M/s. Goel Bricks Industries, V. ITO,

CO 22/JODH/2008

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9832 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-06-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 20-08-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Depreciation

Judgement Text

ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 04/JU/2007 A.Y. : 2003-04 INCOME TAX OFFICER, WARD 27(2), ROOM NO. 213-D, VIKAS BHAVAN, NEW DELHI VS. M/S GOEL BRICKS INDUSTRIES, E-37, KIRTI NAGAR, NEW DELHI (PAN: AAAFG9352P) (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) AND AND AND AND C.O. NO. 22 / JU /20 08 (A.Y. 2003-04) M/S GOEL BRICKS INDUSTRIES, E-37, KIRTI NAGAR, NEW DELHI (PAN: AAAFG9352P) INCOME TAX OFFICER, WARD 27(2), ROOM NO. 213-D, VIKAS BHAVAN, NEW DELHI DEPARTMENT BY : SH. SATPAL SINGH, SR. D.R. ASSESSEE BY : SH. KAPIL GOEL, ADV. DATE OF HEARING DATE OF HEARING DATE OF HEARING DATE OF HEARING : 25.8.2014 : 25.8.2014 : 25.8.2014 : 25.8.2014 DATE OF PRONOUNCEMENT: DATE OF PRONOUNCEMENT: DATE OF PRONOUNCEMENT: DATE OF PRONOUNCEMENT: 29. 29. 29. 29.8.2014 8.2014 8.2014 8.2014 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE EMANATE OUT OF THE ORDER PASSED BY THE LD. CIT(A), ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 2 JODHPUR IN APPEAL NO. 28/2006-07 DATED 18.9.2006 P ERTAINING TO ASSESSMENT YEAR 2003-04. 2. THE GROUND RAISED IN THE REVENUES APPEAL READ AS UNDER:- WHETHER THE CIT(A) WAS CORRECT ON FACTS AND IN LAW IN DELETING ADDITIONS MADE ON ACCOUNT OF BRICK PRODUCTION EXPENSES, CLAY EXCAVATION AND CARRIAGE EXPENSES AND EXPENDITURE ON WATER COURSES WITHOUT APPRECIATING THE FACTS THAT ASSESSEE HAD ALTOGETHER FAILED TO PRODUCE THE RELEVANT SUPPORT EVIDENCE TO SUBSTANTIATE ITS CLAIM OF EXPENSES WHICH WERE ENTIRELY MADE IN CASH. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSM ENT U/S. 143(3)/147 OF THE INCOME TAX ACT WAS COMPLETED BY T HE ACIT, CIRCLE, BARMER ON 13.3.2006 AT THE ASSESSED INCOME OF RS. 48,02,505/- AFTER MAKING DISALLOWANCE OUT OF EXPENS ES TO THE INCOME RETURNED OF RS. 8,09,760/-. AGGRIEVED BY TH E ASSESSMENT ORDER OF AO DATED 13.3.2006, THE ASSESSE E FILED AN APPEAL BEFORE THE CIT(A) JODHPUR. THE CIT(A), JODHP UR VIDE ORDER DATED 18.9.2006 DECIDED THE APPEAL OF THE AS SESSEE ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 3 ALLOWING PART RELIEF. MEANTIME, THE ASSESSEE FILED APPLICATION BEFORE THE CCIT, JODHPUR DATED NIL AND 9.6.2006 FOR TRANSFER OF HIS CASE TO CIT-IX, NEW DELHI. THE CIT-II VIDE ORD ER U/S. 127 DATED 18.9.2006, TRANSFERRED THE JURISDICTION OF TH E ASSESSEE FROM THE ACIT, BARMER, (RAJ) TO ITO, WARD -27(2), N EW DELHI UNDER THE ADMINISTRATIVE CONTROL OF CIT-IX, NEW DEL HI. ACCORDING TO ORDER U/S. 127 DATED 18.9.2006 THE DCI T, CIRCLE, BARMER TRANSFERRED THE CASE RECORD OF THE ASSESSEE TO THE ITO, WARD 27(2), NEW DELHI ON 6.10.2006 WHO ACKNOWLEDGE D THE RECEIPT OF THE SAME ON 09.10.2006. IN PURSUANCE O F ORDER U/S. 127 OF THE I.T. ACT DATED 18.9.2006 OF CIT-II, JOD HPUR, THE ORDER OF THE CIT(A), JODHPUR DATED 18.9.2006 WAS TRANSFER RED TO THE CIT-IX, NEW DELHI VIDE CIT-II, JODHPURS LETTER DAT ED 26.10.2006. 3.1 THE ASSESSEE FILED APPEAL BEFORE THE ITAT, JODH PUR BENCH AGAINST THE ORDER OF THE CIT(A) JODHPURS ORDER DA TED 18.9.2006. THE CIT-IX, NEW DELHI VIDE ORDER DATED 20/21-12- 2006 AUTHORISED THE ITO, WARD 27(2), NEW DELHI TO F ILE SECOND APPEAL AGAINST THE ORDER OF THE CIT(A), JODHPURS D ATED 18.9.2006. THE ASSESSEE ALSO VIDE FORM NO. 36A FILE D CROSS OBJECTION AGAINST THE ORDER OF THE CIT(A), JODHPUR BEFORE THE ITAT, JODHPUR. THE ITAT, JODHPUR, VIDE ORDER DATED 21.9.2007, ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 4 PARTLY ALLOWED THE APPEAL IN ITA NO. 601/JU/2006 FO R A.Y. 2003- 04 OF THE ASSESSEE WITH THE OBSERVATION MADE AT PA GE NO. 3 VIDE PARA NO. 5 OF THE AFORESAID ORDER, WHICH IS R EPRODUCED AS UNDER:- ADMITTEDLY, THE REVENUE HAS NOT FILED ANY SECOND APPEAL AGAINST THE FINDING GIVEN BY THE CIT(A). THI S SHOWS THAT THE IMPUGNED ORDER HAS BEEN ACCEPTED BY THE DEPARTMENT AND ASSESSMENT ORDER TO THAT EXTENT STOOD MERGED WITH THAT OF THE LD. CIT(A)S ORDER. THE ORDER OF THE ITAT, JODHPUR DATED 21.9.2007 IS SUBSEQUENT TO THE CHANGE OF JURISDICTION OVER THE ASSESSEE WHEN ORDER U/S. 127 OF THE I.T. ACT WAS PASSED BY T HE CIT-II, JODHPUR ON 18.9.2006. THE CIT-IX, NEW DELHI IS BEI NG REQUESTED TO DIRECT THE ITO, WARD 27(2), NEW DELHI TO FILE MA AGAINST THE ORDER DATED 21.9.2007 OF THE ITAT, JODHPUR, AS REGA RD ITS OBSERVATION ON PAGE NO. 3 AS ALSO DECIDING THE PRES ENT JURISDICTION OVER THE APPEAL. LD. AR OF THE ASSES SEE VIDE HEARING DATED 21.7.2011 BEFORE THE ITAT, JODHPUR AL SO ARGUED TO TRANSFER THE APPEAL TO THE ITAT, NEW DELHI. ACC ORDINGLY, THE PENDING APPEAL ITA NO. 04/JODH/2007 AND CO NO. ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 5 22/JODH/20098 TRANSFER TO ITAT, DELHI FROM ITAT, JO DHPUR AND THE CASE WAS EARLIER HEARD ON 13.9.2012 AND WAS REF IXED FOR CLARIFICATION OR ORDER SHEET DATED 10.1.2013.THE A PPEAL CAME UP FOR HEARING ON 21.5.2013. ON 21.5.2013 LD. DR TO OK THE ADJOURNMENT TO VERIFY THE STATUS OF APPEAL NO. 601/ JU/2006 DECIDED ON 21.9.2007 AND CASE WAS ADJOURNED TO 17. 9.2013. AGAIN ON 17.9.2013, THE LD. DR MADE THE SAME REQUES T. HOWEVER, LD. COUNSEL OF THE ASSESSEE HAS ARGUED THA T SINCE ORDER OF TRIBUNAL HAD BECOME FINAL, THEREFORE, THE REVENUES APPEAL SHOULD BE DISMISSED. AFTER GOING THROUGH TH E RECORDS, WE FIND THAT VIDE LETTER DATED 11.8.2011 LD. DR, JO DHPUR, ITAT INSTRUCTED CIT-IX, NEW DELHI TO FILE MA IN ITA NO . 601. 4. WE FIND THAT EARLIER ITAT VIDE ORDER DATED 21.9. 2007 HAS ADJUDICATED THE ISSUE VIDE PARA NOS. 3 TO 6 AT P AGES 1 TO 4 OF THE AFORESAID ORDER, WHICH IS REPRODUCED HEREUNDER: - 3. FIRST GROUND IS AGAINST THE CONFIRMATION OF ADDITION OF RS. 2,95,000/ - AS AGAINST TOTAL DISALLOWANCE OF EXPENSES OF RS. 37,83,185/- MADE BY THE ASSESSING OFFICER BY INCREASING THE G. P. RATE BY 1%. ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 6 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSING OFFICER INITIATED REASSESSMENT PROCEEDING S ON THE GROUND THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON TRUCK @ 40% WHICH WAS NOT PERMISSIBLE, AS IN HIS OPINION, THE TRUCK WAS USED FOR THE ASSESSEES OWN BUSINESS. HOWEVER, WHILE FRAMING ASSESSMENT, HE INTER ALIA, MADE THE FOLLOWI NG DISALLOWANCES: A. BRICKS PRODUCTION EXPENSES - RS.28,59, 057/- B. CLAY EXCAVATION AND CARRIAGE EXPENSES- RS. 6,98,382/- C. EXPENDITURE ON WATER COURSE - RS. 2,25,746/- TOTAL TOTAL TOTAL TOTAL RS.37,83,185/ RS.37,83,185/ RS.37,83,185/ RS.37,83,185/- -- - THE ASSESSEE ASSAILED THE FINDING OF THE ASSESSING OFFICER IN THE FIRST APPEAL. THE LD. CIT(A) HELD TH AT THE ASSESSING OFFICER OUGHT TO HAVE APPLIED THE PROVISIONS OF SEE. 145 AND THEN COMPUTED INCOME. HE TOOK NOTE OF THE TRADING RESULTS OF THE ASSESSEE AT PAGE 31 OF THE IMPUGNED ORDER AND CAME TO HOLD THAT THE G.P. RATE WAS REQUIRED TO BE ENHANCED BY 1% ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 7 INSTEAD OF THE SPECIFIC ADDITIONS AS AFORENOTED, MA DE BY THE ASSESSING OFFICER. HE, THEREFORE, MADE ADDITION OF RS. 2,95,0001 - THEREBY DELETING THE OT HER ADDITIONS OF RS. 37,83,185/-. IT IS THIS ADDITION O F RS. 2.95 LAKHS, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL VIDE THE FIRST GROUND. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE RELEVANT MATERIAL ON RECORD. IT IS CLEAR FROM T HE ASSESSMENT ORDER THAT CERTAIN SPECIFIC DISALLOWANCE S WERE MADE BY THE ASSESSING OFFICER WHICH INCLUDED THESE THREE ADDITIONS ON ACCOUNT OF EXPENSES TOTALI NG RS. 37.83 LAKHS. THE LD. CIT(A), HOWEVER, IN THE FI RST APPEAL CAME TO HOLD THAT WHEN THE BOOKS OF ACCOUNT WERE NOT PROPERLY MAINTAINED THE ASSESSING OFFICER OUGHT TO HAVE REJECTED SUCH BOOKS OF ACCOUNT. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE AS UNDE R: 'IN VIEW OF THE ENTIRE DISCUSSION AS ABOVE, I HOLD THAT HE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCES OF EXPENSES OF RS. 28,59,057/-, RS. 6,98,382/- AND RS. 2,25,746/-. THE ASSESSING OFFICER WAS REQUIRED ON THE GIVEN ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 8 FACTS TO APPLY THE PROVISIONS OF SEE. 145 AND THEN ASSESS THE INCOME AT A REASONABLE FIGURE AFTER CONSIDERING THE MATERIAL FACTS ON RECORD AND APPELLANT'S OWN PAST RESULTS AS ALSO THE COMPARABLE CASES, IF ANY. PROVISIONS OF SEC. 145 EXIST ON THE STATUTE AND IT IS THE DUTY OF THE ASSESSING OFFICER TO APPLY THE SAME WHEREVER THE1ACTS SO SUGGEST. NOT APPLYING THE PROVISIONS WHEN THEY ARE REALLY REQUIRED TO BE INVOKED MAKES THE PROVISION ON THE STATUTE AS REDUNDANT. IN THE INSTANCE CASE, THE ASSESSING OFFICER BY NOT APPLYING THE PROVISIONS OF SEE. 145 MADE THE SAME AS REDUNDANT. THE DUTY OF THE ASSESSING OFFICER IS TO CORRECTLY. APPLY PROPER SECTION AND COMPUTE THE CORRECT TAXABLE INCOME. EVEN OTHERWISE, IT IS ESTABLISHED PROCEDURE IN THE DEPARTMENT THAT IN CONTRACTOR'S CASES, WHERE BOOKS OF ACCOUNT ARE DEFECTIVELY MAINTAINED AND VOUCHERS ARE NOT PRODUCED OR THEY ARE SELF MADE) NOT OPEN FOR VERIFICATION, A ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 9 PARTICULAR N. P. RATE IS APPLIED AFTER REJECTING TH E BOOKS OF ACCOUNT. FROM THE ABOVE EXTRACTED PARA IT IS OBVIOUS THAT THE LD. CIT(A) HAD REJECTED THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND PROCEEDED TO DETERMINE THE INCOME BY APPLYING A PARTICULAR PROFI T RATE, WHICH WE WOULD ADVERT TO AT A LATER STAGE. TH E CONTENTION OF THE LD. D.R. THAT THE LD. CIT(A) HAD NOT REJECTED THE BOOKS OF ACCOUNT AND HENCE THE PROVISIONS OF SEE. 145 CANNOT BE APPLIED I DOES NOT MERIT ACCEPTANCE FOR THE CLEAR REASON THAT THE OBSERVATIONS OF THE LD. CIT(A) AS DISCUSSED ABOVE ARE CRYING HOARSE THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE NOT APPROPRIATE AND PROVISIONS OF SEC. 145 ARE APPLICABLE. HIS FURT HER DECISION IN DELETING THE SPECIFIC DISALLOWANCES OF EXPENSES AND APPLYING A PARTICULAR G.P. RATE CLEARL Y PROVES THAT IN HIS OPINION THE BOOKS WERE NOT PROPERLY MAINTAINED AND HE REJECTED SUCH BOOKS OF ACCOUNT FOR MAKING A TRADING ADDITION. ADMITTEDLY T HE REVENUE HAS NOT FILED ANY SECOND APPEAL AGAINST THE FINDING GIVEN BY THE LD. CIT(A). THIS SHOWS THAT TH E IMPUGNED ORDER HAS BEEN ACCEPTED BY THE DEPARTMENT AND THE ASSESSMENT ORDER TO THAT EXTENT STOOD MERGED WITH THAT OF THE LD. CIT(A)'S ORDER. I N THE ABSENCE OF ANY APPEAL FILED BY THE REVENUE WE CANNOT PUT THE ASSESSEE IN A WORST POSITION IN WHI CH ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 10 IT WOULD HAVE BEEN IF NO APPEAL HAD BEEN FILED BY I T. BE THAT AS IT MAY, NOW THE QUESTION, WHICH LOOMS LARGE OVER THE LANDSCAPE OF FACTUAL MATRIX IS, WHETHER THE TRADING ADDITION ON ACCOUNT OF 1 % G. P . RATE CAN BE SUSTAINED? THE LD. CIT(A) HAS TABULATED THE FIGURE OF SALES, GROSS PROFIT AND GROSS PROFIT RATE OF THIS A.Y. AS WELL AS THE IMMEDIATELY PRECEDING T WO A. YS. AT PAGE 31 OF THE IMPUGNED ORDER. ON A PERUSAL OF THIS TABLE, IT TRANSPIRES THAT THE ASSES SEE HAD DECLARED G.P. RATE OF 7.55% IN THIS YEAR AS AGAINST 6.47% OF THE PRECEDING YEAR. THE JODHPUR BENCH OF THE TRIBUNAL HAS HELD IN SEVERAL CASES THA T WHERE THE BOOKS OF ACCOUNT ARE REJECTED, THEN RECOURSE SHOULD BE TAKEN TO THE PROFIT RATE OF THE IMMEDIATELY PRECEDING YEAR UNLESS FACTS JUSTIFY DEPARTURE THEREFROM. ON A CLOSE EXAMINATION OF THE G.P. RATE DECLARED BY THE ASSESSEE IN THIS AS WELL AS THE PRECEDING YEAR, IT BECOMES PATENT THAT SUCH RAT E OF 7.55% IN THIS YEAR IS BETTER THAN OF 6.47% IN T HE IMMEDIATELY PRECEDING YEARS. IN SUCH A SITUATION, THERE CANNOT BE ONLY QUESTION OF APPLYING A STILL HIGHER GP RATE FOR SUSTAINING ANY TRADING ADDITION, WE THEREFORE, ORDER FOR THE DELETION OF ADDITION OF RS . 2,95,000/- 5. WE FIND THAT DEPARTMENT HAS NOT FILED ANY MISC. APPLICATION AGAINST THE TRIBUNALS ORDER DATED 21.9 .2007, HENCE, IT IS ESTABLISHED THAT THE ORDER PASSED BY T HE TRIBUNAL ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 11 HAS ATTAINED FINALITY. ACCORDINGLY, WE DISMISS T HE APPEAL OF THE REVENUE. 6. LD. COUNSEL OF THE ASSESSEE DURING THE HEARING BEFORE US HAS WITHDRAWN THE CROSS OBJECTION FILED BY THE ASSE SSEE, THEREFORE, THE CROSS OBJECTION STANDS DISMISSED AS WITHDRAWN. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 29-8-2014. SD/- SD/- [ [[ [G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 29/8/2014 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 04/JU/2007 AND CO NO. 22/JU/2008 12