AMBERNATH ORGANICS P. LTD, MUMBAI V. ITO WD 10(1)(3), MUMBAI

ITA 4554/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8306 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 28-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 04-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A R BAINLAR
• Assessee Lawyers: ARUN SATHE; ARATHI SATHE
• Section: 43B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SH RI V.D. RAO, JUDICIAL MEMBER I.T.A.NO. 4554/MUM/2009 ASSESSMENT YEAR : 2005-06 M/S. AMBERNATH ORGANICS PVT. LTD., 314, CREATIVE INDL. ESTATE, ROAD NO.2, SUNDER NAGAR KALINA, SANTACRUZ (E), MUMBAI 400 098. PAN: AAACA 3839 N VS. THE INCOME-TAX OFFICER, WARD 10(1)(3) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ARUN SATHE & MS.ARATHI SATHE RESPONDENT BY : SHRI A.R. BAINLAR O R D E R PER P.M. JAGTAP, AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-X, MUMBAI, DAT ED 12.06.2009 FOR THE ASSESSMENT YEAR 2005-06. 2. GROUND NO.1 RAISED BY THE ASSESSEE IN THIS APPEA L READS AS UNDER: ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ER RED (1) (A) IN CONFIRMING THE DISALLOWANCE OF RS 17,30,770/- BEING UNUTILIZED MODVAT/CENVAT, DESPITE THE FACT THAT THE APPROPRIATE AMOUNT OF MODVAT CREDIT IS ADDED TO THE VALUE OF CLOSING STOCK AS REQUIRED U/S.145A OF THE INCOME TAX ACT, 1961 . (B) IN HOLDING THAT UNUTILIZED MODVAT/CENVAT CREDIT IS COVERED BY THE PROVISIONS OF SECTION 43B OF THE INCOME-TAX ACT, 1961. 3. THE ASSESSEE, IN THE PRESENT CASE, IS A COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND PROCESSING OF CHEMICA LS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 27. 10.2005 DECLARING TOTAL INCOME OF RS. 5,73,700/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY ITA NO. 4554/M/2009 M/S.AMBERNATH ORGANICS P.LTD. 2 THE ASSESSING OFFICER THAT ASSESSEE HAS NOT INCLUDE D UNUTILIZED MODVAT CREDIT TO THE EXTENT OF RS.17,30,770/- IN THE VALUE OF CLOSIN G STOCK AS ON 31.03.2005. ACCORDING TO HIM, AS PER THE SPECIFIC PROVISIONS OF SECTION 145A, THE UNUTILIZED MODVAT CREDIT ATTRIBUTABLE TO CLOSING STOCK WAS LIA BLE TO BE ADDED IN THE VALUE THEREOF. AS THE ASSESSEE COMPANY HAD NOT DONE SO, HE ADDED THE UNUTILIZED MODVAT CREDIT TO THE VALUE OF CLOSING STOCK. 4. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ADDI TION MADE BY THE ASSESSING OFFICER ON THIS ISSUE. HE ALSO HELD THAT THE AMOUNT OF MODVAT CREDIT COULD NOT BE ALLOWED TO THE ASSESSEE AS PER THE PRO VISIONS OF SECTION 43B, SINCE IT WAS AN ADVANCE PAYMENT OF DUTY MADE BY THE ASSESSE E. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT A S PER THE PROVISIONS OF SECTION 145A, ADJUSTMENT ON ACCOUNT OF EXCISE DUTY ARE LIAB LE TO BE MADE NOT ONLY TO THE VALUE OF OPENING AND CLOSING STOCK BUT ALSO TO THE VALUE OF PURCHASE AND SALES MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION AND THIS POSITION HAS BEEN ACCEPTED EVEN BY THE LEARNED REPRESENTATIVES O F BOTH THE SIDES. SINCE NO SUCH ADJUSTMENT AS REQUIRED BY THE PROVISIONS OF SE CTION 145A ARE FULLY MADE EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED C IT(A), WE SET ASIDE THEIR ORDERS ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH AFTER MAKING THE REQUIRED ADJUSTMENTS ON ACC OUNT OF EXCISE DUTY TO THE VALUE OF THE OPENING STOCK AND CLOSING STOCK AS WEL L AS THE VALUE OF PURCHASES AND SALES. GROUND NO.1(A) IS ACCORDINGLY TREATED AS AL LOWED FOR STATISTICAL PURPOSES. 6. AS A RESULT OF OUR DECISION ON GROUND NO. 1(A), GROUND NO. 1(B) RAISED BY THE ASSESSEE HAS BECOME INFRUCTUOUS. 7. THE ISSUE RAISED IN GROUND 2 RELATES TO THE DISA LLOWANCE OF RS. 2,13,360/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF TECHNICAL CONSULTATION FEES PAID TO DR. T. RAVINDRA NATHAN. ITA NO. 4554/M/2009 M/S.AMBERNATH ORGANICS P.LTD. 3 8. DURING THE YEAR UNDER CONSIDERATION, A SUM OF RS .2,13,360/- WAS CLAIMED TO BE PAID BY THE ASSESSEE TO DR. T. RAVINDRANATH AN ON ACCOUNT OF TECHNICAL CONSULTATION. THE ASSESSEE, HOWEVER, COULD NOT PROD UCE ANY EVIDENCE TO ESTABLISH THE EXACT NATURE OF SERVICES RENDERED BY DR. T. RAV INDRANATHAN. HE ALSO FAILED TO EXPLAIN CONVINCINGLY AS TO HOW THE TECHNICAL SERVIC ES CLAIMED TO BE RENDERED BY DR. T. RAVINDRANATHAN WERE USEFUL TO THE BUSINESS. THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE O N ACCOUNT OF TECHNICAL CONSULTATION FEES PAID TO DR. T. RAVINDRANATHAN. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER ON THIS ISSUE ON THE GROUND THAT EVEN BEFORE HIM, THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE WITH REGARD TO THE EXACT TECHNICAL SERVICES RENDERED BY DR. T.RAVINDRANATHAN. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIALS ON RECORD. IT IS OBSERVED THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE ON PAYMENT OF TECHNICAL CONSULTATION FEES TO DR. T. RAVINDRANATHAN WAS DISALLOWED AS A RESULT OF FAILURE OF THE ASSESSEE T O PRODUCE ANY EVIDENCE TO ESTABLISH EXACTLY THE NATURE OF SERVICES RENDERED B Y DR. T. RAVINDRANATHAN AND USEFULNESS OF SUCH SERVICES TO THE BUSINESS OF THE ASSESSEE. EVEN BEFORE US, NO SUCH EVIDENCE HAS BEEN PRODUCED ON BEHALF OF THE AS SESSEE IN THE FORM OF ANY AGREEMENT OR UNDERSTANDING WITH DR. T. RAVINDRANATH AN, OUTLINING THE SERVICES TO BE RENDERED BY THE SAID CONSULTANT. THERE IS ALSO NOTHING BROUGHT ON RECORD ON BEHALF OF THE ASSESSEE TO ESTABLISH THAT ANY SUCH S ERVICES AS CLAIMED WERE ACTUALLY RENDERED BY DR. T. RAVIDRANATHAN FOR THE PURPOSE OF ITS BUSINESS. WE, THEREFORE, FIND NO ADJUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LEARNED CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS GROUND NO.2 OF T HE ASSESSEES APPEAL. 10. AS REGARDS GROUND NO.3, IT IS OBSERVED THAT THE ISSUE RAISED THEREIN RELATING TO DISALLOWANCE ON ACCOUNT OF EMPLOYEES CO NTRIBUTION TO PROVIDENT FUND IS ITA NO. 4554/M/2009 M/S.AMBERNATH ORGANICS P.LTD. 4 NOT ARISING FROM THE IMPUGNED ORDER OF THE LEARNED CIT(A). IN THIS REGARD, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE WAS RAISED DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LEAR NED CIT(A) IN THE FORM OF ADDITIONAL GROUND WHICH HAS NOT BEEN CONSIDERED BY THE LEARNED CIT(A). AS FURTHER SUBMITTED BY THE LEARNED COUNSEL FOR THE AS SESSEE, THE ASSESSEE HAS ALREADY MOVED AN APPLICATION FOR RECTIFICATION UNDE R SECTION 154 OF THE ACT BEFORE THE LEARNED CIT(A), WHICH IS PENDING. WE, THEREFORE , DISMISS THIS GROUND RAISED BY THE ASSESSEE AS THE SAME IS NOT ARISING FROM THE IM PUGNED ORDER OF THE LEARNED CIT(A). 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF MARCH, 2011. SD. SD. (V. DURGA RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED THE 9 TH MARCH, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE ITO, WARD 10(1)(3), MUMBAI 3. THE CIT, M.C.X, MUMBAI 4. THE CIT(A)-X, MUMBAI 5. THE DR F BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI