JCIT(OSD), Circle - 8, Kolkata, Kolkata V. M/s. Bhatpara Papers Limited, Kolkata

ITA 61/KOL/2012

• Counselvise Citation: 6123514 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 12-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SABOORUL HASAN USMANI
• Assessee Lawyers: S JHAJHARIA
• Keywords: Business income; Depreciation
• Section: 37(1)

Judgement Text

I.T.A. NO.: 61/KOL./2012 ASSESSMENT YEAR : 2006-07 PAGE 1 TO 4 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTA NT MEMBER) I.T.A. NO.: 61/KOL./ 2012 ASSESSMENT YEAR : 2006-2007 JOINT COMMISSIONER OF INCOME TAX (OSD),....... ..APPELLANT CIRCLE-8, KOLKATA, AAYAKAR BHAVAN, 5 TH FLOOR, ROOM NO. 8, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. BHATPARA PAPERS LIMITED,....................., .................RESPONDENT 113, PARK STREET, KOLKATA-700 013 [PAN : AACCB 7323 G] APPEARANCES BY: SHRI SABOORUL HASAN USMANI, JCIT, SR. D.R., FOR THE DEPARTMENT SHRI S. JHAJHARIA, A.R., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : DECEMBER 19, 2013 DATE OF PRONOUNCING THE ORDER : DECEMBER 30, 2013 O R D E R PER ABRAHAM P. GEORGE : 1. IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVA NCE IS THAT LD. CIT(APPEALS) DELETED VARIOUS DISALLOWANCES MADE BY THE ASSESSING OFFICER. AS PER THE REVENUE, THERE WAS NO BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR AT A LL FOR ALLOWING ANY CLAIM OF EXPENDITURE. 2. FACTS APROPOS ARE THAT ASSESSEE, A PAPER MANUFAC TURER, HAD FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING A LOSS OF RS.24,61,760/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, ASSESSEE I.T.A. NO.: 61/KOL./2012 ASSESSMENT YEAR : 2006-07 PAGE 1 TO 4 2 HAD PRODUCED BOOKS OF ACCOUNTS, BILLS, VOUCHERS AND SUPPORTING DOCUMENTS WHICH WERE TEST CHECKED BY THE ASSESSING OFFICER. BASED ON A LETTER DATED 22.10.2008 OF THE ASSESSEE, ASSESSING OFFICER REACHED A CONCLUSION THAT PLANT OF THE ASSESSEE WAS CLOSED AN D NON-FUNCTIONAL DURING THE RELEVANT PREVIOUS YEAR AND THERE WERE NO SALE OR PURCHASE. HENCE, ACCORDING TO HIM, CLAIM OF BUSINESS EXPENDIT URE COULD NOT BE ALLOWED UNDER SECTION 37(1) OF THE ACT. HE, THEREFO RE, DISALLOWED WHOLE OF THE EXPENDITURE CLAIMED BY THE ASSESSEE, BUT FOR A SUM OF RS.50,000/- WHICH HE ALLOWED AS ESSENTIAL EXPENDITURE REQUIRED TO MAINTAIN ITSELF. AN ADDITION OF RS.39,42,710/- WAS MADE. ASSESSING OFFI CER, INTER ALIA, ALSO NOTED THAT SOME OF THE EXPENDITURE LIKE FILING FEES RS.8,30,000/-, LOSS ON SALE OF FIXED ASSETS RS.1,03,298/- AND DEPRECIATION ON PLANT AND MACHINERY RS.2,14,276/- WERE EVEN OTHERWISE NOT ALL OWABLE. 3. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT DURING THE RELEVANT PREVIOUS YEAR, BY VIRTUE O F AN ORDER DATED 01.02.2006 OF HONBLE JURISDICTIONAL HIGH COURT, TI TAGARH PAPER MILL NO. 2 RUN BY ONE M/S. TITAGARH INDUSTRIES LTD. WAS TRANSF ERRED TO THE ASSESSEE AS A GOING CONCERN. AS PER ASSESSEE, IT WAS NOT A C ASE WHERE THERE WAS NO BUSINESS RECEIPT. ASSESEE HAD BUSINESS RECEIPT OF R S.12,63,120/-. AS PER THE ASSESSEE, IT WAS HAVING STOCK OF RAW MATERIAL, FINISHED GOODS, STORES & SPARES PARTS OF M/S. TITAGARH PAPER MILL NO. 2 TRAN SFERRED TO IT AS A GOING CONCERN. CONSIDERABLE EXPENDITURE WAS INCURRED FOR RUNNING THE COMPANY. AS PER ASSESSEE, IT HAD NEVER CLOSED DOWN ITS BUSINESS BUT THE PLANT ALONE HAD NOT WORKED. RELYING ON THE DECISION OF HONBLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS.- KRITI R ESORTS (P) LTD. [2011] 60 DTR (HP) 138, AND THAT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS.- NORPLEX OAK INDIA LTD. [2011] 198 TAXM AN 470 (KOL.) ASSESSEE ARGUED THAT ITS CLAIM FOR EXPENDITURE COU LD NOT BE DISALLOWED. 4. LD. CIT(APPEALS) WAS APPRECIATIVE OF THESE CONTE NTIONS. ACCORDING TO HIM, THOUGH THE PLANT OF THE ASSESSEE DID NOT WO RK, IT HAD CONTINUED I.T.A. NO.: 61/KOL./2012 ASSESSMENT YEAR : 2006-07 PAGE 1 TO 4 3 WITH ITS BUSINESS ACTIVITIES AND THERE WAS NO CLOSU RE OF BUSINESS. HENCE, ACCORDING TO HIM THE EXPENDITURE CLAIMED UNDER VARI OUS HEADS BY THE ASSESESE COULD BE ALLOWED EXCEPT FOR THE SUM OF RS. 8,30,000/- INCURRED FOR FILING FEES AND RS.1,03,298/- FOR LOSS ON SALE OF FIXED ASSETS. 5. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE ORD ER OF LD. CIT(APPEALS) SUBMITTED THAT ASSESSEE HAD ADMITTED S PECIFICALLY TO BE DOING NO BUSINESS DURING THE RELEVANT PREVIOUS YEAR . AS PER LD. DR. ASSESSEE HAD IN ITS SUBMISSION BEFORE LD. CIT(APPEA LS) SPECIFICALLY MENTIONED THAT ITS PLANT WAS CLOSED AND THERE WERE NO SALE OR PURCHASE. IN SUCH CIRCUMSTANCES, ACCORDING TO HIM, LD. CIT(AP PEALS) FELL IN ERROR IN ALLOWING THE CLAIM INCLUDING DEPRECIATION. 6. PER CONTRA, LD. AR SUPPORTED THE ORDER OF LD. CI T(APPEALS). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THOUGH THE ASSESSEE HAS SUBMIT TED THAT DURING THE RELEVANT PREVIOUS YEAR M/S. TITAGARH PAPER MILL NO. 2 WAS TRANSFERRED TO IT AS A GOING CONCERN, BY VIRTUE OF AN ORDER DATED 01.02.2006 OF HONBLE JURISDICTIONAL HIGH COURT, IT IS NOT CLEAR WHETHER SUCH ORDER WAS PRODUCED BY IT BEFORE THE ASSESSING OFFICER. NO DOUBT LD. CI T(APPEALS) HAS CONSIDERED SUCH ORDER AND ALSO THE CLOSING STOCK OF RAW MATERIAL & FINISHED GOODS HELD BY THE ASSESSEE BELONGING TO TH E TITAGARH PAPER MILLS NO. 2, FOR COMING TO A CONCLUSION THAT THERE WAS N O CLOSURE OF BUSINESS. ASSESSEE HAD ADMITTED THAT ITS PLANT HAD NOT FUNCT IONED. JUST FOR A REASON THAT PLANT HAD NOT FUNCTIONED OR FOR A REASON THAT SALE OR PURCHASE HAD NOT TAKEN PLACE, WE CANNOT CONCLUDE THAT BUSINESS O F THE ASSESSEE HAD STOPPED. TRANSFER OF A PAPER MILL AS A GOING CONCER N TO THE ASSESSEE ITSELF WOULD GO A LONG WAY TO SHOW THAT THE BUSINESS WAS B EING CARRIED ON AS A GOING CONCERN. NEVERTHELESS WHETHER THE ASSESSING O FFICER HAD VERIFIED THE EXISTENCE OF STOCK OF RAW MATERIAL AND FINISHED GOODS AND THE NECESSITY OF EXPENDITURE WITH REGARD TO TAKE OVER O F A PAPER MILL AS A I.T.A. NO.: 61/KOL./2012 ASSESSMENT YEAR : 2006-07 PAGE 1 TO 4 4 GOING CONCERN IS NOT CLEAR. IN THE FITNESS OF THING S, WE ARE OF THE OPINION THAT THE MATTER REQUIRES FRESH ADJUDICATION BY THE ASSESSING OFFICER. WE, THEREFORE, SET ASIDE THE ORDERS OF AUTHORITIES BELO W AND REMIT THE ISSUE REGARDING ALLOWABILITY OF EXPENDITURE CLAIMED BY TH E ASSESSEE BACK TO THE FILE OF ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. ASSESSEE SHALL BE GIVEN ADEQUATE OPPORTUNITY FOR PR ODUCING RECORDS IN SUPPORT OF ITS CLAIM. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF DECEMBER, 2013. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 30 TH DAY OF DECEMBER, 2013 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.