The DCIT, Bharuch Circle, Bharuch V. M/s. Purniuma Builders, Bharuch

ITA 118/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63103 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 12-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K SINGH
• Assessee Lawyers: S N DIVETIA
• Keywords: Business expenditure; Opportunity of being heard; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AN D SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 118/ AHD/2010 (ASSESSMENT YEAR 2006-07) DCIT, BHARUCH CIRCLE, BHARUCH VS. M/S. PURNIMA BUILDERS, D/F-20, SARDAR PATEL COMPLEX, GIDC, ANKLESHWAR, DISTT. BHARUCH PAN/GIR NO. : AACFP3519M (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI D K SINGH, SR. DR RESPONDENT BY: SHRI S N DIVETIA, AR DATE OF HEARING: 26.10.2012 DATE OF PRONOUNCEMENT: 30.11.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDE R OF LD. CIT(A) VI, BARODA DATED 26.10.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: L(I). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 23 ,16,616/- BEING RATE REBATE AND DISCOUNT FROM CONTRACT VALUE IN THE CASE OF CONTRACT AWARDED BY M/S. ITI LTD. (N.S. UNIT). L(II). THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACTS THAT THE AMOUNT DEDUCTED FROM THE ASSESSEE IS FOR THE REASON THAT THE ASSESSEE HAS NOT ACTED AS PER THE WORK ORDER. IT IS SEEN THAT OPTICAL FIBER WIRES WERE SUPPLIED BY THE ITI LTD. AND THE A SSESSEE COMPANY WAS GIVEN CONTRACT FOR LAYING DOWN THE SAME IN LINE . THE ASSESSEE WAS GIVEN THIS WIRE IN BULK WITH A MEASURED QUANTIT Y AS PER THE REQUIREMENT OF THE ASSESSEE AND AS PER LENGTH OF WO RK AS MEASURED FOR LAYING DOWN THE OPTICAL FIBER. THEREFORE, IN TH E WORK DONE BY I.T.A.NO.118 /AHD/2010 2 THE ASSESSEE THERE CANNOT BE ANY DIFFERENCE OR SHOR TAGE. FURTHER, FOR MEASUREMENT DIFFERENCE AND EXTRA WORK FOR WHICH THE DISCOUNT IS GIVEN, THE ASSESSEE IS GIVING DETAILS IN TENDER AND THE WORK IS BEING CARRIED OUT AS PER TERMS AND CONDITIONS. THE TERMS AND CONDITIONS ARE FIXED, NATURE OF THE WORK IS FIXED AND RATES AR E ALSO FIXED. MOREOVER, THE ASSESSEE COMPANY AT THE TIME OF ASSES SMENT PROCEEDINGS HAS NOT PRODUCED ANY SUPPORTING EVIDENC E WITH REGARD TO ITS CLAIM EXCEPT A LETTER FROM M/S. ITI LTD. RELIEF CLAIMED IN APPEAL. THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. BRIEF FACTS OF THE CASE TILL THE ASSESSMENT STAG E ARE NOTED BY LD. CIT(A) IN PARA 6 & 6.1 OF HIS ORDER AND THE SAME AR E REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 6. THE THIRD LIMB OF GROUNDS NO.2 &3 RELATES TO DI SALLOWANCE OF RS.23,16,616/- BEING RATE REBATE AND DISCOUNT FROM CONTRACT VALUE IN THE CASE OF CONTRACT AWARDED BY M/S. ITI LTD. (N .S UNIT). 6.1 IT WAS SEEN BY THE ASSESSING OFFICER THAT THE A SSESSEE HAS CLAIMED RS.24,91,318/- BY WAY OF RATE REBATE AND DI SCOUNT. ON FURTHER VERIFICATION, IT IS SEEN THAT RS.23,16,616/ - IS DISCOUNT GIVEN TO ITI LTD. (N.S. UNIT). THE ASSESSEE HAS CARRIED O UT THE WORK OF ITI LTD. (N.S. UNIT) AND RECEIPT OF THIS COMPANY IS SHOWN AT RS.61,91,742/- DURING THE YEAR UNDER CONSIDERATION. FROM F.Y. 2002-03 TO 2005-06, THE WORK OF THIS COMPANY BY THE ASSESSEE WAS CARRIED OUT. THE ASSESSEE HAS CLAIMED THIS DISCOUNT DURING THE YEAR THE DEDUCTION IS MADE FOR SHORTAGE IN FREE MATERIAL SUPPLY, MEASUREMENT DIFFERENCE, ADDITIONAL ITEM AND EXTRA W ORK. IT IS SEEN THAT OPTICAL FIBER WIRES WERE SUPPLIED BY THIS COMP ANY AND IS GIVEN CONTRACT TO THE ASSESSEE FOR LAYING DOWN THE SAME I N LINE. THE ASSESSEE IS GIVEN THIS WIRE IN BULK WITH A MEASURED QUANTITY AS PER THE REQUIREMENT OF THE ASSESSEE AS PER LENGTH OF WO RK AS MEASURED FOR LAYING DOWN THE OPTICAL FIBER. THEREFORE, IN TH E WORK DONE BY THE ASSESSEE, THERE CANNOT BE ANY DIFFERENCE OR SHO RTAGE. FURTHER FOR MEASUREMENT DIFFERENCE AND EXTRA WORK FOR WHICH THE DISCOUNT IS GIVEN, IT MAY BE STATED THAT, THE ASSESSEE IS GIVIN G DETAILS IN TENDER AND THE WORK IS BEING CARRIED OUT AS PER TERMS AND CONDITIONS. THE TERMS AND CONDITIONS ARE FIXED, NATURE OF WORK IS F IXED AND THE RATES ARE ALSO FIXED. THEREFORE, THE ASSESSEE HAS T O WORK ACCORDING TO THE TENDER AND WORK ORDER. FURTHER, THE ASSESSEE HAS NOT I.T.A.NO.118 /AHD/2010 3 PRODUCED ANY SUPPORTING EVIDENCE WITH REGARDS TO IT S CLAIM EXCEPT A LETTER ITI LTD. (N.S. UNIT). THE AMOUNT IS DEDUCT ED FORM THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAS NOT A CTED AS PER THE WORK ORDER. IF THE ASSESSEE HAS DONE THE WORK AS PE R THE WORK ORDER, THE COMPANY WILL NEVER DEDUCT THIS MUCH HIGH AMOUNT FROM THE ACCOUNT. IT IS ALSO FAILED TO UNDERSTAND THAT T HE COMPANY HAS TO PROVIDE MATERIAL I.E. OPTIC FIBER ACCORDING TO THE LENGTH AND REQUIREMENT AND HOW CAN THERE BE SUCH HUGE DIFFEREN CE FOR SHORTAGE OF MATERIAL SUPPLY. THE ASSESSEE HAS FILED A COPY OF ACCOUNT OF ITI LTD. (N.S. UNIT) FOR A.Y 2006-07. ON VERIFICATION OF ACCOUNT, IT WAS SEEN THAT THE ASSESSEE HAS OPENING DEBIT BALANCE OF RS. 6,36,658/- AND DURING THE YEAR FURTHER WORK OF RS. 25,55,084/- WAS DONE. THE ASSESSEE HAS RECEIVED RS. 38,75,126/- AND ON 31-03- 2006 WRITE 'BAD DEBT' OF RS. 23,16,616.33. FROM THI S ACCOUNT IT CAN BE SEEN THAT THE ASSESSEE HAS WRITTEN AS 'BA D DEBT'. THE COMPANY WHOSE WORK WAS DONE BY THE ASSESSEE IS GOVT . OF INDIA UNDERTAKING AND NO GOVERNMENT WILL REJECT THE RIGHT CLAIM OF ASSESSEE. THE AMOUNT INVOLVED IS NOT A SMALL AMOUNT AND THE PRUDENT BUSINESSMAN WILL NOT ALLOW THIS KIND OF HUG E DISCOUNT. ACCORDINGLY THE CLAIM OF THE ASSESSEE OF RS.23,16,6 16/- IS NOT ALLOWED AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO DELETED THIS ADDITION AND NOW, THE R EVENUE IS IN APPEAL BEFORE US. 5. LD. D.R. SUPPORTED THE ASSESSMENT ORDER AND IN PARTICULAR, HE DRAWN OUR ATTENTION TO PARA 8.2 OF THE ASSESSMENT O RDER AND POINTED OUT THAT THIS FINDING IS GIVEN BY THE A.O. THAT THE ASS ESSEE HAS NOT PRODUCED ANY SUPPORTING EVIDENCE WITH REGARD TO ITS CLAIM EX CEPT A LETTER FROM ITI LTD (NS UNIT). HE SUBMITTED THAT UNDER THESE FACTS , THE ORDER OF LD. CIT(A)SHOULD BE REVERSED AND THAT OF THE A.O. SHOUL D BE RESTORED. 6. AS AGAINST THIS, LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO PLACED RELIANCE ON THE JUDGEMENT OF HONBLE AP EX COURT RENDERED IN THE CASE OF BADRIDAS DAGA VS CIT AS REPORTED IN 34 ITR 10 AND ALSO ON I.T.A.NO.118 /AHD/2010 4 THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE C ASE OF DCIT VS SHREYAS S MORAKHIA AS REPORTED IN 131 TTJ 641. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDER OF AUTHORITI ES BELOW AND THE JUDGEMENTS CITED BY THE LD. A.R. OF THE ASSESSEE. REGARDING VARIOUS JUDGEMENTS CITED BY THE LD. A.R., WE WOULD LIKE TO OBSERVE THAT IN THE ABSENCE OF ACTUAL FINDING IN RESPECT OF QUANTUM OF SHORTAGE IN FREE ISSUE MATERIAL AND TERMS AND CONDITIONS OF AGREEMENT ETC, THE JUDGEMENTS CITED BY HIM CANNOT BE APPLIED AND HENCE, THE MATTER SHOU LD GO BACK TO LD. CIT(A) FOR FACTUAL FINDING FIRST AND WHILE DECIDING THE ISSUE AFRESH, LD. CIT(A) SHOULD CONSIDER THE APPLICABILITY OF THESE J UDICIAL PRONOUNCEMENTS ALSO. WE FIND THAT THIS ISSUE WAS D ECIDED BY LD. CIT(A) IN PARA 6.3 OF HIS ORDER WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 6.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE ID. A R AND FACTS OF THE CASE. THE QUESTION IS WHETHER AN AMOUNT OF RS. 23,16,616/- BEING RATE REBATE AND DISCOUNT FROM CONTRACT VALUE IN THE CASE OF CONTRACT AWARDED BY M/S. ITI LTD. (N.S. UNIT) IS AL LOWABLE BUSINESS EXPENDITURE. THE ASSESSING OFFICER HAS RELIED UPON ASSUMPTION THAT THERE CANNOT BE ANY DIFFERENCE OR SHORTAGE IN THE F REE ISSUE OF MATERIAL AND TERMS AND CONDITIONS ARE FIXED, NATURE OF WORK IS FIXED AND RATE IS ALSO FIXED. THE AMOUNT IS DEDUCTED FROM THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAS NOT ACTED AS P ER WORK ORDER. THE AMOUNT INVOLVED IS NOT A SMALL AMOUNT AND THE P RUDENT BUSINESSMAN WILL NOT ALLOW SUCH KIND OF HUGE DISCOU NT. THE ASSESSING OFFICER HAS STATED THAT THE ASSESSEE HAS NOT PRODUCED ANY SUPPORTING EVIDENCE WITH REGARDS TO ITS CLAIM EXCEP T A LETTER FROM M/S. ITI LTD. (N.S. UNIT). THE APPELLANT HAS STATED THAT THE WORK UNDER THE CONTRACT INVOLVES VARIOUS ITEMS AND STRET CHES TO NOT LESS THAN 1,000 K.M., AND IT IS COMMON PRACTICE IN SUCH KIND OF CONTRACT TO CARRY OUT EXTRA WORK IF REQUIRED TO COMPLETE THE PRINCIPLE WORK UNDER THE CONTRACT WITH IN A SPECIFIED TIME SCHEDUL E, A SHORTAGE IN FREE ISSUE MATERIAL ALSO ARISES IN PRACTICAL SITUAT ION DUE TO THE REASONS STATED BY THE APPELLANT. THE APPELLANT HAS RELIED UPON THE JUDGMENT OF GUJARAT HIGH COURT, WHICH IS A JURISDIC TIONAL HIGH I.T.A.NO.118 /AHD/2010 5 COURT, OF CIT V/S. ANUP ENGINEERING LTD., (2001) 11 4 TAXMANN 585 (GUJ). THE APPELLANT HAS FURTHER STATED THAT FA CTS OF THE CASE ARE SIMILAR TO THE FACTS OF THE CASE OF THE APPELLANT A ND THE APPEAL HAS BEEN ALLOWED IN FAVOUR OF M/S. ANUP ENGINEERING LTD . IN VIEW OF THE SUBMISSIONS MADE BY THE APPELLANT AND JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V/S. ANUP ENGINEERING LTD., (2001) 114 TAXMANN 585 (GUJ), RATE REBATE AND DISCOUNT I S ALLOWABLE BUSINESS EXPENDITURE OR ALTERNATIVELY NOT INCOME OF THE APPELLANT AS DECIDED BY THE HON'BLE SUPREME COURT AND DISCUSSED IN THE CASE OF CIT V/S. ANUP ENGINEERING LTD., (2001) 114 TAXMANN 585 (GUJ) IN THE CASES OF E.D. SASSOON & CO. LTD. V. CIT [195 4] 26 ITR 27, CIT V. SHOORJI VALLABHDAS & CO. [1962] 46 ITR 144 A ND CIT V. BOKARO STEEL LTD. [1999] 236 ITR 315. IN THE CIRCUM STANCES, THE A.O. IS DIRECTED TO DELETE THE ADDITION MADE BY HIM IN THIS RESPECT. 8. FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT IN THIS PARA, LD. CIT(A) MERELY NOTED VARIOUS CONTENTIONS O F THE A.O. IN THE ASSESSMENT ORDER AND VARIOUS CONTENTIONS RAISED BY THE ASSESSEE BEFORE LD. CIT(A) AND THEREAFTER, HE HAS SIMPLY STATED THA T IN THE RESULT, THE A.O. IS DIRECTED TO DELETE THE ADDITION MADE BY HIM IN T HIS RESPECT WITHOUT GIVING ANY REASONING AND BASIS IN SUPPORT OF HIS DE CISION. HE ALSO REFERRED TO VARIOUS JUDGEMENTS IN SUPPORT OF THIS C ONTENTION THAT RATE, REBATE AND DISCOUNT IS ALLOWABLE BUSINESS EXPENDITU RE. THERE CANNOT BE ANY DISPUTE ON THIS ASPECT THAT RATE, REBATE AND DI SCOUNT IS ALLOWABLE BUSINESS EXPENDITURE BUT WHETHER IN FACT, ASSESSEE HAS ALLOWED ANY RATES, REBATES AND DISCOUNTS, HAS TO BE SEEN ON THE BASIS OF THE FACTS OF EACH CASE. THERE IS NO MENTION REGARDING THE QUANTUM OF FREE ISSUE MATERIAL ISSUED BY THE CUSTOMER AND THE QUANTITY OF SHORTAGE IN FREE ISSUE MATERIAL AND WHAT ARE THE NORMS REGARDING SHORTAGE AND WHAT ARE THE TERMS OF AGREEMENT REGARDING SUCH SHORTAGE IN FREE ISSUE MAT ERIAL. IN OUR CONSIDERED OPINION, SUCH A CRYPTIC ORDER OF LD. CIT (A) WHICH DOES NOT CONTAIN ANY BASIS AND REASONING, IS NOT SUSTAINABLE AND IN OUR CONSIDERED OPINION, IN THE INTEREST OF JUSTICE, THIS MATTER SH OULD GO BACK TO THE FILE OF I.T.A.NO.118 /AHD/2010 6 LD CIT(A) FOR AFRESH DECISION BY WAY OF WELL REASON ED AND SPEAKING ORDER AND HENCE, WE SET AIDE THE ORDER OF LD. CIT(A ) ON THIS ISSUE AND RESTORE THE MATTER BACK TO HIS FILE FOR AFRESH DECI SION. HE SHOULD DECIDE THIS ISSUE AFRESH IN THE LIGHT OF ABOVE DISCUSSION AND HE SHOULD PASS A WELL REASONED AND SPEAKING ORDER AFTER PROVIDING ADEQUAT E OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. 9. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. 10. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (G. C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 21.11.2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 22.12.2012.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 30/11/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.30/11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 30/1 1/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .