Income Tax Appellate Tribunal - Mumbai
Kiran Knit & Garment P. Ltd E.K.A Karnani ... vs Ito 6(2)(3), on 15 June, 2017
ITA Nos.4888 &5075/Mum/2011 Kiran Knit & Garments Private Limited Assessment Year 2006-07 आयकर अपीलीय अिधकरण "ए"
ायपीठ मुंबई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, MUMBAI ी जोिग र िसं ह, ाियक सद एवं ी मनोज कुमार अ वाल, ले खा सद केसम BEFORE SHRI JOGINDER SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./I.T.A. No. 4888/Mum/2011 (िनधा रण वष / Assessment Year: 2006-07) Asstt. Commissioner of Income Tax Kiran Knit & Garments Circle 6(3)(2) Private Limited 5th Floor, Room No. 522 (earlier known as Karnani Exports Private Limited) Aaykar Bhavan, M.K. Road, बनाम/ 246, A-Z Industrial Estate, Churchgate Vs. Ganpatrao Kadam Marg, Mumbai - 400 020. Lower Parel Mumbai - 400 013.
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAACK-2150-Q (अ पीलाथ" /Appellant) : (#$थ" / Respondent) & आयकर अ पील सं./I.T.A. No. 5075/Mum/2011 (िनधा रण वष / Assessment Year: 2006-07) Kiran Knit & Garments Private Asstt. Commissioner of Income Limited Tax (earlier known as Karnani Exports Private Limited) Circle 6(3)(2) 246, A-Z Industrial Estate, बनाम/ 5th Floor, Room No. 522 Ganpatrao Kadam Marg, Lower Vs. Aaykar Bhavan, M.K. Road, Parel Churchgate Mumbai - 400 013. Mumbai - 400 020.
2ITA Nos.4888 &5075/Mum/2011 Kiran Knit & Garments Private Limited Assessment Year 2006-07 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAACK-2150-Q (अ पीलाथ" /Appellant) : (#$थ" / Respondent) Revenue By : Rajesh Kumar Yadav,Ld.DR Assessee By : Rahul K. Hakani, Ld. AR सुनवाई की तारीख / : 15/06/2017 Date of Hearing घोषणा की तारीख / : 15/06/2017 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. These are cross appeals by assessee as well as revenue for Assessment Year [AY] 2006-07 against the order of the Ld. Commissioner of Income-Tax (Appeals)- 12 [CIT(A)], Mumbai dated 11/02/2011 on difference grounds of appeal. Since, the issue are inter-related, we dispose- off the same by way of this common order for the sake of convenience & brevity. First, we take up revenue's appeal ITA No. 4888/M/2011 where the revenue is primarily aggrieved by admission of certain additional evidences by Ld. CIT(A) in violation of Rule 46A.
2. Briefly stated, the assessee, being resident corporate assessee engaged in the business of manufacturing & export of knitted readymade garments, was assessee u/s 143(3) for impugned AY on 29/12/2008 at Rs.1,40,08,855/- after certain adjustments / disallowance as against returned income of Rs.14,84,347/- e-filed by the assessee on 23/11/2006.
3ITA Nos.4888 &5075/Mum/2011 Kiran Knit & Garments Private Limited Assessment Year 2006-07 In the present appeal, we are concerned with addition u/s 68, disallowance u/s 40(a)(ia) & re-computation of income under the head capital gains.
3. The relevant facts are that the assessee reflected unsecured loans of Rs.81,05,422/- out of which the assessee could not substantiate the identity, creditworthiness and genuineness of loans obtained from directors and their relatives to the tune of Rs.33,11,487/- which led the Ld. AO to add the same u/s 68. The second issue concerns with commission expenses of Rs.5,03,726/- paid by assessee to various parties, TDS details of which were not furnished by the assessee to Ld. AO which resulted into disallowance of the same u/s 40(a)(ia). The last issue is related with capital gains of Rs.13,00,423/- earned by assessee on sale of building. Since, the assessee could not produce sale agreement, the sale value of the same was presumed to be Rs.50 Lacs and accordingly, capital gains was recomputed at Rs.37,02,772/-.
4. Aggrieved, the assessee assailed the same before Ld. CIT(A), where the assessee contended that details of borrowed funds, ledger extract, bank statements, PAN details etc. were furnished to AO vide letter dated 22/08/2008 but the same could not be appreciated due to paucity of time. The Ld. CIT(A) after appreciating the same deleted additions to the extent of Rs.10,78,033/- but confirmed the balance addition for want of evidences. Regarding disallowance u/s 40(a)(ia), the assessee submitted that the commission was paid to five parties out of which two payees were foreign residents and therefore, no deduction was required. The Ld. CIT(A) was 4 ITA Nos.4888 &5075/Mum/2011 Kiran Knit & Garments Private Limited Assessment Year 2006-07 convinced with the explanation of the assessee and deleted the addition. Regarding re-computation of capital gains, the assessee submitted the relevant details / documents, 'memorandum of family settlement' etc. and after appreciating the same, Ld. CIT(A) deleted the addition.
5. Aggrieved, the revenue is in appeal before us primarily on the ground that additional details / documents have been produced before Ld. CIT(A) which was neither been appreciated by Ld. AO nor any remand report was called against the same in violation of Rule 46A.
6. After perusing the quantum order and appellate order, we are convinced with the revenue's contention that the assessee had produced additional details / documents in support of his various contention, which in view of principle of natural justice, should have been confronted to the Ld.AO. Even otherwise, the same were in violation of Rule 46A. Therefore, all the three issues are restored back to the file of Ld. AO with a direction to the assessee to substantiate his claim in this regard. Resultantly, the revenue's appeal stands allowed for statistical purposes.
7. Now, we take up assessee's appeal ITA No. 5075/M/2011. The assessee has raised five grounds of appeal out of which Ground No. 5 is general in nature whereas Ground No. 4 has been withdrawn as 'Not pressed'. Ground No. 1 is related with confirmation of addition u/s 68 for Rs.8,89,249/-. Since, this issue, in revenue's appeal, has already been restored to the file of Ld. AO, the same is allowed for statistical purposes.
5ITA Nos.4888 &5075/Mum/2011 Kiran Knit & Garments Private Limited Assessment Year 2006-07
8. Ground No. 3 is related with confirmation of disallowance of Rs.30,60,653/- claimed by assessee under the head claims for exports & penalties. Since no supporting evidence were produced by the assessee, the same were disallowed by Ld. AO and confirmed by Ld. CIT(A).
9. The Ld. Counsel for Assessee [AR] drawing our attention to the relevant documents placed in the paper book, contended that the said expenditure represented discounts given to the assessee's customers, the complete details of which was given during assessment proceedings and hence, impugned disallowance was not justified. Per contra, Ld. DR contended that the assessee could not produce evidences to substantiate the same.
10. Upon hearing rival contentions and perusing relevant material on record including ledger extracts, party wise details etc., we are, prima facie, convinced with the arguments of the Ld. AR that the impugned amounts primarily represented discounts, rebates etc. However, certain discrepancies were noticed by the bench in figures given in summary details vis-à-vis party wise details furnished by the Ld. AR and therefore, the same require verification at the level of AO. We direct so. The assessee is directed to substantiate / reconcile the same before Ld. AO. The ground of appeal stands allowed for statistical purposes.
11. The only ground left is ground no. 3 which is related with disallowance of proportionate depreciation on factory building which hitherto being used by assessee for business purposes but let out partly during impugned AY.
6ITA Nos.4888 &5075/Mum/2011 Kiran Knit & Garments Private Limited Assessment Year 2006-07 The assessee claimed aggregate depreciation of Rs. 11.38 Lacs comprising of depreciation of Rs.3.54 Lacs on building and Rs.7.84 Lacs on Machinery. The Ld. AO disallowed the depreciation to the extent of 50% presuming that the half of the building was let out along with Plant & Machinery. The same was confirmed by Ld. CIT(A) on the premises that rent was offered under the head House Property and therefore, part of building and machinery was not used for business purposes in terms of Section 32.
12. The Ld. AR placing reliance on many judicial pronouncements contended that under the concept of block of asset, the individual asset loses its identity and therefore, the WDV of the block could not be bifurcated to disallow depreciation. Per contra, the Ld. DR contended that a deduction of 30% has already been granted on rental income and therefore, allowing depreciation against the same would lead to double benefit to the assessee.
13. We have heard the rival contentions. Although, we concur with the argument of Ld. DR that grant of depreciation would lead to double benefit but we find that there is no mechanism in the law to bifurcate the WDV of the block of asset so as to disallow proportionate depreciation since individual assets loses its identity under the concept of block of asset. Similar view has been expressed by jurisdictional Hon'ble Bombay High Court in CIT Vs. Sonic Biochem Extractions Pvt. Ltd. [ITA No. 2088 of 201 7 ITA Nos.4888 &5075/Mum/2011 Kiran Knit & Garments Private Limited Assessment Year 2006-07 dated 17/11/2015]. Therefore, following the same, we delete the said disallowance and allow assessee's ground of appeal.
14. The Ld. AO is directed to re-compute book profits u/s 115JB and / or brought forward of losses, if required.
15. In nutshell, the revenue's appeal stands allowed for statistical purposes whereas the assessee's appeal stands partly allowed.
Order pronounced in the open court on 15th June, 2017 Sd/- Sd/-
(Joginder singh) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member
मुंबई Mumbai; िदनांक Dated : 15 .06.2017
Sr.PS:- Thirumalesh
आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ" / The Appellant
2. #$थ" / The Respondent
3. आयकर आयु+(अपील) / The CIT(A)
4. आयकर आयु+ / CIT - concerned
5. िवभागीय #ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड/ फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai