KIRAN KNIT & GARMENT P. LTD E.K.A KARNANI EXPORTS P.LTD, MUMBAI V. ITO 6(2)(3),

ITA 5075/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0332 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 02-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Assessee Lawyers: RAHUL K HAKANI LD
• Keywords: Depreciation; Principle of natural justice; Additional evidence; Corroborative evidences
• Section: 143(3); 115JB; 68

Judgement Text

ITA NOS.4888 &5075/MUM/2011 KIRAN KNIT & GARMENTS PRIVATE LIMITED ASSESSMENT YEAR 2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 4888/MUM/2011 ( / ASSESSMENT YEAR: 2006-07) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 6(3)(2) 5 TH FLOOR, ROOM NO. 522 AAYKAR BHAVAN, M.K. ROAD, CHURCHGATE MUMBAI 400 020. / VS. KIRAN KNIT & GARMENTS PRIVATE LIMITED (EARLIER KNOWN AS KARNANI EXPORTS PRIVATE LIMITED) 246, A-Z INDUSTRIAL ESTATE, GANPATRAO KADAM MARG, LOWER PAREL MUMBAI 400 013. ./ ./ PAN/GIR NO. AAACK-2150-Q ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) & ./I.T.A. NO. 5075/MUM/2011 ( / ASSESSMENT YEAR: 2006-07) KIRAN KNIT & GARMENTS PRIVATE LIMITED (EARLIER KNOWN AS KARNANI EXPORTS PRIVATE LIMITED) 246, A-Z INDUSTRIAL ESTATE, GANPATRAO KADAM MARG, LOWER PAREL MUMBAI 400 013. / VS. ASST T. COMMISSIONER OF INCOME TAX CIRCLE 6(3)(2) 5 TH FLOOR, ROOM NO. 522 AAYKAR BHAVAN, M.K. ROAD, CHURCHGATE MUMBAI 400 020. 2 ITA NOS.4888 &5075/MUM/2011 KIRAN KNIT & GARMENTS PRIVATE LIMITED ASSESSMENT YEAR 2006-07 ./ ./ PAN/GIR NO. AAACK-2150-Q ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) REVENUE BY : RAJESH KUMAR YADAV,LD.DR ASSESSEE BY : RAHUL K. HAKANI, LD. AR / DATE OF HEARING : 15/06/2017 / DATE OF PRONOUNCEMENT : 15/06/2017 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THESE ARE CROSS APPEALS BY ASSESSEE AS WELL AS R EVENUE FOR ASSESSMENT YEAR [AY] 2006-07 AGAINST THE ORDER OF T HE LD. COMMISSIONER OF INCOME-TAX (APPEALS)- 12 [CIT(A)], MUMBAI DATED 11/02/2011 ON DIFFERENCE GROUNDS OF APPEAL. SINCE, THE ISSUE ARE INTER-RELATED, WE DISPOSE- OFF THE SAME BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE & BREVITY. FIRST, WE TAKE UP REVENUES APPEAL ITA NO. 4888/M/2011 WHERE THE REVENUE IS PRIMARILY AGGRIEVED BY ADMISSION OF CERT AIN ADDITIONAL EVIDENCES BY LD. CIT(A) IN VIOLATION OF RULE 46A. 2 . BRIEFLY STATED, THE ASSESSEE, BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING & EXPORT OF KNITTED READYMADE GARMENTS, WAS ASSESSEE U/S 143(3) FOR IMPUGNED AY ON 29/12/20 08 AT RS.1,40,08,855/- AFTER CERTAIN ADJUSTMENTS / DISALL OWANCE AS AGAINST RETURNED INCOME OF RS.14,84,347/- E-FILED BY THE ASSESSEE ON 23/11/2006. 3 ITA NOS.4888 &5075/MUM/2011 KIRAN KNIT & GARMENTS PRIVATE LIMITED ASSESSMENT YEAR 2006-07 IN THE PRESENT APPEAL, WE ARE CONCERNED WITH ADDITI ON U/S 68, DISALLOWANCE U/S 40(A)(IA) & RE-COMPUTATION OF INCOME UNDER THE HEAD CAPITAL GAINS. 3. THE RELEVANT FACTS ARE THAT THE ASSESSEE REFLECTED UNSECURED LOANS OF RS.81,05,422/- OUT OF WHICH THE ASSESSEE COULD NOT SUBSTANTIATE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF LOANS OBTAINED FROM DIRECTORS AND THEIR RELATIVES TO THE TUNE OF RS.33,11,487/- W HICH LED THE LD. AO TO ADD THE SAME U/S 68. THE SECOND ISSUE CONCERNS WITH COM MISSION EXPENSES OF RS.5,03,726/- PAID BY ASSESSEE TO VARIOUS PARTIES, TDS DETAILS OF WHICH WERE NOT FURNISHED BY THE ASSESSEE TO LD. AO WHICH RESULTED INTO DISALLOWANCE OF THE SAME U/S 40(A)(IA). THE LAST IS SUE IS RELATED WITH CAPITAL GAINS OF RS.13,00,423/- EARNED BY ASSESSEE ON SALE OF BUILDING. SINCE, THE ASSESSEE COULD NOT PRODUCE SALE AGREEMENT, THE SALE VALUE OF THE SAME WAS PRESUMED TO BE RS.50 LACS AND ACCORDINGLY, CAPITAL GAINS WAS RECOMPUTED AT RS.37,02,772/-. 4. AGGRIEVED, THE ASSESSEE ASSAILED THE SAME BEFORE LD. CIT(A), WHERE THE ASSESSEE CONTENDED THAT DETAILS OF BORROWED FUN DS, LEDGER EXTRACT, BANK STATEMENTS, PAN DETAILS ETC. WERE FURNISHED TO AO V IDE LETTER DATED 22/08/2008 BUT THE SAME COULD NOT BE APPRECIATED DU E TO PAUCITY OF TIME. THE LD. CIT(A) AFTER APPRECIATING THE SAME DELETED ADDITIONS TO THE EXTENT OF RS.10,78,033/- BUT CONFIRMED THE BALANCE ADDITIO N FOR WANT OF EVIDENCES. REGARDING DISALLOWANCE U/S 40(A)(IA), THE ASSESSEE SUBMITTED THAT THE COMMISSION WAS PAID TO FIVE PARTIES OUT OF WHICH TW O PAYEES WERE FOREIGN RESIDENTS AND THEREFORE, NO DEDUCTION WAS REQUIRED. THE LD. CIT(A) WAS 4 ITA NOS.4888 &5075/MUM/2011 KIRAN KNIT & GARMENTS PRIVATE LIMITED ASSESSMENT YEAR 2006-07 CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND DELETED THE ADDITION. REGARDING RE-COMPUTATION OF CAPITAL GAINS, THE ASSESSEE SUBMITTED THE RELEVANT DETAILS / DOCUMENTS, MEMORANDUM OF FAMILY SETTLEMENT ETC. AND AFTER APPRECIATING THE SAME, LD. CIT(A) DELETED THE ADDITION. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US PR IMARILY ON THE GROUND THAT ADDITIONAL DETAILS / DOCUMENTS HAVE BEEN PRODU CED BEFORE LD. CIT(A) WHICH WAS NEITHER BEEN APPRECIATED BY LD. AO NOR AN Y REMAND REPORT WAS CALLED AGAINST THE SAME IN VIOLATION OF RULE 46A. 6. AFTER PERUSING THE QUANTUM ORDER AND APPELLATE O RDER, WE ARE CONVINCED WITH THE REVENUES CONTENTION THAT THE AS SESSEE HAD PRODUCED ADDITIONAL DETAILS / DOCUMENTS IN SUPPORT OF HIS VA RIOUS CONTENTION, WHICH IN VIEW OF PRINCIPLE OF NATURAL JUSTICE, SHOULD HAVE B EEN CONFRONTED TO THE LD.AO. EVEN OTHERWISE, THE SAME WERE IN VIOLATION O F RULE 46A. THEREFORE, ALL THE THREE ISSUES ARE RESTORED BACK TO THE FILE OF LD. AO WITH A DIRECTION TO THE ASSESSEE TO SUBSTANTIATE HIS CLAIM IN THIS REGA RD. RESULTANTLY, THE REVENUES APPEAL STANDS ALLOWED FOR STATISTICAL PUR POSES. 7. NOW, WE TAKE UP ASSESSEES APPEAL ITA NO. 5075/M /2011. THE ASSESSEE HAS RAISED FIVE GROUNDS OF APPEAL OUT OF W HICH GROUND NO. 5 IS GENERAL IN NATURE WHEREAS GROUND NO. 4 HAS BEEN WIT HDRAWN AS NOT PRESSED. GROUND NO. 1 IS RELATED WITH CONFIRMATION OF ADDITI ON U/S 68 FOR RS.8,89,249/-. SINCE, THIS ISSUE, IN REVENUES APPE AL, HAS ALREADY BEEN RESTORED TO THE FILE OF LD. AO, THE SAME IS ALLOWED FOR STATISTICAL PURPOSES. 5 ITA NOS.4888 &5075/MUM/2011 KIRAN KNIT & GARMENTS PRIVATE LIMITED ASSESSMENT YEAR 2006-07 8. GROUND NO. 3 IS RELATED WITH CONFIRMATION OF DIS ALLOWANCE OF RS.30,60,653/- CLAIMED BY ASSESSEE UNDER THE HEAD CLAIMS FOR EXPORTS & PENALTIES. SINCE NO SUPPORTING EVIDENCE WERE PRODUCED BY THE A SSESSEE, THE SAME WERE DISALLOWED BY LD. AO AND CONFIRMED BY LD. CIT(A). 9. THE LD. COUNSEL FOR ASSESSEE [AR] DRAWING OUR AT TENTION TO THE RELEVANT DOCUMENTS PLACED IN THE PAPER BOOK, CONTENDED THAT THE SAID EXPENDITURE REPRESENTED DISCOUNTS GIVEN TO THE ASSE SSEES CUSTOMERS, THE COMPLETE DETAILS OF WHICH WAS GIVEN DURING ASSESSME NT PROCEEDINGS AND HENCE, IMPUGNED DISALLOWANCE WAS NOT JUSTIFIED. PER CONTRA, LD. DR CONTENDED THAT THE ASSESSEE COULD NOT PRODUCE EVIDE NCES TO SUBSTANTIATE THE SAME. 10. UPON HEARING RIVAL CONTENTIONS AND PERUSING REL EVANT MATERIAL ON RECORD INCLUDING LEDGER EXTRACTS, PARTY WISE DETAIL S ETC., WE ARE, PRIMA FACIE, CONVINCED WITH THE ARGUMENTS OF THE LD. AR THAT THE IMPUGNED AMOUNTS PRIMARILY REPRESENTED DISCOUNTS, REBATES ETC. HOWEV ER, CERTAIN DISCREPANCIES WERE NOTICED BY THE BENCH IN FIGURES GIVEN IN SUMMARY DETAILS VIS--VIS PARTY WISE DETAILS FURNISHED BY T HE LD. AR AND THEREFORE, THE SAME REQUIRE VERIFICATION AT THE LEVEL OF AO. W E DIRECT SO. THE ASSESSEE IS DIRECTED TO SUBSTANTIATE / RECONCILE THE SAME BE FORE LD. AO. THE GROUND OF APPEAL STANDS ALLOWED FOR STATISTICAL PURPOSES. 11. THE ONLY GROUND LEFT IS GROUND NO. 3 WHICH IS R ELATED WITH DISALLOWANCE OF PROPORTIONATE DEPRECIATION ON FACTORY BUILDING W HICH HITHERTO BEING USED BY ASSESSEE FOR BUSINESS PURPOSES BUT LET OUT PARTL Y DURING IMPUGNED AY. 6 ITA NOS.4888 &5075/MUM/2011 KIRAN KNIT & GARMENTS PRIVATE LIMITED ASSESSMENT YEAR 2006-07 THE ASSESSEE CLAIMED AGGREGATE DEPRECIATION OF RS. 11.38 LACS COMPRISING OF DEPRECIATION OF RS.3.54 LACS ON BUILD ING AND RS.7.84 LACS ON MACHINERY. THE LD. AO DISALLOWED THE DEPRECIATION T O THE EXTENT OF 50% PRESUMING THAT THE HALF OF THE BUILDING WAS LET OUT ALONG WITH PLANT & MACHINERY. THE SAME WAS CONFIRMED BY LD. CIT(A) ON THE PREMISES THAT RENT WAS OFFERED UNDER THE HEAD HOUSE PROPERTY AND THEREFORE, PART OF BUILDING AND MACHINERY WAS NOT USED FOR BUSINESS PU RPOSES IN TERMS OF SECTION 32. 12. THE LD. AR PLACING RELIANCE ON MANY JUDICIAL PR ONOUNCEMENTS CONTENDED THAT UNDER THE CONCEPT OF BLOCK OF ASSET, THE INDIVIDUAL ASSET LOSES ITS IDENTITY AND THEREFORE, THE WDV OF THE BL OCK COULD NOT BE BIFURCATED TO DISALLOW DEPRECIATION. PER CONTRA, THE LD. DR CONTENDED THAT A DEDUCTION OF 30% HAS ALREADY BEEN GRANTED ON RENTAL INCOME AND THEREFORE, ALLOWING DEPRECIATION AGAINST THE SAME WOULD LEAD T O DOUBLE BENEFIT TO THE ASSESSEE. 13. WE HAVE HEARD THE RIVAL CONTENTIONS. ALTHOUGH, WE CONCUR WITH THE ARGUMENT OF LD. DR THAT GRANT OF DEPRECIATION WOULD LEAD TO DOUBLE BENEFIT BUT WE FIND THAT THERE IS NO MECHANISM IN THE LAW T O BIFURCATE THE WDV OF THE BLOCK OF ASSET SO AS TO DISALLOW PROPORTIONATE DEPRECIATION SINCE INDIVIDUAL ASSETS LOSES ITS IDENTITY UNDER THE CONC EPT OF BLOCK OF ASSET. SIMILAR VIEW HAS BEEN EXPRESSED BY JURISDICTIONAL H ONBLE BOMBAY HIGH COURT IN CIT VS. SONIC BIOCHEM EXTRACTIONS PVT. LTD. [ITA NO . 2088 OF 201 7 ITA NOS.4888 &5075/MUM/2011 KIRAN KNIT & GARMENTS PRIVATE LIMITED ASSESSMENT YEAR 2006-07 DATED 17/11/2015]. THEREFORE, FOLLOWING THE SAME, WE DELETE THE SAID DISALLOWANCE AND ALLOW ASSESSEES GROUND OF APPEAL. 14. THE LD. AO IS DIRECTED TO RE-COMPUTE BOOK PROFI TS U/S 115JB AND / OR BROUGHT FORWARD OF LOSSES, IF REQUIRED. 15. IN NUTSHELL, THE REVENUES APPEAL STANDS ALLOWE D FOR STATISTICAL PURPOSES WHEREAS THE ASSESSEES APPEAL STANDS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2017 SD/- SD/- (JOGINDER SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 15 .06.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. #&- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI