M.P.Udyog Pvt.Limited, Kanpur V. Assistant Commissioner of Income Tax, Kanpur

ITA 53/LKW/2012

• Counselvise Citation: 5323714 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-01-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 06-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K DEY
• Assessee Lawyers: S K GARG SHRI P K KAPOOR
• Keywords: Opportunity of being heard

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.53/LKW/12 ASSESSMENT YEAR:2004 - 05 M. P. UDYOG PVT. LIMITED, 117/K/ 13, GUTAIYA, KANPUR. PAN:AAACM9314Q VS. A.C.I.T., RANGE - 4, KANPUR. (APPELLANT) (RESPONDENT) ITA NO. 77 / LKW / 12 ASSESSMENT YEAR:2004 - 05 A.C.I.T., RANGE - 4, KANPUR. VS. M. P. UDYOG PVT. LIMITED, 117/K/13, GUTAIYA, KANPUR. PAN:AAACM9314Q (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI S. K. GARG, ADVOCATE SHRI P. K. KAPOOR, C.A. REVENUE BY SHRI P. K. DEY , D.R. DATE OF HEARING 0 9 /01/2014 DATE OF PRONOUNCEMENT 3 0 /01/2014 O R D E R PER A. K. GARODIA, A.M. THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE, WHICH ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) - II, KANPUR DATED 30/01/2011 FOR ASSESSMENT YEAR 2004 - 05. 2. FIRST WE TAKE UP THE APPEAL FILED BY THE ASSESSEE. GROUND NO. 1 OF THE ASSESSEES APPEAL IS AS UNDER: 2 1. BECAUSE THE 'CIT(A)' ON A DUE CONSIDERATION OF THE FACTS THAT (I) THE 'APPELLANT' STOOD ASSESSED, WITH THE PROCESSING OF 'RETURN' (F ILED ON 30.10.2004) ON ISSUANCE OF INTIMATION TO THAT EFFECT ON 24.03.2005 ; AND (II) THE NOTICE ISSUED UNDER SECTION 143(2) (AS HAS BEEN REFERRED TO IN THE ASSESSMENT ORDER ITSELF) ISSUED THEREAFTER WAS WHOLLY DEFICIENT IN MEETING THE REQUIREMENT O F CLAUSE (II) OF SUB - SECTION (2) OF SECTION 143 READ WITH PROVISO THERETO; SHOULD HAVE HELD THAT 'VARIATION' BETWEEN THE 'R ETURNED INCOME' AND THE 'ASSESSED INCOME ' AS HAS BEEN IMPUGNED BEFORE HIM IN THE APPEAL FILED ON 2 4. 1.2007 WERE WHOLLY UNAUTHORIZED AND ACCORDINGLY THE SAME SHOULD HAVE Q UASHED IN - TOTO. 3. AT THE TIME OF HEARING, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS GROUND IS NOT PRESSED AND ACCORDINGLY REJECTED AS NOT PRESSED. 4. GROUND NO. 2 IS AS UNDER: BECAUSE ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PARTICULARLY THAT: (A) THE APPELLANT HAD MAINTAINED BOOKS OF ACCOUNT AND OTHER RECORDS IN REGULAR COURSE OF BUSINESS, WHICH HAVE BEEN ACCEPTED AS SUCH FOR MAKING ASSESSMENT; AND (B) NO EXPENSES OF UNVERIFIABLE NATURE HAD BEEN SPECIFIED AND POINTED OUT BY THE ASSESSING OFFICER, WHILE MAKING THE ASSESSMENT. SHOULD HAVE DELETED VARIOUS DISALLOWANCES AS HAD BEEN MADE ON ADHOC BASIS, AS PER PARTICULARS GIVEN BELOW: (I) LOSS ON ACCOUNT OF DAMAGES TO FACTORY BUILDING/SHED, DUE TO HAILSTORM 93,164 UPHELD VIDE PARA 1 ON THE GROUND THAT THE LOSS (DAMAGE CAUSED BY HAILSTORM) IS OF CAPITAL NATURE. (II) DISALLOWANCE OUT OF EXPENSES INCURRED ON 7,00,000 ADHOC DISALLOWANCE HAD BEEN MADE AT RS.10,00,000 AND THE 3 REPAIR OF PLANT & MACHINERY CLAIMED AT RS.1,71,67,596/ - LEARN ED FIRST APPELLATE AUTHORITY HAS RESTRICTED THE SAME APPEAL TO RS.7,00,000/ - VIDE PARA 3 (PAGE 9) OF THE APPELLATE ORDER. (I II ) DISALLOWANCE OUT OF MOTOR RUNNING EXPENSES CLAIMED AT RS.29,21,901/ - 2,00,000 AGAINST THE DISALLOWANCE OF RS.2,92,900/ - MADE IN THE ASSESSMENT, THE SAME HAS BEEN RESTRICTED TO RS.2,00,000/ - VIDE PARA 3 (PAGE9) OF THE APPELLATE ORDER. ( I V) MISC. EXPENSES CLAIMED AT RS.99,38,909 6,00,000 AGAINST DISALLOWANCE OF RS.9,93,890/ - THE SAME HAS BEEN RESTRICTED TO RS.6,00,000/ - VIDE PARA 3 (PAGE 9) OF THE APPELLATE ORDER. 5. REGARDING THE FIRST ISSUE I.E. ADDITION MADE BY THE ASSESSING OFFICER OF RS.91,164/ - IN RESPECT OF LOSS ON ACCOUNT OF DAMAGES TO FACTORY BUILDING/SHED DUE TO HAILSTORM, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ISSUE IS CONNECTED WITH THE ONLY ISSUED RAISED BY THE REVENUE. HE SUBMITTED THAT IN FINANCIAL YEAR 2002 - 03 , THERE WAS SEVERE LOSS INCURRED BY THE ASSESSEE ON ACCOUNT OF HAILSTORM AND INSURANCE CLAIM WAS MADE FOR RS.2,56, 18,847/ - . HE FU RTHER SUBMITTED THAT THE ENTIRE AMOUNT CLAIMED WAS DEBITED BY THE ASSESSEE TO CLAIM RECEIVABLE AMOUNT AND CREDITED TO OTHER INCOME IN THE SAME YEAR. HE FURTHER SUBMITTED THAT AGAINST THE SAID CLAIM RECEIVABLE IN THE PRESENT YEAR, THE ASSESSEE RECEIVED AN AMOUNT OF RS.94,20,631/ - ONLY BECAUSE THE ORIENTAL INSURANCE COMPANY HAS FINALIZED THIS AMOUNT TOWARDS THE CLAIM OF THE ASSESSEE AND, THEREFORE, THE BALANCE AMOUNT OF RS.1,61,98,216/ - WAS DEBITED BY THE ASSESSEE AS BUSINESS LOSS IN THE PRESENT YEAR. HE F URTHER SUBMITTED THAT OUT OF THIS LOSS, THE LOSS OF RS. 1,61,05,052/ - WAS ON ACCOUNT OF DAMAGE TO STOCK AND THE BALANCE AMOUNT OF RS.93,164/ - WAS ON ACCOUNT OF DAMAGE TO FACTORY BUILDING. HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE ENTIR E LOSS BUT IT WAS HELD BY LEARNED CIT(A) THAT THE CLAIM OF THE ASSESSEE REGARDING LOSS OF STOCK TO THE EXTENT OF RS.1,61,05,052/ - IS ALLOWABLE BUT THE LOSS TO BUILDING TO THE EXTENT OF RS.93,164/ - IS NOT ALLOWABLE . T HEREFORE, THE PRESENT ISSUE RAISED BY TH E 4 ASSESSEE IN ITS APPEAL IS IN RESPECT OF THIS AMOUNT OF LOSS OF FACTORY BUILDING AND THE ISSUE RAISED BY THE REVENUE IS IN RESPECT OF INSURANCE LOSS IN RESPECT OF STOCK. HE SUBMITTED THAT SINCE THE ENTIRE INSURANCE CLAIM WAS CONSIDERED AS INCOME IN FINAN CIAL YEAR 2002 - 03 , FOR SUMS SHORT RECEIVED FROM INSURANCE COMPANY IS TO BE ALLOWED AS BUSINESS LOSS OR AS BAD DEBT IN THE YEAR WHEN THE INSURANCE COMPANY FINALIZED THE CLAIM OF THE ASSESSEE AND THE ASSESSEE WRITTEN OFF SUCH LOSS. 6. THE LEARNED D.R. SUPP ORTED THE ASSESSMENT ORDER. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE ARE OF THE CONSIDERED OPINION THAT WHEN THE ENTIRE AMOUNT OF CLAIM MADE BY THE ASSE SSEE WAS SHOWN BY THE ASSESSEE AS INCOME IN TH E YEAR OF CLAIM, LOSS ARISING DUE TO SHORT REALIZATION IN THE PRESENT YEAR AFTER FINALIZATION OF THE CLAIM HAS TO BE ALLOWED AS BUSINESS LOSS AND THE SAME IS NOT DEPENDENT ON THIS AS TO WHETHER THE CLAIM IS IN RESPECT OF BUILDING OR IN RESPECT OF STOCK. THE CLAIM IN THE PRESENT YEAR IS ON TH IS BASIS THAT THE INCOME ACCOUNTED FOR IN EARLIER YEAR I.E. A. Y. 2003 - 04 IS NOT REALIZED AND, THEREFORE, WRITTEN OFF IN THE PRESENT YEAR AND HENCE, THE SAME IS ALLOWABLE IN THE PRESENT YEAR. THEREFORE, THE ISSUE RAISED BY THE REVENUE IN ITS APPEAL IS REJECTED AND GROUND NO. 2 OF THE ASSESSEE IS ALLOWED. 7.1 REGARDING THE THREE OTHER ISSUES RAISED BY THE ASSESSEE IN GROUND NO. 2 BEING AD HOC DISALLOWANCE OUT OF REPAIRS OF PL ANT & MACHINERY, MOTOR RUNNING EXPENSES AND MISC. EXPENSES OF RS.7,00,000/ - , RS.2,00,000/ - AND RS.6,00,000/ - RESPECTIVELY, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT SUCH AD HOC DISALLOWANCES ARE NOT JUSTIFIED AND, THEREFORE, THE SAME SHOULD BE DELETED. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE BOOKS OF ACCOUNT WERE AUDITED AND NO ADVERSE REMARKS HA D BEEN MADE BY THE AUDITORS IN THE AUDIT REPORT AND THE BOOKS WERE PRODUCED BEFORE THE 5 ASSESSING OFFICER ALSO AND, THEREFORE, SUCH AD HOC DISALLOWANCE IS NOT JUSTIFIED. 8. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT REGARDING DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.10 LAC OUT OF REPAIRS TO PLANT & MACHINERY, IT WAS OBSERVED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT EXPENSES CLAIMED UNDER THIS HEAD WERE INCURRED IN CASH AND THE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM WITH ANY KIND OF EVIDENCE . COPY OF THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) IS AVAILABLE ON PAGE 1 TO 8 OF THE PAPER BOOK. ON PAGE 4 OF THE PAPER BOOK, IT IS SUBMITTED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) THAT FOR DETAILS OF REPAIRS TO PLANT & MACHINERY TOTALING TO RS.171.67 LAC, A COPY IS ATTACHED MARKED AS ANNEXURE - 4 AND FROM PERUSAL OF THE SAME IT WOULD BE EVIDENT THAT EXCEPT CASH PAYMENT M ADE FOR PURCHASE OF PETTY STORE ITEMS URGENTLY REQUIRED FOR MAINTENANCE JOBS OR PAYMENT OF WAGES TO THE CASUAL LABOURS EMPLOYED FOR STORES AND MAINTENANCE JOBS, ALL MAJOR ITEMS UNDER DIFFERENT HEADS ARE SUPPORTED BY EXTERNAL BILLS AND VOUCHERS AND THE SAME ARE AMENABLE TO FULL VERIFICATION. A COPY OF ANNEXURE - 4 IS AVAILABLE ON PAGE 23 OF THE PAPER BOOK. FROM THE SAME, WE FIND THAT OUT OF TOTAL PAYMENT OF RS.171.67 LAC, THE PAYMENT MADE IN CASH IS OF RS.35,17,632.40. HENCE, IT IS ADMITTED POSITION THAT CA SH PAYMENT OF THIS MAGNITUDE IS NOT VERIFIABLE EVEN AS PER THE SUBMISSIONS BEFORE THE LEARNED CIT(A). THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS OF RS.10 LACS AND OUT OF THE SAME , LEARNED CIT(A) HAS CONFIRMED THE ADDITION OF RS 7 LAC. HENCE, THE DISALLOWANCE CONFIRMED BY LEARNED CIT(A) OF RS7 LAC IS ONLY 20% OF SUCH CASH PAYMENT OF RS.35.17 LAC. WHEN IT IS ADMITTED POSITION OF FACT THAT THE CASH EXPENSES ARE NOT VERIFIABLE, THE DISALLOWANCE OF 20% OF SUCH EXPENSES IS VERY MUCH REASONABLE AND NO 6 I NTERFERENCE IS CALLED FOR IN OUR CONSIDERED OPINION BECAUSE WHEN HUGE AMOUNT OF CASH PAYMENT IS NOT VERIFIABLE, THE ONLY COURSE BEFORE THE ASSESSING OFFICER IS EITHER TO DIS ALLOW ENTIRE PAYMENT OR PART OF THE SAME. ADMITTEDLY, IF THE ENTIRE AMOUNT IS DIS ALLOWED , IT MAY CAUSE INJUSTICE TO THE ASSESSEE BECAUSE SOME CASH EXPENDITURE IS INEVITABLE . IN THE FACTS OF THE PRESENT CASE, IT CANNOT BE SAID THAT AD HOC DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER WITHOUT ANY BASIS. ADMITTEDLY , THE DISALLOWANCE IS MADE BY THE ASSESSING OFFICER ON THE BASIS THAT HUGE EXPENSES HAVE BEEN PAID BY THE ASSESSEE IN CASH WHICH IS NOT VERIFIABLE AND THEREFORE, WE CONFIRM THE DISALLOWANCE OF RS.7 LAC. 9.1 THE THIRD ITEM IS REGARDING DISALLOWANCE OF RS.2 LAC S OUT OF MOTOR RU NNING EXPENSES CLAIMED BY THE ASSESSEE AT RS.29,19,901/ - . IN FACT , THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER OF RS.2,92,900/ - . THE BASIS GIVEN BY THE ASSESSING OFFICER OF MAKING THIS DISALLOWANCE IS THIS THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE CLAIM FULLY WITH ANY KIND OF SUPPORTING VOUCHERS. THE DETAILS ARE AVAILABLE ON PAGE 24 OF THE PAPER BOOK. FROM THE SAME, WE FIND THAT OUT OF TOTAL PAYMENT OF RS.29.12 LAC, ONLY A PAYMENT OF RS.4.31 LAC WAS MADE BY DD/CHEQUE AND THE REMAINING AMOUNT W AS PAID IN CASH. WHEN SUCH A HUGE AMOUNT IS INCURRED IN CASH, WHICH IS NOT VERIFIABLE, THE DISALLOWANCE OF A SUM OF RS.2 LAC S IS NOT EXCESSIVE AND THIS IS NOT AN AD HOC DISALLOWANCE WITHOUT ANY BASIS BUT ESTIMATED DISALLOWANCE OUT OF HUGE CASH EXPENDITURE ON THE BASIS THAT SUCH CASH EXPENDITURE IS NOT VERIFIABLE. THEREFORE, THIS DISALLOWANCE OF RS.2 LAC IS ALSO CONFIRMED. 9.2 THE FOURTH ITEM IS REGARDING DISALLOWANCE OF RS.6 LAC S OUT OF MISC. EXPENSES CLAIMED BY THE ASSESSEE AT RS.99,38,909/ - . ORIGINALL Y THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER TO THE EXTENT OF 10%, WHICH WAS RESTRICTED BY LEARNED CIT(A) TO RS.6 LAC S . THE DETAILS OF THESE EXPENSES ARE AVAILABLE ON PAGE 25 OF THE PAPER BOOK, WHICH INCLUDES GUARANTEE 7 COMMISSION, BANK CHARGES, GE NERAL CHARGES, TRAVELLING EXPENSES, LAW CHARGES, SAFETY, SECURITY CHARGES AND OTHER VARIOUS EXPENSES UNDER VARIOUS HEADS. IN OUR CONSIDERED OPINION, NO DISALLOWANCE IS CALLED FOR OUT OF SUCH EXPENSES, WHICH ARE USUALLY OFFICE EXPENSES AND ADMINISTRATIVE E XPENSES AND ARE NEITHER EXCESSIVE NOR UNREASONABLE . WE, THEREFORE, DELETE TH IS DISALLOWANCE. 10. IN THE RESULT, GROUND NO. 2 OF THE ASSESSEE IS PARTLY ALLOWED AND ASSESSEE GETS RELIEF OF RS.93,164/ - AND RS.6 LAC S . 11. GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE READS AS UNDER: 3. BECAUSE CIT(A) HAS WRONGLY DISALLOWED THE APPELLANTS CLAIM FOR DEDUCTION OF SUMS AGGREGATING RS.1,44,59,497/ - MADE UP AS UNDER: (I) ADDITIONAL CANE PRICE RS.95,75,777/ - (II) INTEREST ON EXCESS REALIZATION OF LEVY RS. 9,93,890/ - SUGAR (III) AMC OF EPA FOR PREVIOUS YEAR 02 - 03 RS. 8,800/ - DEBITED IN A/C (IV) HOUSE RENT ALLOWANCE PAID TO EMPLOYEES RS. 8,000/ - FOR PREVIOUS YEAR 03 - 04 ACCOUNTED FOR IN A.Y. 04 - 05 (V) EXCISE DUTY ON OPENING AND CLOSING STOCK RS.39,30,818/ - U/S 145A AS HAD BEEN MADE BEFORE THE ASSESSING OFFICER IN TERMS OF LETTER DATED 13/12/2006 (BEFORE COMPLETION OF ASSESSMENT) BY SAYING THAT SUCH CLAIM WAS NOT MAINTAINABLE IN VIEW OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT REP ORTED IN (2006) 284 ITR 323. 12. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE ORDERS OF ASSESSING OFFICER AND LEARNED CIT(A) ARE BY FOLLOWING THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF GOETZE (INDIA) LTD. VS COMMISSIONER OF INCOME - TAX [2006] 284 ITR 323 (SC) . HE SUBMITTED THAT AS PER THIS JUDGMENT ITSELF, THERE IS NO SUCH RESTRICTION ON THE TRIBUNAL AND CIT(A) AND, THEREFORE, THE CIT(A) SHOULD HAVE DECIDED THE ISSUE ON MERIT. HE SUBMIT TED THAT THE 8 ISSUE MAY BE RESTORED BACK TO THE FILE OF THE CIT(A) OR THE ASSESSING OFFICER FOR DECISION ON MERIT. 13. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND FORC E IN THE SUBMISSIONS OF LEARNED A.R. OF THE ASSESSEE AND HENCE, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND RESTORE THE MATTER BACK TO HIS FILE FOR DECISION AFRESH AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES . AS A RESULT, GROUND NO. 3 IS ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE COMBINED RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H JANUARY, 2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR