Jai Praksh Gupta, New Delhi V. ITO, New Delhi

ITA 3374/DEL/2013

• Counselvise Citation: 337420114 RSA 2013
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 28-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DA MKAUNAJMA
• Assessee Lawyers: S K MITTAL
• Keywords: Business income; Depreciation
• Section: 145

Judgement Text

I.T.A. NO.: 3374/DEL/2013 ASSESSMENT YEARS 2009-10 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI D BENCH, NEW DELHI [CORAM: I.C. SUDHIR, JM AND PRAMOD KUMAR, AM] I.T.A. NO.: 3374/DEL/2013 ASSESSMENT YEAR: 2009-10 JAI PRAKASH GUPTA, .APPELLANT 1-D, KAMLA NAGAR, NEW DELHI 110 007 [PAN: AAKPG 4125 E] VS. INCOME TAX OFFICER .RESPONDENT WARD 20(1), NEW DELHI. APPEARANCES BY: S.K. MITTAL , FOR THE APPELLANT P. DAM KAUNAJMA, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING: 28 TH JANUARY, 2015 DATE OF PRONOUNCING THE ORDER: 31 ST MARCH, 2015 O R D E R PER PRAMOD KUMAR: 1. THIS APPEAL, FILED BY THE ASSESSEE, IS DIRECTED AGAINST THE ORDER DATED 31 ST DECEMBER, 2012 PASSED BY THE LEARNED CIT(A) FOR THE ASSESSMENT YEAR 2009-10. 2. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT CA LL FOR ANY ADJUDICATION. 3. IN GROUND NOS.2 & 3, WHICH ARE INTERCONNECTED, T HE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCES:- 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE AL) HAS ERRED IN LAW & IN FACT WHILE SUSTAINING ADDITION OF RS.2,98,0 03/- ON ACCOUNT OF TRADING ACCOUNT FOR NOT INCLUDING THE EXCISE DUTY ON VALUE OF CLOSING STOCK, I.T.A. NO.: 3374/DEL/2013 ASSESSMENT YEARS 2009-10 PAGE 2 OF 4 WHEN SEPARATE DEVIATION ACCOUNT WAS PREPARED AND ADJ USTMENT FOR THE SAID DEVIATION WAS MADE TO THE RETURNED INCOME. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA L) HAS ERRED IN LAW & IN FACT WHILE SUSTAINING ADDITION OF RS.1,02, 125/- ON ACCOUNT OF DEVIATION, WHEN THIS IS THE ADJUSTMENT ON ACCOUNT OF D EVIATION AS PER DEVIATION ACCOUNT PREPARED BY THE APPELLANT AND RETU RNED INCOME ADJUSTED WITH THE SAID DEVIATION IN TRADING ACCOUNT. 4. THE RELEVANT MATERIAL FACTS, AS CULLED OUT FROM MATERIAL BEFORE US, ARE AS FOLLOWS. THE ASSESSEE BEFORE US, AN INDIVIDUAL, IS ENGAGED I N THE BUSINESS OF MANUFACTURING CHEMICALS. DURING THE COURSE OF SCRUTINY ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE EXCISE DUTY OF RS.2,98,003/- PAID BY THE ASSESSEE WAS NOT INCLUDED IN THE CLOSING STOCK. THE ASSESSING OFFICER WAS OF TH E VIEW THAT IN TERMS OF THE PROVISIONS OF SECTION 145A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), WHILE COMPUTING BUSINESS INCOME, VALUATION OF PURCHASE AN D SALE OF GOODS SHOULD NOT ONLY BE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULAR LY EMPLOYED BY THE ASSESSEE BUT SHOULD ALSO INCLUDE CESS DUTY ETC. ACCORDINGLY, TH E ASSESSING OFFICER ADDED RS.2,98,003/- TO THE INCOME RETURNED BY THE ASSESS EE. THE ASSESSING OFFICER FURTHER NOTICED THAT IN THE COMPUTATION OF TAXABLE INCOME A N AMOUNT OF RS.1,02,125/- WAS ALSO DISALLOWED BY THE ASSESSEE AS DEVIATION IN INCOME U NDER SECTION 145 OF THE ACT. IT WAS ALSO ADDED IN ITS TAXABLE INCOME. AGGRIEVED BY TH E ADDITION SO MADE BY THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE THE LEARNED CIT(A) BUT WITHOUT ANY SUCCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN F URTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. WE FIND THAT THE LD. CIT(A) HAS DECLINED TO DEAL WITH THE ISSUE ON MERITS ON THE SHORT GROUND THAT THE ASSESSEE HAS NOT USED THE OPP ORTUNITY TO COME OUT WITH ALL THE DOCUMENTS AVAILABLE, PARTICULARLY REGARDING EXCISE ETC. SO THAT ALL THE CLAIMS OF THE ASSESSEE, THE ACCOUNTING OF EXCISE COULD BE EXAMINE D TO SEE IF THE ADDITIONS MADE BY THE ASSESSING OFFICER DESERVES TO BE SUSTAINED, DELETED OR VARIED. THE ISSUE IN APPEAL, HOWEVER, HAD LITTLE TO DO WITH THE FACTUAL ELEMENT OF ACCOUNTING AS THERE WAS NO DISPUTE I.T.A. NO.: 3374/DEL/2013 ASSESSMENT YEARS 2009-10 PAGE 3 OF 4 ON THAT ASPECT. THE SHORT ISSUE WAS WHETHER AN ADD ITION FOR EXCISE DUTY ON STOCK CAN BE MADE WHEN A SEPARATE DEVIATION ACCOUNT IN RESPECT O F SUCH ELEMENTS EMBEDDED IN OPENING AND CLOSING STOCK, SALES AND PURCHASES IS D ULY MADE AND ADJUSTED FOR IN TAXABLE INCOME. THIS ISSUE IS CLEARLY COVERED IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2007-08 WHEREIN LD. CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE ASSESSING OFFICER IS SAID TO HAVE ACCEPTED THE SAME BY NOT CARRYING THE MATTER IN FURTHER APPEAL. WHILE SO DECIDING THE MATTER, LEARNED CIT( A) HAS HELD THAT WHEN SUCH EXCISE DUTY IS TAKEN INTO ACCOUNT FOR CALCULATING DEVIATIO N PROFIT, AS IT WAS A PROFIT CASE IN THAT YEAR, THERE CANNOT BE ANY BASIS FOR MAKING AN ADDIT ION FOR EXCISE DUTY IN CLOSING STOCK. THE SAME PRINCIPLE MUST HOLD GOOD FOR THIS YEAR AS WELL. ACCORDINGLY, AS LONG AS EXCISE DUTY ON CLOSING SOCK IS TAKEN INTO ACCOUNT IS DULY TAKEN INTO ACCOUNT FOR COMPUTING DEVIATION PROFIT OR LOSS, NO SEPARATE ADDITION CAN BE MADE FOR THE SAME. IT IS ALSO ELEMENTARY THAT WHEN THE IMPACT OF SUCH DEVIATIONS IS BEING COMPETED, IT CAN BE A NEGATIVE FIGURE OR POSITIVE FIGURE BUT ADJUSTMENT F OR SUCH LOSS OR PROFIT IS TO BE MADE IN THE TAXABLE INCOME. HOWEVER, WHAT NEEDS TO BE EXAM INED AND VERIFIED IS THE COMPUTATION OR WORKING OF DEVIATION ACCOUNT AND AS LONG AS ASSESSEE CAN SATISFACTORILY EXPLAIN THE SAME, THE APPROPRIATE ADJUSTMENT IN DEV IATION ACCOUNT IS TO BE GIVEN EFFECT TO AND NO SEPARATE ADDITIONS, AS IN THIS CASE, ARE REQUIRED TO BE MADE. WITH THESE DIRECTIONS, AND FOR THIS LIMITED VERIFICATION, THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 7. GROUND NOS.2 & 3 ARE THUS ALLOWED FOR STATISTICA L PURPOSES. 8. IN GROUND NOS. 4 & 5, THE ASSESSEE HAS RAISED TH E FOLLOWING GRIEVANCES:- 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE AL) HAS ERRED IN LAW & IN FACT WHILE SUSTAINING ADDITION OF RS.6,739/ - BY DISALLOWING 1/6 TH OF THE TELEPHONE EXPENSES. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA L) HAS ERRED IN LAW & IN FACT WHILE SUSTAINING ADDITION OF RS.48190/ - BY DISALLOWING 1/6 TH OF THE VEHICLE EXPENSES INCLUDING DEPRECIATION ON CAR AN D INTEREST ON CAR LOAN. I.T.A. NO.: 3374/DEL/2013 ASSESSMENT YEARS 2009-10 PAGE 4 OF 4 9. AS FAR AS THESE GRIEVANCES OF THE ASSESSEE ARE C ONCERNED, IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT IN THE ASSESSMENT YEAR 2007-0 8, LEARNED CIT(A) HAD RESTRICTED SIMILAR DISALLOWANCES TO 1/10 TH OF RELATED EXPENSES, AND THE MATTER RESTS THERE. WE DO NOT SEE ANY REASONS TO DISTURB THIS ACCEPTED PAST H ISTORY OF THE CASE, AND, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALL OWANCE TO 1/10 TH OF EXPENSES. TO THIS EXTENT, GRIEVANCES OF THE ASSESSEE ARE UPHELD. 10. GROUND NOS. 4 & 5 ARE THUS ALLOWED TO THE EXTEN T ABOVE. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED AS ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST MARCH, 2015. SD/- SD/- I.C. SUDHIR PRAMOD KUMA R (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NEW DELHI, THE 31 ST DAY OF MARCH, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI