CAMPBELL AGRO MFG. INDUSTRIES P. LTD, MUMBAI v. DCIT CEN CIR 42, MUMBAI

ITA 4435/MUM/2010 | 2003-2004
Pronouncement Date: 30-09-2011 | Result: Allowed

Appeal Details

RSA Number 443519914 RSA 2010
Assessee PAN AAACC1738N
Bench Mumbai
Appeal Number ITA 4435/MUM/2010
Duration Of Justice 1 year(s) 3 month(s) 29 day(s)
Appellant CAMPBELL AGRO MFG. INDUSTRIES P. LTD, MUMBAI
Respondent DCIT CEN CIR 42, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted I
Tribunal Order Date 30-09-2011
Date Of Final Hearing 27-09-2011
Next Hearing Date 27-09-2011
Assessment Year 2003-2004
Appeal Filed On 31-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 4435/MUM/2010 (ASSESSMENT YEAR: 2003-04) M/S. CAMPBELL AGRO MFG. INDUSTRIES P. LTD. DCIT CENTRAL CIRCLE 42 A-103 1ST FLOOR 'AAVISHKAR' OLD CGO BUILDING 36-KHATAVWADI NAUSHIR BHARUCHA MARG VS. MUMBAI GRANT ROAD (W) MUMBAI 400007 PAN - AAACC 1738 N APPELLANT RESPONDENT APPELLANT BY: SHRI PANKAJ R. TOPRANI RESPONDENT BY: SHRI SUNIL KUMAR SINGH DATE OF HEARING: 27.09.2011 DATE OF PRONOUNCEMENT: 30.09.2011 O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- IX MUMBAI DATED 08.04.2010. 2. ASSESSEE IS AGGRIEVED ON THE REOPENING OF ASSESSMEN T UNDER SECTION 147 FOR WHICH GROUND NO. 1 & 2 WERE RAISED AND DISA LLOWANCE OF ` 10 00 000/- LOSS CLAIMED IN RESPECT OF FORFEITURE O F EARNEST MONEY DEPOSIT WHICH WAS RAISED IN GROUND NO. 3. 3. ASSESSEE A COMPANY IS ENGAGED IN THE BUSINESS OF M ANUFACTURING OF BABY OIL AND RELIEF PRODUCTS. ASSESSEE FILED RETURN OF INCOME AT NIL CLAIMING BROUGHT FORWARD UNABSORBED DEPRECIATION BUT OFFERED INCOME UNDER SECTION 115JB AT ` 3 77 800/-. THE A.O. ORIGINALLY COMPLETED THE SCRUT INY ASSESSMENT UNDER SECTION 143(3) VIDE ORDER DATED 22 .03.2006. HOWEVER BY A NOTICE DATED 28.03.2008 ASSESSMENT WAS REOPENED U NDER SECTION 147 AFTER RECORDING THE REASONS. IT WAS THE CONTENTION OF THE A.O. THAT ASSESSEE CLAIMED A LOSS OF ` 10 00 000/- FORFEITED WHICH IS IN THE NATURE OF CAP ITAL EXPENDITURE AS THIS PAYMENT WAS MADE FOR ACQUISITIO N OF CAPITAL ASSETS. ITA NO. 4435/MUM/2010 M/S. CAMPBELL AGRO INDUSTRIES P. LTD. 2 THEREFORE ASSESSEE COMPANY INCORRECTLY CLAIMED THE FORFEITED AMOUNT IN THE P & L ACCOUNT AND HE WAS SATISFIED THAT INCOME HAS ESCAPED ASSESSMENT TO THE EXTENT OF ` 10 00 000/-. ASSESSEE WHILE OBJECTING TO THE REOPE NING OF ASSESSMENT AFTER OBTAINING THE REASONS FILED RETUR N IN RESPONSE TO THE NOTICE AND THE A.O. COMPLETED THE ASSESSMENT DISALL OWING THE ABOVE AMOUNT HOLDING IT AS CAPITAL AMOUNT THEREBY ASSESSING THE INCOME AT ` 7 31 330/- AFTER SETTING OFF OF UNABSORBED DEPRECIATION. BEFOR E THE CIT(A) IT WAS CONTESTED THAT THERE IS NO REASON TO REOPEN AS THE A.O. HAS EXAMINED THE ISSUE IN THE COURSE OF SCRUTINY ASSESSMENT ORIGINAL LY AND HAS ALLOWED THE AMOUNT AND FURTHER ON MERITS THE AMOUNT IS ALLOWABL E AS BUSINESS LOSS. THE CIT(A) HOWEVER DID NOT AGREE WITH THE ABOVE CONTE NTIONS AND REJECTED ASSESSEES GROUNDS. THEREFORE THE PRESENT APPEAL. 4. IT WAS THE CONTENTION OF THE LEARNED COUNSEL THAT E VEN THOUGH THE ASSESSMENT WAS REOPENED WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR BUT THE ASSESSEE HAS CLAIMED THE AMOUNT IN THE P & L ACCOUNT AND THE A.O. IN THE CURSE OF SCRUTINY ASSESSMENT CALLED FOR THE DETAILS WHICH WAS SUBMITTED TO HIM IN THE ASSESSMENT PROCEEDINGS. HAV ING EXAMINED THE CLAIM OF THE ASSESSEE AND COMPLETED THE ASSESSMENT WITHOUT MAKING ANY DISALLOWANCE IT HAS TO BE CONSIDERED THAT THE A.O. HAS FORMED AN OPINION IN ALLOWING ASSESSEES CLAIM THEREFORE ON THE SAME S ET OF FACTS REOPENING THE ASSESSMENT COMES WITHIN THE PURVIEW OF CHANGE OF OP INION. IN SUPPORT OF THE CONTENTION THE LEARNED COUNSEL PLACED ON RECORD THE ORDER UNDER SECTION 143(3) THE INFORMATION SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS INCLUDING THE CORRESPONDENCE WITH M/S. SICOM LTD. AND THE REASONS RECORDED BY THE A.O. FOR REOPENING. HE RELI ED ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ASTEROIDS TRADING & INVESTMENTS (P) LTD. VS. DCIT 308 ITR 190 FOR THE CONTENTION TH AT ASSESSMENT CANNOT BE REOPENED ON A MERE CHANGE OF OPINION. ON MERITS THE LEARNED COUNSEL EXPLAINED THAT ASSESSEE WANTED TO PURCHASE ASSETS O N GRAIN BASED DISTILLERY PLANT BEING SOLD BY M/S. SICOM LTD. BY WAY OF PUBLI C AUCTION AND MADE EARNEST MONEY DEPOSIT OF ` 10 00 000/-. DUE TO CERTAIN REASONS ASSESSEE WITHDREW THE BID AND M/S. SICOM LTD. HAS FORFEITED THE AMOUNT OF ` 10 00 000/- PAID. THESE FACTS INCLUDING THE CORRESP ONDENCE WERE PLACED ITA NO. 4435/MUM/2010 M/S. CAMPBELL AGRO INDUSTRIES P. LTD. 3 BEFORE THE A.O. IN THE COURSE OF ASSESSMENT PROCEED INGS ORIGINALLY AND THERE IS NO DISPUTE WITH REFERENCE TO THE FACTS OF THE CA SE. IT WAS FURTHER SUBMITTED THAT FORFEITURE OF ADVANCE COMES WITHIN THE PURVIEW OF BUSINESS LOSS WHICH IS ALLOWABLE AS A DEDUCTION AND RELIED ON THE DECIS ION IN THE CASE OF CIT VS. ANJANI KUMAR CO. LTD. 259 ITR 114 (RAJ) WHERE THE H ON'BLE HIGH COURT CONCLUDED THAT IRRECOVERABLE ADVANCE PAYMENT MADE F OR ACQUISITION OF CAPITAL ASSET WHICH DO NOT MATERIALISE WAS ALLOWABL E AS BUSINESS LOSS. HE RELIED ON THE ABOVE DECISION STATING THAT ON MERITS THE CLAIM OF LOSS IS CORRECT THEREFORE THERE IS NO NEED TO REOPEN THE ASSESSMENT ON THE ISSUE OF CLAIM OF LOSS WHICH WAS ORIGINALLY ALLOWED. 5. THE LEARNED D.R. HOWEVER SUBMITTED THAT THERE IS NOTHING ON RECORD THAT A.O. HAD FORMED AN OPINION SO AS TO CONTEST TH AT IT WAS A CHANGE OF OPINION AND RELIED ON THE REASONS RECORDED TO SUBMI T THAT ASSESSEES CLAIM IS IN THE NATURE OF CAPITAL EXPENDITURE AS HAVING M ADE FOR PROPOSED PURCHASE OF FACTORY I.E. CAPITAL ASSET AND THEREF ORE FORFEITURE OF AMOUNT IS CAPITAL IN NATURE. IT WAS FURTHER SUBMITTED THAT AS SESSMENT WAS REOPENED WITHIN FOUR YEARS. THEREFORE THE PROVISO TO SECTION 147 DOES NOT APPLY AND HE RELIED ON THE DECISION OF THE HON'BLE BOMBAY HIGH C OURT IN THE CASE OF DR. AMINS PATHOLOGY LABORATORY VS. JCIT 252 ITR 673 FO R THE SUBMISSION THAT THE DEPARTMENT WAS JUSTIFIED IN ISSUING NOTICE UNDE R SECTION 148 ON ACCOUNT OF UNDER ASSESSMENT WITHIN THE MEANING OF SECTION 1 47. ON MERITS HE RELIED ON THE ORDERS OF THE A.O. AND THE CIT(A). 6. WE HAVE CONSIDERED THE ISSUE. AS FAR AS THE FACTS A RE CONCERNED IT IS ON RECORD THAT ASSESSEE HAS PARTICIPATED IN THE AUC TION FOR THE PURPOSE OF ACQUIRING ASSETS WHICH ARE BEING SOLD BY M/S. SICOM LTD. AND MADE EARNEST MONEY DEPOSIT OF ` 10 00.000/- AS A SUCCESSFUL BIDDER. SUBSEQUENTLY VI DE LETTER DATED 28.08.2002 ASSESSEE WITHDREW THE OFFER . CONSEQUENTLY THE M/S. SICOM LTD. FORFEITED THE EARNEST DEPOSIT OF ` 10 00 000/- AND THIS AMOUNT HAVING BEEN CRYSTALLISED IN OCTOBER 2002 HAS BEEN C LAIMED AS A DEBIT TO THE P & L ACCOUNT IN THE ACCOUNTS FOR THE YEAR ENDING 3 1.03.2003. IT IS ALSO ON RECORD THAT IN THE SCRUTINY ASSESSMENT BEFORE THE D CIT CENTRAL CIRCLE-42 ASSESSEE HAS FURNISHED COMPLETE DETAILS WITH REFERE NCE TO THE CLAIM OF ITA NO. 4435/MUM/2010 M/S. CAMPBELL AGRO INDUSTRIES P. LTD. 4 EARNEST MONEY DEPOSIT FORFEITED THE DETAILS OF WHI CH WERE PLACED IN THE PAPER BOOK FROM PAGE 2 TO 40. ON SEEING THIS CORRES PONDENCE AND ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 23.06.2006 WE ARE OF THE OPINION THAT THE A.O. HAS FORMED AN OPINION IN ALLOWING THE CLAIM OF FORFEITURE OF DEPOSIT DEBITED AS AN EXPENDITURE IN THE P & L ACCOUNT. IN FACT THE A.O. WHILE MAKING CERTAIN ADJUSTMENTS TO THE R ETURN OF INCOME GAVE A FINDING AS UNDER: - AFTER PERUSING THE RETURN OF INCOME AND VARIOUS DE TAILS FILED BY ASSESSEE THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER: THIS INDICATES THAT THE A.O. HAS PERUSED THE DETAIL S FILED BY ASSESSEE AND SINCE ASSESSEE HAS CLAIMED THE AMOUNT IN THE P & L ACCOUNT ITSELF AND HAVING EXAMINED IN THE COURSE OF SCRUTINY IT HAS TO BE CONCLUDED THAT THE A.O. ALLOWED THE CLAIM AS AN ALLOWABLE DEDUCTION IN THE COURSE OF SCRUTINY ASSESSMENT. THEREFORE ON THE BASIS OF THE VERY SAM E INFORMATION REOPENING OF ASSESSMENT UNDER SECTION 147 WILL COME WITHIN TH E PURVIEW OF CHANGE OF OPINION AND SO SQUARELY COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ASTEROIDS TRADING & INVESTMENT (P) LTD. 308 ITR 190. THE HON'BLE BOMBAY HIGH COURT IN THE ABOVE SAID CAS E HELD THAT A.O. HAVING ALLOWED DEDUCTION UNDER SECTION 80M APPLYING HIS MIND TO THE RELEVANT RECORDS AND LATER REOPENED THE ASSESSMENT ON THE GROUND THAT DEDUCTION UNDER SECTION 80M WAS WRONGLY ALLOWED IN THE ABSENCE OF ANY NEW MATERIAL OR INFORMATION COMING ON RECORD IT IS A CASE OF MERE CHANGE OF OPINION AND THEREFORE A.O. HAD NO JURISDICTION TO INITIATE PROCEEDINGS UNDER SECTION 148.. THE PRINCIPLES ESTABLISHED BY THE SA ID DECISION APPLY TO THE FACTS OF THIS CASE. 7. THE SAME OPINION EXPRESSED BY THE HON'BLE BOMBAY HI GH COURT IN THE CASE OF ASTEROIDS TRADING & INVESTMENT (P) LTD. 308 ITR 190 WAS ALSO SUPPORTED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. 320 ITR 561. NOT ONLY ON LEGAL PRINCIPLE S THE ASSESSING OFFICERS ACTION IN REOPENING THE ASSESSMENT CAN ALSO BE FAUL TED ON MERITS AS THE CLAIM OF ASSESSEE ON FORFEITURE OF EARNEST MONEY DE POSIT IS A BUSINESS LOSS. ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF BAB Y OIL AND WANTED TO ITA NO. 4435/MUM/2010 M/S. CAMPBELL AGRO INDUSTRIES P. LTD. 5 ACQUIRE A FACTORY FOR MANUFACTURING OF GRAIN BASED DISTILLERY PLANT ON AS IS WHERE IS BASIS BEING SOLD BY M/S. SICOM LTD. IT IS ALSO ON RECORD THAT THE ENTIRE EARNEST MONEY DEPOSIT PAID FOR ACQUIRING THE ENTIRE FACTORY WAS FORFEITED BY M/S. SICOM WHEN ASSESSEE WITHDREW. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ANJANI KUMAR CO. LTD. (SUPRA) CONSIDERED A SIMILAR CASE AND HELD THAT AN IRRECOVERABLE ADVANCE PAYMENT MADE BY ASSESSEE FOR ACQUISITION OF CAPITAL ASSET WHICH DID NOT MATERIALISE WAS ALLOWABLE AS BUSINESS LOSS. IN THE SAID CASE ASSESS EE ADVANCED MONEY TO THE AGRICULTURISTS FOR PURCHASE OF AGRICULTURAL LAND WI TH AN INTENTION TO ACQUIRE THE LAND TO SET UP A BOILER FACTORY BUT ULTIMATELY THAT WAS NOT MATERIALISED. THE AGRICULTURISTS REFUSED TO REFUND THE AMOUNT AND ASSESSEE WRITTEN OFF THE AMOUNT IN ITS BOOKS AND CLAIMED DEDUCTION OF THE IN CURRED AMOUNT AS REVENUE LOSS. EVEN THOUGH THE CLAIM WAS REJECTED BY THE A.O. AND THE CIT(A) THE TRIBUNAL CONSIDERED AND ALLOWED THE CLAIM AS UN DER: - AFTER CAREFULLY CONSIDERING ALL THE FACTS AND CIRC UMSTANCES OF THE CASE WE ARE INCLINED TO UPHOLD THE ASSESSEES CONT ENTION. SO FAR AS THE IDENTITY OF THE BUSINESS IS CONCERNED IT IS NO T THE NATURE OF THE ITEM MANUFACTURED BUT THE TEST FOR THE IDENTITY OF THE BUSINESS IS THAT THERE SHOULD BE A SINGLE TRADING AND P&L A/C AND TH E TRANSACTION AS WELL AS THE BUSINESS SHOULD HAVE BEEN DONE BY A COM MON ORGANISATION. IN THESE CIRCUMSTANCES THE ASSESSEE WOULD BE ENTITLED TO THE UNABSORBED LOSS IN THE SHAPE OF SHARES AGAIN ST THE INCOME. THIS WAS SO HELD BY THE HONBLE SUPREME COURT IN ST ANDARD REFINERY & DISTILLERY LTD. VS. CIT (1971) 79 ITR 589 (SC) AN D AGAIN IN PRODUCE EXCHANGE CORPORATION LTD. VS. CIT (1970) 77 ITR 739 (SC). SO FAR AS THE AUTHORITIES RELIED UPON BY THE REVENUE ARE CONC ERNED IN ALL THESE CASES THE CRITERIA ADOPTED BY THE COURT WAS THAT S INCE THE EXPENDITURE INCURRED BROUGHT INTO EXISTENCE A BENEF IT OF ENDURING NATURE IT CAN BE TREATED AS CAPITAL NATURE MEANIN G THEREBY THAT DEPRECIATION CAN BE CLAIMED UPON THE TOTAL EXPENDIT URE FOR SETTING UP THE NEW PROJECT. BUT IN THE PRESENT CASE THE NEW P ROJECT HAS NEVER MATURED. THE EXPENDITURE INCURRED BY THE ASSESSEE H AS THEREFORE TO BE WRITTEN OFF. THE EFFORTS TO MAKE A NEW PROJECT B Y THE SAME MANAGEMENT IN RELATION TO THE SAME BUSINESS WOULD C ERTAINLY COME WITHIN THE TEST OF IDENTITY LAID DOWN BY THE HONBL E SUPREME COURT IN THE TWO AUTHORITIES CITED AFORESAID AND SINCE NO BE NEFIT OF ENDURING NATURE RESULTED TO THE ASSESSEE THE EXPENDITURE IN QUESTION CANNOT BE TREATED TO BE OF CAPITAL NATURE. ITA NO. 4435/MUM/2010 M/S. CAMPBELL AGRO INDUSTRIES P. LTD. 6 THIS ORDER OF THE ITAT WAS CONCURRED BY THE HON'BLE RAJASTHAN HIGH COURT. IN THE PRESENT CASE THE FACTS ARE SIMILAR. ASSESSEE HAS PARTICIPATED IN THE AUCTION FOR ACQUIRING THE FACTORY PREMISES ON AS I S WHERE IS BASIS AND PAID THE EARNEST MONEY DEPOSIT WHICH WAS FORFEITED. NO A SSET HAS COME INTO EXISTENCE AND THE ENTIRE EXPENDITURE HAS BEEN WRITT EN OFF. THEREFORE THE PRINCIPLES LAID DOWN BY THE ABOVE JUDGEMENT OF THE HON'BLE RAJASTHAN HIGH COURT WILL EQUALLY APPLY AND ASSESSEES CLAIM AS RE VENUE LOSS IS AN ALLOWABLE DEDUCTION. THEREFORE EVEN ON MERITS THERE IS NO CA SE FOR CONSIDERING THAT IT IS A CAPITAL LOSS. IN OUR OPINION THE A.O. HAS ORIG INALLY EXAMINED THIS ASPECT AND CORRECTLY ALLOWED THE DEDUCTION WHILE COMPLETIN G THE ASSESSMENT UNDER SECTION 143(3). FOR THESE REASONS WE ARE OF THE OP INION THAT THE ASSESSING OFFICERS JURISDICTION TO REOPEN THE ASSESSMENT IS BAD IN LAW AND THEREFORE ASSESSEES GROUNDS ARE ALLOWED BOTH ON LEGAL ISSUE OF REOPENING THE ASSESSMENT U/S 147 AND ON MERITS AS WELL. 8. IN THE RESULT APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER 2011. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 30 TH SEPTEMBER 2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) IX MUMBAI 4. THE CIT V MUMBAI CITY 5. THE DR I BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.