ITO, Ward 1(2), Nashik V. M/s. Micron Additives India Pvt. Ltd., Nashik

ITA 307/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 85031 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 31-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.307/PN/2013 (A.Y:2008-09) ITO, WARD 1(2), NASHIK APPELLANT VS. M/S. MICRON ADDITIVES INDIA PVT. LTD., 105, 1 ST FLOOR, MATHURA PALACE, OPP. SHANTI TOWER, BEHIND KISAN VIDYUT, VAKILWADI, NASHIK 422001 PAN: AAECM2310A RESPONDENT APPELLANT BY : SHRI RAJESH DAMOR RESPONDENT BY : SHRI KISHORE PHADKE DATE OF HEARING : 18.09.2014 DATE OF PRONOUNCEMENT : 22.09.2014 ORDER PER SHAILENDRA KUMAR YADAV : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 20.11.2012 FOR A.Y.2008-09 ON THE FOLLOWING GROUNDS . 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHETHER THE CIT(A) WAS CORRECT IN DELETING THE OVERALL TOTAL AD DITIONS OF RS.16,23,904/- ON ACCOUNT OF ADMINISTRATIVE EXPENSE S RS.2,25,000/-, DISALLOWANCE U/S. 40A(2)(B) RS.2,28, 000/-, DISALLOWANCE OF FREIGHT & FORWARDING CHARGES RS.4,2 0,000/- MATERIAL HANDLING CHARGES RS.1,00,000/-, PERSONAL EXPENSES RS.50,904/- AND SUSPENSE ENTRY OF RS.6,00, 000/- IN STATE BANK OF INDIA BIKANER & JAIPUR ACCOUNTS? 2. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER ANY GRO UNDS OF APPEAL AT ANY STAGE OF THE APPELLATE PROCEEDINGS. ITA NO.307/PN/13 MICRON ADDITIVES INDIA PVT LTD 2. THE ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURI NG OF FLY ASH. THE ASSESSEE FILED A RETURN OF INCOME DECLARI NG TOTAL LOSS OF RS.20,69,489/- ON 29.08.2008. THE ASSESSING OFFICE R SCRUTINIZED THE RETURN OF INCOME AND MADE ADDITION OF RS.2,25,0 00/- OUT OF ADMINISTRATIVE EXPENSES, RS.2,28,000/- OUT OF PACKI NG CHARGES, RS.4,20,000/- ON ACCOUNT OF FREIGHT AND FORWARDING CHARGES, RS.1,00,000/- ON ACCOUNT OF MATERIAL HANDLING CHARG ES, RS.17,689/- AND RS.1,176/- ON ACCOUNT OF FBT AND IN TEREST ON FBT RESPECTIVELY, RS.6,00,000/- ON ACCOUNT OF SUSPE NSE ACCOUNT AND RS.50,904/- ON ACCOUNT OF PERSONAL USE OF TELEP HONE AND TRAVELLING EXPENSES AND ASSESSED THE TOTAL LOSS OF THE ASSESSEE AT RS.4,26,720/-. THE SAID ASSESSMENT ORDER WAS PASSE D U/S. 144 OF THE ACT AS NONE APPEARED ON BEHALF OF THE ASSESSEE. 2.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED WITH REGARD TO ADMINISTRATIVE EXPENSES WITH REGARD TO ESTIMATED DI SALLOWANCE AMOUNT OF RS.2,25,000/- AND SUBMITTED THAT THE SAME WAS UNREASONABLE. IN PERCENTAGE, THE ADMINISTRATIVE EX PENSES ARE 8.94% OF THE SALES, WHICH WAS CONSIDERED REASONABLE AND IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THESE EX PENSES WERE NOT INCURRED. THERE IS NO BASIS FOR THE ESTIMATED DISA LLOWANCE UNDER THIS HEAD. SO, THE CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE OF RS.2,25,000/- TOWARDS ADMINISTRATIVE EXPENSES. THI S REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SI DE. WE UPHOLD THE SAME. 2.2 THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE O F RS.2,28,000/- UNDER THE PROVISIONS OF SECTION 40A(2)(B) OUT OF PA CKING CHARGES. THE ASSESSING OFFICER HAS MADE THIS DISALLOWANCE BY STATING THAT THE ASSESSEE HAS PAID PACKING CHARGES OF RS.5,70,00 0/- TO ITS SISTER CONCERN VIZ. SUPERFIL INDIA PVT. LTD. THE STAND OF THE ASSESSEE HAS BEEN THAT THE AMOUNT OF RS.5,70,000/- WAS NOT A PAY MENT TO THE SISTER CONCERN, THEREFORE, PROVISIONS OF SECTION 40 A(2)(B) WERE ITA NO.307/PN/13 MICRON ADDITIVES INDIA PVT LTD WRONGLY INVOKED BY THE ASSESSING OFFICER. FURTHER, IT WAS THE STAND OF THE ASSESSEE THAT THE SAID AMOUNT OF RS.5, 70,000/- WAS A RECEIPT ON ACCOUNT OF PACKING CHARGES THAT WAS RECE IVED FROM THE SAID SISTER CONCERN AND HAS BEEN SHOWN AS INCOME IN THE PROFIT & LOSS ACCOUNT, AND FORMS PART OF THE TOTAL RECEIPT O F RS.8,12,580/- UNDER PACKING AND FORWARDING CHARGES RECEIVED. IN THE TAX AUDIT REPORT WHICH THE ASSESSING OFFICER HAS REFERRED TO FOR MAKING THE IMPUGNED DISALLOWANCE, IT WAS CLEARLY MENTIONED THA T RS.5,70,000/- WAS TOWARDS PACKING CHARGES RECEIVED FROM SUPERFIL INDIA PVT. LTD. ACCORDINGLY, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION IN QUESTION. IN APPEAL, THE CIT(A) HAVING VERIFIED THIS FACT, FOUND THE SAME AS CORRECT. IN VIEW OF THIS, THE CIT(A) WAS JUSTIFIED IN DELETING RS.2,28,000/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC TION 40A(2)(B) OF THE ACT. AGAIN, THIS FACTUAL REASONED FINDING OF T HE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE BECAUSE, IN FACT THE ASS ESSEE HAS NOT MADE THE EXPENDITURE BUT HAS RECEIVED THE AMOUNT IN QUESTION. WE UPHOLD THE SAME. 2.3 THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE O F RS.4,20,000/- ON ACCOUNT OF FREIGHT AND FORWARDING CHARGES. THE ASSESSING OFFICER HAS MADE THIS DISALLOWANCE ON THE GROUND TH AT THERE WAS NO SUPPORTING EXPLANATION WITH REGARD TO THE REASON ABLENESS OF THE EXPENDITURE. THE STAND OF THE ASSESSEE HAS BEEN TH AT THE TOTAL EXPENDITURE UNDER THIS HEAD IN THE YEAR UNDER CONSI DERATION WAS RS.21,04,863/- AS COMPARED TO RS.8,74,327/- IN EARL IER YEAR. IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT THE IN CREASE IN THE EXPENDITURE UNDER THIS HEAD WAS BECAUSE OF INCREASE IN EXPORT SALE IN THE YEAR UNDER CONSIDERATION AS COMPARED TO EARL IER YEAR. EXPORT SALES IN THE YEAR UNDER CONSIDERATION WERE RS.78,80 ,125/- AS COMPARED TO RS.29,38,842/- EARLIER YEAR. THEREFORE , THE EXPORT SALES HAVE INCREASED BY RS.49,41,000/-. THE CIT(A) HAS EXAMINED THE SUBMISSIONS OF THE ASSESSEE WITH REFERENCE TO T HE ACCOUNTS AND FOUND TO BE CORRECT. HE FOUND THAT THE EXPENDITURE UNDER FREIGHT ITA NO.307/PN/13 MICRON ADDITIVES INDIA PVT LTD AND FORWARDING IS DIRECTLY LINKED WITH THE EXPORT S ALES, WHICH HAVE GONE UP BY RS.49,41,000/- IN THE YEAR UNDER CONSIDE RATION, THEREFORE, THE EXPENDITURE UNDER FREIGHT AND FORWAR DING CLAIMED BY THE ASSESSEE WAS RIGHTLY FOUND REASONABLE BY THE CI T(A). ACCORDINGLY, HE HAS RIGHTLY DELETED THE IMPUGNED DI SALLOWANCE OF RS.4,20,000/- MADE BY THE ASSESSING OFFICER. THIS REASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SI DE. WE UPHOLD THE SAME. 2.4 THE NEXT ISSUE IS WITH REGARD TO DISALLOWANCE O F RS.1,00,000/- ON ACCOUNT OF MATERIAL HANDLING CHARGES. THE ASSES SEE HAS CLAIMED EXPENDITURE OF RS.4,99,717/- TOWARDS MATERI AL HANDLING CHARGES. THE ASSESSING OFFICER HAS MADE THE ESTIMAT ED DISALLOWANCE OF RS.1,00,000/- CONSIDERING THE SAME AS UNREASONABLE. THE STAND OF THE ASSESSEE HAS BEEN T HAT MATERIAL HANDLING CHARGES OF RS.4,99,717/- INCURRED IN THE Y EAR UNDER CONSIDERATION WERE LESS AS COMPARED TO RS.5,15,694/ - UNDER THE SAME HEAD IN THE LAST YEAR. IT WAS, FURTHER, EXPLA INED THAT MATERIAL HANDLING CHARGES INCLUDE SUPPLY OF LABOUR AND SECUR ITY CHARGES WHICH WAS PAID TO GOP ENTERPRISES. THERE IS NOTHIN G ON RECORD TO SUGGEST THAT THE EXPENDITURE WAS NOT PROPERLY VOUCH ED. THE CIT(A), HAVING EXAMINED ALL FACTS IN THIS REGARD FO UND THAT IN THE ASSESSEE'S BUSINESS EMPLOYING LABOUR IS NECESSARY F OR SHIFTING AND HANDLING MATERIAL AND DURING THE PROCESS IT'S SECUR ITY HAS TO BE OBSERVED. IN VIEW OF THIS, IT WAS FOUND REASONABLE BY THE CIT(A). ACCORDINGLY, HE HAS DELETED THIS ESTIMATED DISALLOW ANCE. AGAIN, THIS FACTUAL REASONED FINDING OF CIT(A) NEEDS NO IN TERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 2.5 THE NEXT ISSUE BEFORE US IS WITH REGARD TO DISA LLOWANCE OF RS.50,904/- ON ACCOUNT OF PERSONAL ELEMENT IN THE C OMMUNICATION EXPENSES, TRAVELLING AND CONVEYANCE EXPENSES. THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS DEBITED AN EXPENDITURE OF RS.2,54,520/- UNDER THESE HEADS. IN THE ASSESSING OFFICER'S VIEW, ITA NO.307/PN/13 MICRON ADDITIVES INDIA PVT LTD PERSONAL ELEMENT WAS NOT DENIED BY THE ASSESSEE, TH EREFORE, AFTER DISCUSSION 20% OF THESE EXPENSES WAS DISALLOWED. I N FIRST APPEAL, THE STAND OF THE ASSESSEE HAS BEEN THAT THERE WAS N O DISCUSSION BY THE ASSESSEE WITH THE ASSESSING OFFICER ON THIS ACC OUNT. THEREFORE, THE STAND OF THE ASSESSING OFFICER HAS BEEN THAT TH E IMPUGNED DISALLOWANCE WAS MADE WITH THE DISCUSSION OF THE AS SESSEE WAS NOT CORRECT. IT WAS BROUGHT TO THE NOTICE OF CIT(A) TH AT THE ASSESSEE BEING A COMPANY, IT DOES NOT HAVE ANY PERSONAL ELEM ENT OF EXPENSES. ALL THE EXPENSES ON ACCOUNT OF COMMUNICA TION EXPENSES AND TELEPHONE AND CONVEYANCE ARE ENTIRELY FOR THE P URPOSE OF BUSINESS AND THERE WAS NO PERSONAL ELEMENT AT ALL. WE FIND THAT THE COMPANY DOES NOT HAVE ANY PERSONAL EXPENDITURE OF ITS OWN AS IT WAS HELD BY THE HONBLE GUJARAT HIGH COURT IN TH E CASE OF SAYAJI IRON & ENGG. CO. VS. CIT (2002) 253 ITR 749 (GUJ). IN VIEW OF ABOVE, THE CIT(A) WAS JUSTIFIED IN DELETING DISALLO WANCE OF RS.50,944/- MADE BY THE ASSESSING OFFICER. THIS RE ASONED FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 2.6 THE LAST ISSUE IS WITH REGARD TO DISALLOWANCE O F RS.6,00,000/- OUT OF SUSPENSION ACCOUNT. THE ASSESSING OFFICER H AS NOTED THAT THE ASSESSEE HAS MADE PAYMENT OF RS.6,00,000/- TOWA RDS SUSPENSION ACCOUNT IN THE BANK BOOK ENTRY DATED 12. 03.2008 IN THE STATE BANK OF INDIA, BIKANER AND JAIPUR. AS TH ERE WAS NO EXPLANATION, THE ASSESSING OFFICER MADE THE IMPUGNE D DISALLOWANCE. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN IT WAS STATED THAT THERE WAS NO ENTRY ON 12.03.2008 IN THE SAID ACCOUNT, HOWEVER, THIS ENTRY APPEARS ON 12.02.2008. IT WAS FURTHER SUBMITTED BY THE ASSESS EE THAT A COPY OF THE LEDGER ACCOUNT OF STATE BANK OF INDIA, BIKAN ER AND JAIPUR WAS SUBMITTED TO THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS AND AS PER THE SAID STATEMEN T, THE ADVANCE OF RS.6,00,000/- WAS SHOWN AGAINST LC ON 12 .02.2008 WHICH WAS TRANSFERRED TO SUSPENSION ACCOUNT ON THE SAME DATE I.E. ITA NO.307/PN/13 MICRON ADDITIVES INDIA PVT LTD 12.02.2008. ON AN EXAMINATION OF THE ASSESSMENT RE CORD, THIS CONTENTION OF THE ASSESSEE WAS FOUND TO BE CORRECT BY THE CIT(A). ON THIS BASIS, THE ADDITION IN QUESTION WAS DELETED BY THE CIT(A). BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUBMITTED THAT THERE WAS NO SUCH EXAMINATION OF THE ASSESSMEN T RECORD AT FIRST APPELLATE AUTHORITY STAGE AND IN ABSENCE OF A NY RECORDING TO THAT EFFECT, THE CIT(A) WAS NOT JUSTIFIED TO REACH A CONCLUSION. THE LEARNED AUTHORIZED REPRESENTATIVE HAS FAIRLY ACCEPT ED THE FACT THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO TH E FILE OF ASSESSING OFFICER FOR VERIFICATION OF ANY GIVEN FINDING ON TH E BASIS OF THE FACTS ON RECORD. IN VIEW OF THIS, WE SET ASIDE THIS ISSU E TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE SA ME AS PER FACTS AVAILABLE ON THE RECORD, OF COURSE, AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 3. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSE AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF SEPTEMBER, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 22 ND SEPTEMBER, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, NASHIK 4) THE CIT-I, NASHIK 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, PUNE.