The ITO, Ward-1(4), Surat V. M/s. Lalman Fashions Pvt.Ltd., Surat

ITA 272/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89587 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 05-05-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 03-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained expenditure; Depreciation; Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD .., , BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER SL. NO(S) ITA NO(S)/CO NOS. ASSESSMENT YEAR(S) APPEAL(S)/COS BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 272/AHD/2011 2006-07 THE ITO WARD-1(4) SURAT LALMAN FASHIONS PVT.LTD. 103, SHANTIKALA APARTMENT NR.MAHARAJA CINEMA SALABATPURA, SURAT PAN:AAACL 7075 R 2. CO NO.61/AHD/11 (IN ITA 272/A/11) 2006-07 ASSESSEE REVENUE 3. 273/AHD/2011 2007-08 REVENUE ASSESSEE 4. CO NO.62 /AHD/11 (IN ITA 273/A/11) 2007-08 ASSESSEE REVENUE REVENUE BY : SMT. SONIA KUMAR, SR.DR ASSESSEE BY : SHRI RAMESH P.MALPANI, AR / DATE OF HEARING 05/05/2015 !' / DATE OF PRONOUNCEMENT 05 /06/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THE APPEALS BY THE REVENUE AND THE CROSS-OBJECTION S BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS O F THE LD.COMMISSIONER ITA NOS.272 & 273 /AHD/2011 (BY REVENUE) AND CO NOS.61 & 62/AHD/2011 (BY ASSESSEE) ITO VS. LALMAN FASHIONS PVT.LTD. RESPECTIVELY ASST.YEARS 2006-07 & 2007-08 - 2 - OF INCOME TAX(APPEALS)-I, SURAT (CIT(A) IN SHORT) BOTH IDENTICALLY DATED 18/10/2010 PERTAINING TO ASSESSMENT YEARS (AY S) 2006-07 & 2007-08. SINCE COMMON ISSUES AND FACTS ARE INVOLVE D IN THESE APPEALS AND CROSS-OBJECTIONS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF C ONVENIENCE. 2. FIRST, WE TAKE UP THE REVENUES APPEAL IN ITA NO .272/AHD/2011 FOR AY 2006-07. THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- [1] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE O N ACCOUNT OF UNEXPLAINED EXPENDITURE OF RS.39,37,338/- U/S.69C. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. [3] IT IS, THEREFORE, PRAYED THAT THE ORDER OF TH E CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 2.1. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE ASSESSEE WAS REOPENED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) R.W.S.147 OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS FRAMED VIDE ORDER DATED 25/12/2009. WHILE FRAMING THE ASSE SSMENT, ASSESSING OFFICER (AO IN SHORT) MADE ADDITION OF RS.39,37,338 /- ON ACCOUNT OF UNEXPLAINED PAYMENTS TOWARDS PURCHASES, MADE ADDITI ON OF RS.5,59,273/- ON ACCOUNT OF NON-DEDUCTION OF TAX AND MADE ADDITIO N OF RS.1,06,269/- ITA NOS.272 & 273 /AHD/2011 (BY REVENUE) AND CO NOS.61 & 62/AHD/2011 (BY ASSESSEE) ITO VS. LALMAN FASHIONS PVT.LTD. RESPECTIVELY ASST.YEARS 2006-07 & 2007-08 - 3 - ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. AGGRIE VED BY THE SAID ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED TH E APPEAL. WHILE PARTLY ALLOWING THE APPEAL, THE LD.CIT(A) DELETED THE ADDI TION OF RS.39,37,338/- AND CONFIRMED THE ADDITION(S) MADE IN RESPECT OF NO N-DEDUCTION OF TAX AMOUNTING TO RS.5,59,273/- AND DISALLOWANCE OF DEPR ECIATION RS.1,06,269/-. AGGRIEVED BY THE ORDER OF THE LD.CI T(A), NOW BEFORE US, BOTH THE REVENUE AND ASSESSEE ARE IN APPEALS AND CR OSS-OBJECTIONS RESPECTIVELY. 3. THE ONLY EFFECTIVE GROUND IN THIS REVENUES APPE AL IS AGAINST THE DELETION OF ADDITION OF RS.39,37,338/- MADE U/S.69C OF THE ACT. 4. THE LD.SR.DR HAS SUBMITTED THAT THE LD.CIT(A) WA S NOT JUSTIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT DURING TH E PROCEEDINGS BEFORE THE DIRECTORATE OF REVENUE INTELLIGENCE (DRI), A ST ATEMENT U/S.108 OF THE CUSTOMS ACT WAS RECORDED, WHEREIN ABOUT UNDERVALUAT ION RESORTED BY THE ASSESSEE IN RESPECT OF 22 CONSIGNMENTS. 4.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT THE ADJUDICATION BY THE CUSTOM AUTHORITY HAS NOT BEEN D ONE, THEREFORE, THE ONLY BASIS TO RELY ON THE STATEMENT MADE BEFORE THE DRI SHOULD NOT BE THE ITA NOS.272 & 273 /AHD/2011 (BY REVENUE) AND CO NOS.61 & 62/AHD/2011 (BY ASSESSEE) ITO VS. LALMAN FASHIONS PVT.LTD. RESPECTIVELY ASST.YEARS 2006-07 & 2007-08 - 4 - ONLY GROUND FOR CONFIRMING THE ADDITION. HE SUBMIT TED THAT THE FINDING BY THE CUSTOM AUTHORITIES WILL HAVE BEARING UPON TH E PRESENT CASE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. BOTH THE PARTIES HAVE AGREED THAT THE FINDING OF TH E CUSTOM AUTHORITIES WOULD HAVE BEARING ON THE PRESENT CASE. THEREFORE, THE RESPECTIVE REPRESENTATIVES OF THE PARTIES AGREED THAT THE ISSU E BE RESTORED TO THE FILE OF AO FOR DECIDING THE ISSUE AFTER THE OUTCOME OF T HE ADJUDICATION BY THE CUSTOM AUTHORITY. IN VIEW OF THE SUBMISSIONS MADE BY THE RESPECTIVE REPRESENTATIVE OF THE PARTIES, WE HEREBY RESTORE TH IS ISSUE TO THE FILE OF THE AO TO DECIDE THE ISSUE AFTER THE ADJUDICATION ORDER IS PASSED BY THE CUSTOM AUTHORITY. THE AO WOULD ALSO MAKE ENQUIRY W HETHER THE ADJUDICATION ORDER HAS BEEN PASSED. THE ASSESSEE W OULD COOPERATE IN FURNISHING THE REQUISITE INFORMATION AND DETAILS TH EREOF. THEREFORE, ORDER OF THE LD.CTI(A) IS HEREBY SET ASIDE AND GROUND NO. 1 OF REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 5.1 GROUND NOS.2 & 3 ARE GENERAL IN NATURE WHICH RE QUIRE NO INDEPENDENT ADJUDICATION. 6. ASSESSEES CO NO.61/AHD/2011 FOR AY 2006-07 (IN ITA NO.272/AHD/2011 FOR AY 2006-07), WHEREIN FOLLOWIN G GROUNDS HAVE BEEN RAISED BY THE ASSESSEE:- ITA NOS.272 & 273 /AHD/2011 (BY REVENUE) AND CO NOS.61 & 62/AHD/2011 (BY ASSESSEE) ITO VS. LALMAN FASHIONS PVT.LTD. RESPECTIVELY ASST.YEARS 2006-07 & 2007-08 - 5 - 1. THAT ON FACTS AND IN THE CIRCUMSTANCES OF CASE , THE HONBLE CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF FREIG HT AND CLEARING AND FORWARDING EXPENSES OF RS.5,59,273/- U /S.40(A)(IA) OF THE ACT FOR THE NON-DEDUCTION OF TDS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CA SE, THE HONBLE CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY OF RS.1,06,269/ -. 6.1. IN RESPECT OF GROUND NO.1, THE LD.COUNSEL F OR THE ASSESSEE SUBMITTED THAT AUTHORITIES BELOW WERE NOT JUSTIFIED IN FASTEN ING THE LIABILITY OF TDS, AS ADMITTEDLY THE PAYMENTS SO MADE WERE NOT THE INC OME OF THE ASSESSEE. THE PAYMENTS WERE MADE MERELY AS REIMBURSEMENT, UND ER THESE FACTS THE LD.CIT(A) OUGHT NOT TO HAVE CONFIRMED THE DISALLOWA NCE. 6.2. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. UNDISPUTEDLY, THE LD.CIT(A) HAS NOT DOUBTED THE SUB MISSION OF THE ASSESSEE THAT PAYMENT SO MADE DOES NOT CONTAIN INCO ME/PROFIT ELEMENT. DESPITE THAT HE PROCEEDED TO CONFIRM THE ADDITION. UNDER THE IDENTICAL FACTS, IN THE AY 2007-08, HOWEVER HE RESTRICTED THE DISALLOWANCE TO THE EXTENT OF SERVICE CHARGES PAID TO THE CHA. THEREFO RE, IN THE YEAR UNDER CONSIDERATION ALSO, DISALLOWANCE OUGHT TO HAVE BEEN RESTRICTED TO SERVICE CHARGE. THE IMPUGNED DISALLOWANCE IS, THEREFORE, R ESTRICTED TO THE EXTENT ITA NOS.272 & 273 /AHD/2011 (BY REVENUE) AND CO NOS.61 & 62/AHD/2011 (BY ASSESSEE) ITO VS. LALMAN FASHIONS PVT.LTD. RESPECTIVELY ASST.YEARS 2006-07 & 2007-08 - 6 - OF SERVICE CHARGES. THE AO IS HEREBY DIRECTED TO R ECOMPUTE THE DISALLOWANCE IN THE LIGHT OF ABOVE DIRECTION. THUS , GROUND NO.1 OF ASSESSEES CROSS-OBJECTION IS ALLOWED FOR STATISTI CAL PURPOSES. 8. GROUND NO.2 OF ASSESSEES CROSS-OBJECTION IS AGA INST CONFIRMATION OF DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHIN ERY OF RS.1,06,269/-. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE. HE SUBMI TTED THAT, HOWEVER, THE PLANT AND MACHINERY WERE NOT USED YET THE SAME WERE READY TO USE. 8.1. ON THE CONTRARY, LD.SR.DR SUPPORTED THE ORDER OF THE LD.CIT(A) AND SUBMITTED THAT THERE IS NO ILLEGALITY IN THE ORDER OF THE LD.CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ADMITTEDLY, THE PLANT AND MACHINERY WERE NOT USED I N THE YEAR UNDER CONSIDERATION. DURING THE COURSE OF HEARING, A QUE RY WAS RAISED BY THE BENCH, WHETHER THE PLANT AND MACHINERY WAS OPERATED AND USED FOR MANUFACTURING AT ANY POINT OF TIME IN NEAR FUTURE. THE ANSWER WAS NEGATIVE, LD.COUNSEL FOR THE ASSESSEE COULD NOT PLA CE ANY MATERIAL ON RECORD SUGGESTING THAT THE PLANT AND MACHINERY WERE USED. UNDER THESE FACTS, WE DO NOT SEE ANY REASON TO INTERFERE WITH T HE ORDER OF THE LD.CIT(A), THE SAME IS HEREBY UPHELD. THUS, GROUND NO.2 OF ASSESSEES ITA NOS.272 & 273 /AHD/2011 (BY REVENUE) AND CO NOS.61 & 62/AHD/2011 (BY ASSESSEE) ITO VS. LALMAN FASHIONS PVT.LTD. RESPECTIVELY ASST.YEARS 2006-07 & 2007-08 - 7 - CROSS-OBJECTION IS REJECTED. AS A R ESULT, THE CROSS OBJECTION NO.61/AHD/2011 FILED BY THE ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. 10. NOW , WE TAKE UP THE REVENUES APPEAL IN ITA NO.273/AHD /2011 FOR AY 2007-08. THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- [1] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE O N ACCOUNT OF UNEXPLAINED EXPENDITURE OF RS.63,79,100/- U/S.69C. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. [3] IT IS, THEREFORE, PRAYED THAT THE ORDER OF TH E CIT(A) MAY BE SET ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 10.1. THE GROUND OF REVENUES APPEAL IN ITA NO.272/ AHD/2011 FOR AY 2006-07(SUPRA), WE HAVE ALLOWED THE REVENUES APPEA L FOR STATISTICAL PURPOSES. THEREFORE, FOR THE SAME REASONING, THI S YEAR ALSO, WE SET ASIDE THE ORDER OF THE LD.CIT(A) AND THE APPEAL OF THE REVENUE FOR AY 2007-08 IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN ASSESSEES CO NO.62/AHD/2011 FOR AY 2007-0 8 (IN ITA NO.273/AHD/2011 FOR AY 2007-08), THE FOLLOWING GR OUND HAS BEEN RAISED BY THE ASSESSEE:- ITA NOS.272 & 273 /AHD/2011 (BY REVENUE) AND CO NOS.61 & 62/AHD/2011 (BY ASSESSEE) ITO VS. LALMAN FASHIONS PVT.LTD. RESPECTIVELY ASST.YEARS 2006-07 & 2007-08 - 8 - 1. THAT ON FACTS AND IN THE CIRCUMSTANCES OF CASE, THE HONBLE CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF CLEAR ING AND FORWARDING EXPENSES TO THE EXTENT OF RS.2,39,088/- U/S.40(A)(IA) OF THE ACT FOR THE NON-DEDUCTION OF T DS. 11.1. SINCE WE HAVE CONFIRMED THIS DISALLOWANCE IN THE AY 2006-07, WE DO NOT SEE ANY REASON TO TAKE A CONTRARY VIEW. TH IS GROUND OF CROSS OBJECTION IS REJECTED. THUS, ASSESSEES CROSS OBJE CTION FOR AY 2007-08 IS DISMISSED. 12 . IN THE COMBINED RESULT, THE APPEALS OF THE REV ENUE ARE ALLOWED FOR STATISTICAL PURPOSES AND CROSS-OBJECTION FILED BY THE ASSESSEE FOR AY 2006-07 IS PARTLY ALLOWED FOR STATISTICAL PURPO SES & CROSS- OBJECTION FILED BY THE ASSESSEE FOR AY 2007-08 IS D ISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 5 TH DAY OF JUNE, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 05/ 06 /2015 (..,.../ T.C. NAIR, SR. PS ITA NOS.272 & 273 /AHD/2011 (BY REVENUE) AND CO NOS.61 & 62/AHD/2011 (BY ASSESSEE) ITO VS. LALMAN FASHIONS PVT.LTD. RESPECTIVELY ASST.YEARS 2006-07 & 2007-08 - 9 - !'#$#%! / COPY OF THE ORDER FORWARDED TO : 1. )* +, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. /0/12 3 / CONCERNED CIT 4. 3 ( )* ) / THE CIT(A)-I, SURAT 5. 45-12 , )* )12' , )0 / DR, ITAT, AHMEDABAD 6. 5789 / GUARD FILE. / BY ORDER, .4*- //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 7.5.15 (DICTATION-PAD 7+ P AGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER ..15.5.15 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.5.6.15 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 5.6.15 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER