The DCIT, Circle-1, Surat V. Anupam Silk Mills Pvt. Ltd., Surat

ITA 3702/AHD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6605 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 14-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

ITA.NO.3702/AH D/2008 ASSESSME NT YEAR 2005- 06. 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH,AHM EDABAD. ( BEFORE SHRI BHAVNESH SAINI AND SHRI A. K. GARODIA) I.T .A. NO. 3702/AHD/2008 (ASSESSMENT YEAR: 2005 -2006) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, ROOM NO.108,AAYAKAR BHAVAN, MAJURA GATE, SURAT . (APPELLANT) VS. M/S.ANUPAM SILK MILLS PRIVATE LTD., 225-226 ARIHANT TEXTILE MARKET, RING ROAD, SURAT. (RESPONDENT) PAN: AACCA 0021 G APPELLANT BY : SHRI BHUVNESH KULSHRESTHA, SR. D. R. RESPONDENT BY : SHRI TUSHAR HEMANI ( (( ( )/ )/)/ )/ ORDER PER: SHRI A.K. GARODIA , A.M. THIS IS A REVENUES APPEAL DIRECTED AGAINST THE ORDER OF LD. CIT (A)-I, SURAT DATED 12-9-2008 FOR THE ASSESSMENT YEAR 20 05-06. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. THE FACTS OF THE CIRCUMSTANCES OF THE CASE AND IN LAW TH E LD. CIT (A) HAS ERRED IN NOT APPRECIATING THAT THE AO HAS WHILE MAKING DISALLOWANCE OF RS.1,14,36,112/- CONSIDERED THE PAYMENT MADE TO RELATES PARTIES I.E. SPECIFIC PARTIES COV ERED U/S. 40A(2)(B) AND OTHER OUTSIDE PARTIES AND HAS ASCERTAINE D THAT THE PAYMENTS MADE TO SPECIFIED PERSONS U/S. 40A(2)(B) THAN PAYMENT MADE TO OUTSIDE PARTIES WERE AT HIGHER SIDE WITHOUT ANY ADMISSIBLE REASONINGS. ITA.NO.3702/AH D/2008 ASSESSME NT YEAR 2005- 06. 2 2. THE FACTS OF THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN NOT APPRECIATING THAT THE BA SIS FOR PRICE OF THE GREY CLOTH IS BASED ONLY ON THE QUALITY OF GR EY CLOTH AND THE ASSESSEE HAS FAILED TO ADDUCE ANY EVIDENCE WHICH MAY SHO W THAT QUALITY OF GREY CLOTH FOR WHICH PAYMENTS WERE M ADE TO SPECIFIED PERSONS WAS NOT HIGHER THAN THE PAYMENT FOR SUCH QUALITIES WERE MADE TO OUTSIDE PARTIES. 3. UNDER THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) UPHELD THE ORDER OF THE AO. 3. BRIEF FACTS ARE THAT IT IS NOTED BY THE ASSESSING OFFICE R IN PARAGRAPH 4 OF THE ASSESSMENT ORDER THAT THE ASSESSEE COMPA NY HAS SHOWN PAYMENTS TO THE PERSONS SPECIFIED U/S. 40 A(2)(B) OF THE I.T. ACT BY WAY OF PURCHASES AS UNDER:- (A) M/S. SHREE LAXMI TEXTILES. RS. 3,61,42,153/- (B) M/S. SHREE AMBICA TEXTILES. RS. 2,73,16,341/- (C) SAJAN TEXTILES. RS. 40,38,469/- 4. THE A.O. ASKED THE ASSESSEE TO SUBMIT THE JUSTIFICATION NOTE IN RESPECT OF THE PAYMENTS MADE TO THESE PERSONS. IT IS NOTED BY THE A.O. THAT ASSESSEE DID NOT FURNISH ANY JUSTIFICATION FOR T HE SAME. THE A.O. REQUESTED ASSESSEE FOR THE SAME AGAIN BY ORDER SHEET ENTRY DATED 14-12-2007 AND 17-12-2007 BUT THE ASSESSEE DID NO T FURNISH THE REQUIRED DETAILS. THEREAFTER, THE A.O. HAS CARRIE D OUT AN ANALYSIS ON PAGES 3 AND 4 OF THE ASSESSMENT ORDER AS PER WHICH IT H AS BEEN WORKED OUT BY HIM THAT THE ASSESSEE HAS MADE EXCESSIVE PAY MENTS OF RS.1,14,36,212/-. FOR WORKING THIS CALCULATION, THE A. O. HAS ESTIMATED THE AVERAGE RATE PAID TO 2 PARTIES OUT OF THESE 3 PAR TIES ON THE BASIS OF ESTIMATE IN THE PRECEDING YEAR. FOR THE THIRD PARTY A LSO, RATE IS ESTIMATED WITHOUT INDICATING ANY BASIS. TOTAL AMOUNT PAID TO THESE PARTIES WAS DIVIDED BY THE AVERAGE RATE ESTIMATED FOR EACH OF THE PARTIES AND IN THIS MANNER, THE A.O. HAS WORKED OUT T HE QUANTITY OF ITA.NO.3702/AH D/2008 ASSESSME NT YEAR 2005- 06. 3 TOTAL METERS PROCESSED. THEREAFTER, THE AO HAD TAKEN TH E AVERAGE RATE PAID TO OUTSIDERS ON THE BASIS OF LAST YEAR AND IN THIS MANNER, HE HAS WORKED OUT THE EXCESS RATE PAID TO SHREE LAXMI TEXTILE AT RS. 3.09 PER METER, TO AMBICA TEXTILE RS.1.86 PER METER AND TO SAJ AN TEXTILE AT RS.2 PER SQ. METER. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT (A) WHO HAS DELETED THI S DISALLOWANCE ON THE BASIS OF TRIBUNAL ORDER IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05. NOW THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. C.I.T. (A). HE ALSO FURNISHED COPY OF THE TRIBUNAL ORDE R IN ASSESSEES OWN CASE IN THE PRECEDING YEAR I.E. A.Y. 2004-05 IN IT A NO.3881/AHD/2007 DATED 18-1-2008. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE TRIBUNAL DECISION SUBMITTED BY THE LD. A .R. OF THE ASSESSEE. WE FIND THAT IN ASSESSMENT YEAR 2004-05, THE DISP UTE WAS WITH REGARD TO PAYMENT TO M/S. SHREE AMBICA TEXTILE A ND M/S. SHREE LAXMI TEXTILE. WHEREAS IN THE PRESENT YEAR, THE DISPUT E IS REGARDING PAYMENT TO SAME TWO PARTIES AND IN ADDITION THERETO, THERE IS ONE MORE PARTY IN THE PRESENT YEAR I.E. SAJAN TEXTILE TO WHOM A SMALL AMOUNT OF RS.40.38 LACS WAS PAID BY THE ASSESSEE. IN THE PR ECEDING YEAR, IT HAS BEEN NOTED BY THE TRIBUNAL IN PARA 5.1 OF THE ORDER THAT THIS IS THE FIRST REQUIREMENT FOR MAKING ANY DISALLOW ANCE U/S. 40A (2)(B) OF THE I.T. ACT THAT THE RELATIONSHIP BETWEEN THE PAYER AND THE PAYEE IS FOUND TO BE AS SPECIFIED IN PROVISIONS OF CLAUSE ( B) OF SUB- SECTION 2 OF SECTION 40A OF THE ACT. THEREAFTER, IT IS N OTED BY THE TRIBUNAL IN PARAGRAPH 6.5 THAT NONE OF THE REVENUE AUTHORITY ITA.NO.3702/AH D/2008 ASSESSME NT YEAR 2005- 06. 4 CONSIDERED THE FACT AS TO WHETHER THE REQUIRED CONDITION S LISTED PARAGRAPH 5.1 WERE SATISFIED OR NOT AND IF SATISFIED HO W AND ON WHAT BASIS. IN THE PRESENT YEAR ALSO, THE A.O. STATED IN PARA GRAPH 4.1 OF THE ORDER THAT THE ASSESSEE HAS SHOWN PAYMENT TO THESE 3 PAR TIES SPECIFIED U/S. 40A (2)(B) OF THE ACT BUT NO BASIS HAS BEE N GIVEN AS TO HOW THESE 3 PARTIES ARE COVERED BY THE PROVISIONS OF SECT ION 40A(2)(B) IN THE PRESENT CASE. WE ALSO FIND THAT IN THE PRESENT YE AR, THE A.O. HAS SIMPLY PROCEEDED ON THE BASIS OF PRECEDING YEAR. EVEN F OR THE PURPOSE OF COMPUTING THE EXCESS PAYMENT AS HAS BEEN ALLEGED BY HI M, HE HAS CONSIDERED THE AVERAGE RATE PAID AS ESTIMATED IN THE P RECEDING YEAR IN RESPECT OF THE 2 PARTIES I.E. M/S. LAXMI TEXTILE AND M/ S. AMBICA TEXTILE. REGARDING THE AVERAGE RATE PAID TO OUTSIDER ALSO, THE A.O. HAS STATED THE SAME ON THE BASIS OF LAST YEAR ONLY AND ON T HE BASIS OF COMPARISON OF THESE TWO RATES OF LAST YEAR, HE HAS WORKED OUT THE EXCESS RATE PAID. QUANTUM OF WORK DONE FOR WHICH PAYMEN TS WERE MADE TO THESE PARTIES WERE ALSO ESTIMATED BY DIVIDING T OTAL AMOUNT PAID BY SUCH ESTIMATED RATE. FOR ESTIMATING THE EXCESS PA YMENT TO THIRD PARTY I.E. SAJAN TEXTILE, HE HAS ESTIMATED THE AVERAGE RATE RS.14 PER METER AND AVERAGE RATE PAID TO OUTSIDERS HAS BEEN ESTIMATED AT RS.12 PER METER AND THERE IS NO BASIS FOR EITHER OF THE SE 2 RATES. UNDER THESE FACTS, WE ARE SATISFIED THAT THE LD. CIT (A) HAS RIGHTLY DELETED THE ADDITIONS MADE BY THE A.O. IN RESPECT OF T HESE 3 PARTIES. THE PAYMENTS TO FIRST 2 PARTIES IS COVERED BY THE TRIBUN AL ORDER IN ASSESSEES OWN CASE IN THE PRECEDING YEAR AND THE ADDITION MADE IN THE CASE OF THIRD PARTY I.E. SAJAN TEXTILE ALSO IS COVE RED BECAUSE IN RESPECT OF THIS PARTY ALSO, THE A.O. HAS NOT SPECIFIED AS TO HOW THIS PARTY IS RELATED PARTY. THIS ALLEGATION IS ALSO WITH OUT ANY BASIS THAT THE RATE PAID BY THE ASSESSEE TO THIS PARTY IS MORE THAN THE MARKET RATE BECAUSE RATE PAID BY THE ASSESSEE TO THIS PARTY AS WELL AS TO OUTSIDERS ITA.NO.3702/AH D/2008 ASSESSME NT YEAR 2005- 06. 5 BOTH ARE ESTIMATED BY THE A.O. WITHOUT INDICATING ANY BASIS FOR SUCH ESTIMATION. HENCE, THIS ALLEGATION OF THE A.O. IS BASELESS THAT EXCESS PAYMENT WAS MADE BY THE ASSESSEE TO THIS PARTY. CONSIDERIN G THESE FACTS AND BY RESPECTFULLY FOLLOWING THE TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05, WE FEEL THAT NO IN TERFERENCE IS CALLED FOR IN THE ORDER OF CIT(A). IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 05- 2011. SD/- S D/- (BHAVNESH SAINI) (A. K. GARODIA) JUDICIAL MEMBER. ACCOUNTANT MEMBER. AHMEDABAD. DATED: 13- 05- 2011. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-I, SURAT. 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA.NO.3702/AH D/2008 ASSESSME NT YEAR 2005- 06. 6 1.DATE OF DICTATION 9 - 5 -2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 10 / 5 / 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2011. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2011 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2011 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2011. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..