SIDDHI INDUSTRIES, MUMBAI V. ITO WD 19(3)(4), MUMBAI

ITA 1530/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1954 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 13-03-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VISHWAS JADHAV
• Assessee Lawyers: K R LAKSHMI NARAYANAN
• Keywords: Opportunity of being heard; Onus to prove
• Section: 143(3); 80IB; 133(6); 144

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SANJAY ARORA , AM ./ I.T.A. NO. 1530/MUM/2015 ( / ASSES SMENT YEAR: 2004 - 05 ) SIDDHI INDUSTRIES 303 - 304, SALISBURY PARK, PALI HILL BANDRA (W), MUMBAI - 400 050 / VS. ITO , WD, 19(3)(4), PIRAMAL CHAMBERS, PAREL, MUMBAI - 400 012 ./ ./ PAN/GIR NO. ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI K. R. L AKSHMINARAYANAN / RESPONDENT BY : SHRI VISHWAS JADHAV / DATE OF HEARING : 01.12.2015 / DATE OF PRONOUNCEMENT : 18 .12.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 34 , MUMBAI (CIT(A) FOR SHORT) DATED 24.12.2014 , DISMISSING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143( 3) R/W S. 254 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2004 - 05 VIDE ORDER DATED 24.12.2012. 2. THE APPEAL , PER ITS FIVE GROUNDS, RAISES A SINGLE ISSUE, I.E., THE VALIDITY IN LAW OF THE DISALLOWANCE OF CLAIM FOR D EDUCTION U/S.80 - IB(4) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THIS IS THE SECOND ROUND BEFORE THE TRIBUNAL ; IT , IN THE FIRST 2 ITA NO. 1530/MUM/2015 (A.Y. 2004 - 05) SIDDHI INDUSTRIES VS. ITO INSTANCE RESTORING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER (A.O.) WITH A VIEW TO ALLOW ONE MORE OPPORTU NITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM FOR DEDUCTION U/S. 80 - IB. T HE ASSESSEE BEING, IN VI EW OF THE REVENUE AUTHORITIES, UN ABLE TO IMPROVE ITS CASE IN ANY MANNER IN THE SET ASIDE PROCEEDINGS, CONFIRMED THE DISALLOWANCE, SO THAT , AGGRIEVED, THE ASSE SSEE IS IN APPEAL. IT WOULD BE IN ORDER TO REPRODUCE THE RELEVANT PART OF THE SAID ORDER BY THE TRIBUNAL (IN ITA NO. 7117/MUM/2007 DATED 30.3.2011/PB PGS. 1 - 8): 7 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION U/S 80IB ON TH E GROUND THAT THE NOTICE U/S 133(6) SENT TO THE PARTIES, FROM WHOM THE PLANT & MACHINERY WERE PURCHASED, WERE RETURNED UN - SERVED. FURTHER, THE ASSESSEE HAD TAKEN OVER THE RUNNING UNIT OF M/S VINOD PLASTICS. THEREFORE, IN ABSENCE OF VERIFIABLE EVIDENCE OF I NSTALLATION OF PLANT & MACHINERY WORTH RS. 6,86,847/ - , THE BENEFIT OF DEDUCTION U/S 80IB CLAIMED BY THE ASSESSEE WAS NOT ALLOWABLE. SINCE THERE WAS NO CO - OPERATION FROM THE SIDE OF THE ASSESSEE TO THE STATUTORY NOTICES, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE IN THE EX - PARTE ORDER PASSED BY HIM. IT IS THE SUBMISSION OF THE LD . COUNSEL FOR THE ASSESSEE THAT AFTER THE PLANT & MACHINERY WERE PURCHASED, IT HAS NO CONTROL OVER THE SELLER. IN OUR OPINION, FOR CLAIMING DEDUCTION U/S 80IB, THE ASS ESSEE MUST FULFIL THE CONDITIONS LAID DOWN IN THE PROVISIONS. HIS ONUS IN THE INSTANT CASE WAS MORE SINCE IT HAD TAKEN OVER A RUNNING UNIT NAMELY M/S VINOD PLASTICS. IT WAS ALL THE MORE NECESSARY ON THE PART OF THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER THAT IT HAD PURCHASED PLANT & MACHINERY WORTH RS. 6,86,847/ - , WHICH IS MORE THAN 80% OF THE TOTAL VALUE OF THE PLANT & MACHINERY. THE RESPONSIBILITY OF THE ASSESSEE INCREASES WHEN THE NOTICES WERE ISSUED U/S 133(6 ) ARE RETUNED BY THE POSTAL AUTHORITIES AND THE WARD INSPECTOR DEPUTED BY THE ASSESSING OFFICER ALSO WAS UNABLE TO TRACE THE PARTIES AT THE GIVEN ADDRESSES BY THE ASSESSEE. 7.1 IN THE INSTANT CASE, THE ASSESSEE FAILED TO DISCHARGE THE ONUS CAST ON IT. H OWEVER, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE MAY BE GIVEN ONE MORE OPPORTUNITY TO SUBSTANTIATE WITH EVIDENCE TO THE 3 ITA NO. 1530/MUM/2015 (A.Y. 2004 - 05) SIDDHI INDUSTRIES VS. ITO SATISFACTION OF THE ASSESSING OFFICER REGARD ING FULFILMENT OF THE CONDITIONS FOR CLAIMING DEDUCTION U/S 80IB. WE THEREFORE, DEEM IT PROPER TO RESTORE THE MATER BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM OF DEDUC TION U/S 80IB. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTI CAL PURPOSE. 3. THE PARTIES WERE HEARD AND THE MATERIAL ON RECORD PERUSED. THE FIRST OBSERVATION IN THE MATTER IS THAT THE ASSESSMENT IN THE FIRST ROUND WAS FRAMED U/S.144 OF THE ACT, I.E., AS A BEST JUDGMENT ASSESSMENT. THE ASSESSEE DID NOT CHALLENGE T HE SAME, I.E., THE INVOCATION OF SECTION 144 BY THE ASSESSING AUTHORITY. THE TRIBUNAL, NEVERTHELESS, IN THE INTEREST OF JUSTICE RESTORED THE MATTER BACK FOR A FRESH DECISION IN ACCORDANCE WITH LAW, THEREBY EFFECTIVELY CONVERTING A SECTION 144 ASSESSMENT (D ATED 13.12.2006), WHICH ASPECT OF THE ASSESSMENT WAS NOT IN DISPUTE, INTO A SECTION 143(3) ASSESSMENT. THE HONBLE HIGH COURT IN CIT VS. RAYALA CORPORATION P. LTD. [1995] 2 15 ITR 883 (MAD) HAS CLARIFIED THAT THIS IS IMPERMISSIBLE IN LAW. IT STANDS EXPLAINE D THAT THE ASSESSING AUTHORITY IS THE BEST JUDGE OF THE SITUATION. IT IS HIS BEST JUDGMENT AND NOT OF ANYONE ELSE. THE QUESTION AS TO WHETHER HE HAS COMMITTED ANY ERROR IN HIS JUDGMENT U/S. 144 OF THE ACT CAN BE DECIDED ONLY ON THE BASIS OF THE MATERIALS GATHERE D BY HIM AND NOT ON THE BASIS OF ANY MATERIALS THAT ARE LATER PRODUCED BY THE ASSESSEE. THERE CANNOT BE A PROCEDURE WHERE THE BEST JUDGMENT OF THE A.O. IS SUBJECT TO DISCRETION OF THE ASSESSEE TO PRODUCE EVIDENCE/MATERIAL AT THE APPELLATE STAGE AND, THUS, CONVERT THE PROCEEDINGS OF THE BEST JUDGMENT ASSESSMENT INTO THE PROCEEDINGS OF A REGULAR ASSESSMENT. THE TRIBUNALS ORDER IN THE FIRST ROUND STANDS ACCEPTED, ATT AIN ING FINALITY, SO THAT IT IS BINDING ON THE PARTIES AS WELL AS THE TRIBUNAL. TH IS ASPECT IS, HOWEVER, EMPHASIZED ONLY TO UNDERLINE THAT EVEN A S ALLOWANCE OF OPPORTUNITY TO THE ASSESSEE TO ESTABLISH ITS CASE WAS NOT IN DISPUTE, THE TRIBUNAL YET SET ASIDE THE ASSESSMENT SO AS TO ALLOW THE ASSESSEE ANOTHER , 4 ITA NO. 1530/MUM/2015 (A.Y. 2004 - 05) SIDDHI INDUSTRIES VS. ITO ONE LAST OPPORTUNITY TO SUBSTANTIATE H I S CLAIM. THIS, DESPITE IT BEING OF THE OPINION THAT THE ASSESSEE HAD NOT DISCHARGED THE ONUS CAST ON IT, WHICH WAS IN THE FACTS AND CIRCUMSTANCES OF THE CASE HEAVY IN - AS - MUCH AS IT HAD TAKEN OVER A RUNNING UNIT, M/S. VINOD PLA STICS AND, FURTHER, THE NOTICES U/S.133(6) TO THE PARTIES FROM WHOM MACHINERY CONSTITUTING 88% OF THE TOTAL MACHINERY - HAD BEEN PURCHASED, HAD CAME BACK UNSERVED EVEN AT THE NEW ADDRESSES SUPPLIED BY THE ASSESSEE. THIS IS IN FACT THE THIRD ROUND BEFORE THE TRIBUNAL ; IT HAVING DISMISSE D THE ASSESSEES APPEAL EARLIER FOR NON - PROSECUTION VIDE ITS ORDER DATED 09.7.2010, WHICH WAS SUBSEQUENTLY RECALLED. THE ASSESSEE IN THE SET ASIDE PROCEEDINGS FILED AFFIDAVITS FROM PARTNERS AND EMPLOYEES OF THE ASSESSEE - FIRM AND EVEN TH EI R FRIENDS. THE SA ME STAND DISMISSED AS BEING FROM INTERESTED PARTIES. HOW COULD THAT, IT IS WONDER ED , BE FAULTED ? HOW COULD THE AFFIDAVIT S , FURNISHED ON ITS OWN BY THE ASSESSEE, BE REGARDED AS EVIDENCE , PARTICULARLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE? THE QUESTION IS NOT OF THE GOODS (INJECTION MO U LD ED PLASTIC PRODUCTS) BEING NOT PRODUCED BY THE ASSESSEE, OR OF TH E REVENUE NOT FINDING ANY DEFECT IN ITS BOOKS OF ACCOUNT . A DISALLOWANCE OF A CLAIM, FOR WANT OF SATISFACTION OF THE CONDITION OF THE RELEVANT PROVISION, I S NOT PREDICATED UPON REJECTION OF THE BOOKS OF ACCOUNT. THE ISSUE IS THE GENUINE NESS OF THE PURCHASE OF MACHINERY, AND WHICH IS TO ESTABLISHED BY THE ASSESSEE. IT CAN RELY ON THE BOOKS OF ACCOUNT NO DOUBT, BUT THE ENTRIES THEREIN, IT IS TRITE LAW, ARE NOT CONC LUSIVE OR DETERMINATIVE OF THE MATTER. THE ASSESSEE H A VING TAKEN OVER A RUNNING UNIT, I.E., WHICH WAS ALREADY IN PRODUCTION , THE PRODUCTION OF GOODS IS NOT DENIED OR IN DISPUTE. BUT, HAVING TAKEN OVER A RUNNING UNIT , THE ASSESSEE , YET , ACQUIRES MACHIN ERY ONLY FOR RS.86,505/ - , I.E., AT A FR ACTION OF THE TOTAL MACHINERY REQUIRED FOR PRODUCTION, PURCHASING THE BALANCE MACHINERY COSTING RS.6.87 LACS FROM OUTSIDE WHICH IS PUZZLING INDEED . THE ASSESSEE HAS IN THE S AID PROCEEDINGS FURTHER CLARIFIED THAT IT WAS NOT IN A POSITION TO MAKE AVAILABLE THE CURRENT ADDRESSES OF THE PARTIES. HOW, THEN, CAN IT ASSAIL THE REVENUE FOR HOLDING THAT NO IMPROVEMENT IN ITS CASE STANDS MADE BY THE ASSESSEE ? RATHER, THAT BEING THE POS ITION , ON WHAT BASIS, IT IS WONDER ED, DID IT S EEK 5 ITA NO. 1530/MUM/2015 (A.Y. 2004 - 05) SIDDHI INDUSTRIES VS. ITO INDULGENCE BY THE TRIBUNAL FOR BEING ALLOWED ONE MORE OPPORTUNITY TO ESTABLISH ITS CASE. TRUE, THE ASSESSEE CANNOT EXERCISE ANY CONTROL OVER THE PARTIES ONCE THE TRANSACTION IS OVER, A POINT SOUGHT TO BE EMPHASIZED WITH REFERENCE TO CASE LAW. HOWE VER, IN THE PRESENT CASE , IT NEEDS TO BE NOTED, AS WAS ALSO BY THE TRIBUNAL O N THE EARLIER OCCASION , THAT THE WARD INSPECTOR HAD REPORTED THE PARTIES TO BE UNTRACEABLE, I.E. , NOT EXISTING AT THE GIVEN ADDRESS ES (REFER PARA 2 OF THE ASSESSMENT ORDER). THIS IS DEFINITELY A DIFFERENT MATTER . SURELY, THE ASSESSEE COULD NOT BE PREJUDICED WHERE THE CORRESPONDING PARTY HAD SHIFTED ITS ADDRESS OR RELOCATED , BUT THE M OO T POINT IN THE PRESENT CASE IS : IS IT SO ? WHERE DID THE PART IES DISAPPEAR ? A PARTY MAY SHIFT ADDRES S, BUT THERE WOULD BE A H O S T OF ANTECEDEN TS AND EVIDENCE S TO SHOW THAT IT WAS EXISTING AT THE GIVEN ADDRESS DURING A PARTICULAR PERIOD. THE REPORT BY THE WARD INSPECTOR, WHICH HAS NOT BEEN CHALLENGED, COMPLETELY INDICTS AND DISPROVES THE ASSESSEES CASE. E VEN THE DATE (OR APPROXIMATE TIME) OF CHANGE OF ADDRESS HAS NOT BEEN SPECIFIED. WHY , IN - AS - MUCH AS ITS REGISTRATION UNDER THE VARIOUS LAW S , INCLUDING UNDER THE ACT IN THE FORM OF PAN ; ELECTRICITY CONNECTION , ETC. WOULD OBTAIN , INFORMATION ON THEIR CURRENT ADDRESS ES W OULD BE AVAILABLE AND COULD BE SOUGHT FROM THE RELEVANT DEPARTMENTS. AN EXAMINATION OF THE MATERIAL ON RECORD ALSO INSPIRE S LITTLE CONFIDENCE. IN THE BILL OF M/S. POLYERA INDUSTRIES, JOGESHWARI (W), MUMBAI DATED 07.4.2003 (PB PG. 9) , AS POINTED OUT BY THE LD. DR, THE ASSESSEES NAME IS OVERWRITTEN. THE BILL STATE S OF THE PAYMENT TERMS AS I MMEDIATE , WHILE THE PAYMENTS HAVE BEEN MADE ONLY IN JULY, 2006 (PB PG. 10). THAT IS, A PART Y SELLING GOODS ON CASH BASIS, YET ALLOWS, FOR NO APPARENT REASON, CREDIT F OR 27 MONTHS; THE ASSESSEE MAKING THE PAYMENT AT THE TIME WHEN THE ASSESSMENT PROCEEDINGS WERE ON . THE PAYMENT TO THE OTHER PARTY, M/S. MEWA HYDRAULICS, NEW DELHI , IS AGAIN OVER AN EXTENDED PERIOD - FROM JULY, 2004 (I.E., 15 MONTHS AFTER THE DATE O F PURCHASE 15.4.2003) TO MARCH, 2006. HOW COULD, THEN, THE ASSESSEE SAY THAT HE WAS NOT AWARE OF THE WHEREABOUTS OF T HE PARTIES AFTER THE GOODS (MACHINERY) W AS PURCHASED? WHY COULD THE ASSESSEE , PAYING THE PARTIES , AND THUS IN TOUCH WITH THEM, NOT SUPPLY THE I R ADDRESS OR EVEN PRODUCE THEM BEFORE THE A.O.? 6 ITA NO. 1530/MUM/2015 (A.Y. 2004 - 05) SIDDHI INDUSTRIES VS. ITO RATHER, ON THE OTHER HAND, IT IS ONLY WHERE THE PARTIES HAVE TREMENDOUS TRUST AND CONFIDENCE IN EACH OTHER , TH AT CREDIT, FOR YEARS, IS ALLOWED. THIS FACT , WHICH IS DIVORCED FROM THE BUSINESS REALITIES, NAY, THE TERMS OF THE CONTRACT ITSELF , MAKES THE TRANSACTIONS AS HIGHLY SUSPECT . FURTHER, IF THE PARTIES HAVE ONCE AGAIN CHANGED THEIR ADDRESSES, IN - AS - MUCH AS THEY WERE NOT FOUND AT THE CHANGED ADDRESS SUPPLIED BY THE ASSESSEE, THE QUESTION IS: W HICH ARE THESE PARTIES THAT CHANGE THEIR ADDRESSES - A PROCESS THAT DISLOCATES ONE COMPLETELY, BESIDES ENTAILING PROHIBITIVE COSTS, EVER SO OFTEN ? THERE IS , IN ANY CASE, N O CONTEM PORANEOUS MATERIAL EVIDENCING THE PURCHASE, VIZ. O CTROI, FREIGHT, TRANSIT INSURANCE, INSURANCE, ETC. ON RECORD , OR EVEN EXPENDITURE BY WAY OF UNLOAD ING AND INSTALLATION OF THE MACHINERY. THE ASSESSEES CASE REMAINS WHOLLY UNPROVED, IF NOT DISPROVED. IT HAS, RATHER, ABUSE D THE PROCESS OF LAW ONLY WITH A VIEW TO GAIN TIME IN THE HOPE OF A FAVOURABLE VERDICT IN - AS - MUCH AS ALL IT FURNISHE S IN THE SET ASIDE PROCEEDINGS IN EVIDENCE IS AFFIDAVIT S FROM SELF AND RELATED PARTIES. THE ONUS TO PROVE ITS RETURN, AND THE CLAIMS PREFERRED THEREBY, IS ONLY ON THE ASSESSEE (REFER : CIT VS . CALCUTTA AGENCY LTD. [1951] 19 ITR 191 ( SC) ) , WHICH IT HAS COMPLETELY FAILED TO. RELIANCE ON CASE LAW; THE MATTER BEING PRIMARILY FACTUAL, TO BE DECIDED BASED ON FACTUAL FINDINGS, IS OF LITTLE CONSEQUENCE. IN FACT, AS REGARDS THE PROPOSITION OF LAW, THE REVENUE HAS RELIED ON CASE LAW, WHIC H HAS NOT BEEN MET BY THE ASSESSEE (REFER PARA 2, PG. 4 OF THE ASSESSMENT ORDER). I, ACCORDINGLY, CONFIRM THE ASSESSMENT. 4. IN THE RESULT, THE ASSESSEES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON DECE MBER 18 , 201 5 SD/ - (S ANJAY ARORA) / A CCOUNTANT MEMBER MUMBAI ; DATED : 18 . 12 .201 5 7 ITA NO. 1530/MUM/2015 (A.Y. 2004 - 05) SIDDHI INDUSTRIES VS. ITO . . ./ ROSHANI , SR. PS / COPY OF THE ORDE R FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI