S.Albert & Co. P Ltd., CHENNAI V. ITO, CHENNAI

ITA 2201/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9678 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 26-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R MOHAN
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Audit objection
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.2201/MDS/2015 ( / ASSESSMENT YEAR: 2011-12) M/S .S.ALBERT & CO.P.LTD., 13/1, WHANNELS ROAD, EGMORE, CHENNAI-600 008. VS THE INCOME TAX OFFICER, CORPORATE WARD-6(1), CHENNAI. PAN: AADCS9670C ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.SRIDHAR, ADVOCATE /RESPONDENT BY : MR. R.MOHAN, CIT /DATE OF HEARING : 11 TH FEBRUARY, 2016 /DATE OF PRONOUNCEMENT : 13 TH APRIL, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCO ME TAX, CHENNAI, DATED 03.11.2015 IN C.NO.6119(22)/PR CIT-6 /2015- 16 PASSED UNDER SECTION 263 OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN HIS A PPEAL. HOWEVER, THE CRUX OF THE ISSUE IS THAT THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX HAS ERRED IN INVOKING TH E PROVISIONS OF SECTION 263 OF THE ACT AND SETTING AS IDE THE ORDER OF THE ASSESSING OFFICER TO REDO THE ASSESSME NT WITH 2 ITA NO.2201 /MDS/2015 SPECIFIC DIRECTIONS TO DISALLOW THE INTEREST EXPEND ITURE OF RS.81,67,676/- AND DEPRECIATION OF RS.19,24,864/-. 3. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF EXPORTS, IMPORTS, TRANSPORTATION , CONTRACTORS, CLEARING |& FORWARDING AGENTS, FILED I TS RETURN OF INCOME ON 23.03.2012 FOR THE ASSESSMENT YEAR 2011- 12 ON 31.07.2007 ADMITTING INCOME OF RS.30,07,109/-. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE LEARNED ASSESSING OFFICER FROM THE PROFIT & LOSS AC COUNT THAT THE ASSESSEE HAS DECLARED MEAGER PROFIT @ 1.56% ON TURNOVER. IN ORDER TO VERIFY THE CLAIM OF THE ASSES SEE, THE LEARNED ASSESSING OFFICER CALLED FOR SUPPORTING BIL LS, VOUCHERS ETC., TOWARDS THE EXPENSES INCURRED. HOWEVER, THE ASSESSEE COULD NOT PRODUCE THE SAME. THEREFORE, THE LEARNED ASSESSING OFFICER ESTIMATED THE PROFIT OF THE ASSE SSEE AT 8% OF THE TURNOVER WHICH IS THE NORMAL PROFIT FROM SU CH BUSINESS AND ACCORDINGLY RECOMPUTED THE NET PROFIT AT RS.1,4 8,87,594/. THE LEARNED ASSESSING OFFICER FURTHER GRANTED DEDUC TION TOWARDS THE INTEREST EXPENSES OF RS.81,61,676/- AND ALLOWED THE BENEFIT OF DEPRECIATION RS. 19,24,864/- TO THE ASSESSEE 3 ITA NO.2201 /MDS/2015 AND THEREBY COMPUTED THE PROFIT OF THE ASSESSEE FRO M ITS BUSINESS AT RS.47,95,054/-. SUBSEQUENTLY, THE LEAR NED PRINCIPAL COMMISSIONER OF INCOME TAX, TAKING CUE FR OM THE AUDIT REPORT CONDUCTED IN THE CASE OF THE ASSESSEE WHEREIN IT WAS STATED - IT IS POINTED OUT THAT WHEN SUCH ESTIMATE IS MADE, IT IS IN SUBSTITUTION OF THE INCOME THAT IS TO BE COMPUTE D UNDER SECTION 29. IN OTHER WORDS, ALL THE DEDUCTION S WHICH ARE REFERRED TO UNDER SECTION 29 ARE DEEMED T O HAVE BEEN TAKEN INTO ACCOUNT WHILE MAKING SUCH AN ESTIMATE AS HELD IN THE CASE OF CIT VS. INDWELL CONSTRUCTION 232 ITR 776. HENCE, THE DEDUCTION ON ACCOUNT OF INTEREST AND DEPRECIATION IS REQUIRED TO BE ADDED BACK TO THE TOTAL INCOME., - INVOKED HIS POWERS UNDER SECTION 263 OF THE ACT A ND DIRECTED THE LEARNED ASSESSING OFFICER TO WITHDRAW THE BENEFIT OF DEPRECIATION AND DEDUCTION OF INTEREST EXPENDITU RE ALLOWED BY HIM. AGGRIEVED BY THIS ORDER, THE ASSESSEE IS I N APPEAL BEFORE US. 4. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE US THAT THE LEARNED PRINCIPAL COMMISSIONER O F INCOME TAX HAS INVOKED HIS JURISDICTION BASED ON THE AUDIT OBJECTION WHICH IS ERRONEOUS. HE FURTHER ARGUED BY STATING T HAT THE LEARNED ASSESSING OFFICER HAS CONSIDERED THE CASE O F THE 4 ITA NO.2201 /MDS/2015 ASSESSEE JUDICIOUSLY AND ESTIMATED ITS INCOME BY GR ANTING THE BENEFIT OF DEPRECIATION AND DEDUCTION OF INTERE ST EXPENDITURE WHILE ARRIVING AT THE PROFIT OF THE ASS ESSEE. IT WAS THEREFORE PLEADED THAT THE ORDER OF THE LEARNED PRI NCIPAL COMMISSIONER OF INCOME TAX UNDER SECTION 263 MAY BE SET ASIDE. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND, ARGUED IN SUPPORT OF THE ORDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX AND JUSTIFIED HIS ACTION BASED ON THE AUDIT REPORT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. ON PERUS ING THE ORDER OF THE LEARNED ASSESSING OFFICER, WE FIND THA T THE LEARNED ASSESSING OFFICER HAS ESTIMATED THE PROFIT OF THE ASSESSEE AT 8% ON ITS TURNOVER AND FURTHER GRANTED THE BENEFIT OF DEPRECIATION AND ALLOWED THE INTEREST EX PENDITURE AS DEDUCTION AND THEREAFTER ESTIMATED THE PROFIT OF THE ASSESSEE CONSCIOUSLY AT RS. 47,95,054/-. THE ENTIRE PROCESS OF ASSESSMENT MADE BY THE LEARNED ASSESSING OFFICER WAS BASED ON ESTIMATION CONSIDERING THE FACTS OF THE RE LEVANT 5 ITA NO.2201 /MDS/2015 CASE BEFORE HIM. IN THESE CIRCUMSTANCES, WE DO NOT FIND STRENGTH IN THE COMMENTS MADE BY THE AUDIT PARTY CI TING CERTAIN DECISIONS WHEREIN THE FACTS OF THE CASE WER E NOT DISCUSSED TO BE IDENTICAL TO THAT OF THE CASE OF TH E ASSESSEE. IT APPEARS THAT THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX HAS BEEN SIMPLY INFLUENCED BY THE AUDIT REPORT OF THE REVENUE WITHOUT EXAMINING THE FACTS INVOLVED IN CAS E OF THE ASSESSEE. IN THESE CIRCUMSTANCES, WE DO NOT FIND M ERIT IN THE ORDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCO ME TAX. THEREFORE, WE HEREBY SET ASIDE THE ORDER OF THE LEA RNED PRINCIPAL COMMISSIONER OF INCOME TAX PASSED UNDER S ECTION 263 OF THE ACT AND REINSTATE THE ORDER OF THE LEARN ED ASSESSING OFFICER. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 13 TH APRIL, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 13 TH APRIL, 2016 SOMU 6 ITA NO.2201 /MDS/2015 *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /