ACIT, Circle - 1, Hooghly, Hooghly V. M/s. Joyrampur Rice Mill Pvt. Ltd., Hooghly

ITA 33/KOL/2011

• Counselvise Citation: 3323514 RSA 2011
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011
• Court: TRIBUNAL
• Department Lawyers: A S MONDAL LD
• Assessee Lawyers: SOMNATH GHOSH LD
• Keywords: Unexplained investment; Principle of natural justice; Reasonable cause; Fair market value; Valuation report; Assessment record

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUN AL C BENCH : KOLKATA () . ., !' !' !' !' ! #' , BEFORE SRI S .V MEHROTRA, AM & SRI MAHAVIR SINGH, JM '$ / I.T.A NO. 33/KOL/2011 #%& !'(/ ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME-TAX VS. M/S. JOYR AMPUR RICE MILLS PVT. LTD CIRCLE-1, HOOGHLY PAN : AABCJ 3260F (*+ /APPELLANT ) (,-*+/ RESPONDENT ) *+ / FOR THE APPELLANT : . / SHRI A.S. MONDAL, LD.DR ,-*+ / FOR THE RESPONDENT : . / SHRI SOMNATH GHOSH, LD.AR /%!0 1 2 /DATE OF HEARING : 28/9/11 3' 1 2 /DATE OF PRONOUNCEMENT : 04/11/2011 4 / ORDER . ., SHRI S.V MEHROTRA, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS),XXXVI, KOLKATA DATED 25/10/2010 FOR THE ASSESSMENT YEAR 2007-08.. 2. THE APPEAL FILED BY THE REVENUE IS TIME BARRED B Y 09 DAYS. SHRI SANJAY MALLICK, ASSTT. CIT, CIRCLE- 1, HOOGHLY HAS FILED AN AFFIDAVIT EXPLAINING THE DELAY. IT HAS BEEN STATED AS UNDER:- 1. THAT THE DATE OF COMMUNICATION OF THE FIRST APP ELLATE ORDER IN THE OFFICE OF THE LD. COMMISSIONER OF INCOME TAX, KOLKA TA-XX, KOLKATA WAS 02.11.2010 AND THAT THE LAST DATE FOR FILING SE COND APPEAL EXPIRED ON 31.12.2010 RECKONING THE PERIOD OF 60(SI XTY) DAYS FROM 02.11.2010; 2 THAT 01.01.2011 WAS SATURDAY; 3. THAT 02.01.2011 WAS SUNDAY, 4. THAT THIS IS A MOFUSSIL OFFICE LOCATED ABOUT 4O KMS. FROM KOLKATA; 5. THAT DUE TO TECHNICAL/MECHANICAL FAULTS THE DEC ISION OF THE LD. COMMISSIONER OF INCOME TAX,KOL-XX,KOLKATA TO FILE 2 APPEAL COULD BE VERBALLY RECEIVED ONLY ON 03.01.2011 AT AB OUT 3.30 PM WITHOUT THE RELEVANT ASSESSMENT RECORDS FROM HIS OF FICE; 6. THAT THE RECORDS WERE COLLECTED FROM THE OFFICE OF THE LD. COMMISSIONER OF INCOME TAX,KOL-XX,KOLKATA ON 04.01. 2011 BY SENDING A MESSENGER AND BROUGHT BACK TO THE OFFICE AT 1 .OOPM. 7. THAT THE FORM 35 AND OTHER PAPERS COLLECTED FRO M LD. CIT(A)- XXXVL/KOLKATA ON 05.01.2011. ITA NO.33/KOL/2011-C-SVM 2 8. THAT NECESSARY WORK OF PREPARING RELEVANT PAPER S STARTED& CONTINUED ON 05.01.2011 AND 06.01.2011. 9. THAT NECESSARY PAPERS CONTAINED ON 06.01.2011. 10. THAT AL FORMALITIES WERE COMPLETED EARLY ON 07 .01.2011 FOR SUBMISSION OF THE SAME DULY. IN VIEW OF THIS, I WOULD FERVENTLY PRAY THAT THE UN INTENTIONAL DELAY HAVING THUS OCCURRED IN FILING THE INSTANT APPEAL M AY KINDLY BE CONDONED. 2.1 AFTER CONSIDERING THE AVERMENTS MADE IN THE AF FIDAVIT, AND HEARING BOTH THE PARTIES, WE ARE OF TH E OPINION THAT THE REVENUE/DEPARTMENT WAS PREVENTED BY REASONABLE CAUSE FROM PREFERRING THE APPEAL WITHIN THE STIPULATED PERIOD. WE, ACCORDINGLY, CON DONE THE DELAY IN FILING THE APPEAL AND ADMIT THE SAME IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF CIT VS. WEST BENGAL INFRASTRUCTUR AL & FINANCIAL CORPORATION LTD REPORTED IN (2011) 196 TAXMAN 321(SC) AND PROCEED TO DECIDE THE APPEAL ON MERITS. 3. THE ASSESSEE, A COMPANY, IN THE RELEVANT ASSESS MENT YEAR, CARRIED ON THE BUSINESS OF RICE MILLING. IT HAD FILED ITS RETURN OF INCOME DISCLOSING TOTAL INCOME OF RS. 23,49,290/-. IN THE COURSE OF ASSESS MENT PROCEEDINGS, THE AO NOTICED THAT ASSESSEE CLAIMED I NSURANCE PREMIUM OF RS. 40,228/-. AS PER TAX AUDI T REPORT, THE WVD OF PLANT & MACHINERY WAS RS.33,45,9 44/-. HOWEVER, AS PER THE COVER NOTE, THE PLANT AN D MACHINERY WAS INSURED FOR RS.49,00,000/- THUS, THE RE WAS DIFFERENCE OF RS.15,54,056/-. HE OBSERVED THAT REPLACEMENT OF OLD PLANT AND MACHINERIES WITH NEW ONES, OVER A REASONABLE PERIOD OF TIME, WAS INEVITABLE. HOWEVER, THE ASSESSEE HAD NOT SHOWN AN Y FRESH INVESTMENT. HE FURTHER OBSERVED THAT NORMALLY INSURANCE COVER WAS TAKEN BY ANY PERSON FOR THE SAFEGUARD OF FRESH AND ALMOST EQUAL INVESTMENT TO PURCHASE/PRODUCTION/MANUFACTURING THE ASSET IN QUESTION. HE, INTER-ALIA, OBSERVED AS UNDER:- UNLESS, THE MARKET PRICE EXPECTATION FOR THE E XISTING PLANT AND MACHINERIES STANDS TO THAT LEVEL, ASSESSEE MUST NO T HAVE INSURED THE MACHINERIES FOR SUCH HUGE AMOUNT. FURTHERMORE, THE INSURANCE C OMPANY DID NOT STAND TO BENEFIT FROM INSURING THE OLD PLANT & MACHINERIES, VALUE OF WHICH IS CLAIMED AT RS.33,45,944/-. INSURANCE COMPANIES HAVE THEIR OWN INFRASTRUCTURE FOR EVALUATION OF ASSETS/PROPERTIES, INSURANCE PROPOSAL FOR WHICH ARE SUBMITTED BEFORE THEM. THEREFORE, IT CANNOT BE ACCEPTED THAT THE TR UE VALUATION OF PLANT & MACHINERIES OF THE ASSESSEE STOOD AT RS.33,45,944/- ONLY. THE LOGICAL CONCLUSION OF THE FACT & CIRCUMSTANCES IS THAT ASSESSEE MUST H AVE MADE FRESH INVESTMENTS WHICH WERE NOT DISCLOSED IN THE BOOKS FULLY. THEREF ORE, THE DIFFERENCE AMOUNT OF RS.15,54,056/- IS CONSIDERED AS UNDISCLOSED INVEST MENT. HE, ACCORDINGLY, MADE ADDITION OF RS.15,54,056 U/S. 69 OF THE ACT. ITA NO.33/KOL/2011-C-SVM 3 4. BEFORE LD.CIT(A), IT WAS, INTER-ALIA, SUBMITTED AS UNDER:- THE PROVISIONS OF SECTION 69 OF THE ACT COME INTO P LAY WHEN INVESTMENTS ARE FOUND TO BE MADE OUTSIDE THE BOOKS FOR WHICH THE AS SESSEE OFFERS NO EXPLANATION OR THE EXPLANATION OFFERED BY HIM IS NO T SATISFACTORY IN THE OPINION OF THE ASSESSING AUTHORITY AND IN SUCH CASE , THE VALUE OF INVESTMENTS MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE FOR THE CORRESPONDING ASSESSMENT YEAR. IN ORDER TO INVOKE THE PROVISIONS OF SECTION 69 OF THE ACT, THE PRINCIPAL REQUIREMENT IS TO PROVE THAT AN UNRECORDED INVESTME NT WAS MADE BY THE ASSESSEE. THE ASSESSING OFFICER HAS NOT GIVEN ANY FINDING REG ARDING ANY INVESTMENT HAVING BEEN MADE BY THE ASSESSEE IN MACHINERY DURI NG THE RELEVANT PREVIOUS YEAR. THE CONCEPT OF ARRIVING AT THE WDV OF AN ASSET MEA NS THE BALANCE VALUE REMAINING IN THE BOOKS AFTER DEDUCTING DEPRECIATI ON ALLOWED THEREON YEAR AFTER YEAR WHEREAS THE DETERMINATION OF FAIR MARKET VALUE FOR THE PURPOSES OF INSURING THE SAME IS TO FIND OUT THE REPLACEMENT COST OF SUCH ASSET. INSURANCE COMPANY HAD INSURED THE MACHINERIES AT TH E SAME VALUE IN THE PRECEDING YEARS ALSO. SINCE FOR SEVERAL YEARS PRECE DING THE ASSESSMENT YEAR UNDER DISPUTE, THE MACHINERY WAS VALUED AT THE SAM E FIGURE FOR DETERMINATION OF INSURANCE PREMIUM, THEREFORE, THE ASSUMPTION OF THE ASSESSING OFFICER REGARDING UNEXPLAINED INVESTMENT IN MACHINERY DURING THE ASSESSMENT PROCEEDINGS THE PREVIOUS YEAR RELEVANT T O THE CONCERNED ASSESSMENT YEAR DOES NOT HAVE ANY LEGS TO STAND ON IMPUGNED ADDITION. 5. THE LD. CIT(A) DELETED THE ADDITION, INTER-ALIA, OBSERVING VIDE PARAS 4.3 AND 4.4 AS UNDER:- 4.3 IT APPEARS THAT THE AO HAD DECIDED THE CASE I N HASTE. AFTER NOTING DOWN THE SUBSTANTIAL DIFFERENCE BETWEEN BOOKS VALUE OF OLD M ACHINERIES VIS--VIS VALUATION DONE BY THE REGISTERED VALUER FOR THE PURPOSE OF IN SURANCE COVERAGE, THE AO SHOULD HAVE UNDERGONE A SPOT VERIFICATION FOR DETAILING Y EAR-WISE, ITEM-WISE AND VALUE- WISE COMPARATIVE STUDY OF EACH MACHINERY AND REFERR ED THE CASE TO THE GOVERNMENT VALUER FOR FRESH VALUATION. THEREAFTER, HE SHOULD H AVE TRIED TO FIND OUT YEAR-WISE DISCREPANCIES. INSTEAD, HE MADE THE ADDITION ON SUR MISES, WHICH IS AGAINST THE LAW. 4.4 IN VIEW OF THE FOREGOING, IT IS CLEAR THAT SINC E THERE WAS NO ADDITION TO P &M, THERE WAS NO SCOPE FOR ADDITION IN THE CURRENT YEAR FOR UNDISCLOSED INVESTMENT IN MACHINERIES. I AM, THEREFORE, INCLINED TO AGREE WITH THE APPELLANT THAT THE ADDITION OF RS.15,54,056/- WAS UNCALLED FOR AND ACC ORDINGLY, DELETED. 6. BEING AGGRIEVED THE DEPARTMENT IS IN APPEAL BEF ORE US AND HAS TAKEN FOLLOWING GROUND OF APPEAL:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD.C IT(A) HAD ERRED IN NOT ASKING FOR A REMAND REPORT FROM THE ASSESSING OFFIC ER ON THE VALUATION SUBMITTED BY THE ASSESSEE. NOT GIVING AN OPPORTUNITY TO THE ASSE SSING OFFICER IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. ITA NO.33/KOL/2011-C-SVM 4 7. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON T HE ASSESSMENT ORDER AND SUBMITTED THAT THE AO HAS RIGHTLY CONCLUDED THAT THERE WAS UNDISCLOSED IN VESTMENT TO THE EXTENT OF DIFFERENCE BETWEEN SUM INSURED IN RESPECT OF PLANT AND MACHINERY AND WDV A S PER TAX AUDIT REPORT. 8. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE S UBMISSIONS MADE BEFORE THE LD.CIT(A), WHICH HAVE BEEN SUMMARIZED EARLIER AND SUBMITTED THAT SI NCE THERE WAS NO ADDITION IN RESPECT OF PLANT AND MACHINERY, SECTION 69 WAS WRONGLY INVOKED. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD OF THE CASE. SECTION 69 DEALING WITH UNEXPLAINED INVESTMENTS READS AS UNDER :- UNEXPLAINED INVESTMENTS. 69. WHERE IN THE FINANCIAL YEAR IMMEDIATELY PRECEDING T HE ASSESSMENT YEAR THE ASSESSEE HAS MADE INVESTMENTS WHICH ARE NOT RECORDE D IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME, AN D THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVE STMENTS OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE 32 [ASSESSING] OFFICER, SATISFACTORY, THE VALUE OF THE INVESTMENTS MAY BE DEEMED TO BE THE IN COME OF THE ASSESSEE OF SUCH FINANCIAL YEAR. 9.1 FROM BARE PERUSAL OF THE ABOVE SECTION, IT IS CLEAR THAT BEFORE INVOKING SECTION 69, THERE HAS TO BE A POSITIVE FINDING THAT THE ASSESSEE HAS MADE INVES TMENTS, WHICH ARE NOT RECORDED IN THE BOOKS OF ACCO UNT. IN THE PRESENT CASE, IT IS EVIDENT FROM THE FINDING S OF THE AO, NOTED ABOVE, THAT THERE IS NO POSITI VE FINDING REGARDING INVESTMENTS BEING MADE BY THE ASS ESSEE, WHICH ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. THE AO HAS NOT REJECTED THE ACCOUNTS OF T HE ASSESSEE. HE HAS PROCEEDED SOLELY ON THE BASIS O F SUM INSURED IN RESPECT OF PLANT AND MACHINERY. IN T HE GROUND OF APPEAL THE DEPARTMENT, INTER-ALIA, HAS STATED THAT THE LD. CIT(A) HAS ERRED IN NOT ASKING FOR A REMAND REPORT FROM THE AO ON THE VALUATION SUBMITTED BY THE ASSESSEE. HOWEVER, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHOW THAT ON ACCOUNT OF SOME FRESH INVESTMENTS BEING MADE BY THE ASSESSEE IN THE FINANCIAL YEAR, THE VALUATION REPORT COULD NOT BE RELIED UPON. THE LD.CIT(A)S OBSERVATION IN THIS REGARD NOTED ABOVE, HAVE NOT BEEN CONTROVERTED BY THE DEPARTMENT BY ANY EVIDENCE. IN VIEW OF ABOVE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). THEREFORE, THE ORDER OF THE LD.CIT(A) ON THIS COUNT IS CONFIRMED. ITA NO.33/KOL/2011-C-SVM 5 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. 4 / 5 /% 6 7 2 . -2011 ORDER PRONOUNCED IN THE OPEN COURT ON 04/11/2011 SD/- SD/- [ ! #' , ] [ . . , ] MAHAVIR SINGH, JUDICIAL MEMBER (S.V. MEHROTRA, ACCOUNTANT MEMBER ) (2) DATED : 04/11/2011 *PP !89 #%:; #='?- COPY OF THE ORDER FORWARDED TO: 1. *+ /APPELLANT- ACIT,CIR-1, AAYKAR BHAWAN, KHADINAMOR E, CHINSURAH, HOOGHLY-712 102. 2 ,-*+ / RESPONDENT : M/S. JOY RAMPUR RICE MILL PVT.LTD J OYRAMPUR, DEHIBAIR, HOOGHLY, PIN-712413. 3. #4%/ THE CIT, 4. #4% ()/ THE CIT(A), KOLKATA. 5. !#6 ,#%/ DR, KOLKATA BENCHES, KOLKATA -= ,#/ TRUE COPY , 4%// BY ORDER , '; /ASSTT. REGISTRAR