ACIT, C.C.IV, Kolkata, Kolkata V. M/s. Allied Resins & Chemicals Ltd., Kolkata

ITA 1556/KOL/2010

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9054 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 06-08-2010
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: V N PUROHIT
• Section: 143(3); 115JB

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA ( ) BEFORE , /AND , ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA , AM ] / I.T.A NO.1 556 /KOL/201 0 / ASSESSMENT YEAR : 200 7 - 0 8 ASSISTANT COMMISSIONER OF INCOME - TAX, VS. M/S. ALLIED RESINS & CHEMICALS LTD. CENTRAL CIRCLE - IV, KOLKATA. (PAN: AACCA8557D) ( /APPELLANT ) ( / RESPONDENT ) DATE OF HEARING: 0 8 . 01 .201 5 DATE OF PRONOUNCEMENT: 16 . 01 .201 5 FOR THE APPELLANT: SHRI VARINDER MEHTA, CIT, DR FOR THE RESPONDENT: SHRI V. N. PUROHIT, FCA / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF CIT(A) , CENTRAL - I , KOLKATA IN APPEAL NO. 278 / CIT(A),C - 1/CC - IV/09 - 10 DATED 06 . 0 5 .201 0 . ASSESSMENT WAS FRAMED BY ACIT,C.C - IV, KOLKATA U/S. 1 43(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 200 7 - 0 8 VID E HIS ORDER DATED 31 . 1 2 .20 0 9 . 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) D IRECTING THE AO TO RECALCULATE THE BOOK PROFIT U/S. 115JB OF THE ACT ALLOWING DEDUCTION IN VIEW OF PROVISION OF CLAUSE (VII) OF EXPLANATION (1) TO SUB - SECTION (1) OF SEC. 115JB OF THE ACT DESPITE THE FACT THAT THE ASSESSEE HAS NOT CLAIMED THE SAME IN THE RETURN OF INCOME. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN DIRECTI NG THE AO TO RECALCULATE THE BOOK PROFIT U/S. 115JB AFTER ALLOWING DEDUCTION AS PER CLAUSE - VII OF EXPLANATION 1 TO SUB - SECTION 2 OF SECTION 115JB IN SPITE OF THE FACT THAT ASSESSEE HAS NOT CLAIMED THE SAME IN RETURN OF INCOME FILED BY IT. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ORIGINALLY THE REVENUE WHILE PROCESSING RETURN ISSUED INTIMATION U/S. 143(1) OF THE ACT AND DISALLOWED THE CLAIM OF DEDUCTION IN RESPECT TO SICK INDUSTRIAL UNDERTAKING D ECLARED BY BIFR. THE AO DISALLOWED THE CLAIM AND CIT(A) DELETED THE SAME AND AGAINST WHICH REVENUE PREFERRED APPEAL BEFORE ITAT. ITAT B BENCH, KOLKATA IN ITA NO. 59/KOL/2010 FOR THE VERY ASSESSMENT YEAR SET ASIDE THE ISSUE BY OBSERVING IN PARA 5 AND 6 AS UNDER: 2 ITA NO.1 55 6/K/2010 M/S. ALLIED RESINS & CHEMICALS LTD. AY 200 7 - 0 8 5. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE HAS RETURNED A NIL INCOME AND THAT NO ADDITIONS HAVE BEEN MADE IN RESPECT OF THE SAME. THE ASSESSEE S CLAIM, AS SET OUT IN THE STATEMENT OF FACTS AS WELL, IS THAT THE PROVISIONS OF SECTION 115JB DO NOT APPLY TO THE ASSESSEE. YET, WITHOUT REJECTING THE SAID CLAIM, A DEMAND HAS BEEN RAISED ON THE ASSESSEE BY WAY OF COMPUTER PROCESSED INTIMATION, AND AS THE INTIMATION CLEARLY STATES IN THE BOTTOM PORTION, IT IS IN RESPECT OF BOOK PROFIT U/S . 115JA/115JB . APPARENTLY, THE ASSESSING OFFICER HAS PROCEEDED ON THE BASIS THAT MINIMUM ALTERNATE TAX ON THE BOOK PROFITS UNDER SECTION 115JB IS APPLICABLE ON THE FACTS OF THIS CASE. AS EVIDENT FROM THE GROUND OF APPEAL BY THE ASSESSING OFFICER, THIS P ROCESSING MISTAKE HAS OCCURRED AS THE RELEVANT COLUMN IN THE INCOME TAX RETURN WAS NOT DULY FILLED IN. A COLUMN HAVING BEEN LEFT BLANK DUE TO INADVERTENT ERROR CANNOT BE VISITED WITH DENIAL OF CLAIM WHEN SUCH CLAIM IS ADMISSIBLE ON THE BASIS OF MATERIAL O N RECORD AND IN ACCORDANCE WITH THE LAW. THEREFORE, THE MATTER SHOULD BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED VERIFICATION ABOUT THE PROVISIONS OF SECTION 115JB BEING INAPPLICABLE ON THE FACTS OF THIS CASE ON THE GROUND THAT THE ASSES SEE COMPANY IS A SICK COMPANY WITHIN MEANINGS OF SECTION 17(1) OF THE SICK COMPANIES (SPECIAL PROVISIONS) ACT. IN THIS VIEW OF THE MATTER, WE SEE NO INFIRMITY IN THE CONCLUSIONS ARRIVED AT BY THE CIT(A) TO THE EFFECT THAT THE ASSESSING OFFICER HAS TO RECT IFY THE SAID MISTAKE AND ISSUE CORRECT INTIMATION TO THE ASSESSEE, BUT THEN WE MAKE IT SPECIFICALLY CLEAR THAT THE ASSESSING OFFICER WILL EXAMINE THE FACT REGARDING THE ASSESSEE COMPANY BEING A SICK COMPANY, AND, THEREFORE, OUTSIDE THE AMBIT OF SECTION 115 JB. WHILE UPHOLDING THE STAND OF THE CIT(A) IN PRINCIPLE, WE MODIFY THE DIRECTIONS TO THE EXTENT INDICATED ABOVE. 6. HAVING UPHELD THE ACTION OF THE CIT(A) ON MERITS, WE MAY CLARIFY THAT WHILE THE CIT(A) HAS MENTIONED THAT THERE IS NO MENTION OF IMPUGNE D DEMAND HAVING BEEN MADE UNDER SECTION 115JB IN THE INTIMATION UNDER SECTION 115JB, WE FIND THAT THIS OBSERVATION IS INCORRECT INASMUCH AS THE SAID INTIMATION SPECIFICALLY STATES THE DEMAND HAVING BEEN MADE IN RESPECT OF SECTION 115JA/SECTION 115JB . HO WEVER, AS THE MATTER HAS BEEN REMITTED TO THE FILE OF THE VERIFICATION OF CLAIM ABOUT INAPPLICABILITY OF SECTION 115JB, NOTHING REALLY TURNS ON THIS ASPECT OF THE MATTER. THERE IS ALSO A MENTION ABOUT FRESH CLAIM HAVING BEEN MADE IN THE APPEAL PROCEEDING S BUT THEN, IN OUR CONSIDERED VIEW, LEAVING A COLUMN BLANK IS NOT THE SAME THING AS NOT MAKING A CLAIM - MORE SO WHEN THE CLAIM IS SAID TO HAVE BEEN MADE IN THE COMPUTATION OF INCOME BY WAY OF A SPECIFIC NOTE. IT IS NOT, THEREFORE, NECESSARY TO DEAL WITH TH ESE ASPECTS IN GREATER DETAIL. 4. THE AO WHILE FRAMING ASSESSMENT U/S. 143(3) OF THE ACT AGAIN DISALLOWED THE CLAIM OF DEDUCTION IN TERM OF CLAUSE (VII) OF EXPLANATION (1) TO SUB - SECTION (2) OF SECTION 115JB OF THE ACT IN RESPECT TO THE CLAIM OF DEDUCTION OF SICK INDUSTRIAL UNDERTAKING AS DECLARED BY BIFR AND AGAIN CIT(A) DELETED. ON QUERY FROM THE BENCH, THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE APPEAL EFFECT TO THE ORDER OF THE TRIBUNAL IN ORIGINAL ROUND HAS NOT BEEN GIVEN TILL DATE. ON THIS, LD . CIT, DR COULD NOT REPLY ANYTHING. WE FIND THAT THE TRIBUNAL HAS ALREADY GIVEN SUFFICIENT DIRECTION IN ITA NO. 59/K/2010 FOR THE VERY SAME ASSESSMENT YEAR 3 ITA NO.1 55 6/K/2010 M/S. ALLIED RESINS & CHEMICALS LTD. AY 200 7 - 0 8 AND NO FURTHER ADJUDICATION IS REQUIRED. THIS IS A SERIOUS ISSUE THAT THE AO IS NOT GIVING EFFECT T O THE ORDER OF THE TRIBUNAL AND IF THIS PRACTICE WILL CONTINUE THE LITIGATION WILL ESCALATE UNNECESSARY AT THE COST OF EXCHEQUER. ACCORDINGLY, WE DIRECT THE AO TO GIVE EFFECT TO THE ORDER OF TRIBUNAL IN ITA NO. 59/K/2010. 5 . SAME IS THE ISSUE IN THE P RESENT APPEAL BEFORE US FILED BY REVENUE AGAINST THE ORDER OF CIT(A) ADJUDICATING THE ASSESSMENT FRAMED U/S. 143(3) OF THE ACT. AS THE ISSUE IS EXACTLY IDENTICAL AND AS WE HAVE ALREADY DECIDED THE SAME IN ITA NO. 59/K/2010, TAKING A CONSISTENT VIEW, WE DI RECT THE AO TO GIVE APPEAL EFFECT TO EARLIER ORDER AND TO THIS ORDER ALSO WITHIN TWO MONTHS FROM THE RECEIPT OF THIS ORDER BY THE CIT CONCERNED. IN CASE, THE AO DOES NOT GIVE APPEAL EFFECT TO THE ORDER IN ITA NO. 59/K/2010 WITHIN TWO MONTHS, HE HAS TO PAY COST OF RS.2000/ - PERSONALLY. IN TERM OF THE ABOVE, THE APPEAL OF REVENUE IS SET ASIDE TO THE FILE OF AO AND ALLOWED FOR STATISTICAL PURPOSES. 6 . THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY AO O N ACCOUNT OF CLUB EXPENSES OF RS.1,02,727/ - . 7 . WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO MADE DISALLOWANCE OF CLUB EXPENSES FOR THE REASON THAT THE SAME ARE NOT FOR THE PURPOSES OF BUSINESS BUT THESE ARE INCURRED BY SHRI S. P. MUNDHRA IN HIS PERSONAL CAPACITY. BEFORE CIT(A) IT WAS AGITATED THAT THE CLUB EXPENSES PAID TO CALCUTTA CLUB LTD. BY CHEQUE ON BEHALF OF COMPANY ACTING AS SUPPORTING MANUFACTURER AND EXPORTER OF RESIN ETC. IT WAS EXPLAINED THAT THIS CLUB EXPENDITURE IS IN RELATION TO EXPORT AND FOR THIS, ASSESSEE COMPANY HAS TO ARRANGE MEETINGS WITH OVERSEAS CUSTOMERS AND THIS CLUB EXPENSES IS DIRECTLY RELATED TO EXPORT SALES/EXPORT TURNOVER OF RS.17,50,26,638/ - . THE CIT(A) G OING THROUGH THE FACTS OF THE CASE AS NARRATED BY ASSESSEE ABOVE DELETED THE DISALLOWANCE BY OBSERVING IN PARA 4.1 AS UNDER: 4.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. A.R. THE A.O. HAS DISALLOWED THE TOTAL EXPENSES CLAIMED UNDER THIS HEAD HOLDING THAT THE EXPENDITURE IN QUESTION WAS NOT INCURRED FOR THE PURPOSE OF THE BUSINESS. HOWEVER, NEITHER ANY SPECIFIC REASON FOR THE SAID CONCLUSION HAS BEEN GIVEN NOR ANY OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO SUPPORT THE EXPENSES CLAIMED. HE NCE, CONSIDERING THE FACT OF THE CASE, NATURE AND QUANTUM OF THE EXPENDITURE AND THE SUBMISSION OF THE ASSESSEE THE DISALLOWANCE MADE BY THE AO IS DELETED. THE APPELLANT WILL GET NECESSARY RELIEF ACCORDINGLY. 7 . WE FIND THAT AO HAS NOT GIVEN ANY REASON EXCEPT A GENERAL OBSERVATION THAT THESE EXPENSES ARE NOT RELATED TO BUSINESS BUT THE ASSESSEE HAS CLEARLY EXPLAINED THE FACT BEFORE US 4 ITA NO.1 55 6/K/2010 M/S. ALLIED RESINS & CHEMICALS LTD. AY 200 7 - 0 8 AS WELL AS BEFORE CIT(A) THAT THESE ARE INCURRED FOR INCREASING EXPORTS OF THE ASSESSEE COMPANY AND FOR THIS, HE DEMONSTR ATED INCREASE IN SALES. WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A) AND HENCE, THE SAME IS CONFIRMED. THIS ISSUE OF REVENUE S APPEAL IS DISMISSED. 8 . THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION ON ACCOUNT OF - (A) POSTAGE AND TELEGRAM RS.15,667/ - , (B) PRINTING AND STATIONERY RS.37,745/ - AND (C) SUNDRY EXPENSES RS.3,51,705/ - IN THE ABSENCE OF AUTHENTIC EVIDENCE TO PROVE THAT THE EXPENSES ARE INCURRED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 9 . W E HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ORDER OF THE AO THAT THESE EXPENSES ARE DISALLOWED ON AD HOC BASIS @ 10% OF THE EXPENSES WITHOUT ANY DISCUSSION. WE FURTHER FIND THAT THE CIT(A) HAS GON E THROUGH THE DETAILS OF THESE EXPENSES AND NOTED THAT ALL THE EXPENSES ARE VERIFIABLE AND VOUCHED. FOR THIS, HE RECORDED HIS FINDING IN PARA 3.1 AS UNDER: 3.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. AR. THE AO HAS DISALLOWED 10% OF POS T AND TELEGRAM AND PRINTING AND STATIONARY EXPENSES AND OF EXPENSES CLAIMED UNDER THE HEAD SUNDRIES HOLDING THAT THE EXPENDITURE IN QUESTION WERE NOT FULLY VERIFIABLE AS IN LARGE NUMBER PAYMENT WERE MADE AGAINST SELF MADE VOUCHERS. HOWEVER NEITHER THE AO HAS SPECIFIED THE VOUCHERS WHICH WERE NOT VERIFIABLE NOR ANY OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO SUPPORT THE EXPENSES CLAIMED. HENCE CONSIDERING THE FACT OF THE CASE, NATURE OF THE EXPENDITURE AND THE SUBMISSION OF THE ASSESSEE, THE DISALLOWANCE MADE BY THE AO IS DELETED. THE APPELLANT WILL GET NECESSARY RELIEF ACCORDINGLY. 10 . WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A0 AS THE EXPENSES ARE FULLY VOUCHED AND VERIFIABLE. IN THE FINDINGS OF THE AO, THERE IS NO WHISPER ABOUT THE DISALLOWANC E BUT ONLY AD HOC 10% DISALLOWANCE WAS MADE. HENCE, WE CONFIRM THE ORDER OF CIT(A ) ON THIS ISSUE AND THIS APPEAL OF REVENUE IS DISMISSED. 1 1 . IN THE RESULT, APPEAL OF REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 1 2 . ORDER IS PRONOUNCED IN THE O PEN COURT ON 1 6 . 0 1 . 2 0 1 5 S D / - S D / - , , ( SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 6 T H JANUARY , 201 5 JD.(SR.P.S.) 5 ITA NO.1 55 6/K/2010 M/S. ALLIED RESINS & CHEMICALS LTD. AY 200 7 - 0 8 - COPY OF THE ORDER FORWARDED TO: 1 . / A PPELLANT ACIT, C.C.IV, KOLKATA 2 / RESPONDENT - M/S. ALLIED RESINS & CHEMICALS LTD., 13, CAMAC STREET, KOLKATA - 700 017 3 . ( )/ THE CIT(A), KOLKATA 4. 5. / CIT KOLKATA / DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, / BY ORDER, /ASSTT. REGISTRAR .