Permionics (I) Ltd., Baroda V. The Income tax Officer,Ward-4(2), Baroda

ITA 81/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73049 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 20-02-2014
• Assessment Year: 1998-1999
• Appeal Filed On: 11-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID SR D R
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Bogus purchase; Corroborative evidences

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.81, 82 AND 83/AHD/2010 [ASSTT.YEAR : 1998-1999, 1999-2000 AND 2006-2007] PERMIONICS (I) LTD. E-2, BIDC INDUSTRIAL ESTATE GORWA, BARODA. PAN : AABCP 2647 L /VS. ITO, WARD-4(2) BARODA. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI SUNIL H. TALATI + 2 3 )/ REVENUE BY : SHRI J.P. JHANGID, SR. -DR 5 2 &(*/ DATE OF HEARING : 20 TH FEBRUARY, 2014 678 2 &(*/ DATE OF PRONOUNCEMENT : 07-03-2014 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT : THESE THREE APPEALS BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1998-1999, 1999-2000 AND 20 06-2007 ARE DIRECTED AGAINST THE ORDER OF THE CIT(A). THESE ARE BEING DI SPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.81/AHD/2010 ASSTT.YEAR 1998-1999 2. THE GROUND NO.1 OF THE ASSESSEES APPEAL IS AS U NDER: ITA NO.81, 82 AND 83/AHD/2010 -2- 1. THE ORDER PASSED BY THE CIT(A) IS BAD IN LAW, C ONTRARY TO LEGAL PRONOUNCEMENT AND SAME BE QUASHED. 3. THIS GROUND OF APPEAL OF THE ASSESSEE IS GENERAL IN NATURE AND REQUIRES NO ADJUDICATION. 4. THE GROUND NO.2 OF THE ASSESSEES APPEAL IS AS U NDER: 2. THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE AO FOR THE REOPENING TO BE JUSTIFIED. YOUR APPELLANT SUBMITS THAT NO REASONS FOR REOPENING WERE PROVIDED AND REOPENING IS NOT JUSTIF IED MERELY ON THE BASIS OF SUSPICION. HENCE, YOUR APPELLANT SUBMITS THAT THE CIT(A) HAS ERRED BOTH IN LAW AND IN FACTS IN JUSTIFYING THE RE OPENING. YOUR APPELLANT THEREFORE SUBMITS THAT REOPENING IS BAD IN LAW AND IN TURN THE ORDER PASSED BEING ILLEGAL BE QUASHED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRE SSED THIS GROUND OF THE APPEAL, WHICH IS ACCORDINGLY DISMISSED. 6. THE GROUND NO.3 OF THE ASSESSEES APPEAL IS AS U NDER: 3. THE CIT(A) HAS ERRED IN CONFIRMING THE NOTIONAL ADDITION OF RS.1,72,400/- BEING EXCISE DUTY ADDED IN THE VALUE OF CLOSING STOCK OF FINISHED GOODS. YOUR APPELLANT SUBMITS THAT THE AD DITION BEING UNWARRANTED BE DELETED. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF ENGLISH ELECTRIC CO. INDIA LTD., 109 TAXMAN 401 AND IT HAS BEEN FOLLOWED BY THE DIFFERENT BENCHES OF THE TRIBUNAL. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSE SSEE. HE SUBMITTED THAT THE ADDITION WAS RIGHTLY MADE BY THE AO. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION RELIED UPON BY THE LEARNED COUNSE L FOR THE ASSESSEE (SUPRA), AND ACCORDINGLY, THE GROUND NO.3 OF THE ASSESSEE IS ALLOWED. ITA NO.81, 82 AND 83/AHD/2010 -3- 9. THE GROUND NO.4 OF THE ASSESSEE IS AS UNDER: 4. THE CIT(A) HAS ERRED IN CONFIRMING THE DEPRECIA TION ON DIES AT 25% AS AGAINST THE CLAIM AT 40%. YOUR APPELLANT SU BMITS THAT THE SAME BE DIRECTED TO BE ALLOWED AS CLAIMED. 10. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND OF THE ASSESSEE, WHICH IS ACCORDINGLY DISMISSED. 11. THE GROUND NO.5 OF THE ASSESSEES APPEAL IS AS UNDER: 5. THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.85,722/- BEING 20% OF THE PRINTING AND STATIONER Y EXPENSES OF RS.4,28,613/-. YOUR APPELLANT SUBMITS THAT THE EXP ENSES ARE GENUINE AND INCURRED FOR THE PURPOSE OF BUSINESS AND AD HOC DIS ALLOWANCE WITHOUT ANY FINDINGS IS UNJUSTIFIED AND CALLED FOR. THE AO BE DIRECTED TO ALLOW THE CLAIM IN FULL. 12. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO MISTAKE IN THE DETAILS OF PRINTING AND STATIONERY EXPENSES WAS FOU ND BY THE AO, AND THEREFORE, THE AD HOC DISALLOWANCE MADE AT THE RATE OF 20% AT RS.85,722/ - WAS NOT JUSTIFIED. THE LEARNED DR SUBMITTED THAT THE ASSES SEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF THE EXPENSES INC URRED UNDER THE HEAD PRINTING AND STATIONERY, AND THEREFORE DISALLOWAN CE WAS JUSTIFIED. 13. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT THE PLEA OF THE AO THAT THE INCREASE IN EXPENDITURE UNDER THE HEAD PR INTING AND STATIONERY AS COMPARED TO THE EARLIER YEARS WERE NOT PROPORTIONAT E WITH THE INCREASE IN SALES DURING THE YEAR, IS NOT SUSTAINABLE IN LAW. HOWEVE R, CONSIDERING THE FACT THAT THE CIT(A) HAS RECORDED A FINDING THAT FULL SUPPORTING EVIDENCE WERE NOT PRODUCED BEFORE THE AO, REGARDING THIS EXPENDITURE, WE CONSI DER THAT THE ENDS OF JUSTICE SHALL BE MET, IF THE DISALLOWANCE UNDER THE HEAD IS RESTRICTED TO 40,000/- AS AGAINST RS.85,722/- SUSTAINED BY THE CIT(A), AND AC CORDINGLY, THE GROUND NO.5 OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.81, 82 AND 83/AHD/2010 -4- 14. THE GROUND NO.6 OF THE ASSESSEE IS AS UNDER: 6. THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.2,283/- BEING 10% OF THE REPAIRS AND MAINTENANCE EXPENSES O F RS.22,834/-. YOUR APPELLANT SUBMITS THAT THE DISALLOWANCE IS ON ESTIM ATE BASIS WITHOUT ANY REASONS ASSIGNED. THE SAME BE DELETED NOW. 15. WE HAVE HEARD THE PARTIES. WE FIND THAT NO VAL ID REASONS FOR MAKING DISALLOWANCE OF RS.2,283/- WAS GIVEN BY THE AO, AND ACCORDINGLY, THE GROUND NO.6 OF THE ASSESSEE IS ALLOWED. 16. THE GROUND NO.7 OF THE ASSESSEE IS AS UNDER: 7. THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.4,080/- TREATING THE SAME AS PRIOR PERIOD EXPENSES. YOUR A PPELLANT SUBMITS THAT THE EXPENSES ARE ACCRUED DUE AND CRYSTALLIZED DURIN G THE YEAR AND HENCE BE ALLOWED AS CLAIMED. 17. THIS GROUND OF THE ASSESSEE IS NOT PRESSED BY T HE LEARNED COUNSEL FOR THE ASSESSEE, AND ACCORDINGLY, THE GROUND NO.7 IS DISMI SSED. 18. THE GROUND NO.8 OF THE ASSESSEE IS AS UNDER: THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANC E OF RS.33,996/- OUT OF CONVEYANCE EXPENSES. YOUR APPELLANT SUBMITS THA T THE EXPENSES ARE GENUINE AND INCURRED FOR THE PURPOSE OF BUSINESS AN D AD HOC DISALLOWANCE WITHOUT ANY FINDINGS IS UNJUSTIFIED AN D UNCALLED FOR. THE AO BE DIRECTED TO ALLOW THE CLAIM IN FULL. 19. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT CONVEYANCE EXPENSES INCURRED ONLY FOR BUSINESS PURPOSE, AND THEREFORE, NO DISALLOWANCE SHOULD HAVE BEEN MADE. THE LEARNED DR SUBMITTED THAT MAXIMUM A MOUNT OUT OF CONVEYANCE EXPENSES WAS INCURRED IN CASH, AND THERE FORE, THE DISALLOWANCE WAS RIGHTLY MADE BY THE AO, AND CONFIRMED BY THE CIT(A) . 20. WE HAVE CONSIDERED RIVAL SUBMISSIONS. WE FIND THAT THE CIT(A) HAS RECORDED THAT MAXIMUM EXPENSES WERE INCURRED IN CAS H AND ARE FULLY VERIFIABLE. HOWEVER, THE CIT(A) IN PARA 11.2 OF HIS ORDER HAS R ECORDED A CONTRADICTORY ITA NO.81, 82 AND 83/AHD/2010 -5- FINDING THAT ALL CLAIMS WERE NOT VERIFIABLE. IN TH ESE CIRCUMSTANCES, WE HOLD THAT NO CASE OF DISALLOWANCE COULD BE MADE OUT BY THE RE VENUE, AND ACCORDINGLY, THE GROUND NO.8 OF THE ASSESSEE IS DECIDED IN FAVOUR OF THE ASSESSEE AND IS ALLOWED. 21. THE GROUND NO.9 OF THE ASSESSEES APPEAL IS AS UNDER: THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANC E OF RS.21,379/- BEING THE DIFFERENCE IN CLOSING BALANCE OF CREDITOR S ACCOUNT CONSIDERING THE SAME AS BOGUS PURCHASES. YOUR APPELLANT SUBMIT S THAT THE CIT(A) HAS CONFIRMED THE ADDITION WITHOUT CONSIDERING THE FACT S OF THE CASE AND HENCE IT IS SUBMITTED THAT NO ADDITION BE MADE DURI NG THE YEAR. IT BE HELD SO NOW. 22. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RECONCILED ALL THE FIGURES, AND THEREFORE, NO ADDIT ION ON ACCOUNT OF BOGUS PURCHASE COULD BE MADE OUT. THE LEARNED DR SUBMITT ED THAT THERE WAS DIFFERENCE BETWEEN THE BALANCE SHOWN IN THE ASSESSE ES BOOKS OF ACCOUNTS AND THE BALANCE IN OTHER PARTIES ACCOUNT. WE HAVE C ONSIDERED RIVAL SUBMISSIONS. CONSIDERING THE VOLUME OF THE BUSINESS CONDUCTED BY THE ASSESSEE AND THE FACT THAT THE DIFFERENCE IN THE ACCOUNTS DOES NOT PERTAI N TO THIS YEAR, WE HOLD THAT NO CASE OF DISALLOWANCE OF RS.21,379/- FOR THE RELEVAN T ASSESSMENT YEAR COULD BE MADE OUT BY THE REVENUE, AND ACCORDINGLY, THE GROUN D NO.9 OF THE ASSESSEE IS ALLOWED. ITA NO.82/AHD/2010 ASSTT.YEAR 1999-2000 23. THE GROUND NO.1 OF THE ASSESSEES APPEAL IS AS UNDER: 1. THE ORDER PASSED BY THE CIT(A) IS BAD IN LAW, C ONTRARY TO LEGAL PRONOUNCEMENT AND SAME BE QUASHED. 24. THIS GROUND OF APPEAL OF THE ASSESSEE IS GENERA L IN NATURE AND REQUIRES NO ADJUDICATION. 25. THE GROUND NO.2 OF THE ASSESSEES APPEAL IS AS UNDER: 2. THE CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE AO FOR THE REOPENING TO BE JUSTIFIED. YOUR APPELLANT SUBMITS THAT NO REASONS FOR ITA NO.81, 82 AND 83/AHD/2010 -6- REOPENING WERE PROVIDED AND REOPENING IS NOT JUSTIF IED MERELY ON THE BASIS OF SUSPICION. HENCE, YOUR APPELLANT SUBMITS THAT THE CIT(A) HAS ERRED BOTH IN LAW AND IN FACTS IN JUSTIFYING THE RE OPENING. YOUR APPELLANT THEREFORE SUBMITS THAT REOPENING IS BAD IN LAW AND IN TURN THE ORDER PASSED BEING ILLEGAL BE QUASHED. 26. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND OF THE APPEAL OF THE ASSESSEE, WHICH IS ACCORDINGLY DISMIS SED. 27. THE GROUND NO.3 OF THE ASSESSEES APPEAL IS AS UNDER: 3. THE CIT(A) HAS ERRED IN CONFIRMING THE NOTIONAL ADDITION OF RS.50,460/- BEING EXCISE DUTY ADDED IN THE VALUE OF CLOSING STOCK OF FINISHED GOODS. YOUR APPELLANT SUBMITS THAT THE AD DITION BEING UNWARRANTED BE DELETED. 28. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF ENGLISH ELECTRIC CO. INDIA LTD., 109 TAXMAN 401 AND IT HAS BEEN FOLLOWED BY THE DIFFERENT BENCHES OF THE TRIBUNAL. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSE SSEE. HE SUBMITTED THAT THE ADDITION WAS RIGHTLY MADE BY THE AO. 29. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION RELIED UPON BY THE LEARNED COUNSE L FOR THE ASSESSEE (SUPRA), AND ACCORDINGLY, THE GROUND NO.3 OF THE ASSESSEE IS ALLOWED. 30. THE GROUND NO.4 OF THE ASSESSEE IS AS UNDER: 4. THE CIT(A) HAS ERRED IN CONFIRMING THE DEPRECIA TION ON DIES AT 25% AS AGAINST THE CLAIM AT 40%. YOUR APPELLANT SU BMITS THAT THE SAME BE DIRECTED TO BE ALLOWED AS CLAIMED. 31. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PR ESSED THIS GROUND OF THE APPEAL OF THE ASSESSEE, WHICH IS ACCORDINGLY DISMIS SED. 32. THE GROUND NO.5 OF THE ASSESSEES APPEAL IS AS UNDER: ITA NO.81, 82 AND 83/AHD/2010 -7- 5.THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWA NCE OF RS.13,791 AND RS.30,066 BEING 10% OF THE SALES PROMOTION EXPENSES AND CONVEYANCE EXPENSES. YOUR APPELLANT SUBMITS THAT THE DISALLOW ANCE IS WITHOUT VERIFYING THE FULL FACTS OF THE CASE AND HENCE, BE DELETED. 33. WE HAVE HEARD THE PARTIES. WE FIND THAT CONVEY ANCE EXPENSES AND SALES PROMOTION EXPENSES WERE JUSTIFIED AND THE AO HAS NO T POINTED OUT ANY ITEM OF DISALLOWABLE OR UNVERIFIABLE IN NATURE. NO ELEMENT OF PERSONAL EXPENDITURE HAS BEEN PLEADED ON BEHALF OF THE REVENUE. THE AD HOC DISALLOWANCE IS MADE WITHOUT VERIFICATION BY THE DEPARTMENT, AND ACCORDI NGLY, WE HOLD THAT NO CASE OF DISALLOWANCE IS MADE OUT AND THE GROUND NO.5 OF THE ASSESSEE IS ALLOWED. ITA NO.83/AHD/2010 ASSTT.YEAR 2006-2007 34. THE GROUND NO.1 OF THE ASSESSEES APPEAL IS AS UNDER: 1. THE ORDER PASSED BY THE CIT(A) IS BAD IN LAW, C ONTRARY TO LEGAL PRONOUNCEMENT AND SAME BE QUASHED. 35. THIS GROUND OF APPEAL OF THE ASSESSEE IS GENERA L IN NATURE AND REQUIRES NO ADJUDICATION. 36. THE GROUND NO.2 OF THE ASSESSEES APPEAL IS AS UNDER: 2. THE CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.56,745/- BEING 10% OF THE SALES PROMOTION EXPENSES. YOUR AP PELLANT SUBMITS THAT THE EXPENSES INCURRED ARE GENUINE AND REASONABLE IN CONSIDERATION TO THE TOTAL TURNOVER. HENCE, THE DISALLOWANCE CONFIRMED I S UNJUST AND THE AO BE DIRECTED TO ALLOW THE SAME. 37. WE HAVE HEARD THE PARTIES. WE FIND THAT THE DI SALLOWANCE OUT OF SALES PROMOTION EXPENSES AT THE RATE OF 10% THEREOF WAS M ADE ON THE PLEA THAT THE ASSESSEE COULD NOT FURNISH ANY DETAILS OF THE SALES MADE THROUGH THESE PARTIES AND THE BASIS FOR INCURRING THE EXPENDITURE. WE FI ND THAT THE GENUINENESS OF THESE EXPENDITURE WAS NOT DOUBTED BY THE REVENUE. THE CLAIM OF THE ASSESSEE IS THAT NECESSARY DETAILS WERE FILED BEFORE THE AO AND NO SPECIFIC BASIS FOR SUCH DISALLOWANCE WAS GIVEN BY THE REVENUE. CONSIDERING VOLUME OF THE BUSINESS OF ITA NO.81, 82 AND 83/AHD/2010 -8- THE ASSESSEE, AND THAT THE REASONING OF THE AO REGA RDING THE SALES MADE THROUGH THESE PARTIES FOR WHOM THESE EXPENDITURE WERE INCUR RED BEING UNTENABLE, AND THAT THE AD HOC DISALLOWANCE WAS MADE, WE HOLD THAT THE DISALLOWAN CE MADE IS NOT JUSTIFIED AND THE GROUND NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 38. THE GROUND NO.3 OF THE ASSESSEES IS AS UNDER: 3. THE CIT(A) HAS ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.3,05,637/- BEING PROVISION FOR GRATUITY. YOUR A PPELLANT SUBMITS THAT THE AO BE DIRECTED TO ALLOW THE SAME ON PAYMENT BAS IS. IT BE HELD SO NOW. 39. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN FACT IT HAS CONTRIBUTED TO THE LIFE INSURANCE CORPORATION FOR T HE GRATUITY FUND AND IT WAS NOT MERELY A PROVISION, AND DIRECTION CAN BE GIVEN TO THE AO TO VERIFY THIS FACT. HE SUBMITTED THAT THE GRATUITY FUND WAS LATER ON AP PROVED BY THE COMMISSIONER OF INCOME TAX. THE LEARNED DR SUBMITTED THAT THE G RATUITY FUND WAS NOT APPROVED BY THE CIT, AND THEREFORE, THE DISALLOWANC E WAS RIGHTLY MADE. 40. WE HAVE HEARD RIVAL SUBMISSIONS. WE FIND THAT IN THESE FACTS OF THE CASE, IT SHALL BE JUSTIFIED TO RESTORE THIS ISSUE TO THE FILE OF THE AO WITH DIRECTION TO VERIFY WHETHER IN FACT THE ASSESSEE HAS CONTRIBUTED TO THE LIFE INSURANCE CORPORATION AND WHETHER THE GRATUITY FUND WAS APPRO VED BY THE COMMISSIONER ON LATER DATE, AND IF THE ANSWER TO THIS ISSUE IS I N THE AFFIRMATIVE, THEN NOT TO MAKE ANY ADDITION ON THIS ISSUE. WE DIRECT ACCORDI NGLY. 41. IN THE RESULT, THE ASSESSEES APPEALS FOR ASSTT .YEAR 1998-1999 AND 1999- 2000 ARE PARTLY ALLOWED, AND THE ASSTT.YEAR 2006-07 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( .. /G.C. GUPTA ) !' !' !' !' /VICE-PRESIDENT