Shree Shantinath Silk Industries,, Surat v. The ACIT., Circle-2,, Surat

ITA 1865/AHD/2006 | misc
Pronouncement Date: 18-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 186520514 RSA 2006
Assessee PAN AAJFS6041C
Bench Ahmedabad
Appeal Number ITA 1865/AHD/2006
Duration Of Justice 3 year(s) 5 month(s) 28 day(s)
Appellant Shree Shantinath Silk Industries,, Surat
Respondent The ACIT., Circle-2,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 18-02-2010
Date Of Final Hearing 09-02-2010
Next Hearing Date 09-02-2010
Assessment Year misc
Appeal Filed On 21-08-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : A HMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HONBLE SH RI D.C. AGRAWAL A.M.) I.T.A. NO. 1865/AHD./2006 ASSESSMENT YEAR : 1989-1990 SHREE SHANTINATH SILK INDUSTRIES SURAT -VS.- ASSISTANT COMMISSIONER OF INCOME TAX (PAN : AAJFS 6041 C) CIRCLE-2 SURAT (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.N. DIVETIA RESPONDENT BY : SHRI SHELLEY JINDAL C IT( D.R.) O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 26.07.2006 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II SURAT ANNUL LING THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 154 OF THE INCOME TAX ACT ON 01.01.2006 FOR THE ASSESSMENT YEAR 1989-90. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A FIRM ENGAGED IN THE BUSINESS OF DYEING AND PRINTING OF ITS OWN CLOTH AND ALSO OF CLOTH BEL ONGING TO THE OUTSIDE PARTIES ON JOB WORK BASIS I.E. RECEIPT OF MAJOORI FOR DYEING BLEACHING ETC. OF CLOTH. THE DYEING BLEACHING ETC. OF CLOTH ATTRACT EXCISE DUTY UNDER THE EXCISE RULES AND REGU LATIONS. THE ASSESSEE-FIRM PAID EXCISE DUTY ON DYEING AND BLEACHING OF ITS OWN CLOTH IN RESPECT OF WHICH THERE WAS NO DISPUTE. HOWEVER AS REGARDS THE LEVY OF EXCISE DUTY ON CLOTH BELONGING TO OUTSIDE PARTIES BEFORE THE EXCISE AUTHORITY THE ASSESSEE CONTENDED THAT IT WAS LIABLE TO PAY EX CISE DUTY ON THE VALUE OF DYEING AND BLEACHING OF CLOTH OF OUTSIDE PARTIES BUT NOT ON THE VALUE O F CLOTH BELONGING TO THE OUTSIDE PARTIES. THIS DISPUTE WAS GOING ON IN CIVIL COURT AND RIGHT UPTO SUPREME COURT. BECAUSE OF THIS DISPUTE BETWEEN THE ASSESSEE AND EXCISE DEPARTMENT THE ASS ESSEE COLLECTED BY WAY OF DEPOSIT OF EXCISE DUTY FROM THE CUSTOMERS LIABLE TO BE LEVIED IF THE ULTIMATE DECISION WAS THAT THE ASSESSEE WAS NOT LIABLE TO PAY EXCISE DUTY ON THE VALUE OF CLOTH BEL ONGING TO OUTSIDE PARTIES THE SAME WAS TO BE ON THE VALUE OF CLOTH OF OUTSIDE PARTIES FROM THE RESP ECTIVE OUTSIDE PARTIES AND CREDITED IT TO SEPARATE EXCISE DUTY DEPOSIT ACCOUNT MAINTAINED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. BEFORE THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF RESP ECTIVE ASSESSMENT YEARS IT WAS CLAIMED THAT EXCISE DUTY ON JOB WORK CHARGES WAS ADMISSIBLE EVEN THOUGH BANK GUARANTEE WAS FURNISHED. 2 ITA NO. 1865/AHD/2006 ULTIMATELY IN APPEAL THE HON'BLE HIGH COURT HELD THAT THE BANK GUARANTEE WAS IN THE NATURE OF A SECURITY AND NOT ACTUAL PAYMENT AS ENVISAGED UNDER SECTION 43B OF THE INCOME TAX ACT. IT WAS THEREFORE HELD THAT EXCISE DUTY WAS NOT ADMISSIBLE WHEN BANK GUARANTEE WAS FURNISHED BUT AS AND WHEN ACTUAL PAYMENT WAS MADE IT WAS TO BE ALLO WED. THE HON'BLE ITAT IN ITA NO. 566/AHD/1997 FOR THE ASSESSMENT YEAR 1986-87 VIDE O RDER DATED 24.08.2004 GIVEN DIRECTIONS TO ALLOW EXCISE DUTY UPON ACTUAL PAYMENT. 3. FOR THE ASSESSMENT YEAR UNDER APPEAL THE ASSESS EE FILED THE RETURN OF INCOME ON 29.12.1989 DECLARING TOTAL INCOME AT RS.35 221/- W HICH WAS ACCEPTED UNDER SECTION 143(1) ON 19.03.1999. THEREAFTER ON 01.01.2006 THE A.O. PASSE D AN ORDER UNDER SECTION 154 WHEREBY THE TOTAL INCOME IS RECOMPUTED BY ALLOWING THE CLAIM OF EXCISE DUTY ON ACTUAL PAYMENT AND HE DETERMINED THE LOSS AT RS.1 13 75 447/- FOR THE ASS ESSMENT YEAR 1989-90. IN THIS ORDER THE A.O. OBSERVED THAT THIS LOSS IS NOT ELIGIBLE FOR CARRY F ORWARD IN VIEW OF RETURN OF INCOME NOT FILED WITHIN THE TIME PRESCRIBED UNDER SECTION 139(1). BE ING AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TA X(APPEALS). THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER DATED 26.07.2006 HELD THAT (A) THE ORDER OF RECTIFICATION UNDER SECTION 154 WA S BARRED BY LIMITATION OF TIME AND HENCE INVALID; (B) THE CARRY FORWARD OF LOSS WAS NOT ADMISSIBLE IN VIEW OF RETURN FILED BEYOND THE DATE SPECIFIED UNDER SECTION 139(1). 4. AGGRIEVED WITH THE ABOVE THE ASSESSEE IS IN APP EAL BEFORE THE TRIBUNAL CHALLENGING THE AFORESAID ORDER OF LD. C.I.T.(A). 5. AT THE TIME OF HEARING ON BEHALF OF ASSESSEE SH RI S.N. DIVETIA APPEARED AND CONTENDED THAT THE A.O. PASSED THE ORDER UNDER SECTION 154 WI THOUT GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS THE A.O. VIOLATED THE PRINCIPLE OF N ATURAL JUSTICE. ON MERIT THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IN ORDER TO CLAIM CARRY FOR WARD AND SET OFF OF BUSINESS LOSS UNDER SECTION 72 OF THE ACT IN SECTION 80 OF THE INCOME TAX ACT IT IS PROVIDED THAT LOSS HAS TO BE DETERMINED IN PURSUANCE OF A RETURN FILED IN ACCORDANCE WITH SECT ION 139(3) OF THE I.T. ACT. THEREFORE TWIN CONDITIONS ARE TO BE FULFILLED SO AS TO CARRY FORWA RD AND SET OFF THE BUSINESS LOSS VIZ. (A) THE LOSS SHOULD HAVE BEEN DETERMINED BY THE A .O. AND 3 ITA NO. 1865/AHD/2006 (B) RETURN OF LOSS SHOULD HAVE BEEN FILED IN ACCORD ANCE WITH SECTION 139(3) OF THE ACT. 6. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT I N THE PRESENT CASE THE DISPUTE IS WITH REGARD TO THE SECOND CONDITION ONLY. THE PERUSAL OF SECTION 139(3) REVEALS THAT WHENEVER THE ASSESSEE CLAIMS ANY LOSS UNDER THE HEAD BUSINESS I NCOME OR CAPITAL GAINS TO BE CARRIED FORWARD UNDER SECTION 72(1) HE IS REQUIRED TO FURN ISH RETURN BEFORE THE DUE DATE PRESCRIBED UNDER SECTION 139(1). THEREFORE IN ORDER TO INVOKE SECTI ON 139(3) TWO CONDITIONS ARE REQUIRED TO BE SATISFIED VIZ. (A) THE ASSESSEE SHOULD HAVE SUSTAINED LOSS IN ANY PREVIOUS YEAR UNDER THE HEAD BUSINESS INCOME OR CAPITAL GAIN S AND (B) HE CLAIMS WHOLE OR ANY PART THEREOF TO BE CAR RIED FORWARD. 7. CONTINUING HIS ARGUMENT THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT FOR THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSEE HAS FILED THE RETUR N OF INCOME DECLARING TOTAL INCOME OF RS.35 220/-. THEREFORE AS PER RETURN OF INCOME IT CAN BE SEEN THAT IT IS NOT A CASE WHERE THE ASSESSEE HAD SUSTAINED BUSINESS LOSS IN THE ASSESSM ENT YEAR UNDER APPEAL WHICH HE CLAIMED FOR CARRY FORWARD. WHEN THE ASSESSEE FILED THE RETURN O F INCOME SHOWING POSITIVE INCOME IT CANNOT BE SAID THAT THE ASSESSEE HAS SUSTAINED A LOSS UNDE R THE HEADING BUSINESS INCOME. SINCE THE ASSESSEE HAS NOT FILED RETURN OF LOSS THERE IS NO QUESTION OF FILING THE RETURN UNDER SECTION 139(3) BEFORE THE PRESCRIBED DATE UNDER SECTION 139(1). TH E LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT IT IS ONLY BECAUSE OF GIVING APPEAL EFFECT TO THE ORDER OF HON'BLE TRIBUNAL FOR EARLIER YEARS THERE IS LOSS ON ASSESSMENT. IN VIEW OF THE PECULIA R FACTS OF THE ASSESSEE AS WELL AS CLEAR POSITION OF LAW THE LD. COUNSEL OF THE ASSESSEE SUBMITTED T HAT BOTH THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN REJECTING THE CLAIM OF CARRY FORWARD OF LOSS OF RS. 1 13 75 447/-. 8. ON THE OTHER HAND SHRI SHELLEY JINDAL CIT(D.R. ) APPEARING ON BEHALF THE REVENUE SUPPORTED THE ORDER OF A.O. 4 ITA NO. 1865/AHD/2006 9. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT NO ASSESSMENT F OR THE ASSESSMENT YEAR UNDER APPEAL WAS FRAMED UNDER SECTION 143(3). THUS NO NOTICE UNDER SECTION 143(2) WAS ISSUED TO THE ASSESSEE. THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX(APPEAL S) CIRCLE-II SURAT PASSED THE IMPUGNED ORDER ON 01.01.2006 WHEREBY HE COMPUTED THE LOSS A T RS.1 13 75 447/- AS AGAINST ORIGINAL INCOME WHICH WAS ACCEPTED UNDER SECTION 143(1) AT RS.35 220/-. IN THIS ORDER THE A.O. HAS MENTIONED AS UNDER :- ASSESSEE IS ALLOWED CARRY FORWARD OF LOSS OF ONLY RS.13 11 398/- PERTAINING TO A.Y. 1988-89. THE ASSESSEE IS NOT ELI GIBLE FOR CARRY FORWARD OF LOSSES OF A.Y. 1989-90 AS THE RETURN OF INCOME I S NOT FILED WITHIN THE DUE DATE. THE HON'BLE ITAT RELYING ON THE CASE OF M/S. MUGAT DYEING AND PRINTING MILLS [261 ITR 69 (AT) IN THE ASSESSMENT YEAR 1986-87 IN PARA 3 HE LD THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION IN THE YEAR IN WHICH EXCISE DUTY IS ACTUA LLY PAID INTO THE GOVERNMENT ACCOUNT. ON THIS BASIS THE A.O. IN ORDER U/S. 154 DATED 01.01.2006 FOR THE ASSESSMENT YEAR UNDER APPEAL ALLOWED THE EXCISE DUTY ACTUALLY PAID IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL AMOUNTING TO RS.77 24 844/- AND RS.23 39 205/-. IN THESE CIRCUMSTANCES IN OUR OPINION THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER CLEARLY ERRED IN ANNULLING THE ORDER PASSED BY THE A.O. UNDER SECTIO N 154 ON 01.01.2006 FOR THE ASSESSMENT YEAR UNDER APPEAL. IT IS PERTINENT TO NOTE THAT BEFORE O BSERVING THAT THE ASSESSEE IS ALLOWED TO CARRY FORWARD OF LOSS ONLY TO THE EXTENT OF RS.13 11 398/ - FOR THE ASSESSMENT YEAR 1988-89 AND THE ASSESSEE IS NOT ELIGIBLE FOR CARRY FORWARD OF LOSSE S FOR ASSESSMENT YEAR 1989-90 THE A.O. IS NOT ALLOWED ANY OPPORTUNITY OF BEING HEARD TO THE ASSES SEE. THUS THE LD. C.I.T(A) HAS VIOLATED THE PRINCIPLE OF NATURAL JUSTICE. IN VIEW OF THIS WE S ET ASIDE THE IMPUGNED ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE A ND RESTORE THE MATTER BACK TO THE FILE OF A.O. WHO WILL ALLOW AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND PASS APPROPRIATE ORDER REGARDING CARRY FORWARD OF LOSS FOR THIS YEAR AS WE LL AS ASSESSMENT YEAR 1989-90. 10. IN THE RESULT FOR STATISTICAL PURPOSES THE AP PEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 18.02.201 0 SD/- SD/- (D.C. AGRAWAL) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18/ 02 / 2010 5 ITA NO. 1865/AHD/2006 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD LAHA/SR.P.S.