Suraj Impex (India) Pvt. Ltd., Indore V. The ACIT 4(1), Indore

ITA 338/IND/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99189 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2013

Judgement Text

SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NO. 338/IND/2013 A.Y.2009-10 SURAJ IMPEX (INDIA) PVT. LTD. INDORE PAN AACCS 3080R ::: APPELLANT VS ASSTT.COMMR. OF INCOME TAX CIRCLE 4(1), INDORE ::: RESPONDENT APPELLANT BY SHRI JITENDRA JAIN & SHRI SACHIN ROMANI RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 18.11.2015 DATE OF PRONOUNCEMENT 2 9 .12.2015 O R D E R PER SHRI B.C. MEENA, AM THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LEARNED CIT(A)-II, INDORE, DATED 1.3 .2013. SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 2 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF EXPORT OF AGRO COMMODITIES AND OTHERS . THE ASSESSING OFFICER MADE CERTAIN ADDITIONS WHICH HAVE BEE N CONFIRMED BY THE LEARNED CIT(A). NOW THE ASSESSEE I S IN APPEAL BEFORE THE TRIBUNAL. 3. GROUND NO. 1 RELATES TO SUSTAINING THE ADDITION OF RS.7,20,673/- ON ACCOUNT OF PRINCIPAL AMOUNT DISALLOWED U/S 68 OF THE ACT. 4. IT WAS CLAIMED BEFORE US THAT THE ASSESSEE HAS ESTABLISHED THE IDENTITY, GENUINENESS AND CAPACITY OF THE LOAN CREDITORS AND SUBMITTED ALL THE RELEVANT DOCUMENT S AND REFUNDED THE DEPOSITS BY ACCOUNT PAYEE CHEQUES. 5. WE HAVE HEARD BOTH THE SIDES. THE ASSESSING OFFIC ER HAS DEALT WITH THE ISSUE IN HIS ORDER IN PARA 1. THE LE ARNED CIT(A) HAS DISMISSED THE ASSESSEES GROUND IN PARA 2.1 OF HIS ORDER. THIS DISALLOWANCE WAS MADE IN THE BACKGROUND SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 3 OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08. TH E LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CONCEDED THAT T HE ADDITION MADE IN EARLIER YEAR U/S 68 OF THE ACT HAS BE EN CONFIRMED BY THE HON'BLE ITAT VIDE ITS ORDER DATED 24.1.2013 WHILE DECIDING ITA NOS. 212 TO 213/IND/20 12 FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09. THEREFORE, THIS ISSUE MAY BE DECIDED AGAINST THE ASSESSEE. 6. AFTER HEARING BOTH THE SIDES, WE CONFIRM THE ORD ER OF THE LEARNED CIT(A) IN SUSTAINING THE DISALLOWANCE OF R S. 7,20,673/- BY FOLLOWING THE DECISION OF THE TRIBUNAL AS THIS ADDITION WAS BASED ON THE INTEREST CLAIMED BY THE ASSESS EE ON THE LOANS WHICH HAVE BEEN DISALLOWED AND CONFIRMED B Y ITAT IN EARLIER YEARS. GROUND NO. 1 IS, THEREFORE, DI SMISSED. 7. GROUND NO. 2 IS AGAINST SUSTAINING THE ADDITION OF RS. 99,48,112/- MADE OUT OF JOB WORK CHARGES. THE ASSESSI NG OFFICER HAS DISCUSSED THE ISSUE AT PAGE 2 OF HIS ORDER AND THE LEARNED CIT(A) HAS CONSIDERED THE ISSUE AT PAGE 26 OF SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 4 HIS ORDER. THIS ADDITION WAS CONFIRMED ON THE BASIS TH AT WHETHER THESE JOB WORK CHARGES WERE GENUINE AND REASONABLE. AS PER THE REVENUE THERE WAS A HAND-WRITTEN NOTE FOR REDUCING THE JOB WORK CHARGES AND THE DETAILS OF COST OF JOB WORKERS OF MARVEL INDUSTRIES LIMITED (M IL FOR SHORT) WERE NOT FURNISHED AND THE MIL WAS A LOSS COMPA NY. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT M ERE CHANGE IN FIGURE BY HAND-WRITING NOTE ON A COMPUTERS BILL CANNOT BE A GROUND FOR DOUBTING THE GENUINENESS OF S UCH BILL. THERE IS NO PROHIBITION IN LAW FOR NOTING THE REVISED FIGURE IN HAND-WRITING IN THE COMPUTER BILL. SUCH NO TINGS ARE NORMALLY DONE WHEN THE REPRESENTATIVES OF TWO SIDE S DISCUSS AND SPEAK TO EACH OTHER AND AGREE TO A REVISED FIGURE, THE SAME IS RECORDED IN THE BILL SO AS TO AVOI D THE ERROR IN CALCULATION. THIS REVISED FIGURE HAS BEEN C ONFIRMED BY MIL AND THE SAME HAS NOT BEEN REBUTTED BY THE REVENUE. HE DREW OUR ATTENTION TO COPIES OF BILLS PL ACED AT SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 5 PAGE 5 OF THE PAPER BOOK. IT WAS ALSO PLEADED THAT THE REVISED FIGURES WERE LESS THAN THE ORIGINAL FIGURES. IT WAS PLEADED THAT THE GENUINE CLAIM HAS BEEN WRONGLY DISALLOWED AND CONFIRMED BY THE LOWER AUTHORITIES. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT TH E AGREEMENT FOR JOB WORK ASSIGNED FOR A PERIOD STARTING F ROM IST APRIL, 2008 AND THE CONSIDERATION WAS BASED ON STANDARD RATE FOR STANDARD FABRICS AND BAGS. THE EXPORT STARTED IN JUNE-JULY, 2008 AND THAT TOO BECAUSE OF SPE CIFIC EXPORT ORDERS REQUIRING FABRIC AND BAG OF A PARTICULAR QUALITY. MIL WAS REQUESTED THE JOB WORK TO MANUFACTURE FABRIC AND BAGS AS PER THE EXPORT SPECIFICATIONS. THE EX TRA SPECIFICATIONS REQUIRED ADDITIONAL USE OF CHEMICALS FOR ACHIEVING THE DESIRED THICKNESS, ADDITIONAL USE OF LIN ER FOR INCREASING THE STRENGTH AND THERE WAS ADDITIONAL PACKING EXPENSE ALSO. THESE FACTS INCREASED THE INPUT COST, THEREFORE, REQUEST TO INCREASE IN THE JOB WORK CHARGES . THE SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 6 ASSESSEES EMPLOYEES WERE DEPUTED TO WORK AT THE FACTO RY PREMISES WHICH IS EVIDENT FROM CLAUSE 8 OF THE AGREE MENT PLACED AT PAGE 40 OF THE PAPER BOOK. THE REVENUES ALLEGATION THAT MIL WAS A LOSS MAKING COMPANY, THEREFORE, THIS TRANSACTION IS NOT GENUINE, IS NOT CORRECT. HE, THEREFORE, PLEADED TO DELETE THE ADDITION. LD. DR RE LIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO GONE THROUGH THE RECORDS PLACED IN THE PAPER BOOK RELATING TO THIS TRANSACTION. WE FIND THAT COMPUTER BILL WAS FOR RS.1,12,00,125/- WHICH HAS BEEN REDUCED TO RS.99,48,112/- AND PERUSAL OF THE BILL PLACED AT PAGE 55 ALSO MAKES IT CLEAR THAT THESE ALTERATIONS WERE MADE IN T HE HANDWRITING. SUCH ALTERATION IN THE QUANTUM IS MADE AFTER NEGOTIATION OF THE PARTIES. THEREFORE, THE REVENUES ALLEGATION THAT THE ALTERATION WAS IN HANDWRITING HENCE N OT GENUINE IS COMPLETELY BASELESS. THE ASSESSEE HAS SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 7 SUBMITTED NECESSARY DOCUMENTS TO EXPLAIN THE PAYMENT OF THIS ENHANCED JOB WORK CHARGES FOR THE REASON THAT EXPO RT ORDERS WERE RECEIVED FOR EXTRA SPECIFICATIONS WHICH R EQUIRED ADDITIONAL USE OF CHEMICALS AND OTHER MATERIAL AND ALSO TH E PACKING. THEREFORE, IN OUR CONSIDERED VIEW, THE LEARN ED CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION. WE DIRECT TO DELETE THE SAME. 9. GROUND NO. 3 IS AGAINST CONFIRMING THE ADDITION OF RS.1,74,49,000/- STATING THAT THERE IS DIFFERENCE IN INCOME FROM SALE OF LAND. THE ASSESSING OFFICER HAS DISCUSSE D THIS ISSUE AT PAGE 5 OF THE ASSESSMENT ORDER AND THE LEARNE D CIT(A) HAS DISCUSSED IT AT PAGES 27 TO 31 OF HIS ORDER . THE ASSESSEE HAS DECLARED CAPITAL GAINS ON THE SALE OF THE PROPERTY. THE SALE CONSIDERATION DECLARED WAS RS.35,51,000/- ON THE SALE OF LAND ADMEASURING 2.614 HECTARES LOCATED AT SURVEY NO. 321/3 AND 321/1 AT VILLAGE BALYA KHEDI, INDORE. THIS SALE DEED WAS REGISTERED ON SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 8 5.4.2008. THIS SALE HAS BEEN MADE TO M/S SMART BUILD HOME PVT. LTD., JAIPUR AND THERE WAS A NAME SANJAY KASLIWAL AND THE SECOND SELLER AND CONSENTER ADITYA AIRE N PVT. LTD. AS A THIRD SELLER AND CONSENTER. THE ASSES SING OFFICER NOTED THAT THIS PROPERTY WAS FINALLY SOLD FOR RS. 2,19,64,000/- WITHIN A SHORT PERIOD AND HE MADE THE ADDITION. 10. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS PURCHASED THE LAND ON 9 TH AUGUST, 2007 FOR A SUM OF RS. 26,14,000/-. ON 11 TH DECEMBER, 2007 THE ASSESSEE ENTERED INTO AGREEMENT TO SELL THE PROPERTY TO SANJAY KASLIWAL FOR A SUM OF RS.35,51,000/-. IT WAS AGREED THAT THE SALE DEED SHALL B E EXECUTED EITHER IN FAVOUR OF SANJAY KASLIWAL OR ON HIS INSTRUCTIONS IN FAVOUR OF SOME OTHER PERSON. THE ASSE SSEE RECEIVED EARNEST MONEY OF RS. 2,01,000/-. SHRI KASLI WAL ENTERED INTO AGREEMENT WITH ARIN ADITYA DEVELOPMENT P VT. SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 9 LTD. AND IT WAS PROVIDED IN THE AGREEMENT THAT SHRI SANJ AY KASLIWAL WILL EXECUTE THE SALE DEED IN FAVOUR OF ARIN A DITYA P. LTD. AND THE ASSESSEE SHALL BE CONFIRMING THE PARTY, BUT, HOWEVER, ON 5 TH APRIL, 2008 THE SALE DEED WAS EXECUTED FINALLY IN FAVOUR OF SMALL BUILD HOME PVT. LTD. AND THE CONSIDERATION WAS RS. 2,19,64,000/-. AS PER THIS AGREEMENT, THE ASSESSEE WAS TO GET PART OF THE SALE CONSIDERATION UP TO RS. 35,51,000/- OUT OF WHICH THE ASSESSEE ALREADY RECEIVED RS. 2,01,000/- AS BAYANA. THE REMAINING AMOUNTS WERE RECEIVED BY SANJAY KASLIWAL AND ARIN ADITYA PRIVATE LIMITED. ALL THESE FACTS ARE TRUE B EYOND ANY DOUBT BY VARIOUS DOCUMENTS. SHRI KASLIWAL AND ARIN ADITYA PVT. LTD. PAID INCOME TAX ACCORDINGLY IN THEIR RETURN OF INCOME AND THE REVENUE HAS ACCEPTED THEIR RETURNS O F INCOME WHICH ALSO CONTAIN THE SALE CONSIDERATION RECEIV ED BY THEM BUT IN THE ASSESSEES CASE THE ADDITION IS BE ING MADE FOR WHOLE OF THE AMOUNT WHICH HAS NEVER BEEN SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 10 RECEIVED BY THE ASSESSEE AND WILL NEVER BE RECEIVED I N FUTURE ALSO. ONLY ON THE BASIS OF APPREHENSION OR GUES S WORK, NO ADDITION CAN BE SUSTAINED AND HE ALSO PLACED RELIANCE ON THE DECISION OF THE HON'BLE APEX COURT I N THE CASE OF K.P. VARGHESE; 131 ITR 597. HE RELIED UPON THE DECISION OF THE HON'BLE ITAT IN THE CASE OF PANCHVATI ARCADE & ORS; 104 TTJ 736 AND ACIT VS. SWASTIK ENTERPRISES; 119 TTJ 557. 11. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 12. WE HAVE HEARD BOTH THE SIDES. THE ASSESSEE PURCHAS ED THE LAND IN THE MONTH OF AUGUST FOR A CONSIDERATION OF RS.26,14,000/-. THE ASSESSEE ENTERED INTO A SALE AGREEMENT IN THE MONTH OF DECEMBER FOR RS.35,51,000/ -. THE PERSON WITH WHOM THE ASSESSEE ENTERED INTO AGREEM ENT HAS FURTHER ENTERED INTO AN AGREEMENT WITH OTHER PERSO NS AND CHARGED HIGHER PRICE. THE PURCHASE IN THE MONTH O F SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 11 AUGUST FOR RS.26,14,000/- WAS NOT DOUBTED BY THE REVENUE. THE ASSESSEE GOT APPRECIATION OF ALMOST MORE THAN 25% WITHIN A SHORT SPAN OF PERIOD WHICH HE OFFERE D FOR TAXATION. SUBSEQUENT SALES AND SUBSEQUENT PURCHASERS IF EARNED HIGHER PROFIT OR HIGHER INCOME, THAT CANNOT PU T THE ASSESSEE UNDER OBLIGATION TO PAY TAXES ON THE AMOUNT WHICH HE HAS NEVER RECEIVED AND WHICH HE WILL NEVER RECEIVE. THEREFORE, THE BASIC FOUNDATION OF THE REVE NUE TO ADD THIS AMOUNT IN THE HANDS OF THE ASSESSEE WAS NOT JUSTIFIED. THERE ARE MANY INSTANCES WHERE INFORMATION N OT AVAILABLE WITH AN IGNORANT PERSON AND IF HE ENTERED INTO AGREEMENT TO SELL THE LAND AND SUBSEQUENTLY IF THERE A RE DEVELOPMENTS, WHICH WERE NOT IN HIS KNOWLEDGE OF TH E ERSON AND THE PRICE SHOOTS UP, THAT PERSON CANNOT BE AS KED TO PAY TAX ON THE ENHANCED RATE WHICH HE HAS NOT REALI SED. THEREFORE, IN OUR CONSIDERED VIEW, THIS ADDITION DES ERVES TO BE DELETED. SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 12 13. IN GROUND NO. 4 THE ISSUE INVOLVED IS REGARDING DISALLOWANCE OUT OF FOREIGN TRAVELLING EXPENSES. THE ASSESSEE DEBITED RS. 31,01,169/- ON ACCOUNT OF TRAVELL ING EXPENSES INCLUDING FOREIGN TRAVEL. THE ASSESSING OFF ICERS OBSERVATION THAT SOME OF THE EXPENSES WERE IN RESPECT OF FAMILY MEMBERS OF THE DIRECTORS INCLUDING CHILDREN AN D NO SPECIFIC EXPLANATION WAS OFFERED BY THE ASSESSEE REGARDI NG ADMISSIBILITY OF SUCH EXPENSES AS BUSINESS EXPENDITUR E. HE, THEREFORE, DISALLOWED RS. 2 LAKHS TOWARDS FOREIGN TRAVELLING EXPENSES. THE LEARNED CIT(A) CONFIRMED TH E ADDITION BY HOLDING AS UNDER :- 2.4 FIFTH GROUND OF APPEAL IS AGAINST DISALLOWANCE OF RS.23 LAKH FROM FOREIGN TRAVELLING EXPENSES. THE A.O. OBSERVED THAT APPELLANT HAS DEBITED RS.31,01,169/- IN P&L ACCOUNT ON ACCOUNT OF TRAVELLING EXPENSES INCLUDING FOREIGN TRAVEL. A.O. OBSERVED THAT SOME OF THESE EXPENSES ARE ON FOREIGN SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 13 TRAVEL OF FAMILY MEMBERS OF DIRECTORS FOR WHICH THE RE IS NO PLAUSIBLE EXPLANATION OR BUSINESS PURPOSE. HENCE A.O. MADE A LUMP SUM DISALLOWANCE OF RS. 2 LAKH OUT OF SUCH EXPENSES. DESPITE CALLING SPECIFIC DETAILS OF EACH FOREIGN VISIT OF DIRECTORS AND THEI R FAMILY MEMBERS THROUGH VARIOUS NOTICES OF THIS NOTI CE AND CALLING DETAILS AS WELL AS BUSINESS PURPOSE OF EACH SUCH VISIT, NO SUCH DETAILS WERE FURNISHED AND ONLY COPY OF LEDGER ACCOUNT IS SUBMITTED WHICH DOES NOT CONTAIN SUCH DETAILS. APPELLANT MERELY SUBMITTE D THAT LOOKING TO HUGE TURNOVER SUCH TRAVELLING EXPENSES IS NORMAL. BUT AS BUSINESS PURPOSE OF EACH FOREIGN TRIP OF DIRECTORS AND THEIR FAMILY MEMBERS IS NOT FURNISHED BEFORE THE UNDERSIGNED, THE DISALLOWANCE OUT OF SUCH EXPENSES OF RS.2 LAKH AS DONE BY A.O. IS UPHELD. THIS GROUND OF APPELLANT IS DISMISSED. SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 14 14. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE ASS ESSEE HAS FAILED TO SUBMIT NECESSARY EXPLANATION TO JUSTIFY TH E FACT THAT THE EXPENDITURE DEBITED UNDER THE HEAD FORE IGN TRAVELLING EXPENSES WERE ALLOWABLE EXPENDITURE AND NON E OF THEM WAS PERSONAL EXPENDITURE OF DIRECTORS OR FAMILY MEMBERS. CONSIDERING THIS FACT, WE DISMISS THIS GRO UND OF APPEAL OF THE ASSESSEE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS P ARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON 29 TH DECEMBER, 2015 SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER 29 TH DECEMBER, 2015 DN/- SURAJ IMPEX (INDIA)PVT.LTD. ITA NO. 338/IND/2013 15