DCIT 3(1), MUMBAI V. ASIAN ELECTRONICS LTD, MUMBAI

ITA 7763/MUM/2011

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5148 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Keywords: Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.7763/M/2011 ASSESSMENT YEAR: 2008-09 DCIT, CIRCLE -3(1), ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 VS. M/S. ASIAN ELECTRONICS LTD., 1219, MAKER CHAMBERS- V, NARIMAN POINT, MUMBAI 400 021 PAN: AABCA 0832C (APPELLANT) (RE SPONDENT) ITA NO.7998/M/2011 ASSESSMENT YEAR: 2008-09 M/S. ASIAN ELECTRONICS LTD., 1219, MAKER CHAMBERS- V, NARIMAN POINT, MUMBAI 400 021 PAN: AABCA 0832C VS. DCIT, CIRCLE -3(1), ROOM NO.607, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400020 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI R.P. MEENA, D.R. DATE OF HEARING : 21.08.2018 DATE OF PRONOUNCEMENT : 26.09.2018 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE ABOVE TITLED APPEALS ONE BY THE ASSESSEE AND T HE OTHER BY THE REVENUE HAVE BEEN PREFERRED AGAINST TH E ORDER ITA NO.7763/M/2011 & ITA NO.7998/M/2011 M/S. ASIAN ELECTRONICS LTD. 2 DATED 14.07.2011 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2008-09. ITA NO.7763/M/2011 (REVENUES APPEAL) 2. THE ONLY ISSUE RAISED BY THE REVENUE IN THE VARI OUS GROUNDS OF APPEAL IS AGAINST THE DELETION OF ADDITI ON OF RS.48,02,63,000/- BY THE LD. CIT(A) AS MADE BY THE A O TOWARDS PROVISION FOR INVENTORY CLAIMED BY THE ASSE SSEE ON THE GROUND THAT PROVISIONS FOR INVENTORY IS NOT ALL OWABLE AS THE SAME IS DIFFERENT FROM WRITE OFF. 3. AT THE OUTSET, WE WOULD LIKE TO STATE THAT DESPIT E SERVICE OF NOTICE THROUGH RPAD AND ALSO THROUGH DEPARTMENTA L REPRESENTATIVE, NEITHER THE ASSESSEE NOR THE AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE APPEARED ON THE DATE OF HEARING. TODAY ALSO WHEN THE CASE WAS CALLED UP FOR HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE. THEREFORE , WE ARE PROCEEDING TO DISPOSE OF THE APPEAL ON MERIT AFTER HEARING THE LD. D.R. 4. AFTER HEARING THE LD. D.R. AND PERUSING THE MATE RIAL ON RECORD, WE FIND THAT THE ASSESSEE HAD PURCHASED THRE E MACHINES FROM M/S. UNIQUE WASTE PLASTIC MANAGEMENT & RESEARCH CO. PVT. LTD. WHICH HAD LICENSE FOR TECHNOL OGY TO COVERT THE PLASTIC INTO OIL AND THEN TO ENERGY. THE ASSESSEE CONVERTED THESE MACHINES INTO USABLE & HIGH CAPABIL ITY MACHINES AND SOLD DURING F.Y. 2006-07. THE ASSESSEE ALSO ITA NO.7763/M/2011 & ITA NO.7998/M/2011 M/S. ASIAN ELECTRONICS LTD. 3 SOLD TWO MACHINES MANUFACTURED BY IT DURING THE YEA R TO TWO OTHER PARTIES. HOWEVER, DUE TO OCCURRENCE OF FIRE AT THE TESTING PLANT, ALL MACHINES HAD TO BE TAKEN BACK A ND THE SALE WAS REVERSED. IN THE MEANTIME, THE MINORITY SHAREH OLDER OF M/S. UNIQUE WASTE PLASTIC MANAGEMENT & RESEARCH CO. PVT. LTD. FILED A SUIT IN COMPANY LAW BOARD OBJECTING TO USE OF TECHNOLOGY BY THE ASSESSEE AND THUS THE ASSESSEE DE CIDED NOT TO PURSUE THE BUSINESS IN VIEW OF THE VARIOUS PRACT ICAL DIFFICULTIES AND DECIDED TO TRANSFER THE BUSINESS B ACK TO M/S. UNIQUE WASTE PLASTIC MANAGEMENT & RESEARCH CO. PVT. L TD. RESULTANTLY, THE ASSESSEE MADE PROVISIONS FOR DOUBT FUL DEBTS, ADVANCES AND THE INVENTORIES. HOWEVER, IN THE COMPUT ATION OF TOTAL INCOME, ONLY THE PROVISION FOR INVENTORY HAS B EEN CLAIMED AS DEDUCTION, WHILE OTHER PROVISIONS HAVE BE EN ADDED BACK. AS PER THE ASSESSEE THE PROVISIONS FOR INVENT ORY HAS BEEN MADE IN RESPECT OF 2 MACHINES WHICH HAVE BECOM E OF NIL VALUE DUE TO RESTRICTION PLACED ON CARRYING OUT THE BUSINESS BY THE MINORITY SHAREHOLDERS OF M/S. UNIQUE WASTE PLASTIC MANAGEMENT & RESEARCH CO. PVT. LTD. THE AO D ID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THIS IS NOT A CASE OF DESTRUCTION OR DEVASTATION OF STOC KS BY FIRE AND THEREFORE THE PROVISIONS FOR INVENTORY CAN NOT BE A LLOWED WHICH HAS RESULTED INTO DISALLOWANCE OF PROVISION O F RS.48,02,63,000/-. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE BY FOLLOWING THE DECISION OF APEX COURT ITA NO.7763/M/2011 & ITA NO.7998/M/2011 M/S. ASIAN ELECTRONICS LTD. 4 IN THE CASE OF CIT VS. JALAN TRADING CO. P. LTD. (15 5 ITR 536) AND HELD THAT ASSESSEE WAS JUSTIFIED IN VALUING ITS INVENTORY BY FOLLOWING A CONSISTENT METHOD OF VALUATION OF STOCK S/INVENTORY ON THE BASIS OF COST OR MARKET VALUE WHICHEVER IS L OWER AND THUS ALLOWED THE APPEAL OF THE ASSESSEE. 6. AFTER HEARING THE LD. D.R. AND CAREFULLY PERUSING THE FACTS ON RECORD, WE FIND THAT THE FIRST APPELLATE AUTHORIT Y HAS PASSED THE ORDER UPHOLDING THE METHOD OF STOCK VALUATION F OLLOWED BY THE ASSESSEE REGULARLY FROM YEAR TO YEAR OF COST OR MARKET VALUE WHICHEVER IS LESS BY FOLLOWING THE DECISION O F APEX COURT IN THE CASE OF CIT VS. JALAN TRADING CO. P. LTD. (SUP RA). HOWEVER, WE ARE OF THE VIEW THAT THE AO HAS TO EXAMI NE THE FACTS AND CONTENTIONS OF THE ASSESSEE THOROUGHLY WI TH REFERENCE TO THE BOARD RESOLUTION AND DECIDE THE IS SUE AFRESH IN ACCORDANCE WITH LAW. AO SHALL PROVIDE ADEQUATE OPPORTUNITY TO THE ASSESSEE. ACCORDINGLY, WE SET AS IDE THE ISSUE TO THE FILE OF AO. 7. THE APPEAL OF THE REVENUE IS ALLOWED FOR STATIST ICAL PURPOSES. ITA NO.7998/M/2011 (ASSESSEES APPEAL) 8. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE CONFIRMATION OF ADDITION OF RS.2,05,65,026/- BY LD. C IT(A) AS AGAINST THE TOTAL ADDITION OF RS.3,91,84,975/- MADE BY THE AO BY TREATING THE PURCHASES AS NON GENUINE. THE ASSES SEE HAS ALSO RAISED ADDITIONAL GROUND VIDE LETTER DATED 05.0 1.2016 ITA NO.7763/M/2011 & ITA NO.7998/M/2011 M/S. ASIAN ELECTRONICS LTD. 5 RAISING THE NON ADJUDICATION OF A GROUND IN RESPECT OF DISALLOWANCE MADE UNDER SECTION 14A OF RS.77,83,508/ -. 9. AFTER HEARING THE LD. D.R. AND PERUSING THE MATE RIAL ON RECORD AS PLACED BEFORE US, WE FIND THAT THE FIRST APPELLATE AUTHORITY HAS RIGHTLY SUSTAINED THE ADDITION TO THE TUNE OF RS.2,05,65,026/- ON ACCOUNT OF GENUINE PURCHASES. W E DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDING OF LD. C IT(A) ON THIS ISSUE AS THERE IS NO MATERIAL BEFORE US TO REA CH A DIFFERENT CONCLUSION ON THIS ISSUE. ACCORDINGLY, THE ADDITION OF RS.2,05,65,026/- IS UPHELD. 10. AS REGARDS THE ADDITIONAL GROUND RAISED BY THE ASSESSEE, WE FIND FROM THE PERUSAL OF THE ASSESSMENT ORDER TH AT THE DISALLOWANCE IS WORKED BY THE AO BY APPLYING THE RU LE 8D READ WITH SECTION 14A AS REGARDS INTEREST AND INDI RECT EXPENSES COMPRISING DISALLOWANCE UNDER RULE 8D(2)(I I) OF RS.64,37,913/- AND UNDER RULE 8D2(III) RS.13,45,595/- AGGREGATING TO RS.77,83,508/-. THERE IS NO MATERIAL BEFORE US TO ADJUDICATE THIS GROUND OF APPEAL AND THEREFORE, WE ARE INCLINED TO RESTORE THE ADDITIONAL GROUND RAISED BY THE ASSESSEE AS THERE IS NO MATERIAL TO GIVE A FINDING CONTRARY TO THE VIEW AS TAKEN BY THE AO. AO SHALL EXAMINE THE CONTENTIONS OF THE ASSESSEE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER PROVIDING ADEQUATE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.7763/M/2011 & ITA NO.7998/M/2011 M/S. ASIAN ELECTRONICS LTD. 6 11. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. 12. IN THE RESULT, APPEAL OF THE REVENUE ALLOWED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATIS TICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26.09.2018. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 26.09.2018. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.