Parikh Enterprises Pvt.Ltd., Ahmedabad V. The ACIT.,(OSD) Circle-5, Ahmedabad

ITA 2298/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94638 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-10-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 12-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: J M SHAH
• Keywords: Non compliance
• Section: 80HHC; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA. NOS. 2298 & 2299/AHD/2011 (ASSESSMENT YEARS:2002-03 & 2003-04) PARIKH ENTERPRISES PVT. LTD. C/O. M/S. VINOD AND NARENDRA 101/102, SHAILY, NR. OLD GUJARAT HIGH COURT, NAVRANGPURA, AHMEDABAD-9 APPELLANT VS. ACIT(OSD), CIRCLE 5, AHMEDABAD RESPONDENT / BY ASSESSEE : SHRI J. M. SHAH, A.R. / BY REVENUE : SHRI DINESH SINGH, SR.D.R. /DATE OF HEARING : 13.10.2015 /DATE OF PRONOUNCEMENT : 06.11.2015 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE TWO ASSESSEES APPEALS FOR ASSESSMENT YEAR 2002-03 & 2003-04, ARISE FROM ORDERS OF THE CIT(A) - XI, AH MEDABAD, ITA NOS.2298 & 2299/AHD/2011 (PARIKH ENTERPRISES P. LTD. VS. ACIT(OSD) A.YS. 2002-03 & 2003-04 - 2 - DATED 16.08.2011 & 23.08.2011; RESPECTIVELY PASSED IN PROCEEDINGS U/S.143(3) R.W.S. 254 OF THE INCOME TAX ACT, 1961, HEREINAFTER THE ACT. 2. WE COME TO A.Y. 2002-03 FIRST INVOLVING ITA NO.2298/AHD/2011. THE ASSESSEES FIRST SUBSTANTIVE GROUND PLEADS ACTION OF BOTH THE LOWER AUTHORITIES UNDER C HALLENGE TO BE INVALID BEING VIOLATIVE OF TRIBUNALS REMAND DIRECT IONS IN FIRST ROUND OF PROCEEDINGS. ITS LATTER TWO GROUNDS ON ME RITS CHALLENGE DISALLOWANCE OF STAFF TRAINING AND FOREIGN TRAVEL E XPENDITURE OF RS.11,10,976/- AND RS.3,31,631/-; RESPECTIVELY. 3. IT TRANSPIRES FROM THE CASE FILE THAT THE ASSESS ING OFFICER COMPLETED A REGULAR ASSESSMENT IN THIS CASE ON 28.0 3.2005 INTER ALIA DISALLOWING THE ABOVE TWO CLAIMS. THE CIT(A) AFFIRMED THE FORMER ACTION AND REVERSED THE LATTER ONE IN HIS OR DER DATED 06.04.2009. THE ASSESSEE FILED ITA NO.2422/AHD/200 5. THE REVENUE INSTITUTED CROSS APPEAL ITA NO.57/AHD/2006 BEFORE THE TRIBUNAL. A CO-ORDINATE BENCH IN ITS ORDER DATED 0 8.04.2009 REMITTED BOTH ISSUES BACK TO THE ASSESSING OFFICER. HE RESUMED CONSEQUENTIAL PROCEEDINGS BY ISSUING NECESSARY NOTI CES. THESE CONSEQUENTIAL PROCEEDINGS SHOULD FINALIZE ON 23.12. 2010 RESULTING IN THE IMPUGNED TWO DISALLOWANCES BEING M ADE AS AFFIRMED IN THE LOWER APPELLATE PROCEEDINGS. 4. THE ASSESSEES SUBMISSION IN THE COURSE OF HEARI NG ALLEGE NON COMPLIANCE OF TRIBUNALS EARLIER ORDER DIRECTIN G THE ASSESSING OFFICER TO TAKE ON RECORD ALL DETAILS SUPPORTING TH ESE TWO CLAIMS. THE LD. CO-ORDINATE BENCH GRANTED LIBERTY TO SEEK A LL MATERIAL ITA NOS.2298 & 2299/AHD/2011 (PARIKH ENTERPRISES P. LTD. VS. ACIT(OSD) A.YS. 2002-03 & 2003-04 - 3 - EVIDENCE IN REBUTTAL. THE LD. AUTHORIZED REPRESENT ATIVE PLEADS THAT THE ASSESSING OFFICER ISSUED NOTICE OF HEARING ON 11.08.2009 FOR 28.08.2009. THE ASSESSEE FILED ITS REPLY ON 26 .08.2009. IT CLAIMS TO HAVE PERSONALLY ATTENDED THE HEARING FIXED . NOTHING TRANSPIRED ON THE SAID DATE TILL NOTICE DATED 21.10 .2009. THE ASSESSEE AGAIN FILED REPLY ON 26.10.2010 OBJECTING TO ASSESSING OFFICERS JURISDICTION. IT FILED A PAPER BOOK ON 2 4.11.2010. THE ASSESSING OFFICER PASSED FINAL ORDER ON 23.12.2010. THE ASSESSEE STRONGLY ARGUED THAT THE CASE HEARING WAS FIXED ON A PUBLIC HOLIDAY/SUNDAY. THE SAME FAILS TO IMPRESS US. WE PUT UP A SPECIFIC QUERY AS TO WHETHER THERE IS ANY FAILURE O N PART OF EITHER OF THE LOWER AUTHORITY IN NOT CONSIDERING THE RELEV ANT MATERIAL OR IS THERE ANY VIOLATION OF PRINCIPLES OF NATURAL JUS TICE OR THERE IS ANY LACK OF OPPORTUNITY AFFORDED TO PRODUCE THE REL EVANT MATERIAL SUPPORTIVE OF THE CLAIMS. THE ASSESSEE REPLIES IN NEGATIVE. WE OBSERVE IN THESE FACTS THAT ITS FIRST PLEA CHALLENG ES VALIDITY OF THE ORDERS UNDER CHALLENGE IS ONLY A TECHNICAL ONE. TH E SAME STANDS REJECTED ACCORDINGLY. 5. WE COME TO ASSESSEES SECOND SUBSTANTIVE GROUND CHALLENGING DISALLOWANCE OF STAFF TRAINING AND EDUC ATION EXPENDITURE OF RS.11,10,925/-. THE SAME WAS INCURR ED ON MS. ARPANA PARIKH. SHE HAPPENS TO BE DAUGHTER OF ASSES SEES MANAGING DIRECTOR, SHRI P. K. PARIKH. THE ASSESSEE S CASE IS THAT MS. PARIKH WORKED AS ITS EMPLOYEE. SHE WENT TO US FOR TRAINING SO AS TO ACQUIRE SPECIAL KNOWLEDGE FOR DEVELOPING A SSESSEES BUSINESS IN US AFTER COMPLETING STUDIES. THE ASSES SEE CLAIMED THIS EXPENDITURE U/S.37 OF THE ACT. IT REITERATED THE EVIDENCE ITA NOS.2298 & 2299/AHD/2011 (PARIKH ENTERPRISES P. LTD. VS. ACIT(OSD) A.YS. 2002-03 & 2003-04 - 4 - ALREADY ON RECORD AS PLACED IN FIRST ROUND. IT PLE ADED THAT MS. PARIKH GRADUATED IN ARTS WITH ENGLISH AND ADVERTISI NG. SHE JOINED THE COMPANY IN DECEMBER, 2000. FOLLOWED BY HER TAKING ADMISSION IN USA ON THE CONDITION THAT SHE WOULD CO MPLETE HER STUDY AND WORKED FOR THE COMPANY TILL HER MARRIAGE AS IT TOOK PLACE IN DECEMBER 2004. THE RELEVANT DEGREE COURSE AAS (ASSOCIATE IN APPLIED SCIENCE). THE ASSESSEE EXPLA INED THAT MS. PARIKH REMAINED IN USA AND PROCURED EXPORT SALES TH ERE. RELEVANT EXPORT FIGURES FROM A.Y. 1999-2000 TO 2002 -03 ARE PLACED ON RECORD. THE ASSESSING OFFICER INVOKED TH E IMPUGNED DISALLOWANCE INTER ALIA AFTER HOLDING THAT ASSESSEE HAD NOT GIVEN THIS TRAINING TO ANY OF OTHER SENIOR EMPLOYEES IN T HE PAST, THE IMPUGNED EXPENDITURE WAS NOT RESULT ORIENTED SINCE MS. PARIKH HAD LEFT THE COMPANY AFTER GETTING MARRIED IN DECEM BER 2004, SHE HAPPENED TO BE DAUGHTER OF ASSESSEES M.D., NAT URE OF THE ACADEMIC COURSE AND ASSESSEES BUSINESS ACTIVITY WE RE TOTALLY DIFFERENT ETC. HE ACCORDINGLY TREATED THE IMPUGNED STAFF TRAINING EXPENDITURE IN QUESTION OF RS.11,10,925/- AS NOT IN CURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS U/S .37 OF THE ACT. THE CIT(A) CONFIRMS THE IMPUGNED DISALLOWANCE. 6. HEARD BOTH SIDES. RECORDS PERUSED. RELEVANT FA CTS NARRATED IN THE PRECEDING PARAGRAPH ARE NOT REPEATE D FOR THE SAKE OF BREVITY. THE ASSESSEE COMPANY MANUFACTURES CHEM ICALS AND PESTICIDES. IT TRADES IN SHARES AND SECURITIES AS WELL. IT RAISED THE IMPUGNED CLAIM OF RS.11,10,925/- TO HAVE BEEN S PENT ON STAFF TRAINING/EDUCATION OF HIS M.D.S DAUGHTER MS. ARPANA PARIKH. HER USA STUDY COURSE DEGREE PROGRAMME AS I SSUED ON ITA NOS.2298 & 2299/AHD/2011 (PARIKH ENTERPRISES P. LTD. VS. ACIT(OSD) A.YS. 2002-03 & 2003-04 - 5 - 01.03.2005 IN THE FIELD OF ASSOCIATE APPLIED SCIENC ES WAS CONDUCTED BY THE FASHION INSTITUTE OF TECHNOLOGY, N EW YORK. THE ASSESSEE FAILS TO PROVE ANY NEXUS BETWEEN ITS CHEMI CALS AND PESTICIDES MANUFACTURING BUSINESS VIS--VIS THE ABO VE STATED FASHION INSTITUTE OF TECHNOLOGYS ASS (SUPRA) COURS E. NOR DOES IT LEAD US TO ANY MATERIAL LEADING TO A CONCLUSION THA T MS. PARIKH COULD RENDER HER SERVICES DURING THE ABOVE STATED C OURSE. IT HAS COME ON RECORD THAT SHE GOT MARRIED AFTER COMPLETIN G THE ABOVE STATED DEGREE PROGRAMME. IT IS FURTHER MADE CLEAR THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE THROWING ANY LI GHT ON MS. PARIKHS PROCURING ITS OVERSEAS SALES ORDERS. WE T AKE INTO ACCOUNT ALL THESE FACTS FOR UPHOLDING ACTION OF THE LOWER AUTHORITIES DISALLOWING ITS CLAIM OF STAFF TRAINING EXPENDITURE OF RS.11,10,925/-. THIS FIRST GROUND FAILS. 7. THIS LEAVES US WITH ASSESSEES SECOND AND LAST G ROUND CHALLENGING LOWER APPELLATE ORDER RESTRICTING FOREI GN TRAVEL EXPENDITURE OF RS.7,79,823/- TO THAT OF RS.3,31,631 /-. THIS EXPENDITURE DEMONSTRATES A SUM OF RS.1,04,004/- IN CASE OF SHRI P. K. PARIKH, SMT. ARCHANA PARIKH OF RS.47,886/-, S HRI K. D. PARIKH AND SMT. VIRMATI PARIKH OF RS.1,77,233/-, SH RI PARESH PARIKH OF RS.39,381/- AND SHRI P. K. PARIKH AND SMT . ARCHANA PARIKH OF RS.3,90,258/-; TOTALING TO RS.7,79,823/-. THE ASSESSING OFFICER DENIED INVOLVEMENT OF ABOVE STATE D FEMALE TRAVELERS IN THE COMPANYS ACCOUNT AS THEY WERE FOU ND NEITHER ITS EMPLOYEES NOR DIRECTOR AND MADE THE IMPUGNED DISALL OWANCE OF RS.3,31,631/-. THE SAME STANDS CONFIRMED IN THE LO WER APPELLATE ORDER. ITA NOS.2298 & 2299/AHD/2011 (PARIKH ENTERPRISES P. LTD. VS. ACIT(OSD) A.YS. 2002-03 & 2003-04 - 6 - 8. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. THE ASSESSEE FILES COPY OF ITS ANNUAL REPORT AS ON 31.03.2002 SHOWING NAME OF SMT. VIRMATI PARIKH (SUP RA) AS ITS DIRECTOR. THE AUTHORITIES BELOW DISALLOWED HALF OF RS.1,77,233/- (SUPRA) IN THIS REGARD. THE FACT ALSO REMAINS THAT THE CIT(A) FINDS THE ASSESSEE TO HAVE BEEN FAILED PROVING THE IMPUGN ED TRAVEL EXPENDITURE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS U/S.37. THE ASSESSEE FAILS TO REBUT CORRECTNESS OF THIS CRUCIAL FINDING IN THE COURSE OF HEARING BY PLACING ON RECO RD SUPPORTIVE EVIDENCE JUSTIFYING THE FOREIGN TRAVELS IN QUESTION . WE ACCORDINGLY REJECT ITS LATTER GROUND AS WELL. ITA NO. 2298/AHD/2011 IS DISMISSED. 9. WE COME TO ITA NO.2299/AHD/2011 FOR A.Y. 2003-04 . THE ASSESSEES FIRST THREE SUBSTANTIVE GROUNDS CHALLENG ING ACTION OF LOWER AUTHORITIES ON THE ISSUE OF VALIDITY, DISALLO WANCE OF STAFF TRAINING EXPENSES OF RS.2,14,660/- AND FOREIGN TRAV EL EXPENSES OF RS.1,25,606/- ARE STATED TO BE IDENTICAL AS DECIDED HEREINABOVE IN PRECEDING ASSESSMENT YEAR. ALL THESE THREE GROU NDS ARE ACCORDINGLY REJECTED. 10. THE ASSESSEES FOURTH SUBSTANTIVE GROUND CHALLE NGES SECTION 80HHC DEDUCTION RE-COMPUTATION AFTER DISALLOWING FD R INTEREST AMOUNT OF RS.79,72,346/- AND EXCISE DUTY REBATE OF RS.89,16,188/-. IT HAD CLAIMED THE IMPUGNED DEDUCT ION QUA A SUM OF RS.1,76,90,013/-. THE ASSESSING OFFICER COM PUTED THE SAME AS RS.1,78,65,343/- IN REGULAR ASSESSMENT FRAM ED ON 30.01.2006. HE THEREAFTER FOUND REASONS TO BELIEVE THAT THIS ITA NOS.2298 & 2299/AHD/2011 (PARIKH ENTERPRISES P. LTD. VS. ACIT(OSD) A.YS. 2002-03 & 2003-04 - 7 - DEDUCTION WAS ALLOWABLE ONLY TO THE TUNE OF RS.1,46 ,46,920/- AFTER DEDUCTING 90% OF INTEREST IN PROFITS AND NON INCLUSION OF SALES TAX AND EXCISE DUTY. THE OTHER REASON OF RE- OPENING APPEARS TO BE EXCISE DUTY INCLUSION IN CLOSING STOC K NOT GERMANE TO THE ISSUE IN HAND. THE ASSESSING OFFICER FRAMED RE- ASSESSMENT ON 20.12.2007 RE-COMPUTING SECTION 80HHC DEDUCTION OFRS.1,32,93,878/-. THE CIT(A) ACCEPTED ASSESSEES CORRESPONDING GROUND IN ORDER DATED 09.01.2009. TH E TRIBUNAL ACCEPTED REVENUES ARGUMENTS IN ITS APPEAL ITA NO. 1074/AHD/2009 DECIDED ON 22.05.2009 FOR STATISTICAL PURPOSES. THE ISSUE ACCORDINGLY STOOD RESTORED BACK TO ASSESS MENT STAGE. 11. THE ASSESSING OFFICER TOOK UP CONSEQUENTIAL PRO CEEDINGS. THE CASE FILE REVEALS THAT THERE IS NO DISCUSSION O N THE SECTION 80HHC IN CONSEQUENTIAL ORDER DATED 23.12.2010 AS TH E SAME ONLY CONSIDERS THIS ISSUE OF SECTION 80HHC DEDUCTIO N IN FINAL COMPUTATION TO THE TUNE OF RS.1,45,42,665/-. THE C IT(A) FOLLOWS CASE LAWS OF CIT VS. PANDYAN CHEMICALS 262 ITR 278 (SC) AND THAT OF LIBERTY INDIA LTD. 317 ITR 218 (SC) QUA AS SESSEES INTEREST ON FDRS. AND EXCISE DUTY REBATE; RESPECTIV ELY. WE REPEAT THAT NEITHER IN THE RE-ASSESSMENT NOR THE LO WER APPELLATE AUTHORITY HAVE DISCUSSED ABOUT THE RELEVANT FACTUAL POSITION ON THE ABOVE STATED FACTORS OF INTEREST AND EXCISE DUT Y VIS--VIS SECTION 80HHC DEDUCTION IN QUESTION. WE ARE OF THE OPINION IN THIS BACKDROP OF FACTS THAT THE ASSESSING OFFICER S HALL RE- ADJUDICATE UPON THE ISSUE AND PASS A FRESH ORDER IN YET ANOTHER INNINGS. IT IS MADE CLEAR THAT THE ASSESSEE SHALL PLACE ON RECORD ALL MATERIALS JUSTIFYING IN ITS FDRS INTEREST AND E XCISE DUTY FOR ITA NOS.2298 & 2299/AHD/2011 (PARIKH ENTERPRISES P. LTD. VS. ACIT(OSD) A.YS. 2002-03 & 2003-04 - 8 - THE PURPOSE OF SECTION 80HHC DEDUCTION. THIS GROUN D IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 12. THIS LEAVES US WITH THE ASSESSEES LAST GROUND CHALLENGING ADDITION OF RS.13,56,684/- MADE BY BOTH THE LOWER A UTHORITIES AFTER NOTICING NON INCLUSION OF EXCISE DUTY ON FINI SHED GOODS. THIS ISSUE HAPPENS TO HAVE ARISEN IN SECTION 148 NO TICE. THE ASSESSING OFFICER ADDED EXCISE DUTY @ 12% COMING TO RS.13,56,684/- ON A SUM OF RS.1,13,05,702/-. THE C IT(A) QUOTES SECTION 145A TO BE MANDATORY IN NATURE FOR INCLUSIO N OF EXCISE DUTY IN VALUATION OF CLOSING STOCK. HE GIVES A LIM ITED RELIEF OF CORRESPONDING OPENING STOCK AS PERTAINING TO A.Y. 2 004-05. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE CASE FILE. THE ASSESSEE FILES BEFORE US COPY OF ITS COMPUTATIO N STATEMENT STATING SUO MOTTO DISALLOWANCE U/S.145A AS PER TAX AUDIT REPORT AMOUNTING TO RS.20,39,130/- IT ACCORDINGLY STATES T HAT THE LOWER AUTHORITIES HAVE RESORTED TO DOUBLE ADDITION UNDER THE VERY HEAD OF EXCISE DUTY INCLUSION IN VALUATION OF CLOSING ST OCK. WE NOTICE THAT NEITHER OF THE AUTHORITY DISCUSSES THE VITAL A SPECT AS TO WHETHER THE INSTANT CASE INVOLVES INCLUSIVE OR EXCL USIVE METHOD IN VALUING ASSESSEES CLOSING STOCK. THE REVENUE F AILS TO REBUT THIS FACTUAL POSITION. WE ACCORDINGLY FEEL THAT TH IS LAST GROUND ALSO DESERVES TO FOLLOW SUIT AS IN GROUND NO.4 TO B E RE-ADJUDICATED BY THE ASSESSING OFFICER. ORDERED ACCORDINGLY. TH IS LATTER APPEAL ITA NO.2299/AHD/2011 IS PARTLY ACCEPTING FOR STATIS TICAL PURPOSES. ITA NOS.2298 & 2299/AHD/2011 (PARIKH ENTERPRISES P. LTD. VS. ACIT(OSD) A.YS. 2002-03 & 2003-04 - 9 - 14. ASSESSEES APPEAL ITA NO.2298/AHD/2011 IS DISMI SSED AND ITA NO.2299/AHD/2011 IS PARTLY ALLOWED FOR STATISTI CAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 6 TH DAY OF NOVEMBER, 2015. SD/- SD/- (ANIL CHATURVEDI) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 06/11/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )* + ,--. . /0 / DR, ITAT, AHMEDABAD 1 + 23 4 5 / GUARD FILE. BY ORDER / . // . /0