Hotline Glass Ltd., New Delhi V. DCIT, New Delhi

ITA 1048/DEL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7489 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 25-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: S K JAIN

Judgement Text

ITA NO. 1048/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1048/DEL/2011 A.Y. : 2004-05 M/S HOTLINE GLASS LTD., 52-A, OKHLA INDUSTRIAL ESTATE, PHASE-III, NEW DELHI -110020 (PAN : AAACH0561L) VS. DCIT, CIRCLE - 12(1) , NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. S.K. JAIN, CA DEPARTMENT BY : SH. SALIL MISHRA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 20.8.2 010 PERTAINING TO ASSESSMENT YEAR 2004-05. 2. THE FIRST ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE OF ` 5179217/- OUT OF LITHARGE PURCHASED UNDER SECTION 40A(2)(B) OF THE I T ACT. 3. IN THIS CASE, ASSESSEE COMPANY HAS PURCHASED LIT HARGE FROM M/S ANUJAY CORPORATION, ASSESSEE SISTER CONCERN DURING T HE RELEVANT YEAR. THE ASSESSEE PURCHASED 290 MTS FOR ` 17283817/- I.E . @ ` 59600 PER MTS. HOWEVER, THE COMPANY HAS PURCHASED LITHARGE O F 1200 MTS FOR ` 47016444/- FROM M/S ASIA LITHARGE @ ` 39220 PER MTS, 503.525 MTS FOR ` 24296451/- FROM RG PIGMENTS PVT. LTD. @ ` 482 50/- PER MTS AND ITA NO. 1048/DEL/2011 2 50 MTS FOR ` 1885365 FROM SHAMBU TRADERS ` 37700/- PE R MTS. THUS, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS PURC HASED AT A RATE MUCH HIGHER THAN THE RATE OF OTHER PARTIES WHICH ARE UNRELATED TO THE ASSESSEE. ASSESSEE HAS EXPLAINED BEFORE THE ASS ESSING OFFICER THAT THE LITHARGE PURCHASED FROM ITS SISTER CONCERN IS OF A SUPERIOR QUALITY COMPARED TO OTHER PARTIES. HOWEVER, THE ASSESSING O FFICER DID NOT FIND THIS CONVINCING. ASSESSING OFFICER NOTED T HAT SIMILAR ISSUE CAME UP BEFORE THE REVENUE IN ASSESSMENT YEAR 2002-03 A ND IT WAS FOUND THAT THE SAME SISTER CONCERN OF THE ASSESSEE IS EN TITLED TO DEDUCTION U/S 80I AND THEREFORE, HIGHER PAYMENTS WERE MADE FOR HIGHER DEDUCTION U/S 80I. ASSESSING OFFICER COMPUTED EXCES S PAYMENT MADE TO THE ASSESSEE CONCERN TO THE TUNE OF ` 51,79,217/ - AND DISALLOWED THE SAME. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) FOUND ASSESSING OFFICERS ACTION JUSTIFIED . LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT FROM THE FACT OF TH E CASE ASSESSEE HAS PURCHASED THE LITHARGE FROM ITS SISTER CONCERN AT A MUCH HIGHER RATE THAN THAT OF OTHER CONCERN. THERE WAS NEIT HER ANY REASONABLE GROUND NOR ANY JUSTIFICATION FORM BUSINESS PRUDEN CE POINT OF VIEW. LD. COMMISSIONER OF INCOME TAX (APPEALS) GAVE A FIND ING THAT THE ONLY REASON FOR PURCHASE FROM THE SISTER CONCERN AT A MU CH HIGHER RATE IS TO ENSURE BENEFIT FOR A SISTER CONCERN. ACCORDINGLY, LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT O F THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. IT IS CLEAR ON THE FACTS OF THE CASE THAT ASSESSEE HAS PURCHASED LITHARGE FROM ITS SISTER CONCERN AT A ITA NO. 1048/DEL/2011 3 MUCH HIGHER RATE THAN THAT OF OTHER CONCERN. NO COG ENT JUSTIFICATION FOR THIS WAS GIVEN. NO COMPARABLE INSTANCE WAS CITED . IT WAS FURTHER FOUND BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE SISTER CONCERN WAS ENTITLED FOR DEDUCTION U/S. 80I AND HI GHER PAYMENT WOULD NATURALLY MAKE IT ELIGIBLE FOR HIGHER DEDUCTION. IN THE BACKGROUND OF THE AFORESAID DISCUSSION, WE DO NOT FIND ANY INFIRMI TY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND HENC E, WE UPHOLD THE SAME. 7. THE NEXT ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTAINING THE DISALLOWANCE OF ` 31 LACS CLAIMED U/S. 35D OF THE IT ACT. 8. ON THIS ISSUE THE ASSESSING OFFICER NOTED THA T THE ASSESSEE HAS CLAIMED AMORTIZATION OF PRELIMINARY EXPENSES OF ` 31 LACS UNDER SECTION 35D. ASSESSEE SUBMITTED THAT PRELIMINARY CA PITAL EXPENSES ARE INCLUDED IN THE CLAIM OF DEDUCTION U/S. 35D. ASS ESSING OFFICER HELD THAT THE CAPITAL ISSUE EXPENSES ARE NOT ALLOWABLE U NDER SECTION 35D IN TERMS OF THE FOLLOWING JUDGEMENTS OF THE COURT:- I) PUNJAB STATE DEVELOPMENT CORP. VS. C.I.T., 225 ITR 792. II) BROOK BOND INDIA VS. C.I.T. 225 ITR 798. III) HINDUSTAN INSECTICIDES LTD. VS. C.I.T. 258 IT R 338. HENCE, ASSESSING OFFICER MADE DISALLOWANCE IN THIS REGARD. 9. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE DISALLOWANCE. 10. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPE AL BEFORE US. ITA NO. 1048/DEL/2011 4 11. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL O F THE ASSESSEE COULD NOT PRODUCED THE BREAK-UP OF THE DETAIL OF TH E EXPENDITURE IN THIS REGARD. ON THE BASIS OF THE CASE LAWS CITED BY THE ASSESSING OFFICER, WE DO NOT FIND ANY INFIRMITY IN THE ORDERS OF THE AU THORITIES BELOW. ACCORDINGLY, WE CONFIRM THE SAME. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/1/2012. SD/- SD/- [I.P. BANSAL] [I.P. BANSAL] [I.P. BANSAL] [I.P. BANSAL] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 20/1/2012 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES