ACIT 15(2), MUMBAI V. CONSTRUCTION & ENGINEERSING EQUIPMENT, MUMBAI

ITA 6022/MUM/2012

• Counselvise Citation: 602219914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 03-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHOK SURI SHRI B V JHAVERI
• Assessee Lawyers: CULLA E MUMBAI PAN SSEFCR
• Keywords: Opportunity of being heard

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI .. , # %, & # ' BEFORE SHRI P.M. JAGTAP, AM AND SHRI SANJAY GARG, J M ./ I.T.A. NO.6022 /MUM/2012 ( &% % / ASSESSMENT YEAR : 2008-2009 ASSTT. COMMISSIONER OF INCOME TAX 15(2), MATRU MANDIR, ROOM NO. 113, GRANT ROAD (W), MUMBAI 400 007. / VS. M/S CONSTRUCTION & ENGINEERING EQUIPMENT, B-18, SUSSEX INDUSTRIAL ESTATE, DADOJI KONDDEO CROSS MARG, BYCULLA (E), MUMBAI 400 027. . / PAN : SSEFC4895R ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY SHRI ASHOK SURI RESPONDENT B Y : SHRI B.V. JHAVERI / DATE OF HEARING : 02-12-2013 / DATE OF PRONOUNCEMENT : 06-12-2013 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A) 26, MUMBAI DATED 16-7-2012 AND IN THE SOLI TARY GROUND RAISED THEREIN, THE REVENUE HAS CHALLENGED THE ACTION OF T HE LD. CIT(A) IN DELETING THE ADDITION OF RS. 22,80,456/- MADE BY THE A.O. ON ACC OUNT OF ASSESSEES CLAIM FOR EXPENSES ON CONSUMABLES. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM WHICH IS ENGAGED IN THE BUSINESS OF ENGINEERING AND FABRICATION OF C ONSTRUCTION EQUIPMENT. ITA 6022/M/12 2 THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON WAS FILED BY IT ON 8-9- 2008 DECLARING A LOSS OF RS. 89,68,416/-. IN THE P &L ACCOUNT FILED ALONG WITH THE SAID RETURN, THE ASSESSEE HAD CLAIMED EXPENSES ON CONSUMABLES AMOUNTING TO RS. 22,80,456/- UNDER THE HEAD OTHER EXPENSES IN ADDITION TO THE EXPENSES ON STORES AND SPARES CLAIMED SEPARATEL Y AT RS. 2,02,65,024/-. ACCORDING TO THE A.O., THE EXPENSES ON CONSUMABLES THUS WERE CLAIMED BY THE ASSESSEE TWICE IN THE FINAL STATEMENT AND HE THEREF ORE REQUIRED THE ASSESSEE TO OFFER ITS EXPLANATION IN THE MATTER. IN REPLY, I T WAS EXPLAINED BY THE ASSESSEE THAT THE CONSUMABLES CONSISTED OF NUTS, BO LTS, SCREWS NAILS ETC. WHICH WERE SEPARATELY CLAIMED UNDER THE HEAD OTHER EXPENSES IN ADDITION TO THE EXPENSES CLAIMED UNDER THE HEAD STORES AND SPA RES. THIS EXPLANATION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE A.O. HE ALSO NOTED THAT THE EXPENSES ON CONSUMABLES WERE CLAIMED BY THE ASSESSE E FROM GROSS PROFIT WHEREAS THE EXPENSES ON STORES AND SPARES WERE CLAI MED AS MANUFACTURING EXPENSES. HE, THEREFORE, DISALLOWED THE EXPENSES O F RS. 22,80,456/- ON CONSUMABLES IN THE ASSESSMENT COMPLETED U/S 143(3)( II) OF THE INCOME TAX ACT, 1961 VIDE AN ORDER DATED 29-12-2010. 3. AGAINST THE ORDER PASSED BY THE A.O. 143(3)(II) OF THE ACT, APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) DIS PUTING, INTER ALIA, THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF CONSUMA BLES. BEFORE THE LD. CIT(A), THE ASSESSEE FURNISHED CERTAIN DETAILS AND DOCUMENTS WHICH WERE FORWARDED BY THE LD. CIT(A) TO THE A.O. FOR THE LAT ERS COMMENT. IN THE REMAND REPORT SUBMITTED TO THE LD. CIT(A), THE A.O. REITER ATED THE STAND THAT THE ASSESSEE COULD NOT EXPLAIN SATISFACTORILY AS TO WHY THE CONSUMABLES WERE INCLUDED IN THE OTHER EXPENSES. WHEN THE REMAND RE PORTED RECEIVED FROM THE A.O. WAS CONFRONTED BY THE LD. CIT(A) TO THE ASSESS EE, THE ASSESSEE OFFERED ITS COUNTER COMMENTS AS UNDER:- ITA 6022/M/12 3 IN PARAGRAPH 7 IN THE REMAND REPORT THE LEARNED AC COULD NOT UNDERSTAND THE PROFIT AND LOSS ACCOUNT, BALANCE SHE ET SUBMITTED WITH THE AUDIT REPORT OF THE ASSESSEE. IN PROFIT AND LOS S ACCOUNT AND BALANCE SHEET THERE IS NO MANUFACTURING ACCOUNT PRE PARED WITH THE PROFIT AND LOSS ACCOUNT IN VERTICAL FORM. THE PROFIT AND LOSS ACCOUNT ANNEXED TO TAX AUDIT RE PORT IS PREPARED AS PER BOOK KEEPING AND ACCOUNTING PRINCIP LES. COPY OF ACCOUNTS IS AGAIN ATTACHED HEREWITH AS ANNEXURE-IV. THE MATERIAL COST (SCHEDULE-VU) ON THE EXPENDITURE SIDE SHOWED THE CONSUMPTION OF RAW MATERIAL THAT IS STEEL AND S TORES/SPARES PURCHASED AND CONSUMED FOR MANUFACTURING MACHINERIE S. THE OTHER EXPENSES ARE VERY CLEAR LISTED OUT IN SCHEDULE-IX A TTACHED TO PROFIT AND LOSS ACCOUNT. THE DETAILS OF CONSUMABLES WITH COPIE S OF SOME OF THE BILLS WERE FILED DURING ASSESSMENT IF PROCEEDING ON 06/09/2010 AND ALSO SUBMITTED TO THE LEARNED AC FOR REMAND REPORT. THE LEARNED AO ASSUMED THAT THE EXCISE DUTY IS CHAR GED ON MANUFACTURING COST HENCE THE APPELLANT ASSESSEE HAS SHOWN CONSUMABLES AS OTHER EXPENSES. ACCORDING TO EXCISE ACT THE DUTY IS CHARGED AND RECOVERED ON THE ULTIMATE SALE PRICE TO CONSUMER AND NOT MANUFACTURING COST. FURTHER, E INCOME TAX IS LEVIED ON THE NET PROFIT. THE LEARNED ACS CLAIM TO REJECT OF ACCOUNTS AND DI SALLOWING CONSUMABLES AS NOT INCLUDED IN MANUFACTURING EXPENS ES IS NOT CORRECT AND NO EVIDENCE OR PROPER REASON IS GIVEN FOR THE S AID DISALLOWANCE. 4. AFTER CONSIDERING THE SUBMISSIONS MADE BY THE AS SESSEE, THE REMAND REPORT SUBMITTED BY THE A.O. AND THE MATERIAL AVAIL ABLE ON RECORD, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE A.O. ON ACC OUNT OF CONSUMABLES FOR THE FOLLOWING REASONS GIVEN IN PARA NO. 3.5 OF HIS IMPUGNED ORDER:- 3.5 I HAVE CAREFULLY CONSIDERED THE FINDINGS OF TH E AC IN THE ASSESSMENT ORDER, FURTHER FINDING OF THE AO IN REMA ND REPORT AS WELL AS THE SUBMISSIONS OF THE APPELLANT. IT IS NOTED THAT IT IS NOT THE CASE OF THE A.O THAT THE APPELLANT HAS NOT ACTUALLY PURCHAS ED AND CONSUMED THE CONSUMABLES, AS THE A.O NEITHER IN ASSESSMENT P ROCEEDINGS NOR IN THE REMAND PROCEEDINGS HAS DOUBTED THE PURCHASE OF CONSUMABLES. RATHER, THE DISALLOWANCES HAS BEEN MADE SOLELY ON A FLIMSY GROUND THAT THE CONSUMABLES WERE NOT CLUBBED UNDER THE HEAD MA NUFACTURING EXPENSES. TECHNICALLY, THE OBSERVATIONS OF THE A.O MAY BE CORRECT BECAUSE, IF THE CONSUMABLES ARE A PART AND PARCEL O F MANUFACTURING PROCESS, EXPENSES ON CONSUMABLES SHOULD BE CLUBBED IN THE MANUFACTURING EXPENSES, BUT, IF THE ASSESSEE HAS WR ONGLY CLUBBED A PARTICULAR HEAD OF EXPENSE IN A WRONG HEAD, THIS IT SELF CANNOT MAKE THE EXPENDITURE NON DEDUCTIBLE. UNDER THESE CIRCUMSTANC ES, IT IS HELD THAT ITA 6022/M/12 4 THE A.O HAS WRONGLY MADE THE DISALLOWANCES OF THESE EXPENSES. THE ADDITION MADE ON THIS GROUND DESERVES TO BE DELETED . 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. D.R. HAS RAISED A LIMITED CONTENTION BEFORE US THAT THE CLAIM OF THE ASSESSEE FOR CONSUMABLES HAVING BEEN DISALLOWED BY THE A.O. ON THE GROUND OF A DOUB LE CLAIM, THE SAME REMAINED TO BE VERIFIED WITH REFERENCE TO THE SUPPO RTING BILLS/VOUCHERS. HE HAS SUBMITTED THAT THE CLAIM OF THE ASSESSEE FOR CO NSUMABLES CANNOT BE DISALLOWED MERELY BECAUSE THE SAME IS MADE UNDER DI FFERENT HEADS AS RIGHTLY HELD BY THE LD. CIT(A). HE HAS CONTENDED THAT AS RE SULT OF THIS STAND TAKEN BY THE A.O., THE EXPENSES UNDER CONSUMABLES, HOWEVER, REMAINED TO BE VERIFIED EITHER BY THE A.O. OR BY THE LD. CIT(A) AND URGED T HAT THE MATTER MAY BE RESTORED TO THE FILE OF THE A.O. FOR LIMITED PURPOS E OF SUCH VERIFICATION. ALTHOUGH THE LD. COUNSEL FOR THE ASSESSEE HAS RAISE D STRONG OBJECTION FOR SENDING THE MATTER BACK TO THE A.O. FOR VERIFICATIO N BY SUBMITTING THAT THE GENUINENESS OF THE EXPENSES ON CONSUMABLES WAS NEVE R DISPUTED BY THE A.O., HE HAS NOT BEEN ABLE TO ESTABLISH BEFORE US THAT TH E CLAIM OF THE ASSESSEE OF EXPENSES ON CONSUMABLES BEING THE ALLOWABLE BUSINES S EXPENSES WAS EXAMINED OR VERIFIED EITHER BY THE A.O. OR BY THE L D. CIT(A) FROM THE RELEVANT BILLS/VOUCHERS. A PERUSAL OF THE SUBMISSION MADE B Y THE ASSESSEE BEFORE THE LD. CIT(A) ALSO SHOWS THAT THE DETAILS OF CONSUMABL ES WERE FURNISHED BY THE ASSESSEE WITH ONLY SOME COPIES OF THE SUPPORTING BI LLS. WE, THEREFORE, CONSIDER IT FAIR AND PROPER AND IN THE INTEREST OF JUSTICE T O RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR THE LIMITED PURPOSE OF VERIFYING TH E CLAIM OF THE ASSESSEE FOR THE EXPENSES ON CONSUMABLES FROM THE SUPPORTING BIL LS/VOUCHERS. NEEDLESS TO OBSERVE THAT THE A.O. SHALL OFFER PROPER AND SUF FICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE MATTER. ITA 6022/M/12 5 4. IN THE RESULT, APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH DECEMBER, 2013. . ( ) * 06-12-2013 SD/- SD/- (SANJAY GARG) (P.M. JAGTAP ) (- JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; * DATED [ .-../ RK , SR. PS , -&./ 0/ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / () / THE CIT(A)26, MUMBAI. 4. / / CIT 15,, MUMBAI 5. 2 --4 , 4 , / DR, ITAT, MUMBAI C BENCH 6. 7 / GUARD FILE. / BY ORDER, 2 - //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI