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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI SANDEEP GOSAIN, JM
O R D E R Per Bench: These are three appeals by the assessee for the above concerned years and also one cross appeal by the Revenue for assessment year (A.Y. for short) 2011-12 arising out of the respective orders of the learned Commissioner of Income Tax (Appeals)
(‘ld.CIT(A) for short). Since the issues are common and connected these have been consolidated and disposed of by this common order for the sake of convenience.
2 M/s. Loot (India) Private Limited Assessee’s appeal for A.Ys. 2009-10 & 2010-11
One issue raised in A.Y. 2009-10 is the assessee’s plea against the validity of Assessing Officer’s (A.O. for short) jurisdiction for reopening the assessment u/s. 147/148 of the Income Tax Act, 1961 (‘the Act' for short).
At the outset, the ld. Counsel of the assessee submitted that he shall not be pressing this ground. Hence, this ground is dismissed as not pressed.
One issue raised in A.Y. 2010-11 is that the ld. CIT(A) erred in confirming the rejection by the A.O. of a validly filed revised return of income by the assessee company.
On this issue, the A.O. noted that the assessee has filed a revised return. The A.O. did not accept the revised return on the ground that the assessee was changing the method of offering taxable income, which is not permitted by way of filing revised return u/s. 139(5) of the Act. He noted that the assessee has changed the figure of sales and also the value of the closing stock by changing the method of valuation. In this regard, he referred to several case laws for the proposition that the revised return can be used for bonafide and inadvertent omission or mistake. That it cannot be used for changing the status or method of accounting. That the original return is a return in all essential respects and the revised return only cures the defects contained in the original return.
3 M/s. Loot (India) Private Limited 6. In this regard, the order of the A.O. may be gainfully referred as under:
4.1 The assessee has filed revised returned of income on17.03.2012, declaring the total income of Rs.1,48,21,151/ . The assessee was asked to furnish a note on revised return of income vide order sheet dated 04.03.2013. The assessee vide letter dated 22.03.2013 has submitted note and reason for revised return. 4.2 The note submitted by the assessee vide its letter dated 22.03.2013 is considered but not acceptable as the assessee has revised total sales and the value of tile closing stock by changing method of valuation of closing stock after the audited annual accounts are finalized. Further during the course of assessment proceeding, The assessee has submitted unsigned copy of Balance sheet and Profit and loss account along with revised returned of income filed on 07.03.2012. 4.3 As per section 139(5) of the act, if any person having furnished the return under sub section 1, (sub section applicable in the case of the company) discovers any omission or any wrong statement therein he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier. However, the change in the method of offering taxable income cannot be claimed in the course of assessment and as per law the same is not permitted even by filing of revised return u/s.139(5) of the act. 4.4 The assessee has revised the figures of sales and also value of closing stock by changing the method of valuation .The assessee has worked out revised profit/loss by showing the figures of sales which are different from the figures reflected in audited Profit & Loss account. The assessee has failed to furnish the basis of arriving at figure. 4.5 The various judicial pronouncements stated herein also draw the same conclusion as explained and relied on herein: Deepnarain Nagu & Co. v. CIT(157ITR 37 (MP)) Status of Method of accounting cannot be changed. The facility of filing a revised return cannot be availed for change of status and change in method of accounting, since that would not amount to an 'omission' or 'wrong " statement'. CIT v. Chitranjali (159ITR 801 (Cal,)) Revised return does not wash away original return. The revised return filed under section 139(5) does not wash away the original return. An originally filed return is a return in all essential respects and the revised return only cures the defects contained in the original return. Sunanda Ram Deka v. CIT (210 ITR 988 (Gauhati)) Omission/wrong statement must be due to bona fide inadvertent or mistake. The filing of a revised return after discovery of the omission or wrong statements is not by itself sufficient to bring the revised return within the ambit of section 139(5). A further requirement is that this omission or 4 M/s. Loot (India) Private Limited wrong statement in the original return must be due to a bona fide it advertence or mistake on the part of the assessee. 4.6 In view of the above discussion and In view of the above facts of the assessee, the legal provisions of the act and various judicial pronouncements, I reject the new revised Statement of Computation of Total Income filed by the assessee on 07.03.2012 and I accept the income as filed in the Original Return of Income on 25.09.2010.
Upon the assessee’s appeal, the ld. CIT(A) confirmed the action of the A.O. He found that the assessee was trying to change the method of accounting in the revised return which was not permissible in law. He observed that the assessee has revised both the sales figure and closing stock figure. He noted that as per the practice of the assessee, the credit notes of the sales return are issued in subsequent financial year and therefore the sales return are considered accordingly in the year credit notes are raised. That in this year also the sales return are accounted for on the basis of credit notes raised and shown as such in the original return but subsequently the return was revised on the premise that the sales return are shown as real time basis. However, the ld. CIT(A) noted that it is the assessee’s submission that credit notes are raised in subsequent years. That the sale return and closing stock were accordingly shown in the original return on the basis of credit notes raised. Thus, the ld. CIT(A) found that the assessee was trying to rewrite the accounts on the basis of revised return which he found to be not permissible as per the several decision referred. Accordingly, the ld. CIT(A) upheld the action of the A.O.
Against the above order, the assessee is in appeal before us.
We have heard both the counsel and perused the records. The ld. Counsel of the assessee referred to the decision of Hon’ble Madras High Court in the case of CIT vs.
5 M/s. Loot (India) Private Limited Venkatesa Spinners (P.) Ltd. [2008] 296 ITR 205 (Mad.) for the proposition that where the change in method of valuation was for genuine reason and the method was based upon the accepted principle of accounting, it cannot be rejected. He further referred to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Indo Rama Synthetic Ltd. [2009] 180 taxman 35 (Del) for the proposition that when the change in method of valuation of inventory was inconsonance with the accounting standard issued and the assessee has followed the change method consisting in the subsequent years, the same was permissible. Hence, the ld. Counsel of the assessee submitted that the assessee has revised the return for cogent reason. Hence, the same is acceptable.
Per contra, the ld. Departmental Representative relied upon the orders of the authorities below and referred to the decisions referred in the order of the A.O.
Upon careful consideration, we note that the assessee in the present case is changing the method of accounting which is affecting both the figures of sales and closing stock. As observed by the ld. CIT(A), the assessee is changing the system of accounting for the credit notes of the sales return which is effecting both the figures of sales and closing stock. In our considered opinion, this cannot be said to be a change of method of valuation of closing stock for making it inconsonance with accounting standard or consistent method of accounting. Hence, in our considered opinion, the revision made by the assessee in the revised return is not permissible in view of the decision of the Hon’ble High Court as referred above which may be reproduced again here:
6 M/s. Loot (India) Private Limited Deepnarain Nagu & Co. v. CIT(157ITR 37 (MP)) Status of Method of accounting cannot be changed. The facility of filing a revised return cannot be availed for change of status and change in method of accounting, since that would not amount to an 'omission' or 'wrong " statement'. CIT v. Chitranjali (159ITR 801 (Cal,)) Revised return does not wash away original return. The revised return filed under section 139(5) does not wash away the original return. An originally filed return is a return in all essential respects and the revised return only cures the defects contained in the original return. Sunanda Ram Deka v. CIT (210 ITR 988 (Gauhati)) Omission/wrong statement must be due to bona fide inadvertent or mistake. The filing of a revised return after discovery of the omission or wrong statements is not by itself sufficient to bring the revised return within the ambit of section 139(5). A further requirement is that this omission or wrong statement in the original return must be due to a bona fide it advertence or mistake on the part of the assessee.
As already found by us hereinabove, the decision relied upon by the assessee are distinguishable. Hence, we do not find any infirmity in the order of the ld. CIT(A) on this issue. Hence, we uphold the order of the ld. CIT(A).
One common issue raised in 2731/Mum/2016 for assessment year 2009-10 and 2010-11 is that the ld. CIT(A) erred in confirming the addition made by the A.O. on account of bogus purchase without appreciating the factual evidence. On this issue, the addition was made on account of bogus purchases by the A.O. pursuant to the information received from the Sales Tax Department regarding the bogus purchase. In this regard, the submission of the assessee is that the assessee was not in a position to submit the complete details before the A.O. That the complete details were submitted before the ld. CIT(A) who has not properly appreciated the evidence. The ld. Counsel of the assessee submitted that the issue may be remitted to the file of the A.O. to consider the same afresh.
7 M/s. Loot (India) Private Limited 14. Per contra, the ld. DR submitted that the assessee has not submitted the details of vehicle on which the goods were transported. He submitted that on the touch stone of the decision of the Hon’ble Apex Court in the case of N.K. Proteins Ltd. vs. Dy. CIT [2017] 84 taxmann.com 195 (SC), the addition needs to be sustained.
Upon careful consideration, we note that certain additional evidence were furnished before the ld. CIT(A). In our considered opinion, on the facts and circumstances of the case, the interest of justice requires that the issue may be examined afresh by the A.O. Hence, we remit this issue to the file of the A.O. The A.O. is directed to consider the same afresh in light of the submissions made by the assessee.
Assessee’s appeal for A.Y. 2011-12:
The grounds of appeal read as under:
1. On facts, in circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the rejection by the learned A.O. of a valid revised return of income filed by the appellant company.
2. On facts, in circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming the addition made by the learned A.O. of Rs.17,16,93,811/- being difference in valuation of opening stock and closing stock as per valid revised return of income filed by the appellant company. 17. In this case, the A.O. has noted that the unsigned document of profit and loss account and balance sheet were filed which are not taken as authentic and, therefore, cannot be relied upon. However, on the issue of valuation of stock, he referred to the perusal of the audited and unaudited balance sheet and the profit and loss account. He referred to the notice issued in this regard to the assessee. He noted that nobody has 8 M/s. Loot (India) Private Limited appeared and no submissions have been made. Accordingly, he proceeded to add the difference.
18. Upon the assessee’s appeal, the ld. CIT(A) noted that the issue of revised return is same as discussed in his appellate order for A.Y. 2010-11. Hence, he held that since the issue is similar in nature and therefore for A.Y. 2010-11 in the case of the assessee the revised return cannot be accepted as the revised return has been shown to be on the basis of the change in the method of accounting.
Against this order, the assessee is in appeal before us.
We have heard both the counsel and perused the records. Upon careful consideration, we find that the ld. CIT(A) has not passed any order on the basis of the addition by the A.O. on account of change in the value of the stock. We find that when the A.O. in this case is making the assessment on the basis of revised figures, there is no case that the A.O. has rejected the revised return. Hence, the ld. CIT(A) has clearly erred in deciding that the revised return is not accepted. When the A.O. has proceeded to make the addition on account of figures given in the revised return, there is no case for holding that the revised return has been rejected by the A.O. Hence, this issue is being remitted to the file of the ld. CIT(A) to pass a speaking order on the addition on account of change in the figures of the stock made by the A.O.
In the cross appeal in for A.Y. 2011-12 the following grounds has been raised by the Revenue:
(i) The Ld. CIT(A) has erred in deleting the addition on account of unexplained cash of Rs95,00,000/- in bank, account by treating the same as sale entries, 9 M/s. Loot (India) Private Limited without any evidence and without appreciating that the facts the daily deposit on account of sales varied only between Rs.60,400/- to Rs 95,000/-, which could not explain the two large, lumsump deposits of Rs.45,00,000/- and Rs.50,00,000/-. (ii) The Ld. CIT(A) has erred in deleting the addition on account of disallowance u/s 2(24)(va) r.w.s. 36(l)(va) of the Income Tax Act, 1961 by holding the provision of section 43B of the Income Tax Act, 1961 are applicable without appreciating the facts that the issues was not governed by the provisions of section 43B of the Income Tax Act, 1961 in view of the CBDT’s circular No. 22/2015 dated 17.12.2015.
2. The Ld. CIT(A)’s order is contrary in law and on facts and deserves to beset aside.
Apropos ground no.1:
On this issue, the addition has been made by the A.O. for the unexplained huge cash deposit of Rs.45 lacs and Rs.50 lacs in the assessee’s bank account which was stated to be out of sales. However, the A.O. has not accepted the same in view of the regular sales pattern. The ld. CIT(A) has summarily allowed the same without bringing necessary facts and figures of the transactions made which are supposed to justify the deposit.
Upon hearing both the counsel and perusing the records, in our considered opinion, the interest of justice demands that this issue to be remitted to file of the ld. CIT(A). The ld. CIT(A) is directed to examine the issue afresh and pass a speaking order justifying the deletion. Needless to add, the assessee should be granted adequate opportunity of being heard.
Apropos ground no.2:
The addition by the A.O. on account of employee’s GPF contribution was made by the A.O. on the premise that the impugned payments was not made within the due date as specified in the relevant Act. However, the ld. CIT(A) has allowed the same by 10 M/s. Loot (India) Private Limited referring to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Ghatge Patil Transports Ltd. [2015] 53 taxmann.com 141 (Bom) and the decision of the Hon’ble Apex Court in the case of Alom Extrusion 319 ITR 306 (SC) for the proposition that the payments before the due date of filing the return is permissible. Hence, we do not find any infirmity in the order of the ld. CIT(A) on this issue. Hence, we uphold the same.
In the result, all the appeals by the assessee and Revenue are partly allowed.