TYTAN ORGANICS P.LTD, MUMBAI V. JT CIT 1(3), MUMBAI

CO 87/MUM/2012

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1490 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA R SWAMY

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 3670 / MUM/20 1 1 ( / ASSESSMENT YEA R : 20 0 7 - 08 ) JT. COMMISSIONER OF INCOME TAX, 1(3), ROOM NO.540/564, 5 TH FLOOR,AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020 / VS. M/S TYTAN ORGANICS PVT. LTD., 3 RD FLOOR, SUNAMA HOUSE, AUGUST KRANTI MARG, KEMPS CORNER, MUMBAI - 400026 ( / APPELLANT ) .. ( / RES PONDENT ) CROSS OBJECTION NO.87/MUM/2012 ARISING OUT OF I.T.A. NO .3670/ MUM/20 11 ( / ASSESSMENT YEA R : 2007 - 08 ) M/S TYTAN ORGANICS PVT. LTD., MUMBAI - 400026 / VS. JT. COMMISSIONER OF INCOME TAX, 1(3), MUMBAI - 40002 0 ( / APPELL ANT ) .. ( / RESPONDENT ) ./ ./PAN. : AAACT2158H / REVENUE BY SHRI MANJUNATHA R SWAMY / ASSESSEE BY SHRI M M GOLVALA / DATE OF HEARING : 26.8 . 201 5 / DATE OF PRONOUNCEMENT: 16. 10. 201 5 / O R D E R P ER B R BASKARAN, AM : THE APPEAL FILED BY THE REVENUE AND THE CROSS - OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 9.2.2011 PASSED BY THE LD. CIT(A) - 2, MUMBAI AND THEY RELATE TO THE ASSESSMENT YEAR 2007 - 08. ITA NO. 3670 /MUM/201 1 AND CO NO.87/MUM/2012 2 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LD.CIT(A) IN ALLOWING DEDUCTION OF RS.11.32 CRORES RELATING TO THE PURCHASES AND RS.15.55 LAKHS RELATING TO THE EXPENSES. 3. W E HEARD THE PARTIES AND PERUSED THE RECORD. THE FACTS RELATING TO THE FIRST ISSUE ARE STATED IN BRIEF. THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.11.32 CRORES RELATING TO PURCHASE S AND RS.15.55 LAKHS RELATING TO THE EXPENSES ONLY IN TH E COMPUTATION OF TOTAL INCOME. IT WAS EXPLAINED THAT THESE EXPENSES WERE PERTAINING TO THE YEAR UNDER CONSIDERATION , BUT BOOKED IN THE SUCCEEDING YEAR UNDER THE HEAD PRIOR PERIOD EXPENSES. IT WAS SUBMITTED THAT THESE EXPENSES HAVE NOT BEEN CLAIMED AS DEDUCTION IN THE SUCCEEDING YEAR. THE ASSESSEE SUBMITTED THAT ONE OF ITS EMPLOYEES HAD COMMITTED A FRAUD BY SHIFTING BOOKING OF EXPENSES TO THE SUCCEEDING YEAR IN ORDER TO SHOW HIGH AMOUNT OF PROFIT. WHEN THESE FACTS CAME TO THE LIGHT , THESE EXPENSES WER E SHOWN AS PRIOR PERIOD EXPENSES IN THE SUCCEEDING YEAR . ACCORDINGLY IT WAS SUBMITTED THAT THEY HAVE BEEN CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCOME , SINCE THEY PERTAIN TO THE YEAR UNDER CONSIDERATION . THE AO DID NOT AGREE WITH THE SAID EXPLANATION S OF THE ASSESSEE, SINCE THE CORRESPONDING FACTS ON THE INVENTOR Y MAINTAINED BY THE ASSESSEE WERE NOT PROPERLY EXPLAINED. THE AO ALSO NOTICED THAT THE AUDITORS HAVE CERTIFIED THAT MANAGEMENT HAD CONDUCTED PHYSICAL VERIFICATION OF INVENTORY. A CCORDINGLY, THE AO HELD THAT CLAIM OF PURCHASES WITHOUT PROPER EXPLANATIONS ABOUT THE INVENTORY CANNOT BE ALLOWED. ACCORDINGLY HE DISALLOWED BOTH THE CLAIMS REFERRED ABOVE. IN THE APPELLATE PROCEEDINGS , THE LD. CIT( A ) ALLOWED BOTH THE CLAIM S AND HENCE, THE REVENUE HA S FILED THIS APPEAL BEFORE US. 4 . THE AO ALSO NOTICED THAT THE EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND AND MLWF HAVE BEEN DEPOSITED BELATEDLY BEYOND THE ITA NO. 3670 /MUM/201 1 AND CO NO.87/MUM/2012 3 PERIOD PRESCRIBED IN THE RELEVANT ACT S . ACCORDINGLY, THE AO DISALLOWED THE SAME UNDER SECTION 3 6(1)(VA) OF THE ACT. THE LD. CIT(A) CONFIRMED THE SAME AND HENCE THE ASSESSEE HAS FILED THIS CROSS - OBJECTION BEFORE US. 5. WITH REGARD TO THE DEDUCTION ALLOWED BY THE LD.CIT(A), THE LD. AR PLACED STRONG RELIANCE ON THE ORDER PASSED BY THE LD. CIT(A) . HOWEVER THE LD.DR SUBMITTED THAT THE ASSESSEE COULD NOT GIVE PROPER EXPLANATION S WITH REGARD TO STOCK POSITION RELATING TO THE PURCHASE INVOICE S BOOKED IN THE SUCCEEDING YEAR. 6. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. IT WAS SUBMITTED THAT THE PURCHASES AND EXPENSES REFERRED ABOVE HAVE BEEN BOOKED IN THE SUCCEEDING YEAR UNDER THE HEAD PRIOR PERIOD ITEMS AND FURTHER IT WAS SUBMITTED THAT THE SAME HAS NOT BEEN CLAIMED AS DEDUCTION IN THE SUCCEEDING YEAR. SINCE TH ESE EXPENS ES PERTAIN ED TO THE YEAR CONSIDERATION, I T WAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED THEM IN THE COMPUTATION OF TOTAL INCOME. HOWEVER , AS SUBMITTED BY THE LD. DR, WE FIND THAT THE ASSESSEE HAS NOT OFFE RED ANY EXPL ANATION WITH REGARD TO THE STOCK POSITION . IF THESE PURCHASES HAVE NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNT , PHYSICAL STOCK SHOULD HAVE BEEN FOUND TO BE IN EXCESS. IT IS NOT CLEAR AS TO HOW THE EXCESS STOCK WAS TREATED IN THE B OOKS OF ACCOUNT. IN OUR VIEW, THE ASSESSEE IS ALSO REQUIRED TO SHOW THAT THE CORRESPONDING STOCK HAS BEEN TAKEN INTO ACCOUNT IN THE BOOKS AND INVENTORY RECORDS DURING THE YEAR UNDER CONSIDERATION ITSELF. OTHERWISE, THE ACCOUNTS SHALL GIVE DISTORTED RESULTS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD BE GIVEN ONE MORE OPPORTUNITY TO OFFER PROPER EXPLANATION S WITH REGARD TO STOCK POSITION , PARTICULARLY IN VIEW OF THE FACT THAT THE AUDITOR HAS CERTIFIED THAT STOCK HAS BEEN VERIFIED BY THE MANAGEMENT. ACCORDINGLY, WE SET ASIDE THE O R DER OF LD. CIT(A) ON TH IS ISSUE AND RESTORE THE SAME TO THE ITA NO. 3670 /MUM/201 1 AND CO NO.87/MUM/2012 4 FILE OF AO WITH A DIRECTION TO EXAMINE THE SAME AFRESH AFTER AFFORD ING NECESSARY OPPORTUNITY OF BEING HE AR D TO THE ASSESSEE . THE ASSESSEE IS ALSO DIRECTED TO OFFER PROPER EXPLANATION S WITH REGARD TO THE STOCK POSITION AND ALSO WITH REGARD TO THE QUERIES THAT MAY BE RAISED BY THE AO. 7 . IN THE CROSS OBJECTION, T HE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF EMPLOYEE S CONTRIBUTION TOWARDS THE PROVIDENT F UND ETC. THE LD. COU NSEL SUBMITT ED THAT THE ASSESSEE HAD PAID THESE AMOUNT S BE FORE THE DUE DA T E FOR FI LING THE RETURN OF INCOME. ACCORDINGLY HE SUBMITTED THAT THE SAME IS ALLOWABLE AS DEDUCTION AS PER THE DECISION OF HONBLE BOMBAY HIGH COURT RENDERED IN CIT VS GHATGE PATIL TRANSPORTS LTD. 368 ITR 749 (BOM). IN VIEW OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIG HT OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN GHATGE PATIL TRANSPORTS LTD.(SUPRA). 8 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE AND THE CROSS - OBJECTION FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUN CED ACCORDINGLY ON 16TH OCT , 2015. 16TH OCT , 2015 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 16TH OCT , 2015 . . . ./ SRL , SR. PS ITA NO. 3670 /MUM/201 1 AND CO NO.87/MUM/2012 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI