The ITO, Ward-4(2),, Ahmedabad v. Kairav Chemicals Ltd.,, Ahmedabad

ITA 2517/AHD/2007 | 2003-2004
Pronouncement Date: 19-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 251720514 RSA 2007
Assessee PAN AAACK8018P
Bench Ahmedabad
Appeal Number ITA 2517/AHD/2007
Duration Of Justice 2 year(s) 9 month(s) 10 day(s)
Appellant The ITO, Ward-4(2),, Ahmedabad
Respondent Kairav Chemicals Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 19-03-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 19-03-2010
Date Of Final Hearing 15-03-2010
Next Hearing Date 15-03-2010
Assessment Year 2003-2004
Appeal Filed On 08-06-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' (BEFORE S/SHRI MAHAVIR SINGH JM AND A N PAHJUA AM) ITA NO.2517/AHD/2007 (ASSESSMENT YEAR:- 2003-04) THE INCOME-TAX OFFICER WARD-4(2) AHMEDABAD V/S KAIRAV CHEMICALS PVT. LTD. 901 PARSHWA TOWER OPP. RAJPATH CLUB SARKHEJ GANDHINAGAR HIGHWAY AHMEDABAD [PAN:AAACK8018P] [APPELLANT] [RESPONDENT] REVENUE BY :- SMT. NEETA SHAH DR ASSESSEE BY:- SHRI R T SHAH AR O R D E R A N PAHUJA : THIS APPEAL FILED BY THE REVENUE AGAINST AN ORDER DATED 08-03-2007 OF THE LEARNED CIT(A)-VIII AHMED ABAD RAISES THE FOLLOWING GRUNDS: 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS O F THE CASE IN DIRECTING THE A.O. TO DELETE THE DISALLOWANCE OF RS.14 75 000/- O N ACCOUNT OF EXCESS DEPRECIATION CLAIMED IN RESPECT OF ASSETS AND DIREC TING TO REWORK THE ALLOWABLE DEPRECIATION AFTER REDUCING RS.40 62 455/ - FROM THE BLOCK OF PLANT & MACHINERY AND RS.7 38 616/- FROM THE BLOCK OF FACTORY BUILDING AS AGAINST RS.55 LACS AND RS.10 LACS RESPECTIVELY DONE BY THE A.O. IN HIS ORDER. 2. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DIRECTING THE A.O. TO ALLOW ASSESSEE'S LOSS DUE TO FIRE TO THE EX TENT OF RS.30 92 041/- BEING THE DIFFERENCE OF ASSESSEE'S CLAIM MADE AND A CTUAL INSURANCE CLAIMED RECEIVED ( RS.1 18 30 098/- - RS.87 38 057/ -) IN RESPECT TO STOCK- IN-TRADE ( FOR WHICH NO CLAIM WAS MADE FOR THE YEAR UNDER APPEAL OR IN THE A.Y. 2004-05) AS LOSS OF STOCK DUE TO DAMAGE IN THE YEAR OF SETTLEMENT I.E. FOR A.Y. 2005-06 IGNORING THE FACT THAT THE SAID IS SUE WAS NEITHER RAISED BY THE ASSESSEE NOR ADJUDICATED BY THE A.O. AND HENCE THE LD. CIT(A) COULD NOT HAVE ADJUDICATED ON THE SAME AS HELD BY THE HON 'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT(2006) 28 4 ITR 323 (SC). 3. THE LD. CIT(A) FURTHER ERRED IN THE CONTENTION T HAT THE AMOUNT OF INSURANCE CLAIM WAS UNASCERTAINABLE TILL THE INSURA NCE CLAIM WAS FINALIZED WHEREAS THE ASSESSEE DID MAKE CLAIM BEFORE THE INSU RANCE COMPANY FOR A ITA NO.2517/AHD/2007 2 2 PARTICULAR AMOUNT AFTER MAKING DUE DILIGENCE FOR TH E ASSETS DESTROYED IN FIRE AND QUANTIFIED THE CLAIM OF INSURANCE. 4. THE LD. CIT(A) FURTHER ERRED IN ADJUDICATING ON THE ISSUE OF ALLOWING LOSS OF RS.30 92 041/- IN THE A.Y. 2005-06 WITHOUT JURIS DICTION. | 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER 6. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED T O THE ABOVE EFFECT . 2 ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL FAC TS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCO ME OF RS.69 13 797/-[BEFORE SET OFF OF B/F LOSSES] FILED ON 14.11.2003 BY THE ASSESSEE ENGAGED IN MANUFACTURING AND TRADING BULK DRUGS WAS PROCESSED ON 11.2.2004 U/S 143(1) OF THE INCOME -TAX ACT 1961[HEREINAFTER REFERRED TO AS THE ACT]. THE REAFTER THE ASSESSEE FILED A REVISED RETURN ON 10.3.2004 DECLA RING INCOME OF RS.37 31 613/-[BEFORE SET OFF OF B/F LOSSES] . THE SAID RETURNS WERE TAKEN FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143 (2) OF THE ACT ON 25.11.2004. DURING THE COURSE OF ASSESSMENT PROCEED INGS THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT DUE TO HEAVY FIRE ON 26- 01-2003 IN THE FACTORY PREMISES OF THE ASSESSEE PL ANT AND MACHINERY BUILDING AND STOCK-IN-TRADE WERE DESTROY ED. IN THE ORIGINAL RETURN THE ASSESSEE DEBITED ESTIMATED AM OUNT TOWARDS THE LOSS OF ASSETS AND SIMULTANEOUSLY CREDITED THEIR C LAIM SUBMITTED TO THE INSURANCE COMPANY FOR AN AMOUNT OF RS.55 LACS TOWARDS PLANT AND MACHINERY AND RS.10 LACS FOR BUILDINGS. SUBSEQU ENTLY THE ASSESSEE SUBMITTED A REVISED RETURN MENTIONING TH AT THESE ENTRIES MAY NOT GIVE TRUE PICTURE IN RESPECT OF LOSSES AND NECESSARY EFFECT WOULD BE GIVEN IN THE YEAR OF SETTLEMENT OF AMOUNT BY THE INSURANCE COMPANY. SINCE THE ASSESSEE DID NOT REDUCE WDV OF A SSETS DESTROYED IN FIRE WHILE CLAIMING DEDUCTION ON ACCOU NT OF DEPRECIATION THE AO SHOWCAUSED THE ASSESSEE AS T O WHY THE SAME SHOULD NOT BE REDUCED AS NON-EXISTENT ASSETS CANNO T BE USED FOR ITA NO.2517/AHD/2007 3 3 THE BUSINESS AND NO DEPRECIATION CAN BE ALLOWED ON THE SAME. AFTER CONSIDERING THE REPLY OF THE ASSESSEE THE AO CONC LUDED THAT THE ASSESSEE WAS NOT ENTITLED TO THE DEPRECIATION ON TH E PLANT AND MACHINERY AND BUILDING DESTROYED IN FIRE TO THE EXT ENT OF LOSS CLAIMED BY THE ASSESSEE OF RS.55 00 000/- IN PLANT AND MACHINERY AND RS.10 00 000/- IN BUILDING. THE AO ACCORDINGLY DISALLOWED DEPRECIATION OF RS.13 75 000/- ON PLANT AND MACHIN ERY @ 25% AND RS.1 00 000/-ON BUILDING @ 10% RESULTING IN DISALLO WANCE OF RS.14 75 000/-. 3 ON APPEAL THE ASSESSEE CONTENDED THAT THEIR CLA IM BEFORE THE AO WAS PROVISIONAL. SINCE THEIR CLAIM WAS SETTL ED ONLY SUBSEQUENTLY DURING THE FY 2004-05 THE DEPRECIATIO N ON ENTIRE BLOCK OF ASSETS WITHOUT ANY REDUCTION SHOULD HAVE B EEN GRANTED. AFTER CONSIDERING THESE SUBMISSIONS OF THE ASSESSEE THE LD. CIT(A) HELD AS UNDER:- 2.1 BEFORE ME IT WAS CONTENDED THAT THE CLAIM BEF ORE THE AO WAS PROVISIONAL AND THE CLAIM WAS SETTLED ONLY SUBSEQUE NTLY DURING THE F.Y. 2004-05 AND HENCE THE DEPRECATION ON ENTIRE BLOCK O F ASSETS WITHOUT ANY REDUCTION SHOULD HAVE BEEN GRANTED. IT WAS ALSO EXP LAINED THAT WHILE PREPARING THE STATEMENT OF INCOME FOR A.Y. 2003-04 ENTRIES IN THE BOOKS OF ACCOUNTS WERE IF THERE WAS NO FIRE AND NO DAMAGE. A CCORDINGLY THE DISALLOWANCE EFFECTED BY THE UNTESTED AS NOT JUSTIF IABLE. AT THIS JUNCTURE THE APPELLANT WAS SPECIFICALLY DIRECTED AS TO THE S ETTLEMENT OF ACTUAL INSURANCE CLAIM IN RESPECT OF VARIOUS ASSETS NAMEL Y PLANT AND FACTORY BUILDING STOCK-IN-TRADE. TO THIS IT WAS EXPLAINED THAT THE TOTAL INSURANCE CLAIMED ON 08.06.2004 WAS RS.1 35 39 128/- AS AGAIN ST THE ORIGINAL CLAIM OF RS.2 15 12 282/-. THE DIFFERENCE OF RS.79 73 154 /- WAS CLAIMED AS BUSINESS EXPENDITURE FOR THE A.Y. 2005-06. AS REGAR DS THE PROPORTIONATE CLAIM RECEIVED TOWARDS PLANT AND MACHINERY AND FACT ORY BUILDING BEING DEPRECIABLE ASSTS THE APPELLANT FURNISHED THE FIGU RES AS UNDER: CLAIM RECEIVED FOR FACTORY BUILDING RS. 7 38 61 6 CLAIM RECEIVED FOR PLANT AND MACHINERY RS. 40 62 455 2.1.1 THUS IT WAS CLAIMED THAT THE AMOUNT TO BE DE DUCTED FROM THE DEPRECIABLE BLOCK ON THE BASIS OF FINAL SETTLEMENT SHALL BE THE ABOVE FIGURE ONLY AS AGAINST RS.10 LACS AND RS.55 LACS ADOPTED B Y THE AO. ITA NO.2517/AHD/2007 4 4 2.2 I FIND THE CONTENTION OF THE APPELLANT WITH REF ERENCE TO THE ACTUAL CLAIM AS TENABLE AS IT IS THE ONLY AMOUNT RECEIVED AGAINS T THE DAMAGED DEPRECIABLE ASSETS. THERE IS NO FURTHER CLAIM DUE A ND HENCE NO NOTIONAL DEDUCTION COULD BE MADE. ACCORDINGLY I DIRECT THE AO TO REDUCE RS.40 62 455/- FROM THE BLOCK OF PLANT AND MACHINER Y AND RS.7 38 616/- FROM THE BLOCK OF FACTORY BUILDING AS AGAINST RS.55 LACS AND RS.10 LACS RESPECTIVELY DONE BY THE AO IN HIS ORDER. THE DEPRE CIATION ALLOWABLE FOR THIS SHALL BE ACCORDINGLY REWORKED. THE BALANCE WDV SHALL BE CARRIED FORWARD TO THE FOLLOWING YEAR AND APPROPRIATE DEPRE CIATION SHALL BE ALLOWED FOR A.Y. 2004-05. AS REGARDS THE DAMAGE OF STOCK-IN -TRADE IN RESPECT OF WHICH NO ADJUSTMENT WAS CARRIED OUT BY THE AO FOR T HIS ASSESSMENT YEAR IT IS SEEN THAT THE ACTUAL CLAIM SETTLED WAS RS.87 38 057/- AS AGAINST THE ESTIMATED DAMAGE OF RS.1 18 30 098/-. THUS THERE W AS ONLY LOSS DUE TO FIRE TO THE EXTENT OF RS.30 92 041/- IN RESPECT OF STOCK-IN-TRADE FOR WHICH NO CLAIM WAS MADE FOR AY 2003-04 OR IN THE AY 2004-05 AS SUBMITTED BY THE APPELLANT. THE AO IS DIRECTED TO ENSURE THAT NO LOS S IS CLAIMED BY WAY OF ADJUSTMENT IN THE INVENTORY FOR THESE TWO ASSESSMEN T YEARS HOWEVER THE DIFFERENCE BETWEEN THE ACTUAL DAMAGE AND THE INSURA NCE CLAIM SETTLED AT RS:_87 38 057/- SHALL BE ALLOWED AS LOSS OF STOCK D UE TO DAMAGE IN THE YEAR OF SETTLEMENT I.E. FOR AY 2005-06. 4 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR WH ILE CARRYING US THROUGH THE IMPUGNED ORDERS CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN ISSUING DIRECTIONS FOR THE AY 2005-0 6 WHICH WAS NOT IN APPEAL BEFORE HIM AND ESPECIALLY WHEN NO SUCH CLAIM OF LOSS OF RS. 30 92 041/- WAS MADE BEFORE THE AO IN THE RETURNS F ILED BY THE ASSESSEE FOR THE AY 2003-04. ON THE OTHER HAND THE LD. AR DID NOT OPPOSE THESE SUBMISSIONS OF THE LD. DR. 5. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED THE RIVAL SUBMISSIONS . UNDISPUTEDLY DUE TO FIRE IN THE FACT ORY PREMISES OF THE ASSESSEE ON 26.1.2005 CERTAIN PLANT AND MACHINERY AS ALSO BUILDINGS WERE DESTROYED. THE AO REDUCED THE AMOU NT ESTIMATED BY THE ASSESSEE FROM THE BLOCK OF ASSETS AND ACCORD INGLY DISALLOWED DEPRECIATION WHILE THE LD. CIT(A) REDUCE D THE ACTUAL AMOUNT SETTLED BY INSURANCE COMPANY. THE LD.CIT(A) THEREFORE DIRECTED THE AO TO REDUCE RS.40 62 455/- FROM THE B LOCK OF PLANT AND MACHINERY AND RS.7 38 616/- FROM THE BLOCK OF FACTO RY BUILDING AS ITA NO.2517/AHD/2007 5 5 AGAINST RS.55 LACS AND RS.10 LACS RESPECTIVELY DONE BY THE AO IN HIS ORDER. THE REVENUE HAVE NOT PLACED BEFORE US ANY M ATERIAL CONTROVERTING THESE FACTS NOR POINTED OUT ANY INFIR MITY IN THE FINDINGS OF THE CIT(A) ON THIS ASPECT SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER. IN THESE CIRCUMSTANCES WE HAVE NO OPTION BUT TO UPHOLD THE FINDINGS OF THE LD. CIT(A). THUS GROUND NO.1 IS DISMISSED. 5 AS REGARDS ISSUE RAISED IN GROUND NOS. 2 TO 4 I N RESPECT DIRECTIONS ISSUED BY THE LD. CIT(A) FOR ALLOWING LOSS OF RS.30 92 041 /- IN THE AY 2005-06 NO SUCH CLAIM IS STATED TO HAVE BEEN MADE IN THE ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION NOR THE RELEVANT FACTS EMERGE F ROM THE ASSESSMENT ORDER. EVEN THE ASSESSEE DID NOT RAISE THE ISSUE IN THE GR OUNDS OF APPEAL BEFORE THE LD. CIT(A) NOR ANY APPEAL FOR THE AY 2005-06 WAS PENDIN G BEFORE HIM. IN THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT THE LD. C IT(A) WAS NOT JUSTIFIED IN ISSUING DIRECTIONS ON A MATTER WHICH WAS NOT IN APP EAL BEFORE HIM AND THAT TOO FOR ANOTHER ASSESSMENT YEAR. THE HONBLE SUPREME COUR T IN THE CASE OF RAJINDER NATH V. CIT [1979] 120 ITR 14 HELD THAT A FINDING GIVEN IN AN APPEAL REVISION OR REFERENCE ARISING OUT OF AN ASSESSMENT MUST BE A FI NDING NECESSARY FOR THE DISPOSAL OF THE PARTICULAR CASE THAT IS TO SAY IN RESPECT OF THE PARTICULAR ASSESSEE AND IN RELATION TO THE PARTICULAR ASSESSMENT YEAR. TO BE A NECESSARY FINDING IT MUST BE DIRECTLY INVOLVED IN THE DISPOSAL OF THE CA SE.IT IS NOW WELL-SETTLED THAT IT MUST BE AN EXPRESS DIRECTION NECESSARY FOR THE DISP OSAL OF THE CASE BEFORE THE AUTHORITY OR COURT AND IT MUST ALSO BE A DIRECTION WHICH THE AUTHORITY OR COURT IS EMPOWERED TO GIVE WHILE DECIDING THE CASE BEFORE IT . WHILE ADJUDICATING A SIMILAR ISSUE HONBLE KERALA HIGH COURT IN COMMISSIONER OF INCOME-TAX. VS CHACKOLA SPINNING AND WEAVING MILLS LIMITED 188 ITR 432(KERA LA) HELD THAT THE OBSERVATION THAT THE PAYMENT WILL BE DED UCTIBLE FOR THE ASSESSMENT YEAR 1981-82 WHILE DISPOSING OF THE APPEAL FOR THE ASSE SSMENT YEAR 1980-81 WAS ONLY AN INCIDENTAL ONE ; SUCH A MATTER NEVER AROSE FOR CONSIDERATION. THE OBSERVATION WAS UNAUTHORISED AND UNCALLED FOR. IT I S TRUE THAT THERE IS NO FINDING IN THE STRICT SENSE. EVEN SO THE OBSERVATION AFORESAI D IS ILLEGAL AND UNJUSTIFIED. WE ARE FORTIFIED IN THIS VIEW BY THE FOLLOWING AMONG OTHER DECISIONS : ITO V. MURLIDHAR ITA NO.2517/AHD/2007 6 6 BHAGWAN DAS [1964] 52 ITR 335 (SC); P. J. UDANI V. CIT [1967] 63 ITR 766 (AP) AND BAKSHISH SINGH V. ITO [1974] 93 ITR 178 (CAL). IN THIS CONNECTION IT SHOULD BE REMEMBERED THAT THE TRIBUNAL WAS DISPOSING OF TH E APPEAL FILED BY THE REVENUE BEFORE IT FOR THE YEAR 1980-81 AND NOT AN APPEAL FILED BY THE ASSESSEE. AND THERE IS NO MATERIAL OR EVEN WHISPER TO SHOW TH AT AN ALTERNATE PLEA OR APPROACH WAS MOOTED BY THE ASSESSEE FOR THE CLAIM M ADE BY IT WHEN THE TRIBUNAL ADJUDICATED THE APPEAL NAMELY THAT THE A MOUNT IS CLAIMABLE FOR THE SUBSEQUENT YEAR 1981-82 AND THAT THE ALTERNATE PLEA NECESSITATED THE OBSERVATIONS MADE IN WHICH CASE THE RATIO OF THE DECISION IN MOTILAL BAWALAL V. CIT [1963] 50 ITR 249 (BOM) MAY CALL FOR APPLICATION. SUCH IS NOT THE CA SE HERE . 5.1 IN THE INSTANT CASE WE FIND THAT THE LD. C IT(A) WAS DISPOSING OF THE APPEAL FOR THE AY 2003-04 & NOT FOR THE AY 2 005-06. THE APPELLATE AUTHORITY CAN GIVE FINDINGS AND DIRECTION S ONLY IN RESPECT OF THE ISSUES AND THE YEAR WHICH ARE BEFORE HIM AND NO DIRECTIONS OR FINDINGS CAN BE GIVEN IN RESPECT OF OTHER YEARS NOT PENDING BEFORE HIM. IN THE LIGHT OF VIEW TAKEN IN THE AFORE CITED DECISIONS WE ARE OF THE OPINION THAT SINCE THE MATTER RELATIN G TO LOSS OF RS. 30 92 041/- ON ACCOUNT OF STOCK IN TRADE NEVER ARO SE FOR CONSIDERATION IN THE ASSESSMENT YEAR BEFORE US THE INCIDENTAL D IRECTIONS ISSUED AND OBSERVATIONS MADE BY THE LD. CIT(A) FOR THE AY 200 5-06 WERE UNAUTHORISED AND UNCALLED FOR. THEREFORE WE HAVE NO HESITATION IN VACATING THESE DIRECTIONS AND OBSERVATIONS OF THE LD. CIT(A) SO FAR AS THESE RELATE TO THE AY 2005-06. THUS GROUND NOS. 2 TO 4 IN THE APPEAL ARE ALLOWED . 6 GROUND NOS.5 AND 6 BEING GENERAL IN NATURE DO NOT REQUIRE ANY ADJUDICATION AND ARE THEREFORE DISMISSED. 7. IN THE RESULT APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 19 -03 -2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 19-03-2010 COPY OF THE ORDER FORWARDED TO : ITA NO.2517/AHD/2007 7 7 1. KAIRAV CHEMICALS PVT. LTD. 901 PARSHWA TOWER OPP. RAJPATH CLUB SARKHEJ GANDHINAGAR HIGHWAY AHMEDAB AD 2. THE ITO WARD-4(2) AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VIII AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD