M/s Model Echoes Pvt. Ltd., Kanpur V. Dy. Commissioner of Income Tax, Central Circle-II, Kanur

ITA 657/LKW/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1217 (ITAT-LUCKNOW)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 04-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Bonafide belief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 657/LKW/2017 ASSESSMENT YEAR: 2014 - 15 M/S MODEL ECHOES PVT. LTD. C/O SULTAN TANNERS JAJMAU, KANPUR V. DCIT CENTRAL CIRCLE II KANPUR T AN /PAN : AAACH9661A (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI RAKESH GARG, ADVOCATE RESPONDENT BY: SHRI AJAY KUMAR, D.R. DATE OF HEARING: 08 01 201 8 DATE OF PRONOUNCEMENT: 10 01 201 8 O R D E R PER P ARTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A) - IV, KANPUR DATED 19/9/2017. 2 . THOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, THE CRUX O F THE GRIEVANCE IS THAT THE LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS.64,52,847/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF TYPING ERROR IN THE AUDIT REPORT 3CD WHEN COMPARED WITH THE AUDITED PROFIT & LOSS ACCOUNT. 3 . THE FACTS REGARDING THIS ISSUE ARE THAT THE NET PROFIT SHOWN BY THE ASSESSEE AS PER 3CD AUDIT REPORT IS RS.1,77,94,019/ - WHILE AS PER THE AUDITED PROFIT & LOSS ACCOUNT , IT IS RS.1,13,41,173/ - . THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING AN INCOME OF RS.1,13,41,173/ - ON 31/11/2014 AS PER THE NET PROFIT IN THE PROFIT & LOSS ACCOU NT. THE ITA NO.657/LKW/2017 PAGE 2 OF 7 ASSESSEE HAS TAKEN THE TURNOVER AT ALL THE PLACES AT RS.35,21,51,232/ - AND COMPUTED THE NET PROFIT IN 3CD AUDIT R EPORT CONSIDERING SUCH TURNOVER AND NET PROFIT OF RS.1,77,94,019/ - . IN VIEW OF THESE FACTS, THE ASSESSEE VIDE LETTER DATED 25/11/2016 WAS REQUIRED TO EXPLAIN AND SHOW CAUSE AS TO WHY DIFFERENCE AMOUNT OF RS.64,52,847/ - SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE DID NOT SUBMIT ANYTHING TO THE ASSESSING OFFICER , AS PER THE FINDING IN THE ASSESSING OFFICERS ORDER , AN D ACCORDINGLY ADDITION OF RS.64,52,847/ - WAS MADE. 4 . BEFORE THE LD. CIT(A), ASSESSEE MADE A DETAILED SUBMISSION WHICH, FOR THE SAKE OF READY REFERENCE, IS REPRODUCED HEREUNDER: - GROUND NO.1 RELATE TO ADDITION OF RS. 64.52,847/ - . THE ABOVE AMOUNT HAS BEEN A DDED ON ACCOUNT OF DIFFERENCE APPEARING IN THE AUDITED PROFIT & LOSS ACCOUNT AND THAT AS APPEARING IN FORM 3CD AUDIT REPORT. THE CORRECT FIGURE IS RS. 1,13,41,172/ - AS PER THE AUDITED ACCOUNTS. WHILE PREPARING FORM NO. 3CD THE FIGURE WRONGLY TYPED BY THE A UDITORS IS RS. 1,177,94,019/ - . THE ASSESSING OFFICER HAS TAKEN THE ABOVE FIGURE OF RS. 1,77,94,019/ - AS AGAINST THE FIGURE REFLECTED IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER HAS DISCUSSED THIS MATTER IN PARA 4 OF THE ASSESSMENT ORDER, WHICH IS A S UNDER: 4. AS PER PROFIT & LOSS ACCOUNT AS PER AUDITED 3CD REPORT & ASSESSEE REPLY THE GROSS TURNOVER AND NET PROFIT SOWN ON AS UNDER - TURN OVER NET PROFIT I . 3CD REPORT RS.35,21,51,232/ - RS.1,77,94,019/ - II . P&L ACCOUNT RS.35,21,51,232/ - RS. 1,13,41,173/ - III . ASSESSEE REPLY RS.35,21,51,232/ - RS.1,77,94,019/ - FROM THE ABOVE IT CAN BE SEEN THAT AS PER 3CD REPORT AS WELL AS ASSE SSEE REPLY THE NET PROFIT SHOWN AS RS.1,77,94,019/ - WHILE AS ITA NO.657/LKW/2017 PAGE 3 OF 7 PER AUDITED P & L ACCOUNT IT IS RS. 1,13,41,173/ - . THE ASSESSEE HAD F I LED ITS RETURN OF INCOME FOR RS. 1,13,41,170/ - ON 31.11.2014 AS PER NET PROFIT IN P & L ACCOUNT. IT IS NOTEWORTHY TO MENTION ED HERE THAT THE ASSESSEE HAS TAKEN TURNOVER AT ALL THE PLACES OF RS.35,21,51,232/ - AND COMPUTED NET PROFIT U/S 3CD REPORT CONSIDERING SUCH TURN OVER AT ALL THE PLACES OF RS. 35,21,51,232/ - AND COMPUTED NET PROFIT U/S 3CD REPORT CONSIDERING SUCH TURN OVER AND NET PROFIT OF RS.1,77,94,019/ - . IN VIEW OF THE ABOVE FACTS, HE ASSESSEE VIDE ITS OFFICE LETTER DATED - 25.11.2016 WAS REQUIRED TO EXPLAIN THE SAME AND TO SHOW CAUSE AS TO WHY THE DEFERENCE AMOUNT OF RS.64.52,847/ - MAY NOT BE ADDED TO ITS INCOME BY 03.12 .2016. THE ASSESSEE HAS NOT SUBMITTED ANYTHING IN THIS REGARD TILL THE DATE OF ORDER. ACCORDINGLY, AN ADDITION OF RS. 64,52,847/ - THE DIFFERENCE BETWEEN THE TWO NET PROFIT DISCLOSED BY THE ASSESSEE, IS BEING MADE TO THE TOTAL INCOME OF THE ASSESSEE. SINCE THE ASSESSEE HAS CONCEAL THE PARTICULAR OF THIS INCOME AND SUBMITTED INACCURATE PARTICULARS OF SUCH INCOME, PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IS BEING INITIATED SEPARATELY. IT WAS EXPLAINED TO THE ASSESSING OFFICER THAT IT IS A TYPOGRAPHICAL ERR OR AND HAS INADVERTENTLY BY MISTAKE WRONGLY TYPED BY THE STAFF OF THE AUDITORS. THE ASSESSING OFFICER KEPT THE EXPLANATION OF FILE AND THEREAFTER DID NOT RAISE ANY FURTHER QUERY. THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE EXPLANATION FURNISHED HAS BEEN ACCEPTED. THE ABOVE EXPLANATION WAS AGAIN PROVIDED BY E - MAIL ON 02.01.2017. THE EXTRACT OF THE EMAIL IS AS UNDER: (COPY AS DOWNLOADED IS ATTACHED.) 2. IN RESPECT OF TURN OVER & NET PROFIT ARE OF RS.35,21,51,232.00 AND RS.1,13,41,172.00, WHILE AS PER PARA 40 OF 3CA REPORT THESE ARE RS. 35,21,51,233.00 AND RS.1,77,94,019.00 FROM THE ABOVE WE WOULD LIKE TO SAY THAT WE HAVE FILED THE ITR FOR THE SAID YEAR RS.1,13,41,172.00AND THE SAME IS SHOWN IN THE PROFIT & LOSS ACCOUNT. THERE IS NO ANY DIFFERENCE IN F ILLING OF ITR. IT WAS AN INADVERTENT MISTAKE WHILE FILING THE 3CA. KINDLY CONSIDER ITA NO.657/LKW/2017 PAGE 4 OF 7 THE VALUE OF NET PROFIT FOR THE ASSESSMENT IS RS.1,13,41,172.00 AND PLEASE DO NOT DRAW ANY ADVERSE VIEW IN THIS REGARD. IN ABSENCE OF ANY FURTHER COMMUNICATION FORM THE AS SESSING OFFICER NO FURTHER REPLY COULD BE SUBMITTED. ON RECEIPT OF THE ASSESSMENT ORDER, A CLARIFICATION AS SOUGHT FOR FROM THE AUDITORS HAS BEEN RECEIVED AND THE AUDITORS VIDE THEIR LETTER DATED JANUARY 13,2017 HAVE EXPLAINED THE DISCREPANCY ARISEN IN F ORM NO. 3CD AS UNDER: IT IS SUBMITTED, THAT IN COMPLIANCE TO THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER (THE BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE ASSESSING OFFICER) AND REPLIES WERE ALSO FURNISHED PARA 2 OF THE ASSESSMENT ORDER IS AS UNDER: 2. THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF SAFETY SHOES. SAFETY UPPERS AND LASTED UPPER FROM THE FINISHED LEATHER. SHRIRAVI SHUKLA, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED FORM TIME TO TIME , FILED VARIOUS D ETAILS AS REQUIRED, PRODUCED BOOKS OF ACCOUNTS, BILLS, VOUCHERS, ETC. WHICH WERE SEEN AND PUT TO TEST CHECK AND THE CASE WAS DISCUSSED WITH HIM. A PERUSAL OF THE ENTIRE ASSESSMENT ORDER IT WOULD BE FOUND THAT THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED A ND THE FIGURE OF NET PROFIT AS DECLARED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT AND THE ITR. HAS BEEN ACCEPTED AS SUCH. THE BOOKS OF ACCOUNT HAVING BEEN ACCEPTED, IT IS ALL THE MORE CLEAR, THAT THE ADDITION OF RS. 64,52,847/ - BEING THE DIFFERENCE OF ( RS.1,77,94,019/ - & RS.1,13,41,173) IS A TYPOGRAPHICAL ERROR. THE DATA TO BE CONSIDERED FOR THE PURPOSES OF ASSESSMENT IS THE BOOKS OF ACCOUNT AND THE PROFIT AND LOSS ACCOUNT PREPARED THERE FROM. THE ACCOUNTS HAVE BEEN AUDITED BY THE SAME AUDITORS. THE AUDI T REPORT MERELY CONTAINS THE INFORMATION. IT IS SUBMITTED THAT IN ITA NO.657/LKW/2017 PAGE 5 OF 7 VIEW OF THE ABOVE SUBMISSIONS, THE ADDITION OF RS.64,52,847/ - BE DELETED. 5 . THE LD. CIT(A) , AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE , CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER AND DISMISSED ASSESSEES APPEAL. 6 . BEING FURTHER AGGRIEVED, ASSESSEE HAS CARRIED THE MATTER BEFORE US. THE LD. A.R. OF THE ASSESSEE , AT THE TIME OF HEARING , VEHEMENTLY ARGUED THAT ALL THE DOCUMENTS SHOWING THAT THERE WAS AN IN ADVERTENT MISTAKE IN 3CD AUDIT REPORT, WAS PLACED BEFORE THE DEPARTMENT, BUT THE SAME WAS NOT CONSIDERED BY THEM. THE LD. A.R. OF THE ASSESSEE PLACED BEFORE US PAPER BOOK RUNNING INTO 45 PAGES AND HE FIRSTLY DREW OUR ATTENTION TO PAGE 7 WHICH IS THE REPLY FILED BY THE ASSESSEE TO THE NOTICE DATED 25/11/2016 OF THE ASSESSING OFFICER . IN THAT LETTER , ASSESSEE HAS CATEGORICALLY STATED IN RESPECT OF TURNOVER AND NET PROFIT AS RS.35 ,21,51,232/ - AND RS.1,13,41,172/ - RESPECTIVELY WHILE AS PER PARA 40 OF 3C A REPO RT , THESE ARE RS.35,21,51,23 2 / - AND RS.1,77,94,019/ - . THE ASSESSEE HAS ALSO STATED THAT THEY FILED ITR SHOWING THE INCOME AT RS.1,13,41,172/ - . IT WAS AN INADVERTENT MISTAKE OCCURRED WHILE FILING 3CA REPORT AND THE VALUE OF NET PROFIT FOR ASSESSMENT IS RS .1,13,41,172/ - . THE LD. A.R. OF THE ASSESSEE ALSO DREW OUR ATTENTION TO PAGE NO. 36 OF THE PAPER BOOK , WHICH IS THE COPY OF AUDITED ANNUAL REPORT FOR THE ASSESSMENT YEAR 2014 - 15 , WHEREIN THE AUDITOR OF THE ASSESSEE HAS GIVEN CLARIFICATION ON THE NET PROFIT SHOWN IN PARA 40 OF 3CD REPORT FOR THE YEAR ENDING ON 31/3/2014 ( ASSESSMENT YEAR 2014 - 15). IN THE LETTER, IT IS SPECIFICALLY MENTIONED THAT NET PROFIT AS PER PROFIT & LOSS ACCOUNT IS RS.1,13,41,173/ - . THE FIGURE OF NET PROFIT MENTIONED IN PARA 40 OF 3CD REPORT DATED 28/8/2014 HAS INADVERTENTLY BEEN MENTIONED AS RS.1,77,94,019/ - . THE ABOVE CLERICAL MISTAKE HAS ITA NO.657/LKW/2017 PAGE 6 OF 7 TAKEN PLACE WHILE IMPORTING THE FIGURES FROM FIXED ASSETS SCHEDULE WHILE FINALIZING THE AUDIT OF ACCOUNTS AND W HILE IMPORTING THE DATA IN 3CD AUDI T REPORT , THE FIGURES OF DEPRECIATION DEDUCTED WAS RS.3,55,907/ - AS AGAINST RS.68,08,753/ - . HOWEVER, T HE CORRECT FIGURE IS AS UNDER: - PROFIT BEFORE DEPRECIATION RS.1,81,49,926.00 LESS DEPRECIATION RS.68,08,753.00 PROFIT BEFORE TAXES RS.1,13,41,17 3.00 7 . IN VIEW OF THE ABOVE, IT WAS STATED THAT THE NET PROFIT SPECIFIED IN COLUMN 40(C) OF 3CD AUDIT REPORT BE READ AS RS.1,13,41,173/ - INSTEAD OF RS.1,77,94,019/ - . THE LD. A.R. OF THE ASSESSEE , ON THE BASIS OF TH E AFORESAID EVIDENCE S, ARGUED THAT IT WAS A N INADVERTENT MISTAKE DONE BY THE AUDITOR OF THE ASSESSEE AND, THEREFORE, THE ADDITION MAY BE DELETED. 8 . THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDER S OF THE SUBORDINATE AUTHORITIES. 9 . WE HAVE PERUSED THE CASE RECORD, HEARD THE RIVAL CONTENTIONS, ANA LYZED FACTS & CIRCUMSTANCES OF THE CASE AND WE FIND THAT ON A PERUSAL OF THE PAPER BOOK FILED BY THE ASSESSEE, ESPECIALLY THE STATEMENT OF PROFIT & LOSS ACCOUNT, THE PROFIT BEFORE TAX IS RS.1,13,41,172.87 AND CORRESPONDINGLY THE CLARIFICATION LETTER FILED BY THE CHARTERED ACCOUNTANT OF THE ASSESSEE CLEARLY STATES THAT THE FIGURE MENTIONED IN COLUMN 40(C) OF 3CD AUDIT REPORT HAS TO BE READ AS RS.1,13,41,173/ - INSTEAD OF RS.1,77,94,019/ - , WHICH WAS INADVERTENTLY MENTIONED. WE FURTHER OBSERVE THAT EVEN BEFORE THE ASSESSING OFFICER , THE SAME WAS EXPLAINED VIDE LETTER DATED 13/1/2017 AS IS APPEARING AT PAGE 7 OF THE PAPER BOOK FILED BEFORE US IN RESPONSE TO NOTICE DATED 25/11/2016. IN THIS VIEW OF THE MATTER, W E ARE OF THE CONSIDERED VIEW THAT THERE WAS AN INAD VERTENT ITA NO.657/LKW/2017 PAGE 7 OF 7 MISTAKE COMMITTED BY THE AUDITOR OF THE ASSESSEE BY WRONGLY MENTIONING THE FIGURE IN COLUMN 40(C) OF 3CD AUDIT REPORT AS RS.1,13,41,173/ - INSTEAD OF RS.1,77,94,019/ - , THEREFORE, ANY ADDITION IN THE HANDS OF THE ASSESSEE DUE TO SOME TYPING ERROR IS NOT LEGALLY PERMISSIBLE. WITH THESE FINDINGS, WE DIRECT THE DELETION OF ADDITION MADE IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, GROUNDS OF APPEAL TAKEN BY THE ASSESSEE ARE ALLOWED. 10 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN T HE OPEN COURT ON 10 / 01 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 TH JANUARY , 201 8 JJ: 0801 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR