M/s C K Trade Ex. Pvt. Ltd., Kolkata V. ITO, WD-9(3), KOLKATA, Kolkata

ITA 772/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6136 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 25-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Depreciation; Principle of natural justice; Additional evidence
• Section: 133(6)

Judgement Text

1 ITA NO.772/KOL/2016 C. K. TRADE EX. (P) LTD., AY: 2011-12 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) BEFORE . . , /AND , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI WASEEM AHMED, AM] I.T.A. NO. 772/KOL/2016 ASSESSMENT YEAR: 2011-12 M/S. C. K. TRADE EX PVT. LTD. (PAN: AADCC2385A) VS. INCOME-TAX OFFICER, WD-9(3), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 23.04.2018 DATE OF PRONOUNCEMENT 18.07.2018 FOR THE APPELLANT SHRI MANOJ KATARUKA, ADVOCATE FOR THE RESPONDENT SHRI S. DASGUPTA, ADDL. CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF LD. CIT(A)-16, KOLKATA DATED 31.03.2016 FOR AY 2011-12. 2. THE ASSESSEE HAS CHALLENGED THE ACTION OF LD. CI T(A) TO UPHOLD THE ADDITION OF RS.1,26,70,127/- WHICH THE ASSESSEE CLAIMED AS LOSS FROM OPERATION OF UNIT I OF M/S. NISSAN FERRO CAST LTD. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PRIV ATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF TRADING OF STEEL AND TEAK WOOD AS WELL AS NON ALLOY STEEL MELTING SCRAP. THE ASSESSEE USED TO IMPORT THE STEEL MELTING SCRAP WHI CH WAS BEING SOLD TO INDIAN HIGH SEA BUYER. 3.1 BESIDES THE ABOVE ACTIVITIES, ASSESSEE HAS TAKE N OVER A MANUFACTURING UNIT OF M/S NISSAN FERRO CAST LTD. (M/S. NFCL FOR SHORT) TO MAN UFACTURE INGOTS /BILLETS AND OTHER ALLIED ITEMS OF IRON AND STEEL AND ITS BY-PRODUCTS VIDE AG REEMENT DATED 01.08.2007. M/S. NFCL IS A PUBLIC LIMITED COMPANY HAVING REGISTERED OFFICE A T 45 MARSHALL HOUSE 4 TH FLOOR, 33/1 2 ITA NO.772/KOL/2016 C. K. TRADE EX. (P) LTD., AY: 2011-12 N.S.BOSE ROAD, KOLKATA-700001. THE M/S. NFCL IS ENG AGED IN THE SIMILAR NATURE OF BUSINESS AS OF THE ASSESSEE. M/S. NFCL WAS HAVING A FACTORY AT N.H. 3, VILL. BHADUA, P.O. MOLLERBER, DANKUNI, DIST HOOGHLY, WEST BENGAL PIN-7 11224.THE FACTORY PREMISES OF M/S. M/S. NFCL WAS DIVIDED INTO UNIT-I AND UNIT-II. THE ASSESSEE HAS TAKEN UNIT-I FOR A PERIOD OF FIVE YEARS WITH EFFECT FROM 01.04.2008 FOR ITS B USINESS ACTIVITIES AS DISCUSSED ABOVE. THE MANUFACTURING UNIT-I OF M/S. NFCL WAS WELL EQUIPPED WITH PLANT AND MACHINERY, EQUIPMENTS, FURNACE ETC. THE ASSESSEE ALSO TOOK OVE R THE PART OF THE OFFICE PREMISES OF M/S. NFCL ALONG WITH FACTORY OF UNIT-I. THE AREA OF THE FACTORY OF THE FACTORY OF THE UNIT-I AND THE OFFICE PREMISES TAKEN OVER BY THE ASSESSEE WAS DULY DEMARCATED. AS PER THE AGREEMENT, ASSESSEE WAS TO PAY MINIMUM GUARANTEE FEE OF RS.78, 00,000/-. IN ADDITION TO ABOVE, ASSESSEE ALSO UNDERTOOK THAT IT WILL BEAR ALL THE E XPENSE FOR RUNNING & MANAGING THE FACTORY UNIT-I AND OFFICE PREMISES. 3.2 THUS, ASSESSEE HAS CLAIMED LOSS OF RS.1,26,70,1 26/- INCURRED FROM THE FACTORY UNIT-I OF M/S. NFCL. THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAS SHOWN THE ABOVE LOSS FROM THE OPERATION OF UNIT-I OF M/S. NFCL BY WAY OF SINGLE E NTRY IN ITS BOOKS OF ACCOUNT. 3.3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO REQUESTED THE ASSESSEE TO FURNISH THE DETAILS OF PURCHASE-SALE AND EXPENDITURE IN ORD ER TO ASCERTAIN IMPUGNED LOSS CLAIMED BY IT. HOWEVER, ACCORDING TO AO, THE ASSESSEE FAILED T O FURNISH THE NECESSARY DETAILS AS DESIRED BY THE AO EXCEPT A PHOTO COPY OF AGREEMENT WITH M/S . NFCL. THUS, AO IN ABSENCE OF ANY DOCUMENTARY EVIDENCE OBSERVED THE FOLLOWING FACTS:- A) THE AGREEMENT IS NOT SUFFICIENT TO PROVE THAT AS SESSEE HAS CARRIED OUT ANY MANUFACTURING ACTIVITY FROM THE FACTORY PREMISES OF M/S. NFCL; B) THE ASSESSEE HAS NO EVIDENCE IN THE FORM OF PURC HASE-SALE DETAILS AND OTHER EXPENSES CLAIMED BY IT THROUGH THE UNIT- OF M/S. NF CL; C) NO BUSINESS ACTIVITY HAS BEEN CARRIED OUT BY THE ASSESSEE FROM MANUFACTURING UNIT-I OF M/S. NFCL AND THEREFORE THE IMPUGNED LOSS CLAIMED BY ASSESSEE IS AFTER- THOUGHT. 3 ITA NO.772/KOL/2016 C. K. TRADE EX. (P) LTD., AY: 2011-12 IN VIEW OF ABOVE, THE AO HELD THAT THE IMPUGNED LOS S IS BOGUS BUSINESS LOSS WHICH CANNOT BE ALLOWED UNDER THE PROVISION OF LAW. HENCE, THE L OSS CLAIMED BY ASSESSEE WAS DISALLOWED BY AO AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A), WHO DISMISSED THIS GROUND OF APPEAL OF ASSESSEE. AGGRIEVED BY TH E ORDER OF LD. CIT(A), THE ASSESSEE IS BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSES SEE DREW OUR ATTENTION THE FACT THAT THIS ISSUE AROSE IN AY 2009-10 AND THE LD. CIT(A) IN THA T ASSESSMENT YEAR WAS PLEASED TO ALLOW THIS GROUND OF APPEAL OF ASSESSEE AND SUBSEQUENTLY THE REVENUE CHALLENGED THE ORDER OF LD. CIT(A) BEFORE THIS TRIBUNAL. AND THE TRIBUNAL WAS P LEASED TO CONFIRM THE ORDER OF LD. CIT(A) IN FAVOUR OF THE ASSESSEE. WE NOTE THAT ASS ESSEE COMPANY IS LIABLE TO RUN FOR FIVE YEARS THE UNIT I OF M/S. NISSAN FERRO CAST LTD. W.E .F. 01.04.2008 VIDE MOU DATED 01.08.2007 AND THE ASSESSEE COMPANY HAD TO PAY A MI NIMUM GUARANTEE OF RS.78,00,000/- (PREVIOUS YEAR RS. 72,00,000/-) TO M/S. NISSAN FERR O CAST LTD. AND ANY PROFIT EARNED MORE THAN THE SAID MINIMUM GUARANTEE CAN BE RETAINED BY THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS INCURRED A LOSS OF RS.48,70,126/- (PREV IOUS YEAR RS.1,40,41,369/-) DURING THE PERIOD FROM 01.04.2010 TO 31.03.2011 FROM THE SAID UNIT I OF M/S. NISSAN FERRO CAST LTD. CONSEQUENTLY TOTAL LOSS OF RS.1,26,70,126/- HAS BEE N DEBITED TO THE P&L ACCOUNT. WE NOTE THAT IN SIMILAR FACTS FOR AY 2009-10, THE REVENUE A PPEAL AGAINST THE ACTION OF LD. CIT(A) ALLOWING THE CLAIM OF LOSS WAS DISMISSED BY THE TRI BUNAL BY OBSERVING AS UNDER: 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS OF THE CASE HAVE ALR EADY BEEN ELABORATED IN DETAILS IN THE FOREGOING PARAGRAPHS AND THERE IS NO DISPUTE WITH R EGARD TO THAT. THEREFORE WE ARE INCLINED NOT TO REPEAT THE SAME FOR THE SAKE OF GRAVITY. 6.1 NOW, THE ISSUE BEFORE US ARISES FOR OUR CONSIDE RATION SO AS TO WHETHER THE IMPUGNED LOSS CLAIMED BY ASSESSEE IS BOGUS. FROM THE FOREGOI NG DISCUSSION, WE FIND THAT THE ASSESSEE HAS TAKEN A FACTORY AND ITS OFFICE PREMISES OF M/S. NFCL FOR A PERIOD OF FIVE YEARS. THE AGREEMENT REMAINED IN FORCE FOR ALL THE FIVE YEARS. THE ASSESSEE HAS ACCOUNTED FOR THE NET RESULTS FROM THE OPERATION OF UNIT-I FACTORY OF M/S . NFCL. THE NET RESULT SHOWN BY M/S. NFCL FROM ITS UNIT-I FACTORY IN ITS BOOKS OF ACCOUN T IS DETAILED UNDER:- 4 ITA NO.772/KOL/2016 C. K. TRADE EX. (P) LTD., AY: 2011-12 NISSAN FERRO CAST LIMITED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2009 PARTICULARS SCHEDULE UNIT-I INCOME SALES & SERVICE 13 181981555.55 OTHER INCOME 14 41872.13 INCREASE/(DECREASE) IN STOCK 15 -1929373 .50 180094054.18 EXPENDITURE DIESEL EXPENSES 16 238810132.62 PURCHASE OF TRADING GOODS 0.00 ADMINISTRATIVE EXPENSES 17 1625119.46 DEPRECIATION 0.00 LOSS OF UNIT-I DEBITED TO LESSEE OF PLANT (60341197.90) TOTAL 1800904054.18 FROM THE ABOVE TABULATION, WE FIND THAT THE LOSS CL AIMED BY ASSESSEE FROM THE OPERATION OF THE FACTORY WERE NOT CLAIMED BY M/S. NFCL IN ITS BO OKS OF ACCOUNT RATHER IT WAS REDUCED FROM THE TOTAL EXPENSE INCURRED IN THE FACTORY UNIT -I. 6.2 IT IS IMPORTANT TO NOTE THAT PART OF THE FACTOR Y M/S. NFCL WAS TAKEN OVER BY ASSESSEE FOR A PERIOD OF FIVE YEARS AND ITS FACTORY WAS WELL EQUIPPED WITH THE PLANT AND MACHINERY, EQUIPMENTS, FURNACE AS EVIDENT FROM THE AGREEMENT. THE ASSESSEE THROUGH THIS FACTORY HAS MADE TURNOVER OF 18,90,81,555/- AS EVIDENT FROM, THE AUDITED PROFIT AND LOSS A/C OF M/S. NFCL. THE ASSESSEE INSTEAD OF BOOKING OF ALL PURCHA SE AND SALES IN ITS BOOKS OF ACCOUNT HAS RECORDED THE NET RESULT WHICH IS LOSS IN THE YEAR U NDER CONSIDERATION IN ITS BOOKS OF ACCOUNT. 6.3 WE FIND THAT THE AO HAS NOT BROUGHT ANY DEFECT IN THE SALE-PURCHASE OF M/S. NFCL. MERELY A SINGLE ENTRY HAS BEEN RECORDED BY THE ASSE SSEE IN ITS BOOKS OF ACCOUNT CANNOT BE A REASON FOR HOLDING THE LOSS AS BOGUS. IN OUR CONSID ERED VIEW, THE ASSESSING OFFICER SHOULD HAVE VERIFIED THE NATURE OF TRANSACTIONS MAINTAINED BY ASSESSEE IN ITS BOOKS OF ACCOUNT. 6.4 ORIGINALLY, THE AGREEMENT WAS MADE WITH THE M/S . NFCL BETWEEN THE PARTNERSHIP FIRM AND M/S. NFCL BUT ON A LATER DATE PARTNERSHIP FIRM WAS CONVERTED INTO A PRIVATE LIMITED COMPANY AND ACCORDINGLY THE AGREEMENT WAS M ODIFIED. THE COPY OF SAID MODIFIED AGREEMENT BETWEEN ASSESSEE AND THE C.K. EXPORT IS P LACED ON PAGES 106 TO 107 OF THE PAPER BOOK. BESIDES THE ABOVE, WE ALSO FIND THAT ASSESSEE HAS GIVEN ADVANCE TO M/S. NFCL AS EVIDENT FROM THE SCHEDULE OF THE BALANCE-SHEET WHIC H IS PLACED ON PAGES 33 OF THE PAPER BOOK. THE AMOUNT OF ADVANCE WAS GIVEN FOR THE RUNNI NG OF THE FACTORY. 6.5 WE FURTHER ALSO FIND THE TRANSACTIONS BETWEEN T HE ASSESSEE AND M/S. NFCL WERE DULY VERIFIED BY THE ASSESSING OFFICER HAVING JURISDICTI ON OVER THE ASSESSEE AS WELL AS M/S. NFCL UNDER THE PROVISION OF SECTION 133(6) OF THE ACT. C ONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES WE CONCLUDE THAT LOSS CLAIMED BY ASSE SSEE CANNOT BE TREATED AS COLORABLE DEVICE TO BOOK THE IMPUGNED LOSS. IN THIS VIEW OF T HE MATTER, WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 6. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND LD. DR WAS UNABLE TO POINT OUT ANY CHANGE IN FACTS OR LAW, WE RESPECT FULLY FOLLOWING THE ORDER OF THE TRIBUNAL 5 ITA NO.772/KOL/2016 C. K. TRADE EX. (P) LTD., AY: 2011-12 FOR AY 2009-10 ALLOW THE CLAIM OF ASSESSEE. THEREFO RE, THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 7. GROUND NOS. 4 AND 5 IS AGAINST THE ACTION OF LD . CIT(A) IN DISALLOWING RS. 10 LAKH. 8. THE LD. AR SUBMITTED THAT THE ADDITION WAS MADE BY AO WHILE ADJUDICATING THE CLAIM OF ASSESSEE THAT IT HAS INCURRED LOSS ON SALE OF LAND OF RS.2,70,475/-. ACCORDING TO AO, ON EXAMINATION OF THE CLAIM OF LOSS, HE UNDERST OOD THAT THERE WAS ACTUALLY PROFIT ON SALE OF LAND TO THE TUNE OF RS.7,29,525/- AND ASSESSEE I N ORDER TO REDUCE THE GAIN HAS SHOWN RS. 10 LAKH AS COST OF PASSAGE. THEREFORE, THE COST OF RS.10,00,000/- CLAIMED BY THE ASSESSEE COMPANY TO HAVE BEEN PAID IN RESPECT OF PASSAGE OF THE LAND WAS DISALLOWED. ON APPEAL, CIT(A) CONFIRMED IT. BEFORE US IT WAS POINTED OUT THAT THE PAYMENT IN QUESTION WAS MADE BY ACCOUNT PAYEE CHEQUE AND DULY REFLECTED IN THE B OOKS OF THE ASSESSEE. FURTHER, BEFORE US FOR THE FIRST TIME, THE COPY OF AGREEMENT FOR THE R IGHT TO USE THE PASSAGE DATED 03.09.2007 AGAINST CONSIDERATION OF RS.10 LAKH WAS FILED AS PE R RULE 18(4) OF THE ITAT RULES, 1963 FOR ADMISSION OF THIS ADDITIONAL EVIDENCE. 9. WE NOTE THAT THIS AGREEMENT WAS NOT FILED BEFORE THE AUTHORITIES BELOW. SO IN THE INTEREST OF NATURAL JUSTICE AND FAIRPLAY, WE ADMIT THIS ADDITIONAL EVIDENCE. THEREFORE, WE SET ASIDE THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) AND REMAND THIS ISSUE BACK TO THE FILE OF AO FOR FRESH ADJUDICATION. THE ADDITIONAL EVIDENCE SUBMITTED BEFORE US TO BE CONSIDERED BY THE AO WHILE ADJUDICATING THIS ISSUE DE NOVO. THEREFORE THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SES. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 18.07.20 18. SD/- SD/- (WASEEM AHMED) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : `18TH JULY, 2018 JD.(SR.P.S.) 6 ITA NO.772/KOL/2016 C. K. TRADE EX. (P) LTD., AY: 2011-12 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. C. K. TRADE EX. (P) LTD., 106, NARKALDANGA MAIN ROAD, KOLKATA-700 054. 2. 3. 4. RESPONDENT ITO, WARD-9(3), KOLKATA. CIT(A)-16, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA. 5 DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY