Income Tax Appellate Tribunal - Indore
Panjwani Packaging P.Ltd, Indore vs Assessee on 21 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARMA, A.M.
PAN NO. : AADCP3506G
I.T.A.No.319 to 324/Ind/2011
A.Ys. : 1987-88 to 1993-94
ACIT, Panjwani Packaging
3(1), Private Limited,
Indore. Indore
vs
Appellant Respondent
C.O.Nos.04 to 07/Ind/2012.
(Arising out of I.T.A.Nos.319, 322, 323 & 324/Ind/2011
A.Ys. : 1987-88 to 1993-94
Panjwani Packaging ACIT,
Private Limited, 3(1),
Indore Indore.
vs
Cross Objector Respondent
Department by : Shri Keshav Saxena, CIT DR
Respondent by : Shri K. C. Agarwal & Shri Sandeep
Garg, CAs
Date of Hearing : 21.03.2012
Date of : 26.03.2012
pronouncement
ORDER
-: 2: -
PER R. C. SHARMA, A.M.
These are the appeals filed by the Revenue and cross objections by the assessee against the order of CIT(A) for the assessment year 1987-88 to 1993-94.
2. Rival contentions have been heard and records perused. Facts of the case are that there was search at business premises of the assessee u/s 132 on 10.8.1992. As a result of search, while framing assessment, various additions and disallowances were made in the first round, the CIT(A) deleted part of additions so made, the Tribunal restored the various issues raised before it by the assessee and Revenue to the file of Assessing Officer vide order dated 21st January, 2010 and directed the Assessing Officer to re-decide all the issues after giving due opportunity of being heard to the assessee. Against the assessment so framed by the Assessing Officer as per the directions of Tribunal, the Revenue is in further appeal against the additions deleted by the ld.CIT(A) and the assessee has also filed cross objections for the same. Most of the grounds taken in appeal before us are common in 2
-: 3: -
all the years, we, therefore, decide all the appeals by this consolidated order.
3. In the assessment year 1987-88, the assessee is aggrieved for disallowance of claim of investment allowance u/s 32A at Rs. 8,37,864/-, which was restricted by the Assessing Officer to the extent of Rs. 66,079/-. From the record, we found that during the year, the assessee has claimed investment allowance on the new plant and machinery installed during the period 25.8.1985 to 31.8.1986. However, the Assessing Officer treated the previous year of the company as starting from 1.4.1986 to 31.8.1987. Thus, only the investment allowance pertaining to new plant and machinery installed during the period 1.4.1986 to 31.8.1986 was allowed. As the previous year of the assessee was starting from 25.8.1985 to 31.8.1986, all the investment made during this period was eligible for claim of deduction u/s 32A. Thus, we do not find any infirmity in the order of CIT(A) for allowing claim of investment allowance in respect of investment made during the period starting from 25.8.1985 to 31.8.1986 relevant to assessment year 1987-88 under consideration. 3
-: 4: -
4. In the result, first ground in Revenue's appeal stands dismissed.
5. Next common issue raised by the Revenue in all the years pertains to CIT(A)'s action in accepting assessee's claim u/s 80HH and 80-I on the business profit of the company.
6. Facts of the case are that in the original return filed by the assessee, there was loss, therefore, no claim of deduction u/s 80HH & 80I was filed. As a result of trading addition made by the Assessing Officer, the assessee filed its claim for deduction u/s 80HH & 80I on the profit so worked out.
However, by relying on the decision of the Hon'ble Supreme Court in the case of Goetz (India) Limited, 157 Taxman 1, the Assessing Officer declined the claim. Before the CIT(A) , it was contended that requirement for eligibility of deduction u/s 80HH & 80I, were furnished at the time of assessment proceedings, therefore, the Assessing Officer should have allowed deduction u/s 143(3). As the total income was worked out at positive income, the CIT(A) directed for allowing claim of deduction u/s 80HH & 80I while giving appeal effect. We do not find any infirmity in the direction of the CIT(A). However, 4
-: 5: -
we modify the directions given by the ld.CIT(A) and direct the Assessing Officer to allow claim of deduction u/s 80HH & 80I only on the eligible profit of the industrial undertaking worked out as per law.
7. Last grievance of the Revenue in all years relates to allowing telescopic credit by the ld.CIT(A).
8. From the record, we found that before the CIT(A), the assessee has come out with detailed submission, wherein it was claimed that they have not challenged the addition made on estimation of net profit at 12 % turnover and thereby there were additions without corresponding use of such funds, which were available with the assessee company for further use and hence was eligible for allowance of credit of the same.
After giving detailed finding in para 4.14.1, the CIT(A) directed to allow telescopic credit of such additions. Precise observations of CIT(A) was as under :-
"4.14.1 I have gone through the submissions of the assessee and legal position of the case and find force in the contention of the assessee and considering the fact that the assessee has given the 5
-: 6: -
working of available telescopic credit for different years and also the fact that the additions so made have not been challenged and no credit of such additions have been granted in any of the assessment years and so also, considering the fact and direct of the assessee company has given the unconditional declaration that they will never agitate the point related to estimation of net profit before any authority, I hereby allow the telescopic credit for such additions. It is noted that the additions on most of the items stands deleted, the Assessing Officer while giving appeal effect is directed to take into, account the telescopic adjustment, if the need be, to work out the total income. The issue is decided in the favour of the assessee."
9. We have considered the rival contentions and do not find any infirmity in the precise directions given by the 6
-: 7: -
ld.CIT(A) for allowing telescopic credit as per para 4.14.1 reproduced hereinabove.
10. In the result, grounds taken by the Revenue with respect to claim of deduction u/s 80HH & 80I and granting of telescopic credit in all the years under consideration are dismissed.
11. In the assessment year 1990-91, the Revenue has taken ground for deleting addition of Rs. 2,40,673/- made on account of unexplained, unsecured loans of Rs. 4,80,673/-.
12. Rival contentions have been heard and records perused. The Assessing Officer has made addition of Rs. 2,76,485/- in the assessment year 1987-88 and Rs. 4,80,673/- in the assessment year 1990-91 in respect of loan taken from Shri Namdeo Panjwani, who was Managing Director of the Company. The assessee has furnished not only loan confirmation letter but also assessment order of Shri Namdeo Panjwani. By the impugned order, the CIT(A) confirmed the addition of Rs. 2.40 lakhs and deleted addition of Rs. 2,40,673/- after having the following observations :- 7
-: 8: -
"4.2.1 The issue is considered. From the records, I find that in assessment year 1987-88, the addition amounting to Rs. 2,76,485/- was made towards the unexplained loans from Shri N.P.Panjwani and in assessment year 1989-90 the addition of Rs. 9,19,667/- were made as unexplained loan from Smt. Jayshri Panjwani and Shri Kamal Panjwani. The assessee has not challenged this addition of Rs. 9,19,667/-. Further, in assessment year 1990-91, the total loan from Shri N.P. Panjwani, Smt. Jayshri Panjwani and Shri Kamal Panjwani at the close of the year stood at Rs. 11,59,667/-. All the three persons are family members. It is contended that in assessment year 1990-91, the additions should have been restricted to the difference amount of Rs. 2,40,000/- as the loan from Shri Jayshri Panjwani amounting to Rs. 5,80,673/- in assessment year 1989-90 had reduced to Rs. 3,40,000/- in 1990-91 and as such the difference Rs. 2,40,673/- and the difference 8
-: 9: -
was available in the family which was re-deposited in the name of Shri N.P.Panjwani. I have considered the fact narrated by the assessee. I do not find any infirmity in the finding of the Assessing Officer for the assessment year 1987-88 and as such the addition of Rs. 2,76,485/- towards unexplained loan from Shri N.P.Panjwani stands confirmed. In respect of assessment year 1990-91, I do agree with the contention raised by the assessee that the additions to the extent of difference amount of Rs. 2,40,000/- could have been made. In view thereof, the addition to the extent of Rs. 2,40,000/- is confirmed in assessment year 1990-91. The assessee would get relief of Rs. 2,40,673/- in that year."
13. From the record, we found that amount of loan was given by the Managing Director of the company, Shri N.P.Panjwani. As per finding recorded by CIT(A), N.P. Panjwani was having funds of Rs. 2,40,673/- out of addition made in the name of other family members. During the assessment 9
-: 10: -
year 1990-91, the assessee company has credited only Rs. 2.40 lakhs out of total balance of Rs. 4,80,673/-. We, therefore, do not find any infirmity in the order of CIT(A) for confirming addition of Rs. 2,40,000/- and deleting the balance addition of Rs. 2,40,673/-, which was found to be available with N.P. Panjwani.
14. In the assessment year 1992-93, the Revenue is aggrieved by the action of the CIT(A) in accepting assessee's claim regarding deposit in Banks amounting to Rs. 1,42,000/- relying on the Bank statement.
15. Rival contentions have been heard and records perused. From the record, we found that additions were made of cash credit in the cash book seized in Annexure C/32 of Rs. 37,000/- in assessment year 1991-92, Rs. 5,38,000/- ( Rs. 4,50,000/- plus Rs. 88,000/-) in annexure C/36 and Rs. 1,42,000/- ( Rs. 1,00,000/- plus Rs.42,000/-) in annexure B/11 and B/12 in assessment year 1992-93. The assessee came up with reply that Rs. 37,000 credited in the cash book in annexure C/32 was received from debtors as the sales of M/s. Panjwani Plastics and Polyesters. Similarly, it was stated 10
-: 11: -
that Rs. 4,50,000/- and Rs. 88,000/- were received from Shri Jagdish Bhutia and these are also received on account of sales realization. It was further explained that Rs. 1,00,000/- and Rs. 42,000/- found in annexure B/11 and B/12 is not cash credit but, cash deposited in the bank out of the cash balance available in the cash book. The assessee furnished the copy of bank account and the order of assessment year 1989-90 in this context.
16. By the impugned order, the CIT(A) deleted addition of Rs. 1,42,000/- by observing that deposit in the Bank account was not cash credit but sales realization. However, the CIT(A) confirmed the addition of Rs. 37,000/- in the assessment year 1991-92 by observing that sales transaction was not found recorded in the seized sales register 'A/1, A/2 & A/3'. The ld.CIT(A) at para 4.9.1 in assessment year 1992-93 also confirmed addition of Rs. 5,38,000/-. The assessee has not filed any cross objection against addition confirmed by CIT(A). Nothing was also brought on record by ld. Senior DR to dislodge the finding of CIT(A) that deposit of Rs. 1,42,000/- in 11
-: 12: -
bank account was out of sale proceeds. Accordingly, we do not find any infirmity in the order of CIT(A).
17. In the assessment year 1993-94, the Revenue is aggrieved for deletion of addition of Rs. 5,00,577/- on account of unexplained expenditure u/s 69C. In this regard, the Assessing Officer found that amount of expenses debited on account of public issue was Rs. 41,80,021/-, whereas amount of expenditure as per seized material was only Rs.36,79,444/-. Thus, the difference of Rs. 5,00,570/- was treated as unexplained. CIT(A) deleted the addition by observing that the assessee has properly debited expenditure on public issue in the books of account, no disallowance can be made only on the plea that in the seized material lower expenses were found recorded. Whatever expenditure were incurred, the same have been duly claimed in the profit and loss account. Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the addition of Rs. 5,00,570/- on account of public issue expenses.
12
-: 13: -
18. Next grievance of the Revenue in the assessment year 1993-94 relates to deletion of addition of Rs. 7,05,475/- on account of valuation of stock.
19. From the record, we found that on the date of search, stock of the assessee was physically taken and the same was valued at Rs. 17,05,475/-. By the impugned order, the CIT(A) deleted the addition of Rs. 7,05,475/- by observing that the assessee was having closing stock valuing Rs. 22,07,850/- as on 31st March, 1992. However, no reconciliation of purchase, sale and closing stock was given for the period 1.4.1992 to 10.8.1992. The CIT(A) confirmed addition of Rs. 10 lakhs and deleted remaining amount of Rs. 7,04,575/-. Both the assessee and Revenue are before us.
20. Rival contentions have been heard and records perused. Addition has been made by the Assessing Officer on the basis of valuation of stock arrived at at the time of search on 10.8.1992. As the assessee could not properly explain as to which firm the stock was belonging nor could reconcile the same with the entries in the books of account, the Assessing 13
-: 14: -
Officer added entire amount of stock found during course of search as unexplained income of the assessee.
21. The CIT(A) on estimate basis deleted the addition of Rs. 7,05,475/- and confirmed the balance addition of Rs. 10 lakhs. No definite basis has been given by the ld.CIT(A) for deleting the addition of Rs. 7,05,475/-. The CIT(A) himself has stated in his appellate order that the assessee has not furnished any reconciliation of purchase, sale and closing stock between the period 1.4.1992 to 10.8.1992. There appears to be no basis for arriving at conclusion that the assessee has explained stock of Rs. 7,05,475/-. Whenever any discrepancy is found in the valuation of stock physically taken during survey or search as compared to the stock recorded in the regular books of account, the onus is on the assessee to explain the difference. Merely by observing that as on 31st March 1992, the assessee was having stock of Rs. 25,05,325/- , it cannot be said that the stock as on the date of search, was explained to the tune of Rs. 7,05,475/-, without filing any reconciliation of purchases and sale made during the period 1.4.1992 to 10.8.1992. The fact that the assessee was also 14
-: 15: -
enjoying working capital limit of Rs. 23.75 lakhs from State Bank of Indore, against hypothecation of stock, also cannot be brushed aside, which is an important evidence of assessee having possessed stock in terms of working capital limit availed by him against the said stock. In the interest of justice and fair play, we restore the ground raised by the assessee and Revenue both to the file of the Assessing Officer with the direction to the assessee to furnish reconciliation of stock by incorporating opening stock as on 31.3.1992 and the purchase and sale made during the period 1.4.92 to 10.8.92. The Assessing Officer is directed to decide the issue afresh in terms of our above observations.
22. In the cross objection filed for the assessment year 1987-88, the assessee is aggrieved for addition of Rs. 1.50 lakhs invested by Smt. Sapna Panjwani and Rs. 1,10,000/- by Yeshwant Panjwani. As the amount has been invested by Directors/close relatives of the Director in share capital of the assessee whose identity is not in dispute, in view of the decision of Hon'ble Supreme Court in the case of Lovely Exports, we do not find any merit in the addition of this 15
-: 16: -
amount in the hands of the assessee company. However, the Department is at liberty to examine the availability of funds in the hands of respective persons Smt. Sapna Panjwani and Yeshwant Panjwani who have contributed the amount as share capital. We direct accordingly.
23. Other cross objections were not pressed by the ld.
Authorized Representative during the course of hearing and the same are general in nature, therefore, dismissed in limine.
24. In the result, both the appeals of the Revenue and cross objections are allowed in part in terms indicated hereinabove.
This order has been pronounced in the open court on 26th March, 2012.
sd/- sd/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 26th March, 2012. CPU* 2126 16