DCIT, Circle-1, Nashik V. Garuda Plant Products Ltd., Nashik

ITA 1892/PUN/2012

• Counselvise Citation: 189224514 RSA 2012
• Duration Of Justice: 1 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Business income; Depreciation; Bad and doubtful debts; Revised return; Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1892/PN/2012 (A.Y: 2006-07) DCIT, CIRCLE-1, NASHIK APPELLANT VS. GARUDA PLANT PRODUCTS LTD., B-26, MIDC, AMBAD, NASHIK. PAN: AAACG0563H RESPONDENT APPELLANT BY : SHRI B.C. MA LAKAR RESPONDENT BY : S/SHRI AB HISHEK TILAK PRIYESH GANSOTTA DATE OF HEARING: 12.08.2014 DATE OF ORDER : 21.08.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL)-I, NASHIK, D ATED 06.07.2012 FOR A.Y. 2006-07 ON THE FOLLOWING GROUND S. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELE TING THE PENALTY OF RS.9,35,070/- WHICH WAS LEVIED ON ACCOUN T OF FURNISHING INACCURATE PARTICULARS OF INCOME I.E. RE NT INCOME FROM THE HOUSE PROPERTY SHOWN UNDER BUSINESS RECEIPTS WITHIN THE MEANING OF PROVISIONS MENTIONED IN SECTION 271 (1)(C) OF THE INCOME TAX ACT, 1961. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD.CIT(A)-I, NASHIK WAS JUSTIFIED IN DELE TING THE PENALTY OF RS.33,780/- LEVIED ON ACCOUNT OF FURNISH ING INACCURATE PARTICULARS OF INCOME I.E. CLAIM OF DEPR ECIATION ON SOLD VEHICLES WITHIN THE MEANING OF PROVISIONS MENTIONED IN SECTION 271(1)(C) OF THE INCOME TAX AC T, 1961. 2 ITA NO.1892 OF 12 GARUDA PLANT PRODUCTS LTD 3. THE APPELLANT PRAYS THE ORDER OF THE ASSESSING OFFI CER MAY BE RESTORED. 4. THE APPELLANT PRAYS TO ADDUCE SUCH FURTHER EVIDENCE TO SUBSTANTIATE HIS CASE. 5. THE APPELLANT PRAYS LEAVE TO ADD, ALTER, CLARIFY, A MEND AND OR WITHDRAW ANY GROUNDS OF APPEAL AS AND WHEN T HE OCCASION DEMANDS. 2. THE ASSESSEE BEING A COMPANY FILED ITS E-RETURN OF INCOME DECLARING TOTAL INCOME OF RS.NIL ON 31.12.2006. TH E SAME WAS ASSESSED U/S.143(1) OF THE I.T. ACT ADJUSTING TOTAL INCOME OF RS.43,80,450/- AS AGAINST NIL INCOME SHOWN BY THE A SSESSEE AND A DEMAND OF RS.18,88,055/- WAS RAISED IN FEBRUARY, 2008. THIS WAS THE FIRST YEAR OF FILING OF E-RETURN BY THE ASS ESSEE. IN THE ACKNOWLEDGEMENT OF RETURN OF INCOME, THE INCOME IS SHOWN AT RS.NIL WHEREAS IN THE COMPUTATION OF INCOME, INCOME FROM HOUSE PROPERTY WAS SHOWN AT RS.41,82,000/- AND BUSINESS I NCOME AT RS.1,98,450/-AGGREGATING TO RS.43,80,450/-. THEREAF TER, NOTICE U/S.148 OF THE ACT WAS ISSUED ON 09.09.2009. IN RE SPONSE TO THE SAME, THE ASSESSEE FILED LETTER DATED 21.10.2010 EX PLAINING A RETURN OF INCOME DECLARING TOTAL INCOME OF RS.14,46 ,187/- ENCLOSING THE REASON FOR FILING REVISED RETURN. TH E REASON WAS THAT IN THE ELECTRONIC RETURN, THE INCOME WAS INCOR RECTLY APPEARING AT RS.NIL. THE ASSESSING OFFICER HAS ASS ESSED THE INCOME OF THE APPELLANT AT RS.15,45,571/- AS UNDER: I) INCOME FROM BUSINESS RS.27,51,000/- AS DISCUSSED IN PARA 4 ABOVE II) INCOME FROM BUSINESS 1. NET PROFIT AS PER PROFIT AND LOSS A/C RS.9,26,940/- 2. LOSS ON SALE OF ASSETS RS.8,24,105/- 3. MAINTENANCE CHARGES PAID RS.8,35,697/- 4.ADVERTISEMENT EXP. RS.2,53,611/- AGAINST HP INADMISSIBLE. 5. BAD DEBTS RECOVERED RS.1,00,000/- GROSS TOTAL INCOME RS.29,63,055/- 3 ITA NO.1892 OF 12 GARUDA PLANT PRODUCTS LTD LESS:- 1. RENT INCOME FROM HP SHOWN UNDER BUSINESS RECEIPTS. RS.39,30,000/- 2. CAR RENT HIRED OUT EPC IND. RS. 2,52,000/- 3. DEPRECIATION ADMISSIBLE RS.3,37,868/- (-) DISALLOWANCE OF DEP. ON ASSET SOLD AS DISCUSSED ABOVE RS.99,384/- RS.2,38,484(-) 14,57 ,429 III) INCOME FROM OTHER SOURCES RENT ON USE ON CAR RS.2,52,000/- TOTAL ASSESSED INCOME RS.15,45,571/- ROUNDED OFF TO RS.15,45,570/- 2.1 THE ASSESSING OFFICER HAS INITIATED PENALTY PRO CEEDINGS IN RESPECT OF INCOME FROM HOUSE PROPERTY ASSESSED BY H ER AT RS.27,51,000/-. THE ASSESSING OFFICER HAS DISALLOWE D DEPRECIATION OF RS.99,384/-IN RESPECT OF VEHICLE SO LD BY THE ASSESSEE DURING THE YEAR UNDER APPEAL AND HAS INITI ATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT IN RESPECT OF THE ABOVE DISALLOWANCE OF THE DEPRECIATION. THE AO HAS LEVIE D PENALTY OF RS.9,68,850/- ON THE ABOVE MENTIONED AMOUNTS TOTALI NG TO RS.28,50,384/- U/S 271(1)(C) OF THE ACT. 2.2 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE REVENUE, INTER ALIA, STATED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY OF RS.9,35,070/- WHICH WAS LEVIED ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME I.E. RENT INCOME FROM THE HOUSE PROPERTY SHOWN UNDER BUS INESS RECEIPTS WITHIN THE MEANING OF PROVISIONS MENTIONED IN SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY OF RS.33,780/- LE VIED ON ACCOUNT OF FURNISHING INACCURATE PARTICULARS OF INCOME I.E. CLAIM OF DEPRECIATION ON SOLD VEHICLES WITHIN THE MEANING OF PROVISIONS MENTIONED IN SECTION 271(1)(C) OF THE INCOME TAX AC T, 1961. ACCORDINGLY, THE ORDER OF CIT(A) BE SET ASIDE AND T HAT OF ASSESSING 4 ITA NO.1892 OF 12 GARUDA PLANT PRODUCTS LTD OFFICER BE RESTORED. ON THE OTHER HAND, THE LEARNE D AUTHORIZED REPRESENTATIVE HAS SUPPORTED THE ORDER OF CIT(A). 2.3 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THE STAND OF THE ASSESSEE HAS BEEN THAT AS THE YEAR UNDER APPEAL BEING FIRST YEAR OF FILING E- RETURN AND THE SOFTWARE THROUGH WHICH THE RETURN HAS BEEN SUBMITTE D WAS NOT UPTO THE STANDARD AND HENCE SOME MISTAKES CREPT IN THE RETURN ELECTRONICALLY FILED. FOR THE FIRST TIME, THE ASSE SSEE HAS FILED ORIGINAL RETURN OF INCOME ON 31.12.2006 AND HAS FIL ED A REVISED RETURN IN RESPONSE TO NOTICE U/S.148 OF THE ACT ON 15.09.2010. IN THE ORIGINAL RETURN FILED BY THE ASSESSEE, HAS I NCORRECTLY CONSIDERED THE INCOME FROM HOUSE PROPERTY AT GROSS RENT AND HAS NOT CONSIDERED DEDUCTION U/S.24 OF THE ACT @ 30% OF THE GROSS RENT. THE ASSESSEE HAS ALSO NOT CONSIDERED THE ADJ USTMENTS TO BE MADE TO THE INCOME AS PER PROVISIONS OF INCOME TAX ACT WHICH WERE CORRECTLY CONSIDERED IN THE REVISED RETURN. F ROM THE AUDITED PROFIT AND LOSS ACCOUNT, IT WAS NOTICED THAT WHILE COMPUTING INCOME IN ORIGINAL RETURN, THE ASSESSEE HAS CONSIDE RED GROSS INCOME OF RS.41,82,000/- AND RS.1,98,450/- AS INCOM E AND HAS ACCORDINGLY WORKED OUT THE GROSS BUSINESS INCOME AS UNDER:- A) GROSS RECEIPTS CONSIDERED AS INCOME FROM HOUSE PROP ERTY- 41,82,000/- B) NET PROFIT AS PER PROFIT & LOSS A/C TREATED AS BUSI NESS INCOME 1,98,450/- ----------- TOTAL INCOME 43,80,450/- 2.4 THE ASSESSEE HAS ALSO POINTED OUT THAT DUE TO M ISTAKE IN COMPUTER SOFTWARE FOR FILING E-RETURN, THE ABOVE ME NTIONED INCORRECT INCOME HAS BEEN SET-OFF AGAINST BROUGHT F ORWARD LOSSES WHICH WERE NEVER INCURRED OR CLAIMED BY THE ASSESSE E. IN THIS BACKGROUND, THE CIT(A) HAS OBSERVED THAT IN THE ORI GINAL E-RETURN THE ACCOUNTANT OF THE ASSESSEE HAS INCORRECTLY FILL ED IN THE GROSS AMOUNT OF RENT RECEIVED AND ALSO GROSS AMOUNT OF BU SINESS 5 ITA NO.1892 OF 12 GARUDA PLANT PRODUCTS LTD RECEIPT AS INCOME WITHOUT CLAIMING ANY DEDUCTION U/ S 24 OF THE ACT AND ALSO VARIOUS ADJUSTMENTS WHICH ARE REQUIRED TO BE MADE AS PER THE PROVISIONS OF THE I.T. ACT. THE MISTAKE IN THE COMPUTATION OF INCOME OF THE ASSESSEE HAS TO BE COR RECTED BY THE ASSESSING OFFICER TO ASSESS CORRECT INCOME AS MANDA TED BY THE CBDT CIRCULAR BEARING NO.L4(XL-35) DATED 11.04.1955 WHEREIN IT HAS BEEN LAID DOWN AS UNDER:- ROLE OF DEPARTMENTAL OFFICERS OFFICER OF THE DEP ARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. ALTHOUGH THE RESPONSIBILITY OF CLAIMIN G REFUNDS AND RELIEFS RESTS WITH ASSESSEES ON WHOM IT IS IMPO SED BY LAW, OFFICER SHOULD (A) DRAW THEIR ATTENTION TO A NY REFUND/RELIEFS TO WHICH THEY APPEAR TO BE CLEARLY E NTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS T O THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO B E ADOPTED FOR CLAIMING REFUND/RELIEFS 2.5 THE ASSESSEE HAS CORRECTED THE MISTAKES COMMITT ED IN THE ORIGINAL RETURN AND HAS FILED REVISED COMPUTATION O F INCOME AND REVISED RETURN DURING THE REASSESSMENT PROCEEDINGS. THE ASSESSEE HAS FURTHER SUBMITTED THAT AS PER COMPUTAT ION OF INCOME AND AUDITED FINAL STATEMENTS OF ACCOUNTS, IT COULD BE NOTICED THAT THE INCOME HAS BEEN CORRECTLY SHOWN AN D DECLARED AT RS.14,86,187/-. THE STATEMENT OF COMPUTATION OF INCOME PREPARED BY THE ASSESSEE WHILE FILING THE REVISED R ETURN OF INCOME IS AS UNDER:- INCOME FROM HOUSE PROPERTY LET OUR OFFICE PREMISES GROSS ANNUAL VALUE 3930000 NET ANNUAL VALUE 3930000 LESS: DEDUCTION U/S 24 STANDARD DEDUCTION 11790001179000 2751000 PROFITS AND GAINS OF BUSINESS OR PROFESSION NET PROFIT/LOSS AS PER PROFIT 926940 ADD: DEPRECIATION TAKEN SEPARATELY 824105 LOSS ON SALE OF ASSETS 835697 RENT, RATES AND TAXES 253611 ADVERTISEMENT 22702 6 ITA NO.1892 OF 12 GARUDA PLANT PRODUCTS LTD BAD DEBTS 10000 2036115 2963055 DEPRECIATION 337867 LESS : INCOME CONSIDER SEPARATELY 3930000 4 267867 (1304182) (1304812) -------------- GROSS TOTAL INCOME 1446187 TOTAL INCOME 1446187 REFUNDED OFF AS PER SECTION 288A 1446190 2.6 FROM THE COMPUTATION OF INCOME FILED BY THE ASS ESSEE, THE CIT(A) HAS OBSERVED THAT THE DIFFERENCE BETWEEN THE STATEMENT OF COMPUTATION OF INCOME FILED WITH THE REVISED RETURN AND THE INCOME ASSESSED BY THE ASSESSING OFFICER IS THAT TH E ASSESSING OFFICER HAS CONSIDERED CAR RENT AS INCOME FROM OTHE R SOURCES INSTEAD OF INCOME FROM BUSINESS AS CONSIDERED BY TH E ASSESSEE. FURTHER THE ASSESSING OFFICER HAS DISALLOWED DEPREC IATION OF RS.99,384/- IN RESPECT OF CAR SOLD WHICH WAS INCLUD ED IN THE BLOCK OF ASSETS. FURTHER, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS CONCEALED INCOME FROM HOUSE PROPERTY TO THE EXT ENT OF RS.27,51,000/- [ I.E. GROSS RENT S.39,30,000/- (-) DEDUCTION U/S 24 @ 30% RS.11,79,000/- ] AS THE ASSESSEE IN THE OR IGINAL RETURN HAS CONSIDERED THE AMOUNT OF RS.41,82,000/- AS INCO ME WHICH INCLUDED GROSS RENT OF RS.39,30,000/-. THEREFORE, IT COULD NOT BE SAID THAT THE ASSESSEE HAS CONCEALED INCOME FROM HO USE PROPERTY OF RS.27,51,000/-. 2.7 THE ASSESSING OFFICER HAS ALSO LEVIED PENALTY O N ADDITION IN RESPECT OF DISALLOWANCE OF DEPRECIATION ON CAR AMOU NTING TO RS.99,384/-. THE SAID CAR WAS INCLUDED IN THE BLOCK OF ASSETS AND DURING THE YEAR THE CAR WAS SOLD. THE ASSESSIN G OFFICER HAS THEREFORE MADE THE ADDITION INTER ALIA, STATING THA T AS THE CAR WAS SOLD NO DEPRECIATION WAS ALLOWABLE IN RESPECT OF W. D.V. OF THE CAR SOLD. IN THIS REGARD, THE ASSESSEE HAS POINTED OUT THAT THE ASSESSING OFFICER HAS IGNORED THE CONCEPT OF BLOCK OF ASSETS WHICH HAS BEEN INTRODUCED FROM 01.04.1988. THE ASS ESSEE CLAIMED THAT AS THE BLOCK OF ASSET CONTINUED EVEN A FTER THE SALE 7 ITA NO.1892 OF 12 GARUDA PLANT PRODUCTS LTD OF CAR, THE DEPRECIATION WAS TO BE ALLOWED ON THE W .D.V. OF BLOCK OF ASSET. IN THIS BACKGROUND, THE CIT(A) HAS OBSER VED THAT THE CONCEPT OF BLOCK OF ASSETS INTRODUCED IN THE INCOME TAX ACT WITH EFFECT FROM 01.04.1988, THE CONTENTION OF THE ASSES SEE THAT THE ASSET SOLD HAS BEEN MERGED IN THE BLOCK OF ASSET AN D HENCE DEPRECIATION WAS TO BE ALLOWED ON W.D.V. OF THE BLO CK OF ASSET WAS FOUND TO BE CORRECT. IN VIEW OF ABOVE, THE ASS ESSING OFFICER WAS NOT JUSTIFIED IN LEVYING PENALTY AND THE SAME W AS RIGHTLY DELETED BY THE CIT(A) ON BOTH THE ACCOUNTS. THIS R EASONED FINDING OF CIT(A) WHEREBY, HE HAS DELETED THE PENAL TY AMOUNTING TO RS.9,68,850/- IMPOSED BY THE ASSESSING OFFICER U /S.271(1)(C) OF THE ACT ON AMOUNT OF RS.28,50,384/-, NEEDS NO IN TERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 3. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 21 ST DAY OF AUGUST, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 21 ST AUGUST, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-I, NASHIK 4) THE CIT-I, NASHIK 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE