The ITO, Ward-4(3), Ahmedabad V. Hinduja Export Pvt.Ltd., Ahmedabad

ITA 1141/AHD/2010

• Counselvise Citation: 114120514 RSA 2010
• Duration Of Justice: 2 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 13-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B K S PANDYA
• Keywords: Corroborative evidences; Revised return; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 1141/AHD/2010 ASSESSMENT YEARS :2006-07 INCOME TAX OFFICER, WARD. 4(3), AHMEDABAD V/S . HINDUJA EXPORT PVT. LTD. A-1011, NARNARAYAN COMPLEX, NAVRANGPURA, AHMEDABAD PAN NO. AA B C H4708E (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI B.K.S. PANDYA, CIT DR /BY RESPONDENT SHRI S.N. SOPARKAR, SR. ADV. WITH SHRI P.M. MEHTA /DATE OF HEARING 18.10.2012 /DATE OF PRONOUNCEMENT 21.12.2012 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT(A)-VIII, AHMEDABAD, ORDER DAT ED 09.12.2009 FOR A.Y. 2006-07. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UN DER: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DIR ECTING THE ASSESSING OFFICER TO ALLOW THE EXPENSES FOR PURCHAS E OF LICENSE FROM BAGADIYA BROTHERS PVT. LTD. FOR 2006-0 7. 1.1 THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY PRO OF OF ITA NO. 1141/AHD/10 A.Y. 06-07 PAGE 2 ACCRUED LIABILITY IN 2006-07. THEREFORE THE ASSESS ING OFFICER HAS RIGHTLY MADE THE ADDITION OF RS.6,73,50,000/-. 1.2 THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT PRODUCED THE ACC OUNTS OF BAGIDYA BROTHERS LTD. FOR THE YEAR UNDER APPEAL. T HE ASSESSEE HAS ONLY PRODUCED THE LEDGER OF THE SUBSEQ UENT PERIOD I.E.; F.Y. 2006-07 BEFORE THE A.O. 2. THE FACTS OF THE CASE IS THAT THE E-RETURN OF IN COME FOR A.Y. 2006-07 WAS FILED BY THE ASSESSEE COMPANY ON 28-12-2006 SHOWING TOTAL INCOME AT RS.5,44,88,647/- THEREAFTER THE REVISED INCOME FILE D 11.01.2008 DECLARED INCOME OF (-) RS.7,77,06,727/-. THE SAME WAS PROCE SSED U/S 143(1) OF THE ACT AT SAME INCOME. THE CASE WAS SELECTED FOR SCRU TINY BY ISSUING NOTICE U/S 143(2) OF THE ACT ON 05/10/2007 WHICH WAS DULY SERV ED UPON THE ASSESSEE. THE ASSESSEE COMPANY IS CARRYING ON THE BUSINESS IM PORT & EXPORT OF MERCHANDISE AND TRADING OF DOMESTIC ITEMS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD DECLARED TO TAL SALES OF RS.3554.44 CRORE AND G.P. DECLARED THEREON @ 0.19%. 2.1 ON PERUSAL OF THE SUBMITTED DETAILS, IT IS NOTI CED BY THE A.O. THAT THE ASSESSEE HAD CLAIMED PRIOR PERIOD EXPENSES OF RS.13 ,21,95,374/- BY FILING THE REVISED RETURN OF INCOME FOR THE YEAR UNDER CONSIDE RATION, HAVING ITEMS MENTIONED AS UNDER: DATE NAME OF THE PARTY DESCRIPTION AMOUNT 19.03.2007 VELJI P. SONS 4,698 31.03.2007 JAYANT AGRO. ORGANICS LTD REIMBURSEMENT OF EXPENSES 3,29,12,772 JAYANT AGRO. ORGANICS LTD REIMBURSEMENT OF EXPENSES 1,95,26,777 BAGDIYA BROTHERS PVT LTD LICENSE PURCHASE 6,73,50,0 00 GUJARAT ADANI PORT LTD INTEREST 1,24,01,127 ITA NO. 1141/AHD/10 A.Y. 06-07 PAGE 3 13,21,95,374 IN SUPPORT OF THE SAME, THE ASSESSEE HAS MENTIONED ITS SUBMISSION THAT WHILE AUDITING THE RECORD RELATED TO A.Y. 2007-08, THE AUDITORS HAS NOTICED THAT THE AMOUNT AS MENTIONED ABOVE ARE ACTUALLY RELATED TO THE PERIOD PERTAINED TO THE A.Y. 2006-07. ACCORDINGLY, THE AMOUNT HAS ADDE D BACK IN TOTAL INCOME OF A.Y. 2007-08 OF THE ASSESSEE COMPANY AND CLAIMED TH E SAME AS EXPENSES FROM THE INCOME RELATED TO A.Y. 2006-07 BY FILING T HE REVISED RETURN OF INCOME. 2.2 ON THE PERUSAL OF THE SUBMITTED DETAILS, IT IS NOTICED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED EXPENSES IN REVISED RETURN OF INCOME ON ACCOUNT OF LICENSE PURCHASE HAVING AMOUNT OF RS.6,73,50,000/-. THE ASSESSEE, IN SUPPORT OF THE SAME, HAS MENTIONED ITS SUBMISSION T HAT WHILE AUDITING THE RECORD RELATED TO A.Y. 2007-08, THE AUDITORS HAS NO TICED THAT THE AMOUNT AS MENTIONED ABOVE ARE ACTUALLY RELATED TO THE PERIOD PERTAINED TO THE A.Y. 2006- 07. ACCORDINGLY, THE AMOUNT HAS ADDED BACK IN TOTA L INCOME OF A.Y. 2007-08 OF THE ASSESSEE COMPANY AND CLAIMED THE SAME AS EXP ENSES FROM THE INCOME RELATED TO A.Y. 2006-07 BY FILING THE REVISE D RETURN OF INCOME. DURING THE HEARING PROCEEDING, THE ASSESSEE HAS ASKED TO P ROVIDE THE DETAILS AND SUPPORTING EVIDENCES WHICH CAN PROVE THE GENUINENES S OF THE CLAIMED AND ALSO JUSTIFY THE FACTS THAT THE CLAIMED EXPENDITURE ON ACCOUNT OF IMPORT LICENSE HAVING AMOUNT OF RS.6,73,50,000/- IS PERTAINED TO T HE YEAR UNDER CONSIDERATION. IN RESPONSE THE QUERY, THE ASSESSEE HAS FURNISHED A COPY OF ACCOUNT OF BAGDIYA BROTHERS PVT. LTD. ONLY HAVING P ERIOD FROM 01.04.2006 TO 31.03.2007 AND NOT SUBMITTED ANY DETAILS FROM WHICH THE TRANSACTION OF ITA NO. 1141/AHD/10 A.Y. 06-07 PAGE 4 PURCHASES OF LICENSE AND UTILIZATION THEREOF CAN BE PROVED IS PERTAINED TO THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS THEREFO RE, VIDE SHOW CAUSE LETTER DATED 27.06.2008, SPECIALLY REQUESTED BY THE A.O. T O FURNISH THE DETAIL IN REFERENCE TO IMPORT LICENSE PURCHASE FROM BAGDIYA B ROTHERS PVT. LTD., HAVING AMOUNT OF RS.6,73,50,000/-, WHICH AMOUNT HAS CLAIME D AS PRIOR PERIOD EXPENSES IN THE A.Y. 2006-07. IN RESPONSES SHOW CA USE LETTER, THE ASSESSEE HAS FURNISHED COPY OF ACCOUNT ONLY OF THE PARTY REL ATED TO NEXT F.Y. 2006-07 AND IN WHICH THE ASSESSEE HAS MADE THE PAYMENT TO T HE PARTY AND ON THE OTHER HAND INVOICE ENTRY, HAVING AMOUNT OF RS.6,73, 50,000/- DTD.31.03.2007 REFLECTED IN THIS ACCOUNT. 2.3 THE A.O. FURTHER OBSERVED THAT THE ASSESSEE, DU RING THE ASSESSMENT PROCEEDING, HAD FAILED TO PROVE THE CLAIMED AMOUNT OF IMPORT LICENSE IN THE YEAR UNDER CONSIDERATION. FURTHER, THE ASSESSEE HA D ALSO NOT PROVIDED THE DETAILS IN SUPPORT OF THE FACTS THAT HOW THE AMOUNT OF PURCHASES OF IMPORT LICENSE IS RELATED TO THIS YEAR, EVEN THOUGH, THE A SSESSEE HAD REQUESTED TO PROVIDE THE DETAILS FROM THE BEGINNING. AS THE CLA IMED AMOUNT OF PURCHASES OF IMPORT LICENSE WAS FOUND WITHOUT BASIS IN THE YE AR UNDER CONSIDERATION, THE CLAIMED AMOUNT ON ACCOUNT OF PURCHASES OF IMPORT LI CENSE OF RS.6,73,50,000/- WAS NOT ALLOWABLE AS EXPENSES IN THE YEAR UNDER CONSIDERATION. AND ACCORDINGLY THE CLAIMED AMOUNT OF PURCHASES OF IMPORT LICENSE WAS DISALLOWED AND ADDED BACK IN TOTAL INCO ME OF THE ASSESSEE. ITA NO. 1141/AHD/10 A.Y. 06-07 PAGE 5 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE WENT IN APPEAL BEFORE CIT(A) WHO HAD ALLOWED THE APPEAL BY CONSIDE RING THE SUBMISSION OF THE ASSESSEE WHICH INCLUDES: (I) AN UNDERSTANDING WITH M/S. BAGADIYA BROTHERS PV T. LTD. AND ACQUIRING THE RIGHTS IN THE LICENSES DERIVED UNDER TARGET PLU S SCHEME ON EXPORT OF CUT AND POLISHED DIAMONDS TO VARIOUS PARTS. (II) TWO DEBIT NOTES OF M/S. BAGADIYA BROTHERS PVT LTD. DATED 31 ST MARCH, 2006. (III) DISALLOWANCE IN A.Y. 07-08 IN COMPUTATION OF INCOME BY THE ASSESSEE. (IV) AUDITOR OBJECTION IN AUDIT REPORT A.Y. 07-08. THE LD. CIT(A) HELD AS UNDER: 7.2 I HAVE CONSIDERED THE FACTS AND SUBMISSION OF THE LD. A.R. CAREFULLY. THE FACTUM OF EXPENSES UNDER REFERENCE IS NOT IN DISPUTE. THE ONLY DISPUTE IS WITH REGARD TO THEIR ALLOWABILI TY IN THE RELEVANT FINANCIAL YEAR. IT IS SEEN THAT M/S BAGADIYA BROTH ERS P. LTD ISSUED A DEBIT NOTE TO THE APPELLANT NO. BBPL/HEPL/001A ON 3 1.3.2006 FOR RS. 8,58,50,000/- WHICH WAS SUBSEQUENTLY SETTLED FO R RS.6,73,50,000/-. IT IS SEEN THAT THE APPELLANT ON THE BASIS OF THIS NOTE MADE THE CLAIM IN THE RETURN FOR THE A.Y. 2007 -08. HOWEVER, WHILE FINALIZING THE ACCOUNTS FOR THE A.Y. 2007-08 THE C.A. OF THE APPELLANT POINTED OUT THAT THE CLAIM WAS REQUIRED T O BE MADE IN THE A.Y. 2006-07 WHICH IS UNDER REFERENCE STATING THAT THE DEAL WAS FINALIZED IN THE YEAR ENDING ON 31.3.2006. IN VIEW OF THIS THE APPELLANT FILED THE REVISED RETURN AND MADE A CLAIM FOR THE EXPENSES UNDER REFERENCE. IT IS FURTHER SEEN THAT THE A.O. HAS ALLOWED THE EXPENSES ON THE BASIS OF ANOTHER DEBIT NOTE FROM M/ S BAGADIYA ITA NO. 1141/AHD/10 A.Y. 06-07 PAGE 6 BROTHERS P. LTD. CLAIMED AT RS.9,05,50,000/- WHICH WAS ALSO BEARING THE DATE OF 31 ST MARCH 2006. 7.3 I FIND CONSIDERABLE FORCE IN THE ARGUMENTS OF T HE LD. A.R. WHEN PART OF THE PAYMENTS HAVE BEEN ACCEPTED HAVING IDEN TICAL FEATURES ON THE BASIS OF DOCUMENTS THEN THE RELATED PAYMENTS WOULD HAVE ALSO BEEN ALLOWED IN THE YEAR UNDER REFERENCE ACCOR DINGLY. FURTHER, THE A.O. WHILE MAKING THE DISALLOWANCE HAS NOT GIVE N ANY FINDING THAT THE EXPENSES DID NOT CRYSTALISE IN THE YEAR UN DER REFERENCE. HE FURTHER RELIED UPON ON FOLLOWING CASE LAWS: (I) M/S. RAILWAY FINANCE CORPORATION V/S ADDL. CIT ITA NO. 1735/DEL/2006 ON CRYSTALLIZATION OF LIABILITY. (II) VISHNU INDUSTRIAL GASES P. LTD. IN ITR NO. 229 /1988 ON ALLOWABILITY OF YEAR AND RATE OF TAX ARE SAME. (III) PERFECT EQUIPMENTS V/S DCIT 85 ITD 50, ITAT, AHMADABAD, CLAIM OF COMMISSION AND DEBIT NOTE ISSUED IN A.Y. 91-92 AND DISALLOWED IN A.Y. 92-93. 4. NOW THE REVENUE IS BEFORE US. THE LD. CIT D.R. CONTENDED THAT THE RETURN REVISED BY THE ASSESSEE ON 11.01.2008 AND CL AIMED LOSS (-) 7,77,06,727/-. AS SECTION 139(3) NO RETURN FOR CLA IMING OF LOSS IS TO BE CARRY FORWARDED, THE ASSESSEE HAD TO FURNISH THE RETURN W ITHIN TIME ALLOWED U/S. 139(1). THE LD. A.O. HAD NOT MADE ADDITION ON ACCO UNT OF VELJI P. SONS FOR RS.4,698/-, JAYANT AGRO. ORGANICS LTD. FOR RS. 3,29 ,12,772/- & RS. 1,95,26,777/-. HOWEVER, IN CASE OF BAGADIYA BROTHE RS PVT. LTD. FOR RS.6,73,50,000/- AND GUJARAT ADANI PORT LTD. FOR RS .1,24,01,127/- ADDITIONS WERE MADE BY THE A.O. THE APPELLANT ONLY CHALLENGE D THE ADDITION ON ACCOUNT OF ADDITION MADE FOR LICENSE PURCHASE AT RS.6,73,50 ,000/- BEFORE THE CIT(A) AND NOT INTEREST CLAIM OF RS.1,24,01,127/-. THE A SSESSEE SUBMITTED ONLY ITA NO. 1141/AHD/10 A.Y. 06-07 PAGE 7 DEBIT NOTES NO. BBPL / HEPL / 001A DATED 31/3/2006 FOR RS. 8,58,50,000/- WHICH WAS CLAIMED TO BE SETTLED AT RS. 6,73,50,000/ - & DEBIT NO. BBPL / HEPL / 001 DATED 31/3/2006 FOR RS.9,05,50,000/-. THE AO ASKED TO PROVIDE DETAILS AND SUPPORTING EVIDENCE WHICH COULD PROVE GENUINENE SS OF CLAIM AND ALSO JUSTIFIED THE FACTS THAT THE CLAIMED EXPENDITURE ON ACCOUNT OF IMPORT HAVING AMOUNT OF RS.6,73,50,000/- WAS PERTAINING TO THE YE AR UNDER CONSIDERATION. THE ASSESSEE DID NOT SUBMIT ANY DETAIL FROM WHICH T RANSACTION OF PURCHASE OF LICENSE AND UTILIZATION THEREOF COULD BE PROVED IN THE YEAR UNDER CONSIDERATION WHICH WAS ASKED BY THE LD. A.O. VIDE LETTER DATED 2 7.06.2008. THE ASSESSEE HAD SUBMITTED COPY OF ACCOUNT FOR A.Y. 07-08 WHICH PROVED THE EXPENDITURE WAS NOT RELATED TO A.Y.07-08. THE PURPOSES OF EXP ENSE DOES NOT ESTABLISH AUTOMATICALLY AND INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSES OF BUSINESS. THEREFORE, THE LD. A.O. HELD THAT THE AS SESSEE CLAIMED IMPORT LICENSE WITHOUT ANY BASIS. THUS, HE PRAYED TO CONF IRM THE ADDITION. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE EVIDENCES E.G. DEBIT NOTES, COPY OF ACCOUNT OF M/S. BAGADIYA BROTH ERS PVT. LTD. FOR A.Y. 06-07 AND CONFIRMATION OF INCOME DISCLOSED BY M/S. BAGADI YA BROTHERS PVT. LTD. IN A.Y. 06-07 WERE FURNISHED BEFORE A.O. DURING THE CO URSE OF ASSESSMENT. HE HAS ALSO DRAWN OUR ATTENTION ON NOTIFICATION NO.48[ RE-2005]/2004-2009 DATED 20.02.2006 ISSUED BY DIRECTOR GENERAL OF FOREIGN TR ADE AND COPY OF AUDIT REPORT FOR A.Y. 07-08 AND ARGUED THAT THE ASSESSEE HAD REVISED THE RETURN ON ACCOUNT OF EXPENSES RELATED TO A.Y. 06-07. HE ALSO ARGUED THAT CIT(A) HAS ALLOWED THE APPEAL ON THE BASIS OF CASE LAW IN FAV OUR OF THE ASSESSEE. ITA NO. 1141/AHD/10 A.Y. 06-07 PAGE 8 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, GONE THROUG H THE ORDERS OF THE AUTHORITIES BELOW AND SEEN THE CASE LAW REFERRED BY THE ASSESSEE. THE LD. A.O. ASKED THE ASSESSEE TO PROVE THE GENUINENESS AN D PURPOSES OF EXPENSES AGAIN AND AGAIN FOR WHICH THE ASSESSEE HAD NOT FILE D ANY EVIDENCE TO JUSTIFY THE CLAIM OF EXPENSES. HE ONLY FILED COPY OF ACCOU NT OF M/S. BAGADIYA BROTHERS PVT. LTD. WHICH SHOWS THAT THE ASSESSEE HA D MADE PAYMENT TO IT BUT THE UTILIZATION OF LICENSE HAD NOT PROVED WITH EVID ENCE THAT THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PU RPOSES. NO DETAIL OF IMPORT AGAINST THIS LICENSE WITH EVIDENCE WERE SUBM ITTED AT ANY STAGE. IF THE ASSESSEE ESTABLISHES THAT THE IMPORT LICENSE HAS IN FACT BEEN USED FOR IMPORT OF GOODS FOR ASSESSEES BUSINESS PURPOSES THEN THE EXPENDITURE ON PROCUREMENT OF THE LICENSE IS AN ALLOWABLE EXPENDIT URE. FURTHER, WE ALSO HEREBY MAKE IT CLEAR THAT THE IMPORT OF GOODS MUST BE OF REVENUE NATURE AND NOT AT ALL CAPITAL NATURE AS PRESCRIBED U/S. 37 OF IT ACT, 1961. AS PER ASSESSEES SUBMISSION, THE TARGET PLUS SCHEME HAD B EEN DISCONTINUED VIDE NOTIFICATION NO. 48[RE-2005]/2004-2009 DATED 20.02. 2006 WHICH WAS EFFECTIVE DURING 01.04.2005 TO 31.03.2006. AS PER POLICY, I MPORT COULD BE FOR IMPORT OF ANY INPUTS, CAPITAL GOODS INCLUDING SPARES, OFFICE EQUIPMENTS, PROFESSIONAL EQUIPMENTS AND OFFICE FURNITURE PROVIDED THE SAME I S FREELY IMPORTABLE UNDER ITC (HS) FOR THEIR OWN USE OR THAT OF SUPPORTING MA NUFACTURING AS DECLARED IN APPENDIX 17 D. THE ASSESSEE HAD CLAIMED THIS EXPEN DITURE AS REVENUE EXPENDITURE BUT WHATEVER EVIDENCE FILED BEFORE AO H AS NOT PROVED THE GENUINENESS AND PURPOSES OF EXPENSES. THE RIGHT WA S DERIVED BY M/S. ITA NO. 1141/AHD/10 A.Y. 06-07 PAGE 9 BAGADIYA BROTHERS PVT. LTD. AN EXPORT OF CUT POLISH ED DIAMOND TO VARIOUS PARTIES BUT THE ASSESSEE WAS CARRYING BUSINESS OF I MPORT AND EXPORT OF MERCHANDIZE AND TRADING DOMESTIC ITEMS. IT IS NOT CLEAR FROM THE EVIDENCE SUBMITTED BY THE ASSESSEE AT ANY STAGE THAT HOW THI S ENTITLEMENT WAS ALLOWED TO ADJUSTABLE IN OTHER ITEMS OF IMPORT. THUS, WE H AVE CONSIDERED VIEW THAT THIS MATTER IS SET ASIDE AND RESTORED BACK TO THE A.O. T O DECIDE THE ISSUE AFRESH BY GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 6. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED F OR STATISTICAL PURPOSE. THESE ORDERS PRONOUNCED IN OPEN COURT ON 21.12.2012 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ; STRENGTHEN PREPARATION & DELIVERY OF ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION H.W. PAPER OF MEMBER ON 04.12.2012 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/ DRAGON DICTATE XXX 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 05.12.2012 4) DATE OF CORRECTION ,, ,, 5) DATE OF FURTHER CORRECTION 20.12.2012 6) DATE OF INITIAL SIGN BY MEMBERS 21.12.2012 7) ORDER UPLOADED ON ,, ,, 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FIL E NO 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 21.12.2012