Marsons Limited, Kolkata V. CIT-I, KOLKATA, Kolkata

ITA 1140/KOL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4800 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 16-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-05-2014
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN
• Assessee Lawyers: K M ROY
• Keywords: Depreciation
• Section: 143(3); 142(1); 133(6); 263

Judgement Text

1 ITA NO.1140/KOL/2014 MARSONS LIMITED A.Y.2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI M.B ALAGANESH, AM ] ITA NO.1140/KOL/2014 ASSESSMENT YEAR : 2009-10 MARSONS LTD. -VERSUS- C.I.T., KOLKATA-1, KOLKATA KOLKATA (PAN:AABCM9906H) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI K.M.ROY, FCA FOR THE RESPONDENT: MD. GHAYAS UDDIN, JCIT, SR.DR DATE OF HEARING : 17.05.2016. DATE OF PRONOUNCEMENT : 20.05.2016. ORDER PER N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 26.03.2014 OF CIT- I, KOLKATA PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (ACT). 2. THE ASSESSEE IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF DISTRIBUTION AND GENERATION OF POWER. FOR A.Y.2009-10 THE ASSESSEE F ILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,37,798/-. AO COMPLETED THE ASS ESSMENT U/S 143(3) OF THE ACT VIDE ORDER DATED 30.12.2011 WHEREBY HE DETERMINED T HE TOTAL INCOME OF THE ASSESSEE AS FOLLOWS :- RETURNED INCOME RS.1,37,798/- BUSINESS PROFIT/LOSS (-)13316943/- DISALLOWED AND ADDED ABOVE 1.INELIGIBLE AS PER SEC.2(24)(X) RS.1,87,736/- 2.INTEREST ON TDS RS. 180/- 3.EXPENSES CLAIMED ON AUDITORS RS.1,22,468/- 4.CASH EXPENSES @5% OF RS.1,42,74,350/- RS.7,13,71 8/- .(-)12292841/- LESS :DEPRECIATION AS PER P/L A/C RS.8442455/- ADD: DEPRECIATION ALLOWED AS PER ACT RS. 5178551/ - LOSS TO BE CARRY FORWARDED RS.(-) 90,28,937/- ASSESSED INCOME RS.1,37,798/- R/O RS.1,37,800/- 2 ITA NO.1140/KOL/2014 MARSONS LIMITED A.Y.2009-10 3. BEFORE COMPLETING THE ASSESSMENT AO ISSUED NO TICES 143(2) AS WELL AS 142(1) OF THE ACT. THE CIT IN EXERCISE OF HIS POWERS U/S 263 OF THE ACT WAS OF THE VIEW THAT THE AFORESAID ORDER OF THE AO WAS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE FOR THE FOLLOWING REASONS :- A) IT IS OBSERVED FROM THE SCHEDULE- G OF THE BALA NCE SHEET FOR THE YEAR ENDING 31.03.2009 THAT GOODS IN TRANSIT AMOUNTING TO RS. 2 ,56,84,652/- WAS SHOWN UNDER THE HEAD 'LOANS AND ADVANCES' APART FROM CLOSING STOCK OF RAW MATERIALS AMOUNTING TO RS. 3,80,01,499/-. IT IS ALSO OBSERVED THAT WHILE ARRIV ING AT RAW MATERIALS CONSUMPTION AMOUNTING TO RS. 32,10,54,392/-, STOCK IN TRANSIT O F RS. 2,56,84,652/- WAS NOT ACCOUNTING FOR. IT IS SEEN THAT STOCK IN TRANSIT AM OUNTING TO RS. 28,66,868/- AS AT. 31.03.2008 ALSO WAS ACCOUNTED FOR WHILE ARRIVING AT RAW MATERIAL CONSUMPTION FOR THE CURRENT YEAR. AS PER PRINCIPLES OF ACCOUNTS, THE STOCK IN TR ANSIT SHOULD BE SHOWN IN THE BALANCE SHEET SEPARATELY TO RECONCILE THE VALUE AND QUANTIT Y OF-STOCK AS PER ACCOUNTS BRANCH AND AS PER RECORDS OF STORES WHEN THE PURCHASE BILL WAS ACCOUNTED FOR BUT THE GOODS WAS NOT RECEIVED BY THE STOCK SECTION, IN THE INSTANT CASE, STOCK IN TRANSIT WAS NEVER ACCOUNTED FOR EITHER DURING THE YEAR OR IN THE IMMEDIATELY SU CCEEDING YEAR. THEREFORE, THERE WAS EXCESS ALLOWANCE OF RAW MATERIAL CONSUMPTION. THIS HAS RESULTED IN UNDERASSESSMENT OF INCOME BY R S. 2,56,84,652/- . B) IT IS OBSERVED FROM THE P/L A/CS THAT EXTRA ORDI NARY ITEM FOR SETTLEMENT OF DISPUTED CLAIMS AMOUNTING TO RS. 2,46,76,295/- DEDUCTED FROM THE PROFIT TO ARRIVE AT A LOSS OF RS. 12994277/-. IT IS OBSERVED FROM THE SCHEDULE 'L' (N OTES FANNING PART OF ACCOUNTS) THAT DURING THE YEAR ASSESSEE COMPANY HAD MADE AN OUT OF COURT SETTLEMENT WITH RURAL ELECTRIFICATION CORPORATION (REC) AGAINST THE CASE WHICH WAS PENDING IN DRT FOR A LONG TIME, LIABILITY BEING SETTLED FOR RS. 4,77,36, 388/- AND ADEQUATE PROVISION HAD BEEN MADE IN THE ACCOUNTS THEREOF. IT IS NOT CLEAR FROM THE RECORDS AS TO THE FACT ON WHICH GROUND ASSESSEE MADE AN OUT OF COURT SETTLEMENT WIT H REC, WHETHER IT IS CAPITAL OR REVENUE IN NATURE AND WHAT WAS THE BUSINESS RELATIO NSHIP/TRANSACTION BETWEEN THE ASSESSEE AND REC. IT IS OBSERVED FROM THE SCHEDULE 'C' OF THE BA LANCE SHEET THAT A LONG TERM LOAN OF RS. 2,94,66,235/- AS ON 31.03.2009 (RS. 2,33,88;252/- A S ON 31.03.2008) WAS TAKEN BY THE ASSESSEE FROM REC AGAINST WIND MILL POWER PROJECT. APART FROM THIS NO OTHER BUSINESS TRANSACTION COULD BE ESTABLISHED FROM THE AVAILABLE RECORDS. IN VIEW OF THE ABOVE, ALLOWANCE OF EXTRA-ORDIN ARY ITEM OF RS. 2,48,76,295/- AS A PROVISION FOR EXPENSES APPEARED TO BE IRREGULAR. TH IS HAS RESULTED IN UNDER ASSESSMENT OF INCOME BY RS. 2,48,76,295/-. IN VIEW OF THE ABOVE FACTS, THE ORDER PASSED U/ S 143(3) OF THE I.T. ACT, 1961 ON 30.12.2011 FOR ASSESSMENT YEAR 2009-10 APPEARED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. THE CASE W AS PROPOSED TO BE TAKEN UP FOR REVISION U/S 263 OF THE 1.T.ACT, 1961. A NOTICE IN THIS REGA RD WAS ISSUED ON 10.01.2014, FIXING HEARING ON 30.01.2014 AND DULY SERVED ON THE ASSESS EE. 4. IN REPLY TO THE AFORESAID SHOW CAUSE NOTICE U /S.263 OF THE ACT DATED 10.1.2014, THE ASSESSEE SUBMITTED REPLIES IN THE COURSE OF HEARING BEFORE CIT ON 06.02.2014. 3 ITA NO.1140/KOL/2014 MARSONS LIMITED A.Y.2009-10 INQUIRIES WITH REGARD TO THE FOLLOWING OTHER ISSUES WAS ALSO MADE BY CIT THOUGH THESE ISSUES WERE NOT THE SUBJECT MATTER OF THE SHOW CAUS E NOTICE DATED 10.01.2014 U/S 263 OF THE ACT. A) CHANGE IN SHARE CAPITAL AND RESERVES AND SURPLU S - BETWEEN 31.03.2008 AND 31.03.2009. HE WAS REQUESTED TO SUBMIT COMPLETE DET AILS SINCE THE SAME WAS NOT EXAMINED DURING SCRUTINY ASSESSMENT PROCEEDING OF T HE CASE. B) . HE WAS ALSO REQUESTED TO SUBMIT DETAILS OF ALL TRANSACTIONS DONE WITH SISTER CONCERNS/FAMILY MEMBERS/RELATIVES. HE WAS REQUESTED TO SUBMIT PAN, ADDRESS AND TRANSACTION DETAILS. C) HE WAS REQUESTED ALSO TO SUBMIT COMPLETE DETAILS OF CHANGE IN INTERESTS RECEIVED/INTEREST PAID -- INCLUDING DETAILS OF LOAN S TAKEN /GIVEN BACK, SINCE THESE HAVE NOT BEEN EXAMINED DURING THE SCRUTINY ASSESSMENT PR OCEEDING OF THE CASE. D) THE BALANCE SHEET ATTACHED TO TAX AUDIT REPORT S HOWS SHARE CAPITAL AS ON 31.03.2009 AS RS. 18 CRS, WHEREAS ANOTHER ANNEXURE ON RECORD (PART-A) SHOWS SHARE CAPITAL AS 10.8 CRS. AS ON 31.03.2009. HE WAS REQUE STED TO RECONCILE THE SAID DISCREPANCY. E) IT IS SEEN FROM THE RECORD THAT THE A.O. HAS ISS UED A NUMBER OF NOTICES U/S 133(6) OF THE LT. ACT, 1961 DURING THE SCRUTINY ASSESSMENT PR OCEEDING OF THE CASE. IT IS ALSO SEEN THAT MOST OF THESE NOTICES WERE NOT COMPILED WITH. DURING HEARING, THE ASSESSEE WAS REQUESTED TO SUBMIT HIS VIEW ON THIS HEARING WAS AD JOURNED TO 25.02.2014. 5. THE ASSESSEE GAVE DETAILS WITH REGARD TO THE AFORESAID QUERIES ALSO. CIT TAKING NOTE OF THE AFORESAID REPLIES CONCLUDED THAT WHILE CONCLUDING THE ASSESSMENT PROCEEDINGS U/S 143(3) AO DID NOT MAKE ANY INQUIRIE S IN RESPECT OF THE ISSUES WITH REGARD TO THE GOODS IN TRANSIT IN THE PROFIT AND LO SS ACCOUNT. THE CIT AFTER REFERRING TO CERTAIN JUDICIAL PRONOUNCEMENTS TOOK THE VIEW THAT NON EXAMINATION OF AN ISSUE WHICH REQUIRES EXAMINATION, BEFORE CONCLUDING AN ASSESSME NT, MAKES THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. CIT ACCORDINGLY SET ASIDE THE ORDER OF AO AND DIRECTED THE AO TO MAKE DENOVO ASSESSMENT. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF CIT IN THIS REGARD. :- 16. IT IS THEREFORE, EVIDENT THAT THE SCRUTINY AS SESSMENT COMPLETED IN THIS CASE, DID NOT HAVE VERIFICATION/ANALYSIS/SCRUTINY DONE IN RESPECT OF ISSUES DISCUSSED ABOVE. 17. I, THEREFORE HOLD THAT THE ASSESSMENT COMPLETED U/S 143(3) OF THE I.T.ACT, 1961 ON 30.12.2011 IS ERRONEOUS IN SO FAR AS IT IS PREJUDIC IAL TO THE INTEREST OF REVENUE. 18. THE ASSESSMENT IS, THEREFORE, SET ASIDE IN FUL L WITH THE DIRECTION THAT THE ASSESSMENT BE MADE DE-NOVO ON ALL THESE ASPECTS AFTER RECONCIL ING AND VERIFYING THE BASIC FACTS OF THE CASE. 6. AGGRIEVED BY THE ORDER OF CIT THE ASSESSEE H AS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4 ITA NO.1140/KOL/2014 MARSONS LIMITED A.Y.2009-10 7. THE LD. COUNSEL FOR THE ASSESSEE MADE SUBMIS SION ON THE MERITS OF THE ISSUES RAISED BY THE CIT IN THE SHOW CAUSE NOTICE U/S.263 OF THE ACT. A SPECIFIC QUERY WAS PUT BY THE BENCH TO THE LD. COUNSEL FOR THE ASSESSE E AS TO WHETHER HE CHALLENGES THE FINDINGS OF THE CIT THAT THE AO DID NOT MAKE ANY IN QUIRIES ON THE ISSUES SET OUT IN THE SHOW CAUSE NOTICE DATED 10.01.2014. THE LD. COUNSEL DID NOT GIVE A STRAIGHT ANSWER BUT SUBMITTED THAT THE RECORDS OF ASSESSMENT SHOULD BE PERUSED. WE FIND THAT THE CIT IN THE IMPUGNED ORDER HAS GIVEN A CLEAR FINDING THA T AO BEFORE COMPLETING THE ASSESSMENT DID NOT MAKE ANY INQUIRIES WITH REGARD T O THE ASPECTS SET OUT IN THE SHOW CAUSE NOTICE DATED 10.01.2014. IT IS ALSO NOT DISPU TED BEFORE US THAT AFTER THE ORDER OF THE CIT U/S.263 OF THE ACT, IN THE ASSESSMENT COMPL ETED PURSUANT TO THE ORDER U/S 263 OF THE ACT, THE AO CONSIDERED ONLY THE ASPECTS SET OUT BY THE CIT IN THE SHOW CAUSE NOTICE DATED 10.01.2014. IN THESE CIRCUMSTANCES THE ONUS WAS ON THE ASSESSEE TO SHOW THAT PROPER AND ADEQUATE INQUIRIES ON THE ISSUES SE T OUT IN THE SHOW CAUSE NOTICE DATED 10.01.2014 WERE IN FACT MADE BY THE AO BEFORE CONCL UDING THE ASSESSMENT U/S 143(3) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE HAS NO T BROUGHT ANY MATERIAL ON RECORD TO PROVE CASE OF THE ASSESSEE IN THIS REGARD. THE LD. COUNSEL HOWEVER PLACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SUNBEAM AUTO LTD. 332 ITR 167 (DELHI) WHEREIN THE HONBLE DELHI HIGH COURT TOOK A VIEW THAT INADEQUATE INQUIRY MADE BY THE AO BEFORE CONCLUDING THE ASSESSMENT CANNOT BE THE BASIS TO REVISE HIS ORDER U/S 263 OF THE ACT THAT S UCH REVISION U/S 263 CAN BE MADE ONLY IN A CASE WHEN THERE IS COMPLETE LACK OF INQUIRY. A S WE HAVE ALREADY POINTED OUT THAT THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE AO HAS MADE SOME INQUIRIES ON THE ISSUES SET OUT IN THE SHOW CA USE NOTICE U/S 263. IN SUCH CIRCUMSTANCES WE ARE OF THE VIEW THAT THE AFORESAID DECISION WILL NOT BE OF ANY ASSISTANCE TO THE PLEA RAISED BY THE ASSESSEE. 8. THE LAW IS WELL SETTLED THAT FAILURE TO MAKE IN QUIRY WHICH THE AO OUGHT TO HAVE MADE IN THE GIVEN FACTS AND CIRCUMSTANCES OF A CASE , RENDERS ORDER OF ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE FOLLOWING DECISIONS ARE RELEVANT IN THIS REGARD :- I)RAMPYARI DEVI SARAOGI VS CIT 67 ITR 84 (SC) 5 ITA NO.1140/KOL/2014 MARSONS LIMITED A.Y.2009-10 II)TARA DEVI AGGARWAL VS CIT 88 ITR 323 ((SC) III)G.B.ENTERPRISES VS ADDL. CIT 99 ITR 375 (DELHI. ) WHENEVER JURISDICTION U/S.263 OF THE ACT IS EXERCIS ED BY THE CIT AND AN ORDER OF ASSESSMENT IS REVISED ON THE GROUND THAT THE AO BEF ORE COMPLETING AN ASSESSMENT DID NOT MAKE THE REQUIRED ENQUIRIES, THAN THE QUESTION FOR CONSIDERATION IN AN APPEAL AGAINST THE ORDER OF CIT U/S.263 OF THE ACT WOULD B E LIMITED TO THE QUESTION WHETHER THE AO MADE PROPER AND ADEQUATE ENQUIRIES OR NOT. IT IS NOT POSSIBLE TO GO INTO THE MERITS OF THE ISSUES ON WHICH THE CIT FEELS THAT TH E AO DID NOT MAKE ENQUIRES BEFORE COMPLETING ASSESSMENT. FOR THIS REASON, WE HAVE NO T GONE INTO THE MERITS OF THE ISSUES WHICH WERE REFERRED TO IN THE SHOW CAUSE NOTICE OF THE CIT U/S.263 OF THE ACT. WE MAKE IT CLEAR THAT WHILE COMPLETING THE ASSESSMENT PURSUANT TO THE ORDER OF CIT U/S.263 OF THE ACT, THE MERITS OF THE ISSUES THAT W ERE REFERRED TO IN THE ORDER OF CIT U/S.263 OF THE ACT, WILL BE GONE INTO INDEPENDENTLY , UNINFLUENCED BY THIS ORDER. 9. IN THE LIGHT OF THE DECISIONS REFERRED TO AB OVE AND THE ADMITTED FACTS AND CIRCUMSTANCES OF THE PRESENT CASE THAT THE AO DID N OT MAKE PROPER AND ADEQUATE INQUIRIES BEFORE CONCLUDING THE ASSESSMENT, WE ARE OF THE VIEW THAT THE CIT WAS FULLY JUSTIFIED IN PASSING THE IMPUGNED ORDER. WE THEREFO RE DO NOT FIND ANY GROUND TO INTERFERE WITH THE ORDER U/S 263 OF THE ACT. ACCORD INGLY THE APPEAL OF THE ASSESSEE IS DISMISSED. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. O RDER PRONOUNCED IN THE COURT ON 20.05.2016. SD/- SD/- [M.BALAGANESH ] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20.05.2016. [RG PS] 6 ITA NO.1140/KOL/2014 MARSONS LIMITED A.Y.2009-10 COPY OF THE ORDER FORWARDED TO: 1.MARSONS LIMITED, 1 ST FLOOR, PREMIER COURT, 4, CHANDNI CHOWK STREET, KOL KATA- 700072. 2. C.I.T., KOLKATA-1, KOLKATA. 3. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, ASST. REGISTRAR, ITAT, KOLKATA BENCHES