The ITO, Ward-6(3), Ahmedabad V. Shree Jalaram Industries, Ahmedabad

ITA 1435/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1421 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 1435/AHD/2012 (ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER, WARD- 6(3), AHMEDABAD V/S M/S. SHREE JALARAM INDUSTRIES 264/265, GIDC, HANSALUR, VIRAMGAM DISTT: AHMEDABAD-382150 (APPELLANT) (RESPONDENT) PAN: AATFS0453Q APPELLANT BY : SHRI KAMLESH MAKWANA, SR. D.R. RESPONDENT BY : SHRI ASEEM L. THAKKAR, A.R. ( )/ ORDER DATE OF HEARING : 07 -06-20 16 DATE OF PRONOUNCEMENT : 08 -06-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF LD. CIT(A)-XI, AHMEDABAD DATED 27.04.2012 PERTAINING TO A.Y. 2009-10. 2. THE SUBSTANTIVE GRIEVANCE OF THE REVENUE READS AS U NDER: ITA NO. 1435 /AHD/2012 . A.Y. 2009-1 0 2 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 43,73,783/- MADE BY THE ASSESSING OFFICER U/S. 41(1 ) OF THE I.T. ACT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS. 2,24,810/- MADE BY THE ASSESSING OFFICER U/S. 3 6(1)(III) OF THE I.T. ACT. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF RS. 51,31,795/- MADE ON ACCOUNT OF PROCESS LOSS. 3. WHILE SCRUTINIZING THE RETURN OF INCOME FOR THE YEA R UNDER CONSIDERATION, THE A.O. FOUND INCREASE IN CREDITORS FROM IMMEDIATELY PRECEDING FINANCIAL YEAR. THE ASSESSEE WAS ASKED TO FURNISH CONFIRMATIONS OF THE CREDITORS. ON RECEIVING NO PLA USIBLE REPLY, THE A.O. MADE AN ADDITION OF RS. 43,73,783/- U/S. 41(1) OF T HE ACT. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND CLAIMED THAT ALL THE NECESSARY DETAILS WERE MADE AVAILABLE TO THE AS SESSING OFFICER WHO HAS SIMPLY RUBBISHED THE DETAILED EXPLANATION FILED BY THE ASSESSEE. IT WAS EXPLAINED THAT THE CREDITORS ARE TRADE CREDITOR S. SINCE CERTAIN GOODS WERE PURCHASED FROM THESE PERSONS ON CREDIT, THEREFORE, THE LIABILITY HAS BEEN SHOWN IN THE BALANCE SHEET. AFTE R CONSIDERING THE FACTS AND THE SUBMISSIONS AND AFTER PERUSING VARIOU S EVIDENCES FURNISHED BY THE ASSESSEE, THE LD. CIT(A) OBSERVED THAT THE ADDITION MADE BY THE A.O. IS TOTALLY UNWARRANTED AND UNTENAB LE AND DELETED THE ADDITION OF RS. 43,73,783/-. 5. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD . D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O., LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AU THORITIES AND DREW OUR ATTENTION TO THE RELEVANT DOCUMENTARY EVIDENCES PLACED IN THE FORM OF PAPER BOOK WHICH WERE ALSO BEFORE THE LOWER AUTHORITIES. ITA NO. 1435 /AHD/2012 . A.Y. 2009-1 0 3 6. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY PERUSED T HE DOCUMENTARY EVIDENCES REFERRED TO BY THE LD. COUNSEL. WE FIND T HAT THERE IS NO DISPUTE THAT THE CREDITORS ARE TRADE CREDITORS EMER GING OUT OF THE PURCHASES MADE DURING THE YEAR UNDER CONSIDERATION. FIRSTLY, WE FAIL TO UNDERSTAND HOW THE LIABILITY CEASED TO EXIST ON ACC OUNT OF PURCHASES MADE DURING THE YEAR ITSELF. SECONDLY FROM PAGES 23 ONWARDS IN THE PAPER BOOK, WE FIND THAT THE ASSESSEE HAS GIVEN DET AILED EXPLANATION IN A TABULAR FORM EXPLAINING EACH AND EVERY CREDIT PURCHASE ALONG WITH THE NAME OF THE CREDITOR. WE FIND THAT THE A.O. HAS SIMPLY RUBBISHED THE DETAILED SUBMISSION WITHOUT BRINGING COGENT MAT ERIAL EVIDENCE ON RECORD. THE LD. CIT(A) HAS RIGHTLY APPRECIATED ALL THESE EVIDENCES IN FAVOUR OF THE ASSESSEE. THEREFORE, NO INTERFERENCE IS CALLED FOR. GROUND NO. 1 IS ACCORDINGLY DISMISSED. 7. GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITIO N OF RS. 2,24,810/-. 8. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O. N OTICED THAT THE ASSESSEE HAS DEBITED INTEREST OF RS. 7,82,032/- IN ITS PROFIT AND LOSS ACCOUNT. THE A.O. FURTHER FOUND THAT THE ASSESSEE H AS NOT CHARGED ANY INTEREST ON THE ADVANCES GIVEN BY IT. THE A.O. DISA LLOWED RS. 2,24,810/- OUT OF THE INTEREST PAID BY THE ASSESSEE . 9. BEFORE THE LD. CIT(A), THE ASSESSEE EXPLAINED THAT THE INTEREST FREE ADVANCES HAVE BEEN MADE OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS AND THE FACTUAL MATRIX, THE LD. CIT(A) WAS CONVINCED THAT THERE WERE SUFFIC IENT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE TO MAKE THE INTER EST FREE ADVANCES AND ACCORDINGLY DELETED THE ADDITIONS. ITA NO. 1435 /AHD/2012 . A.Y. 2009-1 0 4 10. BEFORE US, THE LD. D.R. COULD NOT BRING ANY EVIDENC E IN SUPPORT OF THE REVENUE TO CONTROVERT THE FINDINGS OF THE LD. C IT(A). WE FIND THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FU NDS AVAILABLE WITH IT TO MAKE THE INTEREST FREE ADVANCES. THE FACTS OF TH E CASE ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE HONBLE HIG H COURT OF BOMBAY IN THE CASE OF RELIANCE UTILITIES & POWER 313 ITR 3 40 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT IF THE INTEREST FR EE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT, NO DISALLOWANCE OF INTEREST IS WARRANTED. AS THE FIRST APPELLATE AUTHORITY HAS FOL LOWED THE RATIO LAID DOWN BY THE HONBLE HIGH COURT (SUPRA), WE DECLINE TO INTERFERE. GROUND NO. 2 IS DISMISSED. 11. GROUND NO. 3 RELATES TO THE DELETION OF THE ADDITIO N OF RS. 51,31,795/- MADE ON ACCOUNT OF PROCESS LOSS. 12. ON VERIFICATION OF THE MANUFACTURING & TRADING ACCO UNT, THE A.O. FOUND THAT THE ASSESSEE HAS CLAIMED PROCESS LOSS. I T WAS NOTICED THAT THE ASSESSEE HAS CALCULATED THE LOSS AS FOLLOWS: SR. NO. DESCRIPTION QTY. RATE (IN RS.) AMOUNT (IN RS.) 1 KALYAN KAPAS 12906 RS. 383.83 49,53,710/- 2 KALYAN KAPASIA 340 RS. 523.78 1,78,085/- TOTAL 51,31,795/- AMOUNT OF PROCESS LOSS WORKED OUT 51,31,795/- 13. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM OF LOSS . ON RECEIVING NO PLAUSIBLE REPLY, THE A.O. DISALLOWED THE ENTIRE PROCESS LOSS AND MADE AN ADDITION OF RS. 51,31,795/-. ITA NO. 1435 /AHD/2012 . A.Y. 2009-1 0 5 14. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). IT WAS EXPLAINED THAT THE PRIMARY RAW MATERIAL IS KALA A ND WHEN IT IS CLEANED THALIYA ARE REMOVED. THE PROCESS LOSS IS ON ACCOUNT OF THIS REMOVAL OF THALIYA. 15. THE LD. CIT(A) WAS CONVINCED WITH THIS CLAIM OF THE ASSESSEE. THE LD. CIT(A) FURTHER OBSERVED THAT SUCH LOSSES AR E CONSISTENTLY CLAIMED IN THE EARLIER YEARS AND THE SAME HAVE BEEN ALLOWED AND ACCORDINGLY DELETED THE ADDITION OF RS. 51,31,795/- . 16. BEFORE US, THE LD. D.R. STRONGLY RELIEF UPON THE FI NDINGS OF THE A.O. LD. COUNSEL FOR THE ASSESSEE COULD NOT ADD ANY THING NEW TO WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 17. WE HAVE CAREFULLY CONSIDERED THE FACTS IN ISSUES BE FORE US. IT IS THE MATTER OF COMMON KNOWLEDGE THAT RAW COTTON CONT AINS SO MANY IMPURITIES AND TO MAKE IT USABLE, THE SEEDS HAVE TO BE REMOVED. ON SUCH REMOVAL THERE IS BOUND TO HAVE SOME PROCESS LO SS. AS RIGHTLY OBSERVED BY THE LD. CIT(A) THAT SUCH LOSSES WERE VE RY MUCH THERE IN THE EARLIER ASSESSMENT YEARS WHERE NO ADDITIONS WER E MADE. FOLLOWING THE RULE OF CONSISTENCY, WE DECLINE TO INTERFERE WI TH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 3 IS ACCORDINGLY DISMISSED. 18. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 08- 06 - 201 6. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY