Bridge & Roof Co. (India) Ltd., Kolkata V. DCIT, Circle - 10, Kolkata, Kolkata

ITA 1772/KOL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4883 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 10-09-2014
• Court: TRIBUNAL
• Assessee Lawyers: P K AGARWALA
• Keywords: Revenue expenditure
• Section: 143(3); 263

Judgement Text

I.T.A. NO. 1772/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1772/KOL/ 2014 ASSESSMENT YEAR: 2010-2011 BRIDGE & ROOF COMPANY (INDIA) LIMITED,............. .................APPELLANT KANKARIA CENTRE, 5 TH FLOOR, 2/1, RUSSEL STREET, KOLKATA-700 071 [PAN: AABCB 3166 E] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ...............RESPONDENT CIRCLE-10, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI P.K. AGARWALA, FCA, FOR THE ASSESSEE SHRI SACHIDANANDA SRIVASTAVA, CIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : FEBRUARY 11, 2016 DATE OF PRONOUNCING THE ORDER : MARCH 18, 2016 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX, KOLKATA-IV, KOL KATA DATED 21.08.2014 PASSED UNDER SECTION 263 OF THE INCOME T AX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF EXECUTION OF CONTRACTS MAINLY IN CIVIL, MECHANICAL AND TRUNKEY JOBS IN INDIA AND ABROAD. IT IS ALSO EN GAGED IN THE BUSINESS OF STRUCTURAL AND EQUIPMENT ERECTION WORKS AND MANUFACTURING OF RAILWAY WAGONS, FREIGHT CONTAINERS , BUNK HOUSE, I.T.A. NO. 1772/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 2 OF 5 BAILEY BRIDGE, ETC. THE RETURN OF INCOME FOR THE YE AR UNDER CONSIDERATION WAS FILED BY IT ON 28.09.2010 DECLARI NG TOTAL INCOME OF RS.66,23,21,180/-. IN THE ASSESSMENT COMPLETED UNDE R SECTION 143(3) VIDE AN ORDER DATED 21.03.2013, THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED BY THE ASSESSING OFFICER AT RS74,11,91,7 10/- AFTER MAKING CERTAIN ADDITIONS. THE RECORDS OF THE SAID ASSESSME NT CAME TO BE EXAMINED BY THE LD. CIT AND ON SUCH EXAMINATION, HE FOUND THAT THE ASSESSEE-COMPANY HAD VALUED THE CLOSING STOCK OF T OOLS & TACKLES ON WEIGHTED AVERAGE COST BASIS AND WRITTEN OFF 20% OF SUCH VALUE EVERY YEAR ON ACCOUNT OF WEAR AND TEAR. ACCORDING TO THE LD. CIT, SINCE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING, THE CLOSING STOCK OF TOOLS AND TACKLES VALUED BY THE ASSESSEE A FTER WRITING OFF 20% OF THE COST WAS NOT IN ACCORDANCE WITH THE ACCE PTED ACCOUNTING PRINCIPLES AND THIS ISSUE WAS NOT TAKEN INTO CONSID ERATION BY THE ASSESSING OFFICER WHILE PASSING THE ORDER UNDER SEC TION 143(3). HE, THEREFORE, ISSUED A SHOW-CAUSE NOTICE UNDER SECTION 263 REQUIRING THE ASSESSEE TO EXPLAIN AS TO WHY THE ORDER PASSED BY T HE ASSESSING OFFICER UNDER SECTION 143(3) SHOULD NOT BE REVISED BY TREATING THE SAME AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INT EREST OF THE REVENUE. IN REPLY, THE FOLLOWING EXPLANATION WAS OFFERED BY THE ASSESSEE :- (I) THE ASSESSEE COMPANY SUBMITTED THAT TOOLS & TACKLES ARE USED DAY FOR CONSTRUCTION AND MANUFACTURING OPERATION CARRIED OUT BY THE COMPANY. TOOLS AND TACKLES ARE NEITHER PART OF RAW MATERIAL NOR PART OF FINISHED GOODS AND AS SUCH IS NOT PART OF C LOSING STOCK. THEREFORE, SECTION 145A IS NOT AT ALL APPLIC ABLE TO TOOLS AND TACKLES. (II) ON A TECHNICAL EVALUATION BY ENGINEERING DEPARTMENT OF THE COMPANY IT WAS FOUND THAT NORMALL Y TOOLS AND TACKLES HAS USEFUL LIFE OF ABOUT 5 YEARS. THEREFORE, IT WAS DECIDED TO PROPORTIONATELY WRITE IT OFF 20% EVERY YEAR ON WEIGHTED AVERAGE COST FORMULA. I.T.A. NO. 1772/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 3 OF 5 THE ABOVE EXPLANATION OFFERED BY THE ASSESSEE WAS N OT FOUND ACCEPTABLE BY THE LD CIT AND HE PROCEEDED TO SET AS IDE THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3 ) BY EXERCISING THE POWERS CONFERRED UPON HIM UNDER SECTION 263 WITH A DIRECTION TO THE ASSESSING OFFICER TO PASS A FRESH ORDER AFTER EXAMI NING THE ISSUE OF VALUATION OF CLOSING STOCK OF TOOLS AND TACKLES. AG GRIEVED BY THE ORDER OF THE LD. CIT PASSED UNDER SECTION 263, THE ASSESS EE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE METHOD OF VALUATION OF CLOSING STOCK OF TOOLS AND TACKLES BY WRITING OFF 20% OF THE WEIGHTED AVERAGE COST WAS CONSISTENTLY FOLLOWED BY THE ASSESSEE- COMPANY AND THE SAME WAS ALL ALONG ACCEPTED BY THE ASSESSING OFFICER IN THE EARLIER YEARS IN THE ASSESSMENTS COMPLETED U NDER SECTION 143(3). HE INVITED OUR ATTENTION TO THE WRITTEN SUB MISSIONS DATED 09.03.2013 FILED BEFORE THE ASSESSING OFFICER DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS (COPY PLACED AT PAGE NO. 13 TO 20 OF THE PAPER BOOK) TO POINT OUT THAT THIS ISSUE WAS EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS . HE CONTENDED THAT THERE WAS THUS NO ERROR IN THE ORDER OF THE AS SESSING OFFICER PASSED UNDER SECTION 143(3) AS ALLEGED BY THE LD. C IT. 4. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE I MPUGNED ORDER OF THE LD. CIT IN SUPPORT OF THE REVENUES CASE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT IN THE WRITTEN SUBMISSIONS DATED 09.03.2013 FILED BY THE A SSESSEE WITH REFERENCE TO THE QUERIES RAISED BY THE ASSESSING OF FICER IN THE COURSE I.T.A. NO. 1772/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 4 OF 5 OF ASSESSMENT PROCEEDINGS, THE FOLLOWING EXPLANATIO N WAS OFFERED BY THE ASSESSEE AS REGARDS THE BASIS OF VALUATION OF T OOLS AND TACKLES:- TOOLS AND TACKLES (A) CLOSING STOCK IS SHOWN ON PAGE 23 SCHEDULE 4.1 (B) CONSUMPTION IS SHOWN ON PAGE 29 SCHEDULE 7.1 (C) ON PAGE 31 NOTE 4.4 STATES- VALUE OF TOOLS AND TACKLES ARE DETERMINED USING WEIGHTAGE AVERAGE COST FORMULA AND 20% OF THE COST ARE WRITTEN OFF EVERY YEAR ON ACCOUNT OF WEAR AND TEAR. (D) THIS PRACTICE IS FOLLOWED FOR A NUMBER OF YEARS AS DEFERRED REVENUE EXPENDITURE ALTHOUGH THIS IS ALLOWABLE IN FULL IN THE YEAR OF PURCHASE AS REVENUE EXPENDITURE. AS IS CLEARLY EVIDENT FROM THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE BASIS OF VALUATION OF TOOLS AND TACKLES WAS EXPLAINED BY THE ASSESSEE IN REPLY TO THE QUERY RAISED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IT WAS ALSO SPECIFICALLY BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER BY THE ASSESSEE THA T THE SAME BASIS WAS CONSISTENTLY FOLLOWED EVEN IN THE EARLIER YEARS, WH ICH HAD ALREADY BEEN ACCEPTED. IT IS THUS CLEAR THAT A QUERY ON THE ISSUE OF VALUATION OF CLOSING STOCK OF TOOLS AND TACKLES WAS SPECIFICALLY RAISED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S AND AFTER HAVING SATISFIED WITH THE EXPLANATION OFFERED BY TH E ASSESSEE, THE VALUATION OF CLOSING STOCK OF TOOLS AND TACKLES AS SHOWN BY THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER. AT THE TIME OF HEARING BEFORE US, THE LD. CIT, D.R. HAS NOT BEEN ABLE TO C ONTROVERT OR REBUT THIS POSITION WHICH IS CLEARLY EVIDENT FROM THE REC ORD. HAVING REGARD TO ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, W E ARE OF THE VIEW THAT THERE WAS NO ERROR IN THE ORDER OF THE ASSESSI NG OFFICER PASSED UNDER SECTION 143(3) AS ALLEGED BY THE LD. CIT CALL ING FOR REVISION UNDER SECTION 263. IN THAT VIEW OF THE MATTER, WE S ET ASIDE THE I.T.A. NO. 1772/KOL./2014 ASSESSMENT YEAR: 2010-2011 PAGE 5 OF 5 IMPUGNED ORDER OF THE LD. CIT PASSED UNDER SECTION 263 AND RESTORE THAT OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3). 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 18, 201 6. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 18 TH DAY OF MARCH, 2016 COPIES TO : (1) BRIDGE & ROOF COMPANY (INDIA) LIMITED, KANKARIA CENTRE, 5 TH FLOOR, 2/1, RUSSEL STREET, KOLKATA-700 071 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-10, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX, KOLKATA-IV, KO LKATA (4) THE DEPARTMENTAL REPRESENTATIVE (5) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.