DEVEN CHAND JAIN HUF , SINGHBHUM V. DCIT CIRCLE-3 , RANCHI

ITA 264/RAN/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2144 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 01-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL ACIT
• Keywords: Depreciation; Business expenditure
• Section: 142(1); 234B; 201; 264

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH , RANCHI , BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ./ ITA NO. 264 / RAN /20 1 7 ( / ASS ESSMENT YEAR : 20 1 4 - 20 1 5 ) DEVEN CHAND JAIN(HUF) M.D.HOUSE, CHAIBASA, SADAR, SINGHBHUM, JHARKHAND - 833201 VS. DCIT, CIRCLE - 3, RANCHI ./ ./ PAN/GIR NO. : A A AHD 4479 E ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI DEVESH PODDAR, ADVOCATE /REVENUE BY : SHRI P.K.MONDAL , ACIT( DR ) / DATE OF HEARING : 20 / 0 5 /201 9 / DATE OF PRONOUNCEMENT 26 / 0 7 /201 9 / O R D E R THIS APPEAL HAS BEEN FI LED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), RANCHI , JHARKHAND, DATED 27.09.2017 PASSED IN FIRST APPEAL NO. CIT(A), RANCHI/10461 /201 6 - 1 7 FOR THE ASSESSMENT YEAR 201 4 - 201 5 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1. FOR THAT LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF EXPENSES MADE BY THE LD. A.O. APPELLANT INCURRED EXPENSES IN USUAL COURSE OF BUSINESS AND SUCH EXPENSES WERE ALLOWED IN PAST. LD. CIT(A) WAS NOT JUSTIFIED IN SUGGESTING THAT APPELLANT HAD NO BUSINESS ACTIVITY, AS SUCH, EXPENSES CLAIMED ARE TO BE DISALLOWED MERELY BECAUSE DURING THE YEAR THERE WAS NO INCOME RECEIVED FROM PARTNERSHIP FIRM. THE EXPENSES WHICH WERE INCURRED TO PROTECT INTEREST OF THE APPELLANT SHOULD NOT BE D ISALLOWED. 2. FOR THAT THE LD. CIT(A) WAS FURTHER JUSTIFIED IN MAKING THE ENHANCEMENT BY DISALLOWANCE OF THE EXPENSES CLAIMED BY THE APPELLANT WHICH WERE INCURRED IN USUAL COURSE OF BUSINESS. LD. CIT(A) DISALLOWED EXPENSES TOTAL OF RS. 9,66,637/ - INCURRE D BY ITA NO. 264 / R AN /201 7 2 THE APPELLANT ON ESTABLISHMENT OF REPAIR AND SERVICES CHARGES, LEGAL AND PROFESSIONAL CHARGES, POSTAGE, SECURITY, CHARGES ESTABLISHMENT EXPENSES AND ETC. ENHANCEMENT OF INCOME BY DISALLOWANCE ON EXPENSES IS UNJUSTIFIED, ARBITRARY AND ILLEGAL. 3. FO R THAT INTEREST U/S 234A AND 234 B SHOULD BE CHARGED ON THE RETURNED INCOME AND NOT ON THE ASSESSED INCOME FOLLOWING THE DECISION OF JHARKHAND HIGH COURT. 4. FOR THAT OTHER GROUNDS IN DETAIL WILL BE ARGUED AT THE TIME OF HEARING . 3. BRIEF FACTS OF THE C ASE ARE THAT THE ASSESSEE IS AN HUF AND ENGAGED IN THE BUSINESS OF SHARE TRADING & CURRENCY FUTURES AND FILED ITS ORIGINAL RETURN OF INCOME ON 27.09.2014 SHOWING TOTAL INCOME AT RS. 1,10,022/ - , WHICH WAS PROCESSED AND SELECTED FOR SCRUTINY AND NOTICES U/S.1 43(2) & 142(1) OF THE ACT WERE ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE. ACCORDINGLY, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER AFTER VERIFICATION OF NECESSARY DETAILS, ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS. 24,05,420/ - MAKING ADDITION OF RS.25,15,443/ - ON ACCOUNT OF CAR RUNNING EXPENSES, CAR INSURANCE PREMIUM AND INTEREST PAID ON CAR LOAN. AGAINST WHICH THE ASSESSEE CARRIED THE MATTER TO THE CIT(A). IN THE APPELLATE PROCEED INGS THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ENHANCING THE INCOME OF THE ASSESSEE BY RS.9,66,637/ - 4. AGGRIEVED BY THE ORDER OF CIT(A), NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 5. LD. AR SUBMITTED THAT THE LD. FIRST APPELL ATE AUTH ORITY WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF EXPENSES MADE BY THE AO AS THE ASSESSEE ACTUALLY INCURRED EXPENSES IN THE USEFUL COURSE OF BUSINESS AND IMPUGNED EXPENSES WERE REGULARLY AND CONSISTENTLY ALLOWED DURING ITA NO. 264 / R AN /201 7 3 THE IMMEDIATELY PRECEDING YEA RS BY THE REVENUE AUTHORITIES. THE LD. AR FURTHER SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONCLUDING THAT THE ASSESSEE HAD NO BUSINESS ACTIVITY AND SUCH EXPENSES CLAIMED ARE TO BE DISALLOWED MERELY BECAUSE DURING THE RELEVANT YEAR THERE WAS NO I NCOME RECEIVED FROM THE PARTNERSHIP FIRM. LD. AR CONTENDED THAT THE EXPENSES INCURRED BY THE ASSESSEE FOR MAINTENANCE OF ESTABLISHMENT OF PARTNERSHIP FIRM AND TO PROTECT THE INTEREST OF THE ASSESSEE FIRM AND TO COMPLY WITH THE LEGAL STATUTORY PROVISIONS O F THE VARIOUS ACTS APPLICABLE TO THE PARTNERSHIP FIRM, THEREFORE, THE SAME CANNOT BE DISALLOWED. LD.AR FURTHER SUBMITTED THAT THE FIRST APPELLATE AUTHORITY WAS NOT CORRECT IN MAKING THE ENHANCEMENT OF DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE WHICH WAS INCURRED DURING THE USEFUL COURSE OF BUSINESS OF ESTABLISHMENT OF REPAIRS AND SERVICE CHARGES, LEGAL AND PROFESSIONAL CHARGES, POSTAGE AND COURIER CHARGES, SECURITY CHARGES, ESTABLISHMENT EXPENSES ETC. THEREFORE, ENHANCEMENT OF INCOME BY ENHANCING THE DISALLOWANCE OF EXPENSES WAS UNJUSTIFIED, ARBITRARY AND ILLEGAL. PLACING RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INTEGRATED TECHNOLOGIES LTD., IN ITA NO.530/2011, ORDER DATED 16.12.2011, LD. AR SUBMITTED THAT FOR ALLOWIN G ESTABLISHMENT EXPENSES, IT IS THE ONLY CONDITION THAT BUSINESS SHOULD NOT HAVE BEEN CLOSED DOWN ONCE FOR ALL AND THAT THE ASSESSEE SHOULD DEMONSTRATE THAT THE HOPES OF THE BUSINESS BEING REVIVED ARE ALIVE AND REAL. LD. AR SUBMITTED THAT THE AO HAS NOT R AISED ANY DOUBT REGARDING INCURRING OF EXPENSES AND QUANTUM THEREOF. THEREFORE, NO DISALLOWANCE COULD HAVE BEEN SUSTAINED OR ENHANCED. ITA NO. 264 / R AN /201 7 4 LASTLY, LD. AR PRAYED THAT THE IMPUGNED FIRST APPELLATE ORDER MAY KINDLY BE DISMISSED BY ALLOWING THE GROUNDS OF APPEAL OF THE ASSESSEE AND THE AO MAY KINDLY BE DIRECTED TO DELETE THE SAME. 6. REPLYING TO THE ABOVE, LD. DR VEHEMENTLY SUPPORTED THE ACTION OF AUTHORITIES BELOW AND SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MALAYALAM PLANTATIONS LTD.53 ITR 140 (SC) HELD THAT THE EXPRESSION FOR THE PURPOSE OF BUSINESS IS WIDER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING PROFITS. LD. DR ALSO SUBMITTED THAT THERE WAS NO INCOME DURING THE RELEVANT FINANCIAL PERIOD TO THE ASSESSEE FROM THE SAID E STABLISHMENT, THEREFORE, EXPENSES INCURRED BY THE ASSESSEE CANNOT BE ALLOWED AND, THUS, THE IMPUGNED FIRST APPELLATE ORDER MAY KINDLY BE UPHELD. LD. DR FURTHER SUBMITTED THAT THE AO HAD MADE DISALLOWANCE OF RS.26,60,331/ - , WHICH WAS RIGHTLY ENHANCED BY THE CIT(A) TO RS. 35,97,298/ - , THEREFORE, THE IMPUGNED ORDER MAY KINDLY BE UPHELD. 7. IN REJOINDER, THE LD. AR SUBMITTED THAT FROM THE RETURN OF INCOME, IT IS CLEARLY DISCERNIBLE THAT THE ASSESSEE HAD EARNED AND SHOWN THE INCOME FROM INTEREST FREE SAVING ACCOU NT OF RS.16,15,129/ - AND INTEREST ON LOAN OF RS.18,66,951/ - BUT NO INCOME UNDER THE HAD INCOME FROM BUSINESS OR PROFESSION WAS DECLARED BUT EARNING INCOME IS NOT A PRE - CONDITION FOR CLAIMING BUSINESS AND ESTABLISHMENT EXPENSES. 8. ON CAREFUL CONSIDERATION OF THE ABOVE RIVAL SUBMISSIONS, AT THE VERY OUTSET, FROM THE ASSESSMENT ORDER AS WELL AS FROM THE FIRST APPELLATE ORDER, I CLEARLY OBSERVE THAT THE REVENUE AUTHORITIES HAVE NOT DOUBTED INCURRING OF EXPENDITURE AND QUANTUM OF RS.35,97,298/ - CLAIMED BY THE ITA NO. 264 / R AN /201 7 5 A SSESSEE ON VARIOUS HEADS INCLUDING CAR INSURANCE PREMIUM, INTEREST PAID ON CAR LOAN, REPAIR AND SERVICE CHARGES, CAR RUNNING AND MAINTENANCE, TELEPHONE EXPENSES, HOUSE TAX, PRINTING AND STATIONERY, LEGAL AND PROFESSIONAL CHARGES, POSTAGE AND COURIER CHARGE S, SECURITY CHARGES AND ESTABLISHMENT EXPENSES. THIS FACT HAS NOT BEEN CONTROVERTED OR DISPUTED BY THE REVENUE AUTHORITIES THAT THESE EXPENSES WERE CONSISTENTLY AND CONTINUOUSLY ALLOWED TO THE ASSESSEE DURING THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. I AM IN AGREEMENT WITH THE CONTENTION OF LD. AR WITH REGARD TO EARNING FROM BUSINESS AND PROFESSION INCOME IS NOT A PRE - CONDITION FOR CLAIMING BUSINESS AND ESTABLISHMENT EXPENDITURE SPECIFICALLY WHEN THE ASSESSEE IS SHOWING HUGE INTEREST INCOME ON SAVING ACCOU NT AND OTHER CREDITS IN THE RETURN OF INCOME DURING THE RELEVANT PERIOD. 9. IN THE CASE OF INTEGRATED TECHNOLOGIES LTD (SUPRA), IN PARA 9, THE HONBLE DELHI HIGH COURT HAS HELD THUS : 9. THE TRIBUNAL HAS REFERRED TO THE JUDGMENTS IN CAPITAL BUS SERVICE ( SUPRA), CIT VS. REFRIGERATION AND ALLIED INDUSTRIES LTD. (SUPRA) & CIT VS. PANACEA BIOTECH LTD. (SUPRA) AND HAS APPLIED THE RATIO LAID DOWN THEREIN TO THE FACTS OF THE PRESENT CASE. THE RATIO IN BRIEF IS THAT IT IS NOT NECESSARY THAT THE PLANT AND MACHINER Y OWNED BY THE ASSESSEE SHOULD BE ACTUALLY PUT TO USE IN THE RELEVANT ACCOUNTING YEAR TO JUSTIFY THE CLAIM OF DEPRECIATION AND THAT EVEN IF THE PLANT AND MACHINERY OR OTHER ASSET IS KEPT READY FOR USE IN THE ASSESSEE'S BUSINESS, THE ASSESSEE WOULD BE ENTIT LED TO DEPRECIATION. THE ONLY CONDITION IS THAT THE BUSINESS SHOULD NOT HAVE BEEN CLOSED DOWN ONCE FOR ALL AND THAT THE ASSESSEE SHOULD DEMONSTRATE THAT THE HOPES OF THE BUSINESS BEING REVIVED ARE ALIVE AND REAL. IT IS HOWEVER NOT A MATTER THAT CAN TURN EN TIRELY ON THE ASSESSEE'S HOPES ALONE. THERE SHOULD BE EVIDENCE OR MATERIAL TO SHOW THAT THE ASSESSEE TOOK EFFORTS TO KEEP THE BUSINESS ALIVE IN THE HOPE OF REVIVING THE SAME. MAINTAINING THE OFFICE AND ESTABLISHMENT, COMPLYING WITH THE STATUTORY FORMALITIE S, NOT DISPOSING OF THE PLANT AND MACHINERY, INCURRING EXPENSES ON THE REPAIR OF PLANT AND MACHINERY ETC., ARE SOME OF THE INDICATIONS OF NURTURING THE HOPES OF REVIVING THE BUSINESS. THE ABOVE ARE ONLY ILLUSTRATIVE INSTANCES AND ARE BY NO MEANS EXHAUSTIVE AND THE ITA NO. 264 / R AN /201 7 6 QUESTION AS TO WHETHER THE ASSETS WERE KEPT READY FOR USE IN THE BUSINESS IS LARGELY TO BE DECIDED ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN OUR OPINION, THE TRIBUNAL HAS NOT COMMITTED ANY ERROR IN APPLYING THE RATIO LAID DOWN IN THE JUDGMEN TS OF THIS COURT TO THE FACTS OF THE PRESENT CASE IN ORDER TO UPHOLD THE ASSESSEE'S CLAIM FOR DEPRECIATION. 10. IN VIEW OF THE ABOVE, I AM INCLINED TO HOLD THAT WHEN THE QUANTUM OF EXPENDITURE AND INCURRING OF SAME FOR THE PURPOSE OF BUSINESS OF ASSESSEE HAS NOT BEEN DISPUTED BY THE REVENUE AUTHORITIES, THEN MERELY BECAUSE THE ASSESSEE HAS NOT SHOWN ANY BUSINESS OR PROFESSION INCOME DURING THE RELEVANT FINANCIAL PERIOD, THE BUSINESS EXPENSES FOR MA INTENANCE OF ESTABLISHMENT AND OTHER REQUIREMENTS CANNOT B E DISALLOWED. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF INTEGRATED TECHNOLOGIES LTD.(SUPRA) , WE HOLD THAT THE AO WAS NOT CORRECT IN MAKING DISALLOWANCE AND THE LD. CIT(A) WAS ALSO NOT JUSTIFIED I N CONFIRMING THE DISALLOWANCE AND ALSO ENHANCING THE SAME. THEREFORE, THE ENHANCEMENT OF DISALLOWANCE MADE BY THE CIT(A) IS DISMISSED AND THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE FOR BUSINESS AND ESTABLISHMENT EXPENSES. ACCORDINGLY, GROUND NOS .1 & 2 ARE ALLOWED. 11. GROUND NO.3 RELATES TO CHARGING INTEREST U/S 234 A& 234 B OF THE ACT BY THE AO AND CONFIRMED BY THE CIT(A). I HAVE GONE THROUGH THE DECISION OF HON'BLE JHARKHAND HIGH COURT IN THE MATTER OF AJAY PRAKASH VERMA VS. ITO(2010) TA NO 38 OF 2010 REPORTED IN 2013(1) TMI 140 , PLACED BY THE LD. AR OF THE ASSESSEE BEFORE THE BENCH AND FOUND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORESAID CASE HAS HELD THAT THE REVENUE CAN LEVY THE INTEREST ONLY ON THE TOTAL INCOME DECLARED IN THE RET URN OF ITA NO. 264 / R AN /201 7 7 INCOME AND NOT ON THE INCOME ASSESSED AND DETERMINED BY THE AO TO THAT EXTENT. THEREFORE, THE AO IS DIRECTED TO DELETE THE INTEREST LEVIED U/S.234 A & 234B OF THE ACT. 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN PURSUAN CE WITH RULE 34/4 OF ITAT RULES, 1963 BY PUTTING COPY OF THE SAME ON NOTICE BOARD ON 26 /07/2019, AT RANCHI. SD/ - ( CHANDRA MOHAN GARG ) / JUDICIAL MEMBER / RANCHI ; DATED 26 / 0 7 /201 9 PRAKASH KUMAR MISHRA , S R.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, RANCHI 1. / THE APPELLANT - . DEVEN CHAND JAIN(HUF) M.D.HOUSE, CHAIBASA, SADAR, SING HBHUM, JHARKHAND - 833201 2. / THE RESPONDENT - DCIT, CIRCLE - 3, RANCHI 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, RANCHI 6. / GUARD FILE. / /TRUE COPY//