ACIT, Central Circle-4, Hyderabad V. M/s. Maha Shiv Shakti Steel Rolling Mills Pvt.Ltd, Hyderabad

ITA 782/HYD/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69929 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 22-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: B SAI PRASAD
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NOS. 782, 783, 784 & 785/HYD/2012 ASSESSMENT YEAR : 2005-06 TO 2008-09 ASST. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 4, HYDERABAD. VS. M/S MAHA SHIV SHAKTI STEEL ROLLING MILLS PVT. LTD. PAN: AABCT6893J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI P. SOMA SEKHAR REDDY ASSESSEE BY : SHRI B. SAI PRASAD DATE OF HEARING : 31-10-2013 DATE OF PRONOUNCEMENT : 13-11-2013 O R D E R PER B. RAMAKOTAIAH, A.M.: THESE FOUR APPEALS ARE PREFERRED BY REVENUE AGAINST THE ORDERS OF CIT(A)-VII, HYDERABAD, DATED 28-02-2012 F OR THE ASSESSMENT YEARS 2005-06 TO 2008-09. REVENUE HAS TA KEN TWO EFFECTIVE GROUNDS IN ALL THESE APPEALS ON THE ISSUE OF DISALLOWANCE OF 25% OF THE EXPENSES INCURRED TOWARDS ELECTRICITY AN D FURNACE OIL EXPENDITURE ON AD-HOC BASIS BY THE AO, WHICH WERE D ELETED BY THE LEARNED CIT(A). 2. WE HAVE HEARD THE LEARNED DR AND THE LEARNED COU NSEL IN DETAIL AND PERUSED PAPER BOOK PLACED ON RECORD. 3. REVENUE HAS RAISED THE FOLLOWING TWO GROUNDS, WH ICH ARE COMMON IN ALL THE YEARS UNDER CONSIDERATION: 2 ITA NOS. 782 TO 785/HYD/12 M/S MAHA SHIV SHAKTI STEEL ROLLING MILLS PVT. LTD. 1. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE ASSESSEE FAILED TO FURNISH EVIDENCE WITH REGARD TO THE EXPENDITURE INCURRED TOWARDS ELECTRICITY AND FURNAC E OIL EXPENSES. 2. THE LEARNED CIT(A) OUGHT TO HAVE SUSTAINED THE DISALLOWANCE OF 25% OF THE EXPENSE INCURRED TOWARDS THE ELECTRICITY AND FURNACE OIL EXPENDITURE IN THE ABSE NCE OF NECESSARY EVIDENCE. 3. BRIEFLY STATED, ASSESSEE COMPANY WAS INCORPORATE D ON 30-12- 2004 AND IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF STEEL RE- ROLLING PRODUCTS. THERE WAS A SEARCH & SEIZURE OPER ATION CONDUCTED ON ASSESSEE ON 23-01-2009, CONSEQUENT TO WHICH ASSE SSMENTS HAVE BEEN CONSIDERED U/S 153A OF THE ACT. FOR AY 2005-06 , SCRUTINY ASSESSMENT U/S 143(3) WAS COMPLETED EARLIER ALLOWIN G EXPENDITURE. IN THE PROCEEDINGS U/S 153A, AO DISALLOWED 25% OF THE EXPENDITURE INCURRED TOWARDS ELECTRICITY AND FURNACE OIL IN THE RESPECTIVE ASSESSMENT YEARS ON THE REASON THAT ASSESSEE HAS NO T SUBSTANTIATED CLAIM. 4. BEFORE THE LEARNED CIT(A), ASSESSEE CONTENDED TH AT THE AO DID NOT ALLOW ANY OPPORTUNITY TO EXPLAIN OR THERE WAS A NY OCCASION TO REBUT THE OPINION EXPRESSED BY THE AO. FURTHER, IT WAS SUBMITTED THAT NO INCRIMINATING MATERIAL WAS AVAILABLE DURING THE SEARCH & SEIZURE PROCEEDINGS AND RELIED ON VARIOUS CASE LAW TO SUBMI T THAT ASSESSMENTS ON AD-HOC DISALLOWANCE CANNOT BE MADE N OT ONLY ON LEGAL PRINCIPLES AND ALSO ON FACTS. IT WAS FURTHER SUBMITTED THAT ELECTRICITY CHARGES WERE PAID TO APCPDCL AND APGPCL AND FURNACE OIL WAS PURCHASED FROM HPCL AND BPCL. FURTHER, IT W AS SUBMITTED THAT ALL THE AMOUNTS HAVE BEEN PAID BY WAY OF ACCOU NT PAYEE CHEQUES AND FURNISHED RELEVANT DETAILS ALONG WITH L EDGER FOLIOS JUSTIFYING THE EXPENDITURE. THE LEARNED CIT(A) AFT ER CONSIDERING VARIOUS LEGAL PRINCIPLES, HOWEVER, WAS OF THE OPINI ON THAT ISSUE CAN BE DECIDED ON MERIT OF FACTS ITSELF. ACCORDINGLY, A FTER EXAMINING THE 3 ITA NOS. 782 TO 785/HYD/12 M/S MAHA SHIV SHAKTI STEEL ROLLING MILLS PVT. LTD. FACTS OF THE CASE, THE CIT(A) DELETED THE DISALLOWA NCES MADE BY THE AO STATING AS UNDER: 4.4 THE SUBMISSIONS OF THE APPELLANT ARE PERUSED. A S COULD BE SEEN FROM THE INFORMATION FURNISHED BY THE APPELLANT AND THE ASSESSMENT ORDERS, THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF RE- ROLLING STEEL PRODUCTS FOR WHICH THE FUELS USED ARE ELECTRICITY AND FURNACE OIL. AS COULD BE SEEN FROM THE ASSESSMENT ORDER, THE AOS OBSERVATION THAT THE APP ELLANT HAS NOT FURNISHED THE INFORMATION ON THE ABOVE ISSU ES APPEARS TO BE NOT RELATABLE TO THE FACTS SINCE THE APPELLANT HAS CATEGORICALLY REFERRED TO THE SUBMISSIONS FURNI SHED ON 24.12.2010. 4.5 AS REGARDS TO THE SUBMISSION OF THE APPELLANT REGARDING THE NON-AVAILABILITY OF INCRIMINATING INF ORMATION DURING THE COURSE OF SEARCH & SEIZURE PROCEEDINGS, IT MAY BE RELEVANT TO CONCLUDE THAT AS NO INFORMATION AVAI LABLE WITH THIS OFFICE AS REGARDS TO THE DETAILS OF THE S EIZED MATERIAL FOUND DURING THE COURSE OF SEARCH & SEIZUR E PROCEEDINGS, IT MAY NOT BE PROPER TO COMMENT ON SUC H SUBMISSIONS OF THE APPELLANT AND THE ISSUE IS DECID ED ON MERITS BASED ON THE INFORMATION AS AVAILABLE ON REC ORD AND FURNISHED BY THE APPELLANT, WHICH IS ALSO INCLUDE T HE STATEMENT OF THE AFFAIRS IN THE FORM OF BALANCE SHE ET AND PROFIT & LOSS ACCOUNT FURNISHED DURING THE APPEAL PROCEEDINGS FOR ALL THE RELEVANT ASSESSMENT YEARS. FURTHER, THE APPELLANT HAS NOT RAISED THIS ISSUE IN THE GROU NDS OF APPEAL AS SUCH THIS CONTENTION OF THE APPELLANT IS NOT TAKEN UP FOR DETAILED DISCUSSION. HOWEVER, SINCE THE ISSU E IS RELATED TO MORE OF FACTS THAN THE LEGAL IN NATURE T AKEN UP FOR DISCUSSION ACCORDINGLY AND THE CASE LAW RELIED UPON BY THE APPELLANT IS NOT TAKEN INTO CONSIDERATION IN DISPOS ING THESE APPEALS AND THE APPEALS ARE DECIDED ON STRENGTH/MER ITS OF FACTS. 4.6 COMING TO THE FACTS OF THE CASE, THE APPELLANT IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL P RODUCTS FOR WHICH CERTAIN EXPENDITURES ARE VERY MUCH ESSENT IAL AND AMONG THOSE THE COST OF FUELS IS MAJOR EXPENDITURE FOR STEEL INDUSTRY. ACCORDINGLY, HUGE AMOUNTS WERE DEBITED UN DER THE HEADS ELECTRICITY CHARGES AND FURNACE OIL EXPENDITURE FOR ALL THE THREE ASSESSMENT YEARS UND ER REFERENCE. THE DETAILS OF THE SAME FOR ASSESSMENT Y EARS 2006-07, 2007-08 & 2008-09 UNDER THE SAID HEADS, VI S--VIS THE TURNOVERS ACHIEVED BY THE COMPANY, ARE INDICATE D AS UNDER: 4 ITA NOS. 782 TO 785/HYD/12 M/S MAHA SHIV SHAKTI STEEL ROLLING MILLS PVT. LTD. AY ELECTRICITY CHARGES FURNACE OIL DISALLOWANCE @ 25 OF COL. 2 & 3 TURNOVER (RELATED TO MFG.) 2005-06 21,68,063 18,34,695 10,00,689 6,57,72,745 2006-07 88,37,212 79,55,695 41,98,227 13,43,35,751 2007-08 90,76,632 74,52,864 41,32,374 14,05,30,797 2008-09 1,23,43,863 1,07,03,256 57,61,780 20,45,43,471 4.7 AS COULD BE SEEN FROM THE ABOVE, THE PERCENTAGE OF THE ELECTRICITY EXPENDITURE VIS--VIS THE TURNOVER IS HOVERING AROUND 6.3% TO 6.5% AND THE SAME FOR FURNACE OIL EXPENDITURE IS AROUND 5.23% TO 5.92% FOR THE ASSESS MENT YEARS UNDER REFERENCE AND THERE IS NO ABNORMALITY A S FAR AS VARIATION OF THE EXPENDITURE UNDER THE SAID HEADS A RE CONCERNED. BASED ON THE ABOVE ANALYSIS AND INFORMA TION, IT APPEARS THAT THERE IS NO GROUND FOR MAKING THE DISALLOWANCE OF THE EXPENDITURES IN ABSENCE OF ANY ADVERSE INFORMATION IN THE POSSESSION OF THE AO. 4.8 THE DISALLOWANCES OF THE EXPENDITURES MAY HAVE TO BE RESORTED IN CASES WHERE THE ASSESSMENTS ARE COMPLET ED ON EX-PARTE BASIS. EVEN IN SUCH CASES, THE ESTIMATION OF THE INCOME/DISALLOWANCES OF EXPENSES SHOULD BE REASONAB LE, AS REGARDS TO THE FACTS AND INFORMATION AVAILABLE R EGARDING THE ASSESSEE AND PARTICULAR TRADE/BUSINESS. IN THIS CASE, NEITHER THE ASSESSMENT WAS COMPLETED EX-PARTE NOR A NY INFORMATION WAS AVAILABLE FOR COMING TO ARRIVE AT A DVERSE CONCLUSIONS AS DONE BY THE AO FOR ALL THE THREE ASS ESSMENT YEARS UNDER REFERENCE. AS SUBMITTED BY THE APPELLAN T, THERE IS NO PLACE FOR ESTIMATION IN THE ASSESSMENTS RELAT ED TO SEARCH & SEIZURE PROCEEDINGS. FURTHER, AS EXPLAINED BY THE APPELLANT, THE EXPENDITURE UNDER THE TWO HEADS ARE MET/PAID BY ACCOUNT PAYEE CHEQUES WITH THE AMOUNT PAID TO GOVERNMENT ORGANISATIONS SUCH AS ELECTRICITY BOARD AND HPCL, WHEREIN IT IS ALWAYS POSSIBLE TO VERIFY THE GENUINENESS OF THE EXPENDITURES, SO AS TO EXPLORE T HE POSSIBILITY OF DISALLOWANCES, IF ANY. FURTHER, THER E ARE NO CASH PAYMENTS INVOLVED, SO AS TO ATTRACT THE DISALL OWANCE OF A PART OF THE EXPENDITURES IN THIS CASE. UNDER T HE CIRCUMSTANCES, I AM INCLINED TO ACCEPT THE SUBMISSI ONS OF THE APPELLANT AND HOLD THAT THERE IS NO GROUND FOR MAKING THE ADHOC DISALLOWANCE OF THE EXPENDITURES WHICH AR E ESSENTIALLY CONNECTED TO THE BUSINESS OF THE ASSESS EE, WITHOUT BRINGING ANY EVIDENCE OR ADVERSE FINDINGS A GAINST THE CLAIMS OF THE APPELLANT. THEREFORE, THE ADDITIO NS OF RS. 10,00,690/-, RS. 41,98,227/-, RS. 41,32,374 & RS. 5 7,61,780/- FOR AYS 2005-06, 2006-07, 2007-08 AND 2008-09, BEIN G THE DISALLOWANCE @ 25% OF ELECTRICITY & FURNACE OIL 5 ITA NOS. 782 TO 785/HYD/12 M/S MAHA SHIV SHAKTI STEEL ROLLING MILLS PVT. LTD. EXPENDITURES ARE DELETED. HENCE, THIS GROUND OF APP EAL FOR AYS 2005-06 TO 2008-09 IS TREATED AS ALLOWED. 5. AGGRIEVED BY THE ORDERS OF THE CIT(A), THE REVEN UE IS IN APPEAL FOR THE ASSESSMENT YEARS UNDER CONSIDERATION. 6. AFTER CONSIDERING RIVAL CONTENTIONS AND EXAMININ G THE FACTS OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE WI TH THE ORDERS OF THE LEARNED CIT(A). IN FACT THE AO HAS NO BASIS TO DISA LLOW THE EXPENDITURE, PARTICULARLY, WHEN HE WAS COMPLETING A SSESSMENTS BASED ON SEARCH & SEIZURE OPERATION. THERE IS NO IO TA OF INFORMATION THAT ASSESSEE HAS EITHER INFLATED OR SUPPRESSED PRO DUCTION. AS RIGHTLY CONSIDERED BY THE LEARNED CIT(A), THE EXPENDITURE I S REASONABLE AND PAYMENTS HAVE BEEN MADE BY WAY OF CHEQUES TO VARIOU S PUBLIC SECTOR UNDERTAKINGS, WHICH CAN BE VERIFIED BY THE AO, IF H E INTENDED TO DO SO. REVENUE HAS NOT MADE OUT ANY CASE TO SUPPORT TH E ORDER OF THE AO. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE, IN ALL THE APPEALS UNDER CONSIDERATION, ARE DISMISSED. 7. IN THE RESULT, ALL THE FOUR APPEALS OF REVENUE A RE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THE 13 TH DAY OF NOV.13. SD/- SD/- (ASHA VIJAYARAGHAVAN) (B. R AMAKOTAIAH) JUDICIAL MEMBER AC COUNTANT MEMBER HYDERABAD, DATED: 13 TH NOVEMBER, 2013. KV COPY TO:- 1) ACIT, CENTRAL CIRCLE 4, HYDERABAD 2) M/S MAHA SHIV SHAKTI STEEL ROLLING MILLS PVT. LT D., 21-2-6, URDUGALLI, PATHERGATTI, HYDERABAD. 3) CIT(A)-VII, HYDERABAD. 4) CIT (CENTRAL), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T ., HYDERABAD. 6 ITA NOS. 782 TO 785/HYD/12 M/S MAHA SHIV SHAKTI STEEL ROLLING MILLS PVT. LTD. S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./ P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER