ACIT,Cir.-1, Aurangabad V. Medicore Laboratories Pvt. Ltd., Aurangabad

ITA 402/PUN/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7401 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 02-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Keywords: Business income; Income from undisclosed sources
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 402 /PN/200 9 ( ASSTT. YEAR : 2004 - 05 ) ASSTT. COMMISSIONER OF INCOME TAX , CIRCLE - 1 , AURANGABAD , .. APPELLANT V. M EDICORE LABORATORIES PVT. LTD. , B - 87, MIDC, PAITHAN, DIST. AURANGABAD PAN: NOT AVAILABLE . RESPONDENT APPELLANT BY : SHRI ABHAY DAMLE RESPONDENT BY : NONE ORDER PER I.C. SUDHIR J M THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS : 1. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) AURANGABAD WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCES MADE BY THE AO ON ACCOUNT OF DEDUCTION U/S. 80IB(3) CLAIMED BY THE ASSESSEE ON THE ADDITIONAL I NCOME DECLARED DURING THE COURSE OF SURVEY ACTION U/S. 133A, RELYING ON THE DECISION OF THE HONBLE ITAT, B BENCH, PUNE IN THE CASE OF MANGAL ALLOY CASTING PVT. LTD. IN ITA NO. 779/PN/06. 2. WHETHER, THE INCOME DECLARED DURING THE COURSE OF SURVEY ACTI ON CAN BE SAID TO BE INCOME DERIVED FROM THE INDUSTRIAL ACTIVITY, THEREBY QUALIFYING FOR DEDUCTION U/S. 80IB. 2. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE - RESPONDENT DESPITE HAVING BEEN DULY SERVED WITH THE NOTICE AS REPORTED BY THE DEPARTMENT. ON EAR LIER OCCASION ALSO, ASSESSEE WAS SERVED THROUGH D.R. ON 17.11.2010 FOR HEARING FIXED ON 18.11.2010, BUT NO - ONE ITA NO 402 /PN/200 9 MEDICORE LABORATORIES PVT. LTD. ASSTT.YEAR 2004 - 05 PAGE OF 5 2 APPEARED. THE MATTER WAS ACCONRDINGLY ADJOURNED TO 10.01.2011 FOR FRESH SERVICE. WE, ACCORDINGLY, PROCEEDED EX - PARTE ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3. THE LD. D.R WAS HEARD AND ORDERS OF THE AUTHORITIES BELOW AND DECISIONS RELIED UPON ARE GONE THROUGH. THE LD. D.R. HAS BASICALLY SUPPORTED ASSESSMENT ORDER ON THE ISSUE. HE HAS ALSO CITED DECISIONS OF CHANDIGARH BENCH OF THE TR IBUNAL IN THE CASE OF ACIT V/S. RAJIV KU MAR MADAN (2006), 100 TTJ (CHD.) 744. 4. THE RELEVANT FACTS ARE THAT APPELLANT COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMACEUITICALS AND FOOD PRODUCTS WAS SUBJECT TO SURVEY PROCEEDINGS U/S. 133A. DU RING THE COURSE OF SURVEY PROCEEDINGS, THE ASSESSEE DECLARED AN ADDITIONAL INCOME OF RS.1,01,91,579/ - IN RESPECT OF EXCESS CASH , EXCESS STOCK AND EVIDENCE OF INFLATED EXPENSES FOUND DURING THE COURSE OF SURVEY. WHILE COMPUTING DEDUCTION ALLOWABLE U/S. 80 IB OF THE ACT, THE ASSESSEE INCLUDED THIS ADDITIONAL INCOME OFFERED DURING THE COURSE OF SURVEY IN ITS INCOME ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT. THE A.O DECLINED THIS DEDUCTION ON THE GROUND THAT INCOME DECLARED BY THE ASSESSEE ON THE BASIS OF UN - RECORDED TRANSACTION IS TO BE TREATED AS INCOME FROM UNDISCLOSED SOURCES AND CANNOT BE CLUB B ED WITH THE NORMAL BUSINESS INCOME. IN THIS REGARD, THE A.O RELIED UPON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF AKHTARI BEGUM & SONS VS. CIT, 145 ITR 295 (MP). THE LD CIT(A) HAS, HOWEVER, ALLOWED THE CLAIMED DEDUCTION ON THE ADDITIONAL DECLARED INCOME FOLLOWING THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE C A SE OF MANGAL ALLOY CASTING PVT. LTD. V/S. ACIT, ITA NO. 779/PN/2006 (A.Y. 2003 - 04), ORDER DATED 29 TH AUGUST 2008. THE LD CIT(A) HAS ALSO DISCUSSED THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF AKHTARI BEGUM & SONS (SUPRA) RELIED UPON BY THE A.O. ITA NO 402 /PN/200 9 MEDICORE LABORATORIES PVT. LTD. ASSTT.YEAR 2004 - 05 PAGE OF 5 3 5. HAVING GONE THROUGH THE CITED DECISIONS, WE FIND THAT TH E ISSUE RAISED IN THE GROUND IS FULLY COVERED BY THE DECISION OF CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MANGAL ALLOY CASTING PVT. LTD. V/S. ACIT (SUPRA) HOLDING AS UNDER : 7. WE ARE IN CONSIDEDRED AGREEMENT WITH THE PROPOSITION ADVANCED BY THE LEARNED COUNSEL AND HIS CONTENTION THAT, ON THE FACTS OF THIS CASE, IT IS REASONABLE TO CONCLUDE THAT THE INCOME DECLARED DURING SURVEY PROCEEDINGS WAS BUSINESS INCOME IN NATURE. WHAT HAS BEEN FOUND IS BUSINESS ASSETS, WHETHER BY WAY OF STOCK OR BY WAY OF CASH, WHICH WERE NOT ACCOUNTED FOR EARLIER. THE ONLY BUSINESS THAT THE ASSESSEE IS CARRYING ON IS THE BUSINESS OF MANUFACTURING OF ALLOY CASTINGS AND THIS BUSINESS IS ADMITTEDLY ELIGIBLE TO DEDUCTION UNDER SECTION 80 IB. WE ARE ALIVE TO A LARGE NU MBER OF DECISIONS BY THIS BENCH OF THE TRIBUNAL WHEREIN IT IS HELD THAT WHEN ADDITION IS MADE IN RESPECT OF STOCK AND CASH, AT THE TIME OF SURVEY, THE DECLARATION SO MADE WILL BE TAKEN INTO ACCOUNT FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 40 (B). THE SAME PRINCIPLE WILL APPLY HERE AS WELL. ONCE WE HOLD, AS IS HELD BY THE COORDINATE BENCHES IN SUCH CASES OF DECLARATION, THAT THIS INCOME IS BUSINESS INCOME, THE ONLY BUSINESS THAT THE ASSESSEE IS ENGAGED IN IS ELIGIBLE BUSINESS. ACCORDINGLY, THE AMOUNT DECLARED AS INCOME ON ACCOUNT OF STOCK AND CASH IS ALSO TO BE INCLUDED IN ELIGIBLE PROFITS. THIS IS FURTHER EVIDENT FROM THE FACT THE DECLARED AMOUNT HAS BEEN INCLUDED, AND RIGHTLY SO, IN THE TRADING AND PROFIT LOSS ACCOUNT O THE ELIGIBLE BUSIN ESS. FOR ALL THESE REASONS, AND BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO GRANT DEDUCTION UNDER SECTION 80 IB IN RESPECT OF ENTIRE PROFITS, INCLUDING PROFITS REFLECTED BY DECLARATION MADE DURING SURVEY. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 6. FOLLOWING THE ABOVE DECISION, WE ARE OF THE VIEW THAT LD CIT(A) HAS RIGHTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITH THIS FINDING THAT ADDITIONAL INCOME OFFERED BY THE ASSESSEE DURI NG THE COURSE OF SURVEY ON ACCOUNT OF EXCESS CASH, EXCESS STOCK AND INFLATED EXPENSES WAS ELIGIBLE FOR DEDUCTION U/S. 80 IB OF THE ACT. THE ACTION OF THE LD CIT(A) IN DIRECTING THE A.O TO RECOMPUTE THE DEDUCTION ALLOWOABLE U/S. 80 IB(3) (II) OF THE ACT AFTER INCLUDING ADDITIONAL INCOME OFFERED BY THE ASSESSEE, THUS DOES NOT CALL FOR ANY INTERFERENCE. THE SAME IS UPHELD. ITA NO 402 /PN/200 9 MEDICORE LABORATORIES PVT. LTD. ASSTT.YEAR 2004 - 05 PAGE OF 5 4 7. THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF AKHTARI BEGUM & SONS (SUPRA) IS HAVING DISTIBGUISHABLE F A CTS A ND DIFFERENT ISSUE. IN THAT CASE, ASSESSEE WAS INVOLVED IN THE BUSINESS OF PLYING PASSENGER BUS, AND AFTER REJECTING ASSESSEES BOOKS, THE A.O DEDUCTED THE N ET P ROFIT AT THE RATE OF 20%. THE LD CIT(A) THOUGH REDUCED THE ESTIMATED N ET P ROFIT AT THE RATE OF 19% BUT SEPARATELY ADDED LUGGAGE RECEIPT OF RS. 30,192/ - . THE TRIBUNAL FURTHER REDUCED THE NET PROFIT RATE TO 17.5% BUT MAINTAINED THE FIRST APPELLATE ORDER WHEREBY LUGGAGE RECEIPT WAS ADDED SEPARTELY. THE QUESTION BEFORE THE HONBLE MADHYA PRADHESH HIGH COURT WAS AS TO WHETHER THE TRIBUNAL WAS JUSTIFIED IN CONFIRMING SEPARATE ADDITION OF LUGGAGE RECEIPT TO THE TOTAL INCOME PARTICULARLY WHEN THE PROVISO TO SECTION 145 WAS APPLIED. THE ISSUE WAS DECIDED AGAINST THE ASSESSEE BY THE HONBLE HIGH COURT WITH THIS FINDING THAT NO MATERIAL WAS PLACED BY THE ASSESSEE ON RECORD TO SHOW THAT ANY EXPENSES WAS INCURRED BY IT IN DERIVING THE LUGGAGE RECEIPT. 8. LIKEWISE THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V/S. RAJIV KUMAR M ADAN (SUPRA) RELIED UPON BY THE LD. D.R. IS ALSO NOT HELPFUL TO THE REVENUE AS HAVING DIFFERENT FACTS. IN THAT CASE, THE ASSESSEE COULD NOT PRODUCE ANY CONCRETE EVIDENCE THAT THE ASSET WAS GIVEN ON RENT ON 01.10.1999 AS CLAIMED, HENCE IT WAS NOT ACCEPTED THAT RENT PERIOD COMMENCED ON 01.10. 1999. ASSESSEE HAD SURRENDERED INCOME IN THE BUILDING ACCOUNT AND PLANT & MACHINERY ACCOUNT WHICH WERE CREDITED UNDER THE HEAD MISCELLANEOUS INCOME. THE TRIBUNAL HELD THAT MISCELLANEOUS INCOME CANNOT BE SAID TO BE DERIVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. 9. UNDER THE ABOVE CIRCUMSTANCES AND ESPECIALLY WHEN THERE IS NO ANY ADVERSE FINDING AGAINST THE CONTENTION OF THE ASSESSEE THAT IT HAD NOT CARRIED OUT ANY BUSINESS ACITIVITY OTHER THAN MANUFACTUR E OF PHARMACEUITICAL AND FOOD ITA NO 402 /PN/200 9 MEDICORE LABORATORIES PVT. LTD. ASSTT.YEAR 2004 - 05 PAGE OF 5 5 PRODUCTS, WE ARE NOT INCLINED TO INTERFERE WITH THE FIRST APPELLATE ORDER ON THE ISSUE. THE SAME IS UPHELD. THE GROUND IS ACCORDINGLY REJECTED. 10. IN THE RESULT, APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN CO URT ON 31ST MARCH 2011 SD/ - SD/ - ( D. KARUNAKARA RAO ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE , DATED THE 31ST MARCH , 20 1 1 US COPY OF THE ORDER IS FORWARDED TO : 1. THE A PPELLANT 2. THE RESPONDENT 3. THE CIT , AURANGABAD 4. THE CIT(A) - , AURANGABAD 5. THE D.R. A BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE