Nirma Limited, Ahmedabad V. The CIT,A'bad-III, Ahmedabad

ITA 1104/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6117 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K ISHAN VYAS HEARING CONCLUDED
• Section: 263

Judgement Text

ITA NO. 1104 / AHD/201 3 ASSESSMENT Y EAR: 20 0 8 - 09 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO. 1104 /AHD/20 13 ASSESSMENT Y EAR: 2008 - 09 NIRMA LIMITED ... .......... . APPELLANT NIRMA HOUSE, ASHRAM ROAD, AHMEDA B AD. [PAN: AAACN 5350 K ] VS. COMMISSIONER OF INCOME TAX, AHMEDABAD III, AHMEDABAD. ... .. ......... RESPONDENT APPEARANCES BY S.N. SOPARKAR FOR THE A PPELLANT K ISHAN VYAS FOR THE R E SPONDENT HEARING CONCLUDED ON: 07.02 .2017 ORDER PRONOUNCED ON : 26 . 0 4 .2017 O R D E R PER PRAMOD KUMAR , AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED COMMISSIONER S ORDER DATED 28.03.2013 , PASSED UNDER SECTION 263 OF THE INCOME TAX AC T 1961 , FOR THE ASSESSMENT YEAR 200 8 - 09. 2. ALTHOUGH THE ASSESSEE HAS RAISED AS MANY AS FIFTEEN GROUNDS OF APPEAL, THE SHORT GRIEVANCE RAISED BEFORE US IS THAT IN L AW AND IN FACTS AND CIRCUMSTANC ES OF THE APPELLANT'S CASE, THE LEARNED COMMISSIONER HAS GR OSSLY ERRED IN HOLDING THAT WRITTEN BACK OF SALES TAX LIABILITY OF RS.2 , 97 , 68 , 672 SHOU LD BE ADDED TO THE TOTAL INCOME . ITA NO. 1104 / AHD/201 3 ASSESSMENT Y EAR: 20 0 8 - 09 PAGE 2 OF 4 3. WHEN THIS APPEAL WAS CALLED OUT FOR HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE IMPUGNED ORDER, LEARNED COMMIS SIONER, IN EXERCISE OF HIS REVISION POWERS UNDER SECTION 263, HAS DIRECTED THAT SALES TAX LIABILITY WRITTEN BACK, AMOUNTING TO RS 2,97,68,672, BE ADDED TO THE TAXABLE INCOME OF THE ASSESSEE, BUT THEN THERE IS NO QUESTION OF ADDING BACK THIS INCOME SINCE T HE SALES TAX LIABILITY WAS NEVER CLAIMED AS A DEDUCTION ANYWAY. HE SUBMITS THAT, AS EVIDENT FROM THE COPY OF ACCOUNT PLACED BEFORE US IN THE COMPILATION OF PAPERS, THE LIABILITY WAS CREATED IN 2007 - 08 TO THE DEBIT OF CAPITAL RESERVE. GIVEN THIS FACTUAL POS ITION, THE DIRECTIONS OF THE COMMISSIONER ARE STATED TO BE VITIATED IN LAW AND ON FACTS. HIS GRIEVANCE AGAINST THE REVISION ORDER IS RESTRICTED TO THIS SHORT POINT. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITS THAT THE FACTUAL ELEMENT EMBEDDED IN THE ARGUMENTS OF THE LEARNED COUNSEL NEEDED TO BE VERIFIED. BEYOND THIS POINT, AND BEYOND PLACING HIS RELIANCE ON THE STAND OF THE COMMISSIONER, LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT HAVE MUCH TO SAY. 4. AS EVIDENT FROM A PLAIN READING O F THE IMPUGNED REVISION ORDER, IT HAS BEEN A CONSISTENT STAND OF THE ASSESSEE ALL ALONG, INCLUDING BEFORE THE LEARNED COMMISSIONER IN THE REVISION PROCEEDINGS, THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION FOR THE SALES TAX LIABILITY, AND A WRITE BACK OF SALES TAX LIABILITY CANNOT RESULT IN AN INCOME IN THE HANDS OF THE ASSESSEE. THE BASIC OBJECTION OF THE COMMISSIONER WAS THAT THE MATTER WAS NOT EXAMINED BY THE ASSESSING OFFICER IN CORRECT PERSPECTIVE AND ALLOWED THE CLAIM OF WRITE BACK OF THE SALES T AX LIABILITY OF RS 2,97,68,672 AS NOT BEING INCOME ONLY ON THE BASIS OF SUBMISSION OF THE ASSESSEE AS DISCUSSED IN PARA 13 OF THE ASSESSMENT ORDER . YET, WITHOUT REJECTING THE CLAIM OF THE ASSESSEE ON MERITS OR EVEN EXAMINING THE SAME, LEARNED COMMISSIONE R HAS CONCLUDED THAT THE CLAIM OF DEDUCTION OF RS ITA NO. 1104 / AHD/201 3 ASSESSMENT Y EAR: 20 0 8 - 09 PAGE 3 OF 4 2,97,68,672 IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME BY TREATING THE SAME AS PART OF MISCELLANEOUS INCOME SUBJECTED TO TAX . THE ASSESSEE IS AGGRIEVED BY THIS CONCLUSION ARRIVED AT BY THE LEARNED COMMISSIONER AND IS IN APPEAL BEFORE US. 5. HAVING HEARD THE RIVAL CONTENTIONS, AND HAVING PERUSED THE MATERIAL ON RECORD, WE DEEM IT FIT AND PROPER TO MODIFY THE DIRECTIONS OF THE COMMISSIONER TO THE EXTENT THAT THE ASSESSING OFFICER WILL EXAMINE THE MAT TER DE NOVO, AND ONLY IN THE EVENT OF THE ASSESSEE BEING ALLOWED ANY DEDUCTION IN RESPECT OF THE SALES TAX LIABILITY WHICH IS WRITTEN BACK, THE AMOUNT WRITTEN BACK WILL BE ADDED TO THE TOTAL INCOME. IT IS SO FOR THE SIMPLE REASON THAT THE QUESTION OF ADDIN G BACK A WRITE BACK CANNOT ARISE WHEN DEDUCTION AT THE TIME OF DEBIT OF OR CREATING PROVISION FOR SALES TAX LIABILITY, DEDUCTION IS NOT CLAIMED. SUCH A CREATION OF PROVISION OR DEBIT, IN THE EVENT OF NOT BEING CLAIMED A DEDUCTION, HAS TO BE TAX NEUTRAL, AN D ITS WRITE BACK CANNOT LEAD TO A TAXABLE INCOME IN THE HANDS OF THE ASSESSEE. IN OTHER WORDS, NO ADDITION CAN BE MADE BY THE ASSESSING OFFICER WITHOUT DEALING WITH THE EXPLANATION OF THE ASSESSEE AS ABOVE AND WITHOUT GIVING A CATEGORICAL FINDING ABOUT DED UCTION HAVING BEEN CLAIMED ABOUT THE SALES TAX LIABILITY IN THE PRECEDING ASSESSMENT YEARS. TO THIS EXTENT, DIRECTIONS OF THE LEARNED COMMISSIONER STAND MODIFIED. 6. WE MAY ADD THAT THE ASSESSEE HAS SIGHTED THE FINANCIAL STATEMENTS FOR THE ASSESSMENT YEA R 2007 - 08 TO DEMONSTRATE THAT THE PROVISION FOR SALES TAX LIABILITIES, AGGREGATING TO RS 9.86 CRORES AND COVERING VARIOUS YEARS, WAS CREATED AFTER THE FINALIZATION OF ACCOUNTS BY WAY OF DEBIT TO THE CAPITAL RESERVE. IT IS CONTENDED THAT THE AMOUNT WRITTEN BACK IS OUT OF THE LIABILITY SO CREATED. HOWEVER, HAVING REMITTED THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR FACTUAL VERIFICATION, IT IS NOT REALLY NECESSARY ITA NO. 1104 / AHD/201 3 ASSESSMENT Y EAR: 20 0 8 - 09 PAGE 4 OF 4 TO DEAL WITH IT ON MERITS. SUFFICE IS TO SAY THAT IF THIS CLAIM OF THE ASSESSEE IS FOUND TO BE CORRECT BY THE ASSESSING OFFICER, THE IMPUGNED ADDITION WILL HAVE TO BE DELETED. 7. IN THE RESULT, THE APPEAL IS ALLOWED IN THE LIMITED TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON THE 26 TH DAY OF APRIL, 2017 SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 26 TH DAY OF APRIL , 201 7 . PBN/* COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD