MAHARASHTRA AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD, MUMBAI V. ACIT CIR 6(3), MUMBAI

ITA 5718/MUM/2009

• Counselvise Citation: 571819914 RSA 2009
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 27-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-10-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: ASHOK T PATIL
• Keywords: Opportunity of being heard; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI R.K. PANDA, A.M. ITA NO.5718/MUM/2009 ASSESSMENT YEAR : 2005-06 THE MAHARASHTRA AGRO INDUSTRIES DEVELOPMENT CORPORATION LTD., KRUSHIUDYOG BHAVAN, AAREY MILK COLONY, GOREGOAN (E), MUMBAI-400 065 PAN NO. : AAACT1546M VS. ACIT CENTRAL CIRCLE-6(3), 15-16, WING, 3 RD FLOOR, MITTAL COURT, NARIMAN POINT, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK T. PATIL RESPONDENT BY : SMT. ASHIMA GUPTA O R D E R PER R.K. PANDA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 24.07.2009 OF THE CIT(A)-XXVI, MUMBAI RELATING TO A SSESSMENT YEAR 2005-06. 2. THE EFFECTIVE GROUNDS OF APPEAL FILED BY THE ASS ESSEE ARE AS UNDER :- 1. DISALLOWANCE OF EARLIER YEAR EXPENSES OF `. 136.14 LAKHS AND ADDING EARLIER YEAR INCOME OF `. 4.44 LAKHS. 2. ADDITION OF OUTSTANDING CREDIT BALANCE OF SUNDRY CREDITORS OF `. 5,72,115/- AS TERMINATION OF LIABILITY. 3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING FOR THE ISSUE RELATING TO ADDITI ON OF EARLIER YEAR INCOME OF `. 4.44 LAKHS AS PER SECOND LIMB OF GROUND NO.1, FOR W HICH THE LD. DR HAS NO OBJECTION. THEREFORE, THE ONLY ISSUES TO BE DECIDED IN THIS APPEAL ARE 2 DISALLOWANCES OF EARLIER YEAR EXPENSES OF `. 136.44 LAKHS AND ADDITION OF OUTSTANDING CREDIT BALANCE OF SUNDRY CREDITORS OF `. 5,72,115/-, AS TERMINATION OF LIABILITY. 4. SO FAR AS, THE FIRST ISSUE RELATING TO ADDITION OF PRIOR PERIOD EXPENSES OF `. 136.14 LAKHS IS CONCERNED, THE FACTS ARE AS UNDER. 4.1 THE ASSESSING OFFICER NOTICED DURING THE ASSESS MENT PROCEEDINGS THAT THE ASSESSEE HAS DEBITED A SUM OF `. 140.78 LAKHS AS PRIOR PERIOD EXPENSES (NET) IN THE PROFIT & LOSS ACCOUNT BUT THE SAME WAS NOT ADDED TO THE INCOME IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME. AFTER NETTING OF THE CREDIT IN THE ACCOUNT OF `. 4.44 LAKHS OUT OF TOTAL EXPENDITURE OF `. 145.22 LAKHS, NET ALLOWABLE CLAIM OF `. 140.8 LAKHS IS MADE BY THE ASSESSEE IN RETURN OF IN COME. OUT OF THE ABOVE CLAIM OF `. 140.78 LAKHS, THE ASSESSING OFFICER DISALLOWED EXPENSES OF `. 136.14 LAKHS WHICH INCLUDES `. 82.03 LAKHS RELATING TO M/S. KRIBHCO, `. 53.31 RELATING TO M/S. GODAVARI FERTILIZER & CHEMIC ALS LTD. AND `. 79,540/-. 5. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT THE EXPENSES TO THE EXTENT OF `. 82.03 LAKHS PAID TO M/S. KRIBHCO AND `. 53.31 LAKHS PAID TO M/S. GODAVARI FERTILIZERS & CHEMICALS LTD. WERE CRYSTALLIZED DURI NG THE YEAR, THEREFORE, THE SAME WAS CLAIMED IN THE YEAR UNDER REFERENCE. IT WA S STATED THAT M/S. KRIBHCO ARE STILL DOING RECONCILIATION OF THEIR ACCOUNTS ON THE BASIS OF CREDIT/DEBITS OUTSTANDING FOR THE YEAR FROM F.Y. 2001-02 TO 2004- 05. IT WAS CONTENDED THAT M/S. KRIBHCO HAS ADMITTED LIABILITY TO THE EXTENT O F `. 82.03, THEREFORE, THE SAME WAS CLAIMED AS PRIOR PERIOD EXPENSES. 6. SINCE, THE SUBMISSIONS AND CORRESPONDENCE WITH M /S. KRIBHCO AND GFCL FILED ALONG WITH LETTER DATED 19.12.2008 WERE NOT BEFORE THE A.O. AND BEING ADDITIONAL AND FRESH EVIDENCES, THE SAME WERE FORWARDED TO THE A.O. FOR HIS COMMENTS. AFTER RECEIVING THE COMMENTS FROM THE A.O., THE LD. CIT(A) CONFRONTED THE SAME TO THE ASSESSEE. THE ASSESSEE F ILED ITS REJOINDER AND REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE A.O. AT THE TIME OF ASSESSMENT PROCEEDINGS AND ALSO IN REMAND PROCEEDIN GS. IT WAS FURTHER SUBMITTED THAT THE CLAIM OF EXPENDITURE OF M/S. KRI BHCO IS FOR THE ACCOUNTING 3 PERIOD 01.04.2000 TO 31.03.2004, WHICH IS STILL UND ER CONSIDERATION AND UN- RECONCILED, BUT M/S. KRIBHCO HAS ADMITTED THE LIABI LITY TO THE EXTENT OF `. 82.03 LAKHS. IT WAS ACCORDINGLY, CONTENDED THAT THE ASCER TAINED LIABILITY TO THE EXTENT SHOULD BE ALLOWED AS CRYSTALLIZED DURING THE YEAR. 7. HOWEVER, THE LD. CIT(A) WAS NOT SATISFIED WITH T HE EXPLANATION GIVEN BY THE ASSESSEE AND CONFIRMED THE ADDITION MADE BY THE A.O. TO THE EXTENT OF `. 136.14 LAKHS BY HOLDING AS UNDER :- I HAVE CONSIDERED THE SUBMISSION MADE BY THE ASSES SEE AND REASONS GIVEN BY THE ASSESSING OFFICER IN THE ORDER AND REMAND REPORT AS DISCUSSED ABOVE. THE PLAIN FACTS WHICH CU LLED OUT FROM THE RECORD ARE THAT THE ASSESSING OFFICER HAS ADDED A S UM OF `. 82.03 LAKHS CLAIMED BY THE ASSESSEE AS ASCERTAINED LIABIL ITY IN THE NAME OF M/S. KRIBHCO, `. 53.31 LAKSH RELATING TO M/S. GODAVARI FERTILIZERS & CHEMICALS LTD. AND REMAINING `. 79,540/- BEING EXPENDITURE RELATING TO CREDITOR ACCOUNTS FOR WHICH NO DETAILS WERE FILED TO THE ASSESSING OFFICER. THE ASSESSEE HAS NOT GIVEN ANY E XPLANATION AND PROOF WHICH CAN SUBSTANTIATE THAT RECONCILIATION OF ACCOUNTS OF M/S. KRIBHCO AND M/S. GODAVARI FERTILIZERS & CHEMICALS L TD. WAS COMPLETED DURING THE YEAR AND LIABILITY IS CRYSTALL IZED IN THE FINANCIAL YEAR UNDER REFERENCE. THE CORRESPONDENCE FURNISHED BY THE ASSESSEE TO THE ASSESSING OFFICER DURING ASSESS MENT AND REMAND PROCEEDINGS AND TO THE UNDERSIGNED IN THE AP PEAL PROCEEDINGS ALSO STATES THAT RECONCILIATION OF ACCO UNTS FOR THE PERIOD FROM 01.04.2000 TO 31.03.2004 WAS NOT FINALIZED EVE N TILL THE END OF FINANCIAL YEAR 31.03.2005. THE LETTER DATED 31.0 8.2005 AND 12.09.2005 FURNISHED FROM M/S. KRIBHCO AS EVIDENCE ALSO REVEALS THE SAME FACTS AND NOWHERE PROVES THAT THE LIABILIT Y TO THE EXTENT OF `. 82.03 LAKSH HAS BEEN ADMITTED AND CRYSTALLIZED DURI NG THE FINANCIAL YEAR UNDER REFERENCE. SIMILAR IS THE CAS E OF THE LIABILITY OF `. 53.31 LAKHS CLAIMED AS PRIOR PERIOD EXPENDITURE IN THE NAME OF M/S. GODAVARI FERTILIZERS & CHEMICALS LTD. (GFCL) W HICH AS PER THE DOCUMENTS FILED BY THE ASSESSEE, WAS CRYSTALLIZED O N 30.05.2003 RELEVANT TO F.Y. 2003-04 AND NOT IN THE YEAR UNDER REFERENCE. THE CLAIM OF THE ASSESSEE IS ASCERTAINED LIABILITY FOR THE YEAR IS, THEREFORE, NOT ACCEPTABLE. NO EXPLANATION AND DETAI LS OF CLAIM OF EXPENDITURE FOR `. 79,540/- ( `. 68,086 + `. 11,454) WAS FILED TO THE ASSESSING OFFICER IN ASSESSMENT AS WELL AS IN REMAN D PROCEEDINGS, HENCE IN THE ABSENCE OF ANY PROOF, SAME CANNOT BE C ONSIDERED AS PRIOR PERIOD LIABILITY CRYSTALLIZED IN THE YEAR UND ER REFERENCE. THE ASSESSING OFFICER HAS DISCUSSED IN DETAIL ALL THE F ACTS OF THE CASE, THEREFORE, THE LIABILITY BEING NOT PERTAINING TO TH E YEAR UNDER REFERENCE AND NOT CRYSTALLIZED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR IS NOT ALLOWABLE. THE ADDITION MADE BY THE ASSESSING OFFICER OUT OF PRIOR PERIOD EXPENSES TO T HE EXTENT OF `. 136.14 LAKHS IS CONFIRMED. THE GROUND OF APPEAL IS DISMISSED. 4 8. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 9. THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING FILED THE PAPER BOOK CONTAINING 20 PAGES WHICH ALSO CONTAINED ADDIT IONAL EVIDENCE IN THE SHAPE OF MINUTES OF MEETING HELD ON 23.01.2009 BETW EEN M/S. KRIBHCO AND MAIDC. THE ASSESSEE HAS FILED AN APPLICATION FOR AD MISSION OF ADDITIONAL EVIDENCE UNDER RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963. IN THE SAID APPLICATION, IT HAS BEEN MENTIONED THAT TH E ABOVE DOCUMENT WAS NOT AVAILABLE DURING THE ASSESSMENT PROCEEDINGS OR FIRS T APPEAL PROCEEDINGS. SINCE THE SAID DOCUMENT GIVES ADDITIONAL SUPPORT TO THE S TAND TAKEN AND EVIDENCE FILED BY THE ASSESSEE DURING THE ASSESSMENT AND APP EAL PROCEEDINGS, THEREFORE, THE SAME SHOULD BE ADMITTED. 10. AFTER HEARING BOTH THE SIDES, THE ADDITIONAL EV IDENCE FILED BY THE ASSESSEE IS ADMITTED. 11. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING. 54.5% SHARES OF THE SAID CO MPANY ARE HELD BY THE STATE GOVERNMENT AND 45.5% SHARES OF THE SAID COMPA NY ARE HELD BY THE CENTRAL GOVERNMENT. THE ASSESSEE DEALS IN AGRO INPU TS LIKE FERTILIZERS, PESTICIDES AND ALSO DEALS IN AGRICULTURAL IMPLEMENT S, CATTLE FEEDS, PROCESSED FRUIT PRODUCTS AND IT ALSO DOES TRADING ACTIVITIES OF THESE PRODUCTS. IT SUPPLIES VARIOUS PRODUCTS TO FARMERS THROUGH VARIOUS CO-OPER ATIVE SOCIETIES. IT HAS ITS HEAD OFFICE AT BOMBAY. IT HAS 12 REGIONAL OFFICES, 3 SUB-REGIONAL OFFICES AND 30 GODOWNS. REFERRING TO PAGE 35 OF ANNUAL REPORT, HE DREW THE ATTENTION OF THE BENCH TO SCHEDULE S, WHICH CONTAINS THE EXPENSES/ INCOME RELATING TO THE PREVIOUS YEAR, ENDING 31.03.2005, THE NET AMOUNT OF WHICH IS `. 140.78 LAKHS. HE SUBMITTED THAT THE AMOUNT OF `. 136.14 LAKHS DISALLOWED BY THE A.O. BEING PRIOR PERIOD EXPENSES CONSISTS OF `. 82.03 LAKHS RELATING TO M/S. KRIBHCO, `. 53.31 LAKHS RELATABLE TO M/S. GODAVARI FERTILIZERS & CHEMICALS LTD. AND THE BALANCE AMOUNT OF `. 79,540/- RELATING TO VARIOUS SMALL PARTIES. HE SUBM ITTED THAT IT IS A FACT THAT THE ASSESSEE WAS UNABLE TO R ECONCILE THE SAME. HOWEVER, THIS BEING A GOVERNMENT ORGANIZATION AND THERE BEIN G NO INTENTION TO GIVE WRONG FIGURES TO THE INCOME TAX DEPARTMENT AND SINC E, IT TAKES TIME TO 5 RECONCILE VARIOUS PARTICULARS, THEREFORE, ONE MORE OPPORTUNITY TO THE ASSESSEE MAY BE GRANTED TO PROVE BEFORE THE A.O. THE GENUINE NESS OF THE PRIOR PERIOD EXPENSES CLAIMED IN THE PROFIT & LOSS A/C. 12. THE LD. DR ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE LD. CIT(A) SUBMITTED THAT ENOUGH OPPORTUNITIES HAS BEEN GIVEN TO THE ASSESSEE. HOWEVER, THE ASSESSEE WAS UNABLE TO RECONCILE THE P RIOR PERIOD EXPENSES CLAIMED. SHE HOWEVER, HAS NO OBJECTION IF THE MATTE R IS RESTORED TO THE FILE OF A.O. FOR FRESH ADJUDICATION, SINCE IT IS A STATE GO VERNMENT UNDERTAKING. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO GONE THROUGH T HE PARTY-WISE DETAILS OF PRIOR PERIOD TRANSACTIONS FROM A.Y. 2005-06 TO 2008 -09, FILED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING. CO NSIDERING THE TOTALITY OF THE FACTS OF THE CASE, AND CONSIDERING THE FACT THAT IT IS A STATE GOVERNMENT UNDERTAKING AND CONSIDERING THE SUBMISSION OF THE L D. COUNSEL FOR THE ASSESSEE THAT IT TAKES CONSIDERABLE TIME FOR RECONC ILIATION OF PARTY ACCOUNTS IN GOVERNMENT CONCERNS, WE, IN THE INTEREST OF JUSTICE , DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF A.O. WITH THE DIRECT ION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLA IM OF EARLIER YEARS EXPENSES OF `. 136.14 LAKHS. THE A.O. SHALL DECIDE THE ISSUE AFRES H AND IN ACCORDANCE WITH LAW, AFTER GIVING DUE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE FIRST GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY, PARTLY ALLOWED FOR STATISTICAL PURPOSE. 14. THE SECOND GROUND RAISED BY THE ASSESSEE RELATE S TO THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ADDITION OF OUTSTANDING CR EDIT BALANCE OF SUNDRY CREDITORS OF `. 5,72,715, AS TERMINATION OF LIABILITY. 15. FACTS OF THE CASE, IN BRIEF, ARE THAT THE CREDI TORS TO THE EXTENT OF `. 33,96,817/- WERE OUTSTANDING SINCE MANY YEARS. THER EFORE, THE A.O. ASKED THE ASSESSEE TO FURNISH THE DETAILS AND COPIES OF A CCOUNTS OF CREDITORS. THE ASSESSEE FAILED TO EXPLAIN THE REASONS DURING THE A SSESSMENT PROCEEDINGS. IN 6 THE ABSENCE OF ANY COMPLIANCE BY THE ASSESSEE, THE A.O. MADE ADDITION OF `. 33,96,817/-, TO THE TOTAL INCOME OF THE ASSESSEE U/ S. 41(1)OF THE I.T. ACT. 16. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED T HAT OUT OF THE 14 PARTIES MENTIONED BY THE A.O. IN THE ASSESSMENT ORDER, SOME AMOUNTS WERE SUBSEQUENTLY PAID. IT WAS SUBMITTED THAT IN CERTAIN CASES THE BUSINESS DEALINGS HAS BEEN STOPPED TEMPORARILY, BUT RESUMED SUBSEQUENTLY. IN CERTAIN CASES, THE AMOUNTS WERE OFFERED FOR TAXATION IN SUB SEQUENT YEARS. ACCORDINGLY, IT WAS SUBMITTED THAT NO ADDITION IS CALLED FOR U/S . 41(1) OF THE I.T. ACT. 16.1 HOWEVER, THE LD. CIT(A) WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE ACCEPTED THE CONTENTION OF THE ASS ESSEE TO THE EXTENT WHERE THE LIABILITY WAS PAID TO THE CREDITORS IN THE NEXT YEAR. HE REJECTED THE CONTENTION OF THE ASSESSEE TO THE EXTENT OF CREDIT BALANCES OFFERED FOR TAXATION ON ACCOUNT OF CESSION OF LIABILITY IN THE CASE OF E XCEL INDUSTRIES, AMOUNTING TO `. 1,63,460/-, ON THE GROUND THAT THE SAME IS NOT SUPP ORTED BY ANY COGENT REASON EXPLAINING WHY THE LIABILITY WAS OUTSTANDING SINCE LONG, AND WAS NOT TREATED AS TERMINATION OF LIABILITY. HE, HOWEVER, D ELETED THE AMOUNT OUTSTANDING OF `. 27,43,679/- IN THE CASE OF M/S. DHARAMSHI MORARJI, ON THE GROUND THAT SOME DISPUTE WAS GOING ON AND THE CREDI TOR HAS GIVEN A LETTER DATED 16.10.2006, ACCORDING TO WHICH THE AMOUNT IS STILL PAYABLE. HE, ACCORDINGLY, DELETED THE ADDITION OF `. 27,43,679/- ON ACCOUNT OF M/S. DHARAMSHI MORARJI. THUS OUT OF THE TOTAL ADDITION O F `. 33,96,817/-, THE LD. CIT(A) SUSTAINED THE AMOUNT OF `. 5,72,115/-. 17. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE US. 18. THE LD. COUNSEL FOR THE ASSESSEE AGAIN SUBMITTE D THAT THIS ISSUE ALSO SHOULD BE RESTORED TO THE FILE OF THE A.O. WITH A D IRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CAS E. 19. AFTER HEARING BOTH THE SIDES AND IN THE LIGHT O F OUR OBSERVATIONS WHILE DECIDING GROUND NO.1, WE DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF A.O. 7 FOR FRESH ADJUDICATION OF THE ISSUE. NEEDLESS TO SA Y, THE A.O. SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECI DE THE ISSUE AS PER LAW. WE HOLD AND DIRECT ACCORDINGLY. THE SECOND GROUND RAIS ED BY THE ASSESSEE IS ACCORDINGLY, ALLOWED FOR STATISTICAL PURPOSE. 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ITSELF I.E. ON 28.04.2011. SD/- (R.V. EASVAR) HON'BLE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED : 28/04/2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, F - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI