M/s. B. Ratan & Company, JODHPUR V. ACIT, BARMER

MA 12/JODH/2012

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1860 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 01-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-03-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 21-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN
• Keywords: Depreciation; Question of law
• Section: 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER MA NOS.12 & 13/JODH/2012 (ARISING OUT OF ITA NOS. 25 & 24/JODH/2010) (A.YS. : 2006-07 & 2005-06) M/S. B. RATAN & COMPANY, VS. ACIT, CIRCLE-BAR MER, C/O SHRI U.C. JAIN, ADVOCATE, BARMER. SHATRUNJAY HARI SINGH NAGAR, PALI ROAD, JODHPUR. PAN: AABFB 0915 C (APPELLANT) (RESPONDENT) AND ITA NOS. 24 & 25/JU/2010) (A.YS. : 2005-06 & 2006-07) M/S. B. RATAN & COMPANY, VS. ACIT, CIRCLE-BAR MER, C/O SHRI U.C. JAIN, ADVOCATE, BARMER. SHATRUNJAY HARI SINGH NAGAR, PALI ROAD, JODHPUR. PAN: AABFB 0915 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI U.C. JAIN . DEPARTMENT BY : SHRI N.A. JOSHI, D.R. DATE OF HEARING : 28-03-2014 DATE OF PRONOUNCEMENT : 01-04-2014 2 ORDER PER N.K. SAINI, A.M. THESE TWO MISCELLANEOUS APPLICATIONS ARISING OUT OF THE COMMON ORDER DATED 03/06/2011 PASSED IN ITA NOS. 24 & 25/JU/2010 FOR THE A.YS. 2005-06 & 2006-07 HAVE BEEN FILED BY THE ASSESSEE. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IN THESE MISC . APPLICATIONS IS THAT THE FINDING RECORDED AT PAGE 24 WITH REGARD TO CITATION JHAVARLAL VS. ITO, IN INCOME TAX DIVISION BENCH I.T. REF. NO 76/1999, DATED 24/0 9/1999 IS CIT VS. B. RATAN & COMPANY (THE ASSESSEE) , A COPY OF WHICH IS AVAILAB LE AT PAGE 83-98 AND THIS IS A CONSOLIDATED ORDER IN RESPECT OF SEVEN PARTIES REPO RTED IN 245 ITR 527. IT IS FURTHER STATED THAT THE GROUND NO. 6 IN BOTH THE YE ARS IS NOT DECIDED AND THAT THE ASSESSEE CHALLENGED THE ORDER OF THE LD. CIT UNDER SECTION 263 OF THE ACT ON THE GROUND THAT WHEN THE LD. CIT HAS NOT RAISED THE ISS UE RELATING TO THE PAYMENT OF INTEREST TO 3 RD PARTIES IN THE SHOW CAUSE NOTICE NOR PROVIDED ANY OPPORTUNITY ON THE ISSUE BEFORE ISSUING SUCH DIRECTION, THE DIRECT ION SO ISSUED IS WITHOUT JURISDICTION AND REQUIRES TO BE QUASHED. 3. DURING THE COURSE OF HEARING, LD. COUNSEL FOR TH E ASSESSEE REITERATED THE CONTENTS OF THE AFORESAID MISC. APPLICATIONS DATED 24/06/2011 AND SUBMITTED THAT THE MISTAKE IS APPARENT FROM RECORD, THEREFORE, THE ORDER MAY BE RECALLED AND 3 CORRECT FINDING IS TO BE GIVEN WITH REGARD TO DEDUC TION OF INTEREST PAID TO THE THIRD PARTIES. 4. IN HIS RIVAL SUBMISSIONS, LD. D.R. ALTHOUGH OPPO SED FOR RECALLING OF THE ORDER, BUT COULD NOT CONTROVERT THE AFORESAID CONTE NTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NO TICED THAT INADVERTENTLY AND DUE TO OVERSIGHT, THE NAME OF THE CASE AT PAGE 24 OF TH E ORDER HAS WRONGLY BEEN MENTIONED AS JHAVARLAL VS. ITO, IN INCOME TAX DIVIS ION BENCH I.T. REF. NO 76/1999, DATED 24/09/1999 WHEREAS THE CASE DECIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE JUDGMENT DATED 24/09 /1999 WAS RELATING TO THE ASSESSEE ITSELF WHICH IS APPARENT FROM PAGE 87-102 OF THE ASSESSEES PAPER BOOK WHICH IS A COPY OF THE JUDGMENT DELIVERED BY THE HO N'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 24/09/1999. IN THE SAID JUDGMENT AT SERIAL NO.7 IN DIVISION BENCH I.T. REF. NO. 76/1999, THE NAME OF THE CASE I S THE COMMISSIONER OF INCOME TAX, BARMER VS. M/S. B. RATNA & COMPANY I.E. ASSESSEE. WE, THEREFORE, BY ACCEPTING THE PLEA OF THE LEARNED COUNSEL FOR TH E ASSESSEE, RECALL THE ORDER DATED 03/06/2011 IN I.T.A.NO. 24 & 25/JU/2010 FOR T HE A.Y. 2005-06 & 2006-07 TO DECIDE THE ISSUE RELATING TO THE DEDUCTION ON AC COUNT OF INTEREST PAID TO THE THIRD PARTIES. 4 6. SINCE, BOTH THE PARTIES WERE READY TO ARGUE THE MATTER, THEREFORE, BOTH THE CASES I.E. I.T.A. NOS. 24 & 25/JU/2010 ON THE LIMIT ED ISSUE OF DEDUCTION ON ACCOUNT OF INTEREST PAID TO THE THIRD PARTIES WERE HEARD TOGETHER. 7. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 24/09/19 99 IN I.T. REF.NO. 76/1999 AND ALSO IN THE CASE OF CIT VS. BHAWAN VA PATH NIRM AN (BOHRA) AND CO. (NO.1) REPORTED IN 258 ITR 431. 8. IN HIS RIVAL SUBMISSIONS, LD. D.R. ALTHOUGH SUP PORTED THE ORDER OF THE LD. CIT(A), BUT COULD NOT CONTROVERT THE AFORESAID CONT ENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IT IS NOT ICED THAT THE HON'BLE JURISDICTIONAL HIGH COURT WHILE DECIDING THE CASE O F THE ASSESSEE FOR THE A.Y. 1993-94 IN I.T. REF. NO. 76/1999 VIDE ORDER DATED 2 4/09/1999 HAS HELD AS UNDER:- IN THE INSTANT CASES, THE TRIBUNAL WHILE ALLOWING THE APPEAL HAS DIRECTED THE ASSESSING AUTHORITY TO RE-COMPUTE THE TOTAL INCOME AS ESTIMATED BY HIM AND ALLOW RELIEF ON ACCOUNT OF PAYMENT OF INTEREST AND CLAIM OF DEPRECIATION. THE FINDING RECORDED BY THE TRIBUNAL IS PURELY A FI NDING OF FACT, BASED ON PROPER APPRECIATION OF MATERIAL ON RECORD AND THE E VIDENCE PRODUCED BY THE ASSESSEE. AS NO QUESTION OF LAW ARISES OUT OF THE ORDER PASSED BY THE 5 TRIBUNAL, WE FIND NO FAULT WITH THE ORDER OF THE TR IBUNAL DECLINING TO REFER THE QUESTION FOR OUR OPINION. 10. SIMILARLY, THE HON'BLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS. BHAWAN VA PATH NIRMAN (BOHRA) AND CO. (NO.1) (SUPRA ) HELD AS UNDER:- THAT THE TRIBUNAL LINKED THE PROCESS OF ESTIMATIN G INCOME WITH THE PAST PRACTICE FOLLOWED IN THE ASSESSEES CASE BY THE REV ENUE ITSELF CONSISTENTLY FOR FIVE YEARS PRIOR TO THE RELEVANT YEARS IN QUESTION. IN THIS CASE THE VERY FOUNDATION OF FIXING THE NET PROFIT RATE HAD BEEN T HE AVERAGE NET PROFIT RATE AS HAD BEEN APPLIED BY THE REVENUE IN THE PAST CONS ISTENTLY SINCE THE ASSESSMENT YEAR 1989-90 AND WHICH HAD BEEN FOLLOWED IN DETERMINING THE TAXABLE INCOME OF THE ASSESSEE YEAR AFTER YEAR. IN THE NET PROFIT SO FIXED THE ELEMENT OF DEPRECIATION ON THE FIXED ASSET AND INTE REST ON BORROWINGS HAD NOT BEEN TAKEN INTO CONSIDERATION IN DETERMINING TH E NET PROFIT RATE. CONSEQUENTLY, THE TRADING RESULT OBTAINED BY APPLYI NG SUCH NET PROFIT RATE NEED FURTHER APPROPRIATION TOWARDS ALLOWABLE DEPREC IATION AND INTEREST ON BORROWINGS. THE TRIBUNAL WAS RIGHT IN MODIFYING TH E ORDER PASSED BY THE ASSESSING OFFICER BY MAKING THE NET PROFIT RATE SUB JECT TO ADJUSTMENT TOWARDS DEPRECIATION AND INTEREST ON BORROWINGS. T HIS CONCLUSION WAS A PURE FINDING OF FACT AND WOULD NOT GIVE RISE TO A Q UESTION OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW. 11. WE, THEREFORE, IN VIEW OF THE RATIO LAID DOWN B Y THE HON'BLE JURISDICTIONAL HIGH COURT IN THE AFORESAID REFERRED TO CASES, ARE OF THE CONFIRMED VIEW THAT THE DEDUCTION ON ACCOUNT OF INTEREST PAID TO THE THIRD PARTIES IS TO BE ALLOWED TO THE ASSESSEE AND MODIFY THE EARLIER ORDER DATED 03/06/2 011 PASSED BY THE ITAT TO THIS EXTENT THAT ALLOWING DEDUCTION OF GOVT. RECOVE RIES FROM THE TOTAL TURNOVER, THE ASSESSMENT ORDER WAS ERRONEOUS INASMUCH AS IT I S PREJUDICIAL TO THE INTEREST OF THE REVENUE, BUT NOT IN RESPECT OF OTHER ISSUES INCLUDING THE DEDUCTION OF INTEREST PAID TO THE THIRD PARTIES RAISED BY THE CO MMISSIONER. THIS ORDER SHOULD BE CONSIDERED AS PART OF THE EARLIER ORDER DATED 03 /06/2011. 6 12. IN THE RESULT, MISC. APPLICATIONS OF THE ASSESS EE ARE ALLOWED AND APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01-0 4-2014.) SD/- SD/- (HARI OM MARATHA) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 01 ST APRIL, 2014 VR/- COPY TO:- 1.THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE LD. CIT(A) 5. THE DR 6. THE GUARD FILE ASSISTANT REGISTRAR ITAT, JODHPUR