Valeo Friction Materials India Pvt. Ltd., Kancheepuram V. ACIT, CHENNAI

ITA 2209/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4785 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 03-04-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 22-07-2016
• Court: TRIBUNAL
• Department Lawyers: SUPRIYA PAL
• Assessee Lawyers: A CHANDAN ANCHALIA
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , # $ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 2209/MDS/2016 / ASSESSMENT YEAR : 2008-09 VALEO FRICTION MATERIALS INDIA PVT. LTD., NO. 16A, SENGUNDRAM INDUSTRIAL AREA, MELROSAPURAM, VIA SINGAPERUMAL KOIL, KANCHIPURAM DISTRICT, CHENNAI - 603 204. [PAN: AAAACV 3671K] VS . ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE III(4), CHENNAI - 600 034. ( / APPELLANT) ( /RESPONDENT) & ' / APPELLANT BY : SHRI A. CHANDAN ANCHALIA, CA *+& ' / RESPONDENT BY : MR. SUPRIYA PAL, JCIT ' /DATE OF HEARING : 03.04.2017 ' /DATE OF PRONOUNCEMENT : 18.04.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNAI IN ITA NO. 535/ 2013-14/CIT(A)-11 DATED 22.04.2016 PASSED U/S. 143(3) AND 250 OF THE INCOME TAX ACT. :-2-: I.T.A. NO. 2209/MDS/2016 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 2.1 THE ORDER OF THE LD. CIT(A) AND LD. AO IS BAD O N FACTS AND IN LAW. 2.2 THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF LD. AO IN MAKING ADDITION ON THE UNPAID BALANCE OF SUNDRY CREDITORS 2.3 THE APPELLANT SUBMITS THAT EACH GROUNDS OF APPE AL ARE WITHOUT PREJUDICE TO ONE ANOTHER. 2.4 THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND , SUBSTITUTE, DELETE AND/OR MODIFY, IN ANY MANNER WHATSOEVER, ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL, AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS IN THE BUSINESS OF DEVELOPMENT, MANUFACTURE AND SALE OF NO N-ASBESTOS FRICTION MATERIALS TO BE INTEGRATED IN CLUTCH SYSTEMS FOR AUTOMOBILES AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 30.09.2008 WITH TOTAL INCOME OF RS, 12,83,64,063/- AND THE RETURN OF INCOME WAS PROCESS ED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S. 143(2) OF THE ACT WAS ISSUED. THE DGM OF THE ASSESSEE COMPANY AP PEARED ON VARIOUS DATES AND FILED THE INFORMATION. THE ASSESSING OFFICER O N PERUSAL OF THE FINDINGS AND SUBMISSIONS ON THE DISPUTED ISSUE FIND THAT THE ASS ESSEE COMPANY HAS DISCLOSED RS. 8,56,84,785/- AS CURRENT LIABILITIES & PROVISIO NS AS PER THE SCHEDULE OF BALANCE SHEET. THE ASSESSEE COMPANY HAS ALSO FURNISHED LED GER ACCOUNT COPIES. WHEREAS, ON VERIFICATION THAT THE LD. AO OBSERVED T HAT THE AMOUNT PERTAINING TO EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT FOR VAR IOUS SERVICES ARE RS. :-3-: I.T.A. NO. 2209/MDS/2016 1,65,47,256/- AND PROVISION WAS CREATED FOR THE MON TH OF APRIL 2008. ON VERIFICATION AND EXAMINATION OF THE LEDGER COPIES F OR THE BALANCE AMOUNT, THE ASSESSEE COULD NOT FILE ANY EXPLANATIONS OR SUBMIT NARRATIONS IN RESPECT OF EXPENSES AND THE LD. AO ESTIMATED AND DISALLOWED 10 % OF THE CURRENT LIABILITIES RS. 69,13,751/- WITH ADDITIONS AND PASSED ORDER U/S . 143(3) OF THE ACT DATED 21.12.2011. 4. AGGRIEVED BY THE ORDER, THE ASSESSEE COMPANY HAS FILED AN APPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A ) ON THE DISPUTED ISSUE CONSIDERED THE ASSESSEE'S SUBMISSIONS AND CALLED FO R THE REMAND REPORT AND OPPORTUNITY WAS PROVIDED TO THE ASSESSEE TO COMMENT ON REMAND REPORT. THE LD. AR SUBMITTED THAT THE OUTSTANDING BALANCE OF SU NDRY CREDITORS PERTAINS TO VARIOUS PARTIES AND THEREFORE ARBITRARY ADHOC ADDIT ION OF 10% OF SUNDRY CREDITORS IS NOT ACCEPTABLE IN THE EYES OF LAW. FURTHER, THE LD. CIT(A) CALLED FOR THE DETAILS OF SUNDRY CREDITORS AND THE ASSESSEE COMPANY COULD NOT SUBMIT THE CONFIRMATION LETTERS TO THE EXTENT OF RS. 1,58,43,360/- AND FINA LLY THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDE R SUNDRY CREDITORS TO THE EXTENT OF CONFIRMATION LETTERS NOT PRODUCED BY THE ASSESSE E AND PARTLY ALLOWED THE APPEAL. 5. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE TRIBUNAL. BEFORE US, THE LD. AR ARGUED THAT THE CI T(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE IN RESPECT OF SUNDRY CREDITORS WHE RE THE CONFIRMATION LETTERS ARE :-4-: I.T.A. NO. 2209/MDS/2016 NOT AVAILABLE AMOUNTING TO RS. 1,58,48,360/- AND TH E ASSESSEE HAS FILED VARIOUS DOCUMENTS AND EVIDENCE ALONG WITH PAN NO. OF CREDIT ORS AND STATEMENT OF BALANCE AS ON 31.03.2008 AND 31.03.2009 AND THERE I S NO CLARITY IN THE DIRECTIONS OF CIT(A) TO RESTRICT THE DISALLOWANCE. PRIMA FACI E, THE CIT(A) HAS CONSIDERED THE REMAND REPORT AND COMMENTS OF THE ASSESSEE AND ALSO THE SUNDRY CREDITORS PERTAINS TO VENTURES WHERE THE ASSESSEE HAS PROCURE D RAW MATERIAL/SERVICES. FURTHER, THE DIFFERENCE VALUE OF RS. 1,58,48,360/- INCLUDES MAXIMUM OUTSTANDING BALANCE AND MINIMUM OUTSTANDING BALANCE OF RS. 550/ - AND THE LD. AR SUPPORTED WITH THE PAPER BOOK AND JUDICIAL DECISIONS. CONTRA , THE LD. DR RELIED ON THE ORDERS OF THE CIT(A) AND OPPOSED TO THE GROUNDS. 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS. THE SOLE CRUX OF THE ISSUE BEI NG LD. CIT(A) HAS CONSIDERED THE BALANCE OF SUNDRY CREDITORS TO THE EXTENT OF RS. 1, 58,48,360/- AND RESTRICT THE DISALLOWANCE TO 10%, IN THE ABSENCE OF CONFIRMATION LETTERS. THE ASSESSEE WAS PROVIDED AN OPPORTUNITY TO SUBMIT THE COMPLETE INFO RMATION OF SUNDRY CREDITORS WITH LEDGER ACCOUNTS AND WHEREAS THE ASSESSEE HAS C OMPLIED IN PIECE MEAL AND FILED PAPER BOOK WITH THE CONFIRMATION LETTERS OF M AJORITY OF SUNDRY CREDITORS REFERRED AT PAGE 37 TO 78 OF PAPER BOOK AND THE ASS ESSEE ALSO PRODUCED THE INFORMATION WITH NAMES AND OUTSTANDING BALANCES. T HE LD. AO AND THE CIT(A) ARE OF THE OPINION THAT THE ASSESSEE COULD NOT SUBS TANTIATE THE CLAIMS TO THE EXTENT OF RS. 1,58,48,360/-. THE LD. DR SUBMITTED THAT THE ASSESSEE WAS PROVIDED ADEQUATE OPPORTUNITY BEFORE THE LOWER AUTH ORITIES TO PRODUCE THE :-5-: I.T.A. NO. 2209/MDS/2016 COMPLETE INFORMATION. THE LD. AR RELIED ON THE JUD ICIAL DECISIONS AND ALSO REFERRED TO THE PROVISIONS OF SECTION 41(1) OF THE ACT AND EXPLAINED THAT THE CIT(A) HAS UPHELD THE ORDER OF THE ASSESSING OFFICE R IN PARTIAL IN RESPECT OF UNPAID BALANCE WITHOUT REFERRING TO ANY PROVISIONS OR LEGAL PRECEDENCES AND THE FACTS BEING BALANCE OF THE SUNDRY CREDITORS REMAIN ED UNPAID DURING THE END OF THE YEAR AND CANNOT BE TREATED AS INCOME OF THE ASS ESSEE . 6.1 WE FIND THAT THE LD. AR HAS SUBSTANTIATED THE C LOSING BALANCE OF SUNDRY CREDITORS IN RESPECT OF BUSINESS IN THE EARLIER AND CURRENT YEAR. THE LD. CIT(A) HAS NOT APPRECIATED THE FACT THAT THE SUNDRY CREDIT ORS WERE NOT PAID AND RESTRICTED THE DISALLOWANCE @ 10% OF OUTSTANDING BA LANCE OF SUNDRY CREDITORS AS ON 31.03.2008, WHERE NO CONFIRMATIONS WERE AVAILABL E. WE ARE OF THE OPINION, THAT THE ASSESSEE IS A LIMITED COMPANY AND MAINTAIN ING BOOKS OF ACCOUNTS AND THE ASSESSEE SUBMITTED THE INFORMATION BEFORE THE L OWER AUTHORITIES BUT COULD NOT EXPLAIN THE DETAILS FOR VARIOUS REASONS AND THE CON FIRMATION WEREL NOT AVAILABLE TO THE EXTENT OF RS. 1,58,48,360/-. WE CONSIDERED THE FACTS, MATERIAL ON RECORD AND THE JUDICIAL DECISIONS ARE OF THE OPINION TO PROVID E ONE MORE OPPORTUNITY TO THE ASSESSEE COMPANY TO ESTABLISH THE GENUINENESS WITH CONFIRMATIONS OF THE SUNDRY CREDITORS OUTSTANDING BALANCE TO THE EXTENT OF RS. 1,58,48,360/-. IN THE INTEREST OF THE JUSTICE, WE REMIT THE DISPUTED ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED PURPOSE TO EXAMINE THE GENUINENESS OF THE S TATEMENT OF CREDITORS WITH THE ADDRESS AND THE ASSESSEE SHALL BE PROVIDED ADEQ UATE OPPORTUNITY OF HEARING :-6-: I.T.A. NO. 2209/MDS/2016 TO SUBSTANTIATE ITS CLAIMS BEFORE PASSING THE ORDER ON MERITS AND THE GROUNDS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. 7. IN THE RESULT, ASSESSEE APPEAL IN ITA NO. 2209/M DS/2016 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON TUESDAY, THE 18TH DAY OF APRIL, 2017 AT CHENNAI. SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER SD/- ( . ) (G. PAVAN KUMAR) /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 18TH APRIL, 2017. JPV ' *#23 43 /COPY TO: 1. &/ APPELLANT 2. *+& /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 *## /DR 6. 9 /GF