BALLAL CHEMICALS AND METALS P. LTD, MUMBAI V. ITO 6(1)(1), MUMBAI

ITA 3947/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92508 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Keywords: Capital asset; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI SANJAY ARORA , A M AND SHRI AMIT SHUKLA, J M . / I.T.A. NO. 3947/MUM/2011 ( / ASSESSMENT YEAR: 2006 - 07 ) BALLAL CHEMICALS AND METALS P. LTD. 15 KIRI MANDIR, L. J. ROAD, MAHIM, MUMBAI - 400 016 / VS. ITO - 6(1)(1) MUMBAI ./ ./ PAN/GIR NO. AAACB 2994 F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI GOVIND JAVERI / RESPONDENT BY : SHRI VIVEK BATRA / DATE OF HEARING : 16.02.2015 / DATE OF PRONOUNCEMENT : 08 .0 5 .2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMI SSIONER OF INCOME TAX (APPEALS) , MUMBAI (CIT(A) FOR SHORT) DATED 18.02.2011 , DISMISSING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2006 - 07 VIDE ORDER DATED 26.12.2008 2. THE CASE HAS HAD A CHE QUERED HISTORY. THE RETURN OF INCOME FOR THE YEAR , DISCLOSING AN INCOME OF RS.11,0 2,280/ - (PB PG.1), WAS FILED ON 27.11.2006, WHICH WAS SUBJECT TO VERIFICATION PROCEDURE UNDER THE ACT BY THE ISSUE OF NOTICE U/S.143 ( 2) ON 2 ITA NO. 3947/MUM/2011 (A.Y. 2006 - 07) BALLAL CHEMICALS AND METALS P. LTD. VS. ITO 08.10.2007. THIS WAS FOLLOWED BY NOTICE U/S.14 2 (1), ALONG WITH DETAILED QUESTION NAIR E/S , DURING THE MONTHS OF AUGUST TO OCT OBER, 2008. DESPITE SEVERAL OPPORTUNITIES FOR DIFFERENT DATES EXTENDING UP TO 15.12.2008, NON E ATTENDED THE PROCEEDINGS (REFER PARA 2 OF THE ASSESSMENT ORDER). THE ASSESSMENT GETTING TIME BARRED ON 31.12.2008, WAS FINALLY FRAMED ON 26.12.2008, EFFECTING TH REE AD JUSTMENTS , BESIDES MINOR DISALLOWANCES, ON THE BASIS OF THE MATERIALS FURNISHED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM/S, STATING ALSO THE REASON/S FOR THE SAME. OF THE THREE, DISALLOWANCE U/S.40(A)(IA) OF THE ACT HAVING BEEN RECTIFIED U/S.154, THE BALANCE TWO, AS UNDER, SURVIVE , AND ARE SUBJECT TO APPEAL BEFORE US: A) DISALLOWANCE OF MACHINERY PURCHASED (AT RS.16,49,797/ - ), CLAIMED AS PART OF COST OF PRODUCTION (REFER PARA 5.1 OF THE ASSESSMENT ORDER); AND B) ASSESSMENT OF SHORT TERM CAPITAL GAIN (STCG) , RETURNED AT RS.30,544/ - , AT RS.51,42,014/ - (REFER PARAS 6.1 TO 6.4 OF THE ASSESSMENT ORDER). IN APPEAL, THE ASSESSEE CLAIMING NON - CONSIDERATION OF ITS CLAIMS BY THE A SSESSING OFFICER (A .O. ) , THE MATTER WAS REMANDED TO THE LATTER, WHOSE REPORT (DATED 29. 06.2010) , BEING FURTHER OBJECTED TO BY THE ASSESSEE, WAS AGAIN REQUIRED TO BE COMMENTED UPON BY HIM (A.O.) BY THE FIRST APPELLATE AUTHORITY. THE LD. CIT(A), ON THE BASIS OF THE SECOND REMAND REPORT, AS WELL AS THE MATERIAL ON RECORD, INCLUDING THE ASSESSEE S ASSESSMENT RECORD FOR THE PRECEDING YEARS AND THE REPLY TO NOTICE U/S.133(6) RECEIVED FROM SISCO RESEARCH LABORATORIES PVT. LTD. (SRLL) , THE TRANSFEREE, CONFIRMED THE TWO ADJUSTMENTS, REPRODUCING THE RELEVANT PART OF THE SECOND REMAND REPORT (DATED 29.1 2.2010) IN HIS ORDER AT PARAS 10 AND 12 THEREOF. AGGRIEVED, THE ASSESSEE IS IN APPEAL, WHICH WAS DISMISSED IN THE FIRST INSTANCE BY THE T RIBUNAL VIDE ITS ORDER DATED 14.02.2014 AFTER CONSIDERING THE MATERIAL ON RECORD AND HEARING THE DEPARTMENTAL REPRESENT ATIVE (DR) ( COPY ON RECORD ) . THE ASSESSEE PLEADED (THROUGH ITS DIRECTOR SHRI HARIDAS BA L LAL) NON - SERVICE OF THE NOTICE OF HEARING (FOR 11.0 2.2014) VIDE AN AFFIDAVIT DATED 03.0 5 .2014 (COPY ON RECORD) . THE DATE OF HEARING WAS IN FACT COMMUNICATED TO ITS REP RESENTATIVE, SHRI KIRIT MANE K, C.A. ON THE OCCASION OF AN EARLIER HEARING, WHO DEPOSE D H I S NON ATTENDANCE ON THE DATE OF HEARING ON ACCOUNT OF BEING UNABLE TO LOCATE TO DATE OF HEARING (11. 0 2.2014) ON THE CAUSE LIST FROM THE WEBSITE OF THE TRIBUNAL, ADMITT ING TO THEREFORE HAVING PRESUMED AN ADJ OURNMENT 3 ITA NO. 3947/MUM/2011 (A.Y. 2006 - 07) BALLAL CHEMICALS AND METALS P. LTD. VS. ITO BY THE TRIBUNAL TO ANOTHER DATE VIDE A FFIDAVIT DATED 19.06.2014 (COPY ON RECORD). THE TRIBUNAL TAKING A H OLISTIC VIEW OF THE MATTER AND IN THE INTEREST OF JUSTICE RECALLED ITS ORDER VIDE ORDER U/S. 254(2) (IN MA NO. 115/MUM/2014 DATED 20.06.2014 ) . T HE ASSESSEE S APPEAL RAISES THE FOLLOWING GROUNDS: 1. THE AUTHORITIES BELOW ERRED IN ADDING SHORT TERM CAPITAL GAIN OF RS.51,42,014/ - . 2. THE AUTHORITIES BELOW ERRED IN ADDING MACHINERY PURCHASES TO INCOME. 3. BEFORE US, THE ASSESSEES CASE, ADDUCING A NEW PAPER - BOOK CONTAINING 31 PAG E S , WAS THAT PROPER RECONCILIATIONS FROM THE ASSESSEES ACCOUNTS HAVE SINCE BEEN DRAWN (AT PB PGS. 28 - 31), TO EXPLAIN THE FIGURES IN THE ASSESSEES STATEMENT OF INCOME. THE SAME BE ADMITTED A N D OPPORTUNITY AFFORDED TO THE ASSESSEE TO ESTABLISH THE VERACITY OF ITS CLAIMS. THE LD. DR WOULD, ON THE OTHER HAND, STATE OF SUFFICIENT OPPORTUNITY HAVING BEEN ALREADY EXTENDED TO THE ASSESSEE , AND WHEREAT IT HAD FAILED TO ESTABLISH ITS CLAIMS . 4. WE HA VE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. 4.1 WITHOUT DOUBT, THE ASSESSEE HAS NOT ACTED RESPONSIBLY, I.E., WITH DUE REGARD FOR ITS STATUTORY OBLIGATIONS. THIS IS EVIDENT FROM THE FACT OF THE RECONCILIATIONS, DRAWN FROM I T S OWN ACCOUNT S , B EING FURNISHED FOR THE FIRST TIME IN FEBRUARY, 2015, I.E., AFTER SEVERAL ROUNDS OF EXPLANATIONS/ OPPORTUNITIES IN THE ASSESSMENT/REMAND PROCEEDINGS, INCLUDING BEFORE THE FIRST APPELLATE AUTHORITY. THE ARGUMENT THAT THE LD. CIT(A) DID NOT EXTEND OPPORTUNITY TO REBUT THE SECOND REMAND REPORT IS , A GAIN, FRIVOLOUS. IT IS NOBODYS CASE THAT THE SECOND REMAND REPORT WAS NOT SUPPLIED OR MADE AVAILABLE TO THE ASSESSEE, FORMING IN FACT PART OF ITS ASSESSMENT AS WELL AS APPELLATE RECORD, AND BEING ITSELF OCCASIONED B Y AND ARISING ONLY TO MEET THE ASSESSEES OBJECTION TO THE FIRST REMAND REPORT. THE RECONCILIATION /S ESSENTIALLY CORROBORATE AND EXPLAIN THE FIGURES APPEARING IN THE ASSESSEES RETURN WITH REFERENCE TO ITS ACCOUNTS, THE BASE MATERIAL (FROM WHICH THE RETURN ITSELF WOULD HAVE BEEN PREPARED), OUGHT TO HAVE BEEN , RATHER, IN VIEW OF THE APPARENT INCONSISTENCIES, FURNISHED BY THE ASSESSEE IN THE FIRST INSTANCE. IT IS, RATHER, THE ABSENCE OR INADEQUATE SUBSTANTIATION OF ITS ACCOUNTS WITH EXTERNAL MATERIALS/EVIDENC ES, SO AS TO MEET THE QUERIES 4 ITA NO. 3947/MUM/2011 (A.Y. 2006 - 07) BALLAL CHEMICALS AND METALS P. LTD. VS. ITO ARISING IN THE COURSE OF THEIR VERIFICATION , WHERE TH E ASSESSEE FALTERS AND HAS BEEN FOUND WANTING. 4.2 WE MAY NEXT ENLIST THE CONTROVERSIES ARISING IN THE INSTANT CASE, AS DISCERN ED ON AN EXAMINATION OF THE MATERIAL O N RECORD: (A) SALE OF FACTORY LAND AND BUILDING : THE SALE AS EVIDENCED BY THE ASSIGNMENT DEED DATED 29.10.2005 BETWEEN THE ASSESSEE - COMPANY AND SRLL (PB PGS. 12 - 15) IS ONLY TOWARD TRANSFER , BY WAY OF ASSIGNMENT , OF LEASEHOLD RIGHTS IN PLOT OF LAND BEARING NO. H - 4 AT TALOJA INDUSTRIAL AREA, ALONG WITH THE BUILDING/ STRUCTURE EXISTING THEREAT ; THE PREMISES STATED TO BEAR A CON STRUCTED AREA ADMEASURING 617.27 , SQ. MTRS. OR ABOUTS, WHICH WE MAY REFER TO AS A PROPERTY OR PROPERTY TRANSFERRED , FOR A LUMPSUM CONSIDER ATION OF RS.50 LACS. THERE IS, THEREFORE, NO QUESTION OF PLANT AND MACHINERY AT THE SAID S ITE / FACTORY HAVING ALS O BEEN TRANSFERRED ALONG WITH. IN FACT, WE FIND THE ASSESSEE TO HAVE ALLOCATED THE SAID CONSIDERATION ONLY AGAINST ELECTRICAL FITTINGS IN THE MAIN, I.E., APART FROM LEASEHOLD LAND AND FACTORY BUILDING (PB PG. 30 ) . THE BASIS OF THE SAID ALLOCATION, HOWEVER, HAS NOT BEEN SPECIFIED AT ANY STAGE , AND WOULD R EQUIRE BEING ENQUIRED INTO AND EXPLAINED. I N THE ABSENCE OF ANY SPECIFICATION IN THE AGREEME NT , WHICH IS FOR A L UMPSUM CONSIDERATION, ALLOCATION THEREOF WOULD WARRANT BEING ON SOME REASONABLE BASIS. CONTRARY TO WHAT ONE MAY EXPECT, ONLY A MINOR SUM, CORRESPONDING TO ITS COST, INCURRED DECADES EARLIER (IN 1982) , HAS BEEN ASCRIBED TO THE NON DEPRE CIABLE ASSET OF LEASEHOLD LAND. OUR SECOND OBSERVATION IN THE MATTER IS THAT LAND, INCLUDING RIGHTS THEREIN, IS AN ASSET SEPARATE AND DISTINCT FROM BUILDING , AND EVEN THOUGH TRANSFERRED ALONG WITH, WOULD FORM A SEPARATE CAPITAL ASSET, CAPITAL GAINS ON WHI CH WOULD REQUIRE BEING COMPUTED SEPARATELY , AND TOWARD WHICH WE MAY REFER TO THE DECISIONS IN THE CASE OF CIT VS. ALPS THEATRE [1967] 65 ITR 377 (SC) AND CIT VS. CITIBANK N. A. [2003] 261 ITR 570 (BOM), BESIDES BEIN G ALSO THE SUBJECT MATTER OF DECISION S BY THE TRIBUNAL, AS IN THE CASE OF EAGLE BURGMANN INDIA P. LTD . (IN ITA NO. 4249/MUM/2012 & CO NOS. 1 34 & 158 /MUM /201 3 DATED 08.04.2015). OUR THIRD OBSERVATION IN THIS REGARD IS T HAT THERE IS NO MATIERAL ON RECORD TO SUPPORT THE CONTENTION OF A BUILDING AT PL OT OF LAND BEARING N O. H - 3, TALOJA INDUSTRIAL A REA , TO 5 ITA NO. 3947/MUM/2011 (A.Y. 2006 - 07) BALLAL CHEMICALS AND METALS P. LTD. VS. ITO HAVE BEEN S IMILARLY SOLD/TRANSFERRED . THERE IS NOTHING ON RECORD TO EXHIBIT THE LEASING OF PLOT OF LAND AT THE SAID ADDRESS. HOW COULD THE ASSESSEE, WE WONDER, CONSTRUCT A BUILDING THEREAT, AND HOW IS IT CLAIMED TO HAVE BEEN SOLD? HOW COULD THE SAME BE CONSIDERED AS PART OF PROPERTY TRANSFERRED ? THERE IS ALSO SOME CONTROVERSY WITH REGARD TO THE VALUE OF THE SHED (NEW CONSTRUCTION). EVEN THE ADDITIONAL MATERIAL PLACED ON RECORD DOES NOT , IN ANY MANNER, EVIDENCE THE SAME OR THROW ANY LIGHT IN THE MATTER. THE COST, WE MAY THOUGH CLARIFY, COULD ONLY BE AS PER THE ASSESSEES BOOKS OF ACCOUNT. (B) CONVERSION OF PLANT AND MACHINERY INTO STOCK - IN - TRADE : OUR NEXT OBSERVATION IN THE MATTER IS THAT THERE IS NO BASI S TO THE ASSESSEES CLAIM OF CONVERSION OF THE PLANT AND MACHINERY OF ITS METAL UNIT INTO STOCK - IN - TRADE. BY ADMISSION, THE BUSINESS TO WHICH THE SAME PERTAIN ED (I.E., METALS), STANDS DISCONTINUED , WITH THE ASSESSEE DIVERSIFYING INTO CHEMICAL BUSINESS. HOW COULD, THEREFORE, THE SAID MACHINERY , OF A DIFFERENT BUSINESS , BECOME A PART OF , A ND TOO AS TRADING STOCK, OF SUCH BUSINESS. RATHER, WE OBSE RVE NO PURCHASE OF ANY MATERIAL , ETC., SO THAT WHAT, IF AT ALL, CHEMICAL BUSINESS HAS BEEN UNDERTAKEN, IS ITSELF NO T CLEAR. THE CLAIM , BESIDES BEING UNPROVED , WITHOUT ANY MATERIAL AT ANY STAGE , I S EX FACIE FALLACIOUS , AND AS FAR AS WE ARE ABLE TO SEE , IS ONLY A WRITE OFF OF THE SAID CAPITAL ASSETS IN THE ACCOUNTS. FURTHER, THE SAID MACHINERY/S BEING STATED TO BE SOLD, THE CREDIT IN ITS RESPECT APPEAR S TO BE THROUGH THE SALES ACCOUNT (RS.54.78 LACS) AS R EFLECTED IN THE PROFIT AND LOSS ACCOUNT, IN WHICH CASE, HOW WOULD, IN VIEW OF SECTION 50, WE WONDER, THE IMPUGNED CONVERSION MATTER, APART FROM THE HEA D OF INCOME WHERE - UN DER THE NET INCOME WOULD STAND TO BE ASSESSED. 4.3 HAVING DELINEATE D THE DIFFERENT ISSUES AS WELL AS OUR CLEAR FINDINGS IN THE MATTER, WE ONLY CONSIDER IT PROPER, NOTWITHSTANDING OUR OBSERVATIONS ABOUT THE ASSESSEES CONDUCT AS BEING LACKADAISICAL AND WH OLLY IRRESPONSIBLE, TO RESTORE THE MATTER BACK TO THE FILE OF THE FIRST APPELLATE AUTHORITY TO ENABLE THE ASSESSEE TO PRESENT ITS CASE WITH REFERENCE TO THE MATERIALS ALREADY SUBMITTED BEFORE HIM (THOUGH NOT BEFORE THE A.O.) , WHICH WE ENLIST AS 6 ITA NO. 3947/MUM/2011 (A.Y. 2006 - 07) BALLAL CHEMICALS AND METALS P. LTD. VS. ITO UNDER , BESI DES THE VARIOUS CHAR TS AND RECONCILIATION STATEMENTS PLACED AT PGS. 28 TO 31 OF THE ASSESSEES PAPER - BOOK: SR. NO. PARTICULARS PLACED AT PB PG. 1 FIXED ASSETS CHART SHOWING W.D.V. OF ASSETS SOLD AND TRANSFERRED TO TRADING, P & L ACCOUNT DURING THE PREVIO US YEAR 11 2 CONFIRMATION OF ICI INDIA LTD. FOR MACHINERIES SOLD 16 3 CONFIRMATION OF SISCO RESEARCH AND LABORATORIES LTD. FOR FACTORY BUILDING AND MACHINERIES SOLD 17 4 SALE BILL OF THE ASSESSEE FOR MACHINERY SOLD TO SISCO RESEARCH AND LABORATORIES LTD . 18 5 CONFIRMATION OF MAKWAN CHEMI - EQUIP P. LTD. FOR MACHINERIES SOLD 19 THE ONUS TO ESTABLISH ITS CLAIMS, WHICH WE UNDERSTAND TO BE ONLY IN AGREEMENT WITH ITS RETURN, IS ONLY ON THE ASSESSEE . TO THE EXTENT IN DISAGREEMENT, EVEN AS THE BOOKS, THE BASE MATERIAL SHOULD TAKE PRECEDENCE, WE LEAVE IT OPEN TO THE AUTHORITIES BELOW TO TAKE A CONSIDER ED VIEW IN THE MATTER AFTER CALLING FOR EXPLANATION /S OR RELEVANT MATERIALS , WHERE DEEMED PROPER, FROM THE ASSESSEE. WE DO SO IN THE INTEREST OF , AND TO ADVANCE TH E CAUSE OF , JUSTICE, WHICH HA S AN OVERRID ING CONS IDERATION, AND SHOULD ORDINARILY PREVAIL. THE REVENUE SHALL HOWEVER BE AT LIBERTY TO CAUSE ANY VERIFICATION IN THE MATTER AS IT MAY DEEM FIT AND, FURTHER, TO DRAW INFERENCES AS WARRANTED UNDER THE CIRCUMSTAN CES, I.E., IN THE ABSENCE OF THE RELEVANT EVIDENCES; ITS MANDATE BEING TO DECIDE IN ACCORDANCE WITH LAW. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISPOSED OF IN THE A FORE - SAID T ERMS. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 08 , 201 5 SD/ - SD/ - ( AMIT SHUKLA ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 08 . 0 5 .201 5 7 ITA NO. 3947/MUM/2011 (A.Y. 2006 - 07) BALLAL CHEMICALS AND METALS P. LTD. VS. ITO . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI