DCIT/CIR-5/KOL, Kolkata V. M/s Somany Ceramics Ltd., Kolkata

ITA 1737/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4826 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SITAL CHANDRA DAS
• Assessee Lawyers: P K SANGHAI
• Keywords: Opportunity of being heard
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C, KOLKATA (BEFORE SHRI P. M. JAGTAP, A.M. & SHRI S.S.VISWANET HRA RAVI, J.M.) ITA NO. 1737/KOL/2013 : A SSTT. YEAR : 2009-2010 DCIT, CIRCLE-5 KOLKATA VS M/S. SOMANY CERAMICS LTD. (PAN AAECS 0763K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SITAL CHANDRA DAS, JCIT, SR .DR RESPONDENT BY : SHRI P.K.SANGH AI, FCA DATE OF HEARING : 11.03.2016 DATE OF PRONOUNCEMENT : 27.05.2016 ORDER PER SHRI S.S.VISWANETHRA RAVI, J.M . THIS APPEAL IS FILED BY THE REVENUE HAVING AGGRIEVE D BY THE ORDER DATED 13.12.2012 PASSED BY THE CIT(APPEALS)-VI, KOL KATA IN APPEAL NO.144/CIT(A)-VI/R-5/11-12/KOL FOR THE ASSESSMENT Y EAR 2009-10 FRAMED UNDER SECTION 143(3) OF THE I.T.ACT. 2. CHALLENGING THE ABOVE IMPUGNED ORDER, THE REVENU E RAISED THE FOLLOWING GROUNDS BEFORE THE TRIBUNAL. 1. THAT THE LD. CIT(A) HAS ERRED IN ACCEPTING THE VIEW OF THE ASSESSEE REGARDING PRIOR PERIOD EXPENSES RELATE D TO EARLIER YEARS BEING DEBITED IN THE P/L ACCOUNT, THO UGH IT IS NOT PERMISSIBLE IN MERCANTILE ACCOUNTING SYSTEM. 2. THAT THE LD. CIT(A) HAS ERRED IN TAKING DECISIO N ON THE BASIS OF ADDITION INFORMATION UNDER RULE 46A BY ACC EPTING MATERIALS DURING THE APPELLATE PROCEEDINGS. 2 ITA NO.1737/KOL/2013 S OMANY CERAMICS LTD. ASSESSMENT YEAR: 2009-10 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR WITHDREW ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TI ME OF HEARING OF THE APPEAL. 3. THE REVENUE FILED THIS APPEAL WITH A DELAY OF 80 DAYS AND THE REASONS STATED IN THE AFFIDAVIT THAT THE AO WAS BUS Y WITH HUGE TIME BARRED CASES ETC. THE DR SUBMITTED THAT THE AO GOT ENGAGED IN PREPARATION OF PAPERS IN THIS APPEAL, AS WELL AS, O THER TIME-BARRED APPEALS AND PRAYED TO CONDONE THE DELAY IN THE INTE REST OF JUSTICE. THE A.R. DID NOT RAISE ANY OBJECTION SERIOUSLY. FOR THE REASONS STATED IN THE AFFIDAVIT, WE ARE OF THE OPINION THAT IN THE INTERE ST OF JUSTICE, THE REASONS SUBMITTED BY THE DEPARTMENT ARE REASONABLE, THEREFORE THE DELAY OF 80 DAYS BE CONDONED AND APPEAL OF THE REVENUE IS ADMITTED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY FILED THEIR RETURN OF INCOME ON 24.09.2009 FOR THE YEAR UNDER C ONSIDERATION DECLARING A TOTAL INCOME OF RS.12,05,21,925/- WHICH WAS SELECTED FOR SCRUTINY. DURING SCRUTINY, NOTICES UNDER SECTION 14 3(2) AND 142(1) WERE ISSUED AND IN RESPONSE TO WHICH THE ASSESSEE APPEAR ED FROM TIME TO TIME BEFORE THE AO AND FURNISHED THE REQUIRED DETAILS AN D EXPLANATIONS. DURING THE COURSE OF ASSESSMENT, THE AO FOUND THAT THE ASSESSEE COMPANY HAS DEBITED PRIOR PERIOD EXPENSES OF RS.38, 48,350/- DURING THE RELEVANT FINANCIAL YEAR. THE AO OBSERVED THAT SINCE THE ASSESSEE COMPANY IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTIN G, THE EXPENSES SHOULD HAVE BEEN CHARGED IN THE SAME FINANCIAL YEAR TO WHICH IT PERTAINED. ON QUERY THE ASSESSEE SUBMITTED THAT THE SE LIABILITIES HAVE BEEN GENERATED DURING THE YEAR AND IT WAS NOT KNOWN EARLIER, THE SAME SHOULD BE DISALLOWED. BEING DISSATISFIED WITH THE C ONTENTION OF THE ASSESSEE, THE AO DISALLOWED THE PRIOR PERIOD EXPENS ES OF RS.38,48,350/- 3 ITA NO.1737/KOL/2013 S OMANY CERAMICS LTD. ASSESSMENT YEAR: 2009-10 4. AGGRIEVED BY THE ASSESSMENT ORDER UNDER SECTION 143(3), THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT-A. DURING THE APPELLATE PROCEEDINGS, AFTER EXAMINING THE VOUCHERS FOR ALL E XPENSES, EXCEPTING THE VOUCHERS AT SL. NOS.137,138,152 AND 153 AND AFT ER CONSIDERING THE SUBMISSIONS MADE BY BOTH THE REPRESENTATIVES, THE L D. CIT(A) DISALLOWED ONLY RS.3,71,464/- OUT OF THE TOTAL DISA LLOWANCE MADE BY THE AO AMOUNTING TO RS.38,48,350/-. THUS, THE LD. CIT(A ) ALLOWED RELIEF OF RS.34,76,886/- TO THE ASSESSEE COMPANY. 5. AT THE TIME OF HEARING BEFORE US, THE LD. DR HAS VEHEMENTLY RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE LD. C IT(A) SHOULD NOT HAVE ALLOWED THE RELIEF TO THE ASSESSEE BECAUSE THE VIEW OF THE ASSESSEE REGARDING PRIOR PERIOD EXPENSES RELATED TO EARLIER YEARS BEING DEBITED IN THE P&L ACCOUNT IS NOT PERMISSIBLE IN MERCANTILE AC COUNTING SYSTEM AND THE ASSESSEE HAS NOT SUBMITTED EVERY DETAILS OF PRI OR PERIOD EXPENSES BEFORE THE AO. FURTHER, THE LD. DR SUBMITTED THAT T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED SOME ADDITIONAL INFORMATION DURING THE APPELLATE PROCEEDINGS AND THE LD. CIT(A) GAVE RELIEF TO THE A SSESSEE BY RELYING ON THE SAME WITHOUT GIVING OPPORTUNITY TO THE AO TO EX AMINE THE SAME WHICH IS IN CONTRAVENTION OF RULE 46A OF THE I.T. R ULES. THEREFORE, THE LD. DR PRAYED THAT THE RELIEF GIVEN TO THE ASSESSEE COMPANY SHOULD BE CANCELLED AND THE ORDER OF THE AO BE RESTORED. 5.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CONCEPT OF DISALLOWANCE ON THE MERCANTILE SYSTEM OF ACCOUNTING BY THE A.O. WAS ABSOLUTELY WRONG AS HE MIXED UP THE ACCOUNTING STAN DARD NORMS WITH THAT OF THE CONCEPT OF MERCANTILE SYSTEM AND ACCRUA L UNDER THE TAXATION LAW. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND URGED THAT THE AO HIMSELF HAS OBSERVED IN THE 4 ITA NO.1737/KOL/2013 S OMANY CERAMICS LTD. ASSESSMENT YEAR: 2009-10 ASSESSMENT ORDER THAT THE A.R. OF THE ASSESSEE APPE ARED FROM TIME TO TIME DURING THE ASSESSMENT PROCEEDINGS AND FURNISHE D THE REQUIRED DETAILS AND EXPLANATIONS. THEREFORE, THE LD. COUNSE L FOR THE ASSESSEE PRAYED FOR SUSTAINING THE ORDER OF THE LD. CIT(A) A ND DISMISSING THE APPEAL OF THE REVENUE. 6. HEARD BOTH THE REPRESENTATIVES AND PERUSED THE R ECORD. THE MAIN STAND OF THE LD. DR IS THAT THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED SOME ADDITIONAL INFORMATION BEFORE THE LD . CIT(A), WHICH WERE NOT SUBMITTED BEFORE THE AO. THE LD. CIT(A) WI THOUT AFFORDING ANY OPPORTUNITY OF BEING HEARD ABOUT THE ADDITIONAL INFORMATION BEING FURNISHED BY THE ASSESSEE DURING THE APPELLATE PROC EEDINGS, ALLOWED RELIEF TO THE ASSESSEE, WHICH IS NOT PERMISSIBLE UN DER LAW. THE LD. CIT(A) SHOULD HAVE BEEN CALLED REMAND REPORT FROM T HE AO. WE, THEREFORE, SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) AND REMIT THE MATTER TO THE AO WITH A DIRECTION TO EXAMINE THE AD DITIONAL INFORMATION SUBMITTED BEFORE THE LD. CIT(A) AND DECIDE THE SAME ON MERIT, AFTER GIVING THE ASSESSEE PROPER AND SUFFICIENT OPPORTUNI TY OF BEING HEARD. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27.05.2016. SD/- SD/- ( P.M.JAGTAP) (S.S.VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27.05.2016 TALUKDAR/SR.PS 5 ITA NO.1737/KOL/2013 S OMANY CERAMICS LTD. ASSESSMENT YEAR: 2009-10 COPY OF ORDER FORWARDED TO: 1 M/S. SOMANY CERAMICS LTD., 2, RED CROSS PLACE, KOLK ATA 700 001 2 DCIT, CIRCLE-5, KOLKATA 3 THE CIT(A), 4 5 CIT, 5. D.R. TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA