DCIT Corporate Circle 2(1), CHENNAI V. Gem Spinners, CHENNAI

ITA 2708/CHNY/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9363 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 10-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Additional evidence
• Section: 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !, # !$ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.2620/CHNY/2017 & '& / ASSESSMENT YEAR : 2003-04 M/S GEM SPINNERS INDIA LTD., 78, CATHEDRAL ROAD, CHENNAI - 600 086. PAN : AAACG 2498 K V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(2), CHENNAI. ()*/ APPELLANT) (+,)*/ RESPONDENT) ./ ITA NO.2708/CHNY/2017 & '& / ASSESSMENT YEAR : 2003-04 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI - 600 034. V. M/S GEM SPINNERS INDIA LTD., 78, CATHEDRAL ROAD, CHENNAI - 600 086. PAN : AAACG 2498 K ()*/ APPELLANT) (+,)*/ RESPONDENT) &-. / 0 /ASSESSEE BY : SH. PHILIP GEORGE, ADVOCATE / 0 /REVENUE BY : SHRI AR.V. SREENIVASAN, JCIT 1 / .# / DATE OF HEARING : 19.11.2019 23' / .# / DATE OF PRONOUNCEMENT : 03.01.2020 2 I.T.A. NO.2620/CHNY/17 I.T.A. NO.2708/CHNY/17 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -6, CHENNAI, DATED 01.09.2017 AND PERTAIN TO ASSESSMENT YEAR 2003- 04. THEREFORE, WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSING THE SAME BY THIS COMMON ORDER. 2. LETS FIRST TAKE THE REVENUES APPEAL IN I.T.A. NO.2708/CHNY/2017. 3. SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSMENT PROCE EDINGS WERE REOPENED BY ISSUING NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') ON 25.03.2010. ACCO RDING TO THE LD. D.R., EVEN THOUGH THE REVENUE HAS RAISED GROUNDS WI TH REGARD TO DISCREPANCY FOUND IN THE CLOSING STOCK OF COTTON, T HE CIT(APPEALS) BY ACCEPTING ADDITIONAL MATERIAL, IN VIOLATION OF R ULE 46A(3) OF INCOME-TAX RULES, 1962, ALLOWED THE CLAIM OF THE AS SESSEE. ON A QUERY FROM THE BENCH, THE LD. D.R. CLARIFIED THAT E VEN THOUGH THE REVENUE HAS RAISED GROUND WITH REGARD TO DISCREPANC Y FOUND IN THE 3 I.T.A. NO.2620/CHNY/17 I.T.A. NO.2708/CHNY/17 CLOSING STOCK OF COTTON ON MERIT, THE MAIN GRIEVANC E OF THE REVENUE IS VIOLATION OF RULE 46A(3). THE LD. D.R. CLARIFIE D THAT THE CIT(APPEALS) BY REFERRING TO LEDGER AND FINANCIAL S TATEMENTS, FOUND THAT THERE WAS NO DISCREPANCY FOUND IN THE CLOSING STOCK OF COTTON. ACCORDINGLY, HE DELETED THE ADDITION. ACCORDING TO THE LD. D.R., THIS LEDGER AND FINANCIAL STATEMENTS WERE NOT AVAILABLE BEFORE THE ASSESSING OFFICER, THEREFORE, THE LEDGER AND FINANC IAL STATEMENTS ARE ADDITIONAL EVIDENCE. ON A QUERY FROM THE BENCH, TH E LD. D.R. CLARIFIED THAT REASONS FOR REOPENING THE ASSESSMENT WERE RECORDED AND IT IS REPRODUCED IN THE ASSESSMENT ORDER. AFTE R READING THE REASONS RECORDED BY THE ASSESSING OFFICER IN THE AS SESSMENT ORDER, THE LD. D.R. COULD NOT CLARIFY HOW THERE WAS VIOLAT ION OF RULE 46A(3). THE VERY FACT THAT THE LEDGER AND PROFIT & LOSS ACCOUNT, INCLUDING ITS SCHEDULES WERE THE BASIS FOR REOPENIN G THE ASSESSMENT, THE LD. D.R. VERY FAIRLY SUBMITTED THAT HE HAS NOTHING TO ARGUE ON MERIT. 4. WE HEARD SH. PHILIP GEORGE, THE LD.COUNSEL FOR T HE ASSESSEE ALSO. THE REASON RECORDED BY THE ASSESSIN G OFFICER FOR REOPENING ASSESSMENT IS REPRODUCED AT PAGE 1 OF THE ASSESSMENT ORDER WHICH READS AS FOLLOWS:- 4 I.T.A. NO.2620/CHNY/17 I.T.A. NO.2708/CHNY/17 THE ASSESSEE IS A COMPANY CARRYING ON BUSINESS IN MANUFACTURING COTTON YARN AND KNITTED FABRIC AND EXP ORT THEM. ON A PERUSAL OF THE PROFIT AND LOSS ACCOUNT, WHILE CALCULATING RAW MATERIAL CONSUMPTION, ASSESSEE HAS MENTIONED STOCK AT CLOSE OF COTTON AS 8,84,22,692.47 AS PER SCHEDULE NO.14. HOWEVER, IN THE BALANCE SHEET U NDER INVENTORIES AS PER SCHEDULE NO.5, THE CLOSING STOCK OF COTTON IS MENTIONED AS 11,59,72,388.48. THE ASSESSEE FAILED TO EXPLAIN WITH MATERIAL FACTS AS THERE CAN B E NO EXCESS DEBIT OF 2,75,49,696/- TO THE P&L ACCOUNT. THE ASSESSEE HAS FAILED TO FURNISH TRUE AND CORRECT FAC TS WHICH WOULD HAVE CAUSED INCLUSION OF 2,75,49,696/- TO THEIR TOTAL INCOME. 5. FROM THE ABOVE, IT IS VERY OBVIOUS THAT THE ASSE SSING OFFICER, AFTER PERUSING PROFIT & LOSS ACCOUNT, FOUND THAT TH E CASE NEEDS TO BE REOPENED. THE CIT(APPEALS) BY PLACING RELIANCE ON THE VERY SAME PROFIT & LOSS ACCOUNT AND OTHER FINANCIAL STAT EMENTS, INCLUDING LEDGER, FOUND THAT THERE WAS NO DISCREPAN CY IN THE CLOSING STOCK. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THE LEDGER AND PROFIT & LOSS ACCOUNT ARE NOT ADDITIONAL EVIDENCES / ADDITIONAL MATERIAL AS CLAIMED BY THE REVENUE IN TH E ADDITIONAL GROUNDS OF THE APPEAL FILED BEFORE THIS TRIBUNAL. ON MERIT, THE REVENUE HAS NO ARGUMENT. AS RIGHTLY SUBMITTED BY T HE LD. D.R., THE MAIN GRIEVANCE OF THE REVENUE IS VIOLATION OF R ULE 46A(3) OF INCOME-TAX RULES, 1962. THIS TRIBUNAL IS OF THE CO NSIDERED OPINION 5 I.T.A. NO.2620/CHNY/17 I.T.A. NO.2708/CHNY/17 THAT THE LEDGER AND PROFIT & LOSS ACCOUNT, INCLUDIN G THE SCHEDULES, WERE VERY MUCH AVAILABLE BEFORE THE ASSESSING OFFIC ER EVEN BEFORE THE REOPENING OF ASSESSMENT. THE VERY BASIS FOR RE OPENING THE ASSESSMENT IS ONLY THE ABOVE DOCUMENTS/ MATERIAL. THEREFORE, IT MAY NOT CORRECT TO SAY THAT THE CIT(APPEALS) PLACED HIS RELIANCE ON THE ADDITIONAL MATERIAL IN VIOLATION OF RULE 46A(3) . IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY MERIT IN THE C ONTENTION OF THE LD. D.R. AS RIGHTLY FOUND BY THE CIT(APPEALS), THERE W AS NO DISCREPANCY BETWEEN THE LEDGER AND FINANCIAL STATEM ENTS AND SCHEDULE NO.5 OF THE BALANCE SHEET, THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 6. NOW COMING TO THE ASSESSEES APPEAL, THE ONLY GR IEVANCE OF THE ASSESSEE IS REOPENING OF ASSESSMENT. 7. THE CIT(APPEALS) FOUND THAT NO DISCUSSION IS REQ UIRED SINCE THE ADDITION WAS DELETED ON MERIT. ADMITTEDLY, THE ASSESSMENT WAS REOPENED AFTER THE EXPIRY OF FOUR YEARS. IT IS ALS O NOT IN DISPUTE THAT THE ORIGINAL ASSESSMENT WAS MADE UNDER SECTION 143( 3) OF THE ACT ON 16.03.2006. THE FINANCIAL STATEMENTS, LEDGER, P ROFIT & LOSS 6 I.T.A. NO.2620/CHNY/17 I.T.A. NO.2708/CHNY/17 ACCOUNT, BALANCE SHEET, ETC. WERE VERY MUCH AVAILAB LE BEFORE THE ASSESSING OFFICER. THEREFORE, IT MAY NOT BE CORREC T TO SAY THAT THERE WAS ANY NEGLIGENCE ON THE PART OF THE ASSESSEE IN F URNISHING RELEVANT MATERIAL FOR COMPLETING THE ASSESSMENT. S INCE THIS TRIBUNAL CONFIRMS THE ORDER OF THE CIT(APPEALS) DEL ETING THE ADDITION MADE BY THE ASSESSING OFFICER ON MERIT, THE GROUNDS RELATING TO REOPENING OF ASSESSMENT NEED NOT BE ADJUDICATED. T HEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE CIT(APPEALS). 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE AND THE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE COURT ON 3 RD JANUARY, 2020 AT CHENNAI. SD/- SD/- (. !) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) # / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 3 RD JANUARY, 2020. KRI. 7 I.T.A. NO.2620/CHNY/17 I.T.A. NO.2708/CHNY/17 / +.67 87'. /COPY TO: 1. &-. /ASSESSEE 2. ASSESSING OFFICER 3. 1 9. () /CIT(A)-6, CHENNAI 4. PRINCIPAL CIT- 2, CHENNAI 5. 7: +. /DR 6. ;& < /GF.