M/S. SONA VETS PVT. LTD.,KOLKATA vs. DCIT, CC-2(1), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : KOLKATA [Before Hon’ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ] I.T.A No. 947/Kol/2017 Assessment Year : 2010-11 M/s Sona Vets Pvt. Ltd. -vs- DCIT, CC-2(1), Kolkata [PAN: AAECS 0908 G] (Appellant) (Respondent)

For the Appellant : Shri A.K.Tulsyan, AR For the Respondent : Shri Goulean Hangshing, CIT DR Date of Hearing : 21.09.2017 Date of Pronouncement : 17.10.2017

ORDER Per M.Balaganesh, AM

2 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 and cattle feed. The return of income for the Asst Year 2010-11 was filed by the assessee u/s 139(1) of the Act on 9.10.2010 declaring total income of Rs 5,01,11,522/-. The assessment was completed u/s 143(3) of the Act on 30.12.2011 accepting the income returned. A search u/s 132 of the Act was carried out in the business premises of the assessee at 17B & C, Everest House, 46C, Chowringhee Road, Kolkata – 700071 on 13.12.2012. Panchanamas were drawn in the name of persons including the assessee. The following valuables and documents were found / seized during the course of search : Address of the Cash Jewellary Identification premises where Mark of the search was documents Found Seized Found Seized conducted seized (Rs.) (Rs.) (Rs.) (Rs.) 17B & C, Everest 32,67,500/- 39,00,000 NIL NIL SPG/1 to House, 46C, SPG/13 and Chowringhee SPG/HD/1 Road, Kolkata- 700071 Plot no. C-3, NIL NIL NIL NIL SV/1 to WBIIDC SV/4 and Raninagar SV/PD/1 Industrial Growth Centre, Jalpaiguri- 7351010

Hence as on the date of search, the original assessment proceedings stood unabated i.e completed. Pursuant to the search, notice u/s 153A of the Act was issued to the assessee and the assessee filed a leter dated 9.12.2013 to treat the return filed u/s 139(1) of the Act as a return in response to notice u/s 153A of the Act. The ld AO completed the assessment u/s 153A read with section 143(3) of the Act on 27.3.2015 determining the total income at Rs 8,10,41,760/-. The ld AO denied the benefit of deduction u/s 80IB of the Act to the tune of Rs 3,09,30,242/- and disallowed the same in the 2

3 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 assessment framed u/s 153A of the Act on 27.3.2015 on the ground that the assessee is not engaged in the manufacturing activity. The assessee preferred an appeal against this order before the Learned Commissioner of Income Tax (Appeals) [ in short the ld CITA] who deleted the disallowance u/s 80IB of the Act vide his order dated 11.2.2016. On further appeal by the revenue to this tribunal, the same was dismissed vide order dated 30.11.2016 on the ground that there was no incriminating material found in the course of search and hence the assessment already framed u/s 143(3) of the Act could not be disturbed. On merits of the disallowance, the tribunal also held that the activity carried on by the assessee amounts to manufacture and hence is eligible for deduction u/s 80IB of the Act. In effect, the claim of deduction u/s 80IB of the Act was directed to be allowed for the Asst Year 2010-11 and was also further held that the concluded assessments cannot be disturbed without the existence of any incriminating materials found during the search.

4 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 24.8.2016 and CIT vs Veerprabhu Marketing Limited reported in 73 taxmann.com 149 (Calcutta) . It was also specifically pointed out with supporting evidences that the ld AO had duly examined these aspects of deemed dividend and excess claim of depreciation on motor lorries at higher rate during the course of assessment proceedings. It was stated that there was due and proper application of mind of the ld AO before framing the assessment on these two issues among others. Accordingly it was pleaded that the order of the ld AO cannot be termed as erroneous warranting revision u/s 263 of the Act.

4.1. The assessee also explained before the ld CIT that the assessee purchased hatching egges from M/s Shalimar Hatcheries Ltd and sold chicks to the said company. Accordingly it had maintained both sundry creditors ledger and sundry debtors ledger in its books in the name of Shalimar Hatcheries Limited. Even within the sundry creditors ledger, the assessee maintains separate creditors ledger for ‘Shalimar Hatcheries Limited’ ; ‘Shalimar Hatcheries Limited (Guwahati)’ ‘Shalimar Hatcheries Limited (Habra)’ ; ‘Shalimar Hatcheries Limited (Natungrame)’. Similarly assessee maintains different sundry debtors ledger such as ‘Shalimar Hatcheries Limited’ ; ‘Shalimar Hatcheries Limited (Panchal)’ ; ‘Shalimar Hatcheries Limited (Rajafarmbi)’. It was stated that total purhcases made by the assessee from the said company was Rs 9,80,00,700/- and total sales made to them was Rs 2,57,00,096/-. From the sundry creditors ledger, it could be found that the total value of credit transactions was Rs 11,30,68,501/- which includes, purchase, payments and transfer entry through journal. The credit transactions includes purchase bills totaling to Rs 9,80,00,700/- and balance amount of Rs 1,50,67,801/- was towards closing balance of Rs 1,32,54,079/- transferred from other ledger accounts maintained in the name of Shalimar Hatcheries Limited nad payment of Rs 18,13,722/- received from the said party against sale. Accordingly it was pleaded that the total credit transactions of Rs 11,30,68,501/- was misinterpreted as advance although the same was purchase, payment received against sale and balance of 4

5 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 different ledgers and hence the assessee had not received any advance or loans from the said party and accordingly the question of deemed dividend u/s 2(22)(e) of the Act does not arise.

4.2. The assessee explained before the ld CIT with regard to claim of depreciation on motor lorries at 30% as under:- “6.2. In this contention, it is pertinent to mention that the assessee is a company engaged in the manufacturing and selling of poultry feed, eggs & total chicken and it needs heavy motor vehicles for the transportation of its raw materials as well as finished goods. Therefore, the assessee has bought its own motor lorries for this purpose. Now, as per the Rule 5 of the Income Tax Rules, depreciation should be applicable as per the rates prescribed in the depreciation should be applicable as per the rates prescribed in the depreciation schedule. Any assessee is eligible for depreciation at the rates prescribed in the schedule. In case of the assessee, the year concerned here is assessment year 2010-11. Hence, the assessee would be eligible for depreciation at the rates applicable to that particular year. Now, in the concerned year i.e. FY 2009-10, it was mentioned in the schedule that New commercial vehicle which is acquired on or after the 1st day of January, 2009 but before the 1st day of October, 2009 for the purpose of business or profession would be eligible for depreciation at the rate of 50%, where “Commercial vehicle”means “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle” and “medium passenger motor vehicle” but does not include “maxi-cab”, “motor cab”, “tractor” and “road-roller”. The expressions “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle” and “medium passenger motor vehicle” but does not include “maxi-cab”, “motor cab”, “tractor” and “road-roller” shall have the meanings respectively as assigned to them in Section 2 of the Motor Vehicles Act, 1988 (59 of 1988). (copy of Schedule attached). Thus, from the above cited rules, it is clearly evident that any commercial vehicle purchased by any assessee on or after 01.01.2009 but before 01.10.2009 and also put to use before 01.10.2009, would be eligible for depreciation at the 50% provided the same asset was used for the purpose of business or profession. 6.3 Now, coming to facts of the case, the assessee purchased various motor lorries during the period of 01.01.2009 to 30.09.2009 and also put them to use for its business purpose. Please find enclosed herewith the details of addition to motor car along with copy of the registration certificate etc. The assessee used those motor lorries for carrying its products from one place to another. Thus, it is beyond any question that the lorries were used for the purpose of business of the assessee. Thus, the assessee has fulfilled the criteria for claiming the depreciation at a higher rate than the normal prescribed rate of 15%. But instead of claiming the depreciation at 50%, the accountant of the assessee not being professionally equipped and not very well accustomed with the taxation laws, mistakenly claimed the depreciation @ 30%. Therefore, the assessee has 5

6 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 inadvertently claimed a lower rate of contended by your honours of claiming a higher rate of depreciation. Thus, the assessee did not claim any extra depreciation instead it claimed depreciation at a lower rate. 6.4 Thus, from the above discussed facts and circumstances we can come to the conclusion that the charging of depreciation in this particular case is case specific The depreciation charged on the lorries is based on the condition prescribed in the schedule. The assessee though eligible for depreciation at a higher rate of 50%, has claimed depreciation @ 30% only. Thus, the assessee claimed a lower rate of depreciation as being unaware of the taxation laws. Thus, the contention of your Honour that the assessee claimed depreciation at a higher rate than the prescribed one is not justified.”

Based on this submission, it was pleaded on the point of claim of depreciation, that the same could be construed only as prejudicial to the interest of the assessee and not prejudicial to the interest of the revenue.

4.3. The ld CIT referred to certain seized documents marked as SHL (Corporate Office) -2, SPG-3, SPG -1 . According to ld CIT, the seized document marked as SHL -2 in page 8 thereon contained the fact that M/s Sona Vets Pvt Ltd (assessee herein) is holding 360000 shares out of total 1095050 shares (which is in excess of 10%) as evident from the list of shareholding pattern of Ms Shalimar Hatcheries Limited. From the seized document marked as SPG-3 in pages 14 & 15, the ld CIT observed that assessee company has shown liabilities in the name of M/s Shalimar Hatcheries. From the seized document marked as SPG-1 in pages 17 & 18, the ld CIT observed from the trial balance that assessee had shown numerous lorries as part of the assets. The assessee explained before the ld CIT that the ld AO had duly replied in this regard before the ld AO vide letter dated 20.2.2015 as under:-

(1) Page No. 1 to 24 of SPG 1 belong to Sona Vets Private Limited contains copy of trial balance for the F.Y. 2012-13 which are as per regular books of accounts and are enclosed herewith.

7 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 (5) Page No. 11 to 20 of SPG 3 belong to Sona Vets Private Limited contains copy of group summary of Sundry Creditors for F.Y. 2007-08 to 2011-12 which are as per regular books of accounts and are enclosed herewith.

The assessee vide separate letter dated 20.2.2015 explained the seized document SHL/02 and its contents page wise in detail before the ld AO. In effect, it was stated that the assessee had duly explained the following seized documents before the ld AO vide letter dated 20.2.2015 :-

8 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 31. Page No. 26 to 28 of SPG 12 32. Page No. 29 of SPG 12 33. Page No. 30 to 35 of SPG 12 34. Page No. 24 to 25 & 36 of SPG 12 35. Page No. 38 to 43 & 44 of SPG 12 36. Page No. 45 to 47 of SPG 12 37. Page No. 48 to 49 of SPG 12 38. Page No. 52 of SPG 12 39. Page No. 1 of SPG 13 40. Page No. 2 of SPG 13 41. Page No. 3 & 20 of SPG 13 42. Page No. 4 & 5 of SPG 13 43. Page No. 6,7,8,9 & 19 of SPG 13 44. Page No. 10 to 14 of SPG 13 45. Page No. 15 to 18 of SPG 13 46. Page No. 21 to 24 of SPG 13 47. Page No. 25 to 30 of SPG 13 48. Page No. 31 of SPG 13 49. Page No. 32 to 39 of SPG 13 50. Page No. 01 to 02 of SHL/02 51. Page No. 03-07of SHL/02 52. Page No. 08 of SHL/02 53. Page No. 09-21 of SHL/2 54. Page No. 22 of SHL/2 55. SHL/3 & 4 56. Page No. 1 of SHL/5 57. Page No. 2 of SHL/5 58. Page No. 03-08 of SHL/5

Further vide letter dated 23.2.2015, M/s Websol Energy System Limited explained the seized document marked as SHL/03 in pages 1 to 78 ; SHL/04 in pages 1 to 41; Explanation of Hard Disk vide ID marked HD-1 and SHL-7 before the ld AO as belonging to them.

4.4. The assessee replied before the ld CIT that the seized document marked as SHL -2 Page 8 contains list of shareholders of Shalimar Hatcheries Limited together with number of shares held by each shareholder. In this list, the name fo the assessee also

9 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 appears as holding 360000 shares of Shalimar Hatcheries Limited and assessee pleaded that such information is already in the public domain and is part of regular books of accounts of the assessee and there is nothing incriminating therein.

4.4.1. The assessee replied before the ld CIT that the seized document marked as SPG-3 pages 14& 15 contains sundry creditors trial balance for the period from 1.4.2009 to 31.3.2010 which are part of regular books of accounts of the assessee and there is nothing incriminating therein.

4.4.2. The assessee replied before the ld CIT that the seized document marked as SPG-1 pages 17& 18 contains trial balance for the period from 1.4.2012 to 31.3.2013 which are part of regular books of accounts of the assessee and there is nothing incriminating therein.

10 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 2. That without prejudice to our above ground, the AO has conducted proper enquiry. The order of the AO is not erroneous as well as prejudicial to the interest of the revenue on the issue of deemed dividend and rate of depreciation on lorries. As such, exercising of the power u/s 263 of the I.T. Act is bad in law and needs to be deleted.

11 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11 30% while framing the search assessment u/s 153A of the Act. Moreover, we find that the assessee had given proper explanations regarding these items before the lower authorities as reproduced above. We find that the assessee had also duly explained the complete contents of the seized documents relied upon by the ld CIT in his order. In our considered opinion, those materials are not incriminating at all and are forming part of regular books of accounts of the assessee. These explanations have been completely ignored by the ld CIT while directing the ld AO to frame the assessment afresh. We hold that when an addition could not be made as per law in section 153A proceedings, then the said order cannot be construed as erroneous warranting revisionary jurisdiction u/s 263 of the Act by the ld CIT. We hold that even on merits, there is no case made out by the ld CIT for making any addition towards deemed dividend or disallowance of excess depreciation on motor lorries. In these facts and circumstances, we find that the order of the ld CIT u/s 263 of the Act deserves to be quashed. Accordingly, the preliminary ground raised by the assessee on the issue of assumption of jurisdiction u/s 263 of the Act is allowed.

Order pronounced in the Court on 17.10.2017

Sd/- Sd/- [N.V. Vasudevan] [ M.Balaganesh ] Judicial Member Accountant Member

Dated : 17.10.2017 SB, Sr. PS

12 ITA No.947/Kol/2017 M/s Sona Vets Pvt. Ltd. A.Yr.2010-11

Copy of the order forwarded to: 1. M/s Sona Vets Pvt. Ltd., 17B & C, Everest House, 46C, Chowringhee Road, Kolkata- 700071. 2. DCIT, CC-2(1), Kolkata, Aayakar Bhawan Poorva, 110, Shantipally, Kolkata- 700107. 3.P.C.I.T, Central-1, Kolkata 4. C.I.T.- Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.