TMI Blog2011 (4) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... stifying interference in this appeal - Decided against the assessee - I.T.A. No.112 of 2004 - - - Dated:- 29-4-2011 - Mr. Justice Bhaskar Bhattacharya, Justice Sambuddha Chakrabarti, JJ. For the Appellant: Mr. J.P. Khaitan, Mr. Ravi Asopa. For the Respondent: Mr. Dipak Shome. Bhaskar Bhattacharya, J.: This appeal under Section 260A of the Income-tax Act is at the instance of an assessee and is directed against an order dated October 28, 2003 passed by the Income-tax Appellate Tribunal, B Bench, Calcutta, in Income-tax Appeal bearing ITA Nos.973 and 1103 (Kol/2001) for the Assessment Year 1996-97. The facts giving rise to filing of this appeal may be summed up thus: A) The appellant is a public limited company within the meaning of the Companies Act, 1956 and is assessed to tax. The appellant filed a return on November 29, 1996 disclosing a taxable income of Rs.56,35,160/- for the Assessment Year 1996-97. B) The Income-tax Department commenced a search against the assessee on September 3, 1997 and the same was concluded on October 31, 1997. C) During the previous year relevant to the Assessment Year 1996-97, the appellant imported aluminium ingo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the factory-shed at Silvassa and consequently, during the previous year ending on March 31, 1996 a sum of Rs.1,11,40,100/- was spent on further construction. H) However, because of financial problems, the commercial production could not be commenced at Silvassa and in order to tide over the financial difficulties, in March 1996, the appellant started the factory-shed at Silvassa for Rs.4,78,91,114/- resulting in a profit of Rs.2,57,42,014/-. Since the factory-shed at Silvassa formed part of the block of assets along with the appellant s other factory-sheds under the provisions of Section 50 of the Act, the consideration received upon transfer of the Silvassa factory shed was required to be reduced from the value of the block of assets and depreciation was to be allowed under Section 32 of the Act on the value of the block of assets so reduced. In other words, the profit made on the sale of the Silvassa factory shed was not separately liable for capital gains tax but the sale proceeds thereof were to be reduced from the block of assets resulting in a lower claim for depreciation. In the original return filed for the Assessment Year 1996-97, though the appellant excluded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as unexplained expenditure on purchases not accounted for in the books of account. N) Being aggrieved by the foresaid decision of the Assessing Officer, the appellant preferred an appeal before the Commissioner of Income-tax (Appeals) and filed written submissions and all relevant and material documents and the Commissioner of Income-tax (Appeals ) disposed of the appeal with the following observations: i) The Commissioner of Income-tax (Appeals) accepted the position that the account of M/s. J.J.H. Industry Ltd. was debited with the cost of raw-materials purchased from the Swiss suppliers which she treated as a deliberate act. However, the claim was disallowed on the ground that the wrong entry should have been noticed much earlier and according to the Director s report to the shareholders, the appellant had earned a profit but if the purchases were debited the accounts should reflect a completely different picture than what was sought to be portrayed in the Director s report. ii) In respect of the delayed provident fund contributions, the Commissioner of Income-tax (Appeals) held that the appellant was entitled to deduction in respect of contributions to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concile the same after giving the appellant giving an opportunity of being heard. Being dissatisfied, the appellant has come up with the present appeal. At the time of admission of the present appeal, a Division Bench of this Court formulated the following substantial questions of law for determination: I) Whether the Tribunal was justified in law in not allowing deduction of Rs.8,22,42,335/- in respect of purchases of imported raw-materials not debited as an expenditure in the accounts and its purported findings that the wrong-entry in the accounts was not established or that it was a fictitious entry or after thought designed to reduce the tax liability/under state the profit and upholding the disallowance are arbitrary, unreasonable and perverse? ii) Whether on a true and proper interpretation of the provisions of Sections 2(11), 32(1), 43(6) and 50 of the Income-tax Act, 1961 the sale proceeds of the Silvassa factory shed were required to be reduced from the block of assets and no short term capital gains could be computed in respect of the said transfer and the purported findings of the Tribunal that the Silvassa factory shed was not put to use and upholding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al amount would have to be simultaneously allowed as business expenditure. At any rate, Mr. Khaitan contended that there was no justification of remanding the matter without deciding the points raised by the parties. In support of his aforesaid contentions, Mr. Khaitan placed strong reliance upon the following decisions in support of his aforesaid contention: 1) Commissioner of Income-tax Vs. 1) Mahendra Mills, 2) Arun Textile C Anr. 3) Humphereys Glasgow Consultants, reported in (2000) 243 ITR Page 56; 2) Commissioner of Income-tax, Haryana Chandigarh Vs. O.P. Khanna Sons, reported in (1983) 140 ITR Page 558; 3) Kedernath Jute Mfg. Co. Ltd. Vs. Commissioner of Income-tax (Central), Calcutta, reported in (1971) 82 ITR Page 363; 4) Commissioner of Income-tax Vs. Bhaskar Mitter, reported in (1994) 73 T.R. Page 437; 5) Commissioner of Income-Tax, Madras Vs. V. MR. P. Firm, Muar Otr., reported in (1965) 56 ITR Page 67; 6) Omar Salay Mohamed Sait Vs. Commissioner of Income-tax, Madras, reported in (1959) 37 ITR Page 151; 7) Commissioner of Income-tax Vs. Bharat General Reinsurance, reported in (1971) 81 ITR Page 303; 8) Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount by way of expenditure and instead of that, the account of J. J. H. stood debited twice, once at the time of sale and again upon the closer of Swiss suppliers accounts. Thus, no expenditure for the purchase of the imported materials was charged in the accounts although the income upon the sale thereof was reflected in the accounts. It appears that on discovery of such mistake, the assessee passed a rectification entry in its accounts for the subsequent previous year ended September 30, 1997 and in the subsequent year, the assessee did not claim any deduction in respect of the said sum of Rs. 8,22,42,335/-. All the authorities below refused to go into the question of rectification of the said mistake on the sole ground that it was not a bona fide mistake but a deliberate and fictitious entry and thus, should not be rectified. In our opinion, even if we assume for the sake of argument that it was a case of deliberate and fictitious entry, it is the duty of the Income-tax authority to find out the real nature of the transaction behind the said entry and to pass appropriate order of assessment in accordance with law. Merely because an assessee has made a wrong or even fictit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer to decide the actual income of the assessee based on materials in accordance with law and to assess the tax payable by it. But the Revenue cannot without deciding the question raised bind the assessee by the doctrine of estoppel. The said decision, thus, has no application to the facts of the present case. The case of K.M. Bhatia (Supra), is also one where the Gujarat High Court was dealing with a case in which a revised return was filed admitting mistake in claiming double deduction. In such a case, the High Court held that the mistake having been accepted and no penalty having been imposed for the Assessment Years 1970-71 and 1972- 73, there was no justification for imposing penalty on the ground of concealment for the year 1971-72. We find that the said decision rather goes against the Revenue and cannot have any application to the facts of the present case where the assessee asserts less income in its revised return by specifically pointing out its mistake in the original return. In such a case, it is the duty of the Assessing authority to deal with the case of mistake alleged in the revised return on merit. The decisions cited by Mr. Shome, therefore, do not help his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as depreciable asset. The appellant, in turn, sent a written submission to the assessing officer not supported by any evidence and materials. If the appellant s claim that the trial production had been indeed carried out at the Silvassa premises was to be believed then the appellant must have bought raw materials and consumables delivered at Silvassa and engaged workers to work on the factory floor. The electricity must have been bought from the State Electricity Board; if the appellant had not generated power from the generator. The plant and machinery must have been bought and installed, even though some of them must have been borrowed from Calcutta Factory. The appellant would have with it the licence from the Central Excise Authority permitting it to carry out production in the premises. In support of its claim that trial commercial production was carried out in the Silvassa premise the appellant could have produced to the assessing officer the copies of invoices of raw materials and consumables delivered at Silvassa and their relevant freight bills, copies of pay roll evidencing engagement of workers, copies of electricity bills and excise licence etc. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by merely making certain statements in the letter addressed to the assessing officer. What was required by the appellant was to show by placing adequate materials and evidence on record that the premises at Silvassa was acquired for the purpose of making commercial production and that its facilities were used to make trial production. This, however, was not done. In the circumstances, I do not find any good ground for interfering with the order of the assessing officer. 7.5 The above being the position I have no hesitation in holding that the assessing officer was justified in treating the sum of Rs.2,57,42,014/-, being the difference between the cost of acquisition/construction of building at Silvassa and consideration received by the appellant for its sale as short term capital gain of the appellant and adding the sum of its total income. It appears that the learned Tribunal has affirmed the aforesaid finding of fact. The aforesaid find is based on consideration of all the materials on record and any reasonable individual having regard to Section 3 of the Evidence Act would accept such finding as reasonable. We are unable to describe the said finding as one based ..... X X X X Extracts X X X X X X X X Extracts X X X X
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