JUNOBO HOTELS PVT. LTD., MUMBAI V. ACIT 12 (3)(1), MUMBAI

CO 126/MUM/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 4114 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 07-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, J MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.2236/MUM/2017 ASSESSMENT YEAR:2011-12 ACIT-12(3)(1), ROOM NO.147B, 1 ST FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 / VS. M/S JUNOBO HOTELS PVT. LTD. 502, SAGAR FORTUNE, WATERFIELD ROAD, BANDRA (WEST), MUMBAI-400050 ( / REVENUE) ( !'# $ /ASSESSEE) PAN. NO . AACCJ4959L C.O. NO.126/MUM/2017 (ARISING OUT OF ITA NO.2236/MUM/2017) ASSESSMENT YEAR:2011-12 M/S JUNOBO HOTELS PVT. LTD. 502, SAGAR FORTUNE, WATERFIELD ROAD, BANDRA (WEST), MUMBAI-400050 / VS. ACIT-12(3)(1), ROOM NO.147B, 1 ST FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 ( !'# $ /ASSESSEE) ( / REVENUE) ITA NO.2236/MUM/2017 AND C.O. NO.126/MUM/2017 M/S JUNOBO HOTELS PVT. LTD. 2 PAN. NO . AACCJ4959L % & $ ' / DATE OF HEARING : 16/08/2018 & $ ' / DATE OF ORDER: 24/09/2018 / O R D E R PER JOGINDER SINGH(JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DATE D 02/12/2016 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI AND ASSESSEE HAS PREFERRED CROSS OBJECTION. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT T HE APPEAL OF THE REVENUE IS BARRED BY LIMITATION BY 58 DAYS. THE LEARNED DR POINTED OUT THE REASONS OF DELAY AND BY CONTENDING THAT THE DELAY MAY BE CONDONED. THE LEA RNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE DELAY M AY NOT BE CONDONED. 1.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. . IN VIEW OF THE ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, SO FAR AS, COND ONATION OF ! / REVENUE BY SHRI V. K. CHATURVEDI SR.DR !'# $ ! / ASSESSEE BY SHRI DEVEN VORA ITA NO.2236/MUM/2017 AND C.O. NO.126/MUM/2017 M/S JUNOBO HOTELS PVT. LTD. 3 DELAY IS CONCERNED NO DOUBT FILING OF AN APPEAL IS A RIGHT GRANTED UNDER THE STATUTE TO THE ASSESSEE AND IS NO T AN AUTOMATIC PRIVILEGE, THEREFORE, THE ASSESSEE IS EXP ECTED TO BE VIGILANT IN ADHERING TO THE MANNER AND MODE IN WHIC H THE APPEALS ARE TO BE FILED IN TERMS OF THE RELEVANT PR OVISIONS OF THE ACT. NEVERTHELESS, A LIBERAL APPROACH HAS TO BE ADOPTED BY THE APPELLATE AUTHORITIES, WHERE DELAY HAS OCCURRED FOR BONA- FIDE REASONS ON THE PART OF THE ASSESSEE OR THE REVENUE IN FILING THE APPEALS. IN MATTERS CONCERNING THE FILI NG OF APPEALS, IN EXERCISE OF THE STATUTORY RIGHT, A REFU SAL TO CONDONED THE DELAY CAN RESULT IN A MERITORIOUS MATT ER BEING THROWN OUT AT THE THRESHOLD, WHICH MAY LEAD TO MISC ARRIAGE OF JUSTICE. THE JUDICIARY IS RESPECTED NOT ON ACCOU NT OF ITS POWER TO LEGALIZE IN JUSTICE ON TECHNICAL GROUNDS B UT BECAUSE IT IS CAPABLE OF REMOVING INJUSTICE AND IS EXPECTED TO DO SO. 2.2. THE HONBLE APEX COURT IN A CELEBRATED DECIS ION IN COLLECTOR, LAND ACQUISITION VS MST. KATIJI & ORS. 1 67 ITR 471 OPINED THAT WHEN TECHNICAL CONSIDERATION AND SUBSTA NTIAL JUSTICE ARE PITTED AGAINST EACH OTHER, THE COURTS A RE EXPECTED TO FURTHER THE CAUSE OF SUBSTANTIAL JUSTICE. THIS IS FOR THE REASON THAT AN OPPOSING PARTY, IN A DISPUTE, CANNOT HAVE A ITA NO.2236/MUM/2017 AND C.O. NO.126/MUM/2017 M/S JUNOBO HOTELS PVT. LTD. 4 VESTED RIGHT IN INJUSTICE BEING DONE BECAUSE OF A N ON- DELIBERATE DELAY. THEREFORE, IT FOLLOWS THAT WHILE CONSIDERING MATTERS RELATING TO THE CONDONATION OF DELAY, JUDIC IOUS AND LIBERAL APPROACH IS TO BE ADOPTED. IF SUFFICIENT C AUSE IS FOUND TO EXIST, WHICH IS BONA-FIDE ONE, AND NOT DUE TO NE GLIGENCE OF THE ASSESSEE, THE DELAY NEEDS TO CONDONED IN SUCH C ASES. THE EXPRESSION SUFFICIENT CAUSE IS ADEQUATELY ELASTIC TO ENABLE THE COURTS TO APPLY LAW IN A MEANINGFUL MANNER, WHI CH SUB- SERVES THE END OF JUSTICE- THAT BEING THE LIFE PURP OSE OF THE EXISTENCE OF THE INSTITUTION OF THE COURTS. WHEN S UBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATION ARE PITTED AGAI NST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED. THE HONBLE APEX COURT IN VEDABHAI VS SA NTARAM 253 ITR 798 OBSERVED THAT INORDINATE DELAY CALLS OF CAUTIOUS APPROACH. THIS MEANS THAT THERE SHOULD BE NO MALAF IDE OR DILATORY TACTICS. SUFFICIENT CAUSE SHOULD RECEIVE LIBERAL CONSTRUCTION TO ADVANCE SUBSTANTIAL JUSTICE. THE H ONBLE APEX COURT IN 167 ITR 471 OBSERVED AS UNDER:- 3. THE LEGISLATURE HAS CONFERRED THE POWER TO COND ONE DELAY BY ENACTING SECTION 51 OF THE LIMITATION ACT OF 1963 I N ORDER TO ENABLE THE COURTS TO DO SUBSTANTIAL JUSTICE TO PART IES BY DISPOSING OF MATTERS ON DE MERITS. THE EXPRESSION SUFFICIENT CAUSE EMPLOYED BY THE LEGISLATURE IS ADEQUATELY EL ASTIC TO ENABLE THE COURTS TO APPLY THE LAW IN A MEANINGFUL MANNER ITA NO.2236/MUM/2017 AND C.O. NO.126/MUM/2017 M/S JUNOBO HOTELS PVT. LTD. 5 WHICH SUBSERVES THE ENDS OF JUSTICE THAT BEING THE LIFE-PURPOSE OF THE EXISTENCE OF THE INSTITUTION OF COURTS. IT IS C OMMON KNOWLEDGE THAT THIS COURT HAS BEEN MAKING A JUSTIFI ABLY LIBERAL APPROACH IN MATTERS INSTITUTED IN THIS COURT. BUT T HE MESSAGE DOES NOT APPEAR TO HAVE PERCOLATED DOWN TO ALL THE OTHERS COURTS IN THE HIERARCHY. 2.3. FURTHERMORE, THE HON'BLE SUPREME COURT IN THE CASE OF VEDABAI ALIA VAIJAYANATABAI BABURAO PATIL V S. SHANTARAM BABURAO PATIL 253 ITR 798 HELD THAT THE C OURT HAS TO EXERCISE THE DISCRETION ON THE FACTS OF EACH CASE KEEPING IN MIND THAT IN CONSTRUING THE EXPRESSION SUFFICIENT CAUSE, THE PRINCIPLE OF ADVANCING SUBSTANTIAL JUST ICE IS OF PRIME IMPORTANCE. THE COURT HELD THAT THE EXPRESSIO N SUFFICIENT CAUSE SHOULD RECEIVE LIBERAL CONSTRUCT ION. 2.4. THE DECISION OF THE TRIBUNAL IN PEOPLE INFOCO M PRIVATE LTD. V/S CIT (ITA NO.210/MUM/2013) ORDER DA TED 19/05/2016, M/S NEUTRON SERVICES CENTRE PVT. LTD VS ITO (ITA NO.1180/MUM/2012) ORDER DATED 18/02/2016, SHRI SAIDATTA COOP-. CREDIT SOCIETY LTD. V/S ITO (ITA NO.2379/MUM/2015) ORDER DATED 15/01/2016 AND MR. NIKUNJ BAROT (PROP. ENIGMA) VS ITO (ITA NO.4887/MUM/2015) ORDER DATED 06/01/2016, WHEREIN, SUBSTANTIAL DELAY WAS CONDONED, SUPPORTS T HE CASE OF THE PRESENT REVENUE. HAVING MADE THE AFORESAID ITA NO.2236/MUM/2017 AND C.O. NO.126/MUM/2017 M/S JUNOBO HOTELS PVT. LTD. 6 OBSERVATION AND VARIOUS DECISIONS DISCUSSED HEREINA BOVE, INCLUDING FROM HONBLE APEX COURT, THE CIRCUMSTANCE S NARRATED BY THE ASSESSEE, WHEREIN, IT HAS STATED TH E REASONS WHICH CAUSED THE DELAY, THEREFORE, THE DELAY IS CON DONED. 3. NOW WE SHALL TAKE UP THE APPEAL OF THE REVENUE O N MERIT, WHEREIN THE GROUND RAISED PERTAINS TO ALLOWI NG THE CAPITALIZATION OF EXPENSES TO THE TUNE OF RS. 3,85, 37,106/- WITHOUT APPRECIATING THAT EXPENSES IN QUESTION WERE INCURRED PRIOR TO SETTING UP OF THE BUSINESS THEREFORE, THE ASSESSEE CANNOT BE TREATED TO HAVE SET UP THE BUSINESS DURIN G FINANCIAL YEAR 2010-11. 4. DURING HEARING, THE LEARNED DR SHRI V K CHATURVE DI ADVANCED ARGUMENTS WHICH IS IDENTICAL TO THE GROUND S RAISED BY CLAIMING THAT EVEN THOUGH THE PREMISES WHICH WAS TO BE USED AS A HOTEL HAD BEEN TAKEN ON LEASE BY THE ASSE SSEE ON 18 TH FEBRUARY 2011 AND WAS UNDER REPAIR AND RENOVATION DURING F Y 2010-11 TO MAKE IT FIT TO FUNCTION AS A HOTEL AND, FURTHER, THE HOTEL PREMISES, TAKEN ON LEASE BY THE ASSESSEE COMPANY, WAS NOT READY TO HOUSE THE CUSTOMER AND TH E ASSESSEE WAS NOT IN A POSITION TO TAKE BOOKING AND, THUS, THE HOTEL WAS NOT READY TO COMMENCE ITS BUSINESS. ITA NO.2236/MUM/2017 AND C.O. NO.126/MUM/2017 M/S JUNOBO HOTELS PVT. LTD. 7 5. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE SHRI DEVEN VORA DEFENDED THE IMPUGNED ORDER BY EXPL AINING THAT IT WAS THE FIRST YEAR OF BUSINESS OF THE ASSES SEE AND LOSS TO THE TUNE OF RS. 3.85 CRORE WAS INCURRED AND DEFE NDED THE FINDING RECORDED BY THE LEARNED CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. BEFORE ADVERTING FURTHER, WE ARE REPRODUCING HEREUNDER THE FINDING RECORDED BY T HE LEARNED CIT(A), WHICH ARE AS UNDER: 5.3 I HAVE PERUSED THE ASSESSMENT ORDER OF THE A.O . AND THE SUBMISSIONS MADE BY THE APPELLANT. IT IS NOTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE COMPANY HAD ACCUMULATED LOSS OF RS. (-) 3,85,37,106/-. THE ASSESSEE COMPANY HAD NOT SHOWN ANY RECEIPT DURING THE YEAR. DURING THE YEAR THE OPERATION OF THE COMPANYS BUSINESS HAD NOT STARTED . ALL THE PRELIMINARY EXPENSES BEFORE STARTING OF THE BUSINESS HAD BEEN CLAIMED AS ADMINISTRATIVE AND OTHER EXPENSES. SINCE, THE BUSINESS OF THE COMPANY HAD NOT STARTED ALL THESE EXPENSES SHOULD NOT HAVE BEEN CLAIMED IN THE PURCHASE & L A/C. SINCE THE COMPANY HAD NOT COMMENCED ITS OPERATION. THE EXPENSES CLAIMED SHOULD HAVE BEEN CAPITALIZED. THEREFORE, THE LOSS OF RS. (-) 3,85,37,106/- WAS DISALLOWED BY THE A.O. THE AR HAS VEHEMENTLY OPPOSED THE DISALLOWANCE AND HAS SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS DISALLOWED THE EXPENSES CLAIMING THAT THE EXPENSES SHOULD HAVE BEE N CAPITALIZED. THE LEARNED ASSESSING OFFICER OUGHT T O HAVE AT LEAST ALLOWED THE SAID EXPENSES TO BE CAPITALIZED. THE LEARNED ASSESSING OFFICER HAS ITA NO.2236/MUM/2017 AND C.O. NO.126/MUM/2017 M/S JUNOBO HOTELS PVT. LTD. 8 ACCEPTED THE GENUINENESS OF THE EXPENSES AND THE ISSUE IS WITH TREATMENT OF THE SAME IN BOOKS AND INCOME TAX RETURN. ON THE SIMILAR FACTS AND CIRCUMSTANCES, THE LEARNED ASSESSING OFFICER FOR ASSESSMENT YEARS 2012-13 AND 2013-14 HAS ALLOWED THE EXPENSES TO BE CAPITALIZED. WE REQUEST YOUR HONOUR TO ALLOW THE EXPENSES TO BE CAPITALIZED SO A S TO CLAIM DEPRECIATION BENEFIT AS AND WHEN THE OPERATIO NS ARE COMMENCED. IT IS NOTED THAT THE LEARNED ASSESSING OFFICER HAS RIGHTLY NOTED THAT THE BUSINE SS OF THE ASSESSEE HAS NOT COMMENCED AND THE EXPENSES CANNOT BE ALLOWED AS REVENUE EXPENSES. HOWEVER, TH E AO SHOULD HAVE ALLOWED THE SAID EXPENSES TO BE CAPITALIZED AS WAS DONE ON THE SIMILAR FACTS AND CIRCUMSTANCES FOR ASSESSMENT YEARS 2012-13 AND 2013-14 WHERE IN THE AO HAD ALLOWED THE EXPENSES TO BE CAPITALIZED. IN VIEW OF THIS DISCUSSION THE AO IS DIRECTED TO ALLOW THE EXPENSES TO BE CAPITALIZED SO AS TO ENABLE THE CLAIM DEPRECIATION BENEFIT AS AND WHE N THE BUSINESS OPERATIONS OF ASSESSEE ARE COMMENCED. ACCORDINGLY THIS GROUND OF APPEAL IS PARTLY ALLOWED . 6.1 IF THE AFORESAID FACTUAL FINDING RECORDED BY TH E LEARNED CIT(A) IS ANALYZED, UNDISPUTEDLY, THE ASSESSEE COMP ANY HAS NOT SHOWN ANY RECEIPT DURING THE YEAR AS THE BUSINE SS OPERATION OF THE ASSESSEE COMPANY HAD NOT STARTED A ND THE PRELIMINARY EXPENSES, BEFORE STARTING OF THE BUSINE SS, HAD BEEN CLAIMED AS ADMINISTRATIVE AND OTHER EXPENSES. THE STAND OF THE ASSESSEE IS THAT THE DISALLOWANCE WAS MADE BY THE LEARNED ASSESSING OFFICER ON THE PLEA THAT SUCH EXPENSES SHOULD HAVE BEEN CAPITALIZED. THE GENUINENESS OF I NCURRING ITA NO.2236/MUM/2017 AND C.O. NO.126/MUM/2017 M/S JUNOBO HOTELS PVT. LTD. 9 OF EXPENSES HAS NOT BEEN DOUBTED BY THE LEARNED ASS ESSING OFFICER AND THE ISSUE IS WITH RESPECT TO THE TREATM ENT OF THE SAME IN THE BOOKS OF ACCOUNT AND THE RETURN FILED B Y THE ASSESSEE. THERE IS UNCONTROVERTED FINDING IN THE I MPUGNED ORDER THAT FOR A.YS. 2012-13 AND 2013-14, THE LEARN ED ASSESSING OFFICER ALLOWED THE EXPENSES TO BE CAPITA LIZED. THUS, WE FIND NO INFIRMITY IN THE DIRECTION OF THE LEARNED CIT(A) TO ALLOW THE EXPENSES TO BE CAPITALIZED SO A S TO ENABLE THE CLAIM OF DEPRECIATION BENEFIT AS AND WHEN THE B USINESS OPERATION OF THE ASSESSEE IS COMMENCED. THE APPEAL OF THE REVENUE IS THEREFORE HAVING NO MERIT, CONSEQUENTLY DISMISSED. 7. SO FAR AS THE CROSS-OBJECTION NO. 126/MUM/2017 I S CONCERNED, THE LEARNED COUNSEL FOR THE ASSESSEE ADV ANCED IDENTICAL ARGUMENTS BY CLAIMING THAT THIS CROSS OBJ ECTION IS IN SUPPORT OF THE ORDER OF THE FIRST APPELLATE AUTHORI TY. SINCE, WE HAVE DISMISSED THE APPEAL OF THE REVENUE THEREFORE, THIS CROSS-OBJECTION AS BECOME INFRUCTUOUS. ITA NO.2236/MUM/2017 AND C.O. NO.126/MUM/2017 M/S JUNOBO HOTELS PVT. LTD. 10 8. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS-OBJECTION OF THE ASSESSEE IS DISMISSED AS INF RUCTUOUS. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF HEARING ON 16/08/2018. SD/- SD/- ( MANOJ KUM AR AGGARWAL ) (JOGINDER SINGH) '!# / ACCOUNTANT MEMBER $!# /JUDICIAL MEMBER % MUMBAI; ) DATED : 24/09/2018 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT (RESPECTIVE ASSESSEE) 2. ./,- / THE RESPONDENT. 3. 0 0 1$ ( + ) / THE CIT, MUMBAI. 4. 0 0 1$ / CIT(A)- , MUMBAI, 5. 34 .$! , 0 +' ! 5 , % / DR, ITAT, MUMBAI 6. 6' 7% / GUARD FILE. ! / BY ORDER, /! (DY./ASSTT. REGISTRAR) , % / ITAT, MUMBAI