Income Tax Officer, Kanpur V. M/s Hari Om Steels Pvt. Ltd., Kanpur

ITA 791/LKW/2013

• Counselvise Citation: 79123714 RSA 2013
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARE BEING DISPOSED OF
• Keywords: Depreciation; Opportunity of being heard

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NOS.790 & 791/LKW/2013 A.YRS.:2007 - 08 & 2008 - 09 INCOME TAX OFFICER, WARD - 6(1), KANPUR. VS. M/S HARI OM STEELS PVT. LTD., 46/146, HALSEY ROAD, KANPUR. PAN:AAACH7413H (APPELLANT) (RESPONDENT) O R D E R PER A. K. GARODIA, A.M. BOTH THESE APPEALS ARE FILED BY THE REVENUE, WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LEARNED CIT(A) - II, KANPUR BOTH DATED 12/09/2013 FOR THE ASSESSMENT YEARS 2007 - 2008 AND 2008 - 09. BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE APPOINTED DATE OF HEARING, ALTHOUGH ON THE LAST DATE OF HEARING I.E. 06/01/2015, PAPER BOOK WAS FILED BY LEARNED A.R. OF THE ASSESSEE SHRI ANIL ANAND, ADVOCATE WHO WAS PRESENT IN COURT AND THE DATE OF HEARING WAS ANNOUNCED IN OPEN COURT . IN SPITE OF THIS, NEITHER ANYBODY APPEARED ON THE PRESENT DATE NOR ANY REQUEST WAS MADE FOR ADJOURNMENT AND THEREFORE, WE PROCEED TO DECIDE THE APPEALS EX - PARTE QUA THE ASSESSEE. APPELLANT BY NONE RESPONDENT BY SHRI PUNEET KUMAR D. R. DATE OF HEARING 12/02/2015 DATE OF PRONOUNCEMENT 1 2 /03/2015 2 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED D.R. OF THE REVENUE, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE CLAIM OF THE ASSESSEE FOR DEPRECIATION WAS DISALLOWED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007 - 08 ON THE BASIS THAT IT WAS SUBMITTED BY THE ASSESSEE ITSELF BEFORE THE ASSESSING OFFICER THAT NO MANUFACTURING ACTIVITY HAS BEEN CARRIED OUT DURING THE YEAR. THIS DISALLOWANCE WAS DELETED BY CIT(A) ON THE BASIS THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.92,211/ - AND THAT TOO ON BUILDING AND FURNITURE AND NO DEPRECIATION WAS CLAIMED ON PLANT & MACHINERY. WE ALSO FIND THAT IN THE ASSESSMENT ORDER ALSO, IT IS NOTED BY THE ASSESSING OFFICER THAT DEPRECIA TION OF RS.12,10,698/ - CLAIMED BY THE ASSESSEE COMPANY IN PROFIT & LOSS ACCOUNT HAS BEEN ADDED BACK IN THE COMPUTATION OF INCOME AND DEPRECIATION OF RS.92,211/ - HAS BEEN CLAIMED AS DEPRECIATION AS PER INCOME TAX RULES. WHEN IT IS NOTED BY THE ASSESSING OF FICER ALSO THAT IN THE COMPUTATION, DEPRECIATION OF RS.92,211/ - WAS CLAIMED BY THE ASSESSEE AND DEPRECIATION OF RS.12,10,698/ - CLAIMED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT HAS BEEN ADDED BACK IN THE COMPUTATION OF INCOME OF THE ASSESSEE, THE DISALL OWANCE IF AT ALL WAS TO BE MADE, THE SAME SHOULD HAVE BEEN OF RS.92,211/ - BUT AFTER OBSERVING SO, WE ALSO FIND THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS STARTED WITH THE FIGURE OF LOSS REPORTED BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT AND NOT WITH THE FIGURE OF NIL INCOME REPORTED IN THE COMPUTATION OF INCOME AND THEREFORE, THE ONLY DISPUTE IS REGARDING ALLOWABILITY OF CLAIM OF THE ASSESSEE FOR DEPRECIATION OF RS.92,211/ - BECAUSE ONLY THIS MUCH WAS IN FACT CLAIM ED AND DISALLOWED BY THE ASS ESSING OFFICER. THIS CLAIM WAS ALLOWED BY THE CIT(A) WITHOUT GIVING A FINDING THAT THE BUILDING AND FURNITURE WERE PUT TO USE AND THEREFORE, ON THIS ASPECT, WE HOLD THAT THE ORDER OF CIT(A) IS NOT SUSTAINABLE. 3 5. THE SECOND DISALLOWANCE MADE WAS OF RS.85 ,786/ - U/S 40A(2)(B) OF THE INCOME TAX ACT. IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT DURING THE PRESENT YEAR, THE ASSESSEE HAS SHOWN SALE OF IRON STEEL TO THE RELATED PARTIES @RS.15,440/ - PER M T AND SALE O F IRON SCRAP @RS.16,467/ - PER MT TO THE RELATED PARTIES WHEREAS SIMILAR SALE TO OUTSIDER WERE MADE @RS. 16,333/ - PER MT AND @RS.17,325/ - PER M T RESPECTIVELY. FOR SUCH SALE TO RELATED PARTIES AT A LOWER PRICE, THE ASSESSING OFFICER MADE THE ADDITION. THIS ADDITION WAS DELETED BY C IT(A) BY PASSING A CRYPTIC ORDER BY SAYING THAT BETTER QUALITY MATERIAL WAS SOLD IN MARKET TO OUTSIDER PARTIES AND LOWER GRADE MATERIAL WAS SOLD TO RELATED PARTIES WITHOUT INDICATING ANY BASIS FOR MAKING THIS OBSERVATION. HENCE, ON THIS ISSUE, WE RESTORE THE MATTER BACK TO THE FILE OF CIT(A) FOR FRESH DECISION BY WAY OF PASSING A SPEAKING AND REASONED ORDER AFTER ALLOWING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH THE SIDES. IN THIS MANNER, GROUND NO. 1 IS ALLOWED WHEREAS GROUND NO. 2 OF THE REVENUE STAN DS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. 7. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2008 - 09 I.E. I.T.A. NO.791/LKW/2013. IN THIS APPEAL THE REVENUE HAS RAISED THE FOL LOWING GROUNDS: 1. THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN APPLYING A LOWER G.P. RATE THAN THAT ADOPTED BY THE AO, WITHOUT APPRECIATING THE FACT THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE VALIDLY REJECTED BY THE AO AFTER PROPER VERIFICATION. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ADOPTING A G.P. RATE LOWER THAN THAT ARRIVED AT BY THE AO WITHOUT CONTROVERTING THE FINDINGS OF THE AO ARRIVED AT AFTER CONSIDERING AVAILABLE MATERIAL. 3. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.48,000/ - WITHOUT APPRECIATING THE FACTS THAT 4 ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM AND/OR PRODUCE THE CONFIRMATION FROM THE EMPLOYEES. 4. THE ORDER OF THE CIT (A), KANPUR BEING ERRONEOUS, UNJUST AND BAD IN LAW BE VACATED AND THE ORDER OF THE AO BE RESTORED. 8. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED D.R. OF THE REVENUE, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IT IS NOTED BY ASSESSING OFFICER ON PAGE NO. 9 OF THE ASSESSMENT ORDER THAT DURING THE PERIOD FROM 10/03/2008 TO 31/03/2008, THE ASSESSEE HAS MADE PURCHASES FROM SISTER CONCERN @RS.19,100/ - PER M T AND SOLD THEM @RS.18,786/ - PER MT. HE HAS FU RTHER NOTED THAT THE PURCHASE BILLS AND SALE INVOICES FROM/TO SISTER CONCERNS MENTION SALE/PURCHASE OF IRON & STEEL ONLY. HE HAS ALSO OBSERVED THAT THE ASSESSEE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO DEMONSTRATE THE REASONS FOR SHOWING DIFFERENT RATES OF SALE/PURCHASE OF IRON & STEEL FROM/TO SISTER CONCERNS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE REASONS FOR SHOWING GROSS LOSS OF RS.5,40,193/ - DURING THE SHORT PERIOD OF 20 DAYS AT THE FAG END OF THE FINANCIAL YEAR ON THE SALES OF RS.87 .02 LACS. THE ASSESSING OFFICER ALSO NOTED ON THE SAME PAGE OF THE ASSESSMENT ORDER THAT THE SALES TAX AUTHORITIES, KANPUR HAVE ALSO NOT ACCEPTED THE PURCHASE AND SALES DECLARED BY THE ASSESSEE FOR THE YEAR AND HAVE IMPOSED TAXES BY TREATING THE PURCHASES AS FROM UNREGISTERED PARTIES. THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS BASIS WAS DELETED BY CIT(A) BY MAKING OBSERVATION IN PARA 10 OF HIS ORDER THAT HE DID NOT FIND ANY OBSERVATION OR FINDINGS ON THE QUALITY AND GRADE OF MATERIAL DEALT WITH BY OTHER PARTIES WITH THE QUALITY AND GRADE ETC. DEALT WITH BY THE ASSESSEE COMPANY. THE CIT(A) HAS CLEARLY OVERLOOKED THE OBSERVATION OF THE ASSESSING OFFICER THAT IN THE PURCHASE/SALE BILLS FOR THIS PERIOD, THE ONLY DESCRIPTION WAS IRON & STEEL AND 5 NO DETA ILED DESCRIPTION HAS BEEN GIVEN BY THE ASSESSEE AND IN THAT SITUATION , HOW THE CIT(A) CAN COME OUT WITH ANY OBSERVATION REGARDING QUALITY AND GRATE OF MATERIAL. WHEN THE ASSESSEE IS SHOWING PURCHASE OF SAME ITEM AT HIGHER PRICE AND SALE AT LOWER PRICE TO THE RELATED PARTIES WITHOUT SHOWING ANY REASON FOR SUCH ACTION, IN OUR CONSIDERED OPINION, THERE IS AMPLE JUSTIFICATION FOR REJECTING THE BOOKS AND ESTIMATING THE SALES AND PROFITS. WE, THEREFORE, REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESS ING OFFICER. 10. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED. 11. IN THE COMBINED RESULT, B OTH THE APPEALS OF THE REVENUE ARE ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 2 /03/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR