M/s N.L.Engineers Pvt Ltd, Mohali V. Pr.Commissioner Of Income Tax, Chandigarh

ITA 781/CHANDI/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1768 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 29-03-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGJIVAN KUMAR GARG
• Keywords: Assessment record
• Section: 263; 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH !, ' # , . %.. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR , A M ./ ITA NO. 781/CHD/2017 / ASSESSMENT YEAR : 2012-13 SHRI. N.L. ENGINEERS PVT. LTD. C-114, INDUSTRIAL AREA PHASE-VII MOHALI PR. CIT - 2 CHANDIGARH ./ PAN NO: AAACN5006G / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI. PARIKSHIT AGGARWAL # ! ' / REVENUE BY : SHRI. JAGJIVAN KUMAR GARG $ % ! &/ DATE OF HEARING : 30/08/2018 '()* ! &/ DATE OF PRONOUNCEMENT : 16/11/2018 ')/ ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. PCIT-2, CHANDIGARH DT. 07/03/2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SUB-STATION STRUCTURE TRANSMISSION TOWERS, MICROWAVE TOWERS, CABLE TRAY AND TRADING OF IRON & STEEL. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN INCOME UNDER THE HEADS PROFIT A ND GAINS FROM BUSINESS OR PROFESSION. 3. THE FIRST GROUND RELATES TO ADDITION OF LAND AND FIXED ASSETS OF RS. 10.01 CRORES WHICH THE ASSESSEE CLAIMS AS NOT A NEW ITEM AND INFACT PAID IN THE PRECEDING YEARS AND ONLY DUE TO REGISTRATION OF SAL E DEED DURING THE YEAR IN QUESTION THE ITEM WAS CLASSIFIED AS FIXED ASSETS ON TRANSFERRING FROM THE HEAD OF ADVANCE. 2 4. THE LD. PR. CIT VIDE ORDER PASSED UNDER SECTION 263 OF INCOME TAX ACT,1961 DIRECTED THAT THE ASSESSMENT ORDER UNDER S ECTION 143(3) DT. 15/11/2014 FOR THE A.Y. 2012-13 BE CANCELLED OWING TO NON ENQU IRY OF REGISTRATION OF THE SALE DEED PERTAINING TO THE FIXED ASSETS BROUGHT IN TO THE BOOKS DURING THE YEAR IN QUESTION. THE COMPLETE PART OF THE ORDER UNDER SECT ION 263 RELEVANT TO THE ISSUE IS AS UNDER: 3.1.1 IN ITS REPLY, THE ASSESSEE SUBMITTED THAT R EAL POSSESSION OF THE LAND WAS TAKEN DURING F.Y. 2008-09 BUT THE TITLE DEED WAS RE GISTERED DURING F.Y. 2011-12 AND THE SAME WAS CLASSIFIED AS FIXED ASSET. A COPY OF T HE DEED HAS ALSO BEEN SUBMITTED NOW BY THE ASSESSEE DURING THE COURSE OF PROCEEDING UNDER SECTION 263 OF THE ACT. IT IS THUS EVIDENT THAT THE AO DID NOT OBTAIN THE COPY OF SALE DEED FROM THE ASSESSEE FOR VERIFICATION / EXAMINATION RE GARDING SOURCE OF INVESTMENT, BUSINESS NEXUS ETC. DURING THE COURSE OF ASSESSMENT PROCEEDING. THUS, THE ISSUE REMAINS UNEXAMINED AND UNVERIFIED ON THE PART OF TH E AO. 5. DURING THE PROCEEDINGS UNDER SECTION 263 THE ASS ESSEE SUBMITTED THE COMPLETE DETAILS PERTAINING TO ACQUISITION OF THE L AND WHICH ARE AS UNDER: THIS IS W.R.T. LETTER NO. PCIT-2/CHD/JUDL./263/39/2 016-17/7145 DATED 16/02/2017 FROM OFFICE OF YOUR GOOD SELF. IN THIS REGARDS WE W ISH TO SUBMIT AS UNDER:- 1. AS FAR AS THE ADDITION IN LAND AND BUILDING DURING A.Y. 2012-13 CONCERNED WE WISH TO SUBMIT THAT THE LAND WAS MAINLY ACQUIRED DURING F.Y. 2007-08 AND 2008-09 BY GIVING PAYMENT TO THE PARTY. THE REAL PO SSESSION OF THE LAND WAS TAKEN DURING F.Y. 2008-09. HOWEVER, THE COMPANY FROM WHIC H THE LAND WAS PURCHASED WAS IN THE PROCESS OF LIQUIDATION WITH DELHI COURT. DUE TO WHICH THERE WERE CERTAIN LEGAL ISSUES IN TRANSFERRING THE TITLE OF T HE LAND TO N.L. ENGINEERS PVT. LTD. SINCE THERE WAS NO LEGAL TITLE WITH N.L. ENGINEERS PVT. LTD. WE HAVE BEEN SHOWING THE PAYMENTS MADE AS ADVANCE. DURING F.Y. 2011-12 WHEN THE TITLE DEED WAS REGISTE RED IN THE COMPANYS NAME THE SAME WAS CLASSIFIED AS FIXED ASSET AND WE MADE A PAYMENT OF RS. 2,06,38,500/- ONLY FOR WHICH THE COMPANY HAD ENOUGH FUNDS. THE LAND WAS PURCHASED FOR BUSINESS USE AND HAS BEE N PUT TO USE SINCE THE DATE OF PURCHASE. THE RAW MATERIAL AND OTHER STORES ARE STORED IN SUCH PLACES. THE PLACE HAS ALSO BEEN REGISTERED UNDER VAT AS A PLACE OF BUSINESS. 6. BEFORE US, THE LD. AR REITERATED THE SUBMISSIONS TAKEN BEFORE THE LD. PCIT WHILE THE LD. DR RELIED ON THE ORDER OF THE LD. PCI T. 7. WE HAVE HEARD LD. REPRESENTATIVE OF BOTH THE PAR TIES. 8. FROM THE ORDER OF THE PR. CIT AS WELL AS THE SUB MISSIONS OF THE ASSESSEE BEFORE THE PR.CIT THE FOLLOWING FACTS EMERGED. 3 I. THE PAYMENT FOR THE LAND WAS MADE DURING THE F.YS. 2007-08 AND 2008-09. II. THE PAYMENTS MADE WERE DULY REFLECTED UNDER THE HEA D ADVANCES FOR THE A.Y. 2008-09 ONWARDS. III. THE POSSESSION WAS TAKEN DURING THE CURRENT YEAR. IV. THE REGISTRATION EXPENSES ONLY WERE CLAIMED DURING THE CURRENT YEAR. V. IT WAS BROUGHT BEFORE THE PCIT ABOUT THE PROCESS OF LIQUIDATION BEFORE THE HONBLE DELHI HIGH COURT AND THE REASONS FOR NON REGISTRATION. VI. THE PR. CIT HELD THAT THE ASSESSING OFFICER DID NOT OBTAIN THE COPY OF THE SALE DEED AND HENCE THE ASSESSMENT WAS DIRECTED TO BE ANNULLED. VII. THE PR. CIT HELD THAT ASSESSING OFFICER DID NOT ENQ UIRE THE BUSINESS NATURE AND THE SOURCE OF INVESTMENT. FROM THE ABOVE WE OBSERVE THAT WHILE PASSING THE OR DER UNDER SECTION 263 THE LD. PR. CIT IS QUITE AWARE OF THE FACT THAT THE AMOUNTS WERE RECEIVED IN THE EARLIER YEARS AND DULY REFLECTED IN THE BALANCE SHE ET OVER THE YEARS. AFTER OBTAINING THE COPY OF THE REGISTRATION DEED THE PCI T WOULD BE IN A WELL DEFINED POSITION TO KNOW THAT NO ESCAPEMENT OF REVENUE OR U NDER ASSESSMENT OR ANY PREJUDICE OR ERROR COULD BE ATTRIBUTABLE TO THE YEA R IN QUESTION. HAVING EXAMINED THE FACTS THE PCIT COULD HAVE WELL DROPPED THE PROCEEDINGS AT THAT JUNCTURE. NO PURPOSE WOULD BE SERVED BY NULLIFYING THE ASSESSMENT OF THE CURRENT YEAR EVEN THOUGH ON RECORD IT IS PROVED THAT THE AM OUNT IS RECEIVED IN THE EARLIER YEARS. EVEN IF IT IS PROVED TO BE BOGUS OR OTHERWISE THE ADDITION WOULD BE CALLED ONLY IN THE EARLIER YEARS. NO ACTION WOULD B E FEASIBLE IN THE CURRENT YEAR. HENCE KEEPING IN VIEW THE ENTIRE FACTS AND CIRCUMST ANCES OF THE CASE, WE ARE OF THE OPINION THAT THE ACTION OF THE LD. PCIT ANNU LLING THE ASSESSMENT CANNOT BE UPHELD. 9. THE SECOND ISSUE RELATES TO ANNULLING THE ASSESS MENT ON THE GROUNDS THAT THE A.O. WAS NOT EXAMINED THE REASONS BEHIND FALL I N THE GROSS PROFIT AND NET PROFIT OF THE ASSESSEE. THE COMPLETE PART OF THE OR DER UNDER SECTION 263 RELEVANT TO THE ISSUE IS AS UNDER: 4 3.2 REGARDING DECREASE IN THE GROSS PROFIT AND NE T PROFIT THOUGH INCREASE IN GROSS TURNOVER AS COMPARED TO THE PREVIOUS YEAR: 3.2.1 IN ITS REPLY, THE ASSESSEE SUBMITTED THAT INC REASE IN GROSS TURNOVER IS DUE TO INCLUSION OF EXCISE DUTY PAID AMOUNTING TO RS. 3,38 ,68,746/-. FURTHER, FOR INCREASE IN SALE THERE HAS BEEN CORRESPONDING INCREASE IN RELEV ANT COST. THE ASSESSEE COMPUTED GP RATE ON NET SALE AS 12.70% AND THAT OF ON GROSS SALE AS 11.55%. THE ASSESSEE ALSO SUBMITTED THAT DURING F.Y. 2011-12 TH ERE WAS NOT MUCH MOVEMENT IN WIP AS COMPARED TO FY 2010-11. IN REPLY TO CAUSE OF DECREASE IN NET PROFIT THE ASSESSEE SUBMITTED THAT IT WAS MAINLY ON ACCOUNT OF PROVISION OF DEFERRED TAX LIABILITY AMOUNTING TO RS. 19,43,711/- WHICH WAS MA DE FOR THE FIRST TIME OTHERWISE THE NET PROFIT WOULD BE 29,27,087/-. 3.2.2 THE FACTS AND FIGURES SUBMITTED BY THE ASSESS EE IN RESPECT OF REASON BEHIND DECREASE IN GROSS PROFIT AND NET PROFIT HAVE BEEN C ONSIDERED. HOWEVER, ON PERUSAL OF ASSESSMENT RECORD, IT IS FOUND THAT THE AO HAS NEITHER RAISED THESE ISSUES NOR EXAMINED THE JUSTIFICATION NOW BEING OFF ERED BY THE ASSESSEE FOR ALL IN GROSS PROFIT AND NET PROFIT RATES DURING THE ASSESS MENT PROCEEDINGS. THUS, THE ISSUE ISSUES REMAIN UNEXAMINED AND UNVERIFIED ON THE PART OF THE AO. 10. BEFORE THE ASSESSING OFFICER THE ASSESSEE SUBMI TTED THE G.P RATE AND N.P RATE FOR THE YEAR UNDER ASSESSMENT AND FOR THE LAS T THREE A.YS WHICH IS AS UNDER: ASSESSMENT YEAR GROSS TURNOVER %AGE GP %AGE NP 2012-13 37.41 12.70% 0.26% 2011-12 30.58 14.22% 1.21% 2010-11 36.84 13.49% 1.90% 11. THE ASSESSEE HAS FILED THE COMPUTATION OF GP/NP RATIO ON NET BASIS AS PER THE FINANCIAL STATEMENT WHICH ARE AS UNDER: ASSESSMENT YEAR TURNOVER (IN LACS) PURCHASES AND DIRECT EXPENSES (IN LACS) GROSS PROFIT (IN LACS) GP RATE% INDIRECT EXPENSES EXCL. INCOME TAX(IN LACS) NET PROFIT BEFORE TAX AS PER FINANCIAL STATEMENTS NP RATE % 2012-13 3,740.94 3,212.87 528.07 14.12 482.66 45.41 1.21 2011-12 3,057.61 2,666.92 390.69 12.78 353.15 37.54 1.23 2010-11 3,683.72 3,202.55 481.17 13.06 410.86 70.31 1.91 2009-10 4,612.49 4,032.81 579.68 12.57 483.41 96.27 2.09 12. FROM THE ABOVE FACTS ON RECORD, WE FIND THAT TH E INCREASE IN TURNOVER ON NET SALES IS OF RS. 6.65 CRORES AFTER EXCLUDING EXC ISE DUTY AND FURTHER WE FIND THAT DEFERRED TAX LIABILITY PROVISION OF RS. 19.43 LACS HAS BEEN MADE FOR THE FIRST TIME BY THE ASSESSEE. THE ASSESSING OFFICER CANNOT BE EX PECTED TO MAKE ANY FURTHER ROVING ENQUIRIES WHEN THE PCIT DURING THE PROCEEDIN G UNDER SECTION 263 COULD 5 NOT CONDUCT ANY VERIFICATION OR INVESTIGATION TO DE TERMINE THAT THE GP AND NP RETURNED BY THE ASSESSEE ARE NOT CORRECT. HENCE KEE PING IN VIEW THE ENTIRE FACTS ON RECORD, KEEPING IN VIEW THE FACT THAT EXAMINATIO N OF THE PROFIT WAS DONE BY THE ASSESSING OFFICER, THE EXPLANATION OF THE ASSES SEE BEFORE THE PCIT THAT THERE WERE MODIFICATIONS IN ACCOUNTING OF EXCISE DUTY AND ALSO PROVISIONS OF DEFERRED TAX LIABILITY AND IN KEEPING IN VIEW THERE WAS NO C ONSIDERABLE CHANGE IN THE G.P /N.P IN THE CURRENT YEAR, WE ARE OF THE OPINION THA T THE ACTION OF THE LD. PCIT ANNULLING THE ASSESSMENT CANNOT BE UPHELD. 13. AS A RESULT, THE ORDER UNDER SECTION 263 PASSED BY THE LD. PCIT IS HEREBY QUASHED IN ITS ENTIRETY. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . %.. . & , (DIVA SINGH) (DR. B.R.R. KUMAR) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 16/11/2018 (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ()/ THE CIT(A) 5. -23 4, & 4, 67839/ DR, ITAT, CHANDIGARH GUARD FILE