The ITO, Ward-6(4), Ahmedabad V. Himanshu Engg. Works, Ahmedabad

ITA 1847/AHD/2009

• Counselvise Citation: 184720514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-10-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 03-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Assessee Lawyers: PF JAIN
• Section: 143(3); 263

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD , .' ', # BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER . / ITA NO. 1847/AHD/2009 $ %$ / ASSESSMENT YEAR:- 2003-04 DATE OF HEARING:5.10.11 DRAFTED:24.10.11 INCOME TAX OFFICER, WARD-6(4), C.U. SHAH BUILDING, ASHRAM ROAD, / V/S . M/S HIMANSHU ENGG. WORKS, 620, PHASE-IV, GIDC, VATVA, AHMEDABAD PAN NO.AABFH2716F '(/ APPELLANT .. )*'(/ RESPONDENT '(/ BY APPELLANT SHRI ALOK JOHRI, CIT-DR )*'( + , / BY RESPONDENT SHRI P.F. JAIN, AR -. + /0# / DATE OF HEARING 05-10-2011 1'% + /0# / DATE OF PRONOUNCEMENT 31-10-2011 / / / / ORDER .' ', # /PER A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER:- THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHMEDABAD IN APPEAL NO. CI T(A)-XI/641/08-09 DATED 18- 03-2009 FOR ASSESSMENT YEAR 2003-04. THE REVENUE HA S RAISED FOUR GROUNDS IN ITS APPEAL, WHEREIN GROUND NO.3 & 4 DO NOT SURVIVING FO R ADJUDICATION SINCE THEY ARE GENERAL IN NATURE. GROUND NO. 1 AND 2 ARE REPRODUCE D HEREIN BELOW FOR ADJUDICATION:- ITA NO.1847/AHD/2009 A.Y. 2003-04 ITO WD-6(4) ABD V. M/S. HIMANSHU ENGG. WORKS PAGE 2 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.40,89,0 52/- ON ACCOUNT UNDER VALUATION OF CLOSING STOCK. 2. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.7,41,29 5/- ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES. 2. THE ASSESSEE IS A FIRM IN THE BUSINESS OF MANUFA CTURING ROLLING MILLS MACHINERIES AND PARTS. THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT IN SHORT), THEREAFTER LD. CIT INVOKED THE PROVISIONS OF SECTION 263 OF THE ACT AND ORDER WAS PASSED, PURSUANT TO WHICH THE ASSESSMENT WAS COMPLETED U/S. 143(3) R.W.S 263 OF THE ACT ON 05-12-2008. IN THE PROCEEDINGS U/S.263 OF THE ACT THE LD. CIT HAD NOTICED THAT THE ASSESSEE HAD NOT I NCLUDED THE EXCISE DUTY PAYABLE IN THE VALUATION OF CLOSING STOCK AND FURTHER THE A SSESSEE HAS NOT CHARGED INTEREST ON LOANS AND ADVANCES GRANTED FROM BORROWED FUNDS WHIC H WAS FURTHER CONFIRMED BY LD.AO IN HIS ORDER U/S 143(3) R.W.S 263 OF THE ACT. VALUATION OF RAW MATERIAL CLOSING STOCK. 3. THE LD. AR SUBMITTED BEFORE US THAT THE CLOSING STOCK AS ON 31-03-2003 WAS VALUED AT RS.2,55,56,578/- ON WHICH EXCISE DUTY @ 1 6% HAS BEEN INCLUDED AMOUNTING TO RS.40,89,052/-. LD. AR EXPLAINED THAT THE CLOSING STOCK RELATES TO STOCK OF RAW MATERIALS PURCHASED DURING THE YEAR AND EARL IER YEAR, WHICH INCLUDED THE EXCISE DUTY, AND THE DETAILS OF THE STOCK ALONG WIT H INVOICES WERE GIVEN DURING THE PROCEEDINGS U/S.263 OF THE ACT AND SUBSEQUENTLY IN THE ASSESSMENT PROCEEDINGS GIVING EFFECT TO ORDER U/S.263 OF THE ACT BY THE AO . HOWEVER, THE REVENUE HAS IGNORED THE SAME AND MADE THE ADDITION OF RS.40,89, 052/-. LD. AR FURTHER SUBMITTED THAT DURING THE APPELLATE PROCEEDINGS, LD. CIT(A) H AD VERIFIED THE BILLS PERTAINING TO RAW MATERIALS AND HAVE DELETED THE ADDITIONS MADE B Y LD. AO. 4. LD. DR RELIED UPON THE ORDER OF THE LD.CIT AND THE ORDER OF LD. AO GIVING EFFECT TO THE ORDER U/S.263 OF THE ACT AND PRAYED T HAT SAME MY BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RECORDS. ON PERUSING THE ORDER OF LD. CIT(A), IT IS EVIDENT THA T THE LD.CIT(A) HAS DELETED THE ITA NO.1847/AHD/2009 A.Y. 2003-04 ITO WD-6(4) ABD V. M/S. HIMANSHU ENGG. WORKS PAGE 3 ADDITION MADE BY AO AFTER VERIFYING THE BILLS RELAT ED TO RAW MATERIALS AND CORRELATING THE SAME WITH THE CLOSING STOCK. THE RELEVANT PARA OF THE ORDER IS REPRODUCED HEREIN BELOW:- 2.1.2 THE BILLS PERTAINING TO RAW MATERIALS ARE AL SO VERIFIED. IT IS SEEN THAT THE APPELLANT HAS ALSO PAID EXCISE DUTY FOR EVERY PURCH ASES OF RAW MATERIAL WHICH ARE UNDER CONSIDERATION. FURTHER, IT IS SEEN THAT T HE RAW MATERIALS WERE PURCHASED DURING PREVIOUS YEAR AS WELL AS DURING EA RLIER PREVIOUS YEARS. IT IS PERTINENT TO POINT OUT THAT THE RAW MATERIALS PURCH ASED BY THE APPELLANT ARE FINISHED PRODUCTS OF THE SUPPLIERS WHO HAVE SOLD TO THE APPELLANT. THEREFORE, THE EXCISE DUTY IS BOUND TO BE INCLUDED IN THE PURC HASE COST OF THE APPELLANT WHICH IS IN FACT CORRECT IN APPELLANTS CASE. THERE FORE, I FIND THAT NO ADDITION CAN BE MADE ON ACCOUNT OF ALLEGED NON INCLUSION OF EXCISE DUTY. HENCE, THE ADDITION MADE BY THE A.O IS DELETED. 5.1 SINCE THE LD. CIT(A) HAD VERIFIED THE FACTS I N DETAIL AND ARRIVED AT A FAIR CONCLUSION, WE DO NOT FIND IT NECESSARY TO INTERFER E WITH HIS ORDER AS NO OTHER EVIDENCES CONTRARY TO THE FINDINGS OF THE LD.CIT(A) ARE PRODUCED BEFORE US. THEREFORE WE CONFIRM THE ORDER OF LD. CIT(A) ON THI S ISSUE. BANK INTEREST 6. THE ASSESSEE HAD PAID INTEREST AMOUNTING TO RS.7 ,41,295/- ON BORROWED FUNDS AND ON THE OTHER HAND GIVEN INTEREST FREE LOA N OF RS.1,08,08,082/-. THE LD.CIT WAS OF THE OPINION THAT ASSESSEE HAD DIVERTED THE I NTEREST BEARING BORROWED FUNDS FOR NON-BUSINESS PURPOSES AND CLAIMED INTEREST AS E XPENSES. SUBSEQUENTLY THE LD.AO DISALLOWED THE INTEREST OF RS.7,41,295/- BASE D ON THE DIRECTIONS GIVEN BY LD. CIT IN HIS ORDER U/S.263 OF THE ACT. THE LD. AO FUR THER HELD THAT THE ASSESSEE HAD NOT SUBMITTED ANY DETAILS WITH EVIDENCE TO SHOW THA T ONLY THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE HAD BEEN ADVANCED. ON A PPEAL BEFORE LD. CIT(A) AND LD. CIT(A) HELD AS UNDER:- 3.1.2 IT IS SEEN THAT THE RS.1,08,08,082/- ARE OF VARIOUS ADVANCES RELATED TO BUSINESS. HOWEVER, THE APPELLANT IS HAVING INTEREST FREE ADVANCES OF RS.3,06,99,228/- APART FROM CAPITAL AND RESERVES. F URTHER, AS IT COULD BE SEEN THAT NO FINDING IS ESTABLISHED THAT THE VARIOUS OUT STANDING DEBTORS ARE NOT RELATED TO APPELLANTS BUSINESS. THEREFORE, IN VIEW OF ABOVE APPELLANTS SUBMISSION, THE DISALLOWANCE OF INTEREST EXPENDITUR E CANNOT BE SUSTAINED. HENCE, THIS GROUND OF APPEAL IS ALLOWED. 6.1 LD.AR SUBMITTED BEFORE US THAT ALL THE REL EVANT MATERIALS WERE BEFORE THE REVENUE AT EVERY STAGE AND THE LD.CIT(A) AFTER EXAM INING THE RECORDS HAD JUDICIOUSLY DELETED THE ADDITIONS MADE, ON THE OTHE R HAND THE LD.DR RELIED ON THE ITA NO.1847/AHD/2009 A.Y. 2003-04 ITO WD-6(4) ABD V. M/S. HIMANSHU ENGG. WORKS PAGE 4 ORDERS OF THE LD.CIT U/S 263OF THE ACT., AND THE OR DER OF THE LD.AO U/S 143(3) R.W.S 263 OF THE ACT. 6.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CA REFULLY PERUSED THE MATERIALS BEFORE US. FROM THE RECORDS AVAILABLE BEFORE US IT IS APPARENT THAT THE LD. CIT(A) HAD VERIFIED THE FACT THAT THE APPELLANT WAS HAVING IN TEREST FREE FUNDS TO THE EXTENT OF RS.3,06,99,228/- APART FROM CAPITAL DESERVES FROM W HICH THE INTEREST FREE ADVANCE FOR RS 1,08,08,082 WAS EXTENDED. THE REVENUE HAS NOT PR ODUCED ANY MATERIALS BEFORE US CONTRARY TO THE FINDINGS OF THE LD.CIT(A). THERE FORE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF LD. CIT(A). IT IS ORDER ED ACCORDINGLY. 7. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMISSED . 2 + 1'% 3 4 31 / 10 /2011 ' #- 8 + 9. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/10/ 2011 . SD/- SD/- ( ) (# ) (BHAVNESH SAINI) (A.MOHAN ALANKAMON Y) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, 31/10/2011 *DKP + ++ + )/< )/< )/< )/< =<%/ =<%/ =<%/ =<%/ / COPY OF ORDER FORWARDED TO:- 1. '( / APPELLANT 2. )*'( / RESPONDENT 3. / -? / CONCERNED CIT 4. -?- / CIT (A) 5. <9 )/ , , / DR, ITAT, AHMEDABAD 6. 9D$ E2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ F/ G ,