DCIT, Jeypore V. M/s AlizaInternational P Ltd, Bhubaneswar

ITSSA 74/CTK/2013

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0927 (ITAT-CUTTACK)
• Duration Of Justice: 9 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 12-10-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 06-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Document seized; Principle of natural justice; Additional evidence; Documents seized; Revenue expenditure; Capital expenditure
• Section: 132; 143(3); 153A; 44AB; 13

Judgement Text

आयकर अऩीऱीय अधधकरण, कटक न्यायऩीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK श्री जाजज माथन, न्याययक सदस्य एवं श्री अरुण खोड़पऩया ऱेखा सदस्य के समऺ । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर (तऱाशियाां और अशिग्रहण) अऩीऱ सं/IT(SS)A No.51&52/ CT K/2013 (ननधाारण वषा / Asses s m ent Year :2008-2 009 & 2009-2010) M/s Aliza International (P) Ltd., HiG-19, BDA Housing Colony, Jaydev Vihar, Bhubaneswar-751013 Vs ACIT, Circle-1(2), Bhubaneswar PAN No. : AAFCA 9579 A AND आयकर (तऱाशियाां और अशिग्रहण) अऩीऱ सं/IT(SS)A No.73&74/ CT K/2013 (ननधाारण वषा / Asses s m ent Year :2008-2 009 & 2009-2010) DCIT, Circle-1(2), Bhubaneswar Vs M/s Aliza International (P) Ltd., HiG-19, BDA Housing Colony, Jaydev Vihar, Bhubaneswar-751013 PAN No. : AAFCA 9579 A (अऩीऱाथी /Appellant) .. (प्रत्यथी / Respondent) ननधााररती की ओर से /Assessee by : Shri Sunil Mishra, Advocate राजस्व की ओर से /Revenue by : Shri M.K.Gautam, CIT-DR स ु नवाई की तारीख / Date of Hearing : 13/10/2022 घोषणा की तारीख/Date of Pronouncement : 13/10/2022 आदेश / O R D E R Per Bench : IT(SS)A Nos.51&52/CTK/2013 are two appeals filed by the assessee and IT(SS)A Nos.73&74/CTK/2013 are two appeals filed by the revenue against the separate orders of the ld. CIT(A)-1, Bhubaneswar, all dated 15.03.2013, passed in I.T.Appeal Nos.0269 & 0270/10-11, for the assessment years 2008-2009 & 2009-2010. IT(SS)A Nos.51,52,73&74/CTK/2013 2 2. The assessee in its appeal i.e. IT(SS)A Nos.51/CTK/2013 (AY: 2008-2009) has raised the following grounds :- On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in failing to consider that the assessment order passed u/s.143(3)/153A/144 of the Income Tax Act,1961(herein after referred as ' the Act') is bad in law and liable to be quashed inasmuch as that:- 1. no warrant of authorization u/s 132 of the Act was issued in the case of the appellant for which the assessment order passed u/s 153A of the Act is beyond jurisdiction and search action conducted and all other consequential proceedings are illegal and without jurisdiction; 2. no prior approval was taken in accordance with the provisions of Section 153D of the Act vis-a-vis CBDT instruction. 3. no opportunity was given for cross-examination of various persons whose statements were relied upon for making various disallowances thereby violating the principles of natural justice. 4. the assessment order was passed without providing the print out from seized and sealed CDs , Hard disks and the books of account illegally removed from the premises of its accountant thereby violating the principle of natural justice. 5. the assessment order was passed simultaneously under section 143(3) and 144 of the Act. 6. the assessment order was passed without serving notice under section 153A(1)(a) of the Act. The Ld Commissioner of Income Tax (Appeals) erred:- 7. in making disallowance on estimation basis @10% of the administrative expenses minus Directors' remuneration recorded in the books of account and claimed in the audited profit and loss account without appreciating the fact that no such estimated disallowance can be made merely on assumption and presumption and hence, the disallowance made out of administrative expenses on estimation basis @10% amounting to RS.10,20,293/- is without any justification and liable to be deleted. 8. in failing to appreciate that not a single defect or discrepancy is pointed out in the claim made of administrative expenses are incurred not for business or otherwise and hence, having not pointed out any such defects/discrepancy, the ad hoc IT(SS)A Nos.51,52,73&74/CTK/2013 3 disallowance out of administrative expenses is unjustified and liable to be deleted. 9. in making disallowance on estimation basis @10% of the export expenses minus Custom duty recorded in the books of account and claimed in the audited profit and loss account without appreciating the fact that no such estimated disallowance can be made merely on assumption and presumption basis particularly so when the amount was paid through bank after deducting income tax at source and hence, the disallowance made out of export expenses on estimation basis @10% amounting to Rs.13,06,759/- is without any justification and liable to be deleted. 10. in failing to appreciate that not a single defect or discrepancy is pointed out in the claim made of export expenses are incurred not for business or otherwise and hence, having not pointed out any such defects/discrepancy, the ad hoc disallowance out of commission charges is unjustified and liable to be deleted. 11. in failing to appreciate that the appellant has duly paid the export expenses through bank payments and where ever applicable tax has been deducted at source and also paid service tax as per the invoices and the disallowance thus made on estimation basis is unjustified and liable to be deleted. 12. The appellant craves leave to add, amend, alter or delete all or any of the aforesaid grounds of appeal. 3. The assessee in its appeal i.e. IT(SS)A Nos.52/CTK/2013 (AY: 2009-2010) has raised the following grounds :- On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in failing to consider that the assessment order passed u/s.143(3)/153A/144 of the Income Tax Act,1961(herein after referred as ' the Act') is bad in law and liable to be quashed inasmuch as that:- 1. no warrant of authorization u/s 132 of the Act was issued in the case of the appellant for which the assessment order passed u/s 153A of the Act is beyond jurisdiction and search action conducted and all other consequential proceedings are illegal and without jurisdiction; 2. no prior approval was taken in accordance with the provisions of Section 153D of the Act vis-a-vis CBDT instruction. IT(SS)A Nos.51,52,73&74/CTK/2013 4 3. no opportunity was given for cross-examination of various persons whose statements were relied upon for making various disallowances thereby violating the principles of natural justice. 4. the assessment order was passed without providing the print out from seized and sealed CDs , Hard disks and the books of account illegally removed from the premises of its accountant thereby violating the principle of natural justice. 5. the assessment order was passed simultaneously under section 143(3) and 144 of the Act. 6. the assessment order was passed without serving notice under section 153A(1)(a) of the Act. The Ld Commissioner of Income Tax (Appeals) erred:- 7. in making disallowance on estimation basis @10% of the administrative expenses minus Directors' remuneration recorded in the books of account and claimed in the audited profit and loss account without appreciating the fact that no such estimated disallowance can be made merely on assumption and presumption and hence, the disallowance made out of administrative expenses on estimation basis @10% amounting to Rs.11,97,831/- is without any justification and liable to be deleted. 8. in failing to appreciate that not a single defect or discrepancy is pointed out in the claim made of administrative expenses are incurred not for business or otherwise and hence, having not pointed out any such defects/discrepancy, the ad hoc disallowance out of administrative expenses is unjustified and liable to be deleted. 9. in making disallowance on estimation basis @10% of the export expenses minus Custom duty recorded in the books of account and claimed in the audited profit and loss account without appreciating the fact that no such estimated disallowance can be made merely on assumption and presumption basis particularly so when the amount was paid through bank after deducting income tax at source and hence, the disallowance made out of export expenses on estimation basis @10% amounting to Rs.2,88,853/- is without any justification and liable to be deleted. 10. in failing to appreciate that not a single defect or discrepancy is pointed out in the claim made of export expenses are incurred not for business or otherwise and hence, having not pointed out any such defects/discrepancy, the ad hoc disallowance out of commission charges is unjustified and liable to be deleted. IT(SS)A Nos.51,52,73&74/CTK/2013 5 11. in failing to appreciate that the appellant has duly paid the export expenses through bank payments and where ever applicable tax has been deducted at source and also paid service tax as per the invoices and the disallowance thus made on estimation basis is unjustified and liable to be deleted. 12. The appellant craves leave to add, amend, alter or delete all or any of the aforesaid grounds of appeal. 4. At the time of hearing, ld AR of the assessee submitted that he does not wish to press Ground Nos.1 to 6 of assessee’s appeals and has endorsed in the file to that effect in both the appeals. Consequently, Ground Nos.1 to 6 of both appeals of the assessee stand dismissed as not pressed. 5. The revenue is its appeal i.e. IT(SS)A No.73/CTK/2013 (AY: 2008- 2009) has raised the following grounds :- 1. On the facts and in the circumstances of the case,. the Ld. CIT(A) is not justified in holding that lease right payment of Rs.28, 98,298/ - was not a capital expenditure. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in holding that the claim of purchases at Rs.35,89,89,500/- in the P & L AIc was correct. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in holding that the assessee did not have income of Rs.53,61,991/- from crushing activity. 4. On the facts and in the circumstances of the case,. the Ld. CIT(A) is not justified in directing to compute the income on the basis of P & L A/c in the audit report when the assessee did not produce the details before the AO during assessment. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in allowing 90% of administrative and other expenses & 90% of export expenses claimed by the assessee. 6. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in directing to adopt total income at IT(SS)A Nos.51,52,73&74/CTK/2013 6 Rs.5,11,36,353/ - before depreciation in place of the total income assessed by the AO at Rs.10,06,97,423/-. 7. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in directing to allow depreciation to the assessee. 8. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in accepting the contentions of the assessee and not accepting the findings of the AO in violation of Rule 46A of the IT Rules. 9. The appellant craves to alter, amend or add any other ground that may be considered necessary in course of the appeal proceeding. 6. The revenue is its appeal i.e. IT(SS)A No.74/CTK/2013 (AY: 2009- 2010) has raised the following grounds :- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in directing to compute the income on the basis of P & L AIc in the audit report when the assessee did not produce the details before the AO during assessment. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in allowing 90% of administrative and other expenses & 90% of export expenses claimed by the assessee. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) is not justified in directing to adopt total' income at Rs. 98,25,179/- before depreciation in place of the total income assessed by the AO at Rs.10,19,09,150/-. 7. The issues remained to be decided in assessee’s appeals and the issues raised by the revenue in its appeals for both the assessment years under consideration (except issue of lease right payment, income from crushing activity and export expenses less custom duty), have already been decided by the coordinate bench of the Tribunal in the case of M/s Serajuddin & Co., passed in IT(SS)A Nos.30 & 31/CTK/2013 & IT(SS)A Nos.41&42/CTK/2013, order dated 10.10.2022 for the assessment years IT(SS)A Nos.51,52,73&74/CTK/2013 7 2008-2009 & 2009-2010, wherein the Tribunal in para 12 has sustained the findings of the CIT(A) holding therein that the ld CIT(A) has only accepted the remand report of the AO when directing that the figures in the audit report is to be considered in place of figures adopted by the AO in the assessment order. The relevant observations of the Tribunal in para 12 are as under :- 12. We have considered the rival submissions. Admittedly, the first issue that comes up for adjudication is in regard to admission of the additional evidence in the form of 44AB report by the ld CIT(A). As rightly pointed out by ld CIT DR, the due date of filing the 44AB report was 30.9.2008 but the audit report has been obtained only on 23.3.2011 and the assessment order has been passed only on 28.12.2010. Clearly, the assessee was not in possession of the audit report when the assessment was done. True, ld CIT(A) has not given a speaking finding in regard to clause under which the additional evidence has been admitted under rule 46A. However, a perusal of the remand report by the AO shows that the AO has not raised any objection in respect of admission of the audit report. In fact, the AO in the report dated Nil has categorically mentioned that other income disclosed in the audit report not taken in the assessment order may be accepted. In respect of expenses representing the transportation charges, stevedoring charges and unloading charges shown in the profit and loss account in the audit report are lower than the value taken in the assessment order and consequently, the claim of expenses in the audit report could be accepted. The closing stock in the audit report is higher than the closing stock in the assessment and that could be accepted. In the end, the AO mentions that the additional income assessed by the AO over and above the reported income in the audit report is based on materials/documents/piece of evidence seized during the search operation. Such additional income is not recorded in the audited books of account and the additions thus made and the enhanced income arrived at may be sustained. When this is compared with the assessment order, it is noticed that there is no additional income assessed in the assessment order on the basis of any materials/documents/piece of evidence seized during the search operation. The additional income is determined by recasting the profit and loss account on the basis of turnover informed by the Asst. Commissioner, Custom House. Rs. 70,03,32,624/- is arrived at by taking Rs.61,59,92,274/- as intimated by the Asst. Commissioner, Custom House in respect of export sale and an amount of Rs.8,43,40,350/- intimated by the Commercial Tax Authorities, Barbil. A perusal of the remand report dated 23.11.2012 shows that in para 3, the information provided by the IT(SS)A Nos.51,52,73&74/CTK/2013 8 Custom House, Paradeep and the details provided by the assessee was compared and it was found that the total export sales of FOB value for Serajuddin & Co Pvt Ltd.,. and Yajdani International Pvt Ltd., is same for the assessment year 2008-09. The difference is only due to short shipment and wrongly taken for the different assessment years. Then, the AO does the reconciliation and gives findings that the export sales value provided by the assessee is different from the FOB value and as per the assessee’s statement, realisation of sale is on the date of making invoices, when ship start from the Port. The exchange rate on that date decide the export sale value. As per the invoices and exchange rate, the export sale value for the assessment year 2008-09 for the assessee herein is Rs.36,01,28,151/-. To this, if we add the local sales as intimated by the Commercial Tax Authorities of Rs.8,43,40,353/-, the turnover as disclosed by the assessee in 44 AB report at Rs.44,46,37,802/- is reached. Thus, clearly, the 44AB report as admitted by the ld CIT(A) and on which remand report has been called for from the AO had been examined by the AO and same has also found to be substantially correct. The AO having given a finding in the remand report that the auditor’s report u/s.44AB alongwith profit and loss account and balance sheet as submitted by the assessee may be accepted for the reasons mentioned therein, it no more lies in the mouth of the AO to raise a ground in the second appeal that there has been violation of the provisions of Rule 46A. The audit report having also been reconciled with the figures as arrived at by the AO on the basis of communication received from the Commercial Tax Authorities and the Asst. Commissioner, Custom House. we are of the view that the ld CIT(A) has only accepted the remand report of the AO when directing that the figures in the audit report is to be considered in place of figures adopted by the AO in the assessment order. Consequently, we are of the view that the findings of the ld CIT(A) are on right footing and does not call for any interference. 8. It was further submitted by the ld. CIT-DR in respect of IT(SS)A No.73/CTK/2013 for the assessment year 2008-2009, two additional issues are there being against the action of ld. CIT(A) in holding the lease rights payments to Paradeep Port as revenue expenditure as against capital expenditure treated by the AO. It was submitted by the ld. CIT-DR that the assessee got long term benefit out of the said lease insofar as the assessee was able to stock iron ore and iron fines at the Paradeep Port and this is liable to be treated as a capital expenditure as rightly been IT(SS)A Nos.51,52,73&74/CTK/2013 9 done by the AO. It was the submission that the order of the ld. CIT(A) deserves to be reversed and that of the AO to be restored. 9. In reply, ld. AR submitted that the lease was only for a period of 8 months and the lease was also cancelled by the Paradeep Port for non- performance. The ld. AR drew our attention to the order of the ld. CIT(A) at page 12 para 5. It was the submission that the order of the ld.CIT(A) is liable to be upheld. 10. We have considered the rival submissions. A perusal of the order of ld. CIT(A) clearly shows that the ld. CIT(A) has recorded the facts that the lease was only for a period of eight months and further renewal of 11 months subject to satisfactory performance. It is noticed that the ld. CIT(A) has taken on record that the lease was for the period from 20.07.2007 to 31.03.2008 and further renewal of 11 months subject to satisfactory performance and that the lease was cancelled on 09.08.2011 and the assessee was in Writ before the Hon’ble Jurisdictional High Court. This being so, we are of the view that the ld. CIT(A) is right in holding that the lease right payment does not give any enduring benefit to the assessee and it is a revenue expenditure. 11. It was further the submission of the ld. CIT-DR that the ld. CIT(A) has deleted the addition representing the crushing activity of an amount of Rs.53,61,991/-, which the assessee has not offered in its return. It was the submission that the said addition was made on the basis of search documents i.e. BMD-10. It was the prayer that it was the duty of the assessee to substantiate the seized documents as per Section 292C of IT(SS)A Nos.51,52,73&74/CTK/2013 10 the Act. It was submitted that the order of the ld. CIT(A) deserves to be reversed and that of the AO to be restored. 12. In reply, ld. AR submitted that the said seized documents i.e. BMD- 10 was never given to the assessee in the course of assessment proceedings. The said seized document being BMD-10 was never produced before the ld. CIT(A) when specifically requested for. It was further submitted that even in the remand report the AO has categorically mentioned that the seized document being BMD-10 is not available. It was the submission that in the absence of seized document the addition has rightly been deleted by the ld. CIT(A). 13. We have considered the rival submissions. A perusal of the order of the ld. CIT(A) at page 13 of his order clearly shows that he has called for the said seized document i.e. BMD-10 and the same was not produced and in the remand report the AO had categorically admitted that the seized document was not available. This being so, in absence of corroborating evidence being the seized material, we are of the view that the ld. CIT(A) was right in deleting the addition made by the AO in respect of crushing activity. 14. In respect of IT(SS)A No.74/CTK/2013 filed by the revenue for assessment year 2009-2010, ld. CIT-DR submitted that the ld. CIT(A) has disallowed 10% of the export expenses less custom duty. It was the further submission that in respect of administrative expenses disallowed at 10%, which was done minus the director’s remuneration. It was the submission that at the outset the ld. CIT(A) should have disallowed both IT(SS)A Nos.51,52,73&74/CTK/2013 11 the entire administrative expenses and the export expenses. It was the alternative prayer that if at all the ld. CIT(A) wanted to reduce the same to 10%, he should not have reduced the director’s remuneration from the administrative expenses and the customs duty from the export expenses. 15. In reply, ld. AR vehemently supported the order of the CIT(A) and submitted that the disallowance made itself is very high and it should be reduced in line with the decision of the coordinate bench of the Tribunal in the case of M/s Serajuddin & Co. in IT(SS)A Nos.30&31/CTK/2013, order dated 10.10.2022. 16. We have considered the rival submissions. A perusal of the order of the ld. CIT(A), it is noticed that the ld. CIT(A) when disallowing 10% out of the administrative and other expenses, has directed to reduce the director’s remuneration. In fact, this is a right method insofar as the director’s remuneration has already been taxed in the hands of the directors. So further taxing the same in the hands of the assessee would actually be a miscarriage of justice. Further in the interest of justice, we are of the view that the disallowance at 10% as made by the ld. CIT(A) is excessive and the same is reduced to 5%. 17. Coming to the issue of export expenses, we are of the view that the ld. CIT(A) is right in directing the exclusion of the export duty insofar as the same is a payment made to the Government. However, it is noticed that the ld.CIT(A) has directed for disallowance of 10% out of export expenses and in the interest of justice the same is also reduced to 5%. IT(SS)A Nos.51,52,73&74/CTK/2013 12 18. In the result, appeals of the assessee i.e. IT(SS)A Nos.51&52/CTK/2013 are partly allowed and the appeals of the revenue i.e. IT(SS)A Nos.73&74/CTK/2013 are dismissed. Order dictated and pronounced in the open court on 13/10/2022. Sd/- (अरुण खोड़पऩया) (ARUN KHODPIA) Sd/- (जाजज माथन) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 13/10/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : आदेशान ु सार/ BY ORDER, (Assistant Registrar) आयकर अऩीऱीय अधधकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. पविागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. सत्यापऩत प्रयत //True Copy//