Sri.Late P.P.Jose rep by L/hr Sunny P.Jose, Trivandrum V. ACIT, Trivandrum

MA 101/COCH/2012

• Counselvise Citation: [2013] 123 COUNSELVISE.COM (IT) 9782 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-01-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 20-11-2012
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: N VASUDEV RAJKUMAR
• Keywords: Depreciation
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 303/COCH/2011 & 137/COCH/2012 ASSESSMENT YEAR : 2007-08 REHABILITATION PLANTATIONS LTD., PUNALUR. [ PAN:AAACT 8105A] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLLAM. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) I.T.A. NO. 422/COCH/2011 ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-1, KOLLAM. VS. REHABILITATION PLANTATIONS LTD., PUNALUR. [ PAN:AAACT 8105A] (REVENUE -APPELLANT) (ASSESSEE-RESPONDENT) REVENUE BY SMT. S. VIJAYAPRABHA JR. DR ASSESSEE BY SHRI N. VASUDEV RAJKUMAR, CA DATE OF HEARING 29/11/2012 DATE OF PRONOUNCEMENT 22/01/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: ALL THE THREE APPEALS RELATE TO THE ASSESSMENT YEA R 2007-08. BOTH THE PARTIES ARE IN APPEAL CHALLENGING THE ORDER PASSED BY LD CIT(A) AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. THE ASSESSEE HAS FILED ONE MORE APPEAL IN ITA NO.137/COCH/2012 CHALLENGING THE REVISION ORDER PASSED BY THE ADMINISTRATIVE COMMISSIONER U/S 263 OF THE ACT. ALL THESE APPEALS WERE HEARD TOGETHER AND HENCE THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. I.T.A. NOS. 303 & 422/COCH/2011 & 137/COCH/2012 2 2. WE SHALL TAKE UP THE APPEALS FILED BY BOTH T HE PARTIES AGAINST THE ORDER OF LD CIT(A). THE ASSESSEE IS CHALLENGING THE DECISIO N OF LD CIT(A) ON THE FOLLOWING ISSUES:- (A) DEDUCTION OF REPLANTATION EXPENSES UNDER RULE 7A. (B) ADDITION PERTAINING TO INCOME FROM SALE OF FI ELD LATEX. (C) DETERMINATION OF WDV OF ASSETS FOR THE PURPOSE OF COMPUTING DEPRECIATION. 3. THE REVENUE IS IN APPEAL BEFORE US ON THE FO LLOWING ISSUES:- (A) DEDUCTION OF REPLANTATION EXPENSES UNDER RULE 7A. (B) INCOME FROM SALE OF FIREWOOD AND JACKFRUIT TR EE. 4. THE FIRST ISSUE, WHICH IS COMMON IN BOTH THE APPEALS RELATE TO THE DEDUCTION OF REPLANTATION EXPENSES UNDER RULE 7A OF THE INCOME TAX RULES. BOTH THE PARTIES AGREED THAT THE IMPUGNED ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY HONBLE JURISDICTIONAL KERALA HIGH COUR T, VIDE ITS ORDER DATED 21-02- 2012 IN ITA NO.126 TO 132 OF 2011 IN THE ASSESSEES OWN CASE. WE NOTICE THAT THE DECISION TAKEN BY THE ASSESSING OFFICER ON THIS ISSUE IS IN ACCORDANCE WITH THE DECISION RENDERED BY THE HONBLE HIGH COURT. HENCE , WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE ASS ESSING OFFICER. 5. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE RELATES TO THE ADDITION PERTAINING TO SALE OF FIELD LATEX. THE AO NOTICED THAT THE ASSESSEE HAD PURCHASED FIELD LATEX FROM OUTSIDE SOURCES FOR CENTRIFUGING. THE AO TOOK THE VIEW THAT EXEMPTION PROVIDED UNDER RULE 7A IS APPLICABLE ONLY FOR INCOME DERIVED FROM SALE OF CENTRIFUGING OF LATEX GROWN AND MANUFACTURE D BY THE ASSESSEE. IT APPEARS THAT THE ASSESSEE ACCEPTED THE SAID VIEW OF THE AO AND ACCORDINGLY IT FURNISHED A WORKING SHEET TO SHOW THE INCOME DERIVE D FROM PROCESSING AND SALE OF PURCHASED FIELD LATEX. AS PER THE SAID WORKING, THE ASSESSEE HAD INCURRED A LOSS OF RS.27,100/-. THE AO DID NOT ACCEPT THE SAI D WORKINGS ON THE REASONING THAT THE ASSESSEE DID NOT MAINTAIN SEPARATE BOOKS O F ACCOUNT. ACCORDINGLY, THE AO PROCEEDED TO COMPUTE THE INCOME IN PROPORTION TO THE QUANTITY MANUFACTURED I.T.A. NOS. 303 & 422/COCH/2011 & 137/COCH/2012 3 OUT OF PURCHASED LATEX TO THE TOTAL QUANTITY MANUFA CTURED AND ACCORDINGLY DETERMINED THE INCOME FROM SALE OF PURCHASED LATEX AT RS.5,78,489/-. THE LD CIT(A) ALSO CONFIRMED THE ORDER OF THE AO ON THIS I SSUE. 6. BEFORE US, THE LD A.R CONTENDED THAT THE ASS ESSEE HAS FURNISHED A WORKING SHOWING THE INCOME DERIVED FROM SALE OF CENTRIFUGED LATEX PRODUCED OUT OF THE PURCHASED FIELD LATEX. HE SUBMITTED THAT THE SAID WORKINGS HAVE BEEN MADE BY ADOPTING THE ITEMS OF EXPENDITURE BOOKED IN THE REG ULAR BOOKS OF ACCOUNT. HE SUBMITTED THAT THE AO DID NOT EXAMINE THE SAID WORK INGS AND SIMPLY REJECTED THE SAME BY HOLDING THAT THE ASSESSEE DID NOT MAINTAIN SEPARATE BOOKS OF ACCOUNTS. 7. ON THE CONTRARY, THE LD D.R SUBMITTED THAT T HE ASSESSEE HAS FAILED TO MAINTAIN SEPARATE BOOKS OF ACCOUNT AND HENCE THE AS SESSING OFFICER WAS CONSTRAINED TO ESTIMATE THE INCOME IN PROPORTION TO THE QUANTITY OF CENTRIFUGAL LATEX MANUFACTURED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. ADMITTEDLY, THE ASSESSEE DID NOT MAINTAIN SEPARATE BOOKS OF ACC OUNT FOR PURCHASED LATEX AND MANUFACTURED LATEX. THE QUANTITY MANUFACTURED OUT OF PURCHASED LATEX WAS 38.89 MT AND THE TOTAL QUANTITY MANUFACTURED BY THE ASSESSEE DURING THE YEAR WAS 1728.63 MT. THUS, IT IS SEEN THAT THE QUANTITY MANUFACTURED OUT OF PURCHASED LATEX FORMS A FRACTION OF THE TOTAL QUANT ITY MANUFACTURED DURING THE YEAR. BE THAT AS IT MAY, IT IS ALSO AN ADMITTED FA CT THAT THE ASSESSEE HAS FURNISHED A WORKING TO ARRIVE AT THE PROFIT ON SALE OF 38.89 MT OF LATEX, REFERRED ABOVE. WE NOTICE THAT THE AO DID NOT EXAMINE THE S AID WORKING AT ALL AND DECIDED TO REJECT THE SAME ON THE REASONING THAT TH E ASSESSEE DID NOT MAINTAIN SEPARATE BOOKS OF ACCOUNT. IN OUR VIEW, THE AO SHO ULD HAVE EXAMINED THE SAID WORKINGS AND SHOULD HAVE POINTED OUT THE DEFECTS BE FORE REJECTING THE SAME. ACCORDINGLY, IN OUR VIEW, THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT( A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION TO EXAMINE THE ISSUE AFRESH BY I.T.A. NOS. 303 & 422/COCH/2011 & 137/COCH/2012 4 DULY CONSIDERING THE WORKINGS FURNISHED BY THE ASSE SSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 9. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE RELATES TO THE DETERMINATION OF WDV OF ASSETS FOR THE PURPOSE OF COMPUTATION OF DEP RECIATION. DURING THE COURSE OF HEARING, THE ASSESSEE SUBMITTED THAT THE IMPUGNED ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE SU PREME COURT IN THE CASE OF CIT VS. DOOM DOOMA INDIA LTD (2009)(310 ITR 392). IN VIEW OF THE SAID DECISION OF APEX COURT, IN OUR OPINION, THIS ISSUE REQUIRED FRESH EXAMINATION AT THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE O RDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH T HE DIRECTION TO EXAMINE THIS ISSUE AFRESH BY DULY CONSIDERING THE DECISION OF HO NBLE SUPREME COURT, REFERRED SUPRA. 10. THE ONLY REMAINING ISSUE IN THE APPEAL OF THE REVENUE RELATES TO THE DETERMINATION OF NATURE OF INCOME DERIVED ON SALE O F FIREWOOD AND JACKFRUIT TREE. THE ASSESSEE TREATED THE AMOUNT DERIVED ON SALE OF FIREWOOD AND JACK FRUIT TREE AS AGRICULTURAL INCOME. THE AO, BY FOLLOWING THE D ECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF TRAVANCORE TEA ESTATES (93 ITR 315) HELD THAT THE SAID INCOME IS TO BE TREATED AS OTHER INCOME AND ACCOR DINGLY ASSESSED THE SAME. HOWEVER, THE LD CIT(A) NOTICED THAT THE HONBLE KER ALA HIGH COURT, IN THE ABOVE MENTIONED CASE, HAS DIRECTED TO TREAT THE GAINS ARI SING ON SALE OF TREES AS INCOME FROM CAPITAL GAINS ASSESSABLE U/S 45 OF THE ACT. A CCORDINGLY, THE LD CIT(A) HELD THAT THE INCOME DERIVED BY THE ASSESSEE ON SALE OF FIREWOOD AND JACK FRUIT TREES SHOULD BE TREATED AS GAIN ASSESSABLE U/S 45 OF THE ACT. 11. WE NOTICE THAT THE LD CIT(A) HAS FOLLOWED T HE BINDING DECISION OF THE JURISDICTIONAL HIGH IN DECIDING THIS ISSUE. IT WAS NOT SHOWN TO US THAT THE SAID DECISION WAS REVERSED BY THE HONBLE APEX COURT. U NDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A) ON THIS ISSUE, WHICH IS RENDERED BY FOLLOWING THE BINDING DECISION OF THE J URISDICTIONAL HIGH COURT. I.T.A. NOS. 303 & 422/COCH/2011 & 137/COCH/2012 5 12. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE ASSESSEE AGAINST THE REVISION ORDER PASSED BY THE ADMINISTRATIVE COMMISSIONER. ON EXAMINATION OF RECORD, THE LD CIT NOTICED THAT THE ASSESSING OFFICER HAS FULLY ALLOWED THE LOSS ARISING FROM RUBBER SHEET FACTORY WITHOUT RESTRICTING IT TO 35% BY APPLYING RULE 7A. ACCORDINGLY, HE SET THE ASSESSMENT ORDER AND DIRECT ED THE AO TO REWORK THE LOSS ARISING FROM RUBBER SHEETING FACTORY. AGGRIEVED, TH E ASSESSEE IS IN APPEAL BEFORE US. 13. THE CONTENTION OF THE LD A.R BEFORE US WAS TH AT THE AO HAS DULY CONSIDERED THIS ASPECT, WHILE THE LD D.R SUBMITTED THAT THE AO DID NOT EXAMINE THIS ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDI NG. 14. WE FEEL IT PERTINENT TO REFER TO THE DECISION RENDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92), WHEREIN THE COURT HAS DISCUSSED ABOUT THE SCOPE OF PROVISIONS OF SECTION 263 AS UNDER: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS TH E COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEED INGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER AN ENQUIRY AS IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSE SSMENT. THE KEY WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORD ER MUST BE CONSIDERED BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMEN TS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LT D. V. CIT [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISI ON CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME CO URT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APPLIC ATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONE OUS. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JU STICE OR WITHOUT APPLICATION OF MIND, WOULD BE AN ORDER FALL ING IN THAT I.T.A. NOS. 303 & 422/COCH/2011 & 137/COCH/2012 6 CATEGORY. THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF TH E REVENUE, THE SUPREME COURT HELD, IT IS OF WIDE IMP ORT AND IS NOT CONFINED TO A LOSS OF TAX. WHAT IS PREJUDICIAL TO T HE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMENT OF THE SUPREME COURT (HEAD NOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF A N ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICE R ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULT ED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE IN COME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR I NDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAI NED IN A SUBSEQUENT JUDGMENT OF THE SUPREME COURT IN CIT V . MAX INDIA LTD. [2007] 295 ITR 282. THERE MAY NOT BE ANY DISPUTE THAT THE REVISION PROC EEDING SHALL NOT LIE ON THE ISSUES ON WHICH THE ASSESSING OFFICER HAS TAKEN A P LAUSIBLE VIEW AFTER EXAMINING AND APPLYING HIS MIND ON IT. IF THE AO DID NOT MAK E ANY ENQUIRY ON ANY OF THE PERTINENT ISSUE, IT WILL RESULT IN LACK OF APPLICAT ION OF MIND. THE HONBLE SUPREME COURT HAS HELD IN THE CASE OF MALABAR INDUSTRIAL CO MPANY LTD (SUPRA) THAT THE ASSESSMENT ORDER PASSED WITHOUT APPLICATION OF MIND WILL BE RENDERED ERRONEOUS. IN THE INSTANT CASE, THE AO, APPARENTLY, DID NOT DI SCUSS ABOUT THE ISSUE POINTED OUT BY THE LD CIT. FURTHER, THE ISSUE POINTED OUT BY LD CIT WOULD HAVE IMPLICATION ON THE TAX COMPUTATION, IN WHICH CASE T HE IMPUGNED ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER ARE ALSO PRE JUDICIAL TO THE INTERESTS OF THE REVENUE. 15. IN VIEW OF THE FOREGOING DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY IN THE REVISION ORDER PASSED BY LD CIT. I.T.A. NOS. 303 & 422/COCH/2011 & 137/COCH/2012 7 16. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS TREATED AS PARTLY ALLOWED. THE APPEAL OF THE ASSESSEE IN ITA NO.303/COCH/11 IS TREATED AS ALLOWED AND THE OTHER APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 22-01-2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 22ND JANUARY, 2013 GJ COPY TO: 1. REHABILITATION PLANTATIONS LTD., PUNALUR. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLLAM 3. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, KOLLAM. 4. THE COMMISSIONER OF INCOME-TAX(APPEALS)-I, TRIVA NDRUM. 5. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 6. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 7. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN