M/s. Ganesh Garhia Construction Co., SRIGANGANAGAR V. ACIT, SRIGANGANAGAR

MA 4/JODH/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1851 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 02-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-04-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 29-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Depreciation; Question of law

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 NO.04 /JODH/2013 (ARISING OUT OF ITA NO. 430/JU/2008) ASSESSMENT YEAR : 2004-05 M/S. GANESH GARHIA CONSTRUCTION CO., VS. ACIT, CI RCLE, 1-D-21, JAWAHAR NAGAR, SRIGANGANAGAR. SRIGANGANAGAR. PAN: AACFG 3888 L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURESH OJ HA DEPARTMENT BY : SHRI N.A. JOSHI, D.R. DATE OF HEARING : 28-04-2014 DATE OF PRONOUNCEMENT : 02-05-2014 ORDER PER N.K. SAINI, A.M. THIS MISCELLANEOUS APPLICATION ARISING OUT OF THE O RDER DATED 16/04/2009 IN ITA NO. 430/JU/2008 FOR THE A.Y. 2004-05 HAS BEEN F ILED BY THE ASSESSEE STATING THEREIN AS UNDER:- 2 IN THIS MISC. APPLICATION, THE ASSESSEE CONTENDED A S UNDER:- WITH REFERENCE TO ABOVE IT IS STATED THAT APPEAL OF THE REVENUE WAS DECIDED BY THE HON'BLE BENCH VIDE ORDER DATED 26.4. 2009, IN THIS RESPECTS IT IS STATED THAT THE HON'BLE TRIBUNAL DECIDED THE APPEAL OF THE DEPARTMENT. THE ISSUE INVOLVED IN THE APPEAL IS IN RESPECT OF ALLOW ABILITY OF FURTHER 2 DEDUCTION AFTER APPLICATION OF RATE OF PROFIT IN CA SE OF INTEREST PAID TO THIRD PARTY AND DEPRECIATION. THE ISSUE BEFORE THE HON'BLE BENCH WAS WHETHER 92% EXPENSES HAS TO BE CONSIDERED AND REST OF THE 8% SHOULD BE TAXED IRRESPECTIVE OF THE DEDUCTION OF INTEREST AND DEPRECIATION TO THE THIRD PARTY. AS FAR AS THE MISTAKE IS CONCERNED I WANT TO DRAW Y OUR KIND ATTENTION TOWARDS THE FACT THAT FROM THE PERUSAL OF PARAGRAPH 6 OF THE ORDER OF HON'BLE TRIBUNAL YOU WILL OBSERVE THAT THE HON'BLE TRIBUNAL ALSO DISCUSSED AND REFERRED THE CASE LAWS ON WHICH THE ASSESSEE RE LIED UPON. IN COURSE OF THE HEARING OUR ADVOCATE SH. SURESH OJHA APPEARED ON RE LYING UPON 258 ITR PAGE NO. 440 (RAJASTHAN), 266 ITR PAGE NO. 99 (SC) AND 105 ITD PAGE NO. 1 (DELHI). THE HON'BLE TRIBUNAL WHILE DECIDING THE AP PEAL HAVING ADJUDICATED THE CASE LAWS ON WHICH THE ASSESSEE RELIED UPON. TH E JUDGMENT RELIED BY OUR ADVOCATE IS JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT HAVING THE CHARACTER OF BINDING NATURE. NOT CONSIDERING THE JUDGMENT OF HO N'BLE RAJASTHAN HIGH COURT ITSELF CONSTITUTED A MISTAKE A PPARENT FROM THE RECORD. IN THIS RESPECT YOUR KIND ATTENTION IS INVITED TOWA RDS ORDER OF THIS HON'BLE BENCH DECIDED IN CASE OF DR. ASHOK UPAL. IN THE ORDER IN QUESTION IS SQUARELY APPLICABLE DECIDED THE ISSUE W HERE THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT REMAIN UN-ADJUDICATED, THEREFORE, THE ISSUE INVOLVED IS SQUARELY COVERED BY THE JUDGMENT OF HON 'BLE RAJASTHAN HIGH COURT. YOUR KIND ATTENTION IS INVITED TOWARDS THE CASE LAW REFERRED BY THE HON'BLE MEMBER WHILE DECIDING THE APPEAL IN CASE OF 245 ITR PAGE NO. 527. THE HON'BLE TRIBUNAL WHILE DECIDING THE APPEAL PICKS UP PART OF THE JUDGMENT AND NOT CONSIDERED REST OF THE PART. THOUG H, THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT ON WHICH THE HON'BLE B ENCH RELIED WAS IN RESPECT OF REOPENING OF THE ASSESSMENT UNDER SECTIO N 263. WHILE DELIVERING THE JUDGMENT THE HON'BLE HIGH COURT ALSO APPROVED THE APPLICATION OF RATE OF PROFIT AND THEREAFTER ALLOW THE DEPRECIATION. THE ISSUE OF INTEREST PAID TO THIRD PARTY WAS NOT THE S UBJECT MATTER OF THIS JUDGMENT. IN SUCH CIRCUMSTANCE THIS CASE LAW IS NOT APPLICABLE. IN CASE OF M/S BHAWAN VA PATH NIRMAN THE HON'BLE RA JASTHAN HIGH COURT ALSO APPROVED INTEREST PAY TO THIRD PARTY WHI CH TO IS APPLICABLE. THE HON'BLE BENCH WHILE DECIDING THE APPEAL SAID NO THING ABOUT THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT. IN THIS RESPECT IT WILL BE WORTHWHILE TO MENTION HE RE THAT THE SECOND MISTAKE IS THAT WHEN THE ASSESSEE REFERRED CASE OF SUPREME COURT REPORTED IN 266 ITR PAGE 99. THE HON'BLE TRIBUNAL S AID NOTHING WHEREAS 3 THE JUDGMENT OF HON'BLE SUPREME COURT IS LAW OF LAN D, WHICH CANNOT BE IGNORED JUST BY REFERRING, THEREFORE THIS TOO BEING A MISTAKE. IN CASE OF THE ASSESSEE HIMSELF, IN PAST ACCEPTED THE APPEAL A ND NO APPEAL HAS BEEN FILED BEFORE THE HON'BLE HIGH COURT THEREFORE THE JUDGMENT OF SUPREME COURT IS APPLICABLE IN TOTO. NON-CONSIDERIN G THE SUPREME COURT JUDGMENT IS A MISTAKE APPARENT FROM RECORD. IN ABOVE MENTIONED FACTS AND CIRCUMSTANCES YOU WILL OBSERVE THAT THE MISTAKE AS POINTED OUT ABOVE I.E. NOT ALLOWING THE INTEREST PAID TO THIRD PARTY IS A MISTAKE APPARENT FROM THE RECORD REQUIRE D RECTIFICATION. FURTHER, IT WILL BE WORTHWHILE TO MENTION HERE THAT THE ORDER OF THE HON'BLE TRIBUNAL IN CASE OF THE ALLIED CONSTRUCTION ON WHICH THE ASSESSEE RELIED UPON WAS ALSO ADJUDICATED. IN THIS RESPECT YOUR KIND ATTENTION IS INVITED TOWARDS THE CASE REPORTED IN 9 4 TTJ PAGE NO. 133 IN WHICH THE HON'BLE BENCH HELD THAT NOT CONSIDERING A ND ADJUDICATING THE CASE LAW REFERRED BY THE ADVOCATE IN COURSE OF HEAR ING WILL CONSTITUTE A MISTAKE APPARENT FROM THE RECORD. IN ABOVE MENTIONED FACTS AND CIRCUMSTANCES YOU WILL OBSERVE THAT THE FINDING RECORDED BY THE HON'BLE BENCH IN PARAGRAPH 12 SEEMS TO BE UNDER SOME WRONG IMPRESSION AND WITHOUT APPRECIATIN G CASE LAW. THE HON'BLE TRIBUNAL CONSISTENTLY HELD THAT PAST HI STORY SHOULD BE CONSIDERED AND CAN BE A GAUGE AND GUIDE. IN THIS CO NNECTION YOUR KIND ATTENTION IS FURTHER INVITED TOWARDS THE ORDER OF M /S G.R. CONTRACTOR, SRI GANGANAGAR IN WHICH THE HON'BLE TRI BUNAL HELD THAT PAST RESULT SHOULD HAVE BEEN FOLLOWED. THE NEXT MISTAKE IS THAT THE HON'BLE TRIBUNAL WHILE DECIDING THE APPEAL REFERRED ONE CASE OF ALLIED CONSTRUCTION COMPANIES REPORTED IN 105 ITD PAGE 1. THE HON'BLE TRIBUNAL WHILE PASSING THE ORDE R MENTIONED AS SB CASE WHEREAS THE CASE REPORTED IN 105 ITD PAGE 1 IS A CASE OF SPECIAL BENCH. THERE ARE SO MANY CASES THAT CASE OF SPECIAL BENCH IS HAVING THE CHARACTER OF BINDING NATURE. THIS ISSUE WHETHER THE SPECIAL BENCH ORDER WILL PREVAIL OR NOT HAVE THRESH OUT BY MANY TIME, T HEREFORE, I AM NOT SUBMITTING MUCH MORE BUT ONLY STATING THAT THE ORDE R OF THE SPECIAL BENCH IS HAVING THE CHARACTER OF BINDING NATURE. NO W, REGARDING MISTAKE APPARENT FROM THE RECORD IS CONCERNED YOUR KIND ATTENTION IS INVITED TOWARDS THE JUDGMENT OF RAJASTHAN HIGH COUR T IN WHICH IT HAS BEEN HELD THAT IF THE BINDING JUDGMENT HAS BEEN ESC APED OR NOT CONSIDERED, MISTAKE CAN BE RECTIFIED AS PER THE JUD GMENT OF HON'BLE RAJASTHAN HIGH COURT REPORTED IN 251 ITR PAGE NO.58 7. JUST TO BRING THE ATTENTION OF THE BENCH IT WILL BE WORTHWHILE TO DRA W YOUR KIND ATTENTION FOR EXAMPLE TOWARDS THE CASE REPORTED IN 151 ITR PA GE NO. 584 IN WHICH IT HAS BEEN HELD THAT THE ORDER OF THE SPECIA L BENCH IS BINDING. 4 IN THESE FACTS AND CIRCUMSTANCES YOU WILL OBSERVE T HAT THIS BEING A MISTAKE ALSO APPARENT FROM THE RECORD REQUIRES RECT IFICATION. IN ABOVE MENTIONED FACTS AND CIRCUMSTANCES IT IS RE QUESTED THAT THE MISTAKE AS POINTED OUT ABOVE MAY KINDLY BE RECTIFIE D UNDER SECTION 254 (2) OF THE INCOME TAX ACT. IN THIS RESPECT IT IS STATED THAT THE JUDGMENT OF T HE BINDING NATURE WAS NOT CONSIDERED AND ARGUMENT NOT CONSIDERED IS/ ARE MISTAKES COVERED U/S 254(2) OF THE I. T. ACT. CHALLAN BEING THE MISCELLANEOUS APPLICATION FEES AM OUNTING TO RS. 50 IS BEING ANNEXED HEREWITH. COPY OF ORDER OF THE HON'BLE TRIBUNAL DATED 16.4.20 09 IS ALSO BEING ANNEXED HEREWITH FOR YOUR KIND PERUSAL. THANKING YOU, YOURS FAITHFULLY, FOR M/S GANESHGARHIA CONSTRUCTION CO. SD/- X XXX X PARTNER ENCL: -AS ABOVE DATE: - 26/04/2011 3. DURING THE COURSE OF HEARING, LD. COUNSEL FOR TH E ASSESSEE REITERATED THE CONTENTS OF THE AFORESAID MISC. APPLICATION AND SUB MITTED THAT SINCE THE MISTAKE IS APPARENT FROM THE RECORD, THE ORDER DATED 16/04/200 9 MAY BE RECALLED AND RECTIFIED. 4. IN HIS RIVAL SUBMISSIONS, LD. D.R. OPPOSED THE R ECALLING OF THE ORDER AND STATED THAT THE ISSUE WAS DECIDED ON MERIT VIDE ORD ER DATED 16/04/2009. SO, THERE IS NO MISTAKE APPARENT FROM THE RECORD. 5 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND FOUND MERIT IN THE SUBMISSION OF LEARNED COUNSEL FOR THE ASSESSEE. IN THE PRESENT CASE, IT APPEARS THAT DUE TO OVERSIGHT AND INADVERTENTLY, TH E ITAT IN PARA 12 HAS GIVEN DIRECTION WITH REGARD TO THE DEPRECIATION CLAIMED O UT OF THE ESTIMATED INCOME, BUT HAD NOT CONSIDERED THE CLAIM OF THE ASSESSEE ON ACC OUNT OF INTEREST TO THE THIRD PARTIES WHICH WAS OTHERWISE ALLOWABLE BY THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BHAWAN VA PATH NIRMAN REPORTED AT 258 ITR 4 31 (RAJ.) CITED BY THE ASSESSEE, AS SUCH THE MISTAKE IS APPARENT FR OM THE RECORD. WE, THEREFORE, BY ACCEPTING THE PLEA OF THE LD. COUNSEL FOR THE AS SESSEE, RECALL THE ORDER DATED 16/04/2009 IN I.T.A.NO. 430/JU/2008 TO DECIDE THE I SSUE RELATING TO INTEREST TO THE THIRD PARTIES OUT OF THE NET PROFIT RATE WORKED OUT BY APPLYING THE NP RATE OF 8%. 6. SINCE, BOTH THE PARTIES WERE READY TO ARGUE THE MATTER, THEREFORE, I.T.A. NO. 430/JODH/2008 ON THE LIMITED ISSUE OF DEDUCTION ON ACCOUNT OF INTEREST PAID TO THE THIRD PARTIES FROM THE ESTIMATED INCOME DETE RMINED BY APPLYING THE NP RATE WAS HEARD ALONG WITH THIS MISC. APPLICATION. 7. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN THE CASE OF M/S. B. RATAN & COMPANY BY T HE HON'BLE JURISDICTIONAL HIGH COURT VIDE ORDER DATED 24/09/1999 IN I.T. REF .NO. 76/1999 AND ALSO IN THE 6 CASE OF CIT VS. BHAWAN VA PATH NIRMAN (BOHRA) AND C O. (NO.1) REPORTED IN 258 ITR 431 (SUPRA). 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 M/S. B. RATAN & COMPANY FOR THE A.Y. 1993-94 IN I.T. REF. NO. 76/1999 VIDE ORDE R DATED 24/09/1999 HAS HELD AS UNDER:- IN THE INSTANT CASES, THE TRIBUNAL WHILE ALLOWING THE APPEAL HAS DIRECTED THE ASSESSING AUTHORITY TO RE-COMPUTE THE TOTAL INC OME AS ESTIMATED BY HIM AND ALLOW RELIEF ON ACCOUNT OF PAYMENT OF INTER EST AND CLAIM OF DEPRECIATION. THE FINDING RECORDED BY THE TRIBUNAL IS PURELY A FINDING OF FACT, BASED ON PROPER APPRECIATION OF MATERIAL ON R ECORD AND THE EVIDENCE PRODUCED BY THE ASSESSEE. AS NO QUESTION OF LAW ARISES OUT OF THE ORDER PASSED BY THE TRIBUNAL, WE FIND NO FAULT WITH THE ORDER OF THE TRIBUNAL DECLINING TO REFER THE QUESTION FOR OUR OP INION. 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 Y EARS IN QUESTION. IN THIS CASE THE VERY FOUNDATION OF FIXING THE NET PROFIT R ATE HAD BEEN THE 7 AVERAGE NET PROFIT RATE AS HAD BEEN APPLIED BY THE REVENUE IN THE PAST CONSISTENTLY SINCE THE ASSESSMENT YEAR 1989-90 AND WHICH HAD BEEN FOLLOWED IN DETERMINING THE TAXABLE INCOME OF THE A SSESSEE YEAR AFTER YEAR. IN THE NET PROFIT SO FIXED THE ELEMENT OF DE PRECIATION ON THE FIXED ASSET AND INTEREST ON BORROWINGS HAD NOT BEEN TAKEN INTO CONSIDERATION IN DETERMINING THE NET PROFIT RATE. CONSEQUENTLY, THE TRADING RESULT OBTAINED BY APPLYING SUCH NET PROFIT RATE NEED FURT HER APPROPRIATION TOWARDS ALLOWABLE DEPRECIATION AND INTEREST ON BORR OWINGS. THE TRIBUNAL WAS RIGHT IN MODIFYING THE ORDER PASSED BY THE ASSESSING OFFICER BY MAKING THE NET PROFIT RATE SUBJECT TO ADJUSTMENT TOWARDS DEPRECIATION AND INTEREST ON BORROWINGS. THIS CONC LUSION WAS A PURE FINDING OF FACT AND WOULD NOT GIVE RISE TO A QUESTI ON 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 16/04/2 009 PASSED BY THE ITAT TO THIS EXTENT. 12. IN THE RESULT, MISC. APPLICATION OF THE ASSESSE E IS ALLOWED AND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON THIS 02-0 5-2014.) SD/- SD/- (HARI OM MARATHA) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 02 ND MAY, 2014 VR/- 8 COPY TO:- 1.THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE LD. CIT(A) 5. THE D.R. 6. THE GUARD FILE. ASSISTANT REGISTRAR ITAT, JODHPUR.