SHUKRA JEWELLERY LTD, MUMBAI V. ITO WD 5(3)(2), MUMBAI

ITA 6753/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92462 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 22-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Depreciation; Opportunity of being heard; Unabsorbed depreciation
• Section: 143(3); 115JB; 32; 68; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN (AM) AND AMIT SHUKLA, (JM) . . , , ./ I.T.A. NO. 6753 / MUM/20 1 3 ( / ASSESSMENT YEAR : 2007 - 08 ) SHUK R A JEWELLERY LTD, M/S SHUK R A JEWELLERY LTD, 232, PANCHRATNA, OPERA HOUSE, MUMBAI - 400004 / VS. INCOME TAX OFFICER 5(3)(2), MUMBAI . ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAACS7962C / A SSESSEE BY SHRI ANUJ KISNADWALA / RE VENUE BY SHRI LOVE KUMAR / DATE OF HEARING : 2 0 .4. 201 5 / DATE OF PRONOUNCEMENT : 1. 5 . 201 5 / O R D E R PER B.R. BASKARAN (AM) THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 11 - 09 - 201 3 FOR ASSESSMENT YEAR 2007 - 08 WHEREIN HE HAS CONFIRMED THE FOLLOWING ADDITION S MADE BY THE AO: A) C ASH DEPOSITS FOUND IN THE BANK ACCOUNT ASSESSED UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 (THE ACT); B) C OMPUTING BOOK PROFIT UNDER SECTION 115JB OF THE ACT BY ADDING CAPITAL LOSS . 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF JEWELLERY. THE ORIGINAL ASSESSMENT FOR THE YEAR UNDER CONSIDERATION W A S COMPLETED ITA NO. 6753 / MUM/201 3 2 UNDER SECTION 143(3) ON 30.10.2009 AND IT WAS SET ASIDE BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT. CONSEQUENTLY, THE AO PASSED THE IMPUGNED ASSESSMENT ORDER. 3 . THE FIRST ISSUE RELATES TO THE ADDITION MADE U/S 68 OF THE ACT TOWARDS UNEXPLAINED BANK DEPOSITS. THE AO RECEIVED AIR INFORMATION ABOUT DEPOSIT OF RS.28.53 LAKHS MADE BY THE A SSESSEE IN A BANK ACCOUNT MAINTAINED WITH O RIENTAL BANK OF COMMERCE. ON EXAMINATION OF THE DETAILS OF CASH DEPOSITS MADE, THE AO NOTICED THAT THE ASSESSEE HAS DEPOSITED AGGREGATE AMOUNT OF RS.16.60 LAKHS IN THE BANK A CCOUNT . SINCE THE ASSESSEE DID NOT PR OPERLY EXPLAIN THE SOURCE S FOR MAKING THESE DEPOSITS , THE AO ASSESSED THE ABOVE SAID AMOUNT OF RS.16.60 LAKHS AS INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT. THE LD. CIT(A), HOWEVER, REDUCED THE SAME TO RS.16 .00 LAKHS. 4 . THE LD.AR SUBMITTED T HAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNT AND THE CASH WITHDRAWALS AND DEPOSITS MADE FROM/INTO THE BANK ACCOUNT WERE DULY REFLECTED THEREIN. HE FURTHER SUBMITTED THAT THE ASSESSEE HAD HELD SUFFICIENT CASH BALANCE IN THE CASH BOOK AND THE SAME WAS DEPOSITED IN THE BANK ACCOUNT. HE FURTHER SUBMITTED THAT THE ASSESSEE DID NOT HAVE NEGATIVE BALANCE ON ANY OF THE DATE S . ACCORDINGLY, HE SUBMITTED THAT THE SOURCE FOR MAKING THE IMPUGNED BANK DEPOSITS ARE AVAILABLE IN THE CASH BOOKS ITSELF AND HENCE, T HE ADDITION MADE BY THE AO AND THAT CONFIRMED BY THE LD.CIT(A) IS LIABLE TO BE DELETED . IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO V/S SHRI BABURAO K.PISAL IN ITA NO.6091/MUM/2012 (AY:2009 - 10) DATED 22.12.2014 . ITA NO. 6753 / MUM/201 3 3 5 . ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE ASSESSEE DID NOT FURNISH RELEVANT DETAILS AND HENCE, THE LD.CIT(A) WAS CONSTRAINED TO CONFIRM THE ADDITION TO THE EXTENT OF RS.16 LAKHS. 6 . WE HEARD THE PARTIES ON THIS ISSUE AND PE RUSED THE CORD. IN THE PAPER BOOK , THE ASSESSEE HAS FURNISHED RELEVANT EXTRACT OF CASH BOOK SHOWING THE DEPOSITS AND WITHDRAWALS . ACCORDING TO THE SAID WORKINGS, THE ASSESSEE WAS HAVING A CASH BALANCE O F RS.16.45 LAKHS AS ON 1.4.2006 AND HAS CARRIED OUT AN AVERAGE CASH BALANCE OF ABOUNT RS.19 LAKHS FROM 1.4.2006 TO 21.8.2006. THE CASH BALANCE AVAILABLE AS ON 21.8.2006 WAS RS.17. 5 6 LAKHS . ACCORDING TO THE ASSESSEE , A SUM OF RS.16 LAKHS WAS DEPOSITED INTO BANK ACCOUNT MAINTAINED WITH ORIENTAL BANK OF COMM ERCE OUT OF THE CASH BALANCE AVAILABLE WITH THE ASSESSEE IN ITS CASH BOOK . THUS, ACCORDING TO THE ASSESSEE, T HE CASH BOOK MAINTAINED BY IT SUFFICIENTLY EXPLAINS THE SOURCE OF MAKING IMPUGNED DEPOSITS INTO BANK ACCOUNT. 7 . AN IDENTICAL ISSUE WAS CONSIDE RED BY THE CO - ORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF SHRI BABURAO K.PISAL (SUPRA) AND THE TRIBUNAL HAS HELD AS UNDER : 4. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE FINDING GIVEN IN THE IMPUGNED ORDERS AND THE MATERIAL PLACED ON RECORD BEFORE US, WE FIND THAT THE ASSESSEE HAS MAINTAINED REGULAR CASH BOOK AND ALL ITS ACCOUNT ARE AUDITED. THE LD.CIT(A) HAS ANALYZED EACH AND EVERY DEPOSITS MADE BY THE ASSESSEE IN THE BANK ACCOUNT FROM THE WITHDRAWALS MADE BY THE ASSESSEE FROM THE BA NK AND THE CASH AVAILABLE IN THE CASH BOOK. THE ASSESSEE HAS ALSO SHOWN SUFFICIENT CASH IN HAND IN THE BALANCE SHEET OF THE EARLIER YEARS AND ALSO THE SOURCE OF CASH AVAILABLE WITH THE ASSESSEE. THUS, THE DEPOSITS MADE BY THE ASSESSEE HAS BEEN PROPERLY EXP LAINED BY THE ASSESSEE BEFORE THE LD.CIT(A) AND WITHOUT THERE BEING ANY CONTRARY EVIDENCE OR REBUTTAL BY THE DEPARTMENT, WE DO NOT FIND ANY REASON TO DEVIATE FROM SUCH A THE FINDING RECORDED BY THE LD.CIT(A). ACCORDINGLY, THE ITA NO. 6753 / MUM/201 3 4 ORDER OF THE LD.CIT(A) IS AFFI RMED AND GROUND RAISED BY THE REVENUE IS DISMISSED. 8 . IN THE CASE ALSO, THE ASSESSEE CLAIMS TO HA VE MAINTAINED REGULAR BOOKS AND FURTHER CLAIMED THAT SUFFICIENT CASH BALANCE WAS AVA I LABLE IN THE BOOKS. HOWEVER, WE NOTICE THAT THE TAX AUTHORITIES HAVE M ADE THE IMPUGNED ADDITION WITHOUT CONSIDERING THE EXPLANATION OF THE ASSESSEE AS WELL AS THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, WHICH WE CONSIDER TO BE NOT PROPER. ACCORDINGLY , WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES CONSIDERATION DE NOVA B Y CONSIDERING THE BOOKS OF ACCOUNTS AND EXPLANATIONS OF THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO TO EXAMINE THIS ISSUE AFRESH IN THE LIGHT OF DISCUSSIONS MADE SUPRA AND TAKE A PPROPRIATE DECISION IN ACCORDANCE WITH THE LAW, AFTER PROVIDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9 . THE NEXT ISSUE RELATES TO THE ADDITION OF LOSS ARISING ON SALE OF HOUSE PROPERTY AMOUNTING TO RS.2.93 CRORES WHILE COMPUTING THE BOOK PROFIT UNDER S ECTION 115JB OF THE ACT. FROM THE ASSESSMENT ORDER, WE NOTICE THAT THE COMPUTATION OF INCOME INITIALLY FILED BY THE ASSESSEE WAS REVISED BY THE ASSESSEE ON NOTICING CERTAIN MISTAKES. SINCE COMPUTATION OF INCOME WAS REVISED, THE AO T OOK THE VIEW THAT THERE ARE DEFECTS IN THE BOOKS OF ACCOUNT AND ACCORDINGLY CAME TO THE CONCLUSION THAT THE AO WAS ENTITLED TO MAKE ADJUSTMENT S TO ARRIVE AT CORRECT BOOK PROFIT UNDER SECTION 115JB OF THE ACT. ACCORDINGLY , THE AO PROCEEDED TO COMPUTE THE BOOK PRO FIT UNDER SECTION 115JB OF THE ACT IN THE FOLLOWING MANNER: A) THE AO COMPUTED THE TOTAL INCOME UNDER THE NORMAL PRO VISIONS OF THE ACT, WHICH WAS NIL AFTER SET TING OFF OF BROUGHT FORWARD BUSINESS LOSS. (B) T HE TOTAL INCOME COMPUTED BY THE AO BEFORE SET TI NG OFF OF BROUGHT FORWARD LOSS WAS TAKEN A S BOOK PROFIT OF THE COMPANY. ITA NO. 6753 / MUM/201 3 5 AGAINST THE SAME, THE AO ALLOWED DEDUCTION OF UNABSORBED DEPRECIATION . ACCORDINGLY, HE DETERMINED THE BOOK PROFIT AT RS.98,68,237. FOR THE SAKE OF CLARITY, WE EXTRACT BELOW THE WO RKS GIVEN BY AO. INCOME FROM BUSINESS OR PROFESSION NET PROFIT AS PER PROFIT AND LOSS ACCOUNT ADD: DEPRECIATION AS COMPANY ACT LOSS ON SALE OF WALKESHWAR FLAT LESS : DEPRECIATION ALLOWABLE AT IT RS.21,962 PROFIT ON SALE OF VASAI FACTORY RS.9,49,377 ADD: UN - EXPLAINED CASH DEPOSITED IN THE BANK ACCOUNT INCOME FROM CAPITAL GAIN SHORT TERM CAPITAL GAIN ON SALE OF WALKESHWAR FLAT RS.10,47,156 VASAI FACTORY RS.9,87,853 LESS : SET - OFF BUSINESS LOSS CLAIMED ASSESSED TOTAL INCOME BOOK PROFIT OF THE COMPANY AS PER ABOVE WORKING [AS PER RECORD FOLLOWING UNABSORBED DEPRECIATION AND CARRY FORWARD BUSINESS LOSS AVAILABLE] UNABSORBED DEP RECIATION RS.2,61,93,429 UNABSORBED LOSS RS.9,17,67,983 LESS : THE UNABSORBED DEPRECIATION IS LESSER: BOOK PROFIT RS.39,92,529 RS.29,667 RS.2,93,45,467 RS.3,33,37,996 RS.971339 RS.3 , 23,66,657 RS.16,60,000 RS. 3,40,26,657 RS.20,35,009 RS.3,60,61,666 RS.3,60,61,666 RS.NIL RS.3,60,61,666 RS.2,61,93,429 RS.98,68,237 ITA NO. 6753 / MUM/201 3 6 A CAREFUL PERUSAL OF THE ABOVE SAID WORKINGS WOULD SHOW THAT THE ASSESSING OFFICER HAS PROCEEDED TO COMPUTE THE BOOK PROFIT U/S 115JB OF THE ACT AGAINST THE PROVISIONS OF THE ACT. IT IS WELL SETTLED PROPOSITION THAT THE PROVISION OF SEC. 115JB IS A COMPLETE CODE BY ITSELF AND HENCE THE BOOK PROFIT SHOULD BE COMPUTED STRICTLY IN ACCORDANCE WITH THE PROVISIONS CONTAINED THEREIN. THE NET PRO FIT DISCLOSED IN THE PROFIT AND LOSS ACCOUNT PREPARED IN ACCORDANCE WITH THE COMPANIES ACT SHOULD BE THE STARTING POINT TO WHICH THE ADDITIONS AND DEDUCTIONS PRESCRIBED IN THAT PROVISION ARE REQUIRED TO BE ADDED AND DEDUCTION. ACCORDINGLY THE BOOK PROFIT SHOULD BE ARRIVED. IN THIS CONNECTION, WE MAY GAINFULLY REFER TO THE DECISION RENDERED BY THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD (255 ITR 273). ON THE CONTRARY, WE NOTICE THAT THE ASSESSING OFFICER HAS TAKEN THE TOTAL INCOME COMPUTED B EFORE SETTING OFF OF THE BROUGHT FORWARD BUSINESS UNDER NORMAL PROVISIONS OF THE ACT, AS THE STARTING POINT, WHICH IS LEGALLY NOT CORRECT. ACCORDINGLY, THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE SAME. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT( A) ON THIS ISSUE ALSO AND DIRECT THE ASSESSING OFFICER TO COMPUTE THE BOOK PROFIT STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF SEC. 115JB OF THE ACT, AS DISCUSSED ABOVE. 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR S TATISTICAL PURPOSES . THE AB OVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 1 ST MAY , 2015 . 1ST MAY , 2015 SD SD ( / AMIT SHUKLA ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI: 1ST MAY ,2015 . . . ./ SRL , SR. PS ITA NO. 6753 / MUM/201 3 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI