AVI Polymers Limited, Ahmedabad V. The CIT-1, Ahmedabad-1, Ahmedabad

ITA 775/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9732 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: PF JAIN
• Keywords: Depreciation; Tax effect
• Section: 143(3); 263

Judgement Text

IT A NO. 775 / AHD/ 201 2 ASSESSMENT YEAR: 200 7 - 08 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I TA NO. 775 /AHD/201 2 A SSESSMENT Y EAR : 20 0 7 - 08 AVI POLYMERS LTD., .APPELLANT 103, NALANDA COMPLE X , PREMCHAND NAGAR ROAD , VASTRAPUR, AHMEDABAD . [ P AN: AABCA 2775 L ] VS. COMMISSIONER OF INCOME TAX - 1, . RESPONDENT AHMED A BAD. APPEARANCES BY: P.F. JAIN , FOR THE A PPELLANT SANJAY AGRAWAL , FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING: OCTOBER 30 TH , 201 5 DATE O F PRONOUNCING THE ORDER : JANUARY 27 TH , 201 6 O R D E R PER PRAMOD KUMAR , AM : 1. BY WAY OF THIS APPEAL, THE A SSESS EE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 9 TH JANUARY , 201 2 , PASSED BY THE LD. CIT UNDER SECTION 263 READ WITH SECTION 143(3) OF THE INCOME TAX ACT , 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 2007 - 08. 2. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS : - 1. THE LEARNED CIT AHMEDABAD - I, AHMEDABAD HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN ASSUMING JURI SDICTION U/S. 263 AND RESORTING TO PROVISIONS OF SECTION 263 AGAINST THE ORDER PASSED AFTER SCRUTINY U/S. 143(3) ON 29/12/2009 IN THE CASE OF APPELLANT INASMUCH AS T HAT THE ORDER PASSED U/S. 143(3) IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF RE VENUE AND THE CONDITIONS OF INVOKING SECTION 263 ARE NOT FULFILLED. IT A NO. 775 / AHD/ 201 2 ASSESSMENT YEAR: 200 7 - 08 PAGE 2 OF 6 2. THE LEARNED CIT AHMEDABAD - I, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN CANCELLING THE SCRUTINY ORDER U/S.143(3) OF THE I.T. ACT AND DIRECTING TO MAKE A FRESH ASSESSMENT WHICH IS IN VAR IANCE TO NOTICE ISSUED U/S.263 . 3. THE ORDER PASSED U/S. 263 IS BAD IN LAW AND ON FACT S AND WITHOUT JURISDICTION IN AS MUCH AS THAT WHILE PASSING ASSESSMENT ORDER THE TAX AUDIT REPORT AND DETERMINATION OF DEPRECIATION HAS ALREADY BEEN EXAMINED BY THE A SSE SSING OFFICER. 4. ON THE FACTS, THE ORDER U/S. 263 BEING BAD IN LAW AND WITHOUT JURISDICTION DESERVES TO BE QUASHED. 5. THE LEARNED CIT HAS ERRED IN LAW AND ON FACTS IN REJECTING THE SUBMISSION OF APPELLANT TO JU ST IFY THE ACTION U/S. 263 OF THE I.T. AC T . 3. BRIEFLY STATED , THE RELEVANT MARTIAL FACTS ARE LIKE THIS. THE ASSESSMENT UND E R SECTION 143(3) DETERMINING TOTAL LOSS OF RS.1,95,79,345/ - WAS FINALISED ON 29.12.2009 . SUBSEQUENTLY, HOWEVER, THE LEARNED CIT WAS OF THE VIEW THAT THE ORDER SO P A SSE D BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR A S IT IS PREJUDICIAL TO THE INTEREST OF R EVENUE ON THE FOLLOWING GROUNDS : - (I) AS PER ANNEXURE F TO FORM 3 CD - ACCOUNTING RATIOS/FINISHED GOODS PRODUCED - THERE WAS NO EXPENDITURE ON ELECTRICITY, MACHINERY R EPAIRS AND LABOUR CHAR G ES I.E. ASSETS WERE NOT PUT T O USE. (II) UNDER SECTION 32(1) OF I.T. ACT, 1961 , DEDUCTION ON DEPRECIATION IS ALLOWABLE IN RESPECT OF ASSETS USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. (III) HOWEVER, IT WAS SEEN THAT THE ASSESSE E HAS CLAIMED AND ALLOWED DEPRECIATION OF RS.36,70,650/ - . AS THE ASSETS WERE NOT PUT TO USE, DEPRECIATION IS NOT ALLOWABLE UN D ER THE SECTION QUOTED ABOVE. IN CORRECT ALLOWANCE OF DEPRECIATION HAD RESULTED IN UNDER ASSESSMENT OF INCOME TO THAT EXTENT. TH E TAX EFFECT WORKS OUT TO RS.12,35,549(P). IT A NO. 775 / AHD/ 201 2 ASSESSMENT YEAR: 200 7 - 08 PAGE 3 OF 6 4. IT WAS IN THIS BACKDROP R E VISION PROCEEDING S UNDER SECTION 263 OF THE ACT WERE INITIATED IN THE PRESENT CASE. IT WAS EXPLAINED BY THE ASSESSEE THAT UNDER SECTION 32(1) FIFTH PROVISO E XPLANATION - 5 IT IS PR OVIDED THAT FOR THE REMOVAL OF DOUBTS , IT IS HERBY DECLARED THAT PROVISIONS OF SUB - SECTION SHALL APP LY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCOME . I T WAS ALSO EXPLAINED THAT IN TERMS OF THE PROVISIONS OF S E CT I ON 3 2(1) THE DEPRECIATION IS TO BE ALLOWED ON ANY BLOCK OF ASSETS, SUCH PERCENTAGE ON THE WRITTEN DOWN VALUE THEREO F AS M A Y BE PRESCRIBED. THE ASSESSE E S CONTENTION WAS THAT FOLLOWING THE ABOVE PROVISION S THE DEPRECIATION WAS CORRE CTLY CLAIMED A ND ACCORDINGLY ALLOWED BY THE ASSESSING OFFICER IN THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS . IT WAS A LSO POINTED OUT THAT T HE BLOCK OF FIXED ASSET S WAS IN EXISTENCE IN PHYSIC A L FORM BY WAY OF MOTOR FOR PUMP AND IT HAD WRITTEN DOWN VALUE AS WELL. THE ASSESSEE T HUS CONTENDED THAT GIVEN ABOVE FACTS , THE O R D E R PAS S ED BY THE ASSESSING OFFICER C A NNOT BE S A ID TO BE ERRONEOUS. THE ASSESS E E FUR T HER EXPLAINED THAT THE ELECTRICITY EXPENSES OF RS.21,309/ - WERE INCURRED BY THE DIRECTOR OF THE COMPA NY BUT IN VIEW OF WEAK FINANCIAL PO S ITION THESE EXPENSES WERE BORNE BY THE DIRECTOR HIMSELF RATHER THAN CLAIMING THE REIMBURSEMENT FROM THE COMPANY. THE ASSESSEE ALSO REFERRED TO AND SIGHTED COPIES OF STATEMENT, BILLS, LEDGER ACCOUNT ETC. I T WAS IN T HE LIGHT OF THIS AND O THER SUBMISSIONS THAT THE ASSESSEE OBJECTED TO THE A SSESSMENT O RDER BEING SUBJECTED TO REVISION PROCEEDINGS. THE S E SUBMISSIONS , HOWEVER , DID NOT S A TISFY THE L EARNED CIT. HE REJECTED THE SAME AND PROCEEDED TO SET ASIDE THE ASSESSMENT ORD ER AN D DIRECTED FRESH ASSESSMENT BY , INTER ALIA , OBSERVING AS FOLLOWS : - 10. I HAVE CAREFULLY GONE THROUGH THE AFORESAID WRITTEN SUBMISSION OF THE ASSESS E E AND I DO NOT FIND ANY MERIT I N THEM FOR THE FOLLOWING REASONS : - (1) AT THE OUTSET, IT WOULD BE PERTINE NT TO MENTION HERE THAT THE AFORESAID DETAILS FILED BY THE LEARNED COUNSEL OF THE ASSESSEE BEFORE THE UNDERSIGNED SHOULD HAVE IT A NO. 775 / AHD/ 201 2 ASSESSMENT YEAR: 200 7 - 08 PAGE 4 OF 6 BEEN FILED ALONG WITH THE RETURN OF INCOME OR ALONG WITH THE SUBMISSIONS MADE AT THE TIME OF ASSESSMENT BEFORE THE A.O. (2) THERE IS NO MERIT IN THE SUBMISSIONS GIVEN BY THE LEARNED COUNSEL. THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY HIM ARE TOTALLY DISTINGUISHABLE FROM THE FACTS OF THE CASE UNDER CONSIDERATION. THE LEARNED COUNSEL HAS SIMPLY CULLED THE RATIO OF THE DECISIONS FROM DIFFERENT JUDICIAL DECISION. IT WOULD BE WORTHWHILE TO REFER TO ONE OF THE LOCUS CLASSIUS ON THE SUBJECT, LEARNING THE LAW ( ELEVENTH EDITION, STEVENS AND SONS, LONDON, 1982 ) BY PROF. GLANVILLE WILLIAMS AT PAGE 67 THAT PART OF A CASE THAT IS SAID TO POSS ESS AUTHORITY IS THE RATIO DECIDENDI, THAT IS TO SAY, THE RULE OF LAW UPON WHICH THE DECISION IS FOUNDED . THE RATIO DECIDENDI OF A CASE CAN BE DEFINED AS THE MATERIAL FACTS OF THE CASE PLUS DECISION THEREON. THIS VIEW HAS BEEN APPROVED BY THE CONS TITUTION BENCH OF THE HON BLE SUPREME COURT IN KRISHNAKUMAR V. UNION OF INDIA, (199 - ) 4 SCC 207 (SC) AND ALSO IN CI T VS. SUM ENGINEERING CO. PVT. LTD . (1992) 198 ITR 272 (SC) (PER J.S. ANAND J ). (3) ON THE OTHER HAND, IT IS QUITE EVIDENT THAT UNDER SECTIO N 32(1) OF THE I.T. ACT, 1961 DEDUCTION ON DEPRECIATION IS ALLOWABLE IN RESPECT OF ASSETS USED OR THE PURPOSE OF BUSINESS OR PROFESSION. H OWEVER, IT WAS SEEN THAT THE ASSESSEE HAS CLAIMED AND ALLOWED DEPRECIATION OF RS.36,70, 650/ - . AS THE ASSE T S WERE NOT PUT T O USE, DEPRECIATION IS N OT ALLOWABLE UNDER THE SECTION QUOTED ABOVE. IN CORRECT ALLOWANCE OF DEPRECIATION HAD RESULTED UNDER ASSESSMENT OF INCOME TO THE EXTENT. (4) THE PROCEEDINGS U/S . 143(3) OF THE I . T . ACT 1961 ARE TOTALLY DISTINCT FROM THE PROC EEDINGS U/S . 263 OF THE IT ACT 1961 BEFORE THE UNDERSIGNED . IT IS NO T T HE DUTY OF THE CI T U/S . 263 TO FALL IN THE MISSING G APS OF THE ERRONEOUS ASSESSMENT ORDER PASSED BY THE A.O. (5) IT WOULD ALSO BE RELEVANT TO MENTION HERE THAT THE AO HAS NOT MADE ANY ENQUIRIES BEFORE PASSING THE ASSESSMENT ORDER, THE ASSESSMENT CAN BE TERMED AS ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF REVENUE . THIS VIEW GET SUPPORT FROM THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF TOYOTO MOTOR CORPORATION VS. CIT 306 ITR 5 2 (SC) WHICH HAS BEEN REFERRED TO BY ITAT, AHMEDABAD B BENCH IN THE CASES OF KIRAN M. SHELAT IN APPEAL ITA NO.965/AHD/2006. 11. FROM THE AFORESAID F ACTS AND CIRCUMSTANCES , JUDICIAL DECISIONS, REASONING, A FORTIORI, IT IS QUITE EVIDENT THAT THE AO S ASSE SSMENT UNDER SECTION 143(3) OF THE I.T. ACT, 1961 DATED 29.12.2009 ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, THE ASSESSMENT ORDER U/S. 143(3) OF I .T ACT, 1961 DATED 29.12.2009 IS CANCELLED WITH A DIRECTION TO MAKE A FRESH ASSESSME NT BY CORRECTLY V ERIFYING THE ISSUES IN QUES TI ON AND ALSO BY A FF ORDING REASONABLE OPPORTUNITY T O THE ASSESSEE. 5. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. IT A NO. 775 / AHD/ 201 2 ASSESSMENT YEAR: 200 7 - 08 PAGE 5 OF 6 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSID ERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. W E FIND THAT IT IS UNDISPUTED POSITION THAT THE ASSESSING OFFICER DID NOT EXAMINE THE MATTER IN SUFFICIENT DETAILS EVEN THOUGH THE FACTS , AS CLEARLY DISCERNABLE FROM THE MATERIAL ON REC ORD, DID IN FACT WARRANT AND JUSTIFY FURTHER INQUIRY IN THE MATTER. AS NOTED, AS TO WHETHER SUCH AN INERTIA OF THE ASSESSING OFFICER CAN RESULT IN AN ORDER BEING TREATED AS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE, WE FIND GUIDANCE FROM THE HON BLE DELHI HIGH COURT IN THE CASE OF G EE VEE ENTERPRISE S VS. ADDL. CIT, 99 ITR 375 (DELHI) WHEREIN THEIR LORDSHIPS HAVE OBSERVED, INTER ALIA , AS FOLLOWS : - THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE C ASE THE INCOME TAX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSED IN HIS RETURN. (14) THE REASON IS OBVIOUS. THE POSITION AND FUNCTION OF THE INCOME TAX OFFICER IS VERY DIFFERENT FROM THAT OF A CIVIL COURT . THE STATEMENTS A MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY BE ACCEPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL . IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFO RE IT. THE INCOME TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CAL L S FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FA C TS STATED IN TH E RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS' IN SECTION 263 EMERGES OUT OF THIS CONTRACT. IT IS BECAUSE IT IS I NCUMBENT ON THE INCOME TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIR C U MSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MA DE AND NOT BECAUSE THERE IS ANY THING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. 7. IN THIS VIEW OF THE MATTER AND IN THE LIGHT OF UNDISPUTED POSITION, THE CLAIM FOR DEPRECIATION WAS NOT SUBJECTED TO PROPER VERIFICATION, WE ARE OF THE CONSIDERED VIEW THAT THE L EARNE D CIT WAS INDEED JUSTIFIED IN SUBJECTING THE ASSESSMENT ORDER DATED 29.12.2009 TO REVISION PROCEEDINGS. IN ANY EVENT , AS FAR AS THE CONTENTIONS OF THE ASSESSEE ON MERITS IT A NO. 775 / AHD/ 201 2 ASSESSMENT YEAR: 200 7 - 08 PAGE 6 OF 6 AR E CONCERNED , IT IS NOT EVEN IN DISPUTE THAT THE ASSESSING OFFICER H A D NO OCCASION TO EXAMINE THE SAME . THE LEARNED CIT H A S ONLY REMITTED THE MATTER TO THE FILE OF A SSESSING OFFICER . THE ASSESSEE I S NOT DEBARRED FROM REFERRING AND RELYING UPON SUCH EVIDENCES WHICH SUPPORT HIS CASE IN THE COURSE OF PROCEEDINGS BEFORE THE ASSESSING OFFICER. HE HAS TO DECIDE ON THESE EVIDENCES ON MERITS AND IN ACCORDANCE WITH L A W. IN THE LIGHT OF THESE DIS CUSSIONS AND BEARING IN MIND ENTIRETY OF THE CASE , WE ARE NOT INCLINED TO INTERFERE IN THE MATTER. ORDER OF THE L EARNED CIT IS CONFIRMED. 8. IN THE RESULT, APPEAL IS DISMISSED. P RONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JANUARY, 2016. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 27 TH DAY OF JANUARY , 201 6 . PBN/ * COPIES TO : (1) THE APPE LLANT ( 2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD