M/s Himalya International Ltd., New Delhi V. DCIT, New Delhi

ITA 228/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1346 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 14-10-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 20-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIV MEHROTRA
• Assessee Lawyers: G R AGNIHOTRI
• Keywords: Opportunity of being heard; Set aside
• Section: 14A; 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI D.R.SINGH, JM AND SHRI R.C.SHARMA, AM ITA NO.228/DEL/2009 ASSESSMENT YEAR : 2003-04 M/S HIMALYA INTERNATIONAL LIMITED, NO.206, AGGARWAL SQUARE PLAZA, PLOT NO.9, POCKET-7, SECTOR-12, DWARKA, NEW DELHI 110 075. PAN NO.AAACH0158H. VS. DY.COMMISSIONER OF INCOME TAX, CIRCLE-12(1), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO.815/DEL/2009 ASSESSMENT YEAR : 2003-04 DY.COMMISSIONER OF INCOME TAX, CIRCLE-12(1), NEW DELHI. VS. M/S HIMALYA INTERNATIONAL LIMITED, NO.206, AGGARWAL SQUARE PLAZA, PLOT NO.9, POCKET-7, SECTOR-12, DWARKA, NEW DELHI 110 075. PAN NO.AAACH0158H. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.R.AGNIHOTRI, ADVOCATE. REVENUE BY : SHRI RAJIV MEHROTRA, CIT-DR. ORDER PER R.C.SHARMA, AM : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 24.12.2008 FOR AY 2003-04, IN THE MATTER OF ORDER PASSED BY THE AO U/S 143(3)/144 OF THE IT ACT. ITA-228/D/2009 & 815/D/2009 2 2. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN T HE BUSINESS OF MANUFACTURING, FOOD PROCESSING AND INFOTECH. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND DETAILED INFORMATION WAS CALLED BY THE AO. THE AO OBSERVED THAT ASSESSEE HAS DELIBERATELY DELAYED SUBMISSION OF RELEVANT DETAILS DESPITE BEING GIVEN NUMEROUS OPPORTUNITIES. VARIOUS DATES ON WHICH ADJOURNMENT WAS SOUGHT FOR OR THERE WAS NO APPEARANCE ON BEHALF OF THE ASSESSEE WAS ELABORA TELY MENTIONED BY THE AO IN HIS ORDER. AO FOUND THAT ASSESSEE HAS CLAIMED SELL ING AND ADMINISTRATIVE EXPENSES OF RS.5,85,45,000/- OUT OF WHICH EXPENSES OF USA SA LES OFFICE WERE RS.478.76 LAKHS. THE AO OBSERVED THAT DESPITE GIVING VARIOUS OPPORTUNITIES, THE ASSESSEE HAS NOT FURNISHED REQUIRED DETAILS, THEREFORE CASE WAS FINALIZED WITH THE DETAILS AVAILABLE ON RECORD, WHEREIN HALF OF THE US OFFICE EXPENSES WERE DISALLOWED AND ADDED BACK TO THE ASSESSEES INCOME. THE AO ALSO D ECLINED ASSESSEES CLAIM FOR DEDUCTION U/S 80IA ON THE PLEA THAT ASSESSEE WAS NO T ENGAGED IN THE MANUFACTURE OR PRODUCTION ACTIVITY. AS PER AO, ASSESSEE WAS PR IMARILY ENGAGED IN THE GROWING AND EXPORTING MUSHROOMS, WHICH IS NOT INDUSTRIAL AC TIVITY. THE AO ALSO DECLINED CLAIM OF EXPENSES IN RESPECT OF INFOTECH DIVISION B Y INVOKING PROVISIONS OF SECTION 14A READ WITH SECTION 10A, ON THE PLEA THAT THESE E XPENSES WERE IN RESPECT OF A DIVISION, INCOME OF WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE. FINALLY, ASSESSMENT WAS COMPLETED U/S 143(3)/144, W HEREIN RETURNED LOSS OF RS.2.94 CRORES WAS ASSESSED AT NIL INCOME. BY THE IMPUGNED ORDER, CIT(A) DELETED DISALLOWANCE OF EXPENDITURE OF RS.1.29 CROR ES OUT OF ADDITION OF RS.2.39 CRORES MADE BY THE AO AFTER DISALLOWING EXPENSES IN CURRED ON BEHALF OF US OFFICE. THE CIT(A) ALSO DIRECTED FOR CARRY FORWARD OF LOSS OF RS.4.15 CRORES PERTAINING TO THE INFOTECH DIVISION AS NORMAL BUSINESS LOSS WHERE AS IT WAS PERTAINING TO THE EXEMPT UNIT. AGGRIEVED BY THIS ORDER OF CIT(A), BO TH REVENUE AND ASSESSEE ARE IN APPEAL BEFORE US. ASSESSEE IS AGGRIEVED FOR DISALL OWING PART OF THE EXPENDITURE OF RS.1.09 CRORES OUT OF SELLING AND ADMINISTRATIVE EX PENSES OF RS.1.56 CRORES WHICH HAD BEEN INCURRED BY CONSIGNEE FOR THE SALE OF GOOD S OF ASSESSEE IN USA. THE ASSESSEE IS ALSO AGGRIEVED FOR DISALLOWING MOST OF THE EXPENSES INCURRED BY CONSIGNEE ON BEHALF OF ASSESSEE AND WHICH HAS BEEN RECOVERED BY THE CONSIGNEE ITA-228/D/2009 & 815/D/2009 3 OUT OF THE SALE PROCEEDS OF THE ASSESSEE IN USA. R EVENUE IS AGGRIEVED FOR THE RELIEF GIVEN BY THE CIT(A). 3. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND FOUND THAT BECAUSE OF NON-COOPERATIVE ATTITUDE OF THE ASSESSEE IN FURNISHING VARIOUS DETAILS, THE ASSESSMENT WAS FRAMED U/S 143(3)/144. CONTENTI ON OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT AO CANNOT COMPUTE THE INCOME MERELY ON GUESS WORK, CONJECTURES OR SPECULATION. IT WAS ALSO STATED THA T IF THE ORDER OF THE AO SUFFERS FROM FAILURE TO CONSIDER THE MATERIAL BEFORE HIM, S UCH ORDER IS LIABLE TO BE SET ASIDE. WE FOUND FROM THE RECORD THAT ON VARIOUS DA TES AS MENTIONED ELABORATELY IN THE ASSESSMENT ORDER, THERE ARE EITHER PART COMPLIA NCE OR A COMPLETE ABSENCE OF PARTICIPATION IN THE ASSESSMENT PROCEEDINGS. AT TH E VERY SAME TIME, IT IS TRUE THAT WHILE MAKING A BEST JUDGEMENT ASSESSMENT, THE AO MU ST MAKE WHAT HE HONESTLY BELIEVES TO BE A FAIR ESTIMATE OF THE PROPER FIGURE OF ASSESSMENT AND FOR THIS PURPOSE, HE SHOULD TAKE INTO CONSIDERATION TOTALITY OF FACTS AND CIRCUMSTANCES AND THE MATERIAL BEFORE HIM. THOUGH THE POWERS CONFERR ED UNDER THIS SECTION ON THE AO ARE WIDE, THE LIMITS OF THE POWER ARE IMPLICIT I N THE EXPRESSION BEST OF HIS JUDGMENT. WHILE AN ESTIMATE IS NORMALLY INEVITABL E IN SUCH KIND OF ASSESSMENT, IT SHOULD NOT BE ARBITRARY OR PUNITIVE, BUT IT MUST HA VE A REASONABLE NEXUS TO THE MATERIAL AVAILABLE. THE AO CANNOT COMPUTE THE INCO ME MERELY ON GUESSWORK, CONJUNCTURE OR SPECULATION. IF THE ORDER SUFFERS F ROM EVEN FAILURE TO INDICATE THE RELIANCE OF MATERIAL OR BASIS OF INCOME ASSESSED, S UCH ORDER IS LIABLE TO BE SET ASIDE. FOR THIS PURPOSE, RELIANCE MAY BE PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MAHARAJA SHRI B.P.SING H DEO 76 ITR 690. THE CIT(A) HAS ALSO NOT APPRECIATED THE CORRECT LEGAL P OSITION WITH REGARD TO SET OFF AND CARRY FORWARD LOSS OF EXEMPT UNIT. IN CASE ASS ESSEE IS HAVING ONE OF THE UNIT EXEMPT FROM TAX, LOSS OF SUCH UNIT IS TO BE ACCUMUL ATED AND WHENEVER SUCH UNIT IS HAVING INCOME, AFTER SETTING OFF CARRY FORWARD LOSS OF SUCH UNIT AGAINST INCOME OF EXEMPTED UNIT, DEDUCTION ALLOWABLE UNDER IS TO BE C ONSIDERED. PROFITABILITY AND DEDUCTION PERMISSIBLE TO SUCH UNIT IS TO BE LOOKED INTO INDEPENDENTLY AS PER ITA-228/D/2009 & 815/D/2009 4 PROVISIONS OF LAW. DURING THE COURSE OF HEARING, B OTH LEARNED AR AND LEARNED DR AGREED THAT MATTER MAY BE RESTORED BACK TO THE FILE OF THE AO FOR DECIDING ALL THE ISSUES AFRESH. KEEPING IN VIEW TOTALITY OF FACTS A ND CIRCUMSTANCES OF CASE, WE RESTORE THE APPEAL TO AO AND DIRECT THE ASSESSEE TO PRODUCE ALL THE RELEVANT DETAILS BEFORE THE AO, AND THE AO IS TO EXAMINE ALL THE ASS ESSEES CLAIM AFRESH AFTER GIVING HIM DUE OPPORTUNITY OF BEING HEARD. WE DIRE CT ACCORDINGLY. 4. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AND REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 14 TH OCTOBER, 2009. SD/- SD/- (D.R.SINGH) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14.10.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR