Lt. Padamakar R. Kibe, Talegaon Dabhade V. Addl.CIT,Range 8, Pune, Pune

ITA 469/PUN/2012

• Counselvise Citation: 46924514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS PUSHPALATA SRIVASTAV
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Business income; Depreciation; Opportunity of being heard; Cost of acquisition; Unabsorbed depreciation
• Section: 143(3); 72(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.469/PN/2012 (ASSESSMENT YEAR : 2006-07) LATE SHRI PADMAKAR R. KIBE C/O PAISA FUND GLASS WORKS, CHAKAN ROAD, TALEGAON DABHADE, PUNE 410 507 PAN : ABAPK2700Q . APPELLANT VS. ADDL. COMMISSIONER OF INCOME TAX RANGE - 8, PUNE . RESPONDENT APPELLANT BY : MR. SUNIL PATHAK RESPONDENT BY : MRS. PUSHPALATA SRIVASTAV DATE OF HEARING : 18-06-2013 DATE OF PRONOUNCEMENT : 25-06-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 30.12.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 29.12.2008 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME-TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THREE IS SUES WHICH WE SHALL DEAL IN SERIATIM. HOWEVER, IT WOULD BE APPROPRIATE TO NOTICE THE BACKGROUND OF THE CASE BEFORE PROCEEDING FURTHER. FOR THE ASSESSM ENT YEAR 2006-07, ASSESSEE FILED A RETURN OF INCOME DECLARING TOTAL I NCOME OF RS.2,95,75,834/- AND A SUM OF RS.76,22,116/- WAS REDUCED ON ACCOUNT OF BROUGHT FORWARD LOSSES OF THE EARLIER YEARS, THEREBY RETURNING A NE T INCOME OF RS.2,19,53,718/-. THE ASSESSING OFFICER NOTICED THAT ASSESSEE WAS RUN NING A POULTARY BUSINESS ITA NO.469/PN/2012 LATE SHRI PADMAKAR R. KIBE A.Y. 2006-07 WHICH WAS SOLD OUT ENTIRELY DURING THE PREVIOUS YEA R RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER DETERMINED TOTAL TAXABLE INCOME AT RS.2,91,34,460/- AFTER MAKING TWO ADJUSTMENTS. FIRSTLY, LOSSES ON SALE OF STOCK IN TRADE CLAIMED AT RS.20,3 5,956/- WAS DISALLOWED AND SECONDLY, THE BROUGHT FORWARD LOSSES FROM EARLIER Y EARS CLAIMED AT RS.76,22,116/- WAS ALLOWED ONLY TO THE EXTENT OF RS .51,44,786/-. 3. ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). WITH REGARD TO THE LOSSES ON SALE OF STOCK-IN-TRADE AMOUNTING TO R S.20,35,946/- IS CONCERNED, THE CIT(A) ACCEPTED THE PLEA AND ALLOWED THE CLAIM OF THE ASSESSEE. THERE IS NO GRIEVANCE OF THE ASSESSEE ON THIS SCORE BEFORE U S. HOWEVER, THE GRIEVANCE REVOLVES AROUND ASSESSEES CLAIM FOR SET-OFF OF THE BROUGHT FORWARD LOSSES OF THE PAST YEARS. ON THIS ASPECT, THE CIT(A) NOTED TH AT THE SET-OFF OF RS.51,44,786/- OF PAST LOSSES ALLOWED BY THE ASSESS ING OFFICER WAS ALSO WRONG. THE CIT(A) NOTED THAT THE BROUGHT FORWARD LO SSES OF RS.76,22,116/- WAS CLAIMED BY THE ASSESSEE AGAINST LONG TERM CAPIT AL GAIN (LTCG) ON SALE OF LAND, WHICH WAS COMPUTED BY THE ASSESSEE IN THE RETURN OF INCOME AT RS.2,95,75,834/-. AS PER THE CIT(A) HAVING REGARD T O SECTION 72(1) OF THE ACT, THE BROUGHT FORWARD BUSINESS LOSSES COULD NOT BE SE T-OFF AGAINST AN INCOME BY WAY OF LTCG BUT WERE ONLY TO BE SET-OFF AGAINST PRO FITS AND GAINS FROM ANY BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE. THEREFORE, THE CIT(A) INVOKED SECTION 251(2) OF THE ACT AND ISSUED A NOTI CE FOR ENHANCEMENT OF INCOME INASMUCH AS THE SET-OFF OF RS.51,44,786/- AL LOWED BY THE ASSESSING OFFICER WAS STATED TO BE WRONG. AFTER CONSIDERING T HE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) HELD THAT THE PAST BUSINESS LO SSES COULD NOT BE SET-OFF AGAINST INCOME DECLARED BY THE ASSESSEE DURING THE CURRENT YEAR WHICH WAS BY WAY OF LTCG ON SALE OF LAND IN VIEW OF SECTION 7 1(1) OF THE ACT. AGAINST SUCH A DECISION, ASSESSEE IS IN APPEAL BEFORE US. ITA NO.469/PN/2012 LATE SHRI PADMAKAR R. KIBE A.Y. 2006-07 4. BEFORE US, THE FIRST GRIEVANCE OF THE ASSESSEE I S THAT THE CIT(A) WAS NOT JUSTIFIED IN DENYING THE SET-OFF BROUGHT FORWARD LO SSES AGAINST THE IMPUGNED INCOME BY WAY OF LTCG ON SALE OF LAND BECAUSE THE L AND IN QUESTION WAS BEING USED FOR THE PURPOSE OF BUSINESS AND THEREFOR E BEING A BUSINESS ASSET, EVEN IF THE GAIN ON ITS SALE IS TAXABLE AS THE CAPI TAL GAIN, BUT IT WAS AN INCOME FROM SALE OF BUSINESS ASSET, AND THEREFORE FOR THE PURPOSES OF THE SET-OFF, IT SHOULD BE TAKEN AS INCOME FROM BUSINESS. 5. ON THIS ASPECT, WE ARE UNABLE TO ACCEPT THE PLEA OF THE ASSESSEE IN VIEW OF THE EXPLICIT OF PROVISIONS OF SECTION 72(1) OF THE ACT WHICH PERMITS CARRY FORWARD AND SET-OFF OF BUSINESS LOSSES IN THE FOLLO WING ASSESSMENT YEARS ONLY AGAINST THE PROFITS AND GAINS OF ANY BUSINESS OR PR OFESSION CARRIED ON BY THE ASSESSEE. THE INCOME FROM THE SALE OF LAND IS AN IN COME UNDER THE CAPITAL GAINS AND THE SAME IS NOT AVAILABLE FOR SET-OFF AG AINST THE BROUGHT FORWARD BUSINESS LOSSES. THEREFORE, ON THIS ASPECT, ASSESSE E HAS TO FAIL. 6. THE NEXT PLEA IS THAT BEFORE THE CIT(A), ASSESSE E HAD PLEADED THAT BROUGHT FORWARD LOSSES WERE NOT ONLY COMPRISING OF BUSINESS LOSSES BUT ALSO UNABSORBED DEPRECIATION OF THE PAST YEARS AND THAT THE ELEMENT OF UNABSORBED DEPRECIATION IS ALLOWABLE IN THE SUBSEQUENT YEARS E VEN AGAINST THE INCOMES OTHER THAN THE BUSINESS INCOME. IT HAS BEEN CONTEND ED THAT THE BROUGHT FORWARD UNABSORBED DEPRECIATION FORMS A PART OF THE CURRENT YEARS DEPRECIATION IN VIEW OF THE PROVISIONS OF SECTION 3 2(2) OF THE ACT AND THEREFORE, THE SAME IS ELIGIBLE TO BE SET-OFF AGAINST ANY HEAD OF INCOME IN THE CURRENT YEAR. 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE APPEARING FOR THE REVENUE POINTED OUT THAT THE AFORESAID PLEA WAS NOT ALLOWED BY THE CIT(A) IN TERMS OF HIS DISCUSSION IN PARA 14 OF THE ORDER WHEREBY IT IS OBSERVED ITA NO.469/PN/2012 LATE SHRI PADMAKAR R. KIBE A.Y. 2006-07 THAT THERE WAS NO CLEAR PICTURE REGARDING THE CORRE CT AMOUNT OF UNABSORBED DEPRECIATION AVAILABLE FOR SET-OFF IN THE PRESENT Y EAR. 8. ON THIS ASPECT, THE LEARNED COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE ASSESSEE WOULD BE SATISFIED IF THE CLAIM OF THE ASS ESSEE IS ALLOWED AFTER DUE VERIFICATION AT THE LEVEL OF THE ASSESSING OFFICER. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. OSTENSIBLY, THE CLAIM OF SET-OFF OF BROUGHT FORWARD UNABSORBED DEPR ECIATION STANDS ON A DIFFERENT FOOTING THAN THE UNABSORBED BUSINESS LOSS ES. IN TERMS OF SECTION 32(2) OF THE ACT, UNABSORBED DEPRECIATION CAN BE SE T-OFF AGAINST ANY HEAD OF INCOME, AND IN-FACT ON THIS ASPECT THE CIT(A) HAS A CCEPTED THE CLAIM OF THE ASSESSEE, IN PRINCIPLE. HOWEVER, AS PER THE DISCUSS ION CONTAINED IN PARA 14 OF HIS ORDER, THE CIT(A) HAS INDICATED THAT THE ASSESS EE HAS BEEN CLAIMING VARYING AMOUNTS OF UNABSORBED DEPRECIATION AS WELL AS BROUGHT FORWARD LOSSES ON DIFFERENT OCCASIONS. THEREFORE, IN THE ABSENCE O F ANY CLARITY REGARDING THE CORRECT AMOUNT OF UNABSORBED DEPRECIATION, HE HAS D ECLINED THE CLAIM. IN OUR VIEW, IT WOULD BE IN THE FITNESS OF THINGS THAT MAT TER BE EXAMINED BY THE ASSESSING OFFICER ON THE BASIS THE MATERIAL SOUGHT TO BE RELIED UPON BY THE ASSESSEE IN THIS REGARD. NOTABLY, IN THE PAPER BOOK FILED BEFORE US, THE ASSESSEE HAS APPENDED A DETAILED STATEMENT OF UNABS ORBED LOSSES AND DEPRECIATION WITH COPIES OF RETURN, COMPUTATION OF INCOME, ETC. AT PAGES 21 TO 45. BEING A FACTUAL ASPECT, THE SAME IS TO BE VERIF IED BY THE ASSESSING OFFICER. THEREFORE, WE REMAND THE MATTER TO THE FILE OF THE ASSESSING OFFICER, WHO SHALL CONSIDER THE MATERIAL THAT MAY BE PUT-FORTH BY THE ASSESSEE IN SUPPORT OF HIS STAND, AND THEREAFTER THE ASSESSING OFFICER SHALL P ASS AN ORDER AFRESH ON THIS LIMITED ASPECT AS PER LAW. THUS, ON THIS ASPECT ASS ESSEE SUCCEEDS FOR STATISTICAL PURPOSES. ITA NO.469/PN/2012 LATE SHRI PADMAKAR R. KIBE A.Y. 2006-07 10. AN ADDITIONAL GROUND HAS BEEN RAISED BY THE ASS ESSEE WHICH IS IN RELATION TO THE ERROR ON THE PART OF THE CIT(A) IN ADOPTING THE COST OF ACQUISITION OF LAND SOLD AT RS.12,58,403/- AS AGAINST THE CORRE CT COST OF RS.16,22,474/- WHILE COMPUTING THE LTCG ON SALE OF LAND. ON THIS A SPECT THE LEARNED COUNSEL EXPLAINED THAT DURING THE APPELLATE PROCEEDINGS BEF ORE THE CIT(A), IT WAS NOTICED THAT THERE WAS A MISTAKE IN ADOPTING THE CO ST OF ACQUISITION OF LAND FOR THE PURPOSE OF COMPUTING THE LTCG ON SALE OF LAND. THE ASSESSEE HAD TAKEN THE COST OF LAND AT RS.1,25,84,030/- WHICH WAS WRON G AND THE SAME WAS ACCEPTED BEFORE THE CIT(A). HOWEVER, WHILE ADOPTING THE FIGURE OF COST OF ACQUISITION, CIT(A) ADOPTED THE SAME AS RS.12,58,40 3/- AS REVEALED FROM THE FIXED ASSET/DEPRECIATION CHART ENCLOSED IN THE RETU RN OF INCOME. 11. BEFORE US, THE LEARNED COUNSEL DOES NOT DISPUTE THAT THE COMPUTATION OF LTCG ENCLOSED WITH THE RETURN OF INCOME WAS WRONG Q UA THE COST OF ACQUISITION OF LAND. HOWEVER, IT IS SUBMITTED THAT THE CORRECT COST OF ACQUISITION IS RS.16,20,474/- AND NOT RS.12,58,403/- ADOPTED BY THE CIT(A), AND IN THIS REGARD REFERENCE WAS MADE TO THE PAPER BOOK FILED W HEREIN IS PLACED THE RELEVANT DEPRECIATION SCHEDULES AND FIXED SCHEDULE, ETC.. THE LEARNED COUNSEL SUBMITTED THAT ASSESSEE WOULD BE SATISFIED IF HIS P LEA IS VERIFIED BY THE ASSESSING OFFICER AND APPROPRIATE RELIEF BE ALLOWED THEREAFTER. 12. THE AFORESAID PLEA OF THE ASSESSEE HAS NOT BEEN SERIOUSLY OPPOSED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. 13. CONSIDERING THE RIVAL STANDS, WE, DEEM IT FIT A ND PROPER TO REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF CONSIDERING THE PLEA OF THE ASSESSEE THAT CORRECT C OST OF ACQUISITION OF LAND SOLD IS RS.16,20,474/- AND NOT RS.12,20,403/- AS DI RECTED BY THE CIT(A). THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASON ABLE OPPORTUNITY OF BEING HEARD IN SUPPORT OF HIS STAND AND THEREAFTER HE SHA LL PASS AN ORDER ON THIS ITA NO.469/PN/2012 LATE SHRI PADMAKAR R. KIBE A.Y. 2006-07 LIMITED ASPECT AFRESH AS PER LAW. THUS, ON THIS ASP ECT ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 25 TH JUNE, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE