ACIT, Noida V. M/s H.P. Peizer India (P) Ltd., Noida

ITA 854/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53366 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-12-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 11-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B R R KUMARDR
• Assessee Lawyers: SANJIV RAI MEHRAAR
• Keywords: Principle of natural justice; Proportionate interest; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'C' BEFORE SHRI R.P. TOLANI,JM & SHRI A N PAHUJA,AM ITA NO.854/DEL/2011 ASSESSMENT YEAR:-2001-02 ASSTT. C.I.T.,CIRCLE, NOIDA G BLOCK, SHOPPING COMPLEX, SECTOR-20,NOIDA V/S M/S H.P. PEIZER INDIA (P) LTD., C-15, SECTOR-57, NOIDA (PAN: AAACH 5498 Q) [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI SANJIV RAI MEHRA,AR REVENUE BY:- SHRI B.R.R. KUMAR,DR DATE OF HEARING 28-12-2011 DATE OF PRONOUNCEMENT 28-12-2011 O R D E R A N PAHUJA: THIS APPEAL FILED ON 11.02.2011 BY THE REVENUE AGAINST AN ORDER DATED 04-11-2010 OF THE LD. CIT (A PPEALS)- GHAZIABAD FOR THE ASSESSMENT YEAR 2001-02, RAISES T HE FOLLOWING GROUNDS:- 1. THAT THE LEARNED CIT (A) HAS ERRED IN LAW ON FAC TS BY ALLOWING RELIEF OF ` ``28,05,039/- TO THE ASSESSEE ON ACCOUNT OF EXCISE DUTY & MODVET, BY TREATING INCREASE IN CLOSING STOCK WOU LD BE THE SAME AS INCREASE IN OPENING STOCK AND CONSEQUENTLY THERE WOULD BE NO EFFECT ON INCOME, INSTEAD OF TREATING I NCREASE IN CLOSING STOCK AMOUNTS TO SUPPRESSION OF CLOSING STO CK AND CONSEQUENTLY THERE WOULD BE INCREASE IN INCOME AS A SSESSED BY ASSESSING OFFICER. 2. THAT THE LEARNED CIT (A) HAS ERRED IN LAW ON FAC TS BY ALLOWING RELIEF OF ` ``8,90,188/- TO THE ASSESSEE ON ACCOUNT OF CLOSING STOCK, BY TREATING INCREASE IN CLOSING STOCK WOULD BE THE SAME AS INCREASE IN OPENING STOCK AND CONSEQUENTLY THERE WOULD BE NO EFFECT ON INCOME, INSTEAD OF TREATING INCREASE I N CLOSING STOCK AMOUNTS TO SUPPRESSION OF CLOSING STOCK AND CONSEQU ENTLY THERE WOULD BE INCREASE IN INCOME AS ASSESSED BY ASSESSIN G OFFICER. 3. THAT THE LEARNED CIT (A) HAS ERRED IN LAW AND FA CTS BY ALLOWING RELIEF OF ` ``17,90,767/- TO THE ASSESSEE ON ACCOUNT OF FINANCI AL ITA NO.854 /DEL/2011 2 2 CHARGES, BY TREATING IT REASONABLE INSTEAD OF CHARG ING INTEREST IN RESPECT OF DEPOSIT BALANCES OF THE PARTIES AS ASSES SED. 4. THAT THE ORDER OF THE LEARNED CIT (A) DESERVES T O BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE TH AT RETURN DECLARING LOSS OF ` ` ` 2,67,95,122/- FILED ON 17 TH OCTOBER, 2001 BY THE ASSESSEE-COMPANY, MANUFACTURING INTERIOR AUTO PARTS, AFTER BEING PRO CESSED ON 26.07.2002 U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 30.10.2002. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THE ASSESSEE H AD SHOWN BASIC EXCISE DUTY, SPECIAL EXCISE CLAIM AND MODVAT RECEIVABLE AT ` ` `2,71,975/-, ` ` `11,82,651/- AND ` ` `13,50,413/- RESPECTIVELY IN THE ASSETS AND DID NOT INCLUDE THESE IN THE VALUE OF CLOSING STOCK. SINCE THE EXCISE DUTY WAS PAID ON P URCHASE OF RAW MATERIAL AND THUS, BECAME PART OF RAW MATERIAL, THE AO ADDED AN AMOUNT OF ` `28,05,039/- TO THE VALUE OF CLOSING STOCK, HAVING RECOURSE TO PROV ISIONS OF SECTION 145A(B) OF THE ACT. 2.1 LIKEWISE, THE AO NOTICED THAT THE ASSESSEE DI D NOT INCLUDE FREIGHT AND CLEARING CHARGES IN THE CLOSING STOCK AND WORK IN PROGRESS OF ` 57,83,814/- AND ` 27,90,815/- RESPECTIVELY AND ACCORDINGLY, THE AO AD DED PROPORTIONATE AMOUNT OF ` `8,90,188/- ON ACCOUNT OF FREIGHT AND CLEARING CHAR GES TO THE VALUE OF CLOSING STOCK. 2.2 THE AO FURTHER NOTICED ON PERUSAL OF PROFIT A ND LOSS ACCOUNT THAT THE ASSESSEE PAID FINANCIAL CHARGES OF ` ` 26,80,428/- ON LOANS TAKEN FROM VARIOUS PARTIES WHILE THE ASSESSEE HAD DEBIT BALANCE OF ` ` 56,85,167/- IN THE NAME OF M/S BAJAJ CARPETS AND ` `1,25,19,900/-IN THE NAME OF M/S HANKOOK PULZER LTD . FROM WHOM NO INTEREST HAD BEEN CHARGED. ACCORDINGLY, TH E AO DISALLOWED PROPORTIONATE INTEREST @15% ON THESE ADVANCES, RESU LTING IN DISALLOWANCE OF ` ` 17,91,767/-. 2.3 IT MAY BE POINTED OUT THAT THERE IS NO DISC USSION IN THE ASSESSMENT ORDER AS TO WHETHER OR NOT ANY QUERY WAS RAISED BY THE AO BEFORE MAKING AFORESAID ITA NO.854 /DEL/2011 3 3 DISALLOWANCES NOR ANY REPLY OF THE ASSESSEE HAS BEE N REFERRED TO IN THE ASSESSMENT ORDER. 3. ON APPEAL, THE ASSESSEE FILED WRITTEN SUBMISSI ONS AS REPRODUCED IN PARA 4 OF THE IMPUGNED ORDER. THOUGH, THE LD. CIT (A) CALLED FOR A REPORT FROM THE AO ON THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE, THE AO DID NOT SUBMIT ANY REPORT. ACCORDINGLY, THE LEARNED CIT (A) WHILE OBSERVING TH AT MATTER IS BEING DECIDED ON MERITS WHERE EVER ADDITIONAL FACTS/EVIDENCES ARE FO UND TO BE ADMISSIBLE AND CONCLUDED ON THE AFORESAID DISALLOWANCES, AS UNDER: - 5. THE MATTER WAS REMANDED BECAUSE MANY OF THE SUB MISSIONS AND DETAILS ON EVIDENCES WERE FILED FOR THE FIRST TIME. HOWEVER, NO REPORT HAS BEEN RECEIVED IN SPITE OF SEVERAL REMIND ERS. THEREFORE, MATTER IS BEING DECIDED ON MERITS WHEREVER ADDITION AL FACTS/EVIDENCES ARE FOUND TO BE ADMISSIBLE. 6. AFTER HAVING CAREFULLY CONSIDERED THE RIVAL CONT ENTIONS AND ALSO THE MATERIAL AVAILABLE OF RECORD, MY CONCLUSIONS/OB SERVATIONS ON THE GROUNDS TAKEN IN APPEAL ARE AS UNDER:- 1) GROUND OF APPEAL NO.1 IS GENERAL IN NATURE. 2) GROUND OF APPEAL NO.2 IS ALLOWABLE BECAUSE ALTHO UGH EXCISE DUTY IS INCLUDIBLE IN VALUATION OF CLOSING S TOCK, BUT INCREASE IN CLOSING STOCK WOULD BE THE SAME AS INCR EASE IN OPENING STOCK. CONSEQUENTLY THERE WOULD BE NO E FFECT ON INCOME. ADDITION OF ` ` 28,05,039/- IS, THEREFORE, DELETED. 3) SIMILARLY ADDITION OF ` ` 8,90,188/- IS ALSO DELETED BECAUSE IT IS VERIFIED FROM THE DETAILS FURNISHED THAT INCL USION OF PROPORTIONATE AMOUNT OF FREIGHT AND FORWARDING CHAR GES WILL HAVE SAME IMPACT ON CLOSING STOCK AS ON OPENIN G STOCK. THUS, GROUND OF APPEAL NO.3 IS ALSO ALLOWED . . 5. REGARDING GROUND OF APPEAL NO.5, I HAVE GONE THR OUGH APPELLANTS EXPLANATION AND FIND THAT THERE IS REAS ONABLE EXPLANATION IN TERMS OF BUSINESS TRANSACTIONS IN RE SPECT OF DEPOSIT BALANCE TOWARDS BAJAJ CARPETS AND M/S H. P. PELZER INDIA PVT. LTD. CORRESPONDINGLY NO INTEREST WAS CHARGEABLE ON THESE BALANCES. CLEARLY THE ASSESSIN G OFFICER DID NOT VERIFY EXPLANATION FURNISHED BY ASS ESSEE DURING THE ASSESSMENT PROCEEDING 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF LEARNED CIT (A). THE LD. WHILE CARRYING US THROUGH THE IMPUGNED ORDER ITA NO.854 /DEL/2011 4 4 CONTENDED THAT THE LD. CIT (A) HAVE IGNORED THE PRO VISIONS OF SECTION 145A OF THE ACT NOR ANALYSED THE FACTS OF THE CASE AND NOR EVE N RECORDED SPECIFIC FINDINGS ON THE ISSUES RAISED BY THE AO. ON THE OTHER HAND, T HE LD. AR ON BEHALF OF THE ASSESSEE WHILE CARRYING US THROUGH THE WRITTEN SUBM ISSIONS FILED BEFORE THE LD. CIT(A) AS MENTIONED IN PARA 4 OF THE IMPUGNED ORDER ARGUED THAT THE LD. CIT(A) DID NOT PASS A SPEAKING ORDER IN THE LIGHT OF THEIR SUBMISSIONS. 5. WE HAVE HEARD BOTH /THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. WE FIND THAT NEITHER THE AO NOR THE LD. CIT( A) ANALYSED THE FACTS OF THE CASE IN THE LIGHT OF SUBMISSIONS MADE BY THE ASSESS EE BEFORE THEM NOR THE LD. DR OR LD. AR PLACED BEFORE US ANY OF THE REPLY FILE D BEFORE THE AO OR THE LD. CIT(A) ON THE AFORESAID ISSUES. A MERE GLANCE AT TH E IMPUGNED ORDER REVEALS THAT THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTICE, NAMELY, THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUT HORITY MUST PASS REASONED ORDER, WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHORITY TO THE ISSUES/POINTS RAISED BEF ORE IT. THE APPLICATION OF MIND TO THE MATERIAL FACTS AND THE A RGUMENTS SHOULD MANIFEST ITSELF IN THE ORDER. SECTION 250(6) OF T HE ACT MANDATES THAT THE ORDER OF THE CIT(A) WHILE DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POINTS FOR DETERMINATIO N, THE DECISION THEREON AND THE REASONS FOR THE DECISION. THE REQUI REMENT OF RECORDING OF REASONS AND COMMUNICATION THEREOF BY T HE QUASI- JUDICIAL AUTHORITIES HAS BEEN READ AS AN INTEGRAL P ART OF THE CONCEPT OF FAIR PROCEDURE AND IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVANCE OF THE RULE OF LAW. IT INTRODUCES CLARIT Y, CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERAT IONS AND MINIMIZES ARBITRARINESS IN THE DECISION-MAKING PROC ESS. HONBLE JURISDICTIONAL HIGH COURT IN THEIR DECISION IN VODA FONE ESSAR LTD. VS. DRP,196 TAXMAN423(DELHI) HELD THAT WHEN A QUASI JUDICIAL AUTHORITY DEALS WITH A LIS, IT IS OBLIGATORY ON ITS PART TO ASCRIBE COGENT AND GERMAN E REASONS AS THE SAME IS THE HEART AND SOUL OF THE MATTER AND FURTHER, THE SAME ALSO FACILITATES APPRECIATION WHEN THE ORDER IS CALLED IN QUESTION BEFORE THE SUP ERIOR FORUM. WE MAY POINT OUT THAT A DECISION DOES NOT MERELY MEAN THE CO NCLUSION. IT ITA NO.854 /DEL/2011 5 5 EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS. STATE OF PUNJAB,(199 5)1SCC 760(SC)]. MOREOVER, AS MENTIONED IN THE IMPUGNED O RDER, THE ADDITIONAL EVIDENCE/DOCUMENTS FILED BEFORE THE LEAR NED CIT(A) HAVE BEEN ADMITTED WITHOUT RECORDING ANY FINDINGS AS TO WHETHER OR NOT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE SAID EVIDENCE/DOCUMENTS BEFORE THE AO AND WITHOUT R ECORDING ANY REASONS IN TERMS OF RULE 46A(2) OF THE IT RULES,196 2. AS ALREADY OBSERVED, THE IMPUGNED ORDER SUFFERS FROM LACK OF R EASONING AND IS NOT A SPEAKING ORDER. IN VIEW OF THE FOREGOING, E SPECIALLY WHEN THE LD. CIT(A) HAVE NOT PASSED A SPEAKING ORDER ON VAR IOUS ISSUES RAISED IN THE APPEAL BEFORE HIM NOR FOLLOWED THE PR OCEDURE LAID DOWN UNDER RULE 46A OF THE IT RULES,1962, WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A ) AND RESTORE THE MATTER TO HIS FILE FOR DECIDING THE ISSUES RAISED IN THE AFORESAID GROUND NOS. 1 TO 3 BEFORE US , AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES . NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL, THE LEARNED CIT(A ) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MA NDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT. WITH THESE OB SERVATIONS, GROUND NOS. 1 TO 3 IN THE APPEAL ARE DISPOSED OF. 6. GROUND NO. 4 IN THE APPEAL BEING MERE PRAYER N OR ANY SUBMISSIONS HAVING BEEN MADE BEFORE US ON THIS GROU ND, DOES NOT REQUIRE ANY SEPARATE ADJUDICATION AND IS, THEREFORE , DISMISSED. 7. NO OTHER SUBMISSION OR ARGUMENT WAS MADE BEF ORE US. 8. IN RESULT, APPEAL IS ALLOWED BUT FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- (R.P. TOLANI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER ITA NO.854 /DEL/2011 6 6 NS COPY OF THE ORDER FORWARDED TO: 1. M/S H.P. PEIZER INDIA (P) LTD., C-15, SECTOR-57, NOIDA. 2. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE, NOIDA . 3. CIT CONCERNED. 4. CIT(A), NOIDA. 5. DR, ITAT, DELHI BENCH-C, NEW DELHI 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, NEW DELHI