M/s Raju Vegesna Infotech & Industries Pvt. Ltd., Visakhapatnam V. The ACIT, Circle-4(1),

CO 13/VIZ/2014

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2264 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 05-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: I SARISH KUMAR
• Keywords: Business income; Business expenditure
• Section: 143(3); 14A

Judgement Text

ITA NO.703/VIZAG/2013 & CO 13/VIZAG/2014 M/S. RAJU VEGESNA INFOTECH & INDUSTRIES (P) LTD., V SKP 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.703/VIZAG/2013 ( / ASSESSMENT YEAR: 2010-11 ) ACIT CIRCLE - 4(1) VISAKHAPATNAM VS. M/S. RAJU VEGESNA INFOTECH & INDUSTRIES (P) LTD. VISAKHAPATNAM [PAN: AACCR 6263K ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NO.13/VIZAG/2014 (ARISING OUT OF I.T.A.NO.703/VIZAG/2013) ( / ASSESSMENT YEAR: 2010-11 ) M/S. RAJU VEGESNA INFOTECH & INDUSTRIES (P) LTD. VISAKHAPATNAM VS. ACIT CIRCLE - 4(1) VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI I. SARISH KU MAR, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 18.01.2016 / DATE OF PRONOUNCEMENT : 02.03.2016 ITA NO.703/VIZAG/2013 & CO 13/VIZAG/2014 M/S. RAJU VEGESNA INFOTECH & INDUSTRIES (P) LTD., V SKP 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 20.9.2013 FOR THE ASSES SMENT YEAR 2010- 11. THE CROSS OBJECTION FILED BY THE ASSESSEE IS I N SUPPORT OF THE ORDER OF CIT(A), VISAKHAPATNAM. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A COMPAN Y ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT AND INFRASTRUCTURE DEVELOPMENT ACTIVITIES FILED RETURN OF INCOME ON 30.9.2010 DECL ARING A TOTAL INCOME OF ` NIL. THE RETURN FILED BY THE ASSESSEE WAS PROCESS ED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE AC T'). SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT W AS COMPLETED U/S 143(3) OF THE ACT. IN THE ASSESSMENT ORDER, THE A. O. HAS NOTED FROM THE PROFIT & LOSS ACCOUNT THAT THE ASSESSEE HAS NOT SHOWN ANY BUSINESS INCOME. IT HAS SHOWN INCOME FROM HOUSE PROPERTY AN D LOSS FROM THE BUSINESS. IT IS ALSO NOTED THAT ASSESSEE HAS CLAIM ED EXPENDITURE WHICH INCLUDES DIRECT EXPENSES, FINANCIAL CHARGES AND DEP RECIATION, THEREBY RESULTING INTO NET LOSS. WHEN THE A.O. HAS ASKED TH E ASSESSEE, IT WAS SUBMITTED THAT THERE IS NO INCOME OUT OF THE BUSINE SS DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEES BUSINESS WAS N OT DISCONTINUED AND ITA NO.703/VIZAG/2013 & CO 13/VIZAG/2014 M/S. RAJU VEGESNA INFOTECH & INDUSTRIES (P) LTD., V SKP 3 WAS STILL CONTINUING AND SUBMITTED THAT THE ASSESSE E HAS INCURRED SUBSTANTIAL AMOUNTS TO RUN THE BUSINESS AND THE SAM E MAY BE ALLOWED. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE A.O. HAS NOTED IN THE ASSESSMENT ORDER THAT THERE WAS NO BUSINESS TRA NSACTION DURING THE YEAR AND THE POSITION IN THE EARLIER YEARS WAS ALSO GIVEN AS FOLLOWS: ASST. YEAR 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 BUSINESS TRANSACTION NIL NIL NIL NIL NIL NIL BUSINESS EXPEND. 7,80,700 74,84,021 79,30,311 75,92,782 86,51,970 1,02,97,091 3. AFTER CONSIDERING THE ABOVE, THE A.O. WAS OF THE OPINION THAT THE BUSINESS LOSS HAS BEEN CONTINUOUSLY SET OFF OVER TH E YEARS WITHOUT ANY KIND OF BUSINESS RECEIPTS AND THAT THE PROVISIONS O F SECTION 14A OF THE ACT WOULD APPLY IN SUCH CIRCUMSTANCES AND ACCORDING LY ASSESSMENT WAS COMPLETED. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) HAS OBSERVED THAT SECTION 14A OF THE ACT HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. SO FAR AS EXPEND ITURE INCURRED BY THE ASSESSEE IS CONCERNED, THE LD. CIT(A) HAS OBSERVED THAT BY FOLLOWING CERTAIN JUDICIAL PRECEDENTS THAT, THE EXPENDITURE I NCURRED DURING THE PERIOD OF LULL HAS TO BE ALLOWED AS A BUSINESS EXPE NDITURE AND ITA NO.703/VIZAG/2013 & CO 13/VIZAG/2014 M/S. RAJU VEGESNA INFOTECH & INDUSTRIES (P) LTD., V SKP 4 ACCORDINGLY DIRECTED THE A.O. TO ALLOW THE EXPENDIT URE CLAIMED OF ` 1,05,02,595/- AS A BUSINESS EXPENDITURE. 5. ON BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. D.R. HAS SUBMITTED THAT THE COMMISSIONER WITHOU T EXAMINING THE FACTS OF THE CASE SIMPLY RELYING ON THE SUBMISSIONS AND SOME CASE LAWS, HE HAS DIRECTED THE A.O. TO ALLOW THE EXPENDITURE A ND THE SAME MAY BE REVERSED. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT THERE IS A TEMPORARY LULL IN THE BUSINESS OF T HE ASSESSEE. THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE HAS TO BE ALLOWED. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. FROM THE FACTS AVAILABLE ON RECORD, IT APPEARS THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPMENT AND INFRASTRUCTURE DEVELOPMENT ACTIVITIES. THERE IS NOTHING ON THE RE CORD THAT WHAT IS THE NATURE OF PROPERTY PURCHASED BY THE ASSESSEE AND WH AT IS THE NATURE OF INFRASTRUCTURE DEVELOPED BY THE ASSESSEE? FROM THE ASSESSMENT ORDER ASSESSEE IS CLAIMING EXPENDITURE OF ` 7,80,700/- IN A.Y. 2005-06, ` 74,84,021/- IN A.Y. 2006-07, ` 79,30,311/- IN A.Y. 2007-08, ` 75,92,782/- IN A.Y. 2008-09, ` 86,51,970/- IN A.Y. 2009-10 & ITA NO.703/VIZAG/2013 & CO 13/VIZAG/2014 M/S. RAJU VEGESNA INFOTECH & INDUSTRIES (P) LTD., V SKP 5 ` 1,02,97,091/- IN THE ASSESSMENT YEAR UNDER CONSIDE RATION I.E. 2010- 11. WE FIND THAT THERE IS A HUGE GAP BETWEEN THE EX PENDITURE CLAIMED BY THE ASSESSEE IN ASSESSMENT YEAR 2005-06 AND SUBS EQUENT ASSESSMENT YEARS. THIS IS NOT EXAMINED BY THE A.O. THE A.O. AND CIT(A) BOTH ARE FAILED TO EXAMINE THAT WHAT IS THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE. THAT APART, THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSEE HAS PURCHASED IMMOVABLE PROPERTY AND T HE SAME IS SHOWN AS A STOCK IN TRADE AND THEREFORE HE IS CLAIMING TH E EXPENDITURE INCURRED TO MAINTAIN THAT IMMOVABLE PROPERTY AS A BUSINESS E XPENDITURE. IN OUR OPINION, SIMPLY BECAUSE THE ASSESSEE HAS PURCHASED SOME PROPERTY AND SHOWN IT AS A STOCK IN TRADE, IT CANNOT BE CONSIDER ED AS A BUSINESS. IT HAS TO BE EXAMINED WHAT IS THE NATURE OF THE ACTIVI TY CARRIED BY THE ASSESSEE AFTER BUYING THE PROPERTY AND WHAT ARE THE FURTHER STEPS TAKEN TO USE THE PROPERTY PURCHASED BY HIM AS A BUSINESS ACTIVITY. THESE ASPECTS ARE NEITHER EXAMINED BY THE A.O. NOR BY THE CIT(A). UNDER THESE CIRCUMSTANCES, WE SET ASIDE THE ORDER PASSED BY THE LD. COMMISSIONER AND WE DIRECT THE A.O. TO DECIDE THE I SSUE DE-NOVO IN ACCORDANCE WITH LAW. 8. SO FAR AS APPLICATION OF SECTION 14A OF THE ACT IS CONCERNED, THE LD. CIT(A) HAS HELD THAT IT HAS NO APPLICATION WITH THE FACTS OF THE CASE. ITA NO.703/VIZAG/2013 & CO 13/VIZAG/2014 M/S. RAJU VEGESNA INFOTECH & INDUSTRIES (P) LTD., V SKP 6 WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON T HIS ASPECT. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE REVENUE IS ALLOW ED FOR STATISTICAL PURPOSES. 9. SO FAR AS THE C.O. FILED BY THE ASSESSEE IS CONC ERNED, IN VIEW OF OUR DISCUSSIONS ABOVE, C.O. IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND THE C.O. FILED BY THE ASSE SSEE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 2 ND MAR16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 02.03.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-4(1), VISAKHAPA TNAM 2. / THE RESPONDENT M/S. RAJU VEGESNA INFOTECH & IN DUSTRIES PVT. LTD., FLAT NO.104, 10-27-2/21, LAKSHMI APARTMENTS, KAILAS H METTA, WALTAIR UPLANDS, VISAKHAPATNAM 3. ) / THE CIT-2, VISAKHAPATNAM 4. ) ( ) / THE CIT(A), VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM