ACIT, Trichy V. M/s. Santhosh Textile Process, Tiruppur

ITA 1630/CHNY/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7639 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 04-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S RAMACHANDRAN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE DR.O.K.NARAYANAN, VICE PRESIDENT AND SHRI GEORGE MATHAN JUDICIAL MEMBER .. ITA NO.1630/MDS./10 A.Y : 2006-2007 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1, 121, SIXTY FEET ROAD, TIRUPUR 641 602. VS. M/S.SANTHOSH TEXTILE PROCESS, 165, SANTHOSH GARDEN, KULATHUPUDUR, ANDIPALAYAM POST, TIRUPUR 641 604. ( PAN NO.AALGS 1491 G ) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHAJI P JACOB DEPARTMENT BY : SHRI S.RAMACHANDRAN O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT: THIS APPEAL IS FILED BY THE REVENUE. THE RELEVA NT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF CIT(A)- II AT COIMBATORE DATED 06.07.2010 THE APPEAL ARIS ES OUT OF THE ASSESSMENT COMPLETED U/S. 143(3) OF THE INCOME TAX ACT, 1961. PAGE 2 OF 4 ITA.1630 /MDS/10 2. THE GROUND RAISED BY THE REVENUE IN THIS APPEAL IS THAT THE CIT(A) HAS ERRED IN NOT CONSIDERING THE DISALLOWANC E OF ` .32,89,930/- OUT OF A TOTAL EXPENDITURE FOR WATER PURCHASE AMOUN TING TO ` .77,82,148/- IN AS MUCH THE WATER BILLS FOR THE AMO UNT DISALLOWED WERE NOT IN THE NAME OF THE ASSESSEE AND WERE NOT S UPPORTED BY ANY EVIDENCE. IT IS THE CASE OF THE REVENUE THAT THE C IT(A) HAS ERRED IN DELETING THE ADDITION MADE TOWARDS PURCHASE OF FIRE WOOD ON THE GROUND THAT THE PURCHASES WERE SUPPORTED BY PROPER EVIDENCE AND THAT THE PAYMENTS FOR THE BILLS WERE ROUTED THROUGH BANK. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE FIREWOOD PURCH ASE TO JOB RECEIPTS CONSTITUTED 7 TO 8% OF THE TOTAL JOB RECEIPTS AND T HAT MERE PRODUCTION OF EVIDENCE FOR PAYMENTS THROUGH BANKS AND PURCHASE BILLS CAN NOT PROVE THE GENUINENESS OF SUCH PURCHASES. 3. WE HEARD BOTH SIDES IN DETAIL. 4. THE QUESTION OF WATER BILLS HAS BEEN DISCUSSED BY THE CIT(A) IN A DETAILED MANNER IN PAGES-4, 5 & 6 IN HIS ORDER. T HERE IS A BASIC FINDING THAT THE WATER SUPPLY CONNECTIONS ARE LOCAT ED IN ASSESSEES OWN PREMISES AND THE ENTIRE WATER IS USED BY THE AS SESSEE ITSELF. EVEN THOUGH CERTAIN WATER BILLS ARE ISSUED IN THE N AME OF OTHER ASSESSEES LIKE M/S.SREE SANTHOSH GARMENTS ETC., THE ENTIRE WATER IS CONSUMED BY THE ASSESSEE. THE PROCESS CARRIED OUT BY THE ASSESSEE REQUIRES LARGE QUANTITIES OF WATER IS VERY ESSENTIAL FOR WASHING AND IT GENERATES STEAM FOR VARIOUS OTHER PU RPOSES. THE TOTAL EXTENT OF AREA UTILIZED BY THE UNIT IS 10 ACRES IN WHICH SOME OTHER UNIT IS FUNCTIONING. IN THESE CIRCUMSTANCES, THE CIT(A) HELD THAT EVEN PAGE 3 OF 4 ITA.1630 /MDS/10 THOUGH BILLS ARE ISSUED IN CERTAIN OTHER NAMES, WAT ER IS SUPPLIED TO THE ASSESSEE AND ENTIRE WATER IS UTILIZED BY THE AS SESSEE ITSELF AND ON THE BASIS OF THIS FINDING, DISALLOWANCES HAVE BE EN DELETED BY THE CIT(A). WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). 5. REGARDING THE PURCHASE OF FIREWOOD, THE CIT(A) DISCUSSED THE MATTER IN PAGES 6, 7, 8, 9 & 10 OF HIS ORDER IN A D ETAILED MANNER. AS A RESULT OF THE VERIFICATION MADE BY THE CIT(A), HE H AS TO GIVE A FINDING THAT THE DELIVERY OF FIRE WOODS AT ASSESSEES SITE HAS BEEN PROVED AND THE CORRESPONDENT PAYEES HAVE BEEN PROVED THROUGH BANK ACCOUNT. ONCE THE CASH MOVEMENTS ARE ESTABLISHED WITH THE HE LP OF BILLS AND PAYMENT DETAILS, THE CIT(A) FURTHER EXAMINED THE RE ASONABLENESS OF THE QUANTUM USED BY THE ASSESSEE AND CLAIMED AS AN EXPENDITURE. THE CIT(A) FOUND THAT ASSESSEE HAS TO GENERATE A HU GE AMOUNT OF STEAM IN A CONTINUOUS MANNER FOR CARRYING OUT HIS P ROCESS IN WHICH FIREWOODS ONE OF THE PRE-DOMINATE MATERIALS. ON TH E BASIS OF EMPIRICAL ENQUIRIES, HE FOUND THAT THE EXPENDITURE RELATING TO FIREWOOD MAY COME TO 8% TO 9% AS IT IS ESSENTIALLY USED TO GENERATE STEAM. THE ASSESSING OFFICER HAS NOT CITED ANY OTHER COMPA RABLE CASE, SO THAT THE ISSUE IS COMPARED ON THE ASSERTION OF THE ASSESSEE. THE GRIEVANCE OF THE REVENUE IS THAT EVEN THOUGH ASSESS EE HAS PRODUCED ALL THE DETAILS AND EVIDENCES, THE QUANTU M OF EXPENDITURE CLAIMED BY THE ASSESSEE WAS HIGH. BUT WE FEEL THAT IT IS ONLY AN OPINION. WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THIS POINT IS JUST AND PROPER. PAGE 4 OF 4 ITA.1630 /MDS/10 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THI S APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THURSDAY THE 23 RD OF DECEMBER, 2010 AT CHENNAI. SD/- SD/ - ( GEORGE MATHAN ) ( DR.O.K.NARAYANAN ) JUDICIAL MEMBER VICE PRESIDENT CHENNAI, DATED THE 23 RD DECEMBER, 2010. KSS COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE