Lakshmi Balaji Bottling Private Limited , Hyderabad V. Income Tax Officer, Ward-16(1), Hyderabad

ITA 2162/Hyd/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8758 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 03-07-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 09-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Depreciation; Business expenditure; Reasonable cause; TDS; Set aside
• Section: 142(1); 14A; 115JB; 40(a)(ia); 37(1); 201(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B ', HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 2162 / HYD/201 8 ASSESSMENT YEAR: 20 12 - 13 LAKSHMI BALAJI BOTTLING PVT. LTD., HYDERABAD. PAN A ACCP1184B VS. INCOME - TAX OFFICER, WARD 16 ( 1 ), HYDERABAD. A PPELLANT RESPONDENT ASSESSEE BY: S H RI P. MURALI MOHANA RAO REVENUE BY: S MT. AMISHA S. GUPT DATE OF HEARING: 03 / 0 7 / 201 9 DATE OF PRONOUNCEMENT: 12 / 0 7 /201 9 O R D E R PER S. RIFAUR RAHMAN , AM: T H IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) 4 , HYDERABAD, DATED, 22 / 1 2 /201 6 FOR AY 20 12 - 13. 2. ON PERUSAL OF RECORD, WE FIND THAT THERE IS A DELAY OF 593 DAYS IN FILING THIS APPEAL BEFORE US. AT THE TIME OF HEARING, LD. AR SUBMITTED THAT ASSESSEE HAS MERIT IN THE CASE AND COURTS HAVE HELD THAT WHEN ASSESSEE HAS FAVOURABLE CASE ON MERIT, JUSTICE CANN OT BE DENIED ON ACCOUNT OF DELAY IN FILING THE APPEAL. IN THIS REGARD, THE ASSESSEE FILED AN AFFIDAVIT AFFIRMING THERE IN THAT APPEAL PAPERS WERE MISPLACED BY ONE OF OFFICE STAFF, DUE TO WHICH, THE DELAY WAS OCCURRED. IT WAS, THEREFORE, PRAYED THAT THE DE LAY MAY BE CONDONED AND THE APPEAL MAY BE CONSIDERED DUE TO CIRCUMSTANCES WHICH WERE BEYOND THE CONTROL OF THE ASSESSEE. IN THIS CONNECTION, THE ASSESSEE RELIED ON THE FOLLOWING CASES: I.T.A. NO. 2162 /HYD/1 8 LAKSHMI BALAJI BOTTLING PVT. LTD., HYD. 2 1. COLLECTOR, LAND ACQUISITION VS. MST KATIJI & OTHERS, 167 ITR 471 (SC ) 2. KSP SHANMUGAVEL NADAR, 30 TAXMANN 133 (MAD.) 3. MIDAS POLYMER COMPOUNDS PVT. LD., 288/COCH/2017 4. N. BALAKRISHNAN VS. M. KRISHNA MURTHY, SC, JUDGMENT DATED 03/09/1998. 2.1 FURTHER, LD. AR RELIED ON THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF DIVYA JYOTHI STEELS LTD. VS. ACIT, ORDER DATED 28/03/2018 IN ITA NOS. 1176 & 29/HYD/2016, (WHERE BOTH THE MEMBERS ARE PARTY) WHEREIN THE BENCH HAS HELD AS UNDER: 4. WHILE ADJUDICATING THE DELA Y IN FILING THE APPEAL, THE HONBLE SUPREME COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJU AND OTHERS, [1987]167 ITR 471, HAS HELD AS BELOW: 3. THE LEGISLATURE HAS CONFERRED THE POWE R TO CONDONE DELAY BY ENACTING S. 5 OF THE LIMITATION ACT OF 1963 IN ORDER TO ENABLE THE COURTS TO DO SUBSTANTIAL JUSTICE TO PARTIES BY DISPOSING OF MATTERS ON 'MERITS'. THE EXPRESSION 'SUFFICIENT CAUSE' EMPLOYED BY THE LEGISLATURE IS ADEQUATELY ELASTIC TO ENABLE THE COURTS TO APPLY THE LAW IN A MEANINGFUL MANNER WHICH SUBSERVES THE ENDS OF JUSTICE THAT BEING THE LIFE - PURPOSE OF THE EXISTENCE OF THE INSTITUTION OF COURTS. IT IS COMMON KNOWLEDGE THAT THIS COURT HAS BEEN MAKING A JUSTIFIABLY LIBERAL APPROACH IN MATTERS INSTITUTED IN THIS COURT. BUT THE MESSAGE DOES NOT APPEAR TO HAVE PERCOLATED DOWN TO ALL THE OTHER COURTS IN THE HIERARCHY. 4. AND SUCH A LIBERAL APPROACH IS ADOPTED ON PRINCIPLE AS IT IS REALIZED THAT: 1. ORDINARILY, A LITIGANT DOES NOT STAND T O BENEFIT BY LODGING AN APPEAL LATE. 2. REFUSING TO CONDONE DELAY CAN RESULT IN A MERITORIOUS MATTER BEING THROWN OUT AT THE VERY THRESHOLD AND CAUSE OF JUSTICE BEING DEFEATED. AS AGAINST THIS, WHEN DELAY IS CONDONED, THE HIGHEST THAT CAN HAPPEN IS THAT A CAUSE WOULD BE DECIDED ON MERITS AFTER HEARING THE PARTIES. 3. 'EVERY DAY'S DELAY MUST BE EXPLAINED' DOES NOT MEAN THAT A PEDANTIC APPROACH SHOULD BE MADE. WHY NOT EVERY HOUR'S DELAY, EVERY SECOND'S DELAY ? THE I.T.A. NO. 2162 /HYD/1 8 LAKSHMI BALAJI BOTTLING PVT. LTD., HYD. 3 DOCTRINE MUST BE APPLIED IN A RATIONAL COMMON SENSE AND PRAGMATIC MANNER. 4. WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED, FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGHT IN INJUSTICE BEING DONE BEC AUSE OF A NON - DELIBERATE DELAY. 5. THERE IS NO PRESUMPTION THAT DELAY IS OCCASIONED DELIBERATELY, OR ON ACCOUNT OF CULPABLE NEGLIGENCE, OR ON ACCOUNT OF MALA FIDES. A LITIGANT DOES NOT STAND TO BENEFIT BY RESORTING TO DELAY. IN FACT, HE RUNS A SERIOUS RISK . 6. IT MUST BE GRASPED THAT THE JUDICIARY IS RESPECTED NOT ON ACCOUNT OF ITS POWER TO LEGALIZE INJUSTICE ON TECHNICAL GROUNDS BUT BECAUSE IT IS CAPABLE OF REMOVING INJUSTICE AND IS EXPECTED TO DO SO. 4.1 CONSIDERING THE ABOVE DECISION AND REASONS FOR DE LAY IN FILING THE APPEAL, WE CONDONE THE DELAY IN FILING THE APPEAL BEFORE US ON THE GROUND THAT THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE IN FILING THE APPEAL BELATEDLY. ACCORDINGLY, WE ADMIT THE APPEAL FOR HEARING AND ADJUDICATION. AS THE ASSESS EE WAS PREVENTED BY REASONABLE CAUSE FOR NOT FILING THE APPEAL WITHIN THE DUE DATE AND IT HAS A MERIT IN ITS FAVOUR , WE CONDONE THE DELAY AND ADMIT THE SAME FOR HEARING AND ADJUDICATION. 3. BRIEF FACTS OF THE CASE ARE, THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF POWER GENERATION FROM WIND MILL, FILED ITS RETURN OF INCOME ELECTRONICALLY FOR THE AY 2012 - 13 ON 29/09/2012 DECLARING TOTAL INCOME OF RS. 13,93,770/ - UNDER THE NORMAL PROVISIONS AND BOOK PROFITS OF RS. NIL U/S 115JB OF THE INCOME - TAX ACT, 196 1 (IN SHORT THE ACT). THE RETURN WAS PROCESSED U/S 143(1) AND SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) WERE ISSUED. THE AO COMPLETED THE ASSESSMENT BY MAKING THE FOLLOWING ADDITIONS/DISALLOWANCES: I.T.A. NO. 2162 /HYD/1 8 LAKSHMI BALAJI BOTTLING PVT. LTD., HYD. 4 A) DISALLOWANCE U/S 14A RS. 16,95,026 B) DISALLOWANCE U/S 40(A)(IA) RS. 85,000 C) DISALLOWANCE OF LOSS ON SALE OF CAR RS. 8,15,559 D) DISALLOWANCE OF INTEREST ON TDS RS. 52,223 4. WHEN THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), THE CIT(A) DELETED THE DISALLOWANCES MADE BY THE AO ON ACCOUNT OF DISALLOWANCE U/S 14A AND DISALLOWANCE OF INTEREST ON TDS AND SUSTAINED THE DISALLOWANCE IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT OF RS. 85,000/ - AND DISALLOWANCE OF LOSS ON SALE OF CA R OF RS. 8,15,559/ - . 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW BY PARTLY ALLOWING THE CASE. 2. THE LD. CIT (A) ERRED IN UPHOLDING THE ADDITION MADE BY THE AO BY DISALLOWING AN AMOUNT OF RS.8,15,559 / - TOWAR DS L OSS ON SA LE OF VEHICLE WITHOUT APPREC IATING THE DETAILS SUBMITTED BY THE ASSESSEE. 3. T HE LD. CIT (A) OUGHT TO HAVE APPRECIATED THAT THE VEHICLE WAS USED BY THE ASSESSEE FOR BUSINESS PURPOSE ONLY AND HENCE IT IS ALLOWABLE AS EXPENDITURE U/S 37(1) OF THE ACT. 4. THE LD. CIT (A) ERRED IN UP HOLDING THE DISALLOWANCE MADE IN ASSESSMENT BY AO A SUM OF RS. 85,000/ - U/S 40(A)(IA) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE APPELLANT WAS NOT SEEMED AS AN ASSESSEE IN DEFAULT U/S.201 OF THE I .T. ACT. 5 . THE LD. CIT (A) OUGHT TO HAVE APPRECI ATED THE FACT THAT AO HAS ERRED IN DISALLOWANCE THE ABOVE CLAIM, WITHOUT THE APPELLANT BEING DEEMED AS AN ASSESSEE IN DEFAULT IN TERMS OF SECTION 201 OF THE ACT. 6. THE APPELLANT MAY ADD OR ALTER OR AMEND MODIFY OR SUBSTITUTE OR DELETE AND OR RESCIND AL L OR ANY OF THE I.T.A. NO. 2162 /HYD/1 8 LAKSHMI BALAJI BOTTLING PVT. LTD., HYD. 5 GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEA RING OF THE APPEAL. 6. GROUND NOS. 1 & 6 ARE GENERAL IN NATURE, HENCE, NEED NO ADJUDICATION. 6.1 AS REGARDS GROUND NOS. 1 & 2 RELATING TO THE DISALLOWANCE OF LOSS ON SALE OF VEHICLE AMOUNTING TO RS. 8,15,559/ - , THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS. 17,54,653/ - TOWARDS ADMINISTRATIVE EXPENSES OUT OF WHICH RS. 10,84,979/ - RELATE S TO OFFICE MAINTENANCE EXPENDITURE. FURTHER, THE AO OBSERVED THAT ON VERIFICATION OF DETAILS OF OFFICE MAINTENANCE EXPENDITURE, IT WAS NOTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 8,15,559/ - TOWARDS LOSS ON SALE OF VEHICLE, WHICH IS NOT AN ALLOW ABLE EXPENDITURE U/S 37(1) OF THE ACT. ACCORDINGLY, HE DISALLOWED THE SAID AMOUNT OF RS. 8,15,559/ - U/S 37(1) OF THE ACT. 7. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE SAID VEHICLE IS USED IN THE REGULAR COURSE OF BUSINESS AND HENCE, THE SAID EXP ENDITURE IS DEBITED TO P&L A/C AND NOT ADDED BACK IN THE COMPUTATION OF TOTAL INCOME. FURTHER, IT WAS CONTENDED THAT THE AO IS NOT CORRECT IN DISALLOWING THE SAID EXPENDITURE U/S 37(1) OF THE ACT AS IT IS AN ALLOWABLE BUSINESS EXPENDITURE. 8. AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) REJECTED SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE MADE BY THE AO BY HOLDING THAT LOSS ON SALE OF VEHICLE IS NOT AN ALLOWABLE EXPENDITURE U/S 37(1) OF THE ACT. 9. CONSIDERED THE RIVAL SU BMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US, THE LD. AR OF THE ASSESSEE RELIED ON THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF M/S CAMBRIDGE TECHNOLOGY ENTERPRISES LTD. IN ITA NO. I.T.A. NO. 2162 /HYD/1 8 LAKSHMI BALAJI BOTTLING PVT. LTD., HYD. 6 213/HYD/2016, DATED 16/12/2016 WHEREIN THE BENCH HAS HELD AS UNDER: 16. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE ARE OF THE OPINION THAT THE ASSESSEE'S CONTENTIONS NEEDS VERIFICATION BY THE AO AS THE SPECIFIC ASSET WHICH HAS BEEN SOLD AND THE LOSS THEREON IS NOT EVIDENT FROM EITHER THE ASSESSMENT ORDER OR THE DRP'S ORDER AND THEREFORE, THE ASSESSEE'S CONTENTION THAT THE LOSS HAS BEEN REDUCED FROM THE BLOCK OF ASSETS IS NOT ACCEPTABLE AT THIS STAGE WITHOUT THE SPECIFIC DETAILS. THEREFORE, THIS ISSUE IS SET ASIDE TO THE FILE OF THE AO FOR VERIFICATIO N AFTER GIVING THE ASSESSEE A FAIR OPPORTUNITY OF HEARING AND CONSIDERING THE ASSESSEE'S SUBMISSIONS ON THE ISSUE. FOLLOWING THE SAID DECISION, WE REMIT THE ISSUE BACK TO THE FILE OF THE AO TO VERIFY WHETHER THE ASSE T UNDER CONSIDERATION IS PART OF BLOC K OF ASSETS AND ASSESSEE HAS CLAIMED ANY DEPRECIATION, IF SO , THE CLAIM OF THE ASSESSEE MAY BE ALLOWED. 10. AS REGARDS GROUND NOS. 4 & 5 RELATING TO DISALLOWANCE OF RS. 85,000/ - U/S 40(A)(IA) OF THE ACT, THE AO OBSERVED THAT THE ASSESSEE CLAIMED AN AMOUN T OF RS. 85,000/ - TOWARDS PAYMENT TO AUDITORS, BUT, NO TDS WAS DEDUCTED ON THE SAID EXPENDITURE. HENCE, HE DISALLOWED THE SAID EXPENDITURE U/S 40(IA)(A) OF THE ACT. 11. BEFORE THE CIT(A), THE ASSESSEE, INTER - ALIA, SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 40(A)(IA), IF AN ASSESSEE FAILS TO DEDUCT OR PAY TAX THEN HE SHOULD BE ASSESSED U/S 201(1) OF THE ACT AND SINCE THE AO HAS NOT TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT U/S 201(1) AND NOT PROCEEDINGS WERE INITIATED, THE DISALLOWANCE MADE BY THE A O INVOKING THE PROVISIONS OF SECTION 40(A)(IA) IS NOT IN ACCORDANCE WITH LAW. I.T.A. NO. 2162 /HYD/1 8 LAKSHMI BALAJI BOTTLING PVT. LTD., HYD. 7 12. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) DIRECTED THE AO TO FOLLOW THE DECISION OF THE ITAT IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS, VISAKHAPATN AM. 13 BEFORE US, THE LD. AR OF THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE CIT(A) AND SUBMITTED THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT, WHEREIN THERE IS NO PROCEEDINGS U/S 201(1) OF THE ACT. FOR THIS PROPOSITION, HE REL IED ON VARIOUS CASE LAW INCLUDING THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF M/S VISU INTERNATIONAL LTD. VS. CIT, ITA NO. 488/HYD/2013. 14. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF REVENUE AUTHORITIES. 15. CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. THE AO CAN INVOKE SECTION 40(A)(IA) ONLY AFTER DUE VERIFICATION WHETHER THE ASSESSEE IS AN ASSESSEE IN DEFAULT. SINCE, AO HAS NOT MADE ANY REFERENCE, AS PER THE JUDICIAL PRECEDENT, AO CANNOT MAKE ADDITION WHEN THE RECIPIENT DECLARED THE ABOVE PAYMENT AS THEIR INCOME IN THE RETURN OF INCOME, IT AMOUNTS DOUBLE TAXATION. THEREFORE, WE REMIT THIS ISSUE TO THE FILE OF AO TO VERIFY WHETHER THE RECIPIENT I.E. THE AUDITOR HAS DECLARED THE AMOUNT OF RS. 85,000/ - AS THEIR INCOME. I F THE AMOUNT IS DECLARED AS INCOME, NO DISALLOWANCE CAN BE MADE ON THIS ACCOUNT. ACCORDINGLY, THE GROUNDS RAISED ON THIS ISSUE ARE ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NO. 2162 /HYD/1 8 LAKSHMI BALAJI BOTTLING PVT. LTD., HYD. 8 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 12 TH JU LY , 2019. SD/ - ( P. MADHAVI DEVI ) JUDICIAL MEMBER SD/ - ( S. RIFAUR RAHMAN ) ACCOUNTANT MEMBER HYDERABAD, DATED 12 TH JULY , 201 9. KV COPY FORWARDED TO: 1. LAKSHMI BALAJI BOTTLING PVT. LTD., C/O P. MURALI & CO., CAS, 6 - 3 - 655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD 82 2 . I TO, WARD 16 ( 1 ), HYDERABAD . 3 . CIT (A) - 4 , HYDERABAD 4. PR. CIT - 4 , HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE