The ACIT, Circle-1(1), Trivandrum, Trivandrum V. M/s.Kerala State Electronics Dev.Corpn Ltd, Trivandrum, Trivandrum

ITA 52/COCH/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0940 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-09-2018
• Assessment Year: 1994-1995
• Appeal Filed On: 16-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: C G
• Keywords: Opportunity of being heard

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI CHANDRA POOJARI, AM & GEORGE GEORGE K., JM ITA NO. 52 /COCH/201 8 ASSESSMENT YEAR : 1994 - 95 THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1(1), TRIVANDRUM. VS. KERALA STATE ELECTRONICS DEVELOPMENT CORPORATION LTD., KELTRON HOUSE, VELLAYAMBALAM, TRIVANDRUM. [PAN :AABCK 1319E] (REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SMT. A.S. BINDHU, DR ASSESSEE BY SHRI C.G. PANKAJAKSHAN, CA D ATE OF HEARING 17 / 09 /2018 DATE OF PRONOUNCEMENT 19 / 0 9 /2018 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), TRIVANDRUM DATED 18/12/2017 AND PERTAINS TO THE ASSESSMENT YEAR 1994-95. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: I) THE CIT(A) OUGHT TO HAVE SEEN THAT THE ASSESSEE HAS CLEARLY DEBITED EXPENDITURE OF RS. 889 LAKHS IN THE CURRENT YEAR WHICH WAS PERTAINING TO A SUBSEQUENT YEAR. IT IS CLEAR FROM NOTE NO 6(C) OF THE 'REPORT OF THE AUDITORS'* FOR THE RELEVANT ASSESSMENT YEAR THAT 'PURCHASE RELATED TO SUBSEQUENT YEAR TREATED AS CURRENT YEAR PURCHASE: KELTRON CONTROLS, AROOR-RS 889 LAKHS'. I.T.A. NO.52 /COCH/2018 2 II) THE CIT (A) OUGHT TO HAVE SEEN THAT THE ASSESSEE IS MAINTAINING THE BOOKS OF ACCOUNT ON MERCANTILE BASIS, AND HENCE THIS AMOUNT IS NOT AN ALLOWABLE EXPENDITURE AS IT DOES NOT PERTAIN TO THE RELEVANT ASSESSMENT YEAR 1994-95. III) THE LD. CIT(A) OUGHT TO HAVE SEEN THAT AS PER NOTE NO 6(A) OF THE 'REPORT OF THE AUDITORS' 'SATES INCLUDE RS 1158.13 LAKHS BEING THE VALUE OF BILLS RAISED BY THE FOLLOWING BRANCHES IN RESPECT OF WHICH DELIVERY OF GOOD WERE MADE AFTER 31 MARCH 1994.THIS INCLUDES SALES OF KELTRON CONTROLS ADOOR OF RS. 892.66LAKHS'. FROM THE NOTE, IT IS CLEAR THAT BILLS CORRESPONDING TO THE SALES OF KELTRON CONTROLS ADOOR OF RS 892.66 LAKHS WERE RAISED DURING THE ASSESSMENT YEAR 1994-95. HENCE IT IS CLEAR THAT EVEN THOUGH DELIVERY HAPPENED SUBSEQUENTLY, THE ASSESSEE HAS RIGHTLY OFFERED TO TAX, THE BILLS THAT WERE RAISED DURING THE YEAR. IV) THE LD. CIT(A} OUGHT TO HAVE SEEN THAT THE ASSESSEE CANNOT DEDUCT EXPENSE OF A SUBSEQUENT YEAR WHILE COMPUTING THE PROFIT OF A PARTICULAR YEAR, JUST BECAUSE CERTAIN SALES, FOR WHICH DELIVERY HAPPENED SUBSEQUENTLY HAS BEEN OFFERED TO TAX DURING THE YEAR. ALSO ASSESSEE HAS NOT ESTABLISHED THAT THESE PURCHASES AND SALES ARE RELATED, AS CLAIMED. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT THERE WERE PURCHASES MADE AT KELTRON CONTROL DIVISION, AROOR AMOUNTING TO RS.889 LAKHS RELATED TO SUBSEQUENT YEAR AND SINCE THE ASSESSEE WAS MAINTAINING THE BOOKS OF ACCOUNT ON MERCANTILE BASIS, THE AMOUNT WAS NOT AN ALLOWABLE EXPENDITURE FOR THE RELEVANT ASSESSMENT YEAR AND THEREFORE, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. AGAINST THIS, THE ASSESSEE CARRIED THE APPEAL TO THE CIT(A). THE CIT(A) OBSERVED THAT IN ORDER TO EFFECT SUPPLY AS PART OF A CONTRACT AWARDED TO KELTRON CONTROL DIVISION, AROOR, ONE OF THE UNITS OF THE ASSESSEE COMPANY, TO VISAKH STEEL PLANT AN ORDER WAS PLACED TO MANNESSMAN DEMAG, A GERMAN COMPANY FOR I.T.A. NO.52 /COCH/2018 3 SUPPLYING A SUBLANCE SYSTEM. IT WAS OBSERVED THAT DUE TO THE FINANCIAL CONDITION PREVAILING IN KELTRON AT THAT POINT OF TIME, THE ASSESSEE COULD NOT OPEN THE LC AND ON THEIR REQUEST VISAKH STEEL PLANT HAD OPENED THE LC IN FAVOUR OF MANNESSMAN DEMAG DIRECTLY. IT WAS NOTICED THAT DURING FEBRUARY, 1994 MANNESSMAN DEMAG INFORMED THE ASSESSEE THAT THEY WERE DISPATCHING THE ITEMS AND FORWARDED A PROFORMA INVOICE FOR THE VALUE OF THE EQUIPMENT AND AS THE LC WAS OPENED BY VISAKH STEEL PLANT, THE ULTIMATE CUSTOMER DIRECTLY, THE ITEMS HAD TO BE DISPATCHED TO THEM DIRECTLY. IT WAS OBSERVED THAT THE ASSESSEE PROVIDED THE PURCHASE EXPENSES IN THEIR ACCOUNTS FOR THE FY 1993-94 AND RAISED AN INVOICE ON VISAKH STEEL PLANT FOR THE SALE VALUE AS PER THE CONTRACT. AS THE DELIVERY OF THE ITEM TOOK PLACE AFTER CUSTOM CLEARANCE ETC, AFTER 31.03.1994, THE STATUTORY AUDITORS REPORTED THIS FACT REGARDING SALES IN PARA 6 (A) AND REGARDING PURCHASE IN PARA 6(C) OF THEIR REPORT. FROM THE ABOVE, THE CIT(A) MADE OUT THAT BOTH THE PURCHASE OF RS.889 LAKHS AND SALE OF RS.892.53 LAKHS ACCOUNTED DURING THE FY 1993-94 ACTUALLY SHOULD HAVE BEEN ACCOUNTED FOR THE FY 1994-95 SINCE THE DELIVERY OF THE SUBLANCE SYSTEM HAD TAKEN PLACE AFTER CUSTOM CLEARANCE ETC, ONLY AFTER 31.03.1994. THUS, THE CIT(A) WAS OF THE VIEW THAT THE ENTIRE TRANSACTION SHOULD NOT HAVE BEEN CONSIDERED FOR TAXATION DURING THE YEAR UNDER CONSIDERATION. THE CIT(A) WAS OF THE VIEW THAT THE ASSESSING OFFICER CANNOT HAVE TWO DIFFERENT STAND JUST ADDING BACK THE COST OF PURCHASE OF RS.889 LAKHS WITHOUT EXCLUDING THE SALE OF MATERIALS AMOUNTING TO RS.892.53 LAKHS. INSTEAD, ACCORDING TO THE CIT(A), THE ASSESSING OFFICER SHOULD HAVE CONSIDERED BOTH THE I.T.A. NO.52 /COCH/2018 4 PURCHASES AND SALES FOR THE YEAR UNDER CONSIDERATION AND BROUGHT TO TAX THE PROFIT MADE OF RS.3.53 LAKHS OVER THE TRANSACTION CARRIED OUT. ACCORDING TO THE CIT(A), THIS IS BECAUSE, IT WAS MENTIONED IN PARA 6(C) IN PAGE 8 OF THE AUDIT REPORT THAT THE PURCHASE OF RS.889 LAKHS MADE BY KELTRON CONTROL DIVISION, AROOR WAS TREATED AS CURRENT YEAR PURCHASE THOUGH IT RELATED TO SUBSEQUENT YEAR. SIMILARLY, IT WAS ALSO MENTIONED IN PARA 6(A) IN PAGE 8 OF THE AUDIT REPORT THAT THE SALE OF RS.1158.13 LAKHS INCLUDED SALE OF RS.892.66 LAKHS MADE BY KELTRON CONTROL DIVISION, AROOR BUT DELIVERY OF GOODS MADE AFTER 31 ST MARCH, 1994. ACCORDING TO THE CIT(A), ADDING BACK THE COST OF PURCHASE OF RS.889 LAKHS WITHOUT EXCLUDING THE SALE OF MATERIALS AMOUNTING TO RS.892.53 LAKHS HAD NO JUSTIFICATION AT ALL AND THEREFORE, THE ADDITION MADE WAS DELETED AND THE ADDITION MADE WAS DELETED FOR FURTHER REASON THAT BOTH THE PURCHASE AND SALE OF A DEVICE SUBLANCE SYSTEM HAD RIGHTLY BEEN TAKEN INTO ACCOUNT BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WARRANTING THEREBY NO ADDITION WAS TO BE MADE FOR THE YEAR UNDER CONSIDERATION. ACCORDINGLY, THE CIT(A) DELETED THE ADDITION. 5. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT ESTABLISHED WHETHER THE SALES MADE BY THE ASSESSEE FOR RS.892.53 LAKHS WAS RELATABLE TO THE PURCHASES OF RS. 889 LAKHS MADE FROM KELTRON, CONTROL DIVISION, AROOR. I.T.A. NO.52 /COCH/2018 5 6. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS MADE SALES AGAINST THE SAME PURCHASES MADE FROM KELTRON, CONTROL DIVISION, AROOR AND TO PROVE THE SAME, THE ASSESSEE HAS FURNISHED SALES INVOICES AND ALSO PURCHASE DETAILS BEFORE THE LOWER AUTHORITIES AND PRAYED TO CONFIRM THE CIT(A)S ORDER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN OUR OPINION, IT IS THE DUTY OF THE ASSESSEE TO BRING ON RECORD BOTH THE PURCHASE INVOICES AND THE CORRESPONDING SALES INVOICES AND TO PRODUCE THE SAME BEFORE THE ASSESSING OFFICER. HOWEVER, IN THE PRESENT CASE, AS SEEN FROM THE RECORDS, THE ASSESSEE HAS NOT ESTABLISHED THE PURCHASES BY PRODUCING THE RELEVANT INVOICES BEFORE THE LOWER AUTHORITIES. HENCE, THERE WAS A DOUBT IN THE MIND OF THE ASSESSING OFFICER REGARDING THE GENUINENESS OF THESE PURCHASES. IN VIEW OF THIS, WE DIRECT THE ASSESSEE TO PRODUCE THE RELEVANT PURCHASE INVOICES TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM KELTRON, CONTROL DIVISION, AROOR BEFORE THE ASSESSING OFFICER. BEING SO, THE ASSESSING OFFICER IS DIRECTED TO RE-EXAMINE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, THE ISSUE IN DISPUTE IS REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION. THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO.52 /COCH/2018 6 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH SEPTEMBER, 2018. SD/- SD/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 19 TH SEPTEMBER, 2018 GJ COPY TO: 1. KERALA STATE ELECTRONICS DEVELOPMENT CORPORATION LTD., KELTRON HOUSE, VELLAYAMBALAM, TRIVANDRUM. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVANDRUM. 4. THE PR. COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN