The Dy. CIT., Baroda Circle-1, Baroda. V. Bell Graito Ceramics Ltd., Dist-Baroda.

ITA 1068/AHD/2004

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0366 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-08-2010
• Assessment Year: 1997-1998
• Appeal Filed On: 05-04-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Unexplained cash credit; Depreciation; Additional evidence; Revenue expenditure; TDS; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, ACCOUNTANT MEMBER ITA NO.1068-1069/AHD/2004 ASSESSMENT YEARS:1997-98 & 1998-99 DATE OF HEARING:11.8.10 DRAFTED:12.8.10 DCIT, BARODA CIRCLE-1, BARODA V/S . BELL GRANITO CERAMICA LTD., VILLAGE: GAVASAD, TAL: PADRA DIST. BARODA PAN NO.AAACB9401D (APPELLANT) .. (RESPONDENT) REVENUE BY :- SHRI ALOK JOHRI, CIT-DR ASSESSEE BY:- SHRI S.N.SOPARKAR, SR-AR& SMT. URVASHI SHODHAN O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THESE TWO APPEALS BY REVENUE ARE ARISING OUT OF TH E ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-I, BARODA IN APPEAL NOS.CAB /I-542 & 629/99-2000/2000- 2001 BY DIFFERENT DATE 09-01-2001.AND 12-01-2001. T HE ASSESSMENTS WERE FRAMED BY JCIT, SPL. RANGE-1 & ADDL. CIT(ASSTT), SPL. RANG E, BARODA U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HER DIFFERENT ORDERS DATE I.E. 09-02-2000 AND 12-01-2001 FOR ASSESSMENT YEARS 1997-98 AND 1998-99 RESPECTIVELY. 2. THE FIRST, WHICH IS COMMON, ISSUE IN THESE APPEA LS OF THE REVENUE IS AS REGARDS TO THE ORDER OF CIT(A) IN DELETING THE ADDI TION BEING EXCISE DUTY ON FINISHED GOODS NOT INCLUDED IN THE CLOSING STOCK. FOR THIS, REVENUE HAS RAISED THE EFFECTIVE GROUNDS :- ASSESSMENT YEAR 1997-98 ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 2 (II) DELETING THE ADDITION OF RS.15,17,136/- BEING EXCISE DUTY ON FINISHED GOODS. ASSESSMENT YEAR 1998-99 (I) DELETING THE ADDITION OF RS.1,59,65,068/- BEING EXCISE DUTY ON CLOSING STOCK. 3. THE BRIEF FACTS LEADING TO THE ABOVE COMMON ISSU E ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THESE ASSESSMENT YEARS NOTICED THAT THE ASSESSEE HAS SHOWN VALUE OF CLOSIN G STOCK OF FINISHED GOODS WHICH ARE EXCISABLE ITEMS BUT DO NOT INCLUDE THE EXCISE D UTY PAYABLE ON THE FINISHED GOODS. ACCORDING TO ASSESSING OFFICER, THE LIABILITY OF TH E CENTRAL EXCISE DUTY ARISES AS SOON AS GOODS ARE MANUFACTURED AND THE ASSESSEE SHOULD H AVE INCLUDED THE CENTRAL EXCISE DUTY LEVIED IN THE VALUE OF CLOSING STOCK OF FINISHED GOODS. AGGRIEVED, AGAINST THE ACTION OF AO INCLUDING THE EXCISE DUTY IN THE VALUE OF CLOSING STOCK MAKING ADDITIONS ASSESSEE PREFERRED APPEALS BEFORE CIT(A) AND HE DELETED THE ADDITION BY FOLLOWING DECISIONS OF HONBLE MADRAS H IGH COURT IN THE CASE OF CIT V. ENGLISH ELECTRIC CO. OF INDIA LTD. (2000) 243 ITR 512 (MAD) AND HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. INDO NIPPON CHEMICAL CO. LTD. (2000) 245 ITR 384 (BOM). AGGRIEVED, REVENUE PREFERRED APPEAL BEFORE U S. 4. AT THE OUTSET, LD. SR-COUNSEL FOR THE ASSESSEE S HRI S.N.SOPARKAR STATES THAT THIS COMMON ISSUE IS SQUARELY COVERED BY THE DECISI ON OF HONBLE JURISDICTIONAL HIGH COURT IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE IN THE CASE OF ACIT V. NARMADA CHEMATUR PETROCHEMICALS LTD. (2010) 233 CTR 265 (GUJ) WHEREIN THE HONBLE JURISDICTIONAL COURT HAS HELD AS UNDER:- .THOUGH THE BILL PROPOSED RETROSPECTIVE INSERTION ULTIMATELY THE SECTION HAS COME ON THE STATUTE BOOK ONLY FROM 1.4.1999. WHAT I S MORE MATERIAL IS THAT THE SAME RELATES TO INCLUSION SINS THE VALUE OF INV ENTORY THE AMOUNT OF ANY TAX, DUTY ETC. PAID OR LIABILITY INCURRED FOR THE S AME UNDER ANY LAW IN FORCE. MEANING THEREBY SUCH TAX, DUTY, ETC. SHOULD HAVE BE EN ACTUALLY PAID OR SHOULD BE ACTUALLY DUE AND PAYABLE UNDER THE LAW APPLICABL E TO SUCH TAX, DUTY, ETC. IN FORCE. OTHERWISE EVEN SECTION145-A OF THE ACT WILL ALSO NOT CARRY CASE OF REVENUE ANY FURTHER. 31. VARIOUS JUDGMENTS CITED ON BEHALF OF THE PARTIE S WHICH HAVE NOT BEEN SPECIFICALLY REFERRED TO HAVE BEEN CONSIDERED WHILE RENDERING THIS JUDGMENT BEARING IN MIND THE SALUTARY PRINCIPLE THAT A JUDGM ENT IS AN AUTHORITY FOR WHAT IS ACTUALLY DECIDED AND THE OBSERVATIONS MADE THERE IN WOULD BE APPLICABLE IN THE CONTEXT IN WHICH THEY ARE MADE AND WHAT IS BIDI NG IS ONLY THE RATIO ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 3 DECIDENDI OF THE DECISION WHICH HAS TO BE GATHERED FROM THE STATEMENTS OF LEGAL PRINCIPLES SET OUT IN THE FACTS OF THE CASE B ROUGHT BEFORE THE COURT. 32. THIS COURT IS IN RESPECTFUL AGREEMENT WITH THE OPINION EXPRESSED BY THE MADRAS HIGH COURT IN THE TWO JUDGMENTS CITED ON BEH ALF OF THE PARTIES. 33. ACCORDINGLY, IT IS HELD THAT THE TRIBUNAL WAS J USTIFIED IN LAW IN EXCLUDING THE EXCISE DUTY AT THE TIME OF VALUATION OF THE CLOSING STOCK OF FINISHED GOODS AT THE END OF THE ACCOUNTING PERIOD IN LIGHT OF WHAT I S STATED HEREINBEFORE. THE APPEAL IS ACCORDINGLY DISMISSED WITH NO ORDER AS TO COSTS. 5. WE FIND THAT HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF NARMADA CHEMATUR PETROCHEMICALS LTD. (SUPRA) HAS HELD THAT, IF THE DUTY OF CENTRAL EXCIS E IS NOT DUE AND PAYABLE, IT CANNOT BE TERMED TO BE A CO ST IN RELATION TO THE RAW MATERIALS THEN SUCH DUTY ALSO CANNOT BE TERMED TO BE A COST Q UA THE FINISHED GOODS APPEARING IN THE CLOSING STOCK BECAUSE ADMITTEDLY, ON THE SAI D DAY (PRESUMPTION BEING THAT SUCH GOODS ARE EXCISABLE GOODS) NO EXCISE DUTY IS D UE AND PAYABLE AT THE SAID SAGE AND FOR THE PURPOSES OF EXCISE ACT, THEY LEVY IS NO T COMPLETE UNLESS AND UNTIL SEC.3 AND 4 OF THE EXCISE ACT OPERATE TOGETHER. ACCORDING TO HONBLE HIGH COURT FOR THE PURPOSE OF THE SAID STATUTE, WHICH IS THE ONLY STAT UTE UNDER WHICH DUTY OF CENTRAL EXCISE CAN BE LEVIED AND COLLECTED, THE CHARGE IS N OT FASTENED IN LAW AND IT CANNOT BE STATED THAT FOR THE PURPOSE OF COMPUTING CHARGEABLE INCOME SUCH A CHARGE GETS FASTENED QUA THE FINISHED GOODS APPEARING AS PART O F CLOSING STOCK. FURTHER HONBLE HIGH COURT ELABORATING THAT IT WOULD RESULT INTO AN ANOMALOUS SITUATION UNDER THE TWO STATUTES, THE EXCISE ACT AND THE IT ACT LEADING TO CONTRARY POSITIONS UNDER BOTH THE STATUES AND IN THE FACTS OF THE PRESENT CASE, EVEN ON APPLICATION OF THE GENERAL PRINCIPLES, THE ADDITION SOUGHT TO BE MADE BY REVEN UE CANNOT BE SUSTAINED. FURTHER IT IS HELD THAT MAKING OF AN ENTRY OR ABSENCE OF AN ENTRY CANNOT DETERMINE RIGHTS AND LIABILITIES OF PARTIES. IN OTHER WORDS, HONBLE HIG H COURT HELD THAT IF THE LAW DOES NOT LEAD TO INCURRING OF A LIABILITY, OR DOES NOT LEAD TO A CORRESPONDING RIGHT TO INSIST FOR DISCHARGING SUCH A LIABILITY ANY ACCOUNTING PRACTIC E (EVEN IF SUGGESTED BY THE ICAI) CANNOT LAY DOWN ANYTHING TO THE CONTRARY. HONBLE H IGH COURT HAS DISCUSSED THE PROVISIONS OF S. 145A WHICH HAS BEEN INSERTED BY FI NANCE (NO.2) ACT, 1998 W.E.F. 1ST APRIL, 1999. HONBLE HIGH COURT CONSIDERED THAT THO UGH THE BILL PROPOSED RETROSPECTIVE INSERTION ULTIMATELY THE SECTION HAS COME ON THE STATUTE BOOK ONLY FROM 1 ST APRIL, 1999 BUT WHAT IS MORE MATERIAL IS THAT THE SAME RELATES TO INCLUSION IN THE ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 4 VALUE OF INVENTORY THE AMOUNT OF ANY TAX, DUTY ETC. PAID OR LIABILITY INCURRED FOR THE SAME UNDER ANY LAW IN FORCE. MEANING THEREBY SUCH T AX, DUTY, ETC. SHOULD HAVE BEEN ACTUALLY PAID OR SHOULD BE ACTUALLY DUE AND PAYABLE UNDER THE LAW APPLICABLE TO SUCH TAX, DUTY, ETC. IN FORCE. OTHERWISE EVEN S. 145A WI LL ALSO NOT CARRY CASE OF REVENUE ANY FURTHER. CIT VS. ENGLISH ELECTRIC CO. OF INDIA LTD (2000) 243 ITR 512 (MAD) AND CIT VS. DYANAVISION LTD (2004) 267 ITR 600 (MAD) WA S ALSO CONSIDERED. AND FINALLY CONCLUDED THAT UNDER THE SCHEME OF THE EXCISE DUTY THE ASSESSEE INCURS LIABILITY TO PAY EXCISE DUTY ONLY UPON BOTH THE EVENTS TAKING PL ACE, NAMELY MANUFACTURE OF EXCISABLE GOODS AND REMOVAL OF EXCISABLE GOODS; EXC ISE DUTY IS NOT THEREFORE INCLUDIBLE IN THE VALUATION OF CLOSING STOCK. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOU R OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HONBLE JURISDICTIONAL H IGH COURT IN NARMADA CHEMATUR PETROCHEMICALS LTD. (SUPRA). ACCORDINGLY, THIS COMMON ISSUE IN THE APPE ALS OF THE REVENUE IS DISMISSED. 6. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IN ITA NO.1068/AHD/2004 IS AS REGARDS TO THE ORDER OF CIT(A) IN DELETING THE ADDI TION OF LEASE RENT PAID IN ADVANCE. FOR THIS, REVENUE HAS RAISED THE GROUND NO.1.(I) :- (I) DELETING A SUM OF RS.1004650/- BEING LEASE REN T PAID IN ADVANCE INSPSITE OF THE FACT THAT THE ASSESSEE IS FOLLOWING MERCANTI LE SYSTEM OF ACCOUNTING AND THAT THE EXPENDITURE RELATES TO THE SUBSEQUENT YEAR S 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING O FFICER MADE DISALLOWANCE ON ACCOUNT OF CLAIM OF LEASE RENT TREATING THE SAME AS ADVANCE RENT PERTAINING TO SUBSEQUENT YEARS. THE ASSESSEE BEFORE THE LOWER AUT HORITIES FILED THE DETAILS OF LEASE RENTALS ITEM-WISE AND PERIOD-WISE. IT WAS STA TED THAT THE LEASE RENTALS DISALLOWED PERTAIN TO THE ASSESSMENT YEAR 1997-98 O NLY AND DO NOT INCLUDE ANYTHING PAID IN ADVANCE. ASSESSEE HAS ENCLOSED STATEMENT CO NTAINING DETAILS OF LESSOR, MACHINES TAKEN ON LEASE, PERIOD OF LEASE AND RENTAL AMOUNT. FROM THE STATEMENT, IT IS CLARIFIED THAT ALL THE LEASE RENTALS PERTAIN TO FINANCIAL YEAR 1996-97 AND COPIES OF THE LEASE AGREEMENTS ARE ALREADY ON RECORD. THE ASS ESSEE-COMPANY HAD ENTERED INTO LEASE AGREEMENTS FOR FOUR SETS OF ITEMS. ONE A S JCB MACHINE FOR WHICH THE AGREEMENT DATE WAS 19-06-1995 AND THE PAYMENT RELAT ED TO THE PERIOD 01-04-1996 ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 5 TO 31-03-1997. SECONDLY, THERE WAS A DG SET FOR WHI CH, THE SIMILAR PERIOD WAS COVERED AND PAYMENT WAS MADE OF RS.6,67,176/- AND T HIRD WAS SIX VEHICLES WHICH WERE ALL TAKEN ON LEASE FOR A TWELVE MONTHS PERIOD AND FOR WHICH SIMILAR LEASE RENTS HAD BEEN GIVEN. THE FOURTH WAS THE POLISHING MACHIN E UNDER WHICH HEAD, THERE WERE NUMBER OF PAYMENTS TOTALING RS.75,67,847/-. WHILE I N RESPECT OF THE OTHER IT IS CLEAR THAT THE LIABILITY WAS FOR ASSESSMENT YEAR 1996-97, DETAILS WERE CALLED FOR IN RECEIPT OF THE POLISHING LINE MACHINE. IT IS CLARIFIED THAT AS FAR AS ALL THE OTHER ITEMS ARE CONCERNED, THE LEASE AGREEMENT STIPULATED PAYMENT O F EACH MONTH AND THE DATE BY WHICH THE REQUIRED PAYMENT FOR EACH MONTH AND THE D ATE BY WHICH THE REQUIRED PAYMENT WAS TO BE PAID IN ADVANCE FOR THAT MONTH. I N VIEW OF THESE FACTS, THE CIT(A) DELETED THE ADDITION BY GIVING FOLLOWING FINDING IN PARA-2.3 OF HIS APPELLATE ORDER:- 2.3. FROM THE ABOVE, IT IS CLEAR THAT ALL THESE PA YMENT WERE REQUIRED TO BE MADE PRIOR TO THE LEASE OF LINE POLISHI MACHINE AND THEY ARE MORE ION THE NATURE OF PAYMENTS TO LESS FOR COSTS INCURRED IN GE TTING THE MACHINE TO THE DESIRE PLACE OF INSTALLATION. LEASE RENT IS SEPARAT ELY PAYABLE. THE QUESTION AROSE OF WHETHER SUCH EXPENDITURE COULD CAPITALIZED . HOWEVER, ON GOING THROUGH THE FACTS OF THE CASE I HOLD THAT THE APPEL LANT HAS NEVER BECOME THE OWNER OF THE ASSET AND HAS NOT PAID ANY AMOUNT TOWA RDS THE COST OF THE SAME. THESE ARE ONLY THE INITIAL PAYMENTS FOR OBTAI NING VERY LARGE PIECE OF MACHINERY FOR WHICH LC CHARGES ETC. WOULD NORMALLY BE PAYABLE. DEBIT NOTES FROM M/S.LLYODS FINANCE ARE ON RECORD, CLARIFYING E ACH AND EVERY PAYMENT. ALL THE PAYMENTS HAVE BEEN MADE DURING THE YEAR ITSELF AND THEREFORE IN FACT THEY ARE NOT IN THE NATURE OF ADVANCE PAYMENTS AT A BUT ARE EITHER LEASE FINANCE FACILITY PAYMENTS, OR LEASE RENTALS OF THE RELEVANT PERIOD. UNDER THE CIRCUMSTANCES, HOLD THAT THE PAYMENT IS MADE IN THE COURSE OF BUSINESS PER AGREEMENT FOR LEASING OF MACHINERY. SUCH EXPENDITUR E ALLOWABLE AS REVENUE EXPENDITURE. THE ALTERNATIVE QUESTION THAT AROSE WAS WHETHER THE TRANSACTION WAS GENUINE OR A MERE FINANCE TRANSACTION AND NONE OF HIRING. I FIND THAT THERE IS NO LEASING BACK OF THE MACHINERY AND IT HAS BEEN CLARIFIED BY THE APPELLANT THAT AFTER COMPLETION OF 60 MONTHS, THE TERMS OF PURCHASE WERE RENEGOTIATED BY A SEPARATE DOCUMENT AND TAKING IN CONSIDERATION VARIO US OTHER FACTORS. DURING THE ENTIRE PERIOD, THE OWNERSHIPS OF THE ASSETS REM AINED WITH THE LESSER. HENCE, IN MY VIEW, THIS APPEARS TO BE A GENUINE LEA SING A HIRING TRANSACTION. HENCE, THE AMOUNT OF RS.1,00,46,560 CLAIMED AS REVE NUE EXPENDITURE FOR THE YEAR IS ALLOWED. 8. WE FIND FROM THE ABOVE FACTS THAT THE LEASE RENT AGREEMENT ON RECORD CLEARLY PROVE THAT THE FIRST THREE ITEMS I.E. JCB MACHINE, DG SET AND VEHICLES ARE TAKEN ON MONTHLY LEASE RENT AND PAYMENTS ARE MADE THROUGH AC COUNT PAYEE CHEQUES. AS REGARDS TO POLISHING LINE MACHINE, THE LEASE RENT C LAIMED BY THE ASSESSEE ON THE FOLLOWING ITEMS:- ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 6 LEASE MANAGEMENT FEE 564171 LC OPENING CHARGES 649512 FEE FOR ADVANCE PAYMENT 6133239 STAMP CHARGES 196000 DELAYED PAYMENT CHARGES FOR LEASE RENT 24 925 ACTUAL LEASE RENT FROM 20.03.97 TO 31.03.97 509117 THESE ITEMS OF PAYMENT WERE CLAIMED BY THE ASSESSEE ARE REVENUE EXPENDITURE. THE LEASE MANAGEMENT FEE WAS FOR SANCTIONING THE LE ASE OF THE MACHINE. INTEREST WAS PAID TOWARDS ADVANCE PAYMENT MADE BY LLYODS FIN ANCE. THE MACHINES WERE LEASED ACCORDING TO COMPANY SPECIFIC AGENT AND ACQU IRED FROM SUPPLIER SUGGESTED BY THE COMPANY. THESE PAYMENTS ARE ON ACCOUNT OF IM PORTING THE MACHINES FOR WHICH VARIOUS PAYMENTS WERE REQUIRED TO MAKE AT DIF FERENT POINT OF TIME BEFORE THE MACHINES COULD BE INSTALLED SUCH AS ADVANCE TO SUPP LIER FOR PLACING THE ORDER, SEA FREIGHT DUTY AT THE TIME OF ARRIVAL IN INDIAN PORT AND CUSTOM DUTY FOR CLEARANCE OF MACHINE. THIS PAYMENT WAS MADE TO M/S. ISM ITALY ON BEHALF OF THE ASSESSEE. THEREFORE, WE FIND THAT THE LOWER AUTHORITIES HAVE GONE INTO THE LEASE DOCUMENTS AND THE EVIDENCES OF PAYMENTS AS NOTED BY CIT(A). WE FI ND NO INFIRMITY IN THE ORDER OF CIT(A) ALLOWING THE CLAIM OF THE ASSESSEE. ACCORDIN GLY, WE CONFIRM THE ORDER OF CIT(A) DELETING THE ADDITION. THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. 9. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IN ITA NO.1068/AHD/2004 IS AS REGARDS TO THE ORDER OF CIT(A) IN DELETING THE ADDI TION PERTAINING TO BILL OF MARCH 96. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.1.(III) :- (III) DELETING A SUM OF RS.96,800/- PERTAINING TO THE BILL OF MARCH 1996 (RELEVANT TO A.Y. 96-97) DESPITE THE FACT THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE T HROUGH THE FACT AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSI NG OFFICER DISALLOWED HIRE CHARGED TREATING THE SAME AS PERTAINING AS EARLIER YEARS. THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE BY GIVING FOLLOWING FINDING IN PARA-5.2 OF HIS APPELLATE ORDER:- 5.2 IN MY VIEW, THE MATTER STANDS CLARIFIED ON FAC TS ONLY AND EVEN IF IT PERTAINS TO THE CHARGES FOR MARCH96, THE LIABILITY HAS CLEA RLY CRYSTALLIZED DURING THE CURRENT YEAR AND THEREFORE, THERE LIES NO CASE FOR DISALLOWANCE ON THIS POINT. THE ADDITION MADE IS DELETED. ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 7 WE FIND THAT THE ASSESSEE HAS PAID HIRE CHARGES OF RS.96,800/- TO M/S GANATRA HEAVY LIFTERS VIDE INVOICE DATED 24-04-1996 RECEIVE D FOR AN AMOUNT OF RS.1.24 LAKH FOR HIRING CHARGES OF FORK LIFT FOR THE MONTH OF MA R96. THE HIRE CHARGES PERTAINS TO THE MONTH OF MAR96 BUT THE LIABILITY WAS RAISED TO INV OICE DATED 24-04-1996 AND WAS ACTUALLY RECEIVED IN THE CURRENT YEAR. AS THE LIABI LITY WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION, THE CIT(A) HAS RIGHTLY DELETED THE ADDITION. WE CONFIRM THE SAME. THIS ISSUE OF THE REVENUES APPEAL IS DISMISS ED. 11. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IN ITA NO.1068/AHD/2004 IS AS REGARDS TO THE ORDER OF CIT(A) IN DELETING THE ADDI TION OF RS.86,68,945/- BEING UNEXPLAINED CASH CREDIT DEPOSIT AND CONSEQUENTIAL I NTEREST. FOR THIS, REVENUE HAS RAISED THE FOLLOWING GROUND NO.1.(IV) :- (IV) DELETING ADDITION OF RS.86,68,945/- BEING UNE XPLAINED CASH CREDIT DEPOSIT AND INTEREST THERE ON 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSING OFFICER NO TED THAT THE ASSESSEE COULD NOT FILE CONFIRMATION IN RESPECT OF M/S. RAJ ACQUATIC G ROUP P. LTD. AND M/S. J.A. PATEL PHARMA PVT. LTD. IN THE ABSENCE OF THE ANY EVIDENCE TO PROVE THE CREDITWORTHINESS, IDENTITY AND GENUINENESS OF TRANSACTION, THE ASSESS ING OFFICER MADE ADDITION OF THESE TWO CASH CREDITORS AMOUNTING TO RS.86,68,945/ -. THE AO ALSO DISALLOWED INTEREST ON THE ABOVE DEPOSITS. THE CIT(A) DELETED THE ADDITION BY GIVING FOLLOWING IN PARA-10.4 OF HIS APPELLATE ORDER:- 10.4 AFTER GOING THROUGH THE REPORT OF THE ASSESSI NG OFFICER, I AM PAINED TO COMMENT THAT NOT ONLY HAS THE DCIT BUT ALSO THE ADD L. CIT EXCEEDED THEIR JURISDICTION IN STATING THAT FRESH EVIDENCE SHOULD NOT BE ADMITTED, AND FURTHER THAT EVEN THOUGH THEY HAVE EXAMINED THE ISSUE THEY HAVE NOT SENT A FACTUAL REPORT BUT HAVE RATHER DISPLAYED AN OBSTRUCTIVE ATT ITUDE, SUFFICIENT TO ENSURE THAT JUSTICE IS NOT DONE. THE PREROGATIVE OF ADMITT ING NEW EVIDENCE LIES WITH THE APPELLATE AUTHORITIES AND NOT WITH THE ASSESSIN G AUTHORITIES AND ONCE ADMITTED, THE ASSESSING OFFICER CAN RECOMMEND THAT IT NOT BE CONSIDERED ONLY IF IT IS FOUND TO BE TECHNICALLY UNSOUND, FRAUDULEN T OBTAINED, OR NOT A GENUINE PIECE OF PAPER. IT IS NOT OPEN TO THE ASSESSING OFF ICER TO COMMENT UPON THE DISCRETION OF ADMISSION OF FRESH EVIDENCE. GOING BY SUCH LOGIC, WHATEVER THE ASSESSING OFFICER DOES AND WHATEVER EVIDENCE HE ENT ERTAINS SHOULD BE THE FINAL WORD ON THE SUBJECT, AND THERE WOULD BE NO NE ED OF ANY APPELLATE AUTHORITIES OR FACT FINDING AUTHORITIES UPTO THE TR IBUNAL LEVEL. I WOULD THEREFORE, PASS A STRICTURE ON THE ASSESSING OFFICER AND THE A DDL. CIT IN THIS RESPECT, AND STATE THAT INSTEAD OF FORWARDING A FACTUAL REPO RT THAT WAS CALLED FOR, THE OBSTRUCTIVE AND OPINIONATED VIEW POINT COMMUNICATED IS REPREHENSIBLE. ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 8 THE FACT REMAINS THAT AFTER VERIFYING THE DETAILS S UMMONED FROM THE APPELLANT, NOTHING ADVERSE WAS FOUND WHICH COULD BE COMMUNICAT ED. HOWEVER, I HAVE PERSONALLY PERUSED THE DOCUMENTS PROVIDED AND FIND THAT THE CONFIRMATIONS ARE CLEAR, THE PERMANENT ACCOUNT NUMBERS SHOW THAT M/S.RAJ ACQUAITC GROUP IS ASSESSED IN THE SAME CIRCLE IN BARODA AS T HE ASSESSING OFFICER AND ALL THE PAYMENTS ARE BY CHEQUES. COPY OF BANK ACCOU NTS SHOWING THE NECESSARY ENTRIES IS AVAILABLE. SIMILARLY, M/S. J.A PATEL FARMS P LTD HAVE ALSO PROVIDED SIMILAR EVIDENCE AND THEY ARE ASSESSED AT AHMEDABAD. THE COPIES OF BANK ACCOUNT SUBMITTED CLEARLY SHOW THE PAYMENTS AND THE RETURN OF THE DEPOSITS ALSO. HENCE, THERE IS NO WAY THAT SUCH EVI DENCED IS NOT SATISFACTORY, NOR ANY REASON TO STATE THAT IT SHOULD NOT BE ENTER TAINED. AFTER EVALUATING THE EVIDENCE, I HOLD THAT THERE IS NO CASE FOR ANY ADDI TION ON THIS POINT AND THE SAME IS DELETED. WE FIND THAT CIT(A) HAS DELETED THE ADDITION AFTER GOING THROUGH THE REMAND REPORT OF THE ASSESSING OFFICER. WE ARE WITH THE SENTIMENTS O F CIT(A) THAT THE AO SHOULD NOT HAVE GONE INTO THE ADMISSIBILITY OF THE ADDITIONAL EVIDENCES UNDER RULE 46A OF I.T. RULES, 1962, WHEREAS HE SHOULD HAVE EXAMINED THE AD DITIONAL EVIDENCES ON MERITS AND SHOULD HAVE SUBMITTED THE REMAND REPORT. HOWEVE R, WITHOUT GOING INTO THIS CONTROVERSY, WE ARE OF THE VIEW THAT THE ASSESSEE F ILED COMPLETE DETAILS I.E. CONFIRMATION, PAN NO., INCOME TAX DETAILS BEFORE TH E CIT(A), WHO FORWARDED THE SAME TO THE AO FOR EXAMINATION. WE FIND THAT ONCE T HE COMPLETE INFORMATION IN RESPECT OF CASH CREDIT, I.E. THE IDENTITY, THE CRED ITWORTHINESS AND THE GENUINENESS OF THE TRANSACTION IS FILED, THE ONUS SHIFTS ON REVENU E TO EXAMINE THE SAME BUT HERE THE REVENUE FAILED IN THEIR DUTY. AS THE COMPLETE EVIDE NCES WERE AVAILABLE IN DETAILS LIKE INCOME-TAX PARTICULARS, COPIES OF LEDGER ACCOUNT, S OURCES OF DEPOSITS, DETAILS OF INTEREST PAID AND TDS PAID, NOTHING FURTHER IS REQU IRED BY US FOR VERIFICATION. ACCORDINGLY, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 13. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IN ITA NO.1069/AHD/2004 IS AS REGARDS TO THE ORDER OF CIT(A) IN DELETING THE ADDI TION BEING EXCESS DEPRECIATION CLAIMED ON UN-CRYSTALLIZED LIABILITY. FOR THIS, RE VENUE HAS RAISED THE FOLLOWING GROUND NO.1.(II) :- (II) DELETING A SUM OF RS.85,29,643/- BEING EXCESS DEPRECIATION CLAIMED DESPITE THE FACT THAT THE LIABILITY IS UNCRYSTALLIZ ED. ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 9 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSING OFFICER DU RING THE COURSE OF ASSESSMENT PROCEEDINGS MADE ADDITION ON EXCESS DEPRECIATION ON THE VALUE OF PLANT & MACHINERY INCLUDING THE RATE DIFFERENCE OF FLUCTUAT ION OF FOREIGN CURRENCY. THE AO MADE ADDITION ON THE PREMISE THAT THE RATE DIFFEREN CE NOT ACTUALLY PAID BY ASSESSEE BUT THE ADDITION IS MADE IN VIEW OF PROVISIONS OF S ECTION 43A OF THE ACT. ACCORDING TO AO THE LIABILITY WITH REGARD TO FLUCTUATION RATE IS UNASCERTAINED IN THE PRESENT CASE AND THE RATE DIFFERENCE ON PLANT & MACHINERY IS ACT UALLY NOT PAID, THEREFORE HE DISALLOWED DEPRECIATION ON ADDITION ON PROVISIONS O F EXCHANGE RATE DIFFERENCE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) DELETED THE ADDITION BY GIVING FOLLOWING FINDING IN PARA-6 OF HIS APPELLATE ORDER:- 6. THE FIRTH GROUND OF APPEAL IS REGARDING DISALLO WANCE OUT OF DEPRECIATION CLAIMED ON ADDITION TO ASSET ON ACCOUNT OF RATE DIF FERENCE. THE ASSESSING OFFICER HAS NOT ALLOWED FLUCTUATION RATE DIFFERENCE OF RS.85,29,643/- HOLDING THAT THE SAME WOULD BE ALLOWABLE ONLY WHEN IT CRYST ALLIZE ON THE DATE OF PAYMENT. UNTIL THEN IT IS UNCRYSTALLISED LIABILITY AND IS NOT ALLOWABLE. THIS ISSUE HAS ALSO BEEN DISCUSSED ON SIMILAR FACTS IN THE APP ELLATE ORDER FOR A.Y. 97-98 WHEREIN THE ADDITION HAS BEEN DELETED AND THE ASSES SING OFFICER WAS DIRECTED TO ALLOW THE DEPRECIATION CLAIMED. ACCORDINGLY, THI S YEAR ALSO THE ADDITION IS DELETED. WE FIND THAT THE PROVISIONS OF SECTION 43A OF THE A CT IS VERY CLEAR THAT THE CONSEQUENCE OF A CHANGE IN THE RATE OF EXCHANGE DUR ING ANY PREVIOUS YEAR AFTER THE ACQUISITION OF THE ASSET, THE AMOUNT BY WHICH THE L IABILITY OF PAYMENT IS INCREASED OR REDUCED DURING THE PREVIOUS YEAR AND WHICH IS TAKEN INTO ACCOUNT AT THE TIME OF MAKING THE PAYMENT, IRRESPECTIVE OF METHOD OF ACCOU NTING, SHALL BE ADDED TO OR DEDUCTED FROM AS THE CASE MAY BE. BUT IN THE PRESEN T CASE THE FACTS ARE NOT CLEAR AS THE ORDER OF CIT(A) IS NO A SPEAKING ORDER AND EVEN THE FACTS CANNOT BE UNDERSTOOD FROM THE ASSESSMENT ORDER, THE ISSUE IS SET ASIDE T O THE FILE OF ASSESSING OFFICER FOR RE-ADJUDICATION AFTER PROVIDING REASONABLE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. THIS ISSUE OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 15. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IN ITA NO.1069/AHD/2004 IS AS REGARDS TO THE ORDER OF CIT(A) IN DELETING THE ADDI TION ON ACCOUNT OF INTEREST ON MARGIN MONEY WITH BANK. FOR THIS, REVENUE HAS RAIS ED THE FOLLOWING GROUND NO.1.(III) :- ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 10 (III) DELETING ADDITION OF RS.8,31,561/- BEING ACC RUED INTEREST ON MARGIN MONEY WITH THE BANK AS THE ASSESSEE IS FOLLOWING ME RCANTILE SYSTEM OF ACCOUNTING. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSING OFFICER MA DE ADDITION ON ACCOUNT OF INTEREST ON MARGIN MONEY NOT ADDED IN THE PROFIT & LOSS ACCOUNT AS THE ASSESSEE HAD BALANCE OF MARGIN MONEY OF RS.86.85 LAKH WITH VARIO US BANKS. THE AO NOTED FROM THE WORKING GIVEN BY THE ASSESSEE THAT IT HAD NOT O FFERED INTEREST INCOME OF RS.8,31,561/- AND HE ADDED THE SAME. THE CIT(A) DEL ETED THE ADDITION BY GIVING FOLLOWING FINDING IN PARA-7.2 AND 7.3 OF HIS APPELLATE ORDER:- 7.2 ON GOING THROUGH THE LETTER, I FIND THAT VIDE LETTER DATED 28.02.2001, THE BANK OF BARODA HAS STATED THAT THEY HAD BANK GUARAN TEE NO.94217 DATED 21.12.94 FOR RS.1,42,90,000/- FURNISHED BY THEM ON BEHALF OF THE COMPANY FAVOURING THE PRESIDENT OF INDIA ACTING THROUGH DIR ECTOR GENERAL OF FOREIGN TRADE FOR FULFILLING EXPORT OBLIGATION AGAINST EPCG LINCENSEE DATED 20.12.94. THEY STATE THAT THE SAID GUARANTEE WAS RENEWED FROM TIME TO TIME AND LASTLY ON 21.12.2000 FOR A FURTHER PERIOD UPTO 31.03.2001. HOWEVER, THEY HAVE RECEIVED A FORFEITURE NOTICE FROM THE BENEFICIARY I NVOKING THE GUARANTEE AND DEMANDING THE PAYMENT OF THE GUARANTEE AMOUNT OF RS .1,42,90,000 IMMEDIATELY. HAD THEY PAID THE AMOUNT BY DEMAND DRA FTS TO THE DGFT. HENCE, ON THE BASIS OF COUNTER INDEMNITY SIGNED BY THE MD OF THE COMPANY, THE COMPANY WAS REQUIRED TO MAKE PAYMENT OF RS1.07, 17,500/- BEING THE AMOUNT OF GUARANTEE LESS CASH MARGIN OF RS.35,72,50 0/- AVAILABLE WITH THE BANK. THIS WAS TO BE PAID ALONG WITH INTEREST @ 18% TILL DATE OF ACTUAL PAYMENT. 7.3 THE APPELLANT HAS FURTHER PRODUCED BEFORE ME LE TTER FROM BANK OF BARODA DATED 22.02.2002 WHICH STATES AS FOLLOWS:- FROM THE ABOVE, IT IS CLEAR THAT NO INTEREST HAS E ITHER ACCRUED OR ANY ACCOUNTED FOR OR PAID BY THE BANK ON THE MARGIN MON EY KEPT WITH IT. UNDER THE CIRCUMSTANCES, NO ADDITION EITHER ON ACCR UAL OR REAL INCOME BASIS IS POSSIBLE UNDER THE CIRCUMSTANCES, THE ADDI TION MADE IS DELETED. 17. WE FIND FROM THE FACTS OF THE CASE THAT VIDE LE TTER DATED 28-02-2001 THE BANK OF BARODA HAS STATED THAT THEY HAD BANK GUARANTEE N O.94217 DATED 21.12.94 FOR RS.1,42,90,000/- FURNISHED BY THEM ON BEHALF OF THE COMPANY FAVOURING THE PRESIDENT OF INDIA ACTING THROUGH DIRECTOR GENERAL OF FOREIGN TRADE FOR FULFILLING EXPORT OBLIGATION AGAINST EPCG LINCENSEE DATED 20.1 2.94. THEY STATE THAT THE SAID GUARANTEE WAS RENEWED FROM TIME TO TIME AND LASTLY ON 21.12.2000 FOR A FURTHER PERIOD UPTO 31.03.2001. HOWEVER, THEY HAVE RECEIVED A FORFEITURE NOTICE FROM THE ITA NO.1068-69/AHD/2004 A.YS. 97-98 & 98-9 9 DCIT CIR-1, BARODA V. BELL GRANITO CERAMICA LTD. PAGE 11 BENEFICIARY INVOKING THE GUARANTEE AND DEMANDING TH E PAYMENT OF THE GUARANTEE AMOUNT OF RS.1,42,90,000 IMMEDIATELY. WHETHER THEY HAVE PAID THE AMOUNT BY DEMAND DRAFTS TO THE DGFT OR NOT, THIS FACT HAS NOT BEEN VERIFIED BY THE LOWER AUTHORITIES. WE FURTHER FIND THAT ON COUNTER INDEMN ITY SIGNED BY THE MD OF THE COMPANY, THE COMPANY WAS REQUIRED TO MAKE PAYMENT O F RS1.07,17,500/- BEING THE AMOUNT OF GUARANTEE LESS CASH MARGIN OF RS.35,72,50 0/- (AS CLAIMED BY THE ASSESSEE) AVAILABLE WITH THE BANK. ACCORDING TO THE FACTS AVAILABLE, THE BANK WAS TO PAY THIS ALONG WITH INTEREST @ 18% TILL DATE OF ACT UAL PAYMENT. THESE FACTS NEED VERIFICATION AND ACCORDINGLY THIS ISSUE OF THE REVE NUES APPEAL IS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE AFTER VERIFYING THE SAME. THIS ISSUE OF THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. 18. IN THE RESULT, REVENUES APPEAL IN ITA NO.1068/AHD/2004 IS DISMISSED AND ITA NO.1069/AHD/2004 IS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 11/08 /2010 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 11/08/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-I, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/P DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD