED THE ADDITION OF RS. 11 46 598/- MADE SEPARATELY AS INCOME OF THE ASSESSEE. 3. THE LEARNED DR RELIED UPON THE ORDER OF THE AO A ND SUBMITTED THAT SINCE IT WAS PART OF THE SALES THEREFORE ADDITION WAS RIGHTLY MADE BY THE AO. THE LEARNED DR SUBMITTED THAT IT WAS NOT SEPARA TELY SHOWN IN THE CAPITAL ACCOUNT. ON THE OTHER HAND LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IDENTICAL ISSUE WAS CONSIDERED BY TH E LEARNED CIT(A) IN ASSESSMENT YEAR 2001-02 AND VIDE ORDER DATED 20-10- 2004 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. COPY OF THE ORDER IS FILED AT PAGE 4 OF THE PAPER BOOK. THE LEARNED COUNSEL FOR THE ASSESSEE FU RTHER SUBMITTED THAT THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL I N ASSESSMENT YEAR 2001-02 WHICH WAS DECIDED SEPARATELY VIDE ORDER DAT ED 21-11-2005 (PB- 11) AND THE DEPARTMENT HAS NOT PREFERRED ANY APPEAL AGAINST THE DELETION ITA NO.853/AHD/2008 CIT CIR-1 BHAVNAGAR VS VHALLABHBHAI DANJIBHAI & C O. 3 OF THE ADDITION OF SIMILAR NATURE IN ASSESSMENT YEA R 2001-02. THEREFORE THE ISSUE STANDS FINALLY SETTLED IN FAVOUR OF THE A SSESSEE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL AVAILABLE ON RECORD. THE AO MENTIONED IN THE ASSESSMENT ORDER THAT DIAMONDS WERE WITHDRAWN BY THE PARTNERS FOR SELF USE. IT WOU LD THEREFORE SHOW THAT IT WAS NOT SALE OF THE ASSESSEE BECAUSE IT WOU LD AMOUNT TO WITHDRAWAL FROM CAPITAL ACCOUNT BY THE PARTNERS. SI MILAR ISSUE WAS CONSIDERED BY LEARNED CIT(A) IN ASSESSMENT YEAR 200 1-02 AND THE LEARNED CIT(A) SPECIFICALLY GAVE THE FINDING THAT S TOCK OF DIAMONDS ARE WITHDRAWN BY THE PARTNERS FOR SELF USE AND THE VALU E WISE COST IS WORKED OUT AT THE SAME AMOUNT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT REVENUE HAS NOT PREFERRED ANY APPEAL AGAINST T HE ABOVE ORDER OF THE LEARNED CIT(A) BEFORE THE TRIBUNAL. IN THE ASSESSME NT YEAR 2001-02 THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL ON SO ME OTHER ISSUE WHICH IS DECIDED VIDE ORDER DATED 22-11-2005 COPY OF WHIC H IS FILED AT PAGE 11 OF THE PAPER BOOK. HOWEVER BOTH THE PARTIES HAVE N OT FILED ANY MATERIAL TO SHOW THAT THE ORDERS OF THE LEARNED CIT(A) IN EA RLIER YEARS HAVE BECOME FINAL. THE LEARNED CIT(A) HAS ALSO NOT GIVEN ANY SP ECIFIC FINDING IN THE ASSESSMENT YEAR UNDER APPEAL. THE ORDER OF THE LEAR NED CIT(A) IS NON- SPEAKING AND AS SUCH REQUIRES RECONSIDERATION. THE LEARNED CIT(A) SHOULD ASCERTAIN THE FACT WHETHER THE DEPARTMENT HA S PREFERRED ANY APPEAL IN THE EARLIER YEAR AND WHAT IS THE OUTCOME OF THE FURTHER LITIGATION BEFORE THE TRIBUNAL. IN THE ABSENCE OF A NY SPECIFIC MATERIAL ON RECORD AND THAT THE ORDER OF THE LEARNED CIT(A) IS NON-SPEAKING WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE T HE MATTER TO HIS FILE WITH DIRECTION TO PASS REASONED ORDER BY GIVING REA SONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . THE LEARNED CIT(A) SHALL ALSO VERIFY WHETHER HIS ORDERS IN EARLIER YEARS INCLUDING AY 20 03-04 HAVE REACHED FINALITY OR NOT BEFORE DECIDING THE ABOVE ISSUE. ITA NO.853/AHD/2008 CIT CIR-1 BHAVNAGAR VS VHALLABHBHAI DANJIBHAI & C O. 4 5. ON GROUND NO.2 REVENUE CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN DIRECTING TO ALLOW DEDUCTION U/S 80 HHC OF THE I T ACT TO THE EXTENT OF SALES CERTIFIED BY AUDITORS AND FILED BEFORE THE AO AT THE REMAND REPORT. THE AO DID NOT ALLOW DEDUCTION U/S 80 HHC OF THE IT ACT BECAUSE THE ASSESSEE COULD NOT FURNISH REQUIRED CERTIFICATE IN FORM NO.10 CCABA. THE AO NOTED THAT SINCE THE REQUIRED CERTIFICATE IN PRE SCRIBED FORM WAS NOT FURNISHED WITH THE RETURN OF INCOME THEREFORE IN THE ABSENCE OF REQUISITE CERTIFICATE THE CLAIM OF DEDUCTION COULD NOT BE ALL OWED. THE AO DID NOT ALLOW DEDUCTION U/S 80 HHC OF THE IT ACT ON DEEMED EXPORT OF RS.50 14 787/- OUT OF THE WHOLE AMOUNT OF RS.82 64 438/- SHOWN AS TOTAL SALES TO SPECIAL ECONOMIC ZONE. THE AO HAS AL LOWED THE AMOUNT OF RS.32 49 651/- FOR WHICH THE CERTIFICATE WAS FURNIS HED BEFORE THE AO. THE BALANCE OF RS.50 14 787/- WAS EXCLUDED FROM THE EXPORT TURNOVER OF THE BUSINESS FOR CALCULATION OF DEDUCTION U/S 80 HH C OF THE ACT BY THE AO. DURING THE APPELLATE PROCEEDINGS THE ISSUE WAS REMANDED TO THE AO AND THE ASSESSEE FILED THE ORIGINAL CERTIFICATE IN FORM NO.10CCABA ON 10-10-2007 WHICH WAS CONSIDERED BY THE AO IN THE RE MAND PROCEEDINGS. THE LEARNED CIT(A) NOTED THAT SINCE THIS WAS A TECH NICAL DEFAULT ON THE PART OF THE ASSESSEE TO FILE CERTIFICATE IN FORM NO .10 CCABA ALONG WITH RETURN OF INCOME WHICH IS NOW FILED BEFORE THE AO A T THE REMAND PROCEEDINGS THEREFORE THE ASSESSEE WOULD BE ENTIT LED FOR DEDUCTION U/S 80 HHC OF THE IT ACT. THIS GROUND WAS ACCORDINGLY D ECIDED IN FAVOUR OF THE ASSESSEE. 6. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND RELIED UPON T HE FOLLOWING DECISIONS: (1) DECISION OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF GUJARAT OIL & ALLIED INDUSTRIES 201 ITR 325 IN WHICH IT WAS HELD THAT AUDIT ITA NO.853/AHD/2008 CIT CIR-1 BHAVNAGAR VS VHALLABHBHAI DANJIBHAI & C O. 5 REPORT FILED AT THE ASSESSMENT STAGE IS SUFFICIENT COMPLIANCE FOR DEDUCTION U/S 80 J OF THE ACT. (2) DECISION OF THE HONBLE M. P. HIGH COURT IN THE CASE OF PANAMA CHEMICAL WORKS 245 ITR 684 IN WHICH IT WAS HELD THA T DEDUCTION U/S 80-I IS ALLOWABLE TO THE ASSESSEE WHEN AUDIT RE PORT IS FILED AT THE ASSESSMENT STAGE. (3) ORDER OF ITAT INDORE BENCH IN THE CASE OF M.P. RAJYA VIKASH NIGAM 60 ITD 39 IN WHICH IT WAS HELD THAT AUDIT REPORT FIELD AT THE APPELLATE STAGE IS IN CONTINUATION OF THE ASSESSMEN T PROCEEDINGS AND DEDUCTION IS ALLOWABLE. (4) DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF MAGNUM EXPORTS (P) LTD. 262 ITR 10 IN WHICH IT WAS HELD TH AT AUDIT REPORT FILED AT APPELLATE STAGE SPECIAL DEDUCTION U/S 80 HHC ALLOWABLE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIALS AVAILABLE ON RECORD AND DO NOT FIND ANY JUSTIFICATION TO INTE RFERE WITH THE ORDER OF THE LEARNED CIT(A) IN ALLOWING DEDUCTION U/S 80 HHC OF THE IT ACT ON FILING REQUIRED CERTIFICATE AT THE APPELLATE STAGE BEFORE THE LEARNED CIT(A). THE ASSESSEE DID NOT FURNISH REQUIRED CERTIFICATE I N FORM NO.10CCABA ALONG WITH THE RETURN OF INCOME. HOWEVER IT WAS FU RNISHED AT THE ASSESSMENT STAGE. BUT THE SAID CERTIFICATE WAS IN R ESPECT OF DEEMED EXPORT OF RS.32 49 659/-. FOR THE REMAINING AMOUNT NO CERTIFICATE WAS FILED. THEREFORE IN THE ABSENCE OF REQUISITE CERTI FICATE CLAIM OF THE ASSESSEE WAS DISALLOWED. THE ASSESSEE FILED REQUISI TE CERTIFICATE OF THE BALANCE AMOUNT AT THE APPELLATE STAGE WHICH WAS REF ERRED TO THE AO AND REMAND REPORT WAS CALLED FOR. THE LEARNED CIT(A) T HEREFORE HELD THAT IT WAS A TECHNICAL DEFAULT THEREFORE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION U/S 80HHC TO THE EXTENT OF THE SALE CERTI FIED BY THE AUDITORS AND FILED BEFORE THE AO AT THE STAGE OF REMAND REPO RT. THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY SUP PORT THE FINDINGS OF THE LEARNED CIT(A) AND MOREOVER EVEN FOR THE PART AMOUNT CERTIFICATE WAS FILED AT THE ASSESSMENT STAGE ONLY MEANING THEREBY THE AO HIMSELF ITA NO.853/AHD/2008 CIT CIR-1 BHAVNAGAR VS VHALLABHBHAI DANJIBHAI & C O. 6 CONDONED THE DEFAULT OF FILING OF THE REQUISITE CER TIFICATE ALONG WITH RETURN OF INCOME. CONSIDERING THE ABOVE FACTS WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DIRECTING THE AO TO ALLOW DEDUCTION U/S 80 HHC OF THE ACT TO THE EXTENT OF SALES CERTIFIED BY THE AUDITORS AS PER THE CERTIFICATE FILED BEFORE THE AO AT THE REMAND P ROCEEDINGS. AS A RESULT THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 8. NO OTHER POINT IS ARGUED OR PRESSED. 9. AS A RESULT THE DEPARTMENTAL APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 19-08-2010. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 19-0 8-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD