M/s. Amba Metals, New Delhi V. ACIT, New Delhi

CO 308/DEL/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 7085 (ITAT-DELHI)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 21-09-2016
• Court: TRIBUNAL

Judgement Text

1 ITA NO. 4186 & C.O NO. 308/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R. K. PANDA ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER (THROUGH VIDEO CONFERENCING) I.T.A. NO. 4186/DEL/2016 (A.Y 2011-12) ACIT CIRCLE-50(1) NEW DELHI (APPELLANT) VS AMBA METALS 21/6, WEST PATEL NAGAR NEW DELHI AAKFA0755C (RESPONDENT) C.O NO. 308/DEL/2016 (A.Y 2011-12) AMBA METALS 21/6, WEST PATEL NAGAR NEW DELHI AAKFA0755C (APPELLANT) VS ACIT CIRCLE-50(1) NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THE APPEAL IS FILED BY THE REVENUE AND CROSS OBJECT ION IS FILED BY THE AGAINST ORDER DATED 09/06/2016 PASSED BY CIT(A)-17 NEW DELHI FOR ASSESSMENT YEAR 2011-12. APPELLANT/RESPONDENT BY SH. ASHOK GAUTAM, SR. DR RESPONDENT/APPELLANT BY SH. VED JAIN, ADV & SH. AASHISH GOYAL, ADV DATE OF HEARING 08.03.2021 DATE OF PRONOUNCEMENT 07.04.2021 2 ITA NO. 4186 & C.O NO. 308/DEL/2016 2. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO. 4186/DEL/2016 REVENUES APPEAL 1 THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2,00,89,648/- ON ACCOUNT OF BOGUS SUNDRY CREDITORS. 2. THE LD CIT(A) HAS ERRED IN DELETING THE ADDITIO N OF RS. 2,00,89,648/- ON ACCOUNT OF THE FACT THAT EVEN AFTER ISSUING ;SUM MONS TO THE 21 PARTIES FOR ASCERTAINING THE GENUINENESS OF SUNDRY CREDITOR S, NEITHER PARTIES EVEN APPEARED NOR GIVEN ANY CONFIRMATION. 3. THE LD.CIT(A) HAS ERRED IN TAKING INTO CONSIDERA TION OF FACT THAT EVERY ASSESSMENT YEAR IS DISTINCT FROM EACH OTHER AND CAN NOT BE COMPARED WITH THE RESULTS OF THE CURRENT YEAR CONSIDERATION ON A CCOUNT OF GENUINENESS AND CREDITWORTHINESS OF FACTS. 4. THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 74,55,600/- WITHOUT TAKING CONSIDERATION OF FACTS THAT BILLS HA VE BEEN RAISED @ RS. 2100/MT ONLY. THEREFORE, THERE IS NO REASON TO MAKE PAYMENT TO ITS SISTER CONCERN @ 2500/MT ON ACCOUNT OF JOB WORK CHARGES. 5. THE LD.CIT(A) HAS ERRED IN NOT TAKING CONSIDERA TION OF FACTS THAT THE ASSESSEE IS NOT RESPONSIBLE FOR EXPENSES INCURRED B Y ITS SISTER CONCERN ON JOB WORK CHARGES AND MAKING PAYMENT ACCORDINGLY AS IT IS AGAINST THE CONCEPT OF ANY BUSINESS PRUDENCE. C.O NO. 308/DEL/2016 (A.Y 2011-12) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORD ER PASSED BY THE LEARNED CIT(A) IS BAD BOTH IN THE EYES OF LAW AND F ACTS. 2. (I)ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION O F THE AO IN RESTRICTING THE DEDUCTION UNDER SECTION 80-IC TO RS.6,96,627/- AS A GAINST RS.13,72,033/- CLAIMED AND ALLOWABLE UNDER THE PROVISIONS OF THE A CT. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA NED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION O F THE AO IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED TO 80-IC DEDUCTION IN RESP ECT OF SALE OF TMT BARS, ANGLES/CHANNELS. (III) THAT THE SAID ORDER HAS BEEN PASSED REJECTING THE C ONTENTION OF THE ASSESSEE THAT THE OBSERVATION OF THE LEARNED AO THA T THE ASSESSEE IS NOT ENGAGED IN MANUFACTURING IS AGAINST THE FACTS ON RE CORD. 3. THAT IN THE ALTERNATIVE AND WITHOUT PREJUDICE TO T HE ABOVE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECT ING THE CONTENTION OF THE 3 ITA NO. 4186 & C.O NO. 308/DEL/2016 ASSESSEE THAT THE AO WHILE RE-COMPUTING DEDUCTION U NDER SECTION 80 IC HAS IGNORED THE FACT THAT THE TMT BARS BEING SOLD BY TH E ASSESSEE ARE ALSO PRODUCED OUT OF THE BILLETS BEING MANUFACTURED BY T HE ASSESSEE AND HENCE THE ASSESSEE IS ELIGIBLE TO DEDUCTION UNDER SECTION 80- IC IN RESPECT OF THE BILLETS PRODUCED AND CONSUMED FOR PRODUCING TMT BARS, ANGLE S/CHANNELS. 3. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF M S BILLETS. THE ASSESSEE DECLARED INCOME FROM BUSINES S OR PROFESSION AND INCOME FROM OTHER SOURCES. THE ASSESSEE FILED RETURN OF I NCOME ON 20/9/2011 DECLARING INCOME OF RS. 47,50,900/-. THE ASSESSING OFFICER MADE AN ADDITION OF RS.6,75,406/- IN RESPECT OF SECTION 80IC DEDUCTI ON WHICH WAS CLAIMED BY THE ASSESSEE TO THE EXTENT OF MANUFACTURING OF TMT BARS AS WELL AS RS. 2,22,89,648/- IN RESPECT OF SUNDRY CREDITORS. THE ASSESSING OFFICER FURTHER MADE AN ADDITION OF RS.74,55,600/- IN RESPECT OF JO B WORK EXPENSES CLAIMED IN PROFIT AND LOSS ACCOUNT. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL O F THE ASSESSEE. 5. AS REGARDS GROUND NO. 1, 2 & 3 OF THE REVENUES APPEAL RELATING TO ADDITION OF RS. 2,22,89,648/- ON ACCOUNT OF BOGUS C REDITORS, THE LD. DR SUBMITTED THAT THE CIT(A) HAVE NOT TAKEN THE COGNI ZANCE OF GENUINENESS OF 21 PARTIES AS THOSE PARTIES HAS NOT GIVEN ANY CONFIRM ATION OR NOT APPEARED BEFORE THE ASSESSING OFFICER. THUS, THE CREDITWORTHINESS AS WELL AS GENUINENESS WAS NOT PROVED BY THE ASSESSEE. 6. THE LD. AR SUBMITTED THAT THE CREDITWORTHINESSS WAS NEVER DOUBTED BY THE ASSESSING OFFICER AND ALL THE RELEVANT DOCUMENT S WERE FILED BEFORE THE ASSESSING OFFICER AS ALL THE CREDITORS HAVE REPLIED AND GIVEN THE RESPONSE. THE LD. AR FURTHER SUBMITTED THAT SUMMONS U/S 131 WERE ISSUED ON 26/2/2014 TO THE PARTIES WHO WERE HAVING OUTSTANDING BALANCE OF MORE THAN RS. 1 LAC AS ON 31/3/2011. OUT OF ALL THE CREDITORS TO WHOM SUMMON S WERE ISSUED ALL THE CREDITORS REPLIED EXCEPT 21 CREDITORS TO WHOM EITHE R SUMMONS COULD NOT BE 4 ITA NO. 4186 & C.O NO. 308/DEL/2016 SERVED OR NO COMPLIANCE WAS MADE BY THE CREDITOR T O THE SUMMON. THE ASSESSEE ALSO FILED CONFIRMATION OF 4 CREDITORS ALO NG WITH THEIR REPLIES AND THEIR PAN NUMBERS. THESE ARE M/S RAJ NANDI METAL PVT. LT D., M/S AJAY ENTERPRISES, M/S SATON REFLECTORS ENTERPRISES AND M/S SHIV ENTER PRISES, AHMEDABAD. THE ASSESSEE HAS FILED COPY OF LEDGER ACCOUNT OF ALL TH E PARTIES WHERE IN THE AMOUNT OF OUTSTANDING HAS BEEN SQUARED OFF BY MAKING PAYME NT THROUGH PROPER BANKING CHANNEL. THE LD. AR ALSO SUBMITTED THE BAN K STATEMENTS HIGHLIGHTING THE PAYMENTS MADE TO THE ABOVE PARTIES THROUGH ACCO UNT PAYEE CHEQUE AS WELL AS INDICATING THE OUTSTANDING BALANCE OF EACH 21 PA RTIES WAS ALSO PROVIDED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. THE SAI D DOCUMENTARY EVIDENCES SUBMITTED BY THE ASSESSEE WERE TOTALLY IGNORED BY T HE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE LD. AR SUBMITTED THAT THE AS SESSING OFFICER HAS NEVER REJECTED BOOKS OF ACCOUNTS AND HAS NOT POINTED OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE CIT(A) HAS GIVEN A COGENT AND RE ASONED FINDING WHILE DELETING THE ADDITION. THE LD. AR RELIED UPON THE FOLLOWING DECISIONS:- (A) DCIT VS. NORMA INDIA LTD.2016 TMI 645 ITAT, DEL HI (B) M/S HIND GLOBE LINK VS. ITO 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT IN THE PRESEN T CASE THE ASSESSEE DISCLOSED THE BANK ACCOUNT NUMBERS, NAME OF THE BANK OF THE P ARTIES VIDE LETTER DATED 07.02.2013 AND 20.02.2013. DURING THE ASSESSMENT PR OCEEDINGS, THE ASSESSEE ALSO FURNISHED THE CONFIRMATIONS OF OUTSTANDING BAL ANCE OBTAINED FROM THE SAID PARTIES, BUT THOSE PARTIES COULD NOT BE PRODUCED FO R THE REASON THAT A PROLONGED LITIGATION WAS GOING ON AND THE PARTIES W ERE ABSCONDING. HOWEVER, THE ASSESSEE FURNISHED THE DETAILS OF THEIR BANK AC COUNT WHEREIN THE PAYMENT MADE BY THE ASSESSEE IN SUBSEQUENT YEAR WAS CREDITE D. IN FACT, THE ASSESSING OFFICER ACCEPTED THE PURCHASES MADE FROM THESE PART IES IN WHOSE NAMES, BALANCES WERE OUTSTANDING BUT ONLY DOUBTED THE GENU INENESS. WHEN THE 5 ITA NO. 4186 & C.O NO. 308/DEL/2016 PURCHASES FROM THE PARTIES WERE ACCEPTED AND THE SA LES MADE OUT OF THOSE PURCHASES WERE NOT DOUBTED, THE PAYMENTS OUTSTANDIN G IN THE NAME OF THOSE PARTIES WERE ACCEPTED IN THE SUBSEQUENT YEAR, THEN THERE WAS NO REASON TO DOUBT THE GENUINENESS OF THE OUTSTANDING BALANCE. T HESE FINDINGS GIVEN BY THE CIT(A) ARE CORRECT AS PER THE RECORDS. MERELY, NON- PRODUCING THE PARTIES IN PERSON DESPITE KNOWING THAT THESE PARTIES ARE IDENT IFIED PARTIES, CANNOT DETERMINE THE NON-GENUINENESS OF THE TRANSACTION. T HUS, THE CIT(A) RIGHTLY DELETED THE ADDITION AND THERE IS NO NEED TO INTERF ERE WITH THE FINDINGS OF THE CIT(A). HENCE, GROUND NO. 1 TO 3 OF THE REVENUES A PPEAL IS DISMISSED. 8. AS REGARDS GROUND NO 4 & 5 RELATING TO ADDITION OF RS. 74,55,600/- RELATING TO JOB WORK CHARGES, THE LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY MADE ADDITION AND RELIED UPON THE ORDER OF THE ASSESSMENT ORDER. 9. THE LD. AR SUBMITTED THAT THE JOB WORK WAS RELAT ED TO THE SISTER CONCERN AND, THEREFORE, THE CIT(A) HAS RIGHTLY DELETED THI S ADDITION. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE CIT(A) HAS GIVEN A CATEGO RICAL FINDING THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY COMPARABLE CA SES IN RESPECT OF INCREASE IN JOB WORK CHARGES AS THERE IS INCREASE IN LABOUR AND ELECTRICITY COST WHICH WAS CATEGORICALLY PROVED BY THE ASSESSEE BEFORE THE CIT(A). THUS, GROUND NO. 4 & 5 ARE DISMISSED. 11. AS RELATED TO CROSS-OBJECTION OF THE ASSESSEE T HE DISALLOWANCE RELATING TO DEDUCTION U/S 80IC CLAIMED BY THE ASSESSEE, THE LD. AR SUBMITTED THAT THE ASSESSEE FIRM WAS ENGAGED IN THE MANUFACTURE OF MS BILLETS I.E. THE RAW MATERIAL REQUIRED TO MANUFACTURE THE FINAL PRODUCT TMT BARS. THIS MANUFACTURED RAW MATERIAL IS FURTHER SUPPLIED TO IT S SISTER CONCERN M/S AMBA SHAKTI ISPAT PVT. LTD. WHICH IN TURN MANUFACTURES THE FINAL PRODUCT TMT BARS FOR THE ASSESSEE ON JOB WORK BASIS. THE ASSESSEE HA S DULY SUBMITTED THE LEDGER ACCOUNT FOR JOB WORK CHARGES, AUDITOR REPORT IN FOR M 10CCB, CERTIFICATE OF 6 ITA NO. 4186 & C.O NO. 308/DEL/2016 COMMENCEMENT OF COMMERCIAL PRODUCTION FROM DISTRICT INDUSTRIES CENTRE, NAHAN. THE LD. AR SUBMITTED THAT NO DEDUCTION IS D ISALLOWED IN AY 2012-13 & 2013-14 AND CLAIM OF ASSESSEE WAS ACCEPTED BY THE R EVENUE. THE LD. AR RELIED UPON THE DECISION OF TRIBUNAL IN CASE OF SUNRISE ME TAL INDUSTRIES VS. ITO 2002(11) TM 284 & DCIT VS. LEGANCY FOODS PVT. LTD. (ITA NO. 3643/DEL/2013 ORDER DATED 22/08/2014) AS WELL AS SHAH ORIGINALS V S. ACIT (ITA NO. 3206/MUMBAI/2006. 12. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT THE ASSESSEE FIRM WAS ENGAGED IN THE MANUFACTURE OF MS BILLETS I.E. THE RAW MATER IAL REQUIRED TO MANUFACTURE THE FINAL PRODUCT TMT BARS. THIS MANUFACTURED RAW MATERIAL IS FURTHER SUPPLIED TO ITS SISTER CONCERN M/S AMBA SHAKTI ISPA T PVT. LTD. WHICH IN TURN MANUFACTURES THE FINAL PRODUCT TMT BARS FOR THE ASS ESSEE ON JOB WORK BASIS. IT IS PERTINENT TO NOTE THAT TMT BARS MADE FROM MS INGOTS SUFFER FROM A DEFICIENCY IN TENSILE PROPERTIES, AND THERE ARISES INCONSISTENCY IN TENSILE STRENGTH AND ELONGATION. BUT TMT BARS PRODUCED FROM CONTINUOUS CASTING MS BILLETS SHOW A REMARKABLE CONSISTENCY OF PROPERTIES BECAUSE OF THE HIGH TENSILE STRENGTH AND ELONGATION. THUS, THE LD. AR SUBMITTED THAT IT IS A MANUFACTURING ACTIVITY ITSELF AND THUS, THE ASSESSEE HAS RIGHTLY CLAIMED THE DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 WHICH IS A LSO ACCEPTED IN SUBSEQUENT YEARS BY THE REVENUE. AS PER THE CIT(A) AND THE ASSESSING OFFICER THE ASS ESSEE HAS NOT PROVIDED ALL THE REQUISITES IN RESPECT OF C LAIMING DEDUCTION UNDER SECTION 80IC OF THE ACT. THEREFORE, WE ARE REMANDI NG BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING WHETHER THE ASSESSEE IS CARRYING OUT ANY MANUFACTURING ACTIVITY OR NOT AS ENVISAGED UNDER SE CTION 80IC FOR CLAIMING DEDUCTION AND IF THE REVENUE HAS ALLOWED THE DEDUCT ION IN SUBSEQUENT YEARS, WHY THE SAME SHOULD NOT BE ALLOWED IN THIS YEAR. HE NCE, THE ISSUE RELATING TO DEDUCTION UNDER SECTION 80IC IN THE PRESENT ASSESSM ENT YEAR IS RESTORED TO THE 7 ITA NO. 4186 & C.O NO. 308/DEL/2016 FILE OF THE ASSESSING OFFICER. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTI CE. THUS, GROUND NOS. 1 TO 3 OF CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 14. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND THE CROSS-OBJECTION OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07 TH DAY OF APRIL, 2021 SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED : 07/04/2021 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DEHI 8 ITA NO. 4186 & C.O NO. 308/DEL/2016