The DCIT, Circle-1, Surat V. Abhishek Exports, Surat

ITA 961/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0903 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 09-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: KK SHAH
• Keywords: Capital asset; Depreciation; Wrong claim; Revised return; Unabsorbed depreciation
• Section: 40A(3); 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO.961/AHD/2012 ASST. YEAR: 2008-09 DCIT, CIRCLE-2, SURAT. VS. M/S ABHISHEK EXPORTS, BHISHEK HOUSE OPP. JEEVAN BHARTI SCHOOL, TIMALIAWAD, NANPURA, SURAT. APPELLANT RESPONDENT PAN AAEFA 8406E APPELLANT BY SHRI SANJAY KUMAR, SR.DR RESPONDENT BY SHRI K. K. SHAH, AR DATE OF HEARING: 9/8/2016 DATE OF PRONOUNCEMENT: 22/8/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL BY THE REVENUE FOR ASST. YEAR 2008-09 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) II, SURAT, DATED 7 .2.2012 VIDE APPEAL NO.CAS-II/181/10-11. ASSESSMENT U/S 143(3) OF THE I T ACT, 1961 (IN SHORT THE ACT) WAS FRAMED ON 30.11.2010 BY DCIT, CI RCLE-2, SURAT. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN RESTRICTING THE ADDIT ION TO THE EXTENT OF RS.5,00,000/- AS AGAINST ADDITION OF RS.37,74,268/- MADE BY THE ITA NO. 961/AHD/2012 ASST. YEAR 2008-09 2 ASSESSING OFFICER BEING DISALLOWANCE OF 20% OUT OF WAGES TO WORKER CLAIM BY THE ASSESSEE AT RS.1,88,71,344/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A)-II, SURAT HAS ERRED IN ALLOWING REVISED CLAI M OF DEPRECIATION TO BE CARRIED FORWARD TO THE EXTENT OF RS.10,86,68,629 /- AS AGAINST RS.9,89,57,085/- ALLOWED BY THE ASSESSING OFFICER, 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) MAY BE SET-SIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO TH E ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING & SALES OF DIAMONDS, PRECIOUS STONE, READYMADE GARMENTS, AGRO PRODUCTS, ETC. RETURN OF INCOME WAS FILED ON 15.09.2008 DECLARING TOTAL INCO ME AT RS.NIL AND CLAIMED CARRY FORWARD OF DEPRECIATION OF RS.9,89,57 ,085/- BROUGHT FORWARD FROM ASST. YEAR 2007-08. THE CASE WAS SELEC TED FOR SCRUTINY ASSESSMENT. NOTICE U/S 143(2) WAS ISSUED ON 26.8.20 09 AND DULY SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS ASSESSEE FILED REVISED COMPUTATION OF I NCOME, AS PER WHICH DEPRECIATION FOR ASST. YEAR 2007-08 WAS CLAIM ED TO BE CARRIED FORWARD AT RS.10,86,68,629/- WHICH WAS ARRIVED AT A FTER WORKING CORRECT CALCULATION OF DEPRECIATION AS PER PROVISIO NS OF SECTION 32 OF THE ACT. ASSESSMENT WAS COMPLETED BY MAKING DISALLO WANCE @ 20%OF WAGES PAID TO WORKERS FOR LACK OF COMPLETE VE RIFICATION AT RS.37,74,268/- AND FURTHER DEPRECIATION CLAIMED TO CARRY FORWARD WAS CONSIDERED ONLY AS PER THE ORIGINAL RETURN OF INCOM E FILED AND NO ITA NO. 961/AHD/2012 ASST. YEAR 2008-09 3 COGNIZANCE WAS GIVEN TO THE DEPRECIATION CLAIMED AS PER REVISED COMPUTATION OF INCOME. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A). LD. CIT(A) SUSTAINED THE DISALLOWANCE OF WAGES TO WORKE RS AT RS.5,00,000/- AND AS REGARDS CLAIM OF DEPRECIATION REMITTED THE MATTER BACK TO THE FILE OF ASSESSING OFFICER FOR CO RRECT COMPUTATION OF DEPRECIATION AS PER PROVISIONS OF EXPLANATION -5 TO SECTION 32 OF THE ACT. 4. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE T RIBUNAL. 5. REGARDING GROUND NO.1 AT THE OUTSET LD. AR SUB MITTED THAT SIMILAR ISSUE CAME UP BEFORE THE TRIBUNAL FOR THE S AME ASST. YEAR IN ONE OF THE GROUP CONCERN M/S ABHISHEK EXIM PVT. LTD . IN ITA NO.2748/AHD/2011 WHEREIN THE ORDER OF LD. CIT(A) WA S UPHELD AND DISALLOWANCE OUT OF WAGES PAID TO WORKERS WAS SUSTA INED AT RS.5 LACS. LD. AR SUBMITTED THAT IT HAS NO OBJECTION FOR THE DISALLOWANCE SUSTAINED AT RS.5 LACS. 6. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND REVENUE HAS ASSAILED THE ORDER OF LD. CIT(A) FOR SUSTAINING THE DISALLOWANCE OF WAGES PAI D TO WORKERS AT RS.5 LACS. WE OBSERVE THAT DURING THE COURSE OF ASS ESSMENT ITA NO. 961/AHD/2012 ASST. YEAR 2008-09 4 PROCEEDINGS LD. ASSESSING OFFICER WHILE EXAMINING T HE WAGES PAID TO WORKERS AT RS.1,88,71,344/- FOUND THAT THESE WERE P AID TOWARDS CUTTING, STITCHING, CHECKING, IRONING AND PACKING A ND MOST OF THESE EXPENSES WERE INCURRED IN CASH. 8. WE FURTHER OBSERVE THAT EVEN IF THE PAYMENTS WER E MADE IN CASH, LD. ASSESSING OFFICER HAS ONLY GIVEN A GENERA L FINDING THAT WAGES ARE PAID ON A SINGLE DATE TO 5 TO 7 WORKERS O R 9 TO 21 WORKERS BUT DID NOT BRING A SINGLE INSTANCE OF ANY PAYMENT EXCEEDING RS.20,000/- IN CASH BEING DISALLOWABLE UNDER SECTIO N 40A(3) OF THE ACT. THE MAIN REASON FOR DISALLOWANCE BY LD. ASSESS ING OFFICER IS THAT MOST OF THE VOUCHERS WERE SELF MADE. FURTHER WE FIN D THAT WAGES PAID TO WORKERS IN PERCENTAGE TERMS HAS NOT INCREASED SI GNIFICANTLY DURING THE YEAR IN COMPARISON TO EARLIER YEARS. NO SPECIFI C DEFECT IN THE BOOKS OF ACCOUNT HAS BEEN NOTICED BY LD. ASSESSING OFFICER AND GP SHOWN BY THE ASSESSEE HAS BEEN ACCEPTED. WE FURTHER OBSERVE THAT SIMILAR TYPE OF OBSERVATION WAS MADE BY LD. ASSESSI NG OFFICER IN THE SCRUTINY ASSESSMENT OF GROUP SISTER CONCERN OF M/S ABHISHEK EXIM (P) LTD. AND THE MATTER CAME UP BEFORE THE TRIBUNAL FOR ASST. YEAR 2008-09 VIDE ITA NO.2748/AHD/2011 WHEREIN DISALLOWA NCE OF RS.37,90,158/- MADE BY ASSESSING OFFICER AND SUSTAI NED BY LD. CIT(A) AT RS.5 LACS WAS UPHELD BY THE CO-ORDINATE B ENCH. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLO WING THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF ABHISHEK EXIM ( P) LTD. (SUPRA), WE ARE OF THE VIEW THAT THERE IS SPECIFIC INSTANCE OF NON-VERIFICATION OF EXPENDITURE, NO SPECIFIC DEFECT HAS BEEN OBSERVED I N THE BOOKS OF ACCOUNT, AND IN VIEW OF ACCEPTANCE OF ASSESSEE TOW ARDS LUMP SUM ITA NO. 961/AHD/2012 ASST. YEAR 2008-09 5 DISALLOWANCE OF RS.5 LACS OUT OF WAGES AS HELD BY L D. CIT(A), WE ALSO UPHOLD THE SAME. IN THE RESULT, DISALLOWANCE OUT OF WAGES IS SUSTAINED AT RS.5,00,000/-. THIS GROUND OR REVENUE IS DISMISSED. 9. AS REGARDS GROUND NO.2 REVENUE HAS OBJECTED THE ORDER OF LD. CIT(A) FOR ALLOWING REVISED CLAIM OF DEPRECIATION T O BE CARRIED FORWARD TO THE EXTENT OF RS.10,86,68,629/- AS AGAINST RS.9, 89,57,085/-. 10. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER . ON THE OTHER HAND, LD. AR SUBMITTED THAT AT THE TIME OF FILING O RIGINAL RETURN OF INCOME DEPRECIATION BROUGHT FORWARD FROM ASST. YEAR 2007-08 WAS CLAIMED AT RS.9,89,57,085/- TO BE CARRIED FORWARD. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT CAME TO THE NOTICE THAT THERE WAS A MISTAKE IN CALCULATION OF DEPRECIATION AND CO RRECT DEPRECIATION TO BE CARRIED FORWARD SHOULD HAVE BEEN AT RS.10,86, 68,629/-. IN VIEW OF THIS, REVISED COMPUTATION OF INCOME WAS PLACED O N RECORD BUT COGNIZANCE WAS NOT GIVEN TO IT BY LD. ASSESSING OFF ICER. LD. AR FURTHER SUBMITTED THAT AS PER EXPLANATION -5 TO SECTION 32 OF THE ACT ASSESSEE IS ENTITLED TO CORRECT AMOUNT OF DEPRECIATION EVEN IF ASSESSEE HAS NOT CLAIMED IT WHICH MEANS THAT ASSESSING OFFICER HAS T O ALLOW THE CORRECT CLAIM OF DEPRECIATION WHILE COMPUTING THE T OTAL INCOME OF ASSESSEE. THEREFORE, LD. CIT(A) HAS REMITTED BACK T HE ISSUE TO THE ASSESSING OFFICER FOR DOING THE NEEDFUL. LD. AR REF ERRED AND RELIED ON THE DECISION OF THE CO-ORDINATE BENCH, MUMBAI IN T HE CASE OF DR. MRS. SUDHA S. TRIVEDI VS. ITO (2009) 318 ITR (AT) 3 56 (MUMBAI). ITA NO. 961/AHD/2012 ASST. YEAR 2008-09 6 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL PLACED BEFORE US. THROUGH THIS GROUND REVENUE HAS C HALLENGED THE ORDER OF LD. CIT(A) ACCEPTING THE REVISED COMPUTATI ON OF INCOME TOWARDS CLAIM OF DEPRECIATION. WE OBSERVE THAT ASSE SSEE CLAIMED CARRY FORWARD OF DEPRECIATION OF RS.9,89,57,085/- R ELATING TO ASST. YEAR 2007-08. THEREAFTER REVISED COMPUTATION OF INC OME WAS FURNISHED BY ASSESSEE STATING THE LOSS ON ACCOUNT O F UNABSORBED DEPRECIATION OF ASST. YEAR 2007-08 AT RS.10,86,68,6 29/- AT THE PLACE OF RS.9,89,56,085/-. THE REASON FOR THIS CHANGE OF DEPRECIATION WAS THE PARTNERSHIP FIRM WAS CONVERTED TO PRIVATE LIMIT ED COMPANY W.E.F. 12.12.2007 AND DEPRECIATION WAS REQUIRED TO BE WORK ED OUT ON PRO- RATA BASIS AS PER THE PROVISIONS OF SECTION 32 OF T HE ACT AND OF SECTION 47(XIII) OF THE ACT. 12. WE FURTHER OBSERVE THAT LD. CIT(A) HAS DEALT WI TH THIS ISSUE IN THE LIGHT OF PROVISIONS OF EXPLANATION 5 TO SECTION 32 OF THE ACT BY OBSERVING AS UNDER :- 3.3 I HAVE CONSIDERED THE FACTS OF THE ISSUE AND LE GAL POSITION ON IT. THE PROVISIONS OF SECTION 47(XIII) CLEARLY SAY THAT TRANSFER OF ANY CAPITAL ASSET OR INTANGIBLE ASSET BY A FIRM TO A CO MPANY AS A RESULT OF SUCCESSION OF THE FIRM BY A COMPANY IN THE BUSINESS CARRIED ON BY THE FIRM, THE ASSETS AND LIABILITIES OF THE FIRM BE COME THE ASSETS AND LIABILITIES OF COMPANY. THIS PROVISION WOULD AUTOMA TICALLY ATTRACT THE PROVISIONS RELATED TO ALLOWANCE OF DEPRECIATION. FU RTHER, EXPLANATION 5 TO SECTION 32 CLEARLY SAYS THAT THE PROVISIONS OF D EPRECIATION SHALL APPLY WHETHER OR NOT ASSESSEE HAS CLAIMED THE DEDUC TION IN COMPUTING HIS TOTAL INCOME. THE SAID EXPLANATION IS REPRODUCE D AS UNDER: ITA NO. 961/AHD/2012 ASST. YEAR 2008-09 7 'EXPLANATION 5- FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL APPLY WHET HER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DE PRECIATION IN COMPUTING HIS TOTAL INCOME.' 3.4 THE AFORESAID LEGAL PROVISIONS ARE UNAMBIGUOUS AND VERY MUCH CLEAR. EXPLANATION 5 CLEARLY SAYS THAT DEPRECIATION HAS TO BE MANDATORILY ALLOWED AS PER THE PROVISIONS, WHETHER OR NOT ASSESSEE HAS CLAIMED WHILE COMPUTING HIS TOTAL INCOME. EVEN IF ASSESSEE HAS WRONGLY COMPUTED THE DEDUCTION, AO HAS TO CORRECTLY COMPUTE IT AND ALLOW WHILE ASSESSING HIS TOTAL TAXABLE INCOME. IN THIS CASE THE APPELLANT HAS WRONGLY CLAIMED DEPRECIATION ALLOWANC E WHILE FILING THE RETURN OF INCOME WHICH HAS BEEN CORRECTED BY FILING REVISED COMPUTATION. THE ASSESSING OFFICER OUGHT TO HAVE CO MPUTED THE CORRECT ALLOWABLE DEPRECIATION, WHETHER OR NOT APPE LLANT HAD CLAIMED IT. MOREVER, THE DECISION OF APEX COURT IN THE CASE OF GOETZE (INDIA) LTD. V/S. CIT (204 CTR 182) WHICH SAYS ANY FRESH CLAIM O F DEDUCTION CAN BE MADE BY FILING REVISED RETURN ONLY, WOULD NOT BE AB LE TO ASSIST THE AO AS THE EXPLANATION 5 TO SECTION 32 OF IT. ACT HAS B EEN INTRODUCED AFTER THE JUDGMENT IS DELIVERED BY HON'BLE SUPREME COURT. IN THE LIGHT OF THIS LEGAL POSITION, I DIRECT THE AO TO COMPUTE THE DEPR ECIATION AS PER PROVISIONS OF LAW AND ALLOW THE SAME TO THE APPELLA NT. 3.5 THIS GROUND OF APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. 13. IN VIEW OF OUR ABOVE DISCUSSION AND THE FINDING OF LD. CIT(A) WE ARE OF THE CONSIDERED VIEW THAT THROUGH THE EXPLANA TION -5 TO SECTION 32 OF THE ACT, THE DUTY IS CAST UPON THE ASSESSING AUTHORITY TO ALLOW CORRECT AMOUNT OF DEDUCTION IN RESPECT OF DEPRECIAT ION WHETHER OR NOT THE SAME HAS BEEN CLAIMED BY THE ASSESSEE WHICH CER TAINLY ALSO COVERS A SITUATION WHERE A WRONG CLAIM HAS BEEN MAD E BY THE ITA NO. 961/AHD/2012 ASST. YEAR 2008-09 8 ASSESSEE BUT THEN ASSESSING OFFICER HAS TO ALLOW ON LY THE CORRECT CLAIM. WE, THEREFORE, ARE OF THE VIEW THAT LD. CIT( A) HAS RIGHTLY RESTORED THE MATTER TO THE FILE OF ASSESSING OFFICE R TO VERIFY THE CORRECTNESS OF DEPRECIATION CLAIMED BY THE ASSESSEE AS PER REVISED COMPUTATION OF INCOME. WE UPHOLD THE SAME. ACCORDIN GLY, THIS GROUND OF REVENUE IS ALSO DISMISSED. 13. GROUND NOS.3 & 4 OF REVENUES APPEAL ARE GENERA L IN NATURE, WHICH NEED NO ADJUDICATION. 14. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND AUGUST, 2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 22/8/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 961/AHD/2012 ASST. YEAR 2008-09 9 1. DATE OF DICTATION: 16/08/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 16/08/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:2 2/8/2016 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: