Income Tax Appellate Tribunal - Ahmedabad
Relish Pharmaceuticls Ltd.,, ... vs Assessee on 30 December, 2014
आयकर अपीलȣय अͬधकरण, अहमदाबाद Ûयायपीठ ''ए'', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" A " BENCH, AHMEDABAD
सम¢ Įी एन.एस.सैनी, लेखा सदèय एवं Įी कुल भारत, ÛयाǓयक सदèय ।
BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER And
SHRI KUL BHARAT, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. No.1130/Ahd/2011
( Ǔनधा[रण वष[ / Assessment Year : 2007-08)
The Dy.CIT, बनाम/ Relish Pharmaceuticals Ltd.
th
Circle-5 Vs. 1/2, 4 Floor, Moonlight
Ahmedabad Complex
Opp. Gurukul Tower
Drive-in-Road, Ahmedabad
èथायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAACR 5476 N
(अपीलाथȸ /Appellant) .. (Ĥ×यथȸ / Respondent)
And
CO No.107/Ahd/2011 for AY 2007-08
(In ITA No.1130/Ahd/2011 for AY 2007-08)
Relish Pharmaceuticals Ltd. vs. The Dy.CIT
Ahmedabad Ahmedabad
(Cross Objector .... (Respondent)
Revenue by : Shri B.Kulshrestha, Sr.DR
Assessee by : -None-
सन
ु वाई कȧ तारȣख / Date of Hearing 10/12/2014
घोषणा कȧ तारȣख /Date of Pronounce ment 30/12/2014
आदे श / O R D E R
PER SHRI KUL BHARAT, JUDICIAL MEMBER :
The Revenue and the Assessee both have challenged the order of the Commissioner-of Income Tax (Appeals)-XI, Ahmedabad ('CIT(A)' in short) dated 15/02/2011 pertaining to Assessment Year (AY) 2007-08 by way of appeal and cross-objection respectively. Both the appeal and ITA No.1130/Ahd/2011 (By Revenue) and CO No.107/Ahd/2011 (By Assessee) DCIT vs. Relish Pharmaceuticals Ltd.
Asst.Year - 2007-08 -2- the cross objection are taken up together and are being disposed of by this consolidated order for the sake of convenience.
2. First, we take up the appeal filed by the Revenue, i.e. ITA No.1130/Ahd/2011 for AY 2007-08. The Revenue has raised the following grounds of appeal:-
1. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of ₹ 16,03,831/- out of interest expenses.
2. The Ld.CIT(A) has erred in law and on facts in deleting the addition of ₹ 1,04,802/- made on account of discrepancy in AIR.
3. On the facts and circumstances of the case, the Ld.Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer.
4. It is, therefore, prayed that the order of the Ld.Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored.
2.1. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 25/11/2009, thereby the Assessing Officer (AO in short) made disallowance of interest on loans and advances amounting to Rs.16,03,831/- and disallowance on account of transaction made with M/s.J.B. Chemicals & Pharmaceuticals Ltd. amounting to Rs.1,04,802/-.
The AO had also made disallowance on account of late payment of PF & ITA No.1130/Ahd/2011 (By Revenue) and CO No.107/Ahd/2011 (By Assessee) DCIT vs. Relish Pharmaceuticals Ltd.
Asst.Year - 2007-08 -3- ESI Contribution amounting to Rs.23,736/- Against this, the assessee filed an appeal before the ld.CIT(A), who after considering the submissions, partly allowed the appeal. While allowing the appeal, the ld.CIT(A) confirmed the disallowance made on account of employees' contribution towards PF/ESI as the same was not deposited in the Government Account within the stipulated time. However, the ld.CIT(A) deleted the disallowance of Rs.16,03,831/- and Rs.1,04,802/-. Now, before us, both the Revenue and Assessee are in appeal and cross- objection respectively.
3. During the course of hearing, no one appeared on behalf of the assessee. It is observed that the assessee had filed an application on 19/06/2014, wherein it has been submitted that due to unavoidable circumstances, the assessee was not in a position to appear before this Tribunal on the date of hearing, i.e. on 27/06/2014. The hearing of appeal was adjourned to 11/08/2014 on request application of the assessee. The assessee made another application dated 07/08/2014 making a similar submission that due to unavoidable circumstances, the assessee was not in a position to appear before the Tribunal on the date fixed on 11/08/2014. On 11/08/2014, the matter was adjourned to 22/09/2014. On 22/09/2014, the matter was further adjourned to 31/10/2014. The assessee filed an application dated 30/10/2014 making similar prayer that due to unavoidable circumstances, the assessee was not in a position to appear before the Tribunal on the date fixed. The appeal was fixed for hearing on 10/12/2014. The assessee has neither filed any adjournment application nor appeared before the Tribunal.
ITA No.1130/Ahd/2011 (By Revenue)and CO No.107/Ahd/2011 (By Assessee) DCIT vs. Relish Pharmaceuticals Ltd.
Asst.Year - 2007-08 -4- Thus, from the records, it is transpired that the assessee is making frivolous applications seeking adjournment without any reasonable cause. Under these facts, it appears that the assessee is not interested in prosecuting the cross objection and making any defense in respect of the appeal filed by the Revenue. Therefore, the appeal of the Revenue as well as the cross-objection filed by the assessee were taken up for hearing in the absence of the assessee.
4. First ground of the Revenue's appeal is against deletion of disallowance of Rs.16,03,831/- out of interest expenses. The ld.Sr.DR Shri B.Kulshrestha vehemently argued that the order of the ld.CIT(A) is not justified. He submitted that the finding of the ld.CIT(A) is categorically contradictory to the records. He submitted that the ld.CIT(A) has given a finding that the AO has not established that the interest-bearing funds were advanced as interest-free funds. He pointed out that in the submission of the assessee, the assessee has shown the position of the balance in respect of capital accumulated profit and balance of creditors as under:-
Capital 89862000
Accumulated Profit -94007128
Balance of creditors 34525023
Total 30379895
Advances given 16090849
4.1. The ld.Sr.DR also submitted that the order of the ld.CIT(A) is cryptic and not a speaking order.
ITA No.1130/Ahd/2011 (By Revenue)and CO No.107/Ahd/2011 (By Assessee) DCIT vs. Relish Pharmaceuticals Ltd.
Asst.Year - 2007-08 -5-
5. We have heard the ld.Sr.DR, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has decided this issue by observing as under:-
"4.1. I have considered the submissions made by the A.R. of the appellant and the observations of the assessing officer in the assessment order. A.O. has not established that interest- bearing funds were advanced interest-free. In the absence of such nexus being established, the disallowance of interest (at the notional rate of 11%) cannot be sustained. It is deleted. This ground of appeal is allowed."
5.1. After considering the totality of the facts as well as the material on record, we find that the order of the ld.CIT(A) is non-speaking, hence cryptic. Moreover, the finding as given by the ld.CIT(A) that the AO has not established that the interest-bearing funds were advanced as interest- free funds which is contrary to records. We find that the AO has given finding that the assessee had given a total loans and advances amounting to Rs.1,60,90,948/- on which the assessee has not charged interest on some of the advances. Moreover, the finding that the assessee was having sufficient interest-free funds is also not correct. It is pointed out by the AO that the advance given to M/s. M.P.Builders in connection with advance for capital goods. Similarly, other advances are amounting to Rs.93,42,143/- on which no break-up is given. Under these facts, we are of the considered view that the ld.CIT(A) was not justified in deleting the disallowances, therefore, the order of the ld.CIT(A) on this issue is set aside and the disallowances made by the AO are hereby confirmed. Thus, this ground of Revenue's appeal is allowed.
ITA No.1130/Ahd/2011 (By Revenue)and CO No.107/Ahd/2011 (By Assessee) DCIT vs. Relish Pharmaceuticals Ltd.
Asst.Year - 2007-08 -6-
6. Second ground of Revenue's appeal is against deletion of addition of Rs.1,04,802/- made on account of discrepancy in AIR.
7. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in deleting the disallowances. He submitted that the AO has given a categorical finding that the transaction as mentioned has been reported by M/s.J.B.Chemicals in the Annual Information Return (AIR) and so to that extent, there was discrepancy in the same in the account furnished by the assessee. He submitted that the ld.CIT(A)'s order on this issue is cryptic as deleted the addition that the AO did not make any enquiry with M/s.J.B.Chemicals in respect of the explanation of the assessee.
8. We have heard the ld.Sr.DR, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has decided this issue by observing as under:-
"5.2. In have considered the submissions made by the A.R. of the appellant and the observations of the assessing officer in the assessment order. Appellant's contentions are tenable. A.O. did not make any inquiry with M/s.J.B.Chemicals. Appellant's explanation before the A.O. (mentioned at para-5 of the assessment order) remains uncontroverted. Hence, impugned addition is unwarranted. It is deleted. This ground of appeal is allowed."
8.1. After considering the submissions of the ld.Sr.DR and perusal of the material available on record, we are of the considered view that the ld.CIT(A) while deleting the addition as it was incumbent upon the ITA No.1130/Ahd/2011 (By Revenue) and CO No.107/Ahd/2011 (By Assessee) DCIT vs. Relish Pharmaceuticals Ltd.
Asst.Year - 2007-08 -7- assessee to reconcile the discrepancy, if any. We find that the assessee has grossly failed to do so, therefore, the order of the ld.CIT(A) is set aside and the finding of the AO is confirmed. Thus, this ground of the Revenue's appeal is allowed.
9. Ground Nos.3 & 4 are general in nature require no independent adjudication.
10. In the result, Revenue's appeal is allowed.
11. Now, we take up the Cross Objection No.107/Ahd/2011 for AY 2007-08 filed by the assessee (out of ITA No.1130/Ahd/2011 for AY 2007-08), wherein following grounds have been raised by the assessee:-
1. The learned CIT(A) has grossly erred in law and facts is passing the order.
2. In law and in the facts and circumstances in the case of respondent, the honorable Commissioner of income Tax (Appeals) has grossly erred in confirming disallowance of Rs.23736 PF and ESI expenses u/s.43B of the Act.
12. Apropos to Ground No.1, none appeared on behalf of the assessee despite having been given various opportunities. Therefore, we are of the view that the assessee is not interest in prosecuting this ground. Thus, this ground raised in the cross-objection filed by the assessee is rejected.
13. Ground No.2 of cross-objection is against the confirmation of disallowance of Rs.23,736/- in respect of the contribution of PF & ESI by ITA No.1130/Ahd/2011 (By Revenue) and CO No.107/Ahd/2011 (By Assessee) DCIT vs. Relish Pharmaceuticals Ltd.
Asst.Year - 2007-08 -8- invoking the provisions of section 43B of the Act. The ld.Sr.DR supported the order of the CIT(A) and submitted that the order of the ld.CIT(A) is justified. He further submitted that the issue is no more res integra as the Hon'ble Jurisdictional High Court has decided the issue in favour of the Revenue in the case of CIT vs. Gujarat State Road Transport Corporation reported at (2014) 366 ITR 170 (Guj.).
14. We have heard the ld.Sr.DR perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has decided this issue vide para-3.2 of his order by observing as under:-
"3.2. I have considered the submissions made by the A.R. of the appellant and the observations of the assessing officer in the assessment order. As regards employee's contribution, it is governed only by Sec.36(1)(va) and Sec.43B(b) and deletion of second proviso to Sec.43B have no application. As seen from the assessment order and as admitted by the appellant, there is delay in making payment. Appellant's contentions are general and vague. Hence disallowance of the said sum is upheld. This ground of appeal is dismissed."
14.1. We find that the issue is with regard to disallowance of payment towards employees' PF/ESI contribution. The Hon'ble Gujarat High Court rendered in the case of CIT vs. Gujarat State Road Transport Corporation reported at (2014) 366 ITR 170(Guj.), has held as under:-
ITA No.1130/Ahd/2011 (By Revenue)and CO No.107/Ahd/2011 (By Assessee) DCIT vs. Relish Pharmaceuticals Ltd.
Asst.Year - 2007-08 -9- "8.00. In view of the above and for the reasons stated above, and considering section 36(1)(va) of the Income Tax Act, 1961 read with sub-clause (x) of clause 24 of section 2, it is held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section (2) applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees' account in the relevant fund or funds on or before the "due date" mentioned in explanation to section 36(1)(va). Consequently, it is held that the learned tribunal has erred in deleting respective disallowances being employees' contribution to PF Account / ESI Account made by the AO as, as such, such sums were not credited by the respective assessee to the employees' accounts in the relevant fund or funds (in the present case Provident Fund and/or ESI Fund on or before the due date as per the explanation to section 36(1)(va) of the Act i.e. date by which the concerned assessee was required as an employer to credit employees' contribution to the employees' account in the Provident Fund under the Provident Fund Act and/or in the ESI Fund under the ESI Act.
Consequently, all these appeals are allowed and the impugned judgement and orders passed by the tribunal in deleting the disallowances made by the AO are hereby quashed and set aside and the disallowances of the respective sums with respect to the Provident Fund / ESI Fund made by the AO is hereby restored. The questions raised in present appeal are answered in favour of the revenue. With this, all these appeals are allowed."
15. Respectfully following the judgement of Hon'ble Jurisdictional High Court in the case of CIT vs. Gujarat State Road Transport Corporation(supra), this ground of cross objection filed by the assessee is dismissed.
ITA No.1130/Ahd/2011 (By Revenue)and CO No.107/Ahd/2011 (By Assessee) DCIT vs. Relish Pharmaceuticals Ltd.
Asst.Year - 2007-08
- 10 -
16. In the result, Revenue's appeal is allowed, whereas Cross- objection filed by the Assessee is dismissed.
Order pronounced in the Court on Tuesday, the 30th day of December, 2014 at Ahmedabad.
Sd/- Sd/-
(एन.एस.सैनी) (कुल भारत)
लेखा सदèय ÛयाǓयक सदèय
( N.S. SAINI ) ( KUL BHARAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 30/ 12 /2014
टȣ.सी.नायर, व.Ǔन.स./T.C. NAIR, Sr. PS
आदे श कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. Ĥ×यथȸ / The Respondent.
3. संबंͬधत आयकर आयुÈत / Concerned CIT
4. आयकर आयुÈत(अपील) / The CIT(A)-XI, Ahmedabad
5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER, स×याͪपत ĤǓत //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation - 16.12.14 (dictation-pad 16- pages attached at the end of this File)
2. Date on which the typed draft is placed before the Dictating Member ..23.12.14
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S.................
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.........30.12.14
7. Date on which the file goes to the Bench Clerk......................30.12.14
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................