ITO, Ward - 23(4) , Hooghly V. M/s. Mother India Rice Mill, Hooghly

ITA 2273/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7751 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 05-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B N ROY
• Keywords: Depreciation; Cost of acquisition; Corroborative evidences; Valuation report; Non compliance
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.2273/KOL/2018 ( / ASSESSMENT YEAR:2014-15) ITO, WARD-23(4), HOOGHLY VS. M/S MOTHER INDIA RICE MILL VILLAGE-TIROL, ARAMBAGH, HOOGHLY- 712601, WB ./ ./PAN/GIR NO.: AAMFM 5563 G (APPELLANT) .. (RESPONDENT) APPELLANT BY :SHRI BAIJ NATH SINGH, JCIT RESPONDENT BY :SHRI B. N. ROY, ADVOCATE / DATE OF HEARING : 14/11/2019 /DATE OF PRONOUNCEMENT : 29/01/2020 / O R D E R DR. A.L. SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTA INING TO ASSESSMENT YEAR 2014-15, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-6, KOLKATA IN APPEAL NO. CIT(A), KOLKATA-6 /10283/2016-17, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY TH E ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DA TED 29/12/2016. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ S AS FOLLOWS: 1. THAT THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS. 1,80,45,086/- WITHOUT APPRECIATING THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER BASED ON THE SUBMISSION OF THE ASSESSEE WHO REPEATE DLY FAILED TO RECONCILE THE INVESTMENT AMOUNT OF RS. 1,80,45,086/- WITH SPE CIFIC SUPPORTING EVIDENCES. NEITHER COULD THE ASSESSEE EXPLAIN THE S OURCE OF SUCH INVESTMENT M/S MOTHER INDIA RICE MILL ITA NO.2273/KOL/2018 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 2 22 2 WHICH WAS ALSO OFFERED AS COLLATERAL SECURITY IN OR DER TO OBTAIN C.C. LOAN FROM BANK AND THE SAME AMOUNT WAS ALSO NOT REFLECTE D IN BALANCE SHEET. 2. THAT THE ORDER OF LD. CIT(A) ON THE ABOVE ISSUE IS UNJUSTIFIED AND IS DEVOID OF ANY MERIT, THE SAME SHOULD BE QUASHED. 3. THAT THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, MODIFY, SUBSTITUTE, ADD TO, ABRIDGE AND /OR RESCIND ANY OR ALL OF THE ABOVE GROUNDS. 3. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE CO URSE OF HEARING IT WAS OBSERVED BY ASSESSING OFFICER FROM THE BALANCE SHEET FOR F.Y. 2 013-14 THAT FIXED ASSET WAS REFLECTED TO THE TUNE OF RS. 1,31,54,563/-AND BALAN CE OF FIXED DEPOSIT WITH HDFC BANK WAS REFLECTED TO THE TUNE OF RS. 25,27,691/-. BUT IN REPLY TO QUERY AGAINST NOTICE U/S 133(6) OF ACT DATED 14.10.2016, IT WAS STATED BY HDFC BANK LTD. VIDE LETTER DATED 24.10.2016, RELATING TO COLLATERAL SEC URITY THAT COMMERCIAL PROPERTY VALUATION OF RICE MILL IS TO THE TUNE OF RS. 312 LA KH AND FD & LICARE TO THE TUNE OF RS. 3.75 LAKH ONLY. IN VIEW OF ABOVE, LETTER WAS IS SUED TO ASSESSEE FIRM ON 22/11/2016 TO PROVIDE COLLATERAL SECURITY WITH SUP PORTING EVIDENCES TO SUBSTANTIATE ITS CLAIM. IN REPLY TO ABOVE A.R OF TH E ASSESSEE FILED A SUBMISSION DATED 08.12.2016 STATING INTER ALIA THAT ALL ASSETS OF THEIR UNIT I.E. LAND & BUILDING, CIVIL CONSTRUCTIONS, PLANT & MACHINERY, ELECTRICAL EQUIPMENTS, FURNITURE ALONG WITH FIXED DEPOSITS ARE IN THE NAME OF THE UNIT & P ARTNERS PERSONAL LIC BONDS. ALSO FILED A STATEMENT OF FD WITH HDFC BANK WHICH S HOWS CLOSING BALANCE AS ON 31.03.2014 AT RS.25,27,691/- AND FD WITH S.I.D.B.I. KOLKATA STANDS AT RS.6,26,782/- ONLY.SINCE THE STATEMENT VARIES WITH THE REPLY OF HDFC BANK, ARAMBAGH BRANCH. THE ASSESSING OFFICER ISSUED NOTIC E TO THE ASSESSEE ON 09.12.2016 TO RECONCILE THE DIFFERENCE. THE NOTICE OF ASSESSING OFFICER IS REPRODUCED BELOW: ..ALLOWING REASONABLE OPPORTUNITY OF BEING HEAR D YOUR CASE IS FINALLY FIXED FOR HEARING ON 15 .12.2016 AT 2.30 PM TO CLARIFY/RECONCILE THE MATTER RELATING TO CO- LATERAL SECURITY WITH REFERENCE TO INFORMATI ON RECEIVED FROM HDFC BANK, ARAMBAGH HOOGHLY 12601 ON 31.10.2016 (COPY ENCLOSED ) , WHICH IS SELF EXPLANATORY.( FIXED ASSET/PROPERTY RS 312 LAKH & FD & LIC RS 36.75 LAKH ) IN THIS CONNECTION IT IS NOT OUT OF PLACE TO MENTIO N HERE THAT AS PER YOUR ACCOUNTSFIXED ASSET WAS SHOWN TO THE TUNE OF RS 1,3 1,54,583.94 & FDS WITH HDFC BANK STANDS AT RS 2571691.19. RECONCILIATION ON THE OF ABOVE MATTER IS URGENTLY R EQUIRED LATEST BY 15.12.2016 M/S MOTHER INDIA RICE MILL ITA NO.2273/KOL/2018 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 3 33 3 NON COMPLIANCE/INEFFECTIVE COMPLIANCE WILL ATTRACT PENALTY AS PER ACT 61. & COMPLETION OF SCRUTINY ASSESSMENT WITHOUT ANY REFER ENCE TO YOU. ' 4. IN REPLY TO ABOVE, THE LD. COUNSEL OF THE ASSES SEE FILED A SUBMISSION ON 20.12.2016 WITH VALUATION REPORT OF HDFC BANK STATI NGTHAT THE LIQUID CO-LATERAL SECURITY WAS KEPT WITH THE BANK CONSIST OF BANK FD OF RS.25.27 LAKH AND REST RS. 11.56 LAKH WERE IN THE FORM OF L.I.P. OF PARTNERS, WHICH IS TAKEN AS ITS SURRENDER VALUE AS PER THE LIC AUTHORITY. FINALLY CALCULATED THE INFORMATION OF FIXED ASSET AND LIP VALUE WHICH STANDS AT RS.36.83 LAKH, WHEREA S AS PER HDFC BANK INFORMATION OF FIXED ASSET AND LIP VALUE STANDS AT RS.36.75 LAKH. ALSO STATED THAT THE LAND, ON WHICH THE UNIT WAS CONSTRUCTED, PURCHA SED IN THE YEAR 2004 AS AN AGRICULTURAL LAND IN THE REMOTE AREA. SUBSEQUENTLY, THE LAND WAS CONVERTED AS COMMERCIAL LAND IN FAVOUR OF RICE MILL UNIT. AGAIN STATED THAT THE VALUE OF EARLIER PURCHASE IN THE YEAR 2004 WAS NOT A COMPARATIVE TO PRESENT VALUATION OF THE YEAR 2011 AFTER AN INDUSTRIAL CONSTRUCTION OVER THE AGRI CULTURAL LAND. MOREOVER, THE RAPID GROWTH IN LAND VALUATION SINCE YEAR 2004 TO 2 011 IS TO BE TAKEN INTO CONSIDERATION AS THE PRICE JUMP IN REAL ESTATE ASSE TS VALUE. FURTHER STATED THAT THE ENTIRE CIVIL CONSTRUCTION - TRANSFORMER ROOM (RCC). GENERATOR ROOM (ASBESTOS SHED), FACTORY SHED (TIN S HED), HUSK SHED (TIN SHED), STORE AND SERVANT QUARTER WAS VALUED AFTER DEPRECIA TION AS ON 31.03.2014 OF RS. 15,03,458/-.ONLY. HOWEVER, THE VALUATION REPORT AS PER HDFC BANK STA NDS AS FOLLOWS:- LAND VALUE RS.L,33,18,500 NET COST OF CONSTRUCTION RS.L,78,81,150 TOTALRS.3,11,99,650 THEREFORE ASSESSING OFFICER NOTICED THAT ASSETSREFL ECTED INSCHEDULE OF FIXED ASSETS IN AUDITED ACCOUNTS TO THE TUNE OF RS. 1,31,54,563/ -,WHICH INCLUDES W.D.V. OF CIVIL CONSTRUCTION OF RS. 15,03,458/- BUT, AS PER VALUATI ON REPORT OF HDFC BANK LTD. LAND VALUE STANDS AT RS. 1,33,18,500/- AND VALUE OF CONSTRUCTION STANDS AT M/S MOTHER INDIA RICE MILL ITA NO.2273/KOL/2018 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 4 44 4 RS.L,78,81,150/-, I.E. IN TOTAL RS 3,11,99,650 /- O NLY. ACCORDINGLY, TOTAL DIFFERENCE OF VALUATION RELATING TO COLLATERAL SECURITY STANDS TO THE TUNE OF RS. 1,80,45,086/- (RS.3,11,99,650.00 - RS. 1,31,54,563.94). SINCE THE ASSESSEEFAILED TO RECONCILE THE ABOVE INV ESTED AMOUNT OF RS. 1,80,45,086/- WITH SPECIFIC SUPPORTING EVIDENCES AN D COULD NOT EXPLAIN THE SOURCE OF SUCH INVESTMENT, WHICH WAS ALSO OFFERED AS COLLA TERAL SECURITY IN ORDER TO OBTAIN C.C LOAN AGAINST A/C NO 10628970000128 OF HDFC BANK , ARAMBAGH AND AS THE ABOVE AMOUNT WAS NOT REFLECTED IN BALANCE SHEET,THE REFORE, ASSESSING OFFICER MADE ADDITION TO THE TUNE OF RS. 1,80,45,086/-. 5. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION O BSERVING THE FOLLOWING: 5. GROUND NO. 2 IS IN RESPECT OF ADDITION OF RS. 1 ,80,45,086/- TO THE TOTAL INCOME OF THE APPELLANT. THE ASSESSING OFFICER HAS ADDED S UCH SUM BEING THE DIFFERENCE OF THE MARKET VALUE OF THE COMMERCIAL PROPERTY OF APPE LLANT (RUNNING RICE MILL) AND SUCH ASSET OWNED BY THE APPELLANT MARKET VALUE BEIN G AT RS. 3,11,99,650/- AND THE BOOK VALUE OF THE FIXED ASSET AS APPEARING IN THE B OOKS OF THE APPELLANT WAS AT RS. 1,39,54,563.94 (AS ON 31.03.2014). AS SUCH, THE ASS ESSING OFFICER ADDED THE DIFFERENCE OF THE TWO RS. 1,80,45,086/- (RS. 3,11,9 9,650 - RS. 1,39,54,563.94). ON A PERUSAL OF THE ORDER, I FIND THAT THE ASSESSING O FFICER HAS MERELY RELIED UPON THE VALUATION REPORT BY THE HDFC BANK WHERE THE AGGREGA TE VALUE OF THE LAND AND CONSTRUCTION STOOD AT RS.3,11,99,650/-. I FIND NO S UBSTANCE IN THE A.OS CONTENTION AND THE ADDITION SO MADE SINCE MERE DIFFERENCE IN THE VALUATION OF THE PROPERTY AND THE BOOKS VALUE OF THE SAID PROPERTY DOES NOT I NVITE ANY KIND OF TAXABILITY. THE ASSESSING OFFICER HAS MENTIONED IN THE ORDER THAT T HE PURCHASES WERE MADE IN EARLIER YEAR SO IT IS NOT THE CASE OF THE A.O. THAT THE DIFFERENCE REFLECTED ANY UNDISCLOSED INVESTMENT OF THE YEAR. HENCE I AM NOT INCLINED TO ACCEPT THE CONTENTION OF THE ASSESSING OFFICER IN ANY MANNER A ND HENCE THE ADDITION SO MADE IS DELETED. HENCE THIS GROUND OF THE APPELLANT IS A LLOWED. 6. AGGRIEVED BY THE ORDER OF LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 7. THE LD. DR HAS PRIMARILY REITERATED THE STAND TA KEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY AND ON THE OTHER HAND THE L D. COUNSEL FOR THE ASSESSEE HAS RELIED ON THE ORDER OF THE LD. CIT(A). M/S MOTHER INDIA RICE MILL ITA NO.2273/KOL/2018 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 5 55 5 8. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GON E THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCU MENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS AVAILABLE ON RECORD. WE NOTE THAT THE LD. ASSESSING OFFICER ERRED IN ADDING A SUM OF RS. 1,82,52,392/- TO THE TOTAL INCOME OF THE ASSESSEE WITHOUT CONSIDERING THE FACT THAT THE SAME WAS MERE PRESENT MARKET VALUE OF THE SAID ASSETS TAKEN BY THE BANK TO ASSESS THE VALUE OF SECURITY HELD AGAINST THE LOAN GIVEN TO THE ASSESSEE AND THE BOOK VALUE OF AS SETS REPRESENTS AMOUNTS IN THE BOOKS WHICH WERE THE ACTUAL COST FOR ACQUIRING OF A SSETS OR PURCHASE COST LESS DEPRECIATION, AS APPLICABLE.WE NOTE THAT ASSESSING OFFICER HAS NOT CONSIDERED ACCOUNTING NORMS AND PRINCIPLES AND STANDARDS AS LA ID DOWN FROM TIME TO TIME AS THE AMOUNTS OF ASSETS REPRESENTED IN THE BOOKS IS A LWAYS THE DEPRECIATED VALUE OF HISTORICAL COST OF ASSET AND NEVER THE MARKET VALUE OF THE SAME.WE NOTE THAT THE LD. ASSESSING OFFICER FAILED TO SPECIFY ANY PROVISIONS OF THE INCOME TAX ACT UNDER WHICH THE DIFFERENCES BETWEEN BOOK VALUE OF ASSETS AND VALUE ASSESSED BY THE BANKER FOR SECURITY VALUATION CAN BE TREATED AS I NCOME OF THE ASSESSEE.JUST TO VALUE THE PROPERTY BY BANK FOR THE PURPOSE OF SECUR ITY AGAINST THE LOAN GIVEN TO THE ASSESSEE DOES NOT GIVE PROFIT TO THE ASSESSEE. HAVI NG GONE THROUGH THE ORDER OF THE LD. CIT(A) WE NOTE THAT THERE IS NO INFIRMITY IN TH E ORDER PASSED BY THE LD. CIT(A). THAT BEING SO, WE DECLINE TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A), HIS ORDER ON THIS ISSUE, IS HEREBY UPHELD AND THE GROUN DS OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 29.01.2020 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 29/01/2020 ( SB, SR.PS ) M/S MOTHER INDIA RICE MILL ITA NO.2273/KOL/2018 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 6 66 6 COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-23(4), HOOGHLY 2. M/S MOTHER INDIA RICE MILL. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATABENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES