MCM Oil Mills Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 1049/DEL/2010

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6290 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 29-03-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 10-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V K TULSIYAN
• Keywords: Opportunity of being heard; Capital expenditure
• Section: 142(1); 37(1); 68; 37

Judgement Text

1 ITA NO. 1049/DEL/2010 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A .NO. 1049/DEL/2010 (ASSESSMENT YEAR-2004-05) APPELLANT BY SH. V. K. TULSIYAN, CA RESPONDENT BY SH. RAJESH KUMAR, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 28/01/2010 PASSED BY CIT(A)- IX, NEW DELHI FOR ASSESSMENT YEAR 2004-05. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS: 1. WHETHER THE LD.CIT(A) WAS JUSTIFIED BY NOT ALL OWING THE TRADING LOSS OF RS.25,640/- JUST ON ACCOUNT OF NON AVAILABILITY CASH SALE BILLS, MADE TO THE TUNE OF RS.81,360/-, OUT OF THE OPENING STOCK OF RS.1,07,000/-. 2. WHETHER THE LD.CIT(A) WAS JUSTIFIED BY UPHOLDING THE ADDITION U/S 68 OF RS.11,50,000/- LOAN TAKEN FROM THE DIRECTOR, JUST BECAUSE ONFNON AVAILABILITY OF FEW DOCUMENTS ON RECORD AS R EGARDS CREDITWORTHINESS ALTHOUGH THE SAME WERE FILED WITH W.S. 3. WHETHER THE LD.CIT(A) WAS JUSTIFIED BY NOT ALLOW ING THE DEDUCTION OF ELECTRICITY SECURITY DEPOSIT AMOUNT OF RS.2,35,277/ - WITH RSEB FOR THE NON-REFUND OF SECURITY DEPOSIT/FORFEITED BY RSE B. 4. WHETHER THE LD.CIT(A) WAS JUSTIFIED BY NOT ALLO WING THE LOSS RS.36,294/- ON SALE OF BUSINESS OLD CAR IN CASH MCM OIL MILLS PVT. LTD. 349, NAYA BANS DELHI AAACM3590J (APPELLANT) VS ITO WARD 6(1) NEW DELHI (RESPONDENT) DATE OF HEARING 29.03.2017 DATE OF PRONOUNCEMENT 31.03.2017 2 ITA NO. 1049/DEL/2010 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF EDIBLE OIL. THE RETURN OF INCOME WAS FILED ON 30/1 0/2004 DECLARING LOSS OF RS.11,83,467/- NOTICE U/S 143(2) OF THE INCOME-TAX ACT WAS ISSUED ON 10/12/2004. THE SAME WAS DULY SERVED BY THE NOTICE SERVER OF THE DEPARTMENT. THE CASE WAS FIXED FOR HEARING ON 20/1 2/2004. THE ASSESSEE FAILED TO APPEAR ON THOSE DATE. ANOTHER NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 10/2/2005. THE SAME WAS DULY SERVED BY A NOTICE SERVER AND THE CASE WAS FIXED FOR HEARING ON 22/2/2005. A QUESTIONNAIRE DA TED 11/2/2005 WAS ALSO ISSUED AND DULY SERVED. THE ASSESSEE FAILED TO APP EAR OR TO FILE DETAILS AS ASKED FOR IN THE QUESTIONNAIRE. ANOTHER NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 9/5/2006. THE SAME WAS DULY SERVED BY TH E NOTICE SERVER AND THE CASE WAS FIXED FOR HEARING ON 18/5/2006. THE ASSES SEE ONCE AGAIN FAILED TO APPEAR. HOWEVER, C.A OF THE ASSESSEE APPEARED ON 2 3/5/2006 BUT DID NOT PRODUCE ANY POWER OF ATTORNEY IN HIS FAVOUR OR ANY DETAIL ASKED AS PER A NOTICE U/S 142(1) OF THE ACT WAS ALSO ISSUED ON THIS DATE (23/05/2006) AND SERVED UPON C.A OF THE ASSESSEE. THE CASE WAS FIXED FOR H EARING ON 12/6/2006. ON 12/06/2006, THE C.A OF THE ASSESSEE APPEARED AND FI LED A LETTER DATED 12/06/2006 IN WHICH IT HAS STATED THAT THE ASSESSEE HAD NOT RECEIVED THE QUESTIONNAIRE AND REQUESTED FOR A COPY OF QUESTIONN AIRE AND ALSO FOR ADJOURNMENT. THE COPY OF QUESTIONNAIRE WAS GIVEN T O THE C.A OF THE ASSESSEE ON THE VERY SAME DATED I.E. 12/6/2006. THE CASE WA S ADJOURNED TO 3/7/2006 ONCE AGAIN THE ASSESSEE OR HIS AUTHORIZED REPRESENT ATIVE FAILED TO APPEAR ON THIS DATE. YET ANOTHER NOTICE U/S 142(1) WAS ISSUED ON 12/7/2006 WHICH WAS DULY SERVED UPON THE ASSESSEE. THE CASE WAS FIXED FOR HEARING ON 2/8/2006. THE ASSESSEE AGAIN FAILED TO APPEAR. THEREFORE, AN OTHER NOTICE U/S 142(1) OF THE ACT WAS ISSUED ON 3/8/2006 WHICH WAS SENT THROU GH SPEED POST. THE CASE WAS FIXED FOR HEARING ON 21/8/2006. THE AUTHORIZED REPRESENTATIVE APPEARED AND REQUESTED FOR ADJOURNMENT HE HAS FILED DETAILS VIDE LETTER DATED 6/9/2006 3 ITA NO. 1049/DEL/2010 & 20/9/2006. THE CASE WAS ADJOURNED ON 27/9/2006. 4. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY COULD NOT CONTINUE ITS MANUFACTURING ACTIVITIES. THEREFORE, IT HAS DECIDED FOR THE TIME BEING TO SUSPEND ITS OWN MANUFACTURING ACTIVITY BUT CONTINUES JOB WORK AND LETTING OUT. THE COMPANY HAD LET OUT THE WHOLE FAC TORY ALONG WITH PLANT AND MACHINERY TO A THIRD PARTY FOR A MONTHLY RENT OF RS .30,000/- PER MONTHS. THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE SHOWS THAT IT HAS DECLARED INCOME FROM FOLLOWING DURING THE RELEVANT PREVIOUS YEAR:- SALES: RS.31360 INSURANCE CLAIM RECEIVED: RS. 7028 RENT: RS.360000 LIABILITIES WRITTEN OFF: RS. 303439 BANK INTEREST WRITTEN OFF: RS. 226228 THE ASSESSEE DECLARED SALES OF RS.81360/- IN ITS PR OFIT AND LOSS ACCOUNT AS MENTIONED ABOVE. THE STOCK OF THE ASSESSEE STAT ED TO BE DECREASED BY RS.107000/- IN ITS PROFIT AND LOSS ACCOUNT. THUS, THE ASSESSEE CLAIMED TRADING LOSS OF RS.25640/- (RS.107000 RS. 81360/-.) THE AS SESSEE WAS ASKED VIDE ORDER SHEET ENTRY DATED 20/9/2006 TO FILE DETAILS R EGARDING SALES MADE BY IT AND TO FILE COPY OF ITS SALES ACCOUNT. THE ASSESSE E DID NOT FILE ANY DETAIL IN THIS REGARD. THE MANDATORY DETAILS AS REQUIRED IN THIS REGARD AS PER SCHEDULE VI OF THE COMPANIES ACT WERE ALSO NOT FOUND IN THE PROFIT AND LOSS OF THE ASSESSEE. THUS, THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT ABLE TO ESTABLISH THE TRANSACTIONS OF SALES AND PURCHASE. THE ASSESSEE C LAIMED ADMINISTRATIVE AND OTHER EXPENSES OF RS.2,16,000/- DURING THE YEAR. T HE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE DID NOT CONDUCT ANY BUSI NESS DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSEE SHOULD HAVE CLAIMED EX PENSES U/S 37 OF THE INCOME TAX ACT, 1961 ONLY IN RELATION TO THE BUSINE SS CONDUCTED BY IT. THE ASSESSING OFFICER OBSERVED THAT IF DURING THE RELEV ANT PERIOD THERE WAS NO BUSINESS, THE QUESTION OF ALLOWABILITY OF EXPENSES WOULD NOT ARISE. THEREFORE, THE CLAIM OF THE ASSESSEE FOR ADMINISTRATIVE AND O THER EXPENSES OF RS.2,16,000/- WAS REJECTED. THE ASSESSEE ALSO CLAIM ED AN EXPENSE OF 4 ITA NO. 1049/DEL/2010 RS.235278/- FOR SECURITY WITH RSEB W/O. THE ASSE SSEE DID NOT PRODUCE ANY DETAIL REGARDING THESE EXPENSES. THE ASSESSEE SHOUL D HAVE NOT CLAIMED THIS CLAIM OF BAD DEBT U/S 37 OF THE INCOME TAX ACT, 196 1. SECTION 37(1) OF THE INCOME TAX ACT, 1961 PROVIDES THAT ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT B EING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OR PRO FESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PRO FITS AND GAINS OF BUSINESS OR PROFESSION. HERE, THE WORDS NOT BEIN G EXPENDITURE OF THE ASSESSEE NATURE DESCRIBED IN SECTIONS 30 TO 36 ARE IMPORTANT. THE CLAIM OF BAD DEBT AND ITS ALLOWABILITY ARE SPECIFICALLY PROV IDED IN SECTION 36(1) (VII) AND 36(2) OF THIS ACT. THEREFORE, THE QUESTION OF THEI R ALLOWABILITY U/S 37 DOES NOT ARISE. THEREFORE, THE ASSESSING OFFICER HELD THAT T HE CLAIM OF THE ASSESSEE FOR BAD DEBT REGARDING SECURITY WITH RSEB WAS NOT ALLOW ABLE EITHER IN SECTION 36 OR IN SECTION 37 OF THE INCOME TAX ACT, 1961. THER EFORE, THE CLAIM OF THE ASSESSEE FOR EXPENSE OF RS.235278/- IN THIS REGARD WAS HEREBY REJECTED. 5. THE LD. AR SUBMITTED THAT THE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER BUT THE OPPORTUNITY TO EXPLAIN THE SAME WAS NOT GIVEN TO THE ASSESSEE. THE ASSESSING OFFICER HAS NOT DISPUTED ON CLOSING A ND OPENING STOCK. THE LD. AR FURTHER SUBMITTED THAT THE CIT(A) ALSO IGNORED T HESE ASPECT. 6. THE LD. DR SUBMITTED THAT THE CIT(A) AFTER GOING THROUGH THE RECORDS HAS RIGHTLY UPHELD THE SAID ADDITIONS. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RECORDS. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER AS WEL L AS CIT(A) HAS NOT DEALT WITH THE RECORDS RELATED TO THE SALE OF EDIBLE OILS. TH ERE IS NO CLEAR FINDING GIVEN BY THE ASSESSING OFFICER AS WELL AS CIT(A) DURING THE ASSESSMENT PROCEEDINGS AS THE ASSESSEE WAS NOT GIVEN PROPER OPPORTUNITY TO BE HEARD. THEREFORE, IN THE INTEREST OF JUSTICE IT WILL BE APPROPRIATE TO SENT BACK THE MATTER TO THE ASSESSING 5 ITA NO. 1049/DEL/2010 OFFICER TO VERIFY ALL THE LEDGER ACCOUNTS ALONG WIT H BILLS AND VOUCHERS. THE ASSESSEE BE GIVEN HEARING AS PER THE PRINCIPLE OF N ATURAL JUSTICE. 7. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 ST OF MARCH, 2017. SD/- SD/- (R.S. SYAL) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 31/03/2017 *R.NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 30/03/2017 SR. PS 2. DRAFT PLACED BEFORE AUTHOR 30/03/2017 SR. PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE 03.03.2017 PS/PS 6 ITA NO. 1049/DEL/2010 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 05.03.2017 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.