AAREY DRUGS & PHARMACEUTICALS LTD., MUMBAI V. DCIT- CC- 2(3), MUMBAI

ITA 2821/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5755 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 04-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALD
• Assessee Lawyers: A C JHAVERI A R S
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 13; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE S HRI RAJESH KUMAR (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 2821 /MUM/2018 ASSESSMENT Y EAR: 2013 - 2014 & ITA NO. 2822/MUM/2018 ASSESSMENT Y EAR: 2014 - 2015 AAREY DRUGS & PHARMACEUTICALS L TD., B/1504, HIGHLAND PARK, LOKHANDWALA, NEW LINK ROAD, ANDHERI (WEST), MUMBAI - 400053 PAN: AAACA5253A VS. THE DCIT CENTRAL CIRCLE - 2(3), OLD CGO BLDG., ROOM 803, 8 TH FLR, MK ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DH ARMIL JHAVERI & A.C. JHAVERI ( A R S ) REVENUE BY : SHRI MICHAEL JERALD (D R ) DATE OF HEARING: 24/02 /2020 DATE OF PRONOUNCEMENT: 26 / 02 /2020 O R D E R PER RAM LAL NEGI, JM THESE APPEAL S HAVE BE EN FILED BY THE ASSESSEE AGAINST THE TWO ORDER S DATED 28.03.2018 AND 26.03.2018 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 8 (FOR SHORT THE CIT(A) , MUMBAI , FOR THE ASSESSMENT YEAR S 2013 - 14 AND 2014 - 15 RESPECTIVELY , WHEREBY THE LD. CIT(A) HAS PART LY ALLOWED THE APPEAL PERTAINING TO THE AY 2013 - 14 AND DISMISSED THE APPEAL PERTAINING TO THE AY 2014 - 2015, FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDERS PASSED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) 2 ITA NO S . 2821 AND 2822 /MUM/2018 ASSESSMENT YEAR S : 2013 - 14 AND 2014 - 1 5 IT A NO. 2821/MUM/2018 (A SSESSMENT YEAR: 2013 - 2014 ) 2. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING GROUNDS : - 1. THE LD. CIT (A) HAS NEITHER GIVEN PROPER OPPORTUNITY OF HEARING TO THE APPELLANT BEFORE DECIDING THE APPEAL. 2. THE LD. CI T (A) NOT JUSTIFIED IN TREATING THE ROC FEES AS A CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE. 3. THE LD. CIT (A) NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEPRECIATION FULLY. THE ASSESSEE HAS PURCHASED THE MACHINERY WORTH OF RS. 40,47,187/ - DURING F.Y. 2008 - 09 FROM SUSPICIOUS HAWALA DEALER AND LD. AO DISALLOWED THE COST OF PURCHASE AND DEPRECIATION BOTH WHICH IS AGAINST THE PRINCIPAL OF NATURAL JUSTICE. 4. THE LD. CIT (A) NOT JUSTIFIED IN DISALLOWING THE PAYMENT TO SURYA CHEMICAL BY TREATING THE NAT URE OF PAYMENT AS COMMISSION INSTEAD OF RATE DIFFERENCE. THERE IS NO PROVISION OF TDS ON RATE DIFFERENCE. HENCE DISALLOWANCE IS UNJUSTIFIED AND UNWARRANTED. 5. THE LD. CIT (A) NOT JUSTIFIED IN DISALLOWING THE INTEREST EXPENSES FOR PAYMENTS/ADVANCES MADE IN DUE COURSE OF BUSINESS. PRAYER: 1) THE APPELLANT HEREBY PRAYS THAT ALL THE ADDITIONS AS ABOVE MAY BE DELETED IN FULL. 3. BEFORE US, T HE LD. COUNSEL FOR THE ASSESSEE FILED WRITTEN SUBMISSIONS AND SUBMITTED THAT THE ASSESSEE ISSUED THE RIGHT ISSUE DURING THE ASSESSMENT YEAR 2012 - 13 AND THE TOTAL EXPENSES FOR THE SAME WAS RS. 15,67,634/ - . THE ASSESSEE HAS WRITTEN OFF 20% OF THE TOTAL EXPENSES FOR THE AY 2012 - 13 TO AY 2017 - 18 AS PER PROVISIONS OF SECTION 35D OF THE ACT. THEREFORE, THE DISALLOWANCE OF 20% OF THE COST OF THE RIGHT ISSUE IS UNJUSTIFIED AND UNWARRANTED. SO FAR AS THE 15% DISALLOWANCE OF DEPRECIATION IS CONCERNED, THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS MADE ADDITION TO THE FIXED ASSETS UNDER THE HEAD PLANT AND MACHINERY AMOUNTING TO RS. 60,91,874/ - DURING THE FY 2010 - 11 A S PER THE INSTALLAT ION CERTIFICATE AND FIXED ASSET REGISTER 3 ITA NO S . 2821 AND 2822 /MUM/2018 ASSESSMENT YEAR S : 2013 - 14 AND 2014 - 1 5 MAINTAINED BY THE ASSESSEE. THE SAID ASSET WAS IN USED DURING THE CONCERNED YEARS, THEREFORE, THE REVENUE HAS WRONGLY DISALLOWED THE DEPRECIATION ON OPENING WRIT TEN DOWN VALUE OF RS. 44,01,373/ - . THE LD. COUNSEL FURTHER POINTED OUT THAT THE ASSESSEE HAS ALLOWED CREDIT NOTE TO M/S SURYA CHEMICALS FOR RATE DIFFERENCE DISCOUNT. THERE IS NO PROVISION FOR TDS ON DISCOUNT, THEREFORE, THE DISALLOWANCE DUE TO NON DEDUCTIO N OF TDS IS UNJUSTIFIED. SO FAR AS THE ADDITION ON ACCOUNT OF INTEREST ON ADVANCES IS CONCER NED , THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS GIVEN ADVANCES FOR PURCHASE OF FIXED ASSET. THE SAME WAS OUTSTANDING AS ON 31.03.2013 . THE SAID ADVANCES WERE P AID DURING THE COURSE OF BUSINESS THEREFORE THE AUTHORITIES BELOW HAVE WRONGLY MADE DISALLOWANCE OF 15% INTEREST EXPENSES ON ASSUMPTION AND ESTIMATION BASIS, WHICH IS NOT JUSTIFIED. 4. T HE LD. COUNSEL FURTHER SUBMITTED THAT THE AUTHORITIES BELOW HAVE NOT TAKEN INTO THE CONSIDERATION OF THE CONTENTIONS OF THE ASSESSEE AS THE ASSESSEE WAS NOT AFFORDED A REASONABLE OPPORTUNITY OF BEING HEARD. THE LD. COUNDEL FURTHER SUBMITTED THAT THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) IS NOT IN ACCORDANCE WITH THE EVID ENCE ON RECORD, THEREFORE THE SAME MAY BE SET ASIDE OR IN ALTERNATIVE, THE ISSUES MAY BE SET ASIDE TO THE FILE OF AO FOR PASSING THE ASSESSMENT ORDER AFRESH IN THE LIGHT OF THE SUBMISSIONS MADE BY THE ASSESSEE. 5. ON THE OTHER HAND, THE LD. DEPART MENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER PASSED BY THE LD. CIT (A) AND SUBMITTED THAT SINCE THE AO HAS MADE DETAIL FINDINGS IN THE ORDER. THE LD. CIT (A) HAS RIGHTLY ENDORSED THE FINDINGS OF THE AO. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE TH ROUGH THE MATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER PASSED BY THE LD. CIT (A). WE NOTICE THAT THE LD. CIT (A) HAS DECIDED THE ISSUES INVOLVED IN THE PRESENT APPEAL BY REFERRING THE RELEVANT PARAS OF THE ASSESSMENT ORDER PASSED BY THE AO. WE FURTHER N OTICE THAT THE PLEA RAISED BY THE ASSESSEE BEFORE US ARE NOT REFLECTED IN THE ASSESSMENT ORDER. THE LD. CIT (A) HAS ENDORSED THE ORDER OF THE AO AND NOT RECORDED HIS FINDINGS . HENCE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE 4 ITA NO S . 2821 AND 2822 /MUM/2018 ASSESSMENT YEAR S : 2013 - 14 AND 2014 - 1 5 SHOULD GET ONE MORE OPPOR TUNITY TO PRESENT ITS CASE BEFORE THE AO. THE LD. DR HAS NO OBJECTION IN CASE THE APPEAL IS SEND BACK TO THE AO FOR PASSING ASSESSMENT ORDER AFRESH IN THE LIGHT OF THE SUBMISSIONS MADE BEFORE US. 7. WE ACCORDINGLY, SET ASIDE THE ORDER PASSED BY THE LD. CIT (A) AND SEND THE FILE BACK TO THE AO FOR PASSING ASSESSMENT ORDER AFRESH AFTER CONSIDERING THE WRITTEN SUBMISSIONS FILED BEFORE US AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . HENCE, WE ALLOW THE ASSESSEES APPEAL FOR STATISTIC AL PURPOSES. ITA NO. 2822 /MUM/2018 (ASSESSMENT YEAR: 2014 - 2015 ) THE FACTS OF THE PRESENT CASE AND THE ISSUES INVOLVED ARE SIMILAR TO THE FACTS OF THE CASE AND THE ISSUES INVOLVED IN THE ASSESSEES OWN CASE FOR THE AY 2013 - 14. 2 . THE ASSESSEE HAS CHALLEN GED THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS : - 1. THE LD. CIT (A) HAS NEITHER GIVEN PROPER OPPORTUNITY OF HEARING TO THE APPELLANT BEFORE DECIDING THE APPEAL. 2. THE LD. CIT (A) NOT JUSTIFIED IN TREATING THE ROC FEE S AS A CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE. 3. THE LD. CIT (A) NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEPRECIATION FULLY. THE ASSESSEE HAS PURCHASED THE MACHINERY WORTH OF RS. 40,47,187/ - DURING F.Y. 2008 - 09 FROM SUSPICIOUS HAWALA DEALER AND LD. AO DISALLOWED THE COST OF PURCHASE AND DEPRECIATION BOTH WHICH IS AGAINST THE PRINCIPAL OF NATURAL JUSTICE. 4. THE LD. CIT (A) NOT JUSTIFIED IN DISALLOWING THE ADVERTISEMENT EXPENDITURE BY TREATING IS AS A DONATION EXPENSE WHICH IS UNJUSTIFIED AND UNWARRANTED. PRAYER: 2) THE APPELLANT HEREBY PRAYS THAT ALL THE ADDITIONS AS ABOVE MAY BE DELETED IN FULL. 3. THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS IN THIS CASE ALSO TAKING THE IDENTICAL PLEA TAKEN IN THE APPEAL PERTAINING TO THE ASSESSMENT YEAR . SIN CE, WE HAVE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) IN THE ASSESSEES OWN CASE FOR THE AY 2013 - 14, CONSISTENT WITH OUR FINDINGS, WE SET ASIDE THE 5 ITA NO S . 2821 AND 2822 /MUM/2018 ASSESSMENT YEAR S : 2013 - 14 AND 2014 - 1 5 ORDER PASSED BY THE LD. CIT (A) IN THIS CASE ALSO AND SEND THE FILE BACK TO THE AO FOR PASSING ASSESSMENT ORDER AFRESH IN THE LIGHT OF THE SUBMISSIONS MADE BY THE ASSESSEE IN ITS WRITTEN SUBMISSION S FILED BEFORE US. IN THE RESULT, APPEAL S FILED BY THE ASSESSEE FOR ASSESSMENT YEAR S 2013 - 2014 AND 2014 - 2015 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY , 2020 . SD/ - SD/ - ( RAJESH KUMAR ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 26 / 02 / 2020 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI