The ACIT, Amritsar. V. Sh. Suresh Chander Mehta HUF, Amritsar.

ITA 355/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5789 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 10-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Retrospective amendment
• Section: 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO.355(ASR)/2010 ASSESSMENT YEAR:2004-05 PAN :AABHS8006D THE ASSTT. COMMR. OF INCOME-TAX, VS. SH. SURESH CHA NDER MEHRA HUF CIRCLE-III, AMRITSAR. AMRITSAR. (APPELLANT) (RESPONDENT) C.O. NO.22(ASR)/2010 (ARISING OUT OF ITA NO.355(ASR)/2010) ASSESSMENT YEAR : 2004-05 SH. SURESH CHANDER MEHRA HUF, VS. ASSTT. COMMR. OF INCOME-TAX, AMRITSAR. CIRCLE-III, AMRITSAR. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH. TARSEM LAL, DR ASSESSEE BY: SH. SATISH BANSAL, CA ORDER PER MEHAR SINGH, AM, THE APPEAL FILED BY THE DEPARTMENT AND C.O. FILE D BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A), DATE D 31.05.2010, PASSED UNDER SECTION 250(6) OF THE INCOME-TAX ACT, 1961 ( HEREIN AFTER REFERRED TO IN SHORT THE ACT), FOR THE ASSESSMENT YEAR 2004-05. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), AMRITSAR WAS JUSTIFIED IN TREATING THE DEBI T NOTE ISSUED 2 ON 28.02.2004 AS GENUINE SINCE IT WAS A DEVICE TO R EDUCE THE PROFITS OF THE ASSESSEE CONCERN. 2. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A), AMRITSAR DECISION IS ARBITRARY SINCE NO BAS IS OF APPORTIONMENT OF DISALLOWANCE HAS BEEN GIVEN IN HIS ORDER WHEREIN HE COMPUTED THE DISALLOWANCE COMPUTED AT RS .20 LAKH AS AGAINST ASSESSING OFFICERS DISALLOWANCE OF RS.5 2,35,509/-. 3. WHETHER ON THE FACTS & IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A), AMRITSAR, WAS JUSTIFIED IN LAW AND ON THE F ACTS IN ALLOWING RELIEF OF RS.32,35.509/- ON ACCOUNT OF DEB IT NOTE DATED 28.02.2004 ISSUED BY M/S. ESSMA TEXTILES PVT. LTD, AMRITSAR WHICH IS RELATED TO THE ASSESSEE U/S 40A(2)(B) OF T HE INCOME-TAX ACT, 1961. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ADD ANY O R MORE GROUND(S) OF APPEAL. 3. ALL THE GROUNDS RAISED BY THE ASSESSEE, IN THIS APPEAL, IN NUT-SHELL, PERTAIN TO THE RELIEF OF RS.32,35,509/- ALLOWED BY THE CIT(A). THE BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RELEVANT RECORDS ARE THAT THE RETURN DECLARING TOTAL INCOME OF RS.13,60,620/- AND AGRICU LTURAL INCOME RS.2,05,585/- WAS FILED BY THE ASSESSEE ON 28.10.20 04. THE RETURN WAS PROCESSED U./S 143(1) OF THE ACT, ON 14.01.2005. T HEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSEE HUF IS A PROPRI ETOR OF M/S. ESSMA WOOLLEN MILLS AND ENGAGED IN THE BUSINESS OF MANUFA CTURING OF YARN AT SPINNING UNITS AT AMRITSAR AND LUDHIANA. THE GP RAT E DECLARED BY THE ASSESSEE WAS AS UNDER: A.Y. TOTAL SALES (RS) G.P. RATIO 2002-03 111247728 17.89% 2003-04 128347848 16.46% 2004-05 182633268 13.30% THE ASSESSEE EXPLAINED THAT THE FALL IN G.P. RATIO WAS ATTRIBUTED TO THE INCREASE IN SALES AND SUPPLY OF GOODS WORTH RS.6,22 ,11,876/- TO GOVT. 3 DEPARTMENTS WHEREIN LOWER RATES WERE QUOTED. DURIN G ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE DEBI TED AN AMOUNT OF RS.52,35,509/- ON 29.2.2004 TO PURCHASE ACCOUNT ON THE BASIS OF A DEBIT NOTE RAISED BY THE SUPPLIER OF GOODS M/S. ESSMA TEXTILES PVT. LTD. THE ASSESSEE FILED A COPY OF DEBIT NOTE DATED 28.2.2004 AND SUBM ITTED THAT M/S. ESSMA TEXTILE PVT. LTD. HAD RAISED DEBIT NOTE FOR THE RAT E DIFFERENCE OF THE GOODS SOLD BY THE COMPANY TO THE ASSESSEE AFTER TAKING IN TO ACCOUNT THE INCREASED PRICE OF RAW MATERIAL AND INCREASE IN THE MANUFACTU RING COST AS AGREED MUTUALLY. THE AO OBSERVED THAT CERTAIN BILLS PERTAI NING TO A DATE LATER THAN THE DATE OF DEBIT NOTE AND THE RATES WERE REVISED W ITH RETROSPECTIVE EFFECT WHICH WAS A COLOURFUL DEVICE TO ADJUST THE PROFITS OF THE ASSESSEE AS THE ASSESSEE WAS NOT BOUND TO PAY ANY FURTHER AMOUNT ON CE IT PURCHASED THE GOODS. BESIDES, ESSMA TEXTILES PVT. LTD. WAS A PER SON SPECIFIED UNDER SECTION 40A(2)(B) OF THE ACT AS THE KARTA OF THE AS SESSEE HUF, SH. SURESH CHANDER MEHRA WAS DIRECTOR IN HIS INDIVIDUAL CAPACI TY IN ESSMA TEXTILE PVT. LTD. THE ASSESSEE ALSO SUBMITTED THAT THE RATES PA ID TO ESSMA TEXTILE PVT. LTD. WERE BELOW THE SALE PRICE EVEN AFTER CONSIDERI NG THE RATE DIFFERENCE PAID TO ESSMA TEXTILE PVT. LTD.. HOWEVER, RELYING ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUMATI DAYAL A ND MCDOWELL & CO. LTD; THE AO MADE AN ADDITION OF RS.52,35,509/- BY D ISALLOWING THE AMOUNT DEBITED TO PURCHASE ACCOUNT ON THE STRENGTH OF DEBI T NOTE RAISED BY ESSMA TEXTILES PVT. LTD. ON APPEAL, THE LEARNED CIT(A), DELETED THE ADDITION OF RS.32,35,509/- AND CONFIRMED THE ADDITION OF RS.20 ,00,000/-. AGGRIEVED WITH THE ORDER OF THE CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 4. THE LD. DR RELIED ON THE ORDER OF THE ASSESSIN G OFFICER. 4 5. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, RELIED ON THE ORDER OF THE CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE HIM. 6. WE HAVE HEARD BOTH THE PARTIES AND GIVEN OUR THO UGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS, EXAMINED THE FACTS OF THE CASE, EVIDENCE AND MATERIAL PLACED ON RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. A CAREFUL PERUSAL OF THE IMPUGNED APPELLATE ORDER DATED 31.05.2010, CLEARLY REVEALS THAT THE LD. CIT(A), HAS CONSIDERED AND ADJUDICATED THE ISSUE, IN QUESTION, IN GREATER DETAIL, AFTER APPRECIATION OF THE EVIDENCES AND MATERIAL ON RECORD, AS ALSO THE LEGAL AND FACTUAL POSITION OF THE CASE. NEEDLESS TO SAY THAT THE IMPUGNED APPELLATE ORDER IS WELL REASONED AND BASED ON THE COGENT AND CREDIBLE MATERIAL AND FACTS OF THE CASE. HOWEVE R, IT WOULD PERTINENT TO REPRODUCE ONLY THE CONCLUSIVE PART OF THE DECISION OF THE CIT(A), FOR THE PURPOSE OF PROPER APPRECIATION OF THE SAME: 6.2. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, T HE EXCESS RATE DIFFERENCE CHARGED BY WAY OF DEBIT NOTE IN RESPECT OF PURCHASES WORKS OUT TO RS.20,45,578/- (I.E. RS.9,34,042/- + RS.11,1 1,536/-). THERE ARE CERTAIN MINOR DISCREPANCIES AS REGARDS RATE DIFFERE NCE IN THE CHART SUBMITTED BY APPELLANT AS COMPARED TO THE RATE DIFF ERENCE MENTIONED IN PARA 11 OF THE SUBMISSIONS REPRODUCED IN PARA 5 OF THE ORDER ABOVE. HOWEVER, SINCE THE ISSUE U/S 40A(2)(B) OF THE ACT I S TO DETERMINE THE UNREASONABLENESS OR EXCESSIVENESS OF THE EXPENDITUR E BY ESTIMATION, THESE MINOR VARIATIONS ARE IGNORED. THE AO HAS NEIT HER LOOKED INTO THE PRACTICE FOLLOWED BY THE APPELLANT IN THE EARLIER Y EARS NOR TAKEN COGNIZANCE OF DEBIT NOTE RAISED IN A.Y. 2003-04 FOR RS.21,37,200/-. HAD IT BEEN SO, ONLY THE EXCESS RATE DIFFERENCE OVE R THE LAST YEAR COULD HAVE BEEN DISALLOWED. IN THE FACTS AND CIRCUMSTANCE S OF THE CASE, IT WOULD BE FAIR AND REASONABLE TO RESTRICT THE DISALL OWANCE TO RS.20,00,000/- OUT OF RS.52,35,509/- CLAIMED BY THE ASSESSEE ON ACCOUNT OF DEBIT NOTE RAISED ESSMA TEXTILES PVT LTD . AGAINST PURCHASES MADE BY THE APPELLANT. HENCE, THE ADDITIO N OF RS.20,00,000/- IS CONFIRMED AND BALANCE ADDITION OF RS.32,35,509/- IS 5 DELETED. THIS GROUND OF APPEAL TAKEN BY THE APPELLA NT IS PARTLY ALLOWED. 6.1. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIR MITY IN THE FINDINGS OF THE CIT(A), AS THE SAME ARE BASED ON PROPER APPREC IATION OF THE LEGAL AND FACTUAL POSITION OF THE CASE. ACCORDINGLY, THIS APP EAL OF THE REVENUE IS DISMISSED. 7. IN C.O. NO.22(ASR).2010, THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE, IS AS UNDER: 1. THAT THE LD. CIT(A) HAS WRONGLY CONFIRMED PART OF THE ADDITION OF RS.20 LACS ON ACCOUNT OF DEBIT NOTE BEI NG THE RATE DIFFERENCE (INCLUDING EXCISE DUTY APPLICABLE F ROM THIS YEAR) CHARGED FROM THE ASSESSEE. 7.1. SINCE, WE HAVE UPHELD THE VIEW TAKEN BY THE LD . CIT(A), AND DISMISSED THE APPEAL OF THE REVENUE, THE C.O. FIL ED BY THE ASSESSEE NEEDS NO SEPARATE ADJUDICATION, AS IT FALLS IN THE REALM OF ACADEMIC INTEREST. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND C.O. FILED BY THE ASSESSEE STAND DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 8TH JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 8TH JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: SH. SURESH CHANDER MEHRA, HUF, AMRITS AR. 2. THE ACIT, CIR.III, AMRITSAR. 3. THE CIT(A), AMRITSAR. 4. THE CIT, AMRITSAR. 5. THE SR DR 6 TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.