ASSISTANT COMMISSIONER OF INCOME TAX, Mangalore V. Shri Arjun Moraes, Mangalore

ITA 1393/BANG/2014

• Counselvise Citation: 139321114 RSA 2014
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 14-11-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 143(3); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE C BENCH, BANGALORE [CORAM: PRAMOD KUMAR AM AND VIJAY PAL RAO JM] I.T. (IT)A. NO. 1393/BANG/14 ASSESSMENT YEAR: 2011-12 THE ASST.COMMISSIONER OF INCOME TAX CIRCLE 1(1), MANGALORE ..APPELLANT VS. SHRI ARJUN MORAES RESPONDENT 1-13/821, ASHOKBAGH, ASHOKANAGAR URVA STORES MANGALORE 575 006 [PAN:ACMPM8215D] APPEARANCES BY: DR SHANKARPRASAD K, FOR THE ASSESSING OFFICER SHRI V SRINIVASAN, FOR THE ASSESSEEE DATES OF CONCLUDING THE HEARING :APRIL 08, 2015. DATE OF PRONOUNCING THE ORDER :APRIL 08, 2015. ORDER PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HA S CALLED INTO QUESTION CORRECTNESS OF ORDER DATED 22 ND AUGUST, 2014 PASSED BY THE COMMISSIONER OF INCOME-TAX(A), IN THE MATTER OF ASSESSMENT UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2011-1 2, ON THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO L AW AND FACTS OF THE CASE. ITA 1393/BANG/2014 ASSESSMENT YEAR 2011-12 2 2. THE LEARNED CIT(A) ERRED IN ALLOWING THE ASSESSE ES CLAIM U/S 10B IGNORING THE FACT THAT AS PER STATEMENT OF THE ACCOUNTANT ON THE DATE OF SEARCH, THE EXCAVATOR HAD BEEN HIRED BY M/S SONAR IMPEX. 3. THE LEARNED CIT(A) ERRED IN ALLOWING THE CLAIM U/S 10B RELYING ON THE EVIDENCE OF TRANSPORTATION OF THE EX CAVATOR TO AP WITHOUT APPRECIATING THE FACT THAT THE ASSESS EE CONTINUED TO CLAIM DEPRECIATION ON THE ASSET AND NO RENT OR INCOME HAS BEEN GENERATED BY THE ASSESSEE FROM T HE EXCAVATOR CLAIMED TO HAVE BEEN TRANSPORTED EVIDENCI NG ITS USE BY THE ASSESSEE IN HIS NEW BUSINESS, I.E. M/S S ONAR IMPEX. 4. THE LEARNED CIT(A) ERRED IN ACCEPTING THE ASSESSEE S ARGUMENT IN THE ABSENCE OF ANY EVIDENCE TO SHOW THA T THE LEASE RENT PAID BY M/S SONAR IMPEX TO M/S MANGALORE OVERSEAS TRADERS DID NOT INCLUDE THE RENT ON THE SA ID EXCAVATOR. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED THAT THE ORDER OF THE COMMISSIONER OF INCOME-TAX(A), ON THE ABOVE POINTS MAY BE SET ASIDE AND THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 2. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE IS SUE IN APPEAL IS SQUARELY COVERED, IN FAVOUR OF THE ASSESSEE AD IN A SSESSEES OWN CASES FOR THE ASSESSMENT YEARS 2006-07 TO 2010-11, BY THIS TR IBUNALS ORDER DATED 30 TH DECEMBER 2014. LEARNED DEPARTMENTAL REPRESENTATIV E, HOWEVER, RATHER DUTIFULLY RELIED ON THE ORDERS OF THE AUTHOR ITIES BELOW. 3. WE FIND THAT, AS NOTED BY THE ASSESSING OFFICER, THAT SIMILAR DISALLOWANCE UNDER SECTION 10B WAS MADE IN THE EARL IER ASSESSMENT YEARS AS ITA 1393/BANG/2014 ASSESSMENT YEAR 2011-12 3 WELL AND THAT THERE IS NO MATERIAL CHANGE IN FACTS AND CIRCUMSTANCE, AND IN EXPLANATION OF THE ASSESSEE. HOWEVER, WHILE UPHOLD ING THE CLAIM OF THE ASSESSEE AND REJECTING THE STAND OF THE ASSESSING O FFICER, THE COORDINATE BENCH HAD HELD AS FOLLOWS: 25. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE EXCAVATOR THAT WAS USED IN THE BUSINESS OF MOT BY THE ASSESSEE AND WHICH WAS PART OF THE PLANT AND MACHINERY USED BY MOT WAS PURCHASED ON 30.9.2000. COPY OF THE INVOICE DATED 30.9.2000 IS AT PAGE-280 OF THE ASSES SEES PAPER BOOK. A PERUSAL OF THE SAME SHOWS THAT THE ASSESSEE AS PROP RIETOR OF MOT PURCHASED A TATA HITACHI HYDRAULIC EXCAVATOR MODEL EX200 LC BH WITH HD BUCKET/6BT ENGINE, FROM TELCO CONSTRUCTION EQUI PMENT CO. LTD. ADMITTEDLY THIS EXCAVATOR WAS USED IN THE BUSINESS OF MOT AT ASSESSEES QUARRY AT SHINGINKOPPA VILLAGE OF KHANAPUR TALUK, B ELGAUM DISTRICT, KARNATAKA. ON 25.5.2005 THIS EXCAVATOR WAS SENT BY THE ASSESSEE TO RAYADURGA, ANANTHAPUR DISTRICT, ANDHRA PRADESH BY R OAD. IN TERMS OF RULE 23-B(1A) OF THE KARNATAKA SALES TAX RULES, THE ASSESSEE HAD GIVEN A DECLARATION THAT THE EXCAVATOR IS BEING SENT NOT FO R SALE. THE FORM OF DECLARATION DOES NOT HAVE A COLUMN AS TO PURPOSE FO R WHICH IT IS BEING TRANSPORTED OUTSIDE THE STATE OF KARNATAKA, IF IT I S NOT FOR SALE. THE DELIVERY NOTE IN FORM NO.39 EVIDENCES MOVEMENT OF T HE EXCAVATOR FROM SHINGINKOPPA VILLAGE OF KHANAPUR TALUK, BELGAUM DIS TRICT, KARNATAKA TO ROYADURGA, ANANTHAPUR, ANDHRA PRADESH AS ON 25.5.20 05. THE NAME OF M/S.RAGHAVENDRA GRANITES DOES NOT FIGURE IN THE DEL IVERY NOTE BUT THE FACT THAT THE EXCAVATOR MOVED TO ANDHRA PRADESH FRO M KARNATAKA IS CLEARLY EVIDENCED BY THIS DELIVERY NOTE. THE ASST. COMMR. OF COMMERCIAL TAXES (AUDIT & RECOVERY)-8, DVO, MANGALORE HAS CONF IRMED THE AUTHENTICITY OF THIS DELIVERY NOTE. M/S.RAGHAVENDR A GRANITES OF ROYADURGA, ANANTHAPUR DISTRICT, ANDHRA PRADESH HAVE CONFIRMED THAT THE EXCAVATOR WAS USED BY THEM. IN THE STATEMENT OF TH E ASSESSEE RECORDED ITA 1393/BANG/2014 ASSESSMENT YEAR 2011-12 4 U/S.132(4) OF THE ACT ON 17.3.2010, THE ASSESSEE IN REPLY TO QUESTION NO.24 HAS STATED THAT THE PLANT AND MACHINERY OF MO T ARE USED BY THE ASSESSEE IN THEIR QUARRY EXCEPT ONE EXCAVATOR WHICH IS USED BY MR.MAHESH SRI RAGHAVENDRA GRANITES OF RAYADURGA QUA RRY. THE ABOVE EVIDENCE HAS BEEN BRUSHED ASIDE BY THE AO AS WELL A S CIT(A) FOR APPARENTLY NO VALID REASONS. 26. THE QUESTION THEN ARISES AS TO HOW SI WAS EXCA VATING GRANITE BLOCKS. IN THE STATEMENT RECORDED U/S.132(4) OF THE ASSESSE E ON 18.3.2010, THE AUTHORIZED OFFICER CONFRONTED A LIST OF PLANT AND M ACHINERY OWNED BY MOT AS WELL AS SI AS WAS GIVEN ON 5.3.2010 BY SRI.L AXMAN SALIAN, AN EMPLOYEE OF THE ASSESSEE. THE ASSESSEE IN ANSWER T HE ASSESSEE POINTED OUT THAT THE LIST OF PLANT AND MACHINERY OWNED BY S I AS GIVEN BY SRI.LAXMAN SALIAN DOES NOT CONTAIN ONE HITACHI HYD RAULIC EXCAVATOR PURCHASED BY SI FOR RS.60 LACS. THIS EXCAVATOR WAS PURCHASED BY THE ASSESSEE UNDER INVOICE DATED 20.10.2005 FROM TELCO CONSTRUCTION EQUIPMENT COMPANY LIMITED AND ITS MODEL AS MENTIONE D IN THE INVOICE IS ZX33LC WITH 600 MM TRIPLE GROUSER SHOES 6.4M BOOR N, 2.66M ARM, AIR CONDITIONER, DOUBLE FUEL FILTER, TROPICAL COVER & S TANDARD TOOLS AND MANUALS. THIS WAS TRANSPORTED FROM CHENNAI TO SHIN GINKOPPA VILLAGE OF KHANAPUR TALUK, BELGAUM DISTRICT, KARNATAKA, THROUG H REACH CARGO MOVERS, CHENNAI. THE FACT THAT THIS EXCAVATOR PURC HASED BY SI WAS USED BY SI IS NOT DISPUTED BY THE REVENUE. THE INVENTOR Y PREPARED BY THE AUTHORISED OFFICER CONDUCTING THE SEARCH AT THE TIM E OF SEARCH ON 5.3.2010 AT QUARRY OF THE ASSESSEE AT SHINGINKOPPA VILLAGE OF KHANAPUR TALUK, BELGAUM DISTRICT, KARNATAKA, CLEARLY GIVES T HE DESCRIPTION OF THIS EXCAVATOR AND IT MATCHES WITH THE DESCRIPTION AS GI VEN IN THE INVOICE DATED 20.10.2005. THERE IS NO REFERENCE TO THE PRE SENCE OF THE EXCAVATOR OWNED BY MOT IN THE INVENTORY PREPARED BY THE AUTHO RIZED OFFICER CONDUCTING THE SEARCH. ITA 1393/BANG/2014 ASSESSMENT YEAR 2011-12 5 27. FROM THE ABOVE TWO THINGS ARE CLEAR VIZ., (I) THE FACT THAT THE EXCAVATOR BELONGING TO MOT WAS NOT AVAILABLE AT SHI NGINKOPPA VILLAGE OF KHANAPUR TALUK, BELGAUM DISTRICT, KARNATAKA; (II) T HE EXCAVATOR THAT WAS AVAILABLE AT THE QUARRY ON 5.3.2010 ON THE DATE OF SEARCH AT SHINGINKOPPA VILLAGE OF KHANAPUR TALUK, BELGAUM DISTRICT, KARNAT AKA WAS NEW EXCAVATOR PURCHASED BY SI ON 20.10.2005. 28. DESPITE THE ABOVE OVERWHELMING EVIDENCE IN SUP PORT OF THE ASSESSEES CASE, THE AO REJECTED THE THEORY OF MOVE MENT OF EXCAVATOR BELONGING TO MOT TO ANDHRA PRADESH FOR THE REASON T HAT THE EXCAVATOR WAS STATED TO HAVE BEEN GIVEN TO M/S.RAGHAVENDRA GR ANITES FOR THEIR USE WITHOUT ANY CONSIDERATION AND THEREFORE CANNOT BE B ELIEVED. THE AO HAS ALSO ASSUMED THAT THE USE OF EXCAVATOR BELONGING TO MOT BY SI WAS NOT DENIED BY THE ASSESSEE WHEN EVEN IN THE STATEMENT R ECORDED U/S.132(4) OF THE ACT THE ASSESSEE IN ANSWER TO Q.NO.24 HAS DE NIED SUCH USE. THE REASONS GIVEN BY THE AO IN OUR OPINION CANNOT BE A SOUND BASIS ON WHICH THE PLEA OF THE ASSESSEE CAN BE REJECTED. 29. THE CIT(A) FIRSTLY PROCEEDED UNDER A WRONG ASS UMPTION THAT THE EXCAVATOR OWNED BY MOT WAS FOUND AT THE TIME OF SEA RCH AT SHINGINKOPPA VILLAGE OF KHANAPUR TALUK, BELGAUM DIS TRICT, KARNATAKA, WHICH IS CONTRARY TO THE INVENTORY TAKEN BY THE AUT HORIZED OFFICER CONDUCTING SEARCH. SECONDLY THE CIT(A) HAS HELD TH AT THE ASSESSEE HAS ADMITTED USE OF PLANT AND MACHINERY OF MOT BY SI, I GNORING THE STATEMENT RECORDED U/S.132(4) OF THE ACT RECORDED ON 17.3.201 0 WHEREIN THE ASSESSEE CLARIFIED THAT EXCAVATOR BELONGING TO MOT WAS TRANSPORTED TO ANDHRA PRADESH FOR USE BY SREE RAGHAVENDRA GRANITES . THIRDLY THE CIT(A) HAS QUESTIONED THE RELIABILITY OF THE EVIDEN CE PRODUCED BY THE ASSESSEE FOR TRANSPORTING EXCAVATOR BELONGING TO MO T FROM KARNATAKA TO ANDHRA PRADESH. ACCORDING TO CIT(A) IN FORM NO.39 DELIVERY NOTE THE ASSESSEE HAS NOT MENTIONED THE PURPOSE FOR WHICH TH E EXCAVATOR WAS ITA 1393/BANG/2014 ASSESSMENT YEAR 2011-12 6 TRANSPORTED AND THAT THE NAME OF RAGHAVENDRA GRANIT ES DOES NOT FIGURE IN THE DECLARATION. AS WE HAVE ALREADY OBSERVED THE F ORM OF DECLARATION DOES NOT HAVE A COLUMN AS TO PURPOSE FOR WHICH IT I S BEING TRANSPORTED OUTSIDE THE STATE OF KARNATAKA, IF IT IS NOT FOR SA LE. THE CIT(A) ALSO EXPRESSED DOUBTS REGARDING THE EXCAVATOR OF MOT HAV ING CROSSED EITHER THE BORDER OF KARNATAKA OR ANDHRA PRADESH. THE CIT (A)S CONCLUSION THAT THE DELIVERY NOTE IS A SELF SERVING DOCUMENT AND TH ERE IS NO CONCRETE EVIDENCE THAT THE EXCAVATOR MOVED OUTSIDE THE STATE OF KARNATAKA IN OUR VIEW IS CONTRARY TO EVIDENCE ON RECORD IN THE FORM OF THE CONFIRMATION OF THE ASST.COMMR. OF COMMERCIAL TAXES (AUDIT & RECOVE RY)-8, DVO, MANGALORE WHO HAD CONFIRMED THE AUTHENTICITY OF THI S DELIVERY NOTE AS WELL AS THE MOVEMENT OF EXCAVATOR FROM KARNATAKA AN DHRA PRADESH. ANOTHER REASON GIVEN IS THERE IS NO JUSTIFIABLE REA SON GIVEN FOR TRANSPORTING THE EXCAVATOR TO ANDHRA PRADHESH AND T HAT THERE WAS NO USE OF THE EXCAVATOR BY THE ASSESSEE IN THE BUSINESS OF MOT BUT DEPRECIATION WAS CLAIMED BY THE ASSESSEE IN THE BOOKS OF MOT AND LATER WITHDRAWN. IN OUR VIEW ALL THESE REASONS GIVEN BY THE CIT(A) DOES NOT ESTABLISH THAT THE EXCAVATOR BELONGING TO MOT WAS USED BY SI. ON THE OTHER HAND THE EVIDENCE THAT IT WAS NOT AVAILABLE AT THE QUARRY AN D THAT IT WENT OUT OF KARNATAKA TO ANDHRA PRADESH AND THE FACT THAT THE E XCAVATOR COULD NOT HAVE BEEN USED BY THE ASSESSEE IN THE BUSINESS OF S I, HAS TOTALLY BEEN IGNORED BY THE CIT(A). 30. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THE ASSESSEE HAS SATISFIED THE CONDITIONS FOR ALLOWING DEDUCTION U/S.10B OF TH E ACT AND THE CLAIM OF THE ASSESSEE IS DIRECTED TO BE ALLOWED IN ALL THE A .Y.S. 4. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. RESPECTFULLY FOL LOWING THESE ESTEEMED VIEWS, AND DIRECTING THAT A COPY OF THE SAID ORDER DATED 30 TH DECEMBER, 2014 ITA 1393/BANG/2014 ASSESSMENT YEAR 2011-12 7 WILL BE DEEMED TO BE ATTACHED TO AND FORMING PART O F THIS ORDER, WE UPHOLD THE PLEA OF THE ASSESSEE. THE ASSESSING OFFICER WI LL, ACCORDINGLY, GRANT THE EXEMPTION U/S 10-B AMOUNTING TO RS.5,19,17,143. 5. IN THE RESULT, THE APPEAL IS ALLOWED. IT WAS SO PRONOUNCED IN THE OPEN COURT IMMEDIATELY UPON CONCLUSION OF HEARING ON 8 TH APRIL 2015. SD/- SD/- VIJAY PAL RAO PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) BANGALORE, THE8 TH DAY OF APRIL, 2015. COPIES TO: 1. THE ACIT, CIR.1(1), MANGALORE 2. SHRI ARJUN MORAES, 1-13/821, ASHOKBAGH, ASHOKNAGA R, URVA STORES, MANGALORE 575 006. 3. COMMISSIONER OF INCOME-TAX(A, MYSORE 4. COMMISSIONER OF INCOME-TAX, MANGALORE 5. THE DR, C BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES, BANGALORE