DCIT, Circle - 3(1), Kolkata V. M/s. Lalbaba Seamless Tubes Pvt. Limited , Kolkata

ITA 58/KOL/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3528 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 11-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RADHEY SHYAM
• Keywords: Business income; Depreciation; Unabsorbed depreciation; Capital Gains
• Section: 143(3); 32; 68; 69; 56; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.58/KOL/2019 ( / ASSESSMENT YEAR: 2014-15) DCIT, CIRCLE-3(1), KOLKATA VS. M/S LALBABA SEAMLESS TUBES PVT. LTD. 13A, GOVT. PLACE EAST, 2 ND FLOOR, KOLKATA-700069. ./ ./PAN/GIR NO.: AABCL 2668 M (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI RADHEY SHYAM, CIT DR RESPONDENT BY : NONE / DATE OF HEARING : 31/10/2019 /DATE OF PRONOUNCEMENT : 13/11/2019 / O R D E R PER BENCH: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERT AINING TO ASSESSMENT YEAR 2014-15, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-12, KOLKATA IN APPEAL NO. 10101/CIT(A)-12 /KOL/2018-19, WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY THE ASS ESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 27/12/2016. 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F ASSESSEE IN SPITE OF ISSUANCE OF NOTICE FOR HEARING MORE THAN ONE OCCASION AND LD . DEPARTMENTAL REPRESENTATIVE(DR), WAS PRESENT FOR THE APPELLANT R EVENUE. IN THE ABSENCE OF ANY APPEARANCE BY THE ASSESSEE, THE APPEAL IS BEING DIS POSED OF EX PARTE QUA THE M/S LALBABA SEAMLESS TUBES PVT. LTD. ITA NO.58/KOL/2019 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 2 22 2 ASSESSEE, AFTER HEARING LD. DR FOR THE REVENUE ON M ERITS IN TERMS OF RULE 24 OF THE INCOME TAX APPELLATE, TRIBUNAL, RULES, 1963. 3. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS: 1. THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING THE SET OFF OF CURRENT YEAR BUSINESS LOSS AND CARRY FORWARD LOSSES AND UNABSORB ED DEPRECIATION AGAINST THE INCOME DETERMINED U/S 68 OF THE I.T. AC T SINCE THE INCOME DETERMINED U/S 68 DOES NOT FALL UNDER ANY HEAD IN S EC. 14. 2. THE APPELLANT CRAVES THE LEAVE TO MAKE ANY ADDIT ION, ALTERATION, MODIFICATION ETC. OF THE GROUNDS EITHER BEFORE THE APPELLATE PROCEEDINGS, OR IN THE COURSE OF APPELLATE PROCEEDINGS. 4. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR THE A. Y. 2014-15 ON 29.09.2014 DECLARIN G TOTAL INCOME OF RS. (-) 6,45,82,182/-. THE ASSESSMENT WAS MADE U/S. 143(3) ON 27.12.2016. BY MAKING SEVERAL ADDITION TO THE TOTAL INCOME. BEING AGGRIEV ED, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A)-L, KOLKATA AGAINST THE ORDER U/S. 143(3) OF THE I.T. ACT. THE LD. CIT(A), KOLKATA HAS PASSED ORDER DATED 07.04.20 17 VIDE NO. 596619881190117/CIT(A)-1/CIRCLE- 3(1)/2016-17 & GAV E RELIEF TO THE ASSESSEE AND DIRECTED ASSESSING OFFICER TO ALLOW THE SET OF F OF BUSINESS LOSSES AND UNABSORBED DEPRECIATION FOR THE A. Y. 2010-11 TO 20 13-14 AFTER DUE VERIFICATION. SUBSEQUENTLY THE ASSESSEE WAS IN THE RECEIPT OF ORD ER U/S. 143(3) DATED 27/12/2016 FILED A RECTIFICATION PETITION BEFORE THE ASSESSING OFFICER ON 15.02.2017 FOR ALLOWING SET OFF OF BUSINESS LOSSES AS PER RETURNED LOSS OF RS. 6,45,82,182/- WHICH HAS NOT BEEN SET OFF LOSSES AS PER PROVISION OF SEC 71(1) READ WITH SEC 32(2) OF THE I.T. ACT. THE A.O. REJECTED THE PETITION OF THE ASSESSEE AND STATED THAT ALL OTHER ADDITIONS TOTALING OF RS. 11,20,28,453/- WERE MADE AS UN-EXPLAINED CASH CREDIT U/S. 68 OF THE I.T. ACT. THE PLEA OF THE REV ENUE IS THAT INCOME ASSESSED U/S. 68 IS A TECHNICALLY HEADLESS INCOME SINCE IT DOES N OT FALL WITHIN THE PURVIEW OF FIVE HEADS OF INCOME CONTEMPLATED IN THE ACT. HENCE ASSE SSEES REQUEST FOR SET OFF BROUGHT FORWARD LOSS / UN ABSORBED DEPRECIATION AGA INST ASSESSED INCOME U/S. 68 FOR THE A.Y. 2014-15 WAS NOT ACCEPTED AND HENCE ASS ESSEES PETITION WAS REJECTED. M/S LALBABA SEAMLESS TUBES PVT. LTD. ITA NO.58/KOL/2019 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 3 33 3 BEING AGGRIEVED THE ASSESSEE APPEALED BEFORE THE LD . CIT(A)-1,KOLKATA AGAINST REJECTING THE APPLICATION FOR RECTIFICATION U/S. 15 4 OF THE I.T. ACT. LD. CIT(A), KOLKATA PASSED ORDER DATED 05.10.2018 VIDE NO. 1010 1/CIT(A)-12/KOL/2018-19 & GAVE RELIEF TO THE ASSESSEE & DIRECTED THE A O TO A LLOW THE SET OFF OF CURRENT YEAR BUSINESS LOSS AND CARRY FORWARD LOSSES AND UNABSORB ED DEPRECIATION AFTER DUE VERIFICATION. THE DETAILED ORDER OF THE LD. CIT(A) IS REPRODUCED BELOW: 3.2. I HAVE CONSIDERED THE FACTS OF THE CASE AND T HE SUBMISSIONS OF THE APPELLANT. THE AO HAD EARLIER PASSED THE ASSESSMENT ORDER UNDE R SECTION 143(3) WHEREIN SET OFF OF LOSSES UNDER SECTION 71,72 READ WITH SEC. 32 (2) OF THE IT ACT WAS NOT ALLOWED. THE ASSESSEE FILED A PETITION UNDER SECTIO N 154 OF THE IT ACT BEFORE THE A.O TO ALLOW SET OFF OF LOSSES AS PER PROVISIONS OF THE LAW SINCE THE ADDITIONS SO MADE U/S 68 OF THE I.T. ACT WERE TO BE TREATED AS B USINESS INCOME & THEREBY B/F LOSSES NEEDED TO BE SET OFF. THE AO REJECTED THE 15 4 PETITION MAINLY ON THE GROUNDS THAT MOST OF THE ADDITIONS MADE IN THE ASSE SSMENT ORDER HAVE BEEN MADE UNDER SECTION 68 OF THE IT ACT AND RELIED UPON THE HONBLE KERALA HIGH COURT JUDGMENT IN THE CASE OF CIT VS KERALA SPONGE IRON P VT. LTD. (2015) AND CAME TO A CONCLUSION THAT INCOME ASSESSED UNDER SECTION 68 IS A HEADLESS INCOME AND THEREFORE CAME TO A CONCLUSION THAT BROUGHT FORWARD LOSSES/DEPRECIATION ETC. CANNOT BE SET OFF. THE APPELLANT HAS SUBMITTED THAT IN THE JUDGEMENT I N CIT VS KERALA SPONGE IRON PVT. LTD. (2015) IS NOT SUSTAINABLE AS THE FACTS OF THE CASE ARE DIFFERENT CASE THE ASSESSEE HAD CREDITED IN HIS BOOKS OF ACCOUNTS, WIT H CERTAIN CASH ENTRIES REFLECTED AS INCOME FROM COMMODITIES , NO DESCRIPTION AS TO T HE SOURCE, IDENTITY, ETC. WERE PUT ON RECORD. THE KERALA HIGH COURT RELYING ON THE GUJARAT HIGH COURT DECISION IN THE CASE OF FAKIR MOHD. HAJI HASSAN VS C1T 247 I TR 290 (2001) DISALLOWED THE SET OFF OF BUSINESS LOSSES WITH THE UNEXPLAINED PROFIT FROM COMMODITIES. IN THE CASE OF FAKIR MOHD. HAJI HASSAN VS CIT 247 ITR 290 (2001) THE MATTER RELATED TO DISALLOWANCE OF DEDUCTION FOR CONFISCATION OF GOLD BY CUSTOM AUTHORITIES AND THE TRADING LOSS THEREON DUE TO CONFISCATION CLAIMED BY THE ASSESSEE WAS NOT ALLOWED BY THE HIGH COURT.LT IS ALSO SEEN THAT THE HONBLE GUJARAT HIGH COURT IN ITS DECISION IN THE CASE OF CIT V RADHEY DEVELOPERS IND IA LTD. HAS OVERTURNED ITS DECISION IN THE CASE OF FAQIR MOHD HAJI HASSAN AFTE R MAKING THE FOLLOWING ORDER:- 'THE DECISIONS OF THIS COURT IN THE CASE OF FAKIR M OHMED HAJI HASAN (SUPRA) AND KRISHNA TEXTILES (SUPRA) ARE NEITHER RELEVANT NOR G ERMANE TO THE ISSUE CONSIDERING THE FACT THAT IN NONE OF THE DECISIONS THE LEGISLATIVE SCHEME EMANATING FROM CONJOINT READING OF PROVISIONS OF SE CTION 14 & 56 OF THE ACT HAVE BEEN CONSIDERED'. INCOME DETERMINED UNDER SECTION 68 OF THE I.T. ACT IS INCOME UNDER OTHER SOURCES. BROUGHT FORWARD DEPRECIATION LOSS WHICH MERGES WITH THE CURRENT YEARS DEPRECIATION WILL THEREFORE HAVE TO BE ALLOWED AS A SET OFF AGAINST UNEXPLAINED INCOME DETERMINED UNDER SECTION 68 OF THE I.T. ACT. RULES OF SET OFF TO BE FOLLOWED WILL BE THE ONE APPLICABLE IN THE YEAR IN WHICH SET OFF IS BEING CLAIMED. THUS I FIND FORCE IN THE CONTENTIONS OF THE APPELLANT AND THE J UDGEMENTS RELIED UPON ARE SQUARELY APPLICABLE TO THE PRESENT CASE. HENCE THE AO IS DIRECTED TO ALLOW THE SET OFF OF CURRENT YEAR BUSINESS LOSS AND CARRY FORWARD LOSSES AND UNABSORBED M/S LALBABA SEAMLESS TUBES PVT. LTD. ITA NO.58/KOL/2019 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 4 44 4 DEPRECIATION AFTER DUE VERIFICATION . THIS GROUND O F APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE RE VENUE IS IN APPEAL BEFORE US. 6. THE LD. DR HAS PRIMARILY REITERATED THE STAND TA KEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY AND ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS DEFENDED THE ORDER OF THE LD. CIT(A). 7. WE HEARD BOTH THE PARTIES AND CAREFULLY GONE THR OUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLU DING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS AVAILABLE ON RECORD. WE NOTE THAT ASSESSING OFFICER MADE ADDITIONS IN RESPECT OF UNDISCLOSED SALES UNDE R SECTION 68 OF THE ACT. ANOTHER ADDITION RELATES TO CASH CREDIT U/S 68 WITH RESPECT TO UNSECURED LOAN. WE NOTE THAT THESE ADDITIONS SO MADE U/S 68 OF THE ACT WERE RELATED TO BUSINESS INCOME THEREFORE BROUGHT FORWARD LOSSES NEEDS TO BE SET OF F. WE NOTE THAT HONBLE GUJRAT HIGH COURT IN THE CASE OF CIT VS. SHILPA DYEING & P RININTING MILLS (P) LTD. REPORTED IN [2013] 219 TAXMAN 279 (GUJ) HELD THAT S ECTION 71 PERMITS ASSESSEE TO SET OFF LOSS OTHER THAN THAT OF CAPITAL GAINS AGAIN ST INCOME FROM OTHER HEAD WHICH IS REPRODUCED FOR READY REFERENCE: 7. BEFORE US, LEARNED COUNSEL FOR THE REVENUE PLACE D STRONG RELIANCE ON THE DECISION IN CASE OF FAKIR MOHMED HAJIHASAN VS. COMM ISSIONER OF INCOME TAX (SUPRA) AND SUBMITTED THAT WHEN THE INCOME FROM UND ISCLOSED SOURCE DOES NOT FALL IN ANY OF THE HEADS SPECIFIED IN SECTION 14 OF THE ACT, THE BUSINESS LOSS OF THE CURRENT YEAR COULD NOT HAVE BEEN SET OFF AGAINST SU CH INCOME. HE SUBMITTED THAT IN DEPUTY COMMISSIONER OF INCOME TAX VS. RADHEDEVEL OPERS INDIA LTD. AND ANR (SUPRA) THIS COURT HAD NOT, IN ANY MANNER, DISA GREED WITH THE VIEW IN CASE OFFAKIRMOHMED HAJI HASAN VS. COMMISSIONER OF INCOME TAX(SUPRA) AND THUS, SUCH RATIO STILL HOLD THE FIELD. 8. WE, HOWEVER, FIND THAT SECTION 71 OF THE ACT PER MITS AN ASSESSEE TO SET OFF LOSS OTHER THAN THAT OF CAPITAL GAINS AGAINST INCOME FRO M OTHER HEAD. THIS VERY ISSUE CAME-UP FOR CONSIDERATION BEFORE THE MADRAS HIGH CO URT IN CASE OF COMMISSIONER OF INCOME TAX VS. CHENSING VENTURES (SUPRA). THE DIVISION BENCH OF THE COURT CONSIDERED THE ISSUE IN FOLLOWIN G MANNER: '6.HEARD COUNSEL. THE ASSESSING OFFICER HAS NOT GIV EN ANY REASON WHATSOEVER TO DENY THE SET OFF OF THE BUSINESS LOSS AGAINST THE INCOME M/S LALBABA SEAMLESS TUBES PVT. LTD. ITA NO.58/KOL/2019 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 5 55 5 DECLARED UNDER THE HEAD & 'OTHER SOURCES'. SECTION 71 DEALS WITH SET OFF OF LOSS AGAINST INCOME UNDER ANY OTHER HEAD. AFTER SET TING OFF LOSSES AGAINST THE INCOME UNDER THE SAME HEAD, IF THE NET RESULT IS ST ILL A LOSS, THE ASSESSEE CAN SET OFF THE SAID LOSS UNDER SECTION 71 OF THE ACT A GAINST INCOME OF THE SAME YEAR UNDER ANY OTHER HEAD, EXCEPT FOR LOSSES WHICH ARISE UNDER THE HEAD 'CAPITAL GAINS'. THE INCOME TAX IS ONLY ONE TAX AND LEVIED ON THE SUM TOTAL OF THE INCOME CLASSIFIED AND CHARGEABLE UNDER THE VARI OUS HEADS. SECTION 14 HAS CLASSIFIED THE DIFFERENT HEADS OF INCOME AND INCOME UNDER EACH HEAD IS SEPARATELY COMPUTED. INCOME WHICH IS COMPUTED IN AC CORDANCE WITH LAW IS ONE INCOME AND IT IS NOT A COLLECTION OF DISTINCT T AX LEVIED SEPARATELY ON EACH HEAD OF INCOME AND IT IS NOT AN AGGREGATE OF VARIOU S TAXES COMPUTED WITH REFERENCE TO EACH OF THE DIFFERENT SOURCES SEPARATE LY. THERE IS ONLY ONE ASSESSMENT AND THE SAME IS MADE AFTER THE TOTAL INC OME HAS BEEN ASCERTAINED. THE ASSESSEE IS SUBJECT TO INCOME-TAX ON HIS TOTAL INCOME THOUGH HIS INCOME UNDER EACH HEAD MAY BE WELL BELOW THE TAXABLE LIMIT . HENCE THE LOSS SUSTAINED IN ANY YEAR UNDER ANY HEADS OF INCOME WIL L HAVE TO BE SET OFF AGAINST INCOME UNDER ANY OTHER HEAD. IN THIS CASE, THE ASSESSING OFFICER MADE ADDITION OF RS.28,50,000/- AS UNDISCLOSED INCO ME UNDER SECTION 69 OF THE ACT. ONCE THE LOSS IS DETERMINED, THE SAME SHOU LD BE SET OFF AGAINST THE INCOME DETERMINED UNDER ANY OTHER HEAD OF INCOME. I N THE ASSESSMENT, NO REASONS WERE GIVEN BY THE ASSESSING OFFICER TO DENY THE BENEFIT OF SECTION 71 OF THE ACT. THE BENEFIT PROVIDED UNDER SECTION 71 O F THE ACT CANNOT BE DENIED AND THE LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE IS ALSO UNABLE TO EXPLAIN OR GIVE REASONS WHY THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF SECTION 71 OF THE ACT. THE REASONS GIVEN BY THE TRI BUNAL ARE BASED ON VALID MATERIALS AND EVIDENCE AND THE SAME IS IN ACCORDANC E WITH THE PROVISIONS OF SECTION 71 OF THE ACT. WE FIND NO ERROR OR LEGAL IN FIRMITY IN THE IMPUGNED ORDER.' IN THE LIGHT OF THE JUDGMENT OF HONBLE GUJRAT HIGH COURT IN THE CASE OF SHILPA DYEING AND PRINTING MILLS PVT. LTD. (SUPRA) WE NOTE THAT THERE IS NO INFIRMITY IN THE ORDER OF LD. CIT(A), HIS ORDER ON THIS ISSUE, IS HE REBY ACCEPTED AND GROUNDS OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 13.11. 2019 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 13/11/2019 ( SB, SR.PS ) M/S LALBABA SEAMLESS TUBES PVT. LTD. ITA NO.58/KOL/2019 ASSESSMENT YEAR:2014-15 P PP PA AA AG GG GE EE E | || | 6 66 6 COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-3(1), KOLKATA 2. M/S LALBABA SEAMLESS TUBES PVT. LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES