Income Tax Appellate Tribunal - Pune
Deputy Commissioner Of Income-Tax ,, ... vs M/S. Tulsi Extrusions Ltd.,, on 19 July, 2019
आयकर अपीऱीय अधिकरण "सी" न्यायपीठ पण
ु े में ।
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, PUNE
BEFORE SHRI R.S.SYAL, VP AND
SHRI PARTHA SARATHI CHAUDHURY, JM
आयकर अपीऱ सं. / ITA No.1434/PUN/2014
नििाारण वषा / Assessment Year : 2010-11
Tulsi Extrusions Ltd.
N-99 & 100, MIDC Area,
Ajantha Road, Jalgaon,
Dist. Jalgaon, Pin-425 003
PAN : AAACT8441P
.......अऩीऱाथी / Appellant
बिाम / V/s.
The Joint Commissioner of Income Tax,
Range-1, Jalgaon.
......प्रत्यथी / Respondent
आयकर अपीऱ सं. / ITA No.1549/PUN/2014
नििाारण वषा / Assessment Year : 2010-11
The Deputy Commissioner of Income Tax,
Circle-1, Jalgaon.
.......अऩीऱाथी / Appellant
बिाम / V/s.
Tulsi Extrusions Ltd.
N-99, MIDC, Jalgaon,
Pin-425 003.
PAN : AAACT8441P
......प्रत्यथी / Respondent
Assessee by : Shri Sunil Ganoo
Revenue by : Ms. Kesang Y Sherpa
2
ITA No. 1434/PUN/2014
ITA No.1549/PUN/2014
A.Y.2010-11
सुनवाई की तारीख / Date of Hearing : 18.07.2019
घोषणा की तारीख / Date of Pronouncement : 19.07.2019
आदे श / ORDER
PER PARTHA SARATHI CHAUDHURY, JM :
These cross appeals preferred by the assessee and by the Revenue emanates from the order of the Ld. CIT(Appeals)-2, Nashik dated 27.05.2014 for assessment the year 2010-11 as per the grounds of appeal on record.
2. These cases were heard together. Since issues common, facts are similar, these cases are being disposed of vide this consolidated order. First, we would take issues in assessee‟s appeal in ITA No.1434/PUN/2014 for adjudication.
ITA No.1434/PUN/2014 ( By Assessee)
A.Y.2010-11
3. Ground No.1 relates to the disallowance of expenses made u/s.14A r.w.s. Rule 8D of the Income Tax Rules, 1962.
4. At the time of hearing, the Ld. AR of the assessee vehemently argued that during the year there was no exempt income and therefore, disallowance u/s.14A of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) is not warranted. Hence, it should be deleted. The Ld. AR of the assessee invited our attention to Schedule-11 which is part of Balance Sheet of the assessee‟s books of accounts placed before us in the paper book and demonstrated that there is no exempt income during the year in respect of the assessee. 3 ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014
A.Y.2010-11
5. We have perused the case records. We observe that in the submissions made before the Ld. CIT(Appeals), the assessee has categorically stated that as there is no exempt income earned by the assessee during the year, question of disallowance u/s.14A of the Act does not arise. For this proposition, the assessee has relied on the decision of the Hon‟ble Apex Court in the case of CIT Vs. Walfort Share & Stock Brokers (P) Ltd. reported in (2010) 41 DTR 233 wherein it was held that " for attracting section 14A, there has to be a proximate cause for disallowance which is its relationship with the tax exempted income. In absence of proximate cause for disallowance u/s.14A cannot be invoked. Further, We observe, the Hon‟ble Gujarat High Court in the case of CIT Vs. Corrtech Energy P. Ltd. reported in (2015) 372 ITR 97 ( Guj.) has categorically held that "expenditure cannot be disallowed u/s.14A of the Act if there is no exempt income." We also observe, the Hon‟ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT reported in (2015) 378 ITR 33 (Del) has held that "no exempted income was earned by the assessee in the relevant assessment year and since the genuineness of the expenditure incurred by the assessee was not in doubt, no disallowance could be made u/s.14A of the Act."
However, arguments of the Ld. AR did not find favour with the Ld. CIT(Appeals). He observed that earning of exempt income is not a criteria for making addition u/s.14A since it is a deeming provision. In our considered opinion, the Hon‟ble Apex Court in the case of CIT Vs. Walfort Share & Stock Brokers (P) Ltd. (supra.) has made it clear that there has to be proximate relationship between exempt income and disallowance u/s.14A of the Act. In this backdrop, we have examined the Schedule-11 of the Balance 4 ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014 A.Y.2010-11 Sheet of the assessee and we find that there is no exempt income during the year in respect of the assessee. Thus, we set aside the order of the Ld. CIT(Appeals) and direct deletion of disallowance made u/s.14A of the Act. Thus, ground No.1 raised in appeal by the assessee is allowed.
6. Ground No.2 is with regard to the addition on bogus purchase of machinery and interest thereon on borrowed funds.
7. The Assessing Officer on this issue after considering the submissions of the assessee which are on record observed and held that there is no evidence as to the fact that the machinery purchased reached at the site of the assessee premises. Further, the Assessing Officer stated that since the assessee has come forward and surrendered the amount, hence, addition is made towards the income of the entire amount of Rs.36 Lakhs and no penalty proceedings were initiated against the assessee. Further, since the above purchases is bogus and assessee has used borrowed money for the above purchase, therefore, interest over it calculated by the assessee at Rs.80,787/- was also disallowed.
8. The Ld. CIT(Appeals) upheld the addition of bogus purchases as well as interest disallowed on the amount taken for such purchases for two reasons:
(i) That the assessee had agreed for the said addition before the Assessing Officer and now the assessee cannot go back on it/ retract it.
(ii) The assessee did not prove the genuineness of the said purchase of machinery before the Assessing Officer nor adduce any other evidence during the Appellate proceedings in support of the purchases.5 ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014
A.Y.2010-11 During First Appellate proceedings, clear facts were not brought on record by the assessee nor he has adduced any direct or corroborative evidences in support of his contention.
9. At the time of hearing, the Ld. AR of the assessee on the issue of admission of addition with regard to the bogus purchases claimed it to be an ad-hoc acceptance and therefore, the assessee is not bound by it. For this proposition, the Ld. AR relied on the judgment of the Hon‟ble Bombay High Court in the case of The Commissioner of Income Tax, Mumbai Vs. M/s. Everest Kento Cylinders Ltd., Income Tax Appeal No.1165 of 2013 dated 8th May, 2015. The Ld. AR further submitted that the purchase of machinery so far as the assessee was concerned, is genuine one and from the seller from whom they had purchased, perhaps he may be a person on the wrong side of law but the assessee had always been a bona fide assessee. Therefore, genuineness of the purchase of machinery cannot be doubted. For this proposition, the Ld. AR of the assessee relied on the judgment of the Hon‟ble Gujarat High Court in the case of Pr. Commissioner of Income Tax, Surat-1 Vs. Tejua Rohitkumar Kapadia, Tax Appeal No.691 of 2017 dated 18.09.2017. 9.1 That regarding facts, establishing the genuineness of transaction, no evidences were produced before the Revenue Authorities in respect of the machinery being taken to the site of the assessee and installed therein and no other supporting or corroborative evidences showing that machinery was purchased were either produced by the assessee. The Ld. AR submitted further that sufficient opportunity was not given to the assessee and at the same time, the Revenue Authorities did not conduct independent enquiry regarding the matter. For this proposition, the Ld. AR relied on the decision of 6 ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014 A.Y.2010-11 the Hon‟ble Supreme Court of India in the case of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala and Another reported in (1973) 91 ITR 81 (SC) wherein it has been held that it is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity.
10. Per contra, the Ld. DR invited our attention to Page 56 of the Ld. CIT(Appeals)‟s order Para 12.2 and submitted that the assessee neither proved the said purchases before the Assessing Officer nor adduced any further evidences during the Appellate proceedings in support of the purchases. The assessee also failed to bring any sort of evidence which proves beyond doubt that the assessee had purchased the said machinery. The Ld. DR vehemently argued that these facts demonstrates that sufficient opportunities were provided to the assessee to support his case on merits through furnishing documentary corroborative/supporting evidences of which the assessee did not avail of. The Ld. DR further submitted that the Revenue Authorities have given sufficient opportunities to the assessee but the assessee himself is not keen on using these opportunities for establishing its own case. Therefore, the contention of the assessee that sufficient opportunity was not given, should not be accepted and disallowances made on this ground should be sustained.
11. We have perused the case records and heard the rival contentions. We have also considered the judicial pronouncements placed before us on record. It is an undisputed fact that no evidence is there on record to demonstrate that the machinery reached at the site of the assessee‟s premises. In both rounds of proceedings before the Assessing Officer and as well as before the 7 ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014 A.Y.2010-11 Ld. CIT(Appeals), the assessee was provided sufficient opportunity to provide supporting and corroborative documents regarding purchase of machinery but the assessee has not brought in any evidences on record regarding this purchase. Even, before us, the assessee could have furnished additional evidences which could have demonstrated in a way that the assessee‟s transactions were genuine and therefore, the acceptance of the addition made before the Assessing Officer was an ad-hoc one. However, no such evidences were brought on record by the assessee. The entire scenario clearly reflects that the assessee knew that the transactions were not genuine and therefore, in order to buy peace of mind it accepted the addition before the Assessing Officer and therefore, it in no circumstances, can be termed as ad-doc acceptance of the addition. It is rather well planed action on the part of the assessee. That further, the assessee with regard to the bogus purchases of machinery is only harping upon case laws but those judicial pronouncements have been decided based on specific evidences on record.
In the instant case, the assessee as clearly seen from the records, has not brought in any evidences as to the fact of showing the genuineness of the transactions in respect of purchase of machinery. In view of the matter, we find no infirmity with the findings of the Ld. CIT(Appeals) and the additions made on bogus purchases of machinery and interest thereon on borrowed funds are upheld. Thus, ground No.2 raised in appeal by the assessee is dismissed.
12. Ground No.3 is general in nature and hence, requires no adjudication.
13. In the result, appeal of the assessee in ITA No.1434/PUN/2014 is partly allowed.
8ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014
A.Y.2010-11 ITA No.1549/PUN/2014 (By Revenue) A.Y. 2010-11 Now, we take up the issues in the Revenue‟s appeal in ITA No.1549/PUN/2014 for adjudication.
14. Ground No.1 in Revenue‟s appeal is with regard to the deletion of the disallowance of expenditures in respect of professional fees paid which was in connection with the installation of a machinery or set up of new assets and was capital in nature.
15. The Assessing Officer in his order analyzed the entire expenses regarding expansion plan and new machinery set up providing entire details as appearing in his order and held that since these expenses were in the nature of capital expenditure, therefore, added to the total income of the assessee. The Ld.CIT(Appeals) deleted this addition stating that it is a revenue expenditure.
16. We have perused records and analysed the facts and circumstances on this issue. We have also given considerable thought to the findings arrived at by the Assessing Officer as well as by the Ld. CIT(Appeals). We observe in the findings of the Assessing Officer on perusal of the detailed chart provided for installation of machinery, all expenses are in the nature of capital expenditure. Therefore, we reverse the findings of the Ld. CIT(Appeals) and uphold the order of the Assessing Officer. The additions made by the Assessing Officer are therefore sustained. Thus, ground No.1 of the Revenue's appeal is allowed.
9ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014
A.Y.2010-11
17. Ground No.2 in Revenue‟s appeal is with regard to the deletion of addition made under Section 40A(3) of the Act.
18. The Ld. CIT(Appeals) on this issue observed that the Assessing Officer made addition of Rs.1,50,000/- invoking provisions of Section 40A(3) of the Act in respect of cash payments made each of Rs.75,000/- on 15.07.2009 and 18.07.2009 to Shri Vasant Waman Sinkar. The assessee has explained that this amount was paid as per Consumer Dispute Redressal Forum of Jalgaon‟s order dated 11.11.2005 and also filed supporting evidences and copy of order of Consumer Dispute Redressal Forum. The Ld. CIT(Appeals) allowed the payments though made in contravention to Section 40A(3) of the Act only because of the fact that the payments were made as per directions given by the Consumer Dispute Redressal Forum of Jalgaon.
19. We observe that on perusal of the relevant documents and facts on records that the exceptions available in respect to section 40A(3) of the Act are provided in Rule 6DD of the Income Tax Rules, 1962. We have perused the exceptions as contained therein and we find that the criteria for which the Ld. CIT(Appeals) has allowed the amount though it is in contravention to Section 40A(3) of the Act, is not supported by any exceptions covered under Rule 6DD of the Income Tax Rules, 1962. The legislature in its own wisdom has created the provision of Section 40A(3) of the Act and even though the objective is to curb black money transactions, in additions to it, Rule 6DD is also provided by the legislature stating specific exceptions under which payments can be made in contravention to Section 40A(3) of the Act. The payment made in pursuance to Consumer Dispute Redressal Forum order is not an exception under Rule 6DD.
10ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014
A.Y.2010-11 In view of the matter, we reverse the findings of the Ld. CIT(Appeals) on the issue and uphold the findings of the Assessing Officer. The additions made by the Assessing Officer u/s.40A(3) of the Act is therefore sustained. Thus, ground No.2 raised in appeal by the Revenue is allowed.
20. Grounds No. 3 to 6 in Revenue‟s appeal is with regard to the findings of the Ld. CIT(Appeals) that in the case of the assessee there cannot be any rejection of books of accounts u/s.145 (3) of the Act and thereby, deleting the addition made by the Assessing Officer on account of extra profit on manufacturing sale at Rs.5,74,73,362/- and also deleting the addition made on account of unexplained investment towards extra production of Rs.5,32,85,323/-.
21. Both the parties agreed that the facts and circumstances and grounds are similar to that of the assessee‟s case in ITA No.556/PUN/2013 and ITA No.823/PUN/2013 for assessment year 2009-10. That regarding these issues in assessment year 2009-10, the Tribunal has accepted the findings of the Ld. CIT(Appeals) and deleted all the additions from the hands of the assessee. Since facts and issues are common for this year also, the decision rendered in ITA No.556/PUN/2013 and ITA No.823/PUN/2013 for assessment year 2009-10 shall apply mutatis-mutandis for this assessment year i.e. 2010-11 also in ITA No.1549/PUN/2014. Therefore, grounds No. 3 to 6 raised in appeal by Revenue are dismissed.
22. Grounds No. 7, 8 and 9 are general in nature and hence, requires no adjudication.
11ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014
A.Y.2010-11
23. In the result, appeal of the Revenue in ITA No.1549/PUN/2014 is partly allowed.
24. In the combined result, appeal of the assessee in ITA No.1434/PUN/2014 and appeal of the Revenue in ITA No.1549/PUN/2014 are partly allowed.
Order pronounced on 19th day of July, 2019.
Sd/- Sd/-
R.S.SYAL PARTHA SARATHI CHAUDHURY
VICE PRESIDENT JUDICIAL MEMBER
ऩण
ु े / Pune; ददनाांक / Dated : 19th July, 2019.
SB
आदे श की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to :
1. अऩीऱाथी / The Appellant.
2. प्रत्यथी / The Respondent.
3. The CIT(Appeals)-2, Nashik.
4. The CIT-2, Nashik.
5. ववभागीय प्रतततनधध , आयकर अऩीऱीय अधधकरण, "सी" बेंच, ऩण ु े / DR, ITAT, "C" Bench, Pune.
6. गार्ड फ़ाइऱ / Guard File.
// True Copy // आदे शानुसार / BY ORDER, तनजी सधचव / Private Secretary आयकर अऩीऱीय अधधकरण, ऩण ु े / ITAT, Pune.
12ITA No. 1434/PUN/2014 ITA No.1549/PUN/2014 A.Y.2010-11 Date 1 Draft dictated on 18.07.2019 Sr.PS/PS 2 Draft placed before author 18.07.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order