Income Tax Appellate Tribunal - Mumbai
Joitabhai Trust Aero Industries, ... vs Pr.Cit -21, Mumbai on 15 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"J" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI N.K. PRADHAN, ACCOUNTANT MEMBER
ITA No.4124/Mum/2017
(Assessment Year :2012-13)
M/s. Joitabhai Trust Aero Industries
228, Pragati Industrial Estate
N.M. Marg, Lower Parel ................ Appellant
Mumbai - 400 011
PAN:AAATJ1944Q
v/s
Principal Commissioner of Income Tax-
21,
5th Floor, Piramal Chambers ................ Respondent
Lalbaug, Parel
Mumbai - 400 012
Appellant by : SHRI DIPAK J. SHUKLA
Respondent by : SHRI RAJESHWAR YADAV
Date of Hearing - 13.12.2017 Date of Order - 15.12.2017
ORDER
PERSAKTIJIT DEY, J.M. This is an appeal filed by the assessee against order dated 30.03.2017 passed under section.263 of the Act by the Pr. Commissioner of Income Tax(PCIT)-21, Mumbai for the Assessment Year 2012-13.
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ITA no.4124/Mum/2017 M/s. Joitabhai Trust Aero Industries
2. Briefly the facts are, the assessee a trust is engaged in the business of manufacturing and trading of aerosol components and products. For the assessment year under dispute assessee filed its return of income on 29/09/2012 declaring income Rs.45,93,110/-. Assessment in case of the assessee was completed under section.143(3) of the Act accepting the income returned by the assessee. Subsequently, ld. Pr. Commissioner of Income Tax exercising his powers under section.263 of the Act called for the assessment record of the assessee and after examining the same, he found that in the profit and loss account assessee has debited an amount of Rs.30,09,489/- towards repairs and maintenance of building which has been claimed under the head 'manufacturing expenses.' Further, he found that under the head 'sales and administrative expenses', the assessee has debited an amount of Rs.16,18,525/- towards excise duty penalty. Learned PCIT found from the submissions of the assessee that in the relevant financial year, the assessee has carried out major restoration work on plant foundations consisting of building, shed, boundary walls and ware house / stores located at Vapi. Ld. PCIT was of the view that since, the assessee has carried out extensive repair and renovation of the existing building it resulted in a 3 ITA no.4124/Mum/2017 M/s. Joitabhai Trust Aero Industries new advantage of enduring benefit, therefore, such expenditure is of capital in nature.
3. Further, he observed that excise duty penalty being of penal nature cannot be allowed as business expenditure. Since, without making any enquiry or examining the allowability of such expenditures the Assessing Officer has allowed the same,ld. PCIT held the assessment order to be erroneous and prejudicial to the interest of revenue and called upon the assessee to explain why the assessment order should not be revised.
4. In response to the show-cause notice, the assessee submitted its reply stating that the Assessing Officer after examining the issue having allowed the expenditure, the assessment order cannot be erroneous and prejudicial to the interest of revenue. As far as the issue of expenditure incurred on repair and maintenance of building, it was submitted by the assessee that due to lack of regular repair and maintenance work, the structure of the boundary wall, godown and all other buildings required urgent repairs for continuing the manufacturing operation without any interruption. It was submitted, the expenditure incurred by the assessee has to be viewed in the context of the extensive structure of the plant on a large plot of land of 12,535 sq.mtr. Therefore, it cannot be said that the expenditure is for 4 ITA no.4124/Mum/2017 M/s. Joitabhai Trust Aero Industries bringing into existence an asset of enduring nature. As far as payment of excise duty penalty of Rs.16,18,525/- is concerned, it was submitted, the entire amount does not represent penalty but due to wrong computer coding it has been mentioned as excise penalty. Furnishing bifurcation of the payment made, it was submitted by the assessee that the quantum of penalty was only to the tune of Rs.1,04,500/-. The ld. PCIT, however, was not convinced with the submissions of the assessee and set aside the assessment order with a direction to the Assessing Officer to complete the assessment on the issues referred to in the revision order keeping in view the observations made by him.
5. The learned Authorized Representative submitted, in course of assessment proceedings the Assessing Officer has made detailed enquiry with regard to the various expenditures claimed by the assessee including the expenditure towards repair and maintenance of the building and excise duty. In this context, he drew our attention to the documents filed in the paper book. The learned Authorised Representative submitted, since the Assessing Officer after examining the evidences and applying his mind, has passed the assessment order, it cannot be considered to be erroneous and prejudicial to the interest of the Revenue so as to empower the ld. PCIT to revise under 5 ITA no.4124/Mum/2017 M/s. Joitabhai Trust Aero Industries section.263 of the Act. As far as the merits of the issue is concerned, the learned Authorised Representative submitted, the assessee has carried out regular repair works to the existing building and by such expenditure no enduring benefit has accrued to the assessee. Therefore, he submitted,such expenditure for repairs has to be treated as revenue in nature. In support of such contention, he relied upon the following decisions:-
i. CIT v/s Kalyanji Mavji& Co., (1980)122 ITR 491(SC) ii. CIT v/s. Chowgule& Co Pvt. Ltd., (1995) 214 ITR 523 (Bom)
6. As far as amount of Rs.16,18,525/- is concerned, the ld. Authorised representative submitted, the entire amount is not towards penalty but an amount of Rs.1,04,500/- out of that is towards penalty. He further submitted, details of excise duty payment were furnished before the Assessing Officer during the assessment proceedings and the Assessing Officer has examined the same. Thus, the learned Authorised Representative submitted, since, the Assessing Officer has completed the assessment after due enquiry and examination the exercise of power under section.263 was improper. In support of such contention, he relied upon the followingdecisions:-
i. CIT v/s. Nirav Modi (2017) 390 ITR 292 (Bom)
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ITA no.4124/Mum/2017
M/s. Joitabhai Trust Aero Industries
ii. CIT V/s. Gabriel India Ltd., (1993) 203 ITR 108 (Bom)
7. The ld. Departmental Representative justifying the exercise of revisional jurisdiction submitted that the Assessing Officer without making any enquiry or investigation has accepted the claim of the assessee while completing the assessment. He submitted, the Assessing Officer has not at all examined the nature of expenditure incurred towards repair and maintenance of building. He submitted, in the financial statements a deduction towards payment of penalty was debited which is not allowable under section. 37(1) of the Act. The Assessing Officer completely ignoring the statutory provision has allowed assessee's claim. He submitted, without making any enquiry the Assessing Officer has allowed deductions to the assessee which are otherwise not allowable.Therefore, the assessment order is erroneous and prejudicial to the interest of the revenue as contemplated under section.263 of the Act.
8. We have heard rival submissions and perused the material on record. A perusal of the impugned assessment order reveals that It is a cryptic and non-speaking order.The Assessing Officer has accepted the returned income without making any discussion. The Assessing Officer nowhere in the assessment order has even mentioned whether he has examined the books of accounts and called for any details from 7 ITA no.4124/Mum/2017 M/s. Joitabhai Trust Aero Industries the assessee in support of various deductions claimed. At least, nothing has been mentioned in this regard by the Assessing Officer in the assessment order. Only thing he has mentioned is, after discussion with the assessee's authorized representative he is finalizing the assessment. Though, the learned Authorized Representative referring to the documents submitted in the paper book has tried to impress upon us that the Assessing Officer has enquired into and examined all the issues on which the assessment order has been held to be erroneous and prejudicial to the interest of revenue, however, on a specific query from the bench, the learned Authorised Representative was unable to furnish even a single notice or order sheet entry to demonstrate that the Assessing Officer has conducted any enquiry on the issues on which ld. PCIT held the assessment order to be erroneous and prejudicial to the interest of revenue.
10. On the contrary, the admission of the assessee that a part of the excise duty claimed as deduction was towards penalty bears testimony to the fact that the Assessing Officer has not at all examined the nature and allowability of the expenditure. Therefore, conclusion of the ld.PCIT that the assessment order is erroneous and prejudicial to the interest of revenue is vindicated. Even, the assessee has failed to substantiate by bringing cogent material on record the fact that the Assessing Officer has examined the nature of expenditure incurred 8 ITA no.4124/Mum/2017 M/s. Joitabhai Trust Aero Industries towards repairs and maintenance of the building before allowing it. Therefore, the facts on record clearly indicate that the Assessing Officer before allowing the deductions claimed by the assessee has not made any enquiry at all, which rendered the assessment order erroneous and prejudicial to the interests of revenue. That being the case, the ld. PCIT was justified in revising the assessment order under section.263 of the Act. The decisions relied upon by the learned Authorised Representative will not apply to the facts of the present case as we have factually found that the Assessing Officer has not made even a semblance of enquiry on the issues pointed out by the PCIT. As far as the merits of the issues are concerned, in our view, the nature of expenditure incurred towards repair and maintenance of the building, whether capital or revenue, requires thorough enquiry and investigation at the end of the Assessing Officer. Therefore, without being influenced by the observations of the ld. PCIT, the Assessing Officer is directed to examine the claim of the assessee by calling for necessary and relevant details and making independent enquiry. He has to ascertain whether by incurring such expenditure any structural change to the building/factory premises has been made by the assessee which may result in an enduring benefit or the expenditure are of regular nature.
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ITA no.4124/Mum/2017 M/s. Joitabhai Trust Aero Industries
11. As regards the payment of excise duty, the Assessing Officer after ascertaining the facts from the assessee and verifying the same must disallow the payment made towards penalty as it is not allowable under section.37(1). With the aforesaid observations, we uphold the order of the ld.PCIT to the extent indicated above.
12. In the result, assessee's appeal is partly allowed for statistical purposes.
Order pronounced in the open Court on 15.12.2017 Sd/- Sd/-
Sd/- Sd/-
N.K. PRADHAN SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 15.12.2017
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
True Copy
By Order
Karuna
Sr. Private Secretary
(Dy./Asstt.Registrar)
ITAT, Mumbai