M/s Haryana Warehousing Corporation, Panchkula V. ACIT, Panchkula

ITA 1374/CHANDI/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9725 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 02-04-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 14-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH GUPTA
• Assessee Lawyers: B K NOHRIA
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Change of opinion; Capital expenditure; Set aside
• Section: 143(3); 147; 148; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , ! ' # $ %! , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.1374/CHD/2016 / ASSESSMENT YEAR : 2010-11 HARYANA WAREHOUSING CORPORATION, BAY NO.15-18, SECTOR 2, PANCHKULA. THE A.C.I.T., PANCHKULA CIRCLE, PANCHKULA. ./PAN NO: AAATH7482H /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI B.K.NOHRIA, CA ! / REVENUE BY : SHRI ASHISH GUPTA, CIT (DR) ' # $ /DATE OF HEARING : 02.04.2019 %&'( $ /DATE OF PRONOUNCEMENT : 01.07.2019 /ORDER PER SANJAY GARG, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA [(HEREINAFTER REFERRED TO AS CIT(A)] DA TED 20.10.2016, PASSED U/S 250(6) OF THE INCOME TAX ACT , 1961 (IN SHORT ACT). ITA NO.1374/CHD/2016 A.Y.2010-11 2 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN THE FOLLOW ING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LEARNED CIT (A) PANCHKULA HAS ERRED IN LAW AND FACT S IN UPHOLDING THE CONTENTION OF THE LEARNED AO FOR WRON G INITIATION OF THE PROCEEDINGS U/S 148 OF THE ACT FO R THE ASSESSMENT YEAR 2010-11 WHEN THE REASONS TO BELIEVE HAVE BEEN RECORDED FOR THE ASSESSMENT YEAR 2014-15 AND N O REASONS TO BELIEVE SUPPLIED FOR THE ASSESSMENT YEAR 2010- 11. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A) PANCHKULA HAS ERRED IN LAW AND FACT S IN UPHOLDING THE CONTENTION OF THE LEARNED A O FOR WRO NG INITIATION OF THE PROCEEDINGS U/S 148 OF THE ACT WI THOUT COMPLIANCE OF THE PROVISO TO SECTION 147 AS THERE I S NO ALLEGATION IN THE REASONS RECORDED TO ISSUE THE NOT ICE U/S 148 THAT THERE IS A FAILURE ON THE PART OF THE ASSE SSEE TO MAKE FULL AND TRUE DISCLOSURE IN THE RETURN OF INCOME WH ICH HAS RESULTED IN ESCAPEMENT OF THE INCOME ALLEGED WHEREA S THE ASSESSEE HAS DISCLOSED THE DEDUCTION U/S 3 5AD OF T HE ACT IN THE RETURN OF INCOME AND ALLOWED IN THE ASSESSME NT U/S 143(3) OF THE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A) PANCHKULA HAS ERRED IN LAW AND FACT S IN UPHOLDING THE CONTENTION OF THE LEARNED A O FOR WRO NG INITIATION OF THE PROCEEDINGS U/S 148 OF THE ACT IN CASE OF CHANGE OF OPINION U/S 147 OF THE ACT. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A) PANCHKULA HAS ERRED IN LAW AND FACT S IN UPHOLDING THE CONTENTION OF THE LEARNED A O FOR FAI LURE TO PROVIDE ANY FRESH TANGIBLE MATERIAL WHICH HAS COME TO HIS NOTICE AND REQUIRES REOPENING OF THE ASSESSMENT AS PER JUDGMENT OF THE HON'BLE SUPREME COURT CITED AS 320 ITR 561 THAT THE REASONS MUST HAVE A LINK WITH THE FORM ATION OF THE BELIEF. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A) PANCHKULA HAS ERRED IN LAW AND FACT S IN ITA NO.1374/CHD/2016 A.Y.2010-11 3 UPHOLDING THE CONTENTION OF THE LEARNED A O FOR FAI LURE TO DISPOSE OFF PRELIMINARY OBJECTION NO. 6 AS SUCH THE ORDER PASSED WITHOUT DISPOSING OFF PRELIMINARY OBJECTIONS FULLY DESERVES TO BE SET ASIDE IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT CITED AS GKN DRIVESHAFTS (IND IA) LTD VS. INCOME TAX OFFICER & ANOTHER (2003) 259 ITR 19( SC). 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LEARNED CIT (A) PANCHKULA HAS ERRED IN LAW AND FACT S IN UPHOLDING THE CONTENTION OF THE LEARNED A O FOR ADD ING RS.20,98,92,952/- UNDER SECTION 35AD OF THE ACT WIT HOUT GOING INTO THE FACTS AND MERIT OF THE CASE. 7. THAT THE APPELLANT RESERVES THE RIGHT TO ADD, AM END OR DELETE ONE OR MORE OF THE GROUNDS OF APPEAL BEFORE THE APPEAL IS DISPOSED OFF. 3. APART FROM THAT, THE ASSESSEE HAD TAKEN FOLLOWIN G ADDITIONAL GROUNDS OF APPEAL: 1. THAT FROM THE FINDINGS IN PARA 5 OF THE ORDER O F LEARNED CIT(A) PANCHKULA IT IS CLEAR THAT NO SANCTION OF TH E PRINCIPAL CIT PANCHKULA WAS TAKEN AFTER RECORDING T HE REASONS FOR INITIATING PROCEEDINGS U/S 147 OF THE I NCOME TAX ACT, 1961 TO ISSUE NOTICE U/S 148 ON 28.10.2015 UNDER SECTION 151(1) OF THE INCOME TAX ACT, 1961. H ENCE THE REOPENING U/S 147 OF THE ACT WITHOUT SANCTION U /S 151 AFTER RECORDING THE REASONS ON 28.10.2015 IS BAD IN THE E YES OF LAW AND BE DECLARED AS NULL AND VOID. 2. THAT REASONS FOR INITIATING PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 TO ISSUE NOTICE U/S 148 WERE N OT SUPPLIED TO THE APPELLANT FOR WHICH THE SANCTION WA S OBTAINED FROM THE PRINCIPAL CIT PANCHKULA ON 15.10 .2015. GROUND NO.1: 4. GROUND NO.1 IS A LEGAL GROUND, VIDE WHICH THE AS SESSEE HAS CONTESTED THE VALIDITY OF REOPENING OF THE ASSE SSMENT BY THE A.O. INVOKING THE PROVISIONS OF SECTION 147 REA D WITH ITA NO.1374/CHD/2016 A.Y.2010-11 4 SECTION 148 OF THE ACT ALLEGING THAT THE A.O. HAS R ECORDED THE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 2014-15, WHEREAS ON THE BASIS OF SAID REASONS RECORDED, THE ASSESSMENT FOR THE YE AR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2010-11 HAS BEEN REOPENED. THAT EVEN THE REASONS TO BELIEVE HAVE NOT BEEN SUPP LIED TO THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSU E. THE LD. DR IN THIS RESPECT HAS INVITED OUR ATTENTION TO PAG E NOS.4 TO 8 OF THE PAPER BOOK FILED BY HIM AND SUBMITTED THAT T HE A.O. HAS RECORDED THE REASONS THAT THE INCOME OF THE ASSESSE E HAS ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 2010-11 I.E. THE ASSESSMENT YEAR UNDER CONSIDERATION. 6. WE HAVE GONE THROUGH THE AFORESAID DOCUMENTS REL IED UPON BY THE LD. DR. WE FIND THAT IN THE PERFORMA, W HICH WAS SENT BY THE A.O. TO THE PRINCIPAL CHIEF COMMISSIONE R OF INCOME TAX, PANCHKULA SEEKING PERMISSION TO ISSUE N OTICE U/S 148 OF THE ACT TO THE ASSESSEE, ASSESSMENT YEAR HAS BEEN MENTIONED ASSESSMENT YEAR 2010-11. FURTHER THE A. O. RECORDED THE REASONS SECOND TIME ON 28.10.2015 WHER EIN THOUGH IN THE TITLE THE ASSESSMENT YEAR HAS BEEN ME NTIONED AS ASSESSMENT YEAR 2014-15, HOWEVER, FROM THE READIN G OF THE ITA NO.1374/CHD/2016 A.Y.2010-11 5 ENTIRE DOCUMENT IT IS APPARENT THAT THE A.O. HAS ME NTIONED THE ASSESSMENT YEAR 2010-11. THE MENTION OF THE ASS ESSMENT YEAR 2014-15 IN THE TITLE, IN OUR VIEW, IS A CLERIC AL MISTAKE. MOREOVER, THE LD. DR HAS ALSO INVITED OUR ATTENTION TO THE COPY OF THE ORDER SHEET ENTRY DATED 15.12.2015 TO S HOW THAT THE COPY OF THE REASONS RECORDED WAS DULY SUPPLIED TO THE ASSESSEE. EVEN THE ASSESSEE HAS ALSO PLACED ON RECO RD THE COPY OF THE APPLICATION DATED 11.12.2015 MOVED BY T HE CHARTERED ACCOUNTANT OF THE ASSESSEE TO SUPPLY THE COPY OF REASONS RECORDED, WHICH WERE DULY SUPPLIED TO THE A SSESSEE, A COPY OF WHICH HAS BEEN PLACED ON PAPER BOOK PAGE NO .20 FILED BY THE ASSESSEE. IN VIEW OF THIS, WE DO NOT FIND AN Y MERIT IN GROUND NO.1 RAISED BY THE ASSESSEE, THE SAME IS ACC ORDINGLY, DISMISSED. GROUND NO.2: 7. VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE VALIDITY OF THE REOPENING OF ASSESSMENT U/S 147 READ WITH SE CTION 148 OF THE ACT ON THE GROUND THAT THE ASSESSMENT IN THI S CASE HAS BEEN REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM T HE END OF THE RELEVANT ASSESSMENT YEAR AND THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT YEAR. FURTHER TH AT INITIALLY THE ASSESSMENT WAS CARRIED OUT U/S 143(3) OF THE AC T. HE, ITA NO.1374/CHD/2016 A.Y.2010-11 6 THEREFORE, HAS SUBMITTED THAT REOPENING OF THE ASSE SSMENT IS HIT BY 1 ST PROVISO TO SECTION 147 OF THE ACT. THE LD. COUNSE L HAS FURTHER SUBMITTED THAT IN THIS CASE NO NEW INFO RMATION HAD COME INTO THE POSSESSION OF THE ASSESSING OFFICER F OR FORMING A BELIEF THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE ASSESSING OFFICER HAS FORMED THE OPINION FOR RE OPENING OF THE ASSESSMENT ONLY ON THE BASIS OF RE-APPRAISAL OF THE MATERIAL WHICH WAS ALREADY ON THE RECORD. 5. THE LD. DR, ON THE OTHER HAND, HAS SUBMITTED THA T THE REOPENING HAS BEEN DONE VALIDLY IN THIS CASE AS IT HAS COME TO THE KNOWLEDGE OF THE A.O. THAT THE INCOME OF THE AS SESSEE HAD ESCAPED ASSESSMENT. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. AS PER THE 1 ST PROVISO TO SECTION 147 OF THE ACT, THE REOPENING/RE -ASSESSMENT CAN BE RESORTED TO ONLY IF THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF ANY OF THE FOLLOW ING FAILURE ON THE PART OF THE ASSESSEE : A) MAKING RETURN U/S 139 OR IN RESPONSE TO NOTICE U/S 142 OR NOTICE U/S 148. B) TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY TO ASSESSMENT. 7. THE UNDISPUTED FACTS IN THIS CASE ARE THAT: ITA NO.1374/CHD/2016 A.Y.2010-11 7 A) THE IMPUGNED ASSESSMENT YEAR IS ASSESSMENT YEAR 2010-11 B) INITIALLY, THE ASSESSMENT U/S 143(3) FOR THE SAI D YEAR HAD BEEN MADE VIDE ORDER DATED 27.03.2013 C) NOTICE U/S 148 WAS ISSUED ON 28.10.2015. 8. IT IS EVIDENT FROM THE ABOVE THAT RE-ASSESSMENT PROCEEDINGS WERE INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND ASSESSM ENT U/S 143(3) HAD ALREADY BEEN FRAMED ON THE ASSESSEE. IN SUCH FACTUAL CIRCUMSTANCES, IT IS ONLY IN THE CONDITIONS STIPULATED IN THE 1 ST PROVISO TO SECTION 147 THAT THE RE-ASSESSMENT PROCEEDINGS CAN BE RESORTED TO. A PERUSAL OF THE RE ASONS RECORDED BY THE A.O. REVEALS THAT THE A.O. HAS DISP UTED ELIGIBILITY OF THE ASSESSEE TO CLAIM DEDUCTION U/S 35AD OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS FOR ASSESSME NT YEAR 2012-13, THE A.O. NOTICED THAT THE ASSESSEE HAD CLA IMED DEDUCTION U/S 35AD OF THE ACT WHILE THE ASSESSEE HA D BEEN RUNNING ITS BUSINESS FOR SO MANY YEARS. THE A.O. WA S OF THE VIEW THAT THE DEDUCTION U/S 35AD OF THE ACT COULD B E ALLOWED ONLY FOR PRIOR PERIOD OF COMMENCEMENT OF THE SPECIF IED BUSINESS. HE ACCORDINGLY, ON THE BASIS OF HIS OPINI ON FORMED FOR ASSESSMENT YEAR 2012-13, REOPENED THE ASSESSMENT FO R THE ASSESSMENT YEAR UNDER CONSIDERATION. THERE IS NO AL LEGATION THAT THE ASSESSEE HAD NOT FULLY AND TRULY DISCLOSED ALL THE ITA NO.1374/CHD/2016 A.Y.2010-11 8 MATERIAL FACTS FOR MAKING THE ASSESSMENT. THE ASSES SEE HAD CLAIMED DEDUCTION U/S 35AD OF THE ACT DISCLOSING AL L THE PARTICULARS. IT IS ONLY OF THE INTERPRETATION OF TH E RELEVANT PROVISIONS OF SECTION, ON THE BASIS OF WHICH, THE A .O. FORMED THE OPINION DURING ASSESSMENT PROCEEDINGS FOR ASSES SMENT YEAR 2012-13 THAT THE DEDUCTION TO THE ASSESSEE U/S 35AD OF THE ACT WAS WRONGLY ALLOWED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. HOWEVER SO FAR AS THE ASSESSEE IS CO NCERNED, THE ASSESSEE ON ITS PART HAD DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. IN VI EW OF THIS, THE CASE IS SQUARELY HIT BY THE 1 ST PROVISO TO SECTION 147 OF THE ACT SINCE THE REOPENING IN THIS CASE SINCE HAS BEEN MAD E AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR. IN VIEW OF OUR ABOVE OBSERVATIONS, THIS GRO UND OF APPEAL OF THE ASSESSEE IS ALLOWED AND REOPENING OF ASSESSM ENT IS SET ASIDE AND THE CONSEQUENTIAL ASSESSMENT MADE IS QUAS HED. GROUND NOS.3 & 4: 9. VIDE GROUND NOS. 3 & 4, THE ASSESSEE HAS AGAIN A GITATED THE REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT ON THE GROUND THAT THERE WAS CHANGE OF OPINION. THIS GROUN D HAS ALREADY BEEN DISCUSSED AND DECIDED BY THIS TRIBUNAL IN THE OWN CASE OF THE ASSESSEE ON IDENTICAL FACTS VIDE COMMON ORDER DATED ITA NO.1374/CHD/2016 A.Y.2010-11 9 19.3.2019 IN THE APPEALS FOR ASSESSMENT YEARS 2012- 13, 2013- 14 AND 2014-15 WHEREIN IT HAS BEEN OBSERVED AS UNDE R: A PERUSAL OF THE AFORESAID REASONS RECORDED BY THE A.O. REVEALS THAT THE A.O. HAD COME INTO THE KNOWLEDGE OF ESCAPEMENT OF INCOME OF THE ASSESSEE WHILE CONDUCTING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT FOR THE SUBSEQUENT ASSESSMENT YEAR. HENCE, IT CANNOT BE SAID THAT NO INFORMATION HAD COME TO THE KNOWLEDGE OF THE A.O. OR THAT IT WAS A CASE OF CHANGE OF OPINION. THOUGH BEFORE FORMING THE OPINION, THE A.O. HAS ALSO NOTED THAT THE AFORESAID ISSUE ESCAPED THE ATTENTION OF THE A.O. FOR THE YEAR UNDER CONSIDERATION AND THE A.O. WAS OF THE VIEW THAT THE ASSESSEE WAS NOT ENTITLED TO THE AFORESAID CLAIM OF DEDUCTION U/S 35AD OF THE ACT. IN VIEW OF THIS, IT CANNOT BE SAID THAT IT IS A CASE OF CHANGE OF OPINION OR THAT NO TANGIBLE INFORMATION HAD COME INTO THE POSSESSION OF THE A.O. TO FORM THE BELIEF OF ESCAPEMENT OF INCOME FOR THE YEAR UNDER CONSIDERATION. 10. FOLLOWING THE ABOVE DECISION IN THE OWN CASE OF THE ASSESSEE FOR SUBSEQUENT ASSESSMENT YEARS, THESE GRO UNDS OF APPEAL ARE ACCORDINGLY, DISMISSED. GROUND NO.5: 11. VIDE GROUND NO.5, THE ASSESSEE HAS PLEADED THAT THE A.O. HAS MADE THE ASSESSMENT IN QUESTION WITHOUT DI SPOSING OFF ONE OF THE PRELIMINARY OBJECTIONS I.E. PRELIMIN ARY OBJECTION NO.6 TAKEN BY THE ASSESSEE. THE LD.COUNSE L FOR THE ASSSESSEE HIMSELF HAS PLACED ON THE FILE THE ORDER DATED 17.2.2018 OF THE A.O. ON THE PRELIMINARY OBJECTIONS . WE FIND THAT THE PLEA TAKEN BY THE ASSESSEE VIDE PRELIMINAR Y ITA NO.1374/CHD/2016 A.Y.2010-11 10 OBJECTION NO.6 HAS BEEN DULY CONSIDERED BY THE A.O. IN THE ORDER DATED 17.2.2016 WHILE DECIDING POINT NOS.3 AN D 4 OF THE SAID OBJECTIONS VIDE ORDER DATED 17.2.2016 ON T HE PRELIMINARY OBJECTIONS. IN VIEW OF THIS, THERE IS N O MERIT IN THIS GROUND AND THE SAME IS ACCORDINGLY DISMISSED. GROUND NO.6: 12. THIS GROUND PERTAINS TO THE MERIT OF THE CASE. 14. THE BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 35AD OF THE ACT FROM ITS PROFITS ON ACCOUNT OF CONSTRUCTION OF WAREHOUSES IN DIFFERENT DISTRICTS OF HARYANA, HOWEVER, THE AO DISALLOWED TH E DEDUCTION OBSERVING THAT AS PER THE PROVISO TO SECT ION 35AD OF THE ACT, THE EXPENDITURE INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF ANY SPECIFIED BUSINESS SHALL BE ALLOWED AS DEDUCTION DURING THE PREVIOUS YEAR IN WHICH THE ASS ESSEE COMMENCES OPERATIONS OF HIS SPECIFIED BUSINESS. TH E AO OBSERVED THAT THOUGH THE ASSESSEE HAD TAKEN UP THE CONSTRUCTION OF WAREHOUSING FACILITY DURING THE YEA R WHICH IS COVERED UNDER THE SPECIFIED BUSINESS, HOWEVER, IN V IEW OF THE PROVISO TO SECTION 35AD, THE DEDUCTION WAS AVAILABL E TO AN ASSESSEE WHOSE DATE OF COMMENCEMENT OF BUSINESS WAS ON OR AFTER 01.04.2009. THAT SINCE, IN THIS CASE, THE ASS ESSEE HAD ITA NO.1374/CHD/2016 A.Y.2010-11 11 EXISTING BUSINESS OF WAREHOUSING AND HENCE, IT COUL D NOT BE SAID THAT THE ASSESSEE HAD COMMENCED THE BUSINESS O F WAREHOUSING DURING THE YEAR UNDER CONSIDERATION. HE , THEREFORE, DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 35AD OF THE ACT. THE LD. CIT(A) UPHELD THE ABOV E FINDING OF THE AO. 15. AT THE OUTSET, THE LD. REPRESENTATIVES OF BOTH THE PARTIES HAVE BEEN FAIR ENOUGH TO ADMIT THAT THE ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION D ATED 19.3.2019 (SUPRA) OF THE I.T.A.T. IN THE OWN CASE O F THE ASSESSEE. THE RELEVANT PART OF THE ORDER IS REPRODU CED HEREUNDER: 11. WE HAVE HEARD THE RIVAL CONTENTIONS. TO BETTE R UNDERSTAND THE CASE, WE DEEM IT FIT TO FIRST REPRODUCE THE PROVISIONS OF SECTION 35AD OF THE ACT : : DEDUCTION IN RESPECT OF EXPENDITURE ON SPECIFIED BUSINESS. [35AD. (1) AN ASSESSEE SHALL BE ALLOWED A DEDUCTION IN RESPECT OF THE WHOLE OF ANY EXPENDITURE OF CAPITAL NATURE INCURRED, WHOLLY AND EXCLUSIVELY, FOR THE PURPOSES OF ANY SPECIFIED BUSINESS CARRIED ON BY HIM DURING THE PRE VIOUS YEAR IN WHICH SUCH EXPENDITURE IS INCURRED BY HIM: PROVIDED THAT THE EXPENDITURE INCURRED, WHOLLY AND EXCLUSIVELY, FOR THE PURPOSES OF ANY SPECIFIED BUSI NESS, SHALL BE ALLOWED AS DEDUCTION DURING THE PREVIOUS Y EAR IN WHICH HE COMMENCES OPERATIONS OF HIS SPECIFIED BUSI NESS, IF (A) THE EXPENDITURE IS INCURRED PRIOR TO THE COMMEN CEMENT OF ITS OPERATIONS; AND ITA NO.1374/CHD/2016 A.Y.2010-11 12 (B) THE AMOUNT IS CAPITALISED IN THE BOOKS OF ACCOU NT OF THE ASSESSEE ON THE DATE OF COMMENCEMENT OF ITS OPERATI ONS. 12. A PERUSAL OF THE ABOVE PROVISIONS OF SECTION 35AD OF THE ACT REVEALS THAT ASSESSEE IS ELIGIBLE T O CLAIM DEDUCTION IN RESPECT OF CAPITAL EXPENDITURE I F THE SAME IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ANY SPECIFIED BUSINESS CARRIED OUT BY HIM DURING THE PREVIOUS YEAR IN WHICH SUCH EXPENDITURE IS INCURRED. HOWEVER, IN CASES WHERE SUCH EXPENDITURE IS INCURRED PRIOR TO THE COMMENCEMENT OF ITS OPERATIONS BY THE ASSESSEE AND AMOUNT IS CAPITALIZED IN THE BOOKS OF ACCOUNT O F THE ASSESSEE ON THE DATE OF COMMENCEMENT OF OPERATIONS, THEN SUCH EXPENDITURE IS ALLOWABLE AS DEDUCTION IN THE PREVIOUS YEAR IN WHICH THE ASSESSEE COMMENCES OPERATIONS OF HIS SPECIFIED BUSINESS. 13. IN OUR VIEW, THE LOWER AUTHORITIES HAVE WRONGLY INTERPRETED THE RELEVANT PROVISIONS OF THE ACT. THERE ARE TWO PARTS OF THE ABOVESAID PROVISIONS. IN THE FIRST PART, IT HAS BEEN MENTION ED THAT AN ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION OF THE CAPITAL EXPENDITURE IF SUCH AN EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY IN A SPECIFIED BUSINESS. THERE IS NO CONDITION OF ANY DATE OR YEA R OF COMMENCEMENT OF SPECIFIED BUSINESS. HOWEVER, IN THE SECOND PART, IT HAS BEEN PROVIDED THAT IF SU CH AN EXPENDITURE HAS BEEN INCURRED PRIOR TO THE COMMENCEMENT OF BUSINESS AND HAS BEEN DULY CAPITALIZED IN THE BOOKS OF ACCOUNT, THE CLAIM WILL BE ALLOWED IN THE YEAR IN WHICH THE ASSESSEE COMMENCES OPERATIONS OF HIS SPECIFIED BUSINESS. THERE IS NEITHER ANY OVERLAPPING NOR ANY CONTRADICTION IN THE AFORESAID PROVISION. THE ASSESSEE IS COVERED IN THE FIRST PART I.E. THE ASSESSEE HAS INCURRED THE EXPENDITURE ON THE SPECIFIED BUSINESS DURING THE YEAR IN WHICH OPERATIONS OF HIS BUSINESS OF WAREHOUSING WERE ALREADY GOING ON. IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LOWER AUTHORIT IES IN DENYING THE DEDUCTION TO THE ASSESSEE U/S 35AD OF THE ACT. THIS GROUND IS, ACCORDINGLY, ALLOWED IN FAVOUR OF THE ASSESSEE. ITA NO.1374/CHD/2016 A.Y.2010-11 13 14. IN VIEW OF THIS, THE LEGAL GROUNDS RELATING TO THE RE-ASSESSMENT ARE DECIDED AGAINST THE ASSESSEE WHEREAS THE GROUNDS TAKEN ON MERITS REGARDING THE ALLOWABILITY OF THE CLAIM OF DEDUCTION U/S 35AD ARE ALLOWED IN FAVOUR OF THE ASSESSEE. 16. IN VIEW OF OUR FINDINGS GIVEN ON GROUND NO.2 ON THE LEGAL ISSUE AND GROUND NO.6 ON MERITS AND SUBJECT TO OUR FINDINGS GIVEN ON OTHER LEGAL GROUNDS, THE APPEAL O F THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.07.2019. SD/- SD/- ' # $ %! (ANNAPURNA GUPTA) (SANJAY GARG) ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER )' /DATED: 01.07.2019 * ! * &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 5# / GUARD FILE &) ' / BY ORDER, ! / ASSISTANT REGISTRAR