M/s Sagar Maize Products Ltd., Ujjain V. THE ACIT, CIRCLE 1(1), Ujjain

ITA 248/IND/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5891 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 17-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K G GOYAL
• Keywords: Revision of order; Reassessment proceedings; Set aside
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.248/IND/2016 ASSESSMENT YEAR: 2003-04 M/S. SAGAR MAIZE PRODUCTS PVT. LTD. 28, DAULATGANJ, UJJAIN (MP) / VS. ACIT-1(1) UJJAIN ( APPELLANT ) ( RE VENUE) PAN: AAICS4907K APPELLANT BY SHRI PAVAN VED , ADV. REVENUE BY SHRI K.G. GOYAL, SR. DR DATE OF HEARING: 10.12.2018 DATE OF PRONOUNCEMENT: 18.12.2018 / O R D E R PER MANISH BORAD, A.M: THIS APPEAL BY ASSESSEE PERTAINING TO A.Y. 2003-04 IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INC OME TAX(APPEALS)-UJJAIN, (IN SHORT CIT(A)), DATED 30.12. 2015 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) R.W.S 2 63 OF THE INCOME TAX ACT 1961(HEREINAFTER CALLED AS THE ACT) F RAMED SAGAR MAIZE PRODUCTS LTD. ITANO.248/IND/2016 2 ON 21.12.2010 BY ACIT, 1(1) UJJAIN. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE IMPUGNED ORDER OF THE LEARNED ASSESSING OFFICE R IS BAD IN LAW BEING SERVED TO THE ASSESSEE BY HAND DELIVER Y AFTER THE SPECIFIED DATE AS SET OUT UNDER THE PROVISIONS OF T HE ACT AND NEEDS TO BE SET ASIDE. 2. THE PROCEEDINGS INITIATED U/ S 263 OF THE ACT IS UL TRA VIRES, BAD IN LAW AND NOT JUSTIFIED IN THE VIEW OF DECISIO N OF THE FIRST APPEAL OF THE ORIGINAL ORDER DECIDED IN FAVOUR OF T HE APPELLANT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED FOR CONFIRMING DISALLOWANCE OF RS. 2,37,162/- ON ACCOUNT OF DISALLOWANCE OF PRELIMINARY EXPENSES U/ S 35D. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED FOR CONFIRMING DISALLOWANCE OF RS. 2,37,162/- ON ACCOUNT OF DISALLOWANCE OF RAILWAY CLAIM EXPENSES. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED FOR CONFIRMING DISALLOWANCE OUT OF FINANCIAL EXPENS ES OF RS. 4,03,987/-. THE ASSESSEE HAS FILED AN ADDITIONAL GROUND AS UNDER: THE PROCEEDINGS FOR ASSESSMENT HAD ORIGINALLY BEEN INITIATED BY ISSUE OF NOTICE U/S 148 WHICH WAS NOT CHALLENGED AT THAT TIME, THE APPELLANT CONTENDS THA T ISSUE OF NOTICE U/S 148 WAS ILLEGAL HENCE WHOLE PROCEEDINGS BE DECLARED AS VOID AB INITIO. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECORDS ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY. LOSS OF RS.25,799/- DISCLOSED IN THE INCOME TAX RETURN FILE D ON 14.10.2003. ORIGINAL ASSESSMENT WAS COMPLETED U/S SAGAR MAIZE PRODUCTS LTD. ITANO.248/IND/2016 3 143(3) R.W.S. 147 OF THE ACT ON 24.12.2007 AT TOTAL INCOME OF RS.29,200/- AND ALSO MAKING ADDITION FOR LONG TERM CAPITAL GAIN OF RS.2,17,06,330/-, WHICH WAS DELETED BY THE LD. CIT(A) VIDE ORDER DATED 17.01.2007. 3. SUBSEQUENTLY, PROCEEDINGS U/S 263 OF THE ACT WERE INITIATED BY THE LD. CIT THEREBY DIRECTING THE ASSESS ING OFFICER TO REFRAME THE ASSESSMENT ON THE BASIS OF THE OBSERVATION GIVEN IN THE ORDER U/S 263 OF THE ACT. I N COMPLIANCE THERETO ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S 263 OF THE ACT WERE COMPLETED AFTER MAKING FOL LOWING DISALLOWANCES OF RS.9,62,248/- FOR WANT OF PROPER VERIFICATION OF BOOKS OF ACCOUNTS AND DOCUMENTS: 1. DISALLOWANCE OF A/C OF 35D RS.2,37,162/- 2. DISALLOWANCE OF RAILWAY CLAIM EXPENSES RS.3,21 ,099/- 3. DISALLOWANCE OF FINANCIAL EXPENSES RS.4,03,98 7/- TOTAL INCOME RS.9,62,248/- 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE L D. CIT CHALLENGING THE IMPUGNED DISALLOWANCE AS WELL AS CHALLENGING THE VALIDITY OF THE PROCEEDINGS INITIATED U/S 263 OF THE ACT BUT FAILED TO SUCCEED ON ANY OF THE GROUND . 5. NOW ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING GROUND NO.1 TO 5 AND APART FROM THIS HAS ALSO RAISED AN SAGAR MAIZE PRODUCTS LTD. ITANO.248/IND/2016 4 ADDITIONAL GROUND ON LEGAL ISSUE ON THE STRENGTH OF TH E JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT 229 ITR 383 (SC). WE FIRST TAKE UP GROUND NO.1 1. THE IMPUGNED ORDER OF THE LEARNED ASSESSING OFFICER IS BAD IN LAW BEING SERVED TO THE ASSESSEE BY HAND DELIVERY A FTER THE SPECIFIED DATE AS SET OUT UNDER THE PROVISIONS OF T HE ACT AND NEEDS TO BE SET ASIDE. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE R ECORD PLACED BEFORE US. WE FIND THAT THE IMPUGNED ASSESSMENT ORDER WAS PASSED ON 21.12.2010 WHICH IS WELL WITHIN T HE TIME LIMIT PRESCRIBED UNDER THE ACT FOR COMPLETING ASSESSMENT U/S 143(3) R.W.S. 263 OF THE ACT CLAIM OF THE ASSESSEE THAT IMPUGNED ASSESSMENT ORDER WAS RECEIVED AFTER SPECIFIED DATE IS NOT SUPPORTED BY PROPER EVIDE NCE. WE THEREFORE, DISMISS GROUND NO.1 RAISED BY THE ASSESSE E. NOW WE TAKE UP GROUND NO.2 2. THE PROCEEDINGS INITIATED U/ S 263 OF THE ACT IS UL TRA VIRES, BAD IN LAW AND NOT JUSTIFIED IN THE VIEW OF DECISIO N OF THE FIRST APPEAL OF THE ORIGINAL ORDER DECIDED IN FAVOUR OF T HE APPELLANT. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE R ECORD PLACED BEFORE US. THROUGH THIS GROUND LD. COUNSEL FO R THE ASSESSEE HAS PLEADED THAT PROCEEDINGS INITIATED U/S 263 OF THE ACT OR ULTRA-WIRES BAD IN LAW. WE, HOWEVER, ARE O F THE SAGAR MAIZE PRODUCTS LTD. ITANO.248/IND/2016 5 VIEW THAT ASSESSEE HAS SPECIFIC RIGHT UNDER THE PROVIS IONS OF LAW TO CHALLENGE THE ORDER OF LD. CIT(A) FRAMED U/ S 263 OF THE ACT. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT WHETHER ANY APPEAL WAS FILED BEFORE THE TRIBUNAL CHALLENGING THE ORDER U/S 263 OF THE ACT. WE, THEREF ORE, FIND NO MERIT IN GROUND NO.2 RAISED BY THE ASSESSEE AN D THE SAME DESERVE TO BE DISMISSED. NOW WE WILL DEAL THE ADDITIONAL GROUND RAISING FOLLOWING LEGAL ISSUE: THE PROCEEDINGS FOR ASSESSMENT HAD ORIGINALLY BEEN INITIATED BY ISSUE OF NOTICE U/S 148 WHICH WAS NOT CHALLENGED AT THAT TIME, THE APPELLANT CONTENDS THA T ISSUE OF NOTICE U/S 148 WAS ILLEGAL HENCE WHOLE PROCEEDINGS BE DECLARED AS VOID AB INITIO. 9. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE R ECORD PLACED BEFORE US. THE MAIN CONTENTION OF THE LD. COUN SEL FOR THE ASSESSEE IS THAT NOTICE U/S 148 OF THE ACT HAS BEEN ISSUED TWICE TO THE ASSESSEE. FIRSTLY, WHILE CONDUCT ING REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT AND THEREAFTER AGAIN ISSUED WHILE INITIATING THE PROCEEDING S FOR ASSESSMENT IN LIEU OF THE ORDER OF LD. CIT U/S 263 O F THE ACT. NOTHING HAS BEEN PLACED ON RECORD BEFORE US BY L D. COUNSEL FOR THE ASSESSEE WHICH THROUGH LIGHT ON THIS ASPECT THAT WHICH PROVISIONS OF LAW STOPS THE ASSESSING OFFI CER SAGAR MAIZE PRODUCTS LTD. ITANO.248/IND/2016 6 FROM ISSUING NOTICE U/S 148 OF THE ACT FOR INITIATIN G THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 263 OF THE ACT EVEN WHEN FIRST ROUND OF ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 147 OF THE ACT HAS BEEN COMPLETED. WE, THEREFORE, FIND NO FORCE IN THE CONTENTION OF THE L D. COUNSEL FOR THE ASSESSEE THAT THE IMPUGNED ASSESSMENT PROCEEDINGS ARE VITIATED BY THE WRONG ISSUANCE OF NOTI CE U/S 148 OF THE ACT. WE, THEREFORE, DISMISS THE ADDIT IONAL GROUND RAISED BY THE ASSESSEE. NOW WE WILL DEAL WITH GROUND NOS. 3, 4 & 5: 3.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED FOR CONFIRMING DISALLOWANCE OF RS. 2,37,162/- ON ACCOUNT OF DISALLOWANCE OF PRELIMINARY EXPENSES U/ S 35D. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED FOR CONFIRMING DISALLOWANCE OF RS. 2,37,162/- ON ACCOUNT OF DISALLOWANCE OF RAILWAY CLAIM EXPENSES. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED FOR CONFIRMING DISALLOWANCE OUT OF FINANCIAL EXPENSES OF RS. 4,03,987/-. 10. AGAINST THE FINDINGS OF LD. ASSESSING OFFICER, AS SESSEE FILED APPEAL BEFORE THE LD. CIT(A) BUT FAILED TO SUCCE ED AS LD. CIT(A) CONFIRMED THE DISALLOWANCE OF PRELIMINARY EXPENSES OF RS. 2,37,162/- CLAIMED U/S 35D OF THE AC T, SAGAR MAIZE PRODUCTS LTD. ITANO.248/IND/2016 7 DISALLOWANCE OF RAILWAY CLAIM EXPENSES OF RS.2,37,162/- AND DISALLOWANCE OF FINANCIAL EXPENSES OF RS. 4,03,987/- . 11. BRIEF FACTS RELATING TO THESE THREE DISALLOWANCES AR E COMMON THAT DUE TO THE FIRE BOOKS OF ACCOUNT FOR RELE VANT ASSESSMENT YEAR WERE DESTROYED. NECESSARY EVIDENCES TO PROVE THE GENUINENESS OF THE EXPENDITURE COULD NOT BE PLACED BEFORE THE ASSESSING OFFICER DUE TO WHICH THE IMPUGNED DISALLOWANCE HAS BEEN MADE. 12. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RECORD PLACED BEFORE US. WE FIND THAT THE ASSESSEE HAS TO GO THROUGH A SECOND ROUND OF ASSESSMENT PROCEEDINGS. NO SUCH DISALLOWANCES WERE MADE IN THE FIRST ROUND OF ASSESSMENT PROCEEDINGS EVEN WHEN THE FINANCIAL STATEMEN T WERE PLACED BEFORE THE ASSESSING OFFICER. IN THE SECO ND ROUND THE ASSESSEE HAS DULY PRODUCED, COPY OF THE FIR IN SUPPORT OF HIS CLAIM THAT THERE WAS A FIRE AT THE RESIDE NCE OF THE DIRECTOR IN WHICH THE BOOKS OF ACCOUNT AND VOUCHE RS WERE DESTROYED. IT IS NOT DISPUTED THAT THE BOOKS OF ACCOUNT WERE AUDITED AND THE AUDITED FINANCIAL STATEMENT INCLUDI NG BALANCE SHEET AND PROFIT AND LOSS ACCOUNTS WERE AVAILABLE FOR EXAMINATION BEFORE THE ASSESSING OFFICER. NO DOUBT S SAGAR MAIZE PRODUCTS LTD. ITANO.248/IND/2016 8 HAVE BEEN RAISED FOR OTHER SOURCES OF REVENUE AND EXPENDITURE EXCEPT THE IMPUGNED DISALLOWANCE. 13. AS REGARDS THE DISALLOWANCE OF 35D OF THE ACT IS CONCERNED I.E. 1/5 TH PORTION OF THE PREOPERATIVE AND PRELIMINARY EXPENSES HAVE BEEN WRITTEN OFF DURING THE YEAR AT RS.2,37,262/-. WE FIND THAT THE ASSESSING OFFICERS CHOOSE TO DISALLOW THE CLAIM OF PRELIMINARY EXPENSES ALLEGING THAT BOOKS OF ACCOUNT WERE NOT PRODUCED. WE FIND NO JUSTIFICATION IN SUCH DISALLOWANCE MADE BY THE ASSESSING OFFICER AND WE ACCORDINGLY DIRECT HIM TO DELETE THE DISALLOWANCE U/S 35D OF THE ACT AT RS.2,37,262/-. 14. WE ARE INCLINED TO TAKE SIMILAR VIEW REGARDING ALLEG ED DISALLOWANCES OF RAILWAY CLAIM EXPENSES AND FINANCIAL CHARGES OF RS.3,21,099/- & RS.4,03,987/- RESPECTIVEL Y WHICH RELATES TO VARIOUS EXPENSES INCLUDING PROFESSIO NAL FEES, ADVOCATE FEES, TELEPHONE AND FAX CHARGES, BANK CHARGES, BANK INTEREST AND BANK GUARANTEE COMMISSION. ALL SUCH TYPE OF EXPENSES ARE INCURRED IN THE NORMAL COURSE OF BUSINESS AND IT WILL NOT BE FAIR AND JUSTIFIED TO D OUBT THE GENUINENESS OF SUCH EXPENSES WHICH ARE PART OF AUDITED FINANCIAL STATEMENT AND ALSO IN THE GIVEN FACTS WHEN THE BOOKS OF ACCOUNT WERE DESTROYED BY FIRE AND MORE SO T YPE AND QUANTUM OF EXPENSES ARE NOT SUCH WHICH CAN BE SAGAR MAIZE PRODUCTS LTD. ITANO.248/IND/2016 9 DOUBTED FOR THEIR GENUINENESS. WE, THEREFORE, DIREC T THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE FOR RAILW AY CLAIM EXPENSES AT RS.3,21,099/- AND DISALLOWANCE OF FINANCIAL CHARGES OF RS.4,03,987/-. WE, ACCORDINGLY ALLO W GROUND NOS.3 ,4 & 5 RAISED BY THE ASSESSEE AND DELETE THE TOTAL DISALLOWANCE OF RS.9,62,348/- (RS.2,37,262+3,21,099+4,03,987). 15 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 .12.2 018. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER INDORE; DATED : 18/12/2018 CTX? P.S/. . . COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR