ACIT Central Circle 10, V. Technofab Engineering Ltd,

ITA 2666/DEL/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8482 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 02-07-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 09-08-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA : VICE PRESIDENT; A ND SRHI D.R. SINGH : JUDICIAL MEMBER ITA NO. 4698/DEL/05 & 2666/DEL/06 ASSTT. YRS: 2002-03 & 2003-04 ACIT CEN. CIRCLE-10, VS. M/S TECHNOFAB ENGG. LTD. , NEW DELHI. 507 EROS APARTMENTS, 56 NEHRU PLACE, NEW DELHI. PAN/GIR NO. AAACT3829R ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI BHASKAR GOSWAMI DR RESPONDENT BY : SHRI R.S. SINGHVI FCA O R D E R PER G.E. VEERABHADRAPPA, V.P: THESE APPEALS, BOTH BY THE REVENUE , ARISE OUT OF T HE ORDER DATED 5-9- 2005 OF CIT(A) FOR A.Y. 2002-03 AND DATED 29-5-200 6 OF CIT(A) FOR A.Y. 2003-04. THEY WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST GROUND OF APPEAL FOR A.Y. 2002-03 REL ATES TO THE ADDITION OF RS. 30,65,300/- IN RESPECT OF THE FOLLOWING EXPE NSES: RENT, RATS AND TAXES 25,000/- OFFICE MAINTENANCE AND GENERAL REPAIRS 3,99,000/- SALES PROMOTION, ADVERTISEMENT & SEMINAR 26,670/- CONVEYANCE 7,33,860/- LEGAL & PROFESSIONAL CHARGES 25,000/- OUT OF POSTAGE, TELEPHONE & TELEX 6,90,600/- TRAVELLING 11,64,900/- 30,65,300/- 2 2.1. THE ASSESSING OFFICER MADE THE DISALLOWANCE. A CCORDING TO THE ASSESSING OFFICER ALL THESE EXPENSES WERE NOT SUPP ORTED BY PROPER VOUCHERS AND DOCUMENTARY EVIDENCE. THE LEARNED CIT(A) WAS OF THE VIEW THAT ASSESSING OFFICER HAD MADE THE DISALLOWANCE IN MOST CASUAL AND CAVALIER MANNER WITHOUT ANY BASIS. 2.2. WE HAVE HEARD BOTH SIDES AND ARE UNABLE TO FIN D ANY INFIRMITY IN THE ORDER OF CIT(A) THE ASSESSEE HAS PRODUCED VOUCHERS AND ALSO FILED ALL THE DETAILS THAT WERE REQUIRED AND THE BOOKS OF ACCOU NT WERE ALSO REGULARLY AUDITED. THE ASSESSING OFFICER, AS THE RECORD SHOWS , HAS MADE DISALLOWANCE IN MOST CASUAL AND CAVALIER MANNER. THE DISALLOWAN CES MADE BY THE ASSESSING OFFICER HAVE NO BASIS AND HAVE BEEN CORR ECTLY DELETED BY THE CIT(A). WE DECLINE TO INTERFERE. 3. THE SECOND GROUND OF APPEAL FOR A.Y. 2002-03 RE LATES TO ADDITION OF RS. 47,83,343/- MADE ON ACCOUNT OF NON-CHARGING OF INTEREST ON ADVANCES. 3.1. WE HAVE HEARD THE PARTIES AND GONE THROUGH THE RECORD. RS. 1,49,50,500/- AND RS. 1,50,49,500/- WERE PAID TO CH IRAG TRUST AND DOPSONS PHARMA INDIA LTD. RESPECTIVELY FOR THE PURCHASE OF PROPERTY AT BOMBAY. ACCORDING TO THE ASSESSING OFFICER THESE ADVANCES W ERE MADE FOR SIMPHONING OFF OF MONEY FROM THE ACCOUNT OF THE ASS ESSEE COMPANY, SINCE 3 THEY WERE ENTITIES CONTROLLED BY THE ASSESSEE COM PANY. THE ASSESSING OFFICER COMPUTED INTEREST AT 15% AND ARRIVED AT THE ADDITION OF RS. 47,83,343/-. 3.2. IN APPEAL, THE CIT(A) FOUND THAT THESE ADVANCE S WERE MADE AT THE FAG END OF THE YEAR ON 26-3-2002 AND THEREFORE QUESTION OF COMPUTATION OF IMAGINARY ADDITION OF 15% FOR THE ENTIRE YEAR WAS T OTALLY UNJUSTIFIED. THE CIT(A) FOUND THAT A SIMILAR ADDITION WAS DELETED BY HIM FOR A.Y. 2001-02 AND HE ACCORDINGLY DELETED THE ADDITION. 3.3. WE HAVE HEARD BOTH SIDES. THE ASSESSEE HAS FIL ED BEFORE US A COPY OF TRIBUNALS ORDER DATED 14-11-2006 IN ITA NO. 4460/ DEL/04, IN ASSESSEES OWN CASE, FOR A.Y. 2001-02 WHEREIN IDENTICAL ADDITI ON HAS BEEN DELETED. APART FROM THE ISSUE BEING SUBJECT MATTER OF A DECI SION BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, WE FIND THAT THE ASSESSEE H AS MADE ADVANCES AT THE FAG END OF THE FINANCIAL YEAR IN QUESTION AND COMP UTATION OF ADDITION FOR THE ENTIRE YEAR IS WHOLLY UNJUSTIFIED. THE CIT(A) FUR THER GAVE A FINDING THAT THERE WAS NO FLOW OF FUNDS INVOLVED IN THE SAID TRA NSACTION AS THESE PROPERTIES WERE TO BE TRANSFERRED BY THE TWO ENTITI ES IN LIEU OF THE SHARES TO BE ALLOWED TO THEM BY THE ASSESSEE COMPANY. HAVING REGARD TO THESE DISCUSSIONS WE ARE UNABLE TO FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY, ORDER OF CIT(A) ON THE ISSUE IN QUESTI ON IS UPHELD. 4 4. THE NEXT DISPUTE FOR A.Y. 2002-03 AND THE ONLY D ISPUTE FOR A.Y. 2003-04 RELATES TO THE DIRECTION OF THE CIT(A) TO A LLOW LIABILITY OF INTEREST ALTHOUGH THE SAME WAS NOT DEBITED TO THE BOOKS OF A CCOUNT AND THE SAID CLAIM WAS NOT MADE BY FILING A REVISED RETURN. 4.1. WE HAVE HEARD BOTH SIDES AND GONE THROUGH THE RECORD. THERE IS NO DISPUTE THAT THE ASSESSEE IS FOLLOWING THE MERCANTI LE SYSTEM OF ACCOUNTING AND THE SAID METHOD HAS ALL ALONG BEEN ACCEPTED BY THE ASSESSING OFFICER. IN THE CASE OF MERCANTILE SYSTEM OF ACCOUNTING THE LIABILITY THAT ACCRUED IN THE PREVIOUS YEAR, IS REQUIRED TO BE ACCOUNTED FOR . THE ASSESSEE HAS NOT ACCOUNTED AND THEREFORE HE HAS NOT CLAIMED DEDUCTIO N IN THE ORIGINAL RETURN FILED. BUT HE HAS GIVEN A LETTER TO THE ASSESSING OFFICER BEFORE ASSESSMENT TO ALLOW THE SAME IN ACCORDANCE WITH THE METHOD OF ACC OUNTING REGULARLY EMPLOYED BY THE ASSESSEE. 4.2. IT IS WELL KNOWN PRINCIPLE THAT IT IS INCUMBEN T UPON THE ASSESSING OFFICER TO FIND OUT WHETHER THE PARTICULAR INCOME I S ASSESSABLE IN A PARTICULAR YEAR AND MERELY BECAUSE THE ASSESSEE WRONGLY INCLUD ES THE INCOME IN ITS INCOME IN A PARTICULAR YEAR, IT DOES NOT CONFER ANY JURISDICTION ON THE AO TO TAX THE INCOME IN THAT YEAR EVEN THOUGH SUCH INCOM E DID NOT PERTAIN TO THAT YEAR. IT HAS ALSO BEEN HELD THAT IT IS THE DUTY OF THE ASSESSING OFFICER TO DETERMINE WHETHER A PARTICULAR RECEIPT IS TAXABLE AS INCOME OR NOT. THE MERE 5 CIRCUMSTANCE THAT THE ASSESSEE HAS SHOWN THE INCOME IN HIS RETURN DOES NOT MAKE HIM LIABLE THEREON. THE ASSESSEE IS LIABLE TO TAX IF ONLY SUCH RECEIPT CAN BE INCLUDED IN HIS TOTAL INCOME AND IS ASSESSABLE U NDER THE ACT. 4.3. THE CENTRAL BOARD OF DIRECT TAXES HAS ISSUED C IRCULARS TO THE EFFECT THAT THE ASSESSEE SHOULD BE PROPERLY GUIDED IN RELA TION TO THE CLAIM. THE CBDT HAS EMPHASIZED UPON THE ASSESSING OFFICERS TO ASSESS THE CORRECT INCOME TO TAX. IF THE ASSESSEE IS FOLLOWING A PARTI CULAR METHOD OF ACCOUNTING AND HE HAS OMITTED TO CLAIM THAT DEDUCTION OR EXEMP TION , WHICH HE IS OTHERWISE ENTITLED, THE BOARD HAS EMPHASIZED THAT T HE ASSESSING OFFICER SHOULD GUIDE THE ASSESSEE SO THAT THE CORRECT INCOM E IS ASSESSABLE AS PER THE PROVISIONS OF THE I.T ACT. IN THE CASE IN HAND THOU GH TECHNICALLY THE ASSESSEE HAS NOT REVISED THE RETURN OF INCOME ACCORDANCE WI TH THE PROVISIONS OF SECTION 139(5) OF THE ACT BUT HAS FILED A LETTER MA KING THE CLAIMS WHICH ARE PERFECTLY LEGAL AND SUPPORTED BY THE METHOD OF ACC OUNTING WHICH THE ASSESSING OFFICER HIMSELF HAS ACCEPTED FROM YEAR TO YEAR. IT IS IN THESE CIRCUMSTANCES THAT THE LEARNED CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE. 4.4. IN CBDT CIRCULAR NO. 14 DATED 11-4-1955 THE BO ARD HAS EMPHASIZED THAT THE DEPARTMENT SHOULD NOT TAKE ADVANTAGE OF A SSESSEES IGNORANCE TO COLLECT MORE TAX OUT OF HIM THAN THE LIABILITY DUE FROM HIM. THIS CIRCULAR OF 6 THE BOARD IS VERY MUCH BINDING UPON THE DEPARTMENT. IN THE LIGHT OF THE SAID CIRCULAR THE ORDER OF THE CIT(A) CANNOT BE FOUND FA ULT WITH. ACCORDINGLY, WE UPHOLD THE ORDERS OF THE CIT(A) FOR BOTH THE YEA RS ON THE ISSUE IN QUESTION 5. IN THE RESULT, BOTH THE APPEALS, FILED BY THE RE VENUE STAND DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 TH JULY 2009. SD/- SD/- (D.R. SINGH ) ( G.E. VEERABHADRAP PA ) JUDICIAL MEMBER VICE PRESIDENT DATED: 30-07-2009. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR