M/s. Stretch Bands (Guj.) Pvt. Ltd., Bhavnagar V. The ACIT.,Bhavnagar Range-I, Bhavnagar

ITA 3267/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5998 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Keywords: Opportunity of being heard; Initiation of penalty proceedings
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' BEFORE SHRI BHAVNESH SAINI,JM & SHRI A N PAHUJA,AM ITA NO.3267/AHD/2009 (ASSESSMENT YEAR:-2006-2007) M/S STRETCH BANDS (GUJARAT) PVT. LTD., 283-A, GIDC CHITRA ESTATE, BHAVNAGAR-364004 V/S ASST. COMMISSIONER OF INCOME-TAX, BHAVNAGAR RANGE-1, BHAVNAGAR PAN: AACCS 9941 D [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI TUSHAR HEMANI, AR REVENUE BY:- SHRI S K MEENA, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATE D 30-10-2009 OF THE LD. CIT(APPEALS)-XX, AHMEDABAD, F OR THE ASSESSMENT YEAR 2006-07, RAISES THE FOLLOWING GROU NDS:- [1] THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF T HE CASE IN CONFIRMING THE ACTION OF ID. AO IN DISALLOWING REMUNER ATION OF RS.6,00,000/- TO DIRECTORS OF THE APPELLANT COMPANY. [2] THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF TH E CASE IN NOT APPRECIATING THE FACTS THAT THE ID. AO HAS MADE ADJUS TMENT IN RESPECT REMUNERATION OF RS.6,00,000/- IN THE MAT PROVISI ONS OF THE S. 115JB OF THE ACT, WHICH IS NOT SPECIFIED ADJUSTMENT. T HE CIT(A) FURTHER ERRED IN LAW AND ON FACTS IN NOT ADJUDICATING THE SAID ISSUE IN THE BODY OF APPELLATE ORDER EVEN THOUGH SUBMISSION MADE BY THE APPELLANT BEFORE THE CIT(A). [3] BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT PROPERLY APPRECIATING AND CONSIDERING VARIOUS SUBMISSIONS, EVIDENCES AND SUPPORTING PLACED ON RECORD DURING THE COU RSE OF THE ASSESSMENT PROCEEDINGS AND NOT PROPERLY APPRECIATING VARIOU S FACTS AND LAW IN ITS PROPER PERSPECTIVE. [4] THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS O F THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234B/C/D OF THE ACT. [5] THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS O F THE CASE IN INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT . 2 ITA NO.3267/AHD/2009 THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, EDIT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE TIME OF OR BEFORE THE HEARING OF THE APPEAL. 2 AT THE OUTSET, THE LEARNED AR ON BEHALF OF THE AS SESSEE DID NOT PRESS GROUND NO.1 RELATING TO DISALLOWANCE OF REMUN ERATION OF RS.6,00,000/- TO DIRECTORS OF THE ASSESSEE COMPANY WHILE DETERMINING INCOME UNDER THE NORMAL PROVISIONS THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT]. ACCOR DINGLY, THIS GROUND IS DISMISSED, AS SUCH. 3. GROUND NO.2 IN THE APPEAL RELATES TO DISALLOWANC E OF REMUNERATION WHILE DETERMINING BOOK PROFITS U/S 115 JB OF THE ACT. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT R ETURN DECLARING NIL INCOME FILED ON 30-12-2006 BY THE ASSESSEE, MANUFAC TURING NARROW FABRIC TAPES, WAS SELECTED FOR SCRUTINY WITH THE SE RVICE OF NOTICE U/S 143(2) OF THE ACT ON17-11-2007. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER [AO IN SHORT] NOTICED THAT THE ASSESSEE DETERMINED BOOK PROFITS OF RS.11,90,434/- U/S 115JB OF THE ACT. RELYING UPON HIS OWN FINDINGS FOR THE AYS 2000-01 AND 2005-06 AS ALSO FINDINGS OF THE LD. CIT(A) IN THE A YS 2000-01 & 2003-04, THE AO DISALLOWED THE CLAIM FOR REMUNERATI ON OF RS.3,50,000/- TO SMT. BINDUBEN S MODI AND RS.2,50,0 00/- TO SMT. MEENABEN R MEHTA. INTER ALIA, THE AMOUNT OF RS. 6 L ACS WAS ADDED WHILE DETERMINING THE BOOK PROFITS U/S 115JB OF THE ACT. 4. ON APPEAL, THE LEARNED CIT(A) UPHELD THE FINDING S OF THE AO IN THE FOLLOWING TERMS:- 3.3 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE L EARNED, COUNSEL FOR THE APPELLANT AND HAVE ALSO CAREFULLY GONE THROUGH THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER. IT-IS SEEN, IN THIS CASE, THAT THE DISALLOWANCE MADE IS CONFIRMED BY THE CIT(A) IN A.Y. 2005-06. THE HON'BLE TRIBUNAL HAS ALSO NOT ALLOWED THE APPEAL OF THE APPELLANT ON THIS ISSUE BUT HAS RESTORED BACK THE FILE TO THE AO FOR MAKING A FRESH ASSESSM ENT AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELL ANT. WHEN ASKED FOR 3 ITA NO.3267/AHD/2009 PRODUCING THE ABOVE LADY DIRECTORS BEFORE THE AO, THE A PPELLANT STATED THAT ITS APPEAL IS PENDING FOR DISALLOWANCE OF REMUNERATION PAID TO THESE TWO LADY DIRECTORS FOR EARLIER YEARS AND PRESENTLY, IT IS NOT POSSIBLE TO PRODUCE THESE LADIES AND SHOWED ITS INABILITY TO PRODUCE THE TWO LADY DIRECTORS. THIS FACT ITSELF SUGGESTS THAT THERE IS NOTHING DEFINITE AS TO THE ACTUAL SERVICES RENDERED BY THESE TWO LADY DIRECTORS TO THE COMPANY BY WHI CH THE REMUNERATION PAID COULD JUSTIFIABLY BE ESTABLISHED. THEY WERE TOTALLY IGNORANT ABOUT THE COMPANIES WITH WHOM BUSINESS WAS BEI NG TRANSACTED. THUS, THE PAYMENT OF REMUNERATION CAN NEITHER BE JUSTIF IED NOR CAN BE CONSIDERED TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF BUSINESS. SINCE THERE IS A CASE OF PVT. LTD. COMPANY, IF TH E APPELLANT HAD INTENTION TO PRODUCE THEM BEFORE THE AO, IT COULD HAVE PRODUCED THEM. THE APPELLANT HAS PRODUCED THE COPY OF RESOLUTION BUT FROM THE SAME ALSO, IT IS NOT POSSIBLE TO MAKE OUT WHETHER THESE LADIES WERE REALLY ENGAGED IN 1HE BUSINESS ACTIVITIES OF THE APPELLANT-COMPANY AND RENDE RED SERVICES FOR WHICH THEY HAVE BEEN PAID SUCH REMUNERATIONS. THE CASE -LAWS RELIED UPON BY THE LEARNED COUNSEL ARE ALSO NOT APPLICABLE T O THE PRESENT FACTS OF THE CASE. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, I A M OF THE CONSIDERED VIEW THAT NO PAYMENTS OF REMUNERATION TO THES E THREE LADY DIRECTORS WERE WARRANTED TO BE PAN BY THE APPELLANT-COM PANY. THE AO WAS, THUS, JUSTIFIED IN DISALLOWING AND ADDING THE SAME TO THE TOTAL INCOME OF THE APPELLANT. HENCE, THE DISALLOWANCE SO MADE IS H EREBY CONFIRMED. THIS GROUND OF APPEAL IS REJECTED. 5. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE WHILE RELYING UPON THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. APOLLO TYRES LTD., 255 ITR 273, CONTENDED THAT NO SUCH ADJUSTMENT CAN BE MADE WHILE DETERMINING THE BOOK PROFITS U/S 115JB OF THE ACT. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE FINDINGS OF THE AO. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. INDISPUTABLY, WHILE MAKING THE DISALLOWAN CE OF REMUNERATION OF RS.6,00,000/- TO THE AFORESAID TWO DIRECTORS ON THE BASIS OF HIS FINDINGS IN THE PRECEDING ASSESSMENT YEARS, THE AO, INTER ALIA, ADDED THE AMOUNT WHILE DETERMINING THE BOOK PROFITS U/S 115JB OF THE ACT. AS IS APPARENT FROM THE AFORESAI D FINDINGS IN THE IMPUGNED ORDER, THE LD. CIT(A) DID NOT ADJUDICATE T HE ISSUE IN RELATION TO DISALLOWANCE OF REMUNERATION OF RS.6,00 ,000/- TO THE AFORESAID TWO DIRECTORS WHILE DETERMINATION BOOK PR OFITS U/S 115JB 4 ITA NO.3267/AHD/2009 OF THE ACT EVEN WHEN SPECIFIC SUBMISSIONS WERE MADE ON BEHALF OF THE ASSESSEE BEFORE HIM NOR ANY SUCH SPECIFIC GROUN D APPEARS TO HAVE BEEN TAKEN BEFORE THE LD. CIT(A). SINCE THE LD. CIT(A) DID NOT RECORD HIS SPECIFIC FINDINGS ON THE SUBMISSIONS MADE BEFORE HIM ON THE ISSUE NOW RAISED BEFORE US WE CONSIDER IT FAIR AND APPROPR IATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE MATTER TO HIS FILE WITH THE DIRECTIONS TO RECORD HIS SPECIFIC FINDINGS ON THE S UBMISSIONS MADE BEFORE HIM ON THIS ISSUE, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL, THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF T HE ACT. WITH THESE OBSERVATIONS, GROUND NO. 2 IN THE APPEAL IS DISPOSE D OF. 7. GROUND NO.3 IN THE APPEAL, BEING GENERAL IN NATU RE NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US ON THIS GROU ND, DOES NOT REQUIRE ANY SEPARATE ADJUDICATION AND ACCORDINGLY, IS DISMISSED. 8. GROUND NO. 4 IN THE APPEAL OF THE ASSESSEE RELA TES TO LEVY OF INTEREST U/S.234B, 234C & 234D OF THE ACT. SINCE TH E LD. AR ON BEHALF OF THE ASSESSEE DID NOT MAKE ANY SUBMISSIONS ON THIS GROUND WHILE THE LEVY OF INTEREST U/S 234B,234C & 234D OF THE ACT BEING MANDATORY [COMMISSIONER OF INCOME TAX. VS ANJUM M. H. GHASWALA AND OTHERS,252 ITR 1(SC), AFFIRMED BY HON'BLE APEX COURT IN THE CASE OF CIT V. HINDUSTAN BULK CARRIERS [2003] 259 I TR 449(SC) AND IN THE CASE OF CIT V. SANT RAM MANGAT RAM JEWELLERS [2003] 264 ITR 564(SC)], THIS GROUND IS DISMISSED. HOWEVER, THE AO MAY ALLOW CONSEQUENTIAL RELIEF ,IF ANY, WHILE GIVING EF FECT TO THIS ORDER 9. GROUND NO.5 IN THE APPEAL RELATES TO PENALTY PRO CEEDINGS U/S 271(1)(C) OF THE ACT. SINCE NO APPEAL LIES AGAINST MERE INITIATION OF PENALTY PROCEEDINGS NOR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US , THIS GROUND IS ALSO DISMISSED. 5 ITA NO.3267/AHD/2009 10. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE US IN TERMS OF RESIDUARY GROUND IN THE APPEAL, ACCORDINGLY, THIS G ROUND IS ALSO DISMISSED. 11.. NO OTHER PLEA OR ARGUMENT WAS MADE BEFORE US . 12. IN THE RESULT, APPEAL IS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 29 -07-2011 SD/- SD/- ( BHAVNESH SAINI ) JUDICIAL MEMBER ( A N PAHUJA ) ACCOUNTANT MEMBER DATED : 29-07-2011 COPY OF THE ORDER FORWARDED TO: 1. M/S STRETCH BANDS (GUJARAT) PVT. LTD., 283-A, GI DC CHITRA ESTATE, BHAVNAGAR 2. ASST. COMMISSIONER OF INCOME-TAX, BHAVNAGAR RANG E-1, BHAVNAGAR 3. CIT CONCERNED 4. CIT(A)-XX, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-A, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD