BDG Metal and Power Ltd., Kolkata V. The DCIT, CC-XXI, KOLKATA, Kolkata

ITA 1047/KOL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5022 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 24-07-2015
• Court: TRIBUNAL
• Department Lawyers: MD GAYAS UDDIN
• Assessee Lawyers: A K TIBREWAL
• Keywords: Wrong claim
• Section: 43B; 143(3); 115JB; 263

Judgement Text

I.T.A. NO. 1047/KOL./2015 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1047/KOL/ 2015 ASSESSMENT YEAR: 2009-2010 BDG METAL AND POWER LIMITED,....................... .....................APPELLANT 5 TH FLOOR, HMP HOUSE, 4, FAIRLIE PLACE, KOLKATA-700 001 [PAN : AACCB 2298 Q] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. .............RESPONDENT CENTRAL CIRCLE-4(4), KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTIPALLY, KOLKATA-700 107 APPEARANCES BY: SHRI A.K. TIBREWAL, FCA, FOR THE ASSESSEE MD. GAYAS UDDIN, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JANUARY 28, 2016 DATE OF PRONOUNCING THE ORDER : MARCH 09, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-21, KOLKAT A DATED 15.05.2015 AND IN THE SOLITARY GROUND RAISED THEREIN, THE ASSE SSEE HAS DISPUTED THE ADDITION OF RS.27,92,456/- MADE BY THE ASSESSING OF FICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF VAT PAYMENT M ADE TO SALES TAX DEPARTMENT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL SEMIES, SILI CA MANGANESE AND HOT ROLLED PRODUCTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 21.09.2009 DECLARING LOSS UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF RS.8,80,096/- UNDER S ECTION 115JB OF THE ACT. IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTIO N 143(3) VIDE AN I.T.A. NO. 1047/KOL./2015 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 6 ORDER DATED 24.10.2011, LOSS UNDER THE NORMAL PROVI SIONS WAS DETERMINED BY THE ASSESSING OFFICER AT RS.21,83,002 /- AND BOOK PROFIT AT RS.8,80,096/-. THE RECORD OF THE SAID ASSESSMENT CA ME TO BE EXAMINED BY THE LD. CIT(APPEALS) AND ON SUCH EXAMINATION, HE FO UND THAT A SUM OF RS.27,92,456/- WAS DEBITED BY THE ASSESSEE IN THE P ROFIT & LOSS ACCOUNT ON ACCOUNT OF INPUT VAT REVERSAL. ACCORDING TO HI M, THE SAID AMOUNT WAS NOT ALLOWABLE AS DEDUCTION SINCE THE VAT ACCOUN TS WERE MAINTAINED SEPARATELY BY THE ASSESESE-COMPANY AND THE ORDER PA SSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) ALLOWING THE SAID DEDUCTION WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE, THEREFORE, ISSUED A SHOW-CAUSE NOTICE UNDER SECTION 263, IN REPLY TO WHICH IT WAS SUBMITTED BY THE ASSESSEE THAT ALTHOUG H VAT ACCOUNT WAS SEPARATELY MAINTAINED, WHERE ALL DEBITS AND CREDITS HAD BEEN MADE, THERE WAS A DISPUTE IN RESPECT OF CERTAIN CREDITS AS A RE SULT OF WHICH THE CLAIM FOR INPUT CREDIT WAS REQUIRED TO BE REVERSED AND TH E PAYMENTS TO THE EXTENT OF SUCH REVERSAL AMOUNTING TO RS.5,86,000/- FOR THE FINANCIAL YEAR 2007-08 AND RS.22,06,454/- FOR FINANCIAL YEAR 2006- 07 WERE REQUIRED TO BE MADE. IT WAS CONTENDED THAT THE AMOUNT OF RS.27, 92,456/- THUS REPRESENTED ACTUAL PAYMENT OF VAT MADE DURING THE Y EAR UNDER CONSIDERATION AND THE SAME, THEREFORE, WAS ALLOWABL E AS PER SECTION 43B OF THE ACT. ACCORDING TO THE LD. CIT(APPEALS), THIS STAND TAKEN BY THE ASSESSEE REQUIRED VERIFICATION AND ACCORDINGLY SETT ING ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) BY EXERCISING HIS POWERS UNDER SECTION 263, HE DIRECTED THE ASSESSING OFFICER TO VERIFY THE STAND OF THE ASSESESE FROM THE RELEVANT RECORD. 3. AS PER THE DIRECTIONS GIVEN BY THE LD. CIT(APPEA LS) UNDER SECTION 263, THE MATTER WAS TAKEN UP BY THE ASSESSING OFFIC ER IN THE PROCEEDINGS UNDER SECTION 143(3) READ WITH SECTION 263 AND THE ASSESSEE WAS CALLED UPON BY HIM TO EXPLAIN ITS STAND IN THE MATTER. IT WAS SUBMITTED BY THE ASSESSEE THAT IT WAS ENGAGED IN THE BUSINESS OF MAN UFACTURE AND DEALING OF IRON AND STEEL DURING THE FINANCIAL YEARS 2006-0 7 AND 2007-08 AND IN THE SAID YEARS, STOCK WAS TRANSFERRED TO CONSIGNMEN T AGENTS WITHOUT I.T.A. NO. 1047/KOL./2015 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 6 CHARGING SALES TAX. THE INPUT TAX CREDITS LYING AG AINST MATERIAL USED FOR MANUFACTURE OF THE SAID GOODS, HOWEVER, WERE UTILIZ ED FOR ADJUSTMENT OF CST/VAT PAYABLE. AS SUBSEQUENTLY BROUGHT TO THE NOT ICE OF THE ASSESSEE BY THE CONCERNED COMMERCIAL TAX OFFICER, THE CREDIT FOR SUCH INPUT TAX, HOWEVER, WAS NOT AVAILABLE FOR ADJUSTMENT AGAINST V AT PAYABLE AND THE SAME WAS, THEREFORE, LIABLE TO BE REVERSED. ACCORDI NGLY, THE RELEVANT INPUT TAX CREDITS WERE REVERSED BY THE ASSESESE AND THE A MOUNTS TO THE EXTENT OF SUCH REVERSAL AGGREGATING TO RS.27,92,456/- WERE ACTUALLY PAID BY THE ASSESSEE ON 13.03.2009 AND 26.03.2009. IT WAS CONTE NDED THAT THE SAID AMOUNT THUS WAS NOTHING BUT PAYMENT AGAINST VAT/SAL ES TAX AND THE SAME HAVING BEEN ACTUALLY PAID DURING THE YEAR UNDE R CONSIDERATION, DEDUCTION WAS ALLOWABLE UNDER SECTION 43B OF THE AC T. THIS STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AND HE DISALLOWED AND ADDED THE SUM OF RS.27,92,456/- TO T HE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) READ WITH SECTION 263 OF THE ACT VIDE AN ORDER DATED 19.02.20 14 FOR THE FOLLOWING REASONS GIVEN ON PAGE 2 OF THE ASSESSMENT ORDER:- VAT & CST DO NOT PASS THROUGH TRADING, P&L ACCOUNT S OF THE ASSESSEE. VAT & CST ACCOUNTS ARE MAINTAINED SEPARATELY. THE AUDITOR IN NOTES ON ACCOUNTS CERTIF IED THE SAME. SO, WHEN AN ITEM OF SUBSEQUENT CLAIM ON COMPUTATION WHOSE CREDIT IS NOT A PART OF P&L ACCOU NTS ANYTHING ARISING OUT OF ANY STATUTORY AUTHORITY ORD ER PAID ACTUALLY OR NOT CANNOT PASS THROUGH P&L ACCOUNT. IN FACT, BY CHARGING THE INPUT VAT REVERSED IN ITS P&L WHE RE THE VAT & CST COLLECTED FROM ITS CUSTOMER ARE NOT INCLU DED LIN SALES THE ASSESSEE HAS REDUCED TAXABLE INCOME BY TH E EQUAL AMOUNT. THEREFORE, THE INPUT VAT REVERSED CLAIMED IN THE ACCOUNT AS EXPENSES IS NOT ALLOWED AND ADDED BACK. AS A RESULT RS.27,92,456/- IS BEING ADDED. 4. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3) READ WITH SECTION 263, AN APPEAL WAS PREFERR ED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AND THE SUBMISSIONS MAD E BEFORE THE ASSESSING OFFICER WERE REITERATED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(APPEALS) IN SUPPORT OF ITS CLAIM FOR DEDUCTION OF RS.27,92,456/- ON ACCOUNT OF PAYMENT AGAINST THE REVERSAL OF VAT CRED ITS. THE SUBMISSION OF I.T.A. NO. 1047/KOL./2015 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 6 THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE LD. CI T AND HE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE FOR THE FOLLOWING REASONS GIVEN PARAGRAPH NO. 7 OF HIS IMPUGNED ORDER :- 7. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. THE FACTS OF THE CASE HAVE ALREADY BEEN DISCUSSED AS ABOVE. IT IS OBSERVED THA T THERE IS NO DISPUTE ON THE FACT THTA IN ITS PROFIT AND LOSS ACCOUNT THE APPELLANT COMPANY HAD SHOWN THE SALES AND PURCHASES AT NET FIGURES I.E. THE SALES CREDITED TO THE PROFIT AND L OSS ACCOUNT DID NOT CONTAIN THE AMOUNT OF SALES TAX COLLECTED FROM THE CUSTOMERS AND SIMILARLY THE PURCHASES DEBITED DID N OT CONTAIN THE AMOUNT OF SALES TAX/VAT PAID BY THE APPELLANT. THE APPELLANT COMPANY HAD MAINTAINED A SEPARATE ACCOUNT VAT AND CST ACCOUNTS AND THE PAYMENT OF STATUTORY LIABI LITIES WAS SETTLED THROUGH THESE ACCOUNTS. IN THE YEAR UNDER CONSIDERATION THE APPELLANT COMPANY CLAIMED DEDUCTI ON OF RS.27,92,456/- UNDER THE HEAD INPUT VAT REVERSE. BEFORE THE AO AS WELL AS IN THE COURSE OF APPELLATE PROCEEDING S IT IS CLAIMED BY THE APPELLANT THAT IN THE FY 2006-07 AND 2007-08, IT HAD CLAIMED EXCESS INPUT TAX CREDIT ON TRANSFER OF STOCK TO ITS CONSIGNMENT AGENTS OUTSIDE THE STATE, AS PER T HE SHOW CAUSE NOTICE ISSUED BY THE CONCERNED GOVERNMENT DEP ARTMENT. HENCE, THE APPELLANT COMPANY MADE THE PAYMENT OF TA X IN THE YEAR UNDER CONSIDERATION AND REVERSED THE INPUT TAX CREDIT TO THE EXTENT OF DISENTITLEMENT. AS PER THE APPELLANT THE DEDUCTION ON ACCOUNT OF TAX PAYMENT IS ALLOWABLE U/ S 43B OF THE ACT ON THE BASIS OF ACTUAL PAYMENT IN THE YEAR UNDER CONSIDERATION. ON THE OTHER HAND, THE AO HAS DISALL OWED THE CLAIM OF THE APPELLANT ON THE GROUND THAT THE PAYME NT OF VAT/CST HAS NOT BEEN ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT AND THAT THE APPELLANT COMPANY HAD MAINTAIN ED SEPARATE ACCOUNTS FOR THE SAME. HENCE, ANY PAYMENT MADE BY THE APPELLANT SUBSEQUENTLY AS PER THE ORDER OF A ST ATUTORY AUTHORITY COULD NOT BE PASSED THROUGH THE PROFIT AN D LOSS ACCOUNT. IN OTHER WORDS, THE CLAIM OF THE APPELLANT OF PAYMENT UNDER THE HEAD INPUT VAT REVERSE IS NOT ALLOWABLE AS DEDUCTION IN THE PROFIT AND LOSS ACCOUNT. ON CAREFU L CONSIDERATION OF THE FACTS, I AM INCLINED TO AGREE WITH THE VIEW TAKEN BY THE AO. SINCE THE APPELLANT HAS MAINT AINED SEPARATE VAT AND CST ACCOUNTS AND ANY STATUTORY LIA BILITY WHICH AROSE IS SETTLED THROUGH THESE ACCOUNTS WITHO UT ROUTING THROUGH THE PROFIT AND LOSS ACCOUNT AND, THEREFORE, ANY PAYMENT MADE SUBSEQUENTLY ON ACCOUNT OF EXCESS CLAI M OF INPUT CREDIT IS NOT ALLOWABLE AS DEDUCTION EVEN ON PAYMENT BASIS. IN VIEW OF ABOVE, THE DISALLOWANCE MADE BY T HE AO IS UPHELD. THE GROUND NO. 2 IS DISMISSED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. I.T.A. NO. 1047/KOL./2015 ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 6 5. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE REITERATED BEFORE ME THE SUBMISSIONS MADE BEFORE THE AUTHORITI ES BELOW IN SUPPORT OF THE ASSESSEES CASE, WHILE THE LD. D.R. STRONGLY RELIED ON THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) IN SUPPORT OF THE REV ENUES CASE. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY C ONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE, IT APPEARS THAT THE EXACT NATURE OF AMOUNT IN DISPUTE PAID BY THE ASSESSEE ON ACCOUNT OF REVERSAL OF VAT INPUTS HAS NOT BEEN APPRECIATED EITHER BY THE ASSESSING OFFICER OR BY THE LD. CIT(APPEALS) IN THE RIGHT PERSPECTIVE. THE INPUT TA X CREDIT ON ACCOUNT OF VAT PAID ON PURCHASES WAS ACTUALLY CLAIMED BY THE A SSESSEE IN THE F.YS. 2006-07 AND 2007-08 AND SINCE THE RELEVANT MATERIAL S PURCHASED BY THE ASSESSEE WERE USED FOR MANUFACTURE OF GOODS, WHICH WERE TRANSFERRED TO ITS CONSIGNMENT AGENT WITHOUT CHARGING SALES TAX, T HE ASSESSEE WAS NOT ENTITLED FOR THE INPUT TAX CREDIT. SUCH CREDITS, HO WEVER, WERE WRONGLY CLAIMED BY THE ASSESSEE AGAINST CST/VAT PAYABLE FOR THE RELEVANT YEARS AND ONLY AS A RESULT OF SHOW-CAUSE NOTICE ISSUED BY THE ASSISTANT COMMISSIONER, COMMERCIAL TAXES, THE CREDIT WRONGLY CLAIMED WAS REVERSED BY THE ASSESSEE AND THE AMOUNT IN QUESTION WAS PAID AGAINST SUCH REVERSAL. THE SAID PAYMENT MADE BY THE ASSESSE E THUS WAS ON ACCOUNT OF CST/VAT ACTUALLY PAYABLE FOR THE F.YS. 2 006-07 AND 2007-08 AND THE SAME HAVING BEEN PAID IN THE YEAR UNDER CON SIDERATION. I AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSE SSEE THAT THE ASSESSEE WAS ENTITLED FOR DEDUCTION OF THE SAME IN THE YEAR UNDER CONSIDERATION AS PER SECTION 43B OF THE ACT. THE METHOD OF ACCOUNTIN G FOLLOWED BY THE ASSESSEE TO MAINTAIN A SEPARATE VAT ACCOUNT TO MAKE ALL CREDIT AND DEBIT ENTRIES RELATING TO VAT THEREIN IS NOT RELEVANT TO DECIDE THE ALLOWABILITY OF THE AMOUNT IN QUESTION PAID BY THE ASSESSEE ON A CCOUNT OF REVERSAL OF INPUT VAT CREDIT, INASMUCH AS THE WRONG CLAIM OF CR EDIT FOR INPUTS IN THE EARLIER YEARS HAD RESULTED IN SHORT PAYMENT OF CST/ VAT PAYABLE BY THE ASSESSEE AND THE SAME HAVING BEEN PAID DURING THE Y EAR UNDER I.T.A. NO. 1047/KOL./2015 ASSESSMENT YEAR: 2009-2010 PAGE 6 OF 6 CONSIDERATION, THE ASSESSEE, IN MY OPINION, WAS ENT ITLED FOR DEDUCTION OF SUCH TAX ON PAYMENT BASIS UNDER SECTION 43B. I, THE REFORE, DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AND CONFIRME D BY THE LD. CIT(APPEALS) ON THIS ISSUE AND ALLOW THIS APPEAL OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 09, 20 16. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 9 TH DAY OF MARCH, 2016 COPIES TO : (1) BDG METAL AND POWER LIMITED, 5 TH FLOOR, HMP HOUSE, 4, FAIRLIE PLACE, KOLKATA-700 001 (2) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4(4), KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTIPALLY, KOLKATA-700 107 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-21, KOLKA TA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.