The ITO, Ward-4(1), Ahmedabad V. M/s. Gallops Infrastructure Ltd.,, Ahmedabad

ITA 2803/AHD/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73035 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 25-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 11-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Assessee Lawyers: S N DIVETIA
• Keywords: Business income; Depreciation; Earning of tax free income; Bad and doubtful debts; Corroborative evidences; Revenue expenditure
• Section: 143(3); 14A; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI D.K. TYAGI, J.M. & SHRI ANIL CHATURVE DI, A.M.) I.T. A. NO. 2803/AHD/2012 (ASSESSMENT YEAR: 2008-09) THE ITO, WARD-4(1), AHMEDABAD V/S GALLOPS INFRASTRUCTURE LIMITED 10 TH FLOOR, ASTRON TECH PARK, S.G. HIGHWAY, OPP. FUN REPUBLIC, SATELLITE, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACX 0143J APPELLANT BY : SHRI J.P. JHANGID, SR. D. R. RESPONDENT BY : SHRI S.N. DIVETIA ( )/ ORDER DATE OF HEARING : 23-02-2014 DATE OF PRONOUNCEMENT : 07 -03-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-VIII, AHMEDABAD DATED 07.09.2012 FOR A.Y. 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION AND INFORMATION TECHNOLOGY. IT ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 2008-09 DECLARING TOTAL LOSS OF RS. 55,81,520/-. T HE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U /S. 143(3) VIDE ORDER ITA NO 2803/AHD/2012 . A.Y. 2008 -09 2 DATED 15.12.2010 AND THE TOTAL INCOME WAS DETERMINE D AT RS. 20,96,590/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED TH E MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 7.09.2012 GRANTED PARTIAL R ELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE ASSESSING OFFICER TO RESTRICTING DISALLOWANCE TO RS. 3,73,714/- OUT OF TOTAL DISALLO WANCE OF RS. 14,64,083/- WITHOUT APPRECIATING FACTS THAT THE WORKING GIVEN BY THE ASSESSEE AND AC CEPTED BY THE CIT(A) IS NOT ACCORDANCE WITH RULE 8D OF THE IT RULES. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE DISALLOWANCE OF RS. 2,07,399/- MADE BY THE ASSESSING OFFICER U/S. 36(1)(VII) WITHOUT AP PRECIATING FACTS THAT THE ASSESSEE HAS NOT FULFILLED THE CONDITIONS LAID DOWN IN SECTION 36 OF THE I.T. ACT. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIR ECTING THE ASSESSING OFFICER TO DELETE THE ADDITION AND WORK OUT THE CAPITAL GAIN/LOSS ON SALE OF PROPERTY OF KAMALDEEP FLAT AMOUNTING TO RS. 16,87,364/- HOLDING THAT THE SALE CONSIDERATION OF PROPERTY IS IN CONFORMITY WITH SECTION 45 WITHOUT APPRECIATING FACTS THAT THE ASSESSEE HAS FA ILED TO PROVE ITS CLAIM WITH ANY SUPPORTING EVIDENCES DURING THE ASSESSMENT PROCEEDINGS. 1 ST GROUND IS WITH RESPECT TO RESTRICTING DISALLOWANCE U/S. 14A TO RS. 3,73,714/- . 4. ON PERUSING THE BALANCE SHEET, A.O NOTICED THAT ASSESSEE HAD MADE INVESTMENT IN SHARES AND MUTUAL FUNDS AMOUNTING TO RS. 9.27 CRORE, EARNED DIVIDEND INCOME OF RS. 39,20,000/- WHICH WAS CLAIME D AS EXEMPT AND HAD CLAIMED INTEREST PAYMENT TO THE EXTENT OF RS. 7,98, 403/-. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE EXPENSES INCURRED FO R EARNING EXEMPT INCOME NOT BE DISALLOWED UNDER SECTION 14A OF THE ACT. AS SESSEE INTERALIA SUBMITTED THAT THE INVESTMENTS HAVE BEEN MADE OUT OF OWN FUND S AND FURTHER NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE TO EA RN EXEMPT INCOME. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABL E TO THE A.O. HE WAS OF THE VIEW THAT ASSESSEE HAS FAILED TO PROVE THE NEXU S OF INVESTMENT WITH THE INTEREST FREE FUNDS AVAILABLE WITH IT. HE ACCORDING LY BY APPLYING THE FORMULA LAID DOWN IN RULE 8D OF THE INCOME TAX RULES, 1962 WORKED OUT THE TOTAL DISALLOWANCE U/S. 14A AT 14,64,683/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- ITA NO 2803/AHD/2012 . A.Y. 2008 -09 3 3.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSION OF THE APPELLANT CAREFULLY. THE AO HAS WORKED OUT THE AMOUNT OF DISALLOWANCE U/S 14A O F THE ACT R.W. RULE 8D OF THE INCOME TAX RULES 1962 OF RS.14,64,083/-(RS.11,27,433/-+ RS.3,36,650/ ). THE APPELLANT HAS SUBMITTED THAT THE LOANS HAVE BEEN AVAILED FROM THE BANKS AND FINANCIAL INSTITUTI ONS FOR SPECIFIC PROJECT OR BUSINESS PURPOSE AND NO T FOR ANY INVESTMENTS. THE LENDERS OF THE LOAN ALSO K EEP A TRACK OF PROPER UTILIZATION OF THE LOANS FOR THE PURPOSE FOR WHICH IT HAS BEEN GRANTED AND THERE IS NO QUESTION OF DIVERTING ANY SPECIFIC BUSINESS PURPOSE LOAN FOR MAKING ANY INVESTMENTS. HENCE, THE RE IS NO PROXIMATE CONNECTION BETWEEN THE INTEREST EXPENDITURE INCURRED AND THE DIVIDEND INCO ME RECEIVED AND THERE IS NO NEXUS BETWEEN THE INTEREST BEARING BORROWING AND THE INVESTMENT MADE. THE APPELLANT FURTHER SUBMITS THAT AO HAS CONSIDERED THE VALUE OF NET CURRENT ASSETS AND ENTI RE INVESTMENTS (INCOME FROM WHICH IS EXEMPT OR TAXABLE) FOR ARRIVING AT AVERAGE VALUE OF TOTAL ASS ETS AND INVESTMENTS FOR CALCULATING THE DISALLOWANC E, WHICH IS AGAINST THE PROVISIONS OF LAW AS PER FORMU LA MENTIONED IN RULE 8D, THE DISALLOWANCE THOUGH NOT ADMITTED BY THE APPELLANT SHOULD HAVE BEEN AS U NDER AS PER THE FIGURES AVAILABLE FROM THE AUDITED BALANCE SHEET FOR THE YEAR ENDED 31.3.2007 AND 31.3 .2008 RESPECTIVELY ON RECORD WITH THE LD. AO AND TOTAL DISALLOWANCE SHOULD HAVE BEEN RS. ,373,714/- ONLY (RS.66,939 + RS.3,06,775) IF SECTION 14A READ WITH RULE 8D IS CORRECTLY APPLIED. 3.4. ON CAREFUL CONSIDERATION OF OBSERVATION OF ASS ESSING OFFICER AND CONTENTION OF APPELLANT, IT IS S EEN THAT APPELLANT HAS MADE INVESTMENTS IN ASSOCIATE CO NCERNS AND MUTUAL FUNDS BUT HAS NOT ESTABLISHED ANY NEXUS BETWEEN UTILIZATION OF INTEREST-FREE FUND S AND SUCH INVESTMENTS. FURTHER, APPELLANT HAS EVEN NOT SUBSTANTIATED ITS CLAIM THAT NO OTHER EXPENDITU RE WAS INCURRED FOR MAKING SUCH INVESTMENTS. CONSIDERING THIS, ASSESSING OFFICER WAS JUSTIFIED I N INVOKING THE RULE 8D FOR THE PURPOSE OF MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT. EVEN HON'BLE BOMBAY HIGH COURT IN CASE OF GODREJ & BOYCE MANUFACTURING COMPANY LIMITED 328 ITR 81 HAS HELD THAT PROVISIONS OF RULE 8D ARE APPLICABLE FROM A.Y. 2008-09. HOWEVER, THE ARGUMENT OF APPELLANT THAT THAT AO HAS CONSIDERED THE VALUE OF NET CURRENT ASSETS AND ENTIRE INVESTMENTS (INCOME FROM WHICH IS EXEMPT OR TAXABLE) FOR ARRIVING AT AVERAGE VALUE OF TOTAL ASSETS AND INVES TMENTS FOR CALCULATING THE DISALLOWANCE, WHICH IS AGAINST THE PROVISIONS OF LAW AS PER FORMULA MENTIO NED IN RULE 8D, IS ACCEPTABLE AS APPELLANT HAS EARNED TAXABLE INCOME ON DAY-TO-DAY BALANCE OF INVE STMENTS MADE IN SUCH ENTITIES. IN NUTSHELL, DISALLOWANCE UNDER SECTION 14A IS RESTRICTED TO ALT ERNATE WORKING OF RS. 373714/- ONLY (RS.66939 + RS.306775) PROVIDED BY APPELLANT AND REPRODUCED AT PARA 3.2 HEREIN ABOVE. THE BALANCE ADDITION OF RS. 1090369 /- MADE BY ASSESSING OFFICER IS DELETED . IN THE RESULT, THIS GROUND OF APPEAL IS PARTLY ALLOWED. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, THE LD. D.R. SUBMITTED THAT CIT(A) HA S GRANTED RELIEF TO THE ASSESSEE ON THE BASIS OF ALTERNATE WORKING OF DISAL LOWANCE SUBMITTED BEFORE CIT(A), THE AFORESAID ALTERNATE WORKING WAS NEITHER SUBMITTED BEFORE THE A.O. NOR ANY REPORT ON THE ALTERNATE WORKING WAS OBTAINE D BY CIT(A). HE FURTHER SUBMITTED THAT THE PROVISIONS OF SECTION 14A READ W ITH RULE 8D OF THE RULES ARE MANDATORY IN NATURE AND THEREFORE THE A.O. HAS RIGHTLY WORKED OUT THE DISALLOWANCE UNDER 14A. HE THEREFORE SUBMITTED THA T THE ORDER OF A.O. BE UPHELD AND IN THE ALTERNATIVE, THE MATTER BE RESTOR ED TO A.O FOR VERIFYING OF THE ALTERNATE WORKING OF DISALLOWANCE. ON THE OTHER HAN D THE LD. A.R. SUBMITTED ITA NO 2803/AHD/2012 . A.Y. 2008 -09 4 THAT A.O. HAD WRONGLY WORKED OUT THE DISALLOWANCE U NDER SECTION 14A AT RS. 14,64,083/- INSTEAD OF 3,73,714/- WHICH SHOULD HAVE BEEN THE CORRECT DISALLOWANCE AS PER THE FORMULA PRESCRIBED UNDER RU LE 8D WHICH WAS ACCEPTED BY CIT(A). HE THUS SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT DURING THE YEAR, ASSESSEE H AS EARNED TAX FREE INCOME FROM DIVIDEND AMOUNTING TO RS. 39.20 LACS. WE FIND THAT THE A.O. HAD WORKED OUT THE DISALLOWANCE UNDER 14A OF THE ACT BY FOLLOW ING THE FORMULA PRESCRIBED UNDER RULE 8D OF THE I.T. RULES WHICH WORKS OUT TO RS. 13,36,839/-. IT IS ALSO SEEN THAT CIT(A) HOWEVER ACCEPTED THE ALTERNATE WO RKING OF DISALLOWANCE AS SUBMITTED BY THE ASSESSEE BEFORE HIM ACCORDING TO W HICH THE DISALLOWANCE U/S. 14A WORKED OUT TO RS. 3,73,414/-. IT IS ALSO AN UNDISPUTED FACT THAT THE REVISED WORKING BASED ON WHICH CIT(A) HAD REDUCED THE DISALLOWANCE AND THEREBY GRANTED RELIEF TO THE ASSESSEE WAS NOT FURN ISHED BY ASSESSEE BEFORE A.O. NOR ANY REPORT ON THE ALTERNATE WORKING OF DI SALLOWANCE WAS OBTAINED DURING APPELLATE PROCEEDINGS BY CIT(A) FROM A.O. IN VIEW OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT IN ALL FAIRNESS AND TO MEET THE ENDS OF JUSTICE, THE A.O SHOULD BE GRANTED AN OPPORTUNITY TO EXAMINE THE WORKING OF DISALLOWANCE U/S. 14A WHICH HAS BEEN ACCEPTED BY CI T(A). WE THEREFORE REMIT THE ISSUE TO THE FILE OF A.O FOR THE LIMITED PURPOSE OF VERIFICATION OF THE CALCULATION OF DISALLOWANCE U/S. 14A OF THE ACT AS UPHELD BY CIT(A). IF THE CALCULATION AS WORKED OUT BY CIT(A) IS FOUND CORREC T AND IS AS PER LAW, THE DISALLOWANCE U/S. 14A BE CONFIRMED ONLY TO BE EXTEN T TO WHICH WAS ACCEPTED MADE BY CIT(A). WE THEREFORE REMIT THE ISSUE TO TH E FILE OF A.O. WITH THE AFORESAID DIRECTION. IN THE RESULT, THIS GROUND OF REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 2 ND GROUND IS WITH RESPECT TO DELETING THE DISALLOWANC E OF RS. 2,07,399/- UNDER SECTION 36(1)(VII). ITA NO 2803/AHD/2012 . A.Y. 2008 -09 5 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAD DEBITED RS. 2,07,399/- TO THE PROFIT AND LOSS A CCOUNT UNDER THE HEAD DEFERRED REVENUE EXPENSES WRITTEN OFF. THE ASSESS EE WAS ASKED TO JUSTIFY THE CLAIM. ASSESSEE INTERALIA SUBMITTED THAT DURIN G THE YEAR UNDER CONSIDERATION, IT WAS IN THE PROCESS OF IMPLEMENTIN G SMART CARD BASED SYSTEM FOR SOLUTION TO SMART CARD APPLICATION AND CERTIFIE D VENDOR FOR VISA AND MASTER CARD. IN ORDER TO UNDERTAKE THIS PROJECT VARIOUS E XPENSES WERE INCURRED. OUT OF THE TOTAL EXPENSES OF RS. 10,36,995/- INCURRED B Y THE ASSESSEE, IT WROTE OFF 1/5 OF THE EXPENSES AND CLAIMED IT AS AN EXPENDITUR E. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O FOR TH E REASON THAT THE ASSESSEE HAD NOT SHOWN ANY INCOME IN ANY OF THE PRE VIOUS YEAR UNDER HEAD ON WHICH IT HAD INCURRED EXPENDITURE. HE WAS THUS OF THE VIEW THAT SINCE THE ASSESSEE HAS NOT FULFILLED THE CONDITION LAID DOWN U/S 36 OF THE ACT, THE EXPENDITURE CANNOT BE ALLOWED AS BAD DEBT. HE WAS FURTHER OF THE VIEW THAT SINCE THE LOSS WAS CAPITAL IN NATURE IT WAS NOT ALL OWABLE. HE ACCORDINGLY REJECTED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY TH E ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) DELETED TH E ADDITION BY HOLDING AS UNDER:- 4.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSION OF THE APPELLANT VERY CAREFULLY. THE AO HAS DISALLOWED THE CLAIM OF RS. 2,07,399/- OF DE FERRED REVENUE EXPENDITURE WRITTEN OFF AS EXPENSE U/S 36 OF INCOME TAX ACT, 1961 AND ADDED TO THE TOT AL INCOME OF THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT THE APPELLANT HAS DEBITED THE DEFERR ED REVENUE EXPENDITURE WRITTEN OFF AND CLAIMED AS ALLOWABLE EXPENSE U/S 37(1) OF THE INCOME TAX ACT, AS ALLOWABLE EXPENSES AND ADDITION MADE BY LD. ASSESSING OFFICER FOR BAD DEBT U/S 36 (1) (VII) IS BAD IN LAW AND ON FACTS. AFTER GOING THROUGH THE SUBMISSION OF THE APPELLANT, IT BECOMES CLEAR THAT APPELLANT IS SUBMITTING THAT THIS IS DEFERRED REVEN UE EXPENDITURE AND NOT BAD DEBTS U/S 36(1)(VII) OF THE INCOME TAX ACT, 1961.THE APPELLANT HAS SUBMITTED THAT COMPANY WAS IN PROCESS OF IMPLEMENTING SMART C ARD BASED SYSTEM FOR SOLUTIONS TO SMART CARD APPLICATION AND CERTIFIED VENDOR FOR VISA AND MASTE R CARD. IN ORDER TO UNDERTAKE THIS PROJECT, NUMBER OF EXPENSES SUCH AS ADVERTISEMENT EXPENSES, CERTIFI CATION EXPENSES ETC. WERE INCURRED WHICH WOULD GIVE ENDURING BENEFITS AND THEREFORE AS A PRUDENT A CCOUNTING POLICY, THE EXPENSES AMOUNTING TO RS. 10,36,995/- WHICH BELONGED TO CARD PROCESSING DIVIS ION WERE CAPITALIZED AS DEFERRED REVENUE EXPENSE. THE COMPANY HAS WRITTEN OFF ONE FIFTH OF THE SAME TAKING A REASONABLE PERIOD OF FIVE YEAR S FOR THESE EXPENSES TO BE WRITTEN OFF IN THE BOOKS OF ACCOUNT AND THE SAME HAS BEEN CLAIMED AS EXPENSE. AFTER GOING THROUGH THE FACTS OF THE CASE AND THE SUBMISS ION OF THE APPELLANT, IT BECOMES CLEAR THAT THE AO HAS NOT APPRECIATED THE POINT THAT THE APPELLANT CO MPANY HAS WRITTEN OFF ONE FIFTH OF THE EXPENSES AMOUNTING TO RS. 10,36,995/- WHICH BELONGED TO CARD PROCESSING DIVISION WHICH WERE CAPITALIZED AS DEFERRED REVENUE EXPENSE AND TAKING A REASONABLE PE RIOD OF FIVE YEARS FOR THESE EXPENSES, 1/5 WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT. THE SAME IS AL LOWABLE U/S 37 OF THE I T ACT. IN VIEW OF THE ABOVE DISCUSSION, THE A.O. IS DIRECTED TO DELETE THE SAME . THE GROUND OF THE APPEAL IS ALLOWED. ITA NO 2803/AHD/2012 . A.Y. 2008 -09 6 9. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NOW IN APPEAL BEFORE US. 10. BEFORE US, THE LD. D.R. TOOK US THROUGH THE FIN DINGS OF A.O. AND REITERATED THAT THE ASSESSEE IS NOT ENTITLED TO THE CLAIM. HE FURTH ER SUBMITTED THAT ASSESSEE IS ALSO NOT ENTITLED TO DEDUCTION U/S. 37 OF THE AC T. HE THUS SUPPORTED THE ORDER OF A.O. THE LD. A.R. ON THE OTHER HAND SUPPO RTED THE ORDER OF CIT(A). HE FURTHER POINTED OUT THAT IN THE GROUNDS OF APPEA L RAISED BEFORE TRIBUNAL, REVENUE HAS NOT DISPUTED THE DISALLOWANCE U/S. 37 B UT HAS NOT CONTESTED THE DISALLOWANCE U/S. 36(1)(VII) OF THE ACT. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT CIT(A) WHILE DELETING THE ADDITION HAS NO TED THAT THE ASSESSEE HAD CLAMED THE EXPENDITURE UNDER SECTION 37OF THE ACT A ND NOT AS BAD DEBTS U/S 36(1)(VII) OF THE ACT. CIT(A) HAS FURTHER GIVEN A F INDING THAT THAT 1/5 OF THE EXPENSES AS CLAIMED BY THE ASSESSEE WAS ALLOWABLE U /S. 37 OF THE ACT. BEFORE US, THE REVENUE COULD NOT CONTROVERT THE FIN DINGS OF CIT(A) NOR HAS BROUGHT ON RECORD ANY CONTRARY MATERIAL IN ITS SUPP ORT. WE ALSO FIND THAT IN THE GROUND RAISED BEFORE US, THE REVENUE IS CONTESTING THE DISALLOWANCE U/S. 36(1)(VII) AND NOT THE DEDUCTION U/S. 37 OF THE AC T. IN VIEW OF THE AFORESAID FACTS WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A). THUS THIS GROUND OF REVENUE IS DISMISSED. 3 RD GROUND IS WITH RESPECT TO DELETION OF ADDITION ON ACCOUNT OF LOSS ON SALE OF PROPERTY OF RS. 16,87,364/-. 12. ON PERUSING THE PROFIT AND LOSS ACCOUNT, A.O. N OTICED THAT ASSESSEE HAD DEBITED OF SUM OF RS. 13,36,839/- UNDER THE LOSS ON SALE OF ASSETS. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM. A.O. NOTED THAT SINCE THE ASSESSEE DID NOT SUBMIT ANY JUSTIFICATION OR REASON FOR CLAI MING THE DEDUCTION, THE LOSS ON SALE OF ASSETS CLAIMED BY THE ASSESSEE WAS DISAL LOWED. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE C IT(A). CIT(A) AFTER ITA NO 2803/AHD/2012 . A.Y. 2008 -09 7 CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY HOLDING AS UNDER:- 5.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSION OF THE APPELLANT VERY CAREFULLY. THE AO HAS DISALLOWED THE CLAIM OF PROFIT ON SALE OF IN VESTMENTS AMOUNTING TO RS.39,38,520/- AND TREATED THE SAME BUSINESS INCOME FOR THE YEAR UNDER ASSESSM ENT FOR, WANT OF DETAILS FROM THE APPELLANT. THE APPELLANT HAS SUBMITTED THAT EVEN THOUGH SUFFICIENT DOCUMENTARY EVIDENCES AND EXPLANATIONS HAVE BEEN FURNISHED, SUPPORTING THE TRANSACTION OF SALE OF PR OPERTY AND CAPITAL GAINS THEREON, THE LD. ASSESSING OFFICER IGNORED & OVERLOOKED THE SAME AND MADE THE ADDITION WITHOUT ANY BASIS BY ALLEGING THAT NO EXPLANATIONS WERE FURNISHED. THE APPELLANT HAS FURT HER SUBMITTED THAT HE HAS SUBMITTED THE SUBMISSIONS ON 24.06.2010, 15.11.2010 AND ON 10.12. 2010 WHICH A.O. HAS CHOSEN NOT TO CONSIDER WHILE DECIDING THE ISSUE. THE APPELLANT HAS FURTHER SUBMITTED THAT THE INCOME FROM INVESTMENT IN PROPERTY HAS BEEN OFFERED TO TAX AS CAPITAL GAIN AS IS EVIDENT FROM THE COPY OF STATEMENT SHOWING COMPUTATION OF INCOME FOR THE ASST YEAR 2008-09 AND VARIOUS SUBMISSIONS AS EXPLAINED IN ABOVE PARAGRAPH. THE PROPERTY SOLD WAS KEPT AS INVESTMENT AND WAS GIVEN ON RENT IN THE EARLIER YEARS. THE APPELLANT HAS FURTHER SUBMITTED THAT THE INCOME FRO M THE RENTALS FOR THE PROPERTY REFERRED AS ABOVE HAVE BEEN TAXED UNDER THE HEAD 'INCOME FROM HOUSE P ROPERTY' IN RESPECTIVE YEARS. THE PROPERTY HAS BEEN HELD AS INVESTMENT AND USED FOR PURPOSE OF REN TALS OR FOR CAPITAL APPRECIATION. AS THE SOLD PROPERTY WAS KEPT AS INVESTMENT NO DEPRECIATION ON SOLD PROPERTY WAS EVER CLAIMED SINCE DATE OF ITS ACQUISITION IN BOOKS. SO, THE DIFFERENCE OF SALE CO NSIDERATION AND INDEXED COST OF THE INVESTMENT IN PROPERTY DURING THE YEAR HAS BEEN TREATED AS CAPITA L GAINS U/S 45 OF INCOME TAX ACT, 1961, AND SHOWN IN INCOME TAX RETURN AS CAPITAL GAIN/LOSS ON SALE O F ASSETS. AFTER GOING THROUGH THE BALANCE SHEET OF THE APPELLANT, IT IS SEEN FROM OF RECORDS THAT THE CLAIM AND TREATMENT OF THE SALE CONSIDERATION OF TH E PROPERTY IS IN CONFORMITY WITH THE SECTION 45 OF TH E INCOME TAX ACT, 1961. THEREFORE, THE ADDITION MADE BY THE A.O. HAS BEEN DONE WITHOUT APPRECIATING THE FACTS OF THE CASE, THE PROVISIONS OF THE IT AC T AND WITHOUT CONSIDERING THE SUBMISSION THE APPELLAN T. THE ADDITION IS DIRECTED TO BE DELETED AND A.O I S FURTHER DIRECTED TO WORK OUT THE CAPITAL GAIN/LOSS ON SALE OF PROPERTY OF KAMAL DEEP FLAT AMOUNTING TO RS. 16,87,364/- ARRIVED AT BY THE APPELLANT UNDE R THE HEAD CAPITAL GAINS DURING THE YEAR. 13. BEFORE US, THE LD. D.R. SUBMITTED THAT ASSESSEE DID NOT FILE ANY EXPLANATION BEFORE A.O. AND THEREFORE THE A.O. HAD RIGHTLY DISA LLOWED THE LOSS ON SALE OF ASSETS. IN THE ALTERNATE HE SUBMITTED THAT THE ISSU E BE RESTORED TO A.O. FOR VERIFICATION OF THE CLAIM OF ASSESSEE. LD. A.R. ON THE OTHER HAND POINTED OUT THAT IT HAD MADE SUBMISSIONS ON VARIOUS DAYS BEFORE THE A.O. BUT THE A.O. DID NOT CONSIDER THE SUBMISSIONS MADE BY THE ASSESS EE. HE POINTED OUT TO THE RELEVANT FINDINGS OF CIT(A). HE THEREFORE SUBMI TTED THAT AFTER THE CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT(A) HAS RIGHTLY DELETED THE ADDITION. HE THUS OPPOSED THE REQUESTS OF LD. D.R. TO REMIT THE MATTER FOR VERIFICATION BY THE A.O AND SUPPORTED THE ORDER OF CIT(A). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE BEFORE US IS ABOUT THE CLAIM OF LOSS BY ASSES SEE. A.O IN HIS ORDER HAS HELD THAT IN THE ABSENCE OF DETAILS, A.O HAD NO OTH ER OPTION BUT TO DENY THE ITA NO 2803/AHD/2012 . A.Y. 2008 -09 8 CLAIM OF ASSESSEE. ON THE OTHER HAND, WE FIND THAT CIT(A), WHILE DELETING THE ADDITION HAS NOTED THAT ASSESSEE HAD SUBMITTED SUFF ICIENT DOCUMENTARY EVIDENCES AND EXPLANATION BEFORE THE A.O BUT A.O. H AD IGNORED AND OVER LOOKED THE SAME. WE FURTHER FIND THAT CIT(A) HAS FU RTHER ACCEPTED THE SUBMISSIONS OF THE ASSESSEE THAT THE PROPERTY SOLD WAS KEPT AS INVESTMENT, IT WAS GIVEN ON RENT IN EARLIER YEARS, THE INCOME FRO M RENTALS FROM THE PROPERTY HAS BEEN OFFERED TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND NO DEPRECIATION HAS BEEN CLAIMED ON THE PROPERTY WHICH WAS SOLD DURING THE YEAR. HE HAS FURTHER GIVEN A FINDING THAT THE TREAT MENT OF SALE CONSIDERATION OF PROPERTY WAS IN CONFORMITY WITH THE PROVISIONS OF S ECTION 45 OF THE ACT AND HAD ACCORDINGLY DIRECTED THE A.O TO WORK OUT THE CA PITAL GAIN/LOSS UNDER THE HEAD CAPITAL GAINS DURING THE YEAR. BEFORE US, TH E REVENUE COULD NOT CONTROVERT THE FINDINGS OF CIT(A), NOR HAS BROUGHT ANY CONTRARY MATERIAL IN ITS SUPPORT ON RECORD. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GR OUND OF REVENUE IS DELETED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 07 - 03 - 2014. SD/- SD/- (D.K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMED ABAD