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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SH. R. K. PANDA & SMT. BEENA A. PILLAI
Revenue/Department by : Sh. Umesh Chand Dubey, Sr.DR Assessee by : None. Date of hearing : 01.03.2017 Date of pronouncement : 22.03.2017 O R D E R PER BEENA A. PILLAI, J.M : 1. The present appeals have been filed by revenue as well as assessee against order dated 28.12.2012, 17.03.2010 and 12.01.2012 for assessment years, 2006-07 and 2008-09 ITA No. 3738/Del/2010 respectively passed by Ld. CIT(A)-II, Denradun on the following grounds of appeal: (2008-09 filed by revenue) 1. " Ld, CIT(A) has erred in 'aw and on tacts of the case in deleting the addition made on account of variation in GP of FL2 unit without appreciating the facts that the company was not maintaining proper books of accounts and preparing Balance Sheet and the special auditor was unable to express an opinion about the true and fairness of the profit arrived by the provisional profit & loss a/c
2. "Ld. CIT(A) has erred in law and on facts of the case in deleting the addition made on account of variation in GP of Tourism division without appreciating the facts that the company was not maintaining proper books of accounts and preparing Balance Sheet and the special auditor was unable to express an opinion about the true and fairness of the profit arrived by the provisional profit & loss a/c
3. "Ld. CIT(A) has erred in*law and on facts of the case in deleting the addition made on account of variation in GP of Parvat Plastic without appreciating the facts that the company was not maintaining proper books of accounts and preparing Balance Sheet and the special auditor was unable to express an opinion about the true and fairness of the profit arrived by the provisional profit& loss a/c
4. "Ld. CIT(A) has erred in law and on facts of the case in deleting the addition made on account of variation in GP of Parvat wires without appreciating the facts that the company was not maintaining proper books of accounts and preparing Balance Sheet and the special auditor was unable to express an opinion about the true and fairness of the profit arrived by the provisional profit & loss a/c". 5. "Ld. CIT(A) has erred in law and on facts of the case in deleting the addition made on account of undervaluation of stock in RTF Champawat Unit ITA No. 3738/Del/2010 without appreciating the facts that the company did not produce any supporting documents for valuation of stuck and the special auditor was unable to express an opinion about the true and fairness of the profit arrived by the provisional profit & loss a/c". 6. "Ld. CIT(A) has erred in law and on facts of the case in deleting the addition made on account of interest earned on ear marked funds without appreciating the facts that the corporation's financial affairs being in mess. Absence of Balance sheet to prove that interest is liability and not used for own purpose and recommendation of the Statutory Auditor that the corporation should stop using and crediting the interest on ear marked fund in its income, the interest is being treated as Income from Other Sources as per definition of interest given in section 28A and includes any service fee or other change in respect of any credit facility which has not been utilized. 7. " Ld. CIT(A) has erred in law and on facts of the case in deleting the addition made on account of expenses debited to FOR interest received account without appreciating the observations made by the special auditor that why the expenses are not allowable. 8. " Ld. C1T(A) has erred in, law and on facts of the case in deleting the addition made on account of Disallowance under section 14A without appreciating the facts that the calculated expenses u/s 14A by the special auditor were made exclusively for the income which does not form part of the total income under this Act.
(2003-04, filed by the revenue) 1. Ld. CIT (A) has erred in law and on facts of the case in upholding the deletion made by the C1T(A) on account of disallowance made u/s 36 (1) (va) r.w.s 2 (24) (x) for delay in payment of employees contribution. 2. Ld. CIT (A) has erred in law and on facts of the case in deleting the addition made on account of disallowance under section 32 of the IT. Act, 1961 ITA No. 3738/Del/2010 without appreciating the facts that the claim of depreciation remains unexplained as WDV on 01.04.2002 is not verifiable also chart of depreciation as per I.T. Act has not been submitted by the assessee. 3. Ld. CIT [A) has erred in law and on fact of the case in deleting the addition made on account of expenses under construction division without appreciating the facts that the assessee foiled to give information on the payments made to various other parties alongwith sub contractors.
ITANo.3768/del/10 (2006-07 filed by assessee) 1. That, the learned CIT (Appeal) erred in overlooking and summarily rejecting the Assessee's contention that the additions on account of variation in GP of FL2 Unit were made without acknowledging the facts and overlooking and in summarily rejecting the detailed statement of facts submitted along with copies of accounts and evidence placed. The learned AO also ignored the fact that the special auditor did not find any defect in the accounts of FL 2 Unit and has carefully derived the profit of the Unit. Addition sustained Rs. 14,39,903/- 2. That, the learned CIT (Appeal) erred in overlooking and summarily rejecting the Assessee’s contention that disallowance of expenses u/s 40A(3) were wrong in the light of the fact that the payment were made by the corporation to its agents who is required to make payment in cash for goods or services on behalf of the corporation. ITA No. 3738/Del/2010
Addition sustained Rs. 5.43,882/- 3. That, the learned CIT (Appeal) erred in rejecting the Assessee’s contention that disallowing the payment of statutory liability of Group Gratuity to L1C was incorrect because the corporation has incurred the expenditure and has contributed to the Group gratuity trust and the Corporation has no control over the affairs of the Group gratuity trust, solely created for the welfare of the Employees. Addition sustained Rs. 35,00,000/- 4. That, the learned CIT (Appeal) erred in rejecting the Assessee’s contention that disallowance of interest paid to Govt. on the ground that the loans are given to its subsidiaries by the corporation is incorrect. Here it is pertinent to note that the corporation is a Govt. corporation and it acts as per Govt. advice and orders, therefore the addition is unlawful and is liable to be deleted. Addition made Rs. 11,21,250/- 5. That, the learned CIT (Appeal) erred in rejecting the Assessee's contention that treating the security deposit as income of the corporation is incorrect. The Security deposit is a liability and treating it as income is unlawful & liable to be deleted. Addition made Rs. 18,42,813/- ITA No. 3738/Del/2010
The corporation craves leave to add or amend any of the ground of appeal
2. It is observed that appeal was 1st listed for hearing on 16.12.2013 and thereafter, none has appeared for assessee till date. These being very old appeals, filed way back in the year 2010, pertaining to assessment years 2003-04, 2006-07 and 2008-09. In the interest of natural Justice we do not to keep these appeals pending any further and we are deciding them ex parte.
3. Brief facts of the case are as under: At the outset it is observed from records placed before us for assessment years 2003-04, that it is second round of litigation. It has been observed from assessment order that assessment under section 143(3) was completed on 17.02.2006 by making addition of Rs.2,51,54,552/- against which, assessee preferred an appeal before Ld. CIT(A). Ld. CIT(A) partly allowed these appeals in favour of assessee however, confirmed addition on the basis of estimated income in case of FL-2 and CL-5 . On an appeal before this Tribunal in a coordinate bench of this Tribunal set aside appeal to Ld. AO with a direction to produce audited accounts in support of its computation of income and held that income of assessee should be recomputed on the basis of audited accounts. Accordingly, Ld. AO issued notices to assessee and computed Rs.3,88,60,749/- as total income in the hands of assessee. Ld. CIT(A) gave part ITA No. 3738/Del/2010 relief against order of Ld. CIT(A) revenue is in appeal before us now.
ITA No. 1286/del/13 (A.Y. 2003-04)
Ld. AO in order has recorded certain categorical finding of Co-ordinate Benche of this Tribunal in assessee’s own case for assessment year 2002-03, 2003-04 2004-05. It is observed that assessee is wholly owned company of the Govt. of Uttrakhand. The accounts of assessee are required to be audited by Chartered Accountant (CAG) appointed by Comptroller & Auditor General of India from year to year. It has been observed therein that appointment of auditor is normally delayed by the office of the CAG, hence, returns were filed in these assessment years on estimate basis.
It is emerging out from assessment order that, assesses had annexed tentative profit and loss account alongwith original return of income. Subsequently on remand by this Tribunal before assessing officer, assessee filed audited return of income for assessment year 2003-04. Ld. AO made certain additions which were challenged before Ld. CIT(A). Ld. CIT(A) placing reliance upon order of his predecessor for assessment year 2008-09 decided the appeal partly in favour of assessee. 6. The revenue is in appeal before us on the additions that has been deleted by Ld. CIT(A) on account of disallowance made under section 36 (1)(a) read with section 2(24)(x) for ITA No. 3738/Del/2010 delay in payment of employees contribution as well as claim of depreciation allowed under section 32. Revenue has also alleged the addition that has been deleted on account of expenses under construction division. It is observed that the Ld. CIT(A) has relied upon his predecessors order for assessment year 2006-07. On perusal of order of Ld. CIT(A) for assessment year 2006-07 it is observed as under: “11. The above has been carefully perused. In this regard, the statutory requirement is that the payment should be made to an approved gratitude find as defined under section 2 (5) of the act. An approved gratitude fund is defined to mean that gratitude fund which has been and continues to be approved by the Chief Commissioner or Commissioner in accordance with the rules contained in part C of the fourth- seeded. The fund is not approved as required by this definition. Ld. AR’s view that in the absence of will of the Chief Commissioner or Commissioner in the reduction should be allowed under section 37 of the act, is not acceptable in the light of the fact that the conditions in Para C of the 4th schedule which ensures and safeguard the interest of the employees would be rendered teeth less and the gratuity fund would be subject to the relation to the advantage of employees. The disallowance made by the Ld. Officer on account of the fund and not been approved by the Commissioner despair upheld.”
In respect of construction expenses allowed by Ld. CIT(A), it is observed that he has followed his own decision in first round of appeal for the year under consideration for and has decided as under: “8. Ground number 7 challenges the adhoc disallowance of Rs.2,00,000/- from expenses claimed in the Construction Division. It is seen that this issue was ITA No. 3738/Del/2010
decided in favour of the Appellant vide Appeal no. 163/NTL/2005-06, order dated 31.01.2017 (AY 2003- 04) in the first round proceedings. The following finding was given:- I have considered the ground on which this addition was made, appellant’s submission thereon and other materials available on record. In fact, this issue stands examined and resolved my predecessor during the course of appellant proceedings for A.Y 2011- 12. According to the appellate order for A.Y 2001-02, the appellant receives centage charge ranging from 10-12% of the gross amount of construction activities done for Government departments. The appellant furnished evidences which proved that the corporation received centage charges @ 12.5%. Therefore, it was held by my predecessor that addition on this account is called for. The facts of the case for the assessment year under consideration are identical. Therefore, respectfully following decision of my predecessor on this issue, I delete the addition on this account to the tune of Rs. 2,00,000/-.”
In respect of the addition that has been deleted in respect of depreciation we observed by Ld. CIT (A) as under: “Ground no. 6 challenges the fact that depreciation has not been allowed on the ground that complete details were not available in the accounts. The Ld. AR has submitted a detailed working of depreciation (Rs.17,87,601/-) at the Appellate stage. It is felt that since depreciation is a statutory deduction the Ld. AO must take this working into consideration and allow depreciation as per law at the time of giving effect to this Appellate order.” ITA No. 3738/Del/2010
We have perused all the relevant details examined by Ld. CIT (A) and the assessment order passed, following the directions of this Tribunal. We do not find any infirmity in the findings of Ld. CIT (A) and the same is upheld. Accordingly the grounds raised by revenue stands dismissed. In the result appeal filed by the revenue for assessment year 2003-04 stands dismissed. (A Y 2006-07 in assessee’s appeal)
We have duly considered the rival contentions and gone through the records carefully. No doubt, assessee is a company wholly owned by the Govt. of Uttrakhand. Its accounts are to be audited by CA appointed by CAG of India on year to year. It appears that auditor has not been appointed for year under consideration, who could have audited accounts of assessee and, therefore, assessee filed its income-tax return on estimate basis. The assessee has loss of Rs.15,43,175/-, as per tentative profit and loss and account. In this background, we deem it appropriate that Assessing Officer should have the benefit of audit report before determining taxable income of the assessee.
Accordingly the grounds raised by assessee stands allowed for statistical purpose. In the result appeal filed by the assessee stands allowed statistical purposes ITA No. 3738/Del/2010 ( revenue’s appeal A Y 2008-09) 12. Assessee has declared total profit of Rs.1,14,58,175.95 as per tentative profit and loss account. In the absence of audited accounts, it was difficult for Assessing Officer to determine true income and, therefore, he resorted to estimation of income. Assessee has already shown an income of Rs.1,10,75,680/- and had paid a tax of Rs.39,47,592/-. Assessee has many units as per tentative profit and loss and account. In this background, we deem it appropriate that Assessing Officer should have benefit of audit report before determining taxable income of assessee. Accordingly, the grounds raised by revenue stands allowed for statistical purposes. In the result appeal filed by revenue stands allowed statistical purposes. Order pronounced in the open court on 22nd March, 2017. Sd/- Sd/- (R. K.PANDA) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER Date: 22.03.2017 @m!t