Dy.Commissioner of Income Tax-6, Kanpur V. M/s Handloom Intensive Developement Project (Bijnore) Ltd., Kanpur

ITA 317/LKW/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87725 (ITAT-LUCKNOW)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-11-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 25-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADEEP SETH
• Section: 37

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.317/LKW/2014 ASSESSMENT YEAR:2005 - 06 M/S HANDLOOM INTENSIVE DEVELOPMENT PROJECT LTD., HATKARGHA BHAWAN, G. T. ROAD, KANPUR. PAN:AABCH2299E VS DY.C.I.T. - 6, KANPUR. (RESPONDENT) (APPELLANT) SHRI K. C. MEENA, D. R. APPELLANT BY SHRI PRADEEP SETH, C. A. RESPONDENT BY 20/11/2014 DATE OF HEARING 08 /01/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, DEHRADUN HOLDING CONCURRENT CHARGE OF CIT(A) - II, KANPUR DATED 31/01/2014 FOR THE ASSESSMENT YEAR 2005 - 2006. 2. IN THIS APPEAL , THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.20,68,908/ - ON ACCOUNT OF DEDUCTION U/S. 37 IGNORING THE FACT THAT THERE WAS NO BUSINESS ACTIVITIES DONE BY THE ASSESSEE SINCE A.Y. 1991 - 92. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF EXPENSES ON ACCOUNT OF INTEREST ON GOVERNMENT LOANS HOLDING THAT THESE ARE NOT STATUTORY LIABILITIES WITHIN THE MEANING OF SECTION 43B. 3. THE CIT(A) HAS ERRED IN LAW AN D ON FACTS IN ALLOWING THE RELIEF OF EXPENSES ON ACCOUNT OF INTEREST ON GOVERNMENT 2 LOANS AND MUNICIPAL TAXES IGNORING THE FACT THAT THESE EXPENSES WERE APPEARING AS 'PAYABLE' IN THE BALANCE SHEET AND THUS, NOT ALLOWABLE U/S. 43B. 4. THE ORDER OF THE CIT ( A), KANPUR BEING ERRONEOUS, UNJUST AND BAD IN LAW BE VACATED AND THE ORDER OF THE AO BE RESTORED. 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 4. WE HAVE CON SIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA 3 OF THE ASSESSMENT ORDER THAT IN THE COMPUTATION OF INCOME FILED ALONG WITH RETURN, THE INCOME FROM PROPERTY HAS BEEN SEPARATELY COMPUTED AT RS.4,16,974/ - AND LOSS FROM BUSINESS HAS BEEN SHOWN AT RS.20,68,908/ - . HE HAS FURTHER NOTED THAT THE ASSESSEE HAS ADMITTED THAT IT DID NOT CARRY OUR ANY BUSINESS ACTIVITY EVER SINCE 01 /04/91. THEREAFTER, THE ASSESSING OFFICER HAS NOTED THAT AS PER ORDER SHEET ENTRY DATED 16/08/2007, THE ASSESSEE WAS REQUIRED TO EXPLAIN WHY THE CLAIM OF LOSS OF BUSINESS MAY NOT BE DISALLOWED AS THE ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY. TH E ASSESSEE WAS ALSO REQUIRED BY THE ASSESSING OFFICER TO EXPLAIN WHY THE INTEREST ON INCOME TAX REFUND MAY NOT BE ASSESSED AS INCOME FROM OTHER SOURCES. THE REPLY OF THE ASSESSEE WAS CONSIDERED BY THE ASSESSING OFFICER AND THEREAFTER , HE HAS ACCEPTED THE INCOME DECLARED BY THE ASSESSEE UNDER THE HEAD INCOME FROM HOUSE PROPERTY BUT HE HAS DISALLOWED THE CLAIM OF THE ASSESSEE REGARDING BUSINESS LOSS . IN ADDITION TO THAT , THE ASSESSING OFFICER HAS ASSESSED THE INTEREST FROM INCOME TAX REFUND OF RS.37,503/ - AS INCOME FROM OTHER SOURCES AFTER ALLOWING DEDUCTION OF RS.5,107/ - ON ACCOUNT OF LEGAL/CONVEYANCE EXPENSES AND ASSESSED THE INCOME AT RS.5,10,190/ - AS AGAINST THE CLAIM OF THE ASSESSEE IN THE RETURN OF INCOME AT NET LOSS OF RS.16,51,930/ - . IT IS HELD BY CIT(A) THAT THERE WAS LULL IN BUSINESS AND CESSATION OF BUSINESS ACTIVITIES AND THEREFORE, BUSINESS LOSS IS ALLOWABLE. THE 3 BENCH RAISED A VERY SPECIFIC QUERY AS TO WHETHER THE BUSINESS HAS BEEN RESTARTED TILL DATE AND IN REPLY , IT WAS ADMITTED BY LEARNED A.R. OF THE ASSESSEE THAT TILL DATE , THE BUSINESS COULD NOT BE STARTED. A CLEAR FINDING IS GIVEN BY THE ASSESSING OFFICER THAT AS PER THE ASSESSEES OWN ADMISSION, THE BUSINESS ACTIVITY WAS NOT CARRIED OUT EVER SINCE 01/04/91. NOW WE ARE IN THE YEAR 201 4, THAT MEANS MORE THAN 23 YEARS HAVE ELAPSED SINCE THEN AFTER THE BUSINESS HAS NOT STARTED TILL NOW AND HENCE , IT CANNOT BE SAID THAT THERE IS ANY TEMPORARY LULL ONLY AND NOT PERMANENT CESSATION OF BUSINESS. HENCE, IN OUR CONSIDERED OPINION, THE ORDER OF CIT(A) IS NOT SUSTAINABLE. WE, THEREFORE, REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 /01/2015. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR