The DCIT, Circle-1, Surat V. Condor Footware(India) Ltd., Surat

ITA 2314/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9324 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 13-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI S . S. GODARA, J.M.) ( , !'# ' $' $%& , ! '( ) ITA NO: 2314/AHD/2011 (ASSESSMENT YEAR: 2008-09) THE DY. COMMISSIOER OF INCOME-TAX, CIRCLE-1, ROOM NO.108, AAYAKAR BHAVAN, MAJURA GATE, SURAT VS M/S.CONDOR FOOTWEAR INDIA LTD., SHED NO.A-1, 3503/04, ROAD NO.3, SUB ROAD 35, B/H DEVREKHA, SACHIN GIDC, SACHIN SURAT 394230 PAN: AAACC9540N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL KUMAR BHARDWAJ, SR . D.R. RESPONDENT BY : SHRI HARDIK VORA, A.R. DATE OF HEARING : 12-02-201 6 DATE OF PRONOUNCEMENT : 16-02-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY REVENUE IS AGAINST THE ORDER OF CIT(A)-I, SURAT, D ATED 28.06.2011 FOR THE ASSESSMENT YEAR 2008-09. ITA NO .2314/AHD/2011 . A.Y. 2008-09 (DCIT VS. M/S. CONDOR FOOTWEAR INDIA LTD. ) 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A COMPANY STATED TO ENGAGED IN T HE BUSINESS OF MANUFACTURING AND TRADING OF FOOTWEAR ITEMS. THE ASSESSEE ELECTR ONICALLY FILED ITS E-RETURN OF INCOME FOR A.Y. 2008-09 ON 26.09.2008 DECLARING TOTAL INCO ME OF RS.5,18,74,783/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S.143(3) VIDE ORDER DATED 27.12.2010 AND THE TOTAL INCOME WAS DETERMINE D AT RS.5,58,24,910/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO VIDE ORDER DATED 28.06.2011 ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN THE APPEAL B EFORE US AND HAS RAISED FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW, THE LD. CIT(A)-I, SURAT, HAS ERRED IN DELETING THE ADDITION OF RS.28,94,837/ - ON ACCOUNT OF ADJUSTMENT U/S.145A OF THE I.T. ACT WITHOUT APPRECIATING THE F ACT THAT THE ASSESSEE FAILED TO MADE ADJUSTMENT REGARDING EXCISE DUTY IN BOOKS OF A CCOUNTS WHICH REQUIRED U/S.145(A) OF THE ACT. 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A)-I, SURAT, HAS ERRED IN DELETING THE ADDITION OF RS.5,76,430/- ON ACCOUNT OF DISALLOWANCE OUT OF EXPENSES WITHOUT APPRECIATING THE FACT THAT ASSESSEE FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE FOR CLAIM OF EXPENSES DEBITED IN ASSESSEES ACCOUNT. 4. ON THE ISSUE OF ADJUSTMENT OF RS.28,94,837/-, DU RING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE TAX AUDIT REPORT FI LED BY THE ASSESSEE, ASSESSING OFFICER NOTICED THAT SALES SHOWN BY THE ASSESSEE WA S INCLUSIVE OF EXCISE DUTY WHEREAS PURCHASE, CLOSING STOCKS WERE EXCLUDING EXCISE DUTY . A.O. WAS OF THE VIEW THAT AS PER THE PROVISIONS OF SECTION 145A OF THE ACT FOR DETER MINING THE INCOME CHARGEABLE UNDER THE HEAD PROFIT & GAINS OF BUSINESS OR PROFESSION WHERE ACCOUNTING FOR PURCHASE, SALE AND INVENTORY WAS DONE BY THE ASSESSEE ON NET BASIS I.E. BY NETTING OF EXCISE DUTY, SALES TAX ETC., ASSESSEE HAD TO RECAST THE ACCOUNTS FOR INCOME TAX PURPOSES ON GROSS BASIS I.E. BY INCLUDING THE EXCISE DUTY, SALES TAX ETC. SO AS TO DETERMINE THE CORRECT PROFIT OF THE BUSINESS OF THE ASSESSEE. THE SUBMIS SION OF THE ASSESSEE THAT IN VIEW OF THE FACT THAT SINCE EXCISE DUTY WAS HIGHER ON PURCHASES WHEREAS THE EXCISE DUTY LEVIABLE ITA NO .2314/AHD/2011 . A.Y. 2008-09 (DCIT VS. M/S. CONDOR FOOTWEAR INDIA LTD. ) 3 ON FINISHED GOODS WAS LOWER AND THEREFORE, THERE AL WAYS REMAINED THE BALANCE IN CENVAT RECEIVABLE ACCOUNT, WHICH WAS ALWAYS HIGHER THAN THE LIABILITY OF EXCISE DUTY OF FINISHED GOODS AND THEREFORE, NO ADJUSTMENT WAS REQUIRED TO BE MADE U/S.145A OF THE ACT WAS NOT FOUND ACCEPTABLE TO THE A.O. TH E A.O. THEREAFTER WORKED OUT THE ADJUSTMENT REQUIRED U/S.145A OF THE ACT BY INCLUDIN G THE EXCISE DUTY TO CLOSING STOCK AND WORKED OUT THE ADDITION TO INCOME AT RS.28,94,8 37/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFO RE THE LD. CIT(A) WHO DECIDED THE ISSUE BY HOLDING AS UNDER: DECISION: THE ARGUMENTS OF AO AS WELL AS APPELLANT HAS BEEN C ONSIDERED. THERE IS CONSIDERABLE FORCE IN THE ARGUMENTS OF APPELLANT. THE APPELLANT HAS MADE OUT A GOOD CASE AGAINST THE ADDITION MADE BY AO. HAVING REGAR D TO THE ARGUMENTS ADVANCED BY APPELLANT, THE ADDITION MADE BY THE AO IS DELETED. 5. ON THE ISSUE OF ADDITION OF RS.5,76,430/- THAT W AS MADE, A.O. NOTICED THAT ASSESSEE HAD CLAIMED THE REPAIRS AND MAINTENANCE EX PENSES OF RS.22,67,348/- AND RS.34,96,961/- UNDER THE HEAD ADMINISTRATIVE AND SALES PROMOTION EXPENSES AS AGAINST THE EXPENSES OF RS.7,49,286/- AND RS.11,28, 238/- RESPECTIVELY IN THE IMMEDIATE PRECEDING YEAR WHICH ACCORDING TO HIM SHOWN DISPROP ORTIONATE INCREASE IN COMPARISON TO INCREASE IN TURN OVER. ASSESSEE WAS ASKED TO FU RNISH DETAILS OF THE EXPENSES AND THE JUSTIFICATION FOR INCREASE. A.O. NOTED THAT ASSESS EE ONLY FURNISHED COPIES OF LEDGER ACCOUNT WITHOUT ANY SUPPORTING EVIDENCE. A.O. WAS THEREFORE OF THE VIEW THAT ASSESSEE HAS NOT PROVED THAT EXPENDITURE HAS BEEN INCURRED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HE, ACCORDINGLY, DISALLOWED 1 0% OF THE EXPENSES FOR WANT OF VERIFICATION AND THUS MADE DISALLOWANCE OF RS.5,76, 430/-. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFO RE THE LD. CIT(A) WHO DECIDED THE ISSUE BY HOLDING AS UNDER: APPELLANT'S ARGUMENTS: IN THIS RESPECT, WE HAVE TO STATE THAT WHATEVER DET AILS DESIRED BY THE ASSESSING OFFICER WERE PRODUCED FOR VERIFICATION AT THE TIME OF PERSONAL HEARING. ALL THE ITA NO .2314/AHD/2011 . A.Y. 2008-09 (DCIT VS. M/S. CONDOR FOOTWEAR INDIA LTD. ) 4 MAJOR EXPENSES HAVE BEEN MADE BY ACCOUNT PAYEE CHEQ UES ONLY. WE ENCLOSE HEREWITH THE LEDGER ACCOUNTS ALONG WITH SUPPORTING VOUCHERS/ BILLS FOR READY REFERENCE. THE ASSESSEE IS DEALING IN CONSUMER PRODUCT AND IT REQU IRES LOT OF ADVERTISEMENT/SALES PROMOTION ACTIVITY. THE EXPENSES ARE NOT OF PERS ONAL IN NATURE AND SPENT FOR BUSINESS PURPOSE ONLY, HENCE IT SHOULD BE FULLY ALLOWED. DECISION: THE ARGUMENTS OF AO AS WELL AS APPELLANT HAS BEEN C ONSIDERED. THERE IS CONSIDERABLE FORCE IN THE ARGUMENTS OF APPELLANT. THE APPELLANT HAS MADE OUT A GOOD CASE AGAINST THE ADDITION MADE BY AO. HAVING REGAR D TO THE ARGUMENTS ADVANCED BY APPELLANT, THE ADDITION MADE BY THE AO IS DELETED. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN THE APPEAL BEFORE US. 6.1 BEFORE US, LD. D.R. SUPPORTED THE ORDER OF A.O. AND FURTHER SUBMITTED THAT LD. CIT(A) HAS PASSED A VERY CRYPTIC ORDER WITHOUT GIVI NG ANY FINDING. HE, THEREFORE, SUBMITTED THAT THE ORDER OF LD. CIT(A) NEEDS TO BE SET ASIDE. LD. A.R., ON THE OTHER HAND, SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. ON PERUSING THE ORDER OF LD. CIT(A), WE FIND THAT LD. CIT(A) BY A VERY CRYPTIC ORDER HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY DELETING THE ADDITION MADE BY THE A.O. (THE OPERATIVE PORTION OF ORDER IS REPRODUCED HEREINABOV E). IT IS A SETTLED LAW THAT THE LD. CIT(A) MUST PASS A REASONED ORDER WHICH SHOULD REFL ECT APPLICATION OF MIND ON THE ISSUES/POINTS RAISED BEFORE HIM. THE HONBLE DELHI HIGH COURT IN THE CASE OF VODAFONE ESSAR LTD VS. DRP, REPORTED IN (2011) 196 TAXMAN 04 23, HAS HELD THAT WHEN A QUASI JUDICIAL AUTHORITY DEALS WITH A LIS, IT IS OBLIGATO RY ON ITS PART TO ASCRIBE COGENT AND GERMANE REASONS AS THE SAME IS THE HEART AND SOUL O F THE MATTER AND FURTHER THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER IS CAL LED IN QUESTION BEFORE THE SUPERIOR FORUM. IN THE PRESENT CASE, WE ARE OF THE VIEW THA T THE IMPUGNED ORDER SUFFERS FROM LACK OF REASONING AND IS NOT A SPEAKING ORDER. WE, THEREFORE, CONSIDER IT APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE T HE MATTER BEFORE LD. CIT(A) FOR DECIDING THE ISSUES AFRESH IN ACCORDANCE WITH LAW A ND AFTER ALLOWING SUFFICIENT OPPORTUNITY OF HEARING TO BOTH THE PARTIES. NEEDLE SS TO STATE THAT WHILE DECIDING THE ITA NO .2314/AHD/2011 . A.Y. 2008-09 (DCIT VS. M/S. CONDOR FOOTWEAR INDIA LTD. ) 5 APPEAL, THE LD. CIT(A) SHALL PASS A SPEAKING ORDER AS MANDATED BY PROVISIONS OF SECTION 250(6) OF THE ACT. ACCORDINGLY, THE APPEAL FILED B Y THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF REVENUE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 16 -02- 2016. SD/- SD/- (S. S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED. 16/02/2016 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD