Sivanandha Steels Limited, CHENNAI V. ACIT, Coimbatore

ITA 1697/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0837 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 05-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: R MUGUNTHAN
• Keywords: Depreciation
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NO.1697/MDS/2012 ASSESSMENT YEAR : 2007-08 M/S SIVANANDHA STEELS LTD. 130/3, DESIGNARE COMPLEX, 1 ST FLOOR, DR. NANJAPPA ROAD COIMBATORE 641 018 VS THE ACIT COMPANY CIRCLE I(3) COIMBATORE [PAN AADCS 0678 N] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. MUGUNTHAN, CA RESPONDENT BY : DR. S. MOHARANA, CIT/DR DATE OF HEARING : 31-01-2013 DATE OF PRONOUNCEMENT : 12-02-2013 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE CIT-I, COIMBATORE, DATED 20.3.2011. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF AP PEAL: 1. THE COMMISSIONER OF INCOME TAX -I, COIMBATORE, HAS ERRED IN SETTING ASIDE THE ORDER PASSED U/S 143(3) OF THE I NCOME TAX ACT 1961 BY THE ASSISTANT COMMISSIONER OF INCOME TAX , COMPANY CIRCLE 1(3), COIMBATORE, IN RESPECT OF DEPRECIATION OF RS. 12,83,962/- CLAIMED, BY HIS ORDER U/S 263 OF THE I NCOME TAX ACT 1961. 2. THE COMMISSIONER OF INCOME TAX, OUGHT TO HAVE CO NSIDERED THAT THE ELIGIBILITY OF DEPRECIATION CLAIM WAS DULY CONS IDERED AND ALLOWED BY THE ASSISTANT COMMISSIONER OF INCOME TAX WHILE PASSING THE SCRUTINY ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT 1961. I.T.A.NO. 1697/12 :- 2 -: 3. THE COMMISSIONER OF INCOME TAX FAILED TO CONSIDE R THE SUBMISSIONS MADE BY THE APPELLANT BEFORE SETTING AS IDE THE SAID ASSESSMENT ORDER. 4. IN VIEW OF THE ABOVE AND ANY OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THAT THE ORDER PASSED U/S 263 OF THE INCOME TAX ACT 1961, BY THE COMMISSIONER OF INCOME TAX-I , COIMBATORE, MAY KINDLY BE QUASHED. AT THE OUTSET, IT WAS NOTICED THAT THERE IS A DELAY OF 105 DAYS IN FILING THE APPEAL BY THE ASSESSEE. THE ASSESSEE HAS FILED A CONDONATION PETITION EXPLAINING THE REASONS FOR THE DELAY IN FI LING THE APPEAL. THE CIT/DR HAD NO OBJECTION IN CONDONING THE DELAY IN F ILING THE APPEAL. THEREFORE, THE DELAY OF 105 DAYS IN FILING THE APPE AL BY THE ASSESSEE IS CONDONED AND THE APPEAL IS ADMITTED FOR HEARING. 3. THE A.R OF THE ASSESSEE SUBMITTED THAT THE CIT WAS NOT JUSTIFIED IN SETTING ASIDE THE ORDER U/S 143(3) OF THE INCOME-TAX ACT, 1961 PASSED BY THE ASSESSING OFFICER IN RESPECT OF DEPRECIATION OF ` 12,83,962/- CLAIMED BY THE ASSESSEE AND ALLOWED BY THE ASSESSING OFFICER BY PASSING ORDER U/S 263 OF THE ACT. HE S UBMITTED THAT THE ASSESSING OFFICER HAS DULY CONSIDERED THE ALLOWABIL ITY OF DEPRECIATION CLAIMED WHILE PASSING THE ASSESSMENT ORDER U/S 143 (3) OF THE ACT. HENCE, IT WAS HIS SUBMISSION THAT THE ORDER PASSED U/S 263 OF THE ACT BY THE CIT SHOULD BE QUASHED. 4. ON THE OTHER HAND, THE CIT/DR ARGUED THAT IT WILL B E SEEN FROM THE ASSESSMENT ORDER DATED 4.11.2009 PASSED U /S 143(3) THAT THE ASSESSING OFFICER HAS ACCEPTED THE RETURN OF IN COME FILED BY THE ASSESSEE WITHOUT ANY VERIFICATION AND ENQUIRY. HE ALSO SUBMITTED THAT I.T.A.NO. 1697/12 :- 3 -: THE COUNSEL OF THE ASSESSEE HAS NOT FILED ANY PAPE R BOOK SHOWING DOCUMENTS SUBMITTED BEFORE THE ASSESSING OFFICER ON AN ENQUIRY MADE BY THE ASSESSING OFFICER WITH REGARD TO THE CLAIM O F DEPRECIATION. HE SUBMITTED THAT THE ASSESSEE HAD DISCONTINUED INDEF INITELY THE MANUFACTURING OF STEEL WHICH AMOUNTED TO DISCONTINU ATION OF ITS STEEL MANUFACTURING AND SELLING BUSINESS. IN THE 34 TH ANNUAL REPORT FOR THE YEAR 1998-99, UNDER THE HEAD COMMENCEMENT OF NEW B USINESS AT PAGE 6 IT IS STATED THAT OUT OF THE INVESTMENTS IN 18.79 ACRES OF LAND, 11.25 ACRES WERE CONVERTED INTO STOCK-IN-TRADE AND THEREAFTER THE ASSESSEE STARTED SELLING LAND. THUS, IT WAS A CONS CIOUS DECISION OF THE BOARD OF DIRECTORS OF THE ASSESSEE IN THE YEAR 199 8-99. THUS, IT IS EVIDENT THAT THE ASSESSEE HAD DISCONTINUED ITS STE EL MANUFACTURING BUSINESS WITH EFFECT FROM 31.3.1999 I.E APPLICABLE TO THE ASSESSMENT YEAR 1999-2000 AND ONWARDS. NOW THE ASSESSEE IS A RGUING THAT DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2007- 08 MACHINERY WAS KEPT READY FOR USE. HE SUBMITTED THAT AS THE STEEL MANUFACTURING BUSINESS WAS DISCONTINUED FROM 31.3.1999, THE CLAIM OF DEPRECIATION ON ASSETS PERTAINING TO THE STEEL MANUFACTURING ACT IVITY WAS NOT ALLOWABLE TO THE ASSESSEE. HE FURTHER ARGUED THA T EVEN TO-DAY, DURING THE COURSE OF HEARING BEFORE THE TRIBUNAL, T HE A.R OF THE ASSESSEE WAS NOT STATING WHEN THE ASSESSEE RESTART ED THE STEEL I.T.A.NO. 1697/12 :- 4 -: MANUFACTURING BUSINESS AND HAS NOT SUBMITTED ANY EV IDENCE IN SUPPORT OF THE SAME. THUS, THE CIT WAS FULLY JUSTIFIED IN INVOKING HIS POWERS U/S 263 OF THE ACT AND DIRECTING THE ASSESSING OFFI CER TO DISALLOW THE CLAIM OF DEPRECIATION ON THE WDV OF MACHINERY PERTA INING TO STEEL MANUFACTURING BUSINESS FOR ASSESSMENT YEAR 2007-08. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE ISSUE TO BE DECIDED BEFORE US IS WHETHER THE CIT WAS JUST IFIED IN PASSING ORDER U/S 263 OF THE ACT ON 20.3.2011 AND DIRECTIN G THE ASSESSING OFFICER TO DISALLOW THE CLAIM OF DEPRECIATION OF ` 12,83,962/- ALLOWED IN THE ASSESSMENT MADE U/S 143(3) OF THE ACT ON 4.11. 2009 ON WDV OF THE ASSETS USED IN STEEL MANUFACTURING BUSINESS BY THE ASSESSEE SINCE THE BUSINESS OF MANUFACTURING AND SELLING OF STEEL WAS DISCONTINUED BY THE ASSESSEE FROM FINANCIAL YEAR 1998-99. 6. THE ONLY CONTENTION RAISED BY THE ASSESSEE BEFORE US IS THAT THE CIT WAS NOT JUSTIFIED IN PASSING ORDER U/S 263 OF THE ACT AND DIRECTING THE ASSESSING OFFICER TO DISALLOW THE CLA IM OF DEPRECIATION OF ` 12,83,962/- TO THE ASSESSEE AS THE ASSESSING OFFI CER HAD DULY CONSIDERED THE ALLOWABILITY OF DEPRECIATION CLAIMED BY THE ASSESSEE WHILE PASSING ORDER U/S 143(3) OF THE ACT ON 4.11. 2009. NO MATERIAL WAS BROUGHT ON RECORD BY THE ASSESSEE TO SHOW HOW THE ISSUE OF I.T.A.NO. 1697/12 :- 5 -: ALLOWABILITY OF DEPRECIATION TO THE ASSESSEE ON WD V OF ASSETS USED IN STEEL MANUFACTURING BUSINESS WAS EXAMINED BY THE AS SESSING OFFICER. WHAT WAS THE QUERY OF THE ASSESSING OFFICER AND IN RESPONSE TO THAT WHAT MATERIAL WAS FILED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM OF DEPRECIATION? THEREFORE, WE DO NOT FIND ANY MERIT I N THIS ARGUMENT OF THE ASSESSEE AND HENCE, THE SAME IS DISMISSED. H OWEVER, WE OBSERVE FROM THE ORDER OF THE CIT THAT HE HAD ISSUE D NOTICE U/S 263 OF THE ACT ON 13.6.2011 ON THE GROUND THAT THE PROF IT & LOSS ACCOUNT FOR THE YEAR ENDING ON 31.3.2007 DID NOT SHOW ANY M ANUFACTURING ACTIVITY OF STEEL DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08 AND THAT FORM 3CD REPORT, VIDE CLAUSE-28, S HOWED OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK OF FINISH ED GOODS AND RAW MATERIALS AS NIL, BUT THE ASSESSEE HAS CLAIMED DEP RECIATION OF ` 12,83,962/- ON THE ASSETS PERTAINING TO THE STEEL M ANUFACTURING BUSINESS. THEREFORE, SUCH CLAIM WAS INCORRECT AND WAS DISALLOWABLE. 7. WE FIND FROM PARA 4.3 OF THE ORDER OF THE CIT THAT THE ASSESSEE HAD INDEFINITELY DISCONTINUED THE MANUFACT URING AND SELLING OF STEEL BUSINESS BECAUSE HE FOUND FROM THE 34 TH ANNUAL REPORT FOR THE YEAR 1998-99 OF THE ASSESSEE FILED BEFORE HIM THAT OUT OF INVESTMENTS IN 18.79 ACRES OF LAND, 11.25 ACRES WERE CONVERTED INTO STOCK-IN-TRADE AND THE ASSESSEE STARTED SELLING THE LAND. FROM T HIS, THE CIT CAME TO I.T.A.NO. 1697/12 :- 6 -: THE CONCLUSION THAT THE ASSESSEE WAS NO LONGER IN T HE BUSINESS OF MANUFACTURING AND SELLING OF STEEL. THE CIT HAS BR OUGHT NO MATERIAL ON RECORD AFTER VERIFICATION THAT WITH THE BALANCE LAND OF 7.54 ACRES WHETHER THE ASSESSEE COULD CONTINUE TO DO THE BUSI NESS OF MANUFACTURING OF STEEL OR NOT. HE ALSO DID NOT EXA MINE WHETHER THE EXISTING INFRASTRUCTURE WAS SUFFICIENT FOR THE ASS ESSEE TO CARRY ON ITS BUSINESS OF MANUFACTURING AND SELLING OF STEEL. TH E CONTENTION OF THE ASSESSEE ALL ALONG WAS THAT ITS PLANT AND MACHINERY WAS KEPT READY FOR USE IN THE BUSINESS OF MANUFACTURING AND SELLING OF STEEL. HOWEVER, NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSE E SUCH AS PROFIT & LOSS ACCOUNT WHICH SHOWED THAT THE ASSESSEE HAS INCURRED DAY-TO- DAY EXPENDITURE FOR MAINTAINING THE STAFF AND THE I NFRASTRUCTURE IN THE BUSINESS OF MANUFACTURING AND SELLING OF STEEL AND WHICH EXPENDITURE WAS ALLOWED BY THE ASSESSING OFFICER IN THE ASSESSM ENT OF INCOME FOR THE YEAR UNDER CONSIDERATION. THEREFORE, IN THE AB OVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER REQUIRES FURTHER INVESTIGATION AND VERIFICAT ION BY THE CIT ON THE ABOVE LINES. HENCE, WE SET ASIDE THE ORDER OF THE CIT AND REMAND THE MATTER BACK TO THE FILE OF THE CIT TO PASS A WELL R EASONED AND SPEAKING ORDER AFTER VERIFICATION IN THE LIGHT OF THE DISCUS SION MADE HEREIN ABOVE AS PER LAW. NEEDLESS TO MENTION THAT HE SHALL ALLO W REASONABLE I.T.A.NO. 1697/12 :- 7 -: OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE ADJU DICATING THE ISSUE AFRESH. THUS, THE GROUNDS RAISED BY THE ASSESSEE IN THE PRESENT APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON TUESDAY, THE 12 TH OF FEBRUARY, 2013, AT CHENNAI. SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 12 TH FEBRUARY, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR