DCIT, Hyderabad V. M/s Gemini Distilleries(Hyd)P.Ltd., R.R.Dist

ITA 824/HYD/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3391 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-01-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 05-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: S RAMA RAO
• Keywords: Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT & SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A. NO. 905/HYD/2008 (ASSESSMENT YEAR 2004-05) M/S. GEMINI DISTILLERIES (HYD) PVT. LTD., HYDERABAD PAN: AACCB3837H VS. DY. CIT, CENTRAL CIRCLE 1, HYDERABAD APPELLANT RESPONDENT I.T.A. NO. 824/HYD/2008 (ASSESSMENT YEAR 2004-05) DY. CIT, CENTRAL CIRCLE 1, HYDERABAD VS. M/S. GEMINI DISTILLERIES (HYD) PVT. LTD., HYDERABAD PAN: AACCB3837H APPELLANT RESPONDENT ASSESSEE BY: SHRI S. RAMA RAO REVENUE BY: SHRI K.E. SUNIL BABU O R D E R PER G.C. GUPTA, VP: THESE ARE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE FOR THE ASSESSMENT YEAR 2004-05 AND ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-I, DATED 2 5 TH FEBRUARY, 2008. THESE ARE BEING DISPOSED OF WITH T HIS CONSOLIDATED ORDER. I.T.A. NO. 905/HYD/2008 (ASSESSEES APPEAL): 2. THERE IS A DELAY OF 11 DAYS IN FILING THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY HAS FILED AN AFFIDAVIT EXPLAINING THE I.T.A. NOS. 905 & 824/HYD/2008 M/S. GEMINI DISTILLERIES (H) PVT. LTD. ============================ 2 REASONS FOR THE DELAY OF 11 DAYS IN FILING THE APPE AL. WE HAVE HEARD THE PARTIES ON THE ISSUE OF CONDONATION OF DELAY. CONSIDERING THE CONTENTS OF THE AFFIDAVIT F ILED BY THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY, WE H OLD THAT IT IS A FIT CASE FOR CONDONATION OF DELAY IN F ILING THE APPEAL BEFORE THE TRIBUNAL AND THE DELAY IS ACCORDI NGLY CONDONED. 3. GROUNDS OF APPEAL NO. 1 IS GENERAL IN NATURE. 4. GROUNDS OF APPEAL NO. 2 OF THE ASSESSEE IS AS UNDER: THE LEARNED CIT(A) ERRED IN HOLDING THAT THE INCOME OF BAGGA TAMILNADU MARKETING AGENCY IS TAXABLE IN THE ASSESSMENT OF SHRI KULDIP SINGH BAGGA AND NOT IN THE ASSESSMENT OF THE APPELLANT HEREIN. 4.1 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED WITH THE DECISION OF THE HYDER ABAD BENCH OF THE TRIBUNAL IN KULDEEP SINGH BAGGA VS. DC IT IN I.T.A. NO. 906/HYD/2008 DATED 13.1.2011 WHEREIN IT WAS HELD THAT THE INCOME OF M/S. BAGGA TAMILNADU MARKET ING AGENCY WAS TAXABLE IN THE HANDS OF THE ASSESSEE COM PANY I.E., M/S. GEMINI DISTILLERIES (HYD) PVT. LTD. AND THE SAME SHOULD NOT BE ASSESSED IN THE HANDS OF SHRI KULDEEP SINGH BAGGA 4.2 THE LEARNED DR COULD NOT CONTROVERT THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE . I.T.A. NOS. 905 & 824/HYD/2008 M/S. GEMINI DISTILLERIES (H) PVT. LTD. ============================ 3 4.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE ISSUE OF TAXABILITY OF INCOME OF M/S. BAGGA TAMILNA DU MARKETING AGENCY IS COVERED WITH THE DECISION OF TH E HYDERABAD TRIBUNAL IN THE CASE OF SHRI KULDEEP SING H BAGGA VS. DCIT (SUPRA) AND WE BEING IN AGREEMENT WI TH THE DECISION OF THE TRIBUNAL IN THE CASE OF KULDEEP SINGH BAGGA VS. DCIT, HOLD THAT SINCE THERE WAS A MERGER OF M/S. BAGGA TAMILNADU MARKETING AGENCY INTO THE ASSESSEE I.E., M/S. GEMINI DISTILLERIES (HYD) PVT. LTD., THE PROFIT THEREOF BE TAXED IN THE HANDS OF THE ASSESSE E. WE DIRECT ACCORDINGLY. 5. GROUNDS OF APPEAL NO. 3 OF THE ASSESSEE IS AS UNDER: THE LEARNED CIT(A) ERRED IN CONFIRMING AN ADDITION OF RS. 6,50,000 OUT OF RS. 11,05,322 ADDED BY THE ASSESSING OFFICER ON THE GROUND THERE WAS EXCESS CLAIM OF WASTAGES IN RESPECT OF PP CAPS, CARTONS, BOTTLES AND LABELS. 5.1 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE OF DISALLOWANCE ON ACCOUNT OF WASTAGE IS COVERED WITH THE DECISION OF THE HYDERABAD TRIBUNAL IN ASSE SSEES OWN CASE FOR THE EARLIER A.Y. 2001-02 IN I.T.A. NO. 141/HYD/05 DATED 24.8.09 WHEREIN THE WASTAGE @ 15% WAS HELD REASONABLE. THE LEARNED DR HAS RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). I.T.A. NOS. 905 & 824/HYD/2008 M/S. GEMINI DISTILLERIES (H) PVT. LTD. ============================ 4 5.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE OF ALLOWABILITY OF WASTAGE IN RESPEC T OF PP CAPS, CARTONS, BOTTLES AND LABELS IS COVERED WITH T HE DECISION OF THE HYDERABAD TRIBUNAL IN ASSESSEES OW N CASE FOR EARLIER A.Y. 2001-02 WHEREIN THE WASTAGE @ 15% WAS HELD AS REASONABLE. WE BEING IN AGREEMENT WITH THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE EARLIER A.Y. 2001-02 (S UPRA) DIRECT THE ASSESSING OFFICER TO ALLOW THE WASTAGE O UT OF THE ABOVE ITEMS @ 15% BEING A REASONABLE WASTAGE AND WHEREVER THE WASTAGE (BREAKAGE) IS MORE THAN 15%, 1 5% THEREOF SHOULD BE ALLOWED AND THE EXCESS OF BREAKAG E CLAIMED BY THE ASSESSEE MAY BE DISALLOWED. WE DIRE CT ACCORDINGLY. 6. GROUNDS OF APPEAL NO. 4 OF THE ASSESSEE IS AS UNDER: THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS. 10,00,000 FROM OUT OF THE EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT ON ESTIMATE BASIS. 6.1 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE OF RS. 10,00,000 WAS CONFIRMED BY THE CIT(A) BY CONSIDERING THAT THE TOTAL UNVOUCHED EXPE NSES WERE RS. 28,62,08,142 WHICH IS A FACTUAL MISTAKE AS THE MAJOR PORTION THEREOF WAS ON ACCOUNT OF EXCISE DUTY OF RS. 22.36 CRORES AND ROYALTY AMOUNTING TO RS. 1.23 CROR ES. HE I.T.A. NOS. 905 & 824/HYD/2008 M/S. GEMINI DISTILLERIES (H) PVT. LTD. ============================ 5 SUBMITTED THAT THE UNVOUCHED EXPENSES WERE AMOUNTIN G TO RS. 40 TO 50 LAKHS ONLY. 6.2 THE LEARNED DR HAS RELIED ON THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 6.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE DETAILS OF ADMINISTRATIVE AND SELLING E XPENSES GIVEN IN SCHEDULE F FILED BY THE ASSESSEE. WE FI ND THAT ALTHOUGH THE MAJOR PORTION OF THE ADMINISTRATIVE AN D SELLING EXPENSES ARE ON ACCOUNT OF EXCISE DUTY, ROY ALTY, FINANCIAL CHARGES, ETC., BUT THE FACT REMAINS THAT SOME OF THE EXPENSES ARE UNVOUCHED. THE ASSESSEE HAS ADMIT TED THAT THE UNVOUCHED EXPENSES ARE TO THE TUNE OF RS. 40 TO 50 LAKHS. IN THE FACTS OF THE CASE, WE HOLD THAT T HE DISALLOWANCE OF RS. 10 LAKHS ON ACCOUNT OF UNVERIFI ABLE EXPENSES COULD NOT BE SAID TO BE EXCESSIVE. ACCORD INGLY THE DISALLOWANCE MADE IS CONFIRMED AND THE GROUND O F APPEAL NO. 4 OF THE ASSESSEE IS DISMISSED. I.T.A. NO. 824/HYD/2008 (REVENUES APPEAL): 7. GROUNDS OF APPEAL NOS. 1 AND 2 OF THE REVENUE ARE AS UNDER: 1. THE CIT(A) ERRED IN RESTRICTING THE ADDITION MADE ON ACCOUNT OF EXCESS CLAIM OF WASTAGE IN RESPECT OF CAPS, CARTONS, BOTTLES AND LABELS FROM RS. 11,05,322/- TO RS. 6,50,000/- IN THE ABSENCE OF ANY EVIDENCE I.T.A. NOS. 905 & 824/HYD/2008 M/S. GEMINI DISTILLERIES (H) PVT. LTD. ============================ 6 ADDUCED BY THE ASSESSEE TO SUPPORT ITS CLAIM. 2. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSING OFFICER HAS ADOPTED A SCIENTIFIC METHOD TO ARRIVE AT THE EXCESS CLAIM OF WASTAGE MADE BY THE ASSESSEE. 7.1 WE HAVE HEARD THE PARTIES. THE ISSUE IN THESE GROUNDS OF APPEAL OF THE REVENUE IS COVERED WITH OU R DECISION IN THE FOREGOING PARAS OF THIS ORDER WHILE DISPOSING OF GROUNDS OF APPEAL NO. 3 IN ASSESSEES APPEAL AND THIS GROUND OF APPEAL OF THE REVENUE IS DISPOSE D OF ACCORDINGLY. 8. GROUNDS OF APPEAL NO. 3 OF THE REVENUE IS AS UNDER: 3. THE CIT(A) ERRED IN ALLOWING THE LOSS OF RS. 6,53,937/- WHICH WAS DISALLOWED BY THE AO. SINCE THE UNIT DID NOT CONDUCT ANY SORT OF BUSINESS DURING THE RELEVANT PERIOD, THE AO HAS CORRECTLY DISALLOWED THE LOSS. 8.1 WE HAVE HEARD THE PARTIES. WE FIND THAT IT IS NOT NECESSARY THAT EACH LIMB OF ASSESSEES BUSINESS SHO ULD BE ACTIVE AND IN OPERATION DURING THE RELEVANT PERIOD. THE ASSESSEE HAS CARRIED OUT BUSINESS DURING THE RELEVA NT PERIOD AND MERELY BECAUSE ONE OF ITS UNITS, NEW CIT Y DISTRIBUTORS WAS NOT IN OPERATION DURING THE RELEVA NT PERIOD, IT COULD NOT BE SAID THAT THE ASSESSEE HAD NOT CARRIED OUT BUSINESS DURING THE YEAR. IN THESE FAC TS OF THE CASE, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASS ESSING I.T.A. NOS. 905 & 824/HYD/2008 M/S. GEMINI DISTILLERIES (H) PVT. LTD. ============================ 7 OFFICER AND ACCORDINGLY, THE ORDER OF THE CIT(A) IS CONFIRMED AND THE GROUNDS OF APPEAL NO. 3 OF THE RE VENUE IS DISMISSED. 9. GROUNDS OF APPEAL NO. 4 OF THE REVENUE IS AS UNDER: 4. THE CIT(A) OUGHT TO HAVE CONFIRMED THE ADDITION MADE OF RS. 79,06,356/- ON PROTECTIVE BASIS IN RESPECT OF PROFIT OF M/S. BAGGA TAMILNADU MARKETING AGENCY WHICH WAS THE PROPRIETARY CONCERN OF SRI KULDEEP SINGH BAGGA. 9.1 WE HAVE HEARD THE PARTIES. THE ISSUE IS COVERED WITH THE DECISION OF THE CO-ORDINATE BENCH OF THE T RIBUNAL IN THE CASE OF SHRI KULDEEP SINGH BAGGA FOR A.Y. 20 04-05 IN I.T.A. NO. 906/HYD/2008 DATED 13.1.2011AND ACCORDINGLY, WE HOLD THAT M/S. BAGGA TAMILNADU MARKETING AGENCY WAS MERGED WITH THE ASSESSEE COMPA NY AND, THEREFORE, THE INCOME THEREOF WAS ASSESSABLE I N THE HANDS OF THE ASSESSEE AND THE GROUNDS OF APPEAL NO. 4 OF THE REVENUE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE AS WELL A S THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH APRIL, 2011 SD/- SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER SD/- (G.C. GUPTA) VICE PRESIDENT HYDERABAD, DATED 8 TH APRIL, 2011 TPRAO I.T.A. NOS. 905 & 824/HYD/2008 M/S. GEMINI DISTILLERIES (H) PVT. LTD. ============================ 8 COPY FORWARDED TO: 1. M/S. GEMINI DISTILLERIES (HYD) PVT. LTD., C/O. SRI S. RAMA RAO, ADVOCATE, FLAT NO. 103, H. NO. 3-6- 542/4, INDIRADEVI NILAYAM, ST. NO. 7, HIMAYATNAGAR, HYDERABAD-500 029. 2. THE DCIT, CENTRAL CIRCLE 1, HYDERABAD. 3. THE CIT(A) - I , HYDERABAD. 4 THE CIT CENTRAL) , HYDERABAD 5. THE DR B BENCH, ITAT, HYDERABAD SR. NO. PARTICULARS DATE 1. DATE OF DICTATION 17.03.2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER 18.03.2011 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER 5. DATE ON WHICH THE FAIR ORDER GOES TO THE SR. P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8. DATE ON WHICH THE FILE GOES TO THE ASST. REGISTR AR 9. DATE OF THE DESPATCH OF THE TRIBUNAL ORDER