ITO 1(1)(2), MUMBAI V. ASHOK ALCO-CHEM LTD, MUMBAI

ITA 992/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5015 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 06-08-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 03-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . , , ! ! ! ! '# $% '# $% '# $% '# $% , ,, , & & & & ' ' ' ' BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 902/MUM./2011 ( &) * !+* / ASSESSMENT YEAR : 200304 ) DY. COMMISSIONER OF INCOME TAX CIRCLE1(1), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. ,- / APPELLANT ) V/S M/S. ASHOK ALCOCHEM LTD. 404, SHARDA CHAMBERS 33, NEW MARINE LINES MUMBAI 400 020 .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AAACA6876H 1! 2 3 / REVENUE BY : MR. O.P. SINGH &) *4# 2 3 / ASSESSEE BY : DR. K. SHIVRAM A/W MR. AJAY R. SINGH )! 2 # / DATE OF HEARING 06.08.2013 $ 5+ 2 # / DATE OF ORDER 13.09.2013 $ $ $ $ / ORDER '# $% '# $% '# $% '# $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E, CHALLENGING THE IMPUGNED ORDER DATED 27 TH SEPTEMBER 2010, PASSED BY THE LEARNED COMMISSIONER (APPEALS)-I, MUMBAI, FOR THE QUANTUM O F ASSESSMENT, PASSED M/S. ASHOK ALCOCHEM LTD. 2 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (F OR SHORT THE ACT) FOR THE ASSESSMENT YEAR 200304, VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE DISALLOWANCE OF R S. 29,50,259/- OUT OF MISCELLANEOUS EXPENSES. 2. THE LD. CIT(A) HAS FURTHER OVERLOOKED THE FACT THAT IDENTICAL ISSUE FOR THE A.Y. 2004-05 HAS BEEN RESTORED TO THE FILE OF AO FO R FRESH ADJUDICATION AFTER GIVING OPPORTUNITY TO THE ASSESSEE. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 6 8,02,969/- MADE U/S. 41. 4. THE LD. CIT (A) HAS FURTHER OVERLOOKED THE FACT THAT IDENTICAL ISSUE FOR A.Y. 2004-05 HAS BEEN RESTORED TO THE FILE OF AO FOR FRE SH ADJUDICATION AFTER GIVING OPPORTUNITY TO THE ASSESSEE.. 2. FACTS IN BRIEF : THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF ORGANIC CHEMICAL, INDUSTRIAL ALCOHOL AND GLACIAL ACEIC ACID AND BIOGAS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED MISCELLANEOUS E XPENDITURE OF ` 62,06,783. HE REQUIRED THE ASSESSEE TO SUBMIT MONTH WISE DETAILS, COPY OF LEDGER FOR THE MONTH OF JANUARY TO MARCH 2003, ALON G WITH ALL BILLS AND VOUCHERS. HOWEVER, THE ASSESSEE COULD NOT EVEN FURN ISH THOSE DETAILS. THE ASSESSEE HAD ONLY FILED DETAILS TO THE EXTENT OF 3, 06,266. HENCE, THE ASSESSING OFFICER HELD THAT THE GENUINENESS OF THE CLAIM OF SUCH AND EXPENDITURE COULD NOT BE ESTABLISHED, HENCE, HE DIS ALLOWED 50% OF THE BALANCE AMOUNT OF ` 29,50,259. HE FURTHER REQUIRED THE ASSESSEE TO GIV E NAME AND ADDRESS OF THE PARTIES ABOVE ` 1,00,000 ALONG WITH COPY OF ONE BILL AND A LIST OF THE CREDITORS SHOWING BALANCE AS ON 3 1 ST MARCH 2000 TO 31 ST MARCH 2005 FOR EACH YEAR. IN RESPONSE, THE ASSESSEE FILED THE SAID LIST OF THE CREDITORS FOR FIVE YEARS. FROM THESE DETAILS, HE NO TED THAT THE BALANCE ARE OUTSTANDING SINCE 31 ST MARCH 2001 AND, THEREFORE, THESE DEBTS HAVE BECOME TIME BARRED IN THREE YEARS AND STILL NOT PAID AND H ENCE THE ADDITION SHOULD BE M/S. ASHOK ALCOCHEM LTD. 3 MADE UNDER SECTION 41(1). A LIST OF SUCH 35 PERSONS HAVE BEEN INCORPORATED IN PARA5 OF THE ASSESSMENT ORDER WHICH AGGREGATES TO ` 68,02,969. 3. BEFORE THE LEARNED COMMISSIONER (APPEALS), REGARDIN G FIRST ADDITION, ON ACCOUNT OF 50% OF MISCELLANEOUS EXPENDITURE, THE ASSESSEE SUBMITTED DETAILS OF EXPENDITURE, DEBITED UNDER THE HEAD MISC. EXPENDITURE AND ALSO MONTHWISE EXPENSES FOR EACH HEAD OF EXPENSES ALONG WITH THE COPIES OF ACCOUNT AS APPEARING IN THE AUDITED BOOKS OF ACCOUN T. IT WAS ALSO SUBMITTED THAT THESE DETAILS WERE FURNISHED BEFORE THE ASSESS ING OFFICER, HOWEVER, NO QUERIES WERE RAISED BY THE ASSESSING OFFICER THEREA FTER. IT WAS ALSO SUBMITTED THAT SIMILAR DISALLOWANCE WAS MADE IN THE ASSESSMENT YEAR 2004 05 WHEREIN THESE DISALLOWANCE WERE DELETED BY THE L EARNED COMMISSIONER (APPEALS). THE LEARNED COMMISSIONER (APPEALS), FOLL OWING THE EARLIER YEARS ORDER FOR ASSESSMENT YEAR 200405, DELETED THE SAID ADDITION. ON THE ISSUE OF ADDITION ON ACCOUNT OF UNPAID LIABILITY UNDER SE CTION 41(1), IT WAS SUBMITTED THAT THE ASSESSEE, THAT THERE IS NO EVIDE NCE REGARDING REMISSION OF SUCH LIABILITY AND SUCH LIABILITY HAS NOT BEEN RETU RNED BACK BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS INCURRING HEAVY LOSSES AND EVEN FILED AN APPLICATIO N TO BIFR AND, THEREFORE, DUE TO THIS REASON, THERE WAS FINANCIAL STRINGENCY BUT THERE IS NO CESSATION TRADING LIABILITY. 4. THE LEARNED COMMISSIONER (APPEALS) ACCEPTED THE ASS ESSEES CONTENTION AND DELETED THE ADDITION AFTER OBSERVING AND HOLDING AS UNDER: 4.3 I HAVE CONSIDERED THE A.OS ORDER AS WELL AS AP PELLANT A.RS SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT TRE ATING THIS LIABILITY AS NOT PAYABLE AND CONSIDERING THE SAME AS INCOME UNDE R SEC. 41 OF THE I.T.ACT, 1961 WAS NOT CORRECT ON THE PART OF THE AS SESSING OFFICER. THERE IS NO EVIDENCE REGARDING THE REMISSION / CESS ATION OF SUCH LIABILITY AND SUCH LIABILITY HA NOT BEEN WRITTEN BA CK BY THE APPELLANT COMPANY IN ITS 130? OR DENIED AS PAYABLE. I FIND TH AT THE APPELLANT COMPANY HAS FILED AN APPLICATION TO BIFR UNDER THE PROVISION OF SICA, 1985. NOWHERE THE APPELLANT COMPANY HAS DENIED THIS LIABILITY FOR PAYMENT. HENCE, THE LIABILITY STILL REMAINS WITH TH E APPELLANT COMPANY M/S. ASHOK ALCOCHEM LTD. 4 AND THERE IS NO CESSATION OF SUCH LIABILITY. IN VIE W OF THE SAME, I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT THE AO WAS NOT JUSTIFIED IN ACTION OF MAKING ADDITION U/S. 41(1) OF THE I.T. ACT, 1961 AND ACCORDINGLY THE ADDITION MADE BY THE AO IS DELETED . 5. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT INSOFAR AS THE FIRST ISSUE IS CONCERNED, THE MATTER HAD TRAVELED UP TO THE STAGE OF THE TRIBUNAL, WHEREIN THE ISSUE OF DISALLO WANCE OF MISC. EXPENDITURE WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. THEREFORE, IN THIS YEAR ALSO, THE MATTER SHOULD BE SET ASIDE. REGARDING THE ADDIT ION ON ACCOUNT OF CESSATION OF LIABILITY AMOUNTING TO ` 68,02,969, HE RELIED UPON THE FINDINGS OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESS EE HAS NOT BEEN ABLE TO PRODUCE ANY EVIDENCE THAT LIABILITY IS STILL EXISTI NG AND, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY INVOKED PROVISIONS OF SECTION 41(1) FOR MAKING THE ADDITION. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT INSOFAR AS THE ADDITION OF ` 29,50,259 ON ACCOUNT OF MISC. EXPENDITURE IS CONCERNED, IN THE ASSESSMENT YEAR 200405, THE MATT ER WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER AND IN SET ASI DE THE PROCEEDINGS, THE ASSESSING OFFICER, AFTER VERIFICATION, HAS DISALLOW ED 20% AND, THEREFORE, IF ANY DISALLOWANCE IS CALLED FOR, THE SAME SHOULD NOT BE MORE THAN 20%. HOWEVER, HE SUBMITTED THAT THE LEARNED COMMISSIONER (APPEALS) HAS GIVEN A CATEGORICAL FINDING THAT THERE IS NO BASIS FOR DISA LLOWANCE AND, THEREFORE, WITHOUT ANY MATERIAL ON RECORD SUCH FINDINGS SHOULD NOT BE DISTURBED. REGARDING SECOND ISSUE OF ADDITION OF ` 68,02,969 UNDER SECTION 41(1), HE SUBMITTED THAT BEFORE THE ASSESSING OFFICER, ALL TH E DETAILS OF SUNDRY CREDITORS WERE GIVEN AND WAS ALSO EXPLAINED BEFORE THE AUTHORITIES BELOW THAT THE ASSESSEE WAS REGISTERED UNDER BIFR AND IT HAS NO FINANCIAL MEANS TO PAY TO THE CREDITORS, HOWEVER, THE ASSESSEE HAS NOT TREATED THE SAID LIABILITY AS CEASED. IN FACT, THE ASSESSEE HAS WRITTEN BACK T HIS AMOUNT IN THE ASSESSMENT YEAR 201304 WHICH CAN BE FULLY VERIFIED . HE ALSO SUBMITTED THAT IN THE EARLIER YEAR, THE ADDITION WAS DELETED BY TH E LEARNED COMMISSIONER M/S. ASHOK ALCOCHEM LTD. 5 (APPEALS), HOWEVER, THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE PERUSE D THE FINDINGS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) AS WELL AS THE MATERIAL AVAILABLE ON RECORD. INSOFAR AS THE DISALL OWANCE OF ` 29,50,259 IS CONCERNED, IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT SIMILAR DISALLOWANCE WAS MADE IN THE ASSESSMENT YEAR 200405 WHEREIN, TH E LEARNED COMMISSIONER (APPEALS) HAS DELETED THE ADDITION. AG AINST THE SAID ORDER, THE REVENUE HAD GONE IN THE SECOND APPEAL BEFORE THE TR IBUNAL WHEREIN THIS MATTER WAS RESTORED BACK TO THE FILE OF THE ASSESSI NG OFFICER FOR FRESH CONSIDERATION. IT HAS BEEN INFORMED TO THE BENCH TH AT IN THE SET ASIDE PROCEEDINGS, THE ASSESSING OFFICER HAS MADE DISALLO WANCE OF 20% UNDER THE HEAD MISC. EXPENDITURE. SINCE THE ASSESSING OFFICER HAS MADE ADHOC DISALLOWANCE OF 50% AND THE LEARNED COMMISSIONER (A PPEALS) HAS DELETED THE SAID DISALLOWANCE BASED ON EARLIER ORDER, WHERE IN THE ISSUE HAS BEEN SETTLED IN THE SET ASIDE PROCEEDINGS AT 20%, WE ALS O HOLD THAT THE DISALLOWANCE UNDER THE HEAD MISC. EXPENDITURE TO THE EXTENT OF 20% IS JUSTIFIED IN THIS YEAR ALSO. ACCORDINGLY, WE RESTRI CT THE DISALLOWANCE TO 20% AND TREAT THE GROUND NO.1 AND 2 OF THE REVENUE ARE TREATED AS PARTLY ALLOWED. 8. AS REGARDS THE ADDITION OF ` 68,02,969 UNDER SECTION 41(1) IS CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS INFORMED TO THE BENCH THAT THIS AMOUNT HAS BEEN WRITTEN BACK IN THE ASSES SMENT YEAR 201314. MOREOVER, IN THIS YEAR, THERE IS NO EVIDENCE FOR RE MISSION / CESSATION OF SUCH LIABILITY, THEREFORE, THERE IS NO QUESTION OF DISAL LOWANCE UNDER SECTION 41(1) IN THIS YEAR. EVEN THOUGH THIS MATTER HAS BEEN REST ORED BACK TO THE FILE OF THE ASSESSING OFFICER IN THE EARLIER YEARS, HOWEVER , IN THIS YEAR, IT HAS BEEN INFORMED THAT THE ASSESSEE HAS WRITTEN BACK THIS AM OUNT IN THE ASSESSMENT YEAR 201314 AND HAS BEEN ADDED AS INCOME. THEREFOR E, ONLY FOR THE LIMITED PURPOSE OF VERIFICATION OF THIS CONTENTION, THE MAT TER IS RESTORED TO THE FILE OF M/S. ASHOK ALCOCHEM LTD. 6 THE ASSESSING OFFICER. ACCORDINGLY, GROUND NO.3 AND 4 ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. 4 #7 1! 2 82 9:; ' '$ !# < ) 1# =>? 9. IN THE RESULT, REVENUES APPEAL IS TREATED AS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. $ 2 5+ @ A)7 13 TH SEPTEMBER 2013 2 B ? ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER 2013 SD/- . .. . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/- '# '# '# '# $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, A) A) A) A) DATED : 13 TH SEPTEMBER 2013 $ 2 .&#'C DC+# / COPY OF THE ORDER FORWARDED TO : (1) &) *4# / THE ASSESSEE; (2) 1! / THE REVENUE; (3) E () / THE CIT(A); (4) E / THE CIT, MUMBAI CITY CONCERNED; (5) C!HB .&#&) , , / THE DR, ITAT, MUMBAI; (6) BI* J / GUARD FILE. /C# .&# / TRUE COPY $) / BY ORDER . 1. KL / PRADEEP J. CHOWDHURY !4M &)1 K! / SR. PRIVATE SECRETARY 9 / = 1 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI