Meghmani Organics Limited, Ahmedabad V. The ACIT.,Cent.Circle-1(1), Ahmedabad

ITA 2647/AHD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76674 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 10-04-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 13-11-2013
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 143(3); 263; 63

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] VGENKCKN U;K;IHB *,*] VGENKC KN IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD JH EQDQY JKOR] U;KF;D LNL; ,OA JH ,U-,L- LSUH] YS[K K LNL; DS LE{K BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER & SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NOS. 226 & 2647/AHD/2013 (ASSESSMENT YEAR 2004-05) MEGHMANI ORGANICS LTD. MEGHMANI HOUSE, SHREE NIVAS SOCIETY, PALDI, AHMEDABAD. PAN: AABCM0644E V/S CIT(CENTRAL)-1, 3 RD FLOOR, AYKAR BHAVAN, ASHRAM ROAD, AHMADABAD. (APPELLANT)/ VIHYKFKHZ (RESPONDENT)/ IZR;FKHZ APPELLANT BY : SHRI S.N. S OPARKAR WITH URVAS HI SHODHAN, AR RESPONDENT BY : SHRI SUBHASH B AINS, SR. DR DATE OF HEARING : 10-04-2014 DATE OF PRONOUNCEMENT : 17-04-2014 ( )/ ORDER PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(CENTRAL)-1 DATED 26.11.2012 PASSED IN THE ASSES SMENT YEAR 2003-04 AND AGAINST THE ORDER OF THE LD. CIT(A)-1 A HMADABAD DATED 16.08.2013 PASSED IN THE ASSESSMENT YEAR 2004 -05. ITA NOS.226 & 2647 OF 2013 MEGHMANI ORGANICS LTD. VS. CIT(CENTRAL)-1, AHD. AY 2004-05 - 2 - 2. IN ITA NO. 226/AHD/2013, THE GRIEVANCE OF THE ASSESSEE IS THAT LD CIT(A) ERRED IN LAW AND ON FACT IN PASSING ORDER UNDER U/S. 263 OF THE ACT AND HOLDING THE ORDER PAS SED U/S. 143(3) OF THE ACT BY THE AO AS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF THE REVENUE ON THE GROUND THAT OMISSION BY AO TO DI SALLOW CUSTOM DUTY PAID OF RS. 1,42,55,270/- ON BEHALF OF THE CUS TOMERS BEING INCURRED BY THE ASSESSEE UNDER ASSESSMENT OF INCOME . 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILA BLE ON RECORD. IN THE INSTANT CASE, THE ASSESSMENT ORDER PASSED BY TH E AO ON 30-04- 2010 U/S. 143(3) R.W.S. 147 OF THE ACT HAS BEEN REV ISED BY THE IMPUGNED ORDER PASSED U/S. 263 ON 26-11-2012. IN TH E OPINION OF THE CIT, THE AO HAS NOT PROPERLY CONSIDERED THE LIA BILITY OF DEDUCTION CLAIMED BY THE ASSESSEE OF RS. 1,42,55,27 0/- AND THEREFORE HE CONSIDERED THE ASSESSMENT ORDER AS ERR ONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND S ET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO MODIFY THE ASSESSMENT ORDER AFTER MAKING THE APPROPRIATE INQUIRY IN RESPE CT OF THE MATTER RESTORED. 4. WE FIND THAT PRIOR TO ISSUANCE OF NOTICE U/S. 2 63 ON THE VERY SAME ISSUE OF LIABILITY OF DEDUCTION IN RESPEC T OF CUSTOM DUTY AT RS. 1,42,55,270/- NOTICE U/S. 147 WAS ISSUED ON 23-03-2011. THE VALIDITY OF THIS NOTICE WAS CHALLENGED BY THE A SSESSEE BEFORE THE HON'BLE GUJARAT HIGH COURT. THE HON'BLE GUJARAT HIGH COURT QUASHED THE NOTICE IN SPECIAL CIVIL APPLICATION NO. 17010 OF 2011 VIDE ORDER DATED 23-01-2012 AND OBSERVED IN THE ORD ER AS UNDER:- '10. ON 17' DECEMBER 2007, WHILE ORIGINAL ASSESSM ENT PROCEEDINGS-WERE GOING ON, THE ASSESSEE IN RESPONSE TO ITA NOS.226 & 2647 OF 2013 MEGHMANI ORGANICS LTD. VS. CIT(CENTRAL)-1, AHD. AY 2004-05 - 3 - CERTAIN QUERIES RAISED BY THE ASSESSING OFFICER HAD GIVEN AN EXPLANATION, RELEVANT PORTION OF WHICH READS AS UND ER:- 3. PAYMENT OF CUSTOMS DUTY: AS PER THE PRICING POLICY T>F THE ASSESSEE' COMPANY , ITS INVOICE PRICE IS INCLUSIVE OF CUSTOMS DULY AS REC OVERED FROM THE CUSTOMERS. FURTHER, THE SAID DUTY IS PAYA BLE OF DELIVERY I.E. DDP. VIDE ANNEXURE-4 THE ASSESSEE PROVIDES WITH CUSTOMS DUTY LEDGER ALONG WITH RESPEC TIVE SALES INVOICES. ' XXXXX XXXXX 6. COPY OF ACCOUNTS OF PARTIES TO WHOM SALES COMPENSATION IS PAID. COPY OF ACCOUNTS OF PARTIES TO WHOM SALES COMMISSIO N IS PAID IS FURNISHED VIDE ANNEXURE. ' IT MAY BE NOTICED, THAT AFTER RECEIVING SUCH RESPON SE- FROM THE ASSESSEE, THE ASSESSING OFFICER FRAMED ASS ESSMENT ORDER, BUT MADE NO ADDITIONS EITHER ON ACCOUNT OF T HE CUSTOMS DUTY PAID ON BEHALF OF THE CUSTOMERS OR CON TINUATION OF THE COMMISSION LIABILITY. 11. FROM THE ABOVE CLARIFICATIONS ISSUED BY THE ASS ESSEE, IT CAN BE EASILY SEEN THAT BOTH THE ISSUES WERE WITHIN THE KNOWLEDGE OF THE ASSESSING OFFICER WHILE ORIGINAL A SSESSMENT WAS BEING FRAMED- NO! ONLY THAT THE ASSESSEE HAD DI SCLOSED ALL FADS PERTAINING TO THESE ISSUE BUT HAD MADE FUR THER CLARIFICATION IN RESPONSE TO THE QUERIES RAISED BY THE ASSESSING OFFICER. ' IN VIEW OF THE FINDING OF THE JURISDICTIONAL HIGH C OURT THE CONTRARY VIEW EXPRESSED BY THE LD. CIT IN THE IMPUGNED ORDER IS UN- SUSTAINABLE. 5. FURTHER WE FIND THAT THE ASSESSEE IN REPL Y TO NOTICE ISSUED BY LD. CIT U/S. 263 SUBMITTED BEFORE HIM AS UNDER:- 'IN ACCORDANCE WITH THE TERMS OF CONTACT WITH OUR C USTOMERS, THE PRICES CHARGED FOR EXPORT OF GOODS SOLD ARE AT DDP I.E. DUTY PAID DELIVERIES. THIS FACT IS AMPLY CLEAR FROM THE COPIES ITA NOS.226 & 2647 OF 2013 MEGHMANI ORGANICS LTD. VS. CIT(CENTRAL)-1, AHD. AY 2004-05 - 4 - OF SALE INVOICES IN WHICH THE COLUMN OF TERMS OF DE LIVERY AND PAYMENT, 'DDP AT RESPECTIVE PORT DESTINATION' IS MENTIONED. THEREFORE, THE ASSESSEE HAS TO BEAR ALL THE EXPENSE S TILL GOODS REACH TO THE CUSTOMERS ' DESTINATION. THE ASS ESSEE HAS THEREFORE, IN ACCORDANCE WITH THE SAID TERMS, PAID CUSTOM DUTY PAYABLE TO RESPECTIVE COUNTRY AT RESPECTIVE DE STINATION OF THE CUSTOMERS SO AS TO ENABLE THE CUSTOMERS TO G ET THE DELIVERY OF GOODS SOLD. THE EXPENSES THUS INCURRE D ARE THUS SELLING EXPENSES AND ARE CLEARLY ADMISSIBLE AS BUSI NESS EXPEND/LURE. ' WE FIND THAT NO ERROR IN THIS SUBMISSION OF THE ASS ESSEE COULD BE POINTED OUT BY THE CIT. IN OUR CONSIDERED VIEW, WHE N AS PER THE TERMS OF CONTRACT BETWEEN THE ASSESSEE AND HIS CUST OMERS THE ASSESSEE WAS REQUIRED TO PAY THE CUSTOM DUTY IN QUE STION, IT CANNOT BE HELD THAT CUSTOMS DUTY SO PAID WAS NOT BUSINESS EXPENSES OF THE ASSESSEE OR THE SAME WAS RECEIVABLE BY THE ASSESSEE FROM ANY PERSON. THUS, WE FIND NO ERROR IN THE VIEW ADOPTED BY THE AO IN THE ASSESSMENT ORDER. 6. WE FURTHER OBSERVE THAT THE ASSESSEE HAD ALSO P OINTED OUT TO THE LD. CIT IN THE COURSE OF PROCEEDINGS U/S . 263 THAT SIMILAR DISALLOWANCE OF CUSTOMS DUTY WAS MADE BY THE AO IN THE ASSESSMENT OF THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR 2005- 06 WAS ON APPEAL DELETED BY THE LD. CIT(A). LD. AR OF THE ASSESSEE BEFORE US STALED AT BAR THAT THE DECISION OF THE LD . CIT(A) WAS ACCEPTED BY THE REVENUE AND NO APPEAL THEREAGAINST WAS FILED. LD. CIT COULD NOT POINT OUT ANY ERROR IN THE SUBMISSION S OF THE ASSESSEE BEFORE HIM NOR THE LD. DR COULD POINT OUT ANY ERROR BEFORE US. IN VIEW OF THIS IN OUR CONSIDERED VIEW AS THE LD. CIT COULD NOT SHOW THAT THE VIEW ADOPTED BY THE AO IN THE ASSESSMENT O RDER IN RESPECT OF LIABILITY OF CUSTOMS DUTY AS BUSINESS DEDUCTION TO THE ASSESSEE WAS NOT A POSSIBLE VIEW, IN OUR CONSIDERED VIEW THE LD. CIT WAS NOT JUSTIFIED IN CONSIDERING THE ASSESSMENT ORDER AS ER RONEOUS. ITA NOS.226 & 2647 OF 2013 MEGHMANI ORGANICS LTD. VS. CIT(CENTRAL)-1, AHD. AY 2004-05 - 5 - THEREFORE, THE IMPUGNED ORDER PASSED U/S. 263 IS SE T ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN VIEW OF OUR DECISION IN ITA NO. 226/AHD/2013 WHEREIN WE HAVE SET ASIDE THE ORDER PASSED U/S. 263 OF THE ACT, THE IMPUGNED ORDER IN THE APPEAL OF THE ASSESSEE IN ITA NO. 2467/AHD/2013 BEING AN OFF-SHOOT OF THAT 263 ORDER HAS BECOME WITHOUT ANY VALID FOUNDATION. WE, THEREFORE, CANCE L THE IMPUGNED ASSESSMENT ORDER AND ALLOW THE APPEAL OF THE ASSESS EE. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON THURSDAY, THE 17 TH OF APRIL, 2014 AT AHMEDABAD. SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER (N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD : DATED 17/04/2014 AK TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION- 15.04.2014