Real Strips Ltd., Ahmedabad V. The CIT-III, Ahmedabad

ITA 3320/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63207 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 30-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D P GUPTA
• Keywords: Assessment record
• Section: 143(3); 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD D BENCH BEFORE: SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI ANIL CHATURVEDI, ACCOUNTANT ME MBER I.T.A. NO.3320/AHD/2011 A. Y. 2007-08 REAL STRIPS LTD. MEHTA LODHA & CO. CHARTERED ACCOUNTANTS, 105, SAKAR-1,ASHRAM ROAD AHMEDABAD-380 009 PAN-AABCR2893N APPELLANT VS. THE COMMISSIONER OF INCOME TAX, AHMEDABAD-III, AHMEDABAD RESPONDENT DEPARTMENT BY : SHRI D.P. GUPTA, CIT- D.R. ASSESSEE BY : SHRI PRAKASH D. SHAH, A.R. DATE OF HEARING : 18.10.2012 DATE OF PRONOUNCEMENT 14.12.2012 / ORDER PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT-III, AHMEDABAD DATED 23.11.2011 WHERE THE ONLY EFFECTIVE GROUND OF APPEA L READS AS UNDER:- 1. THAT THE LD. CIT HAS ERRED IN LAW AND FACTS BY PASSING ORDER U/S 263 OF THE ACT, WHEREIN THE LD. CIT HAS CANCELLED T HE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) AND DIRECTING HIM TO PASS A FRESH ASSESSMENT ORDER, BY ENHANCING THE BOOK PROFIT U/S 115JB OF THE ACT, BY THE AMOUNT OF DEFERRED TAX OF RS.75.95 LACS (THE CORRECT AMOUNT IS RS.75.81 LACS) AND THEREFORE IT IS PRAYED TO QUASH THE ORDER PASSED U/S 263 OF THE ACT. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A COM PANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF SS. COLD ROLLED COILS/ STRIPS. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME ON 29.10.2007 FOR A.Y. 2 007-08 DECLARING TOTAL INCOME OF RS.8387419/-. THE CASE WAS SELECTED FOR SCRUTI NY AND THEREAFTER THE I.T.A. NO.3320/AHD/2011 A. Y. 2007-08 2 ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DATED 2 1.07.2009 AND THE INCOME WAS DETERMINED AS RS.8387420/- AND THE BOOK PROFIT U/S 115JB WAS WORKED OUT AT RS.37459832/-. 3. ON VERIFICATION OF THE ASSESSMENT RECORDS, LD. C IT OBSERVED THAT WHILE COMPUTING BOOK PROFITS U/S 115JB THE ASSESSEE HAD NOT ADDED THE DEFERRED TAX OF RS.7595000/- TO THE NET PROFITS SHOWN IN IT S PROFIT & LOSS ACCOUNT AND ACCORDINGLY THE ASSESSEES INCOME U/S 115JB WAS NOT ASSESSED TO THE EXTENT OF RS.7595000/- AND THEREBY THERE WAS SHORT LEVY OF TA X INCLUSIVE OF INTEREST TO THE EXTENT OF RS.238605/- AND THEREFORE THE ORDER OF TH E A.O. WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. LD. CIT IS SUED SHOW CAUSE NOTICE ON 16.05.2011 IN RESPONSE TO WHICH THE ASSESSEE INTERA LIA SUBMITTED THAT THE ASSESSMENT WAS FRAMED BY THE A.O. U/S 143(3) AFTER DUE APPLICATION OF MIND AND VERIFICATION AND THEREFORE THE ORDER OF THE A.O . CANNOT BE CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. LD. CIT DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND HELD THE ORDER OF T HE A.O. PASSED ON 21.07.2009 U/S 143(3) TO BE ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF REVENUE BY HOLDING AS UNDER:- IN THE CASE OF THE ASSESSEE, THE A.O. SIMPLY PASSE D A VERY BRIEF AND CRYPTIC ORDER WITHOUT EXAMINING ANY OF THE ADJUSTME NTS MADE BY THE ASSESSEE TO THE NET PROFIT AS APPEARING IN THE P & L A/C., AND WITHOUT CORRECTLY APPLYING THE PROVISIONS OF SECTION 115JB IN ITS ENTIRETY, INCLUDING THE EXPLANATION-1 BELOW THE SAID SECTION. HE SIMPLY OVERLOOKED THE PROVISIONS OF CLAUSE (H) TO THE EXPL ANATION IN ACCORDANCE WITH WHICH HE SHOULD HAVE INCREASED THE NET PROFIT AS SHOWN IN THE P&L A/C. BY THE DEFERRED TAX OF RS.75, 95,000/-. THIS WAS THUS A CLEAR CASE OF BOTH INCORRECT ASSUMPTION OF FACTS AS ALSO INCORRECT APPLICATION OF LAW. THE A.O. THUS FAIL ED TO PASS THE ORDER WITH PROPER APPLICATION OF MIND RESULTING IN THE OR DER BEING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE, AND CO NSEQUENTLY, THE PROVISIONS OF SECTION 263 BECAME APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. I.T.A. NO.3320/AHD/2011 A. Y. 2007-08 3 5. AGGRIEVED BY THE AFORESAID ORDER OF CIT THE ASSE SSEE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. A.R. SUBMITTED THAT IN THE PRESEN T CASE THE PREREQUISITE CONDITIONS SPECIFIED U/S 263 FOR HOLDING THE ASSESS MENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ARE NOT SATISFIED. HE SUBMITTED THAT THE A.O. HAD PASSED THE ORDER AFTER DETAILED INQUIR IES AND VERIFICATION OF THE BOOKS OF ACCOUNTS AND RECORDS OF THE ASSESSEE. SPE CIFIC QUERIES WERE RAISED DURING THE COURSE OF ASSESSMENT AND AFTER BEING SAT ISFIED, THE A.O. PASSED THE ORDER. HE THEREFORE URGED THAT THE ORDER PASSED U/ S 263 BE QUASHED. THE LD. A.R. FURTHER SUBMITTED THAT THE ENTIRE CREDIT OF MA T PERTAINING TO A.Y. 2007-08 ALONG WITH SUBSEQUENT YEARS MAT CREDIT HAS BEEN UT ILIZED IN A.Y. 2011-12 AND ACCORDINGLY OVERALL THERE IS NO REVENUE LOSS AND TH EREFORE THE ORDER OF THE A.O. CANNOT BE CONSIDERED TO BE PREJUDICIAL TO THE INTER EST OF THE REVENUE. THE LD. A.R. FURTHER SUBMITTED THAT IN RESPONSE TO THE SHOW CAUSE NOTICE BY CIT, THE ASSESSEE HAD MADE DETAILED SUBMISSIONS BUT IN THE O RDER PASSED U/S 263, LD. CIT HAS NOT DEALT WITH THE SUBMISSIONS AND THEREFOR E THE ORDER PASSED BY LD. CIT NEEDS TO BE QUASHED. FOR THIS PROPOSITION HE RELIE D ON THE DECISION IN THE CASE OF SMT. LILA CHOUDHARY VS. CIT (289 ITR 226 (GAU). 7. ON THE OTHER HAND LD. D.R. SUBMITTED THAT THE A. O. HAD NOT CORRECTLY APPLIED THE PROVISIONS OF SECTION 115JB AND HAD OVE RLOOKED THE PROVISIONS OF CLAUSE (H) TO THE EXPLANATION. AS PER THE REQUIREME NTS OF THE SECTION, THE DEFERRED TAX OF RS.7595000/- SHOULD HAVE BEEN ADDED TO THE NET PROFIT AND ON THE ENHANCED FIGURE THE ASSESSEE WAS REQUIRED TO PA Y TAX AS PER THE PROVISIONS OF SECTION 115B. BY OVERLOOKING THE PROVISION, BOT H THE CONDITIONS NECESSARY FOR INVOKING THE PROVISIONS OF SECTION 263 WERE SATISFI ED (AS THE ORDER WAS ERRONEOUS I.T.A. NO.3320/AHD/2011 A. Y. 2007-08 4 AND DUE TO WHICH THE ASSESSEES LIABILITY TO TAX WA S UNDERSTATED) AND THEREFORE THE ORDER OF THE CIT SHOULD BE UPHELD. HE RELIED O N THE DECISION OF THE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. VS. CIT (2000) 243 ITR 83 (SC). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE FACTUAL MATRIX OF THE CASE IS THAT THE ASSESSME NT WAS FRAMED U/S 143(3) AND THE TAX LIABILITY WAS WORKED OUT ON THE BASIS OF PR OVISIONS OF SECTION 115JB. THE A.O. HAS DETERMINED THE TAX LIABILITY U/S 115JB ON THE BASIS OF BOOK PROFITS. AS PER THE CLAUSE (H) OF EXPLANATION 1 TO SECTION 115J B, THE AMOUNT OF DEFERRED TAX AND PROVISION THEREFOR IS REQUIRED TO BE ADDED TO T HE NET PROFIT SHOWN IN THE PROFIT AND LOSS ACCOUNT TO ARRIVE AT THE BOOK PROF ITS. IN THE PRESENT CASE, THE A.O. HAD NOT ADDED THE DEFERRED TAX AMOUNT OF RS.75 95000/- TO THE NET PROFITS TO ARRIVE AT THE BOOK PROFITS AND THEREBY THE BO OK PROFITS WAS LESS TO THAT EXTENT AND ALSO THE TAX PAYABLE BY ASSESSEE IN TERM S OF PROVISIONS OF SECTION 115JB. 9. IN THE CASE OF MALABAR INDUSTRIAL CO. VS. CIT(SU PRA) THE HONBLE APEX COURT HAS HELD THAT CIT HAS TO BE SATISFIED TO TWIN CONDI TIONS, NAMELY (I) THE ORDER OF THE A.O. SOUGHT TO BE REVISED IS ERRONEOUS; AND (II ) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IT FURTHER HELD THAT IF DUE TO AN ERRONEOUS ORDER OF T HE I.T.O., THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 10. APPLYING THE PRINCIPLES LAID DOWN BY THE HONBL E APEX COURT IN THE AFORESAID CASE TO THE FACTS OF THE PRESENT CASE, IT CAN BE SEEN THAT BY NOT ADDING THE DEFERRED TAX TO THE NET PROFITS THERE WAS INCOR RECT APPLICATION OF LAW AND DUE I.T.A. NO.3320/AHD/2011 A. Y. 2007-08 5 TO WHICH THE REVENUE HAS LOST THE TAX IN THE YEAR U NDER APPEAL. IN VIEW OF THE AFORESAID FACTS WE ARE OF THE VIEW THAT BOTH THE RE QUIRED CONDITIONS FOR INVOKING THE PROVISIONS OF SECTION 263 ARE FULFILLED AND THE REFORE THE ORDER OF LD. CIT CANNOT BE FAULTED. THE DECISIONS RELIED BY THE LD. A.R. ARE DISTINGUISHABLE ON FACT AND CANNOT BE APPLIED TO THE FACTS OF THE PRESENT C ASE. WE, THUS, UPHOLD THE ORDER OF LD. CIT AND ACCORDINGLY, DISMISS THE APPEA L OF THE ASSESSEE. 10. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 14.12.2012 SD/- SD/- (G.C. GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# *