Sh. R.P. Kapur, Mandi V. Pr. CIT, Shimla

ITA 206/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4542 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 19-02-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S PHANI KISHORE
• Assessee Lawyers: PARKISHIT AGGARWAL
• Keywords: TDS; Set aside
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! . .., # $, %& BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ./ ITA NO. 206/CHD/2018 / ASSESSMENT YEAR : 2014-15 SH. R.P. KAPUR PROP M/S MANDAV AIR INDUSTRIES, PLOT NO;. 12, PHASE -1, INDUSTRIAL AREA SAULI KHAD, DISTT. KANDI (H.P) VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX, SHIMLA ./ PAN NO.AKZPK1895L / APPELLANT / RESPONDENT ! / ASSESSEE BY : SHRI PARKISHIT AGGARWAL, CA ' ! / REVENUE BY : SH. G.S. PHANI KISHORE, CIT DR # $ % / DATE OF HEARING : 02.05.2019 &'() % / DATE OF PRONOUNCEMENT : 30.05.2019 %' / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 4.12.2017 OF THE PRINCIPAL COMMISSIONER OF INCOME TAX, SHIMLA [HEREINAFTER REFERRED TO AS PCIT]. 2. THE ASSESSEE IN THIS APPEAL HAS AGITATED THE ACT ION OF THE LD. PCIT IN INVOKING THE PROVISIONS OF SECTION 263 OF THE AC T, WHEREBY, HE HAS SET ITA NO. 206-CHD/2018 SH. R.P. KAPUR PROP M/S MANDAV AIR INDUSTRIES, MAN DI 2 ASIDE THE ASSESSMENT ORDER DATED 28.2.2016 OF THE A SSESSING OFFICER PASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') FOR DE NOVO ASSESSMENT. 3. A PERUSAL OF THE IMPUGNED ORDER OF THE LD. PCIT PASSED U/S 263 OF THE ACT REVEALS THAT THE LD. PCIT NOTICED THE FOLLO WING ERRORS / DISCREPANCIES IN THE ORDER OF THE ASSESSING OFFICER : A. DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961 WAS ALLOWED TO YOU IN RESPECT OF UNIT -II WHERE DISSOLVED ACETYLENE GAS WAS BEING PRODUCED WHICH FALLS UNDER THE NEGATIVE LIST OF SCHEDULE XIII OF T HE INCOME TAX ACT, L961. THE ASSESSMENT ORDER WAS PASS ED ON 28.12.2016. HOWEVER, THE INFORMATION RELATED TO THE PRODUCTION OF DISSOLVED ACETYLENE GAS (THAT IT FALL S UNDER THE LIST) WAS AVAILABLE WITH THE A.O. FROM TH E LETTERS ISSUED BY DIRECTORATE OF INDUSTRIES, H.P. A ND DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, GOVT . OF INDIA VIDE LETTER DATED 03.06.2016 AND 11.03.201 6 RESPECTIVELY DESPITE THEREOF THE DEDUCTION U/S 80I C IS ALLOWED BY THE A.O. B. IN PROFIT & LOSS ACCOUNT UNIT I (IU-II) YOU HAVE SHOWN INCOME ON ACCOUNT OF RENT AT RS. 60,000/- AND NET INCOME WAS SHOWN AT RS.45,97,055/- SAID INCOM E WAS NOT DERIVED FROM MANUFACTURING ACTIVITIES AND ALSO HAD NO DIRECT NEXUS BETWEEN THE PROFITS AND GAINS F ROM INDUSTRIAL UNDERTAKING. HENCE YOU ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IC OF THE INCOME TAX ACT,1961. HOWEVER, THE A.O. HAS NOT VERIFIED THE SAME AND HAD WRONGLY ALLOWED DEDUCTION U/S 80IC ON THIS INCOME. C. ON PERUSAL OF NOTE 7, SHORT TERM LOANS AND ADVANCES, IT IS NOTICED THAT YOU HAD DEPOSITED SECURITIES WITH SALES TAX DEPARTMENT AMOUNTING TO R S. ITA NO. 206-CHD/2018 SH. R.P. KAPUR PROP M/S MANDAV AIR INDUSTRIES, MAN DI 3 5,000/- AND RS. 4,58,000/- WITH HPSEB. ON VERIFICAT ION OF FORM NO. 26AS, IT IS ALSO NOTICED THAT YOU HAD RECEIVED INTEREST INCOME OF RS. 35,179/- FROM HPSEB ON WHICH TDS OF RS. 3624/- WAS ALSO DEDUCTED. THE INTEREST EARNED ON THESE DEPOSITS IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IC. HOWEVER, IT APPEARS THAT INTEREST INCOME WAS NOT DISCLOSED BY YOU. D. ON PERUSAL OF THE PROFIT & LOSS ACCOUNT IN RESPECT OF UNIT I (IU-II), YOU HAD SHOWN NET PROFIT OF RS. 45,97,055/- ON WHICH DEDUCTION @ 25% WAS CLAIMED AT RS. 11,49,264/-. NEVERTHELESS, THE SAID CLAIM WAS REJECTED BY THE A.O., BY HOLDING THAT IT IS SPL ITTING UP/RECONSTRUCTION OF EXISTING BUSINESS I.E. UNIT-I( IU-I) INSTEAD OF NEW INDUSTRIAL UNDERTAKING BUT STILL DEDUCTION WAS ALLOWED TO YOU; WHEREAS, THE DEPARTME NT IS ALREADY IN APPEAL IN ITAT AGAINST ALLOWANCE OF T HE SAME BY CIT(A) FOR A.Y. 2012- 13. E. ON PERUSAL OF PROFIT & LOSS ACCOUNT IN RESPECT O F UNIT I(IU-II) IN WHICH YOU HAD CLAIMED DEDUCTION @ 25% U/S 80IC, EXPENSES ON ACCOUNT OF ELECTRICITY AN D WATER HAS BEEN CLAIMED AT RS. 82,70,484/-, WHEREAS ONLY RS. 1,66,020/- (THERE IS NO SCHEDULE OR DETAIL S OF THESE EXPENSES ALSO) HAS BEEN CLAIMED FOR UNIT-II A S ELECTRICITY AND WATER EXPENSES, IN WHICH 100% DEDUCTION UNDER SECTION 80IC WAS CLAIMED. IT IS ALS O NOTICED THAT THERE IS NO ELECTRICITY SECURITY DEPOS ITED WITH THE HPSEB FOR INSTALLATION OF ELECTRIC CONNECT ION IN RESPECT OF THIS UNIT. THUS, THERE APPEARS TO BE NO ELECTRIC CONNECTION FOR UNIT-II AND THEREFORE, WHOL E ELECTRICITY/WATER EXPENSES HAVE BEEN CLAIMED IN UNIT -1 ONLY. IN THE ABSENCE OF ANY DETAILS, THE EXPENSE S SHOULD HAVE BEEN APPORTIONED AMONGST THE UNITS IN SAME PROPORTIONATE AS PER THE SALES/TURNOVER AND ACCORDINGLY, DEDUCTION U/S 80IC HAS BEEN EXCESSIVEL Y ALLOWED. SIMILARLY, IT IS NOTICED THAT THE EXPENSES ON ACCOUNT OF EMPLOYEES BENEFITS HAVE BEEN CLAIMED IN RESPECT OF UNIT 1 AT 29.87 LAC AND FOR UNIT II ONLY ITA NO. 206-CHD/2018 SH. R.P. KAPUR PROP M/S MANDAV AIR INDUSTRIES, MAN DI 4 10.49 LAC, WHEREAS TURNOVER OF UNIT II IS MORE TH AN 45% OF UNIT I AT RS. 3.05 CRORE AND RS. 2.10 CRORE RESPECTIVELY. THUS, IT APPEARS THAT YOU HAVE DIVERT ED THE EXPENSES TO CLAIM HIGHER DEDUCTION U/S 80IC. 4. THE LD. PCIT THEREAFTER SHOW CAUSE THE ASSESSEE AS TO WHY THE ASSESSMENT ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE BE NOT SET ASIDE. THE ASSESSEE THEREAFTER R EPLIED TO THE AFORESAID SHOW CAUSE NOTICE. THE LD. PCIT DID NOT A GREE WITH THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT SINCE THE REQUIRED ENQUIRIES HAD NOT BEEN MADE BY THE ASSESSING OFFICER BEFORE C OMPLETING THE ASSESSMENT AND ALSO SINCE THE ASSESSEE HAD NOT BEEN ABLE TO SATISFACTORILY EXPLAIN THE ISSUES RAISED BY THE LD. PCIT, HENCE, THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF REVENUE. HE ALSO OBSERVED THAT THE ASSE SSING OFFICER EVEN WHILE CALCULATING THE TAX HAD WRONGLY APPLIED THE P ROVISIONS OF SECTION 115JC OF THE I.T. ACT, WHEREAS, THE SAID SECTION WA S NOT APPLICABLE TO THE ASSESSEE BEING AN INDIVIDUAL. HE, THEREFORE, S ET ASIDE THE ORDER OF THE ASSESSING OFFICER AND DIRECTED THE ASSESSING OF FICER TO FRAME THE ASSESSMENT AFRESH IN ACCORDANCE WITH LAW AFTER GIVI NG DUE AND REASONABLE OPPORTUNITY TO THE ASSESSEE TO PRESENT HIS CASE. 5. BEING AGGRIEVED BY THE SAID ORDER OF THE LD. PCI T, THE ASSESSEE HAS COME IN APPEAL BEFORE US. THE ARGUMENT OF THE L D. COUNSEL FOR THE ASSESSEE HAS BEEN RESTRICTED TO ONLY POINT A AS N OTED BY THE LD. PCIT ITA NO. 206-CHD/2018 SH. R.P. KAPUR PROP M/S MANDAV AIR INDUSTRIES, MAN DI 5 IN THE IMPUGNED ORDER. THE ISSUE RAISED VIDE POINT A WAS AS TO WHETHER THE PRODUCT MANUFACTURED BY THE ASSESSEE I.E. DISS OLVED ACETYLENE GAS FALLS IN NEGATIVE LIST OF SCHEDULE XIII OF THE I.T. ACT, HENCE, NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80IC OF THE ACT. THE LD. PCI T WAS OF THE VIEW THAT THE PRODUCT MANUFACTURED BY THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. HOWEVER, THE LD. COU NSEL FOR THE ASSESSEE, BEFORE US, HAS SUBMITTED THAT THE PRODUCT MANUFACTURED BY THE ASSESSEE DOES NOT FIND MENTION IN THE NEGATIVE LIST AS PROVIDED UNDER THE THIRTEENTH SCHEDULE OF THE INCOME TAX ACT. THAT THE SUB-CLASS UNDER NATIONAL INDUSTRIAL CLASSIFICATION (NIC), 1998 MENT IONING PRODUCT CODE IS 24117 IN RESPECT OF SERIAL NO.5, PART B OF THE THIRTEENTH SCHEDULE. THAT, WHEREAS, THE PRODUCT MANUFACTURED BY THE ASS ESSEE AS PER THE ACTIVITY AND PRODUCT CLASSIFICATION GIVEN BY STATI STICS & DATABANK DIVISION, MINISTRY OF MICRO, SMALL & MEDIUM ENTERPR ISES, GOVERNMENT OF INDIA BEARS CODE 24119 AND, HENCE, THE SAME DO ES NOT FALL IN THE NEGATIVE LIST. HOWEVER, THE LD. COUNSEL FOR THE AS SESSEE HAS NOT ADDRESSED ANY ARGUMENTS ABOUT THE REMAINING POINTS ON ACCOUNT OF WHICH ALSO LD. PCIT HELD THAT THE ORDER OF THE ASSE SSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE LD. COUNSEL THOUGH ORALLY SUBMITTED THAT THE LD. PCIT DID NOT F IND ANY ERROR IN RESPECT OF POINT D RAISED BY HIM IN THE IMPUGNED ORDER. MAY IT BE SO, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT ADDRESSED ANY ARGUMENTS REGARDING POINT B, POINT C AND POINT E BEFORE US. WE HAVE BEEN ITA NO. 206-CHD/2018 SH. R.P. KAPUR PROP M/S MANDAV AIR INDUSTRIES, MAN DI 6 CONVEYED THAT EVEN IN THE SET ASIDE PROCEEDINGS, TH E ASSESSEE COULD NOT CONVINCE THE ASSESSING OFFICER APART FROM POINT A , REGARDING POINT B AND POINT C ALSO AS MENTIONED IN THE IMPUGNED ORD ER OF THE PCIT. FROM THE ABOVE DISCUSSION WHAT EMERGES IS THAT THER E WERE CERTAIN ERRORS IN THE ORDER OF THE ASSESSING OFFICER PASSED U/S 1 43(3) OF THE ACT AND BECAUSE OF THOSE ERRORS, THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. HENCE, THE SAID ORDER BEING ERRONEOUS W AS ALSO PREJUDICIAL TO THE INTEREST OF REVENUE. THOUGH THE ASSESSEE HAS ARGUABLE POINTS REGARDING POINT A RAISED IN THE IMPUGNED ORDER OF THE PCIT, HOWEVER, THE FACTS ESTABLISH ON THE FILE THAT THE ASSESSEE C OULD NOT REBUT THE FINDINGS OF THE LD. PCIT IN RESPECT OF POINTS B A ND C WHICH PROVES THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEO US AND PREJUDICIAL TO THE INTEREST OF REVENUE AS THE ASSESSING OFFICER HA D FAILED TO MAKE ANY PROPER REQUIRED ENQUIRES TO FRAME THE ASSESSMENT. 6. IN VIEW OF THIS, WE DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDER OF THE LD. PCIT IN SETTING ASIDE THE ASSESSMENT OR DER PASSED U/S 143(3) OF THE ACT. HOWEVER, THE ASSESSEE WILL BE AT LIBERT Y TO PUT ITS POINTS OF ARGUMENTS / EXPLANATIONS REGARDING THE ISSUES RAISE D BY THE LD. PCIT INCLUDING THE ISSUE RAISED VIDE POINT A IN THE IM PUGNED ORDER OF THE LD. PCIT. ITA NO. 206-CHD/2018 SH. R.P. KAPUR PROP M/S MANDAV AIR INDUSTRIES, MAN DI 7 IN VIEW OF THIS, SO FAR AS THE ORDER PASSED BY THE PCIT U/S 263 IS CONCERNED, WE DO NOT DEEM IT FIT TO INTERFERE WITH THE SAME AND THE SAME IS ACCORDINGLY UPHELD. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.5.2019 SD/- SD/- ( . . , # $ / B.R.R. KUMAR) %& / ACCOUNTANT MEMBER ( / SANJAY GARG ) / JUDICIAL MEMBER DATED : 30.05.2019 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR