IMRAN TRADING ESTABLISHMENT, NAVI MUMBAI V. ASST CIT 19(3), MUMBAI

ITA 896/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84561 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 02-12-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SACCHIDANAND DUBEY
• Assessee Lawyers: MINHAZALI N LADIWALA
• Keywords: Business income; Rule of consistency
• Section: 147; 263; 143(3); 80HHC

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,M UMBAI - I BENCH. , , BEFORE S/SH. RAJENDRA, ACCOUNTANT MEMB ER & VIVEK VARMA, JUDICIAL MEMBER /. ITA NO.896/MUM/2013, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-1999-2000 M/S IMRAN TRADING ESTABLISHMENT, ONION HOUSE, PLOT NO. 13, A.P.M.YARD, TURBHE, NAVI MUMBAI, MAHARASHTRA-400613 # # # # . . . /PAN:AAACI5375F V/S. ACIT CIRCLE 19(3), 3RD FLOOR,PIRAMAL CHAMBERS, PAREL, MUMBAI -400012 ( #$ / APPELLANT) ( %&#$ / RESPONDENT) !'( !'( !'( !'( ) ) ) ) / ASSESSEE BY : SHRI MINHAZALI N. LADIWALA * ) / REVENUE BY : SHRI SACCHIDANAND DUBEY ! ! ! ! * ** * (+ (+ (+ (+ / DATE OF HEARING : 02-12-2014 ,-' * (+ / DATE OF PRONOUNCEMENT : 26-12-2014 ! ! ! ! , 1961 * ** * 254 )1 ( (.( (.( (.( (.( / / / / ORDER U/S..254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! : CHALLENGING THE ORDER DATED 03.12.2012 OF THE CIT(A )-18,MUMBAI THE ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX APPEAL HAS B EEN ERRED IN CONFIRMING THE DEDUCTION @ RS NIL UNDER SECTION 80HHC IN THE CASE OF THE APPELLAN T AGAINST THE CLAIM OF RS.8,36,830/- (RS. EIGHT LAC THIRTY SIX THOUSAND EIGHT HUNDRED THIRTY ONLY) BY THE APPELLANT FOR THE ABOVE ASSESSMENT YEAR. 2. THE LEARNED COMMISSIONER OF INCOME TAX APPEAL HAS A LSO ERRED IN DISMISSING THE GROUND OF APPEAL IN RESPECT OF INTEREST CHARGED U/S.. 234C OF THE INCOME TAX ACT, 1961. 3. YOUR APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTER, SUBSTITUTE, OR DELETE ANY OR ALL OF THE FOREGOING GROUNDS OF APPEAL BEFORE OR DURING THE HEARING OF T HE APPEAL. ASSESSEE-FIRM,ENGAGED IN THE BUSINESS OF EXPORT AND RE-SELLING OF ONION,FILED ITS RETURN ON INCOME ON 31.12.1999 DECLARING INCOME OF RS.34.47 LAKHS.AS SESSING OFFICER(AO)FINALISED THE ASSESSMENT ON 19.03.2002 DETERMINING THE INCOME OF THE ASSESSE E AT RS.35.28 LAKHS. 2. DURING THE ORIGINAL ASSESSMENT PROCEEDINGS,THE AO N OTICED THAT THE ASSESSEE HAD MADE A CLAIM U/S.80HHC OF THE ACT AMOUNTING TO RS.8,36,8301/-.WH ILE COMPLETING THE ASSESSMENT THE AO MADE CERTAIN ADDITIONS TO THE INCOME OF THE ASSESSE E,BUT ACCEPTED THE CLAIM MADE U/S.80HHC.AN APPEAL WAS FILED BEFORE THE FIRST APPELLATE AUTHORI TY(FAA),WHO DELETED THAT ADDITIONS MADE BY THE AO. AS A RESULT,THE INCOME WAS REDUCED TO RS. 3 4,52,400/- WHILE GIVING EFFECT TO THE ORDER OF THE FAA. LATER ON,IT WAS FOUND THAT THE ASSESSEE HA D CLAIMED AN AMOUNT OF RS.70,000/- PAID AS PENALTY TO THE CUSTOM AUTHORITIES WHICH WAS EXPRESS LY AN INADMISSIBLE DEDUCTION U/S.37 OF THE ACT.THE AO REOPENED THE ASSESSMENT U/S.147,AFTER RE CORDING REASONS FOR THE SAME.NOTICE U/S..148 WAS ISSUED AND THE ASSESSMENT WAS COMPLETED U/S. 14 3(3) R/W SEC. 147 OF THE ACT ON 30.03.2005 BY MAKING AN ADDITION OF RS. 70, 000/-. A PENALTY O F RS. 2,45,000/- WAS ALSO LEVIED. SUBSEQUENTLY, THE CIT- 19, MUMBAI FOUND THAT THE DE DUCTION U/S. 80HHC WAS WRONGLY COMPUTED AND WORKED OUT THE DEDUCTION U/S.80HHC AT RS. 65,93 2/- AS AGAINST RS. 8,36,830/- CLAIMED BY THE ASSESSEE.HE ACCORDINGLY PASSED AN ORDER U/S. 263 OF THE ACT ON 23.03.2007. AN ORDER U/S. 143(3) R/W SEC. 263 DATED 28.08.2007 WAS PASSED TO GIVE EF FECT TO THE CIT'S ORDER U/S. 263 OF THE ACT. 2 ITA NO. 896/M/2013 M/S IMRAN TRADING ESTABLISHMENT HOWEVER,THE FAA DELETED THE ADDITIONS MADE,VIDE HIS ORDER DATED 27.01.2009.HIS ORDER WAS CONTESTED BY THE DEPARTMENT BEFORE THE TRIBUNAL.THE TRIBUNAL,VIDE THEIR ORDER DATED 10.03.2010, RESTORED THE MATTER BACK TO THE AO FOR EXAMINING TH E WORKING OF DEDUCTION U/S. 80HHC AND TO ALLOW THE DEDUCTION AFTER VERIFICATION OF FACTS AND EXAMINING THE ASSESSEE'S CONTENTION. 3. AS PER THE DIRECTIONS OF THE TRIBUNAL, THE AO GAVE AN OPPORTUNITY TO ASSESSEE AND ASKED IT TO SUBMIT THE DETAILS TO VERIFY THE CLAIM OF THE DEDUC TION U/S.80HHC.ON THE BASIS OF THE SUBMISSIONS OF THE ASSESSEE,THE AO COMPUTED THE DEDUCTION U/S. 80HHC.HE COMPUTED THE TOTAL SALES BY BIFURCATING LOCAL SALES AND EXPORT SALES ON TOTAL C OST OF GOODS SOLD IN THE YEAR INCLUDING THE OPENING STOCK AND PURCHASES AND REDUCED BY THE CLOS ING STOCK. ON THIS BASIS, THE RATIO OF LOCAL SALES TO THE COST OF GOODS FOR THE PURPOSE WAS COMP UTED AT RS.2,54,50,200/-AS AGAINST THE WORKING OF RS.2,05,00,346/- MADE BY THE ASSESSEE.THE AO SPE CIFICALLY ASKED THE ASSESSEE,VIDE LETTER DATED 30.08.2010,TO SUBSTANTIATE THE DIRECT EXPENSES OF R S. 2.71 CRORES WHICH INCLUDED THE COST OF GOODS SOLD.AS PER THE AO,THE ASSESSEE FAILED TO SUBMIT AN Y DETAILS REGARDING THE QUANTITY AND THE AMOUNT OF GOODS SOLD FORMING THE BASIS FOR SUBSTANTIATING ITS CLAIM ON THE DIRECT COST OF GOODS.HE COMPUTED THE DEDUCTION ON THE BASIS OF AVAILABLE MA TERIAL AND HELD THAT THE BUSINESS OF EXPORT HAD RESULTED IN LOSS THAT THE ASSESSEE WAS NOT ENTITLED FOR ANY DEDUCTION U/S. 80HHC OF THE ACT. THE ASSESSEE AGAIN APPROACHED THE FAA AND SUBMITTED BEFORE HIM THAT THE AO HAD ERRED IN CONSIDERING THE VALUE OF THE PURCHASES BEING THE CO ST OF GOODS SOLD FOR THE PURPOSE OF EXPORT AND LOCAL SALES ON THE BASIS OF PERCENTAGE AND RATIOS W ORKED OUT ON THE VALUE OF EXPORTS AND LOCAL SALES INSTEAD OF QUANTITY EXPORTED AND SOLD LOCALLY,THAT THE ALLOCATIONS OF THE COST OF GOODS SOLD SHOULD ON THE BASIS OF THE QUANTITY SOLD AND NOT ON THE BA SIS OF THE VALUE OF THE SALES.THE ASSESSEE WORKED OUT THE COST OF PURCHASE BEING THE COST OF GOODS SO LD FOR EXPORT AND LOCAL SALES ON THE BASIS OF AVERAGE COST OF PURCHASES ALLOCATING ON THE BASIS O F QUANTITY SOLD FOR EXPORTS AND LOCAL SALES.IT WAS CLAIMED THAT THE SAID METHOD OF WORKING WAS FOLLOWE D BY THE ASSESSEE FOR LAST MANY YEARS AND ALSO THE SAME HAS BEEN ACCEPTED BY THE DEPARTMENT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ORDER OF THE AO,THE FAA HELD THAT THE AO HAD GIVEN SPECIFIC OPPORTUNITY TO THE ASSESSEE T O SUBMIT COMPLETE DETAILS OF WORKING,THAT EXCEPT ONE LETTER DATED 30.08.2010 IT HAD NOT SUBMI TTED ANY FURTHER DETAILS,THAT ONUS WAS ON THE ASSESSEE TO SUBMIT COMPLETE DETAILS BEFORE AO BEFOR E CLAIMING ANY DEDUCTION,THAT THE ASSESSEE HAD FAILED TO SUBMIT DETAILS,THAT EVEN DURING THE A PPELLATE PROCEEDINGS IT HAD FAILED TO SUBMIT ANY FURTHER EVIDENCE TO DISPROVE THE FINDING OF THE AO, THAT THE AO HAD RIGHTLY TAKEN THE VALUE OF GOODS AGAINST THE QUANTITY OF GOODS CLAIMED BY THE ASSESSEE THAT HE HAD RIGHTLY DISTRIBUTED THE DIRECT EXPENSES BETWEEN THE EXPORT AND LOCAL SALES AND HELD THAT THE BUSINESS OF EXPORT HAVE RESULTED IN A LOSS, THAT THE ASSESSEE WAS NOT ENTIT LED FOR DEDUCTION U/S. 80HHC OF THE ACT.HE UPHELD THE ORDER OF THE AO. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)STATED T HAT THE ASSESSEE WAS FOLLOWING THE SAME METHOD REGULARLY,THAT THE AO HAD ALLOWED THE DEDUCT ION IN EARLIER YEARS,THAT ALL THE DETAILS WERE FILED BY THE ASSESSEE.HE REFERRED TO THE PAGES 1-16 OF THE PAPER BOOK.DEPARTMENTAL REPRESENTATIVE(DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. WE FIND THAT THE AO HAS DISALLOWED THE CLAIM MADE B Y THE ASSESSEE ON THE GROUND THAT IT HAD NOT FILED DETAILS SUPPORTING THE CLAIM.IT IS A FACT THA T THE ASSESSEE HAS GIVEN WORKING OF THE DEDUCTION AT PAGE NO 1-3 OF THE PAPER BOOK.IN THE AY.1998-99 THE ASSESSEE HAD CLAIMED THE DEDUCTION ON THE IDENTICAL BASIS AND THE AO HAD ACCEPTED IT WHILE PA SSING ORDER U/S.143(3)OF THE ACT.HE HAS NOT MENTIONED THE DISTINGUISHING FACTS OF THE YEAR UNDE R CONSIDERATION AS COMPARED TO THE FACTS OF THE AY.1998-99 FOR REJECTING THE CLAIM.IN OUR OPINION T HE RULE OF CONSISTENCY SHOULD BE FOLLOWED UNTIL AND UNLESS FACTS THAT COULD DIFFERENTIATE TWO ASSES SMENTS ARE CLEARLY BROUGHT OUT ON RECORD.IT IS ALSO TO BE REMEMBERED THAT THE ASSESSEE HAD CLAIM ED THE DEDUCTION ON THE BASIS OF AUDIT REPORT. THE AO SHOULD GIVE REASONS FOR NOT ACCEPTING THE AU DITORS REPORT.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE,MATT ER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FO R 3 ITA NO. 896/M/2013 M/S IMRAN TRADING ESTABLISHMENT FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASO NABLE OPPORTUNITY TO THE ASSESSEE AND PASS A SPEAKING ORDER AFTER CONSIDERING THE TAX AUDIT REPO RT AND THE ASSESSMENT ORDER FOR THE AY.1998- 99.GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE SECOND GROUND OF APPEAL ABOUT CHARGING INTEREST U/S. 234C OF THE ACT IN RESPECT OF NON- PAYMENT AND/OR SHORT PAYMENT OF INSTALLMENTS OF THE ADVANCE INCOME TAX PAID ON THE INCOME DECLARED UNDER THE SURVEY ACTION.SINCE THE GROUND O F APPEAL IS OF CONSEQUENTIAL NATURE, HENCE, SAME IS ALSO ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT,THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSE. 1(2 !'( 3 4 45* 678 9 * ( :; . ORDER PRONOUNCED IN THE OPEN COURT ON 26TH, DECEMBER 2014 . / * ,-' < =! 26 FNLA FNLA FNLA FNLA , 201 4 - * . > SD/- SD/- ( / VIVEK VARMA) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, =! /DATE: 26.12 . 2014. / / / / * ** * %( %( %( %( ? '( ? '( ? '( ? '( / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR I BENCH, ITAT, MUMBAI / B. %(! , . . . 6. GUARD FILE/ . 1 & ( & ( & ( & ( %( %(%( %( //TRUE COPY// /! / BY ORDER, 6 / : DY./ASST. REGISTRAR , /ITAT, MUMBAI