Mynah Industries Ltd., Hosur V. ITO TDS Ward, Salme

ITA 2435/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1930 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-04-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 24-08-2018
• Court: TRIBUNAL

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , ! ' # , % #& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NOS.2433, 2434, 2435, 2436 & 2437/CHNY/2018 ) *) / ASSESSMENT YEARS : 2014-15, 2015-16, 2014-15, 201 2-13 & 2011-12 M/S MYNAH INDUSTRIES LTD., NO.66, MUGALAPALLI VILLAGE, HOSUR 635 105. PAN : AABCR 5484 M V. THE INCOME TAX OFFICER, TDS WARD, SALEM. THE ASSISTANT / DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE(1), HOSUR. (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : NONE ./,- 0 1 / RESPONDENT BY : SHRI V.M. MAHIDAR, JCIT 2 0 3% / DATE OF HEARING : 05.08.2019 45* 0 3% / DATE OF PRONOUNCEMENT : 03.09.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : ALL THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS), SALEM. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN ALL THESE APPEALS, WE HEARD THESE APPEALS TOGETHER AND DISPOS ING THE SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.2433 TO 2437/CHNY/18 2. THERE WAS A DELAY OF 117 DAYS IN FILING THESE AP PEALS BY THE ASSESSEE. THE ASSESSEE HAS FILED PETITIONS FOR CON DONATION OF DELAY. WE FIND THAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THESE APPEALS BEFORE THE STIPULATED TIME. THEREFORE, WE CONDONE THE DELAY AND ADMIT THE APPEALS. 3. SINCE THE ASSESSEE DID NOT APPEAR BEFORE THIS TR IBUNAL EVEN AFTER TAKING NOTE OF THE DATE OF HEARING BY MAKING ENDORSEMENT IN THE APPEAL FOLDER, WE HEARD THE LD. DEPARTMENTAL RE PRESENTATIVE AND PROCEEDED TO DISPOSE OF THE APPEALS ON MERIT. 4. I.T.A. NOS.2433 & 2434/CHNY/2018 RELATE TO LEVY OF INTEREST FOR NON-DEDUCTION OF TAX. SHRI V.M. MAHIDAR, THE L D. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE HAS NOT DEDUCTED TAX AS REQUIRED UNDER SECTION 194A AND 194C, 194-I AND 194J OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDI NG TO THE LD. D.R., THE ASSESSING OFFICER LEVIED INTEREST UNDER SECTION 201(1)/201(1A) OF THE ACT. THE NON-DEDUCTION OF TAX MAKES THE ASS ESSEE TO PAY NOT ONLY INTEREST BUT ALSO THE TAX DUE. HENCE, ACCORDI NG TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 3 I.T.A. NOS.2433 TO 2437/CHNY/18 5. WE HEARD THE LD. D.R. AND ALSO CAREFULLY GONE TH ROUGH THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE BEFORE THI S TRIBUNAL. THE CASE OF THE ASSESSEE APPEARS TO BE THAT THE RECIPIE NT OF THE AMOUNT PAID TAX. HOWEVER, IT IS NOT CLEAR WHETHER THE REC IPIENT HAS PAID THE TAXES. IF THE ASSESSEE FAILED TO DEDUCT TAX AS REQ UIRED UNDER THE STATUTORY PROVISION, THE ASSESSEE HAS TO BE TREATED AS ASSESSEE IN DEFAULT AND THE ASSESSEE IS LIABLE TO PAY NOT ONLY TAX BUT ALSO INTEREST. BUT, THE INTEREST COMPONENT SHALL BE RES TRICTED TO THE DATE OF PAYMENT TAX EITHER BY THE ASSESSEE OR BY THE REC IPIENT. SINCE THE ASSESSEE CLAIMS THAT THE RECIPIENT HAS PAID THE TAX ES, AND THE DATE OF ACTUAL PAYMENT IS NOT CLEAR FROM THE MATERIAL AV AILABLE ON RECORD, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE OF LEVY OF INTEREST UNDER SECTION 201(1)/201(1A) OF THE ACT IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING O FFICER SHALL RE- EXAMINE THE ISSUE AND BRING ON RECORD THE ACTUAL DA TE ON WHICH THE RECIPIENT HAS PAID THE TAXES AND THEREAFTER DETERMI NE THE INTEREST PAYABLE BY THE ASSESSEE TILL THE DATE OF PAYMENT OF TAXES BY THE RECIPIENT TO THE GOVERNMENT. 4 I.T.A. NOS.2433 TO 2437/CHNY/18 6. WITH THE ABOVE OBSERVATION, ORDERS OF BOTH THE A UTHORITIES BELOW ARE SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. 7. NOW COMING TO ASSESSMENT YEAR 2014-15 IN I.T.A. NO.2435/CHNY/2018. THE FIRST ISSUE ARISES FOR CONS IDERATION IS ADDITION MADE UNDER SECTION 56(2)(VIIB) OF THE ACT TOWARDS SHARE PREMIUM. 8. SHRI V.M. MAHIDAR, THE LD. D.R., SUBMITTED THAT THE ASSESSEE HAS RECEIVED LARGE AMOUNT OF SHARE PREMIUM TO THE E XTENT OF 45,61,32,384/-. THE ASSESSING OFFICER FOUND THAT T HE ASSESSEE HAS RECEIVED SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE. THEREFORE, ACCORDING TO THE LD. D.R., THE EXCESS AM OUNT HAS TO BE TAXED UNDER THE HEAD OTHER SOURCES. ON A QUERY F ROM THE BENCH HOW THE SHARES WERE VALUED BY THE ASSESSEE AND THE ASSESSING OFFICER? THE LD. D.R. POINTED OUT THAT THE ASSESSE E ITSELF WORKED OUT THE FAIR MARKET VALUE OF THE SHARES AT 32.34 PER SHARE. THE FACE VALUE IS 10/- PER SHARE. HOWEVER, THE ASSESSEE ALLOTTED THE SHARE AT A PREMIUM OF 48.63 PER SHARE WHICH IS MORE THAN THE FAIR MARKET VALUE OF THE SHARES AS ESTIMATED BY THE ASSE SSEE ITSELF. THEREFORE, THE ASSESSING OFFICER ADOPTED THE FAIR M ARKET VALUE AT 5 I.T.A. NOS.2433 TO 2437/CHNY/18 32.34 PER SHARE INSTEAD OF 48.63 PER SHARE. SINCE THE FAIR MARKET VALUE IS ADOPTED AS PER THE WORKING OF THE ASSESSEE AT 32.34 PER SHARE, ACCORDING TO THE LD. D.R., NO INTERFERENCE I S CALLED FOR. 9. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF BOT H THE AUTHORITIES BELOW IN THE LIGHT OF THE SUBMISSION MA DE BY THE LD. D.R. AS RIGHTLY SUBMITTED BY THE LD. D.R., THE ASSESSEE RECEIVED 48.63 PER SHARE. THE ASSESSEE APPEARS TO HAVE SUBMITTED ITS OWN WORKING OF THE FAIR MARKET VALUE AT 32.34 PER SHARE IN THE COURSE OF ASSESSMENT PROCEEDING. ADMITTEDLY, THE FACE VALUE IS 10/-. SINCE THE ASSESSING OFFICER ADOPTED THE WORKING SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING , THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 10. THE NEXT ISSUE ARISES FOR CONSIDERATION IS SETT ING OFF BROUGHT FORWARD LOSSES. 11. WE HEARD THE LD. D.R. AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE MATERIAL AVAILABLE O N RECORD, IT APPEARS THAT FOR THE ASSESSMENT YEAR 2014-15, THE A SSESSEE DECLARED NIL INCOME AFTER SETTING OFF THE SO CALL ED BROUGHT FORWARD 6 I.T.A. NOS.2433 TO 2437/CHNY/18 LOSSES OF 19,39,66,527/-. FOR THE ASSESSMENT YEAR 2012-13, T HE ASSESSEE DECLARED THE TAXABLE INCOME OF 1,11,55,850/- AND ALSO PAID TAX OF 40,39,976/- WHICH INCLUDED THE SELF ASSESSMENT TAX OF 24,33,090/-. THEREFORE, IT IS OBVIOUS THAT THE ASS ESSEE HAS NOT DECLARED ANY LOSS FROM BUSINESS FOR THE ASSESSMENT YEAR 2012-13. EVEN FOR EARLIER YEARS, NO LOSSES WERE DECLARED. T HEREFORE, THERE IS NO QUESTION OF ANY SET OFF OF LOSSES AS CLAIMED BY THE ASSESSEE. FOR THE PURPOSE OF CLAIMING LOSS, THE ASSESSEE HAS TO NECESSARILY FILE THE RETURN OF INCOME BEFORE THE DUE DATE PRESC RIBED UNDER SECTION 139(1) OF THE ACT. FOR THE ASSESSMENT YEAR 2013-14, THE ASSESSING OFFICER APPEARS TO HAVE DISALLOWED THE SO CALLED BROUGHT FORWARD LOSSES AS WELL AS THE LOSSES PERTAINING TO THE ASSESSMENT YEAR 2013-14. THE ASSESSEE HAS NOT FILED ANY APPEA L AND THAT ATTAINED FINALITY. IN THOSE FACTUAL SITUATION, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS NOT ELIGIBL E FOR SET OFF OF SO CALLED BROUGHT FORWARD LOSSES OF THE EARLIER YEAR. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 12. NOW COMING TO THE DEBIT NOTE RAISED BY M/S SRI VASAVI INDUSTRIES LTD., TO THE EXTENT OF 21,81,26,981/-. THE ASSESSING 7 I.T.A. NOS.2433 TO 2437/CHNY/18 OFFICER FOUND THAT IT IS ONLY AN AFTERTHOUGHT. THI S CLAIM OF DEBIT NOTE SAID TO BE RECEIVED FROM M/S SRI VASAVI INDUSTRIES LTD. WAS RAISED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFI CER FOUND THAT THE BROUGHT FORWARD LOSSES CANNOT BE ALLOWED. THER EFORE, THIS CLAIM OF DEBIT NOTE WAS RAISED AS ALTERNATIVE PLEA TO SET OFF THE SO CALLED BROUGHT FORWARD LOSSES. THEREFORE, THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT AS RIGHTLY FOUND BY THE LOW ER AUTHORITIES, THE CLAIM OF DEBIT NOTE FROM M/S SRI VASAVI INDUSTRIES LTD. IS ONLY AN AFTERTHOUGHT. THEREFORE, IT CANNOT BE ALLOWED. 13. THUS THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2014-15 STANDS DISMISSED. 14. NOW COMING TO ASSESSMENT YEAR 2012-13 IN I.T.A. NO.2436/CHNY/2018. 15. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DIS ALLOWANCE OF EXPENDITURE TO THE EXTENT OF 7,13,773/- TOWARDS EXCISE DUTY ON CLOSING STOCK. 16. WE HEARD THE LD. D.R. AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE ORDERS OF THE LOWER AUTHORITIES IT APPEARS THAT THE ASSESSEE DEBITED TO PROFIT & LOSS ACCOUNT AN 8 I.T.A. NOS.2433 TO 2437/CHNY/18 AMOUNT OF 7,13,773/- TOWARDS EXCISE DUTY ON CLOSING STOCK. T HE ASSESSING OFFICER FOUND THAT SECTION 145A OF THE AC T REQUIRES TO INCLUDE THE VALUE OF EXCISE DUTY PAID ON RAW MATERI ALS USED FOR PRODUCTION WHILE VALUING THE CLOSING STOCK. THEREF ORE, DEBITING THE EXCISE DUTY PAYABLE ON THE CLOSING STOCK IS AGAINST THE PROVISION OF LAW. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 145A OF THE ACT WHICH READS AS FOLLOWS:- METHOD OF ACCOUNTING IN CERTAIN CASES 145A. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAI NED IN SECTION 145, (A) THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE U NDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE (I) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REG ULARLY EMPLOYED BY THE ASSESSEE ; AND (II) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUAT ION. EXPLANATION - FOR THE PURPOSES OF THIS SECTION, ANY TAX, DUTY, CES S OR FEE (BY WHATEVER NAME CALLED) UNDER ANY LAW FOR THE TIME BEING IN FORCE, SHALL INCLUDE ALL SUCH PAYMENT NOTWITHSTA NDING ANY RIGHT ARISING AS A CONSEQUENCE TO SUCH PAYMENT. (B) INTEREST RECEIVED BY AN ASSESSEE ON COMPENSATIO N OR ON ENHANCED COMPENSATION, AS THE CASE MAY BE, SHALL BE DEEMED TO BE THE INCOME OF THE YEAR IN WHICH IT IS RECEIVED. 9 I.T.A. NOS.2433 TO 2437/CHNY/18 17. SECTION 145A(A)(II) CLEARLY SAYS THAT THE VALUA TION OF PURCHASE AND SALE OF GOODS AND INVENTORY SHALL BE E STIMATED INCLUDING DUTY, CESS OR FEE PAID OR INCURRED BY THE ASSESSEE. IN VIEW OF THE ABOVE, THE SAME CANNOT BE REDUCED FROM THE CLOSING STOCK. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY CON FIRMED THE ORDER OF THE ASSESSING OFFICER. 18. THE NEXT ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE OF 11,03,000/- PERTAINING TO PROFESSIONAL FEES. 19. THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFIC ER THAT A SUM OF 11,03,000/- WAS PAID TO TECHNO PARK FOR CONDUCTING FEASIBILITY STUDY IN THE ASSESSMENT YEAR 2010-11 AN D IT WAS WRITTEN OFF AS THE PROJECT PROPOSAL HAS NOT TAKEN OFF. T HE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE SO CALLED EXPENDITURE OF FEASIBILITY STUDY DOES NOT RELATE TO ASSESSMENT YEAR UNDER CONSIDERATION, THEREFORE, IT CANNOT BE ALLOWED DURING THE YEAR UNDER CONSIDERATION. ADMIT TEDLY, THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCO UNTING, THEREFORE, THE ASSESSEE HAS TO CLAIM EXPENDITURE IN THE YEAR IN WHICH IT WAS INCURRED OR PAID. ADMITTEDLY, THE SO CALLED FEE FOR STUDY THE TECHNICAL FEASIBILITY WAS PAID DURING THE ASSES SMENT YEAR 2010- 10 I.T.A. NOS.2433 TO 2437/CHNY/18 11. THEREFORE, THE SAME HAS TO BE CLAIMED DURING T HAT YEAR AND DEFINITELY NOT IN THE ASSESSMENT YEAR 2012-13 WHICH IS UNDER CONSIDERATION. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORD ER OF THE ASSESSING OFFICER. THIS TRIBUNAL DO NOT FIND ANY R EASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDING LY THE SAME IS CONFIRMED. 20. NOW COMING TO ASSESSMENT YEAR 2011-12 IN I.T.A. NO.2437/CHNY/2018. 21. THE FIRST ISSUE ARISES FOR CONSIDERATION IS ADD ITION OF 25 CRORES AS UNEXPLAINED INVESTMENT. 22. AFTER HEARING THE LD. D.R., THIS TRIBUNAL FINDS THAT THE ASSESSEE INVESTED A SUM OF 25 CRORES IN FOREIGN COUNTRY, NAMELY, SINGAPORE. THE ASSESSEE CLAIMED BEFORE THE ASSESSI NG OFFICER THAT THE SHARE APPLICATION MONEY WAS USED FOR INVESTMENT IN SINGAPORE. THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER T HAT A SUM OF 25 CRORES WAS RECEIVED FROM ONE SHRI PRASHANT BOOGR U TOWARDS SHARE APPLICATION MONEY. HOWEVER, THE CHEQUE WAS R ETURNED WITH AN ENDORSEMENT INSUFFICIENT FUNDS ON PRESENTATION . THEREFORE, THE 11 I.T.A. NOS.2433 TO 2437/CHNY/18 ASSESSEE HAD NO FUNDS FOR MAKING INVESTMENT. THE A SSESSEE HAS NO OTHER EXPLANATION TO SUBSTANTIATE THE SOURCE FOR MAKING INVESTMENT IN M/S ATLANTA NATURAL RESOURCES PVT. LT D., SINGAPORE. THE CIT(APPEALS) CONFIRMED THE ADDITION. SINCE ADM ITTEDLY THE CHEQUE ISSUED BY SHRI PRASHANT BOOGRU WAS RETURNED FOR INSUFFICIENT FUNDS, THE ASSESSEE COULD NOT EXPLAIN ANY OTHER SOU RCE FOR MAKING INVESTMENT TO THE EXTENT OF 25 CRORES IN SINGAPORE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. HENCE, THERE IS NO REASON TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, THE SAME IS CONFIRMED. 23. THE NEXT ISSUE ARISES FOR CONSIDERATION IS INVE STMENT TO THE EXTENT OF 17,89,02,182/-. 24. WE HEARD THE LD. D.R. AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS INVESTMENT OF 17,89,02,182/- FORMS PART OF INVESTMENT TO THE EXTENT OF 25 CRORES. FROM THE ASSESSMENT ORDER IT APPEARS THAT THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT INITIALLY AN AMOUNT OF 17,89,02,182/- WAS INVESTED IN M/S ATLANTA NATURAL RESOURCES PVT. LTD., SINGAPORE DURING THE YEAR 2011-12 THROUGH PURCHASE OF SHARES. IN THE BALANCE SHEET OF THE 12 I.T.A. NOS.2433 TO 2437/CHNY/18 ASSESSEE-COMPANY, THERE WAS INCREASE IN THE SHARE A PPLICATION MONEY TO THE EXTENT OF 25 CRORES. THE ASSESSEE ALSO CLAIMED THAT THE CHEQUE RECEIVED FROM SHRI PRASHANT BOOGRU WAS R ETURNED. HAVING CONSIDERED THE FACTS OF THE CASE, THE ASSESS ING OFFICER MADE ADDITION OF 25 CRORES WHICH INCLUDED THE ADDITION OF 17,89,02,182/-. NO SEPARATE ADDITION WAS MADE. TH EREFORE, THIS GROUND RAISED BY THE ASSESSEE IS PART OF ADDITION M ADE TO THE EXTENT OF 25 CRORES, WHICH WAS ADJUDICATED IN THE EARLIER PAR T OF THIS ORDER. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 25. IN THE RESULT, THE ASSESSEES APPEALS IN I.T.A. NOS.2433 & 2434/CHNY/2018 ARE ALLOWED FOR STATISTICAL PURPOSES AND I.T.A. NOS.2435, 2436 & 2437/CHNY/2018 ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 3 RD SEPTEMBER, 2019 AT CHENNAI. SD/- SD/- ( ! ' # ) ( . . . ) (INTURI RAMA RAO) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 3 RD SEPTEMBER, 2019. KRI. 13 I.T.A. NOS.2433 TO 2437/CHNY/18 0 .389 :9*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENTS 3. 2 ;3 () /CIT(A), SALEM 4. CIT, TDS, COIMBATORE. 5. 9< .3 /DR 6. =) > /GF.