Deputy Commissioner of Income tax, V. M/s. Kala Genset Pvt.Ltd., Pune

ITA 2653/PUN/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8578 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 21-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Unexplained investment; Valuation report; Accommodation entries; Tax effect; Reassessment proceedings
• Section: 10B; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . .. . / ITA NOS.2653 & 2654/PUN/2016 / ASSESSMENT YEARS : 2010-11 & 2006-07 THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-9, PUNE ....... / APPELLANT / V/S. M/S. KALA GENSET PVT. LTD., 392/1, VILLAGE : MAHALUNGE, TALUKA : KHED, PUNE 410 501 PAN : AAACK6784C / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK REVENUE BY : SHRI YOGESH KAMAT / DATE OF HEARING : 20-12-2018 / DATE OF PRONOUNCEMENT : 31-12-2018 / ORDER PER VIKAS AWASTHY, JM : THESE TWO APPEALS HAVE BEEN FILED BY THE REVENUE. ITA NO.2654/PUN/2016 IS DIRECTED AGAINST THE ORDER OF COMMIS SIONER OF INCOME-TAX (APPEALS)-6, PUNE DATED 30-08-2016 FOR THE ASSESSMENT YEAR 2006-07 IN REASSESSMENT PROCEEDINGS U/S.147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). IN ITA NO.2653/PUN/2016, THE REVENUE HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-6, DATED 31-08-2016 FOR THE ASSESSMENT YEAR 2010-11. 2 ITA NOS. 2653 & 2654/PUN/2016 M/S. KALA GENSET PVT. LTD., ITA NO.2654/PUN/2016 FOR A.Y. 2006-07 : 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE RECO RDS ARE; THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE A ND ASSEMBLING OF GENERATOR SETS. THE ASSESSEE FILED ITS RETUR N OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 22-11-2006 DECLARIN G TOTAL INCOME OF RS.1,71,42,956/-. THE ASSESSEE CLAIMED DEDUCTION U/S.80IB(5) IN RESPECT OF MANUFACTURING UNIT LOCATED AT SILVAS SA. IN SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSEES CLAIM OF DEDUCTION U/S.80IB(5) WAS ALLOWED VIDE ORDER DATED 04-11-2008. SUB SEQUENTLY, THE ASSESSING OFFICER (IN SHORT AO) REOPENED THE ASSESSM ENT TO REJECT ASSESSEES CLAIM OF DEDUCTION AMOUNTING TO RS.1,63,06,945/- U/S.80IB(5) OF THE ACT. THE AO VIDE ORDER DATED 08-03-20 13 PASSED U/S.143(3) READ WITH SECTION 147 DISALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S.80IB(5) OF THE ACT. 3. AGGRIEVED BY REOPENING OF ASSESSMENT AND DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80IB(5), THE ASSESSEE FILED APPEAL BEFORE TH E CIT(A). THE FIRST APPELLATE AUTHORITY VIDE IMPUGNED ORDER HELD THA T THE ASSESSEE IS ELIGIBLE FOR CLAIMING THE DEDUCTION U/S.80IB(5) AND REVERSE D THE FINDINGS OF AO. AGAINST THE ORDER OF CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 4. SHRI YOGESH KAMAT REPRESENTING THE DEPARTMENT SUBM ITTED THAT THE CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT AS SEMBLING AMOUNTS TO MANUFACTURING. THE CIT(A) WHILE ALLOWING THE A PPEAL OF ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF PUNE BENC H OF THE 3 ITA NOS. 2653 & 2654/PUN/2016 M/S. KALA GENSET PVT. LTD., TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR S 2007-08 AND 2008-09 IN ITA NOS. 2056 & 2057/PUN/2012 DECIDED ON 28 -02-2014. THE DEPARTMENT IS IN APPEAL BEFORE THE HONBLE HIGH COUR T AGAINST THE SAID ORDER OF TRIBUNAL. THE LD. DR FAIRLY CONCEDED THAT THE APPEAL OF THE REVENUE MAY NOT BE ACCEPTED BY THE HONBLE HIGH C OURT AS THE TAX EFFECT IN THE APPEAL IS BELOW THE MONETARY LIMIT AS HAS BE EN RECENTLY NOTIFIED BY THE CBDT VIDE CIRCULAR NO.21/2015. THE LD. DR P LACED RELIANCE ON THE DECISION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. BABCOCK & WILCOX OF INDIA LTD. REPORTED AS 241 I TR 583 TO CONTEND THAT ASSEMBLING OF PARTS CANNOT BE EQUATED WITH MANUFACTURE OF AN ARTICLE OR A THING. THE LD. DR CONTENDED THAT THE PROVISIONS OF SECTION 10A AND 10B HAVE BEEN AMENDED BY THE FINANCE ACT, 2000 WHEREBY DEFINITION OF MANUFACTURING, WHICH INCLUDED ANY PROC ESS OR ASSEMBLING HAS BEEN DELETED W.E.F. 01-04-2001. 5. ON THE OTHER HAND, SHRI NIKHIL PATKAK APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE CLAIMED DEDUCTION U/S.80IB(5) FOR THE FIRST TIME IN THE ASSESSMENT YEAR 2005-06. THE REVENUE INITIALLY ALLOWED THE ASSESSEES CLAIM OF DEDUCTION. THEREAFTE R, THE ASSESSMENT WAS REOPENED AND THE ASSESSEES CLAIM OF DE DUCTION U/S.80IB(5) WAS DENIED. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) DELETED TH E ADDITION. THEREAFTER, THE DEPARTMENT DID NOT AGITATE THE ISSUE IN A PPEAL BEFORE THE TRIBUNAL ON ACCOUNT OF LOW TAX EFFECT. IN ASSESSMENT YEARS 2007- 08 AND 2008-09, THE ASSESSEES CLAIM OF DEDUCTION WAS A GAIN DISALLOWED. IN THE FIRST APPEAL BEFORE THE CIT(A), THE ASSES SEES CLAIM OF DEDUCTION U/S.80IB(5) IN RESPECT OF SILVASSA UNIT WAS ALLOWE D. THE DEPARTMENT CARRIED THE ISSUE IN APPEAL BEFORE THE TRIBUNA L IN ITA NOS. 2056 & 2057/PUN/2012 (SUPRA). THE TRIBUNAL UPHELD THE OR DER OF 4 ITA NOS. 2653 & 2654/PUN/2016 M/S. KALA GENSET PVT. LTD., CIT(A) IN HOLDING ASSESSEE ELIGIBLE FOR CLAIMING DEDUCTION. THE LD. AR REFERRED TO THE ABOVE ORDER OF TRIBUNAL PLACED AT PAGES 21 TO 37 OF THE PAPER BOOK. THE LD. AR SUBMITTED THAT THE TRIBUNAL HAS HELD THAT MANUFACTURING INCLUDES ASSEMBLY OF PARTS. THE LD. AR FURT HER POINTED THAT THE TRIBUNAL WHILE ALLOWING ASSESSEES CLAIM HAS CONSIDERED THE DECISION RENDERED IN THE CASE OF CIT VS. B ABCOCK & WILCOX OF INDIA LTD. (SUPRA). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE SOLITARY ISSUE IN THE APPEAL BY REVENUE IS AGAINST ALLOWING ASSESSEES CLAIM OF DEDUCTION OF RS.1,63,06,945/- U/S.80IB(5). THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ASSEMBLING AND MANUFACTURE OF DIESEL GENERATOR SETS FOR INDUSTRIAL AND COMMERCIAL APPLICATIONS. AS PER THE CONTENTIO NS OF THE REVENUE, ASSEMBLING OF VARIOUS COMPONENTS DOES NOT AMOUN T TO MANUFACTURE. WE FIND THAT, FOR SIMILAR REASONS, THE ASSESS EES CLAIM OF DEDUCTION U/S.80IB(5) WAS DENIED BY THE DEPARTMENT IN A SSESSMENT YEARS 2007-08 AND 2008-09. THE ISSUED TRAVELLED TO THE TRIBUNA L. THE TRIBUNAL AFTER PLACING RELIANCE ON THE DECISIONS RENDERED IN THE CASE OF CHIRANJEEVI WIND ENERGY LTD. REPORTED AS 2011-TIOL-91-H C-MAD-IT, TATA LOCOMOTIVE & ENGINEERING LTD. REPORTED AS 68 ITR 3 25 (BOM.), CIT VS. JACKSON ENGINEERS LTD. REPORTED AS 341 ITR 518 (DELHI) UPHE LD THE ORDER OF CIT(A) IN ALLOWING ASSESSEES CLAIM OF DEDUCTION U/S.80IB(5). WE FURTHER FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE H AS ALSO CONSIDERED THE DECISION RENDERED IN THE CASE OF CIT VS. B ABCOCK & WILCOX OF INDIA LTD. (SUPRA). SINCE THIS ISSUE HAS ALREADY BEE N CONSIDERED AND DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL, WE FIND NO REASON TO TAKE A CONTRARY VIEW, ESPECIALLY WHEN T HE FACTS ARE 5 ITA NOS. 2653 & 2654/PUN/2016 M/S. KALA GENSET PVT. LTD., IDENTICAL. ACCORDINGLY, THE IMPUGNED ORDER IS UPHELD AND T HE APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.2653/PUN/2016 FOR A.Y. 2010-11 : 8. THE REVENUE IN APPEAL HAS ASSAILED THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS.1,37,66,943/-. 9. THE LD. DR SUBMITTED THAT AS PER THE INFORMATION RECE IVED FROM THE SALES TAX DEPARTMENT, GOVT. OF MAHARASHTRA THE ASSE SSEE HAS INDULGED IN BOGUS PURCHASES OF MATERIAL FROM HAWALA OPERA TORS. THE ASSESSEE HAS OBTAINED BOOK ENTRIES INDICTING PURCHASE OF BUILDING MATERIAL FROM THE FOLLOWING HAWALA DEALERS AMOUNTING TO RS.1,37,66,943/- : 1. AJKSHAR DISTRIBUTORS PVT. LTD. 2. RAMDEV TRADING COMPANY 3. DARSHAT TRADING PVT. LTD., 4. EVERSHINE ENTERPRISES 5. RELIANCE ENTERPRISES THE ASSESSEE FAILED TO SUBSTANTIATE WITH COGENT EVIDENCE THAT THE MATERIAL WAS PROCURED FROM THE AFORESAID DEALERS. CONSE QUENTLY, THE AO MADE ADDITION. HOWEVER, IN THE FIRST APPEAL, THE CIT(A) DE LETED THE ADDITION OF BOGUS PURCHASES ON THE GROUND THAT THE ASS ESSEE MIGHT HAVE OBTAINED THE MATERIAL LOCALLY IN CASH AND ONLY FOR TH E PURPOSE OF AVAILING VAT CREDIT THE BILLS HAVE BEEN SOUGHT FROM THE HAW ALA OPERATORS. THE FINDINGS OF CIT(A) ARE ERRONEOUS AS THEY A RE MERELY BASED ON PRESUMPTIONS AND ASSUMPTIONS. 6 ITA NOS. 2653 & 2654/PUN/2016 M/S. KALA GENSET PVT. LTD., 10. ON THE OTHER HAND, LD. AR VEHEMENTLY DEFENDED THE FIN DINGS OF CIT(A) IN DELETING THE ADDITION. THE LD. AR SUBMITTED THAT, EV EN IF THE PURCHASES ARE ADMITTED TO BE BOGUS, THE CONSTRUCTION O F THE BUILDING HAS NOT BEEN DISPUTED BY THE DEPARTMENT. THE CASH AV AILABLE WITH THE ASSESSEE AGAINST BOGUS PURCHASES OF CONSTRUCTION MATER IAL HAVE BEEN INVESTED FOR CONSTRUCTION OF THE BUILDING. THEREFORE, THE SA ID AMOUNT CAN BE SET OFF AGAINST WORK-IN-PROGRESS. 11. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESE NTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE SOLITARY ISSUE RAISED IN APPEAL BY THE DEPARTMENT IS AGAINS T DELETING THE ADDITION OF RS.1,37,66,943/- ON ACCOUNT OF BOGUS PURCHA SE OF BUILDING MATERIAL FROM THE HAWALA OPERATORS BY THE ASSESSE E. THE CONTENTION OF THE REVENUE IS THAT THE ASSESSEE HAS NEV ER PURCHASED THE MATERIAL FOR CONSTRUCTION OF THE BUILDING. IT HAS MERE LY OBTAINED THE ACCOMMODATION ENTRIES FROM HAWALA DEALERS. AT THE S AME TIME, CONSTRUCTION OF BUILDING BY THE ASSESSEE HAS NOT BEEN DIS PUTED BY THE DEPARTMENT. THE CIT(A) HAS DELETED THE ADDITION BY CONSI DERING THE FACT THAT CASH AVAILABLE WITH THE ASSESSEE AGAINST ALLEGED BOGUS PURCHASES HAS BEEN UTILIZED TOWARDS CONSTRUCTION OF BUILD ING AND HENCE, IT IS PART OF WORK-IN-PROGRESS. FOR THE SAKE OF CO MPLETENESS, THE RELEVANT EXTRACT OF THE FINDINGS OF CIT(A) ARE REPRODUC ED HEREIN BELOW : 4.3.1 CONSIDERING THIS EVIDENCE AND THE FACT T HAT THE WIP HAS BEEN CERTIFIED BY THE AUDITORS, I AM OF THE VIEW THAT THERE HAS BEEN A CONSTRUCTION WORK WHICH HAS BEEN CARRIED OUT DURING THE YEAR. THE VALUE AS PER VALUATION REPORT IS RS.1,56,55,200 /- AND THE WIP AS PER THE BOOKS IS SHOWN AT RS.1,51,26,000/-. THE MA TERIAL PURCHASED FROM THE ALLEGED BOGUS SUPPLIERS IS RS.1,37,66,943/ -. IT IS QUITE POSSIBLE THAT THE APPELLANT MAY HAVE INCURRED THIS EXPENDITURE BY PURCHASING THE MATERIAL LOCALLY IN CASH AND ONLY FO R THE PURPOSE OF 7 ITA NOS. 2653 & 2654/PUN/2016 M/S. KALA GENSET PVT. LTD., AVAILING ANY VAT CREDIT HE MAY HAVE SOUGHT THE BILL S FROM THESE HAWALA OPERATORS. IN VIEW OF THE FACT THAT THE BUILDING H AS BEEN CONSTRUCTED, IT COULD NOT HAVE BEEN POSSIBLE WITHOUT PURCHASING THE MATERIAL. THEREFORE, THE ACTION OF THE AO IN NOT CONSIDERING THE WITHDRAWALS MADE FROM THE BOOKS AS NOT HAVING BEEN INVESTED IN CAPIT A; WIP IS ERRONEOUS. THEREFORE THE ADDITION MADE BY THE AO TREATING THE INVESTMENTS IN THE WIP HAS UNEXPLAINED INVESTMENT IS DELETED. FURTHER , AS THE WITHDRAWN AMOUNTS HAVE BEEN UTILIZED FOR THE PURPOSE OF BUSIN ESS, THE DISALLOWANCE OF INTEREST MADE BY THE AO IS WITHOUT ANY BASIS AND HENCE DELETED. 12. WE FIND THAT THE REASONS GIVEN BY THE CIT(A) IN DELETIN G THE ADDITION ARE PLAUSIBLE AND HENCE, WE CONCUR WITH THE SAME. WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF CIT(A). ACCORDIN GLY, THE APPEAL OF THE REVENUE IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 31 ST DAY OF DECEMBER, 2018. SD/- SD/- (D. KARUNAKARA RAO) (VIKAS AWASTHY) ACCOUNTANT MEMBER JU DICIAL MEMBER / PUNE; / DATED : 31 ST DECEMBER, 2018 SATISH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. () / THE CIT(A)-6, PUNE 4. / THE PR.CIT-5, PUNE 5. , , $ , / DR, ITAT, A BENCH, PUNE. 6. ' / GUARD FILE. // // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY, , / ITAT, PUNE 8 ITA NOS. 2653 & 2654/PUN/2016 M/S. KALA GENSET PVT. LTD., DATE 1. DRAFT DICTATED ON 26-12-18 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 27-12-18 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER.