The DCIT, Circle-9, Surat V. M/s. Siddhi Vinayak Impex, Surat

ITA 1615/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67538 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-06-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 14-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Opportunity of being heard; Additional evidence; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMADABAD BEFORE SHRI MUKUL KR. SHRAWAT , JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 1615/AHD/2010 ASSESSMENT YEAR :2004-05 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-9, ROOM NO. 423, AAYKAR BHAVAN, MAJURA GATE, SURAT. V/S . M/S. SIDDHI VINAYAK IMPEX, I.G. GANDHI COMPUND, A.K. ROAD, SURAT PAN NO. AA J E S3950L (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI T. SANKAR, SR. D.R. /BY RESPONDENT SHRI M. K. PATEL, A.R. /DATE OF HEARING 26.06.2013 /DATE OF PRONOUNCEMENT 08.08.2013 O R D E R PER : T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WHIC H HAS EMANATED FROM THE ORDER OF CIT(A)-V, AHMEDABAD, DATED 22.12. 2009 FOR A.Y. 2004- 05. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER: [1] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.11, 13,603/- MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT THE AO HA D BROUGHT OUT THE FACT OF SHORT CREDIT OF EXPORT INCENTIVE (EXCISE) I N THE BOOKS ACCOUNTS BY THE ASSESSEE. [2] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.11, 13,603/- WITHOUT OBTAINING THE REMAND REPORT ON THE ISSUE. ITA NO. 1615/AHD/10 A.Y. 04-05 PAGE 2 [3] ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE BUSINESS LOSS OF R S.6,04,077/- WITHOUT APPRECIATING THE FACT THAT THE AO HAD OBSER VED DURING THE COURSE OF ASSESSMENT THAT THE LOSS COULD NOT BE TRE ATED AS BUSINESS LOSS AS THERE HAD BEEN NO BUSINESS ACTIVITY IN THAT YEAR. 2. GROUND NO.1, 2 & 3 ARE AGAINST DELETING THE ADDI TION OF RS.11,13,603/- BY CIT(A) ON ACCOUNT OF SHORT CREDIT OF EXPORT INCE NTIVE (EXCISE) IN THE BOOKS ACCOUNT BY THE ASSESSEE AND DELETING THIS ADDITION WITHOUT OBTAINING THE REMAND REPORT & ALLOWING THE BUSINESS LOSS OF RS.6, 04,077/-. THE A.O. FOUND THAT THE APPELLANT HAD SHOWN DEBTORS OF RS.36,99,47 4/- AS ON 31.03.2004 IN THE BALANCE SHEET. THE APPELLANT FOLLOWED MERCANTI LE SYSTEM OF ACCOUNTING. THE SUNDRY DEBTORS OF RS.36,99,474/- CONSISTED OF D EPB OF RS.3,38,433/- AND EXPORT INCENTIVE (EXCISE) OF RS.33,61,041/-, WHICH HAD BEEN REFLECTED IN THE STATEMENT OF LEDGER GIVING BREAK UP OF THE SUNDRY D EBTORS, WAS ALLOWED BUT SET OFF IN F.Y. 03-04. HE FURTHER OBSERVED THAT IN THE P&L ACCOUNT ON ACCOUNT OF DEPB CREDIT OF RS.29,16,191/- ON THE EXPORT INCENTI VE CREDIT OF RS.22,47,438/- WAS GIVEN TOTALING TO RS.51,63,629/-. THUS, AGAINS T RS.33,61,041/- SHOWN AS RECEIVABLE ON ACCOUNT OF EXPORT INCENTIVE (EXCISE) IN THE SUNDRY DEBTORS, IN THE P&L ACCOUNT CREDIT OF RS.22,47,438/- WAS SHOWN, WHI CH WAS NOT IN ORDER TO ACCOUNTING STANDARD FOLLOWED BY THE ASSESSEE. EVEN FOR THE EARLIER YEAR I.E. A.Y. 03-04, OTHER INCOME OF RS.1,10,832/- ONLY OFFE RED AND NO SUNDRY DEBTORS WERE REFLECTED TO CONSIDER THAT THE EARLIER YEAR AM OUNT HAS BEEN CARRIED FORWARD. AS PER THE BALANCE SHEET OF A.Y. 03-04, L OANS AND ADVANCES WAS ITA NO. 1615/AHD/10 A.Y. 04-05 PAGE 3 SHOWN AT RS.4,71,985/-. IN VIEW OF THAT IT WAS BEL IEVED BY THE A.O. THAT THE APPELLANT HAD UNDERSTATED THE INCOME TO THE TUNE OF RS. 11,13,603/-. 2(I). THE SECOND ADDITION WAS MADE BY THE A.O. ON T HE GROUND OF NO BUSINESS LOSS AND UNABSORBED DEPRECIATION WAS ALLOW ED ON THE BASIS OF NO BUSINESS LOSS IN A.Y. 03-04 AND INCOME DISCLOSED UN DER THE HEAD OF INCOME FROM OTHER SOURCES IN FORM OF INTEREST, DIVIDEND, INSURANCE. THUS, THE ADDITION OF RS.6,04,077/- WAS MADE BY THE A.O. THE LD. A.O. PASSED ORDER U/S. 144 OF THE IT ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE APPEAL BY ACCEPTING THE ADDITIONAL EVIDENCE WITHOUT CALLING ANY REMAND REPO RT ON BOTH THE ADDITIONS. THE OBSERVATION OF THE CIT(A) ON GROUND-WISE AS UND ER: 7. I HAVE CAREFULLY CONSIDERED BOTH THE POSITION. I HAVE ALSO GONE THROUGH THE VARIOUS DOCUMENTARY EVIDENCES FURNISHED BY THE AR AS ALSO THE ASSESSMENT ORDER. AFTER VERIFYING THE COP Y OF AUDIT REPORT AS WELL AS RECONCILIATION STATEMENT, I AGREE WITH T HE CONTENTION OF AR THAT THE ASSESSEE HAS OFFERED FULL AMOUNT OF EXPORT INCENTIVES RECEIVED AND DULY SHOWN IN THE RETURN OF INCOME FIL ED BY HIM. HENCE THERE IS NO QUESTION OF ESCAPEMENT OF ANY INCOME. THE A.O. DID NOT EXAMINE THE DOCUMENTS WHICH WERE ALREADY IN THE FIL E OR MISINTERPRETED THE SAME. IN THE LIGHT OF DISCUSSIO N AS ABOVE, THE ADDITION OF THE SUM OF RS.11,13,603/- 10. I HAVE GONE THROUGH THE COPY OF ACCOUNT OF F.Y. 2002-03 AND FOUND THAT THE CONTENTION OF AR IS RIGHT. THE ASSE SSEE FIRM HELD STOCK OF RS.32,91,891/- AT THE YEAR END AND THE EXP ENSES CLAIMED BY THE ASSESSEE FIRM INCLUDED FINANCIAL CHARGES OF RS.5,08,092/- AND ALSO CLAIMED DEPRECIATION ON FIXED ASSETS OF RS.85, 181/- ON AND ITA NO. 1615/AHD/10 A.Y. 04-05 PAGE 4 ABOVE THE SELLING AND ADMINISTRATIVE EXPENSES. FRO M THE ABOVE FACT IT CAN BE ANALYZED THAT THE PLEA TAKEN BY THE AO FO R REJECTING CLAIM OF THE ASSESSEE FOR SET OFF LOSSES AND UNABSORBED D EPRECIATION AGAINST THE INCOME OF SUBSEQUENT YEAR WAS NOT RIGHT . AS THE ASSESSEE FIRM WAS HOLDING STOCK OF GOODS AS WELL AS EXPENSES INCURRED BY THE FIRM IS ALSO RELATED TO BUSINESS AC TIVITY OF THE ASSESSEE AND THERE IS NOT A SINGLE FACT POINTED OUT BY THE AO WHICH CAN BE CONSIDERED AS NON-CONTINUATION OR DIVERSION OF BUSINESS ACTIVITY. THE ASSESSEE HAS THEREFORE RIGHT TO CARR Y FORWARD THE SAME IN THE RETURN OF INCOME. FURTHER, IN THIS CONTEXT THE AR POINTED OUT THE DECISION OF GIVEN BY VARIOUS COURTS. I AGREE W ITH THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF KANAKA FILMS P VT. LTD. V. ITO (1989) 177 ITR 88 (MAD) IN WHICH IT WAS HELD THAT O NCE THE AO DETERMINED THE LOSS FOR A PARTICULAR YEAR AND HOLDS THAT THE ASSESSEE IS ENTITLED TO CARRY FORWARD THE SAME, THEN HE IS N OT COMPETENT TO TAKE A VIEW THAT SUCH LOSS CANNOT SET OFF AGAINST B USINESS INCOME OF ANY OF THE SUBSEQUENT YEARS. IN SUCH CIRCUMSTANCES , THE AO IS DUTY BOUND TO RECTIFY THE ASSESSMENT ALREADY COMPLETED B Y HIM AND ALLOW SUCH SET OFF. AS THE CARRY FORWARD OF BUSINESS LOS S AND UNABSORBED DEPRECIATION IS ALREADY ACCEPTED IN THE PREVIOUS YE AR AND REJECTION OF SET OFF IN THE YEAR UNDER CONSIDERATION IS NOT A S PER THE LAW. THE APPEAL ON THIS GROUND IS ALLOWED. 4. NOW, THE REVENUE IS BEFORE US. LD. SR. D.R. ARG UED THAT LD. CIT(A) HAD NOT JUSTIFIED IN ACCEPTING THE EVIDENCE FURNISHED B Y THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDING WITHOUT CALLING REMA ND REPORT FROM THE A.O. THUS, THE MATTER MAY BE SET ASIDE TO THE A.O. TO AL LOW THE OPPORTUNITY TO HIM. AT THE OUTSET, LD. COUNSEL FOR THE APPELLANT RELIED UPON THE ORDER OF THE CIT(A) AND REQUESTED TO CONFIRM THE ORDER OF THE CIT(A). ITA NO. 1615/AHD/10 A.Y. 04-05 PAGE 5 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. LD. CIT(A) HAD CONSIDERED THE WRITTEN SUBM ISSION OF THE APPELLANT AND RECONCILIATION STATEMENT ON AUDIT REPORT AND HELD T HAT FULL EXPORT INCENTIVE HAD BEEN DISCLOSED BY THE APPELLANT. SIMILARLY, HE HAD ACCEPTED THE CARRY FORWARDED LOSS AND UNABSORBED DEPRECIATION WITHOUT SEEKING REMAND REPORT. THUS, IN THE INTEREST OF JUSTICE, WE FEEL THAT REAS ONABLE OPPORTUNITY IS TO BE GIVEN TO THE A.O. ON ALL THE EVIDENCES SUBMITTED BE FORE THE CIT(A). THUS, WE SET ASIDE THE ORDER OF THE CIT(A) FOR DE NOVO AND C IT(A) IS DIRECTED TO GIVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE A.O. A ND PASS THE ORDER AS PER THE LAW. 6. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED F OR STATISTICAL PURPOSE. THIS ORDER PRONOUNCED IN OPEN COURT ON 08.08.2013 SD/- SD/- ( MUKUL KR. SHRAWAT ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ), ) , 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 8/ 1 ': ) , 12( ;