DCIT, CIR-4, KOLKATA, Kolkata V. M/s Arcuttipore Tea Co, Ltd., Kolkata

ITA 912/KOL/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4747 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-05-2017
• Assessment Year: 2002-2003
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Depreciation; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A, KOLKATA BEFORE SH. P.M.JAGTAP, VICE PRESIDENT & SH.S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.912/KOL/2014 (ASSESSMENT YEAR-2002-03) ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 30.10.2013 PASSED BY CIT(A)-IV, KOLKATA FOR AY 2002-03. 2. IT IS NOTED THAT THIS APPEAL WAS FILED WITH A DELAY OF 52 DAYS. THE APPELLANT-REVENUE FILED AN AFFIDAVIT DATED 08.05.2014 STATING REASONS FOR THE SAID DELAY. ON PERUSAL OF THE SAID AFFIDAVIT AND ON HEARING BOTH THE PARTIES, WE FIND THAT THE REASONS STATED THEREIN ARE BONAFIDE AND REALLY PREVENTED THE REVENUE TO FILE THIS APPEAL ON TIME. THEREFORE, THE DELAY OF 52 DAYS ARE CONDONED. 3. GROUND NO.1 IS RELATING TO DELETION OF CLAIM OF EXPENSES INCURRED ON ADDITIONS MADE TO FIXED ASSETS. DCIT, CIRCLE-4, KOLKATA. VS M/S. ARCUTTIPORE TEA CO.LTD., 4A, COUNCIL HOUSE STREET, M M S CHAMBERS, KOLKATA-700001. PAN-AACCA3214B (APPELLANT) (RESPONDENT) APPELLANT BY SH.SANKAR HALDER, ADDL. CIT, SR.DR RESPONDENT BY SH.ANKIT JALAN, ACCOUNTANT DATE OF HEARING 26.11.2018 DATE OF PRONOUNCEMENT 08 .02.2019 ITA NO.912/KOL/2014 (ASSESSMENT YEAR-2002-03) PAGE | 2 4. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMED AN AMOUNT OF RS.42,64,382/- ON ACCOUNT OF ADDITION MADE TO FIXED ASSETS. THE AO ALLOWED FULL DEPRECIATION TO THE EXTENT OF RS.25,01,050/- BUT, HOWEVER, DENIED DEDUCTION IN RESPECT OF ADDITION MADE TO NON-VERIFIABLE FIXED ASSTS. THE CIT(A) OBSERVED THAT THE ASSESSEE PRODUCED ALL THE BILLS INVOLVING THE EXPENDITURE MADE TO FIXED ASSETS UNDER THE HEAD ADDITION AND THE SAME WERE ENTERED INTO BOOKS OF ACCOUNTS SUPPORTED BY BANK STATEMENT. FURTHER, CIT(A) HELD WHEN THE AO ALLOWED FULL DEPRECIATION TO THE EXTENT OF RS.25,01,056/- ON FIXED ASSETS AND IT IS WRONG TO DENY THE DEDUCTION UNDER THE HEAD MADE TO FIXED ASSETS AS NON- VERIFIABLE. THE RELEVANT PORTION WHICH IS REPRODUCED HEREIN BELOW FOR READY- REFERENCE:- 5.2. I HAVE EXAMINED THE ASSESSMENT ORDER, THE SUBMISSION OF THE A.R. OF THE APPELLANT AS WELL AS THE DIRECTION OF CIT(A)-IV, KOLKATA, IN HER ORDER DT.17.1.2007. THE SPECIFIC DIRECTION OF THE CIT(A)-IV, KOLKATA, DT.17.1.2007 IS AS BELOW :- 'IF THE CONTENTION OF THE APPELLANT IS CORRECT; THE ASSESSING OFFICER MAY VERIFY THE CLAIM OF DEPRECIATION OF THE APPELLANT AND THE ADDITION TO FIXED ASSETS. HERE, THE CIT(A) HAS ASKED FOR VERIFICATION OF ADDITIONS MADE TO FIXED ASSETS WITHOUT MAKING ANY DISTINCTION BETWEEN ADDITION MADE BY WAY OF CAPITAL WORK IN PROGRESS AND OTHER ADDITION MADE IN TERMS OF FACTORY BUILDING, MACHINERY, FURNITURE AND FITTINGS, ET. IN ANY CASE, WHEN THE A.O. IS ALLOWING FULL DEPRECIATION TO THE EXTENT OF RS.25,01,056/- ON ALL THE FIXED ASSETS, THEN PRESUMING CERTAIN FIXED ASSETS AS NON VERIFIABLE IS NOT TENABLE. FURTHER, THE A.R HAS PRODUCED ALL THE BILLS OF ADDITIONS MADE TO FIXED ASSETS AND THE SUPPORTING ENTRY IN THE BOOKS OF ACCOUNTS AND THE BANK STATEMENT OF THE APPELLANT. EVEN AT THE REMAND STAGE, THESE EVIDENCES WERE NOT EXAMINED BY THE A.O. NOR WAS ANY A ADVERSE INFERENCE DRAWN. THEREFORE, I AM OF THE VIEW THAT ADDITION OF RS.42,64,382/- TOWARDS NON VERIFIABLE FIXED ASSETS SHOULD BE DELETED. 5. IN VIEW OF THE ABOVE DISCUSSION MADE HEREIN ABOVE AND FINDING OF CIT(A), WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND IT IS JUSTIFIED. THUS, GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 6. GROUND NO.2 IS RELATING TO DIRECTION AS GIVEN BY THE CIT(A) TO DELETE THE ADDITION MADE ON ACCOUNT OF OTHER SOURCES. ITA NO.912/KOL/2014 (ASSESSMENT YEAR-2002-03) PAGE | 3 7. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND WHILE ADJUDICATING THE ISSUE, THE CIT(A) DIRECTED THE AO TO ALLOW APPORTIONING INDIRECT COST AFTER DUE VERIFICATION OF THE RECORDS. IN PURSUANCE OF WHICH THE AO PASSED AN ORDER DATED 24.12.2013 WHEREIN THE AO ALLOWED APPORTIONMENT OF EXPENDITURE AFTER VERIFICATION. RESPONDENT ASSESSEE PLACED ON RECORD THE SAID ORDER FOR OUR PERUSAL AND LD.DR DID NOT COTROVERT THE SAME. ON PERUSAL OF THE SAID ORDER DATED 24.12.2013, WE FIND THAT THE AO HAS GIVEN EFFECT TO THE DIRECTION OF CIT(A) ON VERIFICATION OF THE RECORD WHICH IS PLACED BEFORE US AS ANNEXURE (A). THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A). THEREFORE, GROUND NO.2 RAISED BY THE REVENUE IS DISMISSED. 8. GROUND NO.3 IS RELATING TO DELETION OF ADDITION MADE ON ACCOUNT OF LOANS ADVANCED TO SISTER CONCERN OF ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 9. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOTED THAT THE AO CHARGED NOTIONAL INTEREST ON INTEREST FREE LOAN GIVEN TO SISTER CONCERN OF ASSESSEE AND ADDED AN AMOUNT OF RS.41,53,004/-. IT WAS CONTENDED BEFORE THE AO THAT THE ASSESSEE HAS SURPLUS FUND AS WELL AS INTEREST FREE TRADE ADVANCE/LOAN TO COVER THE INTEREST FREE LOAN. BUT, HOWEVER, THE AO REJECTED THE SAID SUBMISSIONS OF THE ASSESSEE. BEFORE CIT(A), THE ASSESSEE SUBMITTED FORMATTED CHART UNDER THE HEAD FUND FOR STATEMENT FOR THE YEAR UNDER CONSIDERATION. ON EXAMINATION OF THE SAID CHART, THE CIT(A) OBSERVED THAT THERE WAS NO FRESH OUT FLOW OF INTEREST FREE LOAN IN THE YEAR UNDER CONSIDERATION AND THE ASSESSEE HAS OWN FUNDS AND INTEREST FREE ADVANCES WHICH ARE MUCH MORE THAN THE ADVANCES MADE TO THE SISTER CONCERN OF THE ASSESSEE. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELOW FOR READY-REFERENCE:- 7.2. THE A.R. OF THE APPELLANT IN HIS WRITTEN SUBMISSION HAS PREPARED THE FUND FLOW STATEMENT OF THE APPELLANT WHICH IS CITED AS BELOW:- ITA NO.912/KOL/2014 (ASSESSMENT YEAR-2002-03) PAGE | 4 FUND FLOW STATEMENT FOR THE YEAR ENDED 31 ST MARCH 2002 THE ABOVE CHART, AS PER THE A.R CLEARLY SUGGESTS THAT DURING THE YEAR THERE HAS BEEN NO FRESH OUTFLOW OF ANY INTEREST FREE LOAN. THE A.R. HAS FURTHER ARGUED THAT IT HAS SUFFICIENT OWN FUNDS AVAILABLE SO AS NOT TO CONSEQUENT ANY DIVERSION OF INTEREST BEARING LOAN TO ITS SISTER CONCERNS. THIS HAS BEEN EXPLAINED AS BELOW:- THE COMPANY HAD GOT ITS OWN FUNDS AND INTEREST FREE ADVANCES AS FLOWS:- (A) OWN FUNDS, SHARE CAPITAL RS.53,083,650 SURPLUS AND RESERVES RS.101,600,256 RS.154,683,906 BALANCE SHEET THAT SUFFICIENT OWN FUND WERE AVAILABLE WITH IT TO BE PROVIDED ON INTEREST FREE BASIS TO ITS SISTER CONCERNS. AT NO POINT, THE AO HAS CHALLENGED THAT SUFFICIENT FUNDS WERE NOT AVAILABLE WITH THE APPELLANT OR ESTABLISHED THROUGH EVIDENCE THAT THERE WAS A DIVERSION OF INTEREST BEARING LOAN TOWARDS PROVIDING INTEREST FREE FUNDS TO ITS SISTER CONCERNS. I, THEREFORE, SEE NO MERIT IN THE ADDITION MADE BY THE A.O. FOR RS.41,53,004/- MADE ON ACCOUNT OF NOTIONAL INTEREST. THE ADDITION SO MADE IS DELETED. ITA NO.912/KOL/2014 (ASSESSMENT YEAR-2002-03) PAGE | 5 10. IN VIEW OF THE DISCUSSION HEREIN ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A), IT IS JUSTIFIED. THUS, GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.02.2019. SD/- SD/- (P.M.JAGTAP) (S.S.VISWANETHRA RAVI) VICE PRESIDENT JUDICIAL MEMBER DATE:-08.02.2019 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT- DCIT, CIRCLE-4, KOLKATA. 2. RESPONDENT- M/S. ARCUTTIPORE TEA CO.LTD., 4A, COUNCIL HOUSE STREET, M M S CHAMBERS, KOLKATA-700001. 3. CIT-KOLKATA 4. CIT(APPEALS)-KOLKATA 5. DR: ITAT -KOLKATA BENCHES BY ORDER AR/H.O.O ITAT, KOLKATA