Income Tax Appellate Tribunal - Kolkata
Kedarnath Cold Storage, 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. 34/Kol/2011
िनधॉरण वषॅ/Assessment Year : 2007-08
Asstt. Commissioner of Income-tax Vs. M/s. Kedarnath Cold Storage
Circle-1, Hooghly PAN : AADFK 4554E
(अपीलाथȸ /Appellant) (ू×यथȸ/Respondent)
अपीलाथȸ/ For the Appellant : ौी़/ Shri A.S. Mondal, ld.DR
ू×यथȸ/ For the Respondent : ौी़/ Shri V.N.Dutta, ld.AR
सुनवाई कȧ तारȣख/Date of Hearing : 29/9/11
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 18/10/2010 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 2nd 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.
8. 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 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 partnership firm, in the relevant assessment year, was running/operating a cold storage. It had filed its return of income disclosing total income of Rs. 7,05,305/-. In the course of assessment proceedings, the AO noticed that assessee claimed insurance premium of Rs.5,02,122/-. As per tax audit report, WDV of machinery was Rs.6,83,858/-. However, as per cover note, the plant and machinery was insured for Rs.32,10,900/-. Thus, there was difference Rs.25,27,042/-. 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. 6,83,858/--. 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. 6,83,858/-- 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. 25,27,042/- is considered as 'Undisclosed Investment'."
He accordingly made addition of Rs. 25,27,042/- u/s.69 of the Act.
ITA No.34/Kol/2011-C-SVM 24. Before ld.CIT(A), it was, inter-alia, submitted as under:-
• Section 69 of the Act specifically speaks that in order to invoke this provision, the two conditions shall have to be fulfilled:-
(i) The assessee's investment in the year relevant to the assessment year was not recorded in the Books of Accounts for any source of income; and
(ii) The assessee failed to offer reasonable explanation about the nature and source of such investment or the explanation adduced is not satisfactory in the opinion of the Assessing Officer.
• The assessee was not given an opportunity to state his case in terms of Section 142(3) of the I.T.Act, the valuation report used for the purpose of Insurance policy cannot constitute any material evidence, which could be legitimately be taken into account for the purpose of arriving at the finding of unexplained investment towards plant and machinery.
• During the year, the assessee's investment in the plant and machineries was Rs.5,84,190/-. All copies of invoices, bills and vouchers evidencing investment on the account were furnished before the Assessing Officer. • The Assessing Officer did not reject the accounts by invoking the provisions of section 145 of the I.T. Act'61, rather accepted such expenditure having actually been incurred and allowed depreciation on such additional plant and machinery. The plants and machineries purchased during the year for Rs.5,84,190/- was condenser pipe and other fittings for installation in the compressors, the valuation of which included in Sl.No.1 to 6 of the valuation report for Rs.7,64,300/- in the earlier submission. The valuation of remaining items in Sl. No. 7 to 65 was done at Rs.24,46,600/- against WDV of Rs. 99,668/- as on 1-4-2006. Therefore, it is evident that the current year's investment in the plants and machineries, which was recorded in the books of account had been fully explained with source to the satisfaction of the Assessing Officer. The valuation of items comprising of old plants and machineries with WDV of Rs.99,668/- was Rs.24,46,600/-. It was, therefore, to be held that the Assessing Officer had made addition of Rs.23,46,932/- in respect of plant and machineries acquired before the relevant year and Rs. 1,80,110/- in respect of new plants and machineries without any cogent material in hand and on the basis of surmise and conjecture. If valuation report was eliminated from consideration, there was no material evidence at all before the Assessing Officer to think such issue will be governed by section 69 of the I.T.Act. Though the provisions was aimed at, to determine the current year's investment not recorded in the books of accounts and remained unexplained as to its source. .
• The Assessing Officer had also erred in considering the fair market value to work out unexplained investment u/s.69 of the I.T Act. Investment mentioned therein undoubtedly meant to refer to the actual cost of acquisition/investment as contrast to the fair market value. Where the cost remains constant eternally, the fair market value is subject to fluctuation over period of time.
• The Assessing Officer did not gather any material evidence to indicate that the assessee had invested money outside the books of account for acquiring ITA No.34/Kol/2011-C-SVM 3 new plants and machineries of expended for the purpose of substantial renovation which had enhanced its fair market value. As the fair market value is likely to show upwards trend, it will be futile to consider the difference between such FMV & the WDV of plants and machineries (obviously reduced further) after laps of some years as unexplained investment u/s.69 on the ground that the WDV of such plants and machineries are appreciably less in comparison to the insured value.
5. The ld. CIT(A) deleted the addition, inter-alia, observing vide paras 6.2 and 6.3 as under:-
"6.2 I have duly considered the submission of the AR and the necessary details filed. During the previous year relevant to the assessment year, appellant had added P & M to the tune of Rs.5,84,190/- with the existing machineries, w.d.v of which was of Rs.99,668/-. The AO did not find any discrepancy on that and allowed depreciation claimed by the appellant. However, from the Cover Note of the insurance policy AO found that the appellant had got the P & M valued at Rs.32,10,900/- by a Govt. approved valuer for insurance purpose and arrived at the conclusion that the appellant was having undisclosed investments in P & M for the difference amount of Rs.25,27,042/- and added the same u/s. 69 of the Act. This action of AO is not sustainable. The provisions of section 69 can only be invoked after establishing a real difference between machineries existed in appellant's premises and machineries declared in the books.
6.3 From the details filed it is observed that the new machineries purchased during the previous year were not considered by the valuer as the valuation was done on 20/03/2006., whereas new machineries were purchased in the month of September, 2006 and thereafter. Therefore, the claim of the appellant that the new machineries which were purchased for Rs.5,84,190/-, was valued by the valuer at Rs.7,64,300/- cannot be correct. This suggests that the brought forward old machineries, w.d.v at Rs.99,668/- was valued at Rs.32,10,900/- by the valuer. Taking lead from this huge difference between books value of ld machineries vis-à- vis valuation done by the Govt. approved valuer for insurance coverage, the AO should have undergone a detailed year-wise, item-wise and value-wise comparative study for each machinery as well as referred the case to the registered valuer for fresh valuation and thereafter should have tried to find out year-wise discrepancies. Instead of that, he made the addition on surmises, which is against the law. 6.3 In view of the discussions made above, it is clear that since there was no scope for addition in the current year for undisclosed investment in machineries as the AO did not pointed out any discrepancies towards addition to P &M and the valuer also did not consider the new purchases for valuation purposes. I, therefore, inclined to agree with the appellant that the addition of Rs.25,27,042/- 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 ITA No.34/Kol/2011-C-SVM 4 by the assessee. Not giving an opportunity to the Assessing Officer is against the principles of natural justice.
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 reproduced 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 of section 59, 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 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.34/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 04/112011
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
/Sr.P.S.
*PP वǐरƵ िनǔज सिचव
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. Kedarnath Cold Storage, Gajar More, Dalapatipur, Hooghly, PIN-71243.
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.34/Kol/2011-C-SVM 6