CREST PAPER MILLS LTD., MUMBAI V. DCIT 8 (1), MUMBAI

MA 275/MUM/2019

AI Insights

The case involves M/s. Crest Paper Mills Ltd., which filed Miscellaneous Applications against the orders of the Income Tax Appellate Tribunal concerning the assessment year 2010-11. The applications were related to the Tribunal's earlier decisions on issues of bogus purchases and the taxability of waived working capital loans under Section 41(1) of the Income Tax Act. The Tribunal's earlier rulings had upheld the rejection of the assessee's books of accounts and the estimation of profits by the Assessing Officer. The Tribunal found that the additional evidences and affidavits submitted by the assessee were not considered in the original hearings due to improper submission procedures.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302301 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 5 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 19-02-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-01-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 14-04-2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Rejection of books of accounts; Business income; Depreciation; Additional evidence
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘C‘ BENCH MUMBAI BEFORE: SHRI M.BALAGANESH, ACCOUNTANT MEMBER & SHRI KULDIP SINGH, JUDICIAL MEMBER MA No.275/Mum/2019 (Arising out of ITA No.2579/Mum/2016) (Asse ssment Year :2010-11) & MA No.276/Mum/2019 (Arising out of ITA No.3044/Mum/2016) (Asse ssment Year :2010-11) M/s.Crest Paper Mills Ltd. 2 nd Floor, Tarun Plastic Compound Mogra Villa Andheri (E) Mumbai – 400 069 Vs. DCIT-8(1) Room No.665, A-6 th Floor Aayakar Bhavan M.K.Road, Mumbai – 400 020 PAN/GIR No.AAACC4143D (Appellant) .. (Respondent) Assessee by Shri Ajay Singh Revenue by Smt. Vranda Matkari Date of Hearing 13/01/2023 Date of Pronouncement 20/02/2023 आदेश / O R D E R PER M. BALAGANESH (A.M): MA No.275/Mum/2019 (Arising Out of 2579/Mum/2016) A.Y.2010-11 MA Nos.275 & 276/Mum/2019 M/s. Crest Paper Mills Ltd 2 By virtue of this Miscellaneous Application, the assessee seeks to recall the Revenue appeal in ITA No.2579/Mum/2016 for A.Y.2010-11 disposed of by this Tribunal vide order dated 19/12/2018. 2. We find that the issue adjudicated in this appeal pertains to addition made on account of bogus purchases. The main grievance of the assessee in its Miscellaneous Application is that it had submitted an affidavit and additional evidence in paper book 2 & 2A which has not been considered by this Tribunal while passing the order. At the outset, we find that the filing of an affidavit or filing of additional evidences has not been mentioned in the order of this Tribunal. Even the additional evidences filed, if any, at the time of original hearing should be supported by way of a separate petition under Rule 29 of the ITAT Rules for its admission. Even that petition under Rule 29 is not available in the file. At the time of hearing, none of the paper books were placed on record before us. Hence, it is highly doubtful that even the paper books including paper book 2 & 2A were even filed. If it has been filed, the Tribunal could have certainly adjudicated the additional evidences and affidavit in the order. As stated supra, since Rule 29 petition is not filed by the assessee there was no need even for the Tribunal to address the additional evidences, if any, filed by the assessee. 3. We find that the ld. AO had rejected the books of accounts of the assessee and resorted to estimation of profits. Accordingly, the ld. AO concluded that the entire transactions shown by the assessee in this regard are sham. Having held so, the ld. AO was gracious enough to apply the profit percentage provided in the provisions of Section 44AD of the Act and accordingly, added only 8% as profit as the addition to the MA Nos.275 & 276/Mum/2019 M/s. Crest Paper Mills Ltd 3 total income in the assessment. This profit percentage was further reduced to 5% by this Tribunal. In fact this Tribunal had upheld the action of the ld. AO in rejecting the books of accounts u/s.145(3) of the Act. The ld. AR before us filed a letter dated 22/12/2022 trying to point out various mistakes that had crept in the appellate order of this Tribunal. We find that the consideration of those issues would not either way change the final decision already taken by this Tribunal in the facts and circumstances of the instant case, as they are merely clerical errors and there is no error of judgment. Moreover, the various points that were brought out by the ld. AR in the letter dated 22/12/2022 were not even reflected by the assessee in its Miscellaneous Application. The Miscellaneous Application preferred by the assessee does not even state that whether the additional evidences filed by the assessee were at all admitted by this Tribunal in the original appellate proceedings. There is absolutely no averment to this fact in the Miscellaneous Application. Hence, what is to be seen is that Miscellaneous Application before us which clearly state the mistakes, if any, apparent from record in the order of the Tribunal warranting rectification u/s.254(2) of the Act. In the instant case, the Miscellaneous Application only states that the paper book No.2 & 2A filed by the assessee had not been considered. This fact has already been addressed before us hereinabove. In any case, entertaining this Miscellaneous Application of the assessee would only tantamount to review of an order which is not permissible u/s.254(2) of the Act. Hence, the Miscellaneous Application preferred by the assessee in M.A.No.275/Mum/2019 arising out of ITA N.2579/Mum.2016 is hereby dismissed as devoid of merit. MA Nos.275 & 276/Mum/2019 M/s. Crest Paper Mills Ltd 4 MA No.276/Mum/2019 (Arising Out of 3044/Mum/2016) A.Y.2010-11 4. By virtue of this Miscellaneous application, the assessee seeks to recall the order passed by this Tribunal in assessee’s appeal in ITA No.3044/Mum/2016 for A.Y.2010-11 dated 19/12/2018. 5. We have heard rival submissions and perused the materials available on record. The first issue in dispute in the impugned appeal was with regard to applicability of provisions of Section 41(1) of the Act in respect of waiver of working capital loans by the banks. We find that this Tribunal had given a categorical finding that working capital loan has been taken by the assessee by way of hypothecation of stocks and receivables and when the said loan is waived by the banks, the same would constitute business receipts chargeable to tax. In fact, the Tribunal has also taken note of waiver of term loan used for capital purposes in the sum of Rs.17,99,653/- which has already been granted relief by the ld. CIT(A). This factual finding has not been controverted by the assessee in its Miscellaneous Application. In fact, the Miscellaneous Application preferred by the assessee on this issue is similar to that prescribed in MA. No.275/Mum/2019 above i.e. the Tribunal has not considered the paper books 2 & 2A and affidavit filed by the assessee during the course of original hearing. This aspect has already been addressed by us while disposing of MA No.275/Mum/2019 supra. The conclusion drawn thereon would apply here also. We do not find any mistake in the order passed by this Tribunal on this issue of waiver of working capital loan chargeable to tax u/s.41(1) of the Act. MA Nos.275 & 276/Mum/2019 M/s. Crest Paper Mills Ltd 5 6. The next issue in dispute that has been adjudicated by the Tribunal was with regard to disallowance of expenses against the interest waiver by banks and financial institutions credited by the assessee in its profit and loss account. We find that interest waived by the banks in the sum of Rs.5,66,26,527/- has been duly offered to tax by the assessee by crediting the same in the profit and loss account. Against this income, the assessee claimed expenses to the tune of Rs.5,63,46,730/- in the form of depreciation, bad debts, obsolete inventories written off, debit balances written off, stores and spares, direct expenses, interest paid and administrative expenses. The ld. AO in the assessment simply brought to tax the interest waived by the banks u/s.41(1) of the Act in the sum of Rs.5,66,26,527/- without giving any deduction towards expenses claimed by the assessee. The ld. CIT(A) having dismissed the allowability of depreciation directed ld. AO to verify the actual quantum of depreciation claimed by the assessee company and disallow the same after verification. The ld. CIT(A) allowed deduction for bad debts of Rs 1,10,30,224/- and debit balances written off of Rs 31,66,612/- by the assessee. Similarly, the ld. CIT(A) deleted the disallowance of interest made in the sum of Rs.47,53,817/-. The Revenue did not prefer any appeal on this issue. With regard to remaining expenses of Rs.1,42,66,261/-, ld. CIT(A) observed that the plant and machinery were taken back by the assessee from the financial institutions after a gap of more than 8 years and therefore, certain repairs maintenance has to be incurred by the assessee. But since no details in the form of bills, vouchers were provided by the assessee, the ld. CIT(A) gave relief on an adhoc basis in the sum of Rs.25,00,000/- towards allowability of those expenses and confirmed the remaining sum of Rs.1,17,66,261/- which was disallowed by the ld. AO. MA Nos.275 & 276/Mum/2019 M/s. Crest Paper Mills Ltd 6 7. We find that this Tribunal had confirmed the disallowance of depreciation by giving a finding that the plant and machinery had not been put to use by the assessee for the purpose of its business and by also placing reliance on the decision of the Hon’ble Bombay High Court, Nagpur Bench reported in 267 ITR 768. With regard to other expenses that were confirmed by the ld. CIT(A), this Tribunal had upheld the order of the ld. CIT(A) on the ground that no evidences were furnished by the assessee to support the claim of the expenses. Even before us, the grievance is only with regard to non-consideration of certain evidences in the paper book as has been stated in MA No.275/Mum/2019 supra. We have already held that none of the paper books were placed on record before us. This aspect has already been dealt by us in MA No.275/Mum/2019 supra and hence, the same decision shall apply here also. 8. With regard to yet another issue of non-consideration of additional ground preferred by the assessee on 10/10/2018 which is mentioned in para 9 of the Miscellaneous Application, on perusal of the file, we find that assessee had indeed filed additional ground. We find that though the assessee in the Miscellaneous Application had again relied on the same paper book 2 in support of this additional ground, it is a fact that none of the paper books were placed on record before us. However, in the interest of natural justice and fair play, since the copy of additional ground raised by the assessee on 10/10/2018 is available inside the appeal folder in ITA No.2579/Mum/2016 and also considering the fact that this additional ground has not been adjudicated by this Tribunal while disposing of the assessee’s appeal, we deem it fit and appropriate MA Nos.275 & 276/Mum/2019 M/s. Crest Paper Mills Ltd 7 to recall the order passed by this Tribunal in respect of assessee’s appeal in ITA No.3044/Mum/2016 dated 29/12/2018 only for the limited purpose of adjudication of additional ground filed on 10/10/2018. The other issues raised in the Miscellaneous Application by the assessee in Miscellaneous Application No.276/Mum/2019 are dismissed. 9. In the result, the Miscellaneous Application preferred by the assessee in M.A.No.275/Mum/2019 is hereby dismissed and Miscellaneous Application preferred by the assessee in MA No.276/Mum/2019 is partly allowed. Order pronounced on 20/02/2023 by way of proper mentioning in the notice board. Sd/- (KULDIP SINGH) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 20/02/2023 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//