M/s SAAR Industries Ltd., Delhi V. ITO, New Delhi

ITA 3816/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6648 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 15-02-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 14-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RASHMITA JHA SE NIOR
• Keywords: Business income; Depreciation; Opportunity of being heard; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH G GG G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT AND AND AND AND SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 3816/DEL/2013 3816/DEL/2013 3816/DEL/2013 3816/DEL/2013 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2006 2006 2006 2006 - -- - 07 0707 07 M/S SAAR INDUSTRIES LIMITED, M/S SAAR INDUSTRIES LIMITED, M/S SAAR INDUSTRIES LIMITED, M/S SAAR INDUSTRIES LIMITED, R RR R- -- -52, VIKAS MARG, 52, VIKAS MARG, 52, VIKAS MARG, 52, VIKAS MARG, 3 33 3 RD RDRD RD FLOOR, SHAKARPUR, FLOOR, SHAKARPUR, FLOOR, SHAKARPUR, FLOOR, SHAKARPUR, DELHI DELHI DELHI DELHI 110 092. 110 092. 110 092. 110 092. PAN : AABCS8871K. PAN : AABCS8871K. PAN : AABCS8871K. PAN : AABCS8871K. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -7(1), 7(1), 7(1), 7(1), C.R. BUILDING, I.P. ESTATE, C.R. BUILDING, I.P. ESTATE, C.R. BUILDING, I.P. ESTATE, C.R. BUILDING, I.P. ESTATE, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRATAP GUPTA, CA. RESPONDENT BY : SMT. RASHMITA JHA, SE NIOR DR. DATE OF HEARING : 15.02.2016 15.02.2016 15.02.2016 15.02.2016 DATE OF PRONOUNCEMENT : 24.02.2016 24.02.2016 24.02.2016 24.02.2016 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: :- -- - THIS APPEAL BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-0 7 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-X, NEW DELHI DATED 28 TH MARCH, 2013. 2. FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY TH E ASSESSEE :- 1. THAT THE LEARNED CIT(A)-X HAS GROSSLY ERRED BOTH O N FACTS AND IN LAW IN MAKING A DISALLOWANCE OF RS.200000 /-TO THE TOTAL INCOME OF THE APPELLANT COMPANY ON ACCOUN T OF UNSATISFACTORY AND UNVERIFIABLE BILLS AND VOUCHERS WITH OUT PROPERLY APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE EXPENDITURE SO INCURRED WAS NECESSARY REQUIRED TO BE INCURRED SEEING THE PECULIAR NATURE O F THE BUSINESS UNDERTAKEN BY THE APPELLANT COMPANY AND THEREFORE NO SUCH DISALLOWANCE WAS EXIGIBLE IN THE EYE S OF LAW. ITA-3816/DEL/2013 2 2. THAT WHILE MAKING A DISALLOWANCE OF RS.200000/- TO THE TOTAL INCOME OF THE APPELLANT COMPANY ON ACCOUN T OF UNSATISFACTORY AND UNVERIFIABLE BILLS AND VOUCHERS, THE LEARNED CIT(A)-X WAS WHOLLY UNJUSTIFIED IN THE FACTS A ND CIRCUMSTANCES OF THE CASE AND IN LAW IN PARTLY SUSTAIN ING THE REJECTION OF BOOKS OF ACCOUNT IGNORING THE BARE FACT THAT NEITHER ANY SPECIFIC FINDING WITH REGARD TO THE REJECTION OF BOOKS OF ACCOUNT WAS GIVEN NOR THE PROVI SIONS OF SECTION 145(3) OF THE ACT WERE INVOKED BY THE AO IN THE ORDER PASSED BY HIM. 3. THAT THE AUTHORITIES BELOW HAVE GROSSLY ERRED AND WERE WHOLLY UNJUSTIFIED IN THE FACTS AND CIRCUMSTANCE S OF THE CASE IN TREATING THE SHORT TERM CAPITAL GAIN EARN ED BY THE APPELLANT COMPANY IN SHARES AS BUSINESS INCOME OF TH E APPELLANT COMPANY. 4. THAT THE AUTHORITIES BELOW HAVE GROSSLY ERRED AND WERE WHOLLY UNJUSTIFIED IN THE FACTS AND CIRCUMSTANCE S OF THE CASE AND IN LAW IN NOT ALLOWING THE SET OFF OF B ROUGHT FORWARD LOSS AND UNABSORBED DEPRECIATION OUT OF THE INCOME EARNED BY THE APPELLANT COMPANY AND WHILE DO ING SO THEY HAVE MISERABLY FAILED IN CONSIDERING AND EXAMI NING THE CASE RECORDS OF THE APPELLANT COMPANY FOR EARLIER YEARS AND POSITION OF THE LAW AS WELL. 5. THAT IN ANY CASE AND WITHOUT PREJUDICE, THE ORDER S PASSED BY THE AUTHORITIES BELOW ARE MISCONCEIVED, UNJUSTIFIED AND UNWARRANTED IN THE FACTS AND CIRCUMST ANCES OF THE CASE. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, AL TER, MODIFY OR DELETE ANY OR ALL OF THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 3. THE FACTS RELATING TO GROUND NOS.1 & 2 ARE THAT TH E ASSESSEE DERIVES INCOME FROM DEVELOPING RESIDENTIAL AND COMMER CIAL COMPLEXES. FOR THE YEAR UNDER CONSIDERATION, THE ASSES SEE DISCLOSED THE INCOME OF `6,03,107/- FROM REAL ESTATE BUSINESS. T HE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND APPLIED GR OSS PROFIT RATE OF 20% ON THE RECEIPT OF `1,80,93,200/- WHICH RESULTED IN THE ADDITION OF ITA-3816/DEL/2013 3 `30,15,533/-. LEARNED CIT(A) WAS OF THE OPINION THA T COMPLETE REJECTION OF BOOKS OF ACCOUNT AND APPLICATION OF GRO SS PROFIT RATE WAS NOT PROPER ON THE FACTS OF THE CASE BUT, AT THE SAME T IME, SOME DISALLOWANCE OUT OF EXPENSES WAS REQUIRED BECAUSE THE ASSE SSEE DID NOT PRODUCE THE BILLS AND VOUCHERS WHICH COULD HAVE B EEN VERIFIED BY THE ASSESSING OFFICER. CERTAIN VOUCHERS PRODUCED BY THE ASSESSEE DID NOT CONTAIN THE NAME AND ADDRESS OF THE PERSONS FROM W HOM THE PURCHASES OF MATERIAL WERE MADE. THE REVENUE SEEMS TO HAVE ACCEPTED THE ORDER OF LEARNED CIT(A). HOWEVER, THE ASSESSEE IS IN APPEAL. 4. AT THE TIME OF HEARING BEFORE US, LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSING OFFICER WAS WRONG IN MENTI ONING THAT THE BOOKS OF ACCOUNT AND SUPPORTING BILLS AND VO UCHERS WERE NOT PRODUCED. HE STATED THAT THE ASSESSEE MAINTAINED REGUL AR BOOKS OF ACCOUNT WHICH ARE DULY AUDITED AND ALL EXPENSES INCUR RED BY THE ASSESSEE ARE DULY VERIFIABLE. HE ALSO STATED THAT SOME OF THE BUILDING CONSTRUCTION MATERIAL LIKE BRICKS, SAND, STONES ARE BEIN G SOLD BY UNORGANIZED SECTOR WHICH DOES NOT MAINTAIN PROPER BIL L BOOKS. THEY JUST ISSUE THE CASH BILLS. HOWEVER, WHEN THE PURCHASE OF MATERIAL AND ITS UTILIZATION IN THE CONSTRUCTION WORK IS NOT IN DISP UTE, LEARNED CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF `2 LAKHS OUT OF EXPENSES. HE FURTHER SUBMITTED THAT THE PURCHASES WHICH ARE CLAIMED TO BE UNVERIFIABLE, SUCH BILLS WERE ATTACHED ALONG WI TH THE ASSESSMENT ORDER AND THE TOTAL OF SUCH BILL IS LESS THAN `1 LAKH. THEREFORE, CONSIDERING THESE FACTS, THE DISALLOWANCE SUSTAINED IS UNC ALLED FOR. 5. WITH REGARD TO GROUND NO.3, LEARNED COUNSEL STATE D THAT THE ASSESSING OFFICER HAS TREATED THE INCOME FROM SHORT TERM CAPITAL GAIN EARNED BY THE ASSESSEE AS BUSINESS INCOME. HE STATED THAT THE ASSESSEE MADE INVESTMENT IN THE SHARES AND REALIZED THOSE ITA-3816/DEL/2013 4 INVESTMENTS. THE ASSESSING OFFICER, WITHOUT ALLOWING ANY OPPORTUNITY OF BEING HEARD, TREATED SUCH INCOME AS BUSINESS INCOME M ERELY ON THE BASIS OF WRONG REPORTING IN THE AUDIT REPORT. HE, TH EREFORE, SUBMITTED THAT THIS ISSUE MAY BE SENT BACK TO THE FILE OF THE ASSESSI NG OFFICER FOR ALLOWING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. WITH REGARD TO GROUND NO.4, LEARNED COUNSEL STATE D THAT THE ASSESSING OFFICER DID NOT ALLOW SET OFF OF BROUGHT FORWA RD LOSS AND UNABSORBED DEPRECIATION. HE STATED THAT THIS ISSUE CAN ALSO GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION WITH THE DIRECTION TO ALLOW THE SET OFF OF UNABSORBED LOSS/DEPRECIATION AS AV AILABLE ON RECORD. 7. LEARNED DR, ON THE OTHER HAND, STATED THAT THE EN TIRE MATTER MAY BE SEND BACK TO THE FILE OF THE ASSESSING OFFICER BE CAUSE THE ASSESSING OFFICER HAS RECORDED A FINDING THAT THE ASSESSEE DID NOT PRODUCE ALL THE BILLS AND VOUCHERS AND SOME OF THE VO UCHERS PRODUCED BY THE ASSESSEE WERE NOT VERIFIABLE. THE ASSESSING OFFICER HAS ATTACHED ONLY A FEW SAMPLES OF SUCH VOUCHERS AND NOT AL L SUCH VOUCHERS WHICH ARE NOT VERIFIABLE. LEARNED COUNSEL F OR THE ASSESSEE ALSO HAS NO OBJECTION IN SETTING ASIDE ALL THE ISSUES RAIS ED IN THE ASSESSEES APPEAL TO THE FILE OF THE ASSESSING OFFICER. 8. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF AU THORITIES BELOW ON ALL THE POINTS RAISED IN THIS APPEAL BEFORE US AND R ESTORE ALL THE ISSUES TO THE FILE OF THE ASSESSING OFFICER. WE DIRECT TH E ASSESSING OFFICER TO RE-EXAMINE THE BOOKS OF ACCOUNT OF THE ASSE SSEE AND THEREAFTER DETERMINE THE ASSESSEES INCOME IN ACCORDANCE WITH LAW. WE ALSO DIRECT THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOU NT AND ALL THE VOUCHERS BEFORE THE ASSESSING OFFICER. WE ALSO DIREC T THE ASSESSING OFFICER TO ALLOW ADEQUATE OPPORTUNITY OF BEIN G HEARD TO THE ITA-3816/DEL/2013 5 ASSESSEE BEFORE READJUDICATING THE ISSUE OF HEAD OF INCO ME UNDER WHICH PROFIT FROM SALE OF SHARES IS ASSESSABLE. SIMILARLY , HE IS ALSO DIRECTED TO VERIFY FROM RECORD WHETHER ANY UNABSORB ED BROUGHT FORWARD LOSS/UNABSORBED DEPRECIATION IS AVAILABLE. I F THE SAME IS AVAILABLE, THEN SET OFF OF THE SAME SHOULD BE ALLOWED IN ACCORDANCE WITH LAW. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 24.02.2016. SD/- SD/- (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT : M/S SAAR INDUSTRIES LIMITED, M/S SAAR INDUSTRIES LIMITED, M/S SAAR INDUSTRIES LIMITED, M/S SAAR INDUSTRIES LIMITED, R RR R- -- -52, VIKAS MARG, 3 52, VIKAS MARG, 3 52, VIKAS MARG, 3 52, VIKAS MARG, 3 RD RDRD RD FLOOR, SHAKARPUR, FLOOR, SHAKARPUR, FLOOR, SHAKARPUR, FLOOR, SHAKARPUR, DELHI DELHI DELHI DELHI 110 092. 110 092. 110 092. 110 092. 2. RESPONDENT : INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -7(1), C.R. BUILDING, I.P. ESTATE, 7(1), C.R. BUILDING, I.P. ESTATE, 7(1), C.R. BUILDING, I.P. ESTATE, 7(1), C.R. BUILDING, I.P. ESTATE, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR