DCIT, Circle - 10(1), , Kolkata V. M/s. Bengal Chemicals & Pharmaceuticals Limited., Kolkata

ITA 355/KOL/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4482 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 26-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: HARSH VARDHAN BHARDWAJ
• Keywords: Capital asset
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI A.T. VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.355/KOL/2019 ( S / ASSESSMENT YEAR: 2010-11) DCIT, CIRCLE-10(1), KOLKATA VS. M/S BENGAL CHEMICALS & PHARMACEUTICALS LIMITED 6, GANESH CHANDRA AVENUE, KOLKATA-700013 ./ ./ PAN/GIR NO. :AABCB 5107 F (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI SUPRIYO PAL, JCIT, SR. DR RESPONDENT BY :SHRI HARSHVARDHAN BHARDWAJ, FCA / DATE OF HEARING : 16/12//2019 /DATE OF PRONOUNCEMENT : 26/02/2020 / O R D E R PER DR. A. L. SAINI, AM: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTA INING TO ASSESSMENT YEAR 2010-11, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-8, KOLKATA, IN APPEAL NO. CIT(A), KOLKATA- 8/10141/2013-14, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY TH E ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) DATED 25/02/2013. M/S BENGAL CHEMICALS & PHARMACEUTICALS LIMITED ITA NO.355/KOL/2019 ASSESSMENT YEAR:2010-11 2 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 3,96,03,000/- ON ACCOUNT OF PRIOR PERIOD EXPENSES MADE BY THE ASSESSING OFFICER, AS THE NOTE S 1.9 (SCHEDULE 23) STATES THAT INCOME ON EXPENSES WHICH ARISE IN THE CURRENT PERIOD AS A RESULT OF ERRORS OF OMISSIONS IN THE PREPARATION OF FINANCIAL STATEMENT OF ONE OR MORE PRIOR PERIOD ARE CONSIDERED IN PRIOR PERIOD ADJUSTMENT ACCOUNT . 2. THAT THE APPELLANT CRAVES TO ADD DELETE OR MODIF Y ANY OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3.THE APPEAL FILED FOR ASSESSMENT YEAR 2010-11, IS BARRED BY LIMITATION BY 63 DAYS. THE REVENUE HAS MOVED A PETITION REQUESTING T HE BENCH TO CONDONE THE DELAY. THE REVENUE EXPLAINED THE REASONS FOR DELAY STATING THAT ORDER OF THE CIT(A) WAS RECEIVED VERY LATE DUE TO POSTAL ANOMALI ES. WE HEARD THE PARTY ON THIS PRELIMINARY ISSUE. HAVING REGARD TO THE REASON S GIVEN IN THE PETITION, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 4. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 07.10.2010 DECLARING TOTAL LOSS OF RS. 7,72,98,479/ - AND CLAIMED REFUND OF RS. 1,45,678/-. THE ASSESSEES CASE WAS SELECTED FOR SC RUTINY THROUGH CASS. IN COURSE OF ASSESSMENT PROCEEDING IT WAS NOTICED BY A O THAT THE ASSESSEE COMPANY IN ITS PROFIT AND LOSS ACCOUNT CLAIMED A SUM OF RS. 3,95,52,000/-. THE NOTE NO. 19 (SCHEDULE 23) OF THE FINANCIAL STATEMENTS OF THE AS SESSEE COMPANY CONTAINS THE DETAILS STATING THAT INCOME OR EXPENSES WHICH ARISE IN THE CURRENT PERIOD AS A RESULT OF ERRORS OF OMISSIONS IN THE PREPARATION OF FINANCIAL STATEMENT OF ONE OR MORE PRIOR PERIOD ARE CONSIDERED IN PRIOR PERIOD AD JUSTMENT ACCOUNT. THE AO WAS OF THE VIEW THAT THE SAID PRIOR PERIOD ADJUSTMENT I S NOT ALLOWED, THEREFORE HE DISALLOWEDRS.3,95,52,000/-. M/S BENGAL CHEMICALS & PHARMACEUTICALS LIMITED ITA NO.355/KOL/2019 ASSESSMENT YEAR:2010-11 3 THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSE E COMPANY DEBITED AN AMOUNT OF RS.376.46 LACS IN ITS PROFIT& LOSS ACCOUNT UNDER THE HEAD PROVISION FOR LOSSES AND WRITTEN OFF. IT WAS NOTED BY AO THAT THE ABOVE AMOUNT OF RS.376.46 LACS INCLUDES RS.296.79 ON ACCOUNT OF BOOK DEBTS, AMOUNT OF RS.0.51 LACS ON ACCOUNT OF LIVE STOCK WRITTEN OFF, AND AMOUNT OF RS 79.16 LACS ON ACCOUNT OF STOCK. IN COMPUTATION THE ASSESSEE COMPANY ITSELF D ISALLOWED RS.296.79 LACS BEING PROVISION FOR BOOK DEBTS AND RS.79.16 LAC FOR STOCK. HOWEVER, IT HAS NOT ADDED BACK PROVISION FOR LIVE STOCK OF RS 51,000/-. IN NOTES TO ACCOUNTS (SCHEDULE-23) CAG HAS MENTIONED THAT NO DEPRECIATIO N IS PROVIDED ON LIVESTOCK AND THE COST OF SAME IS WRITTEN OFF IN THE YEAR OF DEATH. THE LIVESTOCK IS TREATED AS CAPITAL ASSET BY THE ASSESSEE. WHEN THE LIVESTOCK D IES THE VALUE OF CAPITAL ASSET SHOULD BE REDUCED FROM THE ASSET AND THE SAME CANNO T BE DEBITED IN ITS PROFIT& LOSS ACCOUNT, THEREFORE AO DISALLOWED RS.51,000/-. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWINGS: 5. DISCUSSION, AND, DECISION. 4. FOREMOST - WHEN THE APPELLANT HAS NOT CLAIMED THE E XPENSE - THEN DISALLOWANCE JUST DOES NOT ARISE. THE DCIT AO HAS STATED THAT THE AMOUNT HAD BEEN DEB ITED TO THE P & L A/C - BUT WHAT IS THE NARRATION OF THAT DEBIT IS NOT MENTIONE D BY THE DCIT AO. IT APPEARS THAT THE DCIT AO HAD JUST PRESUMED - BY READING OF NOTE NO. 1.9 OF SCHEDULE 23 - WHICH IS A USUAL GENERAL NOTE TO ACCOUNTS. AND, T HE ISSUE OF DISALLOWANCE OF PRIOR-PERIOD EXPENSES BEING A COMMON ITEM OF DISALL OWANCE IN ASSESSMENTS. EVEN IF IT SO - WHAT MATTERS IN THE END IS THE COMP UTATION OF INCOME. WHEN IN THE COMPUTATION IT HAS NOT BEEN CLAIMED/[OR ADDED BACK] , THEN OCCASION FOR DISALLOWANCE DOES NOT ARISE. 5. THEN FOR ALTERNATIVE ARGUMENTS SAKE - EVEN IF IT WE RE THAT DEDUCTION WAS CLAIMED - IT IS ALLOWABLE, AS THE ERRORS OF OMISSIO NS IN THE ACCOUNTS HAVE BEEN RECTIFIED; I.E., THE LIABILITIES HAD CRYSTALLIZED. M/S BENGAL CHEMICALS & PHARMACEUTICALS LIMITED ITA NO.355/KOL/2019 ASSESSMENT YEAR:2010-11 4 6. THEN, THERE ARE ALSO TECHNICAL DEFICIENCIES IN THE IMPUGNED ASSESSMENT ORDER. 5.3.1 THE ASSESSMENT IS MADE U/S 143(3) SO, IT IS NOT T HE CASE OF BEST JUDGMENT U/S 144, OR,REJECTION OF ACCOUNTS U/S 145( 3). THAT IS, THE RETURN OF INCOME FILED IS TECHNICALLY NOT REJECTED. IT IS A V ALID RETURN OF INCOME. 5.3.2 THE DCIT AO HAS MENTIONED OF CAG AUDIT. [IT SHOULD. BE C&AG AUDIT). FIRSTLY, THE APPELLANT BEING A PUBLIC SECTOR UNDERT AKING, AUDIT BY C&AG IS NORMAL PROCESS. THEN, OF A REVISED STATEMENT OF TOT AL INCOME THAT WAS FURNISHED DURING THE ASSESSMENT PROCEEDINGS BASED ON ACCOUNTS AUDITED BY C&AG. ON THIS ASPECT IT WAS REQUIRED TO KNOW WHAT WAS THE PURPOSE OF THE C&AG AUDIT - FOR USUALLY THERE IS SPECIFIC PURPOSE/OBJECTIVE OF C&AG AUDIT. IN ANY CASE, FROM PERUSAL OF THE SUMMARY COMPARATIVE TABLEAT PAGE 1 O F THE IMPUGNED ASSESSMENT ORDER, IT IS JUST SOME INTERPOLATION BETWEEN HEADS OF ACCOUNTING/INCOME. WHAT MATTERS - IS THE COMPUTATION OF INCOME IN THE RETURN OF INCOME. I DIRECT THE AO TO DELETE THE DISALLOWANCE OF RS.3, 96,03,000/- 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GO NE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCU MENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS AVAILABLE ON RECORD. WE HAVE GONE THROUGH THE FINDINGS OF THE LD. CIT(A), WHEREIN THE LD CIT(A) C LEARLY STATED THAT : EVEN IF IT SO - WHAT MATTERS IN THE END IS THE COM PUTATION OF INCOME. WHEN IN THE COMPUTATION IT HAS NOT BEEN CLAIMED/[OR ADDED B ACK], THEN OCCASION FOR DISALLOWANCE DOES NOT ARISE. THEREFORE, LD CIT(A) RIGHTLY HELD THAT ASSESSEE HAD SHOWN PRIOR PERIOD ADJUSTMENT IN ITS BOOKS OF ACCOUNTS ONLY BUT DID N OT CLAIM IN ITS COMPUTATION OF INCOME WHICH HE HAD OFFERED FOR TAXATION PURPOSES. MEANING THEREBY, THAT ASSESSEE HAS NOT CLAIMED AMOUNT OF PRIOR PERIOD AD JUSTMENT. THEREFORE, THERE IS NO ANY IMPACT ON THE REVENUE.THAT BEING SO, WE DECL INE TO INTERFERE IN THE ORDER M/S BENGAL CHEMICALS & PHARMACEUTICALS LIMITED ITA NO.355/KOL/2019 ASSESSMENT YEAR:2010-11 5 PASSED BY THE LD. CIT(A), HIS ORDER ON THIS ISSUE, IS HEREBY ACCEPTED AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISS ED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 26.02.2020 SD/- ( A.T. VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 26/02/2020 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-10(1), KOLKATA 2. M/S BENGAL CHEMICALS & PHARMACEUTICALS LIMITED 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATABENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES