ACIT, C.C. VI, Kolkata V. M/s. J.K. Corp. Ltd., Kolkata

ITA 1950/KOL/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2539 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2000-2001
• Appeal Filed On: 20-11-2006
• Court: TRIBUNAL
• Department Lawyers: K HARIPRASAD
• Assessee Lawyers: S JHAJHANIA
• Keywords: Opportunity of being heard; Set aside
• Section: 115JB

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH - C , KOLKATA ( ) BEFORE . . , SHRI B.R.MITTAL, JUDICIAL MEMBER. /AND . . , , SHRI C.D. RAO, ACCOUNTANT M EMBER . / I.T.A.NO. 1950/KOL/2006 AND 1675/KOL/2007 / ASSESSMENT YEAR S 2000 - 01 AND 2001 - 02 DCIT, CENTRAL CIRCLE VI, KOLKATA. - - - VERSUS - . M/S.J.K.CORPORATION LTD., 7, COUNCIL HOUSE STREET, KOLKATA 1 AAACJ 6715 G ( / A PPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI K.HARI PRASAD, DR / FOR THE RESPONDENT : / SHRI S.JHAJHANIA, AR / ORDER . . , SHRI B.R.MITTAL, JUDICIAL MEMB ER. THE DEPARTMENT HAS FILED THESE TWO APPEALS AGAINST ORDERS OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT.31.8.2006 FOR THE ASSESSMENT YEAR 2000 - 01 AND DT.30.3.2007 FOR THE ASSESSMENT YEAR 2001 - 02 ON THE FOLLOWING GROUNDS. GROUNDS OF APPEA L FOR THE ASSESSMENT YEAR 2000 - 01 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN DELETING THE DISALLOWANCES OF RS.13,96,574 OUT OF EMPLOYEES WELFARE EXPENSES BASING ON THE DECISION OF THE KERALA HIGH COURT, INSTEAD OF GIVING A FURTH ER OPPORTUNITY TO RE - EXAMINE THE SAME AS DONE BY ITAT IN ASSESSMENT YEAR. 1994 - 95 ON THE BASIS OF THE DECISION OF THE KERALA HIGH COURT REPORTED AT 243 ITR 284. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN ALLOWING LOSS OF RS.2,2 7,10,000 ON ACCOUNT OF SALE OF CURRENT ASSETS AS A GENUINE LOSS HOLDING THAT IT IS FOR THE ASSESSEE TO DECIDE WHICH IS THE BEST PRICE. 3. (1) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN LAW IN DIRECTING THE A.O. TO ADD THE AMOUNT O F / I.T.A.NO. 1950/KOL/2006 AND 1675/KOL/2007 2 RS.4,96,09,612 TO THE NET LOSS TO ARRIVE AT BOOK LOSS FOR THE PURPOSE OF SECTION 115JA OF THE I.T.ACT,1961. (2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN IN LAW IN APPRECIATING THE MANDATE OF THE PROVISION OF SEC.115JA READ WI TH THE EXPLANATION THERETO WHICH STOPS ANY SORT OF ACCOUNTING JUGGLERY TO CLAIM REDUCED BOOK PROFIT AND LIABILITY U/S.115JA OF THE I.T.ACT,1961. GROUNDS OF APPEAL FOR THE ASSESSMENT YEAR 2001 - 02 . 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT(A) ERRED IN DELETING THE DISALLOWANCES OF RS.16,87,503 OUT OF EMPLOYEES WELFARE EXPENSES BASING ON THE DECISION OF THE KERALA HIGH COURT, INSTEAD OF GIVING A FURTHER OPPORTUNITY TO RE - EXAMINE THE SAME AS DONE BY ITAT IN A.Y. 1994 - 95 ON THE BASIS OF THE DECISION OF THE KERALA HIGH COURT REPORTED AT 243 ITR 284. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN LAW IN DIRECTING THE A.O. TO ADD THE AMOUNT OF RS.6,78,65,960 TO THE NET LOSS TO ARRIVE AT BOOK LOSS FOR THE P URPOSE OF SECTION 115JB OF THE I.T.ACT,1961. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN LAW IN APPRECIATING THE MANDATE OF THE PROVISION OF SEC.115B READ WITH THE EXPLANATION THERETO WHICH STOPS ANY SORT OF ACCOUNTING JU GGLERY TO CLAIM REDUCED BOOK PROFIT AND LIABILITY U/S.115JB OF THE I.T.ACT.,1961. 2. IN RESPECT OF GROUND NO.1 IN THE APPEALS FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION, THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES AGREED THAT THE ISSUE IS COV ERED IN ASSESSEES FAVOUR BY THE TRIBUNALS ORDER FOR THE ASSESSMENT YEAR 1994 - 95 AND SUBSEQUENTLY FOLLOWED BY THE TRIBUNAL IN ITA NO.1315/K/2006 FOR THE ASSESSMENT YEAR 1999 - 00 DT.19.3.2008, WHEREIN THE TRIBUNAL BY FOLLOWING THE EARLIER ORDER DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY CONFIRMING THE ORDER OF THE LEARNED CIT(A). THE DEPARTMENT HAS NOT BROUGHT ANY ADDITIONAL FACTS IN THE ASSESSMENT YEAR UN DER CONSIDERATION. THEREFORE, RESPECTFULLY FOLLOWING THE EARLIER ORDERS OF THE TRIBUNAL AS STATED AB OVE, WE DECIDE THE ISSUE IN GROUND NO.1 IN THE APPEALS OF THE DEPARTMENT FOR BOTH THE ASSESSMENT YEARS UNDER / I.T.A.NO. 1950/KOL/2006 AND 1675/KOL/2007 3 CONSIDERATION IN FAVOUR OF THE ASSESSEE AND DISMISS THE GROUND OF THE REVENUE BY UPHOLDING THE IMPUGNED ORDERS OF THE LEARNED CIT(A). 3. AS REGARD S GROUND NO.2 OF THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2000 - 01, THE LEARNED DR SUBMITTED THAT THE ASSESSING OFFICER AT PAGE 3 OF THE ASSESSMENT ORDER DISALLOWED THE CLAIM OF THE ASSESSEE FOR LOSS ON SALES OF CURRENT ASSETS AMOUNTING TO RS.2,27, 10,000 ON THE GROUND THAT THE ASSESSEE HAD NOT SUBMITTED ANY DOCUMENT TO SUBSTANTIATE THAT THE PRICE AT WHICH THE ASSESSEE STATED TO HAVE SOLD ITS CURRENT ASSETS WAS AT MARKET PRICE. THE ASSESSEE DID NOT SUBMIT ANY REPORT NOR ANY QUOTATION THAT THE SAID CU RRENT ASSETS WERE SOLD AT MARKET PRICE TO RELIANCE INDUSTRIES. THE LEARNED DR FURTHER SUBMITTED THAT THE LEARNED CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER MERELY BY ACCEPTING THE CONTENTION OF THE ASSESSEE. HE SUBMITTED THAT NO EVIDENCE WERE FILED BY THE ASSESSEE BEFORE THE LEARNED CIT(A) AS WELL. THE LEARNED DR SUBMITTED THAT THE MATTER SHOULD BE RESTORED TO THE ASSESSING OFFICER TO DIRECT THE ASSESSEE TO PRODUCE THE DETAILS OF THE ASSETS SOLD EVIDENCING THAT THEY WERE SOLD AT MARKET PR ICE. THE LEARNED AR OF THE ASSESSEE ON THE OTHER HAND SUBMITTED THAT THE CURRENT ASSETS WERE LYING IN FACTORY AND WERE SOLD TO A THIRD PARTY AT MARKET PRICE. HE FURTHER SUBMITTED THAT THE DEPARTMENT HAS NOT BROUGHT ANY EVIDENCE ON RECORD THAT THE SAID ASSE TS WERE EITHER SOLD AT A LESSER PRICE OR WERE SOLD AT A HIGHER PRICE AND THE ASSESSEE HAS SUPPRESSED THE SALE PRICE. THE LEARNED AR OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE ITAT, DELHI BENCH IN THE CASE OF DCIT V. NARENDRA CHANDRA TIWARI [(20 08) 13 DTR 233 (DEL)]. 4. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES AND THE ORDERS OF THE AUTHORITIES BELOW. WE OBSERVE THAT THE ASSESSEE HAS SOLD ITS CURRENT ASSETS BEING RAW MATERIAL WHICH WAS USED I N THE MANUFACTURE OF POLYSTER STAPLE FIBRE/CHUPS & POLYSTER FILAREET YARN. WE OBS ERVE THAT THE ASSESSEE STOPPED THE PRODUCTION OF THESE ITEMS ON ACCOUNT OF CONTINUED LOSSES. THE ASSESSEE TOOK UP THE PRODUCTION OF THESE GOODS ON JOB CONVERSION BASIS FOR ANO THER COMPANY AND THE ASSESSEE DECIDED TO SELL THE CURRENT ASSETS IN STOCK. WE OBSERVE THAT THE ASSESSEE HAS STATED TO HAVE SOLD THE SAID / I.T.A.NO. 1950/KOL/2006 AND 1675/KOL/2007 4 CURRENT ASSETS BEING RAW MATERIAL AT RS.948.90LAKHS AGAINST ITS BLOCK VALUE OF RS.1176LAKHS. WE OBSERVE THAT THE ASSESS ING OFFICER ADDED THE DIFFERENCE OF LOSS CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE COULD NOT BRING ANY EVIDENCE THAT THE SAID CURRENT ASSETS WERE SOLD AT MARKET VALUE OR THE SALE PRICE WAS NOT SUPPORTED BY A QUOTATION ETC. HOWEVER, THERE IS N O SUCH ALLEGATION BY THE ASSESSING OFFICER THAT THE ASSESSEE SOLD THE SAID CURRENT ASSETS AT A PRICE HIGHER THAN THE PRICE DISCLOSED BY THE ASSESSEE. FURTHER IT IS NOT THE CASE OF THE DEPARTMENT THAT THE SAID CURRENT ASSETS WERE SOLD BY THE ASSESSEE TO ITS ASSOCIATE CONCERN. THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT THE SAID ASSETS WERE SOLD TO A THIRD PARTY. WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE SAID ADDITION MADE BY THE ASSESSING OFFICER AS THE ASSESSEE HAS TAKE N A BUSINESS DECISION TO SELL THE SAID CURRENT ASSETS AT A PRICE DISCLOSED BY IT AND PARTICULARLY WHEN THE ASSESSING OFFICER HAS NOT BROUGHT ANY EVIDENCE ON RECORD THAT THE ASSESSEE HAS SUPPRESSED THE SALE PRICE. THE ITAT, DELHI BENCH IN THE CASE OF DCIT V. NARENDRA CHANDRA TIWARI [(2008) 13 DTR 233 (DEL)] HAS HELD THAT THERE IS NO PROVISION IN THE ACT TO ESTIMATE THE SALE PRICE. THE TRIBUNAL HAS HELD IN THE SAID CASE THAT THERE IS NO CORRESPONDING PROVISION IN THE ACT TO INCREASE THE PROFIT UPWARDS EVEN I F THE TRANSACTION IS WITH THE ASSOCIATE CONCERN. THE TRIBUNAL DIRECTED THE ASSESSING OFFICER TO ADOPT THE PROFIT IN RESPECT OF SALES MADE BY THE ASSESSEE TO ASSOCIATE CONCERN AS DECLARED BY THE ASSESSEE. 6. CONSIDERING THE DECISION OF THE ITAT. DELHI BENC H IN THE CASE OF DCIT V. NARENDRA CHANDRA TIWARI (SUPRA), WE HOLD THAT THE LEARNED CIT(A) IS JUSTIFIED IN THE PRESENT CASE TO DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AS THERE IS NO MATERIAL WITH THE DEPARTMENT TO SHOW THAT THE ASSESSEE RECEIVED A NY AMOUNT OVER AND ABOVE THE AMOUNT DISCLOSED BY IT FOR THE SALES OF CURRENT ASSETS IN QUESTION. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) AND ACCORDINGLY WE UPHOLD THE SAME AND DISMISS THE GROUND NO.2 OF THE REVENUE TAKEN IN T HE ASSESSMENT YEAR 2000 - 01. 7. AS REGARDS G ROUND NO.3 OF THE APPEAL FOR THE ASSESSMENT YEAR 2000 - 01 AND GROUNDS NO.2 & 3 OF THE APPEAL FOR THE ASSESSMENT YEAR 2001 - 02, THE LEARNED / I.T.A.NO. 1950/KOL/2006 AND 1675/KOL/2007 5 AR OF THE ASSESSEE CONCEDED THAT THE LEARNED CIT(A) HAS REDUCED THE AMOUN T WITHDRAWN FROM THE RESERVE WHILE COMPUTING THE BOOK PROFIT BY FOLLOWING CLAUSE (I) OF EXPLANATION OF SUB - SECTION (2) OF SECTION 115JA FOR THE ASSESSMENT YEAR 200 0 - 01 AND CLAUSE(I) OF EXPLANATION I OF SUB - SECTION (2) OF SECTION 115JB FOR THE ASSESSMENT YE AR 2001 - 02 . LEARNED AR OF THE ASSESSEE ADMITTED THAT SOME RESERVES WERE CRE ATED BY THE ASSESSEE AFTER APRIL,1997 AND AS SUCH THAT PART OF THE RESERVE CREATED ARE NOT TO BE REDUCED AS PER PROVISO TO CLAUSE (I) OF THE ABOVE EXPLANATION WHILE COMPUTING BOOK PROFIT FOR THE PURPOSE OF SECTION 115JA AS APPLICABLE IN THE ASSESSMENT YEAR 2000 - 01 AND SECTION 115JB AS APPLICABLE IN THE AY 2001 - 02. IN VIEW OF THE ABOVE, THE LEARNED AR OF THE ASSESSEE SU BMITTED THAT THE ISSUE C OULD BE RESTORED TO THE ASSESSING OFFICER TO RECALCULATE THE AMOUNT OF RESERVES TO BE REDUCED WHILE COMPUTING THE BOOK PROFIT FOR THE AYS 2000 - 01 AND 2001 - 02 U/S.115JA AND SECTION 115JB OF THE ACT RESPECTIVELY. THE LEARNED DR AGREED TO THIS ABOVE SUBMISSION OF THE LEARNED AR OF THE ASSESSEE . 8. IN VIEW OF THE ABOVE SUBMISSIONS MADE BY THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW IN RESPECT OF THE ABOVE ISSUE AND RESTORE THE SAME TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO RE - COMPUTE TH E BOOK PROFIT FOR THE PURPOSE OF SECTION 115JA IN THE ASSESSMENT YEAR 2000 - 01 AND SECTION 115JB IN THE ASSESSMENT YEAR 2001 - 02 AS PER LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THUS, G ROUND NO.3 OF APPEAL IN THE ASSESSMENT YEAR 2000 - 0 1 AND GROUNDS NO.2 & 3 OF APPEAL IN THE ASSESSMENT YEAR 2001 - 02 ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE ALLOWED IN PART. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 25.06.2010 SD/ - SD/ - ( . . ) (C.D. RAO), ACCOUNTANT MEMBER ( . . ), ( B.R.MITTAL ), JUDICIAL MEMBER ( ) DATE : 2 5.06.2010 / I.T.A.NO. 1950/KOL/2006 AND 1675/KOL/2007 6 - COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT : DCIT, CENTRAL CIRCLE VI, KOLKATA 2 / THE R ESPONDENT - M/S.J.K.CORPORATION LTD., 7, COUNCIL HOUSE STREET, KOLKATA 1 3. / THE CIT, 4. ( )/ THE CIT(A), 5. / DR, KOLKATA BENCH 6. GUARD FILE . / TRUE COPY , / BY ORDER , / DEPUTY REGISTRAR . ( /) H.K.PADHEE / SNR.PRIVATE SECRETARY.