Srimukha Precision Products, CHENNAI V. ACIT, CHENNAI

ITA 93/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8758 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 18-01-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Opportunity of being heard
• Section: 143(3); 133A; 92

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I.T.A.NO S . 92 AND 93 /MDS/201 6 ASSESSMENT YEAR S : 20 0 7 - 0 8 AND 2008 - 0 9 M/S. SRIMUKHA PRECISION PRODUCTS, PLOT NO. 51, X SOUTH PHASE ROAD, AMBATTUR INDUSTRIAL ESTATE, CHENNAI 600 058. [PAN: AA A FS1929A ] VS. THE ASSISTANT COMMISSIONER OF INC OME TAX , CIRCLE 7 , CHENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI M. KARUNAKARAN, ADVOCATE / RESPONDENT BY : SHRI A.V. SREEKANTH , J CIT / DATE OF HEARING : 1 2 . 0 5 .201 6 / DATE OF P RONOUNCEMENT : 20 . 0 7 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH THE APPEAL S FILED BY THE ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDER S OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 7 , CHENNAI , BOTH DATED 1 3 . 11 . 20 1 5 RELEVANT TO THE ASSESSMENT YEAR S 20 0 7 - 0 8 AND 200 8 - 0 9 . I.T.A. NO. 92/MDS/2016 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING PRECISION COMPONENTS AND FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 200 7 - 08 ON 31.10.2007, ADMITTING TOTAL I.T.A. NO S . 92 & 93 /M/ 16 2 INCOME OF .90,97,182/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] PM 09.03.2009. IN RESPONSE TO NOTICE UNDER SECTION 143(2) OF THE ACT, THE ASSESSEE HAS FURNISHED ALL DETAILS. ON VERIFICATION OF DETAILS FURNISHED BY THE ASSESSEE AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT BY MAKING VARIOUS ADDITIONS. ON APPEAL, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL OF THE A SSESSEE. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE FIRST GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF .3,75,639/ - BEING DISCREPANCY IN RAW MATERIALS PURCHASED AND SECOND GROUND RELATES TO CONFIRMATION OF DISALLOWANCE OF .1,20,000/ - MADE UNDER SECTION 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TDS ON ANNUAL MAINTENANCE CHARGES PAID TO M/S. SIEMENS INDIA L TD. 3.1 WITH REGARD TO THE DISALLOWANCE OF .1,20,000/ - UNDER SECTION 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TDS, THE ASSESSEE MADE A CLAIM OF DEDUCTION OF .1,20,000/ - TOWARDS AMC PAID TO M/S. SIEMENS INDIA LTD. ACCORDING TO THE ASSESSING OFFICER THI S WAS SUBJECTED TO TDS. SINCE TDS WAS DEDUCTED FOR THE AMOUNT PAID BY THE ASSESSEE TOWARDS AMC, BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE ASSESSING OFFICER I.T.A. NO S . 92 & 93 /M/ 16 3 DISALLOWED .1,20,000/ - . ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 3.2 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN THIS CASE, IT WAS AN ADMITTED FACT THAT THE PAYMENT WAS ALREADY MADE BY THE ASSESSEE AND NOTHING IS OUTSTANDING ON THE C LOSING OF THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT THERE IS NO APPLICATION OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN VIEW OF THE SPECIAL BENCH DECISION IN THE CASE OF MER ILYN SHIPPING & TRANSPORT 16 ITR (TRIB.) 1[VIZAG] , WHEREIN, THE TRIBUNAL HAS HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT COMES INTO OPERATION ONLY IF THE AMOUNTS REMAIN PAYABLE AT THE END OF THE ACCOUNTING YEAR. IN THIS CASE, ADMITTEDLY, NO AMOUNT REMAINED PAYABLE BY THE ASSESSEE AT THE END OF THE ACCOUNTING YEAR, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED. THEREFORE, RESPECTFULLY FOLLOWING THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRAN SPORTS V. ADDL. CIT (SUPRA), WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITIONS MADE UNDER SECTION 40(A)(IA) OF THE ACT. ACCORDINGLY, WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE. 3.4 TH E NEXT GROUND RAISED IN THIS APPEAL IS WITH REGARD TO THE ADDITION OF .3,75,639/ - TOWARDS DISCREPANCY IN RAW MATERIALS PURCHASED AND SHOWN IN I.T.A. NO S . 92 & 93 /M/ 16 4 THE BOOKS OF ACCOUNT AND THE DATA IN THE COMPUTER AS IMPOUNDED DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT. SINCE THE ASSESSEE COULD NOT RECONCILE AND EXPLAIN THE DIFFE RENCE BETWEEN THE PURCHASE FIGURE AS PER THE DATA IN THE COMPUTER AND AS PER THE BOOKS OF ACCOUNTS TO THE EXTENT OF .3,75,639/ - , THE ASSESSING OFFICER MADE THE ADDITION. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. ON BE ING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3.5 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ONE MORE OPPORTUNITY MAY BE GIVEN TO THE ASSESSEE TO RECONCILE THE STOCK SHOWN IN THE BOOKS OF ACCOUNT WITH THE DATA REFLECTED IN THE COMPUTER. CONSIDERING THE PLEA OF THE ASSESSEE, WE REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO G IVE ONE MORE OPPORTUNITY TO RECONCILE THE FIGURES SHOWN IN THE BOOKS OF ACCOUNT AND THE DATA AVAILABLE IN THE COMPUTER AND DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 93/MDS/2016 4. IN THE APPEAL FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 09, THE FIRST GROUND RAISED BY THE ASSESSEE IS WITH REGARD TO CONFIRMATION OF ADDITION TOWARDS SUPPRESSION OF SALES OF .48,33,445/ - . I.T.A. NO S . 92 & 93 /M/ 16 5 4.1 THE FACTS OF THE ISSUE ARE THAT DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT, IT WAS NOTICED BY THE REVENUE AUTHORITIES THAT BETWEEN THE SALES AS PER PROFIT AND LOSS ACCOUNT AND THE SALES AS PER THE IMPOUNDED DOCUMENTS, THE RE IS A DIFFERENCE OF .48,43,445/ - . THE ASSESSEE PLEADED BEFORE THE ASSESSING OFFICER THAT THERE WAS NO SUPPRESSION OF SALE AS QUANTIFIED BY THE ASSESSING OFFICER AND ASKED FOR BREAK - UP OF SALES IN THE IMPOUNDED DOCUMENT, WHICH WAS NOT GIVEN TO THE ASSESS EE AND SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION. AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A). ACCORDING TO HIM, THE DOCUMENTS FOUND DURING THE COURSE OF SURVEY SHOWING T HE SALES SHOULD BE CONSIDERED RATHER THAN THE FIGURES SHOWN IN THE PROFIT AND LOSS ACCOUNT AND CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 4.2 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4.3 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIA LS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THERE IS A DIFFERENCE BETWEEN THE SALES FIGURES IN THE PROFIT AND LOSS ACCOUNT AND THE SALES AS PER THE IMPOUNDED DOCUMENTS. THE MAIN ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE I S THAT PROPER OPPORTUNITY TO REBUT THESE TWO FIGURES WERE NOT GIVEN TO THE ASSESSEE. IN OUR OPINION, IT IS PROPER TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE DIFFERENCE IN SALES SHOWN IN THE PROFIT AND LOSS ACCOUNT AND THE SALES AS PER THE IMPOUNDED DOCUMENTS. ACCORDINGLY, WE I.T.A. NO S . 92 & 93 /M/ 16 6 SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT ISSUE RAISED IN THE APPEAL IS WITH REGARD TO DISALLOWANCE OF INTEREST ON ADVANCE MADE TO M/S. ASHVA TECHNOLOGIES OF .14,11,200/ - . 5.1 THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE IS STATED TO BE GIVEN ADVANCE OF .1,17,60,000/ - TO M/S. ASHVA TECHNOLOGIES, WHICH IS BELONGING TO SHRI S.A. RAMAMOORTHY, I.E., PARTNER OF THE PRESENT ASSESSEE FIRM. ACCORDING TO THE ASSESSI NG OFFICER INTEREST BEARING FUNDS WAS DIVERTED AND THE ASSESSEE HAS NOT RECEIVED ANY INTEREST FROM M/S. ASHVA TECHNOLOGIES . ACCORDINGLY, THE INTEREST @ 12% PER ANNUM WAS CALCULATED AND WORKED OUT TO .14,11,200/ - . 5.2 ON APPEAL, THE LD. CIT(A) OBSERVED T HAT 12% INTEREST PER ANNUM ON DAY TODAY BASIS SHOULD BE CHARGED AND NOT AT 12% OF TOTAL AMOUNT, BECAUSE AS THIS IS A RUNNING ACCOUNT. 5.3 AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5.4 WE HAVE HEARD RIVAL CONTENTIONS. WHENEVER THE ASSESSE E DIVERTED ANY FUND FOR NON BUSINESS PURPOSES OR TO SISTER CONCERN, IT IS THE DUTY OF THE I.T.A. NO S . 92 & 93 /M/ 16 7 ASSESSEE TO SHOW IT AS IT IS OUT OF OWN FUND, WHICH IS NOT BEARING ANY INTEREST COSTS. IN THE PRESENT CASE, THE ASSESSEE HAS NOT ESTABLISHED THE FACT THAT THERE IS NO NEXUS BETWEEN THE BORROWED FUNDS AND AMOUNT ADVANCED TO THE SISTER CONCERN. THE ASSESSEE HAS NOT DISCHARGED THE BURDEN CAST UPON ITS SHOULDER. UNDER SECTION 36(1)(III) OF THE ACT, ONLY INTEREST INCURRED ON BORROWED FUNDS USED FOR BUSINESS PURPOSES COULD B E ALLOWED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE. THERE IS NO JUSTIFICATION FOR DIVERTING ASSESSEE S INTEREST BEARING FUNDS TO ITS SISTER CONCERN WITHOUT CHARGING INTEREST. BEFORE US, THE ASSESSEE HAS FAILED TO SHOW THAT THE ASSESSEE HAS D IVERTED ITS OWN FUNDS. UNDER THESE FACTS AND CIRCUMSTANCES, WE ARE NOT IN A POSITION TO APPRECIATE THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. ACCORDINGLY, THE ADDITION MADE BY THE ASSESSING OFFICER IS SUSTAINED. 6. THE NEXT GROUND RAISED BY THE A SSESSEE IS WITH REGARD TO DISALLOWANCE OF .14,70,293/ - UNDER SECTION 40(A)(IA) OF THE ACT. 6.1 FACTS ARE THAT AS PER TAX AUDIT REPORT, THE ASSESSING OFFICER FOUND THAT AS PER CLAUSE 27(B)(I), THE ASSESSEE FIRM STATED AN AMOUNT OF .14,70,293/ - AS TAX DEDUCTIBLE AND NOT DEDUCTED AT ALL. THE AR O F THE ASSESSEE ALSO CONFIRMED THE SAME. THEREFORE, BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, THE ASSESSING OFFICER DISALLOWED THE SUM OF .14,70,293/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. BEFORE THE LD. I.T.A. NO S . 92 & 93 /M/ 16 8 CIT(A), THE AR OF THE ASS ESSEE HAS CONTENDED THAT THE AUDITOR S REMARK IN THE TAX AUDIT REPORT IS INCORRECT. HOWEVER, THE LD. CIT(A) HAS NOT ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 6.2 AGGRIEVED, THE ASSESSEE IS IN A PPEAL BEFORE THE TRIBUNAL. 6.3 WE HAVE HEARD THE RIVAL CONTENTIONS. IN THIS CASE, THE ASSESSEE WAS OBLIGED TO DEDUCT AN AMOUNT OF .14,70,293/ - , BUT NOT DEDUCTED THE SAME. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE WAS NOT AWARE OF THE CIRCUMSTANCES UNDER WHICH THE AUDITOR HAS MADE THE REMARK IN THE TAX AUDIT REPORT THAT THE ABOVE AMOUNT HAS TO BE DEDUCTED AS TA X, BUT NOT DEDUCTED. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS DEDUCTED TAX WHEREVER IT WAS REQUIRED AS PER LAW AND REMITTED THE SAME TO THE GOVERNMENT ACCOUNT AND THEREFORE, THE REMARK OF THE AUDITOR IS NOT CORRECT. IN THIS CASE , AS PER TAX AUDIT REPORT, IT WAS FOUND THAT AS PER CLAUSE 27(B)(I), THE ASSESSEE HAS TO DEDUCT TAX, BUT NO DETAILS WERE FURNISHED BEFORE US. COPY OF THE TAX AUDIT REPORT WAS ALSO NOT PLACED ON RECORD. THE SUBMISSION OF THE ASSESSEE IS THAT THE TAX HAS BEE N DEDUCTED WHEREVER IT WAS REQUIRED AND REMITTED THE SAME CANNOT BE IGNORED. IF THE ASSESSEE HAS ALREADY PAID ALL THE TAXES AND NO TAX IS PENDING AT THE END OF THE RELEVANT FINANCIAL YEAR, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE MADE O N THIS ACCOUNT . UNDER THE ABOVE FACTS AND I.T.A. NO S . 92 & 93 /M/ 16 9 CIRCUMSTANCES, AND IN VIEW OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V. ADDL. CIT (SUPRA), WE REMIT T HE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE AND THE ASSESSEE SHALL PLACE NECESSARY DETAILS FOR VERIFICATION . THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT, THE APPEAL IN I.T.A. NO. 92/MDS/2016 FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND I.T.A. NO. 93/MDS/2016 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 20 TH JU LY , 201 6 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJAR I ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 20 . 0 7 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.