ITO 6(3)(2), MUMBAI V. INDOKEM LTD, MUMBAI

ITA 1414/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7164 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 14-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Keywords: Bogus purchase; Depreciation; Earning of tax free income; Accommodation entries; Unabsorbed depreciation
• Section: 69C; 143(3); 142(1); 14A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER & SHRI G MANJUNATHA, ACCOUNTANT MEMBER ITA NO.1414/MUM/2016 ASSESSMENT YEAR : 2011-12 ITO 6(3)(2), MUMBAI VS. INDOKEM LTD., 410/411 KHATAU HOUSE, MOGUL LANE, MAHIM, MUMBAI 400 016 PAN AAACI2959M (APPELLANT) (RESPONDENT) ITA NO.1419/MUM/2016 ASSESSMENT YEAR : 2011-12 INDOKEM LTD., MUMBAI 400 016 PAN AAACI2959M VS. ITO 6(3)(2), MUMBAI (APPELLANT) (RESPONDENT) FOR THE REVENUE : SHRI M V RAJGURU FOR THE ASSESSEE : SHRI NITESH JOSHI DATE OF HEARING :07.06.2018 DATE OF PRONOUNCEMENT : 15.06.2018 O R D E R PER G MANJUNATHA, ACCOUNTANT MEMBER THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS THE REVENUE ARE DIRECTED AGAINST THE ORDER OF CIT(A)-12, MUMBAI, DA TED 10.12.2015, AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. SINCE FACTS ARE IDENT ICAL AND ISSUES ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD T OGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. ITA NOS.1414 & 1419/MUM/2016 INDOKEM LTD. 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G OF SYNTHETIC DYESTUFF, CHEMICALS AND DYES. IT FILED ITS RETURN OF INCOME FOR A.Y. 2011-12 ON 30.09.2011, DECLARING NIL TOTAL INCOME. THE CASE WAS SELECTE D FOR SCRUTINY AND, ACCORDINGLY, NOTICES U/S. 143(2) AND 142(1) ALONG WITH DETAILED QUESTIONNAIRE CALLING FOR VARIOUS DETAILS WERE ISSUED. IN RESPONSE TO NOTICES, THE A R OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED THE DETAILS CALLED FOR. THE ASSESSMENT WAS COMPLETED U/S. 143(3) ON 28.03.2014, DETERMINING THE TOTAL INCOME AT ` 10,18,63,220/-, INTER ALIA, MAKING ADDITIONS TOWARDS DISALLOWANCES OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME U/S 14A OF THE INCOME TAX ACT, 1961, ADDITIO NS TOWARDS BOGUS PURCHASES U/S. 69C OF THE INCOME TAX ACT, 1961, AND RE-COMPUT ATION OF SHORT TERM CAPITAL GAIN AS WELL AS LONG TERM CAPITAL GAIN ON DEPRECIABLE AS SET BY DENYING SET OFF OF UNABSORBED DEPRECIATION OF A.Y. 1996-97. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 3. BEFORE THE CIT(A) THE ASSESSEE HAS CHALLENGED TH E ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS DISALLOWANCES OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME ON THE GROUND THAT DURING THE YEAR UNDER CON SIDERATION THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME. THEREFORE, NO DISALLO WANCE CAN BE MADE U/S. 14A OF THE INCOME TAX ACT, 1961. THE ASSESSEE ALSO MAD E A ALTERNATIVE SUBMISSION, IN AS MUCH AS ITS INVESTMENTS YIELDING EXEMPT INCOME W ERE OUT OF ITS OWN FUNDS AND IN THE ABSENCE OF ANY FINDINGS TO THE CONTRARY, THERE WAS A PRESUMPTION THAT INVESTMENTS ARE MADE FROM OWN FUNDS AVAILABLE TO TH E ASSESSEE AND, THEREFORE, NO DISALLOWANCE CAN BE MADE TOWARDS EXPENDITURE UNDER RULE 8D(2)(II). IN THIS REGARD HE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. VS. CIT [313 ITR 340]. AS R EGARDS DENIAL OF BROUGHT FORWARD UNABSORBED DEPRECIATION OF THE ASSESSMENT YEARS 199 6-97 TO 2000-01, THE ASSESSEE SUBMITTED THAT WHEN THE AMENDMENT WAS BROUGHT TO SE CTION 32(2) OF THE INCOME TAX ACT, 1961, THE PERIOD OF EIGHT YEARS HAD NOT EX PIRED ALLOWING INDEFINITE CARRY FORWARD OF THE LOSSES. THEREFORE, THE ASSESSING OF FICER WAS INCORRECT IN RESTRICTING UNABSORBED DEPRECIATION SET OFF UP TO THE ASSESSMEN T YEAR 2000-01. SIMILARLY, AS REGARDS ADDITIONS TOWARDS BOGUS PURCHASES, THE ASSE SSEE HAS FILED VARIOUS DETAILS ITA NOS.1414 & 1419/MUM/2016 INDOKEM LTD. 3 INCLUDING PURCHASE BILLS AND PAYMENT DETAILS TO M/S . AMRISH TRADERS AND S P CORPORATION. IT WAS ARGUED THAT MERELY BECAUSE TH IRD PARTY STATEMENT REVEALS THAT THE PARTIES ARE HAWALA OPERATORS ENGAGED IN PROVIDI NG ACCOMMODATION ENTRIES, PURCHASES FROM THESE PARTIES CANNOT BE TREATED AS B OGUS WHEN THE ASSESSEE HAS FILED NECESSARY EVIDENCES. 4. THE CIT(A) AFTER CONSIDERING RELEVANT SUBMISSION S OF THE ASSESSEE AND ALSO RELYING UPON THE DECISION OF HONBLE KERALA HIGH CO URT IN THE CASE OF STATE BANK OF TRAVANCORE [16 TAXMAN.COM 289], REJECTED THE ARGUME NTS OF THE ASSESSEE IN SO FAR AS DISALLOWANCE OF EXPENSES INCURRED IN RELATION TO EXEMPT INCOME BY HOLDING THAT THE ASSESSING OFFICER HAS BROUGHT OUT CLEAR FACTS T HAT THE ASSESSEE HAS EARNED EXEMPT INCOME, HOWEVER, FAILED TO DISALLOW ANY EXPE NSES INCURRED IN RELATION TO EARNING OF EXEMPT INCOME. THEREFORE, THERE IS NO R EASON TO INTERFERE IN THE FINDINGS OF THE ASSESSING OFFICER. 5. AS REGARDS REJECTION OF SET OFF OF UNABSORBED DE PRECIATION OF A.YS. 1996-97 TO 2000-01, THE CIT(A) ALLOWED PARTIAL RELIEF TO THE A SSESSEE WHEREIN HE HAS ALLOWED SET OFF TOWARDS UNABSORBED DEPRECIATION FOR A.YS 19 97-98 TO 2000-01 ON THE GROUND THAT BROUGHT UNABSORBED DEPRECIATION FOR A.YS 1997- 98 TO 2000-01 CAN BE CARRIED FORWARD EVEN AFTER AMENDMENT TO SECTION 32(2) BY TH E FINANCE ACT,2001 AS THE PERIOD OF EIGHT YEARS HAS NOT EXPIRED. HOWEVER, HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN SO FAR AS A.Y. 1996-97. 6. IN SO FAR AS ADDITIONS TOWARDS UNEXPLAINED PURCH ASES FROM M/S. AMRISH TRADERS AND S P CORPORATION ARE CONCERNED, THE CIT( A) DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER BY FOLLOWING THE JURISDICT IONAL HIGH COURT JUDGMENT IN THE CASE OF CIT VS. NIKUNJ EXIM ENTERPRISES (PVT.) LTD. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 7. THE FIRST ISSUE THAT CAME UP FOR CONSIDERATION F ROM ASSESSEES APPEAL IS THE DISALLOWANCE OF EXPENDITURE IN RELATION TO EXEMPT I NCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAS ITA NOS.1414 & 1419/MUM/2016 INDOKEM LTD. 4 RECEIVED DIVIDEND INCOME OF ` 2000/- WHICH DOES NOT FORM PART OF TOTAL INCOME. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSE E HAS CLAIMED EXEMPTION FOR DIVIDEND INCOME BUT FAILED TO DISALLOW EXPENSES ATT RIBUTABLE TO EARNING SUCH EXEMPT INCOME U/S. 14A. THEREFORE, CALLED UPON THE ASSESS EE TO EXPLAIN AS TO WHY THE EXPENSES IN RELATION TO EXEMPT INCOME SHOULD NOT BE DISALLOWED. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT DURI NG THE YEAR UNDER CONSIDERATION IT HAS EARNED DIVIDEND FROM CO-OPERATIVE BANK, WHIC H IS NOT EXEMPT U/S. 10(34) OF THE INCOME TAX ACT, 1961, ALTHOUGH IT HAS CLAIMED E XEMPTION FOR SUCH DIVIDEND INCOME BY MISTAKE OF FACTS. DURING THE COURSE OF A SSESSMENT PROCEEDINGS IT HAS FILED BEFORE THE ASSESSING OFFICER WITHDRAWING EXEM PTION CLAIMED TOWARDS DIVIDEND INCOME BY STATING THAT ANY DIVIDEND RECEIVED FROM C O-OPERATIVE BANKS IS NOT EXEMPT U/S. 10(34) OF THE ACT. THE ASSESSEE FURTHER SUBMI TTED THAT IT DID NOT INCUR ANY SPECIFIC EXPENDITURE FOR EARNING EXEMPT INCOME THER EFORE, QUESTION OF DISALLOWANCE OF EXPENSES BY INVOKING THE PROVISIONS OF RULE 8D O F THE INCOME TAX RULES, 1962, DOES NOT ARISE. THE ASSESSING OFFICER AFTER CONSID ERING THE RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO RELYING UPON VARIOUS DECISION S INCLUDING THE DECISION OF ITAT DELHI SPECIAL BENCH IN THE CASE OF CHEMINVEST LIMIT ED VS. ITO 317 ITR 86 (AT) HELD THAT THE DISALLOWANCE U/S. 14A CAN BE MADE EVEN IF NO EXEMPT INCOME IS ACTUALLY EARNED OR RECEIVED DURING THE YEAR FROM THE INVESTM ENTS. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE CANNOT EARN DIVI DEND WITHOUT SYSTEMATIC MANAGEMENT AND THE ACTIVITY OF INVESTMENT IS VERY C OMPLEX IN NATURE. IT REQUIRES SUBSTANTIAL MARKET RESEARCH, DAY TO DAY ANALYSIS OF MARKET TRENDS AND DECISIONS WITH REGARD TO ACQUISITION, RETENTION AND SALES OF SHARE S AT THE APPROPRIATE TIME. THEREFORE, THERE IS NO MERIT IN THE ARGUMENTS OF TH E ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO EARNING OF EXEMPT INCOME. ACCORDINGLY, DETERMINED THE DISALLOWANCE CONTEMPLATED U/S. 14A OF THE ACT, BY APPLYING THE PRESCRIBED METHOD UNDER RULE 8D OF THE INCOME TAX RULES 1962 A ND MADE THE ADDITION OF ` 27,22,435/- 8. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT T HE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITIONS MADE BY THE ASSESSING OFFI CER TOWARDS DISALLOWANCE OF EXPENSES IN RELATION TO EXEMPT INCOME WITHOUT APPRE CIATING THE FACT THAT THE ITA NOS.1414 & 1419/MUM/2016 INDOKEM LTD. 5 ASSESSING OFFICER HAS FAILED TO ESTABLISH NEXUS BET WEEN EXEMPT INCOME EARNED AND PURPORTED EXPENSES INCURRED TO EARN SUCH EXEMPT INC OME. THE AR FURTHER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME WHICH DO NOT FORM PART OF TOTAL I NCOME UNDER THIS ACT AND IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD [2015] 378 ITR 33 (DEL), SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. T HE ASSESSING OFFICER HAS MADE ADDITIONS TOWARDS EXPENSES U/S. 14A BY APPLYING THE SPECIAL BENCH DECISION OF ITAT DELHI IN THE CASE OF CHEMINVEST LTD., BUT THE SAID DECISION HAS BEEN OVER RULED BY THE HONBLE DELHI HIGH COURT, WHEREIN IT WAS HELD T HAT THE EXPRESSION DOES NOT PART OF TOTAL INCOME IN SECTION 14A ENVISAGES THAT THER E SHOULD BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME , DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCU RRED IN RELATION TO SAID INCOME. SINCE THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME THE QUESTION OF DISALLOWANCE OF ANY EXPENSES IN RELATION TO EXEMPT INCOME DOES N OT ARISE. 9. THE LEARNED DR, ON THE OTHER HAND, STRONGLY SUPP ORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE TIME OF HEARING, THE LEARNED AR FOR THE ASSE SSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD [2015] 378 ITR 33 (DEL), WHE REIN IT HAS BEEN CATEGORICALLY HELD THAT SECTION 14A WILL NOT APPLY IF NO EXEMPT I NCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. THERE IS NO DIS PUTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURIN G THE YEAR UNDER CONSIDERATION. ALTHOUGH THE ASSESSEE HAS CLAIMED E XEMPTION U/S. 10(34) FOR DIVIDEND INCOME RECEIVED FROM CO-OPERATIVE BANK, SU CH CLAIM HAS BEEN WITHDRAWN BEFORE THE ASSESSING OFFICER BY STATING THAT DIVIDE ND RECEIVED FROM CO-OPERATIVE BANK IS NOT EXEMPTED U/S. 10(34) AND THE CLAIM MADE IN THE RETURN OF INCOME BY MISTAKEN FACTS HAS BEEN WITHDRAWN. WE FURTHER OBSE RVED THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD (SUPRA), I N PARA 23 OBSERVED THAT THE EXPRESSION DOES NOT PART OF TOTAL INCOME IN SECTI ON 14A ENVISAGES THAT THERE SHOULD ITA NOS.1414 & 1419/MUM/2016 INDOKEM LTD. 6 BE AN ACTUAL RECEIPT OF INCOME, WHICH IS NOT INCLUD IBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISAL LOWING ANY EXPENDITURE INCURRED IN RELATION TO SAID INCOME. IN OTHER WORDS, SECTIO N 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVAN T PREVIOUS YEAR. IN THIS CASE, ON PERUSAL OF FACTS, WE FIND THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME, WHICH FORM PART OF TOTAL INCOME. THEREFORE, WE AR E OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER HAS ERRED IN COMPUTING DISALLOWAN CE U/S. 14A BY INVOKING RULE 8D(2)(II) OF THE INCOME TAX RULE, 1962. HENCE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITIONS MADE U/S. 14A OF THE INCOME TA X ACT, 1961. 11. THE NEXT ISSUE THAT CAME UP FOR CONSIDERATION F ROM THE ASSESSEES AS WELL AS REVENUES APPEAL IS DISALLOWANCE OF CARRY FORWARD U NABSORBED DEPRECIATION LOSS OF A.YS. 1996-97 TO 2000-01. THE ASSESSING OFFICER HA S DISALLOWED UNABSORBED DEPRECIATION LOSS SET OFF AGAINST INCOME OF CURRENT YEAR ON THE GROUND THAT BY VIRTUE OF AMENDMENT TO SECTION 32(2) OF THE INCOME TAX ACT , 1961, BY THE FINANCE ACT 2001, FROM A.Y. 2002-03, THE UNABSORBED DEPRECIATIO N OF UPTO A.Y. 2001-02 CAN BE CARRIED FORWARD UP TO EIGHT YEARS. ACCORDING TO TH E ASSESSING OFFICER, DEPRECIATION LOSS OF EARLIER YEARS CAN BE CARRIED FORWARD UP TO MAXIMUM EIGHT YEARS BY VIRTUE OF SECTION 32 OF I.T.ACT. HOWEVER, SUCH RESTRICTIONS HAVE BEEN REMOVED FROM A.Y. 2002-03 ONWARDS, WHERE ASSESSEE CAN CARRY FORWARD D EPRECIATION FOR INDEFINITE PERIOD. SINCE THE ASSESSEE HAS CARRIED FORWARD UNA BSORBED DEPRECIATION OF A.YS 1996-97 TO 2001-02 AGAINST CURRENT YEAR INCOME UND ER THE HEAD INCOME FROM CAPITAL GAINS, DISALLOWED UNABSORBED DEPRECIATION O F EARLIER YEARS. 12. THE LEARNED AR FOR THE ASSESSEE, AT THE TIME OF HEARING, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ITS OWN CASE FOR A.Y. 2009-10, WHEREIN SIMILAR ISSU E HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF HONBLE G UJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS PVT. LTD. (2012) 25 TAXMAN.COM 364, WHEREIN THE CO-ORDINATE BENCH HELD THE UNABSORBED DEPRECIATION PRIOR TO A Y 1997- 98 AND AFTER A.Y. 2003-04, SET OFF AFTER A PERIOD OF EIGHT YEARS IN REGARDS WITH S ECTION 32(2) OF THE ACT, IS TO BE ALLOWED IN VIEW OF AMENDMENT BY THE FINANCE ACT, 20 01. ITA NOS.1414 & 1419/MUM/2016 INDOKEM LTD. 7 13. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE I SSUE IS NO LONGER RES INTEGRA AND THE CO-ORDINATE BENCH OF ITAT, MUMBAI BENCHES, VIDE ORDER DATED 09.06.2017, IN ASSESSEES OWN CASE FOR A.Y. 2009-10 IN ITA NO. 358/MUM/2016, AFTER CONSIDERING THE RATIO LAID DOWN BY HONBLE GUJARAT IN THE CASE OF GENERAL MOTORS PVT. LTD. (SUPRA), HELD THAT UNABSORBED DEPRECIATIO N LOSS CAN BE CARRIED FORWARD WITHOUT ANY LIMITATION TO PRE-AMENDED AND POST-AMEN DED PERIOD. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: 5. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF THE AO IN DENYING C ARRY FORWARD UNABSORBED DEPRECIATION OF RS. 3,18,76,367/- AND RS .9,94,88,199/-- PERTAINING TO AYS 1995-96 AND 1996-97 RESPECTIVELY. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.2: - '2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING THE ACTION OF THE AO IN DENYING CARRY FO RWARD OF UNABSORBED DEPRECIATION OF RS. 3,18,76,367/- AND RS . 9,94,88,199/- PERTAINING TO AY 1995-96 & AY 1996-97 RESPECTIVELY, I.E. PERTAINING TO ASSESSMENT YEARS PRIOR TO THE AMENDMENTS MADE BY THE FINANCE ACT NO. 2 OF 1996 WHICH RESTRICTED CARRY FORWARD OF UNABSORBED DEPRECIATION UP TO 8 YEARS, IN WHICH THE APPELLANT HAD VESTED RIGHT TO INDEFINITE CARRY FORWARD.' 6. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE MADE CLAIM OF UNABSORBED DEPRECIATION PERTAINING TO AYS 1995-96 OF RS. 3,18, 76,367/- FOR AY 1996- 97 OF RS. 9,94,88,1997-. THE AO DENIED THE CARRY FO RWARD OF UNABSORBED DEPRECIATION FOR THE REASON THAT IN AYS 1996-97 TO 2001-02 THE LIMIT FOR CARRY FORWARD OF UNABSORBED DEPRECIATION WAS FOR 8 YEARS BY VIRTUE OF AMENDMENT IN THE PROVISIONS OF SECTION 74(1) OF THE ACT BUT WITH EFFECT FROM 01-04-2003 THIS RESTRICTION WAS REMOVED BY ANO THER AMENDMENT IN THE PROVISIONS OF SECTION 74(1) OF THE ACT AND IN B ETWEEN FROM THE PERIOD OF 1997-98 TO 2001-02 THIS LIMIT WAS IN FORCE. THE LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF HON'BLE GUJARAT HIGH COURT AND OTHER HIGH COURT JUDGEMENTS PARTICULARLY IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT (2012) 25 TAXMANN.C OM 364 GUJARAT, WHEREIN IT IS HELD THAT THE UNABSORBED DEPRECIATION PRIOR TO AY 1997-98 AND AFTER AY 2003-04, SET OFF AFTER A PERIOD OF 8 Y EARS IN REGARDS WITH THE SECTION 32(2) OF THE ACT IS TO BE ALLOWED IN VIEW O F THE AMENDMENT BY THE FINANCE ACT 2001. THE LEARNED COUNSEL FOR THE ASSES SEE ALSO RELYING ON THE CBDT CIRCULAR CLARIFYING THE INTEND OF THE AMEN DMENT IN SECTION 74(1) OF THE ACT AND ARGUED THAT IT IS FOR ENABLING THE I NDUSTRY TO CONSERVE SUFFICIENT FUNDS TO REPLACE THE PLANTS AND MACHINER Y AND ACCORDINGLY, THE AMENDMENT DISPENSES WITH THE RESTRICTION OF 8 YEARS FOR CARRY FORWARD AND SET OFF UNABSORBED DEPRECIATION. IN VIEW OF THI S, THE LEARNED COUNSEL ITA NOS.1414 & 1419/MUM/2016 INDOKEM LTD. 8 FOR THE ASSESSEE STATED THAT THE ORDERS OF THE LOWE R AUTHORITIES ARE VITIATED AND WITHOUT ANY BASIS. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ISSUE I S SQUARELY COVERED IN FAVOUR OF ASSESSEE REASON BEING THE CLAIM OF CARRY FORWARD OF UNABSORBED DEPRECIATION PERTAINS TO AY 1995-96 AND 1997-98 AND THIS RESTRICTION CAME FROM AY 1997-98 TO 2001-02. THIS PERIOD IS OUT SIDE THE AMBIT OF RESTRICTION PERIOD AND IN VIEW OF THE DECISION OF T HE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD (SUPRA), WHICH HAS INTERPRETED THE RESTRICTED PERIOD AND HOLD THE ISSU E IN FAVOUR OF ASSESSEE. RESPECTFULLY, FOLLOWING THE SAME, WE ALLOW THE CLAI M OF THE ASSESSEEE. THE ISSUE OF APPEAL OF ASSESSEE IS ALLOWED. 14. IN THIS VIEW OF THE MATTER AND BEING CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OW N CASE FOR A.Y. 2009-10, WE DIRECT THE ASSESSING OFFICER TO ALLOW SET OFF OF UN ABSORBED DEPRECIATION OF A.Y. 1996- 97 TO AY. 2000-01. 15. THE NEXT ISSUE THAT CAME UP FOR CONSIDERATION F ROM REVENUES APPEAL IS ADDITION TOWARDS UNEXPLAINED PURCHASES FROM M/S. AM RISH TRADERS AND S P CORPORATION FOR ` .8,08,500/- . THE ASSESSING OFFICER MADE ADDITIONS TOWARDS PURCHASES FROM ABOVE TWO PARTIES ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FILE ANY EVIDENCES IN SUPPORT OF PURCHASES FROM THE ABOV E PARTIES IN VIEW OF THE FINDINGS OF THE INVESTIGATION WING OF MAHARASHTRA VAT DEPART MENT, THAT THESE PARTIES WERE INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. THE A SSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE EVEN FAILED TO PRODUCE T HE PARTIES IN QUESTION FOR EXAMINATION THEREFORE, OPINED THAT PURCHASES FROM T HE SAID PARTIES ARE BOGUS IN NATURE AND ACCORDINGLY, MADE ADDITION U/S. 69C OF T HE INCOME TAX ACT, 1961. 16. IT IS THE CONTENTION OF THE ASSESSEE THAT PURCH ASES FROM ABOVE PARTIES ARE SUPPORTED BY VALID DOCUMENTS INCLUDING PURCHASE BIL LS, PURCHASE ORDERS, GOODS RECEIPT ENTRY NOTES, LEDGER ACCOUNTS, PAYMENT FOR S AID PURCHASES HAS BEEN MADE THROUGH BANKING CHANNEL AND ALL THESE EVIDENCES HAV E BEEN PLACED BEFORE THE ASSESSING OFFICER, BUT HE MADE THE ADDITIONS ONLY O N THE BASIS OF INFORMATION FROM THIRD PARTIES IGNORING THE FACT THAT THE ASSESSEE H AS MADE VAT PAYMENT ON THE SAID PURCHASES. ITA NOS.1414 & 1419/MUM/2016 INDOKEM LTD. 9 17. WE HAVE HEARD BOTH THE SIDES AND HAVE PERUSED T HE MATERIAL AVAILABLE ON RECORD. THE LEARNED CIT(A) HAS RECORDED CATEGORICA L FINDING IN THE LIGHT OF EVIDENCE FILED BY THE ASSESSEE THAT PURCHASE FROM M/S. AMRIS H TRADERS AND S P CORPORATION AMOUNTING TO ` 8,08,500/- ARE SUPPORTED BY VALID DOCUMENTS. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: 11. GROUND OF APPEAL NO.9 RELATES TO THE DISALLOWA NCE OF PURCHASES FROM M/S. AMRISH TRADERS AND S P CORPORATION OF RS 1,96, 875/- AND RS 6,11,625/- RESPECTIVELY. IT IS SEEN THAT SUCH PURC HASES HAVE BEEN MADE DURING THE ORDINARY COURSE OF BUSINESS. THE APPELL ANT HAS ALSO SUBMITTED THE DOCUMENTARY EVIDENCE SUCH AS COPIES OF PURCHASE ORDERS, INVOICES, GOODS RECEIPT ENTRY NOTES, LEDGER ACCOUNTS AND BANK STATEMENTS. IT IS ALSO SEEN THAT BOTH THE PURCHASES ARE REFLECTED IN THE BOOKS OF ACCOUNT AND THE APPELLANT HAS MADE PAYMENT OF VAT ON THE SA ID PURCHASES. THE PAYMENT TO THESE TWO PARTIES HAVE BEEN MADE THROUGH A/C PAYEE CHEQUE DRAWN IN THEIR FAVOUR. THE APPELLANT HAS RELIED ON THE JURISDICTIONAL HIGH COURT ORDER DT. 17.12.2013 IN THE CASE OF CIT-1, MU MBAI VS. M/S. NIKUNJ EXIMP ENTERPRISES (PVT.) LTD. AND JURISDICTIONAL IT AT ORDERS IN THE CASE OF M/S. NIKUNJ EXIMP ENTERPRISES (ITA 8994/M/04, MADHU KANT B GANDHI (ITA NO. 5929/M/2013 AND ITA 6203/M/2013). THEREFORE, S INCE THE DISALLOWANCE ON THIS ACCOUNT IS IDENTICAL TO THEE J URISDICTIONAL DECISIONS, THE GROUNDS OF APPEAL NO.9 IS ALLOWED. THE A.O. IS DIRECTED TO DELETE THE ADDITION OF RS.8,08,500/-) 18. FACTS REMAIN UNCHANGED, THE REVENUE FAILS TO BR ING ON RECORD ANY EVIDENCE CONTRARY TO THE FINDINGS OF FACTS RECORDED BY LEARN ED CIT(A). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE CIT(A) WAS RIGHT IN DE LETING ADDITIONS MADE TOWARDS BOGUS PURCHASES. WE DO NOT FIND ANY ERROR IN THE O RDER OF THE CIT(A), HENCE, INCLINED TO UPHOLD HIS FINDINGS AND REJECT THE GROU ND OF THE REVENUE. 19. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D AND THAT OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5 TH JUNE 2018. SD/- SD/- (JOGINDER SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 15 TH JUNE, 2018. SA ITA NOS.1414 & 1419/MUM/2016 INDOKEM LTD. 10 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI