D.C. SILK MILLS PVT. LTD., V. JT. CIT CIR.,

MA 704/MUM/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6178 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: misc
• Appeal Filed On: 25-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Loose papers; Question of law; Block assessment; Unabsorbed depreciation
• Section: 153A

Judgement Text

M.A.NO.704/M/2010 D.C. SILK MILLS PRIVATE LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, F BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND R.S. PADVEKAR, JUDICIAL MEMBER M.A.NO.704/M/2010 (ARISING OUT OF I.T.(SS)A NO.714/ MUM/2002) BLOCK PERIOD: 1.4.1987 TO 22.1.1998 DY.CIT 8(1), .. APPELLANT ROOM NO.210, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-20. VS D.C. SILK MILLS PRIVATE LIMITED ,. RESPONDEN T 5, CHUNAWALA INDUSTRIAL ESTATE, KONDIVITTA, ANDHERI KURLA ROAD, ANDHERI(EAST), MUMBAI-59 APPEARANCES: JITENDRA YADAV, FOR THE APPELLANT SASHI TULSIYAN, FOR THE RESPONDENT O R D E R 1. BY WAY OF THIS MISCELLANEOUS APPLICATION, THE ASSESSING OFFICER SEEKS MODIFICATION OF OUR ORDER DATED 22 ND JANUARY, 1998 BY - A) RESTORING THE UNDISCLOSED INCOME OF RS.21,66,452 ON ACC OUNT OF FOREIGN TRAVEL EXPENSES, OFFERED BY THE ASSESSEE FOR TAX IN THE B LOCK RETURN OF INCOME. B) DISALLOWING UNABSORBED LOSSES, AS PER CHAPTER VI AND UNAB SORBED DEPRECIATION AS PER SECTION 32(2) OF THE INCOME TAX ACT, CLAIMED BY THE ASSESSEE IN VIOLATION OF THE PROVISIONS OF EXPLANATION (A ) OF SECTION 158BB(1) OF THE I.T.ACT. 2. AS FAR AS GROUND (B) ABOVE IS CONCERNED, LEARNED DE PARTMENTAL REPRESENTATIVE DOES NOT POINT OUT ANY FINDINGS IN OUR ORDER TO THE EFFECT THAT THE M.A.NO.704/M/2010 D.C. SILK MILLS PRIVATE LIMITED 2 UNABSORBED LOSSES AND UNABSORBED DEPRECIATION UNDER SECTI ON 32(2) OF THE INCOME TAX ACT WERE TO BE ALLOWED IN THE CASE OF THE ASSESSEE. WE, THEREFORE, UNABLE TO SEE ANY MERITS IN THE MISTAKE SO POINTED OUT TO US. AS A MA TTER OF FACT, THERE IS NO DISCUSSION OF ANY SUCH DIRECTION IN OUR ORDER AND THERE IS NO DIRECTION BY THE TRIBUNAL TO ALLOW SUCH UNABSORBED LOSSES AND UNABSORBED D EPRECIATION AS HAS BEEN REFERRED IN THE MISCELLANEOUS APPLICATION. AS THERE I S NO FINDING BY THE TRIBUNAL ON THIS ISSUE, THERE IS CLEARLY NO OCCASION TO RECTIFY THIS ALLEGED MISTAKE WHICH HAVE BEEN POINTED OUT. 3. COMING BACK TO POINT NO.(A) ABOVE, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF BLOCK ASSESSMENT PROCEEDINGS, THE D ISALLOWANCE OF AMOUNT OF RS.21,66,652 WAS MADE BY THE ASSESSEE, ON ACCOUNT OF FOR EIGN TRAVELING EXPENSES, ON THE BASIS OF STATEMENT RECORDED DURING THE COURSE OF SEA RCH OPERATIONS. WHILE THE ASSESSEE HAD HIMSELF OFFERED THE SAID EXPENSES AS UNDISCLOSED INCOME, A GRIEVANCE WAS SUBSEQUENTLY RAISED THAT THE ADDITIONS, WHICH HAVE NOT BEEN MADE ON THE BASIS OF SEIZED MATERIAL, CANNOT BE MADE DURING BLOCK ASSESSME NT PROCEEDINGS. WHEN THE MATTER FINALLY TRAVELED BEFORE US, FOLLOWING THE ESTE EMED VIEWS OF THE CO-ORDINATE BENCHES IN THE CASE OF SIDDARTH KUMAR BAGLA VS DCIT (IT(SS)A NO.76/KOL/2003; ORDER DATED 2 ND APRIL, 2004) AS ALSO HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS DR MKE MENON (248 ITR 310), WE UPHELD THE CON TENTIONS OF THE ASSESSEE AND DIRECTED THE AO TO DELETE THE ADDITION AS UNDISCLOSED INCOME AND LEFT THE MATTER OPEN FOR THE SAME BEING CONSIDERED IN THE COURSE OF RE GULAR ASSESSMENT PROCEEDINGS. NOT SATISFIED WITH THE STAND SO TAKEN BY THE TRIBUNAL, THE ASSESSING OFFICER CARRIED THE MATTER IN APPEAL BEFORE THE HO NBLE BOMBAY HIGH COURT AND THEIR LORDSHIPS UPHELD OUR ACTION BY OBSERVING AS FOLLO WS: THE BASIC QUESTION WHICH ARISES IN THE PRESENT APP EAL PERTAINS TO A DISALLOWANCE OF AN AMOUNT OF RS.21.66 LAKHS BY TH E ASSESSING OFFICER, WHICH WAS CLAIMED BY THE ASSESSEE ON ACCOU NT OF FOREIGN TRAVELING EXPENSES. THE AFORESAID AMOUNT WAS DISCL OSED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE COURSE OF R EGULAR ASSESSMENT FOR ASSESSMENT YEARS 1995-96, 1996-97 AN D 1997-98. BASED ON A SEARCH, AN ADDITION WAS SOUGHT TO BE MAD E BY THE ASSESSING OFFICER DURING THE COURSE OF A BLOCK ASSE SSMENT. IT APPEARS THAT A DIRECTOR OF THE ASSESSEE HAD MADE A STATEMENT DURING THE COURSE OF SEARCH THAT THE AMOUNT HAS BEE N INCURRED TOWARDS TRAVELING EXPENSES OF HIS SPOUSE BUT THIS S TATEMENT WAS M.A.NO.704/M/2010 D.C. SILK MILLS PRIVATE LIMITED 3 RETRACTED. THE TRIBUNAL HAS HELD THAT ADMITTEDLY N O EVIDENCE WAS FOUND AS A RESULT OF THE SEARCH TO INDICATE THE IN ADMISSIBILITY OF THE TRAVELING EXPENSES. THE STATEMENT WHICH WAS MADE BY THE DIRECTOR, AS ALREADY NOTED, WAS RETRACTED. HENCE, WHILE DIRECTING DELETION OF THE DISALLOWANCE OF RS.21.66 LAKHS, THE TRIBUNAL CLARIFIED THAT ITS DECISION SHOULD NOT BE CONSTRUED TO MEAN THAT THE DISALLOWANCE OF FOREIGN TRAVELING EXPENSES CANNOT B E MADE AT ALL IN THE REGULAR ASSESSMENT OF INCOME AS WELL ON THE BASIS OF THE STATEMENT RECORDED BY THE DIRECTOR. THE TRIBUNAL W AS CONCERNED ONLY ABOUT THE CONNOTATION OF UNDISCLOSED INCOME UN DER THE SCHEME OF BLOCK ASSESSMENT. IN VIEW OF THE FINDING OF THE TRIBUNAL THAT THERE WAS NO EVIDENCE FOUND DURING THE COURSE OF SEARCH TO INDICATE THAT THE EXPENSES WERE INADMISSIBLE AND HA VING REGARD TO THE CLARIFICATION OF THE TRIBUNAL NOTED EARLIER, WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW WOULD ARISE IN THIS APP EAL. THE APPEAL IS ACCORDINGLY DISMISSED. THERE SHALL BE NO ORDER AS TO COST. 4 THE ASSESSING OFFICER IS NOW BACK BEFORE US CONTENDING THAT THE STATEMENT WAS MADE BY THE DIRECTOR ON THE BASIS OF LOOSE PAPERS F OUND DURING THE COURSE OF SEARCH OPERATIONS AND, THEREFORE, THE SAME SHOULD HAVE BEEN HELD TO BE TAXABLE AS UNDISCLOSED INCOME. THE ASSESSING OFFICER FURTHER CONTE NDS THAT SINCE THE ASSESSEE HIMSELF HAD OFFERED THIS INCOME FOR TAX IN ITS BLOCK R ETURN OF INCOME, THE DIRECTIONS OF THE TRIBUNAL HAVE RESULTED IN ASSESSMENT OF INCOME AT RS.12,000 AS AGAINST THE INCOME RETURNED BY THE ASSESSMENT IN THE BLOCK RETURN AT RS.7,48,931. IN OTHER WORDS, THE CONTENTION OF THE AO IS THAT ASSESSED INCOME CANNOT BE LOWER THAN THE RETURNED INCOME. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE L EGAL POSITION. 6. AS REGARDS THE QUESTION AS TO WHETHER THE ASSESSED INCOM E CAN BE LOWER THAN THE RETURNED INCOME, IT IS NOW WELL SETTLED LAW THAT THERE IS NO SUCH BAR UNDER THE SCHEME OF THE ACT. IN THE CASE OF GUJARAT GAS CO LTD VS JCIT (245 ITR 84), HONBLE GUJARAT HIGH COURT HAS HELD THAT THE ASSESSING OFFICER CANNOT BE INFLUENCED BY THE DIRECTION OF THE BOARD TO THE EFFECT THAT THE ASSESSED INCOME CANNOT BE LOWER THAN THE RETURNED INCOME. WHILE DOING SO, THEIR LORDSHIPS TOOK NOTE OF THE JUDGEMENT OF THE HONBLE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS BAKELITE HYLM LTD (237 ITR 392), WHEREIN, SIMILAR VIEW HAS BEEN TA KEN BY THE HONBLE A.P. HIGH M.A.NO.704/M/2010 D.C. SILK MILLS PRIVATE LIMITED 4 COURT AS WELL. IN ANY EVENT, NEITHER THE ISSUE WAS AGI TATED BY THE DEPARTMENT AT ANY STAGE NOR IS IT AN ISSUE WHICH IS, EVEN ACCORDING TO REV ENUE, NOT CAPABLE OF MORE THAN ONE VIEWS BEING TAKEN. THEREFORE, THE QUESTION AS TO WHETHER THE ASSESSED INCOME CAN NOT BE LOWER THAN THE RETURNED INCOME, E VEN IN THE CASE OF BLOCK ASSESSMENT, CANNOT INFLUENCE OUTCOME OF APPEAL AT THE ST AGE OF THE RECTIFICATION PROCEEDINGS. AS REGARDS THE CONTENTIONS THAT THE DISCLO SURE BY THE DIRECTOR HAS BEEN MADE ON THE BASIS OF SEIZED MATERIAL, THE TRIBUNA L HAS CLEARLY DEALT WITH THE SAME AND OBSERVED THAT A STATEMENT BEING OBTAINED FROM THE DIRECTOR AND EVIDENCE BEING FOUND IN THE COURSE OF SEARCH PROCEEDINGS ARE T WO DISTINCT THINGS AND HONBLE BOMBAY HIGH COURT HAS ALSO TAKEN NOTE OF THIS ASPECT O F THE MATTER. IN ANY EVENT, ALL THAT THE TRIBUNAL WAS REALLY CONCERNED WAS WHETHER T HE DISALLOWANCE IN RESPECT OF THE FOREIGN TRAVELING EXPENSES COULD BE MADE IN THE COURSE OF BLOCK ASSESSMENT OR NOT AND IT WAS SPECIFICALLY CLARIFIED, AS NOTED BY H ONBLE BOMBAY HIGH COURT ALSO IN THEIR JUDGMENT DATED 3 RD FEBRUARY, 2010, THAT ITS DECISION SHOULD NOT BE CONS TRUED TO MEAN THAT THE DISALLOWANCE OF FOREIGN TRAVELING E XPENSES CANNOT BE MADE AT ALL IN THE REGULAR ASSESSMENT OF INCOME AS WELL ON THE BASIS OF T HE STATEMENT RECORDED BY THE DIRECTOR AND THAT THE TRIBUNAL WAS CONCERNED O NLY ABOUT THE CONNOTATION OF UNDISCLOSED INCOME UNDER THE SCHEME OF BLOCK ASSESSMENT. THERE IS NO DISPUTE THAT NO MATERIAL WAS FOUND DURING THE COURSE OF SEARCH TO INDICATE THAT THE EXPENSES CLAIMED BY THE ASSESSEE WERE BOGUS EXPENSES OR UNRELATED TO THE BUSINESS OF THE ASSESSEE. THERE IS ALSO NO DISPUTE THAT ALL THESE EXPENSES WE RE MADE BY BANKING CHANNELS AND DULY REFLECTED IN THE BOOKS OF ACCOUNT. IN FACT DURING THE COURSE OF HEARING OF THIS MISCELLANEOUS APPLICATION, WE REQUESTED THE LEARNED DEPARTMENTAL REPRESENTATIVE TO INSPECT OUR FILES AND POINTS OUT ANY EVIDENCE OF ANY SEIZED MATERIAL INDICATING INADMISSIBILITY OF DEDUCTION IN R ESPECT OF FOREIGN TRAVELING EXPENSES. WHILE HE WAS UNABLE TO FIND OUT ANY SUCH MAT ERIAL, HE REFERRED TO THE LOOSE PAPERS FOUND BY THE SEARCH TEAM, IN THE LIGHT OF WHICH, ONE OF THE DIRECTORS MADE A STATEMENT ADMITTING THAT THE FOREIGN TRAVELIN G EXPENSES WERE INCURRED FOR NON BUSINESS PURPOSES. HOWEVER, AT THE COST OF REPETIT ION, WE MUST POINT OUT THAT A STATEMENT RECORDED BY THE DIRECTOR IS QUALITATIVELY DIFFERENT IN CONNOTATION AND SCOPE THAN MATERIAL FOUND DURING THE SEARCH OPERATIO N. WHEN NO MATERIAL WAS FOUND DURING THE SEARCH, EVEN THOUGH THERE IS AN ADM ISSION BY THE DIRECTOR TO THE M.A.NO.704/M/2010 D.C. SILK MILLS PRIVATE LIMITED 5 EFFECT THAT THE FOREIGN TRAVELING EXPENSES WERE NOT F OR THE BUSINESS PURPOSES, IN THE LIGHT OF SETTLED LEGAL POSITION, SUCH DISALLOWANCE CANN OT BE MADE IN THE BLOCK ASSESSMENT PROCEEDINGS. WE MAY ALSO ADD THAT IT WAS IN VI EW OF SUCH DIFFICULTIES AND EXPERIENCES IN THE BLOCK ASSESSMENT PROCEEDINGS THAT THE VERY SCHEME OF BLOCK ASSESSMENT WAS ALTERED AND SECTION 153A WAS INTRODUCED SO A S TO ENSURE THAT ASSESSEE DO NOT GET UNDUE BENEFIT BY THIS LINE OF DEMARC ATION BETWEEN WHAT CAN BROUGHT TO AS UNDISCLOSED INCOME AND WHAT CAN NOT BE BROUGHT TO TAX AS UNDISCLOSED INCOME. THE ASSESSMENT WAS MADE IN THE PRE 15 3A LEGAL POSITION IN WHICH LINE OF DEMARCATION BETWEEN UNDISCLOSED INCOME AND INCOME OTHER THAN UNDISCLOSED INCOME, HAD A CRUCIAL ROLE TO PLAY AT TH AT POINT OF TIME. ALL THAT WE HAD HELD WAS THAT DISALLOWANCE IN QUESTION COULD NOT BE MA DE AS UNDISCLOSED INCOME DURING BLOCK ASSESSMENT PROCEEDINGS, AND THE ISSUE OF SUCH DISALLOWANCE BEING MADE IN THE REGULAR ASSESSMENT PROCEEDINGS WAS LEFT OPEN . 7. IN VIEW OF THE ABOVE DISCUSSION AND BEARING IN MIND THE ENTIRETY OF THE CASE, WE ARE UNABLE TO SEE ANY LEGAL SUSTAINABLE MERITS IN TH E RECTIFICATION PETITION FILED BY THE REVENUE. IN ANY EVENT, THE HONBLE BOMBAY HIGH COURT HAS ALREADY APPROVED THE STAND SO TAKEN BY THE TRIBUNAL AND DECLINED TO ADMIT THE APPEAL AGAINST THE SAME. WE HAVE ALSO PERUSED THE APPEAL FILED BY THE ASSESSING OF FICER BEFORE HONBLE BOMBAY HIGH COURT AND WE FIND THAT THE GRIEVANCE AG AINST DELETION OF RS.22.66 LAKHS ON ACCOUNTS FOREIGN TRAVELING EXPENSES WAS COMPREHENSIVE LY COVERED IN THE APPEAL FILED BEFORE THEIR LORDSHIPS AND ONCE THEIR LORDSHIPS DECLINED TO INTERFERE, IT WOULD NOT BE APPROPRIATE FOR US TO TINKER WITH THE ORDER P ASSED BY US. WE, THEREFORE, REJECT THIS GRIEVANCE ALSO. 8. IN THE RESULT, MISCELLANEOUS APPLICATION IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22 ND MARCH, 2011 SD/- (R.S.PADVEKAR) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 22 ND MARCH, 2011 PARIDA M.A.NO.704/M/2010 D.C. SILK MILLS PRIVATE LIMITED 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)VIII, MUMBAI 4. COMMISSIONER OF INCOME TAX, MC-VIII , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH F, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI