ACIT 13(2), MUMBAI V. WORLD TRADE LINK, MUMBAI

ITA 4210/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8068 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 16-03-2011
• Assessment Year: 1994-1995
• Appeal Filed On: 09-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B N RAO

Judgement Text

I.T.A NO.4210/ MUM/2009 WORLD TRADE LINK 1 IN THE INCOME TAX APPELLATE TRIBUNAL, G BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, PRESIDENT AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A NO.4210/ MUM/2009 ASSESSMENT YEAR: 1994-95 ACIT 13(2) .. APPELLANT R.NO.421, 4 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI. VS WORLD TRADE LINK ,. RESPONDEN T 308, STEEL CENTRE, SANT TUKARAM ROAD, MUMBAI. PA NO.AAGPM 3492 E APPEARANCES: ASHIMA GUPTA, FOR THE APPELLANT B.N. RAO, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. THE APPEAL FILED BY THE ASSESSING OFFICER IS DIRECTED AGAINST CIT (A)S ORDER DATED 16 TH APRIL, 2009, FOR THE ASSESSMENT YEAR 1994-95. 2. IN GROUND NOS.1(I) AND 1(II), WHICH ARE INTERCONN ECTED AND WHICH WE WILL TAKE UP TOGETHER, ASSESSING OFFICER HAS RAISED FOLLOWING GRIEVANCES: 1.(I) THE LD CIT (A) ON THE FACTS AND IN THE CIRCUM STANCES OF THE CASE, ERRED IN LAW IN DIRECTING THE AO TO DELETE THE ADDITION MADE OF ` .7,82,852 ON ACCOUNT OF UNPROVED PURCHASES. (II) THE LD CIT (A) ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, ERRED IN NOT APPRECIATING THAT PURCHASE EXPENDITURE IN CONTRA VENTION OF CUSTOMS ACT IS NOT AN ALLOWABLE EXPENDITURE U/S.37(1) OF THE I.T. ACT. I.T.A NO.4210/ MUM/2009 WORLD TRADE LINK 2 3. BRIEFLY STATED, MATERIAL FACTS ARE LIKE THIS. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD, INTER ALIA, MADE PURCHASES OF ` .7,82,582 FROM A SINGAPORE BASED CONCERN, BUT AS SHIPP ED GOODS WERE OTHER THAN GOODS ORDERED BY THE ASSESSEE, AND THE ASSESSEE D ID NOT WANT TO PAY HIGH CUSTOM DUTY LEVIABLE, AS A PENAL MEASURE, ON SUCH IMPOR TS, ASSESSEE DID NOT CLEAR THE GOODS. THE IMPORTED GOODS WERE, ACCORDINGLY, CONFISCA TED BY THE CUSTOM AUTHORITIES. ON THESE FACTS, ASSESSING OFFICER DISALLOWED THE PURCHASES BY OBSERVING THAT CONSIDERING THIS (SITUATION), ASSESSEES CLAIM OF PUR CHASES CANNOT BE CONSIDERED. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE THE CIT(A) WHO DELETED THE DISALLOWANCE HOLDING THAT PURCHASE WAS MAD E IN REGULAR COURSE OF BUSINESS, PAYMENT WAS MADE THROUGH BANKING CHANNELS AND MERELY BECAUSE LOSS WAS CAUSED DUE TO SUBSEQUENT EVENTS, PURCHASES CANNOT BE DISALLOWED. THE ASSESSING OFFICER IS AGGRIEVED OF THE STAND SO TAKEN BY TH E CIT (A) AND IS IN APPEAL BEFORE US. 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PER USED THE MATERIAL ON RECORD, WE SEE NO REASONS TO INTERFERE IN THE CONCLUSI ONS ARRIVED AT BY THE CIT (A). WE HAVE NOTED THAT WHILE THE ASSESSEE HAD MADE PAYMENT THROUGH SYNDICATE BANK, FOR THESE GOODS, ON 23 RD SEPTEMBER, 1993, THE FACT THAT GOODS WAS NOT AS PER O RDER WAS DISCOVERED MUCH LATER, AND, ACCORDINGLY, ASSESSEE DI D NOT TAKE DELIVERY OF THE GOODS TO MINIMIZE THE LOSSES, SINCE TAKING DELIVERY OF G OODS, BY PAYING HIGH CUSTOM DUTY AT PENAL RATES, WOULD HAVE ONLY INCREASED THE LOSS TO THE ASSESSEE. IN ANY EVENT, PURCHASES CANNOT BE DISALLOWED ONLY BECAUSE GOOD S PURCHASED WERE SUBJECTED TO LOSS LATER. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE THE STAND OF THE CIT (A) AND DEC LINE TO INTERFERE IN THE MATTER. 5. GROUND NO.1(I) AND (II) ARE, ACCORDINGLY, DISMISSE D. 6. IN GROUND NOS.1(III) AND (IV), THE AO HAS RAISED TH E FOLLOWING GRIEVANCES: (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT (A) ERRED IN DIRECTING THE AO TO ALLOW LOSS OF ` .34,045 ON ACCOUNT OF SECOND PURCHASE WHICH WAS SOLD TO SISTER CONCERN. I.T.A NO.4210/ MUM/2009 WORLD TRADE LINK 3 (IV) THE LD CIT (A) ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, ERRED IN NOT APPRECIATING THAT THE SALE TO SISTER CONCERNS IS HIT BY THE PROVISION U/S.40A(2)(B) OF THE I.T.ACT AND HENCE SALE BELOW PAR IS NOT ACCEPTABLE. 7. AS FAR AS THIS GRIEVANCE IS CONCERNED, WE HAVE NOTED THAT THE ASSESSEE HAS MADE ADDITION OF ` .34,025 ON ACCOUNT OF CLEARING CHARGES NOT RECOVERED FROM SISTER CONCERN ON SALE OF GOODS, AND ` .7,050 BEING PROFIT THE ASSESSEE OUGHT TO HAVE MADE ON THIS TRANSACTION WITHOUT ASSUMING ANY REASON. AGGRI EVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT (A) WHO DELETED THE ADD ITION BY OBSERVING AS FOLLOWS: I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPELLAN T MADE A PURCHASE AND SOLD THE SAME TO THE SISTER CONCERN AT LOSS. THE SALE AND PURCHASE TRANSACTIONS WERE CONSIDERED AS GENUINE. THE P URCHASE AMOUNT INCLUDED ALL TYPES OF COST INCLUDING CLEARING CHARGES ETC. SINCE THE TRANSACTION RESULTED IN LOSS THEREFORE, THE LOSS IS AL LOWABLE TO THE APPELLANT. IN THE FACTS AND CIRCUMSTANCES, THE AO IS DIRECTED TO ALLOW THE LOSS OF ` .34,025 TO THE APPELLANT. THIS GROUND OF APPELLANT I S ALSO ALLOWED. 8. AGGRIEVED, ASSESSING OFFICER IS IN APPEAL BEFORE US. 9. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PER USED MATERIAL ON RECORD, WE ARE INCLINED TO APPROVE ACTION OF THE CIT(A). NO REASONS OF IMPUGNED ADDITIONS ARE GIVEN BY THE CIT (A), BUT, IN ANY CASE, JUST BECA USE SALE HAS TAKEN PLACE AT LOWER PRICE VIS--VIS COST OF PURCHASE EVEN TO A SISTER CONCER N, ADDITIONS CANNOT BE MADE AS HAS BEEN DONE IN THE PRESENT CASE. WE APPROVE THE ACTI ON OF THE CIT (A) AND DECLINE TO INTERFERE IN THE MATTER. 10. GROUND NO.1(III) AND (IV) ARE ALSO DISMISSED. 11. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2011 SD/- (R.V.EASWAR) PRESIDENT SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 22 ND MARCH, 2011 PARIDA I.T.A NO.4210/ MUM/2009 WORLD TRADE LINK 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),XIII, MUMBAI 4. COMMISSIONER OF INCOME TAX, 13, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH G, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI