Shreeji Rice Mills Pvt Ltd, Bargarh V. ACIT, Sambalpur

ITA 528/CTK/2011

• Counselvise Citation: 52822114 RSA 2011
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 29-12-2011
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: SIDHARTHA RAY
• Keywords: Retrospective amendment; Valuation report; Assessment record

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 528/CTK/2011 (ASSESSMENT YEAR 2005 - 06) S HREEJI RICE MILLS PVT. LTD., BHATALI ROAD, BARGARH. VERSUS ASST.COMMISSIONER OF INC OME - TAX , CIRCLE 2(1), SAMBALPUR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SIDHARTHA RAY, AR FOR THE RESPONDENT SHRI A.BHATTACHARJEE, DR DATE OF HEARING : 13.01.2012 DATE OF PRONOUNCEMENT : 17.02.2012 ORDER SHRI K.S.S.PRASAD RAO, JM : THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE LEARNED CITA) DT. 16.11.2011 FOR THE ASSESSMENT YEAR 2005 - 06 , IN THE CASE OF THE ASSESSEE. 2. THE ASSESSEE HAS RAISED THE FOLLOWING THREE ISSUES. 1. FOR THAT THE LEARNED CIT (A) WAS WHOLLY UNJUSTIFIED IN NOT ALLOWING THE EXPENDITURE CLAIMED BY THE APPELLANT TO THE TUNE OF 55,000 RELATING TO THE CARRIAGE INWARD. 2. FOR THAT THE LEARNED CIT(A) WAS WHOLLY UNJUSTIFIED IN SUSTAINING THE ADDITION OF 13,200 TOWARDS CAR HIRE CHARGES. 3. FOR THAT THE LEARNED CIT(A) WAS WHOLLY UNJUSTIFIED AND ERRED IN LAW IN ARRIVING AT THE COS T OF INVESTMENT IN THE BUILDING TO BE AT 1 , 28,70,212 AND FURTHER ERRED IN LAW IN NOT ACCEPTING THE VALUATION REPORT SUBMITTED BY THE APPELLANT. 3. BOTH THE PARTIES WERE HEARD REGARDING THE ISSUES RAISED IN THE APPEAL AND THEIR LEGAL IMPLICATIONS 4. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE SUBMISSIONS OF BOTH THE PARTIES, THE UNDISPUTED FACTS RELATING TO THE ISSUES ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND FILED THE R ETURN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION SHOWING LOSS OF 4,51,270. THIS RETURN WAS ORIGINALLY PROCESSED ITA NO.528/CTK/2011 2 U/S.143(1 ) BY ISSUING NECESSARY INTIMATION ON 31.3.2006. THERE IS A SURVEY U/S.133A OF THE I.T.ACT,1961 IN THE CASE OF THE ASSESSEE CONSEQUENTLY FOLLOWING THE INSTRUCTION NO.09 OF 2004 DT.20.9.23004. THIS WA S TAKEN UP FOR SCRUTINY ASSESSMENT AND AFTER ISSUING NECESSARY STATUTORY NOTICES, THE ASSESSING OFFICER STARTED THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS PRODUCED BEFORE THE ASSESSING OFFICER THE BOOKS OF ACCOUNT AND OTHER PARTICULARS AS REQUIRED BY THE ASSESSING OFFICER. THE BOOKS OF ACCOUNT INCLUDE CASH BOOK, LEDGER, JOURNAL, PURCHASE REGISTER, STOCK REGISTER AND SOME BILLS AND VOUCHERS. ON GOING THROUGH THE MATERIAL PRODUCED BY THE ASSESSEE BEFORE HIM, THE ASSESSING OFFICER HAS FOUND THAT THE ASSESSEE HAS INCURRED DELIVERY CHARGES, LOADING AND UNLOADING CHARGES, TRANSPORTATION CHARGES ETC., ON PURCHASES MADE BY IT. THE ASSESSEE COULD NOT PRODUCE THE BILLS BEFORE THE ASSESSING OFFICER . HE PRODUCED ONLY DEBIT VOUCHERS AND JOURNAL, LEDGER. FROM THESE THIN GS, THE ASSESSING OFFICER FOUND THAT THE EXPENDITURE AS STATED BY THE ASSESSEE INCLUDED WITH THE PURCHASES WERE NOT VERIFIABLE. ACCORDINGLY HE DISALLOWED ON AD HOC OF 55,000 AND ADDED BACK TO THE INCOME OF THE ASSESSEE. HE FURTHER FOUND THAT THE ASSESSEES COMPAN Y CARS ARE USED BY THE DIRECTOR AND HIS FAMILY MEMBERS BUT THE CAR EXPENSES HAVE BEEN DEBITED TO THE COMPANYS ACCOUNT. THEREFORE, THE ASSESSING OFFICER HAS D ISALLOWED 10% OF SUCH EXPENSES ON ACCOUNT OF PERSONAL USE OF THE DIRECTOR AND HIS FAMILY MEMBERS. APART FROM THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS INVESTED FO R THE PERIOD UNDER CONSIDERATION A SUM OF 11,01,085 TOWARDS CONSTRUCTION OF MI LL REMISES. THE ASSESSING OFFICER REFERRED THE VALUATION TO THE DVO AND THE VALUE CERTIFIED BY THE DVO CAME TO 23,37,765. THE DIFFERENCE BETWEEN THE DVOS VALUATION REPORT AND THE FIGURES DISCLOSED BY THE ASSESSEE AS INVESTMENT IN CONSTRUCTION OF THE MIL L PREMISES AT 11,01,085 AND THE DIFFERENCE OF 1,36,288 WERE FOUND EXCESS ITA NO.528/CTK/2011 3 AND IT WAS ADDED TO THE INCOME OF THE ASSESSEE AS UNDISCLOSED INCOME INVESTED FROM THE ASSESSEES OWN SECRET INCOME. ACCORDINGLY, THE AIO PASSED THE ASSESSMENT ORDER DETERMINING T HE INCOME AT 8,53,610. AT THE SAME TIME HE HAS INITIATED PROCEEDINGS U/S.271 ( 1)(C) ALSO AGAINST THE ASSESSEE. AGGRIEVED WITH THIS ASSESSMENT ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND THE LEARNED CIT(A) AFTER HEARING THE ASSESSEE AND PERUSI NG THE MATERIAL AVAILABLE IN THE ASSESSMENT RECORD, CAME TO THE CONCLUSION THAT THE ADDITION OF 55,000 MADE BY THE ASSESSING OFFICER ON ESTIMATE BASIS OF LOADING AND UNLOADING CHARGES AND TRANSPORTATION CHARGES, THE LEARNED CIT(A) HAS DIRECTED THE ASSESS ING OFFICER TO DISALLOW 5% OF SUCH EXPENDITURE WHICH COMES TO 40,000 THEREBY GIVING PART RELIEF OF 15,000 ON THIS ACCOUNT. THE LEARNED CIT(A) AFTER CONSIDERING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OUT OF THE MOTOR CAR HIRE CHARGES FOUND THAT 10% DISALLOWANCE MADE BY THE ASSESSING OFFICER HAVING PERSONAL ELEMENT OF USAGE OF THE CAR BY THE DIRECTOR AND HIS FAMILY MEMBERS, HE FOUND DISALLOWANCE AT 10% AS CORRECT AND HE CONFIRMED THE SAME. CONSIDERING THE ISSUE OF INVESTMENT IN PROPERTY MADE BY T HE ASSESSING OFFICER, HE REDUCED THE ADDITION TO 7,16,127 INSTEAD OF 12,36,680 MADE BY THE ASSESSING OFFICER. STILL AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. DURING THE COURSE OF HEARING, THE LEARNED AR OF THE ASSESSEE HAS VEHEMENTLY ARGUED CONTE NDING INTER ALIA T HAT THE DISALLOWANCE FROM EXPENSES ACCOUNT AS CONFIRMED BY THE LEARNED CIT(A) IS ONLY ON AD HOC BASIS WITHOUT POINTING OUT AS TO HOW THE EXPENDITURE IS NOT VERIFIABLE THEREFORE, SUCH DISALLOWANCE ON AD HOC BASIS IS NOT PERMISSIBLE IN LAW. IN THE SAME LINE OF ARGUMENT, HE ASSAILED THE ADDITION MADE ON ACCOUNT OF PERSONAL USE OF CAR BY THE DIRECTOR AND FAMILY MEMBERS AT 10% OF 1,35,000 CLAIMED BY THE ASSESSEE. HE CONTENDED THAT HERE IS ALSO AD HOC DISALLOWANCE WITHOUT ITA NO.528/CTK/2011 4 SHOWING ACTUALLY THE EXPENDITURE ATTRIBUTABLE TO THE PERSONAL USAGE OF THE CAR BY THE DIRECTOR AND HIS FAMILY MEMBERS , THEREFORE, SUCH AD HOC DISALLOWANCE IS NOT SUSTAINABLE . 6. AS REGARDS THE ADDITION BEING THE DIFFERENCE IN VALUATION FURNISHED BY THE DVO AND THAT DISCLOSED BY THE ASSESSEE IN INVESTMENT MADE IN THE MILL PREMISES CONSTRUCTED DURING THE PERIOD UNDER CONSIDERATION BY THE ASSESSEE, THE LEARNED AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT THERE IS NO BASIS OR REASON THAT TOO COGENT REASON POINTED OUT BY THE AUTHORITIES TO SHOW THAT THE EXPENDITURE OF INVESTMENT MADE BY THE ASSESSEE IN THE MILL REMISES CONSTRUCTED DURING THE PERIOD UNDER CONSIDERATION IS M ORE THAN WHAT HE HAS SHOWN OR DECLARED IN THE RETURN. THEREFORE, IN A WAY THIS IS ALSO AN AD HOC ADDITION NOT SUSTAINABLE FOR LEGAL SCRUTINY. THEREFORE, HE CONTENDED THAT THE ASSESSEES CONTENTION IS TO BE ACCEPTED BY THE DEPARTMENT IN THE ABSENCE OF ANY P OSITIVE MATERIAL MADE BY THE DEPARTMENTAL AUTHORITIES TO DENY THE CLAIMS MADE BY THE ASSESSEE. 7. THUS CONTENTING, HE SOUGHT FOR ALLOWING THE APPEAL OF THE ASSESSEE AND SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES CONCERNING THESE ADDITIONS. 8. CONTRARY TO THIS, THE LEARNED DR HAS VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS PASSED BY THE DEPARTMENTAL AUTHORITIES. FURTHER CONTENDING INTER ALIA T HAT THE LEARNED CIT(A) HAS GIVEN A MAJOR RELIEF TO THE ASSESSEE THOUGH THE ASSESSEE IS NOT ABLE TO MADE OUT HOW T HE ASSESSMENT ORDER IS NOT SUSTAINABLE. THEREFORE, HE ASSAILED THE CONTENTION OF THE ASSESSEE AND SOUGHT FOR UPHOLDING THE ORDER OF THE LOWER AUTHORITIES BY DISMISSING THE APPEAL OF THE ASSESSEE. 9. ON CAREFUL ANALYSIS OF THE ORDERS PASSED BY THE DEPARTMEN TAL AUTHORITIES, IT IS FOUND THAT THE ASSESSEE IS NOT ABLE TO ESTABLISH THAT THE EXPENDITURE ON ACCOUNT OF LOADING AND UNLOADING CHARGES AS CLAIMED BY IT IS ITA NO.528/CTK/2011 5 SUPPORTED BY COGENT EVIDENCE. HENCE, THE DEPARTMENTAL AUTHORITIES HAS MADE AD HOC DISALLOWANCE AS T HEY FOUND THE EXPENDITURES ARE NOT FULLY VERIFIABLE. AT THE SAME TIME, THE USAGE OF THE CAR BY THE DIRECTOR AND HIS FAMILY MEMBERS IS DENIED BY THE ASSESSEE. BUT AT THE SAME TIME, THE ASSESSEE COULD NOT ESTABLISH WITH COGENT EVIDENCE AS TO THE EXTENT O F USAGE OF THE CAR BY THE DIRECTOR AND FAMILY MEMBERS AND HENCE, THE DEPARTMENTAL AUTHORITIES HAS RESORTED TO DISALLOW AD HOC DISALLOWANCE ON CAR HIRE CHARGES. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE AD HOC D ISALLOWANCE MADE BY THE DEPARTMENTAL AUTHORITIES ON THESE TWO COUNTS APPEARS TO BE REASONABLE AND HENCE, THEY ARE HEREBY UPHELD BY FINDINGS ISSUES RAISED BY THE ASSESSEE AS DEVOID OF MERITS. 10. NOW COMING TO THE ISSUE OF ADDITION MADE ON ACCOUNT OF INVEST MENT MADE IN THE CONSTRUCTION IN THE MILL PREMISES FROM UNDISCLOSED SOURCE, IN THE ASSESSMENT ORDER, THERE IS CATEGORICAL FINDING OF THE ASSESSING OFFICER THAT HE HAS GONE THROUGH THE BOOKS OF ACCOUNT AND OTHER RELEVANT DOCUMENTS PRODUCED BY THE ASSESSEE B EFORE HIM AND HENCE NOT REJECTED THE BOOKS OF ACCOUNT. BUT AT THE SAME TIME HE RESORTED TO REFERENCE TO THE DVO OF THE VALUATION OF THE MILL PREMISES CONSTRUCTED BY THE ASSESSEE DURING THE PERIOD UNDER CONSIDERATION U/S.142A OF THE I.T.ACT. THIS SECTION 14 2A WAS INTRODUCED BY FINANCE ACT NO.2 OF 2004 WITH RETROSPECTIVE EFFECT FROM 15.11.1972. THE ASSESSMENT ORDER IS DT.28.12.2007 AND THE ASSESSMENT YEAR IS ASSESSMENT YEAR 2005 - 06 CORRESPONDING TO FINANCIAL YEAR 22004 - 05. ACCORDING TO THIS PROVISION OF SECTI ON 142A, IT IS NOT APPLICABLE TO THE PERIOD IN RESPECT OF ASSESSMENT MADE ON OR BEFORE 30 TH SEPTEMBER, 2004.THIS BEING THE ASSESSMENT MADE AFTER THE 30 TH SEPTEMBER, 2004, THIS PROVISION IS NO DOUBT APPLICABLE. HOWEVER, HONBLE APEX COURT HAS HELD IN THE CA SE OF SA RGAM CINEMA V. CIT (2011) 197 TAXMAN 203 HOLDING THAT THE ASSESSING AUTHORITIES ITA NO.528/CTK/2011 6 COULD NOT REFER ANY MATTER TO THE DVO WITHOUT BOOKS OF ACCOUNT BEING REJECTED. IN THE PRESENT CASE ON HAND , THE ACCOUNTS OF THE ASSESSEE ARE SUBJECTED TO AUDIT AND THEY WERE AUDITED BY A CERTIFIED CHARTERED ACCOUNTANT AND COPY OF THE REPORT IS MADE AVAILABLE TO THE TRIBUNAL. BOTH THE LOWER AUTHORITIES HAVE NOT FOUND ANY DEFECT IN THE BOOKS OF ACCOUNT NOR THE FINANCIAL ACCOUNTS AND AUDIT REPORT GIVEN BY THE CHARTERED ACCO UNTANT AND THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE , WHICH INCLUDES THE AMOUNT OF THE CONSTRUCTION OF THE MILL PREMISES DURING THE PERIOD UNDER CONSIDERATION. THE VERDICT OF THE HONBLE SUPREME COURT BEING THE LA W OF THE LAND, THE DEPARTMENT IS BOUND TO FOLLOW IT. HENCE, THE ACTION OF THE ASSESSING OFFICER IN REFERRING THE VALUATION TO THE DVO IS NOT SUSTAINABLE FOR LEGAL SCRUTINY IN THE LIGHT OF THE HONBLE APEX COURTS DECISION STATED SUPRA. THEREFORE , THE ADDIT ION MADE BY THE DEPARTMENTAL AUTHORITIES BASING ON THE DVOS REPORT WHICH IS CONSEQUENT TO THE REFERENCE MADE BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF SECTION 142A AS INTERPRETED BY THE HONBLE SUPREME COURT (SUPRA), CANNOT BE SUSTAINED. ACCORDINGL Y, WE DELETE THE SAID ADDITION BY ALLOWING THE GROUND OF APPEAL RAISED BY THE ASSESSEE IN THIS REGARD. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD/ - (K.K.GUPTA) ACCOUNTANT MEMBER ( K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 17.02.2012 H.K.PADHEE, SENIOR PRIVATE SECRETARY. ITA NO.528/CTK/2011 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SHREEJI RICE MILLS PVT. LTD., BHATALI ROAD, BARGARH. 2. THE RESPONDENT: ASST.COMMISSIONE R OF INCOME - TAX , CIRCLE 2(1), SAMBALPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.