M/s. Galaxy Global Pvt. Ltd., Ahmedabad V. DCIT Circle 2(1)(2), Ahmedabad

CO 16/AHD/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4294 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-10-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 11-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S S SHUKLA
• Keywords: Reopening of assessment; Business expenditure; Revenue expenditure
• Section: 43B; 37(1); 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (THROUGH WEB-BASED VIDEO CONFERENCING PLATFORM) ] ] BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEM BER ITA NO. 1694/AHD/2019 & CO NO. 16/AHD/2020 ASSESSMENT YEARS : 2013-14 DCIT, CIRCLE-2(1)(1), AHMEDABAD VS M/S. GALAXY GLOBAL PVT. LTD., UGF 1-2, RIVIERA ARCADE, NR. PRAHLADNAGAR AUDA GARDEN, SATELLITE ROAD, AHMEDABAD-380014 PAN : AACCG 1840 P / (APPELLANT) / (RESPONDENT/ CROSS-OBJECTOR) REVENUE BY : SHRI S.S. SHUKLA, SR DR ASSESSEE BY : NONE / DATE OF HEARING : 28/09/2021 / DATE OF PRONOUNCEMENT: 04/10/2021 / O R D E R PER RAJPAL YADAV, VICE PRESIDENT : THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINS T THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-2, AHM EDABAD (CIT(A) IN SHORT) DATED 14.08.2019 PASSED FOR ASSESSMENT YE AR 2013-14. ON RECEIPT OF NOTICE IN THE REVENUES APPEAL, THE ASSESSEE HAS FILED CROSS OBJECTION BEARING CO NO.16/AHD/2020. 2. THE GRIEVANCE OF THE REVENUE IS THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.3,22,561/- WHICH WA S ADDED BY THE ASSESSING OFFICER WITH THE AID OF SECTION 43B OF TH E INCOME TAX ACT, 1961. ITA NO. 1694/AHD /2019 & CO NO16/AHD/2020 DCIT VS. GALAXY GLOBAL PVT LTD AY : 2013-14 2 3. IN RESPONSE TO THE NOTICE OF HEARING, NO ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. HOWEVER, WITH THE ASSISTANC E OF THE LEARNED DEPARTMENTAL REPRESENTATIVE, WE HAVE GONE THROUGH T HE RECORD CAREFULLY AND PROCEED TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE. 4. WITH THE ASSISTANCE OF LEARNED DEPARTMENTAL REPR ESENTATIVE, WE HAVE PERUSED THE ORDER OF THE LEARNED CIT(A) WHICH IS A WELL REASONED ORDER EXHIBITING EVERY DETAILS. WE DEEM IT APPROPRIATE T O TAKE NOTE OF HIS FINDINGS RECORDED AT PARAGRAPH NO. 3.3 TO 3.5 OF IMPUGNED OR DER WHICH READ AS UNDER:- 3.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND STATEMENT OF FACTS FILED BY THE APPELLANT. THE ASSE SSING OFFICER HAS OBSERVED THAT APPELLANT HAS CLAIMED CUSTOM DUTY EXPENDITURE OF RS. 3,22,561/- ON THE GROUND THAT SUCH DUTY WAS NOT CLAIMED AS EXPENSES I N THE YEAR OF ACTUAL PAYMENT AS APPELLANT WAS ENTITLED TO RECEIVE SPECIA L BENEFITS AS PER CUSTOM & EXCISE RULES BUT SAID SPECIAL BENEFITS WERE NOT REC EIVED HENCE EXPENSES WERE CLAIMED AS REVENUE EXPENDITURE IN YEAR UNDER CONSID ERATION. THE AO HAS STATED THAT AS PER PROVISIONS OF SECTION 43B OF THE ACT, ANY DUTY, TAXES, CESS OR FEES BY WHATEVER NAME CALLED, SHALL BE ALLOWED O NLY IN PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID AND CUSTOM DUTY IS PAID IN EARLIER YEAR HENCE CANNOT BE ALLOWED AS EXPENDITURE UNDER SECTIO N 43B OF THE ACT. ACCORDINGLY, HE MADE DISALLOWANCE OF RS.3,22,561. 3.4. THE APPELLANT HAS CLAIMED THAT IT HAS PAID CUS TOM DUTY IN EARLIER ASSESSMENT YEAR AND SAME WAS NOT CLAIMED AS REVENUE EXPENDITURE BUT SHOWN AS CUSTOM DUTY RECEIVABLE AS IT WAS ENTITLED TO RECEIVE REFUND OF SUCH CUSTOM DUTY BENEFITS FROM THE GOVERNMENT. AS SUCH B ENEFITS WERE NOT RECEIVED, APPELLANT HAS WRITTEN OFF BALANCE LYING I N CUSTOM DUTY RECEIVABLE ACCOUNT IN PROFIT & LOSS ACCOUNT IN CURRENT YEAR AN D CLAIMED IT AS REVENUE EXPENDITURE UNDER SECTION 37 OF THE ACT. THE APPELL ANT HAS CONTENDED THAT CUSTOM DUTY IS ALREADY PAID IN EARLIER YEARS, PROVI SIONS OF SECTION 43B WOULD NOT APPLY WHEN EXPENDITURE IS CLAIMED AS REVENUE EX PENDITURE IN CURRENT YEAR. THE APPELLANT IN ITS ALTERNATE CONTENTION HAS STATED THAT IF SUCH EXPENDITURE IS NOT ALLOWED ALLOWABLE EXPENDITURE, S AME MAY BE ALLOWED IN EARLIER ASSESSMENT YEAR AS REVENUE EXPENDITURE. ITA NO. 1694/AHD /2019 & CO NO16/AHD/2020 DCIT VS. GALAXY GLOBAL PVT LTD AY : 2013-14 3 3.5. APPELLANT HAS PAID CUSTOM DUTY IN EARLIER ASSE SSMENT YEARS BUT SAME WAS NOT CLAIMED AS REVENUE EXPENDITURE IN THE YEAR OF PAYMENT BUT WAS SHOWN AS 'CUSTOM DUTY RECEIVABLE ACCOUNT' IN BALANC E SHEET. AS ABOVE AMOUNT IS NOT RECEIVED FROM CONCERNED AUTHORITY AS PER RELEVANT SCHEMES, SUCH AMOUNT IS WRITTEN OFF AS BUSINESS LOSS/EXPENDI TURE IN YEAR UNDER CONSIDERATION. THE PROVISIONS OF SECTION 43B RELIED UPON BY AO ARE NOT APPLICABLE BECAUSE PAYMENT OF CUSTOM DUTY IS ALREAD Y MADE BY APPELLANT WHICH IS NOT IN DISPUTE. THE PROVISION OF SECTION 4 3B DOES NOT ENVISAGE THAT EXPENDITURE IS ALLOWABLE ONLY IN THE YEAR OF PAYMEN T AND IF PAYMENT HAS PRECEDED THE YEAR OF CLAIMING OF SUCH PAYMENT AS EX PENDITURE, DISALLOWANCE OF EXPENDITURE CANNOT BE MADE UNDER THIS PROVISION. SO FAR AS ALLOWABILITY OF SUCH EXPENDITURE AS REVENUE EXPENDITURE IS CONCERNE D, IT IS FOUND THAT HON'BLE AHMEDABAD ITAT IN THE CASE OF ACIT V/S RANG OLI INDUSTRIES PVT. LIMITED IN ITA NO. 1936/AHD/2010 VIDE ORDER DATED 1 1 TH JANUARY, 2013 HAS HELD AS UNDER: 'FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING A SSESSMENT ORDER PASSED U/S.143(3) R.W.S. 147 DATED 22.12.2009 WERE THAT THE ASSESSEE- COMPANY IS FOLLOWING THE MERCANTILE' SYSTEM OF ACC OUNTING. IT WAS NOTED BY THE ASSESSING OFFICER THAT FOR THE YEAR UN DER CONSIDERATION AN AMOUNT OF RS.65,24,121/- WAS WRITTEN OFF BY DEBI TING THE PROFIT & LOSS ACCOUNT PERTAINING TO EXCISE DUTY. ACCORDING T O HIM, GOVERNMENT HAD DECLARED THE SCHEME WHEREIN THE ASSE SSEE HAS BEEN GIVEN AN OPTION TO CONTINUE WITH THE PRESENT RATE O F EXCISE DUTY OR TO AVAIL A ROUTE OF EXEMPTION. AFTER GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER WAS NOT CONVINCED A ND HELD THAT THERE WAS NO EVIDENCE FROM THE EXCISE DEPARTMENT THROUGH WHICH THE ASSESSEE COULD ESTABLISH THAT THE ASSESSEE WAS ENTI TLED TO WRITE OFF THE AMOUNT IN THE YEAR UNDER CONSIDERATION.... 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND CONSIDERING THE FACTS OF THE CASE AS NARRATED BEFORE THE LOWER AUTH ORITIES, IT WAS OBSERVED THAT THE AFORESAID AMOUNT OF THE EXCISE DU TY WAS WRITTEN OFF AT THE TIME OF SURRENDER OF EXCISE REGISTRATION CER TIFICATE. ON THIS ISSUE, THE RESPECTED COORDINATE BENCH CHANDIGARH IN THE CASE OF M/S.MOHAN SPINNING MILLS (SUPRA) HAS OPINED AS UNDE R:- '7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RESPE CT OF THE DEDUCTION CLAIMED ON ACCOUNT OF CENVAT AMOUNTING TO RS.35,94,577. THE ASSESSEE WAS ENGAGED IN THE BUSIN ESS OF ITA NO. 1694/AHD /2019 & CO NO16/AHD/2020 DCIT VS. GALAXY GLOBAL PVT LTD AY : 2013-14 4 MANUFACTURING AND TRADING OF YARN AND FIBRE. THE YA RN MANUFACTURED BY THE ASSESSEE WAS AN EXCISABLE ITEM. THE ASSESSEE WAS PAYING EXCISE DUTY ON THE RAW MATERIAL PURCHASE D I.E. ACRYLIC YARN/FIBRE AND POLYESTER YARN/FIBRE. IN TURN, ASSES SEE WAS LIABLE TO PAY DUTY ON ITS MANUFACTURED ITEMS. THE RATE OF EXC ISE DUTY PAYABLE ON THE RAW MATERIAL WAS HIGHER AND THE ASSE SSEE WAS DEPOSITING THE EXCISE DUTY IN PLA ACCOUNT WHICH IN TURN WAS ADJUSTABLE AGAINST THE EXCISE DUTY PAYABLE ON THE F INISHED PRODUCTS. THE EXCISE DUTY PAYABLE ON THE FINISHED P RODUCTS WAS ON THE LOWER SIDE AND CONSEQUENTLY OVER THE PERIOD OF YEARS THE ASSESSEE HAD CREDIT OF EXCISE DUTY RESULTING IN ACC UMULATION OF CENVAT.' '10. VARIOUS TESTS HAVE BEEN LAID DOWN BY VARIOUS H IGH COURTS AND THE APEX COURT IN RELATION TO THE AILOWABILITY OF EXPENDITURE UNDER SECTION 37(1) OF THE ACT WHILE COMPUTING THE INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFESSION. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD PAID CENVAT ON PURCH ASE OF RAW MATERIAL WHICH WAS DEPOSITED IN ITS PLA ACCOUNT FOR CLAIMING THE BENEFIT OF SET OFF AGAINST THE EXCISE DUTY PAYABLE ON THE MANUFACTURED ITEMS I.E. BRANDED YEARN. THE ASSESSEE WAS PAYING HIGHER RATE OF EXCISE DUTY ON THE RAW MATERIAL PURC HASED BY IT AS AGAINST THE RATE OF EXCISE DUTY APPLICABLE ON THE M ANUFACTURED ITEMS, CONSEQUENTLY CREDIT OF EXCISE DUTY WAS AVAIL ABLE WITH THE ASSESSEE. THE SAID EXCISE DUTY PAID FROM YEAR TO YE AR WAS NOT CLAIMED AS AN EXPENDITURE BUT WAS CARRIED FORWARD F ROM YEAR TO YEAR TO BE ADJUSTED AGAINST THE EXCISE DUTY PAYABLE BY THE ASSESSEE ON ITS MANUFACTURED ITEMS. HOWEVER, DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CLOSED DOWN ITS MANUFACT URING UNIT AND CONSEQUENTLY THE BENEFIT OF THE CENVAT CREDIT R EMAINED UNADJUSTED. ONCE THE MANUFACTURING UNIT OF THE ASSE SSEE IS CLOSED DOWN, ADMITTEDLY THE BENEFIT OF CENVAT CREDIT NOT A VAILED OF AGAINST THE EXCISE DUTY PAYABLE ON MANUFACTURED ITE MS, CANNOT BE UTILIZED BY THE ASSESSEE AND THE SAID WRITE OFF OF CENVAT CREDIT, IS ALLOWABLE AS AN EXPENDITURE IN THE YEAR UNDER CO NSIDERATION ON THE CLOSURE OF THE BUSINESS. THE WRITE OFF OF CENVA T CREDIT BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT IS THUS ALLOWABLE AS BUSINESS EXPENDITURE UNDER THE PROVISIONS OF SECTION 37(1) O F THE ACT RELATABLE TO THE YEAR, IN WHICH THE MANUFACTURING A CTIVITIES ARE CLOSED DOWN BY THE ASSESSEE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE IN RESPE CT OF WRITE OFF OF CENVAT CREDIT OF RS 35,94,577/-. GROUND NO.1 RAISED BY THE ASSESSEE IS THUS ALLOWED.' ITA NO. 1694/AHD /2019 & CO NO16/AHD/2020 DCIT VS. GALAXY GLOBAL PVT LTD AY : 2013-14 5 4.1. WE HAVE ALSO NOTED THAT RESPECTED COORDINATE B ENCH 'A' AHMEDABAD IN THE CASE OF GIRDHAR FIBRES PVT.LTD. (S UPRA) HAS ALSO OPINED AS UNDER:- '9. WE HEARD BOTH THE SIDES. BEFORE US, FORM E.R.I, I.E. RETURN OF EXCISABLE GOODS AND AVAILMENT OF CENVAT CREDIT H AS BEEN PLACED. THE EXPLANATION OF THE ASSESSEE WAS THAT TH E IMPUGNED TWO AMOUNTS WERE PART OF THE DUTY WHICH WAS PAID BY THE ASSESSEE AT THE TIME OF PURCHASE OF RAW-MATERIAL, H OWEVER, THE ASSESSEE HAD MAINTAINED EXCLUSIVE SYSTEM OF ACCOUNT ING, THEREFORE THE DUTY PAID WAS NOT DEBITED AS A PART O F THE PURCHASES BUT A SEPARATE ACCOUNT WAS MAINTAINED AND CARRIED TO THE BALANCE-SHEET. THE AED AND NCCD WERE APPLICA BLE ON POY, I.E. RAW-MATERIAL. WHEN THE FINISHED GOODS, I. E. TEXTURIZED YARN IS MANUFACTURED, THE EXCISE IS LEVI ED IN THE FORM OF BASIC DUTY. THE ASSESSEE HAS ADOPTED EXCLUS IVE METHOD OF ACCOUNTING, THEREFORE DEBITED THE NET PURCHASES AND THOSE WERE SEPARATELY RECORDED IN THE BOOKS OF ACCOUNTS. WE FIND FORCE IN THIS ARGUMENT OF THE ASSESSEE BECAUSE WHILE MAIN TAINING THE EXCLUSIVE METHOD OF ACCOUNTING THE ASSESSEE HAD A C HOICE TO INCREASE THE VALUE OF THE PURCHASES IN RESPECT OF T HE DUTY PAID IN THE FORM OF AED & NCCD. IN OTHER WORDS, AN EXPEN DITURE WAS INCURRED BUT THAT EXPENDITURE COULD NOT BE ADJU STED AGAINST THE CENVAT RULES BECAUSE ON THE FINISHED GO ODS, I.E. TEXTURIZED YARN ONLY THE BASIC DUTY IS LEVIABLE. WE , THEREFORE, HOLD THAT THE AMOUNT WHICH IS NOW WRITTEN OFF BEING PART OF THE BUSINESS EXPENDITURE, HENCE ALLOWABLE UNDER THE PRO VISIONS OF THE ACT. IN THE RESULT, WE HEREBY REVERSE THE FINDI NGS OF THE AUTHORITIES BELOW AND ALLOW THE GROUND RAISED BY TH E ASSESSEE.' 5. IN THE LIGHT OF THE ABOVE DECISIONS, ONCE ON IDE NTICAL FACTS, A VIEW HAS ALREADY BEEN TAKEN IN FAVOUR OF THE ASSESSEE ON THIS ISSUE, THEREFORE RESPECTFULLY FOLLOWING THAT VIEW, WE HEREBY HOLD TH AT LD.CIT(A) HAS RIGHTLY ALLOWED THE CLAIM. IN THE RESULT, GROUND RA ISED BY THE REVENUE IS HEREBY DISMISSED.' RELYING UPON THE DECISION REFERRED SUPRA AND THE FA CTS OF THE CASE, ADDITION MADE BY AO FOR RS.3,22,561/-PERTAINING TO CUSTOM DUTY IS ALLOWED AS REVENUE EXPENDITURE. ITA NO. 1694/AHD /2019 & CO NO16/AHD/2020 DCIT VS. GALAXY GLOBAL PVT LTD AY : 2013-14 6 5. A PERUSAL OF THE ABOVE WOULD INDICATE THAT THE A SSESSEE HAS PAID CUSTOM DUTY WHICH WAS ALLOWABLE DEDUCTION OF THE AS SESSEE UNDER SECTION 43B OF THE ACT IN THE YEAR OF PAYMENT ITSELF. HOWEV ER, THE ASSESSEE WAS EXPECTING CERTAIN SPECIAL BENEFITS AS PER CUSTOM AN D EXCISE RULES; THEREFORE, THE ASSESSEE DID NOT CLAIM IT IN THAT YEAR. ULTIMA TELY, THOSE BENEFITS WERE NOT GIVEN TO THE ASSESSEE AND, IN THIS YEAR, HE HAS WRI TTEN OFF THE ALLEGED CUSTOMS DUTY RECEIVABLE IN THE ACCOUNTS AND CLAIMED IT AS R EVENUE EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT. WE FIND THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY ADJUDICATED THIS ISSUE AFTER PUTTING RE LIANCE UPON THE DECISION OF THE ITAT IN THE CASE OF ACIT VS. RANGOLI INDUSTRIES PVT. LIMITED (SUPRA) AND NO INTERFERENCE IS CALLED FOR. 6. SO FAR AS THE CROSS-OBJECTION IS CONCERNED, THE ASSESSEE HAS RAISED TWO GROUNDS OF APPEAL. IN GROUND NO.1, IT HAS CHALLENG ED THE REOPENING OF THE ASSESSMENT AND GROUND NO.2 IS A GENERAL GROUND OF A PPEAL WHICH DOES NOT CALL FOR RECORDING OF ANY FINDING. 7. WE HAVE DISMISSED THE APPEAL OF THE REVENUE ON M ERIT. NO ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE AND NO PAPER -BOOK WAS FILED IN SUPPORT OF ITS CROSS-OBJECTION. THE LEARNED CIT(A) UPHELD THE REOPENING OF ASSESSMENT BY RECORDING A WELL REASONED FINDINGS RE CORDED AT PARAGRAPH NOS. 2.3 TO 2.5 OF THE IMPUGNED ORDER. AFTER GOING THROUGH THE WELL REASONED FINDINGS, AS RECORDED BY THE LEARNED CIT(A ), WE DO NOT FIND ANY MERIT IN THE CROSS-OBJECTION FILED BY THE ASSESSEE AND THE REOPENING OF THE ASSESSMENT IS UPHELD. ACCORDINGLY, THE CROSS-OBJE CTION FILED BY THE ASSESSEE IS REJECTED. ITA NO. 1694/AHD /2019 & CO NO16/AHD/2020 DCIT VS. GALAXY GLOBAL PVT LTD AY : 2013-14 7 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND CROSS-OBJECTION FILED BY THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 4 TH OCTOBER 2021 AT AHMEDABAD. SD/- SD/- (PRADIP KUMAR KEDIA) ( RAJPAL YADAV) ACCOUNTANT MEMBER VICE-PRESIDENT AHMEDABAD, DATED 04/10/2021 *BT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ) ( / THE CIT(A)- 5. , , /DR,ITAT, AHMEDABAD, 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) ITAT, AHMEDABAD 1. DATE OF DICTATION- 30.09.2021 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30.09.2021 OTHER MEMBER 30.09.2021. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. - 04.10.2021 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 04.10.2021.. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .04.10.2021 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REG ISTRAR FOR SIGNATURE ON THE ORDER 8. DATE OF DESPATCH OF THE ORDER