Rifah Shoes P Ltd., CHENNAI V. DCIT Corporate Circle 5(2), CHENNAI

ITA 2716/CHNY/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7364 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 13-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N GOPIKRISHNA IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Principle of natural justice; Corroborative evidences; Capital expenditure
• Section: 5(2)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , !' . #$#% , & '' ( [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO.2716/CHNY/2017 / ASSESSMENT YEAR : 2010-2011. M/S. RIFAH SHOES P. LTD, FLAT A, BSR ELYSIUM ROAD, KILPAUK, CHENNAI 600 010. [PAN AABCR 3805J] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 5(2) CHENNAI. ( )* / APPELLANT) ( +,)* /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI. N. GOPIKRISHNA, IRS, JCIT. /DATE OF HEARING : 17-07-2018 ! /DATE OF PRONOUNCEMENT : 17-07-2018 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE ASSESSEE, WHICH IS DIRECTED AGAINST AN ORDER DATED 30.08.2017 OF LD. COMMISSION ER OF INCOME TAX (APPEALS)-3, CHENNAI, ITS PRIME GRIEVANCE IS TH AT THE LD. ASSESSING ITA NO.2716/CHNY/2017 :- 2 -: OFFICER WHILE GIVING EFFECT TO AN ORDER DATED 22.05 .2015 OF THIS TRIBUNAL IN ITA NO.1017/MDS/2014, DID NOT FOLLOW IT S DIRECTIONS. 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESS EE A MANUFACTURER AND EXPORTER OF LEATHER SHOES, HAD MA DE A CLAIM OF B25,88,711/- UNDER THE HEAD REPAIRS AND RENEWALS . AS PER THE LD. AUTHORISED REPRESENTATIVE, LD. ASSESSING OFFICER HA D ORIGINALLY DISALLOWED A SUM OF B15,53,226/- OUT OF SUCH CLAIM AND ALLOWED THE BALANCE CLAIM ON AN ESTIMATE BASIS. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT WHEN THE MATTER REACHED THI S TRIBUNAL, THIS TRIBUNAL HAD DIRECTED THE LD. ASSESSING OFFICER TO RECONSIDER THE ISSUE. AS PER THE LD. AUTHORISED REPRESENTATIVE, THE DIREC TIONS GIVEN BY THIS TRIBUNAL WAS TO ASCERTAIN WHETHER THE EXPENDITURE M ADE BY THE ASSESSEE, CLAIMED BY IT AS REPAIRS AND RENEWAL OF COMPOUND WALLS, RELAYING OF CONNECTING ROADS AND CONSTRUCTION OF TE MPORARY DINING HALL FOR THE WORKERS, WERE ACTUALLY INCURRED FOR THESE PURPOSE OR WERE CAPITAL OUTGOES. AS PER THE LD. AUTHORISED REPRESE NTATIVE, THE MATTER WHEN TAKEN UP BY THE LD. ASSESSING OFFICER AFRESH T O GIVE EFFECT TO THE ORDER OF THE TRIBUNAL, HE HAD ISSUED A SHOW CAUSE N OTICE ON 07.09.2016 TO THE ASSESSEE, REQUIRING IT TO PRODUCE THE LEDGER COPY, COPIES OF BILLS AND TO EXPLAIN THE NATURE OF THE CO NSTRUCTION. CONTENTION ITA NO.2716/CHNY/2017 :- 3 -: OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT ASS ESSEE WAS GIVEN TIME ONLY UPTO 12.09.2016 AND EFFECTIVELY DENIED OP PORTUNITY TO REPRESENT ITS CASE. LD. AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT ASSESSEE IN ITS APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) FURNISHED VARIOUS RECORDS PROVING THE N ATURE OF THE CONSTRUCTION AND ALSO THE EVIDENCE FOR EXPENDITURE INCURRED. HOWEVER, AS PER THE LD. AUTHORISED REPRESENTATIVE, LD. COMM ISSIONER OF INCOME TAX (APPEALS) REFUSED TO CONSIDER SUCH EVIDENCE HO LDING THAT ASSESSEE HAD NOT AVAILED THE OPPORTUNITY GIVEN BY THE LD. ASSESSING OFFICER. LD. AUTHORISED REPRESENTATIVE SUBMITTED TH AT ASSESSEE WAS DENIED NATURAL JUSTICE AND HENCE THE ORDERS OF THE LOWER AUTHORITIES HAD TO BE SET ASIDE. 3. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD SPECIF ICALLY NOTED THE FAILURE OF THE ASSESSEE TO FILE ANY REPLY OR ATLEA ST A LETTER SEEKING ADJOURNMENT TO THE SHOW CAUSE NOTICE ISSUED BY THE LD. ASSESSING OFFICER. THUS, ACCORDING TO THE LD. DEPARTMENTAL R EPRESENTATIVE, ASSESSEE WAS NOT CORRECT IN SAYING THAT THERE WAS A NY VIOLATION OF NATURAL JUSTICE. ITA NO.2716/CHNY/2017 :- 4 -: 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. WHAT WAS HELD BY THE TRIBUNAL IN THE FIRST ROUND OF PROCEEDINGS WITH REGARD TO THE CLAI M OF THE ASSESSEE ON REPAIRS AND RENEWALS IS REPRODUCED HEREUNDER:- 10. SH. RAGHAV PRASAD, THE LD. REPRESENTATIVE. SU BMITTED THAT THE ASSESSEE-COMPANY DEBITED AN AMOUNT OF B 25,88,711/- UNDER THE HEAD REPAIRS AND RENEWALS. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE INCURRED EXPENDITURE F OR CONSTRUCTION OF COMPOUND WALL AND RELAYING OF CONNE CTING ROADS. ACCORDING TO THE LD. REPRESENTATIVE, MAJOR E XPENSES HAD BEEN USED FOR CONSTRUCTION OF WALL AND RELAYING OF CONNECTING ROADS. ACCORDING TO THE LD. REPRESENTATI VE, THE COMPOUND WALL WAS DAMAGED DUE TO HEAVY RAIN. THE AS SESSEE HAS ALSO CONSTRUCTED TEMPORARY DINING HALL FOR THE WORKERS IN THE FACTORY. THE LD. REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSES SEE ON ESTIMATE BASIS AND DISALLOWED THE SUM OF B 15,53,226/-. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS ) FOUND THAT THE EXPENDITURE DISALLOWED BY THE ASSESSING OF FICER IS IN THE NATURE OF CAPITAL, THEREFORE, THE ASSESSING OFF ICER SHOULD ALLOW DEPRECIATION. ACCORDING TO THE LD. REPRESENTA TIVE, THESE EXPENSES ARE REVENUE IN NATURE. THEREFORE, THE ENTI RE EXPENDITURE OUGHT TO HAVE BEEN ALLOWED. 11. ON THE CONTRARY, SHRI S. DAS GUPTA, THE LD. D.R . SUBMITTED THAT THE CONSTRUCTION OF DINING HALL FOR THE WORKERS, CONSTRUCTION OF CONNECTING ROADS AND WALLS ARE CAPI TAL IN NATURE. THEREFORE, THE ASSESSING OFFICER HAS RIGHTL Y TREATED THE SAME AS CAPITAL EXPENDITURE. THE LD. D.R. FURTH ER SUBMITTED THAT THE ASSESSEE DID NOT FILE ANY PROOF WITH REGARD TO REPAIRS AND EXPENDITURE ON CONSTRUCTION OF TEMPO RARY STRUCTURE. ACCORDING TO THE LD. D.R., THE WALLS AND ROADS CANNOT BE TREATED AS TEMPORARY STRUCTURE. THEREFORE , THE ASSESSING OFFICER HAS DISALLOWED B 15,53,226/- ON ESTIMATE BASIS. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE AS SESSEE CLAIMS THAT A SUM OF B 25,88,711/- WAS INCURRED IN REPAIRS AND ITA NO.2716/CHNY/2017 :- 5 -: RENEWALS OF COMPOUND WALL, RELAYING OF CONNECTING R OADS AND CONSTRUCTION OF TEMPORARY DINING HALL FOR THE WORKE RS. IF IT IS A CONSTRUCTION OF NEW WALL AND NEW ROADS, IT CAN BE A CAPITAL EXPENDITURE, BUT, IF IT IS REPAIRS AND MAINTENANCE OF EXISTING WALLS AND ROADS, THEN DEFINITELY IT IS A REVENUE EX PENDITURE. THE ASSESSEE CLAIMS THAT A TEMPORARY DINING HALL WA S CONSTRUCTED FOR THE WORKERS IN THE FACTORY. IT IS N OT KNOWN THE NATURE OF CONSTRUCTION MADE BY THE ASSESSEE. WHEN T HE ASSESSEE CLAIMS THAT THESE ARE ALL REVENUE EXPENDIT URE, THE ASSESSING OFFICER ESTIMATED 60% OF THE SAME AS CAPI TAL EXPENDITURE. THE DETAILS WITH REGARD TO THE NATURE OF CONSTRUCTION OF THE DINING HALL ARE NOT AVAILABLE O N RECORD. THEREFORE, WE SET ASIDE THE ORDERS OF THE LOWER AUT HORITIES AND THE ISSUE OF REPAIRS AND RENEWALS IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH TO FIND OUT WHETHER IT IS A CONSTR UCTION OF NEW COMPOUND WALL AND ROADS. THE ASSESSING OFFICER SHAL L ALSO RECONSIDER THE NATURE OF TEMPORARY STRUCTURE MADE B Y THE ASSESSEE FOR DINING HALL. THE ASSESSING OFFICER SHA LL THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVIN G REASONABLE OPPORTUNITY TO THE ASSESSEE. WHEN THE MATTER WAS TAKEN UP BY THE LD. ASSESSING OFFICER, LD. ASSESSING OFFICER INDEED ISSUED A SHOW CAUSE NOTI CE TO THE ASSESSEE WHICH READ AS UNDER:- IN YOUR CASE FOR THE ASST. YEAR 2010-2011, THE ITA T HAS SETASIDE THE ASSESSMENT AND GIVEN DIRECTION TO EXAM INE THE BOOKS OF ACCOUNTS OF THE ASSESSEE SO AS TO VERIFY I SSUE OF REPAIRS AND RENEWALS. IN THIS REGARD YOU ARE REQUESTED TO FURNISH LEDGER COPY, NATURE OF CONSTRUCTION AND COPY OF BIL LS IN THE HEAD OF REPAIRS AND RENEWALS OF COMPOUND WALL A ND CONSTRUCTION OF TEMPORARY DINING HALL FOR AN AMOUNT OF B 25,88,711/- AND ANY OTHER SUPPORTING EVIDENCES FOR THESE EXPENSES ARE IN CAPITAL IN NATURE. ITA NO.2716/CHNY/2017 :- 6 -: THE ABOVE DETAILS TO BE FURNISHED ON OR BEFORE 12.0 9.2016. NO FURTHER OPPORTUNITY WOULD BE GRANTED. FAILURE TO F URNISH THE EVIDENCES, THE ASSESSMENT WILL BE COMPLETED DISALLO WING THE EXPENSES RELATING TO REPAIRS AND RENEWALS. THE ABOVE SHOW CAUSE NOTICE WAS ISSUED ON 07.09.20 16. THE DATE ON WHICH IT WAS SERVED TO THE ASSESSEE IS NOT CLEAR FROM THE RECORDS. HOWEVER, TIME GIVEN TO THE ASSESSEE WAS ONLY UPTO 1 2.09.2016 VIZ ABOUT FIVE DAYS. WHEN THE MATTER REACHED THE LD. CO MMISSIONER OF INCOME TAX (APPEALS), LD. COMMISSIONER OF INCOME TA X (APPEALS) RELIED ON THE DEFINITION OF NATURAL JUSTICE AS GIV EN BY SHRI. K.J. AIYAR IN HIS JUDICIAL DICTIONARY. WHATEVER MAY BE THE D EFINITION OF NATURAL JUSTICE GIVEN BY SHRI. K.J. AIYAR IN HIS BOOK, WE FIND THAT LD. ASSESSING OFFICER WAS NOT FAIR IN GIVING ONLY FIVE DAYS TO T HE ASSESSEE, WHICH INCLUDED THE DATE OF NOTICE, FOR FURNISHING EVIDEN CE ON ITS CLAIM OF REPAIRS AND RENEWALS. ASSESSEE HAD FILED DOCUMENT S BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) WHO REFUSED TO CONSIDER IT FOR A SOLE REASON THAT ASSESSEE HAD NOT REPLIED TO THE SHOW CAUSE NOTICE ISSUED BY THE LD. ASSESSING OFFICER NOR FURNISHED A N ADJOURNMENT APPLICATION. IN THE CIRCUMSTANCES, WE ARE OF THE OP INION THAT LD. ASSESSING OFFICER NEEDS TO RELOOK THE ISSUE AFTER G IVING PROPER OPPORTUNITY TO THE ASSESSEE TO EXPLAIN ITS CASE. WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE ISSUE REGARD ING THE CLAIM OF ITA NO.2716/CHNY/2017 :- 7 -: REPAIRS AND RENEWALS BACK TO THE FILE OF THE LD. A SSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON TUESDAY, THE 17TH DAY OF JULY, 2018, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED: 17TH JULY, 2018. KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF