M/s Moorthy Industries, Channarayapatna V. CIT, Bangalore

ITA 1250/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9476 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 23-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS JT
• Assessee Lawyers: CHAITHANYA V MUDRABETTU
• Keywords: Condonation of delay; Reason to believe
• Section: 234B; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC B BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER ITA NO.1250/BANG/2015 ASSESSMENT YEAR : 2006-07 M/S. MOORTHY INDUSTRIES, NO.44, GANESH TEMPLE STREET, FORT, CHANNARAYAPATNA 573 116. PAN: AAMFM 4199G VS. THE INCOME TAX OFFICER, WARD 1, HASSAN. APPELLANT RESPONDENT APPELLANT BY : SHRI CHAITHANYA V. MUDRABETTU, ADVOCATE RESPONDENT BY : SMT. SWAPNA DAS, JT. CIT(DR) DATE OF HEARING : 30.06.2016 DATE OF PRONOUNCEMENT : 19.08.2016 O R D E R THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 05.12.2014 OF THE CIT(APPEALS), MYSURU FOR THE ASSE SSMENT YEAR 2006-07 INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E-TAX (APPEALS), MYSURU IS OPPOSED TO LAW, WEIGHT OF EVID ENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE. 2. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSMENT IS BAD IN LAW AS THE MANDATORY CONDITION S TO ASSUME JURISDICTION UNDER SECTION 148 DOES NOT EXIS T AND CONSEQUENTLY THE ASSESSMENT MADE IS BAD IN LAW. THE REASON AS RECORDED BY THE LEARNED ASSESSING OFFICER IS NOT GERMANE TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE REA SONS ITA NO.1250/BANG/2015 PAGE 2 OF 6 RECORDED BY THE LEARNED ASSESSING OFFICER AMOUNT TO REASON TO SUSPECT AND DO NOT AMOUNT TO REASON TO BELIEVE. THU S THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD IN LAW. 3. WITHOUT PREJUDICE THE APPELLANT DENIES ITSELF LI ABLE TO BE ASSESSMENT ON A TOTAL INCOME OF RS.6,09,490/- AS AGAINST THE RETURNED INCOME BY THE APPELLANT OF RS.91,540/- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAS FILED ITS RETURN OF INCOME AS PER THE FORM 16A ISSUED BY THE AUTHORITIES UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT TH E SAID AMOUNT OF RS.5,17,950/- HAS BEEN DULY ACCOUNTED AND OFFERED FOR TAX IN THE ASSESSMENT YEAR 2007-08 AND NECESSAR Y TAXES HAVE BEEN DULY PAID. THE LEARNED CIT(A) OUGHT TO HA VE APPRECIATED THAT THE INCOME HAS ALREADY SUFFERED TA X AND THUS, TAXING THE SAME WOULD AMOUNT TO DOUBLE TAXATION ONE IN ASSESSMENT YEAR 2006-07 AND ONCE AGAIN IN THE ASSES SMENT YEAR 2007-08 UNDER THE FACTS AND CIRCUMSTANCES OF T HE CASE 6. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE INCOME HAS ALREADY BEEN OFFERED TO TAX AND THE SAME NEED N OT BE TAXED AS THERE IS NO LOSS OF REVENUE AND THE SAME W ILL BE IN THE NATURE OF REVENUE NEUTRAL AS THERE IS NO LOSS O F INCOME TO THE EXCHEQUER UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. WITHOUT PREJUDICE THE CIT(A) OUGHT TO HAVE RECTI FIED THE ORDER OF ASSESSMENT FOR THE ASSESSMENT YEAR 200 7-08 BY REDUCING THE INCOME WHICH HAS BEEN TAXED BY THE LEA RNED ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2006-07 U NDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, SUBSTI TUTE AND DELETE ANY OR ALL OF THE GROUNDS OF APPEAL URGED AB OVE. 9. FOR THE ABOVE AND OTHER GROUNDS TO BE URGED DURI NG THE HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL BE ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE. ITA NO.1250/BANG/2015 PAGE 3 OF 6 2. DURING THE COURSE OF HEARING, MY ATTENTION WAS I NVITED TO THE FACT THAT THE APPEAL WAS FILED LATE BY 192 DAYS, FOR WHI CH THE ASSESSEE HAS FILED APPLICATION FOR CONDONATION OF DELAY EXPLAINING THE REASONS FOR DELAY IN FILING OF THE APPEAL. FINDING FORCE THEREIN, I CON DONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 3. THOUGH VARIOUS GROUNDS ARE RAISED, BUT THEY ALL RELATE TO ADDITION OF RS.5,17,950. ACCORDING TO THE ASSESSEE, THIS AMOUN T WAS OFFERED TO TAX IN THE AY 2007-08 AND NECESSARY TAXES HAVE BEEN PAID T HEREON. THEREFORE, THE SAID AMOUNT CANNOT BE TAXED IN AY 2006-07. IF IT IS DONE, IT WOULD AMOUNT TO DOUBLE TAXATION. BUT, ACCORDING TO THE REVENUE, THE ASSESSEE IS FOLLOWING COMPLETED CONTRACT METHOD AND HAS RAISED TWO BILLS FOR RS.18,000 AND RS.4,99,950 TOTALLING TO RS.5,17,950 ON 16.03.2 006. SINCE THE ASSESSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF AC COUNTING, THIS AMOUNT SHOULD HAVE BEEN ACCOUNTED IN THE PREVIOUS YEAR REL EVANT TO AY 2006-07 AS BILLS RECEIVABLE. THE AO ACCORDINGLY MADE AN ADD ITION OF THIS AMOUNT OF RS.5,17,950 IN AY 2006-07. 4. AN APPEAL WAS PREFERRED BEFORE THE CIT(APPEALS) WITH THE SUBMISSION THAT FOR THE CURRENT AY, THERE WAS A CLO SING STOCK OF RS.9,56,715 AND IF THE ABOVEMENTIONED TWO BILLS ARE CONSIDERED, THEN THE CLOSING STOCK WILL AUTOMATICALLY COME DOWN AND BASE D ON MERCANTILE SYSTEM OF ACCOUNTING, THE GROSS PROFIT WILL COME DO WN BY RS.5,17,950, AS THE ENTRIES WOULD BE REVENUE NEUTRAL. IT WAS FURTH ER CONTENDED THAT IN ANY ITA NO.1250/BANG/2015 PAGE 4 OF 6 CASE PAYMENT WAS RECEIVED ON 8.5.2006 AND ON ITS RE CEIPT, THE ASSESSEE OFFERED IT TO TAX. THEREFORE, NO PURPOSE WOULD BE SERVED BY MAKING ADDITION IN THE IMPUGNED A.Y. AS IT WOULD AMOUNT TO DOUBLE TAXATION. 5. THE CIT(APPEALS) RE-EXAMINED THE ISSUE, BUT WAS NOT CONVINCED WITH THE ARGUMENTS OF THE ASSESSEE AND HE CONFIRMED THE ADDITION. THE RELEVANT OBSERVATIONS ARE EXTRACTED HEREUNDER FOR T HE SAKE OF REFERENCE:- 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS CAREF ULLY. ON THE LEGAL ISSUE OF REOPENING I FIND THAT THE AO HAS DUL Y FOLLOWED ALL THE LEGAL FORMALITIES. FURTHER, THE AO HAD REASON T O BELIEVE WITH CLEAR DOCUMENTARY EVIDENCE AND NOT JUST REASON TO S USPECT AS ARGUED BY THE APPELLANT. HENCE I DO NOT FIND MERIT IN THE ARGUMENT OF THE APPELLANT. FURTHER EVEN IF THE INC OME IS ADMITTED IN THE SUBSEQUENT YEAR, IF THE INCOME HAS TO BE TAX ED IN THE PARTICULAR YEAR, THE SAME HAS TO BE TAXED IN THAT Y EAR ALONE. HENCE ON THE ARGUMENT THAT THE INCOME ADMITTED IN SUBSEQU ENT YEAR CANNOT BE REASON FOR REOPENING DO NOT HAVE MERIT. H ENCE THESE ARGUMENTS ARE NOT ACCEPTABLE. ON MERITS, IT IS CLEA R THAT THE BILLS ARE RAISED ON 16.3.2006 WHICH IS ALSO ACKNOWLEDGED BY THE CESC LTD, IN THEIR STATEMENT. THERE IS NO BASIS FOR THE ARGUMENT OF THE APPELLANT THAT THE BILLS WERE DESPATCHED BELATEDLY AND NO EVIDENCE IS ADDUCED FOR THIS. APPARENTLY, THE EXPENSES ARE A LL BOOKED IN THE PREVIOUS YEAR AND THE WORK IS ALSO COMPLETED. HENCE THE ARGUMENT OF ADMITTING INCOME ON COMPLETE CONTRACT M ETHOD ALSO GOES AGAINST THE APPELLANT. I ALSO DO NOT FIND STRE NGTH IN THE ARGUMENT OF THE APPELLANT THAT THE ISSUE IS REVENUE NEUTRAL BECAUSE THE INTEREST LIABILITY WOULD STILL BE THERE AND THE APPELLANT IS ALSO CONTESTING CHARGING OF INTEREST U/S 234B WHICH IS MANDATORY AS HELD BY THE HON'BLE KARNATAKA HIGH COU RT IN THE CASE OF UNION HOME PRODUCTS LTD VS. UNION OF INDIA AND ANOTHER 215 ITR 758(KTK). HOWEVER SINCE THE INCOME IS ASSES SED FOR THE CURRENT YEAR, THE APPELLANT CAN CLAIM CREDIT FOR TH E SAME IN THE NEXT YEAR AS PER LAW. SINCE THIS ISSUE IS NOT A MAT TER OF APPEAL BEFORE ME, NO SPECIFIC DIRECTION IS GIVEN REGARDING A.Y.2007-08. ITA NO.1250/BANG/2015 PAGE 5 OF 6 6. AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND REITERATED ITS CONTENTIONS. WHEREAS T HE LD. DR, ON THE OTHER HAND, HAS SUBMITTED THAT INCOME HAS TO BE ASSESSED IN THE RIGHT ASSESSMENT YEAR. SINCE THE ASSESSEE HAS BEEN FOLLO WING MERCANTILE SYSTEM OF ACCOUNTING, THE BILL RECEIVABLE SHOULD HA VE BEEN ACCOUNTED FOR IN THE PREVIOUS YEAR RELEVANT TO IMPUGNED ASSESSMENT Y EAR. THE ASSESSEE CANNOT BE ALLOWED TO ADOPT MIXED SYSTEM OF ACCOUNTI NG. MOREOVER, THE CIT(APPEALS) HAS ALREADY OBSERVED THAT SINCE THE IN COME IS ASSESSED FOR THE CURRENT YEAR, THE ASSESSEE CAN CLAIM CREDIT FOR THE SAME IN THE NEXT YEAR AS PER LAW. HOWEVER, THE CIT(APPEALS) DID NOT ISSUE NECESSARY INSTRUCTIONS IN THIS REGARD. 7. HAVING CAREFULLY EXAMINED THE ORDERS OF LOWER AU THORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, I FIND THAT UNDISPUTEDLY ASSE SSEE HAS BEEN FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THEREFORE, THE BIL L RECEIVABLE SHOULD HAVE BEEN ACCOUNTED FOR DURING THE IMPUGNED ASSESSMENT Y EAR. THE CIT(APPEALS) HAS ALREADY OBSERVED THAT SINCE THE IN COME IS ASSESSED FOR THE CURRENT YEAR, THE ASSESSEE CAN CLAIM CREDIT FOR THE SAME IN THE NEXT YEAR AS PER LAW. IN ORDER TO AVOID DOUBLE TAXATION , THE CIT(APPEALS) SHOULD HAVE DIRECTED THE AO TO ALLOW CREDIT FOR THE SAME I N THE NEXT YEAR, BECAUSE THERE SHOULD NOT BE ANY DOUBLE TAXATION IN DIFFEREN T ASSESSMENT YEARS. SINCE I DO NOT FIND ANY INFIRMITY IN THE FINDING OF THE CIT(APPEALS), I CONFIRM THE SAME. HOWEVER, I DIRECT THE AO TO ALLOW CREDIT OF THE SAME IN THE ITA NO.1250/BANG/2015 PAGE 6 OF 6 SUBSEQUENT ASSESSMENT YEAR I.E., AY 2007-08 IN WHIC H THE ASSESSEE HAS OFFERED THIS AMOUNT TO TAX, AFTER MAKING NECESSARY VERIFICATION. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF AUGUST, 2016. SD/- (SUNIL KUMAR YADAV ) JUDICIAL MEMBER BANGALORE, DATED, THE 19 TH AUGUST, 2016. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.