GOLDEN CROSS PHARMA P. LTD, MUMBAI V. ASST CIT RG 6(3), MUMBAI

ITA 7014/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3413 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 10-06-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 17-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K SINHA
• Section: 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI R.K. GUPTA, JM AND SHRI N.K. BILLAI YA, AM ./I.T.A. NO. 3013/MUM/2011 ( / ASSESSMENT YEAR :2007-08 M/S. GALAXY AVIATION PVT. LTD., CAMBATA BLDG., 5 TH FLOOR, EAST WING, CHURCHGATE, MUMBAI-400 020 THE ACIT, RANGE-1(1), MUMBAI ./ ./PAN/GIR NO. :AAACG 5075C ( ! /APPELLANT ) .. ( '#! / RESPONDENT ) ! $ / APPELLANT BY : ` SHRI VIJAY MEHTA & SHRI ANUJ KISNADWALA '#! % $ /RESPONDENT BY : SHRI D.K. SINHA % &' / DATE OF HEARING :10.06.2013 () % &' / DATE OF PRONOUNCEMENT :19.6.2013 *+ / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-1, MUMBAI DT.30.11.2010 PERTAINING TO A.Y. 2007-08. 2. THE ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUND S AND FOUR ADDITIONAL GROUNDS OF APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT HE IS NOT PRESSING GROUND NO.1, WHICH IS ACCOR DINGLY DISMISSED AS NOT PRESSED. ITA NO.3013/M/2011 2 3. GROUND NO. 2 RELATES TO THE GRIEVANCE THAT THE L D. CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 12,71,348/- ON ACCOUN T OF NON DEDUCTION OF TAX AT SOURCE. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH DETAILS OF TDS MADE ON EXPENSES CL AIMED IN THE PROFIT AND LOSS ACCOUNT. AFTER CONSIDERING THE DETAILS SU BMITTED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE ON A TOTAL SUM OF RS. 12,71,348/-. THE ASSE SSEE WAS ASKED TO EXPLAIN AS TO WHY THE ABOVE AMOUNTS SHOULD NOT BE D ISALLOWED WITHIN THE MEANING OF PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. ON RECEIVING NO EXPLANATION, THE AO DISALLOWED THE ENTIRE SUM OF RS . 12,71,348/-. 5. THE ASSESSEE AGITATED THE ADDITION BEFORE THE LD . CIT(A). THE ASSESSEE EXPLAINED THAT THE AO HAS NOT TAKEN INTO C ONSIDERATION THE EXPENSES INCURRED FOR PURCHASE OF RAW MATERIAL ETC . DEBITED UNDER THE HEAD REPAIRS AND MAINTENANCE. IT WAS FURTHER EXPLA INED THAT THE AO HAS NOT CONSIDERED THE PAYMENT MADE TO CONTRACTORS WHER E A SINGLE PAYMENT EXCEEDING RS. 20,000/- AND THE AGGREGATE PAYMENT DU RING THE FINANCIAL YEAR DID NOT EXCEED RS. 50,000/-. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) CONFIRM ED THE FINDINGS OF THE AO. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE AO HAS DISALLOWED AN ENTIRE SUM OF RS. 12,71,348/- WHI CH ALSO INCLUDED PAYMENTS IN RESPECT OF PURCHASES OF RAW MATERIAL. THE LD. COUNSEL FURTHER SUBMITTED THAT THE PAYMENT TO CONTRACTORS D O NOT FALL WITHIN THE PURVIEW OF SEC. 194C OF THE ACT AS EITHER THE SINGL E PAYMENT WAS LESS THAN RS. 20,000/- OR AGGREGATE PAYMENT TO THE SAME CONTRACTOR DID NOT EXCEED RS. 50,000/-. ITA NO.3013/M/2011 3 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE LOWER AUTHORITIES. 8. WE FIND THAT THIS ISSUE DESERVES A FRESH LOOK AT THE ASSESSMENT STAGE. WE ACCORDINGLY RESTORE THIS ISSUE BACK TO T HE FILE OF THE AO. THE AO IS DIRECTED TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE PAYMENT INCLUDES PURCHASE OF RAW MATERIALS AND THE PAYMENTS MADE TO CONTRACTORS IS OUTSIDE THE PURVIEW OF SEC. 194C OF THE ACT. TH E ASSESSEE IS DIRECTED TO FILE NECESSARY DETAILS TO SUBSTANTIATE ITS CLAIM THAT THE PAYMENTS INCLUDE PURCHASES OF RAW MATERIALS. GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO. 3 RELATES TO ADDITION OF RS. 8,06,860 /- ON ACCOUNT OF WRITE OFF OF CLOSING STOCK. 10. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE AO NOTICED THAT THE ASSESSEE HAS WRITTEN OFF AN AMOUNT OF RS. 9,21,860/- BEING THE VALUE OF STOCK ON CLOSURE OF ITS DIVISIONS KNOWN AS GROOVE AND PERSEPOLIS. THE ASSESSEE WAS ASKED TO JUSTIFY IT S CLAIM. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DT. 17.9.2009 AN D SUBMITTED THAT THE STOCK WAS OLD AND INCLUDES CONDEMNED MUSIC CDS, CASSETTE S, DRY FRUITS, SAFFRON AND HANDICRAFTS ETC. THE SAME WAS WRITTEN OFF SINC E THE DIVISION WAS CLOSED DURING THE YEAR. THE ASSESSEE FURTHER CONTE NDED THAT THE STOCK WAS DISPOSED OFF TO MAKE THE STORAGE PLACE /PREMISES MO RE USABLE. THE SUBMISSIONS OF THE ASSESSEE WERE REJECTED BY THE AO WHO OBSERVED THAT THE BOOK VALUE OF THE STOCK IS STATED AT RS. 9,21,8 60/-, THE SAME WAS SOLD OUT FOR A CONSIDERATION OF RS. 1,15,000/-. THEREFO RE, THE LOSS INCURRED BY ASSESSEE HAS NO BUSINESS PRUDENCE AS NO EVIDENCE WA S FURNISHED REGARDING DEPLETION IN THE VALUE OF SUCH STOCK. T HE AO ALSO OBSERVED ITA NO.3013/M/2011 4 THAT THE ASSESSEE HAS NOT FURNISHED ITEM-WISE DETAI LS OF SUCH STOCK AND ACCORDINGLY DISALLOWED THE CLAIM OF RS. 8,06,860/- 11. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS WRITTEN OFF STOCK O F MUSIC CASSETTES AT RS. 1,50,655/- AND DRY FRUITS, SPICES AND HANDICRAFT IT EMS AT RS. 6,56,205/-. IT WAS EXPLAINED THAT THE ASSESSEE HAS CLOSED DOWN THE DIVISION WHICH WAS DEALING IN SALE OF MUSIC CASSETTES. IT WAS FUR THER EXPLAINED THAT THE ASSESSEE HAS SOLD THE ENTIRE LOT OF MUSIC CASSETTE S HAVING BOOK VALUE OF RS. 1,80,655/- WAS SOLD FOR RS. 30,000/-. IT WAS CONTENDED THAT THESE MUSIC CASSETTES WERE PURCHASED 3 TO 4 YEARS BEFORE. IT WAS FURTHER SUBMITTED THAT THE DRY FRUITS, SPICES AND HANDICRAF TS WERE IMPORTED DURING JULY, 2004, SINCE THE MATERIAL COULD NOT BE SOLD IN TIME, THE DRY FRUITS AND SPICES WERE TOTALLY OUTDATED, AS THE PRODUCT WAS PE RISHABLE, THE ASSESSEE HAD NO ALTERNATIVE BUT TO REALIZE THE MAXIMUM POSSI BLE PRICE AND WRITE OFF THE BALANCE AMOUNT. 12. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS MADE BY THE ASSESSEE, THE LD. CIT(A) OBSERVED THAT THE ASSESSE E HAS NOT FURNISHED ANY VALID EXPLANATION FOR THE DEPLETION IN THE VALUE O F SUCH STOCK OR THE STOCK GETTING SPOILT AND CONFIRMED THE FINDINGS OF THE AO . 13. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE RE ITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 14. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED T HE FINDINGS OF THE LOWER AUTHORITIES. ITA NO.3013/M/2011 5 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO THE BENEFIT OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO. 5905/MUM/2010 WHEREIN A DISPUTE AROSE IN RELATION T O THE VALUATION OF CLOSING STOCK OF GROOVE DIVISION (MUSIC CASSETTES) . IN THAT YEAR, THE REVENUE AUTHORITIES DID NOT ACCEPT THE VALUATION OF THE ASSESSEE AND HAS MADE AN ADDITION OF RS. 5,26,892/-. THE TRIBUNAL H AS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THERE IS A SUDD EN DROP IN THE DEMAND OF MUSIC CASSETTES BECAUSE OF CDS AND MP3S AND CONS IDERING THE OBSOLETENESS AND DEPLETION IN THE VALUE OF THE MUSI C CASSETTES, THE TRIBUNAL HAS DELETED THE ADDITION OF RS. 5,26,892/- . 16. TAKING A LEAF OUT OF THE AFORESAID FINDING OF T HE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEAR, WE FIND THAT I N EARLIER YEAR ALSO, IT HAS BEEN ACCEPTED THAT THE VALUE OF MUSIC CASSETTES HAV E FALLEN DOWN SHARPLY, THEREFORE, CLAIM OF THE ASSESSEE THAT IT HAD NO ALT ERNATIVE BUT TO CLEAR ALL THE STOCK BY SELLING IT FOR A SUM OF RS. 30,000/- H AS SOME FORCE IN IT. IN OUR CONSIDERED VIEW, THE DECISION OF THE ASSESSEE I S BACKED BY COMMERCIAL PRUDENCE THEREFORE LOSS ARISING OUT OF T HE SALE OF MUSIC CASSETTES DESERVES TO BE ALLOWED. WE ACCORDINGLY D IRECT THE AO TO ALLOW THE CLAIM OF LOSS OF RS. 1,50,655/- ON ACCOUNT OF MUSIC CASSETTES. 17. SO FAR AS CLAIM OF LOSS IN RESPECT OF SPICES, D RY FRUITS AND HANDICRAFT ITEMS ARE CONCERNED, WE AGREE WITH THE FINDINGS OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAS NOT FURNISHED NECESSARY DETAI LS AS HAS BEEN GIVEN IN RESPECT OF MUSIC CASSETTES. HOWEVER, IN THE INTERE ST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS ISSUE BACK TO THE FILES OF T HE AO FOR VERIFICATION OF THE CLAIM OF LOSS OF RS. 6,56,205/- IN RESPECT OF S PICES, DRY FRUITS AND HANDICRAFT ITEMS. THE ASSESSEE IS DIRECTED TO FILE YEAR-WISE DETAILS OF ITA NO.3013/M/2011 6 PURCHASE OF THESE ITEMS. THE AO IS DIRECTED TO VER IFY THE DETAILS OF PURCHASES. THE AO IS ALSO DIRECTED TO VERIFY WHEN THE LAST PURCHASE WAS MADE, WHETHER ANY SALES HAS BEEN ACCOUNTED FOR IN T HESE ITEMS AND DECIDE THE ISSUE AFRESH AFTER GIVING REASONABLE OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS PARTLY AL LOWED. 18. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE R ELATE TO THE DISALLOWANCE MADE BY THE AO ON SHORT DEDUCTION OF T AX AT SOURCE. 19. THE GRIEVANCE OF THE ASSESSEE IS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 IN ITA NO. 5905/M/2010 WHEREIN ON SHORT DEDUCTION OF TAX, THE TRIBUNAL HAS HELD THAT THE SHORT DEDUCTION OF TAX DOES NOT ATTRACT TH E PROVISIONS OF SEC. 40A(IA) OF THE ACT. THE TRIBUNAL HAS DECIDED THIS ISSUE AT PARA-23 OF ITS ORDER WHICH IS AS UNDER: WE HAVE HEARD THE ARGUMENTS AND PERUSED THE RECORD BROUGHT BEFORE US AND THE ORDER OF THE COORDINATE B ENCHES OF MUMBAI AND KOLKATA. WE FIND THAT THE CASE OF THE A SSESSEE IS NOT OF NON DEDUCTION OF TDS BUT SHORT DEDUCTION OF TDS, WHICH THE ASSESSEE HAD REALIZED ITSELF AND ON THE BASIS, THE AMOUNT EQUIVALENT TO SHORT DEDUCTION OF TAX WAS ADDED BACK. SIMILAR QUESTION ALSO AROSE BEFORE THE HONBLE COORDINATE BENCHES IN MUMB AI & KOLKOTA AND THE CO-ORDINATE BENCHES HAVE HELD THAT SHORT DEDUCTION OF TAX DOES NOT ATTRACT THE PROVISIONS OF SEC. 40(A)(IA). RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNA L IN ASSESSEES OWN CASE, WE DIRECT THE AO TO DELETE THE ADDITIONS. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED. ITA NO.3013/M/2011 7 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19.6.2013 . *+ % ) , -*. 19.6.2013 ) % / SD/- SD/- (R.K. GUPTA ) (N.K . BILLAIYA ) * /JUDICIAL MEMBER * / ACCOUNTANT MEMBER MUMBAI; -* DATED 19/ 06/2013 . . ./ RJ , SR. PS *+ *+ *+ *+ % %% % '&0 '&0 '&0 '&0 10& 10& 10& 10& / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT. 3. 2 ( ) / THE CIT(A)- 4. 2 / CIT 5. 03/ '& , , / DR, ITAT, MUMBAI 6. /4 5 / GUARD FILE. *+ *+ *+ *+ / BY ORDER, #0& '& //TRUE COPY// 6 66 6 / 7 7 7 7 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI