M/s.Grand Motors sales Coporation, Trivandrum V. ACIt, Trivandrum

ITA 205/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68989 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Capital asset; Depreciation
• Section: 68; 263

Judgement Text

1 ITA NO.205/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 205/COCH/2013 (ASSESSMENT YEAR 2008-09) M/S GRAND MOTORS SALES CORPORATION VS THE A.CI.T., CIR.1(2) T.C. 31/1398-2, BYE-PASS ROAD THIRUVANANTHAPURAM CHACKA, THIRUVANANTHAPURAM PAN : AACFG3656L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.M. SREEDHARAN RESPONDENT BY : SHRI M ANIL KUMAR, C.I.T. SMT. LATHA V KUMAR DATE OF HEARING : 23-09-2013 DATE OF PRONOUNCEMENT : 27-09-2013 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER U/S 263 DATED 18-03-201 3 FOR THE ASSESSMENT YEAR 2008-09. 2. SHRI T.M. SREEDHARAN, THE LD.SENIOR COUNSEL SUBM ITTED THAT THE ADMINISTRATIVE COMMISSIONER FOUND THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS ON THE GROUND THAT THE INTEREST BEARI NG FUNDS WERE DIVERTED 2 ITA NO.205/COCH/2013 FOR THE PERSONAL PURPOSE OF THE PARTNERS AND THERE WAS A REDUCTION IN THE VALUE OF THE LAND TO THE EXTENT OF RS.7,48,350. AC CORDING TO THE LD.SENIOR COUNSEL, THOUGH THIS TRIBUNAL HAD AN OCCASION TO CO NSIDER AN APPEAL AGAINST THE DISALLOWANCE OF INTEREST, DIVERSION OF FUNDS TO THE PARTNERS WAS NOT SUBJECT MATTER OF APPEAL. THE LD.SENIOR COUNSE L FURTHER SUBMITTED THAT THIS TRIBUNAL HAS ALSO CONSIDERED THE ISSUE OF REDU CTION IN VALUE OF THE LAND AND THE ISSUE WAS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. ACCORDING TO THE LD.SENIOR COUNSE L, WHEN THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS, THE CI T(A) CANNOT REVISE THE ORDER ON THE GROUND THAT THERE IS AN ERROR IN THE O RDER OF THE ASSESSING OFFICER. ACCORDING TO THE LD.SENIOR COUNSEL, THERE IS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER WHICH IS PREJUDICIAL TO THE I NTEREST OF THE REVENUE. 3. ON THE CONTRARY, SHRI M ANIL KUMAR, THE LD.DR SU BMITTED THAT THE ISSUE OF DIVERSION OF FUNDS TO THE PARTNERS WAS NOT SUBJECT MATTER OF APPEAL EITHER BEFORE THE CIT(A) OR BEFORE THIS TRIBUNAL. THE ADMINISTRATIVE COMMISSIONER FOUND THAT THERE WAS A DEBIT BALANCE I N THE PARTNERS CURRENT ACCOUNT. THEREFORE, THE DISALLOWANCE HAS TO BE MAD E TO THE EXTENT OF DIVERSION OF BORROWED FUNDS. THE LD.DR FURTHER POI NTED OUT THAT IN THE DEPRECIATION STATEMENT FILED DURING THE COURSE OF A SSESSMENT THERE WAS A 3 ITA NO.205/COCH/2013 REDUCTION OF VALUE OF THE LAND TO THE EXTENT OF RS. 7,48,350. THE ASSESSING OFFICER TREATED IT AS CAPITAL GAIN AND THIS TRIBUNA L FOUND THAT IN THE ABSENCE OF A TRANSFER, THERE CANNOT BE ANY CAPITAL GAIN. A CCORDINGLY, THE ORDER WAS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION SINCE THE ASSESSEE CLAIMED THAT REDUCTION WAS DUE TO REVA LUATION OF THE ASSET. SINCE THE ASSESSEE CLAIMED REDUCTION OF THE VALUE O F THE LAND IN THE DEPRECIATION STATEMENT, ACCORDING TO THE LD.DR, THE ADDITION SHOULD HAVE BEEN MADE AS UNEXPLAINED CREDIT. THE LD.DR FURTHER POINTED OUT THAT NO DEPRECIATION IS ALLOWABLE ON THE VALUE OF THE LAND, HENCE IT IS FOR THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF DEPRECIATION WHICH GOES TO REDUCE THE VALUE OF THE LAND. IN THE ABSENCE OF ANY MATERIAL, ACCORDING TO THE LD.DR, THE ADMINISTRATIVE COMMISSIONER FOUND THAT THE ORDE R OF THE ASSESSING OFFICER IS ERRONEOUS WHICH IS PREJUDICIAL TO THE IN TEREST OF THE REVENUE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ADMI NISTRATIVE COMMISSIONER FOUND THAT AS ON 31-03-2008, THE PARTN ERS CURRENT ACCOUNT DISCLOSED A DEBIT BALANCE WHICH INDICATED THE DIVER SION OF BORROWED FUNDS FOR THE PERSONAL PURPOSE OF THE PARTNERS. THIS ISS UE WAS NOT CONSIDERED BY 4 ITA NO.205/COCH/2013 THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT P ROCEEDINGS. ADMITTEDLY, THIS WAS ALSO NOT SUBJECT MATTER OF APPEAL EITHER B EFORE THE CIT(A) OR BEFORE THIS TRIBUNAL. THEREFORE, THIS TRIBUNAL IS OF THE C ONSIDERED OPINION THAT THE NON CONSIDERATION OF THE DEBIT BALANCE IN THE PARTN ERS CURRENT ACCOUNT IS AN ERROR WHICH IS PREJUDICIAL TO THE INTEREST OF TH E REVENUE. THE NON APPLICATION OF MIND TO THE DEBIT BALANCE FOUND IN T HE PARTNERS CURRENT ACCOUNT BY THE ASSESSING OFFICER IS SUFFICIENT TO E XERCISE THE REVISIONAL JURISDICTION U/S 263 OF THE ACT. THEREFORE, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT THE ADMINISTRATIVE COMMISSIONER HAS RI GHTLY INVOKED HIS JURISDICTION U/S 263 OF THE ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER SHALL CONSIDER THE ISSUE WITH REGARD TO AVAILABLE INTEREST FREE FUNDS, BORROWED FUNDS AND DEBIT BALAN CES SHOWN IN THE PARTNERS CURRENT ACCOUNT AND THEREAFTER FIND OUT W HETHER THERE WAS ANY DIVERSION OF BORROWED FUNDS FOR THE PERSONAL USE OF THE PARTNERS. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY ON THIS ISSUE. ACCORDINGLY, THE ORDER OF THE ADMINISTRATIVE COMMISSIONER ON THIS ISSUE IS CONFIR MED. 5 ITA NO.205/COCH/2013 5. THE NEXT ISSUE IS WITH REGARD TO REDUCTION IN TH E VALUE OF THE LAND ON THE DEPRECIATION STATEMENT FILED BEFORE THE ASSESSI NG OFFICER. THE ASSESSING OFFICER MADE ADDITION OF RS.7,48,350 UNDER THE HEAD CAPITAL GAIN. IN THE REGULAR APPEAL BEFORE THIS TRIBUNAL IN ITA NO.76/CO CH/2013, THE ASSESSEE CLAIMED THAT THE VALUE OF THE BLOCK OF ASSET WAS SH OWN ON REVALUATION. IF THERE WAS A REVALUATION AND THERE WAS NO TRANSFER O F CAPITAL ASSET, THERE CANNOT BE ANY CAPITAL GAIN. THEREFORE, THIS TRIBUN AL REMANDED BACK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO EXAMINE THE ISSUE IN THE LIGHT OF DEFINITION IN SECTION 2(47) O F THE ACT. THEREFORE, THE ISSUE BEFORE THIS TRIBUNAL IS WHETHER THERE CAN BE A CAPITAL GAIN TO THE EXTENT OF RS.7,48,350. THE ADMINISTRATIVE COMMISSI ONER FOUND THAT THE DEPRECIATION STATEMENT FILED DURING THE COURSE OF A SSESSMENT PROCEEDINGS SHOWS THE REDUCTION OF THE VALUE OF THE LAND TO THE EXTENT OF RS.7,48,350 AND SINCE DEPRECIATION IS NOT ALLOWABLE ON THE LAND , THE ADDITION COULD HAVE BEEN MADE AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. THIS ASPECT WAS NOT CONSIDERED EITHER BY THE ASSESSING OFFICER OR B Y THE APPELLATE AUTHORITY INCLUDING THIS TRIBUNAL. THEREFORE, WHETHER THE AD DITION COULD BE MADE U/S 68 OF THE ACT OR AS CAPITAL GAIN HAS TO BE CONSIDER ED BY THE ASSESSING OFFICER. SINCE THE ISSUE HAS ALREADY BEEN REMITTED BACK BY T HE TRIBUNAL FOR 6 ITA NO.205/COCH/2013 CONSIDERATION BY THE ASSESSING OFFICER IN THE LIGHT OF SECTION 2(47) OF THE ACT IT IS ALSO NECESSARY TO CONSIDER WHETHER THERE WAS ANY UNEXPLAINED CREDIT SINCE THERE WAS DEVALUATION FOUND IN THE DEPRECIATI ON STATEMENT. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACC ORDINGLY, THE ORDER OF THE ADMINISTRATIVE COMMISSIONER IS CONFIRMED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH SEPTEMBER, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 27 TH SEPTEMBER, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH