M/s Kisan Sahkari Chini Mills Ltd. Badaun, Nainital V. DCIT, Moradabad

ITA 1738/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3600 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 16-06-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 16-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIV RANTA
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Unabsorbed depreciation; Capital expenditure
• Section: 37

Judgement Text

I.T.A. NO. 1738 /DEL/2010 1/11 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH D BEFORE SHRI I. P. BANSAL, JUDICIAL MEMBER AND SHRI A K GARODIA, ACCOUTANT MEMBER ITA NO. 1738/DEL/2010 (ASSESSMENT YEAR 2003-04) KISAN SAHAKARI CHINI MILLS LTD., VS. DCIT, MORADAB AD C/O BANGA & CO., CA, BANGA HOUSE, MOHAN PARK, NAINITAL (APPELLANTS) (RESPONDENTS) PAN / GIR NO. K-101 APPELLANT BY: NONE RESPONDENT BY: SHRI RAJIV RANTA, SR. DR ORDER PER A. K. GARODIA, AM: 1. THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) BAREILLY DATED 16.11.2009 FOR THE ASS ESSMENT YEAR 2003-04. THIS APPEAL WAS FILED BY THE ASSESSE E ON 16.04.2010 AND IN THE ACKNOWLEDGEMENT CUM NOTICE IS SUED TO THE ASSESSEE ON FILING OF APPEAL, DATE OF HEARING W AS FIXED ON 16.06.2010 AND THE DATE OF HEARING IS DULY NOTED IN SUCH ACKNOWLEDGEMENT CUM NOTICE ISSUED TO THE APPELLANT. IN SPITE OF THIS, NONE APPEARED ON BEHALF OF THE ASSESSEE ON TH E APPOINTED DATE OF HEARING AND THERE IS NO REQUEST FOR ADJOURN MENT AND HENCE WE DECIDE THIS APPEAL EX-PARTY QUA THE ASSESS EE. 2. THE GROUNDS NOS. 1 & 2 READ AS UNDER: I.T.A. NO. 1738 /DEL/2010 2/11 1) THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE EXCISE DUTY PROVISION AND PAYMENT MADE UP TO DUE DATE OF F ILING RETURN NOT ALLOWED. 2) THAT THE VALUATION OF OPENING STOCK AND CLOSING STO CK WITH EXCISE DUTY NOT ALLOWED. 2.1 THESE TWO ISSUES WERE RAISED BY THE ASSESSEE BEFORE LD. CIT(A) ALSO BY WAY OF GROUNDS NOS. 1 & 2 RAISED BEFORE HIM AND THESE TWO GROUNDS WERE REJECTED BY THE LD. CIT(A) ON THE BASI S THAT THE A.O. DID NOT MAKE ANY ADDITION ON THESE GROUNDS AND IN C OMPUTATION OF INCOME FIELD BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME, THE ASSESSEE ITSELF HAS ADDED BACK THE PROVISIONS FOR E XCISE DUTY AND DURING THE APPELLATE PROCEEDINGS ALSO, THE ASSESSEE DID NOT FURNISH ANY SUBMISSION ON THESE ISSUES. BY MAKING THESE OB SERVATIONS, LD. CIT(A) REJECTED THESE TWO GROUNDS RAISED BY THE ASS ESSEE BEFORE HIM. WHEN WE EXAMINED THE ASSESSMENT ORDER, WE ALS O FIND THAT IN THE RETURN OF INCOME, THE ASSESSEE HAS DECLARED THE TOTAL LOSS OF RS.1052.05 LACS WHEREAS THE NET LOSS AS PER P & L A CCOUNT WAS RS.1258.71 LACS. IT WAS THE SUBMISSION OF THE LD. D.R. FOR THE REVENUE BEFORE US THAT THE RETURNED LOSS OF RS.1052 .05 LACS WAS AFTER MAKING ADJUSTMENT OF RS.161.14 LACS ON ACCOUN T OF THE PROVISIONS FOR EXCISE DUTY SHOWN BY THE ASSESSEE AN D HENCE THIS ADJUSTMENT IS AS PER THE RETURN OF INCOME FILED BY THE ASSESSEE AND NO EFFECTIVE ADDITION WAS MADE BY THE A.O. OVER AND ABOVE THE LOSS DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. REGARDING THE 2 ND ASPECT ALSO I.E. REGARDING VALUATION OF OPENING STO CK AND CLOSING STOCK WITH EXCISE DUTY, WE FIND THAT NO SUCH ADDITI ON WAS MADE BY THE A.O. IN THE ASSESSMENT ORDER. UNDER THESE CIRC UMSTANCES, WE I.T.A. NO. 1738 /DEL/2010 3/11 DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) ON THESE TWO ISSUES. BOTH THESE GROUNDS ARE REJECT ED. 3. GROUND NO.3 OF THE APPEAL READS AS UNDER: 3) THAT P F CONTRIBUTION OF EMPLOYEES AND EMPLOYER NO T ALLOWED. 3.1 THE LD. D.R. FOR THE REVENUE SUPPORTED THE ORDER OF LD. CIT(A) BUT WE FIND THAT AN ADDITION OF RS.72,04,298/- WAS MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF P.F. WHILE MAKING TH IS DISALLOWANCE, IT IS OBSERVED BY THE A.O. THAT AS PE R THE TAX AUDIT REPORT, AN AMOUNT OF RS.30,87,030/- WAS PAID BY THE EMPLOYER AND SIMILAR AMOUNT WAS PAYABLE FOR EMPLOYEES CONTRIBUTI ON BUT THE ASSESSEE HAS MADE PAYMENT OF RS.38,41,625/- ONLY ON VARIOUS DATES DURING MAY, 2002 TO MARCH, 2003. IT IS FURTHER NOT ED BY THE A.O. THAT ANOTHER SUM OF RS.10,32,500/- WAS PAID ON VARI OUS DATES AFTER THE DUE DATE AND OUT OF THIS AMOUNT, RS.5,15,019/- WAS THE EMPLOYEES CONTRIBUTION AND THE BALANCE AMOUNT WAS E MPLOYERS CONTRIBUTION. THE ENTIRE AMOUNT WAS DISALLOWED BY THE A.O. ON THE BASIS THAT EITHER THE SAME WAS NOT PAID OR THE PAYM ENTS WERE NOT ON OR BEFORE THE DUE DATE AND HENCE THE ENTIRE AMOUNT WAS TO BE DISALLOWED. LD. CIT(A) HAS ALSO CONFIRMED THE ASSE SSMENT ORDER ON THIS ISSUE FOR THE REASON THAT ANY PAYMENT OF PF AFTER THE DUE DATE AS PER THE P F ACT HAS TO BE DISALLOWED. BUT NOW, IT IS A SETTLED LEGAL POSITION THAT IF THE PAYMENT OF PF IS MADE ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, THE SAM E HAS TO BE ALLOWED IN THE PRESENT YEAR ITSELF. IN THE PRESENT CASE, THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 31.10.2003 AND SINCE THE ASSESSEE WAS REQUIRED TO GET ITS ACCOUNTS AUDITED U /S 44AB, THE DUE DATE OF FILING OF RETURN WAS ALSO 31.10.2003, AND H ENCE THE I.T.A. NO. 1738 /DEL/2010 4/11 PAYMENTS MADE BY THE ASSESSEE ON ACCOUNT OF PF BEFO RE THIS DATE ARE TO BE ALLOWED. THE PAYMENT OF RS.35,84,252/- A ND ALSO OR RS.10,32,500 WERE MADE WITHIN THE FINANCIAL YEAR IT SELF I.E. FINANCIAL YEAR 2002-03 AS PER THE DATES OF PAYMENT NOTED BY THE A.O. ON PAGES 1 AND 2 OF THE ASSESSMENT ORDER AND H ENCE TO THIS EXTENT, THE DISALLOWANCE MADE BY THE A.O. IS NOT JU STIFIED. IN THIS REGARD, WE FOLLOW THE JUDGMENT OF HONBLE DELHI HIG H COURT RENDERED IN THE CASE OF P M ELECTRONICS AS REPORTED IN 313 ITR 161 AND ALSO ANOTHER JUDGEMENT OF HONBLE DELHI HIGH CO URT RENDERED IN THE CASE OF CIT VS DHARMENDER SHARMA AS REPORTED IN 213 CTR 609. WE ALSO FOLLOW THE TRIBUNAL DECISION RENDERED IN THE CASE OF KUBER HINGES PVT. LTD. AS REPORTED IN 12 DTR 461 (D EL.). IN ALL THESE JUDGEMENTS, IT WAS HELD THAT PAYMENT OF PF WH ETHER ON ACCOUNT OF EMPLOYER CONTRIBUTION OR ON ACCOUNT OF E MPLOYEES CONTRIBUTION, HAS TO BE ALLOWED IF THE PAYMENTS ARE MADE ON OR BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME A ND IN THIS SITUATION, NO DISALLOWANCE OR ADDITION IS JUSTIFIED . RESPECTFULLY FOLLOWING THESE JUDGEMENTS, WE DIRECT THE A.O. THAT OUT OF TOTAL DISALLOWANCE MADE BY HIM OF RS.72,04,298/-, THE DIS ALLOWANCE TO THE EXTENT OF RS.35,84,252/- AND RS.10,32,500/- STA ND DELETED ON THIS BASIS THAT PAYMENTS WERE MADE BEFORE THE END O F THE FINANCIAL YEAR ITSELF ALTHOUGH THE ACTUAL DATES OF PAYMENTS W ERE BEYOND THE DUE DATE PRESCRIBED UNDER THE P F ACT. REGARDING T HE BALANCE AMOUNT OF DISALLOWANCE, WE DIRECT THE A.O. TO EXAMI NE THE AMOUNT OF PAYMENT OF PF BY THE ASSESSEE, IF ANY, AFTER THE END OF THE FINANCIAL YEAR I.E. AFTER 31.3.2003 BUT BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME I.E. 31.10.2003 AND IF THE ASSE SSEE FURNISHES EVIDENCE REGARDING PAYMENT OF P. F. WITHIN THAT PER IOD I.E. I.T.A. NO. 1738 /DEL/2010 5/11 01.04.2003 TO 31.10.2003, TO THAT EXTENT ALSO, NO D ISALLOWANCE IS TO BE MADE AND THE DISALLOWANCE SHOULD BE RESTRICTED T O THE AMOUNT OF PF WITH REMAINED UNPAID AS ON 31.10.2003 BEING THE DATE ON WHICH THE RETURN OF INCOME WAS FILED BY THE ASSESSEE BEIN G THE DUE DATE PRESCRIBED U/S 139(1) FOR FILING THE RETURN OF INCO ME. THE A.O. SHALL DECIDE THIS ASPECT AS PER THE ABOVE DISCUSSIO N AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE ASSESSEE IS TO FURNISH EVIDENCE BEFORE THE A.O. REG ARDING PAYMENTS MADE BY IT DURING 01.04.2003 TO 31.10.2003 IN CONNE CTION WITH UNPAID PF OUTSTANDING AS ON 31.03.2003 AND THEREAFT ER, THE A.O. SHALL PASS NECESSARY ORDER AS PER LAW. GROUND NO.3 OF THE ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PU RPOSES. 4. THE GROUND NO.4 OF THE APPEAL READS AS UNDER: 4) THAT SALES TAX PAID NOT ALLOWED UNDER SECTION U/S 43-B. 4.1 ON THIS ASPECT ALSO, LD. D.R. FOR THE REVENUE SUPPO RTED THE ORDER OF LD. CIT(A). WE FIND THAT AN ADDITION OF RS.79,550/ - WAS MADE BY THE A.O. ON ACCOUNT OF UNPAID SALES TAX. AGAINST T HIS DISALLOWANCE / ADDITION, GROUND NO.3 WAS RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND THIS GROUND WAS REJECTED BY THE LD. CIT(A) ON THE BASIS THAT THE ASSESSEE DID NOT FURNI SH ANY EVIDENCE TO REBUT THE FINDINGS OF THE A.O. ON THIS ISSUE. I N VIEW OF THIS, WE ALSO FIND NO REASON TO INTERFERE IN THE ORDER OF LD . CIT(A) ON THIS ISSUE BECAUSE THE ASSESSEE WAS REQUIRED TO BRING EV IDENCE BEFORE THE LD. CIT(A) THAT ANY PAYMENT OF UNPAID SALES TAX WAS MADE BY THE ASSESSEE DURING THE PERIOD FROM 01.04.2003 TO 3 1.10.2003 AND IN THE ABSENCE OF THIS, THE DISALLOWANCE / ADDITION MADE BY THE A.O. IS JUSTIFIED. GROUND NO.4 OF THE APPEAL IS ALSO RE JECTED. 5. GROUND NO.5 OF THE APPEAL READS AS UNDER: I.T.A. NO. 1738 /DEL/2010 6/11 5) THAT STAFF WELFARE EXPENSES HAS NOT BEEN ALLOWED. 5.1 FOR THIS ISSUE ALSO, LD. D.R. FOR THE REVENUE SUPPO RTED THE ORDER OF LD. CIT(A). WE FIND THAT IT IS NOTED BY THE A.O. I N PARA 4 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAD CLAIMED EXPE NSES OF RS.49,717/- ON ROZA AFTAR. THE A.O. ASKED THE ASSE SSEE TO JUSTIFY SUCH EXPENSES. IN REPLY, IT WAS SUBMITTED BY THE A SSESSEE BEFORE THE A.O. THAT THIS IS SPENT ON MUSLIM STAFF AND IS STAFF WELFARE EXPENDITURE. THE SAME WAS DISALLOWED BY THE A.O. B Y OBSERVING THAT THE EXPENSES ON ROZA AFTAR WERE NOT MEANT FOR BUSINESS ACTIVITY AND HENCE CANNOT BE ALLOWED. THE ASSESSEE RAISED T HIS GRIEVANCE BEFORE THE LD. CIT(A). BUT THIS GROUND OF THE ASSE SSEE WAS REJECTED BY THE LD. CIT(A) ON THE BASIS THAT THE NA TURE OF EXPENSES ITSELF PROVE THAT THE SAME WERE NOT REQUIRED TO MEE T THE PURPOSE OF BUSINESS BUT WE ARE NOT IN AGREEMENT WITH THE AUTHO RITIES BELOW ON THIS ACCOUNT BECAUSE ONCE IT IS ACCEPTED THAT THESE EXPENSES WERE INCURRED FOR THE WELFARE OF THE STAFF OF THE ASSESS EE, IT CANNOT BE ALLEGED THAT SUCH EXPENSES ARE NOT FOR BUSINESS EXP ENSES. WE FIND THAT NEITHER THE A.O. NOR THE LD .CIT(A) HAVE DISPU TED THIS ARGUMENT OF THE ASSESSEE THAT THESE EXPENSES WERE I NCURRED FOR MUSLIM STAFF ON ROZA AFTAR. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE LD. CIT(A) THAT ALL THESE EXPENSES ARE D ULY VOUCHED AND THE SAME WERE INCURRED FOR STAFF MEMBERS. IT IS NO T THE CASE OF THE REVENUE THAT THE EXPENSES WERE NOT INCURRED ON STAF F MEMBERS. EXPENSES INCURRED ON STAFF MEMBERS ARE TO BE TREATE D AS BUSINESS EXPENSES UNLESS THE SAME IS EXCESSIVE OR UNREASONAB LE. THIS IS NOT THE CASE OF THE REVENUE THAT THE EXPENSES ARE EXCES SIVE OR UNREASONABLE AND CONSIDERING ALL THESE FACTS AND CI RCUMSTANCES, WE I.T.A. NO. 1738 /DEL/2010 7/11 ARE OF THE CONSIDERED OPINION THAT SUCH DISALLOWANC E IS NOT JUSTIFIED. WE, THEREFORE, DELETE THE SAME. GROUND NO.5 IS ALLOWED. 6. THE GROUND NO.6 OF THE APPEAL READS AS UNDER: 6) THAT CANE DEVELOPMENT EXPENSES HAVE NOT BEEN ALLOW ED. 6.1 ON THIS GROUND ALSO, LD. D.R. SUPPORTED THE ORDER O F THE AUTHORITIES BELOW. WHEN WE GO THROUGH THE ORDER OF AUTHORITIES BELOW, WE FIND THAT NO ADDITION/DISALLOWANCE WAS MADE BY THE A.O. ON ACCOUNT OF ANY CANE DEVELOPMENT EXPENSES AND IN FAC T THE A.O. HAS MADE DISALLOWANCE OF RS.97,370/- ON ACCOUNT OF CAN FARM EXPENSES. SUCH DISALLOWANCE WAS MADE BY THE A.O. O N THE BASIS THAT IT IS NOT THE BUSINESS EXPENSES. WE FEEL THAT THIS GROUND OF THE ASSESSEE IS REGARDING DISALLOWANCE OF CANE FARM EXP ENSES AND NOT THE CANE DEVELOPMENT EXPENSES AND WE DECIDE THIS GR OUND OF THE ASSESSEE ON THIS BASIS. WHEN THIS ISSUE WAS RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A), IT WAS SUBMITTED BY HE ASSES SEE THAT THE EXPENSES ARE ALLOWABLE AS THESE RELATE TO CANE NURS ERY FOR EXPERIMENT PURPOSES AT FACTORY SITE TO FIND OUT MAT URITY OF CANE, JUICE % ETC. AND HENCE THIS IS BUSINESS EXPENDITURE ALLOWABLE U/S 37 AND IT IS NOT A CAPITAL EXPENDITURE OR PERSONAL EXP ENDITURE. LD. CIT(A) HAS REJECTED THIS GROUND OF THE ASSESSEE BY MAKING THIS OBSERVATION THAT THE ASSESSEE DID NOT SUBMIT ANY EV IDENCE TO SUBSTANTIATE HIS CLAIM OF EXPENSES REGARDING GENUIN E NEED OF THE BUSINESS. WHEN WE GO THROUGH THE ORDERS OF THE AUT HORITIES BELOW ON THIS ISSUE, WE ARE OF THE CONSIDERED OPINION THA T THE MATTER NEEDS RE-EXAMINATION BECAUSE WE FIND THAT THE A.O. HAS MA DE THIS DISALLOWANCE WITHOUT MAKING ANY INQUIRY FROM THE AS SESSEE REGARDING THE ALLOWABILITY OF THESE EXPENSES AND LD . CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE ON THE BASIS THAT T HE ASSESSEE DID I.T.A. NO. 1738 /DEL/2010 8/11 NOT SUBMIT ANY EVIDENCE TO SUBSTANTIATE HIS CLAIM O F EXPENSES REGARDING GENUINE NEEDS OF THE BUSINESS AND IT IS N OT COMING OUT FROM ORDERS OF AUTHORITIES BELOW THAT BEFORE MAKING DISALLOWANCE, THE ASSESSEE WAS ISSUED ANY SHOW CAUSE NOTICE OR WH ETHER ANY QUESTION WAS RAISED BY ANY OF THE AUTHORITIES BELOW ASKING THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE IN THIS REGARD AND HENCE WE SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF THE A.O. FOR FRESH DECISION AS PER LAW. THE A.O. SHALL PROVIDE ADEQUATE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE AND THE ASSESSEE SHALL SUBSTANTIATE ITS CL AIM REGARDING GENUINE BUSINESS NEED FOR INCURRING THESE EXPENSES AND THEREAFTER, THE A.O. SHALL PASS NECESSARY ORDER AS PER LAW. TH IS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 7. THE GROUND NO.7 OF THE APPEAL READS AS UNDER: 7) THAT TA BILLS EXPENSES NOT ALLOWED U/S 37(1). 7.1 ON THIS ISSUE ALSO, LD. D.R. FOR THE REVENUE SUPPOR TED THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT IT IS OBSERVED BY THE A.O. IN PARA 6 OF THE ASSESSMENT ORDER THAT THE AUDITORS HAVE REPO RTED THAT THE TRAVEL BILL AMOUNTING TO RS.60,736/- HAVE BEEN REIM BURSED TO THE DIRECTOR BUT THESE BILLS HAVE NOT BEEN GOT SANCTION ED BY DM/CHAIRMAN. ON THE BASIS OF THESE REMARKS OF TAX AUDITORS, THE A.O. CAME TO THE CONCLUSION THAT THESE EXPENSES HAV E NOT BEEN INCURRED IN REGULAR COURSE OF BUSINESS AND MADE THE DISALLOWANCE. THE ASSESSEE CARRIED THIS MATTER IN APPEAL BEFORE C IT(A) AND WE FIND THAT ON PAGE 6 OF HIS ORDER, THE LD. CIT(A) HA S DELETED THIS DISALLOWANCE AND HENCE THIS GROUND OF ASSESSEE IS M ISPLACED BECAUSE WHEN THE ENTIRE DISALLOWANCE ON ACCOUNT OF TRAVELLING EXPENSES WAS DELETED BY LD. CIT(A), THERE CANNOT BE ANY GRIEVANCE I.T.A. NO. 1738 /DEL/2010 9/11 OF THE ASSESSEE ON THIS ACCOUNT. HENCE, THIS GROUN D OF ASSESSEE IS INFRUCTUOUS AND REJECTED ACCORDINGLY. 8. THE GROUND NO.8 OF THE APPEAL READS AS UNDER: 8) THAT PREVIOUS YEAR EXPENSES QUANTIFIED DURING THE Y EAR NOT ALLOWED AND PREVIOUS YEAR EXPENSES BELOW THE LINE H AS BEEN ERRONEOUSLY DISALLOWED. 8.1 ON THIS GROUND ALSO, LD. D.R. FOR THE REVENUE SUPPO RTED THE ORDER OF THE AUTHORITIES BELOW. WE FIND THAT IT IS NOTED BY THE A.O. IN PARA 7 OF THE ASSESSMENT ORDER THAT ASSESSEE CLAIME D EXPENSES OF RS.11,71,546/- PERTAINING TO EARLIER YEAR AS PER AN NEXURE B TO TAX AUDIT REPORT. IT IS ALSO OBSERVED BY THE A.O. THAT THE ASSESSEE DID NOT FILE ANY EVIDENCE IN SUPPORT OF THIS CONTEN TION THAT THESE EXPENSES WERE QUANTIFIED DURING THE RELEVANT PREVIO US YEAR. AFTER MAKING THIS OBSERVATION, THE A.O. DISALLOWED THE EN TIRE AMOUNT OF PREVIOUS YEAR EXPENDITURE OF RS.11,71,546/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E LD. CIT(A) ON THIS ISSUE ALSO. BEFORE LD. CIT(A), IT WAS SUBMITT ED BY THE LD. A.R. FOR THE ASSESSEE THAT PREVIOUS YEAR ADJUSTMENT OF RS.11,71,546/- IS BELOW THE LINE AND HENCE SHOULD N OT HAVE BEEN DISALLOWED. IT WAS ALSO THE SUBMISSION OF THE ASSE SSEE BEFORE THE LD. CIT(A) THAT THESE EXPENSES WERE QUANTIFIED AND ASCERTAINED DURING THE RELEVANT PREVIOUS YEAR. IT IS OBSERVED BY THE LD. CIT(A) THAT THE ASSESSEE DID NOT SUBMIT ANY EVIDENC E IN SUPPORT OF THIS GROUND OF APPEAL AND THERE IS NOTHING ON RE CORD TO SUBSTANTIATE THE FACTS ON THIS ISSUE. HE DIRECTED THE A.O. TO VERIFY THE FACTS OF ANNEXURE G OF TAX AUDIT REPORT AND I F THE EXPLANATION OF THE ASSESSEE IS FOUND CORRECT THEN T HE SAME NEED TO BE ALLOWED. AS PER THIS OBSERVATION OF THE LD. CIT (A), THIS I.T.A. NO. 1738 /DEL/2010 10/11 ADDITION WAS NOT UPHELD BY HIM BUT THIS ISSUE WAS R ESTORED BACK BY HIM TO THE FILE OF THE A.O. FOR RE-ADJUDICATION AFTER VERIFYING THE FACTS OF THE CASE. WE, THEREFORE, FEEL THAT TH IS GROUND OF ASSESSEE IS ALSO MISCONCEIVED BECAUSE THIS ADDITION WAS NOT UPHELD BY THE LD. CIT(A) AND IN FACT, THIS MATTER W AS RESTORED BACK BY HIM TO THE FILE OF THE A.O. FOR A FRESH DEC ISION. WE ALSO FEEL THAT THIS CLAIM OF THE ASSESSEE SHOULD BE EXAM INED AS TO WHETHER THESE EXPENSES WERE DEBITED BY THE ASSESSEE TO THE P & L ACCOUNT BEFORE WORKING OUT THE LOSS OF RS.1258.71 L ACS BEING THE STARTING POINT OF COMPUTATION DONE BY THE A.O. IN T HE ASSESSMENT ORDER. IF SUCH AMOUNT OF PREVIOUS YEAR EXPENSES HA VE BEEN DEBITED BY THE ASSESSEE IN THE P & L ACCOUNT AFTER ASCERTAINING THE NET LOSS AS PER THE P & L ACCOUNT OF RS.1258.71 LAC S THEN SUCH PREVIOUS YEAR EXPENSES STANDS ADDED BACK IN THE NET LOSS AS PER P & L ACCOUNT OF RS.1258.71 LACS CONSIDERED BY THE A. O. AS A STARTING POINT OF COMPUTATION IN THE ASSESSMENT ORD ER AND ANY FURTHER EXCLUSION OF THIS AMOUNT FROM SUCH LOSS AMO UNT TO DOUBLE EXCLUSION FROM THE LOSS OF THE ASSESSEE. THIS FACT UAL ASPECT SHOULD ALSO BE EXAMINED BY THE A.O. AND THEREAFTER, HE SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADE QUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. THE GROUND NO.9 OF THE APPEAL READS AS UNDER: THAT LOSS RETURNED HAS NOT BEEN ACCEPTED IN FULL. 9.1 THIS IS GENERAL GROUND AND DOES NOT CALL FOR ANY SE PARATE ADJUDICATION. 10. THE GROUND NO.10 READS AS UNDER: THAT UNABSORBED LOSS DEPARTATION OF EARLIER YEARS NOT ALLOWED. I.T.A. NO. 1738 /DEL/2010 11/11 10.1 THIS GROUND OF THE ASSESSEE ALSO DOES NOT CALL FOR ANY ADJUDICATION BECAUSE EVEN IN THE ASSESSMENT ORDER, AFTER MAKING VARIOUS ADJUSTMENTS, THE A.O. HAS COMPUTED THE INCOME OF TH E ASSESSEE AT A LOSS OF RS.1003.96 LACS AND HENCE, NO ADJUSTMENT ON ACCOUNT OF BROUGHT FORWARD UNABSORBED LOSS OR UNABSORBED DEPRE CIATION IS REQUIRED TO BE MADE IN THE PRESENT YEAR BECAUSE BRO UGHT FORWARD UNABSORBED LOSS AND UNABSORBED DEPRECIATION IF ANY, HAS TO BE SET OFF AGAINST THE TAXABLE INCOME AND SINCE THE ASSESS ED INCOME IS LOSS, NO SUCH ADJUSTMENT/SET OFF OF BROUGHT FORWARD LOSS/UNABSORBED DEPRECIATION IS REQUIRED TO BE MADE . THIS GROUND IS REJECTED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED IN THE TERMS INDICATED AS ABOVE. 12. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON J UNE 25 TH 2010. SD./- SD./- (I.P.BANSAL) (A K GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:25 TH JUNE, 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI