M/s. Kandhari & Kandhari Pvt. Ltd., UDAIPUR V. DCIT (Asstt.), UDAIPUR

ITA 537/JODH/1997

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54328 (ITAT-JODHPUR)
• Duration Of Justice: 14 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 19-08-2013
• Assessment Year: 1993-1994
• Appeal Filed On: 17-04-1997
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Keywords: Capital asset; Capital expenditure
• Section: 43B; 143(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ JODHPUR BENCH, JODHPUR ] BEFORE SHRI RAJPAL YADAV, JM AND SHRI K. D. RAN JAN, AM I. T. APPEAL NOS. 342 (JODH.) OF 1996 I. T. APPEAL NOS. 537 (JODH.) OF 1997. A N D I. T. APPEAL NOS. 336 (JODH.) OF 1999. ASSESSMENT YEARS : 1991-92, 1992-93 & 1993-94. M/S. KANDHARI & KANDHARI PVT. LTD., DY. COMMISS IONER OF INCOME-TAX, C/O. L. S. NALWAYA & COMPANY, C. AS. VS. [ ASSESSMENT ]; SPECIAL RANGE, 1516, BANERA HOUSE, SUKHADIA CIRCLE, U D A I P U R. U D A I P U R 313 001. P A N / G I R NO. K5/DC(A)/CO. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI GAUTAM CHAND BAID, A. R.; DEPARTMENT BY : SHRI G. R. KOKANI, SR. D. R .; O R D E R. PER K. D. RANJAN, A.M. : THESE APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 1991-92, 1992-93 AND 1993-94 ARISE OUT OF SEPARATE ORDERS OF THE LD. CIT (APPEAL S), UDAIPUR. THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF, FOR THE SAKE OF CONVENIENCE, BY THIS COMMON ORDER. 2. FIRST WE WILL TAKE UP THE APPEAL FOR ASSESSMENT YEAR 1992-93. THE FIRST ISSUE FOR CONSIDERATION RELATES TO CONFIRMING THE ADDITION OF RS.1,14,840/- ON ACCOUNT OF EXPENDITURE INCURRED ON BUILDING MAINTENANCE. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR WAS ENGAGED IN THE BUSINES S OF HDPE WOVEN SACKS AND WAS ALSO DOING 2 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. JOB WORK OF CONVERTING HDPE GRANULES INTO HDPE TAPE S WHICH WAS ULTIMATELY USED AS YARN IN WEAVING HDPE FABRIC. THE UNIT OF ASSESSEE WAS SITU ATED IN MADRI INDUSTRIAL AREA OF UDAIPUR. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CL AIMED TO HAVE INCURRED FACTORY BUILDING, MAINTENANCE EXPENSES OF RS.1,43,145/- IN COMPARISON OF LAST YEARS EXPENSES OF RS.52,050/-. IN VIEW OF STEEP RISE OF MAINTENANCE EXPENSES THE ASSE SSEE WAS CALLED UPON TO FILE DETAILS OF FACTORY REPAIR EXPENSES. FROM THE DETAILS SO OBTAINED IT T RANSPIRED THAT THE ASSESSEE HAD PURCHASED LARGE QUANTITY OF CEMENT, CONCRETE BLOCKS AS WELL AS ASBE STOS SHEETS, ANGLE IRON ETC. AS WELL AS 50 TUBE LIGHTS, TUBE LIGHT FITTINGS, LOT OF PIPE LINE FITTI NGS. ON FURTHER ENQUIRY IT WAS REVEALED THAT ALL T HESE EXPENSES WERE INCURRED FOR THE PURPOSE OF EXTENDING THE EXISTING FACTORY SHED SUBSTANTIALLY. THE DETAILS OF FACTORY LAY OUT PLAN; DETAILS OF CIVIL W ORK DONE EARLIER AND DURING THE YEAR WERE CALLED, BUT NOT FILED. THE ASSESSING OFFICER ON THE BASIS OF THE DETAILS FILED CAME TO THE CONCLUSION THAT THE ASSESSEE HAD DEBITED THE ENTIRE LABOUR COST AS CAPITAL EXPENDITURE WHEREAS THE MATERIAL COST TO THE EXTENT OF RS.1,14,840/- HAD BEEN CLAIMED AS FAC TORY BUILDING REPAIR EXPENSES. THE AO ALSO NOTED THAT THE ASSESSEE HAD CAPITALIZED AN AMOUNT O F RS.4,15,000/- TOWARDS COST OF FACTORY BUILDING, WHICH INCLUDED SUBSTANTIAL LABOUR COST. THE AO, THEREFORE, TREATED THE AMOUNT OF RS.1,14,840/- AS CAPITAL EXPENDITURE. 3. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT THE MATERIAL WAS PURCHASED FOR THE REPLACEMENT AND MAINTENANCE OF THE EXISTING STRUCTU RE. IT WAS FURTHER SUBMITTED THAT ONLY ONE MASON (MISTRY) WAS ENGAGED WHO COULD NOT HAVE CONST RUCTED THE SHED. IT WAS ALSO SUBMITTED THAT NO EXPENSES WERE INCURRED ON DOORS, WINDOWS, VENTIL ATION, FLOORING ETC. THEREFORE, THE EXPENDITURE WAS INCURRED ON REPAIRS AND MAINTENANCE OF FACTORY BUILDING. THE LD. CIT (A) ON THE BASIS OF THE ABOVE FACTS OBSERVED THAT THE AO HAD S TATED THAT EXPENDITURE WAS INCURRED FOR EXTENSION OF EXISTING FACTORY SHED. HE HAS NOWHERE SAID THAT AN ALTOGETHER NEW FACTORY SHED WAS CONSTRUCTED. AS REGARDS THE ENGAGEMENT OF ONLY ONE MISTRY, THE AO HAS POINTED OUT THAT THE LABOUR EXPENSES WERE ALREADY INCLUDED IN THE AMOUNT CAPITALIZED AT RS.4,15,000/-. THERE WAS NO EVIDENCE THAT ONLY ONE MISTRY WAS ENGAGED FOR EXTEN SION OF THE SHED. SINCE IT WAS AN EXTENSION OF SHED, THERE MIGHT BE NO NECESSITY FOR ANY EXTRA DOORS, WINDOWS, VENTALITATIONS ETC. THE MAJOR ITEMS UTILIZED WERE CEMENT CONCRETE BLOCKS, ASBESTO S SHEETS, ANGLE IRON ETC. WHICH CLEARLY 3 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. INDICATED THAT THERE HAD BEEN AN EXTENSION OF THE S HED. MOREOVER THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE TO SUBSTANTIATE THE CONTENTION THAT TH E MATERIAL WAS UTILIZED ONLY FOR REPLACEMENT AND MAINTENANCE. THE ASSESSEE DID NOT FILE THE ORI GINAL FACTORY LAY OUT PLAN AND CURRENT LAY OUT PLAN EVEN DURING THE APPELLATE PROCEEDINGS. THEREF ORE, THERE WAS NO EVIDENCE TO ESTABLISH THAT THE EXPENDITURE WAS INCURRED FOR THE REPAIR AND MAI NTENANCE. THE LD. CIT (A), THEREFORE, CONFIRMED THE DISALLOWANCE MADE BY THE AO TREATING THE SAME AS CAPITAL EXPENDITURE. 4. BEFORE US THE LD. AR OF THE ASSESSEE RE-ITERATED THE SIMILAR ARGUMENTS. ON THE OTHER HAND, THE LD. SR. DR SUPPORTED THE ORDER OF THE LD. CIT ( APPEALS). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE, IT IS EVIDENT THAT BEFORE T HE ASSESSING OFFICER IT WAS STATED THAT THE EXPENSE S WERE INCURRED FOR THE PURPOSE OF EXTENDING EXISTING FACTORY SHED SUBSTANTIALLY. THE ASSESSEE PURCHASED CEMENT, CONCRETE BLOCKS, ASBESTOS SHEETS, ANGLE IRON, TUBE LIGHT FITTINGS, WATER PIPE LINE FITTINGS. THE ASSESSING OFFICER AS WELL AS THE LD. CIT (A) HAS TREATED THE EXPENDITURE CAPITAL IN NATURE AS THE ASSESSEE HAD NOT PROVED WITH DETAILS OF FACTORY LAY OUT PLAN AND DETAILS OF CIVIL WORK DONE EARLIER AND DURING THE YEAR UNDER CONSIDERATIO N. THE EXPENDITURE INCURRED HAS NOT BEEN PROVED TO HAVE BEEN INCURRED ON REPAIR AND MAINTENA NCE OF THE EXISTING BUILDING. NO EVIDENCE HAS BEEN FILED BEFORE THE ASSESSING OFFICER OR THE LD. CIT (A) THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF REPAIRS AND MAINTENANCE OF THE E XISTING BUILDING. RATHER TO A QUERY, IT WAS STATED THAT THE EXPENDITURE WAS INCURRED FOR THE PU RPOSE OF EXTENSION OF EXISTING FACTORY SHED. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO PROVE WITH EVIDENCE THAT THE EXPENDITURE WAS INCURRED FOR REPAIRS AND MAINTENANCE OF THE BUILDING, THEREFORE, THE LD. CIT (A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BY TREAT ING THE SAME AS CAPITAL EXPENDITURE. ACCORDINGLY, IN OUR CONSIDERED OPINION, THE LD. CIT (A) WAS JUSTIFIED IN CONFIRMING THE ADDITION. 6. THE NEXT ISSUE FOR CONSIDERATION RELATES TO CONF IRMING THE ADDITION OF RS.10,51,780/- UNDER SECTION 43B OF THE ACT TAKING LIABILITY CREAT ED BY THE EXCISE DEPARTMENT, BUT THE PAYMENT 4 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. OF THE SAME WAS STAYED BY THE HONBLE RAJASTHAN HIG H COURT. THE RELEVANT GROUND OF APPEAL IS REPRODUCED AS UNDER :- THE LD. A.O. HAS ERRED IN MAKING ADDITION OF RS. 10,51,780/- UNDER SECTION 43-B, TAKING LIABILITY CREATED BY THE EXCISE DEPART MENT BUT PAYMENT OF THE SAME STAYED BY THE RAJASTHAN HIGH COURT ON FURNISHING BA NK / SOLVENCY GUARANTEE TO THE SATISFACTION OF EXCISE DEPARTMENT. AS THE APPE LLANT HAD FURNISHED BANK / SOLVENCY GUARANTEE TO THE SATISFACTION OF THE EXCIS E DEPARTMENT THE ADDITION MADE MAY KINDLY BE DELETED; 7. THE FACTS RELATING TO THIS GROUND STATED IN BRI EF ARE THAT THE ASSESSING OFFICER FROM LIST OF CREDITORS FOR EXPENSES FOUND THAT AN AMOUNT OF RS.1 5,53,740/- WAS INCLUDED ON ACCOUNT OF UN- PAID EXCISE DUTY AS AGAINST LAST YEARS CLOSING BALA NCE OF RS.5,01,959/-. THE ADDITION ON ACCOUNT OF UN-PAID EXCISE DUTY DURING THE YEAR UNDER CONSID ERATION WAS RS.10,51,780/-. THE ASSESSEE HAD NOT OFFERED THE SAID UN-PAID LIABILITY AS DISALLOWA BLE UNDER SECTION 43-B OF THE ACT. THE AO FURTHER NOTED THAT A DISPUTE AROSE BETWEEN THE ASSE SSEE AND THE EXCISE DEPARTMENT AS TO WHETHER EXCISE DUTY WAS LEVIABLE ON THE FINISHED PRODUCTS [ HDPE WOVEN SACKS] AS PLASTIC PRODUCT OR A TEXTILE PRODUCT. THERE WAS ALSO SOME DISPUTE AS TO WHETHER HDPE TAPE, AN INTERMEDIATE PRODUCT ALSO ATTRACTED EXCISE DUTY OR NOT. WHEN EXCISE DEP ARTMENT RAISED DEMAND FOR HIGHER RATE OF EXCISE DUTY, THE ASSESSEE APPROACHED THE HONBLE RA JASTHAN HIGH COURT BY WAY OF WRIT UNDER ARTICLE 226 OF THE CONSTITUTION. HONBLE HIGH COUR T PERMITTED THE ASSESSEE TO CLEAR THE GOODS PENDING WRIT UNDER A DIFFERENT CHAPTER I.E. AT THE LOWER RATE SUBJECT TO ASSESSEES FURNISHING SOLVENCY GUARANTEE. ACCORDINGLY, THE ASSESSEE HAD BEEN CLEARING THE GOODS AT LOWER RATES AND HAD BEEN FURNISHED SOLVENCY GUARANTEE TO EXCISE DEP ARTMENT IN RESPECT OF DIFFERENTIAL DUTY. THE ASSESSEE ON THE OTHER HAND HAD BEEN CHARGING NORMAL EXCISE DUTY FROM ITS CUSTOMERS. AS AGAINST THE EXCISE DUTY LIABILITY THE ASSESSEE HAD BEEN CLA IMING SET OFF OF MODVAT CREDIT IN RESPECT OF EXCISE DUTY ELEMENT ON RAW MATERIAL OR PAID THE EXC ISE DUTY IN CASH/CHEQUE. THE ASSESSEE CREDITED PROFIT LOSS ACCOUNT ONLY BY SALE PRICE AS REDUCED BY EXCISE DUTY COLLECTED. ON THE OTHER HAND, IT DEBITED THE TRADING/PROFIT LOSS ACCOUNT BY THE GROSS PURCHASE VALUE INCLUDING EXCISE DUTY ELEMENT OF RAW MATERIAL PURCHASED. THEREAFTER WHAT EVER EXCISE DUTY WAS PAID BY CASH/BANK WAS DEBITED TO EXCISE DUTY ACCOUNT, WHICH HAS ALREADY B EEN CREDITED BY THE EXCISE DUTY COLLECT ORATE. AT THE YEAR END, WHATEVER WAS THE CREDIT BALANCE IN THE EXCISE DUTY ACCOUNT, THAT WAS CREDITED TO 5 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. PROFIT AND LOSS ACCOUNT AS INCOME. HOWEVER, AT THE YEAR END THE ASSESSEE HAS DEBITED THE EXCISE DUTY ACCOUNT BY THE EXPECTED EXCISE DUTY LIABILITY AND CREDITED A NEW ACCOUNT, DEPARTMENT OF CENTRAL EXCISE, WHICH ALREADY HAD A CREDIT BALANCE OF RS.5,01,959/-. ON A QUERY, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE COLLECT ED EXCISE DUTY TO THE EXTENT DEMANDED BY THE EXCISE DEPARTMENT. IT WAS DOUBTFUL PROFIT AND HENC E COULD NOT BE TAXED. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD NOT CLAIMED DEDUCTION OF LIAB ILITY FROM PROFIT AND LOSS ACCOUNT. TO THE EXTENT EXCISE DUTY HAD NOT BEEN PAID, THE ASSESSEE WAS ENTITLED FOR MODVAT CREDIT/SET OFF, HENCE THERE WAS NO QUESTION OF DISALLOWANCE UNDER S ECTION 43B AS THE SAME SHOULD HAVE BEEN TREATED AS HAD BEEN PAID. THE AO HOWEVER TREATED T HE AMOUNT OF EXCISE DUTY COLLECTED AS PART OF ITS PROFIT. THE ASSESSEE HAD IN FACT DEBITED THE D ISPUTED EXCISE DUTY LIABILITY IN THE PROFIT LOSS ACCOUNT BY FIRST TAKING OUT A PART OF TAXABLE RECEI PTS AND THEN REDUCING IT BY DISPUTED EXCISE DUTY. AS REGARDS THE DOUBTFULNESS OF THE ASSESSEES PROFI T, IT HAS BEEN ADMITTED THAT THE ASSESSEE WAS UNDER NO OBLIGATION TO REFUND THE EXCISE DUTY COLLE CTED TO HIS CUSTOMERS. IT WAS STATED TO BE DOUBTFUL BECAUSE OF APPREHENDED EXCISE DUTY LIABILI TY AGAINST IT. DURING THE YEAR THE ASSESSEE HAD COLLECTED EXCISE DUTY OF RS.24,25,943/-. THE ASSES SEE MADE PAYMENT AGAINST THIS TO THE EXCISE DEPARTMENT AT RS.9,11,096/-. AFTER PUTTING ASIDE R S.10,51,780/- THE BALANCE OF RS.4,63,066/- WAS CREDITED TO PROFIT AND LOSS ACCOUNT. THE AO NO TED THAT EXCISE DUTY WAS PART OF SALES. HE RELIED ON JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF MC DOWELL & CO. LTD. VS. CTO 154 ITR 148 (SC). HE FURTHER OBSERVED THAT THE CON TENTION OF THE ASSESSEE THAT EXCISE DUTY WAS A DOUBTFUL PROFIT COULD NOT BE ACCEPTED BECAUSE IT HA D BEEN ADMITTED THAT THE ASSESSEE WAS UNDER NO OBLIGATION TO REFUND THE EXCISE DUTY COLLECTED TO I TS CUSTOMERS. AS REGARDS FURNISHING OF BANK GUARANTEE FOR THE DIFFERENTIAL AMOUNT THE AO OBSERV ED THAT SECTION 43-B REFERRED TO ACTUAL PAYMENT. SINCE THE BANK GUARANTEE COULD NOT BE TRE ATED ACTUAL PAYMENT THE AO MADE DISALLOWANCE UNDER SECTION 43-B OF THE ACT. AS REG ARDS MODVAT SET OFF IT WAS OBSERVED BY THE AO THAT MODVAT CREDIT TO THE EXTENT OF EXCISE DUTY INCLUDED ON PURCHASES WAS ALLOWED. THEREFORE, THE ASSESSEE COULD NOT CLAIM AGAIN DEDUC TION OF PART OF EXCISE DUTY WHEN FULL CREDIT HAS BEEN ALLOWED AS DEDUCTION. THE AO, HOWEVER, R EJECTED ALL THE ARGUMENTS OF THE ASSESSEE AND TREATED THE AMOUNT OF RS.10,51,780/- AS DISALLOWANC E UNDER SECTION 43B OF THE ACT OR BRINGING TO THE TAX THE TAXABLE RECEIPTS WITHOUT ALLOWING DIVER SION OF THE SAME FOR APPREHENDED TAX LIABILITY. 6 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. 8. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT THE AO HAD CONCLUDED THAT THE ASSESSEES RETURNED INCOME WAS INCREASED BY RS.10,5 1,780/- WHICH COULD BE SAID BOTH WAYS BY DISALLOWANCE UNDER SECTION 43-B AND BRINGING TO TAX THE TAXABLE RECEIPT WITHOUT ALLOWING DIVERSION OF THE SAME FOR APPREHEND TAX LIABILITY. THE LD. AR OF THE ASSESSEE SUBMITTED THAT NO SUCH ADDITION OR DISALLOWANCE WAS MADE IN AY 1991-9 2. HE FURTHER STATED THAT IN AY 1993-94 THE ADDITION MADE ON THIS GROUND HAS BEEN DELETED U NDER SECTION 154 BY THE SAME AO WHO HAD PASSED THE ORDER UNDER APPEAL. THE LD. AR OF THE A SSESSEE RELIED ON THE JUDGEMENT OF THE ITAT, DELHI BENCH IN THE CASE OF NUCHEM PLASTIC LTD. VS. DCIT 44 TTJ 261 TO SUPPORT HIS CONTENTION THAT IF BANK GUARANTEE HAS BEEN FURNISHED NO DISALL OWANCE UNDER SECTION 43-B COULD BE MADE. HE ADMITTED THAT IT WAS NOT DISPUTED POINT WHETHER EXCISE DUTY FORMED PART OF SALE CONSIDERATION OR NOT. THE LD. AR OF THE ASSESSEE DID NOT PRODUCE COPY OF THE BANK GUARANTEE THAT IT HAD ALREADY BEEN FURNISHED TO THE EXCISE AUTHORITIES. 9. THE LD. CIT (APPEALS) ON CONSIDERATION OF FACTS DISTINGUISHED THE FACTS OF THE ASSESSEES CASE WITH THAT OF NUCHEM PLASTIC LTD. VS. DCIT (SUP RA). IN THE CASE OF THE ASSESSEE, IF THE ASSESSEE WON THE CASE IN WRIT PETITION, THE AMOUNT WAS NOT TO BE PAID TO THE CENTRAL EXCISE AUTHORITIES. WHILE IN THE CASE OF NUCHEM PLASTIC L TD. VS. DCIT THE AMOUNT HAD TO BE PAID TO THE CENTRAL EXCISE AUTHORITIES IRRESPECTIVE OF FACT THA T THE ASSESSEE WON THE CASE. THEREFORE THE CASE LAW RELIED UPON BY THE ASSESSEE WAS NOT APPLICABLE. THE LD. CIT (A) FURTHER NOTED THAT DEDUCTION UNDER SECTION 43-B CAN BE ALLOWED ONLY IF THE SUM I S ACTUALLY PAID. IF THE ASSESSEE PAID THE LIABILITY THE SAME CAN BE ALLOWED UNDER SECTION 43B OTHERWISE NOT. HE FURTHER OBSERVED THAT PROVISIONS OF SECTION 43B NOWHERE SAY THAT FURNISHI NG OF BANK GUARANTEE WOULD MEAN ACTUAL PAYMENT. THE ASSESSEE FAILED TO FURNISH ANY CERTIF ICATE FROM CENTRAL EXCISE DEPARTMENT CERTIFYING THAT BANK GUARANTEE AMOUNTED TO ACTUAL P AYMENT. THE LD. CIT (A), THEREFORE, HELD THAT PROVISIONS OF SECTION 43B OF THE ACT WILL BE ATTRAC TED. HE, THEREFORE, CONFIRMED THE DISALLOWANCE. AS REGARDS THE CONTENTION OF THE ASS ESSEE THAT SECTION 43B CANNOT BE APPLIED, BECAUSE THE ASSESSEE HAS NOT CLAIMED DEDUCTION OF L IABILITY IN PROFIT AND LOSS ACCOUNT. THE LD. CIT (A) OBSERVED THAT IT MIGHT BE STATED THAT IT WA S IMMATERIAL AS TO HOW ENTRIES WERE MADE IN THE ACCOUNTS OF THE ASSESSEE. WHAT WAS MATERIAL WA S THE TRUE NATURE OF RECEIPTS. THE LD. CIT (A) RELIED ON THE DECISION OF HONBLE RAJASTHAN HIGH CO URT IN THE CASE OF CIT VS. ASSAM ROLLER AND 7 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. FLOUR MILLS 209 ITR 835. THE LD. CIT (A) FURTHER O BSERVED THAT THE ASSESSEE HAS CREDITED THE SALES BY REDUCING THE AMOUNT OF EXCISE DUTY. THERE FORE, THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF MC DOWELL & CO. VS. CTO (SUPRA ) WAS APPLICABLE. THE LD. CIT (A) THEREFORE, CAME TO THE CONCLUSION THAT CORRECT WAY WOULD HAVE BEEN TO CREDIT THE SALES BY TOTAL AMOUNT INCLUDING EXCISE DUTY. HAD IT BEEN SO, THE UNPAID EXCISE DUTY WOULD HAVE BECOME A PART OF TAXABLE INCOME AUTOMATICALLY. PRESENTLY, IT WAS NOT REFLECTED IN THE PROFIT AND LOSS ACCOUNT BECAUSE OF DIFFERENT TREATMENT GIVEN BY THE ASSESSE E IN ITS ACCOUNT BOOKS. THE LD. CIT (A) RELYING ON THE JUDGEMENT OF HONBLE RAJASTHAN HIGH COURT HELD THAT THE AMOUNT WAS COVERED UNDER SECTION 43-B OF THE ACT IRRESPECTIVE OF THE F ACT THAT IT HAD NOT BEEN INCLUDED IN THE PROFIT AND LOSS ACCOUNT. AS REGARDS MODVAT THE AO HAS CLE ARLY MENTIONED THAT SINCE EXCISE DUTY PAID ON RAW MATERIAL HAD BEEN ALLOWED FULLY AS DEDU CTION, NO FURTHER CLAIM COULD BE ADMITTED. THE LD. CIT (A), THEREFORE, UPHELD THE ORDER MAKING ADDITION OF RS.10,51,780/-. 10. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT PROVISIONS OF SECTION 145-A WERE NOT IN EXISTENCE AT THE RELEVANT POINT OF TIME. THEREF ORE, EXCISE DUTY WAS NOT TO BE INCLUDED IN THE SALES. THE ASSESSEE HAD CLAIMED MODVAT CREDIT WHIC H HAS BEEN DISALLOWED BY THE AO AND CONFIRMED BY THE LD. CIT (A). AS REGARDS THE CONTE NTION OF THE REVENUE THAT THE EXCISE DUTY COLLECTED BY THE ASSESSEE WAS NOT PAYABLE, IS NOT C ORRECT. THE LIABILITY TO PAY EXCISE DUTY WAS IN EXISTENCE ON THE GROUND THAT THE CENTRAL EXCISE DEP ARTMENT WAS DEMANDING THE PAYMENT OF EXCISE DUTY. HOWEVER, THE COLLECTION WAS STAYED BY THE HONBLE RAJASTHAN HIGH COURT ON SUBMISSION OF THE BANK GUARANTEE. THEREFORE, IT IS INCORRECT ON THE PART OF THE REVENUE THAT THE LIABILITY FOR PAYMENT OF EXCISE DUTY WAS NOT IN EXI STENCE. 11. THE ASSESSEE HAD FILED ADDITIONAL GROUND OF APP EAL THAT THE LD. CIT (APPEALS) HAD ERRED IN UPHOLDING THE FINDINGS OF THE ASSESSING OFFICER THA T THE EXCISE DUTY COLLECTED ON SALE OF GOODS WAS A TAXABLE RECEIPT IRRESPECTIVE OF ACCOUNTING TREATM ENT GIVEN IN THE BOOKS OF ACCOUNT. REGARDING ADDITIONAL GROUND OF APPEAL IT HAS BEEN SUBMITTED T HAT THE ASSESSEE HAD ALL ALONG DISPUTED THAT THE DUTY COLLECTED ON SALE WHICH WAS NOT CREDITED TO SA LES ACCOUNT AND CREDITED TO EXCISE DUTY ACCOUNT WAS NOT TAXABLE INCOME AS IT HAD INHERITED LIABILITY TO PAY THE SAME TO THE EXCISE 8 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. AUTHORITIES. THE LD. AR OF THE ASSESSEE ALSO SUBM ITTED THAT PROVISIONS OF SECTION 43B OF THE ACT WILL APPLY ONLY IN THE CASES WHEN THE ASSESSEE CLAI MED DEDUCTION FOR ANY SUM PAYABLE BY WAY OF TAX OR DUTY UNDER ANY LAW. WHERE NO SUCH DEDUCTION WAS CLAIMED NOR CHARGE MADE ON THE PROFIT AND LOSS ACCOUNT, THERE WAS NO QUESTION OF DISALLOW ING THE AMOUNT TAKEN TO THE BALANCE SHEET. HE PLACED RELIANCE ON THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF INDIAN CARBON LTD. VS. IAC 200 ITR 759 (GAU). ON THE OTHER HAND, THE LD. SR. DR SUBMITTED THAT THE ASSESSEE HAD COLLECTED EXCISE DUTY FROM THE CUSTOMERS, BUT HAS N OT PAID TO THE CENTRAL EXCISE DEPARTMENT. THEREFORE, THE AMOUNT WAS LIABLE TO BE TAXED AS INC OME OF THE ASSESSEE. 12. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE IT IS CLEAR THAT THE ASSESSE E HAD COLLECTED EXCISE DUTY OF RS.24,25,943/- WHICH HAD BEEN CREDITED TO A SEPARATE ACCOUNT. THE ASSESSEE HAD MADE PAYMENT OF EXCISE DUTY BY CASH/CHEQUE OF RS.9,11,096/-. THE ASSESSEE HAD SET APART A SUM OF RS.10,51,780/- OUT OF EXCISE DUTY COLLECTED AND HAD CREDITED THE PROFIT A ND LOSS ACCOUNT BY BALANCE ACCOUNT OF RS.4,63,066/-. NOW THE QUESTION ARISES WHETHER THE AMOUNT OF RS.10,51,780/- WHICH HAS BEEN SET APART IS LIABLE TO BE TAXED UNDER SECTION 43B OR AS TRADING RECEIPT. THE AO AS WELL AS THE LD. CIT (A) HAD HELD THAT AMOUNT WILL BE DISALLOWABLE UNDER SECTION 43-B OR WILL BE LIABLE TO BE TAXED AS TAXABLE RECEIPT WITHOUT ALLOWING DIVERSION OF THE S AME FOR APPREHENDED TAX LIABILITY. UNDER SECTION 43-B ANY SUM PAYABLE BY WAY OF TAX, DUTY, C ESS OR FEE BY WHATEVER NAME CALLED SHALL BE ALLOWED IN THE YEAR IN WHICH PAYMENT OF SUCH TAX, D UTY, CESS OR FEE IS MADE. PROVISIONS OF SECTION 43-B OF THE ACT WILL BE APPLICABLE IN THE C ASES WHERE DEDUCTION ON ACCOUNT OF TAX, DUTY, CESS OR FEE IS OTHERWISE ALLOWABLE UNDER THE ACT. THEREFORE, IN A CASE WHERE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION ON ACCOUNT OF TAX, DUTY OR CE SS PAYABLE, NO DISALLOWANCE CAN BE MADE ON THE GROUND THAT SUCH AMOUNT WAS NOT PAID DURING THE YEAR UNDER CONSIDERATION. IN THE CASE BEFORE US, IT IS CLEAR THAT THE ASSESSEE HAS COLLECTED EXC ESS AMOUNT OF RS.10,51,780/-, BUT THE SAME HAS NOT BEEN CREDITED TO PROFIT AND LOSS ACCOUNT. THE AMOUNT HAS BEEN CREDITED TO A SEPARATE ACCOUNT. THE LD. SR. DR HAS PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU P. LTD. VS. CIT 87 ITR 543 (SC) WHEREIN IT HAS BEEN HELD THAT THE AMOUNTS COLLECTED BY THE ASSESSEE AS SALES TAX FORM ED PART OF THE TRADING RECEIPT, HENCE TAXABLE. IN THAT CASE THE ASSESSEE AN AUCTIONEER COLLECTED T HE SALES TAX FROM THE BUYERS. IN THE BOOKS OF 9 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. ACCOUNTS, SALES TAX COLLECTED WAS CREDITED UNDER TH E HEAD SALES TAX COLLECTION ACCOUNT. THE ASSESSEE WAS NOT PAYING THE AMOUNT COLLECTED TO THE REVENUE OR THE OWNERS OF THE GOODS NOR WAS IT REFUNDING SUCH TAX TO THE PURCHASERS. THE AMOUN T SO COLLECTED BY THE ASSESSEE AS SALES TAX FORMED PART OF THE TRADING RECEIPT AND, THEREFORE, IT WAS HELD TO BE TAXABLE AS TRADING RECEIPT. IN THE CASE BEFORE US THE ASSESSEE COLLECTED EXCISE DU TY FROM ITS CUSTOMERS. THE ASSESSEE HAD BEEN PAYING LOWER EXCISE DUTY TO THE EXCISE DEPARTMENT. HONBLE RAJASTHAN HIGH COURT HAD PERMITTED THE ASSESSEE TO PAY LOWER EXCISE DUTY ON THE DISPUTED GOODS UNDER BANK GUARANTEE. AS DISCUSSED ABOVE, THE PAYMENT OF TAX, DUTY OR CESS W ILL BE AVAILABLE WHEN IT IS PAID. THEREFORE, THE AMOUNT COLLECTED FROM THE CUSTOMERS, WHICH IN A NY CASE IS NOT GOING TO BE REFUNDED TO THEM, HAS BEEN CREDITED IN SEPARATE ACCOUNT. THE FACTS A RE IDENTICAL TO THE FACTS CHOWRINGHEE SALES BUREAU P. LTD. VS. CIT (SUPRA). THEREFORE, THE EXC ESS EXCISE DUTY COLLECTED WILL BE CHARGEABLE TO TAX AS TRADING RECEIPT IN THE YEAR OF RECEIPT ITSEL F. IF IN CASE THE ASSESSEE HAD TO PAY HIGHER EXCI SE DUTY, THE AMOUNT WILL BE DEDUCTIBLE UNDER SECTION 43B OF THE ACT ON PAYMENT BASIS. IN VIEW OF THE ABOVE FACTS IT IS HELD THAT THE AMOUNT COLLECTE D BY THE ASSESSEE FROM THE CUSTOMERS IS CHARGEABLE TO TAX AS A TRADING RECEIPT IN VIEW OF T HE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU P. LTD. VS. CIT (S UPRA). 13. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS D ISMISSED. ASSESSMENT YEAR 1993-94 : 14. THE FIRST ISSUE FOR CONSIDERATION RELATES TO CO NFIRMING THE DISALLOWANCE OF COMMISSION / SALES PROMOTION EXPENSES OF RS.2,11,058/-. THE REL EVANT GROUND OF APPEAL IS REPRODUCED AS UNDER :- THE LD. AO HAS ERRED IN DISALLOWING COMMISSION / SALES PROMOTION EXPENSES OF RS.2,11,058/- WITHOUT ANY LEGAL BASIS. 10 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. 15. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF RS.2,11,058/- ON ACCOUNT OF COMMISSION PAYABLE TO M /S. SHREEJI MARBLES OF NATHDWARA. IT WAS SUBMITTED BY THE ASSESSEE THAT THE AMOUNT WAS PAID TO M/S. SHREEJI MARBLES FOR PROCURING SUPPLY ORDER FROM HINDUSTAN ZINC LTD. AT THE RATE OF 2.5 P ER CENT ON VALUE OF SUPPLIES MADE AVAILABLE TO THE ASSESSEE. SUMMONS UNDER SECTION 131 OF THE ACT WERE ISSUED TO M/S. SHREEJI MARBLES IN ORDER TO ASCERTAIN WHETHER ANY SERVICES WERE RENDER ED TO THE ASSESSEE. THEY WERE ALSO ASKED TO PRODUCE THE COPY OF AGREEMENT WITH THE ASSESSEE COM PANY. IN RESPONSE TO SUMMONS ISSUED BY THE ASSESSING OFFICER IT WAS SUBMITTED BY M/S. SHRE EJI MARBLES THAT THEY HAD NOT RENDERED ANY SERVICES TO M/S. KANDHARI & KANDHARI DURING FINANCI AL YEAR 1992-93 NOR ANY PAYMENT WAS RECEIVED BY THEM. WHEN THE ASSESSEE WAS ASKED TO C OMMENT ON THE REPLY GIVEN BY M/S. SHREEJI MARBLES, IT WAS SUBMITTED THAT THE ASSESSEE WAS IN DISPUTE WITH THE SAID FIRM ON QUANTUM OF COMMISSION TO BE PAID. HOWEVER, IT WAS STATED THAT THE ASSESSEE WAS NOT IN A POSITION TO OFFER ANY COMMENT/EXPLANATION ON THE REPLY SUBMITTED BY M /S. SHREEJI MARBLES. IT WAS ALSO SUBMITTED THAT THE LIABILITY OF COMMISSION HAD BEEN PROVIDED AS PER THE AGREEMENT MADE WITH THE SAID FIRM. THE AO REJECTED THE CONTENTION OF THE ASSESSEE ON T HE GROUND THAT THE ASSESSEE INITIALLY STATED THAT THE AMOUNT WAS PAID TO THE SAID PARTY. HOWEVE R, IT WAS ONLY AFTER THE FACT OF NON-PAYMENT OF THE AMOUNT WAS DETECTED BY THE DEPARTMENT, THE ASSE SSEE CAME OUT WITH NEW STORY OF DISPUTE WITH THE SAID PARTY. THE AO ALSO NOTED THAT THOUGH THE ASSESSEE HAD TRIED TO SUBSTANTIATE THE CLAIM OF COMMISSION ON THE BASIS OF THE AGREEMENT, BUT NO COPY OF SUCH AGREEMENT WAS FILED BEFORE HIM. THE AO, THEREFORE, ADDED THE AMOUNT OF ALLEGED COMMISSION OF RS.2,11,058/-. 16. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED B Y THE ASSESSEE THAT SUCH COMMISSION WAS ALLOWED IN THE EARLIER YEARS. IT WAS ALSO STATED T HAT COMMISSION DURING THE YEAR WAS PAID FOR THE PART SUPPLY OF THE ORDER RECEIVED IN EARLIER YEARS. HE EMPHASIZED THAT THE AMOUNT OF COMMISSION ADJUSTED TO THE CREDIT OF RECIPIENT FIRM WAS THE RE SULT OF THE ORDERS PROCURED IN THE PRECEDING YEARS FOR WHICH SERVICES WERE RENDERED IN THE PRECE DING YEARS. THE LD. CIT (A) ON CONSIDERATION OF SUBMISSIONS MADE BY THE ASSESSEE AND THE FACTS R ECORDED BY THE AO OBSERVED THAT THERE WAS NO EVIDENCE TO INDICATE THAT COMMISSION HAD BEEN PA ID IN RESPECT OF ORDERS PROCURED IN EARLIER YEARS. IN EARLIER YEARS THE RECIPIENTS HAD CONFIRM ED THE RECEIPT OF COMMISSION AND THE FACT OF RENDERING THE SERVICES AND, THEREFORE, COMMISSION W AS ALLOWED. DURING THE YEAR UNDER 11 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. CONSIDERATION M/S. SHREEJI MARBLES HAD SPECIFICALLY DENIED HAVING RENDERED ANY SERVICES OR RECEIVED ANY COMMISSION. THE ASSESSEE HAD NOT FILE D CONFIRMATION FROM M/S. SHREEJI MARBLES REGARDING ANY OUTSTANDING COMMISSION FOR THE YEAR U NDER CONSIDERATION. IN THE ABSENCE OF ANY EVIDENCE FOR THE LIABILITY OF COMMISSION, THE LD. C IT (A) UPHELD THE ADDITION MADE BY THE ASSESSING OFFICER. 17. BEFORE US THE LD. AR OF THE ASSESSEE REITERATED THE SIMILAR ARGUMENTS. ON THE OTHER HAND, THE LD. SR. DR SUPPORTED THE ORDER OF THE LD. CIT ( APPEALS). 18. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS STATED ABOVE, IT IS CLEAR THAT THE ASSESS EE HAD CLAIMED DEDUCTION ON ACCOUNT OF COMMISSION PAYABLE TO M/S. SHREEJI MARBLES OF NATHD WARA. M/S. SHREEJI MARBLES OF NATHDWARA IN RESPONSE TO SUMMON ISSUED UNDER SECTION 131 OF T HE ACT HAD DENIED TO HAVE RENDERED ANY SERVICES TO THE ASSESSEE DURING THE FINANCIAL YEAR 1992-93 NOR ANY PAYMENT WAS RECEIVED BY THEM. THE ASSESSEE HAD NOT FILED COPY OF ANY AGREE MENT BETWEEN THE ASSESSEE AND M/S. SHREEJI MARBLES OF NATHDWARA. THE ASSESSEE HAD ALSO NOT FI LED ANY CONFIRMATION FROM M/S. SHREEJI MARBLES THAT THE AMOUNT OF RS.2,11,058/- WAS PAYABL E ON ACCOUNT OF COMMISSION. IN THE ABSENCE OF ANY EVIDENCE ON RECORD CONFIRMING THE PAYMENT AN D SERVICES RENDERED THE DISALLOWANCE OF COMMISSION HAS TO BE UPHELD. THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE TO SUPPORT ITS CONTENTION THAT THE LIABILITY TO PAY SUCH COMMISSIO N WAS INCURRED BY IT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. C IT (A) CONFIRMING THE ADDITION. 19. THE NEXT ISSUE FOR CONSIDERATION RELATES TO CON FIRMING THE ADDITION OF RS.10,00,000/- ON ACCOUNT OF REIMBURSABLE EXCISE DUTY AS JOB WORK CHA RGES. THE RELEVANT GROUND OF APPEAL IS REPRODUCED AS UNDER:- THE LD. AO HAS ERRED IN MAKING ADDITION OF RS.10, 00,000/- TREATING REIMBURSABLE EXCISE DUTY AS JOB CHARGES BEING TRADI NG RECEIPT ON ACCRUED BASIS WITHOUT ANY LEGAL BASIS. 12 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. 20. THE FACTS OF THE CASE RELATING TO THIS GROUND O F APPEAL ARE THAT THE ASSESSEE COMPANY DURING THE RELEVANT PREVIOUS YEAR CONTINUED TO DO J OB WORK FOR HIS SISTER CONCERN, NAMELY, M/S. PLASTO PACK INTERNATIONAL P. LTD. BY CONVERTING HDP E GRANULES INTO TAPE. THERE HAS BEEN DISPUTE BETWEEN THE MANUFACTURERS OF TAPE AND THE C ENTRAL EXCISE DEPARTMENT AS TO WHETHER THE PROCESS OF MANUFACTURING TAPE WOULD ATTRACT EXCISE DUTY LIABILITY OR NOT. M/S. PLASTO PACKS INTERNATIONAL P. LTD. WAS GETTING JOB WORK DONE FRO M THE ASSESSEE UNDER AN AGREEMENT DATED 28/12/1984. THE SAID AGREEMENT PROVIDED THAT THE E XCISE DUTY, TAXES AND OTHER LEVIES FOR PROCESSING OF GOODS, IF ANY, LEVIED AT ANY TIME SHA LL BE TO THE ACCOUNT OF M/S. PLASTO PACKS INTERNATIONAL P. LTD., THE SECOND PARTY TO THE AGRE EMENT AND SHALL MADE GOOD IMMEDIATELY. AS STATED ABOVE A DISPUTE AROSE WITH THE EXCISE DEPART MENT AS TO WHETHER ITS PROCESSING WOULD ATTRACT EXCISE DUTY OR NOT, A WRIT WAS FILED BEFORE THE HONBLE RAJASTHAN HIGH COURT BY THE ASSESSEE. HONBLE HIGH COURT GRANTED INTERIM STAY TO THE ASSESSEE, SUBJECT TO ASSESSEE FURNISHING NECESSARY BANK GUARANTEE AND SOLVENCY GUARANTEE. I N VIEW OF THESE DEVELOPMENTS THE DIRECTOR OF PLASTO PACK INTERNATIONAL P. LTD. GAVE AN UNDERTAKI NG ON 24/08/2001 IN LIEU OF THE AFORESAID AGREEMENT DATED 28/12/1984 FOR MAKING GOOD ANY LIAB ILITY FOR EXCISE DUTY OR OTHER TAXES AND LEVIES CREATED BY ANY DEPARTMENT AGAINST THE ASSESS EE ON ACCOUNT OF PROCESSING OF RAW MATERIAL FOR PLASTO PACK INTERNATIONAL P. LTD. ON 19 TH MARCH, 1993 THE ASSESSEE ISSUED A DEBIT NOTE CALLI NG UPON PLASTO PACK INTERNATIONAL P. LTD. TO PAY RS.18 ,00,000/- BY 27 TH MARCH, 2003 FAILING WHICH INTEREST / PENALTY WAS TO BE BORNE BY THEM. OUT OF RS.18,00,000/- AN AMOUNT OF RS.8,00,000/- BELONGED TO ASSESSMENT YEAR 1991-92 AND RS.10,00,00 0/- FOR THE YEAR UNDER CONSIDERATION. PLASTO PACK INTERNATIONAL P. LTD. AND M/S. KANDHARI & KANDHARI ARE SISTER CONCERNS AND ARE LOCATED IN THE SAME PREMISES. THE ASSESSING OFFICE R FURTHER OBSERVED THAT PLASTO PACK INTERNATIONAL P. LTD. HAD TREATED THE AFORESAID LIA BILITY AS HAVING ACCRUED IN THE ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSEE HAD NOT PASSED CORRESPONDING ENTRY IN THE BOOKS OF ACCOUNTS. THE AO FURTHER NOTED THAT THE AMOUNT OF EXCISE DUTY RECEIVABLE AT RS.10 LAKHS WAS TO BE TREATED AS PART OF THE TRADING RECEIPT. THE AO, THEREFORE, HELD THAT THE ASSESSEE SHOULD HAVE PASSED CORRESPONDING CREDIT AND DEBIT ENTRIES IN IT S BOOKS OF ACCOUNTS IN RESPECT OF AFORESAID AMOUNT OF RS.10 LAKHS. THE ASSESSEE WILL BE ENTITL ED FOR DEDUCTION OF TAX LIABILITY ON MERCANTILE BASIS EXCEPT FOR THE REASON THE TAX DUTY, CESS WILL BE ALLOWABLE FOR DEDUCTION ON PAYMENT BASIS 13 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. UNDER SECTION 43-B OF THE ACT. THE AO, THEREFORE, TREATED THE AMOUNT OF RS.10 LAKHS AS TRADING RECEIPT FOR THE YEAR UNDER CONSIDERATION. 21. AS REGARDS GROUND NO. 3 RAISED BY THE ASSESSEE, THE AO HAD TREATED THE AMOUNT OF RS.3,95,763/- ON ACCOUNT OF DISPUTED EXCESS EXCISE DUTY COLLECTED AND SET APART AS TRADING RECEIPT. THE AO FROM THE OUTSTANDING LIABILITIES NOTED THAT AN AMOUNT OF RS.3,95,763/- WAS PAYABLE TO THE CENTRAL EXCISE DEPARTMENT. DURING THE YEAR UNDER C ONSIDERATION THE ASSESSEE COLLECTED EXCISE DUTY FROM ITS CUSTOMERS AMOUNTING TO RS.21,04,056/- WHICH WAS CREDITED TO A SEPARATE ACCOUNT. THE ASSESSEE AVAILED OF MODVAT CREDIT OF RS.16,14,7 93/- AND PAID EXCISE DUTY IN CASH AMOUNTING TO RS.93,500/-. THUS THE EXCISE DUTY ACC OUNT SHOWED A CREDIT OF RS.3,95,763/-. THIS AMOUNT OF RS.3,95,763/- WAS NOT SHOWN AS INCOME AS IN AY 1992-93. SINCE THE ASSESSEE HAD COLLECTED EXCESS EXCISE DUTY FROM ITS CUSTOMERS, TH E AO TREATED THE SAME AS TRADING RECEIPTS. 22. ON APPEAL THE LD. CIT (APPEALS) UPHELD THE AMOU NT OF RS.10 LAKHS ON THE GROUND THAT M/S. PLASTO PACK INTERNATIONAL P. LTD. IN APPEAL HA D ARGUED THAT THE AMOUNT HAS BECOME DUE FOR PAYMENT TO M/S. KANDHARI & KANDHARI P. LTD. ON THE BASIS OF DEBIT NOTES DATED 19/03/2003 AND 21 ST MARCH, 1992. THE LD. CIT (A) HAD CONFIRMED THE AM OUNT OF RS.10 LAKHS AS TRADING RECEIPTS. AS REGARDS THE EXCESS AMOUNT COLLECTED FROM ITS CUS TOMERS AT RS.3,95,763/-, THE LD. CIT (A) CONFIRMED THE DISALLOWANCE ON THE BASIS OF HIS DECI SION FOR AY 1992-93. 23. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE MATERIAL AVAILABLE ON RECORD. AS REGARDS THE ISSUE FOR CONFIRMING THE ADDITION OF RS .3,95,763/- THE ISSUE IS IDENTICAL TO AS IN ASSESSMENT YEAR 1992-93 WHEREIN WE HAVE UPHELD THE EXCESS COLLECTION OF AMOUNT OF RS.3,95,763/- ON ACCOUNT OF EXCISE DUTY AS TRADING RECEIPTS FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUR EAU P. LTD. VS. CIT(SUPRA). SINCE THE ISSUE IS IDENTICAL, THE STAND TAKEN BY THE AO TREATING TH E AMOUNT OF RS.3,95,763/- AS TRADING RECEIPT IS UPHELD. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF CIT(A) WHICH MAY REQUIRE ANY INTERFERENCE BY US. 14 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. 24. AS REGARDS CONFIRMING THE ADDITION OF RS.10 LAK HS BY TREATGING THE REIMBURSABLE EXCISE DUTY AS JOB CHARGES AS TRADING RECEIPTS, M/S. PLAST O PACK INTERNATIONAL P. LTD. ON RECEIPT OF DEBIT NOTE FROM THE ASSESSEE HAD DEBITED THE AMOUNT PAYAB LE TO PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER DISALLOWED THE AMOUNT IN THE HANDS OF M/S . PLASTO PACK INTERNATIONAL P. LTD. LD. CIT(A) ALLOWED DEDUCTION ON THE GROUND THAT THE AMOUNT HAD BECOME DUE FOR PAYMENT TO M/S. KANDHARI & KANDHARI P. LTD. ON THE BASIS OF THE DEBIT NOTE I SSUED TO THEM. WE ALSO FIND THAT ITAT JODHPUR BENCH IN THE CASE OF DY. CIT V. M/S. PLASTO PACK I NTERNATIONAL P. LTD. VIDE ORDER DATED 09.06.2005 IN ITA NO 404/JP/1997 FOR A.Y. 1993-94 F OLLOWING ITS DECISION FOR A.Y. 1992-93 IN ITA NO 403/JP/97 AND CO NO 73/JDPR/99 UPHELD THE OR DER OF CIT(A) ALLOWING DEDUCTION OF EXCISE DUTY DEBITED TO PROFIT LOSS ACCOUNT ON THE BASIS OF DEBIT NOTE ISSUED BY THE ASSESSEE. SINCE MS. PLASTO PACK INTERNATIONAL HAD CLAIMED DED UCTION ON ACCOUNT OF EXCISE DUTY PAYABLE BY THEM AT RS.10 LAKHS, THE ASSESSEE SHOULD HAVE CREDI TED THE PROFIT AND LOSS ACCOUNT BY RS.10 LAKHS. IT IS ALSO A SETTLED LAW THAT AS AND WHEN THE PAYME NT OF RS.10 LAKHS WILL BE MADE, THE DEDUCTION WILL BE ALLOWABLE TO THE ASSESSEE AS PER PROVISION OF 43B OF THE ACT. SINCE ITAT HAS UPHELD THE CLAIM OF M/S. PLASTO PACK INTERNATIONAL P. LTD. FOR DEDUCTION OF EXCISE DUTY PAYABLE ON JOB WORK CHARGES ON THE BASIS OF DEBIT NOTE ISSUED BY THE AS SESSEE, IN OUR CONSIDERED OPINION, THE LD. CIT (APPEALS) IS JUSTIFIED IN CONFIRMING THE DISALLOWAN CE OF RS.10 LAKHS ON ACCOUNT OF REIMBURSABLE EXCISE DUTY ON JOB WORK CHARGES. WE UPHOLD THE ORD ER OF CIT(A) ON THIS ISSUE. 25. THE LAST ISSUE FOR CONSIDERATION RELATES TO CON FIRMING THE DISALLOWANCE ON PURCHASE OF NEON-SIGN BOARD OF RS.10,800/-, STEEL LETTERS OF RS .7,200/-, INSTALLATION EXPENSES OF SODIUM LIGHTS AT RS.6,800/- AND LAND DEVELOPMENT EXPENSES OF RS.1 2,822/- TREATING THE SAME AS CAPITAL EXPENDITURE. THE FACTS OF THE CASE RELATING TO THI S GROUND ARE THAT THE ASSESSEE PAID RS.7,200/- TO M/S. KLARTHI AKRYLIC ART WORKS FOR SUPPLY AND FIXIN G OF STEEL LETTERS. ON A QUERY IT WAS SUBMITTED THAT STEEL LETTERS WERE USED ON BOARDS FO R PUBLICITY. IT WAS ALSO SUBMITTED THAT THE EXPENDITURE WAS IN THE NATURE OF REVENUE EXPENDITUR E. THIS CONTENTION OF THE ASSESSEE WAS REJECTED ON THE GROUND THAT THE BOARDS WERE STILL A VAILABLE FOR PHYSICAL VERIFICATION FOR THREE YEARS. THEREFORE, THERE COULD NOT BE ANY DOUBT THA T THE EXPENDITURE INCURRED HAD BROUGHT INTO EXISTENCE CAPITAL ASSET OF ENDURING BENEFIT. AS RE GARDS THE PURCHASE AND INSTALLATION OF SODIUM 15 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. LIGHTS, THE ASSESSEE HAD NOT BEEN ABLE TO PROVE WIT H ANY DOCUMENTARY EVIDENCE THAT IT WAS REPLACEMENT OF EXISTING LIGHTS. IT WAS STATED BY T HE ASSESSEE THAT THERE WERE ONLY LOCATION AND CIRCUMSTANTIAL FACTS IN ITS SUPPORT. THE FACTORY W AS IN EXISTENCE FOR THE LAST 15 YEARS AND REPLACEMENT OF LIGHTS AFTER A PERIOD OF 15 YEARS WA S INEVITABLE. THE AO REJECTED THIS CONTENTION ON THE GROUND THAT MERE EXISTENCE OF FACTORY FOR 15 YEARS WOULD NOT ESTABLISH THAT THE EXPENDITURE WAS REVENUE IN NATURE. THE ASSESSEE HAD NOT LED AN Y EVIDENCE WHATSOEVER THAT THE ASSESSEE HAD SUCH SODIUM LIGHTS IN ITS FACTORY. AS REGARDS LAND DEV. EXPENSES OF RS.12,822/- THE AMOUNT WAS PAID TO SHRI KAILASH. THE EXPENDITURE WAS CLAIMED TO HAVE BEEN INCURRED ON LEVELING EXPENSES. THE ASSESSEE WAS ASKED TO PRODUCE BILL AND LAY OUT PLAN OF THE FACTORY WHEREIN SUCH LAND LEVELING WAS CARRIED OUT. THE ASSESSEE FILED THREE SHEET OF PAPER ON WHICH MEASUREMENT OF WORK WAS GIVEN. THERE WERE NO SIGNATURES ON THE SAID SHEET. THE NAME OF PERSON WHO HAD CARRIED OUT THE WORK WAS LEFT BLANK. A FURTHER SCRUTINY OF THE MEA SUREMENT SHEET INDICATED THAT MEASUREMENT WERE FOR EARTHWORK CUTTING MEASURING 9,158.89 CUBIC FEET. THE AO ASKED THE ASSESSEE TO PRODUCE MAP OF THE AREA. NO SUCH ATTEMPT WAS MADE BY THE ASSESSEE TO SUBSTANTIATE THE CLAIM. IN THE ABSENCE OF EVIDENCE FOR EXCAVATION WORK DONE , THE AO DISALLOWED THE CLAIM OF THE ASSESSEE. 26. ON APPEAL IT WAS SUBMITTED BY THE ASSESSEE THAT ITEMS PURCHASED DID NOT BRING ANY ASSET OF ENDURING NATURE INTO EXISTENCE BECAUSE THOSE ITE MS REQUIRED FOUNDATION, STAND, ELECTRIC FITTINGS ETC. IT WAS SUBMITTED THAT THE LAND LEVELING WAS D ONE TO IMPROVE THE WORKING CONDITIONS OF THE LABOURERS. THE LD. CIT (APPEALS) CONSIDERED THE AR GUMENTS OF THE ASSESSEE. HE OBSERVED THAT RS.10,800/- WAS ADMITTED TO HAVE BEEN SPENT ON BUYI NG A NEON SIGN BOARD. IT WAS IMMATERIAL EVEN IF THE NEON SIGN BOARD, A NEW ASSET WAS INSTAL LED ON THE OLD FOUNDATION / STAND. IF NEW MACHINERY IS PURCHASED AND INSTALLED ON OLD FOUNDAT ION, IT COULD NOT BE CALLED A REPAIR OF THE MACHINERY. THE LD. CIT (A) THEREFORE, UPHELD THE E XPENDITURE ON PURCHASE AND INSTALLATION OF NEW NEON SIGN BOARDS OF RS.10,800/-. AS REGARDS TH E EXPENDITURE INCURRED ON STEEL LETTERS, THE LD. CIT (APPEALS) OBSERVED THAT EARLIER THERE WAS NO ST EEL LETTER BOARD. EARLIER THERE WAS A BOARD ON WHICH THE NAME OF THE COMPANY WAS PAINTED. NOW STE EL LETTERS WERE PURCHASED AFRESH AND FIXED ON THE BOARD. SINCE THIS WAS A NEW ASSET, WHICH DI D NOT EXIST EARLIER, THE EXPENDITURE INCURRED WAS CAPITAL IN NATURE. HE, THEREFORE, UPHELD THE D ISALLOWANCE. 16 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. 27. COMING TO THE ISSUE OF PURCHASE OF SODIUM LIG HTS FOR RS.6,800/-, IT WAS AN ADMITTED FACT THAT THOSE WERE INSTALLED FOR THE FIRST TIME. THER EFORE, THE LD. CIT (APPEALS) UPHELD THE STAND OF THE ASSESSING OFFICER THAT THE EXPENDITURE CONSTITU TED CAPITAL ASSET. AS REGARDS RS.12,822/- INCURRED ON LAND DEVELOPMENT, THE ASSESSING OFFICER HAD MENTIONED THE NAME OF THE CONTRACTOR HAD BEEN LEFT BLANK ON THE SHEET INDICATING THE EAR TH-WORK CUTTING. THE TOTAL WORK DONE WAS 9,158.89 CUBIC FEET. AS PER THE MEASUREMENT SHEET, THERE WAS A MAP FOR EXCAVATION WORK, BUT THE SAME WAS NOT FILED EITHER BEFORE THE AO OR BEFORE T HE LD. CIT (A). THE LD. AR OF THE ASSESSEE COULD NOT FILE ANY EVIDENCE TO ESTABLISH THAT THE E XPENDITURE INCURRED WAS REVENUE IN NATURE. HE ACCORDINGLY UPHELD THE DISALLOWANCE. 28. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. BEFORE US SIMILAR ARGUMENTS WERE REITERATED BY THE LD. AR OF THE ASSESSEE. FROM THE FACTS STATED ABOVE IT IS CLEAR THAT THE EXPENDITURE INCURRED ON PURCHAS E AND INSTALLATION OF NEON SIGN, PREPARATION OF NAME BOARD OF THE COMPANY IN STEEL LETTERS, PURCHAS E AND INSTALLATION OF SODIUM LIGHTS WERE INCURRED FOR THE FIRST TIME AND WERE IN NO WAY RELA TED FOR REPAIR OR REPLACEMENT OF THE EXISTING ITEMS. AS REGARDS LAND DEV. EXPENSES THE TOTAL WOR K WAS 9158.89 CUBIC FEET. AS PER MAP IT WAS EXCAVATION WORK WHEREAS ACCORDING TO THE ASSESSEE, IT WAS LAND LEVELING WORK. THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN THE FORM OF MAP. THE NAME OF THE CONTRACTOR WHO CARRIED OUT THE WORK WAS ALSO LEFT BLANK. THEREFORE, THE AO WA S JUSTIFIED IN TREATING THE EXPENDITURE INCURRED ON LAND DEVELOPMENT IN THE CAPITAL FIELD. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT CONFIRMING THESE ADDITI ONS. 29. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 1993-94 IS DISMISSED. 30. NOW COMING TO THE APPEAL FOR ASSESSMENT YEAR 19 91-92, WHICH IS DIRECTED AGAINST THE ORDER OF THE LD. CIT (APPEALS), UDAIPUR, PASSED BY THE AO UNDER SECTION 143(3) / 263 OF THE ACT. 17 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. THE ONLY ISSUE FOR CONSIDERATION RELATES TO MAKING ADDITION OF RS.5,01,959/- MADE UNDER SECTION 143-B. THE RELEVANT GROUND OF APPEAL IS REPRODUCED AS UNDER :- THE LD. AO HAS ERRED IN MAKING ADDITION OF RS. 5,01,959/- UNDER SECTION 143-B TAKING LIABILITY CREATED BY THE EXCISE DEPARTMENT B UT PAYMENT OF THE SAME STAYED BY THE RAJASTHAN HIGH COURT ON FURNISHING BANK / SO LVENCY GUARANTEE TO THE SATISFACTION OF EXCISE DEPARTMENT. AS THE APPELLAN T HAD FURNISHED BANK / SOLVENCY GUARANTEE TO THE SATISFACTION OF THE EXCISE DEPARTM ENT THE ADDITION MADE MAY KINDLY BE DELETED. 31. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ORIGINAL ASSESSMENT WAS MADE UNDER SECTION 143(3) ON AN INCOME OF RS.9,76,677/- WHICH WAS SET ASIDE BY THE LD. CIT (APPEALS) VIDE HIS ORDER DATED 26 TH MARCH, 1996 AND RESTORED THE ORDER BACK TO THE ASS ESSING OFFICER FOR GIVING A FRESH FINDING REGARDING THE ADMISSIBILITY OF AMOUNT OF RS.5,01,959/- IN RESPECT OF CENTRAL EXCISE LIABILITY AS THE VIEW TAKEN BY THE ASSESSING OFFICE R REGARDING THE SAME WAS HELD TO BE WITHOUT DUE ENQUIRIES IN THE MATTER WAS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN TH E LIST OF OTHER LIABILITIES HAD SHOWN LIABILITY OF RS.5,01,959/- TOWARDS CENTRAL EXCISE DEPARTMENT. I N ASSESSMENT YEAR 1992-93 AMOUNT OF RS.10,51,780/- HAD BEEN TAXED AS TRADING RECEIPT AN D THE SAME HAS BEEN CONFIRMED BY THE LD. CIT (APPEALS) VIDE HIS ORDER DATED 28/12/1995. SINCE THE ARGUMENTS ADVANCED BY THE ASSESSEE WERE IDENTICAL TO THAT OF ASSESSMENT YEAR 1992-93, LD. CIT (APPEALS), THEREFORE, UPHELD THE DISALLOWANCE OF RS.5,01,959/-. 32. WE HAVE HEARD BOTH THE PARTIES. DURING THE COUR SE OF HEARING IT WAS FAIRLY CONCEDED BY THE LD AR OF THE ASSESSEE THAT ISSUE IS IDENTICAL TO ASSESSMENT YEARS 1992-93 IN RESPECT OF ITAT HAD CONFIRMED THE ORDER OF CIT PASSED U/S 263 OF T HE ACT. IN ASSESSMENT YEARS 1992-93 AND 1993-94 IN PRECEDING PARAGRAPHS WE HAVE CONFIRMED THE ISSUE RELATING TO EXCESS COLLECTION OF EXCISE DUTY AS TRADING RECEIPTS FOLLOWING THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU P. LTD. VS. CIT (SUPRA). SINCE THE ISSUE IS IDENTICAL, THE STAND TAKEN BY THE ASSESSING OFFICER TREATING THE AMOUNT OF RS. 5,01,959/- AS TRADING RECEIPT IS UPHELD. 18 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF CIT (APPEALS) WHICH MAY REQUIRE ANY INTERFERENCE BY US. 33. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 1991-92 IS DISMISSED. 34. TO SUM UP ALL THE THREE APPEALS ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 30 TH AUGUST, 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER AT NEW DELHI . DATED : 30 TH AUGUST, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 19 ITA. NO. 342 (JODH.) OF 1996 & ITA. NO. 537 (JO DH.) OF 1997 A N D I. T. APPEAL NO. 336 (JODH.) OF 1999.