The ITO, Indore V. Shri Anand Prakash Garg,Prop-M/s Anand Trading Co., Indore

ITA 277/IND/2010

• Counselvise Citation: 27722714 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2001-2002
• Appeal Filed On: 10-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: K C AGRAWAL
• Keywords: Bogus purchase; Depreciation; Tax effect
• Section: 260A; 148; 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.277/IND/2010 A.Y. 2001-02 ITO-4(2), INDORE APPELLANT VS ANAND PRAKASH GARG PROP. M/S. ANANDA TRADING COMPANY INDORE PAN ABOPG 9119 M RESPONDENT AND, CROSS-OBJECTION NO.10/IND/2010 (ARISING OUT OF ITA NO.277/IND/2010) A.Y.: 2001-02 ANAND PRAKASH GARG PROP. M/S. ANANDA TRADING COMPANY INDORE PAN ABOPG 9119 M OBJECTOR VS ITO-4(2), INDORE RESPONDENT 2 DEPARTMENT BY : SHRI ARUN DEWAN, SR. DR RESPONDENT BY : SHRI K.C. AGRAWAL, CA DATE OF HEARING : 27.9.2011 DATE OF PRONOUNCEMENT : 27.9.2011 O R D E R PER JOGINDER SINGH, JM THIS APPEAL & CROSS-OBJECTION ARE BY THE REVENUE AN D ASSESSEE, RESPECTIVELY, AGAINST THE ORDER OF THE LEARNED CIT(A)-II, INDORE, DATED 5.2.2010. THE APPEAL OF THE REVENUE IS ON THE GROUND THAT TH E LD. CIT(A) ERRED IN REDUCING THE ADDITION OF RS.4,29,750/- TO RS.21,000/- MADE BY THE A.O. ON ACCOUNT OF BOGUS PURCHASES. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I ARUN DEWAN, LD. SR. DR FOR THE REVENUE AND SHRI K.C. AGRAWAL, LD. C OUNSEL FOR THE ASSESSEE. AT THE OUTSET, THE LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE TAX EFFECT IN THE DEPARTMENTAL APPEAL IS BELOW PRESCRIBED MONETARY LIMIT, THEREFORE, STRAIGHT WAY, THE APPEAL OF THE R EVENUE MAY BE DISMISSED BECAUSE QUESTION OF THE FACTS IS THE ONLY ISSUE IN THE DEPARTMENTAL APPEAL AS NO SUBSTANTIAL QUESTION OF L AW INVOLVED. THE LD. SR. DR FAIRLY ADMITTED THAT THE TAX EFFECT IS BELOW PRESCRIBED MONETARY LIMIT. 3 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BEFORE COMING TO ANY CONCLUSION, ON THE ISSUE OF TAX EFFECT, THE BENCH IN THE CASE OF ACIT VS. M/S. SHRIRAM NUTRIENTS LTD. IN ITA NO.123/ IND/2010 (A.Y. 2002-03) VIDE ORDER DATED 28.10.2010 HELD AS UNDER: THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER O F THE LEARNED CIT(A)-UJJAIN, DATED 16.12.2009 ON THE GROU ND WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN TREATING THE ASSESSMENT MADE BY THE A.O. AS INFRUCTUOUS, WITHOUT APPRECIATING THE FACT THAT OTHERWISE ON 6.3.2006 (THE DATE OF ISSUE OF NOTICE) THE A.O. WAS EMPOWERED TO ISSUE NOTICE U/S 148 FOR THE A.Y. 2002-03, IN VIEW OF THE PROVISIONS OF SECTION 149(1 )(A) READ WITH SECTION 151(1) OF THE IT ACT, 1961? 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I S.S. DESHPANDE, LD. COUNSEL FOR THE ASSESSEE AND SH RI P.K. MITRA, LEARNED SENIOR DR. THE CRUX OF ARGUMENT IS THAT THE TAX EFFECT IN THE PRESENT APPEAL IS BELOW MONETARY PRESCRIBED LIMIT, THEREFORE, STRAIGHT WAY THE APPEA L OF THE REVENUE MAY BE DISMISSED. THE LD. SR. DR SHRI P.K. MITRA FAIRLY ADMITTED THAT THE TAX EFFECT IS BELOW PRESCR IBED MONETARY LIMIT. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. IN THE PRESENT APPEAL, THE INC OME ASSESSED IS RS.1,37,880/- AND THE TAX INVOLVED IS RS.40,611/- ONLY, THEREFORE, WITHOUT GOING INTO MER ITS OF 4 THE CASE ON THE PRIMARY OBJECTION OF MONETARY LIMIT , THE APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. OUR VIEW IS SUPPORTED BY THE DECISION OF THE TRIBUNAL I N HIMANSHU FLOUR MILLS (ITA NO.506/IND/2009, ORDER DA TED 26.5.2010). THE RELEVANT PORTION OF THE SAME IS REPRODUCED HEREUNDER: THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 26.8.2009 ON THE GROUND THAT T HE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) WAS NO T JUSTIFIED IN DELETING THE ADDITION OF RS. 5,46,831/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON FIXED ASSETS AND ALSO IN DIRECTING THE ASSESSING OFFICER TO ALLOW CARRY FORWARD OF BROUGHT FORWARD LOSSES OF EARLIER YEARS. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD THE LEARNED COUNSELS FROM BOTH THE SIDES AND CONSIDERED THE ARGUMENTS ADVANCED BY THEM. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE RAISED A PRELIMINARY OBJEC TION THAT SINCE THE TAX EFFECT IS BELOW THE PRESCRIBED M ONETARY LIMIT, THEREFORE, THE DEPARTMENT IS NOT PERMITTED T O FILE THIS APPEAL AND THE SAME DESERVES TO BE DISMISSED ON THI S SHORT GROUND ITSELF. HOWEVER, THE LEARNED SR. DR FA IRLY AGREED THAT THE TAX EFFECT IS BELOW PRESCRIBED MONE TARY LIMIT. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. IN VIEW OF THE ABOVE ASSERTI ON OF THE LEARNED RESPECTIVE COUNSELS, WE ARE OF THE CONSIDER ED OPINION THAT THIS APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. OUR VIEW FINDS SUPPORT FROM THE DECISION DATED 2 ND DECEMBER, 2009 OF THE TRIBUNAL IN THE CASE OF HIMANSHU FLOOR MILLS (ITA NO. 507/IND/2009). THE RELEVANT PORTION OF THE SAME IS REPRODUCED HEREUNDE R :- THIS APPEAL IS BY THE REVENUE CHALLENGING THE ORD ER OF THE CIT(A) DATED 26.8.2009. DURING HEARING OF THIS APP EAL, I HAVE HEARD SMT. APARNA KARAN, LEARNED SENIOR DR, AND NO- BODY WAS PRESENT FOR THE ASSESSEE. REGISTERED NOTICE OF HEARING WAS SENT TO THE ASSESSEE ON 11.11.2009. THE ASSESSEE N EITHER PRESENTED ITSELF NOR MOVED ANY APPLICATION FOR ADJO URNMENT, THEREFORE, I HAVE NO OPTION BUT TO PROCEED EX-PARTE QUA THE 5 ASSESSEE AND DISPOSE OF THIS APPEAL ON THE BASIS OF MATERIAL AVAILABLE IN THE FILE. 2. THE FIRST GROUND RAISED IS THAT THE LEARNED FIRS T APPELLATE AUTHORITY ERRED IN DELETING THE ADDITION OF RS.4,26 ,936/- MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON THE F IXED ASSETS. ON QUESTIONING FROM THE BENCH ABOUT THE TAX EFFECT, IT WAS FAIRLY POINTED OUT THAT THE TAX EFFECT IS BELOW THE PRESCR IBED MONETARY LIMIT. I HAVE CONSIDERED THE SUBMISSIONS PUT-FORTH BY THE LEARNED SENIOR DR AND PERUSED THE MATERIAL AVAILABL E ON RECORD. 3. BRIEF FACTS ARE THAT THE ASSESSEE CLAIMED DEPREC IATION OF RS. 8,53,871/- ON THE FIXED ASSETS. THE LEARNED AS SESSING OFFICER BASED UPON THE COMMENTS OF THE AUDITORS IN THE NOTES TO ACCOUNTS AND THE NATURE OF THE BUSINESS, DISALLOWED 50% OF THE DEPRECIATION CLAIMED BY THE ASSESSEE WHICH WAS WORK ED OUT AT RS.4,26,936/-. BEFORE THE LEARNED FIRST APPELLATE AUTHORITY THE SUBMISSION OF THE ASSESSEE WAS THAT THE FIXED ASSET S WERE DULY REFLECTED IN THE BALANCE SHEET DURING THE RELEVANT PERIOD AND THERE WAS NO NEW ADDITION IN THE ASSETS. THE DEPRE CIATION ON ALL THE ASSETS WAS REGULARLY ALLOWED SINCE THE DATE OF INCLUSION IN THE BALANCE SHEET. EVEN IN THE IMPUGNED ORDER T HERE IS A FACTUAL FINDING THAT THE ASSESSEE FROM THE DATE OF INCLUSION HAS NOT SHOWN IN ADDITION TO THE BLOCK OF ASSETS AS THE WDV AS ON 31.3.2002 WAS TAKEN AS BASIS AFTER REDUCING THE SAL E OF SOME ASSETS FOR THE CALCULATION OF ALLOWABLE DEPRECIATIO N FOR THE ASSESSMENT YEAR 2003-04 AND THE ASSESSEE WAS ALLOWE D DEPRECIATION FOR THE ASSESSMENT YEAR 2002-03. THE REVENUE HAS NOT ADDUCED ANY EVIDENCE CONTROVERTING THE FACTUAL FINDING MENTIONED IN THE IMPUGNED ORDER, THEREFORE, THE DIS ALLOWANCE IS DESIRABLE IN THE IMPUGNED APPEAL. EVEN OTHERWISE O N THE TAX EFFECT THIS APPEAL OF THE REVENUE IS LIABLE TO BE D ISMISSED. THIS VIEW FINDS SUPPORT FROM THE DECISION OF THE TRIBUNA L IN THE CASE OF R.K. HOTELS (ITA NO.383/IND/09). THE RELEVANT PO RTION OF THE ORDER IS REPRODUCED HEREUNDER :- THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER O F LD. CIT-(A)-II, BHOPAL, DATED 31.3.2009 FOR THE AY 2005 -06 ON THE GROUND THAT THE LD. FIRST APPELLATE AUTHORITY E RRED IN DELETING THE ADDITION OF 6,37,206/- MADE BY THE AO BY APPLYING THE PROVISIONS OF SEC. 154(3) ON ACCOUNT O F INCORRECTNESS AND INCOMPLETENESS OF BOOKS OF ACCOUN T.. 2. DURING HEARING OF THE APPEAL, WE HAVE HEARD SMT. APARNA KARAN, LD. SR. DR AND SHRI H.P. VERMA ALONG WITH SH RI ASHISH 6 GOYAL, LD. COUNSEL FOR ASSESSEE. AT THE OUTSET, IT WAS POINTED OUT THAT THERE IS TYPOGRAPHICAL ERROR IN MENTIONING THE FIGURE OF RS.6,37,206/- IN THE GROUND OF APPEAL AS THE CO RRECT FIGURE IS RS.3,94,732/-. THE ASSERTION OF THE ASSESSEE WAS CONSENTED TO BE CORRECT BY THE LD. SR. DR. FURTHER, IT WAS PO INTED OUT THAT THE TAX EFFECT IS ALSO BELOW MONETARY LIMIT, T HEREFORE, THE APPEAL OF THE REVENUE MAY BE DISMISSED. THE LD. SR. DR FAIRLY AGREED TO THE SUBMISSION OF THE ASSESSEE TO THE EXT ENT THAT THE TAX EFFECT IS BELOW PRESCRIBED MONETARY LIMIT F OR FILING THE APPEAL BEFORE THE TRIBUNAL. S.NO. AUTHORITY MONETARY LIMIT (IN RS.) 1 ITAT 2,00,000/ - 2 APPEAL UNDER SECTION 260A BEFORE HIGH COURT 4,00,000/ - 3 SUPREME COURT 10,00,000/ - THE BOARD FURTHER CLARIFIED THE TAX EFFECT, WHICH M EANS THE DIFFERENCE BETWEEN THE TAX ON THE TOTAL INCOME ASSE SSED AND THE TAX THAT WOULD HAVE BEEN CHARGEABLE, HAD SUCH T OTAL INCOME BEEN REDUCED BY THE AMOUNT OF INCOME IN RESP ECT OF THE ISSUE AGAINST WHICH APPEAL IS INTENDED TO BE FI LED. HOWEVER, THE TAX WILL NOT INCLUDE ANY INTEREST THER EON. IN CASES OF PENALTY ORDERS, THE TAX EFFECT WILL MEAN Q UANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE APPEA LED AGAINST. IN THE PRESENT APPEAL, THE TOTAL DISPUT ED ADDITION IS RS.3,94,732/-, THEREFORE, AS AGREED/CANVASSED BY LD. REPRESENTATIVES FROM BOTH SIDES, THE TAX EFFECT IS BELOW RS.2 LAKHS, THE LIMIT PRESCRIBED FOR FILING APPEAL BEFOR E THE TRIBUNAL, THEREFORE, APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. OUR VIEW FINDS SUPPORT FROM THE DECISIO N OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASES OF SH RI J.S. LUTHRA (ITA NO.712 TO 715/CHD/2009) AND ITO, WARD 2 (2), ROPAR VS. THE JHALLIAN KALAN PRI. COOP MILK PRODUCE SOCIETY LTD., JHALLIAN KALAN DISTT. ROPAR (ITA NO.721/CHD/2 009). THEREFORE, WITHOUT GOING INTO THE MERITS OF THE CAS E, FACTS AND THE JUDICIAL PRONOUNCEMENTS (SUPRA), THIS APPEA L OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH SIDES ON 6.10.2009. IN THE LIGHT OF THE ABOVE, THIS GROUND OF THE REVEN UE IS HAVING 7 NO MERIT, THEREFORE, THE STAND OF THE LEARNED CIT(A ) IS AFFIRMED CONSEQENTLY, THIS GROUND OF THE REVENUE IS DISMISSED. 4. THE NEXT GROUND RAISED IS THAT THE LEARNED FIRST APPELLATE AUTHORITY ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW CARRY FORWARD OF BROUGHT FORWARD LOSSES OF EARLIER YEARS WITHOUT ANY BASIS. THE CONTENTION RAISED ON BEHALF OF THE REVENUE IS THAT IN COMING TO A PARTICULAR CONCLUSIO N, NO BASIS HAS BEEN ADDUCED BY THE LEARNED FIRST APPELLATE AUT HORITY AND IT WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER IN THE ABSENCE OF PROOF FURNISHED BY THE ASSESSEE. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL AVAILABLE ON RECORD. THE STAND OF THE REV ENUE IS THAT PROOF OF LAST YEARS LOSSES WAS NOT FURNISHED BY TH E ASSESSEE CONSEQUENTLY THESE ARE NOT ALLOWABLE WHEREAS BEFORE THE LEARNED FIRST APPELLATE AUTHORITY THERE IS A FACTUA L FINDING THAT IN ALL PREVIOUS YEARS RETURNS WERE DULY FILED BY T HE ASSESSEE AND THE SAME WERE AVAILABLE ON RECORD OF THE ASSESS ING OFFICER. IN THE IMPUGNED ORDER THE LEARNED FIRST AP PELLATE AUTHORITY HAS DIRECTED THE ASSESSING OFFICER TO ALL OW CARRY FORWARD OF BROUGHT FORWARD LOSSES OF EARLIER YEARS WHICH WERE NOT SET OFF AFTER VERIFICATION OF RECORDS OF EARLIE R YEARS. EVEN OTHERWISE, IT IS A CASE OF ASSESSED LOSS WHICH HAS NOT BEEN SET OFF. CONSEQUENTLY, WE ARE IN AGREEMENT THAT IN VIE W OF THE PROVISIONS OF SECTION 72 IT SHOULD BE ALLOWED. CON SEQUENTLY, THERE IS NO GRIEVANCE TO THE REVENUE SINCE IT HAS B EEN REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER TO DO THE NEEDFUL AFTER VERIFICATION OF RECORDS OF EARLIER YE ARS. MY VIEW FINDS SUPPORT FROM THE RATIO LAID DOWN IN CIT V. J. H. GOTLA; 156 ITR 323 (SC); TARA DEVI BEHL V. CIT; 218 ITR 5 41 (P&H). THE HONBLE APEX COURT IN THE CASE OF CIT V . MAHALAXMI SUGAR MILLS CO. LTD.; 160 ITR 920 EVEN W ENT TO THE EXTENT THAT ITO MUST ALLOW SET OFF EVEN IF IT I S NOT CLAIMED BY THE ASSESSEE BECAUSE A DUTY IS CAST UPON THE ITO TO APPLY THE RELEVANT PROVISIONS OF THE INDIAN INCOMETAX ACT FOR THE PURPOSE OF DETERMINING THE TRUE FIGURE OF ASSESSEE S TAXABLE INCOME AND THE CONSEQUENTIAL TAX LIABILITY. MERELY BECAUSE THE ASSESSEE FAILS TO CLAIM THE BENEFIT OF SET OFF CANN OT RELIEVE THE ITO OF HIS DUTY TO APPLY SECTION 72 IN AN APPROPRIA TE CASE. IN VIEW OF THESE FACTS AND JUDICIAL PRONOUNCEMENTS, I HAVE FOUND NO INFIRMITY IN THE IMPUGNED ORDER, CONSEQUENTLY, T HIS GROUND OF THE REVENUE ALSO FAILS. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF BOTH 8 THE PARTIES AT THE CONCLUSION OF HEARING ON 1.12.20 09. IN THE AFORESAID CASE, THE TRIBUNAL HAS PASSED A DE TAILED ORDER, THEREFORE, WITHOUT GOING INTO THE MERITS OF THE CASE AND RESPECTFULLY FOLLOWING THE AFORESAID DECISION, THIS APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF HEARING ON 26 TH MAY, 2010. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 28.10.2010. THE CBDT VIDE INSTRUCTION NO.3/2011 DATED 9.2.2011 REVISED/RAISED THE MONETARY LIMIT FOR FILING THE APPEAL BY THE DEPARTM ENT AS UNDER: S.NO. AUTHORITY MONETARY LIMIT (IN RS.) 1 ITAT 3,00,000/ - 2 APPEAL UNDER SECTION 260A BEFORE HIGH COURT 10,00,000/ - 3 SUPREME COURT 25,00,000/ - 4. HOWEVER, WE FIND THAT THE TAX EFFECT ON THE ADDI TION OF RS.4,29,750/- COMES TO EVEN BELOW RS.2 LACS AND THE DEPARTMENT APPEAL WAS FILED ON 10.5.2010, THEREFORE, DEPARTMEN TAL APPEAL IS NOT MAINTAINABLE AS THE SAME IS FILED IN CONTRAVENTION WITH THE EARLIER CBDTS CIRCULAR NO.2/05 DATED 24.10.2005 ITSELF. IN VIEW OF THE ABOVE, THE DEPARTMENT APPEAL IS DISMISSED BEING NOT MAINTA INABLE. 9 5. SO FAR AS THE CROSS-OBJECTION OF THE ASSESSEE IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THE SAME BEI NG QUANTUM INVOLVED IS VERY SMALL, THEREFORE, THE CROSS-OBJECT ION IS DISMISSED BEING NOT PRESSED. FINALLY, THE APPEAL AND THE CROSS-OBJECTION FILED BY REVENUE AND ASSESSEE, RESPECTIVELY, ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 27.9.2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27.9.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE !VYAS!