Income Tax Appellate Tribunal - Kolkata
Joyrampur Rice Mill Pvt. Ltd., Hooghly vs Department Of Income Tax
आयकर अपीलीय अधीकरण, Ûयायपीठ " C " कोलकाता
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH : KOLKATA
(सम¢) ौी एस. भी.मेहरोऽा, लेखा सदःय एवं महावीर िसंह, Ûयायीक सदःय
Before Sri S.V Mehrotra, AM & Sri Mahavir Singh, JM
आयकर अपील संÉया / I.T.A No. 33/Kol/2011
िनधॉरण वषॅ/Assessment Year : 2007-08
Asstt. Commissioner of Income-tax Vs. M/s. Joyrampur Rice Mills Pvt. Ltd
Circle-1, Hooghly PAN : AABCJ 3260F
(अपीलाथȸ /Appellant) (ू×यथȸ/Respondent)
अपीलाथȸ/ For the Appellant : ौी़/ Shri A.S. Mondal, ld.DR
ू×यथȸ/ For the Respondent : ौी़/ Shri Somnath Ghosh, ld.AR
सुनवाई कȧ तारȣख/Date of Hearing : 28/9/11
घोषणा कȧ तारȣख/Date of Pronouncement : 04/11/2011
आदे श/ORDER
ौी एस. भी.मेहरोऽा, लेखा सदःय Shri S.V Mehrotra, Accountant Member :
This is an appeal filed by the revenue against the order of the learned Commissioner of Income- tax (Appeals),XXXVI, Kolkata dated 25/10/2010 for the assessment year 2007-08..
2. The appeal filed by the revenue is time barred by 09 days. Shri Sanjay Mallick, Asstt. CIT, Circle- 1, Hooghly has filed an affidavit explaining the delay. It has been stated as under:-
1. That the date of communication of the first appellate order in the office of the Ld. Commissioner of Income Tax, Kolkata-XX, Kolkata was 02.11.2010 and that the last date for filing Second Appeal expired on 31.12.2010 reckoning the period of 60(sixty) days from 02.11.2010;
2 That 01.01.2011 was Saturday;
3. That 02.01.2011 was Sunday,
4. That this is a mofussil office located about 4OKms. from Kolkata;
5. That due to technical/mechanical faults the decision of the Ld. Commissioner of Income Tax,Kol-XX,Kolkata to file 2' appeal could be verbally received only on 03.01.2011 at about 3.30 PM without the relevant assessment records from his office;
6. That the records were collected from the office of the Ld. Commissioner of Income Tax,Kol-XX,Kolkata on 04.01.2011 by sending a messenger and brought back to the office at 1 .OOPM.
7. That the Form 35 and other papers collected from Ld. CIT(A)-
XXXVl/Kolkata on 05.01.2011.
28. That necessary work of preparing relevant papers started& continued on 05.01.2011 and 06.01.2011.
9. That necessary papers contained on 06.01.2011.
10. That al formalities were completed early on 07.01.2011 for submission of the same duly.
In view of this, I would fervently pray that the unintentional delay having thus occurred in filing the instant Appeal may kindly be condoned.
2.1 After considering the averments made in the affidavit, and hearing both the parties, we are of the opinion that the revenue/department was prevented by reasonable cause from preferring the appeal within the stipulated period. We, accordingly, condone the delay in filing the appeal and admit the same in view of the decision of the Hon'ble Supreme Court in the case of CIT Vs. West Bengal Infrastructural & Financial Corporation Ltd reported in (2011) 196 Taxman 321(SC) and proceed to decide the appeal on merits.
3. The assessee, a company, in the relevant assessment year, carried on the business of rice milling. It had filed its return of income disclosing total income of Rs. 23,49,290/-. In the course of assessment proceedings, the AO noticed that assessee claimed insurance premium of Rs. 40,228/-. As per tax audit report, the WVD of plant & machinery was Rs.33,45,944/-. However, as per the cover note, the plant and machinery was insured for Rs.49,00,000/- Thus, there was difference of Rs.15,54,056/-. He observed that replacement of old plant and machineries with new ones, over a reasonable period of time, was inevitable. However, the assessee had not shown any fresh investment. He further observed that normally insurance cover was taken by any person for the safeguard of fresh and almost equal investment to purchase/production/manufacturing the asset in question. He, inter-alia, observed as under:-
" Unless, the market price expectation for the existing Plant and machineries stands to that level, assessee must not have insured the machineries for such huge amount. Furthermore, the Insurance Company did not stand to benefit from insuring the old Plant & machineries, value of which is claimed at Rs.33,45,944/-. Insurance Companies have their own infrastructure for evaluation of assets/properties, insurance proposal for which are submitted before them. Therefore, it cannot be accepted that the true valuation of Plant & machineries of the assessee stood at Rs.33,45,944/- only. The logical conclusion of the fact & circumstances is that assessee must have made fresh investments which were not disclosed in the Books fully. Therefore, the difference amount of Rs.15,54,056/- is considered as 'Undisclosed Investment'."
He, accordingly, made addition of Rs.15,54,056 u/s.69 of the Act.
ITA No.33/Kol/2011-C-SVM 34. Before ld.CIT(A), it was, inter-alia, submitted as under:-
• The provisions of section 69 of the Act come into play when investments are found to be made outside the books for which the assessee offers no explanation or the explanation offered by him is not satisfactory in the opinion of the Assessing Authority and in such case, the value of investments may be deemed to be the income of the assessee for the corresponding assessment year.
• In order to invoke the provisions of section 69 of the Act, the principal requirement is to prove that an unrecorded investment was made by the assessee.
• The Assessing Officer has not given any finding regarding any investment having been made by the assessee in machinery during the relevant previous year.
• The concept of arriving at the WDV of an asset means the balance value remaining in the books after deducting depreciation allowed thereon year after year whereas the determination of fair market value for the purposes of insuring the same is to find out the replacement cost of such asset. • Insurance Company had insured the machineries at the same value in the preceding years also. Since for several years preceding the assessment year under dispute, the machinery was valued at the same figure for determination of insurance premium, therefore, the assumption of the Assessing Officer regarding unexplained investment in machinery during the assessment proceedings the previous year relevant to the concerned assessment year does not have any legs to stand on impugned addition.
5. The ld. CIT(A) deleted the addition, inter-alia, observing vide paras 4.3 and 4.4 as under:-
"4.3 It appears that the AO had decided the case in haste. After noting down the substantial difference between books value of old machineries vis-à-vis valuation done by the registered valuer for the purpose of insurance coverage, the AO should have undergone a spot verification for detailing year-wise, item-wise and value- wise comparative study of each machinery and referred the case to the Government valuer for fresh valuation. Thereafter, he should have tried to find out year-wise discrepancies. Instead, he made the addition on surmises, which is against the law. 4.4 In view of the foregoing, it is clear that since there was no addition to P &M, there was no scope for addition in the current year for undisclosed investment in machineries. I am, therefore, inclined to agree with the appellant that the addition of Rs.15,54,056/- was uncalled for and accordingly, deleted."
6. Being aggrieved the department is in appeal before us and has taken following ground of appeal:-
" On the facts and circumstances of the case, ld.CIT(A) had erred in not asking for a remand report from the Assessing Officer on the valuation submitted by the assessee. Not giving an opportunity to the Assessing Officer is against the principles of natural justice."ITA No.33/Kol/2011-C-SVM 4
7. The ld. Departmental Representative relied on the assessment order and submitted that the AO has rightly concluded that there was undisclosed investment to the extent of difference between sum insured in respect of plant and machinery and WDV as per tax audit report.
8. The ld. Counsel for the assessee relied on the submissions made before the ld.CIT(A), which have been summarized earlier and submitted that since there was no addition in respect of plant and machinery, section 69 was wrongly invoked.
9. We have considered the rival submissions and perused the record of the case. Section 69 dealing with unexplained investments reads as under :-
"Unexplained investments.
69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the 32[Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year."
9.1 From bare perusal of the above section, it is clear that before invoking section 69, there has to be a positive finding that the assessee has made investments, which are not recorded in the books of account. In the present case, it is evident from the findings of the AO, noted above, that there is no positive finding regarding investments being made by the assessee, which are not recorded in the books of account. The AO has not rejected the accounts of the assessee. He has proceeded solely on the basis of sum insured in respect of plant and machinery. In the ground of appeal the department, inter-alia, has stated that the ld. CIT(A) has erred in not asking for a remand report from the AO on the valuation submitted by the assessee. However, no evidence has been brought on record to show that on account of some fresh investments being made by the assessee in the financial year, the valuation report could not be relied upon. The ld.CIT(A)'s observation in this regard noted above, have not been controverted by the department by any evidence. In view of above, we do not find any reason to interfere with the order of the ld.CIT(A). Therefore, the order of the ld.CIT(A) on this count is confirmed.
ITA No.33/Kol/2011-C-SVM 510. In the res ult, the appeal of the revenue is dismissed.
यह आदे श खुले Ûयायालय मɅ सुनाया गया है तारȣख .... -2011
Order pronounced in the open court on 04/11/2011
Sd/- Sd/-
[ महावीर िसंह, Ûयायीक सदःय ] [एस. भी.मेहरोऽा, लेखा सदःय]
Mahavir Singh, Judicial Member (S.V. Mehrotra, Accountant Member )
(तारȣख) Dated : 04/11/2011
*PP वǐरƵ िनǔज सिचव /Sr.P.S.
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ /Appellant- ACIT,Cir-1, Aaykar Bhawan, Khadinamore, Chinsurah, Hooghly-712 102.
2 ू×यथȸ/ Respondent : M/s. Joy Rampur Rice Mill Pvt.Ltd Joyrampur, Dehibair, Hooghly, PIN-712413.
3. आयकर किमशनर/The CIT,
4. आयकर किमशनर (अपील)/The CIT(A), Kolkata.
5. वभािगय ूितनीधी/DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, सहायक पंजीकार/Asstt. Registrar ITA No.33/Kol/2011-C-SVM