Sunshine Silk Mills Pvt. Ltd., Surat V. The Income Tax Officer, Ward-4(3), Surat

ITA 524/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6257 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 19-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P M JAGASHETH

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL CAMP AT SURAT BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.524/AHD/2014 / ASSTT. YEAR: 2008-2009 SUNSHINE SILK MILLS P.LTD. GANDHI COLONY ASHWANI KUMAR ROAD SURAT 395 008. PAN ADCS 3517 L. VS. ITO, WARD-4(3) SURAT. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : MR.P.M. JAGASHETH REVENUE BY : MR.DHARMVIR YADAV, SR.DR ! / DATE OF HEARING : 10/03/2017 '#$ ! / DATE OF PRONOUNCEMENT: 13 /04/2017 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-II, SURAT DATED 9.1.2014 PASSED FOR THE A SSTT.YEAR 2008-09. 2. SOLITARY SUBSTANTIAL GRIEVANCE OF THE ASSESSEE I S THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.12,41,027/- ADDED BY THE AO ON ACCOUNT OF DISALLOWANCE OF EXCISE CENVAT CREDIT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ON 30.9.2008 DECLARING TOTAL INCOME AT NIL. THE CASE OF THE ITA NO.524/AHD/2014 2 ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED THAT IN SCHEDULE J OF BALANCE SHEET, THE ASSESSEE HAD SHOWN A COMPUTATION FOR EXCISE AND CENVAT CREDI T OF RS.12,41,027/-. ACCORDING TO THE AO, CENVAT ON PRO CESSED GOODS ARE WITHDRAWN FROM JULY, 2006 AND STILL THE ASSESSEE HA S NOT OFFERED CENVAT CREDIT FOR TAXATION. THEREFORE, A SHOW CAUS E NOTICE DATED 9.8.2010 WAS ISSUED TO THE ASSESSEE. IN REPLY TO T HE SHOW CAUSE NOTICE, THE ASSESSEE HAS SUBMITTED A LETTER DATED 1 6.8.2010. REPLY OF THE ASSESSEE AND FINDING OF THE AO READ AS UNDER: THE A.R. OF THE ASSESSEE VIDE ITS LETTER DATED 16.08.2010 HAS REPLIED THE SAME WHICH IS AS FOLLOWS : 'THE COMPANY HAS CENVAT CREDIT OF RS.12,41,027/- IN THE BALANCE SHEET WHICH IS A. LIABILITY TO THE GOVT. OF INDIA. THE FIRM HAS NOT YET SURRENDERED ITS EXCISE LICENSE AND IS A STATUTORY OBLIGATION TO THE EXCISE DEPARTMENT. REGA RDING YOUR CONTENTION OF SOLD OUT MACHINERIES AND CLOSED DOWN OF UNIT IT IS HUMBLY SUBMITTED TO YOU THAT THE COMPANY IS WORKING DURING THE FINANCIAL IN CONCERN AND HAVING TURNOVER FROM MANUFACTURING ACTIVITY OFRS.7.18 CRORE AND HAV ING PLANT AND MACHINERY WORTH RS.59.06 LACS. THE FIRM G IVEN THE MACHINERIES ON RENT FOR ONLY TWO MONTHS TO SIST ER CONCERN. WHILE IT WAS FREE TO AVAIL FINANCIAL BENEF IT IN THE SLACK PERIOD. HENCE THE QUESTION OF WRITING OFF THE CENVAT CREDIT IS TOTALLY OUT OF QUESTION.' FINDING OF THE AO: THE REPLY OF THE ASSESSED IS DULY CONSIDERED BUT TH E SAME IS NOT ACCEPTABLE ON MERITS. SO AGAIN THE ASSESSEE WAS ASKED WHICH IS AS BELOW: IN RESPECT OF EXCISE CREDIT OF RS. 12,41,027/- IN T HE BALANCE SHEET, YOU HAVE STATED THAT IT IS A LIABILITY TO GO VT, OF INDIA. THE FIRM HAS NOT SURRENDERED ITS EXCISE LICENSE AND IS A STATUTORY TO THE EXCISE DEPARTMENT. IN THIS REGARD, I HAVE TO STATE THAT THE CREDIT BAL ANCE IS NOTHING BUT THE EXCISE RECOVERED FROM THE PARTIES W HO HAVE SENT THEIR GOODS FOR PROCESS(BEFORE JULY 2006) . TH E CENVAT ITA NO.524/AHD/2014 3 ON PROCESSED GOODS ALREADY WITHDRAWN RIGHT FROM JUL Y 2006. UNDER THE CIRCUMSTANCES, IT IS YOUR INCOME BEING RE MISSION OF LIABILITY ON WITHDRAWAL OF CENVAT ON PROCESSED G OODS. IT WAS REQUIRE TO BE OFFERED FOR TAXATION IN THE A.Y. 2007-08. MOREOVER THIS AMOUNT/LIABILITY NOT REQUIRE TO BE PA ID TO THE EXCISE DEPARTMENT ON SURRENDER OF LICENSE ALSO. IN RESPONSE OF THE THIS LETTER THE ASSESSEE HAS NOT OFFERED ANY EXPLANATION TILL DATE. THE SILENCE ON THE PART OF THE ASSESSEE ONLY PROVES THAT THE ASSESSEE HAS NOTHING TO SAY IN THIS MATTER. MOREOVER IT IS A FACT ONCE THE LIAB ILITY TO THE GOVT, OF INDIA AS SAID BY THE ASSESSEE IS OVER THEN IT IS NOTHING BUT INCOME OF THE ASSESSEE. ACCORDINGLY AS DISCUSSED ABOVE THE AMOUNT OF RS. 12,41,027/- OF CE NVAT CREDIT IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. DISSATISFIED WITH THIS ADDITION, THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) HAS ALS O CONFIRMED THE ADDITION BY OBSERVING AS UNDER: 7. THE APPELLANT DURING THE COURSE OF APPELLATE PRO CEEDINGS EXPLAINED THAT THOUGH THERE IS NO BALANCE AS PER EX CISE RECORDS, THE CORRESPONDING ENTRY HAS NOT BEEN PASSED BY THE ACCOUNTANT SINCE A Y 2005-06, DUE TO OVERSIGHT AS A RESULT OF WHICH , THIS ENTRY IS CONTINUING . 8. FROM A PERUSAL OF THE ABOVE FACTS, IT IS APPAREN T THAT THE APPELLANT HAS MISREPRESENTED THE FACTS REGARDING CE NVAT CREDIT PAYABLE AS PAYABLE TO THE GOVERNMENT. THE CENVAT CR EDIT IS RECEIVABLE FROM GOVERNMENT AND IT APPEARS ON THE AS SET SIDE OF THE BALANCE SHEET. IT DOES NOT APPEAR ON THE LIABIL ITY SIDE OF THE BALANCE SHEET. SINCE THE APPELLANT IS A PROCESSING HOUSE, GOODS OF ITS CLIENTS ARE SENT TO THE APPELLANT FOR THE PURPO SE OF PROCESSING. AFTER PROCESSING THE SAME, THE GOODS ARE RETURNED T O THE CLIENTS. SINCE EXCISE DUTY ON PROCESSING HOUSE EXISTED TILL JULY 2006, THE PROCESSING HOUSES USED TO PAY EXCISE DUTY AND AVAIL CENVAT CREDIT ON INPUTS AND CLAIMS SET OFF OF THE SAME, AG AINST EXCISE DUTY PAYABLE. SINCE THE GOODS WERE RECEIVED FROM TH E CLIENTS, THE PROCESSING HOUSE USED TO DEBIT AND CREDIT THE CLIEN T 'S ACCOUNT IN RESPECT OF EXCISE DUTY PAID AND CENVAT CREDIT AVAIL ED CORRESPONDING TO GOODS RECEIVED FROM THEM FOR PROCE SSING. ANY EXCISE DUTY PAID ON BEHALF OF CLIENTS WAS DEBITED T O THEIR ACCOUNT AND ANY CENVAT CREDIT RECEIVABLE , IN RESPECT OF GO ODS OF CLIENT WAS CREDITED IN THE CLIENT S ACCOUNT. IT IS FOR TH IS REASON THAT THE CENVAT CREDIT I APPEARS ON THE LIABILITY SIDE AND T HIS AMOUNT WAS ITA NO.524/AHD/2014 4 APPARENTLY I PAYABLE TO THE PARTIES FROM WHOM THE G OODS WERE RECEIVED FOR JOB WORK. 9. AS REGARDS THE EXCISE DEPARTMENT THE CENVAT CRED IT AVAILED WAS UTILIZED AS THERE IS NO CENVAT RECEIVABLE OR EX CISE PAYABLE AS PER EXCISE RECORDS. THE CENVAT REGISTER FILED BY TH E APPELLANT, DURING THE COURSE OF APPELLATE PROCEEDINGS IS PLACE D ON RECORD. 10. THE EXCISE DUTY ON PROCESSING WAS WITHDRAWN FRO M JULY 2006 AND THEREFORE, THERE ARE NO FURTHER ENTRIES IN THIS ACCOUNT, APPARENTLY, THIS AMOUNT OF RS. 12,41,027/- WAS PAYA BLE TO THE PARTIES FROM WHOM GOODS FOR JOB WORK WERE RECEIVED TILL ASSESSMENT YEAR 2005-06 AND THE SAME HAS HOT BEEN P AID. HOWEVER, WHEN THIS ISSUE WAS INVESTIGATED, THE APPE LLANT COMPANY TRIED TO REPRESENT AS IF THIS LIABILITY IS PAYABLE TO THE GOVERNMENT. 11 THE APPELLANT COMPANY WAS GIVEN SEVERAL OPPORTUN ITIES DURING THE APPELLATE PROCEEDINGS TO EXPLAIN HOW THIS LIABI LITY IS PAYABLE TO THE GOVERNMENT BUT, NO EXPLANATION WAS FILED. THE A PPELLANT COULD NOT EVEN FURNISH ANY RECONCILIATION STATEMENT OF EXCISE RECORDS WITH APPELLANT Y BOOKS OF ACCOUNT, WHICH ME ANS THAT THE INTERPRETATION OF THE UNDERSIGNED THAT THIS AMOUNT WAS PAYABLE TO PARTIES WHOSE GOODS RECEIVED FOR JOB WORK BASIS AS ON 31.03.2005 IS CORRECT. 12. SINCE THIS LIABILITY IS NO LONGER PAYABLE AND T HE APPELLANT - COMPANY HAS FAILED TO ESTABLISH THAT THIS LIABILITY EXISTS OR STILL PAYABLE , THIS AMOUNT OUGHT TO HAVE BEEN OFFERED FO R TAX BY THE APPELLANT, U/S 41 (1) OF THE INCOME TAX ACT. 13. CONSIDERING THE SAME, THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED AND CONSEQUENTLY, THE APPEAL F ILED IS DISMISSED. 14. IN THE RESULT, APPEAL STANDS DISMISSED. 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE LD.COUNSEL FOR T HE ASSESSEE REITERATED HIS STAND AS WAS TAKEN BEFORE THE LD.REVENUE AUTHOR ITIES BELOW. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDER OF THE CIT(A). THE LD.CIT(A) HAS EXPLAINED THE ISSUE CATEGORICALLY. I T WAS OBSERVED THAT THE ASSESSEE WAS WORKING AS PROCESSING HOUSE. IT U SED TO RECEIVE GOODS FROM CLIENTS. ON RECEIPT OF SUCH GOODS, IT D EBITS AND CREDITS ITA NO.524/AHD/2014 5 CLIENTS ACCOUNT IN RESPECT OF PROCESS CHARGES PAID AND CENVAT AVAILABLE CORRESPONDING TO THE GOODS RECEIVED BY TH EM FOR PROCESSING. ANY EXCISE DUTY PAID ON BEHALF OF THE CLIENTS WAS D EBITED TO THEIR ACCOUNT AND ANY CENVAT CREDIT RECEIVABLE IN RESPECT OF GOODS OF CLIENTS WAS CREDITED IN THE CLIENTS ACCOUNT. IT IS FOR TH IS REASON THAT CENVAT CREDIT APPEARS ON THE LIABILITY SIDE AND THIS AMOUN T WAS APPARENTLY PAYABLE TO THE PARTIES FROM WHOM GOODS WERE RECEIVE D FOR JOB WORK. ACCORDING TO THE LD.CIT(A) THE ASSESSEE HAS TRIED T O MISREPRESENT THE FACTS BY SHOWING IT AS LIABILITY TOWARDS GOVERNMENT . THE LD.CIT(A) HAS RIGHTLY OBSERVED THAT LIABILITY IS NOT PAYABLE AND THE ASSESSEE-COMPANY HAS FAILED TO ESTABLISH THAT THIS LIABILITY EXISTS OR STILL PAYABLE. AFTER PERUSAL OF WELL REASONED FINDING OF THE LD.CIT(A) W E SEE NO REASON TO INTERFERE IN IT. HENCE, THE APPEAL OF THE ASSESSEE IS DISMISSED BEING DEVOID OF ANY MERIT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 13 TH APRIL, 2017 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 13/04/2017