BECTOCHEM CUNSULTANTS & ENGINEERS P. LTD, MUMBAI V. ACIT 9(1), MUMBAI

ITA 86/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1481 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 06-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P R BAJWAR
• Assessee Lawyers: Y P TRIVEDI
• Keywords: Depreciation; Period of limitation; Set aside
• Section: 142(1); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI. BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A. NO. 86/MUM/2009. ASSESSMENT YEAR : 2005-06. BECTOCHEM CONSULTANTS & AS STT. COMMISSIONER OF & ENGINEERS LTD., VS. INCOME TAX- 9(1), 201, AHOK HOUSE, MUMBAI. DR. RAJENDRA PRASAD ROAD, OFF. GANDHIGRAM ROAD, JUHU, MUMBAI : 400049. PAN AABCB7908G. APPELLANT RESPONDENT APPELLANT BY : SHRI Y.P.TRIVEDI. RESPONDENT BY : S HRI P.R.BAJWAR. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE CIT(APPEALS)-IX, MUMBAI DATED 27-10-20 08 FOR THE ASSESSMENT YEAR 2005-06. 2. FACTS IN BRIEF : THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND SALES, THROUGH EXPORTS, OF PHARMACEUTICAL MACHINERY. IT FI LED ITS RETURN OF INCOME ON 30-10-2005, DECLARING A TOTAL INCOME OF R S.37,29,710/- ALONG WITH AN AUDIT REPORT U/S 44AB OF THE ACT. THE RETUR N WAS ORIGINALLY PROCESSED U/S 143(1) AND SUBSEQUENTLY THE CASE WAS TAKEN FOR SCRUTINY. NOTICES U/S 143(2) AND 142(1) ALONG WITH A QUESTION NAIRE WERE ISSUED 2 AND DULY SERVED ON THE ASSESSEE. THEREFORE, ASSESSM ENT WAS FRAMED U/S 143(3), INTER ALIA, MAKING AN ADDITION ON ACCOUNT O F ALLEGED INFLATION OF PURCHASES, ON ACCOUNT OF AMOUNT SHOWN AS RECEIVAB LE IN RESPECT OF CENVAT CREDIT, DISALLOWANCE OF INTEREST ON THE GROU ND THAT IT IS ATTRIBUTABLE TO CLOSING WORK IN PROGRESS. DISALLOWANCES OF EXPEN DITURE WERE ALSO MADE ON ACCOUNT OF DEPRECIATION, TELEPHONE EXPENSES , SALES PROMOTION EXPENSES ETC. AGGRIEVED, THE ASSESSEE CARRIED THE M ATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY GRANTED PART RELIEF. FURT HER AGGRIEVED, THE ASSESSEE FILED THIS APPEAL. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, MR. Y.P. TRIVEDI, SENIOR ADVOCATE, SUBMITTED THAT THERE ARE FOUR MAIN GROUNDS OF APPEAL. THE FIRST PERTAINING TO THE ADDITION MADE ON ACCOUN T OF INFLATION IN PURCHASES, THE SECOND PERTAINING TO THE ADDITION MA DE ON ACCOUNT OF AMOUNT RECEIVABLE IN RESPECT OF CENVAT CREDIT, THE THIRD BEING DISALLOWANCE OF INTEREST MADE U/S 36(1)(III) ON THE GROUND THAT THE SAME IS ATTRIBUTABLE TO THE CAPITAL WORK IN PROGRESS AND TH E FOURTH GROUND PERTAINING TO ADHOC DISALLOWANCES OF DEPRECIATION ON MOTOR CAR, TELEPHONE EXPENSES AND SALES PROMOTION EXPENSE. REG ARDING THE FIFTH GROUND I.E. LOSS ARISING FROM DISPOSAL OF PROPERTY, THE LEARNED SENIOR COUNSEL SUBMITTED THAT HE DOES NOT WISH TO PRESS TH E SAME, AS THE BENEFIT OF CARRYING FORWARD OF SHORT TERM CAPITAL LOSS IS L OST DUE TO THE FACT THAT THE PERIOD OF LIMITATION GOT EXPIRED. 3.1. ON THE FIRST GROUND, THE LEARNED SENIOR COUNS EL SUBMITTED THAT THE ADDITION WAS MADE BASICALLY ON THE PREMISE THAT THE ASSESSEE HAS FAILED TO GIVE CONFIRMATIONS IN RESPECT OF CREDITOR S. HE FILED A PAPER BOOK RUNNING INTO 72 PAGES AND SUBMITTED THAT THE ASSESS EE HAD FILED DULY CONFIRMED COPIES FROM THE PARTIES BEFORE THE AO. HE DREW OUR ATTENTION 3 TO PAGES 4 TO 9 OF THE ASSESSEES PAPER BOOK AND SUBMITTED THAT EACH OF THE DIFFERENCES BETWEEN THE OPENING BALANCES AND T HE CLOSING BALANCES, ITEM-WISE WERE EXPLAINED IN DETAILED BEFORE THE REV ENUE AUTHORITIES BUT THE SAME WAS NOT CONSIDERED. HE SUBMITTED THAT THE ENTIRE ADDITION HAS BEEN MADE ON ADHOC BASIS, WITHOUT CONSIDERING OR AN ALYSING THE THIRD PARTY CERTIFIED ACCOUNT COPIES AND CONFIRMATIONS FI LED BY THE ASSESSEE AND THE EXPLANATIONS GIVEN IN RESPECT OF EACH OF THE VA RIATION IN THE ACCOUNTS. HE VEHEMENTLY CONTENDED THAT THE ASSESSEE HAS RECON CILED EACH AND EVERY DIFFERENCES AND THE AO WAS WRONG IN MAKING AN ADDIT ION OF ALL THE DIFFERENCES. HE SUBMITTED THAT IT WOULD BE APPROPRI ATE IF THIS ISSUE IS SET ASIDE TO THE FILE OF THE AO FOR FRESH ADJUDICATION AND FOR CONSIDERING EACH AND EVERY EXPLANATION GIVEN BY THE ASSESSEE. 3.2 ON GROUND NO.2, THE LEARNED COUNSEL SUBMITTED THAT THERE IS A DOUBLE TAXATION INVOLVED AS THE CENVAT CREDIT IN QUESTION HAS NOT BEEN ADDED TO PURCHASES AND WHEREAS THE REVENUE AUTHORIT IES HAVE MADE AN ADDITION TO THE CLOSING STOCK. HE SUBMITTED THAT TH E ISSUE OF DOUBLE ADDITION MAY BE SET ASIDE TO THE AO FOR VERIFICATIO N. 3.3 ON THE ISSUE OF DISALLOWANCE OF INTEREST, HE S UBMITTED THAT THE ASSESSEE HAD BORROWED FUNDS AND INCURRED INTERE ST ON THE SAME. HE SUBMITTED THAT THE BORROWED FUNDS WERE USED FOR CAP ITAL WORK IN PROGRESS FOR CIVIL CONSTRUCTION WHICH WAS CAPITALIZED DURING THE YEAR. HE SUBMITTED THAT MAJOR CIVIL CONSTRUCTION WORK WAS COMPLETED DU RING THE PRECEDING FINANCIAL YEAR AND THAT THE WORK WAS COMPLETED IN A LL ASPECTS AS ON 15-07- 2004 AND CERTIFICATE TO THIS EFFECT WAS OBTAINED. I T WAS SUBMITTED THAT THE ASSET WAS PUT TO USE ON 1 ST AUGUST, 2004 AND HENCE THERE IS NO QUESTION OF DISALLOWANCE OF INTEREST PAID ON BORROWED FUNDS WHI CH WAS CLAIMED U/S 36(1)(III). 4 3.4 REGARDING ADHOC DISALLOWANCE OF DEPRECIATION O N MOTOR CAR, TELEPHONE EXPENSES, SALES PROMOTION ETC., THE LEARN ED COUNSEL LEFT THE ISSUE TO THE BENCH. 4. THE LEARNED DR, MR. P.R.BAJWAR APPEARING ON BEHALF OF THE REVENUE, ON THE OTHER HAND, OPPOSED THE CONTENT IONS AND SUBMITTED THAT THE REASONS GIVEN FOR THE DIFFERENCES HAVE RIG HTLY BEEN REJECTED BY THE AO AS THE ASSESSEE HAS NOT DISCHARGED THE BURDEN TH AT LIE ON IT, TO SUBSTANTIATE THE EXPLANATION GIVEN. HE POINTED OUT SOME OF THE REASONS FOR THE ALLEGED DIFFERENCES BETWEEN THE ACCOUNT COPIES AND SUBMITTED THAT NO EVIDENCE HAS BEEN FILED BY THE ASSESSEE TO SUBSTANT IATE ITS EXPLANATION. 4.1 ON THE ISSUE OF CANVET CREDIT, THE LEARNED DR SUBMITTED THAT THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO FO R VERIFYING THE CLAIM OF THE ASSESSEE. 4.3 ON THE OTHER TWO GROUNDS, THE LEARNED DR RELIE D ON THE ORDER OF THE CIT(APPEALS). 5. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSA L OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES AS WELL AS THE CASE LAWS CITED, WE HOLD AS FOLLOWS. 6. COMING TO GROUND NO.1, THE ASSESSEE HAD SUBMIT TED THAT THE LEDGER ACCOUNTS OF THIRD PARTIES WERE DULY ACKNOWLE DGED BY THEM. IT HAS ALSO FURNISHED A DETAILED TABLE WHEREIN THE DIFFERE NCE IN THE OPENING BALANCES, AS WELL AS THE CLOSING BALANCES AND THE D IFFERENCE DURING THE YEAR HAVE BEEN QUANTIFIED AND EACH OF THE DIFFERENC E HAS BEEN EXPLAINED. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE EX PLANATIONS GIVEN BY 5 THE ASSESSEE ON EACH OF THE DIFFERENCES HAVE NOT BE EN INDEPENDENTLY DEALT WITH. THE ADDITION WAS BASED ON GENERAL CONCLUSIONS . THE AO, IN OUR HUMBLE OPINION, SHOULD HAVE EXAMINED EACH OF THE EX PLANATION GIVEN BY THE ASSESSEE AND GIVE A REASON AS TO WHY HE IS UN ABLE TO ACCEPT THE SAME. NO DOUBT THE BURDEN IS ON THE ASSESSEE TO LEAD THE EVIDENCE IN SUPPORT OF THE REASONS GIVEN BY HIM FOR THE SAID DIFFERENCES I N ACCOUNTS. THE FIRST APPELLATE AUTHORITY ALSO HAS NOT CONSIDERED THE IND IVIDUAL EXPLANATION GIVEN BY THE ASSESSEE. THOUGH IT IS TRUE THAT THE ASSESSEE HAS NOT FILED CONFIRMATORY LETTERS EXPLAINING THE RECONCILIATION AND THE DIFFERENCES, IT CAN BE SEEN THAT IN SOME CASES SUCH THIRD PARTY CON FIRMATION MAY NOT BE NECESSARY AND THE DIFFERENCE CAN BE RECONCILED FROM THE FACTS ON RECORD. IN VIEW OF THE ABOVE, DISCUSSION, WE AGREE WITH THE SUBMISSION OF SHRI Y.P. TRIVEDI, THAT THE MATTER SHOULD BE SET ASIDE T O THE FILE OF THE AO FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. NEEDLESS TO SAY, THE AO SHALL AFFORD ADEQUATE OPPORTUNITY TO THE ASSESSEE. 6.1 IN THE RESULT, GROUND NO. 1 IS ALLOWED FOR STA TISTICAL PURPOSES. 7. COMING TO GROUND NO.2, AS SUBMITTED BY BOTH THE PARTIES, WE SET ASIDE THE MATTER TO THE FILE OF THE AO FOR VERI FYING WHETHER THERE IS A DOUBLE DISALLOWANCE IN THIS CASE. 7.1 IN THE RESULT, GROUND NO.2 IS ALLOWED FOR STAT ISTICAL PURPOSES. 8. COMING TO GROUND NO. 3, THE CIT(APPEALS) CONFIR MED THE DISALLOWANCE FOR THE REASON THAT NO EVIDENCE HAS BE EN FILED BY THE ASSESSEE, IN SUPPORT OF ITS CONTENTION THAT THE CIV IL CONSTRUCTION WORK WAS COMPLETED AND THE ASSET WAS PUT TO USE ON 01-08-200 4. THE ASSESSEE HAS MADE THE CLAIM BEFORE THE AO AND SUBMITTED THAT THE AO HAD NOT ASKED FOR THE REQUIRED DETAILS. IN VIEW OF THE ABOVE POSI TION, WE DEEM IT 6 APPROPRIATE TO SET ASIDE THE ISSUE TO THE FILE OF T HE AO FOR VERIFYING WHETHER THE CIVIL WORK IN QUESTION WERE COMPLETED O N 15-07-2004 AND WHETHER THE BUILDING WAS PUT TO USE ON 01-08-2004. IF THE AO HAS ALLOWED DEPRECIATION ON THIS ASSET, THE QUESTION OF DISALLOWANCE U/S 36(1)(III) DOES NOT ARISE. 8.1 IN THE RESULT, THIS GROUND IS ALLOWED FOR STAT ISTICAL PURPOSES. 9. COMING TO GROUND NO. 4, THESE ARE ALL ADHOC DIS ALLOWANCES. IN VIEW OF THE SMALLNESS OF THE AMOUNTS, SHRI Y.P. TRIVEDI, LEARNED COUNSEL, HAS NOT PUT FORWARD ANY CONTENTIONS. 9.1 IN THE RESULT, THIS GROUND IS DISMISSED. 10. AS ALREADY STATED, GROUND NO. 5 IS DISMISSED A S NOT PRESSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED IN PART. ORDER PRONOUNCED ON THIS 18 TH DAY OF JUNE, 2010. SD/- SD/- (R.V. EASWAR) (J. SUDHAKAR REDDY) PRESIDENT. ACCOUNTANT MEMBER. MUMBAI, DATED : 18 TH JUNE, 2010. WAKODE 7 COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, B-BENCH (TRUE COPY) BY ORDER AS STT.REGISTRAR, ITAT, MUMBAI BENCHES, MUMBAI.