Appeal details
Counselvise Citation
[2011] 140 COUNSELVISE.COM (IT) 54705 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 2 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-11-2011
Appeal Filed By
Department
Order Result
Allowed
Bench Allotted
B
Next Hearing Date
13-07-2011
Assessment Year
2004-2005
Appeal Filed On
16-09-2010
Judgement Text
, , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA ( ) . . , , , , , , ) [BEFORE SRI S.V. MEHROTRA, A.M. & SRI MAHAVIR SING H, J.M.] ' ' ' ' / I.T.A NO. 1790/KOL/2010 #$ %& / ASSESSMENT YEAR : 2004-2005 INCOME TAX OFFICER, WARD-2(3), KOLKATA -VS.- M/ S. L.M.J. CONSTRUCTION PVT. LTD., KOLKATA (PAN : AAACL 4494 Q) ( '( /APPELLANT ) ( )*'( / RESPONDENT ) & ' ' ' ' / I.T.A NO. 1791/KOL/2010 #$ %& / ASSESSMENT YEAR : 2007-2008 DEPUTY COMMISSIONER OF INCOME TAX, -VS.- M/S. L .M.J. CONSTRUCTION PVT. LTD., KOLKATA KOLKATA (PAN : AAACL 4494 Q) ( '( /APPELLANT ) ( )*'( / RESPONDENT ) FOR THE ASSESSEE : S/SHRI S. KHEMKA AND M. BAJORI A, A.R. FOR THE DEPARTMENT : SHRI S.K. MALAKAR, D.R. + / ORDER PER SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER/ . . , :- WE FIRST TAKE UP THE APPEAL BEING ITA NO. 1790/KOL./2010 . THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER OF LD. COMMISSIONER OF INCOME- TAX (APPEALS)-I, KOLKATA DATED 09.07.2010 FOR THE A SSESSMENT YEAR 2004-05. THE ONLY GROUND OF APPEAL IS AS UNDER :- THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A.) HAS ERRED IN DELETING THE ADDITION OF RS.18,17,811/ - ON ACCOUNT OF SALES OF SCRAP WHICH WAS NOT CREDITED TO PROFIT & L OSS ACCOUNT HOLDING THAT SALE PROCEEDS OF SCRAP WAS NOT IN THE NATURE OF BUSINESS RECEIPT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY IN THE RELEVANT ASSESSMENT YEAR WAS CARRYING ON THE BUSINESS OF LOGISTICS & WAREHOU SING. IT HAD FILED ITS RETURN OF INCOME DECLARING NIL INCOME. THE ASSESSING OFFICER, HOWEVE R, COMPUTED TOTAL INCOME AT RS.18,26,683/-, INTER ALIA, MAKING ADDITION OF RS.1 8,17,811/- ON ACCOUNT OF RECEIPT OF CASH ITA NOS. 1790 & 1791/KOL./2010 2 AGAINST SALE OF SCRAP. IN RESPECT OF THIS ADDITION, THE RELEVANT FACTS ARE THAT FROM THE BANK A/C. OF ASSESSEE WITH CANARA BANK, CHOWRINGHEE BRANCH BEING A/C. NO. BACA 000001904, THE ASSESSING OFFICER NOTICED THAT THERE WERE CASH DEPO SITS TO THE TUNE OF RS.15,70,000/- IN THE MONTH OF JUNE, 2003 AS UNDER :- 13.06.2003 CASH RS.4,00,000/- 16.06.2003 CASH RS.3,20,000/- 16.06.2003 CASH RS.5,00,000/- 17.06.2003 CASH RS.3,50,000/- IT WAS EXPLAINED THAT THE DEPOSITS WERE MADE BY THE ASSESSEE ITSELF OUT OF THE PROCEEDS OF SALE OF SCRAP MADE DURING THE YEAR. THE ASSESSING OFFICER N OTICED THAT THIS SALE WAS NOT SHOWN IN THE PROFIT & LOSS A/C. HE, THEREFORE, REQUIRED THE ASSE SSEE TO EXPLAIN THIS ASPECT. THE ASSESSEE POINTED OUT AS UNDER :- SALE PROCEEDS WERE TOTALING TO RS.18,17,811/-. OUT OF THIS RS.18,17,811/-, THE ASSESSEE HAD ADJUSTED RS.15,00, 000/- AGAINST THE PAYMENT OF RS.90,00,000/- MADE TO AVERY INDIA LIMIT ED. THE BALANCE OF RS.3,17,811/- HAS BEEN ADJUSTED WITH THE REPAIRS AND MAINTENANCE ACCOUNT. HENCE, NOTHING APPEARED IN THE PROFIT & LO SS ACCOUNT OF THE ASSESSEE REGARDING THE SALE OF SCRAP. ASSESSING OFFICER EXAMINED THE ASSESSEES PLEA AND NOTED THAT THE LEDGER A/C. OF AVERY INDIA LIMITED SHOWED OPENING DEBIT BALANCE OF RS.90 LAKHS . HE NOTED THAT ON 30.03.2003, THERE WAS A CREDIT ADJUSTMENT OF RS.15 LAKHS, WHICH, AS PER THE ASSESSEE, WAS OUT OF SALE PROCEEDS OF SCRAP. THE ASSESSING OFFICER AFTER EXAMINING THE AGREEMENT BETWEEN LMG CONSTRUCTION AND AVERY INDIA LIMITED CONCLUDED THAT AVERY INDIA LIMITED EN JOYS NO FURTHER RIGHT AT ALL IN ANY RESPECT OVER 51, HIDE ROAD EXTENSION, KOLKATA-88. HENCE, TH E SCRAP LYING AT THE PREMISES BECAME ASSESSEES PROPERTY AND, THEREFORE, THE ASSESSEE WA S REQUIRED TO DISCLOSE THE INCOME. HE FURTHER NOTED THAT IN THE AGREEMENT DATED 14.03.2003 BETWEE N AVERY INDIA LIMITED AND LMJ CONSTRUCTION PVT. LTD. RELATING TO THE TRANSFER OF LEASE RIGHTS OVER 51, HIDE ROAD EXTENSION, KOLKATA-88, THERE WAS NO MENTION OF ANY SCRAP MATER IALS IN SCHEDULES ANNEXED THERETO WHICH PROVIDE AN INVENTORY OF ALL ITEMS AS PER THE AGREEM ENT. HE, THEREFORE, CONCLUDED THAT THE SCRAP SOLD BY THE ASSESSEE WAS NOT A PART OF THE CAPITAL ASSETS INVOLVED IN THE AGREEMENT. THE ASSESSING OFFICER CONCLUDED THAT THE SALE OF SCRAP PRIMARILY REPRESENTED CURRENT ASSETS AND, THEREFORE, TREATED THE SALE THEREOF AS REVENUE RECE IPT. HE, THEREFORE, CONCLUDED THAT ASSESSEE WAS REQUIRED TO ACCOUNT FOR THE SAME IN ITS PROFIT & LO SS A/C AND ACCORDINGLY, MADE AN ADDITION OF RS.18,17,811/-. ITA NOS. 1790 & 1791/KOL./2010 3 3. BEFORE THE LD. CIT(APPEALS), THE ASSESSEE HAD GI VEN DETAILED SUBMISSIONS, WHICH HAVE BEEN REPRODUCED IN PARA 3 AT PAGE 6 OF LD. CIT(APPE ALS)S ORDER AND AFTER CONSIDERING THE SUBMISSIONS, LD. CIT(APPEALS) OBSERVED AT PAGE 8 AS UNDER :- 3. AFTER GOING THROUGH THE FACTS OF THE CASE AND S UBMISSIONS MADE BY THE APPELLANT, IT APPEARS THAT THE SCRAP SO LD OUT OF THE STRUCTURES & ITEMS MENTIONED IN THE AGREEMENT. HENCE, THE SAME C ANNOT BE CONSIDERED AS THE BUSINESS INCOME OF THE ASSESSEE PER SE. FURTHER , THE BLOCK OF THE ASSETS UNDER WHICH THE ITEMS HAD BEEN SOLD WAS NOT EXHAUST ED. THE QUESTION OF CAPITAL GAIN ALSO DOES NOT ARISE. 4. LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVE NUE REFERRED TO THE FINDING OF LD. CIT(APPEALS) AS REPRODUCED ABOVE AND SUBMITTED THAT THE ORDER IS COMPLETELY NON-SPEAKING AND, THEREFORE, THE MATTER NEEDS TO BE RESTORED BAC K TO THE FILE OF LD. CIT(APPEALS). 5. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS FAR AS ADJUSTMENT TO THE EXTENT OF RS.3,17,811/- IS CONCERNED, THE SAME HAS BEEN MADE AGAINST REPAIRS AND MAINTENANCE AND, THEREFORE, NO ADDITION IS CALLED FOR IN RESPEC T OF THE SAID AMOUNT. AS REGARDS THE BALANCE SUM OF RS.15,00,000/- ADJUSTED AGAINST THE VALUE OF FIXED ASSETS, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF LD. CIT(APPEALS). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEES CLAIM IS THAT IT HAD ADJUSTED SALE O F SCRAP AGAINST THE TOTAL SALE CONSIDERATION. ADMITTEDLY, THE AGREEMENT HAD BEEN ENTERED INTO BET WEEN AVERY INDIA LIMITED AND THE ASSESSEE ON 14.03.2003. M/S. AVERY INDIA LTD. VIDE THIS AGREEMENT HAD TRANSFERRED, ASSIGNED AND SURRENDERED ABSOLUTELY AND WITHOUT ANY RESERVAT ION TO THE ASSSESSEE-COMPANY ALL ITS RIGHTS, TITLE AND INTEREST IN RESPECT OF THE SAID PREMISES, BUILDING AND STRUCTURES STANDING IN THE SAID PREMISES, ALL PLANT, MACHINERY AND EQUIPMENT LYING IN THE SAID PREMISES. IN CONSIDERATION OF THIS TRANSFER, THE ASSESSEE-COMPANY HAD AGREED TO P AY A TOTAL SUM OF RS.90,00,000/- TO AIL FOR THE BUILDING, SUPER STRUCTURES, MACHINERIES, GOODS ETC. LYING AT 51, HIDE ROAD, KOLKATA. THEREFORE, THE ASSESSEE WAS REQUIRED TO CAPITALIZE THE ENTIRE PURCHASE CONSIDERATION OF RS.90,00,000/- IN ITS BOOKS OF ACCOUNT ON 14.03.200 3. HOWEVER, THE ASSESSEE HAD SHOWN THE ENTIRE AMOUNT UNDER DEPOSIT. THE SCRAP WAS ALLEGE DLY SOLD IN JUNE, 2003 FOR RS.15,70,000/- AND, THEREFORE, HOW THE ASSESSEE ACCOUNTED FOR RS.1 5,00,000/- ON 30.03.2003 IS NOT CLEAR. LD. CIT(APPEALS) HAS PROCEEDED ON THE ASSUMPTION THAT T HERE WAS BLOCK OF ASSETS BUT THE CLAIM OF ITA NOS. 1790 & 1791/KOL./2010 4 ASSESSEE ITSELF IS THAT SALE CONSIDERATION OF SCRAP HAD BEEN ADJUSTED AGAINST THE PURCHASE CONSIDERATION AS ON 30.03.2003 WHICH ADMITTEDLY WAS KEPT IN DEPOSIT ACCOUNT AND NOT CAPITALIZED. THE FACT NEEDS TO BE RE-VERIFIED IN OR DER TO ARRIVE AT CORRECT CONCLUSION. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE WA S NOT CLEAR IN ASCERTAINING THE NATURE OF THE SALE OF SCRAP AND, THEREFORE, PARTLY ADJUSTED THE S CRAP AGAINST REPAIRS AND MAINTENANCE AND PARTLY TREATED THE SAME AS CAPITAL RECEIPT. THIS TR EATMENT PER SE IS CONTRADICTORY, PARTICULARLY WHEN THE ASSESSEES CLAIM WAS THAT THE ENTIRE SALE CONSIDERATION FROM SCRAP WAS CAPITAL IN NATURE. THIS ASPECT NEEDS TO BE CLARIFIED. FURTHER, LD. CIT(APPEALS) HAS ACCEPTED THE ASSESSEES CONTENTION REGARDING SCRAP BEING GENERATED FROM ITE MS PURCHASED BUT HE HAS NOT EXAMINED THE SAME WITH REFERENCE TO THE AGREEMENT. FURTHER, IT I S NOT CLEAR AS TO WHETHER SCRAP WAS GENERATED FROM THE ASSETS PURCHASED FROM AVERY INDIA LTD. OR NOT. WE, THEREFORE, RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OFFICER TO EXAMINE THE FAC TS AFRESH IN REGARD TO THE SUM OF RS.15,70,000/- IN LIGHT OF ABOVE OBSERVATIONS. HOWE VER, WE CONFIRM THE FINDING OF LD. CIT(APPEALS) IN REGARD TO RS.3,17,811/-, WHICH HAS BEEN ADJUSTED AGAINST REPAIRS AND MAINTENANCE BY THE ASSESSEE AND, THEREFORE, ANY FUR THER ADDITION WILL AMOUNT TO DOUBLE ADDITION. RESULTANTLY, THIS GROUND OF APPEAL IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES 7. IN THE RESULT, THIS APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. NOW WE TAKE UP THE APPEAL BEING ITA NO. 1791/KOL./2010 9. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME- TAX (APPEALS)-I, KOLKATA DATED 09.07.2010 FOR THE A SSESSMENT YEAR 2004-05. THE ONLY GROUND OF APPEAL IS AS UNDER :- THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A.) ERRED IN DELETING THE ADDITION MADE UNDER SECTION 4 0A(IA) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE AS PER SECTION 194I. 10. BRIEF FACTS APROPOS THIS ISSUE ARE THAT THE ASS ESSEE HAD CLAIMED AN EXPENDITURE TOWARDS PAYMENT OF RENT TO KOLKATA PORT TRUST OF RS.21,78,3 42/-. THE ASSESSING OFFICER HAS NOTED THAT AS PER ASSESSEES SUBMISSIONS, THE SAME WAS AS PER THE INSTRUCTIONS/ DECREE PASSED BY THE HONBLE HIGH COURT. THE ASSESSING OFFICER OBSERVED THAT KOLKATA PORT TRUST IS A RESIDENT LOCAL AUTHORITY AND, THEREFORE, DEDUCTION OF TAX WAS TO B E STATUTORILY DONE ON CREDIT OF SUCH AMOUNT. HE, THEREFORE, DISALLOWED THE WHOLE AMOUNT OF RS.21 ,78,342/- UNDER SECTION 40(A)(IA). LD. CIT(APPEALS) DELETED THE DISALLOWANCE FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH ITA NOS. 1790 & 1791/KOL./2010 5 COURT IN THE CASE OF MADHUSUDHAN SHRIKRISHNA VS.- EMKAY EXPORTS [2010] 188 TAXMAN 195 (BOMBAY), INTER ALIA, OBSERVING THAT THE PAYMENT OF RENT BY THE ASSESSEE TO KOLKATA PORT TRUST WAS ON THE INSTRUCTION/ DECREE FROM THE HONBLE HIG H COURT. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORDS OF THE CASE. WE FIND THAT BEFORE THE ASSESSING OFFICER, TH E ASSESSEES SUBMISSION WAS THAT THE PAYMENT OF RENT WAS AS PER THE INSTRUCTION/DECREE P ASSED BY THE HONBLE HIGH COURT. HOWEVER, BEFORE LD. CIT(APPEALS), THE CONTENTION WA S THAT THE ORDER WAS PASSED BY THE ESTATE OFFICER, KOLKATA PORT TRUST, WHO HAD ALL THE POWERS VESTED IN A CIVIL COURT FOR HOLDING ENQUIRY BY THE COURT. THEREFORE, HE WAS A QUASI-JUDICIAL BO DY. WE FIND THAT LD. CIT(APPEALS), HOWEVER, HAS PROCEEDED ON THE PREMISE THAT THE PAYMENT OF RE NT BY THE ASSESSEE TO KOLKATA PORT TRUST WAS AS PER THE INSTRUCTION/ DECREE FROM THE HONBLE HIGH COURT. THUS, IT IS EVIDENT THAT THE FACTS HAVE NOT CORRECTLY BEEN APPRECIATED BEFORE AR RIVING AT THE CONCLUSION. WE, THEREFORE, RESTORE THE MATTER BACK TO THE FILE OF LD. CIT(APPE ALS) TO DECIDE THE ISSUE DE NOVO. RESULTANTLY, THIS APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL P URPOSES. 12. IN THE RESULT, BOTH THE APPEALS OF REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25/ 11/2011. , - . + 25/11/2011. SD/- SD/- [ MAHAVIR SINGH / ] [S.V. MEHROTRA/ ( . . )] JUDICIAL MEMBER/ ACCOUNTANT MEMBER/ DATED : 25/ 11/ 2011 COPY OF THE ORDER FORWARDED TO: 1. M/S. LMJ CONSTRUCTION PVT. LTD., 26B, CAMAC STREET, FLAT NO. 2A, 2 ND FLOOR, KOLKATA-16. 2 ITO, WARD-2(3), KOLKATA, P-7, CHOWRINGHEE SQUARE, K OLKATA-700 069. 3. COMMISSIONER OF INCOME-TAX (APPEALS)- ,KOLKATA 4. CIT, WB- , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, I.T.A.T., KOLKATA LAHA, SR. P.S.
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