Morarjee Brembana Ltd. ( Now Known As ... vs Department Of Income Tax

श्री जोगिन्दर स हिं , न्याययक सदस्य, एवुं श्री डी. करुणाकर राव, ऱेखा सदस्य के समक्ष

BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER

आमकय अऩीर सं. / ITA no.4883/Mum./2011 (ननधधायण वषा / Assessment Year : 1998-99)

Asstt. Commissioner of Income Tax ................. अऩीरधथी / Circle-6(3), Aayakar Bhavan 101, M.K. Road, Mumbai 400 020 Appellant

फनधभ v/s

M/s. Morarjee Brembana Ltd. (Now knows as Morarjee Textiles Ltd.), 2, Peninsula Peta ................... प्रत्मथी / Mathuradas Mills Compound Senapati Bapat Marg, Lower Parel Respondent Mumbai 400 013 - PAN - AAACM2725R

यधजस्व की ओय से / Revenue by : Shri Love Kumar ननधधारयती की ओय से / Assessee by : Shri Ronak G. Doshi

सन ु वधई की तधयीख / आदे श घोषणध की तधयीख / Date of Hearing - 08.04.2015 Date of Order - 21/05/2015

ORDER

डी. करुणाकर राव, ऱेखा सदस्य के द्वारा / PER D. KARUNAKARA RAO, A.M.

The present appeal preferred by the Revenue is directed against

the impugned order dated 18th March 2012, passed by the M/s. Morarjee Brembana Ltd.

(Now knows as Morarjee Textiles Ltd.)

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Commissioner (Appeals)-12, Mumbai, for the assessment year 1998-

99. Following grounds have been raised by the Revenue:-

"1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding that the amount set aside by ITAT and required for verification by the Assessing Officer was ` 15,77,59,305 only, without appreciating the fact that the Tribunal by its order set aside the issue of addition to fixed assets amounting to ` 33.88 crores to the file fo the Assessing Officer for fresh examination.

2. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in directing the Assessing Officer to restrict the disallowance made of ` 4,96,62,661 to ` 1,57,75,930 i.e., 10% of ` 15,77,59,305 on ad-hoc basis, without appreciating the fact that the assessee was not in possession of any third party evidences in support of its claim.

3. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding that pre-operative expenses were subject to scrutiny in earlier years, without appreciating the fact that such expenses shall be subject to scrutiny only in the year in which these are capitalized, out of which the claim for depreciation will arise."

2. The relevant facts of the case are that the assessee is engaged in

manufacturing of higher value 100% cotton fabrics. The assessee filed

its return of income declaring loss of ` 4,24,84,200. In the first round

of assessment, the Assessing Officer made various additions and the

same travelled to the Tribunal in the first round. The Tribunal, vide its

order dated 24th August 2007, set aside the issues of additions to fixed

assets amounting to ` 33.18 crores to the file of the Assessing Officer.

Giving effect to the said order of the Tribunal, the Assessing Officer M/s. Morarjee Brembana Ltd.

(Now knows as Morarjee Textiles Ltd.)

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passed an order, the relevant portion of the assessment order, is

extracted below:-

"During the course of assessment proceedings relevant details have been called for. The facts of the case are that the assessee company has incurred an addition to fixed assets amounting to Rs. 33.88 crores during the year. The Assessing Officer in the original assessment proceedings made an addition of Rs. 5,08,34,170/- being 15% of the addition to fixed assets as unexplained investment. The learned CIT(A) deleted the addition. The Honourable ITAT has now set aside the matter to the file of the assessing officer. During the course of reassessment proceedings, the assessee was asked to submit the details of the same and also asked to furnish the evidence in support of the addition to fixed assets. However, the assessee, could only furnish the evidence, in support of the claim to addition to fixed assets, amounting to Rs. 6,22,56,795/- in respect of plant and machinery and Rs. 7,03,53,248/- in respect of building. In spite of repeated opportunities the assessee could not file any evidence in respect of capitalisation of preoperative expenses amounting to Rs. 19,86,50,645/- in respect of plant and machinery. As the evidence in support of their claim of addition to fixed assets in Rs. 19,86,50,645/- has not been filed by them the depreciation claimed amounting to Rs. 4,96,62,661/- is disallowed and added back to the total income of the assessee".

3. From the above, it is evident that the Assessing Officer disallowed

the claim of depreciation to the tune of ` 4,96,62,661, relatable to the

addition to fixed asset amounting to ` 19.86 crores. The assessee's

failure to submit necessary supporting evidence is the reason for the

said disallowance. The other facts brought in by the Assessing Officer in

the order includes the total additions made to the fixed assets works

out to ` 34,38,50,768. It has two segments namely, actual additions M/s. Morarjee Brembana Ltd.

(Now knows as Morarjee Textiles Ltd.)

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amounting to ` 7,48,46,875 and the capitalization of pre-operative

expenses works out to ` 26,90,03,893.

4. During the assessment proceedings, the assessee could furnish

evidences only to the extent of ` 49,56,300, leaving unexplained

portion of ` 33,88,94,468. The assessee explained that part of the

above unexplained portion was already scrutinized during the relevant

assessment years in the past. If the same is considered as explained,

what is left unexplained works out to only ` 15,77,59,305, and the

learned CIT(A) appreciated the same and held that the disallowance @

10% of the same towards non-genuineness of the expenditure is

reasonable. The learned CIT(A), accordingly, granted part relief to the

assessee against which there is no appeal by the assessee. Being

aggrieved, the Revenue is in appeal with the grounds mentioned above.

5. Before us, while the learned Departmental Representative relying

on the order of the Assessing Officer, the learned Counsel for the

assessee filed a summary chart explaining and justifying the order of

the learned Commissioner (Appeals). The details, as contained the

chart which is placed on record, is extracted below:-

CHART IS APPENDED TO THIS ORDER SEPARATELY M/s. Morarjee Brembana Ltd.

(Now knows as Morarjee Textiles Ltd.)

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6. From the above chart, it is evident that the total additions made

during the year and the pre-operative expenses crystallised during the

year aggregated to ` 34,38,50,828 (A). After netting the same with the

details furnished by the assessee before the Assessing Officer at the

time of original assessment, the total additions to fixed assets to be

explained works out to ` 33,88,94,528. The pre-operative expenditure

already under scrutiny for the assessment year 1996-97 and 1997-98

which are required to be considered as examined and allowed by the

Assessing Officer works out to ` 11,12,44,588. The total expenditure as

per the assessee on which depreciation is to be allowed as held by the

learned CIT(A) works out to ` 32,80,74,898.

7. During the course of proceedings before us, both the parties

submitted that the chart may be remanded to the file of the Assessing

Officer for considering the figures and verifying the same with the

claims made by the assessee in the year under consideration as well as

for the assessment year 1996-97 and 1997-98. The Assessing Officer

shall note that once the return of income is scrutinized in the

assessment year 1996-97 and 1997-98, the claims made in the said

returns cannot be done once again in the proceedings like this in the

year under consideration. Accordingly, we dismiss the arguments raised

in ground no.3 of this appeal. The Assessing Officer is directed to M/s. Morarjee Brembana Ltd.

(Now knows as Morarjee Textiles Ltd.)

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examine the above chart and the figures contained therein after giving

reasonable opportunity of being heard to the assessee. Consequently,

grounds no.1 and 2 are dismissed in principle. We order accordingly.

10. ऩरयणधभत् यधजस्व की अऩीर खधरयज की जधती है ।

10. In the result, Revenue's appeal is dismissed as above.

Order pronounced in the open Court on 21.05.2015

Sd/- Sd/-

जोगिन्दर स हिं डी. करुणाकर राव न्याययक सदस्य ऱेखा सदस्य JOGINDER SINGH D. KARUNAKARA RAO JUDICIAL MEMBER ACCOUNTANT MEMBER

मुंबई MUMBAI, ददनाुंक DATED: 21.5.2015

आदे श की प्रनतलरपऩ अग्रेपषत / Copy of the order forwarded to:

(1) ननधधारयती / The Assessee;

(2) यधजस्व / The Revenue;

(3) आमकय आमुक्त(अऩीर) / The CIT(A);

(4) आमकय आमुक्त / The CIT, Mumbai City concerned; (5) पवबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / The DR, ITAT, Mumbai; (6) गधर्ा पधईर / Guard file.

सत्मधपऩत प्रनत / True Copy आदे शधनुसधय / By Order प्रदीऩ जे. चौधयी / Pradeep J. Chowdhury वरयष्ठ ननजी सधचव / Sr. Private Secretary उऩ / सहधमक ऩंजीकधय / (Dy./Asstt. Registrar) आमकय अऩीरीम अधधकयण, भुंफई / ITAT, Mumbai