M/s. The Bhavnagar Vegetable Products Ltd., Bhavnagar V. The Income tax Officer,Ward-1(4), Bhavnagar

ITA 1616/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94432 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 28-08-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 25-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ITA NO AHD
• Keywords: Unexplained cash credit; Depreciation; Unabsorbed depreciation
• Section: 143(3); 68; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV JUDICDIAL MEMBER AND SHRI MANISH BORAD ACCOUNTANT MEMBER ./ ITA NO.1616/AHD/2012 (BY ASSESSEE) ./ ITA NO.1656/AHD/2012 (BY REVENUE) / ASSESSMENT YEAR: 2005-06 THE BHAVNAGAR VEGETABLES PRODUCTS LIMITED, BUNDER ROAD, BHAVNAGAR-364001 PAN :AAACT 5644A VS. THE INCOME TAX OFFICER, WARD 1(4), BHAVNAGAR. / (APPELLANT) / (RESPONDENT) BY APPELLANT : SHRI TUSHAR HEMANI. BY RESPONDENT : SMT. VIBHA BHALLA, CIT (DR) / DATE OF HEARING : 28/08/2015 / DATE OF PRONOUNCEMENT: 11/09/2015 / O R D E R PER RAJPAL YADAV JUDICIAL MEMBER: 1. I.T.A. NO.1616/AHD/2012 IS DIRECTED AT THE INSTA NCE OF THE ASSESSEE AGAINST THE ORDER OF LD. CIT (A) DATED 21- 05-2012 PASSED FOR ASSESSMENT YEAR 2005-06.IT EMERGES OUT FROM AN ASSE SSMENT ORDER PASSED BY THE ASSESSING OFFICER DATED 16-12-2010 UN DER SECTION 143(3) READ WITH SECTION 263 OF THE INCOME TAX ACT. 2. I.T.A. NO.1656/AHD/2012 IS DIRECTED AT THE INSTA NCE OF REVENUE AGAINST THE ORDER OF LD. CIT (A) DATED 25-05-2012 F OR ASSESSMENT YEAR ITA NO.1616/AHD/2012 & ITA 1656/AHD/2012 THE BHAVNAGAR VEGETABLES PRODUCTS LTD. VS. ITO WD.1 (4). FOR AY 2005-06 2 2005-06.THE GRIEVANCE OF THE REVENUE IS THAT LD. CI T (A) HAS ERRED IN DELETING THE PENALTY IMPOSED UNDER SECTION 271(1)(C ) OF THE INCOME TAX ACT,1961. 3. FIRST WE TAKE THE APPEAL OF THE ASSESSEE. THIS C ASE HAS A CHEQUERED HISTORY, THEREFORE BEFORE TAKING NOTE OF THE SPECIFIC GROUND OF APPEAL RAISED BY THE ASSESSEE, WE DEEM IT APPROP RIATE TO MAKE REFERENCE OF BRIEF BACK-GROUND. 4. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 3 1-10-2005 DECLARING TOTAL INCOME OF RS.49,28,830/-. ALONG WIT H THE RETURN, IT FILED AUDITED ACCOUNTS AND AUDITORS REPORT. HOWEVER, AFT ER CLAIMING THE DEPRECIATION AND SETTING OFF OF BROUGHT FORWARD LOS SES OF EARLIER YEARS, THE TAXABLE INCOME WAS SHOWN AT RS. NIL. THE ASSESS ING OFFICER HAS PASSED AN ASSESSMENT ORDER ON 31-12-2007. HE COMPUT ED THE INCOME OF THE ASSESSEE AS UNDER:- SUBJECT TO THE ABOVE REMARKS AND DATA MADE AVAILABLE, THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER:- TOTAL INCOME AS PER STATEMENT OF INCOME RS. 49,12,199/- ADD: UNEXPLAINED CASH CREDIT U/S.68. RS . 5,38,98,903/- ------------------------ ASSESSED INCOME. RS. 5,88,11,102/- LESS: BROUGHT-FORWARD LOSS RS.3,14,74,308/- UNABSORBED DEPRECIATION RS.1,94, 94,410/- RS. 5,09,68,718/- TAXABLE INCOME. R S. 78,42,384/- ROUNDED OFF RS. 78,42,390/- ITA NO.1616/AHD/2012 & ITA 1656/AHD/2012 THE BHAVNAGAR VEGETABLES PRODUCTS LTD. VS. ITO WD.1 (4). FOR AY 2005-06 3 ASSESSED U/S.143(3) OF THE ACT. CALCULATE THE TAX PA YABLE. CHARGE INTEREST U/S. 234B, 234C. ISSUE DEMAND NOTICE AND C HALLAN. ISSUE PENALTY NOTICE U/S. 274 R.W.S. 271(1)(C) FOR CONCEALI NG THE PARTICULARS OF INCOME. ALSO ISSUE NOTICE U/S. 271(1)(B) FOR NON COM PLIANCE OF ANY TERMS OF NOTICE U/S. 142(1). 5. DISSATISFIED WITH THE ADDITION OF RS.5,38,98,903 /-, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 15-10-2009. THE ORDER OF THE CIT (A) WAS CHALLENGED BEFORE THE TRIBUNAL IN I.T.A .25/AHD/2010. THE TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE VID E ORDER DATED 5-9- 2014. THE TRIBUNAL HAS DELETED THE ADDITION OF RS.5 ,38,98,903/-. THE CONCLUSION OF THE TRIBUNAL READS AS UNDER:- IN THE INSTANT CASE, THE BALANCE SHEET OF THE CRE DITOR WHICH IS PLACED AT PAGE NO.21 OF PAPER BOOK WHICH WAS ALSO F ILED BEFORE THE LOWER AUTHORITIES WHICH SHOWS THAT THE CREDITOR HAD CAPIT AL OF RS.1,88,16,039/- AS ON 31-3-2005 AND APART FROM THA T, HE HAD UNSECURED LOAN OF RS.4,26,47,700/-. IN ABSENCE OF A NY MATERIAL BEFORE US TO SHOW THAT IN THE ABOVE FACTS THE CREDITOR COULD NOT HAVE ADVANCED LOAN OF RS.5,38,98,903/- TO THE ASSESSEE, IN OUR CO NSIDERED VIEW THE ADDITION MADE U/S. 68 OF THE ACT CANNOT BE SUSTAINE D. WE, THEREFORE, DELETE THE ADDITION OF RS.5,38,98,903/- AND ALLOW T HE GROUNDS OF APPEAL OF THE ASSESSEE. 6. WHEN THE DISPUTE WAS PENDING BEFORE THE LD. CIT (A), LD. COMMISSIONER, WHILE EXERCISING POWER UNDER SEC. 263 , INVITED THE EXPLANATION OF ASSESSEE AS TO WHY THE SET OFF GRANT ED BY THE ASSESSING OFFICER WITH REGARD TO BUSINESS LOSS SHOULD NOT BE DISALLOWED. THE LD. C.I.T., HAS PASSED THE ORDER U/S. 263 ON 29-07-2009 . THE LD.CIT HAS OBSERVED THAT IN THE CASE OF A COMPANY WHERE PUBLIC ARE SUBSTANTIALLY ITA NO.1616/AHD/2012 & ITA 1656/AHD/2012 THE BHAVNAGAR VEGETABLES PRODUCTS LTD. VS. ITO WD.1 (4). FOR AY 2005-06 4 INTERESTED AND A CHANGE IN THE SHAREHOLDING PATTERN TAKEN PLACE DURING THE RELEVANT PREVIOUS YEAR, THEN AS PER SECTION 79 OF THE ACT, THE BENEFIT OF BROUGHT BUSINESS LOSSES WILL NOT ADMISSIBLE TO T HE ASSESSEE. ACCORDING TO THE LD. COMMISSIONER THERE HAD BEEN A CHANGE IN THE SHAREHOLDING PATTERN IN THE ASSESSEE-COMPANY AND TH EREFORE THE BENEFIT OF BROUGHT FORWARD BUSINESS LOSSES FOR SET OFF AGAINST THE INCOME OF THE CURRENT YEAR CANNOT BE GRANTED. SINCE THE A.O. HAS MADE AN ADDITION OF RS.5,38,98,903/- TO THE INCOME OF TH E ASSESSEE AND SIMULTANEOUSLY HE HAS ALLOWED THE SET OFF OF BROUGH T FORWARD LOSSES OF RS.3,14,74,308/- THIS SET OFF CANNOT BE GRANTED TO THE ASSESSEE IN VIEW OF SECTION 79 OF THE ACT. THIS ORDER OF THE LD. COMMIS SIONER WAS NOT CHALLENGED BY THE ASSESSEE. WHILE GIVING EFFECT TO THE ORDER OF THE LD. COMMISSIONER PASSED U/S. 263, THE LD. A.O. HAS PASS ED THE IMPUGNED ORDER DATED 16-12-2010 U/S. 143(3) R.W.S. 263, HE M ADE THE FOLLOWING COMPUTATION:- SUBJECT TO THE ABOVE REMARKS THE TOTAL INCOME OF TH E ASSESSEE IS COMPUTED AS UNDER:- TOTAL INCOME AS PER ORDER U/S. 143(3) DT. 31-12-2007 RS . 78,42,390/- ADD:- AS DISCUSSED IN PARA-3 ABOVE. RS. 3,1 4,74,308/- ASSESSED TOTAL INCOME. RS. 3,93,16,698/- ASSESSED U/S.143(3) R.W.S.263 OF THE I.T. ACT. RE-CA LCULATE TAX. CHARGE INTEREST AS APPLICABLE. GIVE CREDIT FOR PRE- PAID TAXES, IF ANY AFTER DUE VERIFICATION. ISSUE DEMAND NOTICE/CHALLAN. ENTE R IN THE PENALTY REGISTER AND ISSUE NOTICE U/S. 274 R.W.S. 271(1)(C) F OR FURNISHING INACCURATE PARTICULARS OF INCOME. ITA NO.1616/AHD/2012 & ITA 1656/AHD/2012 THE BHAVNAGAR VEGETABLES PRODUCTS LTD. VS. ITO WD.1 (4). FOR AY 2005-06 5 7. LET US REVERT TO THE GRIEVANCE OF THE ASSESSEE. ACCORDING TO THE ASSESSEE THE LD. REVENUE AUTHORITIES HAVE ERRED IN NOT APPRECIATING THE FACTS AND CIRCUMSTANCES IN RIGHT PERSPECTIVE WHILE GIVING EFFECT TO THE 263 ORDER. WITH THE ASSISTANCE OF LD. REPRESENTATIV E WE HAVE GONE THROUGH THE RECORDS CAREFULLY. WE FIND THAT THE LD. A.O. HAS FAILED IN WORKING OUT THE ASSESSED INCOME OF THE OF THE ASSES SEE AT RS. 3,93,16,698/-.THE ASSESSEE HAS A POSITIVE INCOME DU RING THE CURRENT YEAR OF RS.49,28,830/- AS DISCERNIBLE FROM THE FIRS T COMPUTATION. THE ADDITION OF RS.5.38 CRORE MADE BY THE A.O. STANDS D ELETED BY THE ITAT IN THE ORDER PASSED ON 5-9-2014. AFT ER THE ORDER OF ITAT, IF THE ORDER OF LD. CIT PASSE D U/S. 263 IS GIVEN EFFECT THEN FOLLOWING SCENE WOULD EMERGE. A. TAXABLE INCOME AS PER STATEMENT OF INCOME. RS. 49,12,199/- B UNABSORBED DEPRECIATION. RS.1,94,94,410/- THE A.O. HAS TO GIVE SET OFF OF THE INCOME AGAINST THE BROUGHT FORWARD DEPRECIATION. SECTION 79 OF THE ACT TALKS OF BUSINE SS LOSS AND NOT DEPRECIATION. THEREFORE, THIS LOSS OF 1.94 CRORE IS AVAILABLE TO THE ASSESSEE WHICH IS TO BE SET OFF AGAINST THE INCOME OF THE CURRENT YEAR. IN SUCH SITUATION INCOME OF THE ASSESSEE WILL AGAIN RE MAIN AS LOSS. THE BENEFIT OF BROUGHT FORWARD BUSINESS LOSSES EVEN IF NOT AVAILABLE TO THE ASSESSEE, THEN, ALSO THAT AMOUNT WOULD NOT BECOME P OSITIVE INCOME OF THE ASSESSEE. TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANCES AND THE DEVELOPMENT IN THE SHAPE OF ITATS ORDER DA TED 5-9-2014 SUBSEQUENT TO THE DECISION OF THE CIT (A), WE DEEM IT APPROPRIATE THAT WE REMIT THIS ISSUE TO THE FILE OF A.O. FOR FRESH A DJUDICATION. THE ITA NO.1616/AHD/2012 & ITA 1656/AHD/2012 THE BHAVNAGAR VEGETABLES PRODUCTS LTD. VS. ITO WD.1 (4). FOR AY 2005-06 6 OBSERVATIONS MADE BY US WILL NOT IMPAIR OR INJURE T HE CASE OF A.O. AND WILL NOT CAUSE ANY PREJUDICE TO THE EXPLANATION OF THE ASSESSEE. THE LD. A.O. SHALL GIVE EFFECT TO THE ORDER OF THE TRIBUNAL ALONG WITH THE ORDER OF THE C.I.T. PASSED U/S.263 AFRESH AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW. NOW WE TAKE ITA NO.1656/AHD/2012. 8. THE LD. A.O. HAS INITIATED THE PENALTY PROCEEDIN GS ON THE BASIS OF ADDITION MADE TO THE INCOME OF ASSESSEE U/S. 68. THIS ADDITION OF RS. 5,38,98,903/- STOOD DELETED BY THE TRIBUNAL. THE PE NALTY HAS BEEN COMPUTED ON THE INCOME WORKED OUT BY THE A.O. VIDE ORDER DATED 16- 12-2010 WHICH WAS PASSED IN PURSUANCE OF THE ORDER OF LD. CIT U/S. 263 AS DISCERNIBLE FROM THE COMPUTATION WE HAVE EX TRACTED ABOVE. HOWEVER, WE FIND THAT THIS DETERMINATION OF INCOME BY THE A.O. AT RS.3,93,16,698/- HAS BEEN MADE WRONGLY. THE INCOME OF THE ASSESSEE WOULD BE LOSS EVEN AFTER BUSINESS LOSS IS NOT ALLOW ED TO IT FOR SET OFF. THE SIMPLE REASON IS THAT MAIN ADDITION MADE BY THE A.O. STANDS DELETED BY VIRTUE OF THE TRIBUNALS ORDER, ONLY TAX ABLE INCOME REMAIN WITH THE ASSESSEE IS THE DECLARED INCOME OF RS.49,1 2,199/- WHOSE SET OFF WILL BE GIVEN AGAINST THE BROUGHT FORWARD UNABS ORBED DEPRECIATION OF RS.1,94,94,410/-. THE ULTIMATE RESULT WILL BE N IL INCOME. ONCE THERE IS NIL INCOME THERE IS NO AMOUNT ON WHICH IT CAN BE ALLEGED THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OR CO NCEALED THE PARTICULARS FOR WHICH ALLEGATION AGAINST THE ASSESS EE CAN BE MADE OF EVADING TAXES. IN OTHER WORDS AS PER SUB-CLAUSE (II I) OF SECTION 271(1)(C) THE PENALTY WILL NOT BE CALCULATED. IT HAS BEEN PRO VIDED IN SUB-CLAUSE ITA NO.1616/AHD/2012 & ITA 1656/AHD/2012 THE BHAVNAGAR VEGETABLES PRODUCTS LTD. VS. ITO WD.1 (4). FOR AY 2005-06 7 (III) OF 2712(1)(C) THAT PENALTY WILL BE EQUIVALENT OR THREE TIMES OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE QUA THE ADD ITIONS WHICH HAS BEEN MADE TO THE INCOME OF THE ASSESSEE. ONCE NO A DDITION REMAINS THERE CANNOT BE ANY PENALTY ON THAT AMOUNT. IN THE PRESENT CASE, NEITHER LOSS HAS BEEN REDUCED NOR ANY ADDITION SUST AINED. THE LD. FIRST APPELLATE AUTHORITY THOUGH DELETED THE PENALTY BUT FOR DIFFERENT REASON ACCORDING TO THE CIT (A), ASSESSEE HAS A PLAUSIBLE EXPLANATION FOR THE ADDITION MADE U/S. 68 OF THE ACT. SINCE THAT ADDIT ION STANDS DELETED THERE CANNOT BE ANY PENALTY QUA THAT ADDITION. TAKI NG INTO CONSIDERATION THIS FACT AND CIRCUMSTANCES WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT (A) IN THIS APPEAL. 9. WE SUMMARIZE THE RESULT AS UNDER: (1) ITA NO.1616/AHD/2012 ALLOWED FOR STATISTICAL PURPOS E. (2) ITA NO.1656/AHD/2012 DISMISSED. O RDER PRONOUNCED IN THE COURT ON 11 TH SEPTEMBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) (RA JPAL YADAV) ACCOUNTANT MWEMBER PATKI AHMEDABAD. DATED 11 /09/2015 JUDICIAL MEMBER ITA NO.1616/AHD/2012 & ITA 1656/AHD/2012 THE BHAVNAGAR VEGETABLES PRODUCTS LTD. VS. ITO WD.1 (4). FOR AY 2005-06 8 !' #'$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. !' # / CONCERNED CIT 4. # ( ) / THE CIT(A) 5. &'( ' , ' , *+,!, / DR, ITAT, AHMEDABAD 6. (- . / GUARD FILE. % & / BY ORDER, TRUE COPY '/ () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION- 28-8-2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 7-9-2015 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S. -7-9-2015. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT .. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 8. DATE OF DESPATCH OF THE ORDER