ITO 3(1)1), MUMBAI V. ADVANCE REFRACTORY WARD TECHNOLOGY P.LTD, MUMBAI

ITA 5007/MUM/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2754 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 03-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A DYANI
• Keywords: Additional evidence

Judgement Text

, THE INCOME-TAX APPELLATE TRIBUNAL -ABENCH MUMB AI , , BEFORE SH.RAJENDRA,ACCOUNTANT MEMBER AND M S.BEENA PILLAI,JUDICIAL MEMBER /ITA NO.5007/MUM/2012, /ASSESSMENT YEAR 2005-06 INCOME TAX OFFICER 3(1)(1), ROOM NO.666, 6 TH FLOOR AAYAKAR BHAVAN, MK ROAD MUMBAI-20. VS. M/S. ADVANCE REFRACTORY TECHNOLOGY P. LTD., C-127, UDYOG BHAVAN, CTS NO.85, SONAWALA ROAD, GOREGAON(E) MUMBAI-63. PAN: AACCA 8275 G ( / APPELLANT ) ( / RESPONDENT ) / ASSESSEE BY : NONE / REVENUE BY : SHRI R.A. DYANI / DATE OF HEARING :29.10. 2015 / DATE OF PRONOUNCEMENT :29 .10 . 2015 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. CHALLENGING THE ORDERS DATED 31.5.2012 OF THE CIT(A )-5, MUMBAI, THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL. ASSESSEE-FIRM,ENGAGED IN THE BUSINESS OF TRADING O F REFRACTORY MATERIALS.ORIGINAL ASSESSMENT WAS COMPLETED ON 24.12.2007,U/S.143(3) OF THE ACT,A SSESSING THE INCOME OF THE ASSESSEE AT RS.7.13 CRORES,WHEREIN AN ADDITION ON ACCOUNT OF UN EXPLAINED LIABILITY WAS MADE AMOUNTING TO RS.5.50 CRORES.THE AO FURTHER MADE AN ADDITION OF R S.1.53 CRORES,ESTIMATING THE GROSS PROFIT. THE MATTER TRAVELLED UP TO THE TRIBUNAL,WHO SET ASI DE BOTH THE ISSUES TO THE FILE OF THE AO TO CONSIDER THE ADDITIONAL EVIDENCES AND DECIDE THE IS SUE AFRESH.THE AO WHILE COMPLETING THE ASSESSMENT U/S.143(3) R.W.S.254 OF THE ACT,ON 27.11 .2011 DETERMINED ITS INCOME AT RS.1.44 CRORES. 2. THE EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING TH E ADDITION OF RS.1.34 CRORES ON ACCOUNT OF PRIOR PERIOD EXPENSES.DURING THE SET ASIDE PROCE EDINGS,THE AO FOUND THAT THE ASSESSEE HAD CLAIMED THE AMOUNT OF RS.1,34,88,851/-ON ACCOUN T OF DEBIT BY M/S. ISPAT INDUSTRIES LTD.(IIL),THAT THE SAME WAS NOT CREDITED IN THE BOO KS OF ACCOUNTS FOR THE AY 2004-05, THAT THE EXPENSES IN QUESTION PERTAINED TO EARLIER YEAR, THAT IT HAD DEBITED THE SAID SUM IN THE BOOKS OF ACCOUNT FOR THE YEAR UNDER APPEAL.HE CALLE D FOR AN EXPLANATION FROM THE ASSESSEE IN THAT REGARD.AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE ,DT.27.9.2011,THE AO HELD THAT THE EXPENSES PERTAINED TO AY 2004-05 AND NOT TO THE YEAR UNDER APPEAL, THAT THERE WAS A DISPUTE BETWEEN THE ASSESSEE AND IIL,THAT THE CLAI M MADE BY THE ASSESSEE WAS AN AFTER - THOUGHT,THAT THE ASSESSEE HAD NOT PRODUCED ANY DOCU MENTARY EVIDENCE IN SUPPORT OF HIS CLAIM,THAT THE CLAIM MADE BY THE ASSESSEE WAS NOT A CCEPTABLE.FINALLY, HE ADDED BACK A SUM OF RS.1.34 CRORES TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM,IT MADE ELABOR ATE SUBMISSIONS AND FILED A TABULAR CHART DISPLAYING THE DETAILS OF DISALLOWANCE MADE I N THE ASSESSMENT ORDER AND SAME READS AS UNDER :- SR. PARTICULARS AMOUNT(RS.) ITA NO.5007/M/12 ADVANCE REFRACTROY 2 2 NO 1. EXCHANGE RATE FLUCTUATION 64,14,263 2. EXCHANGE RATE FLUCTUATION 7,02,967 71,17,230 3. CUSTOM DUTY 2,93,534 4. CUSTOM DUTY 1,87,814 ------------ 4,81,348 5. COMPENSATION FOR MATERIAL SHORTAGE/DAMAGES 12,27,804 6. MATERIAL REJECT 98,528 7. MATERIAL REJECT 1,19,365 8. MATERIAL REJECT 42,999 ------------ 2,60,892 9. MATERIAL SHORTAGE AND DISCOUNTS 5,25,494 10. MATERIAL SHORTAGE AND DISCOUNTS 76,082 -------------- EXPENSES CLAIMED IN IMPUGNED YEAR (A) 96,88,851 11. ACCOUNT ADJUSTMENT WITH DELTA STEEL & IRON (NOT AN EXPENSE & NOT DEBITED IN AUDITED P&L ACCOUNT) (B) 38,00,000 --------------- TOTAL(A+B) 1,34,88,851 IT WAS ARGUED BEFORE HIM THAT THE ASSESSEE HAD CLAI MED THE REVENUE EXPENSES OF RS.96.88 LACS,THAT THE BALANCE AMOUNT OF RS.38.00 LACS REPRE SENTED THE ADJUSTMENT, JOURNAL BOOK ENTRY PASSED IN ASSESSEES BOOKS OF ACCOUNT FOR SETTLING THE ACCOUNTS OF THREE PARTIES.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE FAA HELD THAT ASSESSEE HAD DEBITED THE ACCOUNT OF M/S. ORISSA INDUSTRIES LTD. AND HAD CRED ITED THE ACCOUNT OF IIL, THAT FROM THE CONFIRMATION OF IIL IT WAS CLEAR THAT IT HAD PASSED SIMILAR JOURNAL ENTRY, THAT THE ASSESSEE HAD NOT CLAIMED EXPENDITURE OF RS.38.00 LACS IN ITS P&L ACCOUNT, THAT THE AO HAD NOT BROUGHT ANY EVIDENCE TO PROVE THAT RS.38 LACS WAS C LAIMED AS AN EXPENDITURE DURING THE YEAR UNDER APPEAL.ACCORDINGLY, THE FAA DELETED THE DISALLOWANCE OF RS.38.00 LACS.WITH REGARD TO THE BALANCE DISALLOWANCE OF RS.96.88 LACS , THE FAA HELD THAT THE SAID EXPENDITURE COMPRISED OF FOREIGN EXCHANGE FLUCTUATION LOSS(RS.7 1.17 LACS), CUSTOM DUTY (RS.4.81 LACS), COMPENSATION (RS.12.27 LACS) AND MATERIAL REJECTION S ETC.(RS.8.61 LACS), THAT THE PERUSAL OF RECORD FILED BY THE ASSESSEE, PROVED THAT THE EXPEN SES WERE INCURRED IN THE COURSE OF BUSINESS, THAT THE AO HAD DISALLOWED THE EXPENSES F OR THE REASON THAT SUCH EXPENSES WERE RELATED TO THE EARLIER YEAR, THAT THE EXPENDITURE I N QUESTION WAS ALLOWABLE DURING THE YEAR UNDER CONSIDERATION AS EXPENSES HAD BEEN ASCERTAINE D AND CRYSTALLIZED DURING THE YEAR ONLY, THE AO WAS NOT JUSTIFIED IN BRUSHING ASIDE VARIOUS DOCUMENTS FILED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS,THAT THE COPIES OF CIVIL SUIT,PETITION OF INTERIM INJUNCTION DT.11.5.2004, CIVIL COURTS STAY ORDER, CONSENT TERM S AND COURTS NOTICE DT.24.1.2005 PROVED THAT THERE EXISTED SERIOUS DISPUTE BETWEEN THE PART IES, THAT DURING THE YEAR UNDER APPEAL THE DISPUTE WAS SETTLED AND THE EXPENSES WERE CRYSTALLI ZED, THAT THE CORRESPONDENCE BETWEEN THE ASSESSEE AND IIL PROVED THAT THE DISPUTE WAS NOT S ETTLED IN THE EARLIER AY.HE REFERRED TO THE ITA NO.5007/M/12 ADVANCE REFRACTROY 3 3 CASE OF SESHASAYEE PAPER AND BOARD LTD.(260 ITR 415 ) AND OTHER CASES RELIED UPON BY THE ASSESSEE.FINALLY,HE HELD THAT THE CLAIM OF THE EXPE NSES WAS ALLOWABLE DURING THE YEAR UNDER CONSIDERATION. 4. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE AO.AS STATED EARLIER NONE APPEARED ON BEHALF OF THE ASSESSEE . 5. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORED.W E FIND THAT THE AO HAD REJECTED THE CLAIM OF THE ASSESSEE AS HE WAS OF THE OPINION THAT THE EXPENDITURE DID NOT PERTAIN TO THE YEAR UNDER APPEAL.AS FAR AS INCURRING OF EXPENDITURE IS CONCERNED THERE IS NO DISPUTE ABOUT IT.OUT OF THE TOTAL EXPENDITURE OF RS.1.34 CRORES THE ASSESSE E HAD NOT CLAIMED EXPENDITURE OF RS. 38 LAKHS IN THE BOOKS OF ACCOUNTS.THE FAA HAS GIVEN A CATEGORICAL FINDING OF FACTS IN THAT REGARD. THEREFORE,IN OUR OPINION,THE AO WAS NOT JUSTIFIED I N DISALLOWING THE SAID EXPENDITURE. AS FAR AS BALANCE AMOUNT OF RS.96.88 LAKHS IS CONCERNED,IT IS FOUND THAT SERIOUS LITIGATION WAS GOING ON BETWEEN THE ASSESSEE AND IIL,THAT MATTER WAS SETTLE D ONLY AFTER THE COURT INTERVENED,THAT THE FAA HAS PERUSED THE DOCUMENTS RELATED WITH THE COUR T PROCEEDINGS AND HAD GIVEN A CATEGORICAL FINDING OF FACT. ONCE IT IS FOUND THAT THE LIABILIT IES OR EXPENSES OF EARLIER YEAR/(S)WERE CRYSTALLISED DURING A SUBSEQUENT YEAR THEN THERE IS NO JUSTIFICATION FOR DISALLOWING THE SAME.THE ASSESSEE HAD PRODUCED ALL THE NECESSARY EVIDENCE WI TH ABOUT THE PENDING COURT PROCEEDINGS BEFORE THE AO,BUT HE IGNORED THE SAME.IT IS PERTINE NT TO NOTE THAT THE FAA HAS MENTIONED THAT THE INCOME OF EARLIER YEAR CRYSTALLISED DURING THE YEAR WAS TAXED BY THE AO WHILE FIANLISING THE ASSESSMENT.IF THE AO HAD ACCEPTED THAT BECAUSE OF D ISPUTE INCOME OF THE ASSESSEE WAS FINALISED DURING THE YEAR UNDER APPEAL, THEN HE SHOULD HAVE A CCEPTED THE CLAIM OF EXPENDITURE TOO.CONSIDERING THE FACT THAT THE CRYSTALLISATION O F THE EXPENDITURE TOOK PLACE DURING THE YEAR BEFORE US ONLY,WE ARE INCLINED TO CONFIRM THE ORDER OF THE FAA.EFFECTIVE GROUND OF APPEAL,FILED BY THE AO,IS DECIDED AGAINST HIM. AS A RESULT,APPEALS FILED BY THE AO STAND DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 29TH,OCTOBER ,2015. !' 29 #$%& ,2015 '() SD/- SD/- ( / BEENA PILLAI ) ( / RAJENDRA ) * / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI, !' DATE:29.10.2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR K BENCH, ITAT, MUMBAI / , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.