The Assistant Commissioner of Income Tax, Circle-1, Margao., Margao V. M/s Salgaoncar Mining Industries Pvt. Ltd., Panaji

ITA 134/PAN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5453 (ITAT-PANAJI)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: Y V RAVIRAJ
• Assessee Lawyers: P J PARDIWALLA
• Keywords: Depreciation; Earning of tax free income; Corroborative evidences; Revenue expenditure
• Section: 142(1); 14A; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ' PANAJI ' BENCH, PANAJI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA NO. 134 / PAN / 2016 (ASSESSMENT YEAR: 2010 - 11 ) ACIT, CIRCLE - 1 BLESSING PIONEER COMPLEX OPP. DISTRICT COURT OLD MARKET, MARGAO, GOA VS. M/S. SALGAOCAR MINING INDUSTIRES PVT. LTD. SALGAONCAR BHAVAN ALTINHO, PANAJI, GOA PAN AABCS8862N APPELLANT RESPONDENT APPELLANT BY: SHRI Y.V. RAVIRAJ RESPONDENT BY: SHRI P.J. PARDIWALLA DATE OF HEARING: 15 .11.2019 DATE OF PRONOUNCEMENT: 04 . 0 2 .2019 O R D E R PER SHAMIM YAHYA, AM THIS APPEAL FILED BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 1 , PANAJI DATED 11 . 04 .201 6 AND IT RELATES TO A.Y. 2010 - 11 . 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF LD. CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A), PANAJI HAS ERRED IN DELETING ADDITION OF RS. 21,75,612/ - OUT OF TOTAL ADDITION OF RS. 34,24,069/ - , MADE BY THE AO BY WORKING OUT DISALLOWANCE U/S 14A R. W. RULE 8D. 3. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A), PANAJI HAS ERRED IN DELETING ADDITION OF RS. 93,62,28,381/ - , ON ACCOUNT OF CLAIM OF EXPENSES DISALLOWED BY THE A.O, SINCE THE ASSESSEE F AILED TO PRODUCE SUBSTANTIVE EVIDENCE AND DEDUCT TDS AS PER THE PROVISIONS OF THE I.T. ACT. 4. THE LD. CIT(A), PANAJI - 1 FAILED TO APPRECIATE THE FACT THAT THE A.O HAS DISALLOWED THE EXPENSES FOR NON - DEDUCTION OF TDS, NON - FILING OF CONFIRMATIONS OF CREDIT ORS/LOANS AND NON - FURNISHING OF EVIDENCE OF SALE PROCEEDS OF IRON ORE BY THE ASSESSEE . ITA NO. 134 /MUM/ 2016 M/S. SALGAOCAR MINING INDUSTIRES PVT. LTD. 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN THIS CASE DID NOT RESPOND TO THE NOTICES OF THE ASSESSING OFFICER. SEVERAL NOTICES WERE ISSUED BY THEY WERE NOT RESPON DED. BOOKS OF ACCOUNTS OR ANY DOCUMENT WHATSOEVER, WERE NOT PRODUCED. IN THIS REGARD THE ASSESSING OFFICERS OBSERVATION ON THE NON - COOPERATION OF THE ASSESSEE CA N BE GAINFULLY REFERRED IN PARAG RAPH 3 OF THE ASSESSMENT ORDER AS UNDER: - 3 THE ACIT, CIRCLE - 1, MARGAO ISSUED NOTICES U/S 143(2) AND 142(1) DATED 03.05.2012 REQUESTING THE ASSESSEE TO ATTEND ON OR BEFORE 31.05.2012 BEFORE THE A.O. ALONG WITH WRITTEN EXPLANATIONS, BOOKS OF ACCOUNTS AND DOCUMENTS IN SUPPORT OF THE RETURN OF INCOME FILED. HOWEVER, T HE ASSESSEE - COMPANY NOT RESPONDED TO THE NOTICE ISSUED AND NOBODY ATTENDED FOR THE HEARING AND NO BOOKS OF ACCOUNTS ARE PRODUCED. FURTHER, DUE TO CHANGE OF INCUMBENT, A NOTICE U/S 129 DATED 01.11.2012 ALONG WITH NOTICE U/S 142(1) WAS ISSUED TO THE ASSESSEE BY THIS OFFICE REQUESTING TO ATTEND FOR HEARING ON 23.11.2012 AND TO PRODUCE DOCUMENTS, ACCOUNTS AND OTHER EVIDENCES ON WHICH THE ASSESSEE - COMPANY MAY RELY IN SUPPORT OF THE RETURN OF INCOME FILED BY IT. THE ASSESSEE - COMPANY NOT RESPONDED TO THIS NOTICE A ND NO BOOKS OR BILLS ARE PRODUCED AND NO WRITTEN EXPLANATIONS ARE FILED . ONE MORE LETTER DATED 23.11.2012 WAS ISSUED TO THE ASSESSEE REQUESTING FOR PRODUCTION OF BOOKS OF ACCOUNTS, BILLS, DETAILS OF SALES, EXPENSES, CONFIRMATION OF CREDITORS/PURCHASERS, PU RCHASE BILLS FOR NEW ASSETS PURCHASED TO VERIFY THE CLAIM OF DEPRECIATION AND DETAILS OF VALUATION OF CLOSING STOCK, SPARES ETC. IT IS SEEN THAT THE ASSESSEE COMPANY HAS PURCHASED AROUND 100 CRORES WORTH OF SHIPS, BARGES AND OTHER PLANT & MACHINERIES DURIN G THE YEAR AND CLAIMED DEPRECIATION ON THE SAME. THE ASSESSEE - COMPANY NOT RESPONDED TO THIS LETTER AND NO DETAILS ARE FILED BY THE ASSESSEE AND NO BOOKS/BILLS ARE PRODUCED. ONE MORE FINAL OPPORTUNITY DATED 11.03.2013 WAS ISSUED TO THE ASSESSEE REQUESTING I T TO PRODUCE BOOKS OF ACCOUNTS, BILLS AND THE OTHER DETAILS ALREADY CALLED FOR ON OR BEFORE 15.03.2013 AND IN THIS LETTER IT WAS INFORMED TO THE ASSESSEE THAT IF THE BOOKS, BILLS ARE NOT PRODUCED AND INFORMATION IS NOT FILED ON OR BEFORE 15.03.2013, IT WAS PROPOSED TO COMPLETE THE ASSESSMENT EX - PARTE U/S. 144 OF THE IT. ACT, 1961 WITHOUT ANY FURTHER CORRESPONDENCE ON THIS ISSUE. HOWEVER, THE ASSESSEE - COMPANY NOT RESPONDED EVEN TO THIS FINAL NOTICE AND THEREFORE, IN VIEW OF THE TIME BARRING NATURE OF ASSESSM ENT PROCEEDINGS, ORDER UNDER SECTION 144 OF THE IT. ACT IS REQUIRED TO BE PASSED IN THIS CASE THEREAFTER IN THE ASSESSMENT ORDER THE AO NOTED THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF ` 49,02,84,121/ - . HOWEVER, NO DISALLOWANCE HAS BEEN MADE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER 'THE ACT'). IN THE ABSENCE OF ANY DETAILED RESPONSE FROM THE ASSESSEE THE ITA NO. 134 /MUM/ 2016 M/S. SALGAOCAR MINING INDUSTIRES PVT. LTD. 3 AO COMPUTED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT AMOUNTING TO ` 34,24,069/ - . FURTHERMORE IN THE ABSENCE OF THE BOOKS OF ACCOUNT AND THE SUPPORTING DOCUMENTS THE AO MADE ESTIMATE DISALLOWANCE OUT OF THE REVENUE EXPENDITURE WHICH CAME TO ` 93,62,28,381/ - . THEREAFTER THE AO OBSERVED THAT THE PROFIT ARRIVED AT AFTER DIS ALLOWANCE AS ABOVE WERE REASONABLE. HE OBSERVED CERTAIN INSTANCES AND FOUND THAT IN SIMILAR BUSINESS PROFIT RATE OFFERED WAS 50 TO 60%. IN THE PRESENT CASE OF THE ASSESSEE AFTER THE DISALLOWANCE OF THE ASSESSEE THE NET PROFIT COMES TO 37% AND HENCE IT WAS CONSIDERED TO BE REASONABLE AND NOT ARBITRARY. 4. AGAINST THE ABOVE ORDER ASSESSEE APPEALED BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) HAS REPRODUCED SOME OF THE SUBMISSIONS OF THE ASSESSEE. FROM THE READING OF THE SUBMISSION ASSESSEE IT IS FOUND THAT I T IS ASS ESSEE S PLEA THAT THE AO WAS WRONG IN ASKING FOR PRODUCTION OF BOOKS OF ACCOUNT AS THE SAME IS AN UNREASONABLE DEMAND . A READING OF THE ABOVE MAKES IT ABUNDANTLY CLEAR THAT THE ASSESSEE HAS REFUSED TO PRODUCE THE BOOKS OF ACCOUNTS BEFORE THE AO A ND EVEN AT THE LEVEL OF CIT(A). HOWEVER, THE LEARNED CIT(A) CONSIDERED THE LEDGER EXTRACTS AND SOME OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE AND OBTAINED A REMAND REPORT FROM THE AO. IN THE REMAND REPORT QUA THE ISSUE OF DISALLOWANCE UNDER SECTION 14A OF THE ACT THE AO SUBMITTED THAT THE DISALLOWANCE MADE WAS CORRECT. AS REGARDS THE DISALLOWANCE OF EXPENDITURE WHICH WAS DONE BY THE AO IN THE ABSENCE OF BOOKS OF ACCOUNTS THE RELEVANT VOUCHERS IN THE REMAND REPORT THE AO NOTED THAT THE ASSESSEE HAS PRODUCED COPIES OF BILLS OF FIXED ASSETS AND CORRESPONDING BANK ACCOUNT STATEMENT. FURTHERMORE THE AO NOTED THAT THE ASSESSEE HAS SUBMITTED LEDGER EXTRACTS, BILLS AND INVOICES FOR EXPENSES AND COPIES OF BANK STATEMENT. HOWEVER, THE AO NOTED THAT THE ASSESSEE HAS N OT DEDUCTED TDS. HENCE HE PROCEEDED TO PR O P OS E A DISALLOWANCE OF ` 93,62,28,381/ - . 5. CONSIDERING THE ABOVE REMAND REPORT AS REGARDS THE DISALLOWANCE UNDER SECTION 14A OF THE ACT THE LEARNED CIT(A) FOUND THAT THE ASSESSEE ITA NO. 134 /MUM/ 2016 M/S. SALGAOCAR MINING INDUSTIRES PVT. LTD. 4 HAS SUFFICIENT FUNDS. FURTHERMORE THE LEARNED CIT(A) ASKED THE ASSESSEE TO SUBMIT THE WORKING OF DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE LEARNED CIT(A) REPRODUCED THE WORKING WHICH IS AS UNDER: - SL. NO. PARTICULARS AMOUNT (IN RS.) AMOUNT (IN RS.) 1 EXPENDITURE DIRECTLY RELATING TO SUCH INCOME - 2 INTEREST AS PER P&L ACCOUNT 46,225,281 LESS: INTEREST ON FIXED TERM LOANS 18,945,636 LESS: INTEREST ON HIRE PURCHASE ARRANGEMENT 2,953,218 INTEREST ON GENERAL BORROWINGS (A) 25,326,427 AVERAGE BALANCE OF INVESTMENTS OPENING BALANCE OF INVESTMENTS 33,959,653 CLOSING BALANCE OF INVESTMENTS 293,970,185 AVERAGE INVESTMENTS (B) 163,964,919 AVERAGE VALUE OF ASSETS GROSS ASSETS AS ON 1 - 4 - 2009 8,818,253,949 GROSS ASSETS AS ON 31 - 3 - 2010 9,792,939,573 AVERAGE ASSETS (C) 9,305,596,761 DISALLOWANCE U/S 14A AS PER RULE 8D A*B/C 428,632 3 0.5% OF AVERAGE VALUE OF INVESTMENTS B X 0.5% 819,825 TOTAL DISALLOWANCE U/S 14A 1+2+3 1,248,457 THEREAFTER THE LEARNED CIT(A) HELD THAT HE FOUND THAT THE WORKING WAS CORRECT AND RESTRICTED THE DISALLOWANCE TO ` 12,48,457/ - . AS REGARDS THE DISALLOWANCE OF EXPENDITURE THE LEARNED CIT(A) ACCEPTED THAT ASSESSEES SUBMISSION THAT THERE WAS NO REQUIREMENT OF TAX DEDUCTION AT SOURCE ON THE IMPUGNED EXPENDITURE. 6. AGAINST THE ABOVE ORDER REVENUE IS IN APPEAL BEFORE US. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORD. WE FIND THAT IN THIS CASE THE ASSESSEE HAS NOT AT ALL COOPERATED WITH THE AO. SEVERAL NO TICES WERE ISSUED BUT BOOKS OF ACCOUNTS AND VOUCHERS WERE NOT PRODUCED. HENCE THE ITA NO. 134 /MUM/ 2016 M/S. SALGAOCAR MINING INDUSTIRES PVT. LTD. 5 AO MADE THE IMPUGNED DISALLOWANCE. THE AO FOUND THAT THE PROFIT RESULTING AFTER THE DISALLOWANCE WAS MUCH LOWER THAN THE COMPARABLE INDUSTRY AVERAGE. AGAINST THE ABOVE ORDER THE ASSESSEE APPEALED BEFORE THE LEARNED CIT(A). THE ASSESSEE NEVER PRODUCED THE COMPLETE BOOKS OF ACCOUNT. AS A MATTER OF FACT IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE AO SHOULD OT HAVE ASKED FOR THE COMPLETE BOOKS OF ACCOUNT. ON THE BASIS OF S OME OF THE LEDGER EXTRACTS AND VOUCHERS SUBMITTED BY THE ASSESSEE THE LEARNED CIT(A) OBTAINED REMAND REPORT. HE PROCEEDED TO DELETE THE ENTIRE DISALLOWANCE OF EXPENDITURE. AS REGARDS THE DISALLOWANCE UNDER SECTION 14A HE HAS OBTAINED THE WORKING FROM THE A SSESSEE AND ACCEPTED THE SAME AS CORRECT. THE LEARNED CIT(A) DID NOT GIVE ANY FINDING ON THE ASSESSING OFFICERS OBSERVATION IN THE CURRENT ORDER THAT EVEN AFTER THE DISALLOWANCE THE RESULTANT PROFITS WAS LOWER THAN THE INDUSTRY AVERAGE. IN OUR CONSIDERED OPINION THE LEARNED CIT(A) HAS DISPLAYED HASTE IN DELETING THE ADDITIONS WITHOUT THE ASSESSEE EVEN AGREEING TO PRODUCE THE COMPLETE BOOKS OF ACCOUNT AND THE SUPPORTING EVIDENCES. IN OUR CONSIDERED OPINION THE LEARNED CIT(A) HAS NOT DIS LODGED THE FINDINGS O F THE AO IN THE ASSESSMENT ORDER PROPERLY. IN THE REMAND REPORT ALSO IT IS OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED COMPLETE BOOKS OF ACCOUNT. IN THESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION , INTEREST OF JUSTICE WILL BE SERVED IN THIS CASE IF THE ISSU E IS REMITTED TO THE FILE OF THE AO. THE AO IS DIRECTED TO COMPLETE THE ASSESSMENT AFTER GIVING DUE NOTICE TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO PRODUCE THE NECESSARY REQUIREMENTS OF THE AO AND COOPERATE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 04.02.2019 . SD/ - SD/ - ( RAM LAL NEGI ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 04.02. 2019 ITA NO. 134 /MUM/ 2016 M/S. SALGAOCAR MINING INDUSTIRES PVT. LTD. 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) - PANAJI - 1 4. THE PR. CIT - PANAJI 5. THE DR, PAN BENCH, ITAT, PANAJI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.