Prakash Gold Palace Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 2710/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7450 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 19-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 10AA; 115JB; 201; 143(2); 13

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 2 710 /MDS/2016 / ASSESSMENT YEAR :20 12 - 13 M/S. PRAKASH GOLD PALACE PVT. LTD., 144, PURASAIWALKKAM HIGH ROAD, KELLYS, CHENNAI 600 010. [PAN: A A CC A4384Q ] VS. THE DEPUTY COMMISSIONER OF INCOME TAX , CO M PANY CIRCLE (V) 2 , C HENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI T. BANUSEKAR, C.A. / RESPONDENT BY : S HRI S UPRIYO PAL, J CIT / DATE OF HEARING : 2 9 . 12 .201 6 / DATE OF P RONOUNCEMENT : 24 . 0 3 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH I S APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) 3 , C HENNAI DATED 29 . 0 7 .201 6 RELEVANT TO THE ASSESSMENT YEAR 20 12 - 13 . THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING T HE REWORKING OF NET PROFIT OF THE DOMESTIC UNIT AND 10AA I.T.A. NO . 2 710 / M/ 1 6 2 UNIT AT .8,81,02,671/ - AND .1,56,45,300/ - RESPECTIVELY BY REALLOCATING THE EXPENSES BASED ON TURNOVER RATIO BY THE ASSESSING OFFICER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF GOLD JEWELLERY AND ORNAMENTS, AND FILED ITS RETURN OF INCOME ON 2 5.09.2012 ADMITTING A TOTAL INCOME OF .3,36,14,170/ - AS WELL AS BOOK PROFITS UNDER SECTION 115JB OF THE ACT AT .10,37,47,970/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT DATED 21.08.2013 WAS ISSUED AND SERVED ON THE ASSESSEE. AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE, THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 25.03.2015 ASSESSING TOTAL INCOME OF THE ASSESSEE AT .8,76,46,218/ - AFTER REWORKING OF NET PROFIT OF THE DOMESTIC UNIT AND 10AA UNIT AT .8,81,02,671/ - AND .1,56,45,30 0/ - RESPECTIVELY BY REALLOCATING THE EXPENSES BASED ON TURNOVER RATIO. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS AS WELL AS FACTS OF THE CASE, THE LD. CIT(A) DISMISSED THE GROUND RAISED BY THE ASSESSEE. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE I.T.A. NO . 2 710 / M/ 1 6 3 ASSESSEE HAS FURNISHED ALL THE DETAILS BEFORE THE ASSESSING OFFICER FOR VERIFICATION. HE ALSO CONTENDED THAT THE ASSE SSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR DOMESTIC UNIT AS WELL AS 10AA UNITS AND FURNISHED BEFORE THE ASSESSING OFFICER AND THE SAME WAS ALSO REITERATED BEFORE THE LD. CIT(A), WHICH WAS NOT ACCEPTED. BY RELYING ON THE GROUNDS OF APPEAL, THE LD. C OUNSEL FOR THE ASSESSEE HAS PLEADED THAT THE ADDITION MADE ON ACCOUNT OF REWORKING OF NET PROFIT BASED ON REALLOCATION OF EXPENSES SHOULD BE DELETED. 5. ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 6. WE HAVE HEA RD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE IS HAVING DOMESTIC UNIT AS WELL AS 10AA UNIT AT MADRAS EXPORT PROCESSING ZONE. THE TOTAL TURNOVER OF BOTH THE UNITS WAS AT .740,53,75,1 67/ - . ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT OF THE YEAR ENDED 31.03.2012 OF DOMESTIC UNIT, THE INCOME FROM ITS OPERATION WAS CLAIMED AT .387,94,23,996/ - . FURTHER, AS PER THE PROFIT AND LOSS ACCOUNT OF THE 10AA UNIT AS ON 31.03.2012, THE INCOME EARNED OUT OF EXPORT WAS .352,59,51,171/ - . SINCE THE BOOKS OF ACCOUNTS OF THE SEZ I.T.A. NO . 2 710 / M/ 1 6 4 UNIT WERE NOT AVAILABLE , BASED ON THE TURNOVER OF THE DOMESTIC UNIT AS WELL AS SEZ UNIT, THE ASSESSING OFFICER WORKED OUT THE TURNOVER RATIO AND, THE TURNOVER RATIO COMES TO 10AA U NIT AT 47.61% WHEREAS FOR DOMESTIC UNIT , IT IS 52.38% AND APPLIED THE SAME FOR EXPENDITURE COMPONENTS OF BOTH THE UNITS . BEFORE US, B Y MEANS OF AN AFFIDAVIT, THE ASSESSEE HAS FILED DETAILS OF BALANCE SHEET OF BOTH SEZ UNIT AS WELL AS DOMESTIC UNIT INCLUDIN G PROFIT AND LOSS ACCOUNTS. ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT OF THE SEZ UNIT, THE ASSESSEE IS STATED TO HAVE INCURRED DIRECT EXPENSES OF WAGES TO THE EXTENT OF 1,71,13,381/ - AS WELL AS INDIRECT EXPENSES. HOWEVER, INTEREST EXPENSES TOWARDS THE EXPO RT PACKING CREDIT LOAN FROM ING VYSYA BANK HAS NOT BEEN REFLECTED IN THE PROFIT AND LOSS ACCOUNT OF THE SEZ UNIT. IN THE ASSESSMENT ORDER, UNDER FINANCIAL EXPENSES, THE ASSESSING OFFICER HAS OBSERVED THAT THE EXPORT PACKING CREDIT LOAN FROM ING VYSYA BANK AVAILED BY THE ASSESSEE HAS BEEN BOOK ED IN THE BALANCE SHEET OF DOMESTIC UNIT AND THE INTEREST CORRESPONDING TO THE LOAN WAS ALSO BOOKED AS EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT OF THE DOMESTIC UNIT. WHEN THE ASSESSEE HAS AVAILED LOAN FOR SEZ UNIT AND NOT BOOKED THE INTEREST EXPENSES UNDER SEZ UNIT CANNOT BE SUSTAINED UNDER LAW. EVEN FOR ADMINISTRATIVE EXPENSES ALSO THE ASSESSING OFFICER HAS HELD I.T.A. NO . 2 710 / M/ 1 6 5 THAT IN THE ABSENCE OF SEPARATE BOOKS OF ACCOUNTS FOR SEZ UNIT, HE HAS REALLOCATED THE ADMINISTRATIVE EXPEN SES BETWEEN 10AA UNIT AND DOMESTIC UNIT. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE BOOKS OF ACCOUNTS OF THE SEZ UNIT AND IF THE ASSESSEE FAILS TO FURNISH THE DETAILS OF COMPLETE ACCOUNTS OF SEZ UNIT, THEN THE A DDITION MADE BY THE ASSESSING OFFICER STANDS CONFIRMED. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 24 TH MARCH , 201 7 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 24 . 0 3 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF .