Assistant Commissioner of Income Tax, Circle-1(1), New Delhi, C.R. Building V. ASR MARKET VENTURES PRIVATE LIMITED, Delhi

ITA 3161/DEL/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1946 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-05-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 06-11-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMAR GAHLOT; MUZAFFA SALIM
• Keywords: Additional evidence; Bad and doubtful debts; Valuation report
• Section: 143(3); 56(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, ‘A’: NEW DELHI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.3161/DEL/2023 [Assessment Year: 2016-17] Assistant Commissioner of Income Tax, Circle-1(1), Room No.153A, C.R. Building, I.P. Estate, New Delhi Vs ASR Market Ventures Private Limited, 2E/8, 3 rd Floor, Jhandewalan Extn, Central Delhi, New Delhi-110055, PAN-AAKCA4370Q Revenue Assessee Assessee by Shri Amar Gahlot, Muzaffa Salim Kushagra Gahlot, Shivam Mishra and Umesh, Adv. Revenue by Shri Kanv Bali, Sr.DR Date of Hearing 28.05.2024 Date of Pronouncement 31.05.2024 ORDER PER BRAJESH KUMAR SINGH, AM, This appeal by the Revenue is directed against the order of the National Faceless Appeal Centre (in short ‘NFAC’), Delhi, dated 07.08.2023 pertaining to Assessment Year 2016-17. 2. The grounds of appeal raised by the Revenue reads as under:- “1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that section 56(2)(viib) of the Act is not applicable to the assessee's case in view of para no. 4 of the Notification GSR 127(E) dated 19.02.2019, without considering the scope given vide para no. 6 of the abovementioned Notification, wherein it has been clarified that, para no. 4 is not applicable to the shares in respect of which an addition made us 56(2)(viib) of the Act has been made in an 2 ITA No.3161/Del/2023 assessment order made under the Act before the date of issue of Notifications. 2. On the facts and in the circumstances of the case. the Ld. CIT(A) has erred in the light of para no. 6 of the Notification GSR 127(B) dated 19.02.2019 as the assessment order making an addition of Rs. 1,84,86,525/- under section 56(2)(viib) was passed on 28.12.2018, whereas the date of issue of Notification is 19.02,2019, Hence, para no. 4 of the Notification based on which the Ld. CIT(A) has given relief to the assessee is not applicable to this assessee's case as the assessment order was passed before the date of notification. 3. Brief facts of the case:- The assessee is an e-commerce startup, currently operating a fitness portal named ‘FITPASS’. The assessee is a recognized ‘startup’ by the Department of Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, Govt. of India and has been issued a certificate, number DIPP355343, dated 01.05.2019, which is reproduced for ready reference:- 3 ITA No.3161/Del/2023 3.1. In this case, the AO passed assessment order u/s 143(3) of the Act dated 28.12.2018 making an addition of Rs.1,84,86,525/- u/s 56(2)(viib) of the Act. According to the assessee, the addition was made on the following grounds:- ‘The Valuation Report submitted by the Assessee could not be relied upon because the Valuation Report prepared by the Valuer Firm was based on facts and figures, as well as profits/receipts, provided by the management to the Valuer Firm. Additionally, the Assessee did not apply for registration with DPIIT to be recognized as a startup and hence exemption under Section 56(2) (viib) of the Act would not be exempted. The Assessee, aggrieved by the Assessment Order dated 28.12.2018 passed by the Ld. AO, preferred an appeal before the Commissioner of Income Tax (Appeals) ('CIT(A)').” 4. The assessee aggrieved with the assessment order filed an appeal before the ld. CIT(A)/NFAC. By an order dated 07.08.2023, the NFAC deleted the addition of Rs.1,84,86,525/- by holding that the assessee is a ‘startup’ meeting all the parameters and criteria of notification no.G.S.R.127(E) dated 19.02.2019. 5. Aggrieved with the order of the NFAC/ld. CIT(A), the Revenue is in appeal before us. 6. In the grounds of appeal, the Department submits that the decision of the ld. CIT(A)/NFAC erred in holding that section 56(2)(viib) of the Act is not applicable to the assessee's case in view of para no. 4 of the Notification GSR 127(E) dated 19.02.2019, without considering the scope given vide para no. 6 of the abovementioned Notification, wherein it has been clarified that, para no. 4 is not applicable to the shares in respect of which an addition made us 56(2)(viib) of the Act has been made 4 ITA No.3161/Del/2023 in an assessment order made under the Act before the date of issue of Notifications. Further, it was submitted that the Ld. CIT(A) has erred in the light of para no. 6 of the Notification GSR 127(B) dated 19.02.2019 as the assessment order making an addition of Rs. 1,84,86,525/- under section 56(2)(viib) was passed on 28.12.2018, whereas the date of issue of Notification is 19.02,2019, Hence, para no. 4 of the Notification based on which the Ld. CIT(A) has given relief to the assessee is not applicable to this assessee's case as the assessment order was passed before the date of notification. 7. During the appellate proceedings before us, the ld. AR referring to para-4 (ii) of Circular No.22/2019[F.No.173/149/2019-ITA-I] Dated 30.08.2019 submitted that the appeal filed by the Revenue was not maintainable on the ground that in respect of pending appeal before the ITAT, the Department shall not press the ground relating to addition u/s 56(2)(viib) in the case of recognised ‘startup’ and which has submitted Form No.2. In this regard, the ld. AR also submitted Form No.2 dated 01.05.2019 as per Annexure-C of the paper book, which was also submitted before the NFAC. The same was duly forwarded by the NFAC to the AO, but no report was received from the AO and the NFAC admitted the additional evidence including the aforesaid Form No.2 and the copy of certificate of recognition dated 01.05.2019 issued to the assessee company as a ‘startup’ by the Department of Industrial Policy and Promotion (in short ‘DIPP’) as discussed in para-6 of the appellate order. The Ld. DR also agreed with the submission of the Ld. AR. 5 ITA No.3161/Del/2023 8. We have heard both the parties and perused the material available on record. As stated above, the assessee is a recognised ‘startup’ and the addition of Rs.1,84,86,525/- in this case was made u/s 56(2)(viib) of the Act. The relevant para-4 of the aforesaid circular is reproduced as under:- “4. The clarification issued on 9th August, 2019 provided that the provisions of the section 56(2)(viib) of the Act shall also not be applicable in respect of assessment made before 19th February, 2019 if a recognised Startups has filed declaration in Form No. 2. The following procedure is laid down with regard to addition made under section 56(2)(viib) of the Act in assessment order passed before 19th February, 2019:— i. In case the appeal against the assessment is pending before the Commissioner of Income-tax (Appeal) [CIT(A)], the appellate order should be passed by CIT(A) on or before 31st December, 2019 after taking into account the fact that the Startup has filed declaration in Form No. 2 and hence the provisions of section 56(2)(viib) of the Act are not applicable for the addition made under section 56(2)(vib) of the Act before February, 2019. The Department shall not file further appeal on the issue of addition made under section 56(2)(viib) of the Act; ii. In case the case is pending before the ITAT, the Department shall not pres the ground relating to addition under section 56(2)(viib) of the Act in these cases.’ 9. Further, the assessee has also filed Form No.2, which is reproduced as under:- 6 ITA No.3161/Del/2023 10. Therefore, considering the above facts and the provisions laid out in para No.4 of the Board Circular dated 30.08.2019, the appeal filed by the Revenue is not maintainable and hence dismissed. 11. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 31 st May, 2024. Sd/- Sd/- [CHALLA NAGENDRA PRASAD] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 31.05.2024. ff^ ff^ff^ ff^? ?? ? Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 7 ITA No.3161/Del/2023 The learned CIT(A) did not allow the plea of the assessee by observing in para 6.2 to 6.2.2 as under:- “6.2 Ground No. 5 and 6: Total Addition of Rs. 2,71,75,287/- on account of disallowance of claim of expenses/bad debts:- 6.2.1 I have considered the facts of the case. The facts of the case are peculiar as the assessee has not reported its 'revenue' from business and profession, in the profit and loss account but the same was directly added as income in the computation of income. Furthermore, the appellant submitted that direct cost related to such revenue was also not shown in profit and loss account and directly shown as expense in the computation of income. 6.2.2 At the outset, it is noted that the appellant has not prepared the financial statements keeping, in consideration the generally accepted accounting policies and Accounting standards as no revenue and cost related thereto was reflected in profit and loss account. Before the AO, the appellant submitted that since the customers of the appellant rejected the claim of the appellant as on 31/03/2010 amounting to Rs 4,86,21,071/- instead of reporting the amount as income, the same was shown as liability in the books of accounts. The appellant submitted that there was litigation with its customers, because of which it was decided not to disclose the said amount as income in books of account/profit and loss account and thus was shown as liability. The appellant further stated that in view of Income-tax Act, this amount was directly reported as income in computation of income.”