The ACIT, Circle-1, RAJKOT-GUJARAT V. Gondal Taluka Sahkar Kharid Vechan Sangh, GONDAL

ITA 971/RJT/2009

• Counselvise Citation: 97124914 RSA 2009
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 11-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Assessee Lawyers: RM MANEK
• Keywords: Depreciation; Valuation report
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.967/RJT/2009 (ASSESSMENT YEAR 2005-06) GONDAL TALUKA SAHAKAR KHARID VS DY.CIT, CIR.1 SANGH LTD, OLD SARDAR MARKETING RAJKOT YARD, OPP CENTRAL BUS STAND GONDAL PAN : AAAAG0380L (APPELLANT) (RESPONDENT) I.T.A. NO.971/RJT/2009 (ASSESSMENT YEAR 2005-06) ACIT, CIR.1 VS GONDAL TALUKA SAHKAR KHARID RAJKOT VECHAN SANGH, GONDAL (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RM MANEK REVENUE BY : SHRI JAI RAJ KUMAR O R D E R PER N.R.S. GANESAN, JM BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE D IRECTED AGAINST THE ORDER OF CIT(A)-I RAJKOT DATED 17-06-2009 AND PERTA IN TO ASSESSMENT YEAR 2005- 06. THEREFORE, WE HAVE HEARD BOTH THE APPEALS TOGE THER AND ARE DISPOSING OFF THE SAME BY THIS COMMON ORDER. LET US FIRST TAKE A SSESSEES APPEAL IN ITA NO.967/RJT/2009. ITA 967/RJT/2009 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE OF RS.13,52,052 TOWARDS PROVIDENT FUND, GRATUITY AND STAFF LEAVE EN CASHMENT. WE HAVE HEARD SHRI RM MANEK, THE LEARNED REPRESENTATIVE FOR THE A SSESSEE AND SHRI JAI RAJ SINGH, THE LEARNED DEPARTMENTAL REPRESENTATIVE. TH E ASSESSING OFFICER ITA NO.967/RJT/2009 ITA NO.971/RJT/2009 2 DISALLOWED A SUM OF RS.14,28,732 ON THE GROUND THAT IT WAS DEDUCTED FROM THE PROFIT. THE CIT(A) CONFIRMED THE ADDITION TO THE E XTENT OF RS. 13,52,052. THE ASSESSEE CLAIMED BEFORE THE CIT(A) THAT A SUM OF RS .76,680 WAS PAID TO ONE OF THE EMPLOYEES DURING THE YEAR UNDER CONSIDERATION. TAKING INTO CONSIDERATION THE PAYMENT MADE BY THE ASSESSEE, THE CIT(A) DIRECT ED THE ASSESSING OFFICER TO VERIFY THE PAYMENT AND IF IT IS ACTUALLY PAID TO TH E EMPLOYEE THE SAME HAD TO BE REDUCED FROM THE DISALLOWANCE. WITH REGARD TO THE PAYMENTS TO PROVIDENT FUND AND GRATUITY, THE FACT REMAINS THAT THE ASSESSEE HA S NOT CREDITED THE PROVIDENT FUND AND GRATUITY TO THE APPROVED ACCOUNT. THE CLA IM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES WAS THAT IT WAS DEPOSITED IN A FI XED ACCOUNT. THE INCOME-TAX ACT REQUIRES THE ASSESSEE TO DEPOSIT THE SAME IN TH E APPROVED ACCOUNT FOR THE PURPOSE OF CLAIMING THE SAME AS EXPENDITURE. SINCE , ADMITTEDLY, THE AMOUNT WAS NOT DEPOSITED IN THE APPROVED ACCOUNT, IN OUR OPINI ON, THE LOWER AUTHORITY HAS RIGHTLY DENIED THE CLAIM OF THE ASSESSEE. AS FAR A S THE PAYMENT OF RS.76,680 IS CONCERNED, IT APPEARS TO BE PERTAINING TO LEAVE ENC ASHMENT FUND. THE CLAIM OF THE ASSESSEE IS THAT IT WAS PAID DURING THE YEAR UN DER CONSIDERATION TO ONE OF THE EMPLOYEES. SUBJECT TO VERIFICATION BY THE ASSESSIN G OFFICER, THE SAME HAS TO BE ALLOWED. THEREFORE, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 3. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISA LLOWANCE OF 68,214 ON ACCOUNT OF DEPRECIATION. THE ASSESSEE CLAIMED DEPR ECIATION OF RS.82,600. HOWEVER, THE ASSESSING OFFICER FOUND THAT THERE WAS NO ACTUAL CONSTRUCTION OF THE BUILDING TOT THE EXTENT OF RS.56,29,156 AS CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE CONSTRUCT ED THE BUILDING TO THE EXTENT OF RS.1,32,164 AND ACCORDINGLY GRANTED THE DEPRECIA TION AT RS.6,608. THE ASSESSEE BEFORE THE CIT(A) ADMITTED THAT THE CORREC T DEPRECIATION WAS RS.14,386. NO MATERIAL IS AVAILABLE ON RECORD TO S UGGEST THAT THE ASSESSEE CONSTRUCTED THE BUILDING TO THE EXTENT OF RS.56,29, 516 DURING THE YEAR UNDER CONSIDERATION. MOREOVER, THE ASSESSEE MADE ITS CLA IM BEFORE THE CIT(A) THAT THE CORRECT DEPRECIATION ALLOWABLE IS RS.14,386. ACCOR DINGLY THE CIT(A) FOUND THAT ITA NO.967/RJT/2009 ITA NO.971/RJT/2009 3 ONLY RS.14,386 HAS TO BE ALLOWED AS DEPRECIATION AN D NOT RS.82,600. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LO WER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 4. THE NEXT GROUND OF APPEAL IS ADDITION OF RS.38,8 1,186 TOWARDS LONG TERM CAPITAL GAIN. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CREDITED RS.64,48,625 AS PROFIT ON SALE OF MILL DIVISION. T HE ASSESSING OFFICER FURTHER FOUND THAT THE ASSESSEE HAS NOT WORKED OUT THE BALA NCING CHARGE PROFIT FROM THE SALE OF THE LAND AND BUILDING SEPARATELY. AFTER RE DUCING PROFIT FROM SALE OF MACHINERY AT RS.49,11,768 THE PROFIT ON SALE OF ASS ET COMES TO RS.15,36,857. THE ASSESSING OFFICER FOUND THAT THE CORRECT BALANC ING CHARGE ON LAND AND BUILDING IS RS.38,23,211 AND NOT RS.15,36,857. ON APPEAL BY THE ASSESSEE, THE CIT(A) FOUND THAT THE VALUATION REPORT OBTAINED BY THE ASSESSEE WAS A FABRICATED ONE WHICH GAVE DISTORTED FIGURE TO SUIT THE CONVENI ENCE OF THE ASSESSEE. THE CIT(A) ISSUED NOTICE CALLING FOR EXPLANATION WHY TH E CAPITAL GAIN SHOULD NOT BE INCREASED. THE ASSESSEE HAS NOT FILED ANY OBJECTIO N BEFORE THE CIT(A). THEREFORE, THE CIT(A) INCREASED THE CAPITAL GAIN ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. THE FACT REMAINS THAT THE ASS ESSEE HAS NOT EXPLAINED PROPERLY BEFORE THE CIT(A) WHY THE CAPITAL GAIN SHO ULD NOT BE INCREASED. IN OUR OPINION, THE EXPLANATION OF THE ASSESSEE HAS TO BE CONSIDERED BY THE ASSESSING OFFICER INITIALLY TO ASCERTAIN THE CORRECT CAPITAL GAIN ACCRUED TO THE ASSESSEE. THEREFORE, WE SET ASIDE THE ORDER OF THE LOWER AUTH ORITIES AND REMAND BACK THIS ISSUE OF CAPITAL GAIN TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINATION THE ISSUE AFTER GIVING A REASO NABLE OPPORTUNITY TO THE ASSESSEE AND THEREAFTER DETERMINE THE CAPITAL GAIN IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASS ESSEE. 5. THE ASSESSEE HAS RAISED ONE MORE GROUND WITH REG ARD TO LEVY OF INTEREST U/S 234B AND 234C. THE LEVY OF INTEREST U/S 234B A ND 234C IS CONSEQUENTIAL AND THEREFORE, WE DO NOT SEE ANY INFIRMITY IN LEVYI NG SUCH INTEREST. ITA NO.967/RJT/2009 ITA NO.971/RJT/2009 4 ITA 971/RJT/2009 6. NOW COMING TO THE APPEAL FILED BY THE REVENUE, T HE FIRST GROUND OF APPEAL IS WITH REGARD TO DELETION OF ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS. 38,67,944 TOWARDS UNPAID LIABILITY. 7. WE HAVE HEARD THE LD.DR AND LD.REPRESENTATIVE FO R THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS MADE A PROVISION OF RS.38,67,944 WHICH WAS NOT PAID. THE CONTENTION OF THE LD.DR IS THAT THESE EXPENDITURES WERE NOT REFLECTED IN THE PROFIT & LOSS ACCOUNT WHICH WA S NOT PAID AND THEREFORE, IT CANNOT BE ALLOWED DURING THE YEAR UNDER CONSIDERATI ON. HOWEVER, THE CIT(A) FOUND THAT THE ASSESSEE HAS NOT CLAIMED THE IMPUGNE D PROVISION AS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT. MOREOVER, THE NATURE OF EXPENDITURE INDICATED WERE CAPITAL ONE. WHEN THE ASSESSEE HAS NOT CLAIMED TH E PROVISION OF CERTAIN EXPENDITURE IN THE PROFIT & LOSS ACCOUNT AS EXPENDI TURE, IN OUR OPINION, THE QUESTION OF DISALLOWANCE WOULD NOT ARISE FOR CONSID ERATION. THE ASSESSING OFFICER WOULD DISALLOW THE CLAIM OF THE ASSESSEE PROVIDED I T WAS CLAIMED IN THE PROFIT & LOSS ACCOUNT. WHEN THE ASSESSEE ITSELF HAS NOT CLA IMED THE SAME, IN OUR OPINION, THE CIT(A) HAS RIGHTLY DELETED THE ADDITIO N MADE BY THE ASSESSING OFFICER. THEREFORE, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF THE LOWER AUTHORITY AND THE SAME IS CONFIRMED. 8. THE NEXT GROUND OF APPEAL IS WITH REGARD TO THE DELETION OF RS.7,778 BEING DISALLOWANCE OF DEPRECIATION. 9. WE HAVE HEARD THE LD.DR AND LD. REPRESENTATIVE O F THE ASSESSEE. THE CIT(A) BY TAKING THE COST OF CONSTRUCTION AT RS.1, 32,164 GRANTED DEPRECIATION @5% TO THE EXTENT OF RS. 6,608. EVEN THOUGH THE AS SESSEE CLAIMED THE DEPRECIATION AT RS.82,600, THE CIT(A) FOUND THAT TH E CORRECT COST OF CONSTRUCTION WAS RS.1,83,070 AND NOT RS.1,32,164 AS ADOPTED BY T HE ASSESSING OFFICER. THEREFORE, THE CIT(A) ALLOWED THE DEPRECIATION AT R S. 9,153. THE CIT(A) HAS ALSO ALLOWED DEPRECIATION ON THE DEAD STOCK. WHILE CONSIDERING THE DEPRECIATION ITA NO.967/RJT/2009 ITA NO.971/RJT/2009 5 IN THE ASSESSEES APPEAL WE FOUND THAT THE CIT(A) H AS RIGHTLY ADOPTED THE COST OF CONSTRUCTION. ACCORDINGLY WE CONFIRM THE ORDER OF CIT(A). THEREFORE, IN OUR OPINION, THE CIT(A) HAS RIGHTLY GRANTED THE RELIEF TO THE EXTENT OF RS.7,778. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LOWER AUTHORITY. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED, FOR STATISTICAL PURPOSE AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13-05-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 13 TH MAY, 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-I, RAJKOT 4. THE CIT-I, RAJKOT 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT