ACIT, New Delhi V. M/s. Hindustan Prefab Ltd., New Delhi

ITA 1645/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65758 (ITAT-DELHI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH SENIOR
• Assessee Lawyers: K P GANGULI
• Keywords: Depreciation
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) SHRI I.C. SUDHIR, JUDICIAL MEMBER AND BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.1645/DEL./2012 (ASSESSMENT YEAR : 2006-07) ACIT, CIRCLE 12 (1), VS. M/S. HINDUSTAN PREFAB LT D., NEW DELHI. JANGPURA, NEW DELHI - 110 014. (PAN : AAACH0155L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.P. GANGULI, ADVOCATE REVENUE BY : SHRI SATPAL SINGH, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF CIT (APPEALS)-XV, NEW DELHI DATED 17.01.2012 FOR THE AS SESSMENT YEAR 2006-07. THE GROUNDS OF APPEAL READ AS UNDER :- 1. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E DISALLOWANCE OF RS.8,77,300/- MADE BY AO ON ACCOUNT OF PRIOR PERIOD EXPENSES. 2. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E DISALLOWANCE OF RS.10,292/- MADE BY AO ON ACCOUNT O F DEPRECIATION ON COMPUTER PERIPHERALS. ITA NO.1645/DEL./2012 2 3. WHETHER LD. CIT(A) WAS CORRECT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW IN DELETING TH E ADDITION OF RS.20,32,735/- MADE BY AO ON ACCOUNT CESSATION OF L IABILITY. 4. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HE ARING. 2. IN THE GROUND NO.1, THE ISSUE INVOLVED IS DELETI NG THE ADDITION OF RS.8,77,300/- MADE BY ASSESSING OFFICER ON ACCOUNT OF PRIOR PERIOD EXPENSES. 3. THE ISSUE HAS BEEN DEALT BY THE CIT (A) IN PARAS 5 & 6 OF HIS ORDER WHICH READ AS UNDER :- 5. WITH REGARD TO GROUND NO.2 RELATING TO THE ADD ITION MADE BY THE AO ON ACCOUNT OF EXPENSES RELATING TO E ARLIER YEAR THE APPELLANT SUBMITTED AS UNDER: .IN THIS RESPECT IT MAY BE STATED THAT DURING TH IS YEAR THE APPELLANT COMPANY HAS SHOWN AN NET INCOME OF RS.3,15,355 IN RESPECT OF 'PRIOR PERIOD & THEIR ADJUSTMENT' IN ITS PROFIT & LOSS ACCOUNT IN THIS YE AR (PLEASE REFER TO PAGE NO. 12 OF THE PAPER BOOK). TH E DETAILS OF THE 'PRIOR PERIOD EXPENSES' IS GIVEN IN SCHEDULE - 16 FORMING PART OF THE AUDITED ACCOUNT ( FOR SCHEDULE 16 PLEASE REFER TO PAGE NO. 24 OF THE PAPE R BOOK). AS PER SCHEDULE 16 THE COMPANY HAS DEBITED I N ALL RS.2,68,372 ON ACCOUNT OF DEBIT RELATING TO PRE VIOUS YEAR I.E RS.2,23,740 TOWARDS 'TURNOVER TAX EXPENSES '; RS.93,731 TOWARDS 'TRAVELLING EXPENSES'; RS.35,259 IN RESPECT OF EXPENSES THROUGH SUB-CONTRACTOR/OUTSIDE AGENCY. THE APPELLANT ITSELF DISALLOWED THE WHOLE O F THE DEBITS RELATING TO EARLIER YEARS IN ITS COMPUTATION OF INCOME FOR THIS YEAR (FOR COMPUTATION OF INCOME PLE ASE REFER TO PAGE NO.1 & 2 OF THE PAPER BOOK). THAT THE APPELLANT HAS ALREADY INCLUDED WHOLE OF THE CREDITS RELATING TO EARLIER YEARS AS ITS INCOME IN ITS COMP UTATION OF INCOME FOR THIS YEAR, AS THE APPELLANT HAS NOT D EDUCTED ANY AMOUNT FROM 'PRIOR PERIOD INCOME' AS DECLARED I N ITA NO.1645/DEL./2012 3 SCHEDULE 16 FORMING PART OF PROFIT & LOSS ACCOUNT O F THIS YEAR. MOREOVER FROM PROFIT & LOSS ACCOUNT AND SCHEDULE 16 IT CAN NOT BE ASCERTAINED FROM WHERE THE LEARNED DC IT HAS TAKEN AN AMOUNT OF RS.8,77,300 TOWARDS 'EXPENSE S RELATING TO PREVIOUS YEAR' IN HIS ASSESSMENT ORDER. IT MAY FURTHER BE STATED THAT DURING THE COURSE OF ASSESSMENT ONLY THREE QUESTIONNAIRES ALONG WITH NOT ICE UNDER SECTION 142(1) DATED 28.04.2008/29.09.2008 AN D 03.09.2008 WERE ISSUED AND IN THESE NOTICES NO QUER Y REGARDING PRIOR PERIOD EXPENSES WERE EVER RAISED DU RING THE ASSESSMENT PROCEEDINGS. (FOR COPY OF NOTICES PL EASE REFER TO PAGE NO. 36 TO PAGE NO. 42 OF THE PAPER BO OK). SINCE THE APPELLANT ITSELF HAS ADDED BACK WHOLE OF THE 'PRIOR PERIOD EXPENSES/ VIZ. RS.2,68,372 IN ITS COMPUTATION OF INCOME FOR THIS YEAR/HENCE THE DISALLOWANCE OF RS.8,77,300 MADE BY THE LEARNED DCI T IN RESPECT OF EXPENSES RELATING TO PREVIOUS YEAR IS UNCALLED FOR AND AGAINST FACT OF THE CASE.------- FINDINGS 6. SINCE THE APPELLANT SUBMITTED THAT THEY HAVE ADD ED THE WHOLE AMOUNT OF RS.2,68,372 STANDING AS 'PRIOR PERI OD EXPENSES' AND THEY WERE NOT ABLE TO FIND OUT FROM W HERE AO ADDED THE FIGURE OF RS.8,77,300 AS 'PRIOR PERIOD EX PENSES' ACCORDINGLY, THE COMMENTS FROM THE AO WERE SOUGHT I N THE MATTER BY SENDING A LETTER DATED 20.04.2010. AS THE COMMENTS WERE NOT FORTHCOMING FROM THE AO, A REMINDER WAS AG AINST ISSUED ON 20.06.2011. WHEN THE REPORT STILL DIDN'T CAME FROM THE AO, A FINAL REMINDER WAS ISSUED TO THE AO ON 09 .11.2011 CLEARLY STATING THAT 'MORE THAN 1 AND 1/2 YEAR HAVE ELAPSED AND IF BY 21.11.2011, THE COMMENTS FROM YOU WERE NOT RE CEIVED THE ISSUES WILL BE DECIDED ON MERITS. BUT IT IS REGRETTED THAT TILL 21.11.2011, NO REPORT FROM THE AD CAME, HENCE I AM DECIDING THIS GROUND ON THE BASIS OF EVIDENCES AVAILABLE ON RECORD. ITA NO.1645/DEL./2012 4 6.1 FROM THE PERUSAL OF SCHEDULE 16 OF THE APPELLA NT'S BALANCE SHEET, PLACED DURING THE APPELLANT PROCEEDI NG IT IS SEEN THAT 'PRIOR PERIOD EXPENSES' ARE ONLY TO THE EXTENT OF RS.2,68,372 FOR THE YEAR UNDER CONSIDERATION AND TH E SAME HAVE BEEN DULY REFLECTED AND ADDED IN THE COMPUTATI ON SHEET. HENCE IN THE CIRCUMSTANCES WHERE NO EVIDENCE IS THE RE, FROM WHERE AO HAS GOT THE FIGURE OF RS.8,77,300 AND ALSO IN VIEW OF THE FACT THAT AO HAS NOT OFFERED HIS COMMENTS AFTER WAITING FOR MORE THAN 1 AND YEARS, HENCE ADDITION MADE BY THE AO IS HELD TO BE WRONG AND IT DESERVES TO BE DELETED. 4. AFTER HEARING BOTH THE SIDES ON THE ISSUE, WE FI ND THAT THE CIT (A) HAS CORRECTLY APPRECIATED THE FACTS RECORDED IN SCHEDUL E 16 OF THE ASSESSEE BALANCE SHEET WHERE THE TOTAL PRIOR PERIOD EXPENSES WERE OF RS.2,68,372/- ONLY. THE LD. DR HAS FAILED TO PINPOINT ANY DISCRE PANCY ON THESE FACTS. THE CIT (A) HAS CORRECTLY RECORDED THAT THE AMOUNT OF A DDITION MADE BY ASSESSING OFFICER IS NOT COMING OUT OF THE RECORDS OF THE ASSESSEE. IN VIEW OF THESE FACTS, THIS GROUND OF REVENUES APPEAL STANDS DISMISSED. 5. IN THE GROUND NO.2, THE ISSUE INVOLVED IS REGARD ING THE DELETION OF DISALLOWANCE OF RS.10,292/- MADE BY ASSESSING OFFIC ER ON ACCOUNT OF DEPRECIATION ON COMPUTER PERIPHERALS. 6. THE CIT (A) HAS DECIDED THIS ISSUE IN PARAS 7 & 8 OF HIS ORDER AS UNDER:- 7. WITH REGARD TO GROUND NO.3 RELATING TO NOT ALL OWING THE DEPRECIATION @ 60% , ON COMPUTER PERIPHERALS THE AP PELLANT SUBMITTED AS UNDER -: '------ THAT THE APPELLANT COMPANY HAS CLAIMED DEPR ECIATION @ 60% IN RESPECT OF COMPUTER PERIPHERALS SUCH AS PRIN TER, UPS ETC. BUT LEARNED DCIT HAS ALLOWED THE DEPRECIATION THEREON @ ITA NO.1645/DEL./2012 5 15% INSTEAD OF 60% AS CLAIMED ON THE GROUND THAT CO MPUTER PERIPHERALS ARE NOT IN THE NATURE OF COMPUTER DEVIC ES AND THUS MADE AN ADDITION OF RS.10,992 ON THIS ACCOUNT. FOR THIS THE RELIANCE IS PLACED ON THE FOLLOWING JU DGMENT: (A) NEW DELHI ITAT JUDGMENT IN ITA NO.2851 & 3680/DELHI/2007 DATED 27.02.2009 IN THE CASE OF CONTAINER CORPORATION OF INDIA LTD. VS ASSISTANT CI T. (B) ITAT KOLKATA BENCH -B JUDGMENT IN THE CASE OF INCOME TAX OFFICER VS. SAMIRAN MAJUMDAR REPORTED AS [2006) 98 ITD 119 (KOL). THEREFORE, THE PRINTER AND SCANNE R WERE INTEGRAL PART OF THE COMPUTER SYSTEM AND WERE TO BE TREATED AS COMPUTER FOR THE PURPOSES OF ALLOWING HI GHER RATE OF DEPRECIATION I.E 60% AND ACCORDINGLY NO INTERFERENCE WAS REQUIRED IN THE ORDER PASSED BY TH E COMMISSIONER (APPEALS) ON THAT ACCOUNT------ FINDINGS 8. I HAVE GONE THROUGH THE ABOVE SUBMISSIONS OF THE APPELLANT AND I AGREE THAT COMPUTER PERIPHERAL ARE PART AND PARCEL OF THE COMPUTER AND DEPRECIATION @ 60% IS TO ALLOWED KEEPING IN VIEW THE VARIOUS JUDICIAL PRONOUNCEMENT ON THIS ISSUE. ACCORDINGLY, AO'S ACTION IS WRONG AND HE IS DIRECTED TO ALLOW DEPRECIATION @60%. 7. AFTER HEARING BOTH THE SIDES, WE FIND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF ITAT INCLUD ING THE DECISION OF ITAT, NEW DELHI IN ITA NO.2851 & 3680/DELHI/2007 DATED 27 .02.2009 IN THE CASE OF CONTAINER CORPORATION OF INDIA VS. ACIT. IN VIE W OF THESE FACTS, WE FIND NO FAULT IN THE ORDER OF CIT (A) AND WE DISMISS THI S GROUND OF REVENUES APPEAL ALSO. ITA NO.1645/DEL./2012 6 8. IN THE GROUND NO.3, THE ISSUE INVOLVED IS DELETI NG THE ADDITION OF RS.20,32,735/- MADE ON ACCOUNT OF CESSATION OF LIAB ILITY. THIS ISSUE HAS BEEN DEALT BY THE CIT (A) IN PARAS 9 & 10. 9. AFTER HEARING BOTH THE SIDES, WE HOLD THAT THIS IS A LOSS MAKING PUBLIC SECTOR UNDERTAKING WHICH IS SUBJECT TO AUDIT OF CAG . THIS AMOUNT PERTAINS TO FOUR PARTIES. IN THE CASE OF H.P. BISWAS & COMPANY , THE AMOUNT WAS DUE ON ACCOUNT OF WORKING AS SUB-CONTRACTOR OF THE COMPANY . THIS AMOUNT OF RS.10,92,891/- WAS PAYABLE TO THEM AS ON 31.03.2006 . THE ARBITRATION PROCEEDINGS WERE GOING ON REGARDING THE RECOVERY OF AMOUNT FROM M/S. BCCL, DHANBAD. THUS, THE PAYMENT TO THE SUB-CONTRA CTOR WHO PERFORMED THE JOB CONNECTED TO BCCL, DHANBAD, CAN BE PAID ONLY AF TER THE FINAL AWARD FORM THE ARBITRATOR. THEREFORE, IN THIS CASE, THERE IS NO CESSATION OF LIABILITY. SIMILARLY, IN THE CASE OF MADAN & CO WHO WAS THE SU PPLIER OF WIRE TO THE ASSESSEE, THE AMOUNT OF RS.2,68,204/- WAS PAYABLE A S ON 31.03.2006. THE ASSESSEE PAID RS.50,000/- ON 26.07.2006. THIS FACT SHOWS THAT THE AMOUNT WAS STILL RECOVERABLE AND THERE WAS NO CESSATION OF LIABILITY. IN THE CASE OF M/. RAJINDER SINGH & CO. WHO WAS EMPLOYED AS TRANSP ORTER, THE AMOUNT WAS STILL PAYABLE. THIS TRANSPORTER WAS EMPLOYED BY TH E ASSESSEE TO TRANSPORT RAILWAYS SLEEPERS AND POLLS FOR NORTHERN RAILWAYS A ND OTHER STATE ELECTRICITY BOARDS. THE AMOUNT WAS STILL TO BE RECOVERABLE FRO M THESE PERSONS. THE DUES OF THE TRANSPORTER COULD NOT BE CLEARED. THEREFORE , IN OUR CONSIDERED VIEW, IN ITA NO.1645/DEL./2012 7 THE CASE OF M/S. RAJINDER SINGH & CO. ALSO, THERE W AS NO CESSATION OF LIABILITY. M/S. RATLAM WIRES PVT. LTD. WAS ALSO SUPPLIER OF WI RE TO THE ASSESSEE. IN THIS CASE ALSO, THE ASSESSEE WAS STILL TO RECOVER FROM T HE BUYERS. THEREFORE, DUES COULD NOT BE CLEARED. AS STATED ABOVE, THE ASSESSE E WAS A GOVERNMENT UNDERTAKING WHICH WAS CONSISTENTLY MAKING LOSS AND THERE WAS DELAY IN PAYMENTS. KEEPING THESE FACTS IN VIEW AND TOTALITY OF THE CIRCUMSTANCES, WE FIND NO FAULT IN THE ORDER OF THE CIT (A). THIS GR OUND OF REVENUES APPEAL IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 9 TH DAY OF NOVEMBER, 2012. SD/- SD/- (I.C. SUDHIR) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 9 TH DAY OF NOVEMBER, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.