The ACIT.(OSD), Circle-5, Ahmedabad V. Omkar Textile Mills Ltd., Ahmedabad

ITA 402/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5985 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-03-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 14-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 402 & 407/AHD/2011 (ASSESSMENT YEAR: 2003-04 & 2007-08) ACIT (OSD), CIRCLE-5, AHMEDABAD V/S OMKAR TEXTILES MILLS LTD., 212, NEW CLOTH MARKET, AHMEDABAD (APPELLANT) (RESPONDENT) OMKAR TEXTILES MILLS LTD., 212, NEW CLOTH MARKET, AHMEDABAD V/S ACIT (OSD), CIRCLE-5, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACO 2424M APPELLANT BY : SHRI O.P. BATHEJA, SR. D.R . RESPONDENT BY : SHRI GAURAV NAHTA, A.R. ( )/ ORDER DATE OF HEARING : 20-03-20 14 DATE OF PRONOUNCEMENT : 02-05-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THESE TWO APPEALS, ONE FILED BY THE REVENUE AND THE OTHER FILED BY THE ASSESSEE, ARE AGAINST THE ORDER OF CIT(A)-XI, AHMED ABAD DATED 06.12.2010 AND 03.01.2011 FOR A.Y. 2003-04 & 2007-0 8 RESPECTIVELY. ITA NOS. 402 & 407/AHD/2011 . A.Y. 2003- 04 & 2007- 08 2 WE FIRST TAKE UP ASSESSEES APPEAL FOR A.Y. 07-08 ( ITA NO. 407/AHD/2011) 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MA NUFACTURING AND PROCESSING OF TEXTILE GOODS. ASSESSEE ELECTRONICAL LY FILED ITS RETURN OF INCOME FOR AY 2007-08 ON 31.10.2007 DECLARING TOTAL INCOME OF RS 2,96,20,960/-. THE CASE WAS SELECTED FOR SCRUTINY A ND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 2 2.10.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS 3,00,61,030/-. AG GRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). C IT(A) VIDE ORDER DATED 3.1.2011 PARTLY ALLOWED THE APPEAL OF THE ASS ESSEE. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFO RE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ID. CIT(A) XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN PASSING APPELLATE ORDER DATED 03.01.2011 FOR A.Y. 2007-08 IN THE CASE OF APPELLAN T BY CONFIRMING ADDITION OF RS. 3,80,477/- OUT OF TRAVELING EXPENSES. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS BY CON FIRMING THE ADDITION OF RS. 91,729/- ON ACCOUNT OF LATE PAYMENT OF PF AND ESIC ON ACCOUNT OF EMPLOY EES CONTRIBUTION. 1 ST GROUND IS WITH RESPECT TO ADDITION ON ACCOUNT OF T RAVELLING EXPENSES. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON PERU SING THE PROFIT AND LOSS ACCOUNT, A.O NOTICED THAT ASSESSEE HAS CLAIMED TRAVELLING EXPENSES OF RS 21,65,715/- WHICH INCLUDED TRAVELING EXPENSES FOR FOREIGN VISITS AND ALSO THE DIRECTOR'S TRAVELING OF RS 16,39,061/- . AO WAS OF THE VIEW ITA NOS. 402 & 407/AHD/2011 . A.Y. 2003- 04 & 2007- 08 3 THAT THE FOREIGN TRAVEL OF DIRECTORS APPEARED TO BE OF PERSONAL IN NATURE AS THE ASSESSEE WAS NOT CARRYING OUT ANY EXPORTS AND N O INCOME HAD BEEN EARNED BY MAKING SUCH EXPENDITURE. HE ACCORDINGLY D ISALLOWED 20% OF FOREIGN RELATED EXPENSES AGGREGATING TO RS. 3,80,47 7/- (COMPRISING OF 20% OF FOREIGN RELATED EXPENSES OF RS. 163900 AND 1 0% OF DIRECTORS TRAVELLING EXPENSES) AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) UPHELD THE DISALLOWANC E BY HOLDING AS UNDER:- 3.1. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. IT IS TH E OBSERVATION OF THE A. O. THAT THE EXPENSES INCURR ED BY THE APPELLANT ON ACCOUNT OF FOREIGN TRAVEL ARE P ARTLY PERSONAL IN NATURE AS THE APPELLANT HAS NOT CARRIED OUT ANY EXPORTS AND NO INCOME HAS BEEN EARN ED BY MAKING SUCH EXPENDITURE. APPELLANT HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OFA.O. NO EVID ENCE HAS BEEN FURNISHED TO SHOW THAT THE EXPENSES WERE WHOLLY IN CONNECTION WITH BUSINESS. THEREFORE, A.O'S ACTION IS UPHELD. THESE GROUNDS OF APPEAL ARE DISMISSED. 5. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW I N APPEAL BEFORE US. 6. BEFORE US, THE LD A.R. REITERATED THE SUBMISSIONS M ADE BEFORE CIT(A) AND ALSO SUBMITTED THAT SIMILAR DISALLOWANCE WAS MA DE IN THE CASE OF ASSESSEE IN AY 1995-96 WHICH WAS DELETED BY HON'BLE TRIBUNAL. HE PLACED ON RECORD THE COPY OF THE DECISION REPORTED IN (2008) 115 TTJ (AHD) 716 AND POINTED TO THE RELEVANT PARA PLACED A T PAGE 8 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT SINCE AO HAS ALSO N OT DOUBTED THE EXPENSES, THE DISALLOWANCE MADE BY THE AO BE DELETE D. LD D.R. ON THE OTHER HAND RELIED ON THE ORDER OF AO AND CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT AO HAD DISALLOWED 20% OF THE FOREIGN T RAVELLING EXPENSES ITA NOS. 402 & 407/AHD/2011 . A.Y. 2003- 04 & 2007- 08 4 OF THE DIRECTORS AND OTHER EXPENSES HOLDING THE SAM E TO BE IN PERSONAL NATURE. IT IS ALSO A FACT THAT IN ASSESSEES OWN CAS E, SIMILAR DISALLOWANCE WAS MADE BY THE AO IN AY 1995-96 AND THE SAME WAS D ELETED BY THE CO- ORDINATE BENCH OF TRIBUNAL BY HOLDING AS UNDER:- 11. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S. IT WAS THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURES WERE INCURRED FOR EXPLORING THE POSSIB ILITY OF EXPORTS AND ATTENDING EXHIBITION IN FRANCE. THE FACT THAT EXPORT HAS NOT BEEN EFFECTED IN THE YEAR UNDER CONSIDERATION OR IN THE SUBSEQUENT YEAR WOULD BE OF NO CONSEQUENCE IN DETER MINING THE ALLOWABILITY OF THE EXPENDITURE. IN OUR OPINION, IF THE EXPENDITURE IS INCURRED FOR EXPLORING THE POSSIBILITY OF EXPORTS AND ATTENDING EXHIBITION IN FRANCE, THE EXPENDITURE WOULD BE FOR THE PURPOSE OF ASSESSEES BUSINESS AND THE ENTIRE EXPENDITURE IS TO BE ALLOWED IRRESPECTIVE OF WHETHER THE ASSESSEE WAS ABLE TO GET EXPORT ORDERS OR MAKE ANY EXPORT IN THIS YEAR OR IN THE SU BSEQUENT YEAR. THEREFORE THE CIT(A) WAS NOT JUSTIFIED IN RESTRICTING 50 PER CENT OF THE EXPENDI TURE INCURRED FOR TRAVELLING. WE DIRECT TRAVELLING EXPENSES INCURRED BY THE ASSESSEE IN FULL. 8. IT IS ALSO A FACT THAT WHILE DISALLOWING THE EXPENS ES, THE AO HAD NOT DOUBTED THE EXPENDITURE NOR POINTED OUT ANY SPECIFI C INSTANCE OF PERSONAL EXPENSES. AT THE SAME TIME, CIT(A) HAS UPHELD THE D ISALLOWANCE BY NOTING THAT ASSESSEE COULD NOT CONTROVERT THE FINDI NGS OF ASSESSING OFFICER AND HAS HELD THE PART OF THE EXPENSES TO BE PERSONAL IN NATURE. IT IS ALSO A FACT THAT EACH ASSESSMENT YEAR IS A SEPARATE UNIT AND THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE TO INCOME TAX ASSESS MENTS. CONSIDERING THE AFORESAID FACTS, WE ARE OF THE VIEW THAT THE ENDS O F JUSTICE SHALL BE MET IF THE DISALLOWANCE IS RESTRICTED TO RS 1 LAC AS AGAIN ST RS 3,80,477/- MADE BY THE AO. WE THUS DIRECT ACCORDINGLY. THUS THIS GR OUND OF THE ASSESSEE IS PARTLY ALLOWED. 2 ND GROUND IS WITH RESPECT TO DISALLOWANCE OF RS. 91,7 29/- ON ACCOUNT OF LATE PAYMENT OF PF AND ESIC: ITA NOS. 402 & 407/AHD/2011 . A.Y. 2003- 04 & 2007- 08 5 9. ON PERUSING THE TAX AUDIT REPORT AO NOTICED THAT EM PLOYEES CONTRIBUTION ON ACCOUNT OF ESIC AND PF WAS PAID AFTER THE DUE DA TE. HE ACCORDINGLY DISALLOWED THE AGGREGATE AMOUNT OF RS 91,729 (THE D ETAILS OF WHICH ARE LISTED AT PAGE 4 OF THE ORDER). AGGRIEVED BY THE OR DER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) UPHELD THE ORDER OF AO BY HOLDING AS UNDER:- 5.1. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE IMPU GNED AMOUNTS ARE EMPLOYEES' CONTRIBUTION TO P.P. AND E.S.I. HAVING GIVEN MY CAREFUL CONSIDERATION TO THE SUPREME COURT'S DECISION IN THE CASE OF CIT VS. ALOM EXTRUSIONS LTD. (319 ITR 306), I AM OF THE VIEW THAT THE RATIO OF THE SAID DECISION IS APPLICABLE ONLY TO EMPLOYER'S CONTRIBUTION AND NOT TO EMPLOYEE'S CONTRIBUTION. SEC. 43(B) SPEAKS OF ONLY EMPLOYER'S CONTRIBUTION AND THEREFORE DELETION OF SECOND PROVISO TO SEC. 43B W.E.F. A. Y. 04-05 HAS NO IMPACT ON THE EMPLOYEE'S CONTRIBUTION, WHICH IS GOVERNED BY SEC. 36(L)(VA). THEREFORE, I AM OF THE CONSIDERED VIEW THAT, EMPLOYEES' CONTRIBUTION R EMITTED BEYOND STIPULATED DATES IS NOT ALLOWABLE. HENCE, A.O'S ACTION IN DISALLOWING THE IMPUGNED AMO UNTS IS UPHELD. THESE GROUNDS OF APPEAL ARE DISMISSED. 10. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NOW I N APPEAL BEFORE US. BEFORE US AT THE OUTSET, ID A.R. FAIRLY CONCEDED AN D SUBMITTED THAT THE ISSUE OF EMPLOYEES CONTRIBUTION HAS BEEN DECIDED AG AINST THE ASSESSEE BY THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CA SE OF CIT VS GUJARAT STATE ROAD TRANSPORT CORPORATION (TAX APPEAL NO 637 OF 2013 ORDER DATED 26.12.2013) AND THEREFORE THE ISSUE IS COVERE D AGAINST ASSESSEE. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAD DEPOSITE D EMPLOYEES CONTRIBUTION OF ESIC AND PF FOR VARIOUS MONTHS AFTE R THE DUE DATES PRESCRIBED UNDER THE ACT (AS LISTED AT PAGE 4 OF TH E ASSESSMENT ORDER). HON'BLE GUJARAT HIGH COURT IN THE CASE GUJARAT STAT E ROAD TRANSPORT CORPORATION (SUPRA) HAS HELD THAT 'ANY SUM WITH RESPECT TO THE EMPLOYEES ITA NOS. 402 & 407/AHD/2011 . A.Y. 2003- 04 & 2007- 08 6 CONTRIBUTION AS MENTIONED IN S. 36(L)(VA), ASSESSEE SHALL BE ENTITLED TO THE DEDUCTION OF SUCH SUM TOWARDS THE EMPLOYEES CONTRIB UTION IF THE SAME IS DEPOSITED IN THE ACCOUNTS OF THE CONCERNED EMPLOYEE S AND IN THE CONCERNED FUND SUCH AS PROVIDENT FUND, ESI CONTRIBU TION FUND, ETC PROVIDED THE SAID SUM IS CREDITED BY THE ASSESSEE T O THE EMPLOYEES ACCOUNTS IN THE RELEVANT FUND OR FUNDS ON OR BEFORE THE 'DUE DATE' UNDER THE PROVIDENT FUND ACT, ESI ACT, RULE, ORDER OR NOT IFICATION ISSUED THEREUNDER OR UNDER ANY STANDING ORDER, AWARD, CONT RACT OR SERVICE OR OTHERWISE. ..' 12. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT TH E AMOUNT OF EMPLOYEES CONTRIBUTION TOWARDS PF AND ESIC HAS BEEN DEPOSITED BEYOND THE DUE DATES PRESCRIBED UNDER THE RELEVANT ACT. IN VIEW OF THE AFORESAID FACTS, AND RELYING ON THE AFORESAID DECISION OF HON'BLE GU JARAT HIGH COURT, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A ) AND THUS THIS GROUND OF ASSESSEE IS DISMISSED. 13. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. WE NOW TAKE UP REVENUES APPEAL FOR A.Y. 02-03 WHIC H IS WITH RESPECT TO DELETION OF PENALTY U/S 271(1)(C): 14. WHILE PASSING THE ASSESSMENT ORDER DATED 10.4.2008 U/S 143(3) RWS 254 OF THE ACT, THE DISALLOWANCE AGGREGATING TO RS 9,84 ,487/- ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PROVID ENT FUND AND ESIC WAS MADE BY THE AO AND WAS ALSO CONFIRMED BY CIT(A) . ON THE AFORESAID ADDITION, AO VIDE ORDER DATED 26.11.2008 LEVIED PENALTY OF RS ITA NOS. 402 & 407/AHD/2011 . A.Y. 2003- 04 & 2007- 08 7 4,56,000/- U/S 271(L)(C) OF THE ACT. AGGRIEVED BY T HE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) D ELETED THE PENALTY BY HOLDING AS UNDER:- 3.7.2. IT IS SETTLED LAW THAT PENALTY PROCEEDINGS ARE DIST INCT FROM ASSESSMENT PROCEEDINGS. DISALLOWANCE OF EMPLOYEES CONTRIBUTION IS SUBJECT-M ATTER OF DIVERGENT JUDICIAL OPINION. IN VIEW OF THE APEX COURT DECISION IN THE CASE OF RELIANCE PETRO P RODUCTS [ 322ITR 158(SC)] MERE REJECTION OF CLAIM MADE DOES NOT ATTRACT PENALTY U/S. 271(L)(C). IN TH E INSTANT CASE A.O. HAS NOT MADE OUT ANY CASE THAT THE APPELLANT CONCEALED INCOME OR FURNISHED INACCURATE PARTICULARS THEREOF. HENCE, THE IMPUGNED PENALTY LEVIED IS CANCELLED. THESE GROUNDS OF APPEAL ARE AL LOWED. 15. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 16. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. AND ON THE OTHER HAND LD A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O. AN D CIT(A) AND SUPPORTED THE ORDER OF CIT(A). 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS DISALLOWANCE OF EMPLOYEES CONTRIBUTION WAS MADE ON ACCOUNT OF LATE PAYMENT OF EMPLOYEES CONTRIBUTION OF PROVIDENT FUND AND ESIC. IT IS ALSO A FACT THAT THERE HAVE BEEN DIVERGENT VIEWS OF VARI OUS HIGH COURTS AND TRIBUNALS ON THE ALLOWABILITY OF BELATED PAYMENT OF CONTRIBUTION AND THEREFORE THE ISSUE CAN BE SAID TO BE A DEBATEABLE ISSUE. CIT(A) WHILE DELETING THE PENALTY HAS NOTED THAT AO HAS NOT MADE OUT ANY CASE THAT THE ASSESSEE HAD CONCEALED INCOME OR FURNISHED INACCURA TE PARTICULARS OF INCOME AND HAD ALSO RELIED ON THE DECISION OF HON'B LE APEX COURT IN THE CASE OF RELIANCE PETRO PRODUCTS 322 ITR 158 (SC) FO R DELETING THE PENALTY U/S. 271(1)(C). BEFORE US, REVENUE COULD NO T CONTROVERT THE FINDINGS OF CIT(A). IN VIEW OF THE AFORESAID FACTS , WE FIND NO REASON TO ITA NOS. 402 & 407/AHD/2011 . A.Y. 2003- 04 & 2007- 08 8 INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GR OUND OF REVENUE IS DISMISSED. 18. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED . 19. IN THE RESULT THE APPEAL OF ASSESSEE IS PARTLY ALLO WED AND THAT OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 02 - 05 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT ,AHMEDABAD