M/S. C.D. PLASTICS, MUMBAI v. THE ITO WD 24(1)(4), MUMBAI

ITA 4989/MUM/2007 | 2001-2002
Pronouncement Date: 17-02-2010 | Result: Allowed

Appeal Details

RSA Number 498919914 RSA 2007
Assessee PAN AACFC7166P
Bench Mumbai
Appeal Number ITA 4989/MUM/2007
Duration Of Justice 2 year(s) 7 month(s) 1 day(s)
Appellant M/S. C.D. PLASTICS, MUMBAI
Respondent THE ITO WD 24(1)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 17-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 17-02-2010
Date Of Final Hearing 19-01-2010
Next Hearing Date 19-01-2010
Assessment Year 2001-2002
Appeal Filed On 16-07-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 4989/MUM/2007 (ASSESSMENT YEAR: 2001-02) M/S. C.D. PLASTICS INCOME TAX OFFICER 24(1)(4) 19/40/C-2 SEKSARIA INDL. ESTATE C-13 PRATYAKSHA K AR BHAVAN CHICHOLI BUNDER ROAD S.V. ROAD VS. B.K.C. BANDRA (E) MALAD (W) MUMBAI 400064 MUMBAI 400051 PAN - AACFC 7166 P APPELLANT RESPONDENT APPELLANT BY: SHRI K. SHIVARAM RESPONDENT BY: SHRI VIRENDRA OJHA O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE BY THE ASSESSEE IS AGAINST THE O RDER OF THE CIT(A)- XXIV MUMBAI DATED 20.06.2007. 2. THE ASSESSEE HAS RAISED THE FOLLOWING FOUR GROUNDS: - 1. THE LD. CIT (APPEALS) ERRED IN HOLDING THAT THE INVESTMENT OF RS.30 09 000/- REMAIN UNEXPLAINED WITHOUT APPRECIAT ING THE FACTS OF THE CASE AND THE LEGAL POSITION APPLICABLE. 2. THE LD. CIT (APPEALS) ERRED IN ENHANCING THE ADD ITION IN RESPECT OF UNEXPLAINED INVESTMENT OF RS.30 09 000/- INSTEAD OF RS.6 29 803/- MADE BY THE LD. ASSESSING OFFICER. 3. THE LD. CIT (APPEALS) ERRED IN HOLDING THAT INVE STMENTS IN PLANT AND MACHINERY REMAINED UNEXPLAINED TO THE EXTENT OF RS. 30 09 000/- WITHOUT APPRECIATING THE FACT THAT INVESTMENTS MADE IN MACHINERY WERE DULY RECORDED AND REFLECTED IN THE BOOKS OF AC COUNT AND AUDITED BALANCE SHEET. HENCE THE ADDITION MADE IS B AD IN LAW DESERVES TO BE DELETED. 4. THE APPELLANT PAYS THAT THE DISALLOWANCE MADE OF UNEXPLAINED INVESTMENT OF RS.30 09 000/- MAY BE DELETED. 3. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF MAN UFACTURING OF PLASTIC GRANULES TUBINGS AND BAGS. THIS IS THE FIR ST YEAR OF OPERATION. THE ASSESSEE FILED NIL RETURN OF INCOME CLAIMING DEDUCT ION UNDER SECTION 80IB ITA NO. 4989/MUM/2007 M/S. C.D. PLASTICS 2 AMOUNTING TO RS.10 17 648/-. THE ASSESSEE HAS CLAIM ED TO HAVE PURCHASED MACHINERY VALUED AT RS.32 26 256/- FROM M/S. SARVAJ ITKUMAR NEW DELHI AND FURNISHED THE NECESSARY BILLS AND CERTIFICATE INSTALLATION CERTIFICATE AND AFFIDAVIT OF PARTNERS IN SUPPORT OF THE PURCHASE OF MACHINERY. ON ENQUIRY BY THE A.O. THE NEW DELHI DDI (INV) INFORMED THAT THE MACHINERY PURCHASED FROM M/S. SARVAJITKUMAR WAS ONLY WORTH RS.2 08 900/ - EXCLUDING SALES TAX VIDE REPORT DATED 16.01.2004. THE A.O. OPINED THAT THE ASSESSEE WOULD HAVE PURCHASED MACHINERY OUTSIDE THE BOOKS AND ACCORDING LY HE DETERMINED THE VALUE OF THE MACHINERY PURCHASED AT RS.4 12 547/- A ND RS.2 17 256/- CONFIRMED FROM M/S. SARVAJITKUMAR AND ALLOWED DEPRE CIATION ACCORDINGLY. HE ALSO CONSIDERED THAT THE ASSESSEE FAILED TO PROV E THE SOURCE OF INVESTMENT AND MADE AN ADDITION OF RS.6 29 803/- ( TOTAL VALUE DETERMINED BY AO) UNDER SECTION 68 OF THE ACT HOLDING THAT THE PURCHA SE OF MACHINERY IS FROM UNDISCLOSED INVESTMENT. BEFORE THE CIT(A) IT WAS CO NTENDED THAT THE ENTIRE MACHINERY WAS PURCHASED GENUINELY AND PAYMENTS WERE MADE BY CHEQUES WHICH ARE CLEARED FROM THE BANK ACCOUNT IN THE SUBS EQUENT YEAR AND ONLY ENTRIES PASSED DURING THE YEAR IS WITH REFERENCE TO THE OUTSTANDING AMOUNT AND SINCE THE AMOUNT WAS PAID THROUGH THE BOOKS OF ACCOUNT NO ADDITION UNDER SECTION 68/69 CAN BE CONSIDERED. IT WAS FURTH ER SUBMITTED THAT THE A.O. WAS WRONG IN RESTRICTING THE DEPRECIATION TO T HE ESTIMATED AMOUNT ON THE PRESUMPTION THAT IT COULD HAVE PURCHASED IN SEC OND HAND MARKET AND THE DEPRECIATION OF THE WHOLE AMOUNT MAY BE ALLOWED . THE CIT(A) WHILE ACCEPTING THE CONTENTION THAT THERE IS NO BASIS FOR RESTRICTING THE DEPRECIATION TO THE AMOUNT OF RS.6 29 803/- DIRECTE D THE A.O. TO ALLOW DEPRECIATION ON THE COST AND ALSO ALLOW DEDUCTION U NDER SECTION 80IB. HOWEVER HE HAS ENHANCED THE ADDITION UNDER SECTION 68/69 FROM RS.6 29 803/- ARRIVED BY THE A.O. TO RS.30 09 000/- I.E. THE DIFFERENCE OF THE AMOUNT NOT CONFIRMED BY M/S. SARVAJITKUMAR. ACC ORDINGLY THE ASSESSEE IS AGGRIEVED AND RAISED THE ABOVE GROUNDS. 4. WE HAVE HEARD THE LEARNED COUNSEL AND THE LEARNED D .R. IN DETAIL ON THIS ISSUE. ITA NO. 4989/MUM/2007 M/S. C.D. PLASTICS 3 5. ON EXAMINATION OF THE FACTS WE ARE OF THE OPINION T HAT BOTH THE A.O. AS WELL AS THE CIT(A) HAVE ERRED IN CONSIDERING THE ISSUES IN ITS CORRECT PERSPECTIVE. THE ASSESSEE HAS CLAIMED ESTABLISHING A NEW UNIT AND PURCHASE OF MACHINERY WORTH RS.32 26 256/-. THERE IS NO DISP UTE WITH REFERENCE TO THE FURNISHING OF PRIMARY EVIDENCES AND SUBSEQUENT PAYMENT TO THE BANK ACCOUNT. ON ENQUIRY THE A.O. OBSERVED THAT THESE AM OUNTS WERE PAID TO A DIFFERENCE SOURCE. HOWEVER IT IS NOT ON RECORD WHE THER THE AMOUNTS WERE PAID FOR PURCHASE OF MACHINERY OR OTHERWISE. THE CI T(A) HAS GIVEN THE FOLLOWING FINDING VIDE PARA 2.8.1: - 2.8.1 I HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF LD. A.R. CAREFULLY. THE ASSESSING OFFICER DID NOT HAVE ANY MATERIAL TO SHOW THAT SOME OF THE PLANTS AND MACHINERIES WERE OLD AN D WERE PURCHASED FROM THE SECOND HAND MARKET. IT WAS HIS MERE PRESUM PTION AND GUESS THAT SUCH MACHINERIES WOULD HAVE BEEN PURCHASED FRO M THE SECOND HAND MARKET. HE DID NOT MAKE ON-THE-SPOT VERIFICATI ON OF THE MACHINERIES INSTALLED IN THE INDUSTRIAL UNDERTAKING EITHER DURI NG THE COURSE OF THE ASSESSMENT PROCEEDINGS OR DURING THE REMAND PROCEED ING. AS AGAINST IT THE APPELLANT HAS ADDUCED SUFFICIENT EVIDENCE TO ES TABLISH THAT THE PLANTS AND MACHINERIES PURCHASED BY IT WERE NEW. I THEREFORE CANNOT CONFIRM THE PRESUMPTION OF THE ASSESSING OFFICER TH AT SOME OF THE PLANTS AND MACHINERIES WERE PURCHASED FROM THE SECOND HAND MARKET. I HOLD THAT THE PLANTS AND MACHINERIES PURCHASED BY THE AP PELLANT WERE NEW. THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEPRECIA TION ON THEIR COST I.E. RS.32 26 256/- AT THE PRESCRIBED RATE. HE IS ALSO D IRECTED TO ALLOW DEDUCTION U/S 80IB ON THE PROFIT DERIVED FROM THE I NDUSTRIAL UNDERTAKING. 6. AS CAN BE SEEN THE SPOT VERIFICATION OF THE MACHIN ERY INSTALLED IN THE INDUSTRIAL UNDERTAKING HAS NOT BEEN UNDERTAKEN EITH ER BY THE A.O. OR BY THE CIT(A). WITHOUT EXAMINING THE MACHINERIES INSTALLED IT IS NOT POSSIBLE TO GIVE A FINDING ON THE PRESUMPTIONS WHETHER THE ASSESSEE HAS PURCHASED NEW MACHINERY OR SECOND HAND MACHINERY. THE A.O. HAS DE NIED 80IB ONLY TO THE EXTENT OF PROFIT ON TRADING BUT ALLOWED THE PROFIT DERIVED FROM MANUFACTURING PLASTIC BAGS. THE ORDER INDICATES THAT HE HAS ALLOW ED MORE DEDUCTION THAN WAS CLAIMED BY THE ASSESSEE. SINCE THERE IS NO FIND ING WHETHER THE MACHINERY INSTALLED BY THE ASSESSEE IS NEW MACHINER Y OR OLD MACHINERY AND THE ACTUAL COST THEREON IT IS NOT POSSIBLE TO GIVE ANY FINDING WHETHER THE ASSESSEE PURCHASE OF MACHINERY WAS TO THE EXTENT OF RS.32.92 LAKHS OR NOT. THE LEARNED COUNSEL FAIRLY ADMITTED THAT THIS ISSUE CAN BE REMANDED BACK TO ITA NO. 4989/MUM/2007 M/S. C.D. PLASTICS 4 THE A.O. TO EXAMINE NATURE OF THE MACHINERY WAS INS TALLED AND IF SO THE COST THEREON. ACCORDINGLY THE ISSUE OF PURCHASE OF MACHI NERY AND COST THEREON IS RESTORED BACK TO THE A.O. WITH THE DIRECTION TO INS PECT THE MACHINERY BEING UTILIZED BY THE ASSESSEE AND DETERMINE THE COST AFT ER EXAMINING THE FACTS AND PURCHASE THEREOF. HOWEVER THE ISSUE OF ADDITIO N ON UNACCOUNTED PURCHASES DOES NOT ARISE AS THE INVESTMENTS HAVE BE EN REFLECTED IN THE BOOKS OF ACCOUNT AND THE AMOUNTS HAVE BEEN PAID THR OUGH BANK ACCOUNTS. THERE IS NO UNEXPLAINED INVESTMENT TO BE CONSIDERED UNDER SECTION 68/69 OF THE ACT. BOTH THE A.O. AND THE CIT(A) HAVE ERRED IN TREATING THE ACCOUNTED INVESTMENT AS UNACCOUNTED INVESTMENT JUST BECAUSE T HE AMOUNTS PAID HAVE NOT BEEN CLEARED THROUGH THE ACCOUNT OF THE CONCERN ED PARTY. THERE IS EVIDENCE THAT THE CHEQUES HAVE BEEN CLEARED IN SOME OTHER ACCOUNTS THE DETAILS OF WHICH ARE NOT BROUGHT ON RECORD. THE ASS ESSEE IN THE BOOKS OF ACCOUNT CLAIMED A INVESTMENT OF TOTAL AMOUNT OF RS. 32 45 615/- AND IF THE PURCHASES ARE NOT TRUE/GENUINE THE COST THEREOF CAN BE REWORKED OUT ON EXAMINATION BUT THERE IS NO NEED FOR INVOKING THE PROVISIONS OF SECTION 68/69 TO CONSIDER THAT THE INVESTMENTS ARE MADE OUT SIDE THE BOOKS OF ACCOUNT. TO THAT EXTENT THE ADDITION MADE BY THE A. O. ORIGINALLY AT RS.6 29 803/- AND THE ENHANCED AMOUNT BY THE CIT(A) AT RS.30 09 000/- IS NOT CORRECT ACCORDING TO THE LAW AND FACTS.. WITH T HESE DIRECTIONS THE ISSUE OF EXAMINATION OF THE MACHINERY AND DETERMINATION OF C OST FOR THE PURPOSE OF DEPRECIATION AND ALLOWANCE OF 80IB IS RESTORED BACK TO THE A.O. FOR NECESSARY VERIFICATION AND DETERMINATION ACCORDING TO THE FACTS AND LAW. ASSESSEE SHOULD BE GIVEN REASONABLE OPPORTUNITY IN THE REASSESSMENT PROCEEDINGS. 7. IN THE RESULT APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY 2010. SD/- SD/- (R.K. GUPTA) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 17 TH FEBRUARY 2010 ITA NO. 4989/MUM/2007 M/S. C.D. PLASTICS 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXIV MUMBAI 4. THE CIT XXIV MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.