JOITABHAI TRUST AERO INDUSTRIES, MUMBAI V. PR.CIT -21, MUMBAI

ITA 4124/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8136 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Assessment Year: 2012-2013
• Appeal Filed On: 05-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESHWAR YADAV
• Assessee Lawyers: DIPAK J SHUKLA
• Keywords: Business expenditure; Assessment record; Non passing of speaking order
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA N O. 4124/MUM/2017 ( ASSESSMENT YEAR : 2012 13 ) M/S. JOITABHAI TRUST AERO INDUSTRIES 228, PRAGATI INDUSTRIAL ESTATE N.M. MARG, LOWER PAREL MUMBAI 400 011 PAN:AAATJ1944Q . APPELLANT V/S PRINCIPAL COMMISSIONER OF INCOME TAX 21, 5 TH FLOOR, PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI 400 012 . RESPONDENT APPELLANT BY : SHRI DIPAK J. SHUKLA RESPONDENT BY : S HRI RAJESHWAR YADAV DATE OF HEARING 13.12.2017 DATE OF ORDER 15.12.2017 O R D E R PER SAKTIJIT DEY, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST ORDER DATED 30.03.2017 PASSED UNDER SECTION.263 OF THE ACT BY THE PR. COMMISSIONER OF INCOME TAX (PCIT) 21 , MUM BAI FOR THE ASSESSMENT YEAR 2012 13 . 2 ITA NO.4124/MUM/2017 M/S. JOITABHAI TRUST AERO INDUSTRIES 2. BRIEFLY THE FACTS ARE , THE ASSESSEE A TRUST IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF A EROSOL COMPONENTS AND PRODUCTS. FOR THE ASSESSMENT YEAR UNDER DISPUTE A SSESSEE FILED ITS RETURN OF INCOME ON 29/09/2012 DECLARING INCOME RS .45,93,110/ . ASSESSMENT IN CASE OF THE ASSESSEE WAS COMPLETED UNDER SECTION.143(3) OF THE ACT ACCEPTING THE INCOME RETURNED BY THE ASSESSEE. SUBSEQUENTLY, LD. PR. COMMISSIONER OF INCOME T AX EXERCISING HIS POWERS UNDER SECTION.263 OF THE ACT CALLED FOR THE ASSESSMENT RECORD OF THE ASSESSEE AND AFTER EXAMINING THE SAME, HE FOUND THAT IN THE PROFIT AND LOSS ACCOUNT ASSESSEE HAS DEBITED AN AMOU N T OF RS. 30,09,489/ TOWARDS REPAIRS AND MAINTENANCE OF BUILDING WHICH HAS BEEN CLAIMED UNDER THE HEAD MANUFACTU R ING EXPENSES. FURTHER , HE FOUND THAT UNDER THE HEAD SALES AND ADMINISTRATIVE EXPENSES , THE ASSESSEE HAS DEBITED AN AMOUNT OF RS .16,18,525/ TOWARDS EXCISE DUTY PENALTY. LEARNED PCI T FOUND FROM THE SUBMISSIONS OF THE ASSESSEE THAT IN THE RELEVANT FINANCIAL YEAR, THE ASSESSEE HAS CARRIED OUT MAJOR RESTORATION WORK ON PLANT FOUNDATIONS CONSISTING OF BUILDING, SH ED , BOUNDARY WALLS AND WARE HOUSE / STORES LOCATED AT VAPI . LD. PCIT WAS OF THE VIEW THAT SINCE , THE ASSESSEE HAS CARRIED OUT EXTENSIVE REPAIR AND RENOVATION OF THE EXISTING BUILDING IT RESULTED IN A 3 ITA NO.4124/MUM/2017 M/S. JOITABHAI TRUST AERO INDUSTRIES NEW ADVANTAGE OF ENDURING BENEFIT, THEREFORE, SUCH EXPENDITURE IS OF CAPITA L IN NATURE. 3. FURTHER, HE OBSERVED THAT EXCISE DUTY PE NALTY BEING OF PENAL NATURE CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. SINCE, WITHOUT MAKING ANY ENQUIRY OR EXAMINING THE ALLOW A BILITY OF SUCH EXPENDITURE S THE ASSESSING OFFICER HAS ALLOWED THE SAME ,L D. PCIT HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE AND CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE ASSESSMENT ORDER SHOULD NOT BE REVISED. 4. IN RESPONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED ITS REPLY STATING THAT THE ASSESSING OFFICER AFTER EXAMINING THE I SSUE HAVING ALLOWED THE EXPENDITURE, THE ASSESSMENT ORDER CANNOT BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. AS FAR AS THE ISSUE OF EXPENDITURE INCURRED ON REPAIR AND MAINTENANCE OF BUILDING , IT WAS SUBMITTED BY THE ASSESSEE THAT DUE TO LACK O F REGULAR REPAIR AND MAINTENANCE WORK, THE STRUCTURE OF THE BOUNDARY WALL, GODOWN AND ALL OTHER BUILDINGS REQUIRE D URGENT REPAIRS FOR CONTINUING THE MANUFACTURING OPERATION WITHOUT ANY INTERRUPTION. I T WAS SUBMITTED , THE EXPENDITURE INCURRED BY THE ASSESSE E HAS TO BE VIEWED IN THE CONTEXT OF THE EXTENSIVE STRUCTURE OF THE PLANT ON A LARGE PLOT OF LAND OF 12,535 SQ.MTR. THEREFORE, IT CANNOT BE SAID THAT THE EXPENDITURE IS FOR 4 ITA NO.4124/MUM/2017 M/S. JOITABHAI TRUST AERO INDUSTRIES BRINGING INTO EXISTENCE AN ASSET OF ENDURING NATURE . AS FAR AS PAYMENT OF EXCISE DU TY PENALTY OF RS. 16,18,525/ IS CONCERNED, IT WAS SUBMITTED , THE ENTIRE AMOUNT DOES NOT REPRESENT PENALTY BUT DUE TO WRONG COMPUTER CODING IT HAS BEEN MENTIONED AS EXCISE PENALTY . FURNISHING BIFUR C ATION OF THE PAYMENT MADE, IT WAS SUBMITT ED BY THE ASSESSEE THAT THE QUANTUM OF PENALTY WAS ONLY TO THE TUNE OF RS .1,04,500/ . THE LD. PCIT, HOWEVER, WAS NOT CONVINCED WITH THE SUBMISSION S OF THE ASSESSEE AND SET ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO THE ASSESSING OFFICER TO COMPLETE THE A SSESSMENT ON THE ISSUES REFERRED TO IN THE REVISION ORDER KEEPING IN VIEW THE OBSERVATIONS MADE BY HIM. 5. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED , IN COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS MADE DETAILED ENQUIRY WITH REGARD TO THE VARIOUS EXPENDITURES CLAIMED BY THE ASSESSEE INCLUDING THE EXPENDITURE TOWARDS REPAIR AND MAINTENANCE OF THE BUILDING AND EXCISE DUTY. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE DOCUMENTS FILED IN THE PAPER BOOK. THE LEARNED AUTHORISED REPRESENTATIV E SUBMITTED, SINCE THE ASSESSING OFFICER AFTER EXAMINING THE EVIDENCES AND APPLYING HIS MIND, HAS PASSED THE ASSESSMENT ORDER, IT CANNOT BE CONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE SO AS TO EMPOWER THE LD. PCIT TO REVISE UN DER 5 ITA NO.4124/MUM/2017 M/S. JOITABHAI TRUST AERO INDUSTRIES SECTION.263 OF THE ACT. AS FAR AS THE MERITS OF THE ISSUE IS CONCERNED , THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE HAS CARRIED OUT REGULAR REPAIR WORKS TO THE EXISTING BUILDING AND BY SUCH EXPE NDITURE NO ENDURING BENEFIT HAS ACCRUED TO THE ASSESSEE. THEREFORE, HE SUBMITTED , SUCH EXPENDITURE FOR REPAIRS HAS TO BE TREATED AS REVENUE IN NATURE. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I. CIT V/S KALYANJI M A VJI& CO., (1980)122 ITR 491(SC) II. CIT V/S. CHOWGULE& CO PVT. LTD., (1995) 214 ITR 523 (BOM) 6. AS FAR AS AMOUNT OF RS .16,18,525/ IS CONCERNED, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED , THE ENTIRE AMOUNT IS NOT TOWARDS PENALTY BUT AN AMOUNT OF RS .1,04,500/ OUT OF THAT IS TOWARDS PENALTY. HE FURTHER SUBMITTE D , DETAILS OF EXCISE DUTY PAYMENT WERE FURNISHED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSING OFFICER HAS EXAMINED THE SAME. THUS, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SINCE, THE ASSESSING OFFICER HAS COMPLET ED THE ASSESSMENT AFTER DUE ENQUIRY AND EXAMINATION THE EXERCISE OF POWER UNDER SECTION.263 WAS IMPROPER. IN SUPPORT OF SUCH CONTENTION, HE RELIED UPON THE FOLLOWING DECISIONS: I. CIT V/S. NIRAV MODI (2017) 390 ITR 292 (BOM) 6 ITA NO.4124/MUM/2017 M/S. JOITABHAI TRUST AERO INDUSTRIES II. CIT V/S. GABRIEL INDIA LTD., (1993 ) 203 ITR 108 (BOM) 7. THE LD. DEPARTMENTAL REPRESENTATIVE JUSTIFYING THE EXERCISE OF REVISIONAL JURISDICTION SUBMITTED THAT THE ASSESSING OFFICER WITHOUT MAKING ANY ENQUIRY OR INVESTIGATION HAS ACCEPTED THE CLAIM OF THE ASSESSEE WHILE COMPLETING THE ASSES SMENT. HE SUBMITTED , THE ASSESSING OFFICER HAS NOT AT ALL EXAMINED THE NATURE OF EXPENDITURE INCURRED TOWARDS REPAIR AND MAINTENANCE OF BUILDING. HE SUBMITTED , IN THE FINANCIAL STATEMENT S A DEDUCTION TOWARDS PAYMENT OF PENALTY WAS DEBITED WHICH IS NOT ALLO WABLE UNDER SECTION. 37(1) OF THE ACT. THE ASSESSING OFFICER COMPLETE LY IGNORING THE STATUTORY PROVISION HAS ALLOWED ASSESSEES CLAIM. HE SUBMITTED , WITHOUT MAKING ANY ENQUIRY THE ASSESSING OFFICER HAS ALLOWED DEDUCTIONS TO THE ASSESSEE WHICH ARE OTHERWISE NOT ALLOW ABLE .T HEREFORE, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AS CONTEMPLATED UNDER SECTION.263 OF THE ACT. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. A PERUSAL OF THE IMPUGNED ASSES SMENT ORDER REVEALS THAT IT IS A CRYPTIC AND NON SPEAKING ORDER .T HE ASSESSING OFFICER HAS ACCEPTED THE RETURN ED INCOME WITHOUT MAKING ANY DISCUSSION . T HE ASSESSING OFFICER NOWHERE IN THE ASSESSMENT ORDER HAS EVEN MENTIONED WHETHER HE HAS EXAMINED THE BOOKS OF ACCOUNTS AND CALLED FOR ANY DETAILS FROM 7 ITA NO.4124/MUM/2017 M/S. JOITABHAI TRUST AERO INDUSTRIES THE ASSESSEE IN SUPPORT OF VARIOUS DEDUCTIONS CLAIMED. AT LEAST , NOTHING HAS BEEN MENTIONED IN THIS REGARD BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ONLY THING HE HAS MENTIONED IS , AFTER DISCUSSION WITH THE ASSESSEES AUTHORIZED REPRE SENTATIVE HE IS FINALIZING THE ASSESSMENT. THOUGH , THE LEARNED AUTHORIZED REPRESENTATIVE REFERRING TO THE DOCUMENTS SUBMITTED IN THE PAPER BOOK HAS TRIED TO IMPRESS UPON US THAT THE ASSESSING OFFICER HAS ENQUIRED INTO AND EXAMINED ALL THE ISSUES ON WHICH THE ASSESSMENT ORDER HAS BEEN HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTER E ST OF REVENUE, HOWEVER, ON A SPECIFIC QUERY FROM THE B EN C H , THE LEARNED A UTHORISED REPRESENTATIVE WAS UN ABLE TO FURNISH EVEN A SINGLE NOTICE OR ORDER SHEET ENTRY TO DEMONSTRATE THAT THE ASSESSING OFFICER HAS CONDUCTED ANY ENQUIRY ON THE ISSUES ON WHICH LD. PCIT HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTER E ST OF REVENUE. 10. ON THE CONTRARY, THE AD MISSION OF THE ASSESSEE THAT A PART OF THE EXCISE DUTY CLAIMED AS DEDUCTION WAS TOWARDS PENALTY BEARS TESTIMONY TO THE FACT THAT THE ASSESSING OFFICER HAS NOT AT ALL EXAMINED THE NATURE AND ALLOWABILITY OF THE EXPENDITURE. THEREFORE, CONCLUSION OF THE LD. P CIT THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJU DICIAL TO THE INTER E ST OF REVENUE IS VINDICATED . EVEN , THE ASSESSEE HAS FAILED TO SUBSTANTIATE BY BRINGING COGENT MATERIAL ON RECORD THE FACT THAT THE ASSESSING OFFICER HAS EXAMINED THE NATURE OF EXPENDI TURE INCURRED 8 ITA NO.4124/MUM/2017 M/S. JOITABHAI TRUST AERO INDUSTRIES TOWARDS REPAIRS AND MAINTENANCE OF THE BUILDING BEFORE ALLOWING IT. THEREFORE, THE FACTS ON RECORD CLEARLY INDICATE THAT THE ASSESSING OFFICER BEFORE ALLOWING THE DEDUCTION S CLAIMED BY THE ASSESSEE HAS NOT MADE ANY ENQUIRY AT ALL , WHICH RENDERED THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE . THAT BEING THE CASE, THE LD. PCIT WAS JUSTIFIED IN REVISING THE ASSESSMENT ORDER UNDER SECTION.263 OF THE ACT . THE DECISIONS RELIED UPON BY THE LEARNED AUTHORISED REPRESENTATIVE WILL NOT APPLY TO THE FACTS OF THE PRESENT CASE AS WE HAVE FACTUALLY FOUND THAT THE ASSESSING OFFICER HAS NOT MADE EVEN A SEMBLANCE OF ENQUIRY ON THE ISSUES POINTED OUT BY THE PCIT. AS FAR AS THE MERITS OF THE ISSUES ARE CONCERNED, IN OUR VI EW, THE NATURE OF EXPENDITURE INCURRED TOWARDS REPAIR AND MAINTENANCE OF THE BUILDING , WHETHER CAPITAL OR REVENUE , REQUIRES THOROUGH ENQUIRY AND INVESTIGATION AT THE END OF THE ASSESSING OFFICER . T HEREFORE , WITHOUT BEING INFLUENCED BY THE OBSERVATIONS OF T HE LD. PCIT, THE ASSESSING OFFICER IS DIRECTED TO EXAMIN E THE CLAIM OF THE ASSESSEE BY CALLING FOR NECESSARY AND RELEVANT DETAILS AND MAKING INDEPENDENT ENQUIRY. HE HAS TO ASCERTAIN WHETHER BY INCURRING SUCH EXPENDITURE ANY STRUCTURAL CHANGE TO THE BUILDIN G/FACTORY PREMISES HAS BEEN MADE BY THE ASSESSEE WHICH MAY RESULT IN AN ENDURING BENEFIT OR THE EXPENDITURE ARE OF REGULAR NATURE. 9 ITA NO.4124/MUM/2017 M/S. JOITABHAI TRUST AERO INDUSTRIES 11. AS REGARDS THE PAYMENT OF EXCISE DUTY, THE ASSESSING OFFICER AFTER ASCERTAINING THE FACTS FROM THE ASSESSEE AND VERIFYING THE SAME MUST DISALLOW THE PAYMENT MADE TOWARDS PENALTY AS IT IS NOT ALLOWABLE UNDER SECTION.37(1). WITH THE AFORESAID OBSERVATIONS, WE UPHOLD THE ORDER OF THE LD.P CIT TO THE EXTENT INDICATED ABOVE. 12. IN THE RESULT, A SSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15.12.2017 SD/ - SD/ - SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 15.12.2017 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER KARUNA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI