DCIT CORPORATE CIRCLE-1(2), CHENNAI V. BRAYAN AUTOMATIONS PVT LTD, CHENNAI

ITA 1552/CHNY/2019

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals)-1, Chennai, which allowed certain claims of the assessee, M/s. Brayan Automations Pvt. Ltd., without proper verification by the Assessing Officer (AO) as required under Rule 46A of the Income Tax Rules, 1962. The issues pertained to the claim of deduction under section 35D of the Income Tax Act, 1961 for pre-operative charges, and the addition of unsecured loans. The CIT(A) had admitted fresh evidences from the assessee which were not previously examined by the AO, leading to the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135050 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 16-05-2019
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी जी. मंजुनाथ, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1552/CHNY/2019 िनधाᭅरण वषᭅ/Assessment Year: 2014-15 The DCIT, Corporate Circle 1(2), Chennai. vs. M/s. Brayan Automations Pvt. Ltd., 33, Hindi Prachar Sabha Street, T.Nagar, Chennai – 600 017. PAN: AAECB 2492C (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri D. Hema Bhupal, JCIT ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri S. Sridhar, Advocate सुनवाई कᳱ तारीख/Date of Hearing : 09.01.2023 घोषणा कᳱ तारीख/Date of Pronouncement : 09.01.2023 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)-1, Chennai in ITA No.356/CIT(A)-1/2016-17 & 2017-18 dated 14.03.2019. The assessment was framed by the ACIT, Corporate Circle 1(2), Chennai for the assessment year 2014-15 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 27.12.2016. 2 ITA No. 1552/Chny/2019 2. The only issue raised by Revenue in this appeal is as regards to violation of Rule 46A of the Income Tax Rules, 1962 by the CIT(A) by admitting fresh evidences submitted by assessee for the first time in regard to first issue of claim of deduction u/s.35D of the Act in regard to pre-operative charges and second issue of addition of unsecured loans. For this, Revenue has raised the following grounds:- “2.1 The Ld.CIT(A) erred in giving relief to the assessee by deleting the addition under section 35D of the Income Tax Act, 1961 based on fresh evidence submitted for the first time before the CIT(A) without giving opportunity to the AO under Rule 46A of the Income tax Rules, for verifying the said claim of the assessee based on evidences filed afresh during appellate proceedings. 2.2 The Ld.CIT(A) failed to appreciate that even in Col.No.19 of the tax audit report filed u/s 44AB, there is no mention of pre-operative charges u/s 35D to be claimed or reported by the Auditor. 3.1 The Ld.CIT(A) erred in deleting the disallowance made by the AO u/s 68 of the Act by admitting fresh submitted for the first time before the CIT(A) without giving opportunity to the AO under Rule 46A of the Income tax Rules, for verifying the said claim of the assessee based on evidences filed afresh during appellate proceedings. 3.2 The Ld.CIT(A) failed to appreciate that during the A.Y.2015-16, the assessee had obtained additional unsecured loans only from its directors and not from the third parties viz., NileshBhai Patel and CKB Investments Pvt. Ltd. Hence the contention of the assessee that the amount obtained from the above parties were transferred to unsecured loans cannot be true. 3. Brief facts are that the assessee is a private limited company engaged in the business of home automation, mechanical engineering plumbing, heating ventilation and air conditioning, fire alarming system and industrial automation. The AO during the 3 ITA No. 1552/Chny/2019 course of assessment proceedings noticed that the assessee has claimed as sum of Rs.33,12,412/- as preliminary expenses written off but could not substantiate with evidences and details of expenses incurred before the commencement of the business. Therefore, the AO disallowed the claim of assessee. On appeal, the CIT(A) admitted fresh evidences without confronting the AO. For this, the ld.Senior DR pointed out the fact recorded by CIT(A) that “The dominant expenses comprised cost of Raw materials and components, Employee Benefit Expenses, Finance Costs and other expenses. The appellant furnished Purchase Accounts in which particulars of the supplies of hard wares, electrical, wires and cables were listed. Some salary accounts and ledger accounts for expenses such as EB charge and consulting Fees were submitted. Taking into account the details furnished by the appellant, I am inclined to conclude that there is considerable merit in the contentions of the appellant regarding its claim for admissibility of preliminary expenses for deduction under Section 35D of the Act.” Accordingly the CIT(A) after admitting the various evidences as noted in his order, allowed the claim of assessee without confronting the same to the AO in violation of Rule 46A of the Income Tax Rules. 4. As regards to addition of unsecured loans deleted by CIT(A) amounting to Rs.1,42,55,500/- wrongly classified by assessee as 4 ITA No. 1552/Chny/2019 share application money, the assessee before CIT(A) filed various details and CIT(A) noted that “in order to bolster its arguments, the appellant furnished the financials of assessment years 2014-15 & 2015-16. It was clarified that the amounts of Rs.15 lakhs and Rs.41 lakhs pertaining to Sampath Kumar and Ezhil Residence respectively were “customer receipts” and which were offered as income during the subsequent year. As regards the sum of Rs.18 lakhs and Rs.75 lakhs received from NileshBhai Patel and CKB Investments P. Ltd., they were found to have been transferred the accounting head to unsecured loans. The appellant furnished the ledger accounts of the parties concerned in the books of the appellant and also furnished the bank particulars pertaining to these transactions. It was reiterated that no shares were allotted to the said parties. They had been wrongly credited as share application money but subsequently, in the assessment year 2015-16, they were transferred to unsecured loans and Customer receipts in the financials. Taking into account the facts, circumstances and the evidences furnished by the appellant, I am inclined to accept the contentions of the appellant. They are considered to be tenable.” The CIT(A) after considering additional evidences as noted by him, deleted the addition without confronting the same to the AO. According to ld. Senior DR, the CIT(A) has violated Rule 46A of the Income Tax Rules on both the issues. 5 ITA No. 1552/Chny/2019 5. When these facts were confronted to ld.counsel for the assessee, he admitted that the assessee has filed these evidences before the CIT(A) for the first time on both the issues and he has no objection in case, the matter goes back to the file of the AO for verification. 6. After hearing both the sides and going through the facts of the case, we are of the view that whatever evidences were produced by assessee before CIT(A), the same be produced before AO who will verify the same and will decide the claim accordingly. The appeal of the Revenue is allowed for statistical purposes. 7. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the open court on 9 th January, 2023 at Chennai. Sd/- Sd/- (जी. मंजुनाथ) (G. MANJUNATHA) लेखा सद᭭य/ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 9 th January, 2023 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकरआयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.