Bindal Smelting (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 5568/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6502 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 14-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ CHOPRA
• Keywords: Bogus purchase; Business income; Depreciation; Unabsorbed depreciation
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A , NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI AT VARKEY , JUDICIAL MEMBER ITA NO. 5568 / DEL/201 3 AY: 20 10 - 11 BINDAL SMELTING P.LTD. VS. DCIT, CIRCLE 3(1) 987, 1 ST FLOOR, HARDHIYAN SINGH ROAD NEW DELHI KAROLBAGH NEW DELHI 110 005 PAN: AAACB 5260 C (APPELLANT) (RESPONDENT) APPELLANT BY : SH. KAPIL GOEL, ADV. RESPONDENT BY : SH. MANOJ CHOPRA, SR. D.R. ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX (APPEALS) - VI, NEW DELHI DT. 16.8.2013 PERTAINING TO THE ASSESSMENT YEAR (A.Y.) 20 10 - 11 . 2. FACTS IN BRIEF : - THE BRIEF FACTS OF THE CASE AS ENUMERATED IN PARAS 2.1 TO 2.5 OF THE LD.CIT(APPEALS) S ORDER ARE EXTRACTED FOR READY REFERENCE. 2.1 .THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 16.09.2010 FOR A.Y 2010 - 11 DECLARING NIL INCOME AFTER CLAIMING DEDUCTION UNDER CHAPTER VI A ( SECTION 80 I B) OF RS.12 , 01 , 070 / - . THE ASSESSEE COMPANY, HOWEVER, PAID TAX U/ S 115 JB TO THE EXTENT OF RS.13,03,926/ - ON ITS BOOK PROFITS OF RS. 8 4 , 39,655/ - 2 .2 THE ASSESSEE DECLARED ITS BUSINESS INCOME OF RS.10,33,096/ - FOR THE RELEVANT ASSESSMENT YEAR AFTER CLAIMING SET OFF OF BROUGHT FORWARD LOSSES OF EARLIER YEARS OF RS.59,36,184/ - AS BUSINESS LOSS AND RS.10,80,413/ - AS UNABSORBED DEPRECIATION, BOTH PERTAINING TO THE A.Y. 2009 - 10. IT ALSO DECLARED ITA 5568/DEL/2013 A.Y. 2010 - 11 BINDAL SMELTING P.LTD., NEW DELHI 2 INCOME FROM OTHER SOURCES I.E. INTEREST RECEIVED RS.L,67,974/ - AND THE ASSESSEE ALSO CLAIMED DEDUCTION U/S 80 I B TO THE EXTENT OF R S .12,01,070/ - . 2.3 FOR THE RELEVANT A. Y., THE ASSESSEE COMPANY DECLARED INCOME BY WAY OF JOB WOR K RENDERED OF RS.56,80,139/ - APART FROM SALES (NET OF EXCISE) AND RS.53,59,10,862/ - AND OTHER INCOME RS.2,54,337/ - IN ITS P&L A / C, FOR THE YEAR ENDED ON 31.03.2010 . 2.4 THE FACTORY PREMISES OF THE ASSESSEE COMPANY WAS SEARCHED ON 19.0 8 .2009 BY EXCISE AUT HORITIES AND THEY ALLEGEDLY FOUND 75 MT OF RAW MATERIAL AND 0.580 MT OF FINISHED GOODS SHORT AS PER THEIR REPORT DATED 19.08.2009. 2.5 THE AO COMPLETED THE ASSESSMENT OF THE ASSESSEE COMPANY ON 31.01.2013 AND MADE VARIOUS DISALLOWANCES/ADDITIONS AND ASSES SED INCOME AT RS.42,16,030 / - , AFTER ALLOWING SET OFF OF BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION AND FURTHER ACCEPTED THE BOOK PROFIT @ RS.84,39,655/ - FOR THE PURPOSES OF SECTION 115 JB. 3. ON APPEAL, THE FIRST APPELLATE AUTHORITY HELD THAT T HE A.O. HAS RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80 IB OF THE ACT ON THE AMOUNT OF ADDITION OF RS.40,48,009/ - ON ACCOUNT OF SHORTAGE OF STOCK. ON THE ISSUE OF DENIAL OF DEDUCTION U/S 80 IB OF THE ACT IN RESPECT OF JOB WORK RECEIPTS , THE LD.CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 4. A GGRIEVED THE ASSESSEE IS BEFORE US ON THE FOLLOWING GROUNDS. 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD.CIT(A) ERRED IN UPHOLDING THE ADDITION MADE BY LD.AO AMOUNTING TO RS.40,48,059/ - ON ACCOUNT OF ALLEGED INFLATED PURCHASES AND SUPPRESSION OF SALES MISREADING THE EXCISE AUTHORITIES FINDINGS, DEHORS THE CONTEXT, IGNORING OUR VARIOUS CONTENTIONS AND DEFECT FREE AUDITED BOOK RESULTS FULLY VOUCHED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, WITHOUT PREJUDICE, LD.CIT(A) ERRED IN NOT GIVING CORRESPONDING BENEFIT U/S 80IB OF THE ACT WHILE ENHANCING BUSINESS PROFITS BY RS.40,48,059/ - IGNORING DECISIONS CITED. 5. WE HAVE HEARD SHRI MANOJ CHOPRA, LD.SR.D.R. ON BEHALF OF THE REVENUE AND SHRI KAPIL GOEL, THE LD.COUNSEL FOR THE ASSESSEE. . ITA 5568/DEL/2013 A.Y. 2010 - 11 BINDAL SMELTING P.LTD., NEW DELHI 3 6. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF MATERIAL ON RECORD, ORDERS OF LOWER AUTHORITIES, CASE LAWS CITED, W E HOLD AS FOLLOWS. 7. THE LD.COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ASSESSMENT WAS BASED ON THE FINDINGS OF THE CENTRAL EXCISE OFFICIALS DURING THE SURVEY OPERATION CARRIED OUT BY THEM ON THE ASSESSEE ON 19.8.2009. HE CONTENDS THAT THERE IS NO BOGUS PURCHASE O R SALES BY THE ASSESSEE, NOR THERE WAS ANY SHORTAGE OR DIFFERENCE IN THE STOCKS HELD BY IT. HE ARGUED THAT THE ASSESSEE ADMITTED TO THE ALLEGED SHORTAGE, AS IT HAS RESULTED ONLY IN REVERSING CENVAT CREDIT, WHICH ANY HOW WAS NOT OF MUCH USE TO THE ASSESSEE. HE CONTENDS THAT THE WHOLE NOTING AND RECORDING BY THE EXCISE AUTHORITY IN THE PANCHANAMA DATED 19.8.2009 ONLY RELATES TO THE REVERSAL OF CENVAT CREDIT WITHOUT ANY REMOTE CORRELATION TO PURCHASES AND SALES RECORDED BY THE ASSESSEE COMPANY. HE VEHEMENTLY CONTENDS THAT THERE IS NO SUPPRESSION OF SALE NOR INFLATION OF PURCHASES AND THAT NO SUCH OBSERVATION WAS RECORDED BY THE EXCISE AUTHORITIES. HE CONTENDS THAT THE ENTIRE EXERCISE OF THE EXCISE AUTHORITIES WAS TO CHECK THE CORRECTNESS OF CENVAT CREDIT. HE SUBMITTED THAT BEFORE THE REVENUE AUTHORITIES COMPLETE DETAILS BOTH QUANTITATIVE AND VALUE WERE FILED OF SALES, PURCHASES, CLOSING STOCK ETC. A ND THAT NO DISCREPANCY WAS POINTED OUT IN THE STOCK DETAILS BY THE A.O . HE FURTHER SUBMITS TH AT THE GROSS PROFIT RATE OF THE ASSESSEE COMPANY HAS GONE UP DURING THE YEAR AS COMPARED TO THE EARLIER A.Y . HE CONTENDED THAT THE REPORT OF THE EXCISE AUTHORITIES CANNOT BE TAKEN FOR MAKING AN ADDITION IN THE CASE OF THE ASSESSEE, WITHOUT INDEPENDENT VER IFICATION, WHEN THE ASSESSEE IS GIVING REASONS AND SUBMITTING DATA TO THE A.O. HE RELIED ON A NUMBER OF CASE LAWS IN SUPPORT OF HIS CONTENTIONS. 7.1 . ALTERNATIVELY HE SUBMITTED THAT THE RESULT OF THE ADDITION MADE BY THE A.O. IS THAT , THE BUSINESS PROFITS OF THE ASSESSEE INCREASED AND IT SHOULD BE ALLOWED AS A DEDUCTION U/S 80 IB OF THE ACT. HE RELIED ON THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S FASHION WORLD VS. ITA 5568/DEL/2013 A.Y. 2010 - 11 BINDAL SMELTING P.LTD., NEW DELHI 4 ACIT IN ITA 1634/AHMD./2006 FOR THE A.Y. 2003 - 04 AND OTHER CASE LAW FOR THIS PROPOSITION. 7.2 . HE FURTHER RELIED ON THE FOLLOWING CASE LAWS. * CIT VS. SK SRIGIRI & BROS. (2008) 298 ITR 13 (KARNA) * CIT VS. MARGARET S HOPE TEA CO. LTD. (1993) 201 ITR 747 (CAL.) 8. THE LD. SR. D.R. ON THE OTHER HA ND DISPUTED THE CONTENTIONS OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE HAS ADMITTED BEFORE THE EXCISE AUTHORITIES THAT THERE WAS A SHORTAGE IN STOCK AND HAS ACCORDINGLY PAID THE DUTY. HE ARGUED THAT SUCH CONFESSIONAL STATEMENT CANNOT BE RETRACTED AT THIS JUNCTURE. HE RELIED ON THE ORDER OF THE AUTHORITIES BELOW. ON THE CLAIM U/S 80IB OF THE ACT HE REFERRED TO THE ORDER OF THE LD.CIT(A) AT PAGE 4 AND SUBMITTED THAT THE DIFFERENCE IS ONLY ON ACCOUNT OF RAW MATERIAL AND HENCE CANNOT BE ALLOWED. 9. AFT ER HEARING RIVAL CONTENTIONS WE FIND THAT, THE ALTERNATIVE CONTENTION OF THE ASSESSEE HAS FORCE. THE ADDITION IN QUESTION WAS MADE TO THE BUSINESS PROFITS OF THE ASSESSEE COMPANY. IT IS NOT THE CASE OF THE REVENUE THAT, THIS PROFIT IS NOT CONNECTED INEXT RICABLY WITH THE PRODUCTION OF GOODS BY THE ASSESSEE . O NCE THE INCOME IN QUESTION IS TREATED AS DERIVED OUT OF MANUFACTURING OF GOODS, THEN THE SAME IS ELIGIBLE FOR DEDUCTION U/S 80 IB OF THE ACT. 9.1 . THE HON BLE BOMBAY HIGH COURT, NAGPUR BENCH, NAG PUR IN THE CASE OF CIT - IV VS. SUNIL VIS H WA MBHARNATH TIWARI HELD AS FOLLOWS. 8. AFTER HEARING THE RESPECTIVE COUNSEL, WE FIND FACT THAT TDS WAS NOT EFFECTED BY THE RESPONDENT ASSESSEE IS NOT IN DISPUTE. IN VIEW OF THE SCHEME OF SECTION 40 OF THE ACT, AS TDS IS NOT EFFECTED, PAYMENT TO CONTRACTORS CANNOT BE DEDUCTED, AS THOSE EXPENDITURE BECOME INADMISSIBLE. THE EXPENDITURES ITA 5568/DEL/2013 A.Y. 2010 - 11 BINDAL SMELTING P.LTD., NEW DELHI 5 THEREFORE ARE ADDED BACK TO THE INCOME, WHICH IS NOTHING BUT, ELIGIBLE INCOME. THIS INCOME WHICH IS ELIGIBLE FOR DEDUCTION IN TERMS OF SECTION 80 IB OF THE ACT, THEREFORE, ONLY INCREASES BY SAID FIGURE OF DISALLOWED EXPENDITURE. 9. C IT (APPEALS) HAS IN THIS BACKGROUND REFERRED TO THE ABOVE REFERRED JUDGMENT IN CASE OF SHIRKE CONSTRUCTIONS AND EQUIPMENTS LTD (SUPRA), WHERE IN DISTINCTION BETWEEN CERTAIN SECTIONS OF CHAPTER VI - A, WHICH REFER TO DEDUCTION OUT OF GROSS TOTAL INCOME AND OTHER SECTIONS OF CHAPTER VI - A, WHICH DO NOT MAKE SUCH REFERENCE TO GROSS TOTAL INCOME, HAS BEEN EXPLAINED. CIT (APPEALS) HAS CORRECTLY POINTED OUT THAT THE DEDUCTION ALLOWABLE UNDER SECTION 80 IB(10 OF THE ACT ) IS WITH REFERENCE TO THE RESPONDENTS GROSS TOTAL INCOME. (EMPHASIS OURS). 9.2. RESPECTFULLY FOLLOWING THE PROPOSITION LAID DOWN IN THIS JUDGEMENT , WE UPHOLD THIS ALTERNATE CONTENTION OF THE ASSESSEE AND ALLOW GROUND NO.2. 10. WITH RESPECT TO GROUND NO.1, THOUGH WE FIND SOME MERIT IN THE SUBMISSIONS OF THE LD.COUNSEL FOR THE ASSESSEE, AS THE SAME IS IN LINE WIT H THE PROPOSITIONS LAID DOWN IN THE CASE OF CIT, TRICHI VS. M/S A M MAN STEEL AND ALLIED INDUSTRIES, 377 ITR 568 (MADRAS), AND IN VIEW OF OUR ACCEPTING THE ALTERNATE CONTENTIONS, WE DO NOT EXPRESS ANY OPINION ON THIS ISSUE, AS IT WOULD BE AN ACADEMIC EXERCIS E. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH , 2016 . SD/ - SD/ - ( A.T.VARKEY ) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 17 TH MARCH , 2016 MANGA ITA 5568/DEL/2013 A.Y. 2010 - 11 BINDAL SMELTING P.LTD., NEW DELHI 6 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR