M/s O T G Global Finance Ltd, V. The ACIT 5 (1),

ITA 223/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2712 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-07-2010
• Assessment Year: misc
• Appeal Filed On: 15-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: H P VERMA
• Keywords: Depreciation; Loose papers
• Section: 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI B.R. KAUSHIK, ACCOUNTANT MEMBER ITA NOS.223 AND 373/IND/2008 A.YS. 2003-04 & 2005-06 M/S OTG GLOBAL FINANCE LIMITED INDORE PAN AAACO-2321F APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX 5(1), INDORE . RESPONDENT APPELLANT BY : SHRI H.P. VERMA AND SHRI ASHISH GOYAL RESPONDENT BY : SMT. APARNA KARAN, SR. DR O R D E R PER JOGINDER SINGH, JM THESE APPEALS ARE BY THE ASSESSEE AGAINST DIFFERENT ORDERS OF THE LEARNED CIT(A) DATED 22.2.2008 AND 30.6.2008, RESPE CTIVELY. WE SHALL TAKE UP ITA NO. 223/IND/08 FIRST WHEREIN FIRST GROU ND RAISED PERTAINS TO SUSTAINING THE ADDITION OF RS.3,46,297/- RECEIVED F ROM ADVERTISEMENT INCOME ALLEGED TO HAVE BEEN EARNED ON THE BASIS OF LOOSE PAPERS FOUND DURING SURVEY. DURING HEARING OF THESE APPEALS, WE HAVE HEARD SHRI H.P. VERMA AND SHRI ASHISH GOYAL, LD. COUNSEL FOR THE AS SESSEE AND SMT. 2 APARNA KARAN, LEARNED SR. DR. THE CRUX OF ARGUMENT S ON BEHALF OF THE ASSESSEE IS THAT THE SURVEY U/S 133A OF THE ACT WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 4 TH FEBRUARY, 2004 WHEREIN CERTAIN PAPERS WERE IMPOUNDED. IT WAS NOTICED BY THE AO THAT THE ASSESSEE SHOWED SPONSORSHIP RECEIPTS UNDER ADVERTISEMENT AT RS. 21, 30,000/- AGAINST RS. 17,83,003/-, SHOWED BY THE ASSESSEE IN ITS RETU RN. IT WAS PLEADED THAT THE AO ADDED RS.21,30,000/- WHEREAS THE LEARNE D COMMISSIONER OF INCOME TAX (APPEALS) RETAINED THE DIFFERENCE OF RS. 3,46,297/-. IT WAS SUBMITTED THAT THE LOOSE PAPERS ARE ROUGH NOTINGS G IVING PROJECTIONS, THE PAPERS ARE UNDATED AND IN SOME OF THE MONTHS, THE P ROJECTIONS ARE LESS THAN THE ACTUAL. IT WAS ALSO SUBMITTED THAT EVEN T HE LOOSE PAPERS DO NOT MENTION THE PLACE I.E. UJJAIN AND NOTHING WAS BROUG HT ON RECORD BY THE REVENUE THAT ANY ADVERTISEMENT WAS NOT ACCOUNTED FO R IN THE BOOKS OF ACCOUNTS. ON THE OTHER HAND, THE LEARNED SENIOR DEP ARTMENTAL REPRESENTATIVE STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT FIRSTLY THE PAPERS WERE FOUND FROM THE PREMISE S OF THE ASSESSEE AND SECONDLY THE CIRCUMSTANCES CANNOT BE IGNORED. A PL EA WAS ALSO RAISED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS OBJECTIVELY CONSIDERED THE ISSUE BY MENTIONING THE MONTHWISE DE TAILS FOR WHICH OUR ATTENTION WAS INVITED TO PAGES 2 AND 3 OF THE IMPUG NED ORDER. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON 3 RECORD. BRIEF FACTS ARE THAT A SURVEY U/S 133A OF T HE ACT WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 4.2.2004 WHEREIN CERTAIN LOOSE PAPERS WERE IMPOUNDED. THE LOOSE PAPER NOS. 26 AND 27 WERE FOUND IN BUNCH OF LP-1 CONTAINING OTG-NET WORK INDORE-SPONSO RSHIP RECEIPTS. THE TOTAL AMOUNT REFLECTED IN THESE LOOSE PAPERS IS TO THE TUNE OF RS.18,94,000/- AND RS. 2,36,000/-, RESPECTIVELY. DU RING THE ASSESSMENT PROCEEDINGS AND ALSO BEFORE US THE CLAIM OF THE ASS ESSEE IS THAT THESE ARE PROJECTIONS OF ADVERTISEMENT SPONSORSHIP OF IND ORE AND UJJAIN AND NOT ACTUAL FIGURES. THE LEARNED AO TREATED THESE A MOUNTS AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. CONSEQUENTL Y, HE MADE THE ADDITION OF RS.21,30,000/-. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS OF THE VIEW THAT THESE CAN NOT BE TERMED AS PROJECTION AND SINCE THE AMOUNT OF RS.16,71,900/- H AD ALREADY BEEN DECLARED AS RECEIPT FROM ADVERTISEMENT FROM OTG NET WORK, THE DIFFERENCE OF RS.3,46,297/- WAS RETAINED AGAINST WH ICH THE ASSESSEE IS IN APPEAL BEFORE US. IF THE TOTALITY OF FACTS AND THE ARGUMENTS ADVANCED BY THE LEARNED RESPECTIVE COUNSELS IS KEPT IN JUXTA POSITION AND ANALYSED, IT IS AN ADMITTED FACT THAT FROM OTG NET WORK INDOR E (APRIL, 2002 TO MARCH, 2003) THE ASSESSEE RECEIVED RS.18.94 LACS WH EREAS FROM OTG NET WORK BHOPAL, THE ASSESSEE RECEIVED RS.2.36 LACS . IF THE TABLE MENTIONED AT PAGE 2 AND 3 OF THE IMPUGNED ORDER IS ANALYSED, THE MONTHLY AVERAGE OF PAYMENTS RECEIVED COMES TO RS.1. 57 LACS AND 4 RS.0.19 LAC RESPECTIVELY. EVEN OTHERWISE, THE ASSE SSEE ALREADY DECLARED RS.16,71,900/- FROM SUCH ADVERTISEMENT FRO M OTG NET WORK AGAINST RS.18,94,000/- FOUND WRITTEN ON THE AFORESA ID IMPOUNDED PAPERS AND AT RS.1,11,803/- AGAINST RS.2,36,000/- FOUND AG AINST BHOPAL OFFICE. THEREFORE, BY NO STRETCH OF IMAGINATION, THESE CANN OT BE CONSIDERED AS PROJECTED FIGURES. ON THE BASIS OF FACTS NARRATED B EFORE US, WE ARE IN AGREEMENT WITH THE ORDER OF THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) WHO HAS SUSTAINED THE DIFFERENCE OF THE F IGURES MENTIONED IN THESE PAPERS AND ALREADY DECLARED IN ITS RETURN. TH EREFORE, THIS GROUND OF THE ASSESSEE IS DISMISSED. 3. THE NEXT GROUNDS I.E. GROUND NOS. 2 AND 3 PERTA IN TO RESTRICTING THE DISALLOWANCE OF DEPRECIATION @ 25% AGAINST 40% CLAIMED BY THE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE WAS THE OWNER OF THREE AIR-CRAFTS WHICH WERE LATER ON LEASED OUT TO BOMBAY FLYING CLUB. IT WAS PLEADED TH AT THE AIR-CRAFTS WERE USED FOR THE WHOLE YEAR AND THE OWNERSHIP VESTED WI TH THE ASSESSEE WHEN THESE WERE HANDED OVER TO THE ASSESSEE BY M.P. FLYING CLUB. IT WAS PLEADED THAT EVEN DURING PASSIVE USE, THE DEPR ECIATION IS ALLOWABLE FOR WHICH RELIANCE WAS PLACED UPON THE DECISION IN THE CASE OF CIT V. M/S PREMIER INDUSTRIES INDIA LIMITED (2008) 10 ITJ 654 (M.P.) AND CIT V. ASHOK KUMAR JAIN; 32 ITC 408. 5 ON THE OTHER HAND, THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE AIR-CRAFTS WERE HANDED OVER TO THE ASSESSE E ON 29.9.2002 AND BEFORE THIS DATE THESE AIR CARFTS WERE NOT IN POSSE SSION OF THE ASSESSEE AND ONLY ON 17.10.2002 THESE WERE LEASED OUT TO BOM BAY FLYING CLUB. IT WAS FURTHER PLEADED THAT ALL THESE FACTS WERE CONFR ONTED TO THE MANGING DIRECTOR OF THE COMPANY WHO COULD NOT CONTRADICT TH ESE FACTS. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT M.P. FLYING CLUB PURC HASED THREE AIR CRAFTS WITH THE FINANCIAL ASSISTANCE OF THE ASSESSEE AND G UJRAT MERCANTILE SAHKARITA LIMITED. DUE TO LOSSES, THE M.P. FLYING C LUB COULD NOT MAINTAIN THESE AIR-CRAFTS AND THE TRI-PARTITE AGREE MENT DATED 8.12.2001 WAS TERMINATED BY M.P. FLYING CLUBVIDE LETTER DATED 10.7.2001 AND AS SUCH NO INCOME WAS RECEIVED FROM M.P. FLYING CLUB. THESE AIR-CRAFTS WERE HANDED OVER TO THE ASSESSEE ON 29.9.2002. IN T HESE CIRCUMSTANCES, THE ASSESSEE WAS ASKED TO ESTABLISH THE FACT WHETHER THESE AIR-CRAFTS WERE UTILISED FOR BUSINESS PURPOSE S PRIOR TO GIVING THEM ON LEASE TO BOMBAY FLYING CLUB ON 17.10.2002. THE A SSESSEE WAS GIVEN OPPORTUNITY TO PRODUCE THE EVIDENCE OF UTILIZ ATION BUT AS PER THE REVENUE, NOTHING WAS PRODUCED. IF THE TOTALITY OF FACTS IS ANALYSED, NOTHING OF OOZING OUT FROM THE RECORD FIRSTLY WHAT WAS THE AGREEMENT 6 BETWEEN THE PARTIES AND SECONDLY WHETHER THESE AIR- CRAFTS WERE USED FOR BUSINESS PURPOSES FOR THE PERIOD FROM 29.9.2002 TO 17.10.2002. IT IS ALSO NOT CLEAR WHETHER M.P. FLYING CLUB, THE ASSESS EE AND THE BOMBAY FLYING CLUB CLAIMED DEPRECIATION DURING THE PERIOD WHEN THESE AIR CRAFTS WERE IN THEIR POSSESSION BECAUSE DOUBLE DEPRECIATI ON CANNOT BE ALLOWED. EVEN THERE IS NO DISCUSSION WHETHER THESE AIR-CRAFTS WERE PUT TO USE DURING THE PERIOD FROM 29.9.2002 TO 17.10.2002. DURING HEARING BEFORE US, THE ASSESSEE CLAIMED THAT THE POSSESSION OF THESE AIR-CRAFTS WAS WITH THE ASSESSEE FOR 182 DAYS AND IF THE POSSE SSION REMAINS FOR 180 DAYS, THEN THE ASSESSEE IS ENTITLED TO FULL DEP RECIATION. IN THE IMPUGNED ORDER THOUGH THERE IS A MENTION THAT INITI ALLY M.P. FLYING CLUB PURCHASED THESE AIR CRAFTS WITH THE FINANCIAL ASSIS TANCE FROM THE ASSESSEE AND GUJRARAT MERCHANTILE COOPERATIVE SAHKA RITA LIMITED. HOWEVER, THE ASSESSEE IS CLAIMING THAT FROM THE DAT E OF PURCHASE ITSELF, THE ASSESSEE WAS THE OWNER. IN THE LIGHT OF THE RI VAL CLAIMS, NOTHING IS OOZING OUT FROM RECORD AS TO WHOM WAS THE ACTUAL OW NER OF THE AIR-CRAFTS AND ALSO THE PERIOD OF OWNERSHIP. IN VIEW OF THESE FACTS, THIS ISSUE IS REMANDED TO THE FILE OF THE LEARNED AO FOR FRESH AD JUDICATION IN ACCORDANCE WITH LAW FOR WHICH DUE OPPORTUNITY BE PR OVIDED TO THE ASSESSEE. THE LEARNED AO IS EXPECTED TO EXAMINE TH E CLAIM OF THE ASSESSEE OBJECTIVELY AND TO NARRATE THE FACTS FULLY . THE LEARNED AO IS ALSO EXPECTED TO CONSIDER THE DECISIONS FROM THE HO NBLE JURISDICTIONAL 7 HIGH COURT MENTIONED ABOVE FOR PASSIVE USE, IF ANY. THEREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. THIS DECISION WILL COVER GROUND NO. 1 OF THE APPEAL OF THE ASSESS EE IN ITA NO. 393/IND/2008 ALSO. 5. THE NEXT GROUND I.E. GROUND NO. 4 PERTAINS TO DE NYING DEPRECIATION ON THE AMOUNTS CLAIMED AT RS.9,21,036/ - AGAINST THE LET OUT PORTION OF THE BUILDING. THE CRUX OF ARGUMENTS ON B EHALF OF THE ASSESSEE IS THAT THE DEPRECIATION HAS TO BE ALLOWED TO THE A SSESSEE WHEREAS THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE DEFENDED THE IMPUGNED ORDER. 6. ON CONSIDERATION OF RIVAL SUBMISSIONS AND ALSO O N PERUSAL OF RECORD, WE HAVE FOUND THAT FIRSTLY NO AGREEMENT HAS BEEN PRODUCED BEFORE US NEITHER DISCUSSED IN THE IMPUGNED ORDER W HETHER THE ASSESSEE WAS THE OWNER OF THE BUILDING LET OUT AND SECONDLY THERE IS NO MENTION OF ANY AGREEMENT WHETHER THE ASSESSEE WAS E NTITLED TO SUB-LET THE PORTION OF THE BUILDING OF WHICH HE WAS NOT THE OWNER. NORMALLY, THE TENANTS ARE NOT AUTHORIZED TO SUB-LET THE BUILDING. IN THE ABSENCE OF THESE FINDINGS, NO DECISION CAN BE ARRIVED AT. THE REFORE, THIS GROUND IS ALSO REMANDED BACK TO THE FILE OF THE LEARNED AO WH O WILL EXAMINE THE CLAIM THE ASSESSEE AND THE REAL FACTS FOR WHICH DUE OPPORTUNITY BE PROVIDED TO THE ASSESSEE. THEREFORE, THIS GROUND OF THE ASSESSEE IS 8 ALLOWED FOR STATISTICAL PURPOSES. IT WILL ALSO COV ER GROUND NO. 2 OF ITA NO. 393/IND/2008. 6. THE NEXT GROUND PERTAINS TO LOSS ON THE SALE OF CAR AT RS.57,990/-. THIS GROUND WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE. CONSEQUENTLY, IT IS DISMISSED AS NOT PRES SED. FINALLY, BOTH THESE APPEALS OF THE ASSESSEE ARE PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 29 TH JULY, 2010. SD/- SD/- (B.R. KAUSHIK) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER 29 TH JULY, 2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE *DN/