D.C.I.T, Cir-2, Kolkata, Kolkata V. M/s Machine Tools (India) Ltd., Kolkata

ITA 1721/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1694 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 16-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2013
• Court: TRIBUNAL
• Keywords: Capital asset; Additional evidence; Revenue expenditure

Judgement Text

1 ITA NO. 1721/K/13 M/S. MACHINE TOOLS (I) LTD IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH KOLKATA BEFORE : SHRI P.M JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1721/KOL/2013 A.Y: 2009-10 D.C.I.T, CIR-2, KOLKATA VS. M/S. MACHINE TOOLS (INDIA) LTD PAN: AABCM9740R (APPELLANT) (RESPONDENT) APPEARANCES BY: SHRI SALLONG YADEN, ADDL.CIT, LD. SR.DR SHRI S.K. TULSIYAN. SR. ADVOCATE, LD.AR DATE OF HEARING : 16-03-2017 DATE OF PRONOUNCEMENT : 07-06-2017 O R D E R SHRI S.S. VISWANETHRA RAVI, JM :- THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DT. 01-03-2013 PASSED BY THE CIT-A, I, KOLKATA FOR THE A.Y 2009-10 . 2. THIS APPEAL WAS FILED WITH A DELAY OF ONE DAY A ND WE FIND THAT THE REASONS STATED BY THE LD.DR ARE REASONABLE. THUS, D ELAY OF ONE DAY IS CONDONED. WE PROCEED TO HEAR THE CASE ON MERIT 3. THE REVENUE HAS RAISED TWO GROUNDS OF APPEAL CH ALLENGING THE ACTION OF THE CIT-A IN GIVING RELIEF TO THE ASSESSEE BY CO NSIDERING THE FRESH EVIDENCES FILED BY THE ASSESSEE IS AGAINST THE RULE 46A OF THE I.T RULES, 1962. 2 ITA NO. 1721/K/13 M/S. MACHINE TOOLS (I) LTD 4. GROUND NO. 1 IS RELATING TO DELETION OF ADDITION S MADE BY THE AO ON ACCOUNT OF PERSONAL EXPENSES OF RS.17,500/- AND RS. 15,000/-. 5. THE AO IN THE SCRUTINY PROCEEDING DISALLOWED THE EXPENSES ON ACCOUNT OF PERSONAL CAPACITY A SUM OF RS.17,500/- AND RS.15 ,000/- ON THE GROUND THAT THE SAID EXPENSES ARE NOT ALLOWABLE UNDER THE ACT. THE CIT-A DELETED THE SAID ADDITIONS TAKING INTO CONSIDERATION THE BU SINESS PROFILE OF THE ASSESSEE AND EXPENDITURE CLAIMED AS REVENUE EXPENDI TURE. RELEVANT PORTION OF FINDING OF THE CIT-A IS REPRODUCED HEREIN BELOW: - NEXT GROUND NO. 2 RELATES TO DISALLOWANCE OF EXPE NSES OF RS.17,500/- AND RS.15,000/- UNDER THE HEAD PERSONAL EXPENDITURE. IT IS CONTENDED THAT BY THE ASSESSEE THESE EXPENSES WERE INCURRED ON ACCOUNT OF CONSULTATION F EES AS ASSESSEE WAS DOING THE BUSINESS OF CONSULTANCY SERVICES AND COMMISSION WHICH WERE DULY CREDITED IN SCHEDULE 7 OF THE P & L A/C AND ACCORDINGLY THIS EXPENDITURE WAS CLAIMED AS REV ENUE EXPENDITURE. THEREFORE GROUND NO. 2I IS ALLOWED. 6. THE LD.DR SUBMITS THAT THE CIT-A HAS GIVEN RELIE F TO THE ASSESSEE BY ACCEPTING THE FRESH EVIDENCES. THE CIT-A DID NOT G IVE SUFFICIENT OPPORTUNITY TO THE AO FOR VERIFICATION OF THE SAID DETAILS OF T HE ASSESSEE. THE LD. DR ARGUED THAT THE CIT-A VIOLATED THE RULE 46A OF THE IT RULES 1962 IN ADMITTING THE FRESH EVIDENCE. 7. ON THE OTHER HAND, THE LD.AR SUBMITS THAT THE AS SESSEE DID NOT FILE ANY FRESH EVIDENCE BEFORE THE CIT-A. THE CIT-A EXAMINED THE SCHEDULE 7 OF P & L ACCOUNT AND FOUND THAT THE EXPENDITURE WAS CLAIME D AS REVENUE EXPENDITURE AND DELETED THE ADDITIONS. HE RELIED ON THE ORDER OF THE CIT-A. 8. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION OF THE REVENUE IS THAT THE VIOL ATION OF RULE 46A BY ACCEPTING THE FRESH EVIDENCE BY THE CIT-A. BUT, THE LD.DR DID NOT BRING ON RECORD ANYTHING TO SHOW THAT THE CIT-A HAS ACCEPTED THE FRESH EVIDENCE FROM THE ASSESSEE IN ALLOWING RELIEF. WE FIND THAT THE CIT-A HAS GIVEN RELIEF 3 ITA NO. 1721/K/13 M/S. MACHINE TOOLS (I) LTD TAKING INTO CONSIDERATION THE SUBMISSION OF ASSESS EE THAT THE EXPENSES WERE INCURRED DURING THE COURSE OF BUSINESS OF THE ASSES SEE. THESE EXPENSES WERE REVENUE IN NATURE. THE CIT-A CONSIDERING THE BUSINE SS PROFILE OF THE ASSESSEE I.E CONSULTANCY SERVICES AND COMMISSION AN D BY EXAMINING THE SCHEDULE 7 OF THE P & L ACCOUNT, WHICH WAS ALREADY AVAILABLE BEFORE THE AO ALLOWED THE CLAIM OF ASSESSEE AS REVENUE EXPENDITUR E. WE FIND THAT THERE WAS NO FRESH EVIDENCE BEFORE THE CIT-A AS SUCH THER E WAS NO VIOLATION UNDER RULE 46A OF THE IT RULES. THE ORDER OF THE CIT-A IS JUSTIFIED. ACCORDINGLY, GROUND NO. 1 RAISED BY THE REVENUE IS DISMISSED. 9. GROUND NO. 2 IS RELATING TO DELETION OF ADDITION OF RS.63,90,500/- MADE ON ACCOUNT OF LONG TERM CAPITAL GAIN [ LTCG]. 10. THE AO FOUND THAT THE ASSESSEE SOLD ITS HOUSE P ROPERTY (H.P) OF MUMBAI FOR A CONSIDERATION OF RS.77,00,000/-. THE A O ON INDEX COST DETERMINED THE LTCG AT RS.63,90,500/-. ACCORDING TO THE AO, THE ASSESSEE DID NOT DISCLOSE THE SAME IN ITS RETURN. ACCORDINGL Y, HE ADDED THE SUM OF RS.63,90,500/- TO THE TOTAL INCOME OF THE ASSESSEE BEING LTCG. 11. BEFORE THE CIT-A, THE ASSESSEE CONTENDED THAT B ASING ON AGREEMENT OF SALE THE AO DETERMINED THE SAID LTCG. THE SAID PROP ERTY WAS TENANTED AND LEGAL PROCEEDINGS WERE PENDING AGAINST TENANTS. THE ASSESSEE COULD NOT HANDOVER THE VACANT PORTION OF THE SAID PROPERTY. THE SAID AGREEMENT OF SALE WAS NOT ACTED UPON. THE CIT-A EXAMINING THE AG REEMENT ON SALE DT. 20-06-08 AND DEED OF CANCELLATION DT. 02-07-2011 F OUND THAT THE ASSESSEE REFUNDED THE AMOUNT OF RS. 77 LACS AS PER SAID AGR EEMENT DT. 20-06-08 IN FY 2011-12. THE CIT-A TAKING INTO CONSIDERATION THE SUBMISSIONS OF THE ASSESSEE AND EXAMINING THE SAID AGREEMENT DELETED T HE SAID ADDITION BY STATING AS UNDER:- 4 ITA NO. 1721/K/13 M/S. MACHINE TOOLS (I) LTD NEXT GROUND NO.6 ADDITION OF RS.63,90,500/- AS LO NG TERM CAPITAL GAINS FOR SALE OF PROPERTY SITUATED IN MUMBAI. THE APPELLANT HAD EXEC UTED AN AGREEMENT FOR SALE FOR PROPERTY HAD 75, M.K ROAD, MUMBAI AS PER AGREEMENT DATED 20. 06.2008 WITH M/S. SUCCESS HOME (INDIA) LTD FOR RS. 77.00 LACS AS FULL VALUE OF CON SIDERATION THE SAID PROPERTY WAS TENANTED PROPERTY AND LEGAL PROCEEDINGS AGAINST TENANTS WERE PENDING AGAINST SMALL CAUSES COURT AT MUMBAI AND CONSEQUENTLY VACANT POSSESSION OF THE PR EMISES COULD NOT BE HANDED OVER. THE RELEVANT TRANSACTION WAS SHOWN IN SCHEDULE-3 AND SC HEDULE -8 OF THE BALANCE SHEET AS BUSINESS ASSET IN THE GROSS BLOCK OF ASSETS. THE AGREEMENT D ATED 20.06.2008 COULD NOT BE TRANSFORMED IN SALE DEED BECAUSE OF CANCELLATION AGREEMENT DATE D 02.07.2011 AND ACCORDINGLY RS.77.00 LACS WAS REFUNDED TO M/S. SUCCESS HOME (INDIA) LTD. IN FY 2011-12. ASSESSEE PAID FURTHER A SUM OF RS.5,00,000/- AS DAMAGES TO M/S. SUCCESS HOM E (INDIA) LTD. KEEPING IN VIEW THESE FACTS AND CIRCUMSTANCES NO CAPITAL GAIN AROSE AS T HE POSSESSION WAS NOT HANDED OVER AS PER AGREEMENT DATED 20.06.2008 WHICH WAS CANCELLED ON 0 2.07.2011 AND NO TRANSFER OF CAPITAL ASSET COULD PLACE AND ACCORDINGLY ADDITION OF RS.63 , 90,500/- IS DELETED. 12. THE LD.DR BEFORE US AGITATED THE VIOLATION OF R ULE 46A OF THE IT RULES 1962 BY THE CIT-A IN GIVING RELIEF TO THE ASSESSEE. HE ALSO SUBMITS THAT THE SAID AGREEMENT OF SALE AND DEED OF CANCELLATION WER E NOT BEFORE THE AO AND AS SUCH URGED THAT THE ASSESSEE FILED FRESH EVIDEN CES BEFORE THE CIT-A. BASING ON WHICH, THE CIT-A HAS GIVEN RELIEF TO THE ASSESSEE WITHOUT GIVING AN OPPORTUNITY TO THE REVENUE BY SEEKING THE REMAND REPORT FROM THE AO AND URGED TO ALLOW GROUND NO.2 RAISED BY THE REVENU E. 13. ON THE OTHER HAND, THE LD.AR SUBMITS THAT THE A SSESSEE FILED THE SAID AGREEMENT OF SALE BEFORE THE AO. THE AO EXAMINING T HE SAME DETERMINED THE LONG TERM CAPITAL GAIN AT RS.63,90,500/-. HE SU BMITS THAT THE DEED OF CANCELLATION WAS NOT BEFORE THE AO DURING THE ASSE SSMENT PROCEEDINGS AND URGED TO REMAND THE GROUND NO.2 TO THE FILE OF AO . 14. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L AVAILABLE ON RECORD. WE FIND THAT THE CIT-A EXAMINING THE AGREEMENT ON S ALE AND DEED OF CANCELLATION DT. 20-06-08 AND 02-07-2011 RESPECTIVE LY HAS DELETED THE SAID ADDITION AS MADE BY THE AO. ADMITTEDLY, THE AO DETE RMINED THE LTCG OF THE ASSESSEE BY OBSERVING THAT THE SAME WAS NOT DISCLOS ED BY THE ASSESSEE IN THE RETURN. THEREFORE, IT IS CLEARLY ESTABLISHED TH AT THE AGREEMENT ON SALE WAS BEFORE THE AO, ON WHICH BASIS HE DETERMINED THE SAID LTCG. THEREFORE, THE ARGUMENTS AS ADVANCED BY THE LD.DR THAT THE SAI D AGREEMENT/EVIDENCE 5 ITA NO. 1721/K/13 M/S. MACHINE TOOLS (I) LTD WAS NOT BEFORE THE AO APPEARS TO BE INCORRECT. REGA RDING THE DEED OF CANCELLATION DT. 02-07-2011, BY EXAMINING THE SAME THE CIT-A FOUND THAT THE ASSESSEE RETURNED THE VALUE OF CONSIDERATION OF RS. 77 LACS TO M/S. SUCCESS HOME (INDIA) LTD IN FY 2011-12. WE FIND THA T THE AO PASSED HIS ORDER DT. 13-12-2011 AND DEED OF CANCELLATION DT. 0 2-07-2011 DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND AT THE TIME OF PASSING THE ASSESSMENT ORDER THE SAID DEED OF CANCELLATION WAS NOT ON RECORD FOR AOS CONSIDERATION. THEREFORE, WE AGREE WITH THE ARGUME NT OF THE LD.DR THAT VIOLATION OF RULE 46A OF THE IT RULES 1962 BY THE C IT-A IS VALID IN RESPECT OF ACCEPTING THE ADDITIONAL EVIDENCE WITHOUT GIVING A NY OPPORTUNITY TO AO. IN SUCH CIRCUMSTANCES AND DISCUSSION ABOVE, WE REMAND THE ISSUE TO THE FILE OF AO FOR HIS VERIFICATION. ACCORDINGLY, GROUND NO.2 R AISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 07-06- 2017. SD/- SD/- P.M JAGTAP S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07-06-2017 1. THE APPELLANT/ REVENUE : THE DCIT, CIR - 2, AAYKAR BHAWAN, 7 TH FLOOR, P-7 CHOWRINGHEE SQ., KOL-69. 2 . THE RESPONDENT/ ASSESSEE: M/S. MACHINE TOOLS (INDI A) LTD 56A MIRZA GHALIB STREET, KOL - 16. 3. CIT 4. CIT(A) 5. THE DE PARTMENTAL REPRESENTATIVE 6. GUARD F ILE TRUE COPY BY ORDER SR.PS/H.O.O ** PRADIP SPS ITAT, KOLKA TA COPY OF THE ORDER FORWARDED TO: -