ITO, Ward - 1(1), Hooghly, Hooghly V. M/s. Ashutosh Cold Storage, Hooghly

ITA 62/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3068 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2013
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 12-01-2012
• Court: TRIBUNAL
• Department Lawyers: JAWWAD KHAN
• Assessee Lawyers: SARNATH GHOSH
• Keywords: Depreciation; Income from undisclosed sources; Fair market value
• Section: 147; 69

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [ () . .. . . .. . , ,, , , !' #! $'# #! $'# #! $'# #! $'#, ,, , ] ]] ] [BEFORE HONBLE SRI K.K.GUPTA, AM & HONBLE SRI MAHAVIR SINGH, JM] '& '& '& '& /ITA NO.132/KOL/2012 $'( !)*/ ASSESSMENT YEAR : 2006-07 (,- / APPELLANT ) - !' - ( /0,- /RESPONDENT) ASHUTOSH COLD STORAGE I.T.O., WARD-1(1) HOOGHLY . -VERSUS- HOOGHLY (PAN: AAHFA 9894 M) '& '& '& '& /ITA NOS.62-64/KOL/2012 $'( !)*/ ASSESSMENT YEARS : 2004-05,2005-06 & 2006-07 (,- / APPELLANT ) - !' - ( /0,- /RESPONDENT) I.T.O., WARD-1(1), M/S.ASHUTOSH COLD STORAGE HOOGHLY -VERSUS- HOOGHLY (PAN: AAHFA 9894 M ) ,- 1 2 / FOR THE DEPARTMENT SHRI JAWWAD KHAN, SR.DR /0,- 1 2 / FOR THE ASSESSEE SHRI SOMNATH GHOSH AND SHRI SARNATH GHOSH '!3 1 4 /DATE OF HEARING : 17.04.2013 5) 1 4 /DATE OF PRONOUNCEMENT : 19.04.2013 6 / ORDER PER SHRI K.K.GUPTA, AM THE APPEALS BY THE ASSESSEE FOR A.YR. 2006-07 AND B Y THE REVENUE FOR THE A.Y.2004-05, 2005-06 AND 2006-07 ARE ON THE SAME IS SUE WHEN THE PURPORTED DEPRECIATION NOT CLAIMED ON THE INSURED VALUE OF TH E ASSET BEING THE PLANT AND MACHINERY WAS SUBJECTED TO TAXATION U/S 69 OF THE A CT HAS BEEN APPEALED BY THE REVENUE ON ITS DELETION BY THE LD. CIT(A) WHEN THE ASSESSEE IS IN APPEAL ON THE ISSUE OF LD. CIT(A) HAVING HELD THE RE-ASSESSMENT PROCEED INGS U/S 147/148 OF THE ACT VALID. 2. THE CASCADING EFFECT IN A.YR. 2006-07 WAS CONSID ERED IN A.YEAR 2004-05 AND 2005-06 WHEN THE REVENUE IS IN APPEAL FOR A.YR. 200 4-05 AND 2005-06 WHICH THE LD. ITA NOS.132 ,62-64/KOL/2012 2 CIT(A) HAD ALREADY CONSIDERED FIT FOR DELETION AND NOT TO BE TAXED U/S 69 OF THE ACT BEING A HYPOTHETICAL VALUATION ON MERIT NOT TO BE C ONSIDERED TAXABLE IN THE HANDS OF THE ASSESSEE. WE PROPOSE TO DISPOSE OFF ALL THE APP EALS TOGETHER FOR THE SAKE OF CONVENIENCE AND BREVITY, IN SO FAR AS THE ARGUMENTS WERE PLACED BEFORE THE BENCH BY THE RIVAL PARTIES THE ISSUE BEING COMMON. 3. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD A ND AS WERE NOTED BY THE LD. CIT(A) READ AS UNDER :- DURING THE COURSE OF HEARING, INFORMATION WAS GATH ERED FROM THE UNITED INDIA INSURANCE COMPANY, THAT THE ASSESSEE HAD SUBMITTED A LIST OF PLANT AND MACHINERY THE VALUE OF WHICH WAS DISCLOSED AT RS.28,29,000/- WHER EAS IN THE BALANCE SHEET, IT WAS DISCLOSED AT RS.47/- A SHOW CAUSE NOTICE WAS ISSUED TO EXPLAIN WHY THE RS.28,28,953/- SHOULD NOT BE TREATED AS UNDISCLOSED INVESTMENT IN PLANT AND MACHINERY IN VIEW OF THE PROVISIONS OF S.69 OF THE INCOME TAX ACT, 1961. IN REPLY, THE ASSESSEE FIRM SUBMITTED ITS REJOINDER ON 01-12-2008. THE CONTENTION OF THE ASSESSEE FIRM IS THAT THE INSURANCE PREMIUM PAI D FOR PLANT AND MACHINERY WHICH ALSO INCORPORATED ELECTRICAL EQUIPMENTS AND THE VALUE FO R WHICH THE ASSETS ARE INSURED WAS TAKEN AT RS.28,29,000/- AND AS SUCH THE WRITTEN DOW N VALUE AMOUNTED TO RS.47/- ONLY THE ASSESSEE MUST HAVE INVESTED AN AMOUNT OF RS.28,28,9 53/- (RS.28,29,000/- - RS.7/-) WHICH WAS MISCONCEIVED AS INCOME FROM UNDISCLOSED S OURCES WITHOUT ADDUCING ANY RELEVANT MATERIAL ON RECORD. IT WAS FURTHER ARGUED THAT THE CONCEPT HAS NOT PROXIMATE RELATIONSHIP TO THE MARKET VALUE, WHEREAS THE INSUR ANCE COMPANY HAS TO SEE THE REPLACEMENT COST OF THE ASSET WHICH IT INSURES. THE ASSESSEE MAINTAINED THE PLANT AND MACHINERY IN PRISTINE CONDITION. THE INSURER THEREF ORE ACCORDING TO THIS PRINCIPLE, TOOK INTO ACCOUNT THE MARKET VALUE OF SUCH ASSET. IN THI S CONTEXT, IT WAS ARGUED THAT AS THE VALUE ASCERTAINED BY THE INSURANCE COMPANY WAS FAR IN EXCESS OF THE WRITTEN DOWN VALUE AND AS SUCH INVESTMENT OUT OF UNDISCLOSED SOURCES I S TO BE PRESUMED WAS MISCONCEIVED. THERE IS NO SUCH LICENCE UNDER THE STATUE AND MATER IAL MUST BE BROUGHT ON RECORD TO PROVE BEYOND DOUBT THAT A SPECIFIC INVESTMENT MADE ON A PARTICULAR DATE WAS NOT DISCLOSED BEFORE THE REVENUE SO THERE IS EVIDENCE F OR THE CONCLUSION THAT INCOME FROM UNDISCLOSED SOURCES WAS UTILIZED IN THE PROCESS. IT WAS ALSO CONTENDED THAT THIS IS A PROCESS WHICH HAS BEEN GOING ON FOR SEVERAL YEARS E ARLIER AND EVEN THE PRESUMPTION THAT THE DIFFERENCE BETWEEN THE WDV AND THE VALUE ESTIMA TED BY THE INSURANCE COMPANY CAN GIVEN RISE TO ANY THOUGHT OF FRESH UNDISCLOSED INVE STMENT IN SUCH ASSETS IN THE IMPUGNED PREVIOUS YEAR 2005-06 IS BEYOND ANY LOGICAL FINDING . IT WAS CONCLUDED THAT THERE IS NO UNDISCLOSED INVESTMENT MADE BY THE CONCERNED ASSESS EE FIRM AND AS SUCH THE ADDITION OF RS.28,28,953/- HAS BEEN MISCONCEIVED INDULGING IN S PECULATION, SURMISE, SUSPICION AND CONJECTURE WHICH DOES NOT HAVE ANY SANCTITY IN LAW. I HAVE GIVEN A CAREFUL CONSIDERATION ON THE REJOIND ER OF THE ASSESSEE FIRM AND THE ARGUMENTS OF THE A/R IN LIGHT OF THE FACTS AND CIRC UMSTANCES OF THE CASE. HOWEVER, I FIND THAT THE ABOVE ARGUMENT OF THE ASSESSEE IS NOT FOUN D TO BE SATISFACTORY. IT IS NOT IN DISPUTE THAT SUBSTITUTION OF OLD PLANT AND MACHINER Y WITH NEW ONES OVER A REASONABLE PERIOD OF TIME IS INEVITABLE TO ANY BUSINESS AND AS SUCH THE REPLACEMENT OF THE OLD MACHINERIES WAS MADE WITHOUT RECORDING THE SAME IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FIRM WHICH LED TO THE UNDISCLOSED INVESTME NT. FURTHER THE INSURANCE COMPANY ITA NOS.132 ,62-64/KOL/2012 3 DOES NOT STAND TO BENEFIT BY GETTING THE OLD ASSETS THE W.D.V. OF WHICH IS ONLY RS.47/- INSURED AT SUCH A HIGH VALUE OF RS.28,29,000/- UNLE SS THE SAME WERE NEWLY ACQUIRED IN THE RECENT PAST. ON THIS PREMISES AND CONSIDERING A LL CIRCUMSTANCES AND ALSO TAKING INTO CONSIDERATION THAT THE ASSESSEE FIRM WOULD PAY SUCH HIGH INSURANCE PREMIUM TO GET INSURED OLD ASSETS WORTH RS.47/- (W.D.V.) AS DISCLO SED IN THE BOOKS OF ACCOUNTS OF THE ASSESEE FIRM, I THERE, PROCEED TO TREAT RS.28,29,95 3/- AS THE UNDISCLOSED INVESTMENT IN PLANT AND MACHINERY AND ADD THE SAME U/S 69 OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2006-2007. 4. ON APPEAL BEFORE THE FIRST APPELLATE AUTHORITY T HE FACTS WERE NARRATED LEADING TO CLAIM OF LESS DEPRECIATION, IN SO FAR AS, THE DE PRECIATION HAS BEEN ALLOWED IN ACCORDANCE WITH THE INCOME TAX ACT.. IN SO FAR AS T HE FAIR MARKET VALUATION AS NOTED BY THE AO WAS ON THE BASIS OF THE INSURERS VALUING THE MACHINES FOR INSURANCE CANNOT BE BROUGHT TO TAX U/S 69 OF THE ACT, WAS NOTED BY THE LD. CIT(A). HE NOTED THAT THERE WAS NO ADDITION IN RESPECT OF PLANT AND MACHINERY NOR AO HAD NOTED ANY UNDISCLOSED INVESTMENT. THERE WAS NO SCOPE FOR DISALLOWANCE U/S 69 OF THE ACT AND WAS DELETED BY THE LD. CIT(A) FOR THE IMPUGNED ASSESSMENT YEARS BE FORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CAREFUL PERUSAL OF THE FACT S AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) ON MERIT, IN SO FAR AS, THE REVENUE IS IN APPEAL ON THE DELETION OF ADDITION MADE BY THE A O U/S 69 OF THE ACT WHERE THE FAIR MARKET VALUE OF THE PURPORTED MACHINERIES WHICH THE ASSESSEE HELD WERE UTILIZED BY THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEARS WERE NOT FROM KNOWN SOURCE OF THE INCOME, WAS CONSIDERED BY THE LD. CIT(A) FIT FOR DE LETION. THE LD .COUNSEL FOR THE ASSESSEE HAS FURNISHED THE AUDITED STATEMENT ALONG WITH LIST OF MACHINERY FORMING PART OF THE VALUATION THEREOF FOR INSURANCE PURPOSE BY U NITED INDIA INSURANCE COMPANY WHEN THE SAME WAS CONSIDERED FOR INVOKING THE PROVI SION OF SECTION 147/148 OF THE ACT BY THE AO AS INCOME HAVING ASSESSMENT. WE HAVE ALSO PERUSED VARIOUS COMPILATION OF THE CASE LAWS RELIED UPON BY THE ASS ESSEE APPELLANT BEFORE THE LD. CIT(A), IN SO FAR AS, THE LD. CIT(A) SATISFIED HIMS ELF THAT THE ADDITION U/S 69 OF THE ACT IN THE IMPUGNED ASSESSMENT YEARS WERE WITHOUT ANY J USTIFICATION AND MERIT IN SO FAR AS SECTION 69 IS ONLY AN INFERENTIAL AND ENABLE THE PR OVISION IMPARTING THE AO TO ADD WHILE COMPUTING THE INCOME SUCH INVESTMENTS AS REMA IN UNEXPLAINED BY THE ASSESSEE ITA NOS.132 ,62-64/KOL/2012 4 AND CANNOT BE INVOKED FOR REOPENING ASSESSMENT. IN OTHER WORDS THE FAIR MARKET VALUE WAS TO BE THE FAIR MARKET VALUE AND NOT BECAUSE THE ASSESSEE DENIES THAT THE WRITTEN DOWN OF VALUE OF ASSETS WHICH MACHINERIES HAVE BEEN INSURED WERE NOT FOR PROFIT OR INCOME BUT FOR DEPRECATION TO SUCH AN EXTENT THAT T HE SCHEDULE OF FIXED ASSETS INDICATING THE RETURNED VALUE IS THE DIFFERENCE BET WEEN THE FAIR MARKET VALUE AND THE VALUE DECLARED BY THE ASSESSEE IN ITS FINANCIAL STA TEMENT. THEREFORE THE LD. CIT(A) RIGHTLY CONSIDERED THAT THE AO BRINGING TO TAX SUCH INCOMES WAS DEVOID OF MERIT, IN SO FAR AS, THE REVENUE IS IN APPEAL BEFORE US FOR A.YR . 2006-07 AGITATING THE DELETION OF ADDITION OF RS.28,28,927/- FOR A.YEAR 2004-05 AND R S.28,28,945/- FOR A.YEAR 2005- 06. THE MINOR DIFFERENCE BETWEEN THE THREE ARE THE ACTUAL DEPRECIATION CLAIMED AND REDUCED BY THE LD. AO TO TAX THE BALANCE U/S 69. 6. THE LD. COUNSEL FOR THE ASSESSEE IS IN APPEAL RE GARDING HOLDING OF VALIDITY OF RE- ASSESSMENT U/S 147 OF THE ACT WHICH THE LD. CIT(A), IN SO FAR AS, CONSIDERED THE APPELLANTS CASE STRONG ON MERITS WAS TO BE CONSIDE RED BY THE TRIBUNAL. WE HAVE FOUND THE CONTENTION OF THE LD. COUNSEL FOR THE ASS ESSEE JUSTIFIED, IN SO FAR AS, THE ONLY ISSUE FOR INVOKING THE PROVISION OF SECTION 147/148 OF THE ACT WAS THE AO ASSUMING RE-ASSESSMENT PROCEEDINGS WAS ON THE BASIS OF A INS URABLE VALUE TO BE INSURED BY THE ASSESSEE WHICH VALUE WAS ASSESSED BY THE INSURANCE COMPANY AND WAS NOT TO BE BROUGHT TO TAX U/S 69 OF THE ACT BY THE AO WAS CONS IDERED BY THE LD. CIT(A) IN ASSESSEES FAVOUR. THE LD. CIT(A) HELD THAT THE INS URANCE COMPANY COULD NOT HAVE PARTED THE DIFFERENCE TO BE TAXED AS INCOME IN THE HANDS OF THE INSURERS AS THE INSURED CANNOT MAKE PROFIT FOR TAXATION U/S 69. THIS WILL R ENDER THE DISCUSSION OF VALIDITY OF RE- ASSESSMENT BY US FOR ACADEMIC PURPOSE WHICH ONLY T HE LD. COUNSEL HAS LEFT THE DISCRETION OF THE BENCH IN SO FAR AS HAVING CONSIDE RED THE CASE OF THE REVENUE ON MERITS THE ADDITION RIGHTLY CONSIDERED FIT FOR DELE TION BY THE LD. CIT(A). WE HAVE NO FURTHER COMMENTS TO MAKE IN SO FAR AS THE MATERIAL AVAILABLE TO THE AO WAS FURNISHED BY THE UNITED INDIA INSURANCE CO.LTD. WAS TO BE VER IFIED BY THE AO WHEN HE METICULOUSLY CONSIDERED THE INSURED VALUE OF THE AS SETS BUT WERE EXISTING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AT A VALUE ON WHICH DEP RECIATION HAS BEEN GRANTED AND ALLOWED BY THE TAX AUTHORITIES FOR THE EARLIER YEAR S. IT WAS NOT THE CASE OF THE AO TO ITA NOS.132 ,62-64/KOL/2012 5 DISALLOW DEPRECATION WHICH EXPENDITURE AS OF NOW HA S BEEN BROUGHT TO TAX BY THE AO HIMSELF U/S 69 OF THE ACT. WE DO FIND THAT THE LD. CIT(A) HAS RIGHTLY CONSIDERED THE ADDITION MADE BY THE AO IN THE THREE ASSESSMENT YEA RS DEVOID OF MERIT AND RIGHTLY DELETED THE SAME WHICH WE UPHOLD. HOWEVER, AS RIGHT LY POINTED OUT IT WILL BE A DELIBERATION ON CASE LAWS VERSUS THE LD. CIT(A) UPH OLDING THE VALIDITY OF SECTIONS 147/148 OF THE ACT, WHEN THE LD. CIT(A) HAVING HIMS ELF DELETED THE ADDITION AS BROUGHT ON RECORD HAS NOT DISTINGUISHED THE CASE LA WS ON FACTS. IN THIS VIEW OF THE MATTER WE DISMISS THE APPEAL FILED BY THE ASSESSEE AS WELL AS THE REVENUE FOR THE THREE IMPUGNED ASSESSMENT YEARS AS INDICATED ABOVE. 7. IN THE RESULT THE APPEALS OF THE REVENUE AS WELL AS THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 19.04.2013. SD/- SD/- [ .#! $'# , ] [ .., ,, , ] [MAHAVIR SINGH ] [K.K.GUPTA] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (4 4 4 4) )) ) DATE: 19.04.2013. R.G.(.P.S.) 6 1 /$$7 87)9- COPY OF THE ORDER FORWARDED TO: 1. ASHUTOSH COLD STORAGE, C/O SHRI SOMNATH GHOSH, ADVO CATE, SEVEN BROTHERS LODGE, CHINSURAH, DIST. HOOGHLY, PIN-712 105. 2 I.T.O., WARD-1(1), HOOGHLY. 3 . CIT KOLKATA 4 . CIT(A)-XXXVI, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 07 /$/ TRUE COPY, 6'/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NOS.132 ,62-64/KOL/2012 6