Dy. Comm. of Income-tax, Nashik V. Metaforge Engineering Pvt. Ltd., Nashik

ITA 1654/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9779 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 26-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINITA MENON
• Keywords: Corroborative evidences

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1654/PN/2011 (ASSESSMENT YEAR 2007-08) DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, NASHIK. .. APPELLANT VS. METAFORGE ENGINEERING PVT. LTD., DINDORI ROAD, MHASRUL, NASHIK. .. APPELLANT PAN NO.AADCM 4876 C ASSESSEE BY : SRI NIKHIL PATHAK DEPARTMENT BY : SMT. VINITA MENON DATE OF HEARING : 17 -12-2012 DATE OF PRONOUNCEMENT : 19-12-2012 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 10-10- 2011 OF THE CIT(A)-II, NASHIK RELATING TO THE ASSES SMENT YEAR 2007-08. 2. GROUND OF APPEAL NO.1 BY THE REVENUE READS AS UN DER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A)-II, NASHIK WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF INTEREST AT RS.4,65,603/- PAID TO M/S. METAFORGE 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMOBILE PARTS, SHEE T METAL COMPONENTS AND ENGINEERING GOODS. IN ABSENCE OF ANY SATISFACTORY EXPLANATION BY THE ASSESSEE THE AO DISALLOWED INTEREST AND FINANCIAL CHARGES AMOUNT ING TO RS.4,65,506/- PAID TO M/S. METAFORGE. IN APPEAL THE LEARNED CIT(A) FOLLO WING THE ORDER OF HIS PREDECESSOR IN THE PRECEDING ASSESSMENT YEAR DELETE D THE ADDITION FOR WHICH THE REVENUE IS ON APPEAL BEFORE US. 4. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME BEFORE THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN THE PRECEDI NG ASSESSMENT YEAR AND THE 2 TRIBUNAL VIDE ITA NO.161/PN/2011 ORDER DATED 28-08- 2012 FOR A.Y. 2006-07 HAS DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDIN G AS UNDER : 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THE FINDING OF THE LEARNED CIT(A) THAT AS PER THE TERMS AND CONDITIONS BETWEEN THE ASSESSEE AND M/S. METAFORGE THE ASSESSEE WAS REQUIRED TO PAY INTEREST @ 11% PER ANNUM ON THE OUTSTANDING AMOUNT COULD NOT BE CONTROVERTED BY THE LEARNED DR. FURTHER THE FINDING GIVEN BY THE LEARNED CIT(A) THAT THE PLANT AND MACH INERY AND THE STOCK PURCHASED FROM M/S. METAFORGE FOR CONSIDERATION OF RS. 52,12,337/- WERE PUT TO USE DURING THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR ALSO COULD NOT BE CONTROVERTED BY THE LEARNED DR. WE, THEREFORE, FIND MERIT IN THE OBSER VATION OF THE LEARNED CIT(A) THAT THE NEXUS BETWEEN THE OUTSTANDING PAYABLE AMOUNT OF RS. 52,15,337/- AND THE INTEREST OF RS. 8,03,253/- IS ESTABLISHED. IN THIS VIEW OF THE MAT TER AND IN VIEW OF THE DETAILED DISCUSSION BY THE LEARNED CIT(A) WE FIND NO INFIRMITY IN THE S AME. ACCORDINGLY THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. SINCE FACTS IN THE CURRENT ASSESSMENT YEAR ARE IDEN TICAL TO THAT OF THE PRECEDING YEAR, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIO N OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YE AR AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LEAR NED DR THIS GROUND BY THE REVENUE IS DISMISSED. 5. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS UN DER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A)-II, NASHIK WAS JUSTIFIED IN PARTIALLY DELETING THE DISALLOWANCE OF LABOUR CHARGES OF RS.84,353/-. 6. AFTER HEARING BOTH THE SIDES, WE FIND THE AO DIS ALLOWED AN AMOUNT OF RS.94,335/- BEING 10% OF THE TOTAL LABOUR CHARGES P AID BY THE ASSESSEE ON THE GROUND THAT THE SAME HAS BEEN PAID TO THE FATHER OF ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY. IN APPEAL THE LEARNED CIT(A) RE DUCED SUCH DISALLOWANCE TO RS.15,000/- AND DELETED AN AMOUNT OF RS.84,835/-. WHILE DOING SO, HE HELD THAT THE AO HAS NOT GIVEN THE MARKET RATES BEFORE ARRIVI NG AT THE CONCLUSION THAT THE AMOUNT PAID WAS EXCESSIVE OR UNREASONABLE. AGGRIEV ED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 7. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE T RIBUNAL IN THE CASE OF THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YE AR AND THE TRIBUNAL VIDE ITA 3 NO.161/PN/2011 ORDER DATED 28-08-2012 FOR A.Y. 2006 -07 HAS DISMISSED THE APPEAL FILED BY THE REVENUE BY HOLDING AS UNDER : 15. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO WHILE DISALLOWING 10% OF THE EXPENSES A S EXCESSIVE AND UNREASONABLE HAS NOT GIVEN ANY COMPARATIVE CASE. THEREFORE, THE ORDE R OF THE CIT(A) RESTRICTING SUCH DISALLOWANCE TO RS. 25,000/- ON ADHOC BASIS IN OUR OPINION APPEARS TO BE REASONABLE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE WE FIND NO INFIRMITY IN THE SAME. ACCOR DINGLY THE GROUND RAISED BY THE REVENUE IS DISMISSED. SINCE FACTS IN THE CURRENT ASSESSMENT YEAR ARE IDEN TICAL TO THAT OF THE FACTS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THEREFORE, R ESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL AND IN ABSENCE OF ANY CONTRARY MATE RIAL, THE GROUND BY THE REVENUE IS DISMISSED. 8. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS UN DER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A)-II, NASHIK WAS JUSTIFIED IN DELETING THE DISALLOWANCE ON ACCOUNT O F SALES RETURN OF RS.1,21,040/-. 9. AFTER HEARING BOTH THE SIDES, WE FIND THE AO DIS ALLOWED AN AMOUNT OF RS.1,21,040/- BEING 10% OF THE SALES RETURN ON ACCO UNT OF REDUCTION OF FINISHED GOODS ON THE GROUND THAT NO SUPPORTING EVIDENCES WE RE PRODUCED BEFORE HIM TO PROVE THAT THE SAME IS DUE TO RETURN OF FINISHED GO ODS BY THE CUSTOMERS. IN APPEAL THE LEARNED CIT(A) FOLLOWING THE ORDER OF HIS PREDE CESSOR FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR DELETED THE DISALLOWANCE FOR WHICH THE REVENUE IS IN APPEAL BEFORE US. 10. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIM E OF HEARING BROUGHT TO OUR NOTICE THAT SIMILAR DISALLOWANCE WAS MADE BY THE AO WHICH WAS DELETED BY THE CIT(A). HOWEVER, THE REVENUE DID NOT CHALLENGE TH IS ISSUE IN THE APPEAL FILED BY IT BEFORE THE TRIBUNAL ALTHOUGH THEY HAVE CHALLENGED V ARIOUS OTHER RELIEFS GIVEN BY THE CIT(A). IN OTHER WORDS, THE DEPARTMENT HAS ACCE PTED SUCH RELIEF GIVEN BY THE CIT(A) ON ACCOUNT OF SALES RETURN. THEREFORE, FACT S BEING SIMILAR THE ORDER OF THE 4 CIT(A) SHOULD BE UPHELD AND THE GROUND RAISED BY TH E REVENUE ON THIS ISSUE SHOULD BE DISMISSED. 10.1 THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE AO. 11. AFTER HEARING BOTH THE SIDES WE FIND THE AO FOL LOWING HIS ORDER FOR A.Y. 2006-07 DISALLOWED 10% OF THE SALES RETURN AS UNVER IFIABLE. WE FIND ALTHOUGH THE DEPARTMENT FILED AN APPEAL BEFORE THE TRIBUNAL ON A CCOUNT OF OTHER RELIEFS GIVEN BY THE CIT(A), HOWEVER, IT HAS NOT FILED ANY APPEAL AG AINST THE RELIEF GIVEN BY THE CIT(A) ON THIS ISSUE IN THE IMMEDIATELY PRECEDING A SSESSMENT YEAR. WE, THEREFORE, FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE DEPARTMENT SHOULD NOT HAVE ANY GRIEVANCE ON THIS IS SUE FOR THIS YEAR SINCE THEY HAVE ACCEPTED THE ORDER OF THE CIT(A) IN THE PRECED ING YEAR UNDER IDENTICAL FACTS. ACCORDINGLY WE UPHOLD THE SAME. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 12. GROUND OF APPEAL NO.4 BY THE REVENUE READS AS U NDER : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A)-II, NASHIK WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF TECHNICAL FEES PAID TO ACCOUNT OF SALES RETURN OF RS.2,40,000/-. 13. AFTER HEARING BOTH THE SIDES, WE FIND THE AO DI SALLOWED AN AMOUNT OF RS.2,40,000/- BEING TECHNICAL FEES PAID TO SRI AMOD R. MEHTA, FATHER OF MR. PANKAJ MEHTA, WHO IS ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY ON THE GROUND THAT ASSESSEE COULD NOT PROVE THE REASONABLENESS OF THE AMOUNT PAID AND THE NATURE OF SERVICES RENDERED BY MR. MEHTA. WE FIND THE LEARNE D CIT(A) FOLLOWING THE ORDER OF HIS PREDECESSOR IN THE IMMEDIATELY PRECEDING ASS ESSMENT YEAR DELETED THE DISALLOWANCE FOR WHICH THE REVENUE IS IN APPEAL BEF ORE US. 13.1 WE FIND SIMILAR ISSUE HAD COME UP BEFORE THE T RIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR A ND THE TRIBUNAL VIDE ITA 5 NO.161/PN/2011 ORDER DATED 28-08-2012 FOR A.Y. 2006 -07 DISMISSED THE GROUND RAISED BY THE REVENUE BY HOLDING AS UNDER : 19. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO DISALLOWED THE TECHNICAL FEES PAID TO S RI AMOD RATANCHAND MEHTA ON THE GROUND THAT HE IS FATHER OF ONE OF THE DIRECTOR OF THE ASSESSEE COMPANY AND THE ASSESSEE HAS NOT PROVED CONCLUSIVELY THAT THE SERVICES RENDE RED BY MR. MEHTA WAS FOR THE BENEFIT AND HEALTH OF THE ASSESSEE COMPANY. WE FIND THE AS SESSEE HAS STATED BEFORE THE AO THAT MR. MEHTA IS A TECHNOCRAT AND HAS 40 YEARS OF EXPER IENCE IN THE FIELD OF COLD STORAGE AND HAS RENDERED VARIOUS SERVICES TO THE COMPANY AS PER THE DETAILS GIVEN BEFORE THE AO. WE FIND THE AO HAS NOT BROUGHT ON RECORD ANY COMPARATI VE CASE TO JUSTIFY THAT THE PAYMENT IS EXCESSIVE OR UNREASONABLE. FURTHER, THE SUBMISSION OF THE ASSESSEE COMPANY THAT BECAUSE OF THE CONSULTANCY THE BUSINESS HAS GROWN U P HAS NOT BEEN DISPROVED BY THE AO. MERELY BECAUSE THE PAYEE IS A SPECIFIED PERSON U/S. 40A(2)(B), THE TECHNICAL FEES PAID TO HIM IN OUR OPINION CANNOT BE DISALLOWED ENTIRELY WI THOUT GIVING ANY COMPARABLE CASE. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE DETAILED DISCUSSION BY THE LEARNED CIT(A) ON THIS ISSUE WHILE DELETING THE DISALLOWANCE WE FIND NO INFIRMITY IN THE SAME. ACCORDINGLY THE SAME IS UPHELD. GROUND RAISED BY THE REVENUE I S DISMISSED. SINCE FACTS IN THE CURRENT ASSESSMENT YEAR ARE IDEN TICAL TO FACTS IN THE PRECEDING ASSESSMENT YEAR, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEA R AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LEAR NED DR THIS GROUND BY THE REVENUE IS DISMISSED. 14. OTHER GROUNDS BY THE REVENUE BEING GENERAL IN N ATURE ARE DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED PRONOUNCED IN THE OPEN COURT ON THIS THE 19 TH DAY OF DECEMBER, 2012. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 19 TH DECEMBER 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, NASHIK 4. CIT-I, NASHIK 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE