EKL Appliances Ltd., V. Addl.CIT, Range-11,

ITA 490/DEL/2006

• Counselvise Citation: 49020114 RSA 2006
• Duration Of Justice: 6 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 27-11-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 13-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS SUSHMA SINGH
• Assessee Lawyers: SHAILASH SHAH
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) SHRI R.P. TOLANI, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.490/DEL./2006 (ASSESSMENT YEAR : 2001-02) M/S. EKL APPLIANCES LIMITED, VS. ADDL.CIT, RANGE 11, (FORMERLY ELECTROLUX KELVINATOR LTD.) NEW DELHI. FLAT NO.201 203, A 22, GREEN PARK, NEW DELHI. (PAN : AAAPM7192G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHAILASH SHAH, FCA REVENUE BY : MRS. SUSHMA SINGH, CIT DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE CIT (APPEALS)-XIV, NEW DELHI DATED 15.09.2005 FOR THE A SSESSMENT YEAR 2001- 02. 2. THE ASSESSEE WAS CARRYING ON THE BUSINESS OF MAN UFACTURING/TRADING OF REFRIGERATORS, WASHING MACHINES AND SPARE PARTS. D URING THE YEAR UNDER CONSIDERATION, TWO COMPANIES, NAMELY, INTRON LIMITE D (IL) AND ELECTROLUX INDIA LIMITED (EIL) AMALGAMATED WITH THE ASSESSEE C OMPANY. THE HON'BLE DELHI HIGH COURT IN ITS ORDER DATED 14.09.2001 APPR OVED THE AMALGAMATION ITA NO.490/DEL./2006 2 W.E.F. 01.01.2001 I.E. THE APPOINTED DAY. THE ASSE SSEE COMPANY FILED THE RETURN FOR ASSESSMENT YEAR 2001-02 BY TAKING ITS IN COME FROM ITS OWN OPERATION FOR FINANCIAL YEAR 2000-01 AND ALSO TAKIN G INTO ACCOUNT, THE TRANSACTIONS CARRIED OUT BY IL AND EIL (TRANSFEROR COMPANY). THE RETURN WAS FILED DECLARING LOSS OF RS.1,48,67,71,386/- ON 31.1 0.2001. THE LOSS WAS SUBSEQUENTLY REVISED TO RS.1,49,97,62,826/-. BEFOR E US, THE ASSESSEE IS IN APPEAL BY TAKING FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) - XIV, NEW DELHI [CIT(A)] ERRED IN CONFIRMING THE DISALLOW ANCE OF THE PROVISIONS FOR EXPENSES/CREDITORS AMOUNTING TO RS.28,61,72,607/- AND THE REASONS ASSIGNED FOR DOIN G SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PR OVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THEREUNDER; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE A PPELLANT HAS NOT BEEN ABLE TO RECONCILE THE DIFFERENCES IN PROVI SION FOR EXCISE DUTY INCLUDED IN THE PROVISIONS FOR CREDITORS AND T HE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF THE INCOME TAX ACT, 1961 AN D THE RULES MADE THEREUNDER; 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT (A) ERRED IN HOLDING THAT THE DETAILS OF THE EXPENSES IN PROVISIONS FOR CREDITORS HAVE NOT BEEN FILED IN REFERENCE TO WHICH THE SAMPLE INVOICES HAVE BEEN SU BMITTED AND HENCE THE APPELLANT HAS NOT BEEN ABLE TO JUSTIFY IT S CLAIM WHICH IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PR OVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THEREUNDER; 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT ADMITTING ADDI TIONAL EVIDENCES UNDER RULE 46A AND FURTHER PRESUMING THAT EVEN IF IT HAD BEEN ADMITTED IT COULD NOT HAVE SERVED ANY PURP OSE, WHICH ITA NO.490/DEL./2006 3 IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THEREUN DER; 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE. LEARNED CIT(A) ERRED IN CONFIRMING THE DI SALLOWANCE OF RS.47,42,220/- ON ACCOUNT OF ADVANCES WRITTEN OFF A ND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRAR Y- TO THE: FACTS OF THE CASE, THE PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THEREUNDER; 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CTT(A) ERRED IN HOLDING THAT NO DE TAIL HAS BEEN FILED AND THE APPELLANT HAS NOT BEEN ABLE TO SUBSTA NTIATE THAT THE ADVANCES GIVEN WERE FOR RUNNING OF ITS BUSINESS, WH ICH IS WRONG AND CONTRARY TO THE FACTS OF THE CASE, THE PROVISIO NS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THEREUNDER; 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN REPLACING THE ADDI TIONAL EVIDENCES UNDER RULE 46A AND THE REASONS ASSIGNED F OR DOING SO ARE WRONG AND CONTRARY TO THE FACTS OF THE CASE, TH E PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THEREUN DER; 3. GROUNDS NO.1 TO 4 DEAL WITH THE SUSTAINING OF DI SALLOWANCE OF THE PROVISIONS FOR EXPENSES/CREDITORS AMOUNTING TO RS.2 8,61,72,607/-. 4. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. THE ASSESSEE HAS PROVIDED AN AMOUNT OF RS.28,61,72,607/- AS PROVISION FOR EXP ENSES AND CREDITORS. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG. PART OF THIS PROVISION WAS EXCISE DUTY PAYABLE. THE ASSESSEE SUBMITTED DE TAILS OF THE PROVISIONS FOR EXPENSES AND CREDITORS BEFORE THE ASSESSING OFFICER IN THE SUBMISSIONS MADE ON 27 TH FEBRUARY, 2004, WHICH IS EVIDENT FROM PAGES 82 & 8 3 OF THE PAPER BOOK. THE ASSESSING OFFICER PICKED UP ONE ITEM FOR EXCISE DUTY PAYABLE FROM ITA NO.490/DEL./2006 4 THE BREAK UP AND COMPARED THIS WITH THE EXCISE DUTY AS STATED IN THE TAX AUDIT REPORT FIGURES WHICH WERE AVAILABLE AT CLAUSE 21 (I ) OF FORM 3CD. IN THIS CLAUSE, FACTS ABOUT THE DISALLOWANCES U/S 43B ARE R EPORTED. THE ASSESSING OFFICER OBSERVED THAT THE RECONCILIATION DOES NOT C ONFORM. RECONCILIATION OF EXCISE DUTY PAYABLE AS SUBMITTED BY ASSESSEE IS AS UNDER : RECONCILIATION OF EXCISE DUTY PAYABLE AS PER PROVIS ION CREDITORS AND TAX AUDIT REPORT : S.NO. AS PER SCHEDULE OF PROVISION OF CREDITORS PLANT NAME AMOUNT (RS.) A.2 BUTIBORI 3,052,664 A.3 NANDALUR 16,637,584 B.2 SHAHJANPUR 31,105,198 C.1 INTRON 69,696 D SANATH 2,063,194 PROVISION-OTHER.1 WARORA PLANT 22,427,423 TOTAL PROVISION AS ON MARCH 31,2001 75,355,759 ADD : AMOUNT PAID BEFORE MARCH 31, 2001 OUT OF IL OUTSTANDING BALANCE AS ON DECEMBER 31, 2000 1,529,280 TOTAL BALANCE AS REFLECTED IN TAX AUDIT REPORT (AS PER SEPARATE DETAILS BELOW) 76,885,039 DETAILS OF EXCISE DUTY AS SHOWN IN SCHEDULE VII OF TAR COMPANY AMOUNT (RS.) PAID BEFORE THE DUE DATE FOR FURNISHING RETURN BALANCE REMARKS EKL 61501185 61452443 48742 RS.48,742 ADDED BACK IN THE COMPUTATION OF EKL EIL 13784878 13784878 0 RS.13,784,878 ADDED BACK IN COMPUTATION ITA NO.490/DEL./2006 5 OF EIL AND CLAIMED AS DEDUCTION IN COMPUTATION OF EKL. IL 1598976 1529280 (PAID BEFORE MARCH 31, 2001) 69696 RS.1,598,976 ADDED BACK IN COMPUTATION OF IL AND RS.1,529,280 CLAIMED AS DEDUCTION IN COMPUTATION OF EKL THE ASSESSING OFFICER DISBELIEVED THE RECONCILIATIO N ONLY STATING THAT WHEN RS.15,29,280/- OF EXCISE DUTY PAID BEFORE 31.03.200 1 THEN WHY THIS AMOUNT WAS MENTIONED IN FORM 3CD. IN THIS REPORT, ONLY TH E AMOUNT WHICH NEEDS TO BE PAID ON OR BEFORE THE DUE DATE BY FURNISHING RET URN OF INCOME U/S 139(1) IS REQUIRED TO BE REPORTED. ONLY ON THIS BASIS, ASSES SING OFFICER TOOK A VIEW THAT THE CREDITORS ARE TAKEN PURELY ON ESTIMATE BAS IS. SIMILARLY, THE CIT (A) HAD ALSO SUSTAINED THE ADDITION FIRSTLY IN ABSENCE OF REMAND REPORT WHICH WAS NOT SUBMITTED BY THE ASSESSING OFFICER EVEN AFTER T HE WRITTEN DIRECTION BY THE CONCERNED CIT AND VARIOUS REMINDERS BY CIT (A). TH E CIT (A) HAS SIMPLY DISMISSED THE ASSESSEES PLEA WITHOUT GOING INTO A BIT OF MERIT OF RECONCILIATION. DUE TO AMALGAMATION, THERE WAS REP ORTING IN AUDIT REPORT ABOUT THE EXCISE DUTY PAYABLE AS ON 31.12.2000 OF A MALGAMATED COMPANY. THIS RECONCILIATION WAS FILED BEFORE THE ASSESSING OFFICER AS WELL BEFORE THE ITA NO.490/DEL./2006 6 CIT (A). THE ONLY DISCREPANCY NOTED BY AUTHORITIES BELOW WAS ACTUALLY NOT A DISCREPANCY AT ALL. IT IS CLEAR FROM THE RECONCILI ATION THAT IT WAS DUE TO AMALGAMATION APPROVED BY HIGH COURT FOR MIDDLE OF T HE FINANCIAL YEAR W.E.F. 1.1.2001. THE RETURN OF INCOME FOR THE OPERATIONS OF AMALGAMATED COMPANY FOR THE PERIOD FROM 01.03.2000 TO 31.12.2000 WERE F ILED SEPARATELY. THE INCOME FROM OPERATIONS OF THESE AMALGAMATED COMPANI ES FOR THE PERIOD 01.04.2000 TO 31.12.2000 WERE RETURNED ALONG WITH T HE INCOME OF ASSESSEES OWN OPERATION FOR FINANCIAL YEAR 2000-01. THUS, TH IS AMOUNT OF RS.15,29,280/- WHICH WAS MADE THE BASIS BY ASSESSIN G OFFICER FOR DRAWING ADVERSE INFERENCE, WAS OUTSTANDING IN THE BOOKS OF AMALGAMATED COMPANY IL AS ON 31.12.2000, HOWEVER IT WAS PAID BEFORE 31.03. 2001. THEREFORE, WE ARE OF THE VIEW THAT THERE WAS NO DISCREPANCY IN THE RE CONCILIATION OF EXCISE DUTY PAYABLE AS PER THE PROVISIONS OF CREDITORS AND THE TAX AUDIT REPORT. THIS AMOUNT OF RS.15,29,280/- WAS DISALLOWED IN THE RETU RN OF INCOME FILED BY IL THE AMALGAMATED COMPANY FOR THE PERIOD ENDED UP TO 31.03.2000. THIS AMOUNT IS ALLOWABLE IN THE HANDS OF THE ASSESSEE FO R THIS FINANCIAL YEAR AS IT WAS PAID PRIOR TO 31.03.2001. THIS FACT WAS CLEARL Y MENTIONED IN THE INCOME- TAX RETURN WHICH HAS NOT BEEN TAKEN INTO CONSIDERAT ION BY AUTHORITIES BELOW. HAD THERE BEEN AMALGAMATION AT THE BEGINNING OF THE FINANCIAL YEAR, THEN SUCH REPORTING COULD NOT HAVE ARISEN. HENCE ADVERS E INFERENCE DRAWN DISALLOWANCE ON SUCH GROUND IS DEFINITELY NOT SUSTA INABLE. EXCEPT THIS SIMPLY ITA NO.490/DEL./2006 7 MISUNDERSTANDING, THE REVENUE HAD NOT BROUGHT ANYTH ING ON RECORD WHICH MAKES THESE PROVISIONS DISALLOWABLE. FURTHER, BAS ED ON THIS OBSERVATION, DISALLOWANCE OF ENTIRE PROVISION FOR EXPENSES AND C REDITORS IS COMPLETELY ARBITRARY AND UNJUSTIFIED. THE OBSERVATION THAT IT WAS MERE AN AD HOC PROVISION HAS NO LEGS TO STAND. THE PROVISIONS ARE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE . THE NON-SUBMISSION OF THE REMAND REPORT DESPITE CONCERNED COMMISSIONERS DIRECTION AND VARIOUS REMINDERS BY THE CIT (A) ITSELF SHOWS THAT THIS ADD ITION WAS NOT BASED ON SOUND FOOTING. RESTORING THE MATTER BACK TO THE R EVENUE AUTHORITIES SHALL NOT BE IN THE INTEREST OF JUSTICE AS IT SHALL AMOUNT TO GIVING A SECOND INNING OF INVESTIGATION WITHOUT ANY FAULT OF ASSESSEE. HON'B LE BOMBAY HIGH COURT IN THE CASE OF MITSUI O.S.K. LINES MARITIME (INDIA) (P .) LTD. VS. DCIT 8(2), MUMBAI IN ITA NO.426 OF 2012 DATED 17.07.2012 HELD AS UNDER :- THE TRIBUNAL DOES NOT STATE THAT THE MATERIAL, INC LUDING THE COMPARABLES, FURNISHED BY THE APPELLANT WAS INADEQU ATE. THE DEPARTMENT/RESPONDENT ALSO DO NOT CONTEND THAT THE COMPARABLES WERE INADEQUATE. THEY HAVE ANALYZED THE SAME IN A PARTICULAR MANNER WHEREAS THE CIT (A) HAS ANALYZED THE SAME IN A DIFFERENT MANNER. IN OTHER WORDS, THE RESPONDENT H AS NOT CONTENDED AND THE TRIBUNAL HAD NOT HELD THAT THE RE LEVANT COMPARABLES ARE INSUFFICIENT. ITA NO.490/DEL./2006 8 .THE TRIBUNAL HAS NOT HELD THAT IT IS NOT POSSI BLE TO ARRIVE AT THE ALP ON THE BASIS OF THE EXISTING MATE RIAL. THE TRIBUNAL MUST, THEREFORE, NOW DECIDE THE MATTER. KEEPING THESE FACTS IN VIEW AND JUDICIAL PRONOUNCEM ENTS, WE HOLD THAT SUCH AD HOC DISALLOWANCE IS UNJUSTIFIED AND IT CANNOT BE SUSTAINED. 5. THE ISSUE INVOLVED IN GROUNDS NO.5 TO 7 IS AGAIN ST THE CONFIRMATION OF DISALLOWANCE OF RS.47,42,220/- ON ACCOUNT OF ADVANC ES WRITTEN OFF. 6. THE CIT (A) HAS OBSERVED THAT THE ASSESSEE HAS N OT FILED DETAILS BEFORE THE ASSESSING OFFICER. THE CIT (A) HAS ALSO OBSERV ED THAT NEITHER DETAILS OF THESE ADVANCES WERE FILED NOR THE ADDRESSES OF THES E PERSONS WERE FILED. THE CIT (A) HAS ALSO OBSERVED THAT ASSESSEE HAS FAILED TO ESTABLISH THAT THE ADVANCES WERE GIVEN FOR RUNNING OF BUSINESS OF THE ASSESSEE COMPANY AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THE CIT (A) HAS ALSO OBSERVED THAT IN THE LAST DATE OF HEARING, THE ASSESSEE COUN SEL WANTED TO FILE THE LIST OF PARTIES TO WHOM THE ADVANCES WERE GIVEN WHICH WAS R EJECTED. HE ALSO OBSERVED THAT EVEN IF THESE EVIDENCES ARE ADMITTED THIS WOULD NOT SERVE ANY PURPOSE. AFTER HEARING BOTH THE SIDES, WE FIND THA T THE ASSESSEE HAS BEEN DENIED THE OPPORTUNITY AT THE LEVEL OF AUTHORITIES BELOW TO RECONCILE THE ADVANCES WRITTEN OFF. THE ASSESSEE HAS WRITTEN OFF THE AMOUNT IN ITS BOOKS OF ACCOUNTING TREATING THE SAME AS DOUBTFUL ADVANCES. THE ASSESSEE HAS ALSO SUBMITTED THAT THE ADVANCES WERE TO THE VENDORS FOR SUPPLY OF PACKING ITA NO.490/DEL./2006 9 MATERIAL AND OTHER RAW MATERIAL. IN THE ABSENCE OF ANY SUPPLY RECEIVED AGAINST THESE ADVANCES, THE SAME BECOME UNRECOVERAB LE, HENCE WRITTEN OFF. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THIS ASPECT, WE FIND IT APPROPRIATE THAT THE ASSESSEE DESERVES AN OPPORT UNITY TO JUSTIFY ITS CLAIM FOR WRITING OFF THE ADVANCES. HENCE, THESE GROUNDS OF APPEAL ARE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY ALLOW ED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF DECEMBER, 2012. SD/- SD/- (R.P. TOLANI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 21 ST DAY OF DECEMBER, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XIV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.