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Income Tax Appellate Tribunal, “ D ” BENCH, AHMEDABAD
Before: SHRI S.S. GODARA & SHRI PRADIP KUMAR KEDIA
आदेश / O R D E R PER PRADIP KUMAR KEDIA - AM: The captioned appeal filed at the instance of the Revenue is against the order of the Commissioner of Income Tax(Appeals)-III, Baroda [CIT(A) in short] dated 05/03/2014 in the matter of assessment order under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") dated 17/03/2005 relevant to Assessment Year (AY) 2002-03.
ITA No.1858/Ahd/2014 Milestone Organics Ltd. vs. DCIT Asst.Year – 2002-03 - 2 -
The grounds of appeal raised by the Revenue as under:-
1) The Ld.CIT(A) has erred in law and on facts in deleting addition of Rs.49,20,892/- made on account of Excise Duty not including in closing stock. 2) The Ld.CIT(A) has erred in law and on facts in deleting addition of Rs.2,52,755/- out of total addition of Rs.5,05,509/- made on account of disallowance of Loading & Unloading Charges.
First ground concerns addition of Rs.49,20,892/-made by the Assessing Officer (AO) on account of excise duty not included in closing stock. Facts concerning the aforesaid issue are that in the course of the scrutiny assessment for the AY 2002-03, the AO inter alia observed that the assessee has omitted to include excise duty component on finished goods in terms of s.145A of the Act while determining the value of closing stock as on 31/03/2002. It was thus alleged by the AO that the assessee-company has not included the excise duty component of Rs.49,20,892/- for the purpose of valuation of closing stock of finished goods. It was accordingly concluded that the taxable income of the assessee-company has been under reported to the extent of aforesaid amount owing to undervaluation of closing stock. The assessed income was accordingly increased by the aforesaid amount.
ITA No.1858/Ahd/2014 Milestone Organics Ltd. vs. DCIT Asst.Year – 2002-03 - 3 - 4. In the first appeal, the CIT(A) decided the issue in favour of assessee and deleted the addition so made by the AO. The relevant para of the order of the CIT(A) read as under:-
“4.3. I have considered the facts of the case and submissions made by the AR of the appellant. It has been held in the decision of Hon'ble Gujarat High Court in the case of Narmada Chematur Petrochem Ltd that under excise law, an assessee incurs liability to pay excise duty only on both events taking place, namely, manufacturing of excisable goods and removal of excise goods, and for the purpose of IT Act position in law is not different. Following this decision, the addition for excise on goods was found untenable by the jurisdictional ITAT, Ahmedabad in its decision in the case of Nitrochem India Pvt. Ltd. in ITA No. 86 to 91/And/2009 dated 08/07/2011. Similar decision has been given by ITAT, Ahmedabad in the case of Shri Pankaj Ambalal Shah (Supra). Hence the AO's statement that the excise duty is leviable at the time of manufacturing of goods as per excise law is not correct. Accordingly, the addition made by the AO is directed to be deleted and this ground of appeal is allowed.”
Aggrieved, the revenue challenged the aforesaid action of the CIT(A) granting relief towards additions made under s.145A of the Act.
None appeared on behalf of assessee. The matter is accordingly proceeded ex-parte.
The Ld.DR relied upon the order of the AO.
We find that the exclusion of excise duty on finished goods was examined by the CIT(A) in light of the decision of the Hon’ble Gujarat
ITA No.1858/Ahd/2014 Milestone Organics Ltd. vs. DCIT Asst.Year – 2002-03 - 4 - High Court in the case of Narmada Chematur Petrochem Ltd. and decision of the Coordinate Bench of Tribunal. The Revenue has failed to brought on record any tangible ground for not following the view taken by the Coordinate Bench in the light of the decision of the Hon’ble Gujarat High Court. In the circumstances, we decline to interfere with the order of the CIT(A).
Ground No.1 of Revenue’s appeal is dismissed.
Ground No.2 concerns addition of Rs.2,52,755/- made on account of loading and unloading charges. The CIT(A) has dealt with the aforesaid issue as reproduced hereunder:
8.0. The fifth ground of appeal is as follows: "The Ld. AO has erred in law and in facts in disallowing an amount of Rs.5,05,509/- on account of loading and unloading charges. The disallowance of Rs.5,05,509/- being contrary to facts and law is prayed to be allowed. 8.1 The AO has stated in his order as foilows:- “8. Loading and unloading Rs.5,05,509/-:- Under the head labour charges, the assessee has claimed an expense of Rs.5,05,509/- on account of loan and unloading charges from September, 2001 to March, 2002, The expense was found to be incurred in cash and paid to the party M/s Marwadi Loading, Unloading and Shifting Contractor, At & PO Manger/i, tal-Bhopalganj, Dist> Jodhpur (Rajasthan). The letter u/s 133(6) of the Act issued to this party on the given address was returned un-served with remark of the postal
ITA No.1858/Ahd/2014 Milestone Organics Ltd. vs. DCIT Asst.Year – 2002-03 - 5 - authority that no such person/firm found. This fact was intimated to the assesses and vide this office letter dtd. 11.02.2005 and notice u/s 142(1) dtd. 28.03.2005, the assessee company was requested to show cause as to why the claim should not be disallowed but till the date of order, no reply/clarification was received from the assessee company. The copy of cash voucher and debit note submitted during the course of assessment proceedings shows that the cash was paid to one Sr. Jamlaram Marwadi who happens to be labour contractor to whom the assessee has also paid labour loading and unloading charges to claim an allowable expense us/ 37(1) of the Act, onus lies on the assessee company to prove justify and substantiate the claim a^ the facts are known only to it. Here, the assessee company has failed to substantiate and justify its claim of expense of Rs.5,05,509/- on account of loan and unloading charges. Hence, the same is disallowed and accordingly an addition of Rs.5,05,509/- is made to the income computed by the assessee company. Penalty proceedings u/s 271(1)(C) of the Act, is also initiated on the issue."
8.2 During the course of appellate proceedings, the AR of the appellant has made the following submissions:-
"Disallowance out of loading & unloading expense of Rs.5,05,509/- During the year under consideration, the appellant has claimed labour charges of Rs.7,72,497/- out of which an amount of Rs.5,05,509/- on account of loading and unloading and shifting charges is paid to Shri Jamparam Marwadi, resident of village Manger/a, Tal Bhopalgunj, Dist. Jodhpur for the month of April-2001 to March 2002. Copy of ledger account of labour charges paid during the year under consideration is enclosed at Page No. 46 - 48 of the paper Book.
Shri Jamparam Marwadi is a labour contractor for loading and unloading and shifting of goods at the factory premises of the appellant from several years and in the past such expenses have been claimed by the appellant and accepted by the Department.
The Id. A.O. has disallowed the amounts paid on the ground that the payments to Mr. Jamparam Marwadi is made in cash.
ITA No.1858/Ahd/2014 Milestone Organics Ltd. vs. DCIT Asst.Year – 2002-03 - 6 -
The appellant submits to your honour that Mr. Jamparam Marwadi has engaged various labourers as per the requirements of the appellant company and the payments to them is made by cash through the contractor Mr. Jamparam Marwadi. The evidence of payment vouchers to the various labourers and the payment to Mr. Jamparam Marwadi is enclosed at page no. 49 -51 of the Paper Book.
The Id. A.O. has disallowed the payments as he found that the enquiries made u/s. 133(6) were unresponded.
It is respectfully submitted that the Id. A.O. failed to appreciate the fact that Mr. Jamparam Marwadi is a small contractor and as already explained above, due to bad financial health of the company, the work was suspended and, therefore, the contractor must have obviously moved away to some other place.
The Id. A.O. ought to have considered the fact that the appellant has made payment of labour charges to Mr. Jamparam Marwadi after deducting the tax at source which is deposited in Central Government Account. The copy of PAN Card and T.D.S. certificate issued in Form No. 16A is enclosed at Page No. 52 -64 of the Paper Book.
The appellant submits to your honour that during the year the appellant company has achieved a turnover of Rs. 11.18 crores against which the amount of loading and unloading charges paid is reasonable.
Moreover, no such expenditure was disallowed in the past and, therefore, there is no reason for the Id. A.O. to doubt the same.
Considering the above submission and facts of the appellant's case, the expense as claimed may kindly be directed to be allowed"
8.3. I have considered the facts of the case and submission made by the AR of the appellant. The letter sent by the AO to Mr. Jamparam Marwadi had been returned back by the Postal Department as this person was not found on the
ITA No.1858/Ahd/2014 Milestone Organics Ltd. vs. DCIT Asst.Year – 2002-03 - 7 - given address. The appellant had also not provided any new address of this person. At the same time, the appellant had made IDS on the payments made to this person and deposited the same in the Central Government Account. It has also provided the copy of the PAN card and IDS certificate issued in Form No. 16A to this person. But the fact remains that the payments have been made in cash and whereabouts of this person to whom payments were made is not available. Hence, the expenses are not fully verifiable. But the appellant's must have incurred some expenses on account of loading and unloading charges. Hence, to meet the end of justice, the AO is directed to restrict such disallowance to 50% of the amount paid to Mr. Jamparam Marwadi. The appellant gets part relief accordingly.”
The Ld.DR relied upon the order of the AO but failed to controvert the findings of the CIT(A). In the absence of any perversity pointed out, we do not see any reason to interfere with the order of the CIT(A).
Ground No.2 of Revenue’s appeal is therefore dismissed.
In the result, Revenue’s appeal stands dismissed.
This Order pronounced in Open Court on 29 / 11 /2017
Sd/- Sd/- (एस.एस.गोदारा) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( PRADIP KUMAR KEDIA ) ( S.S. GODARA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 29/ 11 /2017 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
ITA No.1858/Ahd/2014 Milestone Organics Ltd. vs. DCIT Asst.Year – 2002-03 - 8 -
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-III, Baroda �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation ..29.11.17(dictation-pad 6-pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …29.11.17 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….30.11.17 7. Date on which the file goes to the Bench Clerk…………………30.11.17 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………