M/s. Magna Chemical Mfrs. (P) Ltd., CHENNAI V. ACIT, CHENNAI

ITA 209/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57778 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 23-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO.209/MDS/2010 ASSESSMENT YEAR: 2004-05 M/S. MAGNA CHEMICAL MFRS. (P) LTD., 16, S-4, SANGEETHA APTS., SARANGAPANI STREET, T. NAGAR, CHENNAI -600 017. PAN AAACM 2160 Q VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-IV(1), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PH ILIP GEORGE, ADVOCATE RESPONDENT BY : DR. I. VIJA YAKUMAR, IRS, COMMISSIONER OF INCOME-TAX DATE OF HEARING : 3 RD JANUARY, 2012 DATE OF PRONOUNCEMENT : 3 RD JANUARY, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2004-05. THE APPEAL IS DIRECTE D AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-V AT CHENNAI - - ITA 209/MDS/ 10 2 DATED 21.01.2010. THE APPEAL ARISES OUT OF THE ASS ESSMENT COMPLETED UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1 961. 2. THE FIRST ISSUE RAISED IN THE APPEAL IS THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN UP HOLDING THE ADDITION OF ` 24,69,070/- AGAINST THE CLAIM OF EXPENDITURE MADE BY THE REVENUE TOWARDS PURCHASE OR FIREWOOD. THE ASSESSEE IS BASICALLY A MANUFACTURER OF INORGANIC C HEMICALS AND THEREFORE PURCHASE OF FIREWOOD IS NECESSARY TO RUN ITS FURNACES AND OTHER PROCESSING SYSTEM. THE ASSESSING AUTHORI TY HAS DISALLOWED THE CLAIM TO THE EXTENT OF ` 24,69,070/- ON THE GROUND THAT THE SUPPORTING DOCUMENTS AND VOUCHERS FILED BY THE ASSESSEE WERE NOT TALLYING WITH THE DETAILS COLLECT ED BY THE ASSESSING OFFICER ON ENQUIRIES. 3. THE ASSESSEE HAS BOOKED AN EXPENDITURE OF ` 46,19,880/- TOWARDS THE PURCHASE OF FIREWOOD. PURCHASES WORTH ` 17,77,681/- WERE MADE FROM ONE MR. RAVICHANDRAN AND PURCHASES WORTH ` 3,73,129/- WERE MADE FROM ONE MR. KUMARESAN. THE ASSESSING AUTHORITY HAS ACCEPTED BOT H THE ABOVE PURCHASES AS GENUINE. THE ASSESSEE HAS MADE - - ITA 209/MDS/ 10 3 PURCHASES WORTH ` 24,69,070/- FROM SUNDRY PARTIES WHICH WERE DISALLOWED BY THE ASSESSING AUTHORITY AS BOGUS. TH E MAIN REASON FOR DISALLOWANCE IS THAT THE MAJORITY OF THE INVOICES WERE SELF MADE VOUCHERS. MANY OF THE VEHICLES WHICH WER E REFLECTED IN THE VOUCHERS WERE FOUND TO BE AUTO-RICKSHAWS WHI LE ENQUIRING FROM THE OFFICE OF THE RTO ON A SAMPLE BASIS. IT I S FOR THIS AND OTHER REASONS THAT THE PURCHASES FROM SUNDRY PARTI ES HAVE BEEN DISALLOWED BY THE ASSESSING AUTHORITY. THE SAME HA S BEEN CONFIRMED BY THE COMMISSIONER OF INCOME-TAX(APPEALS ). 4. WE CONSIDERED THE MATTER IN DETAIL. IT IS TRUE THAT THE ASSESSING AUTHORITY HAS LISTED A SERIES OF DEFICIEN CIES IN THE DOCUMENTATION, EVIDENCE AND PARTICULARS FURNISHED B Y THE ASSESSEE AGAINST THE PURCHASE OF FIREWOOD FROM SUND RY PARTIES. BUT ONE IMPORTANT THING OVERLOOKED BY THE ASSESSING AUTHORITY IS THAT THE DISALLOWANCE OF FIREWOOD PURCHASES HAS BRO UGHT OUT A SITUATION WHERE EVEN THE NECESSARY QUANTUM OF FIREW OOD TO CARRY ON THE OPERATION OF THE ASSESSEE HAS NOT BEEN ACCEP TED BY THE ASSESSING AUTHORITY. IF THE ENTIRE PURCHASE MADE F ROM THE SUNDRY PARTIES HAS TO BE DISALLOWED, AS DONE BY THE ASSESS ING AUTHORITY, THE QUANTUM OF PURCHASE OF FIREWOOD AVAILABLE WITH THE ASSESSEE - - ITA 209/MDS/ 10 4 WOULD BE QUITE INSUFFICIENT TO MEET ITS OPERATIONAL REQUIREMENTS. SECONDLY, IN THE MATTER OF PURCHASE OF FIREWOOD ETC ., THERE IS EVERY CHANCE FOR MAKING LOCAL PURCHASE OFF AND ON, FOR WHICH FOOLPROOF AND FORMAL DOCUMENTARY EVIDENCES IN THE F ORM OF BILLS MAY NOT BE AVAILABLE. THEREFORE, IT IS NOT PROPER ON THE PART OF THE LOWER AUTHORITIES TO DISALLOW THE ENTIRE PURCHA SES MADE FROM SUNDRY PARTIES AS BOGUS. THEREFORE, WE FIND THAT T HE DISALLOWANCE OF ` 24,69,070/- AS A WHOLE IS NOT AT ALL JUSTIFIED. 5. NOW, TAKING INTO ALL ASPECTS OF THE CASE AND TO BE FAIR AND REASONABLE, WE DIRECT THE ASSESSING AUTHORITY TO AL LOW THE EXPENDITURE OF ` 15 LAKHS AS DEDUCTION AGAINST THE PURCHASE OF FIREWOOD FROM SUNDRY PARTIES. BALANCE OF ` 9,69,070/- WILL BE DISALLOWED. 6. THE NEXT GROUND IS REGARDING THE ADDITION OF ` 93,058/- TOWARDS UNLOADING WAGES. EVEN THOUGH, THE LEARNED COUNSEL ARGUED HEAVILY ON THIS POINT, WE FIND NO GROUND TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITIES. THIS GROUND IS ACCORDINGLY, REJECTED. - - ITA 209/MDS/ 10 5 7. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 3 RD OF JANUARY, 2012 AT CHENNAI. SD/- SD/- (GEORGE MATHAN) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 3 RD JANUARY, 2012. MPO* COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.