M/s Happy Forgings Ltd., Ludhiana V. DCIT, Ludhiana

ITA 174/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8940 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Depreciation; Revised return
• Section: 72(1); 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.174/CHD/2016 (ASSESSMENT YEAR : 2010-11) M/S HAPPY FORGINGS LTD., VS. THE D.C.I.T., B-XXIX-2254/1, KANGANWAL ROAD, CIRCLE-V, P.O. JUGIANA, LUDHIANA. LUDHIANA. PAN: AAACH4369J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 11.08.2016 DATE OF PRONOUNCEMENT : 21.11.2016 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA DATED 7.12.2015. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THAT ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD.COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA IS AGAINST LAW AND FACTS ON T HE FILE IN AS MUCH AS SHE WAS NOT JUSTIFIED TO UPHOLD A SUM OF RS. 20,000/- OUT OF EXPENSES ON GROUND THAT CERTAIN EXPENSES WERE UN-VOUCHED WITHOUT PIN POINTING ANY SPECIFIC ITEM OF DISALLOWANCE. 2 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)- II, GRAVELY ERRED IN NOT ENTERTAINING THE CLAIM MADE BY THE APPELLANT BY FILING A LETTER BEFORE THE LD ASSESSING OFFICER IN RESPECT OF CLAIM OF RS.2,57,64 3/- PAID TO PSEB AS PEAK LOAD VIOLATION CHARGES AND A SUM OF RS.4,75,06,021/- CLAIMED AS EXCESS DEPRECIATION IN PREVIOUS YEAR WHICH IS NOT INCOME O F THE APPELLANT AS IT WAS MERELY A TRANSFER ENTRY. 3. GROUND NO.1 RAISED BY THE ASSESSEE WAS NOT PRESSED BEFORE US. THE SAME IS, THEREFORE, TREATED AS DISMISSED. 4. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED ON ACCOUNT OF THE ACTION OF THE LD. CIT (APPEALS) IN N OT ENTERTAINING THE FOLLOWING CLAIMS OF THE ASSESSEE M ADE BY WAY OF FILING LETTER BEFORE THE ASSESSING OFFICER : 1. PEAK LOAD VIOLATION CHARGES PAID TO PSEB RS.2,57,643/- 2. EXCESS DEPRECIATION REDUCED FROM THE INCOME OF THE ASSESSEE RS.4,75,06,021/- 5. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE F ILED A REVISED COMPUTATION OF INCOME CLAIMING DEDUCTION ON ACCOUNT OF SUM PAID AS VIOLATION CHARGES OF PEAK LO AD FACILITY TO PSEB AMOUNTING TO RS.2,57,643/- AND A S UM OF RS.4,75,06,921/- REPRESENTING EXCESS DEPRECIATION C LAIMED IN EARLIER YEARS AS PER COMPANIES ACT AND CREDITED TO THE PROFIT & LOSS ACCOUNT BY PASSING TRANSFER ENTRY, S INCE IT WAS OMITTED TO BE REDUCED AT THE TIME OF FILING THE ORIGINAL RETURN . THE ASSESSING OFFICER DID NO CONSIDER THE CLAIM 3 OF THE ASSESSEE. THE MATTER WAS RAISED IN APPEAL B EFORE THE LD. CIT (APPEALS) WHO ON THE ISSUE OF AMOUNT PA ID ON ACCOUNT OF VIOLATION OF PEAK LOAD FACILITY TO PSEB, ENTERTAINED AND CONSIDERED THE CLAIM OF THE ASSESSE E, BUT DISALLOWED IT HOLDING IT TO BE PENAL IN NATURE. AS FOR REDUCTION OF DEPRECIATION WRITTEN BACK, CLAIMED BY THE ASSESSEE, THE LD. CIT (APPEALS) DID NOT ENTERTAIN T HE CLAIM, SINCE IT WAS NOT MADE THROUGH A REVISED RETU RN OF INCOME AND MOREOVER, SINCE NO DETAILED BIFURCATION OF THE DEPRECIATION WAS FURNISHED AS IT HAD BEEN DISALLOWE D MANY TIMES IN EARLIER YEAR. 6. BEFORE US, ON THE ISSUE OF PEAK LOAD CHARGES, I T WAS POINTED OUT BY THE BENCH TO THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE CLAIM OF THE ASSESSEE HAD BEE N ENTERTAINED BY THE LEARNED CIT (APPEALS) AND THERE AFTER DISALLOWED. THEREFORE, THERE COULD BE NO GRIEVANCE OF THE ASSESSEE VIS--VIS NON-ENTERTAINMENT OF CLAIM BY TH E LOWER AUTHORITIES. AS REGARDS DISALLOWANCE OF THE SAME, WE FIND THAT THE CIT (APPEALS) HAD HELD THE SAME TO BE PENA L IN NATURE. ON BEING CONFRONTED BY THE BENCH TO ADDUCE EVIDENCE TO PROVE THAT THE CLAIM WAS NOT PENAL IN N ATURE, THE LEARNED COUNSEL FOR THE ASSESSEE EXPRESSED HIS INABILITY TO DO SO. IN VIEW OF THE SAME, WE HOLD T HAT THERE IS NO INFIRMITY IN THE ORDER OF THE LEARNED CIT (AP PEALS) IN DISALLOWING THE CLAIM OF PEAK LOAD VIOLATION CHARGE S PAID AMOUNTING TO RS.2,57,643/-. 4 7. AS REGARDS THE REMAINING ISSUE RELATING TO REDUCTION OF EXCESS DEPRECIATION CREDITED TO THE PR OFIT AND LOSS ACCOUNT, LD.AR CONTENTED THAT EXCESS DEPRECIAT ION COMPUTED AS PER COMPANIES ACT, WAS INCLUDED IN ITS INCOME BY WAY OF TRANSFER ENTRY WHICH NEEDED TO BE REDUCED WHILE COMPUTING THE TAXABLE INCOME, SINCE I T WAS NOT IN THE NATURE OF INCOME AND WAS JUST AN ADJUSTM ENT ENTRY AND FURTHER THAT THE ASSESSEE WAS ONLY ENTITL ED TO CLAIM DEPRECIATION AS PER THE INCOME TAX ACT, THE E NTRY AS PER THE COMPANIES ACT, THEREFORE WAS IRRELEVANT. L D. AR FURTHER ARGUED THAT THE LD.CIT(A) HAD ERRED IN NOT ENTERTAINING THE CLAIM OF THE ASSESSEE MADE DURING ASSESSMENT PROCEEDINGS DESPITE VARIOUS JUDGEMENTS O F THE TRIBUNAL AND HIGH COURTS TO THIS EFFECT CITED BY TH E ASSESSEE.LD AR REFERRED TO THE FOLLOWING JUDGEMENTS IN SUPPORT OF ITS CONTENTION : 1) DCIT VS. LAB INDIA INSTRUMENTS PVT. LTD. (2005) 93 ITD 120 (PUNE) 2) CIT VS. RAMCO INTERNATIONAL, 322 ITR 306 (P&H) 3) CIT VS. JAI PARABOLIC SPRINGS LTD., 306 ITR 42 (DEL) 8. LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE CIT(A) AND STATED THAT SINCE THE ASSESSEE HA D FAILED TO EXPLAIN HOW IT FAILED TO CLAIM THE SAME AT THE T IME OF FILING OF ORIGINAL RETURN AS WELL AS WHEN THE TIME TO FILE REVISED RETURN WAS AVAILABLE TO IT AND HAD ALSO FAI LED TO EXPLAIN HOW THE FIGURES OF DEPRECIATION HAD BEEN AR RIVED 5 AT THE CLAIM OF THE ASSESSEE HAD BEEN CORRECTLY REJ ECTED BY THE LD.CIT(A). 9. WE HAVE HEARD THE CONTENTION OF BOTH THE PARTIE S AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS ALSO THE DOCUMENTS REFERRED BEFORE US. WE FIND MERIT IN THIS CONTENTION OF THE ASSESSEE THAT CLAIM NOT MADE IN T HE RETURN OF INCOME CAN BE MADE DURING ASSESSMENT PROCEEDINGS. THE RELIANCE PLACED BY THE LD .COUNSE L FOR THE ASSESSEE IN THIS REGARD ON THE DECISION OF THE ITAT PUNE BENCH IN THE CASE OF DCIT VS. LAB INDIA INSTRU MENTS PVT. LTD. (2005) 93 ITD 120 IS APT WHEREIN THE TRIB UNAL HELD THAT AN INCOME NOT TAXABLE CANNOT BE TAXED MER ELY BECAUSE THE ASSESSEE FORGOT TO CLAIM THE EXEMPTION OF DEDUCTION UNDER SOME BELIEF. THE TRIBUNAL HELD THA T UNDER SECTION 4 OF THE INCOME TAX ACT ONLY TRUE AND CORRECT TOTAL INCOME IS TO BE ASSESSED AND IT IS TH E DUTY OF THE TAX COLLECTOR TO COLLECT THE LEGITIMATE TAX DUE NOT A PENNY LESS, NOR A PENNY MORE. THE TRIBUNAL HELD AT PARAS 8 TO 11 OF ITS ORDER AS FOLLOWS: 8. RIVAL SUBMISSIONS OF THE PARTIES HAVE BEEN CONSID ERED CAREFULLY IN THE LIGHT OF CASE LAW REFERRED TO AND TH E MATERIAL PLACED BEFORE US. THE FIRST QUESTION TO BE CONSIDERE D IS WHETHER THE CLAIM OF ASSESSEE UNDER SECTION 80-O CAN BE DENIED MERELY ON THE GROUND THAT SUCH CLAIM WAS RAIS ED BY THE ASSESSEE IN THE REVISED RETURN WHICH WAS FILED A FTER THE PRESCRIBED TIME BUT BEFORE THE COMPLETION OF ASSESSME NT. IN OUR HUMBLE OPINION, THE ANSWER TO SUCH QUESTION IS IN NEGATIVE FOR THE REASONS GIVEN HEREAFTER. IT IS TRUE AND CORRE CT TOTAL INCOME OF EVERY PERSON WHICH IS ASSESSABLE UNDER SECTIO N 4 OF THE ACT. CONSEQUENTLY, THE TAX COLLECTOR IS RATHER DUT Y BOUND TO COLLECT THE LEGITIMATE TAX DUE ON SUCH TOTAL INCOME NEIT HER A PENNY LESS NOR A PENNY MORE. THE DETERMINATION/ASSESS MENT OF TOTAL INCOME WOULD DEPEND ON THE RELEVANT PROVISIO NS OF THE ACT IRRESPECTIVE OF THE NATURE OF RETURN FILED BY A NY PERSON. AN INCOME WHICH IS NOT TAXABLE CANNOT BE TAXED MERELY B ECAUSE 6 THE ASSESSEE FORGOT TO CLAIM THE EXEMPTION/DEDUCTION UNDER COME MISTAKEN BELIEF. FOR EXAMPLE, ASSESSEE'S PROFIT A ND LOSS ACCOUNT MAY INCLUDE AGRICULTURAL INCOME EXEMPT UNDER S ECTION 10(1) OR SHARE OF PROFIT FROM REGISTERED FIRM EXEMPT UNDER SECTION 10(2 A) OR DIVIDEND INCOME EXEMPT UNDER SECT ION 10(33) OF THE ACT, BUT THE ASSESSEE MAY FORGOT TO CLA IM SUCH EXEMPTION IN THE RETURN FILED BY HIM. SUCH INADVERTEN T MISTAKE CANNOT BE EXPLOITED BY TAX AUTHORITIES FOR REJECTING T HE CLAIM OF ASSESSEE FOR EXEMPTION/DEDUCTION EVEN THOUGH SUCH C LAIM HAS BEEN MADE BY ASSESSEE IN THE COURSE OF ASSESSME NT PROCEEDINGS. RATHER, IT IS THE DUTY OF THE AO TO ALLOW SUCH DEDUCTION OR EXEMPTION TO WHICH ASSESSEE IS ENTITLED T O ON THE BASIS OF MATERIAL PLACED ON RECORD. NO DOUBT, THE CLAIM OF EXEMPTION/DEDUCTION CANNOT BE THUS; UPON THE ASSESS EE BUT, AT LEAST, IT IS THE DUTY OF AO TO APPRISE OF THE RELEV ANT PROVISIONS UNDER WHICH ASSESSEE IS ENTITLED TO EXEMPTION/DEDUCTIONS. THEREFORE, IN OUR OPINION, ASSES SEE IS ENTITLED TO CLAIM DEDUCTION IF SUCH CLAIM IS MADE BY ASSE SSEE BEFORE THE COMPLETION OF ASSESSMENT PROCEEDINGS. 9. THE ABOVE VIEW OF OURS IS ALSO FORTIFIED BY THE JU DGMENT OF SUPREME COURT IN THE CASE OF ANCHOR PRESSINGS P. LTD ., 161 ITR 159 WHEREIN IT HAS BEEN HELD THAT IF ON THE BASIS OF MATERIAL PLACED ON THE RECORD, THE ASSESSEE IS ENTITLED TO CLAIM ANY DEDUCTION BUT FORGET TO MAKE HIS CLAIM IN THE RE TURN OR IN THE COURSE OF ASSESSMENT PROCEEDINGS THEN ASSESSEE IS ENTITLED TO MAKE SUCH CLAIM BY MOVING APPLICATION UNDER SECTION 154 FOR RECTIFICATION SINCE NON-GRANTING OF DEDUCTION/EXEMPTION WOULD AMOUNT TO MISTAKE APPARENT FROM RECORD. THE RATIO OF THIS JUDGMENT IS BASED ON THE P RINCIPLE THAT AO IS DUTY BOUND TO GIANT THE EXEMPTION/DEDUCTI ON EVEN WHERE ASSESSEE FAILED TO CLAIM THE SAME. THE RELEVANT OBSERVATIONS OF THEN LORDSHIPS ARE EXTRACTED BELOW: 'AN OBLIGATION IS IMPOSED ON THE INCOME-TAX OFFICER BY SECTION 84 OF THE INCOME-TAX ACT, 1961, TO GRANT REL IEF THERE UNDER AND THE RELIEF CANNOT BE REFUSED MERELY BECAUSE THE ASSESSEE HAD OMITTED TO CLAIM THE RELIEF, BUT THE MERE EXISTENCE OF SUCH AN OBLIGATION ON THE INCOME TAX OFFICER IS NOT SUFFICIENT. PRECISE FACTUA L MATERIAL AND CLEAR DATA MUST BE CONTAINED IN THE RECOR D SUFFICIENT TO ENABLE THE INCOME- TAX OFFICER TO CONS IDER WHETHER THE RELIEF SHOULD BE GRANTED UNDER SECTION 8 4. IN THE ABSENCE OF SUCH MATERIAL, NO FAULT CAN BE FOUN D WITH THE INCOME-TAX OFFICE FOR POT MAKING AN ORDER UNDER SECTION 84 FAVOURING THE ASSESSEE. 10. OUR VIEW IS FURTHER FORTIFIED BY THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CORPORATION, 229 ITR 383 WHEREIN IT HAS BEEN HELD THAT ENTIRE ASSESSMENT PROCEEDINGS ARE OPEN BEFORE THE TRIBUNAL, AND THEREFORE, ASSESSEE IS ENTITLED TO RAISE ADDITIONAL GROU ND OF APPEAL TO CLAIM ANY DEDUCTION/EXEMPTION PROVIDED NO INVESTIGATION INTO FACTS IS REQUIRED AT APPELLATE ST AGE. IT WAS FURTHER HELD THAT CLAIM OF ASSESSEE CANNOT BE REJECTE D MERELY ON THE GROUND THAT ASSESSEE HIMSELF HAD OFFERED THE RECEIPTS 7 TO TAX IN THE RETURN FILED BY HIM. IF ANY INCOME IS NO T TAXABLE UNDER THE ACT, THE ASSESSEE IS ENTITLED TO CLAIM THE S AME BY RAISING THE ADDITIONAL GROUND OF APPEAL BEFORE THE AP PELLATE AUTHORITIES. IF THE CLAIM CAN BE RAISED BEFORE THE APP ELLATE AUTHORITIES FOR THE FIRST TIME THEN, IN OUR OPINION, T HERE IS NO QUESTION OF REJECTING SUCH CLAIM IF MADE BEFORE THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS. 11.THE QUESTION BEFORE US CAN ALSO BE CONSIDERED (SIC )OM ANOTHER ANGLE. THE PROVISIONS OF SECTION 139 ARE PROC EDURAL PROVISIONS FOR MAKING THE ASSESSMENT (R. DALMIA, 236 IT R 480. THEREFORE, SUCH PROVISIONS CANNOT AFFECT THE RI GHTS AND LIABILITIES OF THE ASSESSEE UNLESS SPECIFIC PROVISION S (SIC) MADE TO THAT EFFECT. REFERENCE CAN BE MADE TO THE PROVISI ONS OF SECTION (SIC) WHICH DISENTITLES THE ASSESSEE TO CLAIM T HE CARRY FORWARD/SET OFF OF LOSSES UNDER SECTIONS 72(1) , 73(2), 74( 1), 74(3) AND SECTION 74A(3) WHERE RETURN TILED BY ASSESSE E IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 139(3). T HIS PROVISION SUPPORTS THE VIEW TAKEN BY US. HAD THE LEGI SLATURE INTENDED TO DISENTITLE THE ASSESSEE TO MAKE ANY CLAIM OF DEDUCTION AFTER THE EXPIRY OF PERIOD SPECIFIED UNDE R SECTION 139(5), IT COULD DO SO BY MAKING SPECIFIC PROVISIONS I N THIS REGARD. THEREFORE, IN THE ABSENCE OF SUCH PROVISIONS THE ASSESSEE IS ENTITLED TO MAKE ANY CLAIM OF DEDUCTION/EXEMPTION IN THE COURSE OF ASSESSMENT PROCEEDINGS. 10. EVEN OTHERWISE, THE HON'BLE PUNJAB & HA RYANA HIGH COURT, IN THE CASE OF CIT VS. RAMCO INTERNATIO NAL (SUPRA) HAS HELD THAT THE CLAIM NOT MADE IN THE RET URN OF INCOME CAN BE MADE DURING THE APPELLATE PROCEEDINGS . IN VIEW OF THE SAME, WE HOLD THAT THE CLAIM OF THE ASS ESSEE BE ENTERTAINED. HAVING ENTERTAINED THE CLAIM WE F IND THAT THE LD. COUNSEL FOR THE ASSESSEE HAS SHOWN US THE INCLUSION OF THE IMPUGNED SUM IN THE PROFIT AND LOS S ACCOUNT AND HAS FURTHER TRIED TO DEMONSTRATE THROUG H ITS COMPUTATION OF INCOME THAT THE SAME WAS NOT REDUCED . BUT WE FIND THAT THE FACTS DO NOT APPEAR TO BE EVID ENT AND CLEAR. WE, THEREFORE CONSIDER IT FIT TO RESTORE TH E ISSUE TO THE FILE OF THE LD. CIT (APPEALS) TO ADJUDICATE THE ISSUE IN ACCORDANCE WITH LAW. WE MAY ADD THAT THE ASSESSEE BE 8 GRANTED DUE OPPORTUNITY OF HEARING AND ALSO BE ALLO WED TO ADDUCE ALL EVIDENCES IN SUPPORT OF ITS CONTENTIONS. THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST NOVEMBER, 2016 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH