DCIT, Circle-2(1), Hyd, Hyderabad V. Integrated Thermoplastics Ltd., Hyd, Hyderabad

ITA 1001/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6230 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 03-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation; Opportunity of being heard; Tax effect
• Section: 37(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA.NO.1001/HYD/2015 ASSESSMENT YEAR 2006-07 DCIT, CIRCLE - 2(1), HYDERABAD. VS. M/S. INTEGRATED THERMOPLASTICS LTD., HYDERABAD. PAN AAACI2574A (APPELLANT) (RESPONDENT) FOR REVENUE : MR. K.E. SUNIL BABU FOR ASSESSEE : MR. S. RAMA RAO DATE OF HEARING : 2 4 .0 8 .2016 DATE OF PRONOUNCEMENT : 21 .09.2016 ORDER PER D. MANMOHAN, V.P. THIS IS AN APPEAL FILED AT THE INSTANCE OF THE REVENU E AND IT PERTAINS TO THE A.Y. 2006-07. THE FOLLOWING GROU NDS WERE URGED BEFORE US. 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS ON FACTS AND IN LAW. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT ILL DELETING DISALLOWANCE OF EXPE NDITURE UNDER VARIOUS HEADS WHICH ARE NOT SUPPORTED BY VOUCHERS ? WHEREAS, THE PROVISIONS OF SECTION 37(1) OF THE 1.T .ACT PLACE THE ONUS ON THE ASSESSEE TO PROVE THAT THE EXPENDITURE CLAIMED BY IT IS GENUINE AND EXPENDED WHOLLY AND EXCLUSIVELY F OR THE PURPOSE OF ITS BUSINESS. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS CORRECT IN DELETING DISALLOWANCE OF EXPEN DITURE INSPITE OF THE ADMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT IT COULD NOT PRODUCE THE VOUCHERS ? 4. ANY OTHER GROUND THAT MAY BE PRAYED AT THE TIME OF HEARING. 2 ITA.NO.1001/HYD/2015 M/S. INTEGRATED THERMOPLASTICS LTD., HYDERABAD. 2. WHEN THE CASE WAS FIRST POSTED FOR HEARING ON 19.05.2016, THE BENCH NOTICED THAT THE AUTHORISATION GIVEN BY THE COMMISSIONER IS VAGUE INASMUCH AS IT REFERS TO THE TAX EFFECT BEING BELOW RS.4 LAKHS AND NO GROUNDS WERE SPECIFIE D. WHEREAS, THE RELIEF GRANTED BY THE COMMISSIONER INDICATES THAT TH E DISALLOWANCES SET ASIDE BY THE COMMISSIONER IS ABOVE RS.50 LAKHS IN WHICH CASE THE TAX EFFECT WOULD BE MORE THAN R S.10 LAKHS. THEREFORE, THE LD. D.R. WAS CALLED-UPON TO OB TAIN THE GROUNDS WHICH WERE AUTHORISED BY THE COMMISSIONER. AS COULD BE NOTICED FROM PAGE-117 OF THE OFFICE PROCEDURE MANU AL PRINTED BY THE DEPARTMENT OF REVENUE DECISION HAS TO BE TAKEN BY THE COMMISSIONER TO FILE AN APPEAL BEFORE THE ITAT WHICH SHALL ALSO INCLUDE FINALISATION OF THE GROUNDS OF APPEAL AND IT S HOULD BE SENT TO THE ASSESSING OFFICER. PAGE-28 OF THE SAME BOOK IN DICATES THAT THE ASSESSING OFFICER HAS TO FORWARD THE PAPERS TO THE D.R. ALONG WITH THE COPY OF THE CENTRAL SCRUTINY REPORT (CSR) A LONG WITH THE COMMENTS OF THE ASSESSING OFFICER OF THE CONCERNED RANGE AND THE DECISION OF THE COMMISSIONER AND IF SUCH PAP ERS ARE NOT ENCLOSED THE D.R. HAS TO IMMEDIATELY TAKE-UP THE MATTER WITH THE ASSESSING OFFICER CONCERNED. 2.1. THE GROUNDS ABOVEMENTIONED DO NOT INDICATE AS TO WHAT ARE THE DISALLOWANCES WHICH ARE SUBJECT MATTER OF CHALLENGE BEFORE THE TRIBUNAL AND SO THE D.R. WAS DIRECTED TO OB TAIN THE GROUNDS WHICH WERE AUTHORISED BY THE COMMISSIONER AN D ACCORDINGLY THE CASE WAS POSTED FOR HEARING FROM 19.0 5.2016 TO 23.08.2016. DESPITE GRANTING OF MORE THAN TWO MONTHS TI ME, THE D.R. COULD NOT OBTAIN THE RELEVANT MATERIAL AND AGAIN THE CASE WAS POSTED FOR DISMISSAL ON 24.08.2016 WITH A SPECIFI C DIRECTION THAT HE HAS TO SPECIFY AS TO WHAT ARE THE GROUNDS WHICH A RE 3 ITA.NO.1001/HYD/2015 M/S. INTEGRATED THERMOPLASTICS LTD., HYDERABAD. UNDER CHALLENGE BEFORE THE TRIBUNAL BY OBTAINING GROU NDS WHICH WERE AUTHORISED BY THE COMMISSIONER. HOWEVER, EVEN ON 24.08.2016 THE LD. D.R. COULD NOT OBTAIN THE GROUNDS AUTHORISED BY THE COMMISSIONER AND IN FACT, NO PAPER BOOK WAS FI LED BEFORE US TO CONTRADICT THE FINDINGS OF THE LD. CIT(A). 3. AS COULD BE NOTICED FROM THE ORDER OF THE LD. CIT( A) THE ASSESSEE DECLARED NIL INCOME AFTER SETTING-OFF U NABSORBED BUSINESS LOSS. THE CASE HAVING BEEN SELECTED FOR SC RUTINY, THE ASSESSEE WAS CALLED-UPON TO FURNISH DETAILS AND IN THE ABSENCE OF FURNISHING INFORMATION ASSESSMENT WAS COMPLETED UNDER SECTION 144 OF THE ACT WHICH WAS CHALLENGED BEFORE THE CIT(A) IN VAIN. BUT ON A FURTHER APPEAL BEFORE THE TRIBUNAL, THE ORDER OF THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) WERE SET ASIDE WITH A DIRECTION TO RE-FRAME THE ASSESSMENT AFTER ALLOWING THE ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD. THE ASSESSIN G OFFICER THUS GAVE A FRESH OPPORTUNITY TO THE ASSESSEE AND CAL LED-UPON HIM TO FURNISH THE DETAILS OF EXPENDITURE CLAIMED AL ONG WITH BOOKS OF ACCOUNT AND SUPPORTING VOUCHERS. AS COULD BE NOTICED FROM PARA-4 OF THE ASSESSMENT ORDER THE ASSESSEE FURN ISHED THE SAME BUT IMMEDIATELY THEREAFTER THE ASSESSING OFFICER STATES THAT VOUCHERS WERE NOT FURNISHED TO SUBSTANTIATE THE EXPENDITU RE CLAIMED BY THE ASSESSEE WHICH WAS QUANTIFIED AT RS.5 1,66,057 BIFURCATION OF WHICH IS AS UNDER : 1. POWER AND FUEL RS.20,34,103 2. DIESEL FOR TRANSPORT VEHICLES RS.13,58,759 3. DRIVER & LOADING EXPENDITURE RS. 6,96,790 4. RAW MATERIAL PURCHASE BILLS RS.10,76,705 TOTAL RS.51,66,357 4 ITA.NO.1001/HYD/2015 M/S. INTEGRATED THERMOPLASTICS LTD., HYDERABAD. 4. AGGRIEVED, THE ASSESSEE CONTENDED BEFORE THE CIT( A) THAT OUT OF THE TOTAL EXPENDITURE OF RS.74,94,785, WHICH INCLUDES ELECTRICITY CHARGES AND FUEL EXPENSES, THE ASSESSEE SUBMITTED VOUCHERS TO THE EXTENT OF RS.54,66,082 BUT WITH REGARD TO THE BALANCE AMOUNT OF RS.20,34,103 THE BILLS COULD NOT BE PRODUCED. FURTHER, IT WAS CONTENDED THAT THE EXPENDITURE WAS INCURRE D FOR RUNNING THE GENERATOR AT FACTORY PREMISES. DUE TO CHANG E OF ACCOUNTANT ALL THE BILLS COULD NOT BE PRODUCED THOUGH TH EY WERE GENUINELY INCURRED. 5. SIMILARLY, AS REGARDS THE DISALLOWANCE OF DIESE L EXPENDITURE FOR TRANSPORT VEHICLES, IT WAS CONTENDED THAT OUT OF THE TOTAL EXPENDITURE, THE ASSESSING OFFICER DISALLOWED RS.13,58,759 ON THE GROUND THAT VOUCHERS WERE NOT SUB MITTED BUT THE FACT REMAINS THAT PLASTIC PIPES ARE TO BE DELIVE RED TO THE FARMERS AT REMOTE PLACES AND THE ASSESSEE HAD TO NECES SARILY INCUR EXPENDITURE ON DIESEL, DRIVERS, LOADING AND UN LOADING CHARGES BUT THOSE DETAILS COULD NOT BE PRODUCED DUE TO C HANGE OF ACCOUNTANT APART FROM THE FACT THAT DRIVERS DO NOT HANDOVER THE BILLS METICULOUSLY. AS REGARDS THE DRIVER AND LOADING EXPENSES, THE CASE OF THE ASSESSEE WAS THAT AS COMPARED TO THE COMP ANYS TURNOVER THE EXPENDITURE CLAIMED WAS VERY REASONABLE AND ALSO STATED THAT VOUCHERS FOR THE ENTIRE AMOUNT ARE AVAILABLE AND THEY WERE SUBMITTED BEFORE THE ASSESSING OFFICER AT THE TIME O F ASSESSMENT PROCEEDINGS BUT THE SAME WERE NOT PROPERLY CONSIDERED. 6. THE FOURTH ISSUE IS WITH REGARD TO THE DISALLOWANC E OF RAW MATERIAL PURCHASED OF RS.10,76,705. IN THIS REGA RD, THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER VERIFIED THE 5 ITA.NO.1001/HYD/2015 M/S. INTEGRATED THERMOPLASTICS LTD., HYDERABAD. PURCHASE REGISTER, CORRESPONDING BANK PAYMENTS ALONG WITH BILLS FOR THE PURCHASE. REGARDING THE PURCHASE FROM IPCL O F RS.8,87,441, IT WAS SUBMITTED THAT THE RAW MATERIAL WAS PURCHASED VIDE BILL NO.3 DATED 04.04.2005 AND ENTERED IN THE PURCHASER REGISTER AFTER MAKING CORRESPONDING PAYMEN T TO IPCL WHICH IS AGAIN REFLECTED IN THE LEDGER ACCOUNT OF IPC L. IT WAS SUBMITTED THAT IPCL IS MERGED WITH RIL AND THERE IS A DIF FICULTY IN TRACING THE COPY OF INVOICE. IT WAS SUBMITTED THAT THE EXPENDITURE INCURRED WAS GENUINE. A REQUEST WAS MADE TO DELETE THE ADDITION, IN THE FACTS AND CIRCUMSTANCES OF THE CASE . 7. AS REGARDS PURCHASE FROM NANDI CHEMICALS OF RS.2,64,337, IT WAS SUBMITTED THAT THE CHEMICALS WERE PU RCHASED FOR MIXING WITH PLASTIC GRANULES. THE PURCHASE WAS MA DE ON 12.08.2005 BUT IT WAS NOT DEBITED TO P & L ACCOUNT BY MISTAKE AND THE SAME WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER VIDE LETTER DATED 06.11.2011. AT ANY RATE, THE QUESTION OF DISALLOWANCE OF THE SAME DOES NOT ARISE SINCE IT WAS N OT DEBITED TO P & L A/C. 7.1. A SPECIFIC CONTENTION WAS URGED BEFORE THE CIT(A ) THAT AT THE TIME OF FILING OF THE RETURN THERE WAS ABSOLUTELY NO NECESSITY FOR THE ASSESSEE TO INCREASE THE EXPENDITUR E SINCE SUBSTANTIAL UN-AVAILED DEPRECIATION LOSS WAS LYING UN -USED. IT WAS ALSO CONTENDED THAT THE ABOVE ADHOC DISALLOWANCE WA S MADE WITHOUT POINTING OUT ANY SPECIFIC DEFECTS. IT DESERVES TO BE NOTICED EVEN IN THIS YEAR THERE WAS NO TAX EFFECT SINCE THE ASSE SSMENT WAS ULTIMATELY COMPLETED AT NIL INCOME AFTER SETTING- OFF UN- ABSORBED BUSINESS LOSS OF RS.1.44 CRORES AND THERE W AS FURTHER UN-ABSORBED LOSS. 6 ITA.NO.1001/HYD/2015 M/S. INTEGRATED THERMOPLASTICS LTD., HYDERABAD. 8. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) SET ASIDE THE DISALLOWANCES. AGGRIEVED, R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL. AS MENTIONED HEREINABOVE, THERE IS NO TAX EFFECT IN THIS YEAR AND EVEN IF THE ADDITION IS TO BE TAKEN INTO CONSIDERATION THE TAX THEREON WOULD HAVE BEEN MORE THAN RS.10 LAKHS WHEREAS IT IS NOT KNOWN AS TO WHY THE PR. COMMISSIONER OF INCOME TAX, HYDERABAD-2, MENTIONED TH AT THE TAX EFFECT IS BELOW RS.4 LAKHS AND DESPITE CALLING FOR THE DETAILED REPORT, AS IS SUPPOSED TO BE AVAILABLE WITH THE LD. D .R, NOTHING WAS BROUGHT ON RECORD TILL DATE. WE FURTHER NOTICED THAT THE DIRECTION ISSUED BY THE COMMISSIONER UNDER SECTION 253 (2) REFERS TO TWO ISSUES WHEREAS IN THE INSTANT CASE, THERE ARE 04 SEPARATE GROUNDS ON 04 DIFFERENT DISALLOWANCES WHICH WERE SUB JECT MATTER OF DISPUTE BEFORE THE CIT(A) AND THE DISALLOWANCES HA VING BEEN SET ASIDE BY THE CIT(A), IT IS THE DUTY OF EITHER THE ASS ESSING OFFICER OR THE CIT TO SPECIFY AS TO WHAT ARE THE DISALLO WANCES WHICH WERE CHALLENGED BEFORE THE TRIBUNAL. NOT ONLY T HE AUTHORISATION BUT EVEN THE GROUNDS RAISED BEFORE US AR E VAGUE AND THE LD. D.R. COULD NOT POINT OUT AS TO WHICH TWO IS SUES OUT OF THE 04 ISSUES CONSIDERED BY THE CIT(A) ARE CHALLENGED BEFORE THE TRIBUNAL. AT ANY RATE, NO MATERIAL WAS BROUGHT ON RE CORD TO CONTRADICT THE FINDINGS OF THE CIT(A). UNDER THESE CIRC UMSTANCES, WE DISMISS THE APPEAL FILED BY THE REVENUE. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 21.09.2016. SD/- SD/- (S.RIFAUR RAHMAN) (D.MANMOHAN) ACCOUNTANT MEMBER. VICE PRESIDENT HYDERABAD, DATED 21 ST SEPTEMBER, 2016 VBP/- 7 ITA.NO.1001/HYD/2015 M/S. INTEGRATED THERMOPLASTICS LTD., HYDERABAD. COPY TO: 1. THE DCIT, CIRCLE-2(1), 8 TH FLOOR, B-BLOCK, I.T. TOWERS, A.C. GUARDS, HYDERABAD. 2. M/S. INTEGRATED THERMOPLASTICS LTD., 701, 7 TH FLOOR, PAIGAH PLAZA, BASHEERBAGH, HYDERABAD. 3. COMMISSIONER OF INCOME TAX-(APPEALS)-II, HYDERAB AD 4. PR. COMMISSIONER OF INCOME TAX-II, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, A BENCH, HYDERAB AD 6. GUARD FILE.