The DCIT, Circle-1, Surat V. M/s. Himson Twisting & Texturing Pvt.Ltd., Surat

ITA 1182/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6316 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 04-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Keywords: Fair market value; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD CAMP AT SURAT (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI D.C. AGRAWAL, A.M.) I.T.A. NO. 1182/AHD./2008 ASSESSMENT YEAR : 2004-2005 DEPUTY COMMISSIONER OF INCOME TAX, -VS.- M/S. HI MSON TWISTING & TEXTURING CIRCLE-1, SURAT PVT. LTD., SURAT (PA N : AAACH 5982 R) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.P. MEENA, S R. D.R. RESPONDENT BY : NONE (WRITTEN SUB MISSIONS FILED) O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 24.01.2008 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I, SURAT FOR TH E ASSESSMENT YEAR 2004-05. 2. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE, WHEN THE CASE WAS CALLED FOR HEARING. THE DIRECTOR OF ASSESSEE-COMPANY HAD FILED A WRITTEN SU BMISSION DATED 17.04.2010. WE, THEREFORE, DECIDED TO DISPOSE OF THE APPEAL AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE AS WELL AS THE WRITTEN SUBMISSION FILED BY THE ASSESSEE AND THE MA TERIAL AVAILABLE ON RECORD. 3. THE FACTS RELATING TO CONTROVERSY INVOLVED IN GR OUND NO. 1 OF THIS APPEAL ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATI ON OF THE DETAILS, FURNISHED, IT WAS NOTICED BY THE ASSESSING OFFICER THAT SUNDRY CREDITORS TO THE EXTENT OF RS.1,32,468/- SHOWN IN THE BALANCE- SHEET OF THE ASSESSEE-COMPANY WERE OUTSTANDING FOR MORE THAN THREE YEARS. THE ASSESSING OFFICER, THEREFORE, ASKED THE ASSESSEE TO FURNISH E VIDENCES TO SHOW THAT THE AFORESAID CREDITORS ARE GENUINE ONES. BEFORE THE ASSESSING OFFICER, THE ASS ESSEE STATED THAT THE AMOUNTS APPEARING IN THE NAME OF CREDITORS ARE DISPUTED AND HENCE OUTSTANDIN G AND CANNOT BE TAXED. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE COMPLETE ADDRESS, CONFIRMATION AND EVIDENCE REGARDING THE 2 ITA NO. 1182/AHD/200 8 NATURE OF DISPUTE. THESE WERE NOT FURNISHED. THE AS SESSING OFFICER IN THE ABSENCE OF ANY DETAILS, MADE THE ADDITION OF RS.1,32,468/- IN RESPECT OF CR EDITORS APPEARING IN THE BALANCE-SHEET. 4. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE SAID ADDITION FOR THE DETAILED REASONS GIVEN IN PARA 3.3, WHICH READS AS UNDER :- 3.3. I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND OBSERVATION OF THE AO. ADMITTEDLY, THESE CREDITORS ARE OLD AND THEY HAVE NOT ARISEN DURING THE YEAR. THEREFORE, IF THE CREDITORS ARE BOGUS THEY CA N ONLY BE ADDED IN THE YEAR IN WHICH THEY AROSE. FURTHER, SINCE THE APPELLANT HAS BEEN SHOWING THE CREDITORS IN THE BALANCE-SHEET, THEY CANNOT BE ADDED EVEN U/S. 4 1(1) AS CESSATION OF LIABILITY IN VIEW OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF AMBICA MILLS LTD. [54 ITR 167]. HENCE, THIS ADDITION IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 5. AGGRIEVED BY THE ORDER OF LD. CIT(A) DELETING TH E ADDITION OF 1,32,468/-, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING BEFORE US, SHRI H.P. MEEN A, SR. D.R. APPEARING ON BEHALF OF THE REVENUE CONTENDED THAT IN THIS CASE, THE ADDITION W AS MADE BY THE ASSESSING OFFICER BECAUSE THE ASSESSEE GROSSLY FAILED TO EXPLAIN THE CREDIT ENTRY APPEARING IN THE BALANCE-SHEET. THE LD. D.R. SUBMITTED THAT THE ASSESSEE FAILED TO PRODUCE THE D ETAILS CALLED BY THE ASSESSING OFFICER. EVEN BEFORE THE LD. CIT(A), THESE DETAILS WERE NOT FURNI SHED. THE LD. CIT(A), IN THE IMPUGNED ORDER, HAS NOT GIVEN ANY CLEAR-CUT FINDING TO RE-OPEN OR B RING TAX AT THE CORRECT AMOUNT OF CREDITOR IN THE RELEVANT ASSESSMENT YEAR. WITH REGARD TO REFERENCE TO SECTION 41(1), HE CONTENDED THAT THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF AMBICA MILLS LTD. [54 ITR 167] IS NOT APPLICABLE TO THE FACTS OF ASSESSEES CASE BECAUSE IN THAT CASE, THE QUESTION REFERRED TO THE COURT WAS WHETHER THE EXPENDITURE CLAIMED WAS CAPITAL EXP ENDITURE OR REVENUE EXPENDITURE. THE LD. D.R. ACCORDINGLY CONTENDED THAT THE ADDITION MADE BY THE ASSESSING OFFICER BE RESTORED. 7. IN THE WRITTEN SUBMISSION DATED 17.04.2010, THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). IN THE WRITTEN SUBMISSION, IT WAS FURTHER S UBMITTED THAT THE CREDITORS WERE DISPUTED IN NATURE AND THEREFORE, THEY WERE NOT OFFERED TO TAX UNDER SECTION 41(1) OF THE ACT. IT WAS FURTHER SUBMITTED THAT RECENTLY THE ITAT, D BENCH IN THE CASE OF HIMSON FADIS MACHINERY PVT. LTD., THE SISTER CONCERN OF THE ASSESSEE, ALLOWED THE APP EAL VIDE PARA 14 FOLLOWING THE DECISION OF THE 3 ITA NO. 1182/AHD/200 8 HONBLE GUJARAT HIGH COURT IN THE CASE OF AMBICA MI LLS LTD. (SUPRA). THEREFORE, THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 8. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE HONBLE SUPREME COURT IN THE CASE OF T.V . SUNDARAM IYENGAR & SONS LTD. REPORTED IN 222 ITR 344 HELD THAT ADDITION HAS TO BE MADE I F THE ASSESSEE HAS WRITTEN OFF THE CREDITORS DUE TO INFLUX OF TIME THE LIABILITY IS CEASED TO BE OPE RATIVE AND ACCORDINGLY THE SAME IS REQUIRED TO BE TAXED U/S. 41(1) OF THE ACT. FOLLOWING THE JUDGMEN T OF THE HONBLE SUPREME COURT, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING O FFICER. IN THE PRESENT CASE, THE ASSESSEE HAS NOT WRITTEN OFF THE CREDITORS. WE ARE, THEREFORE, O F THE VIEW THAT IN THE IMPUGNED ORDER, THE LD. CIT(A) HAS GIVEN COGENT REASON FOR DELETING THE ADD ITION OF RS.1,32,468/-. WE, THEREFORE, DECLINE TO INTERFERE. RESULTANTLY, THIS GROUND OF APPEAL IS REJECTED. 9. THE FACTS RELATING TO CONTROVERSY INVOLVED IN GR OUND NO. 2 OF THIS APPEAL ARE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER DISALLOWED RS.31,69,306/- BY INVOKING THE PROVISIONS CONTAINED IN SECTION 40A(2)(B) OF THE ACT IN RESPEC T OF PAYMENT MADE TO SPECIFIED PERSONS COVERED UNDER SECTION 40A(2)(B) OF THE ACT TREATING IT AS EXCESSIVE AND UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS OR SER VICES RENDERED. 10. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A ) DELETED THE ADDITION ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD NEC ESSARY FINDING TO SHOW THAT HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, THE ASSESSEE HA S PAID EXCESSIVE AND UNREASONABLE PAYMENT TO THE SPECIFIED PERSONS COVERED UNDER SECTION 40A(2)( B) OF THE ACT. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNA L. 11. AT THE TIME OF HEARING RELYING ON THE REASONING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE LD. D.R. CONTENDED THAT THE D ISALLOWANCE MADE BY THE ASSESSING OFFICER BE RESTORED. 12. ON THE OTHER HAND, IN THE WRITTEN SUBMISSION, T HE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). IT WAS FURTHER SUBMITTED THAT ON SIMILAR FA CTS AND CIRCUMSTANCES, THE ITAT, AHMEDABAD 4 ITA NO. 1182/AHD/200 8 BENCH DISMISSED THE REVENUES APPEAL FOR THE ASSESS MENT YEAR 2004-05 IN ITA NO. 4117/AHD/2007 & ITA NO. 1800/AHD/2009 FOR THE ASSES SMENT YEAR 2006-07 IN CASE OF SISTER CONCERN OF THE ASSESSEE M/S. HIMSON FADIS MACHINERY PVT. LTD. THEREFORE, THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 13. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AU THORITIES BELOW AS WELL AS THE DECISIONS DATED 31.08.2009 AND 01.06.2008 IN THE CASE OF HIMS ON FADIS MACHINERY PVT. LTD. IN ITA NO. 1800/AHD/2009 FOR THE ASSESSMENT YEAR 2006-07 AND I TA NO. 4117/AHD/2007 FOR THE ASSESSMENT YEAR 2004-05 RESPECTIVELY CITED BY THE A SSESSEE IN THE WRITTEN SUBMISSION . IT IS PERTINENT TO NOTE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER MADE THE DISALLOWANCE OF 10% WITHOUT BRINGING ANY MATERIAL ON RECORD TO SHOW THAT PAYMENT MADE BY THE ASSESSEE WAS EXCESSIVE OR UNREASONABLE. THE ONUS TO BRING NECESS ARY MATERIAL FOR MAKING DISALLOWANCE UNDER SECTION 40A(2)(B) IS ON THE REVENUE. SINCE THERE IS NO MATERIAL, IN OUR OPINION, THE LD. CIT(A) IS LEGALLY AND FACTUALLY CORRECT IN DELETING THE ADDIT ION OF RS.31,69,306/- MADE BY THE ASSESSING OFFICER BY INVOKING PROVISIONS CONTAINED IN SECTION 40A(2)(B). WE, THEREFORE, DECLINE TO INTERFERE. RESULTANTLY, THIS GROUND OF APPEAL IS RE JECTED. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 28.05.2010 . SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 / 05 /2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHM EDABAD LAHA/SR.P.S.