The Dy. Commissioner of Income-tax, Jammu V. Sh. Abhinandan Singh Sachdev, Jammu

ITA 289/ASR/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73233 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 04-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: P N ARORA
• Keywords: Business income; Depreciation; Wrong claim
• Section: 143(3); 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.289(ASR)/2012 ASSESSMENT YEAR:2009-10 PAN :AFQPS5223J DY.COMMR. OF INCOME TAX, VS. SHRI ABHINANDAN SINGH SACHDEV, CIRCLE-1, JAMMU. 46-A B/C GANDHI NAGAR, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.AMRIK CHAND, DR RESPONDENT BY:SH.P.N.ARORA, ADVOCATE DATE OF HEARING: 27/01/2014 DATE OF PRONOUNCEMENT:30/01/2014 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JAMMU, DATED16.04.2012 FOR THE ASSESSMENT YEAR 2009 -10. THE REVENUE RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CITA) WAS RIGHT IN ALLOWING RELIEF ON ACCOUNT OF DEDUCTION U/S 80IB (4) OF THE ACT INSPITE OF THE FACT THAT THE SAID UNIT IS MEREL Y AN EXTENSION OF EXISTING INDUSTRIAL UNDERTAKING AND NO NEW INDUS TRIAL UNDERTAKING HAS BEEN SET UP BY THE ASSESSEE. ITA NO.289(ASR)/2012 2 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C ITA) WAS RIGHT IN HOLDING THAT THE TRADING RESULTS SHOWN BY THE AS SESSEE WERE CORRECT INSPITE OF THE FACT THAT TOTAL EXPENSES DEB ITED TO P&L A/C WERE LESS THAN 1.5% OF THE GROSS PROFIT SHOWN B Y THE ASSESSEE WHICH ALSO INCLUDED DEPRECIATION. 3. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C ITA) WAS RIGHT IN APPRECIATING THE FACT THAT FOR TOTAL SALES OF RS .98,64,785/-, MANUFACTURING EXPENSES AMOUNTING TO RS.78,101/- ONL Y WOULD HAVE BEEN INCURRED. 2. THE BRIEF FACTS OF THE CASE, AS ARISING FROM THE ORDER OF THE AO, ARE REPRODUCED FOR THE SAKE OF CONVENIENCE AS UNDER: AS PER INFORMATION M/S. S.A.S. INDUSTRIES SUPPLIED TUBULAR POLES TO VARIOUS GOVERNMENT DEPARTMENTS MAINLY, SALES HAVE B EEN SHOWN AT RS.98,34,785/- AGAINST WHICH GROSS PROFIT HAS BEEN SHOWN AT RS.22,79,559/- GIVING A GP RATE OF APPROX 23.1% WH ICH IS ABNORMALLY HIGH LOOKING TO THE OVERALL ACTIVITY. IN THIS PROCESS, THE ASSESSEE HAS JUST TO CUT THE PIPES PURCHASED INTO T HE LENGTH OF THE POLE REQUIRED AND THEN TO ADD ONLY A MS PLATE AT THE BAS E. TOTAL MANUFACTURING EXPENSES HAVE BEEN SHOWN AT ONLY RS.7 8101/- WHICH ITSELF REFLECTS UPON THE NATURE OF MANUFACTURING AC TIVITY. THERE IS STATED TO BE NO POWER EXPENSES. ONLY GENERATOR EXPE NSES RS.22,252/- HAS BEEN DEBITED. WHEN A GENERATOR IS BEING RUN, TH ERE ARE SOME EXPENSES ON REPAIR AND MAINTENANCE DEFINITELY. IN T HIS CASE, THESE ARE NIL. TOTAL MACHINERY IS STATED TO BE RS.2,38,984/- AGAINST WHICH NO EXPENSES ON ACCOUNT OF REPAIR ETC. HAS BEEN DEBITED . WITH TOTAL ASSETS OF RS.2,56,627/- AS PER BALANCE SHEET, THE ASSESSEE HAS SHOWN GP OF RS.22,79,559/-. THE OVERALL LOOK AT THESE FACTS WIL L SHOW THAT THE GROSS PROFIT SHOWN IS ABNORMALLY HIGH. NOW LET US HAVE A LOOK AT THE P&L ACCOUNT. AGAINST GP OF RS.22,79,559/- THE TOTAL EXPENSES ON ALL ITEMS INCL UDING BANK INTEREST ARE RS.1,51,973/-. THESE EXPENSES INCLUDE BANK INTE REST OF RS.36,714/- , AUDIT FEE OF RS.10,000/- DEPRECIATION OF RS.43,50 5/-. SO EFFECTIVELY ON RUNNING OF BUSINESS, THE EXPENSES ARE LESS THAN RS. 61,754/- ON TOTAL SALES OF RS.98,34,785/- AND THAT TOO MAINLY TO GOVE RNMENTS DEPARTMENTS. NATURE OF EXPENSES FURTHER REVEAL FOLL OWING: ITA NO.289(ASR)/2012 3 I) NO EXPENSES ON ACCOUNTANCY MAINTENANCE OF ACCOUNTS . II) NO EXPENSES ON ACCOUNT OF TELEPHONE. III) NO EXPENSES ON ACCOUNT OF MAINTENANCE OF OFFICE. IV) NO EXPENSES ON ACCOUNT OF TA AND DA AND TRANSPORTAT ION V) NO EXPENSES ON ACCOUNT OF PRINTING AND STATIONERY. VI) NO EXPENSES ON ACCOUNT OF UPKEEP OF OFFICE, MACHINE RY, VEHICLES, ENTERTAINMENT ETC. VII) NO EXPENSES ON ACCOUNT OF PROCUREMENT AND SUBMISSIO N OF TENDERS VIII) NO EXPENSES ON ACCOUNT OF POWER CHARGES OF ANY TYPE . IX) NO EXPENSES ON ACCOUNT OF DISCOUNTS OR COMMISSIONS ETC. X) NO EXPENSES ON ACCOUNT OF SALARY OF STAFF BECAUSE T HE ASSESSEE IS HANDLING TWO OTHER INDUSTRIES AND IT IS NOT POSS IBLE FOR HIM TO LOOK INTO THE AFFAIRS OF HIS OWN. XI) NO EXPENSES ON ACCOUNT OF POSTAGE AND TELEGRAM EXCE PT PETTY RS.41.95. XII) NO EXPENSES ON ACCOUNT OF RENT OF BUILDING OR SHED AND NO BUILDING ON THE ASSET SIDE IN THE BALANCE SHEET. DUE TO ABOVE, THE NET PROFIT OF THE UNIT HAS BEEN A S HIGH AS 21.5% AGAINST GP OF 23% I.E. EXPENSES OF P & L ACCO UNT ARE LESS THAN 1.5% WHICH INCLUDE DEPRECIATION. ALL THES E FACTS PROVE THAT TRADING RESULTS SHOWN FOR THIS UNIT ARE NOT CO RRECT. IN FACT, THE ASSESSEE HAS BEEN RUNNING ANOTHER UNIT (M/S. SH ARP INDUSTRIES) FROM THE SAME PREMISES WHERE SUCH TYPE OF EXPENSES HAVE BEEN SHOWN AND NET PROFIT IS APPROX 11% ONLY. LOOKING INTO ABOVE FACTS AND OVERALL SCENARIO, IT CAN BE SA FELY HELD THAT IN REALITY THE ASSESSEE IS RUNNING AN INDUSTRY FROM A SINGLE BUILDING/PLOT BUT HAS SHOWN IT AS TWO FOR SIMPLY CL AIMING DEDUCTIONS U/S 80IB OF THE ACT. IT IS ONLY AS EXTEN SION OF THE EARLIER BUSINESS CARRIED BY THE ASSESSEE. THE ASSESSEE IS OPERATING INDUSTRY IN THE NAMES I) M/S. SAS INDUSTRIES AND II) M/S. SHARP INDUSTRIES FROM THE S AME PREMISES OF PHASE-III INDUSTRIAL AREA, GANGYAL, JAMMU. IN FI RST ONE INDUSTRY, HE HAS STATED THAT HE IS MANUFACTURING TA BULAR POLE WHEREAS IN SECOND ONE, HE IS MANUFACTURING TIN CONT AINERS FOR PACKAGING INDUSTRY. IN FIRS ONE, VIDE HIS REPLY DAT ED 02.12.2001 THE ASSESSEE HAS CLAIMED EXEMPTION U/S 80IB OF THE ACT STATING ITA NO.289(ASR)/2012 4 THEREIN THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION BECAUSE OF FULFILLMENT OF FOLLOWING CONDITION: A) THE SMALL SCALE INDUSTRY IS SITUATED IN BACKWARD AR EA OF J&K STATE. B) IT IS EMPLOYEES MORE THAN 10 WORKERS IN PRODUCTION. C) IT IS RUN WITH THE AID OF POWER. D) IT IS NOT FORMED BY TRANSFER TO A NEW BUSINESS OF MACHINERY & PLANT PREVIOUSLY USED FOR ANY PURPOSE. E) BUT AS PER THE FACTS AND CIRCUMSTANCES OF THE CASE AS ENUMERATED ABOVE, IT CAN BE SEEN THAT THE ASSESSEE HAS MADE WRONG CLAIM OF DEDUCTION U/S 80IB(4) OF THE A CT IN RESPECT OF HIS INDUSTRIAL UNIT NAMELY M/S. SAS INDU STRIES TO THE TUNE OF RS.21,29,286/- AS THE SAID UNIT IS M ERELY AN EXTENSION OF EXISTING INDUSTRIAL UNDERTAKING AND NO NEW INDUSTRIAL UNDERTAKING HAS BEEN SET UP BY THE ASSES SEE. AS SUCH, THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/ S 80IB OF THE ACT IN RESPECT OF HIS INDUSTRIAL UNIT NAMELY M/S. SAS INDUSTRIES IS NOT ADMISSIBLE. ACCORDINGLY, THE SAME IS DISALLOWED. AS SUCH, AN AMOUNT OF RS.21,29,286/- IS ADDED TO THE INCOME OF THE ASSESSEE. 3. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE SUBMIS SIONS, WHICH WERE SENT TO THE AO FOR COMMENTS. AFTER RECEIVING C OMMENTS OF THE AO, THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND D IRECTED THE AO TO ALLOW DEDUCTION U/S 80IB OF THE ACT, AS CLAIMED BY THE AS SESSEE. 4. THE LD. DR, RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER. 5. THE LD. COUNSEL FOR THE ASSESSEE, RELIED UPON TH E ORDER OF THE LD. CIT(A) AND FURTHER ARGUED THAT THE ORDER OF THE LD. CIT(A) IS WELL REASONED ONE AND M/S. S.A.S.INDUSTRIES WAS AN INDEPENDENT UN IT HAVING SEPARATE ITA NO.289(ASR)/2012 5 FACTORY SHEDS AND BLOCK OF ASSETS WHICH ARE APPARE NT FROM THE RECORD AND THE BOOKS OF ACCOUNT PLACED BEFORE THE AUTHORITIES BELOW. THE ASSESSEE HAS BEEN GIVEN DEPRECIATION ON THE SAID BLOCK OF ASSETS AND ASSETS IN THE PAST AS WELL AS IN THE PRESENT ASSESSMENT YEAR ALSO. BOTH T HE UNITS I.E. M/S. S.A.S. INDUSTRIES AND M/S. SHARP INDUSTRIES ARE PRODUCING DIFFERENT ARTICLES. AS REGARDS THE EXPENSES AS ALLEGED BY THE AO THAT THEY WERE NOT DEBITED, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE AO HAS ACC EPTED THE BOOK RESULTS AND THEREFORE, IT CANNOT BE ALLEGED THAT CERTAIN EX PENSES HAVE NOT BEEN DEBITED IN THE ACCOUNTS OF M/S. S.A.S. INDUSTRIES A ND THEREFORE, NO ADVERSE VIEW CAN BE TAKEN. THE PRESENT UNIT M/S. S.A.S. INDUSTRIES IS BEING RUN ON D.G. SET WHICH IS SHOWN IN THE ASSETS AND DIESEL EX PENSES ARE DULY DEBITED IN THE PROFIT & LOSS ACCOUNT WHICH FOUND FAVOUR IN REM AND REPORT SUBMITTED BY THE AO. IN SUCH FACTS AND CIRCUMSTANCES, THE AO IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE AND THE LD. C IT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT IT IS AN UNDISPUTED FACT THAT W.E.F. ASSESSMENT YEAR 2005-06, THE UNIT M/S. SAS I NDUSTRIES, MANUFACTURING TABULAR POLES, HAS BEEN ALLOWED DEDUCTION U/S 80IB OF THE ACT. IT IS ALSO NOT DISPUTED THAT ANOTHER UNIT OF ASSESSEE M/S. SHARP I NDUSTRIES IS ITA NO.289(ASR)/2012 6 MANUFACTURING ENTIRELY DIFFERENT ITEM THAT IS TIN CONTAINERS FOR PACKAGING. IT IS ALSO NOT IN DISPUTE THAT THE UNIT M/S. SAS INDUS TRIES HAS SEPARATE REGISTRATION AND SALES TAX NUMER AND SEPARATE BOOKS OF ACCOUNTS IN RESPECT OF THIS UNIT ARE MAINTAINED. THE AO HAS NOTICED THAT T HE NET PROFIT IN THIS UNIT WAS 21.5% AS COMPARED TO 11% IN M/S. SHARP INDUSTRI ES. HE ALSO NOTED THAT CERTAIN ITEMS OF EXPENSE WERE NOT AT ALL DEBITED. F URTHER, IN HIS OPINION THE TWO UNITS WERE RUNNING FROM A SINGLE PREMISES HENCE THE LATER UNIT I.E. M/S. SAS INDUSTRIES WAS ONLY AN EXTENSION OF EXISTING UN IT M/S. SHARP INDUSTRIES AND NO DEDUCTION U/S 80-IB OF THE ACT WAS ALLOWABLE TO M/S. SAS INDUSTRIES. IN THIS REGARD, FROM THE WRITTEN SUBMISSION AS WELL AS THE REMAND REPORT BEFORE LD. CIT(A), IT IS CLEAR THAT THOUGH THE TWO UNITS IN REFERENCE OPERATED FROM SAME PLOT, YET HAD DIFFERENT AND SEPARATE FACT ORY SHEDS WHICH WAS DULY SHOWN IN THE BLOCK OF ASSETS AND THE DEPRECIATION I S ALSO ALLOWED IN THE PAST AND IN THE PRESENT ASSESSMENT ALSO. BOTH UNITS ARE PRODUCING DIFFERENT ARTICLES ALTOGETHER, HENCE IN NO WAY M/S. SAS INDUS TRIES COULD BE SAID TO BE AN EXTENSION OF OLD UNITS, THE AO THOUGH AT ONE PLA CE IN HIS ASSESSMENT ORDER HAS OBSERVED THAT IN VIEW OF THE FACT THAT CERTAIN EXPENSES WHICH OUGHT TO HAVE BEEN THERE, WERE NOT DEBITED, THE TRADING RESU LTS SHOWN FOR THE UNIT WERE NOT CORRECT BUT IT IS SEEN THAT BOOK RESULTS A RE ACCEPTED AND CITING THE REASON THAT THE UNIT M/S. SAS INDUSTRIES WAS AN EXT ENSION OF OLD UNIT THE ITA NO.289(ASR)/2012 7 DEDUCTION U/S 80IB OF THE ACT WAS DENIED IN A WHOLE SALE MANNER. AS FAR AS NON DEBIT OF CERTAIN EXPENSES AS PER AO IS CONCERNE D, THE EXPLANATION THAT THE UNIT WAS RUN ON D.G. SET WHICH IS DULY SHOWN I N ASSETS AND DIESEL EXPENSES ARE DULY DEBITED IN PROFIT AND LOSS ACCOU NT FOUND FAVOUR IN REMAND REPORT AND THE FACT THAT NOT ONLY IN THIS YEAR BUT IS PREVIOUS YEARS ALSO THE UNIT WAS RUN ON DG SET, THIS ISSUE IS SET TO REST. IN RESPECT OF OTHER EXPENSES ALSO, LOOKING TO THE NATURE OF MANUFACTURING AND SU PPLIES TO THE GOVERNMENT DEPARTMENT TO A GREAT EXTENT THE REPLY OF THE ASSES SEE IS ACCEPTABLE. SINCE THE UNIT HAS NO PHONE, THERE IS NO QUESTION OF SUCH EXPENSES. EVEN AS PER THE AO ALSO THE PROCESS OF MANUFACTURING WAS SIMPLE AND NOT COMPLEX. ALSO FROM THE ASSESSMENT ORDER FOR A.Y.06-07 PASSED U/S 143(3) OF THE ACT, AS FILED BEFORE THE LD. CIT(A) CAN BE FOUND THAT THE G .P. OF M/S. SHARP INDUSTRIES WHICH WAS 4.99% IN A.Y.06-07 WHEREAS N.P . FOR THE A.Y. IN QUESTION IS 11% (AS PER ASSESSMENT ORDER) WHICH COU LD NOT BE THE CASE OF EXCESS EXPENDITURE RELATING TO OTHER UNIT M/S. SAS INDUSTRIES WERE DEBITED TO IT. IN VIEW OF THE ABOVE, LD. CIT(A) HAS RIGHTLY OBSERVED THAT THERE WAS NO REASON OR JUSTIFICATION TO DEVIATE FROM THE PATH TA KEN IN THE A.Y. 2005-06 ONWARDS AND DISALLOW THE ENTIRE DEDUCTION U/S 80IB OF THE ACT BY THE AO. ON MERITS ALSO, THE CLAIM IN VIEW OF THE DISCUSSION AS ABOVE IS ALLOWABLE. ITA NO.289(ASR)/2012 8 THE AO HAS RIGHTLY BEEN DIRECTED TO BY THE LD. CIT( A) ALLOW DEDUCTION U/S 80IB OF THE ACT ACCORDINGLY. 6.1. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS R IGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. HENCE, THE APPEAL OF THE REVENUE IS D ISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA NO.289(ASR)/2012 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JANUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30TH JANUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH.ABHINANDAN SINGH SACHDEV, JAMMU 2. THE DCIT, CIRCLE-1, JAMMU 3. THE CIT(A),JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR