Priyank Cords & Tussels Pvt.Ltd., Ahmedabad V. The Income tax Officer, Ward-1(4)., Surat

ITA 1914/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6553 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 09-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Keywords: Opportunity of cross examination

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.1914/AHD/2009 (ASSESSMENT YEAR:-2006-07) PRIYANK CORDS & TASSELS PRIVATE LIMITED, G-2, PARSHVA APARTMENT, NEAR HANDLOOM HOUSE, CHOWKI SHERI, NANPURA, SURAT V/S INCOME-TAX OFFICER, WARD- 1(4), SURAT PAN: AACCP 6996 L [APPELLANT] [RESPONDENT] ASSESSEE BY :- NONE REVENUE BY:- SHRI JAI RAJ KUMAR, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 13- 04-2009 OF THE LD. CIT(APPEALS)-I, SURAT, FOR THE ASSESSMENT YEAR 2006-07, RAISES THE FOLLOWING GROUNDS:- 1.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S) ERRED IN LAW AND ON FACTS IN DISMISSING THE APPEAL OF THE APPELL ANT. 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) ERRED IN LAW AND ON FACTS IN REJECTING THE CLAIM OF EXEMPTION U/ S 10A OF THE INCOME-TAX ACT, 1961, AMOUNTING TO RS.4,84,650/- ME RELY BY FOLLOWING THE DECISION OF HIS PREDECESSOR IN THE CA SE OF THE APPELLANT FOR THE AY 2003-04. 3.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) FURTHER ERRED IN LAW AND ON FACTS IN SUMMARILY REJECTING THE GROUND NO.3 RAISED BY THE APPELLANT REGARDING CROSS EXAMINATION, WITHOUT APPRECIATING THE LEGAL POSITION THAT THE ASSESSMENT OF EACH YEAR IS SEPARATE PROCEEDINGS. 4.0 THE APPELLANT MAY BE ALLOWED TO ADD, AMEND, ALT ER OR RAISE ADDITIONAL GROUNDS OF APPEAL. 2 NONE APPEARED ON BEHALF OF THE ASSESSEE. CONSIDER ING THE FACT THAT A SIMILAR ISSUE HAD BEEN ADJUDICATED BY THE IT AT IN THE PRECEDING YEARS, THE BENCH REJECTED THE REQUEST FOR ADJOURNMENT AND 2 ITA N O.1914/AHD/2009 2 PROCEEDED TO DISPOSE OF THE APPEAL AFTER HEARING TH E LEARNED DEPARTMENTAL REPRESENTATIVE. 3. ADVERTING TO GROUND NOS 2 & 3 IN THE APPEAL, FA CTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING NIL INCOME FILED ON 28- 12-2006 BY THE ASSESSEE, ENGAGED IN MANUFACTURING C ORDS AND TASSELS IN SURAT SPECIAL ECONOMIC ZONE, AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REF ERRED TO AS THE ACT], WAS SELECTED FOR SCRUTINY, WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ISSUED ON 18-10-2007. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER [AO I N SHORT] NOTICED THAT THE ASSESSEE HAD SHOWN GROSS PROFIT OF RS.21,5 1,934/- ON THE TOTAL TURNOVER OF RS.84,55,211/-.THE UNIT BEING LO CATED IN FREE TRADE ZONE, THE ASSESSEE CLAIMED EXEMPTION U/S 10A OF TH E ACT. SINCE IT WAS FOUND IN THE ASSESSMENT PROCEEDINGS FOR THE AY 2003-04 THAT THE ASSESSEE USED OLD MACHINERY, RELYING UPON HIS OWN FINDINGS FOR THE AY 2003-04, THE AO DENIED THE CLAIM FOR EXEMPT ION U/S 10A OF THE ACT. 4. ON APPEAL, THE LEARNED CIT(A), FOLLOWING THE ORD ER OF HIS PREDECESSOR IN THE ASSESSEES OWN CASE FOR THE AY 2 003-04, UPHELD THE FINDINGS OF THE AO IN THE FOLLOWING TERMS:- 2.2 DURING THE APPELLATE PROCEEDINGS, THE APPELLAN T REPEATED THE SUBMISSION MADE BEFORE THE CIT(A) DURING THE APPELL ATE PROCEEDINGS FOR A.Y. 2003-04 IN THE APPELLANT'S OWN CASE. THE CIT(A ) HAS DISMISSED THE APPEAL FOR A.Y. 2003-04 WITH THE FOLLOWING REMARKS: - I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPEL LANT AND OBSERVATION OF THE A.O, THE CONTENTION OF THE APPEL LANT THAT CROSS EXAMINATION OPPORTUNITY HAS NOT BEEN GIVEN IS TOTAL LY MISCHIEVOUS BECAUSE BY WAY OF REMAND PROCEEDINGS THE AO WAS CLE ARLY DIRECTED TO ALLOW CROSS EXAMINATION OPPORTUNITY TO THE APPEL LANT. THE APPELLANT WAS ALSO TOLD DURING THE APPELLATE PROCEE DINGS THAT HE SHOULD COOPERATE IN THE REMAND PROCEEDINGS AND HE S HOULD NOT CREATE OBSTACLES. THE AO ISSUED A NOTICE TO THE APP ELLANT FOR ATTENDING HIS OFFICE SO THAT HE COULD GIVEN CROSS E XAMINATION OPPORTUNITY AS WELL AS REPORT OF THE INSPECTOR VIDE LETTER DATED 3 ITA N O.1914/AHD/2009 3 6,11,06 FOR ATTENDANCE ON 14.11.06 GIVING MORE THAN ONE WEEK FOR THE ASSESSEE TO SIMPLY ATTEND. IN THIS LETTER NO DE TAILS WERE ASKED TO BE COMPILED. THE ASSESSEE HAD TO SIMPLY ATTEND A ND WORK OUT THE MODALITIES OF CROSS EXAMINATION. FOR REASONS BE AST KNOWN TO THE APPELLANT IT NEITHER ATTENDED NOR FILED ANY WRI TTEN LETTER FOR ADJOURNMENT. THEREFORE THE APPELLANT HAS FORFEITED ITS RIGHT FOR CROSS EXAMINATION WHICH WAS GIVEN DURING THE APPELLATE PR OCEEDINGS BY WAY OF REMAND PROCEEDINGS. IN FACT, THE APPELLANT H AS WASTED THE TIME OF AO AS WELL AS CIT(A). WITH RESPECT TO THE F ACTS IT IS CLEAR THAT FIRST THE ADDRESS OF THE PARTIES FROM WHOM THE MACH INERIES HAVE BEEN PRODUCED WAS WRONG. ALL THE THREE CUSTOMERS HA VE GIVEN THE STATEMENT THAT THEY WERE NOT ENGAGED IN THE MANUFAC TURE AND SALE OF NEW MACHINERIES. INTERESTINGLY,, IN RESPECT OF A LL THE THREE PARTIES THE MAIN PERSON IS ABSCONDING DUE TO SALES TAX/EXCI SE PROBLEMS. THEY WERE ENGAGED IN THE BUSINESS OF BUYING OLD MAC HINERIES AND AFTER RECONDITIONING/REPAIRING/REFITTING THE SAME A RE SOLD. THE CERTIFICATE OF THE DEVELOPMENT COMMISSIONER, SPECIA L ECONOMIC ZONE, SURAT ONLY SAYS THAT THE MACHINERIES HAVE ENT ERED THE ZONE BUT IT DOES NOT SAY WHETHER THE MACHINERIES WERE OL D OR NEW. THE CERTIFICATE OF ORIENTAL BANK OF COMMERCE ONLY SAYS THAT THE FUNDS WERE DISBURSED TO THE SUPPLIERS BUT IT DOES NOT SAY WHETHER THE MACHINERIES WERE OLD OR NEW. FURTHER IT IS INTEREST ING THAT THAT THE ASST. GENERAL MANAGER OF ORIENTAL BANK OF COMMERCE CERTIFIES THAT THE LOAN HAS BEEN AVAILED ON 26.12.02 AND THIS LOAN WAS DISBURSED DIRECTLY TO THE SAID PARTIES WHEREAS THE MACHINERIE S HAVE REACHED MUCH EARLIER AS PER THE CERTIFICATE OF DEVELOPMENT COMMISSIONER ON 2,10.02, NO EXPLANATION SEEMS TO HAVE BEEN GIVEN BY THE ASSESSEE AS TO WHY ANYBODY WILL SUPPLY THE MACHINES WITHOUT ANY PAYMENT OR GUARANTEE, THE STATEMENT OF THE BANK IN THE LETTER DATED 17.10,05 THAT THE DISBURSEMENT OF THE SAID LOAN WAS MADE DIR ECTLY TO THE SUPPLIER IS ALSO WRONG BECAUSE THE PERUSAL OF THE D ETAILS GIVEN BY THE ASSESSEE VIDE LETTER DATED 19.1.06 SHOWS THAT T HE ASSESSEE HAD MADE D.D. FROM THE CURRENT ACCOUNT. THE D.D. WAS MA DE BY DEBITING BOTH THE CURRENT ACCOUNT FOR PART AMOUNT A ND THE TERM LOAN FOR THE BALANCE AMOUNT. THEREFORE THE PAYMENTS CAN- NOT LYE SAID TO BE DIRECTLY FROM THE TERM LOAN BY THE BANK. FURTHER THE BANK CERTIFICATE DOES NOT SHOW THAT THE MACHINERIES ARE NEW OR OLD. IN VIEW OF THE ABOVE THE FACTS ARE NOT ONLY CONTRARY I N MANY PLACES BUT THEY SHOW THAT EITHER NO MACHINERY WAS INSTALLED OR OLD RECONDITIONED MACHINERY MIGHT HAVE BEEN USED OR SIM PLY BILLING OF THE MACHINERY MIGHT HAVE BEEN TAKEN. THE FACT REGAR DING BILLING OF THE MACHINERY ALSO FINDS SUPPORT FROM THE FACT THAT NORMALLY BANKS MAKE PAYMENTS DIRECTLY TO THE VENDOR BUT IN THIS CA SE THE PAYMENT HAS GONE INTO THE APPELLANT'S ACCOUNTS. THE MACHINE RIES SEEM TO HAVE COME MUCH EARLIER THEN THE PAYMENTS ARE MADE W HICH DO NOT GENERALLY HAPPEN. WITH RESPECT TO THE LEGAL ARGUMEN T IT IS SEEN THAT THE PROVISIONS OF SECTION 10A(2)(III) ARE CLEAR THA T THE PHRASE USED IS THE UNDERTAKING SHOULD NOT HAVE BEEN FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT 'PREVIOUSLY USED FOR ANY 4 ITA N O.1914/AHD/2009 4 PURPOSE'. THIS SHOWS THAT THE MACHINERY SHOULD NOT HAVE BEEN USED FOR ANY PURPOSE EARLIER AT ALL WHICH MEANS EVE N SECOND HAND MACHINERY ARE NOT A I LOWED. THE PURPOSE OF SECTION 10A IS TO PROMOTE GROWTH OF BUSINESS AND NOT SIMPLY TRANSFER OF OLD MACHINERY FROM ONE PLACE TO ANOTHER. IN VIEW OF THI S REASON I AGREE WITH THE AO THAT THE DEDUCTION /EXEMPTION U/S 10A I S NOT ALLOWABLE. IN VIEW OF THIS REASON BOTH THE GROUNDS OF APPEAL A RE DISMISSED. ' ADMITTEDLY, THE FACTS ARE SIMILAR TO THE A.Y. 2003- 04 IN THE CASE OF APPELLANT'S OWN CASE, THEREFORE, FOLLOWING THE ABOV E ORDER THE EXEMPTION IS DENIED IN THIS YEAR ALSO. HENCE THESE GROUNDS OF AP PEAL ARE DISMISSED. 5. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A).NONE APPEARED ON BEH ALF OF THE ASSESSE WHILE THE LEARNED DR SUPPORTED THE IMPUGNED ORDER. 6. WE HAVE HEARD THE LEARNED DR AND GONE THROUGH TH E FACTS OF THE CASE. AS IS APPARENT FROM THE FACTS NARRATED IN THE IMPUGNED ORDER, BOTH THE AO AND THE LD. CIT(A) FOLLOWED THEI R RESPECTIVE ORDERS FOR THE AY 2003-04 WHILE DISALLOWINGD THE CL AIM FOR EXEMPTION U/S 10A OF THE ACT. HOWEVER, WE FIND THAT THE ITAT AHMEDABAD BENCH-A VIDE THEIR ORDER DATED 22-10-2010 IN THE AS SESSEES OWN CASE FOR AYS 2003-04 AND 2004-05 IN ITA NOS.161 & 3 922/AHD/2007 RESTORED THE SAID ISSUE TO THE FILE OF THE AO IN TH E FOLLOWING TERMS:- 15. WE FIND THAT THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN DRAWING AN ADVERSE INFERENCE AGAINST THE ASSESSEE M ERELY BECAUSE OF A SINGLE FAILURE OF THE ASSESSEE TO APPEAR ON THE APP OINTED DATE. IT IS NOT A CASE WHERE THE ASSESSEE REPEATEDLY FAILED TO APPEAR BEFORE THE LEARNED ASSESSING OFFICER. THE LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) WAS NOT JUSTIFIED IN ACCEPTING THE REMAND REPORT WH ICH WAS SUBMITTED IMMEDIATELY ON THE FIRST DATE ON WHICH THE CASE WAS FIXED BY THE LEARNED ASSESSING OFFICER AND SHOWS THAT THE LEARNED ASSESS ING OFFICER ACTED IN UNDUE HASTE. WE THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND RESTORE THE ISSUE BACK TO THE FILE OF THE LEARN ED ASSESSING OFFICER FOR ADJUDICATION AFRESH AS PER LAW AFTER ALLOWING PROPE R AND REASONABLE OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE OF THE PARTIES WHOSE STATEMENTS THE LEARNED ASSESSING OFFICER WISHES TO RELY UPON AND AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE A SSESSEE. IT IS AN ESTABLISHED POSITION OF LAW THAT A STATEMENT WHICH IS RECORDED BEHIND THE BACK OF THE ASSESSEE CANNOT BE USED AGAINST THE ASS ESSEE UNLESS THE ASSESSEE IS ALLOWED OPPORTUNITY TO CROSS EXAMINE TH E MAKER OF THE 5 ITA N O.1914/AHD/2009 5 STATEMENT. THE LEARNED AO SHALL KEEP THE ABOVE SETT LED PRINCIPLE OF LAW IN MIND AT THE TIME OF ADJUDICATING AFRESH THE ISSUE U NDER CONSIDERATION . 6.1 INDISPUTABLY, SINCE BOTH THE AO A ND THE LD. CIT(A) RELIED UPON THEIR RESPECTIVE FINDINGS IN THE AY 2003-04, FOLLOWING T HE VIEW TAKEN BY THE ITAT IN THEIR AFORESAID DECISION DATED 22.10.2010 FOR THE AYS 2003-04 & 2004-05, WE HAVE NO ALTERNATIVE BUT TO SET ASIDE THE IMPUGNED O RDER OF THE LD. CIT(A) AND RESTORE THE ISSUE RAISED IN GROUND NO S. 2 & 3 OF THE APPEAL TO THE FILE OF THE AO FOR DECIDING THE MATTE R AFRESH IN ACCORDANCE WITH LAW, IN THE LIGHT OF HIS FINDINGS F OR THE AY 2003-04 IN TERMS OF THE AFORESAID DIRECTIONS OF THE ITAT AN D OF COURSE AFTER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. WITH THESE DIRECTIONS, GROUND NOS. 2 & 3 IN THE APPEAL ARE DIS POSED OF. 7. GROUND NO.1 BEING GENERAL IN NATURE, DOES NOT R EQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITIONAL GROUND HA VING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND NO.4 IN THE APPEAL, THESE TWO GROUNDS ARE, THEREFORE, DISMISSED. 8. IN THE RESULT, APPEAL IS ALLOWED BUT FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 26-05-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 26-05-2011 COPY OF THE ORDER FORWARDED TO: 1. PRIYANK CORDS & TASSELS PRIVATE LIMITED, G-2, PA RSHVA APARTMENT, NEAR HANDLOOM HOUSE, CHOWKI SHERI, NANPU RA, SURAT 2. INCOME-TAX OFFICER, WARD-1(4), SURAT 3. CIT CONCERNED 4. CIT(A)-I, SURAT 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY/ASST. REGISTRAR ITAT, AHMEDABAD