Vijayeswari Textiles Ltd., Coimbatore V. ACIT, Coimbatore

ITA 909/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52122 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D VIJAYAKUMARC I T
• Assessee Lawyers: R MEENAKSHISUNDARAM
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENN AI BEFORE DR.O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. ITA NO.909/MDS./2011 ASSESSMENT YEAR:2005-06 M/S.VIJAYESWARI TEXTILES LTD., 10/400,PALGHAT ROAD, KUNIAMUTHUR, COIMBATORE 641 008. VS. ASST. COMMISSIONER OF INCOME TAX, SALARY CIRCLE-I, COIMBATORE 641 018. PAN AAACV 6388 F (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.MEENAKSHISUNDARAM ADVOCATE DEPARTMENT BY : SHRI D.VIJAYAKUMAR,C.I.T, D.R DATE OF HEARING : 16.11.11 DATE OF PRONOUNCEMENT : 23.1 1.11 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2005- 06 IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX, COIMBATORE DATED 29.03.11, PASSED U/S.263 OF T HE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT FOR SHORT). THE ASSESSMENT ORDER ON RETURN FILED BY T HE ASSESSEE- COMPANY FOR ASSESSMENT YEAR 2005-06 WAS COMPLETED PAGE OF 6 ITA.909 /MDS/11 2 U/S.143(3) VIDE ORDER DATED 02.12.2008 IN DETERMINI NG TOTAL INCOME AT RS.43,17,744/- AS AGAINST DECLARED AT RS.21,04,421/-. 2. SUBSEQUENTLY, LD. COMMISSIONER OF INCOME TAX, COIMBATORE CALLED FOR AND EXAMINED THE RECORDS/ASSE SSMENT ORDER AND NOTICED THAT THE ASSESSEE-COMPANY HAD PUR CHASED YARN CLEARERS COSTING RS.19,22,698/- AND ALSO PURCH ASED SECOND HAND LOOMS FOR A PRICE OF RS.35,82,960/-. THE ASSESSEE-COMPANY HAS CLAIMED THE ENTIRE ABOVE PURCH ASES AS REVENUE EXPENDITURE, WHICH HAS BEEN ALLOWED BY THE ASSESSING OFFICER. THE LD. COMMISSIONER OF INCOME TAX HAS TREATED THIS ACTION OF THE ASSESSING OFFICER AS ERR ONEOUS BECAUSE IN HIS OPINION THE NATURE OF THOSE EXPENDIT URE IS CAPITAL AND NOT REVENUE. THEREFORE, AFTER ISSU ING SHOW CAUSE NOTICE U/S.263 TO THE ASSESSEE COMPANY AND IN VITING ITS OBJECTIONS/EXPLANATION, HAS FINALLY REVISED THE ASS ESSMENT ORDER DATED 02.12.2008 BY DIRECTING THE ASSESSING O FFICER TO DECIDE THIS ISSUE AFRESH. THUS, LD. COMMISSIONER O F INCOME TAX HAS FOUND THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THAT EXTENT TO THE INTEREST OF THE R EVENUE ON THE ISSUE OF PURCHASE OF SECOND HAND LOOMS, BUT DROPPED THE PAGE OF 6 ITA.909 /MDS/11 3 PROCEEDINGS REGARDING PURCHASE OF YARN CLEARERS. NO W, ASSESSEE IS AGGRIEVED AND HAS FILED THIS APPEAL BY RAISING THE FOLLOWING GROUNDS:- 1.1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 1.2. THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED ON FACTS AND IN LAW, IN HOLDING THAT THE ASSESSMENT ORDER MADE BY THE ASSESSING OFFICER U/S.143(3) IS ERRONEOUS AND IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 1.3. THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE COST OF DOBBIES, WHICH IS ONE OF THE PARTS OF A LOOM, IS NOT A REVENUE EXPENDITURE ALLOWABLE U/S.31 OR U/S.37. 1.4 THE LEARNED COMMISSIONER OF INCOME TAX HAS NOT APPRECIATED THAT THE APPELLANT HAD TO TAKE DELI VERY OF THE ENTIRE LOOM INSTEAD OF ONLY THE DOBBIES TH EREIN, ONLY BECAUSE OF THE SELLERS REFUSAL TO DISMANTLE T HEM FROM THE CONDEMNED LOOMS AT ITS COST AND RISK. 1.5 THE LEARNED COMMISSIONER OF INCOME TAX HAS NOT APPRECIATED THAT THE PRICE PAID BY THE APPELLAN T IS ONLY FOR THE PARTS OF THE LOOM VIZ., DOBBIES AND THE SAME IS EVIDENT BY THE ACTUAL CONDUCT OF THE APPELL ANT IN IMMEDIATELY CONDEMNING AND SCRAPPING THE OTHER PARTS AND OUTERSHELL OF THE LOOMS AND THAT NO NEW L OOM HAS COME INTO EXISTENCE, WHICH IS AN UNDISPUTED FAC T. PAGE OF 6 ITA.909 /MDS/11 4 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY EXAMINED THE ISSUE IN QUESTION IN THE LIGHT OF THE AVAILABLE FACTS AND EVIDENCE ON RECORD. LD. AR SUBMITTED B EFORE US THAT THE ASSESSING OFFICER HAS VERILY EXAMINED THE ISSUE OF SECOND HAND LOOMS AND SOUGHT EXPLANATION FROM THE ASSESSEE COMPANY AND AFTER CONSIDERING THE REPLY, T HE ASSESSING OFFICER HAS ACCEPTED THE CONTENTION OF TH E ASSESSEE COMPANY THAT THE SECOND HAND LOOMS WERE PURCHASED FOR THE PURPOSE OF REMOVING THE DOBBIES FROM THOSE SECOND HAND LOOMS FOR CONVERTING (SICK REPLA CING) ASSESSEES LOOMS WITH ELECTRONIC DOBBIES. IT WAS EXPLAINED THAT THE OUTER SHELL OR FRAME OF THE SECOND HAND LO OMS HAD BEEN DISCARDED AND TREATED AS SCRAPS THAT IS WHY TH E ASSESSING OFFICER HAS ACCEPTED THIS CLAIM OF THE AS SESSEE. WHEN THE ASSESSING OFFICER CONSIDERED THIS ISSUE IN THE ASSESSMENT ORDER AND HAS TAKEN ONE OF THE POSSIBLE VIEWS, THIS CANNOT AMOUNT TO AN ERROR IN THE ORDER, EVEN I F THE C.I.T. HAS ANOTHER VIEW ON THE SUBJECT. THEREFORE, ONE OF THE TWIN CONDITIONS, WHICH ARE SINE QUA NON FOR REVISING AN ORDER, IS MISSING IN THIS CASE. THE COMMISSIONER CAN REVISE AN ORDER ONLY IF IT IS FOUND NOT ONLY ERRONEOUS BUT ALSO PRE JUDICIAL TO THE PAGE OF 6 ITA.909 /MDS/11 5 INTEREST OF THE REVENUE. THEREFORE, THE ASSESSMENT ORDER QUA THE IMPUGNED ISSUE IS NOT FOUND TO BE ERRONEOUS BY US. HENCE, THE REVISIONARY ORDER MADE BY THE COMMISSION ER CANNOT BE APPROVED. ACCORDINGLY, WE SET ASIDE THE ORDER DT.29.03.11 PASSED U/S.263 BY THE COMMISSIONER, COI MBATORE AND RESTORE THE ASSESSMENT ORDER. 4. IN RESULT, THE APPEAL OF THE ASSESSEE STANDS AL LOWED. ORDER PRONOUNCED ON 23 RD NOVEMBER, 2011. SD/- SD/- (DR.O.K.NARAYANAN ) ( HARI OM MARATHA ) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 23 RD NOVEMBER, 2011. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE PAGE OF 6 ITA.909 /MDS/11 6 DATE INITIALS 1. DRAFT DICTATED ON 2. DRAFT PLACED BEFORE AUTHORITY 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S. 6. KEEP FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE 9. DATE OF DISPATCH OF ORDER