Shri. Palghat Ramanathan Seshadri, Bengaluru V. Income-Tax Officer, Ward-4(2)(1), Bengaluru

CO 37/BANG/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3846 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 27-03-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PADMA MEENAKSHI
• Keywords: Depreciation; Business expenditure; Wrong claim
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 702 / BANG/201 8 ASSESSMENT YEAR : 20 1 1 - 12 THE INCOME TAX OFFICER, WARD 4 (2)(1), BANGALORE. VS. SHRI PALGHAT RAMANATHAN SESHADRI, TAPOVANA, NO. 32, CLUB ROAD, BIDRAHALLI, OPP: EAST POINT HOSPITAL, BANGALORE 560 049. PAN: ACOPS5602C APPELLANT RESPONDENT & C.O. NO. 37/BANG/2018 (IN ITA NO. 702/BANG/2018) ASSESSMENT YEAR : 2011 - 12 (B Y ASSESSEE) ASSESSEE BY : SHRI RAVISHANKAR, ADVOCATE REVENUE BY : SMT. PADMA MEENAKSHI, JCIT (DR) DATE OF HEARING : 0 9 . 0 5 .2018 DATE OF PRONOUNCEMENT : 01 . 0 6 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THEREVENUE AND THE C.O. BY ASSESSEE AND THESE ARE DIRECTED AGAINST THE ORDER OF CIT (A) DATED 30.11.2 017 FOR ASSESSMENT YEAR 2011-12. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER. 6. THE ORDER OF THE LD. CIT (A), IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IS OPPOSED TO LAW AND THE FACT AND CIRCUMSTANCES OF THE CASE. 7. ON FACTS OF THE CASE, WHETHER THE DECISION OF TH E LD CIT (A) IS RIGHT WHILE DELETING THE ADDITIONS MADE BY THE AO ON THE ISSUE OF WRITE OFF OF HOTEL EQUIPMENTS AND STT PAID AND STT PROCESSING CHARGES BY HOLDING THAT THE SECTION 154 HAS A LIMITED PURVIEW OF APPLICATION AS ITA NO.702/BANG/2018& C.O. NO. 37/BANG/2018 PAGE 2 OF 6 AGAINST THE DISCRETION AVAILABLE TO THE AO WHILE PA SSING THE ORDER U/S 143(3). 8. IN VIEW OF BOARD'S CIRCULAR NO 21/2015 DATED 10. 12.2015 ON MONETARY LIMIT FOR FILING APPEAL, PARA 8(C) OF THE CIRCULAR SQUARELY APPLIES TO THE FACTS OF THE CASE. 9. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT (A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF TH E ASSESSING OFFICER MAY BE RESTORED. 10. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND / OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED. 3. THE GROUNDS RAISED BY THE ASSESSEE IN THE C.O. A RE AS UNDER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX [APPEALS] IN AS FAR AS IT IS AGAINST THE RESPONDENT / CROSS OBJE CTOR IS OPPOSED TO LAW, FACTS, EQUITY, AND WEIGHT OF EVIDENCE AND CIRC UMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) OUGHT TO HAVE ANNULLED/CANCEL LED THE ORDER PASSED UNDER SECTION 154 OF THE ACT, ON THE FACTS A ND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN LAW IN C ONFIRMING THE RECTIFICATIONORDER IN RESPECT OF DEPRECIATION, AS T HERE WAS NO MISTAKE APPARENT FROM RECORD, ON THE FACTS AND CIRCUMSTANCE S OF THE CASE. 4. WITHOUT PREJUDICE THE LEARNED ASSESSING OFFICER IS NOT JUSTIFIED IN LAW IN CHARGING THE INTEREST UNDER SECTION 234 B AN D 234 C OF THE ACT AND FURTHER THE CALCULATION OF INTEREST UNDER SECTI ON 234 B AND 234 C OF THE ACT IS NOT IN ACCORDANCE WITH LAW SINCE THE RATE, METHOD OF CALCULATION, QUANTUM IS NOT DISCERNABLE FROM THE OR DER OF ASSESSMENT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE RESPONDENT / CROSS OBJECTOR CRAVES LEAVE TO ADD, ALTER, DELETE, SUBSTITUTE OR MODIFY ANY OF THE GROUNDS URGED ABOVE . 6. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF THE HEARING OF THE APPEAL, THE RESPONDENT / CROSS O BJECTOR PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF EQUITY AND JUSTICE. 4. AT THE VERY OUTSET, IT WAS SUBMITTED BY LD. AR O F ASSESSEE THAT THE C.O. FILED BY THE ASSESSEE IS NOT PRESSED AND ACCORDINGLY THE C.O . OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. ITA NO.702/BANG/2018& C.O. NO. 37/BANG/2018 PAGE 3 OF 6 5. REGARDING THE APPEAL OF THE REVENUE, IT WAS SUBM ITTED BY LD. DR OF REVENUE THAT THERE IS A TYPING MISTAKE IN THE NUMBER OF THE GROUNDS WHICH ARE SAID TO BE GROUND NOS. 6 TO 10 BUT THIS IS A TYPING MISTAKE AN D THEREFORE, THESE GROUNDS SHOULD BE READ AS GROUND NOS. 1 TO 5. SHE FURTHER SUBMITTED THAT GROUND NO. 1 IS GENERAL. REGARDING ONE ASPECT OF THE MATTER RAI SED AS PER GROUND NO. 2, SHE SUPPORTED THE ASSESSMENT ORDER. IN REPLY, IT WAS S UBMITTED BY LD. AR OF ASSESSEE THAT THIS ISSUE WAS DECIDED BY CIT(A) AS P ER PARA NO. 6.3 OF HIS ORDER WHEREIN IT WAS HELD BY HIM THAT OUT OF TOTAL CLAIM OF THE ASSESSEE ON ACCOUNT OF WRITE OFF OF HOTEL EQUIPMENT OF RS. 8,68,500/-, THE AO HAS ALREADY MADE DISALLOWANCE OF RS. 5,68,500/- IN THE ORIGINAL ORDE R PASSED BY HIM U/S. 143(3) OF IT ACT AND IT IS HELD BY CIT(A) THAT ONCE SUCH DISC RETION HAS BEEN EXERCISED IN THE ORIGINAL ASSESSMENT ORDER, THE AMOUNT OF SUCH D ISALLOWANCE CANNOT BE ENHANCED U/S 154 IN ABSENCE OF SPECIFIC AND PRIMA-F ACIE DOCUMENTARY PROOF. HE SUBMITTED THAT IN VIEW OF THIS CATEGORICAL FINDI NG OF CIT(A), HIS ORDER SHOULD BE CONFIRMED. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, I REPRODUCE PARA 6.3 FROM THE ORDER OF CIT(A) FOR THE SAKE OF READY REFERENCE . THIS PARA READS AS UNDER. 6.3 THIS ISSUE PERTAINS TO DISALLOWANCE OF THE ENTI RE CLAIM OF RS. 8,68,500/- MADE TOWARDS 'WRITE-OFF OF HOTEL EQUIPME NT'. THE AO IN THE ORIGINAL ORDER U/S 143(3) HAD ALREADY DISALLOWED A PORTION OF THE SAME AT RS. 5,68,500/-. IN THE IMPUGNED ORDER U/S 1 54. THE AO HOWEVER PROCEEDED TO DISALLOW THE CLAIM IN ITS ENTI RETY. THE ASSESSEE, HAS VEHEMENTLY OBJECTED TO THE AO'S ACTION, CLAIMIN G THE SAME TO BE IN NATURE OF ROUTINE BUSINESS EXPENDITURE IN ITS HOTEL BUSINESS. IT IS SUBMITTED THAT. IN ANY EVENT THE HOTEL BUSINESS WAS CLOSED DOWN AFTER A SHORT PERIOD, HAVING INCURRED UNBEARABLE BUSINESS LOSSES. IT IS SUBMITTED THAT, ALL EXPENSES IN RESPECT OF THE HOTE L EQUIPMENT WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND THERE WAS NO BOGUS CLAIM AS SUCH. THE AO IN HIS IMPUGNED ORDER HAS NOT DISCUSSED THE EXACT NATURE OF THE EQUIPMENTS INVOLVED. THERE IS NO SPEC IFIC BREAK-UP AVAILABLE IN THE AO'S ORDER U/S 143(3) / 154 TO DET ERMINE, WHETHER THE EQUIPMENTS ARE PERMANENT FIXTURES AND THEREFORE CAP ITAL IN NATURE. THERE IS NO QUESTION ALSO RAISED AGAINST THE GENUIN ENESS OF THE TRANSACTIONS RELATING TO THE HOTEL EQUIPMENTS. IT I S ALSO NOT CLEAR AS WHAT ARE THE NATURES OF ITEMS TREATED AS CAPITAL. THE AO WHILE DISPOSING THE ORIGINAL-ORDER U/S 143(3 ) HAS ALREADY DISALLOWED THE AMOUNT OF RS. 5,68,500/-. THERE APPE ARS TO BE NO ITA NO.702/BANG/2018& C.O. NO. 37/BANG/2018 PAGE 4 OF 6 SPECIFIC EVIDENCIARY JUSTIFICATION TO MODIFY AND EN HANCE THE IMPUGNED SUM U/S 154. THE SECTION 154 HAS A LIMITED PURVIEW OF APPLICATION AS AGAINST THE DISCRETION AVAILABLE TO THE AO WHILE PA SSING THE ORDER U/S 143(3). ONCE SUCH DISCRETION HAS BEEN EXERCISED IN THE ORIGINAL ASSESSMENT-ORDER THE AMOUNT OF SUCH DISALLOWANCE CA NNOT BE ENHANCED, IN ABSENCE OF SPECIFIC AND PRIMA-FACIE DO CUMENTARY-PROOF. IN THESE FACTS & CIRCUMSTANCES THE ADDITIONAL DISAL LOWANCE OF RS. 3.00,000/- MADE U/S 154, IS DIRECTED TO BE DELETED. THE ASSESSEE GROUNDS ARE THEREFORE ALLOWED TO THE ABOVE EXTENT. 7. FROM THE ABOVE PARA REPRODUCED FROM THE ORDER OF CIT(A), IT IS SEEN THAT A CATEGORICAL FINDING HAS BEEN GIVEN BY CIT(A) THAT T HE ENHANCEMENT OF DISALLOWANCE BY AO BY RS. 3 LAKHS U/S. 154 IS NOT PROPER BECAUSE A SPECIFIC AND PRIMA-FACIE DOCUMENTARY PROOF IS NOT ON RECORD BEFORE THE AO. THIS CATEGORICAL FINDING OF CIT(A) COULD NOT BE CONTROVE RTED BY LD. DR OF REVENUE AND THEREFORE, ON THIS ISSUE, I FIND NO REASON TO I NTERFERE IN THE ORDER OF CIT(A). ACCORDINGLY THIS ISSUE IS DECIDED AGAINST THE REVEN UE. 8. REGARDING THE SECOND ASPECT OF THE MATTER IN THE SAME GROUND NO. 2, IT IS SEEN THAT THE DISPUTE IS REGARDING STT AND PROCESSING CH ARGES DISALLOWED BY THE AO IN THE ORDER PASSED BY HIM U/S. 154 OF IT ACT. THE LD. DR OF REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. AR OF ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE ALSO SUBMITTED THAT P&L ACCOUNT FOR THE PRESENT YEAR IS AVAILABLE ON PAGE NO. 23 OF PAPER BOOK AND FROM THE SAME, IT CAN BE SEEN THAT THE ASSESSEE HAS SHOWN INCOME OF RS. 6410.17 LAKHS ON ACCOUNT OF SALES OF SHARES AND THE AMOUNT DEBITED IN P&L ACCOUNT ON THIS ASPECT IS OF RS. 6424.31 LAKHS BEING PURCHASE OF NIFTY AND EQUITY. HE SUBMITTED THAT TH E PAYMENT REGARDING STT AND PROCESSING CHARGES DISALLOWED BY THE AO IS IN R ESPECT OF THESE SHARE TRANSACTIONS. BUT AS PER THE ORDER PASSED BY THE A O U/S. 154, THE AO HAS PROCEEDED ON THIS BASIS THAT THIS DEBIT OF RS. 1,56 ,508/- ON ACCOUNT OF STT AND RS. 1,26,583/- ON ACCOUNT OF PROCESSING CHARGES IS CLAIMED BY THE ASSESSEE AGAINST THE NORMAL INCOME OF THE ASSESSEES BUSINES S OF TECHLIGHTS BUT THE FACT IS THAT THE DEDUCTION OF THESE TWO AMOUNTS ARE CLAI MED AGAINST THE RECEIPT OF SALES OF SHARES (NIFTY & EQUITY) OF RS. 6410.17 LAK HS AND HENCE, THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE ALSO . ITA NO.702/BANG/2018& C.O. NO. 37/BANG/2018 PAGE 5 OF 6 9. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER PARA 9.3 OF HIS ORDER AND HENCE, THE SAME IS REPRODUCED HEREINBELOW FOR THE SAKE OF READY REFERENCE. 9.3 THE DISALLOWANCE U/S 154 WAS MADE BY THE AO ON THE GROUND THAT, THE SAME WERE NOT ALLOWABLE IN THE ORDINARY C OURSE OF BUSINESS, WHICH PERTAINS TO 'TECHLIGHTS'. THE ASSESSEE ON THE OTHER HAND SUBMITS THAT, THE AO, IN DOING SO HAS IGNORED THE FACT THAT THE ASSESSEE, BESIDES, ITS INDIVIDUAL INCOME, IS ALSO INTO REGULA R CONDUCT OF HOTEL BUSINESS, RENTING ACTIVITY AND SHARE-TRADING ACTIVI TY APART FROM DECLARING INCOME UNDER THE HEAD 'TECHLIGHTS'. IT IS SUBMITTED THAT, THE PURCHASE OF SHARES ARE CLEARLY REFLECTED IN THE P&L ACCOUNT. IT IS SUBMITTED BY THE APPELLANT THAT, THE AO HAS MADE NO CASE FOR DISALLOWANCE OF THE IMPUGNED SUM. WHICH WAS AN EXPE NDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR ASSESSEE'S ROUT INE BUSINESS ACTIVITY. THE AO IN THE ORIGINAL-ORDER U/S 143(3) HAS NOT MAD E ANY DISALLOWANCE ON THE ISSUE UNDER REFERENCE. THERE IS NO ADVERSE FINDING OF FACT AGAINST THE GENUINENESS OR CORRECTNESS OF A SSESSEES TRANSACTIONS RELATING TO SHARE-BUSINESS. THERE IS N O SPECIFIC FINDING OF FACT IN THE IMPUGNED-ORDER U/S 154 AGAINST THE QUES TION OF ACTUAL INCURRING OF THE STT AND RELATED PROCESSING CHARGES . IT IS ALSO NOT DENIED BY THE AO THAT ASSESSEE IS INTO SHARE-TRADIN G AS REGULAR ACTIVITY. IN THESE FACTS & CIRCUMSTANCES, THE ORDER U/S 154 CANNOT SUPERSEDE THE AOS ORIGINAL ORDER U/S 143(3) ON THI S ASPECT. THE DISALLOWANCE MADE BY THE AO IS ACCORDINGLY TO BE DE LETED. 10. FROM THE ABOVE PARA REPRODUCED FROM THE ORDER O F CIT(A), IT IS SEEN THAT A CATEGORICAL FINDING IS GIVEN BY HIM THAT THE AO HAS IGNORED THE FACT THAT THE ASSESSEE IS ALSO HAVING SHARE TRADING ACTIVITY APAR T FROM DECLARING INCOME UNDER THE HEAD TECHLIGHTS. THIS FINDING IS ALSO GI VEN BY CIT(A) THAT THERE IS NO ADVERSE FINDING OF FACT AGAINST THE GENUINENESS AND CORRECTNESS OF ASSESSEES TRANSACTION CLAIMED TO BE IN SHARE-BUSINESS. HE HA S ALSO GIVEN A FINDING THAT IT IS ALSO NOT DENIED BY THE AO THAT ASSESSEE IS INTO SHARE-TRADING AS REGULAR ACTIVITY. BEFORE ME, THE LD. DR OF REVENUE COULD N OT CONTROVERT THESE FINDINGS OF CIT(A). AS PER THE P&L ACCOUNT OF THE ASSESSEE AVA ILABLE ON PAGE NO. 23 OF PAPER BOOK ALSO, IT IS SEEN THAT THE ASSESSEE HAS S HOWN CREDIT IN P&L ACCOUNT OF RS. 6410.17 LAKHS ON ACCOUNT OF SALE OF SHARES ( NIFTY & EQUITY) AND SHOWN DEBIT IN P&L ACCOUNT OF RS. 6424.31 LAKHS ON ACCOUN T OF PURCHASE (NIFTY & EQTY). HENCE, I FIND NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ASPECT ALSO. ACCORDINGLY, GROUND NO. 2 IS REJECTED. ITA NO.702/BANG/2018& C.O. NO. 37/BANG/2018 PAGE 6 OF 6 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 12. IN THE COMBINED RESULT, THE APPEAL FILED BY THE REVENUE AS WELL AS THE C.O. FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 01 ST JUNE, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.