The ACIT, Ahmedabad Circle-1, Ahmedabad v. M/S Arvind Mills Ltd ( Successor To Erstwhilt Rohit Mills Ltd ), Ahmedabad

ITA 3818/AHD/2002 | 1994-1995
Pronouncement Date: 29-01-2010 | Result: Allowed

Appeal Details

RSA Number 381820514 RSA 2002
Assessee PAN EYEAR1989W
Bench Ahmedabad
Appeal Number ITA 3818/AHD/2002
Duration Of Justice 7 year(s) 1 month(s) 18 day(s)
Appellant The ACIT, Ahmedabad Circle-1, Ahmedabad
Respondent M/S Arvind Mills Ltd ( Successor To Erstwhilt Rohit Mills Ltd ), Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 29-01-2010
Date Of Final Hearing 03-11-2009
Next Hearing Date 03-11-2009
Assessment Year 1994-1995
Appeal Filed On 11-12-2002
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI H.L.KARWA JUDICIAL MEMBER AND SHRI D.C. AGRAWAL ACCOUNTANT MEMBER DATE OF HEARING : 05/11/09 DRAFTED ON: 14/12 /2009 1. ITA NO.3818/AHD/2002 2. ITA NO.3550/AHD/2002 ASSESSMENT YEAR : 1994-95 1. THE ASSTT.CIT-I AHMEDABAD 2. THE ARVIND MILLS LTD.(IN THE NAME OF ERSTWHILE ROHIT MILL LTD._ AHMEDABAD VS. 1. THE ARVIND MILLS LT.D (SUCCESSOR TO ERSTWHILE ROHIT MILLS LTD.) NARODA ROAD AHMEDABAD 2. THE ASSTT.CIT-I AHMEDABAD PAN/GIR NO. : 31-010-CY-0141 (APPELLANTS) .. (RESPONDENTS) ASSESSEE BY: SHRI J.P. SHAH REVENUE BY: D.S. BENU PANI CIT-DR O R D E R PER D.C.AGRAWAL ACCOUNTANT MEMBER :- THESE ARE THE CROSS APPEALS; ONE BY THE REVENUE AND THE OTHER BY THE ASSESSEE AGAINST THE COMMON ORDER OF THE LD.CI T(APPEALS)-XIV AHMEDABAD DATED 27/09/2002 PASSED FOR ASSESSMENT YEAR 1994-95. THE FOLLOWING GROUNDS HAVE BEEN RAISED BY THE RESPE CTIVE PARTIES IN ITS APPEALS:- ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 2 - (A) ITA NO.3818/AHD/2002 BY REVENUE THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE MADE BY THE A.O. U/S.43B AMOUNTING TO RS.27 61 932/-. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A.O. BE RESTOR ED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW AROUND WHICH MAY BE NECESSARY. (B) ITA NO.3550/AHD/2002 BY ASSESSEE THE APPELLANT BEING AGGRIEVED WITH THE ORDER PASSED BY HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XIV AHMEDABAD IN RESPECT OF APPEAL AGAINST THE ORDER P ASSED U/S.143(3) OF THE INCOME TAX ACT PRESENTS THIS APPE AL AGAINST THE SAME ON THE FOLLOWING AMONGST OTHER GROUNDS: 1. (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) [CIT(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF RS.1 25 23 880/- BEING RETRENCHMENT COMPENSATION AN D GRATUITY PAID TO THE WORKERS ON THE GROUND THAT EXP ENDITURE WAS INCURRED FOR CLOSED BUSINESS AS THE APPELLANT C OMPANY WAS CONDUCTING DISTINCT AND INDEPENDENT BUSINESS. IT IS SUBMITTED THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE APPELLANT WAS A COMPOSITE MILL HAVING DIFF ERENT DEPARTMENTS AND NOT DISTINCT BUSINESS. AND ACCORDI NGLY THE DISALLOWANCE WAS NOT CALLED FOR. (B) THE CIT(A) FAILED TO CONSIDER THE RATIO OF DEC ISION OF APEX COURT IN THE CASE OF K.RAVINDRAN NAIR V CIT 11 4 TAXMAN 53(SC). (C) WITHOUT PREJUDICE TO THE ABOVE THE CIT(A) OUGH T TO HAVE GIVEN DIRECTIONS TO RESTRICT THE DISALLOWANCE TO RS .45 81 171/- ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 3 - BEING THE AMOUNT DEBITED TO THE PROFIT AND LOSS ACC OUNT AND CLAIMED AS REVENUE EXPENDITURE IN THE RETURN OF INC OME. 2. (A) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDI TION MADE OF RS.10 37 083/- ON ACCOUNT OF PURCHASE MADE FROM MADHAV TRADERS WITHOUT APPRECIATING THAT ALL THE TRANSACTIONS WERE GENUINE TRANSACTIONS ROUTED THROU GH ACCOUNT PAYEE CHEQUES. (B) THE CIT(A) FURTHER ERRED IN NOT CONSIDERING THE BANK CERTIFICATES AND THE COPY OF ACCOUNTS PRODUCED BY T HE APPELLANT COMPANY. YOUR APPELLANT CRAVES LEAVE TO ADD ALTER AND/OR AM END ALL OR ANY OF THE GROUNDS OF APPEAL BEFORE THE FINAL HEARI NG OF THE APPEAL. 2. FIRST WE TAKE UP THE ASSESSEES APPEAL I.E. IT A NO.3550/AHD/2002. 3. THE FIRST ISSUE RELATES TO DISALLOWANCE OF RETRE NCHMENT COMPENSATION PAID BY THE ASSESSEE TO ITS WORKERS. THE ASSESSEE EARLIER CALLED AS ROHIT MILLS LTD. WAS SITUATED AT AHMEDABAD. IT HAD TEXT ILE MANUFACTURING UNIT WITH DIFFERENT DEPARTMENTS SUCH AS SPINNING WEAV ING PROCESS ENGINEERING WARPING AND CLOTH. THERE WAS A HEAVY FIRE IN THE FACTORY OF THE ASSESSEE IN THE YEAR 1989 WHICH RESULTED IN DES TRUCTION OF WEAVING PROCESSING CLOTH AND ENGINEERING DEPARTMENTS WHICH RESULTED IN A HUGE LOSS TO THE ASSESSEE. THERE WAS AN AGREEMENT WITH THE WORKERS ACCORDING TO WHICH THEY WERE RETRENCHED ON ACCOUNT OF CLOSUR E OF THE UNITS DESTROYED IN FIRE. AS PER AGREEMENT DATED 27.09.90 WITH THE WORKERS THEY WERE PAID RETRENCHMENT COMPENSATION. THE ASSESSEE PAID RS.79 42 200/- AND RS.79 41 000/-. DURING THE YEAR UNDER CONSIDER ATION THE ASSESSING ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 4 - OFFICER NOTICED THAT THE ASSESSEE DEBITED A SUM OF RS.45 81 171/- OUT OF RETRENCHMENT COMPENSATION OF RS.79 42 000/-. ON B EING ASKED TO EXPLAIN THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD COMPO SITE TEXTILE MILL CONSISTING OF SEVERAL DEPARTMENTS AND EACH DEPART MENT WAS CONNECTED TO EACH OTHER. COMPLETION OF PROCESS IN ONE UNIT RES ULTED IN BEGINNING OF PROCESS IN OTHER UNIT AND SO ON AND IN THE END CLOT H WAS MANUFACTURED FROM THE COTTON. INDIVIDUAL DEPARTMENT DID NOT HA VE ANY SEPARATE BUSINESS. TAKING ALL THE DEPARTMENTS TOGETHER CONS TITUTED ONE SINGLE BUSINESS. THE CLOSURE OF SOME DEPARTMENT DID NOT AMOUNT TO CLOSURE OF BUSINESS. NO SEPARATE BOOKS OF ACCOUNT WERE MAINTA INED FOR DIFFERENT UNITS AND TRANSACTIONS OF ALL THE DEPARTMENTS WERE RECORDED IN THE BOOKS OF ACCOUNT MAINTAINED BY THE COMPANY AS A WHOLE. ALL THE DEPARTMENTS WERE ADMINISTRATED BY THE COMMON MANAGEMENT. THERE WAS THUS INTER- CONNECTION INTER-LACING INTER-DEPENDENTS AND UNIT Y CONTROL. IT BEING ONE BUSINESS BOARD OF DIRECTORS WERE ALSO THE SAME. FUNDS WERE ALSO COMMON. CONSOLIDATED PROFIT AND LOSS A/C. AND BAL ANCE-SHEET WERE DRAWN. THE ASSESSING OFFICER HOWEVER DID NOT AGR EE AND HELD THAT IT WAS NOT A COMPOSITE BUT SEPARATE BUSINESS IN DIFFEREN T/DEPARTMENTS. SINCE SPINNING IS CONTINUED EVEN AFTER CLOSURE OF OTHER U NITS IT SHOWED THAT SPINNING WAS AN INDEPENDENT BUSINESS. IN FACT THE TEXTILE MILL WAS A GROUP OF SEVERAL INDUSTRIAL UNDERTAKINGS ENGAGED IN SPINN ING WEAVING AND PROCESSING. HE FINALLY HELD THAT RETRENCHMENT COM PENSATION AND GRATUITY OF THE WORKERS DID NOT PERTAIN TO THE PRESENT SPIN NING UNIT BUT TO CLOSED UNITS HE THEREFORE DISALLOWED A SUM OF RS.1 25 23 880/- AS NOT PERTAINING TO THE PRESENT UNIT. ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 5 - 4. THE LEARNED CIT(APPEALS) UPHELD THE DECISION OF ASSESSING OFFICER IN DISALLOWING THE AMOUNT OF RETRENCHMENT COMPENSAT ION AND GRATUITY AS ACCORDING TO HIM ASSESSEE WAS CONDUCTING DISTINCT A ND INDEPENDENT BUSINESS OF SPINNING. 5. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT IT IS INCORRECT TO SAY THAT DIFFEREN T DEPARTMENTS WERE DIFFERENT BUSINESS OF THE ASSESSEE. NO INDEPENDEN T SELLING/PURCHASE IN DIFFERENT UNITS WAS CARRIED OUT. THE OUTPUT OF ON E UNIT WAS INPUT OF OTHER UNIT AND ACCORDINGLY COTTON IN THE BEGINNING WAS CONVERTED INTO CLOTH AT THE END OF THE FINAL UNIT. THEREFORE DESTRUCTION OF SOME UNITS IN FIRE DID NOT AMOUNT TO CLOSURE OF SOME BUSINESS OF THE ASSES SEE. FURTHER FACTS AND CIRCUMSTANCES REMAINING SAME IN ANY EARLIER YEARS THE DEPARTMENT HAS ALLOWED SUCH RETRENCHMENT COMPENSATION AND GRATUITY PAID TO THE WORKERS EMPLOYED IN THE UNITS WHICH WERE DESTROYED IN FIRE. THEREFORE DEPARTMENT SHOULD NOT NOT HAVE TAKEN A DIFFERENT ST AND THIS YEAR AS THERE WAS NO CHANGE IN FACTS. HE REFERRED TO SEVERAL DEC ISIONS ON THE ISSUE OF CONSISTENCY. 6. AGAINST THIS LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT I T WAS A CLOSURE OF BUSINESS AND THEREFORE RETRENCHMENT COMPENSATION IS NOT ALLOWABLE. HE RELIED ON THE DECISION OF HON'BLE GUJARAT HIGH COUR T IN THE CASE OF NATHALAL ASHARAM VS. CIT (1992) 194 ITR 110 (GUJ.) FOR THE PROPOSITION THAT RETRENCHMENT COMPENSATION PAID TO WORK-MEN DUE TO CLOSURE OF ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 6 - BUSINESS IS NOT AN EXPENDITURE INCURRED FOR CARRYIN G ON THE BUSINESS AND IS ALSO NOT AN EXPENDITURE LAID DOWN WHOLLY AND EXCLUS IVELY FOR THE PURPOSE OF BUSINESS AND ACCORDINGLY IT IS NOT AN ALLOWAB LE EXPENDITURE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN OUR CONSIDERED VIEW STANDS TAKEN BY THE ASSESSING OFFICER AND THE LD.CIT(A) IS NOT LEGALLY CORRECT. THERE IS NO FINDING BY THE AUTHOR ITIES BELOW THAT ASSESSEE WAS DOING INDEPENDENT BUSINESSES IN RESPECT OF UNIT S OR THAT SEPARATE BOOKS OF ACCOUNTS WERE KEPT OR PROFIT AND LOSS ACC OUNT FOR RESPECTIVE UNITS WERE DRAWN BY THE ASSESSEE. THE CLAIM OF THE ASSES SEE THAT IT WAS RUNNING COMPOSITE UNIT WITH DIFFERENT DEPARTMENT AND OUTCOM E OF ONE DEPARTMENT WAS INPUT FOR OTHER DEPARTMENT AND ASSESSEE WAS FIN ALLY SELLING WAS CLOTH AND WHAT IT WAS PURCHASING WAS COTTON HAS NOT BEEN CONTRASTED. THE FACT REMAINED THAT ASSESSEE WAS MAINTAINING ONE BOOKS OF ACCOUNTS FOR THE BUSINESS AS A WHOLE THERE WAS A COMMON MANAGEMENT THERE WAS COMMON BOARD OF DIRECTORS THERE WERE COMMON FUNDS COMMON /CONSOLIDATED PROFIT & LOSS ACCOUNT AND BALANCE-SHEET WERE DRAWN THERE WAS NO EVIDENT TO SHOW THAT ANY UNIT WAS CARRYING ON INDEP ENDENT SALE AND PURCHASE OR IT WAS DECLARING PROFIT INDEPENDENT OF OTHER UNITS. ACCORDINGLY THERE IS NO MATERIAL TO HOLD THAT WHAT WAS DESTROYED IN FIRE WAS SOME INDEPENDENT BUSINESS OF THE ASSESSEE. THE Y WERE ONLY SOME OF THE UNITS OF THE COMPOSITE BUSINESS WHICH WERE DEST ROYED. IT DID NOT RESULT IN THE CLOSURE OF BUSINESS OF THE ASSESSEE. FURTH ER MERE FACT THAT SPINNING UNIT IS RUNNING INDEPENDENTLY AFTER DESTRUCTION OF OTHER UNITS IN FIRE DOES ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 7 - NOT MEAN THAT ALL THE UNITS DESTROYED IN FIRE WERE ALSO RUNNING INDEPENDENTLY. IT IS A BUSINESS DECISION OF THE AS SESSEE TO RUN A SPINNING UNIT INDEPENDENTLY AFTER DESTRUCTION OF OTHER UNIT S. IT CANNOT BE INFERRED FROM THIS THAT EVEN PRIOR TO FIRE SPINNING UNITS OR OTHER UNITS WERE RUNNING INDEPENDENTLY. THE DECISION OF HON'BLE GUJARAT HIG H COURT IN THE CASE OF NATHALAL ASHARAM VS. CIT (GUJ.)[SUPRA] WAS APPLICA BLE TO A BUSINESS CLOSED DOWN. THERE IS NO DISPUTE WITH THIS PROPOS ITION THAT ONCE BUSINESS IS CLOSED DOWN ASSESSEE CANNOT BE SAID TO HAVE INC URRED EXPENDITURE FOR THE PURPOSE OF BUSINESS. IN THE PRESENT CASE WE FI ND THAT BUSINESS OF THE ASSESSEE HAD CONTINUED EVEN AFTER DESTRUCTION OF CE RTAIN UNITS IN FIRE AND THEREFORE THAT AUTHORITY WILL NOT BE APPLICABLE ON THE FACTS OF THE PRESENT CASE. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. M.G.F INDIA LTD. (2005) 272 ITR 191 (DELHI) HAS SIMILAR FACTS A S IN THE PRESENT CASE. IN THAT CASE ALSO THE ASSESSEE WAS MAINTAINING COM MON BOOKS OF ACCOUNT AND COMMON FUNDS FOR DIFFERENT BUSINESS. ONE BUSIN ESS WAS CLOSED THEN IT WAS HELD THAT RETRENCHMENT COMPENSATION PAID BY THE ASSESSEE WAS DEDUCTIBLE. WHILE GIVING THIS DECISION THE HON'BL E DELHI HIGH COURT HAS FOLLOWED DECISION OF HON'BLE SUPREME COURT IN THE C ASE OF CIT VS. PRITHVI INSURANCE CO. LTD. (1967) 63 ITR 632 (SC). HON'BL E MADRAS HIGH COURT IN THE CASE OF CIT VS. DIESEL ENGINEER (2000) 244 ITR 488 (MAD.) HELD THAT WHERE MANUFACTURING AND TRADING ACTIVITY OF AS SESSEE CONSTITUTED A SINGLE BUSINESS THEN GRATUITY RETRENCHMENT COMPEN SATION PAID IN RESPECT OF MANUFACTURING UNITS SOLD WOULD BE DEDUCTIBLE FRO M THE PROFITS OF TRADING BUSINESS. IN THE CASE OF CIT VS. SIMON (P. I.) (1991) 187 ITR 302(KER.) THE ASSESSEE HAD CLOSED ONE OIL MILL RES ULTING IN PAYMENT OF ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 8 - RETRENCHMENT COMPENSATION TO WORKMEN. THE ASSESSEE WAS RUNNING AN OIL MILL AS WELL AS COMMISSION AGENCY. OIL MILL WA S MAINTAINING SEPARATE ACCOUNTS BUT DUE TO CLOSURE OF OIL MILL RETRENCHM ENT COMPENSATION WAS PAID. THE TRIBUNAL FOUND THAT ENTIRE REQUIREMENT OF FUNDS FOR OIL MILL CAME FORM THE HEAD OFFICE. OIL MILL HAD NO INDEPEN DENT ACCOUNT NO ROLLS WERE SHOWN AS PAYABLE BY THE OIL MILL THERE WAS CO MPLETE INTER-LACING AND INTER-LOCKING OF FUNDS APART FROM UNITY OF CONTROL AND THEREFORE OIL MILL WAS BRANCH AND NOT A SEPARATE BUSINESS. THE REQUI REMENT OF BUSINESS NECESSITATED THE CLOSURE OF OIL MILL AND HENCE TH E PAYMENT OF RETRENCHMENT COMPENSATION WAS A PERMISSIBLE DEDUCTI ON U/S.37 OF THE I.T. ACT 1961. 8. IN THE PRESENT CASE ALL THE UNITS WERE INTEGRAL PART OF ONE BUSINESS OF MANUFACTURING OF CLOTH. THE DESTRUCTION OF SOM E UNITS EXCEPT SPINNING UNIT DID NOT TANTAMOUNT TO CLOSURE OF BUSINESS OF THE ASSESSEE. THE ASSESSEE CONTINUED ITS BUSINESS WITH TRUNCATED DEPA RTMENT I.E. SPINNING UNIT ONLY. THERE WAS INTER-LACING OF FUNDS THE U NIT DESTROYED IN FIRE DID NOT MAINTAIN SEPARATE BOOKS OF ACCOUNT THEY DID NO T HAVE ANY INDEPENDENT BANK ACCOUNT THERE WAS NO INDEPENDENT TRADING IN T HOSE UNITS FUNDS WERE COMMON AND MANAGEMENT WAS ALSO COMMON. THEREFORE D ESTRUCTION OF SOME UNITS DID NOT AMOUNT TO CLOSURE THE BUSINESS. ACCORDINGLY ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 9 - RETRENCHMENT COMPENSATION AND GRATUITY PAID TO WORK ERS OF DESTROYED UNITS WAS DEDUCTIBLE AS BUSINESS EXPENDITURE. 9. NOTWITHSTANDING THE DEPARTMENT HAS ALLOWED THE CLAIM OF THE ASSESSEE IN ASSESSMENT YEARS 1990-91 TO 1993-94 UND ER THE SAME SET OF CIRCUMSTANCES. THEREFORE THERE IS NO REASON TO TA KE A DIFFERENT VIEW THAN TAKEN BY THE ASSESSING OFFICER IN EARLIER YEARS. F OR REJECTING THE VIEW TAKEN IN EARLIER YEARS THERE MUST BE MATERIAL CHAN GE IN THE FACTUAL MATRIX OUR VIEW IS SUPPORTED BY THE DECISION OF HON'BLE S UPREME COURT IN THE CASE OF RADHASWAMY SATSANG VS. CIT (1992) 193 ITR 3 21 (SC) IN THE CASE OF CIT VS. DALMIA PROMOTERS DEVELOPERS PVT.LT D. (2006) 281 ITR 346 (DELHI) AND IN THE CASE OF ITO VS. TEJMALBHAI & CO. (2006) 282 ITR (AT) 224 (ITAT-RAJ.). 11. IN VIEW OF ABOVE WE HOLD THAT THERE IS NO JUS TIFICATION TO TAKE A DIFFERENT VIEW THIS YEAR. AS A RESULT CLAIM OF T HE ASSESSEE IS ALLOWED. 12. THE NEXT ISSUE IS REGARDING ADDITION MADE ON AC COUNT OF PURCHASES FROM MADHUR TRADERS TREATED AS NOT GENUINE. THE F ACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE PURCHASED COTTON FOR RS.10 37 083/- FROM M/S.MADHUR TRADERS. THE ASSESS ING OFFICER CARRIED ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 10 - OUT ENQUIRIES AND FOUND THAT SUMMONS SENT TO THIS P ARTY WERE RETURNED UNSERVED AS THERE WERE NO PARTY AT THE GIVEN ADDRE SS. IT WAS SUBMITTED THAT ADDRESS OF THE PARTY WAS CHANGED BUT ASSESSING OFFICER REQUIRED THE PRODUCTION OF PARTY FOR VERIFICATION. THE ASSESSIN G OFFICER ALSO NOTED THAT PURCHASES FROM THE PARTY WERE MADE BUT PAYMENTS H AVE NOT BEEN MADE AT ALL. THE ENTIRE AMOUNT OF PURCHASES WERE SHOWN OU TSTANDING CREDIT. HE ACCORDINGLY DISALLOWED PURCHASE OF RS.10 37 083/- M ADE FROM THAT PARTY. 13. THE LEARNED CIT(APPEALS) CONFIRMED THE ADDITION FOR THE SAME REASONING AS SHOWN BY THE ASSESSING OFFICER. 14. BEFORE US THE LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE SUBMITTED THAT ALL THE PURCHASES FROM ABOVE PARTY A RE GENUINE. COTTON WAS PURCHASED AND ALL THE PAYMENTS WERE MADE BY 'A/C PA YEE CHEQUE'. THE COPY OF THE ACCOUNT OF THE PARTY APPEARING FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE AS WELL AS COPY OF THE ACCOUNT OF THE ASSESSEE AS APPEARING IN THE BOOKS OF M/S.MADHUR TRADERS IS SHOWN IN THE PAP ER-BOOK. THERE IS NO CASH PAYMENT IN RESPECT OF THESE PURCHASES. THE CO NFIRMATION OF PURCHASES FROM THAT PARTY HAS BEEN SUBMITTED. THA T PARTY HAS BEEN DOING BUSINESS EARLIER WITH ROHIT MILLS. IT HAD GIVEN C ORRECT ADDRESS TO THE ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 11 - ASSESSING OFFICER BUT ASSESSING OFFICER DID NOT VE RIFY NEW ADDRESS AND ALSO DID NOT VERIFY THE COPY OF THE ACCOUNTS SUBMIT TED TO HIM. 15. AGAINST THIS LEARNED DEPARTMENT REPRESENTATIVE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN OUR CONSIDERED VIEW THE ADDITION IS MADE ON THE PRESUMPTION ONLY. ONCE THE ASSESSEE HAS GIVEN THE NEW ADDRESS TO THE ASSESSING OFFICER THEN IT WAS HIS DUTY TO VERIFY THE NEW ADDRESS RATHER INSISTING ON PRODUCT ION OF THAT PARTY. IT IS NOT A LOAN TRANSACTION BUT IT IS TRADING TRANSACTI ON. IT IS NOT APPROPRIATE TO CALL THE PARTIES FROM WHOM THE ASSESSEE HAS MADE PU RCHASES IN EVERY CASE. ONCE COPY OF ACCOUNT FROM THAT PARTY HAS BEEN SUBMI TTED ALONGWITH CONFIRMATION AND IT IS SHOWN THAT TRANSACTIONS ARE THROUGH BANKING CHANNELS AND IN ADDITION NEW ADDRESS HAS BEEN SUB MITTED THEN IT HAS TO BE VERIFIED BY THE ASSESSING OFFICER BEFORE PROPOSI NG TO MAKE ADDITION UNDER THESE CIRCUMSTANCES WHEN PAYMENTS TO HAVE BE EN MADE BY 'A/C PAYEE CHEQUE' AND IT IS NOT DOUBTED THAT THESE P URCHASES ARE NOTED IN THE RELEVANT REGISTERS THEN IT IS NOT CORRECT TO DISAL LOW PURCHASES HOLDING IT AS ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 12 - NON-GENUINE. ACCORDINGLY ADDITIONS SO MADE BY TH E ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(APPEALS) IS DELETE D. 17. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. REVENUES APPEAL I.E. ITA NO.3818/AHD/2002 18. IN THIS APPEAL THE ISSUE IS REGARDING DISALLOW ANCE MADE BY THE ASSESSING OFFICER U/S.43-B OF THE I.T. ACT 1961 BU T ALLOWED BY THE LEARNED CIT(APPEALS). 19. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE MADE A PROVISION OF RS.27 61 932/- FOR HANK YARN OBLIGATION. THE ASSES SING OFFICER NOTED THAT ASSESSEE HAS NOT MADE PURCHASES. THE BIFR ALL OWED EXEMPTION TO THE ASSESSEE TO HANK YARN OBLIGATION. THEREFORE THE C LAIM WAS NOT ALLOWABLE. THE STAND OF THE ASSESSEE WAS THAT COMP ANY FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING THE OBLIGATION WAS IN RESPECT OF YEAR UNDER CONSIDERATION FOR WHICH PROVISION HAS BEEN MADE IN THE BOOKS. IT IS NOT COVERED BY PROVISIONS OF SECTION 43B OF THE I.T. AC T 1961 AND THEREFORE NON-PAYMENT THEREOF COULD NOT BE THE BASIS FOR DISA LLOWANCE. IT WAS FURTHER SUBMITTED THAT THE BIFR ORDER DATED 08/10/1 996 HAS ALLOWED RELIEF BY GIVING WAIVER FROM FULFILLMENT TO HANK YARN OBLI GATION IN EARLIER YEARS ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 13 - AND THEREFORE ASSESSEE IS NOT REQUIRED TO DISCHAR GE THE OBLIGATION. THE ASSESSING OFFICER DID NOT AGREE AND HELD THAT PAYME NT HAS NOT BEEN MADE THIS YEAR AND THEREFORE THIS CANNOT BE ALLOWED U/ S.43-B OF THE I.T. ACT 1961. 20. THE LEARNED CIT(APPEALS) NOTED THAT AS PER THE SCHEME OF GOVERNMENT CERTAIN TEXTILE MILLS WERE REQUIRED TO MANUFACTURE CERTAIN QUANTITY OF HANK YARN WHICH ARE NORMALLY USED BY RU RAL PEOPLE. WHERE A MILL DOES NOT MANUFACTURE SUCH YARN THEN ASSESSEE IS DUTY BOUND TO PURCHASE OBLIGATION BY PAYMENT OF PRICE OF SUCH OBL IGATION TO OTHER MILLS MANUFACTURING SUCH YARN IN EXCESS OF THEIR REQUIREM ENT. THE LEARNED CIT(APPEALS) HELD THAT LIABILITY HAS OCCURRED THIS YEAR AND THEREFORE CLAIM IS ALLOWABLE. IN FACT IT IS NOT IN THE NAT URE OF TAX DUTY OR LESS. THEREFORE PROVISIONS OF SECTION 43B OF THE I.T. AC T 1961 WOULD NOT APPLICABLE. IT WAS SUBMITTED BY THE LEARNED AUTHOR ISED REPRESENTATIVE OF THE ASSESSEE THAT LIABILITIES SO WAIVED WAS WRITTEN BACK TO PROFIT & LOSS ACCOUNT FOR THE YEAR ENDING ON 31/03/1997 I.E. ASS ESSMENT YEAR 1997-98 AND THUS IT HAS BEEN OFFERED FOR TAX U/S.41(1) OF THE I.T. ACT 1961. SINCE TAX LIABILITIES ARE SAME THE AMOUNT SHOULD NOT BE DISALLOWED THIS YEAR OTHERWISE IT WOULD BE DOUBLE TAXATION. ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 14 - 21. AFTER HEARING THE RIVAL SUBMISSIONS WE HOLD TH AT CLAIM OF THE ASSESSEE SHOULD BE ALLOWED IF THE ASSESSEE HAS OFFE RED THE ENTIRE OBLIGATION UNDER THIS SCHEME FOR TAXATION U/S.41(1) IN THE ASS ESSMENT YEAR 1997-98. THEREFORE WE RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. HE WILL VERIFY WHETHER THE ASSESSEE HAS OFFERED THE SA ME FOR TAXATION IN THE ASSESSMENT YEAR 1997-98. IF IT IS SO THE CLAIM SH OULD BE ALLOWED. 22. AS A RESULT THIS GROUND OF REVENUE IS TREATED AS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. 23. IN THE RESULT APPEAL OF THE ASSESSEE IS ALL OWED WHEREAS APPEAL OF THE REVENUE IS TREATED AS PARTLY ALLOWED FOR STATIS TICAL PURPOSES. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 2009. SD/- SD/- (H.L. KARWA) ( D.C.AGRAWAL ) JUDICIAL MEMBER ACCOUNTANT MEMBE R AHMEDABAD; DATED / /2009 PRONOUNCED ON 29/01/2010 SD/- SD/- (MAHAVIR SINGH) (D.C. AG RAWAL) JM AM 29/01/2010 T.C. NAIR ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 15 - ITA NOS.3818 &3550 /AHD/200 ACIT VS. THE ARVIND MILLS LTD. ASST.YEAR 1994-95 - 16 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIV AHMEDABAD 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD