Citadel Fine Pharmaceuticals, CHENNAI V. ITO, CHENNAI

ITA 2158/CHNY/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6242 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-04-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 12-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Business income; Business expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . ! , ' $ BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO.2158/ MDS/2013 ( / ASSESSMENT YEAR: 2009-10) M/S. CITADEL FINE PHARMACEUTICALS, 43, MAIN ROAD, VELACHERY, CHENNAI-600 042. VS THE INCOME TAX OFFICER, BUSINESS WARD-III(2), CHENNAI-600 034. PAN: AAAFC0517E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. G.SEETHARAMAN, C.A /RESPONDENT BY : MR. GURU BHASHYAM, JCIT / DATE OF HEARING : 30 TH APRIL , 2014 /DATE OF PRONOUNCEMENT : 13 TH JUNE, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-V, CHEN NAI DATED 02.09.2013 FOR THE ASSESSMENT YEAR 2009-10. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT CO MMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISALLOWING THE EN TIRE BUSINESS EXPENSES INCURRED BY THE ASSESSEE AMOUNTIN G TO ` 18,72,840/- WITHOUT APPRECIATING THAT ASSESSEE NEVE R HAD ITA NO.2158/MDS/2013 2 INTENTION OF WINDING UP OF BUSINESS AND ONLY IN THE PROCESS OF REVIVING THE BUSINESS. 2. BRIEF FACTS ARE THAT THE ASSESSEE IS A FIRM ENGA GED IN THE BUSINESS OF MANUFACTURE AND SALE OF PHARMACEUTI CAL PRODUCTS. DURING THE FINANCIAL YEAR 2008-09 RELEVAN T TO THE ASSESSMENT YEAR 2009-10, THE ASSESSEE HAS NOT REPOR TED ANY SALES AND NO BUSINESS INCOME WAS SHOWN. THE ASSESS EE ADMITTED INTEREST ON FIXED DEPOSITS, PROFIT ON SALE OF ASSETS AND THE ASSESSEE CLAIMED BUSINESS EXPENSES. THE ASS ESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED EXPENSES AMOUNTING TO ` 23,79,050/- ON THE GROUND THAT ASSESSEE HAS NOT CONDUCTED ANY BUSINESS ACTIVITY AND NO INCOME F ROM SALES HAS BEEN REPORTED DURING THE ASSESSMENT YEAR AND TH EREFORE BUSINESS EXPENSES ARE NOT ALLOWABLE. BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), ASSESSEE CONT ENDED THAT ASSESSING OFFICER HAS DISALLOWED AGGREGATE AMO UNT OF ` 23,79,050/- EVEN THOUGH THE TOTAL AMOUNT OF EXPENDI TURE CLAIMED BY THE ASSESSEE WAS ONLY ` 18,72,840/-. THE COMMISSIONER OF INCOME TAX (APPEALS) ON VERIFYING T HE ITA NO.2158/MDS/2013 3 SUBMISSIONS AND CONTENTIONS OF THE ASSESSEE RESTRIC TED THE AMOUNT OF DISALLOWANCE OF EXPENSES TO ` 18,72,840/- . 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE H AS SUSPENDED ITS BUSINESS OPERATIONS DURING THE ASSES SMENT YEAR 2009-10 TEMPORARILY AND IN FACT ASSESSEE CONTI NUED ITS BUSINESS IN THE ASSESSMENT YEAR 2010-11 ONWARDS. THEREFORE, COUNSEL SUBMITS THAT SINCE THE ASSESSEE CONTINUED ITS BUSINESS IN THE SUBSEQUENT YEARS AND AS THE ASS ESSEE PONLY SUSPENDED ITS BUSINESS OPERATIONS TEMPORARILY DURING THE ASSESSMENT YEAR 2009-10, THERE IS NO JUSTIFICAT ION IN DISALLOWING THE EXPENSES CLAIMED BY THE ASSESSEE UN DER THE HEAD BUSINESS. 4. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER DISALLOWED THE EXPENSES CLAIM ED BY THE ASSESSEE ON THE GROUND THAT ASSESSEE HAS NOT CA RRIED ON ITA NO.2158/MDS/2013 4 BUSINESS ACTIVITY IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR AND NO INCOME FROM SALES HAS BEEN REPORTED. THEREFORE, IN THE ABSENCE OF ANY BUSINESS ACTIVITY, ENTIRE EXPENSES CLAIMED BY THE ASSESSEE WERE DISALL OWED BY THE ASSESSING OFFICER. THIS WAS SUSTAINED BY THE COMMISSIONER OF INCOME TAX (APPEALS) TO THE EXTENT OF ` 18,72,840/-. COUNSEL FOR THE ASSESSEE SUBMITS THAT IN THE ASSESSMENT YEAR 2010-11, ASSESSEE CARRIED ON THE BU SINESS WHICH WAS STOPPED BY THE ASSESSEE TEMPORARILY IN T HE ASSESSMENT YEAR 2009-10. IF THE ASSESSEE CONTINUED THE BUSINESS IN ASSESSMENT YEAR 2010-11, WHICH WAS TEMP ORARILY STOPPED IN THE ASSESSMENT YEAR 2009-10, THE EXPENSE S CLAIMED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2009 -10, IN OUR CONSIDERED VIEW, CANNOT BE DISALLOWED. THE ASS ESSEE HAS NOT COMPLETELY STOPPED ITS BUSINESS. THE CLOSUR E OF BUSINESS IN THE ASSESSMENT YEAR 2009-10 APPEARS TO BE TEMPORARY AND SUCH BUSINESS HAS BEEN CARRIED ON IN THE ASSESSMENT YEAR 2010-11. THUS, WE HOLD THAT BUSINES S EXPENSES CLAIMED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2009-10 HAVE TO BE ALLOWED. HOWEVER, FOR THE LIMITE D PURPOSE ITA NO.2158/MDS/2013 5 OF VERIFYING THE FACT AS TO WHETHER THE ASSESSEE CO NTINUED ITS BUSINESS IN THE SUBSEQUENT ASSESSMENT YEARS, WE REM IT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER, W HO SHALL VERIFY WHETHER THE ASSESSEE CONTINUED ITS BUSINESS IN THE SUBSEQUENT ASSESSMENT YEARS AND IN THE EVENT THAT A SSESSEE CONTINUED ITS BUSINESS, EXPENSES CLAIMED BY THE ASS ESSEE SHALL BE ALLOWED. 6. APPEAL OF THE ASSESSEE IS ALLOWED ON THE ABOVE T ERMS. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 13 TH DAY OF JUNE, 2014 AT CHENNAI. SD/- SD/- ( N.S. SAINI ) ( CHALLA NAGENDRA PRASAD ) ( . . ) ( % '( ) ACCOUNTANT MEMBER / * JUDICIAL MEMBER/ ' * ' /CHENNAI, + /DATED, 13 TH JUNE, 2014 SOMU -. /. /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. 0 () /CIT(A) 4. 0 /CIT 5. . 4 /DR 6. /GF .