ACIT, Circle-24(1), Hooghly, Hooghly V. M/s Kumar Associates, Hooghly

ITA 1951/KOL/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4152 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 05-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR CIT SRDR
• Keywords: Depreciation; Valuation report; Capital expenditure
• Section: 143(3)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1951 / KOL / 20 16 ASSESSMENT YEAR :2010-11 ACIT, CIRCLE-24(1), AAYAKAR BHAWAN, G.T. ROAD, KHADINA MORE, CHINSURAH, HOOGHLY-712101 V/S . M/S KUMAR ASSOCIATES C/O S.N.GHOSH & ASSOCIATES, ADVOCATES, SEVEN BROTHERSLODGE, P.O. BUROSHIBTALA, P.S. CHINSURAH, DIST. HOOGHLY PIN-712105 [ PAN NO.AAAAK 0986 E ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SAURABH KUMAR, ADDL. CIT-SR-DR /BY RESPONDENT SHRI SOMNATH GHOSH, ADVOCATE /DATE OF HEARING 08-10-2018 /DATE OF PRONOUNCEMENT 12 -10-2018 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 A RISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-6, KOLKATAS O RDER DATED 22.07.2016, PASSED IN CASE NO.294/CIT(A)-6/KOL/13-14, IN PROCEE DINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. IT IS NOTICED AT THE OUTSET THAT THE REVENUES S OLE SUBSTANTIVE GROUND RAISED IN THE INSTANT APPEAL CHALLENGES CORRECTNESS OF CIT(A)S ORDER DELETING / PARTLY RESTRICTING TOOLS & TACKLES EXPENSES ADDITIO N OF 4,39,661/- THEREBY GRANTING RELIEF OF 80,21,484/- VIDE FOLLOWING DETAILED DISCUSSION:- 3.1 THE SECOND TO FIFTH GROUNDS OF APPEAL ARE AGAIN ST AN ADDITION OF RS.84,61,145/- ON ACCOUNT OF EXPENSES ON TOLLS AN TACKLES CLAIMED BY THE ITA NO.1951/KOL/2016 A.Y. 2010-11 ACIT, CIR-24(1), HOOGHLY VS. M/S KUMAR ASSOC IATES PAGE 2 APPELLANT. IN THE ASSESSMENT ORDER, THE ASSESSING O FFICER (AO) HAS DISCUSSED THE ISSUE AS UNDER:- THE ASSESSEE HAD DEBITED TO P & L A/C. A SUM OF RS .84,61,1145/- UNDER THE HEAD TOOLS AND TACKLES. NO PROOFS RELATED TO (I) PURCHASE OF THOSE TOOLS AND TACKLES, (II) SITE-WISE SENDING OF THOSE ITEMS, (III) ITEM- WISE USE & EXHAUSTION DETAILS, (IV) AFTER USING, IT EMS RELEASED AS INTACT FOR FURTHER USE, (V) ACTUAL STOCK POSITION, OF ALL TOOLS AND TACKLES I.E. STOCK REGISTER COULD BE FURNISHED AT ALL. THE ASSES SEE VIDE ITS SUBMISSION LETTER DATED 30.03.2013 HAD ESTIMATED VA LUE OF STOCK AT RS.27,77,791/-. NO SPECIFIC DETAILS OF STOCK OF TOO LS & TACKLES COULD BE FURNISHED. IT IS ALSO OBSERVED THAT USE OF TOOLS & TACKLES IS NOT LOSING ITS UTILITY PERIOD IF IT IS USED ONCE. THERE ARE SCOPE OF USE O F THE SAME GOODS SEVERAL TIMES WHICH GIVES THE ENTITY OF THE ITEMS A S CAPITAL IN NATURE. HENCE, CLAIMING OF THE EXPENDITURE UNDER THE HEAD T OOLS AND TACKLES IS NOT REASONABLY BE TAKEN AS ESTABLISHED REVENUE EXPE NDITURE. THE ASSESSEE DID NOT GIVE ANY CLARIFICATION REGARDING T HE NATURE OF GOODS WHETHER REVENUE OR CAPITAL. MOREOVER, THE EXPLANATI ON REGARDING STOCK VALUE EXPLAINED BY THE ASSESSEE ONLY BASED ON ESTIM ATION WHICH GOES AGAINST THE PRINCIPLE OF ACCOUNTING. CONSIDERING TH E ABOVE FACTS AND OBSERVATION THE CLAIM MADE BY THE ASSESSEE UNDER TH E HEAD TOOLS AND TACKLES AMOUNTING TO RS.84,11,145/- IS ENTIRELY DIS ALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3.2 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT CONTENDED THAT THE TOOLS AND TACKLE WERE USED BY THE APPELLANT FOR CARRYING OUT SPECIFIC CONSTRUCTION WORKS AND COULD BE CATEGORISED INTO VARIOUS GROUPS LIKE STEEL SHUTTERING MATERIALS, DEWATERING SLUDGE PUMP LIFTING TOOLS ETC ., BLANK PIPES, MS CHISEL, CASTING BAILOR, SPARE PLYWOOD AND MS SHEET. DETAILS OF THE VARIOUS GROUPS WERE ENCLOSED WITH LEDGER ACCOUNT OF TOOLS AND TACK LES. THE USAGE AND CONSUMPTION OF THE TOOLS AND TACKLES WAS EXPLAINED AS UNDER: 1. STEEL SHUTTERING MATERIALS AS PER LIST A: AMOUN T OF PURCHASE RS.2532319/- BILL RAISED TO CLIENT FOR STAGING WORK OF 23768.20 CUM AND FORM WORK/SHUTTERING WORK OF 21948.70 SQ. MT. AMOUN TING RS.13899750/- AFTER REPEATED USE OF TOTAL MATERIA LS PURCHASED I.E. RS1266160/- WERE FOUND REUSABLE. 2. HAMMER DRILL, DEWATERING SLUDGE PUMP, LIFTING TO OLS ETC. AS PER LIST B. A) DEWATERING SLUDGE PUMP-6 NO. OF RS.216295/- : US ED FOR DEWATERING BENTONITE MIXED SLUDGE FROM 20 MTR. DEEP BORED PILE BEFORE CONCRETING 3 NO. PUMPS WERE FOUND REPAIRABLE. DEPRECIATION ALL OWABLE @ 100% IN SIMILAR NATURE VIDE N OF IX SCHEDULE OF DEPRECIAT ION WATER POLLUTION EQUIPMENT. B) BLACK PIPES OF 730 PCS. OF RS.504720/-: USED FOR STAGING/SUPPORTING OF SHUTTER PLATES DURING CONCRETING. QUANTITY OF 36 0 PC. WERE FOUND REUSABLE AND THUS OF TOTAL VALUE HAS BEEN TAKEN A S STOCK. C) HAMMER DRILL, BAR CUTTING TOOLS, LIFTING TOOLS: REQUIRED FOR PILING WORK ARE DAMAGED FULLY DURING SITE WORK. HOWEVER REPAIRI NG COST WAS VALUED AT OF THE TOTAL VALUE PURCHASED. 3. M/S CHISEL, CASING, BAILOR SPARES, HARDWOOD PLYW OOD ETC.: AS PER LIST C ITA NO.1951/KOL/2016 A.Y. 2010-11 ACIT, CIR-24(1), HOOGHLY VS. M/S KUMAR ASSOC IATES PAGE 3 A) PLYWOOD (6153.84 SQFT.), HARDWOOD (745.32 CFT) ETC. OF RS.498888/- USED WOOD SHUTTERING/ROD BINDING WHICH IS SUBJECT T O DEPRECIATION @ 100% AS PURELY TEMPORARY STRUCTURE AS PER SCHEDULE 1(4). TOTAL BILL RAISED TO CLIENT OF RS.120480/-. B) M.S. CHISEL 15237 KG. OF 548532/-: FULLY CONSUMA BLE DURING UNDERGROUND CONCRETING FOR PILING. APPROX 3000 KG O F RS.109706/- WERE FOUND IN STOCK AS REUSABLE. C) M/S CHISEL: TOTAL QUANTITY PURCHASED: 14 NO. OUT OF WHICH 11 NO. WERE DAMAGED / STUCK UP DURING UNDERGROUND BORING O F 14000 RUNNING METRE IN ROCKY SOIL AND ONLY 3 NO. FOUND REUSABLE A FTER REPAIRING/MODIFICATION AND HENCE PROPORTIONATE VALU E WERE TAKEN AS STOCK AND THE ITEM IS SUBJECT TO DEPRECIATION @ 60% ALLOWABLE IN THE CASE OF EQUIPMENT USED IN FIELD OPERATION UNDERGROU ND FOR MINERAL OIL CONCERNS AS PER I. TAX ACT. D) M.S. CASING: TOTAL QUANTITY PURCHASED 8 NO. AND USED FOR BORING/DRILLING HOLE UPTO 3 MTR. BELOW GROUND LEVEL . ONLY 2 PCS. WERE FOUND REUSABLE AFTER REPAIRING/MODIFICATIONS. HENCE PROPORTIONATE VALUE HAS BEEN TAKEN AS CLOSING STOCK. E) M.S. BAILOR: TOTAL QUANTITY PURCHASED 6 NO. AND USED INITIAL BORING AT TOP PORTION AFTER WHICH CHISEL BORING STARTS. ONLY 1 NO. WAS FOUND REUSABLE AFTER REPAIR AND MODIFICATIONS. F) OTHER SPARES, TOOLS, ACCESSORIES: ALL THE MATERI ALS PURCHASED AND USABLE UNDERGROUND JOB AND FULLY CHARGEBLE A REVENU E EXPENDITURE. APPROX. ASSESSMENT MADE AND FOUND 1/5 TH OF THE TOTAL QUANTITY IS REUSABLE AND HENCE PROPORTIONATE VALUE HAS BEEN AS CLOSING STOCK. 3. M/S CHISEL, CASING, BAILOR SPARES, HARDWOOD PLYW OOD ETC.: AS PER LIST C IT WAS STATED THAT UTILITY AND TENURE OF THE MACHIN ERIES WAS VERY LIMITED AS THE TOOLS AN TACKLES LOSE THEIR SHARPNESS AFTER CERTAIN USE PARTICULARLY IN ROCKY SOIL AND DEVELOP CRACKS AND BECOME COMPLETELY USELESS. A S PER THE DETAILED NARRATION GIVEN ABOVE, PART OF THE CONSUMPTION WAS SUITABLY ESTIMATED AS THE VALUE OF CLOSING STOCK TOTALLING TO RS.27,77,791/-. COPIES OF THE SUBMISSIONS MADE DURING THE AM PROCEEDING WERE ALSO FURNISHED T O SHOW THAT THE DETAILS WERE FURNISHED DURING THE AM PROCEEDINGS. THE DETAI LS AND SUBMISSION FURNISHED BY THE APPELLANT DURING THE APPELLATE PRO CEEDING WERE FORWARDED TO THE AO FOR HIS VERIFICATION AND COMMENTS WITH SPECI FIC DIRECTION TO VERIFY THE SAME WITH PURCHASE BILLS//REGISTERS AND OTHER DETAI LS. 3.3 THE AO FURNISHED HIS REMAND REPORT ON 25.05.201 6 VIDE NO. CIR.- 24/HOOGHLY/ REMAND REPORT/210-11/16-17/167 DATED 23 .05.2016, WHEREIN IT WAS REPORTED AS UNDER:- AS DIRECTED, ADEQUATE OPPORTUNITIES WERE EXTENDED TO THE ASSESSEE FOR SUBMISSION OF DOCUMENTS. IN RESPONSE TO HEARING NOT ICES SRI B. DAS, CA AND SRI T. LAHA, ACCOUNTANT APPEARED TIME TO TIM E AND SUBMITTED REQUISITE DETAILS. IN RESPONSE TO THE QUERIES, THE ASSESSEE SUBMITTED PHOTOCOPIES OF TORE LEDGER (STOCK REGISTER), PHOTOCOPIES OF PURCHASE VO UCHERS AND A PHYSICAL VALUATION OF CLOSING STOCK CERTIFICATE BY A CIVIL ENGINEER. VERIFICATION LETTER WAS ISSUED TO THE CONCERNED ENG INEER AND HIS REPLY DATED 12.04.2016, RECEIVED ON 17.05.2016, IS PLACED ON RECORD. ITA NO.1951/KOL/2016 A.Y. 2010-11 ACIT, CIR-24(1), HOOGHLY VS. M/S KUMAR ASSOC IATES PAGE 4 PURCHASE VOUCHERS ARE VERIFIED WITH THE ORIGINALS. THE ASSESSEE COULD NOT PRODUCE/SUBMIT PURCHASE VOUCHERS OF R.2,99,461/- (M ARKED IN STORE LEDGER) AND PER THE CERTIFICATE OF THE CIVIL ENGINEER, THER E ARE SOME TOOLS OF RS.1,40,200/- ARE REPAIRABLE, ABUT CLAMED AS DAMAGE D/SCRAP. 3.4 THE AR OF THE APPELLANT, FURNISHED A WRITTEN RE PLY TO THE REMAND REPORT ON 19.07.2016, WHEREIN IT WAS STATED, INTER-ALIA, AS U NDER:- WE APPEARED AT THE OFFICE OF ASST. COMMISSIONER O F INCOME TAX, CIRCLE-24, CHINSURAH, HOOGHLY IN CONNECTION WI TH REMAND REPORT FOR THE ABOVE MENTIONED APPEAL CASE FROM TI ME TO TIME AND SUBMITTED THE DOCUMENTS INCLUDING THE COPIES OF PURCHASE DOCUMENTS, STORE LEDGER, STOCK CERTIFICATE AND STOC K VALUATION REPORT ISSUED BY A QUALIFIED ENGINEER AS REQUIRED B Y THE OFFICE OF ASST. COMMISSIONER OF INCOME TAX DURING VERIFICATIO N AND ASSESSMENT. WE TRIED OUR BEST TO CLARIFY ALL THE QUERIES RAISE D BY THE OFFICE OF THE ASST. COMMISSIONER TIME TO TIME. WE COULD NOT PRODUCE THE PURCHASE DOCUMENTS WORTH RS.2,99,461/- WHICH MIGHT HAVE BEEN MISPLACED AND R EMAINED UNTRACEABLE. THE ENGINEER WHO CERTIFIED THE STOCK VALUATION REP ORT DID NOT CONSIDER SOME TOOLS FOR RS.140,200/- A SCRAP AS PER OUR STOCK LEDGE AND CERTIFIED AS REPAIRABLE AND RECOMMENDED A DDITION TO THE CLOSING STOCK BY RS.1,40,200. 3.5 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANTS SUBMISSIONS. I FIND THAT THE AO DISALLOWED THE EXPENSES OF TOOLS A ND TACKLES OF RS.84,61,145/- AS ACCORDING TO HIM, THE APPELLANT D ID NOT FURNISH ANY EVIDENCE RELATING TO THEIR PURCHASE OR USAGE AND SOME OF THE TOOLS AND TACKLES WERE REUSED SHOWING THAT THE EXPENDITURE WAS CAPITAL IN NATURE.. AS IS EVIDENT FROM THE REMAND REPORT, THE AO HAS NOT FOUND ANY SPECIFI C EVIDENCE TO CONFIRM THE FINDINGS IN THE ASSESSMENT ORDER THAT THE EXPENDITU RE WAS IN THE NATURE OF CAPITAL EXPENDITURE. THE FINDING GIVEN IN THE ASSES SMENT ORDER THE EXPENDITURE WAS IN THE NATURE OF CAPITAL EXPENDITURE HAD NO CON CRETE BASIS AND NO SPECIFIC ITEMS OF TOOLS AND TACKLES WERE DISCUSSED TO SHOW T HAT THE EXPENDITURE WAS CAPITAL EXPENDITURE YIELDING ENDURING BENEFITS. I H AVE EXAMINED THE DETAIL FURNISHED BY THE APPELLANT AND DO NOT FIND ANY MATE RIAL TO SHOW THAT THE EXPENDITURE WAS IN THE NATURE OF CAPITAL EXPENDITUR E. MOREOVER, ON THE BASIS OF POSSIBLE REUSE OF TACKLES, CLOSING STOCK OF TOOL S AND TACKLES HAS BEEN FAIRLY ESTIMATED, WHICH HAS TO BE INCREASED BY RS.1,40,200 /- AS PER THE CERTIFICATE GIVEN BY THE ENGINEER REFERRED TO IN THE REMAND REP ORT. THUS, IT HAS TO BE HELD THAT THE EXPENDITURE CLAIMED BY THE APPELLANT WAS R EVENUE EXPENDITURE. AS AGREED TO BY THE APPELLANT, IN THE REMAND REPORT IT HAS BEEN POINTED OUT THAT PURCHASE BILLS/.VOUCHERS WORTH RS.2,99,461/- COULD NOT BE PRODUCED. THE OTHER PURCHASES HAVE BEEN FOUND PROPERLY VOUCHED BY THE AO AT THE REMAND REPORT STGE. THEREFORE, ADDITION OF RS.4,39,661/- ( I.E. RS.2,99,461/- + RS.1,40,200/-) IS CONFIRMED AND THE BALANCED ADDITI ON MADE BY THE AO IS DELETED. ITA NO.1951/KOL/2016 A.Y. 2010-11 ACIT, CIR-24(1), HOOGHLY VS. M/S KUMAR ASSOC IATES PAGE 5 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDS DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER HAD RI GHTLY MADE THE IMPUGNED ADDITION IN THE GIVEN FACTS AND CIRCUMSTANCES OF TH E CASE. WE FIND NO MERIT IN THE INSTANT ARGUMENT AS THE ASSESSING OFFICER HIMSE LF HAS MADE IT CLEAR IN HIS REMAND REPORT DATED 25.05.2016 (SUPRA) THAT ASSESSE E SUCCESSFULLY VERIFIED THE RELEVANT PURCHASE VOUCHERS WITH THE ORIGINALS. HE APPEARS TO HAVE CONCLUDED THAT ONLY VOUCHERS OF 2,99,461/- AND TOOLS AMOUNTING TO 1,40,200/- COULD NOT BE PRODUCED OR WERE FOUND TO H AVE BEEN CLAIMED AS DAMAGED / SCRAP. WE CONCLUDE IN THESE FACTS THAT TH E REVENUE CAN HARDLY BE HELD TO BE AGGRIEVED AGAINST THE CIT(A)S FINDINGS SINCE THE ASSESSING OFFICER HAS HIMSELF CONFIRMED THE IMPUGNED PURCHASE DISALL OWANCE TO THE EXTENT OF 4,39,661/- ONLY DURING REMAND PROCEEDINGS. WE ACCO RDINGLY UPHOLD THE CIT(A)S FINDINGS GRANTING PART RELIEF TO THE ASSES SEE WITH A RIDER THAT SAME SHALL NOT BE TREATED AS A PRECEDENT IN ANY OTHER CA SE. 4. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 12/10/2018 SD/- SD/- ( %) (' %) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 12 / 10 /201 8 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT,CIR-24(1), G.T.ROAD, KHADINA MORE, CHINSURAH, HOOGHLY-712101 2. /RESPONDENT-M/S KUMAR ASSOCIATES, C/O S.N. GHOSH & ASSOCIATES, ADVOCATE, SEVEN BROTHERS, LODGE, P.O. BUROSHIBTALA, P.S. CHINSURAH, DIST. HOOGHLY, PIN-712 105 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,