M/s. Sukam Gravures Ltd., Uttar Pradesh V. ITO, Muzaffarnagar

ITA 3516/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6691 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 11-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-I : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.3516/DEL/2014 ASSESSMENT YEAR : 2010-11 SUKAM GRAVURES LTD., C/O M/S MALIK & CO. (ADVOCATES), 305/7, THAPAR NAGAR, MEERUT CITY, UTTAR PRADESH. PAN: AAECS3642K VS. ITO, WARD-1(1), MUZAFFARNAGAR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY MALIK, ADVOCATE DEPARTMENT BY : SHRI F.R. MEENA, SR. DR DATE OF HEARING : 22.02.2017 DATE OF PRONOUNCEMENT : 23.02.2017 ORDER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 29.01.2014 IN RELATION TO T HE ASSESSMENT YEAR 2010-11. ITA NO.3516/DEL/2014 2 2. THE ASSESSEE HAS RAISED THREE GROUNDS, NAMELY, R EDUCING THE GROSS LOSS OF RS.16,04,026/- TO NIL; DISALLOWAN CE OF RS.10,000/- OUT OF EXPENSES ON ESTIMATE BASIS; AND ADDITION OF RS.10 LAC ON ESTIMATE BASIS. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A LIMITED COMPANY WHICH FILED ITS RETURN DECLARING NIL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THERE WAS A GROSS LOSS OF RS.16.04 LAC SHOWN B Y THE ASSESSEE AGAINST THE SALES OF RS.33.39 LAC, WHICH W AS ROUGHLY 50% OF SALES. IT WAS SEEN THAT THE ASSESSEE HAD SH OWN RECEIPTS OF RS.36.63 LAC UNDER THE HEAD RENT, ETC., WHICH, IN THE OPINION OF THE AO, HAD NO NEXUS WITH THE TRADING AC TIVITIES. HE, THEREFORE, PROCEEDED TO RECAST THE ASSESSEES T RADING, PROFIT AND LOSS ACCOUNT AS UNDER:- OP. STOCK RS.23,62,467/- SALES RS.32,39,927/- PURCHASE RS.30,02,358/- CLOSING STOCK RS.21,16,409/- STORES RS. 1,54,631/- POWER RS.12,57,874/- EXCISE DUTY RS. 1,83,031/- GROSS LOSS RS.16,04,026/- RS. 69,60,362 RS. 9,60,362 GROSS LOSS RS.16,04,026/- NET LOSS RS.35,47,224/- RENT RS.1,20,000/- ITA NO.3516/DEL/2014 3 INTEREST RS.9,69,242/- DEPRECIATION RS.3,55,796/- SALE PROMOTION RS. 1,390/- CONVEYANCE RS. 12,071/- OTHER EXPENSES RS. 28,641/- REPAIR AND MACHINERY RS. 34,431/- OTHER EXPENSES SALARY, TELEPHONE, INSURANCE, ETC. RS. 4,21,627/- ----------------- RS.35,47,224/- RS.35,47,224/- 4. THE AO NOTICED THAT THE ASSESSEE COULD NOT JUSTI FY CONSUMPTION OF RAW MATERIAL WITH PRODUCTION, SALES, OPENING STOCK AND CLOSING STOCK OF FINISHED GOODS. THE ASSE SSEE HAD CLAIMED EXPENSES AGGREGATING TO RS.42,101/-. IN TH E ABSENCE OF ANY CASH MEMOS AND BILLS, ETC., THE AO MADE DISA LLOWANCE OF RS.10,000/-. THEREAFTER, HE PROCEEDED TO COMPUT E THE TOTAL INCOME AS UNDER :- NET LOSS RS.35,47,224/- DEDUCT: (I) GROSS LOSS SHOWN RS.16,04,026/- REDUCED TO NIL RS.16,04,026/- (II) DISALLOWANCE OF EXPENSES AS CLAIMED AND AS PARA 4 RS. 10,000/- RS.16,14,026/- LOSS (-) RS.19,33,198/- ITA NO.3516/DEL/2014 4 5. WITH THE ABOVE OBSERVATIONS, TAXABLE INCOME FOR THE YEAR WAS DETERMINED AS UNDER:- INCOME FROM RENT INTEREST, ETC., AS PER FACTS IN PARA 3 RS.36,63,228/- (-) LOSS IN MANUFACTURING MARKETING OF PACKING MATERIAL AS PER FACTS IN PARA 4 RS.19,33,198/- RS.17,30,030/- ADD I) THE ASSESSEE HAD SHOWN CLOSING STOCK OF RS.21,16,409/- IN TRADING ACCOUNT AS AGAINST RS.31,16,409/- AS SHOWN IN BALANCE SHEET. BY SHOWING (IN CORRECT) AMOUNT OF CLOSING STOCK IN TRADING ACCOUNT, THE ASSESSEE HAD UNDERSTATED NET INCOME AS PER P&L A/C, HENCE, THE DIFFERENCE OF RS.10,00,000/- IS ADDED TO THE TAXABLE INCOME. (ADDITION RS.10,00,000/-) RS.10,00,000/- ASSESSED INCOME RS.27,30,030/- 6. THE ASSESSEE REMAINED UNSUCCESSFUL TO THE EXTENT OF THE ISSUES RAISED IN THIS APPEAL. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. THE LD. AR CONTENDED T HAT THE RECASTING OF THE TRADING AND PROFIT & LOSS ACCOUNT BY THE AO WAS TOTALLY BASELESS INASMUCH AS MOST OF THE FIGURE S TAKEN BY HIM DID NOT TALLY WITH THE AUDITED ACCOUNTS FURNISH ED BY THE ITA NO.3516/DEL/2014 5 ASSESSEE. AS REGARDS THE ADDITION OF RS.10 LAC, TH E LD. AR CONTENDED THAT THE AO HAD WRONGLY TAKEN THE FIGURE OF CLOSING STOCK IN TRADING ACCOUNT AND BALANCE SHEET, WHEREAS THERE WAS ACTUALLY NO DIFFERENCE. TO SUPPORT SUCH CONTENTION, THE LD. AR ALSO DREW MY ATTENTION TOWARDS PAGES 26, 27, 27A, E TC., CLAIMED TO BE ELABORATION OF FIGURES FROM THE AUDIT ED ACCOUNTS. THE LD. DR COULD NOT POINT OUT AS TO HOW SOME OF TH E FIGURES, POINTED OUT BY THE LD. AR, WERE TAKEN BY THE AO FOR COMPUTING THE TOTAL INCOME. IN VIEW OF THE FACT THAT THERE IS SO MUCH MISMATCH IN THE FIGURES TAKEN BY THE AO WITH THE AU DITED ACCOUNTS, I AM UNABLE TO UPHOLD THE IMPUGNED ORDER UNDER THESE CIRCUMSTANCES. IN MY CONSIDERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF AO. I ORDER ACCORDINGLY AND DIRECT HIM TO MAKE THE ASSESSMENT A FRESH AFTER ALLOWING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO.3516/DEL/2014 6 8. IN THE RESULT, THE APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.02.201 7. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED, 23 RD FEBRUARY, 2017. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.