Shri Rahul Das, Uttar Pradesh V. CIT, Meerut

ITA 2346/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52476 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 12-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: KAVIND ER SINGH
• Keywords: Depreciation; Additional depreciation; Deemed dividend; Capital expenditure; TDS
• Section: 143(3); 2(22)(e); 263; 12; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.D. RANJAN ITA NO. 2346/DEL/2011 ASSESSMENT YEAR: 2006-07 RAHUL DASS, VS. COMMISSIONER OF IT, C/O M/S. KARTAR SINGH & CO. MEERUT. 86 BANK STREET, MEERUT CANTT. (PAN: AAJPD4374N) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI KAVIND ER SINGH, ADV. RESPONDENT BY: SHRI SUDESH GARG, CIT (DR) ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED COMMISSIONER OF INCOME-TAX, MEERUT DATED 28.03.2011 PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 FOR ASSESSMENT YEAR 2006-07. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LEARNED CIT HAS E RRED IN TAKING COGNIZANCE UNDER SECTION 263 AND SETTING ASIDE THE ASSESSMENT ORDER DATED 3 RD APRIL 2008 PASSED UNDER SEC. 143(3) OF THE ACT AND DIRECT ING THE ASSESSING OFFICER TO MAKE AN ADDITION OF RS.12,06,717 ADVANCED BY M/S . DASS GARAGE (P) LTD. TO THE ASSESSEE BEING DEEMED DIVIDEND UNDER SEC. 2( 22)(E) OF THE I.T. ACT, 1961. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS RUNNING A PROPRIETARYSHIP CONCERN, NAMELY, M/S. DASS MOTORS, ABU LANE, MERRUT. HE HAS FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2006-07 ON 30 TH OCTOBER, 2006 DECLARING TOTAL INCOME AT RS.3,08,225. THE CAS E OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) WAS ISSUED AND SERVED. AFTER HEARING THE ASSESSEE, ASSESSING O FFICER HAS PASSED THE ASSESSMENT ORDER ON 3.4.2008. HE DETERMINED THE TAX ABLE INCOME OF THE ASSESSEE AT RS.4,13,033. ON AN ANALYSIS OF ASSESSME NT RECORD, LEARNED COMMISSIONER ARRIVED AT A CONCLUSION THAT ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER WITHOUT CONDUCTING ANY INQUIRY. SH E ISSUED A SHOW-CAUSE NOTICE UNDER SEC. 263 OF THE ACT ON THE FOLLOWING I SSUES: 2. ON EXAMINATION OF THE RECORDS, IT IS EVIDENT TH AT THE SAID ASSESSMENT WAS PASSED WITHOUT PROPERTY ENQUIRY AND: A) THE A.O. HAS ALLOWED THE CLAIM OF TDS OF RS.231 BUT FAILED TO ASSESS INCOME OF RS.10,275 EARNED THEREON. B) THE ASSESSEE PAID INTEREST OF RS.45,000 ON WHICH NO TDS HAS BEEN DEDUCTED, AND ACCORDINGLY THE A.O. FAILED TO DISALLOW THIS EXPENSE UNDER SEC. 40(A)(IA); C) THE ASSESSEE IS HAVING 34.78% SHARE HOLDING IN DAS GARAGE PVT. LTD. AND RECEIVED ADVANCE OF RS.4,15,000 ON 1. 10.2005, RS.2,82,578 ON 12.12.2005 AND RS.5,09,139 ON 25.2.2 006 (TOTAL AMOUNT OF RS.12,06,717). THE A.O. HAS NOT EN QUIRED 3 INTO THE DETAILS OF THESE TRANSACTIONS FOR INVOKING PROVISIONS OF SEC. 2(22)(E). 3. IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER- PASS ED BY THE INCOME-TAX OFFICER, WARD 2(2), MEERUT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 3. AFTER HEARING THE ASSESSEE, LEARNED COMMISSIONER HAS PASSED THE IMPUGNED ORDER. LEARNED COMMISSIONER HAD DIRECTED T HE ASSESSING OFFICER TO EXAMINE TWO ISSUES ENUMERATED AT A & B (EXTRACTE D SUPRA IN THE SHOW- CAUSE NOTICE). WITH REGARD TO ITEM C IN THE SHOW-C AUSE NOTICE, LEARNED COMMISSIONER HAS MADE THE ADDITION OF RS.12,06,717. SHE DIRECTED THE ASSESSING OFFICER TO ISSUE REVISED DEMAND NOTICE AN D CHALLAN. 4. THE ASSESSEE HAD RAISED TWO FOLD GRIEVANCES IN T HE GROUNDS OF APPEAL. IN THE FIRST FOLD, HE HAS SUBMITTED THAT LEARNED CO MMISSIONER HAS ERRED IN TAKING COGNIZANCE UNDER SEC. 263 AND IN THE SECOND FOLD, ASSESSEE IS IMPUGNING INCLUSION OF RS.12,06,717 IN THE INCOME O F THE ASSESSEE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT A SCRUTINY ASSESSMENT HAS BEEN PASSED BY THE ASSESSING OFFICER MEANING THEREBY ASSESSING OFFICER MUST HAVE GONE THROUGH ALL THE AS PECTS RELATING TO DEEMED 4 DIVIDEND AND LEARNED COMMISSIONER HAS NO JURISDICTI ON TO ISSUE A SHOW- CAUSE NOTICE ON THOSE ISSUES WHICH WERE CONSIDERED BY THE ASSESSING OFFICER AND DECIDED IN ACCORDANCE WITH LAW. WITH REGARD TO HIS SECOND FOLD OF SUBMISSIONS, HE CONCEDED TO THE EXTENT THAT ALL ING REDIENTS OF SEC. 2(22)(E) OF THE ACT ARE PRESENT IN THE PRESENT CASE. HOWEVER, T HERE IS NO ACCUMULATED PROFIT WITH M/S. DASS GARAGE (P) LTD. WHICH COULD B E CONSTRUED AS A DEEMED DIVIDEND GIVEN BY THAT CONCERN TO THE ASSESSEE. IN ORDER TO BUTTRESS HIS CONTENTIONS, HE POINTED OUT THAT ACCUMULATED PROFIT FOR THE PURPOSE OF SEC. 2(22)(E) ARE TO BE WORKED OUT UP TO THE DATE OF EAC H PAYMENT OR ADVANCEMENT OF THE LOAN. M/S. DASS GARAGE HAS SHOWN ACCUMULATED PROFIT IN THE BALANCE SHEET AT THE END OF EACH YEAR BUT BEFOR E WORKING OUT THE ACCUMULATED PROFIT FOR THE PURPOSE OF SEC. 2(22)(E) OF THE ACT, THE DEDUCTION IN RESPECT OF EXPENDITURE INCURRED BY M/S. DASS GAR AGE ON ADDITION OF ASSETS BY WAY OF A DEVELOPMENT HAS TO BE GRANTED. HE TOOK US THROUGH PARAGRAPH 4.3 OF THE IMPUGNED ORDER, WHERE LEARNED COMMISSION ER HAS REPRODUCED THE DETAILS SUBMITTED BY THE ASSESSEE IN TABULAR FORM. ON THE STRENGTH OF THESE DETAILS, HE POINTED OUT THAT AS ON 31.3.2002 M/S. D ASS CARRIAGE (P) LTD. HAS SHOWN ACCUMULATED PROFIT OF RS.8,86,976.91. THIS CO NCERN HAS INCURRED A SUM OF RS.21,63,097 TOWARDS ADDITION OF ASSETS, MEA NING THEREBY THE NET ACCUMULATED PROFIT AVAILABLE AS OF 31.3.2002 WITH T HE COMPANY WAS A MINUS 5 FIGURE I.E. 2,76,120.29. SIMILARLY, HE EXPLAINED T HE POSITION IN OTHER YEARS. IN BRIEF, THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT BEFORE WORKING OUT ACCUMULATED PROFIT IN THE HANDS OF COMP ANY WHO HAS ADVANCED LOANS TO THE ASSESSEE, THE EXPENSES INCURRED TOWARD S ADDITION OF ASSETS HAS TO BE DEDUCTED. AFTER SUCH DEDUCTION, IF SOME AMOUNTS AVAILABLE ONLY THAT CAN BE CONSTRUED AS ACCUMULATED PROFIT. FOR BUTTRESSING HIS CONTENTION, HE RELIED UPON THE ORDER OF THE ITAT IN THE CASE OF MBS PURSH OTAM VS. ITO REPORTED IN 26 TTJ 520. HE HAS ALSO RELIED UPON THE ORDER OF THE ITAT, AHMEDABAD IN THE CASE OF MB STOCKHOLDINGS (P) LTD. VS. ACIT REPO RTED IN 84 ITD 542. HE MADE A REFERENCE TO THE DECISION OF HON'BLE MUMB AI HIGH COURT IN THE CASE OF CIT VS. P.K. BADANI REPORTED IN 76 ITR 369. LEARNED COMMISSIONER HAS CONSIDERED THE JUDGMENT OF HON'BLE SUPREME COUR T AGAINST THIS JUDGMENT OF HON'BLE MUMBAI HIGH COURT REPORTED IN 1 05 ITR 642. IN THIS WAY, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THA T THERE IS NO ACCUMULATED PROFIT IN THE HANDS OF M/S. DASS CARRIAGE (P) LTD. WHICH COULD BE CONSTRUED AS DEEMED DIVIDEND WITHIN THE MEANING OF SEC. 2(22) (E) OF THE ACT. LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDER OF LEARN ED COMMISSIONER. HE POINTED OUT THAT THE M/S. DASS GARAGE (P) LTD. ITSE LF HAS SHOWN ACCUMULATED PROFIT AT THE END OF THE YEAR. SUCH DETAILS ARE AVA ILABLE IN ANNEXURE 9 AT PAGE NO. 15 OF THE PAPER BOOK. THE ACCUMULATED PROFIT HA S BEEN SHOWN ON 6 FINALIZATION OF ACCOUNTS AT THE END OF EACH YEAR. T HE ASSESSEE IS TRYING TO RECAST THE ACCOUNTS BY ADOPTING CERTAIN EXPENDITURE WHICH ACCORDING TO HIS UNDERSTANDING INCURRED TOWARDS THE ADDITION OF ASSE TS BUT NO SUCH THINGS ARE DISCERNIBLE FROM THE ACCOUNTS OF M/S. DASS GARAGE ( P) LTD. HOW THE EXPENSES CLAIMED BY THE ASSESSEE IS AN ADMISSIBLE D EDUCTION IN THE HANDS OF M/S. DASS GARAGE. HE FURTHER CONTENDED THAT ASSESS ING OFFICER DID NOT MAKE ANY INQUIRY IN THIS RESPECT, THEREFORE, HIS OR DER IS ERRONEOUS. HE RELIED UPON THE DECISION OF HON'BLE DELHI HIGH COURT IN TH E CASE OF GEE VEE ENTERPRISES REPORTED IN 99 ITR 373. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE ITAT IN THE CASE OF MRS. KHA TIZA S. OOMERBHOY VS. ITO,MUMBAI, 101 TTJ 1095, HAS ANALYZED IN DETAIL VARIOUS AUTHORITATIVE PRONOUNCEMENTS INCLUDING THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF MALABAR INDUSTRIES 243 ITR 83 AS WELL AS H ONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GABRIEL INDIA LTD. RE PORTED IN 203 ITR 108 AND HAS PROPOUNDED THE FOLLOWING BROADER PRINCIPLE TO JUDGE THE ACTION OF CIT TAKEN UNDER SECTION 263. THE FUNDAMENTAL PRINCIPLE WHICH EMERGE FROM THE A BOVE CASES MAY BE SUMMARIZED BELOW 7 (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE A.O IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. BO TH THE CONDITIONS MUST BE FULFILLED. (II) SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AN D EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE A,O AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCOR RECT APPLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION O F MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PRE JUDICIAL TO THE INTERESTS OF THE REVENUE AND IF THE A.O HAS ADOPTED ONE OF TH E COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE A.O HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT B E TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE A.O I S UNSUSTAINABLE UNDER LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE A.O EXAMI NES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINE THE INCOME, THE CIT, WHILE EXERC ISING HIS POWER UNDER S. 263 IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE A.O. (VII) THE A.O EXERCISES QUASI-JUDICIAL POWER VEST ED IN HIS AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARR IVES AT A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SI MPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER S. 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE A.O HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE A.O ALLOWS THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION OF TH E ASSESSEE, THE DECISION OF THE A.O CANNOT BE HELD TO BE ERRONE OUS SIMPLY 8 BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. 7. BEFORE EMBARKING UPON AN INQUIRY ABOUT THE FACTS OF THE PRESENT CASE AND HOW THOSE FACTS HAVE BEEN CONSIDERED BY THE LEA RNED REVENUE AUTHORITIES BELOW, WE DEEM IT APPROPRIATE TO MAKE A REFERENCE OF THE OBSERVATIONS OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF VEE GEE ENTERPRISES REPORTED IN 99 ITR 373 WHEREIN HON'BLE HI GH COURT HAS EXPOUNDED THE APPROACH OF THE ASSESSING OFFICER WHI LE PASSING ASSESSMENT ORDER. THE OBSERVATIONS OF THE HON'BLE HIGH COURT RE AD AS UNDER:- IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCELING THE ASSESSMENT ORDER OF THE INCOME-TAX OF FICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME-TAX OFFICER SHOULD HAVE MADE FURTHER INQ UIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. THE POSITION AND FUNCTION OF THE INCOME-TAX OFFICER IS VERY DIFF ERENT FROM THAT OF A CIVIL COURT. THE STATEMENT MADE IN A PLEADING PROVED BY THE MINI MUM AMOUNT OF EVIDENCE MAY BE ADOPTED BY A CIVIL COURT IN THE ABSENCE OF A NY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF T HE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME-TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF THE RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH 9 OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMST ANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. IT IS BECAUSE IT IS INCUMBENT O N THE ITO TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES W OULD MADE SUCH AN INQUIRY PRUDENT THAT THE WORD ERRONEOUS IN SECTION 263 IN CLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUC H AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH T HE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. 8. FROM PERUSAL OF THE ASSESSMENT ORDER, IT NOWHERE REVEALS THAT ASSESSING OFFICER HAS CONSIDERED THE ISSUE NARRATED IN THE SHOW-CAUSE NOTICE ISSUED UNDER SEC.263 BY THE LEARNED CIT. WE HAVE CO NFRONTED THE LEARNED COUNSEL FOR THE ASSESSEE TO SHOW THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER WHEREBY HE HAS INQUIRED THE APPLICABILITY O F SEC. 2(22)(E) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE WAS UNABLE TO GIVE ANY REPLY TO OUR QUERY. ASSESSING OFFICER HAS NOT ISSUED ANY SHOW-CA USE NOTICE ON THIS ISSUE. THUS, IT CAN SAFELY BE CONCLUDED THAT ON THIS ISSUE , ASSESSING OFFICER HAS ACCEPTED THE ACCOUNTING ENTRY AS IT IS WITHOUT MAKI NG ANY INQUIRY, THEREFORE, HIS ORDER HAS RIGHTLY BEEN HELD BY THE LEARNED COMM ISSIONER AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 10 9. THE NEXT ISSUE FOR OUR ADJUDICATION IS WHETHER T HERE WAS ACCUMULATED PROFIT IN THE HANDS OF M/S. D.G. (P). LTD. WHICH CA N BE TERMED AS DISBURSEMENT OF DEEMED DIVIDEND TO THE ASSESSEE WIT HIN THE MEANING OF SEC. 2(22)(E) OF THE ACT. THE ACCUMULATED PROFITS DETAI LS WITH M/S. D.G. (P) LTD. HAVE BEEN PLACED BY THE ASSESSEE ON PAGE 15 WHICH R EAD AS UNDER: ANNEXURE-9 CHART SHOWING ACCUMULATED PROFITS AS PER BALANCE SHEETS OF M/S. DAS GARAGE PVT. LTD., MEER UT S.NO. YEAR OF ENDING ASSESSMENT YEAR AMOUNT (RS.) 1. 31.03.2002 2002-03 8,86,976.91 2. 31.03.2003 2003-04 12,03,239.79 3. 31.03.2004 2004-05 9,01,345.16 4. 31.03.2005 2005-06 13,22,409.55 5. 31.03.2006 2006-07 17,00,621.04 NOTE: COPIES OF ALL BALANCE SHEETS ARE BEING PRODU CED AND CAN BE FILED, IF SO DIRECTED. 10. ON THE STRENGTH OF ITATS ORDER IN THE CASE OF MBS PURSHOTTAM, IT WAS CONTENDED BY THE ASSESSEE THAT EXPENSES INCURRE D ON ADDITION OF THE ASSETS SHOULD HAVE BEEN DEDUCTED FROM THE ACCUMULAT ED PROFIT AND IF ANY NET AMOUNT IS AVAILABLE AND THAT HAS BEEN DISBURSED BY M/S. D.G. (P) LTD. BY WAY OF A LOAN OR ADVANCE TO THE ASSESSEE, THEN IT C AN BE CONSTRUED AS DEEMED DIVIDEND. WE FIND THAT IN THE CASE OF MBS PURUSHOTT AM, THE ASSESSEE HAD INCURRED A SUM OF RS.2,95,360 WHICH WAS INCLUDED IN THE ACCUMULATED PROFIT BY THE ASSESSING OFFICER. OUT OF THIS TOTAL AMOUNT, SUM OF RS.82,000 WERE RELATING TO THE BUILDING IN RESEARCH AND DEVELOPMEN T DIVISION. INCLUSION OF 11 THIS AMOUNT IN THE ACCUMULATED PROFIT WAS NOT DISPU TED BY THE ASSESSEE. THE REST OF THE AMOUNT I.E. RS.2,12,360 WAS INCURRED FO R THE PLANT AND MACHINERY INSTALLED IN THE RESEARCH AND DEVELOPMENT DIVISION. IT WAS CONTENDED THAT THIS IS AN ALLOWABLE DEDUCTION UNDER SEC. 35 AND, THEREF ORE, IT CANNOT FORM PART OF ACCUMULATED PROFIT. THE FACTS OF THIS CASE ARE QUIT E DISTINGUISHABLE. THE ITAT HAS EXCLUDED THE EXPENDITURE WHICH HAVE BEEN I NCURRED BY THE ASSESSEE FOR RESEARCH AND DEVELOPMENT AND WHICH IS AN ALLOWABLE DEDUCTION UNDER SEC. 35. WE HAVE CONFRONTED THE LEARNED COUNS EL FOR THE ASSESSEE TO SHOW US UNDER WHICH PROVISION HE CAN CLAIM THE DEDU CTION IN RESPECT OF THE EXPENSES INCURRED TOWARDS ADDITION OF ASSETS. HE WA S UNABLE TO GIVE ANY REPLY RATHER HE KEPT ON EMPHASIZING THAT IN VIEW OF ITATS ORDER, ANY EXPENDITURE INCURRED BY THE ASSESSEE IS TO BE DEDUC TED FROM THE ACCUMULATED PROFIT. THIS ORDER OF THE ITAT IN ITSELF INDICATES THAT AMOUNT OF RS.82,000 INCURRED BY THE ASSESSEE TOWARDS BUILDING WAS NOT A N ALLOWABLE DEDUCTION AND IT WAS PERMITTED TO BE FORMED PART OF ACCUMULAT ED PROFIT. AS FAR AS THE SECOND JUDGMENT RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASE OF MB STOCKHOLDING IS CONCERNED, THAT IS ALSO NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. IN THAT CASE, THE ISSUE IS WHETHER CURRENT YEARS BUSINESS PROFIT IS TO BE CONSIDERED TOWARDS ACCUMUL ATED PROFIT OR NOT. THE ITAT WAS CALLED UPON TO EXPLAIN THE MEANING OF EXPL ANATION 2 APPENDED TO 12 THIS SECTION. THERE IS NO SUCH ISSUE IN THE PRESENT CASE. AS FAR AS THE JUDGMENT IN THE CASE OF PK BADANI IS CONCERNED, THE ISSUE WAS THAT THE COMPANY WHO HAD GIVEN LOAN TO THE ASSESSEE HAD CREA TED DEVELOPMENT REBATE. IT WAS CHARGED TO THE PROFIT AND LOSS ACCOU NT. IT WAS CONTENDED BY THE ASSESSEE THAT DEVELOPMENT REBATE IS A PERMISSIBLE D EDUCTION UNDER THE IT ACT. THE RESERVE CREATED BY THE COMPANY IS TO BE EX CLUDED FROM THE ACCUMULATED PROFIT. HON'BLE SUPREME COURT HAS NEGAT ED THE CLAIM OF THE ASSESSEE. HONBLE COURT WAS OF THE OPINION THAT IT WAS NOT A RECURRING ALLOWANCE FOR THE SUBSEQUENT YEAR LIKE THE ALLOWANC E OF NORMAL DEPRECIATION OR ADDITIONAL DEPRECIATION. THIS DECISION OTHERWISE GOES AGAINST THE ASSESSEE. LEARNED COUNSEL FAILED TO SHOW ANY PROVISION WHICH CAN SUGGEST THAT EXPENSES INCURRED FOR ADDITION OF ASSETS WOULD BE A N ALLOWANCE DEDUCTION. IF IT IS CAPITAL EXPENDITURE THEN DEPRECIATION WOULD B E ADMISSIBLE TO THAT ASSESSEE. WE HAVE EXTRACTED THE ACCUMULATED PROFIT WORKED OUT BY M/S. DASS GARAGE PVT. LTD. AT THE END OF EVERY YEAR. THIS MUS T HAVE BEEN DRAWN AFTER CONSIDERING EVERY ALLOWABLE EXPENDITURE TO THE ASSE SSEE. HOW THE ASSESSEE A THIRD PERSON CAN SAY THAT SUCH ACCOUNTS WERE NOT PR OPERLY DRAWN. LEARNED CIT HAS CONSIDERED ALL OTHER DECISIONS CITED BY THE ASSESSEE. AT THE END OF THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAS MOVED AN APPLICATION UNDER SEC. 154, LEARNED COMMISSIONER AF TER THE DECISION OF THIS 13 APPEAL, THAT WOULD BECOME REDUNDANT. WE DO NOT WISH TO COMMENT ON THIS ISSUE. IT IS ALTOGETHER A DIFFERENT REMEDY AND AGAI NST AN ORDER PASSED UNDER SEC. 154 BY THE LEARNED CIT. APPEAL WOULD BE AVAIL ABLE TO THE ASSESSEE. THE ISSUE IS NOT BEFORE US, THEREFORE, IT IS NOT AD VISEABLE ON OUR PART TO MAKE ANY COMMENTS. 11. TAKING INTO CONSIDERATION ALL THE FACTS AND CIR CUMSTANCES, WE DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS REJECTED. DECISION PRONOUNCED IN THE OPEN COURT ON 12.08.201 1 SD/- SD/- ( K.D. RANJAN ) ( R AJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 /08/2011 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR