M/s. Sangeeth Textiles Limited, Coimbatore V. DCIT, Tiruppur

ITA 822/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61329 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI
• Assessee Lawyers: T BANUSEKAR
• Section: 115JB

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHENNAI. BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 822/MDS/2011 ASSESSMENT YEAR : 2007 - 08 M/S. SANGEETH TEXTILES LIMITED, NO.551, GANESHAPURAM POST, S.S.KULAM VIA, COIMBATORE 641 107. [PAN: AACCS7188Q] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE, TIRUPPUR. (APPELLANT) (RESPONDENT) A PPELLANT BY : SHRI T. BANUSEKAR, C.A. RESPONDENT BY : SHRI T.N. BETGERI, JCIT DATE OF HEARING : 09.07.2012 DATE OF PRONOUNCEMENT : 20.07.2012 ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) II, COIMBATORE IN ITA NO. 470C/2009-10 FOR THE ASSESSMENT YEAR 2007-08. SHRI T. BANUSEKAR, C.A. REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI T.N. BETGERI, JCIT REPRESENTED ON BEHALF OF THE REVENUE. 2. THE ASSESSEE RAISED FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE HONOURABLE COMMISSIONER OF IN COME TAX (APPEALS) IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE C ASE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.8 88 822 2222 22/M/ /M/ /M/ /M/11 1111 11 2 2. A. HONOURABLE COMMISSIONER OF INCOME TAX (APPEA LS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN ADOPTING THE MARKET VALUE OF COMPARABLE CASES AS AGAINST THE ACTUAL SALE CONSIDE RATION REALIZED BY THE APPELLANT BY SALE OF WASTE. B. HONOURABLE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE ENTIRE SALE OF COMBER NOIL WAST E WAS MADE BY THE APPELLANT ONLY TO ITS ANOTHER ENTITY IN THE GROUP, NAMELY, M/S. SRI VASUDEVA TEXTILES LIMITED, WHICH WAS ALSO SUBJECTED TO SCRUTINY FOR THE SAME ASSESSMENT YEAR BY THE VERY SAME ASSESSING OFFICER. C. HONOURABLE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THE FACT THAT THERE WERE NO LOSSES TO TH E REVENUE ON ACCOUNT OF DIFFERENCE IN THE SALE PRICE OF THE WASTE AS THE PROFIT ARISING ON ACCOUNT OF THE LOWER PURCHASE PRICE OTHERWISE GETS TAXED IN THE HANDS OF THE RECIPIENT COMPANY, NAMELY, SRI VASUDEVA TEXT ILES LTD. D. HONOURABLE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT DISPOSING THE FOLLOWING GROUND NAMELY 'THE LEARNED ASSESSING OFFICER ERRED IN MENTIONED T HE FOLLOWING LINES IN HIS ORDER- THE ASSESSEE HAS ALSO ADMITTED THE DIFFERENCE IN SA LE PRICE OF WASTE COMPARED TO THE PREVAILING MARKET PRICE, AN E STIMATED ADDITION OF RS. 88, 06, 811/ - IS MADE AND ADDED TO THE TOTAL INCOME', WHEN FACTUALLY, THERE WERE NO SUCH ADMISSION MADE B Y THE APPELLANT'. E. HONOURABLE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THERE WAS NO INCOME EARNED BY THE A PPELLANT OUTSIDE THE BOOKS AND CONSEQUENTLY, ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER TO TAX THE NOTIONAL INCOME, IF AN Y, ON ACCOUNT OF DIFFERENCE IN SALE PRICE OF WASTE COTTON IN THE HAN DS OF THE APPELLANT F. HONOURABLE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN FOLLOWING TH E MARKET PRICE OF COMPARABLE CASES WITHOUT APPRECIATING THE FACT THAT THE APPELLANT DID NOT ACTUALLY EARN ANY SUCH INCOME I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.8 88 822 2222 22/M/ /M/ /M/ /M/11 1111 11 3 G. HONOURABLE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO NOTE THAT THE CONCEPT OF TAXING THE NOTIONAL INCOME UNDER THE LAW IS NOT ACCEPTABLE EXCEPT WHERE SPECIFIC ENABLING PROVISIOP S ARE MADE IN THE ACT FOR TAXATION OF SUCH NOTIONAL INCOME. 3. WITHOUT PREJUDICE TO THE ABOVE, IN THE ALTERNAT IVE, THE HONOURABLE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT D IRECTING THE LEARNED ASSESSING OFFICER TO CONSIDER THE ENHANCEMENT OF PU RCHASE PRICE IN THE HANDS OF THE PURCHASING COMPANY I.E., SRI VASUDEVA TEXTIL ES LTD. IN VIEW OF THE ABOVE GROUNDS AND SUCH OTHER ADDITIO NAL GROUNDS WHICH MAY BE ADDUCED AT THE TIME OF HEARING WITH THE LEAVE OF THE HONOURABLE INCOME TAX APPELLATE TRIBUNAL, THE APPELLANT PRAYS BEFORE THE HONOURABLE INCOME TAX APPELLATE TRIBUNAL A) TO CANCEL THE ORDER OF THE HONOURABLE COMMISSION ER OF INCOME TAX (APPEALS) AND TO DIRECT ASSESSING OFFICER TO DELETE THE ADDITION OF ` .88,06,811 / - BEING THE DIFFERENCE BETWEEN THE PRO BABLE MARKET VALUE OF THE COTTON WASTE SOLD AND THE ACTUAL SALE PRICE REALIZED BY SALE OF WASTE COTTON. B) WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERN ATIVE, TO DIRECT THE LEARNED ASSESSING OFFICER TO ENHANCE THE PURCHASE P RICE OF WASTE COTTON IN THE HANDS OF PURCHASING COMPANY I.E., SRI VASUDEVA TEXTILES LTD. C) TO PASS SUCH OTHER CONSEQUENTIAL ORDER AS THE HO NOURABLE INCOME TAX APPELLATE TRIBUNAL MAY DEEM FIT TO RENDER. 3. THE COUNSEL FOR THE ASSESSEE SPECIFICALLY SUBMI TS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) DID NOT DISPOS E OF GROUND NO. 2(D) OF THE ABOVE GROUNDS OF APPEAL. THE COUNSEL SUBMITS THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER STATED THAT THE ASS ESSEE ADMITTED DIFFERENCE IN SALE PRICE OF COTTON WASTE COMPARED TO THE PREVA ILING MARKET PRICE FOR AN ESTIMATED ADDITION OF ` .88,06,811/-. THE COUNSEL FOR THE ASSESSEE SUBMITS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.8 88 822 2222 22/M/ /M/ /M/ /M/11 1111 11 4 THAT THE ASSESSEE NEVER AGREED FOR SUCH AN ESTIMATE D ADDITION TOWARDS COTTON WASTE. THEREFORE, HE SUBMITS THAT THE COMMIS SIONER OF INCOME TAX (APPEALS) ERRED IN NOT CONSIDERING THE SPECIFIC GRO UND RAISED BY THE ASSESSEE THAT IT HAD NEVER ADMITTED FOR SUCH AN ADD ITION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE COUNSEL FOR THE ASSESSE E REFERRING TO THE ORDER SHEET COPY FILED BY THE DEPARTMENT SUBMITS TH AT NO WHERE IN THE ORDER SHEET THE ASSESSEE HAD ADMITTED TO SUCH AN ADDITION AND THEREFORE, THE OBSERVATION OF THE ASSESSING OFFICER THAT THE ASSES SEE ADMITTED FOR SUCH AN ADDITION IS CONTRARY TO THE RECORD. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE HAD ADMITTED FOR SUCH AN ADDITION, THE RE IS NO REASON FOR THE ASSESSING OFFICER TO MAKE SO MUCH OF ELABORATE DISC USSION WITH FIGURE AND ANALYSIS FOR MAKING SUCH AN ESTIMATED ADDITION ON T HE PRETEXT THAT THERE IS A DIFFERENCE IN SALE PRICE OF COTTON WASTE COMPARED T O THE PREVAILING MARKET PRICE. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER MENTIONED SO MANY DETAILS REGARDIN G COTTON WASTAGE AT VARIOUS STAGES OF THE COTTON INDUSTRY. THE ASSESSIN G OFFICER HAS DISCUSSED THE DETAILS OF AVERAGE REALIZATION OF WASTAGES PREV AILING AT VARIOUS STAGES IN COTTON MILLS AND ESTIMATED THE PROBABLE DIFFERENCE IN SALE PRICE OF COTTON WASTE COMPARED TO MARKET PRICE AT ` .88,06,811/-. THE COUNSEL SUBMITS THAT THE ASSESSEE IS NOT AWARE FROM WHERE THE ASSESSING OFFICER HAS GOT THESE DETAILS AND ANALYSIS OF COTTON WASTAGE AT VARIOUS L EVELS IN COTTON INDUSTRY AND THE ASSESSING OFFICER HAS NOT PUT TO THE ASSESS EE THESE DETAILS I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.8 88 822 2222 22/M/ /M/ /M/ /M/11 1111 11 5 GATHERED BY HIM AND NO EXPLANATION WAS CALLED FOR F ROM THE ASSESSEE ON THE DATA COLLECTED BY THE ASSESSING OFFICER BEFORE MAKI NG AN AD-HOC ADDITION OF ` .88,06,811/- TOWARDS DIFFERENCE IN SALE PRICE OF CO TTON WASTE. THE COUNSEL FOR THE ASSESSEE SUBMITS THAT THERE IS NO LOSS TO T HE REVENUE SINCE THE INCOME WAS ASSESSED UNDER THE PROVISIONS OF SECTION 115JB AND THEREFORE THE ENTIRE EXERCISE IS REVENUE NEUTRAL. 4. THE COUNSEL FOR THE REVENUE RELIED ON THE ORDER S OF LOWER AUTHORITIES. 5. WE HAVE GONE THROUGH THE ORDER SHEET COPY FILED BEFORE US AND FIND THAT NOWHERE IN THE ORDER SHEET, THE ASSESSEE OR IT S AUTHORIZED REPRESENTATIVE AGREED FOR AN ESTIMATED ADDITION OF ` .88,06,811/- TOWARDS DIFFERENCE IN SALE PRICE OF COTTON WASTE. THEREFORE , THE OBSERVATION OF THE ASSESSING OFFICER THAT THE ASSESSEE ADMITTED FOR AN ESTIMATED ADDITION OF ` .88,06,811/- TOWARDS DIFFERENCE IN SALE PRICE OF CO TTON WASTE COMPARED TO THE PREVAILING MARKET PRICE IS NOT BORN OUT FROM TH E RECORD. A SPECIFIC GROUND WAS RAISED BEFORE THE COMMISSIONER OF INCOME TAX (A PPEALS) THAT THE ASSESSING OFFICER ERRED IN MENTIONING THAT THE ASS ESSEE HAS ALSO ADMITTED THE DIFFERENCE IN SALE PRICE OF WASTE COMPARED TO T HE PREVAILING MARKET PRICE FOR AN ESTIMATED ADDITION OF ` .88,06,811/- IS MADE AND ADDED TO THE TOTAL INCOME WHEN FACTUALLY THERE WAS NO SUCH ADMISSION WAS MADE BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT DEALT WITH THE ISSUE WHILE DISPOSING OF THIS APPEAL. THE COMMI SSIONER OF INCOME TAX I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.8 88 822 2222 22/M/ /M/ /M/ /M/11 1111 11 6 (APPEALS) SUSTAINED THE ADDITION HOLDING THAT THE C ONCEPT OF REVENUE NEUTRAL CANNOT BE SEEN FROM THE ASSESSMENT YEAR ALONE AND I T HAS TO BE SEEN FROM THE SUBSEQUENT YEARS OF TAXATION. THE COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT THE ASSESSEE SOLD C OTTON WASTE TO ANOTHER ENTITY IN THE GROUP CONCERN M/S. VASUDEVA TEXTILES LTD. AT A LOWER PRICE THAN COMPARED TO MARKET VALUE. THE DIFFERENCE BETWEEN TH E MARKET PRICE OF THE YEAR AND THE SALE PRICE TO THE SISTER CONCERN CANNO T BE TERMED AS NOTIONAL INCOME AND THE ASSESSEE COULD NOT FURNISHED ANY REA SON FOR SELLING THE COTTON WASTE TO THE SISTER CONCERN. AS THE COMMISSI ONER OF INCOME TAX (APPEALS) HAS NOT GIVEN ANY FINDING ON THE GROUND R AISED BY THE ASSESSEE THAT THERE IS NO ADMISSION AT ALL BY THE ASSESSEE F OR AN AD-HOC ESTIMATED ADDITION AND AS THE ASSESSING OFFICER HAS NOT PROVI DED ANY DATA COLLECTED BY HIM TO THE ASSESSEE CALLING FOR ITS OBJECTION FOR M AKING SUCH AN ESTIMATED ADDITION, WE FEEL IT NECESSARY TO SET ASIDE THE ISS UE TO THE COMMISSIONER OF INCOME TAX (APPEALS) FOR DISPOSING OF THE ISSUE AFR ESH. THEREFORE, THE APPEAL OF THE ASSESSEE IS RESTORED TO THE FILE OF T HE COMMISSIONER OF INCOME TAX (APPEALS) FOR DECIDING THE ISSUE AFRESH IN ACCO RDANCE WITH LAW AFTER PROVIDING SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.8 88 822 2222 22/M/ /M/ /M/ /M/11 1111 11 7 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON FRIDAY, THE 20 TH OF JULY, 2012 AT CHENNAI. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER CHENNAI, DATED, THE 20.07.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.