ACIT, Pune V. SUPERFLEX ENGINEERING & POLYMERS P.LTD,

ITA 1460/PUN/2013

• Counselvise Citation: 146024514 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 10-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S NAIK
• Assessee Lawyers: S UMOD S KHOT
• Keywords: Unexplained cash credit; Additional evidence; Corroborative evidences
• Section: 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO . 146 0 /PN/20 1 3 ASSESSMENT YEAR : 200 6 - 07 THE ASSISTANT COMMISSIONER OF INCOM E TAX, CIRCLE 6, PUNE, PMT BUILDING, SWARGATE, PUNE VS. SUPERFLEX ENGINEERING & POLYMERS PRIVATE LIMITED, C - 63, 2 ND PHASE, ADITYAPUR INDUSTRIAL AREA, ADITYAPUR, JAMSHEDPUR (APPELLANT) (RESPONDENT) PAN NO. AACCS9243A REVENUE BY: SHRI P.S. NAIK ASSESSEE BY: SHRI S UMOD S. KHOT DATE OF HEARING : 10 - 11 - 2014 DATE OF PRONOUNCEMENT : 17 - 11 - 2014 ORDER PER R.S . PADVEKAR , JM : - TH IS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - III, PUNE DATED 31 - 10 - 2011 FOR THE A.Y . 2006 - 07. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED ON THE FACTS AND ON CIRCUMSTANCES OF THE CASE AND IN LAW, BY ADMITTING THE ADDITIONAL EVIDENCES & DOCUMENTS WHICH WERE NOT PRODUCED BEFORE THE AO UNDER RULE 46A OF THE I.T. R ULES, 1962. 2. FOR THIS AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF LD. CIT(A) - III, PUNE MAY BE VACATED AND THAT THE AO MAY BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS O F APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL, PUNE 2. THE MAIN GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ADMITTING THE ADDITIONAL EVIDENCE AND DOCUMENTS WHICH WERE 2 ITA NO . 146 0 /PN/2013, SUPERFLEX ENGINEERING & POLYMERS PRIVATE LIMITED, JAMSHEDPUR NOT AVAILABLE BEFORE THE ASS ESSING OFFICER. THE FACTS WHICH ARE REVEALED FROM THE RECORDS AS UNDER. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE A.Y. 2006 - 07 DECLARING TOTAL LOSS OF RS.78,92,104/ - ON 20 - 11 - 2006. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY . THE ASSESS ING OFFICER ISSUED THE DIFFERENT NOTICES OF HEARING TO THE ASSESSEE AS PER THE ADDRESS AVAILABLE ON RECORD BUT IT APPEARS THAT THE NOTICES WERE RETURNED BY THE POSTAL AUTHORITY UN - SERVED. IT ALSO APPEARS THAT THE ASSESSING OFFICER TRIED TO FIND OUT THE AD DRESS OF THE ASSESSEE COMPANY FROM THE OFFICE OF THE REGISTRAR OF THE COMPAN IES A ND IT WAS NOTICED THAT THE ASSESSEES ADDRESS WAS SHOWN AT JAMSHEDPUR . A S THERE WAS NO RESPONSE AS NOTED BY THE ASSESSING OFFICER , HE COMPLETED THE ASSESSMENT OF THE ASSESSEE U/S. 144 OF THE INCOME - TAX ACT EX - PARTE VIDE ASSESSMENT ORDER DATED 28 - 11 - 2008 DETERMINING TOTAL INCOME OF RS.42,31,050/ - . THE ASSESSING OFFICER MADE THE FOLLOWING ADDIT I ONS: A. ON ACCOUNT OF SALARY, WAGES, BONUS : RS.10,55,064/ - B. ON ACCOUNT OF INT. AND MIS C. EXPENSES : RS.16,50,662/ - C. DISALLOWANCE U/S. 40A(2)(B) : RS.8,04,215/ - D. UNEXPLAINED CASH CREDIT : RS.99,92,194/ - TOTAL RS.1,35,02,135/ - 3. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD. CIT(A) . IN RESPECT OF THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS SALARY, WAGES AND BONUS OF RS.10,55,064/ - , THE LD. CIT(A) DELETED THE SAID ADDITION REJECTING THE REASONS GIVEN BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS DEBITED AGGREGATE EXPENDITU RE TO THE EXTENT OF RS.54,65,699/ - TOWARDS SALARIES, WAGES AND BONUS AS AGAINST OF RS.44,10,635/ - WHICH WAS DEBITED DURING THE PRECEDING ASSESSMENT YEAR. THE LD. CIT(A) ALSO DID NOT AGREE WITH THE CONCLUSION OF THE ASSESSING OFFICER THAT IT WAS UNREASONAB LE EXPENDITURE. THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE PRODUCED THE LEDGER ACCOUNT EXTRACTS SHOWING EXPENDITURE INCURRED DURING THE 3 ITA NO . 146 0 /PN/2013, SUPERFLEX ENGINEERING & POLYMERS PRIVATE LIMITED, JAMSHEDPUR YEAR UNDER THE ABOVE HEADS AND ALL THE PAYMENTS WERE MADE BY THE CHEQUE S OF HDFC BANK. 4. IN RESPECT OF THE ADDIT ION OF RS.16,50,662/ - TOWARDS INTEREST AND MISCELLANEOUS EXPENSES. THE REASONS GIVEN BY THE ASSESSING OFFICER WAS THAT NO DETAILS/EVIDENCES WERE AVAILABLE ON RECORD. AS OBSERVED BY THE LD. CIT(A) AS PER THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE ASSESSEE HAS INCURRED THE FOLLOWING EXPENDITURE: I. BANK CHARGES (PAID TO HDFC BANK) : RS.40,402.39/ - II. INTEREST ON BANK LOAN (PAID TO CENTRAL BANK) : RS.4,19,597 .00 / - TOTAL RS.4,59,999.39/ - 4.1. THE LD. CIT(A) WAS SATISFIED THAT THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE WAS IN RESPECT OF THE CC ACCOUNTS (CASH CREDIT) AND BANK CHARGES WERE ALSO PAID TO THE BANK AND ACCORDINGLY DELETED THE ADDITION OF RS.4,59,999/ - . IN RESPECT OF THE BALANCE MISCELLANEOUS EXPENDITURE OF RS.11,90,663/ - WHICH WAS DISA LLOWED BY THE ASSESSING OFFICER ON REASON THAT NO SUPPORTING DOCUMENTS WERE FURNISHED DURING THE ASSESSMENT PROCEEDINGS. THE LD. CIT(A) DELETED THE ADDITION TO THE EXTENT OF RS.10,71,597/ - AND SUSTAINED THE ADDITION OF RS.1,19,066/ - . THE REASONS GIVEN BY THE LD. CIT(A) ARE AS UNDER: 5.2.1. FROM THE ABOVE, IT CAN BE SEEN THAT THE EXPENDITURE INCLUDES CERTAIN ITEMS SUCH AS VEHICLE EXPENSES, POSTAGE AND TELECOMMUNICATION ETC., WHEREIN ELEMENT OF NON - BUSINESS NATURE CANNOT BE RULED OUT. THIS IS MORE SO FOR THE REASON THAT THE APPELLANT DOES NOT APPEAR TO HAVE MAINTAINED ANY LOG BOOK OR REGISTERS INDICATING THE USAGE OF VEHICLE EXPENSES. SAME IS THE CASE WITH THE TELECOMMUNICATION EXPENSES. MOST OF THE VOUCHES FURNISHED BY THE APPELLANT IN SUPPORT OF THESE EXPENSES ARE FOUND TO BE SELF MADE. THUS, THOUGH THERE IS NO JUSTIFICATION FOR THE DISALLOWANCE OF THE ENTIRE EXPENDITURE BY THE ASSESSING OFFICER, THE APPELLANT HAS FAILED TO SUBSTANTIATE CONCLUSIVELY THAT THE ENTIRE EXPENDITURE HAS BEEN INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HAVING CONSIDERED THE FACTS OF THE CASE AND 4 ITA NO . 146 0 /PN/2013, SUPERFLEX ENGINEERING & POLYMERS PRIVATE LIMITED, JAMSHEDPUR THE NATURE OF THE VARIOUS EXPENDITURES INVOLVED, I AM OF THE VIEW THAT IT WOULD BE FAIR AND REASONABLE IF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS RESTRICTED TO 10% OF THE AGGREGATE EXPENDITURE OF RS.11,90,663/ - . ACCORDINGLY, THE DISALLOWANCE IS RESTRICTED TO RS.1,19,066/ - AND THE APPELLANT GETS CONSEQUENTIAL RELIEF OF RS.10,71,597/ - (RS.11,90,663 1,19,066). 5. SO FAR AS THE DISALLOWANCE U/S. 40A(2)(B) IS CONCERNED AS PER THE BREAK - UP GIVEN IN THE IMPUGNED ORDER THE SAID DISALLOWANCE COMPRISES THE FOLLOWING AMOUNTS: I. DIRECTORS REMUNERATION : RS.1,92,294/ - II. LEAVE ENCASHMENT : RS.1,05,000/ - III. GRATUITY : RS.5,06,921/ - I. TOTAL RS.8,04,215/ - 5.1. THE LD. CIT(A ) DELETED THE ENTIRE ADDITION AND THE REASONS GIVEN BY THE LD. CIT(A) ARE AS UNDER: 6.2. THUS, IT CAN BE SEEN THAT THE ACTUAL REMUNERATION PAID TO DIRECTORS DURING THE YEAR IS ONLY RS.1,92,294/ - AND THE OTHER COMPONENTS REPRESENT, LEAVE ENCASHMENT AND GR ATUITY WHICH ARE INCLUDED IN THE EXPENDITURE CLAIMED UNDER THE RESPECTIVE HEADS 'CLAIMED SEPARATELY. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE MERELY CITING THE REASON THAT NO SUPPORTING DETAILS WERE MADE AVAILABLE BEFORE HIM. NOTHING HAS BEEN BROUG HT ON RECORD TO SHOW THAT THE CLAIM WAS EXCESSIVE OR UNREASONABLE IN ANY WAY. IN FACT, THE CLAIM OF REMUNERATION HAS COME DOWN DRASTICALLY DURING THIS YEAR FROM RS.9,60,000/ - CLAIMED DURING THE PRECEDING YEAR. SIMILARLY, IT IS ALSO NOTABLE THAT AGAINST THE GRATUITY COMPONENT OF RS.5,06,921/ - INCLUDED IN THE TOTAL PAYMENT OF RS.8,04,215/ - , THE GRATUITY PAYMENT ACTUALLY CLAIMED IN THE PROFIT & LOSS ACCOUNT IS ONLY TO THE EXTENT OF RS.2,47,038/ - WHILE THE REMAINING PORTION OF THE PAYMENT WAS SET OFF AGAINST GR ATUITY CLAIM RECEIVED FROM LIC GROUP GRATUITY SCHEME. UNDER THE CIRCUMSTANCES, THERE IS ABSOLUTELY NO JUSTIFICATION FOR THE ASSESSING OFFICER IN DISALLOWING THE ENTIRE AMOUNT OF RS.8,04,215/ - . ACCORDINGLY, THE DISALLOWANCE MADE ON THIS GROUND IS HEREBY D ELETED. 5 ITA NO . 146 0 /PN/2013, SUPERFLEX ENGINEERING & POLYMERS PRIVATE LIMITED, JAMSHEDPUR 6 . T HE NEXT ADDITION WAS IN RESPECT OF UNEXPLAINED CASH CREDIT AND THE SAID ADDITION WAS TO THE EXTENT OF RS.9 9 ,92,194/ - . THERE WERE UNSECURED LOAN S AVAILED BY THE ASSESSEE . T HE ASSESSING OFFICER MADE THE ENTIRE ADDITION OF RS. 99,92,194/ - TREA TING THE SAME AS UNEXPLAINED CASH CREDIT S BY GIVING THE REASONS THAT THERE WAS NO SUPPORTING EVIDENCE, LIKE NAME AND ADDRESS OF THE CREDITORS, PAN/GIR NO., MODE AND DATE OF PAYMENT OF LOAN, THEIR CREDITWORTHINESS ETC. BEFORE THE LD. CIT(A) THE ASSESSEE FI LED THE LOAN CONFIRMATION LETTERS FROM THE RESPECTIVE PARTIES, STATEMENT OF ACCOUNT S AND EXTRACTS OF BANK ACCOUNT ETC. THE LD. CIT(A) EXAMINED THE SAME AND DELETED THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER U/S. 68 OF THE ACT. 7 . WE HAVE HEARD TH E RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE ONLY GRIEVANCE OF THE LD. DR IS THAT THE ASSESSEE FILED ALL THE DOCUMENTS WHICH WERE NOT BEFORE THE ASSESSING OFFICER AND IN SUCH CIRCUMSTANCES THE LD. CIT(A) SHOULD HAVE SENT THE MATTER BACK TO THE ASSESSING OFFICER. WE ARE UNABLE TO ACCEPT THE PLEA OF THE REVENUE FOR THE REASON THAT THERE IS NO SPECIFIC GROUND IN RESPECT OF THE ANY SPECIFIC EVIDENCE WHICH HAS BEEN OBJECTED . O NLY GENERAL GROUND IS TAKEN BY THE REVENUE. ON PERUSAL OF THE IMP UGNED ORDER WE FIND THAT IN RESPECT OF THE FIRST THREE ADDITIONS/DISALLOWANCES , THE LD. CIT(A) EXAMINED THE BOOKS OF ACCOUNT AND ALLOWED THE CLAIM OF THE ASSESSEE. 8 . SO FAR AS ADDITION U/S. 68 IS CONCERNED , IT WAS ALSO TEST CHECK ED BY THE LD. CIT(A) ON THE BASIS OF BOOKS OF ACCOUNT AND THE ASSESSEE ALSO FILED THE CONFIRMATION LETTERS AND OTHER RELATED DOCUMENTS. IN OUR OPINION IT IS DISCRETION OF THE LD. CIT(A) ON THE FACTS OF EACH CASE WHETHER TO CALL FOR THE REMAND REPORT OR NOT IF THE ADDITIONAL EVI DENCE IS ADMITTED. MOREOVER, ADMITTING THE ADDITIONAL EVIDENCE IS ALSO THE DISCRETION OF THE LD. CIT(A). ADMITTEDLY, AS PER THE ASSESSMENT ORDER THERE WAS NO PROPER SERVICE OF THE NOTICES O N THE ASSESSEE AND THE ASSESSING OFFICER MADE 6 ITA NO . 146 0 /PN/2013, SUPERFLEX ENGINEERING & POLYMERS PRIVATE LIMITED, JAMSHEDPUR VERY HIGH PITCH ASS ESSMENT ALMOST DISALLOWING ENTIRE EXPENDITURE. THE LAW IS WELL SETTLED THAT WHILE COMPLETING ASSESSMENT U/S. 144 OF THE ACT THE ASSESSING OFFICER HAS TO BE JUST AND MORE RESPONSIBLE TOWARDS HIS DUTY AS THE ASSESSING OFFICER . AS T HERE WAS NO PROPER SERVIC E OF THE NOTICES O N THE ASSESSEE , I N OUR OPINION THE ASSESSEE WAS PREVENTED FROM FILING THE REQUIRED EVIDENCES BEFORE THE ASSESSING OFFICER. ON THE FACTS OF THIS CASE, WE FIND NO MERIT IN THE GROUNDS TAKEN BY THE REVENUE. ACCORDINGLY, ALL THE GROUNDS TAK EN BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 17 - 11 - 201 4 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED : 17 TH NOVEMBER, 201 4 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - III, PUNE 4 THE CIT - III, PUNE 5 6 THE DR, ITAT, B BENCH, PUNE. GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR INCOME TAX APPE LLATE TRIBUNAL PUNE