Monica Electronics Ltd, New Delhi V. M/s. DCIT, New Delhi

CO 135/DEL/2009

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5099 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 27-08-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-08-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 16-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K CHAND D R ITA NO DEL DEL; CO D
• Assessee Lawyers: R SANTANAM
• Keywords: Business expenditure; Deemed to accrue or arise in india; Capital receipt; Revenue expenditure
• Section: 37

Judgement Text

ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI RAJ PAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1839/DEL/2007 A.Y. : 2003-04 M/S MONICA ELECTRONICS LTD., A-19-B-1, MCIE, MATURA ROAD, NEW DLHI 110 044 (PAN: AAACM3532E) (APPELLANT ) VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE-5(1), NEW DELHI (RESPONDENT) ITA NO. 1164/DEL/2009 A.Y. : 2003-04 DY. COMMISSIONER OF INCOME TAX, VS. M/S MONICA ELECTRONICS LTD., CIRCLE-5(1), A-19, B-1, MOHAN COOP. INDL., ROOM NO. 409-A, CR BLDG., ESTATE, MATHURA ROAD, IP ESTATE, NEW DELHI NEW DELHI 110 044 (APPELLANT) (RESPONDENT) AND CROSS OBJECTION NO. 135/DEL/2009 (IN ITA NO. 1164/DEL/2009) A.Y. 2003-04 M/S MONICA ELECTRONICS LTD., VS. DY. COMMISSIONER OF INCOME TAX, A-19, B-1, MOHAN COOP. INDL. CIRCLE-5(1), ESTATE, MATHURA ROAD, ROOM NO. 409-A, CR BLDG., NEW DELHI 110 044 IP ESTATE, NEW DELHI (CROSS OBJECTOR) (CROSS-OBJECTEE) ASSESSEE BY : SH. R. SANTANAM. A.R. DEPARTMENT BY : SH. N.K. CHAND, D.R. ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 2 PER SHAMIM YAHYA: AM THE APPEAL NO. 1839 BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 19.1.200 7, THE APPEAL NO. 1164 FILED BY THE REVENUE AND C.O. NO. 135 BY THE ASSESS EE ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) DATED 7.1.2009. 2. SINCE THE ISSUES ARE CONNECTED AND THE APPEALS W ERE HEARD TOGETHER, HENCE, THESE ARE BEING CONSOLIDATED AND DISPOSED OF TOGETHER FOR THE SAKE OF CONVENIENCE BY THIS COMMON ORDER. ASSESSEES APPEAL - ITA NO. 1839/DEL/07 3. THE FIRST ISSUE RAISED IS THAT THE AUTHORITIES BELOW HAVE ERRED IN TREATING THE SUM OF RS. 48,55,141/- AS DEEMED INCOME OF TH E ASSESSEE. 4. THE ASSESSEE IS A PUBLIC LIMITED COMPANY WHICH W AS INCORPORATED AS A PRIVATE LIMITED COMPANY AND WENT PUBLIC IN THE YEA R 1990-91. DURING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER OBSERVED THAT T HE ASSESSE HAD OFFERED RS. 7016868/- OF INCOME ON ACCOUNT OF FULL AND FINA L SETTLEMENT OF NCDS IN ITS P&L A/C UNDER THE HEAD MISC. INCOME. BUT IT WAS NOTED F ROM THE COMPUTATION OF INCOME OF THE ASSESSEE THAT THE ASSESSEE HAD REDUCE D RS. 4855141/- OF INCOME AND HAD GIVEN A FOOT NOTE AS UNDER:- THE COMPANY HAD ACCEPTED NCDS IN 1992. THESE WERE TO BE REPAID IN THREE INSTALLMENT IN THE YEARS 1998, 1999 AND 2000. BECAUSE OF FINANCIAL CONDITION OF THE COMPANY AND OTHER CONSTRAINTS, THE ASSESSEE COMPANY WAS NOT IN A POSITION TO REPAY THE REDEMPTION AND INTER EST IN RESPECT OF THE DEBENTURES. FINALLY THE COMPANY HAS SETTLED THE AMO UNTS WITH DEBENTURE ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 3 HOLDERS BY PAYING APPROXIMATELY 40% TO 50% OF THE P RINCIPAL AMOUNT DUE TO THEM. THE DIFFERENCE BETWEEN AMOUNT DUE AND PA ID TO DEBENTURE HOLDERS COMES TO RS. 7016868/- WITH BREAK UP AS UND ER:- PRINCIPAL RS. 4855141 INTEREST RS. 2161727 THIS AMOUNT HAS BEEN INCLUDED IN THE MISCELLANEOUS INCOME. SINCE THE DIFFERENCE BETWEEN PRINCIPAL AMOUNT DUE AND PAID AM OUNTING TO RS. 4855141/- DOES NOT CONSTITUTE INCOME AND IS NEITHER COVERED U/S 28(IV) NOR U/S 41(1), THE AMOUNT HAS BEEN EXCLUDED WHILE CALCU LATING TOTAL INCOME OF THE COMPANY. 4.1 ASSESSING OFFICER ASKED THE ASSSSEE AS TO WHY THE AMOUNT OF RS. 4855141/- WHICH WAS THE REDUCTION OF ASSESSES LIABILITY ON ACCOUNT OF FULL AND FINAL SETTLEMENT OF NCDS SHOULD NOT BE TREATED AS INCOME U/S 41 OF THE IT ACT. ASSESSEE SUBMITTED THAT SECTION 41(1) WAS NOT APPL ICABLE IN THIS CASE AS AMOUNT HAD NEVER BEEN CLAIMED AND ALLOWED AS BUSINESS EXPE NDITURE DURING THE EARLIER YEAR. HE FURTHER SUBMITTED THAT THAT IT WAS A CAP ITAL RECEIPT AND NOT TAXABLE UNDER THE IT ACT. IT WAS ALSO CLAIMED THAT SECTI ON 28(4) IS NOT APPLICABLE ON REMISSION OF LOANS. ASSESSING OFFICER DID NOT ACC EPT ASSESSEES CONTENTION. ASSESSING OFFICER REFERRED TO SEVERAL CASE LAWS A ND HELD THAT INCOME WAS TO BE BROUGHT TO TAX U/S 28(IV). HE CONCLUDED THAT WH EN THE ASSESSEES LOANS AND ADVANCES ARE NOT RECOVERED, THE ASSESSEES CLAIM T HE CONSEQUENTIAL LOSS AS BUSINESS LOSS. BY THE SAME LOGIC, ANY REDUCTION IN THE LIABILITY ON ACCOUNT LOANS AND ADVANCES TAKEN FROM OTHERS HAS TO BE SHOWN AS B USINESS INCOME. ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 4 5. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOM E TAX (APPEALS) REFERRED TO THE CASE LAWS RELIED UPON BY THE ASSESSING OFF ICER. HE INTER-ALIA REFERRED TO THE FOLLOWING:- HAVING CONSIDERED THE POSITION OF LAW AND CASE LAW S ON THE SUBJECT I AM OF THE VIEW THAT IN THE FACTS OF THE CASE BEFORE ME TH E DECISION OF ASSESSING OFFICER IN HOLDING THIS AMOUNT TO BE INCOME IS COR RECT. THIS IS SO BECAUSE OF THE WIDE DEFINITION AND YET, INCLUSIVE DEFINITION OF THE WORD INCOME IN SECTION 2(24) AS RIGHTLY STATED BY THE ASSESSING OF FICER. THIS IS SO IN THE LIGHT OF OBSERVATION OF HONBLE SUPREME COURT IN VARIOUS CASES AS QUOTED BY ME ABOVE FROM THE ASSESSMENT ORDER AND IN PARTICULAR T HE OBSERVATION OF THE COURT IN CASE OF C.I.T. VS. T.V. SUNDARAM IYENGAR & SONS LTD. WHERE APPELLANT RECEIVED DEPOSITS IN COURSE OF TRADE TRAN SACTIONS, AMOUNT OF SUCH CREDIT BALANCES WHICH WERE BARRED BY LIMITATION AND WHICH WERE WRITTEN BACK BY APPELLANT TO P&L ACCOUNT WERE TO BE ASSESS ED AS APPELLANTS INCOME. THIS CLEARLY GOES TO SHOW THAT NOTWITHSTAND ING THE PROVISIONS OF SECTION 28(IV) WHICH DO NOT SPECIFICALLY INCLUDE C ASH, THE AMOUNT BY WHICH THE APPELLANT IS SO BENEFITED, HAS TO BE HELD TO BE ITS INCOME. 5.1 LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHE R REFERRED TO THE HONBLE APEX COURT DECISIONS IN THE CASE OF C.I.T. VS. L AKSHMI VILAS BANK 220 ITR 305 (SC) AND C.I.T. VS. KARTHIKEYAN (1993) 201 ITR 866 (SC) AND AFFIRMED THAT THE ASSESSING OFFICER WAS CORRECT AND THE AMOUNT OF RS. 4855141/ - HAS TO BE ASSESSED AS INCOME OF THE ASSESSEE. 6. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 5 7. LD. COUNSEL OF THE ASSESSEE SUBMITTED BEFORE US THAT SECTION 41(1) IS NOT APPLICABLE. HE FURTHER CLAIMED THAT SECTION 28(IV) IS ALSO NOT ATTRACTED. HE ARGUED THAT THE SAID SECTION IS ATTRACTED TOWARDS CASH R ECEIPTS. HERE THE ASSESSEE HAS NOT RECEIVED ANY BENEFIT IN CASH AND THE BENEFIT IF AT ALL IS ONLY IN KIND ONLY. IN THIS REGARD, HE REFERRED THE DECISION IN THE CASE OF RAV INDER SINGH AND ANOTHER VS. C.I.T. 205 ITR 353 AND C.I.T. VS. JINDAL EQUIPMENT LEASING AND CONSULTANCY SERVICES LTD. 325 ITR 87. 7.1 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF C.I.T. VS. TV SUNDARAM I YENGAR AND SONS LTD. HE FURTHER RELIED UPON THE BOMBAY HIGH COURT DECISION IN THE C ASE OF SOLID CONTAINERS LTD. VS. DCIT AND ANR. 308 ITR 417. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. AS PER THE ADMITTED FACTS THE ASSESSEE HAD A LIABILITY IN THE FORM OF NCDS WH ICH WAS ACCEPTED IN THE YEAR 1992. THESE WERE TO BE REPAID. BECAUSE OF THE F INANCIAL CONDITION AND OTHER CONSTRAINTS, SETTLEMENT WAS REACHED BETWEEN THE DE BENTURE-HOLDERS AND THE ASSESSEE WHEREBY THE DEBENTURE-HOLDERS AGREED FOR SETTLEMENT BY PAYING APPROXIMATELY 40% TO 50% OF THE PRINCIPAL DUE TO T HEM. THE TOTAL AMOUNT THUS TAKEN AS MISCELLANEOUS INCOME CAME TO PRINCIPAL RS . 4855141/- AND INTEREST OF RS. 2161777/-. HOWEVER, THE ASSESSEE WAS OF THE OPI NION THAT DIFFERENCE BETWEEN THE PRINCIPAL AMOUNT DUE AND PAID AMOUNTING TO RS. 4855141/- DID NOT CONSTITUTE ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 6 INCOME AND WAS NEITHER COVERED U/S 28(IV) NOR U/S 4 1(1). HENCE THE AMOUNT WAS EXCLUDED WHILE CALCULATING THE TOTAL INCOME OF THE COMPANY. 8.1 WE FIND THAT HONBLE APEX COURT IN THE CASE OF C.I.T. VS. TV SUNDARAM IYENGAR AND SONS (SUPRA) 222 ITR 344 (SC) HAS HELD THAT IF AN AMOUNT IS RECEIVED IN THE COURSE OF A TRADING TRANSACTION, EVEN THOUGH IT IS NOT TAXABLE IN THE YEAR OF RECEIPT AS BEING OF REVENUE CHARACTER, THE AMOUNT C HANGES ITS CHARACTER WHEN THE AMOUNT BECOMES THE ASSESSEES OWN MONEY BECAUSE OF LIMITATION OR BY ANY OTHER STATUTORY OR CONTRACTUAL RIGHT. WHEN SUCH A THING H APPENS, COMMON SENSE DEMANDS THAT THE AMOUNT SHOULD BE TREATED AS INCOME OF THE ASSESSEE. 8.2 THE READING OF THE ABOVE CLEARLY SHOWS THAT A PEX COURT HAS HELD THAT WHEN MONEY IS RECEIVED DURING THE COURSE OF TRADING OPERATION THE SAME THOUGH MAY BE CAPITAL IN NATURE CAN CHANGE CHARACTER AND BECOME REVENUE RECEIPT. HENCE, THE RECEIPT HAS TO BE IN THE COURSE OF TRAD ING OPERATION. OBTAINING MONEY THROUGH NCD IS A MEANS OF RECEIVING LONG TERM FUNDS . IT CAN NOT BE SAID TO BE RECEIPT OF MONEY DURING THE COURSE OF TRADING OPERA TION. HENCE THIS CASE LAW IS NOT APPLICABLE ON THE FACTS OF THE CASE. 8.3 WE FIND THAT SECTION 28(IV) READS AS UNDER:- THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CO NVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION. 8.4 WE ALSO FIND THAT IN THE CASE OF RAVINDER SINGH VS. C.I.T. THE HONBLE JURISDICTIONAL HIGH COURT IN 205 ITR 353 HAD AN OCC ASION TO CONSIDER SECTION 28(IV. IN THIS CASE NON-INTEREST BEARING FUNDS WERE AVAIL ABLE WITH THE FIRM EXCEEDING INTEREST FREE BORROWALS BY THE PARTNERS. HENCE THE ADDITION U/S 28(IV) FOR SUCH ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 7 BORROWERS IN THE ASSESSMENT OF PARTNERS WAS NOT JUS TIFIED. SECTION 28(IV) IS APPLICABLE WHERE THE BENEFIT OR PERQUISITES IS OTHE R THAN CASH. WE FURTHER FIND THAT IN THE CASE OF C.I.T. VS. JINDAL EQUIPMENT LEA SING AND CONSULTANCY SERVICES LTD. IN 325 ITR 87 THE HONBLE JURISDICTIONAL HIGH COURT HAS DEALT WITH THE FOLLOWING:- THE ASSESSEE WAS AN INVESTMENT COMPANY REGISTERED WITH THE RESERVE BANK OF INDIA AS A NON-BANKING FINANCIAL COMPANY. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2003-04, THE ASSESS EE HAD REFLECTED A LOAN PAYABLE TO J. OUT OF THIS, J. WROTE OFF A PART IN I TS BOOKS OF ACCOUNT. IN THE LIGHT OF THIS, THE ASSESSING OFFICER TREATED THE SU M WRITTEN OFF BY J AS INCOME OF THE ASSESSEE AND ADDED IT UNDER SECTION 4 1(1) OF THE INCOME TAX ACT, 1961. THE COMMISSIONER (APPEALS) CONFIRMED THE ADDITION IN TERMS OF SECTION 41(1) READ WITH SECTION 28(I) OF THE ACT. ON FURTHER APPEAL BY THE ASSESSEE, THE TRIBUNAL DELETED THE ADDITION HOLDING THAT SECTION 41(1) OF THE ACT HAD NO APPLICATION. ON APPEAL BY THE DEPAR TMENT ON THE AMENDED QUESTION WHETHER THE AMOUNT OF LOAN WRITTEN OFF WAS INCOME OF THE ASSESSEE WITHIN THE MEANING OF SECTION 28(IV) OF T HE ACT: THE HONBLE COURT HAS HELD AS UNDER:- (I) THAT THE DEPARTMENT HAD NOT DISPUTED THE FACTS ON THE BAIS SOF WHICH DECISION OF THE TRIBUNAL WAS BASED, BUT WAS S EEKING A DECLARATION THAT ON THESE VERY FACTS, THE PROVISION S OF SECTION 28(IV) OF THE ACT WOULD BE ATTRACTED. IT WAS A PURE QUESTI ON OF LAW AND THEREFORE, THE AMENDED GROUND AS RAISED BY THE DEPA RTMENT COULD BE ALLOWED. ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 8 II) THAT ONE OF THE PRE-REQUISITES FOR ATTRACTING T HE PROVISIONS OF SECTION 28(IV) IS THAT THE SUM IN QUESTION SHOULD BE A BENE FIT OR PERQUISITE ARISING IN THE COURSE OF BUSINESS IS OF NATURE, OTH ER THAN CASH OR MONEY. THE TRIBUNAL HAD HELD THAT THE SUM WRITTEN O FF BY J DID NOT CONSTITUTE INCOME IN THE HANDS OF THE ASSESSEE. ON THE FACTS OF THIS CASE AND PARTICULARLY HAVING REGARD TO THE NATURE O F BUSINESS ONLY, IT WOULD CONSTITUTE A CAPITAL RECEIPT. THE SUM COULD NOT BE TAXED. 8.5 THIS CASE LAW IS SQUARELY APPLICABLE ON THE FA CTS OF THE CASE NCD WAS IN THE CAPITAL FIELD. REDUCTION OF LIABILITY ON THIS ACCO UNT WOULD CONSTITUTE A CAPITAL RECEIPT. ACCORDINGLY, FOLLOWING THE ABOVE JURISDIC TIONAL HIGH COURT DECISION WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DE CIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 9. THE NEXT ISSUE RAISED IS THAT THE AUTHORITIES BE LOW HAVE ERRED IN DISALLOWING A SUM OF RS. 3795276/- BEING WORKMAN COMPENSATION P AID. 9.1 THE ASSESSING OFFICER IN THIS CASE NOTED THAT ASSESSEE HAD PAID TOTAL SUM OF RS. 3795276/- AS COMPENSATION TO EMPLOYEES AS FU LL AND FINAL SETTLEMENT OF CLOSURE COMPENSATION. ASSESSEE RESPONDED AS UNDER: - - MANUFACTURING OF CTVS IS NOT THE ONLY ACTIVITY OF THE ASSESSEE COMPANY. IT WAS ALSO DOING TRADING BUSINESS OF CTVS . - ASSESSEES BUSINESS HAS NOT STOPPED WITH THE CLOS URE OF MANUFACTURING BUSINESS. - THE EXPENSES ARE ALLOWABLE U/S 37 OF THE IT ACT . ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 9 - THE ASSESSEE PLACED ITS RELIANCE ON THE FOLLOWIN G CASE LAWS:- - C.I.T. VS. MGF INDIA LTD. 272 ITR 191 (DEL). - JAYSHREE TEA AND INDUSTRIES LTD. VS. C.I.T. 27 2 ITR 193 (CAL.) - K. RAVINDRANATHAN NAIR VS. C.I.T. 164 CTR 498 ( SC). - C.I.T. VS. SRINIVASA IYER (1991) 192 ITR 50 (MA D) - SASSOON J. DAVIND & CO. (P) LTD. VS. C.I.T. (1979 ) 118 ITR 261 (SC) - C.I.T. VS. KHOSLA INDAIR LTD. 92005) 147 TAXMA N 602 (DEL). 9.2 THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE CONTENTIONS. HE REFERRED TO SEVERAL CASE LAWS AND HELD THAT COMPANY DURING T HE YEAR DUE TO LABOUR PROBLEMS, HAS CLOSED DOWN ITS MANUFACTURING OPERATI ONS W.E.F. 13.5.2002 UNDER SECTION 6W TO BE READ WITH 6V OF UP INDUSTRIAL DISP UTE ACT, 1947 AND ACCORDINGLY, HAD PAID FULL AND FINAL DUES TO THE ASSESSEE. HE HELD THAT THIS CLOSURE COMPENSATION HAD BEEN PAID FOR CLOSING THE MANUFA CTURING BUSINESS OF THE ASSESSEE. HENCE, HE DISALLOWED THE SAME. 10. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCO ME TAX (APPEALS) HELD THAT HE FOUND THE ASSESSING OFFICER S ACTION IS CO RRECT IN VIEW OF THE DECISION OF THE HONBLE APEX COURT DECISION IN THE CASE OF C.I .T. VS. GEMINI CASHEW SALES CORPORATION (1967) ITR 643 (SC), WHEREIN IT WAS HE LD THAT AMOUNT PAID TOWARDS RETRENCHMENT AND NOTICE PAY ON THE CLOSURE OF THE BUSINESS OF THE ASSESSEE CANNOT BE HELD TO BE BUSINESS EXPENDITURE AND THE REFORE, ARE NOT DEDUCTIBLE. ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 10 11. BEFORE US THE LD COUNSEL OF THE ASSESSEE CONTEN DED THAT ASSESSEE HAS CLOSED ONLY PART OF THE BUSINESS. HENCE, THE AMOUNT PAID WERE NOT TOWARDS THE CLOSURE OF THE COMPANY. 11.1 LD. COUNSEL OF THE ASSESSEE RELIED UPON THE HO NBLE APEX COURT DECISION IN THE CASE OF K. RAVINDRANATHAN NAIR VS. C.I.T. 247 ITR 178 AND CONTENDED THAT ASSESSEE HAS MORE THAN ONE ACTIVITY OR OPERATION AN D THERE IS COMMON MANAGEMENT AND CONTROL COUPLED WITH OTHER ACTIVITIE S RELATED WITH DIFFERENT OPERATIONS BE INTER-LACED / INTER-CONNECTED AND SHO ULD BE REGARDED AS ONE BUSINESS CARRIED ON BY THE ASSESSEE. 11.2 LD. DEPARTMENTAL REPRESENTATIVE IN THIS REGAR D REFERRED TO PAGE 146 OF THE ASSESSEES PAPER BOOK WHEREIN IT WAS WRITTEN THAT DURING THE YEAR UNDER ASSESSMENT ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TRADING COLOUR TELEVISION. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE FIND THAT IT IS THE ASSESSEES CONTENTION THAT ASSESSEE HAS NOT STOPPED ITS BUSINESS, BUT ONLY PART OF THE BUSINESS. HOWEVER, THIS FACT IS NOT EMERGING F ROM THE FACTS ON RECORD, NOR THERE IS ANY FINDING IN THIS REGARD. BOTH THE CO UNSEL FAIRLY AGREED THAT THIS ISSUE MAY BE REMITTED TO THE FILES OF THE ASSESSING OFFIC ER TO EXAMINE THE FACTUAL ASPECT AS TO WHETHER THE ASSESSEE HAS CLOSED ITS BUSINESS OR NOT. ACCORDINGLY, THIS ISSUE IS REMITTED TO THE FILES OF THE ASSESSING OFFICER . REVENUES APPEAL ITA NO. 1164/DEL/2009 13. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF IN COME TAX (APPEALS) HAS ERRED IN DELETING THE PENALTY U/S 271(1)(C) OF THE ACT. ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 11 14. IN THIS CASE PURSUANT TO THE ADDITIONS MENTION ING IN ITA NO. 1839 ABOVE PENALTY U/S 271(1)(C) WAS ALSO IMPOSED UPON THE ASS ESSEE. 15. LD. COMMISSIONER OF INCOME TAX (APPEALS) UPON A SSESSEES APPEAL HAS CONFIRMED THE LEVY OF PENALTY ON THE ADDITION ON AC COUNT OF RS. 4855141/- HAD DELETED THE PENALTY ON ACCOUNT OF DISALLOWANCE OF R S. 3795276/-. 16. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT WE HAVE ALREADY DELETED THE ADDITION OF RS. 4855141 /- FROM THE INCOME OF THE ASSESSEE, AS A RESULT, SINCE THE ADDITIONS DOES N OT SURVIVE THE PENALTY ON THIS ACCOUNT CANNOT BE IMPOSED. 17. AS REGARDS THE DISALLOWANCE OF RS. 37,95,276/- CLAIMED AS REVENUE EXPENDITURE FOR SETTLING DISPUTES WITH EMPLOYEES/WO RKMEN. 18. WE HAVE ALREADY REMITTED THE ISSUE TO THE FILES OF THE ASSESSING OFFICER TO EXAMINE THE FACTUAL ASPECT. ACCORDINGLY, THIS ISS UE STANDS REMITTED TO THE FILES OF ASSESSING OFFICER, ASSESSING OFFICER SHALL CONSIDER THE SAME AFTER GIVING FINDING AS PER OUR ABOVE DECISION. ASSESSEES CROSSS OBJECTION NO. 135/DEL/09 19. IN THE CROSS OBJECTION THE ASSESSEE HAS URGED T HAT DEPARTMENTAL APPEAL IS TOTALLY MISCONCEIVED, UNWARRANTED AND UNTENABLE AND BEING DEVOID OF MERIT. 20. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT WE HAVE ALREADY DELETED THE PENALTY ON ACCOUNT OF ADD ITION OF RS. 4855141/- AND AS REGARDS THE ADDITION OF RS. 3795276/-, WE HAVE ALRE ADY REMITTED THE MATTER TO THE ITA NO. 1839/DEL/07, 1164/DEL/09 & CO 13/DEL/09 A.Y. 2003-04 12 FILES OF ASSESSING OFFICER. ACCORDINGLY, THIS CRO SS OBJECTION THUS BECOME INFRUCTUOUS. 21. IN THE RESULT, THE ITA NO. 1839 APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES; THE ITA NO. 1164 FILED BY THE REVENUE IS ALSO PARTLY ALLOWED FOR STATISTICAL PURPOSES AND CROSS OBJECTIO N NO. 135 STANDS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 27/08/2010. SD/- SD/- [RAJ PAL YADAV] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 27/08/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES