D.C.I.T Cir - 8,kolkata, Kolkata V. M/s Shree Krishna Fodder Mills Pvt Ltd, Kolkata

ITA 1378/KOL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1337 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Keywords: Depreciation
• Section: 43B; 144; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & HONBLE S HRI S.S.VISWANETHRA RAVI, JM] I.T.A NO. 1378/KOL/20 13 ASSESSMENT YEAR : 2007-0 8 DCIT, CIRCLE-8, KOLKATA -VS- M/S SHREE KRIS HNA FODDER MILLS PVT. LTD. [PAN: AADCS 2476 A] (APPELLANT) (RESPONDEN T) FOR THE APPELLANT : SHRI S. DASGUPTA, ADDL. CIT(DR) FOR THE RESPONDENT : SHRI SUBASH AGARWAL, AD VOCATE DATE OF HEARING : 06.03.2018 DATE OF PRONOUNCEMENT : 16.03.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEAL) KOLKATA [IN SHORT THE LD CIT(A)] U/S 154 OF THE ACT DATED 25.02.2013. THE ASSESSEE WAS COMPLETED BY THE DCIT, CIRCLE-8, KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 144 OF THE INCOME TAX ACT, 196 1 (IN SHORT THE ACT) DATED 16.12.2009 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE IN THE SUM OF RS. 1,28,65,102/- TOWARDS UNPAID INTEREST LIABILITY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.1378/KOL/2013 M/S SHREE KRISHNA FODDER MILLS PVT. LTD. A.YR. 2007-08 2 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS AN INDIAN COMPANY PRODUCING DAY OLD CHICKS, POULTRY FEED AND REARING READY BIRD (BR OILER LIVE BIRDS FOR POULTRY MEAT) THROUGH CONTRACT FARMING. THE POULTRY FARMING IN T HE STATE WAS AFFECTED BY BIRD FLU IN THE YEAR 2004 FOR THE FIRST TIME. THE INFECTION CAU SED DUE TO BIRD FLU IS LIFE THREATENING FOR ITS CONSUMERS. IN INDIA MAJORITY OF CONSUMERS P REFER LIVE CHICKEN FOR CONSUMPTION, THUS, AS SOON AS THE NEWS SPREAD, CONSUMPTION OF CH ICKENS DROPPED TO THE NEGLIGIBLE LEVEL AND THE STANDING CROP OF READY BIRD COULD NOT BE SOLD FOR SEVERAL MONTHS EVEN AFTER ITS MORTALITY. WITH THE RESULT, THE COMPANY SUFFERE D HUGE LOSSES ON ACCOUNT OF EXCESSIVE MORTALITY IN THE FIRM AND FEEDING THE BIRD FOR MONT HS TOGETHER. THE COMPANY SOME HOW SURVIVED THIS CALAMITY IN 2004-05 BUT THE COMPANYS ENTIRE BUSINESS CAME TO GRINDING HALT IN EARLY 2006 WHEN THE BIRD FLU HIT THE POULTR Y FOR THE SECOND TIME. THIS TIME THE GOVERNMENT APPOINTED SPECIAL FORCE FOR CULLING THE BIRDS IN THE FARM FOR THE SAFETY OF THE CHICKEN CONSUMERS IN THE STATE. THIS WAS THE FINAL BLOW IN THE COMPANY WHEN ALL ITS OPERATIONS WERE CLOSED AND IT COULD NEVER REVIVE. F INALLY, ALL THE COMPANYS ASSETS WERE SOLD BY THE FINANCIAL INSTRUCTION TO RECOVER THEIR DUES AND ALL THE WORKERS AND STAFF LOST THEIR JOB. THE ASSESSEE FOR THE ASSESSMENT YEAR 200 7- 08 FILED ITS RETURN OF INCOME SHOWING LOSS OF RS. 1,70,53,982/-. DURING THE ASSES SMENT PROCEEDINGS, NONE APPEARED ON BEHALF OF THE ASSESSEE AND ACCORDINGLY THE LD. A O SOUGHT TO ESTIMATE THE NET PROFIT OF THE ASSESSEE. FOR THIS PURPOSE HE TOOK THE TOTAL CR EDITS OF PROFIT AND LOSS ACCOUNT IN THE SUM OF RS. 1,42,18,159/- AND ESTIMATED NET PROFIT A T 10% THEREON AMOUNTING TO RS. 14,21,816/-. THE RELEVANT OBSERVATION OF THE LD AO IN PARA 2 OF HIS ASSESSMENT ORDER IN THIS REGARD IS AS UNDER: THIS NET PROFIT IS DETERMINED AFTER TAKING INTO CO NSIDERATION DEPRECIATION AS PER IT, ACT, DISALLOWANCE U/S 40A(3), 40A(IA). SO THE NET P ROFIT OF ASSESSEE IS DETERMINED AT RS. 1421816/-. 3.1. THE LD. AO OBSERVED THAT THE ASSESSEE HAD CLAI MED INTEREST EXPENDITURE OF RS. 1,28,65,102/- IN RESPECT OF SUBSTANTIAL LOANS BORRO WED BY IT FROM BANK. IN THE ABSENCE OF 3 ITA NO.1378/KOL/2013 M/S SHREE KRISHNA FODDER MILLS PVT. LTD. A.YR. 2007-08 3 ANY DETAILS GIVEN BY THE ASSESSEE BEFORE THE LD. AO , THE LD. AO SOUGHT TO DISALLOW THE SAID INTEREST EXPENDITURE U/S 43B OF THE ACT IN THE SUM OF RS. 1,28,65,102/-. 3.2 THE ASSESSEE STATED BEFORE THE LD. CIT(A) THAT THE TOTAL CREDIT FIGURE OF PROFIT AND LOSS ACCOUNT WAS TAKEN BY THE LD. AO AT RS. 1,42,18 ,159/- INSTEAD OF RS. 1,08,63,231/- AS PER THE TAX AUDIT REPORT. THE ASSESSEE PLEADED THAT THE TOTAL CREDITS SHOULD HAVE BEEN ARRIVED BASED ON TOTAL OF SALES AND OTHER INCOME AS REDUCED BY THE DECREASE IN STOCK. THE LD. CIT(A) OBSERVED THAT SINCE THE ASSESSEE HAD NOT GIVEN ANY COGENT EVIDENCE REGARDING THE LOSS OF STOCK AT RS. 20,98,683/- HE A RRIVED AT THE TOTAL CREDITS TO BE CONSIDERED AT RS. 1,29,61,914/- AND DIRECTED THE LD . AO TO COMPUTE THE NET PROFIT AT 5% BY TAKING INTO ACCOUNT OF SUCH FIGURE. 3.3. THE ASSESSEE PLEADED BEFORE THE LD. CIT(A) THA T WHEN THE ESTIMATED PROFIT IS TAKEN BY THE LD. AO IS INCLUSIVE OF EXPENDITURE INCURRED BY ACCRUED INTEREST ON SECURED LOANS, ANY ADDITION MADE TOWARDS INTEREST EXPENDITURE SEPA RATELY WOULD RESULT IN DOUBLE ADDITION MADE BY THE LD. AO. IT WAS PLEADED THAT TH E NET PROFIT @ 10% HAS BEEN ARRIVED BY THE LD. AO AFTER TAKING INTO ACCOUNT ALL THE DIS ALLOWANCES U/S 40A(3), 40A(IA) ETC. WHICH IS VERY CLEAR FROM THE WORDINGS USED IN THE A SSESSMENT ORDER IN PARA 2. HENCE, NO SEPARATE ADDITION TOWARDS INTEREST EXPENDITURE COUL D BE MADE BY THE LD. AO. THE LD. CIT(A) OBSERVED IN HIS ORDER AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION ON BEHA LF OF THE APPELLANT. EVIDENTLY, THE ASSESSING OFFICER HAS MADE THE TRADING ADDITION BY ESTIMATING THE NET PROFIT BY APPLYING A RATE OF 10% ON THE TOTAL CREDITS IN THE PROFIT AN D LOSS ACCOUNT. OF COURSE, THIS IS NOT- WITHSTANDING THE CORRECTNESS OR REASONABILITY OF TH E COMPUTATION AS DISCUSSED IN THE PRECEDING GROUNDS OF APPEAL. ADMITTEDLY, THE DEDUCT ION OF A STATUTORY LIABILITY IS TO BE ALLOWED ON ACTUAL PAYMENT BASIS. IN THAT CASE, THE ASSESSEE COMPANY IS ENTITLED FOR SUCH DEDUCTION AS AND WHEN THE PAYMENT IS MADE. THIS NAT URALLY WOULD LEAD TO THE CONCLUSION THAT THE ESTIMATE MADE BY THE ASSESSING OFFICER IN COMPUTING THE PROFIT BY APPLICATION OF A RATE DOES NOT INCLUDE THE AMOUNT OF UNPAID LIABILITY OF ACCRUED INTEREST ON SECURED LOANS. THUS, THERE COULD NOT BE ANY DOUB LE ADDITION IN THIS REGARD. THE ACTION OF THE ASSESSING OFFICER IN SEPARATELY ADDIN G THE SAID UNPAID LIABILITY OF RS. 1,28,65,102/- IS HEREBY CONFIRMED. 4 ITA NO.1378/KOL/2013 M/S SHREE KRISHNA FODDER MILLS PVT. LTD. A.YR. 2007-08 4 3.4 AGAINST THIS ORDER OF LD. CIT(A) NO APPEAL WAS PREFERRED BY BOTH THE PARTIES. 3.5. LATER THE LD. CIT(A) PASSED AN ORDER U/S 154 O F THE ACT ON 25.02.2013 PURSUANT TO RECTIFICATION PETITION FILED BY THE ASSESSEE ON 25. 02.2013, WHEREIN HE DELETED THE DISALLOWANCE MADE BY THE LD. AO TOWARDS INTEREST EX PENDITURE IN THE SUM OF RS. 1,28,65,102/- BY OBSERVING THAT IT IS DOUBLE ADDITI ON IN VIEW OF THE ESTIMATION OF NET PROFIT. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE U S ON THE FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING AOS ADDITION ON ACCOUNT OF UNPA ID ACCRUED INTEREST ON SECURED LOANS TAKEN FOR FINANCIAL INSTITUTIONS. 2. THAT THE APPELLANT RESERVES THE RIGHT TO AMEND, ALTER OR ADD TO ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APP EAL. 3.6. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND F ROM THE OBSERVATION OF THE LD. CIT(A) REPRODUCED SUPRA THAT THE LD. CIT(A) HAD CON SCIOUSLY COME TO THE CONCLUSION THAT DISALLOWANCE MADE BY THE LD. AO TOWARDS INTER EST EXPENDITURE ON SECURED LOANS IN THE SUM OF RS. 1,28,65,102/- WOULD ONLY AMOUNT TO D OUBLE ADDITION SINCE THE ENTIRE NET PROFIT HAS BEEN ESTIMATED BY THE LD. AO AT 10% ON C REDITS IN THE PROFIT AND LOSS ACCOUNT. BUT THE LD. CIT(A) IN HIS CONCLUDING REMARK AS ABOV E HAD ERRONEOUSLY MENTIONED THAT THE ADDITION OF RS. 1,28,65,102/- IS HEREBY CONFIRM ED INSTEAD OF MENTIONING THAT IT IS HEREBY DELETED. THIS TYPOGRAPHICAL ERROR COMMITTED BY THE LD. CIT(A) WAS RIGHTLY BROUGHT TO HIS NOTICE BY THE ASSESSEE AND THE LD. C IT(A) HAD RIGHTLY PASSED AN ORDER U/S 154 OF THE ACT ON 25.02.2013 RECTIFYING HIS EARLIER MISTAKE. THOUGH ON THE FACE OF IT, IT AMOUNTS TO REVIEW OF HIS EARLIER DECISION, WE HOLD THAT THE CONCLUSION OF THE LD. CIT(A) SHOULD BE VIEWED HARMONIOUSLY WITH THE OBSERVATIONS AND REASONING GIVEN BY THE LD. CIT(A). FROM THE OBSERVATION AND REASONING GIVEN BY THE LD. CIT(A) WHICH ARE REPRODUCED SUPRA, IT COULD BE SAFELY INFERRED THAT THE LD. CIT(A) WAS ONLY INTENDING TO DELETE THE ADDITION MADE TOWARDS INTEREST EXPEND ITURE IN THE SUM OF RS. 12865102/-. BUT IN THE CONCLUDING REMARK HE HAD ERRONEOUSLY MEN TIONED AS ADDITION IS CONFIRMED IN 5 ITA NO.1378/KOL/2013 M/S SHREE KRISHNA FODDER MILLS PVT. LTD. A.YR. 2007-08 5 RESPECT OF STATING ADDITION IS DELETED. WE HOLD THA T THERE CANNOT BE ANY GRIEVANCE FOR THE REVENUE IN THE LD. CIT(A) RECTIFYING HIS MISTAKE BY PASSING AN ORDER U/S 154 OF THE ACT AND THIS ISSUE IS ALSO NOT DEBATABLE. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) PASSED U/S 154 OF THE ACT DATED 25. 02.2013. ACCORDINGLY GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED . ORDER PRONOUNCED IN THE COURT ON 16.03.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BAL AGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 16.03.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-8, KOLKATA, AAYAKAR BHAWAN, 5 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. 2. M/S SHREE KRISHNA FODDER MILLS PVT. LTD., 108, E LLIOT ROAD, KOLKATA-700016. 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S