The DCIT, Circle-1, Surat V. M/s. Himson International Pvt.Ltd., Surat

ITA 2948/AHD/2008

• Counselvise Citation: 294820514 RSA 2008
• Duration Of Justice: 6 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 14-08-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Capital expenditure

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ #$ #$ #$ # ## #. .. .# ## #. . . . % % % %, , , , &' ( & ' &' ( & ' &' ( & ' &' ( & ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND N.S. SAINI, ACCOUNTANT MEMBER) ITA NO.2393/AHD/2008 [ASSTT.YEAR : 2005-2006] HIMSON INTERNATIONAL P. LTD. 701, CENTRE POINT RING ROAD, SURAT.GUJARAT. PAN : AAACN 7828 A /VS. JCIT, RANGE-1 SURAT. ITA NO.2948/AHD/2008 [ASSTT.YEAR : 2005-2006] JCIT, RANGE-1 SURAT. /VS. HIMSON INTERNATIONAL P. LTD. 701, CENTRE POINT RING ROAD, SURAT.GUJARAT. ITA NO.2521/AHD/2010 [ASSTT.YEAR : 2005-2006] DCIT, CIR-1 SURAT. /VS. HIMSON INTERNATIONAL P. LTD. HIRALAL COLONY A.K. ROAD, SURAT. ( (( ( *+ *+ *+ *+ / APPELLANT) ( (( ( ,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ( . / & / REVENUE BY : SMT.SONIA KUMAR, SR.DR 12 . / & / ASSESSEE BY : SHRI M.K. PATEL 3 . 24' / DATE OF HEARING : 1 ST DECEMBER, 2014 567 . 24' / DATE OF PRONOUNCEMENT : 09-01-2015 &8 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THESE APPEALS BY THE ASSESSEE AND THE REVENUE FOR THE ASSTT.YEAR 2005-06 ARE DIRE CTED AGAINST THE ORDER OF THE CIT(A). THESE ARE BEING DISPOSED WITH THIS CONSOLIDATED ORDER. ITA NO.2393/AHD/2008 &2 OTHERS -2- ITA NO.2393/AHD/2008 (ASSESSEES QUANTUM APPEAL) 2. THE GROUND NO.1 OF THE ASSESSEES APPEAL IS AS U NDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A OUGHT TO HAVE GRANTED DEDUCTION OF RS.4,98,402/- TO WARDS ELECTRIC POWER AS THE SAME IS INCURRED IN THE COURSE OF BUSINESS. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT AN AMOUNT OF RS.4,98,402/- TOWARDS ELECTRIC POWER WAS CAPITALIZE D BY THE DEPARTMENT AND DEPRECIATION HAS BEEN ALLOWED THEREIN BY THE CIT(A) . THE LEARNED DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND TH E CIT(A). THE ASSESSEE HAS ALREADY BEEN ALLOWED DEPRECIATION ON THE AMOUNT OF ELECTRIC POWER CAPITALIZED AND NO CASE FOR ALLOWING THE SAME AS RE VENUE EXPENDITURE COULD BE MADE BEFORE US, AND ACCORDINGLY, THE GROUND NO.1 OF THE ASSESSEE IS DISMISSED. 4. THE GROUND NO.2 OF THE ASSESSEE IS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD.CIT(A) ADDED ERRED IN DISALLOWING 50% TRAVELING EXPENSES R S.331474 OUT OF TOTAL TRAVELING EXPENSES OF RS.662948/- 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THERE WAS NO BASIS FOR DISALLOWING 50% OF TRAVELLING EXPENSES OUT OF TOTAL TRAVELING EXPENSES OF RS.6,62,948/-. THE LEARNED DR HAS RELIED ON THE OR DERS OF THE AO AND THE CIT(A). WE HAVE CONSIDERED RIVAL SUBMISSIONS AND P ERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE DISALLOWANCE W AS MADE OUT OF FOREIGN TRAVELLING EXPENSES, BUT THE ASSESSEE COULD NOT FIL E COMPLETE DETAILS SUCH AS, PERSON WHO HAS TRAVELLED, HIS DESIGNATION AND PURPO SE OF VISIT ETC. THE ASSESSEE HAS ONLY FILED THE BILLS IN SUPPORT OF THE TICKETS PURCHASED FOR FOREIGN TRAVELLING. IN THESE FACTS, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS CONFIRMED AND THE GROUND NO.2 OF THE ASSESSEE IS DISMISSED. ITA NO.2393/AHD/2008 &2 OTHERS -3- 6. THE GROUND NO.3 OF THE ASSESSEE IS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO FOR DISALL OWING RS.3,68,208/- TOWARDS INTEREST PAID TO ABN AMBRO BANK LTD. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE INTEREST WAS PAID TO ABN AMRO BANK LTD. AND THE SAME WAS DISALLOWED F OR WANT OF EVIDENCE. THE LEARNED DR HAS RELIED ON THE ORDERS OF THE AO. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT NO EVIDENCE IN SUPPORT O F THE CLAIM OF THE ASSESSEE COULD BE FILED BY THE ASSESSEE BEFORE US ALSO, AND ACCORDINGLY, THE GROUND NO.3 OF THE ASSESSEE IS DISMISSED. 8. THE GROUND NO.4 OF THE ASSESSEE IS AS UNDER: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.51,216/- OUT OF GARDEN EXPENSES WHEN ALL THE DETAILS, BILLS AND VOUCHERS WERE PRODU CED DURING ASSESSMENT STAGE. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT EXPENSES OF RS.51,216/- IS INCURRED FOR MAINTENANCE OF GARDEN A ND COMPLETE DETAILS THEREOF WERE FILED. THE LEARNED DR RELIED ON THE ORDERS OF THE AO AND THE CIT(A). WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT TH E GARDEN EXPENSES WERE INCURRED BY THE ASSESSEE FOR THE BUSINESS PURPOSE A ND COPIES OF BILLS WERE ALSO PRODUCED BEFORE THE AO AND THE CIT(A), AND THEREFOR E, THERE IS NO CASE FOR DISALLOWANCE OF 20% OF THE TOTAL GARDEN EXPENSES CL AIMED BY THE ASSESSEE. ACCORDINGLY, THE DISALLOWANCE OF RS.51,216/- IS DEL ETED, AND THE GROUND NO.4 OF THE ASSESSEE IS ALLOWED. 10. THE GROUND NO.5 OF THE ASSESSEE IS AS UNDER: 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) OUGHT TO HAVE ALLOWED CONSULTANCY CHARGES TO THE TU NE OF RS.2,92,815/-, AND THEREFORE, HAS ERRED IN CONFIRMING THE ACTION O F THE AO TOWARDS DISALLOWANCE OF THE SAID ITEM. ITA NO.2393/AHD/2008 &2 OTHERS -4- 11. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AMOUNT OF RS.2,92,815/- WAS CAPITALIZED, BUT NO DEPRECIATION THEREON WAS ALLOWED TO THE ASSESSEE. THE LEARNED DR HAS RELIED ON THE ORDERS OF THE AO AND THE CIT(A). WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THA T THE CIT(A) HAS GIVEN A FINDING THAT THE AMOUNT OF RS.2,92,815/- IS NOT INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ASSESSEE COULD N OT ESTABLISH THAT THE PROMOTIONAL CHARGES WERE PAID FOR THE BUSINESS RUN BY THE ASSESSEE-COMPANY. THE EXPENSES INCURRED EVEN THOUGH GENUINE COULD NOT BE ALLOWED TILL IT IS PROVED THAT THE SAME WAS INCURRED FOR THE BUSINESS PURPOSE ONLY. ACCORDINGLY, THE GROUND NO.5 OF THE ASSESSEE IS DISMISSED. 12. THE GROUND NO.6 OF THE ASSESSEE IS AS UNDER: 6. WITHOUT PREJUDICE TO ABOVE, ON FACTS AND CIRCUM STANCES OF THE CASE THE LD.CIT(A) OUGHT TO HAVE GRANTED DEDUCTION U/S.1 0 IN RESPECT OF SEZ UNIT. 13. WE HAVE HEARD PARTIES. THIS GROUND IS MERELY A CADEMIC IN NATURE, AND ACCORDINGLY IS NOT ADJUDICATED UPON. ITA NO.2948/AHD/2008 (REVENUES QUANTUM APPEAL) 14. THE ONLY GROUND OF THE APPEAL OF THE REVENUE IS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THELD.CIT(A) HAS ERRED IN DELETING THE ADDITION MAD E BY THE AO OF RS.26LACS ON ESTIMATION OF PROFIT. 15. THE LEARNED DR SUBMITTED THAT THE ASSESSEE COUL D NOT JUSTIFY THE LOSS SHOWN IN ITS TRADING ACCOUNT BY THE ASSESSEE, AND T HEREFORE, THE ADDITION OF RS.26 LAKHS WAS MADE ON ESTIMATION OF PROFIT WAS JU STIFIED. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COULD NOT COMPETE WITH THE FOREIGN MANUFACTURERS OF THE TEXTILE MACHINERY AND SPARE PA RTS, AND THEREFORE, THERE WAS SHARP DECLINE OF SALES OF RS.50.57 LAKHS DURING THE YEAR AS AGAINST LAST YEARS SALES OF RS.1023.40 LAKHS, AND THE ASSESSEE HAS DEC LARED LOSS IN THE CURRENT YEAR ITA NO.2393/AHD/2008 &2 OTHERS -5- AS AGAINST GP RATE OF 9.05% IN THE LAST YEAR. HE S UBMITTED THAT DUE TO CONTINUOUS LOSS, THE ASSESSEE HAS TO CLOSE DOWN ITS BUSINESS, AND COULD NOT REVIVE THE SAME TILL THE DATE. HE SUBMITTED NO DEF ECT OF THE ACCOUNTS OF THE ASSESSEE COULD BE POINTED OUT BY THE REVENUE. 16. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ASSESSEE HAS DEC LARED SALES OF RS.50.57 LAKHS DURING THE YEAR AS AGAINST RS.1023.40 LAKHS IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THE ASSESSEE HAS DECLARED LOSS IN THE CURRENT YEAR, AS AGAINST GP RATE OF 9.05% IN THE IMMEDIATELY PRECEDING ASSES SMENT YEAR. NO COGENT DEFECT IN THE ACCOUNT BOOKS OF THE ASSESSEE COULD B E POINTED OUT BY THE DEPARTMENT EXCEPT THAT THE ASSESSEE COULD NOT MAINT AIN DAY-TO-DAY CONSUMPTION REGISTER OF THE ITEMS OF RAW-MATERIAL, WHICH ARE ST ATED TO BE ONE THOUSAND IN NUMBER. THE FACT THAT THE ASSESSEE HAS TO CLOSE DO WN ITS BUSINESS AFTER SOMETIME, COULD NOT BE CONTROVERTED BY THE REVENUE. WE FIND THAT THE CIT(A) HAS PASSED WELL REASONED ORDER ON THIS ISSUE AND HE LD THAT IN THE BOOKS OF THE ACCOUNTS OF THE ASSESSEE CANNOT BE REJECTED AND HA S DELETED THE ADDITION. THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A), THE SA ME IS CONFIRMED, AND THE GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO.2521/AHD/2010 (REVENUES APPEAL) PENALTY U NDER SECTION 271(1)(C) OF THE ACT. 17. THE ONLY GROUND OF THE APPEAL OF THE REVENUE IS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE PENALTY IMPOSED BY THE AO IN RESPECT OF ADDITIONS OF RS.4,98,402/-, RS.3,31,474/-, RS.3, 68,207/- AND RS.2,92,8125/- MADE ON ACCOUNT OF DISALLOWANCE OF C APITAL EXPENDITURE, FOREIGN TRAVELLING EXPENSES, INTEREST U/S.36(I)(III ) AND PROFESSIONAL FEES, RESPECTIVELY. 18. THE LEARNED DR RELIED ON THE ORDER OF THE AO. SHE REFERRED TO THE RELEVANT PORTIONS OF THE PENALTY ORDER AND ASSESSME NT ORDER IN SUPPORT OF THE CASE OF THE REVENUE. THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ITA NO.2393/AHD/2008 &2 OTHERS -6- PENALTY WAS LEVIED ON THE AMOUNT OF CERTAIN DISALLO WANCES MADE BY TREATING THE EXPENDITURE AS CAPITAL EXPENDITURE, OUT OF FOREIGN TRAVELLING EXPENSES, INTEREST UNDER SECTION 36(I)(III) AND PROFESSIONAL FEES. HE SUBMITTED THAT ALL THE MATERIAL FACTS WERE DISCLOSED BY THE ASSESSEE IN THE COMPUTA TION OF INCOME. 19. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE PENALTY UNDER SEC TION 271(1)(C) OF THE ACT HAS BEEN LEVIED ON CERTAIN DISALLOWANCES MADE BY THE AO . WE FIND THAT ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THE CASE OF THE ASSESSEE WERE FILED ALONG WITH RETURN OF INCOME. THE ASSESSEE HAS FILE D EXPLANATION IN THIS REGARD, WHICH SEEMS TO BE BONA FIDE. IT SEEMS THAT THIS IS A CASE OF HONEST DIFFERENCE O F OPINION BETWEEN THE ASSESSEE AND THE REVENUE WITH R EGARD TO ALLOWABILITY OF CERTAIN EXPENSES CLAIMED BY THE ASSESSEE. MERELY B ECAUSE CERTAIN EXPENSES WERE CAPITALIZED AND/OR CERTAIN DISALLOWANCES WERE MADE, IT CANNOT BE SAID THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOME. THE CIT(A) HAS DELETED THE PENALTY BY FOLLOWING THE DECISION IN THE CASE OF CIT VS. RELIANCE PETROPRODU CTS PVT. LTD., 322 ITR 158 (SC). THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A) IN DELETING THE PENALTY IN THIS CASE, WE CONFIRM HIS ORDER AND THE GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEALS OF THE REVENUE IN QUANTUM AS WELL AS IN PENALTY ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( # ## # . .. . # ## # . . . . % % % % /N.S.SAINI) &' ( &' ( &' ( &' ( /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT