M/s. Jigisha Corporation, Surat V. The Income tax Officer,Ward-5(3), Surat

ITA 3113/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6147 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-07-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 20-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JANGID
• Keywords: Unexplained expenditure; Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.2473/AHD/2009 [ASSTT. YEAR : 2006-2007] AND ITA NO.3113/AHD/2009 [ASSTT.YEAR : 2004-2005] M/S.JIGISHA CORPORATION 101-106, SUPER YARN MARKET ZAMPA BAZAR, SURAT. PAN : AABFJ 9650 Q VS. ACIT, CIR.5 SURAT. ITA NO.76/AHD/2010 [ASSTT.YEAR : 2004-2005] ACIT, CIR.5 SURAT. VS. M/S.JIGISHA CORPORATION 101-106, SUPER YARN MARKET ZAMPA BAZAR, SURAT. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HARDIK VORA REVENUE BY : SHRI J.P. JANGID O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THESE ARE THREE APPEALS TWO BY THE ASSESSEE AND ANOTHER BY THE REVENUE AGAI NST RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS), AHMEDA BAD. SINCE ASSESSEE IS SAME AND ISSUES ARE RELATED FOR THE SAK E OF CONVENIENCE WE DISPOSE OF ALL THE APPEALS BY THIS CONSOLIDATED ORD ER. 2. FIRSTLY WE SHALL TAKE UP ITA NO.2473/AHD/2009 (A SSESSEES APPEAL) FOR A.Y.2006-2007. THE ONLY GROUND RAISED IN THIS APPEAL READS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS LAW ON THE SUBJECT, THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS.10,71,161/- ON ACCO UNT OF HIGHER ITA NO.2473 AND 3113/AHD/2009 & 76/AHD/2010 -2- DEPRECIATION CLAIMED ON MACHINES PURCHASED UNDER TU F SCHEME OF THE GOVT. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE ITAT IN ASSESSEES OWN CASE FOR A.Y.2004-05 AND 200 5-2006 VIDE ITA NO.707/AHD/2008 AND ITA NO.3757/AHD/2008. THE LEAR NED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS CLAIMED DEPRECIATION ON CERTAIN PLANT & MACHINERY AT HIGHER RATE I.E. AT THE RATE OF 50% ON THE GROUND THAT THESE MACHINERIES WERE PURCHASED UNDER TUF SCHEME WHEREIN THE DEPRECIATION IS ALLOWABLE AT THE RATE OF 50%. THAT THE AO FOLLO WING HIS OWN ORDER FOR EARLIER YEARS HELD THAT THE ASSESSEE IS NOT ENTITLE D TO HIGHER RATE OF DEPRECIATION. ON APPEAL, THE CIT(A) SUSTAINED THE DISALLOWANCE FOLLOWING ORDER OF HIS PREDECESSOR FOR A.Y.2005-200 6. THE ASSESSEE HAD FILED APPEAL AGAINST THE ORDER OF THE CIT(A) FOR A. Y.2004-2005 AND 2005- 2006 WHEREIN THE ITAT DECIDED THE ISSUE IN FAVOUR O F THE ASSESSEE. IN A.Y.2004-2005 VIDE ITA NO.707/AHD/2008, THE ITAT HE LD AS UNDER: 3. THE FIRST ISSUE IN ASSESSEES APPEAL IS REGARDI NG DISALLOWANCE OF RS.14,73,981/- OUT OF DEPRECIATION CLAIMED BY TH E ASSESSEE. THE FACTS OF THE CASE ARE THAT ASSESSEE COMPANY IS ENGA GED IN THE BUSINESS OF TRADING IN YARN OF MODIPON ON COMMISSIO N BASIS. IT IS ALSO SELLING TEXTURISED YARN AND CRIMPED YARN. THE ASSESSEE CLAIMED DEPRECIATION @ 65% ON MACHINERY AND PLANT W HICH ARE USED FOR LESS THAN 180 DAYS. ACCORDING TO THE AO HI GHER RATE OF DEPRECIATION AS CLAIMED BY THE ASSESSEE CANNOT BE G RANTED AS THE PLANT AND MACHINERY WERE NOT USED IN WEAVING, PROCE SSING AND GARMENTS SECTOR OF TEXTILE INDUSTRY. THESE MACHINER IES WERE PURCHASED UNDER TUFS ON OR AFTER 1.4.2001 BUT BEFOR E 1.4.2004. FURTHER ACCORDING TO THE AO THE ACTIVITIES OF THE A SSESSEE DID NOT RELATE TO PROCESSING OF THREAD TO BE USED IN WEAVIN G SECTOR. IN OTHER WORDS PLANT AND MACHINERY UTILIZED BY THE ASS ESSEE WAS ITA NO.2473 AND 3113/AHD/2009 & 76/AHD/2010 -3- BEFORE THE STAGE OF WEAVING. THE LD. CIT(A) ALSO CO NFIRMED THE ORDERS OF THE AO HOLDING THAT PROCESSING OF YARN IS NOT COVERED UNDER TUF SCHEME AND, THEREFORE, WHATEVER PROCESSIN G THE ASSESSEE IS DOING WOULD NOT BE CALLED WEAVING.. 4. BEFORE US, THE LD. AR SUBMITTED THAT ASSESSEE IS NOW COVERED BY VARIOUS DECISIONS OF THE TRIBUNAL., WHEREIN IT IS H ELD THAT PROCESSING IS ALSO PART OF WEAVING AND, THEREFORE, IT IS COVERED UNDER TUF SCHEME. IN FOLLOWING JUDGMENTS THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE: (I) FAIRDEAL FILAMENTS LTD. VS. DCIT IN ITA NO.870/AHD/2007, (II) MAVIN TEXTURISERS (P) LTD. VS. DCIT IN ITA NO.2296/AHD/2008, (III) AGARWAL RAYONS (P) LTD. VS. ITO ITA NO.3186/AHD/2007, AND (IV) GIRDHAR FIBERS (P) LTD. VS. DCIT IN ITA NO.1582/AHD/2008. IN PARTICULAR HE REFERRED TO A DECISION IN THE CASE OF AGARWAL RAYONS (P) LTD. (SUPRA) WHEREIN THE ISSUE HAS BEEN DISCUSS ED IN DETAIL AS UNDER:- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORDS. IN OUR CONSIDERED VIEW THE FAC TS OF THE PRESENT CASE AND FACTS IN THE CASES REFERRED TO BY THE LD. A. R. PARTICULARLY IN THE CASE OF NANGALIA SYNTHETICS PVT LTD., ARE SI MILAR. IN THAT CASE THE TRIBUNAL HAS OBSERVED AS UNDER: 7. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH T HE PARTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOU R OF THE ASSESSES AND AGAINST THE REVENUE BY THE DECISION OF ITATAHMEDABAD D BENCH IN THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR VS. 1TO, WD-6(1), SURAT IN ITA NO.3128/AHD/2008 DATED 18-02-2009 RELATING TO A.Y.2 005- 06. THE ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS SIMILAR TO THAT OF THE CASE OF BIPINCHANDRA MOHANLAL GAJJAR (SUPRA), WE HOLD THAT SINCE ADMITTEDLY, THE TWISTING MACHINE WAS USED BY WEAVING SECTOR OF TEXTILE INDUSTRY, DEPRECIATION ON THE SAID MACHINERY @ 50% SHOULD BE ALLOWED. WE ACCORDIN GLY, ALLOW THE GROUND OF APPEAL. ITA NO.2473 AND 3113/AHD/2009 & 76/AHD/2010 -4- 8. THE LD. D.R. HAS SOUGHT TO DISTINGUISH THE AUTHO RITIES REFERRED TO BY THE LD. A.R. ON THE GROUND THAT THER E WAS A NEXUS OF BACKWARD AND FORWARD AGES OF THE ACTIVITIE S. THERE WAS COMPOSITE ACTIVITIES IN THESE CASES, AREAS IN T HE CASE OF THE PRESENT ASSESSEE IT IS ONLY MANUFACTURING OF YA RN J\O WEAVING CARRIED OUT. HOWEVER, DISTINCTION SOUGHT TO BE MADE BY THE LD. , IS ARTIFICIAL AND DOES NOT CONFIRM TO THE LANGUAGE USED IN THE RULES. IN :, TEXTURISING AND TWISTING A CTIVITIES ARE PART OF PROCESSING. IT IS INCORRECT ON PART OF THE A. 0, TO HOLD THAT LANGUAGE USED IN THE RULE CONFINE PROCESSING O F CLOTH ONLY AND NOT TEXTURISING AND TWISTING OF THE YARN. THE LANGUAGE USED IN RULE -6 OF BLOCK 3 OF APPENDIX -1 OF DEPRECIATION TABLE READS AS UNDER :- MACHINERY AND PLANT, USED IN WEAVING PROCESSING A ND GARMENT SECTOR OF TEXTILE INDUSTRY, WHICH IS PURCHA SED UNDER TUFS FROM THIS IT CANNOT HE READ THAT WEAVING AND PROCESSING IS PROVIDED BY CLOTH SO AS TO INFER THAT IT IS ONLY WEAVING AND PROCESSING OF CLOTH WHOSE MACHINERIES A RE ENTITLED FOR HIGHER DEPRECIATION. THE WORDS USED AR E WEAVING, PROCESSING AND GARMENTS SECTOR OF TEXTILE INDUSTRY. 9. IN OTHER WORDS, WEAVING, PROCESSING AND GARMENTS SECTOR ARE PART OF TEXTILE INDUSTRIES WHICH IS A LARGER GR OUP. IN THIS TEXTILE INDUSTRY, THE WEAVING PROCESSING AND GARMEN T SECTOR ARE COVERED IN RESPECT OF WHOSE MACHINERIES, THE HI GH RATE OF DEPRECIATION IS PROVIDED. THUS THE WORD PROCESSING WOULD INCLUDE TEXTURISING AND TWISTING OF YARN WHICH IS F INALLY USED IN TEXTILE INDUSTRY. THUS RESPECTFULLY FOLLOWING TH E ABOVE DECISION OF THE TRIBUNAL WE ALLOW THE CLAIM OF THE ASSESSEE. 8. THE LD. DR ON THE OTHER HAND, SUPPORTED THE ORD ERS OF AUTHORITIES BELOW. 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND VARI OUS JUDGMENTS OF THE TRIBUNAL ON THIS ISSUE, WE HOLD THAT WEAVING, P ROCESSING OF THE GARMENTS SECTOR IS COVERED IN RULE-6 OF BLOCK-6 OF APPENDIX-I OF DEPRECIATION TABLE AND, THEREFORE, THE WORD PROCES SING WILL INCLUDE TEXTURISING AND TWISTING OF YARN WHICH IS F INALLY USED IN TEXTILE INDUSTRY. FOLLOWING THE ABOVE ORDER, WE ALL OW THIS GROUND OF THE ASSESSEE. THIS GROUND OF ASSESSEE IS ACCORDI NGLY ALLOWED. ITA NO.2473 AND 3113/AHD/2009 & 76/AHD/2010 -5- 5. THE ABOVE VIEW WAS UPHELD IN A.Y.2005-06 VIDE IT A NO.3757/AHD/2008. ADMITTEDLY, THE FACTS OF THE YEA R UNDER CONSIDERATION ARE IDENTICAL. IN FACT BOTH THE AUTHORITIES HAVE D ECIDED THE ISSUE AGAINST THE ASSESSEE FOLLOWING THEIR OWN ORDERS FOR EARLIER YEARS. IN VIEW OF THE ABOVE, WE RESPECTFULLY FOLLOWING THE DECISION OF TH E ITAT IN ASSESSEES OWN CASE FOR A.Y.2004-05 AND 2005-06 HOLD THAT THE ASSESSEE IS ENTITLED TO HIGHER RATE OF DEPRECIATION. ACCORDINGLY, THE A SSESSEES APPEAL IS ALLOWED. ITA NO.76/AHD/2010 (REVENUES APPEAL): 6. THE ONLY GROUND RAISED IN THIS APPEAL READS AS U NDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE PENALTY OF RS. 5,71,255/- OUT OF TOTAL PENALTY LEVIED U/S.271(1)(C) OF RS.13,22,300/ - 7. THE FACTS OF THE CASE ARE THAT IN A.Y.2004-05, T HE AO HAS DISALLOWED THE ASSESSEES CLAIM FOR HIGHER DEPRECIA TION ON CERTAIN PLANT & MACHINERY WHICH RESULTED IN REDUCTION IN THE CLAIM OF DEPRECIATION AMOUNTING TO RS.14,73,981/-. THE AO LEVIED PENALTY UNDER SECTION 271(1)(C) ON THE GROUND THAT THE ASSESSEE MADE A WR ONG CLAIM OF DEPRECIATION. ON APPEAL, THE CIT(A) CANCELLED THE PENALTY, HENCE THIS APPEAL BY THE REVENUE. 8. AT THE TIME OF HEARING IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT IN QUANTUM APPEAL, THE ITAT ACCEPTED THE ASSES SEES CLAIM OF HIGHER DEPRECIATION IN ITA NO.707/AHD/2008. A COPY OF THE ORDER IS FILED BEFORE US AND THE RELEVANT PORTION OF THE ORDER HAS ALREADY EXTRACTED IN PARA-4 ABOVE. SINCE THE ASSESSEES CLAIM OF DEPREC IATION IS ACCEPTED, THERE REMAINS NO SUCH ADDITION IN RESPECT OF WHICH PENALTY UNDER SECTION ITA NO.2473 AND 3113/AHD/2009 & 76/AHD/2010 -6- 271(1)(C) OF THE ACT COULD BE LEVIED. IN VIEW OF T HE ABOVE, WE DO NOT FIND ANY MERIT IN THE REVENUES APPEAL, THE SAME IS DISM ISSED. ITA NO.3113/AHD/2009 (ASSESSEES APPEAL) 9. THE ONLY GROUND RAISED IN THIS APPEAL READS AS U NDER: 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LD.CIT(A) HAS ERRED IN PARTLY C ONFIRMING THE ACTION OFT HE AO IN IMPOSING PENALTY U/S.271(1)(C) OF THE ACT BY SUSTAINING THE PENALTY ON THE ADDITION OF RS.22,09, 984/- ON ACCOUNT OF UNEXPLAINED EXPENSES U/S.69C AND ON THE ADDITION OF RS.1,884/- AS ALLEGED DIFFERENCE IN CONTRA ACCOUNT WITH NOVA P ETROCHEMICALS LTD. 10. THE FACTS OF THE CASE ARE THAT FOR THE YEAR UND ER CONSIDERATION, THE AO LEVIED PENALTY UNDER SECTION 271(1)(C) AMOUNTING TO RS.13,22,300/-. THE PENALTY WAS LEVIED IN RESPECT OF FOLLOWING ADDI TIONS: I) EXCESS CLAIM OF DEPRECIATION : RS.14,73,981/- II) UNEXPLAINED EXPENDITURE : RS.22,09,984/- III) DIFFERENCE IN THE ACCOUNT OF NOVA : RS. 1 ,884/- PETROCHEMICALS LTD. ON APPEAL, THE CIT(A) HAD DELETED THE PENALTY IN RE SPECT OF THE DISALLOWANCE OUT OF DEPRECIATION AGAINST WHICH THE REVENUE WAS IN APPEAL WHICH HAS ALREADY ADJUDICATED UPON BY US IN PARA-7 & 8 ABOVE. IN RESPECT OF REMAINING TWO ADDITIONS, THE CIT(A) SUST AINED THE PENALTY HENCE THIS APPEAL BY THE ASSESSEE. 11. AT THE TIME OF HEARING BEFORE US, IT WAS POINTE D OUT BY THE LEARNED COUNSEL THAT IN THE QUANTUM APPEAL, THE ITAT HAS SE T ASIDE THE ISSUE OF UNEXPLAINED EXPENDITURE TO THE FILE OF THE AO. ONC E THE ADDITION HAS BEEN SET ASIDE, PENALTY IN RESPECT OF SUCH ADDITION CANNOT SURVIVE. FOR THE DIFFERENCE IN THE ACCOUNT OF NOVA PETROCHEMICALS LT D., IT IS STATED BY THE ITA NO.2473 AND 3113/AHD/2009 & 76/AHD/2010 -7- LEARNED COUNSEL THAT THE DIFFERENCE IS NEGLIGIBLE A ND IT CAN OCCUR FOR VARIETY OF REASONS INCLUDING DEBIT BY THE OTHER SID E FOR ANY EXPENDITURE, DISCOUNT ETC. HE THEREFORE SUBMITTED THAT PENALTY SUSTAINED BY THE CIT(A) MAY BE CANCELED. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE ISSUE OF ADDITION OF UNEXPLAINED EXPENDITURE AMOUNTING TO RS.22,09,98 4/- IS SET ASIDE BY THE ITAT BACK TO THE FILE OF THE AO FOR RE-ADJUDICA TION. THE RELEVANT FINDINGS OF THE ITAT READ AS UNDER: 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE ISSU E REQUIRES TO BE RECONSIDERED BY THE AO. IT IS BECAUSE THE DETAILS A S TO WHEN PAYMENTS WERE SHOWN BY THE ASSESSEE IN ITS BOOKS AN D TO WHOM SUCH PAYMENTS HAVE GONE AND WHETHER THERE WAS ANY C ASH TRANSACTION INVOLVED WHICH COULD SHOW THAT MONEY HA S COME BACK TO THE ASSESSEE ARE NOT ON RECORD. IT IS NECESSARY TO GIVE A FINDING, AFTER CARRYING OUT ENQUIRIES, AS TO WHETHER CASH HA D COME BACK TO THE ASSESSEE AGAINST THE PAYMENTS SHOWN BY IT IN IT S BOOKS OF ACCOUNTS IN RESPECT OF THESE FOUR PURCHASES, AND FU RTHER WHETHER SUCH RECEIPT OF CASH WAS PRIOR TO FURTHER PAYMENT M ADE TO RELIANCE INDUSTRIES BY SANJEEV TEXTILES. IF CASH TRANSACTION IS PROVED THEN BENEFIT OF TELESCOPING EFFECT SHOULD BE GIVEN. IF M ONEY HAS GONE TO SANJEEV TEXTILES FROM THE ACCOUNT OF THE ASSESSEE S TILL THEN BENEFIT OF TELESCOPING SHOULD BE GIVEN. IT IS BECAUSE AFTER RECEIPT OF MONEY FROM THE ASSESSEE FURTHER PAYMENTS COULD BE MADE BY SANJEEV TEXTILES TO RELIANCE INDUSTRIES. WITH THE ABOVE OBS ERVATIONS, WE RESTORE THE MATTER TO THE FILE OF AO FOR ENQUIRING AND DECIDING THE ISSUE AFRESH. THIS ISSUE OF ASSESSEE IS ALLOWED BUT FOR STATISTICAL PURPOSES. ONCE THE ADDITION IN RESPECT OF WHICH THE PENALTY I S LEVIED ITSELF HAS BEEN SET ASIDE, THE PENALTY BASED UPON SUCH ADDITION CAN NOT SURVIVE. THE SAME IS CANCELLED. SO FAR AS THE DIFFERENCE IN THE ACCO UNT OF NOVA ITA NO.2473 AND 3113/AHD/2009 & 76/AHD/2010 -8- PETROCHEMICALS OF RS.1,884/- IS CONCERNED, IN OUR O PINION IT IS TOO NEGLIGIBLE TO BE CONSIDERED AS CONCEALMENT OF THE I NCOME. THE LEARNED COUNSEL FOR THE ASSESSEE RIGHTLY EXPLAINED THAT SUC H MINOR DIFFERENCE IN THE ACCOUNT OF THE PARTY MAY OCCUR FOR VARIETY OF R EASONS. CONSIDERING PITTANCE OF THE DIFFERENCE WE ARE OF THE OPINION TH AT NO PENALTY SHOULD BE LEVIED IN RESPECT OF SUCH MINOR DIFFERENCE. IN VIE W OF THE ABOVE, WE CANCEL THE PENALTY LEVIED UNDER SECTION 271(1)(C) O F THE ACT. HOWEVER, AFTER RE-ADJUDICATION OF THE ISSUE OF ADDITION FOR UNEXPLAINED EXPENDITURE UNDER SECTION 69C, IF THE AO DEEM PROPER, HE WILL B E AT LIBERTY TO RE- INITIATE THE PENALTY UNDER SECTION 271(1)(C). SUBJ ECT TO THIS REMARK, PENALTY SUSTAINED BY THE CIT(A) IS CANCELLED. 13. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 8 TH JULY, 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 08-07-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD