ACIT i, Kanpur V. M/s Allied Exims, Kanpur

ITA 604/LKW/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9134 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-12-2014
• Assessment Year: misc
• Appeal Filed On: 10-10-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J J MEHROTRA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.604/LKW/2011 ASSESSMENT YEAR:2006-07 ACIT-1 KANPUR V. M/S ALLIED EXIMS 377-C, ALLIED STREET JAJMAU, KANPUR TAN/PAN:AAFFA0253J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. AMIT NIGAM, D.R. RESPONDENT BY: SHRI. J. J. MEHROTRA, C.A. DATE OF HEARING: 15 12 2014 DATE OF PRONOUNCEMENT: 06 02 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON VARIOUS GROUNDS, WHICH ARE AS UNDER:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION OF RS.1,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF EXTRA CONSUMPTION OF CHEMICALS TO RS.50,000/- ONLY, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.20,00,000/- MIADE BY THE ASSESSING OFFICER ON ACCOUNT OF PENALTY PAID TO KESCO FOR THEFT OF ELECTRICITY WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. :- 2 -: 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.55,12,582/- ON ACCOUNT OF DEPRECIATION CLAIMED IN RESPECT OF B ANTHER UNIT WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. 4. THAT THE ORDER OF THE LD. CIT (A)-II, KANPUR DATED 27.07.2011 NEEDS TO BE QUASHED AND THE ORDER DATED 03.12.2008 PASSED BY THE ASSESSING OFFICER BE RESTORED. 2. APROPOS GROUND NO.1, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE AD HOC DISALLOWANCE OF RS.1 LAKH OUT OF CHEMICAL CONSUMPTION. 3. IN APPEAL BEFORE THE LD. CIT(A), THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSEE HAS FURNISHED DETAILS OF STOCK OF CHEMICAL IN HAND AND COMPLETE INVENTORY OF THE SAME WAS ALSO FILED BEFORE THE LD. CIT(A). HAVING CAREFULLY EXAMINED THE EXPLANATIONS OF THE ASSESSEE, THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO RS.50,000/- FROM OF RS.1 LAKH OUT OF CONSUMPTION OF CHEMICAL. 4. SINCE THE DISALLOWANCE WAS MADE ON AD HOC BASIS, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND WE CONFIRM THE SAME. 5. APROPOS GROUND NO.2, IT IS NOTICED THAT THE ASSESSING OFFICER HAS DISALLOWED PAYMENT OF RS.20 LAKHS TO KANPUR ELECTRIC SUPPLY CO. LTD. (KESCO) ON THE GROUND THAT IT WAS A PENALTY LEVIED ON ACCOUNT OF ELECTRICITY THEFT. 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS ALLOWED THE PAYMENT OF RS.20 LAKHS, HAVING TREATED IT TO BE OF COMPENSATORY IN NATURE. 7. NOW THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT SINCE THE PENALTY WAS PAID FOR INFRACTION OF LAW, THE SAME CANNOT BE ALLOWED. IN SUPPORT OF HIS CONTENTION, THE LD. D.R. HAS :- 3 -: INVITED OUR ATTENTION TO THE ASSESSMENT OF PENALTY AVAILABLE AT PAGE 7 OF THE COMPILATION OF THE ASSESSEE, WITH THE SUBMISSION THAT THE ASSESSMENT OF PENALTY WAS MADE ON ACCOUNT OF ELECTRICITY THEFT. THEREFORE, PAYMENT OF PENALTY CANNOT BE ALLOWED, AS IT WAS ON ACCOUNT OF ELECTRICITY THEFT AND FOR INFRACTION OF LAW. 8. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS SUBMITTED THAT THOUGH EXCESS PAYMENT OF ELECTRICITY CHARGES WERE ASSESSED ON ACCOUNT OF ELECTRICITY THEFT, BUT IT WAS NOT FOR ANY INFRACTION OF LAW, AS IT WAS OF COMPENSATORY NATURE. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE ASSESSMENT MADE BY KESCO AVAILABLE AT PAGE 8 OF THE COMPILATION OF THE ASSESSEE AND RECEIPT FOR PAYMENT OF RS.20 LAKHS AT PAGE 9 OF THE COMPILATION OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER INVITED OUR ATTENTION TO PAGE 10 OF THE COMPILATION OF THE ASSESSEE, WHICH IS ALSO BILL FOR PAYMENT AGAINST REVISED ASSESSMENT OF RS.20,24,282/-. NOWHERE THE WORD PENALTY WAS USED EITHER IN THE BILL OR IN THE ASSESSMENT. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO INVITED OUR ATTENTION TO THE ORDER OF THE KESCO WITH REGARD TO THE WITHDRAWAL OF THE CASE FILED UNDER SECTION 151 OF THE ELECTRICITY ACT, 2003 ON ACCOUNT OF PAYMENT OF EXCESS ELECTRICITY CHARGES AND THE CASE WAS ALSO WITHDRAWN. THEREFORE, THE PAYMENT WAS OF COMPENSATORY IN NATURE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER CONTENDED THAT PART OF PAYMENT OF THIS EXCESS ELECTRICITY CHARGES WERE ALSO PAID IN ASSESSMENT YEAR 2007-08 AND IN THAT ASSESSMENT YEAR NO DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF PAYMENT OF ELECTRICITY CHARGES AFTER TREATING IT TO BE PENALTY. THEREFORE, THE ASSESSING OFFICER CANNOT TAKE A CONTRARY VIEW IN DIFFERENT ASSESSMENT YEAR. 9. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT NO DOUBT THE ASSESSEE WAS CHARGED FOR ELECTRICITY THEFT AND EXCESS ELECTRICITY CHARGES WERE CLAIMED BY MAKING ASSESSMENT. THE ASSESSEE HAS MADE PAYMENT OF RS.20 LAKHS :- 4 -: DURING THE IMPUGNED ASSESSMENT YEAR AND RS.20,24,282/- IN NEXT ASSESSMENT YEAR I.E. 2008-09 AND IN THAT YEAR NO DISALLOWANCE WAS MADE IN THIS REGARD. THE ASSESSING OFFICER HAS TREATED THIS PAYMENT AS PENALTY ON ACCOUNT OF INFRACTION OF LAW IN ASSESSMENT YEAR 2006-07, BUT IN OTHER ASSESSMENT YEAR I.E. 2008-09 THIS PAYMENT WAS TREATED TO BE COMPENSATORY IN NATURE AND WAS ALLOWED BY THE ASSESSING OFFICER. WE HAVE ALSO CAREFULLY PERUSED THE WITHDRAWAL ORDER OF THE CASE REGISTERED UNDER SECTION 151 OF THE ELECTRICITY ACT, 2003 AND THE ASSESSMENT ORDER AND AFTER TAKING INTO ACCOUNT ALL THESE DOCUMENTS, WE ARE OF THE CONSIDERED VIEW THAT THE PAYMENT OF RS.20 LAKHS IS OF COMPENSATORY IN NATURE AND NOT FOR INFRACTION OF LAW. THEREFORE, THE PAYMENT OF THE SAME CANNOT BE DISALLOWED. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY ALLOWED THE PAYMENT OF ELECTRICITY CHARGES OF RS.20 LAKHS AFTER TREATING IT TO BE COMPENSATORY IN NATURE. 10. APROPOS GROUND NO.3, IT IS NOTICED THAT THE ASSESSEE HAS ESTABLISHED A NEW UNIT AT BANTHAR APART FROM ITS EXISTING UNIT AT JAJMAU. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2004-05, IT WAS ADMITTED BY THE ASSESSEE THAT COMMENCEMENT OF PRODUCTION IN BANTHAR UNIT STARTED AFTER 31.3.2006 AND IN VIEW OF THIS DEPRECIATION OF BANTHAR UNIT HAS NOT BEEN ALLOWED IN ASSESSMENT YEAR 2004-05. IN ASSESSMENT YEAR 2005- 06 THE ASSESSEE HAS NOT CLAIMED ANY DEPRECIATION OF BANTHAR UNIT. BUT IN THE IMPUGNED ASSESSMENT YEAR I.E. 2006-07, THE ASSESSEE CLAIMED DEPRECIATION OF BANTHAR UNIT. THE CLAIM OF THE ASSESSEE WAS EXAMINED BY THE ASSESSING OFFICER IN THE LIGHT OF THE NO OBJECTION CERTIFICATE GRANTED BY THE POLLUTION CONTROL BOARD AND HE WAS OF THE VIEW THAT TILL 31.3.2006 PRODUCTION WAS NOT COMMENCED IN BANTHAR UNIT AND HE ACCORDINGLY DENIED DEPRECIATION ON BUILDING AND PLANT & MACHINERY CLAIMED AT RS.55,12,582/-. 11. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS ALLOWED DEPRECIATION RELYING UPON THE NO OBJECTION CERTIFICATE DATED 16.3.2004 GRANTED BY THE POLLUTION CONTROL BOARD. :- 5 -: 12. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE LD. CIT(A) HAS GRANTED DEPRECIATION RELYING UPON THE CERTIFICATE ISSUED BY THE U.P. POLLUTION CONTROL BOARD, LUCKNOW DATED 16.3.2004; WHEREAS EVEN AFTER THIS CERTIFICATE, THE DEPRECIATION WAS NOT ALLOWED TO THE ASSESSEE DURING ASSESSMENT YEAR 2004-05 AND IN ASSESSMENT YEAR 2005-06 THE ASSESSEE HIMSELF HAS NOT CLAIMED DEPRECIATION FOR BATHAR UNIT. THEREFORE, THE POLLUTION CONTROL BOARD CERTIFICATE DATED 16.3.2004 IS NOT A RELEVANT DOCUMENT TO DECIDE AS TO WHEN PRODUCTION WAS COMMENCED IN THE BANTHAR UNIT. THE LD. D.R. HAS FURTHER INVITED OUR ATTENTION TO THE ANOTHER POLLUTION CONTROL BOARD CERTIFICATE DATED 27.4.2006 WITH THE SUBMISSION THAT IN THIS POLLUTION CONTROL BOARD CERTIFICATE, THERE WAS A CONDITION THAT BEFORE PRODUCTION STARTS, INSPECTION OF THE POLLUTION CONTROL BOARD IS TO BE ENSURED. IT WAS ALSO A CONDITION THAT BEFORE START OF TRIAL PRODUCTION, THE ASSESSEE WAS REQUIRED TO OBTAIN CONSENT FROM THE BOARD AND THIS POLLUTION CONTROL BOARD CERTIFICATE WAS GRANTED SUBJECT TO THE CONDITIONS MENTIONED THEREIN. THEREFORE, TILL THE CONDITIONS ARE FULFILLED, THE ASSESSEE IS NOT ENTITLED TO START ITS PRODUCTION. THEREFORE, THE ORDER OF THE LD. CIT(A) IS NOT TENABLE UNDER THE LAW, AS IT WAS BASED ON IRRELEVANT EVIDENCE. 13. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A), BESIDES IT WAS ALSO CONTENDED THAT THE ASSESSEE HAS PLACED RELEVANT EVIDENCE ON RECORD TO ESTABLISH THAT THE PRODUCTION WAS COMMENCED BEFORE 31.3.2006. THEREFORE, THE ASSESSEE IS ENTITLED FOR DEPRECIATION. 14. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE ASSESSING OFFICER HAS CATEGORICALLY MENTIONED IN HIS ORDER THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2004-05 THE ASSESSEE HAS ADMITTED THAT COMMENCEMENT OF PRODUCTION IN BANTHAR UNIT :- 6 -: WAS STARTED AFTER 31.3.2006. IN VIEW OF THESE FACTS, DEPRECIATION AT BANTHAR UNIT WAS NOT ALLOWED IN ASSESSMENT YEAR 2004-05. IT IS ALSO MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT CLAIMED DEPRECIATION ON BANTHAR UNIT IN ASSESSMENT YEAR 2005-06. THEREFORE, TILL 31.3.2006, THE PRODUCTION AT BANTHAR UNIT HAS NOT BEEN COMMENCED AND IN ORDER TO REVERT THIS FINDING NOTHING IS PLACED ON RECORD ON BEHALF OF THE ASSESSEE. THE ASSESSING OFFICER HAS PLACED RELIANCE UPON THE POLLUTION CONTROL BOARD CERTIFICATE DATED 27.4.2006 WHILE CONCLUDING THAT IN VIEW OF THIS POLLUTION CONTROL BOARD CERTIFICATE, THE PRODUCTION AT BANTHAR UNIT WAS NOT COMMENCED TILL 31.3.2006, THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION DURING THE IMPUGNED ASSESSMENT YEAR. 15. THE LD. CIT(A) HAS ALLOWED DEPRECIATION RELYING UPON THE POLLUTION CONTROL BOARD CERTIFICATE DATED 16.3.2004, HAVING OBSERVED THAT THROUGH THIS CERTIFICATE THE ASSESSEE WAS PERMITTED TO PRODUCE DRY CRUSHED LEATHER FROM 120 HIDES PER DAY. IF THE ASSESSEE WAS ALLOWED TO START PRODUCTION AS PER THIS POLLUTION CONTROL BOARD CERTIFICATE, DEPRECIATION IN ASSESSMENT YEAR 2004-05 WOULD HAVE BEEN ALLOWED AND EVEN IN ASSESSMENT YEAR 2005-06 THE ASSESSEE COULD HAVE CLAIMED DEPRECIATION ON THE BANTHAR UNIT, BUT IT WAS NOT CLAIMED. WE, HOWEVER, HAVE CAREFULLY EXAMINED THE CERTIFICATE OF POLLUTION CONTROL BOARD DATED 16.3.2004. THAT CERTIFICATE WAS GRANTED SUBJECT TO CERTAIN CONDITIONS AND IT IS NOT CLEAR WHETHER THE CONDITIONS MENTIONED IN THIS CERTIFICATE WERE EVER COMPLIED WITH BY THE ASSESSEE OR NOT. ONE OF THE MAIN CONDITIONS IN THAT CERTIFICATE WAS THAT BEFORE START OF PRODUCTION, THE ASSESSEE HAS TO ENSURE CONSENT FROM THE POLLUTION CONTROL BOARD WITH REGARD TO THE AIR AND WATER. THEREAFTER ONE MORE POLLUTION CONTROL BOARD CERTIFICATE WAS ALSO TO BE OBTAINED BY THE ASSESSEE, THAT IS AVAILABLE AT PAGE 14 OF THE COMPILATION OF THE ASSESSEE AND AS PER THIS CERTIFICATE DATED 27.4.2006, THE ASSESSEE WAS REQUIRED TO GET ITS UNIT INSPECTED BY THE REGIONAL OFFICE OF THE POLLUTION CONTROL BOARD BEFORE START OF TRIAL PRODUCTION. IT WAS ALSO ASKED TO GET CONSENT OF THE POLLUTION CONTROL :- 7 -: BOARD BEFORE START OF PRODUCTION. WITH VARIOUS CONDITIONS, THE CERTIFICATE WAS GRANTED ON 27.4.2006 AND ASSESSEE WAS ASKED TO MAKE COMPLIANCE BY 30.4.2006, BUT NO EVIDENCE IS PLACED ON RECORD TO DEMONSTRATE AS TO WHETHER THE ASSESSEE HAS MADE COMPLIANCE OF THE CONDITIONS MENTIONED IN THE POLLUTION CONTROL BOARD CERTIFICATE BEFORE START OF PRODUCTION. THE ENTIRE ONUS IS UPON THE ASSESSEE TO PLACE RELEVANT EVIDENCE ON RECORD WITH RESPECT TO THE START OF PRODUCTION AT BANTHAR UNIT BEFORE END OF 31.3.2006. BUT NO EVIDENCE IS PLACED ON RECORD. THE LD. CIT(A) HAS SIMPLY ALLOWED THE CLAIM OF DEPRECIATION RELYING UPON THE POLLUTION CONTROL BOARD CERTIFICATE DATED 16.3.2004. THEREFORE, WE DO NOT FIND OURSELVES IN AGREEMENT WITH THE ORDER OF THE LD. CIT(A); WHEREAS THE ASSESSING OFFICER HAS MADE OUT A CASE THAT THE PRODUCTION WAS NOT COMMENCED BEFORE 31.32006. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER ON THIS ISSUE. 16. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 6 TH FEBRUARY, 2015 JJ:1601 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR