The ACIT,(OSD)Circle-8, Ahmedabad V. Shree Rama Multi Tech Pvt.Ltd., Ahmedabad

ITA 898/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76726 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 25-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Bogus purchase; Depreciation; Additional evidence; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NOS.898 & 899/AHD/2011 A.YS. 2003-04 & 2004-05 ACIT (OSD) CIRCLE-8, AHMEDABAD. VS SHREE RAMA MULTI TECH LIMITED RAM NIVAS NO.1, KHANPUR, AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ALOK JOHRI, CIT-D.R., ASSESSEE(S) BY : MS. URVASHI SHODHAN, A.R. / DATE OF HEARING : 08/05/2014 / DATE OF PRONOUNCEMENT: 16/05/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THESE TWO APPEALS HAVE BEEN FILED BY THE REVENUE AR ISING FROM THE ORDER OF LEARNED CIT(A), DATED 28.01.2011. FOR BOTH THE YEARS, REVENUE HAS CHALLENGED THE DELETION OF PENALTY LEVIED U/S.2 71(1)(C) OF RS.2,89,39,072/- AND RS.1,77,74,855/-, RESPECTIVELY , FOR A.Y. 2003-04 AND A.Y. 2004-05. 2. WE HAVE CAREFULLY PERUSED THE CORRESPONDING ASSE SSMENT ORDER OF A.Y.2003-04 PASSED U/S.143(3) DATED 17.03.2006 AND THE PENALTY ORDER PASSED U/S.271(1)(C) DATED 29.03.2010. WE HAVE ALSO EXAMINED THE FACTS OF A.Y.2004-05 AS MENTIONED IN THE ASSESSMENT ORDER PASSED U/S.143(3) DATED 27.12.2006 AND THE PENALTY ORDER U/S.271(1)(C ) DATED 29.03.2010. THE ASSESSEE IS A LIMITED COMPANY AND ENGAGED IN TH E BUSINESS OF MANUFACTURING OF MULTI LAYER TUBE PRINTED PRODUCTS, PRINTED PRODUCTS, ITA NOS.898 & 899/AHD/2011 ACIT (OSD), AHMEDABAD VS. SHREE RAMA MULTI TECH LIM ITED. A.YS.2003-04 & 2004-05 - 2 - LABELS, STICKERS, PLASTIC PRODUCTS AND PACKING MATE RIAL, ETC. FOR A.Y.2003- 04, LEARNED CIT(A) HAS CONFIRMED THE FOLLOWING ADDI TIONS: DEPRECIATION RS.56368033 BAD DEBTS RS.12759710 BOGUS PURCHASES RS. 7704308 PUBLIC ISSUE EXPENSES RS. 1908282 TOTAL RS.78740333 2.1 FOR A.Y. 2004-05, LEARNED CIT(A) HAS CONFIRMED THE FOLLOWING ADDITIONS: DEPRECIATION RS.41143665 BOGUS PURCHASES RS. 7489107 PUBLIC ISSUE EXPENSES RS. 913861 TOTAL RS.49546633 3. BEFORE US A CONSOLIDATED ORDER OF ITAT C BENCH AHMEDABAD PRONOUNCED FOR THE A.YS.1999-00, 2002-03, 2003-04, 2004-05, 2005-06 IS PLACED DATED 06.01.2012. FOR A.Y. 2003-04 IN RES PECT OF DISALLOWANCE OF DEPRECIATION THE TRIBUNAL IN ITA NOS.1510 & 1890 /AHD/2009 HAS CONCLUDED THIS ISSUE VIDE PARAGRAPH 41 AS UNDER: 41. ON GROUND NO.3, ASSESSEE CHALLENGED THE DISAL LOWANCE OF DEPRECIATION ON TANGIBLE ASSETS. THE REVENUE ON GROUND NO.1 CH ALLENGED THE DELETION OF DISALLOWANCE OF DEPRECIATION ON ASSETS. IT IS STATED THAT ISSUE IS SAME AS IS CONSIDERED IN ASSESSMENT YEAR 2002-03 AND THE LEARN ED CIT(A) FOLLOWED HIS ORDER FOR ASSESSMENT YEAR 2002-03 AND DIRECTED THE AO TO ALLOW DEPRECIATION ON SOFTWARE PURCHASED I.E. INTANGIBLE ASSETS AND DISALLOWED THE CLAIM OF DEPRECIATION ON TANGIBLE ASSETS, IT IS STATED BY BO TH THE PARTIES THAT ORDER OF THE TRIBUNAL IN ASSESSMENT YEAR 2002-03 ABOVE MAY B E FOLLOWED. IN ASSESSMENT YEAR 2002-03, WE HAVE DECIDED THE CROSS APPEALS IN ITA NO.298/AHD/2006 AND ITA NO.338/AHD/2006 AND THE DEP ARTMENTAL APPEAL HAS BEEN DISMISSED CONFIRMING DEPRECIATION ON SOFTWARE I.E. INTANGIBLE ASSETS AND RESTORED THE ISSUE OF CLAIM OF DEPRECIATION ON TANG IBLE ASSETS TO THE FILE OF THE AO. BY FOLLOWING THE ORDER OF THE TRIBUNAL FOR ASSE SSMENT YEAR 2002-03 ABOVE, THE DEPARTMENTAL APPEAL IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS SIMILARLY ALLOWED FOR STATISTICAL PURPOSES ON THIS ISSUE. 4. LIKEWISE FOR A.Y.2003-04 IN PARAGRAPH 40 THIS IS SUE OF BAD DEBT WAS DECIDED IN ASSESSEES FAVOUR AS UNDER: ITA NOS.898 & 899/AHD/2011 ACIT (OSD), AHMEDABAD VS. SHREE RAMA MULTI TECH LIM ITED. A.YS.2003-04 & 2004-05 - 3 - 40. THE ASSESSEE ON GROUND NOS. 1 AND 2, CHAL LENGED THE DISALLOWANCE OF BAD DEBTS OF RS.1,27,59,170/- U/S 36(1)(III) OF THE IT ACT. IT IS NOTED IN THE IMPUGNED ORDER THAT SIMILAR CLAIM WAS MADE IN RESPE CT OF PARAS TRADING CORPORATION IN ASSESSMENT YEAR 2002-03 IN WHICH ADD ITION WAS UPHELD BY THE LEARNED CIT(A). SINCE THE ASSESSEE COULD NOT PRODUC E ANY PROOF REGARDING EFFORTS MADE FOR RECOVERY OF THE DEBTS, CLAIM O F BAD DEBTS WAS DISALLOWED FOLLOWING THE OBSERVATION IN ASSESSM ENT YEAR 2002-03. WE FIND THAT IN ASSESSMENT YEAR 2002-03 THE SIMILAR CLAIM OF THE ASSESSEE IN ITA NO.338/AHD/2006 ABOVE HAS BEEN ALLOWED BY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T. R. F . LTD. (SUPRA). BY FOLLOWING THE SAME DECISION, WE SET ASIDE THE ORDERS OF THE A UTHORITIES BELOW AND ALLOW THE CLAIM OF THE ASSESSEE. GROUND NOS. 1 AND 2 OF T HE APPEAL OF THE ASSESSEE ARE ALLOWED. 5. FOR A.Y. 2003-04, THE ISSUE OF PUBLIC ISSUE EXP ENSES THE TRIBUNAL HAS DECIDED THE SAME IN PARAGRAPH 46 & 47 AS UNDER: 46. O N GROUND NO.5, THE ASSESSEE CHALLENGED THE DISALLOW ANCE OF RS.9,94,421 /- U/S 35D OF THE IT ACT AND ON GROUND NO.6 CHALLENGED THE DISALLOWANCE OF RS.9,13,861/- IN RESPECT OF PUBLIC ISSUE EXPENSES. THE AO FOLLOWING THE ORDERS OF EARLIER YEARS MADE THE DISA LLOWANCES. THE AO ALSO NOTED THAT IN ASSESSMENT YEAR 2000-01 THE ISSUE HAS BEEN SET ASIDE BUT THERE IS NOTHING ON RECORD TO JUSTIFY THE DEDUCTION. THE LEA RNED CIT(A) FOLLOWING THE ORDER OF LEARNED CIT(A) FOR ASSESSMENT 2000-01 AND NOTING THAT APPEAL IS PENDING BEFORE THE TRIBUNAL CONFIRMED THE ADDITION AND NOTED THAT IF FAVOURABLE DECISION IS RECEIVED FROM ITAT FOR THE E ARLIER YEAR, THE AO SHALL FOLLOW THE SAME ORDER. 47. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET SUBMITTED THAT ITAT AHMEDABAD BENCH IN THE CASE OF THE SAME ASSESSEE IN ASSESSMENT YEAR 2001- 02 IN ITA NO. 667/AHD/2005 FOLLOWING THE ORDER OF T HE TRIBUNAL FOR ASSESSMENT YEAR 2000-01 RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR RECONSIDERATION. COPY OF THE ORDER DATED 21-10-2011 IS FILED ON RECORD. THE SAME IS NOT DISPUTED BY THE LEARNED DR. BY FOLLOWIN G THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2001-02 (SUPRA) ON THE ISSUE OF DEDUCTION U/S 35D, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BEL OW AND RESTORE THE ISSUE BACK TO THE FILE OF THE AO FOR RECONSIDERATION. AS REGARDS FOR PUBLIC ISSUE, THE AO SHALL FOLLOW THE ORDER OF THE TRIBUNAL FOR ASSES SMENT YEAR 2000-01 AS IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE. IN THE RESULT, GROUND NO.5 AND 6 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 6. PENALTY HAS ALSO BEEN LEVIED IN RESPECT OF BOGU S PURCHASES HOWEVER THAT ISSUE HAS ALSO BEEN DECIDED IN ASSESSE ES FAVOUR FROM PARAGRAPHS 42 TO 45, RELEVANT PORTION REPRODUCED BE LOW: ITA NOS.898 & 899/AHD/2011 ACIT (OSD), AHMEDABAD VS. SHREE RAMA MULTI TECH LIM ITED. A.YS.2003-04 & 2004-05 - 4 - 42. O N GROUND NO.4, THE ASSESSEE CHALLENGED THE DIRECTIO N OF THE LEARNED CIT(A) IN RESTRICTING THE DISALLOWANCE TO THE EXTEN T OF 25% ON DISALLOWANCE OF RS.3,08,17,231/- MADE BY THE AO ON ACCOUNT OF NON-G ENUINE PURCHASES. THE REVENUE HAS RAISED GROUND NO.4 CHALLENGING THE DELE TION OF ADDITION AND GRANTING PART RELIEF OF RS.2,31,12,921 /- ON THE SAME ISSUE OF BOGUS PURCHASES .. 45. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND JUSTIFICATION EVEN TO SUSTAIN PART ADDITION. IT IS NOT IN DISPUTE THAT SEARCH WAS CARRIED OUT BY CENTRAL EXCISE DEPARTMENT PRIOR TO START THE FIN ANCIAL YEAR IN APPEAL. THE FINANCIAL YEAR STARTS FROM 01-04-2002 AND WOULD END ON 31-03-2003 FOR ASSESSMENT YEAR 2003-04 UNDER APPEAL. THE SEARCH IS CONDUCTED ON 15-02- 2002; THEREFORE, THERE IS NO QUESTION OF RECOVERY O F ANY INCRIMINATING MATERIAL AGAINST THE ASSESSEE IN THE SEARCH FOR THE ASSESSME NT YEAR 2003-04. THE AUTHORITIES BELOW MERELY ON GOING THROUGH THE FINDI NGS IN EARLIER YEAR FOLLOWED THE ORDER FOR HOLDING BOGUS PURCHASES MADE BY THE ASSESSEE. THE ASSESSEE EXPLAINED BEFORE THE LEARNED CIT(A) THAT N O SUFFICIENT OPPORTUNITY WAS GIVEN TO PRODUCE THE DOCUMENTS ON THIS ISSUE, T HEREFORE, ADDITIONAL DOCUMENTS WERE FILED AT THE APPELLATE STAGE ON WHIC H REMAND REPORT FROM THE AO WAS CALLED FOR, BUT THE AO HAS NOT GIVEN ANY FIN DING AGAINST THE ASSESSEE BASED ON THE ADDITIONAL EVIDENCES. THE CONCERN PART IES HAVE FURNISHED DETAILS AND ALSO FILED CONFIRMATIONS EVEN AS PER FINDINGS O F THE AO. NOTHING IS BROUGHT ON RECORD IF ANY ADVERSE FINDINGS WERE GIVE N BY CENTRAL EXCISE AUTHORITIES AGAINST THE ASSESSEE FOR ASSESSMENT YEA R UNDER APPEAL. THE LEARNED CIT(A) IN SUBSTANCE ACCEPTED THE CLAIM OF T HE ASSESSEE BUT MERELY ON PRESUMPTION AND ASSUMPTION OBSERVED THAT IT IS LIKELY THAT THE ASSESSEE WOULD CONTINUE TO RECEIVE BILLS WITHOUT ACTUAL DELIVERY. THE FINDINGS OF LEARNED CIT(A) HAVE NO BASIS AND HAVE NOT BEEN SUPPORTED BY ANY EVIDENCE OR MATERIAL ON RECORD. IN THE ABSENCE OF ANY MATERIAL ON RECORD AGAINST THE ASSESSEE, WE DO NOT FIND ANY JUSTIFICATION TO SUSTA IN EVEN PART ADDITION AGAINST THE ASSESSEE. WE ACCORDINGLY, SET ASIDE THE ORDER O F THE LEARNED CIT(A) IN CONFIRMING PART ADDITION AND SUSTAIN THE ORDER IN D ELETING THE ADDITION. IN THE RESULT, GROUND NO.4 OF THE APPEAL OF THE ASSESSEE I S ALLOWED AND THE GROUND NO.4 OF THE APPEAL OF THE REVENUE IS DISMISSED. 7. IN VIEW OF THE ABOVE PARAGRAPHS REPRODUCED FROM THE ORDER OF THE TRIBUNAL FOR A.Y. 2003-04 PRONOUNCED WHILE DECIDING THE QUANTUM ADDITIONS WE HAVE NOTED THAT EITHER THE IMPUGNED AD DITIONS ON WHICH THE PENALTY IN QUESTION HAS BEEN LEVIED WERE RESTORED B ACK FOR RECONSIDERATION OR DECIDED IN ASSESSEES FAVOUR. LI KEWISE, FOR A.Y.2004- 05 IN ITA NO.1511 & 1982/AHD/2009 VIDE PARAGRAPH 70 PAGE 51 THE ISSUE OF DISALLOWANCE OF DEPRECIATION ON TANGIBLE A SSETS WAS RESTORED BACK TO THE FILE OF THE AO TO BE DIRECTED AS PER TH E DIRECTIONS GIVEN IN ITA NOS.898 & 899/AHD/2011 ACIT (OSD), AHMEDABAD VS. SHREE RAMA MULTI TECH LIM ITED. A.YS.2003-04 & 2004-05 - 5 - A.Y. 2002-03. FURTHER, WE HAVE NOTED THAT THE ISSUE OF BOGUS PURCHASES HAS ALSO BEEN DECIDED BY THE TRIBUNAL IN A.Y. 2004- 05 AT PAGE 50 PARAGRAPH 61/68 IN FAVOUR OF THE ASSESSEE FOLLOWING AN ORDER OF THE TRIBUNAL FOR A.Y. 2003-04. THE ENTIRE DISALLOWANCE WAS DELETED. IN RESPECT OF THIRD ADDITION ON WHICH THE PENALTY IN Q UESTION U/S.271(1)(C) HAS BEEN LEVIED PERTAINED TO PUBLIC ISSUE EXPENSES , WHICH HAS ALSO BEEN DECIDED IN A.Y.2004-05 BY THE TRIBUNAL (SUPRA) AT P AGE 50 VIDE PARAGRAPH 69 BY HOLDING THAT A VIEW ALREADY TAKEN I N A.Y. 2003-04 IN ASSESSEES OWN CASE SHOULD BE FOLLOWED FOR THIS YEA R AS WELL. MEANING THEREBY, THE MATTER WAS RESTORED BACK TO THE FILE O F THE AO TO BE DECIDED AS PER LAW. 8. APART FROM THE ABOVE LEGAL POSITION THAT THE IMP UGNED ADDITIONS HAVE EITHER BEEN ALLOWED OR RESTORED BACK FOR RECON SIDERATION AT THE STAGE OF THE AO BY THE TRIBUNAL IN QUANTUM APPEAL, WE HAV E ALSO NOTED THAT LEARNED CIT(A) HAS DELETED THE IMPUGNED PENALTY AFT ER CONSIDERING THE MERITS OF EACH ADDITION. IN RESPECT OF DISALLOWANCE OF DEPRECIATION, IT WAS HELD THAT THE CLAIM WAS MADE ON THE BASIS OF CERTAI N DOCUMENTARY EVIDENCES AND ON THAT BASIS AN EXPLANATION WAS OFFE RED WHICH WAS NOT A FALSE EXPLANATION, THEREFORE, OUT OF THE PURVIEW OF THE CONCEALMENT PENALTY. IN RESPECT OF DISALLOWANCE OF BAD DEBT, LE ARNED CIT(A) HAS EXPRESSED THAT THE ADDITION WAS MADE BY AO ON THE P RETEXT THAT NO EFFORTS WERE MADE TO RECOVER THE BAD DEBTS. AS FAR AS THE O NUS ON THE ASSESSEE WAS CONCERNED FOR THE PURPOSE OF LEVY OF PENALTY, A CCORDING TO LEARNED CIT(A) ALL THE RELEVANT PARTICULARS WERE DISCLOSED AND THERE WAS NO CONCEALMENT OF FACTS AND THE BAD DEBT WAS ERRONEOUS LY DISALLOWED; HENCE, HE HAS DIRECTED TO DELETE THE PENALTY. LIKEW ISE IN RESPECT OF BOGUS ITA NOS.898 & 899/AHD/2011 ACIT (OSD), AHMEDABAD VS. SHREE RAMA MULTI TECH LIM ITED. A.YS.2003-04 & 2004-05 - 6 - PURCHASES, LEARNED CIT(A) HAS GIVEN HIS FINDING ON MERIT THAT VARIOUS EVIDENCES WERE FURNISHED BEFORE THE FIRST APPELLATE AUTHORITY AND IN REMAND PROCEEDINGS THE AO HAD NOT FOUND THOSE EVIDE NCES AS FALSE OR BOGUS EVIDENCES. ACCORDING TO LEARNED CIT(A), THERE WERE EVIDENCES THROUGH WHICH THE SUPPLIERS HAVE CONFIRMED THE TRAN SACTIONS. BY CITING CERTAIN CASE LAWS, LEARNED CIT(A) HAS DELETED THE P ENALTY. FINALLY, IN RESPECT OF PUBLIC ISSUE EXPENSES HE HAS HELD THAT THE APPELLANT HAD A BONA FIDE BELIEF THAT THE CLAIM WOULD BE ALLOWED IN TERMS OF SECTION 35D OF IT ACT. THE AO HAD A DIFFERENT VIEW ABOUT THE EL IGIBILITY OF THE DEDUCTION. HOWEVER, FACTS RELATING TO THE PUBLIC I SSUE EXPENSES WERE DISCLOSED BY THE ASSESSEE. BY PLACING RELIANCE ON C ERTAIN CASE LAWS PENALTY WAS DELETED. 9. THEREFORE, UNDER THE TOTALITY OF THE FACTS AND C IRCUMSTANCES OF THE CASE THAT ON ONE HAND THE QUANTUM ADDITIONS HAVE NO T BEEN CONFIRMED BY THE TRIBUNAL AND ON THE OTHER HAND THE LEARNED CIT( A) HAS DISCUSSED THE MERITS OF EACH ADDITION, WHILE DISPOSING OFF THE PE NALTY ISSUE, WE HEREBY CONFIRM THE DELETION OF PENALTY. WE FIND NO FORCE I N THE GROUNDS RAISED BY THE REVENUE; HENCE HEREBY DISMISS. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. SD/- SD/- (N.S. SAINI) ( MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 16/05/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT ITA NOS.898 & 899/AHD/2011 ACIT (OSD), AHMEDABAD VS. SHREE RAMA MULTI TECH LIM ITED. A.YS.2003-04 & 2004-05 - 7 - 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD