ACIT, CHENNAI V. M/s. Virgo Polymers India Ltd., CHENNAI

ITA 1352/CHNY/2005

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61071 (ITAT-CHENNAI)
• Duration Of Justice: 6 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-04-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 02-06-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH KAMAT IRS SR
• Assessee Lawyers: D ANAND
• Keywords: Unexplained investment; Depreciation
• Section: 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER] I.T.A.NO. 1352/MDS/2005 ASSESSMENT YEAR : 1996-97 THE ACIT COMPANY CIRCLE III(4) CHENNAI VS M/S VIRGO POLYMERS INDIA LTD NEW NO.10, OLD NO.34, ARUNACHALAM STREET CHENNAI 93 [PAN AAACV8490Q] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI YOGESH KAMAT, IRS, SR.AR RESPONDENT BY : SHRI D. ANAND DATE OF HEARING : 26.4.2012 DATE OF PRONOUNCEMENT : 30.4.2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD.CIT(A)-III, CHENNAI, DATED 24.2.2005. 2. THE SOLE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS THAT THE LD.CIT(A) ERRED IN HOLDING THAT THE ADDITION MADE B Y THE ASSESSING OFFICER FOR UNACCOUNTED INVESTMENTS IN ASSETS ON WH ICH DEPRECIATION WAS WITHDRAWN BY THE ASSESSEE UNDER VDIS IS TO BE DELETED. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFIC ER OBSERVED THAT ASSESSEE HAS CLAIMED ` 1,14,55,421/- AS DEPRECIATION IN THE ORIGINAL I.T.A.NO. 1352/05 :- 2 -: RETURN OF INCOME FILED ON 28.11.1996. IN THE DEPRE CIATION STATEMENT, THE ASSESSEE HAS CLAIMED 100% DEPRECIATION ON CAPI TAL WORK-IN- PROGRESS OF ` 14,98,219/-. SUBSEQUENTLY, THE ASSESSEE DECIDED NOT TO CLAIM 100% DEPRECIATION AND RESORTED TO VDIS 1997 W ITHDRAWING THE EXCESS CLAIM FOR ASSESSMENT YEARS 1995-96 AND 1996- 97 AS UNDER: SL.NO A.Y DESCRIPTION OF THE INCOME AMOUNT 1. 95-96 INFLATED DEPRECIATION 15,21,133 2. 96-97 -DO- 6,91,398 3. 96-97 PRELIMINARY EXP. WRITTEN OFF 2,74,042 TOTAL 24,86,573 4. THE ASSESSING OFFICER FURTHER OBSERVED THAT FOR ASS ESSMENT YEAR 1996-97, THE TOTAL INCOME OF THE ASSESSEE WAS DETE RMINED AT ` 2,67,071/- U/S 143(3) ON 7.3.1998 AND THE DEPRECIA TION SCHEDULE FOR INCOME TAX PURPOSES APPENDED TO THE RETURN WAS AS F OLLOWS: WDV AS ON 1.4.95 ADDITIONS COST AS ON 31.3.96 DEPRECIATION FOR THE YEAR WDV AS ON 31.3.96 MORE THAN 6 MONTHS LESS THAN 6 MONTHS 1,56,65,434 12,88,967 557,59,303 727,24,704 114,55, 421 612,69,283 5. THE ASSESSING OFFICER OBSERVED THAT THE DEPRECIATIO N OF ` 1,14,55,421/- INCLUDED ` 14,98,129/- BEING 100% DEPRECIATION ON CAPITAL WORK-IN-PROGRESS. THE ASSESSEE UNDER VDIS 1997 DISCLOSED I.T.A.NO. 1352/05 :- 3 -: THE INFLATED DEPRECIATION OF ` 6,91,398/- AND REMITTED THE REQUIRED TAX AS UNDER: DEPRECIATION AS PER THE RETURN ` 1,14,55,421 DEPRECIATION AS PER THE VDIS 97 STATEMENT ` 1,07,64,023 ` 6,91,398 6. THE ASSESSING OFFICER FURTHER NOTED THAT THE DEPREC IATION STATEMENT FOR THE PURPOSE OF INCOME TAX WAS MODIFIED AS UNDER : WDV AS ON 1.4.95 ADDITIONS COST AS ON 31.3.96 DEPRECIATION FOR THE YEAR WDV AS ON 31.3.96 MORE THAN 6 MONTHS LESS THAN 6 MONTHS 156,76,434 12,88,967 607,15,647 7,76,81,048 107,64, 023 669,17,025 7. THE ASSESSING OFFICER OBSERVED THAT AS PER ORIGINAL DEPRECIATION STATEMENT FOR ASSESSMENT YEAR 1996-97, VALUE OF ASS ETS ADDED AFTER EXCLUSION OF THE CAPITAL WORK-IN-PROGRESS WAS AS FO LLOWS: MORE THAN 6 MONTHS 12,88,967 LESS THAN 6 MONTHS 5,57,59,303 5,70,48,270 LESS: CAPITAL WIP 14,98,219 5,55,50,051 8. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE AS SESSEE HAS STATED IN THE REVISED STATEMENT THAT THE EXPENSES RELATED TO SUBSTANTIAL EXPENSES OF THE PROJECT HAD BEEN CAPITALIZED AFTER COMPLETION OF THE PROJECT AND COMMERCIAL PRODUCTION COMMENCED IN THE SECOND OF THE FINANCIAL YEAR. THE ASSESSING OFFICER NOTED FROM T HE BALANCE SHEET AS I.T.A.NO. 1352/05 :- 4 -: ON 31.3.1995 AND AS ON 31.3.1996 THAT CAPITAL WORK- IN-PROGRESS TO AN EXTENT OF ` 25,67,882/- SHOWN IN THE BALANCE SHEET AS AT 31.3. 1995 WAS COMPLETED IN THE YEAR 1995-96 AND BALANCE UNDER CAPITAL WORK-IN- PROGRESS FOR THE ASSESSMENT YEAR 1996-97 RELEVANT T O THE PREVIOUS YEAR 1995-96 WAS SHOWN AS NIL. SO, THE VALUE OF AD DITION AFTER EXCLUSION OF THE CAPITALIZED WORKS IN ASSESSMENT YE AR 1996-97 WORKS OUT TO ` 5,94,36,733/- AS UNDER: VALUE OF ADDITION FOR THE A.Y 96-97 AS PER THE REVI SED STATEMENT 6,20,04,614 LESS: WORKS CAPITALIZED IN THE A.Y 96-97 25 ,67,882 BALANCE 5,94,36,732 9. FROM THIS, THE ASSESSING OFFICER INFERRED THAT TH ERE WAS AN UNEXPLAINED ADDITION TO THE EXTENT OF ` 38,86,681/- TO THE VALUE OF ASSETS FOR ASSESSMENT YEAR 1996-97. HE ALSO OBSERV ED THAT THOUGH THE DIFFERENCE IN DEPRECIATION WAS DULY ACCOUNTED F OR UNDER THE VDIS 1997, THE SOURCE OF INCOME FOR THE PROCUREMENT OF T HE ADDITION AND VALUE OF ASSETS FOR AN AMOUNT OF ` 38,86,681/- WAS NOT EXPLAINED SATISFACTORY AND ACCORDINGLY, THE DIFFERENCE AMOUNT OF ` 38,86.681/- WAS ADDED TO THE INCOME OF THE ASSESSEE U/S 69C O F THE ACT. ON APPEAL, THE LD.CIT(A) DELETED THE ADDITION BY OBSE RVING AS UNDER: I.T.A.NO. 1352/05 :- 5 -: 4.2 I HAVE CAREFULLY CONSIDERED THE FACTS ON REC ORD, THE ASSESSMENT ORDER AND THE APPELLANT'S SUBMISSIONS. THE APPELLANT'S SUBMISSION IS THAT THE ISSUE RELATED TO PUBLIC ISSUE EXPENSES WRITTEN OFF UNDER PROFIT AND LOSS ACCOUNT ON 3 1.03.1996 AND 100% DEPRECIATION WITHDRAWN ASSETS (1994-95) FOR THE A SSESSMENT YEAR 1995-96. THUS THE EXPENSES ARE DULY RECORDED IN THE BOOKS OF ACCOUNTS. DEPRECIATION HAS BEEN CLAIMED ONLY BECAUSE THE ASSETS ARE ALREADY RECORDED IN THE BOOKS OF ACCOUNTS. A PERUSAL OF THE RECORDS SHOW THAT THE INCREASE IN VALUE OF FIXED ASSETS IS DULY ACCOUNTED FOR IN THE ACCOUNTS AS FOLLOWS: PUBLIC ISSUE EXPENSES WRITTEN OFF UNDER PROFIT A/C (BELOW LINE) FOR THE FINANCIAL YEAR 31.03.1996 34,35,21 1 100% DEPRECIATION ON CAPITALIZED ASSET (IDBI) INTER EST 15,21,133 FOR ASSESSMENT YEAR 1995-96 WITHDRAWN LATER 100% DEPRECIATION ON CAPITALIZED ASSET (IDBI) INTER EST FOR ASSESSMENT YEAR 1996-97 WITHDRAWN LATER 1 4,98,219 64,54,563 LESS: WORK IN PROGRESS CAPITALIZED AS PER ASSESSMENT ORDER 25,67,882 BALANCE 38,86,681 4.2.1 . THE FURTHER FACT THAT THE APPELLANT HAS AVA ILED OF THE VDIS SCHEME OFFERING THE EXCESS DEPRECIATION CLAIM WOULD SHOW THAT THE ASSET IN RESPECT OF W HICH SUCH EXCESS DEPRECIATION WAS CLAIMED IS ALREADY RECORDED IN THE BOOKS. HENCE, I AGREE WITH THE APPELLANTS CLAIM THAT THE INVESTMENTS ARE RECORDED AND CONSEQUENTLY THERE IS NO ESCAPEMENT OF INCOME. THE ADDITION OF RS.38,86,6 81/ MADE BY THE ASSESSING OFFICER IS NOT CALLED FOR AND THE SAM E IS THEREFORE DELETED. THE APPELLANT SUCCEEDS ON THIS GROUND. 10. THE LD. DR SUPPORTED THE ORDER OF THE ASSESSING OFF ICER WHEREAS THE LD. A.R SUPPORTED THE ORDER OF THE LD .CIT(A). 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSIN G THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE LD. DR COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE LD.CIT( A). HE COULD NOT I.T.A.NO. 1352/05 :- 6 -: CONTROVERT THE FINDING OF THE LD.CIT(A) THAT THE A SSESSING OFFICER HAS WRONGLY ARRIVED AT THE AMOUNT OF INCREASE IN ASSETS AT ` 38,86,681/- AND THE CORRECT AMOUNT WAS ` 49,56,344/-. THE SAID INCREASE WAS EXPLAINED BY THE ASSESSEE AND CONFIRMED BY THE LD .CIT(A) AFTER VERIFICATION THAT THE AMOUNT WAS ADJUSTED IN THE BA LANCE SHEET BEING PUBLIC ISSUE EXPENSES WRITTEN OFF IN THE PROFIT & L OSS ACCOUNT ON 31.3.1996 AND 100% DEPRECIATION WITHDRAWN ASSETS IN ASSESSMENT YEAR 1995-96 I.E ` 15,21,133/-. WE FIND THAT THE LD. DR COULD NOT BRING ANY MATERIAL BEFORE US TO CONTROVERT THE FIND ING OF THE LD.CIT(A) THAT SHARE ISSUE EXPENSES OF ` 34,35,211/- WHICH WAS DEBITED IN THE ORIGINAL RETURN BELOW THE LINE WAS SHOWN AS ADDITIO N TO FIXED ASSETS IN THE REVISED FIXED ASSETS STATEMENT. FURTHER, THE B ALANCE AMOUNT OF ` 15,21,133/- WHICH WAS SHOWN AS ADDITION TO FIXED AS SETS IN THE REVISED STATEMENT REPRESENTS WITHDRAWAL OF EXCESS DEPRECIAT ION PROVIDED IN ASSESSMENT YEAR 1995-96 ON COMPUTATION OF WORK-IN-P ROGRESS OF 31.3.1995 AND ON WHICH TAX WAS PAID BY THE ASSESSE E UNDER VDIS ALSO COULD NOT BE CONTROVERTED BY THE LD. DR. NO M ATERIAL WAS BROUGHT BEFORE US TO SHOW THAT ANY EXTRA EXPENDITURE WAS IN CURRED BY THE ASSESSEE ON ACQUISITION OF FIXED ASSETS WHICH WAS N OT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HENCE, WE DO NO T FIND ANY GOOD AND JUSTIFIABLE REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) WHICH IS CONFIRMED AND THE APPEAL OF THE REVENUE IS DISMISSED. I.T.A.NO. 1352/05 :- 7 -: 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.4 .2012. SD/- SD/- (VIKAS AWASTHY) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: APRIL, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR