ACIT, CC-3(2), Kolkata, Kolkata V. Ritum Jain, Kolkata

ITSSA 37/KOL/2019

AI Insights

The case involves the Assistant Commissioner of Income Tax, Central Circle-3(2), Kolkata as the appellant and Ritum Jain as the respondent. The appeal pertains to the assessment year 2015-16 and arises from a consolidated order passed by the CIT(A)-21, Kolkata, which included several assessment years. The main issues in the appeal were the deletion of addition regarding stock discrepancy found during a search operation and the treatment of a sales tax incentive received as a capital receipt. The Tribunal referenced decisions from previous years and similar cases within the same group, leading to the dismissal of the revenue's appeal.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 108388 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-11-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-11-2022
• Assessment Year: misc
• Appeal Filed On: 28-05-2019
• Other Referred Cases: ACIT Vs. Shanthinath Detergents Pvt. Ltd., National Thermal Power Co. Ltd. v. CIT, Jute Corporation of India vs. CIT, CIT vs Ponni Sugars & Chemicals Ltd., Balaji Alloys vs CIT, CIT vs Rasoi Limited
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Search and seizure; Capital receipt
• Section: 132; 143(3); 143(2)

Judgement Text

1 IT(SS)A No.37/Kol/2019 Ritum Jain, AY: 2015-16. IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA आयकर अपीलीय अधीकरण, ᭠यायपीठ “A” कोलकाता, BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER IT(SS)A No.37/Kol/2019 Assessment Year: 2015-16 Assistant Commissioner of Income Tax, Central Circle- 3(2), Kolkata Vs. Ritum Jain Metro Towers, 1, Ho-Chi-Minh Sarani, Kolkata-700071. (PAN:ACTPJ4441K) (Appellant) (Respondent) Present for: Appellant by : Shri A. K. Tulsiyan, FCA Respondent by : Shri Devi Saran Singh, CIT, DR Date of Hearing : 21.11.2022 Date of Pronouncement : 24.11.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This present appeal by the revenue is arising out of consolidated order passed by Ld.CIT(A)-21, Kolkata comprising of AYs 2010-11 to 2013-14 and 2015-16 (five assessment years) which also includes the year under consideration i.e. AY 2015-16 vide Appeal No. 370/CC-3(2)/CIT(A),Kol-21/2016-17 dated 29.03.2019 against the assessment order passed by the ACIT, Central Circle-3(2), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) dated 29.12.2016. 2. Grounds raised by the revenue in the present appeal for AY 2015- 16 are reproduced as under: 2 IT(SS)A No.37/Kol/2019 Ritum Jain, AY: 2015-16. “i) Whether on the facts and circumstances of the case the Ld.CIT(A)-21, Kolkata, was justified in law in allowing the stock discrepancy found in the course of search & treating the same as undisclosed investment in stock. ii) Whether on the facts and circumstances of the case the Ld. CIT(A)-21, Kolkata, was justified in law in allowing the Appeal of the assessee by holding that Sales Tax Incentive received by the assessee from the Government of West Bengal amounting to Rs.3,03,57,566/ - is of the nature of capital receipt and hence non-taxable. iii) Whether on the facts and the circumstances of the Ld. CIT(A)-21, Kolkata, was justified in law by considering the claim of the assessee of incentive received as capital receipt although in the return of income as well as in the tax audit report the assessee had considered the same as revenue receipt and auditor has mentioned as revenue receipt respectively. iv) Whether on the facts and circumstances of the case conclusion arrived at by the Ld. CIT(A)-21, Kolkata, is not justified in law in not appreciating and considering that incentive received by the assessee, being a non-refundable grant earned through exercise of business is taxable business income and is a capital receipt but not a revenue receipt. v) That the Department craves leave to add, modify or alter any of the grounds of appeal and/ or adduce additional evidence at the time of hearing of the case.” 3. From the grounds above, there are broadly two issues involved (i) relating to deletion of addition in respect of stock discrepancy found in the course of search and the (ii) relating to treatment of sales tax incentive (Industrial Promotion Assistance i.e. IPA) as capital receipt not taxable under the Act. 4. Issues relating to AY 2013-14 dealt in by the Ld. CIT(A) in the impugned consolidated order travelled up to the coordinate bench of ITAT, Kolkata in IT(SS)A No. 36/Kol/2019 wherein the appeal of the revenue was dismissed vide order dated 22.10.2010. Also in respect of AY 2014-15 though not covered by the consolidated order of Ld. CIT(A) referred above, matter went in appeal before the coordinate bench of ITAT, Kolkata in ITA No.466/Kol/2021 wherein the appeal of the assessee was allowed vide order dated 30.03.2022. 3 IT(SS)A No.37/Kol/2019 Ritum Jain, AY: 2015-16. 5. Brief facts of the case are that assessee derives income from manufacture and trading of detergent and resale of soda ash. Case of the assessee is one of the cases under “SAFECHEM Industries Group of Companies” in which a search and seizure operation u/s. 132 of the Act was conducted on 17/18.12.2014. For the purpose of post search assessment case of the assessee along with other assessees of the group was centralized in the central circle of the department. The present year under appeal is an abated year considering the date of search for which the assessment has been completed u/s. 143(3) of the Act. 6. Before us Shri A. K. Tulsiyan, FCA represented the assessee and Shri Debi Saran Singh, CIT, DR represented the department. 7. At the outset, ld. Counsel for the assessee submitted that the two issues raised by the revenue in the present appeal are covered by the decision of the coordinate bench of ITAT, Kolkata, one by the assessee’s own case and the other by the case of one of the group companies which was also covered under the same search. On the first issue relating to addition made in respect of stock discrepancy, it was submitted that department has conducted a survey operation at the premises of the assessee on 17 and 18 th December, 2014 as part of the search and seizure exercise. During the said operation, it was observed that the stock of the assessee was inventorised by the Investigation Wing of the Department for which assessee was asked to provide a reconciliation 4 IT(SS)A No.37/Kol/2019 Ritum Jain, AY: 2015-16. statement showing the manner in which the items of stock were categorised. The method followed by the assessee was not accepted by the Ld. AO, who made an ad-hoc addition by considering the stock discrepancy where it was more than 500 units. The categorisation and computation done by the Ld. AO in respect of stock as contained in the order of Ld. CIT(A) at page 26 is reproduced hereunder: 5 IT(SS)A No.37/Kol/2019 Ritum Jain, AY: 2015-16. 8. Ld. CIT(A) found the method followed by the assessee as reasonable and rejected the action of the Ld. AO and deleted the addition made thereon. Similar issue was dealt by the coordinate bench of ITAT, Kolkata in the case of ACIT Vs. Shanthinath Detergents Pvt. Ltd. (IT(SS)A No.27 to 32/Kol/2019 dated 20.03.2020 which is also part of the same group to which the assessee belongs. The issue relating to addition made on account of stock discrepancy was dealt in para 12 of the said order which is reproduced as under: “12. Lastly comes the Revenue’s sixth appeal IT(SS)A No. 32/Kol/2019 for assessment year 2015-16 raising third substantive grievance seeking to revive addition on account of stock discrepancy made in the course of assessment. The CIT(A)’s detailed discussion to this effect reads as under:- “27.0 Ground No.1: Wrong addition of Rs.2,48,781 on account of stock discrepancy 27.1 The departmental had conducted a survey operation at the premises of the assessee. At Graham Lane, Kamarhati, Kolkata-700058, on 17-12-2014 and 18-12- 2014. During the operation it was observed that the stock of the assessee was inventorised by the investigation wing. The appellant was asked to provide a reconciliation statement showing the manner in which the items of stock held b the appellant was categorised. The Ld. AO did not accept the method followed by the appellant in categorizing the items of its stock, leading to a discrepancy. The Ld. AO then on ad-hoc basis, added back the discrepancies, where the discrepancies were more than 500 unit, to the total income of the appellant. The calculation followed by the Ld. AO is given below: 6 IT(SS)A No.37/Kol/2019 Ritum Jain, AY: 2015-16. 27.02 The appellant submitted that the Ld. AO without giving any reasonable explanation has considered the method of categorization of stock as incorrect. The Ld. AO, on ad-hoc basis has re-categorised the items present in the inventory and added a sum of Rs.2,48,781 to the total income, u/s 69B, for undisclosed investment in stock. 27.3 Findings of CIT(Appeals) 27.3.1 I have perused the order of the AO and the appellant and based on it I have come to the conclusion that method followed by the appellant is reasonable. The Ld. AO without giving any justification or reasoning has rejected the method followed by the appellant and has substituted the same with its own method of computation on ad-hoc basis, without giving any reasonable explanation / justification. Therefore, the AO’s action in rejecting the method in current year is not justified. In view of the aforesaid I am deleting the disallowance made the AO and allowed this ground in favour of the assessee.” 13. Learned CIT-DR fails to dispute that the instant issue involves an ad hoc additions only arising from re-categorisation of the assessee’s inventorized items than any substantive discrepancy. That being the case, we hold that CIT(A) has rightly granted relief to the assessee since finding no discrepancy in stock in principle. We thus affirm CIT(A)’s above findings under challenge deleting the impugned addition. The Revenue’s sixth appeal IT(SS)A No.32/Kol/2019 also fails.” 9. Since the issue has already been dealt as referred above, we respectfully following the decision of the coordinate bench of ITAT, Kolkata in the case of Shatinath Detergents Pvt. Ltd. (supra) find no reason to interfere with the findings given by the Ld. CIT(A) in deleting the impugned addition. Accordingly, ground no. 1 is dismissed. 10. In respect of ground nos. 2 to 4, wherein the sales tax incentive received by the assessee from the Govt. of West Bengal amounting to Rs.3,03,57,566/- treated as capital receipt and hence, not chargeable to tax, it was submitted by the Ld. Counsel that this very issue has been dealt in assessee’s own case for AYs 2013-14 and 2015-16 by the coordinate bench of ITAT, Kolkata in IT(SS)A No. 36/Kol/2019 and ITA No. 466/Kol/2021 respectively. The sales tax incentive received by the assessee from the Govt. of West 7 IT(SS)A No.37/Kol/2019 Ritum Jain, AY: 2015-16. Bengal has been held to be capital in nature in both the above cited decisions. Relevant extracts from IT(SS)A No. 36/Kol/2019 dated 22.10.2020 is reproduced as under: 5. Ground No. 3, 4 & 5 are against the ld. CIT(A) holding that the sales tax incentive received by the assessee from the Govt. of West Bengal, amounting to Rs.1,72,23,509/-, as being capital receipt and hence no taxable. 5.1. After hearing rival contentions, we find that the assessee has made this claim for the first time before the ld. CIT(A) and the ld. CIT(A), by applying the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 and Jute Corporation of India vs. CIT [1991] 187 ITR 688 (SC), admitted the additional grounds. This admission of additional grounds is not specifically challenged by the revenue. 5.1.1. Coming to the merits, the finding of the ld. CIT(A) held that the sales tax incentive received from the Government of West Bengal is capital in nature. We find that the Kolkata ‘C’ Bench of the ITAT, in the case of ACIT, CC-3(2) vs. Shantinath Detergents Pvt. Ltd. in IT(SS)A No. 27 to 32/Kol/2019, order dt. 20/03/2020, in the case of a group concern of the assessee and has considered an identical facts and adjudicated the same in favour of the assessee by holding as under:- “7. We have given our thoughtful consideration to rival contentions. It is crystal clear from the CIT(A)'s above extracted detailed discussion and the relevant facts emerging from the case file(s) that the assessee had raised both these issue(s) in the course of lower appellate proceedings. We further find that contrary to the Revenue's case that only the last assessment year involved sec. 143(3) proceedings, scrutiny assessment(s) for AYs 2012-13 and 2013-14 were also pending as on the date of search i.e. 17/18.12.2014 since the Assessing Officer had issued the corresponding sec. 143(2) notice(s) on 24.12.2014 and 08.09.2014; respectively. The Revenue's case that the former five assessment year(s) upto assessment year 2013-14 involved unabated assessment 153A(1)(b) is not factual correct therefore since only AYs 2009-10 to 2011-12 contain abated proceedings. That being the case, we are of the opinion that it technical argument challenging correctness of the CIT(A)'s action to have erred in admitting the assessee's additional ground to this effect carries no merit in assessment years in AYs 2012-13, 2013-14 and 2015-16 since involved "abated" assessment(s) for assessing not only the income under normal provisions but also that emanating from the alleged incriminating material found / seized during the course of search. 9. Next comes yet another significant aspect on merit as to whether the impugned sales tax incentive subsidy sum(s) received under Notification No. 1460 dated 27.05.1994 issued by the West Bengal Industrial Promotion (Assistance to Industrial Units) Scheme are in the nature of a capital or revenue subsidy. We find this latter issue to be no more res integra since the CIT(A) has taken note of various 8 IT(SS)A No.37/Kol/2019 Ritum Jain, AY: 2015-16. judicial precedents; including that of hon'ble jurisdictional high court, that this subsidy gives rise to capital receipt only. We adopt the very reasoning mutatis mutandis and uphold the CIT(A)'s findings under challenge granting relief to assessee.” 6. On a query from the Bench, the ld. D/R, could not demonstrate that the scheme under which the Sales Tax incentive was given to the assessee was different from the scheme under which sales tax incentive was given to Shantinath Detergents Pvt. Ltd.. On facts, he could not distinguish this case from that of the case of Shantinath Detergents Pvt. Ltd. Hence, we find no infirmity in the order of the ld. CIT(A). We uphold the same by applying the proposition of law laid down by the ITAT, in the case of Shantinath Detergents Pvt. Ltd. (supra). Hence Ground Nos. 3, 4 & 5 raised by the revenue are dismissed.” 11. Also relevant extracts from ITA No.466/Kol/2021 dated 30.03.2022 are reproduced as under: “4.1. We have heard the rival contentions of the ld. representatives of both the parties and gone through the records. So far as the claim of ITA No.466/KOL/2021 Shri Ritum Jain A.Y. 2014-15 4 the assessee on merits is concerned, the ld. DR has been fair enough to admit that as per the settled position of law by the Hon’ble Supreme Court in the case of CIT vs Ponni Sugars & Chemicals Ltd. [2008] 306 ITR 392 / 174 Taxman 87 (SC) and further by the decision of Hon’ble Supreme Court in the case of Balaji Alloys vs CIT [2017] 80 taxmann.com 239 (SC) dated 19.04.2016 and the decision of the Jurisdictional Calcutta High Court in the case of CIT vs Rasoi Limited [2011] 335 ITR 438 (Cal) (HC) dated 19.05.2011, the sales tax subsidy received by the assessee from the Govt. of West Bengal under a scheme of industrial promotion was a capital receipt. She has also fairly admitted that the said issue has already been decided by the Tribunal in the own case of the assessee for the earlier assessment year A.Y. 2013-14 vide order dated 22.10.2020 passed in IT(SS)A No. 36/Kol/2019, wherein, the Tribunal while relying upon the another decision of the Coordinate Bench of the Tribunal in the case of “ACIT vs Shantinath Detergents Pvt. Ltd. in IT(SS)A No. 27 to 32/Kol/2019 order dated 20.03.2020 has decided the aforesaid issue in favour of the assessee. Having the said issue already decided in favour of the assessee in the earlier assessment year i.e. A.Y. 2013-14, it is obvious that for the subsequent assessment year 2014- 15, on the same analogy, the said receipt of sales tax subsidy is to be treated as capital receipt.” 12. Since the issue has already been decided in favour of the assessee in the preceding assessment years of 2013-14 and 2014-15, on the same analogy, we respectfully following the same, treat the receipt of sales tax subsidy in the year under consideration before us as capital receipt and affirm the 9 IT(SS)A No.37/Kol/2019 Ritum Jain, AY: 2015-16. finding given by the Ld. CIT(A) in this respect. Accordingly, grounds taken by the revenue in this respect are dismissed. 13. In the result, appeal of the revenue is dismissed. Order pronounced in the open Court on 24th November, 2022 Sd/- Sd/- (Sanjay Garg) (Girish Agrawal) Judicial Member Accountant Member Dated: 24 th November, 2022 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent:. 3. CIT(A), 21, Kolkata. 4. The Pr. CIT, Kolkata. 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata