PREVAL PUMPS & ACCESSORIES (I) P.LTD, MUMBAI V. DCIT CIR 7(1), MUMBAI

ITA 4868/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88111 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 19-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 24-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R N DSOUZA
• Assessee Lawyers: D J SHUKLA
• Keywords: Business income; Additional evidence; Wholly owned subsidiary; Corroborative evidences
• Section: 43B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BE NCH, MUMBAI , !' #$%& , '' ' ( BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO. 4868/MUM/2013 ( ! ! ! ! ) ) ) ) / ASSESSMENT YEAR : 2007-08 M/S.PREVAL PUMPS & ACCESSORIES (I) PVT. LTD. 228, PRAGATI INDUSTRIAL ESTATE, N.M.JOSHI MARG, LOWER PAREL, MUMBAI 400001 ! ! ! ! / VS. THE DCIT, CIR. 7, MUMBAI. * '' ./ + ./ PAN/GIR NO. : AACCP 1851F ( *, / APPELLANT ) .. ( -.*, / RESPONDENT ) *, / ' / APPELLANT BY: SHRI D.J.SHUKLA -.*, 0 / ' / RESPONDENT BY: SHRI R.N.DSOUZA ! 0 12' / DATE OF HEARING :27.01.2015 3) 0 12' / DATE OF PRONOUNCEMENT :27.01.2015 '4 / O R D E R PER N.K. BILLAIYA, AM: WITH THIS APPEAL THE ASSESSEE HAS CHALLENGED CORRE CTNESS OF THE ORDER OF THE LD. CIT(A)-12, MUMBAI DATED 06/03/201 3 PERTAINING TO ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED F OUR SUBSTANTIVE GROUND OF APPEAL.. I .T.A. NO. 4868/MUM/2013 2 2. BEFORE US THE ASSESSEE HAS MOVED AN APPLICATION FOR WITHDRAWING GROUND NO.3. GROUND NO.3 IS ACCORDINGLY DISMISSED AS WITHDRAWN. 3. GROUND NO.1 RELATES TO THE ADDITION MADE UNDER S ECTION 43B OF THE INCOME TAX ACT, 1961(THE ACT) IN RESPECT OF MODVAT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, AFTER CONSIDERING TH E INFORMATION GIVEN BY THE AUDITORS IN THE TAX AUDIT REPORT THE AO OBSERVE D THAT ASSESSEE HAS SHOWN RS.7,29,142/- AS OUTSTANDING WITH THE EXCISE AUTHORITIES. WHILE INVOKING THE PROVISIONS OF SECTION 43B OF THE ACT, THE AO WAS OF THE OPINION THAT THIS STATUTORY LIABILITY WAS NOT PAID ON OR BEFORE THE DUE DATE OF FILING OF THE RETURN. THE AO ACCORDINGLY, DISAL LOWED RS.7,29,142/-. 3.1 THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND EXPLAINED ITS METHOD OF ACCOUNTING OF MODVAT. IT WAS EXPLAINED THAT THE ASSESSEE IS FOLLOWING EXCLUSIVE SYSTEM OF ACCOUNTIN G. IT WAS FURTHER EXPLAINED THAT THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IS SUPPORTED BY THE GUIDANCE NOTE OF ICAI. THE LD. CI T(A) WAS OF THE OPINION THAT AS THE APPELLANT HAS FOLLOWED EXCLUSIV E SYSTEM OF ACCOUNTING REGARDING THE VALUATION OF STOCK IT STAND THAT THE SAME HAS NOT BEEN DONE AS REQUIRED TO BE DONE UNDER SECTION 145A OF THE A CT. UPHOLDING THE ADDITION MADE BY THE AO THE LD. CIT(A) OBSERVED TH AT THE AO HAS CORRECTLY HELD THAT THE AMOUNT OF RS.7,29,142/- SHO WN IN THE BALANCE SHEET AS BALANCE OF DEPOSIT WITH EXCISE AUTHORITIE S WOULD NEED TO BE BROUGHT TO TAX. AGGRIEVED BY THIS THE ASSESSEE IS BEFORE US. 3.2 LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HA S BEEN STATED BEFORE LOWER AUTHORITIES. IT IS THE SAY OF LD. COUNSEL TH AT ON IDENTICAL SET OF FACTS THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . MAHALAKSHMI I .T.A. NO. 4868/MUM/2013 3 GLASS WORKS PVT., 318 ITR 116 (BOM) HAS DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE. 3.3 PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUP PORTED THE ORDER OF THE LD. CIT(A). 3.4 WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AU THORITIES BELOW. WE FIND THAT THE REVENUE AUTHORITIES HAVE NOT APPRECIA TED THE FACTS IN THE RIGHT PERSPECTIVE. WE ALSO FIND THAT THE ACCOUNTIN G ENTRIES HAVE NOT BEEN PROPERLY UNDERSTOOD BY THE REVENUE AUTHORITIES. AD JUSTMENT OF MODVAT TO THE VALUE OF CLOSING STOCK WOULD BE REVENUE NEUT RAL IF THE ENTRIES ARE UNDERSTOOD IN THE RIGHT PERSPECTIVE. WE, THEREFORE , RESTORE THIS ISSUE TO THE FILE OF AO. THE AO IS DIRECTED TO VERIFY THE E NTRIES EXPLAINED BY THE ASSESSEE IN RELATION TO THE MODVAT, BE IT INCLUSIVE OR EXCLUSIVE METHOD, THE ASSESSEE IS DIRECTED TO SHOW THAT THE ADJUSTMENT W OULD BE REVENUE NEUTRAL. THE AO IS DIRECTED TO VERIFY THE SAME. G ROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES. 4. GROUND NO.2 RELATES TO DISALLOWANCE MADE BY THE AO TO THE EXTENT OF RS.32,65,260/- OUT OF THE EXPENSES SHARED BY TH E ASSESSEE WITH ITS HOLDING COMPANY. 4.1 WHILE SCRUTINIZING THE RETURN THE AO NOTICED TH AT ASSESSEE HAS MADE PAYMENTS TO M/S. PRECISION VALVE (INDIA) LTD. AMOUNTING TO RS.45,74,304/-. THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. IT WAS EXPLAINED THAT THE ASSESSEE IS 100% SUBSIDIARY OF M /S. PRECISION VALVE (INDIA) PVT. LTD. AND THERE ARE COMMON EXPENSES INC URRED BY THE PARENT COMPANY WHICH IS SHARED BY THE ASSESSEE. HOWEVER, NO DETAILS WERE I .T.A. NO. 4868/MUM/2013 4 FURNISHED BY THE ASSESSEE. THE AO, THEREFORE, DIS ALLOWED THE SAME AND ADDED BACK TO THE BUSINESS INCOME OF THE ASSESSEE. 4.2 THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT( A) AND FILED NECESSARY DETAILS WITH DOCUMENTARY EVIDENCES. SUCH DETAILS WERE SENT TO THE AO. IN HIS REMAND REPORT THE AO STATED THAT SI NCE SPECIFIC QUERY WAS RAISED DURING THE ASSESSMENT PROCEEDINGS, THE ASSES SEE DID NOT FILE ANY DETAIL IN SUPPORT OF THE CLAIM OF EXPENDITURE, AND THE AO ASKED LD. CIT(A) NOT TO ACCEPT THESE ADDITIONAL EVIDENCES. L D. CIT(A) PROCEEDED BY OBSERVING THAT THE ASSESSEE IS SHARING RENT OF T HE OFFICE PREMISES WITH THE HOLDING COMPANY BUT NO AGREEMENT WAS FURNISHED. SIMILARLY, DIRECTORS REMUNERATION IS ALSO NOT SUPPORTED BY AN Y DOCUMENTS TO SHOW THE SHARING OF THE REMUNERATION BETWEEN THE ASSESSE E AND ITS HOLDING COMPANY. LD. IT(A) WAS CONVINCED THAT THE AO HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. AGGRIE VED BY THIS, THE ASSESSEE IS BEFORE US. 4.3 LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY SUBMITT ED THAT ALL NECESSARY DETAILS WERE FILED BEFORE THE FIRST APPEL LATE AUTHORITY. THE SAME WERE TRANSMITTED TO THE AO FOR VERIFICATION/COMMEN TS. THE AO DID NOT DO SO. IT IS THE SAY OF THE LD. COUNSEL THAT THE C LAIM OF THE EXPENDITURE IS SUPPORTED BY DOCUMENTARY EVIDENCES. 4.4 PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF REVENUE AUTHORITIES. 4.5 HAVING HEARD THE RIVAL SUBMISSIONS, WE HAVE CAR EFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS SUBMITTED DETAILS WITH SUPPORTING DOCUMENTS BEFORE LD. CIT(A) . IT IS ALSO A FACT I .T.A. NO. 4868/MUM/2013 5 THAT THE SAME WERE TRANSMITTED TO THE AO FOR VERIFI CATION/COMMENTS. IT IS ALSO A FACT THAT THE AO DID NOT VERIFY THE SAME. I N OUR CONSIDERED OPINION AND IN THE INTEREST OF JUSTICE THIS ISSUE NEEDS VE RIFICATION AT THE ASSESSMENT STAGE. WE, THEREFORE, RESTORE THIS ISSU E TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO FILE THE NECESSARY DETA ILS WITH SUPPORTING EVIDENCES BEFORE THE AO AND THE AO IS DIRECTED TO DECIDE THE ISSUE AFRESH AFTER CONSIDERING THE DETAILS WITH SUPPORTIN G EVIDENCES FILED BY THE ASSESSEE. GROUND NO.2 IS TREATED AS ALLOWED FOR S TATISTICAL PURPOSES. 5. GROUND NO.4 RELATES TO THE TREATMENT OF INTEREST INCOME AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME. A T THE OUTSET LD. COUNSEL FOR THE ASSESSEE STATED THAT IN THE EARLIER ASSESSMENT YEAR INTEREST OF FIXED DEPOSITS HAS BEEN ACCEPTED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. WITHOUT ASSIGNING ANY REAS ON THE AO HAS CHANGED THE HEAD OF INCOME AND THE LD. CIT(A) CONFI RMED THE SAME. IN OUR CONSIDERED OPINION THIS ISSUE ALSO NEEDS TO BE VERIFIED THAT WHETHER IN EARLIER ASSESSMENT YEARS INTEREST ON BANK DEPOSI TS WAS TAXED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AN D IF FOUND CORRECT THE SAME TREATMENT SHOULD BE GIVEN DURING THE YEAR UNDE R CONSIDERATION. GROUND NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON 27 TH JANUARY, 2015. SD/- SD/- (JOGINDER SINGH ) (N.K. BILLAIYA) /JUDICIAL MEMBER '' / ACCOUNTANT MEMBER MUMBAI; 5! DATED : 27.01.2015 I .T.A. NO. 4868/MUM/2013 6 . ! . ./ VM , SR. PS '4 '4 '4 '4 0 00 0 -1# -1# -1# -1# 6'#)1 6'#)1 6'#)1 6'#)1 / COPY OF THE ORDER FORWARDED TO : 1. *, / THE APPELLANT 2. -.*, / THE RESPONDENT. 3. 7 ( ) / THE CIT(A)- 4. 7 / CIT 5. #8 -1! , , / DR, ITAT, MUMBAI 6. 9 : / GUARD FILE. '4! '4! '4! '4! / BY ORDER, .#1 -1 //TRUE COPY// ; ;; ; / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI