Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s. Kobashi Machine Tools Ltd Versus Dy. CIT, Circle 2 (1) , Hyderabad.

2015 (11) TMI 1449 - ITAT HYDERABAD

Revision u/s 263 - telescoping the un-reconciled creditors into estimated income - Held that:- What amount was considered for addition is the amount as per P & L Account submitted to the ROC. Assessee has calculated the amount of loss as per P & L Account being set off by the income offered in the P & L Account and only the additional income was offered to tax. The computation of income started with that of originally assessed income, consequent to the orders of the Ld. CIT(A) and the additional .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g rejected the books of accounts and also making additions on the basis of books of accounts. Thus the orders passed by the A.O. are in fact is not prejudicial to the interest of the Revenue.

One of the item which Ld. CIT has directed in his order under section 263 is also on interest income. The computation for A.Y. 2002-2003 indicates the original income as per the consequential order dated 17.07.2007 at ₹ 29,42,079 + Additional Income offered as per the P & L Account at ͅ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

also added along with the interest income of ₹ 16,52,200 which according to the assessee is sale of scrap already considered in the P & L Account. Thus the revised income was determined at ₹ 69,84,340. As seen from the reasons recorded for reopening the assessment for A.Y. 2002-03, A.O. reopened the assessment for bringing to tax amount of ₹ 1,93,703 not disclosed in the original income but received as interest income and for A.Y. 2003-04 the interest income was at ₹ 2,8 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

R For The Assessee : Smt. Sreelata Reddy Vootkoor For The Revenue : Mr. Konda Ramesh ORDER PER BENCH These are five appeals by assessee. Appeal Nos. 346, 347, 348/Hyd/2014 are appeals on the orders of the A.O. consequent to orders of Ld. CIT under section 263 of IT Act, 1961 for A.Ys. 2002-03, 2003-04 and 2004-05. Subsequently, having realized that the orders under section 263 have not been contested, assessee preferred appeals which are listed as Appeal Nos. 1238 & 1239/Hyd/2014 for A.Ys. 2 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r section 263 is not required to be appealed as the Ld. CIT has set aside the assessment to re-do the assessment as per the directions of the Ld. CIT. 3. Subsequently, assessee came to know through the new auditor that the order under section 263 is appellable and therefore, assessee has preferred the appeals with a petition for condonation of delay. 4. In the course of appellate proceedings, the Ld. Counsel submitted that assessee company was promoted by two groups and there were disputes betwe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat the delay be condoned in the interest of justice. 5. After considering the objections of the Ld. D.R. we are of the opinion that assessee was prevented by sufficient cause in not preferring appeal in time. Accordingly, the delay in preferring the appeals is condoned in both the assessment years. The appeal memos are treated as maintainable. 6. We have heard the Ld. Counsel and Ld. D.R. in detail. 7. Briefly stated, assessee had filed returns of income for impugned assessment years 2002-03 an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e turnover by 50% and determined the turnover around ₹ 5.47 crores in the impugned years. Proceedings under section 147 were initiated and assessment under section 143(3) read with section 147 dated 05.05.2006 have been made determining the taxable income at 8% on the turnover of ₹ 5.47 crores. This matter was contested by the assessee before the Ld. CIT(A) and as per the consequential orders dated 04.05.2007, the taxable income was determined at 8% on the admitted turnover of ₹ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to the Banks and ROC, A.O. initiated proceedings under section 147 again. The entire result of these proceedings are the assessment orders dated 03.11.2009 passed by the A.O. fixing the total income at ₹ 75,56,622 for A.Y. 2002-03 and ₹ 69,84,340 for A.Y. 2003-04. In doing so, A.O. also received directions from the Addl. CIT and assessments have been completed consequent to the directions of the Addl. CIT. 8. Ld. CIT on examination of the records has initiated proceedings under sect .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/-had been determined at the lowest possible profit rate of 8% on the turnover of ₹ 3.67 crores. 8.1. In the proceedings, assessee has explained that all the issues which the Ld. CIT has raised have been examined by the A.O. and after giving due explanation of the various amounts, the total incomes are determined, therefore, the proceedings under section 263 does not arise. Ld. CIT however, did not agree and after considering the various objections and asking for details of account copies .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s far as the first issue is for issuing show cause notice, we are unable to understand how the loss worked out during the year could not be set off to the other income. The provisions of section 71 of Act provides the set off of loss from one head against the income from another as applicable and nowhere it is prescribed under the said section that loss arising in that year cannot be set off to other incomes, just because return was not filed within the time prescribed under the Law. This condit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e in turnover reported to Bank being different from turnover as per statements with ROC. Assessee explained that there is no difference in the turnover as the income from job work is same in both the statements, whereas the increase in stock was also added to the total turnover by the Ld. CIT in the statement taken from the ROC, which is not reported to the Bank as turnover. After reconciliation given by the assessee which are extracted by the Ld. CIT in pages 4, 5 and 6, this issue was dropped .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

utstanding and un reconciled creditors appearing in books of accounts. On reconciliation of books this amount is truly offered as income and this was included in the total income computed in concluding the final assessment. We here under furnish you the computation of Total Income Statement submitted to the department during the assessment proceedings. Computation Total Income Amount in Rs. Profit as per Profit & Loss Account 1,72,516 Add: Depreciation as per P & L (Companies Act) 36,71, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

u/s.143(3) r.w.s. 147 dt.5.5.2005 as modified by consequential order dt.4.5.07 and modification order dt.17.7.07 29,42,070 Add: Additional Income determined 24,17,340 53,59,419 Add: Interest Income 22,97,203 Total Income 76,56,622 The above two statements reveals it clearly that the amount of ₹ 67,37,050 is considered in arriving at the total income in the final assessment order. Hence we request you to kindly go through the facts and drop the proposal for adding this as income. 11.1. On t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

submitted that the other miscellaneous income represents the sale of scrap and other miscellaneous receipts were shown as interest income by mistake in the profit and loss account filed with the bank. In support of this, he filed bank certificates. Assessing Officer is directed to verify these certificates before accepting assessee s claim. Even otherwise as discussed below, the profit shown in these profit and loss accounts is way below final assessed income. Assessee has also worked out the i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d in the balance sheet. The assessee tried to reconcile the balance sheet. The assessee admitted to reconcile the same and admitted that he is not in a position to reconcile certain creditors for expenses. The assessee also admitted that the reconciliation was done based on the payments made through the banks and the ascertainment of payments still to be made. It thus arrived at amounts of ₹ 67 ,34,050/- for the assessment year 2002-03, ₹ 59,22,990/- for the assessment year 2003-04 a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

2002-03 to 2004-05. However since the profit of margin for the assessment year 2004-05 is considerably less than those of earlier years, the assessee was asked to substantiate the same. The assessee claimed that in view of the differences between the groups, the turnover also drastically reduced effecting the performance. However, in order to avoid any protracted litigation, the assessee has agreed the same level of profits for the A.Y. 2004-05 also, which works out to ₹ 7,50,000/-. In vi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed litigation, the assessee offered substantial creditors to cover up all the shortcomings. After having gone through the High Court clearly indicated that the present management group is not having control over the books of account and bills, it would be futile to accept to furnish all the evidence in support of the balance sheet and the P & L A/c prepared subsequently. Having considered all the above pleading, I find it reasonable to accept and the additional incomes offered by the assesse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

DS certificates were filed. He also claimed that he didn t receive all the certificates from the concerned Government agencies. A substantial time has elapsed, it would be difficult for the assessee to obtain the details from the Government agencies. The Assessing Officer may write directly to the concerned agencies to obtain the total TDS deducted details based on the TDS return filed by them or from other records. Assessee is also directed to make all efforts to obtain the certificates from th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

filed. Net profit or loss as per the books of accounts was offered in the revised proceedings. Consequently, the opinion of the Ld. CIT that A.O. has telescoped the incomes is not correct. What the Addl. CIT has directed is the net income as per the P & L Account to be added to the already assessed income on the same turnover. In fact, the proceedings under section 148 resulted in assessing the assessee s profit in business on estimation basis, having rejected the books of accounts and also .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the bank pertains to sale of scrap. It was wrongly classified as interest income. However, A.O. did not accept with that contention and the entire amount of ₹ 22,97,203 which is sale of scrap according to assessee was also added as interest income. Thus, the computation for A.Y. 2002-2003 indicates the original income as per the consequential order dated 17.07.2007 at ₹ 29,42,079 + Additional Income offered as per the P & L Account at ₹ 24,17,340 + Interest Income that too .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

est income of ₹ 16,52,200 which according to the assessee is sale of scrap already considered in the P & L Account. Thus the revised income was determined at ₹ 69,84,340. As seen from the reasons recorded for reopening the assessment for A.Y. 2002-03, A.O. reopened the assessment for bringing to tax amount of ₹ 1,93,703 not disclosed in the original income but received as interest income and for A.Y. 2003-04 the interest income was at ₹ 2,89,800. In fact, the A.O. has .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

riginally estimated on the turnover in the absence of books of accounts. When books of accounts are not available, generally estimation of income was resorted to. After resorting to estimation of income, again relying on the very same books of accounts which were rejected does not arise so as to make various additions. In view of that, the directions of the Ld. CIT to make various miscellaneous additions out of the entries in the books of accounts also cannot be accepted. Leave alone that, even .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ning the contentions of the assessee when the revised assessment proceedings were pending. How the Ld. CIT can substitute his opinion to the opinion of the A.O. in the proceedings under section 263 is not explained. Therefore, this part of the directions can only be considered as substitution of the opinion of the Ld. CIT over the opinion of the A.O., in fact, of that of the Addl. CIT in the present proceedings, which is not permissible under Law. Looking at any angle, we are not in a position t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the cancellation of the orders under section 263 in the above appeals. Therefore, we vacate the orders of both A.O. and Ld. CIT, which are consequential in nature to the proceedings u/s 263. Assessee s grounds are allowed. ITA.No.348/Hyd/2014 :AY 2004-05 13. In this appeal, assessee has raised the following grounds : 1. The order of the CIT(A) dated 10th December 2013 for the above assessment year is contrary to the law, facts and in the circumstances of the case. 2. The Ld. CIT(A) erred confir .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the case of Indwell Constructions Vs CIT reported in 232 ITR 776(AP) and in the case of Maddi Sudarsanam Oil Mills Co. Vs. CIT reported in 37 ITR 369. 5. Without prejudice to the above, the lower authorities should have estimated the income of the assessee company at @12.50% on turnover before depreciation. 6. The appellant craves leave to file additional grounds of appeal at or before the time of hearing. 14. The facts of the case are similar to the facts discussed in A.Y. 2002-03 an 2003-0 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

5.2006 estimating the income. As can be seen from the grounds, assessee is agitating that it is not appropriate to make the addition of un-reconciled creditors available out of the books of accounts after estimating income of the assessee at 8% on the turnover after depreciation. These contentions are supported by the case law relied on ground No.4. However, the facts in this case are little peculiar in the sense that assessee has accepted additions in A.Ys. 2002-03, 2003-04 and 2004-05 before t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version