M/s. Sumukha Synthetics, CHENNAI V. ACIT, Coimbatore

ITA 1068/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2490 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P PEERYA IRS
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A.NO. 1068/MDS/2012 ASSESSMENT YEAR : 2005-06 M/S. SUMUKHA SYNTHETICS 101E, 2 ND FLOOR, BVA KALAMANSION BUILDING, D.B.ROAD, R.S.PURAM, COIMBATORE-641 002. PAN AAXFS3967M VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-II, COIMBATORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. VIJAYARAGHAVAN, AD VOCATE RESPONDENT BY : SHRI P.PEERYA, IRS, CIT DATE OF HEARING : 20 TH JUNE, 2013 DATE OF PRONOUNCEMENT : 20 TH JUNE, 2013 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2005-06. THE APPEAL IS DIRECTE D AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, COIMBATORE DATED 21.02.2012. THE APPEAL ARISES OUT OF THE ORD ER PASSED BY THE ASSESSING OFFICER GIVING EFFECT TO THE ORDER OF THE ITA 1068/12 :- 2 -: COMMISSIONER OF INCOME-TAX PASSED UNDER SEC.263 OF THE INCOME-TAX ACT, 1961. 2. IN THE PRESENT CASE, THE ASSESSMENT WAS COMPLETE D UNDER SEC.143(3) ON 14.9.2007. THE ASSESSEE HAD MADE HUG E PAYMENTS TO M/S. SITALAKSHMI MILLS LTD. AGAINST CON VERSION CHARGES. ON EXAMINATION OF RECORD OF THE CASE, THE COMMISSIONER FOUND THAT THE ASSESSING OFFICER HAS N OT CONSIDERED THE APPLICABILITY OF SEC.40A(3) ON CASH PAYMENTS MADE BY THE ASSESSEE TO M/S. SITALAKSHMI MILLS LTD . ACCORDINGLY, THE ASSESSMENT ORDER WAS SET ASIDE AND THE FILE WAS REMITTED BACK TO THE ASSESSING OFFICER TO RE-DO THE ASSESSME NT AFTER CONSIDERING THE PROVISIONS OF SEC.40A(3). THE ASSE SSING OFFICER IMPLEMENTED THE DIRECTIONS OF THE COMMISSIONER OF I NCOME-TAX THROUGH THE IMPUGNED ORDER BY GIVING EFFECT TO HIS ORDER IN WHICH HE HAS DISALLOWED 20% OF CASH PAYMENTS MADE BY THE ASSESSEE TO M/S. SITALAKSHMI MILLS LTD. THE TOTAL CASH PAYM ENTS AMOUNTED TO ` 3,06,62,382/-. THE DISALLOWANCE MADE IS 20% THERE OF, AMOUNTING TO ` 61,32,478/-. THIS DISALLOWANCE WAS CONFIRMED BY THE COMMISSIONER OF INCOME-TAX(APPEALS) IN FIRST AP PEAL. THE ASSESSEE IS AGGRIEVED AND THEREFORE THE SECOND APPE AL BEFORE US. ITA 1068/12 :- 3 -: 3. IT IS THE CONTENTION OF THE ASSESSEE THAT M/S. S ITALAKSHMI MILLS LTD. HAS BEEN DECLARED AS A SICK UNIT BY BIFR AND THEREFORE, M/S. SITALAKSHMI MILLS LTD. DID NOT HAVE ITS OWN BU SINESS OPERATIONS AND IT DID NOT HAVE ANY OPERATING BANK A CCOUNT AT THAT POINT OF TIME. IT IS THE CASE OF THE ASSESSEE THAT M/S. SITALAKSHMI MILLS LTD. WAS DUMB AND DULL AT THAT POINT OF TIME AND ONLY BECAUSE OF THAT THE ASSESSEE HAD UTILIZED CONVERSI ON FACILITY FROM THE SAID MILL, FOR WHICH PAYMENTS WERE MADE IN CASH , AS M/S. SITALAKSHMI MILLS LTD. HAD NO OPERATING BANK ACCOUN T. IT WAS NOT POSSIBLE FOR THE ASSESSEE TO MAKE THE PAYMENTS TO M /S. SITALAKSHMI MILLS LTD. BY WAY OF CHEQUE OR PAYMENT BY WAY OF ANY OTHER INSTRUMENT. IT IS THE CASE OF THE ASSESSEE T HAT THE PAYMENTS WERE MADE IN CASH FOR REASONS BEYOND THE CONTROL OF THE ASSESSEE AND THE SITUATION WAS WELL COVERED BY RULE 6DD. IT IS THE CASE OF THE ASSESSEE THAT THERE WAS NO JUSTIFIC ATION IN MAKING DISALLOWANCE OF CASH PAYMENTS MADE TO M/S. SITALAKS HMI MILLS LTD. 4. WE HEARD BOTH SIDES IN DETAIL. IT IS TRUE THAT THE ASSESSEE HAS MADE HUGE AMOUNT OF PAYMENTS TO M/S. SITALAKSHM I MILLS LTD. THE PAYMENTS WERE MADE AGAINST CONVERSION CHARGES. BUT WHILE IMPLEMENTING THE REVISION ORDER OF THE COMMISSIONER OF INCOME- ITA 1068/12 :- 4 -: TAX, THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO VARIOUS CONSTRAINTS EXPLAINED BY THE ASSESSEE BEFORE HIM. IT IS SEEN THAT THE ASSESSING OFFICER HAS MECHANICALLY APPLIED 20% DISALLOWANCE FORMULA AND MADE THE ADDITION. WHEN THE COMMISSION ER OF INCOME-TAX HAS SET ASIDE THE ASSESSMENT ORDER AND R EMITTED BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICE R, HE OUGHT TO HAVE CONSIDERED THAT WHETHER ANY PAYMENTS MADE BY T HE ASSESSEE TO M/S. SITALAKSHMI MILLS LTD. COMES UNDER RULE 6DD OR NOT. THE ASSESSING OFFICER HAS MADE THE ADDITION INDISCRIMINATELY. THE COMMISSIONER OF INCOME-TAX(A PPEALS) HAS ALSO EQUALLY IGNORED THE FERVENT SUBMISSION MADE BY THE ASSESSEE. 5. IT IS OUR CONSIDERED VIEW THAT IT WAS NECESSARY FOR THE ASSESSING OFFICER TO EXAMINE THE APPLICABILITY OF S EC.40A(3) WITH REFERENCE TO THE CASH PAYMENTS MADE TO M/S. SITALAK SHMI MILLS LTD. IT DOES NOT MEAN THAT IT MUST BE A BLIND AND MECHANICAL EXAMINATION. IF THE ASSESSEE HAS A CASE THAT CASH PAYMENTS WERE MADE DUE TO CIRCUMSTANCES BEYOND ITS CONTROL, THEN THE ASSESSING OFFICER HAS TO EXAMINE WHETHER SUCH PAYM ENTS ARE COVERED BY RULE 6DD OR NOT. AS THIS HAS NOT BEEN D ONE, WE FIND THAT MECHANICAL ADDITION MADE BY THE ASSESSING OFFI CER IS AGAINST ITA 1068/12 :- 5 -: PRINCIPLES OF JUSTICE. EVERY ADDITION MUST BE IN F AIRNESS AND MUST BE CONVINCED. THEREFORE, WE SET ASIDE THE ADDITION AND REMIT BACK THE FILE TO THE ASSESSING OFFICER TO RE-EXAMIN E THE ISSUE AND SEE WHETHER THE ASSESSEE IS ENTITLED FOR THE BENEFI T OF RULE 6DD IN RESPECT OF ALL THE PAYMENTS OR ANY OF THE PAYMEN TS. 6. IN THIS REGARD, WE ARE NOT CONSTRAINING THE ASSE SSING OFFICER IN ANY WAY. HE IS FREE TO EXAMINE THE CASE OF THE ASSESSEE IN THE LIGHT OF THE EVIDENCES AND EXPLANATIONS AVAILAB LE WITH IT. HE MAY COME TO A LAWFUL FINDING AND COMPLETE THE PROCE EDINGS ACCORDINGLY. 7. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON THURSDAY, THE 20 TH OF JUNE, 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR.O.K.NA RAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 20 TH JUNE, 2013 MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.