ACIT CIR 3, THANE V. RUPA ORGANICS P.LTD, MUMBAI

ITA 5023/MUM/2012

• Counselvise Citation: 502319914 RSA 2012
• Duration Of Justice: 3 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 06-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR
• Assessee Lawyers: RAVI K MULCHANDI
• Section: 148; 263; 143(3)

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D , BENCH . , , BEFORE S/SH. D. MANMOHAN , VICE PRESIDEN T & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 5023 /MUM/20 1 2 , / ASSESSMENT YEAR - 2003 - 04 DCIT - CIRCLE - 3 ROOM NO.2, B - WING, 6TH FLOOR ASHAR IT PARK, ROAD NO.16 - Z WAGLE IND. ESTATE THANE(W) - 400 604. VS M/S. RUPA ORGANICS 202 , DEVPARAG CHS RAVI INDUSTRIAL ESTATE, NAUPADA THANE(W) - 400 602 PAN:AAACR 8091 H ( / ASSESSEE ) ( / RESPONDENT ) /ASSESSEE BY :SHRI RAVI K. MULCHANDI - (AR) / REVENUE BY :SHRI SANJAY KUMAR - (DR) / DATE OF HEARING : 13 - 0 8 - 2015 / DATE OF PRONOUNCEMENT : 13 - 0 8 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT. 28.5.12 OF CIT(A) - I, THANE, ASSESSING OFFICER(AO) , HAS RAIS ED FOLLOWING GROUNDS OF APPEAL : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX(APPEALS) - I, THANE ERRED IN DELETING THE ADDITION OF RS.15,07,310/ - MADE U/S.41(1) OF THE INCOME TAX ACT, 1961 IGNORING THE DECISION OF THE HO N'BLE KARNATAKA HIGH COURT IN THE CASE OF MYSORE THERMO ELECTRIC (P) LTD. (1996) 221 ITR 504/89 TAXMAN 558, WHICH DECIDES THAT THE EXCISE REFUND RECEIVED BY THE ASSESSEE IS A REVENUE RECEIPT AND SHOULD BE CREDITED TO PROFIT AND LOSS A/C. AND OFFERED FOR T AXATION EVEN IF SEPARATE ACCOUNT FOR THE SAME IS BEING MAINTAINED. 2. THE APPELLANT PRAYS THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) - I, THANE, MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY GROUND/GROUNDS WHICH MAY BE NECESSARY. 2. ASSESSEE - COMPANY, ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF CHEMICALS, FILED RETURN OF INCOME ON 27.1 1.03 , DECLARING I NCOME OF RS. 14.48 LACS. THE AO COMPLETED THE ASSESSMENT U/S. 143(3 ) ON 20.02 .200 6 DETERMINING THE INCOME OF THE ASSESSE AT RS.24.57 LACS. SUBSEQUENTLY, CIT - II, THANE ISSUED NOTICE U/S. 263 OF THE ACT TO THE ASSESSE ON 12.3.2008. A FTER EXAMINING THE RECORDS , HE PASSED REVISIONARY ORDER ON 24.3.2008 AND SET ASIDE THE ASSESSMEN T TO THE FILE OF THE AO. HE DIRECTED THE AO TO ADJUDICATE THE ISS UE OF EXCISE DUTY PAID, MODVAT/C ENVAT CREDIT AND EXCISE REFUND.THE AO, INSTEAD OF PASSING SET ASIDE ASSESSMENT, ISSU ED A NOTICE U/S. 148 ON 30.3.09.VIDE HIS ORDER, DT.9.12. 20 09,HE COMPLETED ORDE R U/S. 143(3) R.W.S. 147 OF THE ACT .IN HIS ORDER, THE AO HELD THAT THE ASSESSE HAD RECEIVED A REFUND FROM EXCISE DEPARTMENT OF 15.07 LACS, THAT THE AMOUNT IN QUESTION WAS REQUIRED TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSE . REFERRING TO THE PROVISIONS OF S.41(1 ) OF THE ACT, HE MADE AN ADDITION OF RS.15,07,310/ - TO THE INCOME OF THE ASSESSE E . 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY ( FAA ) . B EFORE HIM, IT WAS ARGUED THAT THE CIT IN HIS REVISIONARY ORD ER HAD ISSUED SPECIFIC DIRECTION TO THE AO, THAT AO HAD TO VERIFY THE CREDIT BALANCE IN EXCISE ACCO UNT AND HAD 5023/12 - RUPA ORGAICS 2 TO TAKE A DECISION, THAT THE EXCISE DUTY PAID ON PURCHASES WAS NOT CLAIMED IN THE P&L ACCOUNT, THAT IT WAS SHOWN IN THE SEPARATE ACCOUNT IN THE BA LANCE SHEET AS EXCISE DUTY/MODVAT CREDIT UNDER THE HE AD DEPOSITS/LOANS AND ADVANCES, THAT THE EXCISE DUTY PAYABLE ON THE SALES WAS ADJUSTED IN THOSE ACCOUNTS, THAT THE BALANCE WAS TRANSFERRED TO EXCISE DUTY REFUND R ECEIVABLE A CCOUNT (EDRRA) AGAIN AND WAS SHOW N UNDER THE HEAD DEPOSIT/LOANS/ADVANCES, THAT IT HAD FURNISHED COMPLETE DETAILS OF THE ACCOUNTS A ND A COPY OF THE BALANCE SHEET. IT WAS CONTENDED THAT THE ASSESSEE HAD SHOWN REFUND OF RS.15.07 LACS IN THE EDRRA, THAT PROVISI ONS OF S.41(1) WOULD NOT APPLY, TH AT IT HAD NEVER CLAIMED ANY DEDUCTION OR EXPENDITURE FOR EXCISE DUTY. 4. AFTER CONSIDERING THE MATTER AVAILABLE ON RECORD, THE FAA HELD THA T THE AO HAD MADE ADDITION U/S. 41(1) OF THE ACT WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAD NOT CLAIMED ANY EXP ENDITURE ON THAT ACCOUNT, THAT THE AO HAD IGNORED THE DIRECTIONS GIVEN BY THE CIT IN HIS REVISIONARY ORDER, THAT THE AO HAD NOT POINTED OUT AS TO WHETHER OR NOT THERE WAS A CREDIT BALANCE IN THE EXCISE ACCOUNT, THAT EXCISE DUTY PAID ON PURCHASE WAS NOT CLAIM ED IN THE P&L ACCOUNT, THAT THE SAME WAS PART OF THE BALANCE SHEET, THAT THE EXCISE DUTY PAYABLE ON SALE WAS ADJUSTED IN A PROPER ACCOUNT AND WAS TRANSFERRED TO THE E DRRA, THAT THE EXCISE REFUND RECEIVED DURING THE YEAR UNDER APPEAL WAS ADJUSTED AGAINST THE REFU ND RECEIVABLE OF RS.21.27 LACS, THAT THE BALANCE AMOUNT OF RS.6.19 LACS WAS REFLECTED AS CLOSING BALANCE IN THE BALANCE SHEET AS ON 31.3.2003.FINALLY, HE DELETED THE ADDITION MADE BY THE AO. 5. BEFORE US, THE DEPARTMENTAL REPRESENTATIVE (DR) ARGUED THAT THE AO HAD RIGHTLY INVOKED THE PROVISION OF S.41(1) OF THE ACT. HE SUPPORTED THE ORDER OF THE AO AND RELIED UPON THE CASE OF MYSORE THERM O ELECTRIC (P) LD.(221ITR 504). THE AUTHORISED REPRESENTATIVE(AR ) CONTENDED THAT THE ACTION OF THE AO WA S NOT AS PER L AW, THAT THE AO HAD NOT CARRIE D OUT THE DIRECTION OF THE CIT, THAT THE DISPUTED AMOUNT WAS NEVER CLAIMED IN THE P&L ACCOUNT. HE FURTHER STATED THAT THE FACTS UNDER CONSIDERATION WERE TOTALLY DIFFERENT FROM THE FACTS OF THE MYSORE THERMO ELECTRIC (P) LTD. (S UPRA). HE RELIED UPON THE CASES O F BHAWANVA PATH NIRMAN (BOHRA) (258 ITR 440 ) AND EMKAY GLASS WORKS (288 ITR 582) 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.WE FIND THAT THE AO HAD ISSUED NOTICE U/S. 148 OF THE ACT AFTER THE OR DER U/S. 263 WAS PASSED BY THE CIT, THAT THE C IT HAD, IN HIS REVISIONARY ORDER, GIVEN HIM SPECIFIC DIRECTIONS ABOUT THE EXCISE DUTY/MODVAT, THE AO DID NOT FOLLOW THE DIRECTIONS OF THE CIT AND COMPLETED THE ASSESSMENT, THAT HE MADE ADDITION OF 15. 07 LACS U/S . 41(1) OF THE ACT. HERE WE WOULD LIKE TO REPRODUCE THE DIRECTIONS ISSUED BY THE CIT IN HIS O RDER PASSED U/S. 263 OF THE ACT AND SAME READ AS UNDER: 03. I HAVE CONSIDERED THE ASSESSEE'S SUBMISSIONS. THE ASSESSEE HAS EXPLAINED HOW IT MAINTAINS A SEPARATE EXC ISE A/C AS PER PARA 7(2) TO 7(4) GIVEN EARLIER. HE DEBITS THE PURCHASES NET OF EXCISE PAID ON IT AND IN A SEPARATE A/C HE ACCUMULATES THE SAME TO BE ADJUSTED AGAINST EXCISE CHARGED ON LOCAL SALES. THE EXPORTS ARE EXEMPT FROM EXCISE DUTY AS PER PARA 7(2). T HEREFORE, THE PURCHASES, PART OF WHICH IS APPLIED FOR LOCAL SALES AND PARTLY FOR EXPORTS INVOLVE EXCISE DUTY PAID (ON INPUTS). THE EXCISE PAID BALANCE IN SUCH A/C WHICH REMAINS UNADJUSTED BY EXCISE CHARGED ON LOCAL SALES IS REFUNDED BY THE GOVT. THEREFO RE, AT THE END OF A PARTICULAR TRANSACTION AT THE END OF THE YEAR THESE EXCISE ON INPUTS SHOULD BALANCE OUT AGAINST EXCISE CHARGED ON LOCAL SALES AND EXCISE REFUND. BUT, THE AR. CLA IMED THAT IT NEVER HAPPENED AND THAT THERE WAS ALWAYS A DEBIT BALANCE AT THE END OF A FINANCIAL YEAR IN SUCH A/C, PRIMARILY BECAUSE EXCISE REFUND CLAIM WAS 5023/12 - RUPA ORGAICS 3 ENTERTAINED ONLY WHEN THE BAL ANCE OF UNADJUSTED EXCISE PAID WAS CLAIMED BY THE ASSESSEE AS REFUNDABLE. BE THAT AS IT MAY, THESE FACTS WERE SEEN AS NOT APPEARING ANYWHERE IN THE RECORDS OF EARLIER YEARS OR THIS PARTICULAR YEAR. THE AR. WAS ASKED, IF HE COULD RECONCILE THE BALANCES IN SUCH A/C OVER A PERIOD OF FOUR TO FIVE PAST ASSESSMENT YEARS. HE DID NOT HAVE THE FIGURES AND SOUGHT TIME. HE COULD NOT GIVE ANY PLAUSIBLE REA SON WHY THERE COULD NOT BE A CREDIT BALANCE IN SUCH A/C. WHICH WAS KEPT OUTSIDE THE PURVIEW OF THE P&L A/C AND THEREFORE, APPARENTLY, OUTSIDE THE SCOPE OF EXAMINATION BY THE AO. THE AR. ADMITTED THAT THERE WAS A CASE FOR TAXATION, IF THERE WAS A CREDIT BA LANCE IN SUCH A/C AT THE END OF THE YEAR. 04. I THEREFORE, FEEL THAT THIS IS A FIT CASE FOR SET ASIDE, WHERE THE AO CAN EXAMINE THIS ISSUE ONCE AGAIN. IF SUCH IMPUGNED ACCOUNT ALWAYS REFLECTS A DEBIT BALANCE AND IF OTHER ENTRIES ARE KEPT OUT SIDE P &L A/C. THEN THERE MIGHT NOT BE ANY SCOPE OF INVOKING SECTION 145(1). HOWEVER, IF THERE IS A CREDIT BALANCE IN SUCH ACCOUNT EITHER IN THIS YEAR OR IN PAST, THEN THE ASSESSING OFFICER WILL BE UNDER A LEGAL OBLIGATION TO BRING THE SAME TO TAX AS PER PROFI TS AND GAINS OF THE BUSINESS OF THAT AY. HOWEVER, THIS QUESTION REMAINS OPEN EVEN FOR THIS YEAR AS THE SAME HAS NOT BEEN ENQUIRED INTO BY THE AO., WHICH HAS CAUSED THE ASSESSMENT TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THE CLAIM OF THE ASSESSEE THAT THE ISSUE STOOD EXAMINED BY THE AO IS NOT BORNE OUT FROM THE MATERIAL ON RECORD. I, THEREFORE SET ASIDE THE ASSESSMENT ORDER DATED 28 - 02 - 2006 AND DIRECT THE AO TO CONSIDER THE ABOVE AND MAKE A FRESH ASSESSMENT . FROM THE ABOVE, IT IS CLEA R THAT THE CIT HAD GIVEN A VERY SPECIFIC DIRECTION ,B UT THE AO INVOKED THE PROVISIONS OF S .41(1) OF THE ACT. WE ARE OF THE OPINION THAT PROVISIONS RELATED TO CESSATION OF LIABILITY CAN BE INVOKED ONLY IF SOME EXPENDITURE IS CLAIMED BY AN ASSESSE IN ITS P&L ACCOUNT. IN THE CASE BEFORE US, THE FAA HAS GIVEN A CATEGORICAL FINDING OF FACT THAT THE EXPENDITURE AMOUNTING TO RS.15.07 LACS WAS NOT ROUTED THROUGH THE P&L ACCOUNT.IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE FAA RIGHTLY REVERSED THE ORDER OF T HE AO. AS FAR AS CASE OF MYSORE THERMO ELECTRIC (P) LD. (SUPRA) IS CONCERNED, WE FIND THAT THE FACTS OF THE CASE WERE TOTALLY DIFFERENT . IN THAT MATTER THERE WAS ONE ENTRY IN THE DEBIT SIDE AND WHEREAS TWO ENTRIES IN THE CREDIT SIDE. IN THE CASE UNDER CONSIDE RATION IN THE BOOKS OF ACCOUNT OF THE ASSESSE THERE IS ONLY ONE ENTRY ON CREDIT AND DEBIT SIDE S PERTAINING TO MODVAT CREDIT.IT IS FOUND THAT THE ASSESSE HAD CONSIDERED EXCISE DUTY ON SALES AS WELL AS PURCHASES AND HAD TAKEN THE NET AMOUNT TO THE BALANCE S HEET.CONSIDE R ING THESE PECULIAR FACT S AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FR O M ANY LEGAL O R FACTUAL INFIRMITY. THEREFORE, CONFIRMING HIS ORDER WE DECIDE THE EFFECTIVE G ROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH , AUGUST ,2015. , 2015 SD/ - SD/ - ( . , / D.MANMOHAN ) ( / RAJENDRA) / VICE PRESIDENT / ACCOUNTANT MEMBER / MUMBAI, /DATE: 13 .0 8 .2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 5023/12 - RUPA ORGAICS 4 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.