J.K Petro Chemicals, UDHAMPUR V. The Income Tax Officer, UDHAMPUR

ITA 69/ASR/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3261 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 20-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 25-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N. S . SAINI, ACCOUNTANT MEMBER A ND SH. N. K. CHOUDH RY , JUDICIAL MEMBER ITA NO. 68 /ASR./2016 : ASSTT. YEAR : 2010 - 11 ITA NO. 69/ASR./2016 : ASSTT. YEAR : 2011 - 12 JK PETRO CHEMICALS, 26, IID CENTRE, BATTLE BALLIAN, UDHAMPUR, (J&K) VS INCOME TAX OFFICER, UDHAMPUR (J&K) (APPELLANT) (RESPONDENT) PAN NO. A GFJ0928G ASSESSEE BY : SHRI. ASHWANI KALIA, CA REVENUE BY : SH . YA SHENDER GARG, DR DATE OF HEARING : 20 .02 .201 9 DATE OF PRONOUNCE MENT : 19 .03 .201 9 ORDER PER N. S . SAINI, AM : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), JAMMU DATED 21.06.2013 FOR THE AS SESSMENT YEAR 2010 - 11 AND DATED 18.03.2014 FOR ASSESSMENT YEAR 2011 - 12. 2. IN BOTH THE APPEALS, THE SOLE ISSUE INVOLVED IS THAT THE CIT(A) ERRED IN RESTRICTING THE CLAIM FOR DEDUCTION OF RS.3,42,62,680/ - IN THE ASSESSMENT YEAR 2010 - 11 AND RS.3,46,21,000/ - IN THE ASSESSMENT YEAR 2011 - 12 AS AGAINST THE CLAIM OF THE ASSESSEE OF RS. 30,81,02,973/ - IN THE ASSESSMENT YEAR 2010 - 11 AND RS.31,53,81,657/ - IN THE ASSESSMENT YEAR 2011 - 12 U/S 80IB OF THE ACT. ITA NOS. 68 & 69 /ASR./2016 JK PETRO CHEMICALS 2 3. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS THE FACTS AND ISSUE S INVOLVED IN BOTH THE APPEALS ARE COMMON HE WILL ARGUED FOR ASSESSMENT YEAR 2010 - 11 AND SAME ARGUMENT MAY BE TAKEN INTO CONSIDERATION FOR ASSESSMENT YEAR 2011 - 12. 4. THE AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE WA S ALLOWED DEDUCTION U/S 80IB OF THE ACT BY THE AO HIMSELF IN ALL THE ASSESSMENT YEARS STARTING FROM THE ASSESSMENT YEAR 2007 - 08 TILL ASSESSMENT YEAR 2009 - 10. HE SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2007 - 08 IS PLACED AT P AGE NOS. 3 TO 7 OF THE PAPER BOOK WHICH IS DATED 29.12.200 9 WHEREIN DEDUCTION U/S 80IB OF THE ACT CLAIMED BY THE ASSESSEE WAS ALLOWED TO THE ASSESSEE. HE SUBMITTED THAT COPY OF ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2009 - 10 IS PLACED AT PAGE NOS. 13 TO 1 5 OF THE PAPER BOOK WHICH IS DATED 26.12.2011 WHEREIN DEDUCTION U/S 80IB OF THE ACT WAS ALLOWED TO THE ASSESSEE. HE FURTHER SUBMITTED THAT ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2012 - 13 DATED 19.03.2015 IS PLACED AT PAGE NOS. 30 TO 36 OF THE PAPER BOO K W HEREIN DEDUCTION U/S 80IB OF THE ACT CLAIMED BY THE ASSESSEE WAS ALLOWED. HENCE, IT WAS HIS SUBMISSION THAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) WERE NOT JUSTIFIED IN DENYING THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT TO THE ASSESSEE IN THE ASSESSME NT YEARS 2010 - 11 AND 2011 - 12. 5. ON THE OTHER HAND, THE DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON THE RECORD. ITA NOS. 68 & 69 /ASR./2016 JK PETRO CHEMICALS 3 7. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER AL LOWED TH E CLAIM OF DEDUCTION U/S 80IB OF THE ACT TO THE ASSESSEE IN THE ASSESSMENT YEAR 2010 - 11 AND ALSO IN THE ASSESSMENT YEAR 2011 - 12. 8. ON APPEAL, THE CIT(A) OBSERVED THAT IN ASSESSMENT YEAR 2010 - 11, THE APPELLANT HAS REFLECTED AN EXORBITANT PROFIT WH ICH DOES NOT REFLECT THE NORMAL PROFITS EXPECTED IN SUCH INDUSTRY. HE OBSERVED THAT NET PROFIT AMOUNTING TO RS.30.81 CRORES OF AROUND 90% ON GROSS TURNOVER AMOUNTING TO RS.34.26 CRORES IS SHOWN IN THE ASSESSMENT YEAR 2010 - 11. ACCORDINGLY, THE ASSESSEE WAS ASKED TO EXPLAIN THE MANUFACTURING PROCESS AND REASONS FOR SUCH AN EXORBITANT PROFIT. THE APPELLANT PROVIDED A VAGUE REPLY IN WHICH IT WAS EXPLAINED THAT IT USED CERTAIN MATERIALS WHICH ARE DIFFERENT FROM THE MATERIALS NORMALLY USED BY THE INDUSTRY WHICH R ESULTED IN HIGHER PROFIT. THE CIT(A) OBSERVED THAT APPELLANT FAILED TO NAME THE MATERIALS USED AND ALSO FAILED TO JUSTIFY HOW MATERIAL USED INCREASED THE PROFITS MANY FOLD. THEREFORE, HE OPINED THAT THE APPELLANT FAILED TO EXPLAIN THE REASONS FOR EXORBITAN T PROFIT. HE OBSERVED THAT THE APPELLANT WAS PROVIDED COPY OF FINANCIAL STATEMENTS OF A COMPARABLE CASE FROM THE SAME INDUSTRY M/S SARASWATI PLASTOTECH INDIA PVT. LTD. HAVING ONE UN IT IN JAMMU MAKING POLY CARBONATE PRODUCTS HAVE SHOWN NET LOSS IN THE FINAN CIAL YEAR 2013 - 14 ON A TURNOVER OF RS.54.71% AND RS.85.05 CRORES RESPECTIVELY. HE OBSERVED THAT EVEN IF IT IS ASSUMED THAT THE APPELLANT HAS RUN ITS BUSINESS VERY EFFICIENTLY, IT CANNOT EARN A PROFIT OF MORE THAN 10%. THE SHOW CAUSE NOTICE WAS ISSUED TO TH E ASSESSEE ON 13.03.2015 TO SUBMIT REPLY BY 25.03.2015. HOWEVER, NO REPLY WAS RECEIVED FROM THE PARTNERS OR COUNSEL ITA NOS. 68 & 69 /ASR./2016 JK PETRO CHEMICALS 4 OF THE APPELLANT FIRM. ANOTHER NOTICE WAS ISSUED ON 10.04.2015 ALONGWITH SHOW CAUSE NOTICE DATED 13.03.2015 TO FURNISH EXPLANATION BY 22.04. 2015. ON 21.04.2015, THE APPELLANT SUBMITTED A LETTER WHEREIN HE HAS SHOWN HIS INABILITY TO ATTEND THE OFFICE DUE TO SOME COURT CASES AND NO REPLY WAS SUBMITTED BY THE APPELLANT. THE CIT(A) OBSERVED THAT EVEN AFTER PERIOD OF MORE THAN ONE AND HALF MONTHS, THE APPELLANT IS IN SHOW CAUSE NOTICE WHICH IS A REASONABLE OPPORTUNITY WHICH COULD NOT HAVE BEEN AFFORDED TO THE APPELLANT FOR MAKING A SUBMISSION. THE SUBMISSION, IN RESPONSE TO THE SHOW CAUSE NOTICE COULD HAVE BEEN SENT THROUGH THE AUTHORIZED REPRESENTA TIVE OF THE APPELLANT, IF THE PARTNERS WERE NOT ABLE TO ATTEND THE OFFICE FOR ONE AND HALF MONTHS PERIOD. EARLIER, ON OTHER DATE OF HEARING DETAILS WERE ALSO FILED THROUGH SHRI HARINDER SINGH, AUTHORIZED REPRESENTATIVE OF THE APPELLANT. THEREFORE, NON - APPE ARANCE AND NON - SUBMISSION OF REPLY FROM THE APPELLANT LEAD TO A CONCLUSION THAT THE APPELLANT HAS NOTHING TO SAY OR PUT ON RECORD THEIR EXPLANATIONS IN RESPECT OF THE SHOW CAUSE NOTICE DATED 13.03.2015 ISSUED BY HIM. IN THE CIRCUMSTANCES, HE RESTRICTED THE DEDUCTION U/S 80IB OF THE ACT TO 10% OF THE NET PROFITS ON TURNOVER BY INVOKING THE PROVISIONS OF SECTION 80IB(13) OF THE ACT AND ON THE BALANCE AMOUNT DEDUCTION WAS ALLOWED BY HIM. 9. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPE AL BEFORE US. THE ONLY ARGUMENT OF THE AR O F THE ASSESSEE IS THAT IN EARLIER YEARS SINCE ASSESSMENT YEARS 2007 - 08 TO 2009 - 10 DEDUCTION CLAIMED U/S 80IB O F THE ACT HAS BEEN ALLOWED TO THE ASSESSEE H AS CLAIMED IN THE RETURN OF INCOME ALSO IN ASSESSMENT FRAME D U/S 143(3) OF THE ACT FOR ITA NOS. 68 & 69 /ASR./2016 JK PETRO CHEMICALS 5 ASSESSMENT YEARS 2007 - 08 TO 2009 - 10. THEREFORE, FACTS REMAINING THE SAME AND METHOD OF ACCOUNTING THE SAME THERE WAS NO REASON FOR THE CIT(A) TO RESTRICT THE DEDUCTION U/S 80IB OF THE ACT TO 10% OF THE TURNOVER OF THE ASSESSEE. 10. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE OPPOSING THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE ARGUED THAT EACH YEAR IS A SEPARATE YEAR OF ASSESSMENT AND THEREFORE, FINDING IN AN EARLIER ASSESSMENT YEAR CANNOT BE MADE APPLICABLE IN THE OTHER YEAR OF ASSESSMENT AS THE PRINCIPLE OF RES JUDICATA ARE NOT APPLICABLE TO INCOME TAX PROCEEDINGS. 11. HE FURTHER SUBMITTED THAT THE CIT(A) BEFORE RESTRICTING THE DEDUCTION U/S 80IB OF THE ACT TO 10% OF THE TURNOVER OF THE ASSESSEE HAD GIVEN SUFFICI ENT OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE EXORBITANT PROFIT EARNED BY IT . THE ASSESSEE FILED VAGUE REPLIES AND COULD NOT FILE ANY CONVINCING REPLY WITH COGENT MATERIAL TO SUPPORT ITS CLAIM. THEREFORE, THE CIT(A) HAS RIGHTLY RESTRICTED THE CLAIM FOR DE DUCTION U/S 80IB OF THE ACT TO THE ASSESSEE AT 10% OF THE TURNOVER OF THE ASSESSEE. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT IT IS UNDISPUTED FACT THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB OF THE ACT WHICH WORKED OUT TO 90% OF THE TURNOVER OF THE ASSESSEE IN BOTH THE ASSESSMENT YEARS BEING ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 UNDER CONSIDERATION. THE CIT (A) REQUIRED THE ASSESSEE TO EXPLAIN THE REASON FOR THE SAME. THE CIT (A) IN HIS OR DER HAS OBSERVED THAT HE HAD GIVEN SUFFICIENT OPPORTUNITY AND THEREAFTER WAITING OF ABOUT ONE AND HALF MONTHS WHEN NO REPLY WAS RECEIVED BY HIM FROM THE ASSESSEE FOR EARNING ITA NOS. 68 & 69 /ASR./2016 JK PETRO CHEMICALS 6 EXORBITANT PROFIT AND AFTER CONFRONTING THE ASSESSEE WITH COMPARABLE CASE IN THE S AME INDUSTRY IN THE CASE OF M/S SARASWATI PLASTOTECH INDIA PVT. LTD. WHERE NET PROFIT @0.84% WAS SHOWN IN FINANCIAL YEAR 2013 - 14, T HE CIT(A) RESTRICTED THE CLAIM FOR DEDUCTION U/S 80IB OF THE ACT TO 10% OF THE TURNOVER OF THE ASSESSEE. 13. BEFORE US, THE ONLY SUBMISSION OF THE AR OF THE ASSESSEE IS THAT SINCE DEDUCTION U/S 80IB OF THE ACT WAS ALLOWED TO THE ASSESSEE AS CLAIMED BY THE ASSESSEE IN A N ASSESSMENT FRAMED U/S 143(3) OF THE ACT IN THE PRECEDING ASSESSMENT YEARS 2007 - 08 TO 2009 - 10 FOR WHICH ASSES SMENT ORDERS OF THESE YEARS HA VE BEEN FILED IN THE PAPER BOOK, T HE CLAIM FOR DEDUCTION U/S 80IB OF THE ACT SHOULD BE ACCEPTED AS CLAIMED IN THE RETURNS OF INCOME FOR THE YEARS UNDER APPEAL. 14. IN THE ABOVE FACTS OF THE CASE, IN OUR CONSIDERED OPINION , TH E ASSESSEE FAILED TO FILE EVIDENCE REGARDING ITS EARNING OF PROFIT OF RS.30.81 CRORES ON A TURNOVER OF RS.34.26 CRORES IN THE ASSESSMENT YEAR 2010 - 11 AND PROFIT OF RS.31.53 CRORES ON A TURNOVER OF RS.38.12 CRORES IN THE ASSESSMENT YEAR 2011 - 12. THE ASSESSE E HAS ALSO NOT FILED MATERIAL TO SHOW THAT IT HAS EARNED SIMILAR PROFIT IN THE PRECEDING ASSESSMENT YEARS AND SUBSEQUENT ASSESSMENT YEARS AND THE SAME WAS ACCEPTED BY THE DEPARTMENT IN ASSESSMENT MADE U/S 143(3) OF THE ACT. ON THE OTHER HAND, THE CIT(A) HA S ALSO NOT GIVEN BASIS FOR ESTIMATING PROFIT OF THE ASSESSEE @10% OF THE TURNOVER. HENCE, IN THE INTEREST OF SUBSTANTIAL JUSTICE, WE SET ASIDE THE ORDERS OF THE CIT(A) AND RESTORE THE MATTER BACK TO HIS FILE TO ADJUDICATE THE ISSUE AFRESH IN LIGHT OF THE D ISCUSSION MADE HEREINABOVE. ITA NOS. 68 & 69 /ASR./2016 JK PETRO CHEMICALS 7 15. NEEDLESS TO MENTION THAT HE SHALL ALLOW REASONABLE OPPORTUNITY OF HEARING TO BOTH THE PARTIES BEFORE ADJUDICATING THE ISSUE AFRESH. THUS, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 16 . IN T HE RESULT, THE APPEAL S OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES . (ORDER PRON OUNCED IN THE OPEN COURT ON 19 /0 3 /2019 ) SD/ - SD/ - ( N. K. CHOUDHRY ) (N. S . SAINI) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 19 /03 /2019 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR