M/S Janki Oil Mills, Khandwa V. The ITO, Khandwa

ITA 367/IND/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9581 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 15-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Assessee Lawyers: GIRDHAR GARG CAS; SSH S S MUNDRA
• Keywords: Business income; Opportunity of being heard; Revised return
• Section: 43B; 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.367/IND/2009 A.Y. 2005-06 M/S. JANKI OIL MILLS PAN AACFJ 5025 A C/O GIRDHAR GARG & ASSO., CAS 411, CHETAK CENTRE, 12/2, R.N.T. MARG, INDORE APPELLANT VS ITO-KHANDWA RESPONDENT APPELLANT BY : S/SH. S.S. MUNDRA & GIRDHAR GARG, CAS RESPONDENT BY : SH. PRADEEP KUMAR MITRA, SR. DR O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THIS APPEAL IS BY THE ASSESSEES AGAINST THE ORDER O F THE LEARNED CIT(A)-II, INDORE, DATED 5.5.2009 ON THE FOLLOWING GROUNDS: 1. THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITIONS MADE U/S 68 OF THE I.T. ACT BY THE ASSESS ING OFFICER FOR RS.1,88,700/-. 2. THAT THE LD. CIT(A) HAS FURTHER ERRED IN NOT ALL OWING THE DEDUCTION OF RS.1,92,344/- U/S 43B OF THE I.T. ACT. 2 2. DURING HEARING OF THE APPEAL, WE HAVE HEARD SHRI S.S. MUNDRA ALONG WITH SHRI GIRDHAR GARG, LD. COUNSEL FO R THE ASSESSEE AND SHRI PRADEEP KUMAR MITRA, LEARNED SR. DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT OUT OF THE NINE CRED ITORS, FIVE WERE PRODUCED BEFORE THE ASSESSING OFFICER AND THEIR STA TEMENTS WERE RECORDED WHEREIN THEY HAVE DULY CONFIRMED THE PAYME NT OF LOAN WHICH WAS SUPPORTED BY THE RESPECTIVE AFFIDAVIT FOR WHICH OUR ATTENTION WAS INVITED TO CERTAIN PAGES OF THE PAPER BOOK. RELIANC E WAS ALSO PLACED UPON THE DECISIONS OF HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF CIT VS. METACHEM INDUSTRIES (245 ITR 160) (MP) AND 116 TTJ 149 (DEL). ON THE OTHER HAND, THE LD. SR. DR DEFENDED THE IMPUGNE D ORDER BY CONTENDING THAT THE FINANCIAL CAPACITY OF THE CREDI TORS WAS NOT PROVED, THEREFORE, THE ADDITION WAS RIGHTLY MADE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSESSEE DERIVES I NCOME FROM COTTON SEED OIL/CAKE SHOWED TOTAL SALES AT RS.1,53,33,086/ - BUT DECLARED NIL INCOME IN ITS RETURN FILED ON 31.10.2005. THE ASSES SING OFFICER NOTED THAT THE ASSESSEE TOOK SOME LOANS AND DEPOSITS. THE ASSESSEE WAS ASKED TO ESTABLISH THE GENUINENESS OF THESE CREDITS , THEREFORE, THE ASSESSEE WAS DIRECTED TO PRODUCE THE NINE CREDITORS AS MENTIONED IN PARA 2.1 (PAGE 2 OF THE IMPUGNED ORDER). THE ASSESS EE PRODUCED THE 3 CREDITORS AT SL. NO. 3 TO 5, 8 & 9. THEIR STATEMENT S WERE RECORDED AND ULTIMATELY CONCLUDED THAT THEIR CAPACITY OF ADVANCI NG THE CREDIT IS DOUBTFUL. ON APPEAL, THE LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) AFFIRMED THE STAND OF THE ASSESSING OFFIC ER WHICH IS UNDER CHALLENGE BEFORE THE TRIBUNAL. IF THE TOTALITY OF F ACTS IS ANALYASED, WE ARE OF THE VIEW THAT THAT OUT OF 9 CREDITORS, THE ASSES SEE VERY MUCH PRODUCED 5 PERSONS WHO IN THEIR RESPECTIVE STATEMENT, RECORD ED BY THE ASSESSING OFFICER, HAVE DULY CONFIRMED THE PAYMENTS OF IMPUGN ED AMOUNT WHICH WAS SUPPORTED BY AFFIDAVITS. EVEN OTHERWISE, THESE AMOUNTS WERE RETURNED BACK. IN THE CASE OF NAGARMAL YADAV IT WAS CLAIMED THAT HE WAS NOT HAVING BANK ACCOUNT, THEREFORE, THE PAYMENT S WERE MADE IN CASH. THESE CREDITORS ALSO EXPLAINED THE SOURCE OF THEIR EARNING, THEREFORE, WE ARE OF THE VIEW THAT AS FAR AS THESE FIVE CREDITORS ARE CONCERNED, THE ASSESSEE HAS DISCHARGED ITS ONUS, TH EREFORE, THE ADDITION WHICH PERTAINS TO THESE FIVE PERSONS IS DELETED. O UR VIEW FINDS SUPPORTS FROM THE RATIO LAID DOWN IN THE CASE OF JALAN TIMBE RS V. CIT; 223 ITR 11(GAU), CIT V. DIVINE LEASING & FINANCE LIMITED; 1 58 TAXMAN 440 (DEL) AND CIT V. LOVELY EXPORTS PRIVATE LIMITED; 21 6 CTR (SC) 195. SO FAR AS THE REMAINING FOUR CREDITORS, WHO WERE NO T PRODUCED, ARE CONCERNED, WE ARE OF THE CONSIDERED OPINION THAT TH E ASSESSEE DID NOT DISCHARGE ITS ONUS AS REQUIRED U/S 68 OF THE ACT, T HEREFORE, THE ADDITION WAS RIGHTLY MADE BY THE ASSESSING OFFICER AND CONFI RMED BY THE LEARNED 4 COMMISSIONER OF INCOME TAX (APPEALS). WE, THEREFOR E, UPHOLD THE SAME. THIS GROUND OF THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED. 4. SO FAR AS GROUND NO. 2 WITH REGARD TO THE DEDUCT ION U/S 43B IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE CONTEND ED THAT SINCE IT IS PURELY A LEGAL ISSUE AND ALL THE FACTS ARE ALREADY ON THE RECORD, THE SAME CAN BE ACCEPTED BY THE TRIBUNAL. THE LEARNED SENIO R DR CONTENDED THAT IT BEING A FRESH ARGUMENT, THE SAME CANNOT BE ACCEPTED BY THE TRIBUNAL. WE, HOWEVER, FIND THAT SINCE IT IS PUREL Y A LEGAL GROUND, IT CAN BE ADMITTED BY THE TRIBUNAL BECAUSE IT GOES TO THE ROOT OF THE MATTER. WE, ACCORDINGLY, ADMIT THE SAME AND PROCEED TO DECI DE THE APPEAL ON MERITS. 4.1 WE FIND THAT DURING THE YEAR, UNDER CONSIDERATI ON, IN THE ORIGINAL RETURN, THE ASSESSEE HAS NOT MADE ANY CLAIM, NOR DE BITED ITS PROFIT AND LOSS ACCOUNT FOR THE EXPENDITURE SO INCURRED. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT SALES TAX WAS PER TAINING TO THE ASSESSMENT YEAR 2004-05, BUT NO CLAIM WAS MADE DURI NG THAT YEAR SINCE IT WAS NOT ACTUALLY PAID. HOWEVER, DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS ACTUALLY PAID THE SALES-TAX LIABIL ITY, THE CLAIM WAS MADE BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR ALLOWING THE DEDUCTION U/S 43B OF THE ACT. IT WAS D ECLINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE PLEA TH AT IN VIEW OF THE 5 DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F GOETZE (INDIA) LIMITED; 284 ITR 323, THERE IS NO PROVISION IN THE INCOME TAX ACT FOR ALLOWING AMENDMENT IN THE RETURN WITHOUT FILING A R EVISED RETURN. ACCORDINGLY, THE GROUND TAKEN BEFORE THE LEARNED CO MMISSIONER OF INCOME TAX (APPEALS) WAS DECLINED BY HIM TO BE ADMI TTED. IN THIS REGARD THE CONTENTION OF THE LD. COUNSEL FOR THE AS SESSEE WAS THAT EVEN THOUGH THE ASSESSING OFFICER IS NOT AUTHORIZED TO R EVISE THE CLAIM WITHOUT THE REVISED RETURN, BUT A LEGAL CLAIM CAN BE ADMITT ED BY THE TRIBUNAL EVEN IF IT IS RAISED FOR THE FIRST TIME BEFORE IT. AS PER THE LD. COUNSEL FOR THE ASSESSEE, SINCE THE CLAIM WAS ALREADY MADE BEFO RE CIT(A), HE SHOULD HAVE CONSIDERED THE SAME AND ALLOWED THE DED UCTION U/S 43B OF THE ACT IN RESPECT OF ACTUAL PAYMENT OF SALES-TAX IRRESPECTIVE OF THE FACT THAT THE SAME WAS NOT CLAIMED IN THE ORIGINAL RETUR N. 4.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GO NE THROUGH THE MATERIAL ON RECORD AS ALSO PROPOSITION OF LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LIMITED (SUPRA). AS PER OUR CONSIDERED VIEW, THE LEGISLATIVE INTENT BEHIND INTR ODUCTION OF SECTION 43B OF THE ACT IS TO ENSURE ACTUAL PAYMENT OF GOVERNMEN T LIABILITY FOR CLAIM OF DEDUCTION. IT WAS FELT THAT BUSINESS HOUSES WERE C LAIMING DEDUCTION OF EXPENDITURE ON THE BASIS OF ACCRUAL OF LIABILITY ON ACCOUNT OF GOVERNMENT DUES BUT THE SAME WERE NOT ACTUALLY PAID AND THE AS SESSEES USED TO CLAIM DEDUCTION ONLY ON THE BASIS OF ITS ACCRUAL AN D THEREBY REDUCING 6 THEIR TAXABLE PROFIT. KEEPING IN VIEW THIS FACT, S ECTION 43B OF THE ACT WAS INTRODUCED AND IT WAS MADE MANDATORY THAT DEDUCTION WILL BE ALLOWED ONLY IF THERE IS ACTUAL PAYMENT OF GOVERNMENT DUES NOT-WITH-STANDING THE FACT THAT THE SAME HAS BECOME DUE AS PER THE MERCAN TILE SYSTEM OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEES. IN THE INSTANT CASE, WE FIND THAT THE LIABILITY DOES NOT PERTAIN TO THE YEA R UNDER CONSIDERATION BUT TO THE ASSESSMENT YEAR 2004-05 WHICH IS PRIOR TO IT . AS PER THE ARS CONTENTION, SINCE IN THE EARLIER YEAR THE ASSESSEE S CLAIM WAS DECLINED ON THE PLEA THAT THERE WAS NO ACTUAL PAYMENT, THE S AME CAN BE CONSIDERED FOR DEDUCTION U/S 43B OF THE ACT WHEN SU BSEQUENTLY THE ASSESSEE HAS MADE THE ACTUAL PAYMENT. THE LD. COUN SEL FOR THE ASSESSEE HAS ALSO DRAWN OUR ATTENTION TO THE CHALLA NS ACKNOWLEDGING PAYMENT OF SALES TAX DURING THE YEAR UNDER CONSIDER ATION. SINCE ALL THESE FACTS WERE NOT BEFORE THE ASSESSING OFFICER, IN THE INTEREST OF JUSTICE, WE RESTORE THIS GROUND TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AS PER THE PROVISIONS OF S ECTION 43B OF THE ACT. THE ASSESSING OFFICER IS FURTHER DIRECTED TO VERIFY WHETHER THE ASSESSEE HAS ACTUALLY CLAIMED THE DEDUCTION BY DEBITING PROF IT AND LOSS ACCOUNT OF THE EARLIER YEAR WHEN THE LIABILITY AROSE IN ITS BO OKS OF ACCOUNTS. THE LIABILITY U/S 43B CAN BE ALLOWED SUBJECT TO FULFILL MENT OF BOTH THE CONDITIONS OF PAYABILITY AND ACTUAL PAYMENT. IF TH E EXPENDITURE IS ACTUALLY PAID WHEN IT IS NOT DUE FOR PAYMENT, NO DE DUCTION CAN BE 7 ALLOWED. IN THE SAME WAY, ACCRUAL OF LIABILITY IN RESPECT OF GOVERNMENT DUES IS NOT SUFFICIENT FOR ALLOWING THE ASSESSEES CLAIM UNLESS THE SAME IS ACTUALLY PAID. FULFILMENT OF BOTH THE CONDITION S OF EXPENDITURE BEING PAYABLE AND ACTUALLY PAID IS REQUIRED TO BE SATISFI ED BEFORE ALLOWING DEDUCTION U/S 43B OF THE ACT. IF THE EXPENDITURE IS ALREADY DUE AND PAYABLE IN EARLIER YEAR AND THE SAME HAS BEEN CLAIM ED AS DEDUCTION, BUT DECLINED BY THE ASSESSING OFFICER ON THE PLEA OF NO N-PAYMENT, THE SAME CAN BE CONSIDERED IN THE YEAR OF ACTUAL PAYMENT. WE , THEREFORE, DIRECT THE ASSESSING OFFICER TO VERIFY IF BOTH THE CONDITI ONS ARE SATISFIED WITH REGARD TO PAYMENT OF SALES-TAX AMOUNTING TO RS.1,92 ,344/- AND DECIDE THE ISSUE AFRESH AFTER PROVIDING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS ALSO AT LIBERTY TO FURNI SH EVIDENCE, IF ANY, IN SUPPORT OF ITS CLAIM. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED AS INDICATED ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 17 TH FEBRUARY, 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17.2.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE DN/-