PUNE HEAT TREAT P. LTD, MUMBAI V. ITO WD 2(2)(4), MUMBAI

ITA 7178/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78791 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-12-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 24-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: DR K SHIVARAM; NEELAM C JADHAV
• Keywords: Depreciation
• Section: 115JB; 147

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI . . , , . . ! , ' BEFORE SHRI I P BANSAL, JUDICIAL MEMBER & SHRI N K BILLAIYA, AM ./ ITA NO.7178/MUM/2011 # $# / ASSESSMENT YEAR 2003-04 PUNE HEAT TREAT P. LTD., PIRAMAL MANSION, 2 ND FLOOR, D N ROAD, FORT, MUMBAI 400 001 PAN AAACP9811D VS. ITO WARD 2(2)(4), MUMBAI ( %& /APPELLANT) ( '(%& /RESPONDENT) APPELLANT BY : DR K SHIVARAM & MS. NEELAM C JADHAV RESPONDENT BY : SHRI M L PERUMAL ) *+! / DATE OF HEARING :28.04.2014. ,-$ ) *+! / DATE OF PRONOUNCEMENT : 30.04.2014 . . . . / O R D E R PER N K BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-5, MUMBAI, DATED 09.08.2011 PERTAINING TO A.Y. 2003-04 . THE GRIEVANCE OF THE ASSESSEE READS AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN CONFIRMING THE APPEAL FOR RE-OPENING OF THE ASSESSMENT /S. 148 WITHOUT GIVING COGENT REASON. 2. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS H AS ERRED IN CONFIRMING THE APPLICATION OF SECTION 115JB IN-SPIT E OF THE FACT THAT THE PROVISION ARE NOT APPLICABLE IN THIS CASE. ITA NO.7178/MUM/2011 2 3. THE LEARNED COMMISSIONER OF INCOME TAX APPEALS W AS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER ALLOWING HIM TO MAKE ADJUSTMENT OF RS.1,21,61,961/- U/S. 115JB I N SPITE OF THE FACT THAT NO SUCH ADJUSTMENT ARE REQUIRED TO BE MADE AS PER LAW. 2. AT THE VERY OUTSET THE COUNSEL FOR THE ASSESSEE STATED THAT HE IS NOT PRESSING GROUND NO.1. GROUND NO.1 IS ACCORDINGLY, DISMISSED . 3. THE GRIEVANCE VIDE GROUND NOS. 2 & 3 RELATES TO THE DETERMINATION OF BOOK PROFIT FOR THE PURPOSES OF SECTION 115JB OF THE ACT . IT IS THE CLAIM OF THE ASSESSEE THAT NO ADJUSTMENTS ARE REQUIRED TO BE MADE AS PER LAW. 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT FOR TH E YEAR UNDER CONSIDERATION THE RETURN OF INCOME WAS FILED ON 28.10.2003 DECLARING TOTAL INCOME AT NIL, WHICH WAS ACCEPTED U/S. 143(1)(A) OF THE ACT VIDE INTIMATION DATED 24.12.2003. SUBSEQUENTLY, ON PERUSAL OF THE RECORD THE AO NOTICED THAT THE AS SESSEE HAS CLAIMED HIGHER DEPRECIATION @3.34% AS AGAINST 1.63% PRESCRIBED IN SCHEDULE XIV OF THE COMPANIES ACT, 1956. ACCORDING TO THE AO AS THE BO OK PROFIT TAXABLE U/S. 115JB HAD ESCAPED ASSESSMENT, ASSESSMENT WAS RE-OPENED U/ S. 147 OF THE ACT AND NOTICE U/S. 148 WAS ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THIS, THE ASSESSEE STATED THAT RETURN FILED ON 28.10.2003 MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE NOTICE U/S. 148. 5. THEREAFTER, THE ASSESSEE WAS ASKED TO EXPLAIN TH E CLAIM OF DEPRECIATION VIZ-A- VIZ PROVISIONS OF SECTION 115JB OF THE ACT. ACCORD ING TO THE AO THE ASSESSEE DID NOT RESPOND TO THE QUERIES RAISED DURING THE PROCEEDING S. THE AO WAS OF THE FIRM BELIEF THAT AS PER THE COMPANIES ACT NORMAL DEPRECIATION C ALCULATED ON THE BASIS OF THE WRITTEN DOWN VALUE METHOD SHOULD BE CHARGED TO THE PROFIT & LOSS ACCOUNT. ACCORDING TO THE AO THE CALCULATION OF THE DEPRECIA TION AND CHARGING THE SAME TO THE PROFIT & LOSS ACCOUNT IN THE CASE OF THE ASSESS EE CANNOT BE SAID TO BE IN CONSONANCE WITH THE PROVISIONS OF SECTION PART II & III OF SCHEDULE VI OF THE COMPANIES ACT, 1956. THE AO PROCEEDED TO COMPUTE T HE BOOK PROFIT IN THE LIGHT OF THE PROVISIONS OF SECTION 115JB AND COMPUTED THE AD JUSTMENT TO BE MADE U/S. 115JB AT RS.1,21,61,961/- THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. ITA NO.7178/MUM/2011 3 6. BEFORE US THE LEARNED SENIOR COUNSEL FOR THE ASS ESSEE DREW OUR ATTENTION TO THE AUDITED STATEMENT OF ACCOUNTS, IN PARTICULAR , SCHEDULE OF FIXED ASSETS AND DEPRECIATION. IT IS THE SAY OF THE COUNSEL THAT DU RING THE YEAR UNDER CONSIDERATION THE ASSESSEE CHANGED THE METHOD OF CALCULATING DEPR ECIATION FROM THE STRAIGHT LINE METHOD TO THE WRITTEN DOWN VALUE METHOD. THE COUNS EL FURTHER STATED THAT BOTH THE METHODS ARE ACCEPTABLE UNDER THE COMPANIES ACT. TH E COUNSEL CONCLUDED BY SAYING THAT THE AO DOESNT HAVE ANY POWER TO MAKE A DJUSTMENT ACCEPT PROVIDED IN SECTION 115JB ITSELF. IN SUPPORT OF HIS SUBMISSION S THE COUNSEL RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF KINETIC MOTORS CO. LTD. 262 ITR 330. RELIANCE WAS ALSO PLACED IN THE CASE OF GARDEN SILK MILLS LTD. 35 CCH 135- AHMEDABAD TRIBUNAL. PER CONTRA, DR STRONGLY S UPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES. WE HAVE ALSO CONSIDERED THE DECISIONS RELIED UPON BY THE COUNSEL . IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS CHANGED THE METHOD OF DEPRECIATION FRO M STRAIGHT LINE METHOD TO WRITTEN DOWN VALUE METHOD. DEPRECATION HAS BEEN CA LCULATED IN ACCORDANCE WITH THE NEW METHOD FROM THE DATE OF ASSETS COMING INTO USE. THEREFORE DEPRECIATION FOR THE CURRENT YEAR WAS HIGHER AND PROFIT WAS LOWE R BY THE SAME AMOUNT. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KI NETIC MOTORS CO. LTD. (SUPRA) HAS HELD THAT IT WAS NOT IN DISPUTE THAT UNDER THE COMPANIES ACT BOTH THE STRAIGHT LINE METHOD AND WRITTEN DOWN VALUE METHOD ARE RECOGNIZED . THEREFORE, ONCE THE AMOUNT OF DEPRECIATION ACTUALLY DEBITED TO THE PROF IT AND LOSS ACCOUNT WAS CERTIFIED BY THE AUDITOR, IT WAS NOT PERMISSIBLE FO R THE AO TO MAKE BOOK ADJUSTMENTS. THE HONBLE JURISDICTIONAL HIGH COURT THUS FOLLOWED THE RATIO OF THE HONBLE SUPREME COURT IN THE CASE OF APOLLO TYRES LTD. 255 ITR 273. A PERUSAL OF THE AUDITED STATEMENT OF ACCOUNT BROUGHT BEFORE US SHOW THAT DE PRECIATION ACTUALLY DEBITED TO THE PROFIT AND LOSS ACCOUNT WAS CERTIFIED BY THE AU DITORS AND, THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT AND THE HONBLE SUPREME COURT ITA NO.7178/MUM/2011 4 (SUPRA), IT IS NOT PERMISSIBLE FOR THE AO TO MAKE B OOK ADJUSTMENTS. WE ACCORDINGLY DIRECT THE AO TO DELETE THE ADDITION ON ACCOUNT OF ADJUSTMENTS MADE U/S. 115JB AMOUNTING TO RS.1,21,61,961/-. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF APRIL, 2014. SD/- SD/- (I P BANSAL) (N K BIL LAIYA) /JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER MUMBAI; / DATED : 30 TH APRIL, 2014. SA . . . . ) )) ) '* '* '* '* 0$* 0$* 0$* 0$* / COPY OF THE ORDER FORWARDED TO : 1. %& /THE APPELLANTS. 2. '(%& / THE RESPONDENT. 3. 2 ( ) / THE CIT(A), MUMBAI. 4. 2 / CIT 5. 56 '* , , / DR, C BENCH, ITAT, MUMBAI . / BY ORDER, (* '* //TRUE COPY// /8 9 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI