Dy.CIT, Cir.2, Sangli, Sangli V. Rajaram Solvex Ltd., Islampur

ITA 100/PUN/2012

• Counselvise Citation: 10024514 RSA 2012
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-09-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 19-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Rectification of order; Additional depreciation
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 100 / P N/ 20 12 ASSESSMENT YEAR : 2004 - 05 THE DY. COMMISSIONER OF INCOME TAX, C IRCLE - 2, SANGLI VS. RAJARAM SOLVEX LTD., PLOT NO. A - 21, M.I.D.C., ISLAMPUR, TAL. - WALWA, DIST. - SANGLI (APPELLANT) (RESPONDENT) PAN NO. AAACR 8594H APPELLANT BY: SHRI SANTOSH KUMAR RESPONDENT BY: SHRI NIKHIL PATHAK DATE OF HEARING : 03 - 09 - 2013 DATE OF PRONOUNCEMENT : 20 - 09 - 2013 ORDER P ER R.S. PADVEKAR , JM : - THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT(A) - KOLHAPUR DATED 30 - 11 - 2011 FOR THE A.Y. 2004 - 05. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, CIT (APPEALS) ERRED IN ALLOWING ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE INCOME - TAX ACT, 1961 IN ABSENCE OF COMPLIANCE BY THE ASSESSEE OF STATUTORY REQUIREMENT OF FILING AUDIT REPORT IN FO RM NO. 3AA BY THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, CIT (APPEALS) ERRED IN NOT APPRECIATING THAT THE APPEAL WAS AGAINST ORDER U/S. 154 OF THE I.T. ACT, 1961 PASSED BY THE ASSESSING OFFICER AND POWERS AVAILABLE TO CIT (APPEALS) WERE RESTRICTED TO THE POWERS AVAILABLE TO THE ASSESSING OFFICER U/S. 154 OF THE I.T. ACT, 1961, WHICH DO NOT INCLUDE ADMITTANCE OF FORM NO. 3AA OF THE I.T. RULES CERTIFYING THE ADDITIONAL DEPRECIATION AVAILABLE TO THE ASSESSEE U/S. 32(1)(IIA) OF THE I.T. ACT, 1961. 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS A PUBLIC LIMITED COMPANY, WHICH IS ENGAGED IN PROCESSING OF 2 ITA NO.100/PN/2012, RAJARAM SOLVEX LTD., SANGLI OIL SEEDS/CAKE, REFINING OF CRUDE EDIBLE OIL AND ALSO UNDERTAKE JOB WORK FOR PROCESSING AND REFININ G OF THIRD PARTY SEEDS AND OIL ETC. THE ASSESSEE ALSO EARNED INCOME FROM WIND MILLS. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2004 - 05 DECLARING TOTAL INCOME OF RS.2,96,36,493/ - . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WA S COMPLETED U/S. 143(3) BY DETERMINING TOTAL INCOME AT RS.2,98,01,493/ - . S UBSEQUENTLY , THE ASSESSING OFFICER INITIATED THE PROCEEDINGS U/S. 154 OF THE ACT FOR RECTIFYING THE ASSESSMENT ORDER PASSED U/S. 143(3) BY GIVING THE REASON THAT THE ASSESSEE HAS CL AIMED EXCESS DEPRECIATION ON GENERAL MACHINERY TO THE EXTENT OF RS.39,62,884/ - . THE ASSESSING OFFICER PASSED THE ORDER U/S. 154 DISALLOWING THE EXCESS DEPRECIATION AND CARRIED OUT RECTIF ICATION OF THE ASSESSMENT ORDER . THE ASSESSEE CHALLENGED THE ORDER P ASSED BY THE ASSESSING OFFICER U/S. 154 BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT IN THE ASSESSMENT ORDER U/S. 143(3) THE CLAIM OF ADDITIONAL DEPRECIATION OF RS.39,62,885/ - WAS ALLOWED TO THE ASSESSEE IN ADDITION TO THE NORM AL DEPRECIATION OF RS.84,90,941/ - ON THE PLANT AND MACHINERY. THE SAID CLAIM WAS CERTIFIED BY THE CHARTERED ACCOUNTANT BUT THE REQUISITE REPORT FROM THE C.A. IN FORM NO. 3AA WAS NOT FILED DURING THE ASSESSMENT PROCEEDINGS NOR WITH THE RETURN OF INCOME. T HE ASSESSEE FILED ALL THE DETAILS BEFORE THE LD. CIT(A) TO DEMONSTRATE THAT THE ASSESSEE HAS RIGHTLY CLAIM ED THE ADDITIONAL DEPRECIATION U/S. 32(1)(IIA) OF THE ACT. AS PER THE AUDIT REPORT FILED BY THE ASSESSEE , IT WAS CERTIFIED BY THE AUDITOR THAT THERE WAS A SUBSTANTIAL EXPANSION IN CAPACITY OF THE PLANT AND MACHINERY BY MORE THAN 25%. THE LD. CIT(A) WAS OF THE OPINION THAT EVEN IF THE AUDIT REPORT WAS FILED IN THE A PPELLATE PROCEEDINGS BUT THAT SHOULD NOT DEPRIVE THE ASSESSEE FROM CLAIMING T HE DEDUCTIO N AS THE FILING OF THE AUDIT REPORT IN FORM NO. 3AA IS A DIRECTORY IN NATURE. THE LD. CIT(A) EXAMINED THE CLAIM OF THE ASSESSEE ON MERIT ALSO AND ALLOWED THE ADDITIONAL DEPRECIATION. THE OPERATIVE PART OF THE FINDINGS OF THE LD. CIT(A) ARE AS UNDER: 3 ITA NO.100/PN/2012, RAJARAM SOLVEX LTD., SANGLI 7. I HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE AND I FIND THAT THE APPELLANT HAD NOT FILED FORM NO. 3AA ALONG WITH THE RETURN OF INCOME OR DURING ASSESSMENT PROCEEDINGS IN SUPPORT OF ITS CLAIM THAT ADDITIONAL DEPRECIATION UNDER SECTION 32(1)( IIA). THOUGH THE APPELLANT HAD SUBMITTED VOLUMINOUS RECORDS OF ADDITIONAL PLANT AND MACHINERY, IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER TO FIND WHETHER OR NOT THERE _HAS BEEN SUBSTANTIAL EXPANSION IN CAPACITY OF THE PLANT AND MACHINERY BY MORE THAN 2 5%. FORM NO. 3AA WAS SUPPLIED AT THE TIME OF APPELLATE PROCEEDINGS AT WHICH TIME IT WAS ALSO URGED THAT THE APPELLATE AUTHORITY COULD ENTERTAIN THIS SUBMISSION AND TAKE A JUDICIOUS VIEW REGARDING ALLOWABILITY OF CLAIM UNDER SECTION 32(L)( IIA). IN THE CASE OF CIT V/S JAYANT PATEL (2001) 248 ITR 199 (MAD) IT WAS HELD THAT THE ASSESSEE IS ELIGIBLE FOR RELIEF UNDER SECTION 80J EVEN THOUGH THE AUDIT REPORT WAS NOT FILED ALONG WITH THE RETURN BUT WAS FILED BEFORE THE APPELLATE AUTHORITY. THIS IS FOR THE REASON THAT THE APPELLATE AUTHORITY, UNDER THE ACT, ALSO HAS THE POWERS OF THE ORIGINAL AUTHORITY AND IT IS OPEN TO THE APPELLATE AUTHORITY TO DIRECT THE INCOME - TAX OFFICER TO RECEIVE THE AUDIT REPORT OR TO DIRECT HIM TO CONSIDER THE AUDIT REPORT FILED BEFORE THE APPELLATE AUTHORITY ON MERITS OR TO CONSIDER THE REPORT HIMSELF. IT WAS, THEREFORE, HELD THAT 'THE APPELLATE AUTHORITY OUGHT TO HAVE CONSIDERED THE REPORT ON MERITS. 8. SIMILARLY, THE HONOURABLE JAMMU AND KASHMIR HIGH COURT HAS HELD IN T HE CASE OF CIT V/S TREHAN ENTERPRISES (2001) 248 ITR 333 (J & K) THAT WHILE ADJUDICATING AN APPEAL AGAINST AN ASSESSMENT ORDER, THE CIT(APPEAL) HAS VIRTUALLY ALL THE POWERS WHICH ARE VESTED WITH AN ASSESSING OFFICER FRAMING THE ASSESSMENT. IN THIS CA SE, WHILE CLAIMING DEDUCTION UNDER SECTION 80J AND 80H, FORM NO. 10C AND 10D WAS NOT FILED ALONG WITH THE RETURN OF INCOME OR IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS HELD THAT EVEN IF FORM NO. 10C AND 10D WERE NOT ATTACHED ALONG WITH THE RETURN O F INCOME, THE CIT(APPEAL) SHOULD HAVE GONE INTO THE MERITS OF THE CASE AND FRAME ASSESSMENT OR REMIT THE CASE BACK TO THE INCOME - TAX OFFICER TO PROCEED IN ACCORDANCE WITH LAW IN THE FACE OF SUCH CERTIFICATES. IT HAS BEEN HELD IN THE CASE OF CIT V/S KANPUR COAL SYNDICATE (1964) 53 ITR 225 (SC) THAT 'THE AAC HAS, THEREFORE, PLENARY POWERS IN DISPOSING OFF AN APPEAL. HE CAN DO WHAT THE INCOME TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. IN FACT, THE APPELLATE AUTHORITY I S NO DIFFERENT, FUNCTIONALLY AND SUBSTANTIALLY, FROM THE ASSESSING AUTHORITY ITSELF. SIMILARLY, IT HAS BEEN HELD IN THE CASE OF CIT V/S MOTOR INDUSTRIES COMPANY LTD. (1998) 229 ITR 139 (KAR) THAT WHEN THE ASSESSMENT IS NOT UNDER SECTION 143(1 ) OF THE INCOME - TAX ACT 1961, THE APPELLATE AUTHORITY MAY PERMIT THE ASSESSEE CLAIM A DEDUCTION OR EXEMPTION IN APPEAL WHICH HE HAD NOT CLAIMED BEFORE THE INCOME TAX OFFICER, PARTICULARLY WHEN RELEVANT MATERIAL IS ON RECORD. SIMILARLY , DECISIONS HAVE BEEN GIVEN IN THE CASE OF ITO V/S SMT MANDIRA D VAKHARIA (2001) 250 ITR 432 (KAR) AND MANTEE CONSULTANTS (P) LTD. V/S ITO IN ITA NO. 750/DEL/204 DATED 10/06/2004. 4 ITA NO.100/PN/2012, RAJARAM SOLVEX LTD., SANGLI 9. IN VIEW OF THE SUBMISSIONS MADE AND THE LEGAL POSITIONS ESPOUSED BY VAR IOUS COURTS, IT IS APPARENT THAT FILING OF AUDIT REPORT IN FORM 3AA IN RESPECT OF ADDITIONAL DEPRECIATION IS ALSO DIRECTORY. THE AUDIT REPORT CAN BE FILED AT ANY STAGE OF ANY PROCEEDINGS BEFORE THE ASSESSING OFFICER OR THE C1T(A). SINCE THE POWER OF THE CI T(A) IS COTERMINOUS WITH THAT OF THE ASSESSING OFFICER, THE AUDIT REPORT FILED AT THE TIME OF APPELLATE PROCEEDINGS HAS SUBSTANTIAL VALUE AND SHOULD NOT BE IGNORED. IN VIEW OF THIS ESTABLISHED POSITION, THE FORM NO. 3AA WAS SENT TO THE ASSESSING OFFICER VI DE LETTER NO.KOP/CIT(A)/RAJARAM SOLVEX/09 - 10/51 DATED 01/07/2009. ACCORDINGLY, THE ASSESSING OFFICER SENT HIS REPORT VIDE LETTER NO. SLL/DCIT, CIR - 2/RAJARAM SOLVEX/43/11 - 12 DATED 08/07/2011. VIDE THIS REPORT IT IS STATED THAT THE APPELLANT HAD FURNISHED TH E FOLLOWING DOCUMENTS IN SUPPORT OF EXPANSION OF CAPACITY: 1. COPY OF IEM ACKNOWLEDGEMENT (PART A) ISSUED BY MINISTRY OF COMMERCE & INDUSTRY BEARING N0.1454/SIA/IMO/2003 DATED 2/6/2003 WHEREIN IT IS SEEN THAT, EXPANSION OF REFINERY CAPACITY IS INCREASED FROM EXISTING CAPACITY I.E. 7500 MT TO 30000 MT I.E. FOR ADDITION OF PROPOSED CAPACITY OF 22500 MT. 2. EXPANSION OF ACID OIL PLANT CAPACITY FROM EXISTING 375 . MT TO 1500 MT I.E. FOR ADDITION OF PROPOSED CAPACITY OF 1125 MT. 3. COPY OF IEM ACKNOWLED GEMENT (PART B) ISSUED BY MINISTRY OF COMMERCE & INDUSTRY BEARING NO.4669/SIA/IMO/2005 DATED 3/10/2005 FOR 30000 MT. THE SAID CERTIFICATE IS ISSUED FOR REGISTERING THE NEW INSTALLED CAPACITY AFTER COMPLETION OF EXPANSION OF INDUSTRIAL UNIT. 4. THE CERTIFI CATE ISSUED BY MINISTRY OF CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION DEPT. OF FOOD AND PUBLIC DISTRIBUTION, REGARDING NEW CAPACITY OF UNIT I.E. 30,000 MT. 5. APPLICATION MADE BY THE COMPANY TO M.S.E.B., CIRCLE OFFICE, SANGLI FOR INCREASE IN POWER C ONNECTION TO MEET THE INCREASED POWER REQUIREMENT DUE TO EXPANSION. 6. COMPANY HAS ALSO SUBMITTED PRODUCTION REPORT (FINISHED GOODS STOCK RECONCILIATION) FOR THE YEAR 2002 - 03 AND 2003 - 04. THE REPORT INDICATES THE INCREASE IN TOTAL PRODUCTION CAPACITY . 10. THESE SUBMISSIONS OF THE APPELLANT AND THE REPORT OF THE ASSESSING OFFICER INDICATE THAT THE CAPACITY OF THE PLANT INCREASED FROM 7500 MT PER ANNUM TO 30,000 MT PER ANNUM. SINCE THE PRIMARY CONDITION THAT THE INSTALLED CAPACITY HAS INCREASED SUBSTAN TIALLY IS FULFILLED AND THE FACT THAT THE ISSUE CAN BE ENTERTAINED AT APPELLATE STAGE AS WELL, NOTWITHSTANDING THE FACT THAT FORM 3AA WAS NOT SUBMITTED AT THE TIME OF FILING OF A RETURN OF INCOME OR ASSESSMENT PROCEEDINGS, I HOLD THAT THE ASSESSING OFFICER 5 ITA NO.100/PN/2012, RAJARAM SOLVEX LTD., SANGLI WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF ADDITIONAL DEPRECIATION. HENCE, THE APPEAL IS ALLOWED ON THIS GROUND ON MERIT. NOW THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. THE LD. DR REFERRED TO THE RELEVANT RULES AND SUBMITS THAT IT IS MANDATORY FOR THE ASSESSEE TO FILE THE AUDIT REPORT ALONG WITH THE RETURN OF INCOME . AT THE MOST AUDIT REPORT SHOULD HAVE BEEN FILED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS . H E SUBMITS THA T THERE IS A VIOLATION OF THE MANDATORY CONDITION AND LD. CIT(A) SHOULD NOT HAVE H E LD THAT IT IS MERELY NON - COMPLIANCE OF DIRECTORY PROVISION. HE PLEADED FOR RESTORING THE ORDER OF THE ASSESSING OFFICER. WE HAVE HEARD THE LD. AR. 4. THE SHORT ISSUE IN CONTROVERSY IS IN RESPECT OF THE ADDITIONAL DEPRECIATION CLAIMED BY THE ASSESSE E ON THE EXPANSION OF THE PLANT. INITIALLY THE ASSESSEE DID NOT FILE REQUIRE D AUDIT REPORT IN FORM NO. 3AA IN SUPPORT OF THE CLAIM , ALONG WITH THE RETURN OF INCOME NOR THE SAME WAS FILED IN THE ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER, THEREFORE, REJECTED THE CLAIM OF THE ASSESSEE BY PASSING THE RECTIFICATION ORDER U/S. 154. WE CONCUR WITH THE FINDING OF THE LD. CIT(A) THAT EVEN IF THE AUDIT REPORT IS FILED FOR THE FIRST TIME IN THE APPELLATE PROCEEDINGS , SAID REQUIREMENT FILING A UDIT R EPORT WITH RETURN OF INCOME IS IN DIRECTORY IN NATURE T HE NON - COMPLIANCE OF THE SAID RULE SHOULD NOT HAVE ANY FATAL CONSEQUENCES. WE ALSO FIND THAT THE LD. CIT(A) HAS SENT THE AUDIT REPORT TO THE ASSESSING OFFICER AND CALLED HIS REPORT . T HE ASSESSING OFFICER HAS SENT HIS REPORT ON 08 - 07 - 2011 WHICH REFERENCE IS MADE IN PARA NO. 9 OF THE IMPUGNED ORDER . I N THE REPORT THE UNDISPUTED FACT IS NOTED THAT THERE IS AN EXPANSION OF THE CAPACITY BY MORE THAN 25% . I N OUR OPINION ON MERIT ITSELF THE ASSESSEE IS ENTITLED FOR ADDITIONAL DEPRECIATION WHICH HAS BEEN RIGHTLY ALLOWED BY THE LD. CIT(A). THE REVENUE SHOULD NOT HAVE ANY GRIEVANCE AS THE AUDIT REPORT WAS SENT TO 6 ITA NO.100/PN/2012, RAJARAM SOLVEX LTD., SANGLI THE ASSESSING OFFICER AND HIS C OMMENT/REPORT WAS CALLED. WE FIND NO MERIT IN THE APPEAL FILED BY THE REVENUE. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 20 - 09 - 20 1 3 SD/ - SD/ - ( R.K. PANDA ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDI CIAL MEMBER RK /PS PUNE , DATED : 20 TH SEPTEMBER, 20 1 3 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A), KOLHAPUR 4 THE CIT, KOLHAPUR 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE