THE ITO 4(3)(4), MUMBAI V. M/S. SUMITA SYNTHETICS LTD, MUMBAI

ITA 84/MUM/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62204 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 27-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 04-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: VIPUL B JOSHI; SAMEER S DALAL
• Keywords: Unexplained cash credit; Business income; Opportunity of being heard
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J,MUMBAI BEFORE SHRI T.R. SOOD (AM) & SHRI VIJAY PAL RAO ( JM) I.T.A. NO.84/MUM/2008 (A.Y. 2004-05) INCOME-TAX OFFICER-4(3)(4), R.NO.637, 6 TH FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. VS. SUMITA SYNTHETICS LTD., 609, KALKAD MARKET, 306, KALBADEVI ROAD, MUMBAI-400 002. PAN: AABCS4453P. APPELLANT RESPONDENT I.T.A.NO.6994/MUM/2007 (A.Y. 2004-05) SUMITA SYNTHETICS LTD., 609, KALKAD MARKET, 306, KALBADEVI ROAD, MUMBAI-400 002. PAN: AABCS4453P. VS. INCOME-TAX OFFICER-4(3)(4), R.NO.637, 6 TH FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT DEPARTMENT BY SHRI D.S. SUNDER SINGH. ASSESSEE BY S/SHRI V IPUL B.JOSHI & SAMEER S. DALAL. DATE OF HEARING 27-03-2012 DATE OF PRONOUNCEMENT 04-04-2012 O R D E R PER T.R. SOOD, AM : ITA NOS.84/MUM/2008 & 6994/MUM/2007 SUMITA SYNTHETICS LTD. 2 ITA NO. 84/MUM/2008 (BY REVENUE): IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN SALES OF RS.12,23,601/- IN ABSENCE OF ANY CLARIFICATION OR SUBMISSION MADE BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN SALES OF RS.12,23,601/-, B Y ADMITTING FRESH EVIDENCE DURING APPELLATE PROCEEDIN GS, IN CONTRAVENTION OF RULE 46A. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN TREATING THE JOB WORK CHAR GES OF RS.45,67,375/- RECEIVED FROM THE SISTER CONCERN M/S . SUMITA CRIMPERS AS BUSINESS INCOME INSTEAD OF INCO ME FROM OTHER SOURCES AS DETERMINED BY THE A.O., WITH OUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT CO- OPERATE WITH THE A.O. IN FURNISHING THE DETAILS DESPITE OPPORTUNITIES GIVEN TO HIM. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT T HE ASSESSEE WAS UNABLE TO SUBSTANTIATE ITS CLAIM IN RE SPECT OF PROPORTIONATE DISALLOWANCE OF EXPENDITURE AMOUNT ING TO RS.10,08,930/-. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF SU NDRY BALANCES WRITTEN OFF TO THE TUNE OF RS.21,600/- REL YING ON THE SUBMISSION PUT FORTH BY THE ASSESSEE DURING APPELLATE PROCEEDINGS AND NOT DURING THE ASSESSMENT PROCEEDINGS THEREBY RESULTING IN CONTRAVENTION OF R ULE 46A. GROUND NO. 1 & 2: 2. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DUR ING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS DE CLARED SALES FIGURE OF ITA NOS.84/MUM/2008 & 6994/MUM/2007 SUMITA SYNTHETICS LTD. 3 RS.1,34,45,538/-.THE ASSESSEE WAS ASKED TO FILE DET AILS OF THE SALES AND LABOUR CHARGES WHICH WERE ACCORDINGLY FURNISHED. ON PERUSAL OF THE DETAILS, IT WAS NOTICED THAT AS PER DETAILS OF SALES AND LAB OUR CHARGES THE AMOUNT WAS RS.1,46,69,139/-. THE ASSESSEE WAS ASKED TO REC ONCILE THE DIFFERENCE OF RS.12,23,601/- WITH DOCUMENTARY EVIDENCE. SINCE THE ASSESSEE DID NOT FILE ANY RECONCILIATION, THEREFORE, THE DIFFERENCE WAS A DDED TO THE INCOME OF THE ASSESSEE. ON APPEAL BEFORE THE LD. CIT(A), IT WAS S UBMITTED THAT DETAILS OF SALES FILED INCLUDED SALE OF PLANT & MACHINERY AND OTHER ITEMS ALSO AND A FRESH RECONCILIATION WAS FILED. 3. THE LD. CIT(A) WAS SATISFIED WITH THE RECONCILIA TION AND DELETED THE ADDITION. 4. BEFORE US, THE LD. DR MAINLY SUBMITTED THAT THE ASSESSEE HAD FAILED TO FILE RECONCILIATION BEFORE THE AO AND, THEREFORE, W HEN THE SAME WAS FILED BEFORE THE CIT(A), THE SAME SHOULD HAVE BEEN CONFRO NTED WITH THE AO. HE FURTHER SUBMITTED THAT THE REVENUE HAS TAKEN A SPEC IFIC GROUND FOR VIOLATION OF RULE 46A. THEREFORE, THE MATTER SHOULD BE REMAND ED. 5. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE REFERRED TO PAGE 11 OF THE PAPER BOOK, WHICH IS COPY OF P & L ACCOUNT, WHERE SALES AND PROCESSING CHARGES HAVE BEEN SHOWN AT RS.1,34,45,53 8/-. DETAILS ARE GIVEN IN SCHEDULE 11 WHICH AT PAGE 15 OF THE PAPER BOOK. HE THEN REFERRED TO SCHEDULE 12 AT PAGE 15 OF THE PAPER BOOK WHICH CLEA RLY SHOWS THAT PROFIT ON SALE OF ASSET WAS ALSO SHOWN AT RS.4,82,196/- WHICH CLEARLY SHOWS THAT DURING THE YEAR SOME ASSET WAS SOLD. THIS RECONCILI ATION WAS FILED BEFORE THE LD. CIT(A). HE POINTED OUT THAT IN FACT THE ASSESSE E HAD APPLIED U/S.154 BY ITA NOS.84/MUM/2008 & 6994/MUM/2007 SUMITA SYNTHETICS LTD. 4 FILING A RECTIFICATION APPLICATION SHOWING THERE TH AT DETAILS OF SALES INCLUDED SALE OF ASSET ALSO BUT THIS WAS REJECTED IN THE ORD ER PASSED ON 17-01-2007, COPY OF WHICH WAS FURNISHED BEFORE US. THEREFORE, T HE AO WAS CLEARLY AWARE OF THIS SITUATION MUCH BEFORE PASSING OF THE APPELL ATE ORDER. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFULL Y, WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. THE DIFFERENCE IN SALES IS BECAUSE OF RECONCILIATION IN WHICH IT IS CLEARLY SH OWN THAT CERTAIN MACHINERIES WERE ALSO SOLD DURING THE YEAR. SINCE THE POSITION WAS ALREADY BEFORE THE AO DURING RECTIFICATION PROCEEDINGS, WE ARE OF THE OPINION THAT NO PURPOSE WOULD BE SERVED IN GIVING ONE MORE FOUND TO THE DEPARTMENT. THEREFORE, WE FIND NOTHING WRONG WITH THE FINDING O F THE LD. CIT(A) AND CONFIRM THE SAME. GROUND NO.3: 7. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DU RING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD RE CEIVED A SUM OF RS.45,67,375/- FROM M/S. SUNITA CRIMPERS LTD., A SI STER CONCERN, ON ACCOUNT OF JOB CHARGES. THE ASSESSEE WAS ASKED TO FILE COMPLETE DETAILS OF SERVICES RENDERED TO M/S. SUNITA CRIMPERS LTD. AND WAS ALSO ASKED TO PRODUCE BOOKS OF ACCOUNT OF THAT COMPANY. AFTER VAR IOUS OPPORTUNITIES, A COPY OF THE LEDGER ACCOUNT OF THE SISTER CONCERN WA S FURNISHED BUT BOOKS OF ACCOUNT WERE NOT PRODUCED. THE AO TREATED IT AS A C REDIT IN THE BOOKS OF THE ASSESSEE COMPANY AND IN THE ABSENSE OF DETAILS ADDE D THIS SUM U/S.68. ITA NOS.84/MUM/2008 & 6994/MUM/2007 SUMITA SYNTHETICS LTD. 5 8. ON APPEAL BEFORE THE LD. CIT(A), IT WAS MAINLY S UBMITTED THAT THE AMOUNT WAS RECEIVED ON ACCOUNT OF JOB CHARGES. HE S UBMITTED THAT EVEN THE SISTER CONCERN, I.E. M/S. SUNITA CRIMPERS LTD., WAS BEING ASSESSED BY THE SAME AO. THEREFORE, THE AO WAS ALREADY IN POSSESSIO N OF ALL THE DETAILS AND HE SHOULD NOT HAVE MADE THE ADDITION. 9. BEFORE US, THE LD. DR RELIED ON THE ORDER OF AO AND, ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFUL LY, WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY THE LD. CIT(A) VIDE PARA 6.3, WHICH IS AS UNDER : 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBMISSIONS. ON PERUSAL OF THE DETAILS IT COULD BE SEEN THAT APPELLANT HAD SHOWN RECEIPT OF A SUM OF RS.45,67,375/- ON ACCOUNT OF JOB WORK FROM SUNITA CRIMPERS AND FURTHER RECEIPTS OF RS.13,06,422/- ON ACCOUNT OF LABOUR CHARGES. IN THE TAX AUDIT REPORT IT HAS BEEN MENTIONED THAT SUNITA CRIMPERS HAD MADE THE TO TAL PAYMENT OF RS.59,29,759/- I.E. A SUM OF RS.58,37,79 9/- SHOULD PAID ON ACCOUNT OF JOB WORK CHARGES AND FURT HER A SUM OF RS.59,962/- ON ACCOUNT OF PURCHASE OF OIL BY SUNITA CRIMPERS. IT IS ALSO A FACT THAT THE ACTIVIT Y OF TEXTURISING OF YARN WAS CONTROLLED BY THE EXCISE AN D THEREFORE RELATED EXCISE RECORDED WERE MAINTAINED. THE PAYMENTS WITH REGARD TO THE JOB CHARGES WERE RECEIV ED FROM THE SISTER CONCERN. IT IS ALSO APPARENT THAT D URING THE SUBJECT YEAR, THE APPELLANT HAD STOPPED ITS OWN PRODUCTION OF TEXTURISED YARN AND HAD CONTINUED DOI NG THE JOB WORK ONLY FOR ITS SISTER CONCERN AND THE EX PENSES ON ACCOUNT OF ELECTRICITY AND OTHER HEADS CONTINUED TO BE INCURRED. FURTHER, THE ASSESSMENT OF THE SISTER CON CERN NAMELY SUNITA CRIMPERS WAS ALSO DONE BY THE SAME AO WHO HAD ACCEPTED THE PAYMENTS MADE TO THE APPELLANT ON ACCOUNT OF JOB CHARGES IN THE CASE OF SUNITA CRI MPERS. IN THE CIRCUMSTANCES, THE AOS ACTION IN TREATING T HE JOB CHARGE RECEIPTS AS NON-GENUINE AND UNEXPLAINED U/S. 68 WAS UNWARRANTED. IN MY OPINION THE NATURE OF THE PAYMENT RECEIVED AND SERVICES RENDERED WAS CLEARLY EXPLAINED AND THERE WAS NO BASIS TO TREAT IT AS UNEXPLAINED CASH CREDIT U/S.68. I AGREE WITH THE AR S ITA NOS.84/MUM/2008 & 6994/MUM/2007 SUMITA SYNTHETICS LTD. 6 ARGUMENT THAT SIMPLY BECAUSE THE SISTER CONCERN HAD SHOWN A LOWER PROFIT CANNOT BE A GROUND FOR TREATIN G THE RECEIPTS FROM THAT CONCERN AS UNEXPLAINED CREDIT. I N CASE THE AO GENUINELY FELT THAT NO SERVICES IN FACT WAS RENDERED, THE RIGHT COURSE OPEN FOR HIM WAS TO TAKE SUITABLE ACTION IN THE CASE OF SUNITA CRIMPERS ONLY . ACCORDINGLY, THE AO IS DIRECTED TO TREAT THE JOB WO RK CHARGES RECEIPTS AT RS.58,37,799/- AS BUSINESS INCO ME AS SHOWN BY THE APPELLANT INSTEAD OF INCOME FROM O THER SOURCES. THIS GROUND OF APPEAL IS THEREFORE ALLOWE D. IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY DECIDE D THE ISSUE. PARTICULARLY WHEN THE SAME AO HAD ACCEPTED THE PAYMENTS MADE BY THE SISTER CONCERN TO THE ASSESSEE, THEN THE SAME COULD NOT HAVE BEEN ADD ED U/S. 68 IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. GROUND NO. 4: 10. DURING ASSESSMENT PROCEEDINGS, THE AO FURTHER D ISALLOWED FROM THE EXPENSES ON ACCOUNT OF JOB CHARGES RECEIVED AMOUNTI NG TO RS.45,67,375/- DISCUSSED ABOVE IN GROUND NO. 3. THE AMOUNT OF RS.1 0,08,930/- WAS CALCULATED BY DIVIDING THE EXPENSES PROPORTIONATELY WITH THE TURNOVER. THE LD. CIT(A) DELETED THE ADDITION ON THE BASIS THAT H E HAS ACCEPTED THE JOB CHARGES. 11. BOTH PARTIES WERE HEARD. SINCE THE ISSUE IN THI S GROUND IS CONSEQUENTIAL TO GROUND NO. 3 ADJUDICATED ABOVE, WH EREIN WE HAVE CONFIRMED THE ORDER OF LD. CIT(A) ACCEPTING THE JOB CHARGES. CONSEQUENTLY, THE DISALLOWANCE OF EXPENSES HAS BEEN RIGHTLY DELETED B Y THE LD. CIT(A) AND ACCORDINGLY WE CONFIRM THE DECISION OF LD. CIT(A). ITA NOS.84/MUM/2008 & 6994/MUM/2007 SUMITA SYNTHETICS LTD. 7 GROUND NO. 5: 12. AFTER HEARING BOTH THE PARTIES, WE FIND THAT SU M OF RS.21,600/- HAS BEEN DISALLOWED BY AO WHICH WAS CLAIMED AS SUNDRY B ALANCES WRITTEN OFF. 13. BEFORE THE LD. CIT(A), IT WAS MAINLY SUBMITTED THAT THE AO HAS NEVER RAISED ANY QUERY REGARD THIS AND THE AMOUNT WAS WRI TTEN OFF ON ACCOUNT OF PETTY BALANCES. 14. BOTH THE PARTIES WERE HEARD. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE LD. CIT(A) HAS CORRECTLY ADJUDICAT ED THIS ISSUE VIDE PARA 8.3, WHICH IS AS UNDER : 8.3 I HAVE CAREFULLY CONSIDERED THE FACTS AND SUBMISSIONS AND HAVE PERUSED THE DETAILS. THE AO HA D NOT GIVEN ANY REASON FOR THE DISALLOWANCE OF THE CL AIM OF RS.21,600/- ON ACCOUNT OF SUNDRY BALANCES WRITTEN O FF. ON PERUSAL OF THE DETAILS OF SUNDRY BALANCES WRITTE N OFF IT IS SEEN THAT THEY ARE PETTY BALANCES DUE FROM A NUM BER OF PARTIES WHICH HAVE BEEN WRITTEN OFF AND IN SOME CASES THE BALANCES HAVE BEEN WRITTEN BACK ALSO. CONSIDERI NG THE FACTS, I AGREE WITH THE CONTENTIONS OF THE AR T HAT THERE WAS NO JUSTIFICATION TO MAKE THE DISALLOWANCE. ACCORDINGLY, THE DISALLOWANCE MADE AT RS.21,600/- I S HEREBY DELETED. THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. THE ORDER OF LD. CIT(A) IS WELL REASONED AND REQUIR ES NO INTERFERENCE. 15. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ITA NO.6994/MUM/2007 (BY ASSESSEE): 16. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUND : ITA NOS.84/MUM/2008 & 6994/MUM/2007 SUMITA SYNTHETICS LTD. 8 1.0 RE: ADDITION MADE UNDER SECTION 68 ON ACCOUNT OF SALE OF TEXTURISED YARN RS.925,459: 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF THE SALE PROCEEDS RECEIVED FROM ITS TWO CUSTOMERS; (NAMELY, RS.474,433 RECEIVED FROM A.S. TEXTILES AND RS.451,026 RECEIVED FROM M/S. MATA TEXTILES), BY TREATING THEM AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961. 17. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DU RING ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD RE CEIVED CHEQUES FROM VARIOUS PARTIES AND ENQUIRIES WERE MADE WITH VARIOU S PARTIES. HE NOTICED THAT CERTAIN CHEQUES RECEIVED HAVE NOT BEEN REFLECT ED IN THE BOOKS OF ACCOUNT. IT WAS EXPLAINED THAT THERE WAS A GENERAL BUSINESS PRACTICE IN TEXTILE BUSINESS TO RECEIVE CHEQUES THROUGH BROKERS . HOWEVER, THE AO WAS NOT CONVINCED AND THEREFORE AN ADDITION OF RS.84,77 ,262/- WAS MADE. 18. BEFORE THE LD. CIT(A), THE SUBMISSIONS MADE BEF ORE AO WERE REITERATED. THE LD. CIT(A) CONFIRMED THE ADDITION OF ONLY RS.9, 25,459/- BECAUSE THIS AMOUNT HAD BEEN CLEARLY CREDITED IN THE BOOKS BUT N O EXPLANATION WAS AVAILABLE. 19. BEFORE US, THE LD. DR STRONGLY SUPPORTED THE OR DER OF AO. 20. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE SUBMITTED THAT A DETAILED REPLY IN THIS REGARD WAS GIVEN VIDE LETTER DATED 11-12-2006, COPY OF WHICH IS AVAILABLE AT PAGES 67 TO 81 OF PAPER BOOK. ITA NOS.84/MUM/2008 & 6994/MUM/2007 SUMITA SYNTHETICS LTD. 9 21. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT THE ASSESSMENT ORDER HAS BEEN PASSED ON 12-12-2006 AND, THEREFORE, OBVIOUSLY THE SUBMISSIONS MADE ON 11-12-2006 COULD NOT HAVE BEEN CONSIDERED BY THE AO. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET A SIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO FOR RE- CONSIDERATION OF THE ISSUE AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 22. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 04TH DAY OF APRIL, 201 2. SD/- SD/- (VIJAY PAL RAO) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 04TH APRIL , 2012. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-XIV,MUMBAI. 4 CIT-4,MUMBAI. 5.DR,J BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUMBAI. ITA NOS.84/MUM/2008 & 6994/MUM/2007 SUMITA SYNTHETICS LTD. 10 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 30-03-12 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 02-04-12 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/A M 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER