The Green Environment Services Co.Op.So.Ltd., Ahmedabad V. The Income tax Officer,Ward-6(4), Ahmedabad

ITA 2857/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76686 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-03-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 12-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Keywords: Depreciation; Rectification of order; Principle of natural justice; Difference of opinion
• Section: 143(3); 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 2857/AHD/2010 (ASSESSMENT YEAR:2003-04) THE GREEN ENVIORNMENT SERVICVES CO. OP. SERVICES LTD., PLOT NO. 244-251, PHASE-I, GIDC ESTATE, VATVA, AHMEDABAD V/S THE ITO, WARD 6(4), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAAAT 1191 N APPELLANT BY : SHRI TUSHAR HEMANI RESPONDENT BY : SHRI D.C. MISHRA, SR. D.R. ( )/ ORDER DATE OF HEARING : 04-03-201 4 DATE OF PRONOUNCEMENT : 24 -04-2014 PER SHRI ANIL CHATURVEDI, A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-XVI, AHMEDABAD DATED 23.08.2010 FOR A.Y. 2003-04. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A CO. OP. SOCIETY PROVIDING AFFLUENT TREATMENT AND SOLID WASTE DISPOSAL SERVICES TO ITS MEMBERS. THE SOCIETY FILED ITS RETURN OF INCOME FOR A.Y. 03-04 ON 31.10.2003 DECLARING TOTAL INCOME AT RS. NIL AFTER SETTING OFF OF ITA NO 2857/ AHD/2010 . A.Y. 2003 - 04 2 BROUGHT FORWARD LOSSES AND DEPRECIATION. THE CASE W AS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECT ION 143(3) VIDE ORDER DATED 28 TH MARCH 2006 AND THE TOTAL INCOME WAS DETERMINED AT RS. 1,55,94,949/- BEFORE ADJUSTMENT OF UNABSORBED DEPRE CIATION. SUBSEQUENTLY, A.O. NOTICED THAT THOUGH HE HAD MADE DISALLOWANCE O F 15% OUT OF ADMINISTRATIVE AND WELFARE EXPENSES, THE AMOUNT OF THE DISALLOWANCE WAS WRONGLY CALCULATED AT RS. 73,064/- INSTEAD OF RS. 7 ,30,641/- WHICH ACCORDING TO HIM, WAS AN APPARENT MISTAKE ON RECORD AND HE TH EREFORE VIDE ORDER DATED 28.04.2009 PASSED UNDER SECTION 154 OF THE ACT MADE FURTHER DISALLOWANCE OF THE DIFFERENCE AMOUNT OF RS. 6,57,550/- (RS. 7,30,6 41 LESS RS. 73,064/-). AGGRIEVED BY THE ORDER PASSED BY A.O UNDER SECTION 154 OF THE ACT, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) V IDE ORDER DATED 23.08.2010 DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER:- 4. I HAVE CONSIDERED THE SUBMISSION MADE BY THE AP PELLANT AND OBSERVATION OF THE AO. THE ARGUMENT OF THE APPELLANT THAT VARIOUS COURTS HAVE DECIDED T HAT ONCE AN ORDER OF AO IS MERGED WITH THE ORDER OF CIT APPEAL, NO FURTHER RECTIFICATION ON THAT PARTIC ULAR ISSUE CAN BE DONE IS ACCEPTABLE AND HENCE THE DECISION CITED ARE NOT DISCUSSED SEPARATELY. HOWEVE R, HERE THE ISSUE IS NOT A LEGAL ISSUE. THE ISSUE I S NOT AN ISSUE WHERE THERE CAN BE A DEBATE OR TO OPIN ION POSSIBLE. THE AO HAS DISALLOWED 15% VERY CLEARLY AS IS SEEN FROM THE ASSESSMENT ORDER. IN TH E ASSESSMENT ORDER, THIS ISSUE HAS BEEN DISCUSSED O N PAGE 17 AND 18 OF THE ASSESSMENT ORDER. FROM PARA-7 .3 OF THE ASSESSMENT ORDER ON PAGE 18, IT IS VERY CLEAR THAT THE AO IS DISALLOWING 15% OF THE ADMINIS TRATIVE EXPENSES AND WELFARE EXPENSES. THERE HAS BEEN A CALCULATION MISTAKE AS POINTED OUT ABOVE. TH E NORMAL DISALLOWANCES IN SUCH RESPECTS ARE 15% AND NOT 1.5%, CONTRARY TO THE CLAIM MADE BY THE APP ELLANT. FURTHER, THIS IS NOT AN ISSUE WHERE MERGER THEORY OF THE ASSESSMENT ORDER, AND CIT APPEAL ORDE R WOULD BE APPLICABLE BECAUSE IT IS A QUESTION OF ARITHMETICAL MISTAKES. IT IS VERY UNFORTUNATE THAT THIS MISTAKE HAS REMAINED IN THE CIT APPEAL ORDER, BECAUSE THE APPELLANT DID NOT POINT OUT THAT THERE WAS A DISCREPANCY OF THIS TYPE IN THE ASSESSMENT ORDER. THE CIT APPEAL HAS NOT CONSIDERED THIS ISSUE AS TO WHETHER THE DISALLOWANCE MENTIONED AT 15% IS ARITHMETICALLY COMMENSURATE WITH THE FIGURE OF 7 3064 OR NOT. THIS WAS NOT POINTED OUT BY THE APPELLANT AND THIS HAS NOT BEEN CONSIDERED BY THE C IT(A). HENCE, EVEN ON FACTS THERE IS NO MERGER OF ASSESSMENT ORDER WITH THE CIT(A) ORDER AS THE CIT(A ) HAS NOT CONSIDERED THIS PARTICULAR ISSUE IN THIS PARTICULAR MANNER. IT IS NOT UNDERSTANDABLE AS TO W HY A PATENT MISTAKE SHOULD NOT BE CORRECTED. THE CORRECT LEGAL REMEDIES FOR THE APPELLANT WAS THAT T HIS ISSUE SHOULD HAVE BEEN RAISED AT THE TIME OF CI T APPEAL PROCEEDING. IN ANY CASE, THIS IS A PATENT A RITHMETICAL MISTAKE WHICH THE A.O. HAS RIGHTLY CORRECTED IN THIS ORDER PASSED UNDER SECTION 154. IN THE LIGHT OF THIS REASON, THE GROUNDS OF APPEAL ARE DISMISSED. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS OF BY THE CASE BY CONFIRMING THE ACTION OF ID. AO BY RECTIFYING DISALLOWANCE OUT OF WELFARE EXPENDITURE OF RS.73,064/-, MADE WHILE PASSING ASSESSMENT ORDER U/S 143(3) OF THE ACT, TO RS.7,30,641/- BY VI RTUE OF PROVISIONS OF S.154 OF THE ACT. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS OF CASE BY CONFIRMING THE ACTION OF ID. AO IN INVOCATI ON OF PROVISIONS OF S.154 OF THE ACT ON THE DISALLOWAN CE OUT OF WELFARE EXPENDITURE WHICH HAD BEEN ITA NO 2857/ AHD/2010 . A.Y. 2003 - 04 3 CONSIDERED AND DECIDED BY THE THEN ID. CIT(A) IN AP PELLATE PROCEEDINGS AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. 3. THE ID. CIT(A) HAS FURTHER ERRED IN LAW AND ON FACTS OF THE CASE BY CONFIRMING THE ACTION OF ID. A O BY INVOKING PROVISIONS OF S.154 ON THE MATTER WHICH IS DEBATABLE OR HAVING A DIFFERENCE OF OPINION AND ACCORDINGLY BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER BEYOND THEIR JURISDICTION. 4. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER S WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBM ISSIONS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUT TO HAVE B EEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BR EACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 5. BEFORE US, THE LD. A.R. SUBMITTED THAT THOUGH TH E ASSESSEE HAS RAISED VARIOUS GROUNDS, THE ONLY EFFECTIVE GROUND IS WITH RESPECT TO WRONGLY INVOKING THE PROVISIONS OF SECTION 154 OF THE ACT. THE LD. A.R. SUBMITTED THAT WHILE COMPUTING THE TOTAL INCOME, THE ASSESSEE HAD SUO MO TU DISALLOWED RS. 50,000/- OUT OF THE SUNDRY EXPENSES WHICH THE A.O C ONSIDERED TO BE ON LOWER SIDE AND HE THEREFORE PROPOSED FURTHER DISALLOWANCE . THE LD. A.R. FURTHER SUBMITTED THAT THOUGH THE A.O ON PAGE 18 OF PARA 7. 3 HAD STATED THE DISALLOWANCE AT 15% BUT IN THE SAME PARA HE WORKED OUT THE DISALLOWANCE OF RS. 73,064/- (WHICH WORKS OUT TO 1.5%) AND AFTER AD JUSTING THE SUO MOTU DISALLOWANCE MADE BY THE ASSESSEE, MADE NET DISALL OWANCE OF RS. 23,064/-. HE FURTHER SUBMITTED THAT IN EVEN IN PAR A 8 OF THE ASSESSMENT ORDER, THE A.O. HAS RESTATED THE DISALLOWANCE TO BE 23,064 /-. AGAINST THE DISALLOWANCE MADE BY THE A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 24.12.2007 HELD THAT THE DI SALLOWANCE OF RS. 23,064/- MADE BY THE A.O. WAS NOT WARRANTED AND ACCORDINGLY DIRECTED THE A.O. TO DELETE THE ADDITION OF RS. 23,064/- MADE BY HIM AND ACCORDINGLY THE SUO MOTU DISALLOWANCE MADE BY ASSESSEE WAS UPHELD. HE POIN TED TO THE RELEVANT PARA OF THE ORDER OF CIT(A) PLACED AT PAGE 36 OF TH E PAPER BOOK. THE LD. A.R. FURTHER SUBMITTED THAT AGAINST THE ORDER OF CIT(A), REVENUE PREFERRED APPEAL BEFORE HONBLE TRIBUNAL BUT HOWEVER IN THE APPEAL, THE REVENUE DID NOT CHALLENGE THE DISALLOWANCE OF RS. 23,064 WHICH WAS DELETED BY CIT(A) AND FOR WHICH HE POINTED TO THE GROUNDS OF APPEAL RAISE D BEFORE TRIBUNAL IN ITA NO. 788 & 1216/AHD/2008 AND PLACED AT PAGE 35, 36 O F THE PAPER BOOK. HE THEREFORE SUBMITTED THAT WHEN THE DISALLOWANCE MADE BY THE A.O HAD ATTAINED FINALITY, AND THEREFORE IT COULD NOT BE R ECTIFIED UNDER SECTION 154 OF ITA NO 2857/ AHD/2010 . A.Y. 2003 - 04 4 THE ACT. HE THEREFORE SUBMITTED THAT CIT(A) HAS ERR ED IN UPHOLDING THE ORDER PASSED BY THE A.O. UNDER SECTION 154 OF THE ACT. 6. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORD ER OF A.O. AND CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT WHILE COMPUTING THE TOTAL I NCOME, THE ASSESSEE OUT OF THE TOTAL SUNDRY EXPENSES HAD SUO MOTU DISALLOWED T HE EXPENSES OF RS. 50,000/- ON ADHOC BASIS CONSIDERING THE POSSIBILITY OF EXPENSES BEING INCURRED WITHOUT PROPER SUPPORTING. AGAINST THE DIS ALLOWANCE OF RS. 50,000/- MADE BY THE ASSESSEE, A.O. WAS OF THE VIEW THAT THE DISALLOWANCE WORKED BY THE ASSESSEE TO BE ON LOWER SIDE AND THEREFORE MADE A FURTHER DISALLOWANCE OF RS. 23,064/- BY HOLDING AS UNDER:- 7.3 THE EXPLANATION FURNISHED BY THE ASSESSEE IS CO NSIDERED. WHILE DECIDING THE QUANTUM OF DISALLOWANCE OUT OF STAFF WELFARE AND OTHER OFFICE EXPENSES, THE NATURE OF THE BUSINESS AND HAZARDOUS WORK BEING CARRIED OUT BY THE STAFF MEMBERS HAS BEE N CONSIDERED. HOWEVER, CONSIDERING THE TURNOVER OF THE ASSESSEE I.E. GROSS RECEIPTS OF RS.7,39,,92, 660/- COLLECTED FROM ITS MEMBERS AND THE DIRECT EXPENSES OF RS.3,90,58,552/- AND ADMINISTRATIVE EXP ENSES OF RS.47,49,117/-, THIS AMOUNT OF RS.50,000/. IS FOUND ON LOWER SIDE. LOOKING TO THE NATURE OF BU SINESS OF THE ASSESSEE, IT IS ALSO NOT POSSIBLE TO VERIFY EACH AND EVERY VOUCHER OF EXPENSES TO ASCERTAIN AS TO WHETHER THERE WERE EXPENSES OF PERSONAL NATURE OR CAPITAL NATURE OR FOR THE PURPOSES OF BUSINESS E XCLUSIVELY. THIS FACT SQUARELY APPLIES ON THE ASSESSING OFFICER ALSO. CONSIDERING ALL THESE FACT ORS 15% OF THE EXPENSES OF RS. 4749117(ADMINISTRATIVE EXPENSES AND RS. 121822 BEIN G THE AMOUNT OF EXPENSES UNDER THE HEAD WELFARE EXPENSES ARE DISALLOWED. THE DISALLOWANCE IS WORKED OUT TO RS. 73,064/- AS AGAINST THE DISALLOWANCE ALREADY MADE BY THE ASSESSEE OF RS. 50 ,000/-. THEREFORE, THE NET ADDITION OF RS. 23,064/- IS MADE FOR WANT OF PROPER CONTROL OVER THE EXPENSE S. 8. AGAINST THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED THE ADDITION MADE BY A.O. BY HOLDING AS UND ER:- 6. THE NEXT GROUND OF APPEAL IS DIRECTED AGAINST TH E DISALLOWANCE OF RS. 23,064/- ON ACCOUNT OF SUNDRY EXPENSES. IT IS THE CONTENTION OF THE A.R. OF THE APPELLANT THAT THE APPELLANT ITSELF HAS DISALLOWED THE SUM OF RS. 50,000/- OUT OF RS. 73,064/-, FURTHER DI SALLOWANCE MADE BY THE A.O IS NOT JUSTIFIED AS THE APPELLANT HAS MAINTAINED COMPLETE DETAILS OF SUNDRY EXPENSES. IT IS SUBMITTED BY THE A.R. THAT THE SA ID EXPENDITURE ARE WHOLLY AND EXCLUSIVELY INCURRED BY THE APPELLANT FOR ITS BUSINESS IS CALLED FOR. 6.1 THE SUBMISSION OF THE A.R. OF THE APPELLANT HAV E BEEN PERUSED. HAVING VERIFIED THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT WH EN THE APPELLANT ITSELF HAS DISALLOWED THE SUM OF R S. 50,000/- OUT OF SUNDRY EXPENSES, FURTHER DISALLOWAN CE OF RS. 23,064/- IS NOT WARRANTED. THEREFORE, TH E A.O IS DIRECTED TO DELETE THE ADDITION MADE BY HIM AT RS. 23,064/-. THUS THIS GROUND OF APPEAL IS ALLOWED. ITA NO 2857/ AHD/2010 . A.Y. 2003 - 04 5 9. FROM THE COPY OF THE ASSESSMENT ORDER, IT IS SE EN THAT THE ADDITION OF RS. 23,064/- WAS MENTIONED AT 3 DIFFERENT PLACES IN THE ASSESSMENT ORDER. AGAINST THE ORDER OF A.O, ASSESSEE CARRIED THE MATT ER BEFORE CIT(A) WHO DELETED THE ADDITION MADE BY A.O. IT IS ALSO A FA CT THAT AGAINST THE ORDER OF CIT(A), REVENUE HAD PREFERRED APPEAL BEFORE HONBLE ITAT BUT HOWEVER REVENUE DID NOT RAISE THE GROUND WITH RESPECT TO DI SALLOWANCE ON ACCOUNT OF SUNDRY EXPENSES BEFORE HONBLE TRIBUNAL AND THEREFO RE THE ORDER OF CIT(A) DATED 24.12.2007 HAD ATTAINED FINALITY. SECTION 15 4 OF THE ACT PROVIDES FOR RECTIFICATION OF MISTAKE. THE RELEVANT PORTION OF S ECTION 154(1A) READS AS UNDER:- WHERE ANY MATTER HAS BEEN CONSIDERED AND DECIDED I N ANY PROCEEDING BY WAY OF APPEAL OR REVISION RELATING TO AN ORDER REFERRED TO IN SUB-SECTION(1), THE AUTHORITY PASSING SUCH ORDER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY LAW FOR T HE TIME BEING IN FORCE, AMEND THE ORDER UNDER THAT SUB-SECTION IN RELATION TO ANY MATTER OTHER THAN TH E MATTER WHICH HAS BEEN SO CONSIDERED AND DECIDED. 10. ON READING OF SECTION 154(1A) IT IS SEEN THAT I T SPECIFICALLY PROVIDES THAT ANY MATTER WHICH HAS NOT BEEN CONSIDERED AND DECIDED IN ANY PROCEEDINGS BY WAY OF APPEAL OR REVISION FILED AGAINST AN ORDER RE FERRED TO IN SUB-SECTION (1) OF SECTION 154 OF THE ACT MAY BE AMENDED BY THE AUT HORITY PASSING SUCH AN ORDER IN EXERCISE OF ITS POWER UNDER SUB-SECTION (1 ) OF SECTION 154 OF THE ACT. IN OTHER WORDS, THE AUTHORITY PASSING AN ORDER MAY AMEND THAT PART OF THE ORDER WHICH HAS NOT BEEN CONSIDERED AND DECIDED IN ANY PROCEEDING BY WAY OF APPEAL OR REVISION AGAINST SUCH ORDER. 11. IN THE PRESENT CASE, IT IS AN UNDISPUTED FACT T HAT THE MATTER OF ADHOC DISALLOWANCE OUT OF SUNDRY EXPENSES WAS CONSIDERED AND DECIDED BY CIT(A) IN APPELLATE PROCEEDINGS. IN SUCH A SITUATION, CONS IDERING THE FACTS OF THE CASE AND THE PROVISION OF SECTION 154 (1A), WE ARE OF TH E VIEW THAT THE A.O HAD ERRED IN FRAMING REVISION ORDER PASSED UNDER SECTIO N 154 ORDER DATED 28.04.2009 AND THUS THIS GROUND OF ASSESSEE IS ALLO WED. ITA NO 2857/ AHD/2010 . A.Y. 2003 - 04 6 12. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 24 -04 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD