ACIT, Muzaffarnagar V. M/s. Tayal Concast Pvt. Ltd., Muzaffarnagar

ITA 2980/DEL/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0351 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 03-02-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 14-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR SENIOR
• Assessee Lawyers: PREM PRAKASH
• Keywords: Capital asset; Business income; Depreciation; Search and seizure; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.2980/DEL./2010 (ASSESSMENT YEAR : 2007-08) ACIT, CIRCLE 1, VS. M/S. TAYAL CONCAST PVT. LTD. , MUZAFFARNAGAR. 201, SOUTH BHOPA ROAD, MUZAFFARNAGAR. (PAN : AABCT1327P) CO NO.339/DEL./2010 (IN ITA NO.2980/DEL./2010) (ASSESSMENT YEAR : 2007-08) M/S. TAYAL CONCAST PVT. LTD., VS. ACIT, CIRCLE 1, 201, SOUTH BHOPA ROAD, MUZAFFARNAGAR. MUZAFFARNAGAR. (PAN : AABCT1327P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PREM PRAKASH, ADVOCATE REVENUE BY : SHRI AMRENDRA KUMAR, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT (APPEALS), MUZAFFARNAGAR DATED 18.3.2010 FOR THE AS SESSMENT YEAR 2007-08. ITA NO.2980/DEL./2010 CO NO.339/DEL/2010 2 IN RESPONSE, THE ASSESSEE HAS FILED A CROSS OBJECTI ON BEING CO NO.339/DEL/2010. 2. THE GROUNDS OF REVENUES APPEAL READ AS UNDER :- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED ON LAW AND FACTS BY REDUCING ESTIMATED NET PROFIT @ OF RS.70/- PER BAG TO RS.17.50 (25%) WITHOUT ANY BASIS AND REA SONING. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED ON LAW AND FACTS BY ALLOWING SET OFF UNABSORBED DEP RECIATION OF EARLIER YEARS AGAINST THE SHORT TERM CAPITAL GAIN O F CURRENT YEAR. 3. THE ORDER OF THE LD. CIT (A) SHOULD BE SET ASIDE AND RESTORE THAT OF THE ASSESSING OFFICERS ORDER. THE GROUND IN ASSESSEES CROSS OBJECTION READ AS UN DER :- 1. THAT THE ORDER IS AGAINST LAW A& FACTS ON THE R ECORD. 2. THAT THE CIT (A) WAS WRONG IN CONFIRMING THE PRODUCTION OF CEMENT OUT OF THE BOOKS & APPLYING G. P. OF 25%. 3. THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMPAN Y ENGAGED IN THE BUSINESS OF MANUFACTURING OF CEMENT AND LIME STONE POWDER AND TRADING OF CEMENT. THE RETURN WAS FILED DECLARING NIL INCOME ON 28.10.2007. THE ASSESSING OFFICER GATHERED INFORMATION ON THE BASIS OF NEWSPAPER REPORTING REGARDING MANUFACTURING AND SALE OF SPURIOUS CEMENT . THE POLICE RAIDED THE PREMISES OF ASSESSEE ON 23.5.2006. A TRUCK LOADED WITH 280 BAGS OF SPURIOUS CEMENT WAS FOUND AT THE PREMISES. THE CASE WAS REG ISTERED AGAINST THE ASSESSEE. THEREAFTER, THE ASSESSEE COMPANY STOPPED THE PRODUCTION. THE ITA NO.2980/DEL./2010 CO NO.339/DEL/2010 3 ASSESSING OFFICER ESTIMATED THE PRODUCTION FOR 53 D AYS DURING THE RELEVANT FINANCIAL YEAR AT 14840 BAGS OF CEMENT AND ESTIMATE D THE NET PROFIT AT RS.70/- PER BAG. 4. THE CIT (A) GRANTED PART RELIEF BY HOLDING AS UN DER :- KEEPING IN VIEW THE FACTS AS DISCUSSED ABOVE, IT WOULD BE APPROPRIATE TO ESTIMATE THE PRODUCTION OF CEMENT BA GS FOR 30 DAYS ADOPTING SALE RATE AT RS.146/- PER BAG (PREVAI LING RATE) AND THUS TOTAL SALES WILL WORK OUT TO 280X30X146 = RS.1 2,26,400/-. AS REGARDS G.P. RATE, THE A.O. HAS APPLIED G.P. OF RS.70/- PER BAG WHICH COMES TO 49% WHICH IS ABNORMAL. IN MY VIEW, IT WOULD MEET BOTH THE ENDS OF JUSTICE IF G.P. RATE OF 25% IS APPLIED AND WHICH IS ALSO CONSIDERED FAIR & REASONABLE. THUS, THE A.O. IS DIRECTED TO APPLY G.P. AT THE RAT E OF 25% ON TOTAL SALES WORKED OUT AT RS.12,26,400/-. 5. WHILE PLEADING ON GROUND NO.1, LEARNED DR RELIED ON THE ORDER OF ASSESSING OFFICER AND ALSO SUBMITTED THAT THE CIT ( A) HAS REDUCED THE ESTIMATED NET PROFIT @ RS.17.50 PER BAG WHICH IS 25 % WITHOUT ANY BASIS AND REASONING. 6, LEARNED AR, WHILE REPLYING THE PLEADINGS OF THE LEARNED DR AND ALSO PLEADING ON CROSS OBJECTION, SUBMITTED THAT THE EST IMATE MADE BY THE CIT (A) IS HIGHER WHEN HE APPLIED THE G.P. RATE AT 25%. HE ALSO PLEADED THAT THE FACT THAT ASSESSEE WAS INDULGING IN MANUFACTURING OF SPU RIOUS CEMENT, HAS NOT BEEN ESTABLISHED TILL DATE. ITA NO.2980/DEL./2010 CO NO.339/DEL/2010 4 7. AFTER HEARING BOTH THE SIDES ON THIS ISSUE AND L OOKING TO THE FACTS OF THE CASE, WE FIND THAT THE CIT (A)S ESTIMATE IS REASON ABLE AND MORE REALISTIC TO THE FACTS OF THE CASE. KEEPING THESE FACTS IN VIEW , WE SUSTAIN THE ORDER OF CIT (A) ON THIS ISSUE. THEREFORE, WE DISMISS GROUND NO .1 OF REVENUES APPEAL AND GROUND NO.2 RAISED IN ASSESSEES CROSS OBJECTION. 8. WHILE PLEADING ON GROUND NO.2, LEARNED DR SUBMIT TED THAT CIT (A) HAS ERRED IN ALLOWING SET OFF UNABSORBED DEPRECIATION O F EARLIER YEARS AGAINST THE SHORT TERM CAPITAL GAIN OF CURRENT YEAR. 9. LEARNED AR SUBMITTED THAT CIT (A) HAS CONSIDERED ALL THE RELEVANT PROVISIONS OF LAW AND HE HAS DIRECTED THE ASSESSING OFFICER TO SET OFF THE UNABSORBED DEPRECIATION OF EARLIER YEARS AGAINST TH E SHORT TERM CAPITAL GAIN OF THE CURRENT YEAR AFTER NECESSARY VERIFICATION, THER EFORE, THE ORDER OF CIT (A) DESERVES TO BE SUSTAINED. 10. AFTER HEARING BOTH THE SIDES, WE FIND THAT AS P ER THE PROVISIONS OF SECTION 32(2), UNABSORBED DEPRECIATION IS CONSIDERE D AS DEPRECIATION FOR THE CURRENT YEAR FOR WORKING OUT THE BUSINESS LOSS OF T HE CURRENT YEAR. THE PROVISIONS OF SECTION 71(2) READ AS UNDER :- 71(2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THA N CAPITAL GAINS, IS A LOSS AND THE ASSESSEE HAS INCOME ASSES SABLE UNDER THE HEAD CAPITAL GAINS, SUCH LOSS MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME ITA NO.2980/DEL./2010 CO NO.339/DEL/2010 5 INCLUDING THE HEAD CAPITAL GAINS (WHETHER RELATIN G TO SHORT- TERM CAPITAL ASSETS OR ANY OTHER CAPITAL ASSETS). CONSIDERING THESE PROVISIONS OF LAW, WE FIND THAT T HE CIT (A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO ALLOW SET OFF OF UNABSORBED DEPRECIATION OF EARLIER YEARS AGAINST THE SHORT TERM CAPITAL GAIN O F THE CURRENT YEAR. THUS, THIS GROUND OF REVENUES APPEAL ALSO STANDS DISMISSED. 11. IN THE RESULT, BOTH THE REVENUES APPEAL AND CR OSS OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 11 TH DAY OF FEBRUARY, 2011. SD/- SD/- (I.P. BANSAL) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 11 TH DAY OF FEBRUARY, 2011 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), MUZAFFARNAGAR. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.