DCIT 9(1), MUMBAI v. GLOBAL E SERVICES P. LTD, MUMBAI

ITA 2778/MUM/2010 | 2007-2008
Pronouncement Date: 09-03-2011 | Result: Dismissed

Appeal Details

RSA Number 277819914 RSA 2010
Bench Mumbai
Appeal Number ITA 2778/MUM/2010
Duration Of Justice 11 month(s)
Appellant DCIT 9(1), MUMBAI
Respondent GLOBAL E SERVICES P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 09-03-2011
Assessment Year 2007-2008
Appeal Filed On 09-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI P.M. JAGTAP A.M. AND SHRI V. DURGA RAO J.M. ITA NO. 2778/MUM/2010 ASSESSMENT YEAR: 2007-08 DY. COMMISSIONER OF INCOME-TAX-9(1) APPELLANT ROOM NO. 223 AAYAKAR BHAVAN MUMBAI 400 020. VS. M/S GLOBAL SERVICES PVT. LTD. RESPONDENT GROUND FLOOR ASHOK HOUSE ASHOK NAGAR ASHOK ROAD KANDIVALI (E) MUMBAI 400 101. APPELLANT BY : MR. A.R. BAINLAR RESPONDENT BY : MR. RAJKUMAR SINGH . ORDER PER V. DURGA RAO J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- 19 MUMBAI PASSED ON 18/01/2010 FOR THE AS SESSMENT YEAR 2007-08 WHEREIN THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1 57 45 928/- BEING INCREASE IN STOCK IN TRADE AT T HE END OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION FOLLOWING HER ORDER IN THE ASSESSEES OWN CASE FOR AY 2006-07 WHICH HAS NOT BEEN ACCEPTED. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. ITA NO. 2778/MUM/10 M/S GLOBAL E SERVICES PVT. LTD. 2 2. THE AO NOTICED THAT THE TOTAL INVENTORY AS PER T HE BALANCE SHEET IN THE EARLIER YEAR WAS RS. 41 91 70 605/- AND THUS DURING THE YEAR THERE IS AN INCREASE IN THE VALUE OF INVENTORY (STO CK-IN-TRADE) AMOUNTING TO RS. 1 57 45 928/-. (434916533-41917060 5). ACCORDING TO THE ACCEPTED NORMS OF ACCOUNTANCY THE INCREASE IN THE STOCK-IN- TRADE SHOULD HAVE BEEN CREDITED IN THE P&L A/C WHIC H THE ASSESSEE HAS NOT DONE. THERE IS NO JUSTIFICATION IN THE AUDI T REPORT OR IN ANY SUBMISSIONS MADE BY THE ASSESSEE IN THIS RESPECT. T HEREFORE THE AO ADDED THE INCREASE OF RS. 1 57 45 928/- TO THE INCO ME OF THE ASSESSEE AS INCREASE IN STOCK-IN-TRADE. AGGRIEVED THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 3. BEFORE THE CIT(A) THE ASSESSEE SUBMITTED THAT E ARLIER IT WAS IN THE BUSINESS OF TEXTILE PROCESSING BUT DISCONTINUED THE SAME WEF AY 1997-98 DUE TO HEAVY LOSSES. SINCE HUGE MILL PROPER TY WAS AVAILABLE THE ASSESSEE STARTED COMMERCIAL EXPLOITATION OF THE HUGE PROPERTY AND ACCORDINGLY CONVERTED THE PROPERTY INTO STOCK-I N-TRADE AND HAS STARTED PIECE MEAL DEVELOPMENT OF THE PROPERTY SINC E 1998-99. HE FURTHER SUBMITTED THAT THOUGH LAND AND NEW BUILDING S CONSTRUCTED SINCE HAVE BEEN HELD STOCK-IN-TRADE AS PER CONSIST ENTLY FOLLOWED STANDARD ACCOUNTING PRACTICE THE SAME WAS NEVER CH ARGED TO THE P&L A/C AS THE NEW BUILDINGS WERE CONSTRUCTED FOR OWN U SE OR FOR COMMERCIAL EXPLOITATION THUS EARNING RENTAL INCOM E. HENCE IT WAS SUBMITTED THAT WHEN SUCH EXPENDITURE HAS NOT BEEN C LAIMED THE QUESTION OF DISALLOWANCE OR ADDITION OF THE SAME AS INCOME IS NOT WARRANTED. IT WAS SUBMITTED THAT THE AO HAD VERIFIE D ENTIRE EXPENSES DETAILS AND NOWHERE A FINDING HAD BEEN GIVEN THAT S UCH BUILDING CONSTRUCTION EXPENSES WERE DEBITED TO P&L A/C. AFTE R CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CIT(A) HELD AS UND ER:- 4.2 ON A CAREFUL CONSIDERATION OF THE MATTER I FIN D MERIT IN THE CONTENTIONS OF THE APPELLANT. THE PROPERTIES BEING LAND AND BUILDING ARE HELD AS STOCK-IN-TRADE. WHEN SUCH BUIL DING CONSTRUCTION EXPENSES INCLUDING LAND VALUE HAVE NOT BEEN DEBITED TO THE P&L A/C THE QUESTION OF CREDITING THE SAME INTO THE P&L A/C DOES NOT ARISE. THE AO NOWHERE HAS GIVEN A FIND ING THAT ITA NO. 2778/MUM/10 M/S GLOBAL E SERVICES PVT. LTD. 3 BUILDING CONSTRUCTION EXPENSES INCURRED DURING THE YEAR UNDER APPEL HAVE BEEN DEBITED TO THE P&L A/C. EVIDENTLY I T IS NOT SO. WHEN THE BUILDINGS ARE HELD AS STOCK-IN-TRADE TAXA BILITY WILL ARISE ONLY WHEN THE SAME ARE SOLD OR DISPOSED OF. H ENCE THE ADDITION MADE FOR INCREASE IN STOCK IS TOTALLY UNWA RRANTED ON THE FACTS OF THE CASE. I FIND THAT THE SAID ISSUE HAD C OME UP FOR CONSIDERATION BEFORE THE CIT(A) IN ASSESSEES OWN C ASE FOR AY 2006-07 ALSO AND THE CIT(A) RELYING UPON EARLIER YE ARS ORDERS HAD ALLOWED THE SAID GROUND OF THE ASSESSEE. 4. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE THE ITAT. 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE REVENUE AUTHORITIES. WE FIND THAT THE ISSUE UNDER CONSIDERA TION IS COVERED BY THE DECISION OF ITAT MUMBAI IN ASSESSEES OWN CASE FOR AY 2004- 05(REVENUES APPEAL) VIDE ORDER DATED 22 ND DECEMBER 2009 WHEREIN THE ITAT HELD AS UNDER:- 19. THE LAST GROUND IS ON THE DELETION OF AN ADDITI ON OF RS. 15 65 387/- BEING INCREASE IN STOCK AS CAPITAL EXPE NDITURE. AS ALREADY STATED THE ASSESSEE HAD CONVERTED ITS PROPE RTY INTO STOCK-IN-TRADE AND IS DEVELOPING THE PROPERTY IN PI ECEMEAL MANNER. IT CONSTRUCTED BUILDINGS BY WAY OF IT PARK AND ALL CENTER AND THE EXPENDITURES INCURRED WERE NOT ROUTED THROU GH THE PROFIT & LOSS ACCOUNT BUT WERE DIRECTLY ADDED TO THE CLOSI NG STOCK OR INVENTORIES. IN SUCH CIRCUMSTANCES WE ARE UNABLE T O UNDERSTAND HOW AN ADDITION COULD BE MADE BY THE AO ON ACCOUNT OF INCREASED INVENTORY. IN CASE AO HAS TO TAKE INTO AC COUNT THE INCREASED VALUE OF INVENTORY THEN CORRESPONDINGLY HE HAD TO DEBIT THAT AMOUNT TO THE PROFIT & LOSS ACCOUNT AND CONSIDER THE SAME AS EXPENDITURE. EVEN OTHERWISE THE FIRST APPE LLATE AUTHORITY AT PARAS 8.2 TO 8.4 HAS RIGHTLY OBSERVED THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING A PARTICULAR SYS TEM OF ACCOUNTING AND THERE IS NO LOGIC BEHIND THE AOS MA KING AN ADDITION ON ACCOUNT OF EXPENDITURE INCURRED ON BUIL DINGS WHICH IS ADDED TO THE INVENTORY DIRECTLY. THIS METHOD OF ACC OUNTING HAS BEEN EXAMINED BY THE AO IN EARLIER ASSESSMENT YEAR AND HAS NOT BEEN DISTURBED. ON THESE FACTUAL MATRIX WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY ON THIS POINT AND DIS MISS THIS GROUND OF THE REVENUE. 6. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIALL Y IDENTICAL TO THAT OF THE CASE DECIDED BY THE ITAT IN ASSESSEES OWN CASE FOR AY ITA NO. 2778/MUM/10 M/S GLOBAL E SERVICES PVT. LTD. 4 2004-05 WE RESPECTFULLY THE SAME AND IN THE LIGHT OF THAT WE CONFIRM THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS. 1 57 45 928/- ON ACCOUNT OF INCREASE IN STOCK AND DISMISS THE GROUND RAISED BY THE REVENUE. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF MARCH 2011. SD/- SD/- (P.M. JAGTAP) (V. DURG A RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 9TH MARCH 2011. COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE G BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV ITA NO. 2778/MUM/10 M/S GLOBAL E SERVICES PVT. LTD. 5 S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 02/03/11 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 03/03/11 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER