The ACIT, Circle-1, Surat V. M/s. Proximus Knowledge & Tech.Services Pvt.Ltd., Nasik

ITA 1402/AHD/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1194 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 27-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NARENDRA SINGH
• Keywords: Depreciation
• Section: 27; 144; 154

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.1402/AHD/2012 /BLOCK ASSTT. YEAR: 2009-2010 ACIT, CIR.1 SURAT. VS M/S.PROXIMUS KNOWLEDGE & TECH. SERVICES P. LTD. E/78, 1 ST FLOOR, MIDC, AMBED NASIK 422 010. PAN : AADCA 8575 G %& / (APPELLANT) '( %& / (RESPONDENT) REVENUE BY : SHRI NARENDRASINGH, DR ASSESSEE BY : NONE / DATE OF HEARING : 16/09/2015 / DATE OF PRONOUNCEMENT: 03/12/2015 )*/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF THE CIT(A)-I, SURAT DATED 26.4.2012 PASSED FOR THE ASST T.YEAR 2009-10. 2. THE APPEAL WAS POSTED FOR HEARING ON 28.8.2012. NONE APPEARED ON BEHALF OF THE ASSESSEE. THEREFORE, FRESH NOTICE WAS ISSUED ON 26.10.2012. SHRI R.C. JAIN, LD. COUNSEL FOR THE AS SESSEE APPEARED AND HEARING WAS ADJOURNED. THEREAFTER, THE ASSESSEE MO VED AN APPLICATION FOR ADJOURNMENT WHICH WAS ALSO ALLOWED. HOWEVER, O N THE DATE OF HEARING I.E. 16.9.2015 IN RESPONSE TO THE NOTICE OF HEARING NONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. ITA NO.1402/AHD/2012 2 3. WITH THE ASSISTANCE OF THE LD. DR, WE HAVE GONE THROUGH THE RECORD CAREFULLY AND PROCEED TO DECIDE THE APPEAL O N MERIT. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: [1] ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A)-I, SURAT HAS ERRED IN DELETING ADDITION MADE ON ACCOUNT OF SUNDRY CREDITORS FOR WANT OF ANY PROOF. [2] ON THE FACTS AND CIRCUMSTANCE OF THE CASE A ND IN LAW, THE LD. CIT(A)-I, SURAT HAS ERRED BY ESTIMATING ASSESSEE IN COME @ 50% OF GROSS PROFIT & THEREBY DELETING THE VARIOUS ADDITIO NS MADE BY THE A.O. ON ACCOUNT OF VARIOUS EXPENSES @ 20% AS THE ASSESSE E DID NOT SUBMIT ANY PROOF. [3] ON THE FACTS AND CIRCUMSTANCE OF THE CASE A ND IN LAW, THE LD. CIT(A)-I, SURAT HAS ERRED BY ALLOWING DEPRECIATION OF RS.1,49,07,251/- WHICH THE A.O. HAD ADDED FOR WANT OF ANY EVIDENCES [4] ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER. [5] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) MAY BE SET- SIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 4. WE FIND THAT THE ASSESSEE HAS FILED STATEMENT OF FACTS BEFORE THE LD.FIRST APPELLATE AUTHORITY. FOR RESOLVING THE CO NTROVERSY, IT IS NECESSARY TO TAKE NOTE OF THE COMPUTATION OF INCOME FILED BY THE ASSESSEE AS HAS BEEN STATED IN THE STATEMENT OF FAC TS. IT READ AS UNDER: 1. THE APPELLANT E FILED RETURN OF INCOME ON 30..200 9 DECLARING NIL INCOME AFTER SETTING O BROUGHT FORWARD LOSSES D ETAILS OF THE SAME IS AS UNDER: LOSS AS PER PROFIT AND LOSS ACCOUNT RS.(-) 46,37,53 0/- ADD: DEPRECIATION CONSIDERED SEPARATELY RS.1,49,07, 251/- ADD: DISALLOWANCE U/S.40(A)(I) RS.1,09,94,145/- TOTAL RS.2,12,63,866/- LESS: DEPRECIATION AS PER INCOME TAX RS.62,95,561/- ITA NO.1402/AHD/2012 3 RULES TOTAL INCOME RS.1,49,68,305/- LESS: SET OFF OF BROUGHT FORWARDED LOSSES OF AY : 2005-06 TO THE EXTENT OF CURRENT YEAR INCOME RS.1,49,68,305/- TAXABLE INCOME RS.NIL 5. THE LD.AO HAS PASSED AN EX PARTE ASSESSMENT ORDER UNDER SECTION 144 OF THE INCOME TAX ACT. HE MADE VARIOUS ADDITIO NS TO THE TOTAL INCOME OF THE ASSESSEE. THE DISALLOWANCES MADE BY THE AO ARE AS UNDER: I. 20% DISALLOWANCE OUT OF SUNDRY CREDITORS OF RS. 92,09,983/- II. 20% DISALLOWANCE OUT OF POWER AND FUEL EXPENSES OF RS.55,31,083 III. RENT OF RS.99,03,860 IV. 20% DISALLOWANCE OUT OF REPAIRS TO MACHINERY OF RS.1,88,595/- V. 20% DISALLOWANCE OUT OF OTHER EXPENSES OF RS28,5 4,867 VI. DEPRECIATION OF RS.1,49,07,251/- 6. DISSATISFIED WITH THE DETERMINATION OF THE INCOM E AT RS.1,95,08,550/-, THE ASSESSEE WENT IN APPEAL BEFOR E THE CIT(A). THE LD.CIT(A) HAS DECIDED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: 8. THE CASE RECORDS WERE ALSO REQUISITIONED FROM T HE ASSESSING OFFICER DURING APPELLANT PROCEEDINGS. FROM PERUSAL OF THE SAME, IT IS NOTICED THAT THERE WAS NO COMPLIANCE BY THE ASSE SSEE IN RESPONSE TO ANY OF THE NOTICES ISSUED BY THE ASSESS ING OFFICER. THE ASSESSING OFFICER'S NOTICE DATED 28.7.2011 SERV ED ON 04.08.2011, ASKED FOR PROFIT AND LOSS ACCOUNT, BALA NCE SHEET, AUDIT REPORT, ETC ALONGWITH BOOKS OF ACCOUNTS. HOWE VER, EVEN THE PROFIT AND LOSS ACCOUNT, BALANCE SHEET AND AUDIT RE PORT ARE NOT AVAILABLE ON FILE. IT COULD NOT BE CONFIRMED THAT W HETHER THE AUDIT REPORT WAS FILED OR NOT? IF NOT, WHETHER ANY PENALT Y PROCEEDINGS HAVE BEEN INITIATED BY THE ASSESSING OFFICER U/S 27 1B OR NOT ? THE CASE RECORDS ONLY CONTAIN A PRINT OUT OF E. RETURN FROM WHICH FOLLOWING FACTS ARE NOTICED ON THE CREDIT SIDE OF T HE PROFIT & LOSS ACCOUNT :- A] SALES /GROSS RECEIPTS RS 2,46,12,599 B] PROFIT ON SALE OF ASSETS RS 47,24,925 C] CLOSING STOCK RS. 53,460 ON THE DEBIT SIDE, THE FOLLOWING EXPENSES HAVE BEEN SHOWN :- ITA NO.1402/AHD/2012 4 1. OPENING STOCK RS 53,460/- 2. POWER &FUEL RS 55,31,083/- 3. RENT RS. 99,03,860/- 4. REPAIR TO MACHINERIES RS. 1,88,595/- 5. SALARY AND WAGES RS. 4,27,771/- 6. TELEPHONE EXPENSES RS. 1,24,491/- 7. AUDIT FEES RS.27,575/- 8. OTHER EXPENSES RS. 28,54,867/- 8.1 ON THE BASIS OF ABOVE, NET PROFIT BEFORE THE IN TEREST DEPRECIATION AND TAX HAS BEEN ARRIVED AT RS. 1,02,7 97-282/- AFTER CLAIMING OF INTEREST OF RS. 9,45,561/-AND DEPRECIAT ION OF RS. 1,49,07,251/-THE NET PROFIT HAS BEEN SHOWN AT (-)LO SS OF RS 46,37,530/-THIS GROUND OF APPELLANT I.E. ASSESSING OFFICER SHOULD HAVE STARTED THE COMPUTATION FROM THE LOSS RS 46,37 ,530/- ARISES FROM THIS FACT. HOWEVER, IN THE SCHEDULE OF COMPUTA TION OF TOTAL INCOME THE PROFIT AND GAINS FROM BUSINESS HAVE BEEN SHOWN AT RS. 1, 49, 68, 305/- AGAINST WHICH, BROUGHT FORWARD LOSS OF RS 1, 49. 68, 305/- HAS SET OFF SHOWING THE RETURNED INCO ME AT NIL. THIS MEANS THAT FROM THE LOSS OF RS 46,45,910/- A P ROFIT OF RS 1,49,68,305/- HAS BEEN ARRIVED AT AFTER MAKING SOME ADJUSTMENTS OF ADMISSIBLE / NON - ADMISSIBLE ITEMS, THE DETAILS OF WHICH ARE NOT AVAILABLE. THEREFORE, THE ASSESSING O FFICER SHOULD HAVE STARTED THE COMPUTATION FROM RS 1,49,68,305/- RATHER THAN NIL. SINCE THE ASSESSING OFFICER HAS STARTED WITH N IL, IT APPEARS THAT THE ASSESSING OFFICER HAS ALLOWED THE SET OFF OF BROUGHT FORWARD LOSSES TO THE ABOVE EXTENT. THE ASSESSING O FFICER IS DIRECTED TO VERIFY THE CLAIM OF SET OFF BROUGHT FOR WARD LOSSES AS PER RECORDS AND ALLOW THE SAME AS PER LAW. THIS GRO UND OF APPEAL IS ACCORDINGLY DISPOSED OFF. GROUND NO. 3. 8.2 IN THIS GROUND OF APPEAL, THE ASSESSING OFFICER HAS MADE VARIOUS ADDITIONS / DISALLOWANCES . THE ASSESSING O FFICER HAS ALSO DISALLOWED 20 % ON SUNDRY CREDITORS HOWEVER, THERE IS NO PROVISION FOR ESTIMATED DISALLOWANCES OUT OF SUNDRY CREDITORS. IT IS ALSO NOT KNOWN WHETHER THESE SUNDRY CREDITORS ARE P ART OF OPENING BALANCE IN WHICH CASE, NO DISALLOWANCE CAN BE MADE IN THE CURRENT YEAR OR THE SAME ARE PART OF CURRENT YE AR, IN WHICH CASE, THE DISALLOWANCE CAN BE TAKEN CARE OF BY DISA LLOWANCE OUT OF EXPENSES. THEREFORE, THE ADDITION OF RS.18,41,997/- IS DELETED. 8.2.1 AS DISCUSSED SUPRA, THE OPENING STOCK AND CLO SING STOCK OF THE APPELLANT IS SAME AT RS. 53,460/- THERE IS SUBS TANTIAL PROFIT ON SALE OF FIXED ASSETS. A PERUSAL OF THESE TWO THI NGS CONVEY THAT THE REGULAR BUSINESS ACTIVITY OF THE APPELLANT WAS NOT DONE, IN THE ITA NO.1402/AHD/2012 5 RELEVANT ASSESSMENT YEAR. THEREFORE, THERE IS NO JU STIFICATION FOR VARIOUS EXPENSES TO THE EXTENT CLAIMED. HOWEVER, IT COULD MEET THE ENDS OF JUSTICE, IF THE TAXABLE INCOME OF THE A PPELLANT IS ESTIMATED AS A PERCENTAGE OF GROSS RECEIPTS SHOWN A T RS. 2,46,12,599/-. THEREFORE, THE TOTAL INCOME OF THE A PPELLANT IS TAKEN AS 50% ON THIS AMOUNT I.E. RS.1, 23,06,299/- THE ASSESSING OFFICER HIMSELF ALLOWED SET OFF OF LOSS / DEPRECIAT ION TO THE EXTENT OF RS.87,59, 467/- ON THE BASIS OF ASSESSMENT ORDER FOR ASSTT YEAR 2008-09. THEREFORE, THE TOTAL INCOME ASSESSED BY TH E ASSESSING OFFICER IS REDUCED TO RS. 35,46,833/-. (RS 1,23,06, 299 - RS. 87,59,467/-) THIS GROUND OF APPEAL IS THEREFORE, PA RTLY ALLOWED. 9. IN GROUND NO. 4 THE APPELLANT STATES THAT IT MAD E DISALLOWANCE U/S 40A(IA) WAS MADE IN N THE RETURN OUT OF EXPENSE S. HOWEVER, DISALLOWANCE OUT OF SAME EXPENSES WAS MADE BY THE A SSESSING OFFICER AGAIN. SINCE THE PROFIT OF THE APPELLANT HA S BEEN ESTIMATED (SUPRA), THIS GROUND DOES NOT SURVIVE AND ACCORDING LY DISMISSED. MOREOVER, IT IS NOT VERIFIABLE AS TO WHICH EXPENSES WERE DISALLOWED U/S 40A(IA) FOR WANT OF DETAILS FROM THE APPELLANT. 10. GROUND NO. 5 IS DISMISSED AS THE PROFIT OF THE APPELLANT HAS BEEN ESTIMATED. MOREOVER, DEPRECIATION CLAIM EVEN O THERWISE IS NOT VERIFIABLE. 11. GROUND NO. 6 11.1 THIS GROUND IS RELATED TO SET OFF BROUGHT FORW ARD LOSSES FOR ASSTT YEAR 2005-06 OF RS 2,23,11,126/- THIS MATTER PERTAINS TO SECTION 154 OF THE IT ACT AND THE ASSESSING OFFICER MAY GRANT SET OFF BROUGHT FORWARD LOSS/ DEPRECIATION AS PERMISSIB LE UNDER THE ACT ON THE BASIS OF RECORDS AVAILABLE WITH THE I T DEPARTMENT. 12. IN THE RESULT APPEAL IS PARTLY ALLOWED. 7. WITH THE ASSISTANCE OF THE LD.DR WE HAVE GONE TH ROUGH THE RECORD CAREFULLY. ON PERUSAL OF THE STATEMENT OF INCOME EXTRACTED (SUPRA), VIS--VIS THE COMPUTATION OF INCOME, AND THEREAFTER , THE FINDING OF THE CIT(A), WE DO NOT FIND ANY COHERENCE WITH EACH OTHE R. THE LD.CIT(A) HAS RESTORED SOME OF THE ISSUES TO THE AO FOR VERIF ICATION AND ALLOWANCE TO THE ASSESSEE, PARTICULARLY WITH RESPECT TO SET O FF OF BROUGHT FORWARD LOSS. IN THE GROUNDS OF APPEAL EXTRACTED (SUPRA), THE REVENUE HAS PLEADED THAT THE LD.CIT(A) HAS UPHELD THE DEPRECIAT ION OF RS.1,49,07,251/- BUT IN THE COMPUTATION OF INCOME N O SUCH DEPRECATION ITA NO.1402/AHD/2012 6 AS CLAIMED BY THE ASSESSEE. THE CLAIM OF DEPRECIAT ION IS OF RS.62,95,561/- ONLY. IT IS ALSO PERTINENT TO NOTE THAT THE AO HAS MADE DISALLOWANCE OUT OF THE SUNDRY CREDITORS. HE MADE AD HOC DISALLOWANCE AT 20%. IT IS TOTALLY UNHEARD. WHETHER SUNDRY CRED ITORS ARE GENUINE OR NOT GENUINE ? HOW THEY CAN BE NON-GENUINE TO THE E XTENT OF 20%. IN OTHER WORDS, EITHER TOTAL SUNDRY CREDITORS ARE GENU INE OR ALL THE SUNDRY CREDITORS GENUINE UNLESS POINTED OUT SPECIFICALLY. THERE CANNOT BE ANY AD HOC DISALLOWANCE OUT OF THESE ITEMS. THIS APPEARS TO US THAT THOUGH THE ASSESSMENT WAS FRAMED UNDER SECTION 144 OF THE INCOME TAX ACT, ACCORDING TO THE BEST JUDGMENT OF THE AO, BUT THE A O FAILED TO COLLECT DETAILS BY EXERCISING HIS POWER IN ORDER TO DETERMI NE THE FAIR INCOME OF THE ASSESSEE. HE OUGHT TO HAVE LOOKED INTO THE EAR LIER AND SUBSEQUENT YEARS DETAILS AVAILABLE WITH THE DEPARTMENT BEFORE DETERMINING THE INCOME OF THE ASSESSEE. WHILE HE CONSIDERING ALL T HESE ASPECTS, WE SET ASIDE BOTH THE ORDERS OF THE REVENUE AUTHORITIES AN D RESTORE ALL THE ISSUES TO THE FILE OF THE AO FOR RE-ADJUDICATION. THE LD.AO SHALL ISSUE NOTICE TO THE ASSESSEE, AND THEREAFTER, DETERMINE T AXABLE INCOME OF THE ASSESSEE, IF ANY. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 3 RD DECEMBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 03/12/2015