Chanson Shipping & Packing Co. Pvt. Ltd., V. DCIT, Circle-3(1),

ITA 1251/DEL/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2235 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 08-12-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 13-04-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Business income; Opportunity of being heard
• Section: 131

Judgement Text

ITA NO. 1251/DEL/2006 A.Y. 2001-02 1 IN THE INCOMETAX APPELATE TRIBUNAL DELHI BENCH H: NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 1251/DEL/2006 A.Y. : 2001-02 M/S CHANSON SHIPING & PACKING COMPANY VS. DCIT, CIRCLE3(1), PVT. LTD. C.R. BLDG. NEW DELHI E-56, GREATER KAILASH-I, NEW DELHI - 110 048 (PAN : AAACC0131D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SALIL KAPOOR, CA DEPARTMENT BY : SH. N.K. CHAND, SR. DR O R D E R PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDERS OF THE LD. CIT(A) DATED 20.01.2006 AND PERTAINS TO ASS ESSMENT YEAR 2001-02. 2. THE ISSUES RAISED READ AS UNDER:- THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAVE GROSSLY ERRED IN RESTRICTING THE ALLOWABLE EXPENDIT URE TO RS. 21,84,030/- AS AGAINST RS. 51,11,183/- CLAIMED BY T HE APPELLANT UNDER VARIOUS HEAD OF ACCOUNTS. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAVE WRONGLY CONCLUDED THAT THE APPELLANT HAVE BEEN ALLO WED 1/4 TH DEDUCTION ON ACCOUNT OF STANDARD DEDUCTION ON PROPERTY INCOME SITUATED AT E-56, GREATER KAILASH-I, NEW DELHI WHILE TREATING THE SAID RENTAL INCOME AS INCOME FROM OTHER SOURCES. ITA NO. 1251/DEL/2006 A.Y. 2001-02 2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, DIS ALLOWANCES SUSTAINED BY THE LD. CIT(A) AMOUNTING TO A SUM OF RS. 29,73,153/- UNDER VARIOUS HEAD OF ACCOUNTS IS ARBITRARY, UNWARRA NTED AND CONTRARY TO THE FACTS OF THE CASE. 3. IN THIS CASE AO NOTED THAT THE ASSESSEE COMPANY HAS CLAIMED TO HAVE ENGAGED IN THE BUSINESS OF PROVIDING THE SE RVICES OF PACKING, LOADING/UNLOADING, FORWARDING TRANSPORTATI ON, CUSTOM CLEARANCE, DOCUMENTATION, STORAGE ETC. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAS SHOWN INCOM E FROM SERVICE CHARGES, INTEREST, RENT AND PROFIT ON SALE OF VEHICLES. THE ASSESSEE COMPANY HAS CLAIMED THAT SERVICE CHARGES A MOUNTING TO RS. 19,76,586/- AS BUSINESS INCOME AND CLAIMED HUGE EXPENSES AMOUNTING TO RS. 51,11,1183/- AGAINST THIS RECEIPT. AO FURTHER NOTED THAT MOST OF THE ASSESSEES INCOME IS FROM L ETTING THE PREMISES OWNED BY IT. THE AO ALSO NOTED THAT THE A SSESSEE COMPANY DID NOT PROVIDE ANY SERVICE ON TRANSPORTATI ON, CUSTOM CLEARANCE AND SHIPPING ETC. AO REFERRED TO STATEM ENT UNDER SECTION 131 OF THE IT ACT, 1961 BY DIRECTOR OF ASSE SSEE COMPANY SHRI B.N. CHANDIOK THAT SERVICES OF TRANSPORTATION, CUSTOM CLEARANCE AND SHIPING ETC. HAS BEEN STOPPED SINCE 1 997-98 AND THE COMPANY IS MAINLY IN BUSINESS OF RENTING PROPERTIES AND RUNNING BUSINESS CENTRE AND PACKING CONTRACTS. AO FURTHE R NOTED THAT THE ASSESSEE HAS SHOWN RS. 65,80,000/- AS RENTAL INCOME . AO FURTHER OBSERVED THAT IT INCLUDED INCOME SHOWN FROM WHIRLPO OL INDIA LTD RS. 12 LACS WHICH WAS EARNED BY THE COMPANY ON SUB- LEASING OF PREMISES. AO HELD THAT THE SAME IS TO BE TREATED AS INCOME FROM ITA NO. 1251/DEL/2006 A.Y. 2001-02 3 OTHER SOURCES. IN THIS REGARD, AO MENTIONED THAT COUNSEL OF THE ASSESSEE CLAIMED THAT EXPENSES UNDER SECTION 57 MAY KINDLY BE ALLOWED IN THIS REGARD. HOWEVER, THE AO MENTIONED THAT THE ASSESSEE DID NOT MENTION ANY EXPENSE WHICH HE CLAIM ED ALLOWABLE UNDER SECTION 57 AGAINST INCOME FROM OTHER SOURCES FORM THE SAID BUILDING. AO FURTHER NOTED THAT ASSESSEE HAS SHOWN INTEREST INCOME OF RS. 1649702/-. AO OBSERVED THAT THE SAM E AMOUNT IS EARNED FROM THE DEPOSITS MADE BY THE ASSESSEE COMPA NY WITH CORPORATE WHICH DOES NOT INVOLVE EXPENSE. AO ANALY SED THE NATURE OF INCOME AND EXPENSES AND CAME TO THE CONCLUSION T HAT THE ASSESSEE HAS CLAIMED DISPROPORTIONATELY HIGHER EXPE NSES FOR ITS LIMITED BUSINESS. HE WAS OF THE OPINION THAT ASS ESSEE COMPANY HAS EARNED RS. 1976586/- FROM THESE SERVICES. HEN CE HE OPINED THAT FOR EARNING THE SAID INCOME MAXIMUM OF RS. 8 L ACS ESTIMATED CAN BE ALLOWED. AO ALSO NOTED THAT THE INTEREST EA RNED BY THE ASSESSEE SHOULD BE TREATED AS INCOME FROM OTHER SO URCES. 4. UPON ASSESSEES APPEAL LD. CIT(A) CONSIDERED THE ISSUE AND MADE A CHART ON EXPENSES CLAIMED AND THEREAFTER MAR KED THE PORTION AND THE AMOUNT WHICH HE WAS ALLOWING. HE CONCLUDED THAT THE ASSESSEE IS ALLOWED EXPENSES OF RS. 1394118 AS AGAINST RS. 5111183/- CLAIMED BY THE ASSESSEE. LD. CIT(A) FURTHER CONFIRMED THE ACTION OF AO INCLUDING THAT OF TREAT ING INTEREST INCOME OF RS. 1649702/- AS INCOME FROM OTHER SOURC ES INSTEAD OF INCOME FROM BUSINESS. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. ITA NO. 1251/DEL/2006 A.Y. 2001-02 4 6. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE O RDERS OF THE AUTHORITIES BELOW DID NOT HAVE ANY COGENCY AS ALL T HE DISALLOWANCES HAVE BEEN MADE ONLY ON ADHOC BASIS. HE SUBMITTED THAT THE ASSESSEES CLAIM OF EXPENDITURE HAS BEEN ARBITRARIL Y DEALT WITH. 6.1 LD. DR ON THE OTHER HAND RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. IT TRANSPIRES THAT THE DISALLOWANCE MADE BY THE AO AS WELL AS THE LD. CIT(A) HAVE BEEN ARRIVED AT ON ADHOC BASIS. EXCEPT FOR THE THEORETICAL DISCUSSION, THERE IS NOT ENOUGH DOLLOP OF COGENCY IN THE DISALLOWANCE MADE. ALTHOUGH IT IS ALSO EVIDENT TH AT EXPENDITURE INCURRED ARE QUITE HIGH. IN OUR CONSIDERED OPINIO N THE MATTER NEEDED TO BE EXAMINED IN DETAIL AND COGENT REASON S HOULD HAVE BEEN GIVEN IN ARRIVING AT THE DISALLOWANCE IF ANY. BOTH THE COUNSELS FAIRLY AGREED THAT THE MATTER MAY BE REMITTED TO TH E FILES OF THE AO TO EXAMINE THE ISSUE AFRESH. 7.1 IN THIS REGARD, WE DRAW SUPPORT FROM THE APEX COURT DECISION IN THE CASE OF KAPURCHAND SHRIMAL VS. CIT, 131 ITR 451 WHEREIN IT WAS HELD THAT IT IS THE DUTY OF THE APPELLATE AUTHO RITY TO CORRECT THE LACUNAE IN ORDER OF AUTHORITY BELOW AND ISSUE APPR OPRIATE DIRECTIONS WHEN NEEDED. 7.2 ACCORDINGLY, WE REMIT THE ISSUE IN APPEAL TO TH E FILES OF THE AO TO EXAMINE THE SAME AFRESH AND GIVE A FINDING TH EREON. NEEDLESS TO ADD THAT THE ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. ITA NO. 1251/DEL/2006 A.Y. 2001-02 5 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08/12/2009 AFTER CONCLUSION OF THE HEARING. SD/- SD/- [R.P. TOLANI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08/12/2009 SRB COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT ( A) 5. DR, ITAT TRUE COPY BY ORDER, DR, ITAT, DELHI BENCH