ACIT CIR 6(3), MUMBAI V. MORARJEE BREMBANA LTD. ( NOW KNOWN AS MORARJEE TEXTILES TD), MUMBAI

ITA 4883/MUM/2011

• Counselvise Citation: 488319914 RSA 2011
• Duration Of Justice: 3 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-04-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 17-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Unexplained investment; Depreciation; Opportunity of being heard; Corroborative evidences; Reassessment proceedings

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , . , BEFORE SHRI JOGINDER SINGH , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER . / ITA NO . 4883 / MUM./ 2011 ( / ASSESSMENT YEAR : 1998 99 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 6(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APPELLANT V/S M /S. MORARJEE BREMBANA LTD. (NOW KNOWS AS MORARJEE TEXTILES LTD.) , 2, PENINSULA PETA MATHURADAS MILLS COMPOUND SENAPATI BAPAT MARG, LOWER PAREL MUMBAI 400 013 PAN AAACM2725R .... / RESPONDENT / REVENUE BY : SHRI LOVE KUMAR / ASSESSEE BY : SHRI RONAK G. DOSHI / DATE OF HEARING 0 8 .04.2015 / DATE OF ORDER 21/05/2015 O R D E R . , / PER D. KARUNAKARA RAO , A .M. TH E PRESENT APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 18 TH MARCH 2012, PASSED BY THE M/S. MORARJEE BREMBANA LTD. (NOW KNOWS AS MORARJEE TEXTILES LTD.) 2 COMMISSIONER ( APPEALS) 12 , MUMBAI, FOR THE ASSESSMENT YEAR 1998 99 . FOLLOW ING GROUNDS HAVE BEEN RAISED BY THE REVENUE : - 1. ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THAT THE AMOUNT SET ASIDE BY ITAT AND REQUIRED FOR VERIFICATION BY THE ASSESSING OFFICER WAS ` 15,77,59,305 ONLY, WITHOUT APPRECIATING THE FACT THAT THE TRIBUNAL BY ITS ORDER SET ASIDE THE ISSUE OF ADDITION TO FIXED ASSETS AMOUNTING TO ` 33.88 CRORES TO THE FILE FO THE ASSESSING OFFICER FOR FRESH EXAMINATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESS ING OFFICER TO RESTRICT THE DISALLOWANCE MADE OF ` 4,96,62,661 TO ` 1,57,75,930 I.E., 10% OF ` 15,77,59,305 ON AD HOC BASIS, WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE WAS NOT IN POSSESSION OF ANY THIRD PARTY EVIDENCES IN SUPPORT OF ITS CLAIM. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THAT PRE OPERATIVE EXPENSES WERE SUBJECT TO SCRUTINY IN EARLIER YEARS, WITHOUT APPRECIATING THE FACT THAT SUCH EXPENSES SHALL BE SUBJECT TO SCRUTINY ONLY IN THE Y EAR IN WHICH THESE ARE CAPITALIZED, OUT OF WHICH THE CLAIM FOR DEPRECIATION WILL ARISE. 2. T HE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING OF HIGHER VALUE 100% COTTON FABRICS. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARI NG LOSS OF ` 4,24,84,200. IN THE FIRST ROUND OF ASSESSMENT, THE ASSESSING OFFICER MADE VARIOUS ADDITIONS AND THE SAME TRAVELLED TO THE TRIBUNAL IN THE FIRST ROUND. THE TRIBUNAL, VIDE ITS ORDER DATED 24 TH AUGUST 2007, SET ASIDE THE ISSUES OF ADDITIONS TO FI XED ASSETS AMOUNTING TO ` 33.18 CRORES TO THE FILE OF THE ASSESSING OFFICER. GIVING EFFECT TO THE SAID ORDER OF THE TRIBUNAL, THE ASSESSING OFFICER M/S. MORARJEE BREMBANA LTD. (NOW KNOWS AS MORARJEE TEXTILES LTD.) 3 PASSED AN ORDER, THE RELEVANT PORTION OF THE ASSESSMENT ORDER, IS EXTRACTED BELOW: DURING THE COURSE OF A SSESSMENT PROCEEDINGS RELEVANT DETAILS HAVE BEEN CALLED FOR. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HAS INCURRED AN ADDITION TO FIXED ASSETS AMOUNTING TO RS. 33.88 CRORES DURING THE YEAR. THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT PROCEE DINGS MADE AN ADDITION OF RS. 5,08,34,170/ - BEING 15% OF THE ADDITION TO FIXED ASSETS AS UNEXPLAINED INVESTMENT. THE LEARNED CIT(A) DELETED THE ADDITION. THE HONOURABLE ITAT HAS NOW SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. DURING THE COUR SE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS OF THE SAME AND ALSO ASKED TO FURNISH THE EVIDENCE IN SUPPORT OF THE ADDITION TO FIXED ASSETS. HOWEVER, THE ASSESSEE, COULD ONLY FURNISH THE EVIDENCE, IN SUPPORT OF THE CLAIM TO A DDITION TO FIXED ASSETS, AMOUNTING TO RS. 6,22,56,795/ - IN RESPECT OF PLANT AND MACHINERY AND RS. 7,03,53,248/ - IN RESPECT OF BUILDING. IN SPITE OF REPEATED OPPORTUNITIES THE ASSESSEE COULD NOT FILE ANY EVIDENCE IN RESPECT OF CAPITALISATION OF PREOPERATIVE EXPENSES AMOUNTING TO RS. 19,86,50,645/ - IN RESPECT OF PLANT AND MACHINERY. AS THE EVIDENCE IN SUPPORT OF THEIR CLAIM OF ADDITION TO FIXED ASSETS IN RS. 19,86,50,645/ - HAS NOT BEEN FILED BY THEM THE DEPRECIATION CLAIMED AMOUNTING TO RS. 4,96,62,661/ - IS D ISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION TO THE TUNE OF ` 4,96,62,661, RELATABLE TO THE ADDITION TO FIXED ASSET AMOUNTING TO ` 19.86 CRORES . THE ASSESSEES FAILURE TO SUBMIT NECESSARY SUPPORTING EVIDENCE IS THE REASON FOR THE SAID DISALLOWANCE. THE OTHER FACTS BROUGHT IN BY THE ASSESSING OFFICER IN THE ORDER INCLUDES THE TOTAL ADDITIONS MADE TO THE FIXED ASSETS WORKS OUT TO ` 34,38,50,768. IT HAS TWO SEGMENTS NAMELY, ACTUAL ADDITIONS M/S. MORARJEE BREMBANA LTD. (NOW KNOWS AS MORARJEE TEXTILES LTD.) 4 AMOUNTING TO ` 7,48,46,875 AND THE CAPITALIZATION OF PRE OPERATIVE EXPENSES WORKS OUT TO ` 26,90,03,893. 4. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD FURNISH EVIDENCES ONLY TO THE EXTENT OF ` 49,56,300, LEAVING UNEXPLAINED PORTION OF ` 33,88,94,468. THE ASSESSEE EXPLAINED THAT PART OF THE ABOVE UNEXPLAINED PORTION WAS ALREADY SCRUTINIZED DURING THE RELEVANT ASSESSMENT YEARS IN THE PAST. IF THE SAME IS CONSIDERED AS EXPLAINED, WHAT IS LEFT UNEXPLAINED WORK S OUT TO ONLY ` 15,77,59,305, AND THE LEARNED CIT(A) APPRECIATED THE SAME AND HELD THAT THE DISALLOWANCE @ 10% OF THE SAME TOWARDS NON GENUINENESS OF THE EXPENDITURE IS REASONABLE. THE LEARNED CIT(A), ACCORDINGLY, GRANTED PART RELIEF TO THE ASSESSEE AGAINS T WHICH THERE IS NO APPEAL BY THE ASSESSEE. BEING AGGRIEVED, THE REVENUE IS IN APPEAL WITH THE GROUNDS MENTIONED ABOVE. 5. B EFORE US, WHILE THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING ON THE ORDER OF THE ASSESSING OFFICER, THE LEARNED COUNSEL FOR THE ASS ESSEE FILED A SUMMARY CHART EXPLAINING AND JUSTIFYING THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). THE DETAILS, AS CONTAINED THE CHART WHICH IS PLACED ON RECORD, IS EXTRACTED BELOW: CHART IS APPENDED TO THIS ORDER SEPARATELY M/S. MORARJEE BREMBANA LTD. (NOW KNOWS AS MORARJEE TEXTILES LTD.) 5 6. FROM THE ABOVE CHART, I T IS EVIDENT THAT THE TOTAL ADDITIONS MADE DURING THE YEAR AND THE PRE OPERATIVE EXPENSES CRYSTALLISED DURING THE YEAR AGGREGATED TO ` 34,38,50,828 (A). AFTER NETTING THE SAME WITH THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AT THE T IME OF ORIGINAL ASSESSMENT, THE TOTAL ADDITIONS TO FIXED ASSETS TO BE EXPLAINED WORKS OUT TO ` 33,88,94,528. THE PRE OPERATIVE EXPENDITURE ALREADY UNDER SCRUTINY FOR THE ASSESSMENT YEAR 1996 97 AND 1997 98 WHICH ARE REQUIRED TO BE CONSIDERED AS EXAMINED AN D ALLOWED BY THE ASSESSING OFFICER WORKS OUT TO ` 11,12,44,588. THE TOTAL EXPENDITURE AS PER THE ASSESSEE ON WHICH DEPRECIATION IS TO BE ALLOWED AS HELD BY THE LEARNED CIT(A) WORKS OUT TO ` 32,80,74,898. 7. DURING THE COURSE OF PROCEEDINGS BEFORE US, BOTH TH E PARTIES SUBMITTED THAT THE CHART MAY BE REMANDED TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERING THE FIGURES AND VERIFYING THE SAME WITH THE CLAIMS MADE BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AS WELL AS FOR THE ASSESSMENT YEAR 1996 97 AND 1 997 98. THE ASSESSING OFFICER SHALL NOTE THAT ONCE THE RETURN OF INCOME IS SCRUTINIZED IN THE ASSESSMENT YEAR 1996 97 AND 1997 98, THE CLAIMS MADE IN THE SAID RETURNS CANNOT BE DONE ONCE AGAIN IN THE PROCEEDINGS LIKE THIS IN THE YEAR UNDER CONSIDERATION. A CCORDINGLY, WE DISMISS THE ARGUMENTS RAISED IN GROUND NO.3 OF THIS APPEAL. THE ASSESSING OFFICER IS DIRECTED TO M/S. MORARJEE BREMBANA LTD. (NOW KNOWS AS MORARJEE TEXTILES LTD.) 6 EXAMINE THE ABOVE CHART AND THE FIGURES CONTAINED THEREIN AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. CONSEQUENTLY, GROU NDS NO.1 AND 2 ARE DISMISSED IN PRINCIPLE. WE ORDER ACCORDINGLY. 10. 10. IN THE RESULT, REVENUE S APPEAL IS DISMISSED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT O N 21.05.2015 SD/ - JO GINDER SINGH JUDICIAL MEMBER SD/ - . D. KARUNAKARA RAO ACCOUNTANT MEMBER MUMBAI, DATED : 21.5.2015 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE; (2) / THE REV ENUE; (3) ( ) / THE CIT(A); (4) / THE CIT, MUMBAI CITY CONCERNED; (5) , , / THE DR, ITAT, MUMBAI; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI