The ITO, Ward-4(4),, Ahmedabad v. Mehta Oil Mill Pvt.Ltd.,, Ahmedabad

ITA 524/AHD/2008 | 2004-2005
Pronouncement Date: 31-05-2010 | Result: Partly Allowed

Appeal Details

RSA Number 52420514 RSA 2008
Assessee PAN AABCM0404G
Bench Ahmedabad
Appeal Number ITA 524/AHD/2008
Duration Of Justice 2 year(s) 3 month(s) 18 day(s)
Appellant The ITO, Ward-4(4),, Ahmedabad
Respondent Mehta Oil Mill Pvt.Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 31-05-2010
Date Of Final Hearing 13-05-2010
Next Hearing Date 13-05-2010
Assessment Year 2004-2005
Appeal Filed On 12-02-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI T K SHARMA JM &SHRI A N PAHUJA AM] ITA NO.524/AHD/2008 (ASSESSMENT YEAR:-2004-05) THE INCOME-TAX OFFICER WARD-4(4) AHMEDABAD V/S MEHTA OIL MILLS PVT. LTD. 303 B D CHAMBERS CHOKHA BAZAR AHMEDABAD [PAN: AABCM 0404 G] [APPELLANT] [RESPONDENT] REVENUE BY :- SMT. NEETA SHAH SR. DR ASSESSEE BY:- NONE O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 30- 11-2007 OF THE LD.CIT(APPEALS)-VIII AHMEDABAD RAI SES THE FOLLOWING GROUNDS:- 1 THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF T HE CASE IN DELETING THE DISALLOWANCE OF RS.97 485/- OUT OF ADMINISTRATIVE A ND OTHER EXPENSES. 2 THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF T HE CASE IN DELETING THE ADDITION OF RS.35 13 194/- ON ACCOUNT OF CESSATION OF BANK LIABILITY BY ADMITTING FRESH EVIDENCE IN VIOLATION OF RULE 46A. 3 THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF T HE CASE IN DIRECTING TO REWORK CAPITAL GAIN ON THE BASIS OF THE BANAKHAT SU BMITTED DURING THE APPELLATE PROCEEDINGS WHICH WAS FRESH EVIDENCE ADM ITTED BY THE CIT(A) IN VIOLATION OF RULE 46A. 4 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 5 IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD . CIT(A) MAY BE CANCELLED AND THAT OF THE AO MAY BE RESTORED TO THE ABOVE EXTENT. 2 AT THE OUTSET NONE APPEARED ON BEHALF OF THE ASS ESSEE DESPITE SERVICE OF NOTICE THROUGH THE ASSESSING OFF ICER[AO IN SHORT]. ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 2 THEREFORE WE DECIDED TO DISPOSE OF THE APPEAL AFTE R HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. 3 ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL FAC TS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING NIL I NCOME FILED ON 31- 03-2005 BY THE ASSESSEE AFTER BEING PROCESSED ON 27-05-2005 U/S 143(1) OF THE INCOME-TAX ACT 1961 [HEREINAFTER REF ERRED TO AS THE ACT] WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 26.7.2005.DURING THE COURSE OF ASSESS MENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE COMPA NY DID NOT CARRY OUT ANY COMMERCIAL ACTIVITIES DURING THE YEAR UNDER CONSIDERATION. THE SALES WAS SHOWN AT RS. NIL AS CO MPARED TO SALES OF RS.72 55 336/-IN THE PRECEDING YEAR. TO A QUERY BY THE AO AS TO WHY THE EXPENSES OF RS.7 21 703/- BE NOT DISALLOWED THERE BEING NO BUSINESS CARRIED OUT BY THE ASSESSEE COMPANY DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE REPLIED VIDE THEIR LE TTER DATED 12.12.2006 THAT THE EXPENSES OF RS.7 21 703/- WERE ON ACCOUNT OF SALARY FACTORY REPAIRS MISCELLANEOUS EXPENSES AND THE MAJOR EXPENSE WAS DUE TO LOSS OF RS.6 24 218/-ON SALE OF FIXED ASSETS . THEREFORE IT WAS PLEADED THAT NO DISALLOWANCE SHOU LD BE MADE ON THIS ACCOUNT. HOWEVER THE AO DID NOT ACCEPT THE C ONTENTIONS OF THE ASSESSEE COMPANY ON THE GROUND THAT THEREBEING NO C OMMERCIAL ACTIVITY CARRIED OUT BY THE ASSESSEE COMPANY DURING THE YEAR UNDER C ONSIDERATION WHICH WOULD MAKE THE ASSESSEE COMPANY ELIGIBLE FOR CLAIMING OF THE EXPENDITURE INCURRED DURING THE YEAR UNDER CONSIDERATION AND ALL THE AS SETS HAVING BEEN SOLD BY THE ASSESSEE COMPANY THE ENTIRE CLAIM OF EXPENDITURE W AS DISALLOWED. 4. ON APPEAL THE LD. CIT(A) ALLOWED THE CLAIM I N THE FOLLOWING TERMS:- 2.1 THE ID. A.R. SUBMITTED BEFORE ME THAT THE ADMI NISTRATIVE AND SELLING EXPENSES OF RS.7.19 248/- 'INCLUDE LOSS ON SALE OF FIXED ASSETS OF RS.6 24 218/- WHICH HAS ALREADY BEEN DISALLOWED BY THE APPELLANT WHILE COMPUTING INCOME AND IT IS A DOUBLE DISALLOWANCE TO THE EXTENT OF ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 3 RS.6 24 218/-. THE REMAINING EXPENSES OF RS.97 485/ - AS CLAIMED IN THE P & L ACCOUNT WERE CLAIMED TO BE NORMAL AND ROUTINE EXPENSES SO AS TO CONTINUE THE STATUS. FOR EXAMPLE STAFF SALARY ELE CTRICITY AUDIT FEES AND FACTORY REPAIRS ARE SUCH EXPENSES WHICH HAD TO BE I NCURRED SO AS TO CONTINUE THE ENTITY. IT WAS SUBMITTED THAT BEFORE T HE FIXED ASSETS ARE DISPOSED OFF OR DEBTORS ARE REALIZED AND CREDITORS ARE PAID OFF SOME EXPENSES HAD TO BE INCURRED TO CARRY ON SUCH ACTIVI TIES. NOW IN THE PRESENT CASE WHEN THE FIXED ASSETS WERE BEING SOLD OUT AND THE BUSINESS WAS BEING WOUND UP THE AFORESAID EXPENSES WERE QUITE U SUAL AND AS SUCH ADMISSIBLE. 2.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHOR IZED REPRESENTATIVE CAREFULLY AND HAVE ALSO GONE THROUGH THE DETAILS FILED BY THE AUTHORIZED REPRESENTATIVE. I HAVE ALSO CONSIDER ED THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER. IT IS FOUND FROM THE STATEMENT OF INCOME THAT THE APPELLANT HAS ALRE ADY ADDED BACK LOSS ON SALE OF FIXED ASSETS OF RS.6 24 218/- THEREFORE T O THIS EXTENT THERE IS A DOUBLE ADDITION. THEREFORE THE DISALLOWANCE TO THE TUNE OF RS.6 24 218/- IS DELETED. THE BALANCE EXPENDITURE OF RS.97 485/- IS NORMAL BUSINESS EXPENDITURE WHICH WAS INCURRED BY THE APPELLANT TO CARRY ON THE ACTIVITIES OF DISPOSAL OF FIXED ASSETS AND REALIZATION OF DEBT ORS IN THE PROCESS OF WINDING UP OF THE BUSINESS. THE SAID EXPENSES ARE A LLOWABLE .HENCE THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE SAID EXP ENSES. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR SUPPORTE D THE ORDER OF THE AO AND CONTENDED THAT SINCE THE ASSESSEE-COMPANY HA S NOT DONE ANY COMMERCIAL ACTIVITY DURING THE YEAR UNDER CONSI DERATION AND THE SALES HAVE BEEN SHOWN AT RS. NIL THE AO HAS RIGHTL Y DISALLOWED THE CLAIM OF BUSINESS EXPENDITURE. THE LD. DR FURTHER C ONTENDED THAT THE LEARNED CIT(A) HAS NOT PASSED A SPEAKING ORDER AND THEREFORE THE IMPUGNED ORDER OF THE CIT(A) MAY BE SET ASIDE AND T HAT OF THE AO BE RESTORED. 6. WE HAVE HEARD THE LEARNED DR AND GONE THROUGH TH E FACTS OF THE CASE. WE FIND THAT THE LD. CIT(A) HAS ALLOWED T HE CLAIM OF RS.97 485/- ON THE GROUND THAT EXPENDITURE TOWARDS STAFF SALARY ELECTRICITY AUDIT FEES AND FACTORY REPAIRS EXPENDITURE IS NORMAL BUS INESS EXPENDITURE INCURRED BY THE ASSESSEE TO CARRY ON THE ACTIVITIES OF DISPOSAL OF FIXED ASSETS AND REALIZATION OF DEBTORS IN THE PROCESS OF WINDING UP OF THE BUSI NESS. HOWEVER THE LD. CIT(A) ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 4 HAS NO WHERE RECORDED ANY FINDING AS TO WHETHER OR NOT THAT THE SAID EXPENDITURE IS RELATED TO INCOME WHICH FORMS PART OF TOTAL INCO ME UNDER THE ACT IN THE LIGHT OF PROVISIONS OF SECTION 14A OF THE ACT . IN THESE CIR CUMSTANCES WE CONSIDER IT FAIR AND APPROPRIATE TO VACATE THE FINDINGS OF THE FINDI NGS OF THE LD. CIT(A) AND RESTORE THE MATTER BACK TO HIS FILE WITH THE DIRECT IONS TO READJUDICATE THE ISSUE AFRESH IN ACCORDANCE WITH LAW IN THE LI GHT OF OUR AFORESAID OBSERVATIONS AND CONSIDERING THE PROVISIONS OF SEC. 14A OF THE ACT AFTER PROVIDING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. WITH THESE OBSERVATIONS GROUND NO.1 IS DISPOSED OF. 7 GROUND NO. 2 RELATES TO DELETION OF THE ADDITION OF RS.35 13 194/-. THE AO NOTICED THAT THE ASSESSEE-CO MPANY SOLD ITS FIXED ASSETS AS PER THE DECISION RECEIVED IN LOK AD ALAT AND ACCORDINGLY THE BANK WAIVED THE PRINCIPAL PORTION OF THE LIABILITIES. THE ASSESSEE PLEADED THAT NO ADDITION CAN BE MADE FOR CESSATION OF LIABILITIES ON THIS ACCOUNT. HOWEVER THE AO DI D ACCEPT THE CONTENTIONS OF THE ASSESSEE ON THE GROUND THAT THE LIABILITY TOWARDS BANK ALSO INCLUDED THE INTEREST PORTION AS WAS EVID ENT FROM THE FOLLOWING FIGURES APPEARING IN THE BALANCE SHEET AN D THE P&L ACCOUNT OF THE ASSESSEE IN THE EARLIER YEARS: SR. NO. AY INTEREST EXPENSES CLAIMED SECURED LOAN SHOWN IN BALANCE SHEET 1 03-04 5 016 80 13 194 2 02-03 10 83 813 71 80 184 3 01-02 12 56 060 69 32 699 4 00-01 13 28 343 81 66 905 5 99-00 9 58 403 56 20 626 ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 5 TOTAL 46 31 635 SINCE THE ASSESSEE-COMPANY FAILED TO FURNISH THE R ELEVANT DETAILS AS ALSO THE BREAK UP OF THE INTEREST PORTION AND TH E PRINCIPAL PORTION OF THE BANK LOAN THE AO DID NOT ACCEPT THE PLEA O F THE ASSESSEE THAT THE ENTIRE AMOUNT WAIVED BY THE BANK WAS TOWAR DS PRINCIPAL . ACCORDINGLY PRESUMING THAT THE AMOUNT OF RS.35 13 194/- TOWARDS THE INTEREST THE AO ADDED THE SAME TO THE TOTAL I NCOME OF THE ASSESSEE-COMPANY. 8. ON APPEAL THE LEARNED CIT(A) DELETED THE ADDIT ION HOLDING AS UNDER: 3.1. THE ID. A.R. SUBMITTED BEFORE ME THAT ACCORDI NG TO THE AO THE OPENING BALANCE OF BANK LOAN WAS OF RS.80 13 194/- WHICH INCLUDED INTEREST PORTION OF RS.46 31 635/- AND SINCE THE SE TTLEMENT WAS MADE BY PAYING RS.45 LAKHS THERE WAS CESSATION OF LIABILIT Y TO THE EXTENT OF RS.35 13 194/- IN VIEW OF INTEREST PORTION INCLUDED THEREIN. THE APPELLANT SUBMITTED THAT WHILE MAKING A COMPROMISE WITH BAN- STATE BANK OF SAURASHTRA IN LOK ADAHT A LUMPSUM AMOUNT OF RS.45 LAKHS WAS AGREED UPON AND THERE WAS NO BIFURCATION AS TO INTEREST AN D PRINCIPAL OUTSTANDING. SECONDLY THE A.O. HAS WRONGLY PRESUMED THAT THE OU TSTANDING BALANCE OF RS.80 13 194/- INCLUDED INTEREST PORTION TO THE EXT ENT OF RS.46 31 635/-. ON THE CONTRARY THE FACTS OF THE CASE INDICATED OTHER WISE. THE APPELLANT ENJOYED TWO TYPES OF CREDIT FACILITIES FROMM THE BA NK I.E. RS.65 LAKHS (RS.50 LAKHS + SUB-LIMIT OF RS.15 LAKHS) BY WAY OF CASH CREDIT FACILITY AND ANOTHER RS.20 LAKHS AS TERM LOAN. THE ACCOUNT OF TH E APPELLANT WAS TREATED AS NPA VERY RECENTLY. IT WAS SUBMITTED BY T HE AUTHORIZED REPRESENTATIVE THAT ANY PAYMENT MADE BY THE BORROWE R TO THE LENDER TOWARDS THE BORROWING IS FIRST APPROPRIATED TOWARDS INTEREST AND NOT AGAINST THE PRINCIPAL SUM ADVANCED. THEREFORE IT CAN NOT BE SAID THAT ANY INTEREST WAS OUTSTANDING EVEN IN THIS ACCOUNT. THE APPELLANT HAS ALSO STATED IN THE GROUNDS OF APPEAL THAT THE APPELLANT HAD RUNNING AC COUNT WITH THE SAID BANKER UPTO 19.3.2002 AND THEREAFTER IT WAS TREATED AS NPA A/C. WHICH MEANS THAT INTEREST LIABILITY TILL THAT DATE WAS DU LY DISCHARGED BY THE APPELLANT AND THE BALANCE REMAINING AS ON 31.3.2003 PERTAINED TO THE PRINCIPAL SUM TAKEN BY WAY OF LOAN / CASH CREDIT ET C. WHICH WAS WELL WITHIN THE SANCTIONED LIMIT OF RS.85 LAKHS IN AGGREGATE FO R DIFFERENT CREDIT FACILITIES ALLOWED BY SBS. THEREFORE THE REMAINING AMOUNT OF R S.35 13 194/- DID NOT PERTAIN TO INTEREST LIABILITY AND THE SAME CAN NOT BE INCLUDED IN TOTAL INCOME ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 6 U/S.41(L) OF THE ACT. THE APPELLANT HAS NOT EVEN DE BITED ANY INTEREST IN THE P& L A/C. DURING THE YEAR 2002-03 AND 2003-04 AFTER BECOMING NPA. 3.2 DURING THE COURSE OF APPEAL HEARING A LETTER W AS ISSUED ON 11-10- 2007 AND REMINDER' ON 1-11-2007 TO THE MANAGER STA TE BANK OF SAURASHTRA CHHATRAL BRANCH TO CLARIFY WHETHER THE WAIVED AMOUNT OF RS.35 13 194/- REPRESENTS PRINCIPAL OR INTEREST AND WHAT WAS THE AMOUNT OF INTEREST COMPONENT IN THE WAIVED AMOUNT . THE BANK HAS REPLIED ON 2-11- 2007. THE REPLY IS EXACTLY REPRODUCED AS UNDER: WITH REFERENCE TO YOUR LETTER NO. CIT(A)-VIII/IT O.4(3)/349/06-07 DATED 1-11-2007 WE LIKE TO INFORM YOU THAT UNDER COMPROMISE PROPOSAL OF THE CAPTIONED BORROWER THEY HAVE PAID RS.45 LACS TOWARDS COMPROMISE AMOUNT. RS.35 13 194/- WAS WRITT EN OFF. IT WAS PRINCIPAL COMPONENT ONLY AND RS.24 03 237/- OF INTE REST WAS WAIVED. THIS IS AS PER AVAILABLE RECORDS.' 3.3. AFTER RECEIPT OF THE ABOVE LETTER A CLARIFICA TION WAS SOUGHT FROM THE BANK AGAIN BY THIS OFFICE LETTER DATED 22-11-2007 . THIS LETTER IS REPRODUCED AS UNDER:- 'PLEASE REFER TO YOUR LETTER NO.BL/187 DATED 2.11.2 007 IN CONNECTION WITH THE APPEAL OF THE ABOVE ASSESSEE. Y OU HAVE STATED THAT THE WAIVED AMOUNT OF RS.35 13.194/-REPRESENTS PRINCIPAL COMPONENT. YOU HAVE ALSO STATED THAT RS.24 03 237/- OF INTEREST WAS WAIVED . IN THIS CONNECTION YOU ARE REQUESTED T O LET ME KNOW AS TO WHICH PERIOD THE SAID AMOUNT OF INTEREST OF R S.24.03 LAKHS RELATES TO AND IS THAT AMOUNT OVER AND ABOVE THE OU TSTANDING AMOUNT OF LOAN OF RS.80 13 194/-. WHAT I UNDERSTAND IS THAT THE OUTSTANDING LOAN AMOUNT INCLUDING PRINCIPAL AND INT EREST WAS OF RS.80 13 194/- OUT OF WHICH RS.45 LAKHS WAS PAID B Y THE APPELLANT. PLEASE LET ME KNOW THE BREAK UP OF ADJUSTMENT OF AM OUNT OF RS.45 LAKHS TOWARDS INTEREST AND TOWARDS PRINCIPAL. THE A MOUNT OF RS.35.13 LAKHS WAS ADJUSTED TOWARDS PRINCIPAL AMOUN T OF LOAN AS CONFIRMED BY YOU. 2. YOUR REPLY AND CLARIFICATION IN THIS REGARD IS R EQUESTED BY 30.11.2007.' 3.4 THE BANK REPLIED ON 30-11-2007 AS UNDER:- 'WITH REFERENCE TO YOUR LETTER DATED 22-11-2007 WE LIKE TO INFORM YOU THAT RS.80 13 194/- REPRESENTS PRINCIPAL AMOUNT ONLY OUT OF WHICH RS.45 LACS ARE PAID BY BORROWER AND RS.35.13 LACS ARE WAIVED. FURTHER WE ADVISE YOU THAT INTEREST AMOUNT OF RS.24 03 237/- IS CALCULATED FOR THE PERIOD FROM 1- 7-2002 TO 17-3- ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 7 2004 WHICH IS WAIVED. INTEREST IS CALCULATED FROM N PA DATE I.E. 1-7- 2002 TO UPTO THE DATE OF PAYMENT OF RS.45 LACS.' 3.5 THE BANK HAS THUS WRITTEN SAYING THAT AS PER THE COMPROMISE PROPOSAL OF THE APPELLANT THE APPELLANT HAS PAID R S.45 LACS AND RS.35 13 194/- WAS WRITTEN OFF AND THE SAME WAS PRI NCIPAL COMPONENT ONLY. AS REGARDS INTEREST REFERRED TO BY THE BANK O F RS.24 03 237/- IT IS NOTICED FROM THE REPLY OF THE BANK THAT THE SAME RE LATES TO THE PERIOD FROM 1.7.2002 I.E. THE DATE WHEN THE ACCOUNT BECAME NPA .THE APPELLANT HAS ALSO REPLIED THAT IT HAS NOT DEBITED ANY INTEREST I N THE P& L A/C. FOR THE YEAR 2002-03 AND 2003-04 AFTER THE ACCOUNT BECAME NPA . IN VIEW OF THE ABOVE FACTS AS THE ABOVE AMOUNT OF RS.35 13 194/- WAS WAIVED TOWARDS PRINCIPAL AMOUNT AS CONFIRMED BY THE BANK AND AS TH E APPELLANT HAS NOT CLAIMED ANY INTEREST AFTER THE ACCOUNT BECAME NPA THE ADDITION MADE BY THE A.O. TO THE TUNE OF RS.35 13 194/- IS HELD TO B E NOT JUSTIFIED AND THE SAME IS DELETED. 9. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED D R SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN ADMITTING FRESH EVI DENCE IN VIOLATION OF RULE 46A OF THE IT RULES 1962 AND THEREFORE MA TTER MAY BE RESTORED TO THE FILE OF THE LD. CIT(A). 10. WE HAVE HEARD THE LEARNED DR. REFERRING TO GROU NDS OF APPEAL IT WAS PLEADED BY LD. DR THAT LD. CIT(A) HAS CONSID ERED FRESH EVIDENCE WHILE DELETING THE ADDITION OF RS.35 13 19 4/- WHICH WAS NOT CONFRONTED TO AO AND THEREFORE THERE WAS VIOLATIO N OF RULE 46A OF IT RULES 1962. THE LEARNED DR THEREFORE SUBMITTE D THAT THE MATTER MAY BE SENT BACK TO THE FILE OF CIT(A). THOUGH THE LD. DR PLEADED SO SHE DID NOT REFER US TO ANY EVIDENCE WHICH HA S BEEN PLACED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND IN TURN TH E LD. CIT(A) ADMITTED THE SAID EVIDENCE IN VIOLATION OF RULE 46 A OF THE IT RULES 1962. IT IS WELL ESTABLISHED THAT THE POWERS OF CIT (A) ARE CO- EXTENSIVE WITH THE POWERS OF THE AO. THE FIRST APPE LLATE AUTHORITY HAS PLENARY POWERS AND THE ENTIRE ASSESSMENT IS THR OWN OPEN BEFORE HIM. THAT IS TO SAY THE SCOPE OF HIS POWERS ARE CONTERMINOUS WITH THAT OF THE ASSESSING OFFICER[CIT VS. KANPUR COAL S YNDICATE 53 ITR 225(SC) CIT VS. GANGA JAMUNA 157 ITR 225(CAL.) SATE OF ANDHRA ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 8 PARDESH VS. HYDERABAD ASBESTOS CEMENT PRODUCTION LT D. 119 CTR (SC) 240.].IN FACT IT IS THE DUTY OF THE LD. CIT(A ) TO CORRECT ALL ERRORS [KAPURCHAND SHRIMAL VS. CIT 131 ITR 451(SC)]. THE R ELEVANT PROVISIONS OF SEC. 250(4) AND RULE 46A(4) OF THE IT RULES 1962 PROVIDE AMPLE POWERS TO THE LD. CIT(A) TO CONDUCT E NQUIRIES HIMSELF. IN THE INSTANT CASE THE AO ADDED AN AMOUNT OF RS.3 5 13 194/- U/S 41(1) OF THE ACT ON ACCOUNT OF CESSATION OF LIABILI TIES PRESUMING THAT ENTIRE AMOUNT WAS ATTRIBUTED TO THE INTEREST CLAIME D BY THE ASSESSEE IN THE EARLIER YEARS. THE AO DID NOT MAKE ANY ENQUI RIES FROM THE BANK. THE LD. CIT(A) ASCERTAINED FROM THE BANK TH AT THE ENTIRE AMOUNT OF RS.35 13 194/- WAIVED BY THE BANK WAS TOW ARDS PRINCIPAL WHILE INTEREST OF RS.24 03 237/- RELATED TO THE PERIOD FROM 1.7.2 002 I.E. THE DATE WHEN THE ACCOUNT BECAME NPA AND THE ASSESSEE DID NOT DEBIT ANY INTE REST IN THE P& L A/C. FOR THE YEAR 2002-03 AND 2003-04 AFTER THE ACCOUNT BECAME N PA. SINCE THE AMOUNT OF RS..35 13 194/- WAS WAIVED TOWARDS PRINCIPAL AMOUNT AS CONFIRMED BY THE BANK AND AS THE ASSESSEE DID NOT CLAIM ANY INTEREST AFTER TH E ACCOUNT BECAME NPA THE LD. CIT(A) DELETED THE ADDITION. TO A QUERY BY THE BENC H THE LD. DR COULD NOT POINT OUT ANY INFIRMITY IN THE FINDINGS OF HE LD. CIT(A) NOR REPLIED AS TO THE PURPOSE WHAT THE LD. CIT(A) WOULD DO ON SETTING ASIDE IF THE AMOUNT WAI VED IS TOWARDS PRINCIPAL AMOUNT. IN VIEW OF THE FOREGOING PLEA OF THE LD. DR FOR RE STORING THE MATTER TO THE FILE OF THE LD. CIT(A) IS DEVOID OF ANY MERIT AND IS REJECTED. THER E BEING NO INFIRMITY IN THE APPROACH OF THE LD. CIT(A) IN MAKING ENQUIRIES FROM THE BANK IN EXERCISE OF HIS POWERS WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE GROUND NO.2 OF THE APPEAL IS REJECTED. 11. GROUND NO.3 RELATES TO DIRECTION TO REWORK CAPI TAL GAIN ON THE BASIS OF THE BANAKHAT SUBMITTED DURING THE APPELLAT E PROCEEDINGS IN VIOLATION OF RULE 46A OF THE IT RULES 1962. THE A O NOTICED THAT THE ASSESSEE-COMPANY HAD SHOWN THE OPENING BALANCE OF T HE VALUE OF LAND AT RS.8 49 131/- AND FAILED TO FURNISH THE DET AILS OF THE AMOUNTS FOR WHICH THE INDIVIDUAL ASSETS HAD BEEN TRANSFERRED TO THE PURCHASERS OF THE ASSETS NOR FURNISHED THE DETAILS OF THE PURCHASERS. SINCE THE FIXED ASSETS WERE SOLD FOR ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 9 RS.25 00 000/- TO A PARTY NAMED SHYAM INDUSTRIES A ND NO BASIS FOR ARRIVING AT THE FIGURE OF RS.25.00 LAKHS HAD BEEN SUBMITTED TH E AO ESTIMATED THE GAIN ON THE TRANSFER OF THE ASSETS AT RS.16 50 869/- (RS.25 00 000 RS.8 49 131) AFTER ALLOWING ALL THE EXPENSES OF TRANSFER AND THE COST INFLATION INDEX. 12 ON APPEAL THE LEARNED CIT(A) DIRECTED THE AO TO REWORK THE CAPITAL GAIN IN THE FOLLOWING TERMS: 4.1 THE LD. AR SUBMITTED THAT THE A.O. HAS OBSERVE D THAT THE APPELLANT HAD FAILED TO FURNISH THE DETAILS OF INDIVIDUAL ASS ETS TRANSFERRED AND AS SUCH THE ENTIRE SALES PROCEEDS OF RS.25 LAKHS WERE TREAT ED TOWARDS FIXED ASSETS AND AFTER REDUCING THE WDV OF RS.8 49 131/- THE BA LANCE WAS BROUGHT TO TAX AS CAPITAL GAINS BY THE ASSESSING OFFICER. THE APPELLANT HAD SOLD OUT VARIOUS ASSETS AS PER BANAKHAT / AGREEMENT TO SALE EXECUTED ON 24-6- 2004 TO M/S. SHYAM INDUSTRIES FOR A CONSIDERATION O F RS.25 LAKHS. THE AFORESAID BANAKHAT CLEARLY STATES THAT RS.20 LAKHS WERE PAID TOWARDS BOTH PLOT AND SUPERSTRUCTURE THEREON WHEREAS RS.5 LAKHS TOWARDS MACHINERY. IT WAS CLEARLY STATED IN THE SALE DEED THAT THE FACTOR Y PREMISES ALONG WITH PLANT AND MACHINERY WERE SOLD. IN ANY VIEW OF THE M ATTER THE A.O. HAS TAKEN THE WDV OF LAND AS PER BALANCE SHEET WHILE CA LCULATING THE CAPITAL GAIN AND IGNORED THE WDV OF REST OF THE ASSETS. EVE N OTHERWISE THE NET BLOCK OF LAND AND BUILDING AS PER BALANCE SHEET WAS RS.20 25 498/- AS AGAINST WHICH RS.20 LAKHS WAS REALIZED SO THAT THER E WAS A LOSS OF RS.25 498/-. THE A.O. FAILED TO APPRECIATE THAT FOR COMPUTING SHORT TERM CAPITAL GAIN HE SHOULD HAVE CONSIDERED THE WDV AS PER I.T. RECORDS AND NOT THE BALANCE SHEET. 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE AU THORIZED REPRESENTATIVE CAREFULLY AND HAVE ALSO GONE THROUGH THE DETAILS FILED BY THE AUTHORIZED REPRESENTATIVE I HAVE ALSO CONSIDERE D THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORD ER. ACCORDING TO THE A.R. THE APPELLANT HAD SOLD OUT VARIOUS FIXED ASSE TS AS PER THE BANAKHAT AND AS PER THE BANAKHAT RS.20 LACS WERE RECEIVED A S SALE CONSIDERATION OF LAND AND SUPERSTRUCTURE ON THE SAME AND RS.5 LAC S TOWARDS SALE CONSIDERATION OF MACHINERY. AS THE NET BLOCK OF L AND AND BUILDING AS PER THE BALANCE SHEET IS RS.20 25 498/- THERE IS A LOSS OF RS.25 498/- BEFORE INDEXATION OF LAND . FURTHER THE A.O. HAS TO CONSID ER INDEXED COST OF ACQUISITION OF LAND AND COMPUTE THE CAPITAL GAINS. RS.5 LACS IS TO BE ADJUSTED AGAINST THE BLOCK VALUE OF PLANT AND MACHI NERY. THEREFORE THERE IS NO JUSTIFICATION FOR ADDITION OF RS.16 50 869/-. THE AO IS DIRECTED TO REWORK THE CAPITAL GAIN ACCORDINGLY. ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 10 13 WE HAVE HEARD THE LEARNED DR. REFERRING TO GROUN DS OF APPEAL IT WAS PLEADED BY LD. DR THAT LD. CIT(A) CONSIDERED FRESH EVIDENCE IN THE FORM OF BANAKHAT WHILE DIRECTING TO RECOMPUTE C APITAL GAINS.SINCE SAID BANAKHAT WAS NOT CONFRONTED TO AO AND THE LD. CIT(A) ADMITTED THE SAME IN VIOLATION OF RULE 46A OF IT RULES 1962 THE LEARNED DR SUBMITTED THAT THE MATTER MAY B E SENT BACK TO THE FILE OF CIT(A). AS IS APPARENT FROM THE FACTS O F THE CASE THE LD. CIT(A) ARRIVED AT THE CONCLUSION WITHOUT ASCERTAINI NG AS TO WHETHER OR NOT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM SUB MITTING THE AFORESAID ADDITIONAL DOCUMENTS/INFORMATION BEFORE THE AO AS PER PROVISIONS OF RULE 46A OF THE IT RULES 1962 NOR THE LD. CIT(A) SEEMS TO H AVE RECORDED ANY REASONS BEFORE ADMITTING THE AFORESAID BANAKHAT IN EVIDENCE . HERE WE MAY HAVE A LOOK AT THE RELEVANT PROVISIONS OF RULE 46A OF THE IT RUL ES 1962 WHICH READS AS UNDER: (1) THE APPELLANT SHALL NOT BE ENTITLED TO PRODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE THE COMMISSIONER (APPEALS) ANY EVIDENCE WHETHER ORAL OR DOCUMENTARY OTHER TH AN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCEEDINGS BEFORE THE ASS ESSING OFFICER EXCEPT IN THE FOLLOWING CIRCUMSTANCES NAMELY:-- (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMI T EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED;OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVAN T TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO A DDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE (1 ) UNLESS THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE THE C OMMISSIONER (APPEALS) RECORDS IN WRITING THE REASONS FOR ITS ADMISSION. (3)THE DEPUTY COMMISSIONER(APPEALS) OR AS THE CA SE MAY BE THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (1) UNLESS THE INCOME-TAX OFFICER HA S BEEN ALLOWED A REASONABLE ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 11 OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS-EXAMINE THE WITNESS PRODUCED BY THE APPELLANT OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS) OR AS THE CASE MAY BE THE COMMISSIONER (APPEALS) TO DIRECT THE PRODUCTION OF ANY DOCUMENT OR THE EXAMI NATION OF ANY WITNESS TO ENABLE HIM TO DISPOSE OF THE APPEAL OR FOR ANY OTH ER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY (WHETH ER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER) UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECT ION 271..' 13.1 IT IS EVIDENT FROM THE AFORESAID PROVISION S THAT THE LD. CIT(A) CAN TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-R. (1)(B) & (C) OF RULE 46A OF THE IT RULES 1962 IF THE ASSESSEE WAS PREVENTED BY SUFF ICIENT CAUSE .IN THE CASE UNDER CONSIDERATION THE ASSESSEE PLACED BEFORE THE LD. CIT(A) THE AFORESAID BANAKHAT AND THERE IS NO EVIDENCE ON RECORD THAT TH E SAID DOCUMENT WAS EVER SUBMITTED TO THE AO. MOREOVER THERE IS NOTHING TO SUGGEST AS TO WHETHER OR NOT THE LD. CIT(A) RECORDED ANY REASONS BEFORE ADMITT ING THE BANAKHAT BY WAY OF ADDITIONAL EVIDENCE. SINCE IN THE CASE UNDER CONSID ERATION THE ADDITIONAL EVIDENCE/DOCUMENTS FILED BEFORE THE LEARNED CIT(A) HAVE BEEN ADMITTED WITHOUT RECORDING ANY FINDINGS AS TO WHETHER OR NOT THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE SAID DOCUMEN TS BEFORE THE AO AND WITHOUT RECORDING ANY REASONS IN TERMS OF RULE 46A(2) OF TH E IT RULES 1962 WE FIND MERIT IN THE CONTENTIONS OF THE LEARNED DR AND IN THE INT EREST OF JUSTICE AND FAIR PLAY VACATE THE FINDINGS OF THE LD. CIT(A) AND RESTORE T HE MATTER TO HIS FILE WITH THE DIRECTIONS TO FOLLOW THE MANDATE IN TERMS OF RULE 4 6A OF THE IT RULES 1962 AS ALSO PRINCIPLES OF NATURAL JUSTICE AND THEREAFTER DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW AFTER ALLOWING SUFFICIENT OPPOR TUNITY TO BOTH THE PARTIES. WITH THESE DIRECTIONS GROUND NO. 3 RAISED IN THE APPEA L IS DISPOSED OF AS INDICATED HEREINBEFORE. 14. GROUND NOS. 4 & 5 BEING GENERAL IN NATURE DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE THEREFORE DISMISSED . ITA NO.524/AHD/2008 FOR AY 2004-05 MEHTA OIL MILLS PVT. LTD. 12 15 IN THE RESULT APPEAL IS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 31 -05 -2010 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 31-05-2010 COPY OF THE ORDER FORWARDED TO : 1. MEHTA OIL MILLS PVT. LTD. 303 B D CHAMBERS CH OKHA BAZAR AHMEDABAD 2. THE ITO WARD-4(4) 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