ACIT, CHENNAI V. M/s. TTG Industries Limited, CHENNAI

ITA 1639/CHNY/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9380 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 15-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-08-2012
• Court: TRIBUNAL
• Department Lawyers: SUNDAR RAO
• Assessee Lawyers: R VIJAYARAGHVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ ITA NO. 1639/MDS/2012 / ASSESSMENT YEAR : 2007-08 THE ADDL. COMMISSIONER OF INCOME-TAX, COMPANY RANGE-III, CHENNAI 34. (/ APPELLANT) AND V. M/S. TTG INDUSTRIES LIMITED, 9, VANAGARAM ROAD, AYANAMBAKKAM, CHENNAI -600 095. PAN AAACT6106F (/ RESPONDENT) ./ ITA NO. 1599/MDS/2012 / ASSESSMENT YEAR : 2007-08 M/S. TTG INDUSTRIES LIMITED, THE ADDITIONAL COMMISS IONER CHENNAI 95. V. O F INCOME-TAX, COMPANY RANGE-III, CHENNAI 34. (/ RESPONDENT) (/ APPELLANT) DEPARTMENT BY : SHRI SUNDAR RAO, CIT ASSESSEE BY : SHRI R. VIJAYARAGHVAN, ADVOCATE !' / DATE OF HEARING : 17.03.2016 #$ !' / DATE OF PRONOUNCEMENT: 20.05.2016 - - ITA 1639 & 1599/12 2 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND BY THE REVE NUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 21.8.2012 FOR THE ASSESSMENT YEAR 2007-08. 2. ITA NO.1639/MDS/2012 (REVENUE) THE FIRST GROUND IN THIS APPEAL IS WITH REGARD TO D ELETING THE DISALLOWANCE OF IMPORT EXPENSES MADE BY THE ASSESSING OFFICER. 3. THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE ON IMPORT EXPENSES ON THE REASON THAT NO INVOICES WERE PRODUC ED BEFORE HIM. BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS), THE ASSESSEE PLEADED THAT THE ASSESSEE CANNOT IMPORT THE GOODS D IRECTLY. HENCE, THE IMPORT WAS MADE THROUGH M/S. SHRIRAM EPC LIMITED AN D THE BILLS WERE IN THEIR NAME ONLY. ACCORDINGLY, THE COMMISSION ER OF INCOME- TAX(APPEALS) DIRECTED THE AO TO CONSIDER THE BILLS IN THE NAME OF M/S. SHRIRAM EPC LIMITED. IN OUR OPINION, WHEN THERE I S NO CONFIRMATION FROM M/S. SHRIRAM EPC LIMITED THAT THEY WERE IMPORT ED ON BEHALF OF THE ASSESSEE, IT IS APPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION. ACCORDINGLY, WE REMIT THI S ISSUE TO THE FILE OF THE AO FOR FRESH CONSIDERATION. - - ITA 1639 & 1599/12 3 4. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD TO DELETING THE DISALLOWANCE MADE UNDER IMPORTS TO THE EXTENT OF ` 4,69,65,691/-. 5. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFF ICER HAS VERIFIED THE BILLS OF ` 4,73,53,594/- AND OFFERED REMARKS IN RESPECT OF EA CH BILL SUBMITTED BY THE ASSESSEE. THE TOTAL AS PER THE MA TCHED BE/TR6 ETC. COMES TO ` 4,69,65,691/-. SHE HAS STATED THAT SINCE MANY OF THE INVOICES ARE IN THE NAME OF SHRIRAM EPC LIMITED, SH RIRAM EPC WAS ASKED TO PRODUCE ITS PURCHASE LEDGER EXTRACT FOR TH E PERIOD 01.04.2006 TO 31.03.2007 FOR WHICH THERE WAS NO RESPONSE FROM M/S. SHRIRAM EPC LIMITED. ALSO IN CASE OF BILL OF ENTRY FOR EXBOND THE ULTIMATE END USE/APPLICATION OF THE GOODS PURCHASED IS NOT CLEAR . ALSO AS IS BROUGHT OUT ON RECORD, AS PER ASSESSEES ANNUAL REPORT, THE RE ARE NO WORKS AT 37/1, 7 & 8 VANAGARAM MAIN ROAD. ASSESSEE WAS ASKE D TO OFFER AN EXPLANATION WHICH ASSESSEE FAILED TO EXPLAIN. HEN CE, ADDITION WAS MADE BY THE ASSESSING OFFICER. AGAINST THIS, THE A SSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEAL S). 6. THE COMMISSIONER OF INCOME-TAX(APPEALS) OBSERVED THAT THERE IS NO DISCREPANCY IN THE ADDRESS OF THE ASSESSEE. T HE ASSESSEE BEING DECLARED SICK, IT HAS OPENED THE LC IN THE NAME OF SHRIRAM EPC LTD. A/C TTG INDUSTRIES LTD. THE BILLS WERE DRAWN IN TH E NAME OF SHRIRAM - - ITA 1639 & 1599/12 4 EPC LIMITED. A/C TTG INDUSTRIES LTD. ACCORDING TO THE COMMISSIONER OF INCOME-TAX(APPEALS), THIS DOES NOT PROVE IN ANY WAY, THE FACT THAT THE ASSESSEE WAS NOT THE IMPORTER OF THE MATERIALS. IT HAS DULY PAID THE DUTY AND CLEARED THE GOODS ETC. IN ITS OWN NAME. FURTHER, THE AO IS NOT CORRECT IN STATING THAT THERE ARE NO WORKS AT 37/1, 7 & 8, VANAGARAM MAIN ROAD. THE CIT(APPEALS) FURTHER OBSERVED THAT AS EXPLAINED BY THE LD. AR, THE ASSESSEE HAS WORKED IN THAT PLACE. HEN CE, THE DISALLOWANCE MADE BY THE AO TO THE EXTENT OF ` 4,69,65,691/- IS DELETED AND THE DIFFERENCE OF ` 3,92,263/- IS SUSTAINED BY THE COMMISSIONER OF INC OME- TAX(APPEALS). AGGRIEVED BY THIS, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. SO FAR AS THE DISALLOWANCE MADE UNDER IM PORTS IS CONCERNED, THE BILLS WERE DRAWN ALSO IN THE NAME OF SHRIRAM EP C LTD. A/C. TTG INDUSTRIES LTD. HOWEVER, THERE WAS NO CONFIRMATION FROM SHRIRAM EPC LTD. HENCE, AS DISCUSSED EARLIER, WE REMIT THIS IS SUE BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION. 8. NEXT GROUND IN THIS APPEAL IS WITH REGARD TO DEL ETING THE ADDITION OF ` 13,99,82,143/- MADE UNDER PURCHASES. 9. THE FACTS OF THE CASE ARE THAT IN THE REMAND REP ORT, THE AO HAS ADMITTED THAT THE BILLS SUBMITTED ARE ELIGIBLE WITH REFERENCE TO - - ITA 1639 & 1599/12 5 CONSUMABLES E1, CONSUMABLES FORM XVII, RAWMATERIALS , RAWMATERIALS FORM C AND RAWMATERIALS FORM 17. THE AO HAS FURTHER REMARKED WITH REFERENCE TO PURCHASE-PONDY, LABOUR C HARGES, INTERSTATE, LOCAL THAT THE INVOICES WERE ADDRESSED TO R.S.NO. 4/4 THIRUBUVANAI AND R.S. NO.95/3 & 4, SANYASIKUPPAM V ILLAGE, MANNADEPET COMMUNE, PONDICHERRY. THE ASSESSEE IN I TS REPLY HAD STATED THAT IT HAD FACTORY AT THE ABOVE ADDRESS AND ENCLOSED A COPY OF THE LETTER ISSUED BY MINISTRY OF COMMERCE & INDUSTR Y. THE AO HAS RESTRICTED THE PURCHASES TO THE EXTENT OF ACTUAL PA YMENT. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE COMMISSIONER OF INCOME- TAX(APPEALS). 10. ON APPEAL, THE COMMISSIONER OF INCOME-TAX(APPEA LS) OBSERVED THAT THE ASSESSEE IS ELIGIBLE TO CLAIM THE VALUE OF IMPORTS DEBITED IN ITS PROFIT AND LOSS ACCOUNT. AS REGARDS TO THE PURCHAS E PONDY, LABOUR CHARGES, INTERSTATE, LOCAL FOR WHICH BILLS HAVE BEE N SUBMITTED, THE DEPARTMENT HAS ALREADY RECOGNIZED THE SALE OF WIND MILLS MANUFACTURED/ASSEMBLED AT RS NO.4/4 THIRUBUVANAI AND RS NO.95/3 & 4, SANYASIKUPPAM VILLAGE, MANNADEPET COMMUNE, PON DICHERRY. THEREFORE, ACCORDING TO THE CIT(APPEALS), THE PURCH ASED MATERIALS DESPATCHED TO THIS ADDRESS ARE TO BE ALLOWED. FURT HER, THE CIT(APPEALS) - - ITA 1639 & 1599/12 6 OBSERVED THAT THE BILLS SUBMITTED BY THE ASSESSEE C ANNOT BE RESTRICTED ONLY TO THE EXTENT OF AMOUNT PAID AS THE OUTSTANDIN G EXPENSES FOR PURCHASES ALSO FORMS PART OF TOTAL PURCHASE. THESE WERE SETTLED IN THE SUBSEQUENT PERIOD BUT HAS NOT BEEN CONSIDERED IN TH E REMAND REPORT. THEREFORE, THE BILLS SUBMITTED TO THE EXTENT OF ` 13,99,82,143/- IS ALLOWED AGAINST THE ADDITION OF ` 17,79,93,717/- AND THE REMAINING ADDITION OF ` 3,80,11,574/- IS SUSTAINED BY THE CIT(APPEALS). 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD. AR SUBMITTED THAT SIMILAR ISSUE WA S CONSIDERED BY THE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 2006-07 IN ITA NO.2671/MDS/2014 DATED 5.2.2015, WHEREIN IT WAS HELD AS UNDER : 6. HAVING HEARD THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT ONE SHOULD APPRECIATE THE DIFFICULTY EXPERIENC ED BY THE ASSESSEE IN VIEW OF IT BECOMING SICK. WE NOTICE FR OM THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED ` 78.31 CRORES AS PURCHASE EXPENSES OF WHICH, THE ASSESSING OFFICER HAS MADE ADDITION TO THE TUNE OF ` 10.65 CRORES AND THE LD. CIT(APPEALS) HAS SUSTAINED ONLY TO THE TUNE OF ` 10.65 CRORES AND THE LD. CIT(APPEALS) HAS SUSTAINED ONLY TO THE TUNE OF ` 1.81 CRORES, MEANING THEREBY THE ASSESSEE HAS FURNI SHED EVIDENCE TOWARDS 90% OF THE EXPENDITURE CLAIM MADE BY IT. CONSIDERING THE DIFFICULTY FACED BY THE ASSESSEE, W E ARE OF THE VIEW THAT IT IS NOT JUSTIFIABLE TO DISALLOW THE ENT IRE BALANCE AMOUNT OF ` 1.81 CRORES. HENCE, TO PUT THIS MATTER TO REST, W E ARE OF THE VIEW THAT THE ADDITION MAY BE SUSTAINED TO THE EXTENT OF 25% OF ` 1.81 CRORES. ACCORDINGLY, WE MODIFY HE ORDER OF THE LD. CIT(APPEALS) AND DIRECT THE ASSESS ING OFFICER - - ITA 1639 & 1599/12 7 TO SUSTAIN THE ADDITION TO THE EXTENT OF 25% OF 1.8 1 CRORES AND COMPUTE THE INCOME. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO SUS TAIN THE ADDITION TO THE EXTENT OF 25% OF THE EXPENDITURE AND COMPUTE TH E INCOME AND THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE S. 11.1 IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 12. ITA NO.1599/MDS/2012 (ASSESSEE) THE FIRST TWO GROUNDS IN THIS APPEAL IS GENERAL IN NATURE AND DO NOT REQUIRE ADJUDICATION. 13. THE NEXT GROUND IN THIS APPEAL IS WITH REGARD T O SUSTAINING THE AMOUNT OF ` 3,80,11,574/-. 14. IN VIEW OF OUR FINDING WITH REGARD TO DELETION OF ADDITION MADE UNDER EXPENSES, IN EARLIER PARA, WE DIRECT THE ASSE SSING OFFICER TO SUSTAIN THE ADDITION TO THE EXTENT OF 25% OF THE EX PENDITURE. THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 15. THE NEXT GROUND IS WITH REGARD TO SUSTENANCE O F ` 42,06,000/- TOWARDS BUSINESS PROMOTION, FREIGHT FORWARDING AND HANDLING CHARGES. 16. THE FACTS OF THE CASE ARE THAT THE AO HAS DISAL LOWED FREIGHT, FORWARDING AND HANDLING CHARGES OF ` 28,36,000/- AND BUSINESS PROMOTION EXPENSES OF ` 13,70,000/-, AS DETAILS WERE NOT FURNISHED. - - ITA 1639 & 1599/12 8 THE ASSESSEE SUBMITTED THAT THE AO HAS ERRED IN DIS ALLOWING THE AMOUNTS EXPENDED BY THE ASSESSEE PURELY FOR ITS BUS INESS OPERATION. IT IS SUBMITTED THAT AS THE NET WORTH OF THE COMPANY B ECAME NEGATIVE, REFERENCE WAS MADE TO BIFR. IN THE MEANWHILE, THE BANKS HAVE CLASSIFIED THE COMPANYS ACCOUNT AS NON-PERFORMING ASSET ACCOUNT AND DENIED OPERATION OF THE ACCOUNT. BIFR HAS ALSO DECLARED THE COMPANY AS SICK. UNDER THE CIRCUMSTANCES, THE ASS ESSEE WAS LEFT WITH NO OPTION BUT TO MAKE CERTAIN PAYMENTS BY CASH OF ` 1,37,000/- TOWARDS BUSINESS PROMOTION EXPENSES. THIS AMOUNT HAS BEEN DISALLOWED AT THE TIME OF FILING THE RETURNS U/S.40A(3) AND THE SAME IS INCLUDED AS PART OF ` 43,39,081/-. IT WAS, THEREFORE, SUBMITTED THAT AS THESE PAYMENTS WERE PURELY FOR BUSINESS PURPOSES AND IN VIEW OF THE CIR CUMSTANCES BEYOND THE CONTROL OF THE ASSESSEE, THE ADDITION MAY BE DE LETED. DETAILS OF FREIGHT AND HANDING CHARGES WERE FILED ALONG WITH A CONFIRMATION LETTER FROM A FREIGHT FORWARDER. HOWEVER, THE AO DISALLO WED THE CLAIM OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE WENT IN A PPEAL BEFORE THE COMMISSIONER OF INCOME-TAX(APPEALS). 17. THE COMMISSIONER OF INCOME-TAX(APPEALS) OBSERV ED THAT THE ASSESSEE HAS PRODUCED DETAILS OF FREIGHT & HANDLING CHARGES AND CONFIRMATIONS OF FREIGHT FORWARDERS. THE COMMISSIO NER OF INCOME- - - ITA 1639 & 1599/12 9 TAX(APPEALS), FURTHER OBSERVED THAT NO COMMENT HAS BEEN MADE BY THE AO IN THIS REGARD IN THE REMAND REPORT. THEREFORE, THE COMMISSIONER OF INCOME-TAX(APPEALS) DIRECTED THE AO TO VERIFY THE C ONFIRMATIONS OF FREIGHT FORWARDERS AND ALLOW RELIEF TO THE EXTENT T HESE CONFIRMATIONS ARE AVAILABLE. 18. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE O PINION THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS RIGHTLY REM ITTED THE ISSUE BACK TO THE FILE OF THE AO TO VERIFY THE CONFIRMATI ONS OF FREIGHT FORWARDERS AND DECIDE THE ISSUE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) ON THIS GROUND . 19. IN THE RESULT, THE APPEALS OF THE REVENUE AND T HE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 20TH O F MAY, 2016 AT CHENNAI. SD/- SD/- ( % & . ' ()* ) ( + , - .! ) ( DUVVURU RL REDDY ) (CHANDRA POOJARI) : ;< /JUDICIAL MEMBER (' ;