M/s. M.S. Associates, New Delhi V. ACIT, New Delhi

ITA 2103/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6990 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 23-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Business income; Opportunity of being heard
• Section: 143(3); 142(1); 10; 154

Judgement Text

N THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO S . 2103 & 2104 /DEL/20 14 A.Y RS . : 20 0 7 - 08 M/S M.S. ASSOCIATES, 267, MASJID MOTH, UDAY PARK, FRONT PORTION, 2 ND FLOOR, NEW DELHI (PAN: AABFM1714A) VS. ACIT, CENTRAL CIRCLE - 4, NEW DELHI ARA CENTRE, 3 RD FLOOR, JHANDEWALAN EXTENSION, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SATYA JEET GOEL, CA DEPARTMENT BY : SH. P. DAM KANUNJNA, SR. DR DATE OF HEARING : 23-06-2016 DATE OF ORDER : 01-07-2016 ORDER PER H.S. SIDHU : JM THE ASSESSEE HAS FILED THESE TWO APPEALS AGAINST THE SEPARATE IMPUGNED ORDERS DATED 22.1.2014 & 27.1.2014 OF LD. CIT(A)-XII, NEW DELHI PERTAINING TO ASSESSMENT YEAR 2007-08. SIN CE THESE APPEALS PERTAINS TO SAME ASSESSMENT YEAR I.E. 2007-0 8 OF THE SAME ASSESSEE, HENCE, THESE APPEALS WERE HEARD TOGETHER A ND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. ITA NOS. 2103 & 2104/DEL/2014 2 2. THE GROUNDS RAISED IN ITA NO. 2103/DEL/2014 (AY 2007-08) READ AS UNDER:- 1(I). THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF TH E ASSESSING OFFICER REGARDING CLOSURE OF THE BUSINESS WITHOUT APPRECIATING FACTS AND WRITTEN SUBMISSIONS OF TH E APPELLANT. (II) THAT FINDING ABOUT CLOSURE. OF THE BUSINESS IS ILLEGAL, ARBITRARY AND WITHOUT APPRECIATING THE FACTS AND LEGAL PRINCIPLES. 2(I) THAT THE CLAIM OF EXPENSES WERE IN RESPECT OF TH E EXISTING BUSINESS AND THERE BEING NO DISPUTE ABOUT THE GENUINENESS OF THE CLAIM, ORDERS OF THE LOWER AUTHORI TIES IN REJECTING THE CLAIM ARE WITHOUT ANY LEGAL AND FACTU AL BASIS. (II) THAT ALL THE CLAIM OF EXPENSES ARE RELATING TO YE AR UNDER REFERENCE AND CLAIM BEING IN ACCORDANCE WITH MERCAN TILE SYSTEM OF ACCOUNTING, THERE IS NO GROUND OR BASIS FO R DISALLOWANCE OF SAME. (III) THAT THE ASSESSING OFFICER HAS EVEN DISALLOWED THE EXPENSES WHICH ARE OF STATUTORY AND INCIDENTAL NATUR E. 3(I). THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN CONSIDERING I NTEREST INCOME WHICH IS INCIDENTAL TO THE BUSINESS ACTIVITIES AS INCOME FROM OTHER SOURCES AS AGAINST THE CLAIM OF THE ITA NOS. 2103 & 2104/DEL/2014 3 ASSESSEE THAT SAME IS PART OF BUSINESS AND ASSESSABLE UNDER THE HEAD BUSINESS. (II) THAT THE INTEREST BEING ON IN RELATION TO BANK GU ARANTEES AND MARGIN MONEY, THE SAME IS DIRECTLY RELATED TO AND INCIDENTAL TO BUSINESS AND AS SUCH THERE IS NO GROU ND OR BASIS FOR CONSIDERING THE INTEREST UNDER THE HEAD INCOM E FROM OTHER SOURCES. (III) THAT ORDERS OF THE LOWER AUTHORITIES ARE IN T OTAL DISREGARD TO PAST HISTORY OF THE CASE. 4. THAT ORDERS OF THE LOWER AUTHORITIES ARE NOT JUSTI FIED ON FACTS AND THE SAME ARE BAD IN LAW. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN DECLARING LOSS OF RS. 97,95,818/- UNDER THE HE AD BUSINESS & PROFESSION ON 31.10.2007. THE SAME WAS PROCESSED AND AN INTIMATION U/S. 143(1) WAS ISSUED ON 1.3.2009. THE REAFTER THE CASE WAS SELECTED FOR COMPULSORY SCRUTINY. NOTICE U/S. 14 3(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE AC T) WAS ISSUED ON 10.4.2008 WHICH WAS DULY SERVED UPON THE ASSESSE E. NOTICE U/S. 142(1) ALONGWITH DETAILED QUESTIONNAIRE WAS IS SUED ON 28.4.2009 WHICH WAS ALSO DULY SERVED ON THE ASSESSEE . IN RESPONSE THERETO, ASSESSEES AUTHORISED REPRESENTATIVE ATTENDED TH E ASSESSMENT PROCEEDINGS FROM TIME TO TIME AND THE CASE WAS DISCUSSED AND WRITTEN REPLIES WERE FURNISHED TO THE A O. THEREAFTER, THE AO COMPLETED THE ASSESSMENT U/S. 143(3) OF THE ACT VIDE HIS ITA NOS. 2103 & 2104/DEL/2014 4 ORDER DATED 27.11.2009 AND LOSS ALLOWED TO BE CARRIE D FORWARD AT RS. 2,35,50,357/-. 4. AGGRIEVED BY THE AFORESAID ORDER OF THE ASSESSIN G OFFICER DATED 27.11.2009, ASSESSEE FILED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY, WHO VIDE IMPUGNED ORDER DATED 2 2.1.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED WITH THE AFORESAID FINDING OF THE LD. CI T(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSESSEE STATED THAT THE ISSUES INVOLVED IN GROUND NOS.1, 2 & 3 HAVE A LREADY BEEN ADJUDICATED AND DECIDED BY THE ITAT, DELHI, SMC-2 BE NCH VIDE ITS ORDER DATED 21.9.2015 PASSED IN ITA NO. 2105 & 2106 /DEL/2014 (A.YRS. 2008-09 & 2009-10) AND ITA NO. 2077 & 2078/ DEL/2015 (A.YRS. 2010-11 & 2011-12) VIDE PARA NO. 6 AT PAGE N O. 7 & 8. HE FURTHER STATED THAT THE BENCH HAS SET ASIDE THE ISSUE IN DISPUTE TO THE AO TO DECIDE THE ISSUE AFRESH, UNDER THE LAW, AFT ER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. HE HAS ALSO FILED THE COPY OF THE AFORESAID TRIBUNALS ORDER DAT ED 21.9.2015. 7. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER PASSE D BY THE REVENUE AUTHORITIES. ITA NOS. 2103 & 2104/DEL/2014 5 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE REC ORDS ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES AND THE ORDER OF THE TRIBUNALS ORDER DATED 21.9.2015. FOR THE SAKE OF CO NVENIENCE, WE ARE REPRODUCING THE RELEVANT PORTION OF THE TRIBUNALS ORDER DATED 21.9.2015 AS UNDER:- 6. AFTER HEARING BOTH THE PARTIES AND PERUSING TH E AFORESAID FINDING OF THE LD. CIT(A), I FIND CONSI DERABLE COGENCY IN THE ASSESSEES SUBMISSIONS MADE BEFORE THE LD. CIT(A) THAT THE ASSESSEE IS A PARTNERSHIP F IRM AND INCOME UNDER THE HEAD BUSINESS HAS BEEN COMPUTED AT NIL AND THERE IS NO CASE OF ANY TAX LIABILITY. THE AO HAS MADE DISALLOWANCE OF CLAIM O F EXPENSES ON THE GROUND THAT NO BUSINESS ACTIVITIES HAS BEEN CARRIED OUT DURING THE YEAR UNDER REFERENCE. I ALSO FIND FROM THE RECORD THAT THE ASSESSEE IS ENGA GED IN THE BUSINESS OF LOTTERIES AND THE BUSINESS HAS N EVER BEEN CLOSED OR DISCONTINUED, AS STATED BY THE LD. COUNSEL OF THE ASSESSEE. THE FIRM IS STILL IN EXIS TENCE AND MAINTAINING REGULAR ESTABLISHMENT AND INFRASTRUCTURE. THE LOTTERY BUSINESS IS BEING CARR IED OUT ITA NOS. 2103 & 2104/DEL/2014 6 ON IN TERMS OF AGREEMENT WITH NAGALAND AND MEGHALAYA AUTHORITIES. HOWEVER, THE BUSINESS WAS DISCONTINUED BY THESE AUTHORITIES ON THE TECHNICAL REASONS AND DISPUTE WHICH IS STILL PENDING IN ARBITRATION. I FIND THAT THE ASSESSEE HAS A REGULA R ESTABLISHMENT AND INCURRED VARIOUS EXPENSES AS A PA RT OF RUNNING BUSINESS CLEARLY ESTABLISH THAT BUSINES S HAS NEITHER BEING CLOSED OR DISCONTINUED BY THE ASSESSE E. IN MY VIEW IT IS AN ESTABLISHED LEGAL POSITION THA T MERELY ON THE GROUND THAT THERE IS NO BUSINESS RECE IPT DURING THE YEAR, THERE CANNOT BE ANY PRESUMPTION ABOUT CLOSURE OF THE BUSINESS. IN VIEW OF THE ABOV E, I NOTE THAT NEITHER THE AO NOR THE LD. CIT(A) HAS APPRECIATED THE FACTS AND EVIDENCE FILED BY THE ASSESSEE BEFORE THEM WHICH IN MY OPINION, NEEDS TO BE CONSIDERED BY THE AO. IN THE INTEREST OF JUST ICE, WE REMIT BACK THE ISSUES IN DISPUTE TO THE FILE OF THE AO WITH THE DIRECTIONS TO CONSIDER THE WRITTEN SUBMISS ION FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND DECIDE THE CASE AFRESH, UNDER THE LAW, AFTER GIVING ITA NOS. 2103 & 2104/DEL/2014 7 ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE AO AND FILED ALL THE EVIDENCES / DOCUMENTS TO THE AO T O SUBSTANTIATE ITS CASE. 9. AFTER PERUSING THE AFORESAID FINDING, WE ARE OF TH E CONSIDERED VIEW THAT THE ON SIMILAR GROUNDS, THE ISSUES WERE SET ASIDE TO THE FILE OF THE AO, BY THE TRIBUNAL FOR FRESH ADJUDICAT ION, AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, RESPECTFULLY, FOLLOWING THE COORDINATE BENCH DECISIO N OF THE TRIBUNAL, AS AFORESAID, WE ARE SETTING ASIDE THE IS SUES INVOLVED IN GROUND NO. 1, 2 & 3 TO THE FILE OF THE AO FOR FRESH ADJUDICATION, AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN THE RESULT, THE ITA NO. 2103/DEL/2014 (AY 2007-08 ) IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 2104/DEL/2014 (AY 2007-08) 10. THIS APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) DATED 27.1.2014 CONFIRMING THE ACTION OF T HE AO WHEREIN THE AO PASSED THE ORDER U/S. 154 OF THE ACT ON 7.10. 2010. HE HAS RECTIFIED A MISTAKE WHICH IS ACCORDING TO HIM APPAREN T FROM RECORD. THE PURPORTED MISTAKE IS SETTING OFF OF CARRY FORWARD BUSINESS LOSS OF RS. 2,37,88,905/- WITH ASSESSED INCOME FROM OTHER SOURCES OF ITA NOS. 2103 & 2104/DEL/2014 8 RS. 2,38,548/-. CONSEQUENTLY, THE AO DISALLOWED THE SET OFF OF RS. 2,38,548/- FROM INCOME FROM OTHER SOURCES. ON APPEAL BEFORE THE LD. CIT(A), LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE STATING THAT INTEREST HAS BEEN EARNED ON MARGIN MON EY AGAINST THE ISSUANCE OF BANK GUARANTEE AND THEREFORE, SUCH INTERE ST INCOME IS BUSINESS INCOME AND THE SAME IS NOT ASSESSABLE AS IN COME FROM OTHER SOURCES AND, THEREFORE, CARRY FORWARD BUSINESS LOSS OF RS. 2,38,548/- ORIGINALLY ALLOWED TO THE ASSESSEE IS A CO NTENTIOUS ISSUE, WHICH CANNOT BE RECTIFIED U/S. 154 OF THE ACT. 11. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER:- 1(I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING ORDER U/S. 154 PASSED BY THE ASSESSING OFFICER AND IN DISALLOWING CLAIM OF SET OFF OF CARRY FORWARD BUSINESS LOSS. (II) THAT THERE IS NO MISTAKE IN THE ORIGINAL ORDER OF THE AO AS THE SET OFF WAS ALLOWED ON THE BASIS OF FACTS OF THE CASE, PAST HISTORY AND RELEVANT LEGAL PRINCIPLES. (III) THAT IN ANY CASE, THE ISSUE UNDER REFERENCE IS OF DEBATABLE NATURE AND ORDERS OF THE AO AND CIT(A) AR E NOT SUSTAINABLE ON FACTS AND UNDER THE LAW. 12. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESS EE SUBMITTED THAT WHEN THERE ARE TWO VIEWS ON A PARTICULAR ASPECT OF TAXATION, THE PROVISIONS OF SECTION 154 CANNOT BE INVOKED. HE FURTHER ITA NOS. 2103 & 2104/DEL/2014 9 SUBMITTED THAT THE INTEREST INCOME ON FDR GIVEN FOR BANK GUARANTEE IS CHARGEABLE TO TAX AS BUSINESS INCOME A ND NOT INCOME FROM OTHER SOURCES AND HENCE, THIS BEING A CONTENTI OUS ISSUE, THEREFORE, THE PROVISIONS OF SECTION 154 OF THE ACT CA NNOT BE APPLIED. 13. LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. ADMITTEDLY, WHERE THE BANK INTEREST ON FIXED DEPOSIT WHIC H ARE PLEDGED FOR PERFORMANCE GUARANTEE IS CHARGEABLE UNDE R THE HEAD BUSINESS INCOME IS SUPPORTED BY THE DECISION OF TH E JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. JAYPEE DSC VENTURE S LTD. (2011) 335 ITR 132 (DEL.). THERE ARE OTHER CONTRARY DECISIO NS ALSO AVAILABLE AND THEREFORE, THE ISSUE BECOMES DEBATABLE WITH RESPECT TO THE TAXATION OF SUCH INTEREST INCOME. WHEN THE ISSUE IS DEBATABLE THE PROVISIONS OF SECTION 154 CANNOT BE INVOKED. THE PROVISIONS OF SECTION 154 CAN BE INVOKED WHEN THERE IS APPARENT MI STAKE WHICH IS GLARING AND PATENT. IN THE PRESENT CASE, WE DO NOT FIND ANY SUCH MISTAKE AND, THEREFORE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE PROVISIONS OF SECTION 154 INVOKED BY THE AO. IN THE R ESULT, WE REVERSE THE FINDING OF THE LD. CIT(A) AND CANCEL THE ORDER PASSED ITA NOS. 2103 & 2104/DEL/2014 10 U/S. 154 DATED 7.10.2010. IN THE RESULT, THE APPEAL FI LED BY THE ASSESSEE STANDS ALLOWED. 15. IN THE RESULT, THE ASSESSEES APPEAL BEING ITA NO. 2103/DEL/2014 (AY 2007-08) STANDS ALLOWED FOR STATISTI CAL PURPOSES AND ITA NO. 2104/DEL/2014 (AY 2007-08) STAND ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 01/07/2016. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBE R DATE 01/07/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NOS. 2103 & 2104/DEL/2014 11