Premier Threads Pvt. Ltd., Bhubaneswar V. ACIT, Bhubaneswar

ITA 399/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4428 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 25-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 08-11-2010
• Court: TRIBUNAL
• Department Lawyers: J KHANRADR
• Assessee Lawyers: D C ROYM Q ANSARI ARS
• Keywords: Depreciation; Opportunity of being heard; Unabsorbed depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, (SMC) CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. / ITA NO. 399/CTK/2010 / ASSESSMENT YEAR 2007 - 08 PREMIER THREADS PVT. LTD., 47BHAGABANPUR, INDUSTRIAL ESTATE, BHUBANESWAR 751 019 PAN: AADCP 6099 C - - - VERSUS - ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.C.ROY/M.Q.ANSARI, ARS. / FOR THE RESPONDENT: / SHRI J.KHANRA,DR / ORDER (SMC) . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THIS APPEAL BY THE ASSESSEE AGI TATES THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) CONFIRMING THE DETERMINATION OF PROFIT AMOUNTING TO 4,28,910 BY THE ASSESSING OFFICER ON THE FACTS AND CIRCUMSTANCES WHICH WERE APPEALED AGAINST BEFORE THE FIRST APPELLATE AUTHORITY INTE RALIA INCLUDING A GROUND IS RAISED FOR CP,[ITOMG THE SHORT TERM CAPITAL GAIN AMOUNTING TO 4,92,000 ASSESSED AND COMPUTED BY THE ASSESSING OFFICER. THE CLAIM FOR DEPRECIATION ALLOWANCE HAS ALSO BEEN RAISED BY THE ASSESSEE IN THIS APPEAL TO BE MANDATORILY ALLOWED ON THE BASIS OF ASSETS HAVING BEEN PUT TO USE BY THE ASSESSEE. 2. INITIATING HIS ARGUMENT, THE LEARNED COUNSEL FOR THE ASSESSEE PRAYED FOR NOT PRESSING THE GROUND RELATING TO NON - CONSIDERATION OF SHORT TERM CAPITAL GAIN BY THE LEARNED CIT(A) IN VI EW OF HIS DIRECTING THE ASSESSING OFFICER TO RECOMPUTE THE TAXABILITY OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR INCORPORATING THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION. ITA NO.399/CTK/2010 2 HE PRODUCE THE ORDER GIVING APPEAL EFFECT WHICH CLARIFIES COMPUTING THE T OTAL INCOME AT NIL AND THE AMOUNT OF UNABSORBED DEPRECIATION TO BE CARRIED FORWARD AND THE BUSINESS LOSS HAS BEEN IDENTIFIED BY THE ASSESSING OFFICER IN T HIS ORDER. HE PREFERRED NOT TO PRESS GROUND RELATING TO COMPUTING THE SHORT TERM CAPITAL GAIN IN CONSE QUENCE TO HIS SUBMISSION S FOR T HE REMAINING GROUNDS WOULD RENDER IT INFRUCTUOUS. 3. THE ASSESSEE WAS INCORPORATED UNDER THE COMPANIES ACT,1956 IN THE YEAR 1987 AND WAS MANUFACTURING MULTIPLE COTTON YARN/INDUSTRIAL THREADS OF DIFFERENT VARIETIES TO BE USE D AS BACKING YARN FOR MAKING WOOLEN HAND - KNOTTED CARPETS FOR EXPORT. IT FILED ITS RETURN OF INCOME DECLARING LOSS OF 13,47,358 WHICH WAS SCRUTINIZED UNDER THE PROVISIONS OF SECTION 143(3).THE ASSESSING OFFICER HELD THAT THE ASSETS COULD NOT HAVE BEEN US ED IN THE PURPORTED LOCKOUT PERIOD IN THE IMPUGNED ASSESSMENT YEAR BUT SUFFERED SALE OF STOCK AND ASSETS WHICH WAS TO BE CONSIDERED AS PER THE PROVISIONS OF SECTION 50 OF THE I.T.ACT. HE DISALLOWED DEPRECIATION AMOUNTING TO 10,33,129 HOLDING THAT THE COMP ANY HAD BECOME SICK IN THE ASSESSMENT YEAR 1999 - 2000 DUE TO CLOSURE OF THE COMPANY AND AS THE ASSETS HAVE NOT BEEN PUT TO USE , DEPRECIATION WAS NOT ALLOWABLE TO THE ASSESSEE. HE ALSO DISALLOWED INTEREST REMAINING PAYABLE AMOUNTING TO 2,51,143 UNDER THE P ROVISIONS OF SECTION 43B. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE APPELLANTS CONTENTIONS MAINLY CONFINING HIMSELF TO THE ALLOWABILITY OF DEPRECIATION IN VIEW OF THE FACT THAT THE ASSESSEE HAD NOT PUT TO US E THE ASSETS ON WHICH NO CHARGE HAS BEEN CREATED IN THE PROFIT & LOSS ACCOUNT. HE ALSO CONFIRMED THE AOS ACTION OF COMPUTING SHORT TERM CAPITAL GAIN ON THE FACTS AND CIRCUMSTANCES AS NOTED BY HIM, AS GIVEN IN THE ASSESSMENT ORDER. HOWEVER, HE AGREED TO TH E ITA NO.399/CTK/2010 3 PROPOSITION OF THE APPELLANT BEFORE HIM THAT THE BENEFIT OF CARRY FORWARD OF LOSS AND UNABSORBED DEPRECIATION AS NOT CONSID ERED BY THE ASSESSING OFFICER BE CONSIDERED AFTER EXAMINING THE COMPOSITION OF LOSS OF 31,27,986 WHETHER INCLUDES UNABSORBED DEPRECIATION. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT NOT THAT THE ORDER U/S.251 WA S AVAILABLE WHEN THE ISSUE REGARDING CLAIM OF DEPRECIATION AND ADJUSTMENT WITH RESPECT TO SHORT TERM CAPITAL GAIN WAS TO BE CONSIDERED BY THE LEARNED CIT(A) BUT WAS IN ACCORDANCE WITH THE OBSERVATION OF THE ASSESSING OFFICER HOLDING A VIEW WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT INSOFAR AS HE HAS RELIED ON THE FINANCIAL STATEMENTS AS AVAILABLE TO THE AUTHORITIES INDICATING THE COMPOSITION OF THE BROUGHT FORWARD LOSS INCLUDING DEPRECIATION WHICH HAS BEEN IDENTIFIED BY THE ASSESSING OFFICER IN HIS ORDER U/S.251 . T HEREFORE ASSESSMENTIS TO BE MADE ON THE REAL INCOME IN THE HANDS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR WHEN THE DEPRECIATION CLAIMED IN THE IMPUGNED ASSESSMENT YEAR HAS NOT BEEN INCORPORATED BY THE ASSESSING OFFICER ON THE BASIS OF THE DIRECTION OF THE LEARNED CIT(A) AS WELL AS H OLDING A VIEW THAT THE ASSET WAS NOT PUT TO USE I N THE IMPUGNED ASSESSMENT YEAR. HE PERUSED THE MANUFACTURING, TRADING, PROFIT & LOSS ACCOUNT WHEREIN THE ASSETS THAT HAVE BEEN USED ARE NOT THE ASSETS WHICH HAVE BEEN DISPOSED OFF FOR A SEPARATE CONSIDERATIO N UNDER SECTION 50. HE PRAYED THAT A CLARIFICATORY DIRECTION MAY BE GIVEN TO THE ASSESSING OFFICER TO FRAME THE ASSESSMENT AFRESH BY OBTAINING CLARITY REGARDING THE CLAIM OF DEPRECIATION ONCE THE STATEMENT OF FIXED ASSETS AS ON 31.3.2007 CLEARLY INDICATES THAT THE ASSETS THAT WERE PUT TO USE WERE NOT THE ASSETS WHICH WERE DISPOSED OF U/S.50 COMPUTATION. ITA NO.399/CTK/2010 4 5. THE LEARNED DR HAD NO OBJECTION IF THE FACTS AS NOW BEING SUBMITTED BEFORE THE TRIBUNAL AND ARE ALSO AVAILABLE IN THE FILE OF THE ASSESSING OFFICER AND THE LEARNED CIT(A) , RESULTING IN AN ORDER U/S.251 WHICH ADJUSTMENT REGARDING COMPUTATION OF SHORT TERM CAPITAL GAIN DOES NOT INDICATE THE ASSETS PUT TO USE WHETHER COULD BE CLAIMED IN THE PROFIT & LOSS ACCOUNT FOR DEPRECIATION HAS TO BE VERIFIED. HE POINTE D OUT THAT THE ASSESSEE ITSELF HAS NOT CLAIMED DEPRECIATION IN ITS BOOKS OF ACCOUNT WHICH MAY BE NOTED. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER AND THE LEARNED CIT(A) BOTH HAVE PROCEEDED WITH FACTS ON THE BASIS OF WHICH RELIEF HAS BEEN GRANTED TO THE ASSESSEE AND NOT UNDER THE PROVISIONS OF THE I.T.ACT TO THE EXTENT THAT THE LEARNED COUNSEL FOR THE ASSESSEE HAS PRAYED FOR NOT PRESSING THE GROUND REGARDING THE ISSUE OF SHORT TERM CAPITAL GAIN AMOUNTING TO 4,92,000 WHICH DETAIL HAS NOT BEEN FURNISHED EITHER TO THE LEARNED CIT(A) OR TO THE ASSESSING OFFICER IN SOFAR AS THE ASSESSING OFFICER DISALLOWED THE DEPRECIATION AMOUNTING TO 10,33,129 AS NOT CLAIMED IN THE PROFIT & LOSS ACCOUNT AND WHETHER FORMING PAR T OF THE CARRIED FORWARD LOSS FOR THE IMPUGNED ASSESSMENT YEAR AS NOT BEEN DETERMINED BY THE ASSESSING OFFICER ON DIRECTION OF THE LEARNED CIT(A). IN OTHER WORDS, PROPER ADJUDICATION OF THE FACTS AS HAVE BEEN MADE BY THE ASSESSEE IN ITS RETURN OF INCOME AN D AS CONTENDED BEFOR E THE AUTHORITIES BELOW HAS TO BE SCRUTINIZED IN ORDER TO ARRIVE AT COMPUTATION IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT . T HE ASSESSEE IS REQUIRED TO PRODUCE EVIDENCE OF HAVING PUT TO USE THE ASSETS ON WHICH SUCH DEPRECIATION HA S BEEN CLAIMED BUT NOT CHARGED TO THE PROFIT & LOSS ACCOUNT . THE ORDER OF THE LEARNED CIT(A) IS SET ASIDE AND THE ISSUES ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION OF THE ABOVE. ITA NO.399/CTK/2010 5 NEEDLESS TO SAY THE ASSESSEE WOULD BE GIVEN REASONAB LE OPPORTUNITY OF BEING HEARD BY THE ASSESSING OFFICER TO EXPLAIN HIS STAND . 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 26 TH APRIL, 2011 S D/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 26 TH APRIL, 2011 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : PREMIER THREADS PVT. LTD., 47BHAGABANPUR, INDUSTRIAL ESTATE, BHUBANESWAR 751 019 2 / THE RESPONDENT: ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), (H.K.PADHEE), SENIOR.PRIVATE S ECRETARY.