DEFIANCE CLOTHING COMPANY, V. ASST CIT CIR 18(2),

MA 356/MUM/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1463 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-01-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 01-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D , MUMBAI BEFORE SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER M.A. NO.356/M/2013 ( ITA NO. 6742/M/2011 ) ASSESSMENT YEAR: 2007 - 08 M/S. DEFIANCE CLOTHING COMPANY C/O. MILAN P ATEL (PARTNER) 111, SANGEETA, 27, 28 ARTHUR BUNDER ROAD, COLABA, MUMBAI 400 005 PAN: AACFD2886K VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 18(2), MUMBAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJIV M. SHAH REVENUE BY : SHRI SURENDRA KUMAR, D.R. DATE OF HEARING : 24.01. 201 4 DATE OF PRONOUNCEMENT : 29.01.2014 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT MISCELLANEOUS APPLICATION HAS BEEN MOVED BY THE APPLICANT/ASSES SEE TO RECALL AND SET ASIDE THE IMPUGNED ORDER DATED 26.06.13 ALLEGING THAT THE IMPUGNED ORDER SUFFERS FROM PLA I N AND PALPABLE ERRORS WHICH WOULD CAUSE GREAT PREJUDICE LOSS AND HARM TO THE ASSESSEE IF , THE ALLEGED MISTAKES CREPT THEREIN ARE NOT RECTIFIED. THE MISTAKES ALLEGED TO BE CREPT IN THE ORDER WHICH THE ASSESSEE HAS CLAIMED TO BE APPARENT ON RECORD HAVE BEEN MENTIONED IN PARAGRAPHS 5 TO 8 OF THE APPLICATION WHICH , FOR THE SAKE OF CONVENIENCE ARE REPRODUCED AS UNDER: 5 . IN PARAGRAPH 7, PAGE 5, HO NOURABLE TRIBUNAL HELD THAT APPELLANT DERIVED NO BENEFIT AS QUID PRO QUO FOR ALLOWING USER OF PLANT AND MACHINERY. WITH UTMOST RESPECT, HONOURABLE TRIBUNAL HAS NOT PROPERLY APPRECIATED ARRANGEMENT BETWEEN APPELLANT AND DEFIANCE KNITTING INDUSTRIES PRIVATE LIMITED [DKIPL] WHICH IS EXPOUNDED IN LETTER DATED 29.12.2009 [PAGE 23 - 29 OF M.A. NO.356/M/2013 (ITA NO.6742/M/2011) M/S. DEFIANCE CLOTHING COMPANY 2 PAPERBOOK FILED] AND EXTRACTED IN ASSESSMENT ORDER PARAGRAPH 4, PAGE 2 THERETO. ON A GLEANING OF FOREGOING EXPLANATION, IT IS PALPABLE THAT PLANT AND MACHINERY WAS EXCLUSIVELY USED TO MANUFACTURE GARMENTS FOR APPELLANT WHICH WERE EXPORTED BY APPELLANT IN ITS CAPACITY AS A TRADER - EXPORTER THEREBY GENERATING SUBSTANTIAL PROFITS RS . 162.83 LACS IN HANDS OF APPELLANT RESULTANT IN PAYMENT OF TAXES RS . 54.81 LACS ON SAME. THE PLANT AND MACHINERY WERE SET UP IN THE PREMISES OF DKIPL FOR EXCLUSIVE SUPPLY, SURETY OF SUPPLY AND SURETY OF QUALITY OF MATERIAL TO BE SUPPLIED; ONLY TO THE APPELLANT AND COST OF GARMENTS WERE DECIDED KEEPING THESE IN VIEW. IN THE PREMISES, HONOURABLE TRIBUNAL, W ITH UTMOST RESPECT, ERRED IN HOLDING THAT NO BENEFIT WAS OBTAINED BY APPELLANT FROM SUCH AN ARRANGEMENT CONSEQUENTLY; ORDER SUFFERS FROM AN OBVIOUS MISTAKE. 6. IN THE SAME PARAGRAPH, TRIBUNAL, WITH UTMOST RESPECT, CONCLUDED THAT USER OF PLANT AND MACHIN ERY WAS BY DKIPL AND NOT APPELLANT. IN SUBSTANCE AND EFFECT, IF AFOREMENTIONED ARRANGEMENT IS VIEWED IN ITS CORRECT PERSPECTIVE ALL OF THE PLANT AND MACHINERY WERE MEANT AND ACCORDINGLY EXCLUSIVELY DEPLOYED TO EXECUTE EXPORT ORDERS OF APPELLANT AND THUS, W ITH UTMOST RESPECT, IT CANNOT BE INFERRED THAT PLANT AND MACHINERY IS NOT USED BY APPELLANT OR FOR ITS BENEFIT. IN FACT PLANT & MACHINERY WERE NOT USED BY DKIPL FOR ANY OTHER CUSTOMER OR FOR OWN MANUFACTURING EXCEPT EXCLUSIVELY FOR THE APPELLANT. IN THE RE SULT, HONOURABLE TRIBUNAL'S CONTRARY CONCLUSION RENDERS ORDER SUSCEPTIBLE TO RECTIFICATION OF EVIDENT MISTAKE. 7. FURTHER, HONOURABLE TRIBUNAL, WITH UTMOST RESPECT, ERRED IN OBSERVING THAT 'AFFAIRS OF GROUP CONCERNS WERE COOKED UP SO AS TO REDUCE INCIDE NCE OF TAX ...... ' IT IS RESPECTFULLY SUBMITTED THAT EVEN DURING COURSE OF SURVEY OPERATIONS CONDUCTED BY REVENUE NO ADVERSE MATERIAL WAS FOUND MUCH LESS WHICH LEADS TO CONCLUSION THAT APPLICANT HAS COOKED UP AFFAIRS OF GROUP CONCERNS. IN THE PREMISES, WITH UTMOST RESPECT, HONOURABLE TRIBUNAL HAS GONE INTO ISSUES NOT RAISED EVEN BY AG. IT IS RESPECTFULLY SUBMITTED THAT IF APPELLANT DESIRED TO MITIGATE ITS TAX BURDEN IT COULD HAVE SHIFTED ENTIRE EXPORTS TO DKIPL AND COMPLETELY AVOIDED PAYMENT OF TAXES. MOREO VER, ALL INTER - COMPANY SALES AND PURCHASES ARE AT ARM'S LENGTH AND AO HAS NOT INVOKED SECTION 40A(2). WITHOUT PREJUDICE, APPLICANT WAS NOT AFFORDED OPPORTUNITY TO MEET AFORESAID HOLDING. THEREFORE, IN LIGHT OF AFOREMENTIONED, WITH UTMOST RESPECT, ORDER REQ UIRES CORRECTION INASMUCH AS FAULTS ARE MANIFEST ON RECORD. 8. HONOURABLE TRIBUNAL, WITH UTMOST RESPECT, ERRED IN NOT FOLLOWING JURISDICTIONAL HIGH COURT PRONOUNCEMENT IN G. R. SHIPPING LTD. (SUPRA) AND THIS BY ITSELF CONSTITUTE A PLAIN WRONG LIABLE TO B E RECTIFIABLE SECTION 254(2). 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES AND ALSO HAVE GONE THROUGH THE IMPUGNED ORDER. THE ASSESSEE VIDE PARA NO.5 OF THE APPLICATION HAS PLEADED THAT THE TRIBUNAL HAS NOT CORRECTLY APPRECIATED THE FACT S ON THE FILE. THE ASSESSEE HAS INVITED OUR ATTENTION TO THE SUBMISSIONS MADE BY IT BEFORE THE LOWER AUTHORITIES WHICH HAVE BEEN REPRODUCED IN THE ASSESSMENT M.A. NO.356/M/2013 (ITA NO.6742/M/2011) M/S. DEFIANCE CLOTHING COMPANY 3 ORDER ITSELF. HIS CONTENTION HAS BEEN THAT BY NOT ADMITTING TO HIS CONTENTION AS REPRODUCED IN AS SESSMENT ORDER, THE TRIBUNAL HAS MADE WRONGFUL ASSUMPTIONS OF THE FACTS. VIDE PARA NO.6 OF THE APPLICATION THE ASSESSEE HAS PLEADED THAT IN VIEW OF THE ARRANGEMENT MADE BY THE ASSESSEE WITH ITS SISTER CONCERN THE MACHINERY IN QUESTION WAS USED BY THE SIS TER CONCERN EXCLUSIVELY FOR EXECUTING THE WORK ORDERS GIVEN BY THE ASSESSEE COMPANY. VIDE PARA NO.7 OF THE APPLICATION THE ASSESSEE HAS PLEADED THAT TRIBUNAL HA S MADE CERTAIN OBSERVATIONS WHILE PASSING THE ORDER ON MERIT WHICH WERE NOT REQUIRED TO BE MAD E AS THE ISSUE RELATING TO THOSE OBSERVATIONS WAS NOT RAISED BY ANY OF THE PARTIES BEFORE THE TRIBUNAL. 3. THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED UPON CERTAIN CASE LAWS TO STRESS THAT THE WRONGFUL ASSUMPTION OF FACT AMOUNTS TO MISTAKE APPARENT ON THE RECORD AND FURTHER THAT THE GENUINENESS OR AUTHENTICITY OF THE TRANSACTION IN QUESTION WAS NOT AN ISSUE BEFORE THE TRIBUNAL AND FURTHER THAT THE TRIBUNAL HAS NO JURISDICTION TO GO BEYOND THE ASSESSMENT ORDER. HE HAS FURTHER SUBMITTED THAT THE TRIBUNAL HAS ALSO FAILED TO CONSIDER THE AUTHORITY OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF G.R. SHIPPING LTD ITA NO.598 OF 2009 DECIDED ON 24.7.2009, COPY OF WHICH HAS BEEN PLACED AT PAGE 29 OF THE PAPER BOOK FILED WITH THE PRESENT MISCELLANEOUS APPLICATION. 4. A PERUSAL OF THE ABOVE POINTED MISTAKES BY THE ASSESSEE REVEALS THAT THE SAME DO NOT FALL IN THE DEFINITION OF ANY MISTAKE APPARENT ON THE RECORD AS HAS BEEN ALLEGED BY THE ASSESSEE. THE ABOVE NOTED SUBMISSIONS , AT THE MOST CAN BE SAID TO BE THE ARGUMENTS ON MERITS OF THE CASE , WHICH HA S ALREADY BEEN ADJUDICATED BY US VIDE IMPUGNED ORDER. THE ASSESSEE THROUGH THIS RECTIFICATION APPLICATION HAS RAISED ISSUES RELATING TO FACTUAL MATRIX OF THE CASE. SO FAR THE OBSERVATION S MADE IN PARA 8 OF THE IMPUGNED ORDER AS PLEADED BY THE APPLICANT M.A. NO.356/M/2013 (ITA NO.6742/M/2011) M/S. DEFIANCE CLOTHING COMPANY 4 IN PARA 7 OF THE PRESENT MISCELLANEOUS APPLICATION ARE CONCERNED , THE SAID OBSERVATION S W ERE MADE BY THE TRIBUNAL WHILE APPRECIATING THE FACTS OF THE CASE AND THOSE OBSERVATIONS WERE NOT ONLY RELATING TO T HE ISSUE INVOLVED BUT ALSO IN CONTEXT TO THE ISSUE OF DEPRECIATION CLAIM ED BY THE ASSESSEE WHICH THE TRIBUNAL ULTIMATELY FOUND TO BE NOT ALLOWABLE TO THE ASSESSEE COMPANY. 5. AFTER HEARING THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE AND AFTER G OING THROUGH THE IMPUGNED ORDER, WE MAY FURTHER OBSERVE THAT THOUGH THE ASSESSEE HAD MADE HIS SUBMISSIONS BEFORE THE LOWER AUTHORITIES WHICH WERE REPRODUCED BY THE AO IN HIS ORDER, HOWEVER THOSE SUBMISSIONS WERE NEVER ACCEPTED BY THE LOWER AUTHORITIES WHIL E DISALLOWING THE CLAIM OF THE ASSESSEE. MERELY REPRODUCTION OF THE SUBMISSIONS OF THE ASSESSEE DOES NOT INFER THAT THE SAME HAVE BEEN ADMITTED BY THE LOWER AUTHORITIES . ITS REPRODUCTION WAS JUST TO ELABORATELY DISCUSS AND DECIDE THE CONTENTIONS RAISED B Y THE ASSESSEE AND NOTHING MORE THAN THAT . A FTER MAKING ELABORATE DISCUSSION REGARDING THE SUBMISSIONS MADE BY THE ASSESSEE , THE LOWER AUTHORITIES DISCARDED THE CONTENTIONS OF THE ASSESSEE AND MADE THE DISALLOWANCE. SO THERE WAS NEITHER ANY WRONGFUL ASSUM PTION OF FACT NOR THE TRIBUNAL HAS GONE BEYOND ITS JURISDICTION WHILE DECIDING THE APPEAL OF THE ASSESSEE ON MERITS. 6. SO FAR THE ORDER OF THE HONBLE HIGH COURT IN THE CASE OF G.R. SHIPPING LTD. (SUPRA) IS CONCERNED, IT MAY BE OBSERVED THAT THE DISPUT E BEFORE THE HONBLE HIGH COURT WAS REGARDING THE ELIGIBILITY OF DEPRECIATION ON THE ASSETS WHICH WERE USED BY THE ASSESSEE IN THAT CASE IN THE PREVIOUS YEAR BUT SOME OF THE ASSETS COULD NOT BE USED BY THE ASSESSEE DURING THE SUBSEQUENT ASSESSMENT YEAR BUT THE SAME WERE ENTERED INTO THE BLOCK OF ASSETS. THE HONBLE HIGH COURT UPHELD THE FINDING OF THE TRIBUNAL WHERE BY THE TRIBUNAL HELD THAT ONCE THE ENTIRE PROJECT HAD COMMENCED THE BUSINESS OPERATION, JUST BECAUSE PART OF IT WAS NOT LEASED OUT OR COMMERCIA LLY EXPLOITED DURING THE RELEVANT YEAR, COULD M.A. NO.356/M/2013 (ITA NO.6742/M/2011) M/S. DEFIANCE CLOTHING COMPANY 5 NOT BE A BASIS FOR DISALLOWING OF DEPRECIATION AND EXPENDITURE. HOWEVER, THE FACTS OF THE CASE IN HAND ARE QUITE DIFFERENT. A CATEGORICAL FINDING HAS BEEN GIVEN BY THE TRIBUNAL THAT THE MACHINERY IN QUESTION WAS NEVER USED BY THE ASSESSEE COMPANY . IT WAS USED ONLY BY THE SISTER CONCERN OF THE ASSESSEE COMPANY AND THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEPRECIATION ON THE SAID MACHINERY. VIDE IMPUGNED ORDER , THE TRIBUNAL HAS NOT ONLY CONSIDERED THE SUBMISSIO NS OF THE ASSESSEE BUT HAS GIVEN A CATEGORICAL FINDING ON ALL OF THE ISSUES WHICH WERE RAISED BEFORE THE TRIBUNAL BY THE LD. COUNSEL FOR THE ASSESSEE. NEITHER ANY NEW FACT NOR ANY LAW HAS BEEN BROUGHT BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US , WHICH M AY BE SAID TO BE ESCAPED THE ATTENTION OF THE TRIBUNAL WHILE DECIDING THE APPEAL OF THE ASSESSEE ON MERITS VIDE IMPUGNED ORDER. THIS TRIBUNAL HAS NO JURISDICTION TO RECALL OR REVIEW ITS ORDER PASSED ON MERITS WHILE DEALING WITH AN APPLICATION UNDER SECTIO N 254(2) OF THE INCOME TAX ACT. IF THE ASSESSEE HAS ANY GRIEVANCE AGAINST THE IMPUGNED ORDER , PROPER COURSE TO AGITATE THE SAME IS BY FILING AN APPEAL BEFORE THE NEXT APPELLATE AUTHORITY BUT NOT WITH THE PRESENT APPLICATION UNDER SECTION 254(2) OF THE INC OME TAX ACT. THE OTHER CONTENTIONS RAISED BY THE ASSESSEE THROUGH THIS APPLICATION HAVE ALREADY BEEN DULY CONSIDERED AND ADJUDICATED IN THE IMPUGNED ORDER AND WE DO NOT FIND ANY MISTAKE APPARENT ON THE RECORD OF THE SAID ORDER WHICH MAY REQUIRE ANY RECTIFICATION. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE PRESENT MISCELLANEOUS APPLICATION OF THE APPLICANT/ASSESSEE AND THE SAME IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.01. 201 4 . SD/ - SD/ - ( P.M. JAGTAP ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 29.01. 201 4 . * KISHORE M.A. NO.356/M/2013 (ITA NO.6742/M/2011) M/S. DEFIANCE CLOTHING COMPANY 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.